UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended ~~July 30, 2021~~January 28, 2022

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

For the Transition Period from to

Commission File Number: 1-8649

THE TORO COMPANY

(Exact name of registrant as specified in its charter)


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

8111 Lyndale Avenue South

Bloomington, Minnesota 55420-1196

Telephone Number: (952) 888-8801

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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of shares of the registrant’s common stock outstanding as of ~~August 26, 2021 was 106,444,673.~~February 24, 2022 was 104,537,567.

Table of Contents

THE TORO COMPANY

FORM 10-Q

TABLE OF CONTENTS


Description		Page Number

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Condensed Consolidated Statements of Earnings (Unaudited)	35

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	35

	Condensed Consolidated Balance Sheets (Unaudited)	46

	Condensed Consolidated Statements of Cash Flows (Unaudited)	57

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	68

	Notes to Condensed Consolidated Financial Statements (Unaudited)	79

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728

	Company Overview	2728

	Results of Operations	30

	Business Segments	3332

	Financial Position	3633

	Non-GAAP Financial Measures	3936

	Critical Accounting Policies and Estimates	41

	~~Forward-Looking Information~~	4137

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4537

Item 4.	Controls and Procedures	4739

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	4840

Item 1A.	Risk Factors	4840

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4841

Item 6.	Exhibits	4942

	Signatures	5043

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we or others on our behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on our web sites or otherwise. Statements that are not historical are forward-looking and reflect expectations and assumptions that we believe to be reasonable. Forward-looking statements are based on our current expectations of future events, and often can be identified in this report and elsewhere by using words such as "expect," "strive," "looking ahead," "outlook," "guidance," "forecast," "goal," "optimistic," "encourage," "anticipate," "continue," "plan," "estimate," "project," "target," "improve," "believe," "become," "should," "could," "will," "would," "possible," "promise," "may," "likely," "intend," "can," "seek," "pursue," "potential," "pro forma," variations of such words or the negative thereof, and similar expressions or future dates. Our forward-looking statements generally relate to our future performance, including our anticipated operating results, liquidity requirements, financial condition, the anticipated impacts of COVID-19, and the current global supply chain disruptions and inflationary environment; our business strategies, priorities, goals, and commitments; recent acquisitions and business initiatives; and the effect of laws, rules, policies, regulations, tax reform, new accounting pronouncements, and outstanding litigation on our business and future performance.

Forward-looking statements are only projections and involve risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements. The following are some of the factors known to us that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements:

•Adverse economic conditions and outlook in the United States and in other countries in which we conduct business, including as a result of COVID-19, such as but not limited to business closures, slowdowns, suspensions or delays of production and commercial activity; slow or negative economic growth rates or recessionary conditions; reduced or negative consumer confidence; reduced consumer spending levels; increased or prolonged high unemployment rates; higher costs, longer lead times and reduced availability of commodities, components, parts, and accessories, including as a result of transportation-related costs, inflation, changing prices, foreign currency fluctuations, tariffs, and/or duties; inflationary or deflationary pressures; slowdowns or reductions in levels of interest in the game of golf or golf course activity, development, renovation or improvement; golf course closures; reduced governmental or municipal spending; reduced infrastructure spending; reduced levels of home ownership, construction or sales; home foreclosures; the impact of U.S. federal debt, state debt and sovereign debt defaults; reduced credit availability or unfavorable credit terms for us or our distributors, dealers, or end-user customers; higher short-term, mortgage, and other interest rates; and general economic and political conditions and expectations;

•Effect of COVID-19, including governmental, business, and individual actions that have been, and continue to be, taken in response and the success of COVID-19 vaccines and their effectiveness against COVID-19 and additional variants, on (i) our business, financial condition, and operating results; (ii) our dealers, distributors, mass retailers, and other channel partners and customers; (iii) our suppliers and companies throughout our supply chain and any such supplier's ability to meet supply commitments, requirements, and/or demands; (iv) our ability to continue to obtain commodities, components, parts, and accessories on a timely basis through our supply chain and at anticipated costs; (v) the financial and credit markets and economic activity generally; (vi) our ability to access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all; and (v) other risks described herein and in our SEC reports, which could be heightened as a result of COVID-19;

•Our ability to continue to enhance existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance;

•Disruption and/or shortages in the availability of and the cost of commodities, components, parts, or accessories used in our products for reasons other than may be related to adverse economic conditions or COVID-19;

•Effect that weather conditions or climate change have on demand for our products and operations, including our supply chain;

•Changes in our product mix;

•Effect of competition;

•Our ability to cost-effectively expand and renovate existing facilities, open and manage new or acquired facilities, move production between manufacturing facilities, and/or any disruption at or near any of our facilities or other operations or those of our suppliers, distribution channel customers, mass retailers, or home centers where our products are sold;

•Our ability to retain our executive officers or other key employees, attract and retain other qualified employees or successfully implement executive officer, key employee or other leadership or employee transitions and any failure by us, or our suppliers or distribution channel partners, to hire and/or retain a labor force to enhance existing products and develop and market new products, adequately staff manufacturing operations, perform service or warranty work or other necessary activities, or allow employees to adequately and safely perform their jobs;

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•Our inability to maintain appropriate inventory levels, including if we underestimate or overestimate demand for our products, and the effect of inventory management decisions of our distribution channel customers;

•Changes in composition of, financial viability of, and the relationships with, our distribution channel customers;

•Risks associated with our credit arrangements and ratings and any material change in the availability or terms of, or termination or disruption of, credit offered to our customers, distributors, and dealers;

•Risks associated with our international operations, including but not limited to the effect of foreign currency exchange rate fluctuations and compliance with foreign legal and regulatory requirements;

•Our failure to comply with all applicable legal and regulatory requirements and the effect of product quality issues, product liability claims, and other litigation to which we are or may be subject;

•Risks associated with our recent and any future acquisitions and alliances, joint ventures, investments or partnerships and our failure to successfully complete divestitures or other restructuring activities;

•Our ability to obtain and protect our intellectual property and other proprietary rights or operate our business without infringing upon the intellectual property or other proprietary rights of others;

•Failure of our information systems or information security practices or those of our business partners or third-party service providers to adequately perform and/or protect sensitive or confidential information;

•Our ability to achieve our financial projections or other business initiatives in the time periods that we anticipate or at all;

•Changes in accounting or tax standards and policies and/or assumptions utilized in determining accounting tax estimates; and

•Impact of increased scrutiny on our environmental, social and governance practices.

For more information regarding these and other uncertainties and factors that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements or otherwise could materially adversely affect our business, financial condition, or operating results, see our most recently filed Annual Report on Form 10-K, Part I, Item 1A, "Risk Factors;" Part II, Item 1A, "Risk Factors" of this report; and our subsequent filings with the U.S. Securities and Exchange Commission ("SEC").

All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. We caution readers not to place undue reliance on any forward-looking statement which speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, the risks described in our most recent Annual Report on Form 10-K, Part I, Item 1A, "Risk Factors" and Part II, Item 1A, "Risk Factors" of this report, and our subsequent SEC filings, as well as others that we may consider immaterial or do not anticipate at this time. These risks and uncertainties are not exclusive and further information concerning the company and our businesses, including factors that potentially could materially affect our financial results or condition, may emerge from time to time. We make no commitment to revise or update any forward-looking statements in order to reflect actual results, events or circumstances occurring or existing after the date any forward-looking statement is made, or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures we make on related subjects in our future Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K we file with or furnish to the SEC.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings (Unaudited)

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020			January 28, 2022		January 29, 2021
Net sales	Net sales	$	976,836	$	840,972	$	2,998,929	$	2,537,853	Net sales	$	932,650	$	872,986
Cost of sales	Cost of sales	645,719		546,398		1,949,823		1,648,474		Cost of sales	632,174		557,950
Gross profit	Gross profit	331,117		294,574		1,049,106		889,379		Gross profit	300,476		315,036
Selling, general and administrative expense	Selling, general and administrative expense	209,178		178,622		604,986		556,503		Selling, general and administrative expense	208,850		173,571
Operating earnings	Operating earnings	121,939		115,952		444,120		332,876		Operating earnings	91,626		141,465
Interest expense	Interest expense	(7,016)		(8,304)		(21,662)		(25,119)		Interest expense	(7,013)		(7,522)
Other income, net	Other income, net	2,528		3,345		8,062		10,746		Other income, net	2,534		1,883
Earnings before income taxes	Earnings before income taxes	117,451		110,993		430,520		318,503		Earnings before income taxes	87,147		135,826
Provision for income taxes	Provision for income taxes	21,131		22,025		80,748		60,998		Provision for income taxes	17,637		24,545
Net earnings	Net earnings	$	96,320	$	88,968	$	349,772	$	257,505	Net earnings	$	69,510	$	111,281

Basic net earnings per share of common stock	Basic net earnings per share of common stock	$	0.90	$	0.83	$	3.25	$	2.39	Basic net earnings per share of common stock	$	0.66	$	1.03

Diluted net earnings per share of common stock	Diluted net earnings per share of common stock	$	0.89	$	0.82	$	3.21	$	2.37	Diluted net earnings per share of common stock	$	0.66	$	1.02

Weighted-average number of shares of common stock outstanding — Basic	Weighted-average number of shares of common stock outstanding — Basic	107,130		107,710		107,667		107,561		Weighted-average number of shares of common stock outstanding — Basic	105,037		108,122

Weighted-average number of shares of common stock outstanding — Diluted	Weighted-average number of shares of common stock outstanding — Diluted	108,363		108,543		108,818		108,569		Weighted-average number of shares of common stock outstanding — Diluted	106,048		109,194

See accompanying Notes to Condensed Consolidated Financial Statements.

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

Three Months Ended Nine Months Ended
July 30, 2021 July 31, 2020 July 30, 2021 July 31, 2020
Net earnings $ 96,320 $ 88,968 $ 349,772 $ 257,505
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (5,314) 14,011 6,685 8,120
Derivative instruments, net of tax of $2,641; $(4,589); $140; and $(3,558), respectively 8,035 (14,885) 886 (11,559)
Pension benefits — — — 912
Other comprehensive income (loss), net of tax 2,721 (874) 7,571 (2,527)
Comprehensive income $ 99,041 $ 88,094 $ 357,343 $ 254,978

~~See accompanying Notes to Condensed Consolidated Financial Statements.~~

~~Table of Contents~~

~~THE TORO COMPANY AND SUBSIDIARIES~~

~~Condensed Consolidated Balance Sheets (Unaudited)~~

~~(Dollars in thousands, except per share data)~~

July 30, 2021 July 31, 2020 October 31, 2020
ASSETS
Cash and cash equivalents $ 535,330 $ 394,141 $ 479,892
Receivables, net 301,234 294,672 261,135
Inventories, net 665,648 656,208 652,433
Prepaid expenses and other current assets 43,577 39,225 34,188
Total current assets 1,545,789 1,384,246 1,427,648
Property, plant, and equipment, net 456,992 457,891 467,919
Goodwill 421,958 424,228 424,075
Other intangible assets, net 426,497 413,270 408,305
Right-of-use assets 72,236 81,634 78,752
Investment in finance affiliate 19,272 22,580 19,745
Deferred income taxes 6,362 9,772 6,466
Other assets 18,943 20,242 20,318
Total assets $ 2,968,049 $ 2,813,863 $ 2,853,228
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt $ 104,217 $ 108,869 $ 99,873
Accounts payable 411,413 268,747 363,953
Accrued liabilities 427,407 404,314 376,524
Short-term lease liabilities 15,403 15,182 15,447
Total current liabilities 958,440 797,112 855,797
Long-term debt, less current portion 587,345 782,036 691,250
Long-term lease liabilities 60,002 69,752 66,641
Deferred income taxes 74,381 71,346 70,435
Other long-term liabilities 50,703 39,585 54,277
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 106,440,513 shares as of July 30, 2021, 107,264,098 shares as of July 31, 2020, and 107,582,670 shares as of October 31, 2020 106,441 107,264 107,583
Retained earnings 1,157,428 981,344 1,041,507
Accumulated other comprehensive loss (26,691) (34,576) (34,262)
Total stockholders’ equity 1,237,178 1,054,032 1,114,828
Total liabilities and stockholders’ equity $ 2,968,049 $ 2,813,863 $ 2,853,228

~~See accompanying Notes to Condensed Consolidated Financial Statements.~~

~~Table of Contents~~

~~THE TORO COMPANY AND SUBSIDIARIES~~

~~Condensed Consolidated Statements of Cash Flows (Unaudited)~~

~~(Dollars in thousands)~~

Nine Months Ended
July 30, 2021 July 31, 2020
Cash flows from operating activities:
Net earnings $ 349,772 $ 257,505
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash income from finance affiliate (4,694) (6,161)
Distributions from finance affiliate, net 5,167 7,729
Depreciation of property, plant and equipment 55,301 55,272
Amortization of other intangible assets 17,493 14,591
Fair value step-up adjustment to acquired inventory — 3,951
Stock-based compensation expense 16,176 10,322
Deferred income taxes 699 (3,425)
Other (26) 521
Changes in operating assets and liabilities, net of the effect of acquisitions:
Receivables, net (42,217) (17,687)
Inventories, net (20,080) 18,248
Prepaid expenses and other assets (1,019) 7,827
Accounts payable, accrued liabilities, and other liabilities 100,563 (42,817)
Net cash provided by operating activities 477,135 305,876
Cash flows from investing activities:
Purchases of property, plant and equipment (47,961) (46,627)
Business combinations, net of cash acquired (14,874) (138,225)
Asset acquisitions, net of cash acquired (27,176) —
Proceeds from asset disposals 588 204
Proceeds from sale of a business 18,732 —
Net cash used in investing activities (70,691) (184,648)
Cash flows from financing activities:
Borrowings under debt arrangements — 636,025
Repayments under debt arrangements (100,000) (446,025)
Proceeds from exercise of stock options 12,535 11,939
Payments of withholding taxes for stock awards (1,875) (2,102)
Purchases of TTC common stock (177,152) —
Dividends paid on TTC common stock (84,677) (80,683)
Net cash (used in) provided by financing activities (351,169) 119,154
Effect of exchange rates on cash and cash equivalents 163 1,931
Net increase in cash and cash equivalents 55,438 242,313
Cash and cash equivalents as of the beginning of the fiscal period 479,892 151,828
Cash and cash equivalents as of the end of the fiscal period $ 535,330 $ 394,141


	Three Months Ended
	January 28, 2022		January 29, 2021
Net earnings	$	69,510	$	111,281
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(5,990)		10,396
Derivative instruments, net of tax of $2,032 and $(2,792), respectively	6,372		(8,310)

Other comprehensive income, net of tax	382		2,086
Comprehensive income	$	69,892	$	113,367

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated ~~Statements of Stockholders' Equity~~Balance Sheets (Unaudited)

(Dollars in thousands, except per share data)

Common
Stock Retained
Earnings Accumulated Other
Comprehensive Loss Total Stockholders'
Equity
Balance as of April 30, 2021 $ 107,043 $ 1,151,786 $ (29,412) $ 1,229,417
Cash dividends paid on common stock - $0.2625 per share — (28,075) — (28,075)
Issuance of 64,260 shares for exercised stock options and vested restricted stock units 65 1,605 — 1,670
Stock-based compensation expense — 5,831 — 5,831
Purchase of 666,672 shares of common stock (667) (70,039) — (70,706)
Other comprehensive income — — 2,721 2,721
Net earnings — 96,320 — 96,320
Balance as of July 30, 2021 $ 106,441 $ 1,157,428 $ (26,691) $ 1,237,178
Balance as of October 31, 2020 $ 107,583 $ 1,041,507 $ (34,262) $ 1,114,828
Cash dividends paid on common stock - $0.7875 per share — (84,677) — (84,677)
Issuance of 587,723 shares for exercised stock options and vested restricted stock units and performance share awards 588 10,462 — 11,050
Stock-based compensation expense — 16,176 — 16,176
Contribution of 22,700 shares to a deferred compensation trust 23 1,462 — 1,485
Purchase of 1,752,579 shares of common stock (1,753) (177,274) — (179,027)
Other comprehensive income — — 7,571 7,571
Net earnings — 349,772 — 349,772
Balance as of July 30, 2021 $ 106,441 $ 1,157,428 $ (26,691) $ 1,237,178
Balance as of May 1, 2020 $ 107,111 $ 911,541 $ (33,702) $ 984,950
Cash dividends paid on common stock - $0.25 per share — (26,939) — (26,939)
Issuance of 162,488 shares for exercised stock options and vested restricted stock units 162 3,430 — 3,592
Stock-based compensation expense — 4,955 — 4,955
Purchase of 9,206 shares of common stock (9) (611) — (620)
Other comprehensive loss — — (874) (874)
Net earnings — 88,968 — 88,968
Balance as of July 31, 2020 $ 107,264 $ 981,344 $ (34,576) $ 1,054,032
Balance as of October 31, 2019 $ 106,742 $ 784,885 $ (32,049) $ 859,578
Cash dividends paid on common stock - $0.75 per share — (80,683) — (80,683)
Issuance of 550,835 shares for exercised stock options and vested restricted stock units and performance share awards 551 8,820 — 9,371
Stock-based compensation expense — 10,322 — 10,322
Contribution of stock to a deferred compensation trust — 2,568 — 2,568
Purchase of 28,818 shares of common stock (29) (2,073) — (2,102)
Other comprehensive loss — — (2,527) (2,527)
Net earnings — 257,505 — 257,505
Balance as of July 31, 2020 $ 107,264 $ 981,344 $ (34,576) $ 1,054,032


	January 28, 2022		January 29, 2021		October 31, 2021
ASSETS
Cash and cash equivalents	$	192,959	$	433,394	$	405,612
Receivables, net	366,270		306,865		310,279
Inventories, net	832,072		675,307		738,170
Prepaid expenses and other current assets	45,962		41,177		35,124
Total current assets	1,437,263		1,456,743		1,489,185

Property, plant, and equipment, net	507,549		457,147		487,731
Goodwill	576,940		422,163		421,680
Other intangible assets, net	600,797		410,587		420,041
Right-of-use assets	78,306		75,467		66,990
Investment in finance affiliate	24,119		22,955		20,671
Deferred income taxes	3,938		9,658		5,800
Other assets	24,133		20,418		24,042
Total assets	$	3,253,045	$	2,875,138	$	2,936,140

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	100,000	$	9,992	$	—
Accounts payable	474,483		364,361		503,116
Accrued liabilities	395,739		429,820		419,620
Short-term lease liabilities	15,842		15,368		14,283
Total current liabilities	986,064		819,541		937,019

Long-term debt, less current portion	991,354		691,356		691,242
Long-term lease liabilities	65,760		63,469		55,752
Deferred income taxes	50,382		71,970		50,397
Other long-term liabilities	39,936		49,080		50,598

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 104,528,510 shares as of January 28, 2022, 107,613,431 shares as of January 29, 2021, and 105,205,734 shares as of October 31, 2021	104,529		107,613		105,206
Retained earnings	1,040,634		1,104,285		1,071,922
Accumulated other comprehensive loss	(25,614)		(32,176)		(25,996)
Total stockholders’ equity	1,119,549		1,179,722		1,151,132
Total liabilities and stockholders’ equity	$	3,253,045	$	2,875,138	$	2,936,140

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


	Three Months Ended
	January 28, 2022		January 29, 2021
Cash flows from operating activities:
Net earnings	$	69,510	$	111,281
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Non-cash income from finance affiliate	(1,398)		(1,283)
Contributions to finance affiliate, net	(2,050)		(1,927)
Depreciation of property, plant and equipment	18,487		19,173
Amortization of other intangible assets	6,456		4,894

Compensation cost for stock-based compensation awards	5,225		4,516
Deferred income taxes	—		1,232
Other	146		1,080
Changes in operating assets and liabilities, net of the effect of acquisitions:
Receivables, net	(50,599)		(46,159)
Inventories, net	(59,171)		(25,594)
Prepaid expenses and other assets	(4,187)		(2,794)
Accounts payable, accrued liabilities, and other liabilities	(72,462)		30,606
Net cash (used in) provided by operating activities	(90,043)		95,025

Cash flows from investing activities:
Purchases of property, plant and equipment	(11,903)		(10,504)
Business combinations, net of cash acquired	(401,494)		—
Asset acquisition, net of cash acquired	—		(4,542)
Proceeds from asset disposals	26		74
Proceeds from sale of a business	—		12,886
Net cash used in investing activities	(413,371)		(2,086)

Cash flows from financing activities:
Borrowings under debt arrangements	400,000		—
Repayments under debt arrangements	—		(90,000)
Proceeds from exercise of stock options	1,150		7,714
Payments of withholding taxes for stock awards	(1,381)		(941)
Purchases of TTC common stock	(75,000)		(31,351)
Dividends paid on TTC common stock	(31,469)		(28,411)
Net cash provided by (used in) financing activities	293,300		(142,989)

Effect of exchange rates on cash and cash equivalents	(2,539)		3,552

Net decrease in cash and cash equivalents	(212,653)		(46,498)
Cash and cash equivalents as of the beginning of the fiscal period	405,612		479,892
Cash and cash equivalents as of the end of the fiscal period	$	192,959	$	433,394

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(Dollars in thousands, except per share data)


	Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity










Balance as of October 31, 2021	$	105,206	$	1,071,922	$	(25,996)	$	1,151,132
Cash dividends paid on common stock - $0.30 per share	—		(31,469)		—		(31,469)
Issuance of 109,658 shares of common stock under The Toro Company Amended and Restated 2010 Equity and Incentive Plan	109		1,074		—		1,183
Stock-based compensation expense	—		5,225		—		5,225
Contribution of 33,162 shares of common stock to a deferred compensation trust	(33)		—		—		(33)
Purchase of 752,519 shares of common stock	(753)		(75,628)		—		(76,381)
Other comprehensive income	—		—		382		382
Net earnings	—		69,510		—		69,510
Balance as of January 28, 2022	$	104,529	$	1,040,634	$	(25,614)	$	1,119,549











Balance as of October 31, 2020	$	107,583	$	1,041,507	$	(34,262)	$	1,114,828
Cash dividends paid on common stock - $0.2625 per share	—		(28,411)		—		(28,411)
Issuance of 351,178 shares of common stock for exercised stock options and vested restricted stock units and performance share awards	350		5,879		—		6,229
Stock-based compensation expense	—		4,516		—		4,516
Contribution of 22,700 shares of common stock to a deferred compensation trust	23		1,462		—		1,485
Purchase of 343,117 shares of common stock	(343)		(31,949)		—		(32,292)
Other comprehensive income	—		—		2,086		2,086
Net earnings	—		111,281		—		111,281
Balance as of January 29, 2021	$	107,613	$	1,104,285	$	(32,176)	$	1,179,722

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~July 30, 2021~~January 28, 2022


1			Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States ("U.S.") generally accepted accounting principles ("GAAP") for complete financial statements. Unless the context indicates otherwise, the terms "company," "TTC," "we," "our," or "us" refer to The Toro Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated from the unaudited Condensed Consolidated Financial Statements.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements include all adjustments, consisting primarily of recurring accruals, considered necessary for the fair presentation of the company's ~~Consolidated Financial Position, Results~~consolidated financial position, results of ~~Operations,~~operations, and ~~Cash Flows~~cash flows for the periods presented. Due to seasonality within the industries in which the company's ~~business operates~~businesses operate and the current COVID-19 pandemic, among other factors, operating results for the ~~nine~~three months ended ~~July 30, 2021~~January 28, 2022 cannot be annualized to determine the expected results for the fiscal year ending October 31, ~~2021.~~2022.

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 calendar 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 regarding the company's basis of presentation, refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020.~~2021. The policies described in that report are used for preparing the company's quarterly reports on Form 10-Q.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19," "virus," or "the pandemic") outbreak a global pandemic. COVID-19 has negatively impacted public health and portions of the global economy, significantly disrupted global supply chains, and created volatility in financial markets. The continuing implications of COVID-19 on the company remain uncertain and will depend on ~~certain~~ future developments, including ~~the duration of the pandemic;~~ any adverse impact due to additional variants of the virus; its impact on market demand for the company's products; its impact on the company's employees, customers, and suppliers; the range of government mandated restrictions and other measures; and the success of the ~~deployment of approved~~ COVID-19 vaccines and their effectiveness against the ~~novel strain~~virus and related ~~variants, and their rate of adoption.~~variants. This uncertainty could have a material impact on accounting estimates and assumptions utilized to prepare the Condensed Consolidated Financial Statements as of and for the ~~nine~~three months ended ~~July 30, 2021~~January 28, 2022 and in future reporting periods, which could result in a material adverse impact on the company's ~~Consolidated Financial Position, Results~~consolidated financial position, results of ~~Operations,~~operations, and ~~Cash Flows.~~cash flows.

Accounting Policies and Estimates

In preparing the Condensed Consolidated Financial Statements in conformity with U.S. GAAP, management must make decisions that impact the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures, including disclosures of contingent assets and liabilities. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Estimates are used in determining, among other items, sales promotion and incentive accruals, incentive compensation accruals, income tax accruals, inventory valuation, warranty accruals, allowances for current expected credit losses, pension accruals, self-insurance accruals, legal accruals, right-of-use assets and lease liabilities, useful lives for tangible and finite-lived intangible assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, and valuations of the assets acquired and liabilities assumed in a business combination or an asset acquisition, when applicable. These estimates and assumptions are based on management’s best estimates and judgments at the time they are made and are generally derived from management's understanding and analysis of the relevant and current circumstances, historical experience, and actuarial and other independent external third-party specialist valuations, when applicable. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, including those impacted by COVID-19, actual amounts could differ significantly from those estimated at the time the Condensed Consolidated Financial Statements are prepared.

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New Accounting Pronouncements Adopted

In ~~June 2016,~~December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which modifies the measurement approach for credit losses on financial assets measured on an amortized cost basis from an 'incurred loss' method to an 'expected loss' method. Such modification of the measurement approach for credit losses eliminates the requirement that a credit loss be considered probable, or incurred, to impact the valuation of a financial asset measured on an amortized cost basis. The amended guidance requires the measurement of expected credit losses to be based on relevant information, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. This amendment affects trade receivables, off-balance-sheet credit exposures, and any other financial assets not excluded from the scope of this amendment that have the contractual right to receive cash. The amended guidance was adopted in the first quarter of fiscal 2021, under the modified retrospective transition method. The adoption of the amended guidance did not have a material impact on the company's Condensed Consolidated Financial Statements.

~~In August 2018, the FASB issued ASU No. 2018-13,~~ ~~Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement~~, which modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The amended guidance was adopted in the first quarter of fiscal 2021 and did not have a material impact on the company's Condensed Consolidated Financial Statements.

~~In August 2018, the FASB issued ASU No. 2018-14,~~ ~~Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715)~~, which modifies the disclosure requirements for defined benefit pension plans and other post-retirement plans. The amended guidance was adopted in the first quarter of fiscal 2021 and did not have a material impact on the company's Condensed Consolidated Financial Statements.

