Welcome to The Middleby Corporation Second Quarter Conference Call. With us today from management are Selim Bassoul, Chief Executive Officer; and Tim FitzGerald, CFO. We will start the call with prepared comments and then open it up for questions. Directions will be given at that time on how to enter the queue and ask a question. Now I’d like to turn the call over to Mr. FitzGerald for opening remarks. Please go ahead sir.

Good morning and thank you. Net sales in the 2012 second quarter of 260 million increased 23.3% from 210.9 million in the second quarter of 2012. Sales growth from acquisitions accounted for 38.8 million of this increase in the quarter. Excluding the effect of these acquisitions, sales increased 4.9% over the prior year quarter; this increase reflects the 5.4% increase in sales of our commercial foodservice group and a 2.1% increase in sales of our food processing group. The sales growth in the quarter was adversely impacted by foreign currency exchange rates which impacted sales as reported in the U.S dollar by approximately 1%. At the commercial foodservice group we continue to realize sales growth driven by sales to restaurant chains looking to upgrade equipment and adopt new technologies to improve the efficiency of store operations. Sales in emerging markets also remain strong with the growth in excess of 20% in both Asia and Latin America offset by reduced sales in Europe reflecting difficult economic conditions which we anticipate to continue in the near-term. A modest increase in sales at the food processing group reflects growing demand by food processing customers looking to modernize existing production operations and new customers developing operations in emerging markets as demand for pre-cooked and pre-processed foods increases. Sales in the segment moderated in the first half of the year rebounding from the decline in the prior year and are expected to continue to improve over the course of the second half of this year. Gross profit increased to 101.8 million from 85.3 million and the gross margin rate was 39.2% as compared to 40.5% in the prior year. The gross margin rate reflects a higher mix of sales from the food processing segment at a comparatively lower margin. Within the individual segments, the commercial…

[Operator Instructions] First up is Peter Lisnic with Robert W. Baird.

Can you give us a little bit of flavor for the gross margin outlook for the second half of the year, understanding that food processing a little bit more of the mix? But you got the synergies for acquisitions coming through for couple of quarters this year have been down year-over-year, just kind of wondering what the outlook would be given that mix change in the back half of the year?

Peter, I think the food processing group increased as a percentage of the portfolio and that mix is going to continue in the back half of the year. So, while we think we are going to start to see some increase in the gross margins of that group, as we move into next year. The mix will still be weighed out where that will be somewhat of a drag on margins in the back half. Probably pretty consistent with what we have seen in the first half of this year.

And continuing with food processing, just given the confidence out there and the macro concerns, have you see any backlog being pushed out or any deferrals orders. Can you maybe talk about the backlog and order trends in that business right now?

We haven’t seen any deferrals of projects we are spending at this point. The activities in that segment have been pretty strong.

And then last question, just on Europe, in the foodservice business, can you give us a feel for kind of how significant that business was hit by the macro concerns of what sort of impact that had on the organic growth number of 5.4 in the quarter?

I mean it was down quite a bit, I mean it was down double-digit for Europe. So, I mean a lot of the international sales in total for us was up, but Europe offset most of the gains in Asia and Latin America, because Europe still is a larger piece, is larger than Asia and Latin America, the biggest piece for international sales.

For the chains here, I guess and what they are doing overseas, any change in their investment outlooks. In other words are you continuing to look at international markets the same in terms of what they like to do for a growth prospective there?

We are seeing a lot change, little still growing the unit growth in emerging markets. And I can tell you exactly where it's going, India, Russia, Middle East, Latin America remain very strong. We are also seeing regional chains, local chains coming to us and also adding going from 25 stores to adding 10, 15, 16, 20 stores. So, example, Dominos in India will be adding 100 stores in 2013 and they continuing adding significantly in Asia. Papa John continues to add in Eastern Europe. I will continue saying that Yum! is adding 700 units in China. So, we continue seeing emerging markets being very, very strong. We also see something else that’s happening which is a great phenomena for us specifically. We are seeing a significant increase in labor inflation around emerging markets specifically in China. So, what’s happening is to establish brands in China including Yum! are managed by great people, some their CEO in China is a great, great guy but they are feeling significant pressure from labor inflation that they will have to be forced to start looking at kitchen efficiency, labor efficiencies, force in the back of house and front of the house to keep their margins up. So, that drives significant opportunity for us as we see all the emerging markets labor cost going up.

Next in queue is Jamie Clement with Sidoti and Company.

A follow-up from one of previous questions about processing and obviously I think some of the pork oriented companies have felt some pressure. And there has been kind of the bad news out of them over the last couple of weeks related to corn prices and what that does in their margins and that sort of things. You all have a much higher percentage of the acquisition of processing the sales to things like breads and cakes and snacks and that kind of thing. Can you talk a little bit about that piece of the business and now what the mix looks like compared to where it was 3 years ago.

