FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
--------------- ---------------
Commission file number 1-8649.
A. The Toro Company Investment and Savings Plan
B. The Toro Company
8111 Lyndale Avenue South
Minneapolis, MN 55420
REQUIRED INFORMATION
The following financial statements shall be furnished for the plan:
1. An audited statement of financial condition as of the end of the latest
two fiscal years of the plan (or such lesser period as the plan has
been in existence).
2. An audited statement of income and changes in plan equity for each of the
latest three fiscal years of the plan (or such lesser period as the plan
has been in existence).
3. The statements required by Items 1 and 2 shall be prepared in accordance
with the applicable provisions of Article 6A of Regulation S-X.
4. In lieu of the requirements of Items 1-3 above, plans subject to ERISA may
file plan financial statements and schedules prepared in accordance with
the financial reporting requirements of ERISA. To the extent required by
ERISA, the plan financial statements shall be examined by an independent
accountant, except that the "limited scope of exemption" contained in
Section 103(a)(3)(C) of ERISA shall not be available.
Note: A written consent of the accountant is required with respect to the plan
annual financial statements which have been incorporated by reference in a
registration statement on Form S-8 under the Securities Act of 1933. The consent
should be filed as an exhibit to this annual report. Such consent shall be
currently dated and manually signed.
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
The Toro Company Savings and Investment Plan
--------------------------------------------
(Name of Plan)
Dated July 1, 2002 /s/ Stephen P. Wolfe
------------------------
Stephen P. Wolfe
Vice President - Finance,
Treasurer and Chief Financial Officer
THE TORO COMPANY
INVESTMENT AND SAVINGS PLAN
Financial Statements and Schedule
December 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
THE TORO COMPANY
INVESTMENT AND SAVINGS PLAN
TABLE OF CONTENTS
PAGES
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits 2
Statements of Changes in Net Assets Available for Plan Benefits 3
Notes to Financial Statements 4
SCHEDULE
Schedule of Assets (Held at End of Year) 11
INDEPENDENT AUDITORS' REPORT
The Plan Administrator
The Toro Company Investment and Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of The Toro Company Investment and Savings Plan (the Plan) as of
December 31, 2001 and 2000, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 2001 and 2000, and the changes in net assets available for plan benefits for
the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
June 12, 2002
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
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Assets held by Trustee:
Investments $226,162,637 238,865,248
Employer contribution receivable 7,764,001 7,212,467
Employee contribution receivable 50,198 35,124
------------ ------------
Net assets available for plan benefits $233,976,836 246,112,839
============ ============
See accompanying notes to financial statements
2
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 2001 and 2000
2001 2000
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Investment loss:
Interest, dividends, and cash earnings $ 6,514,099 15,813,378
Net realized/unrealized loss in the fair value of investments (21,513,346) (28,705,746)
------------- -------------
Net investment loss (14,999,247) (12,892,368)
------------- -------------
Employer contributions 10,093,189 9,387,004
Employee contributions 8,938,374 8,684,553
Rollover contributions 329,313 590,218
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Total contributions 19,360,876 18,661,775
Benefit payments (16,497,632) (15,967,831)
------------- -------------
Decrease in net assets available for plan benefits (12,136,003) (10,198,424)
Net assets available for plan benefits:
Beginning of year 246,112,839 256,311,263
------------- -------------
End of year $ 233,976,836 246,112,839
============= =============
See accompanying notes to financial statements
3
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements of The Toro Company
Investment and Savings Plan (the Plan) are presented in
accordance with accounting principles generally accepted in
the United States of America. The accounting records of the
Plan are maintained on an accrual basis.
(b) INVESTMENTS
The Plan's investments are held by Putnam Fiduciary Trust
Company (the Trustee). The investment securities are stated at
fair values based upon published quotations or, in the absence
of available quotations, at fair values determined by the
Trustee. Purchases and sales of securities are recorded on a
trade-date basis.
The Toro Company (the Company) maintains one master trust, the
Wells Fargo Stable Value Fund, formerly the Toro Stable Value
Fund, (master trust) for three profit sharing and retirement
plans that are sponsored by the Company. The three plans are
The Toro Company Profit Sharing Plan for Plymouth Union
Employees, The Toro Company Investment and Savings Plan, and
The Toro Company Employee Stock Ownership Plan. The purpose of
the master trust is to pool investment transactions and
achieve uniform rates of return on comparable funds under all
plans.
