Delaware | 1-8649 | 41-0580470 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
Large accelerated filer ý | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company o |
Emerging growth company o | |
Page Number | ||
Three Months Ended | ||||||||
February 1, 2019 | February 2, 2018 | |||||||
Net sales | $ | $ | ||||||
Cost of sales | ||||||||
Gross profit | ||||||||
Selling, general and administrative expense | ||||||||
Operating earnings | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Other income, net | ||||||||
Earnings before income taxes | ||||||||
Provision for income taxes | ||||||||
Net earnings | $ | $ | ||||||
Basic net earnings per share of common stock | $ | $ | ||||||
Diluted net earnings per share of common stock | $ | $ | ||||||
Weighted-average number of shares of common stock outstanding — Basic | ||||||||
Weighted-average number of shares of common stock outstanding — Diluted | ||||||||
Three Months Ended | ||||||||
February 1, 2019 | February 2, 2018 | |||||||
Net earnings | $ | $ | ||||||
Other comprehensive income (loss), net of tax: | ||||||||
Foreign currency translation adjustments | ||||||||
Derivative instruments, net of tax of $(1,352) and $(579), respectively | ( | ) | ( | ) | ||||
Other comprehensive income (loss), net of tax | ( | ) | ||||||
Comprehensive income | $ | $ | ||||||
February 1, 2019 | February 2, 2018 | October 31, 2018 | ||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents | $ | $ | $ | |||||||||
Receivables, net | ||||||||||||
Inventories, net | ||||||||||||
Prepaid expenses and other current assets | ||||||||||||
Total current assets | ||||||||||||
Property, plant and equipment, gross | ||||||||||||
Less accumulated depreciation | ||||||||||||
Property, plant and equipment, net | ||||||||||||
Deferred income taxes | ||||||||||||
Goodwill | ||||||||||||
Other intangible assets, net | ||||||||||||
Other assets | ||||||||||||
Total assets | $ | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current portion of long-term debt | $ | $ | $ | |||||||||
Accounts payable | ||||||||||||
Accrued liabilities | ||||||||||||
Total current liabilities | ||||||||||||
Long-term debt, less current portion | ||||||||||||
Deferred income taxes | ||||||||||||
Other long-term liabilities | ||||||||||||
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 105,746,538 shares as of February 1, 2019, 106,434,655 shares as of February 2, 2018, and 105,600,652 shares as of October 31, 2018 | ||||||||||||
Retained earnings | ||||||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
Total stockholders’ equity | ||||||||||||
Total liabilities and stockholders’ equity | $ | $ | $ | |||||||||
Three Months Ended | ||||||||
February 1, 2019 | February 2, 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | $ | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Non-cash income from finance affiliate | ( | ) | ( | ) | ||||
Contributions to finance affiliate, net | ( | ) | ( | ) | ||||
Provision for depreciation and amortization | ||||||||
Stock-based compensation expense | ||||||||
Deferred income taxes | ( | ) | ||||||
Other | ( | ) | ||||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||
Receivables, net | ( | ) | ( | ) | ||||
Inventories, net | ( | ) | ( | ) | ||||
Prepaid expenses and other assets | ( | ) | ||||||
Accounts payable, accrued liabilities, deferred revenue and other long-term liabilities | ||||||||
Net cash provided by operating activities | ||||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | ( | ) | ( | ) | ||||
Proceeds from asset disposals | ||||||||
Investment in unconsolidated entities | ( | ) | ||||||
Acquisitions, net of cash acquired | ( | ) | ||||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Payments on long-term debt | ( | ) | ||||||
Proceeds from exercise of stock options | ||||||||
Payments of withholding taxes for stock awards | ( | ) | ( | ) | ||||
Purchases of Toro common stock | ( | ) | ( | ) | ||||
Dividends paid on Toro common stock | ( | ) | ( | ) | ||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
Cash and cash equivalents as of the beginning of the fiscal period | ||||||||
Cash and cash equivalents as of the end of the fiscal period | $ | $ | ||||||
Common Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||
Balance as of October 31, 2018 | $ | $ | $ | ( | ) | $ | ||||||||||
Cash dividends paid on common stock - $0.225 per share | — | ( | ) | — | ( | ) | ||||||||||
Issuance of 537,786 shares for stock options exercised and restricted stock units vested | — | |||||||||||||||
Stock-based compensation expense | — | — | ||||||||||||||
Contribution of stock to a deferred compensation trust | — | — | ||||||||||||||
Purchase of 391,900 shares of common stock | ( | ) | ( | ) | — | ( | ) | |||||||||
Cumulative transition adjustment due to the adoption of ASU 2014-09 | — | — | ||||||||||||||
Other comprehensive loss | — | — | ( | ) | ( | ) | ||||||||||
Net earnings | — | — | ||||||||||||||
Balance as of February 1, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||
Balance as of October 31, 2017 | $ | $ | $ | ( | ) | $ | ||||||||||
Cash dividends paid on common stock - $0.20 per share | — | ( | ) | — | ( | ) | ||||||||||
Issuance of 506,991 shares for stock options exercised and restricted stock units vested | — | |||||||||||||||
Stock-based compensation expense | — | — | ||||||||||||||
Contribution of stock to a deferred compensation trust | — | — | ||||||||||||||
Purchase of 955,308 shares of common stock | ( | ) | ( | ) | — | ( | ) | |||||||||
Other comprehensive income | — | — | ||||||||||||||
Net earnings | — | — | ||||||||||||||
Balance as of February 2, 2018 | $ | $ | $ | ( | ) | $ | ||||||||||
• | Portfolio approach practical expedient relative to the estimation of variable consideration. |
• | Shipping and handling practical expedient to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities. |
• | Costs of obtaining a contract practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset is one year or less. |
• | Immaterial goods or services practical expedient to not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. |
• | Sales taxes practical expedient to exclude sales taxes and other similar taxes from the transaction price. |
• | Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less. |
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | October 31, 2018 | |||||||||
Raw materials and work in process | $ | $ | $ | |||||||||
Finished goods and service parts | ||||||||||||
Total FIFO value | ||||||||||||
Less: adjustment to LIFO value | ||||||||||||
Total inventories, net | $ | $ | $ | |||||||||
(Dollars in thousands) | Professional | Residential | Other | Total | ||||||||||||
Balance as of October 31, 2018 | $ | $ | $ | $ | ||||||||||||
Goodwill acquired | ||||||||||||||||
Translation adjustments | ||||||||||||||||
Balance as of February 1, 2019 | $ | $ | $ | $ | ||||||||||||
(Dollars in thousands) | Weighted-Average Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||
Patents | $ | $ | ( | ) | $ | |||||||||
Non-compete agreements | ( | ) | ||||||||||||
Customer-related | ( | ) | ||||||||||||
Developed technology | ( | ) | ||||||||||||
Trade names | ( | ) | ||||||||||||
Other | ( | ) | ||||||||||||
Total amortizable | ( | ) | ||||||||||||
Non-amortizable - trade names | — | |||||||||||||
Total other intangible assets, net | $ | $ | ( | ) | $ | |||||||||
(Dollars in thousands) | Weighted-Average Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||
Patents | $ | $ | ( | ) | $ | |||||||||
Non-compete agreements | ( | ) | ||||||||||||
Customer-related | ( | ) | ||||||||||||
Developed technology | ( | ) | ||||||||||||
Trade names | ( | ) | ||||||||||||
Other | ( | ) | ||||||||||||
Total amortizable | ( | ) | ||||||||||||
Non-amortizable - trade names | — | |||||||||||||
Total other intangible assets, net | $ | $ | ( | ) | $ | |||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | October 31, 2018 | |||||||||
Foreign currency translation adjustments | $ | $ | $ | |||||||||
Pension and post-retirement benefits | ||||||||||||
Cash flow derivative instruments | ( | ) | ( | ) | ||||||||
Total accumulated other comprehensive loss | $ | $ | $ | |||||||||
(Dollars in thousands) | Foreign Currency Translation Adjustments | Pension and Post-Retirement Benefits | Cash Flow Hedging Derivative Instruments | Total | ||||||||||||
Balance as of October 31, 2018 | $ | $ | $ | ( | ) | $ | ||||||||||
Other comprehensive (income) loss before reclassifications | ( | ) | ||||||||||||||
Amounts reclassified from AOCL | ( | ) | ( | ) | ||||||||||||
Net current period other comprehensive (income) loss | ( | ) | ||||||||||||||
Balance as of February 1, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||
(Dollars in thousands) | Foreign Currency Translation Adjustments | Pension and Post-Retirement Benefits | Cash Flow Hedging Derivative Instruments | Total | ||||||||||||
Balance as of October 31, 2017 | $ | $ | $ | $ | ||||||||||||
Other comprehensive (income) loss before reclassifications | ( | ) | ( | ) | ||||||||||||
Amounts reclassified from AOCL | ( | ) | ( | ) | ||||||||||||
Net current period other comprehensive (income) loss | ( | ) | ( | ) | ||||||||||||
Balance as of February 2, 2018 | $ | $ | $ | $ | ||||||||||||
Three Months Ended | ||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | ||||||
Stock option awards | $ | $ | ||||||
Restricted stock units | ||||||||
Performance share awards | ||||||||
Unrestricted common stock awards | ||||||||
Total compensation cost for stock-based awards | $ | $ | ||||||
Fiscal 2019 | Fiscal 2018 | |||
Expected life of option in years | ||||
Expected stock price volatility | ||||
Risk-free interest rate | ||||
Expected dividend yield | ||||
Per share weighted-average fair value at date of grant | $ | $ | ||
Three Months Ended | ||||||
(Shares in thousands) | February 1, 2019 | February 2, 2018 | ||||
Basic | ||||||
Weighted-average number of shares of common stock | ||||||
Assumed issuance of contingent shares | ||||||
Weighted-average number of shares of common stock and assumed issuance of contingent shares | ||||||
Diluted | ||||||
Weighted-average number of shares of common stock and assumed issuance of contingent shares | ||||||
Effect of dilutive securities | ||||||
Weighted-average number of shares of common stock, assumed issuance of contingent shares, and effect of dilutive securities | ||||||
(Dollars in thousands) | ||||||||||||||||
Three Months Ended February 1, 2019 | Professional | Residential | Other | Total | ||||||||||||
Net sales | $ | $ | $ | $ | ||||||||||||
Intersegment gross sales | ( | ) | — | |||||||||||||
Earnings (loss) before income taxes | ( | ) | ||||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Three Months Ended February 2, 2018 | Professional | Residential | Other | Total | ||||||||||||
Net sales | $ | $ | $ | $ | ||||||||||||
Intersegment gross sales | ( | ) | — | |||||||||||||
Earnings (loss) before income taxes | ( | ) | ||||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Three Months Ended | ||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | ||||||
Corporate expenses | $ | ( | ) | $ | ( | ) | ||
Interest expense | ( | ) | ( | ) | ||||
Other income | ||||||||
Total operating loss | $ | ( | ) | $ | ( | ) | ||
