UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 24, 2004
THE TORO COMPANY
(Exact name of registrant as specified in its charter)
Delaware (State of Incorporation) |
1-8649 (Commission File Number) |
41-0580470 (I.R.S. Employer Identification Number) |
8111 Lyndale Avenue South
Bloomington, Minnesota 55420
Telephone number: (952) 888-8801
(Address, including zip code, and telephone number, including area code, of
registrants principal executive offices)
Item 12. Results of Operations and Financial Condition | ||||||||
SIGNATURES | ||||||||
EXHIBIT INDEX | ||||||||
Press Release |
Item 12. Results of Operations and Financial Condition
On February 24, 2004, The Toro Company announced its earnings for the three months ended January 30, 2004. Attached to this Current Report on Form 8-K as Exhibit 99 is a copy of The Toro Companys press release in connection with the announcement. The information in this report is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference by any general statements by The Toro Company incorporating by reference this report or future filings into any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent The Toro Company specifically incorporates the information by reference. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE TORO COMPANY (Registrant) |
||||
Date: | February 24, 2004 | By /s/ Stephen P. Wolfe Stephen P. Wolfe Vice President Finance, Treasurer and Chief Financial Officer (duly authorized officer and principal financial officer) |
EXHIBIT INDEX
EXHIBIT | ||||||
NUMBER | DESCRIPTION | |||||
99 | Other | |||||
Registrants press release dated February 24, 2004 (furnished herewith). |
The Toro Company 8111 Lyndale Avenue South, Bloomington, Minnesota 55420-1196 #952/888-8801 #FAX 952/887-8258 |
Investor Relations | Media Relations | Web Site | ||||
Stephen P. Wolfe Vice President, CFO (952) 887-8076 |
Tom Larson Assistant Treasurer (952) 887-8449 |
Connie Hawkinson Toro Media Relations (952) 887-8984, pr@toro.com |
www.thetorocompany.com |
TORO REPORTS RECORD FIRST QUARTER NET EARNINGS
UP 34% TO $0.36 PER DILUTED SHARE
Sales Growth and Improved Operating Performance
Benefit First Quarter Performance
Company Now Expects Fiscal 2004 Net Earnings Growth of 14% to 18%
LIVE CONFERENCE CALL
February 24, 10:00 a.m. CT
www.thetorocompany.com/invest
BLOOMINGTON, Minn. (Feb. 24, 2004) The Toro Company (NYSE: TTC) today reported net earnings of $9.3 million, or $0.36 per diluted share, on net sales of $313.6 million for its fiscal 2004 first quarter ended January 30, 2004.
In the comparable fiscal 2003 period, the company reported net earnings of $7.0 million, or $0.27 per diluted share, on net sales of $296.0 million. The companys fiscal 2003 first quarter results included a one-time gain of $0.08 per diluted share resulting from a legal settlement.
We are off to a strong start in the new fiscal year, said Kendrick B. Melrose, The Toro Company Chairman and Chief Executive Officer. Our first quarter net sales were up due to strong early orders for new landscape contractor products, snowthrower shipments and favorable foreign currency exchange effects. For what is typically a seasonally slower period, we saw healthy demand across many categories, with an additional boost from the snowy weather in the eastern United States, said Melrose. Overall, dealers and distributors are feeling optimistic about 2004 and have been placing orders reflecting their expectations of an upturn in the economy and response to Toros enhanced product and services portfolio.
Also contributing to the companys better than expected first quarter net earnings were the ongoing benefits of past and continuing profitability improvement initiatives, as well as the
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2Toro Reports First Quarter Results
positive impact of unexpected items, including a debt recovery. In addition, planned investments in engineering occurred at a slower pace than initially budgeted for the fiscal first quarter and will instead be incurred later in this fiscal year.
SEGMENT RESULTS
Segment data is provided in the table following the Condensed Consolidated Statements of Earnings.
