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, 2006.
 
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
 

 
 
Page
1
2
3
4
Supplemental Schedule *
  
13
   
 
*All other schedules required by 29 CFR 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are not included because they are not applicable.
 

 
 

 


 

 
 
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, 2006 and 2005, 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 as of December 31, 2006 and 2005 and the changes in net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.
 
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) as of December 31, 2006 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.
 
/s/KPMG LLP
 
Minneapolis, Minnesota                                                                                                                
 
June 28, 2007
 


             
 
FOR PLYMOUTH UNION EMPLOYEES
  
             
Statements of Net Assets Available for Benefits
  
             
December 31, 2006 and 2005
  
             
             
             
   
2006
    
2005
  
Assets held by Trustee:
            
Investments, at fair value:
            
Mutual funds
   $
1,259,920
      
1,046,395
  
The Toro Company Common Stock
    
1,368,027
      
1,375,665
  
Bond Collective Fund
    
105,730
      
83,933
  
Master Trust fund
    
244,715
      
273,037
  
                 
Total investments
    
2,978,392
      
2,779,030
  
                 
Employee contribution receivable
    
2,508
      
2,986
  
Employer contribution receivable
    
1,086
      
1,440
  
Net assets available for benefits at fair value
    
2,981,986
      
2,783,456
  
Adjustment from fair value to contract value for
                
fully benefit-responsive investment contracts
    
3,307
      
3,546
  
Net assets available for benefits
   $
2,985,293
      
2,787,002
  
                 
                 

 
2


             
 
FOR PLYMOUTH UNION EMPLOYEES
  
             
Statements of Changes in Net Assets Available for Benefits
  
             
Years ended December 31, 2006 and 2005
  
             
             
             
             
   
2006
    
2005
  
Investment income:
            
Interest and dividends
   $
70,431
      
39,960
  
Net realized/unrealized gain in the fair value of investments
    
214,952
      
140,280
  
Pro rata share of income from Master Trust
    
10,813
      
8,808
  
                 
Net investment income
    
296,196
      
189,048
  
                 
Employer contributions
    
39,984
      
46,602
  
Participant contributions
    
138,885
      
162,758
  
                 
Total contributions
    
178,869
      
209,360
  
                 
Benefit payments
     (276,774 )     (38,979 )
                 
Net increase in net assets available for benefits
    
198,291
      
359,429
  
                 
Net assets available for benefits:
                
Beginning of year
    
2,787,002
      
2,427,573
  
                 
End of year
   $
2,985,293
      
2,787,002
  
                 
                 
See accompanying notes to financial statements.
                


3
      
        FOR PLYMOUTH UNION EMPLOYEES      
                 
        Notes to Financial Statements      
         
        December 31, 2006 and 2005      
    


 
(1)
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 held by JP Morgan Retirement Plan Services (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 Company maintains one Master Trust, the Wells Fargo Stable Value Fund E (Master Trust) for three profit sharing and retirement plans that are sponsored by the Company. The three plans are the Plan, The Toro Company Profit Sharing Plan for Plymouth Union Employees 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 99% as of December 31, 2006 and 2005.
 
 
 (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.
 

4
      
        THE TORO COMPANY PROFIT-SHARING PLAN        
         FOR PLYMOUTH UNION EMPLOYEES           
      
        Notes to Financial Statements          
            
        December 31, 2006 and 2005      
    


 
 
(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 changes could materially affect the amounts reported in the Statement of Net Assets Available for Benefits.
 
Since the assets held by the Trust include The Toro Company Common Stock, the anticipated assets available for benefits in 2007 will be the result of the Company’s future stock market performance, which is subject to various risk factors described more fully in the Company’s periodic filing with the Securities and Exchange Commission.
 
 
(e)
Adoption of New Accounting Guidance
 
The financial statements reflect the retroactive adoption of Financial Accounting Standards Board Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP).  As required by the FSP, 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.  As required by the FSP, the Statements of Net Assets Available for Benefits presented 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.
 
 
(f)
Reclassifications
 
Certain amounts from prior years’ financial statements have been reclassified to conform to the current year presentation.
 

5
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES      
                      
        Notes to Financial Statements      
            
        December 31, 2006 and 2005      
    


 
(2)
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 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.
 
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 made.
 
Transfers to/from other funds, represent participant elected rollovers to/from other plans of other employers or other transfers to/from plans.
 
Pension benefits are paid to employees upon a participant’s normal retirement date or the date a participant incurs a termination of service. An election can be made for an early, late, or disability retirement date. Normal retirement benefits are paid monthly to the retiree or the surviving spouse of the retiree.
 
