BULOVA CORP - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

	FORM 10-Q

[x]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2004

	OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission file number	1-457

BULOVA CORPORATION
(Exact name of registrant as specified in its charter)


New York			11-1719409
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

ONE BULOVA AVENUE, WOODSIDE, NY		11377-7874
(Address of principal executive offices)		(Zip code)

(718) 204-3300

(Registrant's telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

	Yes	X		No


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes			No		X


Class			Outstanding at October 22, 2004
Common stock, $5 par value			4,599,857 shares

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Page 1

BULOVA CORPORATION

                                           INDEX TO QUARTERLY REPORT ON
                                                   FORM 10-Q FILED WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION

                                    For the quarterly period ended September 30, 2004

Item	Part I. Financial Information	Page
No.		No.

1.	Financial Statements
	Consolidated Condensed Balance Sheets September 30, 2004 and December 31, 2003	3

	Consolidated Condensed Statements of Operations
	Three and Nine months ended September 30, 2004 and 2003	4

	Consolidated Condensed Statements of Cash Flows
	Nine months ended September 30, 2004 and 2003	5

	Notes to Consolidated Condensed Financial Statements	6

2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12

4.	Disclosure Controls and Procedures	15

	Part II. Other Information

6.	Exhibits and Reports on Form 8-K	16

	Page 2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

BULOVA CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
______________________________________________________________________________________

	September 30,	December 31,
Assets	2004	2003
______________________________________________________________________________________

Current assets:
Cash and cash equivalents	$ 23,459	$ 18,201
Accounts and notes receivable -- net	81,615	94,732
Inventories, principally watches and clocks	65,087	64,491
Prepaid expenses	2,390	1,019
Deferred income taxes	11,354	9,931
______________________________________________________________________________________
Total current assets	183,905	188,374

Property, plant and equipment-net	16,152	16,385

Other assets:
Deferred income taxes	9,585	9,917
Trademarks	4,983	4,983
Other	690	875
______________________________________________________________________________________
Total assets	$ 215,315	$ 220,534
======================================================================================

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable	$ 9,219	$ 12,656
Accrued expenses	15,726	22,324
Accrued environmental	4,953	385
Accrued federal and foreign income taxes	1,003	376
______________________________________________________________________________________
Total current liabilities	30,901	35,741

Postretirement benefits payable	24,112	24,722

Shareholders' equity	160,302	160,071
______________________________________________________________________________________
Total liabilities and shareholders' equity	$ 215,315	$ 220,534
======================================================================================

See accompanying Notes to Consolidated Condensed Financial Statements.

Page 3

BULOVA CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
____________________________________________________________________________________

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
____________________________________________________________________________________
	2004	2003		2004	2003
____________________________________________________________________________________

Net sales	$ 38,742	$ 37,203		$ 110,264	$ 111,631
Cost of sales	18,628	18,190		53,823	52,797
____________________________________________________________________________________

Gross profit	20,114	19,013		56,441	58,834
Selling, general and administrative expenses	17,797	17,047		50,487	50,008
____________________________________________________________________________________

Operating income	2,317	1,966		5,954	8,826
Royalty income	150	324		205	572
Interest income -- net	57	53		130	170
Environmental expense	(4,122)			(4,849)
Other (expense) income	(160)	(14)		43	(13)
____________________________________________________________________________________

(Loss) income before income taxes	(1,758)	2,329		1,483	9,555
Income tax benefit (expense)	772	(659)		(588)	(2,870)
____________________________________________________________________________________
Net (loss) income	$ (986)	$ 1,670		$ 895	$ 6,685
====================================================================================
Net (loss) income per share	$ (0.21)	$ 0.36		$ 0.19	$ 1.45
====================================================================================
Weighted average number of shares
outstanding (in thousands)	4,599	4,599		4,599	4,599
====================================================================================

See accompanying Notes to Consolidated Condensed Financial Statements.