~~New Accounting Pronouncements Not Yet Adopted~~

~~In December 2019, the FASB issued ASU~~ No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The amended guidance also clarifies and simplifies other aspects of the accounting for income taxes under accounting standards codification Topic 740, Income Taxes. The amended guidance ~~will become effective for the company~~was adopted in the first quarter of fiscal ~~2022. Early adoption is permitted. The company is currently evaluating~~2022 and did not have a material impact on the ~~impact of this new standard on its~~company's Condensed Consolidated Financial Statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which clarified that before applying or upon discontinuing the equity method of accounting for an investment in equity securities, an entity should consider observable transactions that require it to apply or discontinue the equity method of accounting for the purposes of applying the fair value measurement alternative. The amended guidance ~~will become effective for the company~~was adopted in the first quarter of fiscal ~~2022. Early adoption is permitted. The company is currently evaluating~~2022 and did not have a material impact on the ~~impact of this standard on its~~company's Condensed Consolidated Financial Statements.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional guidance to ease the potential burden of accounting for reference rate reform due to the cessation of the London Interbank Offered Rate, commonly referred to as "LIBOR." The temporary guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, relationships, and transactions affected by reference rate reform if certain criteria are met. The guidance was effective upon issuance on March 12, 2020 and the provisions of the temporary optional guidance ~~are only available until~~provided by the ASU may be elected on a prospective basis from the beginning of an interim period that includes the issuance date of the ASU through December 31, 2022, when the reference rate reform activity is expected to be substantially complete. ~~When adopted, entities may apply~~In January 2021, the ~~provisions as~~FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, to provide supplemental guidance and to further clarify the scope of the ~~beginning~~amended guidance. At this time, the company does not have receivables, hedging relationships, or operating lease agreements that reference LIBOR or another reference rate expected to be discontinued; and therefore, the company has not applied the optional practical expedients under this ASU to these classes of assets. On October 5, 2021, the ~~reporting period when~~company entered into an amended and restated credit agreement and at such time, the ~~election~~company concluded that the optional practical expedients provided by the ASU would not be elected as the required criteria were not met. The amended and restated credit agreement includes a transition clause in the event LIBOR is ~~made. The~~discontinued and the company's other fixed-rate financing agreements do not reference LIBOR or another reference rate expected to be discontinued. As such, the company ~~is currently evaluating~~does not expect the transition of LIBOR to have a material impact ~~of this standard~~ on ~~its~~the company's Condensed Consolidated Financial ~~Statements~~Statements; however, a review of other contracts and ~~has yet~~agreements is underway and is expected to ~~elect an adoption date.~~be completed prior to December 31, 2022.

The company believes that all other recently issued accounting pronouncements from the FASB that the company has not noted above, will not have a material impact on its Condensed Consolidated Financial Statements or do not apply to its operations.


2			Business Combination ~~and Asset Acquisitions~~

~~Venture Products, Inc. ("Venture Products")~~Intimidator Group

On ~~March 2, 2020,~~January 13, 2022 ("closing date"), pursuant to an equity interest purchase agreement ("equity agreement"), the company ~~completed its acquisition of Venture Products,~~acquired the ~~manufacturer of Ventrac-branded products. Venture Products~~privately-held Intimidator Group ("Intimidator"). Intimidator primarily designs, manufactures, markets, and sells ~~articulating~~a commercial-grade line of zero-turn mowers under the Spartan Mowers brand, which are intended to provide innovative turf management solutions to landscape contractors and ~~snow~~other customers who require a commercial-grade solution. The acquisition of Intimidator broadened the company's Professional reportable segment and ~~ice management equipment~~expanded its manufacturing footprint and dealer network.

The Intimidator acquisition was structured as an equity purchase, pursuant to which the company acquired 100 percent of the equity interests of the legal entities that comprised Intimidator, with the legal entities continuing as surviving entities and wholly-owned subsidiaries of the company. As part of the acquisition, the company also acquired the real property used by Intimidator that was owned by an affiliate of Intimidator. The aggregate preliminary cash consideration was $398.9 million ("purchase price") and remains subject to certain customary adjustments based on, among other things, the amount of actual cash, debt, and working capital in the business of Intimidator at the closing date. Such customary adjustments are expected to be completed during fiscal 2022. Additionally, the aggregate preliminary cash consideration remains subject to contingent consideration through the end of calendar year 2022, in the event of certain qualifying tax changes. As a result, the company could be subject to additional cash purchase consideration for ~~grounds, landscape contractor, golf, municipal,~~an amount not to exceed $15.0 million and ~~rural acreage customers and provides innovative product~~remittance of such contingent consideration, if required, is due by March 15, 2023. As of January 28, 2022, no liability was recorded within the

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~~offerings that broadened and strengthened~~Condensed Consolidated Balance Sheets for the ~~company's Professional segment and expanded its dealer network. On~~contingent consideration as the ~~closing date~~contingency is not probable or estimable. If amounts were recorded for the contingent consideration during the 12 month provisional measurement period allowed under the accounting standards codification guidance for business combinations as a result of a qualifying tax change, the aggregate preliminary cash consideration would be increased by the amount of the ~~acquisition,~~contingent consideration with a corresponding increase in the company paid preliminary merger consideration of $165.9 million, which consisted of a cash payment of $136.4 million ("initial cash payment") and a $29.5 million holdback to satisfy any indemnification or certain other obligations of Venture Products togoodwill recognized for the ~~company.~~acquisition. The preliminary merger consideration was subject to certain customary adjustments, which were finalized during the third quarter of fiscal 2020 and resulted in an aggregate merger consideration of $163.2 million and at such time, $4.5 million of the holdback set aside for such customary adjustments was released accordingly. During the second quarter of fiscal 2021, $14.9 million of the remaining holdback was released and the remaining holdback of $10.0 million is expected to expire during the fourth quarter of fiscal 2021. As of the closing date of the acquisition, the company funded the ~~initial cash payment~~preliminary purchase price with borrowings under its existing unsecured senior revolving credit ~~facility.~~facility and cash provided by operating activities. For additional information regarding the company's unsecured senior revolving credit facility utilized to fund the purchase price, refer to Note 6, Indebtedness.

Preliminary Purchase Price Allocation

The company accounted for the acquisition in accordance with the accounting standards codification guidance for business combinations, whereby the aggregate preliminary purchase price was allocated to the acquired net tangible and intangible assets of ~~Venture Products~~Intimidator based on their fair values as of the closing date. The company believes that the information available as of the closing date provides a reasonable basis for estimating fair values of the assets acquired and liabilities assumed; however, the company is continuing to finalize these amounts. Thus, the preliminary measurements of the fair values of the assets acquired and liabilities assumed within the preliminary purchase price allocation are subject to change as additional information becomes available and as additional analysis is performed. The company expects to finalize its preliminary valuation and complete the allocation of the preliminary purchase price as soon as practicable, but no later than one year from the closing date of the ~~acquisition. Such fair values were based on internal company and independent external third-party valuations.~~ acquisition, as required.

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


(Dollars in thousands)	~~March 2, 2020~~January 13, 2022
Cash and cash equivalents	$	~~3,476~~2,601
Receivables	~~6,342~~6,788
Inventories	~~23,000~~36,006
Prepaid expenses and other current assets	~~239~~511
Property, plant and equipment	~~26,976~~26,825
Right-of-use assets	349
Goodwill	~~61,225~~155,638
Other intangible assets:
~~Finite-lived customer-related~~	~~19,100~~
Indefinite-lived trade name	~~56,200~~99,100
Finite-lived trade names	3,260
Finite-lived customer-related	81,300
Finite-lived backlog	2,250
Accounts payable	~~(4,075)~~(10,142)
Accrued liabilities	~~(5,196)~~(2,662)
~~Deferred income tax~~Short-term lease liabilities	~~(20,586)~~(102)
Long-term lease liabilities	(247)

Total fair value of net assets acquired	~~166,701~~401,475
Less: cash and cash equivalents acquired	~~(3,476)~~(2,601)
Total preliminary purchase price	$	~~163,225~~398,874

The goodwill recognized is primarily attributable to the expected future cash flows, the value of the workforce, ~~the reputation of Venture Products, expected future cash flows,~~ and expected synergies, including customer and dealer growth opportunities, ~~and integrating and~~ expanding existing product ~~lines.~~lines, and cost reduction initiatives. Key areas of expected cost synergies include increased purchasing power for commodities, components, parts, and accessories, and supply chain consolidation. The goodwill resulting from the ~~Venture Products~~ acquisition of Intimidator was recognized within the company's Professional segment and is ~~non-deductible~~the primary driver for the increase in the company's Professional segment goodwill to $566.4 million as of January 28, 2022. The acquisition was considered an asset acquisition for income tax ~~purposes. During~~purposes and as a result, the ~~first quarter of fiscal 2021, the company completed its valuation of income taxes to finalize the purchase price allocation, which resulted in a decrease to the carrying amount of~~ goodwill ~~of $1.0 million~~arising from the amounts reported within the company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020. Such purchase accounting adjustment did not impact the company's Condensed Consolidated Statements of Earnings for the three and nine month periods ended July 30, 2021.transaction is deductible.

Other Intangible Assets Acquired

The allocation of the preliminary purchase price to the net assets acquired resulted in the recognition of ~~$75.3~~$185.9 million of preliminary value for other intangible assets as of the closing ~~date of the acquisition.~~date. The preliminary fair values of the acquired trade ~~name~~names, customer-related, and ~~customer-related~~backlog intangible assets were determined using the income approach whereby an intangible asset's fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. The useful lives of the other intangible assets were determined based on the period of expected cash flows used to measure the fair value of the

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intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors that may limit the useful life of the respective intangible asset. ~~The fair value~~As of the ~~indefinite-lived~~closing date, the acquired finite-lived intangible assets had a weighted average useful life of 9.5 years. The preliminary fair values of the trade ~~name was~~names were determined using the relief from royalty method, which is based on the hypothetical royalty stream that would be received if the company were to license the respective trade name and ~~was~~were based on expected future ~~revenues.~~revenues from the respective trade name. The weighted-average useful life of the finite-lived trade name intangible assets was determined to be 9.8 years as of the closing date. The preliminary fair ~~value~~values of the customer-related and backlog intangible ~~asset was~~assets were determined using the excess earnings method and ~~was~~were based on the expected operating cash flows attributable to the ~~customer-related~~respective intangible asset, which ~~was~~were determined by deducting expected economic costs, including operating expenses and contributory asset charges, from the revenue expected to be generated from the ~~customer-related~~respective intangible asset. As of the closing date of the acquisition, the weighted-average useful life of the customer-related and backlog intangible ~~asset was~~assets were determined to be ~~16.0 years.~~9.7 years and 9 months, respectively.

~~Table~~Results of ~~Contents~~

Operations

~~Asset Acquisitions~~

~~Effective November 4, 2020, during the first quarter~~Intimidator's results of fiscal 2021, the company completed the acquisition of Turflynx, Lda, a developer of innovative autonomous solutions for turf management and effective March 1, 2021, during the second quarter of fiscal 2021, the company completed the acquisition of Left Hand Robotics, Inc., a developer of innovative autonomous solutions for turf and snow management. These acquisitions complement and support the development of alternative power, smart-connected, and autonomous productsoperations are included within the company's Professional reportable segment in the company's Condensed Consolidated Financial Statements from the closing date. Intimidator's operations had an immaterial impact on the company's Professional reportable segment net sales and ~~Residential segments. Neither of these acquisitions met~~segment earnings for the ~~definition of a business combination~~three month period ended January 28, 2022. Unaudited pro forma financial information is not disclosed as ~~substantially all of~~ the ~~fair value of the gross assets acquired in each~~Intimidator acquisition was concentrated in the respective finite-lived developed technology other intangible asset and as a result, the company accounted for each of these transactions as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather, any excess purchase consideration over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets as of the acquisition date and any direct acquisition-related transaction costs are capitalized as part of the purchase consideration. These asset acquisitions were immaterial in relationconsidered material to the company's ~~Consolidated Financial Condition and Results~~consolidated results of ~~Operations and as a result, additional purchase accounting disclosures have been omitted.~~operations.


3			Segment Data

The company's businesses are organized, managed, and internally grouped into segments based on similarities in products and services. Segment selection is based on the manner in which ~~management~~the company's chief operating decision maker organizes segments for making operating and investment decisions and assessing performance. The company has identified 1112 operating segments and has aggregated certain of those operating segments into 2 reportable segments: Professional and Residential. The aggregation of the company's segments is based on the segments having the following similarities: economic characteristics, types of products and services, types of production processes, type or class of customers, and method of distribution. The company's remaining activities are presented as "Other" due to their insignificance. ~~As further described in Note 7,~~ ~~Divestiture, during the first quarter of fiscal 2021, the company completed the sale of its Northeastern U.S. distribution company. As a result, for the three and nine month periods ended July 30, 2021, the~~The company's Other activities ~~consisted~~consist of the company's wholly-owned domestic distribution company, the company's corporate activities, and the elimination of intersegment revenues and expenses. For the three and nine month periods ended July 31, 2020, the company's Other activities consisted of the company's wholly-owned domestic distribution companies, the company's corporate activities, and the elimination of intersegment revenues and expenses.

The following tables present summarized financial information concerning the company’s reportable business segments and Other activities (in thousands):

Three Months Ended July 30, 2021 Professional Residential Other Total
Net sales $ 718,477 $ 252,117 $ 6,242 $ 976,836
Intersegment gross sales (eliminations) 8,241 13 (8,254) —
Earnings (loss) before income taxes $ 122,331 $ 31,548 $ (36,428) $ 117,451

Nine Months Ended July 30, 2021 Professional Residential Other Total
Net sales $ 2,197,058 $ 784,852 $ 17,019 $ 2,998,929
Intersegment gross sales (eliminations) 24,034 39 (24,073) —
Earnings (loss) before income taxes 406,279 109,642 (85,401) 430,520
Total assets $ 1,949,681 $ 327,064 $ 691,304 $ 2,968,049

Three Months Ended July 31, 2020 Professional Residential Other Total
Net sales $ 623,615 $ 204,961 $ 12,396 $ 840,972
Intersegment gross sales (eliminations) 12,738 23 (12,761) —
Earnings (loss) before income taxes $ 113,652 $ 28,545 $ (31,204) $ 110,993

Nine Months Ended July 31, 2020 Professional Residential Other Total
Net sales $ 1,879,423 $ 632,807 $ 25,623 $ 2,537,853
Intersegment gross sales (eliminations) 38,151 84 (38,235) —
Earnings (loss) before income taxes 322,385 87,233 (91,115) 318,503
Total assets $ 1,967,882 $ 268,562 $ 577,419 $ 2,813,863

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Three Months Ended January 28, 2022	Professional		Residential		Other		Total
Net sales	$	672,885	$	255,402	$	4,363	$	932,650
Intersegment gross sales (eliminations)	5,417		15		(5,432)		—
Earnings (loss) before income taxes	93,272		31,760		(37,885)		87,147
Total assets	$	2,486,201	$	444,549	$	322,295	$	3,253,045







Three Months Ended January 29, 2021	Professional		Residential		Other		Total
Net sales	$	650,223	$	217,700	$	5,063	$	872,986
Intersegment gross sales (eliminations)	6,642		16		(6,658)		—
Earnings (loss) before income taxes	116,816		32,108		(13,098)		135,826
Total assets	$	1,952,536	$	345,185	$	577,417	$	2,875,138

The following table presents the details of operating loss before income taxes for the company's Other activities:


		Three Months Ended				Nine Months Ended					Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021
Corporate expenses	Corporate expenses	$	(33,797)	$	(29,078)	$	(78,814)	$	(76,961)	Corporate expenses	$	(32,828)	$	(11,303)
Interest expense	Interest expense	(7,016)		(8,304)		(21,662)		(25,119)		Interest expense	(7,013)		(7,522)
Earnings from wholly-owned domestic distribution companies and other income, net	Earnings from wholly-owned domestic distribution companies and other income, net	4,385		6,178		15,075		10,965		Earnings from wholly-owned domestic distribution companies and other income, net	1,956		5,727
Total operating loss	Total operating loss	$	(36,428)	$	(31,204)	$	(85,401)	$	(91,115)	Total operating loss	$	(37,885)	$	(13,098)

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4			Revenue

The following tables disaggregate the company's reportable segment net sales by major product type and geographic market (in thousands):


Three Months Ended July 30, 2021		Professional		Residential		Other		Total
Three Months Ended January 28, 2022										Three Months Ended January 28, 2022	Professional		Residential		Other		Total
Revenue by product type:	Revenue by product type:									Revenue by product type:
Equipment	Equipment	$	609,022	$	247,152	$	3,164	$	859,338	Equipment	$	570,871	$	244,589	$	3,147	$	818,607
Irrigation	Irrigation	109,455		4,965		3,078		117,498		Irrigation	102,014		10,813		1,216		114,043
Total net sales	Total net sales	$	718,477	$	252,117	$	6,242	$	976,836	Total net sales	$	672,885	$	255,402	$	4,363	$	932,650

Revenue by geographic market:	Revenue by geographic market:									Revenue by geographic market:
United States	United States	$	559,907	$	219,022	$	6,242	$	785,171	United States	$	530,734	$	202,567	$	4,363	$	737,664
International Countries		158,570		33,095		—		191,665
International countries										International countries	142,151		52,835		—		194,986
Total net sales	Total net sales	$	718,477	$	252,117	$	6,242	$	976,836	Total net sales	$	672,885	$	255,402	$	4,363	$	932,650

Nine Months Ended July 30, 2021 Professional Residential Other Total
Revenue by product type:
Equipment $ 1,891,138 $ 761,724 $ 11,436 $ 2,664,298
Irrigation 305,920 23,128 5,583 334,631
Total net sales $ 2,197,058 $ 784,852 $ 17,019 $ 2,998,929
Revenue by geographic market:
United States $ 1,681,972 $ 661,017 $ 17,019 $ 2,360,008
International Countries 515,086 123,835 — 638,921
Total net sales $ 2,197,058 $ 784,852 $ 17,019 $ 2,998,929

Three Months Ended July 31, 2020 Professional Residential Other Total
Revenue by product type:
Equipment $ 525,285 $ 199,012 $ 7,029 $ 731,326
Irrigation 98,330 5,949 5,367 109,646
Total net sales $ 623,615 $ 204,961 $ 12,396 $ 840,972
Revenue by geographic market:
United States $ 500,828 $ 177,734 $ 12,396 $ 690,958
International Countries 122,787 27,227 — 150,014
Total net sales $ 623,615 $ 204,961 $ 12,396 $ 840,972

Nine Months Ended July 31, 2020 Professional Residential Other Total
Revenue by product type:
Equipment $ 1,618,337 $ 608,870 $ 16,389 $ 2,243,596
Irrigation 261,086 23,937 9,234 294,257
Total net sales $ 1,879,423 $ 632,807 $ 25,623 $ 2,537,853
Revenue by geographic market:
United States $ 1,464,393 $ 539,836 $ 25,623 $ 2,029,852
International Countries 415,030 92,971 — 508,001
Total net sales $ 1,879,423 $ 632,807 $ 25,623 $ 2,537,853

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Three Months Ended January 29, 2021	Professional		Residential		Other		Total
Revenue by product type:
Equipment	$	575,775	$	205,923	$	3,942	$	785,640
Irrigation	74,448		11,777		1,121		87,346
Total net sales	$	650,223	$	217,700	$	5,063	$	872,986

Revenue by geographic market:
United States	$	501,860	$	174,382	$	5,063	$	681,305
International countries	148,363		43,318		—		191,681
Total net sales	$	650,223	$	217,700	$	5,063	$	872,986

Contract Liabilities

Contract liabilities relate to deferred revenue recognized for cash consideration received at contract inception in advance of the company's performance under the respective contract and generally relate to the sale of separately priced extended warranty contracts, service contracts, and non-refundable customer deposits. The company recognizes revenue over the term of the contract in proportion to the costs expected to be incurred in satisfying the performance obligations under the separately priced extended warranty and service contracts. For non-refundable customer deposits, the company recognizes revenue as of the point in time in which the performance obligation has been satisfied under the contract with the customer, which typically occurs upon change in control at the time a product is shipped. As of ~~July 30, 2021~~January 28, 2022 and October 31, ~~2020,~~2021, $24.6 million and ~~$21.9~~$24.1 million, respectively, of deferred revenue associated with outstanding separately priced extended warranty contracts, service contracts, and non-refundable customer deposits was reported within accrued liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets. For the three ~~and nine~~ months ended ~~July 30, 2021,~~January 28, 2022, the company recognized ~~$3.1~~$2.5 million ~~and $8.0 million, respectively,~~ of the October 31, ~~2020~~2021 deferred revenue balance within net sales in the Condensed Consolidated Statements of Earnings. The company expects to recognize approximately ~~$2.0~~$8.6 million of the October 31, ~~2020~~2021 deferred revenue amount within net sales throughout the remainder of fiscal ~~2021, $6.9~~2022, $7.7 million in fiscal ~~2022,~~2023, and ~~$5.0~~$5.3 million thereafter.


5			Goodwill and Other Intangible Assets, Net

The company's acquisition of Intimidator on January 13, 2022 resulted in the recognition of $155.6 million and $185.9 million of preliminary goodwill and other intangible assets, respectively. For additional information on the company's acquisition of Intimidator, refer to Note 2, Business Combination.

Goodwill

The changes in the carrying amount of goodwill by reportable segment for the first ~~nine~~three months of fiscal ~~2021~~2022 were as follows:

(Dollars in thousands) Professional Residential Other Total
Balance as of October 31, 2020 $ 412,061 $ 10,480 $ 1,534 $ 424,075
Purchase price allocation adjustment (1,027) — — (1,027)
Goodwill divested — — (1,534) (1,534)
Translation adjustments 311 133 — 444
Balance as of July 30, 2021 $ 411,345 $ 10,613 $ — $ 421,958


(Dollars in thousands)	Professional		Residential		Other		Total
Balance as of October 31, 2021	$	411,079	$	10,601	$	—	$	421,680
Goodwill acquired	155,638		—		—		155,638
Translation adjustments	(321)		(57)		—		(378)
Balance as of January 28, 2022	$	566,396	$	10,544	$	—	$	576,940

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Other Intangible Assets, Net

The components of other intangible assets, net as of ~~July 30,~~January 28, 2022, January 29, 2021, ~~July 31, 2020,~~ and October 31, ~~2020~~2021 were as follows (in thousands):


July 30, 2021		Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
January 28, 2022									January 28, 2022	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	Patents	9.9	$	18,275	$	(14,482)	$	3,793	Patents	9.9	$	18,291	$	(14,858)	$	3,433
Non-compete agreements	Non-compete agreements	5.5	6,908		(6,861)		47		Non-compete agreements	5.5	6,921		(6,885)		36
Customer-related	Customer-related	18.2	239,762		(59,017)		180,745		Customer-related	16.0	322,296		(66,325)		255,971
Developed technology	Developed technology	7.0	87,512		(40,943)		46,569		Developed technology	7.0	87,427		(45,748)		41,679
Trade names	Trade names	15.3	7,544		(2,882)		4,662		Trade names	13.7	10,762		(3,038)		7,724
Backlog and other	Backlog and other	0.6	4,390		(4,390)		—		Backlog and other	0.7	6,640		(4,390)		2,250
Total finite-lived	Total finite-lived	14.6	364,391		(128,575)		235,816		Total finite-lived	13.5	452,337		(141,244)		311,093
Indefinite-lived - trade names	Indefinite-lived - trade names		190,681		—		190,681		Indefinite-lived - trade names		289,704		—		289,704
Total other intangible assets, net	Total other intangible assets, net		$	555,072	$	(128,575)	$	426,497	Total other intangible assets, net		$	742,041	$	(141,244)	$	600,797

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January 29, 2021	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	9.9	$	18,275	$	(14,123)	$	4,152
Non-compete agreements	5.5	6,908		(6,851)		57
Customer-related	18.2	239,816		(51,747)		188,069
Developed technology	7.7	59,017		(36,230)		22,787
Trade names	15.3	7,563		(2,684)		4,879
Backlog and other	0.6	4,390		(4,390)		—
Total finite-lived	15.3	335,969		(116,025)		219,944
Indefinite-lived - trade names		190,643		—		190,643
Total other intangible assets, net		$	526,612	$	(116,025)	$	410,587


July 31, 2020		Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
October 31, 2021									October 31, 2021	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	Patents	9.9	$	18,232	$	(13,697)	$	4,535	Patents	9.9	$	18,283	$	(14,670)	$	3,613
Non-compete agreements	Non-compete agreements	5.5	6,871		(6,804)		67		Non-compete agreements	5.5	6,914		(6,872)		42
Customer-related	Customer-related	18.2	239,661		(44,368)		195,293		Customer-related	18.2	239,679		(62,617)		177,062
Developed technology	Developed technology	7.6	51,999		(34,232)		17,767		Developed technology	7.0	87,473		(43,348)		44,125
Trade names	Trade names	15.3	7,540		(2,453)		5,087		Trade names	15.4	7,524		(2,969)		4,555
Backlog and other	Backlog and other	0.6	4,390		(4,390)		—		Backlog and other	0.6	4,390		(4,390)		—
Total finite-lived	Total finite-lived	15.5	328,693		(105,944)		222,749		Total finite-lived	14.6	364,263		(134,866)		229,397
Indefinite-lived - trade names	Indefinite-lived - trade names		190,521		—		190,521		Indefinite-lived - trade names		190,644		—		190,644
Total other intangible assets, net	Total other intangible assets, net		$	519,214	$	(105,944)	$	413,270	Total other intangible assets, net		$	554,907	$	(134,866)	$	420,041

October 31, 2020 Weighted-Average Useful Life in Years Gross Carrying Amount Accumulated Amortization Net
Patents 9.9 $ 18,257 $ (13,919) $ 4,338
Non-compete agreements 5.5 6,892 (6,831) 61
Customer-related 18.2 239,634 (48,005) 191,629
Developed technology 7.6 51,995 (35,208) 16,787
Trade names 15.4 7,530 (2,552) 4,978
Backlog and other 0.6 4,390 (4,390) —
Total finite-lived 15.5 328,698 (110,905) 217,793
Indefinite-lived - trade names 190,512 — 190,512
Total other intangible assets, net $ 519,210 $ (110,905) $ 408,305

~~For the three and nine months ended July 30, 2021, amortization~~Amortization expense for finite-lived intangible assets ~~was $6.4~~for the three months ended January 28, 2022 and January 29, 2021 were $6.5 million and ~~$17.5 million, respectively. For the three and nine months ended July 31, 2020, amortization expense for finite-lived intangible assets was $5.0 million and $14.6~~$4.9 million, respectively. Estimated amortization expense for the remainder of fiscal ~~2021~~2022 and succeeding fiscal years is as follows: fiscal ~~2021~~2022 (remainder), ~~$6.4 million; fiscal 2022, $24.2~~$27.2 million; fiscal 2023, ~~$22.4~~$32.7 million; fiscal 2024, ~~$21.4~~$30.7 million; fiscal 2025, ~~$19.8~~$28.2 million; fiscal 2026, ~~$19.0~~$27.2 million; fiscal 2027, $22.7 million; and after fiscal ~~2026, $122.6~~2027, $142.4 million.

