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): May 22,
2008
THE
TORO COMPANY
(Exact
name of registrant as specified in its charter)
|
Delaware
|
1-8649
|
41-0580470
|
|
(State
of Incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification Number)
|
|
8111
Lyndale Avenue South
Bloomington,
Minnesota
(Address
of principal executive offices)
|
55420
(Zip
Code)
|
Registrant’s
telephone number, including area code: (952) 888-8801
Not
Applicable
(Former
name or former address, if changed since last report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Section
2 — Financial Information
Item
2.02 Results of Operations and Financial
Condition.
On May
22, 2008, The Toro Company announced its earnings for the three and six months
ended May 2, 2008.
Attached
to this Current Report on Form 8-K as Exhibit 99.1 is a copy of The Toro
Company’s press release in connection with the announcement. The
information in this Item 2.02, including the exhibit attached hereto, is
furnished pursuant to Item 2.02 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 liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except as shall be expressly set forth by specific
reference in such filing.
Section
9 — Financial Statements and Exhibits
Item
9.01 Financial Statements and
Exhibits
(d) Exhibits.
|
Exhibit
No.
|
Description
|
|
99.1
|
Press
release dated May 22, 2008 (furnished
herewith).
|
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 thereunto
duly authorized.
THE TORO
COMPANY
(Registrant)
|
Date: May
22, 2008
|
By
/s/ Stephen P.
Wolfe
|
|
Stephen
P. Wolfe
|
|
|
Vice
President, Finance
|
|
|
and
Chief Financial Officer
|
|
|
(duly
authorized officer and principal financial
officer)
|
EXHIBIT
INDEX
|
EXHIBIT
NUMBER
|
DESCRIPTION
|
|
99.1
|
Press
release dated May 22, 2008 (furnished
herewith).
|
Investor
Relations
John
Wright
Director,
Investor Relations
(952)
887-8865, invest@toro.com
Media
Relations
Branden
Happel
Manager,
Public Relations
(952)
887-8930, pr@toro.com
www.thetorocompany.com
For
Immediate Release
TORO REPORTS SECOND QUARTER
RESULTS
|
·
|
Company
reports net earnings per share of
$1.60
|
|
·
|
Significant
improvement in channel inventory
|
|
·
|
Board
authorizes repurchase of 4 million additional shares and declares
quarterly dividend
|
BLOOMINGTON,
Minn. (May 22, 2008) – The Toro Company (NYSE: TTC) today reported net earnings
of $62.8 million, or $1.60 per share, on net sales of $638.5 million for its
fiscal second quarter ended May 2, 2008. In the comparable fiscal
2007 period, the company reported net earnings of $75.0 million, or $1.77 per
share, on net sales of $686.7 million.
For the
year to date, Toro reported net earnings of $81.4 million, or $2.07 per share,
on net sales of $1,044.3 million. In the first half of fiscal 2007,
the company reported net earnings of $93.4 million, or $2.21 per share, on net
sales of $1,065.7 million.
“Fiscal
2008 has been a challenging year due to a weakening domestic economy, late
spring and cautious ordering,” said Michael J. Hoffman, Toro’s chairman and
chief executive officer. “As a result, we have taken prudent actions to adjust
production levels, control costs, and work with our channel partners on field
inventory – which is significantly lower compared to last year. Our financial
condition remains strong and we will keep investing to grow our business for the
long term.”
The
company’s continued strong cash flow prompted its board of directors to
authorize the repurchase of up to 4 million additional shares of common stock.
The Board also declared a regular quarterly cash dividend of $0.15 per common
share, payable July 11, 2008 to shareholders of record on June 20,
2008.
SEGMENT
RESULTS
Professional
|
·
|
Professional
segment net sales for the fiscal 2008 second quarter decreased 4.0 percent
to $429.9 million. Sales declined in nearly all product
categories domestically, but increased modestly in most categories outside
the United States. Cautious ordering by customers, challenging domestic
economic conditions and distribution changes resulted in lower quarterly
sales for most domestic businesses. For the year to date, professional
segment net sales increased 0.4 percent to $723.1
million.
|
|
·
|
Professional
segment earnings for the fiscal 2008 second quarter were $96.6 million,
down 10.9 percent compared with the fiscal 2007 second
quarter. For the year to date, professional segment earnings
totaled $149.1 million, down 4.9
percent.
