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 23,
2007
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
23, 2007, The Toro Company announced its earnings for the three and nine months
ended August 3, 2007.
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 23, 2007 related to the announcement of earnings
(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
23, 2007
|
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 23, 2007 related to the announcement of earnings
(furnished herewith).
|
Investor
Relations
John
Wright, Director, Investor Relations
(952)
887-8865
Media
Relations
Connie
Kotke, Manager, Corporate Communications
(952)
887-8984, pr@toro.com
www.thetorocompany.com
For
Immediate Release
TORO
REPORTS RECORD THIRD QUARTER EARNINGS
Net
Earnings Per Share Up 12.1 Percent to $1.02
BLOOMINGTON,
Minn. (August 23, 2007) – The Toro Company (NYSE: TTC) today reported record net
earnings of $42.5 million, or $1.02 per diluted share, on net sales of $478.7
million for its fiscal third quarter ended August 3, 2007. In the
comparable fiscal 2006 period, the company reported net earnings of $40.3
million, or $0.91 per diluted share, on net sales of $477.9
million.
For
the
fiscal nine months, Toro reported net earnings of $135.9 million, or $3.23
per
diluted share, on net sales of $1,544.4 million. In the comparable
2006 period, Toro reported net earnings of $124.7 million, or $2.78 per diluted
share, on net sales of $1,506.5 million.
“In
the
face of challenging economic and market conditions, our earnings performance
in
the third quarter and year-to-date has us on track to deliver another year
of
solid financial results,” said Michael Hoffman, chairman and chief executive
officer. “We continue to benefit from the favorable effects of our
lean initiatives and increased emphasis on asset management. Although
we are not satisfied with our revenue growth, retail demand for our
innovative products outpaced shipments, resulting in lower field inventory
levels. Additionally, we believe our market share position improved
in most businesses.”
SEGMENT
RESULTS
Segment
data are provided in the table following the “Condensed Consolidated Statements
of Earnings.”
Professional
|
·
|
Professional
segment net sales for the fiscal 2007 third quarter increased 3.8
percent
to $332 million. The increase resulted primarily from strong
worldwide growth in shipments and retail sales of landscape contractor
equipment.
|
|
·
|
Professional
segment net sales for the year-to-date increased 3.9 percent to $1,052
million. The year-to-date increase in Professional segment
sales reflects increased worldwide shipments of equipment for golf
courses, sports field and grounds products and irrigation
systems. This increase was somewhat offset by a decline in
landscape contractor shipments resulting in lower field inventory
levels.
|
|
·
|
Professional
segment earnings for the fiscal 2007 third quarter were $70.9 million,
up
13.5 percent from $62.5 million in the fiscal 2006 third
quarter.
|
|
·
|
For
the year-to-date, professional segment earnings totaled $227.7 million,
up
9.3 percent from $208.3 million in the comparable fiscal 2006
period.
|
Residential
|
·
|
Residential
segment sales for the fiscal 2007 third quarter decreased 8.5 percent
to
$133 million. Compared with the 2006 third quarter, strong
growth in domestic shipments of zero-turning-radius riding mowers
was
offset by a significant decline in snowthrower shipments. The decline
in
snowthrower shipments was primarily due to the impact of the mild
winter
in the previous snow season.
|
|
·
|
For
the year-to-date, Residential segment sales are about flat with the
prior
year, at $463 million compared with $463.8 million. The same
factors affecting the quarter results impacted year-to-date sales
for the
segment. Additionally, strong retail acceptance of a new walk
power mower line also helped mitigate the impact of the decline in
snowthrower shipments for the
year-to-date.
|
|
·
|
Residential
segment earnings for the fiscal 2007 third quarter totaled $8.2 million,
down 5.8 percent from $8.8 million in the fiscal 2006 third
quarter.
|
|
·
|
For
the year-to-date, Residential segment earnings totaled $40.1 million,
up
25 percent from $32 million in the comparable fiscal 2006
period.
|
REVIEW
OF OPERATIONS
Gross
margin for the fiscal 2007 third quarter was 37.1 percent compared with 35.6
percent in the prior year’s third quarter. The margin improvement
resulted primarily from productivity and efficiency gains generated by the
company’s lean initiatives and, to a lesser extent, a higher mix of professional
products in the third quarter. For the year-to-date, gross margin
improved to 36.4 percent compared with 35.3 percent for the first nine months
of
fiscal 2006.
Selling,
general and administrative (SG&A) expenses as a percentage of net sales
increased to 23.1 percent compared with 22.7 percent in the fiscal 2006 third
quarter due to higher administrative expenses.
Interest
expense for the fiscal 2007 third quarter totaled $5 million, compared with
$4.7
million in the fiscal 2006 third quarter.
The
effective tax rate in the 2007 third quarter was 33.4 percent compared with
32.6
percent in last year’s third quarter.
