<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended August 2, 1996 Commission File Number 1-8649
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THE TORO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 41-0580470
(State of Incorporation) (I.R.S. Employer Identification Number)
8111 LYNDALE AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420
TELEPHONE NUMBER: (612) 888-8801
-----------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock outstanding as of August 30, 1996 was
11,997,663.
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<PAGE>
THE TORO COMPANY
INDEX TO FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION:
Condensed Consolidated Statements of Earnings and
Retained Earnings -
Three and Nine Months Ended
August 2, 1996 and July 31, 1995. . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets
August 2, 1996, July 31, 1995 and October 31, 1995, . . . . 4
Consolidated Statements of Cash Flows -
Nine Months Ended August 2, 1996 and July 31, 1995. . . . . 5
Notes to Condensed Consolidated Financial Statements. . . . . 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 8-11
PART II. OTHER INFORMATION:
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 12
Exhibit 11 Computation of Earnings Per Common Share. . . . . . 13
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<PAGE>
PART I. FINANCIAL INFORMATION
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- -------------------------------
August 2, July 31, August 2, July 31,
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . $ 232,565 $ 202,586 $ 732,712 $ 727,149
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . 146,681 127,483 466,689 468,636
----------- ----------- ------------ -----------
Gross profit. . . . . . . . . . . . . . . . . . . . . . 85,884 75,103 266,023 258,513
Selling, general and administrative
expense . . . . . . . . . . . . . . . . . . . . . . . . 72,909 66,841 210,273 207,080
----------- ----------- ------------ -----------
Earnings from operations. . . . . . . . . . . . . . . . 12,975 8,262 55,750 51,433
Interest expense . . . . . . . . . . . . . . . . . . . . . . 3,755 3,399 10,858 9,422
Other income, net. . . . . . . . . . . . . . . . . . . . . . (1,489) (1,849) (7,642) (5,264)
----------- ----------- ------------ -----------
Earnings before income taxes. . . . . . . . . . . . . . 10,709 6,712 52,534 47,275
Provision for income taxes . . . . . . . . . . . . . . . . . 4,244 2,685 20,751 18,910
----------- ----------- ------------ -----------
Net earnings. . . . . . . . . . . . . . . . . . . . . . $ 6,465 $ 4,027 $ 31,783 $ 28,365
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Retained earnings at beginning of period . . . . . . . . . . 165,274 137,762 142,891 116,482
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 -- 164 --
Dividends on common stock of $0.12, $0.12,
$0.36 and $0.36 per share, respectively . . . . . . . . (1,458) (1,436) (4,393) (4,494)
----------- ----------- ------------ -----------
Retained earnings at end of period . . . . . . . . . . . . . $ 170,445 $ 140,353 $ 170,445 $ 140,353
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Net earnings per share of common stock and
common stock equivalent . . . . . . . . . . . . . . . . $ 0.52 $ 0.32 $ 2.52 $ 2.17
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Net earnings per share of common stock and
common stock equivalent -
assuming full dilution . . . . . . . . . . . . . . . $ 0.52 $ 0.32 $ 2.52 $ 2.17
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
August 2, July 31, October 31,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . $ 1,151 $ 11,924 $ 7,702
Receivables, net . . . . . . . . . . . . . . . . . . . 265,772 210,125 198,816
Inventories. . . . . . . . . . . . . . . . . . . . . . 143,339 123,720 145,862
Other current assets . . . . . . . . . . . . . . . . . 34,370 35,841 33,879
----------- ----------- ---------
Total current assets. . . . . . . . . . . . . . . 444,632 381,610 386,259
----------- ----------- ---------
Property, plant and equipment. . . . . . . . . . . . . 220,443 208,621 211,681
Less accumulated depreciation and amortization. . 151,626 138,550 141,726
----------- ----------- ---------
68,817 70,071 69,955
Other assets . . . . . . . . . . . . . . . . . . . . . 18,481 16,634 16,439
----------- ----------- ---------
Total assets. . . . . . . . . . . . . . . . . . . $ 531,930 $ 468,315 $ 472,653
----------- ----------- ---------