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6			Indebtedness

The following is a summary of the company's indebtedness:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
$600 million revolving credit facility, due June 2023		$	—	$	—	$	—
$600 million revolving credit facility, due October 2026								$600 million revolving credit facility, due October 2026	$	400,000	$	—	$	—
$270 million term loan, due October 2026								$270 million term loan, due October 2026	270,000		—		270,000
$200 million term loan, due April 2022	$200 million term loan, due April 2022	100,000		100,000		100,000		$200 million term loan, due April 2022	—		100,000		—
$300 million term loan, due April 2024	$300 million term loan, due April 2024	170,000		180,000		180,000		$300 million term loan, due April 2024	—		180,000		—
$190 million term loan, due June 2023		—		190,000		90,000
3.81% series A senior notes, due June 2029	3.81% series A senior notes, due June 2029	100,000		100,000		100,000		3.81% series A senior notes, due June 2029	100,000		100,000		100,000
3.91% series B senior notes, due June 2031	3.91% series B senior notes, due June 2031	100,000		100,000		100,000		3.91% series B senior notes, due June 2031	100,000		100,000		100,000
7.8% debentures, due June 2027	7.8% debentures, due June 2027	100,000		100,000		100,000		7.8% debentures, due June 2027	100,000		100,000		100,000
6.625% senior notes, due May 2037	6.625% senior notes, due May 2037	124,024		123,962		123,978		6.625% senior notes, due May 2037	124,055		123,993		124,040
Less: unamortized discounts, debt issuance costs, and deferred charges	Less: unamortized discounts, debt issuance costs, and deferred charges	2,462		3,057		2,855		Less: unamortized discounts, debt issuance costs, and deferred charges	2,701		2,645		2,798
Total long-term debt	Total long-term debt	691,562		890,905		791,123		Total long-term debt	1,091,354		701,348		691,242
Less: current portion of long-term debt	Less: current portion of long-term debt	104,217		108,869		99,873		Less: current portion of long-term debt	100,000		9,992		—
Long-term debt, less current portion	Long-term debt, less current portion	$	587,345	$	782,036	$	691,250	Long-term debt, less current portion	$	991,354	$	691,356	$	691,242

Principal payments required on the company's outstanding indebtedness, based on the maturity dates defined within the company's debt arrangements, for the remainder of fiscal ~~2021~~2022 and succeeding fiscal years are as follows: fiscal ~~2021~~2022 (remainder), $0.0 million; fiscal ~~2022, $108.5 million; fiscal~~ 2023, ~~$17.0~~$0.0 million; fiscal 2024, ~~$144.5~~$0.0 million; fiscal 2025, ~~$0.0~~$27.0 million; fiscal 2026, $643.0 million; fiscal 2027, $0.0 million; and after fiscal ~~2026,~~2027, $425.0 million. ~~As of July 30, 2021,~~Typically, the company's revolving credit facility is classified as long-term debt within the Condensed Consolidated Balance Sheets as the company ~~reclassified~~has the ~~remaining $100.0 million~~ability to extend the outstanding borrowings under the revolving credit facility for the full-term of the facility. However, if the company intends to prepay a portion of the outstanding balance under the ~~$200.0 million three-year unsecured senior term loan~~revolving credit facility ~~net~~within the next twelve months, the company reclassifies the portion of outstanding borrowings under the

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~~related proportionate share of deferred debt issuance costs,~~ revolving credit facility that the company intends to repay within the next twelve months to current portion of long-term debt within the Condensed Consolidated Balance ~~Sheets as the maturity date~~Sheets. As of ~~the $200.0 million three-year unsecured senior term loan facility is April 1,~~January 28, 2022, ~~and is within the next twelve months. Additionally, as of July 30, 2021,~~ the company reclassified ~~$4.2~~$100.0 million of ~~the~~ outstanding ~~balance~~borrowings under the ~~$300.0 million five-year unsecured senior term loan~~revolving credit facility ~~net of the related proportionate share of deferred debt issuance costs,~~ to current portion of long-term debt within the Condensed Consolidated Balance Sheets as the company ~~is required~~currently intends to ~~begin making quarterly amortization payments on the $300.0 million five-year unsecured senior term loan facility~~repay this amount within the next twelve months. During the first nine months of fiscal 2021, the company prepaid the remaining $90.0 million of outstanding borrowings under the $190.0 million three-year unsecured senior term loan facility and prepaid $10.0 million of the remaining outstanding borrowings under the $300.0 million five-year unsecured senior term loan facility.


7			~~Divestiture~~

On November 2, 2020, in the first quarter of fiscal 2021, the company completed the sale of its Northeastern U.S. distribution company. The divestiture was not material based on the company's Consolidated Financial Condition and Results of Operations.


8			Inventories, Net

Inventories are valued at the lower of cost or net realizable value, with cost determined by the first-in, first-out ("FIFO") and average cost methods for a majority of the company's inventories. All remaining inventories are valued at the lower of cost or market, with cost determined under the last-in, first-out ("LIFO") method. ~~The~~As needed, the company records an inventory valuation adjustment for excess, slow-moving, and obsolete inventory that is equal to the excess of the cost of the inventory over the estimated net realizable value or market value for the inventory depending on the inventory costing method. Such inventory valuation adjustment is based on a review and comparison of current inventory levels to planned production, as well as planned and historical sales of the inventory. The inventory valuation adjustment to net realizable value or market value establishes a new cost basis of the inventory that cannot be subsequently reversed.

On January 13, 2022, with the acquisition of Intimidator, the company acquired $36.0 million of inventory, based on preliminary fair value purchase accounting adjustments. For additional information on the company's acquisition of Intimidator, refer to Note 2, Business Combination.

Inventories, net were as follows:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
Raw materials and work in process	Raw materials and work in process	$	280,774	$	197,439	$	168,759	Raw materials and work in process	$	383,285	$	226,979	$	335,325
Finished goods and service parts	Finished goods and service parts	466,961		540,840		565,761		Finished goods and service parts	584,274		530,415		538,332
Total FIFO and average cost value	Total FIFO and average cost value	747,735		738,279		734,520		Total FIFO and average cost value	967,559		757,394		873,657
Less: adjustment to LIFO value	Less: adjustment to LIFO value	82,087		82,071		82,087		Less: adjustment to LIFO value	135,487		82,087		135,487
Total inventories, net	Total inventories, net	$	665,648	$	656,208	$	652,433	Total inventories, net	$	832,072	$	675,307	$	738,170

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98			Property, Plant and Equipment, Net

Property, plant and equipment assets are carried at cost less accumulated depreciation. The company generally accounts for depreciation of property, plant, and equipment utilizing the straight-line method over the estimated useful lives of the assets. Buildings ~~land improvements,~~ and leasehold improvements are generally depreciated over 10 to 40 years, machinery and equipment are generally depreciated over two to 15 years, tooling is generally depreciated over three to five years, and computer hardware and software and website development costs are generally depreciated over two to five years. Expenditures for major renewals and improvements, which substantially increase the useful lives of existing assets, are capitalized. ~~Expenditures for~~Costs associated with general maintenance and repairs are ~~charged to~~expensed as incurred within cost of sales or selling, general and administrative expense ~~within~~in the Condensed Consolidated Statements of Earnings depending on the nature and use of the related asset. Interest is capitalized during the construction period for significant capital projects.

~~Table~~On January 13, 2022, with the acquisition of ~~Contents~~Intimidator, the company acquired $26.8 million of property, plant, and equipment, based on preliminary fair value purchase accounting adjustments. For additional information on the company's acquisition of Intimidator, refer to Note 2,

Business Combination.

Property, plant and equipment, net was as follows:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
Land and land improvements	Land and land improvements	$	56,004	$	56,257	$	57,387	Land and land improvements	$	57,924	$	56,808	$	57,690
Buildings and leasehold improvements	Buildings and leasehold improvements	299,484		289,484		301,848		Buildings and leasehold improvements	326,137		299,566		308,217
Machinery and equipment	Machinery and equipment	508,383		474,519		499,312		Machinery and equipment	529,289		500,410		522,012
Tooling	Tooling	233,171		218,851		231,142		Tooling	221,646		231,728		220,966
Computer hardware and software	Computer hardware and software	102,293		95,891		102,312		Computer hardware and software	97,629		102,357		97,485
Construction in process	Construction in process	82,211		77,227		48,157		Construction in process	95,448		58,346		85,722
Property, plant, and equipment, gross	Property, plant, and equipment, gross	1,281,546		1,212,229		1,240,158		Property, plant, and equipment, gross	1,328,073		1,249,215		1,292,092
Less: accumulated depreciation	Less: accumulated depreciation	824,554		754,338		772,239		Less: accumulated depreciation	820,524		792,068		804,361
Property, plant, and equipment, net	Property, plant, and equipment, net	$	456,992	$	457,891	$	467,919	Property, plant, and equipment, net	$	507,549	$	457,147	$	487,731


109			Product Warranty Guarantees

The company’s products are warranted to provide assurance that the product will function as expected and to ensure customer confidence in design, workmanship, and overall quality. Standard warranty coverage is generally provided for specified periods of time and on select products’ hours of usage, and generally covers parts, labor, and other expenses for non-maintenance repairs. In addition to the standard warranties offered by the company on its products, the company also sells separately priced extended warranty coverage on select products for a prescribed period after the original warranty period expires. For additional information on the contract liabilities associated with the company's separately priced extended warranties, refer to Note 4, Revenue.

~~The~~At the time of sale, the company recognizes expense and ~~provides~~records an accrual by product line for estimated costs in connection with forecasted future warranty ~~costs at~~claims. The company's estimate of the ~~time~~cost of ~~sale and also establishes accruals for major rework campaigns. Warranty accruals are~~future warranty claims is based primarily 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, and the historical length of time between the sale and resulting warranty claim. The company periodically assesses the adequacy of its warranty accruals based on changes in these factors and records any necessary adjustments if the cost of actual claims experience indicates that adjustments to the company's warranty accrual are necessary. Additionally, from time to time, the company may also establish warranty accruals for its estimate of the costs necessary to settle major rework campaigns on a product-specific basis during the period in which the circumstances giving rise to the major rework campaign become known and when the costs to satisfactorily address the situation are both probable and estimable. The warranty accrual for the cost of a major rework campaign is primarily based on an estimate of the cost to repair each affected unit and the number of affected units expected to be repaired.

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The changes in accrued warranties were as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021
Beginning balance	Beginning balance	$	119,389	$	102,884	$	107,121	$	96,604	Beginning balance	$	116,783	$	107,121
Provisions	Provisions	17,686		15,186		56,204		46,289		Provisions	17,194		16,695
Acquisitions	Acquisitions	—		—		—		2,557		Acquisitions	1,940		—
Claims	Claims	(20,300)		(16,800)		(51,104)		(48,430)		Claims	(15,911)		(15,186)
Changes in estimates	Changes in estimates	377		226		4,931		4,476		Changes in estimates	(146)		153
Ending balance	Ending balance	$	117,152	$	101,496	$	117,152	$	101,496	Ending balance	$	119,860	$	108,783


1110			Investment in Finance Affiliate

The company and TCF Inventory Finance, Inc. ("TCFIF"), a subsidiary of The Huntington National Bank, are parties to the Red Iron joint venture ("Red Iron"), the primary purpose of which ~~was established primarily~~is to provide inventory financing to certain distributors and dealers of certain of the company’s products in the U.S. These financing 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. The company has also entered into a limited inventory repurchase agreement with Red Iron, under which the company has agreed to repurchase certain repossessed products, up to a maximum aggregate amount of $7.5 million in a calendar year. The company's financial exposure under this limited inventory repurchase agreement is limited to the difference between the amount paid for repurchases of repossessed product and the amount received upon the subsequent resale of the repossessed product. The company has repurchased immaterial amounts of inventory under this limited inventory repurchase agreement for the ~~nine~~three months ended ~~July 30, 2021~~January 28, 2022 and ~~July 31, 2020.~~January 29, 2021.

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 ~~nine~~three months ended ~~July 30,~~January 28, 2022 and January 29, 2021 ~~and July 31, 2020~~ were ~~$1,733.0~~$528.1 million and ~~$1,374.3~~$511.3 million, respectively. As of ~~July 30, 2021,~~January 28, 2022, Red Iron’s total assets were ~~$387.6~~$496.9 million and total liabilities were ~~$344.8~~

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$443.3 million. The total amount of receivables due from Red Iron to the company as of ~~July 30,~~January 28, 2022, January 29, 2021, ~~July 31, 2020,~~ and October 31, ~~2020~~2021 were ~~$13.8~~$28.1 million, ~~$21.0~~$13.1 million and ~~$12.6~~$31.0 million, respectively.

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. At inception, 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 $625.0 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 ~~July 30,~~January 28, 2022, January 29, 2021, ~~July 31, 2020,~~ and October 31, ~~2020~~2021 was ~~$19.3~~$24.1 million, ~~$22.6~~$23.0 million, and ~~$19.7~~$20.7 million, respectively. The company has not guaranteed the outstanding indebtedness of Red Iron.


1211			Stock-Based Compensation

Compensation costs related to stock-based compensation awards were as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021
Stock option awards	Stock option awards	$	2,614	$	2,483	$	7,271	$	6,577	Stock option awards	$	1,828	$	2,058
Performance share awards	Performance share awards	2,184		1,665		5,205		327		Performance share awards	1,621		827
Restricted stock unit awards	Restricted stock unit awards	1,033		807		3,029		2,725		Restricted stock unit awards	1,147		960
Unrestricted common stock awards	Unrestricted common stock awards	—		—		671		693		Unrestricted common stock awards	629		671
Total compensation cost for stock-based compensation awards	Total compensation cost for stock-based compensation awards	$	5,831	$	4,955	$	16,176	$	10,322	Total compensation cost for stock-based compensation awards	$	5,225	$	4,516

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 ("Board") on an annual basis in the first quarter of the company’s

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fiscal ~~year.~~year but may also be granted throughout the fiscal year in connection with hiring, mid-year promotions, leadership transition, or retention, as needed and applicable. Options generally vest one-third each year over a three-year period and have a ten-year term but in certain circumstances, the vesting requirement may be modified such that 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 cost equal to the grant date fair value determined under the Black-Scholes valuation method is generally recognized for these awards over the vesting period. Compensation cost recognized for other employees not considered executive officers and non-employee Board members is net of estimated forfeitures, which are determined at the time of grant based on historical forfeiture experience. 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, if the option holder is employed as of the end of the fiscal year in which the options are granted, such options will not be forfeited but continue to vest according to their schedule following retirement. Similarly, if a non-employee Board member has served on the company's Board for ten full fiscal years or more, the awards will not be forfeited but continue to vest according to their schedule following retirement. 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 various inputs and assumptions under the Black-Scholes valuation ~~method with the assumptions noted in the table below.~~method. The expected life is a significant assumption as it determines the period for which the risk-free interest rate, stock price 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 Board members are expected to exercise their stock options, which is primarily based on historical exercise experience. The company groups executive officers and non-employee Board members for valuation purposes based on similar historical exercise behavior. Expected stock price volatility is based on the daily 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. The expected 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 table below illustrates the weighted-average valuation assumptions used under the Black-Scholes valuation method for options granted in the first ~~nine~~three months of the following fiscal periods:


		Fiscal 2021	Fiscal 2020		Fiscal 2022	Fiscal 2021
Expected life of option in years	Expected life of option in years	6.21	6.31	Expected life of option in years	6.19	6.21
Expected stock price volatility	Expected stock price volatility	23.26%	19.53%	Expected stock price volatility	23.76%	23.26%
Risk-free interest rate	Risk-free interest rate	0.55%	1.73%	Risk-free interest rate	1.30%	0.55%
Expected dividend yield	Expected dividend yield	0.86%	0.99%	Expected dividend yield	0.93%	0.86%
Per share weighted-average fair value at date of grant	Per share weighted-average fair value at date of grant	$19.39	$15.23	Per share weighted-average fair value at date of grant	$22.58	$19.38

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, which are generally measured over a three-year period. The number of shares of common stock a participant receives can be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of

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performance goals and will 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 cost is recognized for these awards on a straight-line basis over the vesting period based on the per share fair value, which is equal to the closing price of the company's common stock on the date of grant, and the probability of achieving each performance goal. The per share weighted-average fair value of performance share awards granted during the first quarter of fiscal 2022 and 2021 was $98.41 and ~~2020 was~~ $90.59, ~~and $77.33,~~ respectively. ~~No performance share awards were granted during the second or third quarter of fiscal 2021 and 2020.~~

Restricted Stock Unit Awards

Under the 2010 plan, restricted stock unit awards are generally granted to certain employees ~~that~~who are not executive officers. Occasionally, restricted stock unit awards may be granted, including to executive officers, in connection with hiring, mid-year promotions, leadership transition, or retention. 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. Compensation cost equal to the grant date fair value, net of estimated forfeitures, is recognized for these awards over the vesting period. The grant date fair value 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 unit awards and estimated forfeitures are determined on the grant date based on historical forfeiture experience. The per share weighted-average fair value of restricted stock unit awards granted during the first ~~nine~~three months of fiscal 2022 and 2021 was $99.94 and ~~2020 was $97.84 and $74.43,~~$91.51, respectively.

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Unrestricted Common Stock Awards

During the first quarter of fiscal 2022 and 2021, 6,453 and ~~2020,~~ 8,070 ~~and 8,920~~ shares, respectively, of fully vested unrestricted common stock awards were granted to certain Board members as a component of their compensation for their service on the Board and were recorded within selling, general and administrative expense in the Condensed Consolidated Statements of Earnings. NoAdditionally, our Board members may elect to convert a portion or all of their calendar year annual retainers otherwise payable in cash into shares of ~~fully vested unrestricted~~the company's common ~~stock awards were granted during the second or third quarter of fiscal 2021 and 2020.~~stock.


1312			Stockholders' Equity

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss ("AOCL"), net of tax, within the Condensed Consolidated Statements of Stockholders' Equity were as follows:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
Foreign currency translation adjustments	Foreign currency translation adjustments	$	17,823	$	22,905	$	24,508	Foreign currency translation adjustments	$	25,525	$	14,112	$	19,535
Pension benefits	Pension benefits	5,106		3,949		5,106		Pension benefits	3,899		5,106		3,899
Cash flow derivative instruments	Cash flow derivative instruments	3,762		7,722		4,648		Cash flow derivative instruments	(3,810)		12,958		2,562
Total accumulated other comprehensive loss	Total accumulated other comprehensive loss	$	26,691	$	34,576	$	34,262	Total accumulated other comprehensive loss	$	25,614	$	32,176	$	25,996

The components and activity of AOCL, net of tax, for the three ~~and nine~~ month periods ended ~~July 30,~~January 28, 2022 and January 29, 2021 ~~and July 31, 2020~~ were as follows:


(Dollars in thousands)	(Dollars in thousands)	Foreign Currency Translation Adjustments		Pension Benefits		Cash Flow Derivative Instruments		Total		(Dollars in thousands)	Foreign Currency Translation Adjustments		Pension Benefits		Cash Flow Derivative Instruments		Total
Balance as of April 30, 2021		$	12,509	$	5,106	$	11,797	$	29,412
Balance as of October 31, 2021										Balance as of October 31, 2021	$	19,535	$	3,899	$	2,562	$	25,996
Other comprehensive (income) loss before reclassifications	Other comprehensive (income) loss before reclassifications	5,314		—		(11,117)		(5,803)		Other comprehensive (income) loss before reclassifications	5,990		—		(6,641)		(651)
Amounts reclassified from AOCL	Amounts reclassified from AOCL	—		—		3,082		3,082		Amounts reclassified from AOCL	—		—		269		269
Net current period other comprehensive (income) loss	Net current period other comprehensive (income) loss	5,314		—		(8,035)		(2,721)		Net current period other comprehensive (income) loss	5,990		—		(6,372)		(382)
Balance as of July 30, 2021		$	17,823	$	5,106	$	3,762	$	26,691
Balance as of January 28, 2022										Balance as of January 28, 2022	$	25,525	$	3,899	$	(3,810)	$	25,614

(Dollars in thousands) Foreign
Currency
Translation
Adjustments Pension
Benefits Cash Flow Derivative Instruments Total
Balance as of October 31, 2020 $ 24,508 $ 5,106 $ 4,648 $ 34,262
Other comprehensive income before reclassifications (6,685) — (10,151) (16,836)
Amounts reclassified from AOCL — — 9,265 9,265
Net current period other comprehensive income (6,685) — (886) (7,571)
Balance as of July 30, 2021 $ 17,823 $ 5,106 $ 3,762 $ 26,691

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(Dollars in thousands) Foreign
Currency
Translation
Adjustments Pension
Benefits Cash Flow Derivative Instruments Total
Balance as of May 1, 2020 $ 36,916 $ 3,949 $ (7,163) $ 33,702
Other comprehensive (income) loss before reclassifications (14,011) — 16,838 2,827
Amounts reclassified from AOCL — — (1,953) (1,953)
Net current period other comprehensive (income) loss (14,011) — 14,885 874
Balance as of July 31, 2020 $ 22,905 $ 3,949 $ 7,722 $ 34,576


(Dollars in thousands)	(Dollars in thousands)	Foreign Currency Translation Adjustments		Pension Benefits		Cash Flow Derivative Instruments		Total		(Dollars in thousands)	Foreign Currency Translation Adjustments		Pension Benefits		Cash Flow Derivative Instruments		Total
Balance as of October 31, 2019		$	31,025	$	4,861	$	(3,837)	$	32,049
Balance as of October 31, 2020										Balance as of October 31, 2020	$	24,508	$	5,106	$	4,648	$	34,262
Other comprehensive (income) loss before reclassifications	Other comprehensive (income) loss before reclassifications	(8,120)		—		17,529		9,409		Other comprehensive (income) loss before reclassifications	(10,396)		—		6,312		(4,084)
Amounts reclassified from AOCL	Amounts reclassified from AOCL	—		(912)		(5,970)		(6,882)		Amounts reclassified from AOCL	—		—		1,998		1,998
Net current period other comprehensive (income) loss	Net current period other comprehensive (income) loss	(8,120)		(912)		11,559		2,527		Net current period other comprehensive (income) loss	(10,396)		—		8,310		(2,086)
Balance as of July 31, 2020		$	22,905	$	3,949	$	7,722	$	34,576
Balance as of January 29, 2021										Balance as of January 29, 2021	$	14,112	$	5,106	$	12,958	$	32,176

For additional information on the components reclassified from AOCL to the respective line items in net earnings for derivative instruments refer to Note ~~17,~~16, Derivative Instruments and Hedging Activities.

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1413			Per Share Data

Reconciliations of basic and diluted weighted-average number of shares of common stock outstanding were as follows:


		Three Months Ended		Nine Months Ended			Three Months Ended
(Shares in thousands)	(Shares in thousands)	July 30, 2021	July 31, 2020	July 30, 2021	July 31, 2020	(Shares in thousands)	January 28, 2022	January 29, 2021
Basic	Basic					Basic
Weighted-average number of shares of common stock	Weighted-average number of shares of common stock	107,130	107,710	107,661	107,547	Weighted-average number of shares of common stock	105,015	108,103
Assumed issuance of contingent shares	Assumed issuance of contingent shares	—	—	6	14	Assumed issuance of contingent shares	22	19
Weighted-average number of shares of common stock outstanding - Basic	Weighted-average number of shares of common stock outstanding - Basic	107,130	107,710	107,667	107,561	Weighted-average number of shares of common stock outstanding - Basic	105,037	108,122

Diluted	Diluted					Diluted
Weighted-average number of shares of common stock outstanding - Basic	Weighted-average number of shares of common stock outstanding - Basic	107,130	107,710	107,667	107,561	Weighted-average number of shares of common stock outstanding - Basic	105,037	108,122
Effect of dilutive shares	Effect of dilutive shares	1,233	833	1,151	1,008	Effect of dilutive shares	1,011	1,072
Weighted-average number of shares of common stock outstanding - Diluted	Weighted-average number of shares of common stock outstanding - Diluted	108,363	108,543	108,818	108,569	Weighted-average number of shares of common stock outstanding - Diluted	106,048	109,194

The effect of dilutive shares from stock option awards and restricted stock unit awards is computed under the treasury stock method. Stock option awards to purchase ~~2,109~~466,338 and 635,002 shares of common stock during the third quarter of fiscal 2021 and 2020, respectively, were excluded from the computation of diluted net earnings per share of common stock because they were anti-dilutive. Stock option awards to purchase 425,748 and 493,723268,778 shares of common stock during the first ~~nine months~~quarter of fiscal ~~2021~~2022 and ~~2020,~~2021, respectively, were excluded from the computation of diluted net earnings per share of common stock because they were anti-dilutive.


1514			Contingencies

Litigation

From time to time, 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 occasionally

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involved in commercial disputes, employment or employment-related 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 reviews certain patents issued by the U.S. Patent and Trademark Office and foreign patent offices. The company believes these activities help minimize its risk of being a defendant in patent infringement litigation.

The company records a liability in its Condensed 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~~the company's consolidated results of ~~Operations, Financial Position,~~operations, financial position, or ~~Cash Flows.~~cash flows.

In situations where the company receives, or expects to receive, a favorable ruling related to a litigation settlement, the company follows the accounting standards codification guidance for gain contingencies. The company does not allow for the recognition of a gain contingency within its Condensed Consolidated Financial Statements prior to the settlement of the underlying events or contingencies associated with the gain contingency. As a result, the consideration related to a gain contingency is recorded in the Condensed Consolidated Financial Statements during the period in which all underlying events or contingencies are resolved and the gain is realized.

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Litigation Settlement

On November 19, 2020, Exmark Manufacturing Company Incorporated ("Exmark"), a wholly-owned subsidiary of the company, and Briggs & Stratton Corporation (“BGG”) entered into a settlement agreement (“Settlement Agreement”) relating to the decade-long patent infringement litigation that Exmark originally filed in May 2010 against Briggs & Stratton Power Products Group, LLC (“BSPPG”), a former wholly-owned subsidiary of BGG (Case No. 8:10CV187, U.S. District Court for the District of Nebraska) (the “Infringement Action”). In the Infringement Action, Exmark alleged that certain mower decks manufactured by BSPPG infringed an Exmark mower deck patent. Despite favorable judgments in the Infringement Action in favor of Exmark, including with regard to awarded damages, actions by BGG during the second half of calendar year 2020 put in jeopardy the certainty and timing of the eventual receipt of the damages awarded to Exmark in the Infringement Action, including (i) the filing by BGG and certain of its subsidiaries for bankruptcy relief under chapter 11 of title 11 of the United States Bankruptcy Code (“BGG Bankruptcy”); (ii) the sale of substantially all the assets (but not certain liabilities, including the Infringement Action) of BGG and its subsidiaries to a third-party pursuant to Section 363 of the United States Bankruptcy Code; and (iii) a petition filed by BGG for a panel rehearing of the United States Court of Appeals for the Federal Circuit's decision in the Infringement Action (“Rehearing Petition”).