The Plan's proportionate share of net investment income from
the master trust is based upon the percentage of the fair
value of the Plan's investment in the master trust's assets.
The Plan's percentage interest in the net assets of the master
trust was approximately 91% and 95% as of December 31, 2001
and 2000, respectively.
The Plan's share of net investment income from the master
trust is determined by the Trustee based on the ratio of the
fair value of the Plan's equity in the investment fund to the
total net assets of the investment fund at the beginning of
the plan year.
The short term securities of the Wells Fargo Stable Value Fund
(formerly The Toro Stable Value Fund) are stated at cost,
which approximates fair value. During 2001, the Toro Stable
Value Fund included a fully benefit responsive investment
contract. The contract was valued in the Plan at contract
value, which included cost plus accrued interest. The contract
had a stated interest rate of 6.31%. Certain guaranteed
investment contracts held by the master trust matured on
January 2, 2001 at a value of $2,368,232 and were transferred
to the short-term investment fund. On July 2, 2001, all
remaining short-term investments in the Toro Stable Value Fund
totaling $47,152,920 were transferred to the Wells Fargo
Stable Value Fund.
(c) ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires the plan administrator to make estimates
and assumptions that affect the reported amounts of net assets
available for plan benefits and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of changes in net assets available
for plan benefits during the reporting period. Actual results
could differ from those estimates.
4 (Continued)
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(2) DESCRIPTION OF PLAN
The Plan is a defined contribution profit sharing plan sponsored by the
Company. The Company, as administrator of the Plan, absorbs all
administrative costs and Trustee fees of the Plan, with the exception
of investment management fees, which are netted against investment
income.
A general description of the Plan is contained in the Plan document
amended as of December 21, 1998. Participants should refer to the Plan
document for more complete information.
Contributions are made under the control of the plan administrator. The
allocation of the participants' and Company contributions to the
investment funds is selected by the participants. Company matching
contributions, together with income attributable thereto, vest at the
rate of 20% after one year of vesting service, with an additional 20%
being accumulated annually thereafter until the participant is 100%
vested.
Benefit payments and transfers of participants' interests are made
under the control of the Trustee.
During the years ended December 31, 2001 and 2000, forfeited nonvested
accounts totaled $16,258 and $20,365, respectively. These accounts are
used to offset future employer contributions.
(3) CONTRIBUTIONS AND PLAN TRANSFERS
The Company's funding policy is to make annual contributions to the
Plan in amounts determined by a formula set forth in the Plan. The
contribution formula is based on 5.5% of the participants' total
compensation earned during the plan year plus 5.5% of the participants'
compensation above the Social Security taxable wage base as of the
beginning of the plan year. In addition, the Company is required to
make a matching contribution equal to 50% of the participants'
contributions to the Plan not to exceed 2% of the participant's total
compensation. The contribution formula specifies a minimum annual
contribution to the Plan. The Company contribution is allocated to
participants based on compensation earned during the plan year.
Investment income is allocated based on a formula specified in the
Plan.
Employee contributions consist of salary reduction elections under a
401(k) feature and rollover funds from other qualified plans.
Transfers to/from other plans represent participant elected transfers
to/from other Company plans.
(4) PARTY-IN-INTEREST TRANSACTIONS
Putnam Fiduciary Trust Company and The Toro Company are
parties-in-interest with respect to the Plan. In the opinion of the
Plan's legal counsel, transactions between the Plan and the Trustee and
the Company are exempt from being considered as `prohibited
transactions' under the Employee Retirement Income Security Act of 1974
(ERISA) Section 408(b).
(5) PLAN TERMINATION
The Company has voluntarily agreed to make contributions to the Plan.
Although the Company has not expressed any intent to terminate the
profit sharing plan agreement, it may do so at any time. Upon
termination of the Plan, the interest of the participants in the Plan
shall fully vest.
