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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended APRIL 28, 1995 Commission File Number 1-8649
THE TORO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 41-0580470
(State of Incorporation) (I.R.S. Employer Identification Number)
8111 LYNDALE AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420
TELEPHONE NUMBER: (612) 888-8801
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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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 April 28, 1995 was
12,763,886.
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THE TORO COMPANY
INDEX TO FORM 10-Q
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION:
Condensed Consolidated Statements of Operations and
Retained Earnings -
Three and Nine Months Ended
April 28, 1995 and April 29, 1994 . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets -
April 28, 1995, April 29, 1994 and July 31, 1994. . . . . . 4
Consolidated Statements of Cash Flows -
Nine Months Ended April 28, 1995 and April 29, 1994 . . . . 5
Notes to Condensed Consolidated Financial Statements. . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 7-8
PART II. OTHER INFORMATION:
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . 9
Exhibit 11 Computation of Earnings Per Common Share. . . .10
-2-
PART I. FINANCIAL INFORMATION
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- -------------------------------
April 28, April 29, April 28, April 29,
1995 1994 1995 1994
------------- ------------- ------------- -------------
Net sales. . . . . . . . . . . . . . . . . . . . $ 310,613 $ 276,476 $ 730,267 $ 601,650
Cost of sales. . . . . . . . . . . . . . . . . . 203,271 178,787 470,792 388,339
------------- ------------- ------------- -------------
Gross profit . . . . . . . . . . . . . . . 107,342 97,689 259,475 213,311
Selling, general and administrative
expense. . . . . . . . . . . . . . . . . . 76,245 70,817 202,916 179,618
------------- ------------- ------------- -------------
Earnings from operations . . . . . . . . . 31,097 26,872 56,559 33,693
Interest expense . . . . . . . . . . . . . . . . 3,428 3,631 8,503 10,178
Other income, net. . . . . . . . . . . . . . . . (1,563) (2,820) (6,344) (6,850)
------------- ------------- ------------- -------------
Earnings before income taxes . . . . . . . 29,232 26,061 54,400 30,365
Provision for income taxes . . . . . . . . . . . 11,693 10,424 21,760 12,146
------------- ------------- ------------- -------------
Net earnings . . . . . . . . . . . . . . . $ 17,539 $ 15,637 $ 32,640 $ 18,219
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Retained earnings at beginning of period . . . . 121,751 93,063 109,688 93,451
Dividends on common stock of $0.12, $0.12,
$0.36 and $0.36 per share, respectively. . . (1,528) (1,511) (4,566) (4,481)
------------- ------------- ------------- -------------
Retained earnings at end of period . . . . . . . $ 137,762 $ 107,189 $ 137,762 $ 107,189
------------- ------------- -------------- -------------
------------- ------------- -------------- -------------
Net earnings per share of common stock and
common stock equivalent. . . . . . . . . . . . . $ 1.32 $ 1.19 $ 2.48 $ 1.40
------------- ------------ ------------- -------------
------------- ------------ ------------- -------------
See accompanying notes to condensed consolidated financial statements.
-3-
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
April 28, April 29, July 31,
1995 1994 1994
------------- ------------ -------------
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . $ 11,709 $ 7,664 $ 36,231
Receivables (net). . . . . . . . . . . . . . . . . . . . . 329,447 300,751 183,683
Inventories. . . . . . . . . . . . . . . . . . . . . . . . 138,018 123,662 118,764
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 30,093 23,004 25,817
------------- ------------- -------------
Total current assets . . . . . . . . . . . . . . . . 509,267 455,081 364,495
------------- ------------- -------------
Property, plant and equipment. . . . . . . . . . . . . . . 203,928 182,009 185,478
Less accumulated depreciation and amortization. . . . 138,128 125,091 126,635
------------- ------------- -------------
$ 65,800 $ 56,918 $ 58,843
Other assets . . . . . . . . . . . . . . . . . . . . . . . 17,397 18,266 20,301
------------- ------------- -------------
Total assets. . . . . . . . . . . . . . . . . . . . . $ 592,464 $ 530,265 $ 443,639
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt. . . . . . . . . . . . . $ 16,055 $ 45,645 $ 20,300
Short-term debt. . . . . . . . . . . . . . . . . . . . . . 91,863 43,588 -
Accounts payable . . . . . . . . . . . . . . . . . . . . . 44,650 38,193 37,035
