Toro 2007 Annual Report Download - page 59

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“Share-Based Payment.” SFAS No. 123R focuses primarily on
accounting for transactions in which an entity obtains employee
services through stock-based payment transactions and requires
measurement of the cost of employee services received in ex-
change for the award of equity instruments based on the fair value
of the award as of the date of grant. The company’s stock-based
compensation awards include performance shares issued to key
employees that are contingent on the achievement of performance
goals of the company as well as non-qualified options. Compensa-
tion expense equal to the grant date fair value is recognized for
these awards over the vesting period. See Note 9 for additional
information regarding stock-based compensation plans.
Net Earnings Per Share
Basic net earnings per share is calculated using net earnings
available to common stockholders divided by the weighted-
average number of shares of common stock outstanding during
the year plus the assumed issuance of contingent shares. Diluted
net earnings per share is similar to basic net earnings per share
except that the weighted-average number of shares of common
stock outstanding plus the assumed issuance of contingent shares
is increased to include the number of additional shares of common
stock that would have been outstanding assuming the issuance of
all potentially dilutive shares, such as common stock to be issued
upon exercise of options, contingently issuable shares, and non-
vested restricted shares.
Reconciliations of basic and diluted weighted-average shares of
common stock are as follows:
BASIC
(Shares in thousands)
Fiscal years ended October 31 2007 2006 2005
Weighted-average number of shares of common
stock 40,661 42,848 44,679
Assumed issuance of contingent shares 21 39 35
Weighted-average number of shares of common
stock and assumed issuance of contingent
shares 40,682 42,887 44,714
DILUTED
(Shares in thousands)
Fiscal years ended October 31 2007 2006 2005
Weighted-average number of shares of common
stock and assumed issuance of contingent
shares 40,682 42,887 44,714
Effect of dilutive securities 1,182 1,457 1,825
Weighted-average number of shares of common
stock, assumed issuance of contingent and
restricted shares, and effect of dilutive
securities 41,864 44,344 46,539
Cash Flow Presentation
The consolidated statements of cash flows are prepared using the
indirect method, which reconciles net earnings to cash flow from
operating activities. The necessary adjustments include the re-
moval of timing differences between the occurrence of operating
receipts and payments and their recognition in net earnings. The
adjustments also remove from operating activities cash flows
arising from investing and financing activities, which are presented
separately from operating activities. Cash flows from foreign
currency transactions and operations are translated at an average
exchange rate for the period. Cash paid for acquisitions is classi-
fied as investing activities.
Statement of Stockholders’ Equity and Comprehensive
Income Information
Components of accumulated other comprehensive loss as of
October 31 were as follows:
2007 2006 2005
Foreign currency translation adjustment $ (2,713 ) $ 7,044 $ 9,842
Adjustment related to the adoption of SFAS
No. 158, net of tax 1,484 – –
Minimum pension liability adjustment, net of tax 184 225 2,302
Unrealized loss (gain) on derivative
instruments, net of tax 3,942 (420) (563)
Total accumulated other comprehensive loss $ 2,897 $ 6,849 $ 11,581
New Accounting Pronouncements
In September 2006, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstate-
ments in Current Year Financial Statements” (SAB No. 108). Due
to diversity in practice among registrants, SAB No. 108 expresses
SEC staff views regarding the process by which misstatements in
financial statements are evaluated for purposes of determining
whether financial statement restatement is necessary. We adopted
the provisions of SAB No. 108 as of October 31, 2007, as required.
The adoption of SAB No. 108 did not have an impact on our
consolidated financial position or results of operations.
In October 2006, the Financial Accounting Standards Board
(FASB) issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans.” SFAS No. 158
requires employers to recognize on their balance sheets the
funded status of pension and other postretirement benefit plans. In
addition, employers will recognize, as a component of other
comprehensive income, changes in the funded status of pension
and other postretirement benefit plans, such as actuarial gains and
losses and prior service costs that arise during the year but are not
recognized as components of net periodic benefit cost. SFAS
No. 158 will require the measurement date of plan assets and
benefit obligations to be as of the end of the employer’s fiscal year.
We adopted the provisions of SFAS No. 158, which require the
funded status of pension and other postretirement benefit plans to
be recorded on the balance sheet as of October 31, 2007, as
required, and we will adopt the provisions that require the