Toro Announces Improved Operating Outlook before Charges for the First Quarter And Full Year; Announces the Effect of a Change in Accounting Principle
BLOOMINGTON, Minn., Jan. 28 /PRNewswire/ -- The Toro Company (NYSE: TTC) today announced that it expects to be profitable during the first quarter of fiscal 2002, excluding one time charges, exceeding current analyst expectations. The company had previously said it expected a loss of 20 cents per share to breakeven for the first quarter. This improvement is due to improved expectations largely from Toro's residential segment related to the new line of moderately priced walk power mowers for The Home Depot and dealers, increased snow shipments and expense timing. Toro said its full year EPS should improve by 2 to 3 percent over current analysts' expectations, before one time charges.
Kendrick B. Melrose, chairman and chief executive of Toro said, "We are pleased with the developing strength of the first quarter. The previously announced walk power mower initiative with The Home Depot and dealers is off to a strong start and retail movement is already occurring in some markets." Melrose added, "The late winter snowstorms have stimulated snow sales in certain parts of the country. Our 5 by Five initiative, combined with the timing of certain expenditures, has also improved anticipated profitability for the quarter. While the first quarter operating results appear to be better than expected, we are still approaching the year with caution due to the economic environments worldwide."
Toro had previously announced that it would adopt the new goodwill accounting rules issued by The Financial Accounting Standard Board for the first quarter of fiscal 2002. These rules relate to the treatment of goodwill and other intangible assets and will require, among other things, that such intangible assets with indefinite useful lives no longer be amortized. The impact of this change is expected to improve Toro's earnings for the fiscal 2002 year by approximately $.61 to $.64 per dilutive share. Moreover, the rules require that goodwill be reviewed periodically for potential impairment under a new valuation approach.
As a result of this impairment valuation, Toro expects to incur in the first quarter between a $24.5 and $25.0 million non-cash, after-tax charge for goodwill resulting principally from the acquisition of Drip In Irrigation, and to a lesser extent, the acquisition of Hardie Ag which had been combined to become the Toro Worldwide Ag Division. This charge will be shown as a cumulative effect of a change in accounting principle. The dilutive EPS effect of this charge is expected to be between $1.94 and $2.02 per share. Toro is taking the charge because the performance of these acquisitions has not met management expectations mainly due to less growth than anticipated in the drip line market as a whole. This has caused a reduction in industry-wide pricing and consequently margins on Toro product sales causing unsatisfactory results. The company expects this unit's performance over the next few years will improve as a result of cost reductions and strengthened management, and said it is still committed to the business.
As previously announced, the closing of facilities in Indiana and California will result in a restructuring and other expense charge in the first quarter of approximately $7.4 to 7.9 million. In addition, the company will take a pre-tax asset impairment charge for patents and non-compete agreements estimated to be $1.9 to $ 2.1 million in the first quarter related to the Drip In Irrigation acquisition noted before. The total of these restructuring and other expense charges for the first quarter is expected to be $9.3 to $10.0 million. The dilutive EPS effect of these charges is expected to be between $.48 and $.55 per share. However, the savings going forward from these charges will be approximately $9.4 to $10.2 million pre-tax annually starting in fiscal 2003.
The Toro Company has more than 5,000 employees around the world and is a leading provider of outdoor maintenance and beautification products for home, recreation and commercial landscapes.
Statements made in this news release, which are forward-looking, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding projected fiscal 2002 financial performance, projected fiscal 2002 earnings, the expected impact of new accounting principles on operations, projected restructuring and other expense charges and resulting future savings, expected improvement in performance by the company's drip line irrigation business and the company's commitment to the business, and the potential contribution to results of sales to The Home Depot and dealers, as well as assumptions underlying any of the foregoing.
Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in those statements. Among other things, earnings and revenue growth could be affected by continued global economic decline that began in 2000, and additional economic uncertainty created by the threat of further terrorist acts and war, as well as heightened security for import and export shipments of components or finished good; which could further reduce consumer spending and increase costs in unanticipated ways; the company's ability to continue to reduce expenses and implement all aspects of the "5 by Five" profit improvement program including increased costs necessitated by threats of terrorism or war; the company's ability to achieve fiscal 2002 sales and earnings estimates; continuing problems in the design and manufacturing of irrigation products; whether the company is successful in selling its moderately priced walk power mowers; capital investments for a new production facility to satisfy the expected increase in demand for these products and increased dependence on The Home Depot as a customer; inflationary pressures and continued uncertainty and increased costs due to the continued strength for the dollar in foreign currency markets. In addition to the factors set forth in this paragraph, market, economic, financial, competitive, weather, production and other factors identified in Toro's quarterly and annual reports filed with the Securities and Exchange Commission, could affect the forward-looking statements in this press release. Toro undertakes no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this statement.
MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X44028139
SOURCE The Toro Company
CONTACT: Investor Relations, Stephen P. Wolfe, Vice President, CFO, +1-952-887-8076, or Stephen D. Keating, Assistant Treasurer, Director, Investor Relations, +1-952-887-8526, or Media Relations, Don St. Dennis, Director, Corporate Communications, +1-952-887-8960, firstname.lastname@example.org , all of The Toro Company/