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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 30, 1998 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
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The number of shares of Common Stock outstanding as of February 27, 1998 was
12,831,973.
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<PAGE>
THE TORO COMPANY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Condensed Consolidated Statements of Operations and
Retained Earnings (Unaudited) -
Three Months Ended January 30, 1998 and January 31, 1997 . . .3
Condensed Consolidated Balance Sheets (Unaudited) -
January 30, 1998, January 31, 1997 and October 31, 1997. . . .4
Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended January 30, 1998 and January 31, 1997 . . .5
Notes to Condensed Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . .6
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 7-11
PART II. OTHER INFORMATION:
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . 12
Exhibit 11 Computation of Earnings per Common Share. . . . . . 13
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
January 30, January 31,
1998 1997
----------- -----------
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $ 210,059 $ 208,957
Cost of sales. . . . . . . . . . . . . . . . . . . 137,007 133,730
----------- -----------
Gross profit . . . . . . . . . . . . . . . . . 73,052 75,227
Selling, general and administrative expense. . . . 71,864 68,469
----------- -----------
Earnings from operations . . . . . . . . . . . 1,188 6,758
Interest expense . . . . . . . . . . . . . . . . . 5,805 3,847
Other income, net. . . . . . . . . . . . . . . . . (2,863) (1,206)
----------- -----------
Earnings (loss) before income taxes . . . . . . (1,754) 4,117
Provision (benefit) for income taxes . . . . . . . (693) 1,626
----------- -----------
Net earnings (loss) . . . . . . . . . . . . . . $ (1,061) $ 2,491
----------- -----------
----------- -----------
Retained earnings at beginning of period . . . . . 202,681 173,630
Dividends on common stock of $0.12 per share . . . (1,535) (1,450)
----------- -----------
Retained earnings at end of period . . . . . . . . $ 200,085 $ 174,671
----------- -----------
----------- -----------
Basic net earnings (loss) per share of common stock $ (.08) $ 0.21
----------- -----------
----------- -----------
Diluted net earnings (loss) per share of common
stock and common stock equivalents . . . . . . . $ (.08) $ 0.20
----------- -----------
----------- -----------
</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, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
January 30, January 31, October 31,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . $ 16 $ 76 $ 8
Receivables (net). . . . . . . . . . . . . . . . . . . 287,813 263,662 259,134
Inventories. . . . . . . . . . . . . . . . . . . . . . 209,334 175,215 160,122
Other current assets . . . . . . . . . . . . . . . . . 57,922 44,593 52,780
--------- --------- ---------
Total current assets . . . . . . . . . . . . . . . . 555,085 483,546 472,044
--------- --------- ---------
Property, plant and equipment. . . . . . . . . . . . . 308,466 308,902 297,841
Less accumulated depreciation and amortization . . . 183,672 200,646 180,989
--------- --------- ---------
124,794 108,256 116,852
Other assets . . . . . . . . . . . . . . . . . . . . . 99,505 68,547 72,738
--------- --------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . $ 779,384 $ 660,349 $ 661,634
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt. . . . . . . . . . . $ 664 $ 350 $ 365
Short-term borrowing . . . . . . . . . . . . . . . . . 134,500 194,296 41,000
Accounts payable . . . . . . . . . . . . . . . . . . . 72,157 38,474 58,397
Other accrued liabilities. . . . . . . . . . . . . . . 123,835 133,808 138,071
--------- --------- ---------
Total current liabilities. . . . . . . . . . . . 331,156 366,928 237,833
--------- --------- ---------
Long-term debt, less current portion . . . . . . . . . 178,068 53,330 177,650
Other long-term liabilities. . . . . . . . . . . . . . 4,976 23,176 4,988
Common stockholders' equity:
Common stock par value $1.00,
authorized 35,000,000 shares; issued and
outstanding 12,831,973 shares at January
30, 1998 (net of 676,082 treasury shares),
12,154,257 shares at January 31,
1997 (net of 755,747 treasury shares),
and 12,189,244 shares at October 31,
1997 (net of 720,760 treasury shares). . . . . . 12,832 12,154 12,189
Additional paid-in capital. . . . . . . . . . . . . 58,355 32,688 31,371
Retained earnings . . . . . . . . . . . . . . . . . 200,085 174,671 202,681
Foreign currency translation adjustment . . . . . . (6,088) (2,598) (5,078)
--------- --------- ---------
Total common stockholders' equity . . . . . . . . . 265,184 216,915 241,163
--------- --------- ---------
Total liabilities and common stockholders' equity $ 779,384 $ 660,349 $ 661,634
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
January 30, January 31,
1998 1997
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . $ (1,061) $ 2,491
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Provision for depreciation and amortization . . . . . . . . 6,818 5,359
Loss (gain) on disposal of property, plant and equipment. . 105 (6)
