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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Toro Co | NYSE:TTC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.34 | -0.39% | 86.89 | 87.85 | 86.24 | 87.70 | 20,841 | 15:25:21 |
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Delaware
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41-0580470
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State or Other Jurisdiction of
Incorporation or Organization
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I.R.S. Employer Identification No.
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $1.00 per share
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TTC
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New York Stock Exchange
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Description
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Page Number
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Three Months Ended
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Six Months Ended
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May 1, 2020
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May 3, 2019
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May 1, 2020
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May 3, 2019
|
||||||||
Net sales
|
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$
|
929,398
|
|
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$
|
962,036
|
|
|
$
|
1,696,881
|
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$
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1,564,992
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Cost of sales
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622,681
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640,738
|
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1,102,076
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1,028,077
|
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Gross profit
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306,717
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321,298
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594,805
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536,915
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Selling, general and administrative expense
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180,922
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183,573
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377,881
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329,136
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||||
Operating earnings
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125,795
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|
137,725
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216,924
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207,779
|
|
||||
Interest expense
|
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(8,659
|
)
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(6,694
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)
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(16,815
|
)
|
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(11,436
|
)
|
||||
Other income, net
|
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4,235
|
|
|
6,149
|
|
|
7,401
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10,857
|
|
||||
Earnings before income taxes
|
|
121,371
|
|
|
137,180
|
|
|
207,510
|
|
|
207,200
|
|
||||
Provision for income taxes
|
|
22,925
|
|
|
21,610
|
|
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38,973
|
|
|
32,090
|
|
||||
Net earnings
|
|
$
|
98,446
|
|
|
$
|
115,570
|
|
|
$
|
168,537
|
|
|
$
|
175,110
|
|
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||||||||
Basic net earnings per share of common stock
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$
|
0.92
|
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$
|
1.08
|
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$
|
1.57
|
|
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$
|
1.64
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||||||||
Diluted net earnings per share of common stock
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$
|
0.91
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$
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1.07
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$
|
1.55
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$
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1.62
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Weighted-average number of shares of common stock outstanding — Basic
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107,552
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106,679
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107,487
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106,466
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|
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Weighted-average number of shares of common stock outstanding — Diluted
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108,500
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|
108,007
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|
|
108,581
|
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|
107,909
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|
|
|
Three Months Ended
|
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Six Months Ended
|
||||||||||||
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Net earnings
|
|
$
|
98,446
|
|
|
$
|
115,570
|
|
|
$
|
168,537
|
|
|
$
|
175,110
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
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|
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|
|||||||
Foreign currency translation adjustments
|
|
(5,167
|
)
|
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(3,767
|
)
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(5,891
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)
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(336
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)
|
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Derivative instruments, net of tax of $843; $998; $1,032; and $(354), respectively
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2,674
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3,166
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3,326
|
|
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(843
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)
|
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Pension and retiree medical benefits
|
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912
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|
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—
|
|
|
912
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|
|
—
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|
||||
Other comprehensive loss, net of tax
|
|
(1,581
|
)
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(601
|
)
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(1,653
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)
|
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(1,179
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)
|
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Comprehensive income
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|
$
|
96,865
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|
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$
|
114,969
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$
|
166,884
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|
|
$
|
173,931
|
|
|
|
May 1, 2020
|
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May 3, 2019
|
|
October 31, 2019
|
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ASSETS
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|
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Cash and cash equivalents
|
|
$
|
200,004
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|
$
|
180,078
|
|
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$
|
151,828
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Receivables, net
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400,444
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|
428,567
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268,768
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|
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Inventories, net
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714,167
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611,331
|