Page 4

BULOVA CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
______________________________________________________________________________________

	Nine Months Ended
	September 30,
______________________________________________________________________________________
	2004	2003
______________________________________________________________________________________

Operating Activities:

Net income	$ 895	$ 6,685
Adjustments to reconcile net income to net cash provided (utilized)
by operating activities	7,095	6,488
Changes in operating assets and liabilities-net:
Accounts and notes receivable	10,517	(1,761)
Inventories	(596)	(11,059)
Other assets	(1,186)	(1,425)
Accounts payable and accrued expenses	(10,035)	(10,531)
Accrued federal and foreign income taxes	627	4
Other long-term liabilities	(1,330)	1,679
______________________________________________________________________________________
	5,987	(9,920)
______________________________________________________________________________________

Investing Activities:

Purchases of short-term investments	(4,952)	(3,076)
Proceeds from sales of short-term investments	4,989	1,875
Purchases of property, plant and equipment	(766)	(374)
______________________________________________________________________________________
	(729)	(1,575)
______________________________________________________________________________________

Financing Activities:

Proceeds from debt to affiliate		8,000
______________________________________________________________________________________

Net change in cash and cash equivalents	5,258	(3,495)
Cash and cash equivalents, beginning of period	18,201	9,930
______________________________________________________________________________________

Cash and cash equivalents, end of period	$ 23,459	$ 6,435
======================================================================================

See accompanying Notes to Consolidated Condensed Financial Statements.

Page 5

BULOVA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.	Basis of Presentation:

	Bulova Corporation (together with its subsidiaries referred to herein as "Bulova" or the "Company," unless the context otherwise requires) is a New York corporation. Loews Corporation ("Loews") owns approximately 97% of the Company's outstanding Common Stock.

	The Company is engaged in the distribution and sale of watches, clocks and timepiece parts for consumer use. The principal watch brands are Bulova, Caravelle, Wittnauer and Accutron. In addition, the Company sells watches and clocks with brand names licensed from third parties. The principal licensed brand is Harley Davidson. Clocks are primarily sold under the Bulova brand name and the Company manufactures and distributes high quality grandfather clocks under the Bulova name. The Company's product breakdown includes luxury watch lines represented by Wittnauer and Accutron, a mid-priced watch line represented by Bulova, and a lower-priced watch line represented by Caravelle.

	See Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for Bulova Corporation and Subsidiaries for the year ended December 31, 2003 filed with the Securities and Exchange Commission on March 19, 2004. There have been no changes in significant accounting policies since December 31, 2003.

	The accompanying Consolidated Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to interim financial information. Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying Consolidated Condensed Financial Statements have not been audited, however, in the opinion of Management, contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 2004 and December 31, 2003, the results of operations for the three and nine months ended September 30, 2004 and 2003 and changes in cash flows for the nine months ended September 30, 2004 and 2003.

	Results of operations for the third quarter and the first nine months of each of the years reported herein are not necessarily indicative of results of operations for the entire year.

	Certain amounts applicable to prior periods have been reclassified to conform to the 2004 presentation.

	Accounting Pronouncements --

	In December of 2003, the Financial Accounting Standards Board ("FASB") issued a revised version of Statement of Financial Accounting Standards ("SFAS") No. 132(R), "Employers Disclosures about Pensions and Other Postretirement Benefits" that makes several significant changes to the required disclosures for pension and other postretirement benefit plan assets, obligations, and net cost in financial statements. SFAS No. 132(R) made no changes to the methodologies underlying the measurement of obligations or calculation of expense. In addition, SFAS No. 132(R) requires disclosure of certain plan information on a quarterly basis in interim financial statements. This quarterly report includes the disclosure of plan information required for interim financial statements.

	In January of 2003, the FASB issued Interpretation No. ("FIN") 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." This Interpretation clarifies the application of ARB No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest. On December 24, 2003, the FASB issued a complete replacement of FIN 46 ("FIN 46R"), which clarified certain complexities of FIN 46. FIN 46R is applicable for financial statements issued for reporting periods that end after March 15, 2004. The adoption of FIN 46R did not have any impact on the results of operations or equity of the Company.
	Page 6

	Stock Options -- Loews has a stock option plan, in which some of the Company's employees participate. The Company follows Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its employee stock options and awards. Under APB No. 25, no compensation expense is recognized when the exercise prices of options equal the fair value (market price) of the underlying stock on the date of grant.

	SFAS No. 123, "Accounting for Stock-Based Compensation," requires the Company to disclose pro forma information regarding option grants made to employees. SFAS No. 123 specifies certain valuation techniques that produce estimated compensation charges for purposes of valuing stock option grants. These amounts have not been included in the Company's Consolidated Condensed Statements of Income, in accordance with APB No. 25. The Company's pro forma net (loss) income and pro forma (loss) income per share would have been as follows:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
________________________________________________________________________________
	2004	2003	2004	2003
________________________________________________________________________________

(In thousands, except per share data)

Net (loss) income:

Net (loss) income as reported	$ (986)	$ 1,670	$ 895	$ 6,685
Deduct: Total stock-based
employee compensation expense
determined under the fair value
based method, net	(28)	(28)	(77)	(79)
________________________________________________________________________________
Pro forma net (loss) income	$ (1,014)	$ 1,642	$ 818	$ 6,606
================================================================================

Net (loss) income per share:

As reported	$ (0.21)	$ 0.36	$ 0.19	$ 1.45
Pro forma	$ (0.22)	$ 0.36	$ 0.18	$ 1.44
________________________________________________________________________________


	In May of 2004, the FASB issued Staff Position ("FSP") 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." The FSP provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 for employers that provide prescription drug benefits. FSP 106-2 supersedes FSP 106-1 "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." Adoption of this position has not had a material impact on the Company's results of operations or equity.

