Toro 2009 Annual Report Download - page 52

Inventories as of October 31 were as follows: Impairment of Long-Lived Assets
The company reviews indefinite-life intangible assets and goodwill,
2009 2008 for impairment annually or more frequently if changes in circum-
stances or the occurrence of events suggest the remaining value
Raw materials and work in progress $ 56,679 $ 63,268
Finished goods and service parts 169,739 194,118 may not be recoverable. An asset is deemed impaired and written
down to its fair value if estimated related future cash flows are less
Total FIFO value 226,418 257,386
Less: adjustment to LIFO value 50,143 50,302 than its carrying value.
The company reviewed the fair value of its reporting units that
Total $176,275 $207,084
have goodwill on their respective balance sheets with their corre-
sponding carrying amount (with goodwill) during the fourth quarter
Property and Depreciation of fiscal 2009. The company determined that it has seven reporting
Property, plant, and equipment are carried at cost. The company units, which are the same as its seven operating segments. Five
provides for depreciation of plant and equipment utilizing the reporting units contain goodwill on their respective balance sheets.
straight-line method over the estimated useful lives of the assets. As of August 28, 2009, the company performed a detailed dis-
Buildings, including leasehold improvements, are generally depreci- counted cash flow analysis for all of its reporting units to estimate
ated over 10 to 45 years, and equipment over three to seven their respective fair values. The carrying value is based on the
years. Tooling costs are generally depreciated over three to five assets and liabilities associated with the operations of each report-
years using the straight-line method. Software and web site devel- ing unit, which includes an allocation of corporate assets and liabil-
opment costs are generally amortized over two to five years utiliz- ities based on key financial ratios, such as a proportion of the total
ing the straight-line method. Expenditures for major renewals and account balances to net sales or cost of sales of the respective
improvements, which substantially increase the useful lives of reporting unit. Growth rates for sales and profits are determined
existing assets, are capitalized, and maintenance and repairs are using inputs from the company’s annual long-range planning pro-
charged to operating expenses as incurred. Interest is capitalized cess. Management also makes estimates of discount rates,
during the construction period for significant capital projects. During perpetuity growth assumptions, and other factors.
the fiscal years ended October 31, 2009, 2008, and 2007, the The company also performed an assessment of its indefinite-life
company capitalized $98, $419, and $820 of interest, respectively. intangible assets, mainly trade names, as of October 31, 2009.
Property, plant, and equipment as of October 31 was as follows: The company’s estimate of the fair value of its trade names are
based on a discounted cash flow model using inputs which
2009 2008 included: projected revenues from the company’s annual plan;
Land and land improvements $ 22,736 $ 22,694 assumed royalty rates that could be payable if the company did
Buildings and leasehold improvements 114,905 111,796 not own the trade name; and a discount rate.
Machinery and equipment 358,575 331,079
Computer hardware and software 55,531 52,967 Other long-lived assets, including property, plant, and equipment
and definite-life intangible assets, are reviewed for impairment
Subtotal 551,747 518,536
Less: accumulated depreciation 385,031 349,669 whenever events or changes in circumstances indicate that the
Total property, plant, and equipment, net $166,716 $168,867 carrying value of an asset (or asset group) may not be recover-
able. An impairment loss would be recognized when estimated
During fiscal years 2009, 2008, and 2007, the company undiscounted future cash flows from the operation or disposition of
recorded depreciation expense of $42,031, $46,099, and $40,529, the asset group are less than the carrying amount of the asset
respectively. group. Asset groups have identifiable cash flows and are largely
independent of other asset groups. Measurement of an impairment
Goodwill and Other Intangible Assets loss is based on the excess of the carrying amount of the asset
Goodwill represents the excess of the purchase price over the fair group over its fair value. Fair value is measured using a dis-
value of net assets of businesses acquired and accounted for by counted cash flow model or independent appraisals, as appropri-
the purchase method of accounting. Goodwill and certain other ate. For long-lived assets to be abandoned, the company tests for
intangible assets having indefinite lives are tested annually for potential impairment. If the company commits to a plan to abandon
impairment or more frequently if events suggest the remaining a long-lived asset before the end of its previously estimated useful
value may not be recoverable. life, depreciation estimates are revised.
Other intangible assets with determinable lives consist primarily Based on the company’s impairment analysis, the company
of patents, non-compete agreements, customer relationships, and wrote down $1,071, $3,843, and $163 of long-lived assets during
developed technology that are amortized on a straight-line basis fiscal 2009, 2008, and 2007, respectively.
over periods ranging from two to 13 years.
46