Accounts
receivable at the end of the fiscal 2007 third quarter totaled $379.8 million,
down $14.2 million, or 3.6 percent, on net sales that were essentially flat
with
the same period last year.
Net
inventories at the end of the fiscal 2007 third quarter totaled $243.4 million,
down $11.6 million, or 4.5 percent, from the end of the fiscal 2006 third
quarter.
Cash
flow
from operations for the first nine months increased to $83.7 million compared
to
$63.9 million in 2006. This improvement reflects higher operating
profit and the company’s continued focus on asset
management.
BUSINESS
OUTLOOK
“In
the
fiscal year’s final quarter, we remain focused on advancing our market
leadership positions with innovative products while continuing to drive
profitability improvement company-wide,” said Hoffman. “Our strategic
GrowLean initiatives for long-term growth, bottom-line leverage, and a lower
working capital level have us on track to deliver solid full year results and
positions us well for fiscal 2008.”
Given
the
current market conditions and increased focus on reducing field inventory
towards a working capital goal, the company said it expects net sales growth
for
the fiscal year to be approximately 3 percent. The company also noted
that it is narrowing its previous guidance of 11 to 14 percent for net earnings
per diluted share to the higher end of the range. It now expects
fiscal full year net earnings per diluted share to increase 13 to14
percent.
The
Toro
Company is a leading worldwide provider of outdoor maintenance and
beautification products for home, recreation and commercial
landscapes.
LIVE
CONFERENCE CALL
August
23, 2007 10:00 a.m. CDT
www.thetorocompany.com/invest
The
Toro
Company will conduct a conference call and webcast for investors beginning
at
10:00 a.m. Central Time (CDT) on August 23, 2007. 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.
SafeHarbor
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 and other commodities; rising 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; 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)
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
3, 2007
|
August
4, 2006
|
August
3, 2007
|
August
4, 2006
|
|||||||||||||
|
Net
sales
|
$ |
478,707
|
$ |
477,861
|
$ |
1,544,448
|
$ |
1,506,505
|
||||||||
|
Gross
profit
|
177,443
|
170,336
|
562,224
|
532,466
|
||||||||||||
|
Gross
profit percent
|
37.1 | % | 35.6 | % | 36.4 | % | 35.3 | % | ||||||||
|
Selling,
general, and administrative expense
|
110,598
|
108,615
|
348,722
|
340,129
|
||||||||||||
|
Earnings
from operations
|
66,845
|
61,721
|
213,502
|
192,337
|
||||||||||||
|
Interest
expense
|
(4,959 | ) | (4,677 | ) | (15,235 | ) | (14,097 | ) | ||||||||
|
Other
income, net
|
1,954
|
2,756
|
5,821
|
6,088
|
||||||||||||
|
Earnings
before income taxes
|
63,840
|
59,800
|
204,088
|
184,328
|
||||||||||||
|
Provision
for income taxes
|
21,354
|
19,478
|
68,186
|
59,645
|
||||||||||||
|
Net
earnings
|
$ |
42,486
|
$ |
40,322
|
$ |
135,902
|
$ |
124,683
|
||||||||
|
Basic
net earnings per share
|
$ |
1.05
|
$ |
.94
|
$ |
3.32
|
$ |
2.88
|
||||||||
|
Diluted
net earnings per share
|
$ |
1.02
|
$ |
.91
|
$ |
3.23
|
$ |
2.78
|
||||||||
|
Weighted
average number of shares of common
stock
outstanding – Basic
|
40,569
|
42,852
|
40,938
|
43,283
|
||||||||||||
|
Weighted
average number of shares of common
stock
outstanding – Dilutive
|
41,803
|
44,360
|
42,113
|
44,806
|
||||||||||||
--
more
--
THE
TORO COMPANY AND SUBSIDIARIES
Segment
Data (Unaudited)
(Dollars
in thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
Segment
Net Sales
|
August
3, 2007
|
August
4, 2006
|
August
3, 2007
|
August
4, 2006
|
||||||||||||
|
Professional
|
$ |
332,014
|
$ |
319,733
|
$ |
1,052,013
|
$ |
1,012,436
|
||||||||
|
Residential
|
132,981
|
145,308
|
463,043
|
463,786
|
||||||||||||
|
Other
|
13,712
|
12,820
|
29,392
|
30,283
|
||||||||||||
|
Total *
|
$ |
478,707
|
$ |
477,861
|
$ |
1,544,448
|
$ |
1,506,505
|
||||||||
|
*
Includes international sales of
|
$ |
120,319
|
$ |
113,651
|
$ |
441,793
|
$ |
402,000
|
||||||||
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
