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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 October 28, 1994 Commission File Number 1-8649
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THE TORO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 41-0580470
(State of Incorporation) (I.R.S. Employer Identification Number)
8111 LYNDALE AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420
TELEPHONE NUMBER: (612) 888-8801
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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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
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The number of shares of Common Stock outstanding as of October 28, 1994 was
12,720,343.
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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 Months Ended October 28, 1994 and October 29, 1993. . . . .3
Condensed Consolidated Balance Sheets -
October 28, 1994, October 29, 1993 and July 31, 1994. . . . . . .4
Consolidated Statements of Cash Flows -
Three Months Ended October 28, 1994 and October 29, 1993. . . . .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 (Loss) 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
--------------------------
October 28, October 29,
1994 1993
----------- -----------
Net sales. . . . . . . . . . . . . . . . . . . . . . .$ 205,704 $ 135,761
Cost of sales. . . . . . . . . . . . . . . . . . . . . 129,639 86,726
---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . 76,065 49,035
Selling, general and administrative expense. . . . . . 62,677 51,995
---------- ----------
Earnings (loss) from operations. . . . . . . . . . 13,388 (2,960)
Interest expense . . . . . . . . . . . . . . . . . . . 2,480 3,338
Other income, net. . . . . . . . . . . . . . . . . . . (2,929) (3,141)
---------- ----------
Earnings (loss) before income taxes. . . . . . . . 13,837 (3,157)
Provision (benefit) for income taxes . . . . . . . . . 5,535 (1,263)
---------- ----------
Net earnings (loss). . . . . . . . . . . . . . . .$ 8,302 $ (1,894)
Retained earnings at beginning of period . . . . . . . 109,688 93,451
Dividends on common stock of $0.12 per share . . . . . (1,508) (1,479)
---------- ----------
Retained earnings at end of period . . . . . . . . . .$ 116,482 $ 90,078
---------- ----------
---------- ----------
Net earnings (loss) per share of common stock and
common stock equivalent. . . . . . . . . . . . . .$ 0.64 $ (0.15)
---------- ----------
---------- ----------
See accompanying notes to condensed consolidated financial statements.
-3-
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
(Unaudited) (Unaudited)
----------- -----------
October 28, October 29, July 31,
1994 1993 1994
----------- ----------- -----------
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . $ 12,402 $ 28,199 $ 36,231
Receivables (net). . . . . . . . . . . . . . . . . . . . . 199,910 160,795 183,683
Inventories. . . . . . . . . . . . . . . . . . . . . . . . 132,854 112,813 118,764
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 28,219 24,301 25,817
----------- ----------- -----------
Total current assets . . . . . . . . . . . . . . . . 373,385 326,108 364,495
----------- ----------- -----------
Property, plant and equipment. . . . . . . . . . . . . . . 189,672 175,255 185,478
Less accumulated depreciation and amortization . . . 129,735 117,335 126,635
----------- ----------- -----------
59,937 57,920 58,843
Other assets . . . . . . . . . . . . . . . . . . . . . . . 18,243 15,796 20,301
----------- ----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . $ 451,565 $ 399,824 $ 443,639
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt. . . . . . . . . . . . . $ 21,055 $ 36,206 $ 20,300
Accounts payable . . . . . . . . . . . . . . . . . . . . . 37,473 32,746 37,035
Other accrued liabilities. . . . . . . . . . . . . . . . . 138,659 100,269 131,377
----------- ----------- -----------
Total current liabilities. . . . . . . . . . . . . . 197,187 169,221 188,712
----------- ----------- -----------
Deferred income taxes. . . . . . . . . . . . . . . . . . . - 1,372 -
Long-term debt, less current portion . . . . . . . . . . . 70,399 87,325 81,025
Deferred income. . . . . . . . . . . . . . . . . . . . . . 5,250 - 5,250
Common stockholders' equity:
Common stock par value $1.00,
authorized 35,000,000 shares; issued and
outstanding 12,720,343 shares at October
28, 1994 (net of 2,975 treasury shares),
12,370,452 shares at October 29,
1993 (net of 207,421 treasury shares),
and 12,561,204 shares at July 31, 1994
(net of 76,153 treasury shares). . . . . . . . . . . 12,720 12,371 12,561
Additional paid-in capital. . . . . . . . . . . . . . . 52,374 46,066 49,420
Retained earnings . . . . . . . . . . . . . . . . . . . 116,482 90,078 109,688
Foreign currency translation adjustment . . . . . . . . (235) (1,386) (405)
----------- ----------- -----------
181,341 147,129 171,264
