Toro Reports Record Second Quarter Sales and Earnings
Net Earnings Per Share Up 17% on 5% Sales Growth
LIVE CONFERENCE CALL
May 25, 10:00 a.m. CT
www.thetorocompany.com/invest
BLOOMINGTON, Minn., May 25 /PRNewswire-FirstCall/ -- The Toro Company (NYSE: TTC) today reported record fiscal second quarter net earnings of $70.1 million, or $1.56 per diluted share, on record net sales of $659 million for the quarter ended May 5, 2006. In the comparable fiscal 2005 period, the company reported net earnings of $62 million, or $1.33 per diluted share, on net sales of $628.4 million.
For the six months ended May 5, 2006, Toro reported record net earnings of $84.4 million, or $1.87 per diluted share, on record net sales of $1,028.6 million. In the comparable fiscal 2005 period, the company reported net earnings of $73.1 million, or $1.55 per diluted share, on net sales of $975.4 million.
Michael J. Hoffman, The Toro Company's chairman and chief executive officer, said that growth in world-wide professional segment sales helped offset slower sales in the residential segment, which were particularly strong last year due to early season shipments to retailers. "With our continued focus on improving operating effectiveness and profitability, we increased our second quarter earnings despite challenges posed by lower residential segment volume and increasing commodity costs," said Hoffman.
SEGMENT RESULTS
Segment data are provided in the table following the "Condensed Consolidated Statements of Earnings."
Professional
Professional segment sales for the fiscal 2006 second quarter increased 12.9 percent to $439.1 million. Sales grew in nearly all product categories due to healthy demand for new products, with particularly strong contributions from landscape contractor equipment and international sales. "Ongoing investments to deliver customer-valued and innovative new products continue to drive strong performance and market share growth in our professional businesses," said Hoffman.
Professional segment earnings for the fiscal 2006 second quarter totaled $104.2 million, up 23.1 percent from $84.6 million in the fiscal 2005 second quarter.
For the year to date, professional segment earnings totaled $145.8 million on a 9.2 percent increase in net sales to $692.7 million compared with earnings of $123.5 million on net sales of $634.3 million in the first half of fiscal 2005.
Residential
Residential segment sales for the fiscal 2006 second quarter totaled $210.3 million, down 7.7 percent compared with the fiscal 2005 second quarter. Domestic sales of riding mowers increased sharply in the quarter due to strong acceptance of new products. However, the growth in riding mower shipments was more than offset by declines in world-wide sales of walk power mowers, primarily due to a large domestic retailer holding less inventory through the first-half of the fiscal year.
Residential segment earnings for the fiscal 2006 second quarter totaled $18.1 million compared with $29 million in the fiscal 2005 second quarter. The decline in residential segment earnings compared to the fiscal 2005 second quarter resulted from lower volumes and the mix of products sold in the 2006 second quarter.
For the year to date, residential segment earnings totaled $23.3 million on net sales of $318.5 million compared with earnings of $33.4 million on net sales of $323.6 million in the first half of fiscal 2005.
REVIEW OF OPERATIONS
Gross margin for the fiscal 2006 second quarter was 34.9 percent, up from 34.5 percent compared with the fiscal 2005 second quarter, primarily due to product mix and the impact of price increases. For the year to date, gross margin improved to 35.2 percent from 34.7 percent in the same period last year.
Selling, general and administrative (SG&A) expenses as a percentage of net sales showed a slight improvement compared with the prior year's second quarter at 18.9 percent versus 19 percent in the 2005 second quarter. As a result of the company's ongoing initiatives to better leverage expenses, the growth in SG&A was held to less than the rate of revenue growth.
Interest expense for the second quarter totaled $5.2 million, up from $4.9 million in the fiscal 2005 second quarter.
The effective tax rate in the 2006 second quarter was 32.1 percent, compared with 33.5 percent in the same period last year, due to tax refunds from prior years' tax returns.
