Delaware | 1-8649 | 41-0580470 | ||
(State of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
Page Number | ||
Three Months Ended | ||||||||
February 3, 2017 | January 29, 2016 | |||||||
Net sales | $ | 515,839 | $ | 486,398 | ||||
Cost of sales | 322,359 | 303,744 | ||||||
Gross profit | 193,480 | 182,654 | ||||||
Selling, general, and administrative expense | 132,910 | 128,815 | ||||||
Operating earnings | 60,570 | 53,839 | ||||||
Interest expense | (4,883 | ) | (4,654 | ) | ||||
Other income, net | 3,866 | 4,512 | ||||||
Earnings before income taxes | 59,553 | 53,697 | ||||||
Provision for income taxes | 14,563 | 14,436 | ||||||
Net earnings | 44,990 | 39,261 | ||||||
Basic net earnings per share of common stock | $ | 0.41 | $ | 0.36 | ||||
Diluted net earnings per share of common stock | $ | 0.41 | $ | 0.35 | ||||
Weighted-average number of shares of common stock outstanding — Basic | 108,627 | 110,029 | ||||||
Weighted-average number of shares of common stock outstanding — Diluted | 110,774 | 112,326 |
Three Months Ended | ||||||||
February 3, 2017 | January 29, 2016 | |||||||
Net earnings | $ | 44,990 | $ | 39,261 | ||||
Other comprehensive income (loss) , net of tax: | ||||||||
Foreign currency translation adjustments | 117 | (4,791 | ) | |||||
Derivative instruments, net of tax of $285 and $338, respectively | 221 | (1,059 | ) | |||||
Other comprehensive income (loss) | 338 | (5,850 | ) | |||||
Comprehensive income | $ | 45,328 | $ | 33,411 |
February 3, 2017 | January 29, 2016 | October 31, 2016 | ||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | 158,893 | $ | 118,140 | $ | 273,555 | ||||||
Receivables, net | 183,850 | 190,297 | 163,265 | |||||||||
Inventories, net | 402,103 | 422,036 | 307,034 | |||||||||
Prepaid expenses and other current assets | 36,470 | 36,983 | 35,155 | |||||||||
Total current assets | 781,316 | 767,456 | 779,009 | |||||||||
Property, plant, and equipment, gross | 855,826 | 811,222 | 838,036 | |||||||||
Less accumulated depreciation | 628,909 | 589,699 | 615,998 | |||||||||
Property, plant, and equipment, net | 226,917 | 221,523 | 222,038 | |||||||||
Long-term deferred income taxes | 56,864 | 66,000 | 57,228 | |||||||||
Other assets | 25,788 | 24,352 | 23,422 | |||||||||
Goodwill | 201,246 | 195,222 | 194,782 | |||||||||
Other intangible assets, net | 110,782 | 116,123 | 108,093 | |||||||||
Total assets | $ | 1,402,913 | $ | 1,390,676 | $ | 1,384,572 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current portion of long-term debt | $ | 22,960 | $ | 23,398 | $ | 22,484 | ||||||
Short-term debt | — | 52,912 | — | |||||||||
Accounts payable | 232,440 | 211,216 | 174,668 | |||||||||
Accrued liabilities | 263,724 | 262,888 | 266,687 | |||||||||
Total current liabilities | 519,124 | 550,414 | 463,839 | |||||||||
Long-term debt, less current portion | 315,314 | 337,969 | 328,477 | |||||||||
Deferred revenue | 25,172 | 11,246 | 11,830 | |||||||||
Other long-term liabilities | 30,267 | 31,118 | 30,391 | |||||||||
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 107,575,440 shares as of February 3, 2017, 108,965,108 shares as of January 29, 2016, and 108,427,393 shares as of October 31, 2016 | 107,575 | 108,965 | 108,427 | |||||||||
Retained earnings | 443,559 | 386,657 | 480,044 | |||||||||
Accumulated other comprehensive loss | (38,098 | ) | (35,693 | ) | (38,436 | ) | ||||||
Total stockholders’ equity | 513,036 | 459,929 | 550,035 | |||||||||
Total liabilities and stockholders’ equity | $ | 1,402,913 | $ | 1,390,676 | $ | 1,384,572 |
Three Months Ended | ||||||||
February 3, 2017 | January 29, 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 44,990 | $ | 39,261 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Non-cash income from finance affiliate | (1,943 | ) | (1,878 | ) | ||||
Provision for depreciation, amortization, and impairment loss | 16,516 | 15,741 | ||||||
Stock-based compensation expense | 3,618 | 2,477 | ||||||
Decrease in deferred income taxes | 393 | — | ||||||
Other | (98 | ) | (464 | ) | ||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||
Receivables, net | (19,380 | ) | (12,614 | ) | ||||
Inventories, net | (90,560 | ) | (92,918 | ) | ||||
Prepaid expenses and other assets | (4,272 | ) | (4,655 | ) | ||||
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities | 66,128 | 59,581 | ||||||
Net cash provided by operating activities | 15,392 | 4,531 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant, and equipment | (11,620 | ) | (10,680 | ) | ||||
Proceeds from asset disposals | — | 60 | ||||||
Distributions from finance affiliate, net | (98 | ) | 765 | |||||
Proceeds from sale of a business | — | 1,500 | ||||||
Acquisition, net of cash acquired | (23,882 | ) | — | |||||
Net cash (used in) investing activities | (35,600 | ) | (8,355 | ) | ||||
Cash flows from financing activities: | ||||||||
Increase in short-term debt | — | 51,789 | ||||||
Repayments of long-term debt | (12,702 | ) | (13,371 | ) | ||||
Proceeds from exercise of stock options | 3,128 | 2,495 | ||||||
Purchases of Toro common stock | (67,718 | ) | (27,485 | ) | ||||
Dividends paid on Toro common stock | (18,994 | ) | (16,496 | ) | ||||
Net cash (used in) financing activities | (96,286 | ) | (3,068 | ) | ||||
Effect of exchange rates on cash and cash equivalents | 1,832 | (1,243 | ) | |||||
Net (decrease) in cash and cash equivalents | (114,662 | ) | (8,135 | ) | ||||
Cash and cash equivalents as of the beginning of the fiscal period | 273,555 | 126,275 | ||||||
Cash and cash equivalents as of the end of the fiscal period | $ | 158,893 | $ | 118,140 |
• | The company recorded a discrete tax benefit of $4.9 million related to the excess tax benefit on share-based awards within income tax expense for the three months ended February 3, 2017. Prior to the adoption of this standard, these tax benefits were included in additional paid-in capital on the consolidated balance sheets. Adoption of this standard could add increased volatility to the company's provision for income taxes mainly due to timing of stock option exercises, vesting of restricted stock units and common stock price. |
• | The company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. |
• | The company has elected to change its policy on tax withholding requirements and will allow participants to withhold up to the maximum statutory rate prospectively on new awards. As of November 1, 2016, the company did not have any outstanding liabilities on awards which would require a cumulative-effect adjustment to retained earnings. |
• | The company no longer presents the cash received from excess tax benefits within cash flows from financing activities as this benefit is now reflected within cash flows from operating activities in the consolidated statements of cash flows. The company elected to apply this change retrospectively and the change resulted in a $4.9 million and $3.4 million increase in cash flows from operating activities for the three months ended February 3, 2017 and January 29, 2016, respectively. |
February 3, 2017 | January 29, 2016 | October 31, 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Raw materials and work in process | $ | 107,170 | $ | 115,373 | $ | 90,463 | ||||||
Finished goods and service parts | 353,290 | 370,703 | 274,929 | |||||||||
Total FIFO value | 460,460 | 486,076 | 365,392 | |||||||||
Less: adjustment to LIFO value | 58,357 | 64,040 | 58,358 | |||||||||
Total inventories, net | $ | 402,103 | $ | 422,036 | $ | 307,034 |
(Dollars in thousands) | Professional Segment | Residential Segment | Total | |||||||||
Balance as of October 31, 2016 | $ | 184,338 | $ | 10,444 | $ | 194,782 | ||||||
Goodwill acquired | 6,151 | — | 6,151 | |||||||||
Translation adjustments | 268 | 45 | 313 | |||||||||
Balance as of February 3, 2017 | $ | 190,757 | $ | 10,489 | $ | 201,246 |
(Dollars in thousands) | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||
Patents | $ | 15,142 | $ | (11,040 | ) | $ | 4,102 | |||||
Non-compete agreements | 6,879 | (6,742 | ) | 137 | ||||||||
Customer-related | 87,285 | (15,517 | ) | 71,768 | ||||||||
Developed technology | 30,058 | (24,519 | ) | 5,539 | ||||||||
Trade names | 29,469 | (4,575 | ) | 24,894 | ||||||||
Other | 800 | (800 | ) | — | ||||||||
Total amortizable | 169,633 | (63,193 | ) | 106,440 | ||||||||
Non-amortizable - trade names | 4,342 | — | 4,342 | |||||||||
Total other intangible assets, net | $ | 173,975 | $ | (63,193 | ) | $ | 110,782 |
(Dollars in thousands) | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||
Patents | $ | 15,151 | $ | (10,866 | ) | $ | 4,285 | |||||
Non-compete agreements | 6,886 | (6,681 | ) | 205 | ||||||||
Customer-related | 84,353 | (14,434 | ) | 69,919 | ||||||||
Developed technology | 28,648 | (23,712 | ) | 4,936 | ||||||||
Trade names | 28,715 | (4,235 | ) | 24,480 | ||||||||
Other | 800 | (800 | ) | — | ||||||||
Total amortizable | 164,553 | (60,728 | ) | 103,825 | ||||||||
Non-amortizable - trade names | 4,268 | — | 4,268 | |||||||||
Total other intangible assets, net | $ | 168,821 | $ | (60,728 | ) | $ | 108,093 |
February 3, 2017 | January 29, 2016 | October 31, 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Foreign currency translation adjustments | $ | 31,177 | $ | 29,393 | $ | 31,430 | ||||||
Pension and post-retirement benefits | 6,495 | 5,112 | 6,359 | |||||||||
Derivative instruments | 426 | 1,188 | 647 | |||||||||
Total accumulated other comprehensive loss | $ | 38,098 | $ | 35,693 | $ | 38,436 |
(Dollars in thousands) | Foreign Currency Translation Adjustments | Pension and Postretirement Benefits | Cash Flow Derivative Instruments | Total | ||||||||||||
Balance as of October 31, 2016 | $ | 31,430 | $ | 6,359 | $ | 647 | $ | 38,436 | ||||||||
Other comprehensive loss (income) before reclassifications | (253 | ) | 136 | 102 | (15 | ) | ||||||||||
Amounts reclassified from AOCL | — | — | (323 | ) | (323 | ) | ||||||||||
Net current period other comprehensive loss (income) | (253 | ) | 136 | (221 | ) | (338 | ) | |||||||||
Balance as of February 3, 2017 | $ | 31,177 | $ | 6,495 | $ | 426 | $ | 38,098 |
(Dollars in thousands) | Foreign Currency Translation Adjustments | Pension and Postretirement Benefits | Cash Flow Derivative Instruments | Total | ||||||||||||
Balance as of October 31, 2015 | $ | 24,328 | $ | 5,386 | $ | 129 | $ | 29,843 | ||||||||
Other comprehensive loss (income) before reclassifications | 5,065 | (274 | ) | 165 | 4,956 | |||||||||||
Amounts reclassified from AOCL | — | — | 894 | 894 | ||||||||||||
Net current period other comprehensive loss (income) | 5,065 | (274 | ) | 1,059 | 5,850 | |||||||||||
Balance as of January 29, 2016 | $ | 29,393 | $ | 5,112 | $ | 1,188 | $ | 35,693 |
Fiscal 2017 | Fiscal 2016 | |||
Expected life of option in years | 6.02 | 5.98 | ||
Expected stock price volatility | 22.15% | 24.06% | ||
Risk-free interest rate | 2.03% | 1.81% | ||
Expected dividend yield | 1.01% | 1.24% | ||
Weighted-average fair value at date of grant | $12.55 | $8.79 |
Three Months Ended | ||||||
February 3, 2017 | January 29, 2016 | |||||
(Shares in thousands) | ||||||
Basic | ||||||
Weighted-average number of shares of common stock | 108,585 | 109,955 | ||||
Assumed issuance of contingent shares | 42 | 74 | ||||
Weighted-average number of shares of common stock and assumed issuance of contingent shares | 108,627 | 110,029 | ||||
Diluted | ||||||
Weighted-average number of shares of common stock and assumed issuance of contingent shares | 108,627 | 110,029 | ||||
Effect of dilutive securities | 2,147 | 2,297 | ||||
Weighted-average number of shares of common stock, assumed issuance of contingent shares, and effect of dilutive securities | 110,774 | 112,326 |
(Dollars in thousands) | ||||||||||||||||
Three months ended February 3, 2017 | Professional | Residential | Other | Total | ||||||||||||
Net sales | $ | 371,809 | $ | 140,390 | $ | 3,640 | $ | 515,839 | ||||||||
Intersegment gross sales | 4,556 | 74 | (4,630 | ) | — | |||||||||||