5
(Continued)
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(6) INVESTMENTS
Under the terms of the trust agreement, the Trustee manages investment
funds on behalf of the Plan. The Trustee has been granted discretionary
authority concerning the purchases and sales of the investments of the
investment funds. In accordance with the trust agreement, certain
assets of the Plan are held together with assets of other plans
sponsored by the Company in the master trust.
The net assets available for benefits of the master trust at December
31, 2001 and 2000 were as follows:
2001 2000
----------- -----------
Investments:
Short-term investment funds $49,722,525 41,370,916
Guaranteed investment contracts -- 2,367,031
----------- -----------
Total assets available for benefits $49,722,525 43,737,947
=========== ===========
The changes in net assets available for benefits of the master trust for
the year ended December 31, 2001 were as follows:
Realized gain on investments $ 1,244,460
Unrealized gain on investments 1,695,838
Deposits by participating plans 15,608,657
Withdrawals by participating plans (12,564,377)
------------
Increase in net assets 5,984,578
Net assets available for benefits:
Beginning of year 43,737,947
------------
End of year $ 49,722,525
============
The changes in net assets available for benefits of the master trust for
the year ended December 31, 2000 were as follows:
Investment income (interest and dividends) $ 2,688,159
Deposits by participating plans 11,894,155
Withdrawals by participating plans (15,567,198)
------------
Increase in net assets (984,884)
Net assets available
for benefits:
Beginning of year 44,722,831
------------
End of year $ 43,737,947
============
6
(Continued)
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
The following investments represent 5% or more of the Plan's net assets
available for plan benefits as of December 31, 2001 and 2000:
2001 2000
----------- ----------
Lord Abbett Affiliated Fund $43,306,240 618,461
Wells Fargo Stable Value Fund 45,351,817 --
Toro Stable Value Fund* -- 41,478,932
Putnam Asset Allocation: Balanced Fund* 14,492,489 15,501,264
Putnam Voyager Fund* 53,812,677 69,881,808
The Toro Company Common Stock** 31,026,196 26,883,705
Putnam Growth Opportunities Fund - International* 11,792,599 14,915,573
*Party-in-interest
**Party-in-interest and nonparticipant-directed.
During 2001 and 2000, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year,
interest, dividends, and cash earnings) depreciated in value by
$14,999,247 and $12,892,368, respectively, as follows:
2001 2000
------------ -----------
Mutual funds $(22,833,314) (15,600,295)
Common stocks 6,453,302 94,582
Master trust fund 1,380,765 2,613,345
------------ -----------
$(14,999,247) (12,892,368)
============ ===========
7
(Continued)
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed
investments is as follows:
2001 2000
------------ ------------
Net assets:
The Toro Company Common Stock $ 31,026,196 26,883,705
============ ============
Investment income:
Dividends $ 339,011 348,579
Net realized/unrealized gain (loss) in the fair value of
investments 6,114,291 (253,997)
------------ ------------
Net investment income 6,453,302 94,582
Total contributions 3,030,814 2,891,549
Benefit payments (1,530,896) (1,012,431)
Transfers to other funds (3,810,729) (1,985,788)
------------ ------------
Increase (decrease) in net assets available for
plan benefits 4,142,491 (12,088)
Net assets available for plan benefits:
Beginning of year 26,883,705 26,895,793
------------ ------------
End of year $ 31,026,196 26,883,705
============ ============
(7) FEDERAL INCOME TAXES
The plan administrator has received a determination letter from the
Internal Revenue Service dated July 18, 1996 stating that the Plan is
qualified under Section 401(a) of the Internal Revenue Code and that
the trust created under the Plan is exempt from federal income taxes
under Section 501(a) of the Code. The plan administrator believes that
the Plan and its related trust continue to qualify under the provisions
of Sections 401(a) and 501(a) of the Code and are exempt from federal
income taxes.
