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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, 1999 Commission File Number 1-8649
THE TORO COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 41-0580470
(State of Incorporation) (I.R.S. Employer Identification Number)
8111 LYNDALE AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420
TELEPHONE NUMBER: (612) 888-8801
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares of Common Stock outstanding as of September 3, 1999 was
12,674,206.
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THE TORO COMPANY
INDEX TO FORM 10-Q
Page Number
-----------
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Consolidated Statements of Operations (Unaudited) -
Three and Nine Months Ended July 30, 1999 and July 31, 1998.......................................3
Condensed Consolidated Balance Sheets (Unaudited) -
July 30, 1999, July 31, 1998 and October 31, 1998.................................................4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended July 30, 1999 and July 31, 1998.................................................5
Notes to Condensed Consolidated Financial Statements (Unaudited).....................................6-8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................................9-16
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...........................................17
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K....................................................................18-19
Signatures...........................................................................................20
2
PART I. ITEM 1. FINANCIAL INFORMATION
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER-SHARE DATA)
Three Months Ended Nine Months Ended
------------------------------------ -------------------------------------
July 30, July 31, July 30, July 31,
1999 1998 1999 1998
----------------- ----------------- ----------------- -----------------
Net sales.............................................$ 325,317 $ 290,993 $ 1,009,186 $ 880,738
Cost of sales......................................... 199,478 189,713 642,549 573,457
----------------- ----------------- ----------------- -----------------
Gross profit................................... 125,839 101,280 366,637 307,281
Selling, general, and administrative expenses......... 103,140 89,532 292,276 256,431
Restructuring and other unusual expense............... 722 10,452 722 10,452
----------------- ----------------- ----------------- -----------------
Earnings from operations....................... 21,977 1,296 73,639 40,398
Interest expense...................................... (6,790) (6,650) (18,517) (19,366)
Other income, net..................................... 1,736 1,135 2,599 6,140
----------------- ----------------- ----------------- -----------------
Earnings (loss) before income taxes............ 16,923 (4,219) 57,721 27,172
Provision (benefit) for income taxes.................. 6,600 (1,666) 22,511 10,733
----------------- ----------------- ----------------- -----------------
Net earnings (loss)............................$ 10,323 $ (2,553) $ 35,210 $ 16,439
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
Basic earnings (loss) per share of common stock.......$ .80 $ (0.20) $ 2.72 $ 1.28
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
Diluted earnings (loss) per share of common stock.....$ .78 $ (0.20) $ 2.66 $ 1.24
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
Weighted average number of shares of common stock
outstanding - basic............................ 12,825 12,854 12,961 12,845
Weighted average number of shares of common stock
outstanding - dilutive......................... 13,244 12,854 13,235 13,302
See accompanying notes to condensed consolidated financial statements.
3
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
July 30, July 31, October 31,
1999 1998 1998
----------------- ----------------- -----------------
ASSETS
Cash and cash equivalents........................................$ 1,915 $ 2,800 $ 90
Receivables, net................................................. 339,748 328,628 241,426
Inventories, net................................................. 194,225 202,999 184,306
Prepaid expenses and other current assets........................ 8,352 7,238 14,618
Deferred income taxes............................................ 39,154 44,831 38,997
----------------- ----------------- -----------------
Total current assets..................................... 583,394 586,496 479,437
----------------- ----------------- -----------------
Property, plant, and equipment................................... 345,430 325,473 330,539
Less accumulated depreciation............................ 222,631 192,510 203,402
----------------- ----------------- -----------------
122,799 132,963 127,137
Deferred income taxes............................................ 3,786 1,182 3,763
Goodwill and other assets........................................ 128,230 112,722 113,654
----------------- ----------------- -----------------
Total assets.............................................$ 838,209 $ 833,363 $ 723,991
----------------- ----------------- -----------------
----------------- ----------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt................................$ 644 $ 684 $ 580
Short-term debt.................................................. 115,356 158,031 31,000
Accounts payable................................................. 39,119 30,505 65,273
Accrued liabilities.............................................. 196,153 161,581 161,357
----------------- ----------------- -----------------
Total current liabilities................................ 351,272 350,801 258,210
----------------- ----------------- -----------------
Long-term debt, less current portion............................. 195,617 196,947 196,844
Other long-term liabilities...................................... 6,325 6,625 5,538
Stockholders' equity:
Common stock, par value $1.00, authorized 35,000,000 shares;
issued and outstanding 12,657,994 shares at July 30, 1999
(net of 850,061 treasury shares), 12,867,614 shares at July
31, 1998 (net of 640,441 treasury shares), and 12,769,560
shares at October 31, 1998 (net of 738,495 treasury shares)... 12,658 12,868 12,770
Additional paid-in capital...................................... 48,883 59,455 56,546
Retained earnings............................................... 231,200 214,501 200,609
Foreign currency translation adjustment......................... (7,746) (7,834) (6,526)
----------------- ----------------- -----------------
Total stockholders' equity............................... 284,995 278,990 263,399
----------------- ----------------- -----------------
Total liabilities and stockholders' equity...............$ 838,209 $ 833,363 $ 723,991
----------------- ----------------- -----------------
----------------- ----------------- -----------------
See accompanying notes to condensed consolidated financial statements.