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651,663
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|
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Prepaid expenses and other current assets
|
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59,938
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50,298
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50,632
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|
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Total current assets
|
|
1,374,553
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1,270,274
|
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1,122,891
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|
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Property, plant, and equipment, net
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453,761
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425,381
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437,317
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Goodwill
|
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426,175
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372,343
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362,253
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|
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Other intangible assets, net
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417,886
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333,177
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352,374
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Right-of-use assets
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84,091
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—
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—
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|
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Investment in finance affiliate
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27,836
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30,110
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24,147
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|
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Deferred income taxes
|
|
4,597
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|
|
4,484
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|
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6,251
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|
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Other assets
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22,576
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|
|
30,231
|
|
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25,314
|
|
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Total assets
|
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$
|
2,811,475
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$
|
2,466,000
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$
|
2,330,547
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|
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|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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|
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|
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Current portion of long-term debt
|
|
$
|
99,868
|
|
|
$
|
90,000
|
|
|
$
|
79,914
|
|
Accounts payable
|
|
327,354
|
|
|
391,692
|
|
|
319,230
|
|
|||
Accrued liabilities
|
|
414,499
|
|
|
360,082
|
|
|
357,826
|
|
|||
Short-term lease liabilities
|
|
14,012
|
|
|
—
|
|
|
—
|
|
|||
Total current liabilities
|
|
855,733
|
|
|
841,774
|
|
|
756,970
|
|
|||
|
|
|
|
|
|
|
||||||
Long-term debt, less current portion
|
|
790,908
|
|
|
721,079
|
|
|
620,899
|
|
|||
Long-term lease liabilities
|
|
72,228
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
|
70,755
|
|
|
50,665
|
|
|
50,579
|
|
|||
Other long-term liabilities
|
|
36,901
|
|
|
47,205
|
|
|
42,521
|
|
|||
|
|
|
|
|
|
|
||||||
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|||
Preferred stock, par value $1.00 per share, authorized 1,000,000 voting and 850,000 non-voting shares, none issued and outstanding
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Common stock, par value $1.00 per share, authorized 175,000,000 shares; issued and outstanding 107,110,815 shares as of May 1, 2020, 106,433,714 shares as of May 3, 2019, and 106,742,082 shares as of October 31, 2019
|
|
107,111
|
|
|
106,434
|
|
|
106,742
|
|
|||
Retained earnings
|
|
911,541
|
|
|
723,959
|
|
|
784,885
|
|
|||
Accumulated other comprehensive loss
|
|
(33,702
|
)
|
|
(25,116
|
)
|
|
(32,049
|
)
|
|||
Total stockholders’ equity
|
|
984,950
|
|
|
805,277
|
|
|
859,578
|
|
|||
Total liabilities and stockholders’ equity
|
|
$
|
2,811,475
|
|
|
$
|
2,466,000
|
|
|
$
|
2,330,547
|
|
|
|
Six Months Ended
|
||||||
|
|
May 1, 2020
|
|
May 3, 2019
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net earnings
|
|
$
|
168,537
|
|
|
$
|
175,110
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Non-cash income from finance affiliate
|
|
(4,010
|
)
|
|
(5,825
|
)
|
||
Distributions from (contributions to) finance affiliate, net
|
|
322
|
|
|
(1,743
|
)
|
||
Depreciation of property, plant and equipment
|
|
35,951
|
|
|
29,090
|
|
||
Amortization of other intangible assets
|
|
9,618
|
|
|
5,940
|
|
||
Fair value step-up adjustment to acquired inventory
|
|
2,864
|
|
|
8,422
|
|
||
Stock-based compensation expense
|
|
5,367
|
|
|
7,025
|
|
||
Deferred income taxes
|
|
860
|
|
|
(193
|
)
|
||
Other
|
|
374
|
|
|
42
|
|
||
Changes in operating assets and liabilities, net of the effect of acquisitions:
|
|
|
|
|
|
|
||
Receivables, net
|
|
(126,639
|
)
|
|
(169,820
|
)
|
||
Inventories, net
|
|
(43,095
|
)
|
|
(4,683
|
)
|
||
Prepaid expenses and other assets
|
|
(2,870
|
)
|
|
534
|
|
||
Accounts payable, accrued liabilities, deferred revenue and other liabilities
|
|
23,606
|
|
|
120,091
|
|
||
Net cash provided by operating activities
|
|
70,885
|
|
|
163,990
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Purchases of property, plant and equipment
|
|
(27,167
|
)
|
|
(33,421
|
)
|
||
Proceeds from asset disposals
|
|
46
|
|
|
105
|
|
||
Investment in unconsolidated entities
|
|
—
|
|
|
(150
|
)
|
||
Acquisitions, net of cash acquired
|
|
(136,431
|
)
|
|
(692,077
|
)
|
||
Net cash used in investing activities
|
|
(163,552
|
)
|
|
(725,543
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Borrowings under debt arrangements
|
|
636,025
|
|
|
700,000
|
|
||
Repayments under debt arrangements
|
|
(446,025
|
)
|
|
(201,004
|
)
|
||
Proceeds from exercise of stock options
|
|
8,347
|
|
|
24,408
|
|
||
Payments of withholding taxes for stock awards
|
|
(1,482
|
)
|
|
(1,894
|
)
|
||
Purchases of Toro common stock
|
|
—
|
|
|
(20,043
|
)
|
||
Dividends paid on Toro common stock
|
|
(53,744
|
)
|
|
(47,930
|
)
|
||
Net cash provided by financing activities
|
|
143,121
|
|
|
453,537
|
|
||
|
|
|
|
|
||||
Effect of exchange rates on cash and cash equivalents
|
|
(2,278
|
)
|
|
(1,030
|
)
|
||
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
|
48,176
|
|
|
(109,046
|
)
|
||
Cash and cash equivalents as of the beginning of the fiscal period
|
|
151,828
|
|
|
289,124
|
|
||
Cash and cash equivalents as of the end of the fiscal period
|
|
$
|
200,004
|
|
|
$
|
180,078
|
|
|
|
Common
Stock |
|
Retained
Earnings |
|
Accumulated Other
Comprehensive Loss |
|
Total Stockholders'
Equity |
||||||||
Balance as of January 31, 2020
|
|
$
|
106,977
|
|
|
$
|
837,194
|
|
|
$
|
(32,121
|
)
|
|
$
|
912,050
|
|
Cash dividends paid on common stock - $0.25 per share
|
|
—
|
|
|
(26,888
|
)
|
|
—
|
|
|
(26,888
|
)
|
||||
Issuance of 135,414 shares for exercised stock options and vested restricted stock units and performance share awards
|
|
136
|
|
|
1,501
|
|
|
—
|
|
|
1,637
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
1,407
|
|
|
—
|
|
|
1,407
|
|
||||
Purchase of 1,872 shares of common stock
|
|
(2
|
)
|
|
(119
|
)
|
|
—
|
|
|
(121
|
)
|
||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(1,581
|
)
|
|
(1,581
|
)
|
||||
Net earnings
|
|
—
|
|
|
98,446
|
|
|
—
|
|
|
98,446
|
|
||||
Balance as of May 1, 2020
|
|
$
|
107,111
|
|
|
$
|
911,541
|
|
|
$
|
(33,702
|
)
|
|
$
|
984,950
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of October 31, 2019
|
|
$
|
106,742
|
|
|
$
|
784,885
|
|
|
$
|
(32,049
|
)
|
|
$
|
859,578
|
|
Cash dividends paid on common stock - $0.50 per share
|
|
—
|
|
|
(53,744
|
)
|
|
—
|
|
|
(53,744
|
)
|
||||
Issuance of 388,347 shares for exercised stock options and vested restricted stock units and performance share awards
|
|
389
|
|
|
5,390
|
|
|
—
|
|
