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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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||||||
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January 31, 2020
|
|
February 1, 2019
|
||||
Net sales
|
|
$
|
767,483
|
|
|
$
|
602,956
|
|
Cost of sales
|
|
479,395
|
|
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387,339
|
|
||
Gross profit
|
|
288,088
|
|
|
215,617
|
|
||
Selling, general and administrative expense
|
|
196,959
|
|
|
145,563
|
|
||
Operating earnings
|
|
91,129
|
|
|
70,054
|
|
||
Interest expense
|
|
(8,156
|
)
|
|
(4,742
|
)
|
||
Other income, net
|
|
3,166
|
|
|
4,708
|
|
||
Earnings before income taxes
|
|
86,139
|
|
|
70,020
|
|
||
Provision for income taxes
|
|
16,048
|
|
|
10,480
|
|
||
Net earnings
|
|
$
|
70,091
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$
|
59,540
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|
||||
Basic net earnings per share of common stock
|
|
$
|
0.65
|
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|
$
|
0.56
|
|
|
|
|
|
|
||||
Diluted net earnings per share of common stock
|
|
$
|
0.65
|
|
|
$
|
0.55
|
|
|
|
|
|
|
||||
Weighted-average number of shares of common stock outstanding — Basic
|
|
107,423
|
|
|
106,258
|
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||
|
|
|
|
|
||||
Weighted-average number of shares of common stock outstanding — Diluted
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108,655
|
|
|
107,781
|
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Three Months Ended
|
||||||
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January 31, 2020
|
|
February 1, 2019
|
||||
Net earnings
|
|
$
|
70,091
|
|
|
$
|
59,540
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|||
Foreign currency translation adjustments
|
|
(724
|
)
|
|
3,431
|
|
||
Derivative instruments, net of tax of $189 and $(1,352), respectively
|
|
652
|
|
|
(4,009
|
)
|
||
Other comprehensive loss, net of tax
|
|
(72
|
)
|
|
(578
|
)
|
||
Comprehensive income
|
|
$
|
70,019
|
|
|
$
|
58,962
|
|
|
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January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
ASSETS
|
|
|
|
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|
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|
|||
Cash and cash equivalents
|
|
$
|
108,914
|
|
|
$
|
249,965
|
|
|
$
|
151,828
|
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Receivables, net
|
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321,192
|
|
|
225,528
|
|
|
268,768
|
|
|||
Inventories, net
|
|
738,960
|
|
|
416,650
|
|
|
651,663
|
|
|||
Prepaid expenses and other current assets
|
|
51,442
|
|
|
41,789
|
|
|
50,632
|
|
|||
Total current assets
|
|
1,220,508
|
|
|
933,932
|
|
|
1,122,891
|
|
|||
|
|
|
|
|
|
|
||||||
Property, plant, and equipment, net
|
|
431,253
|
|
|
279,270
|
|
|
437,317
|
|
|||
Goodwill
|
|
362,136
|
|
|
227,091
|
|
|
362,253
|
|
|||
Other intangible assets, net
|
|
347,643
|
|
|
104,017
|
|
|
352,374
|
|
|||
Right-of-use assets
|
|
73,137
|
|
|
—
|
|
|
—
|
|
|||
Investment in finance affiliate
|
|
25,455
|
|
|
25,430
|
|
|
24,147
|
|
|||
Deferred income taxes
|
|
6,161
|
|
|
39,589
|
|
|
6,251
|
|
|||
Other assets
|
|
25,316
|
|
|
13,485
|
|
|
25,314
|
|
|||
Total assets
|
|
$
|
2,491,609
|
|
|
$
|
1,622,814
|
|
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$
|
2,330,547
|
|
|
|
|
|
|
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|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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|
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Current portion of long-term debt
|
|
$
|
113,903
|
|
|
$
|
—
|
|
|
$
|
79,914
|
|
Accounts payable
|
|
348,003
|
|
|
281,526
|
|
|
319,230
|
|
|||
Accrued liabilities
|
|
348,027
|
|
|
283,452
|
|
|
357,826
|
|
|||
Short-term lease liabilities
|
|
14,374
|
|
|
—
|
|
|
—
|
|
|||
Total current liabilities
|
|
824,307
|
|
|
564,978
|
|
|
756,970
|
|
|||
|
|
|
|
|
|
|
||||||
Long-term debt, less current portion
|
|
601,016
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|
|
312,551
|
|
|
620,899
|
|
|||
Long-term lease liabilities
|
|
62,015
|
|
|
—
|
|
|
—
|
|
|||
Deferred income taxes
|
|
50,676
|
|
|
1,410
|
|
|
50,579
|
|
|||
Other long-term liabilities
|
|
41,545
|
|
|
49,478
|
|
|
42,521
|
|
|||
|
|
|
|
