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 2012, 2011, and 2010 ended on December 29, 2012, December 31, 2011 and January 1, 2011, respectively, and each included 52 weeks.

Certain prior year amounts have been reclassified to be consistent with current year presentation.


(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 $6.4 million and $6.9 million at December 29, 2012 and December 31, 2011, respectively. At December 29, 2012, 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 $22.2 million in 2012 and $18.6 million in 2011 and represented approximately 14% and 15% of the total inventory in each respective year. The amount of LIFO reserve at December 29, 2012 and December 31, 2011 was not material. 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 29, 2012 and December 31, 2011 are as follows:



	2012		2011
	(dollars in thousands)
Raw materials and parts	$	87,184	$	69,576
Work in process	18,957		15,463
Finished goods	47,349		39,261
	153,490		124,300


(e)	Property, Plant and Equipment

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



	2012			2011
	(dollars in thousands)
Land	$	8,402		$	8,189
Building and improvements	48,164			46,104
Furniture and fixtures	13,644			11,680
Machinery and equipment	57,650			50,548
	127,860			116,521
Less accumulated depreciation	(63,974		)	(54,014		)
	$	63,886		$	62,507

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 $8.7 million, $6.9 million and $5.9 million in fiscal 2012, 2011 and 2010, 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 on the first day of the fourth quarter 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 Foodservice			Food Processing			Total
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

Goodwill acquired during the year	18,855			22,968			41,823
Measurement period adjustments to goodwill acquired in prior year	528			2,381			2,909
Exchange effect	2,511			956			3,467

Balance as of December 29, 2012	$	397,246		$	128,765		$	526,011

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

Intangible assets consist of the following (in thousands):



	December 29, 2012						December 31, 2011
	Estimated Weighted Avg Remaining Life	Gross Carrying Amount		Accumulated Amortization			Estimated Weighted Avg Remaining Life	Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists	3.3	$	76,763	$	(40,349	)	3.1	$	67,904	$	(28,435	)
Backlog	1.0	8,751		(6,713		)	2.0	9,733		(4,378		)
Developed technology	3.3	17,876		(11,975		)	1.7	18,106		(9,033		)
		$	103,390	$	(59,037	)		$	95,743	$	(41,846	)
Indefinite-lived assets:
Trademarks and tradenames		$	188,988					$	180,829

The aggregate intangible amortization expense was $17.0 million, $12.2 million and $10.6 million in 2012, 2011 and 2010, respectively. The estimated future amortization expense of intangible assets is as follows (in thousands):



2013	$	17,713
2014	12,702
2015	7,498
2016	4,596
2017	1,503
Thereafter	341
	$	44,353


(g)	Accrued Expenses

Accrued expenses consist of the following at December 29, 2012 and December 31, 2011, respectively:



	2012		2011
	(dollars in thousands)
Accrued payroll and related expenses	$	42,960	$	41,434
Advanced customer deposits	37,392		33,246
Accrued customer rebates	23,901		23,136
Accrued warranty	17,593		13,842
Accrued product liability and workers compensation	13,290		10,771
Accrued agent commission	9,531		8,668
Accrued professional services	8,346		7,497
Other accrued expenses	17,919		31,798

	$	170,932	$	170,392


(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:



	2012			2011
	(dollars in thousands)
Unrecognized pension benefit costs, net of tax	$	(5,597	)	$	(7,615	)
Unrealized loss on interest rate swap, net of tax	(1,447		)	(1,691		)
Currency translation adjustments	(5,355		)	(11,228		)

	$	(12,399	)	$	(20,534	)


(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 29, 2012 and December 31, 2011 are as follows (in thousands):



	Fair Value Level 1		Fair Value Level 2		Fair Value Level 3		Total
As of December 29, 2012

Financial Assets:
Pension Plans	$	24,346	$	935	—		$	25,281

Financial Liabilities:
Interest rate swaps	—		$	2,853	—		$	2,853
Contingent consideration	—		—		$	8,609	$	8,609

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

The contingent consideration as of December 29, 2012 relates to the earnout provisions recorded in conjunction with the acquisitions of Cooktek, Danfotech, Stewart and Nieco.

