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Acquisitions and Purchase Accounting | Dec. 27, 2021
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Business Combinations [Abstract] |
Business Combination Disclosure | Acquisitions and Purchase Accounting The company accounts for all business combinations using the acquisition 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 company recognizes identifiable intangible assets, primarily trade names and customer relationships, at their fair value using a discounted cash flow model. The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, and customer attrition rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions. The results of operations are reflected in the consolidated financial statements of the company from the dates of acquisition. Termination of Welbilt Merger On April 20, 2021, Middleby entered into a Merger Agreement with Welbilt, Inc. Following Welbilt's receipt of an alternative acquisition proposal, on July 13, 2021, Middleby announced that, under the terms of the Merger Agreement, it would not exercise its right to propose any modifications to the terms of the Merger Agreement and would allow the match period to expire. Accordingly, on July 14, 2021, Welbilt delivered to Middleby a written notice terminating the Merger Agreement and, concurrently with Middleby’s receipt of the termination fee of $110.0 million in cash from Welbilt, the Merger Agreement was terminated on July 14, 2021. The termination fee received is reflected in the Consolidated Statements of Comprehensive Income as the "merger termination fee" and $19.7 million of deal costs associated with the transaction are reflected in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income. The company completed no material acquisitions during the nine months ended October 1, 2022. Novy Invest NV On July 12, 2021, the company completed its acquisition of all of the capital stock of Novy Invest NV ("Novy"), a leading manufacturer of premium residential ventilation hoods and cook tops located in Belgium, for a purchase price of approximately $250.9 million, net of cash acquired. The final allocation of consideration paid for the Novy acquisition is summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  | Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 16,152 |  |  | $ | — |  |  | $ | 16,152 |
Current assets | 23,762 |  |  | 234 |  |  | 23,996 |
Property, plant and equipment | 17,058 |  |  | 4,383 |  |  | 21,441 |
Goodwill | 142,741 |  |  | (6,938) |  |  | 135,803 |
Other intangibles | 126,557 |  |  | 4,149 |  |  | 130,706 |
Other assets | 26 |  |  | 173 |  |  | 199 |
Current liabilities | (23,440) |  |  | 182 |  |  | (23,258) |
Long-term deferred tax liability | (33,918) |  |  | (2,072) |  |  | (35,990) |
Other non-current liabilities | (1,930) |  |  | (111) |  |  | (2,041) |
Net assets acquired and liabilities assumed | $ | 267,008 |  |  | $ | — |  |  | $ | 267,008 |
The long-term deferred tax liability amounted to $36.0 million. The deferred tax liability is comprised of $32.7 million related to the difference between the book and tax basis of identifiable intangible assets and $3.3 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $106.6 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $24.1 million allocated to customer relationships, which is being amortized over a period of 10 years. Goodwill of $135.8 million and other intangibles of $130.7 million from this acquisition are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Goodwill and other intangibles are not expected to be deductible for tax purposes. Kamado Joe and Masterbuilt On December 27, 2021, the company completed its acquisition of Masterbuilt Holdings, LLC, including its residential outdoor brands ("Kamado Joe and Masterbuilt"), a leader in outdoor residential cooking located in the Atlanta, Georgia area, for a purchase price of approximately $403.6 million, net of cash acquired. The purchase price was comprised of $403.6 million in cash and 12,921 shares of Middleby common stock valued at $2.5 million. During the third quarter of 2022, the company finalized the purchase price adjustment provided for by the purchase agreement, resulting in a payment to sellers of $2.8 million. The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair values of assets acquired and liabilities assumed (in thousands):
| Preliminary Opening Balance Sheet |  | Preliminary Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 5,381 |  |  | $ | (70) |  |  | $ | 5,311 |
Current assets | 137,826 |  |  | (5,263) |  |  | 132,563 |
Property, plant and equipment | 7,773 |  |  | (1,678) |  |  | 6,095 |
Goodwill | 110,052 |  |  | 45,511 |  |  | 155,563 |
Other intangibles | 215,577 |  |  | (28,677) |  |  | 186,900 |
Other assets | 2,143 |  |  | (1,174) |  |  | 969 |
Current liabilities | (54,865) |  |  | (6,774) |  |  | (61,639) |
Long-term deferred tax liability | (15,907) |  |  | — |  |  | (15,907) |
Other non-current liabilities | (1,914) |  |  | 946 |  |  | (968) |
Net assets acquired and liabilities assumed | $ | 406,066 |  |  | $ | 2,821 |  |  | $ | 408,887 |
The long-term deferred tax liability amounted to $15.9 million. The net deferred tax liability is comprised of $2.3 million of deferred tax asset related to tax loss carryforwards and $18.2 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $145.4 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $31.4 million allocated to customer relationships, $3.0 million allocated to developed technology, and $7.1 million allocated to backlog, which are being amortized over periods of 10 to 12 years, 11 years, and 3 to 6 months, respectively. Goodwill of $155.6 million and other intangibles of $186.9 million of the company are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these assets, goodwill of $54.2 million and intangibles of $186.9 million are expected to be deductible for tax purposes. The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for this acquisition. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Other 2021 Acquisitions During the year ended January 1, 2022, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the other 2021 acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  | Preliminary Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 6,414 |  |  | $ | — |  |  | $ | 6,414 |
Current assets | 76,077 |  |  | 477 |  |  | 76,554 |
