Toro Reports Record Third Quarter Sales and Earnings
Net Earnings Per Diluted Share Up 23%
BLOOMINGTON, Minn., Aug. 24 /PRNewswire-FirstCall/ -- The Toro Company (NYSE: TTC) today reported record fiscal third quarter net earnings of $40.3 million, or $0.91 per diluted share, on record net sales of $477.9 million for the quarter ended August 4, 2006. In the comparable fiscal 2005 period, the company reported net earnings of $34.4 million, or $0.74 per diluted share, on net sales of $466.9 million.
For the nine months ended August 4, 2006, Toro reported record net earnings of $124.7 million or $2.78 per diluted share, on record net sales of $1,506.5 million. In the comparable fiscal 2005 period, the company reported net earnings of $107.5 million, or $2.29 per diluted share, on net sales of $1,442.3 million.
Michael J. Hoffman, The Toro Company's chairman and chief executive officer, said Toro is on track for another record year as growth in worldwide professional segment sales and earnings continued to offset slight declines in domestic residential segment results. "We remain focused on advancing our market leadership positions with innovative products and strengthening customer relationships," said Hoffman. "We are also realizing profitability improvement through our company-wide lean initiatives, thereby enabling us to deliver strong, consistent financial results. Despite challenging market conditions, we expect to meet our fiscal 2006 guidance for earnings per share growth."
SEGMENT RESULTS
Segment data are provided in the table following the "Condensed Consolidated Statements of Earnings."
Professional
- Professional segment sales for the fiscal 2006 third quarter increased 5.7 percent to $319.7 million. The company continues to benefit from golf course investment in maintenance equipment and irrigation systems.
- Strong growth in sales of domestic commercial equipment and irrigation products more than offset a slowdown in domestic landscape contractor equipment.
- Professional segment earnings for the fiscal 2006 third quarter totaled $62.5 million, up 4.3 percent from $59.9 million in the fiscal 2005 third quarter.
- For fiscal 2006 to date, professional segment earnings totaled $208.3 million on an 8.1 percent increase in net sales to $1,012.4 million compared with segment net earnings of $183.4 million on net sales of $936.8 million in the first nine months of fiscal 2005.
Residential
- Residential segment sales for the fiscal 2006 third quarter totaled $145.3 million, down 2.2 percent compared with the fiscal 2005 third quarter.
- The decline for the segment was primarily due to slower sales for electric products and retail irrigation products which were partially offset by increased shipments of walk power mowers and zero-turning- radius riding mowers.
- Residential segment earnings for the fiscal 2006 third quarter totaled $8.8 million, down 13.3 percent from $10.1 million in the fiscal 2005 third quarter.
- For fiscal 2006 to date, residential segment earnings totaled $32 million on a 1.8 percent decline in net sales to $463.8 million compared with segment net earnings of $43.5 million on net sales of $472.2 million in the first nine months of fiscal 2005.
REVIEW OF OPERATIONS
Gross margin for the fiscal 2006 third quarter was 35.6 percent compared with 35 percent for the fiscal 2005 third quarter. Gross margin in the fiscal 2006 third quarter benefited from a more favorable mix in professional products compared with the fiscal 2005 third quarter.
Fiscal 2006 third quarter selling, general and administrative (SG&A) expenses as a percentage of net sales improved to 22.7 percent from 23.2 percent in the fiscal 2005 third quarter. The improvement in SG&A was due to lower administration expenses.
Interest expense for the third quarter totaled $4.7 million compared with $4.8 million in the 2005 third quarter.
The effective tax rate in the 2006 third quarter was 32.6 percent, compared with 31.9 percent in the same period last year.
Accounts receivable at quarter end totaled $394 million, down slightly compared with the end of the fiscal 2005 third quarter.
Quarter-ending inventory totaled $255 million, up $19.9 million or 8.5 percent compared with the end of the fiscal 2005 third quarter. The increase resulted from lower than expected third quarter sales volume.
BUSINESS OUTLOOK
Commenting on the company's outlook for the remainder of fiscal 2006, Toro chairman and chief executive officer Michael Hoffman said the company now expects sales growth for fiscal 2006 to range from 3 to 5 percent, with earnings per share growth for the full year of 15 to 17 percent.
"We have generated solid earnings growth throughout 2006 despite challenges posed by lower than expected revenues and higher commodity costs," said Hoffman. "In the fiscal year's final quarter, we will continue to invest in innovation initiatives for future growth while driving improvements in supply chain efficiencies and profitability initiatives to ensure another record year for Toro shareholders."
The Toro Company is a leading worldwide provider of outdoor maintenance and beautification products for home, recreation and commercial landscapes.
LIVE CONFERENCE CALL
August 24, 10:00 a.m. CDT
http://www.thetorocompany.com/invest
The Toro Company will conduct a conference call and webcast for investors beginning at 10:00 a.m. Central Time (CDT) on August 24, 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.