Three Months Ended | ||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | ||||||
Beginning balance | $ | $ | ||||||
Warranty provisions | ||||||||
Warranty claims | ( | ) | ( | ) | ||||
Changes in estimates | ||||||||
Ending balance | $ | $ | ||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | October 31, 2018 | |||||||||
Derivative assets: | ||||||||||||
Derivatives designated as cash flow hedging instruments: | ||||||||||||
Prepaid expenses and other current assets | ||||||||||||
Forward currency contracts | $ | $ | $ | |||||||||
Derivatives not designated as cash flow hedging instruments: | ||||||||||||
Prepaid expenses and other current assets | ||||||||||||
Forward currency contracts | ||||||||||||
Total assets | $ | $ | $ | |||||||||
Derivative liabilities: | ||||||||||||
Derivatives designated as cash flow hedging instruments: | ||||||||||||
Accrued liabilities | ||||||||||||
Forward currency contracts | $ | $ | $ | |||||||||
Derivatives not designated as cash flow hedging instruments: | ||||||||||||
Accrued liabilities | ||||||||||||
Forward currency contracts | ||||||||||||
Total liabilities | $ | $ | $ | |||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | October 31, 2018 | |||||||||
Derivative assets: | ||||||||||||
Forward currency contracts: | ||||||||||||
Gross amounts of recognized assets | $ | $ | $ | |||||||||
Gross liabilities offset in the Consolidated Balance Sheets | ( | ) | ||||||||||
Net amounts of assets presented in the Consolidated Balance Sheets | $ | $ | $ | |||||||||
Derivative liabilities: | ||||||||||||
Forward currency contracts: | ||||||||||||
Gross amounts of recognized liabilities | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Gross assets offset in the Consolidated Balance Sheets | ||||||||||||
Net amounts of liabilities presented in the Consolidated Balance Sheets | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Three Months Ended | ||||||||||||||||
Gain (Loss) Reclassified from AOCL into Earnings | Loss Recognized in OCI on Derivatives | |||||||||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | February 1, 2019 | February 2, 2018 | ||||||||||||
Derivatives designated as cash flow hedging instruments: | ||||||||||||||||
Forward currency contracts: | ||||||||||||||||
Net sales | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Cost of sales | ( | ) | ( | ) | ||||||||||||
Total derivatives designated as cash flow hedging instruments | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Gain (Loss) Recognized in Earnings on Cash Flow Hedging Instruments | ||||||||||||||||||||||||
February 1, 2019 | February 2, 2018 | |||||||||||||||||||||||
(Dollars in thousands) Three Months Ended | Net Sales | Cost of Sales | Other Income, Net | Net Sales | Cost of Sales | Other Income, Net | ||||||||||||||||||
Total Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Gain (loss) on derivatives designated as cash flow hedging instruments: | ||||||||||||||||||||||||
Forward currency contracts: | ||||||||||||||||||||||||
Amount of gain (loss) reclassified from AOCL into earnings | ( | ) | ||||||||||||||||||||||
Gain (loss) on components excluded from effectiveness testing recognized in earnings based on changes in fair value | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Three Months Ended | ||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | ||||||
Loss on derivatives not designated as cash flow hedging instruments | ||||||||
Forward currency contracts: | ||||||||
Other income, net | $ | ( | ) | $ | ( | ) | ||
Total loss on derivatives not designated as cash flow hedging instruments | $ | ( | ) | $ | ( | ) | ||
(Dollars in thousands) | Fair Value Measurements Using Inputs Considered as: | |||||||||||||||
February 1, 2019 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Forward currency contracts | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Forward currency contracts | $ | $ | $ | $ | ||||||||||||
Total liabilities | $ | $ | $ | $ | ||||||||||||
(Dollars in thousands) | Fair Value Measurements Using Inputs Considered as: | |||||||||||||||
February 2, 2018 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Forward currency contracts | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Forward currency contracts | $ | $ | $ | $ | ||||||||||||
Total liabilities | $ | $ | $ | $ | ||||||||||||
(Dollars in thousands) | Fair Value Measurements Using Inputs Considered as: | |||||||||||||||
October 31, 2018 | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | ||||||||||||||||
Forward currency contracts | $ | $ | $ | $ | ||||||||||||
Total assets | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Forward currency contracts | $ | $ | $ | $ | ||||||||||||
Total liabilities | $ | $ | $ | $ | ||||||||||||
Three Months Ended February 1, 2019 | Professional | Residential | Other | Total | ||||||||||||
Revenue by product type: | ||||||||||||||||
Equipment | $ | $ | $ | $ | ||||||||||||
Irrigation | ||||||||||||||||
Total net sales | $ | $ | $ | $ | ||||||||||||
Revenue by geographic market: | ||||||||||||||||
United States | $ | $ | $ | $ | ||||||||||||
Foreign Countries | ||||||||||||||||
Total net sales | $ | $ | $ | $ | ||||||||||||
Three Months Ended February 2, 2018 | Professional | Residential | Other | Total | ||||||||||||
Revenue by product type: | ||||||||||||||||
Equipment | $ | $ | $ | $ | ||||||||||||
Irrigation | ||||||||||||||||
Total net sales | $ | $ | $ | $ | ||||||||||||
Revenue by geographic market: | ||||||||||||||||
United States | $ | $ | $ | $ | ||||||||||||
Foreign Countries | ||||||||||||||||
Total net sales | $ | $ | $ | $ | ||||||||||||
Three Months Ended | ||||||
February 1, 2019 | February 2, 2018 | |||||
Net sales | 100.0 | % | 100.0 | % | ||
Cost of sales | (64.2 | ) | (62.7 | ) | ||
Gross profit | 35.8 | 37.3 | ||||
Selling, general and administrative expense | (24.2 | ) | (25.1 | ) | ||
Operating earnings | 11.6 | 12.2 | ||||
Interest expense | (0.8 | ) | (0.9 | ) | ||
Other income, net | 0.8 | 0.8 | ||||
Provision for income taxes | (1.7 | ) | (8.0 | ) | ||
Net earnings | 9.9 | % | 4.1 | % | ||
Three Months Ended | |||||||||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | $ Change | % Change | |||||||||||
Professional | $ | 455,006 | $ | 403,669 | $ | 51,337 | 12.7 | % | |||||||
Residential | 145,158 | 142,507 | 2,651 | 1.9 | |||||||||||
Other | 2,792 | 2,070 | 722 | 34.9 | |||||||||||
Total net sales* | $ | 602,956 | $ | 548,246 | $ | 54,710 | 10.0 | % | |||||||
*Includes international net sales of: | $ | 141,545 | $ | 146,790 | $ | (5,245 | ) | (3.6 | )% | ||||||
Three Months Ended | |||||||||||||||
(Dollars in thousands) | February 1, 2019 | February 2, 2018 | $ Change | % Change | |||||||||||
Professional | $ | 87,978 | $ | 75,912 | $ | 12,066 | 15.9 | % | |||||||
Residential | 13,072 | 15,713 | (2,641 | ) | (16.8 | ) | |||||||||
Other | (31,030 | ) | (25,240 | ) | (5,790 | ) | (22.9 | ) | |||||||
Total segment earnings | $ | 70,020 | $ | 66,385 | $ | 3,635 | 5.5 | % | |||||||
(Dollars in thousands) | Net Earnings | Diluted EPS | Effective Tax Rate | |||||||||||||||||||
Three Months Ended | February 1, 2019 | February 2, 2018 | February 1, 2019 | February 2, 2018 | February 1, 2019 | February 2, 2018 | ||||||||||||||||
As Reported - GAAP | $ | 59,540 | $ | 22,604 | $ | 0.55 | $ | 0.21 | 15.0 | % | 66.0 | % | ||||||||||
Impacts of tax reform: | ||||||||||||||||||||||
Net deferred tax asset revaluation1 | — | 20,513 | — | 0.19 | — | % | (30.9 | )% | ||||||||||||||
Deemed repatriation tax2 | — | 12,600 | — | 0.11 | — | % | (19.0 | )% | ||||||||||||||
Benefit of the excess tax deduction for share-based compensation3 | (4,361 | ) | (3,576 | ) | (0.04 | ) | (0.03 | ) | 6.2 | % | 5.4 | % | ||||||||||
As Adjusted - Non-GAAP | $ | 55,179 | $ | 52,141 | $ | 0.51 | $ | 0.48 | 21.2 | % | 21.5 | % | ||||||||||
1 | Signed into law on December 22, 2017, the Tax Act, reduced the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent, effective January 1, 2018, resulting in a blended U.S. federal statutory tax rate of 23.3 percent for the fiscal year ended October 31, 2018. This reduction in rate required the re-measurement of the company's net deferred taxes as of the date of enactment, which resulted in a non-cash charge of $20.5 million during the three month period ended February 2, 2018. |
2 | The Tax Act imposed a one-time deemed repatriation tax on the company's historical undistributed earnings and profits of foreign affiliates, which resulted in a charge of $12.6 million during the three month period ended February 2, 2018, payable over eight years. |
3 | In the first quarter of fiscal 2017, we adopted Accounting Standards Update No. 2016-09, Stock-based Compensation: Improvements to Employee Share-based Payment Accounting, which requires that any excess tax deduction for share-based compensation be immediately recorded within income tax expense. We recorded discrete tax benefits of $4.4 million and $3.6 million as excess tax deductions for share-based compensation during the three month periods ended February 1, 2019 and February 2, 2018, respectively. |
• | Adverse economic conditions and outlook in the United States and in other countries in which we conduct business could adversely affect our net sales and earnings, which include but are not limited to recessionary conditions; slow or negative economic growth rates; the impact of U.S. federal debt, state debt and sovereign debt defaults and austerity measures by certain European countries; slow down or reductions in levels of golf course development, renovation, and improvement; golf course closures; reduced levels of home ownership, construction, and sales; home foreclosures; negative consumer confidence; reduced consumer spending levels; increased unemployment rates; prolonged high unemployment rates; higher commodity and component costs and fuel prices; inflationary or deflationary pressures; 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. |
• | Weather conditions, including unfavorable weather conditions exacerbated by global climate changes or otherwise, may reduce demand for some of our products and adversely affect our net sales and operating results, or may affect the timing of demand for some of our products and may adversely affect net sales and operating results in subsequent periods. |
• | Fluctuations in foreign currency exchange rates have in the past affected our operating results and could continue to result in declines in our net sales and net earnings. |
• | Increases in the cost, or disruption in the availability, of raw materials, components, parts and accessories containing various commodities that we purchase, such as steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, electric motors, and other commodities and components, and increases in our other costs of doing business, such as transportation costs or increased tariffs, duties or other charges as a result of changes to U.S. or international trade policies or agreements have in the past affected our profit margins and businesses and could continue to result in declines in our profit margins and businesses. |
