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): August 21,
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 August
21, 2008, The Toro Company announced its earnings for the three and nine months
ended August 1, 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 August 21, 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: August
21, 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 August 21, 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 THIRD QUARTER
2008 RESULTS
|
·
|
Company
delivers net earnings per share of
$0.99
|
|
·
|
Net
sales up 3 percent driven by strength of international
business
|
|
·
|
Operating
cash flow improves by $42 million driven by lower
inventories
|
BLOOMINGTON,
Minn. (August 21, 2008) – The Toro Company (NYSE: TTC) today reported net
earnings of $38.2 million, or $0.99 per share, on net sales of $492.6 million
for its fiscal third quarter ended August 1, 2008. In the comparable
fiscal 2007 period, the company reported net earnings of $42.5 million, or $1.02
per share, on net sales of $478.7 million.
For the
year to date, Toro reported net earnings of $119.6 million, or $3.06 per share,
on net sales of $1,536.9 million. In the comparable fiscal 2007
period, Toro reported net earnings of $135.9 million, or $3.23 per share, on net
sales of $1,544.4 million.
“As
expected, weakness in the domestic economy dampened demand through our fiscal
third quarter, however, our strong international business enabled us to deliver
modest sales growth,” said Michael J. Hoffman, Toro’s chairman and chief
executive officer. “Additionally, our actions to manage production,
reduce inventories and control expenses improved our working capital position
and increased our operating cash flow significantly.”
The
company repurchased 1.4 million common shares during the third quarter for a
total of $49.8 million, and currently has authorization to repurchase up to 3.0
million additional shares.
SEGMENT
RESULTS
Professional
|
·
|
Professional
segment net sales for the fiscal 2008 third quarter increased 5.9 percent
to $351.6 million. Strong worldwide sales of golf maintenance
equipment and golf irrigation systems, along with an increase in domestic
shipments for landscape contractor products, more than offset a decline in
professionally-installed residential and commercial irrigation
products. For the year to date, professional segment net sales
grew 2.2 percent to $1,074.7
million.
|
|
·
|
Professional
segment earnings for the fiscal 2008 third quarter were $71.1 million, up
0.3 percent compared with the fiscal 2007 third quarter. For
the year to date, professional segment earnings totaled $220.2 million,
down 3.3 percent.
|
Residential
|
·
|
Residential
segment net sales for the fiscal 2008 third quarter declined 0.6 percent
to $132.1 million. Increased shipments of snowthrower products
in North America and strong international sales were offset by lower
shipments of domestic walk power mowers. For the year to date,
residential segment net sales declined 4.6 percent to $441.6
million.
|
|
·
|
Residential
segment earnings for the fiscal 2008 third quarter were $3.4 million, down
58.3 percent compared with the fiscal 2007 third quarter. For
the year to date, residential segment earnings totaled $27.3 million, down
31.8 percent.
|
REVIEW OF
OPERATIONS
Gross
margin for the fiscal 2008 third quarter was 35.3 percent compared with 37.1
percent in the comparable fiscal 2007 period. For the year to date,
gross margin was 35.8 percent compared with 36.4 percent in the first nine
months of fiscal 2007. The margin decline in both the fiscal 2008
third quarter and year to date was primarily the result of higher commodity and
freight costs, and lower production volumes.
Selling,
general and administrative (SG&A) expenses for the fiscal 2008 third quarter
improved as a percent of sales to 22.5 percent from 23.1 percent in the same
period last year due to lower incentive expenses somewhat offset by increased
spending for marketing and engineering investments. For the year to
date, SG&A expenses were 23.0 percent of net sales compared with 22.6
percent in the prior year’s first nine months. SG&A expenses for
the year to date were higher mainly due to increased marketing expenses and
investments in engineering, which were somewhat offset by lower incentive
expenses.
Interest
expense for the third quarter was down $0.3 million compared to the prior year’s
third quarter. For the year to date, interest expense totaled $14.9
million, down $0.3 million compared to the first nine months of fiscal
2007.
The
effective tax rate for the third quarter of fiscal 2008 was 34.2 percent
compared with 33.4 percent in the fiscal 2007 third quarter. This
year’s third quarter tax rate was mainly higher due to the December 31, 2007
expiration of the federal Research and Engineering Tax Credit.
Accounts
receivable as of the end of the fiscal 2008 third quarter totaled $365 million,
down $14.8 million or 3.9 percent on a sales increase of 2.9 percent for the
quarter. Net inventories decreased by $31.7 million, or 13 percent,
compared with last year’s third quarter. Cash generated by operating
activities through the first nine months increased by $42 million compared with
the same period in fiscal 2007, a reflection of the company’s commitment to
improve asset management.