As a result, on November 19, 2020, Exmark entered into the Settlement Agreement with BGG which provided, among other things, that (i) upon approval by the bankruptcy court, and such approval becoming final and nonappealable, BGG agreed to pay Exmark $33.65 million (“Settlement Amount”), (ii) BGG agreed to immediately withdraw the Rehearing Petition and otherwise not pursue additional appellate review regarding the Infringement Action, and (iii) after receipt of the Settlement Amount, Exmark agreed to release a supersedeas appeal bond that had been obtained by BGG to support payment of the damages awarded to Exmark in the Infringement Action. On November 20, 2020, BGG filed a motion to withdraw the Rehearing Petition and on December 16, 2020, the bankruptcy court approved the Settlement Agreement. During January 2021, the first quarter of fiscal 2021, the Settlement Amount was received by Exmark in connection with the settlement of the Infringement Action and at such time, the underlying events and contingencies associated with the gain contingency related to the Infringement Action were satisfied. As such, the company recognized in selling, general and administrative expense within the Condensed Consolidated Statements of Earnings during the first quarter of fiscal 2021 (i) the gain associated with the Infringement Action and (ii) a corresponding expense related to the contingent fee arrangement with the company's external legal counsel customary in patent infringement cases equal to approximately 50 percent of the Settlement Amount.

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1615			Leases

The company enters into contracts that are, or contain, operating lease agreements for certain property, plant, or equipment assets utilized in the normal course of business, such as buildings for manufacturing facilities, office space, distribution centers, and warehouse facilities; land for product testing sites; machinery and equipment for research and development activities, manufacturing and assembly processes, and administrative tasks; and vehicles for sales, service, marketing, and distribution activities. Contracts that explicitly or implicitly relate to property, plant, and equipment are assessed at inception to determine if the contract is, or contains, a lease. Such contracts for operating lease agreements convey the company's right to direct the use of, and obtain substantially all of the economic benefits from, an identified asset for a defined period of time in exchange for consideration. The lease term begins and is determined upon lease commencement, which is the point in time when the company takes possession of the identified asset, and generally includes all non-cancelable periods. Lease expense for the company's operating leases is recognized on a straight-line basis over the lease term and is recorded within cost of sales or selling, general and administrative expense within the Condensed Consolidated Statements of Earnings as dictated by the nature and use of the underlying asset. The company does not recognize right-of-use assets and lease liabilities, but does recognize expense on a straight-line basis, for short-term operating leases which have a lease term of 12 months or less and do not include an option to purchase the underlying asset.

Lease payments are determined at lease commencement and generally represent fixed lease payments as defined within the respective lease agreement or, in the case of certain lease agreements, variable lease payments that are measured as of the lease commencement date based on the prevailing index or market rate. Future adjustments to variable lease payments are defined and scheduled within the respective lease agreement and are determined based upon the prevailing market or index rate at the time of the adjustment relative to the market or index rate determined at lease commencement. Certain other lease agreements contain variable lease payments that are determined based upon actual utilization of the identified asset. Such future adjustments to variable lease payments and variable lease payments based upon actual utilization of the identified asset are not included within the determination of lease payments at commencement but rather, are recorded as variable lease expense in the period in which the variable lease cost is incurred.

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Right-of-use assets represent the company's right to use an underlying asset throughout the lease term and lease liabilities represent the company's obligation to make lease payments arising from the lease agreement. The company accounts for operating lease liabilities at lease commencement and on an ongoing basis as the present value of the minimum remaining lease payments under the respective lease term. Minimum remaining lease payments are generally discounted to present value based the estimated incremental borrowing rate at lease commencement as the rate implicit in the lease is generally not readily determinable. Right-of-use assets are measured as the amount of the corresponding operating lease liability for the respective operating lease agreement, adjusted for prepaid or accrued lease payments, the remaining balance of any lease incentives received, unamortized initial direct costs, and impairment of the operating lease right-of-use asset, as applicable.

The following table presents the lease expense incurred on the company’s operating, short-term, and variable leases:


		Three Months Ended				Nine Months Ended					Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021
Operating lease expense	Operating lease expense	$	4,397	$	4,036	$	14,488	$	14,253	Operating lease expense	$	6,165	$	4,974
Short-term lease expense	Short-term lease expense	256		876		1,693		2,204		Short-term lease expense	1,415		580
Variable lease expense	Variable lease expense	22		20		72		116		Variable lease expense	—		17
Total lease expense	Total lease expense	$	4,675	$	4,932	$	16,253	$	16,573	Total lease expense	$	7,580	$	5,571

The following table presents supplemental cash flow information related to the company's operating leases:


		Nine Months Ended					Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021
Operating cash flows for amounts included in the measurement of lease liabilities	Operating cash flows for amounts included in the measurement of lease liabilities	$	14,288	$	13,949	Operating cash flows for amounts included in the measurement of lease liabilities	$	4,567	$	4,682
Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations	$	4,739	$	18,698	Right-of-use assets obtained in exchange for lease obligations	$	14,881	$	293

The following table presents other lease information related to the company's operating leases:

(Dollars in thousands) July 30, 2021 July 31, 2020 October 31, 2020
Weighted-average remaining lease term of operating leases in years 6.6 7.2 7.1
Weighted-average discount rate of operating leases 2.70 % 2.80 % 2.79 %

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(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
Weighted-average remaining lease term of operating leases in years	6.6		6.9		6.6
Weighted-average discount rate of operating leases	2.56	%	2.78	%	2.71	%

The following table reconciles the total undiscounted future cash flows based on the anticipated future minimum operating lease payments by fiscal year for the company's operating leases to the present value of operating lease liabilities recorded within the Condensed Consolidated Balance Sheets as of ~~July 30, 2021:~~January 28, 2022:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		(Dollars in thousands)	January 28, 2022
2021 (remaining)		$	4,712
2022		17,015
2022 (remaining)				2022 (remaining)	$	13,618
2023	2023	13,736		2023	16,571
2024	2024	12,246		2024	15,101
2025	2025	10,751		2025	12,992
2026				2026	7,965
Thereafter	Thereafter	23,998		Thereafter	23,862
Total future minimum operating lease payments	Total future minimum operating lease payments	82,458		Total future minimum operating lease payments	90,109
Less: imputed interest	Less: imputed interest	7,053		Less: imputed interest	8,507
Present value of operating lease liabilities	Present value of operating lease liabilities	$	75,405	Present value of operating lease liabilities	$	81,602


1716			Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

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, costs associated with foreign plant operations, and purchases from suppliers. 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.

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To reduce its exposure to foreign currency exchange rate risk, the company ~~actively manages the exposure of its foreign currency exchange rate risk by entering~~enters into various derivative instruments to hedge against such risk, authorized under a company policy that places controls on these hedging activities, with counterparties that are highly rated financial institutions. The company’s policy does not allow the use of derivative instruments for trading or speculative purposes. The company has 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 hedging activities primarily involve the use of forward currency contracts to hedge most foreign currency transactions, including forecasted sales and purchases denominated in foreign currencies. 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 derivative instruments 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 recognizes all derivative instruments at fair value on the Condensed Consolidated Balance Sheets as either assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as a cash flow hedging instrument.

Cash Flow Hedging Instruments

The company formally documents relationships between cash flow hedging instruments and the related hedged transactions, as well as its risk-management objective and strategy for undertaking cash flow hedging instruments. This process includes linking all cash flow hedging instruments to the forecasted transactions, such as sales to third-parties and costs associated with foreign plant operations, including purchases from suppliers. At the cash flow hedge’s inception and on an ongoing basis, the company formally assesses whether the cash flow hedging instruments have been highly effective in offsetting changes in the cash flows of the hedged transactions and whether those cash flow hedging instruments may be expected to remain highly effective in future periods.

Changes in the fair values of the spot rate component of outstanding, highly effective cash flow hedging instruments included in the assessment of hedge effectiveness are recorded in other comprehensive income within AOCL on the Condensed Consolidated Balance Sheets and are subsequently reclassified to net earnings within the Condensed Consolidated Statements of Earnings during the same period in which the cash flows of the underlying hedged transaction affect net earnings. Changes in the fair values of hedge components excluded from the assessment of effectiveness are recognized immediately in net earnings under the mark-to-market approach. The classification of gains or losses recognized on cash flow hedging instruments and excluded components within the Condensed Consolidated Statements of Earnings is the same as that of the underlying

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exposure. Results of cash flow hedging instruments, and the related excluded components, of sales and costs associated with foreign plant operations, including purchases from suppliers, are recorded in net sales and cost of sales, respectively. 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.

When it is determined that a derivative instrument is not, or has ceased to be, highly effective as a cash flow hedge, the company discontinues cash flow hedge accounting prospectively. The gain or loss on the dedesignated derivative instrument remains in AOCL and is reclassified to net earnings within the same Condensed Consolidated Statements of Earnings line item as the underlying exposure when the forecasted transaction affects net earnings. When the company discontinues cash flow 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 instrument remains in AOCL and is reclassified to net earnings within the same Condensed Consolidated Statements of Earnings line item as the underlying exposure 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 immediately recognized in net earnings within other income, net in the Condensed Consolidated Statements of Earnings. In all situations in which cash flow hedge accounting is discontinued and the derivative instrument remains outstanding, the company carries the derivative instrument at its fair value on the Condensed Consolidated Balance Sheets, recognizing future changes in the fair value within other income, net in the Condensed Consolidated Statements of Earnings.

As of ~~July 30, 2021,~~January 28, 2022, the notional amount outstanding of forward currency contracts designated as cash flow hedging instruments was ~~$267.8~~$287.5 million.

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Derivatives Not Designated as Cash Flow 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 Condensed Consolidated Balance Sheets. These contracts are not designated as cash flow 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 Condensed Consolidated Statements of Earnings together with the transaction gain or loss from the hedged balance sheet position.

The following table presents the fair value and location of the company’s derivative instruments on the Condensed Consolidated Balance Sheets:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
Derivative assets:	Derivative assets:							Derivative assets:
Derivatives designated as cash flow hedging instruments:	Derivatives designated as cash flow hedging instruments:							Derivatives designated as cash flow hedging instruments:
Prepaid expenses and other current assets	Prepaid expenses and other current assets							Prepaid expenses and other current assets
Forward currency contracts	Forward currency contracts	$	1,235	$	(645)	$	802	Forward currency contracts	$	5,451	$	1,294	$	189
Derivatives not designated as cash flow hedging instruments:	Derivatives not designated as cash flow hedging instruments:							Derivatives not designated as cash flow hedging instruments:
Prepaid expenses and other current assets	Prepaid expenses and other current assets							Prepaid expenses and other current assets
Forward currency contracts	Forward currency contracts	309		753		131		Forward currency contracts	1,491		178		133
Total derivative assets	Total derivative assets	$	1,544	$	108	$	933	Total derivative assets	$	6,942	$	1,472	$	322

Derivative liabilities:	Derivative liabilities:							Derivative liabilities:
Derivatives designated as cash flow hedging instruments:	Derivatives designated as cash flow hedging instruments:							Derivatives designated as cash flow hedging instruments:
Accrued liabilities	Accrued liabilities							Accrued liabilities
Forward currency contracts	Forward currency contracts	$	3,682	$	5,248	$	2,687	Forward currency contracts	$	—	$	14,763	$	1,260
Derivatives not designated as cash flow hedging instruments:	Derivatives not designated as cash flow hedging instruments:							Derivatives not designated as cash flow hedging instruments:
Accrued liabilities	Accrued liabilities							Accrued liabilities
Forward currency contracts	Forward currency contracts	1,554		849		(203)		Forward currency contracts	118		2,200		872
Total derivative liabilities	Total derivative liabilities	$	5,236	$	6,097	$	2,484	Total derivative liabilities	$	118	$	16,963	$	2,132

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 instruments at the net amount on its Condensed Consolidated Balance Sheets.

~~Table of Contents~~

The following table presents the effects of the master netting arrangements on the fair value of the company’s derivative instruments that are recorded on the Condensed Consolidated Balance Sheets:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
Derivative assets:	Derivative assets:							Derivative assets:
Forward currency contracts:	Forward currency contracts:							Forward currency contracts:
Gross amount of derivative assets	Gross amount of derivative assets	$	1,544	$	1,116	$	1,139	Gross amount of derivative assets	$	8,118	$	1,472	$	423
Derivative liabilities offsetting derivative assets	Derivative liabilities offsetting derivative assets	—		(1,008)		(206)		Derivative liabilities offsetting derivative assets	(1,176)		—		(101)
Net amount of derivative assets	Net amount of derivative assets	$	1,544	$	108	$	933	Net amount of derivative assets	$	6,942	$	1,472	$	322

Derivative liabilities:	Derivative liabilities:							Derivative liabilities:
Forward currency contracts:	Forward currency contracts:							Forward currency contracts:
Gross amount of derivative liabilities	Gross amount of derivative liabilities	$	(5,849)	$	(6,465)	$	(3,233)	Gross amount of derivative liabilities	$	(159)	$	(16,970)	$	(4,853)
Derivative assets offsetting derivative liabilities	Derivative assets offsetting derivative liabilities	613		368		749		Derivative assets offsetting derivative liabilities	41		7		2,721
Net amount of derivative liabilities	Net amount of derivative liabilities	$	(5,236)	$	(6,097)	$	(2,484)	Net amount of derivative liabilities	$	(118)	$	(16,963)	$	(2,132)

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The following ~~tables present~~table presents the impact and location of the amounts reclassified from AOCL into net earnings on the Condensed Consolidated Statements of Earnings and the impact of derivative instruments on the Condensed Consolidated Statements of Comprehensive Income for the company's derivatives designated as cash flow hedging instruments for the three ~~and nine~~ months ended ~~July 30, 2021~~January 28, 2022 and ~~July 31, 2020:~~January 29, 2021:

Three Months Ended
Gain (Loss) Reclassified from AOCL into Earnings Gain (Loss) Recognized in OCI on Derivatives
(Dollars in thousands) July 30, 2021 July 31, 2020 July 30, 2021 July 31, 2020
Derivatives designated as cash flow hedging instruments:
Forward currency contracts:
Net sales $ (3,113) $ 1,795 $ 7,350 $ (13,501)
Cost of sales 31 158 685 (1,384)
Total derivatives designated as cash flow hedging instruments $ (3,082) $ 1,953 $ 8,035 $ (14,885)


		Nine Months Ended									Three Months Ended
		Gain (Loss) Reclassified from AOCL into Earnings				Gain (Loss) Recognized in OCI on Derivatives					Gain (Loss) Reclassified from AOCL into Earnings				Gain (Loss) Recognized in OCI on Derivatives
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		January 28, 2022		January 29, 2021
Derivatives designated as cash flow hedging instruments:	Derivatives designated as cash flow hedging instruments:									Derivatives designated as cash flow hedging instruments:
Forward currency contracts:	Forward currency contracts:									Forward currency contracts:
Net sales	Net sales	$	(9,325)	$	5,272	$	620	$	(10,396)	Net sales	$	(118)	$	(2,097)	$	5,670	$	(7,694)
Cost of sales	Cost of sales	60		698		266		(1,163)		Cost of sales	(151)		99		702		(616)
Total derivatives designated as cash flow hedging instruments	Total derivatives designated as cash flow hedging instruments	$	(9,265)	$	5,970	$	886	$	(11,559)	Total derivatives designated as cash flow hedging instruments	$	(269)	$	(1,998)	$	6,372	$	(8,310)

The company recognized immaterial gains and losses within other income, net onin the Condensed Consolidated Statements of Earnings during the ~~third~~first quarter ~~and first nine months~~ of fiscal 2022 and fiscal 2021, ~~and 2020~~respectively, due to the discontinuance of cash flow hedge accounting on certain forward currency contracts designated as cash flow hedging instruments. As of ~~July 30, 2021,~~January 28, 2022, the company expects to reclassify approximately ~~$5.1~~$2.1 million of ~~losses~~gains from AOCL to earnings during the next twelve months.

~~Table of Contents~~

The following tables present the impact and location of derivative instruments on the Condensed Consolidated Statements of Earnings for the company’s derivatives designated as cash flow hedging instruments and the related components excluded from effectiveness testing:

Gain (Loss) Recognized in Earnings on Cash Flow Hedging Instruments
(Dollars in thousands) July 30, 2021 July 31, 2020
Three Months Ended Net Sales Cost of Sales Net Sales Cost of Sales
Condensed Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded $ 976,836 $ (645,719) $ 840,972 $ (546,398)
Gain (loss) on derivatives designated as cash flow hedging instruments:
Forward currency contracts:
Amount of gain (loss) reclassified from AOCL into earnings (3,113) 31 1,795 158
Gain on components excluded from effectiveness testing recognized in earnings based on changes in fair value $ 322 $ 70 $ 191 $ 86


		Gain (Loss) Recognized in Earnings on Cash Flow Hedging Instruments									Gain (Loss) Recognized in Earnings on Cash Flow Hedging Instruments
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021				July 31, 2020				(Dollars in thousands)	January 28, 2022				January 29, 2021
Nine Months Ended		Net Sales		Cost of Sales		Net Sales		Cost of Sales
Three Months Ended										Three Months Ended	Net Sales		Cost of Sales		Net Sales		Cost of Sales
Condensed Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded	Condensed Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded	$	2,998,929	$	(1,949,823)	$	2,537,853	$	(1,648,474)	Condensed Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded	$	932,650	$	(632,174)	$	872,986	$	(557,950)
Gain (loss) on derivatives designated as cash flow hedging instruments:	Gain (loss) on derivatives designated as cash flow hedging instruments:									Gain (loss) on derivatives designated as cash flow hedging instruments:
Forward currency contracts:	Forward currency contracts:									Forward currency contracts:
Amount of gain (loss) reclassified from AOCL into earnings	Amount of gain (loss) reclassified from AOCL into earnings	(9,325)		60		5,272		698		Amount of gain (loss) reclassified from AOCL into earnings	(118)		(151)		(2,097)		99
Gain on components excluded from effectiveness testing recognized in earnings based on changes in fair value		$	784	$	366	$	3,183	$	231
Gain (loss) on components excluded from effectiveness testing recognized in earnings based on changes in fair value										Gain (loss) on components excluded from effectiveness testing recognized in earnings based on changes in fair value	$	(926)	$	97	$	162	$	185

The following table presents the impact and location of derivative instruments on the Condensed Consolidated Statements of Earnings for the company’s derivatives not designated as cash flow hedging instruments:


		Three Months Ended				Nine Months Ended					Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021
Gain (loss) on derivatives not designated as cash flow hedging instruments	Gain (loss) on derivatives not designated as cash flow hedging instruments									Gain (loss) on derivatives not designated as cash flow hedging instruments
Forward currency contracts:	Forward currency contracts:									Forward currency contracts:
Other income, net	Other income, net	$	1,972	$	(7,093)	$	(4,511)	$	(5,316)	Other income, net	$	1,242	$	(3,478)
Total gain (loss) on derivatives not designated as cash flow hedging instruments	Total gain (loss) on derivatives not designated as cash flow hedging instruments	$	1,972	$	(7,093)	$	(4,511)	$	(5,316)	Total gain (loss) on derivatives not designated as cash flow hedging instruments	$	1,242	$	(3,478)

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1817			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 flows), 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.

~~Table of Contents~~

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.

Recurring Fair Value Measurements

The company's derivative instruments consist of forward currency contracts that are measured at fair value on a recurring basis. The fair value of such forward currency contracts is determined based on observable market transactions of forward currency prices and spot currency rates as of the reporting date.

The following tables present, by level within the fair value hierarchy, the company's financial assets and liabilities that are measured at fair value on a recurring basis as of ~~July 30,~~January 28, 2022, January 29, 2021, ~~July 31, 2020,~~ and October 31, ~~2020,~~2021, according to the valuation technique utilized to determine their fair ~~values:~~values (in thousands):


(Dollars in thousands)				Fair Value Measurements Using Inputs Considered as:
July 30, 2021		Fair Value		Level 1		Level 2		Level 3
													Fair Value Measurements Using Inputs Considered as:
January 28, 2022										January 28, 2022	Fair Value		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Forward currency contracts	Forward currency contracts	$	1,544	$	—	$	1,544	$	—	Forward currency contracts	$	6,942	$	—	$	6,942	$	—
Total assets	Total assets	$	1,544	$	—	$	1,544	$	—	Total assets	$	6,942	$	—	$	6,942	$	—

Liabilities:	Liabilities:									Liabilities:
Forward currency contracts	Forward currency contracts	$	5,236	$	—	$	5,236	$	—	Forward currency contracts	$	118	$	—	$	118	$	—
Total liabilities	Total liabilities	$	5,236	$	—	$	5,236	$	—	Total liabilities	$	118	$	—	$	118	$	—


(Dollars in thousands)				Fair Value Measurements Using Inputs Considered as:
July 31, 2020		Fair Value		Level 1		Level 2		Level 3
													Fair Value Measurements Using Inputs Considered as:
January 29, 2021										January 29, 2021	Fair Value		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Forward currency contracts	Forward currency contracts	$	108	$	—	$	108	$	—	Forward currency contracts	$	1,472	$	—	$	1,472	$	—
Total assets	Total assets	$	108	$	—	$	108	$	—	Total assets	$	1,472	$	—	$	1,472	$	—

Liabilities:	Liabilities:									Liabilities:
Forward currency contracts	Forward currency contracts	$	6,097	$	—	$	6,097	$	—	Forward currency contracts	$	16,963	$	—	$	16,963	$	—
Total liabilities	Total liabilities	$	6,097	$	—	$	6,097	$	—	Total liabilities	$	16,963	$	—	$	16,963	$	—


(Dollars in thousands)				Fair Value Measurements Using Inputs Considered as:
October 31, 2020		Fair Value		Level 1		Level 2		Level 3
													Fair Value Measurements Using Inputs Considered as:
October 31, 2021										October 31, 2021	Fair Value		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Forward currency contracts	Forward currency contracts	$	933	$	—	$	933	$	—	Forward currency contracts	$	322	$	—	$	322	$	—
Total assets	Total assets	$	933	$	—	$	933	$	—	Total assets	$	322	$	—	$	322	$	—

Liabilities:	Liabilities:									Liabilities:
Forward currency contracts	Forward currency contracts	$	2,484	$	—	$	2,484	$	—	Forward currency contracts	$	2,132	$	—	$	2,132	$	—
Total liabilities	Total liabilities	$	2,484	$	—	$	2,484	$	—	Total liabilities	$	2,132	$	—	$	2,132	$	—

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Nonrecurring Fair Value Measurements

The company measures certain assets and liabilities at fair value on a non-recurring basis. Assets and liabilities that are measured at fair value on a nonrecurring basis include long-lived assets, goodwill, and indefinite-lived intangible assets, which would generally be recorded at fair value as a result of an impairment charge. Assets acquired and liabilities assumed as part of a business combination or asset acquisition are also measured at fair value on a non-recurring basis during the measurement period allowed by the accounting standards codification guidance for business combinations and asset acquisitions, when applicable. For additional information on the company's business combination ~~and asset acquisitions~~ and the related non-recurring fair value measurement of the assets acquired and liabilities assumed, refer to Note 2, Business Combination ~~and Asset Acquisitions~~.

~~Table of Contents~~

Other Fair Value Disclosures

The carrying values of the company's short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and short-term debt, including current maturities of long-term debt, when applicable, approximate their fair values due to their short-term nature. As of ~~July 30,~~January 28, 2022, January 29, 2021 ~~July 31, 2020~~ and October 31, ~~2020,~~2021, the company's long-term debt included $424.1 million, $424.0 million and $424.0 million of gross fixed-rate debt that is not subject to variable interest rate fluctuations. The gross fair value of such long-term debt is determined using Level 2 inputs by discounting the projected cash flows based on quoted market rates at which similar amounts of debt could currently be borrowed. As of ~~July 30,~~January 28, 2022, the estimated gross fair value of long-term debt with fixed interest rates was $499.1 million compared to its gross carrying amount of $424.1 million. As of January 29, 2021, the estimated gross fair value of long-term debt with fixed interest rates was ~~$525.9 million compared to its gross carrying amount of $424.0 million. As of July 31, 2020, the estimated gross fair value of long-term debt with fixed interest rates was $500.4~~$524.3 million compared to its gross carrying amount of $424.0 million. As of October 31, ~~2020,~~2021, the estimated gross fair value of long-term debt with fixed interest rates was ~~$508.2~~$517.9 million compared to its gross carrying amount of $424.0 million. For additional information regarding long-term debt with fixed interest rates, refer to Note 6, Indebtedness.


1918			Subsequent Events

The company has evaluated all subsequent events and concluded that no subsequent events have occurred that would require recognition in the Condensed Consolidated Financial Statements or disclosure in the Notes to the Condensed Consolidated Financial Statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our ~~financial statements~~Condensed Consolidated Financial Statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Unless the context indicates otherwise, the terms "company," "TTC," "we," "our," or "us" refer to The Toro Company and its consolidated subsidiaries. This MD&A should be read in conjunction with the MD&A included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. Unless expressly stated otherwise, the comparisons presented in this MD&A refer to the same period in the prior fiscal year. Our MD&A is presented as follows:

•Company Overview

•Results of Operations

•Business Segments

•Financial Position

•Non-GAAP Financial Measures

•Critical Accounting Policies and Estimates

•~~Forward-Looking Information~~

~~This MD&A should be read in conjunction with the MD&A included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.~~ This discussion contains various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and we refer readers to the section titled ~~"Forward-Looking Information"~~"Cautionary Note Regarding Forward-Looking Statements" located at the ~~end of Part I, Item 2~~beginning of this ~~report~~Quarterly Report on Form 10-Q for more information.

Non-GAAP Financial Measures

Throughout this MD&A, we have provided financial measures that are not calculated or presented in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") ("non-GAAP financial measures"), as information supplemental and in addition to the most directly comparable financial measures presented in this ~~report~~Quarterly Report on Form 10-Q that are calculated and presented in accordance with U.S. GAAP. We believe that these non-GAAP financial measures, when considered in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP, provide investors with useful supplemental financial information to better understand our core operational performance and cash flows. These non-GAAP financial measures, however, should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the most directly comparable U.S. GAAP financial measures. Reconciliations of non-GAAP financial measures to the most directly comparable reported U.S. GAAP financial measures are included in the section titled "Non-GAAP Financial Measures" within this MD&A.

COMPANY OVERVIEW

The Toro Company is in the business of designing, manufacturing, marketing, and selling professional turf maintenance equipment and services; turf irrigation systems; landscaping equipment and lighting products; snow and ice management products; ~~agricultural irrigation~~ag-irrigation systems; rental, specialty, and underground construction equipment; and residential yard and snow thrower products. ~~Unless the context indicates otherwise, the terms "company," "TTC," "we," "our," or "us" refer to The Toro Company and its consolidated subsidiaries.~~ Our purpose is to help our customers enrich the beauty, productivity, and sustainability of the land. Sustainability is the foundation of our enterprise strategic priorities of accelerating growth, driving productivity and operational excellence, and empowering our ~~people, and our~~people. Our focus on alternative power, smart connected, and autonomous solutions, ~~are embedded~~ as ~~part of our "Sustainability Endures"strategy. Our Sustainability Endures strategy also provides transparency on~~well as our continued efforts to address sustainability-focused matters, including environmental, social, and governance ~~priorities.~~priorities, are embedded as part of our "Sustainability Endures"initiative.