With some of the recent acquisitions we have expanded the group so we are not only in meat processing, but there is breads and cakes and so forth. So, it's a broad portfolio of thermal processing technologies and we service all segments. So, there still the majority of sales are in the meat processing segment, but we sell into really all cooking aspects of food processing now.

And I was wondering, and Selim, I don’t know if you want to weigh in on this. I’m just -- because it's not an area that we heard you all talk of that much about, but in terms of processing to those other areas, what are the trends that you notice obviously you spend acquisition dollars over the last couple of years in that, what was particularly attractive about those markets?

Jamie what I like about the food processing business is they are very, very focused. Those processors whether they are in meat or in baking are very focused on payback. So for them, increasing their yield, lowering energy saving, lowering labor saving, they literally operate that segment operates like chains. They remind me a great deal that today, Maple Leaf Foods or Kraft or Sarah Lee or Nestle are literally operate like a Yum! or a McDonald. They are looking at deficiencies in their factory similar to those chains looking at deficiency in their kitchen. So, what is fascinating for us is, we have taken our concept of payback introducing products that increase the yield, reduce labor, increase basically efficiencies and what you have seen right after the recession took place that those food processing continue to upgrade their equipment. For them 1% or 2% yield literally justify spending, 1.2 million, $3 million on a piece of equipment, because the feedback end up being less than a year. So, we are starting to see a significant order demand and I think it will continue through 2013 easily on the food processing where we are seeing our more efficient equipment taking place. So, for example, we are right now in the process of working with several large food processor both in the United States and in emerging markets where we are laying out completely automated lines. Which reminds me of the pizza conveyer business, very much so, it reminds me of over 20 years ago, when Middleby Marshall literally took the pizza business from a deck up and when you have somebody standing in front of those deck ovens, and now they all went to conveyer, almost 90% of the business is conveyor. And I see the same trend happening where you still see many factories. Large factories within Nestle, within Sarah Lee, Oscar Mayer where you have those big ovens and you are starting to see them going to automated conveyer belt and conveyer line. And this is a sweet spot for us because we dominate the automation in the food processing business with a lot of the companies we own to-date, both in the baking and in the meat processing.

Final question, Selim, given the earnings growth that you all seen over the last couple of years, modest balance sheet leverage, would the board consider regular dividend sometime in the near future?

This is something that we will discuss, the problem I’m facing and the board is facing is the fact that we will continue to remain acquisitive and we have many -- the pipeline is pretty strong in our M&A and in fact it's getting stronger as we see a lot of larger sized companies both in food processing and foodservice coming into play. So, my feeling would be, it has to be literally balancing. I don’t want to send the message to our investor that we are running out of M&A and that now we are doing a dividend. I think dividend is a great way. I think repurchase of share is another option that the board always considers and we have done that in 2011; we have done some I think early this year. But I think we need to make sure we don’t send the message while our cash flow is very, very strong and we cannot afford to do both acquisitions and dividends and repurchase of shares. I want to make sure we don’t send a message to the investors that we are running out of acquisitions to buy, because this has been a fantastic part of our D&A, Jamie. So, it's a dilemma for us to give a dividend because you want to be shareholder friendly, no doubt about it. And I’m sure it would attract some funds that would not even consider Middleby and would like to, because most probably their motto is that they should have a dividend paying stock to investment. But you are always concerned about sending the wrong message and starting to have investors to say well, it's Middleby now not being able to buy companies, which is not the case at all. We will continue being very acquisitive and the pipeline is very strong.

Next is Tony Brenner with Roth Capital Partners.

A couple of things, first of all Tim, adjusting for all the recent food processing acquisitions that you have made in normalizing those margins, what is the difference in gross margins between food service and the food processing segment?

It's roughly in the 5% range.

Second, as I recall beginning at the very early last year, maybe even little before that you began reporting that orders on food processing were accelerating sharply and that initially you thought that, that would result in an acceleration of shipments beginning in second half of last year and as we got into the second half of last year. You began reporting that that should result in an acceleration. It's pretty easy comparisons, in the first half of this year, now you are saying it will be in the second half of this year. If in fact as you suggest there haven’t been any deferrals, I’m wondering why those shipments haven't picked up more significantly yet.

Well, lot of the deliveries are scheduled for latter part of this year and even early into next year. So, the timing of kind of the orders that don’t necessarily correlate with the timing of the shipments given the longer lead times.

I’m not sure that you answered the question, but okay.

