Toro 2012 Annual Report Download - page 45
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Please find page 45 of the 2012 Toro annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.During the second quarter of fiscal 2007, we entered into three part of the purchase process. We generally attempt to obtain firm
treasury lock agreements based on a 30-year U.S. Treasury secur- pricing from most of our suppliers for volumes consistent with
ity with a principal balance of $30 million for two of the agreements planned production. To the extent that commodity prices increase
and $40 million for the third agreement. These treasury lock agree- and we do not have firm pricing from our suppliers, or our suppli-
ments provided for a single payment at maturity, which was ers are not able to honor such prices, we may experience a
April 23, 2007, based on the change in value of the reference decline in our gross margins to the extent we are not able to
treasury security. These agreements were designated as cash flow increase selling prices of our products or obtain manufacturing effi-
hedges and resulted in a net settlement of $0.2 million. This loss ciencies to offset increases in commodity costs. Further information
was recorded in accumulated other comprehensive loss, and will regarding rising prices for commodities is presented in Part II,
be amortized to interest expense over the 30-year term of the Item 7, ‘‘Management’s Discussion and Analysis of Financial Con-
senior notes. dition and Results of Operations’’ of this report in the section enti-
tled ‘‘Inflation.’’ We enter into fixed-price contracts for future
Commodity Risk. We are subject to market risk from fluctuating purchases of natural gas in the normal course of operations as a
market prices of certain purchased commodity raw materials means to manage natural gas price risks. Our manufacturing facili-
including steel, aluminum, fuel, petroleum-based resin, and ties enter into these fixed-price contracts for approximately 30 to
linerboard. In addition, we are a purchaser of components and 80 percent of their monthly-anticipated usage.
parts containing various commodities, including steel, aluminum,
copper, lead, rubber, and others that are integrated into our end Equity Price Risk. The trading price volatility of our common
products. While such materials are typically available from numer- stock impacts compensation expense related to our stock-based
ous suppliers, commodity raw materials are subject to price fluctu- compensation plans. Further information is presented in Note 10 of
ations. We generally buy these commodities and components the Notes to Consolidated Financial Statements regarding our
based upon market prices that are established with the vendor as stock-based compensation plans.
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