Toro 2012 Annual Report Download - page 25
Download and view the complete annual report
Please find page 25 of the 2012 Toro annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.products in Canada to support their businesses and increase our subject to the consent of the lenders under our credit arrange-
net sales, as well as to free up our working capital for our other ments, which consent may be withheld or granted subject to condi-
strategic purposes. As a result, we are dependent upon the joint tions specified at the time that may affect the attractiveness or
venture for our inventory financing programs, including floor plan viability of the transaction.
and open account receivable financing. Additionally, we are depen- Although we have in place a $150 million revolving credit facility
dent upon TCFCFC to provide inventory financing to dealers of our that does not expire until July 2015, market deterioration or other
products in Canada. factors could jeopardize the counterparty obligations of one or
The availability of financing from our joint venture or otherwise more of the banks participating in our facility, which could have an
will be affected by many factors, including, among others, the over- adverse effect on our business if we are not able to replace such
all credit markets, the credit worthiness of our dealers and distribu- credit facility or find other sources of liquidity on acceptable terms.
tors, and regulations that may affect TCFIF, as the majority owner
If we are unable to comply with the terms of our credit
of the joint venture and a subsidiary of TCF National Bank, a
arrangements and indentures, especially the financial
national banking association. Any material change in the availabil-
covenants, our credit arrangements could be terminated
ity or terms of credit offered to our customers by the joint venture,
and our senior notes and debentures could become due
any termination or disruption of our joint venture relationship or any
and payable.
delay in securing replacement credit sources could adversely affect
our sales and operating results. We cannot assure you that we will be able to comply with all of the
terms of our credit arrangements and indentures, especially the
The terms of our credit arrangements and the indentures financial covenants. Our ability to comply with such terms depends
governing our senior notes and debentures could limit on the success of our business and our operating results. Various
our ability to conduct our business, take advantage of risks, uncertainties, and events beyond our control could affect our
business opportunities and respond to changing ability to comply with the terms of our credit arrangements and/or
business, market, and economic conditions. indentures. If we were out of compliance with any covenant
Additionally, we are subject to counterparty risk in our required by our credit arrangements following any applicable cure
credit arrangements. periods, the banks could terminate their commitments unless we
Our credit arrangements and the indentures governing our 6.625% could negotiate a covenant waiver. The banks could condition such
senior notes and 7.800% debentures include a number of financial waiver on amendments to the terms of our credit arrangements
and operating restrictions. For example, our credit arrangements that may be unfavorable to us. In addition, our 6.625% senior
contain financial covenants that, among other things, require us to notes and 7.800% debentures could become due and payable if
maintain a minimum interest coverage ratio and a maximum debt we were unable to obtain a covenant waiver or refinance our
to earnings ratios. Our credit arrangements and/or indentures also medium-term debt under our credit arrangements. If our credit rat-
contain provisions that restrict our ability, subject to specified ing falls below investment grade and/or our average debt to earn-
exceptions, to, among other things: ings before interest, tax, depreciation, and amortization (‘‘EBITDA’’)
•
make loans and investments, including acquisitions and transac- ratio rises above 2.00, the interest rate we currently pay on out-
tions with affiliates; standing debt under our credit arrangements would increase, which
•
create liens or other encumbrances on our assets; could adversely affect our operating results.
•
dispose of assets;
Legislative enactments could impact the competitive
•
enter into contingent obligations;
landscape within our markets and affect demand for our
•
engage in mergers or consolidations; and
products.
•
pay dividends that are significantly higher than those currently
being paid, make other distributions to our shareholders or Various legislative proposals, if enacted, could put us in a competi-
redeem shares of our common stock. tively advantaged or disadvantaged position and affect customer
These provisions may limit our ability to conduct our business, demand for our products relative to the product offerings of our
take advantage of business opportunities, and respond to changing competitors. For example, any fiscal-stimulus or other legislative
business, market, and economic conditions. In addition, they may enactment that inordinately impacts the lawn and garden, outdoor
place us at a competitive disadvantage relative to other companies power equipment, or irrigation industries generally by promoting
that may be subject to fewer, if any, restrictions or may otherwise the purchase, such as through customer rebate or other incentive
adversely affect our business. Transactions that we may view as programs, of certain types of mowing or irrigation equipment or
important opportunities, such as significant acquisitions, may be other products that we sell, could impact us positively or nega-
tively, depending on whether we manufacture products that meet
19