<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended January 31, 1997 Commission File Number 1-8649
---------------- --------
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 February 28, 1997 was
12,174,979.
<PAGE>
THE TORO COMPANY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Condensed Consolidated Statements of Earnings and
Retained Earnings (Unaudited) -
Three Months Ended January 31, 1997 and February 2, 1996. . . . . . . . . .3
Condensed Consolidated Balance Sheets (Unaudited) -
January 31, 1997, February 2, 1996 and October 31, 1996 . . . . . . . . . .4
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended January 31, 1997 and February 2, 1996. . . . . . . . . .5
Notes to Condensed Consolidated Financial Statements (Unaudited). . . . . . 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 8-12
PART II. OTHER INFORMATION:
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . .13
Exhibit 11 Computation of Earnings per Common Share. . . . . . . . . . . . .14
</TABLE>
-2-
<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
----------------------------
January 31, February 2,
1997 1996
<S> <C> <C>
----------- -----------
Net sales. . . . . . . . . . . . . . . . . . . . . . . . $ 208,957 $ 211,501
Cost of sales. . . . . . . . . . . . . . . . . . . . . . 133,730 135,172
----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . . . 75,227 76,329
Selling, general and administrative expense. . . . . . . 68,469 63,824
----------- -----------
Earnings from operations . . . . . . . . . . . . . . . 6,758 12,505
Interest expense . . . . . . . . . . . . . . . . . . . . 3,847 2,969
Other income, net. . . . . . . . . . . . . . . . . . . . (1,206) (4,513)
----------- -----------
Earnings before income taxes . . . . . . . . . . . . . 4,117 14,049
Provision for income taxes . . . . . . . . . . . . . . . 1,626 5,551
----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 2,491 $ 8,498
----------- -----------
----------- -----------
Retained earnings at beginning of period . . . . . . . . 173,630 142,891
Dividends on common stock of $0.12 per share . . . . . . (1,450) (1,465)
----------- -----------
Retained earnings at end of period . . . . . . . . . . . $ 174,671 $ 149,924
----------- -----------
----------- -----------
Net earnings per share of common stock and
common stock equivalent. . . . . . . . . . . . . . . . $ 0.20 $ 0.67
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
January 31, February 2, October 31,
1997 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . $ 76 $ 4,322 $ 66
Receivables (net). . . . . . . . . . . . . . . . . . . 263,662 262,473 239,637
Inventories. . . . . . . . . . . . . . . . . . . . . . 175,215 163,575 130,288
Other current assets . . . . . . . . . . . . . . . . . 44,593 32,106 35,010
----------- ----------- -----------
Total current assets. . . . . . . . . . . . . . . . 483,546 462,476 405,001
----------- ----------- -----------
Property, plant and equipment. . . . . . . . . . . . . 308,902 213,256 229,080
Less accumulated depreciation and amortization. . . 200,646 145,319 155,270
----------- ----------- -----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . 108,256 67,937 73,810
Other assets . . . . . . . . . . . . . . . . . . . . . 68,547 17,244 18,066
----------- ----------- -----------
Total assets. . . . . . . . . . . . . . . . . . . . $ 660,349 $ 547,657 $ 496,877
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt. . . . . . . . . . . $ 350 $ 10,331 $ 350
Short-term borrowing . . . . . . . . . . . . . . . . . 194,296 114,909 41,025
Accounts payable . . . . . . . . . . . . . . . . . . . 38,474 45,977 43,524
Other accrued liabilities. . . . . . . . . . . . . . . 133,808 116,547 122,958
----------- ----------- -----------
Total current liabilities . . . . . . . . . . . . . 366,928 287,764 207,857
----------- ----------- -----------
Long-term debt, less current portion . . . . . . . . . 53,330 53,365 53,015
Other long-term liabilities. . . . . . . . . . . . . . 23,176 7,178 22,438
Common stockholders' equity:
Common stock par value $1.00,
authorized 35,000,000 shares; issued and
outstanding 12,154,257 shares at January
31, 1997 (net of 755,747 treasury shares),
12,279,360 shares at February 2,
1996 (net of 562,965 treasury shares),
and 12,032,143 shares at October 31, 1996
(net of 877,861 treasury shares). . . . . . . . . . 12,154 12,279 12,032
Additional paid-in capital. . . . . . . . . . . . . . 32,688 37,766 28,462
Retained earnings . . . . . . . . . . . . . . . . . . 174,671 149,924 173,630
Foreign currency translation adjustment . . . . . . . (2,598) (619) (557)
----------- ----------- -----------
Total common stockholders' equity . . . . . . . . . . 216,915 199,350 213,567
----------- ----------- -----------
Total liabilities and common stockholders' equity . $ 660,349 $ 547,657 $ 496,877
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
