The Toro Company
TTC
#2130
Rank
$9.16 B
Marketcap
$96.81
Share price
0.40%
Change (1 day)
25.78%
Change (1 year)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Fiscal Year Ended October 31, 1997.

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------- --------------------

Commission File Number 1-8649

THE TORO COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE 41-0580470
(State of incorporation) (I.R.S. Employer Identification Number)

8111 LYNDALE AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55420-1196
TELEPHONE NUMBER: (612) 888-8801
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

--------------------------
Securities registered pursuant to Section 12(b) of the Act:


TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $1.00
per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, based upon the closing price of the Common Stock on January 16, 1998
as reported by the New York Stock Exchange, was approximately $499,841,000.

The number of shares of Common Stock outstanding as of January 16, 1998 was
12,823,964.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended October 31, 1997 are incorporated by reference into Parts I, II and IV.

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held March 18, 1998 are incorporated by reference into Part
III.

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Part I
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ITEM 1. BUSINESS

INTRODUCTION
The company designs, manufactures and markets consumer and professional turf
maintenance equipment, snow removal products and irrigation systems and provides
landscaping and turf maintenance services. The company produced its first lawn
mower for golf course fairways in 1922 and its first lawn mower for home use in
1939 and has continued to enhance its product lines ever since.

The company emphasizes quality and innovation in its products, manufacturing
and marketing. The company strives to provide well built, dependable
products supported by an extensive service network. The company's
substantial funding of research and development, as well as its acquisition
strategy and its licensing and related agreements, have all contributed to
its new product development efforts. Through these efforts the company also
attempts to be responsive to trends which may affect its target markets, now
and in the future. The company believes that a significant portion of its
revenues in recent years have been attributable to its new and enhanced
products. Examples of recently introduced products include Toro's Contour
Deck for undulating terrain, the Toro-Registered Trademark-Wheel
Horse-Registered Trademark- 5xi garden tractor which completed the redesign
of the entire Toro riding product line and a new low emission snowthrower
engine scheduled for introduction in 1998. Other new products include a new
line of solar-powered and metal low voltage outdoor lighting for landscapes,
a more powerful Toro-Registered Trademark- Super BlowerVac and a redesigned
string trimmer line.

The company has also expanded its product lines and services by making
acquisitions and strategic alliances. See "Recent Developments" below.

The company was incorporated in Minnesota in 1935 as a successor to a
business founded in 1914. It was reincorporated in Delaware in 1983. The
company's executive offices are located at 8111 Lyndale Avenue South,
Bloomington, Minnesota 55420-1196, telephone number (612) 888-8801. Unless
the context indicates otherwise, the terms "company" and "Toro" refer to The
Toro Company and its subsidiaries. The company finances a significant
portion of its receivables through Toro Credit Company ("Toro Credit"), its
wholly-owned finance subsidiary.

OUTDOOR MAINTENANCE EQUIPMENT
The company classifies its operations into one industry segment, outdoor
maintenance equipment. The company continues to be a leader in transforming
advanced technologies into products and services that provide solutions for
landscape and turf care maintenance and beautification demands. Following is
a summary of Toro's product lines:

CONSUMER PRODUCTS

WALK-BEHIND POWER MOWERS. The company has manufactured walk-behind
power mowers for residential use since 1939. Its walk-behind power lawn
mowers are gasoline and electric powered. The company manufactures
numerous models of walk-behind power mowers under its brand names
Toro-Registered Trademark- and Lawn-Boy-Registered Trademark-, including
both four-cycle and two-cycle engine models, battery and electric models.
Models differ as to cutting width, type of starter mechanism, type of
bagging, controls and power sources, and are either self-propelled or
push mowers. Certain of the lawn mowers are backed by the company's
"Guaranteed To Start" program and some Lawn-Boy-Registered
Trademark- models are equipped with a two-cycle engine manufactured by the
company.

RIDING MOWERS AND LAWN AND GARDEN TRACTORS. The company manufactures
riding lawn mowers and lawn and garden tractors under its brand name
Toro-Registered Trademark-Wheel Horse-Registered Trademark- which range
from an eight horsepower, 25 inch deck, rear engine model to a 23
horsepower, front engine, air and liquid cooled, gas and diesel models.
The front engine model is available with a variety of decks and
accessories. Recycler technology is available in select models. Some
models are equipped with hydrostatic transmissions and/or low emission
engines. The company introduced in 1997 the new Toro-Registered
Trademark-Wheel Horse-Registered Trademark- 5xi garden tractor which
completed the redesign of the entire Toro riding product line.


2
HOME SOLUTIONS PRODUCTS.  The company designs and markets electrical
and gas products under the Toro-Registered Trademark- brand name for
dealers, mass merchandisers and "do-it-yourself" home improvement
markets. These products, which include homeowner-installed, plastic and
metal low voltage and solar lighting, flexible line trimmers and electric
blowers, are intended to require little or no after sales service. Among
recently introduced products include a new line of solar-powered and
metal low voltage outdoor lighting, a more powerful Toro-Registered
Trademark- Super BlowerVac and a redesigned string trimmer line.

SNOW REMOVAL PRODUCTS. The company manufactures and markets
lightweight and larger self-propelled walk-behind snowthrowers and
electric Power Shovel snowthrowers under the Toro-Registered Trademark-
and Lawn-Boy-Registered Trademark- brand names. Single-stage
snowthrowers, developed by the company and first introduced in 1965, are
walk-behind units with a lightweight gasoline engine or electric motor
and the Power Curve-Registered Trademark- snowthrower technology for
general residential use. Two-stage snowthrowers are designed for
relatively large areas with engines ranging from five to 12 horsepower.
Units with eight horsepower and above can be equipped with the Power
Shift-Registered Trademark- snowthrower technology.