Segment
Earnings (Loss) Before Income Taxes
|
August
3, 2007
|
August
4, 2006
|
August
3, 2007
|
August
4, 2006
|
||||||||||||
|
Professional
|
$ |
70,887
|
$ |
62,474
|
$ |
227,737
|
$ |
208,311
|
||||||||
|
Residential
|
8,246
|
8,752
|
40,055
|
32,037
|
||||||||||||
|
Other
|
(15,293 | ) | (11,426 | ) | (63,704 | ) | (56,020 | ) | ||||||||
|
Total
|
$ |
63,840
|
$ |
59,800
|
$ |
204,088
|
$ |
184,328
|
||||||||
Condensed
Consolidated Balance Sheets (Unaudited)
(Dollars
in thousands)
|
August
3, 2007
|
August
4, 2006
|
|||||||
|
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$ |
94,192
|
$ |
24,815
|
||||
|
Receivables,
net
|
379,788
|
394,038
|
||||||
|
Inventories,
net
|
243,437
|
255,031
|
||||||
|
Prepaid
expenses and other current assets
|
13,018
|
14,624
|
||||||
|
Deferred
income taxes
|
58,499
|
56,326
|
||||||
|
Total
current assets
|
788,934
|
744,834
|
||||||
|
Property,
plant, and equipment, net
|
170,748
|
163,703
|
||||||
|
Deferred
income taxes
|
1,861
|
-
|
||||||
|
Goodwill
and other assets, net
|
98,563
|
94,931
|
||||||
|
Total
assets
|
$ |
1,060,106
|
$ |
1,003,468
|
||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
portion of long-term debt
|
$ |
-
|
$ |
12
|
||||
|
Short-term
debt
|
1,449
|
24,535
|
||||||
|
Accounts
payable
|
83,366
|
86,998
|
||||||
|
Accrued
liabilities
|
266,383
|
269,145
|
||||||
|
Total
current liabilities
|
351,198
|
380,690
|
||||||
|
Long-term
debt, less current portion
|
223,157
|
175,000
|
||||||
|
Deferred
revenue and other long-term liabilities
|
10,354
|
10,477
|
||||||
|
Stockholders’
equity
|
475,397
|
437,301
|
||||||
|
Total
liabilities and stockholders’ equity
|
$ |
1,060,106
|
$ |
1,003,468
|
||||
--
more
--
THE
TORO COMPANY AND SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows (Unaudited)
(Dollars
in thousands)
|
Nine
Months Ended
|
||||||||
|
August
3, 2007
|
August
4, 2006
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
earnings
|
$ |
135,902
|
$ |
124,683
|
||||
|
Adjustments
to reconcile net earnings to net cash
provided
by operating activities:
|
||||||||
|
Equity
losses from investments
|
136
|
1,004
|
||||||
|
Provision
for depreciation and amortization
|
30,263
|
31,490
|
||||||
|
Gain
on disposal of property, plant, and equipment
|
(133 | ) | (84 | ) | ||||
|
Stock-based
compensation
expense
|
5,474
|
6,018
|
||||||
|
(Increase)
decrease in deferred
income taxes
|
(2,323 | ) |
419
|
|||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Receivables
|
(86,942 | ) | (99,062 | ) | ||||
|
Inventories
|
101
|
(17,481 | ) | |||||
|
Prepaid
expenses and other
assets
|
(3,693 | ) |
3,042
|
|||||
|
Accounts
payable, accrued
expenses, and deferred revenue
|
4,948
|
13,836
|
||||||
|
Net
cash provided by operating activities
|
83,733
|
63,865
|
||||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchases
of property, plant, and equipment
|
(32,863 | ) | (26,693 | ) | ||||
|
Proceeds
from asset disposals
|
152
|
908
|
||||||
|
Increase
in investment in affiliates
|
-
|
(371 | ) | |||||
|
Decrease
in other assets
|
734
|
5,716
|
||||||
|
Acquisition,
net of cash acquired
|
(1,088 | ) |
-
|
|||||
|
Net
cash used in investing activities
|
(33,065 | ) | (20,440 | ) | ||||
|
Cash
flows from financing activities:
|
||||||||
|
Increase
in short-term debt
|
998
|
24,191
|
||||||
|
Issuance
of long-term debt, net of costs
|
121,465
|
-
|
||||||
|
Repayments
of long-term debt
|
(75,000 | ) | (34 | ) | ||||
|
Excess
tax benefits from stock-based awards
|
12,956
|
16,270
|
||||||
|
Proceeds
from exercise of stock options
|
11,456
|
8,196
|
||||||
|
Purchases
of Toro common stock
|
(70,382 | ) | (97,388 | ) | ||||
|
Dividends
paid on Toro common stock
|
(14,729 | ) | (11,700 | ) | ||||
|
Net
cash used in financing activities
|
(13,236 | ) | (60,465 | ) | ||||
|
Effect
of exchange rates on cash
|
1,237
|
453
|
||||||
|
Net
increase (decrease) in cash and cash equivalents
|
38,669
|
(16,587 | ) | |||||
|
Cash
and cash equivalents as of the beginning of the fiscal
period
|
55,523
|
41,402
|
||||||
|
Cash
and cash equivalents as of the end of the fiscal period
|
$ |
94,192
|
$ |
24,815
|
||||
###