PROFESSIONAL
Compared with the fiscal 2003 first quarter, fiscal 2004 first quarter professional segment sales increased 7.4% to $207.7 million. The top-line growth in the quarter resulted primarily from increases in landscape contractor equipment and irrigation sales. The growth in both Toro® and Exmark® branded landscape contractor equipment is primarily the result of the success of new products and strong early stocking orders in anticipation of increased retail demand. We are also very encouraged by our customers optimistic outlook for a strong 2004 expressed at this months Golf Course Superintendents Association of America Show and Conference, held in San Diego, Melrose said.
International shipments for the first quarter benefited from favorable foreign currency exchange rates, as well as strong shipments of golf mowing equipment and irrigation products.
Professional segment earnings for the fiscal 2004 first quarter totaled $28.4 million, up 2.5% from the fiscal 2003 first quarter. Excluding the impact of the previously mentioned legal settlement on the professional segment results, earnings improvement for the current quarter would have exceeded the sales growth rate.
RESIDENTIAL
Residential segment sales for the fiscal 2004 first quarter totaled $97.9 million, up 3.4% compared with fiscal 2003 first quarter. The major contributors to sales growth in the quarter were snowthrowers, Lawn-Boy® walk power mowers and a new line of riding products somewhat offset by a decline in Toro walk power mower shipments.
Snowthrower sales benefited from strong reorders in January resulting from heavy snowfalls, particularly on the East coast. This will result in lower snowthrower field inventories entering the fiscal 2004 fourth quarter. Lawn-Boy walk power mower shipments increased primarily on strong demand from distributors and dealers for new products. Toro walk power
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3Toro Reports First Quarter Results
mower shipments were lower compared with the 2003 first quarter, which benefited from an earlier than usual promotion program in the mass merchant channel.
International residential segment sales were up sharply compared with fiscal 2003 first quarter, primarily as a result of favorable foreign currency exchange effects and the successful introduction of new products.
Residential segment earnings for the fiscal 2004 first quarter totaled $8.3 million, down 3.7% compared with the fiscal 2003 first quarter. The decline resulted primarily from the impact of higher tooling expenses and one-time costs for a field modification on a new product.
DISTRIBUTION
Distribution segment sales for the fiscal 2004 first quarter totaled $19.7 million up 5.7% compared with fiscal 2003 first quarter. The loss in the distribution segment was reduced to $2.2 million from $3.4 million in the fiscal 2003 first quarter, in part due to profit improvement initiatives at its company-owned distributorships.
REVIEW OF OPERATIONS
Gross margin for the fiscal 2004 first quarter was 35.9% compared with 35.7% in the first quarter of fiscal 2003. The company continued to benefit from prior profit improvement initiatives and the transfer of certain production to lower cost facilities.
Selling, general and administrative expenses for the fiscal 2004 first quarter were 30.6% as a percentage of net sales, compared with 32.6% in the fiscal 2003 first quarter. This decrease as a percentage of net sales was due to improved leveraging of expenses and the previously mentioned debt recovery.
Interest expense for the fiscal 2004 first quarter totaled $3.9 million, down 5.1% compared with the fiscal 2003 first quarter. The decline resulted primarily from a lower average debt level during the quarter as the company used earnings to retire debt.
Net inventories at the end of the fiscal 2004 first quarter totaled $271.1 million, up only 1.4% compared with $267.4 million at the end of the fiscal 2003 first quarter. The fiscal 2004 first quarter increase was due to higher currency rates.
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4Toro Reports First Quarter Results
BUSINESS OUTLOOK
Our first quarter results exceeded our expectations, and we are encouraged by the optimism we see in our distribution channels and the balanced growth across nearly all product categories, said Melrose. As a result, we are raising our earnings guidance and now expect to report a 14% to 18% increase in fiscal 2004 earnings per diluted share compared with fiscal 2003s $3.12 per diluted share. Moreover, we anticipate revenues in fiscal 2004 to improve by 7% to 9%. For its fiscal second quarter, the company said it currently expects to report earnings of $1.80 to $1.90 per diluted share.
Melrose said the revised outlook for 2004 absorbs expected increases in steel and aluminum costs that were unplanned at the beginning of the year, and assumes that no widespread extremes in weather conditions will adversely impact the companys key selling seasons, which are still ahead. It also takes into account Toros plans for increased investment in innovation, technology, new products and brand development.
