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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 July 28, 2000 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: (952) 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 September 1, 2000 was
12,711,852.
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<PAGE> 2
THE TORO COMPANY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Consolidated Statements of Earnings (Unaudited) -
Three and Nine Months Ended July 28, 2000 and July 30, 1999.......................................3
Condensed Consolidated Balance Sheets (Unaudited) -
July 28, 2000, July 30, 1999 and October 31, 1999.................................................4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended July 28, 2000 and July 30, 1999.................................................5
Notes to Condensed Consolidated Financial Statements (Unaudited).....................................6-9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................................10-19
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K....................................................................20-21
Signatures...........................................................................................22
</TABLE>
2
<PAGE> 3
PART I. ITEM 1. FINANCIAL INFORMATION
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER-SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales .................................................. $ 345,166 $ 325,317 $ 1,067,204 $ 1,009,186
Cost of sales .............................................. 211,879 199,478 672,029 642,549
----------- ----------- ----------- -----------
Gross profit ........................................ 133,287 125,839 395,175 366,637
Selling, general, and administrative expense ............... 101,867 103,140 304,585 292,276
Restructuring and other unusual expense .................... -- 722 -- 722
----------- ----------- ----------- -----------
Earnings from operations ............................ 31,420 21,977 90,590 73,639
Interest expense ........................................... (7,651) (6,790) (21,060) (18,517)
Other income, net .......................................... 2,329 1,736 748 2,599
----------- ----------- ----------- -----------
Earnings before income taxes ........................ 26,098 16,923 70,278 57,721
Provision for income taxes ................................. 9,656 6,600 26,003 22,511
----------- ----------- ----------- -----------
Net earnings ........................................ $ 16,442 $ 10,323 $ 44,275 $ 35,210
=========== =========== =========== ===========
Basic net earnings per share of common stock ............... $ 1.29 $ .80 $ 3.46 $ 2.72
=========== =========== =========== ===========
Dilutive net earnings per share of common stock ............ $ 1.26 $ .78 $ 3.39 $ 2.66
=========== =========== =========== ===========
Weighted average number of shares of common stock
outstanding - Basic ................................. 12,745 12,825 12,799 12,961
Weighted average number of shares of common stock
outstanding - Dilutive .............................. 13,071 13,244 13,079 13,235
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
July 28, July 30, October 31,
2000 1999 1999
-------- -------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents .................................................... $ 65 $ 1,915 $ 11,960
Receivables, net ............................................................. 368,134 339,748 268,344
Inventories, net ............................................................. 213,461 194,225 204,430
Prepaid expenses and other current assets .................................... 10,905 8,352 6,116
Deferred income taxes ........................................................ 40,638 39,154 40,892
--------- --------- ---------
Total current assets ................................................. 633,203 583,394 531,742
--------- --------- ---------
Property, plant, and equipment ............................................... 372,639 345,430 353,808
Less accumulated depreciation ........................................ 244,457 222,631 229,636
--------- --------- ---------
128,182 122,799 124,172
Deferred income taxes ........................................................ 8,876 3,786 8,876
Goodwill and other assets, net ............................................... 127,736 128,230 122,388
--------- --------- ---------
Total assets ......................................................... $ 897,997 $ 838,209 $ 787,178
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt ............................................ $ 485 $ 644 $ 637
Short-term debt .............................................................. 121,775 115,356 56,461
Accounts payable ............................................................. 43,544 39,119 65,543
Other accrued liabilities .................................................... 205,430 196,153 183,164
--------- --------- ---------
Total current liabilities ............................................ 371,234 351,272 305,805
--------- --------- ---------
Long-term debt, less current portion ......................................... 195,198 195,617 195,600
Other long-term liabilities .................................................. 6,919 6,325 6,110
Stockholders' equity:
Stock, par value $1.00, authorized 35,000,000 shares;
issued and outstanding 12,721,596 shares at July 28,
2000 (net of 786,459 treasury shares), 12,657,994
shares at July 30, 1999 (net of 640,441 treasury shares),
and 12,569,309 shares at October 31, 1999 (net of
938,746 treasury shares) ................................................ 12,721 12,658 12,569
Additional paid-in capital ................................................... 52,044 48,883 45,343
Retained earnings ............................................................ 269,231 231,200 229,532
Accumulated comprehensive loss ............................................... (9,350) (7,746) (7,781)
--------- --------- ---------
Total stockholders' equity ........................................... 324,646 284,995 279,663
--------- --------- ---------
Total liabilities and stockholders' equity ........................... $ 897,997 $ 838,209 $ 787,178
========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
July 28, July 30,
2000 1999
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ................................................................................... $ 44,275 $ 35,210
Adjustments to reconcile net earnings to net cash used in operating activities:
Provision for depreciation and amortization ................................................. 28,199 26,897
(Gain) loss on disposal of property, plant, and equipment ................................... (86) 264
Deferred income taxes ....................................................................... 254 282
Tax benefits related to employee stock option transactions .................................. 854 393
Changes in operating assets and liabilities:
Receivables, net ....................................................................... (107,281) (95,299)
Inventories, net ....................................................................... (1,869) (4,060)
Prepaid expenses and other current assets .............................................. (4,778) 5,886
Accounts payable and accrued expenses .................................................. 4,945 8,520
--------- ---------
Net cash used in operating activities ............................................... (35,487) (21,907)
--------- ---------
Cash flows from investing activities:
Purchases of property, plant, and equipment ................................................. (26,143) (18,551)
Proceeds from asset disposals ............................................................... 1,480 256
Decrease (increase) in investment in affiliates ............................................. 412 (4,901)
Increase in other assets .................................................................... (2,381) (2,207)
Acquisition, net of cash acquired ........................................................... -- (2,748)
--------- ---------
Net cash used in investing activities .............................................. (26,632) (28,151)
--------- ---------
Cash flows from financing activities:
Increase in short-term debt ................................................................. 63,512 79,736
Repayments of long-term debt ................................................................ (657) (1,554)
Increase in other long-term liabilities ..................................................... 744 763
Proceeds from exercise of stock options ..................................................... 3,629 3,326
Purchases of common stock ................................................................... (10,859) (24,549)
Dividends on common stock ................................................................... (4,576) (4,619)
--------- ---------
Net cash provided by financing activities .......................................... 51,793 53,103
--------- ---------
Foreign currency translation adjustment ........................................................ (1,569) (1,220)
--------- ---------
Net (decrease) increase in cash and cash equivalents ........................................... (11,895) 1,825
Cash and cash equivalents at beginning of period ............................................... 11,960 90
--------- ---------
Cash and cash equivalents at end of period ..................................................... $ 65 $ 1,915
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 28, 2000
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
terms "company" and "Toro" refer 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 nine months ended July 28, 2000 are not indicative of the
results that may be expected for the fiscal year ending October 31, 2000.
