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Mail Stop 0306
March 11, 2005
By U.S. Mail and Facsimile to (952) 887-8258
Mr. Stephen P. Wolfe
Vice President, Finance
Treasurer and Chief Financial Officer
The Toro Company
8111 Lyndale Avenue South
Bloomington, Mn 55420-1196
RE: The Toro Company
Form 10-K for the fiscal year ended October 31, 2004
Dear Mr. Wolfe,
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your future
filings in response to these comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable or
a
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the fiscal year ended October 31, 2004
Note 1 - Summary of Significant Accounting Policies - Page 33
Inventories - Page 33
1. Please revise future filings to disclose your accounting
policies
for valuing inventory, including a discussion of how you determine
your reserves.
Revenue Recognition - Page 34
2. We note that you record a provision when revenue is recognized
for
returns and promotion expenses. In future filings include a
rollforward of this account on Schedule II - Valuation and
Qualifying
Accounts as required by Rule 5-04 of Regulation S-X.
Supplementally
provide us with a rollforward of this allowance account on a gross
basis showing increases, decreases, and adjustments separately,
for
all periods presented.
3. In a supplemental response and in future filings tell us the
accounting for any special arrangements with distributors such as
price protection, rights of return and other discounts, credits or
special terms. Please cite the relevant accounting guidance in
your
response.
4. We note you have deferred revenue and other long term
liabilities
of approximately $13 million at October 31, 2004. In a
supplemental
response and in future filings tell us the significant terms and
conditions of transactions for which you deferred revenue and how
you
account for such transactions.
Note 13 - Commitments and Contingent Liabilities - Page 43
Customer Financing - Page 43
Wholesale Financing - Page 43
5. Supplementally tell us how you account for:
* sales of inventory that are subject to inventory repurchase
agreements, and
* sales of your receivables to third party financing companies
Additionally tell us the aggregate amount of gains and loses you
recorded on the sales of receivables to third parties and where
they
are presented in your financial statements.
End-User Financing - Page 44
6. In future filings disclose the carrying amount of the liability
that you have recorded related to your credit collection and
residual
value exposure under these financing agreements.
Note 14 - Financial Instruments - Page 44
Derivative Instruments and Hedging Activities - Page 44
7. Please disclose the specific line items in your balance sheet,
statement of earnings, and statement of cash flows in which you
report your derivative financial instruments and their related
gains
and losses. Refer to Rule 4-08(n)(7) of Regulation S-X.
8. Tell us and revise future filings to disclose how you account
for
foreign exchange contracts entered into on behalf of distributors.
Where do you record the unrealized gains and losses on these
contracts? Are there occasions upon which these costs are not
reimbursed (if the distributor exercises their right of return,
for
example)?
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments and provides any requested supplemental information.
Please
file your cover letter on EDGAR. Please understand that we may
have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Eric Atallah, Staff Accountant at (202) 824-
5266
or me at (202) 942-2813 regarding comments on the financial
statements and related matters. In this regard, do not hesitate
to
contact, Martin James, Senior Assistant Chief Accountant at (202)
942-1984.
Sincerely,
Daniel Gordon
Branch Chief
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Mr. Stephen P. Wolfe
The Toro Company
March 11, 2005
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