Accounts receivable at quarter end totaled $546.4 million, up only 1.3 percent on the second quarter's 4.9 percent increase in net sales.
Quarter-ending inventory totaled $248.1 million, down $8.8 million or 3.4 percent, compared with the end of the fiscal 2005 second quarter.
BUSINESS OUTLOOK
The company is reaffirming its full year guidance for sales growth of approximately 8 percent for fiscal 2006, assuming the continuation of seasonally normal weather patterns. Despite lower-than-expected sales growth in the first half, Toro is on track to achieve its expectations for earnings growth with a good portion of the retail selling season still ahead.
Given the company's first half performance and current expectations for second half results, Toro now expects fiscal 2006 earnings per share to increase 14 to 17 percent.
The Toro Company is a leading worldwide provider of outdoor maintenance and beautification products for home, recreation and commercial landscapes.
The Toro Company will conduct a conference call and webcast for investors beginning at 10:00 a.m. Central Time (CDT) on May 25, 2006. The webcast will be available at http://www.streetevents.com or at http://www.thetorocompany.com/invest . Webcast participants will need to complete a brief registration form and should allocate extra time before the webcast begins to register and, if necessary, download and install audio software.
Safe Harbor
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. 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 Toro. Particular risks and uncertainties facing the company's overall financial position at the present include the threat of further terrorist acts and war, which may result in contraction of the U.S. and worldwide economies; slow growth rate in global and domestic economies, resulting in rising unemployment and weakened consumer confidence; our ability to achieve the goals for the '6+8' growth and profit improvement initiative which is intended to improve our revenue growth and after-tax return on sales; the company's ability to achieve sales and earnings per share growth in fiscal 2006; our ability to successfully integrate acquisitions and manage alliances; ability of management to manage around unplanned events; unforeseen product quality problems in the development and production of new and existing products; fluctuations in the cost and availability of raw materials, including steel and other commodities; rising cost of transportation; level of growth in the golf market; increased dependence on The Home Depot as a customer for the residential segment; reduced government spending for grounds maintenance equipment due to reduced tax revenue and tighter government budgets; increased competition; elimination of shelf space for our products at retailers; financial viability of distributors and dealers; market acceptance of existing and new products; unforeseen inventory adjustments or changes in purchasing patterns by our customers; the impact of abnormal weather patterns; and the previously disclosed pending litigation against the company and other defendants that challenges the horsepower ratings of lawnmowers, of which the company is currently unable to assess whether the litigation would have a material adverse effect on the company's consolidated operating results or financial condition, although an adverse result might be material to operating results in a particular reporting period. 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.
SOURCE The Toro Company(Financial tables follow) THE TORO COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Unaudited) (Dollars and shares in thousands, except per-share data) Three Months Ended Six Months Ended May 5, April 29, May 5, April 29, 2006 2005 2006 2005 Net sales $659,004 $628,441 $1,028,644 $975,354 Gross profit 230,256 216,643 362,130 338,306 Gross profit percent 34.9% 34.5% 35.2% 34.7% Selling, general, and administrative expense 124,309 119,542 231,514 221,781 Earnings from operations 105,947 97,101 130,616 116,525 Interest expense (5,177) (4,873) (9,420) (8,633) Other income, net 2,446 942 3,332 2,083 Earnings before income taxes 103,216 93,170 124,528 109,975 Provision