January 31, February 2,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,491 $ 8,498
Adjustments to reconcile net earnings to net cash
used in operating activities:
Provision for depreciation and amortization . . . . . . . . . . . 5,359 4,693
Gain on disposal of property, plant and equipment . . . . . . . . (6) (18)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 1,529 -
Tax benefits related to employee stock option transactions. . . . 1,501 -
Changes in operating assets and liabilities:
Receivables (net). . . . . . . . . . . . . . . . . . . . . . . 1,084 (63,657)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . (14,138) (17,713)
Other current assets . . . . . . . . . . . . . . . . . . . . . (8,914) 1,773
Accounts payable and accrued expenses. . . . . . . . . . . . . (15,192) (3,585)
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . 1,100 1,844
----------- -----------
Net cash used in operating activities . . . . . . . . . . . (25,186) (68,165)
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment. . . . . . . . . . . . (6,655) (2,492)
Proceeds from asset disposals . . . . . . . . . . . . . . . . . . 28 18
Increase in other assets. . . . . . . . . . . . . . . . . . . . . (3,829) (987)
Acquisition of James Hardie Irrigation, net of cash acquired. . . (117,622) -
----------- -----------
Net cash used in investing activities . . . . . . . . . . . (128,078) (3,461)
----------- -----------
Cash flows from financing activities:
Increase in short-term borrowing. . . . . . . . . . . . . . . . . 153,271 73,334
Repayments of long-term debt. . . . . . . . . . . . . . . . . . . 72 (5,003)
Change in other long-term liabilities . . . . . . . . . . . . . . 575 (45)
Proceeds from sale of common stock. . . . . . . . . . . . . . . . 2,847 2,814
Purchases of common stock . . . . . . . . . . . . . . . . . . . . - (649)
Dividends on common stock . . . . . . . . . . . . . . . . . . . . (1,450) (1,465)
----------- -----------
Net cash provided by financing activities . . . . . . . . . 155,315 68,986
----------- -----------
Foreign currency translation adjustment. . . . . . . . . . . . . . . (2,041) (740)
----------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . 10 (3,380)
Cash and cash equivalents at beginning of period . . . . . . . . . . 66 7,702
----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 76 $ 4,322
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 1997
BASIS OF PRESENTATION
The accompanying unaudited condensed 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
condensed 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. Since the company's
business is seasonal operating results for the three months ended January 31,
1997 are not necessarily indicative of the results that may be expected for the
year ending October 31, 1997.
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
October 31, 1996. The policies described in that report are used for preparing
quarterly reports.
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 $25,642,000 and $24,841,000 higher than reported at January 31,
1997, and February 2, 1996, respectively. Under the FIFO method,
work-in-process inventories were $86,593,000 and $85,691,000 and finished goods
inventories were $114,264,000 and $102,725,000 at January 31, 1997, and February
2, 1996, respectively.
BUSINESS ACQUISITIONS
On December 2, 1996, the company completed the acquisition of James Hardie
Irrigation Group (Hardie) from James Hardie Limited of Australia. The purchase
price of approximately $119 million is subject to adjustment based on the audit
of the closing date balance sheet. The acquisition has been initially financed
with temporary bank debt, which the company intends to refinance during the
current fiscal year through the issuance of long-term debt. The company has
filed a shelf registration which will facilitate the issuance of long-term debt
to replace the temporary bank debt. The acquisition is being accounted for
under the purchase method of accounting. The purchase price has been initially
allocated to the assets and liabilities acquired based on their estimated fair
values. The final purchase price allocation may be adjusted based upon
appraisals and other information relating to the fair values of assets and
liabilities acquired and the final purchase price. The excess of the purchase
price over the estimated fair value of net assets acquired plus additional
capitalized acquisition costs was approximately $43.6 million and is being
amortized on a straight-line basis over 20 years.
-6-
<PAGE>
BUSINESS ACQUISITIONS (CONTINUED)
The following unaudited pro forma information presents a summary of consolidated
results of operations of the company and Hardie as if the acquisition had
occurred at the beginning of fiscal 1996, with pro forma adjustments to give
effect to amortization of goodwill, interest expense on acquisition debt and
certain other adjustments, together with the related income tax effects.
