Toro 2011 Annual Report Download - page 52

Inventories as of October 31 were as follows: are not amortized; however, both must be tested for impairment
annually as discussed below.
2011 2010
Impairment of Long-Lived Assets
Raw materials and work in progress $ 94,176 $ 66,152 The company reviews indefinite-life intangible assets and goodwill
Finished goods and service parts 189,855 183,992
for impairment annually during each fourth fiscal quarter or more
Total FIFO value 284,031 250,144 frequently if changes in circumstances or the occurrence of events
Less: adjustment to LIFO value 61,001 55,742
suggest the remaining value may not be recoverable. An asset is
Total $223,030 $194,402 deemed impaired and written down to its fair value if estimated
related future cash flows are less than its carrying amount.
Property and Depreciation The company reviewed the fair value of its reporting units that
Property, plant, and equipment are carried at cost. The company have goodwill on their respective balance sheets with their corre-
provides for depreciation of plant and equipment utilizing the sponding carrying amount (with goodwill) during the fourth quarter
straight-line method over the estimated useful lives of the assets. of fiscal 2011. The company determined that it has eight reporting
Buildings, including leasehold improvements, are generally depreci- units, which are the same as its eight operating segments. Six
ated over 10 to 45 years, and equipment over two to seven years. reporting units contain goodwill on their respective balance sheets.
Tooling costs are generally depreciated over three to five years As of August 26, 2011, the company performed an analysis of
using the straight-line method. Software and web site development qualitative factors to determine whether it is more likely than not
costs are generally amortized over two to five years utilizing the that the fair value of a reporting unit is less than its carrying
straight-line method. Expenditures for major renewals and improve- amount as a basis for determining whether it is necessary to per-
ments, which substantially increase the useful lives of existing form the two-step goodwill impairment test. Based on the com-
assets, are capitalized, and maintenance and repairs are charged pany’s analysis of qualitative factors, the company determined that
to operating expenses as incurred. Interest is capitalized during the is was not necessary to perform the two-step goodwill impairment
construction period for significant capital projects. During the fiscal test for any of its reporting units.
years ended October 31, 2011, 2010, and 2009, the company cap- The company also performed an assessment of its indefinite-life
italized $230, $131, and $98 of interest, respectively. intangible assets, which consist of certain trade names, as of Octo-
Property, plant, and equipment as of October 31 was as follows: ber 31, 2011. The company’s estimate of the fair value of its indef-
inite-life trade names are based on a discounted cash flow model
2011 2010 using inputs which included: projected revenues from the com-
Land and land improvements $ 26,776 $ 24,667 pany’s annual plan; assumed royalty rates that could be payable if
Buildings and leasehold improvements 129,252 115,480 the company did not own the trade name; and a discount rate.
Machinery and equipment 434,796 396,228 Other long-lived assets, including property, plant, and equipment
Computer hardware and software 63,826 57,695 and definite-life intangible assets, are reviewed for impairment
Subtotal 654,650 594,070 whenever events or changes in circumstances indicate that the
Less: accumulated depreciation 463,510 420,663 carrying amount of an asset (or asset group) may not be recover-
Total property, plant, and equipment, net $191,140 $173,407 able. An impairment loss is recognized when estimated undis-
counted future cash flows from the operation or disposition of the
During fiscal years 2011, 2010, and 2009, the company
asset group are less than the carrying amount of the asset group.
recorded depreciation expense of $43,539, $42,108, and $42,031,
Asset groups have identifiable cash flows and are largely indepen-
respectively.
dent of other asset groups. Measurement of an impairment loss is
based on the excess of the carrying amount of the asset group
Goodwill and Other Intangible Assets
over its fair value. Fair value is measured using a discounted cash
Goodwill represents the cost of acquisitions in excess of the fair
flow model or independent appraisals, as appropriate. For
values assigned to identifiable net assets acquired. Goodwill is
long-lived assets to be abandoned, the company tests for potential
assigned to reporting units based upon the expected benefit of the
impairment. If the company commits to a plan to abandon a
synergies of the acquisition. Other intangible assets reflect identifi-
long-lived asset before the end of its previously estimated useful
able assets that arose from purchase acquisitions. Other intangible
life, depreciation estimates are revised.
assets with determinable lives consist primarily of patents,
Based on the company’s impairment analysis, the company
non-compete agreements, customer relationships, trade names,
wrote down $109, $348, and $1,071 of long-lived assets during
and developed technology, which are amortized on a straight-line
fiscal 2011, 2010, and 2009, respectively.
basis over periods ranging from two to 15 years. Goodwill and
some trade names, which are considered to have indefinite lives,
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