Annual Statements Open main menu

MIDDLEBY Corp - Quarter Report: 2008 March (Form 10-Q)


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

  For the quarterly period ended March 29, 2008

or
o 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
(I.R.S. Employer Identification No.)
Incorporation or Organization)
 

1400 Toastmaster Drive, Elgin, Illinois
60120
(Address of Principal Executive Offices)
(Zip Code)

Registrant's Telephone No., including Area Code (847) 741-3300

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 x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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 x   Accelerated filer o   Non-accelerated filer o    Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

As of May 2, 2008, there were 16,960,896 shares of the registrant's common stock outstanding.
 

 
THE MIDDLEBY CORPORATION AND SUBSIDIARIES

QUARTER ENDED MARCH 29, 2008
 
INDEX

 
DESCRIPTION
   
PAGE
       
PART I. FINANCIAL INFORMATION
   
       
Item 1.
Condensed Consolidated Financial Statements (unaudited)
   
       
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
March 29, 2008 and December 29, 2007
 
1
       
 
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
   
 
March 29, 2008 and March 31, 2007
  2
       
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   
 
March 29, 2008 and March 31, 2007
  3
       
 
NOTES TO CONDENSED CONSOLIDATED
   
 
FINANCIAL STATEMENTS
 
4
       
Item 2.
Management's Discussion and Analysis of Financial Condition
   
 
and Results of Operations
 
21
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
29
       
Item 4.
Controls and Procedures
 
32
       
PART II. OTHER INFORMATION
   
       
Item 1A.
Risk Factors
 
33
       
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
33
       
Item 6.
Exhibits
 
33
 


PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts In Thousands, Except Share Data)
(Unaudited)

   
Mar. 29, 2008
 
Dec. 29, 2007
 
ASSETS
         
Current assets:
         
Cash and cash equivalents
 
$
5,518
 
$
7,463
 
Accounts receivable, net of reserve for doubtful accounts of $6,443 and $5,818
   
83,928
   
73,090
 
Inventories, net
   
81,513
   
66,438
 
Prepaid expenses and other
   
12,571
   
10,341
 
Prepaid taxes
   
16,159
   
17,986
 
Current deferred taxes
   
15,630
   
16,643
 
Total current assets
   
215,319
   
191,961
 
               
Property, plant and equipment, net of accumulated depreciation of $42,339 and $41,114
   
45,883
   
36,774
 
Goodwill
   
211,612
   
109,814
 
Other intangibles
   
125,686
   
52,522
 
Deferred tax assets
   
5,800
   
16,929
 
Other assets
   
2,526
   
3,079
 
Total assets
 
$
606,826
 
$
411,079
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
             
Current liabilities:
             
Current maturities of long-term debt
 
$
2,661
 
$
2,683
 
Accounts payable
   
36,904
   
26,576
 
Accrued expenses
   
84,607
   
95,581
 
Total current liabilities
   
124,172
   
124,840
 
Long-term debt
   
269,996
   
93,514
 
Other non-current liabilities
   
15,472
   
9,813
 
Stockholders' equity:
             
Preferred stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none issued
   
   
 
Common stock, $0.005 par value; 47,500,000 shares authorized; 20,817,536 and 20,732,836 shares issued in 2008 and 2007, respectively
   
120
   
120
 
Paid-in capital
   
105,947
   
104,782
 
Treasury stock at cost; 3,859,913 and 3,855,044 shares in 2008 and 2007, respectively
   
(90,014
)
 
(89,641
)
Retained earnings
   
180,077
   
166,896
 
Accumulated other comprehensive income
   
1,056
   
755
 
Total stockholders' equity
   
197,186
   
182,912
 
Total liabilities and stockholders' equity
 
$
606,826
 
$
411,079
 

See accompanying notes
 
1

 
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share Data)
(Unaudited)

   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
           
Net sales
 
$
160,883
 
$
105,695
 
Cost of sales
   
101,981
   
64,590
 
Gross profit
   
58,902
   
41,105
 
Selling and distribution expenses
   
16,245
   
11,116
 
General and administrative expenses
   
16,641
   
11,183
 
Income from operations
   
26,016
   
18,806
 
Interest expense and deferred financing amortization, net
   
3,703
   
1,244
 
Other expense (income), net
   
387
   
(107
)
Earnings before income taxes
   
21,926
   
17,669
 
Provision for income taxes
   
8,745
   
6,949
 
Net earnings
 
$
13,181
 
$
10,720
 
               
Net earnings per share:
             
Basic
 
$
0.82
 
$
0.69
 
               
Diluted
 
$
0.77
 
$
0.64
 
               
Weighted average number of shares
             
Basic
   
16,055
   
15,510
 
Dilutive stock options1
   
1,115
   
1,230
 
Diluted
   
17,170
   
16,740
 
 
1      There were no anti-dilutive stock options excluded from common stock equivalents for any period presented.

See accompanying notes
 
2


THE MIDDLEBY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
           
Cash flows from operating activities-
             
Net earnings
 
$
13,181
 
$
10,720
 
               
Adjustments to reconcile net earnings to cash provided by operating activities:
             
Depreciation and amortization
   
3,533
   
1,318
 
Deferred taxes
   
2,512
   
25
 
Non-cash share-based compensation
   
2,350
   
1,322
 
Unrealized loss on derivative financial instruments
   
204
   
 
Cash effects of changes in -
             
Accounts receivable, net
   
815
   
(2,121
)
Inventories, net
   
(1,558
)
 
(4,823
)
Prepaid expenses and other assets
   
3,767
   
(697
)
Accounts payable
   
5,461
   
907
 
Accrued expenses and other liabilities
   
(17,702
)
 
(11,086
)
               
Net cash provided by (used in) operating activities
   
12,563
   
(4,435
)
               
Cash flows from investing activities-
             
Net additions to property and equipment
   
(2,124
)
 
(598
)
Acquisition of Star
   
(188,068
)
 
 
Net cash (used in) investing activities
   
(190,192
)
 
(598
)
               
Cash flows from financing activities-
             
Net proceeds (repayments) under revolving credit facilities
   
176,350
   
9,450
 
Repayments under senior secured bank notes
   
   
(3,750
)
Repayments under foreign bank loan
   
(245
)
 
(1,077
)
Debt issuance costs
   
(162
)
 
 
Purchase of treasury stock
   
(373
)
 
 
Net proceeds from stock issuances
   
37
   
925
 
               
Net cash provided by (used in) financing activities
   
175,607
   
5,548
 
               
Effect of exchange rates on cash and cash equivalents
   
77
   
4
 
               
Changes in cash and cash equivalents-
             
               
Net (decrease) increase in cash and cash equivalents
   
(1,945
)
 
519
 
               
Cash and cash equivalents at beginning of year
   
7,463
   
3,534
 
               
Cash and cash equivalents at end of quarter
 
$
5,518
 
$
4,053
 
               
Supplemental disclosure of cash flow information:
             
Interest paid
 
$
2,359
 
$
1,038
 
Income tax payments
 
$
245
 
$
4,411
 

See accompanying notes
 
3

 
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
March 29, 2008
(Unaudited)

1)
Summary of Significant Accounting Policies

A) Basis of Presentation

The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company"), pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the financial statements and related notes contained in the company's 2007 Form 10-K.

In the opinion of management, the financial statements contain all adjustments necessary to present fairly the financial position of the company as of March 29, 2008 and December 29, 2007, and the results of operations for the three months ended March 29, 2008 and March 31, 2007 and cash flows for the three months ended March 29, 2008 and March 31, 2007.

B) Share-Based Compensation

Share-based compensation expense is calculated by estimating the fair value of market based stock awards and stock options at the time of grant and amortized over the stock options’ vesting period. Share-based compensation expense was $2.4 million and $1.3 million for the first quarter of 2008 and 2007, respectively.
 
