TORO CO [TTC] Filings

10-Q 1 ttc-20240802.htm 10-Q ttc-20240802

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended August 2, 2024

☐ 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 or Other Jurisdiction of Incorporation or Organization						I.R.S. Employer Identification No.

8111 Lyndale Avenue South

Bloomington, Minnesota 55420-1196

Telephone Number: (952) 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	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	TTC	New York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of August 29, 2024 was 102,614,743.

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THE TORO COMPANY

FORM 10-Q

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Description		Page Number

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I.	FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Condensed Consolidated Statements of Earnings (Unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5

	Condensed Consolidated Balance Sheets (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows (Unaudited)	7

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

	Company Overview	29

	Results of Operations	30

	Business Segments	33

	Financial Position	34

	Non-GAAP Financial Measures	36

	Critical Accounting Policies and Estimates	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39

Item 4.	Controls and Procedures	41

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 5.	Other Information	42

Item 6.	Exhibits	43

	Signatures	44

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical are forward-looking and reflect expectations and assumptions that we believe to be reasonable. Forward-looking statements are based on our current expectations of future events and often can be identified in this report and elsewhere by using words such as "expect," "strive," "outlook," "guidance," "forecast," "goal," "anticipate," "continue," "plan," "estimate," "project," "target," "improve," "believe," "become," "should," "could," "will," "would," "possible," "may," "likely," "intend," "can," "pursue," "potential," "approximately," variations of such words or the negative thereof, and similar expressions or future dates. Our forward-looking statements generally relate to our future performance, including our anticipated operating results, liquidity requirements, and financial condition and current trends and uncertainties; the anticipated impacts of elevated field inventory levels and backlog, current global supply chain disruptions, the inflationary environment, current wars and international sanctions and geopolitical tensions, tight labor markets and other macroeconomic factors; our business strategies, priorities, goals, and commitments; acquisitions and any impairment, restructuring, or other charges in connection therewith or resulting therefrom; business and productivity initiatives and anticipated sales growth, profitability, cost savings and other benefits associated therewith; and the effect of laws, rules, policies, regulations, tax reform, new accounting pronouncements, and outstanding litigation on our business and future performance.

Forward-looking statements are only projections and involve risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements. The following are some of the factors known to us that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements:

•Adverse economic conditions and outlook in the United States and in other countries in which we conduct business, such as but not limited to: economic uncertainty; business slowdowns, suspensions or delays of production and commercial activity; slow or negative economic growth rates or recessionary conditions; reduced or negative consumer confidence; reduced consumer spending levels; changing consumer preferences; inflationary or deflationary pressures; higher short-term, mortgage, and other interest rates; increased or prolonged high or low unemployment rates and tight labor markets; higher costs, longer lead times and reduced availability of commodities, components, parts, and accessories, including as a result of transportation-related costs, inflation, changing prices, foreign currency fluctuations, tariffs, and/or duties; slowdowns or reductions in levels of interest in the game of golf or golf course activity, development, renovation, or improvement; golf course closures; reduced customer, governmental or municipal spending; reduced infrastructure spending; reduced levels of home ownership, construction, or sales; home foreclosures; the impact of U.S. federal debt, state debt, and sovereign debt defaults; reduced credit availability or unfavorable credit terms for us or our distributors, dealers, or end-user customers; and general economic and political conditions and expectations, any or all of which affect demand for our products and could adversely affect our operating results and financial condition;

•Seasonality of our businesses and its impact on demand for our products and our working capital;

•Effect that weather conditions or climate change have on demand for our products and operations, including our supply chain;

•Continuing disruption, and/or shortages in the availability of and the cost of commodities, components, parts, or accessories used in our products;

•Our ability and the ability of our distribution channel customers to maintain appropriate inventory levels, including as a result of global supply chain disruptions or changes in purchasing patterns by customers, and if we underestimate or overestimate demand for our products, and the effect of inventory management decisions of our distribution channel customers;

•Risks associated with our acquisitions and alliances, strong customer relations, and new joint ventures, investments, or partnerships and our failure to successfully complete divestitures or other restructuring activities, including without limitation our ability to integrate acquired businesses and to address material issues both identified and not uncovered during our due diligence review, loss of substantial customers, and the ability of acquired companies or our alliances, joint ventures, investments or partnerships to achieve satisfactory operating results, including results being accretive to earnings, realization of synergies and expected cash flow generation, which could lead to impairment, restructuring, and other charges;

•Our ability to leverage new, expanded or emerging markets, such as the broadband and digital infrastructure market, and our ability to continue to enhance existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance, including in particular increased digital, alternative power, smart connected, and autonomous solutions;

•Changes in our product mix or geographic mix;

•Effect of competition;

•Our ability to cost-effectively expand and renovate existing facilities, open and manage new or acquired facilities, move production between manufacturing facilities, and/or any disruption at or near any of our facilities or other

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operations or those of our suppliers, distribution channel customers, mass retailers, or home centers where our products are sold;

•Our ability to retain our executive officers or other key employees, attract and retain other qualified employees or successfully implement executive officer, key employee or other leadership or employee transitions and any failure by us, or our suppliers or distribution channel partners, to hire and/or retain a labor force to enhance existing products and develop and market new products, adequately staff manufacturing operations, perform service or warranty work or other necessary activities, or allow employees to adequately and safely perform their jobs;

•Changes in composition of, financial viability of, and the relationships with, our distribution channel customers;

