SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of Consolidation

The consolidated financial statements reflect the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany profits, transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior periods to confirm to the current year presentation. These reclassifications had no effect on net income for the periods previously reported.

b. Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that directly affect the amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

c. Revenue Recognition

The Company recognizes revenue from the sale of its products when the customer has made a fixed commitment to purchase a product for a fixed or determinable price, collection is reasonably assured under the Company’s billing and credit terms and ownership and all risk of loss has been transferred to the buyer, which is normally upon shipment to or pick up by the customer. Revenues exclude all taxes collected from the customer. Shipping and handling fees are included in Net Sales and the associated costs included in Cost of Sales in the Consolidated Statements of Operations.

d. Used Trailer Trade Commitments and Residual Value Guarantees

The Company has commitments with certain customers to accept used trailers on trade for new trailer purchases. These commitments arise in the normal course of business related to future new trailer orders at the time a new trailer order is placed by the customer. The Company acquired used trailers on trade of approximately $16.2 million, $8.1 million and $2.9 million in 2011, 2010 and 2009, respectively. As of December 31, 2011 and 2010, the Company had approximately $23.3 million and $8.2 million, respectively, of outstanding trade commitments. On occasion, the amount of the trade allowance provided for in the used trailer commitments, or cost, may exceed the net realizable value of the underlying used trailer. In these instances, the Company’s policy is to recognize the loss related to these commitments at the time the new trailer revenue is recognized. Net realizable value of used trailers is measured considering market sales data for comparable types of trailers. The net realizable value of the used trailers subject to the remaining outstanding trade commitments was estimated by the Company to be approximately $23.0 million and $7.7 million as of December 31, 2011 and 2010, respectively.

e. Accounts Receivable

Accounts receivable are shown net of allowance for doubtful accounts and primarily include trade receivables. The Company records and maintains a provision for doubtful accounts for customers based upon a variety of factors including the Company’s historical experience, the length of time the account has been outstanding and the financial condition of the customer. If the circumstances related to specific customers were to change, the Company’s estimates with respect to the collectability of the related accounts could be further adjusted. The Company’s policy is to write-off receivables when it is determined to be uncollectible. Provisions to the allowance for doubtful accounts are charged to both General and Administrative Expenses and Selling Expenses in the Consolidated Statements of Operations. The following table presents the changes in the allowance for doubtful accounts (in thousands):


	Years Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	2,241		$	2,790		$	2,183
(Income) expense		(981	)		60			680
Write-offs, net		(27	)		(609	)		(73	)
Balance at end of year	$	1,233		$	2,241		$	2,790

f. Inventories

Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method, or market. The cost of manufactured inventory includes raw material, labor and overhead. Inventories consist of the following (in thousands):


	December 31,
	2011		2010
Raw materials and components	$	54,000	$	27,970
Work in progress		2,332		4,025
Finished goods		115,095		70,371
Aftermarket parts		5,762		4,486
Used trailers		12,344		3,998
	$	189,533	$	110,850

g. Prepaid Expenses and Other

Prepaid expenses and other as of December 31, 2011 and 2010 were $2.3 million and $2.2 million, respectively. Prepaid expenses and other primarily includes items such as insurance premiums, software licenses and maintenance agreements and are charged to expense over the contractual life which is generally one year or less.

h. Property, Plant and Equipment

Property, plant and equipment are recorded at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred, while expenditures that extend the useful life of an asset are capitalized. Depreciation is recorded using the straight-line method over the estimated useful lives of the depreciable assets. The estimated useful lives are up to 33 years for buildings and building improvements and range from three to ten years for machinery and equipment. Depreciation expense, which is recorded in Cost of Sales and General and Administrative Expenses in the Consolidated Statements of Operations, as appropriate, on property, plant and equipment was $10.2 million, $11.3 million and $13.8 million for 2011, 2010 and 2009, respectively, and includes amortization of assets recorded in connection with the Company’s capital lease agreements. In July 2008, the Company entered into a non-cash capital lease obligation for its manufacturing facility in Cadiz, Kentucky totaling $5.3 million. In 2010, the Company renegotiated the terms of the lease to reflect the current market value of the facility, reducing the total lease obligation to $4.7 million. Furthermore, in February 2012, the Company renegotiated a new, ten-year lease extension resulting in a capital lease obligation for this facility of $2.7 million and a cash payment at closing of $0.8 million. As of December 31, 2011 and 2010, the assets related to the Company’s capital lease agreements are recorded within Property, Plant and Equipment in the Consolidated Balance Sheet for the amount of $6.7 million and $5.2 million, respectively, net of accumulated depreciation of $0.8 million and $0.4 million, respectively.