|
Residential
|
·
|
Residential
segment net sales for the fiscal 2008 second quarter declined 11.8 percent
to $201.3 million. Sales declined in most domestic product
categories due to weak economic conditions and a late-arriving spring that
affected customer purchases. For the year to date, residential
segment net sales declined 6.2 percent to $309.5
million.
|
|
·
|
Residential
segment earnings for the fiscal 2008 second quarter were $21.1 million,
down 23.2 percent compared with the fiscal 2007 second
quarter. For the year to date, residential segment earnings
totaled $23.9 million, down 24.9
percent.
|
REVIEW OF
OPERATIONS
Gross
margin for the fiscal 2008 second quarter was 35.7 percent compared with 35.6
percent in the comparable fiscal 2007 period. For the year to date,
gross margin was 36.1 percent and flat as a percent of sales with the first half
of fiscal 2007. Higher commodity and fuel costs were offset by
favorable product mix and currency, and the continued focus on cost reductions
and productivity improvements achieved through the company’s GrowLean
initiative.
Selling,
general and administrative (SG&A) expenses for the fiscal 2008 second
quarter declined $0.9 million, but increased to 19.6 percent of net sales from
18.3 percent in the fiscal 2007 second quarter. For the year to date,
SG&A expenses were 23.2 percent of net sales compared with 22.3 percent in
the prior year’s first half. Despite lower sales, the company
continued to increase spending for marketing and engineering investments.
Interest
expense for the second quarter was down $0.4 million, a decrease of 6.4 percent,
compared to the prior year’s second quarter. For the year to date,
interest expense totaled $10.3 million – essentially flat compared to the first
half of fiscal 2007.
The
effective tax rate for the second quarter of fiscal 2008 was 35.0 percent
compared with 34.6 percent in the fiscal 2007 second quarter. This year’s second
quarter tax rate was higher due to the expiration of the federal Research and
Engineering Tax Credit on December 31, 2007.
Accounts
receivable as of the end of the fiscal 2008 second quarter totaled $547.2
million, down $30.0 million or 5.2 percent, on a sales decrease of $48.2
million, or 7 percent. Net inventories increased by $17.5 million, or
7.1 percent compared with the end of the fiscal 2007 second
quarter. Cash used in operating activities improved by $9 million in
spite of lower year to date net earnings.
BUSINESS
OUTLOOK
Commenting
on the company’s outlook for the remainder of fiscal 2008, Hoffman
said: “We remain focused on managing our business in light of these
difficult conditions, and will continue to drive customer demand for our
innovative products. Field inventories are in good shape, our strategic
direction is sound, and our cash flow remains strong. Additionally, we are
encouraged by the tremendous efforts of all our employees and channel partners
around the world.”
Looking
ahead, the company expects fiscal 2008 net sales to be roughly equal to fiscal
2007 net sales of $1,876.9 million with net earnings per share flat to down 5
percent from the $3.40 per share reported for fiscal 2007.
The Toro
Company is a leading worldwide provider of outdoor maintenance and
beautification products for home, recreation and commercial
landscapes.
LIVE
CONFERENCE CALL
May
22, 10:00 a.m. CST
www.thetorocompany.com/invest
The
Toro Company will conduct a conference call and webcast for investors beginning
at 10:00 a.m. Central Time (CST) on May 22, 2008. 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.