|
5,779
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
5,367
|
|
|
—
|
|
|
5,367
|
|
||||
Contribution of stock to a deferred compensation trust
|
|
—
|
|
|
2,568
|
|
|
—
|
|
|
2,568
|
|
||||
Purchase of 19,612 shares of common stock
|
|
(20
|
)
|
|
(1,462
|
)
|
|
—
|
|
|
(1,482
|
)
|
||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(1,653
|
)
|
|
(1,653
|
)
|
||||
Net earnings
|
|
—
|
|
|
168,537
|
|
|
—
|
|
|
168,537
|
|
||||
Balance as of May 1, 2020
|
|
$
|
107,111
|
|
|
$
|
911,541
|
|
|
$
|
(33,702
|
)
|
|
$
|
984,950
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of February 1, 2019
|
|
$
|
105,747
|
|
|
$
|
613,165
|
|
|
$
|
(24,515
|
)
|
|
$
|
694,397
|
|
Cash dividends paid on common stock - $0.225 per share
|
|
—
|
|
|
(24,007
|
)
|
|
—
|
|
|
(24,007
|
)
|
||||
Issuance of 687,522 shares for exercised stock options and vested restricted stock units and performance share awards
|
|
687
|
|
|
16,152
|
|
|
—
|
|
|
16,839
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
3,101
|
|
|
—
|
|
|
3,101
|
|
||||
Purchase of 345 shares of common stock
|
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(601
|
)
|
|
(601
|
)
|
||||
Net earnings
|
|
—
|
|
|
115,570
|
|
|
—
|
|
|
115,570
|
|
||||
Balance as of May 3, 2019
|
|
$
|
106,434
|
|
|
$
|
723,959
|
|
|
$
|
(25,116
|
)
|
|
$
|
805,277
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of October 31, 2018
|
|
$
|
105,601
|
|
|
$
|
587,252
|
|
|
$
|
(23,937
|
)
|
|
$
|
668,916
|
|
Cash dividends paid on common stock - $0.45 per share
|
|
—
|
|
|
(47,930
|
)
|
|
—
|
|
|
(47,930
|
)
|
||||
Issuance of 1,225,308 shares for exercised stock options and vested restricted stock units and performance share awards
|
|
1,225
|
|
|
21,779
|
|
|
—
|
|
|
23,004
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
7,025
|
|
|
—
|
|
|
7,025
|
|
||||
Contribution of stock to a deferred compensation trust
|
|
—
|
|
|
1,404
|
|
|
—
|
|
|
1,404
|
|
||||
Purchase of 392,245 shares of common stock
|
|
(392
|
)
|
|
(21,545
|
)
|
|
—
|
|
|
(21,937
|
)
|
||||
Cumulative transition adjustment due to the adoption of ASU 2014-09
|
|
—
|
|
|
864
|
|
|
—
|
|
|
864
|
|
||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(1,179
|
)
|
|
(1,179
|
)
|
||||
Net earnings
|
|
—
|
|
|
175,110
|
|
|
—
|
|
|
175,110
|
|
||||
Balance as of May 3, 2019
|
|
$
|
106,434
|
|
|
$
|
723,959
|
|
|
$
|
(25,116
|
)
|
|
$
|
805,277
|
|
1
|
Basis of Presentation
|
•
|
The transition package of practical expedients, which among other things, allows the company to carryforward the historical lease classification determined under previous U.S. GAAP.
|
•
|
The transition practical expedient to not reassess the company's accounting for land easements that exist as of the adoption of the amended guidance.
|
•
|
The short-term lease exemption to not record right-of-use assets and lease liabilities on the Condensed Consolidated Balance Sheet for leases with an initial lease term of 12 months or less, which has resulted in recognizing the lease payments related to such leases within the company's Condensed Consolidated Statements of Earnings on a straight-line basis over the lease term.
|
2
|
Business Combinations
|
(Dollars in thousands)
|
|
March 2, 2020
|
||
Cash and cash equivalents
|
|
$
|
3,476
|
|
Receivables
|
|
6,342
|
|
|
Inventories
|
|
23,000
|
|
|
Prepaid expenses and other current assets
|
|
239
|
|
|
Property, plant and equipment
|
|
26,976
|
|
|
Goodwill
|
|
65,185
|
|
|
Other intangible assets
|
|
75,300
|
|
|
Accounts payable
|
|
(4,075
|
)
|
|
Accrued liabilities
|
|
(6,186
|
)
|
|
Deferred income tax liabilities
|
|
(20,850
|
)
|
|
Total fair value of net assets acquired
|
|
169,407
|
|
|
Less: cash and cash equivalents acquired
|
|
(3,476
|
)
|
|
Total preliminary Venture Products purchase price
|
|
$
|
165,931
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Finite-lived - customer-related
|
|
16.0
|
|
$
|
19,100
|
|
|
$
|
(199
|
)
|
|
$
|
18,901
|
|
Indefinite-lived - trade name
|
|
|
|
56,200
|
|
|
—
|
|
|
56,200
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
75,300
|
|
|
$
|
(199
|
)
|
|
$
|
75,101
|
|
(Dollars in thousands)
|
|
April 1, 2019
|
||
Cash and cash equivalents
|
|
$
|
16,341
|
|
Receivables
|
|
65,674
|
|
|
Inventories
|
|
241,429
|
|
|
Prepaid expenses and other current assets
|
|
8,050
|
|
|
Property, plant and equipment
|
|
142,779
|
|
|
Goodwill
|
|
134,657
|
|
|
Other intangible assets
|
|
264,190
|
|
|
Other long-term assets
|
|
7,971
|
|
|
Accounts payable
|
|
(35,892
|
)
|
|
Accrued liabilities
|
|
(51,943
|
)
|
|
Deferred income tax liabilities
|
|
(85,277
|
)
|
|
Other long-term liabilities
|
|
(6,665
|
)
|
|
Total fair value of net assets acquired
|
|
701,314
|
|
|
Less: cash and cash equivalents acquired
|
|
(16,341
|
)
|
|
Total CMW purchase price
|
|
$
|
684,973
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Customer-related
|
|
18.3
|
|
$
|
130,800
|
|
|
$
|
(9,405
|
)
|
|
$
|
121,395
|
|
Developed technology
|
|
7.8
|
|
20,900
|
|
|
(3,750
|
)
|
|
17,150
|
|
|||
Trade names
|
|
20.0
|
|
5,200
|
|
|
(282
|
)
|
|
4,918
|
|
|||
Backlog
|
|
0.5
|
|
3,590
|
|
|
(3,590
|
)
|
|
—
|
|
|||
Total finite-lived
|
|
16.6
|
|
160,490
|
|
|
(17,027
|
)
|
|
143,463
|
|
|||
Indefinite-lived - trade names
|
|
|
|
103,700
|
|
|
—
|
|
|
103,700
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
264,190
|
|
|
$
|
(17,027
|
)
|
|
$
|
247,163
|
|
3
|
Segment Data
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Six Months Ended May 1, 2020
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Net sales
|
|
$
|
1,255,808
|
|
|
$
|
427,846
|
|
|
$
|
13,227
|
|
|
$
|
1,696,881
|
|
Intersegment gross sales (eliminations)
|
|
25,413
|
|
|
61
|
|
|
(25,474
|
)
|
|
—
|
|
||||
Earnings (loss) before income taxes
|
|
208,733
|
|
|
58,688
|
|
|
(59,911
|
)
|
|
207,510
|
|
||||
Total assets
|
|
$
|
2,052,529
|
|
|
$
|
328,068
|
|
|
$
|
430,878
|
|
|
$
|
2,811,475
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended May 3, 2019
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Net sales
|
|
$
|
723,506
|
|
|
$
|
232,147
|
|
|
$
|
6,383
|
|
|
$
|
962,036
|
|
Intersegment gross sales (eliminations)
|
|
23,716
|
|
|
80
|
|
|
(23,796
|
)
|
|
—
|
|
||||
Earnings (loss) before income taxes
|
|
$
|
150,119
|
|
|
$
|
22,030
|
|
|
$
|
(34,969
|
)
|
|
$
|
137,180
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Six Months Ended May 3, 2019
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Net sales
|
|
$
|
1,178,512
|
|
|
$
|
377,305
|
|
|
$
|
9,175
|
|
|
$
|
1,564,992
|
|
Intersegment gross sales (eliminations)
|
|
37,325
|
|
|
179
|
|
|
(37,504
|
)
|
|
—
|
|
||||
Earnings (loss) before income taxes
|
|
238,097
|
|
|
35,102
|
|
|
(65,999
|
)
|
|
207,200
|
|
||||
Total assets
|
|
$
|
1,848,351
|
|
|
$
|
271,224
|
|
|
$
|
346,425
|
|
|
$
|
2,466,000
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Corporate expenses
|
|
$
|
(15,441
|
)
|
|
$
|
(34,357
|
)
|
|
$
|
(47,883
|
)
|
|
$
|
(62,671
|
)
|
Interest expense
|
|
(8,659
|
)
|
|
(6,694
|
)
|
|
(16,815
|
)
|
|
(11,436
|
)
|
||||
Earnings from wholly-owned domestic distribution companies and other income, net
|
|
2,090
|
|
|
6,082
|
|
|
4,787
|
|
|
8,108
|
|
||||
Total operating loss
|
|
$
|
(22,010
|
)
|
|
$
|
(34,969
|
)
|
|
$
|
(59,911
|
)
|
|
$
|
(65,999
|
)
|
4
|
Revenue
|
Three Months Ended May 1, 2020
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Revenue by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment
|
|
$
|
569,143
|
|
|
$
|
257,400
|
|
|
$
|
3,835
|
|
|
$
|
830,378
|
|
Irrigation
|
|
91,944
|
|
|
4,598
|
|
|
2,478
|
|
|
99,020
|
|
||||
Total net sales
|
|
$
|
661,087
|
|
|
$
|
261,998
|
|
|
$
|
6,313
|
|
|
$
|
929,398
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue by geographic market:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
|
$
|
509,277
|
|
|
$
|
231,764
|
|
|
$
|
6,313
|
|
|
$
|
747,354
|
|
Foreign Countries
|
|
151,810
|
|
|
30,234
|
|
|
—
|
|
|
182,044
|
|
||||
Total net sales
|
|
$
|
661,087
|
|
|
$
|
261,998
|
|
|
$
|
6,313
|
|
|
$
|
929,398
|
|
Six Months Ended May 1, 2020
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Revenue by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment
|
|
$
|
1,093,052
|
|
|
$
|
409,858
|
|
|
$
|
9,360
|
|
|
$
|
1,512,270
|
|
Irrigation
|
|
162,756
|
|
|
17,988
|
|
|
3,867
|
|
|
184,611
|
|
||||
Total net sales
|
|
$
|
1,255,808
|
|
|
$
|
427,846
|
|
|
$
|
13,227
|
|
|
$
|
1,696,881
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue by geographic market:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
|
$
|
963,565
|
|
|
$
|
362,102
|
|
|
$
|
13,227
|
|
|
$
|
1,338,894
|
|
Foreign Countries
|
|
292,243
|
|
|
65,744
|
|
|
—
