Toro 2009 Annual Report Download - page 57

Mower. Allen Hover Mower sells walk power mowers worldwide for in the aggregate amount of $18,108. As the company sells receiv-
the golf course and grounds maintenance markets that are specifi- ables to Red Iron, the company has and will continue to der-
cally designed to perform well on steep inclines. ecognize non-recourse receivables from its books upon receipt of
The purchase price of these acquisitions was allocated to the cash from Red Iron for receivables sold.
identifiable assets acquired and liabilities assumed based on esti- The company owns 45 percent of Red Iron and TCFIF owns
mates of their fair value, with the excess purchase price for busi- 55 percent of Red Iron. The company accounts for its investment
ness acquisitions recorded as goodwill. These acquisitions were in Red Iron under the equity method of accounting. Red Iron is
immaterial based on the company’s consolidated financial condition managed through a management committee consisting of eight
and results of operations. See Note 5 for further details related to persons, four of whom are designated by the company and four of
the acquired intangible assets. whom are designated by TCFIF. Each of the company and TCFIF
contributed a specified amount of the estimated cash required to
enable Red Iron to purchase the company’s inventory financing
receivables and to provide financial support for Red Iron’s inven-
3INVESTMENT IN JOINT VENTURE tory financing programs. Red Iron borrows the remaining requisite
estimated cash utilizing a $450,000 secured revolving credit facility
On August 12, 2009, the company and TCFIF, a subsidiary of TCF
established under a credit agreement between Red Iron and
National Bank, established a joint venture in the form of a Dela-
TCFIF. The company’s total investment in Red Iron as of Octo-
ware limited liability company named Red Iron Acceptance, LLC
ber 31, 2009 was $3,535. The company has not guaranteed the
(Red Iron) to provide inventory financing, including floor plan and
outstanding indebtedness of Red Iron. The company has agreed to
open account receivable financing, to distributors and dealers of
repurchase products repossessed by Red Iron, up to a maximum
the company’s products in the U.S. and to select distributors of the
aggregate amount of $7,500 in a calendar year. In addition, the
company’s products in Canada. The initial term of the joint venture
company has provided recourse to Red Iron for certain outstanding
will continue until October 31, 2014, subject to unlimited automatic
receivables, which amounted to $4,529 as of October 31, 2009.
two-year extensions thereafter. Either the company or TCFIF may
After the initial transactions of receivables sold, Red Iron pur-
elect not to extend the initial term or any subsequent term by giv-
chased $16,667 of receivables from the company during fiscal
ing one-year notice to the other party of its intention not to extend
2009. As of October 31, 2009, Red Iron’s total assets were
the term. Additionally, in connection with the joint venture, the
$65,894 and total liabilities were $58,038. Red Iron’s net loss from
company and an affiliate of TCFIF entered into an arrangement to
operations through October 31, 2009 was $613.
provide inventory financing to dealers of the company’s products in
Canada. In connection with the establishment of the joint venture,
the company terminated its agreement with a third party financing
company that previously provided floor plan financing to dealers of 4OTHER (EXPENSE) INCOME, NET
the company’s products in the U.S. and Canada. Red Iron began
financing floor plan receivables during the company’s fourth quarter Other income (expense) is as follows:
of fiscal 2009.
With respect to the joint venture, the company sold to Red Iron Fiscal years ended October 31 2009 2008 2007
certain inventory receivables, including floor plan and open account Interest income $ 898 $ 1,856 $ 3,148
receivables, from distributors and dealers of the company’s prod- Gross finance charge revenue 543 1,032 1,791
Retail financing revenue 1,716 2,717 1,786
ucts, at a purchase price equal to the face value of the receiv-
Foreign currency exchange rate gain (loss) 641 (5,041) 1,330
ables. The initial transactions occurred during the company’s fourth Gain on sale of a business – 113 –
quarter of fiscal 2009 and included the sale of the company’s floor Equity losses from investments (136) (859) (361)
plan receivables in the aggregate amount of $72,757. A subse- Litigation settlements, net (6,811) 1,025 50
quent transaction occurred during the company’s first quarter of Miscellaneous 1,318 1,370 1,279
fiscal 2010 and included the sale of open account receivables for Total other (expense) income, net $(1,831) $ 2,213 $ 9,023
customers whose floor plan receivables were sold to Red Iron in
October 2009, as well as for customers whose floor plan receiv-
ables were previously financed by a third party financing company,
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