Tony, let me answer the question, because we are the same way at point address the same issues because you had orders coming in very, very strong and they continue to be very strong. And when you look at the quarter you say well, shipments were up 2% in food processing, where are our orders, how come they are not coming slow. I think part of it simple is, one, we received lot of orders, a lot of orders came in, in the end of the third quarter of last year and in the fourth quarter of this year. Those orders are dependent on 2 things. They are depending on possibly recent orders, because every order is customized, those are not basically stock items. So, every order are multi-million orders that are customized. We also tend to see in terms of dealing with our customers that sometime there is a slowdown in terms of literally laying out their factory to receive those orders. We tend to see some -- most probably slowdown on the perspective of customers, but I’d like to say that most probably 70% of the delays come from our factories versus our customers, because many of our customers are asking us to deliver as sooner that we can. I think some of those lead times on our food processing business has been more stretched than we expected it to be, I think a little bit longer than we thought it's going to be and there are several reasons for that. I’m going to be very transparent to all of you. I think one of the challenge that we have faced is as the recession took place and the food processing business if you remember in 2009 we got hit very hard, 2010 we adjusted our workforce, we…

One last question, could you Selim, give us a little update on this status of the kitchen retrofit program, are you working yet with Chili’s franchisees or still with company itself or other chains kicking in yet or where does that stand?

We are program continues to be very strong with specific chain that casual dining chain, and we are in the process. We have received several orders from the franchisees, so we are starting to see the franchisees coming soon. And we are very excited. I think that program specifically has not only worked very, very well, now we are seeing the franchisees embracing it. And literally we continue now to see interest from other chains. So, I think as I mentioned in my previous conference call, I said that we will continue focusing on Brinker, to make sure that we give them the full service level of attention. We are now I think over 500 stores and it's going extremely well. And I think now we are seeing the franchisee coming through and I think by somewhere in the second half of 2013, we will be working with other chains specifically to make efficient kitchen also for them. It's not going to be very similar to Brinker, I think the Brinker model is the unique, but the similar ways where we are going to help some customize and automate their kitchen. So, we have several other casual dining chain lined up for the second half of 2013.

Next is Greg Halter with Great Lakes Review.

Tim, I just wanted to clarify one point that you made on the food processing gross margins, you meant that they are around 35%, correct, there are differential of about 5 points from the commercial food service?

Yes, I was referring to the differential, the 5 points is the differential, that’s right.

I was hoping it wasn’t a 5% growth.

That’s correct.

And the line of other income which you had some this period versus expense, can you elaborate the difference between the 2 years?

Yes, so this year it's not a very significant amount. It's a slight income item and it largely is foreign exchange gains that’s primarily what runs through there. Last year we did the acquisition of Lincat, which is a large, it is an acquisition that we did in the UK, and just with the financing of that transaction the initial financing there were some larger unrealized exchange losses, but it had to do with the timing of one reacquisition went through and how we financed that. So, that was more of an unusual items specific to the Lincat transaction in last year’s quarter.

And can you comment on what you are seeing or what you saw in the quarter in regards to steel cost and what the outlook is going forward?

We have seen kind of the 2 component of steel; the basic price and the surcharges or the surcharges have come down lot of base price of steel come up. So, net-net the pricing is relatively flattish and we kind of expect that trend to continue for the remainder of the year.

And any shares repurchased in the quarter?

There was not any shares repurchased during the quarter.

And what do you expect your capital spending to be for the year and maybe if you have an indication for next year that would be great?

We always kind of indicated that we would spend in the 2% type range or something less than 3% we've typically tried less than that. Our CapEx spending has been a little bit lower in the first half of the year being at 3 million for the first 6 months, and we are well under the even 1% but expected that will probably ramp up in the second half of the year. We got some consolidation in plant integration initiatives that are going out and that tends to be one of the drivers of CapEx for us. So we will see some of that come through in the second half of the year, that will bring us up closer to that average of 1% to 2%.

And looking at the new credit facility, going from 600 million to a billion seems like a large amount. I’m just wondering if there is something out there that you would need such a significant facility.

It's a 5 year facility, so we put it in place with really a view for the longer term. And if you were to look back over the 5 years prior to the agreement we start off with, we are a much larger facility and we grow into it pretty quickly. So, as Selim mentioned the pipeline for acquisitions are strong and we think it make sense for us to have to dry powder to go ahead and execute on our acquisition strategies. So, we do anticipate that over a 5 year period we may need that and want to keep the ability or the flexibility so we can act on opportunities as they come up.

And the rate I think is this LIBOR plus 1.5% I think.

Yes, that’s correct. It's on a grid so the range it starts off at 1.5%.

And is that above or below your previous, I can’t recall.

Well the grid has -- it depends on -- right now currently we are borrowing at LIBOR plus 1% roughly, so it's about 0.5% greater than the borrowing cost that we had up through the end of the second quarter. And generally prolongated that would be consistent.

