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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2017
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies
A) | Basis of Presentation
The condensed consolidated financial statements have been prepared by The Middleby Corporation (the "company" or “Middleby”), 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 2016 Form 10-K. The company’s interim results are not necessarily indicative of future full year results for the fiscal year 2017. In the opinion of management, the financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly the financial position of the company as of September 30, 2017 and December 31, 2016, the results of operations for the three and nine months ended September 30, 2017 and October 1, 2016 and cash flows for the nine months ended September 30, 2017 and October 1, 2016. Certain prior year amounts have been reclassified to be consistent with current year presentation, including combining selling and distribution expenses with general and administrative expenses. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses. Significant estimates and assumptions are used for, but are not limited to, allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves, non-cash share-based compensation and post-retirement obligations. Actual results could differ from the company's estimates.
B) | Non-Cash Share-Based Compensation
The company estimates the fair value of market-based stock awards and stock options at the time of grant and recognizes compensation cost over the vesting period of the awards and options. Non-cash share-based compensation expense was less than $0.1 million and $6.2 million for the third quarter periods ended September 30, 2017 and October 1, 2016, respectively. Non-cash share-based compensation expense was $6.5 million and $17.3 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. During the first quarter ended April 1, 2017, the company issued restricted shares under its 2011 Stock Incentive Plan. These amounts are contingent on the attainment of certain performance objectives. The aggregate grant-date fair value of these awards was $9.6 million, based on the closing share price of the company's stock at the date of the grant.
C) | Income Taxes
As of December 31, 2016, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $20.3 million (of which $20.0 million would impact the effective tax rate if recognized) plus approximately $2.7 million of accrued interest and $4.9 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. As of September 30, 2017, the company recognized a tax expense of $3.9 million for unrecognized tax benefits related to current year tax exposures. It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that approximately $1.9 million of its remaining unrecognized tax benefits may be recognized over the next twelve months as a result of lapses of statutes of limitations. The effective rate for the three months period ended September 30, 2017 was 33.8% as compared to 32.2% for the prior year quarter. In comparison to the prior year, the tax provision reflects a higher effective tax rate attributable to increased tax reserve and a reduction of tax credits. The effective rate for the nine months period ended September 30, 2017 was 30.8% as compared to 33.0% for the nine months period ended October 1, 2016. The tax rate in the nine months period ended September 30, 2017 was favorably impacted by a tax benefit from the adoption of ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting," which resulted in the recognition of excess tax benefits from share-based payments to be recognized as income tax benefit in the condensed consolidated statement of comprehensive income. A summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:
United States - federal | 2013 – 2016
United States - states | 2007 – 2016
Australia | 2012 – 2016
Brazil | 2012 – 2016
Canada | 2007 – 2016
China | 2007 – 2016
Czech Republic | 2014 – 2016
Denmark | 2012 – 2016
Estonia | 2013 – 2016
France | 2014 – 2016
Germany | 2014 – 2016
India | 2013 – 2016
Ireland | 2011 – 2016
Italy | 2012 – 2016
Luxembourg | 2012 – 2016
Mexico | 2012 – 2016
Netherlands | 2005 – 2016
Philippines | 2014 – 2016
Poland | 2011 – 2016
Romania | 2007 – 2016
Spain | 2013 – 2016
Sweden | 2010 – 2016
Switzerland | 2008 – 2016
Taiwan | 2012 – 2012
United Kingdom | 2015 – 2016
D) | Fair Value Measures
ASC 820 "Fair Value Measurements and Disclosures" 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. ASC 820 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 our own assumptions. The company’s financial liabilities that are measured at fair value and are categorized using the fair value hierarchy are as follows (in thousands):
| Fair Value Level 1 |  | Fair Value Level 2 |  | Fair Value Level 3 |  | Total
As of September 30, 2017 |  |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 7,705 |  |  | $ | — |  |  | $ | 7,705 |
Financial Liabilities: |  |  |  |  |  |  |
Contingent consideration |  |  |  |  |  |  | $ | 2,864 |  |  | $ | 2,864 |
As of December 31, 2016 |  |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 8,842 |  |  | $ | — |  |  | $ | 8,842 |
Financial Liabilities: |  |  |  |  |  |  |
Interest rate swaps | $ | — |  |  | $ | 100 |  |  | $ | — |  |  | $ | 100 |
Contingent consideration | $ | — |  |  | $ | — |  |  | $ | 6,612 |  |  | $ | 6,612 |
The contingent consideration as of September 30, 2017 relates to the earnout provisions recorded in conjunction with the acquisitions of Desmon and Induc. The contingent consideration as of December 31, 2016 relates to the earnout provisions recorded in conjunction with the acquisitions of PES, Desmon, Goldstein Eswood and Induc. The earnout provisions associated with these acquisitions are based upon performance measurements related to sales and earnings, as defined in the respective purchase agreements. On a quarterly basis, the company assesses the projected results for each of the acquired businesses in comparison to the earnout targets and adjusts the liability accordingly. During the nine months ended September 30, 2017, the change in contingent consideration is primarily related to payments on earnout provisions. E) Consolidated Statements of Cash Flows Cash paid for interest was $17.4 million and $15.7 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Cash payments totaling $96.7 million and $80.3 million were made for income taxes for the nine months ended September 30, 2017 and October 1, 2016, respectively.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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