(3)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of Presentation

The consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The company's consolidated financial statements 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. Significant items that are subject to such estimates and judgments include allowances for doubtful accounts, reserves for excess and obsolete inventories, long-lived and intangible assets, warranty reserves, insurance reserves, income tax reserves and post-retirement obligations. On an ongoing basis, the company evaluates its estimates and assumptions 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.

The company's fiscal year ends on the Saturday nearest December 31. Fiscal years 2011, 2010, and 2009 ended on December 31, 2011, January 1, 2011 and January 2, 2010, respectively, and each included 52 weeks.

(b)

Cash and Cash Equivalents

The company considers all short-term investments with original maturities of three months or less when acquired to be cash equivalents. The company’s policy is to invest its excess cash in interest-bearing deposits with major banks that are subject to minimal credit and market risk.

(c)

Accounts Receivable

Accounts receivable, as shown in the consolidated balance sheets, are net of allowances for doubtful accounts of $6.9 million and $8.0 million at December 31, 2011 and January 1, 2011, respectively. At December 31, 2011, all accounts receivable are expected to be collected within one year.

(d)

Inventories

Inventories are composed of material, labor and overhead and are stated at the lower of cost or market. Costs for inventories 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 $18.6 million in 2011 and $17.5 million in 2010 and represented approximately 15% and 16% of the total inventory in each respective year. 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 December 31, 2011 and January 1, 2011 are as follows:

	2011		2010
	(dollars in thousands)

Raw materials and parts	$	69,576	$	60,452
Work in process		15,204		12,292
Finished goods		39,261		33,432
		124,041		106,176
LIFO reserve		259		287
	$	124,300	$	106,463

(e)

Property, Plant and Equipment

Property, plant and equipment are carried at cost as follows:

	2011			2010
	(dollars in thousands)
Land	$	8,189		$	6,566
Building and improvements		46,104			37,796
Furniture and fixtures		11,680			8,037
Machinery and equipment		50,548			38,612
		116,521			91,011
Less accumulated depreciation		(54,014	)		(47,355	)
	$	62,507		$	43,656

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.

Following is a summary of the estimated useful lives:

Description		Life
Building and improvements		20 to 40 years
Furniture and fixtures		3 to 7 years
Machinery and equipment		3 to 10 years

Depreciation expense amounted to $6.9 million, $5.9 million and $6.3 million in fiscal 2011, 2010 and 2009, respectively.

Expenditures which significantly extend useful lives are capitalized. Maintenance and repairs are charged to expense as incurred. Asset impairments are recorded whenever events or changes in circumstances indicate that the recorded value of an asset is greater than the sum of its expected future undiscounted cash flows.

(f)

Goodwill and Other Intangibles

In accordance with ASC 350 “Goodwill-Intangibles and Other”, the company’s goodwill and other indefinite lived intangibles are reviewed for impairment annually at the end of the fiscal year and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In assessing the recoverability of goodwill and other indefinite lived intangibles, 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. Any such charge could have a material adverse effect on the company’s reported net earnings.

Goodwill is allocated to the business segments as follows (in thousands):

	Commercial			Food
	Foodservice			Processing			Total

Balance as of January 2, 2010	$	326,980		$	31,526		$	358,506

Goodwill acquired during the year		3,555			7,962			11,517
Exchange effect		(34	)		—			(34	)

Balance as of January 1, 2011	$	330,501		$	39,488		$	369,989

Goodwill acquired during the year		49,204			64,486			113,690
Measurement period adjustments to goodwill acquired in prior year		(1,272	)		(5	)		(1,277	)
Exchange effect		(3,081	)		(1,509	)		(4,590	)

Balance as of December 31, 2011	$	375,352		$	102,460		$	477,812

The company has not recognized any goodwill impairments and therefore no accumulated impairment loss.

Intangible assets consist of the following (in thousands):

	December 31, 2011							January 1, 2011
	Estimated							Estimated
	Weighted Avg		Gross					Weighted Avg		Gross
	Remaining		Carrying		Accumulated			Remaining		Carrying		Accumulated
	Life		Amount		Amortization			Life		Amount		Amortization
Amortized intangible assets:
Customer lists		3.1	$	67,904	$	(28,435	)		3.9	$	43,662	$	(19,597	)
Backlog		2.0		9,733		(4,378	)		—		3,568		(3,568	)
Developed technology		1.7		18,106		(9,033	)		3.7		15,821		(6,358	)
			$	95,743	$	(41,846	)			$	63.051	$	(29.523	)
Indefinite-lived assets:
Trademarks and tradenames			$	180,829						$	155,726

The aggregate intangible amortization expense was $12.2 million, $10.6 million and $9.1 million in 2011, 2010 and 2009, respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):

2012	$	17,465
2013		16,322
2014		10,887
2015		5,683
2016		2,876
Thereafter		664
	$	53,897

(g)

Accrued Expenses

Accrued expenses consist of the following at December 31, 2011 and January 1, 2011, respectively:

	2011		2010
	(dollars in thousands)

Accrued payroll and related expenses	$	41,434	$	32,625
Advanced customer deposits		33,246		13,357
Accrued customer rebates		23,136		18,086
Accrued warranty		13,842		14,468
Accrued product liability and workers compensation		10,771		9,711
Accrued agent commission		8,668		7,824
Accrued professional services		7,497		5,944
Other accrued expenses		31,798		23,795

	$	170,392	$	125,810

(h)

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 partially 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.

