SEC Filing | The Toro Company

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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 31, 2020

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

Commission File Number: 1-8649

THE TORO COMPANY

(Exact name of registrant as specified in its charter)


Delaware						41-0580470
State or Other Jurisdiction of Incorporation or Organization						I.R.S. Employer Identification No.

8111 Lyndale Avenue South

Bloomington, Minnesota 55420-1196

Telephone Number: (952) 888-8801

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	TTC	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of August 27, 2020 was 107,297,491.

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THE TORO COMPANY

FORM 10-Q

TABLE OF CONTENTS


Description		Page Number

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Condensed Consolidated Statements of Earnings (Unaudited)	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	3

	Condensed Consolidated Balance Sheets (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows (Unaudited)	5

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

	Company Overview	34

	Results of Operations	38

	Business Segments	42

	Financial Position	45

	Non-GAAP Financial Measures	51

	Critical Accounting Policies and Estimates	53

	Forward-Looking Information	54

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58

Item 4.	Controls and Procedures	59

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	61

Item 1A.	Risk Factors	61

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63

Item 6.	Exhibits	64

	Signatures	65

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings (Unaudited)

(Dollars and shares in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	July 31, 2020		August 2, 2019		July 31, 2020		August 2, 2019
Net sales	$	840,972	$	838,713	$	2,537,853	$	2,403,705
Cost of sales	546,398		572,732		1,648,474		1,600,809
Gross profit	294,574		265,981		889,379		802,896
Selling, general and administrative expense	178,622		192,037		556,503		521,173
Operating earnings	115,952		73,944		332,876		281,723
Interest expense	(8,304)		(9,004)		(25,119)		(20,440)
Other income, net	3,345		6,295		10,746		17,152
Earnings before income taxes	110,993		71,235		318,503		278,435
Provision for income taxes	22,025		10,628		60,998		42,718
Net earnings	$	88,968	$	60,607	$	257,505	$	235,717

Basic net earnings per share of common stock	$	0.83	$	0.57	$	2.39	$	2.21

Diluted net earnings per share of common stock	$	0.82	$	0.56	$	2.37	$	2.18

Weighted-average number of shares of common stock outstanding — Basic	107,710		107,005		107,561		106,644

Weighted-average number of shares of common stock outstanding — Diluted	108,543		108,253		108,569		108,024

See accompanying Notes to Condensed Consolidated Financial Statements.

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)


	Three Months Ended						Nine Months Ended
	July 31, 2020		August 2, 2019		July 31, 2020		August 2, 2019
Net earnings	$	88,968	$	60,607	$	257,505	$	235,717
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	14,011		(3,815)		8,120		(4,151)
Derivative instruments, net of tax of $(4,589); $701; $(3,558); and $347, respectively	(14,885)		2,263		(11,559)		1,420
Pension and retiree medical benefits	—		—		912		—
Other comprehensive loss, net of tax	(874)		(1,552)		(2,527)		(2,731)
Comprehensive income	$	88,094	$	59,055	$	254,978	$	232,986

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands, except per share data)


	July 31, 2020		August 2, 2019		October 31, 2019
ASSETS
Cash and cash equivalents	$	394,141	$	143,317	$	151,828
Receivables, net	294,672		312,239		268,768
Inventories, net	656,208		620,612		651,663
Prepaid expenses and other current assets	39,225		54,235		50,632
Total current assets	1,384,246		1,130,403		1,122,891

Property, plant, and equipment, net	457,891		426,415		437,317
Goodwill	424,228		380,503		362,253
Other intangible assets, net	413,270		319,886		352,374
Right-of-use assets	81,634		—		—
Investment in finance affiliate	22,580		25,108		24,147
Deferred income taxes	9,772		3,603		6,251
Other assets	20,242		23,815		25,314
Total assets	$	2,813,863	$	2,309,733	$	2,330,547

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	108,869	$	99,877	$	79,914
Accounts payable	268,747		304,661		319,230
Accrued liabilities	404,314		351,865		357,826
Short-term lease liabilities	15,182		—		—
Total current liabilities	797,112		756,403		756,970

Long-term debt, less current portion	782,036		620,804		620,899
Long-term lease liabilities	69,752		—		—
Deferred income taxes	71,346		46,940		50,579
Other long-term liabilities	39,585		41,764		42,521