----------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt. . . . . . . . . . . $ 373 $ 16,090 $ 15,334
Short-term borrowing . . . . . . . . . . . . . . . . . 83,600 22,535 41,575
Accounts payable . . . . . . . . . . . . . . . . . . . 26,160 41,072 51,052
Other accrued liabilities. . . . . . . . . . . . . . . 136,603 132,962 113,212
----------- ----------- ---------
Total current liabilities . . . . . . . . . . . . 246,736 212,659 221,173
----------- ----------- ---------
Long-term debt, less current portion . . . . . . . . . 53,046 64,935 53,365
Other long-term liabilities. . . . . . . . . . . . . . 22,586 5,250 7,223
Common stockholders' equity:
Common stock par value $1.00,
authorized 35,000,000 shares; issued and
outstanding 11,990,873 shares at August 2,
1996 (net of 919,131 treasury shares),
12,039,776 shares at July 31, 1995
(net of 802,549 treasury shares), and
12,167,835 shares at October 31, 1995 (net
of 674,490 treasury shares) . . . . . . . . . . . 11,991 12,040 12,168
Additional paid-in capital. . . . . . . . . . . . . 27,817 33,145 35,712
Retained earnings . . . . . . . . . . . . . . . . . 170,445 140,353 142,891
Foreign currency translation adjustment . . . . . . (691) (67) 121
----------- ----------- ---------
Total common stockholders' equity . . . . . . . . . 209,562 185,471 190,892
----------- ----------- ---------
Total liabilities and common stockholders' equity $ 531,930 $ 468,315 $ 472,653
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
August 2, July 31,
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,783 $ 28,365
Adjustments to reconcile net earnings to net cash
(used) provided in operating activities:
Provision for depreciation and amortization . . . . . . . . . . . . 13,228 13,395
Loss on disposal of property, plant and equipment . . . . . . . . . (176) (113)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . - (1,283)
Tax benefits related to employee stock option transactions. . . . . 1,490 1,178
Changes in operating assets and liabilities:
Net receivables. . . . . . . . . . . . . . . . . . . . . . . . . (66,956) (12,546)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,523 9,133
Other current assets . . . . . . . . . . . . . . . . . . . . . . (491) (7,621)
Accounts payable and accrued expenses. . . . . . . . . . . . . . (1,502) 1,133
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . - (3,231)
---------- ----------
Net cash (used) provided in operating activities . . . . . . . (20,101) 28,410
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment. . . . . . . . . . . . . (11,655) (23,556)
Proceeds from asset disposals . . . . . . . . . . . . . . . . . . . 439 807
(Increase) decrease in other assets . . . . . . . . . . . . . . . . (2,740) 2,225
---------- ----------
Net cash used in investing activities. . . . . . . . . . . . . (13,956) (20,524)
---------- ----------
Cash flows from financing activities:
Increase in sale of receivables . . . . . . . . . . . . . . . . . . - 2,331
Increase in short-term borrowing. . . . . . . . . . . . . . . . . . 42,025 22,535
Repayments of long-term debt. . . . . . . . . . . . . . . . . . . . (15,280) (10,429)
Change in other long-term liabilities . . . . . . . . . . . . . . . 15,363 -
Proceeds from exercise of stock options . . . . . . . . . . . . . . 3,673 4,033
Purchases of common stock . . . . . . . . . . . . . . . . . . . . . (13,071) (25,120)
Dividends on common stock . . . . . . . . . . . . . . . . . . . . . (4,393) (4,494)
Repayments from ESOP. . . . . . . . . . . . . . . . . . . . . . . . - 2,612
---------- ----------
Net cash (used) provided by financing activities . . . . . . . 28,317 (8,532)
---------- ----------
Foreign currency translation adjustment. . . . . . . . . . . . . . . . (811) 168
---------- ----------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . (6,551) (478)
Cash and cash equivalents at beginning of period . . . . . . . . . . . 7,702 12,402
---------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 1,151 $ 11,924
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 2, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the unaudited consolidated financial statements include all
adjustments, consisting primarily of recurring accruals, considered
necessary for a fair presentation of the financial position and the results
of operations. The Toro Company's business is seasonal. Operating results
for the nine months ended August 2, 1996 are not necessarily indicative of
the results that may be expected for the year ending October 31, 1996.
