Toro 2008 Annual Report Download - page 40

an increase in purchases of property, plant, and equipment, some- were out of compliance with any debt covenant required by our
what offset by higher amounts of cash utilized last year for credit agreement following the applicable cure period, the banks
acquisitions. could terminate their commitments unless we could negotiate a
covenant waiver from the banks. In addition, our long-term public
Cash Flows Used in Financing Activities. Cash used in financ- notes and debentures could become due and payable if we were
ing activities decreased 3.7 percent in fiscal 2008 compared to unable to obtain a covenant waiver or refinance our short-term
fiscal 2007. This decrease was primarily attributable to lower levels debt under our credit agreement. If our credit rating falls below
of cash used for repurchases of our common stock in fiscal 2008 investment grade and/or our average debt to earnings before inter-
compared to fiscal 2007. Somewhat offsetting this decrease was est, taxes, depreciation, and amortization (EBITDA) ratio falls
additional net proceeds we received in fiscal 2007 from the issu- below a certain level, the interest rate we currently pay on our
ance of senior notes in the principal amount of $125 million in April outstanding short-term debt under the credit agreement would
2007 previously discussed, less the payment of long-term notes in increase. However, the credit commitment could not be cancelled
the principal amount of $75 million in June 2007. In addition, we by the banks based solely on a ratings downgrade. Our debt rating
received less proceeds from stock options exercised and tax bene- for long-term unsecured senior, non-credit enhanced debt was
fits from stock-based awards in fiscal 2008 compared to fiscal unchanged during fiscal 2008 by Standard and Poor’s Ratings
2007. Group at BBB- and by Moody’s Investors Service at Baa3.
Credit Lines and Other Capital Resources Share Repurchase Plan
Our business is seasonal, with accounts receivable balances his- During fiscal 2008, we continued repurchasing shares of our com-
torically increasing between January and April, as a result of mon stock as a means of using excess cash and reducing our
higher sales volumes and extended payment terms made available shares outstanding. In addition, our repurchase programs provided
to our customers and decreasing between May and December shares for use in connection with our equity compensation pro-
when payments are received. The seasonality of production and grams. In May 2008, our Board of Directors authorized the repur-
shipments causes our working capital requirements to fluctuate chase of up to an additional 4,000,000 shares of our common
during the year. Our peak borrowing usually occurs between Janu- stock in open-market or privately negotiated transactions. This
ary and April. Seasonal cash requirements are financed from oper- repurchase authorization has no expiration date but may be termi-
ations and with short-term financing arrangements, including a nated by our Board of Directors at any time. As of October 31,
$225.0 million unsecured senior five-year revolving credit facility 2008, 2,324,248 shares remained available for repurchase under
that expires in January 2012. Interest expense on this credit line is our Board authorization.
determined based on a LIBOR rate plus a basis point spread The following table provides information with respect to repur-
defined in the credit agreement. In addition, our non-U.S. opera- chases of our common stock during the past three fiscal years.
tions maintain unsecured short-term lines of credit of approximately
$16 million. These facilities bear interest at various rates depend- (Dollars in millions, except per share data)
ing on the rates in their respective countries of operation. We also Fiscal years ended October 31 2008 2007 2006
have a letter of credit subfacility as part of our credit agreement. Shares of common stock purchased 2,809,927 3,342,729 3,369,285
Average short-term debt was $60.3 million in fiscal 2008 compared Cost to repurchase common stock $ 110.4 $ 182.8 $ 146.5
to $48.9 million in fiscal 2007, an increase of $11.4 million or Average price paid per share $ 39.27 $ 54.70 $ 43.49
23.2 percent. In fiscal 2007, we received additional net proceeds
from the issuance of $125 million senior notes in April 2007 that OFF-BALANCE SHEET ARRANGEMENTS AND
we used to pay down short-term debt, which was the primary con- CONTRACTUAL OBLIGATIONS
tributor to the increase in average short-term debt in fiscal 2008 We do not customarily enter into off-balance sheet arrangements,
compared to fiscal 2007. As of October 31, 2008, we had except for off-balance sheet arrangements related to our customer
$238.3 million of unutilized availability under our credit agreements. financing activities, inventory purchase commitments, deferred
Significant financial covenants in our credit agreement include compensation arrangements, and operating lease commitments
interest coverage and debt-to-capitalization ratios. We were in disclosed in the contractual obligations table below. Moreover, it is
compliance with all covenants related to our credit agreement as of not our normal policy to issue guarantees to third parties.
October 31, 2008, and we expect to be in compliance with all
covenants during fiscal 2009. Our credit agreement requires com-
pliance with all of the covenants defined in the agreement. If we
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