Earnings (loss) before income taxes | 68,166 | 16,558 | (25,171 | ) | 59,553 | |||||||||||
Total assets | 854,384 | 243,145 | 305,384 | 1,402,913 |
(Dollars in thousands) | ||||||||||||||||
Three months ended January 29, 2016 | Professional | Residential | Other | Total | ||||||||||||
Net sales | $ | 338,836 | $ | 144,284 | $ | 3,278 | $ | 486,398 | ||||||||
Intersegment gross sales | 5,717 | 68 | (5,785 | ) | — | |||||||||||
Earnings (loss) before income taxes | 61,592 | 16,739 | (24,634 | ) | 53,697 | |||||||||||
Total assets | 854,106 | 263,407 | 273,163 | 1,390,676 |
Three Months Ended | ||||||||
February 3, 2017 | January 29, 2016 | |||||||
(Dollars in thousands) | ||||||||
Corporate expenses | $ | (23,961 | ) | $ | (24,783 | ) | ||
Interest expense, net | (4,883 | ) | (4,654 | ) | ||||
Other | 3,673 | 4,803 | ||||||
Total | $ | (25,171 | ) | $ | (24,634 | ) |
Three Months Ended | ||||||||
February 3, 2017 | January 29, 2016 | |||||||
(Dollars in thousands) | ||||||||
Beginning balance | $ | 72,158 | $ | 70,734 | ||||
Warranty provisions | 9,615 | 8,940 | ||||||
Warranty claims | (9,794 | ) | (8,527 | ) | ||||
Changes in estimates | 594 | — | ||||||
Ending balance | $ | 72,573 | $ | 71,147 |
Fair Value at | Fair Value at | Fair Value at | ||||||||||
(Dollars in thousands) | February 3, 2017 | January 29, 2016 | October 31, 2016 | |||||||||
Asset Derivatives | ||||||||||||
Derivatives Designated as Hedging Instruments | ||||||||||||
Prepaid expenses and other current assets | ||||||||||||
Forward currency contracts | $ | 1,552 | $ | 3,393 | $ | 1,535 | ||||||
Cross currency contract | — | 142 | — | |||||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||||
Prepaid expenses and other current assets | ||||||||||||
Forward currency contracts | 795 | 1,347 | 432 | |||||||||
Cross currency contract | — | 2,218 | — | |||||||||
Total Assets | $ | 2,347 | $ | 7,100 | $ | 1,967 | ||||||
Liability Derivatives | ||||||||||||
Derivatives Designated as Hedging Instruments | ||||||||||||
Accrued liabilities | ||||||||||||
Forward currency contracts | $ | 1,363 | $ | 2,967 | $ | 973 | ||||||
Derivatives Not Designated as Hedging Instruments | ||||||||||||
Accrued liabilities | ||||||||||||
Forward currency contracts | 141 | 235 | 792 | |||||||||
Total Liabilities | $ | 1,504 | $ | 3,202 | $ | 1,765 |
Effective Portion | Ineffective Portion and excluded from Effectiveness Testing | |||||||||||||||||||||||||||
Gain (Loss) Recognized in OCI on Derivatives | Location of Gain (Loss) Reclassified from AOCL into Income | Gain (Loss) Reclassified from AOCL into Income | Location of Gain (Loss) Recognized in Income on Derivatives | Gain (Loss) Recognized in Income on Derivatives | ||||||||||||||||||||||||
(Dollars in thousands) | February 3, 2017 | January 29, 2016 | February 3, 2017 | January 29, 2016 | February 3, 2017 | January 29, 2016 | ||||||||||||||||||||||
For the three months ended | ||||||||||||||||||||||||||||
Forward currency contracts | $ | (372 | ) | $ | 565 | Net sales | $ | 439 | $ | 1,080 | Other income, net | $ | 397 | $ | (12 | ) | ||||||||||||
Forward currency contracts | (152 | ) | (1,659 | ) | Cost of sales | (762 | ) | (314 | ) | |||||||||||||||||||
Cross currency contracts | — | 34 | Other income, net | — | 128 | |||||||||||||||||||||||
Total derivatives designated as cash flow hedges | $ | (524 | ) | $ | (1,060 | ) | Total | $ | (323 | ) | $ | 894 | Total | $ | 397 | $ | (12 | ) |
Three Months Ended | ||||||||||
Location of Gain (Loss) | February 3, 2017 | January 29, 2016 | ||||||||
(Dollars in thousands) | ||||||||||
Forward currency contracts | Other income, net | $ | 1,144 | $ | 1,337 | |||||
Cross currency contracts | Other income, net | — | 130 | |||||||
Total derivatives not designated as hedges | $ | 1,144 | $ | 1,467 |
(Dollars in thousands) | February 3, 2017 | January 29, 2016 | October 31, 2016 | |||||||||
Assets | ||||||||||||
Forward currency contracts | ||||||||||||
Gross Amounts of Recognized Assets | $ | 2,347 | $ | 4,740 | $ | 2,264 | ||||||
Gross Liabilities Offset in the Balance Sheets | — | — | (297 | ) | ||||||||
Net Amounts of Assets Presented in the Balance Sheets | 2,347 | 4,740 | 1,967 | |||||||||
Cross currency contracts | ||||||||||||
Gross Amounts of Recognized Assets | — | 2,360 | — | |||||||||
Net Amounts of Assets Presented in the Balance Sheets | — | 2,360 | — | |||||||||
Total Assets | $ | 2,347 | $ | 7,100 | $ | 1,967 | ||||||
Liabilities | ||||||||||||
Forward currency contracts | ||||||||||||
Gross Amounts of Recognized Liabilities | $ | (1,614 | ) | $ | (3,202 | ) | $ | (1,765 | ) | |||
Gross Assets Offset in the Balance Sheets | 110 | — | — | |||||||||
Net Amounts of Liabilities Presented in the Balance Sheets | (1,504 | ) | (3,202 | ) | (1,765 | ) | ||||||
Total Liabilities | $ | (1,504 | ) | $ | (3,202 | ) | $ | (1,765 | ) |
(Dollars in thousands) | Fair Value Measurements Using Inputs Considered as: | |||||||||||||||
February 3, 2017 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 158,893 | $ | 158,893 | $ | — | $ | — | ||||||||
Forward currency contracts | 2,347 | — | 2,347 | — | ||||||||||||
Total Assets | $ | 161,240 | $ | 158,893 | $ | 2,347 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Forward currency contracts | $ | 1,504 | $ | — | $ | 1,504 | $ | — | ||||||||
Deferred compensation liabilities | 1,017 | — | 1,017 | — | ||||||||||||
Total Liabilities | $ | 2,521 | $ | — | $ | 2,521 | $ | — |
(Dollars in thousands) | Fair Value Measurements Using Inputs Considered as: | |||||||||||||||
January 29, 2016 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 118,140 | $ | 118,140 | $ | — | $ | — | ||||||||
Forward currency contracts | 4,740 | — | 4,740 | — | ||||||||||||
Cross currency contracts | 2,360 | — | 2,360 | — | ||||||||||||
Total Assets | $ | 125,240 | $ | 118,140 | $ | 7,100 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Forward currency contracts | $ | 3,202 | $ | — | $ | 3,202 | $ | — | ||||||||
Deferred compensation liabilities | 1,524 | — | 1,524 | — | ||||||||||||
Total Liabilities | $ | 4,726 | $ | — | $ | 4,726 | $ | — |
(Dollars in thousands) | Fair Value Measurements Using Inputs Considered as: | |||||||||||||||
October 31, 2016 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 273,555 | $ | 273,555 | $ | — | $ | — | ||||||||
Forward currency contracts | 1,967 | — | 1,967 | — | ||||||||||||
Total Assets | $ | 275,522 | $ | 273,555 | $ | 1,967 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Forward currency contracts | $ | 1,765 | $ | — | $ | 1,765 | $ | — | ||||||||
Deferred compensation liabilities | 1,149 | — | 1,149 | — | ||||||||||||
Total Liabilities | $ | 2,914 | $ | — | $ | 2,914 | $ | — |
Three Months Ended | ||||||
February 3, 2017 | January 29, 2016 | |||||
Net sales | 100.0 | % | 100.0 | % | ||
Cost of sales | 62.5 | 62.4 | ||||
Gross margin | 37.5 | 37.6 | ||||
SG&A expense | 25.8 | 26.5 | ||||
Operating earnings | 11.7 | 11.1 | ||||
Interest expense | (0.9 | ) | (1.0 | ) | ||
Other income, net | 0.7 | 0.9 | ||||
Provision for income taxes | 2.8 | 2.9 | ||||
Net earnings | 8.7 | % | 8.1 | % |
Three Months Ended | |||||||||||||||
(Dollars in thousands) | February 3, 2017 | January 29, 2016 | $ Change | % Change | |||||||||||
Professional | $ | 371,809 | $ | 338,836 | $ | 32,973 | 9.7 | % | |||||||
Residential | 140,390 | 144,284 | (3,894 | ) | (2.7 | )% | |||||||||
Other | 3,640 | 3,278 | 362 | 11.0 | % | ||||||||||
Total* | $ | 515,839 | $ | 486,398 | $ | 29,441 | 6.1 | % | |||||||
* Includes international sales of: | $ | 131,242 | $ | 127,246 | $ | 3,996 | 3.1 | % |
Three Months Ended | |||||||||||||||
(Dollars in thousands) | February 3, 2017 | January 29, 2016 | $ Change | % Change | |||||||||||
Professional | $ | 68,166 | $ | 61,592 | $ | 6,574 | 10.7 | % | |||||||
Residential | 16,558 | 16,739 | (181 | ) | (1.1 | )% | |||||||||
Other | (25,171 | ) | (24,634 | ) | (537 | ) | (2.2 | )% | |||||||
Total | $ | 59,553 | $ | 53,697 | $ | 5,856 | 10.9 | % |
• | Adverse economic conditions and outlook in the United States and in other countries in which we conduct business could adversely affect our net sales and earnings, which include but are not limited to recessionary conditions; slow or negative economic growth rates; the impact of U.S. federal debt, state debt and sovereign debt defaults and austerity measures by certain European countries; slow down or reductions in levels of golf course development, renovation, and improvement; golf course closures; reduced levels of home ownership, construction, and sales; home foreclosures; negative consumer confidence; reduced consumer spending levels resulting from tax increases or other factors; prolonged high unemployment |
• | Weather conditions, including unfavorable weather conditions exacerbated by global climate changes or otherwise, may reduce demand for some of our products and adversely affect our net sales and operating results, or may affect the timing of demand for some of our products and may adversely affect net sales and operating results in subsequent periods. |
• | Fluctuations in foreign currency exchange rates have affected our operating results and could continue to result in declines in our reported net sales and net earnings. |
• | Increases in the cost, or disruption in the availability, of raw materials, components, and parts containing various commodities that we purchase, such as steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, electric motors, and other commodities and components, and increases in our other costs of doing business, such as transportation costs or increased tariffs, duties or other charges as a result of changes to international trade agreements may adversely affect our profit margins and business. |
• | Our Professional segment net sales are dependent upon certain factors, including golf course revenues and the amount of investment in golf course renovations and improvements; the level of new golf course development and golf course closures; the level of property owners who outsource their lawn care and snow and ice removal activities; the level of residential and commercial construction; continued acceptance of and demand for micro-irrigation solutions for agricultural markets; the timing and occurrence of winter weather conditions; demand for our products in the rental and specialty construction market; availability of cash or credit to Professional segment customers on acceptable terms to finance new product purchases; and the amount of government revenues, budget, and spending levels for grounds maintenance equipment. |
• | Our Residential segment net sales are dependent upon consumers buying our products at dealers, mass retailers, and home centers, such as The Home Depot, Inc.; the amount of product placement at mass retailers and home centers; consumer confidence and spending levels, and changing buying patterns of customers. |
• | Changes in our product mix impact our financial performance, including profit margins and net earnings, as our Professional segment products generally have higher profit margins than our Residential segment products. |
• | We intend to grow our business in part through acquisitions and alliances, strong customer relations, and new joint ventures and partnerships, which could be risky and harm our business reputation, financial condition, and operating results, particularly if we are not able to successfully integrate such acquisitions and alliances, joint ventures, and partnerships. If previous or future acquisitions do not produce the expected results or integration into our operations takes more time than expected, our business could be harmed. We cannot guarantee previous or future acquisitions, alliances, joint ventures or partnerships will in fact produce any benefits. |
• | Our ability to manage our inventory levels to meet our customers' demand for our products is important for our business. If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our net sales and/or working capital could be negatively impacted. |