4
THE TORO COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
Nine Months Ended
-----------------------------------------------
July 30, July 31,
1999 1998
------------------- -------------------
Cash flows from operating activities:
Net earnings................................................................... $ 35,210 $ 16,439
Adjustments to reconcile net earnings to net cash used in operating
activities:
Provision for depreciation and amortization................................. 26,897 22,593
Loss on disposal of property, plant, and equipment.......................... 264 301
Deferred income taxes....................................................... 282 (2,490)
Tax benefits related to employee stock option transactions.................. 393 1,815
Changes in operating assets and liabilities:
Receivables, net....................................................... (95,299) (60,811)
Inventories, net....................................................... (4,060) (31,448)
Prepaid expenses and other current assets.............................. 5,886 4,283
Accounts payable and accrued expenses.................................. 8,520 (18,100)
------------------- -------------------
Net cash used in operating activities.............................. (21,907) (67,418)
------------------- -------------------
Cash flows from investing activities:
Purchases of property, plant, and equipment................................. (18,551) (24,514)
Proceeds from asset disposals............................................... 256 1,330
(Increase) decrease in investment in affiliates............................. (4,901) 26
(Increase) decrease in other assets......................................... (2,207) 1,336
Acquisitions, net of cash acquired.......................................... (2,748) (17,173)
------------------ -------------------
Net cash used in investing activities.............................. (28,151) (38,995)
------------------- -------------------
Cash flows from financing activities:
Increase in short-term debt................................................. 79,736 117,031
Repayments of long-term debt................................................ (1,554) (3,601)
Increase in other long-term liabilities..................................... 763 972
Proceeds from exercise of stock options..................................... 3,326 2,176
Purchases of common stock................................................... (24,549) -
Dividends on common stock................................................... (4,619) (4,619)
------------------- -------------------
Net cash provided by financing activities.......................... 53,103 111,959
------------------- -------------------
Foreign currency translation adjustment........................................ (1,220) (2,754)
------------------- -------------------
Net increase in cash and cash equivalents...................................... 1,825 2,792
Cash and cash equivalents at beginning of period............................... 90 8
------------------- -------------------
Cash and cash equivalents at end of period.....................................$ 1,915 $ 2,800
------------------- -------------------
------------------- -------------------
See accompanying notes to condensed consolidated financial statements.
5
THE TORO COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 30, 1999
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 generally accepted accounting principles
for complete financial statements. Unless the context indicates otherwise, the
terms "company" and "Toro" refer to The Toro Company and its subsidiaries. In
the opinion of management, the unaudited condensed consolidated financial
statements include all adjustments, consisting primarily of recurring accruals,
considered necessary for a fair presentation of the financial position and the
results of operations. Since the company's business is seasonal, operating
results for the nine months ended July 30, 1999 are not necessarily indicative
of the results that may be expected for the fiscal year ending October 31, 1999.
Certain amounts from prior period's financial statements have been reclassified
to conform to this period's presentation.
For further information, refer to the consolidated financial statements and
notes included in the company's Annual Report on Form 10-K for the year ended
October 31, 1998. The policies described in that report are used for preparing
quarterly reports.
INVENTORIES
Inventories are valued at the lower of cost or net realizable value with cost
determined by the last-in, first-out (LIFO) method for most inventories.
Inventories were as follows:
(Dollars in thousands) July 30, July 31,
1999 1998
------------- -------------
Raw materials and work in process....................$ 171,194 $ 178,678
Finished goods....................................... 69,003 66,096
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240,197 244,774
Less LIFO and other reserves......................... (45,972) (41,775)
------------- -------------
Total $ 194,225 $ 202,999
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RESTRUCTURING AND OTHER UNUSUAL EXPENSE
During the third quarter of fiscal 1999, the company recorded a net charge of
$.7 million for restructuring and other unusual expense. The company recorded a
restructuring charge of $1.9 million for asset write-downs and severance related
to management and sales force changes due to a reorganization of its Australian
manufacturing operations. Other unusual expense was reduced by $1.2 million
relating to the reversal for the unused portion of the $3.7 million one-time
consumer marketing programs accrued in the third quarter of fiscal 1998. The
company also expects to record an approximate $.8 million restructuring charge
in the fourth quarter of fiscal 1999 related to severance costs for the closure
of its Australian plant. This severance will be recorded in the fourth quarter
because the employees were notified of their termination in the fourth quarter
of fiscal 1999.
At October 31, 1998, the company had $10.7 million of restructuring and other
unusual expense in accrued liabilities. Since then, the company has utilized or
reversed $10.7 million of these reserves and accrued an additional $1.9 million
of restructuring charges, leaving $1.9 million remaining in accrued liabilities
for restructuring and other unusual expense at July 30, 1999. The company
expects most of these reserves to be utilized by the end of the first quarter of
fiscal 2000.
6
COMPREHENSIVE INCOME
Comprehensive income (loss) is comprised of two components: net earnings (loss)
and other comprehensive income (loss). Other comprehensive income (loss) refers
to revenues, expenses, gains, and losses that under generally accepted
accounting principles are recorded as an element of stockholders' equity and are
excluded from net earnings. Toro's other comprehensive loss is comprised of
foreign currency translation adjustments from certain foreign subsidiaries.
The components of comprehensive income (loss) were as follows:
Three Months Ended Nine Months Ended
----------------------------------- ------------------------------
(Dollars in thousands) July 30, July 31, July 30, July 31,
1999 1998 1999 1998
------------- -------------- -------------- ------------
Net earnings (loss)...................................$ 10,323 $ (2,553) $ 35,210 $ 16,439
Other comprehensive loss.............................. (1,623) (1,049) (1,220) (2,754)
------------- ------------- -------------- -----------
Comprehensive income (loss)...........................$ 8,700 $ (3,602) $ 33,990 $ 13,685
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EARNINGS PER SHARE
Reconciliation of basic and dilutive weighted average shares of common stock
outstanding is as follows:
Three Months Ended Nine Months Ended
----------------------------------- ------------------------------
BASIC July 30, July 31, July 30, July 31,
(Shares in thousands) 1999 1998 1999 1998
------------- -------------- -------------- ------------
Weighted average number of shares of common
stock outstanding.................................... 12,825 12,854 12,792 12,845
Assumed issuance of contingent shares ...................... - - 169 -
------------- ------------- -------------- ------------
Weighted average number of shares of common stock
and assumed issuance of contingent shares............ 12,825 12,854 12,961 12,845
------------- ------------- -------------- ------------
------------- ------------- -------------- ------------
DILUTIVE
(Shares in thousands)
Weighted average number of shares of common stock
and assumed issuance of contingent shares............ 12,825 12,854 12,961 12,845
Assumed conversion of stock options and assumed
issuance of restricted shares........................ 419 - 274 457
------------- ------------- -------------- -----------
Weighted average number of shares of common stock,
assumed issuance of contingent shares, assumed
issuance of restricted shares, and assumed
conversion of options outstanding.................... 13,244 12,854 13,235 13,302
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7
BUSINESS ACQUISITIONS
On July 30, 1999, the company entered into an agreement to purchase one of its
midwestern distributors. This company distributes Toro commercial and irrigation
products in one midwestern state.