• | Our Professional segment net sales are dependent upon certain factors, including golf course revenues and the amount of investment in golf course renovations and improvements; the level of new golf course development and golf course closures; the extent to which property owners outsource their lawn care and snow and ice removal activities; residential and commercial construction activity; continued acceptance of, and demand for, ag-irrigation solutions; the timing and occurrence of winter weather conditions; demand for our products in the rental and specialty construction markets; availability of cash or credit to Professional segment customers on acceptable terms to finance new product purchases; and the amount of government revenues, budget, and spending levels for grounds maintenance equipment. |
• | Our Residential segment net sales are dependent upon consumers buying our products at dealers, mass retailers, and home centers, such as The Home Depot, Inc.; the amount of product placement at mass retailers and home centers; consumer confidence and spending levels; changing buying patterns of customers; and the impact of significant sales or promotional events. |
• | Our financial performance, including our profit margins and net earnings, can 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, if we experience lower sales of products that generally carry higher profit margins, our financial performance, including profit margins and net earnings, could be negatively impacted. |
• | We intend to grow our business in part through acquisitions, including our pending acquisition of CMW, and alliances, strong customer relations, and new joint ventures and partnerships, which could be risky and harm our business, reputation, financial condition, and operating results, particularly if we are not able to successfully integrate such acquisitions and |
• | Our ability to manage our inventory levels to meet our customers' demand for our products is important for our business. If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our net sales and/or working capital could be negatively impacted. |
• | Our business and operating results are subject to the inventory management decisions of our distribution channel customers. Any adjustments in the carrying amount of inventories by our distribution channel customers may impact our inventory management and working capital goals as well as operating results. |
• | 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. |
• | We face intense competition in all of our product lines with numerous manufacturers, including from some competitors that have larger operations and financial resources than us. We may not be able to compete effectively against competitors’ actions, which could harm our business and operating results. |
• | A significant percentage of our consolidated net sales 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, weakened international economic conditions, or the United Kingdom’s process for exiting the European Union; and may not be successful or produce desired levels of net sales. In addition, a portion of our international net sales are financed by third parties. The termination of our agreements with these third parties, any material change to the terms of our agreements with these third parties or in the availability or terms of credit offered to our international customers by these third parties, or any delay in securing replacement credit sources, could adversely affect our sales and operating results. |
• | If we are unable to continue to enhance existing products, as well as develop and market new products, that respond to customer needs and preferences and achieve market acceptance, including by incorporating new or emerging technologies that may become preferred by our customers, we may experience a decrease in demand for our products, and our net sales could be adversely affected. |
• | Any disruption, including as a result of natural or man-made disasters, climate change-related events, work slowdowns, strikes, or other events, 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 facilities, and/or move production between manufacturing facilities could adversely affect our business and operating results. |
• | Our production labor needs fluctuate throughout the year and any failure by us to hire and/or retain a production labor force to adequately staff our manufacturing operations, or by our production labor force to adequately and safely perform their jobs could adversely affect our business, operating results, and reputation. |
• | Management information systems are critical to our business. If our information systems or 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. Our products may infringe the proprietary rights of others. |
• | Our business, properties, and products are subject to governmental 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. Governmental policies and regulations may also adversely affect the demand for some of our products and our operating results. In addition, changes in laws, 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, (i) 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, (ii) changes to, or adoption of new, healthcare laws or regulations, or (iii) changes to U.S. or international policies or trade agreements that could result in additional duties or other charges on raw materials, components, parts or accessories we import. |
• | Changes in accounting standards or assumptions in applying accounting 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. |
• | As a result of our Red Iron joint venture, we are dependent upon the joint venture to provide competitive inventory financing programs to certain distributors and dealers of our products. Any material change in the availability or terms of credit offered to our customers by the joint venture, challenges or delays in transferring new distributors and dealers from any business we might acquire to this financing platform, any termination or disruption of our joint venture relationship or any delay in securing replacement credit sources could adversely affect our net sales and operating results. |
• | The terms of our credit arrangements and the indentures governing our senior notes and debentures could limit our ability to conduct our business, take advantage of business opportunities, and respond to changing business, market, and economic conditions. Additionally, we are subject to counterparty risk in our credit arrangements. If we are unable to comply with the terms of our credit arrangements and indentures, especially the financial covenants, our credit arrangements could be terminated and our senior notes, debentures, and any amounts outstanding under our revolving credit facility could become due and payable. |
• | 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, such as the goals of our "Vision 2020" initiative, in the time periods that we anticipate, or at all, which could have an adverse effect on our business, operating results and financial condition. |
(Dollars in thousands, except average contracted rate) | Average Contracted Rate | Notional Amount | Gain at Fair Value | ||||||||
Buy U.S. dollar/Sell Australian dollar | 0.7408 | $ | 101,633.5 | $ | 1,658.6 | ||||||
Buy U.S. dollar/Sell Canadian dollar | 1.3035 | 30,809.7 | 78.6 | ||||||||
Buy U.S. dollar/Sell Euro | 1.2095 | 145,130.1 | 3,340.1 | ||||||||
Buy U.S. dollar/Sell British pound | 1.3475 | 57,913.8 | 661.3 | ||||||||
Buy Mexican peso/Sell U.S. dollar | 20.4994 | $ | 1,883.0 | $ | 64.4 | ||||||
• | delays in completing the acquisition within the expected time period and the risk that the merger may not be completed at all; |
• | diversion of management's attention to complete the acquisition and integrate CMW’s operations thereafter; |
• | disruption to our existing operations and plans or inability to effectively manage our expanded operations after the closing of the acquisition; |
• | failure, difficulties or delays in securing, integrating and assimilating information, financial systems, internal controls, operations, manufacturing processes and products, or the distribution channel for CMW’s businesses and product lines; |
• | potential loss of key CMW employees, suppliers, customers, distributors, or dealers or other adverse effects on existing business relationships with suppliers, customers, distributors, 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; |
• | reallocation of amounts of capital from our other strategic initiatives; |
• | as we intend to finance the acquisition and related transaction expenses with new debt, the expected 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; |
• | inaccurate assessment of undisclosed, contingent or other liabilities, unanticipated costs associated with the acquisition, and despite the existence of representations, warranties and indemnities in the merger agreement and a representation and warranty insurance policy, an inability to recover or manage such liabilities and costs; |
• | incorrect estimates made in the accounting for the acquisition or the potential future write-off of significant amounts of goodwill, intangible assets and/or other tangible assets if the CMW business does not perform in the future as expected; and |
• | other factors mentioned in our recently filed Annual Report on Form 10-K, Part I, Item 1A, “Risk Factors”. |
Period | Total Number of Shares (or Units) Purchased1,2,3 | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs1,2 | Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs1,2 | |||||||||
November 1, 2018 through November 30, 2018 | — | $ | — | — | 2,402,014 | ||||||||
December 1, 2018 through December 28, 2018 | 269,386 | 55.68 | 269,386 | 7,132,628 | |||||||||
December 29, 2018 through February 1, 2019 | 92,361 | 55.81 | 90,372 | 7,042,256 | |||||||||
Total | 361,747 | $ | 55.71 | 359,758 | |||||||||
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. This program has no expiration date but may be terminated by the company’s Board of Directors at any time. The company repurchased 359,758 shares during the period indicated above under this program and 2,042,256 shares remained available to repurchase under this program as of February 1, 2019. |
2 | 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 program has no expiration date but may be terminated by the company’s Board of Directors at any time. No shares were repurchased under this program during the time period indicated above. |
3 | Includes 1,989 units (shares) of the company’s common stock purchased in open-market transactions at an average price of $58.13 per share on behalf of a rabbi trust formed to pay benefit obligations of the company to participants in deferred compensation plans. These 1,989 shares were not repurchased under the company’s repurchase programs described in footnotes 1 and 2 above. |
(a) | Exhibit No. | Description |
2.1 | ||
3.1 and 4.1 | ||
3.2 and 4.2 | ||
3.3 and 4.3 | ||
4.4 | Indenture dated as of January 31, 1997, between Registrant and First National Trust Association, as Trustee, relating to The Toro Company’s 7.80% Debentures due June 15, 2027 (incorporated by reference to Exhibit 4(a) to Registrant’s Current Report on Form 8-K dated June 24, 1997, Commission File No. 1-8649). (Filed on paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T) | |