(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 Nine Months Ended August 4, July 29, August 4, July 29, 2006 2005 2006 2005 Net sales $477,861 $466,942 $1,506,505 $1,442,296 Gross profit 170,336 163,261 532,466 501,567 Gross profit percent 35.6% 35.0% 35.3% 34.8% Selling, general, and administrative expense 108,615 108,595 340,129 330,376 Earnings from operations 61,721 54,666 192,337 171,191 Interest expense (4,677) (4,820) (14,097) (13,453) Other income, net 2,756 642 6,088 2,725 Earnings before income taxes 59,800 50,488 184,328 160,463 Provision for income taxes 19,478 16,111 59,645 52,953 Net earnings $40,322 $34,377 $124,683 $107,510 Basic net earnings per share $.94 $.77 $2.88 $2.38 Diluted net earnings per share $.91 $.74 $2.78 $2.29 Weighted average number of shares of common stock outstanding - Basic 42,852 44,494 43,283 45,121 Weighted average number of shares of common stock outstanding - Dilutive 44,360 46,438 44,806 46,966 THE TORO COMPANY AND SUBSIDIARIES Segment Data (Unaudited) (Dollars in thousands) Three Months Ended Nine Months Ended August 4, July 29, August 4, July 29, Segment Net Sales 2006 2005 2006 2005 Professional $319,733 $302,517 $1,012,436 $936,799 Residential 145,308 148,590 463,786 472,188 Other 12,820 15,835 30,283 33,309 Total* $477,861 $466,942 $1,506,505 $1,442,296 * Includes international sales of $113,651 $108,353 $402,000 $355,782 Segment Earnings Three Months Ended Nine Months Ended (Loss) Before August 4, July 29, August 4, July 29, Income Taxes 2006 2005 2006 2005 Professional $62,474 $59,894 $208,311 $183,382 Residential 8,752 10,096 32,037 43,493 Other (11,426) (19,502) (56,020) (66,412) Total $59,800 $50,488 $184,328 $160,463 Condensed Consolidated Balance Sheets (Unaudited) (Dollars in thousands) August 4, July 29, 2006 2005 ASSETS Cash and cash equivalents $24,815 $34,665 Receivables, net 394,038 394,395 Inventories, net 255,031 235,146 Prepaid expenses and other current assets 14,624 14,142 Deferred income taxes 58,203 51,861 Total current assets 746,711 730,209 Property, plant, and equipment, net 163,703 166,890 Deferred income taxes - 39 Goodwill and other assets 94,931 104,247 Total assets $1,005,345 $1,001,385 LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term debt $12 $45 Short-term debt 24,535 54,509 Accounts payable 86,998 75,964 Accrued liabilities 271,022 267,770 Total current liabilities 382,567 398,288 Long-term debt, less current portion 175,000 175,012 Long-term deferred income taxes 872 3,837 Deferred revenue and other long-term liabilities 9,605 9,318 Stockholders' equity 437,301 414,930 Total liabilities and stockholders' equity $1,005,345 $1,001,385 THE TORO COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands) Nine Months Ended August 4, July 29, 2006 2005 Cash flows from operating activities: Net earnings $124,683 $107,510 Adjustments to reconcile net earnings to net cash provided by operating activities: Equity losses from investments 1,004 510 Provision for depreciation and amortization 31,490 30,110 Gain on disposal of property, plant, and equipment (84) (339) Stock-based compensation expense 6,018 7,284 Decrease (increase) in deferred income taxes 419 (7,481) Changes in operating assets and liabilities: Receivables (99,062) (86,491) Inventories (17,481) (767) Prepaid expenses and other assets 3,042 2,897 Accounts payable, accrued expenses, and deferred revenue 13,836 14,611 Net cash provided by operating activities 63,865 67,844 Cash flows from investing activities: Purchases of property, plant, and equipment (26,693) (24,294) Proceeds from asset disposals 908 2,447 Increase in investments in affiliates (371) (197) Decrease in other assets 5,716 158 Proceeds from sale of a business - 765 Acquisition, net of cash acquired - (35,285) Net cash used in investing activities (20,440) (56,406) Cash flows from financing activities: Increase in short-term debt 24,191 53,374 Repayments of long-term debt (34) (34) Excess tax benefits from share-based arrangements 16,270 5,665 Proceeds from exercise of stock options 8,196 7,609 Purchases of Toro common stock (97,388) (125,093) Dividends paid on Toro common stock (11,700) (8,151) Net cash used in financing activities (60,465) (66,630) Effect of exchange rates on cash 453 (899) Net decrease in cash and cash equivalents (16,587) (56,091) 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 $24,815 $34,665
SOURCE The Toro Company
CONTACT:
Investor Relations: John Wright, Director, Investor Relations
+1-952-887-8865
or
Media Relations: Connie Kotke, Manager, Corporate Communications
+1-952-887-8984
pr@toro.com
both of The Toro CompanyCompany News On-Call: http://www.prnewswire.com/comp/103025.html
Web site: http://www.thetorocompany.com