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, 1999. 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 for most
inventories.
Inventories were as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) July 28, July 30,
2000 1999
-------- --------
<S> <C> <C>
Raw materials and work in process.................... $ 60,260 $ 69,003
Finished goods....................................... 195,810 171,194
---------- -----------
256,070 240,197
Less LIFO and other reserves......................... 42,609 45,972
---------- -----------
Total $ 213,461 $ 194,225
========== ===========
</TABLE>
Restructuring and Other Unusual Expense
At July 28, 2000, the company had $1.5 million of restructuring and other
unusual expense remaining in other accrued liabilities. The company has utilized
$.8 million of these reserves since October 31, 1999. The company expects the
majority of these reserves to be utilized when the closed facilities available
for sale are sold.
6
<PAGE> 7
Comprehensive Income
Comprehensive income is comprised of two components: net earnings and other
comprehensive income (loss). Other comprehensive income (loss) refers to
revenues, expenses, gains, and losses that under generally accepted accounting
principles are recorded as an element of stockholders' equity and are excluded
from net earnings. Toro's other comprehensive income (loss) is comprised of
foreign currency translation adjustments from certain foreign subsidiaries.
The components of comprehensive income were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- --------------------------
(Dollars in thousands) July 28, July 30, July 28, July 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings .................................... $ 16,442 $ 10,323 $ 44,275 $ 35,210
Other comprehensive income (loss) ............... 282 (1,623) (1,569) (1,220)
-------- -------- -------- --------
Comprehensive income ............................ $ 16,724 $ 8,700 $ 42,706 $ 33,990
======== ======== ======== ========
</TABLE>
Net Earnings Per Share
Reconciliations of basic and dilutive weighted average shares of common stock
outstanding are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- --------------------------
Basic July 28, July 30, July 28, July 30,
(Shares in thousands) 2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average number of shares of common
stock outstanding .............................. 12,745 12,825 12,716 12,792
Assumed issuance of contingent shares ................. -- -- 83 169
Weighted average number of shares of common stock -------- -------- -------- --------
and assumed issuance of contingent shares ...... 12,745 12,825 12,799 12,961
======== ======== ======== ========
Dilutive
(Shares in thousands)
Weighted average number of shares of common stock
and assumed issuance of contingent shares ...... 12,745 12,825 12,799 12,961
Assumed conversion of stock options ................... 326 419 280 274
Weighted average number of shares of common stock, -------- ------- -------- --------
assumed issuance of contingent shares, and
assumed conversion of stock options ............ 13,071 13,244 13,079 13,235
======== ======= ======== ========
</TABLE>
7
<PAGE> 8
Segment Data
The presentation of segment information reflects the manner in which management
organizes segments for making operating decisions and assessing performance. On
this basis, the company has determined it has two reportable business segments:
professional and residential. The other segment consists of company-owned
distributor operations and corporate activities, including corporate financing
activities and elimination of intersegment revenues and expenses.
The following table shows the summarized financial information concerning the
company's reportable segments:
<TABLE>
<CAPTION>
(Dollars in thousands)
Three months ended July 28, 2000: Professional Residential Other Total
------------ ----------- ----- -----
<S> <C> <C> <C> <C>
Net sales ............................................. $ 235,662 $ 94,553 $ 14,951 $ 345,166
Intersegment net sales ................................ 23,497 2,927 (26,424) --
Earnings (loss) before income taxes ................... 36,398 5,400 (15,700) 26,098
Three months ended July 30, 1999:
Net sales ............................................ $ 221,129 $ 94,738 $ 9,450 $ 325,317
Intersegment net sales ............................... 23,816 6,560 (30,376) --
Earnings (loss) before income taxes .................. 38,287 (1,199) (20,165) 16,923
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine months ended July 28, 2000: Professional Residential Other Total
------------ ----------- ----- -----
<S> <C> <C> <C> <C>
Net sales ............................................. $ 693,967 $ 349,759 $ 23,478 $1,067,204
Intersegment net sales ................................ 61,651 12,212 (73,863) --
Earnings (loss) before income taxes ................... 96,735 26,760 (53,217) 70,278
Total assets .......................................... 473,996 141,100 282,901 897,997
Nine months ended July 30, 1999:
Net sales ............................................. $ 646,536 $ 352,154 $ 10,496 $1,009,186
Intersegment net sales ................................ 37,970 8,496 (46,466) --
Earnings (loss) before income taxes ................... 101,971 15,192 (59,442) 57,721
Total assets .......................................... 441,660 158,314 238,235 838,209
</TABLE>
The following table presents the details of the other segment earnings (loss)
before income taxes:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
(Dollars in thousands) July 28, July 30, July 28, July 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Corporate expenses .................................... $(17,565) $(19,781) $(50,748) $(53,033)
Finance charge revenue ................................ 1,184 1,037 3,921 3,157
Elimination of corporate financing expense ............ 5,521 5,217 13,921 13,093
Interest expense ...................................... (7,651) (6,790) (21,060) (18,517)
Other ................................................. 2,811 152 749 (4,142)
-------- -------- -------- --------
Total ................................................. $(15,700) $(20,165) $(53,217) $(59,442)
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission (SEC) staff issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB 101). SAB 101 summarizes certain SEC staff views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB 101 will be effective for the company in the fourth quarter of fiscal year
2001. Toro is currently evaluating the impact of SAB 101 on its financial
condition and results of operations.