4.5 | ||
4.6 | ||
4.7 | ||
31.1 | ||
31.2 | ||
32 | ||
101 | The following financial information from The Toro Company’s Quarterly Report on Form 10-Q for the quarterly period ended February 1, 2019, filed with the SEC on March 6, 2019, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Earnings for the three-month periods ended February 1, 2019 and February 2, 2018, (ii) Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended February 1, 2019 and February 2, 2018, (iii) Condensed Consolidated Balance Sheets as of February 1, 2019, February 2, 2018, and October 31, 2018, (iv) Condensed Consolidated Statement of Cash Flows for the three-month periods ended February 1, 2019 and February 2, 2018, (v) Condensed Consolidated Statements of Stockholders' Equity for the three-month periods ended February 1, 2019 and February 2, 2018, and (vi) Notes to Condensed Consolidated Financial Statements (filed herewith). | |
Date: March 6, 2019 | By: | /s/ Renee J. Peterson | |
Renee J. Peterson | |||
Vice President, Treasurer and Chief Financial Officer | |||
(duly authorized officer, principal financial officer, and principal accounting officer) | |||
1. | I have reviewed this quarterly report on Form 10-Q of The Toro Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Richard M. Olson | |
Richard M. Olson | |
Chairman of the Board, President and Chief Executive Officer | |
(Principal Executive Officer) | |
1. | I have reviewed this quarterly report on Form 10-Q of The Toro Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Renee J. Peterson | |
Renee J. Peterson | |
Vice President, Treasurer and Chief Financial Officer | |
(Principal Financial and Accounting Officer) | |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Richard M. Olson | |
Richard M. Olson | |
Chairman of the Board, President and Chief Executive Officer | |
Date: March 6, 2019 | |
/s/ Renee J. Peterson | |
Renee J. Peterson | |
Vice President, Treasurer and Chief Financial Officer | |
Date: March 6, 2019 | |
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 27, 2019 |
|
| Document And Entity Information [Abstract] | ||
| Entity Registrant Name | TORO CO | |
| Entity Central Index Key | 0000737758 | |
| Document Type | 10-Q | |
| Document Period End Date | Feb. 01, 2019 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --10-31 | |
| Entity Current Reporting Status | Yes | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Emerging Growth | false | |
| Entity Small Business | false | |
| Entity Common Stock, Shares Outstanding (in shares) | 106,110,375 | |
| Document Fiscal Year Focus | 2019 | |
| Document Fiscal Period Focus | Q1 |
Condensed Consolidated Statements of Earnings (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Income Statement [Abstract] | ||
| Net sales | $ 602,956 | $ 548,246 |
| Cost of sales | 387,339 | 344,007 |
| Gross profit | 215,617 | 204,239 |
| Selling, general and administrative expense | 145,563 | 137,317 |
| Operating earnings | 70,054 | 66,922 |
| Interest expense | (4,742) | (4,818) |
| Other income, net | 4,708 | 4,281 |
| Earnings before income taxes | 70,020 | 66,385 |
| Provision for income taxes | 10,480 | 43,781 |
| Net earnings | $ 59,540 | $ 22,604 |
| Basic net earnings per share of common stock (usd per share) | $ 0.56 | $ 0.21 |
| Diluted net earnings per share of common stock (usd per share) | $ 0.55 | $ 0.21 |
| Weighted-average number of shares of common stock outstanding — Basic (in shares) | 106,258 | 107,225 |
| Weighted-average number of shares of common stock outstanding — Diluted (in shares) | 107,781 | 109,855 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Statement of Comprehensive Income [Abstract] | ||
| Net earnings | $ 59,540 | $ 22,604 |
| Other comprehensive income (loss), net of tax: | ||
| Foreign currency translation adjustments | 3,431 | 10,872 |
| Derivative instruments, net of tax of $(1,352) and $(579), respectively | (4,009) | (2,779) |
| Other comprehensive income (loss), net of tax | (578) | 8,093 |
| Comprehensive income | $ 58,962 | $ 30,697 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Statement of Comprehensive Income [Abstract] | ||
| Derivative instruments, tax | $ (1,352) | $ (579) |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Feb. 01, 2019 |
Oct. 31, 2018 |
Feb. 02, 2018 |
|---|---|---|---|
| Preferred stock | |||
| Preferred stock, par value (in dollars per share) | $ 1.00 | $ 1.00 | $ 1.00 |
| Preferred stock, issued (in shares) | 0 | 0 | 0 |
| Preferred stock, outstanding (in shares) | 0 | 0 | 0 |
| Common stock | |||
| Common stock, par value (in dollars per share) | $ 1.00 | $ 1.00 | $ 1.00 |
| Common stock, authorized (in shares) | 175,000,000 | 175,000,000 | 175,000,000 |
| Common stock, issued (in shares) | 105,746,538 | 105,600,652 | 106,434,655 |
| Common stock, outstanding (in shares) | 105,746,538 | 105,600,652 | 106,434,655 |
| Voting preferred stock | |||
| Preferred stock | |||
| Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 |
| Non-voting preferred stock | |||
| Preferred stock | |||
| Preferred stock, authorized (in shares) | 850,000 | 850,000 | 850,000 |
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Statement of Stockholders' Equity [Abstract] | ||
| Cash dividends paid on common stock (in dollars per share) | $ 0.225 | $ 0.20 |
| Issuance of options (in shares) | 537,786 | 506,991 |
| Purchase of shares of common stock (in shares) | 391,900 | 955,308 |
Basis of Presentation |
3 Months Ended | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 01, 2019 | |||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States ("U.S.") generally accepted accounting principles ("GAAP") for complete financial statements. Unless the context indicates otherwise, the terms "company," "Toro," "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 of Operations, and Cash Flows for the periods presented. Since the company’s business is seasonal, operating results for the three months ended February 1, 2019 cannot be annualized to determine the expected results for the fiscal year ending October 31, 2019. The company’s fiscal year ends on October 31, and quarterly results are reported based on three-month periods that generally end on the Friday closest to the quarter end. For comparative purposes, however, the company’s second and third quarters always include exactly 13 weeks of results so that the quarter end date for these two quarters is not necessarily the Friday closest to the calendar month end. For further information, refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018. The policies described in that report are used for preparing quarterly reports. Accounting Policies 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 reserves, allowance for doubtful accounts, pension and post-retirement accruals, self-insurance accruals, useful lives for tangible and definite-lived intangible assets, and future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets. 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 circumstances, historical experience, and actuarial valuations. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the current economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, actual amounts could differ significantly from those estimated at the time the Condensed Consolidated Financial Statements are prepared. New Accounting Pronouncements Adopted In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") No. 2014-09, Revenue from Contracts with Customers that updates the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), which deferred the effective date of this standard by one year. The company adopted ASU 2014-09 effective November 1, 2018, during the first quarter of fiscal 2019, using the modified retrospective method of adoption, which was applied to all contracts for which the company's performance obligations were not completed as of October 31, 2018. In adopting ASU 2014-09, the company elected the following allowable exemptions or practical expedients:
Upon adoption of ASU 2014-09, the company recognized an immaterial transition adjustment within the company's fiscal 2019 beginning retained earnings balance on the Condensed Consolidated Balance Sheets for the cumulative effect of the change in accounting standard. Results for reporting periods beginning after November 1, 2018 are presented under the guidelines of Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, while prior reporting period amounts have not been adjusted and continue to be reported under ASC 605, Revenue Recognition. The adoption of ASU 2014-09 did not materially impact the amount of revenue recognized or any other financial statement line item as of and for the three months ended February 1, 2019. Additionally, the company identified and implemented the appropriate changes to its business processes, information systems, and internal controls to support the preparation of financial information, which did not materially affect the company's internal controls over financial reporting. Refer to Note 14, Revenue, for the additional disclosures required under ASC 606. |
Acquisitions |
3 Months Ended |
|---|---|
Feb. 01, 2019 | |
| Business Combinations [Abstract] | |
| Acquisitions | Acquisitions Northeastern U.S. Distribution Company Effective November 30, 2018, during the first quarter of fiscal 2019, the company completed the acquisition of substantially all of the assets of, and assumed certain liabilities for, a Northeastern U.S. distribution company. The purchase price of this acquisition was allocated to the identifiable assets acquired and liabilities assumed based on estimates of their fair value, with the excess purchase price recorded as goodwill. This acquisition was immaterial based on the company's Consolidated Financial Condition and Results of Operations. Additional purchase accounting disclosures have been omitted given the immateriality of this acquisition in relation to the company's Consolidated Financial Condition and Results of Operations. L.T. Rich Products, Inc. |
Investment in Joint Venture |
3 Months Ended |
|---|---|
Feb. 01, 2019 | |
| Equity Method Investments and Joint Ventures [Abstract] | |
