Toro Reports Record Third Quarter Net Earnings Per Diluted Share of $0.74
Year-to-Date Net Earnings Per Diluted Share Up 24.5% on 9.6% Sales Growth
August 23, 10:00 a.m. CT
http://www.thetorocompany.com/invest
BLOOMINGTON, Minn., Aug. 23 /PRNewswire-FirstCall/ -- The Toro Company (NYSE: TTC) today reported record net earnings of $34.4 million, or $0.74 per diluted share, on net sales of $466.9 million for its fiscal third quarter ended July 29, 2005. In the comparable fiscal 2004 period, the company reported net earnings of $34.2 million, or $0.66 per diluted share, on net sales of $454.0 million.
For the nine months ended July 29, 2005, Toro reported net earnings of $107.5 million, or $2.29 per diluted share, on net sales of $1,442.3 million compared with net earnings of $95.7 million, or $1.84 per diluted share, on net sales of $1,315.6 million in the first nine months of fiscal 2004.
Earnings per share figures for all periods reported have been adjusted to reflect the effects of a 2-for-1 stock split effective March 28, 2005.
"Sales growth in international markets helped drive revenues to record levels for the third quarter in both the professional and residential segments helping to mitigate weather related softness in our domestic markets," said Michael J. Hoffman, The Toro Company's president and chief executive officer. "Despite a challenging environment year-to-date consolidated net sales are nearly 10 percent ahead of fiscal 2004's record level."
"Our strong performance in the third quarter and year to date gives evidence of our ability to sustain solid earnings growth and has us on track to deliver another record year of financial results," said Kendrick B. Melrose, executive chairman, The Toro Company. "We continue to enhance our operating model to reduce the volatility to external factors such as weather, while tenaciously focusing on strategic initiatives that will drive sustainable long-term growth and profitability."
SEGMENT RESULTS
Segment data is provided in the table following the "Condensed
Consolidated Statements of Earnings."
Professional
For the third quarter, professional segment sales increased 5.1 percent to $302.5 million. Shipments were particularly strong throughout our international markets and in golf irrigation driven by the introduction of new products.
Professional segment earnings for the quarter were $59.9 million, up 10.2 percent from $54.3 million in last year's third quarter.
For the year to date, professional segment earnings totaled $183.4 million on net sales of $936.8 million compared with earnings of $154.5 million on net sales of $834.1 million in last year's first nine months.
Residential
Residential segment sales for the third quarter totaled $148.6 million, up
3.0 percent from last year's third quarter. Increased international sales of
Hayter products and strong snow thrower shipments both domestically and
internationally drove third quarter sales growth.
For the year to date, net sales were $472.2 million, up 8.1 percent compared with the first nine months of fiscal 2004.
Segment earnings for the quarter totaled $10.1 million, down 42.8 percent from $17.6 million in the same period last year.
For the year to date, segment earnings were $43.5 million compared with $52.7 million in the same period last year.
The decline in segment earnings for the quarter and year to date were primarily due to higher commodity costs.
Review of operations
Gross margin for the third quarter was 35.0 percent compared with
36.2 percent in the prior year's third quarter. As in the preceding quarters,
the decline resulted primarily from the impact of higher commodity costs, as
well as the Hayter acquisition.
SG&A expenses for the third quarter were 23.3 percent of net sales, down from 24.6 percent last year, primarily from lower incentive compensation expenses.
Interest expense for the third quarter was $4.8 million compared with $3.9 million in the same period last year. The increase was due to higher levels of short-term borrowing to support the company's share repurchase program and the Hayter acquisition.
During the quarter the full year effective tax rate was reduced from 33.5 percent to 33.0 percent resulting from increased credits for our growing foreign export sales.
Accounts receivable at the end of the third quarter totaled $399.9 million, up 4.9 percent. Net inventories at the end of the third quarter were $235.1 million, up 8.2 percent compared with the end of the fiscal 2004 third quarter. The increases in quarter-ending accounts receivable and inventories result primarily from higher currency exchange rates and the Hayter acquisition completed in the fiscal 2005 second quarter.
Business outlook
Toro today said that it expects net earnings per diluted share for fiscal
2005 to exceed last year's record levels by 16 to 18 percent on revised sales
growth of 7 to 9 percent.
"For the fiscal year, financial performance will benefit from a favorable mix of businesses and strong expense management," said Hoffman. "With sales growth in nearly all professional segment categories and consistent returns from our international growth initiatives we will improve upon last year's record financial performance despite higher materials costs and unfavorable weather."
Hoffman attributed the company's achievements to its 6+8 profit improvement and growth initiative. "Our lean manufacturing and No Waste initiatives helped us to preserve strong profitability in the face of rising materials costs," said Hoffman. "The efficiencies we are now achieving are sustainable and will continue to benefit our profitability going forward."
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 (CST) on August 23, 2005. 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 2005; 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; potential issues with moving
production between facilities; 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. 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.