During the third quarter of fiscal 1999, Toro acquired the technology and
manufacturing rights for battery-operated valves and remote, hand-held
controllers from a French manufacturer. The technology will be incorporated
into both the Toro and Irritrol-Registered trademark- Irrigation Systems
product lines.
On May 20, 1999, the company completed the purchase of its Minnesota-based
distributor. This company distributes Toro products in several midwestern
states.
NEW ACCOUNTING PRONOUNCEMENTS
During fiscal 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and the Accounting Standards
Executive Committee issued Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use."
SFAS 133 establishes new standards for recognizing all derivatives as either
assets or liabilities, and measuring those instruments at fair value. The
company plans to adopt the new standard beginning with the first quarter of
fiscal year 2001, as required. The company is in the process of evaluating
SFAS 133 and the impact on the company.
SOP 98-1 provides guidance on accounting for the costs of computer software
developed or obtained for internal use and does not require additional
disclosures. The company plans to adopt the SOP in the first quarter of fiscal
year 2000, as required. Costs incurred prior to the initial application of the
SOP will not be adjusted to conform to SOP 98-1. The adoption of SOP 98-1 is not
expected to have a material impact on the company's consolidated financial
statements.
During fiscal 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS 131 requires disclosure of selected
information about operating segments including segment income, revenues, and
asset data, as well as descriptive information about how operating segments are
determined and the products and services provided by the segments. The company
will be required to adopt SFAS 131 beginning with its 1999 fiscal year-end
annual report. The company is in the process of evaluating SFAS 131 and the
impact on the company's current disclosures.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. In addition, forward-looking statements may be made orally
or in press releases, conferences, reports, or otherwise, in the future by or on
behalf of the company.
Statements that are not historical are forward-looking. When used by or on
behalf of the company, the words "expect", "anticipate", "believe", "intend",
and similar expressions generally identify forward-looking statements.
Forward-looking statements involve risks and uncertainties. These uncertainties
include factors that affect all businesses operating in a global market, as well
as matters specific to the company and the markets it serves. Particular risks
and uncertainties facing the company at the present include inflationary
pressures; whether the 1998 profit improvement plan will continue to be
successful; increased competition in the company's businesses from competitors
that have greater financial resources; soft markets in certain international
markets, including Asia, Latin America, and Europe; whether the restructuring of
the Australian operations will be successful at improving operating results; the
continuing relative strength of the dollar which increases the cost of the
company's products in foreign markets and ability to increase prices;
competitive pricing pressures; competitive implications and price transparencies
related to the euro conversion; changing buying patterns affecting the company's
consumer business, including but not limited to a trend away from purchases at
dealer outlets to price and value conscious purchases at hardware, home center,
and mass retailers; potential impact of the internet and e-commerce on the
company's business; changes in distributor ownership; the company's expansion
into selected home center markets and effects on other product lines; the
company's ability to integrate business acquisitions and to manage alliances
successfully; the ability to pursue strategic investments for future earnings
capability; successful implementation of strategies to use outside providers for
warehousing and transportation services; the company's ability to develop and
manufacture new and existing products profitably; market acceptance of existing
and new products; changes in distributors, dealers, home center, or mass
retailers' purchasing practices; the company's ability to manage costs and
capacity constraints at its manufacturing facilities; the company's ability to
obtain resources, including engines, from its suppliers on a timely basis in
order to meet consumer demands; the company's ability to maintain good relations
with its union employees; and the ability to retain and hire quality employees.
In addition, the company is subject to risks and uncertainties facing its
industry in general, including changes in business and political conditions, and
the economy in general in both foreign and domestic markets; weather conditions
affecting demand, including warm winters and wet spring and dry summer weather;
slower growth in the company's markets; financial market changes including
increases in interest rates and fluctuations in foreign exchange rates;
unanticipated problems or costs associated with the transition of European
currencies to the common euro currency; a slowing in housing starts or new golf
course starts; inability to raise prices of products due to market conditions;
threatened or real inflationary pressures; changes in market demographics;
actions of competitors; unanticipated problems or costs associated with
accommodation of the year 2000 in computer applications or products; the
inability of the company's suppliers, customers, creditors, government agencies,
public utility providers, and financial service organizations to implement
computer applications accommodating the year 2000; seasonal factors in the
company's industry; unforeseen litigation; government action, including budget
levels, regulation, and legislation, primarily legislation relating to the
environment, commerce, infrastructure spending, health, and safety; and
availability of raw materials.
The company wishes to caution readers not to place undo reliance on any
forward-looking statement and to recognize that the statements are not
predictions of actual future results. 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, as well as others
not now anticipated. The foregoing statements are not exclusive and further
information concerning the company and its businesses, including factors that
potentially could materially affect the company's financial results, may emerge
from time to time. It is not possible for management to predict all risk factors
or to assess the impact of such risk factors on the company's business.