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 that could cause
actual results to differ materially from those projected or implied. These
uncertainties include factors that affect all businesses operating in a global
market as well as matters specific to Toro. Particular risks and uncertainties
that may affect the company’s operating results or overall financial position at
the present include: slow growth rates in global and domestic economies,
resulting in rising unemployment and weakened consumer confidence; the threat of
further terrorist acts and war, which may result in contraction of the U.S. and
worldwide economies; fluctuations in the cost and availability of raw materials,
including steel, resins and other commodities; rising fuel and other costs of
transportation; the impact of abnormal weather patterns and natural disasters;
the level of growth in our markets, including the golf market; reduced
government spending for grounds maintenance equipment due to reduced tax revenue
and tighter government budgets; dependence on The Home Depot as a customer for
the residential segment; elimination of shelf space for our products at
retailers; inventory adjustments or changes in purchasing patterns by our
customers; market acceptance of existing and new products; increased
competition; our ability to achieve the goals for our current three-year growth,
profit and asset management initiative called “GrowLean” which is intended to
improve our revenue growth, after-tax return on sales and working capital
efficiency; our increased dependence on international sales and the risks
attendant to international operations; interest rates and currency movements
including, in particular,
our
exposure to foreign currency risk; our relationships with our distribution
channel partners, including the financial viability of distributors and dealers;
our ability to successfully achieve our plans for and integrate acquisitions and
manage alliances; the costs and effects of complying with changes in tax,
fiscal, government and other regulatory policies, including rules relating to
environmental, health and safety matters; unforeseen product quality problems in
the development, production and usage of new and existing products; loss of or
changes in executive management or key employees; ability of management to
manage around unplanned events; our reliance on our intellectual property rights
and the absence of infringement of the intellectual property rights of
others; the occurrence of litigation or claims, including 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)
--more--
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
2,
2008
|
May
4,
2007
|
May
2,
2008
|
May
4,
2007
|
|||||||||||||
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Net
sales
|
$ | 638,510 | $ | 686,653 | $ | 1,044,309 | $ | 1,065,741 | ||||||||
|
Gross
profit
|
227,766 | 244,716 | 376,903 | 384,781 | ||||||||||||
|
Gross
profit percent
|
35.7 | % | 35.6 | % | 36.1 | % | 36.1 | % | ||||||||
|
Selling,
general, and administrative expense
|
124,943 | 125,843 | 242,060 | 238,124 | ||||||||||||
|
Earnings
from operations
|
102,823 | 118,873 | 134,843 | 146,657 | ||||||||||||
|
Interest
expense
|
(5,419 | ) | (5,789 | ) | (10,302 | ) | (10,276 | ) | ||||||||
|
Other
(expense) income, net
|
(798 | ) | 1,476 | 900 | 3,867 | |||||||||||
|
Earnings
before income taxes
|
96,606 | 114,560 | 125,441 | 140,248 | ||||||||||||
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Provision
for income taxes
|
33,822 | 39,594 | 44,030 | 46,832 | ||||||||||||
|
Net
earnings
|
$ | 62,784 | $ | 74,966 | $ | 81,411 | $ | 93,416 | ||||||||
|
Basic
net earnings per share
|
$ | 1.64 | $ | 1.82 | $ | 2.12 | $ | 2.27 | ||||||||
|
Diluted
net earnings per share
|
$ | 1.60 | $ | 1.77 | $ | 2.07 | $ | 2.21 | ||||||||
|
Weighted
average number of shares of common
stock
outstanding – Basic
|
38,239 | 41,098 | 38,313 | 41,119 | ||||||||||||
|
Weighted
average number of shares of common
stock
outstanding – Diluted
|
39,126 | 42,253 | 39,263 | 42,255 | ||||||||||||
Segment
Data (Unaudited)
(Dollars
in thousands)
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
Segment Net
Sales
|
May
2,
2008
|
May
4,
2007
|
May
2,
2008
|
May
4,
2007
|
||||||||||||
|
Professional
|
$ | 429,884 | $ | 447,857 | $ | 723,080 | $ | 719,999 | ||||||||
|
Residential
|
201,315 | 228,204 | 309,491 | 330,062 | ||||||||||||
|
Other
|
7,311 | 10,592 | 11,738 | 15,680 | ||||||||||||
|
Total *
|
