**FORM
      10-Q**





**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**





(Mark
      One)




x
            Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934





**For
      the quarterly period ended September 30, 2006**





or




o
            Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934





Commission
      File No. 1-9973





**THE
      MIDDLEBY CORPORATION**


(Exact
      Name of Registrant as Specified in its Charter)





**Delaware**
            
            **36-3352497**(State
                or Other Jurisdiction ofIncorporation
                or Organization)
            
            (I.R.S.
                Employer Identification
                No.)**1400
                Toastmaster Drive, Elgin,
                Illinois**
            
            **60120**(Address
                of Principal Executive
                Offices)
            
            (Zip
                Code)Registrant's Telephone
              No.,
              including Area Code **(847)
              741-3300**





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports) and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes ý  No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.





Large
      accelerated filer o Accelerated
      filer ý Non-accelerated
      filer o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes o  No ý





As
      of
      November 3, 2006, there were 7,940,300 shares of the registrant's common stock
      outstanding.







**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**





**QUARTER
      ENDED SEPTEMBER 30, 2006**




INDEX





DESCRIPTION
            
            PAGEPART I. FINANCIAL
              INFORMATIONItem 1.
            Condensed Consolidated Financial
              Statements (unaudited)CONDENSED
              CONSOLIDATED BALANCE SHEETSSeptember
              30, 2006 and December 31, 2005
            
            1CONDENSED
              CONSOLIDATED STATEMENTSOF
              EARNINGSSeptember
              30, 2006 and October 1, 2005
            
            2CONDENSED
              CONSOLIDATED STATEMENTSOF
              CASH FLOWSSeptember
              30, 2006 and October 1, 2005
            
            3NOTES
              TO CONDENSED CONSOLIDATEDFINANCIAL
              STATEMENTS
            
            4Item 2.
            Management's Discussion
              and
              Analysis of Financial Condition and
              Results of Operations
            
            21Item 3.
            Quantitative and Qualitative
              Disclosures About Market Risk
            
            31Item 4.
            Controls and Procedures
            
            34PART II. OTHER
              INFORMATIONItem 1A.
            Risk Factors
            
            35Item 2.
            Unregistered Sales of Equity
              Securities and Use of Proceeds
            
            35Item 6.
            Exhibits
            
            36








**PART
      I. FINANCIAL INFORMATION**


**Item
      1. Condensed Consolidated Financial Statements**





**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      Thousands, Except Share Amounts)**


**(Unaudited)**




Sep.
                30, 2006
            
            Dec.
                31, 2005**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            3,025
            
            $
            3,908Accounts
                receivable, net of reserve for
              doubtful
                accounts of $3,802 and $3,081
            
            
            52,611
            
            
            38,552Inventories,
                net
            
            
            46,507
            
            
            40,989Prepaid
                expenses and other
            
            
            4,673
            
            
            4,513Prepaid
                taxes
            
            
            --
            
            
            3,354Current
                deferred taxes
            
            
            10,013
            
            
            10,319Total
                current assets
            
            
            116,829
            
            
            101,635Property,
                plant and equipment, net of
              accumulated
                depreciation of $36,466 and $34,061
            
            
            28,346
            
            
            25,331Goodwill
            
            
            100,102
            
            
            98,757Other
                intangibles
            
            
            35,767
            
            
            35,498Other
                assets
            
            
            2,418
            
            
            2,697Total
                assets
            
            $
            283,462
            
            $
            263,918**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            16,704
            
            $
            13,780Accounts
                payable
            
            
            18,749
            
            
            17,576Accrued
                expenses
            
            
            67,463
            
            
            62,689Total
                current liabilities
            
            
            102,916
            
            
            94,045Long-term
                debt
            
            
            80,525
            
            
            107,815Long-term
                deferred tax liability
            
            
            10,372
            
            
            8,207Other
                non-current liabilities
            
            
            6,467
            
            
            5,351Stockholders'
                equity:Preferred
                stock, $0.01 par value; nonvoting; 2,000,000shares authorized; none
                issued
            
            
            --
            
            
            --Common
                stock, $0.01 par value; 20,000,000 shares authorized;11,794,344 and
                11,751,219 shares issued in 2006 and 2005, respectively
            
            
            117
            
            
            117Restricted
                stock
            
            
            --
            
            
            (14,204
            )Paid-in
                capital
            
            
            68,230
            
            
            79,291Treasury
                stock at cost; 3,855,044 and 3,856,344
              shares
                in 2006 and 2005, respectively
            
            
            (89,650
            )
            
            (89,650
            )Retained
                earnings
            
            
            104,858
            
            
            73,540Accumulated
                other comprehensive loss
            
            
            (373
            )
            
            (594
            )Total
                stockholders' equity
            
            
            83,182
            
            
            48,500Total
                liabilities and stockholders' equity
            
            $
            283,462
            
            $
            263,918




See
      accompanying notes




1




**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF EARNINGS**


**(In
      Thousands, Except Per Share Amounts)**


**(** **Unaudited** **)**




**Three
                Months Ended**
            
            **Nine
                Months Ended****Sep.
                30, 2006**
            
            **Oct.
                1, 2005**
            
            **Sep.
                30, 2006**
            
            **Oct.
                1, 2005****Net
                sales**
            
            **$**
            **103,239**
            
            **$**
            **80,937**
            
            **$**
            **304,837**
            
            **$**
            **239,738****Cost
                of sales**
            
            
            **62,664**
            
            
            **48,461**
            
            
            **187,011**
            
            
            **147,604****Gross
                profit**
            
            
            **40,575**
            
            
            **32,476**
            
            
            **117,826**
            
            
            **92,134****Selling
                expenses**
            
            
            **10,009**
            
            
            **8,710**
            
            
            **30,901**
            
            
            **25,663****General
                and administrative expenses**
            
            
            **9,545**
            
            
            **7,482**
            
            
            **30,477**
            
            
            **21,847****Income
                from operations**
            
            
            **21,021**
            
            
            **16,284**
            
            
            **56,448**
            
            
            **44,624****Net
                interest expense and deferred financing amortization**
            
            
            **1,618**
            
            
            **1,579**
            
            
            **5,445**
            
            
            **5,063****Other
                (income) expense, net**
            
            
            **(37**
            **)**
            
            **312**
            
            
            **35**
            
            
            **47****Earnings
                before income taxes**
            
            
            **19,440**
            
            
            **14,393**
            
            
            **50,968**
            
            
            **39,514****Provision
                for income taxes**
            
            
            **7,263**
            
            
            **4,765**
            
            
            **19,650**
            
            
            **14,569****Net
                earnings**
            
            **$**
            **12,177**
            
            **$**
            **9,628**
            
            **$**
            **31,318**
            
            **$**
            **24,945****Net
                earnings per share:****Basic**
            
            **$**
            **1.59**
            
            **$**
            **1.28**
            
            **$**
            **4.11**
            
            **$**
            **3.33****Diluted**
            
            **$**
            **1.48**
            
            **$**
            **1.19**
            
            **$**
            **3.79**
            
            **$**
            **3.09****Weighted
                average number of shares****Basic**
            
            
            **7,645**
            
            
            **7,516**
            
            
            **7,629**
            
            
            **7,499****Dilutive
                stock options****1**
            
            
            **603**
            
            
            **594**
            
            
            **628**
            
            
            **561****Diluted**
            
            
            **8,248**
            
            
            **8,110**
            
            
            **8,257**
            
            
            **8,060**




1
            There
                were 3,500 anti-dilutive stock options excluded from common stock
                equivalents during the three and nine month periods ended September
                30,
                2006. There were no anti-dilutive stock options in the 2005 comparative
                periods.





See
      accompanying notes




2


**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(In
      Thousands)**


**(** **Unaudited** **)**


**Nine
                  Months
                  Ended****Sep.
                  30, 2006**
              
              **Oct.
                  1, 2005****Cash
                  flows from operating activities-**
              
              ****
              
              ******Net
                  earnings**
              
              **$**
              **31,318**
              
              **$**
              **24,945****Adjustments
                  to reconcile net earnings to cashprovided by operating
                  activities:********Depreciation
                  and amortization**
              
              
              **3,643**
              
              
              **2,597****Deferred
                  taxes**
              
              
              **249**
              
              
              **(1,088**
              **)****Stock-based
                  compensation costs**
              
              
              **3,416**
              
              
              **2,482****Cash
                  effects of changes in -****Accounts
                  receivable, net**
              
              
              **(11,972**
              **)**
              
              **(8,218**
              **)****Inventories,
                  net**
              
              
              **(3,145**
              **)**
              
              **1,761****Prepaid
                  expenses and other assets**
              
              
              **3,186**
              
              
              **10,632****Accounts
                  payable**
              
              
              **290**
              
              
              **1,137****Accrued
                  expenses and other liabilities**
              
              
              **6,379**
              
              
              **(3,466**
              **)****Net
                  cash provided by operating activities**
              
              
              **33,364**
              
              
              **30,782****Cash
                  flows from investing activities-****Net
                  additions to property and equipment**
              
              
              **(1,236**
              **)**
              ****
              **(1,085**
              **)****Acquisition
                  of Nu-Vu**
              ****
              ****
              **--**
              ****
              ****
              **(11,450**
              **)****Acquisition
                  of Alkar**
              ****
              ****
              **(1,500**
              **)**
              ****
              **--**
              ******Acquisition
                  of Houno**
              ****
              ****
              **(4,939**
              **)**
              ****
              **--**
              ******Net
                  cash (used in) investing activities**
              ****
              ****
              **(7,675**
              **)**
              ****
              **(12,535**
              **)****Cash
                  flows from financing activities-**
              ****
              ****
              
              ****
              ****
              
              ******Net
                  (repayments) proceeds under revolving credit
                  facilities**
              ****
              ****
              **(16,500**
              **)**
              ****
              **(11,915**
              **)****(Repayments)
                  under senior secured bank notes**
              ****
              ****
              **(9,375**
              **)**
              ****
              **(7,500**
              **)****Net
                  (repayments) under foreign borrowings**
              ****
              ****
              **--**
              ****
              ****
              **--**
              ******(Repayments)
                  of note agreement**
              ****
              ****
              **(2,145**
              **)**
              ****
              **--****Net
                  proceeds from stock issuances**
              
              
              **1,284**
              
              
              **717****Net
                  cash (used in) financing activities**
              
              
              **(26,736**
              **)**
              ****
              **(18,698**
              **)****Effect
                  of exchange rates on cash and cash equivalents**
              
              
              **121**
              
              
              **(79**
              **)********Cash
                  acquired in acquisition**
              
              
              **43**
              
              
              **--****Changes
                  in cash and cash equivalents-****Net
                  (decrease) in cash and cash equivalents**
              
              
              **(883**
              **)**
              ****
              **(530**
              **)****Cash
                  and cash equivalents at beginning of year**
              
              
              **3,908**
              
              
              **3,803****Cash
                  and cash equivalents at end of quarter**
              
              **$**
              **3,025**
              
              **$**
              **3,273****Supplemental
                  disclosure of cash flow information:****Interest
                  paid**
              
              **$**
              **4,898**
              
              **$**
              **4,530****Income
                  tax payments**
              
              **$**
              **8,557**
              
              **$**
              **4,535**




See
      accompanying notes




3




**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**September
      30, 2006**


**(** **Unaudited** **)**





**1)**
            **Summary
                of Significant Accounting
                Policies**





**A)** **Basis
      of Presentation**





The
      condensed consolidated financial statements have been prepared by The Middleby
      Corporation (the "company"), 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 2005 Form 10-K.