(8) SUBSEQUENT EVENTS
Effective January 1, 2002 The Toro Company Employee Stock Ownership
Plan was combined with The Toro Company Investment and Savings Plan
into The Toro Company Investment, Savings and Employee Stock Ownership
Plan. Additional changes to the Plan for 2002 are as follows:
- The Plan now allows rollovers between a Toro Plan and a 403(b)
or governmental plan and rollovers to the Toro Plans of
distributions from all IRAs (not just rollover IRAs)
- The 401(k) contribution limit increased to $11,000 and $1,000
each year thereafter until it will be $15,000 in 2006, which
will be indexed in $500 increments in subsequent years
In addition, the Plan will be amended during 2002 to incorporate the
following tax law changes:
- The new section 415 limit, also known as the annual additions
limit, has increased to the lesser of $40,000 or 100% of
income
- The limit on compensation for testing purposes increased from
$170,000 to $200,000, which will be indexed in $5,000
increments after 2002
8
(Continued)
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
A general description of the Plan is contained in the Plan document
restated as of January 1, 2002. Participants should refer to the Plan
document for more complete information. The plan administrator has
applied to the Internal Revenue Service for a new determination letter,
but has not yet received a response. The plan administrator believes
the plan (as restated) continues to qualify as discussed in note 7.
(9) RECONCILIATION OF DIFFERENCES BETWEEN THESE FINANCIAL STATEMENTS AND
THE FINANCIAL INFORMATION REQUIRED ON FORM 5500
DECEMBER 31,
2001
-------------
Net assets available for plan benefits as presented in these
financial statements $ 233,976,836
Adjustment for employer contribution receivable (7,764,001)
Adjustment for employee contribution receivable (50,198)
-------------
Net assets available for plan benefits as presented on Form 5500 $ 226,162,637
=============
YEAR ENDED
DECEMBER 31,
2001
-------------
Net decrease in net assets available for plan benefits as presented in
these financial statements $ (12,136,003)
Adjustment for employer contribution receivable at December 31, 2001 (7,764,001)
Adjustment for employee contribution receivable at December 31, 2001 (50,198)
Adjustment for employer contribution receivable at December 31, 2000 7,212,467
Adjustment for employee contribution receivable at December 31, 2000 35,124
-------------
Net decrease in net assets available for plan benefits as presented on
Form 5500 $ (12,702,611)
=============
9
(Continued)
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
DECEMBER 31,
2000
-------------
Net assets available for plan benefits as presented in these
financial statements $ 246,112,839
Adjustment for employer contribution receivable (7,212,467)
Adjustment for employee contribution receivable (35,124)
-------------
Net assets available for plan benefits as presented on Form 5500 $ 238,865,248
=============
YEAR ENDED
DECEMBER 31,
2000
-------------
Net decrease in net assets available for plan benefits as presented in these
financial statements $ (10,198,424)
Adjustment for employer contribution receivable at December 31, 2000 (7,212,467)
Adjustment for employee contribution receivable at December 31, 2000 (35,124)
Adjustment for employer contribution receivable at December 31, 1999 7,286,018
Adjustment for employee contribution receivable at December 31, 1999 37,770
-------------
Net decrease in net assets available for plan benefits as presented
on Form 5500 $ (10,122,227)
=============
10
SCHEDULE
THE TORO COMPANY INVESTMENT AND SAVINGS PLAN
Schedule of Assets (Held at End of Year)
December 31, 2001
FACE
AMOUNT OR
DESCRIPTION SHARES COST FAIR VALUE
---------------------------------------------------------- ------------------ ------------------ ------------------
The Toro Company Common Stock** 689,471 $ 20,880,271 31,026,196
Wells Fargo Stable Value Fund 1,418,517 45,351,817
Putnam S&P 500 Fund* 53,955 1,502,647
Putnam Asset Allocation: Growth Fund* 1,134,123 10,932,947
Putnam Asset Allocation: Balanced Fund* 1,475,814 14,492,489
Putnam Asset Allocation: Conservative Fund* 628,682 5,469,529
Putnam Growth Opportunities
Fund - International* 591,108 11,792,599
Putnam Growth Opportunities Fund* 309,699 4,636,199
Putnam Voyager Fund* 3,028,288 53,812,677
Lord Abbett Affiliated Fund 3,163,348 43,306,240
UAM ICM Small Company Portfolio 148,407 3,839,297
--------------
Total $ 226,162,637
==============
*Party-in-interest.
**Party-in-interest and nonparticipant-directed.
See accompanying independent auditors' report.
11