•Risks associated with our credit arrangements and ratings and any material change in the availability or terms of, or termination or disruption of, credit offered to our customers, distributors, and dealers;

•Risks associated with our international operations, including but not limited to the effect of foreign currency exchange rate fluctuations and compliance with foreign legal and regulatory requirements, current wars and international sanctions and geopolitical tensions, political risks associated with the potential instability of governments and legal systems in countries in which we or our customers or suppliers conduct business, upcoming elections, and other current and potential conflicts;

•Our failure to comply with all applicable legal and regulatory requirements and the effect of product quality issues, product liability claims, and other litigation to which we are or may be subject;

•Our ability to obtain and protect our intellectual property and other proprietary rights or operate our business without infringing upon the intellectual property or other proprietary rights of others;

•Failure of our information systems or information security practices or those of our business partners or third-party service providers to adequately perform and/or protect sensitive or confidential information;

•Risks associated with a possible U.S. governmental shutdown and its impact on the U.S. economy, capital markets and our business and risks associated with uncertainties related to the 2024 U.S. presidential election;

•Our ability to achieve our financial projections or other business initiatives, including our Amplifying Maximum Productivity (“AMP”) initiative, in the time periods that we anticipate or at all;

•Changes in accounting or tax standards and policies and/or assumptions utilized in determining accounting tax estimates;

•Stock price volatility, including in response to the risks described herein or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry or general economic conditions, and other factors beyond our control; and

•Climate, environmental, health and safety laws and regulations as well as the impact of increased scrutiny on our environmental, social and governance (“ESG”) practices, our ability to meet our ESG company goals, and public perceptions that our products are not environmentally friendly or that our practices are not sustainable.

For more information regarding these and other uncertainties and factors that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements or otherwise could materially adversely affect our business, financial condition, or operating results, see our most recently filed Annual Report on Form 10-K, Part I, Item 1A, "Risk Factors;" and our subsequent filings with the SEC.

All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. We caution readers not to place undue reliance on any forward-looking statement which speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, the risks described in our most recent Annual Report on Form 10-K, Part I, Item 1A, "Risk Factors," and our subsequent SEC filings, as well as others that we may consider immaterial or do not anticipate at this time. These risks and uncertainties are not exclusive and further information concerning the company and our businesses, including factors that potentially could materially affect our financial results or condition, may emerge from time to time. We make no commitment to revise or update any forward-looking statements in order to reflect actual results, events or circumstances occurring or existing after the date any forward-looking statement is made, or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures we make on related subjects in our future Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K we file with or furnish to the SEC.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings (Loss) (Unaudited)

(Dollars and shares in millions, except per share data)


	Three Months Ended				Nine Months Ended
	August 2, 2024		August 4, 2023		August 2, 2024		August 4, 2023
Net sales	$	1,156.9	$	1,081.8	$	3,507.8	$	3,570.0
Cost of sales	754.1		709.4		2,307.5		2,322.0
Gross profit	402.8		372.4		1,200.3		1,248.0
Selling, general and administrative expense	254.7		240.2		776.0		760.6
Non-cash impairment charges	—		151.3		—		151.3
Operating earnings (loss)	148.1		(19.1)		424.3		336.1
Interest expense	(14.5)		(15.0)		(47.4)		(43.8)

Other income, net	10.6		5.5		26.6		21.3
Earnings (loss) before income taxes	144.2		(28.6)		403.5		313.6
Income tax provision (benefit)	24.9		(13.6)		74.5		54.2
Net earnings (loss)	$	119.3	$	(15.0)	$	329.0	$	259.4

Basic net earnings (loss) per share of common stock	$	1.15	$	(0.14)	$	3.16	$	2.48

Diluted net earnings (loss) per share of common stock	$	1.14	$	(0.14)	$	3.14	$	2.46

Weighted-average number of shares of common stock outstanding — Basic	104.0		104.3		104.2		104.5

Weighted-average number of shares of common stock outstanding — Diluted	104.5		104.3		104.8		105.4

See accompanying Notes to Condensed Consolidated Financial Statements.

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in millions)


	Three Months Ended				Nine Months Ended
	August 2, 2024		August 4, 2023		August 2, 2024		August 4, 2023
Net earnings (loss)	$	119.3	$	(15.0)	$	329.0	$	259.4
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	1.6		(2.0)		6.9		17.0
Derivative instruments, net of tax of $(0.8); $(0.2); $(2.3); and $(5.8), respectively	(8.7)		0.6		(12.8)		(14.5)
Other comprehensive (loss) income, net of tax	(7.1)		(1.4)		(5.9)		2.5
Comprehensive income (loss)	$	112.2	$	(16.4)	$	323.1	$	261.9

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in millions, except per share data)


	August 2, 2024		August 4, 2023		October 31, 2023
ASSETS
Cash and cash equivalents	$	221.1	$	147.9	$	193.1
Receivables, net	532.3		390.7		407.4




Inventories, net	1,082.0		1,112.7		1,087.8
Prepaid expenses and other current assets	78.5		80.5		110.5
Total current assets	1,913.9		1,731.8		1,798.8

Property, plant, and equipment, net	635.7		625.0		641.7
Goodwill	450.2		451.3		450.8
Other intangible assets, net	512.4		549.2		540.1
Right-of-use assets	113.2		116.6		125.3
Investment in finance affiliate	46.4		48.5		50.6
Deferred income taxes	38.3		41.7		14.2
Other assets	21.3		21.8		22.8
Total assets	$	3,731.4	$	3,585.9	$	3,644.3