2.	Related Parties:

	Under the tax allocation agreement between the Company and its parent, Loews, the Company paid, net of payments received, $1,775,000 and $3,614,000 for the nine months ended September 30, 2004 and 2003.

	Loews provides administrative and managerial services for which the Company was charged $750,000 and $2,250,000 for each of the three and nine month periods ended September 30, 2004 and 2003. This expense is included in selling, general and administrative expenses. The cost allocated to the Company is estimated to be the incremental cost incurred by Loews in providing these services to the Company.
	Page 7

	The Company and Loews have a credit agreement (the "Credit Agreement") which provides for unsecured loans to be made by Loews from time to time, in principal amounts aggregating up to $50,000,000. The interest rate for amounts outstanding under the Credit Agreement is a fixed rate equal to the Six-Month London Interbank Offered Rate ("LIBOR"), in effect on the date the Company requests the loan, plus 250 basis points (2.5%). The Credit Agreement has been periodically extended and currently expires on December 31, 2005. At September 30, 2004 and December 31, 2003, no balance was outstanding.

	See Note 2 of the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 for additional discussion of related parties.

3.	Benefit Plans:

	Pension Plans -- The Company maintains non-contributory pension plans for all of its employees in the United States. Separate retirement plans, which are not material, are maintained by the Company's Canadian subsidiary. The Company's funding policy is to make contributions in accordance with applicable governmental requirements. The assets of the plans are invested primarily in interest-bearing obligations. Benefits are determined based on compensation during each year of credited service.

	Other Postretirement Benefit Plans -- The Company maintains postretirement health care plans covering eligible employees and retirees. Union participants become eligible upon retirement at age 55 and 10 years of service or upon completion of 20 years of service. Another plan covers salaried employees who are eligible upon retirement at age 55 and 20 years of service or upon retirement at age 60 and 10 years of service. The benefits provided by the Company include health, and for certain retirees, life insurance type benefits.

Net periodic benefit cost components:

	Pension Benefits		Other Postretirement Benefits
	______________________		________________________
Three Months Ended September 30,	2004	2003	2004	2003
_______________________________________________________________________________
(In thousands)

Service cost	$ 300	$ 285	$ 41	$ 48
Interest cost	568	551	236	258
Expected return on plan assets	(625)	(584)
Amortization of unrecognized
net gain			(64)	(91)
Amortization of unrecognized
prior service cost	7	8	(416)	(423)
_______________________________________________________________________________
Net periodic benefit cost (income)	$ 250	$ 260	$ (203)	$ (208)
===============================================================================

Net periodic benefit cost components:

	Pension Benefits		Other Postretirement Benefits
	______________________		________________________
Nine Months Ended September 30,	2004	2003	2004	2003
_______________________________________________________________________________
(In thousands)

Service cost	$ 900	$ 855	$ 123	$ 144
Interest cost	1,703	1,653	707	774
Expected return on plan assets	(1,875)	(1,752)
Amortization of unrecognized
net gain			(193)	(273)
Amortization of unrecognized
prior service cost	22	24	(1,247)	(1,269)
_______________________________________________________________________________
Net periodic benefit cost (income)	$ 750	$ 780	$ (610)	$ (624)
===============================================================================

Page 8

4.	Geographic Information:

	The Company operates in a single industry segment, the distribution and sale of watches and clocks under the brand names of Bulova, Caravelle, Wittnauer and Accutron. Substantially all of the Company's sales are in the United States, Canada, Mexico and Europe. In January of 2003, the Company's Swiss subsidiary commenced operations and currently distributes products using third party independent agents and/or distributors covering a number of European countries, Russia, Australia and New Zealand. The Company has also signed distribution agreements for Brazil, South and Central America and the Philippines and license agreements for Hong Kong, China, Taiwan and Macao. Sales from distribution agreements covering territories in South and Central America are included within the United States results and were not material for the periods covered hereby. The Company evaluates performance based on operating earnings of the respective geographic area. The geographic di stribution of the Company's operating results are summarized in the following tables:

