<PAGE>   1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion and analysis of the Company's financial condition and
results of operation should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto. In addition to historical
information, the following management's discussion and analysis of financial
condition and results of operations contains forward looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those anticipated as a result of unforeseen factors. For a
discussion of certain factors that could cause actual results to differ from
those anticipated, see the Cautionary Statements included in Exhibit 99 to the
Company's Annual Report on Form 10-K.

RECENT DEVELOPMENT

In March of 1997 the Company completed the acquisition of Kysor Industrial
Corporation ("Kysor"), a major manufacturer and marketer of refrigerated
display cases, commercial refrigeration systems and insulated panels primarily
serving the supermarket industry. The Company purchased Kysor's common and
preferred stock (hereinafter referred to as the "Acquisition") for an aggregate
purchase price of $309 million. Concurrent with the purchase, the Company sold
Kysor's Transportation Products Group to a third party for an aggregate
purchase price of $86 million plus the assumption of certain liabilities. The
Company retained possession of Kysor's Commercial Products Group.

The Acquisition, after giving effect to the divestiture of the Transportation
Products Group and other acquisition related transactions, was financed through
a $415 million loan facility between the Company and the First National Bank of
Chicago (the "FNBC Facility"). The FNBC Facility consists of a $150 million
seven-year term loan and a $265 million seven-year revolving loan facility,
both with an initial interest rate of 1.375 percent above Eurocurrency rates.
The interest rates on both facilities adjust based on a certain ratio tied to
the strength of the Company's balance sheet. The FNBC Facility requires that a
notional amount of $150 million be hedged for three years. In addition to
financing the Acquisition, proceeds from the FNBC Facility were used to repay
existing debt, including borrowings under an earlier $90 million reducing
credit facility with a group of banks ("old credit facility") and a $20 million
private placement of debt, and will be used to pay expenses associated with the
acquisition. The prepayment of the private placement debt resulted in a pre-tax
charge of $0.8 million in the first quarter of 1997.

Due to the significance of the Acquisition to the Company, the Company's future
operating results and capital structure will be materially different from, and
will not be comparable to, prior periods. For fiscal year 1996, Kysor's sales
of commercial refrigeration products were $245.1 million, which when combined
with the comparable period for the Company would have resulted in pro forma
combined sales of $601.4 million, a 69 percent increase over the Company's
reported 1996 sales. The Company's operating income in 1997 is expected to
increase significantly as a result of the Acquisition and associated benefits,
while amortization of goodwill and interest expense also are expected to
increase significantly. Management currently expects that the Acquisition will
not be dilutive to the Company's earnings per share in 1997.

<PAGE>   2

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 29, 1996 ("1996"), COMPARED WITH YEAR ENDED DECEMBER 31,
1995 ("1995")

The Company experienced strong operating results in 1996 compared with 1995.
Sales increased in many of the Company's businesses and operating income as a
percentage of sales increased as well. These positive operating results were
largely attributable to the inclusion of a full year's operations of Hartek
Beverage Handling GmbH ("Hartek"), which was purchased by the Company on
December 31, 1995, strong growth at Whitlenge Drink Equipment Limited
("Whitlenge"), solid sales gains from the Company's European ice machine
businesses and a continued emphasis on cost containment.

The Company's total sales increased by $32.1 million, or 10 percent, to a
record $356.4 million in 1996 from $324.3 million in 1995.

Ice machine sales, which represented 49 percent of total sales of the Company
in 1996, increased by $6.5 million, or 4 percent, to $176.0 million in 1996
from $169.5 million in 1995 primarily due to 15 percent growth in sales from
European operations while domestic sales of ice machines remained relatively
constant.

Food preparation and storage equipment sales, which represented 29 percent of
total sales of the Company in 1996, remained constant compared to 1995,
reflecting a decline in European bakery equipment sales and a modest increase
in sales of food preparation equipment by The Delfield Company ("Delfield"),
which were limited by a slowing of the domestic market for such products. Sales
in this product category are expected to increase in 1997 due to Delfield's
designation by Boston Market as sole supplier of serving line equipment and
certain related products.

Drink dispensing equipment sales, which represented 19 percent of total sales
of the Company in 1996, increased by $27.6 million, or 69 percent, to $67.6
million in 1996 from $40.0 million in 1995, driven primarily by the inclusion
of the operating results of Hartek and growth of 24 percent at Whitlenge due to
increasing their export sales and a strong domestic beer market in the United
Kingdom.

Niche products sales, which represented 3 percent of total company sales in
1996, decreased by $2.3 million, or 21 percent, to $9.2 million in 1996 from
$11.5 million in 1995, driven primarily by a lower volume of certain contract
products and ventilation equipment.

The Company's gross profit increased by $10.5 million, or 12 percent, to $98.4
million in 1996 from $87.9 million in 1995. The Company's gross profit margin
increased to 27.6 percent of total sales in 1996 from 27.1 percent of total
sales in 1995 due to selling price increases in certain products, moderating
material costs and the impact of higher sales in relation to a base of certain
fixed production costs. These gains were partially offset by higher production
costs at Delfield due to inefficiencies incurred while implementing process
improvements and organizational changes in anticipation of future growth
requirements.

<PAGE>   3

Selling and administrative expenses increased $4.7 million, or 9 percent, to
$58.1 million in 1996 from $53.4 million in 1995. Although selling and
administrative expenses increased due to the inclusion of Hartek, selling and
administrative expenses as a percentage of total sales of the Company declined
to 16.3 percent in 1996 from 16.5 percent in 1995, primarily due to higher
overall sales and lower advertising costs.

Income from operations increased by $5.8 million, or 17 percent, to $40.3
million in 1996 from $34.5 million in 1995 primarily due to increased sales
with higher associated gross margins and the continued benefit of cost
containment plans initiated during 1996 and in prior years.

Net interest expense decreased by $1.0 million, or 17 percent, to $5.3 million
in 1996 from $6.3 million in 1995 primarily due to the Company's lower average
debt levels and a favorable interest rate environment.

Income taxes increased by $3.7 million to $16.4 million in 1996 from $12.7
million in 1995 due to higher income from operations and a higher effective tax
rate. The Company's tax rate increased to 47.0 percent in 1996 from 45.2
percent in 1995 primarily due to the higher percentages of sales generated from
foreign operations with higher relative tax rates.

Overall, net income increased by $3.2 million, or 21 percent, to $18.6 million
in 1996 from $15.4 million in 1995. On a fully-diluted basis, earnings per
share increased by $0.28, or 19 percent, to $1.73 in 1996 from $1.45 in 1995.
Of note, the effects of fluctuations in currency exchange rates on the
Company's results of operations were immaterial.



<PAGE>   4
YEAR ENDED DECEMBER 31, 1995 ("1995"), COMPARED WITH YEAR ENDED JANUARY 1, 1995
("1994") Scotsman Industries sales increased 22 percent in 1995, to $324.3
million, compared with $266.6 million in 1994. Strong gains in worldwide ice
machine sales and the inclusion of Delfield and Whitlenge results for the full
year were primary contributors to this growth.

Ice machine sales increased 13 percent from the prior year and represented 52
percent of total sales in 1995. Domestic ice machine sales were up 7 percent, a
significantly greater gain than the market as a whole. New products and
expansion of the distribution system contributed to the share gain. Sales of
ice machines outside the U.S. increased more than 20 percent due to improvement
in Western European markets and substantial sales increases to the Asia-Pacific
region. In December 1995 the Company's joint venture in Shenyang, China began
production of ice machines to be sold in the domestic China market.

Sales of food preparation and storage equipment increased 39 percent from 1994
to 1995 due to the inclusion of results for Delfield for a full year in 1995
versus a partial year (from April 29, 1994) for 1994. Pro forma full-year sales
of these products, as if Delfield had been acquired at the beginning of 1994,
were up 1 percent. Reduced sales from Delfield to a few large national accounts
were largely offset by sales to other customers. Food preparation and storage
equipment represented approximately one-third of total Company sales in 1995.

The Company's 1995 worldwide drink dispensing equipment sales increased 23
percent versus the prior year due to the inclusion of Whitlenge's sales for
only eight months of 1994. On a full-year basis, drink dispensing equipment
realized increased sales of 5 percent, compared with the prior year, primarily
due to Whitlenge's increased penetration of continental European markets. Sales
of this equipment accounted for 12 percent of 1995 Company sales. Niche
products, including ventilation equipment and certain contract products,
comprised the balance of the Company's sales.

Gross profit increased significantly in dollars but declined as a percentage of
sales, to 27.1 percent in 1995 from 28.5 percent in 1994, as a result of the
full-year inclusion of Delfield and Whitlenge results, which historically have
had lower gross profit margins. The impact of the increases of cost of
materials and a shift in sales mix at Delfield toward customers served by
higher-cost distribution channels also impacted gross profit in 1995.

Selling and administrative expenses for the year were up substantially in
dollars, again due in large measure to acquisitions. As a percentage of sales,
however, selling and administrative costs declined to 16.5 percent from 18.0
percent in the prior year due to lower litigation-related costs, favorable
health claims costs and the full-year inclusion of Delfield and Whitlenge and
their historically lower ratios.

Income from operations increased $6.2 million, or 22 percent, from the prior
year as a result of the above mentioned factors.

Interest expense, net, increased $0.9 million due to the higher average debt
levels associated with the Delfield and Whitlenge acquisitions. A higher
effective income tax rate of 45.2 percent in 1995, compared with 43.9 percent
in 1994, reflects a greater proportion of income from the Company's
higher-taxed Italian subsidiaries.

<PAGE>   5

1995 net income of $15.4 million and fully-diluted net income per share of
$1.45 were record highs for Scotsman Industries. Hartek, acquired on December
31, 1995, had no impact on the income statement for the year. The effect of
changes in currency exchange rates was immaterial on the Company's results of
operations.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's liquidity requirements have arisen primarily from
the need to fund its working capital, capital expenditures, acquisitions and
interest expense, including fixed obligations associated with debt or lease
obligations.  The Company has met these liquidity requirements through use of
funds generated from operations, along with financing through various sources.