During fiscal 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 establishes new standards for recognizing all derivatives as either assets
or liabilities, and measuring those instruments at fair value. The new standard
will be effective for the company in the first quarter of fiscal year 2001. The
company is in the process of evaluating the impact of SFAS 133 on its financial
condition and results of operations.
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<PAGE> 10
ITEM 2. 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
or in press releases, conferences, reports, on the company's websites or
otherwise, 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," "estimate," "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 matters specific to the company and the markets it serves. Particular risks
and uncertainties facing the company at the present include inflationary
pressures and rising interest rates that could slow the economic growth that has
been important to the growth of the company's professional businesses, including
golf, agricultural irrigation, and landscape contractor markets; product quality
issues related to the development and production of irrigation products; delays
in key new irrigation product introductions; the degree of success related to
reorganization and management changes in the irrigation and worldwide
agricultural irrigation areas; increasing oil prices that raise the cost of
resin; a slow down in new golf course construction; a decline in the growth rate
in the number of new golfers, which affects new golf course construction; higher
average short-term debt costs for anticipated higher working capital needs;
whether the announced 5 by Five profit improvement program will be successful;
the company's ability to develop and manufacture new and existing products based
on anticipated investments in manufacturing capacity and engineering; market
acceptance of existing and new products relative to expectations and based on
current commitments to fund advertising and promotions; the company's ability to
acquire, develop, and integrate new businesses and manage alliances
successfully; success of a distribution initiative designed to develop a
distribution model; increased competition in the company's businesses from
competitors that have greater financial resources, including competitive pricing
pressures; changing buying patterns affecting the company's residential segment,
including but not limited to a trend away from purchases at dealer outlets to
price and value sensitive purchases at hardware stores, home centers, and mass
retailers; potential impact of the Internet and e-commerce on the company's
business; changes in distributor ownership; loss of, or a significant reduction
in, sales through a significant distribution channel, particularly as the
company's residential segment becomes more dependent on home center sales; the
company's expansion into selected home center markets and the resulting effects
on other product lines; unforeseen difficulties in the implementation of
strategies to use outside providers for warehousing and transportation services;
changes in distributors', dealers', home centers', or mass retailers' purchasing
practices; the company's ability to cost-effectively open new and expand
existing manufacturing facilities; the company's ability to manage costs and
capacity constraints at its manufacturing facilities; socio-economic conditions
in certain international markets; the degree of success from restructuring
actions undertaken at the Australian subsidiary; the continuing relative
strength of the dollar against the euro and Australian dollar, which increases
the cost of the company's products in certain foreign markets and impairs its
ability to increase prices; the decline of the U.S dollar against the Japanese
yen, which increases costs of certain inventory components that in turn could
negatively affect gross margins; competitive implications and price
transparencies related to the euro conversion; the ability to retain and hire
quality employees; threatened or pending litigation on matters relating to
patent infringement; and the impact of new accounting standards.
10
<PAGE> 11
Forward-Looking Information (continued)
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; rising interest
rates; weather conditions affecting demand, including warm winters and wet
spring and dry summer weather; unanticipated problems or costs associated with
the transition of European currencies to the common euro currency; 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; 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, health, and safety; availability of raw materials; and the company's
ability to maintain good relations with its union employees.
The company wishes to caution readers not to place undue reliance on any
forward-looking statement 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 due to the risks and uncertainties described above, as well as others
not now anticipated. The foregoing statements are not exclusive and further
information concerning the company and its businesses, including factors that
have the potential to materially affect the company's financial results, may
emerge from time to time. It is not possible for management to predict all risk
factors or to assess the impact of such risk factors on the company's business.
11
<PAGE> 12
RESULTS OF OPERATIONS
Toro's results for the third quarter of fiscal 2000 were positive, with a
substantial increase in profits on an overall modest sales growth. Fiscal 2000
third quarter net sales increased 6.1 percent to $345.2 million from $325.3
million for the third quarter of fiscal 1999. Net earnings increased 59.3
percent to $16.4 million from $10.3 million after restructuring and other
unusual expense for the same quarter in fiscal 1999, and dilutive earnings per
share for the quarter rose 61.5 percent to $1.26 from $0.78 after restructuring
and other unusual expense in the fiscal 1999 third quarter. Worldwide sales for
the professional segment rose 6.6 percent compared to last year's third quarter
with significant increases in the landscape contractor market and continued
strong demand for golf and grounds maintenance equipment somewhat offset by a
decline in golf irrigation system sales. Worldwide sales for the residential
segment were slightly down by 0.2 percent compared to last year's third quarter
due to the divestiture and discontinuance of non-performing product lines and
lower sales of walk power mowers and do-it-yourself irrigation products, offset
slightly by higher sales of electric trimmers, riding products and snowthrowers.
The other segment net sales increased substantially mainly due to sales
contributed by two additional Toro-owned distributorships acquired in the second
half of calendar 1999. Overall, international sales did well for the quarter
with a 16.9 percent increase due to strong sales in the European and Canadian
markets.
