Toro 2014 Annual Report Download - page 57

Inventories as of October 31 were as follows: however, the company reviews them for impairment annually dur-
ing each fourth fiscal quarter or more frequently if changes in cir-
cumstances or occurrence of events suggest the fair value may
2014 2013
not be recoverable.
Raw materials and work in progress $ 95,144 $ 87,668
The company reviewed the fair value of its reporting units that
Finished goods and service parts 246,954 217,796
have goodwill on their respective balance sheets and compared
Total FIFO value 342,098 305,464
these fair values to the respective carrying amounts during the
Less: adjustment to LIFO value 67,495 65,375
fourth quarter of fiscal 2014. The company determined that it has
Total $274,603 $240,089
eight reporting units, which are the same as its eight operating
segments. Six reporting units contain goodwill on their respective
Property and Depreciation balance sheets. The company’s estimate of fair value is deter-
Property, plant, and equipment are carried at cost. The company mined based on a discounted cash flow model. Where available
provides for depreciation of plant and equipment utilizing the and as appropriate, comparable market multiples are used to cor-
straight-line method over the estimated useful lives of the assets. roborate the results of the discounted cash flow method. Growth
Buildings, including leasehold improvements, are generally depreci- rates for sales and profits are determined using inputs from the
ated over 10 to 45 years, and equipment over two to seven years. company’s annual plan and long-range planning process. Manage-
Tooling costs are generally depreciated over three to five years ment also makes estimates of discount rates, perpetuity growth
using the straight-line method. Software and web site development assumptions, market comparables, and other factors. As of
costs are generally amortized over two to five years utilizing the August 29, 2014, the company performed its annual impairment
straight-line method. Expenditures for major renewals and improve- analysis and determined there was no impairment of goodwill for
ments, which substantially increase the useful lives of existing any of its reporting units as the fair values exceeded their respec-
assets, are capitalized, and maintenance and repairs are charged tive carrying amounts.
to operating expenses as incurred. Interest is capitalized during the As of August 29, 2014, the company also performed an assess-
construction period for significant capital projects. During the fiscal ment of its indefinite-life intangible assets, which consist of certain
years ended October 31, 2014, 2013, and 2012, the company cap- trade names. The company’s estimate of the fair value of its trade
italized $1,710, $722, and $256 of interest, respectively. names are based on a discounted cash flow model using inputs
Property, plant, and equipment as of October 31 was as follows: which included: projected revenues from the company’s forecasting
process; assumed royalty rates that could be payable if the com-
2014 2013 pany did not own the trade name; and a discount rate. Based on
Land and land improvements $ 32,731 $ 27,632 this analysis, which was also performed in the prior fiscal year, the
Buildings and leasehold improvements 156,374 133,866 company concluded its indefinite-life intangible assets were not
Machinery and equipment 305,131 284,492 impaired during fiscal 2014 or 2013. In fiscal 2012, the company
Tooling 177,704 173,039 wrote down $400 of an indefinite-life intangible asset.
Computer hardware and software 77,395 73,302
Construction in process 10,857 29,173
Other Long-Lived Assets
Subtotal 760,192 721,504
Less: accumulated depreciation 554,997 536,408 Other long-lived assets include property, plant, and equipment and
definite-lived intangible assets, which are identifiable assets that
Total property, plant, and equipment, net $205,195 $185,096
arose from purchase acquisitions consisting primarily of patents,
During fiscal years 2014, 2013, and 2012, the company non-compete agreements, customer relationships, trade names,
recorded depreciation expense of $47,136, $48,207, and $46,840, and developed technology and are amortized on a straight-line
respectively. basis over periods ranging from 1.5 to 13 years. The company
reviews other long-lived assets for impairment whenever events or
Goodwill and Indefinite-Life Intangible Assets changes in circumstances indicate that the carrying amount of an
Goodwill represents the cost of acquisitions in excess of the fair asset (or asset group) may not be recoverable. An impairment loss
values assigned to identifiable net assets acquired. Goodwill is is recognized when estimated undiscounted future cash flows from
assigned to reporting units based upon the expected benefit of the the operation or disposition of the asset group are less than the
synergies of the acquisition. Goodwill and some trade names, carrying amount of the asset group. Asset groups have identifiable
which are considered to have indefinite lives, are not amortized; cash flows and are largely independent of other asset groups.
Measurement of an impairment loss is based on the excess of the
carrying amount of the asset group over its fair value. Fair value is
measured using a discounted cash flow model or independent
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