Toro 2011 Annual Report Download - page 57

condition and results of operations. See Note 5 for further details On October 29, 2010, the company and Red Iron amended their
related to the acquired intangible assets. repurchase agreement under which Red Iron provides financing for
certain dealers and distributors. Instead of transactions under the
agreements being characterized as a sale of receivables from the
company to Red Iron, the transactions are structured as an
3INVESTMENT IN JOINT VENTURE advance in the form of a payment by Red Iron to the company on
behalf of a distributor or dealer with respect to invoices financed by
On August 12, 2009, the company and TCFIF, a subsidiary of TCF
Red Iron, which extinguishes the obligation of the dealer or distrib-
National Bank, established Red Iron, a joint venture in the form of
utor to make payment to the company under the terms of the
a Delaware limited liability company that provides inventory financ-
invoice. Under separate agreements between Red Iron and the
ing, including floor plan and open account receivable financing, to
dealers and distributors, Red Iron provides loans to the dealers
distributors and dealers of the company’s products in the U.S. and
and distributors for the advances paid by Red Iron to the company.
to select distributors of the company’s products in Canada. The
The net amount of new receivables financed for dealers and dis-
initial term of Red Iron will continue until October 31, 2014, subject
tributors under this arrangement during fiscal 2011 was
to unlimited automatic two-year extensions thereafter. Either the
$1,111,778. In fiscal 2010, prior to this amended repurchase
company or TCFIF may elect not to extend the initial term or any
agreement, the company sold receivables to Red Iron and der-
subsequent term by giving one-year notice to the other party of its
ecognized receivables from its books upon receipt of cash from
intention not to extend the term. Additionally, in connection with the
Red Iron for receivables sold. Red Iron purchased $804,083 of
joint venture, the company and an affiliate of TCFIF entered into
receivables from the company during fiscal 2010.
an arrangement to provide inventory financing to dealers of the
Summarized financial information for Red Iron is presented as
company’s products in Canada. In connection with the establish-
follows:
ment of Red Iron, the company terminated its agreement with a
third party financing company that previously provided floor plan
For the twelve months ended October 31 2011 2010 2009
financing to dealers of the company’s products in the U.S. and
Canada. During the first quarter of fiscal 2010, Red Iron began Revenue $17,116 $12,056 $ 393
Net income (loss) 11,070 5,552 (613)
financing open account receivables, as well as floor plan receiv-
ables previously financed by such third party financing company.
Red Iron also began financing floor plan receivables during the As of October 31 2011 2010
company’s fourth quarter of fiscal 2009. Finance receivables, net $232,600 $185,741
The company owns 45 percent of Red Iron and TCFIF owns Other assets 6,960 4,991
55 percent of Red Iron. The company accounts for its investment Total liabilities 213,693 169,193
in Red Iron under the equity method of accounting. Each of the
company and TCFIF contributed a specified amount of the esti-
mated cash required to enable Red Iron to purchase the com-
pany’s inventory financing receivables and to provide financial sup- 4OTHER INCOME (EXPENSE), NET
port for Red Iron’s inventory financing programs. Red Iron borrows Other income (expense) is as follows:
the remaining requisite estimated cash utilizing a $450,000
secured revolving credit facility established under a credit agree-
Fiscal years ended October 31 2011 2010 2009
ment between Red Iron and TCFIF. The company’s total invest-
Interest income $ 1,072 $1,056 $ 898
ment in Red Iron as of October 31, 2011 and 2010 was $11,640
Gross finance charge revenue – – 543
and $9,693, respectively. The company has not guaranteed the Retail financing revenue 966 779 1,716
outstanding indebtedness of Red Iron. The company has agreed to Foreign currency exchange rate (loss) gain (1,751) 813 641
repurchase products repossessed by Red Iron and the TCFIF Income (loss) from affiliates 5,682 2,599 (136)
Canadian affiliate, up to a maximum aggregate amount of $7,500 Litigation recovery (settlements), net 543 57 (6,811)
Miscellaneous 797 1,811 1,318
in a calendar year. In addition, the company has provided recourse
to Red Iron for certain outstanding receivables, which amounted to Total other income (expense), net $ 7,309 $7,115 $(1,831)
a maximum amount of $190 and $731 as of October 31, 2011 and
2010, respectively.
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