Toro 2014 Annual Report Download - page 45

to but not exceeding our limited obligation, which could have an Off-Balance Sheet Arrangements and
adverse effect on our operating results. Contractual Obligations
We continue to provide financing in the form of open account The following table summarizes our contractual obligations as of
terms to home centers and mass retailers; general line irrigation October 31, 2014.
dealers; international distributors and dealers other than the Cana-
dian distributors and dealers to whom Red Iron provides financing Payments Due By Period
arrangements; micro-irrigation dealers and distributors; government (Dollars in thousands) Less Than 1-3 3-5 More than
Contractual Obligation 1 Year Years Years 5 Years Total
customers; and rental companies. Beginning in fiscal 2015 as a
Short-term debt
1
$ 20,818 $ – $ – $ – $ 20,818
result of our acquisition of the BOSS business, we will also provide
Long-term debt
1
6,640 26,210 97,500 225,000 355,350
open account financing to distributors and dealers in our BOSS Interest payments
2
17,960 35,267 34,512 204,373 292,112
business until such time as these customers may transition to our Deferred compensation
arrangements
3
514 1,028 599 – 2,141
Red Iron financing joint venture. Purchase obligations
4
18,921 – – – 18,921
Acquisition
5
197,882 30,000 – – 227,882
End-User Financing. We have agreements with third party Operating leases
6
15,308 18,780 9,548 23,886 67,522
financing companies to provide lease-financing options to golf Other
7
15,291 – – – 15,291
course and sports fields and grounds equipment customers in the Total $293,334 $111,285 $142,159 $453,259 $1,000,037
U.S. and select countries in Europe. The purpose of these agree-
1
Principal payments in accordance with our credit facilities and long-term debt
agreements.
ments is to increase sales by giving buyers of our products alter-
2
Interest payments for outstanding short-term and long-term debt obligations. Interest on
native financing options when purchasing our products. We have variable rate debt was calculated using the interest rate as of October 31, 2014.
3
The unfunded deferred compensation arrangements, covering certain current and
no contingent liabilities for residual value or credit collection risk retired management employees, consists primarily of salary and bonus deferrals under
under these agreements with third party financing companies. our deferred compensation plans. Our estimated distributions in the contractual obliga-
tions table are based upon a number of assumptions including termination dates and
From time to time, we enter into agreements where we provide participant elections. Deferred compensation balances are invested according to the
recourse to third party finance companies in the event of default by election of the participant in an array of funds that is substantially similar to the array of
funds offered under The Toro Company Investment, Savings and Employee Stock
the customer for lease payments to the third party finance com-
Ownership Plan, and are payable at the election of the participant.
pany. Our maximum exposure for credit collection under those
4
Purchase obligations represent contracts or commitments for the purchase of raw
arrangements as of October 31, 2014 was $1.9 million. materials.
5
As of October 27, 2014, we entered into an Asset Purchase Agreement for the acquisi-
Termination or any material change to the terms of our end-user tion of the BOSS business, which was subject to certain closing conditions. On Novem-
financing arrangements, availability of credit for our customers, ber 14, 2014, this acquisition closed for $227.9 million, subject to certain post-closing
adjustments, which included a cash payment of $197.9 million and issuance of a
including any delay in securing replacement credit sources, or sig- long-term note of $30.0 million.
nificant financed product repurchase requirements could have a
6
Operating lease obligations do not include payments to property owners covering real
estate taxes and common area maintenance.
material adverse impact on our future operating results.
7
Payment obligation in connection with the renovation of our original corporate facility
located at Bloomington, Minnesota.
Distributor Financing. From time to time, we enter into
long-term loan agreements with some distributors. These transac- As of October 31, 2014, we also had $16.2 million in outstanding
tions are used for expansion of the distributors’ businesses, acqui- letters of credit issued, including standby letters of credit, during
sitions, refinancing working capital agreements, or facilitation of the normal course of business, as required by some vendor con-
ownership changes. As of October 31, 2014, we had an outstand- tracts. In addition to the above contractual obligations, we may be
ing note receivable in the amount of $1.1 million, which is included obligated for additional cash outflows of $5.2 million of unrecog-
in other current and long-term assets on our consolidated balance nized tax benefits, including interest and penalties. The payment
sheet. 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
examination by the relevant taxing authorities.
Market Risk
Due to the nature and scope of our operations, we are subject to
exposures that arise from fluctuations in interest rates, foreign cur-
rency exchange rates, and commodity prices. We are also
exposed to equity market risk pertaining to the trading price of our
common stock. Additional information is presented in Part II,
Item 7A, ‘‘Quantitative and Qualitative Disclosures about Market
Risk,’’ and Note 14 of the Notes to Consolidated Financial
Statements.
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