Deferred income taxes . . . . . . . . . . . . . . . . . . . 23 1,529
Tax benefits related to employee stock option transactions. 1,815 1,501
Changes in operating assets and liabilities:
Receivables (net). . . . . . . . . . . . . . . . . . . (23,762) 1,084
Inventories. . . . . . . . . . . . . . . . . . . . . . (39,185) (14,138)
Other current assets . . . . . . . . . . . . . . . . . (2,599) (8,914)
Accounts payable and accrued expenses. . . . . . . . . (12,599) (14,092)
----------- ------------
Net cash used in operating activities . . . . . . . . (70,445) (25,186)
----------- ------------
Cash flows from investing activities:
Purchases of property, plant and equipment. . . . . . . . . (10,500) (6,247)
Proceeds from asset disposals . . . . . . . . . . . . . . . 1,321 28
Increase in other assets. . . . . . . . . . . . . . . . . . (6,119) (3,829)
Acquisitions, net of cash acquired. . . . . . . . . . . . . (6,349) (118,030)
----------- ------------
Net cash used in investing activities . . . . . . . . (21,647) (128,078)
----------- ------------
Cash flows from financing activities:
Increase in short-term borrowing. . . . . . . . . . . . . . 93,500 153,271
Proceeds from long-term debt. . . . . . . . . . . . . . . . 114 72
Increase (decrease) in other long-term liabilities. . . . . (12) 575
Proceeds from exercise of stock options . . . . . . . . . . 1,043 2,847
Dividends on common stock . . . . . . . . . . . . . . . . . (1,535) (1,450)
----------- ------------
Net cash provided by financing activities . . . . . . 93,110 155,315
----------- ------------
Foreign currency translation adjustment. . . . . . . . . . . . (1,010) (2,041)
----------- ------------
Net increase in cash and cash equivalents. . . . . . . . . . . 8 10
Cash and cash equivalents at beginning of period . . . . . . . 8 66
----------- ------------
Cash and cash equivalents at end of period . . . . . . . . . . $ 16 $ 76
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 30, 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. Unless the context indicates otherwise, the
term "company" or "Toro" refers to The Toro Company and its subsidiaries. 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 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending October 31,
1998. Certain amounts from prior period's financial statements have been
reclassified to conform to this period's presentation.
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, 1997. 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 $27,219,000 and $25,642,000 higher than reported at January 30,
1998, and January 31, 1997, respectively. Under the FIFO method,
work-in-process inventories were $98,985,000 and $86,593,000 and finished goods
inventories were $137,568,000 and $114,264,000 at January 30, 1998, and January
31, 1997, respectively.
BUSINESS ACQUISITIONS
On November 25, 1997, the company completed the acquisition of Exmark
Manufacturing Company Incorporated (Exmark). In exchange for all the capital
stock of Exmark, the company issued 598,051 shares of its common stock and paid
approximately $5.5 million in cash. In addition, under terms of the purchase
agreement, the company will be required to make contingent payments to Exmark's
former shareholders if Exmark's post-acquisition earnings and sales growth from
November 1, 1997 through October 31, 1999 exceed minimum levels established in
the purchase agreement. The maximum amount of these contingent payments is $28
million. Contingent payments will be paid with a combination of cash and the
company's common stock. The acquisition is accounted for using the purchase
method of accounting.
On February 19, 1998, the company completed the acquisition of GR Driplines,
Inc. (Drip In) and various other assets. In exchange for all the capital stock
of Drip In and other related assets, the company paid approximately $10.6
million in cash and issued approximately $15.8 million of promissory notes
bearing an interest rate of 7%. The acquisition is accounted for using the
purchase method of accounting.
-6-
<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.
Statements that are not historical are forward-looking. When used by or on
behalf of the company, the words "expect", "anticipate", "believe", "intend" and
similar expressions generally identify forward-looking statements.
Forward-looking statements involve risks and uncertainties. These uncertainties
include factors that affect all businesses operating in a global market, as well
as matter specific to the company and the markets it serves. Particular risks
and uncertainties facing the company at the present include political and
economic uncertainty and instability in many of the company's markets in Asia;
the warm winter being experienced in many of the company's markets; the strong
dollar which increases the cost of the company's products in foreign markets and
limits the company's ability to increase prices; more cautious buying patterns
affecting the company's consumer business and European sales; increased
competition in the company's businesses; the company's ability to integrate
business acquisitions and to manage alliances successfully; changes in
distributor, dealer or mass merchant purchasing practices; and occasional
production delays affecting selected consumer products.