9
RESULTS OF OPERATIONS
Third quarter net sales were $325.3 million compared to $291.0 million for
the third quarter of fiscal 1998, an increase of 11.8 percent. Net earnings were
$10.3 million compared to a net loss of $2.6 million for the same quarter in the
previous year, and diluted earnings per share for the third quarter of fiscal
1999 were $.78 compared to a loss per diluted share of $.20 for the third
quarter of fiscal 1998. Sales were slightly higher for consumer products due
mainly to the distribution of Toro-Registered trademark- brand lawn mowers
through certain home centers offset by slower sales of Lawn-Boy-Registered
trademark- walk power mowers and consumer riding products. Sales to professional
markets were strong due to the continued North American and European growth of
the golf business and strong demand in the landscape contractor market.
International sales were up due to increased sales to the European and Canadian
markets for golf equipment and irrigation products, offset somewhat by soft
consumer sales mainly for walk power mowers and riding products. The increase
in net earnings and dilutive earnings per share was due to the significant
increase in sales, a lower level of restructuring and other unusual expense,
and an improvement in gross margins primarily in the consumer division.
Year-to-date net sales were $1,009.2 million compared to $880.7 million last
year, an increase of 14.6 percent. Net earnings were $35.2 million compared
to $16.4 million last year, an increase of 114.6 percent, and dilutive earnings
per share for the year were $2.66 compared to $1.24 last year. Sales were strong
for consumer products due to a positive reaction to the introduction of the
new Toro Personal Pace-Registered trademark- walk power mower, initial
distribution of Toro-Registered trademark- brand lawn mowers through home
centers, and timing of snowthrower shipments. Sales to the professional markets
also did well due to the continued worldwide growth of the golf business, strong
demand in the landscape contractor market, and the addition of Drip In products
beginning in the second quarter of fiscal 1998. International sales also
increased over the prior year due to the reasons noted above for the quarter
plus the addition of Drip In in the agricultural irrigation market. The increase
in net earnings and dilutive earnings per share was due to the significant
increase in net sales as described, lower level of restructuring and other
unusual expenses, and an improvement in gross margins.
In summary, fiscal 1999 results have improved greatly from that of fiscal 1998
due to the continued growth in the company's professional businesses and the
recovery of Toro's consumer business. The company is experiencing the success of
the profit improvement plan put in place in fiscal 1998 that has repositioned
portions of the consumer business resulting in significantly improved operating
results. The professional businesses, and the markets they serve, continue to be
very strong. The company's stronger than expected performance in fiscal 1999 has
allowed Toro to pursue additional strategic investments that should position the
company for stronger future earnings capabilities.
The following table sets forth net sales by product line.
Three Months Ended
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(Dollars in thousands) July 30, 1999 July 31, 1998 $ Change % Change
------------- ------------- -------------- --------------
Consumer products...........................................$ 99,247 $ 97,691 $ 1,556 1.6%
Commercial products......................................... 127,973 111,725 16,248 14.5
Irrigation products......................................... 98,097 81,577 16,520 20.3
------------- ------------- --------------
Total *.................................................$ 325,317 $ 290,993 $ 34,324 11.8%
------------- ------------- --------------
------------- ------------- --------------
* Includes international sales of...........................$ 55,097 $ 51,661 $ 3,436 6.7%
Nine Months Ended
-----------------------------------------------------------------------
(Dollars in thousands) July 30, 1999 July 31, 1998 $ Change % Change
------------- ------------- -------------- --------------
Consumer products...........................................$ 356,972 $ 306,008 $ 50,964 16.7%
Commercial products......................................... 422,142 368,316 53,826 14.6
Irrigation products......................................... 230,072 206,414 23,658 11.5
------------- ------------- --------------
Total *.................................................$ 1,009,186 $ 880,738 $ 128,448 14.6%
------------- ------------- --------------
------------- ------------- --------------
* Includes international sales of...........................$ 198,983 $ 186,038 $ 12,945 7.0%
10
CONSUMER PRODUCT SALES
Third quarter net sales of worldwide consumer products were $99.2 million
compared to $97.7 million in the third quarter of fiscal 1998, an increase of
1.6 percent. Sales to home centers, a new distribution channel for the
Toro-Registered trademark- brand walk power mowers, contributed to the sales
increase. Do-it-yourself irrigation product sales were also up from the last
comparable quarter due to dry weather in key Sun Belt markets, better
availability of product, and more shelf space at select home centers. Offsetting
those increases were lower sales for Lawn-Boy-Registered trademark- walk power
mowers compared to the second and third quarter of fiscal 1998 when shipments
were heavier than normal due to production delays in fiscal 1998. Sales in
fiscal 1999 were also lower due to dry weather in certain key markets. Shipments
for most riding products in the third quarter of fiscal 1999 also decreased from
fiscal 1998 due to dry weather in certain key markets and continued strong
competition. International sales were down compared to the third quarter of
fiscal 1998 primarily due to a timing of sales in Australia for tractors that
are expected to ship in the fourth quarter of fiscal 1999. Additionally,
consumer sales continue to be soft in Canada due to dry weather conditions.
Overall, the consumer business recovery plan implemented in fiscal 1998 is
working well, resulting in significantly improved operating results. Year-to-
date net sales of worldwide consumer products were $357.0 million compared to
$306.0 million last year, an increase of 16.7 percent. Sales of Toro-Registered
trademark- brand walk power mowers were up significantly from last year due to
the continued positive reception of the new Toro Personal Pace-Registered
trademark- lawn mower and the addition of sales through 1,500 home center
outlets, a new distribution channel for the Toro-Registered trademark- brand
walk power mowers. Strong sales to Toro's traditional dealers for Toro
- -Registered trademark- walk power mowers were also significantly up from fiscal
1998. Shipments for riding products, primarily lawn tractors, increased slightly
for the period. Year-to-date sales of snowthrowers were higher than last year
due to the timing of shipments from the fourth quarter of fiscal 1998 to the
first quarter of fiscal 1999. Do-it-yourself irrigation product sales were also
up due to dry weather in key Sun Belt markets, better availability of product,
and more shelf space at select home centers. Sales of electric appliance
products, including trimmers and blower vacuums, also did well for the year due
to the warm fall weather that extended the selling season into the first quarter
of fiscal 1999 as well as sales to new mass retail outlets for electric trimmers
and blowers. Offsetting those increases were lower sales of Lawn-Boy-Registered
trademark- walk power mowers due to the dry weather conditions experienced in
certain key markets. International sales were down as noted above in the quarter
comparison, and Australian do-it-yourself irrigation sales declined due to wet
weather.