The profitability growth for the third quarter of fiscal 2000 was led by
improved gross margins and lower selling, general, and administrative costs in
the residential segment as well as additional profitability from the newly
acquired company-owned distributors, which were slightly offset by lower
profitability from the professional segment due to lower gross margins and
higher costs related to special warranty reserves for product modifications.
Year-to-date net sales were $1,067.2 million compared to $1,009.2 million last
year, an increase of 5.7 percent. Net earnings were $44.3 million compared to
$35.2 million after restructuring and other unusual expense last year, an
increase of 25.7 percent, and dilutive earnings per share for the year were
$3.39 compared to $2.66 last year after restructuring and other unusual expense.
Worldwide sales for the professional segment grew 7.3 percent over last year,
led by significant increases in sales to the landscape contractor market and
higher sales of golf and grounds maintenance equipment, somewhat offset by
declines in sales to the golf irrigation and agricultural irrigation markets.
Worldwide sales for the residential segment were down slightly by 0.7 percent.
Snowthrowers, electric trimmers and blowers, riding products, and do-it-yourself
irrigation product sales were up. However, sales of walk power mowers were down.
The elimination of sales due to divestiture and discontinuance of non-performing
product lines also contributed to the decrease. Sales for the residential
segment would have been up 3.9 percent without the elimination of these
non-performing product lines. The other segment net sales increased
substantially mainly due to the acquisition of two distributorships in the
second half of calendar 1999. International sales rose 10.1 percent for the year
due to continued growth in the European market and increases in the Australian
and Asian regions.
The profitability improvement for the year was due to the same reasons noted
above in the quarter comparison.
In May 2000, Toro announced a new profit improvement program called "5 by Five."
The goal of this program is to achieve an after tax return on sales of 5 percent
by the year 2003. The major initiatives to achieve this goal include: revising
and transforming how Toro manufactures, purchases, distributes, markets, and
services products; improving low performing product lines or discontinuing them;
and reviewing the company's expense structure to eliminate low-value activities.
12
<PAGE> 13
The following table summarizes net sales by segment:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
(Dollars in thousands) July 28, July 30,
2000 1999 $ Change % Change
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Professional ............................................ $235,662 $221,129 $ 14,533 6.6%
Residential ............................................. 94,553 94,738 (185) (0.2)
Other ................................................... 14,951 9,450 5,501 58.2
-------- -------- --------
Total * ............................................. $345,166 $325,317 $ 19,849 6.1%
======== ======== ========
* Includes international sales of ....................... $ 65,291 $ 55,836 $ 9,455 16.9%
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------------------------
(Dollars in thousands) July 28, July 30,
2000 1999 $ Change % Change
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Professional ............................................ $ 693,967 $ 646,536 $ 47,431 7.3%
Residential ............................................. 349,759 352,154 (2,395) (0.7)
Other ................................................... 23,478 10,496 12,982 123.7
---------- ---------- ----------
Total * ............................................. $1,067,204 $1,009,186 $ 58,018 5.7%
========== ========== ==========
* Includes international sales of ....................... $ 221,178 $ 200,815 $ 20,363 10.1%
</TABLE>
Professional Segment Net Sales
Net sales for the worldwide professional segment in the third quarter of fiscal
2000 were $235.7 million compared to $221.1 million in the third quarter of
fiscal 1999, an increase of 6.6 percent. The landscape contractor market
continues to show significant growth, primarily for good volume increases of
both Toro(R) and Exmark(R) brand zero radius turning mowers and the Sitework
Systems(TM) product line. Worldwide sales of golf and grounds maintenance
equipment were also up, mainly due to the continued growth of the golf market
and customer acceptance of new products. The company continues to do well in the
new golf market but is shifting its program emphasis to what management believes
is a growing market for golf course renovations. Sales would have been slightly
higher, however, a flood early in the third quarter at one of the company's
distribution facilities destroyed or damaged certain Sitework Systems(TM) and
grounds maintenance equipment. Offsetting those increases was a decline in golf
irrigation systems and residential/commercial irrigation product sales due
mainly to product quality issues related to the development and manufacturing
processes. Worldwide agricultural irrigation sales were also down due to
continued pricing pressures from competitors. The company has taken aggressive
corrective action to address issues in the irrigation and worldwide agricultural
irrigation areas, including reorganization and management changes.
Year-to date net sales for the worldwide professional segment were $694.0
million compared to $646.5 million last year, an increase of 7.3 percent.
Worldwide sales in the landscape contractor market led this increase for both
Toro(R) and Exmark(R) brand zero radius turning mowers and the Sitework
Systems(TM) product line. Worldwide golf and grounds maintenance markets also
performed well during fiscal 2000 with increases in equipment and parts sales
due to the ongoing positive reception of products introduced over the last two
years as well as continued strong retail demand. The dual brands of Toro(R) and
Irritrol(R) residential/commercial irrigation systems posted sales increases for
the year due to better product availability in the first half of fiscal 2000 as
compared to last fiscal year. International sales of Toro residential/commercial
irrigation products also increased for the year due to an increased focus on the
European market. Offsetting those increases were weak sales of agricultural
irrigation and golf irrigation products due to the same reasons mentioned in the
quarter comparison.
