form_11k.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 11-K
 
(Mark One)
 
 
x                              ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2008.
 
OR
 
 
o                                 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.           Full title of the plan and address of the plan if different from that of the issuer named below:
 
The Toro Company Profit-Sharing Plan for Plymouth Union Employees
 
The Toro Company
8111 Lyndale Avenue South
Minneapolis, MN  55420
Attn: Director, Tax Accounting
 
 
B.             Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
 
The Toro Company
8111 Lyndale Avenue South
Minneapolis, MN  55420
 


 
 
 


 
THE TORO COMPANY PROFIT-SHARING PLAN
 
FOR PLYMOUTH UNION EMPLOYEES
 
Table of Contents
 

 
 
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Report of Independent Registered Public Accounting Firm
 
The Plan Administrator
 
The Toro Company Profit-Sharing Plan
 
for Plymouth Union Employees:
 
We have audited the accompanying statements of net assets available for benefits of The Toro Company Profit-Sharing Plan for Plymouth Union Employees (the Plan) as of December 31, 2008 and 2007, and the related statements of changes in net assets available for 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 the standards of the Public Company Accounting Oversight Board (United States).  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 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 benefits of the Plan as of December 31, 2008 and 2007 and the changes in net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.
 

 
/s/ KPMG LLP
 
Minneapolis, Minnesota                                                                                                                
 
June 26, 2009
 

 

 

 
 
 



 
FOR PLYMOUTH UNION EMPLOYEES
  
             
Statements of Net Assets Available for Benefits
  
             
December 31, 2008 and 2007
  
             
             
             
   
2008
    
2007
  
Assets:
            
Investments at fair value:
            
Interest in the Toro Company Master Trust Fund
   $ 2,099,274       3,252,492  
                 
Total investments
     2,099,274       3,252,492  
                 
Employee contribution receivable
     3,002       2,870  
Employer contribution receivable
     1,132       1,339  
Net assets available for benefits at fair value
     2,103,408       3,256,701  
                 
Adjustment from fair value to contract value for
                
fully benefit-responsive investment contracts
     10,842       681  
Net assets available for benefits
   $ 2,114,250       3,257,382  
                 
See accompanying notes to financial statements.
                


 

 
2
 


             
 
FOR PLYMOUTH UNION EMPLOYEES
  
             
Statements of Changes in Net Assets Available for Benefits
  
             
Years ended December 31, 2008 and 2007
  
             
             
             
             
   
2008
    
2007
  
(Deductions) Additions to Net Assets:
            
Investment (loss) income:
            
Plan interest in net investment income of the Toro
            
Company Master Trust Fund
   $ (1,098,931 )     337,448  
Net investment (loss) income
     (1,098,931 )     337,448  
                 
Employer contributions
     45,407       43,170  
Employee contributions
     161,293       150,652  
Total contributions
     206,700       193,822  
                 
Total (deductions) additions to net assets
     (892,231 )     531,270  
                 
Deductions from Net Assets:
                
Benefit payments
     (250,901 )     (259,181 )
                 
Net (decrease) increase in net assets available
                
for benefits
     (1,143,132 )     272,089  
                 
Net assets available for benefits:
                
Beginning of year
     3,257,382       2,985,293  
                 
End of year
   $ 2,114,250       3,257,382  
                 
                 
See accompanying notes to financial statements.
                

 
3

 
THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007

(1)
Summary Description of Plan
 
The following description of The Toro Company Profit-Sharing Plan for Plymouth Union Employees (the Plan) is provided for general information purposes only.  Participants should refer the Plan document restated as of January 1, 2006 for more complete information.
 
Employees are eligible to contribute to the plan after they have completed 180 consecutive days of employment or one year of eligibility service and must be a member of a collective bargaining unit.  Participants are fully vested in the entire balance of their individual accounts attributable to those contributions.  The Toro Company (the Company) also makes matching contributions.  Participants are eligible for matching contributions after completing one year of qualifying service with the Company.  Company contributions, together with the income attributable thereto, vest at a rate of 20% after one year of vesting service, with an additional 20% being accumulated annually thereafter until the participant is 100% vested.
 