|
|
|
357,987
|
|
||||
Total net sales
|
|
$
|
1,255,808
|
|
|
$
|
427,846
|
|
|
$
|
13,227
|
|
|
$
|
1,696,881
|
|
Three Months Ended May 3, 2019
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Revenue by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment
|
|
$
|
618,099
|
|
|
$
|
225,456
|
|
|
$
|
2,661
|
|
|
$
|
846,216
|
|
Irrigation
|
|
105,407
|
|
|
6,691
|
|
|
3,722
|
|
|
115,820
|
|
||||
Total net sales
|
|
$
|
723,506
|
|
|
$
|
232,147
|
|
|
$
|
6,383
|
|
|
$
|
962,036
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue by geographic market:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
|
$
|
546,413
|
|
|
$
|
190,163
|
|
|
$
|
6,383
|
|
|
$
|
742,959
|
|
Foreign Countries
|
|
177,093
|
|
|
41,984
|
|
|
—
|
|
|
219,077
|
|
||||
Total net sales
|
|
$
|
723,506
|
|
|
$
|
232,147
|
|
|
$
|
6,383
|
|
|
$
|
962,036
|
|
Six Months Ended May 3, 2019
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Revenue by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment
|
|
$
|
1,005,649
|
|
|
$
|
358,966
|
|
|
$
|
4,630
|
|
|
$
|
1,369,245
|
|
Irrigation
|
|
172,863
|
|
|
18,339
|
|
|
4,545
|
|
|
195,747
|
|
||||
Total net sales
|
|
$
|
1,178,512
|
|
|
$
|
377,305
|
|
|
$
|
9,175
|
|
|
$
|
1,564,992
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue by geographic market:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
|
$
|
894,517
|
|
|
$
|
300,678
|
|
|
$
|
9,175
|
|
|
$
|
1,204,370
|
|
Foreign Countries
|
|
283,995
|
|
|
76,627
|
|
|
—
|
|
|
360,622
|
|
||||
Total net sales
|
|
$
|
1,178,512
|
|
|
$
|
377,305
|
|
|
$
|
9,175
|
|
|
$
|
1,564,992
|
|
5
|
Goodwill and Other Intangible Assets, Net
|
(Dollars in thousands)
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Balance as of October 31, 2019
|
|
$
|
350,250
|
|
|
$
|
10,469
|
|
|
$
|
1,534
|
|
|
$
|
362,253
|
|
Goodwill acquired
|
|
65,185
|
|
|
—
|
|
|
—
|
|
|
65,185
|
|
||||
Purchase price allocation adjustment
|
|
(866
|
)
|
|
—
|
|
|
—
|
|
|
(866
|
)
|
||||
Translation adjustments
|
|
(318
|
)
|
|
(79
|
)
|
|
—
|
|
|
(397
|
)
|
||||
Balance as of May 1, 2020
|
|
$
|
414,251
|
|
|
$
|
10,390
|
|
|
$
|
1,534
|
|
|
$
|
426,175
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Patents
|
|
9.9
|
|
$
|
18,227
|
|
|
$
|
(13,494
|
)
|
|
$
|
4,733
|
|
Non-compete agreements
|
|
5.5
|
|
6,865
|
|
|
(6,794
|
)
|
|
71
|
|
|||
Customer-related
|
|
18.2
|
|
239,383
|
|
|
(40,555
|
)
|
|
198,828
|
|
|||
Developed technology
|
|
7.6
|
|
51,854
|
|
|
(33,199
|
)
|
|
18,655
|
|
|||
Trade names
|
|
15.4
|
|
7,476
|
|
|
(2,304
|
)
|
|
5,172
|
|
|||
Backlog and other
|
|
0.6
|
|
4,390
|
|
|
(4,390
|
)
|
|
—
|
|
|||
Total finite-lived
|
|
15.5
|
|
328,195
|
|
|
(100,736
|
)
|
|
227,459
|
|
|||
Indefinite-lived - trade names
|
|
|
|
190,427
|
|
|
—
|
|
|
190,427
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
518,622
|
|
|
$
|
(100,736
|
)
|
|
$
|
417,886
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Patents
|
|
9.9
|
|
$
|
18,254
|
|
|
$
|
(12,728
|
)
|
|
$
|
5,526
|
|
Non-compete agreements
|
|
5.5
|
|
6,889
|
|
|
(6,797
|
)
|
|
92
|
|
|||
Customer-related
|
|
18.3
|
|
201,022
|
|
|
(26,719
|
)
|
|
174,303
|
|
|||
Developed technology
|
|
7.6
|
|
50,338
|
|
|
(29,292
|
)
|
|
21,046
|
|
|||
Trade names
|
|
15.5
|
|
7,599
|
|
|
(1,903
|
)
|
|
5,696
|
|
|||
Other
|
|
0.6
|
|
7,380
|
|
|
(1,897
|
)
|
|
5,483
|
|
|||
Total finite-lived
|
|
15.1
|
|
291,482
|
|
|
(79,336
|
)
|
|
212,146
|
|
|||
Indefinite-lived - trade names
|
|
|
|
121,031
|
|
|
—
|
|
|
121,031
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
412,513
|
|
|
$
|
(79,336
|
)
|
|
$
|
333,177
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Patents
|
|
9.9
|
|
$
|
18,230
|
|
|
$
|
(13,102
|
)
|
|
$
|
5,128
|
|
Non-compete agreements
|
|
5.5
|
|
6,868
|
|
|
(6,786
|
)
|
|
82
|
|
|||
Customer-related
|
|
18.4
|
|
220,390
|
|
|
(33,547
|
)
|
|
186,843
|
|
|||
Developed technology
|
|
7.6
|
|
51,911
|
|
|
(31,289
|
)
|
|
20,622
|
|
|||
Trade names
|
|
15.4
|
|
7,496
|
|
|
(2,109
|
)
|
|
5,387
|
|
|||
Other
|
|
0.6
|
|
4,390
|
|
|
(4,390
|
)
|
|
—
|
|
|||
Total finite-lived
|
|
15.5
|
|
309,285
|
|
|
(91,223
|
)
|
|
218,062
|
|
|||
Indefinite-lived - trade names
|
|
|
|
134,312
|
|
|
—
|
|
|
134,312
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
443,597
|
|
|
$
|
(91,223
|
)
|
|
$
|
352,374
|
|
6
|
Indebtedness
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
October 31, 2019
|
||||||
Revolving credit facility
|
|
$
|
—
|
|
|
$
|
90,000
|
|
|
$
|
—
|
|
$200 million term loan
|
|
100,000
|
|
|
200,000
|
|
|
100,000
|
|
|||
$300 million term loan
|
|
180,000
|
|
|
300,000
|
|
|
180,000
|
|
|||
$190 million term loan
|
|
190,000
|
|
|
—
|
|
|
—
|
|
|||
3.81% series A senior notes
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
|||
3.91% series B senior notes
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
|||
7.800% debentures
|
|
100,000
|
|
|
100,000
|
|
|
100,000
|
|
|||
6.625% senior notes
|
|
123,947
|
|
|
123,885
|
|
|
123,916
|
|
|||
Less: unamortized discounts, debt issuance costs, and deferred charges
|
|
(3,171
|
)
|
|
(2,806
|
)
|
|
(3,103
|
)
|
|||
Total long-term debt
|
|
890,776
|
|
|
811,079
|
|
|
700,813
|
|
|||
Less: current portion of long-term debt
|
|
99,868
|
|
|
90,000
|
|
|
79,914
|
|
|||
Long-term debt, less current portion
|
|
$
|
790,908
|
|
|
$
|
721,079
|
|
|
$
|
620,899
|
|
7
|
Management Actions
|
8
|
Inventories
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
October 31, 2019
|
||||||
Raw materials and work in process
|
|
$
|
198,807
|
|
|
$
|
186,065
|
|
|
$
|
179,967
|
|
Finished goods and service parts
|
|
597,431
|
|
|
497,467
|
|
|
553,767
|
|
|||
Total FIFO value
|
|
796,238
|
|
|
683,532
|
|
|
733,734
|
|
|||
Less: adjustment to LIFO value
|
|
82,071
|
|
|
72,201
|
|
|
82,071
|
|
|||
Total inventories, net
|
|
$
|
714,167
|
|
|
$
|
611,331
|
|
|
$
|
651,663
|
|
9
|
Property and Depreciation
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
October 31, 2019
|
||||||
Land and land improvements
|
|
$
|
55,298
|
|
|
$
|
53,123
|
|
|
$
|
55,613
|
|
Buildings and leasehold improvements
|
|
287,303
|
|
|
263,103
|
|
|
276,556
|
|
|||
Machinery and equipment
|
|
466,388
|
|
|
421,927
|
|
|
453,314
|
|
|||
Tooling
|
|
216,177
|
|
|
223,621
|
|
|
226,870
|
|
|||
Computer hardware and software
|
|
94,026
|
|
|
91,353
|
|
|
94,409
|
|
|||
Construction in process
|
|
71,309
|
|
|
55,851
|
|
|
34,937
|
|
|||
Property, plant, and equipment, gross
|
|
1,190,501
|
|
|
1,108,978
|
|
|
1,141,699
|
|
|||
Less: accumulated depreciation
|
|
736,740
|
|
|
683,597
|
|
|
704,382
|
|
|||
Property, plant, and equipment, net
|
|
$
|
453,761
|
|
|
$
|
425,381
|
|
|
$
|
437,317
|
|
10
|
Warranty Guarantees
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Beginning balance
|
|
$
|
96,623
|
|
|
$
|
76,745
|
|
|
$
|
96,604
|
|
|
$
|
76,214
|
|
Provisions
|
|
17,072
|
|
|
17,946
|
|
|
31,103
|
|
|
28,502
|
|
||||
Acquisitions
|
|
2,557
|
|
|
14,272
|
|
|
2,557
|
|
|
14,272
|
|
||||
Claims
|
|
(16,927
|
)
|
|
(11,356
|
)
|
|
(31,630
|
)
|
|
(22,171
|
)
|
||||
Changes in estimates
|
|
3,559
|
|
|
(1,855
|
)
|
|
4,250
|
|
|
(1,065
|
)
|
||||
Ending balance
|
|
$
|
102,884
|
|
|
$
|
95,752
|
|
|
$
|
102,884
|
|
|
$
|
95,752
|
|
11
|
Investment in Finance Affiliate
|
12
|
Stock-Based Compensation
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Unrestricted common stock awards
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693
|
|
|
$
|
592
|
|
Stock option awards
|
|
2,316
|
|
|
1,328
|
|
|
4,094
|
|
|
3,163
|
|
||||
Performance share awards
|
|
(1,885
|
)
|
|
1,014
|
|
|
(1,338
|
)
|
|
1,818
|
|
||||
Restricted stock unit awards
|
|
976
|
|
|
759
|
|
|
1,918
|
|
|
1,452
|
|
||||
Total compensation cost for stock-based awards
|
|
$
|
1,407
|
|
|
$
|
3,101
|
|
|
$
|
5,367
|
|
|
$
|
7,025
|
|
|
|
Fiscal 2020
|
|
Fiscal 2019
|
Expected life of option in years
|
|
6.31
|
|
6.31
|
Expected stock price volatility
|
|
19.38%
|
|
19.84%
|
Risk-free interest rate
|
|
1.79%
|
|
2.77%
|
Expected dividend yield
|
|
0.98%
|
|
1.18%
|
Per share weighted-average fair value at date of grant
|
|
$15.36
|
|
$12.82
|
13
|
Stockholders' Equity
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
October 31, 2019
|
||||||
Foreign currency translation adjustments
|
|
$
|
36,916
|
|
|
$
|
30,047
|
|
|
$
|
31,025
|
|
Pension and post-retirement benefits
|
|
3,949
|
|
|
561
|
|
|
4,861
|
|
|||
Cash flow derivative instruments
|
|
(7,163
|
)
|
|
(5,492
|
)
|
|
(3,837
|
)
|
|||
Total accumulated other comprehensive loss
|
|
$
|
33,702
|
|
|
$
|
25,116
|
|
|
$
|
32,049
|
|
(Dollars in thousands)
|
|
Foreign
Currency Translation Adjustments |
|
Pension and
Post-Retirement Benefits |
|