Property, plant and equipment consist of the following (in thousands):


	December 31,
	2011			2010
Land	$	21,387		$	21,392
Buildings and building improvements		92,507			91,998
Machinery and equipment		159,825			157,066
Construction in progress		4,864			1,338
	$	278,583		$	271,794
Less: accumulated depreciation		(181,992	)		(172,960	)
	$	96,591		$	98,834

i. Intangible Assets

The Company has intangible assets including patents, licenses, trade names, trademarks and customer relationships, which are being amortized on a straight-line basis over periods ranging up to 20 years. As of December 31, 2011 and 2010, the Company had gross intangible assets of $54.0 million. Amortization expense for 2011, 2010 and 2009 was $3.0 million, $3.1 million and $3.1 million, respectively, and is estimated to be $3.0 million per year for the years 2012 through 2016.

j. Other Assets

The Company capitalizes the cost of computer software developed or obtained for internal use. Capitalized software is amortized using the straight-line method over three to seven years. As of December 31, 2011 and 2010, the Company had software costs, net of amortization, of $3.1 million and $5.2 million, respectively. Amortization expense for 2011, 2010 and 2009 was $2.3 million, $2.4 million and $2.6 million, respectively.

k. Long-Lived Assets

Long-lived assets, consisting primarily of intangible assets and property, plant and equipment, are reviewed for impairment whenever facts and circumstances indicate that the carrying amount may not be recoverable. Specifically, this process involves comparing an asset’s carrying value to the estimated undiscounted future cash flows the asset is expected to generate over its remaining life. If this process were to result in the conclusion that the carrying value of a long-lived asset would not be recoverable, a write-down of the asset to fair value would be recorded through a charge to operations. Fair value is determined based upon discounted cash flows or appraisals as appropriate.

l. Other Accrued Liabilities

The following table presents the major components of Other Accrued Liabilities (in thousands):


	Years Ended December 31,
	2011		2010
Warranty	$	11,437	$	11,936
Payroll and related taxes		14,237		8,667
Self-insurance		5,390		5,403
Accrued taxes		6,239		6,255
Customer deposits		16,282		2,689
All other		5,439		3,946
	$	59,024	$	38,896

The following table presents the changes in the product warranty accrual included in Other Accrued Liabilities (in thousands):


	2011			2010
Balance as of January 1	$	11,936		$	14,782
Provision for warranties issued in current year		3,667			2,341
Recovery of pre-existing warranties		(1,992	)		(3,160	)
Payments		(2,174	)		(2,027	)
Balance as of December 31	$	11,437		$	11,936

The Company offers a limited warranty for its products. With respect to Company products manufactured prior to 2005, the limited warranty coverage period is five years. Beginning in 2005, the coverage period for DuraPlate® trailer panels was extended to ten years, with all other product components remaining at five years. The Company passes through component manufacturers’ warranties to our customers. The Company’s policy is to accrue the estimated cost of warranty coverage at the time of the sale.

The following table presents the changes in the self-insurance accrual included in Other Accrued Liabilities (in thousands):


	Self-Insurance Accrual
Balance as of January 1, 2010	$	6,838
Expense		12,004
Payments		(13,439	)
Balance as of December 31, 2010	$	5,403
Expense		16,466
Payments		(16,479	)
Balance as of December 31, 2011	$	5,390

The Company is self-insured up to specified limits for medical and workers’ compensation coverage. The self-insurance reserves have been recorded to reflect the undiscounted estimated liabilities, including claims incurred but not reported, as well as catastrophic claims as appropriate.

m. Income Taxes

The Company determines its provision or benefit for income taxes under the asset and liability method. The asset and liability method measures the expected tax impact at current enacted rates of future taxable income or deductions resulting from differences in the tax and financial reporting basis of assets and liabilities reflected in the Consolidated Balance Sheets. Future tax benefits of tax losses and credit carryforwards are recognized as deferred tax assets. Deferred tax assets are reduced by a valuation allowance to the extent management determines that it is not more-likely-than-not the Company would realize the value of these assets.

The Company accounts for income tax contingencies by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements.

n. Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and customer receivables. We place our cash with high quality financial institutions. Generally, we do not require collateral or other security to support customer receivables.

o. New Accounting Pronouncements

During 2011, there were no new accounting pronouncements that had or are expected to have a material impact to the Company’s financial position, results of operations or cash flows.