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 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 ("Chairman Plan"). The retirement benefits are based upon a percentage of the Chairman’s final base salary.

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

Fiscal Year 2014



	Elgin Plan			Smithville Plan			Wrexham Plan			Chairman Plan
Net Periodic Pension Cost:
Service cost	$	—		$	—		$	—		$	447
Interest cost	183			690			639			416
Expected return on assets	(215		)	(584		)	(996		)	—
Amortization of net loss (gain)	64			303			—			(413		)
Pension settlement	—			—			—			—
	$	32		$	409		$	(357	)	$	450

Change in Benefit Obligation:
Benefit obligation – beginning of year	$	4,134		$	14,799		$	15,745		$	8,815
Service cost	—			—			—			447
Interest on benefit obligations	183			690			639			416
Actuarial loss	654			3,780			1,273			859
Pension settlement	—			—			—			—
Net benefit payments	(222		)	(648		)	(634		)	—
Exchange effect	—			—			(909		)	—
Benefit obligation – end of year	$	4,749		$	18,621		$	16,114		$	10,537

Change in Plan Assets:
Plan assets at fair value – beginning of year	$	3,722		$	9,602		$	15,172		$	—
Company contributions	—			913			511			—
Investment gain	51			157			1,133			—
Benefit payments and plan expenses	(222		)	(648		)	(634		)	—
Exchange effect	—			—			(876		)	—
Plan assets at fair value – end of year	$	3,551		$	10,024		$	15,306		$	—

Funded Status:
Unfunded benefit obligation	$	(1,198	)	$	(8,597	)	$	(808	)	$	(10,537	)

Amounts recognized in balance sheet at year end:
Other non-current liabilities	$	(1,198	)	$	(8,597	)	$	(808	)	$	(10,537	)

Pre-tax components in accumulated other comprehensive income:
Net actuarial loss (gain)	$	1,673		$	8,029		$	2,188		$	(1,672	)
Net prior service cost	—			—			—			—
Net transaction (asset) obligations	—			—			—			—
Total amount recognized	$	1,673		$	8,029		$	2,188		$	(1,672	)

Accumulated Benefit Obligation	$	4,749		$	18,621		$	16,114		$	7,197

Salary growth rate	n/a			n/a			n/a			10.0		%
Assumed discount rate	3.8		%	3.8		%	3.6		%	3.8		%
Expected return on assets	6.0		%	6.0		%	6.3		%	n/a

Fiscal Year 2013



	Elgin Plan			Smithville Plan			Wrexham Plan			Chairman Plan
Net Periodic Pension Cost:
Service cost	$	—		$	—		$	—		$	929
Interest cost	175			643			635			360
Expected return on assets	(209		)	(529		)	(819		)	—
Amortization of net loss (gain)	154			519			—			(145		)
Pension settlement	—			—			—			—
	$	120		$	633		$	(184	)	$	1,144

Change in Benefit Obligation:
Benefit obligation – beginning of year	$	4,862		$	16,070		$	15,462		$	8,993
Service cost	—			—			—			929
Interest on benefit obligations	175			643			635			360
Actuarial (gain)	(675		)	(1,282		)	(7		)	(1,467		)
Pension settlement	—			—			—			—
Net benefit payments	(228		)	(632		)	(716		)	—
Exchange effect	—			—			371			—
Benefit obligation – end of year	$	4,134		$	14,799		$	15,745		$	8,815

Change in Plan Assets:
Plan assets at fair value – beginning of year	$	3,503		$	8,781		$	12,997		$	—
Company contributions	128			649			526			—
Investment gain	319			804			2,054			—
Benefit payments and plan expenses	(228		)	(632		)	(716		)	—
Exchange effect	—			—			311			—
Plan assets at fair value – end of year	$	3,722		$	9,602		$	15,172		$	—

Funded Status:
Unfunded benefit obligation	$	(412	)	$	(5,197	)	$	(573	)	$	(8,815	)

Amounts recognized in balance sheet at year end:
Other non-current liabilities	$	(412	)	$	(5,197	)	$	(573	)	$	(8,815	)

Pre-tax components in accumulated other comprehensive income:
Net actuarial loss (gain)	$	918		$	4,125		$	1,116		$	(2,944	)
Net prior service cost	—			—			—			—
Net transaction (asset) obligations	—			—			—			—
Total amount recognized	$	918		$	4,125		$	1,116		$	(2,944	)

Accumulated Benefit Obligation	$	4,134		$	14,799		$	15,745		$	5,473

Salary growth rate	n/a			n/a			n/a			10.0		%
Assumed discount rate	4.7		%	4.7		%	4.4		%	4.7		%
Expected return on assets	6.0		%	6.0		%	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
			2014		2013
Equity	48	%	48	%	56	%
Fixed income	40		36		32
Money market	4		4		2
Other (real estate investment trusts & commodities contracts)	8		12		10

	100	%	100	%	100	%

Smithville Plan



	Target Allocation		Percentage of Plan Assets
			2014		2013
Equity	48	%	48	%	54	%
Fixed income	40		36		32
Money market	4		4		4
Other (real estate investment trusts & commodities contracts)	8		12		10

	100	%	100	%	100	%

Wrexham Plan



	Target Allocation		Percentage of Plan Assets
			2014		2013
Equity	50	%	72	%	76	%
Fixed income	50		24		23
Money market	—		4		1
Other (real estate investment trusts & commodities contracts)	—		—		—

	100	%	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 January 3, 2015 (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)	$	121	$	—	$	121	$	—

Equity Securities:
Large Cap	813		813		—		—
Mid Cap	100		100		—		—
Small Cap	100		100		—		—
International	686		686		—		—

Fixed Income:
Government/Corporate	1,074		1,074		—		—
High Yield	216		216		—		—

Alternative:
Global Real Estate Investment Trust	314		314		—		—
Commodities Contracts	127		127		—		—

Total	$	3,551	$	3,430	$	121	$	—


(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)	$	446	$	—	$	446	$	—

Equity Securities:
Large Cap	2,297		2,297		—		—
Mid Cap	268		268		—		—
Small Cap	281		281		—		—
International	1,923		1,923		—		—

Fixed Income:
Government/Corporate	3,058		3,058		—		—
High Yield	599		599		—		—

Alternative:
Global Real Estate Investment Trust	830		830		—		—
Commodities Contracts	322		322		—		—

Total	$	10,024	$	9,578	$	446	$	—


(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)	$	667	$	—	$	667	$	—

Equity Securities:
UK	5,109		5,109		—		—
International
Developed	4,827		4,827		—		—
Emerging	487		487		—		—
Global	602		602		—		—

Fixed Income:
Government/Corporate	2,113		2,113		—		—
Aggregate	358		358		—		—
Index Linked	1,143		1,143		—		—

Total	$	15,306	$	14,639	$	667	$	—


(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		Chairman Plan
2015	$	282	$	674	$	623	$	—
2016	280		693		662		—
2017	278		707		701		—
2018	278		726		740		733
2019 through 2024	1,628		4,837		5,300		4,399

Contributions to the Chairman plan are based upon actual retirement benefits at the Chairman's retirement. 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 Smithville and Wrexham plans to be made in 2015 are $0.8 million and $0.4 million, respectively.


(b)	401K Savings Plans

As of January 3, 2015, 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 $0.1 million for fiscal 2014 and less than $0.1 million for fiscal 2013 and 2012. There were no other profit sharing contributions to the 401K savings plans for 2014, 2013 and 2012.