Following the successful completion of our 5 by Five profit improvement program, we set new long-term goals and are embarking on a new initiative called 6+8 that will focus on after-tax profitability and sustainable revenue growth at Toro, said Melrose. Our people are becoming fully engaged in the 6+8 initiative which, coupled with strategic investments in key areas, will drive us toward achievement of these new goals.
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 February 24, 2004. The webcast will be available at www.streetevents.com or at 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.
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5Toro Reports First Quarter Results
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 companys 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 program which is intended to improve our revenue growth and after-tax return on sales; the companys ability to achieve sales growth and low double-digit diluted earnings per share growth in fiscal 2004; unforeseen product quality problems in the development and production of new and existing products; potential issues with moving production between facilities; continued slow growth in the rate of new golf course construction or existing golf course renovations; 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; elimination of shelf space for our products at retailers; changes in raw material costs, including higher oil, steel and aluminum prices; financial viability of distributors and dealers; governmental restriction on water usage and water availability; market acceptance of existing and new products; and increased and adverse changes in currency exchange rates or raw material commodity prices and the costs we incur in providing price support to international customers and suppliers. In addition to the factors set forth in this paragraph, market, economic, financial, competitive, weather, production and other factors identified in Toros 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)
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6Toro Reports First Quarter Results
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(Dollars and shares in thousands, except per-share data)
Three Months Ended | |||||||||
January 30, | January 31, | ||||||||
2004 | 2003 | ||||||||
Net sales |
$ | 313,573 | $ | 295,962 | |||||
Gross profit |
112,610 | 105,581 | |||||||
Gross profit percent |
35.9 | % | 35.7 | % | |||||
Selling, general, and administrative expense |
96,037 | 96,351 | |||||||
Restructuring and other income |
(22 | ) | | ||||||
Earnings from operations |
16,595 | 9,230 | |||||||
Interest expense |
(3,882 | ) | (4,092 | ) | |||||
Other income, net |
1,309 | 5,282 | |||||||
Earnings before income taxes |
14,022 | 10,420 | |||||||
Provision for income taxes |
4,697 | 3,439 | |||||||
Net earnings |
$ | 9,325 | $ | 6,981 | |||||
Basic net earnings per share |
$ | 0.37 | $ | 0.28 | |||||
Diluted net earnings per share |
$ | 0.36 | $ | 0.27 | |||||
Weighted average number of shares of common
stock outstanding Basic |
24,926 | 24,921 | |||||||
Weighted average number of shares of common
stock outstanding Dilutive |
26,129 | 25,843 |
Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective April 1, 2003.
Net Sales by Segment (Unaudited)
(Dollars in thousands)
Three Months Ended | |||||||||
January 30, | January 31, | ||||||||
2004 | 2003 | ||||||||
Professional |
$ | 207,678 | $ | 193,444 | |||||
Residential |
97,887 | 94,665 | |||||||
Distribution |
19,653 | 18,600 | |||||||
Other |
(11,645 | ) | (10,747 | ) | |||||
Total * |
$ | 313,573 | $ | 295,962 | |||||
* Includes international sales of |
$ | 75,378 | $ | 67,456 |
7Toro Reports First Quarter Results
THE TORO COMPANY AND SUBSIDIARIES
Earnings (Loss) Before Income Taxes by Segment (Unaudited)
(Dollars in thousands)
Three Months Ended | |||||||||
January 30, | January 31, | ||||||||
Segment Earnings (Loss) | 2004 | 2003 | |||||||
Professional |
$ | 28,449 | $ | 27,756 | |||||
Residential1 |
8,337 | 8,661 | |||||||
Distribution |
(2,173 | ) | (3,358 | ) | |||||
Other |
(20,591 | ) | (22,639 | ) | |||||
Total |
$ | 14,022 | $ | 10,420 | |||||
1 Includes restructuring and other income of $22 thousand for the
three-month period in fiscal 2004.