Stockholders’ equity:
Preferred stock, par value $1.00 per share, authorized 1,000,000 voting and 850,000 non-voting shares, none issued and outstanding	—		—		—
Common stock, par value $1.00 per share, authorized 175,000,000 shares; issued and outstanding 107,264,098 shares as of July 31, 2020, 106,549,344 shares as of August 2, 2019, and 106,742,082 shares as of October 31, 2019	107,264		106,549		106,742
Retained earnings	981,344		763,941		784,885
Accumulated other comprehensive loss	(34,576)		(26,668)		(32,049)
Total stockholders’ equity	1,054,032		843,822		859,578
Total liabilities and stockholders’ equity	$	2,813,863	$	2,309,733	$	2,330,547

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


	Nine Months Ended
	July 31, 2020		August 2, 2019
Cash flows from operating activities:
Net earnings	$	257,505	$	235,717
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash income from finance affiliate	(6,161)		(9,135)
Distributions from finance affiliate, net	7,729		6,569
Depreciation of property, plant and equipment	55,272		48,770
Amortization of other intangible assets	14,591		13,633
Fair value step-up adjustment to acquired inventory	3,951		31,304
Stock-based compensation expense	10,322		10,258
Deferred income taxes	(3,425)		449
Other	521		4,440
Changes in operating assets and liabilities, net of the effect of acquisitions:
Receivables, net	(17,687)		(54,446)
Inventories, net	18,248		(54,541)
Prepaid expenses and other assets	7,827		10,734
Accounts payable, accrued liabilities, deferred revenue and other liabilities	(42,817)		15,361
Net cash provided by operating activities	305,876		259,113

Cash flows from investing activities:
Purchases of property, plant and equipment	(46,627)		(56,801)
Proceeds from asset disposals	204		4,636

Investment in unconsolidated entities	—		(150)
Acquisitions, net of cash acquired	(138,225)		(691,822)
Net cash used in investing activities	(184,648)		(744,137)

Cash flows from financing activities:

Borrowings under debt arrangements	636,025		900,000
Repayments under debt arrangements	(446,025)		(491,000)
Proceeds from exercise of stock options	11,939		25,482
Payments of withholding taxes for stock awards	(2,102)		(2,632)
Purchases of TTC common stock	—		(20,043)
Dividends paid on TTC common stock	(80,683)		(72,009)
Net cash provided by financing activities	119,154		339,798

Effect of exchange rates on cash and cash equivalents	1,931		(581)

Net increase (decrease) in cash and cash equivalents	242,313		(145,807)
Cash and cash equivalents as of the beginning of the fiscal period	151,828		289,124
Cash and cash equivalents as of the end of the fiscal period	$	394,141	$	143,317

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(Dollars in thousands, except per share data)


	Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance as of May 1, 2020	$	107,111	$	911,541	$	(33,702)	$	984,950
Cash dividends paid on common stock - $0.25 per share	—		(26,939)		—		(26,939)
Issuance of 162,488 shares for exercised stock options and vested restricted stock units and performance share awards	162		3,430		—		3,592
Stock-based compensation expense	—		4,955		—		4,955

Purchase of 9,206 shares of common stock	(9)		(611)		—		(620)

Other comprehensive loss	—		—		(874)		(874)
Net earnings	—		88,968		—		88,968
Balance as of July 31, 2020	$	107,264	$	981,344	$	(34,576)	$	1,054,032

Balance as of October 31, 2019	$	106,742	$	784,885	$	(32,049)	$	859,578
Cash dividends paid on common stock - $0.75 per share	—		(80,683)		—		(80,683)
Issuance of 550,835 shares for exercised stock options and vested restricted stock units and performance share awards	551		8,820		—		9,371
Stock-based compensation expense	—		10,322		—		10,322
Contribution of stock to a deferred compensation trust	—		2,568		—		2,568
Purchase of 28,818 shares of common stock	(29)		(2,073)		—		(2,102)

Other comprehensive loss	—		—		(2,527)		(2,527)
Net earnings	—		257,505		—		257,505
Balance as of July 31, 2020	$	107,264	$	981,344	$	(34,576)	$	1,054,032

Balance as of May 3, 2019	$	106,434	$	723,959	$	(25,116)	$	805,277
Cash dividends paid on common stock - $0.225 per share	—		(24,079)		—		(24,079)
Issuance of 126,514 shares for exercised stock options and vested restricted stock units and performance share awards	126		948		—		1,074
Stock-based compensation expense	—		3,233		—		3,233
Purchase of 10,885 shares of common stock	(11)		(727)		—		(738)
Other comprehensive loss	—		—		(1,552)		(1,552)
Net earnings	—		60,607		—		60,607
Balance as of August 2, 2019	$	106,549	$	763,941	$	(26,668)	$	843,822