$ | 638,510 | $ | 686,653 | $ | 1,044,309 | $ | 1,065,741 | ||||||||
|
*
Includes international sales of
|
$ | 197,770 | $ | 188,861 | $ | 356,227 | $ | 321,474 | ||||||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
Segment Earnings
(Loss) Before Income Taxes
|
May
2,
2008
|
May
4,
2007
|
May
2,
2008
|
May
4,
2007
|
||||||||||||
|
Professional
|
$ | 96,616 | $ | 108,490 | $ | 149,126 | $ | 156,850 | ||||||||
|
Residential
|
21,073 | 27,430 | 23,897 | 31,809 | ||||||||||||
|
Other
|
(21,083 | ) | (21,360 | ) | (47,582 | ) | (48,411 | ) | ||||||||
|
Total
|
$ | 96,606 | $ | 114,560 | $ | 125,441 | $ | 140,248 | ||||||||
--more--
THE
TORO COMPANY AND SUBSIDIARIES
Condensed
Consolidated Balance Sheets (Unaudited)
(Dollars
in thousands)
|
May
2,
2008
|
May
4,
2007
|
|||||||
|
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ | 32,053 | $ | 40,797 | ||||
|
Receivables,
net
|
547,192 | 577,223 | ||||||
|
Inventories,
net
|
265,428 | 247,906 | ||||||
|
Prepaid
expenses and other current assets
|
13,698 | 12,904 | ||||||
|
Deferred
income taxes
|
56,633 | 58,042 | ||||||
|
Total
current assets
|
915,004 | 936,872 | ||||||
|
Property,
plant, and equipment, net
|
172,203 | 169,123 | ||||||
|
Deferred
income taxes
|
6,508 | 1,861 | ||||||
|
Goodwill
and other assets, net
|
110,172 | 98,405 | ||||||
|
Total
assets
|
$ | 1,203,887 | $ | 1,206,261 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
portion of long-term debt
|
$ | 2,341 | $ | 75,000 | ||||
|
Short-term
debt
|
151,500 | 45,825 | ||||||
|
Accounts
payable
|
117,425 | 120,642 | ||||||
|
Accrued
liabilities
|
275,911 | 280,069 | ||||||
|
Total
current liabilities
|
547,177 | 521,536 | ||||||
|
Long-term
debt, less current portion
|
227,753 | 223,141 | ||||||
|
Deferred
revenue and other long-term liabilities
|
16,813 | 9,681 | ||||||
|
Stockholders’
equity
|
412,144 | 451,903 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 1,203,887 | $ | 1,206,261 | ||||
--more--
THE
TORO COMPANY AND SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(Dollars
in thousands)
|
Six
Months Ended
|
||||||||
|
May
2,
2008
|
May
4,
2007
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
earnings
|
$ | 81,411 | $ | 93,416 | ||||
|
Adjustments
to reconcile net earnings to net cash
used
in operating activities:
|
||||||||
|
Equity
losses from investments
|
324 | 125 | ||||||
|
Provision
for depreciation and amortization
|
21,836 | 20,393 | ||||||
|
Gain
on disposal of property, plant, and equipment
|
(81 | ) | (99 | ) | ||||
|
Gain
on sale of a business
|
(113 | ) | - | |||||
|
Stock-based compensation
expense
|
3,281 | 3,828 | ||||||
|
Increase in deferred income
taxes
|
(1,463 | ) | (1,982 | ) | ||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Receivables
|
(260,988 | ) | (282,982 | ) | ||||
|
Inventories
|
(13,920 | ) | (5,628 | ) | ||||
|
Prepaid expenses and other
assets
|
(2,870 | ) | (2,322 | ) | ||||
|
Accounts payable, accrued
liabilities, deferred revenue, and otherlong-term
liabilities
|
61,291 | 54,941 | ||||||
|
Net
cash used in operating activities
|
(111,292 | ) | (120,310 | ) | ||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchases
of property, plant, and equipment
|
(22,479 | ) | (21,752 | ) | ||||
|
Proceeds
from asset disposals
|
871 | 117 | ||||||
|
Increase
in investment in affiliates
|
(250 | ) | - | |||||
|
Increase
in other assets
|
(279 | ) | (48 | ) | ||||
|
Proceeds
from sale of a business
|
1,048 | - | ||||||
|
Acquisitions,
net of cash acquired
|
(1,000 | ) | (1,088 | ) | ||||
|
Net
cash used in investing activities
|
(22,089 | ) | (22,771 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Increase
in short-term debt
|
151,128 | 45,455 | ||||||
|
Issuance
of long-term debt, net of costs
|
- | 121,436 | ||||||
|
Repayments
of long-term debt, net of costs
|
(750 | ) | - | |||||
|
Excess
tax benefits from stock-based awards
|
339 | 5,464 | ||||||
|
Proceeds
from exercise of stock options
|
1,718 | 6,992 | ||||||
|
Purchases
of Toro common stock
|
(36,906 | ) | (41,912 | ) | ||||
|
Dividends
paid on Toro common stock
|
(11,478 | ) | (9,865 | ) | ||||
|
Net
cash provided by financing activities
|
104,051 | 127,570 | ||||||
|
Effect
of exchange rates on cash
|
(664 | ) | 785 | |||||
|
Net
decrease in cash and cash equivalents
|
(29,994 | ) | (14,726 | ) | ||||
|
Cash
and cash equivalents as of the beginning of the period
|
62,047 | 55,523 | ||||||
|
Cash
and cash equivalents as of the end of the period
|
$ | 32,053 | $ | 40,797 | ||||