Commitments and Contingent Liabilities

12 Months Ended

Oct. 31, 2019

Commitments and Contingencies Disclosure [Abstract]



12	Commitments and Contingent Liabilities

Leases

The company enters into contracts for operating lease agreements for certain property, plant, or equipment assets in the normal course of business, such as buildings for manufacturing facilities, office space, distribution centers, and warehouse facilities; land for product testing sites; machinery and equipment for research and development activities, manufacturing and assembly processes, and administrative tasks; and vehicles for sales, marketing and distribution activities. Total rental expense for operating leases was $34.1 million, $27.4 million and $27.9 million for the fiscal years ended October 31, 2019, 2018 and 2017, respectively. As of October 31, 2019, future minimum lease payments under noncancelable operating leases amounted to $83.1 million as follows: fiscal 2020, $17.1 million; fiscal 2021, $15.8 million; fiscal 2022, $12.8 million; fiscal 2023, $9.8 million; fiscal 2024, $8.9 million; and after fiscal 2024, $18.7 million.

Customer Financing Arrangements

Wholesale Financing

The company is party to a joint venture with TCFIF established as Red Iron to provide wholesale financing to certain dealers and distributors of certain of the company's products. Refer to Note 11, Investment in Joint Venture for additional information related to Red Iron. Financing agreements are also in place with separate third-party financial institutions to provide financing to certain dealers not financed through Red Iron, including those in Australia and as a result of the company's acquisition of CMW. These separate third-party financial institutions purchased $235.4 million of receivables from the company during fiscal 2019. As of October 31, 2019, $148.4 million of

receivables financed by these separate third-party financial institutions, excluding Red Iron, was outstanding. During fiscal 2018, $29.8 million of receivables were purchased from the company by these third-party financial institutions and $13.0 million of receivables was outstanding as of October 31, 2018. The increase in financing activity with these institutions is a result of the company's acquisition of CMW. For additional information on the acquisition of CMW, refer to Note 2, Business Combinations.

Additionally, as a result of the company's financing agreements with the separate third-party financial institutions, the company also entered into inventory repurchase agreements with the separate third-party financial institutions. Under such inventory repurchase agreements, the company has agreed to repurchase products repossessed by the separate third-party financial institutions. As of October 31, 2019, the company was contingently liable to repurchase up to a maximum amount of $125.9 million of inventory related to receivables under these inventory repurchase agreements. The company's financial exposure under these repurchase agreements is limited to the difference between the amount paid to the separate third-party financial institutions 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 these repurchase agreements for the fiscal years ended October 31, 2019, 2018, and 2017.

End-User Financing

The company has agreements with third-party financing companies to provide lease-financing options to golf course, sports fields and grounds equipment and underground construction customers in the U.S., Canada, Australia, and select countries in Europe. The company has no material contingent liabilities for residual value or credit collection risk under these agreements with third-party financing companies.

From time to time, the company enters into agreements where it provides recourse to third-party finance companies in the event of default by the customer for lease payments to the third-party finance company. The company's maximum exposure for credit collection as of October 31, 2019 was $10.1 million.

Purchase Commitments

As of October 31, 2019, the company had $22.8 million of noncancelable purchase commitments with certain of the company's suppliers for commodities and supplies as part of the normal course of business. The company also entered into commitments for machinery and equipment purchases to support renovation efforts at its Plymouth, Wisconsin distribution center and certain international facilities. As of October 31, 2019, the amount of the remaining obligation under these commitments was $1.9 million.

Letters of Credit

The company has access to an unsecured senior five-year revolving credit facility that, among other things, includes a $10.0 million sublimit for standby letters of credit. As of October 31, 2019 and October 31, 2018, the company had $1.9

million and $1.5 million outstanding under the sublimit for standby letters of credit, respectively. Refer to Note 6, Indebtedness, for additional information related to the company's revolving credit facility.

The company's domestic and non-U.S. operations maintain import letters of credit during the normal course of business, as required by some vendor contracts. Collectively, these import letters of credit had a maximum availability of $13.3 million and $13.5 million as of October 31, 2019 and October 31, 2018, respectively. As of October 31, 2019 and October 31, 2018, the company had $4.7 million and $6.7 million, respectively, in outstanding import letters of credit.

Litigation

The company is party to litigation in the ordinary course of business. Such matters are generally subject to uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. Litigation occasionally involves claims for punitive, as well as compensatory, damages arising out of the use of the company's products. Although the company is self-insured to some extent, the company maintains insurance against certain product liability losses. The company is also subject to litigation and administrative and judicial proceedings with respect to claims involving asbestos and the discharge of hazardous substances into the environment. Some of these claims assert damages and liability for personal injury, remedial investigations or clean-up and other costs and damages. The company is also typically involved in commercial disputes, employment disputes, and patent litigation cases in which it is asserting or defending against patent infringement claims. To prevent possible infringement of the company's patents by others, the company periodically reviews competitors' products. To avoid potential liability with respect to others' patents, the company regularly reviews certain patents issued by the U.S. Patent and Trademark Office and foreign patent offices. Management believes these activities help minimize its risk of being a defendant in patent infringement litigation. The company is currently involved in patent litigation cases, including cases by or against competitors, where it is asserting and defending against claims of patent infringement. Such cases are at varying stages in the litigation process.

The company records a liability in its Consolidated Financial Statements for costs related to claims, including future legal costs, settlements, and judgments, where the company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. In the opinion of management, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect its Consolidated Results of Operations, Financial Position, or Cash Flows.