PROFESSIONAL TURF PRODUCTS

COMMERCIAL PRODUCTS. Professional turf maintenance equipment marketed
under the Toro-Registered Trademark- brand name is the company's oldest
product line, which began in 1922 with the sale of tractor-pulled reel
mowers to golf courses. Today the company's expanded product line
includes products designed for the large turf areas of schools, parks,
cemeteries, sports fields, plant sites, apartment buildings and townhouse
complexes, as well as golf courses. Management believes that golf courses
will continue to be a significant market for turf maintenance equipment
as new golf course construction continues throughout the world.
Increasing emphasis is being placed on the sports field and landscape
contractor markets.

Products for the golf course include turf sprayer equipment, riding and
walk-behind reel mowers for the putting green, and riding and pull-behind
large reel products for the fairway, rough and trim cutting, turf
aeration and sandtrap/bunker maintenance.

Exmark, one of the company's recent acquisitions, produces mid-sized
walk-behind power mowers and zero-turning-radius riding mowers for
professional contractors.

Other products which service all commercial markets include riding rotary
units with out-front cutting decks ranging from 52 inches to 16 feet
widths of cut, turf sweepers and multipurpose vehicles and attachments
designed for flexibility. Among recently introduced products include the
Toro Contour Deck and a small liquid-cooled riding rotary.

IRRIGATION PRODUCTS. Turf irrigation products marketed under the
Toro-Registered Trademark- and Irritrol-Registered Trademark- Systems
brand names include sprinkler heads and electric and hydraulic control
devices designed to be used in turf irrigation systems for residential,
commercial and golf course use. These products are installed in new
systems and can also be used to replace or retrofit existing systems.
Most of the product line is designed for underground irrigation systems.
Control valves activate the sprinkler heads and controllers typically
activate electric or hydraulic lines to control the valves and sprinkler
heads. The acquisition of the James Hardie Irrigation Group enhanced
Toro's product line for residential and commercial irrigation systems and
provided products for the agricultural micro-irrigation segment,
including drip tape, hose, emitters and other micro-irrigation products.
Recently introduced products include more efficient sprinkler heads and
automatic electronic controllers for residential, commercial and golf
course irrigation systems. Specific introductions in 1997 included the
SitePro-TM- central controller which has made computer technology an easy
and effective way for superintendents to manage the irrigation lifeblood
of a golf course. The company's irrigation products are used in 75 of the
golf courses rated among the top 100 courses in the United States by GOLF
DIGEST.


3
See the table entitled "Net Sales By Product Line" under the caption "Results
of Operations" in the section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on page 16 of the company's
Annual Report to Stockholders for the fiscal year ended October 31, 1997 for
information regarding revenues in the consumer, commercial and irrigation
product lines, which information is incorporated herein by reference.

INTERNATIONAL OPERATIONS

The company currently distributes its products worldwide with sales and/or
distribution offices in Canada, Belgium, the United Kingdom, Australia,
Singapore, Japan, Italy and Greece.

New product development is primarily pursued in the United States. Products
marketed outside of North America are sold in compliance with local safety
standards. All products shipped to Europe conform to the European Community
Certification standards.

In addition to developing new market-specific products, the International
business is adding customers in new regions. Emerging markets in Eastern
Europe (such as the Czech Republic, Slovakia and Hungary) and in South
America (such as Argentina) have recently been added to the distribution base.

RECENT DEVELOPMENTS

On December 1, 1996 the company acquired James Hardie Irrigation Group
(Hardie) from James Hardie Industries Limited of Australia (JHI Limited).
Hardie is a worldwide leader in the production of irrigation systems to the
commercial landscape market. Hardie manufactures products for all major
segments of the irrigation market, except for the golf market, and sells to
distributors and retailers worldwide. Hardie offers a broad range of
irrigation products and has leading positions in valves and controllers
worldwide. In Australia, Hardie has a leading position in hose, hose-end and
micro-irrigation products. Hardie products are marketed under the
Irritrol-Registered Trademark- Systems brand through Hardie's existing global
distribution network. Toro and Hardie's Lawn Genie-Registered Trademark-
brand for the mass merchant retail market is expected to become a leading
presence in do-it-yourself home irrigation.

Effective November 1, 1997 the company acquired Exmark Manufacturing Company
Incorporated (Exmark), a leading manufacturer of equipment for the
professional landscape contractor industry. Exmark is headquartered in
Beatrice, Nebraska and produces mid-sized walk-behind power mowers and
zero-turning-radius riding mowers for professional contractors. Exmark
employs approximately 280 people in a 164,000 square-foot facility.

In September 1997, the company acquired the manufacturing, sales and
distribution rights to Dingo Digging Systems (Dingo). The Dingo utility
loader is the cornerstone product for the newly established Toro Sitework-TM-
Systems product line. The Dingo is a rugged, compact and powerful piece of
equipment with more than 35 attachments that dramatically increase
productivity. The company will manufacture and sell Dingo landscape products
under the Toro Siteworks-TM- brand name for North and South American markets.
Dingo began distributing its products in North America in 1995 under an
agreement with Dingo Mini Diggers of Australia. These products will be
manufactured at the company's manufacturing facility in Tomah, Wisconsin.

The company also completed several other alliances in key business areas.
Product alliances with Bluebird International and Parker Sweeper Company
contributed to development of the company's landscape contractor business.
The company also formed alliances with Pinehurst Resort, home of the 1999
U.S. Men's Open, and Whitbread-Marriott, a European chain of golfing resorts.
As the official turf maintenance provider to Disney's Wide World of Sports
complex in central Florida, the company's scientists and engineers developed
"tomorrowland" turf solutions for Disney's new complex. The Wide World of
Sports and the Toro Town Green, centerpiece of the complex, opened in 1997
and featured the latest in Toro equipment, irrigation systems and organic
nutrient applications utilizing the company's "fertigation" technology.