13
<PAGE> 14
Residential Segment Net Sales
Net sales for the worldwide residential segment in the third quarter of fiscal
2000 were $94.6 million compared to $94.7 million in the third quarter of fiscal
1999, a slight decrease of 0.2 percent. Lower domestic unit shipments were the
cause of this decline, while sales to the international markets increased
substantially due to delayed introduction of new models, which would have
shipped earlier in the fiscal year. Domestic walk power sales were down due to
reduced placement in certain home center regions, field inventory management at
Toro's distributors and dealers, and the cold, wet spring weather in most key
markets. Do-it-yourself irrigation product sales were also down due to water
restrictions in the southeast. The elimination of sales due to the divestiture
and discontinuance of the non-performing outdoor lighting and gas handheld
product lines also contributed to this decline. Somewhat offsetting those
decreases were strong early season shipments of snowthrowers due to high demand
by Toro dealers who want product on their showcase floors to leverage the
increased marketing awareness generated by the introduction of Toro-brand gas
snowthrowers into the home center channel. Riding product sales were also up due
to customers purchasing product closer to retail demand in efforts to better
manage field inventory levels. Riding products manufactured for a third party
also increased due to low field inventory levels entering the fiscal year. Sales
of electric trimmers continue to be strong due to expanded outlets and placement
at mass retailers. International sales were abnormally high due to the delayed
introduction of the Toro(R) Personal Pace(R) walk power mower and new riding
product models that normally would have shipped earlier in the fiscal year. In
addition, stronger than anticipated shipments of snowthrowers also contributed
to the sales increase in the international market.
Year-to-date net sales for the worldwide residential segment in fiscal 2000 were
$349.8 million compared to $352.2 million last year, a slight decline of 0.7
percent. Sales would have been up 3.9 percent after factoring out sales from the
non-performing product lines discussed previously. Walk power mower sales were
down for the same reasons in the quarter comparison. Also, last year's sales
levels were comparatively high for initial stocking orders from home center
outlets, a new distribution channel in fiscal 1999 for the Toro brand of walk
power mowers. That decline was offset by increased sales of snowthrower product
due to the same factors mentioned in the quarter comparison. In addition,
snowthrower sales also increased due to historically low field inventory levels
entering the 1999-2000 winter season and a shift in shipments from the fourth
quarter of fiscal 1999 to the first quarter of fiscal 2000. Electric trimmer and
blower sales were also up for the year due to expanded outlets and placement at
mass retailers. Overall, do-it-yourself irrigation product sales increased due
to additional placement at home centers, introduction of new products, and the
overall growth of this market, somewhat offset by lower sales in the southeast
due to water restrictions. International sales were up for the year due to the
same contributing factors as mentioned in the above quarter comparison.
Snowthrower sales for the fourth quarter of fiscal 2000 and first quarter of
fiscal 2001 are expected to be below the respective prior comparable quarters
because of reasons discussed in the quarter comparison and higher field
inventory levels at the distributors and dealers this year as compared to last
year.
Other Segment Net Sales
The other segment net sales in the third quarter of fiscal 2000 were $15.0
million compared to $9.5 million in the third quarter of fiscal 1999. Net sales
in this segment include sales from Toro's wholly owned distribution companies
less sales from the professional and residential segments to those distribution
companies. The significant sales increase was due to additional sales
contributed by two distribution companies acquired in the second half of
calendar 1999, raising the total to four Toro-owned distribution companies in
fiscal 2000 compared to only two during the comparable period last year.
Year-to-date net sales for the other segment in fiscal 2000 were $23.5 million
compared to $10.5 million last year, an increase of $13.0 million. This increase
is due to the same factors mentioned in the quarter comparison.
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<PAGE> 15
Gross Profit
Third quarter gross profit was $133.3 million compared to $125.8 million last
year, an increase of 5.9 percent. As a percentage of net sales, gross profit for
the third quarter was 38.6 percent compared to 38.7 percent last year. This
slight decline was due to lower gross margins for irrigation and agricultural
irrigation products due to price increases for raw materials. Somewhat
offsetting this decrease was an improvement in gross margin resulting from
increased sales of higher margin products in the residential segment, cost
reductions for certain residential segment products, and additional gross profit
contribution from the distribution companies. In addition, third quarter of
fiscal 1999 reflected the elimination of gross profit previously recorded with
respect to sales of Toro products to a Midwestern-based distributor, which was
acquired by the company in fiscal 1999.
Year-to-date gross profit was $395.2 million compared to $366.6 million last
year, an increase of 7.8 percent. As a percentage of net sales, year-to-date
gross profit was 37.0 percent compared to 36.3 percent last year. The increase
in gross margin was primarily due to an improvement in the residential segment's
margins because of the same factors mentioned in the quarter comparison plus the
additional gross profit contribution from the distribution companies. Also, the
prior year reflected the elimination of gross profit previously recorded with
respect to sales of Toro products to two Midwestern-based distributors, which
were acquired in fiscal 1999. Partially offsetting those positive factors were
lower margins for irrigation and agricultural irrigation products because of
price increases for raw materials and aggressive pricing pressures in the
agricultural irrigation market.
Selling, General, and Administrative Expense
Third quarter selling, general, and administrative expense (SG&A) was $101.9
million compared to $103.1 million last year, a decrease of 1.2 percent. As a
percentage of net sales, SG&A decreased to 29.5 percent from 31.7 percent for
the same quarter in fiscal 1999. The decrease was due to lower administrative
costs mainly related to lower levels of information system spending and lower
incentive compensation costs compared to higher levels of benefits accrued under
the prior year's benefit plans. Somewhat offsetting those decreases was higher
expense for warranty due to special warranty reserves for product modifications.
Year-to-date SG&A expense was $304.6 million compared to $292.3 million last
year, an increase of 4.2 percent. However, as a percentage of net sales, SG&A
decreased slightly to 28.5 percent from 29.0 percent last year. The acquisition
of two distribution companies added $7.5 million of incremental SG&A expense.
Without the addition of these two distribution companies, SG&A expense would
have increased $4.8 million, but decreased 0.8 percent as a percentage of net
sales. The dollar increase was due to higher levels of spending for marketing,
warranty, engineering, service, Internet-based projects, and distribution
changes, slightly offset by lower levels of incentive compensation costs and
information systems spending.
