Annual Report 2016 THIS IS INNOVATION. THIS IS MIDDLEBY. 2016 FINANCIAL HIGHLIGHTS (dollars in thousands) 2016 2015 2014 2013 2012 NET SALES $2,267,852 $1,826,598 $1,636,538 $1,428,685 $1,038,174 GROSS PROFIT $901,180 $706,505 $640,585 $550,011 $402,989 INCOME FROM OPERATIONS $446,225 $302,603 $300,432 $244,462 $188,084 NET EARNINGS $284,216 $191,610 $193,312 $153,928 $120,697 EPS ON NET EARNINGS $4.98 $3.36 $3.40 $2.74 $2.20 WEIGHTED AVERAGE SHARES 57,085,000 56,973,000 56,784,000 56,148,000 54,807,000 CASHFLOW FROM OPERATIONS $294,110 $249,592 $233,882 $146,158 $128,346 TOTAL ASSETS $2,917,136 $2,761,151 $2,066,131 $1,819,206 $1,244,280 TOTAL DEBT $732,126 $766,061 $598,167 $571,598 $260,070 STOCKHOLDERS´ EQUITY $1,265,318 $1,166,830 $1,006,760 $838,347 $650,027 $2,400 $300 $5 2016 2016 2016 2,200 2,000 250 4 2015 1,800 2014 2014 2015 1,600 200 2014 2015 2013 3 1,400 2013 2013 1,200 150 2012 2012 1,000 2012 2 800 100 600 1 400 50 200 0 0 0 NET SALES NET EARNINGS EPS ON NET EARNINGS (dollars in millions) (dollars in millions) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Fiscal Year Ended December 31, 2016 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File No. 1-9973 THE MIDDLEBY CORPORATION (Exact name of Registrant as specified in its charter) Delaware 36-3352497 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number) 1400 Toastmaster Drive, Elgin, Illinois 60120 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: 847-741-3300 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common stock, par value $0.01 per share The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of June 30, 2016 was approximately $6,496,544,653. The number of shares outstanding of the Registrant’s class of common stock, as of February 27, 2017, was 57,539,766 shares. Documents Incorporated by Reference Part III of Form 10-K incorporates by reference the Registrant’s definitive proxy statement to be filed pursuant to Regulation 14A in connection with the 2017 annual meeting of stockholders. THE MIDDLEBY CORPORATION AND SUBSIDIARIES DECEMBER 31, 2016 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Page PART I Item 1. Business 1 Item 1A. Risk Factors 10 Item 1B. Unresolved Staff Comments 18 Item 2. Properties 19 Item 3. Legal Proceedings 20 Item 4. Mine Safety Issues 20 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. Selected Financial Data 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 7A. Quantitative and Qualitative Disclosure about Market Risk 38 Item 8. Financial Statements and Supplementary Data 40 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 88 Item 9A. Controls and Procedures 88 Item 9B. Other Information 90 PART III Item 10. Directors, Executive Officers and Corporate Governance 91 Item 11. Executive Compensation 91 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 91 Item 13. Certain Relationships and Related Transactions, and Director Independence 91 Item 14. Principal Accountant Fees and Services 91 PART IV Item 15. Exhibits and Financial Statement Schedule 92 Item 16. Form 10-K Summary 93 PART I Item 1. Business General The Middleby Corporation (“Middleby” or the “company”), through its operating subsidiary Middleby Marshall Inc. (“Middleby Marshall”) and its subsidiaries, is a leader in the design, manufacture, marketing, distribution, and service of a broad line of (i) foodservice equipment used in all types of commercial restaurants and institutional kitchens, (ii) food preparation, cooking, baking, chilling and packaging equipment for food processing operations, and (iii) premium kitchen equipment including ranges, ovens, refrigerators, ventilation and dishwashers primarily used in the residential market. Founded in 1888 as a manufacturer of baking ovens, Middleby Marshall Oven Company was acquired in 1983 by TMC Industries Ltd., a publicly traded company that changed its name in 1985 to The Middleby Corporation. The company has established itself as a leading provider of (i) commercial restaurant equipment, (ii) food processing equipment and (iii) residential kitchen equipment as a result of its acquisition of industry leading brands and through the introduction of innovative products within each of these segments. The company's annual reports on Form 10-K, including this Form 10-K, as well as the company's quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on the company's internet website, www.middleby.com. These reports are available as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Business Segments and Products The company conducts its business through three principal business segments: the Commercial Foodservice Equipment Group, the Food Processing Equipment Group and the Residential Kitchen Equipment Group. See Note 9 to the Consolidated Financial Statements for further information on the company's business segments. Commercial Foodservice Equipment Group The Commercial Foodservice Equipment Group has a broad portfolio of foodservice equipment, which enable it to serve virtually any cooking or warming application within a commercial kitchen or foodservice operation. This cooking and warming equipment is used across all types of foodservice operations, including quick-service restaurants, full-service restaurants, convenience stores, retail outlets, hotels and other institutions. This commercial foodservice equipment is marketed under a portfolio of forty-one brands, including Anets®, Beech®, Blodgett®, Blodgett Combi®, Blodgett Range®, Bloomfield®, Britannia®, CTX®, Carter-Hoffmann®, Celfrost®, Concordia®, CookTek®, Desmon®, Doyon®, Eswood®, Follett®, FriFri®, Giga®, Goldstein®, Holman®, Houno®, IMC®, Induc®, Jade®, Lang®, Lincat®, MagiKitch'n®, Market Forge®, Marsal®, Middleby Marshall®, MPC®, Nieco®, Nu-Vu®, PerfectFry®, Pitco Frialator®, Southbend®, Star®, Toastmaster®, TurboChef®, Wells® and Wunder-Bar®. The products offered by this group include conveyor ovens, combi-ovens, convection ovens, baking ovens, proofing ovens, deck ovens, speed cooking ovens, hydrovection ovens, ranges, fryers, rethermalizers, steam cooking equipment, warming equipment, heated cabinets, charbroilers, ventless cooking systems, kitchen ventilation, induction cooking equipment, countertop cooking equipment, toasters, professional refrigerators, blast chillers, coldrooms, ice machines, freezers and beverage dispensing equipment. Food Processing Equipment Group The Food Processing Equipment Group offers a broad portfolio of processing solutions for customers producing pre- cooked meat products, such as hot dogs, dinner sausages, poultry and lunchmeats and baked goods such as muffins, cookies and bread. Through its broad line of products, the company is able to deliver a wide array of cooking solutions to service a variety of food processing requirements demanded by its customers. The company can offer highly integrated solutions that provide a food processing operation a uniquely integrated solution providing for the highest level of food quality, product consistency, and reduced operating costs resulting from increased product yields, increased capacity, greater throughput and reduced labor costs though automation. 1 This food processing equipment is marketed under a portfolio of thirteen brands, including Alkar®, Armor Inox®, Auto-Bake®, Baker Thermal Solutions®, Cozzini®, Danfotech®, Drake®, Maurer-Atmos®, MP Equipment®, RapidPak®, Spooner Vicars®, Stewart Systems® and Thurne®.