In addition, the company is subject to risks and uncertainties facing its
industry in general, including changes in business and political conditions and
the economy in general in both foreign and domestic markets; weather conditions
affecting demand, including warm winters and wet spring and summer weather; lack
of growth in the company's markets; financial market changes including increases
in interest rates and fluctuations in foreign exchange rates; a slowing in
housing starts or new golf course starts; inability to raise prices of products
due to market conditions; changes in market demographics; actions of
competitors; unanticipated problems or costs associated with implementation by
the company of computer applications that will accommodate the Year 2000; the
inability of the company's suppliers, customers, creditors and financial service
organizations to implement computer applications accommodating the Year 2000;
the company's ability to develop, manufacture and sell both new and existing
products profitably; seasonal factors in the company's industry; unforeseen
litigation; government action including budget levels, regulation and
legislation, primarily legislation relating to the environment, commerce,
infrastructure spending and health and safety; labor relations; and availability
of materials.
The company wishes to caution readers not to place undo reliance on any
forward-looking statements and to recognize that the statements are not
predictions of actual future results. Actual results could differ materially
from those anticipated in the forward-looking statements and from historical
results, as a result of the risks and uncertainties described, as well as others
not now anticipated. The foregoing statements are not exclusive and are in
addition to other factors discussed elsewhere in the company's filings with the
Securities and Exchange Commission. The company 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.
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<PAGE>
RESULTS OF OPERATIONS
Although revenues increased slightly in the first quarter of fiscal 1998
compared to 1997, the company experienced a first quarter net loss of $1.1
million or 8 cents per share compared to net earnings of $2.5 million or 20
cents per share for the same period in 1997, both of which are calculated on a
diluted per share basis. The decline in net earnings was due to weakness in
consumer product sales, which was exacerbated by warm weather and lower than
normal snowfalls associated with El Nino, reduced snowthrower sales, and
production delays related to the redesign of a portion of the lawn mower product
line delayed the shipment of lawn mower product during the first quarter.
Further pressure on earnings resulted from increases in selling, general and
administrative expenses and increases in interest expense due to higher
borrowing levels.
The following table sets forth net sales by product line.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
January 30, January 31,
1998 1997 $ Change % Change
---------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Consumer products.......................$ 57,444 $ 87,439 $ (29,995) (34.3)%
Commercial products..................... 98,167 77,957 20,210 25.9
Irrigation products..................... 54,448 43,561 10,887 25.0
----------- ----------- ------------
Total *..............................$ 210,059 $ 208,957 $ 1,102 0.5
----------- ----------- ------------
----------- ----------- ------------
* Includes international sales of.......$ 55,172 $ 54,026 $ 1,146 2.1%
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</TABLE>
CONSUMER PRODUCT SALES
Worldwide net sales of consumer products for the three months ended January 30,
1998 declined 34.3% to $57.4 million from the prior year period, primarily as a
result of decreased sales of consumer snowthrowers and lawn and garden
equipment. The lack of snowfall in certain parts of the country during this
winter season caused a significant reduction in snowthrower sales. Furthermore,
the company's redesign of certain portions of its lawn mower product line led to
the delay of product shipment. The company introduced a redesigned riding
garden tractor that did not meet prior period sales levels or sales
expectations. The company continues to experience the effects of distributors
and dealers delaying purchases of lawn and garden equipment until closer to the
retail season which has the effect of moving sales from the first to second
quarter. The company also continues to experience a shift in consumer buying
patterns from brand specific purchases from dealer outlets to price and value
conscious purchases from hardware, home centers and mass merchant retailers, a
trend throughout the industry.
COMMERCIAL PRODUCT SALES
Worldwide commercial product net sales for the three months ended January 30,
1998 of $98.2 million increased by $20.2 million compared to the same period in
the prior year. The acquisition of Exmark in November 1997 accounted for the
majority of the increase in commercial sales. The company also experienced
strong domestic sales to the landscape contractor market. International
commercial sales decreased to $18.1 million for the three months ended January
30, 1998 from $22.6 million for the three months ended January 31, 1997,
primarily as a result of the Asian economic crisis which has led to the delay or
cancellation of several golf projects. The Asian economic crisis could lead to
continued delay or cancellation of golf projects in Asia that would negatively
impact international commercial and irrigation sales for the current year.