Field inventory levels at Toro's distributors and dealers were down for most
domestic consumer products, however, they were slightly higher for domestic
consumer riding products. Heavy snowfall in certain key markets during the
winter of 1998-1999 resulted in historically low levels of snowthrower field
inventories, and Toro's special one-time marketing programs introduced in the
fall of 1998 reduced field inventory levels of walk power mower products to
historically low levels. Management believes that the reduction of snowthrower
domestic field inventories positions Toro for higher snowthrower sales in the
fourth quarter of fiscal 1999 and the first quarter of fiscal 2000 compared to
the fourth quarter of fiscal 1998 and the first quarter of fiscal 1999.
COMMERCIAL PRODUCT SALES
Third quarter net sales of worldwide commercial products were $128.0 million
compared to $111.7 million in the third quarter of fiscal 1998, an increase
of 14.5 percent. The sales increase was largely a result of growth in the
landscape contractor market as well as acceptance of new landscape contractor
equipment products introduced last year. Sales for the Toro-Registered
trademark- Dingo-Registered trademark- Systems were up significantly from the
third quarter of fiscal 1998 due to the greater market acceptance of this
product introduced in fiscal 1998. Worldwide sales of both new and replacement
golf course equipment also increased due to the continued growth of that
market. Commercial product sales also did well for the quarter due to the
introduction of new products. In addition, international commercial sales were
up for the quarter due to strong demand for golf course equipment in Europe and
Canada as well as market acceptance of new products.
Year-to-date net sales of worldwide commercial products were $422.1 million
compared to $368.3 million last year, an increase of 14.6 percent. The nine-
month increase in sales reflects the same factors contributing to the third
quarter increase. In addition, strong retail sales at Toro's distributors and
dealers have also been strong for the year for commercial and landscape
contractor products, which has contributed to the growth.
11
IRRIGATION PRODUCT SALES
Third quarter net sales of worldwide irrigation products were $98.1 million
compared to $81.6 million in the third quarter of fiscal 1998, an increase of
20.3 percent. Worldwide golf irrigation revenues increased over last year's
comparable quarter due to the continued growth in both new and replacement
systems. Irritrol-Registered trademark- Systems sales were also above the
last comparable quarter for fiscal 1998 due to drier weather this year. Toro
residential/commercial irrigation sales were significantly above third
quarter of fiscal 1998 due to better product availability, dry weather
conditions in key markets, and new marketing programs intended to improve
market share. Offsetting those increases were decreased sales of domestic
agricultural irrigation products due to pricing pressures from competitors.
International sales were up from the same quarter in fiscal 1998 due to
strong golf irrigation sales and strong sales of agricultural irrigation
product in Europe.
Year-to-date net sales of worldwide irrigation products were $230.1 million
compared to $206.4 million last year, an increase of 11.5 percent. As
mentioned above in the quarter comparison, strong golf irrigation revenues
contributed to the increase as did the addition of sales from Drip In, which
was acquired in the second quarter of fiscal 1998. Sales of
residential/commercial irrigation products also increased over last year due
to dry weather conditions and new marketing programs this year intended to
improve market share. International sales increased over last year due to the
same factors mentioned in the quarter comparison, offset somewhat by soft
Irritrol-Registered trademark- product sales in Australia due to wet weather
in the early part of the selling season.
GROSS PROFIT
Third quarter gross profit was $125.8 million compared to $101.3 million last
year, an increase of 24.2 percent. As a percent of net sales, gross profit for
the third quarter was 38.7 percent compared to 34.8 percent last year. The
increase in gross profit resulted primarily from higher margins for the consumer
product line due to price increases for certain products and improved
manufacturing processes at the company's El Paso facility. This increase was
slightly offset by a gross margin reversal resulting from an agreement to
purchase one of Toro's midwestern-based distributors.
Year-to-date gross profit was $366.6 million compared to $307.3 million last
year, an increase of 19.3 percent. As a percent of net sales, year-to-date gross
profit was 36.3 percent compared to 34.9 percent last year. The increase in
gross margins was due to the same contributing factors as in the quarter
comparison, in addition to the gross margin reversal from the purchase and
agreement to purchase two Toro midwestern-based distributors in fiscal 1999.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Third quarter selling, general, and administrative expenses (SG&A) were $103.1
million compared to $89.5 million last year, an increase of 15.2 percent. As a
percent of net sales, SG&A increased to 31.7 percent from 30.8 percent for the
same quarter in fiscal 1998. The dollar increase is mainly due to increases for
marketing expenses, warehousing costs, and warranty expenses due to higher sales
levels. The percentage increase in mainly due to increases for incentive
compensation expenses due to improved financial performance of the company in
the third quarter of fiscal 1999. Information systems costs were also higher due
to the continued implementation of an enterprise-wide software system.
Year-to-date SG&A expenses were $292.3 million compared to $256.4 million last
year, an increase of 14.0 percent. However, as a percent of net sales, SG&A
decreased slightly to 29.0 percent from 29.1 percent last year. The dollar
increase is mainly due to increases for marketing expenses, warehousing costs,
and warranty expenses due to higher sales levels. Incentive compensation
expenses were also higher due to improved financial performance of the company.
Information systems costs were higher due to the continued implementation of an
enterprise-wide software system.
12
RESTRUCTURING AND OTHER UNUSUAL EXPENSES
Restructuring and other unusual expenses were $.7 million in the third quarter
of fiscal 1999 compared to $10.5 million in the third quarter of fiscal 1998.