(i)

Accumulated Other Comprehensive Income

The following table summarizes the components of accumulated other comprehensive income (loss) as reported in the consolidated balance sheets:

	2011			2010
	(dollars in thousands)

Unrecognized pension benefit costs, net of tax	$	(7,615	)	$	(2,470	)
Unrealized loss on interest rate swap, net of tax		(1,691	)		(1,105	)
Currency translation adjustments		(11,228	)		(459	)

	$	(20,534	)	$	(4,034	)

(j)

Fair Value Measures

ASC 820 “Fair Value Measurements and Disclosures” defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3 – Unobservable inputs based on our own assumptions

The company’s financial assets and liabilities that are measured at fair value are categorized using the fair value hierarchy at December 31, 2011 and January 1, 2011 are as follows (in thousands):

	Fair Value		Fair Value		Fair Value
	Level 1		Level 2		Level 3		Total

As of December 31, 2011

Financial Assets:
Pension Plans	$	21,229	$	1,297		—	$	22,526

Financial Liabilities:
Interest rate swaps		—	$	3,216		—	$	3,216
Contingent consideration		—		—	$	3,398	$	3,398

As of January 1, 2011

Financial Assets:
Pension Plans	$	11,241	$	354		—	$	11,595

Financial Liabilities:
Interest rate swaps		—	$	2,186		—	$	2,186
Contingent consideration		—		—	$	5,579	$	5,579

The contingent consideration as of December 31, 2011 relates to the earnout provisions recorded in conjunction with the acquisitions of Cooktek and Danfotech.

The contingent consideration as of January 1, 2011 relates to the earnout provisions recorded in conjunction with the acquisitions of Cooktek and Cozzini.

(k)

Foreign Currency

Foreign currency transactions are accounted for in accordance with ASC 830 “Foreign Currency Translation”. The income statements of the company’s foreign operations are translated at the monthly average rates. Assets and liabilities of the company’s foreign operations are translated at exchange rates at the balance sheet date. These translation adjustments are not included in determining net income for the period but are disclosed and accumulated in a separate component of stockholders’ equity. Exchange gains and losses on foreign currency transactions are included in determining net income for the period in which they occur. These transactions amounted to a gain of $0.2 million in fiscal 2011 and fiscal 2010 and a loss of $0.2 million in fiscal 2009 and are included in other expense on the statements of earnings.

(l)

Revenue Recognition

The company recognizes revenue on the sale of its products when risk of loss has passed to the customer, which occurs at the time of shipment, and collectability is reasonably assured. The sale prices of the products sold are fixed and determinable at the time of shipment. Sales are reported net of sales returns, sales incentives and cash discounts based on prior experience and other quantitative and qualitative factors.

At the Food Processing Equipment Group, the company enters into long-term sales contracts for certain products. Revenue under these long-term sales contracts is recognized using the percentage of completion method defined within ASC 605-35 “Construction-Type and Production-Type Contracts” due to the length of time to fully manufacture and assemble the equipment. The company measures revenue recognized based on the ratio of actual labor hours incurred in relation to the total estimated labor hours to be incurred related to the contract. Because estimated labor hours to complete a project are based upon forecasts using the best available information, the actual hours may differ from original estimates. Under ASC 605, the company records the asset for revenue recognized but not yet billed on contracts accounted for under the percentage of completion method in Prepaid Expenses and Other on the consolidated balance sheet. For 2011 and 2010, the amount of this asset was $1.9 million and $5.1 million, respectively. The percentage of completion method of accounting for these contracts most accurately reflects the status of these uncompleted contracts in the company's financial statements and most accurately measures the matching of revenues with expenses. At the time a loss on a contract becomes known, the amount of the estimated loss is recognized in the consolidated financial statements.

(m)

Shipping and Handling Costs

Shipping and handling costs are included in cost of products sold.

