Investment in Joint Venture

12 Months Ended

Oct. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in Joint Venture

11 Investment in Joint Venture

In fiscal 2009, the company and TCFIF, a subsidiary of TCF National Bank, established Red Iron, a joint venture in the form of a Delaware limited liability company that primarily provides inventory financing to certain distributors and dealers of the company’s products in the U.S. Under a separate arrangement, TCF Commercial Finance Canada, Inc. ("TCFCFC") provides inventory financing to dealers of the company's products in Canada. On November 29, 2016, during the first quarter of fiscal 2017, the company entered into amended agreements for its Red Iron joint venture with TCFIF. As a result, the amended term of Red Iron will continue until October 31, 2024, subject to two-year extensions thereafter. Either the company or TCFIF may elect not to extend the amended term, or any subsequent term, by giving one-year written notice to the other party.

The company owns 45 percent of Red Iron and TCFIF owns 55 percent of Red Iron. The company accounts for its investment in Red Iron under the equity method of accounting. The company and TCFIF each contributed a specified amount of the estimated cash required to enable Red Iron to purchase the company's inventory financing receivables and to provide financial support for Red Iron's inventory financing programs. Red Iron borrows the remaining requisite estimated cash utilizing a $550.0 million secured revolving credit facility established under a credit agreement between Red Iron and TCFIF. The company's total investment in Red Iron as of October 31, 2019 and 2018 was $24.1 million and $22.5 million, respectively. The company has not guaranteed the outstanding indebtedness of Red Iron.

Under the financing agreement between Red Iron and the company, Red Iron provides financing for certain dealers and distributors. These transactions are structured as an advance in the form of a payment by Red Iron to the company on behalf of a distributor or dealer with respect to invoices financed by Red Iron. These payments extinguish the obligation of the dealer or distributor to make payment to the company under the terms of the applicable invoice. The company also entered into a limited inventory repurchase agreement with Red Iron and TCFCFC. Under such limited inventory repurchase agreement, the company has agreed to repurchase products repossessed by Red Iron and TCFCFC, up to a maximum aggregate amount of $7.5 million in a calendar year. The company's financial exposure under this repurchase agreement is limited to the difference between the amount paid to Red Iron and TCFCFC for repurchases of repossessed product and the amount received upon the subsequent resale of the repossessed product. The company has repurchased immaterial amounts of inventory under this repurchase agreement for the fiscal years ended October 31, 2019, 2018, and 2017.

Under separate agreements between Red Iron and the dealers and distributors, Red Iron provides loans to the dealers and distributors for the advances paid by Red Iron to the company. The net amount of receivables financed for dealers and distributors under this arrangement during fiscal 2019, 2018, and 2017 was $1,924.9 million, $1,959.7 million, and $1,847.7

million, respectively. The total amount of receivables due from Red Iron to the company as of October 31, 2019 and 2018 were $21.7 million and $21.4 million, respectively.

Summarized financial information for Red Iron is presented as follows (in thousands):

For the Twelve Months Ended October 31	2019			2018			2017
Revenue	$	47,569		$	42,051		$	35,158
Interest and operating expenses, net	(21,011		)	(17,288		)	(13,030		)
Net income	$	26,558		$	24,763		$	22,128

As of October 31	2019		2018
Finance receivables, net	$	486,834	$	446,138
Other assets	3,733		3,449
Total assets	$	490,567	$	449,587
Notes payable	$	419,308	$	378,128
Other liabilities	17,594		21,366
Partners' capital	53,665		50,093
Total liabilities and partners' capital	$	490,567	$	449,587