## Informational Note 

This report contains forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The company cautions readers that these projections are based upon future results or events and are highly dependent upon a variety of important factors which could cause such results or events to differ materially from any forward-looking statements which may be deemed to have been made in this report, or which are otherwise made by or on behalf of the company. Such factors include, but are not limited to, volatility in earnings resulting from goodwill impairment losses which may occur irregularly and in varying amounts; variability in financing costs; quarterly variations in operating results; dependence on key customers; international exposure; foreign exchange and political risks affecting international sales; changing market condi- tions; the impact of competitive products and pricing; the timely development and market acceptance of the company’s products; the availability and cost of raw materials; and other risks detailed herein and from time-to-time in the company’s Securities and Exchange Commission filings, including those discussed under “Risk Factors” further below in this item. 

## Fiscal Year Ended January 1, 2005 as Compared to January 3, 2004 

NET SALES. Net sales in fiscal 2004 increased by $28.9 million or 11.9% to $271.1 million in fiscal 2004 from $242.2 million in fiscal 2003. 

Net sales at the Cooking Systems Group increased by $28.1 million or 12.2% to $257.5 million in 2004 as compared to $229.4 million in the prior year. 

• Core cooking equipment increased by $23.1 million or 14.2% to $185.5 million in 2004. Fryer sales grew by approximately $6.7 million due in part to continued success of the Solstice fryer platform. Sales of convection and combi-ovens increased by approximately $6.2 million with increased sales to institu- tional customers due in part to improved market conditions and success of new product introductions. Range sales grew by approximately $4.2 million with continued success of the new Platinum series of products. Sales of steam equipment increased by approximately $2.5 million due to the introduction of steam products under the Blodgett brand name and success of the newly introduced StratoSteam steamer under the Southbend brand name. 

• Conveyor oven equipment sales increased by approximately $4.9 million or 10.0% to $54.2 million. Increased sales reflect the success of the company’s new generation of more energy efficient conveyor ovens. Improved sales also reflect greater sales with certain major restaurant chain accounts, which increased their purchases during the year. Parts sales 

also increased reflecting higher prices of parts and increased sales volume resulting from an aging base of equipment. 

• Counterline cooking equipment sales increased by approxi- mately $0.2 million or 1.6% and included sales of a new series of counterline equipment introduced in 2004. 

• International specialty equipment sales decreased by $0.2 million or 2.1%. The decrease in sales resulted from lower component parts produced for the company’s U.S. manufacturing operations. 

Net sales at the International Distribution Division increased by $3.4 million or 8.1% to $46.1 million. Sales increased in all regions reflecting growth with the local restaurant chains in Latin America and Europe, and expansion of U.S. restaurant concepts in Asia and Australia. 

Intercompany sales eliminations represent sales of product amongst the Cooking Systems Group operations and from the Cooking Systems Group operations to the International Distribution Division. The sales elimination increased by $2.6 million to $32.5 million reflecting the increase in purchases of equipment by the International Distribution Division from the Cooking Systems Group due to increased sales volumes. 

GROSS PROFIT. Gross profit increased by $16.8 million to $102.6 million in fiscal 2004 from $85.9 million in 2003 as a result of increased sales volume and improvements in the gross margin rate, which increased to 37.9% in 2004 from 35.4% in 2003. The improvement in the gross margin rate resulted from several factors, including the following: 

• Increased sales volumes resulting in greater production efficiencies and absorption of fixed overhead costs. 

• Material cost savings resulting from supply chain initiatives instituted in fiscal 2004. 

• Increased production efficiencies and lower warranty expenses associated with new product introductions resulting from standardization of product platforms and improvements of product design for new generations of equipment. 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased by $13.5 million to $64.4 million in 2004 from $50.8 million in 2003. This increase included $12.6 million of expense associated with the stock repurchase transaction and $1.9 of income resulting from adjustments to acquisition integration reserves. 

Selling and distribution expenses increased to $30.5 million in 2004 from $29.6 million in 2003. The increase in selling and distribution expense resulted from increased commission expense to the company’s independent sales representatives on higher sales. As a percentage of net sales, selling and distribu- tion expenses decreased to 11.2% in 2004 from 12.2% in 2003. 