Balance as of October 31, 2018	$	105,601	$	587,252	$	(23,937)	$	668,916
Cash dividends paid on common stock - $0.675 per share	—		(72,009)		—		(72,009)
Issuance of 1,351,822 shares for exercised stock options and vested restricted stock units and performance share awards	1,351		22,727		—		24,078
Stock-based compensation expense	—		10,258		—		10,258
Contribution of stock to a deferred compensation trust	—		1,404		—		1,404
Purchase of 403,130 shares of common stock	(403)		(22,272)		—		(22,675)
Cumulative transition adjustment due to the adoption of ASU 2014-09	—		864		—		864
Other comprehensive loss	—		—		(2,731)		(2,731)
Net earnings	—		235,717		—		235,717
Balance as of August 2, 2019	$	106,549	$	763,941	$	(26,668)	$	843,822

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

July 31, 2020


1			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 United States ("U.S.") generally accepted accounting principles ("GAAP") for complete financial statements. Unless the context indicates otherwise, the terms "company," "TTC," "we," "our," or "us" refer to The Toro Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated from the unaudited Condensed Consolidated Financial Statements.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements include all adjustments, consisting primarily of recurring accruals, considered necessary for the fair presentation of the company's Consolidated Financial Position, Results of Operations, and Cash Flows for the periods presented. Since the company’s business is seasonal, operating results for the nine months ended July 31, 2020 cannot be annualized to determine the expected results for the fiscal year ending October 31, 2020.

The company’s fiscal year ends on October 31, and quarterly results are reported based on three-month periods that generally end on the Friday closest to the quarter end. For comparative purposes, however, the company’s second and third quarters always include exactly 13 weeks of results so that the quarter end date for these two quarters is not necessarily the Friday closest to the calendar month end.

The company completed its acquisition of The Charles Machine Works, Inc. ("CMW") on April 1, 2019. CMW's financial position, results of operations, and cash flows were historically reported based on a calendar month end. The company aligned the quarterly periods of CMW with the company's quarterly fiscal periods during fiscal 2020. For the third quarter of fiscal 2019, July 31, 2019 was the period end closest to the company's fiscal third quarter ended August 2, 2019. This reporting period difference did not have a significant impact on the Consolidated Financial Position, Results of Operations, and Cash Flows of the company as of and for the three and nine month periods ended August 2, 2019. Refer to Note 2, Business Combinations, for additional information regarding the company's acquisition of CMW.

For further information regarding the company's basis of presentation, refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019. The policies described in that report are used for preparing the company's quarterly reports on Form 10-Q.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19") outbreak a global pandemic. The global outbreak of COVID-19 negatively impacted the global economy, disrupted global supply chains, created significant volatility and disruption in financial markets, and resulted in an economic recession. COVID-19 has had a material impact on the company and the future broader implications of the COVID-19 pandemic on the company remain uncertain and will depend on certain future developments, including the duration, scope, and severity of the pandemic; its impact on the company's employees, customers, and suppliers; and the range of government mandated restrictions and other measures. This uncertainty could have a material impact on accounting estimates and assumptions utilized to prepare the Condensed Consolidated Financial Statements in future reporting periods, which could result in a material adverse impact on the company's Consolidated Financial Position, Results of Operations, and Cash Flows.

Accounting Policies and Estimates

In preparing the Condensed Consolidated Financial Statements in conformity with U.S. GAAP, management must make decisions that impact the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures, including disclosures of contingent assets and liabilities. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Estimates are used in determining, among other items, sales promotion and incentive accruals, incentive compensation accruals, income tax accruals, legal accruals, inventory valuation and reserves, warranty reserves, allowance for doubtful accounts, pension and post-retirement accruals, self-insurance accruals, useful lives for tangible and finite-lived intangible assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, and valuations of the assets acquired and liabilities assumed in a business combination, when applicable. These estimates and assumptions are based on management’s best estimates and judgments at the time they are made and are generally derived from management's understanding and analysis of the relevant and current circumstances, historical experience, and actuarial and other independent external third-party specialist valuations, when applicable. Management evaluates its estimates and assumptions on an ongoing basis using historical

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experience and other factors that management believes to be reasonable under the circumstances, including the economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, including those impacted by the COVID-19 pandemic, actual amounts could differ significantly from those estimated at the time the Condensed Consolidated Financial Statements are prepared.