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	25.3	$	—	$	—
Accounts payable	437.8		407.4		430.0
Accrued liabilities	501.6		482.3		499.1
Short-term lease liabilities	19.7		17.8		19.5
Total current liabilities	984.4		907.5		948.6

Long-term debt, less current portion	966.6		1,061.3		1,031.5
Long-term lease liabilities	99.1		101.2		112.1
Deferred income taxes	0.4		0.1		0.4
Other long-term liabilities	44.5		38.7		40.8

Stockholders’ equity:
Preferred stock, par value $1.00 per share, authorized 1,000,000 voting and 850,000 non-voting shares, none issued and outstanding	—		—		—
Common stock, par value $1.00 per share, authorized 175,000,000 shares; issued and outstanding 103,062,017 shares as of August 2, 2024, 103,834,891 shares as of August 4, 2023, and 103,843,485 shares as of October 31, 2023	103.1		103.8		103.8
Retained earnings	1,576.2		1,403.9		1,444.1
Accumulated other comprehensive loss	(42.9)		(30.6)		(37.0)
Total stockholders’ equity	1,636.4		1,477.1		1,510.9
Total liabilities and stockholders’ equity	$	3,731.4	$	3,585.9	$	3,644.3

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)


	Nine Months Ended
	August 2, 2024		August 4, 2023
Cash flows from operating activities:
Net earnings	$	329.0	$	259.4
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash income from finance affiliate	(15.8)		(14.1)
Distributions from finance affiliate, net	20.0		4.9
Depreciation of property, plant, and equipment	65.5		56.6
Amortization of other intangible assets	26.3		26.8
Stock-based compensation expense	19.5		14.4

Non-cash impairment charges	—		151.3
Other	0.1		0.7
Changes in operating assets and liabilities, net of the effect of acquisitions:
Receivables, net	(123.5)		(52.8)
Inventories, net	(1.9)		(46.6)
Other assets	9.6		(74.3)
Accounts payable	5.1		(174.7)
Other liabilities	(4.1)		3.1
Net cash provided by operating activities	329.8		154.7

Cash flows from investing activities:
Purchases of property, plant, and equipment	(63.6)		(105.7)
Proceeds from insurance claim	4.3		7.1
Business combinations, net of cash acquired	—		(21.0)
Asset acquisition	(0.8)		—
Proceeds from asset disposals	0.2		0.4
Proceeds from divestitures	16.5		—
Net cash used in investing activities	(43.4)		(119.2)

Cash flows from financing activities:
Net (repayments) borrowings under the revolving credit facility1	(40.0)		70.0


Proceeds from exercise of stock options	8.6		19.4
Payments of withholding taxes for stock awards	(3.9)		(3.8)
Purchases of TTC common stock	(109.2)		(60.0)
Dividends paid on TTC common stock	(112.6)		(106.5)
Other	(3.4)		(1.5)
Net cash used in financing activities	(260.5)		(82.4)

Effect of exchange rates on cash and cash equivalents	2.1		6.6

Net increase (decrease) in cash and cash equivalents	28.0		(40.3)
Cash and cash equivalents as of the beginning of the fiscal period	193.1		188.2
Cash and cash equivalents as of the end of the fiscal period	$	221.1	$	147.9

1 Presentation of prior year revolving credit facility and long-term debt activity has been conformed to the current year presentation. There was no change to net cash used in financing activities.

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(Dollars in millions, except per share data)


	Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance as of May 3, 2024	$	104.0	$	1,583.2	$	(35.8)	$	1,651.4
Cash dividends paid on common stock - $0.36 per share	—		(37.5)		—		(37.5)
Issuance of 169,273 shares of common stock under stock-based compensation plans	0.2		6.5		—		6.7
Stock-based compensation expense	—		4.2		—		4.2
Purchase of 1,081,307 shares of common stock	(1.1)		(99.5)		—		(100.6)
Other comprehensive loss	—		—		(7.1)		(7.1)
Net earnings	—		119.3		—		119.3
Balance as of August 2, 2024	$	103.1	$	1,576.2	$	(42.9)	$	1,636.4

Balance as of October 31, 2023	$	103.8	$	1,444.1	$	(37.0)	$	1,510.9
Cash dividends paid on common stock - $1.08 per share	—		(112.6)		—		(112.6)
Issuance of 493,194 shares of common stock under stock-based compensation plans, less contribution of 54,526 shares of common stock to a deferred compensation trust	0.5		8.1		—		8.6
Stock-based compensation expense	—		19.5		—		19.5
Purchase of 1,220,136 shares of common stock	(1.2)		(111.9)		—		(113.1)
Other comprehensive loss	—		—		(5.9)		(5.9)
Net earnings	—		329.0		—		329.0
Balance as of August 2, 2024	$	103.1	$	1,576.2	$	(42.9)	$	1,636.4

Balance as of May 5, 2023	$	104.1	$	1,485.1	$	(29.2)	$	1,560.0
Cash dividends paid on common stock - $0.34 per share	—		(35.4)		—		(35.4)
Issuance of 56,006 shares of common stock under stock-based compensation plans	—		1.8		—		1.8
Stock-based compensation expense	—		3.6		—		3.6
Purchase of 356,757 shares of common stock	(0.3)		(36.2)		—		(36.5)
Other comprehensive loss	—		—		(1.4)		(1.4)
Net loss	—		(15.0)		—		(15.0)
Balance as of August 4, 2023	$	103.8	$	1,403.9	$	(30.6)	$	1,477.1

