Informational Notes

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 2008 Annual Report on Form 10-K and Item 1A of this Form 10-Q.

The economic outlook is highly uncertain at this time, with challenging financial markets and economic conditions. As a global business, the company's operating results are impacted by the health of the North American, European, Asian and Latin American economies. The depth and duration of economic decline and the timing and strength of the recovery are very uncertain.

                                                                  Net Sales Summary
                                                               (dollars in thousands)
                                     Three Months Ended                                       Nine Months Ended
                           Oct 3, 2009                Sep 27, 2008                 Oct 3, 2009                Sep 27, 2008
                       Sales        Percent        Sales        Percent        Sales        Percent        Sales        Percent

Business
Divisions:
Commercial
Foodservice          $ 131,367          85.3     $ 138,327          83.1     $ 432,160          87.5     $ 419,212          83.7
Food Processing         17,346          11.3        21,079          12.7        45,884           9.3        61,435          12.3
International
Distribution(1)         13,765           8.9        16,162           9.7        38,286           7.7        47,380           9.4

Intercompany sales
(2)                     (8,489 )        (5.5 )      (9,096 )        (5.5 )     (22,194 )        (4.5 )     (27,159 )        (5.4 )
Total                $ 153,989         100.0 %   $ 166,472         100.0 %   $ 494,136         100.0 %   $ 500,868         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                   Nine Months Ended
                                            Oct 3, 2009       Sep 27, 2008       Oct 3, 2009      Sep 27, 2008
Net sales                                          100.0 %            100.0 %           100.0 %           100.0 %
Cost of sales                                       59.7               61.1              61.1              61.9
Gross profit                                        40.3               38.9              38.9              38.1
Selling, general and administrative
expenses                                            22.1               20.3              22.1              20.2
Income from operations                              18.2               18.6              16.8              17.9
Net interest expense and deferred
financing amortization                               1.8                1.9               1.8               2.0
Other expense, net                                  (0.1 )              0.5               0.1               0.4
Earnings before income taxes                        16.5               16.2              14.9              15.5
Provision for income taxes                           6.4                6.4               6.1               6.2
Net earnings                                        10.1 %              9.8 %             8.8 %             9.3 %

Three Months Ended October 3, 2009 Compared to Three Months Ended September 27, 2008

NET SALES. Net sales for the third quarter of fiscal 2009 were $154.0 million as compared to $166.5 million in the third quarter of 2008.

· Net sales at the Commercial Foodservice Equipment Group amounted to $131.4 million in the third quarter of 2009 as compared to $138.3 million in the prior year quarter. Net sales from the acquisitions of TurboChef, which was acquired on January 5, 2009, CookTek, which was acquired on April 26, 2009, and Anets, which was acquired on April 30, 2009, accounted for an increase of $20.5 million during the third quarter of 2009. Excluding the impact of acquisitions, net sales of commercial foodservice equipment decreased $27.4 million.

· Net sales for the Food Processing Equipment Group amounted to $17.3 million in the third quarter of 2009 as compared to $21.1 million in the prior year quarter.

· Net sales at the International Distribution Division amounted to $13.8 million in the third quarter of 2009 as compared to $16.2 million in the prior year reflecting lower sales in Asia, Europe and Latin America.

Sales at all three business segments continued to be impacted by the global recession. Chain restaurant customers continue to have lower restaurant openings. Additionally, restaurant operators and food processing customers have deferred the replacement and upgrade of equipment given the current economic conditions.

GROSS PROFIT. Gross profit decreased to $62.0 million in the third quarter of 2009 from $64.7 million in the prior year period, reflecting the impact of lower sales volumes. The gross margin rate was 40.3% in the third quarter of 2009 as compared to 38.9% in the prior year quarter. The net change in the gross margin rate reflects:

· Improved margins at certain of the newly acquired operating companies which have improved due to acquisition integration initiatives including cost savings from plant consolidations.

· Reduced material costs associated with steel prices and other supply chain initiatives.

· The adverse impact of lower sales volumes.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses increased from $33.8 million in the third quarter of 2008 to $34.0 million in the third quarter of 2009. As a percentage of net sales, operating expenses increased from 20.3% in the third quarter of 2008 to 22.1% in the third quarter of 2009. Selling expenses decreased slightly from $16.8 million in the third quarter of 2008 to $16.4 million in the third quarter of 2009. Selling expenses reflect increased costs of $2.4 million associated the acquisitions of TurboChef, CookTek and Anets offset by reduced costs of $2.0 million associated with commission expense due to lower sales and lower commission rates. General and administrative expenses increased from $17.0 million in the third quarter of 2008 to $17.6 million in the third quarter of 2009. General and administrative expenses reflect a $2.5 million non-recurring expense associated with the write-down of fixed assets and the establishment of reserves for lease obligations associated with plant consolidation initiatives and $1.9 million of costs associated with the acquired operations of TurboChef, CookTek and Anets. These increases in expenses were offset by lower incentive based compensation and other expense reduction measures.