• | Our business and operating results are subject to the inventory management decisions of our distribution channel customers. Any adjustments in the carrying amount of inventories by our distribution channel customers may impact our inventory management and working capital goals as well as operating results. |
• | We face intense competition in all of our product lines with numerous manufacturers, including from some competitors that have larger operations and financial resources than us. We may not be able to compete effectively against competitors’ actions, which could harm our business and operating results. |
• | A significant percentage of our consolidated net sales are generated outside of the United States, and we intend to continue to expand our international operations. Our international operations also require significant management attention and financial resources; expose us to difficulties presented by international economic, political, legal, regulatory, accounting, and business factors, including implications of withdrawal by the U.S. from, or revision to, international trade agreements, foreign policy changes between the U.S. and other countries, weakened international economic conditions, or the United Kingdom’s process for exiting the European Union; and may not be successful or produce desired levels of net sales. In addition, a portion of our international net sales are financed by third parties. The termination of our agreements with these third parties, any material change to the terms of our agreements with these third parties or in the availability or terms of credit offered to our international customers by these third parties, or any delay in securing replacement credit sources, could adversely affect our sales and operating results. |
• | If we are unable to continue to enhance existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance, or if we experience unforeseen product quality or other problems in the development, production, or use of new and existing products, we may experience a decrease in demand for our products, and our net sales and business could suffer. |
• | We manufacture our products at and distribute our products from several locations in the United States and internationally. Any disruption at any of these facilities or our inability to cost-effectively expand existing facilities, open and manage new facilities, and/or move production between manufacturing facilities could adversely affect our business and operating results. |
• | Our production labor needs fluctuate throughout the year, with a sharp increase in the number of production staff, some of which may be new to our manufacturing processes and safety protocols, during periods of peak manufacturing activity and any failure by our production labor force to adequately and safely perform their jobs could adversely affect our business, operating results, and reputation. |
• | Management information systems are critical to our business. If our information systems or those of our business partners or third party service providers fail to adequately perform, or if we, our business partners or third party service providers experience an interruption in their operation, including by theft, loss or damage from unauthorized access, security breaches, natural or man-made disasters, cyber attacks, computer viruses, phishing, power loss or other disruptive events, our business, reputation, financial condition, and operating results could be adversely affected. |
• | Our reliance upon patents, trademark laws, and contractual provisions to protect our proprietary rights may not be sufficient to protect our intellectual property from others who may sell similar products. Our products may infringe the proprietary rights of others. |
• | Our business, properties, and products are subject to governmental regulation with which compliance may require us to incur expenses or modify our products or operations and non-compliance may result in harm to our reputation and/or expose us to penalties. Governmental regulation may also adversely affect the demand for some of our products and our operating results. In addition, changes in laws and regulations in the U.S. or other countries in which we conduct business also may adversely affect our operating results, including, (i) taxation and tax policy changes, tax rate changes, new tax laws, revised tax law interpretations, which individually or in combination may cause our effective tax rate to increase,(ii) healthcare laws or regulations, which may cause us to incur higher employee healthcare and other costs, or (iii) changes to international trade agreements that could result in additional duties or other charges on raw materials, whole goods or components we import. |
• | Climate change and climate change regulations may adversely impact our operations. |
• | Costs of complying with the various environmental laws related to our ownership and/or lease of real property, such as clean-up costs and liability that may be associated with certain hazardous waste disposal activities, could adversely affect our financial condition and operating results. |
• | Legislative enactments could impact the competitive landscape within our markets and affect demand for our products. |
• | We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws. The continued expansion of our international operations could increase the risk of violations of these laws in the future. |
• | We are required to comply with “conflict minerals” rules promulgated by the SEC, which has imposed costs on us and could raise reputational and other risks. We have, and we expect that we will continue to, incur additional costs and expenses, which may be significant in order to comply with these rules. Since our supply chain is complex, ultimately we may not be able to sufficiently verify the origin of the conflict minerals used in our products through the due diligence procedures that we implement or we may identify through our due diligence procedures that some or all of the conflict minerals in our products are sourced from covered regions, which may adversely affect our reputation with our customers, shareholders, and other stakeholders. |
• | We are subject to product liability claims, product quality issues, and other litigation from time to time that could adversely affect our business, reputation, operating results, or financial condition. |
• | If we are unable to retain our executive officers or other key employees, attract and retain other qualified personnel, or successfully implement executive officer, key employee or other qualified personnel transitions, we may not be able to meet strategic objectives and our business could suffer. |
• | As a result of our Red Iron joint venture, we are dependent upon the joint venture to provide competitive inventory financing programs to certain distributors and dealers of our products. Any material change in the availability or terms of credit offered to our customers by the joint venture, challenges or delays in transferring new distributors and dealers from any business we might acquire to this financing platform, any termination or disruption of our joint venture relationship or any delay in securing replacement credit sources could adversely affect our net sales and operating results. |
• | The terms of our credit arrangements and the indentures governing our senior notes and debentures could limit our ability to conduct our business, take advantage of business opportunities, and respond to changing business, market, and economic conditions. Additionally, we are subject to counterparty risk in our credit arrangements. If we are unable to comply with the terms of our credit arrangements and indentures, especially the financial covenants, our credit arrangements could be terminated and our senior notes, debentures, term loan, and any amounts outstanding under our revolving credit facility could become due and payable. |
• | We are expanding and renovating our corporate facilities and could experience disruptions to our operations in connection with such efforts. |
• | Our business is subject to a number of other factors that may adversely affect our operating results, financial condition, or business, such as: our ability to achieve the revenue growth, operating earnings, and working capital goals of our “Destination PRIME” initiative or any quarterly financial guidance; natural or man-made disasters or global pandemics that may result in shortages of raw materials and components, higher fuel and commodity costs, delays in shipments to customers, and increases in insurance premiums; financial viability of our distributors and dealers, changes in distributor |
(Dollars in thousands, except average contracted rate) | Average Contracted Rate | Notional Amount | Value in Accumulated Other Comprehensive Income (Loss) | Fair Value Impact (Loss) Gain | ||||||||
Buy US dollar/Sell Australian dollar | 0.7478 | 41,817.7 | 14.9 | (676.1 | ) | |||||||
Buy US dollar/Sell Canadian dollar | 1.3008 | 6,342.4 | 18.1 | 82.8 | ||||||||
Buy US dollar/Sell Euro | 1.1178 | 67,334.4 | 1,312.9 | 1,537.1 | ||||||||
Buy US dollar/Sell British pound | 1.2928 | 38,345.9 | 311.0 | 484.5 | ||||||||
Buy Mexican peso/Sell US dollar | 20.1013 | 21,035.9 | (1,345.7 | ) | (620.1 | ) |
Period | Total Number of Shares (or Units) Purchased (1,2) | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs (1,2) | Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1,2) | |||||||||
November 1, 2016 through December 2, 2016 | 296,400 | $ | 48.22 | 296,400 | 7,396,315 | ||||||||
December 3, 2016 through December 30, 2016 | 445,661 | 55.90 | 445,661 | 6,950,654 | |||||||||
December 31, 2016 through February 3, 2017 | 493,883 | 57.42 | 492,124 | 6,458,530 | |||||||||
Total | 1,235,944 | 54.67 | 1,234,185 |
(a) | Exhibit No. | Description |
2.1 (1) | Second Amendment to Agreement to Form Joint Venture dated November 29, 2016 by and between The Toro Company and TCF Inventory Finance, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K dated November 29, 2016, Commission File No. 1-8649).* | |
2.2 (1) | Third Amendment to Limited Liability Company Agreement of Red Iron Acceptance, LLC dated November 29, 2016 by and between Red Iron Holding Corporation and TCFIF Joint Venture I, LLC (incorporated by reference to Exhibit 2.2 to Registrant’s Current Report on Form 8-K dated November 29, 2016, Commission File No. 1-8649).* | |
2.3 (1) | Fourth Amended and Restated Program and Repurchase Agreement dated as of November 29, 2016 by and between The Toro Company and Red Iron Acceptance, LLC (incorporated by reference to Exhibit 2.3 to Registrant’s Current Report on Form 8-K dated November 29, 2016, Commission File No. 1-8649). | |
3.1 and 4.1 | Restated Certificate of Incorporation of The Toro Company (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated June 17, 2008, Commission File No. 1-8649). | |
3.2 and 4.2 | Certificate of Amendment to Restated Certificate of Incorporation of The Toro Company (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated March 12, 2013, Commission File No. 1-8649). | |
3.3 and 4.3 | Amended and Restated Bylaws of The Toro Company (incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K dated July 19, 2016, Commission File No. 1-8649). | |
4.4 | Specimen Form of Common Stock Certificate (incorporated by reference to Exhibit 4(c) to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2008, Commission File No. 1-8649). | |
4.5 | Indenture dated as of January 31, 1997, between Registrant and First National Trust Association, as Trustee, relating to The Toro Company’s 7.80% Debentures due June 15, 2027 (incorporated by reference to Exhibit 4(a) to Registrant’s Current Report on Form 8-K dated June 24, 1997, Commission File No. 1-8649). | |