Three Months Ended
January 31, February 2,
(Dollars in thousands, except per share data) 1997 1996
--------------------------------
Net sales $ 223,123 $ 243,116
Net earnings 234 6,167
Earnings per share 0.02 0.49
-7-
<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
First quarter net earnings of $2.5 million or 20 cents per share were down
significantly from the net earnings of $8.5 million or 67 cents per share for
the same period in the previous year. Revenues declined slightly from $211.5
million in the first quarter of 1996 to $209.0 million in the first quarter of
1997, as a result of factors discussed in the following paragraphs. The decline
in net earnings was due to a number of unusual factors which affected the first
quarter of 1997, including the acquisition of James Hardie Irrigation Group
(Hardie) which added $19.2 million in sales revenue, but had a negative impact
on first quarter earnings. A shift in shipping patterns bringing inventory
closer to retail and softening in several core markets also contributed to the
decline in first quarter earnings. In addition, several of the company's new
businesses have continued to show positive sales results, but have not yet
reached profitable levels.
The following table sets forth net sales by product line.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
January 31, February 2,
1997 1996 $ Change % Change
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(Dollars in thousands)
Consumer products. . . . . . . . . . . . $ 83,642 $ 102,641 $ (18,999) (18.5)%
Commercial products. . . . . . . . . . . 77,957 78,333 (376) (0.5)
Irrigation products. . . . . . . . . . . 47,358 30,527 16,831 55.1
----------- ----------- -----------
Total *. . . . . . . . . . . . . . . . $ 208,957 $ 211,501 $ (2,544) (1.2)
----------- ----------- -----------
* Includes international sales of. . . . $ 54,026 $ 39,419 $ 14,607 37.1%
</TABLE>
-8-
<PAGE>
CONSUMER PRODUCT SALES
Worldwide net sales of consumer products for the three months ended January 31,
1997 of $83.6 million decreased by $19.0 million from the prior year, primarily
as a result of decreased sales of consumer lawn and garden equipment.
Traditionally, lawn and garden equipment has been shipped to distributors and
dealers from November through January; however, the company's strategy of
producing and shipping consumer products to more closely match retail demand has
resulted in a shift of sales of these products from this period to the second
quarter of the current fiscal year. In addition, inclement weather caused a ten
day plant shutdown that resulted in lower production and sales of riding
equipment. These declines were offset slightly by increased sales of electric
products, especially in the western United States, and increased sales of snow
removal equipment, topping off a successful introduction of the
LawnBoy-Registered Trademark- snow product series. International consumer sales
increased from $13.5 million to $15.3 million as a result of strong demand in
Canada and continued growth in new markets overseas.
COMMERCIAL PRODUCT SALES
Worldwide commercial product net sales were flat compared to the same period in
the prior year. The company's efforts to more closely match commercial product
production and sales to retail demand have shifted sales from the first quarter
into the second quarter of the current year. Commercial sales were also
impacted by ongoing competitive pressures; however, several new product
introductions in the second quarter are expected to reinforce sales.
International commercial sales increased to $22.6 million from $19.4 million in
the prior year, primarily as a result of lower than normal sales in the first
quarter of 1996 due to product availability. International golf sales are
continuing to strengthen as new markets in emerging countries are developed.
IRRIGATION PRODUCT SALES
The decline in consumer and commercial product net sales for the quarter was
largely offset by an increase in irrigation product net sales which rose 55.1%
from the same period in the previous year. This increase is attributable to the
acquisition of the James Hardie Irrigation Group (Hardie) which contributed
approximately $20.0 million in irrigation sales. Without Hardie, irrigation
sales declined by $2.3 million due primarily to field inventory adjustments and
wet weather in southern California and other key markets. Excluding Hardie's
international sales of $10.7 million, international irrigation sales decreased
from $6.5 million to $5.4 million due to inclement weather and overall weakening
in the European economy.
GROSS PROFIT
Gross profit was $75.2 million, a decrease of $1.1 million from the prior year.
As a percent of sales, gross profit for the period ended January 31, 1997 was
36.0% compared with 36.1% for the period ended February 2, 1996. The gross
margin contributed by Hardie product sales was slightly lower than the overall
gross margin, but this was largely offset by higher gross margin contributions
from other new businesses. Manufacturing variances were relatively flat as
compared to last year.
