Welcome to the Middleby Corporation Third Quarter 2015 Earnings Conference Call. With us today from Management is Chairman and CEO, Selim Bassoul and CFO, Tim Fitzgerald. Management will open the comments about the quarter and then we will turn the call over for question-and-answer. Instructions to get in the queue will be given at that time. [Operator Instructions] This conference call will be available for replay today on November 11 at 12:30 PM Eastern Standard Time through November 18, 2015 at 11:59 PM Eastern Standard Time. You may access the replay at any time by dialing 1800-585-8367 and entering access code 74242770. And international participants may dial 4045373406. Those numbers again are 1800-585-8367 and for international participants 4045373406. Again the access code is 74242770. I would now like to turn the call over to Tim Fitzgerald, CFO. You may begin sir.

Good morning and thank you for attending today's conference call. I will go through some brief comments on the third quarter results and then we’ll open the call for questions. Net sales in the 2015 third quarter of $449 million increased 11.1% from $404.3 million in the third quarter of 2014. The third quarter sales include the impact of acquisitions not fully reflected in the prior-year comparative results, and accounted for $46.3 million or 11.5% of the sales growth in the quarter. This acquisition growth included sales of $11.8 million, or 3% related to the AGA acquisition which was completed on September 23, 7 business days prior to the end of the third quarter. Sales in the quarter continue to be affected by the strength of the U.S. dollar against a number of foreign currencies in comparison to the prior year. This fluctuation resulted in lower reported international sales when converted into U.S. dollars and this impact amounted to $12.4 million or 3.1% in lesser reported sales growth in the quarter. Excluding the impact of acquisitions and foreign exchange, sales increased by 2% over the prior-year quarter. This increase reflects an organic sales growth of 9.7% at our Commercial Foodservice Group, a decrease of 4.4% at our Food Processing Group and a decline of 17% at our Residential Kitchen Equipment segment. Sales at the Commercial Foodservice Group amounted to $290.9 million and sales growth reflects continued demand from restaurant chains, upgrading equipment and adopting new technologies to improve the efficiency of restaurant operations. Sales at the Food Processing Group amounted to $74.2 million in the quarter. Although we saw sales decline of 4.4% in the quarter, incoming order rates remained strong during the quarter and are up year-to-date over the prior year by approximately 20%. The sales decrease in the…

[Operator Instructions] Our first question comes from the line of Josh Chan with Baird. Your line is open.

Hi, good morning. Thank you for taking my questions. On the residential segment, what was the impact of the recall or and then also the discontinuation of the non-core products at distribution and how did those compare to your expectations? A – Timothy Fitzgerald: Well - as we mentioned in prior calls with the acquisition of the distributors we did have some products that were discontinued – they're lessening every quarter as we overlap and get further away from the initial acquisition. So that subtracted - just something less than 5% so let’s say 3% to 5% in - from organic sales growth in the quarter. As it relates to the recall, it’s hard to quantify.

Josh, let me step in, I've done a lot of research on recalls. We are not the only company that had had recalls but when you get major recalls likes the one we just had in March where it affects 60,000 ranges which is our core business I went back and looked at companies as strong as Toyota where they had a recall in their core businesses and in general when you look at - and there are been studies after studies and you can research that on the Internet. In general during that year or 12 months later after recall the impact on your company that has a recall is usually between 10% to 15% reduction in sales. That's what every study and every experience has - been studied on recalls of such a magnitude. This is a big recall for us. We're talking 60,000 ranges so we see the impact to be no different than what would happen to a major recall in cars or a major recall in food product and I think we fall into that category. In addition we have some of our key dealers and distributors that have a policy that any brand that has a recall for 90 days they would basically stop ordering that product and basically we got affected in the summer and now we’re feeling in the fourth quarter in terms of those customer, now they are back reordering product, so they stopped ordering just as a policy. And basically between those two if you take the general guidelines that it’s 10% to 15% impact that has been examined over years and years and that’s a research that we’ve done and I think we’ll not going to be different than that, and number two we have specific large dealers that had policies in place that says any recall brand we will stopped ordering it for 90 days till the company gets through the recall, understand what the fixtures are.

Okay. So is it right to think of the impact that maybe the heaviest during the Q3 and Q4 and maybe potentially lessening as you get through the beginning of next year, from the recall?

