Midera Food Processing, Inc.: Form 10-Q for the period ended Jul 4, 2026

The following discussion and analysis should be read in conjunction with the Condensed Combined Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”). References to the “Company,” “Midera,” “we,” “us,” and “our” refer to Midera Food Processing, Inc. and its subsidiaries, unless otherwise stated or indicated by context.

Business Overview

Midera is a technology-focused, global leader in the design and manufacturing of equipment and aftermarket service for a broad line of solutions for industrial protein, bakery and snack food processors. We are a growth-oriented, food processing pure-play, driven by our portfolio of innovative, complementary and industry-leading brands, with a nimble and profitable operating model and proven M&A track record. Our global reach—supported by established regional offices and dedicated local operating teams across key international markets—is a core strategic advantage, enabling us to serve customers with regional expertise and on-the-ground responsiveness at scale.

Our customers include some of the largest international food processing companies and producers of protein products, such as bacon, charcuterie, sausage and hot dogs, egg bites, poultry, alternative protein, case ready, lunch meat and pet food, and producers of bakery products, such as bread and buns, artisan bread, sweet goods, cakes and muffins, biscuits, crackers, pizza and pastries, tortilla and snacks. Through our broad and synergistic line of innovative technology and solutions, we are able to deliver a wide range of food preparation, thermal processing, slicing/packaging, automation and equipment sanitation solutions to service a variety of food processing requirements demanded by our customers across protein, bakery and snack categories. Further, we offer highly integrated total line solutions, from further processing through end-of-line, designed to provide our customers even greater financial and operational efficiencies. Following the installation of our solutions, we provide aftermarket parts and service allowing our customers to sustain performance and reduce downtime during food processing operations.

Spin-off from Middleby

On February 25, 2025, The Middleby Corporation (“Middleby” or “Parent”) announced its intent to separate its Food Processing Equipment Group into a standalone public company through the distribution of Midera common stock to Middleby stockholders (the “Spin-off”). On June 29, 2026, in connection with the completion of the Spin-off, the Company used borrowings under its revolving credit facility and cash on hand to make a distribution to Middleby of $233.0 million. On July 6, 2026, Middleby completed the Spin-off through the distribution of all of the then issued and outstanding shares of Midera common stock to Middleby stockholders on the basis of one share of Midera common stock for every one share of Middleby common stock held as of 4:00 p.m. Central Time on June 26, 2026, the record date for the distribution, resulting in the distribution of 45,222,349 shares of Midera common stock to Middleby stockholders. As a result of the Spin-off, Midera became an independent public company and Middleby has no ownership interest in the Company. Midera common stock began “regular way” trading on The Nasdaq Stock Market LLC under the ticker symbol “MFP” on July 7, 2026. For additional information on the Spin-off and related transactions, see Notes 1, 6, and 14 to the Condensed Combined Financial Statements.

Relationship with Middleby

Historically, we have relied on Middleby to manage certain of our operations and provide us certain services, the costs of which have historically been either allocated or directly billed to us. Historical costs for such services may not necessarily reflect the actual expenses we would have incurred, or will incur, as an independent company. In connection with the Spin-off, we entered into the following agreements with Middleby in order to govern the ongoing relationship between Midera and Middleby after the Spin-off and to facilitate an orderly transition: a Separation and Distribution Agreement, a Tax Matters Agreement, an Employee Matters Agreement, an Intellectual Property Matters Agreement, and a Transition Services Agreement. Under the Transition Services Agreement, we generally expect to be able to utilize Middleby’s services for a transitional period following the Spin-off before we replace these services over time with services supplied either internally or by third parties. The expenses for the services we will receive from Middleby initially and then internally or by third parties may vary from the historical costs directly billed and allocated to us for the same services.

Current Events

Inflation and Interest Rate Environment

Midera has been negatively impacted by inflation in wages, logistics, energy, raw materials and component costs. Price increases and purchasing strategies have been implemented to mitigate the impact of cost inflation on margins and Midera continues to actively monitor costs. High inflation and uncertainty surrounding the Federal Reserve’s interest rate policy decisions, combined with global macroeconomic uncertainty, have impacted and may continue to impact customer demand. Even in light of such headwinds, we remain focused on delivering strong financial results and executing on our long-term strategy and profitability objectives.