Other accrued liabilities. . . . . . . . . . . . . . . . . 167,245 155,882 131,377
------------- ------------- -------------
Total current liabilities. . . . . . . . . . . . . . . 319,813 283,308 188,712
------------- ------------- -------------
Deferred income taxes. . . . . . . . . . . . . . . . . . . - 759 -
Long-term debt, less current portion . . . . . . . . . . . 65,369 77,245 81,025
Deferred income. . . . . . . . . . . . . . . . . . . . . . 5,250 5,250 5,250
Stockholders' equity:
Common stock par value $1.00,
authorized 35,000,000 shares; issued and
outstanding 12,763,886 shares at April 28,
1995 (net of 63,281 treasury shares),
12,604,218 shares at April 29, 1994
(net of 28,544 treasury shares), and
12,561,204 shares at July 31, 1994 (net
of 76,153 treasury shares) . . . . . . . . . . . . . 12,764 12,604 12,561
Additional paid-in capital. . . . . . . . . . . . . . . 53,604 49,357 49,420
Retained earnings . . . . . . . . . . . . . . . . . . . 137,762 107,189 109,688
Foreign currency translation adjustment . . . . . . . . 514 (224) (405)
------------- ------------- -------------
204,644 168,926 171,264
Receivable from ESOP. . . . . . . . . . . . . . . . . . (2,612) (5,223) (2,612)
------------- ------------- -------------
Total common stockholders' equity . . . . . . . . . . . 202,032 163,703 168,652
------------- ------------- -------------
Total liabilities and common stockholders' equity . $ 592,464 $ 530,265 $ 443,639
------------- ------------- -------------
------------- ------------- -------------
See accompanying notes to condensed consolidated financial statements.
-4-
THE TORO COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
Nine Months Ended
--------------------------------------
April 28, April 29,
1995 1994
--------------- ---------------
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,640 $ 18,219
Adjustments to reconcile net earnings to net cash
used in operating activities:
Provision for depreciation and amortization. . . . . . . . . . 13,325 13,680
(Gain)/loss on disposal of property, plant and equipment . . . (256) 53
Provision for deferred income tax benefit. . . . . . . . . . . (297) (613)
Tax benefit related to employee stock options. . . . . . . . . 1,178 -
Changes in operating assets and liabilities:
Receivables (net). . . . . . . . . . . . . . . . . . . . . (163,181) (126,977)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . (19,254) (44,954)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . (4,276) 262
Payables and accruals. . . . . . . . . . . . . . . . . . . 46,535 51,202
Accrued income taxes . . . . . . . . . . . . . . . . . . . (3,052) 7,615
-------------- ---------------
Net cash used in operating activities . . . . . . . . . (96,638) (81,513)
-------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment . . . . . . . . . (19,863) (9,323)
Proceeds from asset disposals . . . . . . . . . . . . . . . . 669 19
(Increase)/decrease in other assets . . . . . . . . . . . . 2,368 (4,541)
--------------- ---------------
Net cash used in investing activities . . . . . . (16,826) (13,845)
--------------- ---------------
Cash flows from financing activities:
Increase in short-term debt. . . . . . . . . . . . . . . . . . 91,863 43,588
Increase in sale of receivables. . . . . . . . . . . . . . . . 17,417 6,589
Repayments of long-term debt . . . . . . . . . . . . . . . . . (19,901) (15,080)
Deferred income. . . . . . . . . . . . . . . . . . . . . . . . - 5,250
Proceeds from sale of common stock . . . . . . . . . . . . . . 6,220 6,026
Purchases of common stock. . . . . . . . . . . . . . . . . . . (3,011) (1,234)
Dividends on common stock. . . . . . . . . . . . . . . . . . . (4,566) (4,481)
--------------- ---------------
Net cash provided by financing activities. . . . . . . 88,022 40,658
--------------- ---------------
Foreign currency translation adjustment. . . . . . . . . . . . . . 920 571
--------------- ---------------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . (24,522) (54,129)
Cash and cash equivalents at beginning of period . . . . . . . . . 36,231 61,793
--------------- ---------------
Cash and cash equivalents at end of period . . . . . . . . . . . . $ 11,709 $ 7,664
--------------- ---------------
--------------- ---------------
See accompanying notes to condensed consolidated financial statements.
-5-
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 28, 1995
1. BACKGROUND
The information furnished reflects all adjustments which, in the opinion of
management, are necessary for a fair presentation of the interim periods.
The Toro Company's business is seasonal. Operating results for the three
months and nine months ended April 28, 1995 are not necessarily indicative
of the results that may be expected for the fiscal year ending July 31,
1995.