| Investment in Joint Venture | Investment in Joint Venture In fiscal 2009, the company and TCF Inventory Finance, Inc. ("TCFIF"), a subsidiary of TCF National Bank, established Red Iron Acceptance, LLC ("Red Iron"), a joint venture in the form of a Delaware limited liability company that primarily provides inventory financing to certain distributors and dealers of the company’s products in the U.S. On November 29, 2016, during the first quarter of fiscal 2017, the company entered into amended agreements for its Red Iron joint venture with TCFIF. As a result, the amended term of Red Iron will continue until October 31, 2024, subject to two-year extensions thereafter. Either the company or TCFIF may elect not to extend the amended term, or any subsequent term, by giving one-year written notice to the other party. The company owns 45 percent of Red Iron and TCFIF owns 55 percent of Red Iron. The company accounts for its investment in Red Iron under the equity method of accounting. The company and TCFIF each contributed a specified amount of the estimated cash required to enable Red Iron to purchase the company’s inventory financing receivables and to provide financial support for Red Iron’s inventory financing programs. Red Iron borrows the remaining requisite estimated cash utilizing a $550 million secured revolving credit facility established under a credit agreement between Red Iron and TCFIF. The company’s total investment in Red Iron as of February 1, 2019 was $25.4 million. The company has not guaranteed the outstanding indebtedness of Red Iron. The company has agreed to repurchase products repossessed by Red Iron and the TCFIF Canadian affiliate, up to a maximum aggregate amount of $7.5 million in a calendar year. Under the repurchase agreement between Red Iron and the company, Red Iron provides financing for certain dealers and distributors. These transactions are structured as an advance in the form of a payment by Red Iron to the company on behalf of a distributor or dealer with respect to invoices financed by Red Iron. These payments extinguish the obligation of the dealer or distributor to make payment to the company under the terms of the applicable invoice. |
Inventories |
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| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories | Inventories Inventories are valued at the lower of cost or net realizable value, with cost determined by the last-in, first-out ("LIFO") method for a majority of the company's inventories and the first-in, first-out ("FIFO") method for all other inventories. The company establishes a reserve for excess, slow-moving, and obsolete inventory that is equal to the difference between the cost and estimated net realizable value for that inventory. These reserves are based on a review and comparison of current inventory levels to planned production, as well as planned and historical sales of the inventory. Inventories were as follows:
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Goodwill and Other Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The changes in the carrying amount of goodwill by reportable segment for the first three months of fiscal 2019 were as follows:
The components of other intangible assets as of February 1, 2019 were as follows:
The components of other intangible assets as of October 31, 2018 were as follows:
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Stockholders' Equity |
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | Stockholders’ Equity Accumulated Other Comprehensive Loss Components of accumulated other comprehensive loss ("AOCL"), net of tax, were as follows:
The components and activity of AOCL for the first three months of fiscal 2019 and 2018 were as follows:
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Stock-Based Compensation |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | Stock-Based Compensation The compensation costs related to stock-based awards were as follows:
During the first quarter of fiscal years 2019 and 2018, 10,090 and 8,388 shares, respectively, of fully vested unrestricted common stock awards were granted to certain members of the company's Board of Directors as a component of their compensation for their service on the Board of Directors and are recorded in selling, general and administrative expense in the Condensed Consolidated Statements of Earnings. Stock Option Awards Under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, as amended and restated (the "2010 plan"), stock options are granted with an exercise price equal to the closing price of the company’s common stock on the date of grant, as reported by the New York Stock Exchange. Options are generally granted to executive officers, other employees, and non-employee members of the company’s Board of Directors on an annual basis in the first quarter of the company’s fiscal year. Options generally vest one-third each year over a three-year period and have a ten-year term. Other options granted to certain employees vest in full on the three-year anniversary of the date of grant and have a ten-year term. Compensation cost equal to the grant date fair value is generally recognized for these awards over the vesting period. Stock options granted to executive officers and other employees are subject to accelerated expensing if the option holder meets the retirement definition set forth in the 2010 plan. In that case, the fair value of the options is expensed in the fiscal year of grant because generally the option holder must be employed as of the end of the fiscal year in which the options are granted in order for the options to continue to vest following retirement. Similarly, if a non-employee director has served on the company’s Board of Directors for ten full fiscal years or more, the awards vest immediately upon retirement, and therefore, the fair value of the options granted is fully expensed on the date of the grant. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation method with the assumptions noted in the table below. The expected life is a significant assumption as it determines the period for which the risk-free interest rate, 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 directors are expected to exercise their stock options, which is primarily based on historical exercise experience. The company groups executive officers and non-employee directors for valuation purposes based on similar historical exercise behavior. Expected stock price volatilities are 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. 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 for options granted in the following fiscal periods:
Performance Share Awards Under the 2010 plan, the company grants performance share awards to executive officers and other employees under which they are entitled to receive shares of the company’s common stock contingent on the achievement of performance goals of the company and businesses of the company, which are generally measured over a three-year period. The number of shares of common stock a participant receives will be increased (up to 200 percent of target levels) or reduced (down to zero) based on the level of achievement of performance goals and 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 as of 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 2019 and 2018 was $59.58 and $65.40, respectively. Restricted Stock Unit Awards |
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Per Share Data |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Per Share Data | Per Share Data Reconciliations of basic and diluted weighted-average shares of common stock outstanding are as follows:
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Segment Data |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Data | 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 organizes segments for making operating and investment decisions and assessing performance. The company has determined it has nine operating segments and has aggregated certain of those operating segments into two reportable segments: Professional and Residential. The aggregation of the company's operating segments is based on the operating 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. These Other activities consist 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 the summarized financial information concerning the company’s reportable segments:
The following table presents the details of operating loss before income taxes for the company's Other activities:
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Contingencies — Litigation |
3 Months Ended |
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Feb. 01, 2019 | |
| Loss Contingency [Abstract] | |
| Contingencies — Litigation | Contingencies — Litigation The company is party to litigation in the ordinary course of business. Such matters are generally subject to uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. Litigation occasionally involves claims for punitive, as well as compensatory, damages arising out of the use of the company’s products. Although the company is self-insured to some extent, the company maintains insurance against certain product liability losses. The company is also subject to litigation and administrative and judicial proceedings with respect to claims involving asbestos and the discharge of hazardous substances into the environment. Some of these claims assert damages and liability for personal injury, remedial investigations or clean up and other costs and damages. The company is also typically involved in commercial disputes, employment disputes, and patent litigation cases in which it is asserting or defending against patent infringement claims. To prevent possible infringement of the company’s patents by others, the company periodically reviews competitors’ products. To avoid potential liability with respect to others’ patents, the company regularly reviews certain patents issued by the U.S. Patent and Trademark Office and foreign patent offices. Management believes these activities help minimize its risk of being a defendant in patent infringement litigation. The company is currently involved in patent litigation cases, including cases by or against competitors, where it is asserting and defending against claims of patent infringement. Such cases are at varying stages in the litigation process. |
Warranty Guarantees |
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| Product Warranties Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warranty Guarantees | 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. 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. Warranty coverage generally does not cover operator abuse or improper use. An authorized company distributor or dealer must perform warranty work. Distributors and dealers submit claims for warranty reimbursement and are credited for the cost of repairs, labor, and other expenses as long as the repairs meet the company's prescribed standards. Warranty expense is accrued at the time of sale based on the estimated number of products under warranty, historical average costs incurred to service warranty claims, the trend in the historical ratio of claims to sales, the historical length of time between the sale and resulting warranty claim, and other minor factors. Special warranty reserves are also accrued for major rework campaigns. Service support outside of the warranty period is provided by authorized distributors and dealers at the customer's expense. 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 14, Revenue. The changes in accrued warranties were as follows:
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Derivative Instruments and Hedging Activities |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities 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, 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. 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 into various derivative instruments to hedge against such risk, authorized under company policies that place 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, foreign plant operations, and 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 exposure. Results of cash flow hedging instruments, and the related excluded components, of sales and foreign plant operations 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. Results of cash flow hedges of intercompany loans are recorded in other income, net as an offset to the remeasurement of the foreign loan balance. 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 February 1, 2019, the notional amount outstanding of forward contracts designated as cash flow hedging instruments was $255.9 million. 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:
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 in its Condensed Consolidated Balance Sheets. The following table shows the effects of the master netting arrangements on the fair value of the company’s derivative instruments that are recorded in the Condensed Consolidated Balance Sheets:
The following 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 months ended February 1, 2019 and February 2, 2018:
For the first quarter of fiscal 2019 and fiscal 2018, the company did not discontinue cash flow hedge accounting on any forward currency contracts designated as cash flow hedging instruments. As of February 1, 2019, the company expects to reclassify approximately $2.1 million of gains from AOCL to earnings during the next twelve months. 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:
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:
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | Fair Value Measurements The company categorizes its assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value, and requires certain disclosures. The framework discusses valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash 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. 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 forward currency contracts is determined based on observable market transactions of forward currency prices and spot currency rates as of the reporting date. There were no transfers between the levels of the fair value hierarchy during the three months ended February 1, 2019 and February 2, 2018, or the twelve months ended October 31, 2018. 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 February 1, 2019, February 2, 2018, and October 31, 2018, according to the valuation technique utilized to determine their fair values:
Non-recurring 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 acquisitions are measured at fair value. Other Fair Value Disclosures |
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| Revenue | Revenue The company enters into contracts with its customers for the sale of products or rendering of services in the ordinary course of business. A contract with commercial substance exists at the time the company receives and accepts a purchase order under a sales contract with a customer. The company recognizes revenue when, or as, performance obligations under the terms of a contract with its customer are satisfied, which occurs with the transfer of control of product or services. Control is typically transferred to the customer at the time a product is shipped, or in the case of certain agreements, when a product is delivered or as services are rendered. Revenue is recognized based on the transaction price, which is measured as the amount of consideration the company expects to receive in exchange for transferring a product or rendering services pursuant to the terms of the contract with a customer. The amount of consideration the company receives and the revenue the company recognizes varies with changes in sales promotions and incentives offered to customers, as well as anticipated product returns. A provision is made at the time revenue is recognized as a reduction of the transaction price for expected product returns, rebates, floor plan costs, and other sales promotion and incentive expenses. If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on the relative standalone selling price of the respective promised good or service. The company does not recognize revenue in situations where collectability from the customer is not probable, and defers the recognition of revenue until collection is probable or payment is received and performance obligations are satisfied. Freight and shipping revenue billed to customers concurrent with revenue producing activities is included within revenue and the cost for freight and shipping is recognized as an expense within cost of sales when control has transferred to the customer. Shipping and handling activities that occur after control of the related products is transferred are treated as a fulfillment activity rather than a promised service, and therefore, are not considered a performance obligation. Sales, use, value-added, and other excise taxes the company collects concurrent with revenue producing activities are excluded from revenue. Incremental costs of obtaining a contract for which the performance obligations will be satisfied within the next twelve months are expensed as incurred. Incidental items, including goods or services, that are immaterial in the context of the contract are recognized as expense when incurred. Additionally, the company has elected not to disclose the balance of unfulfilled performance obligations for contracts with a contractual term of twelve months or less. The following tables disaggregate our reportable segment net sales by major product type and geographic market:
Product Revenue The company's product revenues are generated through sales of manufactured equipment and irrigation products, including related replacement parts and accessories. For the majority of the company's products, control is transferred and revenue is recognized when the product is shipped from the company's manufacturing facility or distribution center to the company's customers, which primarily consist of distributors, dealers, and mass retailers. In certain situations, the company transfers control and recognizes revenue when delivery to the customer has occurred. Additionally, the company ships some of its products to a key retailer's distribution centers on a consignment basis. The company retains control of its products stored at the key retailer's distribution centers. As the company's products are removed from the distribution centers by the key retailer and shipped to the key retailer's stores, control is transferred from the company to the key retailer. At that time, the company invoices the key retailer and recognizes revenue for these consignment transactions. The company does not offer a right of return for products shipped to the key retailer's stores from the distribution centers. When product sales are financed by the company's joint venture, Red Iron, the transactions are structured as an advance in the form of a payment by Red Iron to the company on behalf of a customer with respect to invoices financed by Red Iron. These payments extinguish the obligation of the customer to make payment to the company under the terms of the applicable invoice. Under a separate agreement between Red Iron and the customer, Red Iron provides a loan to the customer for the advances paid by Red Iron to the company. The company's sales of product to customers that do not elect to finance purchases through Red Iron are generally on open account with terms that generally approximate 30 to 120 days and the resulting receivables are included within receivables, net on the Condensed Consolidated Balance Sheets. Product revenue is recognized based on the transaction price, which is measured as the amount of consideration the company expects to receive in exchange for transferring control of a product to a customer. When determining the transaction price, the company estimates variable consideration by applying the portfolio approach practical expedient under ASC 606. The primary sources of variable consideration for the company are rebate programs, volume incentive programs, floor plan and retail financing programs, cash discounts, and product returns. These sales promotions and incentives are recorded as a reduction to revenue at the time of the initial sale. The company estimates variable consideration related to equipment and irrigation products sold under its sales promotion and incentive programs using the expected value method, which is based on sales terms with customers, historical experience, field inventory levels, volume purchases, and known changes in relevant trends. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Additionally, the company may offer to its customers the right to return eligible equipment and irrigation products, replacement parts, and accessories. Returns are recorded as a reduction to revenue based on anticipated sales returns estimated from sales terms, historical experience, and trend analysis. The company records obligations for returns within accrued liabilities in the Condensed Consolidated Balance Sheets and the right-of-return asset in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. The refund liability and right-of-return asset are remeasured for changes in the estimate at each reporting date with a corresponding adjustment to net sales and cost of sales within the Condensed Consolidated Statements of Earnings. Service Revenue In certain cases, the company renders service contracts to customers, which typically range from 12 to 36 months. The company receives payment at the inception of the service contract and recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the performance obligations under the service contract. Warranty Revenue In addition to the standard warranties offered by the company on its equipment and irrigation products intended to provide assurance that the product will function as expected, the company also sells separately priced extended warranty coverage on select products for a prescribed period after the standard warranty period expires, which typically range from 12 to 24 months. The company receives payment at the inception of the separately priced extended warranty contract and recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the performance obligations under the separately priced extended warranty contract. Contract Liabilities Contract liabilities relate to deferred revenue recognized for payments received at contract inception in advance of the company's performance under the contract and generally relates to the sale of separately priced extended warranty and service contracts. The company recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the performance obligations under the separately priced extended warranty and service contracts. As of February 1, 2019 and October 31, 2018, $14.6 million and $14.0 million, respectively, of unearned revenue associated with outstanding separately priced extended warranty and service contracts was reported within accrued liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets. For the three months ended February 1, 2019, the company recognized $1.6 million of the October 31, 2018 unearned revenue balance within net sales in the Condensed Consolidated Statements of Earnings. The company expects to recognize approximately $4.2 million of the October 31, 2018 unearned amount within net sales throughout the remainder of fiscal 2019, $4.4 million in fiscal 2020, and $3.8 million thereafter.