Yes, I think, well studies - let’s go back to studies and let’s talk about impact Josh. The studies will tell you that usually that impact is six to nine months maybe a year after the recall 10% to 15%, we’ve seen that happening so recall happening in March. So we got hit in the third quarter, we got hit some of it in the second quarter, a lot in the third quarter because of those two major distributor - dealers and now we’re seeing some impact of it in the fourth quarter. My gut feel tells me that we will be starting to see lesser of an impact in the first quarter - starting in the first quarter of 2016.

Okay. That's helpful. And in terms of the new products, when do you expect the new products to be shipped to all the dealers and when do you expect to complete the training. I guess the reason I’m asking this is, do you think the residential business can grow organically in 2016?

Josh, I would tell you that I’m going to answer that question differently than talking about specific guidance in terms of whether it’s going to go up or down, but I’m going to give you trends. I always did because - let’s talk about Viking specifically. At Viking I’m making specific long-term decisions over short term decisions and what I mean by that is specifically three things, one I want the quality to be superb, so one of the challenges we have structural challenges at that company and we knew when we bought it, that it had quality issues. Now we’re facing bigger quality issues than we thought and not from our product but from the legacy product that we inherited and we’re in the process of taking literally re-changing everything we've done in the last two years from redesigning our ranges, all the refrigeration is brand new because the past refrigeration had had recalled - several recalls and they were not working efficiently. So we reintroduced brand new refrigeration, just came on board. Ranges we basically introduced a complete - range line called the 7 series went back to the 5 series which is a legacy product and we basically are fixing all the quality issues there. We’ve gone back to our dish washer and basically decided to stop manufacturing our own dish washer and now we outsource it and we work with our supplier to make sure that there is no quality issue there. Most important, as I can tell you what has faced us in 2015 has been the fact that we’re now tackling something that came about another structural issue is packaging. As we basically take the product to make and move the product to our distribution centers to make it available so that our dealers…

Okay. Yes, definitely appreciate the complexity of this integration Selim. So -

Yes, I think just the one thing we've not, Selim talked about it, but one thing we've not had to deal with in the past is a recall situation. So that's a challenge in terms of the visibility in understanding what the impact is there. I think Selim gave some good data points of what other companies have faced, but that's one of the challenges that we have in terms of really having a good understanding of how that's going to check out with the revenues and clearly one of the things that impacted the quarter.

That's fair. That's fair. And if I switch to food processing, what is the confidence that organic growth can come back in Q4 and do you think orders could be deferred again potentially?

Yes, so Josh, the orders were not deferred. So we've had double-digit income in order growth each of the first three quarter, but even when you get an order including a down payment, sometimes the customer is not ready to take the job. Maybe they're getting a sight ready for an installation. So we had the orders and we've had a lesser sales decline in the third quarter. We had originally anticipated we would see growth both in the third and the fourth quarter, but some of the -- some of the customers weren’t ready to take the project. so that kind of slipped out a little bit. We do anticipate that we would be in a positive growth situation in the fourth quarter. So it's always difficult to tell exactly how the timing is going to line up with some of these projects, but the backlog is up significantly. The orders are there. So they're going to ship, so we're confident we're going to be seeing some growth in upcoming quarters. It will probably be even more so in the first quarter than the fourth quarter, but we anticipate we would be in positive territory in the fourth quarter.

Okay. Sounds good and my last question is with Viking innovation and then now are you worried that a lot on your plate, how do you think about the ability to handle kind of both integrations at the same time, thanks?

So let's talk about that, what's different from Viking is amazing because we've learnt a lot of residential from Viking. The other thing is we definitely focused on several things. We focused one on quality. So having faced significant quality issues at Viking, so part of the due diligence we've done at AGA has been spending a lot more time on understanding the quality. So two differences the AGA Group in Viking have not had the recourse that we faced when we got into that business. Number two, from an integration standpoint, we have now an easier way to -- remember at Viking we don't only -- both the companies ended up buying the distribution, so that also took a year and half of integration of buying I think eight or nine distributors that we don't have to face today. So what we've done in three years at Viking, makes AGA move into that system a lot better. Internationally we also converted most of our international distributor to our Middleby worldwide distribution system. So it also took some time. So basically AGA is coming in the beauty of our AGA while the timing is superb because there are going to move all into our distribution. They're going to go into our distribution worldwide, which is ours. The other thing that we love about the fact of having AGA at this moment, it is transformational for us in terms of the quality of the brand. We've become global worldwide. We also like the fact that they bring on a great knowledge of retail stores. So their retail stores have added value for us in terms of being able to integrate Viking, AGA, Rangemaster, Marshall, Nu-Vu into some of those retail stores. And now we can leverage the retail stores a lot better.