4.6 | Indenture dated as of April 20, 2007, between Registrant and The Bank of New York Trust Company, N.A., as Trustee, relating to The Toro Company’s 6.625% Notes due May 1, 2037 (incorporated by reference to Exhibit 4.3 to Registrant’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on April 23, 2007, Registration No. 333-142282). | |
4.7 | First Supplemental Indenture dated as of April 26, 2007, between Registrant and The Bank of New York Trust Company, N.A., as Trustee, relating to The Toro Company’s 6.625% Notes due May 1, 2037 (incorporated by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K dated April 23, 2007, Commission File No. 1-8649). | |
4.8 | Form of The Toro Company 6.625% Note due May 1, 2037 (incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K dated April 23, 2007, Commission File No. 1-8649). | |
10.1 | The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.2 | Form of Nonemployee Director Stock Option Agreement between The Toro Company and its Non-Employee Directors under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.11 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.3 | Form of Nonqualified Stock Option Agreement between The Toro Company and its officers and other employees under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.14 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.4 | Form of Performance Share Award Agreement between The Toro Company and its officers and other employees under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.17 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.5 | Form of Annual Performance Award Agreement between The Toro Company and its officers and other employees under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.6 | Form of Restricted Stock Award Agreement between The Toro Company and its officers and other employees under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.19 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.7 | Form of Restricted Stock Unit Award Agreement between The Toro Company and its officers and other employees under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.21 to Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, Commission File No. 1-8649). | |
10.8 | The Toro Company Supplemental Benefit Plan, Amended and Restated Effective January 1, 2017 (filed herewith). | |
10.9 | The Toro Company Deferred Compensation Plan, Amended and Restated Effective January 1, 2017 (filed herewith). | |
10.10 | The Toro Company Deferred Compensation Plan for Officers, Amended and Restated Effective January 1, 2017 (filed herewith). | |
10.11 | The Toro Company Deferred Compensation Plan for Non-Employee Directors, Amended and Restated Effective January 1, 2017 (filed herewith). | |
10.12 | Second Amendment to Credit and Security Agreement dated November 29, 2016 by and between Red Iron Acceptance, LLC and TCF Inventory Finance, Inc. (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated November 29, 2016, Commission File No. 1-8649). | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith). | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002) (filed herewith). | |
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | |
101 | The following financial information from The Toro Company’s Quarterly Report on Form 10-Q for the quarterly period ended February 3, 2017, filed with the SEC on March 8, 2017, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Earnings for the three-month periods ended February 3, 2017 and January 29, 2016, (ii) Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended February 3, 2017 and January 29, 2016, (iii) Condensed Consolidated Balance Sheets as of February 3, 2017, January 29, 2016, and October 31, 2016, (iv) Condensed Consolidated Statement of Cash Flows for the three-month periods ended February 3, 2017 and January 29, 2016, and (v) Notes to Condensed Consolidated Financial Statements (filed herewith). |
Date: March 8, 2017 | By: | /s/ Renee J. Peterson | |
Renee J. Peterson | |||
Vice President, Treasurer and Chief Financial Officer | |||
(duly authorized officer and principal financial officer) |
TABLE OF CONTENTS | ||||
Page | ||||
I. | DEFINITIONS | 1 | ||
II. | ELIGIBILITY AND PARTICIPATION | 5 | ||
III. | SUPPLEMENTAL ACCOUNT | 5 | ||
3.1 Establishment of Account | 5 | |||
3.2 Credits to Article III Account | 6 | |||
3.3 Earnings on Amounts Credited | 6 | |||
IV. | SUPPLEMENTAL RETIREMENT BENEFIT | 6 | ||
V. | SUPPLEMENTAL SURVIVING SPOUSE BENEFIT | 6 | ||
VI. | DISTRIBUTIONS | 7 | ||
6.1 Distribution of Article III Accounts | 7 | |||
6.2 Election of Distribution Method for Article III Accounts | 7 | |||
6.3 Death Prior to Completion of Distributions for Article III Accounts | 8 | |||
6.4 Limitation on Election of Distribution Method | 8 | |||
6.5 Six-Month Suspension for Payments to Specified Employees | 8 | |||
6.6 Unforeseeable Emergencies | 8 | |||
6.7 Acceleration or Delay of Distributions | 9 | |||
VII. | ADMINISTRATION OF THE PLAN | 9 | ||
7.1 Administrator | 9 | |||
7.2 Authority of Administrator | 9 | |||
7.3 Operation of the Plan | 9 | |||
7.4 Claims Procedures | 9 | |||
VIII. | AMENDMENT OR TERMINATION | 11 | ||
IX. | SOURCE OF PAYMENTS; NATURE OF INTEREST | 12 | ||
9.1 The Trust | 12 | |||
9.2 No Alienation | 12 | |||
9.3 Unfunded Plan | 12 | |||
9.4 No Guaranty | 13 | |||
9.5 Transfers to the Trust | 13 | |||
9.6 Unsecured General Creditor | 13 | |||
X. | GENERAL PROVISIONS | 13 | ||
10.1 No Right of Employment | 13 | |||
10.2 Incompetency | 13 | |||
10.3 Corporate Changes | 14 | |||
10.4 Addresses | 14 | |||
10.5 Limitations on Liability | 14 | |||
10.6 Inspection | 14 | |||
10.7 Withholding | 14 | |||
10.8 Singular and Plural | 14 | |||
10.9 Severability | 15 | |||
10.10 Discharge of Obligations | 15 | |||
10.11 Governing Law | 15 |
10.12 Successors | 15 | |||
10.13 No Assurance of Tax Consequences | 15 | |||
10.14 Code Section 409A | 15 |
3.1 | Establishment of Account |
3.2 | Credits to Article III Account |
3.3 | Earnings on Amounts Credited |
6.1 | Distribution of Article III Accounts |
6.2 | Election of Distribution Method for Article III Accounts |
6.3 | Death Prior to Completion of Distributions for Article III Accounts |
6.4 | Limitation on Election of Distribution Method |
6.5 | Six-Month Suspension for Payments to Specified Employees |
6.6 | Unforeseeable Emergencies |
6.7 | Acceleration or Delay of Distributions |
7.1 | Administrator |
7.2 | Authority of Administrator |
7.3 | Operation of the Plan |
7.4 | Claims Procedures |
(i) | the specific reason or reasons for the denial; |
(ii) | specific reference to pertinent provisions of the Plan on which the denial is based; |
(iii) | a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; |
(iv) | appropriate information as to the steps to be taken if the Participant or Beneficiary wishes to submit a claim for review; and |
(v) | in the case of an adverse benefit determination regarding Disability benefits, if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination, either a copy of the specific rule, guideline, protocol or other similar criterion, or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol or other criterion will be provided free of charge to the claimant upon request. |
(i) | request a review upon written application to the Administrator; |
(ii) | review pertinent documents; and |
(iii) | submit issues and comments in writing. |
9.1 | The Trust |
9.2 | No Alienation |
9.3 | Unfunded Plan |
9.4 | No Guaranty |
9.5 | Transfers to the Trust |
9.6 | Unsecured General Creditor |
10.1 | No Right of Employment |
10.2 | Incompetency |
10.3 | Corporate Changes |
10.4 | Addresses |
10.5 | Limitations on Liability |
10.6 | Inspection |
10.7 | Withholding |
10.8 | Singular and Plural |
10.9 | Severability |
10.10 | Discharge of Obligations |
10.11 | Governing Law |
10.12 | Successors |
10.13 | No Assurance of Tax Consequences |
10.14 | Code Section 409A |
TABLE OF CONTENTS | |||||
Page | |||||
I. | DEFINITIONS | 1 | |||
II. | ELIGIBILITY; PARTICIPATION; DEFERRAL | 5 | |||
2.1 | Eligibility | 5 | |||
2.2 | Participation | 5 | |||
2.3 | Deferral Election | 6 | |||
III. | PARTICIPANTS’ ACCOUNTS | 6 | |||
3.1 | General | 6 | |||
3.2 | Deferral Credits | 7 | |||
3.3 | Company Credits | 7 | |||
3.4 | Earnings on Participant Accounts | 7 | |||
IV. | VESTING | 7 | |||
V. | DISTRIBUTIONS | 7 | |||
5.1 | Distributable Events | 7 | |||
5.2 | Distribution of Benefits | 8 | |||
5.3 | Other Distributions | 9 | |||
5.4 | Commencement of Distributions | 9 | |||
5.5 | Six-Month Delay for Payments to Specified Employee | 10 | |||
5.6 | Acceleration or Delay of Distribution | 10 | |||
VI. | BENEFICIARY DESIGNATION | 10 | |||
VII. | ADMINISTRATION OF THE PLAN | 10 | |||
7.1 | Administrator | 10 | |||
7.2 | Authority of Administrator | 11 | |||
7.3 | Operation of Plan | 11 | |||
7.4 | Claims Procedures | 11 | |||
VIII. | AMENDMENT OR TERMINATION | 13 | |||
8.1 | Amendment | 13 | |||
8.2 | Termination | 13 | |||
IX. | SOURCE OF PAYMENTS; NATURE OF INTEREST | 14 | |||
9.1 | Trust | 14 | |||
9.2 | No Alienation | 14 | |||
9.3 | Unfunded Plan | 14 | |||
9.4 | No Guaranty | 14 | |||
9.5 | Transfers to the Trust | 14 | |||
9.6 | Unsecured General Creditor | 15 | |||
X. | GENERAL PROVISIONS | 15 | |||
10.1 | No Right of Employment | 15 | |||
10.2 | Incompetency | 15 | |||
10.3 | Corporate Changes | 15 | |||
10.4 | Addresses | 16 |
10.5 | Limitations on Liability | 16 | |||
10.6 | Inspection | 16 | |||
10.7 | Withholding | 16 | |||
10.8 | Singular and Plural | 16 | |||
10.9 | Severability | 16 | |||
10.10 | Discharge of Obligations | 16 | |||
10.11 | Governing Law | 17 | |||
10.12 | Successors | 17 | |||
10.13 | No Assurance of Tax Consequences | 17 | |||
10.14 | Code Section 409A | 17 |
2.1 | Eligibility |
2.2 | Participation |
2.3 | Deferral Election |
3.1 | General |
3.2 | Deferral Credits |
3.3 | Company Credits |
3.4 | Earnings on Participant Accounts |
5.1 | Distributable Events |
5.2 | Distribution of Benefits |
5.3 | Other Distributions |
5.4 | Commencement of Distributions |
5.5 | Six-Month Delay for Payments to Specified Employee |
5.6 | Acceleration or Delay of Distribution |
7.1 | Administrator |
7.2 | Authority of Administrator |
7.3 | Operation of Plan |
7.4 | Claims Procedures |
(i) | the specific reason or reasons for the denial; |
(ii) | specific reference to pertinent provisions of the Plan on which the denial is based; |
(iii) | a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; |
(iv) | appropriate information as to the steps to be taken if the Participant or Beneficiary wishes to submit a claim for review; and |
(v) | in the case of an adverse benefit determination regarding Disability benefits, if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination, either a copy of the specific rule, guideline, protocol or other similar criterion; or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol or other criterion will be provided free of charge to the claimant upon request. |
(i) | request a review upon written application to the Administrator; |
(ii) | review pertinent documents; and |
(iii) | submit issues and comments in writing. |
8.1 | Amendment |
8.2 | Termination |
9.1 | Trust |
9.2 | No Alienation |
9.3 | Unfunded Plan |
9.4 | No Guaranty |
9.5 | Transfers to the Trust |
9.6 | Unsecured General Creditor |
10.1 | No Right of Employment |
10.2 | Incompetency |
10.3 | Corporate Changes |
10.4 | Addresses |
10.5 | Limitations on Liability |
10.6 | Inspection |
10.7 | Withholding |
10.8 | Singular and Plural |
10.9 | Severability |
10.10 | Discharge of Obligations |
10.11 | Governing Law |
10.12 | Successors |
10.13 | No Assurance of Tax Consequences |
10.14 | Code Section 409A |
TABLE OF CONTENTS | |||||
Page | |||||
I. | DEFINITIONS | 1 | |||
II. | ELIGIBILITY; PARTICIPATION; DEFERRAL | 6 | |||
2.1 | Eligibility | 6 | |||
2.2 | Participation | 6 | |||
2.3 | Deferral Election | 6 | |||
III. | PARTICIPANTS’ ACCOUNTS | 7 | |||
3.1 | General | 7 | |||
3.2 | Deferral Credits | 7 | |||
3.3 | Account | 7 | |||
