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Investment in Joint Venture
 12 Months Ended
Oct. 31, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Joint Venture
8
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 certain of the company’s products in the U.S. Under such joint venture, the company owns 45.0 percent of Red Iron and TCFIF owns 55.0 percent of Red Iron. Under a separate agreement, TCFCFC provides inventory financing to dealers of the company's products in Canada.
On December 20, 2019, during the first quarter of fiscal 2020, the company amended certain agreements pertaining to the Red Iron joint venture. The purpose of these amendments was, among other things, to: (i) adjust certain rates under the floor plan financing rate structure charged to the company’s distributors and dealers participating in financing arrangements through the Red Iron joint venture; (ii) extend the term of the Red Iron joint venture from October 31, 2024 to October 31, 2026, subject to two-year extensions thereafter unless either the company or TCFIF provides written notice to the other party of non-renewal at least one year prior to the end of the then-current term; (iii) amend certain exclusivity-related provisions, including the definition of the company's products that are subject to exclusivity, inclusion of a two-year review period by the company for products acquired in future acquisitions to assess, without a commitment to exclusivity, the potential benefits and detriments of including such acquired products under the Red Iron financing arrangement, and the pro-rata payback over a five-year period of the exclusivity incentive payment the company received from TCFIF in 2016; (iv) extend the maturity date of the revolving credit facility used by Red Iron primarily to finance the acquisition of inventory from the company by its
distributors and dealers from October 31, 2024 to October 31, 2026 and to increase the amount available under such revolving credit facility from $550.0 million to $625.0 million; and (v) memorialize certain other non-material amendments.
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 $625.0 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, 2020 and 2019 was $19.7 million and $24.1 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 has 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 limited inventory 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 limited inventory repurchase agreement for the fiscal years ended October 31, 2020, 2019, and 2018.
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 2020, 2019, and 2018 was $1,832.5 million, $1,924.9 million, and $1,959.7 million, respectively. The total amount of receivables due from Red Iron to the company as of October 31, 2020 and 2019 were $12.6 million and $21.9 million, respectively.
Summarized financial information for Red Iron is presented as follows (in thousands):
For the Twelve Months Ended October 31202020192018
Revenue$31,040 $47,569 $42,051 
Interest and operating expenses, net(14,177)(21,011)(17,288)
Net income$16,863 $26,558 $24,763 
As of October 3120202019
Finance receivables, net$386,781 $486,834 
Other assets2,929 3,733 
Total assets$389,710 $490,567 
Notes payable$332,838 $419,308 
Other liabilities12,994 17,594 
Partners' capital43,878 53,665 
Total liabilities and partners' capital$389,710 $490,567