The company recorded a restructuring charge of $1.9 million in the third quarter
of fiscal 1999 for asset write-downs and severance related to management and
sales force changes due to a reorganization of its Australian manufacturing
operations. Offsetting that increase was a reduction in other unusual expense of
a $1.2 million related to the reversal for the unused portion of the one-time
consumer marketing programs accrued in the third quarter of fiscal 1998. The
company also expects to record an approximate $.8 million restructuring charge
in the fourth quarter of fiscal 1999 related to severance costs for the closure
of its Australian plant. This severance will be recorded in the fourth quarter
because the employees were notified of their termination in the fourth quarter
of fiscal 1999.
By comparison, fiscal 1998 third quarter restructuring and other unusual expense
was $10.5 million. The restructuring charge consisted of $2.2 million for the
severance and asset write-down related to the closure of a manufacturing
facility, and $1.1 million for other restructuring severance costs. Other
unusual expense consisted of $3.5 million for the expected loss on the sale of
the recycling equipment division, and $3.7 million for special consumer
marketing programs. Those special marketing programs consisted of rebates and
co-op credits designed to reduce certain consumer field inventories to
historically low levels by providing incentives to increase retail sales in
preparation for changes in warehousing and transportation.
INTEREST EXPENSE
Third quarter interest expense was $6.8 million compared to $6.7 million last
year, a slight increase of $.1 million.
Year-to-date interest expense was $18.5 million compared to $19.4 million last
year, a slight decline of $.9 million due to lower borrowing levels compared to
last year as a result of improved asset management, primarily lower inventory
and higher accounts payable and accrued expenses.
OTHER INCOME, NET
Third quarter other income, net, was $1.7 million compared to $1.1 million last
year, an increase of $.6 million, due to currency gains in the third quarter of
fiscal 1999.
Year-to-date other income, net, was $2.6 million compared to $6.1 million last
year, a decrease of $3.5 million. The decrease was due to a favorable settlement
of a trade secret lawsuit in fiscal 1998, higher amounts of currency losses in
fiscal 1999, and recoveries of previously written off notes receivables in
fiscal 1998.
PROVISION FOR INCOME TAXES
The effective tax rate for the third quarter and fiscal 1999 year-to-date was
39.0 percent compared to 39.5 percent for the comparable quarter and year of
fiscal 1998. The decline in the tax rate is due to an increase in benefits
received from the company's foreign sales corporation.
FINANCIAL POSITION AS OF JULY 30, 1999
JULY 30, 1999 COMPARED TO JULY 31, 1998
Total assets at July 30, 1999 were $838.2 million compared to $833.4 million on
July 31, 1998, an increase of $4.8 million. Net accounts receivable increased by
$11.1 million. Increased sales primarily contributed to the increase in net
accounts receivable. Inventory decreased $8.8 million due to the sale of the
recycling and professional fertilizer businesses in the fourth quarter of fiscal
1998, lower levels of consumer inventory due to strong sales for the year, and
improved efforts at inventory management. Those decreases were somewhat offset
by the addition of inventory acquired from Toro's Minnesota-based distributor in
the third quarter of fiscal 1999. Net property, plant, and equipment declined
$10.2 million due to higher amounts of depreciation expense in comparison to
capital additions. Goodwill and other assets increased $15.5 million mainly as a
result of a contingent payment made by the company in the first quarter of
fiscal 1999, in connection with the company's acquisition of Exmark in fiscal
1998.
13
FINANCIAL POSITION AS OF JULY 30, 1999 (CONTINUED)
Total current liabilities at July 30, 1999 were $351.3 million compared to
$350.8 million on July 31, 1998, a slight increase of $.5 million. Short-term
debt decreased by $42.7 million as a result of better asset management. Accounts
payable increased $8.6 million due to higher manufacturing volumes resulting in
higher inventory purchases compared to fiscal 1998. Accrued liabilities also
increased by $34.6 million as a result of the higher sales level that has
increased marketing and warranty accruals.
JULY 30, 1999 COMPARED TO OCTOBER 31, 1998
Total assets at July 30, 1999 were $838.2 million compared to $724.0 million at
October 31, 1998, an increase of $114.2 million. Net accounts receivable
increased $98.3 million from October 31, 1998 due to the normal seasonal
increase in accounts receivable. Inventory increased by $9.9 million from
October 31, 1999 due mainly to the acquisition of Toro's Minnesota-based
distributor. Goodwill and other assets increased $14.6 million mainly as a
result of the Exmark contingent payment.
Total current liabilities at July 30, 1999 were $351.3 million compared to
$258.2 million at October 31, 1998, an increase of $93.1 million. The majority
of this increase was the result of additional short-term debt of $84.4 million,
reflecting the company's strategy of utilizing short-term borrowing to fund the
company's normal seasonal working capital needs. Accounts payable decreased
$26.2 million due to the timing of payments. Accrued liabilities increased $34.8
million as a result of higher accruals for various seasonal sales and marketing
programs and higher warranty reserves.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities for the first nine months of fiscal 1999 was
primarily for the normal seasonal increase in accounts receivable, partially
offset by increases in accrued liabilities and net earnings.
The company's domestic and international working capital needs are funded
primarily with approximately $290 million of committed unsecured bank credit
lines. The company also has banker's acceptance financing agreements under which
an additional $40 million is available. The company's business is seasonal, with
peak borrowing under the working capital lines described above generally
occurring between February and May each year.
Management believes that the combination of funds available through its existing
financing arrangements, coupled with forecasted cash flows, will provide the
necessary capital resources for its anticipated working capital, capital
additions, acquisitions, and stock repurchases.
INFLATION
The company is subject to the effects of changing prices. However, the company
is not currently experiencing any material effects of rising costs. The company
attempts to deal with inflationary pressures through a combination of internal
cost reduction efforts and selected increases in selling prices of certain
products.
