Note I – Warranty

The Company estimates warranty costs using quantitative measures based on historical warranty claim experience and evaluation of specific Customer warranty issues. Following is a reconciliation of warranty reserves for the three months ended October 31, 2011 and 2010 (thousands of dollars):


	October 31,
	2011			2010
Beginning balance	$	19,720		$	15,707
Accruals for warranties issued during the reporting period		791			2,443
Adjustments related to pre - existing warranties (including changes in estimates)		(535	)		2,170
Less settlements made during the period		(3,841	)		(988	)
Ending balance	$	16,135		$	19,332

The prior year increase in warranty accruals was primarily due to two specific warranty matters: one in the Company's Retrofit Emissions Products group for $2.5 million and one in the Company's Off-Road Products group for $1.0 million. These warranty accruals were partially offset by supplier recoveries of $1.0 million. These warranty matters are not expected to have a material impact on our results of operations, liquidity or financial position.