4


C) Income Tax Contingencies

In July 2006, the Financial Accounting Standards Board, (“FASB”) issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This interpretation prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain tax position may be recognized only if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information. A tax benefit from an uncertain position was previously recognized if it was probable of being sustained. Under FIN 48, the liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within 12 months of the reporting date. FIN 48 is effective as of the beginning of the first fiscal year beginning after December 15, 2006. The company adopted the provisions of FIN 48 on the first day of fiscal 2007 as required.

As of December 29, 2007, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $7.7 million plus approximately $1.0 million of accrued interest and $1.3 million of penalties. As of March 29, 2008, the corresponding balance of liability for unrecognized tax benefits was approximately $8.0 million plus approximately $1.0 million of accrued interest and $1.3 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense, which is consistent with reporting in prior periods.

The company does not anticipate that total unrecognized tax benefits will significantly change due to any settlement of audits and the expiration of statute of limitations within the next twelve months.

The company operates in multiple taxing jurisdictions; both within the United States and outside of the United States, and faces audits from various tax authorities. The Company remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within specific countries, the company and its operating subsidiaries may be subject to audit by various tax authorities and may be subject to different statute of limitations expiration dates. A summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:

United States – federal
   
2005 - 2007
 
United States – states
   
2001 - 2007
 
China
   
2006 - 2007
 
Denmark
   
2006 - 2007
 
Mexico
   
2006 - 2007
 
Philippines
   
2004 - 2007
 
South Korea
   
2004 - 2007
 
Spain
   
2005 - 2007
 
Taiwan
   
2005 - 2007
 
United Kingdom
   
2006 - 2007
 
 
5

 
D) Fair Value Measures

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157 “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value in general accepted accounting principles and expands disclosure about fair value measurements. This statement is effective for interim reporting periods in fiscal years beginning after November 15, 2007. The company adopted SFAS No. 157 on December 30, 2007 (first day of fiscal year 2008). The adoption of SFAS No. 157 did not have a material impact on the financial statements.
 
FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” delays the effective date of the application of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis. The company adopted SFAS No. 157 with the exception of the application of the statement to non-recurring nonfinancial assets and liabilities. Non-recurring nonfinancial assets and nonfinancial liabilities for which the company has not applied the provisions of SFAS No. 157 primarily include those measured at fair value in goodwill and long-lived asset impairment testing, those initially measured at fair value in a business combination, and nonfinancial liabilities for exit or disposal activities.

SFAS No. 157 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3 – Unobservable inputs based on assumptions.

The company’s financial assets that are measured at fair value on a recurring basis are categorized using the fair value hierarchy and liabilities at March 29, 2008 are as follows (in thousands):

   
Fair Value
 
Fair Value
 
Fair Value
     
   
Level 1
 
Level 2
 
Level 3
 
Total
 
                   
Financial Assets:
                         
None
   
   
   
   
 
                           
Financial Liabilities:
                         
Interest rate swaps
   
  $
1,353
   
  $
1,353
 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on the financial statements. Upon adoption, the company has not elected to apply SFAS No. 159 to measure selected financial instruments and certain other items; therefore, there was no impact to the financial statements upon adoption. Subsequent to the initial adoption of SFAS No. 159, the company has not made any elections during the three months ended March 29, 2008.

6


2)
Acquisitions and Purchase Accounting

Jade

On April 1, 2007, the company completed its acquisition of the assets and operations of Jade Products Company (“Jade”), a leading manufacturer of commercial and residential cooking equipment from Maytag Corporation ("Maytag") for an aggregate purchase price of $7.4 million in cash plus transaction expenses. The purchase price is subject to adjustment based upon a working capital provision within the purchase agreement.

The company has accounted for this business combination using the purchase method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The allocation of the purchase price to the assets, liabilities and intangible assets is under review and is subject to change based upon finalization of the valuation of the assets and liabilities acquired.

The preliminary allocation of cash paid for the Jade acquisition is summarized as follows (in thousands):

   
Apr. 1, 2007
 
Adjustments
 
Mar. 29, 2008
 
Current assets
 
$
6,727
 
$
217
 
$
6,944
 
Property, plant and equipment
   
2,029
   
(172
)
 
1,857
 
Goodwill
   
250
   
(250
)
 
Other intangibles
   
1,590
   
(135
)
 
1,455
 
Deferred tax assets
   
   
841
   
841
 
Current liabilities
   
(3,205
)
 
(113
)
 
(3,318
)
                     
Total cash paid
 
$
7,391
 
$
388
 
$
7,779
 
 
Other intangibles of $1.3 million associated with the trade name, are subject to the non-amortization provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”, from the date of acquisition. Other intangibles of $0.2 million allocated to customer relationships are to be amortized over a periods of 10 years. Goodwill and other intangibles of Jade are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are expected to be deductible for tax purposes.

Carter-Hoffmann

On June 29, 2007, the company completed its acquisition of the assets and operations of Carter-Hoffmann (“Carter-Hoffmann”), a leading manufacturer of commercial cooking and warming equipment, from Carrier Commercial Refrigeration Inc., a subsidiary of Carrier Corporation, which is a unit of United Technologies Corporation, for an aggregate purchase price of $15.9 million in cash plus transaction expenses.

The company has accounted for this business combination using the purchase method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The allocation of the purchase price to the assets, liabilities and intangible assets is under review and is subject to change based upon finalization of the valuation of the assets and liabilities acquired.
 
7


The preliminary allocation of cash paid for the Carter-Hoffmann acquisition is summarized as follows (in thousands):

   
Jun. 29, 2007
 
Adjustments
 
Mar. 29, 2008
 
Current assets
 
$
7,912
 
$
(795
)
$
7,117
 
Property, plant and equipment
   
2,264
   
   
2,264
 
Goodwill
   
9,452
   
(6,950
)
 
2,502
 
Other intangibles
   
   
3,910
   
3,910
 
Deferred tax assets
   
   
4,199
   
4,199
 
Current liabilities
   
(3,646
)
 
(50
)
 
(3,696
)
Other non-current liabilities
   
(54
)
 
   
(54
)
                     
Total cash paid
 
$
15,928
 
$
314
 
$
16,242
 

The goodwill and $2.3 million of other intangibles associated with the trade name are subject to the non-amortization provisions of SFAS No. 142. Other intangibles also includes $1.6 million allocated to customer relationships are to be amortized over a period of 4 years. Goodwill and other intangibles of Carter-Hoffmann are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are expected to be deductible for tax purposes.

MP Equipment

On July 2, 2007, the company completed its acquisition of the assets and operations of MP Equipment (“MP Equipment”), a leading manufacturer of food processing equipment for a purchase price of $15.0 million in cash plus transaction expenses. An additional deferred payment of $2.0 million is also due to the seller at the earlier of three years or upon the achievement of reaching certain profit targets. An additional contingent payment of $1.0 million is also payable if the business reaches certain target profits.

The company has accounted for this business combination using the purchase method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The allocation of the purchase price to the assets, liabilities and intangible assets is under review and is subject to change based upon finalization of the valuation of the assets and liabilities acquired.

The preliminary allocation of cash paid for the MP Equipment acquisition is summarized as follows (in thousands):

   
Jul. 2, 2007
 
Adjustments
 
Mar. 29, 2008
 
Current assets
 
$
5,315
 
$
114
 
$
5,429
 
Property, plant and equipment
   
297
   
   
297
 
Goodwill
   
9,290
   
(4,682
)
 
4,608
 
Other intangibles
   
6,420
   
(770
)
 
5,650
 
Deferred tax assets
   
   
5,414
   
5,414
 
Other assets
   
16
   
   
16
 
Current liabilities
   
(4,018
)
 
   
(4,018
)
Other non-current liabilities
   
(2,127
)
 
   
(2,127
)
                     
Total cash paid
 
$
15,193
 
$
76
 
$
15,269
 

8


The goodwill and $3.3 million of other intangibles associated with the trade name are subject to the non-amortization provisions of SFAS No. 142. Other intangibles also includes $0.3 million allocated to backlog, $0.3 million allocated to developed technology and $1.8 million allocated to customer relationships which are to be amortized over periods of 6 months, 5 years and 5 years, respectively. Goodwill and other intangibles of MP Equipment are allocated to the Food Processing Equipment Group for segment reporting purposes. These assets are expected to be deductible for tax purposes.