In November 1995, the company changed its fiscal year from a fiscal
year ended July 31 to a fiscal year ended October 31.
For further information, refer to the consolidated financial statements and
notes included in the company's Annual Report on Form 10-K for the year
ended July 31, 1995 (the company's former fiscal year end). The policies
described in that report are used for preparing quarterly reports.
2. INVENTORIES
The majority of inventories are valued at the lower of cost or net
realizable value with cost determined by the last-in, first-out (LIFO)
method. Had the first-in, first-out (FIFO) method of cost
determination been used, inventories would have been $24,841,000 and
$24,730,000 higher than reported at August 2, 1996, and July 31, 1995,
respectively. Under the FIFO method, work-in-process inventories were
$68,952,000 and $68,683,000 and finished goods inventories were
$99,228,000 and $79,767,000 at August 2, 1996, and July 31, 1995,
respectively.
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<PAGE>
3. DEFERRED INCOME
The company entered into a forward starting interest rate exchange
agreement with a bank on March 6, 1996 to hedge the anticipated refinancing
of its $50 million, 11% long-term sinking fund debentures callable August
1, 1997, and to realize the benefit of current favorable interest rates.
Simultaneously with entering into this interest rate exchange agreement,
the company terminated its interest rate exchange agreement entered into
during February 1994. The effect of this transaction was to extend the
original forward starting interest rate exchange agreement from 5 years to
30 years. As a result of this transaction, the deferred income balance
was increased from $5.25 million in 1994 to $17.3 in March of 1996. The
net additional cash received in March 1996 was $12.1 million. In return
for the net proceeds, the company will pay the bank 10.55% on a notational
amount of $50 million from August 1, 1997 through August 2, 2027 and the
company will receive payments based on a floating rate equal to LIBOR on
the notational amount over the same period.
The net interest rate differential to be received or paid and the $17.3
million deferred income will be recognized commencing August 1, 1997 as an
adjustment to interest expense over the term of the agreement.
In accordance with FASB statement 107 "Disclosures about Fair Value of
Financial Instruments" the cost to terminate this agreement at August 2,
1996, had management elected to do so, was approximately $18.5 million
which would have resulted in a loss of approximately $0.8 million.
Subsequent to August 2, 1996 the company entered into a forward starting
interest rate exchange agreement with a bank to hedge the anticipated
refinancing of $50 million currently financed under short-term credit
agreements. The company received or paid no cash as a result of this
transaction.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: This report contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. In addition, forward looking statements may be made
orally in the future by or on behalf of the company.
Forward looking statements involve risks and uncertainties, including, but not
limited to, changes in business conditions and the economy in general in both
foreign and domestic markets; weather conditions affecting demand; seasonal
factors affecting the company's industry; lack of growth in the company's
markets; litigation; financial market changes including interest rates and
foreign exchange rates; trend factors including housing starts, new golf course
starts and market demographics; government actions including budget levels,
regulation, and legislation, primarily legislation relating to the environment,
commerce and infrastructure, and health and safety; labor relations;
availability of materials; actions of competitors; ability to integrate
acquisitions; and the company's ability to profitably develop, manufacture and
sell both new and existing products. Actual results could differ materially
from those projected in the forward looking statements as a result of these risk
factors, and should not be relied upon as a prediction of actual future results.
