**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 July 1, 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 of Incorporation 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
      August 4, 2006, there were 7,903,575 shares of the registrant's common stock
      outstanding.








**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**





**QUARTER
      ENDED JULY 1, 2006**




INDEX


DESCRIPTION
              
              PAGEPART
                  I. FINANCIAL INFORMATIONItem
                  1.
              Condensed
                  Consolidated Financial Statements (unaudited)CONDENSED
                  CONSOLIDATED BALANCE SHEETS
              1July
                  1, 2006 and December 31, 2005CONDENSED
                  CONSOLIDATED STATEMENTS OF
                  EARNINGS
              2July
                  1, 2006 and July 2, 2005CONDENSED
                  CONSOLIDATED STATEMENTS OF
                  CASH FLOWS
              3July
                    1, 2006 and July 2, 2005NOTES
                  TO CONDENSED CONSOLIDATED FINANCIAL
                  STATEMENTS
              4Item
                  2.
              Management's
                    Discussion and Analysis of Financial Condition and
                    Results of Operations
              19Item
                  3.
              Quantitative
                    and Qualitative Disclosures About Market Risk
              28Item
                  4.
              Controls
                    and Procedures
              31PART
                  II. OTHER INFORMATIONItem
                  1A.
              Risk
                    Factors
              32Item
                  2.
              Unregistered
                    Sales of Equity Securities and Use of ProceedsItem
                  4.
              Submission
                    of Matters to a Vote of Security Holders
              32Item
                  6.
              Exhibits
              33


**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)**





**ASSETS**
            
            Jul.
                1, 2006
            
            Dec.
                31, 2005Current
                assets:Cash
                and cash equivalents
            
            $
            3,156
            
            $
            3,908Accounts
                receivable, net of reserve fordoubtful
                accounts of $3,446 and $3,081
            
            
            47,908
            
            
            38,552Inventories,
                net
            
            
            43,769
            
            
            40,989Prepaid
                expenses and other
            
            
            6,581
            
            
            4,513Prepaid
                taxes
            
            
            --
            
            
            3,354Current
                deferred taxes
            
            
            11,428
            
            
            10,319Total
                current assets
            
            
            112,842
            
            
            101,635Property,
                plant and equipment, net ofaccumulated
                depreciation of $35,704 and $34,061a
            
            
            24,509
            
            
            25,331Goodwill
            
            
            98,832
            
            
            98,757Other
                intangibles
            
            
            34,895
            
            
            35,498Other
                assets
            
            
            3,061
            
            
            2,697Total
                assets
            
            $
            274,139
            
            $
            263,918**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Current
                maturities of long-term debt
            
            $
            15,337
            
            $
            13,780Accounts
                payable
            
            
            19,779
            
            
            17,576Accrued
                expenses
            
            
            58,977
            
            
            62,689Total
                current liabilities
            
            
            94,093
            
            
            94,045Long-term
                debt
            
            
            94,007
            
            
            107,815Long-term
                deferred tax liability
            
            
            9,200
            
            
            8,207Other
                non-current liabilities
            
            
            6,338
            
            
            5,351Stockholders'
                equity:Preferred
                stock, $0.01 par value; nonvoting; 2,000,000 shares authorized; none
                issued
            
            
            --
            
            
            --Common
                stock, $0.01 par value; 20,000,000 shares authorized; 11,758,619
                and
                11,751,219 shares issued in 2006 and 2005, respectively
            
            
            117
            
            
            117Restricted
                stock
            
            
            --
            
            
            (14,204
            )Paid-in
                capital
            
            
            67,473
            
            
            79,291Treasury
                stock at cost; 3,856,344shares
                in 2006 and 2005, respectively
            
            
            (89,650
            )
            
            (89,650
            )Retained
                earnings
            
            
            92,681
            
            
            73,540Accumulated
                other comprehensive loss
            
            
            (120
            )
            
            (594
            )Total
                stockholders' equity
            
            
            70,501
            
            
            48,500Total
                liabilities and stockholders' equity
            
            $
            274,139
            
            $
            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**
            
            **Six
                Months Ended****Jul.
                1, 2006**
            
            **Jul.
                2, 2005**
            
            **Jul.
                1, 2006**
            
            **Jul.
                2, 2005****Net
                sales**
            
            **$**
            **104,849**
            
            **$**
            **83,912**
            
            **$**
            **201,598**
            
            **$**
            **158,801****Cost
                of sales**
            
            
            **63,122**
            
            
            **51,326**
            
            
            **124,347**
            
            
            **99,143****Gross
                profit**
            
            
            **41,727**
            
            
            **32,586**
            
            
            **77,251**
            
            
            **59,658****Selling
                expenses**
            
            
            **10,767**
            
            
            **8,769**
            
            
            **20,892**
            
            
            **16,953****General
                and administrative expenses**
            
            
            **10,681**
            
            
            **7,480**
            
            
            **20,932**
            
            
            **14,365****Income
                from operations**
            
            
            **20,279**
            
            
            **16,337**
            
            
            **35,427**
            
            
            **28,340****Net
                interest expense and deferred financing amortization**
            
            
            **2,031**
            
            
            **1,698**
            
            
            **3,827**
            
            
            **3,484****Other
                expense (income), net**
            
            
            **165**
            
            
            **(62**
            **)**
            
            **72**
            
            
            **(265**
            **)****Earnings
                before income taxes**
            
            
            **18,083**
            
            
            **14,701**
            
            
            **31,528**
            
            
            **25,121****Provision
                for income taxes**
            
            
            **6,993**
            
            
            **5,732**
            
            
            **12,387**
            
            
            **9,804****Net
                earnings**
            
            **$**
            **11,090**
            
            **$**
            **8,969**
            
            **$**
            **19,141**
            
            **$**
            **15,317****Net
                earnings per share:****Basic**
            
            **$**
            **1.45**
            
            **$**
            **1.19**
            
            **$**
            **2.51**
            
            **$**
            **2.04****Diluted**
            
            **$**
            **1.34**
            
            **$**
            **1.11**
            
            **$**
            **2.32**
            
            **$**
            **1.91****Weighted
                average number of shares****Basic**
            
            
            **7,623**
            
            
            **7,508**
            
            
            **7,620**
            
            
            **7,490****Dilutive
                stock options****1**
            
            
            **641**
            
            
            **542**
            
            
            **641**
            
            
            **545****Diluted**
            
            
            **8,264**
            
            
            **8,050**
            
            
            **8,261**
            
            
            **8,035**





1  There
      were
      3,500 anti-dilutive stock options excluded from common stock equivalents during
      the three and six month periods ended July 1, 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** **)**