In
      the
      opinion of management, the financial statements contain all adjustments
      necessary to present fairly the financial position of the company as of
      September 30, 2006 and December 31, 2005, and the results of operations for
      the
      three and nine months ended September 30, 2006 and October 1, 2005 and cash
      flows for the nine months ended September 30, 2006 and October 1, 2005.




**B)** **Stock-Based
      Compensation**





The
      company maintains a 1998 Stock Incentive Plan (the "Plan"), as amended on May
      11, 2005, under which the company's Board of Directors issues stock grants
      and
      stock options to key employees. A maximum amount of 1,750,000 shares can be
      issued under the Plan. As of September 30, 2006, a total of 1,231,160 stock
      options and 350,000 restricted stock grants have been issued under the Plan.
      In
      addition to shares under the Plan, certain directors of the company have
      outstanding stock options.





Effective
      January 1, 2006, the company adopted Statement of Financial Accounting Standards
      ("SFAS") No. 123(R): "Share Based Payments", which requires the recognition
      of
      compensation expense associated with stock options and awards based upon their
      values. The company elected to adopt SFAS No. 123(R) using the modified
      prospective method. The company had previously disclosed that it would adopt
      the
      modified retrospective method. However, upon further review, the modified
      prospective method was adopted. Under that method, compensation cost recognized
      in the third quarter and first nine months of 2006 includes a ratable portion
      of
      compensation cost for all share-based payments not yet vested as of January
      1,
      2006, and a ratable portion of compensation cost for all share-based payments
      granted subsequent to January 1, 2006, based upon the grant date fair
      value.





4




*Stock
      Grants:* Stock
      grants issued are issued under the Plan to key employees and are transferable
      upon certain vesting requirements being met. As of the third quarter ended
      September 30, 2006, a total of 350,000 restricted stock grants were issued,
      280,000 of which were unvested. There were no stock grants issued, forfeited
      or
      vested during the three month period ended September 30, 2006. The company
      recorded compensation expense associated with the restricted stock grants
      amounting to $0.9 million and $2.6 million for the three months and nine months
      ended September 30, 2006, respectively and $0.8 million and $2.5 million for
      the
      three months and nine months ended end October 1, 2005,
      respectively.





Prior
      to
      January 1, 2006, the company elected to follow APB Opinion No. 25: "Accounting
      for Stock Issued to Employees" ("APB No. 25") in accounting for stock-based
      awards to employees and directors. In accordance with APB No. 25, the company
      established the value of restricted stock grants based upon the market value
      of
      the stock at the time of issuance. The value of the stock grant was amortized
      and recorded as compensation expense over the applicable vesting period. The
      adoption of SFAS No. 123(R) did not affect the value assigned to the stock
      grants or the amount of the reported compensation expense. Under APB No. 25,
      the
      value of the restricted stock grant was reflected as a separate component
      reducing stockholders' equity with an offsetting increase to Paid-in Capital.
      Accordingly, as of December 31, 2005, the unamortized value of the restricted
      stock grant was reflected as a separate component in Stockholders' Equity.
      Upon
      adoption of SFAS No. 123(R), the company has reclassified $11.6 million related
      to the unamortized restricted stock grant to
      Paid-in-Capital.





*Stock
      Options:* Stock
      options issued under the Plan provide key employees with rights to purchase
      shares of common stock at specified exercise prices. Options may be exercised
      upon certain vesting requirements being met, but expire to the extent
      unexercised within a maximum of ten years from the date of grant.





5




As
      a
      result of the adoption of SFAS No. 123(R), the company recorded compensation
      expense of $238,000 and $843,000, respectively, for the three month and nine
      month periods ended September 30, 2006 associated with the ratable portion
      of
      the stock options granted prior to the adoption date which had not yet vested.
      Prior to January 1, 2006, in accordance with APB No. 25, the company had not
      recorded compensation expense related to issued stock options in the financial
      statements because the exercise price of the stock options was equal to or
      greater than the market price of the underlying stock on the date of grant.
      The
      company’s pro forma net earnings and per share data utilizing a fair value based
      method for the three month and nine month periods ended October 1, 2005 prior
      to
      the adoption of SFAS 123(R) is as follows (in thousands, except per share
      data):


Three
                  Months Ended
              
              Nine
                  Months EndedOct.
                  1, 2005
              
              Oct.
                  1, 2005Net
                  income - as reported
              
              
              9,628
              
              $
              24,945Less:
                  Stock-based employeecompensation
                  expense, netof
                  taxes
              
              
              (184
              )
              
              (500
              )Net
                  income - pro forma
              
              $
              9,444
              
              $
              24,445Earnings
                  per share - as reported:Basic
              
              $
              1.28
              
              $
              3.33Diluted
              
              
              1.19
              
              
              3.09Earnings
                  per share - pro forma:Basic
              
              $
              1.26
              
              $
              3.26Diluted
              
              
              1.16
              
              
              3.03




The
      company has utilized Black-Scholes and binomial option valuation models to
      estimate the fair value of issued stock options. During the second quarter
      of
      2006, 3,500 stock options were issued to company directors at an exercise price
      of $88.43 per share. The fair value of these options was estimated using the
      Black-Scholes valuation model utilizing the following assumptions: volatility
      40%; interest rate 5.03%; and expected life of 4.6 years. The Black-Scholes
      and
      binomial option valuation models require the input of highly subjective
      assumptions, including the expected stock price volatility. Because the
      company’s options have characteristics significantly different from those of
      traded options and because changes in the subjective input assumptions can
      materially affect the fair value estimate, in the opinion of management, the
      existing models do not necessarily provide a reliable single measure of the
      fair
      value of its options.





6




A
      summary
      of stock option activity for the nine months ended September 30, 2006 is
      presented below:




Stock
                Option Activity
              
              Employees
              
              
              Directors
              
              
              OptionPrice
                  Per ShareOutstanding
                  at December 31, 2005:
              
              
              736,025
              
              
              
              6,000Granted
              
              
              --
              
              
              
              3,500
              
              
              $
                  88.43Exercised
              
              
              (40,125
              )
              
              
              (3,000
              )
              
              $5.90
                  to
                  $18.47Forfeited
              
              
              --
              
              
              
              --Outstanding
                    at September
                    30, 2006:
              
              
              695,900
              
              
              
              6,500Weighted
                  average price
              
              $
              19.44
              
              
              $
              52.47Exercisable
                    atSeptember
                    30, 2006:
              
              
              556,140
              
              
              
              6,500Weighted
                  average price
              
              $
              16.14
              
              
              $
              52.47





The
      weighted average price of shares exercised during the nine months ended
      September 30, 2006 was $14.96.





The
      following summarizes the options outstanding and exercisable for the employee
      and director stock plans by exercise price, at September 30, 2006:


Exercise
                Price
              
              OptionsOutstanding
              
              WeightedAverageRemainingLife
              
              OptionsExercisable
              
              WeightedAverageRemainingLifeEmployee
                  plan$5.90
              
              
              184,000
              
              
              5.41
              
              
              147,200
              
              
              5.41$10.51
              
              
              69,900
              
              
              
              
              
              41,940
              
              
              6.43$18.47
              
              
              342,000
              
              
              7.07
              
              
              342,000
              
              
              7.07$53.93
              
              
              100,000
              
              
              8.42
              
              
              25,000
              
              
              8.42695,900
              
              
              6.76
              
              
              556,140
              
              
              6.64Director
                  plan$10.51
              
              
              3,000
              
              
              1.43
              
              
              3,000
              
              
              1.43$88.43
              
              
              3,500
              
              
              9.62
              
              
              3,500
              
              
              9.626,500
              
              
              5.84
              
              
              6,500
              
              
              5.84





7





**2)** **Purchase
      Accounting**





*Nu-Vu*





On
        January 7, 2005, Middleby Marshall Holdings, LLC, a wholly-owned subsidiary
        of
        the company, completed its acquisition of the assets of Nu-Vu Foodservice
        Systems ("Nu-Vu"), a leading manufacturer of baking ovens, from Win-Holt
        Equipment Corporation ("Win-Holt") for $12.0 million in cash. In September
        2005,
        the company reached final settlement with Win-Holt on post-closing adjustments
        pertaining to the acquisition of Nu-Vu. As a result, the final purchase price
        was reduced by $550,000.





The
        company has accounted for this business combination using the purchase 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 was been recorded as goodwill in the financial
        statements.





The
        allocation of cash paid for the Nu-Vu acquisition is summarized as follows
        (in
        thousands):


Jan.
                  7, 2005
              
              Adjustments
              
              Dec.
                  31, 2005Current
                  assets
              
              $
              2,556
              
              
              242
              
              $
              2,798Property,
                  plant and equipment
              
              
              1,178
              
              
              --
              
              
              1,178Deferred
                  taxes
              
              
              3,637
              
              
              (336
              )
              
              3,301Goodwill
              
              
              4,566
              
              
              252
              
              
              4,818Other
                  intangibles
              
              
              2,188
              
              
              (875
              )
              
              1,313Current
                  liabilities
              
              
              (2,125
              )
              
              167
              
              
              (1,958
              )Total
                  cash paid
              
              $
              12,000
              
              $
              (550
              )
              $
              11,450





The
      goodwill and other intangible assets associated with the Nu-Vu acquisition,
      which are comprised of the tradename, are subject to the non-amortization
      provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”, and are
      allocable to the company's Commercial Foodservice Equipment Group for purposes
      of segment reporting (see footnote 12 for further discussion). Goodwill and
      other intangible assets associated with this transaction are deductible for
      income taxes.





*Alkar*





On
      December 7, 2005, the company acquired the stock of Alkar Holdings, Inc.
      ("Alkar") for $26.7 million in cash. Cash paid at closing amounted to $28.2
      million and included $1.5 million of estimated working capital adjustments
      determined at closing. In April 2006, the company reached final settlement
      on
      post-close working capital adjustments, which resulted in an additional payment
      of $1.5 million.