The Company expects to continue to generate significant cash flow from
operations, which will be used to run the Company's businesses and fund further
growth.  Increased levels of working capital, capital expenditures and interest
expense associated with the Acquisition are not expected to adversely impact
the Company's liquidity and access to capital.  The Company expects its needs,
including those associated with the Acquisition, to be satisfied from operating
activities and borrowings available under its existing loan facilities,
including the FNBC Facility.  Subsequent to the Acquisition, the Company's
total debt will increase by approximately $293.4 million to approximately
$370.0 million from $76.6 million at December 29, 1996, and the Company's total
debt to book capitalization will increase to approximately 74 percent from 37
percent at December 29, 1996.

The Company generated cash from operating activities of $23.5 million in 1996,
which was identical to the cash generated from operating activities in 1995.
Net income plus depreciation and amortization increased by $4.4 million, or 19
percent, to $27.4 million in 1996 from $23.0 million in 1995.

Accounts receivable, excluding the effects of changes in exchange rates,
increased by $3.3 million compared with year-end 1995 due to strong sales
growth in many of the Company's businesses along with the impact of extended
payment programs in certain of the Company's businesses. Inventories, excluding
the effect of changes in exchange rates, declined $0.2 million, which reflects
an improvement in the inventory turnover ratio. Trade accounts payable and
other liabilities decreased by $1.9 million, excluding the effects of changes
in exchange rates, primarily due to payment of acquisition costs.

Capital expenditures, including those funded through capital leases, decreased
$0.4 million, or 6 percent, to $6.2 million in 1996 from $6.6 million in 1995.
Capital expenditures in 1996 were made primarily to fund productivity
improvements, new product tooling, and maintenance and replacement items.
Capital expenditures for the Company's current operations (excluding Kysor) are
expected to increase moderately in 1997.

In 1996 the Company acquired 50 percent of the outstanding shares of newly
formed SAW Technologies Limited ("SAW") with Aztec Developments Limited
("Aztec") as the other 50 percent shareholder in the U.K.-based joint venture
company. Under the terms of the joint venture agreement, Aztec sold its
technologically advanced beverage dispensing valve, patents and manufacturing
capability to SAW and the Company contributed capital to SAW. The cost incurred
by the Company in 1996 relating to SAW was approximately $2.0 million. The
Company also increased its investment in the joint venture in China at a

<PAGE>   6

cost of $0.4 million during 1996. The Company financed these capital
contributions to the joint ventures through its old credit facility.

Cash and cash equivalents, which consist primarily of cash held by foreign
subsidiaries, increased by $0.7 million to $16.5 million at December 29, 1996,
from $15.8 million at December 31, 1995.

Long-term debt and capital leases outstanding decreased by $4.5 million to
$70.5 million at December 29, 1996, from $75.0 million at December 31, 1995.
Of this amount, $35.5 million consisted of borrowings issued under the
Company's old credit facility.  In addition, as of December 29, 1996, the
Company also had $20.0 million of outstanding indebtedness under a private
placement agreement and $12.9 million in industrial revenue bonds.  As of
December 29, 1996, the Company was subject to various covenants as part of its
outstanding indebtedness including a covenant which had the effect of
restricting the amount of the Company's dividends to its shareholders. Under
such a covenant, $45.4 million of retained earnings were restricted as of
December 29, 1996. The Company was in compliance with these covenants related
to its long-term debt as of December 29, 1996.

The interest rates under the old credit facility were floating and the interest
rate on the private placement was fixed at 11.43 percent. The interest rates on
the industrial revenue bonds are floating. The Company also has entered into
certain interest rate swap agreements pertaining to certain of its indebtedness
to reduce the impact of changes in interest rates.

Total debt, including capitalized leases, decreased by $11.2 million to $76.6
million at December 29, 1996, from $87.8 million at December 31, 1995.
Correspondingly, the Company's debt to book capitalization ratio decreased to
37 percent at December 29, 1996, from 44 percent at December 31, 1995.

Since its first quarter as a publicly-held company, the Company has paid a
quarterly dividend of $0.025 per share. The continuation, amount and timing of
this dividend will be determined by the Board of Directors and may change as
conditions warrant.

<PAGE>   7
Scotsman Industries, Inc.
Consolidated Statement of Income

(Amounts in thousands, except per-share data)

For the Fiscal Years Ended


<TABLE>
<CAPTION>


                           Dec. 29,    Dec. 31,    Jan. 1,
                               1996        1995       1995

<S>                        <C>         <C>        <C>
Net sales                  $356,373    $324,291   $266,632

Cost of sales               257,942     236,402    190,518
                           --------    --------   --------
Gross profit                 98,431      87,889     76,114

Selling and administrative
expenses                     58,135      53,435     47,900
                           --------    --------   --------
Income from operations       40,296      34,454     28,214

Interest expense, net         5,279       6,326      5,416
                           --------    --------   --------
Income before income taxes   35,017      28,128     22,798

Income taxes                 16,449      12,720     10,013
                           --------    --------   --------
Net income                 $ 18,568    $ 15,408   $ 12,785

Preferred stock dividends       813       1,240        885
                           --------    --------   --------
Net income available to
common shareholders        $ 17,755    $ 14,168   $ 11,900
                           ========    ========   ========

Net income per share:
  Primary                  $   1.85    $   1.58   $   1.49
                           --------    --------   --------
  Fully diluted            $   1.73    $   1.45   $   1.35
                           --------    --------   --------



The accompanying notes to consolidated financial statements are an integral
part of this statement.


</TABLE>


<PAGE>   8

Scotsman Industries, Inc.
Consolidated Balance Sheet

(Amounts in thousands)


<TABLE>
<CAPTION>

                                                         Dec. 29,    Dec. 31,
                                                             1996        1995
<S>                                                      <C>         <C>
Assets
Current Assets:
     Cash and temporary cash investments                 $ 16,501    $ 15,808
     Trade accounts and notes receivable, net of
       allowances of $2,778 in 1996 and $2,960 in 1995     58,734      54,500
     Inventories                                           52,530      52,251
     Deferred income taxes                                  4,708       5,690
     Other current assets                                   5,101       3,093
                                                         --------    --------
     Total current assets                                 137,574     131,342
Properties and equipment, net                              46,659      46,373
Goodwill, net                                              94,975      94,732
Other noncurrent assets                                     4,056       3,496
                                                         --------    --------
     Total assets                                        $283,264    $275,943
                                                         ========    ========

Liabilities and Shareholders' Equity
Current Liabilities:
     Short-term debt and current maturities of
       capitalized lease obligations and
       long-term debt                                    $ 16,317    $ 13,037
     Trade accounts payable                                22,344      24,174
     Accrued income taxes                                   6,302       4,491
     Accrued expenses                                      33,290      34,812
                                                         --------    --------
     Total current liabilities                             78,253      76,514

Long-term debt and capitalized lease obligations           60,289      74,719
Deferred income taxes                                       3,710       3,814
Other noncurrent liabilities                                9,300       8,577
                                                         --------    --------
     Total liabilities                                    151,552     163,624

Shareholders' Equity:
     Common stock, $.10 par value, authorized 50,000,000
       shares; issued 10,729,513 shares and 9,153,014
       shares, respectively                                 1,073         915
     Preferred stock, $1.00 par value, authorized
       10,000,000 shares; issued 0 shares and 1,999,992
       shares, respectively                                    --       2,000
     Additional paid in capital                            73,053      70,514
     Retained earnings                                     62,036      45,232
     Deferred compensation and unrecognized pension cost     (117)        (88)
     Foreign currency translation adjustments              (2,877)     (4,911)
     Less: Common stock held in treasury;
       187,049 and 188,040 shares, respectively            (1,456)     (1,343)
                                                         --------    --------
     Total shareholders' equity                           131,712     112,319
                                                         --------    --------
     Total liabilities and shareholders' equity          $283,264    $275,943
                                                         ========    ========


The accompanying notes to consolidated financial statements are an integral
part of this statement.


</TABLE>

<PAGE>   9


Scotsman Industries, Inc.
Consolidated Statement of Cash Flows

(Amounts in thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended                                    Dec. 29,     Dec.31,     Jan. 1,
                                                                  1996        1995        1995
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
     Net income                                               $ 18,568    $ 15,408    $ 12,785
     Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                             8,870       7,594       6,019
       Loss (gain) on property dispositions                        (82)        (39)         45

     Change in assets and liabilities:
       Trade accounts receivable                                (3,310)     (2,607)     (7,779)
       Inventories                                                 237       2,006      (3,815)
       Trade accounts payable and other liabilities             (1,877)     (2,074)     10,290
       Other, net                                                1,101       3,162      (1,369)
                                                              --------    --------    --------
     Net cash provided by operating activities                  23,507      23,450      16,176
Cash flows from investing activities:
     Investment in properties and equipment                     (6,195)     (6,513)     (5,434)
     Proceeds from dispositions of properties and equipment        230         215          34
     Acquisition of Delfield and Whitlenge                          --          --     (28,689)
     Investment in U.K. joint venture                           (2,024)         --          --
     Investment in China joint venture, net                       (399)       (665)         --
     Acquisition of Hartek                                        (991)     (1,491)         --
                                                              --------    --------    --------
     Net cash used in investing activities                      (9,379)     (8,454)    (34,089)
Cash flows from financing and capital activities:
     Short-term debt, net                                       (6,524)      3,616         (74)
     Issuance of long-term debt                                 16,074      17,806      63,000
     Principal payments under long-term debt
       and capitalized leases                                  (21,128)    (28,071)    (42,831)
     Dividends paid to shareholders                             (2,035)     (2,118)     (1,339)
                                                              --------    --------    --------
     Net cash provided by (used in) financing
       and capital activities                                  (13,613)     (8,767)     18,756
Effect of exchange rate changes on cash and
     temporary cash investments                                    178        (191)        465
                                                              --------    --------    --------

Net increase in cash and temporary cash investments                693       6,038       1,308
Cash and temporary cash investments at beginning of year        15,808       9,770       8,462
                                                              --------    --------    --------
Cash and temporary cash investments at end of year            $ 16,501     $15,808    $  9,770
                                                              ========    ========    ========
Supplemental disclosure of cash flow information:
     Cash paid during the year for:
       Interest                                               $  6,812    $  7,431    $  4,566
                                                              ========    ========    ========
       Income taxes                                           $ 14,957    $ 10,992    $ 10,685
                                                              ========    ========    ========

Supplemental schedule of noncash investing
     and financing activities:
       Investment in properties and equipment through
       issuance of capitalized lease obligations              $    (42)   $    (96)   $    (56)
                                                              ========    ========    ========
       Issuance of stock for acquisition of Delfield and
       Whitlenge                                              $     --    $(12,089)   $(39,000)
                                                              ========    ========    ========


</TABLE>


The accompanying notes to consolidated financial statements are an integral
part of this statement.