**Six
                    Months Ended****Jul.
                    1, 2006**
                
                **Jul.
                    2, 2005****Cash
                    flows from operating activities-****Net
                    earnings**
                
                $
                **19,141**
                
                **$**
                **15,317****Adjustments
                    to reconcile net earnings to cash provided by operating
                    activities:****Depreciation
                    and amortization**
                
                
                **2,433**
                
                
                **1,800****Deferred
                    taxes**
                
                
                **(244**
                **)**
                
                **234****Stock-based
                    compensation costs**
                
                
                **2,320**
                
                
                **1,655****Cash
                    effects of changes in -****Accounts
                    receivable, net**
                
                
                **(9,258**
                **)**
                ****
                **(6,072**
                **)****Inventories,
                    net**
                
                
                **(2,668**
                **)**
                ****
                **(1,306**
                **)****Prepaid
                    expenses and other assets**
                
                
                **1,342**
                
                
                **9,338****Accounts
                    payable**
                
                
                **2,149**
                
                
                **1,106****Accrued
                    expenses and other liabilities**
                
                
                **(1,456**
                **)**
                ****
                **(7,746**
                **)****Net
                    cash provided by operating activities**
                
                
                **13,759**
                
                
                **14,326****Cash
                    flows from investing activities-****Net
                    additions to property and equipment**
                
                
                **(882**
                **)**
                ****
                **(600**
                **)****Acquisition
                    of Nu-Vu**
                
                
                **--**
                ****
                ****
                **(12,000**
                **)****Acquisition
                    of Alkar**
                
                
                **(1,500**
                **)**
                ****
                --**Net
                    cash (used in) investing activities**
                
                
                **(2,382**
                **)**
                ****
                **(12,600**
                **)****Cash
                    flows from financing activities-****Net
                    (repayments) proceeds under revolving credit
                    facilities**
                
                
                **(5,750**
                **)**
                
                **2,735****(Repayments)
                    under senior secured bank notes**
                
                
                **(6,250**
                **)**
                ****
                **(5,000**
                **)****Net
                    (repayments) under foreign borrowings**
                
                
                **(101**
                **)**
                ****
                **--****(Repayments)
                    of note agreement**
                
                
                **(149**
                **)**
                ****
                **--****Net
                    proceeds from stock issuances**
                
                
                **59**
                
                
                **557****Net
                    cash (used in) financing activities**
                
                
                **(12,191**
                **)**
                ****
                **(1,708**
                **)****Effect
                      of exchange rates on cash****and
                      cash equivalents**
                
                
                **62**
                
                
                **(54**
                **)****Changes
                    in cash and cash equivalents-****Net
                    (decrease) in cash and cash equivalents**
                
                
                **(752**
                **)**
                ****
                **(36**
                **)****Cash
                    and cash equivalents at beginning of year**
                
                
                **3,908**
                
                
                **3,803****Cash
                    and cash equivalents at end of quarter**
                
                $
                **3,156**
                
                **$**
                **3,767****Supplemental
                    disclosure of cash flow information:****Interest
                    paid**
                
                $
                **3,313**
                
                
                **3,199****Income
                    tax payments (refunds)**
                
                $
                **5,700**
                ****
                ****
                **(690**
                **)**








See
      accompanying notes




3


**THE
      MIDDLEBY CORPORATION AND SUBSIDIARIES**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**July
      1, 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 July
      1,
      2006 and December 31, 2005, and the results of operations for the three and
      six
      months ended July 1, 2006 and July 2, 2005 and cash flows for the six months
      ended July 1, 2006 and July 2, 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 July 1, 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 second quarter and first six 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.





*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 second quarter ended
      July
      1, 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 July 1, 2006. The company recorded
      compensation expense associated with the restricted stock grants amounting
      to
      $0.8 million and $1.7 million for the three months and six months ended July
      1,
      2006, respectively and $0.8 million and $1.7 million for the three months and
      six months ended end July 2, 2005, respectively.




4





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 amounting to $14.2 million was reflected as a separate component
      in
      Stockholders' Equity. As a result of the adoption of SFAS No. 123(R), the
      unamortized value of the restricted stock grant as of July 1, 2006 in the amount
      of $12.5 million has been reclassified 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.





As
      a
      result of the adoption of SFAS No. 123(R), the company recorded compensation
      expense of $365,000 and $605,000, respectively, for the three month and six
      month periods ended July 1, 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 six month periods ended July 2, 2005 prior to the adoption
      of SFAS 123(R) is as follows (in thousands, except per share data):


Three
                  Months Ended
              
              Six
                  Months EndedJul.
                  2, 2005
              
              Jul.
                  2, 2005Net
                  income - as reported
              
              $
              8,969
              
              $
              15,317Less:
                      Stock-based employeecompensation expense, net of
                      taxes
              
              
              (184
              )
              
              (316
              )Net
                  income - pro forma
              
              $
              8,785
              
              $
              15,001Earnings
                  per share - as reported:Basic
              
              $
              1.19
              
              $
              2.04Diluted
              
              $
              1.11
              
              
              1.91Earnings
                  per share - pro forma:Basic
              
              $
              1.17
              
              $
              2.00Diluted
              
              
              1.09
              
              
              1.87





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.