Wells Bloomfield

On August 3, 2007, the company completed its acquisition of the assets and operations of Wells Bloomfield (“Wells Bloomfield”), a leading manufacturer of commercial cooking and beverage equipment from Carrier Commercial Refrigeration Inc., a subsidiary of Carrier Corporation, which is a unit of United Technologies Corporation, for an aggregate purchase price of $28.4 million in cash plus transaction expenses.

The company has accounted for this business combination using the purchase method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The allocation of the purchase price to the assets, liabilities and intangible assets is under review and is subject to change based upon finalization of the valuation of the assets and liabilities acquired.
 
The preliminary allocation of cash paid for the Wells Bloomfield acquisition is summarized as follows (in thousands):

   
Aug. 3, 2007
 
Adjustments
 
Mar. 29, 2008
 
Cash
 
$
2
 
$
 
$
2
 
Current assets
   
15,133
   
1,226
   
16,359
 
Property, plant and equipment
   
3,961
   
(5
)
 
3,956
 
Goodwill
   
5,835
   
(4,965
)
 
870
 
Other intangibles
   
8,130
   
(200
)
 
7,930
 
Deferred tax assets
   
   
5,579
   
5,579
 
Other assets
   
21
   
   
21
 
Current liabilities
   
(4,277
)
 
(1,534
)
 
(5,811
)
                     
Total cash paid
 
$
28,805
 
$
101
 
$
28,906
 

The goodwill and $5.5 million of other intangibles associated with the trade name are subject to the non-amortization provisions of SFAS No. 142. Other intangibles of $2.4 million allocated to customer relationships are to be amortized over a period of 4 years. Goodwill and other intangibles of Wells Bloomfield are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are expected to be deductible for tax purposes.
 
9


Star

On December 31, 2007, subsequent to the company’s fiscal 2007 year end, the company acquired the stock of New Star International Holdings, Inc. and subsidiaries (“Star”), a leading manufacturer of commercial cooking for an aggregate purchase price of $188.4 million in cash plus transaction expenses. The purchase price is subject to adjustment based upon a working capital provision within the purchase agreement.

The company has accounted for this business combination using the purchase method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The allocation of the purchase price to the assets, liabilities and intangible assets is under review and is subject to change based upon finalization of the valuation of the assets and liabilities acquired.

The preliminary allocation of cash paid for the Star acquisition is summarized as follows (in thousands):

   
Mar. 29, 2008
 
Cash
 
$
376
 
Current assets
   
27,783
 
Property, plant and equipment
   
8,225
 
Goodwill
   
101,365
 
Other intangibles
   
75,150
 
Other assets
   
71
 
Current liabilities
   
(11,394
)
Deferred tax liability
   
(8,837
)
Other non-current liabilities
   
(4.295
)
         
Total cash paid
 
$
188,444
 

The goodwill and $47.0 million of other intangibles associated with the trade name are subject to the non-amortization provisions of SFAS No. 142. Other intangibles also includes $0.4 million allocated to backlog, $3.8 million allocated to developed technology and $24.0 million allocated to customer relationships which are to be amortized over periods of 1 month, 7 years and 7 years, respectively. Goodwill and other intangibles of Star are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are not expected to be deductible for tax purposes.

3)
Stock Split
 
On May 3, 2007, the company’s Board of Directors authorized a two-for-one split of the company’s common stock in the form of a stock dividend. The stock dividend was paid on June 15, 2007 to company shareholders of record as of June 1, 2007. The company’s common stock began trading on a split-adjusted basis on June 18, 2007. All references in the accompanying condensed consolidated financial statements and notes thereto to net earnings per share and the number of shares have been adjusted to reflect this stock split.
 
10


4)
Litigation Matters
 
From time to time, the company is subject to proceedings, lawsuits and other claims related to products, suppliers, employees, customers and competitors. The company maintains insurance to partially cover product liability, workers compensation, property and casualty, and general liability matters.  The company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses.  A determination of the amount of accrual required, if any, for these contingencies is made after assessment of each matter and the related insurance coverage.  The reserve requirement may change in the future due to new developments or changes in approach such as a change in settlement strategy in dealing with these matters.  The company does not believe that any pending litigation will have a material adverse effect on its financial condition, results of operations or cash flows of the company.

5)
Recently Issued Accounting Standards
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on the financial statements.
 
In December 2007, the FAS issued SFAS No. 141R, “Business Combinations”. This statement provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. This statement also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. This statement is effective for business combinations occurring in fiscal years beginning after December 15, 2008. Early adoption of FASB Statement No. 141R is not permitted. The company is evaluating the impact the application of this guidance will have on the company’s financial position, results of operations and cash flows.
 
11


In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective as of the beginning of the company’s 2009 fiscal year, noncontrolling interests will be classified as equity in the company’s financial statements and income and comprehensive income attributed to the noncontrolling interest will be included in the company’s income and comprehensive income. The provisions of this standard must be applied retrospectively upon adoption. The company does not anticipate that the adoption of SFAS No. 160 will have a material impact on its financial statements. The Company will adopt this statement for acquisitions consummated after the statements effective date.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.” This statement amends SFAS No. 133 to require enhanced disclosures about an entity’s derivative and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The company is evaluating the impact the application of this guidance will have on the company’s financial position, results of operations and cash flows.

6)
Other Comprehensive Income

The company reports changes in equity during a period, except those resulting from investment by owners and distribution to owners, in accordance with SFAS No. 130, "Reporting Comprehensive Income."

Components of other comprehensive income were as follows (in thousands):

   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
           
Net earnings
 
$
13,181
 
$
10,720
 
Currency translation adjustment
   
845
   
32
 
Unrealized loss on
             
interest rate swaps, net of tax
   
(544
)
 
(136
)
               
Comprehensive income
 
$
13,482
 
$
10,616
 

Accumulated other comprehensive income is comprised of minimum pension liability of $(0.9) million, net of taxes of $(0.6) million, as of March 29, 2008 and December 29, 2007, foreign currency translation adjustments of $2.5 million as of March 29, 2008 and $1.7 million as of December 29, 2007, and an unrealized loss on interest rate swaps of $0.5 million, net of taxes of $0.4 million, as of March 29, 2008.

12

 
7)
Inventories

Inventories are composed of material, labor and overhead and are stated at the lower of cost or market. Costs for inventory at two of the company's manufacturing facilities have been determined using the last-in, first-out ("LIFO") method. These inventories under the LIFO method amounted to $16.6 million at March 29, 2008 and $16.4 million at December 29, 2007 and represented approximately 20% and 25% of the total inventory in each respective period. Costs for all other inventory have been determined using the first-in, first-out ("FIFO") method. The company estimates reserves for inventory obsolescence and shrinkage based on its judgment of future realization. Inventories at March 29, 2008 and December 29, 2007 are as follows:
 
   
Mar. 29, 2008
 
Dec. 29, 2007
 
   
(in thousands)
 
Raw materials and parts
 
$
24,882
 
$
25,047
 
Work-in-process
   
20,426
   
11,033
 
Finished goods
   
36,616
   
30,669
 
               
     
81,924
   
66,749
 
LIFO adjustment
   
(411
)
 
(311
)
               
   
$
81,513
 
$
66,438
 
 
8)
Accrued Expenses

Accrued expenses consist of the following:

   
Mar. 29, 2008
 
Dec, 29, 2007
 
   
(in thousands)
 
           
Accrued payroll and related expenses
 
$
13,707
 
$
21,448
 
Accrued warranty
   
13,326
   
12,276
 
Accrued customer rebates
   
8,970
   
16,326
 
Advance customer deposits
   
7,948
   
7,971
 
Accrued product liability and workers comp
   
7,946
   
6,978
 
Other accrued expenses
   
32,710
   
30,582
 
               
   
$
84,607
 
$
95,581
 

13

 
9)
Warranty Costs

In the normal course of business the company issues product warranties for specific product lines and provides for the estimated future warranty cost in the period in which the sale is recorded.  The estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Because warranty estimates are forecasts that are based on the best available information, claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.