|
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
January 30, | January 31, | ||||||||
2004 | 2003 | ||||||||
ASSETS |
|||||||||
Cash and cash equivalents |
$ | 17,925 | $ | 87 | |||||
Receivables, net |
311,451 | 311,892 | |||||||
Inventories, net |
271,071 | 267,376 | |||||||
Prepaid expenses and other current assets |
13,710 | 11,689 | |||||||
Deferred income taxes |
43,253 | 39,474 | |||||||
Total current assets |
657,410 | 630,518 | |||||||
Property, plant, and equipment, net |
160,729 | 159,474 | |||||||
Deferred income taxes |
1,181 | 4,196 | |||||||
Goodwill and other assets |
100,841 | 93,913 | |||||||
Total assets |
$ | 920,161 | $ | 888,101 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|||||||||
Current portion of long-term debt |
$ | 225 | $ | 15,846 | |||||
Short-term debt |
2,308 | 25,024 | |||||||
Accounts payable |
84,766 | 90,397 | |||||||
Accrued liabilities |
212,790 | 194,917 | |||||||
Total current liabilities |
300,089 | 326,184 | |||||||
Long-term debt, less current portion |
175,080 | 178,724 | |||||||
Deferred revenue and other long-term liabilities |
11,775 | 8,259 | |||||||
Stockholders equity |
433,217 | 374,934 | |||||||
Total liabilities and stockholders equity |
$ | 920,161 | $ | 888,101 | |||||
8Toro Reports First Quarter Results
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Three Months Ended | ||||||||||||
January 30, | January 31, | |||||||||||
2004 | 2003 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net earnings |
$ | 9,325 | $ | 6,981 | ||||||||
Adjustments to reconcile net earnings to net cash
used in operating activities: |
||||||||||||
Non-cash asset impairment (recovery) |
(52 | ) | | |||||||||
Provision for depreciation and amortization |
8,560 | 7,925 | ||||||||||
Gain on disposal of property, plant, and equipment |
(113 | ) | (4 | ) | ||||||||
Increase in deferred income tax asset |
(921 | ) | (627 | ) | ||||||||
Tax benefits related to employee stock option transactions |
522 | | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||
Receivables, net |
(40,286 | ) | (54,800 | ) | ||||||||
Inventories, net |
(39,289 | ) | (46,134 | ) | ||||||||
Prepaid expenses and other assets |
3,173 | (1,230 | ) | |||||||||
Accounts payable, accrued expenses, and deferred revenue |
(449 | ) | 12,915 | |||||||||
Net cash used in operating activities |
(59,530 | ) | (74,974 | ) | ||||||||
Cash flows from investing activities: |
||||||||||||
Purchases of property, plant, and equipment |
(10,015 | ) | (11,182 | ) | ||||||||
Proceeds from disposal of property, plant, and equipment |
1,285 | 31 | ||||||||||
(Increase) decrease in investment in affiliates |
(1,065 | ) | 1,000 | |||||||||
Decrease (increase) in other assets |
78 | (2,072 | ) | |||||||||
Proceeds from sale of business |
| 1,016 | ||||||||||
Net cash used in investing activities |
(9,717 | ) | (11,207 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Increase in short-term debt |
104 | 23,806 | ||||||||||
Repayments of long-term debt |
(3,616 | ) | (11 | ) | ||||||||
Increase in other long-term liabilities |
52 | 26 | ||||||||||
Proceeds from exercise of stock options |
1,565 | 1,693 | ||||||||||
Purchases of common stock |
(19,786 | ) | (598 | ) | ||||||||
Dividends on common stock |
(1,501 | ) | (1,495 | ) | ||||||||
Net cash (used in) provided by financing activities |
(23,182 | ) | 23,421 | |||||||||
Effect of exchange rates on cash |
67 | 31 | ||||||||||
Net decrease in cash and cash equivalents |
(92,362 | ) | (62,729 | ) | ||||||||
Cash and cash equivalents as of the beginning of the period |
110,287 | 62,816 | ||||||||||
Cash and cash equivalents as of the end of the period |
$ | 17,925 | $ | 87 | ||||||||