We sell our products worldwide through a network of distributors, dealers, mass retailers, hardware retailers, equipment rental centers, home centers, as well as online (direct to end-users). We strive to provide innovative, well-built, and dependable products supported by an extensive service network. A significant portion of our net sales ~~have~~has historically been, and we expect will continue to be, attributable to new and enhanced products. We define new products as those introduced in the current and previous two fiscal years. We classify our operations into two reportable business segments: Professional and Residential. Our remaining activities are presented as "Other" due to their ~~insignificance. As further~~insignificance, as described in ~~Note 7,~~ ~~Divestiture~~,greater detail within the section titled "Business Segments" in ~~the Notes to Condensed Consolidated Financial Statements included in Part I. Item 1~~this MD&A.

Acquisition of ~~this Quarterly Report on Form 10-Q,~~Intimidator Group

On January 13, 2022, during the first quarter of fiscal ~~2021,~~2022, we ~~completed~~acquired the sale of our Northeastern U.S. distribution company. As a result, for the three and nine month period ended July 30, 2021, our Other activities consisted of our remaining wholly-owned domestic distribution company, our corporate activities, and the elimination of intersegment revenues and expenses. For the three and nine month period ended July 31, 2020, our Other activities consisted of our wholly-owned domestic distribution companies, our corporate activities, and the elimination of intersegment revenues and expenses.

~~Acquisition of Venture Products, Inc.~~privately-held Intimidator Group ("~~Venture Products"~~Intimidator")

~~On March 2, 2020, during the second quarter of fiscal 2020, we completed our acquisition of Venture Products, the manufacturer of Ventrac-branded products. Venture Products~~. Intimidator primarily designs, manufactures, markets, and sells ~~articulating~~a commercial-grade line of zero-turn mowers under the Spartan Mowers brand, which are intended to provide innovative turf management solutions to landscape contractors and ~~snow and ice management equipment for grounds, landscape contractor, golf, municipal, and rural acreage~~other customers ~~and provides innovative product offerings that~~who require a commercial-grade solution. The acquisition of Intimidator broadened ~~and strengthened~~ our Professional reportable segment and expanded our manufacturing footprint and dealer network. The aggregate preliminary cash consideration was $398.9 million ("purchase price") and remains subject to certain customary adjustments based on, among other things, the amount of actual cash, debt, and working capital in the business of Intimidator at the closing date. Such customary adjustments are expected to be completed during fiscal 2022. Additionally, the aggregate preliminary cash consideration remains subject to

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~~our dealer network. The total acquisition~~contingent consideration ~~was $163.2 million,~~through the end of ~~which $10.0 million remains from~~calendar year 2022, in the event of certain qualifying tax changes. As a result, we could be subject to additional cash purchase consideration for an ~~initial holdback of $29.5~~amount not to exceed $15.0 million and remittance of such contingent consideration, if required, is ~~expected to be paid during~~due by March 15, 2023. As of January 28, 2022, no liability was recorded within the ~~fourth quarter of fiscal 2021 to~~Condensed Consolidated Balance Sheets for the ~~former Venture Products shareholders, subject to any indemnification claims. Subsequent to~~contingent consideration as the ~~closing date,~~contingency is not probable or estimable. We funded the preliminary purchase price with borrowings under our existing unsecured senior revolving credit facility and cash provided by operating activities. Intimidator's results of operations ~~for Venture Products have been~~are included within our Professional reportable segment ~~within~~in our Condensed Consolidated Financial Statements from the closing date and had an ~~incremental~~immaterial impact ~~to our Professional reportable segment net sales and segment earnings for the nine month period ended July 30, 2021. Venture products did not have an incremental impact to~~on our Professional reportable segment net sales and segment earnings for the three month period ended ~~July 30, 2021.~~January 28, 2022. For additional information regarding the acquisition, refer to Note 2, Business Combination ~~and Asset Acquisitions~~, in the Notes to Condensed Consolidated Financial Statements included in Part I.I, Item 1 of this Quarterly Report on Form 10-Q.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the novel coronavirus ("COVID-19," "virus," or "the pandemic") outbreak a global pandemic. COVID-19 has negatively impacted public health and portions of the global economy, significantly disrupted global supply chains, and created volatility in financial markets. The global impact of the pandemic has had a material impact on parts of our business, as well as our employees, customers, and suppliers, and caused many challenges for our business and manufacturing operations. While we are seeing signs of recovery in the United States and certain other areas of the world, the continuing implications of COVID-19 on our business and manufacturing operations remain uncertain and will depend on certain future developments, including the duration of the pandemic; any adverse impact due to variants of the virus; its impact on market demand for our products; its impact on our employees, customers, and suppliers; the range of government mandated restrictions and other measures; and the success of the deployment of COVID-19 vaccines, their effectiveness against the novel strain and related variants, and their rate of adoption. As a result, the ultimate impact on our future business, operations, and Results of Operations, Financial Position, and Cash Flows as a result of COVID-19 is unknown at this time.

Our main focus from the ~~beginning~~onset of the pandemic has been, and will continue to be, the health, safety, and well-being of our employees, customers, suppliers and communities around the world. In support of continuing our global manufacturing and business operations, we have adopted, and continue to adhere to, certain rigorous and meaningful safety measures recommended by the U.S. Centers for Disease Control and Prevention, World Health Organization, and federal, state, local, and foreign authorities in an effort to protect our employees, customers, suppliers, and communities. These important safety measures enacted at our facilities and other sites include, but are not limited to, implementing social distancing protocols such as the reconfiguration of manufacturing processes and other workspaces, curtailing certain non-essential travel, extensively and frequently disinfecting our facilities and workspaces, limiting certain non-essential visitors, and providing or accommodating the wearing of face coverings and other sanitary measures to those employees who are physically present at our facilities and sites to perform their job responsibilities and where face coverings are required by local government mandates. During the first quarter of fiscal 2021, we implemented an employee campaign in support of COVID-19 vaccine efforts. This employee campaign is designed to provide information about, and support and encourage our employees to receive, a COVID-19 vaccination. As part of this employee campaign, we facilitated the offering of the vaccine to our employees at certain of our facilities. We expect to continue certain applicable and appropriate safety measures until we determine that COVID-19 is adequately contained for purposes of our global manufacturing and business operations and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, suppliers, and communities.

In addition to our vigilant safety measures, we have also maintained our focus on our responsibility to meet the needs of our customers as we supply products that are critical to maintaining essential global infrastructure, agricultural food production, and the enablement of safe areas for outdoor spaces. ~~While our facilities have remained operational during~~Our ability to meet the third quarter and first nine months of fiscal 2021, we continued to experience various degrees of manufacturing cost pressures and inefficiencies. However, such manufacturing cost pressures and inefficiencies were experienced to a lesser extent than those experienced during the third quarter and first nine months of fiscal 2020 when our manufacturing operations experienced intermittent partial or full factory closures, reduced levels of production at certain facilities, and manufacturing inefficiencies as a result of government mandated measures, reduced demand for products in certainneeds of our ~~Professional segment businesses, and~~customers has been challenged by the ~~initial reconfiguration~~adverse impact of ~~certain of our manufacturing processes in order to implement social distancing protocols within our facilities. As a result,~~COVID-19 on the improvement in our manufacturing operations experienced during the third quarter and first nine months of fiscal 2021 as compared to the fiscal 2020 comparable periods had a favorable impact on our gross margins for the three and nine month periods ended July 30, 2021.

global supply chain. Although we regularly monitor the adequacy of the supply of commodities, components, parts, and accessories and the financial health of the companies in our supply chain, and use alternative suppliers when necessary and available, financial hardship and/or government mandated restrictions on our suppliers caused by COVID-19, insufficient demand planning, and/or the inability of companies throughout our supply chain to deliver on supply commitments, requirements, and/or demands as a result of COVID-19 or otherwise, has and could continue to cause a disruption in our ability to procure the commodities, components, and parts required to manufacture our products. Ongoing ~~communications continue~~communication and prioritization continues with our suppliers in an attempt to identify and mitigate such risks and to proactively manage

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inventory levels of commodities, components, and parts to align with anticipated demand for our products and other government actions. ~~During~~

The continuing implications of COVID-19 on our business and manufacturing operations remain uncertain and will depend on certain future developments, including any adverse impact due to additional variants of the ~~third quarter and first nine months of fiscal 2021, we experienced a greater level of disruption within~~virus; its impact on market demand for our products; its impact on the global supply ~~chain that limited~~chain; its impact on our ~~ability to procure commodities, components, parts,~~employees, customers, and ~~accessories in a timely manner to meet manufacturing production requirements than we experienced during~~suppliers; the ~~third quarter~~range of government mandated restrictions and ~~first nine months~~other measures; and the success of ~~fiscal 2020.~~the COVID-19 vaccines against the virus and related variants. As a result, we experienced various degrees of product availability issues, which limited our ability to meet customer demand and adequately replenish certain raw materials, work in process, and finished goods inventory levels. We currently expect a greater level of supply chain disruptions throughout the remainder of fiscal 2021 as compared to prior periods due to a combination of our current challenges to source adequate amounts of certain component parts inventory and, in certain cases, the inability of our suppliers to meet our commodity and component parts demand requirements. Additionally, we experienced inflationary cost pressures on commodity, component parts, and other related costs during the third quarter and first nine months of fiscal 2021 when compared to the prior year comparable periods and we expect to continue to experience an inflationary environment for commodity, component parts, and other related costs throughout the remainder of fiscal 2021, which would put pressureultimate impact on our ~~gross margins.~~

~~During the third quarter~~future business and ~~first nine months~~manufacturing operations, as well as results of ~~fiscal 2021, we experienced a continued strong rebound in demand for many of the products in our Professional segment businesses that were adversely impacted by COVID-19 during the third quarter~~operations, financial position, and first nine months of fiscal 2020. Most notably, our landscape contractor business continued to build upon the momentum generated during the fourth quarter of fiscal 2020 and we continued to experience strong retail demand from contractors and our channel partners worked to replenish their field inventory levels during the third quarter and first nine months of fiscal 2021. Additionally, our golf business continued to experience strong demand as golf course investments increased and spending patterns began to normalize as budgetary constraints moderated. Our rental and specialty construction business also experienced strong demand due to favorable construction industry trends. While these demand rebounds within our Professional segment are positive, we experienced a reduction of net sales within our underground construction business due to product availability issues that limited our ability to meet demand for our products. Our Residential segment continued to build on the momentum generated during fiscal 2020 and experienced strong retail demand across most product lines during the third quarter and first nine months of fiscal 2021cash flows as a result of new and enhanced products, favorable weather conditions, expanded retail placement, and continued investments by homeowners in their properties. While the continued strong retail demand experienced in our Residential segmentCOVID-19 is a positive event, the shift to a greater percentage of Residential segment net sales as a percentage of consolidated net sales has had, and could continue to have, an adverse impact on our gross margins. However, for the three and nine month periods ended July 30, 2021, we experienced a shift to a greater percentage of Professional segment net sales as a percentage of consolidated net sales when compared to the prior year comparable periods and such shift resulted in a favorable impact to our gross margins. Further, as a result of strong business performance throughout the second half of fiscal 2020, many of the COVID-19 cost reduction measures enacted in fiscal 2020 were discontinued during the first quarter of fiscal 2021. Our balance sheet and liquidity profile remained strong as of July 30, 2021 and we expect to continue our historical practice of prudently managing our expenses and adjusting production levels as needed to align with anticipated sales volumes throughout the remainder of fiscal 2021. However, given our current expectation of a greater level of supply chain disruptions during the remainder of fiscal 2021 due to a combination of our current inability to source adequate amounts of component parts inventory and the inability of our suppliers to meet our commodity and component parts demand requirements, our ability to effectively and efficiently adjust production levels as needed may be limited.

~~Significant uncertainty still exists concerning the duration of COVID-19 and variants of the virus.~~unknown at this time. We ~~will~~ continue to monitor the situation and the guidance from global government authorities, as well as federal, state, local and foreign public health authorities, and may take additional meaningful actions based on their requirements and recommendations toin an attempt to protect the health and well-being of our employees, customers, suppliers, and communities. In these circumstances, there may be developments outside our control requiring us to adjust our operating plans and implement appropriate cost reduction ~~measures and such developments could rapidly occur.~~measures. If the adverse impacts from COVID-19 continue or worsen beyond expectations, our business and related ~~Results~~results of ~~Operations, Financial Position,~~operations, financial position, or ~~Cash Flows~~cash flows could be adversely impacted. Any sustained adverse impacts to our business, the industries in which we operate, market demand for our products, and/or certain suppliers or customers may also affect the future valuation of certain of our assets, and therefore, may increase the likelihood of a charge related to an impairment, write-off, valuation adjustment, allowance, or reserve associated with such assets, including, but not limited to, goodwill, indefinite and finite-lived intangible assets, inventories, accounts receivable, deferred income taxes, right-of-use assets, and property, plant and equipment. Such a charge could be material to our future ~~Results~~results of ~~Operations, Financial Position,~~operations, financial position, or ~~Cash Flows.~~cash flows. For additional information regarding risks associated with COVID-19, refer to the section titled ~~"Forward-Looking Information"~~"Cautionary Note Regarding Forward-Looking Statements" located at the ~~end of Part I, Item 2~~beginning of this Quarterly Report on Form 10-Q and also refer to Part I, Item 1A, "Risk Factors", within our Annual Report on ~~From~~Form 10-K for the fiscal year ended October 31, ~~2020.~~2021.

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RESULTS OF OPERATIONS

Overview

~~Worldwide consolidated~~During the first quarter of fiscal 2022, we continued to experience the strong demand environment across both our Professional and Residential segments and we realized favorable impacts to both our net sales and gross margins as a result of our strategic pricing actions across our product lines. For the first quarter of fiscal 2022, our sales cadence was driven more by our ability to produce product than historical demand patterns and seasonality. While the strong demand environment and favorable net price realization positively impacted our results of operations, we continued to experience headwinds associated with the challenging inflationary and supply chain environment that adversely impacted our gross margins for the first quarter of fiscal 2022. More specifically, we experienced a greater degree of inflationary cost pressures on commodity and component parts during the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021. Additionally, we continued to experience significant supply chain disruption during the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021, which resulted in challenging conditions for sourcing adequate amounts of certain commodity and component parts inventory and, in certain cases, limited the ability of our suppliers to meet our commodity and component parts demand requirements. We intend to continue our historical practice of prudently managing expenses and adjusting production levels as needed to align with anticipated sales volumes and availability of commodity and component parts inventories, while also prioritizing our productivity initiatives and other investments that support long-term sustainable growth across our businesses. However, given our current expectation of continuing supply chain disruptions, our ability to effectively and efficiently adjust production levels as needed may be limited.

Consolidated net sales for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$976.8~~$932.7 million, up ~~16.2~~6.8 percent compared to ~~$841.0~~$873.0 million in the ~~third~~first quarter of fiscal ~~2020. For the first nine months of fiscal 2021, worldwide consolidated net sales were $2,998.9 million, up 18.2 percent compared to $2,537.9 million from the same period in the prior fiscal year.~~

2021. Professional segment net sales for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$718.5~~$672.9 million, an increase of ~~15.2~~3.5 percent compared to ~~$623.6~~$650.2 million in the ~~third~~first quarter of the prior fiscal year. ~~For the first nine months of fiscal 2021, Professional segment net sales were $2,197.1 million, an increase of 16.9 percent compared to $1,879.4 million in the prior fiscal year comparable period.~~

Residential segment net sales for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$252.1~~$255.4 million, an increase of ~~23.0~~17.3 percent compared to ~~$205.0~~$217.7 million in the ~~third~~first quarter of the prior fiscal year. ~~For the first nine months of fiscal 2021, Residential segment net sales were $784.9 million, an increase of 24.0 percent compared to $632.8 million in the prior fiscal year comparable period.~~

Net earnings for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$96.3~~$69.5 million, or ~~$0.89~~$0.66 per diluted share, compared to ~~$89.0~~$111.3 million, or ~~$0.82~~$1.02 per diluted share, for the ~~third~~first quarter of fiscal 2020. Net earnings for the first nine months of fiscal 2021 were $349.8 million, or $3.21 per diluted share, compared to $257.5 million, or $2.37 per diluted share, in the comparable fiscal 2020 period. Non-GAAP net earnings for the third quarter of fiscal 2021 were $99.4 million, or $0.92 per diluted share, compared to $88.7 million, or $0.82 per diluted share, for the third quarter of fiscal 2020.2021. Non-GAAP net earnings for the first ~~nine months~~quarter of fiscal ~~2021~~2022 were ~~$333.0~~$69.7 million, or ~~$3.06~~$0.66 per diluted share, compared to ~~$258.6~~$93.2 million, or ~~$2.38~~$0.85 per diluted share, infor the ~~comparable~~first quarter of fiscal ~~2020 period.~~2021. Reconciliations of non-GAAP financial measures to the most directly comparable reported U.S. GAAP financial measures are included in the section titled "Non-GAAP Financial Measures" within this MD&A.

We continued our history of paying quarterly cash dividends and increased our cash dividend for the ~~third~~first quarter of fiscal ~~2021~~2022 by ~~5.0~~14.3 percent to ~~$0.2625~~$0.30 per share compared to ~~$0.25~~$0.2625 per share paid in the ~~third~~first quarter of fiscal ~~2020 and~~2021. We also continued repurchasing shares of our common stock under our Board authorized repurchase plan during the ~~third~~first quarter of fiscal ~~2021.~~2022. As a result of the combination of quarterly cash dividends and share repurchases, we returned $106.5 million of cash to our shareholders during the first quarter of fiscal 2022.

Field inventory levels were lower as of the end of the ~~third~~first quarter of fiscal ~~2021~~2022 compared to the ~~third~~first quarter of fiscal ~~2020~~2021 across the majority of our businesses as a result of continued strong retail demand for our products that has exceeded our ability to produce certain products, most notably for Professional segment rental, specialty, and underground construction equipment and landscape contractor zero-turn riding mowers. The field inventory decrease was partially offset by higher levels of Residential segment zero-turn riding mower and walk power mower field inventory due to strong demand from channel partners ahead of their key selling seasons and our ability to produce product to meet the demand.

Net Sales

Consolidated net sales for the first quarter of fiscal 2022 were $932.7 million, up 6.8 percent compared to $873.0 million in the first quarter of fiscal 2021. This net sales increase was primarily driven by price increases across both Professional and Residential segment product lines, as well as increased shipments of Residential segment zero-turn riding mowers and walk power mowers ahead of our key selling season driven by continued strong demand. The increase in net sales was partially offset by supply chain challenges limiting product availability ~~most notably~~ for Professional segment landscape contractor zero-turn riding ~~mowers; rental, specialty,~~mowers and ~~underground construction equipment;~~golf and ~~Residential segment zero-turn riding mowers.~~

~~Net Sales~~

Worldwide consolidated net sales for the third quarter of fiscal 2021 were $976.8 million, up 16.2 percent compared to $841.0 million in the third quarter of fiscal 2020. This net sales increase was primarily due to continued strong demand for many of the products in our portfolio of Professional segment businesses, most notably the Professional segment businesses that were adversely impacted by COVID-19 during the third quarter of fiscal 2020, including increased sales of landscape contractor zero-turn riding mowers due to strong retail demand and low field inventory levels at the end of fiscal 2020 and increased shipments of golf equipment as a result of normalized golf course spending patterns and course investments. The net sales increase was also the result of price increases across our product lines and continued strong demand for the Residential segment zero-turn riding and walk power mowers due to new and enhancedgrounds products. The net sales increase for the third quarter comparison was partially offset by reduced sales of underground construction equipment as a result of product availability that limited our ability to meet construction industry demand.

For the year-to-date period of fiscal 2021, worldwide consolidated net sales were $2,998.9 million, up 18.2 percent compared to $2,537.9 million from the same period in the prior fiscal year. Consistent with the net sales drivers for the quarter comparison, the increase in worldwide consolidated net sales for the year-to-date period of fiscal 2021 was primarily due to continued strong demand for many of the products in our portfolio of Professional segment businesses, most notably the Professional segment businesses that were adversely impacted by COVID-19 during the first nine months of fiscal 2020, including increased sales of landscape contractor zero-turn riding mowers due to strong retail demand and low field inventory levels at the end of fiscal 2020, increased shipments of golf equipment and irrigation products as a result of normalized golf course spending patterns and course investments, and strong demand for rental and specialty construction equipment due to favorable construction industry trends. The net sales increase was also the result of continued strong demand for Residential segment zero-turn riding and walk power mowers due to new and enhanced products, price increases across our product lines, and incremental net sales as a result of our acquisition of Venture Products. The net sales increase for the year-to-date comparison was partially offset by reduced sales of underground construction equipment as a result of product availability that limited our ability to meet construction industry demand and continued softened demand in the oil and gas industry.

Net sales in international markets increased by ~~27.8 percent and 25.8 percent~~$3.3 million for the ~~third~~first quarter ~~and year-to-date periods~~fiscal 2022 compared to the first quarter of fiscal ~~2021, respectively.~~2021. Changes in foreign currency exchange rates resulted in ~~an increase~~a decrease in our net sales of approximately $1.0 million for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021. The international net sales increase for the quarter comparison was mainly driven by price increases across our product lines and increased shipments of Residential segment zero-turn riding mowers and Professional segment ag-irrigation products due to strong demand, partially offset by supply chain challenges limiting product availability for golf and grounds products and underground construction equipment.

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$6.9 million and $17.4 million for the third quarter and year-to-date periods of fiscal 2021, respectively. The international net sales increase for the quarter and year-to-date comparisons was mainly driven by increased shipments of golf equipment and irrigation products and strong demand for both Professional and Residential segment zero-turn riding products.

The following table summarizes our ~~Results~~results of ~~Operations~~operations as a percentage of consolidated net sales:


		Three Months Ended				Nine Months Ended					Three Months Ended
		July 30, 2021		July 31, 2020		July 30, 2021		July 31, 2020			January 28, 2022		January 29, 2021
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Cost of sales	Cost of sales	(66.1)		(65.0)		(65.0)		(65.0)		Cost of sales	(67.8)		(63.9)
Gross profit	Gross profit	33.9		35.0		35.0		35.0		Gross profit	32.2		36.1
Selling, general and administrative expense	Selling, general and administrative expense	(21.4)		(21.2)		(20.2)		(21.9)		Selling, general and administrative expense	(22.4)		(19.9)
Operating earnings	Operating earnings	12.5		13.8		14.8		13.1		Operating earnings	9.8		16.2
Interest expense	Interest expense	(0.7)		(1.0)		(0.7)		(1.0)		Interest expense	(0.8)		(0.9)
Other income, net	Other income, net	0.2		0.4		0.3		0.5		Other income, net	0.3		0.3
Earnings before income taxes	Earnings before income taxes	12.0		13.2		14.4		12.6		Earnings before income taxes	9.3		15.6
Provision for income taxes	Provision for income taxes	(2.1)		(2.6)		(2.7)		(2.5)		Provision for income taxes	(1.8)		(2.9)
Net earnings	Net earnings	9.9	%	10.6	%	11.7	%	10.1	%	Net earnings	7.5	%	12.7	%

Gross Profit and Gross Margin

Gross profit for the ~~third~~first quarter of fiscal 2022 was $300.5 million, down 4.6 percent compared to $315.0 million in the first quarter of fiscal 2021. Gross margin was 32.2 percent for the first quarter of fiscal 2022 compared to 36.1 percent for the first quarter of fiscal 2021, was $331.1 million, up 12.4 percent compared to $294.6 million in the third quarter of fiscal 2020. Gross margin was 33.9 percent for the third quarter of fiscal 2021 compared to 35.0 percent for the third quarter of fiscal 2020, a decrease of 110 basis points. Non-GAAP gross profit for the third quarter of fiscal 2021 was $331.1 million, up 12.0 percent compared to $295.7 million in the third quarter of fiscal 2020. Non-GAAP gross margin was 33.9 percent for the third quarter of fiscal 2021 compared to 35.2 percent for the third quarter of fiscal 2020, a decrease of 130390 basis points. The decrease in gross margin ~~and non-GAAP gross margin~~ for the ~~third~~first quarter comparison was primarily due to the macroeconomic inflationary environment resulting in higher commodity and component parts costs, unfavorable manufacturing variance due to supply chain challenges, and ~~freight costs, which were~~unfavorable product mix. The gross margin decrease was partially offset by improved net price realization as a result of price increases across our product lines and productivity ~~improvements, and charges incurred for inventory write-downs in the third quarter of fiscal 2020 that did not repeat in the third quarter of fiscal 2021.~~

Gross profit for the year-to-date period of fiscal 2021 was $1,049.1 million, up 18.0 percent compared to $889.4 million in the same period of fiscal 2020. For the year-to-date periods of fiscal 2021 and fiscal 2020, gross margin was flat at 35.0 percent. Non-GAAP gross profit for the year-to-date period of fiscal 2021 was $1,049.1 million, up 17.3 percent compared to $894.2 million in the same period of fiscal 2020. Non-GAAP gross margin was 35.0 percent for the year-to-date period of fiscal 2021 compared to 35.2 percent for the prior year comparable period, a decrease of 20 basis points. Gross margin and non-GAAP gross margin for the year-to-date period of fiscal 2021 was adversely impacted primarily by the macroeconomic inflationary environment that resulted in higher commodity and component parts and freight costs. This negative impact was largely offset by improved net price realization as a result of price increases across our Professional and Residential segment product lines; productivity improvements, including COVID-19 driven production downtime and manufacturing inefficiencies in the first nine months of fiscal 2020 that were experienced to a lesser degree in the first nine months of fiscal 2021; and favorable product mix.

Non-GAAP gross profit and non-GAAP gross margin exclude the impact of acquisition-related costs for our acquisitions of Venture Products and The Charles Machine Works, Inc. ("CMW"), including charges incurred for the take-down of the inventory fair value step-up amounts resulting from purchase accounting adjustments, and the impact of management actions, including charges incurred for inventory write-downs related to the wind down of our Toro-branded large horizontal directional drill and riding trencher product line ("Toro underground wind down"). Reconciliations of non-GAAP financial measures to the most directly comparable reported U.S. GAAP financial measures are included in the section titled "Non-GAAP Financial Measures" within this MD&A.improvements.

Selling, General, and Administrative ("SG&A") Expense

SG&A expense increased ~~$30.6~~$35.3 million, or ~~17.1~~20.3 percent, for the ~~third~~first quarter of fiscal 2022 compared to the first quarter of fiscal 2021. As a percentage of net sales, SG&A expense increased 20250 basis points for the ~~third~~first quarter of fiscal 2022 compared to the first quarter of fiscal 2021. The increase in SG&A expense as a percentage of net sales for the ~~third~~first quarter comparison was primarily due to higher administrative expense as a result of increases in compensation costs resulting from the removal of certain fiscal 2020 COVID-19 cost-reduction measures, as well as a charge incurred for a legal settlement related to a series of ongoing patent infringement disputes, largely offset by decreased indirect marketing expenses as a result of lower meeting, travel, and entertainment costs and reduced incentive compensation costs in the third quarter of fiscal 2021 due to more normalized business performance as compared to the third quarter of fiscal 2020

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~~where we experienced an incentive compensation increase due to improved business performance after the initial onset of the pandemic.~~

SG&A expense increased $48.5 million, or 8.7 percent, for the year-to-date period of fiscal 2021. As a percentage of net sales, SG&A expense decreased 170 basis points for the year-to-date period of fiscal 2021. The decrease in SG&A expense as a percentage of net sales for the year-to-date comparison was primarily the result of leveraging expense over higher sales volumes, which further benefited from a favorable net legal settlement with ~~Briggs & Stratton ("BGG")~~BGG that was recognized in fiscal 2021 and ~~decreased indirect~~did not repeat in fiscal 2022, higher engineering expense for continued investments in new product development, and increased sales and marketing ~~expenses as a result of lower meeting, travel, and entertainment costs. These decreases for the year-to-date comparison were partially offset by increased incentive compensation~~ costs as ~~a result of strong~~trade show and other travel-related business ~~performance.~~practices continue to gradually return to pre-pandemic levels.