(n)

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 for the fiscal years 2011 and 2010 are as follows:

	2011			2010
	(dollars in thousands)

Beginning balance	$	14,468		$	14,265
Warranty reserve related to acquisitions		939			537
Warranty expense		21,019			22,789
Warranty claims		(22,584	)		(23,123	)
Ending balance	$	13,842		$	14,468

(o)

Research and Development Costs

Research and development costs, included in cost of sales in the consolidated statements of earnings, are charged to expense when incurred. These costs were $10.4 million, $7.7 million, and $7.1 million in fiscal 2011, 2010 and 2009, respectively.

(p)

Non-Cash Share-Based Compensation

The company estimates the fair value of restricted share grants and stock options at the time of grant and recognizes compensation costs over the vesting period of the awards and options. Non-cash share-based compensation expense of $18.1 million, $14.7 million and $10.8 million was recognized for fiscal 2011, 2010 and 2009, respectively. This included less than $0.1 million for fiscal 2009 associated with stock options and $18.1 million, $14.7 million and $10.8 million for fiscal 2011, 2010 and 2009, respectively, associated with restricted share grants. The company recorded a related tax benefit of $7.1 million, $5.8 million and $4.2 million in fiscal 2011, 2010 and 2009, respectively. The company issued restricted share grants with a fair value of $34.7 million in fiscal year 2011 and $16.1 million in fiscal 2009. There were no restricted share grants issued in fiscal 2010.

As of December 31, 2011, there was $25.4 million of total unrecognized compensation cost related to nonvested restricted share grant compensation arrangements, which will be recognized over a weighted average life of 1.5 years.

The fair value of restricted share grant awards for which vesting is subject to market conditions have been estimated using binomial option-pricing models, based on the average market price at the grant date and the weighted average assumptions specific to share grant awards. Share grant awards not subject to market conditions for vesting are valued at the closing share price of the company’s stock as of the date of the grant. The company issued 386,000 and 335,614 restricted share grant awards in 2011 and 2009, respectively. There were no restricted share grant awards in 2010. Share grant awards issued in 2011 and 2009 are performance based and were not subject to market conditions. The fair value of $89.98 and $47.78 per share for the awards for 2011 and 2009, respectively, represent the closing share price of the company’s stock as of the date of grant.

(q)

Earnings Per Share

“Basic earnings per share” is calculated based upon the weighted average number of common shares actually outstanding, and “diluted earnings per share” is calculated based upon the weighted average number of common shares outstanding and other dilutive securities.

The company’s potentially dilutive securities consist of shares issuable on exercise of outstanding options and vesting of restricted stock grants computed using the treasury method and amounted to 536,000, 536,000, and 970,000 for fiscal 2011, 2010 and 2009, respectively. There were no anti-dilutive equity awards excluded from common stock equivalents for 2011, 2010 or 2009.

(r)

Consolidated Statements of Cash Flows

Cash paid for interest was $7.8 million, $7.6 million and $10.6 million in fiscal 2011, 2010 and 2009, respectively. Cash payments totaling $32.3 million, $34.3 million, and $34.6 million were made for income taxes during fiscal 2011, 2010 and 2009, respectively.

Net borrowings under the company’s senior revolving credit facility in fiscal 2011 consisted of $290.0 million of borrowings offset by $187.8 million of repayments.

(s)

New Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-29, “Business Combinations (Topic 805).” ASU No. 2010-29 clarifies the disclosures required for pro forma information for business combinations. ASU No. 2010-29 specifies if comparative financial statements are presented, revenue and earnings of a combined entity should be disclosed as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in ASU 2010-29 are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The company adopted the provisions of ASU No. 2010-29 on January 2, 2011.

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This update provides clarification on existing fair value measurement requirements, amends existing guidance primarily related to fair value measurements for financial instruments, and requires enhanced disclosures on fair value measurements. The additional disclosures are specific to Level 3 fair value measurements, transfers between Level 1 and Level 2 of the fair value hierarchy, financial instruments not measured at fair value and use of an asset measured or disclosed at fair value differing from its highest and best use. This ASU is effective for interim and annual periods beginning after December 15, 2011, and will be applied prospectively. The adoption of this guidance is not expected to affect the company’s financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income,” which eliminates the option to present the components of other comprehensive income in the statement of changes in stockholders’ equity. Instead, entities will have the option to present the components of net income, the components of other comprehensive income and total comprehensive income in a single continuous statement or in two separate but consecutive statements. The guidance does not change the items reported in other comprehensive income or when an item of other comprehensive income is reclassified to net income. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and will be applied retrospectively. The adoption of this guidance will require a change in the presentation of comprehensive income and its components which are currently reported within the Consolidated Statement of Changes in Stockholders’ Equity. As this guidance only revises the presentation of comprehensive income, the adoption of this guidance is not expected to affect the company’s financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other (Topic 350),” This ASU will allow an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The ASU also amends previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the ASU provides additional examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. This ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The company did not early adopt this ASU and is evaluating whether it will elect to apply this option for qualitative evaluation in future goodwill impairment tests.