MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS default and cross-default provisions. In the event of default under any one of these arrangements, accelera- tion of the maturity of any one or more of these bor- rowings may result. Management believes that such an event is not reasonably likely to occur. The Company has certain obligations and commit- ments to make future payments under contractual obli- gations and commercial commitments. The following table summarizes such obligations and commitments as of December 31, 2004: 1 Relates to open purchase orders for raw materials at December 31, 2004. 2 Other contractual obligations primarily represent the Company's estimated future capital commitments to its investments in U.S. affordable housing and historic renovation real estate partnerships, non-compete agreements, information technology maintenance contracts and various other contractual obligations. The Company offers product warranties for certain products. The specific terms and conditions of such war- ranties vary depending on the product or customer con- tract requirements. Management estimated and accrued the costs of unsettled product warranty claims at December 31, 2004, 2003 and 2002 based on historical results and experience. Management periodically assess- es the adequacy of the accrual for product warranty claims and adjusts the accrual as necessary. Changes in the accrual for product warranty claims during 2004, 2003 and 2002, which included customer satisfaction settlements, were as follows: Shown below are net sales and the percentage change for the current period by reportable segment for 2004 and 2003: Consolidated net sales for 2004 increased due primarily to volume increases from continuing strong domestic architectural paint sales to contractor and  do-it-yourself (DIY) customers, improving sales and market conditions in domestic industrial maintenance and product finishes and improved international sales. Consolidated net sales include the operations of five acquisitions completed at various times after November 2003 including the operations of two larger acquisi- tions, Duron and PSB, beginning with the month of September 2004. The acquisitions increased consolidat- ed net sales $222.6 million, or 4.1 percent, in 2004. RESULTS OF OPERATIONS - 2004 vs. 2003 (thousands of dollars) 2004 2003 2002 Balance at January 1........ $ 16,555  $ 15,510  $ 14,074  Charges to expense .......... 32,541  28,745  25,023  Settlements....................... (30,998) (27,700) (23,587) Balance at December 31 .. $ 18,098  $ 16,555  $ 15,510  Amount of Commitment Expiration Per Period Commercial Commitments Total Within 1 Year 2-3 Years 4-5 Years After 5 Years Standby letters of credit.................... $ 15,633  $ 15,633  Surety bonds..................................... 27,205  27,205  Other commercial commitments....... 16,921  15,692  $ 476  $ 266  $ 487  Total commercial commitments........ $ 59,759  $ 58,530  $ 476  $ 266  $ 487  (thousands of dollars) 2004 Change 2003 Paint Stores.................. $ 3,976,979  14.6% $ 3,468,857  Consumer .................... 1,296,251  9.0% 1,189,666  Automotive Finishes .... 514,304  12.6% 456,739  International Coatings. 318,627  11.7% 285,282  Administrative ............. 7,628  5.7% 7,220  $ 6,113,789  13.1% $ 5,407,764  (thousands of dollars) Payments Due by Period Contractual Obligations Total Within 1 Year 2-3 Years 4-5 Years After 5 Years Long-term debt ................................ $ 499,453  $ 11,214  $ 198,005  $ 146  $ 290,088  Operating leases............................... 661,931  155,973  244,915  143,219  117,824  Short-term borrowings..................... 238,815  238,815  Purchase obligations 1 ....................... 177,447  177,447  Other contractual obligations 2 ......... 43,596  16,518  25,600  1,478  Total contractual cash obligations.... $1,621,242  $ 599,967  $ 468,520  $ 144,843  $ 407,912  31