Yes, so Josh just -- we do a lot of acquisitions. So not only Viking, but we've had five other acquisitions this year and we probably had five or six last year. So we're pretty good at integrating a lot of the businesses quickly and there is a great management team across the AGA Group. So we're working with them. So we feel very comfortable with that. Viking clearly took a lot more management time than many of the other acquisitions. We don't anticipate that at AGA. So I think we feel comfortable that we've got the bandwidth to work on AGA and get that moving in 2016.

Okay. Sounds good. Thank you both for your time.

Thank you. Our next question comes from the line of Tony Brenner with Roth Capital. Your line is open.

Thank you very much. I've two questions. One, Selim you've talked before about a major objective being to smooth the lumpiness in the food processing business and given the nature of that business, a very high price of the individual products, the degree of customization often required, I am wondering how you proposed to do that?

It's simple. We're -- since yes, I've been working with our group to literally reduce the growth fluctuation year-over-year, which has happened and one of this has been to create a balance between our businesses globally. So number one what you've done is we've basically gone through figuring out our global presence and putting people in emerging markets so that we can create businesses right there. We also feel that our lumpiness has occurred in terms of specific segments. So it hasn’t been across the lumpiness, Tony, has not been across every segments. So if you look at it, we had segments, we're in six segments right now and six segments and part of it has been literally the lumpiness has been coming from our bakery group and our poultry group mostly. And what you're looking at is making sure that we do acquisition to make sure that those segments, those two specific segments are attractive much more globally than they've been. So one, we need to make sure that we continue focusing on poultry and bakery and filling up some tuck-in acquisition that allows us now to take those businesses worldwide. That will reduce the fluctuation. We also need to do another thing that we've not done is we need to increase our bundling of programs. So we started doing that and it was highly successful at the meat processing show where we bundled drake and alcohol and rapid pack, which had not happened in the past. So we're bundling and we're now creating similar what we created to in foodservice in 2009. If you remember Tony, in the beginning of the recession in 2009 we invested everybody else was cutting back and David Brewer, our COO created the national accounting. The national accounting caused us millions of dollars when we started it. Why because it not only challenged people, it was making sure that we backup that team with a conserve step with technical ability and we did in 2009. We are reduplicating that business for our major change worldwide by bumping and the food processing business. So we're copying the success of the national accounting in foodservice to our food processing. So I’m very comfortable that the target that I set I didn’t say it's going to happen in one quarter but I would said was in 24 months or basically smooth lumpiness of that business. Now what is exciting about that business is two-fold. One, the margin expansion of that business was being amazing and that has been the biggest challenge that everybody asking. Now everybody is talking about lumpiness but before that they said, what about the margin, could you take food processing to be equal to foodservice and slow away from having food processing equal to foodservice –

You know we’ll never be satisfied Selim. A – Selim Bassoul: I know that, that's the problem. But it's okay, Tony you know what, I have been at this game, me and Tim and you’ve been with me all of you and most of the analyst and most of you were to close to pick up – we’ve been at this game and I celebrate 20 years at Middleby - exactly at the end of the year I would have finished 20 years. And I would tell you that I am as excited about Middleby as I have ever been and literally the reason I am excited the new product, the new restructuring, the margin expansions, the customer loyalty we’ve had, I could tell you we’ve had four shows this year, I am talking about big shows and I attended this all four of them. We had the Kitchen & Bath Show and we were a huge hit. I have to tell you and I will talk a little bit about Viking a little bit. We had a Kitchen & Bath Show and we introduced all the new products. We had The NAFEM Show which is a North American Food Equipment Manufacturer and we had a huge hit with raise management, ventless, speed of cooking. Then we through National Restaurant Show and all our chain customers came in and I will tell you one rep is out continue complementing us on how if you do business with. Then I went to the Milan Show. I went before to the Meat Processing Show. And the Meat Processing Show which makes it the post show, I would so pleased when we looked different. So we had two propositions that changed the game for us versus everybody else. One customer after customers came…