	United
Three Months Ended September 30, 2004	States	Canada	Mexico	Europe	Total
________________________________________________________________________________
(In thousands)

Sales	$ 34,044	$ 3,800	$ 973	$ 891	$ 39,708
Intercompany sales	(966)				(966)
________________________________________________________________________________
Total net sales	$ 33,078	$ 3,800	$ 973	$ 891	$ 38,742
================================================================================

Operating income (loss)	$ 2,044	$ 224	$ 90	$ (41)	$ 2,317
Royalty income	150				150
Interest income -- net	10	34	13		57
Environmental expense	(4,122)				(4,122)
Other income (expense)	(154)	(25)	19		(160)
________________________________________________________________________________
Income (loss) before income taxes	$ (2,072)	$ 233	$ 122	$ (41)	$ (1,758)
================================================================================

	United
Three Months Ended September 30, 2003	States	Canada	Mexico	Europe	Total
________________________________________________________________________________
(In thousands)

Sales	$ 34,579	$ 4,024	$ 884	$ 930	$ 40,417
Intercompany sales	(3,214)				(3,214)
________________________________________________________________________________
Total net sales	$ 31,365	$ 4,024	$ 884	$ 930	$ 37,203
================================================================================

Operating income (loss)	$ 1,917	$ 192	$ 52	$ (195)	$ 1,966
Royalty income	324				324
Interest income (expense) -- net	10	20	35	(12)	53
Other income (expense)	1	(18)	3		(14)
________________________________________________________________________________
Income (loss) before income taxes	$ 2,252	$ 194	$ 90	$ (207)	$ 2,329
================================================================================

Page 9

	United
Nine Months Ended September 30, 2004	States	Canada	Mexico	Europe	Total
________________________________________________________________________________
(In thousands)

Sales	$ 96,464	$ 10,691	$ 2,999	$ 2,611	$ 112,765
Intercompany sales	(2,501)				(2,501)
________________________________________________________________________________
Total net sales	$ 93,963	$ 10,691	$ 2,999	$ 2,611	$ 110,264
================================================================================

Operating income (loss)	$ 5,569	$ 402	$ 286	$ (303)	$ 5,954
Royalty income	205				205
Interest income -- net	20	76	34		130
Environmental expense	(4,849)				(4,849)
Other income (expense)	43	(26)	26		43
________________________________________________________________________________
Income (loss) before income taxes	$ 988	$ 452	$ 346	$ (303)	$ 1,483
================================================================================

	United
Nine Months Ended September 30, 2003	States	Canada	Mexico	Europe	Total
________________________________________________________________________________
(In thousands)

Sales	$ 102,332	$ 10,840	$ 2,892	$ 2,011	$118,075
Intercompany sales	(6,444)				(6,444)
________________________________________________________________________________
Total net sales	$ 95,888	$ 10,840	$ 2,892	$ 2,011	$111,631
================================================================================

Operating income (loss)	$ 8,035	$ 587	$ 593	$ (389)	$ 8,826
Royalty income	572				572
Interest income (expense) -- net	101	53	35	(19)	170
Other income (expense)		(37)	5	19	(13)
________________________________________________________________________________
Income (loss) before income taxes	$ 8,708	$ 603	$ 633	$ (389)	$ 9,555
================================================================================

5.	Shareholders' equity:

	September 30,	December 31,
	2004	2003
________________________________________________________________________________
(In thousands)

Common stock, $5 par value:
Authorized: 7,500,000 shares
Issued: 4,600,000 shares	$ 22,999	$ 22,999
Additional paid-in capital	23,197	23,197
Retained earnings	114,537	113,642
Accumulated other comprehensive (loss) income	(426)	238
________________________________________________________________________________

Total	160,307	160,076
Less treasury stock, at cost	5	5
________________________________________________________________________________
Total shareholders' equity	$ 160,302	$ 160,071
================================================================================

	For the three and nine months ended September 30, 2004 and 2003, comprehensive (loss) income totaled ($627,000), $1,536,000, $231,000 and $8,938,000, respectively. Comprehensive (loss) income includes net (loss) income, foreign currency translation gains or losses and pension liability adjustments.