<PAGE>   10
Scotsman Industries, Inc.
Consolidated Statement of Shareholders' Equity

(Amounts in thousands, except number of shares)


<TABLE>
<CAPTION>

                                                                                                       Foreign
                                  Treasury     Common  Preferred  Additional                          Currency
                                     Stock      Stock      Stock     Paid in   Retained            Translation  Treasury
                                    Number  Par Value  Par Value     Capital   Earnings Other (a)  Adjustments     Stock    Total
                                  --------  ---------  ---------    --------   -------- ---------   ----------   -------  --------
<S>                                <C>          <C>       <C>      <C>         <C>         <C>         <C>       <C>      <C>
Balance at January 2, 1994         202,295      $ 721     $   --    $ 20,557   $ 20,855    $  (54)     $(6,741)  $(1,344) $ 33,994
                                   -------      -----     ------    --------   --------    ------      -------   -------  --------
  Net income                            --         --         --          --     12,785        --           --        --    12,785
  Foreign currency translation
    adjustments                         --         --         --          --         --        --        1,710        --     1,710
  Issuance of deferred
    compensation                    (8,038)        --         --         118         --      (119)          --         1        --
  Amortization of deferred
    compensation                        --         --         --          --         --        99           --        --        99
  Dividends declared to common
    shareholders                        --         --         --          --       (796)       --           --        --      (796)
  Dividends declared to preferred
    shareholders                        --         --         --          --       (885)       --           --        --      (885)
  Issuance of common and preferred
    stock relating to acquisition
    of Delfield and Whitlenge           --        120      2,000      36,880         --        --           --        --    39,000
  Stock options exercised               --          5         --         530         --        --           --        --       535
  Unrecognized pension cost             --         --         --          --         --        21           --        --        21
  Other                                  2         --         --          --         --        --           --        --        --
                                   -------      -----     ------    --------   --------    ------      -------   -------  --------
Balance at January 1, 1995         194,259      $ 846     $2,000    $ 58,085    $31,959    $  (53)     $(5,031)  $(1,343) $ 86,463
                                   =======      =====     ======    ========   ========    ======      =======   =======  ========
  Net income                            --         --         --          --     15,408        --           --        --    15,408
  Foreign currency translation
    adjustments                         --         --         --          --         --        --          120        --       120
  Issuance of deferred
    compensation                    (6,219)        --         --         120         --      (120)          --        --        --
  Amortization of deferred
    compensation                        --         --         --          --         --       129           --        --       129
  Dividends declared to common
    shareholders                        --         --         --          --       (895)       --           --        --      (895)
  Dividends declared to preferred
    shareholders                        --         --         --          --     (1,240)       --           --        --    (1,240)
  Issuance of common stock
    relating to acquisition
    of Delfield and Whitlenge           --         67         --      12,022         --        --           --        --    12,089
  Stock options exercised               --          2         --         287         --        --           --        --       289
  Unrecognized pension cost             --         --         --          --         --       (44)          --        --       (44)
                                   -------      -----     ------    --------   --------    ------      -------   -------  --------
Balance at December 31, 1995       188,040      $ 915     $2,000    $ 70,514   $ 45,232    $  (88)     $(4,911)  $(1,343) $112,319
  Net income                            --         --         --          --     18,568        --           --        --    18,568

</TABLE>






<PAGE>   11
<TABLE>
<CAPTION>                                                                                              Foreign
                                     Treasury    Common   Preferred  Additional                        Currency
                                      Stock      Stock      Stock     Paid in    Retained            Translatio  Treasury
                                      Number   Par Value  Par Value   Capital    Earnings Other (a)  Adjustment   Stock      Total
                                     --------  ---------  ---------  ----------  -------- ---------  ----------  --------   -------
     <S>                               <C>       <C>        <C>      <C>          <S>      <C>        <C>        <C>        <C>
     Foreign currency translation
      adjustments                          --        --         --         --         --       --       2,034       --        2,034
     Issuance of deferred
      compensation                     (5,965)       --         --        119         --     (119)         --       --          --
     Amortization of deferred
      compensation                         --        --         --         --         --      120          --       --          120
     Dividends declared to common
      shareholders                         --        --         --         --       (951)      --          --       --         (951)
     Dividends declared to preferred
      shareholders                         --        --         --         --       (813)      --          --       --         (813)
     Conversion of preferred stock
      into common stock                    --       153     (2,000)     1,847         --       --          --       --          --
     Stock options exercised            4,974         5         --        573         --       --          --      (113)        465
     Unrecognized pension cost             --        --         --         --         --      (30)         --       --          (30)
                                     --------    ------     ------   --------    -------    -----     -------   -------    --------
Balance at December 29, 1996          187,049    $1,073     $   --   $ 73,053    $62,036    $(117)    $(2,877)  $(1,456)   $131,712
                                     ========    ======     ======   ========    =======    =====     =======   =======    ========

</TABLE>

(a) Other shareholders' equity includes deferred compensation and unrecognized
pension cost.

The accompanying notes to consolidated financial statements are an integral part
of this statement.




<PAGE>   12


SCOTSMAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


      Basis of Consolidation

      The consolidated financial statements include the accounts of Scotsman
      Industries, Inc. ("Scotsman" or "the Company") and its consolidated
      subsidiaries.  All significant intercompany transactions have been
      eliminated in consolidation.

      Certain amounts in the consolidated financial statements for previous
      years have been reclassified to conform to the presentation used for
      fiscal year 1996.

      Use of Estimates

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities at
      the date of the financial statements and the reported amounts of revenues
      and expenses during the reporting period.  Actual results could differ
      from those estimates.

      Fiscal Year

      The Company reports on a 52-53 week fiscal year ending on the Sunday
      nearest to December 31.  Fiscal years 1996, 1995 and 1994 had 52 weeks.

      Cash Management

      The Company considers all highly liquid investments with original
      maturities of three months or less to be temporary cash investments.

      Temporary cash investments, primarily Eurodollar deposits or repurchase
      agreements with maturities of 90 days or less, are carried at cost, which
      approximates market.  Interest income (in thousands) included in interest
      expense, net was $791, $633 and $277 for fiscal years 1996, 1995 and
      1994, respectively.

<PAGE>   13


      Trade Accounts and Notes Receivable

      Trade accounts and notes receivable at December 29, 1996, and December
      31, 1995, included notes of $7.5 million and $7.3 million, respectively.

      Inventories

      Inventories are stated at the lower of cost or market and include the
      appropriate elements of material, labor and manufacturing overhead
      expenses.  Cost is determined using the last-in, first-out ("LIFO")
      method for a portion of domestic inventories and the first-in, first-out
      ("FIFO") method for the balance of domestic and all foreign inventories.

      Properties and Equipment

      Properties and equipment, including capitalized leases, are recorded at
      cost to the Company at date of acquisition and depreciated over either
      their estimated useful lives, ranging from 3 to 40 years, or lease terms,
      whichever is shorter, using principally the straight-line method for
      financial reporting purposes and accelerated methods for tax reporting
      purposes.

      Goodwill

      Cost of investments in excess of net assets of businesses acquired after
      October 1970 is being amortized using the straight-line method over 40
      years.  The related amortization expense was $2.5 million, $2.4 million
      and $1.5 million for the fiscal years 1996, 1995 and 1994, respectively.
      At December 29, 1996, and December 31, 1995,  accumulated amortization
      was $8.0 million and $5.4 million, respectively.  After an acquisition,
      the Company continually reviews whether subsequent events and
      circumstances have occurred that indicate that the remaining estimated
      useful life of goodwill may warrant revision or that the remaining
      balance of goodwill may not be recoverable.  If events and circumstances
      indicate that goodwill related to a particular business should be
      reviewed for possible impairment, the Company uses projections to assess
      whether future operating income of the business on a non-discounted basis
      is likely to exceed the goodwill amortization over the remaining life of
      the goodwill, to determine whether a writedown of goodwill to recoverable
      value (as determined by the same projections) is appropriate.


<PAGE>   14

      Financial Instruments

      The Company has only limited involvement with derivative financial
      instruments and does not use them for trading purposes.  The Company's
      participation in derivatives is limited primarily to interest rate swap
      agreements and forward exchange contracts. The Company enters into
      interest rate swap agreements to reduce the impact of changes in interest
      rates on its floating-rate long-term debt.  The difference between the
      fixed and floating rates, which is to be paid or received, is accrued as
      interest rates change and is recognized over the life of the swap
      agreements. The cash impacts of these instruments are included with the
      cash flows of the items to which they relate in the Consolidated
      Statement of Cash Flows.

      Interest Expense

      Interest expense included in the Consolidated Statement of Income is
      related to private placement debt, debt covered under a credit agreement,
      industrial development revenue bonds, capitalized lease obligations, and
      borrowings on domestic lines of credit and foreign lines of credit.

      Research and Development Costs

      Research and development costs related to both present and future
      products are expensed currently.  Research and development expenditures
      for fiscal years 1996, 1995 and 1994 were $5.6 million, $4.8 million and
      $5.1 million, respectively.

      Foreign Currency Translation

      The Company has foreign subsidiaries located in Italy, Germany, Austria,
      China and the United Kingdom.  Foreign subsidiary income and expenses are
      translated into United States dollars at the average rates of exchange
      prevailing during the year.  The assets and liabilities are translated
      into U.S. dollars at the rates of exchange on the balance sheet date, and
      the related translation adjustments are accumulated  as a separate
      component of shareholders' equity.  As the Company intends to maintain
      its investments in these subsidiaries indefinitely, ultimate realization
      of these translation adjustments is highly uncertain.  Foreign currency
      transaction gains and losses are minimal and are recorded in income as
      they occur.