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|
||||||
Stockholders’ equity:
|
|
|
|
|
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|
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Preferred stock, par value $1.00 per share, authorized 1,000,000 voting and 850,000 non-voting shares, none issued and outstanding
|
|
—
|
|
|
—
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|
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—
|
|
|||
Common stock, par value $1.00 per share, authorized 175,000,000 shares; issued and outstanding 106,977,274 shares as of January 31, 2020, 105,746,538 shares as of February 1, 2019, and 106,742,082 shares as of October 31, 2019
|
|
106,977
|
|
|
105,747
|
|
|
106,742
|
|
|||
Retained earnings
|
|
837,194
|
|
|
613,165
|
|
|
784,885
|
|
|||
Accumulated other comprehensive loss
|
|
(32,121
|
)
|
|
(24,515
|
)
|
|
(32,049
|
)
|
|||
Total stockholders’ equity
|
|
912,050
|
|
|
694,397
|
|
|
859,578
|
|
|||
Total liabilities and stockholders’ equity
|
|
$
|
2,491,609
|
|
|
$
|
1,622,814
|
|
|
$
|
2,330,547
|
|
|
|
Three Months Ended
|
||||||
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net earnings
|
|
$
|
70,091
|
|
|
$
|
59,540
|
|
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
||
Non-cash income from finance affiliate
|
|
(1,751
|
)
|
|
(2,429
|
)
|
||
Distributions from (contributions to) finance affiliate, net
|
|
442
|
|
|
(459
|
)
|
||
Depreciation of property, plant and equipment
|
|
18,089
|
|
|
13,670
|
|
||
Amortization of other intangible assets
|
|
4,714
|
|
|
1,913
|
|
||
Fair value step-up adjustment to acquired inventory
|
|
470
|
|
|
—
|
|
||
Stock-based compensation expense
|
|
3,960
|
|
|
3,924
|
|
||
Deferred income taxes
|
|
141
|
|
|
(1,225
|
)
|
||
Other
|
|
175
|
|
|
—
|
|
||
Changes in operating assets and liabilities, net of effect of acquisitions:
|
|
|
|
|
|
|
||
Receivables, net
|
|
(53,044
|
)
|
|
(31,331
|
)
|
||
Inventories, net
|
|
(88,557
|
)
|
|
(52,380
|
)
|
||
Prepaid expenses and other assets
|
|
237
|
|
|
8,119
|
|
||
Accounts payable, accrued liabilities, deferred revenue and other liabilities
|
|
21,734
|
|
|
26,643
|
|
||
Net cash (used in) provided by operating activities
|
|
(23,299
|
)
|
|
25,985
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Purchases of property, plant and equipment
|
|
(11,821
|
)
|
|
(14,180
|
)
|
||
Proceeds from asset disposals
|
|
25
|
|
|
3
|
|
||
Investment in unconsolidated entities
|
|
—
|
|
|
(150
|
)
|
||
Acquisitions, net of cash acquired
|
|
—
|
|
|
(12,498
|
)
|
||
Net cash used in investing activities
|
|
(11,796
|
)
|
|
(26,825
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Borrowings under debt arrangements
|
|
82,025
|
|
|
—
|
|
||
Repayments under debt arrangements
|
|
(68,025
|
)
|
|
—
|
|
||
Proceeds from exercise of stock options
|
|
6,710
|
|
|
7,569
|
|
||
Payments of withholding taxes for stock awards
|
|
(1,361
|
)
|
|
(1,872
|
)
|
||
Purchases of Toro common stock
|
|
—
|
|
|
(20,043
|
)
|
||
Dividends paid on Toro common stock
|
|
(26,856
|
)
|
|
(23,923
|
)
|
||
Net cash used in financing activities
|
|
(7,507
|
)
|
|
(38,269
|
)
|
||
|
|
|
|
|
||||
Effect of exchange rates on cash and cash equivalents
|
|
(312
|
)
|
|
(50
|
)
|
||
|
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
|
(42,914
|
)
|
|
(39,159
|
)
|
||
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
|
|
$
|
108,914
|
|
|
$
|
249,965
|
|
|
|
Common
Stock |
|
Retained
Earnings |
|
Accumulated Other
Comprehensive Loss |
|
Total Stockholders'
Equity |
||||||||
Balance as of October 31, 2019
|
|
$
|
106,742
|
|
|
$
|
784,885
|
|
|
$
|
(32,049
|
)
|
|
$
|
859,578
|
|
Cash dividends paid on common stock - $0.25 per share
|
|
—
|
|
|
(26,856
|
)
|
|
—
|
|
|
(26,856
|
)
|
||||
Issuance of 351,501 shares for stock options exercised and restricted stock units vested
|
|
253
|
|
|
3,889
|
|
|
—
|
|
|
4,142
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
3,960
|
|
|
—
|
|
|
3,960
|
|
||||
Contribution of stock to a deferred compensation trust
|
|
—
|
|
|
2,568
|
|
|
—
|
|
|
2,568
|
|
||||
Purchase of 17,740 shares of common stock
|
|
(18
|
)
|
|
(1,343
|
)
|
|
—
|
|
|
(1,361
|
)
|
||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
|
(72
|
)
|
||||
Net earnings
|
|
—
|
|
|
70,091
|
|
|
—
|
|
|
70,091
|
|
||||
Balance as of January 31, 2020
|
|
$
|
106,977
|
|
|
$
|
837,194
|
|
|
$
|
(32,121
|
)