NON-OPERATING EXPENSES. Interest and deferred financing amortization costs decreased to $2.8 million in the third quarter of 2009 as compared to $3.2 million in the third quarter of 2008, due to lower interest rates on increased borrowings resulting from recent acquisitions. Other income was $0.1 million in the third quarter of 2009 as compared to other expense of $0.9 million in the prior year third quarter. Other expense and other income consisted primarily of foreign exchange losses and gains.

INCOME TAXES. A tax provision of $9.9 million, at an effective rate of 39%, was recorded during the third quarter of 2009, as compared to a $10.6 million provision at a 40% effective rate in the prior year quarter.

Nine Months Ended October 3, 2009 Compared to Nine Months Ended September 27, 2008

NET SALES. Net sales for the nine-month period ended October 3, 2009 were $494.1 million as compared to $500.9 million in the nine-month period ended September 27, 2008.

· Net sales at the Commercial Foodservice Equipment Group for the nine-month period ended October 3, 2009 amounted to $432.1 million as compared to $419.2 million for the nine-month period ended September 27, 2008. Net sales from the acquisitions of TurboChef, which was acquired on January 5, 2009, CookTek, which was acquired on April 26, 2009 and Anets, which was acquired on April 30, 2009 accounted for an increase of $65.3 million in the nine month period ended October 3, 2009. Excluding the impact of acquisitions, net sales of commercial foodservice equipment for the nine-month period ended October 3, 2009 decreased by $52.4 million as compared to the nine-month period ended September 27, 2008. Sales of the Commercial Foodservice Equipment Group were impacted by reduced restaurant openings and deferred purchases to replace and upgrade existing equipment. This decline was offset in part by a large equipment rollout with a major chain customer to support a new menu item.

· Net sales for the Food Processing Equipment Group amounted to $45.9 million in the nine-month period ended October 3, 2009 as compared to $61.4 million in the prior year period. Net sales of food processing equipment continued to be impacted by the adverse economic conditions.

· Net sales at the International Distribution Division amounted to $38.3 million in the nine-month period ended October 2, 2009 as compared to $47.4 million, reflecting lower sales in Asia, Europe and Latin America. Sales continue to be affected by adverse economic conditions internationally and reduced store openings by the U.S. chains in the international markets.

GROSS PROFIT. Gross profit increased to $192.1 million in the nine-month period ended October 3, 2009 from $190.6 million in the nine-month period ended September 27, 2008, reflecting the impact of higher sales volumes. The gross margin rate was 38.9% in the nine-month period ended October 3, 2009 as compared to 38.1% in the nine-month period ended September 27, 2008. The net increase in the gross margin rate reflects:

· Improved margins at certain of the newly acquired operating companies which have improved due to acquisition integration initiatives.

· Reduced material costs associated with steel prices and other supply chain initiatives.

· The adverse impact of lower sales volumes.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general, and administrative expenses increased from $101.2 million in the nine-month period ended September 27, 2008 to $109.0 million in the nine-month period ended October 3, 2009. As a percentage of net sales, operating expenses increased from 20.2% to 22.1% in the nine-month period ended October 3, 2009. Selling expenses decreased slightly from $49.7 million in the nine-month period ended September 27, 2008 to $49.3 million in the nine month period ended October 3, 2009. Selling expenses reflect increased costs of $7.0 million associated the acquisitions of TurboChef, CookTek and Anets offset in part by reduced costs of $6.1 million associated with commission expense due to lower sales and lower commission rates. General and administrative expenses increased from $51.4 million in the nine-month period ended September 27, 2008 to $59.7 million in the nine-month period ended September 27, 2008. General and administrative expenses reflect $7.5 million of costs associated with the acquired operations of TurboChef, CookTek and Anets and $4.9 million associated with the write-down of fixed assets, the establishment of reserves for lease obligations and severance and employee benefits costs associated with plant consolidation initiatives.

NON-OPERATING EXPENSES. Interest and deferred financing amortization costs decreased to $8.8 million in the nine-month period ended October 3, 2009 as compared to $9.9 million in the nine-month period ended September 27, 2008, due to lower interest rates on increased borrowings resulting from recent acquisitions. Other expense was $0.6 million in the nine-month period ended October 3, 2009 as compared to $1.8 million in the nine-month period ended September 27, 2008. Other expense and other income consisted primarily of foreign exchange losses and gains.