And one last question, Selim, if you could comment on any new products that maybe out there and exciting will give you a chance to elaborate.

Greg, I have to tell you I’m excited about literally 12 new products. We have 12 new products that have immediate payback of which it's less than a year. We are fully measurable, they are in warming. They are in cooking. They are in speed cooking. They are in ventilation, ventless. So, when I look at what’s happening in the marketplace is literally right now, we are seeing 2 trends. We are seeing in the U.S. specifically to U.S, which come into that second, is we are seeing a complete segment which is a casual dining segment totally remodeling their kitchen and their basically operations. That’s the segment that has not done much over the years, and they are under significant pressure. Food cost, labor cost are, same-store sales have been under pressure and what happened was our basically changed our Brinker has led to now other casual dining to say, I have to remodel, Darden, TGI Friday's, Cheesecake Factory, everybody is looking, Applebees are looking at remodeling their kitchen. And we are on the sweet spot for that. Number two, we are seeing significant also change of saying okay, now food cost are going down which is a big relief for all the rest in segments in the U.S. Food cost has stabilized, neutralized in fact commodity price is going down, yes, maybe there is a spike in corn, but in general all the food commodities are way down. So, now most of those operators are saying what do I need to do to grow my same-store sales. So, they have 2 options; one, they are going to spend a lot of money on promotional activity, so we are going to see a significant spending being spent on people promoting advertising. Number two, you are going to see a…

Our next question is from Jamie Sullivan with RBC.

Just wondering on the food processing side, maybe you can go into little bit more detail on what you are seeing on the order levels in the quarter and kind of how that’s trending. Is your book-to-bill greater than 1, are you building backlog?

Yes, we built some backlog during the quarter. So, it is greater than 1.

And then as you look into the back half of the year, maybe kind of the magnitude or the improving growth that you are expecting just given that you probably have some decent visibility there with the backlog.

Well, we do expect it to accelerate, I mean I think we are hesitant to give a number, but I think we are looking to high single-digit and perhaps double-digits type growth in the back half of the year.

And then you saw the trends you are seeing on the food service side maybe there as well, I mean could that start to accelerate as well with some of those trends?

I can answer that Jamie. I think that literally on the chain side both in the U.S. and the emerging market we are going to see increases. We are going to see that happening. I think we are going to see 2 segments that continues to be pressured. The institutional segment which includes schools, hospital, military which represent around 10% of our sales is going to be quite under pressure. I think the leisure and hospitality segment which is hotels, stadiums and country clubs, which represent a little bit less than 5% of our Middleby sales, also will be under pressure. So, when I look at specifically our food service business, 15% of that business roughly, of that food service business will remain under pressure for the second half of this year. So, of course, emerging markets will offset it because I think international continue growing. I think Europe, as Tim mentioned earlier will remain under pressure except the U.K. as people start to see in the fourth quarter improvement in the UK and however, Europe, I’m not talking about Russia, because Russia will be strong for us and UK will start delivering in the fourth quarter better results. I think we will start continue seeing Europe to be -- which represent around 16% of our business to be under pressure.

And then one last one on the stock comp looks like it was down a few million year-over-year just wondering what we should expect going forward on that line?

There was some share grants that’s just based on nesting period sell-off, it was relatively lower year-over-year. Moving forward it's really dependent upon what shares are issued, but they typically are share grants that are issued or every other year. So, at some point there may be an increase in that expense. That’s difficult for us to forecast.

If there are no more question Eric, I’d like to give my final comments please.

Go ahead sir.

So, basically summarized a little bit where the company is going on an organic gross, while the external environment is challenging and restaurant buying habit might change in the short-term. We believe that Middleby will gain market share in the short-term and long-term. We believe that the second half of this year will continue to grow on that organically and for 2 reasons; over 60% of our business is coming from chain and chain continues to invest and remodel tat kitchen platform and adjust their menu offering to better connect with the end user. We have not seen a large change in restaurant chain behavior, so the question is, do we see it was all what’s going on with the volatility, we have not seen chains cutting back or changing their behavior. On the contrary they are continuing to invest in their platform. The second reason why we will see market share gain is the fact that restaurant operators are looking for specific product that can make them more money with immediate payback. And as I mentioned earlier, we are now having over 12 new product that are critical to making money to the restaurant operator. Those products are not discretionary. We are rolling out many of those products today, and we see more chains asking for them. Our success with casual dining has brought forth many other chains that are looking for a similar results to what we have accomplished with that specific chain that we started over a year ago. In Europe, while the markets are very difficult right now. Middleby sales in Europe account for less than 16% of our total sales. While most European markets are struggling, we see opportunities in the UK and in Eastern Europe, starting the fourth quarter of 2012. Our Lincat division…

Thank you very much ladies and gentlemen.