The
      company has accounted for this business combination using the purchase 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 allocation of the purchase price to the assets, liabilities
      and
      intangible assets is under review and is subject to change based upon the
      results of further evaluation.





8




The
      allocation of cash paid for the Alkar acquisition is summarized as follows
      (in
      thousands):




Dec.
                  7, 2005
              
              Adjustments
              
              Sep.
                  30, 2006Current
                  assets
              
              $
              17,160
              
              $
              (75
              )
              $
              17,085Property,
                  plant and equipment
              
              
              3,032
              
              
              --
              
              
              3,032Goodwill
              
              
              19,177
              
              
              75
              
              
              19,252Other
                  intangibles
              
              
              7,960
              
              
              --
              
              
              7,960Current
                  liabilities
              
              
              (16,003
              )
              
              1,500
              
              
              (14,503
              )Long-term
                  deferred tax liability
              
              
              (3,131
              )
              
              --
              
              
              (3,131
              )Total
                  cash paid
              
              $
              28,195
              
              $
              1,500
              
              $
              29,695




The
      goodwill and $5.0 million of trademarks included in other intangibles are
      subject to the nonamortization provisions of SFAS No. 142 from the date of
      acquisition. Other intangibles also includes $2.1 million allocated to customer
      relationships, $0.6 million allocated to backlog, and $0.3 million allocated
      to
      developed technology which are amortized over periods of 10 years, 7 months,
      and
      14 years respectively. Goodwill and other intangibles of Alkar are allocated
      to
      the Industrial Foodservice Equipment Group for segment reporting purposes.
      These
      assets are not deductible for tax purposes.





*Houno*





On
      August
      31, 2006, the company acquired the stock of Houno A/S (“Houno”) located in
      Denmark for $4.9 million in cash. The company also assumed $3.7 million of
      debt
      included as part of the net assets of Houno.





The
      company has accounted for this business combination using the purchase 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 allocation of the purchase price to the assets, liabilities
      and
      intangible assets is under review and is subject to change based upon the
      results of further evaluation.





The
      allocation of cash paid for the Houno acquisition is summarized as follows
      (in
      thousands):




Aug.
                  31, 2006Current
                  assets
              
              $
              4,325Property,
                  plant and equipment
              
              
              4,371Goodwill
              
              
              1,287Other
                  intangibles
              
              
              1,139Other
                  assets
              
              
              15Current
                  liabilities
              
              
              (3,061
              )Long-term
                  debt
              
              
              (2,858
              )Long-term
                  deferred tax liability
              
              
              (356
              )Other
                  comprehensive income
              
              
              77Total
                  cash paid
              
              $
              4,939




The
      goodwill is subject to the nonamortization provisions of SFAS No. 142 from
      the
      date of acquisition. Other intangibles also includes $0.1 million allocated
      to
      backlog and $1.0 million allocated to developed technology which are amortized
      over periods of 1 month and 5 years, respectively. Goodwill and other
      intangibles of Houno are allocated to the Commercial Foodservice Equipment
      Group
      for segment reporting purposes. These assets are not deductible for tax
      purposes.




9




**3)**
            **Litigation
                Matters**




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 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 required
      accrual 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 such matter will have a material adverse
      effect on its financial condition, results of operations or cash flows of the
      company.




**4)**
            **New
                Accounting Pronouncements**





In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
      of
      ARB No. 43, Chapter 4". This statement amends the guidance in ARB No. 43,
      Chapter 4 to clarify the accounting for abnormal amounts of idle facility
      expense, freight, handling costs and wasted material. This statement requires
      that these items be recognized as current period costs and also requires that
      allocation of fixed production overheads to the costs of conversion be based
      on
      the normal capacity of the production facilities. This statement is effective
      for inventory costs incurred during fiscal years beginning after June 15, 2005.
      The adoption of this statement did not have a material effect on the company's
      financial position, results of operations or cash flows.




In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections
      -
      a replacement of APB Opinion No. 20 and FASB Statement No. 3". This statement
      replaces ABP Opinion No. 20, Accounting Changes and FASB Statement No. 3,
      Reporting Changes in Interim Financial Statements and changes the requirements
      for the accounting for and reporting of a change in accounting principles.
      This
      statement applies to all voluntary changes in accounting principles. This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. The company will apply this
      guidance prospectively.





In
      February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments - an amendment of FASB Statements No. 133 and 140". This
      statement provides entities with relief from having to separately determine
      the
      fair value of an embedded derivative that would otherwise be required to be
      bifurcated from its host contract in accordance with SFAS No. 133. This
      statement allows an entity to make an irrevocable election to measure such
      a
      hybrid financial instrument at fair value in its entirety, with changes in
      fair
      value recognized in earnings. This statement is effective for all financial
      instruments acquired, issued, or subject to a remeasurement (new basis) event
      occurring after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006. The company will apply this guidance prospectively. The
      company is continuing its process of determining what impact the application
      of
      this guidance will have on the company's financial position, results of
      operations or cash flows.





10




In
      July
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes.” This interpretation requires that a recorded tax benefit must be
      more likely than not of being sustained upon examination by tax authorities
      based upon its technical merits. The amount of benefit recorded is the largest
      amount of benefit that is greater than 50 percent likely of being realized
      upon
      ultimate settlement. Upon adoption, any adjustment will be recorded directly
      to
      beginning retained earnings. The interpretation is effective for fiscal years
      beginning after December 15, 2006. The company has not yet determined what
      impact the application of the interpretation will have on the company’s
      financial position, results of operations or cash flows.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This
      statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles and expands disclosures about fair
      value measurements. This statement does not require any new fair value
      measurements. This statement is effective for interim reporting periods in
      fiscal years beginning after November 15, 2007. The company will apply this
      guidance prospectively.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This statement improves financial reporting by
      requiring an employer to recognize the overfunded or underfunded status of
      a
      defined benefit postretirement plan as an asset of liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity.
      This
      statement also improves financial reporting by requiring an employer to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position, with limited exceptions. Employers with publicly traded
      equity securities are required to initially recognize the funded status of
      a
      defined benefit postretirement plan and to provide the required disclosures
      as
      of the end of the fiscal year ending after December 15, 2006. The company has
      not yet determined what impact the application of the interpretation will have
      on the company’s financial position.





**5)** **Other
      Comprehensive Income**





The
      company reports changes in equity during a period, except those resulting from
      investment by owners and distribution to owners, in accordance with SFAS No.
      130, "Reporting Comprehensive Income."





Components
      of other comprehensive income were as follows (in thousands):


Three
                  Months Ended
              
              Nine
                  Months EndedSep.
                  30, 2006
              
              Oct.
                  1, 2005
              
              Sep.
                  30, 2006
              
              Oct.
                  1, 2005Net
                  earnings
              
              $
              12,177
              
              $
              9,628
              
              $
              31,318
              
              $
              24,945Cumulative
                  translation adjustment
              
              
              90
              
              
              72
              
              
              354
              
              
              (611
              )Unrealized
                    gain (loss) on interestrate
                    swap
              
              
              (344
              )
              
              318
              
              
              (134
              )
              
              590Comprehensive
                  income
              
              $
              11,923
              
              $
              10,018
              
              $
              31,538
              
              $
              24,924





Accumulated
      other comprehensive loss is comprised of minimum pension liability of $(1.2)
      million, net of taxes of $(0.8) million, as of September 30, 2006 and December
      31, 2005, foreign currency translation adjustments of $0.3 million as of
      September 30, 2006 and $(0.1) million as of December 31, 2005, and an unrealized
      gain on a interest rate swap of $0.6 million, net of taxes of $0.4 million,
      as
      of September 30, 2006 and $0.7 million, net of taxes of $0.5 million as of
      December 31, 2005.





11




**6)**
            **Inventories**





Inventories
      are composed of material, labor and overhead and are stated at the lower of
      cost
      or market. Costs for inventory at two of the company's manufacturing facilities
      have been determined using the last-in, first-out ("LIFO") method. These
      inventories under the LIFO method amounted to $14.2 million at September 30,
      2006 and $15.4 million at December 31, 2005 and represented approximately 31%
      and 38% of the total inventory in each respective period. Costs for all other
      inventory have been determined using the first-in, first-out ("FIFO") method.
      The company estimates reserves for inventory obsolescence and shrinkage based
      on
      its judgment of future realization. Inventories at September 30, 2006 and
      December 31, 2005 are as follows:




Sep.
                  30, 2006
              
              Dec.
                  31, 2005(in
                  thousands)Raw
                  materials and parts
              
              $
              15,582
              
              $
              11,311Work-in-process
              
              
              6,676
              
              
              6,792Finished
                  goods
              
              
              24,749
              
              
              22,65447,007
              
              
              40,757LIFO
                  adjustment
              
              
              (500
              )
              
              232$
              46,507
              
              $
              40,989





**7)** **Accrued
      Expenses**




Accrued
      expenses consist of the following:


Sep.
                  30, 2006
              
              Dec,
                  31, 2005(in
                  thousands)Accrued
                  payroll and related expenses
              
              $
              15,944
              
              $
              15,577Accrued
                  warranty
              
              
              11,865
              
              
              11,286Accrued
                  customer rebates
              
              
              10,552
              
              
              10,740Accrued
                  income taxes
              
              
              5,512
              
              
              1,499Accrued
                  product liability and workers comp
              
              
              4,176
              
              
              2,418Advanced
                  customer deposits
              
              
              3,203
              
              
              6,204Other
                  accrued expenses
              
              
              16,211
              
              
              14,965$
              67,463
              
              $
              62,689




**8)** **Warranty
      Costs**





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.





12




A
      rollforward of the warranty reserve is as follows:




Nine
                  Months EndedSep.
                  30, 2006(in
                  thousands)Beginning
                  balance
              
              $
              11,286Warranty
                  expense
              
              
              7,037Warranty
                  claims
              
              
              (6,458
              )Ending
                  balance
              
              $
              11,865




**9)** **Financing
      Arrangements**


Sep.
                  30, 2006
              
              Dec.
                  31, 2005(in
                  thousands)Senior
                  secured revolving credit line
              
              $
              39,750
              
              $
              56,250Senior
                  secured bank term loans
              
              
              50,625
              
              
              60,000Foreign
                  borrowings
              
              
              6,854
              
              
              3,200Other
                  note
              
              
              --
              
              
              2,145Total
                  debt
              
              $
              97,229
              
              $
              121,595Less:
                  Current maturities of long-term debt
              
              
              16,704
              
              
              13,780Long-term
                  debt
              
              $
              80,525
              
              $
              107,815




During
      the fourth quarter of 2005, the company amended its senior secured credit
      facility. Terms of the agreement provided for $60.0 million of term loans and
      $130.0 million of availability under a revolving credit line. As of September
      30, 2006, the company had $90.4 million outstanding under its senior banking
      facility, including $50.6 million of unamortized term loans and $39.8 million
      of
      borrowings under the revolving credit line. The company also had $6.4 million
      in
      outstanding letters of credit, which reduced the borrowing availability under
      the revolving credit line.