A rollforward of the warranty reserve is as follows:

   
Three Months Ended
 
   
Mar. 29, 2008
 
   
(in thousands)
 
       
Beginning balance
 
$
12,276
 
Warranty reserve related to acquisitions
   
1,030
 
Warranty expense
   
3,625
 
Warranty claims
   
(3,605
)
Ending balance
 
$
13,326
 
 
10)
Financing Arrangements

   
Mar. 29, 2008
 
Dec. 29, 2007
 
   
(in thousands)
 
Senior secured revolving credit line
 
$
267,700
 
$
91,350
 
Foreign loan
   
4,957
   
4,847
 
Total debt
 
$
272,657
 
$
96,197
 
               
Less: Current maturities of long-term debt
   
2,661
   
2,683
 
               
Long-term debt
 
$
269,996
 
$
93,514
 
 
During the fourth quarter of 2007 the company entered into a new senior secured credit facility. Terms of the senior credit agreement provide for $450.0 million of availability under a revolving credit line. As of March 29, 2008, the company had $267.7 million of borrowings outstanding under this facility. The company also has $4.1 million in outstanding letters of credit, which reduces the borrowing availability under the revolving credit line.

Borrowings under the senior secured credit facility are assessed at an interest rate at 1.25% above LIBOR for long-term borrowings or at the higher of the Prime rate and the Federal Funds Rate. At March 29, 2008 the average interest rate on the senior debt amounted to 4.21%. The interest rates on borrowings under the senior bank facility may be adjusted quarterly based on the company’s defined indebtedness ratio on a rolling four-quarter basis. Additionally, a commitment fee, based upon the indebtedness ratio is charged on the unused portion of the revolving credit line. This variable commitment fee amounted to 0.25% as of March 29, 2008.

14


In August 2006, the company completed its acquisition of Houno A/S in Denmark. This acquisition was funded in part with locally established debt facilities with borrowings in Danish Krone.  On March 29, 2008 these facilities amounted to $5.0 million in US dollars, including $2.6 million outstanding under a revolving credit facility and $2.4 million of a term loan.  The interest rate on the revolving credit facility is assessed at 1.25% above Euro LIBOR, which amounted to 5.41% on March 29, 2008. The term loan matures in 2013 and the interest rate is assessed at 5.62%.

The company has historically entered into interest rate swap agreements to effectively fix the interest rate on its outstanding debt. The agreements swap one-month LIBOR for fixed rates. As of March 29, 2008 the company had the following interest rate swaps in effect:

   
Fixed
         
Notional
 
Interest
 
Effective
 
Maturity
 
Amount
 
Rate
 
Date
 
Date
 
               
$  10,000,000
   
5.030
%
 
03/03/06
   
12/21/09
 
$  10,000,000
   
2.520
%
 
2/13/2008
   
2/19/2009
 
$  20,000,000
   
2.635
%
 
2/6/2008
   
2/6/2009
 
$  25,000,000
   
3.350
%
 
1/14/2008
   
1/14/2010
 
$  10,000,000
   
2.920
%
 
2/1/2008
   
2/1/2010
 
$  10,000,000
   
2.785
%
 
2/6/2008
   
2/6/2010
 
$  10,000,000
   
3.033
%
 
2/6/2008
   
2/6/2011
 
$  10,000,000
   
2.820
%
 
2/1/2008
   
2/1/2009
 
 
The terms of the senior secured credit facility limit the paying of dividends, capital expenditures and leases, and require, among other things, certain ratios of indebtedness and fixed charge coverage. The credit agreement also provides that if a material adverse change in the company’s business operations or conditions occurs, the lender could declare an event of default. Under terms of the agreement a material adverse effect is defined as (a) a material adverse change in, or a material adverse effect upon, the operations, business properties, condition (financial and otherwise) or prospects of the company and its subsidiaries taken as a whole; (b) a material impairment of the ability of the company to perform under the loan agreements and to avoid any event of default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the company of any loan document. A material adverse effect is determined on a subjective basis by the company's creditors. The credit facility is secured by the capital stock of the company’s domestic subsidiaries, 65% of the capital stock of the company’s foreign subsidiaries and substantially all other assets of the company. At March 29, 2008, the company was in compliance with all covenants pursuant to its borrowing agreements.

15

 
11)
Financial Instruments

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments. The statement requires an entity to recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Derivatives that do not qualify as a hedge must be adjusted to fair value in earnings. If the derivative does qualify as a hedge under SFAS No. 133, changes in the fair value will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments or recognized in other accumulated comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a hedge's change in fair value will be immediately recognized in earnings.

Foreign Exchange: The company has entered into derivative instruments, principally forward contracts to reduce exposures pertaining to fluctuations in foreign exchange rates. As of March 29, 2008 the company had no forward contracts outstanding.

The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swap one-month LIBOR for a fixed rates. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of March 29, 2008, the fair value of these instruments was $1.4 million. The change in fair value of these swap agreements in the first three months of 2008 was a loss of $0.5 million, net of taxes.

   
Fixed
             
Changes
 
Notional
 
Interest
 
Effective
 
Maturity
 
Fair Value
 
In Fair Value
 
Amount
 
Rate
 
Date
 
Date
 
Mar. 29, 2008
 
(net of taxes)
 
                       
$    10,000,000
   
5.030
%
 
03/03/06
   
12/21/09
  $
(462,000
)
$
(9,000
)1 
$    10,000,000
   
2.520
%
 
2/13/2008
   
2/19/2009
  $
(28,000
)
$
(17,000
)
$    20,000,000
   
2.635
%
 
2/6/2008
   
2/6/2009
  $
(65,000
)
$
(39,000
)
$    25,000,000
   
3.350
%
 
1/14/2008
   
1/14/2010
  $
(464,000
)
$
(278,000
)
$    10,000,000
   
2.920
%
 
2/1/2008
   
2/1/2010
  $
(106,000
)
$
(64,000
)
$    10,000,000
   
2.785
%
 
2/6/2008
   
2/6/2010
  $
(47,000
)
$
(28,000
)
$    10,000,000
   
3.033
%
 
2/6/2008
   
2/6/2011
  $
(81,000
)
$
(49,000
)
$    10,000,000
   
2.820
%
 
2/1/2008
   
2/1/2009
  $
(100,000
)
$
(60,000
)

1
Previous to the fiscal quarter ended March 29, 2008, this swap had not been designated as an effective cash flow hedge. The swap was designated as an effective cash flow hedge during the quarter ended March 29, 2008. In accordance with SFAS No. 133, the net reduction of $0.2 million in the fair value of this swap prior to the designation date has been recorded as a loss in earnings for the first quarter 2008.

16

 
12)
Segment Information

The company operates in three reportable operating segments defined by management reporting structure and operating activities.