      Taxes

      Federal and state income taxes are not provided on undistributed earnings
      of foreign subsidiaries that have been or are intended to be reinvested
      indefinitely.


<PAGE>   15

      Stock Options

      In 1995 the Financial Accounting Standards Board issued Statement of
      Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
      ("SFAS 123").  Currently, when stock options are exercised proceeds from
      the sale of common stock issued under those options are credited to
      common stock and additional paid in capital.  Therefore, under the method
      used by the Company, no charges or credits are made to income for stock
      options.  As permitted by SFAS 123, the Company will continue to account
      for stock options as described above.  The financial statement effect of
      this new standard is limited to additional required footnote disclosure
      in 1996 which is provided in Note 12.

      Earnings Per Share

      Primary earnings per share are computed based on income after preferred
      stock dividends. The number of shares includes common stock and common
      stock equivalents.

      The calculation of fully-diluted net income per share is based on net
      income before preferred stock dividends.  The number of shares includes
      common stock and common stock equivalents, assumes conversion of the
      convertible preferred stock from the date of issue and also includes the
      dilutive impact, as if issuance had occurred on the acquisition date of
      Delfield and Whitlenge, of contingent shares that were issued subsequent
      to January 1, 1995.


2.    INVENTORIES

      Inventories consisted of the following (in thousands):


<TABLE>
<CAPTION>

                           Dec. 29, 1996          Dec. 31, 1995
      <S>                      <C>                    <C>
      Finished goods           $23,207                $21,604
      Work-in-process            9,052                  8,023
      Raw materials             20,271                 22,624
                               -------                -------
      Total inventories        $52,530                $52,251
                               =======                =======
</TABLE>

      Approximately $7.0 million and $7.5 million of total Company inventories
      were valued on the LIFO method in fiscal 1996 and 1995, respectively. In
      1996 there were reductions in levels of inventory valued on LIFO which
      reduced cost of sales by $0.1 million.  If inventories valued on the LIFO
      method had been valued using the FIFO method, they would have been $3.9
      million and $4.1 million higher at December 29, 1996, and December 31,
      1995, respectively.


<PAGE>   16

3.   PROPERTIES AND EQUIPMENT

     Properties and equipment consisted of assets owned and leased under
     capital lease arrangements as follows (in thousands):

<TABLE>
<CAPTION>


                               Dec. 29, 1996      Dec. 31, 1995
                               -------------      -------------
     <S>                       <C>                <C>
     Owned:
      Land                        $  1,966          $  1,995
      Buildings and leasehold
        improvements                28,521            28,046
      Machinery, fixtures and
        equipment                   54,564            49,294
      Accumulated depreciation
        and amortization           (43,000)          (37,949)
                                  --------          --------
      Owned, net                    42,051            41,386
                                  --------          --------

     Leased:
      Buildings and leasehold
        improvements                 5,141             5,029
      Machinery, fixtures and        1,121             1,540
        equipment
      Accumulated depreciation
        and amortization            (1,654)           (1,582)
                                  --------          --------
      Leased, net                    4,608             4,987
                                  --------          --------

      Properties and equipment,
      net                         $ 46,659          $ 46,373
                                  ========          ========

</TABLE>

4. SHORT-TERM DEBT

        Short-term debt (in thousands) at December 29, 1996, and December 31,
1995, was $6,115 and $12,767, respectively, and principally related to amounts
owed under lines of credit.  The weighted average interest rate based on
short-term debt outstanding as of December 29, 1996, and December 31, 1995, was
6.1 percent and 7.3 percent, respectively. Average borrowings (in thousands)
and the related weighted average interest rates were as follows:

<TABLE>
<CAPTION>

                                         1996      1995
                                         ----      ----
     <S>                                <C>       <C>
     Bank and other borrowings          $4,888    $2,463
     Weighted average interest rate       6.4%      7.9%
                                        ======    ======

</TABLE>


      The maximum aggregate short-term debt outstanding (in thousands) at the
      end of any month during fiscal years 1996 and 1995 was $11,109 and
      $12,767, respectively.

<PAGE>   17

5.    LINES OF CREDIT

      The Company maintains various credit agreements which are used primarily
      to fund the Company's working capital needs.  At December 29, 1996, these
      agreements (in thousands) included foreign and domestic lines of credit
      of $18,472 and $11,000, respectively.  Lines of credit are reviewed
      annually, with amounts borrowed under lines of credit included in
      short-term debt.

      At December 29, 1996, foreign and domestic lines of credit not in use
      were (in thousands) $18,216 and $5,141, respectively.  Borrowings under
      these agreements are available at the prime rate or other prevailing
      market rates.  There are no fees or compensating balance requirements on
      the lines of credit.

6.    ACCRUED EXPENSES

      Accrued expenses consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                       Dec. 29, 1996  Dec. 31, 1995
                                       -------------  -------------
      <S>                                  <C>           <C>
      Payroll and employee benefits        $ 7,818       $ 6,394
      Current portion of product
       warranties                            6,673         5,994
      Reserve for customer allowances        4,264         3,446
      Other current liabilities             14,535        18,978
                                           -------       -------
      Total accrued expenses               $33,290       $34,812
                                           =======       =======


</TABLE>

<PAGE>   18

7.   LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS

     Long-term debt and capitalized lease obligations consisted of the
     following (in thousands):

<TABLE>
<CAPTION>
                                      Dec. 29,         Dec. 31,
                                        1996             1995
                                      --------         --------
     <S>                              <C>              <C>
     Credit Agreement
      with floating interest rates;
      due 2000                        $35,473          $41,765
     11.43% private placement
      agreement; due 1997-1998         20,000           20,000
     Allendale County Industrial
      Revenue Bonds with floating
      interest rate;  due 2001          9,250            9,250
     Town of Covington
      Industrial Revenue Bonds
      with floating interest rate;
      due 2002 - 2006                   3,150            3,150
     Isabella County
      Industrial Revenue Bonds
      with floating interest rate;
      due 1996 - 2003                     450              500
     Foreign borrowings
      with various interest rates;
      due 1997 - 2011                   2,047                -
     Capital lease obligations
      with various interest rates;
      due 1996 - 1998                     121              324
                                      -------          -------
      Total                           $70,491          $74,989
      Current portion                  10,202              270
                                      -------          -------
      Long-term portion               $60,289          $74,719
                                      =======          =======

</TABLE>


     In April 1994 a $90 million reducing revolving credit agreement ("Credit
Agreement") was established to provide the financing for the cash consideration
paid in connection with the acquisitions of Delfield and Whitlenge, the
refinancing of the majority of approximately $35 million in existing
indebtedness of Delfield and Whitlenge, replacement of letters of credit of
approximately $10.1 million, working capital for the Company and its
subsidiaries following the acquisitions, and transaction costs associated with
the acquisitions.  Under the terms of the Credit Agreement, the revolving
credit facility reduces by $7 million at the end of years one and two, $12
million at the end of year three and $5 million at the end of years four and
five, with the remaining balance due at the end of year six. As of December 29,
1996, of the $76.0 million of credit available under this agreement, $30.4
million was unused.


<PAGE>   19


Borrowings under the Credit Agreement will bear interest at a floating rate
based upon, at the Company's option, (a) the higher of the agent bank's
corporate base rate or the federal funds rate plus 0.5 percent per annum, or
(b) the rate offered by the agent bank for deposits in the relevant
Eurocurrency, plus an applicable margin.  The applicable margin varies between
0.50 percent and 1.0 percent per annum, depending upon the Company's ratio of
earnings before interest, taxes and amortization to total interest.  As of
December 29, 1996, interest rates under the Credit Agreement ranged from
approximately 6.1 percent for Eurodollar loans to approximately 6.9 percent for
borrowings denominated in pounds sterling.  Commitment fees on the Credit
Agreement vary from 0.175 percent to 0.25 percent per annum on the unused
portion.

In 1989 the Company issued $20.0 million of private placement debt held
primarily by insurance companies.

The Allendale County Industrial Revenue Bonds are secured by a bank letter of
credit for $9.6 million.  The current cost of the commitment fee on the letter
of credit ranges from 0.50 percent to 1.0 percent on outstanding principal and
interest depending on the Company's interest coverage ratio as defined in the
Credit Agreement as described above. The interest rate applicable to the
Allendale County Industrial Revenue Bonds was 4.21 percent and 5.23 percent at
December 29, 1996, and December 31, 1995, respectively.

Delfield had two industrial revenue bonds outstanding which the Company assumed
as of the acquisition in April 1994. One series was issued by the town of
Covington, Tennessee and the other was issued by Isabella County, Michigan. The
Town of Covington Industrial Revenue Bonds are secured by a building with a net
book value of $4.4 million as of December 29, 1996.  The Isabella County
Industrial Revenue Bonds are secured by a building section with a net book
value of $0.8 million as of December 29, 1996. The interest rates for these two
industrial revenue bonds as of December 29, 1996, were 5.16 percent and 5.94
percent, respectively. The interest rates for these two industrial revenue
bonds as of December 31, 1995, were 5.31 percent and 6.12 percent,
respectively.

The Company also has various capital lease obligations which are collateralized
by properties and equipment with a net book value of approximately $0.2
million.


