EMPLOYEE RETIREMENT PLANS

12 Months Ended

Dec. 31, 2011

EMPLOYEE RETIREMENT PLANS

(10) 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 401K savings plan on July 1, 2002, further described below.

The company maintains a non-contributory defined benefit plan for its employees at the Smithville, Tennessee facility, which was acquired as part of the Star acquisition. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 1, 2008, 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 1, 2008 upon reaching retirement age.

The company maintains a defined benefit plan for its employees at the Wrexham, the United Kingdom facility, which was acquired as part of the Lincat acquisition. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2010 prior to Middleby’s acquisition of the company. 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, 2010 upon reaching retirement age.

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 participating on the Board of Directors prior to 2004 (together with the Chairman’s agreement the “Director Plans”). In November 2010, the Board of Directors approved a revision to the directors’ compensation program that resulted in the plan being frozen and benefits being distributed to vested plan participants. Benefit distributions were made in December 2010 and in January 2011 subsequent to the fiscal year end. As of December 31, 2011, there are no longer any participants in the retirement plan for non-employee directors. This plan is not available to any new non-employee directors.

A summary of the plans’ net periodic pension cost, benefit obligations, funded status, and net balance sheet position is as follows (dollars in thousands):

	2011			2011			2011			2011			2010			2010			2010
	Elgin			Smithville			Wrexham			Director			Elgin			Smithville			Director
	Plan			Plan			Plan			Plans			Plan			Plan			Plans
Net Periodic Pension Cost:
Service cost	$	—		$	—		$	—		$	1,123		$	—		$	—		$	1,091
Interest cost		226			669			415			472			231			635			435
Expected return on assets		(178	)		(571	)		(480	)		—			(167	)		(523	)		—
Amortization of net loss		125			203			—			507			114			119			—
Pension settlement		—			—			—			13			—			—			172
	$	173		$	301		$	(65	)	$	2,115		$	178		$	231		$	1,698
Change in Benefit Obligation:
Benefit obligation – beginning of year	$	4,142		$	11,958		$	—		$	7,028		$	4,095		$	10,821		$	6,153
Benefit obligations – acquisitions		—			—			13,328			—			—			—			—
Service cost		—			—			—			1,123			—			—			1,091
Interest on benefit obligations		226			669			415			472			231			635			435
Actuarial losses		695			2,978			192			3,043			85			843			—
Pension settlement		—			—			—			12			—			—			172
Net benefit payments		(262	)		(401	)		(246	)		(300	)		(269	)		(341	)		(823	)
Benefit obligation – end of year	$	4,801		$	15,204		$	13,689		$	11,378		$	4,142		$	11,958		$	7,028
Change in Plan Assets:
Plan assets at fair value – beginning of year	$	3,342		$	8,253		$	—		$	—		$	3,189		$	7,526		$	—
Plan assets at fair value – acquisitions		—			—			11,798			—			—			—			—
Company contributions		156			225			465			300			118			250			823
Investment (loss) gain		(49	)		(257	)		(499	)		—			304			818			—
Benefit payments and plan expenses		(261	)		(401	)		(246	)		(300	)		(269	)		(341	)		(823	)
Plan assets at fair value – end of year	$	3,188		$	7,820		$	11,518		$	—		$	3,342		$	8,253		$	—
Funded Status:
Unfunded benefit obligation	$	(1,614	)	$	(7,384	)	$	(2,170	)	$	(11,378	)	$	(799	)	$	(3,704	)	$	(7,028	)
Amounts recognized in balance sheet at year end:
Other noncurrent liabilities	$	(1,614	)	$	(7,384	)	$	(2,170	)	$	(11,378	)	$	(799	)	$	(3,704	)	$	(7,028	)
Pre-tax components in accumulated other comprehensive income:
Net actuarial loss	$	2,102		$	6,291		$	1,409		$	2,536		$	1,304		$	2,689		$	—
Net prior service cost		—			—			—			—			—			—			—
Net transaction (asset) obligations		—			—			—			—			—			—			—
Total amount recognized	$	2,102		$	6,291		$	1,409		$	2,536		$	1,304		$	2,689		$	—
Accumulated Benefit Obligation	$	4,801		$	15,204		$	13,689		$	3,999		$	4,142		$	11,958		$	4,371
Salary growth rate		n/a			n/a			n/a			10.0	%		n/a			n/a			10.0	%
Assumed discount rate		4.3	%		4.3	%		4.7	%		4.3	%		5.5	%		5.5	%		6.0	%
Expected return on assets		5.5	%		7.0	%		6.6	%		n/a			5.5	%		7.0	%		n/a

The company has engaged non-affiliated third party professional investment advisors to assist the company to develop its investment policy and establish asset allocations. The company's overall investment objective is to provide a return, that along with company contributions, is expected to meet future benefit payments. Investment policy is established in consideration of anticipated future timing of benefit payments under the plans. The anticipated duration of the investment and the potential for investment losses during that period are carefully weighed against the potential for appreciation when making investment decisions. The company routinely monitors the performance of investments made under the plans and reviews investment policy in consideration of changes made to the plans or expected changes in the timing of future benefit payments.