Supply Chain, Labor and Logistics Constraints

Midera continues to actively monitor global supply chain, labor and logistics constraints, which have had a negative impact on Midera’s ability to source parts and complete and ship units. The decreased availability of resources and inflationary costs resulted in heightened inventory levels for certain components above current demand levels. To combat these pressures, Midera has evaluated alternative sourcing, dual sourcing and collaborated across the organization, where appropriate, without materially presenting new risks or increasing current risks around quality and reliability. Our capital resources have been and Midera expects they will continue to be sufficient to address these challenges.

Tariffs

Midera continues to actively monitor and navigate the evolving international tariff environment and its potential impact on our operations and financial performance. Impositions by the United States of tariffs, sanctions or other restrictions on goods exported from the United States or imported into the United States, or countermeasures imposed in response to such actions, could increase the cost of goods for our products or reduce our ability to sell our products globally. Our focus is to mitigate negative impacts from newly imposed tariffs.

Results of Operations

The following table sets forth the condensed combined statements of earnings and respective financial statement line items as a percentage of net sales for the periods presented:

(in millions)

(1) Midera’s fiscal year ends on the Saturday nearest December 31. All fiscal quarters presented included 13 weeks.

Three Months Ended July 4, 2026 as Compared to Three Months Ended June 28, 2025

NET SALES. Net sales for the three months ended July 4, 2026 increased by $28.7 million, or 13.2%, to $245.4 million as compared to $216.7 million in the three months ended June 28, 2025. Net sales increased by $23.9 million, or 11.0%, from the fiscal 2025 acquisitions of Frigomeccanica and Oka. Excluding acquisitions, net sales increased $4.8 million, or 2.2%, from the prior year period. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for the three months ended July 4, 2026 increased net sales by approximately $2.1 million, or 1.0%. Excluding the impact of foreign exchange and acquisitions, sales increased $2.7 million, or 1.2%, for the three months ended July 4, 2026 as compared to the prior year period.

Domestically, Midera realized a sales increase of $0.8 million, or 0.6%, to $126.1 million, as compared to $125.3 million in the prior year period. This includes an increase of $0.8 million from recent acquisitions. Excluding acquisitions, domestic sales were consistent with the prior year period, primarily driven by increases in aftermarket parts and service in the protein and bakery categories, offset by lower equipment sales in the snack category. International sales increased $27.9 million, or 30.5%, to $119.3 million, as compared to $91.4 million in the prior year period. This includes an increase of $23.1 million from the recent acquisitions and an increase of $2.1 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, international sales increased $2.7 million, or 3.0%. The increase primarily reflects higher equipment sales in the European market for the protein and bakery categories and higher sales in aftermarket parts and service, partially offset by lower equipment sales in the snack category and fewer projects in the Middle East.

GROSS PROFIT. Gross profit increased by $5.8 million, or 7.2%, to $86.7 million in the three months ended July 4, 2026, as compared to $80.9 million in the three months ended June 28, 2025. This includes an increase of $6.0 million from recent acquisitions and an increase of $0.5 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, gross profit decreased $0.7 million. Gross profit margin (gross profit as a percentage of net sales) decreased to 35.3% in the three months ended July 4, 2026, as compared to 37.3% in the prior year period. Excluding the impact of foreign exchange and acquisitions, the gross profit margin was 36.6% in the three months ended July 4, 2026. Excluding the impact of foreign exchange and acquisitions, the gross profit and gross profit margin declines were primarily driven by inflationary costs and product mix of equipment sales, partially offset by increases in aftermarket parts and service sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general and administrative expenses increased to $62.8 million in the three months ended July 4, 2026, as compared to $54.6 million in the three months ended June 28, 2025. As a percentage of net sales, selling, general and administrative expenses were 25.6% in the three months ended July 4, 2026 as compared to 25.2% in the three months ended June 28, 2025. The increase in selling, general and administrative expenses of $8.2 million, or 15.0%, is primarily due to increased compensation costs, including share-based compensation and excluding acquisitions, of $6.7 million, higher separation costs of $5.3 million, cost increases of $3.0 million associated with acquired businesses, including $0.2 million of intangible amortization expense, partially offset by favorable contingent consideration fair value adjustments of $3.1 million and lower professional fees, excluding acquisitions, of $2.0 million. Foreign exchange rates had an unfavorable impact of $0.6 million.