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Subsequent Events |
3 Months Ended |
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Feb. 01, 2019 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Subsequent Events On February 14, 2019, the company entered into a definitive merger agreement ("merger agreement") with The Charles Machine Works, Inc. ("CMW"), a privately held Oklahoma corporation. CMW designs, manufactures, and sells a range of products to serve the underground construction market, including horizontal directional drills, walk and ride trenchers, utility loaders, vacuum excavators, asset locators, pipe rehabilitation solutions, and after-market tools. Subject to the terms and conditions of the merger agreement, the company has agreed to pay $700 million in cash ("merger consideration"), subject to certain working capital, net debt, and other adjustments as set forth in the merger agreement. The company plans to fund the merger consideration and transaction expenses with cash on hand and debt, including borrowings from the company's unsecured senior revolving credit facility and/or other potential additional financing arrangements that the company may pursue. On March 1, 2019, the U.S. Federal Trade Commission granted early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), with respect to the transactions contemplated by the merger agreement. The early termination of the waiting period under the HSR Act satisfies one of the conditions to the closing of the merger. The closing of the merger remains subject to the satisfaction or waiver of the remaining closing conditions set forth in the merger agreement, including regulatory approval by the German Federal Cartel Office. The company expects the transaction to close prior to the end of the company's fiscal third quarter. |
Basis of Presentation (Policies) |
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Feb. 01, 2019 | |||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||
| 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," "Toro," "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 of Operations, and Cash Flows for the periods presented. Since the company’s business is seasonal, operating results for the three months ended February 1, 2019 cannot be annualized to determine the expected results for the fiscal year ending October 31, 2019. The company’s fiscal year ends on October 31, and quarterly results are reported based on three-month periods that generally end on the Friday closest to the quarter end. For comparative purposes, however, the company’s second and third quarters always include exactly 13 weeks of results so that the quarter end date for these two quarters is not necessarily the Friday closest to the calendar month end. |
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| Accounting Policies | 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 reserves, allowance for doubtful accounts, pension and post-retirement accruals, self-insurance accruals, useful lives for tangible and definite-lived intangible assets, and future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets. 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 circumstances, historical experience, and actuarial valuations. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the current economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, actual amounts could differ significantly from those estimated at the time the Condensed Consolidated Financial Statements are prepared. | ||||||||||||||||||||||||
| New Accounting Pronouncements Adopted | In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") No. 2014-09, Revenue from Contracts with Customers that updates the principles for recognizing revenue. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), which deferred the effective date of this standard by one year. The company adopted ASU 2014-09 effective November 1, 2018, during the first quarter of fiscal 2019, using the modified retrospective method of adoption, which was applied to all contracts for which the company's performance obligations were not completed as of October 31, 2018. In adopting ASU 2014-09, the company elected the following allowable exemptions or practical expedients:
Upon adoption of ASU 2014-09, the company recognized an immaterial transition adjustment within the company's fiscal 2019 beginning retained earnings balance on the Condensed Consolidated Balance Sheets for the cumulative effect of the change in accounting standard. Results for reporting periods beginning after November 1, 2018 are presented under the guidelines of Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, while prior reporting period amounts have not been adjusted and continue to be reported under ASC 605, Revenue Recognition. The adoption of ASU 2014-09 did not materially impact the amount of revenue recognized or any other financial statement line item as of and for the three months ended February 1, 2019. Additionally, the company identified and implemented the appropriate changes to its business processes, information systems, and internal controls to support the preparation of financial information, which did not materially affect the company's internal controls over financial reporting. Refer to Note 14, Revenue, for the additional disclosures required under ASC 606. |
Inventories (Tables) |
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| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories | Inventories were as follows:
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Goodwill and Other Intangible Assets (Tables) |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Goodwill | The changes in the carrying amount of goodwill by reportable segment for the first three months of fiscal 2019 were as follows:
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| Schedule of Finite-Lived Intangible Assets | The components of other intangible assets as of February 1, 2019 were as follows:
The components of other intangible assets as of October 31, 2018 were as follows:
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| Schedule of Indefinite-Lived Intangible Assets | The components of other intangible assets as of February 1, 2019 were as follows:
The components of other intangible assets as of October 31, 2018 were as follows:
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Stockholders' Equity (Tables) |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Components of Accumulated Other Comprehensive Loss (AOCL), Net of Tax | Components of accumulated other comprehensive loss ("AOCL"), net of tax, were as follows:
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| Schedule of Components and Activity of AOCL | The components and activity of AOCL for the first three months of fiscal 2019 and 2018 were as follows:
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Stock-Based Compensation (Tables) |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Compensation Cost Related to Stock-Based Awards | The compensation costs related to stock-based awards were as follows:
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| Schedule of Assumptions for Options Granted | The table below illustrates the weighted-average valuation assumptions for options granted in the following fiscal periods:
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Per Share Data (Tables) |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliations of basic and diluted weighted-average shares of common stock outstanding | Reconciliations of basic and diluted weighted-average shares of common stock outstanding are as follows:
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Segment Data (Tables) |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summarized Financial Information Concerning Reportable Segments | The following tables present the summarized financial information concerning the company’s reportable segments:
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| Summary of Components of Loss Before Income Taxes Included in Other Segment | The following table presents the details of operating loss before income taxes for the company's Other activities:
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Warranty Guarantees (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 01, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product Warranties Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Warranty Provisions, Claims, and Changes in Estimates | The changes in accrued warranties were as follows:
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Derivative Instruments and Hedging Activities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 01, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value of Derivatives and Consolidated Balance Sheet Location | The following table presents the fair value and location of the company’s derivative instruments on the Condensed Consolidated Balance Sheets:
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| Schedule of Effects of Master Netting Arrangements on Fair Value of Derivative Contracts Recorded in Consolidated Balance Sheets | The following table shows the effects of the master netting arrangements on the fair value of the company’s derivative instruments that are recorded in the Condensed Consolidated Balance Sheets:
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| Schedule of Impact of Derivative Instruments on Consolidated Statements of Earnings for Derivatives Designated as Cash Flow Hedging Instruments | The following 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:
The following 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 months ended February 1, 2019 and February 2, 2018:
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| Schedule of Impact of Derivative Instruments on Consolidated Statements of Earnings for Derivatives Not Designated as Hedging Instruments | The following table presents the 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:
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 01, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis | 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 February 1, 2019, February 2, 2018, and October 31, 2018, according to the valuation technique utilized to determine their fair values:
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Revenue (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 01, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue | The following tables disaggregate our reportable segment net sales by major product type and geographic market:
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Investment in Joint Venture - Narrative (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
Jan. 31, 2019 |
|
| Red Iron Acceptance, LLC | |||
| Schedule of Equity Method Investments | |||
| Period of unlimited automatic extensions after the initial term of joint venture | 2 years | ||
| Period of notice to be given by parties under joint venture for not extending initial term of joint venture | 1 year | ||
| Portion owned by Toro (as a percent) | 45.00% | ||
| Portion owned by TCFIF (as a percent) | 55.00% | ||
| Investment in joint venture | $ 25,400,000 | ||
| Maximum aggregate amount of products repossessed by Red Iron and the TCFIF Canadian affiliate, entity has agreed to repurchase in a calendar year | 7,500,000 | ||
| Net amount of new receivables financed for dealers and distributors | 428,800,000 | $ 386,300,000 | |
| Total assets | $ 501,700,000 | ||
| Total liabilities | $ 445,200,000 | ||
| Red Iron Acceptance, LLC | TCFIF secured revolving credit facility | |||