5


A
        summary
        of stock option activity for the six months ended July 1, 2006 is presented
        below:


OptionStock
                  Option Activity
              
              Employees
              
              Directors
              
              Price
                  Per ShareOutstanding
                  atDecember
                  31, 2005:
              
              
              736,025
              
              
              6,000Granted
              
              
              --
              
              
              3,500
              
              $
              88.43Exercised
              
              
              (7,400
              )
              
              --
              
              $
              5.90
                    to $10.51Forfeited
              
              
              --
              
              
              --
              
              
              --Outstanding
                  atJuly
                  1, 2006:
              
              
              728,625
              
              
              9,500Weighted
                  average price
              
              $
              19.33
              
              $
              39.22Exercisable
                  atJuly
                  1, 2006:
              
              
              521,785
              
              
              9,500Weighted
                  average price
              
              $
              17.26
              
              $
              39.22


The
      weighted average price of shares exercised during the six months ended July
      1,
      2006 was $8.02.





The
      following summarizes the options outstanding and exercisable for the employee
      and director stock plans by exercise price, at July 1, 2006:





Weighted
              
              
              
              
              
              WeightedAverage
              
              
              
              
              
              AverageExercise
              
              
              Options
              
              
              Remaining
              
              
              Options
              
              
              RemainingPrice
              
              
              Outstanding
              
              
              Life
              
              
              Exercisable
              
              
              Life*Employee
                  plan*$5.90
              
              
              188,000
              
              
              5.66
              
              
              112,000
              
              
              5.66$10.51
              
              
              69,900
              
              
              6.68
              
              
              14,060
              
              
              6.68$18.47
              
              
              370,725
              
              
              7.32
              
              
              370,725
              
              
              7.32$53.93
              
              
              100,000
              
              
              8.67
              
              
              25,000
              
              
              8.67728,625
              
              
              7.01
              
              
              521,785
              
              
              6.89*Director
                  plan*$10.51
              
              
              6,000
              
              
              1.68
              
              
              6,000
              
              
              1.68$88.43
              
              
              3,500
              
              
              9.87
              
              
              3,500
              
              
              9.879,500
              
              
              4.70
              
              
              9,500
              
              
              5.78





6


**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.




7





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


Dec.
                  7, 2005
              
              Adjustments
              
              July
                  1, 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.








**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.




8





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.





**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
              
              Six
                  Months EndedJul.
                  1, 2006
              
              Jul.
                  2, 2005
              
              Jul
                  1, 2006
              
              Jul.
                  2, 2005Net
                  earnings
              
              $
              11,090
              
              $
              8,969
              
              $
              19,141
              
              $
              15,317Cumulative
                  translation adjustment
              
              
              318
              
              
              (327
              )
              
              264
              
              
              (683
              )Unrealized
                  gain (loss) oninterest
                  rate swap
              
              
              58
              
              
              (231
              )
              
              210
              
              
              272Comprehensive
                  income
              
              $
              11,466
              
              $
              8,411
              
              $
              19,615
              
              $
              14,906


Accumulated
      other comprehensive loss is comprised of minimum pension liability of $(1.2)
      million, net of taxes of $(0.8) million, as of July 1, 2006 and December 31,
      2005, foreign currency translation adjustments of $0.1 million as of July 1,
      2006 and $(0.1) million as of December 31, 2005, and an unrealized gain on
      a
      interest rate swap of $1.0 million, net of taxes of $0.6 million, as of July
      1,
      2006 and $0.7 million, net of taxes of $0.5 million as of December 31,
      2005.




9





**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 $14.3 million at July 1, 2006
      and
      $15.4 million at December 31, 2005 and represented approximately 33% 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 July 1, 2006 and December 31,
      2005 are as follows:




Jul.
                  1, 2006
              
              Dec.
                  31, 2005(in
                  thousands)Raw
                  materials and parts
              
              $
              12,653
              
              $
              11,311Work-in-process
              
              
              7,458
              
              
              6,792Finished
                  goods
              
              
              23,918
              
              
              22,65444,029
              
              
              40,757LIFO
                  adjustment
              
              
              (260
              )
              
              232$
              43,769
              
              $
              40,989





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





Accrued
      expenses consist of the following:


Jul.
                  1, 2006
              
              Dec,
                  31, 2005(in
                  thousands)Accrued
                  payroll and related expenses
              
              $
              12,262
              
              $
              15,577Accrued
                  warranty
              
              
              11,898
              
              
              11,286Accrued
                  customer rebates
              
              
              7,866
              
              
              10,740Advanced
                  customer deposits
              
              
              5,875
              
              
              6,204Accrued
                  income taxes
              
              
              5,327
              
              
              1,499Accrued
                  product liability and workers comp
              
              
              3,564
              
              
              2,418Other
                  accrued expenses
              
              
              12,185
              
              
              14,965$
              58,977
              
              $
              62,689


10





**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.





A
      rollforward of the warranty reserve is as follows:






Six
                  Months EndedJul.
                  1, 2006(in
                  thousands)Beginning
                  balance
              
              $
              11,286Warranty
                  expense
              
              
              5,088Warranty
                  claims
              
              
              (4,476
              )Ending
                  balance
              
              $
              11,898


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




Jul.
                  1, 2006
              
              Dec.
                  31, 2005(in
                  thousands)Senior
                  secured revolving credit line
              
              $
              50,500
              
              $
              56,250Senior
                  secured bank term loans
              
              
              53,750
              
              
              60,000Foreign
                  borrowings
              
              
              3,098
              
              
              3,200Other
                  note
              
              
              1,996
              
              
              2,145Total
                  debt
              
              $
              109,344
              
              $
              121,595Less:
                  Current maturities of long-term debt
              
              
              15,337
              
              
              13,780Long-term
                  debt
              
              $
              94,007
              
              $
              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 July 1,
      2006, the company had $104.3 million outstanding under its senior banking
      facility, including $53.8 million of unamortized term loans and $50.5 million
      of
      borrowings under the revolving credit line. The company also had $8.9 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
      1.25% above LIBOR for long-term borrowings or at the higher of the Prime rate
      and the Federal Funds Rate for short term borrowings. At July 1, 2006, the
      average interest rate on the senior debt amounted to 6.77%. 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 0.25% as of July 1, 2006.