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(Dollars and shares in thousands, except per-share data)
Three Months Ended Nine Months Ended
July 29, July 30, July 29, July 30,
2005(1) 2004(2) 2005(1) 2004(2)
Net sales $466,942 $454,044 $1,442,296 $1,315,644
Gross profit 163,261 164,202 501,567 475,691
Gross profit percent 35.0% 36.2% 34.8% 36.2%
Selling, general, and
administrative expense 108,595 111,468 330,376 324,630
Earnings from
operations 54,666 52,734 171,191 151,061
Interest expense (4,820) (3,893) (13,453) (11,477)
Other income, net 642 1,533 2,725 3,307
Earnings before income
taxes 50,488 50,374 160,463 142,891
Provision for income
taxes 16,111 16,161 52,953 47,154
Net earnings $ 34,377 $34,213 $ 107,510 $ 95,737
Basic net earnings
per share $ .77 $ .70 $ 2.38 $ 1.94
Diluted net earnings
per share $ .74 $ .66 $ 2.29 $ 1.84
Weighted average number
of shares of common
stock outstanding -
Basic 44,494 48,738 45,121 49,396
Weighted average number
of shares of common
stock outstanding -
Dilutive 46,438 51,587 46,966 52,043
Shares and per share data have been adjusted for all periods presented to
reflect a two-for-one stock split effective March 28, 2005.
(1) Prepared under the accounting provisions of Statement of Financial
Accounting Standard No. 123 (Revised 2004), "Share-Based Payment."
(2) Prepared under the accounting provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
(APB No. 25), and related Interpretations.
THE TORO COMPANY AND SUBSIDIARIES
Segment Data (Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
July 29, July 30, July 29, July 30,
Segment Net Sales 2005 2004 2005 2004
Professional $302,517 $287,928 $ 936,799 $ 834,130
Residential 148,590 144,227 472,188 436,952
Other 15,835 21,889 33,309 44,562
Total* $466,942 $454,044 $1,442,296 $1,315,644
* Includes
international
sales of $108,407 $ 81,135 $ 355,782 $ 268,286
Three Months Ended Nine Months Ended
July 29, July 30, July 29, July 30,
Segment Earnings 2005 2004 2005 2004
(Loss) Before
Income Taxes
Professional $ 59,894 $ 54,326 $183,382 $154,479
Residential 10,096 17,635 43,493 52,691
Other (19,502) (21,587) (66,412) (64,279)
Total $ 50,488 $ 50,374 $160,463 $142,891
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
July 29, July 30,
2005 2004
ASSETS
Cash and cash equivalents $ 34,665 $ 34,022
Receivables, net 399,883 381,329
Inventories, net 235,146 217,357
Prepaid expenses and other current assets 14,142 13,968
Deferred income taxes 57,526 49,103
Total current assets 741,362 695,779
Property, plant, and equipment, net 166,890 164,851
Deferred income taxes 39 1,181
Goodwill and other assets 104,247 98,942
Total assets $1,012,538 $ 960,753
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $45 $44
Short-term debt 54,509 3,146
Accounts payable 75,964 68,245
Accrued liabilities 273,435 256,392
Total current liabilities 403,953 327,827
Long-term debt, less current portion 175,012 175,058
Long-term deferred income taxes 3,837 -
Deferred revenue and other long-term liabilities 14,806 12,747
Stockholders' equity 414,930 445,121
Total liabilities and stockholders' equity $1,012,538 $ 960,753
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Nine Months Ended
July 29, July 30,
2005 2004
Cash flows from operating activities:
Net earnings $107,510 $ 95,737
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Non-cash asset impairment recovery - (415)
Equity losses from an investment 510 538
Provision for depreciation and amortization 30,110 25,398
Gain on disposal of property, plant,
and equipment (339) (254)
Stock-based compensation expense 7,284 6,892
Increase in deferred income taxes (13,146) (7,021)
Changes in operating assets and liabilities:
Receivables, net (91,979) (107,990)
Inventories, net (767) 11,787
Prepaid expenses and other current assets 2,897 (1,194)
Accounts payable, accrued expenses, and
deferred revenue 25,764 50,343
Net cash provided by operating activities 67,844 73,821
Cash flows from investing activities:
Purchases of property, plant, and equipment (24,294) (31,185)
Proceeds from disposal of property, plant,
and equipment 2,447 1,833
Increase in investment in affiliates (197) (1,278)
Decrease in other assets 158 285
Proceeds from sale of a business 765 -
Acquisition, net of cash acquired (35,285) -
Net cash used in investing activities (56,406) (30,345)
Cash flows from financing activities:
Increase in short-term debt 53,374 1,047
Repayments of long-term debt (34) (3,819)
Excess tax benefits from share-based
arrangements 5,665 8,087
Proceeds from exercise of stock options 7,609 12,018
Purchases of Toro common stock (125,093) (132,234)
Dividends paid on Toro common stock (8,151) (4,443)
Net cash used in financing activities (66,630) (119,344)
Effect of exchange rates on cash (899) (397)
Net decrease in cash and cash equivalents (56,091) (76,265)
Cash and cash equivalents as of the beginning
of the period 90,756 110,287
Cash and cash equivalents as of the end
of the period $ 34,665 $ 34,022
SOURCE The Toro Company
Web Site: http://www.thetorocompany.com
http://www.thetorocompany.com/invest
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