|
|
$
|
912,050
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of October 31, 2018
|
|
$
|
105,601
|
|
|
$
|
587,252
|
|
|
$
|
(23,937
|
)
|
|
$
|
668,916
|
|
Cash dividends paid on common stock - $0.225 per share
|
|
—
|
|
|
(23,923
|
)
|
|
—
|
|
|
(23,923
|
)
|
||||
Issuance of 537,786 shares for stock options exercised and restricted stock units vested
|
|
538
|
|
|
5,627
|
|
|
—
|
|
|
6,165
|
|
||||
Stock-based compensation expense
|
|
—
|
|
|
3,924
|
|
|
—
|
|
|
3,924
|
|
||||
Contribution of stock to a deferred compensation trust
|
|
—
|
|
|
1,404
|
|
|
—
|
|
|
1,404
|
|
||||
Purchase of 391,900 shares of common stock
|
|
(392
|
)
|
|
(21,523
|
)
|
|
—
|
|
|
(21,915
|
)
|
||||
Cumulative transition adjustment due to the adoption of ASU 2014-09
|
|
—
|
|
|
864
|
|
|
—
|
|
|
864
|
|
||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(578
|
)
|
|
(578
|
)
|
||||
Net earnings
|
|
—
|
|
|
59,540
|
|
|
—
|
|
|
59,540
|
|
||||
Balance as of February 1, 2019
|
|
$
|
105,747
|
|
|
$
|
613,165
|
|
|
$
|
(24,515
|
)
|
|
$
|
694,397
|
|
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)
|
|
April 1, 2019
|
||
Cash and cash equivalents
|
|
$
|
16,341
|
|
Receivables
|
|
65,674
|
|
|
Inventories
|
|
241,429
|
|
|
Prepaid expenses and other current assets
|
|
9,218
|
|
|
Property, plant and equipment
|
|
142,779
|
|
|
Goodwill
|
|
135,521
|
|
|
Other intangible assets
|
|
264,190
|
|
|
Other long-term assets
|
|
7,971
|
|
|
Accounts payable
|
|
(36,655
|
)
|
|
Accrued liabilities
|
|
(52,258
|
)
|
|
Deferred income tax liabilities
|
|
(86,231
|
)
|
|
Other long-term liabilities
|
|
(6,665
|
)
|
|
Total fair value of net assets acquired
|
|
701,314
|
|
|
Less: cash and cash equivalents acquired
|
|
(16,341
|
)
|
|
Total purchase price
|
|
$
|
684,973
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Customer-related
|
|
18.3
|
|
$
|
130,800
|
|
|
$
|
(7,193
|
)
|
|
$
|
123,607
|
|
Developed technology
|
|
7.8
|
|
20,900
|
|
|
(2,885
|
)
|
|
18,015
|
|
|||
Trade names
|
|
20.0
|
|
5,200
|
|
|
(216
|
)
|
|
4,984
|
|
|||
Backlog
|
|
0.5
|
|
3,590
|
|
|
(3,590
|
)
|
|
—
|
|
|||
Total definite-lived
|
|
16.6
|
|
160,490
|
|
|
(13,884
|
)
|
|
146,606
|
|
|||
Indefinite-lived - trade names
|
|
|
|
103,700
|
|
|
—
|
|
|
103,700
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
264,190
|
|
|
$
|
(13,884
|
)
|
|
$
|
250,306
|
|
|
|
Three Months Ended
|
||||||
(Dollars in thousands, except per share data)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Net sales
|
|
$
|
767,483
|
|
|
$
|
777,537
|
|
Net earnings
|
|
70,561
|
|
|
56,515
|
|
||
Basic net earnings per share of common stock
|
|
0.66
|
|
|
0.53
|
|
||
Diluted net earnings per share of common stock
|
|
$
|
0.65
|
|
|
$
|
0.52
|
|
3
|
Segment Data
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended February 1, 2019
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Net sales
|
|
$
|
455,006
|
|
|
$
|
145,158
|
|
|
$
|
2,792
|
|
|
$
|
602,956
|
|
Intersegment gross sales (eliminations)
|
|
13,609
|
|
|
99
|
|
|
(13,708
|
)
|
|
—
|
|
||||
Earnings (loss) before income taxes
|
|
87,978
|
|
|
13,072
|
|
|
(31,030
|
)
|
|
70,020
|
|
||||
Total assets
|
|
$
|
959,768
|
|
|
$
|
235,520
|
|
|
$
|
427,526
|
|
|
$
|
1,622,814
|
|
|
|
Three Months Ended
|
||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Corporate expenses
|
|
$
|
(32,442
|
)
|
|
$
|
(28,314
|
)
|
Interest expense
|
|
(8,156
|
)
|
|
(4,742
|
)
|
||
Earnings from wholly-owned domestic distribution companies and other income, net
|
|
2,697
|
|
|
2,026
|
|
||
Total operating loss
|
|
$
|
(37,901
|
)
|
|
$
|
(31,030
|
)
|
4
|
Revenue
|
Three Months Ended January 31, 2020
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Revenue by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment
|
|
$
|
523,909
|
|
|
$
|
152,458
|
|
|
$
|
5,525
|
|
|
$
|
681,892
|
|
Irrigation
|
|
70,812
|
|
|
13,390
|
|
|
1,389
|
|
|
85,591
|
|
||||
Total net sales
|
|
$
|
594,721
|
|
|
$
|
165,848
|
|
|
$
|
6,914
|
|
|
$
|
767,483
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue by geographic market:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
|
$
|
454,396
|
|
|
$
|
130,338
|
|
|
$
|
6,914
|
|
|
$
|
591,648
|
|
Foreign Countries
|
|
140,325
|
|
|
35,510
|
|
|
—
|
|
|
175,835
|
|
||||
Total net sales
|
|
$
|
594,721
|
|
|
$
|
165,848
|
|
|
$
|
6,914
|
|
|
$
|
767,483
|
|
