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TheStreet Open House

The Toro Company Reports Record Results For Fiscal 2012

Selling, general and administrative (SG&A) expense as a percent of sales decreased 10 basis points to 23.9 percent for fiscal 2012. For the fourth quarter, SG&A expenses were down $0.8 million, but increased 230 basis points compared to last year’s fourth quarter to 32.1 percent, on lower sales volumes.

Operating earnings as a percent of sales improved 70 basis points to 10.5 percent for fiscal 2012. For the fourth quarter, operating earnings were 1.2 percent of sales compared to 2.5 percent last year.

Interest expense for fiscal 2012 was $16.9 million, down 0.4 percent compared to the fiscal 2011. For the fourth quarter, interest expense totaled $4.1 million, down 5.9 percent from the same period last year.

The effective tax rate for the fiscal year was 34 percent compared with 32.7 percent last year, primarily due to the expiration of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the fiscal year totaled $147.4 million, down 0.5 percent from the prior year period. Net inventories were $251.1 million, up 12.6 percent from the end of fiscal 2011 due to planned inventory build of diesel products to meet anticipated customer demand as part of the Tier 4 transition. Trade payables were $124.8 million, up 5.7 percent compared with last year.

About The Toro CompanyThe Toro Company is a leading worldwide provider of turf and landscape maintenance equipment, irrigation technologies and outdoor lighting solutions to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields.

LIVE CONFERENCE CALL December 5, 10:00 a.m. CST www.thetorocompany.com/invest

The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CST on December 5, 2012. 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 HarborStatements 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 or negative growth rates in global and domestic economies, resulting in rising or persistent unemployment and weakened consumer confidence; the threat of terrorist acts and war, which may result in contraction of the U.S. and worldwide economies; drug cartel-related violence, which may disrupt our production activities and maquiladora operations based in Juarez, Mexico; fluctuations in the cost and availability of raw materials and components, including steel, engines, hydraulics, resins and other commodities and components; fluctuating fuel and other costs of transportation; the impact of abnormal weather patterns, natural disasters and global pandemics; the level of growth or contraction in our key markets; government and municipal revenue, budget and spending levels, which may negatively impact our grounds maintenance equipment business in the event of reduced tax revenues 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 revenue growth, operating earnings and employee engagement goals of our multi-year employee initiative called “Destination 2014”; our increased dependence on international sales and the risks attendant to international operations and markets, including political, economic and/or social instability in the countries in which we manufacture or sell our products resulting in contraction or disruption of such markets; credit availability and terms, 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 or joint ventures, including Red Iron Acceptance, LLC; the costs and effects of changes in tax, fiscal, government and other regulatory policies, including rules relating to environmental, health and safety matters, and Tier 4 emissions requirements; 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; and the occurrence of litigation or claims. In addition to the factors set forth in this paragraph, market, economic, financial, competitive, legislative, governmental, 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.

 
 
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(Dollars and shares in thousands, except per-share data)
 
    Three Months Ended     Fiscal Years Ended
October 31,     October 31, October 31,     October 31,
2012 2011 2012 2011
Net sales $ 339,294 $ 368,094 $ 1,958,690 $ 1,883,953
Gross profit 112,899 118,787 673,094 636,647
Gross profit percent 33.3 % 32.3 % 34.4 % 33.8 %
Selling, general, and administrative expense   108,792     109,580     467,481     452,160  
Operating earnings 4,107 9,207 205,613 184,487
Interest expense (4,115 ) (4,374 ) (16,906 ) (16,970 )
Other income, net   2,324     2,749     7,555     7,309  
Earnings before income taxes 2,316 7,582 196,262 174,826
Provision for income taxes   2,065     2,547     66,721     57,168  
Net earnings $ 251   $ 5,035   $ 129,541   $ 117,658  
 
Basic net earnings per share $ 0.00   $ 0.08   $ 2.18   $ 1.88  
 
Diluted net earnings per share $ 0.00   $ 0.08   $ 2.14   $ 1.85  
 
Weighted average number of shares of common

stock outstanding – Basic

58,836

61,242

59,446

62,534

 
Weighted average number of shares of common

stock outstanding – Diluted

60,162

62,074

60,618

63,594

 

Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective June 29, 2012.