4
In 1997, the company launched a major initiative to increase the speed,
efficiency and cost effectiveness of its supply chain, including raw material
procurement, customer ordering, manufacturing, distribution and product
delivery. The company focused on reducing costs and realizing synergies and
efficiencies of combined resources. The company transferred valve and
controller production to El Paso, Texas and sprinkler head production to
Riverside, California to take advantage of each plant's expertise. The
company also closed a facility and moved consumer electric product
manufacturing to the El Paso plant and other manufacturing facilities.

New innovations like Toro's Contour Deck for undulating terrain were
developed from the company's longstanding knowledge and understanding of the
golf course superintendent. The Toro-Registered Trademark- Wheel
Horse-Registered Trademark- 5xi garden tractor completed the redesign of the
entire Toro riding product line and received acclaim from national news media
for breakthrough technology. A new, low emission snowthrower engine is
scheduled for 1998 introduction. Other new products include a new line of
solar-powered and metal low voltage outdoor lighting for landscapes, a more
powerful Toro-Registered Trademark- Super BlowerVac, and a redesigned string
trimmer line.

In 1997, the company completed the second year of an enterprise-wide software
system implementation that consolidates and integrates all of the company's
operations. ISO 9000 continues to be a high priority for the company.
Facilities at Riverside, California, Tomah, Wisconsin and Shakopee, Minnesota
were again certified in 1997 and Sardis and Oxford, Mississippi and Windom,
Minnesota are working toward ISO 9000 certification in 1998.

MANUFACTURING
The company's consumer spring and summer products are generally manufactured
in the winter and spring months and its consumer fall and winter products are
generally manufactured in the summer and fall months. The company's
irrigation and commercial products are manufactured throughout the year.

In some areas of its business the company is primarily an assembler while in
others it is a fully integrated manufacturer. Most of the components for the
company's products are commercially available from a number of sources and
the company is generally not dependent on any one supplier. The largest
component costs are generally engines, transmissions and electric motors.
The company purchases most of its engines and motors for consumer and
commercial products from several suppliers. In addition, the company
manufactures two types of two-cycle engines for its consumer products.

Management continues to seek greater efficiencies and improve work processes
throughout the company. Toro's total quality process is focused upon
improving product quality, customer response time and reducing overall
product cost.

TRADEMARKS AND PATENTS
Products manufactured by the company are nationally advertised and sold at the
retail level under the trademarks Toro-Registered Trademark-, Wheel
Horse-Registered Trademark-, Lawn-Boy-Registered Trademark- and
Irritrol-Registered Trademark- Systems, all of which are registered in the
United States and in the principal foreign countries in which the company
markets its products. The company holds patents in the United States and
foreign countries and applies for patents as applicable. Although management
believes patents have value to the company, patent protection does not deter
competitors from attempting to develop similar products. Although patent
protection is considered to be very beneficial, the company is not materially
dependent on any one or more of its patents.

In connection with the acquisition of Hardie, the following brand names were
acquired: Lawn Genie-Registered Trademark-, Irritrol-Registered Trademark-,
Richdel-Registered Trademark-, Pope, Blue Stripe, and Aqua-Traxx. The
company agreed to discontinue use of the name "Hardie" or any similar name
within one year after the acquisition and therefore, Toro will now market
former Hardie brand name products under the Irritrol-Registered Trademark-
brand name. Inventory manufactured prior to that one year may continue to
carry the name "Hardie" or similar name.


5
With the recent acquisition of Exmark, the company acquired the Exmark brand
name. The company will also manufacture and sell Dingo landscape products
under the Toro Siteworks-Registered Trademark- brand name for North and South
American markets.

SEASONALITY
Sales of the company's consumer products, which accounted for approximately 43%
of total sales in fiscal 1997, are seasonal with greater sales of consumer
products, excluding snow removal equipment, occurring between February and April
and snow removal equipment between August and January. Opposite seasons in some
global markets somewhat moderate this seasonality in consumer product sales.
Seasonality in irrigation and commercial product sales also exists, but is
tempered because the selling season in west coast and southern states continues
for a longer portion of the year than in northern states. Overall, worldwide
sales levels are highest in the second quarter. Historically, accounts
receivable balances increase between January and March as a result of extended
payment terms made available to the company's customers. Accounts receivable
balances decrease between April and July when payments are made. The seasonal
requirements of the business are financed from operations and with short-term
bank lines of credit.

DISTRIBUTION AND MARKETING
The company markets the majority of its Toro branded products principally
through approximately 40 domestic and 96 foreign distributors and a number of
mass merchandisers worldwide. Toro-Registered Trademark- and
Lawn-Boy-Registered Trademark- consumer products such as walk-behind power
mowers, riding mowers and snowthrowers are sold to distributors for resale to
retail dealers throughout the United States. Home solutions products and
most Lawn-Boy-Registered Trademark- products are sold directly to mass
merchandisers and "do-it-yourself" home improvement retailers. Commercial
and irrigation products are sold to distributors for resale to irrigation
contractors and golf courses. Irrigation products are also sold through
distributors to irrigation dealers and direct to irrigation dealers, mass
merchandisers and "do-it-yourself" home improvement retailers for resale to
contractors, golf courses and end-users. Internationally, consumer products
are sold to distributors for resale to retail dealers and mass merchandisers
outside the United States, principally in Canada and Western Europe. Some
irrigation and consumer products are sold directly to retail dealers in
Canada, Australia and Western Europe.

