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LEGAL PROCEEDINGS

9 Months Ended

Sep. 29, 2012

11. The Company is involved in litigation matters related to its business, principally product liability matters related to the gas-fired heating products and fan coil products in the Heating and Cooling segment. In the Company’s opinion, none of these proceedings, when concluded, will have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial condition as the Company has established adequate accruals for matters that are probable and estimable. The Company does not accrue estimated amounts for future legal costs related to the defense of these matters but rather expenses them as incurred.

In November 2010, the Company filed a lawsuit against an insurance company with regard to a business interruption claim and property damages resulting from an incident that lead to the cessation of operations at the Pikeview Quarry in December of 2008. The discovery process has been completed and the case has been assigned a court date in the first quarter of 2013. No recovery has been recorded in the Company’s financial statements and all related costs have been expensed to date. The Company incurred expenses related to this litigation during the quarter ended September 29, 2012 of $180,000 compared to $421,000 for the quarter ended October 1, 2011 and $406,000 and $876,000 for the nine months ended September 29, 2012 and October 1, 2011, respectively. The Company has entered into a Contingent Fee Agreement with the two legal firms engaged with regard to the Pikeview insurance claim. Under the terms of this agreement the Company has agreed to pay a fixed amount of non-contingent legal fees. In addition to the non-contingent fees, the Company has agreed to pay a contingent fee of 33% of any settlement proceeds or court award in excess of the sum of the non-contingent legal fees, all other litigation expenses and $500,000. The maximum compensation to the Company’s legal counsel is limited to three times their normal billing rates. As of September 29, 2012 approximately 98% of the non-contingent legal fees have been paid. A director of the Company is a partner in one of the firms that has been engaged.

The Company is also involved in a lawsuit to recover a receivable. There has been no significant change since the discussion in the Form 10-K filed with the Securities and Exchange Commission for the 2011 fiscal year.