The Commercial Foodservice Equipment business group manufactures cooking equipment for the restaurant and institutional kitchen industry. This business segment has manufacturing facilities in California, Illinois, Michigan, Missouri, Nevada, New Hampshire, North Carolina, Tennessee, Vermont, Denmark and the Philippines. The Commercial Foodservice Equipment group manufactures conveyor ovens, convection ovens, fryers, ranges, toasters, combi ovens, steamers, broilers, deck ovens, baking ovens, proofers, beverage systems and beverage dispensing equipment, counter-top cooking and warming equipment. This business segment’s principal product lines include Middleby Marshall® and CTX® conveyor oven equipment, Blodgett® convection ovens, conveyor ovens, deck oven equipment, Blodgett Combi® cooking equipment, Blodgett Range® ranges, Nu-Vu® baking ovens and proofers, Pitco Frialator® fryer equipment, Southbend® ranges, convection ovens and heavy-duty cooking equipment, Toastmaster® toasters and counterline cooking and warming equipment, Jade Range® ranges and ovens, Carter Hoffmann® warming, holding and transporting equipment, Bloomfield® beverage systems and beverage dispensing equipment, Wells® convection ovens, counterline cooking equipment and ventless cooking systems, Star® light duty cooking equipment, Holman® toasting equipment, Lang® ovens and ranges, Houno® combi-ovens and baking ovens and MagiKitch'n® charbroilers and catering equipment.   

The Food Processing Equipment business group manufactures cooking and packaging equipment for the food processing industry. This business segment has manufacturing facilities in Georgia and Wisconsin. Its principal products include Alkar® batch ovens, conveyorized ovens and continuous process ovens, RapidPak® food packaging machinery and MP Equipment® breading, battering, mixing, forming, and slicing equipment.

The International Distribution Division provides integrated sales, export management, distribution and installation services through its operations in China, India, Lebanon, Mexico, the Philippines, Russia, South Korea, Spain, Sweden, Taiwan and the United Kingdom. The division sells the company’s product lines and certain non-competing complementary product lines throughout the world. For a local country distributor or dealer, the company is able to provide a centralized source of foodservice equipment with complete export management and product support services.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief decision maker evaluates individual segment performance based on operating income. Management believes that intersegment sales are made at established arms-length transfer prices.

17

 
Net Sales Summary
(dollars in thousands)

   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
   
Sales
 
Percent
 
Sales
 
Percent
 
                   
Business Divisions:
                 
Commercial Foodservice
 
$
134,016
   
83.3
 
$
90,539
   
85.7
 
Food Processing
   
19,888
   
12.4
   
12,196
   
11.5
 
International Distribution(1)
   
15,793
   
9.8
   
13,576
   
12.8
 
                           
Intercompany sales (2)
   
(8,814
)
 
(5.5
)
 
(10,616
)
 
(10.0
)
Total
 
$
160,883
   
100.0
%
$
105,695
   
100.0
%
 
(1)
Consists of sales of products manufactured by Middleby and products  manufactured by third parties.

(2)
Represents the elimination of sales from the Commercial Foodservice Equipment Group to the International Distribution Division. 
 
The following table summarizes the results of operations for the company's business segments(1)(in thousands):

   
Commercial
 
Food
 
International
 
Corporate
         
   
Foodservice
 
Processing
 
Distribution
 
and Other(2)
 
Eliminations(3)
 
Total
 
Three months ended March 29, 2008
                         
Net sales
 
$
134,016
 
$
19,888
 
$
15,793
 
$
 
$
(8,814
)
$
160,883
 
Operating income
   
30,547
   
2,789
   
1,074
   
(8,442
)
 
48
   
26,016
 
Depreciation expense
   
1,269
   
104
   
52
   
37
   
   
1,462
 
Net capital expenditures
   
1,899
   
51
   
152
   
22
   
   
2,124
 
                                       
Total assets
   
475,583
   
68,202
   
29,887
   
43,634
   
(10,480
)
 
606,826
 
Long-lived assets(4)
   
335,317
   
37,766
   
713
   
17,711
   
   
391,507
 
                                       
Three months ended March 31, 2007
                                     
Net sales
 
$
90,539
 
$
12,196
 
$
13,576
 
$
 
$
(10,616
)
$
105,695
 
Operating income
   
21,788
   
2,400
   
846
   
(6,282
)
 
54
   
18,806
 
Depreciation expense
   
695
   
127
   
43
   
36
   
   
901
 
Net capital expenditures
   
520
   
6
   
11
   
61
   
   
598
 
                                       
Total assets
   
217,440
   
49,241
   
29,430
   
1,985
   
(6,523
)
 
291,573
 
Long-lived assets(4)
   
129,492
   
27,736
   
433
   
8,878
   
   
166,539
 
 
(1)
Non-operating expenses are not allocated to the operating segments. Non-operating expenses consist of interest expense and deferred financing amortization, foreign exchange gains and losses and other income and expense items outside of income from operations.
 
(2)
Includes corporate and other general company assets and operations.

(3)
Includes elimination of intercompany sales, profit in inventory and intercompany receivables. Intercompany sale transactions are   predominantly from the Commercial Foodservice Equipment Group to the International Distribution Division.

(4)
Long-lived assets of the Commercial Foodservice Equipment Group includes assets located in the Philippines which amounted to $1,907 and $1,975 in first quarter 2008 and 2007, respectively and assets located in Denmark which amounted to $2,625 and $1,042 in first quarter 2008 and 2007, respectively.
 
18

 
Net sales by major geographic region, including those sales from the Commercial Foodservice Equipment Group direct to international customers, were as follows (in thousands):
 
   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
               
United States and Canada
 
$
132,953
 
$
86,032
 
Asia
   
7,152
   
5,473
 
Europe and Middle East
   
16,371
   
10,777
 
Latin America
   
4,407
   
3,413
 
               
Net sales
 
$
160,883
 
$
105,695
 
 
13)
Employee Retirement Plans

(a) Pension Plans

The company maintains a non-contributory defined benefit plan for its union employees at the Elgin, Illinois facility. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2002 and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 30, 2002 upon reaching retirement age. The employees participating in the defined benefit plan were enrolled in a newly established 401K savings plan on September 30, 2002, further described below.

The company also maintains a retirement benefit agreement with its Chairman. The retirement benefits are based upon a percentage of the Chairman’s final base salary. Additionally, the company maintains a retirement plan for non-employee directors. The plan provides for an annual benefit upon a change in control of the company or retirement from the Board of Directors at age 70, equal to 100% of the director’s last annual retainer, payable for a number of years equal to the director’s years of service up to a maximum of 10 years.

Contributions under the union plan are funded in accordance with provisions of The Employee Retirement Income Security Act of 1974. There are no contributions expected to be made in 2008. Contributions to the directors' plan are based upon actual retirement benefits as they retire.
 
(b) 401K Savings Plans

The company maintains two separate defined contribution 401K savings plans covering all employees in the United States. These two plans separately cover the union employees at the Elgin, Illinois facility and all other remaining union and non-union employees in the United States. The company makes profit sharing contributions to the various plans in accordance with the requirements of the plan. Profit sharing contributions for the Elgin Union 401K savings plans are made in accordance with the agreement.
 
19

 
14)
Subsequent Events

On April 22, 2008, the company completed its acquisition of Giga Grandi Cucine, S.r.l for 12.9 Euro including 6.2 million Euro paid in cash at closing, 3.4 million of deferred payments due to the sellers, and 3.3 million Euro in assumed debt. Giga is a leading European manufacturer of a broad line of commercial cooking equipment, including ranges, ovens and steam cooking equipment.

On April 23, 2008, the company completed its acquisition of the net assets and related business operations of FriFri aro SA from the Franke Group. FriFri is a leading European manufacturer of frying systems.
 
20


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Informational Note

This report contains forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The company cautions readers that these projections are based upon future results or events and are highly dependent upon a variety of important factors which could cause such results or events to differ materially from any forward-looking statements which may be deemed to have been made in this report, or which are otherwise made by or on behalf of the company. Such factors include, but are not limited to, volatility in earnings resulting from goodwill impairment losses which may occur irregularly and in varying amounts; variability in financing costs; quarterly variations in operating results; dependence on key customers; international exposure; foreign exchange and political risks affecting international sales; ability to protect trademarks, copyrights and other intellectual property; changing market conditions; the impact of competitive products and pricing; the timely development and market acceptance of the company’s products; the availability and cost of raw materials; and other risks detailed herein and from time-to-time in the company’s Securities and Exchange Commission filings, including the company’s 2007 Annual Report on Form 10-K.
 
