Toro 2010 Annual Report Download - page 57

effective interest rate method. The underwriting fee and direct debt
issue costs totaling $1,524 will be amortized over the life of the
6SHORT-TERM CAPITAL RESOURCES notes. Although the coupon rate of the senior notes is 6.625%, the
effective interest rate is 6.741% after taking into account the issu-
As of October 31, 2010, the company had a $225,000 unsecured ance discount. Interest on the senior notes is payable
senior five-year revolving credit facility that expires in January semi-annually on May 1 and November 1 of each year. The senior
2012. The company had no outstanding borrowings under this notes are unsecured senior obligations of the company and rank
credit facility as of October 31, 2010 or 2009. Interest expense on equally with the company’s other unsecured and unsubordinated
this credit line is determined based on a LIBOR rate plus a basis indebtedness from time to time outstanding. The indentures under
point spread defined in the credit agreement. The company had no which the senior notes were issued contain customary covenants
outstanding short-term debt as of October 31, 2010 and 2009 and event of default provisions. The company may redeem some
under this line of credit. On November 9, 2010, the company or all of the senior notes at any time at the greater of the full
amended the terms of its credit agreement to better match its principal amount of the senior notes being redeemed or the pre-
financing needs to its ongoing capital requirements. The amend- sent value of the remaining scheduled payments of principal and
ment included the following changes: (i) replace the interest discounted to the redemption date on a semi-annual basis
debt-to-capitalization covenant with a debt to earnings before inter- at the treasury rate plus 30 basis points, plus, in both cases,
est, taxes, depreciation, and amortization (‘‘EBITDA’’) covenant accrued and unpaid interest. In the event of the occurrence of both
that shall not exceed 3.25 to 1.00 for any four-quarter period; (i) a change of control of the company, and (ii) a downgrade of the
(ii) remove language that prohibits the company from repurchasing notes below an investment grade rating by both Moody’s Investors
its own debt; and (iii) reduce the total amount of the credit line Service, Inc. and Standard & Poor’s Ratings Services within a
from $225,000 to $175,000. This amendment provides the com- specified period, the company would be required to make an offer
pany more flexibility in the deployment of its capital, while reducing to purchase the senior notes at a price equal to 101% of the prin-
ongoing costs to maintain the amount of credit required for ongo- cipal amount of the senior notes plus accrued and unpaid interest
ing operations. In addition, the company’s non-U.S. operations to the date of repurchase.
maintain unsecured short-term lines of credit in the aggregate In connection with the issuance in June 1997 of $175,000 in
amount of $18,785. These facilities bear interest at various rates long-term debt securities, the company paid $23,688 to terminate
depending on the rates in their respective countries of operation. three forward-starting interest rate swap agreements with notional
The company had $776 of outstanding short-term debt as of Octo- amounts totaling $125,000. These swap agreements had been
ber 31, 2010 under these lines of credit. In addition, the company entered into to reduce exposure to interest rate risk prior to the
had $258 and $4,529 in short-term debt for certain receivables the issuance of the new long-term debt securities. As of the inception
company has provided recourse with Red Iron as of October 31, of one of the swap agreements, the company had received pay-
2010 and 2009, respectively. The company was in compliance with ments that were recorded as deferred income to be recognized as
all covenants related to the lines of credit described above as of an adjustment to interest expense over the term of the new debt
October 31, 2010 and 2009. securities. As of the date the swaps were terminated, this deferred
income totaled $18,710. The excess termination fees over the
deferred income recorded has been deferred and is being recog-
7LONG-TERM DEBT nized as an adjustment to interest expense over the term of the
debt securities issued.
A summary of long-term debt as of October 31 is as follows:
Principal payments required on long-term debt in each of the
2010 2009 next five fiscal years ending October 31 are as follows: 2011,
7.800% Debentures, due June 15, 2027 $100,000 $100,000 $1,970; 2012, $220; 2013, $0; 2014, $0; 2015, $0; and after 2015,
6.625% Senior Notes, due May 1, 2037 123,358 123,296 $225,000.
Other 2,190 5,515
Total long-term debt 225,548 228,811
Less current portion 1,970 3,765
Long-term debt, less current portion $223,578 $225,046 8STOCKHOLDERS’ EQUITY
Stock repurchase program. The company’s Board of Directors
On April 26, 2007, the company issued $125,000 in aggregate
authorized the repurchase of shares of the company’s common
principal amount of 6.625% senior notes due May 1, 2037. The
stock as follows:
senior notes were priced at 98.513% of par value, and the result-
•
In May 2008, 4,000,000 shares
ing discount of $1,859 associated with the issuance of these senior
•
In July 2009, 5,000,000 shares
notes is being amortized over the term of the notes using the
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