Three Months Ended February 1, 2019
|
|
Professional
|
|
Residential
|
|
Other
|
|
Total
|
||||||||
Revenue by product type:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment
|
|
$
|
387,550
|
|
|
$
|
133,510
|
|
|
$
|
1,969
|
|
|
$
|
523,029
|
|
Irrigation
|
|
67,456
|
|
|
11,648
|
|
|
823
|
|
|
79,927
|
|
||||
Total net sales
|
|
$
|
455,006
|
|
|
$
|
145,158
|
|
|
$
|
2,792
|
|
|
$
|
602,956
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue by geographic market:
|
|
|
|
|
|
|
|
|
|
|||||||
United States
|
|
$
|
348,104
|
|
|
$
|
110,515
|
|
|
$
|
2,792
|
|
|
$
|
461,411
|
|
Foreign Countries
|
|
106,902
|
|
|
34,643
|
|
|
—
|
|
|
141,545
|
|
||||
Total net sales
|
|
$
|
455,006
|
|
|
$
|
145,158
|
|
|
$
|
2,792
|
|
|
$
|
602,956
|
|
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
|
|
Translation adjustments
|
|
(116
|
)
|
|
(1
|
)
|
|
—
|
|
|
(117
|
)
|
||||
Balance as of January 31, 2020
|
|
$
|
350,134
|
|
|
$
|
10,468
|
|
|
$
|
1,534
|
|
|
$
|
362,136
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Patents
|
|
9.9
|
|
$
|
18,238
|
|
|
$
|
(13,307
|
)
|
|
$
|
4,931
|
|
Non-compete agreements
|
|
5.5
|
|
6,875
|
|
|
(6,798
|
)
|
|
77
|
|
|||
Customer-related
|
|
18.4
|
|
220,364
|
|
|
(36,970
|
)
|
|
183,394
|
|
|||
Developed technology
|
|
7.6
|
|
51,902
|
|
|
(32,264
|
)
|
|
19,638
|
|
|||
Trade names
|
|
15.4
|
|
7,485
|
|
|
(2,208
|
)
|
|
5,277
|
|
|||
Backlog and other
|
|
0.6
|
|
4,390
|
|
|
(4,390
|
)
|
|
—
|
|
|||
Total definite-lived
|
|
15.5
|
|
309,254
|
|
|
(95,937
|
)
|
|
213,317
|
|
|||
Indefinite-lived - trade names
|
|
|
|
134,326
|
|
|
—
|
|
|
134,326
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
443,580
|
|
|
$
|
(95,937
|
)
|
|
$
|
347,643
|
|
(Dollars in thousands)
|
|
Weighted-Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net
|
||||||
Patents
|
|
9.9
|
|
$
|
18,255
|
|
|
$
|
(12,524
|
)
|
|
$
|
5,731
|
|
Non-compete agreements
|
|
5.5
|
|
6,891
|
|
|
(6,794
|
)
|
|
97
|
|
|||
Customer-related
|
|
18.5
|
|
89,702
|
|
|
(24,929
|
)
|
|
64,773
|
|
|||
Developed technology
|
|
7.6
|
|
31,079
|
|
|
(28,774
|
)
|
|
2,305
|
|
|||
Trade names
|
|
5.0
|
|
2,319
|
|
|
(1,850
|
)
|
|
469
|
|
|||
Other
|
|
1.0
|
|
800
|
|
|
(800
|
)
|
|
—
|
|
|||
Total definite-lived
|
|
14.2
|
|
149,046
|
|
|
(75,671
|
)
|
|
73,375
|
|
|||
Indefinite-lived - trade names
|
|
|
|
30,642
|
|
|
—
|
|
|
30,642
|
|
|||
Total other intangible assets, net
|
|
|
|
$
|
179,688
|
|
|
$
|
(75,671
|
)
|
|
$
|
104,017
|
|
(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 definite-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)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
Revolving credit facility
|
|
$
|
14,000
|
|
|
$
|
91,000
|
|
|
$
|
—
|
|
$200 million term loan
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
|||
$300 million term loan
|
|
180,000
|
|
|
—
|
|
|
180,000
|
|
|||
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
|
|
123,931
|
|
|
123,869
|
|
|
123,916
|
|
|||
Less: unamortized discounts, debt issuance costs, and deferred charges
|
|
(3,012
|
)
|
|
(2,318
|
)
|
|
(3,103
|
)
|
|||
Total long-term debt
|
|
714,919
|
|
|
312,551
|
|
|
700,813
|
|
|||
Less: current portion of long-term debt
|
|
113,903
|
|
|
—
|
|
|
79,914
|
|
|||
Long-term debt, less current portion
|
|
$
|
601,016
|
|
|
$
|
312,551
|
|
|
$
|
620,899
|
|
7
|
Management Actions
|
8
|
Inventories
|
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
Raw materials and work in process
|
|
$
|
188,235
|
|
|
$
|
124,458
|
|
|
$
|
179,967
|
|
Finished goods and service parts
|
|
632,796
|
|
|
364,393
|
|
|
553,767
|
|
|||
Total FIFO value
|
|
821,031
|
|
|
488,851
|
|
|
733,734
|
|
|||
Less: adjustment to LIFO value
|
|
82,071
|
|
|
72,201
|
|
|
82,071
|
|
|||
Total inventories, net
|
|
$
|
738,960
|
|
|
$
|
416,650
|
|
|
$
|
651,663
|
|
9
|
Property and Depreciation
|
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
Land and land improvements
|
|
$
|
55,602
|
|
|
$
|
40,475
|
|
|
$
|
55,613
|
|
Buildings and leasehold improvements
|
|
276,705
|
|
|
213,927
|
|
|
276,556
|
|
|||
Machinery and equipment
|
|
450,321
|
|
|
351,390
|
|
|
453,314
|
|
|||
Tooling
|
|
216,541
|
|
|
215,902
|
|
|
226,870
|
|
|||
Computer hardware and software
|
|
94,385
|
|
|
83,555
|
|
|
94,409
|
|
|||
Construction in process
|
|
58,056
|
|
|
45,391
|
|
|
34,937
|
|
|||
Property, plant, and equipment, gross
|
|
1,151,610