Balance as of October 31, 2022	$	104.0	$	1,280.8	$	(33.1)	$	1,351.7
Cash dividends paid on common stock - $1.02 per share	—		(106.5)		—		(106.5)
Issuance of 490,469 shares of common stock under stock-based compensation plans, less contribution of 14,270 shares of common stock to a deferred compensation trust	0.4		19.0		—		19.4
Stock-based compensation expense	—		14.4		—		14.4
Purchase of 611,113 shares of common stock	(0.6)		(63.2)		—		(63.8)
Other comprehensive income	—		—		2.5		2.5
Net earnings	—		259.4		—		259.4
Balance as of August 4, 2023	$	103.8	$	1,403.9	$	(30.6)	$	1,477.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE TORO COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

August 2, 2024


1			Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States ("U.S.") generally accepted accounting principles ("GAAP") for complete financial statements. Unless the context indicates otherwise, the terms "company," "TTC," "we," "our," or "us" refer to The Toro Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated from the unaudited Condensed Consolidated Financial Statements.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements include all adjustments, consisting primarily of recurring accruals, considered necessary for the fair presentation of the company's consolidated financial position, results of operations, and cash flows for the periods presented. Due to seasonality within the industries in which the company's businesses operate, among other factors, operating results for the nine months ended August 2, 2024 cannot be annualized to determine the expected results for the fiscal year ending October 31, 2024.

The company’s fiscal year ends on October 31 and quarterly results are reported based on three-month periods that generally end on the Friday closest to the calendar quarter end. For comparative purposes, however, the company’s second and third quarters always include exactly 13 weeks of results so that the quarter end date for these two quarters is not necessarily the Friday closest to the calendar month end.

For further information regarding the company's basis of presentation, refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023. The policies described in that report are used for preparing the company's quarterly reports on Form 10-Q.

Accounting Policies and Estimates

In preparing the Condensed Consolidated Financial Statements in conformity with U.S. GAAP, management must make decisions that impact the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures, including disclosures of contingent assets and liabilities. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Estimates are used in determining, among other items, sales promotion and incentive accruals, incentive compensation accruals, income tax accruals, inventory valuation, warranty accruals, allowances for current expected credit losses, pension accruals, self-insurance accruals, legal accruals, right-of-use assets and lease liabilities, useful lives for tangible and finite-lived intangible assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, and valuations of the assets acquired and liabilities assumed in a business combination or an asset acquisition, when applicable. These estimates and assumptions are based on management’s best estimates and judgments at the time they are made and are generally derived from management's understanding and analysis of the relevant and current circumstances, historical experience, and actuarial and other independent external third-party specialist valuations, when applicable. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, actual amounts could differ significantly from those estimated at the time the Condensed Consolidated Financial Statements are prepared.

New Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to income tax disclosures, which is designed to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amended guidance will become effective for the company's fiscal 2026 annual period. The company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to enhance reportable segment disclosure requirements, primarily through additional, more detailed disclosures about significant segment expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), an amount for other segment items by reportable segment and a description of its composition, and the title and position of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The amended

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guidance will become effective for the company's fiscal 2025 annual period, and interim periods beginning with the first quarter of fiscal 2026. The company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.

In September 2022, the FASB issued ASU No. 2022-04, Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The new standard requires disclosure of the key terms of supplier finance programs, the associated obligations outstanding, and a description of where those obligations are presented in the balance sheet. Additionally, effective for the company's fiscal 2025 annual period, the new standard requires a rollforward of the associated obligations outstanding during the annual period, including the amount of obligations confirmed and the amount of obligations subsequently paid. The amended guidance was adopted in the first quarter of fiscal 2024 and did not have a material impact on the company's Condensed Consolidated Financial Statements. For additional information regarding the company's supplier finance program, refer to Note 14, Commitments and Contingencies.

The company believes that all other recently issued accounting pronouncements from the FASB that the company has not noted above will not have a material impact on its Condensed Consolidated Financial Statements or do not apply to its operations.


2			Acquisitions and Divestitures

Divestiture

Pope Products

On July 1, 2024, during the third quarter of fiscal 2024, the company completed the sale of its Pope Products garden watering and irrigation business based in Australia. The financial results related to the Pope Products business have historically been included in the company's Residential segment. The divestiture was immaterial in relation to the company's Consolidated Financial Condition and Results of Operations.

Business Combination

Dealer Acquisition

On May 9, 2023, during the third quarter of fiscal 2023, the company completed the acquisition of substantially all of the assets of, and assumed certain liabilities for, a U.S. based dealer of underground construction equipment. The purchase price of this acquisition was allocated to the identifiable assets acquired and liabilities assumed based on estimates of their fair value and no goodwill or indefinite-lived intangible assets were recorded. The company finalized the purchase accounting for this acquisition during the third quarter of fiscal 2023. Additional purchase accounting disclosures have been omitted due to immateriality of this acquisition in relation to the company's Consolidated Financial Condition and Results of Operations.


