Commitments and Contingencies

9 Months Ended

Sep. 28, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Sales Returns

The accrued sales returns estimate is based on historical return rates, which are reasonably consistent from period to period, and is adjusted for any current trends as appropriate. If actual returns vary from expected rates, sales in future periods are adjusted.

The activity in the sales returns liability account was as follows (in thousands):

	Nine Months Ended
	September 28, 2013			September 29, 2012
Balance at beginning of year	$	5,330		$	4,402
Additions that reduce net sales	33,260			33,082
Deductions from reserves	(28,816		)	(32,231		)
Acquired sales return reserve	98			—
Balance at end of period(1)	$	9,872		$	5,253

⁽¹⁾ The year-over-year increase in the sales returns liability is primarily due to an increase in our 30-night trial policy to 100 nights.

Warranty Liabilities

During the second quarter of 2013, we extended the limited warranty on our beds to 25 years. The change is not expected to have a significant impact on our warranty expense. The customer participates over the last 23 years of the warranty period by paying a portion of the retail value of replacement parts. The estimated warranty costs, which are expensed at the time of sale and included in cost of sales, are based on historical claims rates incurred by us and are adjusted for any current trends as appropriate. Actual warranty claim costs could differ from these estimates. We regularly assess and adjust the estimate of accrued warranty claims by updating claims rates for actual trends and projected claim costs.

We classify as non-current those estimated warranty costs expected to be paid out in greater than one year. The activity in the accrued warranty liabilities account was as follows (in thousands): 

	Nine Months Ended
	September 28, 2013			September 29, 2012
Balance at beginning of year	$	4,858		$	6,310
Additions charged to costs and expenses for current-year sales	3,206			3,023
Deductions from reserves	(4,428		)	(3,785		)
Changes in liability for pre-existing warranties during the current year, including expirations	3			(484		)
Acquired warranty reserve	532			—
Balance at end of period	$	4,171		$	5,064

Legal Proceedings

We are involved from time to time in various legal proceedings arising in the ordinary course of our business, including primarily commercial, product liability, employment and intellectual property claims. In accordance with generally accepted accounting principles in the United States, we record a liability in our consolidated financial statements with respect to any of these matters when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. With respect to currently pending legal proceedings, we have not established an estimated range of reasonably possible additional losses either because we believe that we have valid defenses to claims asserted against us or the proceeding has not advanced to a stage of discovery that would enable us to establish an estimate. We currently do not expect the outcome of these matters to have a material effect on our consolidated results of operations, financial position or cash flows. Litigation, however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against us could adversely impact our results of operations, financial position or cash flows. We expense legal costs as incurred.