11





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 $2.8 million at July 1, 2006. Borrowings under this facility
      are assessed at an interest rate of 0.45% above LIBOR. At July 1, 2006, the
      interest rate on this loan was 5.72%.





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 July 1, 2006. Borrowings under this facility are
      assessed at an interest rate of 12.34%.





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 July 1, 2006 was $53.8 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
      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. At July 1, 2006, the note amounted
      to $2.0 million. The note is assessed interest at 4.0% above LIBOR with an
      interest rate cap of 9.0%. At July 1, 2006, the interest rate on the note was
      9.0%. The note amortizes monthly and matures in December 2009.





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 July
      1, 2006, the company was in compliance with all covenants pursuant to its
      borrowing agreements.




12





**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 July 1, 2006. A
      summary
      of the reserve balance activity related to the facility closure and lease
      obligation is as follows:




Six
                Months EndedJul.
                1, 2006(in
                thousands)Beginning
              balance
            
            $
            2,598Cash
              payments
            
            
            16Ending
              balance
            
            $
            2,582





**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
      July 1, 2006, the company had forward contracts to purchase $8.4 million U.S.
      Dollars and to sell $8.5 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 $0.2 million at the end of the quarter.




13





*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 July 1, 2006, the unamortized balance of the interest rate swap
      was
      $53.8 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 July 1, 2006, the
      fair value of this instrument was $1.7 million. The change in fair value of
      this
      swap agreement in the first six months of 2006 was a gain of $0.5 million,
      net
      of $0.2 million of taxes.





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 is inception and all changes in fair value of the swap
      are
      recognized in accumulated other comprehensive income. As of July 1, 2006, the
      fair value of this instrument was $(0.2) million. The change in fair value
      of
      this swap agreement in the first six months of 2006 was a loss of $0.2 million,
      net of taxes of less than $(0.1) million.





**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 and the Philippines. 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 Southbend product line of ranges, steamers,
      convection ovens, broilers and steam cooking equipment, the Blodgett product
      line of ranges, convection ovens and combi ovens, MagiKitch'n charbroilers
      and
      catering equipment and the Pitco Frialator product line of fryers. 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.





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.




14





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
              
              Six
                  Months EndedJul.
                  1, 2006
              
              Jul.
                  2, 2005
              
              Jul.
                  1, 2006
              
              Jul.
                  2, 2005Sales
              
              Percent
              
              Sales
              
              Percent
              
              Sales
              
              Percent
              
              Sales
              
              PercentBusiness
                  Divisions:Commercial
                  Foodservice:Core
                  cooking equipment
              
              $
              63,965
              
              
              61.0
              
              $
              59,556
              
              
              71.0
              
              $
              123,904
              
              
              61.5
              
              $
              114,858
              
              
              72.3Conveyor
                  ovenequipment
              
              
              16,050
              
              
              15.3
              
              
              14,601
              
              
              17.4
              
              
              30,053
              
              
              14.9
              
              
              27,439
              
              
              17.2Counterline
                  cooking
                  equipment
              
              
              2,548
              
              
              2.4
              
              
              3,394
              
              
              4.0
              
              
              5,801
              
              
              2.9
              
              
              6,271
              
              
              4.0International specialty equipment
              
              
              2,721
              
              
              2.6
              
              
              2,401
              
              
              2.9
              
              
              5,286
              
              
              2.6
              
              
              4,871
              
              
              3.1Commercial
                  Foodservice
              
              
              85,284
              
              
              81.3
              
              
              79,952
              
              
              95.3
              
              
              165,044
              
              
              81.9
              
              
              153,439
              
              
              96.6Industrial
                  Foodservice(1)
              
              
              14,829
              
              
              14.2
              
              
              --
              
              
              --
              
              
              28,520
              
              
              14.1
              
              
              --
              
              
              --International
                  Distribution Division (2)
              
              
              14,136
              
              
              13.5
              
              
              13,568
              
              
              16.2
              
              
              27,579
              
              
              13.7
              
              
              25,712
              
              
              16.2Intercompany
                  sales (3)
              
              
              (9,400
              )
              
              (9.0
              )
              
              (9,608
              )
              
              (11.5
              )
              
              (19,545
              )
              
              (9.7
              )
              
              (20,350
              )
              
              (12.8
              )Total
              
              $
              104,849
              
              
              100.0
              %
              $
              83,912
              
              
              100.0
              %
              $
              201,598
              
              
              100.0
              %
              $
              158,801
              
              
              100.0
              %





*(1)*
            *Represents
              sales of products manufactured by Alkar, which was acquired in December
              2005.*  *(2)*
            *Consists
              of sales of products manufactured by Middleby and products* *manufactured by third parties.*  *(3)*
            *Represents
                the elimination of sales amongst the Commercial Foodservice Equipment
                Group and**from the Commercial Foodservice Equipment Group to the
                International Distribution
                Division.*


**




15





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







Commercial
            
            Industrial
            
            International
            
            CorporateFoodservice
            
            Foodservice(2)
            