| Schedule of Equity Method Investments | |||
| Maximum borrowing capacity under credit facility | $ 550,000,000 | ||
Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands |
Feb. 01, 2019 |
Oct. 31, 2018 |
Feb. 02, 2018 |
|---|---|---|---|
| Inventory Disclosure [Abstract] | |||
| Raw materials and work in process | $ 124,458 | $ 115,280 | $ 114,150 |
| Finished goods and service parts | 364,393 | 315,179 | 391,994 |
| Total FIFO value | 488,851 | 430,459 | 506,144 |
| Less: adjustment to LIFO value | 72,201 | 72,200 | 66,801 |
| Total inventories, net | $ 416,650 | $ 358,259 | $ 439,343 |
Goodwill and Other Intangible Assets - Changes in Net Carrying Amount of Goodwill (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Feb. 01, 2019
USD ($)
| |
| Changes in the net carrying amount of goodwill | |
| Goodwill, beginning balance | $ 225,290 |
| Goodwill acquired | 1,534 |
| Translation adjustments | 267 |
| Goodwill, ending balance | 227,091 |
| Operating Segments | Professional | |
| Changes in the net carrying amount of goodwill | |
| Goodwill, beginning balance | 214,827 |
| Goodwill acquired | 0 |
| Translation adjustments | 215 |
| Goodwill, ending balance | 215,042 |
| Operating Segments | Residential | |
| Changes in the net carrying amount of goodwill | |
| Goodwill, beginning balance | 10,463 |
| Goodwill acquired | 0 |
| Translation adjustments | 52 |
| Goodwill, ending balance | 10,515 |
| Other | |
| Changes in the net carrying amount of goodwill | |
| Goodwill, beginning balance | 0 |
| Goodwill acquired | 1,534 |
| Translation adjustments | 0 |
| Goodwill, ending balance | $ 1,534 |
Stockholders' Equity - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
Feb. 01, 2019 |
Oct. 31, 2018 |
Feb. 02, 2018 |
|---|---|---|---|
| Accumulated other comprehensive loss (AOCL) | |||
| Foreign currency translation adjustments | $ 26,280 | $ 29,711 | $ 10,162 |
| Pension and post-retirement benefits | 561 | 561 | 2,281 |
| Cash flow derivative instruments | (2,326) | (6,335) | 3,584 |
| Total accumulated other comprehensive loss | $ 24,515 | $ 23,937 | $ 16,027 |
Stock-Based Compensation - Compensation Costs Related to Stock-Based Awards Granted (Details) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Stock-Based Compensation | ||
| Total compensation cost for stock-based awards | $ 3,924 | $ 3,124 |
| Stock option awards | ||
| Stock-Based Compensation | ||
| Total compensation cost for stock-based awards | 1,835 | 1,175 |
| Restricted stock units | ||
| Stock-Based Compensation | ||
| Total compensation cost for stock-based awards | 693 | 1,005 |
| Performance share awards | ||
| Stock-Based Compensation | ||
| Total compensation cost for stock-based awards | 804 | 414 |
| Unrestricted common stock awards | ||
| Stock-Based Compensation | ||
| Total compensation cost for stock-based awards | $ 592 | $ 530 |
| Unrestricted common stock awards | Board of Directors | ||
| Stock-Based Compensation | ||
| Fully vested unrestricted common stock awards granted (in shares) | 10,090 | 8,388 |
Stock-Based Compensation - Stock Option Awards (Details) - Stock option awards - $ / shares |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Assumptions for options granted | ||
| Expected life of option in years | 6 years 3 months 21 days | 6 years 18 days |
| Expected stock price volatility (as a percent) | 19.84% | 20.60% |
| Risk-free interest rate (as a percent) | 2.77% | 2.21% |
| Expected dividend yield (as a percent) | 1.18% | 0.97% |
| Weighted-average fair value at date of grant (in dollars per share) | $ 12.81 | $ 14.29 |
| Board of Directors | ||
| Stock-Based Compensation | ||
| Vesting period | 3 years | |
| Term of options | 10 years | |
| Vesting (as a percent) | 33.33% | |
| Certain employees | ||
| Stock-Based Compensation | ||
| Vesting period | 3 years | |
| Term of options | 10 years | |
| Non-employee members of Board of Directors | ||
| Stock-Based Compensation | ||
| Requisite service period for non-employee director after which fair value of options granted is fully expensed on the date of grant | 10 years | |
Stock-Based Compensation - Performance Share Awards and Restricted Stock and Restricted Stock Unit Awards (Details) - $ / shares |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Performance share awards | ||
| Stock-Based Compensation | ||
| Performance goal period | 3 years | |
| Weighted-average fair value of awards granted (in dollars per share) | $ 59.58 | $ 65.40 |
| Performance share awards | Maximum | ||
| Stock-Based Compensation | ||
| Vesting (as a percent) | 200.00% | |
| Performance share awards | Minimum | ||
| Stock-Based Compensation | ||
| Vesting (as a percent) | 0.00% | |
| Restricted stock and restricted stock unit awards | ||
| Stock-Based Compensation | ||
| Vesting (as a percent) | 33.33% | |
| Vesting period | 3 years | |
| Weighted-average fair value of awards granted (in dollars per share) | $ 58.53 | $ 65.93 |
Per Share Data - Reconciliations of Basic and Diluted Weighted-Average Share (Details) - shares |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Basic | ||
| Weighted-average number of shares of common stock (in shares) | 106,216,000 | 107,173,000 |
| Assumed issuance of contingent shares (in shares) | 42,000 | 52,000 |
| Weighted-average number of shares of common stock and assumed issuance of contingent shares (in shares) | 106,258,000 | 107,225,000 |
| Diluted | ||
| Weighted-average number of shares of common stock and assumed issuance of contingent shares (in shares) | 106,258,000 | 107,225,000 |
| Effect of dilutive securities (in shares) | 1,523,000 | 2,630,000 |
| Weighted-average number of shares of common stock, assumed issuance of contingent shares, and effect of dilutive securities (in shares) | 107,781,000 | 109,855,000 |
| Options, restricted stock, and restricted stock units, excluded from the diluted earnings per share (in shares) | 786,262 | 305,911 |
Segment Data - Narrative (Details) |
3 Months Ended |
|---|---|
|
Feb. 01, 2019
segment
| |
| Segment Reporting [Abstract] | |
| Number of operating segments | 9 |
| Number of reportable segments | 2 |
Segment Data - Components of Loss before Income Taxes Included in Other (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Components of the loss before income taxes included in "Other" | ||
| Interest expense | $ (4,742) | $ (4,818) |
| Other income | 4,708 | 4,281 |
| Earnings before income taxes | 70,020 | 66,385 |
| Other | ||
| Components of the loss before income taxes included in "Other" | ||
| Corporate expenses | (28,314) | (24,401) |
| Interest expense | (4,742) | (4,818) |
| Other income | 2,026 | 3,979 |
| Earnings before income taxes | $ (31,030) | $ (25,240) |
Warranty Guarantees - Schedule of Changes in Accrued Warranties (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Warranty provisions, claims, and changes in estimates | ||
| Beginning balance | $ 76,214 | $ 74,155 |
| Warranty provisions | 10,556 | 10,570 |
| Warranty claims | (10,815) | (9,840) |
| Changes in estimates | 790 | 0 |
| Ending balance | $ 76,745 | $ 74,885 |
Derivative Instruments and Hedging Activities - Narrative (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Feb. 01, 2019
USD ($)
| |
| Derivative Instruments, Gain (Loss) [Line Items] | |
| Maximum length of time hedged in cash flow hedge | 2 years |
| Cash flow hedge effectiveness measurement period | 2 months |
| Gains from AOCL to earnings | $ 2.1 |
| Forward currency contracts | |
| Derivative Instruments, Gain (Loss) [Line Items] | |
| Derivative, notional amount | $ 255.9 |
Derivative Instruments and Hedging Activities - Effects of Master Netting Arrangements (Details) - USD ($) $ in Thousands |
Feb. 01, 2019 |
Oct. 31, 2018 |
Feb. 02, 2018 |
|---|---|---|---|
| Derivative assets: | |||
| Net amounts of assets presented in the Consolidated Balance Sheets | $ 5,836 | $ 10,901 | $ 1,154 |
| Derivative liabilities: | |||
| Net amounts of liabilities presented in the Consolidated Balance Sheets | (33) | (13) | (8,089) |
| Forward currency contracts | |||
| Derivative assets: | |||
| Gross amounts of recognized assets | 5,837 | 10,901 | 1,154 |
| Gross liabilities offset in the balance sheets | (1) | 0 | 0 |
| Net amounts of assets presented in the Consolidated Balance Sheets | 5,836 | 10,901 | 1,154 |
| Derivative liabilities: | |||
| Gross amounts of recognized liabilities | (33) | (13) | (8,089) |
| Gross assets offset in the balance sheets | 0 | 0 | 0 |
| Net amounts of liabilities presented in the Consolidated Balance Sheets | $ (33) | $ (13) | $ (8,089) |
Derivative Instruments and Hedging Activities - Impact and Location of Amounts Reclassified from AOCL and Impacts and Location on OCI (Details) - Cash flow hedging - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Gain (Loss) Reclassified from AOCL into Earnings | $ 1,481 | $ (833) |
| Loss Recognized in OCI on Derivatives | (4,009) | (2,779) |
| Forward currency contracts | Net Sales | ||
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Gain (Loss) Reclassified from AOCL into Earnings | 1,238 | (1,011) |
| Loss Recognized in OCI on Derivatives | (3,481) | (2,678) |
| Forward currency contracts | Cost of Sales | ||
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Gain (Loss) Reclassified from AOCL into Earnings | 243 | 178 |
| Loss Recognized in OCI on Derivatives | $ (528) | $ (101) |
Derivative Instruments and Hedging Activities - Impact and Location of Derivatives Not Designated As Cash Flow Hedging Instruments (Details) - Other Income, Net - Derivatives not designated as cash flow hedging instruments: - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Feb. 02, 2018 |
|
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Total loss on derivatives not designated as cash flow hedging instruments | $ (1,063) | $ (1,816) |
| Forward currency contracts | ||
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Total loss on derivatives not designated as cash flow hedging instruments | $ (1,063) | $ (1,816) |
Revenue - Product Revenue, Service Revenue and Warrant Revenue Narrative (Details) |
3 Months Ended |
|---|---|
Feb. 01, 2019 | |
| Minimum | Product Revenue | |
| Disaggregation of Revenue [Line Items] | |
| Contract with customer, contract period | 30 days |
| Minimum | Service Revenue | |
| Disaggregation of Revenue [Line Items] | |
| Contract with customer, contract period | 12 months |
| Minimum | Warranty Revenue | |
| Disaggregation of Revenue [Line Items] | |
| Contract with customer, contract period | 12 months |
| Maximum | Product Revenue | |
| Disaggregation of Revenue [Line Items] | |
| Contract with customer, contract period | 120 days |
| Maximum | Service Revenue | |
| Disaggregation of Revenue [Line Items] | |
| Contract with customer, contract period | 36 months |
| Maximum | Warranty Revenue | |
| Disaggregation of Revenue [Line Items] | |
| Contract with customer, contract period | 24 months |
Revenue - Contract Liabilities (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Feb. 01, 2019 |
Oct. 31, 2018 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Contract with customer, liability | $ 14.6 | $ 14.0 |
| Contract with customer liability revenue recognized | $ 1.6 |
Subsequent Event (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Aug. 02, 2019
USD ($)
| |
| Charles Machine Works, Inc | Scenario, Forecast | Subsequent Event | |
| Subsequent Event [Line Items] | |
| Cash payment to acquire business | $ 700 |
| Label | Element | Value |
|---|---|---|
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 864,000 |
| Retained Earnings [Member] | ||
| Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 864,000 |