Receivable from ESOP. . . . . . . . . . . . . . . . . . (2,612) (5,223) (2,612)
----------- ----------- -----------
Total common stockholders' equity . . . . . . . . . . . 178,729 141,906 168,652
----------- ----------- -----------
Total liabilities and common stockholders' equity. . $ 451,565 $ 399,824 $ 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)
Three Months Ended
--------------------------
October 28, October 29,
1994 1993
----------- -----------
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . $ 8,302 $ (1,894)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Provision for depreciation and amortization . . . . . . . . . . . 3,959 4,152
Loss on disposal of property, plant and equipment . . . . . . . . (21) -
Changes in operating assets and liabilities:
Receivables (net) . . . . . . . . . . . . . . . . . . . . . (16,227) 19,568
Inventories . . . . . . . . . . . . . . . . . . . . . . . . (14,090) (34,105)
Prepaid expenses and deferred income tax benefits . . . . . (2,402) (1,035)
Accounts payable and accrued expenses . . . . . . . . . . . 8,008 1,628
Accrued income taxes. . . . . . . . . . . . . . . . . . . . (288) (3,873)
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Net cash used in operating activities. . . . . . . . . . (12,759) (15,559)
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Cash flows from investing activities:
Purchases of property, plant and equipment. . . . . . . . . . . . (4,721) (1,858)
Proceeds from asset disposals . . . . . . . . . . . . . . . . . . 36 -
(Increase) decrease in other assets . . . . . . . . . . . . . . . 1,710 (937)
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Net cash used in investing activities. . . . . . . . . . (2,975) (2,795)
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Cash flows from financing activities:
Repayments of long-term debt. . . . . . . . . . . . . . . . . . . (9,871) (14,439)
Proceeds from sale of common stock. . . . . . . . . . . . . . . . 4,203 1,829
Purchases of common stock . . . . . . . . . . . . . . . . . . . . (1,090) (560)
Dividends on common stock . . . . . . . . . . . . . . . . . . . . (1,508) (1,479)
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Net cash used in financing activities . . . . . . . . . . (8,266) (14,649)
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Foreign currency translation adjustment. . . . . . . . . . . . . . . 171 (591)
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Net decrease in cash and cash equivalents. . . . . . . . . . . . . . (23,829) (33,594)
Cash and cash equivalents at beginning of period . . . . . . . . . . 36,231 61,793
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Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 12,402 $ 28,199
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---------- ----------
See accompanying notes to condensed consolidated financial statements.
-5-
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 28, 1994
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 ended October 28, 1994 are not necessarily indicative of the results
that may be expected for the 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
for 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 October 28, 1994, were $451.6 million, an
increase of $51.8 million, or 13.0%, from the $399.8 million reported at the end
of the first quarter last year. The increase in assets consisted primarily of
higher trade receivables and inventory which were offset partially by a decrease
in cash and cash equivalents. The increase in trade receivables reflected an
increase in dealer receivables financed by the company ($24.5 million) as well
as an overall increase in sales. The increase in inventory resulted primarily
from increased walk power mower production carried over from the prior year, as
well as the addition of the recycling equipment product line in 1995. Cash and
cash equivalents have decreased primarily because of continued reduction of
long-term debt.
Total debt as of October 28, 1994 was $91.5 million, or $32.0 million less than
the $123.5 million reported at the end of the first quarter last year. The
ratio of total debt to total debt plus equity decreased to 33.8% from the 46.5%
reported as of October 29, 1993. The lower debt ratio resulted from the reduced
debt levels in combination with an increased equity position primarily because
of earnings in the past two years.
The company's business is seasonal. Historically, accounts receivable balances
increase throughout the winter months as a result of extended payment terms made
available to the company's customers and decrease in late spring when payments
become due. The company's peak borrowing usually occurs in its 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 its existing financing options, coupled with forecasted cash
flows, will provide the capital resources for its anticipated needs.
RESULTS OF OPERATIONS
The following table sets forth sales by product line.