            Distribution
            
            and
              Other(3)
            
            Eliminations(4)
            
            Total**Three
                months ended July 1, 2006**Net
                sales
            
            $
            85,284
            
            $
            14,829
            
            $
            14,136
            
            $
            --
            
            $
            (9,400
            )
            $
            104,849Operating
                income
            
            
            22,444
            
            
            1,959
            
            
            947
            
            
            (4,405
            )
            
            (646
            )
            
            20,279Depreciation
                expense
            
            
            680
            
            
            105
            
            
            35
            
            
            (6
            )
            
            --
            
            
            814Net
                capital expenditures
            
            
            234
            
            
            65
            
            
            42
            
            
            43
            
            
            --
            
            
            384**Six
                months ended July 1, 2006**Net
                sales
            
            $
            165,044
            
            $
            28,520
            
            $
            27,579
            
            $
            --
            
            $
            (19,545
            )
            $
            201,598Operating
                income
            
            
            42,173
            
            
            2,564
            
            
            1,864
            
            
            (10,479
            )
            
            (695
            )
            
            35,427Depreciation
                expense
            
            
            1,363
            
            
            276
            
            
            70
            
            
            (2
            )
            
            --
            
            
            1,707Net
                capital expenditures
            
            
            443
            
            
            95
            
            
            48
            
            
            299
            
            
            --
            
            
            885Total
                assets
            
            
            200,875
            
            
            47,056
            
            
            27,756
            
            
            4,815
            
            
            (6,363
            )
            
            274,139Long-lived
                assets(5)
            
            
            129,035
            
            
            26,213
            
            
            334
            
            
            5,713
            
            
            --
            
            
            161,297**Three
                months ended July 2, 2005**Net
                sales
            
            $
            79,952
            
            $
            --
            
            $
            13,568
            
            $
            --
            
            $
            (9,608
            )
            $
            83,912Operating
                income
            
            
            19,048
            
            
            --
            
            
            804
            
            
            (3,997
            )
            
            482
            
            
            16,337Depreciation
                expense
            
            
            762
            
            
            --
            
            
            35
            
            
            12
            
            
            --
            
            
            809Net
                capital expenditures
            
            
            184
            
            
            --
            
            
            32
            
            
            63
            
            
            --
            
            
            279**Six
                months ended July 2, 2005**Net
                sales
            
            $
            153,439
            
            $
            --
            
            $
            25,712
            
            $
            --
            
            $
            (20,350
            )
            $
            158,801Operating
                income
            
            
            34,420
            
            
            --
            
            
            1,469
            
            
            (6,885
            )
            
            (664
            )
            
            28,340Depreciation
                expense
            
            
            1,581
            
            
            --
            
            
            72
            
            
            23
            
            
            --
            
            
            1,676Net
                capital expenditures
            
            
            550
            
            
            --
            
            
            27
            
            
            23
            
            
            --
            
            
            600Total
                assets
            
            
            193,439
            
            
            --
            
            
            25,003
            
            
            3,119
            
            
            (5,439
            )
            
            216,122Long-lived
                assets(5)
            
            
            128,340
            
            
            --
            
            
            360
            
            
            4,212
            
            
            --
            
            
            133,002





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





*(3)*
            *Includes
              corporate and other general company assets and
              operations.*





*(4)*
            *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.**





*(5)*
            *Long-lived
              assets of the Commercial Foodservice Equipment Group includes assets
              located in the Philippines which amounted to
              $2,039* *and $2,083 in 2006 and 2005,
              respectively.*





16





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




Three
                Months Ended
            
            Six
                Months EndedJul.
                1, 2006
            
            Jul.
                2, 2005
            
            Jul.
                1, 2006
            
            Jul.
                2, 2005United
                States and Canada
            
            $
            85,664
            
            $
            69,153
            
            $
            164,767
            
            $
            130,468Asia
            
            
            7,409
            
            
            5,202
            
            
            13,556
            
            
            10,628Europe
                and Middle East
            
            
            6,989
            
            
            6,818
            
            
            14,742
            
            
            12,946Latin
                America
            
            
            4,787
            
            
            2,739
            
            
            8,533
            
            
            4,759Net
              sales
            
            $
            104,849
            
            $
            83,912
            
            $
            201,598
            
            $
            158,801






**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 July 1, 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 $126,000 was funded during the six-month period
      ended July 1, 2006. Contributions to the directors' plan are based upon actual
      retirement benefits as they retire.








17





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




Six
                  Months EndedJuly
                  1, 2006
              
              July
                  2, 2005Union
              
              Directors
              
              Union
              
              DirectorsPlan
              
              Plans
              
              Plan
              
              PlansService
                  cost
              
              $
              -
              
              $
              458,372
              
              $
              -
              
              $
              227,590Interest
                  on benefit obligations
              
              
              120,756
              
              
              77,271
              
              
              121,633
              
              
              7,129Return
                  on assets
              
              
              (102,576
              )
              
              -
              
              
              (107,301
              )
              
              -Net
                  amortization and deferral
              
              
              73,714
              
              
              -
              
              
              65,912
              
              
              -Net
                  pension expense
              
              $
              91,894
              
              $
              535,643
              
              $
              80,244
              
              $
              234,719





*(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.