	Page 10

6.	Environmental Matters:

	In April 2004, the Company became aware of additional contamination at its former manufacturing facility located in Jackson Heights, New York. Based on the information available at that time, in the second quarter of 2004, the Company recorded an accrual of $727,000 for its estimated environmental ability. Since that time, the Company has been working with two environmental remediation consulting firms. Based on the studies conducted and estimates provided by such firms, in the third quarter of 2004, the Company recorded an additional $4,122,000 accrual to increase its environmental liability which, together with the amount previously recorded, represents the Company's best cost point estimate of the cost of remediating the contamination at this location. The Company cannot presently estimate any additional costs it may incur as a result of further testing, sampling, reporting or remediation, if any, that may be required by the New York State Department of Health, however, such additional costs could have a material adverse impact on the Company's results of operations, cash flow or equity in future periods. The Company does not expect to receive insurance proceeds related to environmental matters. The Company expects to fund these costs from its working capital.

	Prior to 2003, the Company had received notices of potential environmental contaminants at various facilities formerly owned by the Company or used as offsite disposal locations. The Company continues to cooperate with the current owners of those properties and the appropriate regulatory agencies. During 2003, the Company also settled a claim related to contaminants at an offsite disposal location formerly used by the Company. At September 30, 2004, the Company maintained a reserve of $103,000 for these locations, which represents the Company's estimate of its remaining cost of remediation for these properties.

7.	Warranty Reserve:

	The Company maintains a reserve for costs that it estimates will be needed to cover future product warranty obligations for products sold. Estimates are based upon the Company's historical experience as well as current production techniques.

	For the year ended December 31, 2003, the beginning warranty reserve was $445,000, reduced by charges incurred of $12,000, resulting in an ending balance of $433,000. For the nine months ended September 30, 2004, the beginning and ending balance of the warranty reserve is $433,000. The Company charges warranty expenses as incurred and there have been no significant claims made for the nine months ended September 30, 2004.

8.	Commitments and Contingencies:

	The Company leases certain of its warehouse and office facilities. The estimated remaining future minimum lease payments under these operating leases are as follows: $123,000, $491,000 for each of the years ended 2004, 2005, 2006 and 2007, and $2,048,000 in 2008 and thereafter.

	On October 27, 2004, the Company sold its clock warehouse in Brooklyn, New York for $12,750,000. The transaction provides for a lease of the property back to the Company for a period of up to one year at a monthly rent of $50,000, with the Company having the right to terminate the lease on sixty days notice. The pretax gain on the sale is approximately $7,600,000 and will be recorded in the Company's financials for the year ended December 31, 2004.

9.	Income Taxes:

	The effective income tax rate for the nine months ended September 30, 2004 increased to 39.6%, as compared to 30.0% for the corresponding period of the prior year. The lower effective tax rate in 2003 is primarily attributable to franchise, state and city tax settlements totaling $1,202,000 received in the nine months ended September 30, 2003.

	Page 11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the related notes. Actual results could differ from those estimates.

The Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP, applied on a consistent basis. The Company continually evaluates the accounting policies and estimates used to prepare the Consolidated Financial Statements. In general, management's estimates are based on historical experience, evaluation of current trends, information from third party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.

The accounting policies discussed below are considered by management to be critical to an understanding of the Company's Consolidated Condensed Financial Statements as their application places the most significant demands on management's judgment. Due to the inherent uncertainties involved with this type of judgment, actual results could differ significantly from estimates and have a material adverse impact on the Company's results of operations or equity.

Allowance for Doubtful Accounts

Sales are recognized upon shipment of products to customers since title passes upon shipment or, in the case of consignment sales, upon notification from our customers that products have been sold. Allowances for estimated uncollectible accounts, discounts, returns and allowances are provided when sales are recorded and adjusted for market and consumer conditions as necessary based upon historical experience and current trends.

Inventory Reserve

The Company has established a reserve against inventory in order to report it at the lower of cost or market value. The cost of inventory is determined on a first-in, first out basis. In determining the market value of inventory, management considers sales history of the individual product, current consumer purchasing trends, secondary distribution channels, as well as overall sales activity. The inventory reserve also contemplates inventory at customer locations which were shipped under consignment arrangements.

Warranty Reserve

The Company maintains a reserve for costs that it estimates will be needed to cover future product warranty obligations for products sold during the year. This estimate is based upon the Company's historical experience as well as current production techniques.

Reserve for Environmental Matters

The Company has established a reserve for the estimated costs expected to be incurred to test and, as needed, remediate contaminated properties with respect to which the Company may have liability. The Company utilized the services of outside environmental consultants and the estimate recorded is in large part based on the point estimates provided by such consultants. These estimates are periodically reviewed and adjusted to reflect the current remediation progress, estimates of required activity and other relevant factors including technological or regulatory changes. Establishing this