3.4 | Continuation of Accounts | 8 | |||
IV. | VESTING | 8 | |||
V. | DISTRIBUTIONS | 8 | |||
5.1 | Distributable Events | 8 | |||
5.2 | Distribution of Benefits | 8 | |||
5.3 | Other Distributions | 9 | |||
5.4 | Commencement of Distributions | 10 | |||
5.5 | Form of Payment | 10 | |||
5.6 | Six-Month Delay for Payments to Specified Employee | 11 | |||
5.7 | Acceleration or Delay of Distribution | 11 | |||
VI. | BENEFICIARY DESIGNATION | 11 | |||
VII. | ADMINISTRATION OF THE PLAN | 11 | |||
7.1 | Administrator | 11 | |||
7.2 | Authority of Administrator | 12 | |||
7.3 | Operation of Plan | 12 | |||
7.4 | Claims Procedures | 12 | |||
VIII. | AMENDMENT OR TERMINATION | 14 | |||
8.1 | Amendment or Termination of the Plan | 14 | |||
8.2 | Accounts After Termination | 14 | |||
IX. | SOURCE OF PAYMENTS; NATURE OF INTEREST | 15 | |||
9.1 | Trust | 15 | |||
9.2 | No Alienation | 15 | |||
9.3 | Unfunded Plan | 15 | |||
9.4 | No Guaranty | 15 | |||
9.5 | Transfers to the Trust | 16 | |||
9.6 | Unsecured General Creditor | 16 | |||
X. | GENERAL PROVISIONS | 16 | |||
10.1 | No Right of Employment | 16 | |||
10.2 | Incompetency | 16 | |||
10.3 | Corporate Changes | 17 | |||
10.4 | Addresses | 17 | |||
10.5 | Limitations on Liability | 17 |
10.6 | Inspection | 17 | |||
10.7 | Withholding | 17 | |||
10.8 | Voting of Stock | 17 | |||
10.9 | Singular and Plural | 17 | |||
10.10 | Severability | 18 | |||
10.11 | Discharge of Obligations | 18 | |||
10.12 | Governing Law | 18 | |||
10.13 | Successors | 18 | |||
10.14 | No Assurance of Tax Consequences | 18 | |||
10.15 | Code Section 409A | 18 |
2.1 | Eligibility |
2.2 | Participation |
2.3 | Deferral Election |
3.1 | General |
3.2 | Deferral Credits |
3.3 | Account |
3.4 | Continuation of Accounts |
5.1 | Distributable Events |
5.2 | Distribution of Benefits |
5.3 | Other Distributions |
5.4 | Commencement of Distributions |
5.5 | Form of Payment |
5.6 | Six-Month Delay for Payments to Specified Employee |
5.7 | Acceleration or Delay of Distribution |
7.1 | Administrator |
7.2 | Authority of Administrator |
7.3 | Operation of Plan |
7.4 | Claims Procedures |
(i) | the specific reason or reasons for the denial; |
(ii) | specific reference to pertinent provisions of the Plan on which the denial is based; |
(iii) | a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; |
(iv) | appropriate information as to the steps to be taken if the Participant or Beneficiary wishes to submit a claim for review; and |
(v) | in the case of an adverse benefit determination regarding Disability benefits, if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination, either a copy of the specific rule, guideline, protocol or other similar criterion or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol or other criterion will be provided free of charge to the claimant upon request. |
(i) | request a review upon written application to the Administrator; |
(ii) | review pertinent documents; and |
(iii) | submit issues and comments in writing. |
8.1 | Amendment or Termination of the Plan |
8.2 | Accounts After Termination |
9.1 | Trust |
9.2 | No Alienation |
9.3 | Unfunded Plan |
9.4 | No Guaranty |
9.5 | Transfers to the Trust |
9.6 | Unsecured General Creditor |
10.1 | No Right of Employment |
10.2 | Incompetency |
10.3 | Corporate Changes |
10.4 | Addresses |
10.5 | Limitations on Liability |
10.6 | Inspection |
10.7 | Withholding |
10.8 | Voting of Stock |
10.9 | Singular and Plural |
10.10 | Severability |
10.11 | Discharge of Obligations |
10.12 | Governing Law |
10.13 | Successors |
10.14 | No Assurance of Tax Consequences |
10.15 | Code Section 409A |
TABLE OF CONTENTS | |||||
Page | |||||
I. | DEFINITIONS | 1 | |||
II. | ELIGIBILITY; PARTICIPATION; DEFERRAL | 5 | |||
2.1 | Eligibility | 5 | |||
2.2 | Participation | 5 | |||
2.3 | Deferral Election | 5 | |||
III. | CREDITING AND VESTING | 5 | |||
3.1 | Amounts to Be Credited to Accounts | 5 | |||
3.2 | Vesting | 6 | |||
IV. | DISTRIBUTIONS | 7 | |||
4.1 | Distributable Events | 7 | |||
4.2 | Method of Payment | 7 | |||
4.3 | Death Prior to Completion of Payment | 8 | |||
4.4 | Distribution Prior to Retirement | 8 | |||
4.5 | Unforeseeable Emergencies | 8 | |||
4.6 | Commencement of Distributions | 9 | |||
4.7 | Acceleration or Delay of Distributions | 9 | |||
V. | BENEFICIARY DESIGNATION | 9 | |||
VI. | ADMINISTRATION OF THE PLAN | 9 | |||
6.1 | Committee Duties | 9 | |||
6.2 | Administrative Committee; Agents | 10 | |||
6.3 | Binding Effect of Decisions | 10 | |||
6.4 | Indemnity of Committee and Administrative Committee | 10 | |||
6.5 | Claims Procedures | 10 | |||
VII. | AMENDMENT OR TERMINATION | 11 | |||
7.1 | Amendment | 11 | |||
7.2 | Termination | 11 | |||
VIII. | SOURCE OF PAYMENTS; NATURE OF INTEREST | 11 | |||
8.1 | Trust | 11 | |||
8.2 | No Alienation | 11 | |||
8.3 | Unfunded Plan | 11 | |||
8.4 | No Guaranty | 12 | |||
8.5 | Transfers to the Trust | 12 | |||
8.6 | Voting of Stock | 12 | |||
8.7 | Unsecured General Creditor | 12 | |||
IX. | GENERAL PROVISIONS | 13 | |||
9.1 | No Right to Remain in Service | 13 | |||
9.2 | Incompetency | 13 | |||
9.3 | Corporate Changes | 13 | |||
9.4 | Addresses | 13 | |||
9.5 | Limitations on Liability | 13 | |||
9.6 | Inspection | 14 |
9.7 | Singular and Plural | 14 | |||
9.8 | Severability | 14 | |||
9.9 | Discharge of Obligations | 14 | |||
9.10 | Governing Law | 14 | |||
9.11 | Successors | 14 | |||
9.12 | No Assurance of Tax Consequences | 14 | |||
9.13 | Code Section 409A | 14 |
2.1 | Eligibility |
2.2 | Participation |
2.3 | Deferral Election |
3.1 | Amounts to Be Credited to Accounts |
3.2 | Vesting |
4.1 | Distributable Events |
4.2 | Method of Payment |
4.3 | Death Prior to Completion of Payment |
4.4 | Distribution Prior to Retirement |
4.5 | Unforeseeable Emergencies |
4.6 | Commencement of Distributions |
4.7 | Acceleration or Delay of Distributions |
6.1 | Committee Duties |
6.2 | Administrative Committee; Agents |
6.3 | Binding Effect of Decisions |
6.4 | Indemnity of Committee and Administrative Committee |
6.5 | Claims Procedures |
7.1 | Amendment |
7.2 | Termination |
8.1 | Trust |
8.2 | No Alienation |
8.3 | Unfunded Plan |
8.4 | No Guaranty |
8.5 | Transfers to the Trust |
8.6 | Voting of Stock |
8.7 | Unsecured General Creditor |
9.1 | No Right to Remain in Service |
9.2 | Incompetency |
9.3 | Corporate Changes |
9.4 | Addresses |
9.5 | Limitations on Liability |
9.6 | Inspection |
9.7 | Singular and Plural |
9.8 | Severability |
9.9 | Discharge of Obligations |
9.10 | Governing Law |
9.11 | Successors |
9.12 | No Assurance of Tax Consequences |
9.13 | Code Section 409A |
1. | I have reviewed this quarterly report on Form 10-Q of The Toro Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Richard M. Olson | |
Richard M. Olson | |
President and Chief Executive Officer | |
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of The Toro Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Renee J. Peterson | |
Renee J. Peterson | |
Vice President, Treasurer | |
and Chief Financial Officer | |
(Principal Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Richard M. Olson | |
Richard M. Olson | |
President and Chief Executive Officer | |
Date: March 8, 2017 | |
/s/ Renee J. Peterson | |
Renee J. Peterson | |
Vice President, Treasurer and Chief Financial Officer | |
Date: March 8, 2017 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Feb. 03, 2017 |
Mar. 01, 2017 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | TORO CO | |
Entity Central Index Key | 0000737758 | |
Document Type | 10-Q | |
Document Period End Date | Feb. 03, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 107,582,096 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Statements of Earnings (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Feb. 03, 2017 |
Jan. 29, 2016 |
|
Income Statement [Abstract] | ||
Net sales | $ 515,839 | $ 486,398 |
Cost of sales | 322,359 | 303,744 |
Gross profit | 193,480 | 182,654 |
Selling, general, and administrative expense | 132,910 | 128,815 |
Operating earnings | 60,570 | 53,839 |
Interest expense | (4,883) | (4,654) |
Other income, net | 3,866 | 4,512 |
Earnings before income taxes | 59,553 | 53,697 |
Provision for income taxes | 14,563 | 14,436 |
Net earnings | $ 44,990 | $ 39,261 |
Basic net earnings per share of common stock | $ 0.41 | $ 0.36 |
Diluted net earnings per share of common stock | $ 0.41 | $ 0.35 |
Weighted-average number of shares of common stock outstanding — Basic | 108,627 | 110,029 |
Weighted-average number of shares of common stock outstanding — Diluted | 110,774 | 112,326 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Feb. 03, 2017 |
Jan. 29, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net earnings | $ 44,990 | $ 39,261 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustments | 117 | (4,791) |
Derivative instruments, net of tax | 221 | (1,059) |
Other comprehensive income (loss) | 338 | (5,850) |
Comprehensive income | $ 45,328 | $ 33,411 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Feb. 03, 2017 |
Jan. 29, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Derivative instruments, tax | $ 285 | $ 338 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) |
Feb. 03, 2017
$ / shares
shares
|
Oct. 31, 2016
$ / shares
shares
|
Jan. 29, 2016
$ / shares
shares
|
---|---|---|---|
Preferred stock | |||
Preferred stock, par value (in dollars per share) | $ / shares | $ 1.00 | $ 1.00 | $ 1.00 |
Preferred stock, issued (in shares) | 0 | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 | 0 |
Common stock | |||
Common stock, par value (in dollars per share) | $ / shares | $ 1.00 | $ 1.00 | $ 1.00 |
Common stock, authorized (in shares) | 175,000,000 | 175,000,000 | 175,000,000 |
Common stock, issued (in shares) | 107,575,440 | 108,965,108 | 108,427,393 |
Common stock, outstanding (in shares) | 107,575,440 | 108,965,108 | 108,427,393 |
Voting preferred stock | |||
Preferred stock | |||
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 |
Non-voting preferred stock | |||
Preferred stock | |||
Preferred stock, authorized (in shares) | 850,000 | 850,000 | 850,000 |
Basis of Presentation |
3 Months Ended | ||||||||||||||||
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Feb. 03, 2017 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Basis of Presentation | 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 U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. Unless the context indicates otherwise, the terms “company” and “Toro” refer to The Toro Company and its consolidated 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 results of operations. Since the company’s business is seasonal, operating results for the three months ended February 3, 2017, cannot be annualized to determine the expected results for the fiscal year ending October 31, 2017. 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. For further information, refer to the consolidated financial statements and notes included in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016. The policies described in that report are used for preparing quarterly reports. Accounting Policies In preparing the 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, inventory valuation, warranty reserves, earn-out liabilities, allowance for doubtful accounts, pension and postretirement accruals, self-insurance accruals, useful lives for tangible and intangible assets, and future cash flows associated with impairment testing for goodwill and other long-lived assets. These estimates and assumptions are based on management’s best estimates and judgments at the time they are made. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the current economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, actual amounts could differ significantly from those estimated at the time the consolidated financial statements are prepared. Changes in those estimates will be reflected in the consolidated financial statements in future periods. New Accounting Pronouncements Adopted In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This amended guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability. This amended guidance was retrospectively adopted in the first quarter of fiscal 2017. Prior periods have been retrospectively adjusted for the adoption of this amended guidance and are reclassified in the consolidated balance sheets presentation as a direct deduction from the carrying amount of the related debt liability. The adoption of this guidance did not have a material impact on the company's consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This amended guidance requires customers to determine whether or not an arrangement contains a software license element. If the arrangement contains a software element, the related fees paid should be accounted for as an acquisition of a software license. If the arrangement does not contain a software license, it is accounted for as a service contract. This amended guidance was adopted in the first quarter of fiscal 2017. The adoption of this guidance did not have an impact on the company's consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Stock-based Compensation: Improvements to Employee Share-based Payment Accounting. This amended guidance simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and statement of cash flow classification. The company elected to early adopt this amended guidance effective November 1, 2016, which is the first quarter of fiscal 2017. The impact of the early adoption resulted in the following:
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This amended guidance removes the prohibition against the immediate recognition of the current and deferred tax effects of intra-entity transfers of assets other than inventory. This amended guidance was early adopted in the first quarter of fiscal 2017 using a modified retrospective basis. The company recorded a cumulative effect adjustment to the beginning balance of its retained earnings in the first quarter of fiscal 2017 for remaining unamortized deferred tax expense of intra-entity transfers of fixed assets totaling $2.4 million. |
Acquisition |
3 Months Ended |
---|---|
Feb. 03, 2017 | |
Business Combinations [Abstract] | |
Acquisition | Acquisition Effective January 1, 2017, during the first quarter of fiscal 2017, the company completed the acquisition of all the outstanding shares of Regnerbau Calw GmbH (Perrot), a privately held manufacturer of professional irrigation equipment. The addition of these products broadens and strengthens the company's irrigation solutions for the sport, agricultural, and industrial markets. The acquisition was funded with existing foreign cash and cash equivalents. The purchase price of this acquisition was allocated to the identifiable assets acquired and liabilities assumed based on estimates of their fair value, with the excess purchase price recorded as goodwill. As of February 3, 2017, the company has not yet finalized the purchase accounting for the acquisition, but expects to finalize such purchase accounting in fiscal 2017. This acquisition was immaterial based on the company's consolidated financial condition and results of operations. |
Investment in Joint Venture |
3 Months Ended |
---|---|
Feb. 03, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investment in Joint Venture | Investment in Joint Venture In fiscal 2009, the company and TCF Inventory Finance, Inc. (“TCFIF”), a subsidiary of TCF National Bank, established Red Iron Acceptance, LLC (“Red Iron”), a joint venture in the form of a Delaware limited liability company that primarily provides inventory financing to certain distributors and dealers of the company’s products in the U.S. On November 29, 2016, the company entered into amended agreements for its Red Iron joint venture with TCFIF. As a result, the amended term of Red Iron will continue until October 31, 2024, subject to two-year extensions thereafter. Either the company or TCFIF may elect not to extend the amended term or any subsequent term by giving one-year written notice to the other party. The company owns 45 percent of Red Iron and TCFIF owns 55 percent of Red Iron. The company accounts for its investment in Red Iron under the equity method of accounting. The company and TCFIF each contributed a specified amount of the estimated cash required to enable Red Iron to purchase the company’s inventory financing receivables and to provide financial support for Red Iron’s inventory financing programs. Red Iron borrows the remaining requisite estimated cash utilizing a $550 million secured revolving credit facility established under a credit agreement between Red Iron and TCFIF. The company’s total investment in Red Iron as of February 3, 2017 was $20.8 million. The company has not guaranteed the outstanding indebtedness of Red Iron. The company has agreed to repurchase products repossessed by Red Iron and the TCFIF Canadian affiliate, up to a maximum aggregate amount of $7.5 million in a calendar year. Under the repurchase agreement between Red Iron and the company, Red Iron provides financing for certain dealers and distributors. These transactions are structured as an advance in the form of a payment by Red Iron to the company on behalf of a distributor or dealer with respect to invoices financed by Red Iron. These payments extinguish the obligation of the dealer or distributor to make payment to the company under the terms of the applicable invoice. Under separate agreements between Red Iron and the dealers and distributors, Red Iron provides loans to the dealers and distributors for the advances paid by Red Iron to the company. The net amount of receivables financed for dealers and distributors under this arrangement for the three months ended February 3, 2017 and January 29, 2016 was $375.0 million and $336.1 million, respectively. As of January 31, 2017, Red Iron’s total assets were $403.0 million and total liabilities were $356.9 million. |
Inventories |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 03, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories 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 and first-in, first-out (“FIFO”) method for all other inventories. The company establishes a reserve for excess, slow-moving, and obsolete inventory that is equal to the difference between the cost and estimated net realizable value for that inventory. These reserves are based on a review and comparison of current inventory levels to the planned production, as well as planned and historical sales of the inventory. Inventories were as follows:
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Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The changes in the net carrying amount of goodwill for the first three months of fiscal 2017 were as follows:
The components of other intangible assets as of February 3, 2017 were as follows:
The components of other intangible assets as of October 31, 2016 were as follows:
Amortization expense for intangible assets during the first three months of fiscal 2017 was $2.4 million, compared to $3.2 million for the same period last fiscal year. Estimated amortization expense for the remainder of fiscal 2017 and succeeding fiscal years is as follows: fiscal 2017 (remainder), $7.5 million; fiscal 2018, $8.0 million; fiscal 2019, $7.1 million; fiscal 2020, $6.5 million; fiscal 2021, $6.1 million; fiscal 2022, $6.0 million; and after fiscal 2022, $65.2 million. |
Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Accumulated Other Comprehensive Loss Components of accumulated other comprehensive loss (“AOCL”), net of tax, are as follows:
The components and activity of AOCL for the first three months of fiscal 2017 are as follows:
The components and activity of AOCL for the first three months of fiscal 2016 are as follows:
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Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Stock Option Awards Under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (the “2010 plan”), stock options are granted with an exercise price equal to the closing price of the company’s common stock on the date of grant, as reported by the New York Stock Exchange. Options are generally granted to executive officers, other employees, and non-employee members of the company’s Board of Directors on an annual basis in the first quarter of the company’s fiscal year. Options generally vest one-third each year over a three-year period and have a ten-year term. Other options granted to certain employees vest in full on the three-year anniversary of the date of grant and have a ten-year term. Compensation expense equal to the grant date fair value is generally recognized for these awards over the vesting period. Stock options granted to executive officers and other employees are subject to accelerated expensing if the option holder meets the retirement definition set forth in the 2010 plan. In that case, the fair value of the options is expensed in the fiscal year of grant because generally the option holder must be employed as of the end of the fiscal year in which the options are granted in order for the options to continue to vest following retirement. Similarly, if a non-employee director has served on the company’s Board of Directors for ten full fiscal years or more, the awards vest immediately upon retirement, and therefore, the fair value of the options granted is fully expensed on the date of the grant. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation method with the assumptions noted in the table below. The expected life is a significant assumption as it determines the period for which the risk-free interest rate, volatility, and dividend yield must be applied. The expected life is the average length of time in which executive officers, other employees, and non-employee directors are expected to exercise their stock options, which is primarily based on historical experience. Separate groups of employees and non-employee directors that have similar historical exercise behavior are considered separately for valuation purposes. Expected volatilities are based on the movement of the company’s common stock over the most recent historical period equivalent to the expected life of the option. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant. Dividend yield is estimated over the expected life based on the company’s historical cash dividends paid, expected future cash dividends and dividend yield, and expected changes in the company’s stock price. The following table illustrates the weighted-average valuation assumptions for options granted in the following fiscal periods:
Performance Share Awards Under the 2010 Plan, the company grants performance share awards to executive officers and other employees under which they are entitled to receive shares of the company’s common stock contingent on the achievement of performance goals of the company and businesses of the company, which are generally measured over a three-year period. The number of shares of common stock a participant receives will be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of performance goals and vest at the end of a three-year period. Performance share awards are generally granted on an annual basis in the first quarter of the company’s fiscal year. Compensation expense is recognized for these awards on a straight-line basis over the vesting period based on the per share fair value as of the date of grant and the probability of achieving each performance goal. The per share fair value of performance share awards granted during the first three months of each of fiscal 2017 and 2016 was $54.52 and $38.89, respectively. Restricted Stock and Restricted Stock Unit Awards Under the 2010 plan, restricted stock and restricted stock unit awards are generally granted to certain employees that are not executive officers. Occasionally, restricted stock or restricted stock unit awards may be granted, including to executive officers, in connection with hiring, mid-year promotions, leadership transition, or retention. Restricted stock and restricted stock unit awards generally vest one-third each year over a three-year period, or vest in full on the three-year anniversary of the date of grant. Such awards may have performance-based rather than time-based vesting requirements. Compensation expense equal to the grant date fair value, which is equal to the closing price of the company’s common stock on the date of grant multiplied by the number of shares subject to the restricted stock and restricted stock unit awards, is recognized for these awards over the vesting period. The per share weighted-average fair value of restricted stock unit awards granted during the first three months of fiscal 2017 and 2016 was $56.67 and $38.62, respectively. |