New Accounting Pronouncements Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which, among other things, requires lessees to recognize most leases on-balance sheet. The standard requires the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under legacy accounting guidance at Accounting Standards Codification ("ASC") Topic 840, Leases. The standard also requires a greater level of quantitative and qualitative disclosures regarding the nature of the entity’s leasing activities than were previously required under U.S. GAAP. In January 2018, the FASB issued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, which provides an optional transition practical expedient to not evaluate existing or expired land easements under the amended lease guidance. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 (Leases), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard. Additionally, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides an alternative transition method that permits an entity to use the effective date of ASU No. 2016-02 as the date of initial application through the recognition of a cumulative effect adjustment to the opening balance of retained earnings upon adoption. Consequently, an entity's reporting for the comparative periods presented in the financial statements in which it adopts the new lease standard will continue to be in accordance with previous U.S. GAAP under ASC Topic 840, Leases.

ASU No. 2016-02, as augmented by ASU No. 2018-01, ASU No. 2018-10, and ASU No. 2018-11 (the "amended guidance"), was adopted by the company on November 1, 2019, the first quarter of fiscal 2020, under the modified retrospective transition method with no cumulative-effect adjustment to beginning retained earnings within the Condensed Consolidated Balance Sheet as of such date. Under such transition method, the company elected the following practical expedients:

•The transition package of practical expedients, which among other things, allows the company to carryforward the historical lease classification determined under previous U.S. GAAP.

•The transition practical expedient to not reassess the company's accounting for land easements that exist as of the adoption of the amended guidance.

•The short-term lease exemption to not record right-of-use assets and lease liabilities on the Condensed Consolidated Balance Sheet for leases with an initial lease term of 12 months or less, which has resulted in recognizing the lease payments related to such leases within the company's Condensed Consolidated Statements of Earnings on a straight-line basis over the lease term.

The company did not elect the transition practical expedient to use hindsight in determining the lease term and in assessing the impairment of right-of-use assets.

Upon adoption of the amended guidance, the company recorded $78.1 million of right-of-use assets and $77.1 million of corresponding lease liabilities within the Condensed Consolidated Balance Sheet as of November 1, 2019. The adoption of the standard did not have a material impact on the company's Condensed Consolidated Statements of Earnings, Condensed Consolidated Statements of Cash Flows, business processes, internal controls, and information systems. As permitted under the amended guidance, prior period amounts were not restated, but are and will continue to be reported under the legacy accounting guidance that was in effect for the respective prior periods.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The standard requires that most of the guidance related to stock compensation granted to employees be followed for nonemployees, including the measurement date, valuation approach, and performance conditions. The amended guidance was adopted in the first quarter of fiscal 2020 and did not have a material impact on the company's Condensed Consolidated Financial Statements.


2			Business Combinations

Venture Products, Inc. ("Venture Products")

On March 2, 2020 ("Venture Products closing date"), pursuant to an Agreement and Plan of Merger ("Venture Products merger agreement") and an agreement to purchase the real property used by Venture Products ("Venture Products purchase agreement") both dated January 20, 2020, the company completed its acquisition of Venture Products, a privately held Ohio

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corporation and the manufacturer of Ventrac-branded products. Venture Products designs, manufactures, and markets articulating turf, landscape, and snow and ice management equipment for grounds, landscape contractor, golf, municipal, and rural acreage customers and provides innovative product offerings that broadened and strengthened the company's Professional segment and expanded its dealer network.