BUSINESS
OUTLOOK
The
company expects overall economic conditions to remain difficult for the
remainder of fiscal 2008. “In the current environment, we’ll maintain
our focus on driving retail demand, managing inventory levels and addressing
rising commodity costs,” said Hoffman. “Long-term, we win in the
marketplace by delivering innovative, high-quality products that solve
customers’ problems. To that end, we’re looking forward to upcoming
industry events this fall where we expect to introduce a number of exciting
products for the new fiscal year.”
The
company reaffirmed that it expects fiscal 2008 net sales to be roughly equal to
fiscal 2007 net sales of $1,876.9 million and now expects net earnings per share
to be down 6 to 9 percent from the $3.40 per share reported for fiscal
2007.
The Toro
Company is a leading worldwide provider of outdoor maintenance equipment and
beautification products to help customers care for golf courses, sports fields,
public green spaces, commercial and residential properties, and agricultural
fields.
LIVE
CONFERENCE CALL
August
21, 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 August 21, 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 or other 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
release.
(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
1, 2008
|
August
3,
2007
|
August
1, 2008
|
August
3,
2007
|
|||||||||||||
|
Net
sales
|
$ | 492,635 | $ | 478,707 | $ | 1,536,944 | $ | 1,544,448 | ||||||||
|
Gross
profit
|
173,940 | 177,443 | 550,843 | 562,224 | ||||||||||||
|
Gross
profit percent
|
35.3 | % | 37.1 | % | 35.8 | % | 36.4 | % | ||||||||
|
Selling,
general, and administrative expense
|
110,874 | 110,598 | 352,934 | 348,722 | ||||||||||||
|
Earnings
from operations
|
63,066 | 66,845 | 197,909 | 213,502 | ||||||||||||
|
Interest
expense
|
(4,645 | ) | (4,959 | ) | (14,947 | ) | (15,235 | ) | ||||||||
|
Other
(expense) income, net
|
(368 | ) | 1,954 | 532 | 5,821 | |||||||||||
|
Earnings
before income taxes
|
58,053 | 63,840 | 183,494 | 204,088 | ||||||||||||
|
Provision
for income taxes
|
19,826 | 21,354 | 63,856 | 68,186 | ||||||||||||
|
Net
earnings
|
$ | 38,227 | $ | 42,486 | $ | 119,638 | $ | 135,902 | ||||||||
|
Basic
net earnings per share
|
$ | 1.01 | $ | 1.05 | $ | 3.13 | $ | 3.32 | ||||||||
|
Diluted
net earnings per share
|
$ | 0.99 | $ | 1.02 | $ | 3.06 | $ | 3.23 | ||||||||
|
Weighted
average number of shares of common
stock
outstanding – Basic
|
37,901 | 40,569 | 38,177 | 40,938 | ||||||||||||
|
Weighted
average number of shares of common
stock
outstanding – Diluted
|
38,708 | 41,803 | 39,039 | 42,113 | ||||||||||||
Segment
Data (Unaudited)
(Dollars
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
Segment Net
Sales
|
August
1, 2008
|
August
3, 2007
|
August
1, 2008
|
August
3, 2007
|
||||||||||||
|
Professional
|
$ | 351,598 | $ | 332,014 | $ | 1,074,678 | $ | 1,052,013 | ||||||||
|
Residential
|
132,143 | 132,981 | 441,634 | 463,043 | ||||||||||||
|
Other
|
8,894 | 13,712 | 20,632 | 29,392 | ||||||||||||
|
Total *
|
$ | 492,635 | $ | 478,707 | $ | 1,536,944 | $ | 1,544,448 | ||||||||
|
*
Includes international sales of
|
$ | 138,682 | $ | 120,319 | $ | 494,909 | $ | 441,793 | ||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
Segment Earnings
(Loss) Before Income Taxes
|
August
1, 2008
|
August
3, 2007
|
August
1, 2008
|
August
3, 2007
|
||||||||||||
|
Professional
|
$ | 71,113 | $ | 70,887 | $ | 220,239 | $ | 227,737 | ||||||||
|
Residential
|
3,436 | 8,246 | 27,333 | 40,055 | ||||||||||||
|
Other
|
(16,496 | ) | (15,293 | ) | (64,078 | ) | (63,704 | ) | ||||||||
|
Total
|
$ | 58,053 | $ | 63,840 | $ | 183,494 | $ | 204,088 | ||||||||
THE
TORO COMPANY AND SUBSIDIARIES
Condensed
Consolidated Balance Sheets (Unaudited)
(Dollars