Participants and the Company make contributions to the Plan. The investments of employee and employer contributions are selected by the participants. All contributions under the Plan are made to a trust that holds all of the assets of the Plan.
 
Participants may receive distributions from their vested accounts under the Plan upon termination of employment, retirement, or death in the form of a lump-sum payment or in installments.  Participants are allowed to withdraw amounts that they previously rolled into the Plan.  Withdrawals are also allowed from selected accounts in the event of a defined financial hardship to the extent necessary to satisfy the financial need.  To the extent an account is invested in Company common shares, a withdrawal or distribution can be in the form of common shares or cash.
 
Effective November 5, 2007, a new trustee (Fidelity) was appointed to the Plan.  Plan assets transferred to the new trustee were transferred into funds comparable to those offered by the former trustee (J.P. Morgan Retirement Plan Services).  The conversion initiated a “Black Out” period beginning October 20, 2007 and continued through November 4, 2007.  Prior to this period, employees were notified and able to select funds with the new trustee.  During the Black Out period, fund elections could not be changed or withdrawn from the Plan until the new trustee had time to accurately complete the conversion.  Employee contributions continued to be made through payroll deductions and contributions were deposited directly into the participant accounts based on their elections until the completion of the Black Out period.
 
Employee contributions to the plan consist of salary reduction elections under a 401(k) feature, voluntary after tax contributions, and rollover funds from other qualified plans.  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 participants’ total compensation.
 
Transfers to/from other funds, represent participant elected rollovers to/from other plans of other employers or other transfers to/from plans.
 
Forfeited amounts from nonvested accounts totaled $816 during the plan year ended December 31, 2008.  During the plan year ended December 31, 2007, there were no forfeited amounts from nonvested accounts.
 

 
4
 

 
THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007

The Company, administrator of the Plan, absorbs all administrative costs of the Plan, except for the trustee fees.
 
(2)
Summary of Significant Accounting Policies
 
 
 (a)
Basis of Financial Statement Presentation
 
The accompanying financial statements of The Toro Company Profit-Sharing Plan for Plymouth Union Employees (the Plan) are presented in accordance with U.S. generally accepted accounting principles.
 
 
(b)
Investments
 
The Plan’s investments are in a Master Trust held by Fidelity. 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. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  Purchases and sales of securities are recorded on a trade-date basis.  Interest is recorded on an accrual basis.  Dividends are recorded on the ex-dividend date.  Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
 
The Company maintains one Master Trust for three profit sharing and retirement plans that are sponsored by the Company. The three plans are the Plan, The Toro Company Investment, Savings, and Employee Stock Ownership Plan, and the Hahn Equipment Company Savings Plan for Union Employees. The purpose of the Master Trust is to pool investment transactions and achieve uniform rates of return on comparable funds under all plans. The Master Trust invests in fully benefit-responsive investment contracts stated at fair value and then adjusted to contract value.  Fair value of the contracts is calculated by discounting the related cash flows based on current yields of similar instruments with comparable durations.
 
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 net assets. The Plan’s percentage interest in the net assets of the Master Trust was approximately 1% as of December 31, 2008 and 2007.
 
 
 (c)
Use of Estimates
 
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of net assets available for 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 benefits during the reporting period. Actual results could differ from those estimates.
 
 
(d)
Concentrations of Risk
 
The Plan has investments in a variety of investment funds.  Investments in general are exposed to various risks, such as interest rate, credit, and overall market volatility.  Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of the investments will occur in the near term and that such
 

 
5
 

THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007


changes could materially affect participants’ account balances and the amounts reported in the Statement of Net Assets Available for Benefits.
 
The assets held by the Master Trust include The Toro Company Common Stock.  At December 31, 2008 and 2007, approximately 30% and 34% of the investments of the Master Trust were invested in common stock of the Company.  The underlying value of the Company’s common stock is entirely dependent upon the performance of the Company and the market’s evaluation of such performance and other factors.
 
