MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS net sales in the same period as the sale. Our standard sales terms are final and returns or exchanges are not permitted unless expressly stated; provisions for returns or exchanges were established in cases where the right of return existed. The Company offered a variety of programs, primarily to its retail customers, designed to promote sales of its products. Such programs required periodic payments and allowances based on estimated results of specific programs and were recorded as a reduction to net sales. The Company accrued the esti- mated total payments and allowances associated with each transaction at the time of sale. Additionally, the Company offered programs directly to consumers to promote the sale of its products. Promotions which reduced the ultimate consumer sale prices were recorded as a reduction of net sales at the time the promotional offer was made, generally using estimated redemption and participation levels. The Company continually assesses the adequacy of accruals for customer and consumer promotional program costs not yet paid. To the extent total program payments differ from estimates, adjustments may be necessary. Historically, these  total program payments and adjustments have not  been material. Management recorded accounts receivable net of provisions for sales returns and allowances, and net of provisions for doubtful collection of accounts included in Selling, general and administrative expenses. Estimat- ed sales returns and allowances were accrued based on management’s assessment of accounts receivable. Judg- ment was required in order to make this assessment including an analysis of historical bad debts, a review of the aging of accounts receivable and a review of the cur- rent creditworthiness of customers. Management recorded allowances for receivables which were believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices, customer satisfaction claims and pric- ing discrepancies. However, depending on how such potential issues are resolved, or if the financial condition of any of our customers were to deteriorate and their ability to make required payments became impaired, increases in these allowances may be required. As of December 31, 2004, no individual customer constituted more than 5 percent of accounts receivable. Inventories were stated at the lower of cost or market with cost determined principally on the last-in, first-out method. Inventory quantities were adjusted during the fourth quarter of 2004 as a result of annual physical Property, plant and equipment was stated on the basis of cost and depreciated principally on a straight- line method using industry standards and historical experience to estimate useful lives. In accordance with SFAS No. 144, “Accounting for the Impairment or Dis- posal of Long-Lived Assets,” whenever events or changes in circumstances indicated that the carrying value of long-lived assets may not be recoverable or  the useful life had changed, impairment tests were per- formed. Undiscounted future cash flows were used to calculate the fair value of long-lived assets to determine if such assets were impaired. Where impairment was identified, management determined fair values for assets using a discounted cash flow valuation model, incorpo- rating discount rates commensurate with the risks involved for each group of assets. Growth models were Management’s business and technical judgment was used in determining which intangible assets have indefi- nite lives and in determining the useful lives of finite- lived intangible assets in accordance with Statement  of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets.” As required by SFAS No. 142, management performed transitional impairment testing during the first quarter of 2002 and annual impairment testing of goodwill and indefinite- lived intangible assets during the fourth quarters of 2004, 2003 and 2002. Management estimated the fair values of goodwill and indefinite-lived intangible assets using a discounted cash flow valuation model, incorpo- rating discount rates commensurate with the risks involved for each reporting unit. Growth models were developed using both industry and company historical results and forecasts. Such models required management to make certain assumptions based upon information available at the time the valuation was performed, which could differ from actual results. See Notes 3 and 4, pages 51 through 53 of this report, for a discussion of the reductions in carrying value of goodwill and indefi- nite-lived intangible assets recorded in accordance with SFAS No. 142. inventory counts taken in all locations. Management recorded the best estimate of net realizable value for obsolete and discontinued inventories based on histori- cal experience and current trends through reductions to inventory cost by recording a provision included in Cost of goods sold. Where management determined that future demand was lower than current inventory levels, a reduction in inventory cost to estimated net realizable value was made. 23