Per Share Data |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Per Share Data | Per Share Data Reconciliations of basic and diluted weighted-average shares of common stock outstanding are as follows:
Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective September 16, 2016. Incremental shares from options and restricted stock units are computed by the treasury stock method. Options to purchase 317,757 and 398,562 shares of common stock during the first three months of fiscal 2017 and 2016, respectively, were excluded from the diluted net earnings per share because they were anti-dilutive. |
Segment Data |
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Segment Data | 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 three reportable business segments: Professional, Residential, and Distribution. The Distribution segment, which consists of the company-owned domestic distributorship, has been combined with the company’s corporate activities and elimination of intersegment revenues and expenses that is shown as “Other” in the following tables due to the insignificance of the segment. The following table shows the summarized financial information concerning the company’s reportable segments:
The following table summarizes the components of the loss before income taxes included in “Other” shown above:
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Contingencies - Litigation |
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Loss Contingency [Abstract] | |
Contingencies - Litigation | Contingencies — Litigation The company is party to litigation in the ordinary course of business. Such matters are generally subject to uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. Litigation occasionally involves claims for punitive, as well as compensatory, damages arising out of the use of the company’s products. Although the company is self-insured to some extent, the company maintains insurance against certain product liability losses. The company is also subject to litigation and administrative and judicial proceedings with respect to claims involving asbestos and the discharge of hazardous substances into the environment. Some of these claims assert damages and liability for personal injury, remedial investigations or clean up and other costs and damages. The company is also typically involved in commercial disputes, employment disputes, and patent litigation cases in which it is asserting or defending against patent infringement claims. To prevent possible infringement of the company’s patents by others, the company periodically reviews competitors’ products. To avoid potential liability with respect to others’ patents, the company regularly reviews certain patents issued by the United States Patent and Trademark Office and foreign patent offices. Management believes these activities help minimize its risk of being a defendant in patent infringement litigation. The company is currently involved in patent litigation cases, including cases by or against competitors, where it is asserting and defending against claims of patent infringement. Such cases are at varying stages in the litigation process. The company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where the company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. In the opinion of management, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect its consolidated results of operations, financial position, or cash flows. |
Warranty Guarantees |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty Guarantees | Warranty Guarantees The company’s products are warranted to ensure customer confidence in design, workmanship, and overall quality. Warranty coverage is generally for specified periods of time and on select products’ hours of usage, and generally covers parts, labor, and other expenses for non-maintenance repairs. Warranty coverage generally does not cover operator abuse or improper use. An authorized company distributor or dealer must perform warranty work. Distributors and dealers submit claims for warranty reimbursement and are credited for the cost of repairs, labor, and other expenses as long as the repairs meet the company's prescribed standards. Warranty expense is accrued at the time of sale based on the estimated number of products under warranty, historical average costs incurred to service warranty claims, the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, and other minor factors. Special warranty reserves are also accrued for major rework campaigns. Service support outside of the warranty period is provided by authorized distributors and dealers at the customer's expense. The company sells extended warranty coverage on select products for a prescribed period after the original warranty period expires. Warranty provisions, claims, and changes in estimates for the first three months of fiscal 2017 and 2016 were as follows:
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Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The company is exposed to foreign currency exchange rate risk arising from transactions in the normal course of business, such as sales to third party customers, sales and loans to wholly owned foreign subsidiaries, foreign plant operations, and purchases from suppliers. The company actively manages the exposure of its foreign currency exchange rate market risk by entering into various hedging instruments, authorized under company policies that place controls on these activities, with counterparties that are highly rated financial institutions. The company’s hedging activities primarily involves the use of forward currency contracts, that are intended to offset intercompany loan exposures. The company may also utilize cross currency swaps to offset intercompany loan exposures. The company uses derivative instruments only in an attempt to limit underlying exposure from foreign currency exchange rate fluctuations and to minimize earnings and cash flow volatility associated with foreign currency exchange rate fluctuations. Decisions on whether to use such contracts are primarily based on the amount of exposure to the currency involved and an assessment of the near-term market value for each currency. The company’s policy does not allow the use of derivatives for trading or speculative purposes. The company also made an accounting policy election to use the portfolio exception with respect to measuring counterparty credit risk for derivative instruments, and to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open risk position with each counterparty. The company’s primary currency exchange rate exposures are with the Euro, the Australian dollar, the Canadian dollar, the British pound, the Mexican peso, the Japanese yen, the Chinese Renminbi, and the Romanian New Leu against the U.S. dollar, as well as the Romanian New Leu against the Euro. Cash flow hedges. The company recognizes all derivative instruments as either assets or liabilities at fair value on the consolidated balance sheet and formally documents relationships between cash flow hedging instruments and hedged transactions, as well as its risk-management objective and strategy for undertaking hedge transactions. This process includes linking all derivatives to the forecasted transactions, such as sales to third parties, foreign plant operations, and purchases from suppliers. Changes in fair values of outstanding cash flow hedge derivatives, except the ineffective portion, are recorded in other comprehensive income (“OCI”), until net earnings is affected by the variability of cash flows of the hedged transaction. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in net earnings. The consolidated statements of earnings classification of effective hedge results is the same as that of the underlying exposure. Results of hedges of sales and foreign plant operations are recorded in net sales and cost of sales, respectively, when the underlying hedged transaction affects net earnings. The maximum amount of time the company hedges its exposure to the variability in future cash flows for forecasted trade sales and purchases is two years. Results of hedges of intercompany loans are recorded in other income, net as an offset to the remeasurement of the foreign loan balance. The company formally assesses, at a hedge’s inception and on an ongoing basis, whether the derivatives that are designated as hedges have been highly effective in offsetting changes in the cash flows of the hedged transactions and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not, or has ceased to be, highly effective as a hedge, the company discontinues hedge accounting prospectively. When the company discontinues hedge accounting because it is no longer probable, but it is still reasonably possible that the forecasted transaction will occur by the end of the originally expected period or within an additional two-month period of time thereafter, the gain or loss on the derivative remains in AOCL and is reclassified to net earnings when the forecasted transaction affects net earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were in AOCL are recognized immediately in net earnings. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the company carries the derivative at its fair value on the consolidated balance sheets, recognizing future changes in the fair value in other income, net. For the first quarter of fiscal 2017, there were immaterial losses on forward contracts reclassified into earnings as a result of the discontinuance of cash flow hedges. As of February 3, 2017, the notional amount outstanding of forward contracts designated as cash flow hedges was $104.2 million. Derivatives not designated as hedging instruments. The company also enters into foreign currency contracts that include forward currency contracts to mitigate the remeasurement of specific assets and liabilities on the consolidated balance sheet. These contracts are not designated as hedging instruments. Accordingly, changes in the fair value of hedges of recorded balance sheet positions, such as cash, receivables, payables, intercompany notes, and other various contractual claims to pay or receive foreign currencies other than the functional currency, are recognized immediately in other income, net, on the consolidated statements of earnings together with the transaction gain or loss from the hedged balance sheet position. The following table presents the fair value of the company’s derivatives and consolidated balance sheet location.
The following table presents the impact of derivative instruments on the consolidated statements of earnings for the company’s derivatives designated as cash flow hedging instruments for the three months ended February 3, 2017 and January 29, 2016, respectively.
As of February 3, 2017, the company expects to reclassify approximately $0.3 million of losses from AOCL to earnings during the next twelve months. The following table presents the gain/(loss) of derivative instruments on the consolidated statements of earnings for the company’s derivatives not designated as hedging instruments.