Borrowings
      under the senior secured credit facility are assessed at an interest rate of
      1.00% above LIBOR for long-term borrowings or at the higher of the Prime rate
      and the Federal Funds Rate for short term borrowings. At September 30, 2006,
      the
      average interest rate on the senior debt amounted to 6.43%. The interest rates
      on borrowings under the senior bank facility may be adjusted quarterly based
      on
      the company’s defined indebtedness ratio on a rolling four-quarter basis.
      Additionally, a commitment fee, based upon the indebtedness ratio is charged
      on
      the unused portion of the revolving credit line. This variable commitment fee
      amounted to 0.20% as of September 30, 2006.





In
      December 2005, the company entered into a U.S. dollar secured term loan at
      its
      subsidiary in Spain. This term loan amortizes in equal monthly installments
      over
      a four-year period ending December 31, 2009. The unamortized balance under
      this
      loan amounted to $2.6 million at September 30, 2006. Borrowings under this
      facility are assessed at an interest rate of 0.45% above LIBOR. At September
      30,
      2006, the interest rate on this loan was 5.79%.





13




In
      June
      2006, the company entered into a U.S. dollar secured promissory note at its
      subsidiary in Mexico. This promissory note amortizes in equal monthly
      installments over a one-year period. The unamortized balance under this loan
      amounted to $0.3 million at September 30, 2006. Borrowings under this facility
      are assessed at an interest rate of 10.55%.





In
      conjunction with the acquisition of Houno, the company assumed $3.7 million
      of
      outstanding debt obligations included as part of the net assets acquired.
 As of September 30, 2006 the amount of debt associated with Houno amounted
      to $4.0 million and included $1.1 million of borrowings on a revolving credit
      facility with an average interest rate of 5.54%, $0.9 million of borrowings
      under term loan facilities with an average interest rate of 5.52%, and $2.0
      million of mortgage notes with an average interest rate of 6.97%.





The
      company has historically entered into interest rate swap agreements to
      effectively fix the interest rate on its outstanding debt. In January 2005,
      the
      company entered into an interest rate swap agreement for a notional amount
      of
      $70.0 million. This agreement swaps one-month LIBOR for a fixed rate of 3.78%.
      The notional amount amortizes consistent with the repayment schedule of the
      company's term loan maturing November 2009. The unamortized notional amount
      of
      this swap as of September 30, 2006 was $50.6 million. In January 2006, the
      company entered into an interest rate swap agreement for a notional amount
      of
      $10.0 million maturing on December 21, 2009. This agreement swaps one-month
      LIBOR for a fixed rate of 5.03%. In August 2006, in conjunction with the Houno
      acquisition, the company assumed an interest rate swap with a notional amount
      of
      $1.2 million maturing on December 31, 2018. This agreement swaps one-month
      LIBOR
      for a fixed rate of 4.84%.





In
      2004,
      the company entered into a promissory note in conjunction with the release
      and
      early termination of obligations under a lease agreement relative to a
      manufacturing facility in Shelburne, Vermont. Under terms of the agreement,
      the
      company fully retired this note in September 2006.





The
      terms
      of the senior secured credit facility limit the paying of dividends, capital
      expenditures and leases, and require, among other things, certain ratios of
      indebtedness and fixed charge coverage. The credit agreement also provides
      that
      if a material adverse change in the company’s business operations or conditions
      occurs, the lender could declare an event of default. Under terms of the
      agreement a material adverse effect is defined as (a) a material adverse change
      in, or a material adverse effect upon, the operations, business properties,
      condition (financial and otherwise) or prospects of the company and its
      subsidiaries taken as a whole; (b) a material impairment of the ability of
      the
      company to perform under the loan agreements and to avoid any event of default;
      or (c) a material adverse effect upon the legality, validity, binding effect
      or
      enforceability against the company of any loan document. A material adverse
      effect is determined on a subjective basis by the company's creditors. At
      September 30, 2006, the company was in compliance with all covenants pursuant
      to
      its borrowing agreements.





14




**10)**
            **Acquisition
                Integration**





The
      company established reserves through purchase accounting associated with
      facility exit costs related to the Blodgett business operations acquired on
      December 21, 2001. Reserves for facility closure costs predominately relate
      to a
      lease obligation for a manufacturing facility that was exited during the second
      quarter of 2001, prior to the acquisition, for lease obligations associated
      with
      a manufacturing facility in Quakertown, Pennsylvania that was exited when
      production at this facility was relocated to another facility in Bow, New
      Hampshire. The lease associated with the exited facility extends through April
      2015. The facility is currently subleased. The remaining reserve balance is
      reflected net of anticipated sublease income.





The
      forecast of sublease income could differ from actual amounts, which are subject
      to the occupancy by a subtenant and a negotiated sublease rental rate. If the
      company's estimates or underlying assumptions change in the future, the company
      would be required to adjust the reserve amount accordingly.





At
      this
      time, management believes the remaining reserve balance is adequate to cover
      the
      remaining costs identified at September 30, 2006. A
      summary
      of the reserve balance activity related to the facility closure and lease
      obligation is as follows:




Nine
                  Months EndedSep.
                  30, 2006(in
                  thousands)Beginning
                  balance
              
              $
              2,598Cash
                  payments
              
              
              100Ending
                  balance
              
              $
              2,498




**11)** **Financial
      Instruments**





In
      June
      1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments
      and
      Hedging Activities". SFAS No. 133, as amended, establishes accounting and
      reporting standards for derivative instruments. The statement requires an entity
      to recognize all derivatives as either assets or liabilities and measure those
      instruments at fair value. Derivatives that do not qualify as a hedge must
      be
      adjusted to fair value in earnings. If the derivative does qualify as a hedge
      under SFAS No. 133, changes in the fair value will either be offset against
      the
      change in fair value of the hedged assets, liabilities or firm commitments
      or
      recognized in other accumulated comprehensive income until the hedged item
      is
      recognized in earnings. The ineffective portion of a hedge's change in fair
      value will be immediately recognized in earnings.





*Foreign
      Exchange* :
      The
      company has entered into derivative instruments, principally forward contracts
      to reduce exposures pertaining to fluctuations in foreign exchange rates. As
      of
      September 30, 2006, the company had forward contracts to purchase $8.6 million
      U.S. Dollars with various foreign currencies, all of which mature in the next
      fiscal quarter. The fair value of these forward contracts was less than $0.1
      million at the end of the quarter.





15




*Interest
      Rate* : In
      January 2005, the company entered into an interest rate swap with a notional
      amount of $70.0 million to fix the interest rate applicable to certain of its
      variable-rate debt. The notional amount of the swap amortizes consistent with
      the repayment schedule of the company's senior term loan maturing in November
      2009. As of September 30, 2006, the unamortized balance of the interest rate
      swap was $50.6 million. The agreement swaps one-month LIBOR for a fixed rate
      of
      3.78% and is in effect through November 2009. The company designated the swap
      as
      a cash flow hedge at its inception and all changes in the fair value of the
      swap
      are recognized in accumulated other comprehensive income. As of September 30,
      2006, the fair value of this instrument was $1.1 million. The change in fair
      value of this swap agreement in the first nine months of 2006 was a loss of
      $120,000, net of taxes of $48,000.





In
      January 2006, the company entered into another interest rate swap with a
      notional amount of $10.0 million to fix the interest rate applicable to certain
      of its variable-rate debt. The agreement swaps one-month LIBOR for a fixed
      rate
      of 5.03% and is in effect through December 2009. The company designated the
      swap
      a cash flow hedge at its inception and all changes in fair value of the swap
      are
      recognized in accumulated other comprehensive income. As of September 30, 2006,
      the fair value of this instrument was $22,000. The change in fair value of
      this
      swap agreement in the first nine months of 2006 was a gain of $13,000, net
      of
      taxes of $9,000.





In
      August
      2006, in conjunction with the Houno acquisition, the company assumed an interest
      rate swap with a notional amount of $1.2 million. The agreement swaps one-month
      LIBOR for a fixed rate of 4.84% and is in effect through December 31, 2018.
      The
      company has not designated the swap a cash flow hedge. Therefore, all changes
      in
      fair value of the swap are recognized in net earnings. The fair value of this
      swap agreement as of September 30, 2006 was $(75,000), net of taxes of
      $19,000.





**12)** **Segment
      Information**





The
      company operates in three reportable operating segments defined by management
      reporting structure and operating activities.





The
      Commercial Foodservice Equipment business group manufactures cooking equipment
      for the restaurant and institutional kitchen industry. This business division
      has manufacturing facilities in Illinois, Michigan, New Hampshire, North
      Carolina, Vermont, the Philippines and Denmark. This division supports four
      major product groups, including conveyor oven equipment, core cooking equipment,
      counterline cooking equipment, and international specialty equipment. Principal
      product lines of the conveyor oven product group include Middleby Marshall
      ovens, Blodgett ovens and CTX ovens. Principal product lines of the core cooking
      equipment product group include the Blodgett product line of ranges, convection
      ovens and combi ovens, Houno combi ovens, MagiKitch'n charbroilers and catering
      equipment, Nu-Vu baking ovens and proofing equipment, the Pitco Frialator
      product line of fryers and the Southbend product line of ranges, steamers,
      convection ovens, broilers and steam cooking equipment,. The counterline cooking
      and warming equipment product group includes toasters, hot food servers,
      foodwarmers and griddles distributed under the Toastmaster brand name. The
      international specialty equipment product group is primarily comprised of food
      preparation tables, undercounter refrigeration systems, ventilation systems
      and
      component parts for the U.S. manufacturing operations.





16




The
      Industrial Foodservice Equipment business group manufactures cooking and
      packaging equipment for the food processing industry. This business division
      has
      a manufacturing facility in Wisconsin. Its principal products include batch
      ovens, conveyorized ovens and continuous process ovens sold under the Alkar
      brand name and food packaging machinery sold under the RapidPak brand
      name.





The
      International Distribution Division provides integrated sales, export
      management, distribution and installation services through its operations in
      Canada, China, India, South Korea, Mexico, the Philippines, Spain, Taiwan and
      the United Kingdom. The division sells the company’s product lines and certain
      non-competing complementary product lines throughout the world. For a local
      country distributor or dealer, the company is able to provide a centralized
      source of foodservice equipment with complete export management and product
      support services.