<PAGE>   20

The weighted average effective interest rate was 7.5 percent and 7.7 percent at
December 29, 1996, and December 31, 1995, respectively.  Future required
maturities of long-term debt and capital leases assuming letters of credit are
outstanding at the same level as December 29, 1996, were as follows (in
thousands):

<TABLE>
<CAPTION>
<S>                                <C>
     1997                          $10,202
     1998                           10,710
     1999                              415
     2000                           35,888
     2001                            9,320
     Thereafter                      3,956
                                   -------
     Total                         $70,491
                                   =======


</TABLE>
The Credit Agreement and private placement agreement contain various financial
covenants that, among other things, require the Company to maintain, on a
consolidated basis, specified leverage, interest expense coverage and cash flow
coverage ratios, and a minimum adjusted consolidated tangible net worth.  The
Company was in compliance with these covenants as of December 29, 1996. Among
other restrictions, one of the Company's covenants has the effect of
restricting the amount of the Company's dividends to its shareholders to an
amount equal to $2.0 million plus 40 percent of the sum of cumulative net
income from May 2, 1994, forward and the net cash proceeds from the issuance of
equity securities after April 29, 1994.  Under such a covenant, $45.4 million
of retained earnings was restricted as of December 29, 1996.  The Company is
precluded from paying dividends to its shareholders if a default or an event
which, but for the lapse of time or giving of notice, or both, would constitute
a default under the Credit Agreement has occurred and is continuing or would
occur after giving effect to the payment of such dividends.

8.    OPERATING LEASES

      The Company leases certain of its offices, buildings, and machinery and
      equipment for periods up to 10 years with various renewal options.
      Rental expense under operating leases was $2.5 million in 1996, $2.4
      million in 1995 and $2.0 million in 1994.

<PAGE>   21


      Future minimum lease commitments under noncancelable operating leases
      with initial lease terms greater than one year at December 29, 1996, were
      as follows (in thousands):


<TABLE>
                <S>                               <C>
                1997                              $1,584
                1998                               1,390
                1999                                 979
                2000                               1,019
                2001                               1,000
                Thereafter                         1,955
                Total minimum lease               ------
                     commitments                  $7,927
                                                  ======

</TABLE>


9. EMPLOYEE BENEFIT PLANS

      The Company sponsors defined benefit pension plans for certain salaried
      and hourly employees.  Plans covering salaried employees provide benefits
      that are based on years of service and compensation.   Plans covering
      hourly employees provide benefits of stated amounts for each year of
      service.  The pension assets are invested in institutional mutual funds
      which contain both equities and fixed investments.  The Company complies
      with funding requirements under the Employee Retirement Income Security
      Act.

      As a result of the spin-off of the Company from Household International,
      Inc. ("Household") in 1989, Household became responsible for all domestic
      salaried pension benefits accrued prior to March 31, 1989.

      The Company adopted a supplemental executive retirement plan ("SERP") for
      certain employees in 1994.

      Net periodic pension cost included in the Consolidated Statement of
      Income was as follows (in thousands):

<TABLE>
<CAPTION>
                            For the Fiscal Years Ended
                        ------------------------------------
                        Dec. 29,     Dec. 31,      Jan. 1
                          1996         1995         1995
                        ---------   ----------  ------------
     <S>               <C>         <C>         <C>
      Service cost      $1,141       $  919         $ 815
      Interest cost        790          667           475
      Actual return on
       plan assets      (1,050)        (797)         (213)
      Net amortization
       and deferral        519          365           (60)
      Net periodic      ------       ------        ------
       pension cost     $1,400       $1,154        $1,017
                        ======       ======        ======


</TABLE>

<PAGE>   22

      The funded status of the Company's pension plans (in thousands),
      excluding the Italian and German pension plans, was as follows:

<TABLE>
<CAPTION>

                                  Dec. 29, 1996               Dec. 31, 1995
                            ------------------------    ------------------------
                             Plan       Accumulated      Plan       Accumulated
                             Assets        Benefits      Assets        Benefits
                             Exceed          Exceed      Exceed          Exceed
                             Accumulated       Plan      Accumulated       Plan
                             Benefits        Assets      Benefits        Assets
                            ------------  ----------    ------------   ---------

      <S>                       <C>         <C>          <C>          <C>
     Actuarial present
       value of:
     Vested benefits
       obligation               $(4,425)    $(4,435)     $(1,688)     $(5,193)
     Non-vested
       benefits
       obligation                  (419)       (586)          --       (1,542)
     Accumulated                -------     -------      -------      -------
       benefit
       obligation                (4,844)     (5,021)      (1,688)      (6,735)
     Effects of
       anticipated
       future
       compensation
       levels                    (1,838)       (612)        (292)      (1,607)
     Projected                  -------     -------      -------      -------
       benefit
       obligation                (6,682)     (5,633)      (1,980)      (8,342)
     Plan assets
       at fair
       value                      5,115       3,771        1,772        5,393
     Projected                  -------     -------      -------      -------
       benefit
       obligation
       in excess
       of plan
       assets                    (1,567)     (1,862)        (208)      (2,949)
     Unrecognized
       net asset                     --          (9)          --          (12)
     Unrecognized
       prior
       service cost                 464         835           --        1,289
     Unrecognized
       net (gain)
       or loss                     (396)         74          (79)           1
     Adjustment
       required
       to recognize
       minimum
       liability                     --        (344)          --         (482)
     Accrued                    -------     -------      -------      -------
       pension
       cost                     $(1,499)    $(1,306)     $  (287)     $(2,153)
                                =======     =======      =======      =======

</TABLE>


<PAGE>   23

<TABLE>
<CAPTION>

     Assumptions used in the actuarial computations were:

                        Dec. 29,       Dec. 31,       Jan. 1,
                          1996           1995          1995
                        --------       --------       -------
     <S>                <C>            <C>           <C>
     Discount rate      7.5 - 9.0%     7.5 - 9.0%    8.0 - 9.0%
     Rate of increase
       in compensation
       levels           4.0 - 7.0%     4.0 - 7.0%    4.0 - 7.0%
     Expected long-term
       rate of return
       on assets       8.5 - 10.0%     8.5 - 10.0%   9.0 - 10.0%


</TABLE>

      The Company has pension plans covering employees in its Italian
      subsidiaries.  These plans combine aspects of both government mandated
      and non-contributory plans.  Total pension expense under these plans
      included in the Consolidated Statement of Income (in thousands) was $895,
      $888, and $785 in fiscal years 1996, 1995 and 1994, respectively.  The
      unfunded liability for these plans included in the Consolidated Balance
      Sheet at December 29, 1996, and December 31, 1995, (in thousands) was
      $4,578 and $4,286, respectively.  The Company also has a Hartek pension
      plan in Germany which covers only a former employee and his spouse.
      Information for the Hartek pension plan has not been included in the
      tables presented as the amounts were immaterial as of December 29, 1996.

      The Company also sponsors defined contribution benefit plans.
      Participation in one of these plans is available to substantially all
      domestic employees.  Company contributions to these plans are based on
      either a percentage of employee contributions or a specified amount
      depending on the provisions of the plan.  Total costs incurred under the
      plans were (in thousands) $742, $568, and $643 for fiscal years 1996,
      1995 and 1994, respectively.

      The Company maintains plans that provide certain health care benefits to
      certain employees retiring from the Company on or after attaining age 55
      who have rendered at least 10 years of service to the Company.  These
      plans are unfunded.  The Company reserves the right to change or
      terminate the benefits at any time.


<PAGE>   24
      Net periodic post-retirement benefit cost for the fiscal years ended
      December 29, 1996, December 31, 1995, and January 1, 1995, included the
      following components (in thousands):

<TABLE>
<CAPTION>
                                        Dec. 29,  Dec. 31,  Jan. 1,
                                          1996     1995      1995
                                          ----     ----      ----
     <S>                                  <C>      <C>       <C>
     Service cost on benefits earned      $146     $132      $161
     Interest cost on accumulated
       post-retirement benefit obligation  148      139       142
     Amortization of net loss subsequent
       to transition                         -        -         4
                                           ---      ---      ----
     Net periodic post-retirement
       benefit cost                       $294     $271      $307
                                          ====     ====      ====
</TABLE>


The following table sets forth the status of the plan, reconciled to the
accrued post-retirement benefit cost recognized in the Company's balance sheet
(in thousands):


<TABLE>
<CAPTION>
                                         Dec. 29,     Dec. 31,
                                            1996         1995
                                            ----         ----
<S>                                        <C>          <C>
Accumulated post-retirement
  benefit obligation:
  Retirees                                 $  755         $ 820
  Fully-eligible active plan
    participants                              171           141
  Other active plan
    participants                            1,110         1,161
                                           ------        ------

Total                                      $2,036        $2,122
Unrecognized net (loss) gain                   64          (126)
Accrued post-retirement                    ------        ------
  benefit cost recognized
  in the balance sheet                     $2,100        $1,996
                                           ======        ======
</TABLE>


Assumptions used in the actuarial computations were:


<TABLE>
<CAPTION>

                                           1996          1995
                                          ------        ------
<S>                                      <C>            <C>
Discount rate                              7.5%           7.5%
Projected health care cost trend rates:
     Pre-65 benefits                       8.5%          12.6%
     Post-65 benefits                      8.5%          11.3%
Ultimate health care cost trend rates:
     Pre-65 benefits                       5.0%           5.5%
     Post-65 benefits                      5.0%           5.5%


</TABLE>

<PAGE>   25

      Increasing the assumed health care cost trend rate by one percentage
      point in each year would increase the accumulated post-retirement benefit
      obligation by approximately (in thousands) $360 for 1996 and $378 for
      1995, and the aggregate of the service and interest cost components of
      net periodic post-retirement benefit cost  by approximately (in
      thousands) $64 for 1996, $57 for 1995 and $63 for 1994.



10.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      During 1994 the Company adopted Statement of Financial Accounting
      Standards No. 107, "Disclosures About Fair Value of Financial
      Instruments," ("SFAS 107") and Statement of Financial Accounting
      Standards No. 119, "Disclosure About Derivative Financial Instruments and
      Fair Value of Financial Instruments"("SFAS 119"). These statements
      require certain disclosures about the fair value of financial
      instruments, including derivative financial instruments, for which it is
      practicable to estimate fair value.

      The following methods and assumptions were used to estimate the fair
      market value of each class of financial instrument for which it is
      practicable to estimate that value:

            Cash and Temporary Cash Investments

            Temporary cash investments consist principally of investments in
            short-term, interest-bearing instruments.  The carrying amount
            approximates fair market value.

            Trade Accounts and Notes Receivable and Payable

            The carrying amount of the Company's trade accounts and notes
            receivable and payable approximates market value.