The assets of the plans were invested in the following classes of securities (none of which were securities of the company):

Elgin Plan

	Target Allocation			Percentage of Plan Assets
				2011			2010
Equity		48	%		49	%		48	%
Fixed income		40	%		37			32
Money market		4	%		5			12
Other (real estate & commodities)		8	%		9			8
		100	%		100	%		100	%

Smithville Plan

	Target Allocation			Percentage of Plan Assets
				2011			2010
Equity		48	%		51	%		56	%
Fixed income		40	%		37			36
Money market		4	%		4			-
Other (real estate & commodities)		8	%		8			8
		100	%		100	%		100	%

Wrexham Plan

	Target Allocation			Percentage of Plan Assets
				2011
Equity		50	%		66	%
Fixed income		50	%		27
Money market		—	%		7
		100	%		100	%

In accordance with ASC 820 “Fair Value Measurements and Disclosures”, the company has measured its defined benefit pension plans at fair value. The following tables summarize the basis used to measure the pension plans’ assets at fair value as of December 31, 2011 (in thousands):

Elgin Plan

Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Short Term Investment Fund (a)	$	169	$	—	$	169	$	—
Equity Securities:
Large Cap		768		768		—		—
Mid Cap		86		86		—		—
Small Cap		121		121		—		—
International		607		607		—		—
Fixed Income:
Government/Corporate		989		989		—		—
High Yield		183		183		—		—
Alternative:
Global Real Estate		88		88		—		—
Commodities		177		177		—		—
Total	$	3,188	$	3,019	$	169	$	—

^(a) Represents collective short term investment fund, composed of high-grade money market instruments with short maturities.

Smithville Plan

Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Short Term Investment Fund (a)	$	328	$	—	$	328	$	—
Equity Securities:
Large Cap		1,895		1,895		—		—
Mid Cap		209		209		—		—
Small Cap		328		328		—		—
International		1,535		1,535		—		—
Fixed Income:						—		—
Government/Corporate		2,435		2,435
High Yield		449		449
Alternative:
Global Real Estate		225		225		—		—
Commodities		416		416		—		—
Total	$	7,820	$	7,492	$	328	$	—

^(a) Represents collective short term investment fund, composed of high-grade money market instruments with short maturities.

Wrexham Plan

Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Short Term Investment Fund (a)	$	800	$	—	$	800	$	—
Equity Securities:
UK		3,599		3,599		—		—
International
Developed		2,008		2,008		—		—
Emerging		341		341		—		—
Global		1,604		1,604		—		—
Fixed Income:						—		—
Government/Corporate		1,802		1,802		—		—
Aggregate		354		354		—		—
Index Linked		1,010		1,010		—		—
Total	$	11,518	$	10,718	$	800	$	—

^(a) Represents collective short term investment fund, composed of high-grade money market instruments with short maturities.

The fair value of the Level 1 assets is based on observable, quoted market prices of the identical underlying security in an active market. The fair value of the Level 2 assets is primarily based on market observable inputs to quoted market prices, benchmark yields and broker/dealer quotes. Level 3 inputs, as applicable, represent unobservable inputs that reflect assumptions developed by management to measure assets at fair value.

The expected return on assets is developed in consideration of the anticipated duration of investment period for assets held by the plan, the allocation of assets in the plan, and the historical returns for plan assets.

Estimated future benefit payments under the plans are as follows (dollars in thousands):

	Elgin Plan		Smithville Plan		Wrexham Plan		Director Plans
2012		304		409		465		—
2013		309		461		480		—
2014		302		496		496		—
2015		297		516		511		—
2016 through 2021		1,788		3,945		3,392		6,865

Contributions to the directors plans are based upon actual retirement benefits for directors as they retire. Contributions under the Smithville and Elgin plans are funded in accordance with provisions of The Employee Retirement Income Security Act of 1974. Expected contributions to the Elgin, Smithville and Wrexham plans to be made in 2012 are $0.1 million, $0.3 million and $0.5 million, respectively.

(b) 401K Savings Plans

As of December 31, 2011, the company maintained two separate defined contribution 401K savings plans covering all employees in the United States. These two plans separately cover the union employees at the Elgin, Illinois facility and all other remaining union and non-union employees in the United States.

In conjunction with the freeze on future benefits under the defined benefit plan for union employees at the Elgin, Illinois facility, the company established a 401K savings plan for this group of employees. The company makes contributions to this plan in accordance with its agreement with the union. These contributions amounted to less than $0.1 million for each of the years presented. There were no other profit sharing contributions to the 401K savings plans for 2011, 2010 and 2009.