Toro 3rd Quarter Profits Exceed Consensus Analyst Expectations; On Track for Full Year Analyst Estimates
17 August 2000
Toro 3rd Quarter Profits Exceed Consensus Analyst Expectations; On Track for Full Year Analyst Estimates
BLOOMINGTON, Minn., Aug. 17 The Toro Company
today reported that profits for the third quarter ended July 28, 2000,
increased substantially over the same period last year, exceeding analyst
expectations for the quarter.
Dilutive earnings per share (EPS) for the third quarter were $1.26,
compared to 78 cents after restructuring and other unusual charges in last
year's third quarter, an increase of 61.5 percent. Net income for the quarter
was $16.4 million compared to $10.3 million during last year's third quarter,
an increase of 59.3 percent. Sales for the quarter increased by 6.1 percent
to $345.2 million compared to $325.3 million for the same period last year.
"We're very pleased with our overall earnings performance for the quarter,
particularly since the weather did not favor sales of some turf products,"
said Kendrick B. Melrose, chairman and chief executive officer of Toro.
"Despite the weather, we still recorded a modest sales increase. We also
received an early boost from '5 by Five' reengineering efforts as our
divisions and departments began to refocus on process improvement and expense
management."
Toro's "5 by Five" program was announced last May as a long term strategy
to reposition the company for the New Economy, and to improve after tax yield
to at least 5 percent by the end of fiscal 2003.
Toro's nine month dilutive EPS was $3.39, compared to $2.66 in the same
period last year, an increase of 27.4%. Net income for the nine month period
was $44.3 million, compared to $35.2 million after restructuring and other
unusual expense during the nine month period last year. Year-to-date sales
were $1.07 billion, compared to $1.01 billion last year, an increase of
5.7 percent.
Sales for the professional segment increased by 6.6 percent for the
quarter and 7.3 percent for the nine months, led by a growing demand for
landscape contractor products and commercial equipment. The golf equipment
market continues to be strong, although the number of new courses planned,
while still at a high level, is not as robust as a year ago. Toro continues
to do well in the new golf area but is shifting its program emphasis to the
growing market for golf course renovations and has begun an aggressive
marketing program supporting the renovation of existing courses. Nonetheless,
the irrigation division lagged expectations due to some product quality issues
and delays in key new product introductions. International professional sales
were also up for the quarter due primarily to strong sales of commercial
equipment, particularly to the golf market. World Wide Ag sales declined due
to a competitive marketplace.
Operating profit for the professional segment in the third quarter of 2000
was $36.4 million, a 4.9 percent decline from last year. Profitability was
lower due to the aforementioned irrigation problems and a poor performance
from World Wide Ag. Toro said it has begun an aggressive corrective action
plan to address issues in these two divisions, and believes they have high
growth potential long term.
Residential sales were flat for the quarter and the year, due to the
effect of weather on lawn mower and do-it-yourself irrigation sales, field
inventory management and discontinued product lines. Offsetting these
declines were strong early season shipments of snowthrowers due to high demand
by Toro dealers who want product on the floor to leverage the increased
marketing awareness generated by the introduction of Toro-brand gas
snowthrowers into the home center channel. Riding product sales were also up
for the quarter. International residential sales increased due to the
introduction of Toro Personal Pace(TM) lawn mowers to international markets,
strong riding product sales and early season shipments of snowthrowers.
Operating profit for the residential segment was $5.4 million for the
quarter and $26.8 million for the nine months, compared to a $1.2 million loss
after restructuring and other unusual charges last year in the third quarter,
and an operating profit of $15.2 million for the nine-month period in fiscal
1999. Operating profit increased due to margin improvement, better cost
containment, no restructuring and other unusual costs, and the beginning
effects of "5 by Five."
Toro's other segment, comprised of Toro-owned distributors and corporate
expenses, continued to improve due to a combination of lower corporate
spending and additional profitability by the Toro-owned distribution
companies.
Gross margin declined slightly for the quarter to 38.6 percent compared to
38.7 percent for the third quarter last year. Sales, general and
administrative expense for the quarter declined as a percent of sales from
31.7 percent during last year's third quarter to 29.5 percent this year. Toro
had no restructuring and other unusual expenses related to the 1998 Profit
Improvement Program for the quarter and the nine months, compared to
$.7 million for the same periods last year.
"Toro's '5 by Five' programs are beginning to take effect and we expect in
the years ahead to see increased benefits from these efforts as restructuring,
business redefinition, and process improvement will help transform us into an
'Old Economy' company with 'New Economy' ideas. Toro's '5 by Five' goal is to
double fiscal 1999 net earnings by 2003. We are on track for full year
consensus analyst expectations for fiscal 2000 and 2001."