|
|
|
950,640
|
|
|
1,141,699
|
|
|||
Less: accumulated depreciation
|
|
720,357
|
|
|
671,370
|
|
|
704,382
|
|
|||
Property, plant, and equipment, net
|
|
$
|
431,253
|
|
|
$
|
279,270
|
|
|
$
|
437,317
|
|
10
|
Warranty Guarantees
|
|
|
Three Months Ended
|
||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Beginning balance
|
|
$
|
96,604
|
|
|
$
|
76,214
|
|
Provisions
|
|
14,031
|
|
|
10,556
|
|
||
Claims
|
|
(14,703
|
)
|
|
(10,815
|
)
|
||
Changes in estimates
|
|
691
|
|
|
790
|
|
||
Ending balance
|
|
$
|
96,623
|
|
|
$
|
76,745
|
|
11
|
Investment in Finance Affiliate
|
12
|
Stock-Based Compensation
|
|
|
Three Months Ended
|
||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Unrestricted common stock awards
|
|
$
|
693
|
|
|
$
|
592
|
|
Stock option awards
|
|
1,777
|
|
|
1,835
|
|
||
Performance share awards
|
|
548
|
|
|
804
|
|
||
Restricted stock unit awards
|
|
942
|
|
|
693
|
|
||
Total compensation cost for stock-based awards
|
|
$
|
3,960
|
|
|
$
|
3,924
|
|
|
|
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
|
|
$15.37
|
|
$12.81
|
13
|
Stockholders' Equity
|
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
Foreign currency translation adjustments
|
|
$
|
31,749
|
|
|
$
|
26,280
|
|
|
$
|
31,025
|
|
Pension and post-retirement benefits
|
|
4,861
|
|
|
561
|
|
|
4,861
|
|
|||
Cash flow derivative instruments
|
|
(4,489
|
)
|
|
(2,326
|
)
|
|
(3,837
|
)
|
|||
Total accumulated other comprehensive loss
|
|
$
|
32,121
|
|
|
$
|
24,515
|
|
|
$
|
32,049
|
|
(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
|
|
724
|
|
|
—
|
|
|
885
|
|
|
1,609
|
|
||||
Amounts reclassified from AOCL
|
|
—
|
|
|
—
|
|
|
(1,537
|
)
|
|
(1,537
|
)
|
||||
Net current period other comprehensive (income) loss
|
|
724
|
|
|
—
|
|
|
(652
|
)
|
|
72
|
|
||||
Balance as of January 31, 2020
|
|
$
|
31,749
|
|
|
$
|
4,861
|
|
|
$
|
(4,489
|
)
|
|
$
|
32,121
|
|
(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 (income) loss before reclassifications
|
|
(3,431
|
)
|
|
—
|
|
|
5,490
|
|
|
2,059
|
|
||||
Amounts reclassified from AOCL
|
|
—
|
|
|
—
|
|
|
(1,481
|
)
|
|
(1,481
|
)
|
||||
Net current period other comprehensive (income) loss
|
|
(3,431
|
)
|
|
—
|
|
|
4,009
|
|
|
578
|
|
||||
Balance as of February 1, 2019
|
|
$
|
26,280
|
|
|
$
|
561
|
|
|
$
|
(2,326
|
)
|
|
$
|
24,515
|
|
14
|
Per Share Data
|
|
|
Three Months Ended
|
||||
(Shares in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
||
Basic
|
|
|
|
|
|
|
Weighted-average number of shares of common stock
|
|
107,380
|
|
|
106,216
|
|
Assumed issuance of contingent shares
|
|
43
|
|
|
42
|
|
Weighted-average number of shares of common stock and assumed issuance of contingent shares
|
|
107,423
|
|
|
106,258
|
|
|
|
|
|
|
||
Diluted
|
|
|
|
|
|
|
Weighted-average number of shares of common stock and assumed issuance of contingent shares
|
|
107,423
|
|
|
106,258
|
|
Effect of dilutive securities
|
|
1,232
|
|
|
1,523
|
|
Weighted-average number of shares of common stock, assumed issuance of contingent shares, and effect of dilutive securities
|
|
108,655
|
|
|
107,781
|
|
15
|
Contingencies
|
16
|
Leases
|
(Dollars in thousands)
|
|
January 31, 2020
|
||
Operating lease expense
|
|
$
|
4,834
|
|
Short-term lease expense
|
|
682
|
|
|
Variable lease expense
|
|
37
|
|
|
Total lease expense
|
|
$
|
5,553
|
|
(Dollars in thousands)
|
|
January 31, 2020
|
||
Operating cash flows for amounts included in the measurement of lease liabilities
|
|
$
|
4,741
|
|
Right-of-use assets obtained in exchange for lease obligations
|
|
$
|
6,133
|
|
(Dollars in thousands)
|
|
January 31, 2020
|
|
Weighted-average remaining lease term of operating leases in years
|
|
6.2
|
|
Weighted-average discount rate of operating leases
|
|
2.81
|
%
|
(Dollars in thousands)
|
|
January 31, 2020
|
||
2020 (remaining)
|
|
$
|
23,958
|
|
2021
|
|
16,208
|
|
|
2022
|
|
13,476
|
|
|
2023
|
|
10,417
|
|
|
2024
|
|
9,337
|
|
|
Thereafter
|
|
21,217
|
|
|
Total future minimum operating lease payments
|
|
94,613
|
|
|
Less: imputed interest
|
|
18,224
|
|
|
Present value of operating lease liabilities
|
|
$
|
76,389
|
|
(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)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|||
Forward currency contracts
|
|
$
|
9,244
|
|
|
$
|
4,333
|
|
|
$
|
8,642
|
|
Derivatives not designated as cash flow hedging instruments:
|