21

 
Net Sales Summary
(dollars in thousands)

   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
   
Sales
 
Percent
 
Sales
 
Percent
 
                   
Business Divisions:
                         
Commercial Foodservice
 
$
134,016
   
83.3
 
$
90,539
   
85.7
 
Food Processing
   
19,888
   
12.4
   
12,196
   
11.5
 
International Distribution(1)
   
15,793
   
9.8
   
13,576
   
12.8
 
                           
Intercompany sales (2)
   
(8,814
)
 
(5.5
)
 
(10,616
)
 
(10.0
)
Total
 
$
160,883
   
100.0
%
$
105,695
   
100.0
%
 
(1)
Consists of sales of products manufactured by Middleby and products  manufactured by third parties.

(2)
Represents the elimination of sales from the Commercial Foodservice Equipment Group to the International Distribution Division. 

Results of Operations

The following table sets forth certain consolidated statements of earnings items as a percentage of net sales for the periods.
 
   
Three Months Ended
 
   
Mar. 29, 2008
 
Mar. 31, 2007
 
Net sales
   
100.0
%
 
100.0
%
Cost of sales
   
63.4
   
61.1
 
Gross profit
   
36.6
   
38.9
 
Selling, general and administrative expenses
   
20.4
   
21.1
 
Income from operations
   
16.2
   
17.8
 
Net interest expense and deferred financing amortization
   
2.3
   
1.2
 
Other (income) expense, net
   
0.2
   
(0.1
)
Earnings before income taxes
   
13.7
   
16.7
 
Provision for income taxes
   
5.5
   
6.6
 
Net earnings
   
8.2
%
 
10.1
%

22


Three Months Ended March 29, 2008 Compared to Three Months Ended March 31, 2007

NET SALES. Net sales for the first quarter of fiscal 2008 were $160.9 million as compared to $105.7 million in the first quarter of 2007.

Net sales at the Commercial Foodservice Equipment Group amounted to $134.0 million in the first quarter of 2008 as compared to $90.5 million in the prior year quarter.

Net sales from the acquisitions of Jade, Carter-Hoffmann, Wells Bloomfield and Star which were acquired on April 1, 2007, June 29, 2007, August 3, 2007 and December 31, 2007, respectively, accounted for an increase of $45.6 million during the first quarter of 2008. Excluding the impact of acquisitions, net sales of commercial foodservice equipment were flat, reflecting the impact of deferred customer purchases due to slowed economic conditions.

Net sales for the Food Processing Equipment Group amounted to $19.9 million in the first quarter of 2008 as compared to $12.2 million in the prior year quarter. Net sales of MP Equipment, which was acquired on July 2, 2007, accounted for an increase of $9.7 million. Excluding the impact of acquisitions, net sales of food processing equipment decreased $2.0 million due to delayed customer purchases as a result of economic uncertainties and quarterly variations which occur as a result of the timing of large orders. 

Net sales at the International Distribution Division increased by $2.2 million to $15.8 million or 16%, reflecting higher sales in Asia, Europe and Latin America. Increased international sales reflect increased business with restaurant chains and increased pricing competitiveness driven by the weakened US dollar.

GROSS PROFIT. Gross profit increased to $58.9 million in the first quarter of 2008 from $41.1 million in the prior year period, reflecting the impact of higher sales volumes. The gross margin rate was 36.6% in the first quarter of 2008 as compared to 38.9% in the prior year quarter. The net decrease in the gross margin rate reflects:

 
·
Acquisition accounting adjustments of $1.5 million to revalue inventories related to Star which reduced gross margins in the first quarter.

 
·
The adverse impact of steel costs which have risen significantly from the prior year quarter.

 
·
Lower margins at the newly acquired Jade, Carter-Hoffmann, MP Equipment, Wells Bloomfield and Star operations which are in the process of being integrated within the company.
 
23


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses increased from $22.3 million in the first quarter of 2007 to $32.9 million in the first quarter of 2008. As a percentage of net sales, operating expenses decreased from 21.1% in the first quarter of 2007 to 20.4% in the first quarter of 2008. Selling expenses increased from $11.1 million in the first quarter of 2007 to $16.2 million in the first quarter of 2008, reflecting $5.2 million of incremental costs associated with the acquisitions of Jade completed on April 1, 2007, Carter-Hoffmann, completed June 29, 2007, MP Equipment, completed July 2, 2007, Wells Bloomfield, completed August 3, 2007 and Star completed on December 31, 2007. General and administrative expenses increased from $11.2 million in the first quarter of 2007 to $16.6 million in the first quarter of 2008. General and administrative expenses reflects $4.5 million of costs associated with the acquired operations of Jade, Carter-Hoffmann, MP Equipment, Wells Bloomfield and Star. Increased general and administrative costs also include increased non-cash stock compensation costs which increased by $1.2 million from the prior year first quarter.

NON-OPERATING EXPENSES. Interest and deferred financing amortization costs increased to $3.7 million in the first quarter of 2008 as compared to $1.2 million in the first quarter of 2007, due to increased borrowings resulting from recent acquisitions. Other expense of $0.4 million in the first quarter of 2008 compared unfavorably to other income of $0.1 million in the prior year first quarter. Other expense in the first quarter of 2008 included $0.2 million of unrealized losses on financing derivatives and $0.2 million of foreign exchange losses.

INCOME TAXES. A tax provision of $8.7 million, at an effective rate of 40%, was recorded during the first quarter of 2008, as compared to a $6.9 million provision at a 39% effective rate in the prior year quarter.

Financial Condition and Liquidity

During the three months ended March 29, 2008, cash and cash equivalents decreased by $2.0 million to $5.5 million at March 29, 2008 from $7.5 million at December 29, 2007. Net borrowings increased from $96.2 million at December 29, 2007 to $272.7 million at March 29, 2008.

OPERATING ACTIVITIES. Net cash provided by operating activities was $12.6 million for the three-month period ended March 29, 2008 compared to cash used of $4.4 million for the three-month period ended March 31, 2007.

During the three months ended March 29, 2008, working capital levels changed due to normal business fluctuations, including the impact of increased seasonal working capital needs. The changes in working capital included a $0.8 million decrease in accounts receivable, a $1.6 million increase in inventory, a $3.8 million decrease in prepaid expenses and other assets and a $5.5 million increase in accounts payable. Accrued expenses and other non-current liabilities also decreased by $17.7 million reflecting first quarter payout of customer rebates and incentive compensation related to prior year programs.

INVESTING ACTIVITIES. During the three months ended March 29, 2008, net cash used in investing activities amounted to $190.2 million. This includes $188.1 million associated with the acquisition of Star, $1.2 million associated with the purchase of a manufacturing facility for Carter Hoffmann which had been leased and $0.9 million of capital expenditures associated with additions and upgrades of production equipment.
 
24


FINANCING ACTIVITIES. Net cash flows provided by financing activities were $175.6 million during the three months ended March 29, 2008. The net increase in debt includes $176.3 million in borrowings under the company’s $450 million revolving credit facility and $0.2 million of repayments of foreign bank loans.

At March 29, 2008, the company was in compliance with all covenants pursuant to its borrowing agreements. Management believes that future cash flows from operating activities and borrowing availability under the revolving credit facility will provide the company with sufficient financial resources to meet its anticipated requirements for working capital, capital expenditures and debt amortization for the foreseeable future.

Recently Issued Accounting Standards
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on the financial statements.

