NOTE 3 - INVENTORIES

Inventories are valued using the last-in, first-out (LIFO) method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs existing at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many factors beyond management's control, interim results are subject to the final year-end LIFO inventory valuation.

During the nine month period ended October 1, 2011, inventory quantities were reduced. If this reduction remains through year-end, it will result in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the current cost of purchases. Although the effect of such a liquidation cannot be precisely quantified at the present time, management believes that if a LIFO liquidation occurs in 2011, the impact may be material to the Company’s results of operations for the period but will not have a material impact on the financial position of the Company.

Inventories consist of the following:


	October 1, 2011	December 31, 2010
Inventory at FIFO
Finished products	$ 5,190	$ 5,833
Materials and work in process	40,947	42,987
Gross inventories	46,137	48,820
Less: LIFO reserve	(37,101)	(37,448)
Less: excess and obsolescence reserve	(1,281)	(1,545)
Net inventories	$ 7,755	$ 9,827