<Have to dig out who makes those Toro snow blowers. They got to looking good.>
TTC...Toro Company
Toro Beats Expectations with Record Net Income and EPS for Fiscal 2000
Record EPS up 31.4% to $3.47 per diluted share
Strong performances in most markets
5 by Five program improving profitability outlook
Forecasting EPS growth of 12-15% in 2001
BLOOMINGTON, Minn. (Dec. 6, 2000) -- The Toro Company (NYSE:TTC) today reported record sales
and profitability for fiscal 2000, beating analyst expectations for the year, with dilutive earnings per share of
$3.47, compared to $2.64 after restructuring and other unusual expense for fiscal 1999, an increase of 31.4
percent. Net income for fiscal 2000 increased 29.2 percent to $45.3 million, compared to $35.1 million in
fiscal 1999 after restructuring and other unusual expense. Net sales for the period were $1.337 billion, an
increase of 4.9 percent over fiscal 1999 sales of $1.275 billion.
Toro posted fourth quarter EPS of 8 cents per dilutive share, compared to a 1 cent per basic share loss for the
fourth quarter of fiscal 1999 after restructuring and other unusual expense. EPS for the fourth quarter of 1999
before restructuring and unusual expense was 3 cents per dilutive share. Net income for the quarter was $1.0
million, compared to a $.2 million loss in the fourth quarter of fiscal 1999 after restructuring and other unusual
expense. Net sales for the quarter were $269.7 million, compared to $265.8 million for the comparable 1999
period.
"We’re pleased with our record performance in fiscal 2000 and are confident that 2001 will see a continuation
of our earnings improvement," said Kendrick B. Melrose, chairman and chief executive officer of Toro.
"Overall, most of our markets had a good year for sales and profitability, and we are taking aggressive action
to fix those areas that struggled. The introduction of our "5 by Five" profit improvement program has created a
strong sense of process improvement and expense management, and this is transforming Toro into a more
efficient leader in the turf industry. We feel confident this effort will help us achieve our long term profitability
improvement goals."
REVIEW OF OPERATIONS
Gross margins for the year improved to 36.8 percent for the year, compared to 36.0 percent for
fiscal 1999, and gross margin for the quarter improved to 35.9 percent, up from 35.0 percent for
the same period last year. The discontinuation of low margin residential product, plus lower levels
of gross profit margin reversals related to the purchase of distribution companies, were offset
partially by lower irrigation margins due to price competition in the ag irrigation market, increases
in resin prices, and lower sales levels of irrigation’s higher profit product lines.
Selling, general and administration expenses, excluding restructuring and other unusual expense,
declined as a percent of sales for the full year and the fourth quarter due to better expense
management and lower levels of incentive expense. Full year SG&A was 29.5 percent compared
to 30.0 percent last year, and was 33.5 percent for fiscal 2000 fourth quarter compared to 34.1
percent for the same period last year.
Interest expense increased by $2.5 million from last year due to higher interest rates and higher
average borrowing levels related to higher average levels of inventory. The additional inventory
was caused by capacity constraints during the year, particularly during the prime selling season.
Other income for the year was $1.1 million compared to $6.5 million last year. The reduction is
due to currency losses related to the decline of the Euro and Australian dollar versus the U.S.
dollar; an investment charge related to an investment in a technology company; and a lower level
of interest income. This was offset partially by an insurance recovery related to a flood that
damaged product at a warehouse, and by higher amounts of Toro Credit Company finance
charge income.
Toro’s tax rate improved to 37.0 percent, compared to 39.0 percent in 1999.
Receivables decreased to $262.5 million compared to $268.3 million last year due to better asset
management in most divisions.
Inventories were $194.9 million compared to $204.4 million last year, reflecting better inventory
management during the fourth quarter of fiscal 2000.
Total debt decreased by $46.6 million due to lower levels of short-term debt as a result of better
asset management during the fourth quarter of fiscal 2000 and the use of current year profits to
pay down debt.
SEGMENT RESULTS
Professional
The professional segment of Toro increased sales by 7.6 percent for the year due to very strong sales of
landscape contractor equipment, both Toro and Exmark brands, and commercial equipment sales. The
landscaping, golf, and grounds markets continue to be robust for equipment sales. Golf irrigation sales declined
due to the reduction of new course construction and product issues. The company is beginning to focus on the
golf course renovation market to offset the expected downturn in new golf course construction. Toro brand
contractor-installed irrigation systems were down due to product issues and delays in new product
introductions. Toro Ag Irrigation sales were also down due primarily to continued pricing pressure from
competition. International sales of professional products increased 6.6 percent for the year due to strong
demand for golf equipment and the introduction of several new products.
Operating earnings for the professional segment were $99.4 million compared to $112.9 million last year. The
decrease was due to a charge for an investment in a technology company, currency losses, and lower earnings
from the irrigation businesses. These items more than offset overall improvements in operating earnings for
domestic landscape contractor, domestic commercial equipment and international markets.
Residential
Residential segment sales declined for the year by 4.1 percent due primarily to the discontinuance of the
low-voltage lighting and gas hand-held product lines. In addition, planned field inventory reductions at Toro
distributors and dealers in anticipation of lower retail sales, combined with unfavorable comparisons to last
year’s strong initial stocking of Toro’s Personal Pace mower in home centers nationwide, also contributed to
the sales decline. Snowthrower and riding product sales declined slightly, although better retail sales of riding
products reduced field inventory. The introduction of the new Toro Snow Commander was a solid hit resulting
in a sell out of that model. Offsetting the declines were strong increases in electric trimmers and blowers due to
additional outlets, and continued growth of the do-it-yourself irrigation line. International residential sales also
increased by 9.2 percent for the year due to the successful introduction of Toro Personal Pace and new riding
products into foreign markets.