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
|
|
|
|
||||||
Forward currency contracts
|
|
3,432
|
|
|
1,503
|
|
|
2,256
|
|
|||
Total assets
|
|
$
|
12,676
|
|
|
$
|
5,836
|
|
|
$
|
10,898
|
|
|
|
|
|
|
|
|
||||||
Derivative liabilities:
|
|
|
|
|
|
|
||||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
||||||
Accrued liabilities
|
|
|
|
|
|
|
||||||
Forward currency contracts
|
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
—
|
|
Derivatives not designated as cash flow hedging instruments:
|
|
|
|
|
|
|
||||||
Accrued liabilities
|
|
|
|
|
|
|
||||||
Forward currency contracts
|
|
—
|
|
|
3
|
|
|
9
|
|
|||
Total liabilities
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
9
|
|
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
October 31, 2019
|
||||||
Derivative assets:
|
|
|
|
|
|
|
||||||
Forward currency contracts:
|
|
|
|
|
|
|
||||||
Gross amounts of recognized assets
|
|
$
|
12,841
|
|
|
$
|
5,837
|
|
|
$
|
11,056
|
|
Gross liabilities offset in the Condensed Consolidated Balance Sheets
|
|
(165
|
)
|
|
(1
|
)
|
|
(158
|
)
|
|||
Net amounts of assets presented in the Condensed Consolidated Balance Sheets
|
|
$
|
12,676
|
|
|
$
|
5,836
|
|
|
$
|
10,898
|
|
|
|
|
|
|
|
|
||||||
Derivative liabilities:
|
|
|
|
|
|
|
||||||
Forward currency contracts:
|
|
|
|
|
|
|
||||||
Gross amounts of recognized liabilities
|
|
$
|
—
|
|
|
$
|
(33
|
)
|
|
$
|
(9
|
)
|
Gross assets offset in the Condensed Consolidated Balance Sheets
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net amounts of liabilities presented in the Condensed Consolidated Balance Sheets
|
|
$
|
—
|
|
|
$
|
(33
|
)
|
|
$
|
(9
|
)
|
|
|
Three Months Ended
|
||||||||||||||
|
|
Gain Reclassified from AOCL into Earnings
|
|
Gain (Loss) Recognized in OCI on Derivatives
|
||||||||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
January 31, 2020
|
|
February 1, 2019
|
||||||||
Derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
$
|
1,205
|
|
|
$
|
1,238
|
|
|
$
|
584
|
|
|
$
|
(3,481
|
)
|
Cost of sales
|
|
332
|
|
|
243
|
|
|
68
|
|
|
(528
|
)
|
||||
Total derivatives designated as cash flow hedging instruments
|
|
$
|
1,537
|
|
|
$
|
1,481
|
|
|
$
|
652
|
|
|
$
|
(4,009
|
)
|
|
|
Gain Recognized in Earnings on Cash Flow Hedging Instruments
|
||||||||||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 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
|
|
$
|
767,483
|
|
|
$
|
(479,395
|
)
|
|
$
|
602,956
|
|
|
$
|
(387,339
|
)
|
Gain on derivatives designated as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts:
|
|
|
|
|
|
|
|
|
||||||||
Amount of gain reclassified from AOCL into earnings
|
|
1,205
|
|
|
332
|
|
|
1,238
|
|
|
243
|
|
||||
Gain on components excluded from effectiveness testing recognized in earnings based on changes in fair value
|
|
$
|
660
|
|
|
$
|
11
|
|
|
$
|
1,223
|
|
|
$
|
62
|
|
|
|
Three Months Ended
|
||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Gain (loss) on derivatives not designated as cash flow hedging instruments
|
|
|
|
|
||||
Forward currency contracts:
|
|
|
|
|
||||
Other income, net
|
|
$
|
220
|
|
|
$
|
(1,063
|
)
|
Total gain (loss) on derivatives not designated as cash flow hedging instruments
|
|
$
|
220
|
|
|
$
|
(1,063
|
)
|
18
|
Fair Value Measurements
|
(Dollars in thousands)
|
|
|
|
Fair Value Measurements Using Inputs Considered as:
|
||||||||||||
January 31, 2020
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts
|
|
$
|
12,676
|
|
|
$
|
—
|
|
|
$
|
12,676
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
12,676
|
|
|
$
|
—
|
|
|
$
|
12,676
|
|
|
$
|
—
|
|
(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
|
|
$
|
5,836
|
|
|
$
|
—
|
|
|
$
|
5,836
|
|
|
$
|
—
|
|
Total assets
|
|
$
|
5,836
|
|
|
$
|
—
|
|
|
$
|
5,836
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Forward currency contracts
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
—
|
|
Total liabilities
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
—
|
|
(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
|
||||
|
|
January 31, 2020
|
|
February 1, 2019
|
||
Net sales
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
|
(62.5
|
)
|
|
(64.2
|
)
|
Gross profit
|
|
37.5
|
|
|
35.8
|
|
Selling, general and administrative expense
|
|
(25.6
|
)
|
|
(24.2
|
)
|
Operating earnings
|
|
11.9
|
|
|
11.6
|
|
Interest expense
|
|
(1.1
|
)
|
|
(0.8
|
)
|