In December 2007, the FAS issued SFAS No. 141R, “Business Combinations”. This statement provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. This statement also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. This statement is effective for business combinations occurring in fiscal years beginning after December 15, 2008. Early adoption of FASB Statement No. 141R is not permitted. The company is evaluating the impact the application of this guidance will have on the company’s financial position, results of operations and cash flows. The Company will adopt this statement for acquisitons consummated after the statements effective date.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective as of the beginning of the company’s 2009 fiscal year, noncontrolling interests will be classified as equity in the company’s financial statements and income and comprehensive income attributed to the noncontrolling interest will be included in the company’s income and comprehensive income. The provisions of this standard must be applied retrospectively upon adoption. The company does not anticipate that the adoption of SFAS No. 160 will have a material impact on its financial statements.
 
25

 
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.” This statement amends SFAS No. 133 to require enhanced disclosures about an entity’s derivative and hedging activities. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The company is evaluating the impact the application of this guidance will have on the company’s financial position, results of operations and cash flows.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations are based upon the company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. On an ongoing basis, the company evaluates its estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
 
Revenue Recognition.The company recognizes revenue on the sale of its products when risk of loss has passed to the customer, which occurs at the time of shipment, and collectibility is reasonably assured. The sale prices of the products sold are fixed and determinable at the time of shipment. Sales are reported net of sales returns, sales incentives and cash discounts based on prior experience and other quantitative and qualitative factors.

At the food processing equipment group, the company enters into long-term sales contracts for certain products. Revenue under these long term sales contracts is recognized using the percentage of completion method prescribed by Statement of Position No. 81-1 due to the length of time to fully manufacture and assemble the equipment. The company measures revenue recognized based on the ratio of actual labor hours incurred in relation to the total estimated labor hours to be incurred related to the contract. Because estimated labor hours to complete a project are based upon forecasts using the best available information, the actual hours may differ from the original estimates. The percentage of completion method of accounting for these contracts most accurately reflects the status of these uncompleted contracts in the company’s financial statements and most accurately measures the matching of revenues and expenses. At the time a loss on a contract becomes known, the amount of the estimated loss is recognized in the consolidated financial statements.
 
Property and equipment: Property and equipment are depreciated or amortized on a straight-line basis over their useful lives based on management's estimates of the period over which the assets will be utilized to benefit the operations of the company. The useful lives are estimated based on historical experience with similar assets, taking into account anticipated technological or other changes.  The company periodically reviews these lives relative to physical factors, economic factors and industry trends. If there are changes in the planned use of property and equipment or if technological changes were to occur more rapidly than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods.

Long-lived assets: Long-lived assets (including goodwill and other intangibles) are reviewed for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In assessing the recoverability of the company's long-lived assets, the company considers changes in economic conditions and makes assumptions regarding estimated future cash flows and other factors.  Estimates of future cash flows are judgments based on the company's experience and knowledge of operations.  These estimates can be significantly impacted by many factors including changes in global and local business and economic conditions, operating costs, inflation, competition, and consumer and demographic trends.  If the company's estimates or the underlying assumptions change in the future, the company may be required to record impairment charges.

Warranty: In the normal course of business the company issues product warranties for specific product lines and provides for the estimated future warranty cost in the period in which the sale is recorded.  The estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Because warranty estimates are forecasts that are based on the best available information, claims costs may differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.
 
26


Litigation: From time to time, the company is subject to proceedings, lawsuits and other claims related to products, suppliers, employees, customers and competitors. The company maintains insurance to partially cover product liability, workers compensation, property and casualty, and general liability matters.  The company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses.  A determination of the amount of accrual required, if any, for these contingencies is made after assessment of each matter and the related insurance coverage.  The reserve requirements may change in the future due to new developments or changes in approach such as a change in settlement strategy in dealing with these matters.  The company does not believe that any pending litigation will have a material adverse effect on its financial condition or results of operations.

Income taxes: The company operates in numerous foreign and domestic taxing jurisdictions where it is subject to various types of tax, including sales tax and income tax.  The company's tax filings are subject to audits and adjustments. Because of the nature of the company’s operations, the nature of the audit items can be complex, and the objectives of the government auditors can result in a tax on the same transaction or income in more than one state or country.  The company initially recognizes the financial statement effects of a tax position when it more likely than not, based on the technical merits, that the position will be sustained upon examiniation. For tax positions that meet the more-likely-than-not recognition threshold, the company initially and subsequently measures its tax positions as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon effective settlement with the taxing authority. As part of the company's calculation of the provision for taxes, the company has recorded liabilities on various tax positions that are currently under audit by the taxing authorities. The liabilities may change in the future upon effective settlement of the tax positions.

Contractual Obligations

The company's contractual cash payment obligations as of March 29, 2008 are set forth below (in thousands):

 
                 
Total
 
   
Deferred
         
Idle
 
Contractual
 
   
Acquisition
 
Long-term
 
Operating
 
Facility
 
Cash
 
   
Costs
 
Debt
 
Leases
 
Leases
 
Obligations
 
                       
Less than 1 year
 
$
 
$
2,661
 
$
2,661
 
$
332
 
$
5,654
 
1-3 years
   
2,000
   
482
   
3,350
   
793
   
6,625
 
3-5 years
   
   
1,814
   
903
   
870
   
3,587
 
After 5 years
   
   
267,700
   
53
   
1,031
   
268,784
 
                                 
   
$
2,000
 
$
272,657
 
$
6,967
 
$
3,026
 
$
284,650
 

Idle facility leases consists of an obligation for a manufacturing location that was exited in conjunction with the company's manufacturing consolidation efforts. This lease obligation continues through June 2015. This facility has been subleased. The obligation presented above does not reflect any anticipated sublease income from the facilities.

27


The projected benefit obligation of the company’s defined benefit plans exceeded the plans’ assets by $4.6 million at the end of 2007 as compared to $3.5 million at the end of 2006. The unfunded benefit obligations were comprised of a $0.6 million under funding of the company's union plan and $4.0 million of under funding of the company's director plans. The company does not expect to contribute to the director plans in 2008. The company made minimum contributions required by the Employee Retirement Income Security Act of 1974 (“ERISA”) of $0.1 million in 2007 to the company's union plan. The company does not expect to make contributions in 2008 to the union plan.

The company has $4.1 million in outstanding letters of credit, which expire on March 29, 2009, to secure potential obligations under insurance programs.

The company places purchase orders with its suppliers in the ordinary course of business. These purchase orders are generally to fulfill short-term manufacturing requirements of less than 90 days and most are cancelable with a restocking penalty. The company has no long-term purchase contracts or minimum purchase obligations with any supplier.

The company has contractual obligations under its various debt agreements to make interest payments. These amounts are subject to the level of borrowings in future periods and the interest rate for the applicable periods, and therefore the amounts of these payments is not determinable.
 
The company has an obligation to make $2.0 million of purchase price payments to the sellers of MP Equipment that were deferred in conjunction with the acquisition.

The company has no activities, obligations or exposures associated with off-balance sheet arrangements.

28


Item 3. Quantitative and Qualitative Disclosures About Market  Risk

Interest Rate Risk

The company is exposed to market risk related to changes in interest rates. The following table summarizes the maturity of the company’s debt obligations.

   
Fixed
 
Variable
 
   
Rate
 
Rate
 
Twelve Month Period Ending
 
Debt
 
Debt
 
 
 
(in thousands)
 
           
March 29, 2009
 
$
 
$
2,661
 
March 29, 2010
   
   
241
 
March 29, 2011
   
   
241
 
March 29, 2012
   
   
241
 
March 29, 2013
   
   
269,273
 
               
 
 
$
 
$
272,657
 
 
During the fourth quarter of 2007 the company entered into a new senior secured credit facility. Terms of the senior credit agreement provide for $450.0 million of availability under a revolving credit line. As of March 29, 2008, the company had $267.7 million of borrowings outstanding under this facility. The company also has $4.1 million in outstanding letters of credit, which reduces the borrowing availability under the revolving credit line.

