Toro 2014 Annual Report Download - page 28

in Canada to support their businesses and increase our net sales, important opportunities, such as significant acquisitions, may be
as well as to free up our working capital for our other strategic subject to the consent of the lenders under our credit arrange-
purposes. As a result, we are dependent upon the joint venture for ments, which consent may be withheld or granted subject to condi-
our inventory financing programs, including floor plan and open tions specified at the time that may affect the attractiveness or
account receivable financing. Additionally, we are dependent upon viability of the transaction.
TCFCFC to provide inventory financing to dealers of our products Although we have in place a $150 million revolving credit facility
in Canada. that does not expire until October 2019, market deterioration or
The availability of financing from our joint venture or otherwise other factors could jeopardize the counterparty obligations of one
will be affected by many factors, including, among others, the over- or more of the banks participating in our revolving credit facility,
all credit markets, the credit worthiness of our dealers and distribu- which could have an adverse effect on our business if we are not
tors, and regulations that may affect TCFIF, as the majority owner able to replace such revolving credit facility or find other sources of
of the joint venture and a subsidiary of TCF National Bank, a liquidity on acceptable terms.
national banking association. Any material change in the availabil-
If we are unable to comply with the terms of our credit
ity or terms of credit offered to our customers by the joint venture,
arrangements and indentures, especially the financial
challenges or delays in transferring new distributors and dealers
covenants, our credit arrangements could be terminated
from any business we might acquire to this financing platform, any
and our senior notes, debentures, term loan, and any
termination or disruption of our joint venture relationship or any
amounts outstanding under our revolving credit facility
delay in securing replacement credit sources could adversely affect
could become due and payable.
our sales and operating results.
We cannot assure you that we will be able to comply with all of the
The terms of our credit arrangements and the indentures terms of our credit arrangements and indentures, especially the
governing our senior notes and debentures could limit financial covenants. Our ability to comply with such terms depends
our ability to conduct our business, take advantage of on the success of our business and our operating results. Various
business opportunities and respond to changing risks, uncertainties, and events beyond our control could affect our
business, market, and economic conditions. ability to comply with the terms of our credit arrangements and/or
Additionally, we are subject to counterparty risk in our indentures. If we were out of compliance with any covenant
credit arrangements. required by our credit arrangements following any applicable cure
Our credit arrangements and the indentures governing our 6.625% periods, the banks could terminate their commitments unless we
senior notes and 7.800% debentures include a number of financial could negotiate a covenant waiver. The banks could condition such
and operating restrictions. For example, our credit arrangements waiver on amendments to the terms of our credit arrangements
contain financial covenants that, among other things, require us to that may be unfavorable to us. In addition, our 6.625% senior
maintain a minimum interest coverage ratio and a maximum debt notes, 7.800% debentures, $130 million term loan, and any
to earnings ratio. Our credit arrangements and/or indentures also amounts outstanding under our revolving credit facility could
contain provisions that restrict our ability, subject to specified become due and payable if we were unable to obtain a covenant
exceptions, to, among other things: waiver or refinance our medium-term debt under our credit
•
make loans and investments, including acquisitions and transac- arrangements. If our credit rating falls below investment grade
tions with affiliates; and/or our average debt to earnings before interest, tax, deprecia-
•
create liens or other encumbrances on our assets; tion, and amortization (‘‘EBITDA’’) ratio rises above 1.50, the inter-
•
dispose of assets; est rate we currently pay on outstanding debt under our credit
•
enter into contingent obligations; arrangements would increase, which could adversely affect our
•
engage in mergers or consolidations; and operating results.
•
pay dividends that are significantly higher than those currently
We are expanding and renovating our corporate facilities
being paid, make other distributions to our shareholders, or
and could experience disruptions to our operations in
redeem shares of our common stock.
connection with such efforts.
These provisions may limit our ability to conduct our business,
take advantage of business opportunities, and respond to changing We are expanding and renovating our corporate facilities, driven by
business, market, and economic conditions. In addition, they may our need to expand the space available for our product develop-
place us at a competitive disadvantage relative to other companies ment and test capacities, as well as our need for additional infor-
that may be subject to fewer, if any, restrictions or may otherwise mation technology and office space. These expansion efforts
adversely affect our business. Transactions that we may view as
22