 
(e)
Fully Benefit-Responsive Investment Contracts
 
Investment contracts held by a defined contribution plan are required to be reported at fair value.  However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan.  The Statements of Net Assets Available for Benefits present the fair value of the Master Trust, as well as the adjustment of the fully benefit-responsive investment contract from fair value to contract value.  The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
 
(3)
Party-in-interest Transactions
 
Fidelity (trustee of the Plan effective November 5, 2007) and J.P. Morgan Retirement Plan Services (former trustee of the Plan) and The Toro Company are parties-in-interest with respect to the Plan. The Plan’s investments are held by Fidelity (trustee of the Plan effective November 5, 2007) and JP Morgan Retirement Plan Services (former trustee of the Plan). Some of the investment funds available to participants also include mutual funds managed by Fidelity from November 5, 2007 through December 31, 2008 and JP Morgan from January 1, 2007 through November 4, 2007.  In the opinion of the Plan’s legal counsel, transactions between the Plan and the trustees are exempt from being considered as “prohibited transactions” under the ERISA Section 408(b).
 
(4)
Plan Termination
 
The Company has voluntarily agreed to make contributions to the Plan. Although the Company has not expressed any intent to terminate the Plan, it may do so at any time. Each participant’s interest in the Plan is 100% vested at all times, except for the portion attributable to matching contributions which is vested in a manner described above. Upon termination of the Plan, interests of active participants in the Plan fully vest.
 
 (5)
Federal Income Taxes
 
The plan administrator has received a favorable determination letter dated April 15, 2003 from the Internal Revenue Service stating that the Plan constitutes a qualified plan under Section 401(a) of the Internal Revenue Code and that the trust created under the Plan is exempt from federal income tax under Section 501(a) of the Code.  The Plan has been amended since the date of this letter, and an updated tax determination letter was received on February 19, 2008.  Therefore, no provision for income taxes has been included in the Plan’s financial statements.
 

 
6
 

THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007
 
 
(6)            Master Trust Fund
 
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, except to the extent the trustee is subject to the discretion of participants, other fiduciaries, or the Company.  In accordance with the trust agreement, the assets of the Plan are held together with assets of other plans sponsored by the Company in the Master Trust.  Investment income related to the Master Trust is allocated to the individual plans based upon beginning of the month balances invested in the Plan.
 
Net investment income for the Master Trust for the years-ended December 31, 2008 and 2007 was as follows:
 

             
   
2008
    
2007
  
Net realized and unrealized (depreciation) appreciation
            
in fair value of investments
   $ (212,167,157 )     44,948,064  
Net realized and unrealized (depreciation) appreciation
     (212,167,157 )     44,948,064  
                 
Interest
     238,302       23,306  
Dividends
     8,509,596       20,935,009  
Net investment (loss) income
   $ (203,419,259 )     65,906,379  

FASB Statement No. 157 “Fair Value Measurements” (SFAS No. 157) establishes a framework for measuring fair value and expands required disclosures about fair value measurements of assets and liabilities. The Plan adopted the standard as of January 1, 2008, and there was no financial statement impact resulting from the adoption.

SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

   Level 1 — Quoted prices in active markets for identical assets or liabilities.

   Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 
7
 

THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007


   Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Master Trust’s investments in stocks and mutual funds are classified as Level 1 assets in the fair value hierarchy, while the Master Trust’s investments in common collective trusts are classified as Level 2 assets in the fair value hierarchy.

Assets and liabilities measured at fair value, as of December 31, 2008, are summarized below:


   
Level 1
    
Level 2
    
Level 3
    
Total
  
Common Stock
   $ 130,120,605       -       -       130,120,605  
Registered Investment Securities
     150,320,458       -       -       150,320,458  
Common Collective Trusts
     -       157,653,795       -       157,653,795  
Total
   $ 280,441,063       157,653,795       -       438,094,858  



 
8
 


THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007

 
Fair values of Master Trust investments at December 31, 2008 and 2007 were as follows:
 
             
Description
  
2008
    
2007
  
Common Collective Trusts
            
Wells Fargo Stable Return E
   $ 92,054,997       83,706,503  
Barclays Global Investors
     12,334,903       9,472,865  
Registered Investment Securities
                
