COMMITMENTS AND CONTINGENT LIABILITIES

12 Months Ended

Oct. 31, 2012

COMMITMENTS AND CONTINGENT LIABILITIES

COMMITMENTS AND CONTINGENT LIABILITIES

13 COMMITMENTS AND CONTINGENT LIABILITIES

Leases

   Total rental expense for operating leases was $22,166, $21,840, and $19,401 for the fiscal years ended October 31, 2012, 2011, and 2010, respectively. As of October 31, 2012, future minimum lease payments under noncancelable operating leases amounted to $74,543 as follows: 2013, $13,623; 2014, $10,690; 2015, $9,668; 2016, $6,277; 2017, $4,127 and after 2017, $30,158.

Customer Financing

Wholesale Financing.   In fiscal 2009, Toro Credit Company sold its receivable portfolio to Red Iron, the company's joint venture with TCFIF. See Note 3 for additional information related to Red Iron. Some products sold to independent dealers in Australia finance their products with a third party finance company. This third party financing company purchased $23,727 of receivables from the company during fiscal 2012. As of October 31, 2012, $9,754 of receivables financed by the third party financing company, excluding Red Iron, was outstanding, and also includes outstanding receivables that were financed by third party sources before the establishment of Red Iron.

   The company also enters into limited inventory repurchase agreements with third party financing companies and Red Iron for receivables financed by third party financing companies and Red Iron. As of October 31, 2012, the company was contingently liable to repurchase up to a maximum amount of $10,086 of inventory related to receivables under these financing arrangements. The company has repurchased only immaterial amounts of inventory under these repurchase agreements since inception.

End-User Financing.   The company has agreements with third party financing companies to provide lease-financing options to golf course and sports fields and grounds equipment customers in the U.S. and Europe. The company has no 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, 2012 was $2,937.

Purchase Commitments

   As of October 31, 2012, the company had $14,537 of noncancelable purchase commitments with some suppliers for materials and supplies as part of the normal course of business.

Letters of Credit

   Letters of credit are issued by the company during the normal course of business, as required by some vendor contracts. As of October 31, 2012 and 2011, the company had $12,963 and $16,444, respectively, in outstanding letters of credit.

Litigation

General.   The company is party to litigation in the ordinary course of business. Litigation occasionally involves claims for punitive as well as compensatory damages arising out of 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 United States Patent and Trademark Office ("USPTO") and foreign patent offices. Management believes these activities help minimize its risk of being a defendant in patent infringement litigation.

Canadian Lawnmower Engine Horsepower Marketing and Sales Practices Litigation.   In March 2010, individuals who claim to have purchased lawnmowers in Canada filed class action litigation against the company and other defendants that, similar to the class action litigation previously filed by plaintiffs in the United States and settled by the company pursuant to a settlement agreement that became final in February 2011, (i) contains allegations under applicable Canadian law that the horsepower labels on the products the plaintiffs purchased were inaccurate, (ii) seeks certification of a class of all persons in Canada who, beginning January 1, 1994 purchased a lawnmower containing a gas combustible engine up to 30 horsepower that was manufactured or sold by the company and other defendants, and (iii) seeks under applicable Canadian law unspecified compensatory and punitive damages, attorneys' costs and fees, and equitable relief.

   Management continues to evaluate this Canadian litigation and, in the event the company is unable to favorably resolve this litigation, while management does not currently believe that this litigation would have a material adverse effect on the company's annual consolidated operating results or financial condition, an unfavorable resolution or outcome could be material to the company's consolidated operating results for a particular period.