The
      accounting policies of the segments are the same as those described in the
      summary of significant accounting policies. The chief decision maker evaluates
      individual segment performance based on operating income. Management believes
      that intersegment sales are made at established arms-length transfer
      prices.





**Net
      Sales Summary**


**(dollars
      in thousands)**




Three
                Months Ended
            
            Nine
                Months EndedSep.
                30, 2006
            
            Oct.
                1, 2005
            
            Sep.
                30, 2006
            
            Oct.
                1, 2005Sales
            
            Percent
            
            Sales
            
            Percent
            
            Sales
            
            Percent
            
            Sales
            
            PercentBusiness
                Divisions:Commercial
                Foodservice:Core
                cooking equipment (1)
            
            $
            62,364
            
            
            60.4
            
            $
            57,192
            
            
            70.7
            
            $
            186,268
            
            
            61.1
            
            $
            172,050
            
            
            71.8Conveyor
                oven
              equipment
            
            
            15,911
            
            
            15.4
            
            
            13,755
            
            
            17.0
            
            
            45,963
            
            
            15.1
            
            
            41,124
            
            
            17.1Counterline
                cooking
              equipment
            
            
            2,330
            
            
            2.2
            
            
            3,036
            
            
            3.8
            
            
            8,131
            
            
            2.7
            
            
            9,377
            
            
            3.9International
                specialty
              equipment
            
            
            2,024
            
            
            2.0
            
            
            1,898
            
            
            2.3
            
            
            7,311
            
            
            2.4
            
            
            6,769
            
            
            2.8Commercial
                Foodservice
            
            
            82,629
            
            
            80.0
            
            
            75,881
            
            
            93.8
            
            
            247,673
            
            
            81.3
            
            
            229,320
            
            
            96.6Industrial
                Foodservice(2)
            
            
            15,389
            
            
            14.9
            
            
            --
            
            
            --
            
            
            43,909
            
            
            14.4
            
            
            --
            
            
            --International
                Distribution
              Division
                (3)
            
            
            14,023
            
            
            13.6
            
            
            14,764
            
            
            18.2
            
            
            41,602
            
            
            13.6
            
            
            40,476
            
            
            16.9Intercompany
                sales (4)
            
            
            (8,802
            )
            
            (8.5
            )
            
            (9,708
            )
            
            (12.0
            )
            
            (28,347
            )
            
            (9.3
            )
            
            (30,058
            )
            
            (12.5
            )Total
            
            $
            103,239
            
            
            100.0
            %
            $
            80,937
            
            
            100.0
            %
            $
            304,837
            
            
            100.0
            %
            $
            239,738
            
            
            100.0
            %





*(1)*
            *Includes
                sales of products manufactured by Houno, which was acquired in September
                2006.*




*(2)*
            *Represents
                sales of products manufactured by Alkar, which was acquired in December
                2005.*





*(3)*
            *Consists
                of sales of products manufactured by Middleby and products**manufactured
                by third parties.*





*(4)*
            *Represents
                the elimination of sales amongst the Commercial Foodservice Equipment
                Group and**from
                the Commercial Foodservice Equipment Group to the International
                Distribution Division.*





17




The
      following table summarizes the results of operations for the company's business
      segments (1) (in
      thousands):




CommercialFoodservice(2)
            
            IndustrialFoodservice(3)
            
            InternationalDistribution
            
            Corporateand
                Other(4)
            
            Eliminations(5)
            
            Total**Three
                months ended September 30, 2006**Net
                sales
            
            $
            82,629
            
            $
            15,389
            
            $
            14,023
            
            $
            --
            
            $
            (8,802
            )
            $
            103,239Operating
                income
            
            
            22,032
            
            
            3,302
            
            
            694
            
            
            (5,150
            )
            
            143
            
            
            21,021Depreciation
                expense
            
            
            657
            
            
            132
            
            
            63
            
            
            32
            
            
            --
            
            
            884Net
                capital expenditures
            
            
            291
            
            
            6
            
            
            51
            
            
            3
            
            
            --
            
            
            351**Nine
                months ended September 30, 2006**Net
                sales
            
            $
            247,673
            
            $
            43,909
            
            $
            41,602
            
            $
            --
            
            $
            (28,347
            )
            $
            304,837Operating
                income
            
            
            64,205
            
            
            5,866
            
            
            2,558
            
            
            (15,629
            )
            
            (552
            )
            
            56,448Depreciation
                expense
            
            
            2,020
            
            
            408
            
            
            133
            
            
            30
            
            
            --
            
            
            2,591Net
                capital expenditures
            
            
            734
            
            
            101
            
            
            99
            
            
            302
            
            
            --
            
            
            1,236Total
                assets
            
            
            206,447
            
            
            48,318
            
            
            26,960
            
            
            7,856
            
            
            (6,119
            )
            
            283,462Long-lived
                assets(6)
            
            
            130,382
            
            
            25,964
            
            
            486
            
            
            9,801
            
            
            --
            
            
            166,633**Three
                months ended October 1, 2005**Net
                sales
            
            $
            75,881
            
            $
            --
            
            $
            14,764
            
            $
            --
            
            $
            (9,708
            )
            $
            80,937Operating
                income
            
            
            18,716
            
            
            --
            
            
            1,404
            
            
            (4,180
            )
            
            344
            
            
            16,284Depreciation
                expense
            
            
            710
            
            
            --
            
            
            36
            
            
            (10
            )
            
            --
            
            
            736Net
                capital expenditures
            
            
            406
            
            
            --
            
            
            87
            
            
            (8
            )
            
            --
            
            
            485**Nine
                months ended October 1, 2005**Net
                sales
            
            $
            229,320
            
            $
            --
            
            $
            40,476
            
            $
            --
            
            $
            (30,058
            )
            $
            239,738Operating
                income
            
            
            53,136
            
            
            --
            
            
            2,873
            
            
            (11,065
            )
            
            (320
            )
            
            44,624Depreciation
                expense
            
            
            2,291
            
            
            --
            
            
            108
            
            
            13
            
            
            --
            
            
            2,412Net
                capital expenditures
            
            
            956
            
            
            --
            
            
            114
            
            
            15
            
            
            --
            
            
            1,085Total
                assets
            
            
            190,828
            
            
            --
            
            
            26,691
            
            
            3,306
            
            
            (5,185
            )
            
            215,640Long-lived
                assets(6)
            
            
            127,771
            
            
            --
            
            
            431
            
            
            4,635
            
            
            --
            
            
            132,837





*(1)*
            *Non-operating
                expenses are not allocated to the operating segments. Non-operating
                expenses consist of interest expense**and
                deferred financing amortization, and other income and expenses items
                outside of income from operations,**and
                are included in Corporate and
                Other.*





*(2)*
            *Includes
                assets and operations of Houno, which was acquired in September
                2006.*





*(3)*
            *Represents
                assets and operations of Alkar, which was acquired in December
                2005.*




*(4)*
            *Includes
                corporate and other general company assets and
                operations.*





*(5)*
            *Includes
                elimination of intercompany sales, profit in inventory and intercompany
                receivables. Intercompany sale**transactions
                are predominantly from the Commercial Foodservice Equipment Group
                to the
                International**Distribution
                Division****.***





*(6)*
            *Long-lived
                assets of the Commercial Foodservice Equipment Group includes assets
                located in the Philippines which**amounted
                to $2,009 and $2,138 in 2006 and 2005, respectively and assets located
                in
                Denmark which amounted to $1,688 in
                2006.*





18




Net
      sales
      by each major geographic region were as follows (in thousands):





Three
                Months Ended
            
            Nine
                Months EndedSep.
                30, 2006
            
            Oct.
                1, 2005
            
            Sep.
                30, 2006
            
            Oct.
                1, 2005United
                States and Canada
            
            $
            84,035
            
            $
            64,870
            
            $
            248,802
            
            $
            195,338Asia
            
            
            5,932
            
            
            6,377
            
            
            19,488
            
            
            17,005Europe
                and Middle East
            
            
            9,028
            
            
            7,277
            
            
            23,770
            
            
            20,223Latin
                America
            
            
            4,244
            
            
            2,413
            
            
            12,777
            
            
            7,172Net
                sales
            
            $
            103,239
            
            $
            80,937
            
            $
            304,837
            
            $
            239,738




**13)** **Employee
      Retirement Plans**





*(a)* *Pension
      Plans*





The
      company maintains a non-contributory defined benefit plan for its union
      employees at the Elgin, Illinois facility. Benefits are determined based upon
      retirement age and years of service with the company. This defined benefit
      plan
      was frozen on April 30, 2002 and no further benefits accrue to the participants
      beyond this date. Plan participants will receive or continue to receive payments
      for benefits earned on or prior to April 30, 2002 upon reaching retirement
      age.
      The employees participating in the defined benefit plan were enrolled in a
      newly
      established 401(k) savings plan on September 30, 2002, further described below.





The
      company also maintains a retirement benefit agreement with its Chairman. The
      retirement benefits are based upon a percentage of the Chairman’s final base
      salary. Additionally, the company maintains a retirement plan for non-employee
      directors. The plan provides for an annual benefit upon a change in control
      of
      the company or retirement from the Board of Directors at age 70, equal to 100%
      of the director’s last annual retainer, payable for a number of years equal to
      the director’s years of service up to a maximum of 10 years.





Contributions
      under the union plan are funded in accordance with provisions of The Employee
      Retirement Income Security Act of 1974. Expected contributions to be made in
      2006 are $254,000, of which $165,000 was funded during the nine-month period
      ended September 30, 2006. Contributions to the directors' plan are based upon
      actual retirement benefits as they retire.





19




The
      net
      pension expense for the first nine months of 2006 and 2005 for these plans
      was
      as follows (in thousands):




Nine
                  Months EndedSeptember
                  30, 2006
              
              October
                  1, 2005Union
                  Plan
              
              DirectorsPlans
              
              Union
                  Plan
              
              DirectorsPlansService
                  cost
              
              $
              --
              
              $
              687,557
              
              $
              --
              
              $
              830,924Interest
                  on benefit obligations
              
              
              181,133
              
              
              115,906
              
              
              182,449
              
              
              35,636Return
                  on assets
              
              
              (153,853
              )
              
              --
              
              
              (160,952
              )
              
              --Net
                  amortization and deferral
              
              
              110,571
              
              
              --
              
              
              98,868
              
              
              --Net
                  pension expense
              
              $
              137,840
              
              $
              803,463
              
              $
              120,365
              
              $
              866,560




*(b)* *401(k)
      Savings Plans*





The
      company maintains four separate defined contribution 401(k) savings plans
      covering all employees in the United States. These four plans separately cover
      (1) the union employees at the Elgin, Illinois facility, (2) the union employees
      at the Lodi, Wisconsin facility, (3) the non-union employees at the Lodi,
      Wisconsin facility, and (4) all other remaining non-union employees in the
      United States not covered by one of the previous mentioned plans. The company
      makes profit sharing contributions to the various plans in accordance with
      the
      requirements of the plan. Profit sharing contributions for certain of these
      401(k) savings plans are at the discretion of the company.