The Toro Company has more than 4,700 employees around the world and is a
leading provider of outdoor maintenance and beautification products for home,
recreation and commercial landscapes.
Statements made in this news release, including those related to expected
fiscal 2000 financial performance and future performance related to profit
improvement programs, including the 5 by Five program, are forward-looking and
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements involve risks and
uncertainties that may cause results to differ materially from those set forth
in those statements. Among other things, profit improvement and continued
growth will depend on market acceptance of new products, the company's ability
to reduce expense and to implement all aspects of the new profit improvement
program, as well as interest rates or inflation. 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, as well as
threatened or real inflationary pressures, 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 28, July 30, July 28, July 30,
2000 1999 2000 1999
Net sales $345,166 $325,317 $1,067,204 $1,009,186
Gross profit 133,287 125,839 395,175 366,637
Gross profit percent 38.6% 38.7% 37.0% 36.3%
Selling, general, and
administrative
expense 101,867 103,140 304,585 292,276
Restructuring and
other unusual expense -- 722 -- 722
Earnings from
operations 31,420 21,977 90,590 73,639
Interest expense (7,651) (6,790) (21,060) (18,517)
Other income, net 2,329 1,736 748 2,599
Earnings before
income taxes 26,098 16,923 70,278 57,721
Provision for
income taxes 9,656 6,600 26,003 22,511
Net earnings $16,442 $10,323 $44,275 $35,210
Basic earnings
per share $1.29 $.80 $3.46 $2.72
Diluted earnings
per share $1.26 $.78 $3.39 $2.66
Weighted average number
of shares of common
stock outstanding
- Basic 12,745 12,825 12,799 12,961
Weighted average number
of shares of common
stock outstanding
- Dilutive 13,071 13,244 13,079 13,235
Net Sales by Segment (Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
Professional $235,662 $221,129 $693,967 $646,536
Residential 94,553 94,738 349,759 352,154
Other 14,951 9,450 23,478 10,496
Total* $345,166 $325,317 $1,067,204 $1,009,186
* Includes
international sales
of $65,291 $55,836 $221,178 $200,815
Earnings Before Income Taxes by Segment (Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
Professional $36,398 $38,287 $96,735 $101,971
Residential 5,400 (1,199) 26,760 15,192
Other (15,700) (20,165) (53,217) (59,442)
Total $26,098 $16,923 $70,278 $57,721
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
July 28, July 30,
2000 1999
ASSETS
Cash and cash equivalents $65 $1,915
Receivables, net 368,134 339,748
Inventories, net 213,461 194,225
Prepaid expenses and other current assets 10,905 8,352
Deferred income taxes 40,638 39,154
Total current assets 633,203 583,394
Property, plant, and equipment, net 128,182 122,799
Deferred income taxes 8,876 3,786
Goodwill and other assets 127,736 128,230
Total assets $897,997 $838,209
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $485 $644
Short-term debt 121,775 115,356
Accounts payable 43,544 39,119
Other accrued liabilities 205,430 196,153
Total current liabilities 371,234 351,272
Long-term debt, less current portion 195,198 195,617
Other long-term liabilities 6,919 6,325
Stockholders' equity 324,646 284,995
Total liabilities and stockholders' equity $897,997 $838,209
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Nine Months Ended
July 28, July 30,
2000 1999
Cash flows from operating activities:
Net earnings $44,275 $35,210
Adjustments to reconcile net earnings to net cash
used in operating activities:
Provision for depreciation and amortization 28,199 26,897
(Gain) loss on disposal of property, plant,
and equipment (86) 264
Decrease in deferred income taxes 254 282
Tax benefits related to employee
stock option transactions 854 393
Changes in operating assets and liabilities (108,983) (84,953)
Net cash used in operating activities (35,487) (21,907)
Cash flows from investing activities:
Purchases of property, plant, and equipment (26,143) (18,551)
Proceeds from asset disposals 1,480 256
Decrease (increase) in investment in affiliates 412 (4,901)
Increase in other assets (2,381) (2,207)
Acquisition, net of cash acquired -- (2,748)
Net cash used in investing activities (26,632) (28,151)
Cash flows from financing activities:
Increase in short-term debt 63,512 79,736
Repayments of long-term debt (657) (1,554)
Increase in other long-term liabilities 744 763
Proceeds from exercise of stock options 3,629 3,326
Purchases of common stock (10,859) (24,549)
Dividends on common stock (4,576) (4,619)
Net cash provided by financing activities 51,793 53,103
Foreign currency translation adjustment (1,569) (1,220)
Net (decrease) increase in cash
and cash equivalents (11,895) 1,825
Cash and cash equivalents
at beginning of period 11,960 90
Cash and cash equivalents at end of period $65 $1,915