Borrowings under the senior secured credit facility are assessed at an interest rate at 1.25% above LIBOR for long-term borrowings or at the higher of the Prime rate and the Federal Funds Rate. At March 29, 2008 the average interest rate on the senior debt amounted to 4.21%. The interest rates on borrowings under the senior bank facility may be adjusted quarterly based on the company’s defined indebtedness ratio on a rolling four-quarter basis. Additionally, a commitment fee, based upon the indebtedness ratio is charged on the unused portion of the revolving credit line. This variable commitment fee amounted to 0.25% as of March 29, 2008.

In August 2006, the company completed its acquisition of Houno A/S in Denmark. This acquisition was funded in part with locally established debt facilities with borrowings in Danish Krone.  On March 29, 2008 these facilities amounted to $5.0 million in US dollars, including $2.6 million outstanding under a revolving credit facility and $2.4 million of a term loan.  The interest rate on the revolving credit facility is assessed at 1.25% above Euro LIBOR, which amounted to 5.41% on March 29, 2008. The term loan matures in 2013 and the interest rate is assessed at 5.62%.

29

 
The company has historically entered into interest rate swap agreements to effectively fix the interest rate on its outstanding debt. The agreements swap one-month LIBOR for fixed rates. As of March 29, 2008 the company had the following interest rate swaps in effect:

   
Fixed
         
Notional
 
Interest
 
Effective
 
Maturity
 
Amount
 
Rate
 
Date
 
Date
 
               
$   10,000,000
   
5.030
%
 
03/03/06
   
12/21/09
 
$   10,000,000
   
2.520
%
 
2/13/2008
   
2/19/2009
 
$   20,000,000
   
2.635
%
 
2/6/2008
   
2/6/2009
 
$   25,000,000
   
3.350
%
 
1/14/2008
   
1/14/2010
 
$   10,000,000
   
2.920
%
 
2/1/2008
   
2/1/2010
 
$   10,000,000
   
2.785
%
 
2/6/2008
   
2/6/2010
 
$   10,000,000
   
3.033
%
 
2/6/2008
   
2/6/2011
 
$   10,000,000
   
2.820
%
 
2/1/2008
   
2/1/2009
 

The terms of the senior secured credit facility limit the paying of dividends, capital expenditures and leases, and require, among other things, certain ratios of indebtedness and fixed charge coverage. The credit agreement also provides that if a material adverse change in the company’s business operations or conditions occurs, the lender could declare an event of default. Under terms of the agreement a material adverse effect is defined as (a) a material adverse change in, or a material adverse effect upon, the operations, business properties, condition (financial and otherwise) or prospects of the company and its subsidiaries taken as a whole; (b) a material impairment of the ability of the company to perform under the loan agreements and to avoid any event of default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the company of any loan document. A material adverse effect is determined on a subjective basis by the company's creditors. The credit facility is secured by the capital stock of the company’s domestic subsidiaries, 65% of the capital stock of the company’s foreign subsidiaries and substantially all other assets of the company. At March 29, 2008, the company was in compliance with all covenants pursuant to its borrowing agreements.
 
30


Financing Derivative Instruments

The company has entered into interest rate swaps to fix the interest rate applicable to certain of its variable-rate debt. The agreements swap one-month LIBOR for a fixed rates. The company has designated these swaps as cash flow hedges and all changes in fair value of the swaps are recognized in accumulated other comprehensive income. As of March 29, 2008, the fair value of these instruments was $1.4 million. The change in fair value of these swap agreements in the first three months of 2008 was a loss of $0.5 million, net of taxes.

A summary of the company’s interest rate swaps is as follows:

   
Fixed
             
Changes
 
Notional
 
Interest
 
Effective
 
Maturity
 
Fair Value
 
In Fair Value
 
Amount
 
Rate
 
Date
 
Date
 
Mar. 29, 2008
 
(net of taxes)
 
                       
$    10,000,000
   
5.030
%
 
03/03/06
   
12/21/09
  $
(462,000
)
$
(9,000
)1 
$    10,000,000
   
2.520
%
 
2/13/2008
   
2/19/2009
  $
(28,000
)
$
(17,000
)
$    20,000,000
   
2.635
%
 
2/6/2008
   
2/6/2009
  $
(65,000
)
$
(39,000
)
$    25,000,000
   
3.350
%
 
1/14/2008
   
1/14/2010
  $
(464,000
)
$
(278,000
)
$    10,000,000
   
2.920
%
 
2/1/2008
   
2/1/2010
  $
(106,000
)
$
(64,000
)
$    10,000,000
   
2.785
%
 
2/6/2008
   
2/6/2010
  $
(47,000
)
$
(28,000
)
$    10,000,000
   
3.033
%
 
2/6/2008
   
2/6/2011
  $
(81,000
)
$
(49,000
)
$    10,000,000
   
2.820
%
 
2/1/2008
   
2/1/2009
  $
(100,000
)
$
(60,000
)

1
Previous to the fiscal quarter ended March 29, 2008, this swap had not been designated as an effective cash flow hedge. The swap was designated as an effective cash flow hedge during the quarter ended March 29, 2008. In accordance with SFAS No. 133, the net reduction of $0.2 million in the fair value of this swap prior to the designation date has been recorded as a loss in earnings for the first quarter 2008.

Foreign Exchange Derivative Financial Instruments

The company uses foreign currency forward purchase and sale contracts with terms of less than one year to hedge its exposure to changes in foreign currency exchange rates. The company’s primary hedging activities are to mitigate its exposure to changes in exchange rates on intercompany and third party trade receivables and payables. The company does not currently enter into derivative financial instruments for speculative purposes. In managing its foreign currency exposures, the company identifies and aggregates naturally occurring offsetting positions and then hedges residual balance sheet exposures. There was no forward contract outstanding at the end of the quarter.

31


Item 4. Controls and Procedures

The company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of March 29, 2008, the company carried out an evaluation, under the supervision and with the participation of the company's management, including the company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the company's disclosure controls and procedures. Based on the foregoing, the company's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of this period.
 
During the quarter ended March 29, 2008, there has been no change in the company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

32

 
PART II. OTHER INFORMATION

The company was not required to report the information pursuant to Items 1 through 6 of Part II of Form 10-Q for the three months ended March 29, 2008, except as follows:

Item 1A. Risk Factors

There have been no material changes in the risk factors as set forth in the company's 2006 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
 
 
 
Total
 Number of
 Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number
of Shares
Purchased as
Part of
Publicity
Announced
Plan or
Program
 
Maximum
Number of
Shares that
May Yet be
Purchased
Under the Plan
or Program
 
December 30, 2007 to January 26, 2008     4,869     -     4,869     842,132  
January 27, 2008 to February 23, 2008     -     -     -     842,132  
February 24, 2008 to March 29, 2008     -     -     -     842,132  
Quarter ended March 29, 2008     4,869     -     4,869     842,132  
 
In July 1998, the company's Board of Directors adopted a stock repurchase program that authorized the purchase of common shares in open market purchases. As of March 29, 2008, 957,868 shares had been purchased under the 1998 stock repurchase program. 4,869 shares were repurchased by the company during the three month period ended March 29, 2008.

Item 6. Exhibits
 
Exhibits – The following exhibits are filed herewith:
   
Exhibit 31.1 –
Rule 13a-14(a)/15d -14(a) Certification of the Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
Exhibit 31.2 –
Rule 13a-14(a)/15d -14(a) Certification of the Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Exhibit 32.1
Certification by the Principal Executive Officer of The Middleby Corporation Pursuant to Rule 13A-14(b) under the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. 1350).
   
Exhibit 32.2
Certification by the Principal Financial Officer of The Middleby Corporation Pursuant to Rule 13A-14(b) under the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002(18 U.S.C. 1350).
 
33

 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
THE MIDDLEBY CORPORATION
 
(Registrant)
     
Date May 8, 2008
By:
/s/ Timothy J. FitzGerald
   
Timothy J. FitzGerald
   
Vice President,
   
Chief Financial Officer
 
34