RESTRUCTURING EXPENSES. Restructuring expenses increased $0.2 million to $0.2 million for the three months ended July 4, 2026, as compared to no restructuring expenses for the three months ended June 28, 2025. Restructuring expenses related primarily to headcount reductions and facility consolidations.

INCOME FROM OPERATIONS. Income from operations decreased $2.6 million to $23.7 million in the three months ended July 4, 2026 from $26.3 million in the three months ended June 28, 2025. Operating income as a percentage of net sales amounted to 9.7% in the three months ended July 4, 2026, as compared to 12.1% in the three months ended June 28, 2025.

NON-OPERATING EXPENSE (INCOME). Interest expense was $0.4 million in the three months ended July 4, 2026, as compared to interest income of $0.6 million in the prior year period. Other expense was $2.0 million in the three months ended July 4, 2026, as compared to other income of $10.6 million in the prior year period, and consists mainly of net foreign exchange losses and gains.

INCOME TAXES. A tax provision of $10.5 million, at an effective tax rate of 49.3%, was recorded during the three months ended July 4, 2026, as compared to a tax provision of $8.4 million at an effective tax rate of 22.4% in the prior year period. During the three months ended July 4, 2026, the effective tax rate was higher than the prior year period primarily due to non-deductible expenses and other discrete items, none of which was individually significant. The effective tax rates for the three months ended July 4, 2026 and June 28, 2025 were higher than the U.S. statutory federal tax rate of 21.0% primarily due to non-deductible expenses, state taxes and foreign tax rate differentials. The effective tax rate for the three months ended July 4, 2026 was also higher than the U.S. statutory federal tax rate due to other discrete items, none of which was individually significant.

Six Months Ended July 4, 2026 as Compared to Six Months Ended June 28, 2025

NET SALES. Net sales for the six months ended July 4, 2026 increased by $85.2 million, or 22.1%, to $470.4 million as compared to $385.2 million in the six months ended June 28, 2025. Net sales increased by $31.4 million, or 8.2%, from the fiscal 2025 acquisitions of Frigomeccanica and Oka. Excluding acquisitions, net sales increased $53.8 million, or 14.0%, from the prior year period. The impact of foreign exchange rates on foreign sales translated into U.S. Dollars for the six months ended July 4, 2026 increased net sales by approximately $9.3 million, or 2.4%. Excluding the impact of foreign exchange and acquisitions, sales increased $44.5 million, or 11.6%, for the six months ended July 4, 2026 as compared to the prior year period.

Domestically, Midera realized a sales increase of $22.7 million, or 10.4%, to $241.4 million, as compared to $218.7 million in the prior year period. This includes an increase of $1.0 million from recent acquisitions. Excluding acquisitions, the net increase in domestic sales was $21.7 million, or 9.9%, primarily driven by increases in aftermarket parts and service in the protein and bakery categories and higher equipment sales in the bakery and snack categories. International sales increased $62.5 million, or 37.5%, to $229.0 million, as compared to $166.5 million in the prior year period. This includes an increase of $30.4 million from the recent acquisitions and an increase of $9.3 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, international sales increased $22.8 million, or 13.7%. The increase reflects higher sales of protein and bakery equipment in the European markets and higher sales of aftermarket parts and service, partially offset by fewer projects in the Middle East.