Cash Flow Hedging Derivative Instruments
|
|
Total
|
||||||||
Balance as of January 31, 2020
|
|
$
|
31,749
|
|
|
$
|
4,861
|
|
|
$
|
(4,489
|
)
|
|
$
|
32,121
|
|
Other comprehensive (income) loss before reclassifications
|
|
5,167
|
|
|
—
|
|
|
(194
|
)
|
|
4,973
|
|
||||
Amounts reclassified from AOCL
|
|
—
|
|
|
(912
|
)
|
|
(2,480
|
)
|
|
(3,392
|
)
|
||||
Net current period other comprehensive (income) loss
|
|
5,167
|
|
|
(912
|
)
|
|
(2,674
|
)
|
|
1,581
|
|
||||
Balance as of May 1, 2020
|
|
$
|
36,916
|
|
|
$
|
3,949
|
|
|
$
|
(7,163
|
)
|
|
$
|
33,702
|
|
(Dollars in thousands)
|
|
Foreign
Currency Translation Adjustments |
|
Pension and
Post-Retirement Benefits |
|
Cash Flow Hedging Derivative Instruments
|
|
Total
|
||||||||
Balance as of October 31, 2019
|
|
$
|
31,025
|
|
|
$
|
4,861
|
|
|
$
|
(3,837
|
)
|
|
$
|
32,049
|
|
Other comprehensive loss before reclassifications
|
|
5,891
|
|
|
—
|
|
|
691
|
|
|
6,582
|
|
||||
Amounts reclassified from AOCL
|
|
—
|
|
|
(912
|
)
|
|
(4,017
|
)
|
|
(4,929
|
)
|
||||
Net current period other comprehensive (income) loss
|
|
5,891
|
|
|
(912
|
)
|
|
(3,326
|
)
|
|
1,653
|
|
||||
Balance as of May 1, 2020
|
|
$
|
36,916
|
|
|
$
|
3,949
|
|
|
$
|
(7,163
|
)
|
|
$
|
33,702
|
|
(Dollars in thousands)
|
|
Foreign
Currency Translation Adjustments |
|
Pension and
Post-Retirement Benefits |
|
Cash Flow Hedging Derivative Instruments
|
|
Total
|
||||||||
Balance as of February 1, 2019
|
|
$
|
26,280
|
|
|
$
|
561
|
|
|
$
|
(2,326
|
)
|
|
$
|
24,515
|
|
Other comprehensive (income) loss before reclassifications
|
|
3,767
|
|
|
—
|
|
|
(1,812
|
)
|
|
1,955
|
|
||||
Amounts reclassified from AOCL
|
|
—
|
|
|
—
|
|
|
(1,354
|
)
|
|
(1,354
|
)
|
||||
Net current period other comprehensive (income) loss
|
|
3,767
|
|
|
—
|
|
|
(3,166
|
)
|
|
601
|
|
||||
Balance as of May 3, 2019
|
|
$
|
30,047
|
|
|
$
|
561
|
|
|
$
|
(5,492
|
)
|
|
$
|
25,116
|
|
(Dollars in thousands)
|
|
Foreign
Currency Translation Adjustments |
|
Pension and
Post-Retirement Benefits |
|
Cash Flow Hedging Derivative Instruments
|
|
Total
|
||||||||
Balance as of October 31, 2018
|
|
$
|
29,711
|
|
|
$
|
561
|
|
|
$
|
(6,335
|
)
|
|
$
|
23,937
|
|
Other comprehensive loss before reclassifications
|
|
336
|
|
|
—
|
|
|
3,678
|
|
|
4,014
|
|
||||
Amounts reclassified from AOCL
|
|
—
|
|
|
—
|
|
|
(2,835
|
)
|
|
(2,835
|
)
|
||||
Net current period other comprehensive loss
|
|
336
|
|
|
—
|
|
|
843
|
|
|
1,179
|
|
||||
Balance as of May 3, 2019
|
|
$
|
30,047
|
|
|
$
|
561
|
|
|
$
|
(5,492
|
)
|
|
$
|
25,116
|
|
14
|
Per Share Data
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
(Shares in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||
Basic
|
|
|
|
|
|
|
|
|
|
|
||
Weighted-average number of shares of common stock
|
|
107,552
|
|
|
106,679
|
|
|
107,466
|
|
|
106,445
|
|
Assumed issuance of contingent shares
|
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
Weighted-average number of shares of common stock and assumed issuance of contingent shares
|
|
107,552
|
|
|
106,679
|
|
|
107,487
|
|
|
106,466
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted
|
|
|
|
|
|
|
|
|
|
|
||
Weighted-average number of shares of common stock and assumed issuance of contingent shares
|
|
107,552
|
|
|
106,679
|
|
|
107,487
|
|
|
106,466
|
|
Effect of dilutive securities
|
|
948
|
|
|
1,328
|
|
|
1,094
|
|
|
1,443
|
|
Weighted-average number of shares of common stock, assumed issuance of contingent shares, and effect of dilutive securities
|
|
108,500
|
|
|
108,007
|
|
|
108,581
|
|
|
107,909
|
|
15
|
Contingencies
|
16
|
Leases
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 1, 2020
|
||||
Operating lease expense
|
|
$
|
5,383
|
|
|
$
|
10,217
|
|
Short-term lease expense
|
|
646
|
|
|
1,328
|
|
||
Variable lease expense
|
|
59
|
|
|
96
|
|
||
Total lease expense
|
|
$
|
6,088
|
|
|
$
|
11,641
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 1, 2020
|
||||
Operating cash flows for amounts included in the measurement of lease liabilities
|
|
$
|
5,525
|
|
|
$
|
10,266
|
|
Right-of-use assets obtained in exchange for lease obligations
|
|
$
|
10,909
|
|
|
$
|
17,042
|
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
Weighted-average remaining lease term of operating leases in years
|
|
7.4
|
|
Weighted-average discount rate of operating leases
|
|
2.81
|
%
|
(Dollars in thousands)
|
|
May 1, 2020
|
||
2020 (remaining)
|
|
$
|
24,263
|
|
2021
|
|
17,253
|
|
|
2022
|
|
14,698
|
|
|
2023
|
|
11,761
|
|
|
2024
|
|
10,569
|
|
|
Thereafter
|
|
33,394
|
|
|
Total future minimum operating lease payments
|
|
111,938
|
|
|
Less: imputed interest
|
|
25,698
|
|
|
Present value of operating lease liabilities
|
|
$
|
86,240
|
|
(Dollars in thousands)
|
|
October 31, 2019
|
||
2020
|
|
$
|
17,135
|
|
2021
|
|
15,764
|
|
|
2022
|
|
12,806
|
|
|
2023
|
|
9,772
|
|
|
2024
|
|
8,863
|
|
|
Thereafter
|
|
18,732
|
|
|
Total future minimum lease payments
|
|
$
|
83,072
|
|
17
|
Derivative Instruments and Hedging Activities
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
October 31, 2019
|
||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|||
Forward currency contracts
|
|
$
|
13,303
|
|
|
$
|
8,980
|
|
|
$
|
8,642
|
|
Derivatives not designated as cash flow hedging instruments:
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
|
|
|
|
||||||
Forward currency contracts
|
|
7,270
|
|
|
3,881
|
|
|
2,256
|
|
|||
Total assets
|
|
$
|
20,573
|
|
|
$
|
12,861
|
|
|
$
|
10,898
|
|
|
|
|
|
|
|
|
||||||
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
|
|
259
|
|
|
3
|
|
|
9
|
|
|||
Total liabilities
|
|
$
|
259
|
|
|
$
|
3
|
|
|
$
|
9
|
|
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
October 31, 2019
|
||||||
Derivative assets:
|
|
|
|
|
|
|
||||||
Forward currency contracts:
|
|
|
|
|
|
|
||||||
Gross amounts of recognized assets
|
|
$
|
20,662
|
|
|
$
|
12,861
|
|
|
$
|
11,056
|
|
Gross liabilities offset in the Condensed Consolidated Balance Sheets
|
|
(89
|
)
|
|
—
|
|
|
(158
|
)
|
|||
Net amounts of assets presented in the Condensed Consolidated Balance Sheets
|
|
$
|
20,573
|
|
|
$
|
12,861
|
|
|
$
|
10,898
|
|
|
|
|
|
|
|
|
||||||
Derivative liabilities:
|
|
|
|
|
|
|
||||||
Forward currency contracts:
|
|
|
|
|
|
|
||||||
Gross amounts of recognized liabilities
|
|
$
|
(259
|
)
|
|
$
|
(3
|
)
|
|
$
|
(9
|
)
|
Gross assets offset in the Condensed Consolidated Balance Sheets
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net amounts of liabilities presented in the Condensed Consolidated Balance Sheets
|
|
$
|
(259
|
)
|
|
$
|
(3
|
)
|
|
$
|
(9
|
)
|
|
|
Three Months Ended
|
||||||||||||||
|
|
Gain Reclassified from AOCL into Earnings
|
|
Gain Recognized in OCI on Derivatives
|
||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
2,272
|
|
|
$
|
1,240
|
|
|
$
|
2,521
|
|
|
$
|
2,766
|
|
Cost of sales
|
|
208
|
|
|
114
|
|
|
153
|
|
|
400
|
|
||||
Total derivatives designated as cash flow hedging instruments
|
|
$
|
2,480
|
|
|
$
|
1,354
|
|
|
$
|
2,674
|
|
|
$
|
3,166
|
|
|
|
Six Months Ended
|
||||||||||||||
|
|
Gain Reclassified from AOCL into Earnings
|
|
Gain (Loss) Recognized in OCI on Derivatives
|
||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
3,477
|
|
|
$
|
2,478
|
|
|
$
|
3,105
|
|
|
$
|
(715
|
)
|
Cost of sales
|
|
540
|
|
|
357
|
|
|
221
|
|
|
(128
|
)
|
||||
Total derivatives designated as cash flow hedging instruments
|
|
$
|
4,017
|
|
|
$
|
2,835
|
|
|
$
|
3,326
|
|
|
$
|
(843
|
)
|
|
|
Gain (Loss) Recognized in Earnings on Cash Flow Hedging Instruments
|
||||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||||||
Three Months Ended
|
|
Net Sales
|
|
Cost of Sales
|
|
Net Sales
|
|
Cost of Sales
|
||||||||
Condensed Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded
|
|
$
|
929,398
|
|
|
$
|
(622,681
|
)
|
|
$
|
962,036
|
|
|
$
|
(640,738
|
)
|
Gain (loss) on derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Amount of gain reclassified from AOCL into earnings
|
|
2,272
|
|
|
208
|
|
|
1,240
|
|
|
114
|
|
||||
Gain (loss) on components excluded from effectiveness testing recognized in earnings based on changes in fair value
|
|
$
|
2,332
|
|
|
$
|
134
|
|
|
$
|
1,094
|
|
|
$
|
(46
|
)
|
|
|
Gain Recognized in Earnings on Cash Flow Hedging Instruments
|
||||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||||||
Six Months Ended
|
|
Net Sales
|
|
Cost of Sales
|
|
Net Sales
|
|
Cost of Sales
|
||||||||
Condensed Consolidated Statements of Earnings income (expense) amounts in which the effects of cash flow hedging instruments are recorded
|
|
$
|
1,696,881
|
|
|
$
|
(1,102,076
|
)
|
|
$
|
1,564,992
|
|
|
$
|
(1,028,077
|
)
|