20


**Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations.**





**Informational
      Note**





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 2005 Annual Report on Form 10-K.




21




**Net
      Sales Summary**


**(dollars
      in thousands)**




Three
                Months Ended
            
            Nine
                Months EndedSep.
                30, 2006
            
            Oct.
                1, 2005
            
            Sep.
                30, 2006
            
            Oct.
                1, 2005Sales
            
            Percent
            
            Sales
            
            Percent
            
            Sales
            
            Percent
            
            Sales
            
            PercentBusiness
                Divisions:Commercial
                Foodservice:Core
                cooking equipment (1)
            
            $
            62,364
            
            
            60.4
            
            $
            57,192
            
            
            70.7
            
            $
            186,268
            
            
            61.1
            
            $
            172,050
            
            
            71.8Conveyor
                oven
              equipment
            
            
            15,911
            
            
            15.4
            
            
            13,755
            
            
            17.0
            
            
            45,963
            
            
            15.1
            
            
            41,124
            
            
            17.1Counterline
                cooking
              equipment
            
            
            2,330
            
            
            2.2
            
            
            3,036
            
            
            3.8
            
            
            8,131
            
            
            2.7
            
            
            9,377
            
            
            3.9International
                specialty
              equipment
            
            
            2,024
            
            
            2.0
            
            
            1,898
            
            
            2.3
            
            
            7,311
            
            
            2.4
            
            
            6,769
            
            
            2.8Commercial
                Foodservice
            
            
            82,629
            
            
            80.0
            
            
            75,881
            
            
            93.8
            
            
            247,673
            
            
            81.3
            
            
            229,320
            
            
            96.6Industrial
                Foodservice(2)
            
            
            15,389
            
            
            14.9
            
            
            --
            
            
            --
            
            
            43,909
            
            
            14.4
            
            
            --
            
            
            --International
                Distribution
              Division
                (3)
            
            
            14,023
            
            
            13.6
            
            
            14,764
            
            
            18.2
            
            
            41,602
            
            
            13.6
            
            
            40,476
            
            
            16.9Intercompany
                sales (4)
            
            
            (8,802
            )
            
            (8.5
            )
            
            (9,708
            )
            
            (12.0
            )
            
            (28,347
            )
            
            (9.3
            )
            
            (30,058
            )
            
            (12.5
            )Total
            
            $
            103,239
            
            
            100.0
            %
            $
            80,937
            
            
            100.0
            %
            $
            304,837
            
            
            100.0
            %
            $
            239,738
            
            
            100.0
            %





*(1)*
            *Includes
                sales of products manufactured by Houno, which was acquired in September
                2006.*




*(2)*
            *Represents
                sales of products manufactured by Alkar, which was acquired in December
                2005.*





*(3)*
            *Consists
                of sales of products manufactured by Middleby and products**manufactured
                by third parties.*





*(4)*
              *Represents
                  the elimination of sales amongst the Commercial Foodservice Equipment
                  Group and**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 EndedSep.
                30, 2006
            
            Oct.
                1, 2005
            
            Sep.
                30, 2006
            
            Oct.
                1, 2005Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            60.7
            
            
            59.9
            
            
            61.3
            
            
            61.6Gross
                profit
            
            
            39.3
            
            
            40.1
            
            
            38.7
            
            
            38.4Selling,
                general and administrative expenses
            
            
            18.9
            
            
            20.0
            
            
            20.2
            
            
            19.8Income
                from operations
            
            
            20.4
            
            
            20.1
            
            
            18.5
            
            
            18.6Net
                interest expense and deferred financing amortization
            
            
            1.6
            
            
            2.0
            
            
            1.8
            
            
            2.1Other
                (income) expense, net
            
            
            -
            
            
            0.3
            
            
            -
            
            
            -Earnings
                before income taxes
            
            
            18.8
            
            
            17.8
            
            
            16.7
            
            
            16.5Provision
                for income taxes
            
            
            7.0
            
            
            5.9
            
            
            6.4
            
            
            6.1Net
                earnings
            
            
            11.8
            %
            
            11.9
            %
            
            10.3
            %
            
            10.4
            %





22




**Three
      Months Ended September 30, 2006 Compared to Three Months Ended October 1,
      2005**





**NET
      SALES** ***.***  Net
      sales
      for the third quarter of fiscal 2006 were $103.2 million as compared to $80.9
      million in the third quarter of 2005.





Net
      sales
      at the Commercial Foodservice Equipment Group amounted to $82.6 million in
      the
      third quarter of 2006 as compared to $75.9 million in the prior year quarter.





·
            Core
                cooking equipment sales increased by $5.2 million to $62.4 million
                from
                $57.2 million, primarily due to increased fryer, convection oven,
                and
                cooking range sales resulting from increased purchases from major
                and
                regional chain customers due to new store openings and increased
                replacement business. Net sales for the quarter also included $1.0
                million
                of increased combi-oven sales associated with the newly acquired
                Houno
                product line.




·
            Conveyor
                oven equipment sales increased $2.1 million to $15.9 million from
                $13.8
                million in the prior year quarter due to increased sales of new oven
                models, including the WOW oven introduced in the first half of
                2006.





·
            Counterline
                cooking equipment sales decreased to $2.3 million from $3.0 million
                in the
                prior year quarter. Sales during the quarter were impacted in part
                by
                relocation of production of the counterline products to another
                facility.





·
            International
                specialty equipment sales increased to $2.0 million compared to $1.9
                million in the prior year quarter.





Net
      sales
      for the Industrial Foodservice Equipment Group were $15.4 million related to
      the
      business of Alkar, which was acquired in December 2005.





Net
      sales
      at the International Distribution Division decreased by $0.7 million to $14.0
      million, reflecting higher sales in Latin America, which were more than offset
      by reduced sales into Europe and Asia. Sales in Latin America benefited from
      expansion of U.S. restaurant chains overseas and increased business with local
      and regional restaurant chains in developing markets. The decline in Europe
      resulted from a rollout of ovens to a major restaurant chain customer in the
      prior year quarter that did not recur in the current year quarter. Sales in
      Asia
      were impacted by the political situation in North Korea and the timing of store
      openings with a major restaurant customer in China.





**GROSS
      PROFIT** ***.***  Gross
      profit increased to $40.6 million from $32.5 million in the prior year period,
      reflecting the impact of higher sales volumes. The gross margin rate was 39.3%
      in the quarter as compared to 40.1% in the prior year quarter. The
      net decrease in the gross margin rate reflects:





·
            The
                adverse impact of lower margins at the newly acquired Alkar
                operations.





·
            Increased
                sales volumes that benefited manufacturing efficiencies and provided
                for
                greater leverage of fixed manufacturing
                costs.





·
            Higher
                margins associated with new product
                sales.





23




**SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES** ***.***  Combined
      selling, general, and administrative expenses increased from $16.2 million
      in
      the third quarter of 2005 to $19.6 million in the third quarter of 2006. As
      a
      percentage of net sales, operating expenses amounted to 18.9% in the third
      quarter of 2006 as compared to 20.0% in the third quarter of 2005. Selling
      expenses increased from $8.7 million to $10.0 million, reflecting $1.6 million
      of increased costs associated with the newly acquired Alkar and Houno operations
      and increased selling costs related to the higher sales volumes. General and
      administrative expenses increased from $7.5 million to $9.5 million, which
      includes increased costs of $0.8 million associated with the newly acquired
      Alkar and Houno operations. General and administrative expenses also includes
      $0.3 million of increased stock compensation costs, increased incentive
      performance costs and increased legal and professional fees.





**NON-OPERATING
      EXPENSES.** Interest
      and deferred financing amortization costs were $1.6 million in both the third
      quarter of 2006 and 2005. The benefit of lower average debt balances was offset
      by higher average interest rates. Other income was less than $0.1 million
      in the current year quarter as compared to other expense of $0.3
      million in the prior year quarter, primarily related to foreign exchange
      transactions.





**INCOME
      TAXES** ***.***  A
      tax
      provision of $7.3 million, at an effective rate of 37%, was recorded during
      the
      quarter as compared to $4.8 million at a 33% effective rate in the prior year
      quarter. The 2006 and 2005 third quarters both reflect a benefit from favorable
      adjustments to tax reserves associated with closed tax periods. The 2006 third
      quarter reflected a tax benefit of $350,000 as compared to $722,000 in the
      third
      quarter of 2005.





**Nine
      Months Ended September 30, 2006 Compared to Nine Months Ended October 1,
      2005**





**NET
      SALES** ***.***  Net
      sales
      for the nine-month period ended September 30, 2006 were $304.8 million as
      compared to $239.7 million in the nine-month period ended October 1, 2005.





Net
      sales
      at the Commercial Foodservice Equipment Group amounted to $247.7 million in
      the
      nine-month period ended September 30, 2006 as compared to $229.3 million in
      the
      nine-month period ended October 1, 2005.





·
            Core
                cooking equipment sales increased by $14.2 million to $186.3 million
                from
                $172.1 million, primarily due to increased fryer, convection oven,
                and
                cooking range sales resulting from new product introductions and
                increased
                purchases from major and regional restaurant chain customers due
                to new
                store openings and increased replacement business. Net sales for
                the nine
                months ended September 30, 2006 also included $1.0 million increased
                combi-oven sales associated with the newly acquired Houno product
                line.





·
            Conveyor
                oven equipment sales increased $4.9 million to $46.0 million from
                $41.1
                million in the prior year period, as a result of increased sales
                associated with new oven models, including the WOW oven introduced
                in the
                first half of 2006.





·
            Counterline
                cooking equipment sales decreased to $8.1 million from $9.4 million
                in the
                prior year period. The prior year quarter included the rollout of
                a
                toaster program with a major restaurant chain customer. Additionally,
                sales during the third quarter of 2006, were impacted by the relocation
                of
                production of the counterline products to another facility.





·
            International
                specialty equipment sales increased to $7.3 million compared to $6.8
                million in the prior year quarter due to the introduction of a new
                product
                line of counter griddles and
                charbroilers.