These statements should be read in conjunction with the financial
statements and footnotes included in the company's Annual Report for the
year ended July 31, 1994. The policies described in that report are used
in preparing quarterly reports.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Total assets for the company as of April 28, 1995 were $592.5 million, an
increase of $62.2 million, or 11.7%, from the $530.3 million reported at the end
of the third quarter last year. The increase resulted primarily from increases
in trade receivables and inventory. The increase in trade receivables reflected
an increase in dealer receivables financed by the company as well as an increase
in sales volume. Inventory increased as a result of increased production of
riding products to meet anticipated demand and a reduction in walk power mower
shipments in response to excess retail inventory levels.
Total debt as of April 28, 1995 was $173.3 million, or $6.8 million greater than
the $166.5 million reported at the end of the third quarter last year. The
ratio of total debt to total capital of 46.2% has improved from the 50.4%
reported as of April 29, 1994. The lower debt ratio resulted from an increase
in equity as a result of 1995 earnings to date.
The business of the company is seasonal. Historically, accounts receivable
balances increase throughout the winter months as a result of extended payment
terms made available to customers and decrease in the late spring when payments
become due. Peak borrowing usually occurs in the third quarter. The seasonal
working capital requirements of the business are financed primarily with short-
term debt. Management believes that the combination of funds available through
existing financing options, coupled with forecasted cash flows, will provide the
capital resources necessary to meet the company's working capital requirements.
RESULTS OF OPERATIONS
The following table sets forth sales by product line.
Three Months Ended
---------------------------------------------------------
(Dollars in thousands) April 28, April 29,
1995 1994 $ Change % Change
------------ ----------- ------------ ------------
Consumer products. . . . . . . . . . . . . . . . . $ 172,925 $ 158,346 $ 14,579 9.2 %
Commercial products. . . . . . . . . . . . . . . . 100,448 85,038 15,410 18.1
Irrigation products. . . . . . . . . . . . . . . . 37,240 33,092 4,148 12.5
------------ ----------- ------------ ------------
Total * . . . . . . . . . . . . . . . . . . . $ 310,613 $ 276,476 $ 34,137 12.3 %
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
* Includes International sales of: . . . . . . . . $ 56,461 $ 57,774 $ (1,313) (2.3)%
Nine Months Ended
----------------------------------------------------------
(Dollars in thousands) April 28, April 29,
1995 1994 $ Change % Change
------------ ----------- ------------ ------------
Consumer products. . . . . . . . . . . . . . . . . $ 411,660 $ 330,637 $ 81,023 24.5 %
Commercial products. . . . . . . . . . . . . . . . 222,946 192,413 30,533 15.9
Irrigation products. . . . . . . . . . . . . . . . 95,661 78,600 17,061 21.7
------------ ----------- ------------ ------------
Total * . . . . . . . . . . . . . . . . . . . $ 730,267 $ 601,650 $ 128,617 21.4 %
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
* Includes International sales of: . . . . . . . . $ 114,983 $ 101,400 $ 13,583 13.4 %
-7-
Changes in net sales for the third quarter and year to date were attributed to
the following factors. Consumer product sales reflected increased demand and
improved availability of riding products and increased sales of Toro brand walk
power mowers, especially the new Super Recycler-Registered Trademark- mower.
Year to date, exceptional sales of snow removal equipment as well as increased
sales of riding products and Toro brand walk power mowers attributed to the
increase over the prior year. Lawn-Boy walk power mower sales declined as a
result of reduced shipments in response to excess retail inventory as well as
a delayed spring season as a result of adverse weather patterns. The increase
in commercial product sales reflected continued strength in the golf and
tax-supported markets. Sales of equipment to landscape contractors as well as
the addition of recycling equipment products in 1995 also contributed to the
increase. The irrigation product sales increase reflected continued growth in
the golf, commercial and residential markets as well as the positive impact of
a distribution change implemented by the company last year. International
sales for the quarter reflected a decline in commercial products as a result of
a shift in the timing of customer requirements which was partially offset by
continued strong sales of consumer products. On a year to date basis
international sales increased because of rebounding economies which resulted in
increased golf course irrigation equipment sales as well as increased sales of
walk power mowers, snow removal equipment and riding products.