3			Segment Data

The company's businesses are organized, managed, and internally grouped into segments based on similarities in products and services. Segment determination is based on the manner in which the company's chief operating decision maker ("CODM") organizes segments for making operating and investment decisions and assessing performance. In the third quarter of fiscal 2024, the company modified the level at which information was being reviewed, including modification to the reporting packages and materials regularly reviewed by the CODM to evaluate the company’s operating results to assess performance and allocate resources. As a result, the company has identified nine operating segments which are aggregated into two reportable segments: Professional and Residential. There was no impact to results at the reportable segment level as the changes comprised of combining certain operating segments within the Professional reportable segment. The aggregation of the company's segments is based on the segments having the following similarities: economic characteristics, types of products and services, types of production processes, type or class of customers, and method of distribution. The company's remaining activities are presented as "Other" due to their insignificance. The company's Other activities consist of the company's wholly-owned domestic distribution company, the company's corporate activities, and the elimination of intersegment revenues and expenses.

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The following tables present summarized financial information concerning the company’s reportable business segments and Other activities (dollars in millions):


Three Months Ended August 2, 2024	Professional		Residential		Other		Total
Net sales	$	880.9	$	267.5	$	8.5	$	1,156.9
Intersegment gross sales (eliminations)	17.2		0.1		(17.3)		—
Earnings (loss) before income taxes	$	165.7	$	32.6	$	(54.1)	$	144.2

Nine Months Ended August 2, 2024	Professional		Residential		Other		Total
Net sales	$	2,643.0	$	843.2	$	21.6	$	3,507.8
Intersegment gross sales (eliminations)	39.0		0.2		(39.2)		—
Earnings (loss) before income taxes	469.2		92.2		(157.9)		403.5
Total assets	$	2,714.6	$	576.9	$	439.9	$	3,731.4


Three Months Ended August 4, 2023	Professional		Residential		Other		Total
Net sales	$	896.3	$	175.3	$	10.2	$	1,081.8
Intersegment gross sales (eliminations)	11.7		—		(11.7)		—
Earnings (loss) before income taxes1	$	13.0	$	3.8	$	(45.4)	$	(28.6)

Nine Months Ended August 4, 2023	Professional		Residential		Other		Total
Net sales	$	2,845.7	$	705.8	$	18.5	$	3,570.0
Intersegment gross sales (eliminations)	35.5		0.1		(35.6)		—
Earnings (loss) before income taxes1	384.6		64.4		(135.4)		313.6
Total assets	$	2,723.1	$	537.9	$	324.9	$	3,585.9

1 The Professional reportable segment earnings (loss) before income taxes includes $151.3 million of non-cash impairment charges recorded during the preparation of the financial statements for the third quarter of fiscal 2023 related to the Intimidator operating segment. For additional information regarding the impairment charges, refer to Note 5, Goodwill and Other Intangible Assets, Net.

The following table presents the details of operating loss before income taxes for the company's Other activities:


	Three Months Ended				Nine Months Ended
(Dollars in millions)	August 2, 2024		August 4, 2023		August 2, 2024		August 4, 2023
Corporate expenses	$	(44.5)	$	(34.0)	$	(135.1)	$	(110.7)
Interest expense	(14.5)		(15.0)		(47.4)		(43.8)
Earnings from the company's wholly-owned domestic distribution company and other income, net	4.9		3.6		24.6		19.1
Total operating loss	$	(54.1)	$	(45.4)	$	(157.9)	$	(135.4)

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4			Revenue

The following tables disaggregate the company's reportable segment net sales by major product type and geographic market (dollars in millions):


Three Months Ended August 2, 2024	Professional		Residential		Other		Total
Revenue by product type:
Equipment	$	772.8	$	265.0	$	5.6	$	1,043.4
Irrigation	108.1		2.5		2.9		113.5
Total net sales	$	880.9	$	267.5	$	8.5	$	1,156.9

Revenue by geographic market:
United States	$	694.0	$	236.2	$	8.5	$	938.7
International countries	186.9		31.3		—		218.2
Total net sales	$	880.9	$	267.5	$	8.5	$	1,156.9


Nine Months Ended August 2, 2024	Professional		Residential		Other		Total
Revenue by product type:
Equipment	$	2,300.3	$	827.1	$	16.0	$	3,143.4
Irrigation	342.7		16.1		5.6		364.4
Total net sales	$	2,643.0	$	843.2	$	21.6	$	3,507.8

Revenue by geographic market:
United States	$	2,054.8	$	740.0	$	21.6	$	2,816.4
International countries	588.2		103.2		—		691.4
Total net sales	$	2,643.0	$	843.2	$	21.6	$	3,507.8


Three Months Ended August 4, 2023	Professional		Residential		Other		Total
Revenue by product type:
Equipment	$	777.2	$	169.1	$	5.2	$	951.5
Irrigation	119.1		6.2		5.0		130.3
Total net sales	$	896.3	$	175.3	$	10.2	$	1,081.8

Revenue by geographic market:
United States	$	690.8	$	145.8	$	10.2	$	846.8
International countries	205.5		29.5		—		235.0
Total net sales	$	896.3	$	175.3	$	10.2	$	1,081.8


Nine Months Ended August 4, 2023	Professional		Residential		Other		Total
Revenue by product type:
Equipment	$	2,486.9	$	682.8	$	11.5	$	3,181.2
Irrigation	358.8		23.0		7.0		388.8
Total net sales	$	2,845.7	$	705.8	$	18.5	$	3,570.0