-9-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling General and Administrative Expense
(Dollars in millions)
-----------------------------------------------------------------------
Jan 31, % of Net Feb 2, % of Net
SG&A 1997 Sales 1996 Sales
-----------------------------------------------------------------------
Administrative $ 24.0 11.5% $ 22.2 10.5%
Sales and Marketing 23.4 11.2 20.4 9.6
Warranty 4.9 2.3 6.4 3.0
Distributor/Dealer Financing 2.6 1.2 2.4 1.1
Research and Development 7.7 3.7 7.1 3.4
Warehousing 3.5 1.7 3.4 1.6
Service/Quality Assurance 2.4 1.2 1.9 0.9
--- --- --- ---
Total $ 68.5 32.8% $ 63.8 30.1%
---- ----
Selling, general and administrative expense (SG&A) increased $4.7 million from
the prior year, and as a percent of sales increased to 32.8% from 30.1% for the
same period in fiscal 1996. Hardie added $6.0 million in SG&A expense, which
was partially offset by lower SG&A expense in other areas. Administrative,
sales and marketing, research and development and warehousing expenses, net of
Hardie, were flat compared to the same period in fiscal 1996. Warranty expense
as a percent of sales, net of Hardie expenses, decreased from the prior year as
a result of a change in the mix of products sold and a warranty related refund
received from a vendor. Distributor/Dealer financing increased slightly over
the same period in fiscal 1996 due to Toro Credit Company's (TCC) addition of
financing for commercial accessories. Service/quality assurance expenses
increased as a result of additional expenses related to new businesses.
OTHER INCOME, NET
Other income, net, decreased during the quarter due primarily to income received
in the prior period as a result of a favorable settlement of a patent
infringement lawsuit.
FINANCIAL POSITION AS OF JANUARY 31, 1997
JANUARY 31, 1997 COMPARED TO FEBRUARY 2, 1996
Total assets at January 31, 1997 were $660.3 million, up $112.7 million from
February 2, 1996. This increase is comprised of an increase in total assets of
approximately $140.0 million related to the acquisition of Hardie, offset by a
decline in total assets of the remaining business. Cash decreased from the
prior period as the result of improved asset management policies. Accounts
receivable increased by $1.2 million, with $28.9 million in receivables
attributable to the Hardie acquisition and a decline in the remaining business
receivables of $27.7 million. This decline in non-Hardie receivables is the
result of lower levels of shipments driven by the shift of sales closer to
retail demand. Inventory balances, net of Hardie inventories of approximately
$31.5 million, declined by $19.9 million due to asset management strategies
which match production more closely with the retail demand and result in lower
overall inventory levels. Other current assets increased from the prior year
due primarily to an increase in prepaid income taxes. Net property, plant and
equipment, increased by approximately $40.3 million, with $30.7 million of this
increase related to Hardie and the remaining increase related to the corporate
headquarters expansion and new tooling projects. Other assets increased by
$51.3 million as a result of capitalization of the excess of the purchase price
of Hardie over the fair value of Hardie net assets acquired plus additional
capitalized acquisition costs of approximately $43.6 million, in addition to the
acquired other assets of Hardie.
-10-
<PAGE>
FINANCIAL POSITION AS OF JANUARY 31, 1997, (CONTINUED)
Total current liabilities of $366.9 million at January 31, 1997 increased $79.2
million compared with current liabilities at February 2, 1996. The majority of
this increase was short-term borrowing, which increased by $79.4 million over
the prior year due primarily to the financing of both the purchase price and
working capital needs of Hardie. In addition, the variance 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
increase in short-term borrowing was offset by a decrease in trade payables
primarily as a result of reduced inventory levels, net of Hardie. Other accrued
liabilities increased by $17.3 million, primarily as a result of expenses
related to the Hardie acquisition, and Hardie accrued liabilities acquired. The
current portion of long-term debt was also reduced from the first quarter of
fiscal 1996 due to the repayment of Toro Credit Company's (TCC) debt. All TCC
debt financing is now being provided by the parent company. Other long-term
liabilities also increased over the prior period, primarily as a result of an
interest rate swap agreement entered into during second quarter of fiscal 1996.
JANUARY 31, 1997 COMPARED TO OCTOBER 31, 1996
Total assets at January 31, 1997 were $660.3 million, up $163.5 million from
October 31, 1996. As indicated previously, the Hardie acquisition accounted for
approximately $140.0 million of this increase. Accounts receivable, net of
Hardie, declined slightly from October 31, 1996. Inventory increased by $44.9
million, with $31.5 million of this increase attributable to the Hardie
acquisition. The remaining increase in inventory is a result of the normal
buildup of consumer lawn and garden products manufactured in the first quarter.
