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.