Further, Toro undertakes no obligation to update any forward looking statement
to reflect events or circumstances after the date on which such statement is
made, or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
The following table sets forth sales by product line.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------
(Dollars in thousands) August 2, July 31,
1996 1995 $ CHANGE % CHANGE
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
Consumer products. . . . . . . . . . . . $102,290 $ 76,375 $ 25,915 33.9 %
Commercial products. . . . . . . . . . . 84,828 82,372 2,456 3.0
Irrigation products. . . . . . . . . . . 45,447 43,839 1,608 3.7
Total * . . . . . . . . . . . . . . . $232,565 $202,586 $ 29,979 14.8 %
--------- -------- --------
--------- -------- --------
* Includes international sales of. . . . $ 43,238 $ 37,426 $ 5,812 15.5 %
<CAPTION>
Nine Months Ended
--------------------------------------------------------
(Dollars in thousands) August 2, July 31,
1996 1995 $ CHANGE % CHANGE
----------- ---------- --------- --------
<S> <C> <C> <C> <C>
Consumer products. . . . . . . . . . . . $342,722 $361,279 $(18,557) (5.1)%
Commercial products. . . . . . . . . . . 271,684 256,662 15,022 5.9
Irrigation products. . . . . . . . . . . 118,306 109,208 9,098 8.3
--------- -------- ---------
Total *. . . . . . . . . . . . . . . $732,712 $727,149 $ 5,563 0.8 %
--------- -------- ---------
--------- -------- ---------
* Includes international sales of. . . . $146,996 $128,669 $ 18,327 14.2 %
</TABLE>
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<PAGE>
Worldwide net sales for the three months ended August 2, 1996 of $232.6 million
increased by $30.0 million from the prior year. The increase in consumer product
sales occurred primarily as a result of significant snow sales early in the
season. Good performance for riding products and electric products also
contributed to the increase. The commercial product sales increase was
primarily the result of a strong European golf market and increased sales to the
landscape contractors market, fueled by a new product introduced in the quarter
and successful marketing programs. Sales of irrigation products increased as
sales of do-it-yourself products remained strong. International sales, reported
within the consumer, commercial and irrigation results above, increased from the
prior year due to strong commercial sales to the European golf market. Consumer
riding product sales to Australia and early snow shipments also fueled the
increase.
Worldwide net sales for the nine months ended August 2, 1996 of $732.7 million
increased $5.6 million from the prior year. The consumer product sales decline
is the result of the slow start to the lawn and garden retail season because of
the unseasonable weather over most of the United States. This decline was
partially offset by the early snow sales described above. The increase in
commercial products was primarily the result of strong sales to the European
golf market. Irrigation sales are up with increases in both the golf and do-it-
yourself markets. International sales for the nine months are above the prior
year due to the reasons previously noted.
Gross profit of $85.9 million for the third quarter increased $10.8 million from
the prior year. As a percent of sales, gross profit for the third quarter ended
August 2, 1996 was 36.9% compared with 37.1% for the period ended July 31, 1995
due primarily to a change in product mix. Gross profit of $266.0 million for
the nine months ended August 2, 1996 increased $7.5 million from the prior year.
As a percent of sales, gross profit for the nine months ended August 2, 1996 was
36.3% compared with 35.6% for the prior period. This increase was also due
primarily to favorable product costs and product mix.
<TABLE>
<CAPTION>
Selling General and Administrative Expense
-----------------------------------------------------------------------------
Aug 2, % of Net Jul 31, % of Net
S G & A 1996 Sales 1995 Sales
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Administrative $ 25.6 11.0 % $ 25.5 12.6 %
Sales and Marketing 22.8 9.8 17.3 8.5
Warranty 7.3 3.1 8.1 4.0
Distributor/Dealer Financing 2.7 1.2 2.8 1.4
Research and Development 8.3 3.6 7.1 3.5
Warehousing 3.9 1.7 4.4 2.2
Service/Quality Assurance 2.3 0.9 1.6 0.8
--- --- --- ---
Total $ 72.9 31.3 % $ 66.8 33.0 %
</TABLE>
Selling, General and Administrative Expense (S G & A) for the third quarter
increased $6.1 million from the prior year but as a percent of sales decreased
to 31.3%. Administrative expense was flat from the prior year and as a percent
of sales was down 1.6% as the company leverages fixed expenses on increased
sales. Sales and marketing expense increased primarily because of the sales
increase. The percent of sales change in sales and marketing expense was the
result of marketing incentives used in the quarter to stimulate lawn and garden
sales. Warranty expense decreased from the prior year primarily as a result of
lower warranty reserve requirements due to product quality improvement. Research
and development expenditures were above the prior year reflecting the company's
continued commitment to product innovation.
