Toro 2012 Annual Report Download - page 54
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Please find page 54 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.all other inventories, constituting 31 and 33 percent of total inven- Goodwill and Indefinite-Life Intangible Assets
tories as of October 31, 2012 and 2011, respectively. The com- Goodwill represents the cost of acquisitions in excess of the fair
pany establishes a reserve for excess, slow-moving, and obsolete values assigned to identifiable net assets acquired. Goodwill is
inventory that is equal to the difference between the cost and esti- assigned to reporting units based upon the expected benefit of the
mated net realizable value for that inventory. These reserves are synergies of the acquisition. Goodwill and some trade names,
based on a review and comparison of current inventory levels to which are considered to have indefinite lives, are not amortized;
the planned production, as well as planned and historical sales of however, the company reviews them for impairment annually dur-
the inventory. During fiscal 2012 and 2011, no LIFO inventory lay- ing each fourth fiscal quarter or more frequently if changes in cir-
ers were reduced. cumstances or occurrence of events suggest the remaining value
Inventories as of October 31 were as follows: may not be recoverable.
The company reviewed the fair value of its reporting units that
2012 2011 have goodwill on their respective balance sheets with their corre-
sponding carrying amount (with goodwill) during the fourth quarter
Raw materials and work in progress $ 91,465 $ 94,176
Finished goods and service parts 223,459 189,855 of fiscal 2012. The company determined that it has eight reporting
units, which are the same as its eight operating segments. Six
Total FIFO value 314,924 284,031
Less: adjustment to LIFO value 63,807 61,001 reporting units contain goodwill on their respective balance sheets.
As of August 31, 2012, the company performed an analysis of
Total $251,117 $223,030
qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying
Property and Depreciation amount as a basis for determining whether it is necessary to per-
Property, plant, and equipment are carried at cost. The company form the two-step goodwill impairment test. Based on the com-
provides for depreciation of plant and equipment utilizing the pany’s analysis of qualitative factors, the company determined that
straight-line method over the estimated useful lives of the assets. is was not necessary to perform the two-step goodwill impairment
Buildings, including leasehold improvements, are generally depreci- test for any of its reporting units.
ated over 10 to 45 years, and equipment over two to seven years. As of August 31, 2012, the company also performed an analysis
Tooling costs are generally depreciated over three to five years of qualitative factors to determine whether it is more likely than not
using the straight-line method. Software and web site development that its indefinite-life intangible assets, which consist of certain
costs are generally amortized over two to five years utilizing the trade names, are impaired. Based on the company’s analysis of
straight-line method. Expenditures for major renewals and improve- qualitative factors, the company determined that is was necessary
ments, which substantially increase the useful lives of existing to perform a quantitative impairment analysis of its indefinite-life
assets, are capitalized, and maintenance and repairs are charged intangible assets. Based on the company’s impairment analysis,
to operating expenses as incurred. Interest is capitalized during the the company wrote down $400 of an indefinite-life intangible asset
construction period for significant capital projects. During the fiscal during fiscal 2012. There was no indefinite-life intangible asset
years ended October 31, 2012, 2011, and 2010, the company cap- impairment in fiscal 2011 and 2010.
italized $256, $230, and $131 of interest, respectively.
Property, plant, and equipment as of October 31 was as follows: Other Long-Lived Assets
Other long-lived assets include property, plant, and equipment and
2012 2011 definite-life intangible assets, which are identifiable assets that
Land and land improvements $ 27,325 $ 26,776 arose from purchase acquisitions consisting primarily of patents,
Buildings and leasehold improvements 129,353 129,252 non-compete agreements, customer relationships, trade names,
Machinery and equipment 460,568 434,796 and developed technology, and are amortized on a straight-line
Computer hardware and software 65,861 63,826
basis over periods ranging from 1.5 to 13 years. The company
Subtotal 683,107 654,650 reviews other long-lived assets for impairment whenever events or
Less: accumulated depreciation 502,584 463,510
changes in circumstances indicate that the carrying amount of an
Total property, plant, and equipment, net $180,523 $191,140 asset (or asset group) may not be recoverable. An impairment loss
is recognized when estimated undiscounted future cash flows from
During fiscal years 2012, 2011, and 2010, the company
the operation or disposition of the asset group are less than the
recorded depreciation expense of $46,840, $43,539, and $42,108,
carrying amount of the asset group. Asset groups have identifiable
respectively.
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
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