Artisan Mid Cap Fund
     5,405,877       9,961,602  
JP Morgan MidCap Value
     8,545,146       12,271,931  
Fidelity Diversified International Fund
     28,339,242       55,049,741  
Growth Fund of America
     41,181,028       69,498,831  
ICM Small Company
     16,490,806       27,574,964  
Vanguard Institutional Index
     11,669,037       18,891,792  
American Century Large Company Value Fund
     35,190,860       61,240,057  
Alger Small Cap
     3,498,462       7,952,213  
Common Stock
                
The Toro Company Common Stock
     130,120,605       217,508,364  
Pooled Funds
                
Pyramis Index Lifecycle 2000
     955,107       1,815,105  
Pyramis Index Lifecycle 2005
     1,356,696       2,022,179  
Pyramis Index Lifecycle 2010
     4,624,984       6,973,780  
Pyramis Index Lifecycle 2015
     10,710,561       13,034,933  
Pyramis Index Lifecycle 2020
     11,222,486       14,673,475  
Pyramis Index Lifecycle 2025
     11,151,070       14,766,645  
Pyramis Index Lifecycle 2030
     5,998,193       7,849,222  
Pyramis Index Lifecycle 2035
     3,547,850       4,809,707  
Pyramis Index Lifecycle 2040
     1,948,331       2,263,024  
Pyramis Index Lifecycle 2045
     1,297,464       1,469,009  
Pyramis Index Lifecycle 2050
     451,153       300,602  
Total investments
   $ 438,094,858       643,106,544  

 
The following presents investments in the Master Trust as of December 31, 2008 and 2007 that represent 5% or more of the Master Trust’s net assets.
 
Description
  
2008
    
2007
  
Wells Fargo Stable Return E
   $ 92,054,997       83,706,503  
Fidelity Diversified International Fund
     28,339,242       55,049,741  
Growth Fund of America
     41,181,028       69,498,831  
American Century Large Company Value Fund
     35,190,860       61,240,057  
The Toro Company Common Stock
     130,120,605       217,508,364  

 
9
 

THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007


 
(7)
Reconciliation of Differences Between these Financial Statements and the Financial Information Required on Form 5500:
 

 
   
December 31,
  
   
2008
  
Net assets available for benefits as presented in these financial statements
   $ 2,114,250  
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts at December 31, 2008
     (10,842 )
         
Net assets available for benefits as presented on Form 5500
   $ 2,103,408  
         
   
Year Ended
  
   
December 31,
  
   
2008
  
Net (decrease) in net assets available for benefits as
        
presented in these financial statements
   $ (1,143,132 )
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts at December 31, 2008
     (10,842 )
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts at December 31, 2007
     681  
Net (decrease) in net assets available for benefits as
        
presented on Form 5500
   $ (1,153,293 )


 
10
 


THE TORO COMPANY PROFIT-SHARING PLAN
FOR PLYMOUTH UNION EMPLOYEES

Notes to Financial Statements

December 31, 2008 and 2007

   
December 31,
  
   
2007
  
Net assets available for benefits as presented in these financial statements
   $ 3,257,382  
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts at December 31, 2007
     (681 )
         
Net assets available for benefits as presented on Form 5500
   $ 3,256,701  
         
   
Year Ended
  
   
December 31,
  
   
2007
  
Net increase in net assets available for benefits as
        
presented in these financial statements
   $ 272,089  
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts at December 31, 2007
     (681 )
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts at December 31, 2006
     3,307  
Adjustment for employer contribution receivable at December 31, 2006
     733  
Adjustment for employee contribution receivable at December 31, 2006
     2,508  
Net increase in net assets available for benefits as
        
presented on Form 5500
   $ 277,956  


 
11
 




SIGNATURES

 
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 Profit-Sharing Plan for
 
Plymouth Union Employees
   
Date:  June 26, 2009
By /s/ Stephen P. Wolfe
 
Stephen P. Wolfe
 
Vice President Finance
 
and Chief Financial Officer
 
of The Toro Company




 

 
Exhibit Index
 
Exhibit Number
Description
23.1
Consent of Independent Registered Public Accounting Firm