1.
Summary of Significant Accounting Policies, continued
At September 30, 2001, the Company expects to reclassify ($167,000)
of net gains (losses) on derivative instruments from accumulated other
comprehensive income to earnings during the next twelve months due to
actual export sales and the payment of variable interest associated
with the floating rate debt.
Hedge
of Net Investment in Foreign Operations
The Company uses foreign denominated variable debt to protect the value
of its investments in its foreign subsidiaries in Italy. Realized and
unrealized gains and losses from these hedges are not included in the
income statement, but are shown in the cumulative translation adjustment
account included in other comprehensive income, with the related amounts
due to or from counterparties included in other liabilities or other
assets.
During the year
ended September 30, 2001, the Company recognized $1,094,000 of net gains
(losses), included in the cumulative translation adjustment, related
to the foreign denominated variable-rate debt.
Financial
Instruments
The carrying value of the Company’s financial instruments, including
cash and temporary investments, accounts receivable, accounts payable
and long-term debt, as reported in the accompanying consolidated balance
sheets at September 30, 2001 and 2000, approximates fair value. The
estimated fair value of the interest rate swap agreement outstanding
at September 30, 2001 of ($429,000) is the amount the Company would
be required to pay to terminate the swap agreement at September 30,
2001.
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Cash
and Temporary Investments
Cash and temporary investments include cash on hand, amounts due from
banks and highly liquid marketable securities with maturities of three
months or less at the date of purchase.
Inventories
Inventories are stated using product specific standard costs which approximate
the lower of cost or market determined on a first-in, first-out (FIFO)
basis. Inventories consist of the following:
Property,
Plant and Equipment
Capital additions, improvements and major renewals are classified as property,
plant and equipment and are recorded at cost. Depreciation is calculated
for financial statement purposes using the straight-line method over the
estimated useful life of the related asset for each year as follows:
The Company capitalizes interest costs associated with the construction
and installation of plant and equipment. During the years ended September
30, 2001, 2000 and 1999, approximately $2,567,000, $2,086,000 and $2,713,000,
respectively, of interest cost was capitalized.
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