Other income, net
|
|
0.4
|
|
|
0.8
|
|
Earnings before income taxes
|
|
11.2
|
|
|
11.6
|
|
Provision for income taxes
|
|
(2.1
|
)
|
|
(1.7
|
)
|
Net earnings
|
|
9.1
|
%
|
|
9.9
|
%
|
|
|
Three Months Ended
|
|||||||||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
$ Change
|
|
% Change
|
|||||||
Professional
|
|
$
|
594,721
|
|
|
$
|
455,006
|
|
|
$
|
139,715
|
|
|
30.7
|
%
|
Residential
|
|
165,848
|
|
|
145,158
|
|
|
20,690
|
|
|
14.3
|
|
|||
Other
|
|
6,914
|
|
|
2,792
|
|
|
4,122
|
|
|
147.6
|
|
|||
Total net sales*
|
|
$
|
767,483
|
|
|
$
|
602,956
|
|
|
$
|
164,527
|
|
|
27.3
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
*Includes international net sales of:
|
|
$
|
175,835
|
|
|
$
|
141,545
|
|
|
$
|
34,290
|
|
|
24.2
|
%
|
|
|
Three Months Ended
|
|||||||||||||
(Dollars in thousands)
|
|
January 31, 2020
|
|
February 1, 2019
|
|
$ Change
|
|
% Change
|
|||||||
Professional
|
|
$
|
102,474
|
|
|
$
|
87,978
|
|
|
$
|
14,496
|
|
|
16.5
|
%
|
Residential
|
|
21,566
|
|
|
13,072
|
|
|
8,494
|
|
|
65.0
|
|
|||
Other
|
|
(37,901
|
)
|
|
(31,030
|
)
|
|
(6,871
|
)
|
|
(22.1
|
)
|
|||
Total segment earnings
|
|
$
|
86,139
|
|
|
$
|
70,020
|
|
|
$
|
16,119
|
|
|
23.0
|
%
|
|
|
Three Months Ended
|
||||||
(Dollars in thousands, except per share data)
|
|
January 31, 2020
|
|
February 1, 2019
|
||||
Gross profit
|
|
$
|
288,088
|
|
|
$
|
215,617
|
|
Acquisition-related costs1
|
|
470
|
|
|
—
|
|
||
Adjusted non-GAAP gross profit
|
|
$
|
288,558
|
|
|
$
|
215,617
|
|
|
|
|
|
|
||||
Gross margin
|
|
37.5
|
%
|
|
35.8
|
%
|
||
Acquisition-related costs1
|
|
0.1
|
%
|
|
—
|
%
|
||
Adjusted non-GAAP gross margin
|
|
37.6
|
%
|
|
35.8
|
%
|
||
|
|
|
|
|
||||
Operating earnings
|
|
$
|
91,129
|
|
|
$
|
70,054
|
|
Acquisition-related costs1
|
|
2,018
|
|
|
1,647
|
|
||
Adjusted non-GAAP operating earnings
|
|
$
|
93,147
|
|
|
$
|
71,701
|
|
|
|
|
|
|
||||
Earnings before income taxes
|
|
$
|
86,139
|
|
|
$
|
70,020
|
|
Acquisition-related costs1
|
|
2,018
|
|
|
1,647
|
|
||
Adjusted non-GAAP earnings before income taxes
|
|
$
|
88,157
|
|
|
$
|
71,667
|
|
|
|
|
|
|
||||
Net earnings
|
|
$
|
70,091
|
|
|
$
|
59,540
|
|
Acquisition-related costs1
|
|
1,633
|
|
|
1,510
|
|
||
Tax impact of share-based compensation2
|
|
(2,035
|
)
|
|
(4,361
|
)
|
||
Adjusted non-GAAP net earnings
|
|
$
|
69,689
|
|
|
$
|
56,689
|
|
|
|
|
|
|
||||
Diluted EPS
|
|
$
|
0.65
|
|
|
$
|
0.55
|
|
Acquisition-related costs1
|
|
0.01
|
|
|
0.02
|
|
||
Tax impact of share-based compensation2
|
|
(0.02
|
)
|
|
(0.04
|
)
|
||
Adjusted non-GAAP diluted EPS
|
|
$
|
0.64
|
|
|
$
|
0.53
|
|
|
|
Three Months Ended
|
||||
|
|
January 31, 2020
|
|
February 1, 2019
|
||
Effective tax rate
|
|
18.6
|
%
|
|
15.0
|
%
|
Acquisition-related costs1
|
|
—
|
%
|
|
(0.3
|
)%
|
Tax impact of share-based compensation2
|
|
2.4
|
%
|
|
6.2
|
%
|
Adjusted non-GAAP effective tax rate
|
|
21.0
|
%
|
|
20.9
|
%
|
1
|
During first quarter of fiscal 2020, we entered into an Agreement and Plan of Merger to acquire Venture Products, a privately-held Ohio corporation and the manufacturer of Ventrac-branded products, and an agreement to purchase the real property used by Venture Products("Purchase Agreement"). On March 2, 2020, subsequent to the end of the first quarter of fiscal 2020, pursuant to the Agreement and Plan of Merger and the Purchase Agreement, we completed the acquisition of Venture Products. During the second quarter of fiscal 2019, we acquired CMW. For additional information regarding our acquisition of CMW, refer to Note 2, Business Combinations, within the Notes to Condensed Consolidated Financial Statements included within Part 1, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q. Acquisition-related costs for the three month period ended January 31, 2020 represent costs incurred related to our acquisition of Venture Products, as well as integration costs and charges incurred for the take-down of the inventory fair value step-up amount resulting from purchase accounting adjustments related to our acquisition of CMW. Additionally, we elected to recast acquisition-related costs for the three month period ended February 1, 2019 to conform to the current period presentation and as a result, acquisition-related costs were restated to be inclusive of the costs incurred related to our acquisition of CMW for the three month period ended February 1, 2019.