18


**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.




19




**Net
      Sales Summary**


**(dollars
      in thousands)**




Three
                Months Ended
            
            Six
                Months EndedJul.
                1, 2006
            
            Jul.
                2, 2005
            
            Jul.
                1, 2006
            
            Jul.
                2, 2005Sales
            
            Percent
            
            Sales
            
            Percent
            
            Sales
            
            Percent
            
            Sales
            
            PercentBusiness
                Divisions:Commercial
                Foodservice:Core
                cooking equipment
            
            $
            63,965
            
            
            61.0
            
            $
            59,556
            
            
            71.0
            
            $
            123,904
            
            
            61.5
            
            $
            114,858
            
            
            72.3Conveyor
                ovenequipment
            
            
            16,050
            
            
            15.3
            
            
            14,601
            
            
            17.4
            
            
            30,053
            
            
            14.9
            
            
            27,439
            
            
            17.2Counterline
                cookingequipment
            
            
            2,548
            
            
            2.4
            
            
            3,394
            
            
            4.0
            
            
            5,801
            
            
            2.9
            
            
            6,271
            
            
            4.0International
                specialtyequipment
            
            
            2,721
            
            
            2.6
            
            
            2,401
            
            
            2.9
            
            
            5,286
            
            
            2.6
            
            
            4,871
            
            
            3.1Commercial
                Foodservice
            
            
            85,284
            
            
            81.3
            
            
            79,952
            
            
            95.3
            
            
            165,044
            
            
            81.9
            
            
            153,439
            
            
            96.6Industrial
                Foodservice(1)
            
            
            14,829
            
            
            14.2
            
            
            --
            
            
            --
            
            
            28,520
            
            
            14.1
            
            
            --
            
            
            --International
                DistributionDivision
                (2)
            
            
            14,136
            
            
            13.5
            
            
            13,568
            
            
            16.2
            
            
            27,579
            
            
            13.7
            
            
            25,712
            
            
            16.2Intercompany
                sales (3)
            
            
            (9,400
            )
            
            (9.0
            )
            
            (9,608
            )
            
            (11.5
            )
            
            (19,545
            )
            
            (9.7
            )
            
            (20,350
            )
            
            (12.8
            )Total
            
            $
            104,849
            
            
            100.0
            %
            $
            83,912
            
            
            100.0
            %
            $
            201,598
            
            
            100.0
            %
            $
            158,801
            
            
            100.0
            %





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





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


*(3)*  *Represents
      the elimination of sales amongst the Commercial Foodservice Equipment Group
      and* *from
      the Commercial Foodservice Equipment Group to*


*the I* *nternational 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
            
            
            Six
                Months EndedJul.
                1, 2006
            
            
            Jul.
                2, 2005
            
            
            Jul.
                1, 2006
            
            
            Jul.
                2, 2005Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            60.2
            
            
            61.2
            
            
            61.7
            
            
            62.4Gross
                profit
            
            
            39.8
            
            
            38.8
            
            
            38.3
            
            
            37.6Selling,
                general and administrative expenses
            
            
            20.5
            
            
            19.4
            
            
            20.7
            
            
            19.8Income
                from operations
            
            
            19.3
            
            
            19.4
            
            
            17.6
            
            
            17.8Interest
                expense and deferred financing amortization, net
            
            
            1.9
            
            
            2.0
            
            
            2.0
            
            
            2.2Other
                expense, net
            
            
            0.2
            
            
            (0.1
            )
            
            -
            
            
            (0.2
            )Earnings
                before income taxes
            
            
            17.2
            
            
            17.5
            
            
            15.6
            
            
            15.8Provision
                for income taxes
            
            
            6.6
            
            
            6.8
            
            
            6.1
            
            
            6.2Net
                earnings
            
            
            10.6
            %
            
            10.7
            %
            
            9.5
            %
            
            9.6
            %








20





**Three
      Months Ended July 1, 2006 Compared to Three Months Ended July 2,
      2005**





**NET
      SALES** ***.***  Net
      sales
      for the second quarter of fiscal 2006 were $104.8 million as compared to $83.9
      million in the second quarter of 2005.





Net
      sales
      at the Commercial Foodservice Equipment Group amounted to $85.3 million in
      the
      second quarter of 2006 as compared to $80.0 million in the prior year quarter.





·
            Core
                cooking equipment sales increased by $4.4 million to $64.0 million
                from
                $59.6 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.




·
            Conveyor
                oven equipment sales increased $1.4 million to $16.0 million from
                $14.6
                million in the prior year quarter due to increased sales of new oven
                models.





·
            Counterline
                cooking equipment sales decreased to $2.5 million from $3.4 million
                in the
                prior year quarter. The prior year quarter included the rollout of
                a
                toaster program with a major restaurant
                chain.





·
            International
                specialty equipment sales increased to $2.7 million compared to $2.4
                million in the prior year quarter.





Net
      sales
      for the Industrial Foodservice Equipment Group were $14.8 million related to
      the
      business of Alkar, which was acquired in December 2005.





Net
      sales
      at the International Distribution Division increased by $0.5 million to $14.1
      million, reflecting higher sales in Asia and Latin America, offset in part
      by
      reduced sales into Europe. International sales benefited from expansion of
      the
      U.S. 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.





**GROSS
      PROFIT** ***.***  Gross
      profit increased to $41.7 million from $32.6 million in the prior year period,
      reflecting the impact of higher sales volumes. The gross margin rate was 39.8%
      in the quarter as compared to 38.8% in the prior year quarter. 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.








21





**SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES** ***.***  Combined
      selling, general, and administrative expenses increased from $16.2 million
      in
      the second quarter of 2005 to $21.5 million in the second quarter of 2006.
      As a
      percentage of net sales, operating expenses amounted to 20.5% in the second
      quarter of 2006 as compared to 19.4% in the second quarter of 2005. Selling
      expenses increased from $8.8 million to $10.8 million, reflecting $1.2 million
      of increased costs associated with the newly acquired Alkar operations and
      increased selling costs related to the higher sales volumes. General and
      administrative expenses increased from $7.5 million to $10.7 million, which
      includes increased costs of $1.0 million associated with the newly acquired
      Alkar operations. General and administrative expenses also includes $0.4 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 increased from $1.7 million to $2.0
      million in the second quarter of 2006, as a result of higher interest rates,
      which offset the benefit of lower average debt balances. Other expense was
      $0.2
      million in the current year as compared to other income of $0.1 million in
      the
      prior year and primarily related to foreign exchange gains.