Gain on derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Amount of gain reclassified from AOCL into earnings
|
|
3,477
|
|
|
540
|
|
|
2,478
|
|
|
357
|
|
||||
Gain on components excluded from effectiveness testing recognized in earnings based on changes in fair value
|
|
$
|
2,992
|
|
|
$
|
145
|
|
|
$
|
2,317
|
|
|
$
|
16
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Gain on derivatives not designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Other income, net
|
|
$
|
1,557
|
|
|
$
|
1,790
|
|
|
$
|
1,777
|
|
|
$
|
727
|
|
Total gain on derivatives not designated as cash flow hedging instruments
|
|
$
|
1,557
|
|
|
$
|
1,790
|
|
|
$
|
1,777
|
|
|
$
|
727
|
|
18
|
Fair Value Measurements
|
(Dollars in thousands)
|
|
|
|
Fair Value Measurements Using Inputs Considered as:
|
||||||||||||
May 1, 2020
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts
|
|
$
|
20,573
|
|
|
$
|
—
|
|
|
$
|
20,573
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
20,573
|
|
|
$
|
—
|
|
|
$
|
20,573
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts
|
|
$
|
259
|
|
|
$
|
—
|
|
|
$
|
259
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
259
|
|
|
$
|
—
|
|
|
$
|
259
|
|
|
$
|
—
|
|
(Dollars in thousands)
|
|
|
|
Fair Value Measurements Using Inputs Considered as:
|
||||||||||||
May 3, 2019
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts
|
|
$
|
12,861
|
|
|
$
|
—
|
|
|
$
|
12,861
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
12,861
|
|
|
$
|
—
|
|
|
$
|
12,861
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
(Dollars in thousands)
|
|
|
|
Fair Value Measurements Using Inputs Considered as:
|
||||||||||||
October 31, 2019
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts
|
|
$
|
10,898
|
|
|
$
|
—
|
|
|
$
|
10,898
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
10,898
|
|
|
$
|
—
|
|
|
$
|
10,898
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
19
|
Subsequent Events
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||
Net sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
|
(67.0
|
)
|
|
(66.6
|
)
|
|
(64.9
|
)
|
|
(65.7
|
)
|
Gross profit
|
|
33.0
|
|
|
33.4
|
|
|
35.1
|
|
|
34.3
|
|
Selling, general and administrative expense
|
|
(19.5
|
)
|
|
(19.1
|
)
|
|
(22.3
|
)
|
|
(21.0
|
)
|
Operating earnings
|
|
13.5
|
|
|
14.3
|
|
|
12.8
|
|
|
13.3
|
|
Interest expense
|
|
(0.9
|
)
|
|
(0.7
|
)
|
|
(1.0
|
)
|
|
(0.7
|
)
|
Other income, net
|
|
0.5
|
|
|
0.7
|
|
|
0.4
|
|
|
0.6
|
|
Earnings before income taxes
|
|
13.1
|
|
|
14.3
|
|
|
12.2
|
|
|
13.2
|
|
Provision for income taxes
|
|
(2.5
|
)
|
|
(2.3
|
)
|
|
(2.3
|
)
|
|
(2.0
|
)
|
Net earnings
|
|
10.6
|
%
|
|
12.0
|
%
|
|
9.9
|
%
|
|
11.2
|
%
|
|
|
Three Months Ended
|
|||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
$ Change
|
|
% Change
|
|||||||
Professional
|
|
$
|
661,087
|
|
|
$
|
723,506
|
|
|
$
|
(62,419
|
)
|
|
(8.6
|
)%
|
Residential
|
|
261,998
|
|
|
232,147
|
|
|
29,851
|
|
|
12.9
|
|
|||
Other
|
|
6,313
|
|
|
6,383
|
|
|
(70
|
)
|
|
(1.1
|
)
|
|||
Total net sales*
|
|
$
|
929,398
|
|
|
$
|
962,036
|
|
|
$
|
(32,638
|
)
|
|
(3.4
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
*Includes international net sales of:
|
|
$
|
182,044
|
|
|
$
|
219,077
|
|
|
$
|
(37,033
|
)
|
|
(16.9
|
)%
|
|
|
Six Months Ended
|
|||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
$ Change
|
|
% Change
|
|||||||
Professional
|
|
$
|
1,255,808
|
|
|
$
|
1,178,512
|
|
|
$
|
77,296
|
|
|
6.6
|
%
|
Residential
|
|
427,846
|
|
|
377,305
|
|
|
50,541
|
|
|
13.4
|
|
|||
Other
|
|
13,227
|
|
|
9,175
|
|
|
4,052
|
|
|
44.2
|
|
|||
Total net sales*
|
|
$
|
1,696,881
|
|
|
$
|
1,564,992
|
|
|
$
|
131,889
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
*Includes international net sales of:
|
|
$
|
357,987
|
|
|
$
|
360,622
|
|
|
$
|
(2,635
|
)
|
|
(0.7
|
)%
|
|
|
Three Months Ended
|
|||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
$ Change
|
|
% Change
|
|||||||
Professional
|
|
$
|
106,259
|
|
|
$
|
150,119
|
|
|
$
|
(43,860
|
)
|
|
(29.2
|
)%
|
Residential
|
|
37,122
|
|
|
22,030
|
|
|
15,092
|
|
|
68.5
|
|
|||
Other
|
|
(22,010
|
)
|
|
(34,969
|
)
|
|
12,959
|
|
|
37.1
|
|
|||
Total segment earnings
|
|
$
|
121,371
|
|
|
$
|
137,180
|
|
|
$
|
(15,809
|
)
|
|
(11.5
|
)%
|
|
|
Six Months Ended
|
|||||||||||||
(Dollars in thousands)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
$ Change
|
|
% Change
|
|||||||
Professional
|
|
$
|
208,733
|
|
|
$
|
238,097
|
|
|
$
|
(29,364
|
)
|
|
(12.3
|
)%
|
Residential
|
|
58,688
|
|
|
35,102
|
|
|
23,586
|
|
|
67.2
|
|
|||
Other
|
|
(59,911
|
)
|
|
(65,999
|
)
|
|
6,088
|
|
|
9.2
|
|
|||
Total segment earnings
|
|
$
|
207,510
|
|
|
$
|
207,200
|
|
|
$
|
310
|
|
|
0.1
|
%
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Dollars in thousands, except per share data)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Gross profit
|
|
$
|
306,717
|
|
|
$
|
321,298
|
|
|
$
|
594,805
|
|
|
$
|
536,915
|
|
Acquisition-related costs1
|
|
2,393
|
|
|
9,519
|
|
|
2,863
|
|
|
9,519
|
|
||||
Management actions2
|
|
857
|
|
|
—
|
|
|
857
|
|
|
—
|
|
||||
Non-GAAP gross profit
|
|
$
|
309,967
|
|
|
$
|
330,817
|
|
|
$
|
598,525
|
|
|
$
|
546,434
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross margin
|
|
33.0
|
%
|
|
33.4
|
%
|
|
35.1
|
%
|
|
34.3
|
%
|
||||
Acquisition-related costs1
|
|
0.3
|
%
|
|
1.0
|
%
|
|
0.1
|
%
|
|
0.6
|
%
|
||||
Management actions2
|
|
0.1
|
%
|
|
—
|
%
|
|
0.1
|
%
|
|
—
|
%
|
||||
Non-GAAP gross margin
|
|
33.4
|
%
|
|
34.4
|
%
|
|
35.3
|
%
|
|
34.9
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Operating earnings
|
|
$
|
125,795
|
|
|
$
|
137,725
|
|
|
$
|
216,924
|
|
|
$
|
207,779
|
|
Acquisition-related costs1
|
|
3,004
|
|
|
20,107
|
|
|
5,022
|
|
|
21,754
|
|
||||
Management actions2
|
|
857
|
|
|
—
|
|
|
857
|
|
|
—
|
|
||||
Non-GAAP operating earnings
|
|
$
|
129,656
|
|
|
$
|
157,832
|
|
|
$
|
222,803
|
|
|
$
|
229,533
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(Dollars in thousands, except per share data)
|
|
May 1, 2020
|
|
May 3, 2019
|
|
May 1, 2020
|
|
May 3, 2019
|
||||||||
Earnings before income taxes
|
|
$
|
121,371
|
|
|
$
|
137,180
|
|
|
$
|
207,510
|
|
|
$
|
207,200
|
|
Acquisition-related costs1
|
|
3,004
|
|
|
20,107
|
|
|
5,022
|
|
|
21,754
|
|
||||
Management actions2
|
|
857
|
|
|
—
|
|
|
857
|
|
|
—
|
|
||||
Non-GAAP earnings before income taxes
|
|
$
|
125,232
|
|
|
$
|
157,287
|
|
|
$
|
213,389
|
|
|
$
|
228,954
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings
|
|
$
|
98,446
|
|
|
$
|
115,570
|
|
|
$
|
168,537
|
|
|
$
|
175,110
|
|
Acquisition-related costs1
|
|
2,365
|
|
|
16,352
|
|
|
3,998
|
|
|
17,862
|
|
||||
Management actions2
|
|
682
|
|
|
—
|
|
|
682
|
|
|
—
|
|
||||
Tax impact of share-based compensation3
|
|
(1,342
|
)
|
|
(5,957
|
)
|
|
(3,377
|
)
|
|
(10,318
|
)
|
||||
Non-GAAP net earnings
|
|
$
|
100,151
|
|
|
$
|
125,965
|
|
|
$
|
169,840
|
|
|
$
|
182,654
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted EPS
|
|
$
|
0.91
|
|
|
$
|
1.07
|
|
|
$
|
1.55
|
|
|
$
|
1.62
|
|
Acquisition-related costs1
|
|
0.02
|
|
|
0.15
|
|
|
0.04
|
|
|
0.17
|
|
||||
Tax impact of share-based compensation3
|
|
(0.01
|
)
|
|
(0.05
|
)
|
|
(0.03
|
)
|
|
(0.10
|
)
|
||||
Non-GAAP diluted EPS
|
|
$
|
0.92
|
|
|
$
|
1.17
|
|
|
$
|
1.56
|
|
|
$
|
1.69
|
|
|
|
|
|
|
|
|
|
|
||||||||
Effective tax rate
|
|
18.9
|
%
|
|
15.8
|
%
|
|
18.8
|
%
|
|
15.5
|
%
|
||||
Acquisition-related costs1
|
|
—
|
%
|
|
(0.2
|
)%
|
|
—
|
%
|
|
(0.3
|
)%
|
||||
Tax impact of share-based compensation3
|
|
1.1
|
%
|
|
4.3
|
%
|
|
1.6
|
%
|
|
5.0
|
%
|
||||
Non-GAAP effective tax rate
|
|
20.0
|
%
|
|
19.9
|
%
|
|
20.4
|
%
|
|
20.2
|
%
|
1
|
On March 2, 2020, we completed the acquisition of Venture Products and on April 1, 2019, we completed the acquisition of CMW. For additional information regarding these acquisitions, refer to Note 2, Business Combinations, within the Notes to Condensed Consolidated Financial Statements included within Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q. Acquisition-related costs for the three and six month periods ended May 1, 2020 represent transaction costs incurred for our acquisition of Venture Products, as well as integration costs and charges incurred for the take-down of the inventory fair value step-up amounts resulting from purchase accounting adjustments related to the acquisitions of Venture Products and CMW. Acquisition-related costs for the three and six month periods ended May 3, 2019 represent transaction and integration costs, as well as charges incurred for the take-down of the inventory fair value step-up amount and amortization of the backlog intangible asset resulting from purchase accounting adjustments related to our acquisition of CMW.
