Toro 2015 Annual Report Download - page 44

course and sports fields and grounds equipment customers in the
Customer Financing Arrangements
U.S. and select countries in Europe. The purpose of these agree-
Wholesale Financing. We are party to a joint venture with
ments is to increase sales by giving buyers of our products alter-
TCFIF, established as Red Iron, the purpose of which is to provide
native financing options when purchasing our products. We have
inventory financing, including floor plan and open account receiva-
no contingent liabilities for residual value or credit collection risk
ble financing, to distributors and dealers of our products in the U.S.
under these agreements with third party financing companies.
and select distributors of our products in Canada that enables
From time to time, we enter into agreements where we provide
them to carry representative inventories of our products. Under a
recourse to third party finance companies in the event of default by
separate arrangement, TCFCFC provides inventory financing to
the customer for lease payments to the third party finance com-
dealers of our products in Canada. In late fiscal 2015, Red Iron
pany. Our maximum exposure for credit collection under those
also began providing inventory financing to a majority of our BOSS
arrangements as of October 31, 2015 was $4.6 million.
distributors and dealers. Under these financing arrangements,
Termination or any material change to the terms of our end-user
down payments are not required and, depending on the finance
financing arrangements, availability of credit for our customers,
program for each product line, finance charges are incurred by us,
including any delay in securing replacement credit sources, or sig-
shared between us and the distributor and/or the dealer, or paid by
nificant financed product repurchase requirements could have a
the distributor or dealer. Red Iron retains a security interest in the
material adverse impact on our future operating results.
distributors’ and dealers’ financed inventories, and those invento-
ries are monitored regularly. Floor plan terms to the distributors Distributor Financing. From time to time, we enter into long-
and dealers require payment as the equipment, which secures the term loan agreements with some distributors. These transactions
indebtedness, is sold to customers or when payment terms are used for expansion of the distributors’ businesses, acquisitions,
become due, whichever occurs first. Rates are generally indexed refinancing working capital agreements, or facilitation of ownership
to LIBOR plus a fixed percentage that differs based on whether the changes. As of October 31, 2015, we had an outstanding note
financing is for a distributor or dealer. Rates may also vary based receivable in the amount of $1.0 million, which is included in other
on the product that is financed. Red Iron financed $1,430.9 million current and long-term assets on our consolidated balance sheet.
of new receivables for dealers and distributors during fiscal 2015,
of which $367.2 million was outstanding as of October 31, 2015. Off-Balance Sheet Arrangements and
Some independent international dealers continue to finance their Contractual Obligations
products with a third party financing company. This third party The following table summarizes our contractual obligations as of
financing company purchased $25.0 million of receivables from us October 31, 2015.
during fiscal 2015, of which $10.6 million was outstanding as of
October 31, 2015. Payments Due By Period
We also enter into limited inventory repurchase agreements with (Dollars in thousands) Less Than 1-3 3-5 More than
third party financing companies and Red Iron for receivables Contractual Obligation 1 Year Years Years 5 Years Total
Long-term debt
1
$23,110 $ 46,070 $ 84,500 $225,000 $378,680
financed by them. As of October 31, 2015, we were contingently
Interest payments
2
19,131 36,438 33,398 188,292 277,259
liable to repurchase up to a maximum amount of $10.0 million of Deferred compensation
inventory related to receivables under these financing arrange- arrangements
3
517 1,035 86 – 1,638
Purchase obligations
4
4,663 – – – 4,663
ments. We have repurchased immaterial amounts of inventory from Operating leases
5
13,956 18,439 13,177 32,113 77,685
third party financing companies and Red Iron over the past three Other
6
5,285 – – – 5,285
fiscal years. However, a decline in retail sales or financial difficul- Total $66,662 $101,982 $131,161 $445,405 $745,210
ties of our distributors or dealers could cause this situation to
1
Principal payments in accordance with our credit facilities and long-term debt
agreements.
change and thereby require us to repurchase financed product up
2
Interest payments for outstanding long-term debt obligations. Interest on variable rate
to but not exceeding our limited obligation, which could have an debt was calculated using the interest rate as of October 31, 2015.
3
The unfunded deferred compensation arrangements, covering certain retired manage-
adverse effect on our operating results. ment employees, consist primarily of salary and bonus deferrals under our deferred
We continue to provide financing in the form of open account compensation plans. Our estimated distributions in the contractual obligations table are
based upon a number of assumptions including termination dates and participant
terms to home centers and mass retailers; general line irrigation
elections.
dealers; international distributors and dealers other than the Cana-
4
Purchase obligations represent contracts or commitments for the purchase of raw
dian distributors and dealers to whom Red Iron provides financing materials.
5
Operating lease obligations do not include payments to property owners covering real
arrangements; micro-irrigation dealers and distributors; government estate taxes and common area maintenance.
customers; rental companies; and a limited number of BOSS
6
Payment obligation in connection with the renovation of our original corporate facility
located at Bloomington, Minnesota.
dealers.
As of October 31, 2015, we also had $16.2 million in outstanding
End-User Financing. We have agreements with third party
letters of credit issued, including standby letters of credit, during
financing companies to provide lease-financing options to golf
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