for income taxes 33,134 31,212 40,167 36,841 Net earnings $70,082 $61,958 $84,361 $73,134 Basic net earnings per share $1.62 $1.38 $1.94 $1.61 Diluted net earnings per share $1.56 $1.33 $1.87 $1.55 Weighted average number of shares of common stock outstanding - Basic 43,375 44,754 43,494 45,438 Weighted average number of shares of common stock outstanding - Dilutive 44,957 46,592 45,000 47,210 THE TORO COMPANY AND SUBSIDIARIES Segment Data (Unaudited) (Dollars in thousands) Three Months Ended Six Months Ended May 5, April 29, May 5, April 29, Segment Net Sales 2006 2005 2006 2005 Professional $439,098 $389,052 $692,703 $634,282 Residential 210,293 227,722 318,478 323,598 Other 9,613 11,667 17,463 17,474 Total* $659,004 $628,441 $1,028,644 $975,354 * Includes international sales of $168,290 $157,722 $288,349 $247,369 Three Months Ended Six Months Ended Segment Earnings (Loss) Before Income Taxes May 5, April 29, May 5, April 29, 2006 2005 2006 2005 Professional $104,177 $84,623 $145,837 $123,488 Residential 18,136 28,963 23,285 33,397 Other (19,097) (20,416) (44,594) (46,910) Total $103,216 $93,170 $124,528 $109,975 Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) May 5, April 29, 2006 2005 ASSETS Cash and cash equivalents $27,240 $14,449 Receivables, net 546,413 539,633 Inventories, net 248,134 256,926 Prepaid expenses and other current assets 18,688 13,476 Deferred income taxes 74,556 56,265 Total current assets 915,031 880,749 Property, plant, and equipment, net 163,729 170,334 Deferred income taxes - 39 Goodwill and other assets, net 94,876 105,517 Total assets $1,173,636 $1,156,639 LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt $23 $45 Short-term debt 121,078 151,137 Accounts payable 126,201 114,915 Accrued liabilities 296,464 293,333 Total current liabilities 543,766 559,430 Long-term debt, less current portion 175,000 175,024 Long-term deferred income taxes 872 3,837 Deferred revenue and other long-term liabilities 9,356 7,827 Stockholders' equity 444,642 410,521 Total liabilities and stockholders' equity $1,173,636 $1,156,639 THE TORO COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) Six Months Ended May 5, April 29, 2006 2005 Cash flows from operating activities: Net earnings $84,361 $73,134 Adjustments to reconcile net earnings to net cash used in operating activities: Equity losses from investments 839 302 Provision for depreciation and amortization 21,053 18,592 Gain on disposal of property, plant, and equipment (11) (242) Stock-based compensation expense 4,465 4,819 Increase in deferred income taxes (15,923) (3,280) Changes in operating assets and liabilities: Receivables (251,863) (238,083) Inventories (10,839) (20,248) Prepaid expenses and other assets (809) 4,189 Accounts payable, accrued expenses, and deferred revenue 78,028 72,409 Net cash used in operating activities (90,699) (88,408) Cash flows from investing activities: Purchases of property, plant, and equipment (17,155) (15,106) Proceeds from asset disposals 787 2,351 Increase in investment in affiliates (371) (197) Decrease (increase) in other assets 6,192 (538) Proceeds from sale of business - 765 Acquisition, net of cash acquired - (35,285) Net cash used in investing activities (10,547) (48,010) Cash flows from financing activities: Increase in short-term debt 120,722 150,007 Repayments of long-term debt (23) (22) Excess tax benefits from stock-based awards 15,625 4,015 Proceeds from exercise of stock options 7,376 5,631 Purchases of Toro common stock (49,286) (94,029) Dividends paid on Toro common stock (7,842) (5,482) Net cash provided by financing activities 86,572 60,120 Effect of exchange rates on cash 512 (9) Net decrease in cash and cash equivalents (14,162) (76,307) Cash and cash equivalents as of the beginning of the period 41,402 90,756 Cash and cash equivalents as of the end of the period $27,240 $14,449
05/25/2006
CONTACT: Investor Relations, Stephen P. Wolfe, Vice President, CFO
1-952-887-8076, or John Wright, Director, Investor Relations
1-952-887-8865, or Toro Media Relations, Connie Kotke, +1-952-887-8984, or
pr@toro.com , all of The Toro Company
Web site: http://www.thetorocompany.com
http://www.thetorocompany.com/invest
(TTC)