24




Net
      sales
      for Industrial Foodservice Equipment Group were $43.9 million related to the
      business of Alkar, which was acquired in December 2005.





Net
      sales
      at the International Distribution Division increased by $1.1 million to $41.6
      million, reflecting higher sales in Latin America, which more than offset a
      decline in sales in Europe, which had strong sales in the prior year due to
      an
      oven rollout with a major restaurant chain customer. Sales in Latin America
      benefited from expansion of the U.S. chains overseas and increased business
      with
      local and regional restaurant chains in developing markets.





**GROSS
      PROFIT** ***.***  Gross
      profit increased to $117.8 million from $92.1 million in the prior year period,
      reflecting the impact of higher sales volumes. The gross margin rate was 38.7%
      in the quarter as compared to 38.4% in the prior year nine-month period. The
      net
      increase in the gross margin rate reflects:





·
            Increased
                sales volumes that benefited manufacturing efficiencies and provided
                for
                greater leverage of fixed manufacturing
                costs.





·
            Higher
                margins associated with new product
                sales.





·
            Improved
                margins at Nu-Vu, which was acquired in January 2005. The margin
                improvement at this operation reflects the benefits of successful
                integration efforts.





·
            The
                adverse impact of lower margins at the newly acquired Alkar
                operations.





**SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES** ***.***  Combined
      selling, general, and administrative expenses increased from $47.5 million
      in
      the nine-month period ended October 1, 2005 to $61.4 million in the nine-month
      period ended September 30, 2006. As a percentage of net sales, operating
      expenses amounted to 20.2% in the nine-month period ended September 30, 2006,
      versus 19.8% in the nine-month period ended October 1, 2005 reflecting greater
      leverage on higher sales volumes. Selling expenses increased from $25.7 million
      to $30.9 million, reflecting $3.6 million of increased costs associated with
      the
      newly acquired Alkar and Houno operations and higher commission costs associated
      with the increased sales volumes. General and administrative expenses increased
      from $21.8 million to $30.5 million which includes increased costs of $3.1
      million associated with the newly acquired Alkar and Houno operations. General
      and administrative expenses also include increased stock compensation costs,
      increased incentive performance costs and increased legal and professional
      fees.




**NON-OPERATING
      EXPENSES.** Interest
      and deferred financing amortization costs increased to $5.4 million from $5.1
      million in the prior year, due to higher interest rates, which more than offset
      the benefit of lower average debt balances.





**INCOME
      TAXES** ***.***  A
      tax
      provision of $19.7 million, at an effective rate of 39%, was recorded for the
      first nine months of 2006 as compared to $14.6 million at a 37% effective rate
      in the prior year period. The 2006 and 2005 nine-month periods both reflect
      a
      benefit from favorable adjustments to tax reserves associated with closed tax
      periods amounting to $350,000 and $722,000, respectively.





25




**Financial
      Condition and Liquidity**





During
      the nine months ended September 30, 2006, cash and cash equivalents decreased
      by
      $0.9 million to $3.0 million at September 30, 2006 from $3.9 million at December
      31, 2005. Net borrowings decreased from $121.6 million at December 31, 2005
      to
      $97.3 million at September 30, 2006.





**OPERATING
      ACTIVITIES** ***.***  Net
      cash
      provided by operating activities after changes in assets and liabilities was
      $33.4 million as compared to $30.8 million in the prior year period.





During
      the nine months ended September 30, 2006, working capital levels increased
      due
      to the higher sales volumes and increased seasonal working capital needs. The
      changes in working capital included a $11.9 million increase in accounts
      receivable and a $3.1 million increase in inventory. Prepaid and other assets
      decreased due to the utilization of tax overpayments in the first nine months
      of
      2006. Accrued expenses and other liabilities increased by $6.4 million as a
      result of increased accruals for operating liabilities associated with higher
      business volumes.





**INVESTING
      ACTIVITIES** ***.***  During
      the nine months ended September 30, 2006, net cash used in investing activities
      amounted to $7.7 million. This included $1.5 million associated with the
      acquisition of Alkar, $4.9 million associated with the acquisition of Houno
      and
      $1.2 million of additions and upgrades of production equipment, manufacturing
      facilities and training equipment.





**FINANCING
      ACTIVITIES.** Net
      cash
      flows used in financing activities were $26.7 million during the nine months
      ending September 30, 2006. The net reduction in debt includes $16.5 million
      in
      repayments under the revolving credit facility and $9.4 million of scheduled
      repayments of the term loan. The company also repaid in full $2.1 million note
      related and established in conjunction with the release and early termination
      of
      obligations under a lease agreement relative to a manufacturing facility tax
      was
      exited in Shelburne, Vermont.





In
      conjunction with the acquisition of Houno, the company also acquired $3.7
      million of debt included in the net assets of the acquired
      operations.





At
      September 30, 2006, 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.





**New
      Accounting Pronouncements**





In
      November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
      of
      ARB No. 43, Chapter 4". This statement amends the guidance in ARB No. 43,
      Chapter 4 to clarify the accounting for abnormal amounts of idle facility
      expense, freight, handling costs and wasted material. This statement requires
      that these items be recognized as current period costs and also requires that
      allocation of fixed production overheads to the costs of conversion be based
      on
      the normal capacity of the production facilities. This statement is effective
      for inventory costs incurred during fiscal years beginning after June 15, 2005.
      The adoption of this statement did not have a material effect on the company's
      financial position, results of operations or cash flows.





26




In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections
      -
      a replacement of APB Opinion No. 20 and FASB Statement No. 3". This statement
      replaces ABP Opinion No. 20, Accounting Changes and FASB Statement No. 3,
      Reporting Changes in Interim Financial Statements and changes the requirements
      for the accounting for and reporting of a change in accounting principles.
      This
      statement applies to all voluntary changes in accounting principles. This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. The company will apply this
      guidance prospectively.





In
      February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments - an amendment of FASB Statements No. 133 and 140". This
      statement provides entities with relief from having to separately determine
      the
      fair value of an embedded derivative that would otherwise be required to be
      bifurcated from its host contract in accordance with SFAS No. 133. This
      statement allows an entity to make an irrevocable election to measure such
      a
      hybrid financial instrument at fair value in its entirety, with changes in
      fair
      value recognized in earnings. This statement is effective for all financial
      instruments acquired, issued, or subject to a remeasurement (new basis) event
      occurring after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006. The company will apply this guidance prospectively. The
      company is continuing its process of determining what impact the application
      of
      this guidance will have on the company's financial position, results of
      operations or cash flows.





In
      July
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes.” This interpretation requires that a recorded tax benefit must be
      more likely than not of being sustained upon examination by tax authorities
      based upon its technical merits. The amount of benefit recorded is the largest
      amount of benefit that is greater than 50 percent likely of being realized
      upon
      ultimate settlement. Upon adoption, any adjustment will be recorded directly
      to
      beginning retained earnings. The interpretation is effective for fiscal years
      beginning after December 15, 2006. The company has not yet determined what
      impact the application of the interpretation will have on the company’s
      financial position, results of operations or cash flows.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This
      statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles and expands disclosures about fair
      value measurements. This statement does not require any new fair value
      measurements. This statement is effective for interim reporting periods in
      fiscal years beginning after November 15, 2007. The company will apply this
      guidance prospectively.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This statement improves financial reporting by
      requiring an employer to recognize the overfunded or underfunded status of
      a
      defined benefit postretirement plan as an asset of liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity.
      This
      statement also improves financial reporting by requiring an employer to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position, with limited exceptions. Employers with publicly traded
      equity securities are required to initially recognize the funded status of
      a
      defined benefit postretirement plan and to provide the required disclosures
      as
      of the end of the fiscal year ending after December 15, 2006. The company has
      not yet determined what impact the application of the interpretation will have
      on the company’s financial position.





27
 
  **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.





*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 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 such matter 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 the audit items can be
      complex, and the objectives of the government auditors can result in a tax
      on
      the same transaction or income in more than one state or country.  As part
      of the company's calculation of the provision for taxes, the company establishes
      reserves for the amount that it expects to incur as a result of audits. The
      reserves may change in the future due to new developments related to the various
      tax matters.




28




**Contractual
      Obligations**





The
      company's contractual cash payment obligations are set forth below (in
      thousands):




Long-termDebt
              
              OperatingLeases
              
              Idle
                  FacilityLeases
              
              TotalContractualCashObligationsLess
                  than 1 year
              
              $
              16,704
              
              $
              537
              
              $
              320
              
              $
              17,5611-3
                  years
              
              
              33,710
              
              
              730
              
              
              689
              
              
              35,1294-5
                  years
              
              
              45,026
              
              
              312
              
              
              836
              
              
              46,174After
                  5 years
              
              
              1,789
              
              
              91
              
              
              1,705
              
              
              3,585$
              97,229
              
              $
              1,670
              
              $
              3,550
              
              $
              102,449





Idle
      facility lease consists of an obligation for a manufacturing location that
      was
      exited in conjunction with the company's manufacturing consolidation efforts.
      This lease obligation continues through April 2015. This facility has been
      subleased. The obligation presented above does not reflect any anticipated
      sublease income from the facilities.





The
      projected benefit obligation of the defined benefit plans exceeded the plans’
assets by $2.4 million at the end of 2005 as compared to $5.0 million at the
      end
      of 2004. The unfunded benefit obligations were comprised of a $1.0 million
      under
      funding of the company's union plan and $1.4 million of under funding of the
      company's director plans. The company does not expect to contribute to the
      director plans in 2006. The company made minimum contributions required by
      the
      Employee Retirement Income Security Act of 1974
      (“ERISA”) of $0.3 million in 2005 and $0.2 million in 2004 to the company's
      union plan. The company expects to continue to make minimum contributions of
      $0.3 million in 2006 to the union plan as required by ERISA.





29





The
      company has $6.4 million in outstanding letters of credit, which expire on
      September 30, 2007 with an automatic one-year renewal, to secure potential
      obligations under insurance programs.





The
      company places purchase orders with its suppliers in the ordinary course of
      business. These purchase orders are generally to fulfill short-term
      manufacturing requirements of less than 90 days and most are cancelable with
      a
      restocking penalty. The company has no long-term purchase contracts or minimum
      purchase obligations with any supplier.





The
      company has contractual obligations under its various debt agreements to make
      interest payments. These amounts are subject to the level of borrowings in
      future periods and the interest rate for the applicable periods, and therefore
      the amounts of these payments is not determinable.





The
      company has no activities, obligations or exposures associated with off-balance
      sheet arrangements.





30




**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market**  **Risk**





**Interest
      Rate Risk**





The
      company is exposed to market risk related to changes in interest rates. The
      following table summarizes the maturity of the company’s debt
      obligations.