The company's current marketing strategy is to maintain distinct and separate
brands and brand identification for Toro-Registered Trademark-,
Toro-Registered Trademark- Wheel Horse-Registered Trademark- and
Lawn-Boy-Registered Trademark- products and the recently acquired Hardie and
Exmark products. The product lines included in the acquisition of Hardie
have been branded Irritrol and are distributed through both Toro and non-Toro
irrigation dealers. The Exmark brand is distributed through approximately 25
distributors for resale to retail dealers throughout North America.

The company's distribution systems for the sale of its products are intended
to assure quality of sales and market presence as well as effective
after-market service. The company considers its distribution network to be a
significant competitive asset in marketing Toro-Registered Trademark-,
Toro-Registered Trademark- Wheel Horse-Registered Trademark-,
Lawn-Boy-Registered Trademark-, Irritrol and Exmark products.

The company advertises its products during appropriate seasons throughout the
year on television, radio and in print. Most of the company's advertising
emphasizes its brand names. Advertising is directly paid by the company as
well as through cooperative programs with distributors, dealers and mass
merchants.

BACKLOG OF ORDERS
The approximate backlog of orders believed to be firm at October 31, 1997 and
1996 was as follows:

1997 1996
------------ ------------
Consumer $ 21,729,000 $ 51,373,000
Commercial 38,695,000 55,138,000
Irrigation 8,101,000 4,333,000


6
The decline in the consumer product backlog resulted primarily from a
reduction in the overall snow sales for the current season. In addition,
with the increase in sales to mass merchants as some sales have shifted from
dealers to mass merchants, there has been a reduction in order lead time.
The reduction in commercial backlog was caused by a change in the way orders
are taken, from an order covering a three month period to an order covering a
one month period. Irrigation backlog is up due to increased sales from the
Hardie acquisition. The company expects that all of the existing backlog can
be filled in fiscal 1998.

COMPETITION
The principal competitive factors in the company's markets are product
innovation, quality, service and pricing. Management believes the company
offers high quality products with the latest technology and design innovations.
Also, by selling Toro-Registered Trademark-, Toro-Registered Trademark-Wheel
Horse-Registered Trademark-, Lawn-Boy-Registered Trademark- and
Irritrol-Registered Trademark- Systems brand products through a network of
distributors, dealers and mass merchants who provide service, the company offers
competitive service during and after the relevant warranty period.

The company competes in all product lines with numerous manufacturers, many
of which have substantially greater financial resources than the company.
Management believes that its commitment to product innovation, its
distribution systems and its focus on target markets, position it well to
compete in these various markets.

CONSUMER
The company's principal competitors for mowing and snow equipment are
Frigidaire Home Products, Inc. (a subsidiary of Electrolux AB), Deere &
Company, Honda Motor Co., Ltd., MTD Products, Inc., Murray Ohio
Manufacturing Co., Inc. (a subsidiary of Tompkins Corp.), Sears, Roebuck
and Co., Snapper Power Equipment (a division of Metro Media), Ariens
Company, Garden Way, Incorporated and Simplicity Manufacturing Company.
The principal competitors in home solutions products are The Black and
Decker Corporation, Malibu Lighting (a registered trademark of Intermatic,
Inc.), Poulan/Weed Eater and Homelite(a division of Deere & Company).

COMMERCIAL
The company's commercial products compete with products from numerous
manufacturers, but the principal competitors across most of the company's
commercial product lines are Deere & Company, American Honda Motor Co.,
Inc., Echo Inc., Stihl Inc., Scag Power Equipment, Shindaiwa Inc., Snapper
Inc., Gravely International, Lesco Inc., Walker Manufacturing Co., Cub
Cadet Power Equipment, American Yard Products, Husqvarna Forest and Garden
Co., The Ariens Co., MTD Products Inc., Textron Jacobsen and Ransomes Sims
& Jefferies PLC (based in the United Kingdom).

IRRIGATION
The company's principal competitors in irrigation products are Hunter
Industries and Rain Bird Sprinkler Manufacturing Corporation.

INTERNATIONAL
The international market is generally fragmented so that the degree of
competition varies among the different countries in which the company
markets its consumer, commercial and irrigation products. Most competitors
in the irrigation and commercial product lines are based in the United
States. Consumer product lines can face more competition where foreign
competitors manufacture and market competing products in their countries at
a lower cost. In addition, fluctuations in the value of the U.S. dollar
may affect the price of the company's products in such markets, thereby
affecting their competitiveness.


7
RESEARCH AND DEVELOPMENT
The company conducts research and development activities in an effort to
improve existing products and develop new products. Amounts expended on such
activities, including engineering costs, aggregated approximately $36.6
million, or 3.5% of net sales for the year ended October 31, 1997, $31.3
million, or 3.4% of net sales for the year ended October 31, 1996, $6.9
million, or 3.6% of net sales for the 3 months ended October 31, 1995 and
$26.5 million, or 2.8% of net sales for the year ended July 31, 1995.
Management believes that the company's research and development efforts are
important to the quality, mix and growth of its businesses and plans to
continue its strong commitment to such activities.

GOVERNMENTAL REGULATION
The company's products are subject to various federal statutes designed to
protect consumers and are subject to the administrative jurisdiction of the
Consumer Product Safety Commission. The company is also subject to certain
federal and state environmental, occupational safety, transportation and
other regulations, none of which has had a material adverse affect on its
operations or business. Management believes the company is in substantial
compliance with all such regulations. The Environmental Protection Agency
(EPA) released Phase I regulations for all gas engines under 25 horsepower in
June of 1995. Toro's four-cycle engine suppliers are currently in compliance
with these regulations. The company received certification in January 1998 on
its own two-cycle walk-behind power mower engines and earlier on the
two-cycle walk-behind power snowthrowers engines. Both now comply with Phase
I regulations. This will allow the company to continue producing its
two-cycle walk-behind power mower engines at its Oxford, Mississippi plant
through the year 2002.