GROSS PROFIT. Gross profit increased by $22.2 million, or 15.6%, to $164.1 million in the six months ended July 4, 2026, as compared to $141.9 million in the six months ended June 28, 2025. This includes an increase of $7.4 million from recent acquisitions and an increase of $3.1 million related to the favorable impact of exchange rates. Excluding the impact of foreign exchange and acquisitions, gross profit increased $11.7 million. Gross profit margin decreased to 34.9% in the six months ended July 4, 2026, as compared to 36.8% in the prior year period. Excluding the impact of foreign exchange and acquisitions, the gross profit margin was 35.7% in the six months ended July 4, 2026. Excluding the impact of foreign exchange and acquisitions, the gross profit increase was primarily driven by higher aftermarket parts and service sales and higher equipment sales, partially offset by inflationary costs, and the gross profit margin decline was driven by inflationary costs and product mix.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Combined selling, general and administrative expenses increased to $121.9 million in the six months ended July 4, 2026, as compared to $99.9 million in the six months ended June 28, 2025. As a percentage of net sales, selling, general and administrative expenses were 26.0% in the six months ended July 4, 2026 as compared to 25.9% in the six months ended June 28, 2025. The increase in selling, general and administrative expenses of $22.0 million, or 22.0%, is primarily due to increased compensation costs, including share-based compensation and excluding acquisitions, of $14.2 million, higher separation costs of $7.9 million, and cost increases of $6.0 million associated with acquired businesses, including $0.7 million of intangible amortization expense, partially offset by favorable contingent consideration fair value adjustments of $3.4 million and lower professional fees, excluding acquisitions, of $1.1 million. Foreign exchange rates had an unfavorable impact of $2.5 million.

RESTRUCTURING EXPENSES. Restructuring expenses remained consistent at $0.1 million for both the six months ended July 4, 2026 and the six months ended June 28, 2025. Restructuring expenses related primarily to headcount reductions and facility consolidations.

INCOME FROM OPERATIONS. Income from operations increased $0.2 million to $42.1 million in the six months ended July 4, 2026 from $41.9 million in the six months ended June 28, 2025. Operating income as a percentage of net sales amounted to 8.9% in the six months ended July 4, 2026, as compared to 10.9% in the six months ended June 28, 2025.

NON-OPERATING EXPENSE (INCOME). Interest expense was $0.4 million in the six months ended July 4, 2026, as compared to interest income of $1.0 million in the prior year period. Other expense was $1.4 million in the six months ended July 4, 2026, as compared to other income of $11.0 million in the prior year period, and consists mainly of net foreign exchange losses and gains.

INCOME TAXES. A tax provision of $15.2 million, at an effective tax rate of 37.7%, was recorded during the six months ended July 4, 2026, as compared to a tax provision of $12.6 million at an effective tax rate of 23.4% in the prior year period. During the six months ended July 4, 2026, the effective tax rate was higher than the prior year period primarily due to non-deductible expenses and other discrete items, none of which was individually significant. The effective tax rates for the six months ended July 4, 2026 and June 28, 2025 were higher than the U.S. statutory federal tax rate of 21.0% primarily due to non-deductible expenses, state taxes and foreign tax rate differentials. The effective tax rate for the six months ended July 4, 2026 was also higher than the U.S. statutory federal tax rate due to other discrete items, none of which was individually significant.

Financial Condition and Liquidity

Overview

Historically, our business has generated positive cash flows from operations. In June 2026, prior to the completion of the Spin-off, we ceased participation in the Middleby centralized cash management process and our cash and cash equivalents became held and used solely for our own operations.

Our ability to fund our operations and capital needs will depend on our ongoing ability to generate cash from operations and access to capital markets. We believe our existing cash, future cash flows generated from operations, and available borrowing capacity under our revolving credit facility will be sufficient to meet the needs of our current and planned operations for the next 12 months and for the foreseeable future thereafter. Our principal uses of cash are to fund our working capital needs, capital expenditures, debt repayments, acquisitions, and other strategic investments.

Due to the global nature of our operations, a significant portion of our cash is generated and typically held outside the United States to support local operating and working capital requirements. Our cash and cash equivalents totaled $50.5 million at July 4, 2026. Of this amount, cash held by our non-U.S. operations totaled $36.7 million.