Thank you. My second question regards Viking again, what – I know you’ve got your hands for - at the amount but I wonder what your plans are to extend the Viking internationally and have AGA acquisition or having AGA acquisition will [indiscernible]? A – Selim Bassoul: Our plan is to take Viking International. So I’m going to share with you something that just happened. So there is an equivalent high end Kitchen & Bath magazine out of France. So - and we don't advertising that magazine, they just basically ranked all the top - I’m looking at right now it's called [indiscernible] Cuisine et bain which is Kitchen & Bath and its almost architectural digest of France. And their full article Viking was named the VIP of all ranges. So they name it - its right to add and so I don’t know how can I make it available to all of you but if you want it I can have Darcy send you this article and when you look at this – we'll put it on the website and you can pick it up and it's amazing that Viking in France was VIP of stocks, it's our new 700 series. I want to go back and talk about also the type of the thing that - so it's not when you talk about how it ends up full was Viking. Literally it was - we’re almost at the end of it because we would have been a lot better this year if we didn’t have the recall that hit up but I would talk about the awards in 2015. We got Editors Choice of USA TODAY - A – Timothy Fitzgerald: These are all - I mean new products that were introduced in the last 12 to 18. A – Selim Bassoul: The Tuscany, the 700 series, the new cooktop that features three reintroduced, the new hoods and the new refrigeration, that started coming off in the second half of this year. So we got Editor Choice in USA TODAY. We had best guest range the new 700 by good housekeeping. We got the France store often, winner architecture, eight plus awards. We got good design award for Viking for all our new knobs and looks and design. The build of brand, the user study gave us the number one quality rating on our new products. In 2014, we won the French Door won Interior Design Best of the Year product, we were the winner. Then also going back to the Kitchen & Bath we got – we were the winner of the KBB-Readers-Choice. So when I look at all the awards we’ve gotten on the new products its working. It’s just taking a little bit longer because of all the things that I stated but I'm very excited about Viking, I will assure -

So going international -

So Tony we had good success in Latin America particularly in Mexico where we’ve got our own offices and we’ve introduced products in the market and we’re seeing growth at Viking. We’ve also had good growth in the Middle East. We've basically not moved into Europe strong because you need CE approval and we’ve focused on the engineering resources on the new products in the U.S. and dealing with the product recall issues. So the CE approval is something that we’ve got on the slate as you move into 2016. Some of the international growth has been offset a little bit in one particular market which is Brazil, which was a market for Viking when we bought the company because there were some structural issues that we had to clean up there as well as the Brazilian economy with the Real going up. So we have had a little pullback in that market but we’ve seen growth in the other markets that Middleby has made investments. A – Selim Bassoul: So to answer the question I’m looking Viking in 2017. So internationally, we will be ready because we need to put together all certification and we’re going to basically train all sales people and put them into store. So 2016 will be putting all - we’re going to do it right because we have a lot of new products coming out, we need to get the right certification, we need to make sure that our sales people are trained, all our retail stores over 120 of them will have Viking product in them throughout Europe.

Will you manufacture in Europe?

Excuse me.

Will you manufacture Viking products in Europe?

We don’t know that yet, we’ve been looking into that to maybe doing some of our refrigeration in Europe through Desmon and we’ve been looking at that in fact the team was there last week to look at that.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Gary Farber with CL King. Your line is open.

Good morning. Just had a couple of questions. Just on the refrigeration with Viking is that product – like when in the quarter was it fully available to say all for the channel partners?

So Gary it was in full commercial production. We were fulfilling orders so it's just a matter of really seeing in a marketplace.

Okay. So that went on would you say throughout the third quarter or was it awaited towards - was middle of quarter?

I think it’s a continuing process.

Okay. And then on AGA, can you just discuss also if you can the portions of the business that might not fit with the long term strategy and if so what's the thought process on sort of maybe changing – rationalizing partner business.

I think Gary it's too early at this moment we have committed to everyone one of those brands because we like the high end of it. So even the furniture to do kitchen cabinet that was just between Desmon and us. When I went to visit the stores, they have the great stores, it’s a matter of - it's too early to tell but we are committed to keeping those businesses and the style and kitchen and bath they have great locations and we are committed to keeping everything at this moment. So let's put it this way, the commencement is to keep the whole AGA intact the way it works.

I think the management team had a strategy of putting together a great portfolio of high end brands that were synergistic. So I think we are picking up and continuing down that path.