Three Months Ended
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OCTOBER 28, October 29,
1994 1993 $ Change % Change
----------- ----------- ---------- --------
Consumer products. . . . . . . . . . $ 126,756 $ 75,040 $ 51,716 68.9%
Commercial products. . . . . . . . . 48,656 40,903 7,753 19.0
Irrigation products. . . . . . . . . 30,292 19,818 10,474 52.9
---------- ---------- ----------
Total *. . . . . . . . . . . . . . $ 205,704 $ 135,761 $ 69,943 51.5
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* Includes international sales of. . $ 23,740 $ 13,098 $ 10,642 81.2%
-7-
Changes in net sales for the first quarter were attributed to the following
factors. Consumer product sales rose reflecting increased sales of snow removal
equipment, electric blowers and the new lower priced lawn tractor introduced in
1994. The commercial product sales increase was attributable to a continued
strong domestic golf market, increased demand in tax-supported markets and the
introduction of recycling equipment products. The irrigation product sales
increase resulted partially from the domestic distribution reorganization made
in 1994 and favorable weather conditions. The increase in international sales
was primarily the result of strong irrigation product sales, increased sales of
snow removal equipment and rebounding economies in various international
markets.
Gross profit of $76.1 million was $27.1 million (55.3%) higher than the $49.0
million reported for the first quarter of 1994. As a percent of sales, gross
profit increased to 37.0% for the first quarter of 1995 compared to 36.1% for
the first quarter last year. The increases in gross profit and gross profit
percentage were attributed to increased sales and greater manufacturing
efficiencies which were offset partially by a lower-margin product mix.
Selling, general and administrative expenses increased $10.7 million, or 20.6%,
to $62.7 million from the $52.0 million for the first quarter last year which
primarily reflected an increase in marketing expenditures and an increase in
administrative expense for various employee incentive programs, shared costs of
currency protection contracts with foreign distributors, distribution
enhancement costs and product development charges. As a percent of sales,
selling, general and administrative expenses were 30.5% of net sales for the
first quarter of 1995 compared to 38.3% for the first quarter last year
primarily because of benefits from effective cost control measures implemented
in the past few years.
Interest expense of $2.5 million for the quarter was $0.8 million, or 24.2% less
than the $3.3 million for the same period last year principally because of the
reduction in long-term debt.
Other income, net of $2.9 million decreased $0.2 million from the $3.1 million
for the first quarter last year. 1994 other income, net included a one-time
lawsuit settlement of $1.85 million related to the purchase of Lawn-Boy.
Excluding the effect of the $1.85 million lawsuit settlement, 1995 other income,
net would have increased $1.7 million because of increased finance revenue,
foreign currency exchange gains and gains incurred on the company's joint
ventures.
-8-
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11 Computation of Earnings (Loss) per Common Share
(b) Exhibit 27 Financial Data Schedule
Summarized financial data; electronic filing only.
(c) Reports on Form 8-K
The company did not file any Form 8-K reports during the first quarter
of 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE TORO COMPANY
(Registrant)
By /s/ Gerald T. Knight
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Gerald T. Knight
Vice President, Finance
Chief Financial Officer
(principal financial officer)
Date: December 9, 1994
-9-
Exhibit 11
THE TORO COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
Three Months Ended
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October 28, October 29,
1994 1993
----------- -----------
Net earnings (loss). . . . . . . . . . . . . . . . . . .$ 8,302 $ (1,894)
---------- ----------
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Primary:
Shares of common stock and common
stock equivalents:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . .12,585,681 12,299,190
Dilutive effect of outstanding
stock options (1), (3). . . . . . . . . . . 453,494 -
---------- ----------
13,039,175 12,299,190
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Net earnings (loss) per share of common stock
and common stock equivalent . . . . . . . . . .$ 0.64 $ (0.15)
---------- ----------
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Fully Diluted:
Shares of common stock and common
stock equivalents:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . .12,585,681 12,299,190
Dilutive effect of outstanding
stock options (2), (3). . . . . . . . . . . 556,272 -
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13,141,953 12,299,190
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Net earnings (loss) per share of common stock
and common stock equivalent . . . . . . . . . .$ 0.63 $ (0.15)
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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.
3) Loss per share calculations are based on weighted average common shares
outstanding excluding common stock equivalents due to their anti-dilutive
affect.
-10-
5
0000737758
THE TORO COMPANY
1,000
3-MOS
JUL-31-1995
AUG-01-1994
OCT-28-1994
12,402
0
199,910
0
132,854
373,385
189,672
129,735
451,565
197,187
91,454
12,720
0
0
166,009
451,565
205,704
205,704
129,639
62,677
(2,929)
0
2,480
13,837
5,535
8,302
0
0
0
8,302
0.64
0.63
Total net receivables
Not included in quarterly financial information
Total debt
does not include additional paid in capital
other income, net