Property, plant and equipment | 19,561 |  |  | (187) |  |  | 19,374 |
Goodwill | 85,270 |  |  | 8,485 |  |  | 93,755 |
Other intangibles | 158,725 |  |  | (9,193) |  |  | 149,532 |
Other assets | 2,101 |  |  | 31 |  |  | 2,132 |
Current liabilities | (33,910) |  |  | 53 |  |  | (33,857) |
Long-term deferred tax asset (liability) | (3,010) |  |  | 3,457 |  |  | 447 |
Other non-current liabilities | (7,092) |  |  | (3,397) |  |  | (10,489) |
Consideration paid at closing | $ | 304,136 |  |  | $ | (274) |  |  | $ | 303,862 |
Contingent consideration | 9,404 |  |  | (200) |  |  | 9,204 |
Net assets acquired and liabilities assumed | $ | 313,540 |  |  | $ | (474) |  |  | $ | 313,066 |
The long-term deferred tax asset amounted to $0.4 million. The net deferred tax asset is comprised of $0.7 million of deferred tax asset related to tax loss carryforwards and $0.3 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $97.1 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $41.1 million allocated to customer relationships, $3.4 million allocated to developed technology, and $7.9 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 3 months, respectively. Goodwill of $28.8 million and other intangibles of $89.0 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Goodwill of $65.0 million and other intangibles of $60.5 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of $91.8 million and intangibles of $148.4 million are expected to be deductible for tax purposes. One purchase agreement includes earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded and upon the achievement of product rollout targets. One earnout is payable upon the achievement of product rollout targets. The second earnout is payable during 2026 if the company exceeds certain earnings targets. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $9.2 million. The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for these acquisitions completed during 2021. Certain intangible assets are pending external valuation and are preliminarily valued using historical information from the Residential Kitchen Equipment Group and Commercial Foodservice Equipment Group and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Other 2022 Acquisitions As of October 1, 2022, the company completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the other 2022 acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  | Preliminary Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 19,175 |  |  | $ | 187 |  |  | $ | 19,362 |
Current assets | 89,245 |  |  | 200 |  |  | 89,445 |
Property, plant and equipment | 39,610 |  |  | (219) |  |  | 39,391 |
Goodwill | 91,560 |  |  | 2,488 |  |  | 94,048 |
Other intangibles | 66,738 |  |  | 2,112 |  |  | 68,850 |
Long-term deferred tax asset | 426 |  |  | 104 |  |  | 530 |
Other assets | 526 |  |  | (344) |  |  | 182 |
Current portion of long-term debt | (22,072) |  |  | 2,154 |  |  | (19,918) |
Current liabilities | (42,462) |  |  | 736 |  |  | (41,726) |
Long term debt | (4,522) |  |  | (2,320) |  |  | (6,842) |
Long-term deferred tax liability | (17,368) |  |  | 85 |  |  | (17,283) |
Other non-current liabilities | (4,075) |  |  | (3,394) |  |  | (7,469) |
Consideration paid at closing | $ | 216,781 |  |  | $ | 1,789 |  |  | $ | 218,570 |
Contingent consideration | 2,990 |  |  | 3,394 |  |  | 6,384 |
Net assets acquired and liabilities assumed | $ | 219,771 |  |  | $ | 5,183 |  |  | $ | 224,954 |
The long-term deferred tax liability amounted to $17.3 million. The deferred tax liability is comprised of $15.2 million related to the difference between the book and tax basis of identifiable intangible assets and $2.1 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $31.5 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $27.5 million allocated to customer relationships, $3.8 million allocated to developed technology, and $6.0 million allocated to backlog, which are being amortized over periods of 7 years, 5 to 10 years, and 3 to 6 months, respectively. Goodwill of $86.3 million and other intangibles of $49.9 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of $5.4 million and other intangibles of $18.2 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $2.3 million and other intangibles of $0.8 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these assets, goodwill of $21.1 million and intangibles of $9.7 million are expected to be deductible for tax purposes. Two purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement of certain targets. One earnout is payable during 2025 to the extent certain EBITDA targets are met. The other earnout is payable yearly through 2026 based on product sales. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $6.4 million. The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for all acquisitions completed during 2022. Certain intangible assets are preliminarily valued using historical information from the Commercial Foodservice Equipment Group, Food Processing Equipment Group and Residential Kitchen Equipment Group and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous acquisitions. Thus, the provisional measurements of fair values set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Pro Forma Financial Information The following unaudited pro forma results of operations for the nine months ended October 1, 2022 and October 2, 2021, assumes the 2021 and 2022 acquisitions described above were completed on January 3, 2021 (first day of fiscal year 2021). The pro forma results include adjustments to reflect amortization of intangibles associated with the acquisition and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):
| Nine Months Ended
| October 1, 2022 |  | October 2, 2021
Net sales | $ | 3,056,246 |  |  | $ | 2,845,214 |
Net earnings | 332,195 |  |  | 375,112 |
Net earnings per share: |  |  |
Basic | $ | 6.13 |  |  | $ | 6.79 |
Diluted | $ | 6.03 |  |  | $ | 6.64 |
The historical consolidated financial information of the company and the acquisitions have been adjusted in the pro forma information to give effect to events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Additionally, the pro forma financial information does not reflect the costs which the company has incurred or may incur to integrate the acquired businesses.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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