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reserves for inventory obsolescence and shrinkage based on its judgment of future realization. Inventories at January 1, 2005 and January 3, 2004 are as follows: 

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(E) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost as follows: 

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Property and equipment are depreciated or amortized on a straight-line basis over their useful lives based on management’s estimates of the period over which the assets will be utilized to benefit the operations of the company. The useful lives are estimated based on historical experience with similar assets, taking into account anticipated technological or other changes. The company periodically reviews these lives relative to physical factors, economic factors and industry trends. If there are changes in the planned use of property and equipment or if technological changes were to occur more rapidly than antici- pated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation and amortization expense in future periods. 

Following is a summary of the estimated useful lives: 

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Depreciation expense is provided for using the straight-line method and amounted to $3,150,000, $3,583,000 and $3,967,000 in fiscal 2004, 2003 and 2002, respectively. 

Expenditures which significantly extend useful lives are capital- ized. Maintenance and repairs are charged to expense as incurred. Asset impairments are recorded whenever events or changes in circumstances indicate that the recorded value of an asset is less than the sum of its expected future undiscounted cash flows. 

(F) GOODWILL AND OTHER INTANGIBLES Goodwill and other intan- gibles are reviewed for impairment annually or whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. For long-lived assets held for use, an impairment loss is recognized when the estimated undiscounted cash flows produced by an asset are less than the asset’s carrying value. Estimates of future cash flows are judgments based on the company’s experience and knowledge of operations. These estimates can be significantly impacted by many factors including changes in global and local business and economic conditions, operating costs, inflation, competition, and consumer and demo- graphic trends. If the company’s estimates or the underlying assumptions change in the future, the company may be required to record impairment charges. 

(G) ACCRUED EXPENSES Accrued expenses consist of the following at January 1, 2005 and January 3, 2004, respectively: 

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(H) LITIGATION MATTERS From time to time, the company is subject to proceedings, lawsuits and other claims related to products, suppliers, employees, customers and competitors. The company maintains insurance to cover product liability, workers compensation, property and casualty, and general liability matters. The company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after assessment of each matter and the related insurance coverage. The required accrual may change in the future due to new developments or changes in approach such as a change in settlement strategy in dealing with these matters. The company does not believe that any such matter will have a material adverse effect on its financial condition, results of operations or cash flows of the company. 