Revenue by geographic market:
United States	$	2,225.5	$	569.3	$	18.5	$	2,813.3
International countries	620.2		136.5		—		756.7
Total net sales	$	2,845.7	$	705.8	$	18.5	$	3,570.0

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Contract Liabilities

Contract liabilities relate to deferred revenue recognized for cash consideration received at contract inception in advance of the company's performance under the respective contract and generally relate to the sale of separately priced extended warranty contracts, service contracts, and non-refundable customer deposits. The company recognizes revenue over the term of the contract in proportion to the costs expected to be incurred in satisfying the performance obligations under the separately priced extended warranty and service contracts. For non-refundable customer deposits, the company recognizes revenue as of the point in time in which the performance obligation has been satisfied under the contract with the customer, which typically occurs upon change in control at the time a product is shipped. As of August 2, 2024 and October 31, 2023, $26.3 million and $25.6 million, respectively, of deferred revenue associated with outstanding separately priced extended warranty contracts, service contracts, and non-refundable customer deposits was reported within accrued liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets. For the three and nine months ended August 2, 2024, the company recognized $2.5 million and $9.7 million, respectively, of the October 31, 2023 deferred revenue balance within net sales in the Condensed Consolidated Statements of Earnings (Loss). The company expects to recognize approximately $2.3 million of the October 31, 2023 deferred revenue amount within net sales throughout the remainder of fiscal 2024, $7.8 million in fiscal 2025, and $5.8 million thereafter.


5			Goodwill and Other Intangible Assets, Net

Goodwill

The changes in the carrying amount of goodwill by reportable segment for the first nine months of fiscal 2024 were as follows:


(Dollars in millions)	Professional		Residential		Other		Total
Balance as of October 31, 2023	$	440.5	$	10.3	$	—	$	450.8


Divestitures	(0.5)		(0.5)		—		(1.0)

Translation adjustments	0.3		0.1		—		0.4
Balance as of August 2, 2024	$	440.3	$	9.9	$	—	$	450.2

Other Intangible Assets, Net

The components of other intangible assets, net as of August 2, 2024, August 4, 2023, and October 31, 2023 were as follows (dollars in millions):


August 2, 2024	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	9.9	$	18.2	$	(16.6)	$	1.6

Customer-related	15.8	327.7		(124.8)		202.9
Developed technology	7.1	102.9		(70.4)		32.5
Trade names	13.7	10.7		(6.9)		3.8

Total finite-lived	13.5	459.5		(218.7)		240.8
Indefinite-lived - trade names		271.6		—		271.6
Total other intangible assets, net		$	731.1	$	(218.7)	$	512.4

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August 4, 2023	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	9.9	$	18.2	$	(15.8)	$	2.4
Non-compete agreements	5.5	6.9		(6.9)		—
Customer-related	15.7	329.1		(102.0)		227.1
Developed technology	7.1	102.1		(60.8)		41.3
Trade names	13.7	10.7		(3.9)		6.8
Backlog and other	0.6	5.7		(5.7)		—
Total finite-lived	13.2	472.7		(195.1)		277.6
Indefinite-lived - trade names		271.6		—		271.6
Total other intangible assets, net		$	744.3	$	(195.1)	$	549.2


October 31, 2023	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	9.9	$	18.2	$	(16.0)	$	2.2
Non-compete agreements	5.5	6.9		(6.9)		—
Customer-related	15.8	327.5		(106.7)		220.8
Developed technology	7.1	102.0		(63.1)		38.9
Trade names	13.7	10.7		(4.0)		6.7
Backlog and other	0.6	5.7		(5.7)		—
Total finite-lived	13.3	471.0		(202.4)		268.6
Indefinite-lived - trade names		271.5		—		271.5
Total other intangible assets, net		$	742.5	$	(202.4)	$	540.1

Amortization expense for finite-lived intangible assets for the three and nine months ended August 2, 2024 was $8.8 million and $26.3 million, respectively. Amortization expense for finite-lived intangibles assets for the three and nine months ended August 4, 2023 was $8.9 million and $26.8 million, respectively. As of August 2, 2024, estimated amortization expense for the remainder of fiscal 2024 and succeeding fiscal years is as follows:


(Dollars in millions)	August 2, 2024
2024 (remaining)	$	8.3
2025	31.6
2026	30.4
2027	25.4
2028	22.0
2029	20.1
Thereafter	103.0
Total estimated amortization expense	$	240.8

Fiscal 2023 Impairment

Intimidator

At the end of the third quarter of fiscal 2023, the company recorded an impairment charge of $18.0 million related to the indefinite-lived Spartan trade name intangible asset reported under the Professional segment. Further, during the same period, the company recorded an impairment charge of $133.3 million related to goodwill of the Intimidator reporting unit also reported under the Professional segment. Subsequent to these impairment charges, the remaining balance of the indefinite-lived Spartan trade name intangible asset was $81.1 million and the remaining balance of goodwill for the Intimidator reporting unit was $30.5 million. The charges are included in the Non-cash impairment charges caption on the Condensed Consolidated Statements of Earnings (Loss). These impairment charges resulted in a $36.7 million income tax benefit (deferred tax asset) associated with the remaining tax deductible basis in goodwill and other intangible assets.

