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Summary of Significant Accounting Policies
3 Months Ended
Apr. 01, 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 April 1, 2017 and December 31, 2016, the results of operations for the three months ended April 1, 2017 and April 2, 2016 and cash flows for the three months ended April 1, 2017 and April 2, 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 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 $3.5 million and $5.0 million for the first quarter periods ended April 1, 2017 and April 2, 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 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 April 1, 2017, the company recognized a tax expense of $1.2 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 $2.0 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 April 1, 2017 was 24.3% as compared to 33.4% three months period ended April 2, 2016. The tax rate in the three months period ended April 1, 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
2012 – 2016
United States - states
2007 – 2016
Australia
2012 – 2016
Brazil
2012 – 2016
Canada
2007 – 2016
China
2007 – 2016
Czech Republic
2014 – 2016
Denmark
2013 – 2016
France
2014 – 2016
Germany
2014 – 2016
India
2013 – 2016
Ireland
2010 – 2016
Italy
2012 – 2016
Luxembourg
2012 – 2016
Mexico
2012 – 2016
Netherlands
2005 – 2016
Philippines
2013 – 2016
Poland
2011 – 2016
Romania
2007 – 2016
Spain
2012 – 2016
Sweden
2010 – 2016
Switzerland
2008 – 2016
Taiwan
2011 – 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 April 1, 2017
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
    Interest rate swaps
$

 
$
9,585

 
$

 
$
9,585

 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
    Interest rate swaps
$

 
$
16

 
$

 
$
16

    Contingent consideration
$

 
$

 
$
4,797

 
$
4,797

 
 
 
 
 
 
 
 
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 April 1, 2017 relates to the earnout provisions recorded in conjunction with the acquisitions of Desmon, Goldstein Eswood 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.
E)    Consolidated Statements of Cash Flows
Cash paid for interest was $5.8 million and $4.8 million for the three months ended April 1, 2017 and April 2, 2016, respectively. Cash payments totaling $6.2 million and $12.2 million were made for income taxes for the three months ended April 1, 2017 and April 2, 2016, respectively.