14
YEAR 2000 COMPLIANCE
During the third quarter of fiscal 1999, Toro continued its company-wide program
to prepare the company's computer systems for year 2000 compliance. The year
2000 issue relates to computer systems that use the last two digits rather than
all four to define a year and whether such systems will properly and accurately
process information when the year changes to 2000. Incomplete or untimely
resolution of year 2000 issues by the company, by its important suppliers and
customers, by public utility providers, or by governmental entities could have a
material adverse impact on the company's business, operations, or financial
condition.
STATE OF READINESS - The company has completed its project to replace
core-business information systems with an Enterprise Resource Planning (ERP)
software package that is certified as year 2000 compliant by the vendor. The
package includes software to support the company's facilities and business units
with the exception of five domestic subsidiaries and business units. The
company's European subsidiaries are believed to be year 2000 compliant. The
company is in the process of testing these non-ERP systems and updating any
non-compliant systems, which should be completed in the fourth quarter of the
1999 calendar year.
Toro has assessed its products and, with the exception of six irrigation control
systems, believes them to be year 2000 compliant. Testing of these systems has
been completed and software remediations are available. In most cases, the
company believes that the software modification currently available should make
the units year 2000 compliant. In some cases, the company is recommending that
customers replace their older non-compliant systems with newer, functionally
enhanced compliant systems.
Toro's year 2000 issues list has over three hundred software and hardware items,
the majority of which are single-user, departmental or plant systems. The
company is in the testing phase for the following business-critical systems: ERP
and all non-ERP core-business information systems, and associated infrastructure
and support technologies. After delays experienced in the first quarter of
fiscal 1999, the company has obtained products claimed by their vendors to be
compliant. The company has also increased its resources for internal
programming, and is currently back on schedule in the testing phase, which is
expected to be completed by the fourth quarter of fiscal 1999. The company's new
compliant warranty, financing, and customer promotion systems are also scheduled
to be installed by the end of the fourth quarter of fiscal 1999. The company has
completed the installation and testing of new compliant versions of its payroll
and product data management systems.
Communications have been sent to all Toro customers informing them of the
company's efforts and asking them to ensure that their business operations will
not be adversely impacted by year 2000 issues. Surveys have also been sent to
all of the company's production suppliers requesting information on their year
2000 efforts. Based on the surveys returned, the company's customers and key
suppliers are either year 2000 compliant or are working on the issue with plans
to be year 2000 compliant before December 31, 1999.
COSTS - Year 2000 costs through July 30, 1999 were approximately $2.3 million
and have been expensed as incurred. These costs include contractor support and
ERP implementation for the company's recently acquired businesses. Costs
remaining that have been identified are estimated to be less than $1.0 million,
which includes expenses for contractor support, telephone system upgrades,
software modifications for irrigation systems, and business unit system
upgrades. The estimated cost of year 2000 adaptation is less than 15 percent of
the company's information systems budget for fiscal 1999.
RISKS - The company is continuing to test its core-business operating and
financial systems and remains uncertain of the risks the year 2000 will have on
its business operations. In addition, the company remains uncertain about
whether the company's business partners, including dealers, distributors, home
centers, mass retailers, banks, and suppliers will be year 2000 compliant. The
company is particularly concerned about international customers and suppliers
due to their late testing target dates. The company is addressing this issue by
working closely with certain international customers in connection with their
specific plans to attempt to be year 2000 compliant. The scope of Toro's year
2000 project does not include ensuring public utility and governmental agency's
readiness for the year 2000. Toro has little to no control over these
institutions, thereby introducing some level of risk in the company's ability to
continue normal operations at and for the weeks immediately after the turn of
the century.
15
YEAR 2000 COMPLIANCE (CONTINUED)
Testing to validate assumptions continues and is expected to be completed by the
end of the fourth quarter of fiscal 1999. The company believes this timetable
should allow enough time to fix or replace any internal business-critical
problems discovered during the testing phase.
The most reasonably worst-case scenarios revolve around failures that may be
experienced by entities outside the control of the company such as local
electric utilities, telecommunication vendors, customers, suppliers, and
governmental services. The effects of these scenarios vary with the severity and
duration of any failure.
CONTINGENCY PLANS - The company's contingency plans will continue to evolve as
the testing and implementation phase of the business-critical systems and
technologies are completed. The company is in the stage of defining a Business
Resumption Plan, which will include documented manual processes for critical
business functions that could be invoked for any type of business interruption,
including year 2000 problems. A draft of these manual procedures is scheduled to
be updated and completed by the end of the calendar year 1999. A draft of
recovery procedures was completed in the third quarter of fiscal 1999 for the
worldwide headquarters located at Bloomington, Minnesota.
The company is also planning to perform complete, system-wide backups on
December 30 and 31, 1999. Key information system personnel will also be on-site
and on-call for the month of January 2000 to deal with any problems that may
occur.
EURO CURRENCY
Beginning in January 1999, the European Monetary Union (EMU) entered into a
three-year transition phase during which a common currency called the euro will
be introduced in participating countries. Initially, this new currency will be
used for financial transactions, and progressively, it will replace the old
national currencies that will be withdrawn by July 2002. The transition to the
euro currency will involve changing budgetary, accounting, contracts, and fiscal
systems in companies and public administrations, as well as simultaneous
handling of parallel currencies and conversion of legacy data. Uncertainty
exists as to the effects the conversion to euro currency will have on the
marketplace. One of the primary unknowns for the company is the potential
equalization of prices to customers among countries and the resulting
competitive impact on Toro distributor sales and Toro direct sales, and
financial support given to distributors in those countries. The euro will make
price differences on goods in the various countries transparent to the customer
and make comparisons much easier. The company recently formed a group to review
this issue and develop a strategy by late-1999. The company does not have
sufficient experience with the new currency to predict whether price
transparency will affect its operations, cash flows, or financial condition in
future periods.