-8-
<PAGE>
IRRIGATION PRODUCT SALES
Irrigation product net sales for the three months ended January 30, 1998 of
$54.4 million increased by $10.9 million as compared to the same period in the
prior year. The increase is due to strong domestic golf course demand. This
increase was also partially attributable to an additional month of James Hardie
Irrigation Group (Hardie) related sales this quarter as compared to the three
months ended January 31, 1997 because the Hardie acquisition was effective
December 1, 1996. International irrigation sales increased from $16.1 million
for the three months ended January 31, 1997 to $22.4 million for the three
months ended January 30, 1998 due to healthy increases in micro-irrigation
product sales to the worldwide agricultural market.
GROSS PROFIT
Gross profit was $73.1 million, a decrease of $2.2 million from the prior year.
As a percent of sales, gross profit for the period ended January 30, 1998 was
34.8% compared with 36.0% for the period ended January 31, 1997. The decrease
is primarily due to lower snowthrower sales, which have higher margins than
other products. Exmark products, which were added to the company's sales
effective November 1, 1997, have lower product margins than historical Toro
margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense (SG&A) increased $3.4 million from
the period ended January 31, 1997. As a percent of sales, SG&A for the period
ended January 30, 1998 increased to 34.2% from 32.8% for the period ended
January 31, 1997. Exmark added $3.7 million in SG&A expense during the current
period. Without Exmark, SG&A as a percent of sales would have increased to 35.0%
of sales. The increase is due to higher warranty expense as a result of a
change in the sales mix to commercial products with overall higher historical
warranty rates. SG&A expense as a percentage of sales also increased due to
sales levels in the period that did not support fixed SG&A expenses.
OTHER INCOME, NET
Other income, net, increased during the quarter due primarily to income received
as a result of a favorable settlement of a trade secret lawsuit and recovery of
a previously written off note receivable.
FINANCIAL POSITION AS OF JANUARY 30, 1998
JANUARY 30, 1998 COMPARED TO JANUARY 31, 1997
Total assets at January 30, 1998 were $779.4 million, up $119.0 million from
January 31, 1997. This increase is comprised of approximately $41.1 million
related to the acquisition of Exmark and various changes discussed below.
Accounts receivable increased by $24.2 million due to the acquisition of Exmark
and increased sales of landscape contractor equipment and agricultural
micro-irrigation product partially offset by lower sales of consumer product.
Inventory increased $34.1 million due to the acquisition of Exmark and higher
consumer inventory levels due to delayed lawn mower shipments attributable to
production delays and movement of sales from first to second quarters. Other
current assets increased from the prior year due primarily to an increase in
deferred income taxes. Net property, plant and equipment increased by
approximately $16.5 million, with the increase due to the acquisition of Exmark,
corporate headquarters expansion and new tooling projects. Other assets
increased by $31.0 million as a result of capitalization of the excess purchase
price of Exmark over the fair value of assets acquired plus additional
capitalized debt financing costs.
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<PAGE>
FINANCIAL POSITION AS OF JANUARY 30, 1998 (CONTINUED)
Total current liabilities of $331.2 million at January 30, 1998 decreased $35.8
million as compared with current liabilities at January 31, 1997. The majority
of this decrease was short-term borrowing, which decreased by $59.8 million from
the prior year due primarily to the long term financing of both the purchase
price and working capital needs of the Hardie acquisition completed in December
1996. Accounts payable increased due to timing of inventory purchases related
to the increase of inventory as compared to the prior period. Other accrued
liabilities decreased by $10.0 million, primarily as a result of adjusting
Hardie related accruals. Long-term debt increased from January 31, 1997 to
January 30, 1998 as a result of the issuance of $175.0 million of debt
securities which were used to redeem $50.0 million of 11% Debentures and to
replace the temporary short term funding used to purchase Hardie. Other
long-term liabilities also decreased over the prior period, primarily as a
result of terminating an interest rate swap agreement associated with the
issuance of long term debt in fiscal 1997.
JANUARY 30, 1998 COMPARED TO OCTOBER 31, 1997
Total assets at January 30, 1998 were $779.4 million, up $117.8 million from
October 31, 1997. Accounts receivable increased $28.7 million from October 31,
1997 as result of the purchase of Exmark and due to increased sales to landscape
contractor equipment and agricultural micro irrigation product partially offset
by lower sales of consumer products. Inventory increased by $49.2 million that
relates to the normal buildup of consumer lawn and garden products manufactured
in the first quarter. Net property, plant and equipment increased $7.9 million
due to the addition of Exmark net property, plant and equipment, the expansion
of the corporate headquarters and routine capital expenditures. Other assets
increased $26.8 million as a result of the excess of the purchase price of
Exmark over the fair value of the net assets acquired.
Total current liabilities of $331.2 million at January 30, 1998 reflected an
increase of $93.3 million compared with current liabilities at October 31, 1997.
