Toro 2013 Annual Report Download - page 43

note receivables in the aggregate of $1.1 million from two compa- fiscal 2012, which benefited our gross margin growth rate in fiscal
nies, which is included in other current assets on our consolidated 2013 as compared to fiscal 2012. We will continue to closely follow
balance sheet. commodities that affect our product lines, and we anticipate aver-
age prices paid for some commodities to be higher in fiscal 2014
Off-Balance Sheet Arrangements and as compared to fiscal 2013. Historically, we have mitigated, and
Contractual Obligations we currently expect to continue to mitigate, commodity cost
The following table summarizes our contractual obligations as of increases, in part, by collaborating with suppliers, reviewing alter-
October 31, 2013. native sourcing options, substituting materials, engaging in internal
cost reduction efforts, and increasing prices on some of our prod-
Payments Due By Period ucts, all as appropriate.
(Dollars in thousands) Less Than 1-3 3-5 More than
Contractual Obligation 1 Year Years Years 5 Years Total
Acquisitions
Long-term debt
1
$ – $ – $ – $225,000 $225,000
Interest payments 16,081 32,162 32,163 228,254 308,660 On September 30, 2013, during the fourth quarter of fiscal 2013,
Deferred compensation we completed the acquisition of certain assets and assumed cer-
arrangements
2
665 1,014 1,014 84 2,777
Purchase obligations
3
26,997 – – – 26,997 tain liabilities for a company in China that manufactures water-
Operating leases
4
14,632 21,851 9,495 27,187 73,165 efficient drip irrigation products, sprinklers, emitters, and filters for
Other
5
1,395 – – – 1,395 agriculture, landscaping, and green house production. The
Total $59,770 $55,027 $42,672 $480,525 $637,994 purchase price of this acquisition was $3.5 million.
1
Principal payments in accordance with our long-term debt agreements. On April 25, 2012, during the second quarter of fiscal 2012, we
2
The unfunded deferred compensation arrangements, covering certain current and
retired management employees, consists primarily of salary and bonus deferrals under completed the acquisition of certain assets for an equipment line of
our deferred compensation plans. Our estimated distributions in the contractual obliga- concrete and mortar mixers, material handlers, compaction equip-
tions table are based upon a number of assumptions, including termination dates and
participant elections. Deferred compensation balances are invested according to the ment, and other concrete power tools for the rental and construc-
election of the participant in an array of funds that is substantially similar to the array of tion market. On February 10, 2012, also during the second quarter
funds offered under The Toro Company Investment, Savings and Employee Stock
Ownership Plan, and are payable at the election of the participant. of fiscal 2012, we completed the acquisition of certain assets and
3
Purchase obligations represent contracts or commitments for the purchase of raw assumed certain liabilities for an equipment line of vibratory plows,
materials and capital expenditures, including expansion of our corporate facilities.
4
Operating lease obligations do not include payments to property owners covering real trenchers, and horizontal directional drills for the construction mar-
estate taxes and common area maintenance. ket. On December 9, 2011, during the first quarter of fiscal 2012,
5
Payment obligation issued in connection with an acquisition. we completed the acquisition of certain assets and assumed cer-
As of October 31, 2013, we also had $12.7 million in outstanding tain liabilities for a greens roller product line for the golf course
letters of credit issued, including standby letters of credit, during market. The aggregate purchase price of these acquisitions was
the normal course of business, as required by some vendor con- $11.1 million.
tracts. In addition to the above contractual obligations, we may be These acquisitions were immaterial based on our consolidated
obligated for additional cash outflows of $4.6 million of unrecog- financial condition and results of operations and all were
nized tax benefits, including interest and penalties. The payment accounted for as business combinations.
and timing of any such payments is affected by the ultimate resolu-
tion of the tax years that are under audit or remain subject to CRITICAL ACCOUNTING POLICIES AND ESTIMATES
examination by the relevant taxing authorities. In preparing our consolidated financial statements in conformity
with U.S. generally accepted accounting principles (‘‘GAAP’’), we
Market Risk must make decisions that impact the reported amounts of assets,
Due to the nature and scope of our operations, we are subject to liabilities, revenues and expenses, and related disclosures. Such
exposures that arise from fluctuations in interest rates, foreign cur- decisions include the selection of the appropriate accounting princi-
rency exchange rates, and commodity prices. We are also ples to be applied and the assumptions on which to base account-
exposed to equity market risk pertaining to the trading price of our ing estimates. In reaching such decisions, we apply judgments
common stock. Additional information is presented in Part II, based on our understanding and analysis of the relevant circum-
Item 7A, ‘‘Quantitative and Qualitative Disclosures about Market stances, historical experience, and actuarial valuations. Actual
Risk,’’ and Note 14 of the Notes to Consolidated Financial amounts could differ from those estimated at the time the consoli-
Statements. dated financial statements are prepared.
Our significant accounting policies are described in Note 1 of the
Inflation Notes to Consolidated Financial Statements. Some of those signifi-
We are subject to the effects of inflation, deflation, and changing cant accounting policies require us to make difficult subjective or
prices. During fiscal 2013, we experienced lower average commod-
ity costs compared to the average prices paid for commodities in
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