Toro 2010 Annual Report Download - page 55

2ACQUISITIONS AND DIVESTITURE 3INVESTMENT IN JOINT VENTURE
On October 29, 2010, the company completed the acquisition of On August 12, 2009, the company and TCFIF, a subsidiary of TCF
certain assets and assumed certain liabilities of one of its indepen- National Bank, established Red Iron as a joint venture to provide
dent U.S. Western-based distribution companies. On April 30, inventory financing, including floor plan and open account receiva-
2010, the company completed the purchase of certain assets and ble financing, to distributors and dealers of the company’s products
assumed certain liabilities from USPraxis, Inc., a manufacturer of in the U.S. and to select distributors of the company’s products in
stump grinders, wood chippers, and log splitters for rental centers Canada. The initial term of Red Iron will continue until October 31,
and landscape professionals. On December 1, 2009, the com- 2014, subject to unlimited automatic two-year extensions thereaf-
pany’s wholly owned domestic distribution company completed the ter. Either the company or TCFIF may elect not to extend the initial
acquisition of certain assets and assumed certain liabilities of one term or any subsequent term by giving one-year notice to the other
of the company’s independent U.S. Midwestern-based distribution party of its intention not to extend the term. Additionally, in connec-
companies. The aggregate estimated net purchase price of these tion with the joint venture, the company and an affiliate of TCFIF
acquisitions during fiscal 2010 was $9,137, which included cash entered into an arrangement to provide inventory financing to deal-
payments, the issuance of a long-term note, and an estimated ers of the company’s products in Canada. In connection with the
earnout consideration. establishment of Red Iron, the company terminated its agreement
On October 13, 2009, the company completed the purchase of with a third party financing company that previously provided floor
certain assets and assumed certain liabilities for Ty-Crop Manufac- plan financing to dealers of the company’s products in the U.S.
turing Ltd., a leading manufacturer of topdressing and material and Canada. During the first quarter of fiscal 2010, Red Iron began
handling equipment for golf course and sports fields applications. financing open account receivables, as well as floor plan receiv-
The purchase price was $7,900, with $6,400 paid in cash and ables previously financed by such third party financing company.
$1,500 in a long-term note. During the first quarter of fiscal 2009, Red Iron also began financing floor plan receivables during the
the company also completed the sale of a portion of the operations company’s fourth quarter of fiscal 2009.
of its company-owned distributorship. The company sold to Red Iron certain inventory receivables,
On October 10, 2008, the company completed the purchase of including floor plan and open account receivables, from distributors
certain assets and assumed certain liabilities of Southern and dealers of the company’s products, at a purchase price equal
Green, Inc., a leading manufacturer of deep-tine aeration equip- to the face value of the receivables. The initial transactions
ment. On December 6, 2007, the company completed the pur- occurred during the company’s fourth quarter of fiscal 2009 and
chase of Turf Guard wireless monitoring technology from JLH included the sale of the company’s floor plan receivables in the
Labs, LLC, a leader in wireless soil monitoring technology. In aggregate amount of $72,757. A subsequent transaction occurred
accordance with the terms of the asset purchase agreement, as during the company’s first quarter of fiscal 2010 and included the
amended, the company may be obligated to make earn-out pay- sale of open account receivables for customers whose floor plan
ments to JLH Labs, LLC over the six-year period ending Octo- receivables were sold to Red Iron in October 2009, as well as for
ber 31, 2013 based on the financial results of Turf Guard systems. customers whose floor plan receivables were previously financed
The aggregate purchase price of these acquisitions during fiscal by a third party financing company, in the aggregate amount of
2008 was $7,560, with $4,430 paid in cash and $3,130 in $18,108. As the company sold receivables to Red Iron, the com-
long-term notes. pany derecognized receivables from its books upon receipt of cash
The purchase price of these acquisitions was allocated to the from Red Iron for receivables sold. Red Iron purchased $804,083
identifiable assets acquired and liabilities assumed based on esti- of receivables from the company during fiscal 2010.
mates of their fair value, with the excess purchase price for busi- On October 29, 2010, the company and Red Iron amended their
ness acquisitions recorded as goodwill. These acquisitions were repurchase agreement under which Red Iron provides financing for
immaterial based on the company’s consolidated financial condition certain dealers and distributors. Instead of transactions under the
and results of operations. See Note 5 for further details related to agreements being characterized as a sale of receivables from the
the acquired intangible assets. company to Red Iron, the transactions are structured as an
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
Red Iron that extinguishes the obligation of the dealer or distributor
to make payment to the company under the terms of the invoice.
Under separate agreements between Red Iron and the dealers
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