**INCOME
      TAXES** ***.***  A
      tax
      provision of $7.0 million, at an effective rate of 39%, was recorded during
      the
      quarter as compared to a $5.7 million provision at a 39% effective rate in
      the
      prior year quarter.





**Six
      Months Ended July 1, 2006 Compared to Six Months Ended July 2,
      2005**





**NET
      SALES** ***.***  Net
      sales
      for the six-month period ended July 1, 2006 were $201.6 million as compared
      to
      $158.8 million in the six-month period ended July 2, 2005.





Net
      sales
      at the Commercial Foodservice Equipment Group amounted to $165.0 million in
      the
      six-month period ended July 1, 2006 as compared to $153.4 million in the
      six-month period ended July 2, 2005.





·
            Core
                cooking equipment sales increased by $9.0 million to $123.9 million
                from
                $114.9 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.





·
            Conveyor
                oven equipment sales increased $2.7 million to $30.1 million from
                $27.4
                million in the prior year period, as a result of increased sales
                associated with new oven models.





·
            Counterline
                cooking equipment sales decreased to $5.8 million from $6.3 million
                in the prior year quarter. The prior year quarter included the rollout
                of
                a toaster program with a major restaurant chain customer.





·
            International
                specialty equipment sales increased to $5.3 million compared to $4.9
                million in the prior year quarter due to the introduction of a new
                product
                line of counter griddles and
                charbroilers.








22





Net
      sales
      for Industrial Foodservice Equipment Group were $28.5 million related to the
      business of Alkar, which was acquired in December 2005.





Net
      sales
      at the International Distribution Division increased by $1.9 million to $27.6
      million, reflecting higher sales in Latin America and Asia, 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. International
      sales 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 $77.3 million from $59.7 million in the prior year period,
      reflecting the impact of higher sales volumes. The gross margin rate was 38.3%
      in the quarter as compared to 37.6% in the prior year quarter. 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 $31.3 million
      in
      the six-month period ended July 2, 2005 to $41.8 million in the six-month period
      ended July 1, 2006. As a percentage of net sales, operating expenses amounted
      to
      20.7% in the six-month period ended July 1, 2006, versus 19.8% in the six-month
      period ended July 2, 2005 reflecting greater leverage on higher sales volumes.
      Selling expenses increased from $17.0 million to $20.9 million, reflecting
      $2.3
      million of increased costs associated with the newly acquired Alkar operations
      and higher commission costs associated with the increased sales volumes. General
      and administrative expenses increased from $14.4 million to $20.9 million which
      includes increased costs of $2.3 million associated with the newly acquired
      Alkar operations. General and administrative expenses also includes $0.6 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 increased to $3.8 million from $3.5
      million in the prior year, due to higher interest rates, which more than offset
      the benefit of lower average debt balances. Other expense was $0.1 million
      in
      the current year related to foreign exchange losses compared to other income
      of
      $0.2 million in the prior year, which primarily consisted of foreign exchange
      gains.





**INCOME
      TAXES** ***.***  A
      tax
      provision of $12.4 million, at an effective rate of 39%, was recorded for the
      first six months of 2006 as compared to a $9.8 million provision at a 39%
      effective rate in the prior year period.





23





**Financial
      Condition and Liquidity**





During
      the six months ended July 1, 2006, cash and cash equivalents decreased by $0.7
      million to $3.2 million at July 1, 2006 from $3.9 million at December 31, 2005.
      Net borrowings decreased from $121.6 million at December 31, 2005 to $109.3
      million at July 1, 2006.





**OPERATING
      ACTIVITIES** ***.***  Net
      cash
      provided by operating activities after changes in assets and liabilities was
      $13.7 million as compared to $14.3 million in the prior year period.





During
      the six months ended July 1, 2006, working capital levels increased due to
      the
      higher sales volumes and increased seasonal working capital needs. The changes
      in working capital included a $9.3 million increase in accounts receivable,
      a
      $2.7 million increase in inventory and a $2.1 million increase in accounts
      payable. Prepaid and other assets decreased due to the utilization of tax
      overpayments in the first six months of 2006. Accrued expenses and other
      liabilities decreased by $1.5 million as a result of funding the 2005 customer
      rebate programs and incentive compensation programs during the first quarter
      of
      2006.





**INVESTING
      ACTIVITIES** ***.***  During
      the six months ended July 1, 2006, net cash used in investing activities
      amounted to $2.3 million. This included $1.5 million associated with the
      acquisition of Alkar and $0.9 million of additions and upgrades of production
      equipment, manufacturing facilities and training equipment.





**FINANCING
      ACTIVITIES.** Net
      cash
      flows used in financing activities were $12.2 million during the six months
      ending July 1, 2006. The net reduction in debt includes $5.8 million in
      repayments under the revolving credit facility and $6.2 million of repayments
      of
      the term loan.





At
      July
      1, 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.




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.




24





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.








**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.





25





*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.





26





**Contractual
      Obligations**





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


TotalIdle
              
              ContractualLong-term
              
              Operating
              
              Facility
              
              CashDebt
              
              Leases
              
              Leases
              
              ObligationsLess
                  than 1 year
              
              $
              15,337
              
              $
              617
              
              $
              350
              
              $
              16,3041-3
                  years
              
              
              33,810
              
              
              606
              
              
              680
              
              
              35,0964-5
                  years
              
              
              60,197
              
              
              340
              
              
              814
              
              
              61,351After
                  5 years
              
              
              --
              
              
              119
              
              
              1,803
              
              
              1,922$
              109,344
              
              $
              1,682
              
              $
              3,647
              
              $
              114,673





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.