INCOME TAXES. A tax provision of $30.4 million, at an effective rate of 41%, was recorded during the nine-month period ended October 3, 2009, as compared to a $31.2 million provision at a 40% effective rate in the nine-month period ended September 27, 2008.

Financial Condition and Liquidity

During the nine months ended October 3, 2009, cash and cash equivalents increased by $4.8 million to $11.0 million at October 3, 2009 from $6.1 million at January 3, 2009. Net borrowings increased from $234.7 million at January 3, 2009 to $295.0 million at October 3, 2009.

OPERATING ACTIVITIES. Net cash provided by operating activities was $77.2 million for the nine month period ended October 3, 2009 compared to $64.0 million for the nine-month period ended September 27, 2008.

During the nine months ended October 3, 2009, changes in working capital included a $22.1 million decrease in accounts receivable, a $11.7 million decrease in inventory, and a $2.6 million decrease in accounts payable. These changes in working capital reflect the completion and collection of payment related to a large chain customer order that was completed during the first half of the year. Prepaid and other assets increased $0.9 million. Accrued expenses and other non-current liabilities also decreased by $13.6 million reflecting the payment of transaction costs associated with the TurboChef acquisition and obligations under prior year sales rebate and incentive compensation program.

INVESTING ACTIVITIES. During the nine months ended October 3, 2009, net cash used in investing activities amounted to $132.4 million. This includes cash utilized to complete the acquisitions of TurboChef of $116.1 million, CookTek of $8.0 million, Anets of $3.4 million and $4.9 million of capital expenditures associated with additions and upgrades of production equipment and facility enhancements associated with plant consolidation initiatives.

FINANCING ACTIVITIES. Net cash flows provided by financing activities were $60.3 million during the nine months ended October 3, 2009. The net increase in debt includes $59.7 million in net borrowings under the company's $497.5 million revolving credit facility utilized to fund the company's investing activities, $0.2 million in proceeds under foreign bank loans and $0.4 million of proceeds from stock issuances.

At October 3, 2009, 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 December 2007, the Financial Accounting Standards Board ("FASB") issued ASC 805, "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 ASC 805 was not permitted. The company adopted this statement on January 5, 2009, including the acquisition of TurboChef. Accordingly, the company has applied the principles of ASC 805 in valuing this acquisition. Middleby shares of common stock which were issued in conjunction with this transaction were valued using the share price at the time of closing to determine the value of the purchase price. Additionally, the company incurred approximately $4.6 million in transaction related expenses which were recorded as a deferred acquisition cost reported as an asset on the balance sheet on January 3, 2009. In accordance with ASC 805, the company has applied a retrospective application and appropriately reflected the expense incurred in 2008 as a reduction in retained earnings in accordance with ASC 250-10-45, "Changes in Accounting Principles," on reporting a change in accounting principle.

In December 2007, the FASB issued ASC 810-10, "Consolidation". This statement establishes 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 adoption of ASC 810-10 "Consolidation" did not have a material impact on the company's financial position, results of operations or cash flows.

In December 2008, the FASB issued ASC 715-20 "Compensation-Retirement Benefits." This statement requires disclosures about assets held in an employer's defined benefit pension or other postretirement plan. This statement requires the disclosure of the percentage of the fair value of total plan assets for each major category of plan assets, such as equity securities, debt securities, real estate and all other assets, with the fair value of each major asset category as of each annual reporting date for which a financial statement is presented. It also requires disclosure of the level within the fair value hierarchy in which each major category of plan assets falls, using the guidance in ASC 820, "Fair Value Measurements and Disclosures." This statement is applicable to employers that are subject to the disclosure requirements and is generally effective for fiscal years ending after December 15, 2009. The company will comply with the disclosure provisions of this statement after its effective date.

In May 2009, the FASB issued ASC 855, "Subsequent Events." The objective of this statement is to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement defines the period after the balance sheet during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events occurring after the balances sheet date in its financial statements and required disclosures. This statement is effective for interim or annual financial periods ending after June 15, 2009. The company has complied with the disclosure requirements of ASC 855. The adoption of ASC 855 did not have a material impact on the company's financial position, results of operations or cash flows.

In June 2009, the FASB issued ASC 105 "Generally Accepted Accounting Principles." This statement sets forth a new authoritative guidance for U.S. generally accepted accounting principles "GAAP" applicable to nongovernmental entities. ASC 105 establishes the GAAP hierarchy to include only two levels of GAAP: authoritative and nonauthoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The company has complied with the reporting requirements of ASC 105. The adoption of ASC 105 did not have a material impact on the company's financial position, results of operations or 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 ASC 605-25-25 "Percentage of Completion Method for Recognizing Revenue under Construction Contracts" 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 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 with 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.

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 . . .