Twelve
                Month Period Ending
              
              Fixed
                  Rate Debt
              
              Variable
Rate
                  Debt(in
                  thousands)September
                  30, 2007
              
              $
              79
              
              $
              16,625September
                  30, 2008
              
              
              79
              
              
              15,837September
                  30, 2009
              
              
              81
              
              
              17,713September
                  30, 2010
              
              
              84
              
              
              44,942Thereafter
              
              
              1,677
              
              
              112$
              2,000
              
              $
              95,229


During
      the fourth quarter of 2005, the company amended its senior secured credit
      facility. Terms of the agreement provided for $60.0 million of term loans and
      $130.0 million of availability under a revolving credit line. As of September
      30, 2006, the company had $90.4 million outstanding under its senior banking
      facility, including $50.6 million of unamortized term loans and $39.8 million
      of
      borrowings under the revolving credit line. The company also had $6.4 million
      in
      outstanding letters of credit, which reduced the borrowing availability under
      the revolving credit line.





Borrowings
      under the senior secured credit facility are assessed at an interest rate of
      1.00% above LIBOR for long-term borrowings or at the higher of the Prime rate
      and the Federal Funds Rate for short-term borrowings. At September 30, 2006,
      the
      average interest rate on the senior debt amounted to 6.43%. The interest rates
      on borrowings under the senior bank facility may be adjusted quarterly based
      on
      the company’s defined indebtedness ratio on a rolling four-quarter basis.
      Additionally, a commitment fee, based upon the indebtedness ratio is charged
      on
      the unused portion of the revolving credit line. This variable commitment fee
      amounted to 0.20% as of September 30, 2006.





In
      December 2005, the company entered into a U.S. Dollar secured term loan at
      its
      subsidiary in Spain. This loan amortizes in equal monthly installments over
      a
      four year period ending December 31, 2009. The unamortized balance under this
      loan amounted to $2.6 million at September 30, 2006. Borrowings under this
      facility are assessed an interest rate of 0.45% above LIBOR. At September 30,
      2006 the interest rate was 5.79%.





In
      June
      2006, the company entered into a U.S. dollar secured promissory note at its
      subsidiary in Mexico. This promissory note amortizes in equal monthly
      installments over a one-year period. The unamortized balance under this loan
      amounted to $0.3 million at September 30, 2006. Borrowings under this facility
      are assessed at an interest rate of 10.55%.





In
      conjunction with the acquisition of Houno, the company assumed $3.7 million
      of
      outstanding debt obligations included as part of the net assets acquired.
 As of September 30, 2006 the amount of debt associated with Houno amounted
      to $4.0 million and included $1.1 million of borrowings on a revolving credit
      facility with an average interest rate of 5.54%, $0.9 million of borrowings
      under term loan facilities with an average interest rate of 5.52%, and $2.0
      million of mortgage notes with an average interest rate of 6.97%.





31




The
      company has historically entered into interest rate swap agreements to
      effectively fix the interest rate on its outstanding debt. In January 2005,
      the
      company entered into an interest rate swap agreement for a notional amount
      of
      $70.0 million. This agreement swaps one-month LIBOR for a fixed rate of 3.78%.
      The notional amount amortizes consistent with the repayment schedule of the
      company's term loan maturing November 2009. The unamortized notional amount
      of
      this swap as of September 30, 2006 was $50.6 million. In January 2006, the
      company entered into an interest rate swap for a notional amount of $10.0
      million maturing on December 31, 2009. This agreement swaps one-month LIBOR
      for
      a fixed rate of 5.03%. In August 2006, in conjunction with the Houno
      acquisition, the company assumed an interest rate swap with a notional amount
      of
      $1.2 million maturing on December 31, 2018. This agreement swaps one-month
      LIBOR
      for a fixed rate of 4.84%.





In
      November 2004, the company entered into a promissory note in conjunction with
      the release and early termination of obligations under a lease agreement
      relative to a manufacturing facility in Shelburne, Vermont. In 2004, the company
      entered into a promissory note in conjunction with the release and early
      termination of obligations under a lease agreement relative to a manufacturing
      facility in Shelburne, Vermont. Under terms of the agreement, the company fully
      retired this note in September 2006.





The
      terms
      of the senior secured credit facility limit the paying of dividends, capital
      expenditures and leases, and require, among other things, certain ratios of
      indebtedness and fixed charge coverage. The credit agreement also provides
      that
      if a material adverse change in the company’s business operations or conditions
      occurs, the lender could declare an event of default. Under terms of the
      agreement a material adverse effect is defined as (a) a material adverse change
      in, or a material adverse effect upon, the operations, business properties,
      condition (financial and otherwise) or prospects of the company and its
      subsidiaries taken as a whole; (b) a material impairment of the ability of
      the
      company to perform under the loan agreements and to avoid any event of default;
      or (c) a material adverse effect upon the legality, validity, binding effect
      or
      enforceability against the company of any loan document. A material adverse
      effect is determined on a subjective basis by the company's creditors. At
      September 30, 2006, the company was in compliance with all covenants pursuant
      to
      its borrowing agreements.





32




**Financing
      Derivative Instruments**





In
      January 2005, the company entered into an interest rate swap with a notional
      amount of $70.0 million to fix the interest rate applicable to certain of its
      variable-rate debt. The notional amount of the swap amortizes consistent with
      the repayment schedule of the company's senior term loan maturing in November
      2009. The agreement swaps one-month LIBOR for a fixed rate of 3.78% and is
      in
      effect through November 2009. The interest rate swap has been designated a
      cash
      flow hedge, and in accordance with SFAS No. 133 the changes in fair value are
      recorded as a component of accumulated other comprehensive income. As of
      September 30, 2006, the fair value of this instrument was $1.1 million. The
      change in fair value of this swap agreement in the first nine months of 2006
      was
      a loss of $120,000, net of taxes of $48,000. In January 2006, the company
      entered into an interest rate swap agreement for a notional amount of $10.0
      million maturing on December 21, 2009. This agreement swaps one month LIBOR
      for
      a fixed rate of 5.03%. The interest rate swap has been designated a cash flow
      hedge, and in accordance with SFAS No. 133 the changes in fair value are
      recorded as a component of accumulated other comprehensive income. As of
      September 30, 2006, the fair value of this instrument was $22,000. The change
      in
      fair value of this swap agreement in the first nine months of 2006 was a gain
      of
      $13,000, net of taxes of $9,000. In August 2006, in conjunction with the Houno
      acquisition, the company assumed an interest rate swap with a notional amount
      of
      $1.2 million. The fair value of this swap agreement as of September 30, 2006
      was
      $(75,000), net of taxes of $19,000.





**Foreign
      Exchange Derivative Financial Instruments**





The
      company uses foreign currency forward purchase and sale contracts with terms
      of
      less than one year, to hedge its exposure to changes in foreign currency
      exchange rates. The company’s primary hedging activities are to mitigate its
      exposure to changes in exchange rates on intercompany and third party trade
      receivables and payables. The company does not currently enter into derivative
      financial instruments for speculative purposes. In managing its foreign currency
      exposures, the company identifies and aggregates naturally occurring offsetting
      positions and then hedges residual balance sheet exposures. The following table
      summarizes the forward and option purchase contracts outstanding at September
      30, 2006. The fair value of these forward contracts was less than $0.1 million
      at the end of the quarter:




Sell
              
              Purchase
              
              Maturity1,000,000
              
              Euro
              
              1,270,200
              
              U.S.
                  Dollars
              
              October
                  30, 20063,150,000
              
              British
                  Pounds
              
              5,897,400
              
              U.S.
                  Dollars
              
              October
                  30, 200610,000,000
              
              Mexican
                  Pesos
              
              903,300
              
              U.S.
                  Dollars
              
              October
                  30, 20066,000,000
              
              Mexican
                  Pesos
              
              540,300
              
              U.S.
                  Dollars
              
              October
                  30, 2006




33


**Item
      4. Controls and Procedures**





The
      company maintains disclosure controls and procedures that are designed to ensure
      that information required to be disclosed in the company's Exchange Act reports
      is recorded, processed, summarized and reported within the time periods
      specified in the SEC's rules and forms, and that such information is accumulated
      and communicated to the company's management, including its Chief Executive
      Officer and Chief Financial Officer, as appropriate, to allow timely decisions
      regarding required disclosure.





As
      of
      September 30, 2006, the company carried out an evaluation, under the supervision
      and with the participation of the company's management, including the company's
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of the company's disclosure controls and procedures. Based
      on the foregoing, the company's Chief Executive Officer and Chief Financial
      Officer concluded that the  company's
      disclosure controls and procedures were effective as of the end of this
      period.




During
      the quarter ended September 30, 2006, there has been no change in the company's
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, the company's internal control over
      financial reporting.





34




**PART
      II. OTHER INFORMATION**





The
      company was not required to report the information pursuant to Items 1 through
      6
      of Part II of Form 10-Q for the three months ended September 30, 2006, except
      as
      follows:





**Item
      1A. Risk Factors**





There
      have been no material changes in the risk factors as set forth in the company's
      2005 Anuual Report on Form 10-K.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**




*Issuer
      Purchases of Equity Securities*





In
      September 1998, the company's Board of Directors adopted a stock repurchase
      program and subsequently authorized the purchase of up to 1,800,000 common
      shares in open market purchases. As of September 30, 2006, 952,999 shares had
      been purchased under the 1998 stock repurchase program. No shares were
      repurchased by the company during the three month period ended September 30,
      2006.





35




**Item
      6. Exhibits**





Exhibits
      - The following exhibits are filed herewith:




Exhibit
              3.1 -
            Rule
                13a-14(a)/15d -14(a) Certification of the Chief Executive Officer
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.




Exhibit
              31.2 -
            Rule
                13a-14(a)/15d -14(a) Certification of the Chief Financial Officer
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.





Exhibit
              32.1 -
            Certification
                by the Principal Executive Officer of The Middleby Corporation Pursuant
                to
                Rule 13A-14(b) under the Exchange Act and Section 906 of the
                Sarbanes-Oxley Act of 2002(18 U.S.C.
                1350).





Exhibit
              32.2 -
            Certification
                by the Principal Financial Officer of The Middleby Corporation Pursuant
                to
                Rule 13A-14(b) under the Exchange Act and Section 906 of the
                Sarbanes-Oxley Act of 2002(18 U.S.C.
                1350).




36




**SIGNATURE**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.




THE
              MIDDLEBY
              CORPORATION(Registrant)Date November
              9, 2006
            By:
            /s/ Timothy
              J. FitzGeraldTimothy
              J. FitzGeraldVice
              President, Chief
              Financial Officer




37