Restructuring and Other Unusual Expense
Restructuring and other unusual expense was $0 in the third quarter of fiscal
2000 compared to $0.7 million in the third quarter of fiscal 1999.
Interest Expense
Third quarter interest expense was $7.7 million compared to $6.8 million last
year, an increase of 12.7 percent. This increase was due to higher average
short-term debt related to higher levels of working capital as well as higher
interest rates on short-term debt used to finance operating activities compared
to the same prior year period.
Year-to-date interest expense was $21.1 million compared to $18.5 million last
year, an increase of 13.7 percent. This increase in interest expense for the
year was due to the same contributing factors as in the quarter comparison.
Management expects this trend to continue through fiscal 2000 because interest
rates are likely to continue to rise and average short-term debt is planned to
be higher than in fiscal 1999 due to anticipated higher average inventory levels
resulting from manufacturing capacity constraints and property, plant, and
equipment additions planned for fiscal 2000.
15
<PAGE> 16
Other Income, Net
Third quarter other income, net, was $2.3 million compared to $1.7 million last
year, an increase of $0.6 million. This favorable variance was due to higher
amounts of exchange rate currency gains in the third quarter of fiscal 2000 as
compared to the third quarter of fiscal 1999.
Year-to-date other income, net, was $0.7 million compared to $2.6 million last
year, a decrease of $1.9 million. This unfavorable variance for the year was due
to higher amounts of exchange rate currency losses for the year and a valuation
charge related to an investment in a technology company, somewhat offset by
increased levels of finance charge revenue.
In the fourth quarter of fiscal 2000, the company expects to recognize a gain
from payment of an insurance claim related to the flood at a distribution
facility that destroyed or damaged certain Sitework Systems(TM) and grounds
maintenance equipment products in the third quarter of fiscal 2000.
Operating Earnings (Loss) by Segment
Operating earnings (loss) by segment is defined as earnings (loss) from
operations plus other income (expense), net, for the residential and
professional segments. The other segment operating loss includes earnings (loss)
from operations, corporate activities, other income, net, and interest expense.
Professional Segment Operating Earnings
Operating earnings for the worldwide professional segment in the third quarter
of fiscal 2000 were $36.4 million compared to $38.3 million in the third quarter
of fiscal 1999, a decrease of 4.9 percent. As a percentage of net sales,
professional segment operating margins decreased to 15.4 percent from 17.3
percent for the same quarter in fiscal 1999. Gross margin as a percent of sales
fell 2.2 percent mainly due to increased costs for resin that have not been
recaptured with price increases due to competitive implications for irrigation
and agricultural irrigation products. The decline in operating profit was also
due to increased levels of warranty expense related to special reserves for
product modification and lower sales of golf irrigation systems.
Year-to-date operating earnings for the worldwide professional segment in fiscal
2000 were $96.7 million compared to $102.0 million last year, a decrease of 5.1
percent. As a percentage of net sales, professional segment operating margins
decreased to 13.9 percent from 15.8 percent last year. The reasons for the
decrease are the same as in the quarter comparison in addition to higher levels
of exchange rate currency losses and a valuation charge for an investment in a
technology company.
Residential Segment Operating Earnings (Loss)
Operating earnings for the worldwide residential segment in the third quarter of
fiscal 2000 were $5.4 million compared to operating losses of $1.2 million in
the third quarter of fiscal 1999, an improvement of $6.6 million. Gross margin
rose 3.9 percent as a percentage of net sales due to increased sales of higher
margin products, reduced costs for certain products, and the elimination of
non-performing product lines. Also contributing to the increase in operating
profits was a 2.9 percent decline in SG&A expense and restructuring and other
unusual expense as a percentage of net sales. The Australian operations are
showing signs of improvement related to profit improvement programs, which the
company began implementing during the second half of fiscal 1999.
Year-to-date operating earnings for the worldwide residential segment in fiscal
2000 were $26.8 million compared to $15.2 million last year, an increase of 76.1
percent. As a percentage of net sales, residential segment operating margins
increased to 7.7 percent from 4.3 percent last year. Gross margin as a
percentage of net sales increased by 2.5 percent for the same reasons discussed
in the above quarter comparison. SG&A expense and restructuring and other
unusual expense as a percentage of net sales were lower by 0.7 percent compared
to last year, which also contributed to the operating profit improvement.
16
<PAGE> 17
Other Segment Operating Losses
Operating losses for the other segment in the third quarter of fiscal 2000 were
$15.7 million compared to losses of $20.2 million in the third quarter of fiscal
1999, an improvement of 22.1 percent. This improvement resulted from the
addition of profits from two additional company-owned distributors acquired
during the second half of calendar 1999, lower spending for information
systems', and lower incentive compensation costs. The prior year also included
the elimination of gross profit previously recorded with respect to sales of
Toro products to a Midwestern-based distributor, which was acquired in fiscal
1999. Slightly offsetting these positive factors were higher interest costs and
increased spending for Internet-based projects.
Year-to-date operating losses for the other segment in fiscal 2000 were $53.2
million compared to losses of $59.4 million in fiscal 1999, an improvement of
10.5 percent. This improvement was due to the same contributing factors
mentioned in the above quarter comparison. In addition, the company also
eliminated the gross profit previously recorded with respect to sales of Toro
products to a Minnesota-based distributor in the second quarter of fiscal 1999,
which also contributed to this improvement.
Provision for Income Taxes
The effective tax rate for the first nine months of fiscal 2000 was 37.0 percent
compared to 39.0 percent for the first nine months of fiscal 1999. The decrease
was due to benefits from foreign tax strategies and tax minimization projects
implemented in fiscal 1999.