in thousands)
|
August
1, 2008
|
August
3, 2007
|
|||||||
|
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ | 55,013 | $ | 94,192 | ||||
|
Receivables,
net
|
364,988 | 379,788 | ||||||
|
Inventories,
net
|
211,760 | 243,437 | ||||||
|
Prepaid
expenses and other current assets
|
14,811 | 13,018 | ||||||
|
Deferred
income taxes
|
56,147 | 58,499 | ||||||
|
Total
current assets
|
702,719 | 788,934 | ||||||
|
Property,
plant, and equipment, net
|
173,812 | 170,748 | ||||||
|
Deferred
income taxes
|
6,485 | 1,861 | ||||||
|
Goodwill
and other assets, net
|
109,319 | 98,563 | ||||||
|
Total
assets
|
$ | 992,335 | $ | 1,060,106 | ||||
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
portion of long-term debt
|
$ | 2,441 | $ | - | ||||
|
Short-term
debt
|
- | 1,449 | ||||||
|
Accounts
payable
|
86,824 | 83,366 | ||||||
|
Accrued
liabilities
|
258,246 | 266,383 | ||||||
|
Total
current liabilities
|
347,511 | 351,198 | ||||||
|
Long-term
debt, less current portion
|
227,266 | 223,157 | ||||||
|
Deferred
revenue and other long-term liabilities
|
15,836 | 10,354 | ||||||
|
Stockholders’
equity
|
401,722 | 475,397 | ||||||
|
Total
liabilities and stockholders’ equity
|
$ | 992,335 | $ | 1,060,106 | ||||
THE
TORO COMPANY AND SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(Dollars
in thousands)
|
Nine
Months Ended
|
||||||||
|
August
1, 2008
|
August
3, 2007
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
earnings
|
$ | 119,638 | $ | 135,902 | ||||
|
Adjustments
to reconcile net earnings to net cash
provided
by operating activities:
|
||||||||
|
Equity
losses from investments
|
439 | 136 | ||||||
|
Provision
for depreciation and amortization
|
32,196 | 30,263 | ||||||
|
Gain
on disposal of property, plant, and equipment
|
(89 | ) | (133 | ) | ||||
|
Gain on sale of
business
|
(113 | ) | - | |||||
|
Stock-based compensation
expense
|
4,366 | 5,474 | ||||||
|
Increase in deferred income
taxes
|
(1,490 | ) | (2,323 | ) | ||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Receivables
|
(79,252 | ) | (86,942 | ) | ||||
|
Inventories
|
39,663 | 101 | ||||||
|
Prepaid expenses and other
assets
|
(3,712 | ) | (3,693 | ) | ||||
|
Accounts payable, accrued
expenses, and deferred revenue and other long-term
liabilities
|
14,059 | 4,948 | ||||||
|
Net
cash provided by operating activities
|
125,705 | 83,733 | ||||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchases
of property, plant, and equipment
|
(34,304 | ) | (32,863 | ) | ||||
|
Proceeds
from asset disposals
|
880 | 152 | ||||||
|
Increase
in investment in affiliates
|
(250 | ) | - | |||||
|
(Increase)
decrease in other assets
|
(288 | ) | 734 | |||||
|
Proceeds
from sale of a business
|
1,048 | - | ||||||
|
Acquisition,
net of cash acquired
|
(1,000 | ) | (1,088 | ) | ||||
|
Net
cash used in investing activities
|
(33,914 | ) | (33,065 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
(Decrease)
increase in short-term debt
|
(372 | ) | 998 | |||||
|
Issuance
of long-term debt, net of costs
|
- | 121,465 | ||||||
|
Repayments
of long-term debt
|
(1,124 | ) | (75,000 | ) | ||||
|
Excess
tax benefits from stock-based awards
|
3,511 | 12,956 | ||||||
|
Proceeds
from exercise of stock options
|
3,506 | 11,456 | ||||||
|
Purchases
of Toro common stock
|
(86,679 | ) | (70,382 | ) | ||||
|
Dividends
paid on Toro common stock
|
(17,170 | ) | (14,729 | ) | ||||
|
Net
cash used in financing activities
|
(98,328 | ) | (13,236 | ) | ||||
|
Effect
of exchange rates on cash
|
(497 | ) | 1,237 | |||||
|
Net
(decrease) increase in cash and cash equivalents
|
(7,034 | ) | 38,669 | |||||
|
Cash
and cash equivalents as of the beginning of the fiscal
period
|
62,047 | 55,523 | ||||||
|
Cash
and cash equivalents as of the end of the fiscal period
|
$ | 55,013 | $ | 94,192 | ||||