Operating earnings for the residential segment increased to $35.7 million, compared to $21.2 million last year
due to increased sales of higher margin products and the elimination of the low profit low-voltage lighting and
gas handheld product lines. SG&A costs improved as a percentage of sales, due to better leveraging, lower
restructuring and other unusual expenses, and lower warranty costs.
Other Segment
Operating losses for the other segment, comprised of company-owned distributors and corporate expenses,
decreased by 17.5 percent to $63.3 million, compared to $76.7 million last year. The improvement for this
segment is due to higher earnings for the Toro-owned distributors, lower incentive expenses, and lower levels
of gross margin reversals related to the acquisition of distributors. These positives were slightly offset by higher
interest costs, and increased spending for e-business initiatives.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are forward looking and actual
results may differ materially. These statements do not include the potential impact of any mergers, acquisitions
or other business combinations that may be completed after the date of this release.
For the fiscal year ending Oct. 31, 2001, Toro expects to achieve revenue growth in the range of eight to 10
percent compared to 4.9 percent in fiscal 2000. Gross margin percentage in fiscal 2001 is expected to be in
the range of 37 to 38 percent compared to 36.8 percent in fiscal 2000. Total operating expenses in fiscal 2001
are expected to be approximately 7 to 10 percent above fiscal 2000 in dollar terms. Tax rate is expected to
remain constant at approximately 37 percent. Toro expects earnings per share to grow between 12 to 15
percent in fiscal 2001.
The addition of the company-owned distributors and changes in the distribution of the Siteworks product line,
has changed Toro’s historical quarter to quarter profitablility patterns. Going forward, under normal conditions,
the first quarter will be a loss quarter offset by stronger profitability in the fourth quarter. In fiscal 2001, the first
quarter will be further impacted by price supports for pre-season European shipments and lower snowthrower
and irrigation sales, leading to a loss in the range of 10 to 20 cents per share.
Toro will be discussing its fourth quarter and year-end results, and its 2001 outlook, on a conference call
today, beginning at 10 a.m. (CST). A live webcast of the conference call will be available at
www.toro.com/companyinfo/invest.html. A replay of the webcast will be available at the same website shortly
after the call and will remain available through Dec. 20.
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 and fiscal 2001 financial
performance, and future performance related to announced 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. All statements other than statements of historical fact are
forward-looking statements, including any projections of earnings, revenues, or other financial items; statements
of the plans and strategies and objectives of management for future operations; any statements regarding future
economic conditions or performance; or any statements of belief and any statement of assumptions underlying
any of the foregoing. 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 fluctuating interest rates, currency exchange, 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 Operations
(Dollars and shares in thousands, except per-share data)
Three Months Ended
Years Ended
October 31,
2000
October 31,
1999
October 31,
2000
October 31,
1999
Net sales
$ 269,720
$ 265,811
$ 1,336,924
$ 1,274,997
Gross profit
96,888
92,952
492,063
459,589
Gross profit percent
35.9%
35.0%
36.8%
36.0%
Selling, general, and administrative expense
90,273
90,693
394,858
382,969
Restructuring and other unusual expense
-
1,010
-
1,732
Earnings from operations
6,615
1,249
97,205
74,888
Interest expense
(5,354)
(5,396)
(26,414)
(23,913)
Other income, net
343
3,899
1,091
6,498
Earnings (loss) before income taxes
1,604
(248)
71,882
57,473
Provision (benefit) for income taxes
594
(97)
26,597
22,414
Net earnings (loss)
$ 1,010
$ (151)
$ 45,285
$ 35,059
Basic net earnings (loss) per share
$ 0.08
$ (0.01)
$ 3.55
$ 2.72
Diluted net earnings (loss) per share
$ 0.08
$ (0.01)
$ 3.47
$ 2.64
Weighted average number of shares of common
stock outstanding – basic
12,686
12,638
12,770
12,879
Weighted average number of shares of common
stock outstanding – dilutive
12,989
12,638
13,058
13,278
Sales by Segment
(Dollars in thousands)
Three Months Ended
Years Ended
October 31,
2000
October 31,
1999
October 31,
2000
October 31,
1999
Professional
$ 174,519
$ 160,846
$ 868,486
$ 807,382
Residential
79,732
95,712
429,491
447,866
Other
15,469
9,253
38,947
19,749
* Total
$ 269,720
$ 265,811
$ 1,336,924
$ 1,274,997
* Includes international sales of
$ 52,521
$ 54,121
$ 273,699
$ 254,936
Earnings (Loss) Before Income Taxes by Segment
(Dollars in thousands)
Three Months Ended
Years Ended
October 31,
2000
October 31,
1999
October 31,
2000
October 31,
1999
Professional
$ 2,665
$ 10,957
$ 99,400
$ 112,928
Residential
8,985
6,023
35,745
21,215
Other
(10,046)
(17,228)
(63,263)
(76,670)
Total
$ 1,604
$ (248)
$ 71,882
$ 57,473
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
ASSETS
October 31,
2000
October 31,
1999
Cash and cash equivalents
$ 978
$ 11,960
Receivables, net
262,484
268,344
Inventories, net
194,926 |