Financial Position as of April 28, 2000
July 28, 2000 compared to July 30, 1999
Total assets on July 28, 2000 were $898.0 million compared to $838.2 million on
July 30, 1999, an increase of $59.8 million. Net accounts receivable increased
by $28.4 million. The increase in net accounts receivable was caused primarily
by higher sales volumes. Inventory also increased $19.2 million. Finished goods
inventory was higher due to prebuilding of inventory to counter anticipated
capacity limitations at certain manufacturing facilities during the peak selling
season. Service parts inventory also increased because of efforts to improve
fill rates as compared to last year. In addition, the two newly acquired
distribution companies added net incremental inventory. Net property, plant, and
equipment assets increased $5.4 million due to higher amounts of capital
additions in comparison to depreciation expense.
Total current liabilities on July 28, 2000 were $371.2 million compared to
$351.3 million on July 30, 1999, an increase of $19.9 million. Short-term debt
increased by $6.4 million as a result of higher receivables and inventory levels
discussed above. Accounts payable increased by $4.4 million due to higher levels
of inventory resulting from increased plant utilization. Other accrued
liabilities also increased by $9.3 million due to higher levels of warranty,
income tax, and marketing accruals.
July 28, 2000 compared to October 31, 1999
Total assets on July 28, 2000 were $898.0 million compared to $787.2 million on
October 31, 1999, an increase of $110.8 million. Net accounts receivable
increased $99.8 million from October 31, 1999 due to the normal seasonal
increase in accounts receivable. Inventory increased by $9.0 million due to the
normal seasonal buildup of inventory, plus prebuilding of inventory parts and
certain products for the professional segment to attempt to overcome
manufacturing capacity constraints. Also, the acquisition of a new distribution
company in the first quarter of fiscal 2000 added more than half of the increase
of net incremental inventory. Net property, plant, and equipment increased $4.0
million due to higher amounts of capital additions in comparison to depreciation
expense. Goodwill and other assets increased $5.3 million mainly as a result of
the final Exmark contingent payment in connection with the company's acquisition
of Exmark in fiscal 1998.
Total current liabilities at July 28, 2000 were $371.2 million compared to
$305.8 million at October 31, 1999, an increase of $65.4 million. This increase
was the result of additional short-term debt of $65.3 million, reflecting the
company's strategy of utilizing short-term debt to fund seasonal working capital
needs. Accounts payable decreased by $22.0 million due to the timing of payments
and other accrued liabilities, which increased $22.3 million primarily as a
result of higher warranty accruals and accruals for various seasonal sales and
marketing programs.
17
<PAGE> 18
Liquidity and Capital Resources
Cash used in operating activities for the first nine months of fiscal 2000 was
$13.6 million higher than the first nine months in fiscal 1999, primarily
because of higher working capital as compared to the prior period, somewhat
offset by higher net earnings. Cash used in investing activities decreased $1.5
million when compared to last year's investments in affiliates and the purchase
price net of cash acquired for a Minnesota-based distributor in fiscal 1999,
slightly offset by higher purchases of property, plant, and equipment. Cash
provided by financing activities decreased by $1.3 million due to a reduced
change in short-term debt during the first nine months of fiscal 2000 as
compared to the first nine months of fiscal 1999. Purchases of Toro common stock
were also down compared to last year. The cash used in operating and investing
activities was partially funded with the cash on hand at October 31, 1999.
The company's U.S. seasonal working capital requirements are funded with $267.0
million of committed unsecured bank credit lines. In addition, the company's
non-U.S. operations maintain unsecured short-term lines of credit of
approximately $19.0 million, and one European subsidiary has an uncommitted
credit line of approximately $3.0 million. The company also has banker's
acceptance agreements under which an additional $40.0 million of credit lines
are 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.
Management believes that the combination of funds available through its existing
financing arrangements, coupled with forecasted cash flows, will provide the
necessary capital resources for the company's anticipated working capital,
acquisitions, stock repurchases, and property, plant and equipment additions.
Inflation
The company is subject to the effects of changing prices. In fiscal 2000, the
company began experiencing some signs of inflationary pressures for purchases of
general commodities. The company is attempting to deal with these inflationary
pressures by actively pursuing internal cost reduction efforts.
Euro Currency
Beginning in January 1999, the European Monetary Union (EMU) entered into a
three-year transition phase during which a common currency called the euro is
being introduced in participating countries. This new currency is being used for
financial transactions and it will progressively replace the old national
currencies, which will be withdrawn by July 2002. The transition to the euro
currency will involve changing budgetary, accounting, contractual, and fiscal
systems in companies and public administrations, as well as simultaneous
handling of parallel currencies and conversion of legacy data. Uncertainty
exists as to the effects the conversion to the euro currency will have on the
marketplace. One anticipated effect will be more transparent price differences
on goods in European countries.
One of the issues for the company is the competitive impact of the euro on Toro
distributor sales and Toro direct sales, combined with financial support given
to distributors in the countries in the European Union (EU). Current concerns
include currency swings and instability in the rate of exchange between the euro
and the US dollar. The company is also researching how other companies are
planning to incorporate euros into their international business operations.
Beginning in December 1999, Toro implemented euro-hedging plans that consolidate
the net cash flow from its European subsidiaries.
The company continued its program to evaluate whether its computer systems and
programs will experience operational problems when the euro is fully
implemented. These subsidiaries began disclosing the euro value on each
customer's invoice in January 1999, and have continued that practice in fiscal
2000. The company is also in the planning process of converting to a new
operating business system for its European subsidiaries, and therefore, the plan
to begin parallel reporting with the current functional currency of the European
subsidiaries and euros in fiscal 2000 has been extended to late fiscal 2001.