The Venture Products transaction was structured as a merger, pursuant to which a wholly-owned subsidiary of the company merged with and into Venture Products, with Venture Products continuing as the surviving entity and a wholly-owned subsidiary of the company. As a result of the merger, all of the outstanding equity securities of Venture Products were canceled and now only represent the right to receive the applicable consideration as described in the Venture Products merger agreement. The Venture Products purchase agreement was with an affiliate of Venture Products and was for the real estate used by Venture Products. As of the Venture Products closing date, the company paid preliminary merger consideration of $165.9 million, which consisted of a cash payment of $136.4 million and a $29.5 million holdback to satisfy any indemnification or certain other obligations of Venture Products to TTC. The preliminary merger consideration was subject to certain customary adjustments based on, among other things, the amount of actual cash, debt, and working capital in the business of Venture Products as of the Venture Products closing date. During the third quarter of fiscal 2020, the company finalized the customary adjustments, which resulted in an aggregate merger consideration of $163.2 million ("Venture Products purchase price"). As a result, $4.5 million of the holdback set aside for such customary adjustments was released accordingly and the remaining holdback of $25.0 million is expected to expire during the company's fourth quarter of fiscal 2021. The company funded the cash payment with borrowings under its existing unsecured senior revolving credit facility. For additional information regarding the company's unsecured senior revolving credit facility utilized to fund the Venture Products purchase price, refer to Note 6, Indebtedness. As a result of the acquisition, the company incurred approximately $0.6 million of acquisition-related transaction costs during the nine month period ended July 31, 2020. No acquisition-related transaction costs were incurred during the three month period ended July 31, 2020. Acquisition-related transaction costs are recorded within selling, general and administrative expense within the Condensed Consolidated Statements of Earnings.

Preliminary Venture Products Purchase Price Allocation

The company accounted for the acquisition in accordance with the accounting standards codification guidance for business combinations, whereby the Venture Products purchase price was allocated to the acquired net tangible and intangible assets of Venture Products based on their fair values as of the Venture Products closing date. As of July 31, 2020, the company has substantially completed its process for measuring the fair values of the assets acquired and liabilities assumed based on information available as of the Venture Products closing date, with the exception of the company's valuation of income taxes as the company requires additional information to finalize its valuation of income taxes. Thus, the preliminary measurements of fair value reflected for income taxes are subject to change as additional information becomes available and as additional analysis is performed. The company expects to finalize its preliminary valuation of income taxes as soon as practicable, but no later than one year from the closing date of the acquisition, as required.

The following table summarizes the allocation of the Venture Products purchase price to the fair values assigned to the Venture Products assets acquired and liabilities assumed. These fair values are based on internal company and independent external third-party valuations and are subject to change as certain asset and liability valuations are finalized:


(Dollars in thousands)	March 2, 2020
Cash and cash equivalents	$	3,476
Receivables	6,342
Inventories	23,000
Prepaid expenses and other current assets	239
Property, plant and equipment	26,976
Goodwill	62,252
Other intangible assets	75,300
Accounts payable	(4,075)
Accrued liabilities	(5,959)
Deferred income tax liabilities	(20,850)
Total fair value of net assets acquired	166,701
Less: cash and cash equivalents acquired	(3,476)
Total Venture Products purchase price	$	163,225

The goodwill recognized is primarily attributable to the value of the workforce, the reputation of Venture Products, expected future cash flows, and expected synergies, including customer and dealer growth opportunities and integrating and expanding existing product lines. Key areas of expected cost synergies include increased purchasing power for commodities, components,

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parts, and accessories, and supply chain consolidation. The goodwill resulting from the acquisition of Venture Products was recognized within the company's Professional segment and is the primary driver for the increase in the company's Professional segment goodwill to $412.2 million as of July 31, 2020 from $350.3 million as of October 31, 2019. Goodwill is non-deductible for tax purposes. As permitted under the accounting standards codification guidance for business combinations, the company recorded a $2.9 million decrease to the carrying value of goodwill as of July 31, 2020 as a result of finalizing the Venture Products purchase price for certain customary adjustments. Such purchase accounting adjustment did not impact the company's Consolidated Statements of Earnings for the three and nine month periods ended July 31, 2020.

Other Intangible Assets Acquired

The allocation of the Venture Products purchase price to the net assets acquired resulted in the recognition of $75.3 million of other intangible assets as of the Venture Products closing date. The fair values of the acquired trade name and customer-related intangible assets were determined using the income approach. Under the income approach, an intangible asset's fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. The fair value of the trade name was determined using the relief from royalty method, which is based on the hypothetical royalty stream that would be received if the company were to license the trade name and was based on expected future revenues. The fair value of the customer-related intangible asset was determined using the excess earnings method and was based on the expected operating cash flows attributable to the customer-related intangible asset, which were determined by deducting expected economic costs, including operating expenses and contributory asset charges, from revenue expected to be generated from the customer-related intangible asset. The useful lives of the trade name and customer-related intangible assets were determined based on the period of expected cash flows used to measure the fair value of the respective intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors that may limit the useful life of the respective intangible asset.

The fair values of the other intangible assets acquired on the Venture Products closing date, related accumulated amortization from the Venture Products closing date through July 31, 2020, and weighted-average useful lives in years were as follows:

(Dollars in thousands)