The company entered into an International Swap Dealers Association (“ISDA”) Master Agreement with each counterparty that permits the net settlement of amounts owed under their respective contracts. The ISDA Master Agreement is an industry standardized contract that governs all derivative contracts entered into between the company and the respective counterparty. Under these master netting agreements, net settlement generally permits the company or the counterparty to determine the net amount payable or receivable for contracts due on the same date or in the same currency for similar types of derivative transactions. The company records the fair value of its derivative contracts at the net amount in its consolidated balance sheets. The following table shows the effects of the master netting arrangements on the fair value of the company’s derivative contracts that are recorded in the consolidated balance sheets:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The company categorizes its assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value, and requires certain disclosures. The framework discusses valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs reflecting management’s assumptions about the inputs used in pricing the asset or liability. Cash balances are valued at their carrying amounts in the consolidated balance sheets, which are reasonable estimates of their fair value due to their short-term nature. Forward currency contracts are valued based on observable market transactions of forward currency prices and spot currency rates as of the reporting date. The fair value of cross currency contracts is determined using discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs such as interest rates and foreign currency exchange rates. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, such as collateral postings, thresholds, mutual puts, and guarantees, are incorporated in the fair values to account for potential nonperformance risk. The unfunded deferred compensation liability is primarily subject to changes in fixed-income investment contracts based on current yields. For accounts receivable and accounts payable, carrying amounts are a reasonable estimate of fair value given their short-term nature. Assets and liabilities measured at fair value on a recurring basis, as of February 3, 2017, January 29, 2016, and October 31, 2016 are summarized below:
There were no transfers between Level 1 and Level 2 during the three months ended February 3, 2017 and January 29, 2016, or the twelve months ended October 31, 2016. |
Subsequent Events |
3 Months Ended |
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Feb. 03, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The company evaluated all subsequent events and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements. |
Basis of Presentation (Policies) |
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Feb. 03, 2017 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
New Accounting Pronouncements Adopted | New Accounting Pronouncements Adopted In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This amended guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability. This amended guidance was retrospectively adopted in the first quarter of fiscal 2017. Prior periods have been retrospectively adjusted for the adoption of this amended guidance and are reclassified in the consolidated balance sheets presentation as a direct deduction from the carrying amount of the related debt liability. The adoption of this guidance did not have a material impact on the company's consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This amended guidance requires customers to determine whether or not an arrangement contains a software license element. If the arrangement contains a software element, the related fees paid should be accounted for as an acquisition of a software license. If the arrangement does not contain a software license, it is accounted for as a service contract. This amended guidance was adopted in the first quarter of fiscal 2017. The adoption of this guidance did not have an impact on the company's consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Stock-based Compensation: Improvements to Employee Share-based Payment Accounting. This amended guidance simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and statement of cash flow classification. The company elected to early adopt this amended guidance effective November 1, 2016, which is the first quarter of fiscal 2017. The impact of the early adoption resulted in the following:
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This amended guidance removes the prohibition against the immediate recognition of the current and deferred tax effects of intra-entity transfers of assets other than inventory. This amended guidance was early adopted in the first quarter of fiscal 2017 using a modified retrospective basis. The company recorded a cumulative effect adjustment to the beginning balance of its retained earnings in the first quarter of fiscal 2017 for remaining unamortized deferred tax expense of intra-entity transfers of fixed assets totaling $2.4 million. |
Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories | Inventories were as follows:
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Goodwill and Other Intangible Assets (Tables) |
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Feb. 03, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The changes in the net carrying amount of goodwill for the first three months of fiscal 2017 were as follows:
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Schedule of Finite-Lived Intangible Assets | The components of other intangible assets as of February 3, 2017 were as follows:
The components of other intangible assets as of October 31, 2016 were as follows:
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Schedule of Indefinite-Lived Intangible Assets | The components of other intangible assets as of February 3, 2017 were as follows:
The components of other intangible assets as of October 31, 2016 were as follows:
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Stockholders' Equity (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of accumulated other comprehensive loss (AOCL), net of tax | Components of accumulated other comprehensive loss (“AOCL”), net of tax, are as follows:
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Schedule of components and activity of AOCL | The components and activity of AOCL for the first three months of fiscal 2017 are as follows:
The components and activity of AOCL for the first three months of fiscal 2016 are as follows:
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of assumptions for options granted | The following table illustrates the weighted-average valuation assumptions for options granted in the following fiscal periods:
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Per Share Data (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliations of basic and diluted weighted-average shares of common stock outstanding | Reconciliations of basic and diluted weighted-average shares of common stock outstanding are as follows:
Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective September 16, 2016. |
Segment Data (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized financial information concerning reportable segments | The following table shows the summarized financial information concerning the company’s reportable segments:
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Summary of components of loss before income taxes included in Other segment | The following table summarizes the components of the loss before income taxes included in “Other” shown above:
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Warranty Guarantees (Tables) |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of warranty provisions, claims, and changes in estimates | Warranty provisions, claims, and changes in estimates for the first three months of fiscal 2017 and 2016 were as follows:
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Derivative Instruments and Hedging Activities (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of derivatives and consolidated balance sheet location | The following table presents the fair value of the company’s derivatives and consolidated balance sheet location.
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Schedule of impact of derivative instruments on consolidated statements of earnings for derivatives designated as cash flow hedging instruments | The following table presents the impact of derivative instruments on the consolidated statements of earnings for the company’s derivatives designated as cash flow hedging instruments for the three months ended February 3, 2017 and January 29, 2016, respectively.
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Schedule of impact of derivative instruments on consolidated statements of earnings for derivatives not designated as hedging instruments | The following table presents the gain/(loss) of derivative instruments on the consolidated statements of earnings for the company’s derivatives not designated as hedging instruments.
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Schedule of effects of master netting arrangements on fair value of derivative contracts recorded in consolidated balance sheets | The following table shows the effects of the master netting arrangements on the fair value of the company’s derivative contracts that are recorded in the consolidated balance sheets:
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Fair Value Measurements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 03, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value on a recurring basis | Assets and liabilities measured at fair value on a recurring basis, as of February 3, 2017, January 29, 2016, and October 31, 2016 are summarized below:
|
Investment in Joint Venture (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Feb. 03, 2017 |
Jan. 29, 2016 |
Jan. 31, 2017 |
|
Red Iron Acceptance, LLC | |||
Schedule of Equity Method Investments | |||
Period of unlimited automatic extensions after the initial term of joint venture | 2 years | ||
Portion owned by Toro (as a percent) | 45.00% | ||
Portion owned by TCFIF (as a percent) | 55.00% | ||
Investment in joint venture | $ 20.8 | ||
Maximum aggregate amount of products repossessed by Red Iron and the TCFIF Canadian affiliate, entity has agreed to repurchase in a calendar year | 7.5 | ||
Net amount of new receivables financed for dealers and distributors | 375.0 | $ 336.1 | |
Summarized financial information for Red Iron | |||
Total assets | $ 403.0 | ||
Total liabilities | $ 356.9 | ||
Red Iron Acceptance, LLC | TCFIF secured revolving credit facility | |||
Schedule of Equity Method Investments | |||
Maximum borrowing capacity under credit facility | $ 550.0 |
Inventories (Details) - USD ($) $ in Thousands |
Feb. 03, 2017 |
Oct. 31, 2016 |
Jan. 29, 2016 |
---|---|---|---|
Inventory Disclosure [Abstract] | |||
Raw materials and work in process | $ 107,170 | $ 90,463 | $ 115,373 |
Finished goods and service parts | 353,290 | 274,929 | 370,703 |
Total FIFO value | 460,460 | 365,392 | 486,076 |
Less: adjustment to LIFO value | 58,357 | 58,358 | 64,040 |
Total inventories, net | $ 402,103 | $ 307,034 | $ 422,036 |
Goodwill and Other Intangible Assets - Changes in Net Carrying Amount of Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Feb. 03, 2017
USD ($)
| |
Changes in the net carrying amount of goodwill | |
Goodwill, beginning balance | $ 194,782 |
Goodwill acquired | 6,151 |
Translation adjustments | 313 |
Goodwill, ending balance | 201,246 |
Professional | |
Changes in the net carrying amount of goodwill | |
Goodwill, beginning balance | 184,338 |
Goodwill acquired | 6,151 |
Translation adjustments | 268 |
Goodwill, ending balance | 190,757 |
Residential | |
Changes in the net carrying amount of goodwill | |
Goodwill, beginning balance | 10,444 |
Goodwill acquired | 0 |
Translation adjustments | 45 |
Goodwill, ending balance | $ 10,489 |
Stockholders' Equity - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
Feb. 03, 2017 |
Oct. 31, 2016 |
Jan. 29, 2016 |
---|---|---|---|
Accumulated other comprehensive loss (AOCL) | |||
Foreign currency translation adjustments | $ 31,177 | $ 31,430 | $ 29,393 |
Pension and post-retirement benefits | 6,495 | 6,359 | 5,112 |
Derivative instruments | 426 | 647 | 1,188 |
Total accumulated other comprehensive loss | $ 38,098 | $ 38,436 | $ 35,693 |
Per Share Data (Details) |
3 Months Ended | ||
---|---|---|---|
Sep. 16, 2016 |
Feb. 03, 2017
shares
|
Jan. 29, 2016
shares
|
|
Basic | |||
Weighted-average number of shares of common stock | 108,585,000 | 109,955,000 | |
Assumed issuance of contingent shares | 42,000 | 74,000 | |
Weighted-average number of shares of common stock and assumed issuance of contingent shares | 108,627,000 | 110,029,000 | |
Diluted | |||
Weighted-average number of shares of common stock and assumed issuance of contingent shares | 108,627,000 | 110,029,000 | |
Effect of dilutive securities | 2,147,000 | 2,297,000 | |
Weighted-average number of shares of common stock, assumed issuance of contingent shares, and effect of dilutive securities | 110,774,000 | 112,326,000 | |
Stock split, conversion ratio | 2 | ||
Options, restricted stock, and restricted stock units, excluded from the diluted earnings per share | 317,757 | 398,562 |
Segment Data - Components of Loss before Income Taxes Included in Other (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Feb. 03, 2017 |
Jan. 29, 2016 |
|
Components of the loss before income taxes included in "Other" | ||
Interest expense, net | $ (4,883) | $ (4,654) |
Other | 3,866 | 4,512 |
Earnings before income taxes | 59,553 | 53,697 |
Other | ||
Components of the loss before income taxes included in "Other" | ||
Corporate expenses | (23,961) | (24,783) |
Interest expense, net | (4,883) | (4,654) |
Other | 3,673 | 4,803 |
Earnings before income taxes | $ (25,171) | $ (24,634) |
Warranty Guarantees (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Feb. 03, 2017 |
Jan. 29, 2016 |
|
Warranty provisions, claims, and changes in estimates | ||
Beginning balance | $ 72,158 | $ 70,734 |
Warranty provisions | 9,615 | 8,940 |
Warranty claims | (9,794) | (8,527) |
Changes in estimates | 594 | 0 |
Ending balance | $ 72,573 | $ 71,147 |
Derivative Instruments and Hedging Activities - Effects of Master Netting Arrangements (Details) - USD ($) $ in Thousands |
Feb. 03, 2017 |
Oct. 31, 2016 |
Jan. 29, 2016 |
---|---|---|---|
Assets | |||
Net Amounts of Assets Presented in the Balance Sheets | $ 2,347 | $ 1,967 | $ 7,100 |
Liabilities | |||
Net Amounts of Liabilities Presented in the Balance Sheets | (1,504) | (1,765) | (3,202) |
Forward currency contracts | |||
Assets | |||
Gross Amounts of Recognized Assets | 2,347 | 2,264 | 4,740 |
Gross Liabilities Offset in the Balance Sheets | 0 | (297) | 0 |
Net Amounts of Assets Presented in the Balance Sheets | 2,347 | 1,967 | 4,740 |
Liabilities | |||
Gross Amounts of Recognized Liabilities | (1,614) | (1,765) | (3,202) |
Gross Assets Offset in the Balance Sheets | 110 | 0 | 0 |
Net Amounts of Liabilities Presented in the Balance Sheets | (1,504) | (1,765) | (3,202) |
Cross currency contracts | |||
Assets | |||
Gross Amounts of Recognized Assets | 0 | 0 | 2,360 |
Net Amounts of Assets Presented in the Balance Sheets | $ 0 | $ 0 | $ 2,360 |
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