The
      company has $8.9 million in outstanding letters of credit, which expire on
      July
      1, 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.





27





**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.


Fixed
              
              VariableRate
              
              RateTwelve
                  Month Period Ending
              
              Debt
              
              Debt(in
                  thousands)July31,2007
              
              $
              --
              
              $
              15,337July31,2008
              
              
              --
              
              
              16,280July31,2009
              
              
              --
              
              
              17,530July31,2010
              
              
              --
              
              
              60,197July31,2011
              
              
              --
              
              
              --$
              --
              
              $
              109,344





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 July 1,
      2006, the company had $104.3 million outstanding under its senior banking
      facility, including $53.8 million of unamortized term loans and $50.5 million
      of
      borrowings under the revolving credit line. The company also had $8.9 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
      1.25% above LIBOR for long-term borrowings or at the higher of the Prime rate
      and the Federal Funds Rate for short-term borrowings. At July 1, 2006, the
      average interest rate on the senior debt amounted to 6.77%. 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 0.25% as of July 1, 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 $2.8 million at July 1, 2006. Borrowings under this facility
      are assessed an interest rate of 0.45% above LIBOR. At July 1, 2006 the interest
      rate was 5.72%.





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 July 1, 2006. Borrowings under this facility are
      assessed at an interest rate of 12.34%.





28





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 July 1, 2006 was $53.8 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
      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. At July 1, 2006,
      the
      balance due on the note amounted to $2.0 million. The note is assessed interest
      at 4.0% above LIBOR with an interest rate cap of 9.0%. At July 1, 2006 the
      interest rate on the note was 9.0%. The note amortizes monthly and matures
      in
      December 2009.





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 July
      1, 2006, the company was in compliance with all covenants pursuant to its
      borrowing agreements.








**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 July
      1,
      2006, the fair value of this instrument was $1.7 million. The change in fair
      value of this swap agreement in the first six months of 2006 was a gain of
      $0.5
      million, net of $0.2 million of taxes. 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 July 1, 2006, the
      fair value of this instrument was $(0.2) million. The change in fair value
      of
      this swap agreement in the first six months of 2006 was a loss of $0.2 million,
      net of taxes of less than $(0.1) million.





29





**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 July 1,
      2006. The fair value of these forward contracts was $0.2 million at the end
      of
      the quarter:




Sell
              
              
              Purchase
              
              Maturity1,000,000
              
              Euro
              1,250,500
              
              U.S.
                  Dollars
              July27,20063,150,000
              
              British
                  Pounds
              5,714,500
              
              U.S.
                  Dollars
              July27,200610,000,000
              
              Mexican
                  Pesos
              873,400
              
              U.S.
                  Dollars
              July27,20066,000,000
              
              Mexican
                  Pesos
              523,300
              
              U.S.
                  Dollars
              July27,20068,464,100
              
              U.S.
                  Dollars
              49,200,000
              
              Danish
                  Krone
              July24,2006


30


**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
      July 1, 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 July 1, 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.





31





**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 July 1, 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**





*Stock
      Options*





During
      the second quarter of fiscal 2006, the company issued 900 shares of the
      company's common stock to division executives pursuant to the exercise of stock
      options. The following summarizes those transactions:




Number
                of
            
            ExerciseDate
            
            Class
                of persons
            
            Shares
            
            Price
            
            AmountApril
              28, 2006
            
            
            division
                executive
            
            
            900
            
            $
            10.51
            
            $
            9,459.00





The
      issuance of such shares was exempt under the Securities Act of 1933, as amended,
      pursuant to Section 4(2) thereof, as transactions by an issuer not involving
      a
      public offering as such certificates for the shares were legended and stop
      transfer instructions were given to the transfer agent.





*Issuer
      Purchases of Equity Securities*





In
      July
      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 July 1, 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 July 1, 2006.





**Item
      4. Submission of Matters to a Vote of Security Holders**





On
      May
      12, 2006, the company held its 2006 Annual Meeting of Stockholders. The
      following persons were elected as directors to hold office until the 2007 Annual
      Meeting of Stockholders:


Selim
      A.
      Bassoul, Robert B. Lamb, Ryan Levenson, John R. Miller III, Gordon O'Brien,
      Philip G. Putnam, Sabin C. Streeter and Robert L. Yohe. The number of shares
      cast for, withheld and abstained with respect to each of the nominees were
      as
      follows:


Nominee
              
              For
              
              Withheld
              
              AbstainedBassoul
              
              
              6,999,871
              
              
              274,268
              
              
              0Lamb
              
              
              7,102,825
              
              
              171,314
              
              
              0Levenson
              
              
              7,101,967
              
              
              172,172
              
              
              0Miller
              
              
              6,992,824
              
              
              281,315
              
              
              0O'Brien
              
              
              7,093,622
              
              
              180,517
              
              
              0Putnam
              
              
              6,995,061
              
              
              279,078
              
              
              0Streeter
              
              
              7,003,736
              
              
              270,403
              
              
              0Yohe
              
              
              7,101,191
              
              
              172,948
              
              
              0





32





The
      stockholders voted to approve the ratification of the selection of Deloitte
      and
      Touche LLP as independent auditors for the company for the fiscal year ending
      December 30, 2006. 6,834,203 shares were cast for such election, 437,575 shares
      were cast against such election, and 2,361 shares abstained.





The
      stockholders voted to approve the Executive Officer Incentive Plan. 6,955,649
      shares were cast for election, 296,191 shares were cast against such election,
      and 22,299 shares abstained.








**Item
      6. Exhibits**






Exhibits -
            The
                following exhibits are filed herewith:Exhibit 31.1-
            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).





33





**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: August
              10, 2006
            By:
            /s/ Timothy
              J. FitzGeraldTimothy
                J. FitzGerald
              Vice
                President,
              Chief
                Financial Officer




34