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


(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 loss of $3.7 million in 2012, and gains of $0.2 million in 2011 and 2010 and are included in other expense on the statements of earnings.


(l)	Revenue Recognition

The company recognizes revenue on the sale of its products where title transfers and 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 2012 and 2011, the amount of this asset was $8.2 million and $1.9 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 2012 and 2011 are as follows:



	2012			2011
	(dollars in thousands)
Beginning balance	$	13,842		$	14,468
Warranty reserve related to acquisitions	819			939
Warranty expense	28,789			21,019
Warranty claims	(25,857		)	(22,584		)
Ending balance	$	17,593		$	13,842


(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 $14.1 million, $10.4 million, and $7.7 million in fiscal 2012, 2011 and 2010, 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 $12.0 million, $18.1 million and $14.7 million was recognized for fiscal 2012, 2011 and 2010, respectively, associated with restricted share grants. The company recorded a related tax benefit of $4.6 million, $7.1 million and $5.8 million in fiscal 2012, 2011 and 2010, respectively. The company issued restricted share grants with a fair value of $34.7 million in fiscal year 2011. There were no restricted share grants issued in fiscal 2012 or 2010.

As of December 29, 2012, there was $13.1 million of total unrecognized compensation cost related to nonvested restricted share grant compensation arrangements, which will be recognized over a weighted average life of 2.0 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 restricted share grant awards in 2011. There were no restricted share grant awards in 2012 or 2010. Share grant awards issued in 2011 are performance based and were not subject to market conditions. The fair value of $89.98 per share for the awards for 2011 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 329,000, 536,000, and 536,000 for fiscal 2012, 2011 and 2010, respectively. There were no anti-dilutive equity awards excluded from common stock equivalents for 2012, 2011 or 2010.


(r)	Consolidated Statements of Cash Flows

Cash paid for interest was $8.0 million, $7.8 million and $7.6 million in fiscal 2012, 2011 and 2010, respectively. Cash payments totaling $49.0 million, $32.3 million, and $34.3 million were made for income taxes during fiscal 2012, 2011 and 2010, respectively.


(s)	New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. The company adopted the provisions of ASU No. 2011-04 on January 1, 2012. There was no impact to the company’s financial position, results of operations or cash flows.

In June 2011 and December 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” and ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”, respectively. ASU No. 2011-05 eliminated the option to present the components of other comprehensive income in the statement of changes in stockholders’ equity. Instead, entities 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. The company adopted the provisions of ASU No. 2011-05 on January 1, 2012. As this guidance only revises the presentation of comprehensive income, there was no impact to the company’s financial position, results of operations or cash flows. For annual reporting purposes the company has elected to present comprehensive income in a two-statement format.

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. The company adopted the provisions of ASU 2011-08 on January 1, 2012. There was no impact to the company’s financial position, results of operation or cash flows. The company applied the qualitative evaluation allowed under this ASU in connection with the company’s annual goodwill impairment test for fiscal year 2012.

On July 27, 2012, the FASB issued ASU 2012-02, “Intangibles - Goodwill and Other (Topic 350)”. Similar to ASU 2011-08, this ASU amends the guidance in ASC 350-30. While ASU 2011-08 allows 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, ASU-2012-02 allows an entity the option to make a qualitative evaluation to determine whether the existence of events and circumstances indicate that it is more likely than not the indefinite-lived intangible asset is impaired thus requiring the entity to perform quantitative impairment tests in accordance with ASC 350-30. The ASU also amends previous guidance by expanding upon the examples of events and circumstances that an entity should consider when making the qualitative evaluation. The company is currently evaluating its adoption approach to this guidance. The adoption of this guidance is not expected to affect the company's financial position, results of operations or cash flows.