The majority of this increase was the result of additional short-term borrowing
of $93.5 million which reflects the company's strategy of utilizing short-term
borrowing to fund the company's seasonal working capital needs. Accounts payable
increased due to timing of inventory purchases related to the increase of
inventory as compared to October 31, 1997. Other accrued liabilities decreased
by $14.2 million, primarily as a result of the annual payment of profit sharing
and related accruals. There were no significant changes in long-term debt and
other long-term liabilities from October 31, 1997 to January 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities for the three month period ended January 30,
1998 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 million of
unsecured bank credit lines. The company is currently finalizing amendments to
its unsecured bank credit lines to increase the available borrowing facility to
$230 million. The company expects these amendments to be completed by the end
of March 1998. The company also has banker's acceptance financing agreements
under which an additional $40 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.
In February 1998, the company completed the acquisition of Drip In. The company
financed the cash portion of the acquisition price of approximately $10.6
million by using the company's unsecured bank credit lines.
Management believes that the combination of funds available through its existing
financing arrangements, coupled with forecasted cash flows and finalization of
the amendments to the bank credit lines, will provide the capital resources for
its anticipated needs.
-10-
<PAGE>
INFLATION
The company is subject to the effects of changing prices. The company has been
able to deal successfully with inflationary pressures through a combination of
internal cost reduction efforts and selected increases in selling prices of
products.
YEAR 2000 COMPLIANCE
The company is in the process of implementing a year 2000 compliant
enterprise-wide information system. This process was initiated in 1995 and is
currently operational in many locations within the company. This implementation
will be largely completed during 1998. The company has also initiated an
assessment project, which addresses those other significant systems that may
have year 2000 compliance issues.
The company presently believes that with the implementation of the new system
and modifications to existing software, year 2000 compliance will not pose a
significant operational issue for the company. However, if these modifications
and conversion are not completed on a timely basis, including implementation by
its business partners, year 2000 compliance may have a material impact on the
operations of the company.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Computation of Earnings (loss) per Common Share
Exhibit 27 Financial Data Schedule - Summarized financial data;
electronic filing only.
(b) Reports on Form 8-K
The company did not file any Form 8-K reports during the first quarter
of fiscal 1998.
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/ Stephen P. Wolfe
--------------------------
Stephen P. Wolfe
Vice President, Finance
Chief Financial Officer
(principal financial officer)
Date: March 13, 1998
-12-
<PAGE>
EXHIBIT 11
THE TORO COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
January 30, January 31,
1998 1997
----------- ------------
<S> <C> <C>
Net earnings (loss). . . . . . . . . . . . . . . . $ (1,061) $ 2,491
------------ ------------
------------ ------------
Basic:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . 12,636,408 12,085,519
------------ ------------
Net earnings (loss) per share of common stock. . $ (0.08) $ 0.21
------------ ------------
------------ ------------
Diluted:
Shares of common stock and common
stock equivalents:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . 12,636,408 12,085,519
Dilutive effect of outstanding
stock options (1) . . . . . . . . . . . . . - 376,581
------------ ------------
12,636,408 12,462,100
------------ ------------
Net earnings (loss) per share of common stock
and common stock equivalent . . . . . . . . . $ (0.08) $ 0.20
------------ ------------
------------ ------------
</TABLE>
1) The effect of stock options has not been included in the January 30, 1998
calculation because their inclusion would be anti-dilutive.
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 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-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-30-1998
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 287,813<F5>
<ALLOWANCES> 0<F4>
<INVENTORY> 209,334
<CURRENT-ASSETS> 555,085
<PP&E> 308,466
<DEPRECIATION> 183,672
<TOTAL-ASSETS> 779,384
<CURRENT-LIABILITIES> 331,156
<BONDS> 178,732<F1>
0
0
<COMMON> 12,832<F2>
<OTHER-SE> 252,352
<TOTAL-LIABILITY-AND-EQUITY> 779,384
<SALES> 210,059
<TOTAL-REVENUES> 210,059
<CGS> 137,007
<TOTAL-COSTS> 71,864
<OTHER-EXPENSES> (2,863)<F3>
<LOSS-PROVISION> 0<F4>
<INTEREST-EXPENSE> 5,805
<INCOME-PRETAX> (1,754)
<INCOME-TAX> (693)
<INCOME-CONTINUING> (1,061)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,061)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
<FN>
<F1>Total long-term debt
<F2>Does not include additinal paid-in-capital
<F3>Other income-net
<F4>Not included in quarterly financial information
<F5>Total net receivables
</FN>
</TABLE>
