Toro 2010 Annual Report Download - page 66

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The following table presents the impact of derivative instruments on the consolidated statements of earnings for the company’s derivatives
designed as cash flow hedging instruments for the fiscal years ended October 31, 2010 and 2009, respectively.
Gain (Loss) Recognized
Gain (Loss) Location of Gain (Loss) Recognized in in Income on Derivatives
Recognized in OCI on Location of Gain (Loss) Reclassified Gain (Loss) Reclassified Income on Derivatives (Ineffective (Ineffective Portion and
Derivatives from AOCL into Income from AOCL into Income Portion and excluded from Excluded from
(Effective Portion) (Effective Portion) (Effective Portion) Effectiveness Testing) Effectiveness Testing)
October 31, October 31, October 31, October 31, October 31, October 31,
For the fiscal year ended 2010 2009 2010 2009 2010 2009
Foreign exchange contracts $(6,177) $ 7,371 Net sales $(1,294) $11,777 Other income (expense), net $(55) $183
Foreign exchange contracts 976 (4,444) Cost of sales 272 (4,205)
Total $(5,201) $ 2,927 $(1,022) $ 7,572
As of October 31, 2010, the company anticipates to reclassify not active; or other inputs that are observable or can be corrobo-
approximately $3,737 of losses from AOCL to earnings during the rated by observable market data for substantially the full term of
next twelve months. the assets or liabilities.
The following table presents the impact of derivative instruments Level 3 – Unobservable inputs reflecting management’s assump-
on the consolidated statements of earnings for the company’s tions about the inputs used in pricing the asset or liability.
derivatives not designated as hedging instruments. Assets and liabilities measured at fair value on a recurring basis,
as of October 31, 2010 and 2009, respectively, are summarized
Gain (Loss) Recognized below:
in Net Earnings
Location of Gain (Loss) Fiscal Year Ended Fair
Recognized in October 31, October 31, October 31, 2010 Value Level 1 Level 2 Level 3
Net Earnings 2010 2009
Assets:
Foreign exchange contracts Other income (expense), net $1,619 $(10,282) Cash and cash equivalents $177,366 $177,366 – –
During the second quarter of fiscal 2007, the company entered Total assets $177,366 $177,366 – –
into three treasury lock agreements based on a 30-year U.S. Trea- Liabilities:
sury security with a principal balance of $30,000 for two of the Foreign exchange contracts $ 6,512 – $ 6,512 –
agreements and $40,000 for the third agreement. These treasury Deferred compensation
lock agreements provided for a single payment at maturity, which liabilities 4,994 – 4,994 –
was April 23, 2007, based on the change in value of the reference Total liabilities $ 11,506 – $11,506 –
treasury security. These agreements were designated as cash flow
hedges and resulted in a net settlement of $182, which was Fair
October 31, 2009 Value Level 1 Level 2 Level 3
recorded in accumulated other comprehensive loss, and will be
amortized to interest expense over the 30-year term of the senior Assets:
Cash and cash equivalents $187,773 $187,773 – –
notes. The unrecognized loss portion of the fair value of these
agreements in accumulated other comprehensive loss as of Octo- Total assets $187,773 $187,773 – –
ber 31, 2010 and 2009 was $161 and $167, respectively. Liabilities:
Foreign exchange contracts $ 6,779 – $ 6,779 –
Fair Value Deferred compensation liabilities 5,814 – 5,814 –
The company categorizes its assets and liabilities into one of three Total liabilities $ 12,593 – $12,593 –
levels based on the assumptions (inputs) used in valuing the asset Cash and cash equivalents are valued at their carrying amounts
or liability. Level 1 provides the most reliable measure of fair value, in the consolidated balance sheets, which are reasonable esti-
while Level 3 generally requires significant management judgment. mates of their fair value due to their short maturities. Foreign cur-
The three levels are defined as follows: rency forward exchange contracts are valued at fair market value
Level 1 – Unadjusted quoted prices in active markets for identi- using the market approach based on exchange rates as of the
cal assets or liabilities. reporting date, which is the amount the company would receive or
Level 2 – Observable inputs other than Level 1 prices, such as pay to terminate the contracts. The unfunded deferred compensa-
quoted prices for similar assets or liabilities in active markets; tion liability is primarily subject to changes in fixed-income invest-
quoted prices for identical assets or liabilities in markets that are ment contracts based on current yields. For accounts receivable
60