Beginning in fiscal 2002, these European subsidiaries will be fully transitioned
from their old national currencies to the euro currency.
Based on evaluation to date, management currently believes that while the
company will incur internal and external costs to adjust to the euro, such costs
are not expected to have a significant impact on operations, cash flows, or the
financial condition of the company and its subsidiaries taken as a whole in
future periods.
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<PAGE> 19
Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency
The following forward exchange contracts held by the company have maturity dates
in fiscal year 2000 and 2001. All items are non-trading and stated in U.S.
dollars. The average contracted rate, notional amount, and fair value impact at
July 28, 2000 were as follows:
<TABLE>
<CAPTION>
------------------------------------------- ---------------- --------------- --------------
AVERAGE FAIR VALUE
CONTRACTED NOTIONAL IMPACT
DOLLARS IN THOUSANDS RATE AMOUNT GAIN (LOSS)
=========================================== ================ =============== ==============
<S> <C> <C> <C>
Buy US dollar/Sell Australian dollar .6073 $ 12,783.1 $ 159.5
------------------------------------------- ---------------- --------------- --------------
Buy US dollar/Sell British pound 1.5550 1,172.5 28.2
------------------------------------------- ---------------- --------------- --------------
Buy US dollar/Sell Canadian dollar 1.4628 11,485.7 (68.5)
------------------------------------------- ---------------- --------------- --------------
Buy Australian dollar/Sell US dollar .5932 1,852.5 (11.6)
------------------------------------------- ---------------- --------------- --------------
Buy Euro/Sell US dollar .9421 4,145.1 5.2
------------------------------------------- ---------------- --------------- --------------
Buy Mexican Peso/Sell US dollar 9.9389 1,207.4 (12.2)
------------------------------------------- ---------------- --------------- --------------
Buy Japanese yen/Sell US dollar 103.5300 2,994.3 (91.4)
------------------------------------------- ---------------- --------------- --------------
</TABLE>
Interest Rate Risk
The company is exposed to interest rate risk arising from transactions that are
entered into during the normal course of business. The company's short-term debt
rates are dependent upon the LIBOR rate plus an additional percentage based on
the company's current borrowing level. See the company's most recent annual
report filed on Form 10-K (Item 7A). There has been no material change in this
information.
19
<PAGE> 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i)(a) and 4(a) Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-3,
Registration No. 33-16125).
3(i)(b) and 4(b) Certificate of Amendment to Certificate of
Incorporation of Registrant dated December 9, 1986
(incorporated by reference to Exhibit 3 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended January 30, 1987, Commission File No.
1-8649).
3(i)(c) and 4(c) Certificate of Designation to Certificate of
Incorporation of Registrant dated May 28, 1998
(incorporated by reference to Exhibit (1)(A) to
Registrant's Current Report on Form 8-K dated May 27,
1998).
3(ii) and 4(d) Bylaws of Registrant (incorporated by reference to
Exhibit 3(ii) and 4(d) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30,
1999).
4(e) Specimen form of Common Stock certificate
(incorporated by reference to Exhibit 4(c) to
Registrant's Registration Statement on Form S-8,
Registration No. 2-94417).
4(f) Rights Agreement dated as of May 20, 1998, between
Registrant and Norwest Bank Minnesota, National
Association relating to rights to purchase Series B
Junior Participating Voting Preferred Stock, as
amended (incorporated by reference to Registrant's
Current Report on Form 8-K dated May 27, 1998,
Commission File No. 1-8649).
4(g) Indenture dated as of January 31, 1997, between
Registrant and First National Trust Association, as
Trustee, relating to the Registrant's 7.125% Notes due
June 15, 2007 and its 7.80% Debentures due June 15,
2027 (incorporated by reference to Exhibit 4(a) to
Registrant's Current Report on Form 8-K for June 24,
1997, Commission File No. 1-8649).
10(a) Form of Employment Agreement in effect for executive
officers of Registrant (incorporated by reference to
Exhibit 10(a) to Registrant's Quarterly Report on Form
10-Q for the quarter ended July 30, 1999).*
10(b) The Toro Company Directors Stock Plan (incorporated by
reference to Exhibit 10(b) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 28,
2000).*
10(c) The Toro Company Annual Management Incentive Plan II
for officers of Registrant (incorporated by reference
to Exhibit 10(c) to Registrant's Quarterly Report on
Form 10-Q for the quarter ended April 28, 2000).*
10(d) The Toro Company 1989 Stock Option Plan (incorporated
by reference to Exhibit 10(e) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
July 30, 1999).*
10(e) The Toro Company 1993 Stock Option Plan (incorporated
by reference to Exhibit 10(f) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
July 30, 1999).*
10(f) The Toro Company 2000 Stock Option Plan (incorporated
by reference to Exhibit 10(g) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
April 28, 2000).*
10(g) The Toro Company Performance Share Plan (incorporated
by reference to Exhibit 10(h) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
April 28, 2000).*
20
<PAGE> 21
10(h) The Toro Company Supplemental Management Retirement
Plan (incorporated by reference to Exhibit 10(h) to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 30, 1999).*
10(i) The Toro Company Supplemental Retirement Plan
(incorporated by reference to Exhibit 10(i) to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 30, 1999).*
10(j) Chief Executive Officer Incentive Award Agreement
(incorporated by reference to Exhibit 10(k) to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended April 28, 2000).*
10(k) The Toro Company Deferred Compensation Plan for
Officers, as amended.*
10(l) The Toro Company Deferred Compensation Plan for
Non-Employee Directors, as amended.*
*Management contract or compensatory plan or arrangement required to be filed as
an exhibit to this Quarterly Report on Form 10-Q pursuant to Item 14(c).
(b) Reports on Form 8-K
None.
21
<PAGE> 22
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: September 11, 2000
22