Other current assets increased by $9.6 million, primarily as the result of an
increase in prepaid income taxes. Net property, plant and equipment increased
from $73.8 million to $108.3 million due to the addition of Hardie net property,
plant and equipment of $30.7 million, the expansion of the corporate
headquarters and routine capital expenditures. Other assets increased as a
result of the excess of the purchase price of Hardie over the fair value of the
net assets acquired of approximately $26.9 million plus additional capitalized
acqusition costs of approximately $16.7 million and the acquisition of Hardie's
other assets.
Total current liabilities of $366.9 million at January 31, 1997 increased $159.1
million compared with current liabilities at October 31, 1996. The majority of
this increase was the result of additional short-term borrowings of $117.6
million which was used to finance the purchase price of Hardie. The remaining
increase in short-term borrowing reflects the company's strategy of utilizing
short-term borrowing to fund the company's seasonal working capital needs.
Other accrued liabilities increased as a result of expenses related to the
acquisition of Hardie. There were no significant changes in long-term debt and
other long-term liabilities from October 31, 1996 to January 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The primary use of cash during the current fiscal quarter was $117.6 million
used for the acquisition of Hardie. The purchase price has been initially
funded with temporary bank debt. The company has filed a shelf registration
which will facilitate the issuance of long-term debt to replace this temporary
bank debt, and intends to refinance this temporary debt with long-term financing
during the current fiscal year. The company believes that financing is also
available through other sources.
Cash used in operating activities for the three month period ended January 31,
1997, was primarily for the payment of accounts payable and accrued liabilities
and the seasonal build-up of inventories in anticipation of the spring selling
season. The company's working capital needs are funded with $190.0 million of
unsecured bank credit lines. An agreement for an additional $150.0 million
unsecured bank credit line expiring in December 1997 was executed in conjunction
with the acquisition of Hardie. The company also has banker's acceptance
financing agreements under which an additional $40.0 million is available. The
company's business is seasonal, with peak borrowing under the working capital
lines described above generally occurring between February and May each year.
-11-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES, (CONTINUED)
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.
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.
-12-
<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 filed its Current Report on Form 8K dated December 16,
1996, reporting the completion of the acquisition of James Hardie
Irrigation Group from James Hardie Industries Limited of Australia on
December 2, 1996 through the acquisition of all of the outstanding
common stock of James Hardie Irrigation, Inc., a Nevada corporation,
James Hardie Irrigation Pty. Limited, a corporation organized under
the laws of South Australia, Australia, and James Hardie Irrigation
Europe S.p.A., a corporation organized under the laws of Italy.
The company filed Amendment 1 to its Current Report on Form 8K dated
December 16, 1996 on Form 8K/A dated February 18, 1997, providing
financial information of the business acquired and pro forma financial
information related to the acquisition of James Hardie Irrigation
Group.
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: March 17, 1997
-13-
<PAGE>
Exhibit 11
THE TORO COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
January 31, February 2,
1997 1996
------------ ------------
<S> <C> <C>
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 2,491 $ 8,498
------------ ------------
Primary:
Shares of common stock and common
stock equivalents:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . . . 12,085,519 12,219,360
Dilutive effect of outstanding
stock options (1) . . . . . . . . . . . . . . . . 376,581 442,857
------------ ------------
12,462,100 12,662,217
------------ ------------
Net earnings per share of common stock
and common stock equivalent . . . . . . . . . . . . $ 0.20 $ 0.67
------------ ------------
</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.
<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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 76
<SECURITIES> 0
<RECEIVABLES> 263,662<F5>
<ALLOWANCES> 0<F4>
<INVENTORY> 175,215
<CURRENT-ASSETS> 483,546
<PP&E> 308,902
<DEPRECIATION> 200,646
<TOTAL-ASSETS> 660,349
<CURRENT-LIABILITIES> 366,928
<BONDS> 53,680<F1>
0
0
<COMMON> 12,154<F2>
<OTHER-SE> 204,761
<TOTAL-LIABILITY-AND-EQUITY> 660,349
<SALES> 208,957
<TOTAL-REVENUES> 208,957
<CGS> 133,730
<TOTAL-COSTS> 68,469
<OTHER-EXPENSES> (1,206)<F3>
<LOSS-PROVISION> 0<F4>
<INTEREST-EXPENSE> 3,847
<INCOME-PRETAX> 4,117
<INCOME-TAX> 1,626
<INCOME-CONTINUING> 2,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,491
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<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>