EMPLOYEES
During fiscal 1997 the company employed an average of 3,911 employees. The
total number of employees at October 31, 1997 was 3,908. Approximately 20 %
of these employees are covered by four collective bargaining agreements, one
expiring in May 2000, two expiring in September 2000 and one expiring in
October 1999.

As a result of the acquisition of Hardie, the company added approximately
1,070 employees. Hardie's Australian employees have three local agreements
with the National Union of Workers and the Australian Workers Union which
cover approximately 15% of all Hardie employees. These agreements will
expire in June 2000. None of the Hardie U.S. employees are represented by
unions.

As a result of the acquisition of Exmark, the company added approximately 260
employees, none of which are represented by a union.

Management considers its overall relations with its employees to be good.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
With the exception of the Hardie production facilities in Australia, all of the
company's production facilities are located within the United States. Except
for the sales of the company's foreign subsidiaries, which are not significant
when compared to total company sales, substantially all financial transactions
have been made in U.S. dollars. Consequently, although the Hardie acquisition
has brought an increase in transactions denominated in Australian dollars, the
company did not realize any significant impact to earnings due to fluctuations
in foreign currencies during the fiscal year ended October 31, 1997.

A portion of the company's cash flow is derived from sales and purchases
denominated in foreign currencies. To reduce the uncertainty of foreign
currency exchange rate movements on these sales and purchase commitments, the
company enters into foreign currency exchange contracts. These contracts are
designed to hedge firm and anticipated foreign currency transactions.

Export sales were $161,836,000 for the year ended October 31, 1997,
$140,919,000 for the year ended October 31, 1996, $18,557,000 for the 3
months ended October 31, 1995, and $126,560,000 for the year ended July 31
1995. The identifiable assets attributable to foreign operations were not
significant as of October 31, 1997.


8
See Notes to the Consolidated Financial Statements of the company contained
in the company's Annual Report to Stockholders for the fiscal year ended
October 31, 1997 for additional information relating to international and
export sales, which information is incorporated herein by reference.

ITEM 2. PROPERTIES

The company utilizes manufacturing and office facilities which total
approximately 4,115,000 square feet of space. The manufacturing facilities,
excluding Hardie, operated at about 57% of total plant capacity in fiscal
1997. Actual plant utilization varies during the year depending upon the
production cycle. In fiscal 1997, the company announced the closing of its
production facility at Mound, Minnesota. Management believes that its
current facilities are sufficient for current production needs. The
following schedule outlines the company's facilities by location, plant size,
ownership and function:


<TABLE>
<CAPTION>

- ------------------------------------------------------------------------------------------------------------------------------------
Location Square Feet Ownership Products Manufactured / Use
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Plymouth, WI 420,000 Owned Parts distribution center, office
Windom, MN 305,000 Owned Consumer components and products
Lakeville, MN 304,000 Leased Finished Goods distribution center, office
Bloomington, MN 300,000 Owned Corporate headquarters
Tomah, WI 274,000 Owned Consumer and Commercial products
Sardis, MS 245,000 Owned Consumer products and Finished Goods distribution center, office
Baraboo, WI 228,000 Leased Finished Goods distribution center, office
Riverside, CA 217,000 Owned Irrigation and Consumer products
Evansville, IN 178,000 Leased Consumer and Commercial products
Beatrice, NE 164,000 Owned Commercial products, office
Olathe, KS 98,000 Leased Commercial products
Mound, MN 162,000 Leased Plant to be closed and production moved to other manufacturing
plants in fiscal 1998.
Shakopee, MN 146,000 Owned Components for consumer and commercial products
El Paso, TX 143,000 Owned Hardie irrigation products and warehouse
Braeside, Australia 47,000 Leased Hardie irrigation products warehouse
Beverley, Australia 109,000 Owned Hardie Corporate office and distribution center
Murray Bridge, Australia 101,000 Owned Hardie irrigation products and warehouse
El Cajon, California 92,000 Owned Hardie irrigation products and warehouse
Oxford, MS 67,000 Owned Components for consumer products
Oevel, Belgium 63,000 Owned Finished goods distribution center, office
- ------------------------------------------------------------------------------------------------------------------------------------
Total Square Feet 3,663,000

</TABLE>

Other leased office and warehouse space located in various cities in the United
States, Australia, Canada, France, Singapore, Japan and the United Kingdom
totaled approximately 452,000 square feet.


9
ITEM 3. LEGAL PROCEEDINGS

The company is a party to litigation in the ordinary course of its business.
Ongoing litigation primarily involves claims for damages arising out of the
use of the company's products, some of which include claims for punitive as
well as compensatory damages. The company is also subject to administrative
proceedings in respect to certain claims involving the discharge of hazardous
substances into the environment. Certain of these claims assert damages and
liability for remedial investigations and clean up costs. Management is of
the opinion that the amounts which may be awarded or assessed in connection
with these matters will not have a material effect on the company's financial
position. Further, the company maintains insurance against product liability
losses. Such insurance presently covers claims in excess of $1,000,000 per
claim or $2,000,000 in the aggregate during any fiscal year. The company
regularly reviews these dollar limits.

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF THE SECURITY HOLDERS

None.


10
EXECUTIVE OFFICERS OF THE REGISTRANT

The list below identifies those persons deemed to be executive officers of
the company, discloses their age and position with the company as of January
21, 1998 and positions held by them during the last five years. Officers are
elected or appointed annually. A complete list of all officers of the
company is found on the inside back cover of the company's Annual Report to
Stockholders for the year ended October 31, 1997.