            Long-Term Debt

            The carrying amount of most of the Company's long-term debt and the
            Company's short-term debt approximates market value since rates on
            those debt agreements are variable and are set periodically based
            on current rates during the year.  An exception would be the
            private placement agreement which has a fixed interest rate of
            11.43 percent.  The fair value of the private placement agreement
            was estimated based on the current rates quoted to the Company for
            debt with the same maturities.



<PAGE>   26

            Letters of Credit

            As collateral for the Company's industrial revenue bonds and for
            certain of its insurance programs, the Company had a total of $10.1
            million of letters of credit outstanding as of December 29, 1996.
            The Company pays letter of credit fees to its bank group that range
            from 0.50 to 1.0 percent based upon the Company's interest coverage
            ratio as defined in the Credit Agreement.  It is the Company's
            opinion that the replacement costs for such letters of credit would
            not significantly vary from the present fee structure.  No material
            loss is anticipated due to nonperformance by counterparties to
            these agreements.

            Swap Agreements and Forward Contracts

            Effective May 1994 the Company entered into two interest rate swap
            agreements to reduce the impact of changes in interest rates on its
            domestic floating-rate long-term debt.  Both of the interest rate
            swap agreements had a notional principal amount of $10 million and
            interest payable was at a fixed rate of 5.64 percent and 6.33
            percent, respectively.  In return for both of these agreements, the
            Company will receive floating rate interest payments based on
            three-month London Interbank Offered Rate.  These agreements will
            expire in May 1997.  These two swap agreements are accounted for as
            hedges. The Company had a forward exchange contract outstanding as
            of December 29, 1996, to hedge exposure relating to an intercompany
            transaction.  The Company had no forward exchange contracts
            outstanding as of December 31, 1995.

            The fair value of interest rate swaps and forward exchange
            contracts is the estimated amount that the Company would receive or
            pay to terminate the agreements as of the balance sheet date.



<PAGE>   27

      The estimated fair value of the Company's financial instruments at
      December 29, 1996, (in thousands) was as follows:

<TABLE>
<CAPTION>
                                    Carrying       Fair
                                     Amount        Value
                                     -------      -------
     <S>                             <C>          <C>
     Assets:
      Cash and temporary
        cash investments             $16,501      $16,501
      Trade accounts
        and notes receivable          58,734       58,734
      Forward exchange contract           --          229

     Liabilities:
      Short-term debt                  6,115        6,115
      Trade accounts payable          22,344       22,344
      Long-term debt                  70,370       71,535
      Interest rate
        swap agreements                   --           44


</TABLE>


     The estimated fair value of the Company's financial instruments at
     December 31, 1995, (in thousands) was as follows:


<TABLE>
<CAPTION>

                                    Carrying       Fair
                                     Amount        Value
                                    --------      -------
     <S>                            <C>           <C>
     Assets:
      Cash and temporary
        cash investments             $15,808      $15,808
      Trade accounts
        and notes receivable          54,500       54,500

     Liabilities:
      Short-term debt                 12,767       12,767
      Trade accounts payable          24,174       24,174
      Long-term debt                  74,665       76,675
      Interest rate
        swap agreements                   --          176

</TABLE>


<PAGE>   28

11.  INCOME TAXES

      The components of the consolidated net deferred tax assets and
      liabilities as of December 29, 1996, and December 31, 1995, were as
      follows (in thousands):


<TABLE>
<CAPTION>
                                         Dec. 29,      Dec. 31,
                                           1996          1995
<S>                                      <C>           <C>
Gross deferred tax assets:
     Tax credits due to Italian
       reorganization                   $    530      $    556
     Warranty accruals                     3,110         2,907
     Reserve for Delfield and
       Whitlenge                             291         1,055
     Hartek reserve                          461         1,091
     Receivable allowances                   812           797
     Inventory reserves                      720           754
     Reserve for post-retirement
       medical costs                         823           791
     Tax benefit of German
       net operating loss carry forwards   3,562         4,851
     Other                                 3,502         2,989
                                        --------      --------
     Total gross deferred tax assets      13,811        15,791
     Valuation allowance                  (3,681)       (4,991)
                                        --------      --------
     Total deferred tax assets          $ 10,130      $ 10,800
                                        ========      ========
Gross deferred tax liabilities:
     Properties and equipment           $ (6,102)     $ (5,702)
     Inventory related items                (180)         (909)
     Simag goodwill amortization          (1,611)       (1,186)
     Other                                (1,239)       (1,157)
                                        --------      --------
     Total gross deferred tax
       liabilities                      $ (9,132)     $ (8,954)
                                        ========      ========

</TABLE>

Deferred taxes reflected in the accompanying balance sheets as of December 29,
1996, and December 31, 1995, were as follows (in thousands):

<TABLE>
<CAPTION>
                                         Dec. 29,      Dec. 31,
                                          1996          1995
                                         --------      --------
     <S>                                 <C>           <C>
     Current portion of deferred
       tax asset                         $ 4,708       $ 5,690
     Noncurrent portion of deferred
       tax asset (included in other
       noncurrent assets)                      -            22
     Current portion of deferred
       tax liability (included in
       accrued expenses)                       -           (52)
     Noncurrent portion of deferred
       tax liability                      (3,710)       (3,814)
                                        --------      --------

</TABLE>


<PAGE>   29

      The valuation allowance as of December 29, 1996, includes $3.6 million to
      entirely offset the tax asset established for Hartek pre-acquisition net
      operating loss carry forwards which might not be realized due to the
      terms of the purchase agreement of Hartek (see Note 14) which requires
      substantial repayment to the seller if utilized and due to a pending
      decision of the Supreme Tax Court in Germany which may result in such
      carry forwards being not utilizable by the Company.  The German net
      operating loss carry forwards, if realized, will result in a reduction of
      goodwill and the benefit of utilizing the net operating loss carry
      forwards will not flow through the income statement.

      The valuation allowance also includes $0.1 million to partially offset
      the tax asset in Italy relating to a prior-year reorganization of one of
      the Company's Italian subsidiaries.  The Company established this reserve
      for the Italian tax asset due to the limited carry forward life of net
      operating losses in Italy.

      The provision (benefit) for income taxes consisted of the following (in
      thousands):



<TABLE>
<CAPTION>

                            For the Fiscal Years Ended
                     --------------------------------------------
                        Dec. 29,        Dec. 31,       Jan. 1,
                         1996            1995           1995
                     -------------     ---------     ------------
<S>                     <C>             <C>           <C>
United States:
     Current            $ 7,518          $ 7,431       $ 7,300
     Deferred               837              855          (746)
                        -------          -------       -------
                          8,355            8,286         6,554
                        -------          -------       -------
Foreign:
     Current              7,407            3,605         2,412
     Deferred               687              829         1,047
                        -------          -------       -------
                          8,094            4,434         3,459
Provision for           -------          -------       -------
     income taxes       $16,449          $12,720       $10,013
                        =======          =======       =======


</TABLE>


<PAGE>   30

The provision (benefit) for deferred income taxes included the following (in
thousands):


<TABLE>
<CAPTION>

                                   For the Fiscal Years Ended
                                ---------------------------------
                                Dec. 29,    Dec. 31,     Jan. 1,
                                  1996        1995         1995
                                -------     --------     --------
<S>                            <C>          <C>          <C>
Amortization of
   of Italian
   reorganization
   benefits                   $      58      $   122     $   535
Depreciation                        458          307         203
Reserve for
   Glenco-Star
   disposition                       --          249          56
Reserve for swap loss                --           --          38
Warranty reserve                   (311)         (33)       (304)
Inventory adjustments              (732)         913         (95)
Reserve for relocation
   of Crystal Tips                   --           --         167
Valuation allowance
   changes                          (27)         (51)       (117)
Reserve for Delfield
   and Whitlenge                    727           --          --
Utilization of German net
    operating loss carry
    forwards                        952           --          --
Other, net                          399          177        (182)
                                -------       ------     -------
Total                           $ 1,524       $1,684     $   301
                                =======       ======     =======

</TABLE>

Income before income taxes from foreign operations was $15.7 million in 1996,
$8.9 million in 1995, and $6.9 million in 1994.  The differences between the
Company's effective tax rate and the statutory federal income tax rate were as
follows:


<TABLE>
<CAPTION>

                                      For the Fiscal Years Ended
                                  ----------------------------------
                                  Dec. 29,     Dec. 31,     Jan. 1,
                                    1996         1995        1995
                                 ---------    ----------   ---------
<S>                               <C>          <C>          <C>
Statutory federal
     income tax rate               35.0%        35.0%        35.0%
Increase in rate resulting from:
State and local income
     taxes, net of federal
     tax benefit                    1.7          2.9          2.7
Foreign tax effect                  7.6          4.9          4.9
Other                               2.7          2.4          1.3
                                   ----         ----         ----
                                   47.0%        45.2%        43.9%
                                   ====         ====         ====


</TABLE>


<PAGE>   31


      In accordance with the Company's accounting policy, provision for U.S.
      income taxes has not been made on $38.6 million of undistributed earnings
      of foreign subsidiaries at December 29, 1996.


12.   STOCK-BASED COMPENSATION PLANS

      The Company has a long-term executive incentive program which provides
      for granting key employees options to purchase the Company's common
      stock.  Under the program, options are exercisable at a rate set by the
      Compensation Committee of the Board of Directors of the Company.  To
      date, options have been exercisable in cumulative annual increments of 25
      percent commencing one year after the date of grant.  The option price
      per share is not less than the fair market value of one share on the date
      of the grant.  An option may not be exercisable after more than 10 years
      and one day from the date of the grant.