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6			Indebtedness

The following is a summary of the company's indebtedness:


(Dollars in millions)	August 2, 2024		August 4, 2023		October 31, 2023
$600 million revolving credit facility, due October 2026	$	—	$	70.0	$	40.0


$270 million term loan, due October 2026	270.0		270.0		270.0
$200 million term loan, due April 2027	200.0		200.0		200.0
3.81% series A senior notes, due June 2029	100.0		100.0		100.0
3.91% series B senior notes, due June 2031	100.0		100.0		100.0
3.97% senior notes, due June 2032	100.0		100.0		100.0
7.8% debentures, due June 2027	100.0		100.0		100.0
6.625% senior notes, due May 2037	124.2		124.1		124.2
Less: unamortized debt issuance costs	2.3		2.8		2.7
Total long-term debt	991.9		1,061.3		1,031.5
Less: current portion of long-term debt	25.3		—		—
Long-term debt, less current portion	$	966.6	$	1,061.3	$	1,031.5

As of August 2, 2024, principal payments required on the company's outstanding indebtedness, based on the maturity dates defined within the company's debt arrangements, for the remainder of fiscal 2024 and succeeding fiscal years are as follows:


(Dollars in millions)	August 2, 2024
2024 (remaining)	$	—
2025	37.0
2026	263.0
2027	270.0
2028	—
2029	100.0
Thereafter	325.0
Total principal payments required	$	995.0

Covenants

The company is in compliance with all covenants under the company’s outstanding indebtedness as of August 2, 2024.


7			Inventories, Net

The company uses a combination of inventory valuation methods. Inventories are valued at the lower of cost or net realizable value, with cost determined by the first-in, first-out ("FIFO") and average cost methods for certain of the company's inventories. All remaining inventories are valued at the lower of cost or market, with cost determined under the last-in, first-out ("LIFO") method. As needed, the company records an inventory valuation adjustment for excess, slow-moving, and obsolete inventory that is equal to the excess of the cost of the inventory over the estimated net realizable value or market value for the inventory depending on the inventory costing method. Such inventory valuation adjustment is based on a review and comparison of current inventory levels to planned production, as well as planned and historical sales of the inventory. The inventory valuation adjustment to net realizable value or market value establishes a new cost basis of the inventory that cannot be subsequently reversed.

Inventories, net were as follows:


(Dollars in millions)	August 2, 2024		August 4, 2023		October 31, 2023
Raw materials and work in process	$	395.2	$	435.1	$	400.3
Finished goods and service parts	843.5		847.5		844.2
Total FIFO and average cost value	1,238.7		1,282.6		1,244.5
Less: adjustment to LIFO value	156.7		169.9		156.7
Total inventories, net	$	1,082.0	$	1,112.7	$	1,087.8

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8			Property, Plant, and Equipment, Net

Property, plant, and equipment assets are carried at cost less accumulated depreciation. The company generally accounts for depreciation of property, plant, and equipment utilizing the straight-line method over the estimated useful lives of the assets. Buildings and leasehold improvements are generally depreciated over 10 to 40 years, machinery and equipment are generally depreciated over three to 15 years, tooling is generally depreciated over three to five years, and computer hardware and software and website development costs are generally depreciated over two to five years. Expenditures for major renewals and improvements, which substantially increase the useful lives of existing assets, are capitalized. Costs associated with general maintenance and repairs are expensed as incurred within cost of sales or selling, general and administrative expense in the Condensed Consolidated Statements of Earnings (Loss) depending on the nature and use of the related asset. Interest is capitalized during the construction period for significant capital projects.

Property, plant, and equipment, net was as follows:


(Dollars in millions)	August 2, 2024		August 4, 2023		October 31, 2023
Land and land improvements	$	70.2	$	63.0	$	69.0
Buildings and leasehold improvements	360.0		331.1		355.8
Machinery and equipment	642.2		585.4		624.6
Tooling	261.4		235.4		260.4
Computer hardware and software	99.8		108.2		98.0
Construction in process	165.2		204.3		133.2
Property, plant, and equipment, gross	1,598.8		1,527.4		1,541.0
Less: accumulated depreciation	963.1		902.4		899.3
Property, plant, and equipment, net	$	635.7	$	625.0	$	641.7


9			Product Warranty Guarantees

The company’s products are warranted to provide assurance that the product will function as expected and to ensure customer confidence in design, workmanship, and overall quality. Standard warranty coverage is generally provided for specified periods of time and on select products’ hours of usage and generally covers parts, labor, and other expenses for non-maintenance repairs. In addition to the standard warranties offered by the company on its products, the company also sells separately priced extended warranty coverage on select products for a prescribed period after the original warranty period expires. For additional information on the contract liabilities associated with the company's separately priced extended warranties, refer to Note 4, Revenue.

At the time of sale, the company recognizes expense and records an accrual by product line for estimated costs in connection with forecasted future warranty claims. The company's estimate of the cost of future warranty claims is based primarily on the estimated number of products under warranty, historical average costs incurred to service warranty claims, the trend in the historical ratio of claims to sales, and the historical length of time between the sale and resulting warranty claim. The company periodically assesses the adequacy of its warranty accruals based on changes in these factors and records any necessary adjustments if the cost of actual claims experience indicates that adjustments to the company's warranty accrual are necessary. Additionally, from time to time, the company may also establish warranty accruals for its estimate of the costs necessary to settle major rework campaigns on a product-specific basis during the period in which the circumstances giving rise to the major rework campaign become known and when the costs to satisfactorily address the situation are both probable and estimable. The warranty accrual for the cost of a major rework campaign is primarily based on an estimate of the cost to repair each affected unit and the number of affected units expected to be repaired.