During the plan years ended December 31, 2006 and 2005, forfeited nonvested accounts totaled $0.
 
The Company, administrator of the Plan, absorbs all administrative costs of the Plan, except for the trustee fees.

6
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES        
            
        Notes to Financial Statements      
            
        December 31, 2006 and 2005      
    


 
(3)
Party-in-interest Transactions
 
J.P. Morgan Retirement Plan Services 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 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; however it is the opinion of the Plan Administrator that the Plan and its related trust continue to qualify under the provisions of Sections 401(a) and 501(a) of the Code.
 
 (6)
Related Party
 
The Plan’s investments are held by J.P. Morgan Retirement Plan Services. Some of the investment funds available to participants also include mutual funds managed by J.P. Morgan Retirement Plan Services.
 
(7)
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, except to the extent the Trustee is subject to the discretion of participants, other fiduciaries, or the Company.  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 as of December 31, 2006 and 2005 were $86,793,756 and $80,018,240, respectively. All assets of the Master Trust were held in short-term investment funds.

7
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES      
              
        Notes to Financial Statements      
      
        December 31, 2006 and 2005      
    

The changes in net assets available for benefits of the Master Trust for the years ended December 31, 2006 and 2005 were as follows:
 

             
   
2006
    
2005
  
Realized gain on investments
   $
625,159
      
342,341
  
Unrealized gain on investments
    
3,171,227
      
2,861,851
  
Deposits by participating plans
    
18,160,080
      
19,104,981
  
Withdrawals by participating plans
     (15,180,950 )     (19,055,998 )
Increase in net assets
    
6,775,516
      
3,253,175
  
Net assets available for benefits:
                
Beginning of year
    
80,018,240
      
76,765,065
  
End of year
   $
86,793,756
      
80,018,240
  
                 

The following investments represent more than 5% of the Plan’s net assets available for benefits as of December 31, 2006 and 2005:
 

             
   
2006
    
2005
  
Growth Fund of America
   $
364,006
      
328,980
  
American Century Large Company Value Fund
    
440,534
      
377,903
  
Fidelity Diversified International Fund
    
184,340
      
140,767
  
The Toro Company Common Stock**
    
1,368,027
      
1,375,665
  
Master Trust fund
    
244,715
      
273,037
  
                 
**Party-in-interest, participant and nonparticipant directed investment
          
                 

During 2006 and 2005, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $214,952 and $140,280, respectively, as follows:
 
   
2006
    
2005
  
Mutual funds
   $
116,530
      
52,613
  
The Toro Company Common Stock
    
94,314
      
84,712
  
Collective bond fund
    
4,108
      
2,955
  
    $
214,952
      
140,280
  
                 

8
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES        
            
        Notes to Financial Statements      
            
        December 31, 2006 and 2005      
    

Information about the net assets and the significant components of the changes in net assets relating to the investment in Toro Company Common Stock is as follows:

         
Non-
        
         
participant
    
Participant
  
   
Total
    
directed
    
directed
  
   
2006
    
2006
    
2006
  
Net assets:
                  
  The Toro Company Common Stock
   $
1,368,027
      
906,113
      
461,914
  
           
Non-
          
           
participant
    
Participant
  
   
Total
    
directed
    
directed
  
   
2006
    
2006
    
2006
  
Investment income:
                        
  Dividends
   $
10,956
      
7,248
      
3,708
  
  Net realized/unrealized gain in the
                        
   fair value of investments
    
94,314
      
60,799
      
33,515
  
                         
Net investment income
    
105,270
      
68,047
      
37,223
  
                         
Total contributions
    
61,837
      
35,651
      
26,186
  
Benefit payments
     (154,137 )     (95,722 )     (58,415 )
Transfers to/from other funds
     (20,608 )     (15,969 )     (4,639 )
                         
(Decrease) increase in net assets
                        
  available for benefits
     (7,638 )     (7,993 )    
355
  
                         
Net assets available for benefits:
                        
Beginning of year
    
1,375,665
      
914,106
      
461,559
  
                         
End of year
   $
1,368,027
      
906,113
      
461,914
  
                         

9
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES       
            
        Notes to Financial Statements      
            
        December 31, 2006 and 2005      
    



         
Non-
        
         
participant
    
Participant
  
   
Total
    
directed
    
directed
  
   
2005
    
2005
    
2005
  
Net assets:
                  
  The Toro Company Common Stock
   $
1,375,665
      
914,106
      
461,559
  
           
Non-
          
           
participant
    
Participant
  
   
Total
    
directed
    
directed
  
   
2005
    
2005
    
2005
  
Investment income:
                        
