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SEC filingMiddleby's Q2 revenue fell 1.4% with margin contraction, as acquisitions boosted Food Processing while tariff uncertainty persists.
In the second quarter of fiscal 2025, Middleby reported net sales of $977.9 million, a decrease of 1.4% compared to $991.6 million in the prior-year period. Excluding acquisitions and foreign exchange, organic sales fell 5.4%, reflecting broad-based weakness across end markets. Gross profit declined 2.2% to $371.3 million, with gross margin contracting 30 basis points to 38.0%, primarily due to lower volumes and unfavorable product mix, partially offset by cost reduction initiatives in Residential Kitchen. Operating margin decreased to 15.9% from 17.7%, as SG&A expenses rose to 21.9% of sales (vs. 20.0% a year ago) from higher strategic transaction costs and professional fees. Net earnings as a percentage of sales fell to 10.8% from 11.6%, with the effective tax rate dropping to 20.3% from 25.4% due to discrete tax benefits from internal restructuring.
Commercial Foodservice segment sales decreased 4.8% to $580.6 million, with domestic sales down 6.6% amid slower chain customer traffic and replacement demand. International sales were roughly flat, but Latin American and Asian markets weakened. Gross margin edged down to 40.3% from 40.6%, impacted by lower volumes.
Food Processing segment sales increased 14.4% to $216.2 million, driven by acquisitions (MaxMac, JC Ford, Gorreri) that contributed $29.2 million. Organic sales declined 2.9%, with international sales (excluding FX and acquisitions) down 8.4% due to weak European protein and Asian bakery markets. Gross margin fell to 37.4% from 39.3% due to lower volumes and product mix.
Residential Kitchen segment sales fell 6.1% to $181.1 million, with domestic sales down 11.0% and international sales slightly higher. Outdoor products faced headwinds from Chinese tariffs. Gross margin improved to 30.5% from 29.6% thanks to cost reduction initiatives.
Management did not provide quantitative guidance but highlighted ongoing macroeconomic uncertainty from tariffs, inflation, and Federal Reserve interest rate policy. The company is pursuing cost mitigation strategies and evaluating alternative sourcing to offset tariff impacts. The proposed spin-off of the Food Processing business remains on track for the first half of 2026, subject to board and SEC approvals. Middleby expects capital resources, including $511.5 million in cash and access to credit markets, to be sufficient to fund operations, debt service, and capital expenditures. However, the company cautioned that tariff and trade policy uncertainties could materially affect future results.
As of June 28, 2025, Middleby held $511.5M in cash and equivalents, down from $689.5M at year-end 2024, primarily due to share repurchases. Total debt stood at $2,375.8M, a slight decrease of $19.3M from $2,395.1M. Net debt (total debt less cash) is $1,864.3M. The company maintains ample liquidity with $2.7B remaining borrowing capacity under its credit facility. Inventory increased to $888.7M from $841.6M, and contract liabilities (deferred revenue) rose to $159.1M from $140.4M.
The Notes disclose no explicit purchase commitments for inventory or capacity. Contingent consideration liabilities (earnouts) totaled $34.5M, down from $53.2M due to payments and fair value adjustments. Deferred purchase price payments of $15.0M were made in H1 2025, with a remaining contractual obligation of $0.1M.
Share repurchases were aggressive: $351.9M for 2.41M shares in the six months, including $322.7M in Q2 alone. In May 2025, the Board authorized an additional 7.5M shares, bringing total remaining authorization to 9.35M shares. The company does not pay dividends. Debt reduction was modest, with $21.9M repaid under the credit facility. Capital expenditures totaled $54.7M (2.9% of sales), up from $24.7M in the prior year period, reflecting increased investment. Interest expense decreased to $38.2M from $50.8M due to lower rates and debt.
For the six months ended June 28, 2025, Commercial Foodservice revenue declined 4.0% to $1,143M, Food Processing grew 6.5% to $384M, and Residential Kitchen fell 2.6% to $357M. Geographically, US/Canada represents 67% of total sales, Europe/Middle East 22%, Asia 6%, and Latin America 4%. The Food Processing segment saw particular strength in Europe/Middle East (+11.2% to $119.9M) and Latin America (+36.3% to $34.9M). Adjusted EBITDA by segment: Commercial Foodservice $308.0M (27.0% margin), Food Processing $75.9M (19.8%), Residential Kitchen $39.2M (11.0%), and corporate costs of $40.8M. Total company Adjusted EBITDA was $382.3M, down from $402.2M a year ago.