Name, Age and Position with Business Experience During the Last Five Years
the Company
- ------------------------------ ----------------------------------------------

Randy B. James Appointed Vice President and Controller in
54, Vice President and December 1988.
Controller

Stephen P. Wolfe Elected Chief Financial Officer May 1997 and
49, Vice President-Finance and Vice President-Finance/Treasurer June 1997.
Chief Financial Officer Appointed Vice President in August 1994.
Elected President, Toro Credit Company in July
1990.

Charles B. Lounsbury Elected Group Vice President September 1996.
55, Group Vice President From November 1993 to September 1996 was
Office of the President appointed Vice President, Distribution Parts
and Debris Management. From May 1991 to
November 1993 was President and Chief
Operating Officer of Leaseway Transportation
Corporation. While Mr. Lounsbury served as
President and a director of Leaseway, it filed
for protection under Chapter 11 and during
that period it was discharged.

J. David McIntosh Elected Group Vice President September 1996.
54, Group Vice President From January 1992 to September 1996 was
Office of the President appointed Vice President and General Manager,
Consumer Division.

J. Lawrence McIntyre Elected Vice President in July 1993. Elected
55, Vice President, Secretary Secretary and General Counsel in August 1993.
and General Counsel Prior to July 1993, was a shareholder with
Doherty, Rumble & Butler Professional
Association.

Kendrick B. Melrose Elected Chairman of the Board in December 1987
57, Chairman and Chief and Chief Executive Officer in December 1983.
Executive Officer
Office of the President

Karen M. Meyer Elected Vice President, Human
48, Vice President, Resources/Administrative Services in December
Human Resources/Administrative 1991.
Services

Richard R. Pollick Appointed Vice President, International
58, Vice President and General Division in March 1990.
Manager
International Division

James H. Beardsley Appointed Vice President and General Manager,
54, Vice President and General Consumer Business June 1997. From October
Manager 1990 to October 1996 was President and Chief
Consumer Business Executive Officer of Master Lock Company.

Michael J. Hoffman Appointed Vice President and General Manager,
42, Vice President and General Commercial Business November 1997. From
Manager November 1996 to November 1997 he served as
Commercial Business General Manager of the Commercial Division.
He served as Managing Director, Recycling
Division from March 1994 to October 1996 and
as Director of Marketing and Service,
Commercial Division from September 1989 to
March 1994.


11
William J. Miller                Appointed Vice President, Operations June
50, Vice President, Operations 1997. From January 1992 to June 1997 he
served as Group Vice President of the
Frigidaire Company in various divisions.

Richard W. Parod Appointed Vice President and General Manager,
44, Vice President and General U.S. Irrigation Business March 1997. From
Manager December 1993 to March 1997 he served as
U.S. Irrigation Business President of James Hardie Irrigation, Inc. and
from September 1993 to December 1993 as Chief
Financial Officer of James Hardie Irrigation,
Inc.

There are no family relationships between any director, executive officer or
person nominated to become a director or executive officer. There are no
arrangements or understandings between any executive officer and any other
person pursuant to which he or she was selected as an officer.


12
Part II
- -------------------------------------------------------------------------------

All information incorporated by reference in this Part II is from the
Registrant's Annual Report to Stockholders for the fiscal year ended October
31, 1997 ("Annual Report").

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS

Toro Common Stock (including related Preferred Share Purchase Rights) is
listed for trading on the New York Stock Exchange. As of January 19, 1998
there were 6,564 holders of record of the company's common stock.

See "Quarterly Financial Data" on page 39 of the Annual Report for dividends
paid on and range of high and low sales prices for the company's common stock
on the New York Stock Exchange on a quarterly basis for the period from
November 1, 1995 to October 31, 1997 which information is incorporated herein
by reference.

ITEM 6. SELECTED FINANCIAL DATA

See "Selected Financial Data" on page 23 of the Annual Report for financial
data for the years ended October 31, 1997 and 1996, the 3 month period ended
October 31, 1995 and the years ended July 31, 1995, 1994 and 1993 which
information for these periods is incorporated herein by reference.


13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

See the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Annual Report to Stockholders on
pages 16 through 22 which section is incorporated herein by reference.

FORWARD-LOOKING INFORMATION

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Part I of this Annual Report on Form 10-K and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the company's Annual Report to Stockholders for fiscal 1997 referred to above
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. In addition, forward-looking statements may be made orally in the
future by or on behalf of the company.

Statements that are not historical are forward-looking. When used by or on
behalf of the company, the words "expect", "anticipate", "estimate",
"believe", "intend" and similar expressions generally identify
forward-looking statements.

Forward-looking statements involve risks and uncertainties. These
uncertainties include factors that affect all businesses operating in a
global market, as well as matters specific to the company and the markets it
serves. Particular risks and uncertainties facing the company at the present
include political and economic uncertainty and instability in many of the
company's markets in Asia; the warm winter being experienced in many of the
company's markets; the strong dollar which increases the cost of the
company's products in foreign markets and limits the company's ability to
increase prices; more cautious buying patterns affecting the company's
consumer business and European sales; increased competition in the company's
businesses; the company's ability to integrate business acquisitions and to
manage alliances successfully; changes in distributor, dealer or mass
merchant purchasing practices; and occasional production delays affecting
selected consumer products.