|
2
|
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 month periods ended January 31, 2020 and February 1, 2019.
|
•
|
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; reduced governmental or municipal spending; 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 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 credit availability or unfavorable credit terms for our distributors, dealers, and end-user customers; higher short-term, mortgage, and other interest rates; reduced infrastructure spending; 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/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.
|
•
|
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, and increases in our other costs of doing business, such as transportation costs and/or increased tariffs, duties or other charges as a result of pandemics and/or epidemics, including COVID-19 (e.g. the coronavirus), changes to U.S. or international trade policies or trade agreements or trade regulation and/or industry activity, that could or have in the past affected our profit margins, operating results and businesses and could continue to result in declines in our profit margins, operating results 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; infrastructure improvements; demand for our products in the rental, specialty and underground construction markets; the extent to which property owners outsource their lawn care and snow and ice removal activities; residential
|
•
|
Our Residential segment net sales are dependent upon consumers buying our products at mass retailers, dealers, and home centers; the amount of product placement at mass retailers and home centers; consumer confidence and spending levels; changing buying patterns of customers; and the impact of significant sales or promotional events.
|
•
|
Our financial performance, including our profit margins and net earnings, 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 by our recently completed acquisitions of CMW and Venture Products, 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 January 31, 2020, we had goodwill of $362.1 million, which is maintained in various reporting units, including goodwill from the CMW acquisition, and other intangible assets of $347.6 million, which together comprise 28.5 percent of our total assets as of January 31, 2020. As a result of our recently completed Venture Products acquisition, our goodwill and intangible asset balances will likely increase. If we determine that our goodwill or other intangible assets recorded in connection with the CMW acquisition or any other prior or future acquisitions have become impaired, we will be required to record a charge resulting from the impairment. Impairment charges could be significant and could adversely affect our consolidated results of operations and financial position.
|
•
|
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 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.
|
•
|
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 some that have larger operations and greater financial resources than us. We may not be able to compete effectively against competitors’ actions, which could harm our business and operating results.
|
•
|
A significant percentage of our consolidated net sales is generated outside of the United States, and we intend to continue to expand our international operations. Our international operations also require significant management attention and financial resources; expose us to difficulties presented by international economic, political, legal, regulatory, accounting, and business factors, including implications of withdrawal by the U.S. from, or revision to, international trade agreements, foreign trade or other policy changes between the U.S. and other countries, trade regulation and/or industry activity that favors domestic companies, pandemics and/or epidemics, including as a result of COVID-19 (e.g. the coronavirus), or weakened international economic conditions; and may not be successful or produce desired levels of net sales. In addition, a portion of our international net sales are financed by third parties. The termination of our agreements with these third parties, any material change to the terms of our agreements with these third parties or in the availability or terms of credit offered to our international customers by these third parties, or any delay in securing replacement credit sources, could adversely affect our sales and operating results.
|
•
|
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 as a result of COVID-19 (e.g. the coronavirus), 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
|
•
|
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.
|
•
|
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 or trade regulation and/or industry activity that could result in additional duties or other charges on commodities, components, parts or accessories we import.
|
•
|
Changes in accounting standards, policies, 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.
|
•
|
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 at Fair Value
|
|||||||
Buy U.S. dollar/Sell Australian dollar
|
|
0.7111
|
|
|
$
|
102,819
|
|
|
$
|
107,232
|
|
|
$
|
4,413
|
|
Buy U.S. dollar/Sell Canadian dollar
|
|
1.3139
|
|
|
33,093
|
|
|
33,246
|
|
|
153
|
|
|||
Buy U.S. dollar/Sell Euro
|
|
1.1824
|
|
|
147,421
|
|
|
154,681
|
|
|
7,260
|
|
|||
Buy U.S. dollar/Sell British pound
|
|
1.3333
|
|
|
54,317
|
|
|
55,116
|
|
|
799
|
|
|||
Buy Mexican peso/Sell U.S. dollar
|
|
19.7763
|
|
|
$
|
2,023
|
|
|
$
|
2,074
|
|
|
$
|
51
|
|
•
|
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
|
|||||
November 1, 2019 through November 29, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
7,042,256
|
|
November 30, 2019 through January 3, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,042,256
|
|
|
January 4, 2020 through January 31, 2020
|
|
1,310
|
|
|
82.61
|
|
|
—
|
|
|
7,042,256
|
|
|
Total
|
|
1,310
|
|
|
$
|
82.61
|
|
|
—
|
|
|
|
|
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 first quarter of fiscal 2020 and 7,042,256 shares remained available to repurchase under this authorized stock repurchase program as of January 31, 2020.
|
3
|
Includes 1,310 units (shares) of the company’s common stock purchased in open-market transactions at an average price of $82.61 per share on behalf of a rabbi trust formed to pay benefit obligations of the company to participants in deferred compensation plans. These 1,310 shares were not repurchased under the company’s authorized stock repurchase program described in footnote 1 above.
|
Date: March 5, 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)
|
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 5, 2020
|
|
|
|
|
|
/s/ Renee J. Peterson
|
|
Renee J. Peterson
|
|
Vice President, Treasurer and Chief Financial Officer
|
|
Date: March 5, 2020
|
|