Okay. And then just lastly any range if you can give for interest expense for next year? [Technical Difficulty]

[Operator Instructions]

Hi, this is Tim Fitzgerald. We had a technical difficulty, so we are back on the call. So Abigail, you can maybe pick with the questions.

Our next question comes from the line of [Rob Nichols] [ph] with BB&T Capital Markets. Your line is open. Q – Unidentified Analyst: Hi, good morning. This is [Rob Nichols][ph], I’m sitting in for Schon Williams this morning. My first question is about AGA. Tim, you mentioned that AGA brought in close to $12 million in sales for the quarter, which seems highly unusual given that you only had it for two days in the quarter. Could you provide any additional color there?

Yes, as I mentioned at the beginning there, we actually had it for seven days. So I mean, still a short period of time but it's substantially longer than two I guess. And most likely there was maybe some higher sales towards the end of what would have been the third quarter as well. Q – Unidentified Analyst: Okay, I appreciate that. And how should we be thinking about margin opportunities for AGA heading into 2016?

I think it's still early days for us with -- we're just spending time right now with the team there developing kind of the long term strategy. Clearly, we believe that there are margin improvement opportunities. So, I would say the initial kind of indications that we talked about of being able to bring the AGA margins up to kind of the residential platform level of 20%, we still believe that that's achievable in the long term. Exactly how that's going to roll out in 2016, I think it's still difficult to say right now. So I mean, I think it will provide a better visibility at the next quarter as we kind of get some specific action plans in place. Q – Unidentified Analyst: Okay. That's helpful. And then one more if I may, gross margin is lower year over year in Commercial Foodservice you mentioned sales mix and acquisitions. But could you give a little more color on exactly what changed in the mix and why acquisitions are affecting the margins, given that you have little acquisition activity in there in the last nine months or so?

We actually did by a handful of companies in Commercial Foodservice both last year and this year. I mean there is Goldstein, Desmon, Induc, we bought in the second quarter, Concordia was last year, I'm sure I'm probably missing one or two also. So, I mean I think, it is kind of ordinary course when we buy companies that have lower margins and it takes a little bit of time to come up. We've got initiatives around those companies, so as they kind of come into the portfolio over a period of couple of years, we typically see some margin expansion. So, that's a little bit of a drag there. And then kind of an ordinary course, I mean, we do have broad line of brands now and not everybody is exactly at the same margins. So, from quarter-to-quarter you can just have mixed differences for selling more of a particular product category than another. So that's nothing -- A – SelimBassoul: Not a structural.

Yes. A – SelimBassoul: Not a structural. It's always just basically timing of some orders but we believe that long term, the margins on foodservice will continue to grow.

Yes. And overall -- I mean the margins continue to remain very strong, and our EBITDA margins were 28% roughly in the quarter. So what was maybe slightly less in the gross margin was still very strong in EBITDA margin. Q – Unidentified Analyst: Okay. I appreciate the color. Thanks, guys.

Thank you. This concludes today's Q&A session. I'd like to turn the call back to Management, for closing remarks.

I would like to thank everybody for listening to the conference call. So, I go back and I look at where we go as an opportunity to the Company. So, from a Commercial Foodservice, we continue to grow in the fastest growing – western segment, including the fast casual. We continue to innovate with significant game changing technologies from ventless to speed of cooking, to waterless and most important, voice management. I am very excited about the reinvention of all the new products. I'm looking at that and saying that 2016, 2017, and 2018, will bring a lot of business to us from both chains as well as convenience stores. I think the number of innovations coming into foodservice is amongst the highest I've seen in many, many years. We continue to have a great customer retention among the chains and we keep on gaining market share within that segment, the chain business. Internationally, our global infrastructure and distribution continues to penetrate India, Australia, Middle East, China. We continue to do very, very well including U.K. and Europe. I mentioned little bit earlier about our national accounting which is the best in the industry. And we have huge opportunities in beverage and niche cold application including glass chillers with the acquisition of Desmon. On the food processing, our number one objective is to continue growing our margins and we are very proud of what we've been. We've come literally from a 5% margin, less than eight years ago to now almost 25% margin in this business. We're very highly focused on our six growing segments. We are offering turnkey solution that we've not been able to offer even 24 months ago. We've become number one in emerging markets where most of the factories and the demands are coming from as…

Ladies and gentlemen, that does conclude today's conference call. You may all disconnect. Everyone have a great day.