      In August 1994 the Board of Directors adopted, subject to shareholder
      approval, the Non-Employee Directors Stock Option Plan.  The plan was
      approved by the shareholders at the 1995 Annual Meeting of Shareholders.
      The plan provides for (a) an automatic award of options to purchase
      shares of the Company's common stock to non-employee directors as of the
      effective date of the plan, (b) automatic awards to non-employee
      directors who are elected or appointed to the Board of Directors after
      the effective date and (c) automatic annual awards thereafter.  The
      options will vest 100 percent on the date preceding the first annual
      meeting of shareholders following the date of the grant of the options.
      The option price per share may not be less than the fair market value of
      one share on the date of the grant.  An option may not be exercisable
      after more than 10 years and one day from the date of the grant.
<PAGE>   32

      The Company accounts for these plans under APB Opinion No. 25, under
      which no compensation cost has been recognized.  Had compensation cost
      for these plans been determined consistent with FASB Statement No. 123
      ("SFAS 123"), the Company's net income and earnings per share would have
      been reduced to the following pro forma amounts:


<TABLE>
<CAPTION>

                                      1996          1995
                                      ----         -----
<S>                                   <C>          <C>
Net income:
     As reported                      $18,568     $15,408
     Pro forma                         18,306      15,281

Primary net income per share:
     As reported                      $1.85       $1.58
     Pro forma                        $1.82       $1.56

Fully-diluted net income per share:
     As reported                      $1.73       $1.45
     Pro forma                        $1.71       $1.43

</TABLE>


A summary of the status of the Company's two stock option plans at December 29,
1996, December 31, 1995, and January 1, 1995, and changes during the years then
ended is presented in the following table:


<TABLE>
<CAPTION>
                         1996               1995            1994
                -----------------  -----------------  -------------
                         Weighted          Weighted        Weighted
                         Average           Average         Average
                Shares   Exercise  Shares  Exercise Shares Exercise
                (000)     Price    (000)   Price    (000)   Price
<S>              <C>       <C>      <C>      <C>      <C>     <C>
Outstanding
  at beginning
  of year         525      $12        473     $10      472     $ 9
Granted            92       18         79      18       71      16
Exercised         (51)      10        (24)      9      (52)      9
Forfeited          (6)      17         (3)     16      (18)     11
                 ----                 ---              ---
Outstanding
     at end of
     year         560       13        525      12       473     10
                 ----                 ---               ---
Exercisable
     at end of
     year         377       10        357      10       294      9
Weighted
     average
     fair value
     of options
     granted
     during
     the year         $9.74              $10.73            --

</TABLE>
<PAGE>   33


The following table summarizes information about stock options outstanding at
December 29, 1996:

<TABLE>
<CAPTION>


               Options Outstanding            Options Exercisable
               ------------------------       -------------------
                         Weighted
                         Average    Weighted              Weighted
Range of     Number    Remaining    Average    Number     Average
Exercise   Outstanding Contractual Exercise  Exercisable Exercise
Prices    at 12/29/96  Life(years)  Price    at 12/29/96  Price
<S>      <C>           <C>         <C>       <C>         <C>
$ 7 to $ 9     224,187    3.2         $ 8        224,187    $ 8
$11 to $15     121,300    3.8         $12        104,645    $12
$16 to $20     214,675    8.2         $18         48,525    $18
               -------                           -------
$ 7 to $20     560,162    4.3         $13        377,357    $10
               =======                           =======

</TABLE>


      The fair value of each option grant is estimated on the date of grant
      using the Black-Scholes option pricing model with the following weighted
      average assumptions used for grants in 1996 and 1995, respectively:
      risk-free interest rates of 5.93 percent and 7.56 percent for the
      executive options and 6.86 percent and 6.77 percent for the Non-Employee
      Directors Plan options;  expected dividend yields of 0.60 percent for the
      executive plan options for both years and 0.50 percent for the
      Non-Employee Directors plan options for both years; expected lives of
      10.01 for both plans in both years; and expected volatility of 36.60
      percent for both plans in both years.

      The Company issued from treasury 5,965, 6,219, and 8,038 shares of common
      stock in fiscal years 1996, 1995 and 1994,  respectively, as annual Board
      of Directors fees.  Costs relating to these fees (in thousands) of $120,
      $129, and $99  were recorded in fiscal years 1996, 1995 and 1994,
      respectively.



13. ACQUISITION OF DELFIELD AND WHITLENGE

      On April 29, 1994, the Company completed the acquisition of The
      Delfield Company and Whitlenge Drink Equipment Limited  for approximately
      $69.3 million in a combination of cash, preferred stock and common stock.
      The cash outlay was offset by cash on the books of the acquired
      businesses at closing of $3.9 million.  Scotsman shareholders approved
      the issuance of common and preferred stock related to the acquisition at
      a special shareholders meeting on April 28, 1994.




<PAGE>   34

      The method of accounting used for the combination was the purchase
      method.  The initial amount of goodwill allocated to Delfield and
      Whitlenge was $73.7 million and is being amortized over 40 years using
      the straight-line method.  The acquisition price included: (a) $30.4
      million in cash, (b) 1.2 million shares of common stock (with a market
      value of approximately $16.5 million on the acquisition date) and (c) 2.0
      million shares of Series A $0.62 cumulative convertible preferred stock
      with an aggregate liquidation preference of $22.5 million which were
      convertible into 1,525,393 shares of common stock.  (If such conversion
      had taken place on January 1, 1996, primary earnings per share would have
      been $1.73.)  All the cumulative convertible preferred stock was
      converted to common stock during 1996.  Also, the acquisition price of
      $69.3 million was increased by $12.1 million to include 667,000 shares of
      additional common stock based upon the businesses of Delfield and
      Whitlenge meeting a specified level of earnings before interest, income
      taxes, depreciation and amortization in fiscal year 1994.  These
      additional shares were issued subsequent to January 1, 1995.  In
      addition, Scotsman also assumed Delfield and Whitlenge debt of
      approximately $35 million which was substantially repaid on the
      acquisition date. (See Note 7.)  The results of Delfield and Whitlenge
      are included in the income statements for the Company beginning after
      April 29, 1994.

      Delfield, headquartered in Mt. Pleasant, Michigan, manufactures and sells
      refrigerated foodservice equipment, primarily in the United States.
      Whitlenge, located near Birmingham, England, manufactures and sells drink
      dispensing equipment in Western Europe.

      The accompanying unaudited condensed pro forma income statement
      information is presented to illustrate the effect of certain events on
      the historical income statement information of the Company as if the
      acquisitions of Delfield and Whitlenge had occurred as of the first day
      of the period presented.

      The pro forma information includes assumptions and estimates and is not
      necessarily indicative of the results of operations of the Company as
      they may be in the future or as they might have been had the transaction
      occurred as discussed above.

      The unaudited condensed pro forma income statement information should be
      read in conjunction with the historical condensed financial statements
      and notes thereto of the Company appearing elsewhere herein.

<PAGE>   35

(Amounts in thousands, except per-share data)


<TABLE>
<CAPTION>

                                        PRO FORMA (Unaudited)
<S>                                        <C>
Twelve Months Ended                        Jan. 1, 1995

Net sales                                   $304,144

Net income                                    13,547

Net income per share, fully diluted         $   1.28


</TABLE>


14.  ACQUISITION OF HARTEK

      The Company's Scotsman Group Inc. subsidiary acquired on December 31,
      1995, the stock of Hartek Beverage Handling GmbH and the stock of Hartek
      Awagem Vertriebsges. m.b.H., a beverage dispensing manufacturer and a
      small distributor of Hartek and other products located in Radevormwald,
      Germany and Vienna, Austria, respectively (collectively, "Hartek").
      Hartek had 1995 annual sales of approximately $24 million. The method of
      accounting used for the combination was the purchase method.  The results
      of the Hartek businesses have been included in the income statements for
      the Company beginning on the date of acquisition, December 31, 1995.
      Hartek was acquired for an initial cost of $5.8 million, including
      acquisition costs.  No shares of stock were or will be issued as a result
      of these acquisitions. The cash outlay was partially offset by cash on
      the books of Hartek at closing of $3.3 million.  Goodwill of $1.9 million
      has been recorded as of December 29, 1996.  The amount of goodwill from
      this acquisition will be amortized for book purposes over 40 years using
      the straight-line method.

      Under the terms of the agreement governing the purchase of the Hartek
      businesses, the Company is required to pay to the seller 75 percent of
      the actual amount of any tax saving realized by Hartek in respect of each
      of its financial years 1996 through 1998 through the use of the amount of
      any tax loss carry forward available to Hartek as of December 31, 1995,
      in reduction of taxable profits for those financial years 1996 through
      1998.  This additional consideration is not to exceed an amount of 2.2
      million deutsche marks or, as of December 29, 1996, approximately $1.4
      million.  In addition, at the date of acquisition, Scotsman also assumed
      Hartek debt of approximately $6.4 million.
<PAGE>   36

     Pro forma unaudited 1995 net sales of the Company, as if Hartek were
     acquired on the first day of the fiscal year 1995 would have been $349
     million.  Pro forma information relating to net income and earnings per
     share has not been presented as the pro forma impact of those numbers on
     the Company's results was not material.  Pro forma information includes
     assumptions and estimates and is not necessarily indicative of the
     results of operations of the Company as they may be in the future or as
     they might have been had the transaction occurred as discussed above.


15. GEOGRAPHIC INFORMATION

     The Company's geographic data, based on the locations of operations, are
as follows (in thousands):


<TABLE>
<CAPTION>

For the Fiscal Years Ended   Dec. 29,    Dec. 31,        Jan. 1,
                                1996        1995           1995
<S>                      <C>          <C>             <C>
Sales to unaffiliated
customers:
     United States        $235,302     $239,110        $201,746
     Europe                121,071       85,181          64,886
                          --------     --------        --------
       Total              $356,373     $324,291        $266,632
                          ========     ========        ========
Operating profit:
     United States        $ 24,248     $ 25,309        $ 20,773
     Europe                 16,048        9,145           7,441
                          --------     --------        --------
       Total              $ 40,296     $ 34,454        $ 28,214
                          ========     ========        ========
Identifiable assets:
     United States        $181,259     $181,994        $172,608
     Europe                102,005       93,949          72,183
                          --------     --------        --------
       Total              $283,264     $275,943        $244,791
                          ========     ========        ========

</TABLE>


Export sales from the United States were less than 10 percent of consolidated
net sales for all years presented.