|
2
|
During the third quarter of fiscal 2019, we announced the wind down of our Toro-branded large horizontal directional drill and riding trencher product line ("Toro underground wind down"). Management actions represent inventory write-down charges incurred during the three and six month periods ended May 1, 2020 for the Toro underground wind down. For additional information regarding the Toro underground wind down, refer to Note 7, Management Actions, within the Notes to Condensed Consolidated Financial Statements included within Part 1, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q.
|
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. These amounts represent the discrete tax benefits recorded as excess tax deductions for share-based compensation during the three and six month periods ended May 1, 2020 and May 3, 2019.
|
•
|
Adverse economic conditions and outlook in the United States and in other countries in which we conduct business, including as a result of COVID-19, have adversely affected our net sales and earnings and could continue to adversely affect our net sales and earnings, which include but are not limited to business closures; slowdowns, suspensions or delays of production and commercial activity; recessionary conditions; slow or negative economic growth rates; slow down or reductions in levels of golf course development, renovation, and improvement; golf course closures; reduced governmental or municipal spending; reduced levels of home ownership, construction, and sales; home foreclosures; negative consumer confidence; reduced consumer spending levels; increased unemployment rates; prolonged high unemployment rates; higher costs of commodities, components, parts, and accessories and/or transportation-related costs, including as a result of inflation, changing prices, tariffs, and/or duties; inflationary or deflationary pressures; reduced infrastructure spending; the impact of U.S. federal debt, state debt and sovereign debt defaults and austerity measures by certain European countries; reduced credit availability or unfavorable credit terms for our distributors, dealers, and end-user customers; higher short-term, mortgage, and other interest rates; and general economic and political conditions and expectations.
|
•
|
COVID-19 has directly and indirectly adversely impacted our business, financial condition and operating results and such adverse impact will likely continue, is highly uncertain and cannot be predicted, but has been and could continue to be material and is based on numerous factors, which include but are not limited to, the duration, scope, and severity of COVID-19; governmental, business and individual actions that have been, and continue to be, taken in response to COVID-19; the effect of COVID-19 on our dealers, distributors, mass retailers and other channel partners and customers, including reduced or constrained budgets and cash preservation efforts; our ability during COVID-19 to continue operations and/or adjust our production schedules; significant reductions or volatility in demand for one or more of our products or services and/or higher demand for moderately-priced products; the effect of COVID-19 on our suppliers and our ability to obtain commodities, components, parts, and accessories on a timely basis through our supply chain and at anticipated costs; logistics costs and challenges; costs incurred as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations; potential future restructuring, impairment or other charges; availability of employees, their ability to conduct work away from normal working locations and/or under revised work environment protocols, as well as the general willingness of employees to come to and perform work; the impact of COVID-19 on the financial and credit markets and economic activity generally; our ability to access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all; our ability to comply with the financial covenants in our debt agreements if the material economic downturn as a result of COVID-19 results in substantially increased indebtedness and/or lower EBITDA for us; and the exasperation of negative impacts as a result of the occurrence of a global or national recession, depression or other sustained adverse market event as a result of COVID-19.
|
•
|
Our Professional segment net sales are dependent upon certain factors, many of which have been adversely impacted by COVID-19, 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; infrastructure improvements; demand for our products in the rental, specialty and underground construction markets, including those related to oil and gas construction activities; the extent to which property owners outsource their lawn care and snow and ice removal activities; residential and/or municipal commercial construction activity; continued acceptance of, and demand for, ag-irrigation solutions; the timing and occurrence of winter weather conditions; availability of cash or credit to Professional segment customers on acceptable
|
•
|
Increases in the cost, or disruption and/or shortages in the availability, of commodities, components, parts and accessories containing various materials that we purchase for use in our manufacturing process and end-products or to be sold as stand-alone end-products, such as steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, electric motors, and other commodities, components, parts and accessories, including as a result of COVID-19, increased costs, increased tariffs, duties or other charges as a result of changes to U.S. or international trade policies or trade agreements, trade regulation and/or industry activity, or antidumping and countervailing duty petitions on certain products imported from foreign countries, or inability of suppliers to continue operations or otherwise remain in business as a result of COVID-19, financial difficulties, or otherwise, have affected our profit margins, operating results and businesses and could continue to result in declines in our profit margins, operating results and businesses.
|
•
|
Our ability to manage our inventory levels to meet our customers' demand for our products is important for our business. Managing inventory levels in the current COVID-19 commercial environment is particularly difficult as a result of changes to production operations, locations and schedules as well as demand volatility. If we underestimate or overestimate both channel and retail demand for our products, are not able to manufacture product to fulfill customer demand, and/or do not produce or maintain appropriate inventory levels, our net sales, profit margins, net earnings, and/or working capital could be negatively impacted.
|
•
|
Changes in the composition of, financial viability of, and/or the relationships with, our distribution channel customers could negatively impact our business and operating results.
|
•
|
Our business and operating results are subject to the inventory management decisions of our distribution channel customers. 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.
|
•
|
Weather conditions, including unfavorable weather conditions exacerbated by global climate changes or otherwise, may reduce demand for some of our products and/or cause disruptions in our operations, including as a result of disruption in our supply chain, and adversely affect our net sales and operating results, or may affect the timing of demand for some of our products and/or our ability to manufacture product to fulfill customer demand, which 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.
|
•
|
Our Residential segment net sales are dependent upon continued operations of mass retailers, dealers, and home centers; consumers buying our products at mass retailers, dealers, and home centers; the amount of product placement at mass retailers and home centers; consumer confidence and spending levels; changing buying patterns of customers; and the impact of significant sales or promotional events.
|
•
|
Our financial performance, including our profit margins and net earnings, 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 and alliances, strong customer relations, and new joint ventures, investments, and partnerships, which could be risky and harm our business, reputation, financial condition, and operating results, particularly if we are not able to successfully integrate such acquisitions and alliances, joint ventures, investments, and partnerships, such transactions result in disruption to our operations, we experience loss of key employees, customers, or channel partners, significant amounts of goodwill, other intangible assets, and/or long-lived assets incurred as a result of a transaction are subsequently written off, and other factors. If previous or future acquisitions do not produce the expected results or integration into our operations takes more time than expected, our business could be harmed.
|
•
|
As of May 1, 2020, we had goodwill of $426.2 million and other intangible assets of $417.9 million, which together comprise 30.0 percent of our total assets as of May 1, 2020. These amounts are maintained in various reporting units, including goodwill and other intangible assets from the CMW and Venture Products acquisitions. If we determine that our goodwill or other intangible assets recorded have become impaired, we will be required to record a charge resulting from the impairment. Impairment charges, including such charges that could arise as a result of the COVID-19 pandemic, could be significant and could adversely affect our consolidated results of operations and financial position.
|
•
|
We face intense competition in all of our product lines with numerous manufacturers, including some that have larger operations and greater financial resources than us. We may not be able to compete effectively against competitors’ actions, which could harm our business and operating results.
|
•
|
A significant percentage of our consolidated net sales is generated outside of the United States, and we intend to continue to expand our international operations. Our international operations also require significant management attention and financial resources; expose us to difficulties presented by international economic, political, legal, regulatory, accounting,
|
•
|
If we are unable to continue to enhance existing products, as well as develop and market new products, that respond to customer needs and preferences and achieve market acceptance, including by incorporating new, emerging and/or disruptive technologies that may become preferred by our customers, we may experience a decrease in demand for our products, and our net sales could be adversely affected.
|
•
|
Any disruption, including as a result of natural or man-made disasters, inclement weather, including as a result of climate change-related events, work slowdowns, strikes, pandemics and/or epidemics, including COVID-19, protests and/or social unrest, or other events, at or in proximity to any of our facilities or in our manufacturing or other operations, or those of our distribution channel customers, mass retailers or home centers where our products are sold, or suppliers, or our inability to cost-effectively expand existing facilities, open and manage new facilities, and/or move production between manufacturing facilities could adversely affect our business and operating results.
|
•
|
Our labor needs fluctuate throughout the year and any failure by us to hire and/or retain a labor force to adequately staff manufacturing operations, perform service or warranty work, or other necessary activities or by such labor force to adequately and safely perform their jobs could adversely affect our business, operating results, and reputation.
