Toro 2014 Annual Report Download - page 44

investment grade and/or our average debt to EBITDA ratio rises The following table provides information with respect to repur-
above 1.50, the basis point spread over LIBOR (or other rates chases of our common stock during the past three fiscal years.
quoted by the Administrative Agent, Bank of America, N.A.) we
currently pay on outstanding debt under the credit agreement (Dollars in millions, except per share data)
Fiscal years ended October 31 2014 2013 2012
would increase. However, the credit commitment could not be can-
celled by the banks based solely on a ratings downgrade. Our debt Shares of common stock purchased
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1,622,569 2,131,615 2,591,039
rating for long-term unsecured senior, non-credit enhanced debt Cost to repurchase common stock $ 101.7 $ 98.8 $ 92.7
Average price paid per share $ 62.66 $ 46.37 $ 35.78
was unchanged during fiscal 2014 by Standard and Poor’s Ratings
Group at BBB and by Moody’s Investors Service at Baa3.
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Does not include shares of our common stock surrendered by employees to
satisfy minimum tax withholding obligations upon vesting of restricted stock
granted under our stock-based compensation plans.
Capital Structure
The following table details the components of our total capitaliza- Customer Financing Arrangements
tion and debt-to-capitalization ratio.
Wholesale Financing. We are party to a joint venture with
TCFIF, established as Red Iron, the purpose of which is to provide
(Dollars in millions)
October 31 2014 2013 inventory financing, including floor plan and open account receiva-
Short-term debt $ 20.8 $– ble financing, to distributors and dealers of our products in the U.S.
Long-term debt, including current portion 354.0 223.5 and select distributors of our products in Canada that enables
Stockholders’ equity 408.7 358.7 them to carry representative inventories of our products. Under a
Debt-to-capitalization ratio 47.8% 38.4% separate arrangement, TCFCFC provides inventory financing to
dealers of our products in Canada. Under these financing arrange-
Our debt-to-capitalization ratio increased in fiscal 2014 compared ments, down payments are not required and, depending on the
to fiscal 2013 due to an increase in our short-term and long-term finance program for each product line, finance charges are
debt, as previously discussed, partially offset by an increase in incurred by us, shared between us and the distributor and/or the
stockholders’ equity from higher net earnings. dealer, or paid by the distributor or dealer. Red Iron retains a
security interest in the distributors’ and dealers’ financed invento-
Cash Dividends ries, and those inventories are monitored regularly. Floor plan
During the first quarter of fiscal 2014, we changed our annual divi- terms to the distributors and dealers require payment as the equip-
dend guideline from 20 to 30 percent to 30 to 40 percent of our ment, which secures the indebtedness, is sold to customers or
three-year average net earnings per share for the current and pre- when payment terms become due, whichever occurs first. Rates
vious two fiscal years. Each quarter in fiscal 2014, our Board of are generally indexed to LIBOR plus a fixed percentage that differs
Directors declared a cash dividend of $0.20 per share, which was based on whether the financing is for a distributor or dealer. Rates
a 42.9 percent increase over our cash dividend of $0.14 per share may also vary based on the product that is financed. Red Iron
paid each quarter in fiscal 2013. As announced on December 4, financed $1,280.5 million of new receivables for dealers and dis-
2014, our Board of Directors increased our fiscal 2015 first quarter tributors during fiscal 2014, of which $291.6 million was outstand-
cash dividend by 25 percent to $0.25 per share from the quarterly ing as of October 31, 2014.
cash dividend paid in the first quarter of fiscal 2014. Some independent international dealers continue to finance their
products with a third party financing company. This third party
Share Repurchase Plan financing company purchased $18.7 million of receivables from us
During fiscal 2014, we continued repurchasing shares of our com- during fiscal 2014, of which $10.9 million was outstanding as of
mon stock in the open market, thereby reducing our shares out- October 31, 2014.
standing. In addition, our repurchase program provided shares for We also enter into limited inventory repurchase agreements with
use in connection with our equity compensation plans. As of Octo- third party financing companies and Red Iron for receivables
ber 31, 2014, 2,720,493 shares remained available for repurchase financed by them. As of October 31, 2014, we were contingently
under our Board authorization. We expect to continue repurchasing liable to repurchase up to a maximum amount of $9.4 million of
shares of our common stock in fiscal 2015 depending upon market inventory related to receivables under these financing arrange-
conditions. ments. We have repurchased immaterial amounts of inventory from
third party financing companies and Red Iron over the past three
fiscal years. However, a decline in retail sales or financial difficul-
ties of our distributors or dealers could cause this situation to
change and thereby require us to repurchase financed product up
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