Liabilities have been established for the self-insured extended service contracts based on a number of factors, including historical trends in product failure rates and the expected material and labor costs necessary to provide the services. See note 11 in the Notes to Consolidated Financial Statements for further discussion of the extended service contract liabilities.

The accounting for self-insured extended service contracts requires us to make assumptions and to apply judgment when estimating the product failure rates and expected material and labor costs necessary to provide the services. If actual results are not consistent with the assumptions and judgments used to calculate the extended service contract liability, we may be exposed to additional charges that could be material.

Self-Insured Liabilities
We are self-insured for certain losses related to health, workers’ compensation and general liability insurance, although we maintain stop-loss coverage with third-party insurers to limit our total liability exposure.

When estimating our self-insurance liabilities, we consider a number of factors, including historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries. Periodically, management reviews its assumptions and the valuations provided by independent third-party actuaries to determine the adequacy of our self-insured liabilities. Our self-insured liabilities contain uncertainties because management must make assumptions and apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of the balance sheet date. If actual results differ from the assumptions and judgment we have used to calculate the self-insured liabilities, we may be exposed to additional charges that could be material.

We have not made any material changes in the accounting methodology used to establish our self-insured liabilities during the past three years.

Tax Contingencies
We are frequently audited by domestic and foreign tax authorities. These audits include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with our various filing positions, including state and local taxes, we record reserves for probable exposures. As of the end of fiscal 2003, three open tax years were undergoing examination by the United States Internal Revenue Service and two open years with Revenue Canada.

The estimate of our tax contingencies liability contains uncertainty because management must use judgment to estimate the exposure associated with our various filing positions. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of our reserves, our effective tax rate in a given financial statement period could be materially impacted. Although management believes that the estimates discussed above are reasonable, actual results could differ from our estimates, and we may be exposed to a charge that could be material.

Pending Accounting Standards
A discussion of pending accounting standards is included in note 1 of the Notes to Consolidated Financial Statements. >>