In addition, the company is subject to risks and uncertainties facing its
industry in general, including changes in business and political conditions
and the economy in general in both foreign and domestic markets; weather
conditions affecting demand, including warm winters and wet spring and summer
weather; lack of growth in the company's markets; financial market changes
including increases in interest rates and fluctuations in foreign exchange
rates; a slowing in housing starts or new golf course starts; inability to
raise prices of products due to market conditions; changes in market
demographics; actions of competitors; unanticipated problems or costs
associated with implementation by the company of computer applications that
will accommodate the Year 2000; the inability of the company's suppliers,
customers, creditors and financial service organizations to implement
computer applications accommodating the Year 2000; the company's ability to
develop, manufacture and sell both new and existing products profitably;
seasonal factors in the company's industry; unforeseen litigation; government
actions including budget levels, regulation and legislation, primarily
legislation relating to the environment, commerce, infrastructure spending
and health and safety; labor relations; and availability of materials.

The company wishes to caution readers not to place undue reliance on any
forward-looking statement and to recognize that the statements are not
predictions of actual future results. Actual results could differ materially
from those anticipated in the forward-looking statements and from historical
results, as a result of the risks and uncertainties described, as well as
others not now anticipated. The foregoing statements are not exclusive and
are in addition to other factors discussed elsewhere in the company's filings
with the Securities and Exchange Commission. The company undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made, or to reflect
the occurrence of unanticipated events.


14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements described in Item 14(a)1 of this report are
incorporated herein by reference.

See "Quarterly Financial Data" appearing on page 39 of the Annual Report to
Stockholders which is incorporated herein by reference.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.


15
Part III
- -------------------------------------------------------------------------------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See "Executive Officers of the Registrant" in Part I of this report for
information regarding the executive officers of the company, which
information is herein incorporated by reference.

Information regarding the directors of the company and additional information
regarding certain executive officers is incorporated herein by reference to
the information to be contained in the company's Proxy Statement to be filed
with the Securities and Exchange Commission with respect to the next meeting
of stockholders which involves the election of directors or, if such Proxy
Statement is not filed within such 120 days after the end of the fiscal year
covered by this Form 10-K, such information will be filed as part of an
amendment to this Form 10-K not later than the end of the 120-day period.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by
reference to the information to be contained in the company's Proxy Statement
to be filed with the Securities and Exchange Commission with respect to the
next meeting of stockholders which involves the election of directors or, if
such Proxy Statement is not filed within such 120 days after the end of the
fiscal year covered by this Form 10-K, such information will be filed as part
of an amendment to this Form 10-K not later than the end of the 120-day
period.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding the security ownership of certain beneficial owners and
management of the company is incorporated herein by reference to the
information to be contained in the company's Proxy Statement to be filed with
the Securities and Exchange Commission with respect to the next meeting of
stockholders which involves the election of directors or, if such Proxy
Statement is not filed within such 120 days after the end of the fiscal year
covered by this Form 10-K, such information will be filed as part of an
amendment to this Form 10-K not later than the end of the 120-day period.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


16
Part IV
- -------------------------------------------------------------------------------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Incorporated by reference into Part II, Item 8 of Pages in Fiscal
this report: 1997 Annual Report
to Stockholders
---------------

Independent Auditors' Report......................................... 24

Consolidated Statements of Earnings for the years ended
October 31, 1997 and 1996, the 3 months ended October
31, 1995 and the year ended July 31, 1995.......................... 24

Consolidated Balance Sheets
as of October 31, 1997 and 1996.................................... 25

Consolidated Statements of Cash Flows for the
years ended October 31, 1997 and 1996,
the 3 months ended October 31, 1995 and
the year ended July 31, 1995..................................... 26

Notes to Consolidated Financial Statements.......................... 27-39

(a) 2. INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

Included in Part IV of this report.

Independent Auditors' Report.................................... 22

Schedule II - Valuation and Qualifying Accounts................. 23

All other schedules are omitted because the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.

(a) 3. EXHIBITS

2 and 10(i) Stock Purchase Agreement among The Toro Company, James
Hardie (USA) Inc., James Hardie Industries Limited and
RCI Pty. Ltd. (incorporated by reference to the Exhibit
to Registrant's Current Report on Form 8-K dated
September 18, 1996).

2 and 10(ii) Agreement and Plan of Merger, dated as of October 23,
1997 by and among Exmark, Merger Subsidiary and The
Toro Company, as amended (incorporated by reference to
Exhibit Number 2.1 to Registrant's Registration
Statement on Form S-4, Registration No. 333-39769).

3(i)(a) and 4(a) Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-3,
Registration No. 33-16125).


17
3(i)(b) and 4(b)  Certificate of Amendment to Certificate of
Incorporation of Registrant dated December 9, 1986
(incorporated by reference to Exhibit 3 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
January 30, 1987, Commission File No. 1-8649).

3(ii) and 4(c) Bylaws of Registrant (incorporated by reference to
Exhibit 3.3 to Registrant's Annual Report on Form 10-K
for the fiscal year ended July 31, 1991, Commission
File No. 1-8649).

4(d) Specimen form of Common Stock certificate (incorporated
by reference to Exhibit 4(c) to Registrant's
Registration Statement on Form S-8, Registration No.
2-94417).

4(e) Rights Agreement dated as of June 14, 1988, between
Registrant and Norwest Bank Minnesota, National
Association relating to rights to purchase Series B
Junior Participating Voting Preferred Stock, as amended
(incorporated by reference to Exhibit 1 to Registrant's
Registration Statement on Form 8-A dated June 17, 1988
and Exhibit 1 to Registrant's Current Report on Form
8-K dated August 14, 1990, Commission File No. 1-8649).

4(f) Indenture as dated as of January 31, 1997, between
Registrant and First National Trust Association, as
Trustee, relating to the Registrant's 7.125% Notes due
June 15, 2007 and its 7.80% Debentures due June 15,
2027 (incorporated by reference to Exhibit 4(a) to
Registrant's Current Report on Form 8-K for June 24,
1997, Commission File No. 1-8649).