-9-
<PAGE>
FINANCIAL POSITION AS OF AUGUST 2, 1996
AUGUST 2, 1996 COMPARED TO JULY 31, 1995
Total assets as of August 2, 1996 were $531.9 million, up $63.6 million from
July 31, 1995. The primary increases occurred in accounts receivable and
inventory. The increase in inventory comes as a result of the slow retail
season in some product categories. Production schedule changes and a pick up in
retail demand is expected to bring inventory levels back in line with prior
periods by October 31, 1996.
Historically, accounts receivable balances increase in March and April as a
result of extended payment terms made available to the company's customers and
decrease throughout the summer months as payments become due. Accounts
receivable at August 2, 1996 showed an increase of $55.6 million over the prior
year. Of the receivables increase approximately $38.8 million is due to the
large volume of snow sales made at the end of the quarter and a slowdown in
retail commercial product movement. Approximately $5.3 million relates to the
expansion of the dealer financing customer base which is financed by the
company. Approximately $2.3 million of the increase was due to the sale of
receivables in the prior year with no receivables being sold in the current
year. The remaining change is primarily due to increases in consumer and
international sales.
Total current liabilities of $246.7 million at August 2, 1996 increased $34.1
million compared with current liabilities at July 31, 1995. The majority of
this increase occurred in short-term borrowing, which was up $61.1 million over
the prior year. The increase in short-term borrowing reflects the company's
cash management strategy of utilizing short-term borrowing to fund the company's
seasonal working capital needs. The company's peak borrowing usually occurs in
late winter/early spring. The company also acquired $5.9 million of Toro stock
in the third quarter. The purchased stock will be used primarily to fulfill the
company's obligations under a variety of benefit plans. The increase in short-
term borrowing was offset by a decrease in both accounts payable, due to normal
seasonal production slowdowns within the past few months, and a reduction in the
current portion of long-term debt due to scheduled payments.
Other long-term liabilities increased $17.3 million over the prior year because
the company entered into a forward starting interest rate exchange agreement.
See footnote 3 on page 7.
AUGUST 2, 1996 COMPARED TO OCTOBER 31, 1995
Total assets as of August 2, 1996 were $531.9 million, up $59.3 million from
October 31, 1995. The majority of this increase occurred in accounts receivable
($67.0 million). The increase in accounts receivable is attributable to the
fact that the company's business is cyclical with receivables increasing in the
winter months as extended payment terms are offered to customers. Receivable
balances are highest at the end of the second quarter with third quarter the
next largest. In addition, accounts receivable have increased due to the
expansion of the dealer financing customer base.
Total current liabilities of $246.7 million at August 2, 1996 increased $25.6
million compared with current liabilities at October 31, 1995. The majority of
this increase was the result of additional short-term borrowing of $42.0 million
and other accrued liabilities of $23.4 million. The increase in short-term
borrowing reflects the company's strategy of utilizing short-term borrowing to
fund the company's seasonal working capital needs. The company also acquired
$13.1 million of Toro stock in the nine months ended August 2, 1996.
Other long-term liabilities increased $15.4 million mainly because the company
entered into a forward starting interest rate exchange agreement. See footnote
3 on page 7.
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
EQUITY
Equity increased $24.1 million compared with the prior year. Retained earnings
increased $30.1 million. This was offset by a decrease in additional paid in
capital because the company acquired $14.0 million of Toro stock in the twelve
months ended August 2, 1996. The purchased stock will be used primarily to
fulfill the company's obligations under a variety of benefit plans.
Equity as of August 2, 1996 increased $18.7 million compared to October 31,
1995. The increase reflects the earnings over the period offset by the
acquisition of Toro stock.
CASH FLOWS
The seasonal working capital requirements of the business are financed with
short-term debt. Management believes that the combination of funds available
through its existing financing arrangements, coupled with forecasted cash flows,
will provide the capital resources for its anticipated needs.
Net cash used in operating activities was primarily to support the increase in
accounts receivable explained above. Partially offsetting these operating cash
outflows was cash provided from net earnings and the provision for depreciation
and amortization.
