Toro 2008 Annual Report Download - page 53

Property, plant, and equipment as of October 31 was as follows: Insurance
The company is self-insured for certain losses relating to medical,
2008 2007 dental, workers’ compensation, and product liability claims. Specific
stop loss coverages are provided for catastrophic claims in order
Land and land improvements $ 22,694 $ 22,670
Buildings and leasehold improvements 111,796 111,789 to limit exposure to significant claims. Losses and claims are
Machinery and equipment 331,079 394,942 charged to operations when it is probable a loss has been incurred
Computer hardware and software 52,967 47,681 and the amount can be reasonably estimated. Accrued insurance
Subtotal 518,536 577,082 liabilities are based on claims filed and estimates of claims
Less: accumulated depreciation 349,669 406,410 incurred but not reported.
Total property, plant, and equipment, net $168,867 $170,672
During fiscal years 2008, 2007, and 2006, the company Derivatives
recorded depreciation expense of $46,099, $40,529, and $41,219, Derivatives, consisting mainly of forward currency contracts, are
respectively. used to hedge most foreign currency transactions, including fore-
casted sales and purchases denominated in foreign currencies.
Goodwill and Other Intangible Assets Derivatives are recognized on the balance sheet at fair value. If
Goodwill represents the excess of the purchase price over the fair the derivative is designated as a cash flow hedge, the effective
value of net assets of businesses acquired and accounted for by portion of the change in the fair value of the derivative is recorded
the purchase method of accounting. Statement of Financial to a separate component of stockholders’ equity, captioned accu-
Accounting Standards (SFAS) No. 142, ‘‘Goodwill and Other Intan- mulated other comprehensive loss, and recognized in earnings
gible Assets,’’ requires that goodwill and certain other tangible when the hedged item affects earnings. Derivatives that do not
assets having indefinite lives no longer be amortized, but instead meet the requirements for hedge accounting are adjusted to fair
be tested annually for impairment or more frequently if events sug- value through other income, net in the consolidated statements of
gest the remaining value may not be recoverable. earnings.
Other intangible assets with determinable lives consist primarily
of patents, non-compete agreements, customer relationships, and Foreign Currency Translation and Transactions
developed technology that are amortized on a straight-line basis The functional currency of the company’s foreign operations is the
over periods ranging from two to 13 years. applicable local currency. The functional currency is translated into
U.S. dollars for balance sheet accounts using current exchange
Impairment of Long-Lived Assets rates in effect as of the balance sheet date and for revenue and
The company reviews long-lived assets, including intangible assets expense accounts using a weighted-average exchange rate during
and goodwill, for impairment annually or more frequently if the fiscal year. The translation adjustments are deferred as a sep-
changes in circumstances or the occurrence of events suggest the arate component of stockholders’ equity captioned accumulated
remaining value may not be recoverable. An asset is deemed other comprehensive loss. Gains or losses resulting from transac-
impaired and written down to its fair value if estimated related tions denominated in foreign currencies are included in other
future cash flows are less than its carrying value. Based on the income, net in the consolidated statements of earnings.
company’s annual analysis during fiscal 2008, 2007, and 2006, no
material long-lived assets were deemed impaired. Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
Accrued Warranties consequences attributable to differences between the financial
The company provides an accrual for estimated future warranty statement carrying amounts of existing assets and liabilities and
costs at the time of sale. The amount of the liability is based upon their respective tax bases. Deferred tax assets and liabilities are
the historical relationship of warranty claims to sales by product measured using enacted tax rates expected to apply to taxable
line and major rework campaigns. The changes in warranty income in the years that those temporary differences are expected
reserves were as follows: to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
Fiscal years ended October 31 2008 2007 period that includes the enactment date. A valuation allowance is
Beginning Balance $ 62,030 $ 65,235 provided when, in management’s judgment, it is more likely than
Warranty provisions 42,733 44,040 not that some portion or all of the deferred tax asset will not be
Warranty claims (43,630) (44,416) realized. The company has reflected the necessary deferred tax
Changes in estimates (2,447) (2,829) assets and liabilities in the accompanying consolidated balance
Addition from acquisition 84 –
sheets. Management believes the future tax deductions will be
Ending Balance $ 58,770 $ 62,030 realized principally through carryback to taxable income in prior
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