10(iii)(a) Form of Employment Agreement in effect for certain
officers of Registrant (incorporated by reference to
Exhibit 10(b) to Registrant's Annual Report on Form
10-K for the fiscal year ended July 31, 1995).*

10(iii)(b) 1992 Directors Stock Plan, as amended (incorporated by
reference to Exhibit 10(iii)(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October
31, 1996).*

10(iii)(c) Annual Management Incentive Plan for certain key
employees and officers of Registrant (incorporated by
reference to Exhibit B to Registrant's Proxy Statement
dated February 10, 1997).*

10(iii)(d) 1985 Incentive Stock Option Plan, as amended
(incorporated by reference to Exhibit 10(b) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1993).*

10(iii)(e) 1989 Stock Option Plan, as amended.*

10(iii)(f) 1993 Stock Option Plan, as amended.*

10(iii)(g) Continuous Performance Award Plan, as amended
(incorporated by reference to Exhibit 10(iii)(g) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1996).*

10(iii)(h) The Toro Company Supplemental Management Retirement
Plan (incorporated


18
by reference to Exhibit 10(iii)(h) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1996).*

10(iii)(i) Chief Executive Officer Succession Incentive Agreement
dated as of July 31, 1995, as amended.*

11 Computation of Earnings per Share of Common Stock and
Common Stock Equivalent (page 24 of this report).

12 Computation of Ratio of Earnings to Fixed Charges (page
25 of this report).

13 Fiscal 1997 Annual Report to Stockholders for The Toro
Company.

21 Subsidiaries of Registrant (page 26 of this report).

23 Independent Auditors' Consent (page 27 of this report).

27 Supplemental Data Schedule; electronic filing only.


*Management contract or compensatory plan or arrangements
required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(c).


19
(b)  REPORTS ON FORM 8-K

None.

- --------------------------------------------------------------------------------

The company's Annual Report on Form 10-K for the fiscal year ended October
31, 1997, at the time of its filing with the Securities and Exchange
Commission, shall modify and supersede all prior documents filed pursuant to
Sections 13, 14 and 15(d) of the 1934 Act for purposes of any offers or sales
of any securities after the date of such filing pursuant to any Registration
Statement or Prospectus filed pursuant to the Securities Act of 1933 which
incorporates by reference such Annual Report on Form 10-K.


20
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

THE TORO COMPANY
--------------------------------
(Registrant)
Dated: January 21, 1998
/s/ Stephen P. Wolfe
-----------------------
Stephen P. Wolfe
Vice President - Finance
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

- --------------------------------------------------------------------------------
Signature Title Date
- --------------------------------------------------------------------------------

/s/ Kendrick B. Melrose Chairman, Chief Executive January 21, 1998
- -------------------------- Officer, and Director
Kendrick B. Melrose (principal executive officer)


/s/ Stephen P. Wolfe Vice President - Finance, January 21, 1998
- -------------------------- Chief Financial Officer
Stephen P. Wolfe (principal financial officer)


/s/ Randy B. James Vice President, Controller January 21, 1998
- -------------------------- (principal accounting officer)
Randy B. James

/s/ Ronald O. Baukol Director January 21, 1998
- --------------------------
Ronald O. Baukol

/s/ Robert C. Buhrmaster Director January 21, 1998
- --------------------------
Robert C. Buhrmaster

/s/ Janet K. Cooper Director January 21, 1998
- --------------------------
Janet K. Cooper

/s/ Alex A. Meyer Director January 21, 1998
- --------------------------
Alex A. Meyer

/s/ Robert H. Nassau Director January 21, 1998
- --------------------------
Robert H. Nassau

/s/ Dale R. Olseth Director January 21, 1998
- --------------------------
Dale R. Olseth

/s/ Edwin H. Wingate Director January 21, 1998
- --------------------------
Edwin H. Wingate


21
[LETTERHEAD]

INDEPENDENT AUDITORS' REPORT



The Board of Directors
The Toro Company:

Under the date of December 12, 1997, we reported on the consolidated balance
sheets of The Toro Company and subsidiaries (the Company) as of October 31,
1997 and 1996, and the related consolidated statements of earnings and cash
flows for the years ended October 31, 1997 and 1996, the three-month period
ended October 31, 1995 and the year ended July 31, 1995, as contained in the
1997 annual report to stockholders. These consolidated financial statements
and our report thereon are incorporated by reference in the annual report on
Form 10-K for the fiscal year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedule listed in the accompanying
index. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.


KPMG Peat Marwick LLP



Minneapolis, Minnesota
December 12, 1997


22
[LOGO]
Schedule II


THE TORO COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE CHARGED TO
DESCRIPTION AT BEGINNING COSTS AND OTHER (a) DEDUCTIONS (b) BALANCE AT END
OF YEAR EXPENSES OF YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1997
Allowance for doubtful accounts $10,005,000 $ 812,000 $ (425,000) $ 560,000 $ 9,832,000
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1996
Allowance for doubtful accounts $ 7,542,000 $ 3,358,000 $ 330,000 $ 1,225,000 $ 10,005,000
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED OCTOBER 31, 1995
Allowance for doubtful accounts $ 7,343,000 $ 720,000 $ 0 $ 521,000 $ 7,542,000
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 1995
Allowance for doubtful accounts $ 7,702,000 $ 1,543,000 $ 20,000 $ 1,922,000 $ 7,343,000
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(a) Additions to allowance for doubtful accounts due to
acquisitions and reductions due to reclassification.
(b) Uncollectible accounts charged off, net of recoveries.


23