3. Inventories, net

The Company uses the LIFO method of valuation for U.S. inventories. The use of the LIFO method has the effect of reducing net income during periods of rising inventory costs (inflationary periods) and increasing net income during periods of falling inventory costs (deflationary periods). An actual valuation of inventory under the LIFO method is performed at the end of each year based on the inventory levels and costs at that time. Accordingly, the Company bases interim LIFO calculations using current month end perpetual inventory balances, except in those instances where better information regarding projected year-end balances is available.