Cash equivalents

The Company considers all investments with original maturities of three months or less to be cash equivalents. Cash equivalents include money market funds and treasury bills of $11,336 at November 2, 2007 and $1,180 at November 3, 2006.

Restatement / Trading Securities

At November 3, the Company held $12,200 of auction rate securities, which are now shown as a separately stated current asset in the accompanying financial statements. Previously, auction rate securities were part of cash and cash equivalents and are now classified as trading securities in the consolidated balance sheet. Auction rate securities are variable-rate bonds tied to short-term interest rates with maturities on the face of the securities in excess of 90 days.  The Company’s investments in these auction rate securities are accounted for under SFAS 115, Accounting for Certain Investments in Debt and Equity Securities.  The securities are recorded at cost, which approximates fair market value because of their variable interest rates, which typically reset every 7 to 35 days.  Despite the long-term nature of their stated contractual maturities, the Company has the intent and ability to quickly liquidate these securities; therefore, the Company has no cumulative gross unrealized holding gains or losses, or gross unrealized gains or losses from these investments.  All income generated from these investments was recorded as interest income.

The consolidated balance sheet at November 3, 2006 has been restated to move auction rate securities out of cash and cash equivalents to trading securities.

The restated sections of the consolidated balance sheet can be summarized as follows:

The consolidated statements of cash flow for years ended November 3, 2006 and October 28, 2005 have been restated to show the effect of auction rate securities activity classified as trading securities.

The restated sections of the consolidated statements of cash flows can be summarized as follows:

Inventories

Inventories are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market.  Costs related to warehousing, transportation and distribution to customers are considered when computing market value.  Inventories include the cost of raw materials, labor and manufacturing overhead.  The Company regularly reviews inventory

quantities on hand and writes down any excess or obsolete inventories to net realizable value.  An inventory reserve is created when potentially slow-moving or obsolete inventories are identified in order to reflect the appropriate inventory value.  Changes in economic conditions, production requirements, and lower than expected customer demand could result in additional obsolete or slow-moving inventory that cannot be sold or must be sold at reduced prices and could result in additional reserve provisions.