Net cash used in investing activities was the result of spending related to
consumer tooling, and several new molding machines used in the irrigation
facilities and building improvements at the Windom plant. Purchases of
property, plant, and equipment are down due to several one-time expenditures on
facility expansions in the prior year.
Net cash provided by financing activities was the result of proceeds from short-
term borrowing used to fulfill the operating cash flow requirements described
above in addition to reducing long-term debt. The cash provided from the change
in other long-term liabilities is the cash received from the forward starting
interest rate exchange agreement entered into on March 6, 1996. See footnote 3
on page 7. In addition, the company acquired $13.1 million of Toro stock in the
nine months ended August 2, 1996.
INFLATION
The company is subject to the effects of changing prices. The company has,
however, generally been able to pass along inflationary increases in its costs
by increasing the prices of its products.
- 11 -
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11 Computation of Earnings per Common Share
(b) Exhibit 27 Financial Data Schedule
Summarized financial data; electronic filing only.
(c) Reports on Form 8-K
The Company did not file any Form 8-K reports during the third quarter
of 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TORO COMPANY
(Registrant)
By /s/ Gerald T. Knight
-----------------------------
Gerald T. Knight
Vice President, Finance
Chief Financial Officer
(principal financial officer)
Date: September 16, 1996
-12-
<PAGE>
Exhibit 11
THE TORO COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- -------------------------
August 2, July 31, August 2, July 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 6,465 $ 4,027 $ 31,783 $ 28,365
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary:
Shares of common stock and common
stock equivalents:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . 12,108,554 12,270,005 12,183,841 12,591,164
Dilutive effect of outstanding
stock options (1) . . . . . . . . . . . . . 398,235 440,202 424,403 499,037
----------- ----------- ----------- -----------
12,506,789 12,710,207 12,608,244 13,090,201
----------- ----------- ----------- -----------
Net earnings per share of common stock
and common stock equivalent . . . . . . . . $ 0.52 $ 0.32 $ 2.52 $ 2.17
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Fully Diluted:
Shares of common stock and common
stock equivalents:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . 12,108,554 12,270,005 12,183,841 12,591,164
Dilutive effect of outstanding
stock options (2) . . . . . . . . . . . . . 398,235 458,282 424,403 512,895
----------- ----------- ----------- -----------
12,506,789 12,728,287 12,608,244 13,104,059
----------- ----------- ----------- -----------
Net earnings per share of common stock
and common stock equivalent . . . . . . . . $ 0.52 $ 0.32 $ 2.52 $ 2.17
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
1) Outstanding stock options and options exercised in the current period are
converted to common stock equivalents by the treasury stock method using the
average market price of the company's stock during each period.
2) Outstanding stock options and options exercised in the current period are
converted to common stock equivalents by the treasury stock method using the
greater of the average market price or the period-end market price of the
company's stock during each period.
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS, THE
CONDENSED CONSOLIDATED BALANCE SHEET AND EXHIBIT 11 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> AUG-02-1996
<CASH> 1,151
<SECURITIES> 0
<RECEIVABLES> 265,772<F5>
<ALLOWANCES> 0<F4>
<INVENTORY> 143,339
<CURRENT-ASSETS> 444,632
<PP&E> 220,443
<DEPRECIATION> 151,626
<TOTAL-ASSETS> 531,930
<CURRENT-LIABILITIES> 246,736
<BONDS> 53,419<F1>
0
0
<COMMON> 11,991<F2>
<OTHER-SE> 197,571
<TOTAL-LIABILITY-AND-EQUITY> 531,930
<SALES> 232,565
<TOTAL-REVENUES> 232,565
<CGS> 146,681
<TOTAL-COSTS> 72,909
<OTHER-EXPENSES> (1,489)<F3>
<LOSS-PROVISION> 0<F4>
<INTEREST-EXPENSE> 3,755
<INCOME-PRETAX> 10,709
<INCOME-TAX> 4,244
<INCOME-CONTINUING> 6,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,465
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
<FN>
<F5>Total net receivables.
<F4>Not included in quarterly financial information.
<F1>Total long-term debt.
<F2>Does not include additional paid-in-capital.
<F3>Other income-net.
</FN>
</TABLE>