On June 29, 2026, we entered into a five-year, $1.0 billion credit agreement (the “Credit Agreement”), which matures on June 29, 2031, in connection with the Spin-off. The Credit Agreement provides for a new senior secured credit facility in an aggregate principal amount of $1.0 billion, consisting of (i) a $750 million U.S. dollar revolving credit facility and (ii) a $250 million multi-currency revolving credit facility, with the potential, under certain circumstances, to increase the amount of the credit facility by the greater of $151 million and 100% of the Company’s Consolidated EBITDA (as defined in the Credit Agreement) for the most recently ended period of four consecutive quarters (plus additional amounts subject to compliance with a specified leverage ratio depending on the type of indebtedness being incurred) either by increasing one or more revolving facility, or by adding on one or more revolving and/or term loan facilities. As of July 4, 2026, we had $228.0 million in U.S. dollar borrowings outstanding under the revolving credit facility and no outstanding letters of credit, resulting in available borrowing capacity of $772.0 million. For additional information on the Credit Agreement, see Note 6 to the Condensed Combined Financial Statements.

On August 10, 2026, our Board of Directors authorized a share repurchase program, which expires on August 10, 2029, pursuant to which we may repurchase up to $50 million of our common stock. The primary purpose of the share repurchase program is to mitigate stockholder dilution from equity awards. The timing and amount of any shares repurchased will be determined by us based on our evaluation of market conditions and other factors, and will be made in accordance with applicable securities laws in either the open market or in privately negotiated transactions. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate share repurchases under this authorization. We are not obligated to purchase any shares under the program, and the program may be suspended or discontinued at any time. The actual timing, number, and share price of shares repurchased will depend on a number of factors, including the market price of our common stock, general market and economic conditions, alternative investment or acquisition opportunities, and applicable legal requirements.

Cash Flows

The following table summarizes our cash flows for the six months ended July 4, 2026 and June 28, 2025:

(in millions)

Total cash and cash equivalents decreased by $40.4 million to $50.5 million at July 4, 2026 from $90.9 million at January 3, 2026.

OPERATING ACTIVITIES. Net cash provided by operating activities decreased by $7.7 million, or 16.1%, to $40.1 million during the six months ended July 4, 2026, as compared to $47.8 million during the six months ended June 28, 2025, primarily driven by lower net earnings, exclusive of non-cash items, of $9.7 million.

INVESTING ACTIVITIES. During the six months ended July 4, 2026, net cash provided by investing activities increased by $32.5 million to $4.3 million, as compared to net cash used in investing activities of $28.2 million in the six months ended June 28, 2025. Capital expenditures were $6.6 million and $25.7 million during the six months ended July 4, 2026 and June 28, 2025, respectively, primarily for upgrades of production equipment and manufacturing facilities. Capital expenditures during the six months ended June 28, 2025 also include investment in an innovation center in Italy. Net related party loan activities were an increase in net cash provided by investing activities of $11.8 million and an increase in net cash used in investing activities of $2.5 million during the six months ended July 4, 2026 and June 28, 2025, respectively.

FINANCING ACTIVITIES. Net cash used in financing activities increased by $67.6 million to $82.3 million during the six months ended July 4, 2026, as compared to $14.7 million during the six months ended June 28, 2025. The increase relates to transfers to Middleby, including a $233.0 million distribution in connection with the separation and cash management activities given cash was centrally managed by Middleby until June 2026, and the payment of deferred purchase price for acquisitions, partially offset by borrowings under the revolving credit facility of $228.0 million.

Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon the Company’s condensed combined 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 significant 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 and any such differences could be material to our condensed combined financial statements. There have been no material changes to the critical accounting estimates described in the Company's final Information Statement, dated as of June 22, 2026 (the “Information Statement”), included as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on June 22, 2026.

There have been no material changes to the information on market risk exposure disclosed in the Company's Information Statement, except as described below.

Interest Rate Risk

Borrowings under the Company's Credit Agreement and certain foreign loans have variable interest rates. A hypothetical 100 basis point increase in interest rates affecting our external variable rate borrowings as of July 4, 2026 would increase our annual interest expense by approximately $2.5 million, assuming debt levels remained constant throughout the period.

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended July 4, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in the Company's risk factors from those disclosed under the heading “Risk Factors” in the Company's Information Statement.