Gross profit of $107.3 million was $9.6 million (9.8%) higher than the $97.7
million reported for the third quarter of 1994. As a percent of sales, gross
profit decreased slightly to 34.6% for the third quarter of 1995 compared to
35.3% for the third quarter last year as the company continued to incur
increases in the cost of certain raw materials. Year to date gross profit was
$259.5 million, $46.2 million (21.7%) higher than the $213.3 million reported
last year. The dollar increase is attributed to increased sales volume and a
favorable product mix which was offset partially by an increase in the cost of
certain raw materials such as aluminum ingot and raw steel.
Selling, general and administrative (S G & A) expense increased $5.4 million, or
7.6%, to $76.2 million from the $70.8 million for the third quarter last year.
Year to date S G & A of $202.9 million increased $23.3 million from the $179.6
million reported a year ago. As a percent of sales, year to date S G & A
decreased to 27.8% compared to 29.9% for the prior year. The dollar increases
occurred principally as a result of increased marketing expenditures, a company-
wide initiative to replace existing information systems, the addition of a joint
venture with a distributor and the establishment of recycling equipment
products, distribution enhancement and support, increased product development
and various employee incentive programs.
Interest expense of $3.4 million for the quarter was $0.2 million, or 5.6%, less
than the $3.6 million the same period last year. Year to date interest expense
decreased $1.7 million to $8.5 million from the $10.2 million reported a year
ago. These decreases are principally because of the reduction in long-term
debt.
Other income, net decreased $1.2 million to $1.6 million from $2.8 million from
the third quarter last year. Excluding the effect of a patent infringement
lawsuit settlement and the sale of the portable heater business in the third
quarter last year, other income, net would have increased $1.8 million because
of income resulting from joint venture activity and foreign currency exchange
gains. Year to date other income, net of $6.3 million is $0.6 million lower
than the $6.9 million reported a year ago. Excluding the effect of two lawsuit
settlements and the sale of the portable heater business in the prior year,
other income, net would have increased $4.4 million because of increased finance
revenue, foreign currency exchange gains and income resulting from joint venture
activity.
-8-
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11 Computation of Earnings per Common Share
(b) Exhibit 27 Financial Data Schedule
Summarized financial data; electronic filing only
(c) Reports on Form 8-K
The Company did not file any Form 8-K reports during the third quarter
of fiscal 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TORO COMPANY
(Registrant)
By /s/ Gerald T. Knight
----------------------------------------
Gerald T. Knight
Vice President, Finance
Chief Financial Officer
(principal financial officer)
Date: June 09, 1995
-9-
Exhibit 11
THE TORO COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
April 28, April 29, April 28, April 29,
1995 1994 1995 1994
------------- ------------- ------------- -------------
Net earnings .................................... $ 17,539 $ 15,637 $ 32,640 $ 18,219
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Primary:
Shares of common stock and common
stock equivalents:
Weighted average number of common
shares outstanding .................... 12,770,376 12,564,692 12,654,868 12,434,277
Dilutive effect of outstanding
stock options (1) ..................... 504,457 544,903 487,789 543,553
------------- ------------- ------------- -------------
13,274,833 13,109,595 13,142,657 12,977,830
------------- ------------- ------------- -------------
Net earnings per share of common stock
and common stock equivalent ........... $ 1.32 $ 1.19 $ 2.48 $ 1.40
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Fully Diluted:
Shares of common stock and common
stock equivalents:
Weighted average number of common
shares outstanding 12,770,376 12,564,692 12,654,868 12,434,277
Dilutive effect of outstanding
stock options (2) 505,169 544,903 536,703 561,648
------------- ------------- ------------- -------------
13,275,545 13,109,595 13,191,571 12,995,925
------------- ------------- ------------- -------------
Net earnings per share of common stock
and common stock equivalent $ 1.32 $ 1.19 $ 2.47 $ 1.40
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
1) Outstanding stock options and options exercised in the current period are converted to common stock equivalents by the treasury
stock method using the average market price of the company's stock during each period.
2) Outstanding stock options and options exercised in the current period are converted to common stock equivalents by the treasury
stock method using the greater of the average market price or the period-end market price of the company's stock during each
period.
-10-
5
1,000
9-MOS
JUL-31-1994
AUG-01-1994
APR-28-1995
11,709
0
329,447
0
138,018
509,267
203,928
138,128
592,464
319,813
81,424
12,764
0
0
189,268
592,464
730,267
730,267
470,792
202,916
(6,344)
0
8,503
54,400
21,760
32,640
0
0
0
32,640
2.48
2.47
Total net receivables
Not included in quarterly financial information
Total long-term debt
Does not include additional paid-in-capital
Other income, net
