Commitments and Contingencies

6 Months Ended

Jul. 02, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

10. 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):

	Six Months Ended
	July 2, 2011			July 3, 2010
Balance at beginning of year	$	2,944		$	2,885
Additions that reduce net sales		19,015			14,784
Deductions from reserves		(18,395	)		(14,872	)
Balance at end of period	$	3,564		$	2,797

Warranty Liabilities

We provide a 20-year limited warranty on our adjustable-firmness beds. The customer participates over the last 18 years of the warranty period by paying a portion of the retail value of replacement parts. Estimated warranty costs are expensed at the time of sale 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 classify as noncurrent 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):

	Six Months Ended
	July 2, 2011			July 3, 2010
Balance at beginning of year	$	5,744		$	7,143
Additions charged to costs and expenses for current-year sales		2,137			1,753
Deductions from reserves		(2,217	)		(2,149	)
Changes in liability for pre-existing warranties during the current year, including expirations		(233	)		300
Balance at end of period	$	5,431		$	7,047

Legal Proceedings

We are involved from time to time in various legal proceedings arising in the ordinary course of our business. 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 pending legal proceedings, we believe that we have valid defenses to claims asserted against us and we 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.