Interest Expense

Interest expense decreased ~~$1.3 million and $3.5~~$0.5 million for the ~~third~~first quarter ~~and year-to-date periods~~ of fiscal ~~2021~~2022 compared to the ~~comparable periods~~first quarter of fiscal ~~2020. These decreases were~~2021. This decrease was driven by lower average outstanding borrowings under our debt arrangements and lower average interest ~~rates due to the reduction in LIBOR.~~rates.

Other Income, Net

Other income, net for the ~~third~~first quarter of fiscal 2022 increased $0.7 million compared to the first quarter of fiscal 2021, ~~decreased $0.8 million compared to the third quarter of fiscal 2020. This slight decrease was~~ primarily due to lower income from our Red Iron joint venture as a result of lower field inventory levels and increased inventory turnover at our channel partners due to strong retail demand during the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2020, partially offset by the favorable impact of foreign currency exchange rates. Other income, net for the year-to-date period of fiscal 2021 decreased $2.7 million compared to the same period in fiscal 2020. This decrease was primarily due to lower income from our Red Iron joint venture as a result of lower field inventory levels and increased inventory turnover at our channel partners due to strong retail demand during the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020, partially offset by a settlement charge incurred for the termination of our U.S. defined benefit pension plan recognized in fiscal 2020 that did not reoccur in fiscal 2021.rate fluctuations.

Provision for Income Taxes

The effective tax rate for the ~~third~~first quarter of fiscal ~~2021~~2022 was ~~18.0~~20.2 percent compared to ~~19.8~~18.1 percent in the ~~third~~first quarter of fiscal ~~2020.~~2021. The ~~decrease~~increase in the effective tax rate ~~for the quarter comparison~~ was primarily driven by one-time adjustments related to prior years, partially offset by the geographic mix of earnings. The effective tax rate for the year-to-date period of fiscal 2021 was 18.8 percent compared to 19.2 percent in the same period of fiscal 2020. The decrease in the effective tax rate for the year-to-date comparison was primarily driven by increased tax benefits from excess tax deductions for stock-based compensation.

The non-GAAP effective tax rate for the third quarter of fiscal 2021 was 19.3 percent, compared to a non-GAAP effective tax rate of 20.9 percent in the third quarter of fiscal 2020. The decrease in the non-GAAP effective tax rate for the quarter comparison was primarily driven by one-time adjustments related to prior years, partially offset by the geographic mix of earnings. The non-GAAP effective tax rate for the year-to-date periods of fiscal 2021 and 2020 was 20.6 percent. The non-GAAP effective tax rate excludes the impact oflower discrete tax benefits recorded as excess tax deductions for stock-based compensation. The non-GAAP effective tax rate for the first quarter of fiscal 2022 was 20.9 percent, compared to a non-GAAP effective tax rate of 21.5 percent in the first quarter of fiscal 2021. Reconciliations of non-GAAP financial measures to the most directly comparable reported U.S. GAAP financial measures are included in the section titled "Non-GAAP Financial Measures."

Net Earnings

Net earnings for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$96.3~~$69.5 million, or ~~$0.89~~$0.66 per diluted share, compared to ~~$89.0~~$111.3 million, or ~~$0.82~~$1.02 per diluted share, for the ~~third quarter of fiscal 2020. Non-GAAP net earnings for the third~~first quarter of fiscal 2021, ~~were $99.4 million, or $0.92 per diluted share, compared to $88.7 million, or $0.82 per diluted share, for the third quarter~~a decrease of ~~fiscal 2020, an increase of 12.2~~35.3 percent per diluted share. The ~~increase in net earnings and non-GAAP net earnings for the third quarter comparison~~decrease was primarily ~~driven~~due to the macroeconomic inflationary environment resulting in higher commodity and component parts costs, unfavorable manufacturing variance and product mix, and a favorable net legal settlement with BGG that was recognized in fiscal 2021 and did not repeat. The decrease was partially offset by ~~higher sales volumes and~~ improved net price realization as a result of price increases across our product ~~lines; productivity improvements; and charges incurred~~lines.

Non-GAAP net earnings for ~~inventory write-downs in~~ the ~~third~~first quarter of fiscal ~~2020 that did not repeat in~~2022 were $69.7 million, or $0.66 per diluted share, compared to $93.2 million, or $0.85 per diluted share, for the ~~third~~first quarter of fiscal ~~2021. These increases were partially offset by~~2021, a decrease of 22.4 percent per diluted share. The decrease

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was primarily due to the macroeconomic inflationary environment resulting in higher commodity and component parts costs, as well as unfavorable manufacturing variance and ~~freight costs.~~

~~Net earnings for the first nine months of fiscal 2021 were $349.8 million, or $3.21 per diluted share, compared to $257.5 million, or $2.37 per diluted share, for the same period of fiscal 2020.~~product mix. The ~~increase in net earnings for the year-to-date comparison~~decrease was ~~primarily driven~~partially offset by ~~higher sales volumes and~~ improved net price realization as a result of price increases across our product lines; productivity improvements, including COVID-19 driven production downtime and manufacturing inefficiencies in the first nine months of fiscal 2020 that were experienced to a lesser degree in the first nine months of fiscal 2021; a favorable net legal settlement with BGG; and favorable product mix. These increases were partially offset by the macroeconomic inflationary environment resulting in higher commodity and component parts and freight costs. Non-GAAP net earnings for the first nine months of fiscal 2021 were $333.0 million, or $3.06 per diluted share, compared to $258.6 million, or $2.38 per diluted share, for the same year-to-date period of fiscal 2020, an increase of 28.6 percent per diluted share. The

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increase in non-GAAP net earnings for the year-to-date comparison was primarily driven by higher sales volumes and improved net price realization as a result of price increases across our product lines; productivity improvements, including COVID-19 driven production downtime and manufacturing inefficiencies in the first nine months of fiscal 2020 that were experienced to a lesser degree in the first nine months of fiscal 2021; and favorable product mix. These increases were partially offset by the macroeconomic inflationary environment resulting in higher commodity and component parts and freight costs.

Non-GAAP net earnings and non-GAAP net earnings per diluted share exclude the net impact of certain litigation settlements; acquisition-related costs related to our acquisitions of Venture Products and CMW, including transaction and integration costs and charges incurred related to certain purchase accounting adjustments; the impact of discrete tax benefits recorded as excess tax deductions for stock-based compensation; and management actions, including charges incurred for inventory write-downs related to the Toro underground wind down.lines. Reconciliations of non-GAAP financial measures to the most directly comparable reported U.S. GAAP financial measures are included in the section titled "Non-GAAP Financial ~~Measures" within this MD&A.~~Measures."

BUSINESS SEGMENTS

We operate in two reportable business segments: Professional and Residential. Segment earnings for our Professional and Residential segments are defined as earnings from operations plus other income, net. Our remaining activities are presented as "Other" due to their insignificance. ~~As further described in Note 7,~~ ~~Divestiture, during the first quarter of fiscal 2021, we completed the sale of our Northeastern U.S. distribution company. As a result, for the three and nine month periods ended July 30, 2021, operating~~Operating loss for our Other activities included earnings (loss) from our wholly-owned domestic distribution company, Red Iron joint venture, corporate activities, other income, and interest expense. For the three and nine month periods ended July 31, 2020, operating loss for our Other activities included earnings (loss) from our wholly-owned domestic distribution companies, Red Iron joint venture, corporate activities, other income, and interest expense. Corporate activities include general corporate expenditures, such as finance, human resources, legal, information services, public relations, and similar activities, as well as other unallocated corporate assets and liabilities, such as corporate facilities and deferred tax assets and liabilities.

The following tables summarize net sales for our reportable business segments and Other activities:

Three Months Ended
(Dollars in thousands) July 30, 2021 July 31, 2020 Dollar Value Change Percentage Change
Professional $ 718,477 $ 623,615 $ 94,862 15.2 %
Residential 252,117 204,961 47,156 23.0
Other 6,242 12,396 (6,154) (49.6)
Total net sales* $ 976,836 $ 840,972 $ 135,864 16.2 %
*Includes international net sales of: $ 191,665 $ 150,014 $ 41,651 27.8 %


		Nine Months Ended									Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		Dollar Value Change		Percentage Change		(Dollars in thousands)	January 28, 2022		January 29, 2021		Dollar Value Change		Percentage Change
Professional	Professional	$	2,197,058	$	1,879,423	$	317,635	16.9	%	Professional	$	672,885	$	650,223	$	22,662	3.5	%
Residential	Residential	784,852		632,807		152,045		24.0		Residential	255,402		217,700		37,702		17.3
Other	Other	17,019		25,623		(8,604)		(33.6)		Other	4,363		5,063		(700)		(13.8)
Total net sales*	Total net sales*	$	2,998,929	$	2,537,853	$	461,076	18.2	%	Total net sales*	$	932,650	$	872,986	$	59,664	6.8	%

*Includes international net sales of:	*Includes international net sales of:	$	638,921	$	508,001	$	130,920	25.8	%	*Includes international net sales of:	$	194,986	$	191,681	$	3,305	1.7	%

The following tables summarize segment earnings for our reportable business segments and operating (loss) for our Other activities:

Three Months Ended
(Dollars in thousands) July 30, 2021 July 31, 2020 Dollar Value Change Percentage Change
Professional $ 122,331 $ 113,652 $ 8,679 7.6 %
Residential 31,548 28,545 3,003 10.5
Other (36,428) (31,204) (5,224) (16.7)
Total segment earnings $ 117,451 $ 110,993 $ 6,458 5.8 %

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		Nine Months Ended									Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		Dollar Value Change		Percentage Change		(Dollars in thousands)	January 28, 2022		January 29, 2021		Dollar Value Change		Percentage Change
Professional	Professional	$	406,279	$	322,385	$	83,894	26.0	%	Professional	$	93,272	$	116,816	$	(23,544)	(20.2)	%
Residential	Residential	109,642		87,233		22,409		25.7		Residential	31,760		32,108		(348)		(1.1)
Other	Other	(85,401)		(91,115)		5,714		6.3		Other	(37,885)		(13,098)		(24,787)		(189.2)
Total segment earnings	Total segment earnings	$	430,520	$	318,503	$	112,017	35.2	%	Total segment earnings	$	87,147	$	135,826	$	(48,679)	(35.8)	%

Professional Segment

Segment Net Sales

~~Worldwide net~~Net sales for our Professional segment for the ~~third~~first quarter of fiscal ~~2021~~2022 increased ~~15.2~~3.5 percent compared to the ~~third~~first quarter of fiscal ~~2020. Worldwide net sales for our Professional segment for the year-to-date period of fiscal 2021 increased 16.9 percent compared to the same period of fiscal 2020.~~2021. The increase ~~in Professional segment net sales for the third quarter of fiscal 2021~~ was primarily due to continued strong demand for many of the products in our portfolio of Professional segment businesses, most notably the Professional segment businesses that were adversely impacted by COVID-19 during the third quarter of fiscal 2020, including increased sales of landscape contractor zero-turn riding mowers due to strong retail demand and low field inventory levels at the end of fiscal 2020 and increased shipments of golf equipment as a result of normalized golf course spending patterns and course investments. Additionally, the net sales increase was driven by price increases across our Professional segment product lines, ~~partially offset~~as well as growth in our irrigation and ag-irrigation businesses driven by ~~reduced sales of underground construction equipment as a result of~~ product availability ~~that limited our ability to meet construction industry~~and strong demand.

~~Consistent with the net sales drivers for the quarter comparison, the~~ The increase in Professional segment net sales ~~for the first nine months of fiscal 2021~~ was ~~primarily due to continued strong demand~~partially offset by supply chain challenges limiting product availability for many of the products in our portfolio of Professional segment businesses, most notably the Professional segment businesses that were adversely impacted by COVID-19 during the first nine months of fiscal 2020, including increased sales of landscape contractor zero-turn riding mowers ~~due to strong retail demand~~ and ~~low field inventory levels at the end of fiscal 2020, increased shipments of~~ golf ~~equipment~~ and irrigation products as a result of the normalization of golf course spending patterns and course investments, and strong demand for rental and specialty construction equipment due to favorable construction industry trends. Additionally, the net sales increase was driven by price increases across our Professional segment product lines and incremental net sales as a result of our acquisition of Venture Products, partially offset by reduced sales of underground construction equipment as a result of product availability that limited our ability to meet construction industry demand and continued softened demand in the oil and gas industry.grounds products.

Segment Earnings

Professional segment earnings for the ~~third~~first quarter of fiscal ~~2021 increased 7.6~~2022 decreased 20.2 percent compared to the ~~third~~first quarter of fiscal ~~2020,~~2021, and when expressed as a percentage of net sales, decreased to ~~17.0~~13.9 percent from ~~18.2~~18.0 percent. As a percentage of net sales, the Professional segment earnings decrease for the ~~third~~first quarter comparison was primarily due to the macroeconomic inflationary environment resulting in higher commodity and component parts costs, unfavorable manufacturing variance due to supply chain challenges, higher engineering expense for continued investments in new product development, and ~~freight~~increased sales and marketing costs ~~partially offset by improved net price realization~~ as a result of price increases across our product lines, productivity improvements, charges incurred for inventory write-downs in the third quarter of fiscal 2020 that did not repeat in the third quarter of fiscal 2021,trade show and ~~favorable product mix.~~

other travel-related business practices continue to gradually return to pre-pandemic levels. The Professional segment earnings for the year-to-date period of fiscal 2021 increased 26.0 percent compared to the same period of fiscal 2020, and when expressed as a percentage of net sales, increased to 18.5 percent from 17.2 percent. As a percentage of net sales, the Professional segment earnings increase for the year-to-date comparisondecrease was ~~primarily driven~~partially offset by improved net price realization as a result of price increases across our Professional segment product lines; productivity improvements, including COVID-19 driven production downtime and manufacturing inefficiencies in the first nine months of fiscal 2020 that were experienced to a lesser degree in the first nine months of fiscal 2021; reduced SG&A expense as a percentage of net sales due to leveraging expense over higher sales volumes; partially offset by the macroeconomic inflationary environment resulting in higher commodity and component parts and freight costs.lines.

Residential Segment

Segment Net Sales

~~Worldwide net~~Net sales for our Residential segment for the ~~third~~first quarter of fiscal ~~2021~~2022 increased ~~23.0~~17.3 percent compared to the ~~third~~first quarter of fiscal ~~2020.~~2021. The Residential segment net sales increase for the ~~third~~first quarter comparison was mainly driven by ~~continued strong retail demand for zero-turn riding and walk power mowers due to new and enhanced products and~~ price increases ~~across our Residential segment product lines.~~

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~~Worldwide net sales for~~across our Residential segment ~~for the year-to-date period~~product lines and increased shipments of fiscal 2021 increased 24.0 percent compared to the same period of fiscal 2020. The Residential segment net sales increase for the year-to-date comparison was mainly driven by continued strong retail demand for zero-turn riding and walk power mowers ~~due to new and enhanced products, strong retail demand for snow thrower products as a result of favorable winter weather conditions in key regions and enhanced retail placement, increased sales~~ahead of our ~~60V Flex-Force battery-powered home solutions products primarily due to successful new product introductions, and price increases across our Residential segment product lines.~~key selling season driven by continued strong demand.

Segment Earnings

Residential segment earnings for the ~~third~~first quarter of fiscal ~~2021 increased 10.5~~2022 decreased 1.1 percent compared to the ~~third~~first quarter of fiscal ~~2020,~~2021, and when expressed as a percentage of net sales, decreased to ~~12.5~~12.4 percent from ~~13.9~~14.7 percent. As a percentage of net sales, the Residential segment ~~net~~ earnings decrease for the ~~third~~first quarter comparison was primarily due to the macroeconomic inflationary environment resulting in higher commodity and component parts ~~and freight~~ costs, as well as unfavorable product mix. The Residential segment earnings decrease was partially offset by improved net price realization as a result of price increases across our Residential segment product lines, productivity improvements, and ~~favorable product mix.~~

Residential segment earnings for the year-to-date period of fiscal 2021 increased 25.7 percent compared to the same period of fiscal 2020, and when expressed as a percentage of net sales, increased to 14.0 percent from 13.8 percent. As a percentage of net sales, the Residential segment net earnings increase for the year-to-date comparison was driven by improved net price realization as a result of price increases across our Residential segment product lines; productivity improvements, including COVID-19 driven production downtime and manufacturing inefficiencies in the first nine months of fiscal 2020 that were experienced to a lesser degree in the first nine months of fiscal 2021; and reduced SG&A expense as a percentage of net sales due to leveraging expense over higher sales ~~volumes; partially offset by the macroeconomic inflationary environment resulting in higher commodity and component parts and freight costs.~~volumes.

Other Activities

Other Net Sales

~~For the third quarter and year-to-date periods of fiscal 2021, net~~Net sales for our Other activities included sales from our wholly-owned domestic distribution company less sales from the Professional and Residential segments to the distribution company. For the third quarter and year-to-date periods of fiscal 2020, net sales for our Other activities included sales from our wholly-owned domestic distribution companies less sales from the Professional and Residential segments to the distribution companies. Net sales for our Other activities in the ~~third~~first quarter ~~and year-to-date periods~~ of fiscal ~~2021~~2022 decreased by ~~$6.2~~$0.7 million ~~and $8.6 million, respectively,~~ compared to the same ~~periods~~period in fiscal ~~2020. These net sales decreases were~~2021. This decrease was due to ~~the sale of~~decreased sales from our ~~Northeastern U.S.~~wholly-owned domestic distribution company ~~during the first quarter of fiscal 2021,~~due to supply chain challenges limiting product availability, partially offset by reduced intercompany sales eliminations for sales from our Professional and Residential segments to our ~~remaining~~ wholly-owned domestic distribution ~~company as a result of the sale of our Northeastern U.S. distribution company and increased sales from our remaining wholly-owned domestic distribution company driven by strong retail demand.~~company.

Other Operating Loss

The operating loss for our Other activities for the ~~third~~first quarter of fiscal 2022 increased $24.8 million compared to the first quarter of fiscal 2021 ~~increased $5.2 million compared to the third quarter of fiscal 2020. This operating loss increase~~and was primarily due to a charge incurred for a legal settlement related to a series of ongoing patent infringement disputes, partially offset by reduced incentive compensation costs in the third quarter of fiscal 2021 due to more normalized business performance as compared to the third quarter of fiscal 2020 where we experienced an incentive compensation expense increase due to improved business performance after the initial onset of the pandemic.

~~The operating loss for our Other activities decreased $5.7 million for the year-to-date period of fiscal 2021. This operating loss decrease was primarily driven by~~ a favorable net legal settlement with BGG ~~reduced SG&A expense as a result of the sale of our Northeastern U.S. distribution company,~~that was recognized in fiscal 2021 and ~~reduced interest expense as a result of lower average outstanding borrowings under our debt arrangements and lower average interest rates due to the reduction~~did not repeat in LIBOR. The operating loss decrease was partially offset by a charge incurred for a legal settlement related to a series of ongoing patent infringement disputes and increased incentive compensation costs as a result of strong business performance. For additional information regarding the favorable net legal settlement with BGG, refer to Note 15, ~~Contingencies, within the Notes to Condensed Consolidated Financial Statements included within Part I of this Quarterly Report on Form 10-Q.~~fiscal 2022.

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FINANCIAL POSITION

Working Capital

~~Our working capital strategy continues to place emphasis on improving asset utilization with a focus on reducing~~Given the amount of working capital in the supply chain, adjusting production plans, and maintaining or improving order replenishment and service levels to end-users. However, executing on certain aspects of our working capital strategy has been difficult given the currentchallenging macroeconomic environment that has created supply chain ~~disruptions~~disruption and more specifically, resulted in ~~current challenges in our ability to source~~challenging conditions for sourcing adequate amounts of certain commodity and component parts inventory and, in certain cases, the inability of our suppliers to meet our commodity and component parts demand ~~requirements.~~requirements, our working capital strategy continues to place primary emphasis on increasing our commodity and component parts inventories in an attempt to maintain requisite inventory levels to meet our anticipated production requirements, avoid manufacturing delays, and meet the anticipated continued strong demand for our products, as well as attempting to ensure service parts availability for our customers. Accounts receivable as of the end of the ~~third~~first quarter of fiscal ~~2021~~2022 increased ~~$6.6~~$59.4 million, or ~~2.2~~19.4 percent, compared to the end of the ~~third~~first quarter of fiscal ~~2020,~~2021, mainly due to higher Residential segment sales to channels not financed through our Red Iron joint ~~venture.~~venture, as well as a higher receivable from our Red Iron joint venture as a result of increased Professional segment sales financed under the joint venture near quarter-end. Inventory levels were up ~~$9.4~~$156.8 million, or ~~1.4~~23.2 percent, as of the ~~third~~first quarter of fiscal ~~2021~~2022 compared to the ~~third~~first quarter of fiscal ~~2020,~~2021, primarily due to higher raw ~~materials~~material and work in process inventories ~~in certain of our Residential and Professional business segments~~ due to supply chain challenges that prevented the conversion of raw materials and work in process inventories into finished goods and the impact of inflation on the cost of commodities and component parts, as well as ~~the timing of component parts purchases. This increase to our inventory levels was partially offset by lower finished goods~~incremental inventories ~~in certain of our Professional segment businesses~~ as a result of ~~strong demand for~~ our ~~products that has exceeded product availability.~~acquisition of Intimidator. Accounts payable increased ~~$142.7~~$110.1 million, or ~~53.1~~30.2 percent, as of the end of the ~~third~~first quarter of fiscal ~~2021~~2022 compared to the end of the ~~third~~first quarter of fiscal ~~2020,~~2021, mainly due to ~~largely~~ normalized ~~corporate~~ spending activity in the ~~third~~first quarter of fiscal ~~2021 as compared to~~2022 and the ~~lower corporate spending activity in~~impact of inflation on the ~~third quarter~~cost of ~~fiscal 2020 as a result of COVID-19, as well as timing of invoice payments.~~commodities, component parts, and other purchased goods and services.

Cash Flow

Cash Flows from Operating Activities

Cash used in operating activities for the first three months of fiscal 2022 was $90.0 million compared to cash provided by operating activities for the first ~~nine~~three months of fiscal 2021 ~~was $477.1 million compared to $305.9 million for the first nine months~~ of ~~fiscal 2020.~~$95.0 million. This increase in cash used in operating activities was primarily due to ~~a higher~~ cash ~~benefit from~~used to satisfy accounts payable ~~due to largely~~and accrued liabilities that remained outstanding as of October 31, 2021 as a result of normalized ~~corporate~~ spending ~~activity~~patterns and timing of invoice payments ~~as well as higher~~near the end of fiscal 2021, lower net ~~earnings. The increase to cash provided by operating activities was partially offset by~~earnings, and more cash ~~utilized for~~consumed within inventory ~~purchases~~due to supply chain challenges that prevented the conversion of raw materials and work in ~~our Professional~~process inventories into finished goods and ~~Residential segment businesses as a result~~the impact of ~~strong demand for our products~~inflation on the cost of commodities and ~~timing~~component parts.

Table of ~~component parts purchases.~~Contents

Cash Flows from Investing Activities

Cash used in investing activities ~~decreased $114.0~~increased $411.3 million during the first ~~nine~~three months of fiscal ~~2021~~2022 compared to the first ~~nine~~three months of fiscal ~~2020.~~2021. This ~~decrease~~increase was primarily due to ~~less~~more cash ~~utilized for~~used to fund the ~~partial holdback release~~preliminary purchase price for our ~~business combination~~acquisition of Venture Products during the first nine months of fiscal 2021 than was used for the initial cash consideration transferred on the acquisition date during the first nine months of fiscal 2020, as well asIntimidator and lower cash proceeds from the sale of ~~our Northeastern U.S. distribution company. The decrease to cash used in investing activities was partially offset by higher cash used for our asset acquisitions.~~a business.

Cash Flows from Financing Activities

Cash provided by financing activities for the first three months of fiscal 2022 was $293.3 million compared to cash used in financing activities for the first ~~nine~~three months of fiscal 2021 ~~was $351.2 million compared to cash provided by financing activities for the first nine months~~ of ~~fiscal 2020 of $119.2~~$143.0 million. This increase in cash ~~used in~~provided by financing activities was mainly due to ~~cash provided by~~higher borrowings under our ~~debt arrangements during~~unsecured senior revolving credit facility to fund the ~~first nine months~~preliminary purchase price for our acquisition of ~~fiscal 2020 that did not repeat during the first nine months~~Intimidator, as well as less cash used for repayments of ~~fiscal 2021 and~~outstanding indebtedness. This increase was partially offset by more cash used for repurchases of shares of our common stock under our Board authorized repurchase ~~program as we resumed repurchase activity during the first nine months of fiscal 2021, partially offset by lower cash used for repayments of outstanding indebtedness.~~program.

Liquidity and Capital Resources

Our businesses are seasonally working capital intensive and require funding for purchases of raw materials used in production, replacement parts inventory, payroll and other administrative costs, capital expenditures, establishment of new facilities, expansion and renovation of existing facilities, as well as for financing receivables from customers that are not financed with Red Iron or other third-party financial institutions. ~~Our~~Because of our seasonality, our accounts receivable balance have historically ~~increases~~increased between January and April as a result of typically higher sales volumes and extended payment terms made available to our customers, and have typically ~~decreases~~decreased between May and December when payments are received. However, as a result of COVID-19 and the challenging macroeconomic environment that has created supply chain disruption, our accounts receivable pattern has not followed historical patterns during fiscal 2022 and fiscal 2021 because our sales cadence has been driven more by our ability to produce product than historical demand patterns and seasonality. We currently expect this trend to continue throughout the remainder of fiscal 2022.

We generally fund cash requirements for working capital needs, capital expenditures, contractual obligations, acquisitions, investments, debt repayments, interest payments, quarterly cash dividend payments, and common stock repurchases, all as applicable, through cash provided by operating activities, availability under our ~~existing~~ revolving credit facility, and in certain instances, other forms of financing arrangements. Our revolving credit facility has been adequate for these purposes, although we have negotiated and completed additional financing arrangements as needed to allow us to complete ~~acquisitions.~~acquisitions or for other corporate purposes. We currently believe that our existing liquidity position, including the funds available through existing, and potential future, financing

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arrangements and forecasted cash flows from operations will be sufficient to provide the necessary capital resources for our anticipated working capital needs, capital expenditures, investments, debt repayments, interest payments, quarterly cash dividend payments, and common stock repurchases, all as applicable, for at least the next twelve months. As of ~~July 30, 2021,~~January 28, 2022, we had available liquidity of ~~$1,132.2~~$387.4 million, consisting of cash and cash equivalents of ~~$535.3~~$193.0 million, of which ~~$115.1~~$99.1 million was held by our foreign subsidiaries, and availability under our revolving credit facility of ~~$596.9~~$194.4 million.