<PAGE>   37


16. SUBSEQUENT EVENT (UNAUDITED)

In March of 1997 the Company completed the acquisition of Kysor Industrial
Corporation ("Kysor"), a major manufacturer and marketer of refrigerated
display cases, commercial refrigeration systems and insulated panels primarily
serving the supermarket industry.  The Company purchased Kysor's common and
preferred stock (hereinafter referred to as the "Acquisition") for an aggregate
purchase price of $309 million.  Concurrent with the purchase, the Company sold
Kysor's Transportation Products Group to a third party for an aggregate
purchase price of $86 million plus assumption of certain liabilities.  The
Company retained possession of Kysor's Commercial Products Group.  Goodwill
relating to the acquisition of Kysor will be finalized within 12 months of the
acquisition date and will be amortized for book purposes over 40 years using
the straight-line method.

     Kysor, headquartered in Cadillac, Michigan, reported total sales in 1996
of $381 million, of which $245 million related to commercial refrigeration
products.

     The acquisition of Kysor, after giving effect to the divestiture of the
Transportation Products Group and other acquisition related transactions, was
financed through a $415 million loan facility between the Company and the First
National Bank of Chicago (the "FNBC Facility").  The FNBC Facility consists of
a $150 million seven-year term loan and a $265 million seven-year revolving
loan facility, both with an initial interest rate of 1.375 percent above
Eurocurrency rates.  The interest rates on both facilities adjust based on a
certain ratio tied to the strength of the Company's balance sheet.

     The agreement governing the FNBC Facility includes various financial
covenants.  One of those covenants has the effect of restricting the amount of
the Company's dividends to its shareholders by requiring the Company to
maintain consolidated stockholders' equity of at least $120 million (without
giving effect to the cumulative effect of future changes in accumulated
translation adjustments), plus 60 percent of (i) the cumulative net income of
the Company from December 30, 1996, forward and (ii) the net cash proceeds from
any future issuance of equity securities by the Company after the closing of
the FNBC Facility.  At December 29, 1996, consolidated stockholders' equity of
the Company was $131.7 million.  The Company is also precluded from paying
dividends to its shareholders (other than dividends payable in its own capital
stock) if a default or an unmatured default under the agreement has occurred
and is continuing or would occur after giving effect to the payment of such
dividends.

<PAGE>   38

     The FNBC Facility requires that a notional amount of $150 million be hedged
to reduce interest rate exposure for three years.  In addition to financing the
Kysor acquisition, proceeds of the FNBC Facility will be used to pay expenses
associated with this acquisition and were used to repay existing long-term
debt, including the $90.0 million reducing credit agreement and the $20.0
million private placement agreement.


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders of Scotsman Industries, Inc.:

We have audited the accompanying consolidated balance sheet of Scotsman
Industries, Inc. (a Delaware Corporation) and subsidiaries as of December 29,
1996, and December 31, 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 29, 1996.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Scotsman Industries, Inc. and
subsidiaries as of December 29, 1996, and December 31, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 29, 1996, in conformity with generally accepted accounting
principles.




Arthur Andersen LLP
Chicago, Illinois
February 4, 1997

<PAGE>   39

Scotsman Industries, Inc.
Five Year Summary

(Amounts in thousands, except per-share data)


<TABLE>
<CAPTION>

For the Fiscal Years Ended             Dec. 29,    Dec. 31,     Jan. 1,     Jan. 2,    Jan. 3,
                                         1996 (a)   1995 (b)     1995 (c)    1994       1993
<S>                                    <C>         <C>         <C>         <C>         <C>
Net sales                              $356,373    $324,291    $266,632    $163,952    $168,674
Income before income taxes               35,017      28,128      22,798      13,371      10,185
Net income                               18,568      15,408      12,785       7,411       6,392
Net income per share,
     fully diluted (d)                     1.73        1.45        1.35        1.06        0.90
Total assets (e)                        283,264     275,943     244,791     103,173      96,103
Long-term debt and capitalized
     lease obligations, excluding
     current portion (e)                 60,289      74,719      85,161      29,469      29,589
Cash dividends declared per
     common share                      $   0.10    $   0.10    $   0.10    $   0.10    $   0.10
                                       ========    ========    ========    ========    ========


</TABLE>


(a)  The information for the fiscal year ended December 29, 1996, includes
     balance sheet information and the results of  Hartek which was acquired
     on December 31, 1995.

(b)  The information for the fiscal year ended December 31, 1995, includes
     balance sheet information for Hartek which was acquired on
     December 31, 1995.

(c)  The results for the fiscal year ended January 1, 1995, include the
     results from Delfield and Whitlenge as of the date of their
     acquisitions, April 29, 1994.

(d)  The calculation of net income per share for the fiscal years 1996, 1995,
     1994, 1993, and 1992 was based on 10,728,188, 10,649,763, 9,488,965,
     7,000,651, and 7,096,976 weighted average shares of common stock,
     respectively. The calculation of fully-diluted net income per share for
     the fiscal years ended January 1, 1995, December 31, 1995, and December
     29, 1996, is based on net income before preferred stock dividends.  The
     number of shares assumes conversion of convertible preferred stock from
     the date of issue and also includes the dilutive impact, as if issuance
     had occurred on the acquisition date, of contingent shares which were
     subsequently distributed to the sellers of Delfield and Whitlenge based on
     those businesses having achieved a specified combined level of earnings
     during fiscal year 1994, and also includes the dilutive impact of common
     stock options outstanding. The  net income per-share calculation for
     fiscal years ended prior to January 1, 1995, did not reflect the dilutive
     effect of stock options outstanding as the dilutive effect was immaterial.

(e)  At year end




<PAGE>   40

Scotsman Industries, Inc.
Selected Quarterly Financial Data
(Unaudited)
(Amounts in thousands, except per-share data)

<TABLE>
<CAPTION>


                                                  Fiscal year 1996                                 Fiscal year 1995
                                   --------------------------------------------      ---------------------------------------------
<S>                              <C>         <C>         <C>         <C>           <C>          <C>         <C>         <C>
For The Three Months Ended         Dec. 29,   Sept. 29,    June 30,    Mar. 31,      Dec. 31,     Oct.  1,     July 2,     Apr. 2,
                                       1996        1996        1996        1996          1995         1995        1995        1995

Net sales                          $ 73,653    $ 92,764    $104,423    $ 85,533      $ 70,779     $ 87,075    $ 90,363    $ 76,074
Cost of sales                        55,692      66,558      73,562      62,130        52,709       63,348      64,471      55,874
                                   --------    --------    --------    --------      --------     --------    --------    --------
Gross profit                         17,961      26,206      30,861      23,403        18,070       23,727      25,892      20,200
Selling and administrative expenses  13,063      14,195      15,854      15,023        13,506       13,079      13,627      13,223
                                   --------    --------    --------    --------      --------     --------    --------    --------
Income from operations                4,898      12,011      15,007       8,380         4,564       10,648      12,265       6,977
Interest expense, net                 1,120       1,322       1,422       1,415         1,366        1,639       1,744       1,577
                                   --------    --------    --------    --------      --------     --------    --------    --------
Income before income taxes            3,778      10,689      13,585       6,965         3,198        9,009      10,521       5,400
Income taxes                          1,677       4,906       6,520       3,346         1,259        4,099       4,792       2,570
                                   --------    --------    --------    --------      --------     --------    --------    --------

Net income                         $  2,101    $  5,783    $  7,065    $  3,619      $  1,939     $  4,910    $  5,729    $  2,830
                                   ========    ========    ========    ========      ========     ========    ========    ========



Net income per share (a):
  Primary                          $   0.20    $   0.58    $   0.73    $   0.36      $   0.18     $   0.50    $   0.59    $   0.29
                                   ========    ========    ========    ========      ========     ========    ========    ========
  Fully diluted                    $   0.20    $   0.54    $   0.66    $   0.34      $   0.18     $   0.46    $   0.54    $   0.27
                                   ========    ========    ========    ========      ========     ========    ========    ========

Weighted average common shares
  outstanding:
    Primary                      10,475,223   9,474,377   9,315,726   9,140,363     9,111,889    9,129,549   9,128,141   8,565,289
    Fully diluted                10,761,585  10,730,902  10,701,692  10,669,965    10,650,140   10,654,786  10,653,582  10,640,578
</TABLE>


<PAGE>   41


(a)   Net income per share on a primary basis was computed to be net income
after preferred stock dividends.  Fully-diluted net income per share was based
on net income before preferred stock dividends and the number of shares assumed
the conversion of convertible preferred stock from the date of issue and also
included the dilutive impact, as if issuance had occurred on the acquisition
date, of contingent shares that were distributed to the sellers of Delfield and
Whitlenge subsequent to January 1, 1995, based on those businesses having
achieved a specified combined level of earnings during fiscal year 1994.


<PAGE>   42
Scotsman Industries, Inc.
Common Stock


Scotsman Industries, Inc. common stock is listed on the New York Stock
Exchange.  The common stock ticker symbol is SCT.


<TABLE>
<CAPTION>

                                                                                       Dividends
1995                                             High           Low      Last          Declared
<S>                                            <C>           <C>       <C>         <C>
1st Quarter                                    18 5/8        16 7/8    18 1/2          $0.025
2nd Quarter                                    19 3/4        17        18 1/2          $0.025
3rd Quarter                                    20            15 1/8    16 3/8          $0.025
4th Quarter                                    17 3/4        16        17 5/8          $0.025
                                                                                       ------
Total dividends declared                                                               $0.100

Shares outstanding at December 31, 1995                                             8,964,974

Shareholders of record at December 31, 1995                                             4,800

<CAPTION>

                                                                                       Dividends
1996                                             High           Low      Last          Declared
<S>                                            <C>           <C>       <C>         <C>
1st Quarter                                    18            17        17 7/8          $0.025
2nd Quarter                                    21            17 7/8    20 1/8          $0.025
3rd Quarter                                    24            19 1/2    22 7/8          $0.025
4th Quarter                                    24 7/8        22 3/4    23 3/4          $0.025
                                                                                       ------
Total dividends declared                                                               $0.100

Shares outstanding at December 29, 1996                                            10,542,464

Shareholders of record at December 29, 1996                                             4,559

</TABLE>