|
•
|
Our labor force has been impacted by COVID-19 and such impact will likely continue, including as a result of governmental, business and individual actions that have been, and continue to be, taken in response to COVID-19. Furthermore, we have incurred additional costs as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations, including remote working accommodations, enhanced cleaning processes, protocols designed to implement appropriate social distancing practices, and/or adoption of additional wage and benefit programs to assist employees.
|
•
|
Management information systems are critical to our business. If our information systems or information security practices, or those of our business partners or third-party service providers, fail to adequately perform and/or protect sensitive or confidential information, or if we, our business partners, or third-party service providers experience an interruption in, or breach of, the operation of such systems or practices, including by theft, loss or damage from unauthorized access, security breaches, natural or man-made disasters, cyber attacks, computer viruses, malware, phishing, denial of service attacks, power loss or other disruptive events, our business, reputation, financial condition, and operating results could be adversely affected.
|
•
|
Our reliance upon patents, trademark laws, and contractual provisions to protect our proprietary rights may not be sufficient to protect our intellectual property from others who may sell similar products. 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) adoption of laws and regulations to address COVID-19, (ii) taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance, including as a result of the Tax Act, (iii) changes to, or adoption of new, healthcare laws or regulations, or (iv) changes to U.S. or international policies or trade agreements or trade regulation and/or industry activity, including antidumping and countervailing duty petitions on certain products imported from foreign countries, that could result in additional duties or other charges on commodities, components, parts or accessories we import.
|
•
|
Changes in accounting or tax standards, policies, or assumptions in applying accounting or tax policies could adversely affect our financial statements, including our financial results and financial condition.
|
•
|
Climate change legislation, regulations, or accords may adversely impact our operations.
|
•
|
Costs of complying with the various environmental laws related to our ownership and/or lease of real property, such as clean-up costs and liabilities that may be associated with certain hazardous waste disposal activities, could adversely affect our financial condition and operating results.
|
•
|
Legislative enactments could impact the competitive landscape within our markets and affect demand for our products.
|
•
|
We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws. The continued expansion of our international operations could increase the risk of violations of these laws in the future.
|
•
|
We are subject to product quality issues, product liability claims, and other litigation from time to time that could adversely affect our business, reputation, operating results, or financial condition.
|
•
|
If we are unable to retain our executive officers or other key employees, attract and retain other qualified personnel, or successfully implement executive officer, key employee or other qualified personnel transitions, we may not be able to meet strategic objectives and our business could suffer.
|
•
|
We are dependent upon various floor planning programs 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 such programs, challenges or delays in transferring new distributors and dealers from any business we might acquire or otherwise to such programs, or any termination or disruption of our various floor planning programs or any delay in securing replacement credit sources, could adversely affect our net sales and operating results.
|
•
|
The terms of our credit arrangements and the indentures and other terms governing our senior notes and debentures could limit our ability to conduct our business, take advantage of business opportunities, and respond to changing business, market, and economic conditions. Additionally, we are subject to counterparty risk in our credit arrangements. If we are unable to comply with such terms, especially the financial covenants, our credit arrangements could be terminated and our senior notes, debentures, term loan facilities, and any amounts outstanding under our revolving credit facility could become due and payable.
|
•
|
The addition of further leverage to our capital structure could result in a downgrade to our credit ratings in the future and the failure to maintain investment grade credit ratings could adversely affect our cost of funding and our liquidity by limiting the access to capital markets or the availability of funding from a variety of lenders.
|
•
|
We are expanding and renovating our corporate and other facilities and could experience disruptions to our operations in connection with such efforts.
|
•
|
We may not achieve our projected financial information or other business initiatives in the time periods that we anticipate, or at all, which could have an adverse effect on our business, operating results and financial condition.
|
(Dollars in thousands, except average contracted rate)
|
|
Average Contracted Rate
|
|
Notional Amount
|
|
Fair Value
|
|
Gain (Loss) at Fair Value
|
|||||||
Buy U.S. dollar/Sell Australian dollar
|
|
0.6994
|
|
|
$
|
97,693
|
|
|
$
|
103,841
|
|
|
$
|
6,148
|
|
Buy U.S. dollar/Sell Canadian dollar
|
|
1.3310
|
|
|
31,833
|
|
|
33,129
|
|
|
1,296
|
|
|||
Buy U.S. dollar/Sell Euro
|
|
1.1801
|
|
|
150,386
|
|
|
160,916
|
|
|
10,530
|
|
|||
Buy U.S. dollar/Sell British pound
|
|
1.3142
|
|
|
51,279
|
|
|
53,863
|
|
|
2,584
|
|
|||
Buy Mexican peso/Sell U.S. dollar
|
|
21.4522
|
|
|
$
|
2,144
|
|
|
$
|
1,901
|
|
|
$
|
(243
|
)
|
•
|
the duration, scope, and severity of COVID-19;
|
•
|
governmental, business and individual actions that have been, and continue to be, taken in response to COVID-19, including business and travel restrictions, "stay-at-home" and "shelter-in-place" directives, quarantines, and slowdowns, suspensions or delays of commercial activity;
|
•
|
the effect of COVID-19 on our dealers, distributors, mass retailers and other channel partners and customers, including their ability to remain open, continue to sell and service our products, pay for the products purchased from us, collect payment from their customers, adoption of reduced or experiecencing constrained budgets, or enacting cash preservation efforts;
|
•
|
our ability during COVID-19 to continue operations and/or adjust our production schedules, including by the temporary suspension of production activity mandated or otherwise made necessary by governmental authorities, as a result of current and anticipated weakened demand and/or production delays at certain of our facilities;
|
•
|
continued reductions or volatility in demand for one or more of our products or services and/or higher demand for moderately-priced products;
|
•
|
the effect of COVID-19 on our suppliers and our ability to continue to obtain commodities, components, parts, and accessories on a timely basis through our supply chain and at anticipated costs;
|
•
|
logistics costs and challenges, including availability of transportation and at previously anticipated costs;
|
•
|
costs incurred as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations, including remote working accommodations, enhanced cleaning processes, protocols designed to implement appropriate social distancing practices, and/or adoption of additional wage and benefit programs to assist employees;
|
•
|
potential future restructuring, impairment or other charges;
|
•
|
availability of employees, their ability to continue to conduct work away from normal working locations and/or under revised work environment protocols, as well as the general willingness of employees to come to and perform work;
|
•
|
our ability to establish and maintain appropriate estimates and assumptions used to prepare the Condensed Consolidated Financial Statements;
|
•
|
the continued impact of COVID-19 on the financial and credit markets and economic activity generally;
|
•
|
our ability to access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all;
|
•
|
our ability to comply with the financial covenants in our debt agreements if the material economic downturn as a result of COVID-19 results in substantially increased indebtedness and/or lower EBITDA for us; and
|
•
|
the continued exasperation of negative impacts as a result of the continuance of a global or national recession, depression or other sustained adverse market event as a result of COVID-19, including without limitation substantially reduced demand for our products.
|
•
|
diversion of management's attention to integrate Venture Products' operations;
|
•
|
disruption to our existing operations and plans or inability to effectively manage our expanded operations;
|
•
|
failure, difficulties, or delays in securing, integrating, and assimilating information, financial systems, internal controls, operations, manufacturing processes, products, or the distribution channel for Venture Products' businesses and product lines;
|
•
|
potential loss of key Venture Products 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;
|
•
|
because we financed the acquisition and related transaction expenses with additional borrowings under our existing credit facility, our ability to access additional capital thereunder may be limited and the increase in our leverage and debt service requirements could restrict our ability to access additional capital when needed or to pursue other important elements of our business strategy;
|
•
|
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, an inability to recover or manage such liabilities and costs;
|
•
|
incorrect estimates made in the accounting for the acquisition or the potential write-off of significant amounts of goodwill, intangible assets, and/or other tangible assets if the Venture Products business does not perform in the future as expected; and
|
•
|
other factors mentioned in our recently filed Annual Report on Form 10-K, Part 1, Item 1A, "Risk Factors".
|
Period
|
|
Total Number of Shares (or Units) Purchased1,2
|
|
Average Price Paid per Share (or Unit)
|
|
Total Number of Shares (or Units)
Purchased As Part of Publicly Announced Plans or Programs1
|
|
Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs1
|
|||||
February 1, 2020 through February 28, 2020
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
7,042,256
|
|
February 29, 2020 through April 3, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,042,256
|
|
|
April 4, 2020 through May 1, 2020
|
|
1,477
|
|
|
64.24
|
|
|
—
|
|
|
7,042,256
|
|
|
Total
|
|
1,477
|
|
|
$
|
64.24
|
|
|
—
|
|
|
|
|
1
|
On December 3, 2015, the company’s Board of Directors authorized the repurchase of 8,000,000 shares of the company’s common stock in open-market or privately negotiated transactions. On December 4, 2018, the company’s Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of the company’s common stock in open-market or privately negotiated transactions. This authorized stock repurchase program has no expiration date but may be terminated by the company’s Board of Directors at any time. No shares were repurchased under this authorized stock repurchase program during the company's fiscal second quarter of 2020 and 7,042,256 shares remained available to repurchase under this authorized stock repurchase program as of May 1, 2020.
|
2
|
Includes 1,477 units (shares) of the company’s common stock purchased in open-market transactions at an average price of $64.24 per share on behalf of a rabbi trust formed to pay benefit obligations of the company to participants in deferred compensation plans. These 1,477 shares were not repurchased under the company’s authorized stock repurchase program described in footnote 1 above.
|
Date: June 4, 2020
|
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)
|
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