Indebtedness

Our debt arrangements are described in further detail within our most recently filed Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020.~~2021. The following is a summary of our indebtedness:


(Dollars in thousands)	(Dollars in thousands)	July 30, 2021		July 31, 2020		October 31, 2020		(Dollars in thousands)	January 28, 2022		January 29, 2021		October 31, 2021
$600 million revolving credit facility, due June 2023		$	—	$	—	$	—
$600 million revolving credit facility, due October 2026								$600 million revolving credit facility, due October 2026	$	400,000	$	—	$	—
$270 million term loan, due October 2026								$270 million term loan, due October 2026	270,000		—		270,000
$200 million term loan, due April 2022	$200 million term loan, due April 2022	100,000		100,000		100,000		$200 million term loan, due April 2022	—		100,000		—
$300 million term loan, due April 2024	$300 million term loan, due April 2024	170,000		180,000		180,000		$300 million term loan, due April 2024	—		180,000		—
$190 million term loan, due June 2023		—		190,000		90,000
3.81% series A senior notes, due June 2029	3.81% series A senior notes, due June 2029	100,000		100,000		100,000		3.81% series A senior notes, due June 2029	100,000		100,000		100,000
3.91% series B senior notes, due June 2031	3.91% series B senior notes, due June 2031	100,000		100,000		100,000		3.91% series B senior notes, due June 2031	100,000		100,000		100,000
7.8% debentures, due June 2027	7.8% debentures, due June 2027	100,000		100,000		100,000		7.8% debentures, due June 2027	100,000		100,000		100,000
6.625% senior notes, due May 2037	6.625% senior notes, due May 2037	124,024		123,962		123,978		6.625% senior notes, due May 2037	124,055		123,993		124,040
Less: unamortized discounts, debt issuance costs, and deferred charges	Less: unamortized discounts, debt issuance costs, and deferred charges	2,462		3,057		2,855		Less: unamortized discounts, debt issuance costs, and deferred charges	2,701		2,645		2,798
Total long-term debt	Total long-term debt	691,562		890,905		791,123		Total long-term debt	1,091,354		701,348		691,242
Less: current portion of long-term debt	Less: current portion of long-term debt	104,217		108,869		99,873		Less: current portion of long-term debt	100,000		9,992		—
Long-term debt, less current portion	Long-term debt, less current portion	$	587,345	$	782,036	$	691,250	Long-term debt, less current portion	$	991,354	$	691,356	$	691,242

~~During the first nine months~~As of ~~fiscal 2021,~~January 28, 2022, we ~~prepaid the remaining $90.0~~had $400.0 million of outstanding borrowings under the ~~$190.0~~revolving credit facility, primarily as a result of the amount drawn to fund the purchase price of our acquisition of Intimidator, and $5.6 million ~~three-year unsecured senior term loan facility and prepaid $10.0~~outstanding under the

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sublimit for standby letters of credit, which resulted in $194.4 million of unutilized availability under the ~~remaining~~revolving credit facility. Typically, our revolving credit facility is classified as long-term debt within the Condensed Consolidated Balance Sheets as we have the ability to extend the outstanding borrowings under the ~~$300.0 million five-year unsecured senior term loan~~revolving credit facility for the full-term of the facility. AsHowever, if we intend to prepay a portion of ~~July 30, 2021, we reclassified~~ the ~~remaining $100.0 million~~ outstanding balance under the ~~$200.0 million three-year unsecured senior term loan~~revolving credit facility ~~net~~within the next twelve months, we reclassify the portion of outstanding borrowings under the ~~related proportionate share of deferred debt issuance costs,~~revolving credit facility that we intend to repay within the next twelve months to current portion of long-term debt within the Condensed Consolidated Balance ~~Sheets as the maturity date~~Sheets. As of ~~the $200.0 million three-year unsecured senior term loan facility is April 1,~~January 28, 2022, ~~and is within the next twelve months. Additionally, as of July 30, 2021,~~ we reclassified ~~$4.2~~$100.0 million of ~~the~~ outstanding ~~balance~~borrowings under the ~~$300.0 million five-year unsecured senior term loan~~revolving credit facility ~~net of the related proportionate share of deferred debt issuance costs,~~ to current portion of long-term debt within the Condensed Consolidated Balance Sheets as we ~~are required~~currently intend to ~~begin making quarterly amortization payments on the $300.0 million five-year unsecured senior term loan facility~~repay this amount within the next twelve months.

As of ~~July 30, 2021,~~January 28, 2022, we were in compliance with all covenants related to our financing arrangements and were not limited in the amount for payments of cash dividends and common stock repurchases. We expect to be in compliance with all covenants related to our financing arrangements during the remainder of fiscal ~~2021.~~2022. If we were out of compliance with any covenant required by our financing arrangements following the applicable cure period, our term loan ~~facilities,~~facility, long-term senior notes, debentures, and any amounts outstanding under the revolving credit facility could become due and payable if we were unable to obtain a covenant waiver or refinance our borrowings under our financing arrangements.

~~Capital Expenditures~~

During the third quarter of fiscal 2021, we announced that we increased our planned capital expenditures for fiscal 2021 to approximately $130.0 million due to our strong Condensed Consolidated Balance Sheet and future growth expectations, up from $115.0 million indicated in the MD&A included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020. This increase reflects our priorities of investing in key technology areas and ensuring we have capacity to meet our future growth expectations.

Cash Dividends

Our Board of Directors approved a cash dividend of ~~$0.2625~~$0.30 per share for the ~~third~~first quarter of fiscal ~~2021~~2022 that was paid on ~~July 14, 2021.~~January 11, 2022. This was an increase of 514.3 percent over our cash dividend of ~~$0.25~~$0.2625 per share for the ~~third~~first quarter of fiscal ~~2020.~~2021. We currently expect to continue paying our quarterly cash dividend to shareholders for the remainder of fiscal ~~2021.~~2022.

Share Repurchases

During the first ~~nine~~three months of fiscal ~~2021,~~2022, we repurchased ~~1,733,477~~738,632 shares of our common stock in the open market under our Board authorized repurchase program, thereby reducing our total shares outstanding. As of ~~July 30, 2021, 5,308,779~~January 28, 2022, 3,313,830 shares

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remained available for repurchase under our Board authorized repurchase program. We currently expect to continue repurchasing shares of our common stock throughout the remainder of fiscal ~~2021,~~2022, depending on our cash balance, debt repayments, market conditions, our anticipated working capital needs, the price of our common stock, and/or other factors.

Customer Financing Arrangements

Our customer financing arrangements, including both wholesale financing and end-user financing arrangements, are described in further detail within our most recently filed Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020.~~2021. There have been no material changes to our end-user customer financing arrangements during the first ~~nine~~three months of fiscal ~~2021.~~2022.

Wholesale Financing

We are party to a joint venture with TCF Inventory Finance, Inc. ("TCFIF"), ~~established as Red Iron,~~ a subsidiary of The Huntington National Bank, established as Red Iron, the primary purpose of which is to provide inventory financing to certain distributors and dealers of certain of our products in the U.S. that enables them to carry representative inventories of certain of our products. The net amount of receivables financed for dealers and distributors under this arrangement for the ~~nine~~three month ~~period~~periods ended ~~July 30,~~January 28, 2022 and January 29, 2021 ~~and July 31, 2020~~ was ~~$1,733.0~~$528.1 million and ~~$1,374.3~~$511.3 million, respectively.

Under a separate agreement, TCF Commercial Finance Canada, Inc. ("TCFCFC") provides inventory financing to dealers of certain of our products in Canada. We also have floor plan financing agreements with other third-party financial institutions to provide floor plan financing to certain dealers and distributors not financed through Red Iron or TCFCFC, which include agreements with third-party financial institutions in the U.S. and internationally. These third-party financial institutions and TCFCFC financed ~~$323.2~~$106.5 million and ~~$308.3~~$92.6 million of receivables for such dealers and distributors during the ~~nine~~three month periods ended ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020,~~ respectively. As of ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020, $129.7~~$220.0 million and ~~$175.6~~$147.6 million, respectively, of receivables financed by the third-party financing companies and TCFCFC, excluding Red Iron, were outstanding.

We entered into a limited inventory repurchase agreement with Red Iron and TCFCFC. Under such limited inventory repurchase agreement, we have agreed to repurchase products repossessed by Red Iron and TCFCFC, up to a maximum aggregate amount of $7.5 million in a calendar year. Additionally, as a result of our floor plan financing agreements with the separate third-party financial institutions, we have also entered into inventory repurchase agreements with the separate third-party financial institutions. Under such inventory repurchase agreements, we have agreed to repurchase products repossessed by the separate third-party financial institutions. As of ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020,~~ we were contingently liable to repurchase up to a maximum amount of ~~$93.8~~$172.3 million and ~~$140.0~~$111.2 million, respectively, of inventory related to receivables under these inventory repurchase agreements. Our financial exposure under these inventory repurchase agreements is limited to the difference between the amount paid to Red Iron or other third-party financing institutions for repurchases of inventory and the amount received upon subsequent resale of the repossessed product. We have repurchased immaterial amounts of inventory

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pursuant to such arrangements during the ~~nine~~three month ~~period~~periods ended ~~July 30, 2021~~January 28, 2022 and ~~July 31, 2020.~~January 29, 2021. However, a decline in retail sales or financial difficulties of our distributors or dealers could cause this situation to change and thereby require us to repurchase financed product, which could have an adverse effect on our ~~Results~~results of ~~Operations, Financial Position,~~operations, financial position, or ~~Cash Flows.~~cash flows.

~~Contractual Obligations~~

We are obligated to make future payments under various existing contracts, such as debt agreements, operating lease agreements, unconditional purchase obligations, and other long-term obligations. Our contractual obligations are described in further detail within our most recently filed Annual Report on Form 10-K for the fiscal year ended October 31, 2020. There have been no material changes to such contractual obligations during the first nine months of fiscal 2021, with the exception of the repayment of the remaining outstanding borrowings under the $190.0 million term loan during the first quarter of fiscal 2021 and the prepayment of $10.0 million of the remaining outstanding borrowings under the $300.0 million five-year unsecured senior term loan facility during the second quarter of fiscal 2021.

~~Off-Balance Sheet Arrangements~~

We have off-balance sheet arrangements with Red Iron and other third-party financial institutions in which inventory receivables for certain dealers and distributors are financed by Red Iron, TCFCFC, or other third-party financial institutions. Additionally, we use standby letters of credit under our revolving credit facility, import letters of credit, and surety bonds in the ordinary course of business to ensure the performance of contractual obligations, as required under certain contracts. Our off-balance sheet arrangements are described in further detail within our most recently filed Annual Report on Form 10-K for the fiscal year ended October 31, 2020. There have been no material changes to such off-balance sheet arrangements during the first nine months of fiscal 2021 with the exception of those described in the section titled "Wholesale Financing" within this MD&A.

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NON-GAAP FINANCIAL MEASURES

We have provided non-GAAP financial measures, which are not calculated or presented in accordance with U.S. GAAP, as information supplemental and in addition to the most directly comparable financial measures presented in this Quarterly Report on Form 10-Q that are calculated and presented in accordance with U.S. GAAP. We use these non-GAAP financial measures in making operating decisions and assessing liquidity because we believe they provide meaningful supplemental information regarding our core operational performance and cash flows, as a measure of our liquidity, and provide us with a better understanding of how to allocate resources to both ongoing and prospective business initiatives. Additionally, these non-GAAP financial measures facilitate our internal comparisons to both our historical operating results and to our competitors' operating results by factoring out potential differences caused by charges and benefits not related to our regular, ongoing business, including, without limitation, certain non-cash, large, and/or unpredictable charges and benefits; acquisitions and dispositions; legal judgments, settlements, or other matters; and tax positions. We believe that these non-GAAP financial measures, when considered in conjunction with our Condensed Consolidated Financial Statements prepared in accordance with U.S. GAAP, provide investors with useful supplemental financial information to better understand our core operational performance and cash flows. These non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the most directly comparable U.S. GAAP financial measures. The non-GAAP financial measures may differ from similar measures used by other companies.

Reconciliation of Non-GAAP Financial Performance Measures

The following table provides a reconciliation of financial performance measures calculated and reported in accordance with U.S. GAAP to the most directly comparable non-GAAP financial performance measures for the three ~~and nine~~ month periods ended ~~July 30, 2021~~January 28, 2022 and ~~July 31, 2020:~~January 29, 2021:

Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) July 30, 2021 July 31, 2020 July 30, 2021 July 31, 2020
Gross profit $ 331,117 $ 294,574 $ 1,049,106 $ 889,379
Acquisition-related costs2
— 1,087 — 3,950
Management actions3
— — — 857
Non-GAAP gross profit $ 331,117 $ 295,661 $ 1,049,106 $ 894,186
Gross margin 33.9 % 35.0 % 35.0 % 35.0 %
Acquisition-related costs2
— % 0.2 % — % 0.2 %
Non-GAAP gross margin 33.9 % 35.2 % 35.0 % 35.2 %
Operating earnings $ 121,939 $ 115,952 $ 444,120 $ 332,876
Litigation settlements, net1
5,750 — (11,325) —
Acquisition-related costs2
— 1,161 — 6,183
Management actions3
— — — 857
Non-GAAP operating earnings $ 127,689 $ 117,113 $ 432,795 $ 339,916
Earnings before income taxes $ 117,451 $ 110,993 $ 430,520 $ 318,503
Litigation settlements, net1
5,750 — (11,325) —
Acquisition-related costs2
— 1,161 — 6,183
Management actions3
— — — 857
Non-GAAP earnings before income taxes $ 123,201 $ 112,154 $ 419,195 $ 325,543
Net earnings $ 96,320 $ 88,968 $ 349,772 $ 257,505
Litigation settlements, net1
4,525 — (8,947) —
Acquisition-related costs2
— 924 — 4,922
Management actions3
— — — 682
Tax impact of stock-based compensation4
(1,397) (1,173) (7,846) (4,550)
Non-GAAP net earnings $ 99,448 $ 88,719 $ 332,979 $ 258,559
Net earnings per diluted share $ 0.89 $ 0.82 $ 3.21 $ 2.37
Litigation settlements, net1
0.04 — (0.08) —
Acquisition-related costs2
— 0.01 — 0.05
Tax impact of stock-based compensation4
(0.01) (0.01) (0.07) (0.04)
Non-GAAP net earnings per diluted share $ 0.92 $ 0.82 $ 3.06 $ 2.38


	Three Months Ended
(Dollars in thousands, except per share data)	January 28, 2022			January 29, 2021












Operating earnings	$	91,626		$	141,465
Acquisition-related costs1	1,016			—
Litigation settlement, net2	—			(17,075)

Non-GAAP operating earnings	$	92,642		$	124,390

Earnings before income taxes	$	87,147		$	135,826
Acquisition-related costs1	1,016			—
Litigation settlement, net2	—			(17,075)

Non-GAAP earnings before income taxes	$	88,163		$	118,751

Net earnings	$	69,510		$	111,281
Acquisition-related costs1	804			—
Litigation settlement, net2	—			(13,455)

Tax impact of stock-based compensation3	(620)			(4,578)
Non-GAAP net earnings	$	69,694		$	93,248

Net earnings per diluted share	$	0.66		$	1.02
Acquisition-related costs1	0.01			—
Litigation settlement, net2	—			(0.13)

Tax impact of stock-based compensation3	(0.01)			(0.04)
Non-GAAP net earnings per diluted share	$	0.66		$	0.85

Effective tax rate	20.2		%	18.1		%



Tax impact of stock-based compensation3	0.7		%	3.4		%
Non-GAAP effective tax rate	20.9		%	21.5		%

1 On January 13, 2022, we completed the acquisition of Intimidator. Acquisition-related costs for the three month period ended January 28, 2022 represent transaction and integration costs incurred for our acquisition of Intimidator. No acquisition-related costs were incurred during the three month period ended January 29, 2021. For additional information regarding the acquisition of Intimidator, refer to Note 2, Business Combination, within the Notes to Condensed Consolidated Financial Statements included within Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q.

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Three Months Ended Nine Months Ended
July 30, 2021 July 31, 2020 July 30, 2021 July 31, 2020
Effective tax rate 18.0 % 19.8 % 18.8 % 19.2 %
Tax impact of stock-based compensation4
1.3 % 1.1 % 1.8 % 1.4 %
Non-GAAP effective tax rate 19.3 % 20.9 % 20.6 % 20.6 %

1 2On November 19, 2020, Exmark Manufacturing Company Incorporated ("Exmark"), a wholly-owned subsidiary of TTC, and Briggs & Stratton Corporation ("BGG") entered into a settlement agreement ("Settlement Agreement") relating to the decade-long patent infringement litigation that Exmark originally filed in May 2010 against Briggs & Stratton Power Products Group, LLC ("BSPPG"), a former wholly-owned subsidiary of BGG (Case No. 8:10CV187, U.S. District Court for the District of Nebraska) (the "Infringement Action"). The Settlement Agreement provided, among other things, that upon approval by the bankruptcy court, and such approval becoming final and nonappealable, BGG agreed to pay Exmark $33.65 million ("Settlement Amount"). During January 2021, the first quarter of fiscal 2021, the Settlement Amount was received by Exmark in connection with the settlement of the Infringement Action and at such time, the underlying events and contingencies associated with the gain contingency related to the Infringement Action were satisfied. As such, we recognized in selling, general and administrative expense within the Condensed Consolidated Statements of Earnings during the first quarter of fiscal 2021 (i) the gain associated with the Infringement Action and (ii) a corresponding expense related to the contingent fee arrangement with our external legal counsel customary in patent infringement cases equal to approximately 50 percent of the Settlement Amount. ~~Additionally, during~~Accordingly, litigation settlement, net represents the ~~third quarter of fiscal 2021, we~~net amount recorded ~~a charge related to a legal settlement for a series of ongoing patent infringement disputes~~ within selling, general and administrative expense in the Condensed Consolidated Statements of Earnings. Accordingly, litigation settlements, net represents the charge incurred for the settlement of the patent infringement disputes for the three month period ended July 30, 2021. Litigation settlements, net for the nine month period ended July 30, 2021 represents the net amount recordedEarnings for the settlement of the Infringement Action ~~as well as~~during the ~~charge incurred~~three month period ended January 29, 2021. No amounts were recorded for litigation settlement, net during the ~~settlement of the patent infringement disputes.~~three month period ended January 28, 2022. Refer to Note ~~15,~~14, Contingencies, for additional information regarding the settlement of the Infringement Action.

2 On March 2, 2020, we completed the acquisition of Venture Products and on April 1, 2019, we completed the acquisition of CMW. Acquisition-related costs for the three month period ended July 31, 2020 represent integration costs and charges incurred for the take-down of the inventory fair value step-up amount resulting from purchase accounting adjustments related to the acquisition of Venture Products. Acquisition-related costs for the nine month period ended July 31, 2020 represent transaction costs incurred for the acquisition of Venture Products, as well as integration costs and charges incurred for the take-down of the inventory fair value step-up amount resulting from purchase accounting adjustments related to the acquisitions of Venture Products and CMW. No acquisition-related costs were incurred during the three and nine month periods ended July 30, 2021. For additional information regarding the acquisition of Venture Products, refer to Note 2, ~~Business Combination and Asset Acquisitions~~, within the Notes to Condensed Consolidated Financial Statements included within Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q. For additional information regarding the acquisition of CMW, refer to Note 2, ~~Business Combinations~~, of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of our most recent Annual Report on Form 10- K for the fiscal year ended October 31, 2020.

3During the third quarter of fiscal 2019, we announced the wind down of our Toro-branded large horizontal directional drill and riding trencher product line ("Toro underground wind down"). Management actions represent inventory write-down charges incurred during the nine month period ended July 31, 2020 for the Toro underground wind down. No charges were incurred for the Toro underground wind down for the three month period ended July 31, 2020 and the three and nine month periods ended July 30, 2021. For additional information regarding the Toro underground wind down, refer to Note 7, ~~Management Actions~~, of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data," of our most recent Annual Report on Form 10- K for the fiscal year ended October 31, 2020.

4 The accounting standards codification guidance governing employee stock-based compensation requires that any excess tax deduction for stock-based compensation be immediately recorded within income tax expense. Employee stock-based compensation activity, including the exercise of stock options under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended, can be unpredictable and can significantly impact our net earnings, net earnings per diluted share, and effective tax rate. These amounts represent the discrete tax benefits recorded as excess tax deductions for stock-based compensation during the three ~~and nine~~ month periods ended ~~July 30, 2021~~January 28, 2022 and ~~July 31, 2020.~~January 29, 2021.

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Reconciliation of Non-GAAP Liquidity Measures

We define non-GAAP free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. Non-GAAP free cash flow conversion percentage represents non-GAAP free cash flow as a percentage of net earnings. We consider non-GAAP free cash flow and non-GAAP free cash flow conversion percentage to be liquidity measures that provide useful information to management and investors about our ability to convert net earnings into cash resources that can be used to pursue opportunities to enhance shareholder value, fund ongoing and prospective business initiatives, and strengthen our Condensed Consolidated Balance Sheets, after reinvesting in necessary capital expenditures required to maintain and grow our business. The following table provides a reconciliation of net cash provided by operating activities, the most directly comparable GAAP financial measure, to non-GAAP free cash flow for the ~~nine~~three month periods ended ~~July 30, 2021~~January 28, 2022 and ~~July 31, 2020:~~January 29, 2021:


		Nine Months Ended							Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	July 30, 2021			July 31, 2020			(Dollars in thousands)	January 28, 2022			January 29, 2021
Net cash provided by operating activities		$	477,135		$	305,876
Net cash (used in) provided by operating activities								Net cash (used in) provided by operating activities	$	(90,043)		$	95,025
Less: Purchases of property, plant and equipment	Less: Purchases of property, plant and equipment	47,961			46,627			Less: Purchases of property, plant and equipment	11,903			10,504
Non-GAAP free cash flow	Non-GAAP free cash flow	429,174			259,249			Non-GAAP free cash flow	(101,946)			84,521
Net earnings	Net earnings	$	349,772		$	257,505		Net earnings	$	69,510		$	111,281
Non-GAAP free cash flow conversion percentage	Non-GAAP free cash flow conversion percentage	122.7		%	100.7		%	Non-GAAP free cash flow conversion percentage	(146.7)		%	76.0		%

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates since our most recent Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020.~~2021. Refer to Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations", and Part II, Item 8, Note 1, Summary of Significant Accounting Policies and Related Data, within our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020~~2021 for a discussion of our critical accounting policies and estimates.

~~FORWARD-LOOKING INFORMATION~~

This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and that are subject to the safe harbor created by those sections. In addition, we or others on our behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on our web sites or otherwise. Statements that are not historical are forward-looking and reflect expectations and assumptions. Forward-looking statements are based on our current expectations of future events, and often can be identified in this report and elsewhere by using words such as "expect," "strive," "looking ahead," "outlook," "guidance," "forecast," "goal," "optimistic," "anticipate," "continue," "plan," "estimate," "project," "believe," "should," "could," "will," "would," "possible," "may," "likely," "intend," "can," "seek," "potential," "pro forma," or the negative thereof and similar expressions or future dates. Our forward-looking statements generally relate to our future performance, including our anticipated operating results, liquidity requirements, financial condition, and anticipated impacts of COVID-19; our business strategies and goals; and the effect of laws, rules, policies, regulations, tax reform, new accounting pronouncements, and outstanding litigation on our business and future performance.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied. The following are some of the factors known to us that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements:

•Adverse economic conditions and outlook in the United States and in other countries in which we conduct business, including as a result of COVID-19, have and could continue to impact demand for our products, and ultimately, our net sales and earnings. These include but are not limited to business closures; slowdowns, suspensions or delays of production and commercial activity; recessionary conditions; slow or negative economic growth rates; slowdowns or reductions in levels of golf course activity, including development, renovation, and improvement; golf course closures; reduced governmental or municipal spending; reduced levels of home ownership, construction, and sales; home foreclosures; negative consumer confidence; reduced consumer spending levels; increased unemployment rates; prolonged high unemployment rates; higher costs and reduced availability of commodities, components, parts, and accessories and/or transportation-related costs, including as a result of inflation, changing prices, foreign currency fluctuations, tariffs, and/or duties; inflationary or deflationary pressures; reduced infrastructure spending; the impact of U.S. federal debt, state debt and sovereign debt defaults and austerity measures by certain European countries; reduced credit availability or unfavorable credit terms for our distributors, dealers, and end-user customers; higher short-term, mortgage, and other interest rates; and general economic and political conditions and expectations. In the past, some of

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these factors have caused our distributors, dealers, and end-user customers to reduce spending and delay or forego purchases of our products, which have had an adverse effect on our net sales and earnings.

•COVID-19 has materially adversely impacted portions of our business, financial condition and operating results and will likely continue to adversely impact portions of our business and such impact could continue to be material and will depend on numerous evolving factors, including: the duration of the impacts of COVID-19; governmental, business and individual actions that have been, and continue to be, taken in response to COVID-19; the success of the deployment of approved COVID-19 vaccines, their effectiveness against COVID-19 variants and their rate of adoption; the effect of COVID-19 on our dealers, distributors, mass retailers and other channel partners and customers, including reduced or constrained budgets and cash preservation efforts; our ability during COVID-19 to continue operations without disruption and/or adjust our production schedules; significant reductions or volatility in demand for one or more of our products or services; the effect of COVID-19 on our suppliers and companies throughout our supply chain and any such supplier's ability to meet supply commitments, requirements, and/or demands and our ability to continue to obtain commodities, components, parts, and accessories on a timely basis through our supply chain and at anticipated costs; logistics costs and challenges; costs incurred as a result of necessary actions and preparedness plans we have enacted and may enact in the future to help ensure the health and safety of our employees and continued operations; potential future restructuring, impairment or other charges; availability of employees, their ability to conduct work away from normal working locations and/or under revised work environment protocols; our ability to establish and maintain appropriate estimates and assumptions used to prepare the Condensed Consolidated Financial Statements; the continued impact of COVID-19 on the financial and credit markets and economic activity generally; our ability to access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all; our ability to comply with the financial covenants in our debt agreements if the material economic conditions resulting from COVID-19 lead to substantially increased indebtedness and/or lower EBITDA for us; and the continued exacerbation of negative impacts as a result of the occurrence of a global or national recession, depression or other sustained adverse market event as a result of COVID-19. In addition, the impacts from COVID-19 and efforts to contain it have heightened the other risks described herein.