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The changes in accrued warranties were as follows:


	Three Months Ended				Nine Months Ended
(Dollars in millions)	August 2, 2024		August 4, 2023		August 2, 2024		August 4, 2023
Beginning balance	$	151.4	$	153.9	$	143.9	$	134.5
Changes in accrual related to warranties issued during the period	20.0		20.5		60.4		69.9

Payments made during the period	(23.9)		(24.1)		(64.0)		(60.8)
Changes in accrual related to pre-existing warranties	0.2		1.0		7.4		7.7
Ending balance	$	147.7	$	151.3	$	147.7	$	151.3


10			Investment in Joint Venture

The company is party to a joint venture with Huntington Distribution Finance, Inc. ("HDF"), a subsidiary of The Huntington National Bank, established as Red Iron Acceptance, LLC ("Red Iron"), the primary purpose of which is to provide customer inventory financing to certain distributors and dealers of certain of the company’s products in the U.S. The company has also entered into a limited inventory repurchase agreement with Red Iron. For additional information regarding the customer financing aspect of the arrangement, as well as the limited inventory purchase agreement, refer to Note 14, Commitments and Contingencies.

The company owns 45 percent of Red Iron and HDF owns 55 percent of Red Iron. The company accounts for its investment in Red Iron under the equity method of accounting. The company and HDF each contributed a specified amount of the estimated cash required to enable Red Iron to purchase the company's floor plan financing receivables and to provide financial support for Red Iron's floor plan financing programs. Red Iron borrows the remaining requisite estimated cash utilizing an $1,350.0 million secured revolving credit facility established under a credit agreement between Red Iron and HDF. The company's total investment in Red Iron as of August 2, 2024, August 4, 2023 and October 31, 2023 was $46.4 million, $48.5 million, and $50.6 million, respectively. The company has not guaranteed the outstanding indebtedness of Red Iron.


11			Stock-Based Compensation

Compensation costs related to stock-based compensation awards were as follows:


	Three Months Ended				Nine Months Ended
(Dollars in millions)	August 2, 2024		August 4, 2023		August 2, 2024		August 4, 2023
Stock option awards	$	3.2	$	2.0	$	11.3	$	6.3
Performance share awards	(1.0)		(0.2)		1.6		1.9
Restricted stock unit awards	2.0		1.9		6.0		5.1
Unrestricted common stock awards	—		—		0.6		1.1
Total compensation cost for stock-based compensation awards	$	4.2	$	3.7	$	19.5	$	14.4

Stock Option Awards

Stock options are granted with an exercise price equal to the closing price of the company’s common stock on the date of grant, as reported by the New York Stock Exchange. Options are generally granted to executive officers, other employees, and non-employee members of the company’s Board of Directors ("Board") on an annual basis in the first quarter of the company’s fiscal year but may also be granted throughout the fiscal year in connection with hiring, mid-year promotions, leadership transition, or retention, as needed and applicable. Options generally vest one-third each year over a three-year period and have a ten-year term but in certain circumstances, the vesting requirement may be modified such that options granted to certain employees vest in full on the three-year anniversary of the date of grant and have a ten-year term. Compensation cost equal to the grant date fair value determined under the Black-Scholes valuation method is generally recognized for these awards over the vesting period. Compensation cost recognized for other employees not considered executive officers and non-employee Board members is net of estimated forfeitures, which are determined at the time of grant based on historical forfeiture experience. Stock options granted to executive officers and other employees are subject to accelerated expensing if the option holder meets the retirement definition set forth in the company's stock-based compensation plans. In that case, the fair value of the options is expensed in the fiscal year of grant because generally, if the option holder is employed as of the end of the fiscal year in which the options are granted, such options will not be forfeited but continue to vest according to their schedule following retirement. Similarly, if a non-employee Board member has served on the company's Board for ten full fiscal years or more, the awards

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will not be forfeited but continue to vest according to their schedule following retirement. Therefore, the fair value of the options granted is fully expensed on the date of the grant.

The fair value of each stock option is estimated on the date of grant using various inputs and assumptions under the Black-Scholes valuation method. The expected life is a significant assumption as it determines the period for which the risk-free interest rate, stock price volatility, and dividend yield must be applied. The expected life is the average length of time in which executive officers, other employees, and non-employee Board members are expected to exercise their stock options, which is primarily based on historical exercise experience. The company groups executive officers and non-employee Board members for valuation purposes based on similar historical exercise behavior. Expected stock price volatility is based on the daily movement of the company’s common stock over the most recent historical period equivalent to the expected life of the option. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant. The expected dividend yield is estimated over the expected life based on the company’s historical cash dividends paid, expected future cash dividends and dividend yield, and expected changes in the company’s stock price.

The table below illustrates the weighted-average valuation assumptions used under the Black-Scholes valuation method for options granted in the first nine months of the following fiscal periods:


	Fiscal 2024	Fiscal 2023
Expected life of option in years	6.37	6.31
Expected stock price volatility	26.76%	25.20%
Risk-free interest rate	3.95%	3.79%
Expected dividend yield	1.15%	0.95%
Per share weighted-average fair value at date of grant	$30.39	$33.21

Performance Share Awards

The company grants performance share awards to executive officers and other employees under which they are entitled to receive shares of the company’s common stock contingent on the achievement of performance goals of the company, which are generally measured over a three-year period. The number of shares of common stock a participant receives can be increased (up to 200 percent of target levels) or reduced (down to