 
 
Segment Data (Unaudited)
(Dollars in thousands)
 
    Three Months Ended     Fiscal Years Ended
October 31,     October 31, October 31,     October 31,

Segment Net Sales

2012 2011 2012 2011
Professional $ 228,605 $ 216,532 $ 1,329,504 $ 1,239,068
Residential 102,036 143,485 607,435 623,889
Other   8,653     8,077     21,751     20,996  
Total * $ 339,294   $ 368,094   $ 1,958,690   $ 1,883,953  
 
* Includes international sales of $ 113,842 $ 120,651 $ 594,313 $ 607,915
 
Three Months Ended Fiscal Years Ended
October 31, October 31, October 31, October 31,

Segment Earnings (Loss) Before Income Taxes

2012 2011 2012 2011
Professional $ 20,775 $ 17,140 $ 232,104 $ 205,009
Residential 6,715 11,865 57,889 54,410
Other   (25,174 )   (21,423 )   (93,731 )   (84,593 )
Total $ 2,316   $ 7,582   $ 196,262   $ 174,826  
 
 
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
 
    October 31,     October 31,
2012 2011

ASSETS

Cash and cash equivalents $ 125,856 $ 80,886
Receivables, net 147,410 148,140
Inventories, net 251,117 223,030
Prepaid expenses and other current assets 24,437 18,303
Deferred income taxes   63,314   62,523
Total current assets   612,134   532,882
 
Property, plant, and equipment, net 180,523 191,140
Goodwill and other assets, net   142,542   146,641
Total assets $ 935,199 $ 870,663
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current portion of long-term debt $ 1,858 $ 1,978
Short-term debt 41
Accounts payable 124,806 118,036
Accrued liabilities   251,458   239,025
Total current liabilities   378,122   359,080
 
Deferred income taxes 2,280 1,368
Long-term debt, less current portion 223,482 225,178
Deferred revenue 11,143 10,619
Other long-term liabilities 7,770 7,651
Stockholders’ equity   312,402   266,767
Total liabilities and stockholders’ equity $ 935,199 $ 870,663
 
 
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
 
    Fiscal Years Ended
October 31,     October 31,
2012 2011
Cash flows from operating activities:
Net earnings $ 129,541 $ 117,658

Adjustments to reconcile net earnings to net cash provided by operating activities:

Noncash income from affiliates (5,996 ) (5,682 )
Provision for depreciation, amortization, and impairment losses 53,634 48,506
Stock-based compensation expense 9,503 8,533
Increase in deferred income taxes (206 ) (2,006 )
Other (132 ) (118 )
Changes in operating assets and liabilities, net of effect of acquisitions:
Receivables, net (495 ) (2,908 )
Inventories, net (21,973 ) (25,667 )
Prepaid expenses and other assets (6,741 ) (7,144 )
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities   28,663     (17,295 )
Net cash provided by operating activities   185,798     113,877  
 
Cash flows from investing activities:
Purchases of property, plant, and equipment, net (43,242 ) (57,447 )
Proceeds from asset disposals 491 653
Distributions from finance affiliate, net 5,091 3,034
Other (360 )
Acquisitions, net of cash acquired   (9,663 )   (15,155 )
Net cash used in investing activities   (47,323 )   (69,275 )
 
Cash flows from financing activities:
Decrease in short-term debt (922 ) (776 )
Repayments of long-term debt (1,858 ) (1,857 )
Excess tax benefits from stock-based awards 9,017 2,988
Proceeds from exercise of stock options 20,347 14,467
Purchases of Toro common stock (93,395 ) (129,955 )
Dividends paid on Toro common stock   (26,230 )   (24,970 )
Net cash used in financing activities   (93,041 )   (140,103 )
 
Effect of exchange rates on cash   (464 )   (979 )
 
Net increase (decrease) in cash and cash equivalents 44,970 (96,480 )
Cash and cash equivalents as of the beginning of the fiscal year   80,886     177,366  
 
Cash and cash equivalents as of the end of the fiscal year $ 125,856   $ 80,886  




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