•Our Professional segment net sales are dependent upon certain and varied factors. Our Professional segment includes a variety of products that are sold by distributors or dealers, or directly to government customers, rental companies, construction companies, and professional users engaged in maintaining and creating properties and landscapes, such as golf courses, sports fields, residential and commercial properties and landscapes, and governmental and municipal properties. Among other things, any one of a combination of the following factors, many of which have been adversely impacted by COVID-19, could result in a decrease in spending and demand for our products and have an adverse effect on our Professional segment net sales: golf course revenues; reduced levels of investment in golf course renovations and improvements; the level of new golf course development and golf course closures; reduced consumer and business spending on property maintenance, including lawn care and snow removal activities; construction activity; low or reduced levels of infrastructure improvements; decreased oil and gas construction activities; a decline in acceptance of, and demand for, ag-irrigation solutions for agricultural production; availability of cash or credit for our customers to finance new product purchases; and customer and/or government budgetary constraints, resulting in reduced spending for grounds maintenance or construction equipment.

•If we are unable to continue to enhance existing products, as well as develop and market new products, that respond to customer needs and preferences and achieve market acceptance, including by incorporating new, emerging, and/or disruptive technologies that may become preferred by our customers, we may experience a decrease in demand for our products, and our net sales, which have historically benefited from the introduction of new products, may be adversely affected.

•Increases in the cost of commodities, components, parts and accessories that we purchase and/or increases in other costs of doing business have, and could continue to, adversely affect our profit margins and businesses. We purchase commodities, components, parts and accessories for use in our manufacturing process and end-products or to be sold as stand-alone end-products, such as steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, electric motors, and other commodities, components, parts and accessories. Increased costs, including as a result of COVID-19 and/or inflation, increased tariffs, duties or other charges as a result of changes to U.S. or international trade policies or trade agreements, trade regulation and/or industry activity, or antidumping and countervailing duty petitions on certain products imported from foreign countries, including certain engines imported into the United States from China, or the inability of suppliers to continue operations or otherwise remain in business as a result of COVID-19, financial difficulties, or otherwise, have affected our profit margins, operating results and businesses and could continue to result in declines in our profit margins, operating results and businesses.

•~~Disruption and/or shortages in the availability of commodities, components, parts, or accessories used in our products has, and could continue to, adversely affect our business.~~

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•Any disruption at any of our facilities or in our manufacturing or other operations, or those of our distribution channel customers or suppliers, or our inability to cost-effectively expand existing facilities, open and manage new or acquired facilities, and/or move production between manufacturing facilities could adversely affect our business and operating results.

•If we underestimate and overestimate demand for our products and do not maintain appropriate inventory levels, our net sales and/or working capital could be negatively impacted. Our ability to manage our inventory levels to meet our customers' demand for our products is important for our business. Managing inventory levels in the current COVID-19 commercial environment is particularly difficult as a result of changes to production operations, locations and schedules as well as demand volatility and availability of supply of commodities, components, parts or accessories used in our products. Such manufacturing inefficiencies have resulted in unfavorable manufacturing variances that have negatively impacted our financial results. If such manufacturing inefficiencies continue, we underestimate or overestimate both channel and retail demand for our products, are not able to manufacture product to fulfill customer demand, and/or do not produce or maintain appropriate inventory levels, our net sales, profit margins, net earnings, and/or working capital could be negatively impacted.

•~~Changes in the composition of, financial viability of, and/or the relationships with, our distribution channel customers could negatively impact our business and operating results.~~

•Our business and operating results are subject to the inventory management decisions of our distribution channel customers. Adjustments in the carrying amount of inventories by our distribution channel customers have impacted and may continue to impact our inventory management and working capital goals as well as operating results.

•Weather conditions, including conditions exacerbated by global climate changes, have previously impacted demand for some of our products and/or caused disruptions in our operations, including as a result of disruption in our supply chain, and may impact such items in the future which may adversely affect our net sales or otherwise adversely affect our operating results.

•~~Fluctuations in foreign currency exchange rates have in the past affected our operating results and could continue to result in declines in our net sales and net earnings.~~

•Our Residential segment net sales are dependent upon consumers buying our products at mass retailers, dealers, and home centers; the amount of product placement at mass retailers and home centers; consumer confidence and spending levels; changing buying patterns of customers; and the impact of significant sales or promotional events.

•Our financial performance, including our profit margins and net earnings, have been impacted and will continue to be impacted depending on the mix of products we sell during a given period, as our Professional segment products generally have higher profit margins than our Residential segment products. Similarly, within each segment, lower sales of products that generally carry higher profit margins, have impacted our financial performance, including profit margins and net earnings, and such financial performance could continue to be negatively impacted.

•We intend to grow our business in part through acquisitions and alliances, strong customer relations, and new joint ventures, investments, and partnerships, which could be risky and may harm our business, reputation, financial condition, and operating results.

•As of July 30, 2021, we had goodwill of $422.0 million and other intangible assets of $426.5 million. These amounts are maintained in various reporting units and together comprise 28.6 percent of our total assets as of July 30, 2021. If we determine that our goodwill or other intangible assets have become impaired, we will be required to record a charge resulting from the impairment. Impairment charges could be significant and could adversely affect our results of operations and financial condition.

•~~Failure to successfully complete divestitures or other restructuring activities could negatively affect our operations.~~

•We face intense competition in all of our product lines with numerous manufacturers, including some that have larger operations and greater 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 is 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 trade or other policy changes between the U.S. and other countries, trade regulation and/or industry activity that favors domestic companies, including antidumping and countervailing duty petitions on certain products imported from foreign countries, including certain engines imported into the United States from China, pandemics and/or epidemics, including COVID-19, or weakened international economic conditions; 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.

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•Any disruption, including as a result of natural or man-made disasters, inclement weather, including as a result of climate change-related events, work slowdowns, strikes, pandemics and/or epidemics, including COVID-19, protests and/or social unrest, or other events, at or in proximity to any of our facilities or in our manufacturing or other operations, or those of our distribution channel customers, mass retailers or home centers where our products are sold, or suppliers, or our inability to cost-effectively expand existing facilities, open and manage new facilities, and/or move production between manufacturing facilities has and could continue to adversely affect our business and operating results.

•Our labor needs, and those of our suppliers and distribution channel partners, fluctuate throughout the year and by region. During all periods presented in this Quarterly Report on Form 10-Q, such labor needs were negatively impacted by COVID-19 and such impact is expected to continue. Any failure by us, or our suppliers and/or distribution partners, to hire and/or retain a labor force, including to adequately staff manufacturing operations, perform service or warranty work, or other necessary activities or by such labor force to adequately and safely perform their jobs could adversely affect our business, operating results, and reputation.

•Our labor force, and those of our suppliers and distribution channel partners, have been impacted by COVID-19 and such impact will likely continue, including as a result of global governmental, business and individual actions that have been, and continue to be, taken in response to COVID-19. Furthermore, we have incurred additional costs as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations, including remote working accommodations, enhanced cleaning processes, protocols designed to implement appropriate social distancing practices, and/or adoption of additional wage and benefit programs to assist employees.

•Management information systems are critical to our business. If our information systems or information security practices, or those of our business partners or third-party service providers, fail to adequately perform and/or protect sensitive or confidential information, or if we, our business partners, or third-party service providers experience an interruption in, or breach of, the operation of such systems or practices, including by theft, loss or damage from unauthorized access, security breaches, natural or man-made disasters, cyber attacks, computer viruses, malware, phishing, denial of service attacks, 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. In addition, our products may infringe the valid proprietary rights of others.

•Our company, business, properties, and products are subject to laws, rules, policies, and regulations, 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. Laws, rules, policies, and regulations may also adversely affect the demand for some of our products and our operating results. In addition, changes in laws, rules, policies, and regulations in the U.S. or other countries in which we conduct business also may adversely affect our financial results, including as a result of: (1) adoption of laws and regulations to address COVID-19, (ii) taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance, including as a result of the Tax Act, (iii) changes to, or adoption of new, healthcare laws or regulations, or (iv) changes to U.S. or international policies or trade agreements or trade regulation and/or industry activity, including antidumping and countervailing duty petitions on certain products imported from foreign countries, including certain engines imported into the United States from China, that could result in additional duties or other charges on commodities, components, parts, or accessories we import.

•Changes in accounting or tax standards, policies, or assumptions in applying accounting or tax policies could adversely affect our financial statements, including our financial results and financial condition.

•~~Climate change legislation, regulations, or accords 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 liabilities 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 subject to product quality issues, product liability claims, 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.

•We are dependent upon the availability of floor plan financing 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 our floor plan arrangements, challenges or delays in transferring new distributors and dealers from any

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business we might acquire or otherwise to available floor plan platforms, any termination or disruption of our floor plan arrangements, 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 and other terms 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 such terms, especially the financial covenants, our credit arrangements could be terminated and our senior notes, debentures, term loan facilities, and any amounts outstanding under our revolving credit facility could become due and payable.

•~~A downgrade to our credit ratings could increase our cost of funding and/or adversely affect our access to capital markets or the availability of funding from a variety of lenders.~~

•~~The expected phase out of LIBOR could impact the interest rates paid on our variable rate indebtedness and cause our interest expense to increase.~~

•~~We are expanding and renovating our corporate and other facilities and could experience disruptions to our operations in connection with such efforts.~~

•We may not achieve our projected financial information or other business initiatives in the time periods that we anticipate, or at all, which could have an adverse effect on our business, operating results and financial condition.

•~~Brexit and the uncertainty regarding its implementation and effect could disrupt our operations and adversely affect our operating results.~~

For more information regarding these and other uncertainties and factors that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements or otherwise could materially adversely affect our business, financial condition, or operating results, see our most recently filed Annual Report on Form 10-K, Part I, Item 1A, "Risk Factors" and Part II, Item 1A, "Risk Factors" of this report.

All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. We caution readers not to place undue reliance on any forward-looking statement which speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, the risks described in our most recent Annual Report on Form 10-K, Part I, Item 1A, "Risk Factors" and Part II, Item 1A, "Risk Factors" of this report, as well as others that we may consider immaterial or do not anticipate at this time. The foregoing risks and uncertainties are not exclusive and further information concerning the company and our businesses, including factors that potentially could materially affect our financial results or condition, may emerge from time to time. We make no commitment to revise or update any forward-looking statements in order to reflect actual results, events or circumstances occurring or existing after the date any forward-looking statement is made, or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures we make on related subjects in our future Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K we file with or furnish to the Securities and Exchange Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk stemming from changes in foreign currency exchange rates, interest rates, and commodity costs. We are also exposed to equity market risk pertaining to the trading price of our common stock. Changes in these factors could cause fluctuations in our earnings and cash flows. There have been no material changes to the market risk information regarding equity market risk included in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020.~~2021. Refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk", within our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2020~~2021 for a complete discussion of our market risk. Refer below for further discussion on foreign currency exchange rate risk, interest rate risk, and commodity cost risk.

Foreign Currency Exchange Rate Risk

We are 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, costs associated with foreign plant operations,

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and purchases from suppliers. Our primary foreign 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. Because our products are manufactured or sourced primarily from the U.S. and Mexico, a stronger U.S. dollar and Mexican peso generally have a negative impact on our results from operations, while a weaker U.S. dollar and Mexican peso generally have a positive effect.

To reduce our exposure to foreign currency exchange rate risk, we ~~actively manage the exposure of our foreign currency exchange rate risk by entering~~enter into various derivative instruments to hedge against such risk, authorized under a company policy that places controls on these hedging activities, with counterparties that are highly rated financial institutions. Decisions

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on whether to use such derivative instruments are primarily based on the amount of exposure to the currency involved and an assessment of the near-term market value for each currency. Our worldwide foreign currency exchange rate exposures are reviewed monthly. The gains and losses on our derivative instruments offset the changes in values of the related underlying exposures. Therefore, changes in the values of our derivative instruments are highly correlated with changes in the market values of underlying hedged items both at inception and over the life of the derivative instrument. For additional information regarding our derivative instruments, see Note ~~17,~~16, Derivative Instruments and Hedging Activities, in our Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The foreign currency exchange contracts in the table below have maturity dates in fiscal ~~2021~~2022 through fiscal 2024. All items are non-trading and stated in U.S. dollars. As of ~~July 30, 2021,~~January 28, 2022, the average contracted rate, notional amount, fair value, and the gain (loss) at fair value of outstanding derivative instruments were as follows:


(Dollars in thousands, except average contracted rate)	(Dollars in thousands, except average contracted rate)	Average Contracted Rate	Notional Amount		Fair Value		Gain (Loss) at Fair Value		(Dollars in thousands, except average contracted rate)	Average Contracted Rate	Notional Amount		Fair Value		Gain (Loss) at Fair Value
Buy U.S. dollar/Sell Australian dollar	Buy U.S. dollar/Sell Australian dollar	0.7245	$	98,226	$	96,362	$	(1,864)	Buy U.S. dollar/Sell Australian dollar	0.7276	$	103,960	$	106,242	$	2,282
Buy U.S. dollar/Sell Canadian dollar	Buy U.S. dollar/Sell Canadian dollar	1.2918	34,759		33,901		(858)		Buy U.S. dollar/Sell Canadian dollar	1.2827	38,232		37,836		(396)
Buy U.S. dollar/Sell Euro	Buy U.S. dollar/Sell Euro	1.1875	133,575		132,790		(785)		Buy U.S. dollar/Sell Euro	1.1837	137,444		142,350		4,906
Buy U.S. dollar/Sell British pound	Buy U.S. dollar/Sell British pound	1.3402	42,069		40,498		(1,571)		Buy U.S. dollar/Sell British pound	1.3383	46,399		46,110		(289)
Buy Mexican peso/Sell U.S. dollar	Buy Mexican peso/Sell U.S. dollar	22.1157	$	22,262	$	23,648	$	1,386	Buy Mexican peso/Sell U.S. dollar	22.2558	$	38,201	$	38,522	$	321

Our net investment in foreign subsidiaries translated into U.S. dollars is not hedged. Any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment, a component of accumulated other comprehensive loss in stockholders’ equity on the Condensed Consolidated Balance Sheets, and would not impact net earnings.

Interest Rate Risk

Our interest rate risk relates primarily to fluctuations in ~~LIBOR-based~~variable interest rates on our revolving credit facility and term loan credit ~~agreements,~~agreement, as well as the potential increase in the fair value of our fixed-rate long-term debt resulting from a potential decrease in interest rates. We generally do not use interest rate swaps to mitigate the impact of fluctuations in interest rates. We have no earnings or cash flow exposure due to interest rate risks on our fixed-rate long-term debt obligations. Our indebtedness as of ~~July 30, 2021~~January 28, 2022 includes ~~$424.0~~$424.1 million of gross fixed-rate long-term debt that is not subject to variable interest rate fluctuations, ~~and~~ $270.0 million of gross ~~LIBOR-based borrowings~~variable rate debt under our term loan credit ~~agreements. As of July 30, 2021, we did not have an~~agreement, and $400.0 million outstanding ~~balance~~ on our ~~LIBOR-based~~variable rate revolving credit facility.

Commodity Cost Risk

Most of the commodities, components, parts, and accessories used in our manufacturing process and end-products, or to be sold as standalone end-products, are exposed to commodity cost changes. These changes may be affected by several factors, including, for example, as a result of ~~inflation, deflation,~~inflation; deflation; changing ~~prices,~~prices; foreign currency ~~fluctuations, tariffs, duties,~~fluctuations; tariffs; duties; trade regulatory ~~actions,~~actions; industry ~~actions,~~actions; the inability of suppliers to absorb incremental costs resulting from COVID-19 related inefficiencies, continue operations or otherwise remain in business as a result of COVID-19, financial difficulties, or ~~otherwise,~~otherwise; and changes to international trade policies, agreements, and/or regulation and competitor activity, including antidumping and countervailing ~~duty petitions~~duties on certain products imported from foreign countries, including ~~current petitions regarding~~ certain engines imported into the U.S. from China.

Our primary cost exposures for commodities, components, parts, and accessories used in our products are with steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, ~~linerboard,~~ engines, transmissions, transaxles, hydraulics, ~~electric motors,~~electrification components, and ~~others, for use in our products.~~others. Our largest spend for commodities, components, parts, and accessories are generally for steel, engines, hydraulic components, transmissions, resin, aluminum, and ~~electric motors,~~electrification components, all of which we purchase from several suppliers around the world. We generally purchase commodities, components, parts, and accessories based upon market prices that are established with suppliers as part of the purchase process and generally attempt to obtain firm pricing from most of our suppliers for volumes consistent with planned production and estimates of wholesale and retail demand for our products.

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In any given period, we strategically work to mitigate any potential unfavorable impact as a result of changes to the cost of commodities, components, parts, and accessories that affect our product ~~lines. Historically, we have mitigated, and we currently expect that we would continue to mitigate, any commodity,~~lines through our productivity initiatives; however, our productivity initiatives may not be as effective as anticipated depending on macroeconomic cost trends for commodities, components, parts, and accessories ~~cost increases, in part, by~~costs and/or other factors. Our productivity initiatives include, but are not limited to, collaborating with suppliers, reviewing alternative sourcing options, substituting materials, utilizing Lean methods, engaging in internal cost reduction efforts, and utilizing tariff exclusions and duty drawback mechanisms, ~~and increasing~~all as appropriate. When appropriate, we may also increase prices on some of our products ~~all as appropriate. However,~~ to offset changes in the cost of commodities, components, parts, and accessories. To the extent that commodity and component costs increase and we do not have firm pricing from our suppliers, or our suppliers are not able to honor such prices, and/or our productivity initiatives and/or product price increases are less effective than anticipated and/or do not fully offset cost increases, we may experience a decline in our gross ~~margins to the extent we are not able to increase selling prices of our products or obtain manufacturing efficiencies to offset increases in commodity, components, parts, and accessories costs.~~margins. In the first ~~nine~~three months of fiscal ~~2021,~~2022, the average cost of commodities,

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components, parts, and accessories purchased, including the impact of inflation and tariff costs, was significantly higher compared to the average cost of commodities, components, parts, and accessories purchased in the first ~~nine~~three months of fiscal ~~2020.~~2021. We anticipate that the average cost of commodities, components, parts, and accessories purchased, including the impact of inflation and tariff costs, for the remainder of fiscal ~~2021~~2022 will continue to be significantly higher than the average costs experienced during the comparable period of fiscal ~~2020.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible internal controls.

Our management evaluated, with the participation of our Chairman of the Board, President and Chief Executive Officer and our Vice President, Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chairman of the Board, President and Chief Executive Officer and our Vice President, Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chairman of the Board, President and Chief Executive Officer and Vice President, Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

On ~~March 2, 2020,~~January 13, 2022, during the ~~second~~first quarter of fiscal ~~2020,~~2022, we completed the acquisition of ~~Venture Products.~~Intimidator. Prior to this acquisition, ~~Venture Products~~Intimidator was a privately-held company not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements to which public companies may be subject. In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting during the year of acquisition. As part of our ongoing integration activities, we are in the process of incorporating internal controls over significant processes specific to ~~Venture Products~~Intimidator that we believe are appropriate and necessary to account for the acquisition and to consolidate and report our financial results. We expect to complete our integration activities related to internal control over financial reporting for ~~Venture Products~~Intimidator during fiscal ~~2021.~~2023. Accordingly, we do not expect to include ~~Venture Products~~Intimidator within our assessment of internal control over financial reporting as of October 31, ~~2021.~~2022.

With the exception of internal control related integration activities associated with the company's acquisition of ~~Venture Products,~~Intimidator, there was no change in our internal control over financial reporting that occurred during the three month period ended ~~July 30, 2021~~January 28, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to litigation in the ordinary course of business, including claims for punitive, as well as compensatory, damages arising out of the use of our products; litigation and administrative and judicial proceedings with respect to claims involving asbestos and the discharge of hazardous substances into the environment; and commercial disputes, employment and employment-related disputes, and patent litigation cases. For a description of our material legal proceedings, see Note ~~15,~~14, Contingencies, in our Notes to Condensed Consolidated Financial Statements under the headings titled "Litigation" and "Litigation Settlement" included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated into this Part ~~II.~~II, Item 1 by reference.

ITEM 1A. RISK FACTORS

We are affected by risks specific to us, as well as factors that affect all businesses operating in a global market. The material risk factors known to us that could materially adversely affect our business, reputation, industry, operating results, or financial position or could cause our actual results to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statement made in this report, are described in our most recently filed Annual Report on Form 10-K, Part I, Item 1A. "Risk Factors." There has been no material change in those risk ~~factors.~~factors, with the exception of the addition of the following risk factor:

Our recent acquisition of Intimidator involves a number of risks, the occurrence of which could adversely affect our business, financial condition, and results of operations.

On January 13, 2022, we acquired privately-held Intimidator. The acquisition involves certain risks, the occurrence of which could adversely affect our business, financial condition, and results of operations, including:

•Intimidator may have undisclosed, contingent, or other liabilities and we may not be able to recover some of the costs and expenses associated with these liabilities from insurance we obtained to cover breaches of representations and warranties or from indemnities in the equity agreement;

•unexpected events occurring after the acquisition could result in costs and expenses that we cannot recover from the sellers or third-party sources;

•implementing our policies and procedures at Intimidator could be more costly than we anticipated and may be disruptive to Intimidator's operations;

•diversion of management's attention to integrate Intimidator's business and operations and/or reallocation of amounts of capital from our other strategic initiatives;

•disruption to our existing operations and plans or inability to effectively manage our expanded operations;

•failure, difficulties, or delays in securing, integrating, and assimilating information, financial systems, internal controls, operations, manufacturing processes, products, or the distribution channel for Intimidator's businesses and product lines;

•potential loss of key Intimidator employees, suppliers, customers, or dealers or other adverse effects on existing business relationships with suppliers, customers, and dealers;

•adverse impact on overall profitability if our expanded operations do not achieve the growth prospects, net sales, earnings, cost or revenue synergies, or other financial results projected in our valuation models, or delays in the realization thereof;

•incorrect estimates made in the accounting for the acquisition or the potential write-off of significant amounts of goodwill, intangible assets, and/or other tangible assets if the Intimidator business does not perform in the future as expected;

•reduction of our borrowing capacity under our existing unsecured senior revolving credit facility and the increase in our leverage and debt service requirements could restrict our ability to access additional capital when needed or to pursue other important elements of our business strategy because we financed a portion of the acquisition and related transaction expenses with borrowings under our existing unsecured senior revolving credit facility; and

•other factors mentioned in our most recently filed Annual Report on Form 10-K, Part 1, Item 1A, "Risk Factors".

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information with respect to shares of the company's common stock purchased by the company during each of the three fiscal months in the company's ~~third~~first quarter ended ~~July 30, 2021:~~January 28, 2022:

Period
Total Number of Shares (or Units) Purchased1,2
Average Price Paid per Share (or Unit)
Total Number of Shares (or Units)
Purchased As Part of Publicly Announced Plans or Programs1
Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs1
May 1, 2021 through June 4, 2021 — $ — — 5,968,761
June 5, 2021 through July 2, 2021 659,982 106.06 659,982 5,308,779
July 3, 2021 through July 30, 2021 836 111.06 — 5,308,779
Total 660,818 $ 106.07 659,982


Period	Total Number of Shares (or Units) Purchased1,2	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs1	Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs1
November 1, 2021 through December 3, 2021	716,089	$	101.52	716,089	3,336,373
December 4, 2021 through December 31, 2021	22,543	102.24		22,543	3,313,830
January 1, 2022 through January 28, 2022	1,201	97.14		—	3,313,830
Total	739,833	$	101.53	738,632

1 ~~On December 3, 2015, the company’s Board of Directors authorized the repurchase of 8,000,000 shares of the company’s common stock in open-market or privately negotiated transactions.~~ On December 4, 2018, the company’s Board of Directors authorized the repurchase of ~~up to an additional~~ 5,000,000 shares of the company’s common stock in open-market or privately negotiated transactions. This authorized stock repurchase program has no expiration date but may be terminated by the company’s Board of Directors at any time. The company repurchased ~~659,982~~738,632 shares under this authorized stock repurchase program during the period indicated above and ~~5,308,779~~3,313,830 shares remained available to repurchase under this authorized stock repurchase program as of ~~July 30, 2021.~~January 28, 2022.

2 Includes ~~836~~1,201 shares of the company’s common stock purchased in open-market transactions at an average price of ~~$111.06~~$97.14 per share on behalf of a rabbi trust formed to pay benefit obligations of the company to participants in the company's deferred compensation plans. These ~~836~~1,201 shares were not repurchased under the company’s authorized stock repurchase program described in footnote 1 above.

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ITEM 6. EXHIBITS


(a)	Exhibit No.	Description
	2.1	Agreement and Plan of Merger dated as of February 14, 2019, by and among The Toro Company, The Charles Machine Works, Inc., Helix Company, Inc., and Agent 186 LLC as Shareholders’ Agent (incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K dated February 14, 2019, 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	Indenture dated as of January 31, 1997, between The Toro Company 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). (Filed on paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T).

	4.5	Indenture dated as of April 20, 2007, between The Toro Company 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).

	4.6	First Supplemental Indenture dated as of April 26, 2007, between The Toro Company 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).

	4.7	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).

	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 ~~July 30, 2021,~~January 28, 2022, filed with the SEC on ~~September 2, 2021,~~March 3, 2022, formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) Condensed Consolidated Statements of Earnings for the three ~~and nine~~ month periods ended ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020,~~ (ii) Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ month periods ended ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020,~~ (iii) Condensed Consolidated Balance Sheets as of ~~July 30,~~January 28, 2022, January 29, 2021, ~~July 31, 2020,~~ and October 31, ~~2020,~~2021, (iv) Condensed Consolidated Statement of Cash Flows for the ~~nine~~three month periods ended ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020,~~ (v) Condensed Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ month periods ended ~~July 30,~~January 28, 2022 and January 29, 2021, ~~and July 31, 2020,~~ and (vi) Notes to Condensed Consolidated Financial Statements (filed herewith).

	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE TORO COMPANY

(Registrant)


Date: ~~September 2, 2021~~March 3, 2022	By:	/s/ Renee J. Peterson
		Renee J. Peterson
		Vice President, Chief Financial Officer
		(duly authorized officer, principal financial officer, and principal accounting officer)

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Nine Months Ended July 30, 2021	Professional		Residential		Other		Total
Net sales	$	2,197,058	$	784,852	$	17,019	$	2,998,929
Intersegment gross sales (eliminations)	24,034		39		(24,073)		—
Earnings (loss) before income taxes	406,279		109,642		(85,401)		430,520
Total assets	$	1,949,681	$	327,064	$	691,304	$	2,968,049


Three Months Ended July 31, 2020	Professional		Residential		Other		Total
Net sales	$	623,615	$	204,961	$	12,396	$	840,972
Intersegment gross sales (eliminations)	12,738		23		(12,761)		—
Earnings (loss) before income taxes	$	113,652	$	28,545	$	(31,204)	$	110,993


Nine Months Ended July 31, 2020	Professional		Residential		Other		Total
Net sales	$	1,879,423	$	632,807	$	25,623	$	2,537,853
Intersegment gross sales (eliminations)	38,151		84		(38,235)		—
Earnings (loss) before income taxes	322,385		87,233		(91,115)		318,503
Total assets	$	1,967,882	$	268,562	$	577,419	$	2,813,863