The company continued its program to evaluate whether the company's computer
systems and programs will experience operational problems when the euro is fully
implemented. The company's European subsidiaries' financial systems have
completed initial testing and no problems were discovered in their ability to
function using the euro. These subsidiaries began disclosing the euro value on
each customer's invoice in January 1999. The company plans to continue testing
its computer systems in fiscal 1999 for additional euro functionality. The
company believes the risk to be minimal, as billing and banking functions are
already being performed in multiple currencies within these entities.
Based on its evaluation to date, management currently believes that, while the
company will incur internal and external costs to adjust to the euro, such costs
are not expected to have a material impact on operations, cash flows, or the
financial condition of the company and its subsidiaries, taken as a whole, in
future periods.
16
Item 3. Quantitative and Qualitative Disclosures about Market Risk
FOREIGN CURRENCY
The following forward exchange contracts held by the company have maturity dates
in fiscal year 1999 and 2000. All items are non-trading and stated in U.S.
dollars. The average contracted rate, notional amount, and fair value impact at
July 30, 1999 were as follows:
- ----------------------------------------------- ---------------- ----------------- ----------------
AVERAGE FAIR VALUE
DOLLARS IN THOUSANDS CONTRACTED NOTIONAL IMPACT
(EXCEPT AVERAGE CONTRACTED RATE) RATE AMOUNT GAIN (LOSS)
- ----------------------------------------------- ---------------- ----------------- ----------------
Buy Australian dollar/Sell US dollar .6414 $ 4,223.9 $ 71.1
- ----------------------------------------------- ---------------- ----------------- ----------------
Buy US dollar/Sell Australian dollar .6464 13,122.3 (180.1)
- ----------------------------------------------- ---------------- ----------------- ----------------
Buy Belgium franc/Sell US dollar 37.8675 1,853.8 9.5
- ----------------------------------------------- ---------------- ----------------- ----------------
Buy US dollar/Sell Canadian dollar 1.4912 7,477.1 5.6
- ----------------------------------------------- ---------------- ----------------- ----------------
Buy German mark/Sell US dollar 1.8436 1,627.3 44.3
- ----------------------------------------------- ---------------- ----------------- ----------------
Buy Japanese Yen/Sell US dollar 114.8800 6,963.6 276.2
- ----------------------------------------------- ---------------- ----------------- ----------------
DEBT FINANCING
The company is exposed to interest rate risk arising from transactions that are
entered into during the normal course of business. The company's short-term debt
borrowing rates are dependent upon the LIBOR rate plus an additional percentage
based on the company's current borrowing level. See the company's Annual Report
filed on Form 10-K for the fiscal year ended October 31, 1998 (Item 7A) for
additional information. There has been no material change in the information
contained in that report.
17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i)(a) and 4(a) Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-3,
Registration No. 33-16125).
3(i)(b)and 4(b) Certificate of Amendment to Certificate of
Incorporation of Registrant dated December 9, 1986
(incorporated by reference to Exhibit 3 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended January 30, 1987, Commission File No.
1-8649).
3(i)(c) and 4(c) Certificate of Designation to Certificate of
Incorporation of Registrant dated May 28, 1998
(incorporated by reference to Exhibit (1)(A) to
Registrants' Current Report on Form 8-K dated
May 27, 1998).
3(ii) and 4(d) Bylaws of Registrant (incorporated by reference to
Exhibit 3(ii) and 4(d) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
April 30, 1999).
4(e) Specimen form of Common Stock certificate
(incorporated by reference to Exhibit 4(c) to
Registrant's Registration Statement on Form S-8,
Registration No. 2-94417).
4(f) Rights Agreement dated as of May 20, 1998, between
Registrant and Norwest Bank Minnesota, National
Association relating to rights to purchase Series B
Junior Participating Voting Preferred Stock, as
amended (incorporated by reference to Registrant's
Current Report on Form 8-K dated May 27, 1998,
Commission File No. 1-8649).
4(g) Indenture as dated as of January 31, 1997, between
Registrant and First National Trust Association, as
Trustee, relating to the Registrant's 7.125% Notes
due June 15, 2007 and its 7.80% Debentures due
June 15, 2027 (incorporated by reference to
Exhibit 4(a) to Registrant's Current Report on Form
8-K for June 24, 1997, Commission File No. 1-8649).
10(a) Form of Employment Agreement in effect for certain
officers of Registrant, as amended.*
10(b) The Toro Company Directors Stock Plan, as amended.*
10(c) The Toro Company Annual Management Incentive Plan
II for officers of Registrant, as amended.*
10(d) The Toro Company 1985 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10(b) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended July 31, 1993).*
10(e) The Toro Company 1989 Stock Option Plan, as
amended.*
10(f) The Toro Company 1993 Stock Option Plan, as
amended.*
18
Item 6. Exhibits and Reports on Form 8-K (continued)
10(g) The Toro Company Performance Share Plan, as
amended.*
10(h) The Toro Company Supplemental Management Retirement
Plan, as amended.*
10(i) The Toro Company Supplemental Retirement Plan,
as amended.*
10(j) Chief Executive Officer Incentive Award Agreement,
as amended.*
10(k) The Toro Company Deferred Compensation Plan for
Officers (incorporated by reference to Exhibit
10(j) to Registrant's Quarterly Report on Form
10-Q for the quarter ended January 29, 1999).*
10(l) The Toro Company Deferred Compensation Plan for
Non- Employee Directors (incorporated by reference
to Exhibits 10(k) to Registrant's Quarterly Report
on Form 10-Q for the quarter ended
January 29, 1999).*
27 Supplemental Data Schedule; electronic filing only.
*Management contract or compensatory plan or arrangement required to be filed as
an exhibit to this Quarterly Report on Form 10-Q pursuant to Item 14(c).
(b) Reports on Form 8-K
None.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TORO COMPANY
(Registrant)
By /s/ Stephen P. Wolfe
-----------------------
Stephen P. Wolfe
Vice President, Finance
Chief Financial Officer
(principal financial officer)
Date: September 13, 1999