  Dividends
   $
7,801
      
5,180
      
2,621
  
  Net realized/unrealized gain in the
                        
   fair value of investments
    
84,724
      
60,626
      
24,098
  
                         
Net investment income
    
92,525
      
65,806
      
26,719
  
                         
Total contributions
    
74,920
      
44,720
      
30,200
  
Benefit payments
     (12,782 )     (12,477 )     (305 )
Transfers to/from other funds
     (75,954 )     (59,981 )     (15,973 )
                         
Increase in net assets
                        
  available for benefits
    
78,709
      
38,068
      
40,641
  
                         
Net assets available for benefits:
                        
Beginning of year
    
1,296,956
      
876,038
      
420,918
  
                         
End of year
   $
1,375,665
      
914,106
      
461,559
  
                         

10
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES      
            
        Notes to Financial Statements      
            
        December 31, 2006 and 2005      
    


(8)
Reconciliation of Differences Between these Financial Statements and the Financial Information Required on Form 5500:
 

   
December 31,
  
   
2006
  
Net assets available for benefits as presented in these financial statements
   $
2,985,293
  
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts
     (3,307 )
Adjustment for employer contribution receivable
     (733 )
Adjustment for employee contribution receivable
     (2,508 )
Net assets available for benefits as presented on Form 5500
   $
2,978,745
  
         
   
Year Ended
  
   
December 31,
  
   
2006
  
Net increase in net assets available for benefits as
        
presented in these financial statements
   $
198,291
  
Adjustment from contract value to fair value for
        
fully benefit-responsive investment contracts
     (3,307 )
Adjustment for employer contribution receivable at December 31, 2006
     (733 )
Adjustment for employee contribution receivable at December 31, 2006
     (2,508 )
Adjustment for employer contribution receivable at December 31, 2005
    
867
  
Adjustment for employee contribution receivable at December 31, 2005
    
2,986
  
Net increase in net assets available for benefits as
        
presented on Form 5500
   $
195,596
  
         

11
      
        THE TORO COMPANY PROFIT-SHARING PLAN      
        FOR PLYMOUTH UNION EMPLOYEES      
            
        Notes to Financial Statements      
            
        December 31, 2006 and 2005      
    


 
   
December 31,
  
   
2005
  
Net assets available for benefits as presented in these financial statements
   $
2,787,002
  
Adjustment for employer contribution receivable
     (867 )
Adjustment for employee contribution receivable
     (2,986 )
Net assets available for benefits as presented on Form 5500
   $
2,783,149
  
         
   
Year Ended
  
   
December 31,
  
   
2005
  
Net increase in net assets available for benefits as
        
presented in these financial statements
   $
359,429
  
Adjustment for employer contribution receivable at December 31, 2005
     (867 )
Adjustment for employee contribution receivable at December 31, 2005
     (2,986 )
Adjustment for employer contribution receivable at December 31, 2004
    
684
  
Adjustment for employee contribution receivable at December 31, 2004
    
2,318
  
Net increase in net assets available for benefits as
        
presented on Form 5500
   $
358,578
  
         

12
 
               
Schedule 1
  
 
FOR PLYMOUTH UNION EMPLOYEES
  
                   
Schedule of Assets (Held at End of the Year)
  
                   
December 31, 2006
  
                   
                   
                   
                   
   
Face
              
   
amount
          
Fair
  
Description
  
or shares
    
Cost***
    
value
  
                   
Barclays Global Investors
    
7,814
     $       $
105,730
  
Artisan Mid Cap Fund
    
1,108
              
33,748
  
JPM Mid Cap Value*
    
1,491
              
38,722
  
STI Classics Small Cap Growth Stock Fund
    
657
              
13,223
  
Fidelity Diversified International Fund
    
4,989
              
184,340
  
Growth Fund of America
    
11,145
              
364,006
  
ICM Small Company
    
2,346
              
87,678
  
Vanguard Institutional Index
    
754
              
97,669
  
American Century Large Company Value Fund
    
58,118
              
440,534
  
The Toro Company Common Stock**
    
29,314
      
718,418
      
1,368,027
  
Master Trust fund
    
248,022
              
244,715
  
                         
Total investments
           $
718,418
     $
2,978,392
  
                         
                         
*Party-in-interest
                        
**Party-in-interest, participant and nonparticipant directed investment
          
***Information not required for participant directed investments
                  
                         
See accompanying report of independent registered public accounting firm.
          

13

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 28, 2007
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