Form 8-K TORO CO For: May 21

 

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):  May 21, 2015

 

THE TORO COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

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:

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  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 May 21, 2015, The Toro Company announced its earnings for the three and six months ended May 1, 2015.

 

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.

 

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Section 9  —  Financial Statements and Exhibits

 

Item 9.01

Financial Statements and Exhibits

 

(d)       Exhibits.

 

Exhibit No.		Description
99.1		Press release dated May 21, 2015 (furnished herewith).

 

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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 hereunto duly authorized.

 

	THE TORO COMPANY
	(Registrant)
Date: May 21, 2015	By	/s/ Renee J. Peterson
	Renee J. Peterson
	Vice President, Treasurer and
	Chief Financial Officer

 

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EXHIBIT INDEX

 

EXHIBIT NUMBER		DESCRIPTION
99.1		Press release dated May 21, 2015 (furnished herewith).

 

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Exhibit 99.1

 

 

Investor Relations

Heather Hille

Director, Investor Relations

(952) 887-8923, [email protected]

 

Media Relations

Branden Happel

Senior Manager, Public Relations

(952) 887-8930, [email protected]

 

For Immediate Release

 

The Toro Company Reports Record Second Quarter Results

 

·                  Second quarter sales increase 10.9 percent to a record $826.2 million

·                  Net earnings per share for the quarter up 8.6 percent to a record $1.64

·                  Favorable spring weather and innovative products help build retail momentum in the quarter

 

BLOOMINGTON, Minn. (May 21, 2015) — The Toro Company (NYSE: TTC) today reported net earnings of $93.8 million, or $1.64 per share, on a net sales increase of 10.9 percent to $826.2 million for its 2015 second quarter ended May 1, 2015. In the comparable fiscal 2014 period, the company delivered net earnings of $87.1 million, or $1.51 per share, on net sales of $745 million.

 

“Good spring weather conditions helped generate robust retail sales during the quarter,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “Additionally, I’m proud of the dedication of and execution by our strong team that enabled us to deliver our record results. On the residential side of the business, we drove increased sales due to our innovative product line-up, including our new platform of consumer zero-turn riding mowers and new all-wheel drive walk power mower. We also benefited from expanded retail placement for these products. In our professional segment, landscape contractors readied themselves for the spring season by investing in our zero-turn riding and walk behind mowers and newly introduced Toro® and Exmark® branded spreader-sprayer turf management products. Additionally, our recently acquired BOSS® line of snow and ice management products contributed to our second quarter results. Like other companies, however, our earnings were not immune from unfavorable foreign currency rates and also were affected by segment mix.”

 

For the first six months, Toro reported net earnings of $124.7 million, or $2.18 per share, on a net sales increase of 9.2 percent to $1.3 billion. In the comparable fiscal 2014 period, the company posted net earnings of $113 million, or $1.95 per share, on net sales of $1.191 billion. “Our residential segment contributed double-digit revenue growth in the year-to-date period due to strong retail demand for residential zero-turn riding and walk power mowers, as well as higher demand for our residential snow thrower products,” said Hoffman. “On the professional side of our business, the addition of the BOSS snow and ice management products, higher sales of landscape maintenance equipment and solid demand for our golf turf maintenance equipment all helped us to deliver record results for the period.”

 

“As we continue through the key selling season, we are encouraged by the strong retail sales results that we are seeing across our businesses. We believe that we are well-positioned with our portfolio of innovative products to drive additional sales and increase our market share. In particular, we are excited by the successful launch of our Reelmaster® 5010-H hybrid fairway mower for the golf market and early customer demand for our all-new Dingo® TX 1000 compact utility loader for the landscape contractor and rental markets that will be released in our third quarter. With that said, we are mindful of the fact that Mother Nature delivered two consecutive favorable summer growing seasons in 2013 and 2014 and may not do so again this year. We also will have to manage the unfavorable foreign currency rate conditions that we

 

 

expect will continue to pressure our international business. We will remain flexible to address both anticipated and unforeseen challenges and will keep a careful eye on both retail demand and field inventories. In addition, we will focus on the key things within our control that will help us achieve our Destination PRIME objectives, including investing in product innovation, delivering excellent customer service and executing in our markets.”

 

The company continues to expect revenue growth for fiscal 2015 to be about 8 to 10 percent and net earnings per share to be about $3.35 to $3.45. For the third quarter, the company expects net earnings per share to be about $0.85 to $0.90.

 

SEGMENT RESULTS

 

Professional

 

·                  Professional segment net sales for the second quarter totaled $552.8 million, up 4.6 percent from $528.6 million in the same period last year. Incremental sales of our recently acquired BOSS snow and ice management products contributed to the growth for the quarter. In addition, landscape maintenance equipment sales increased due to solid retail demand for our professional zero-turn riding and walk behind mowing platforms and new turf management products. Domestic golf sales also grew on strong channel and retail demand for our innovative application equipment and vehicles. For the first six months, professional segment net sales were $892.5 million, up 8.3 percent from the comparable fiscal 2014 period. For the year-to-date period, sales benefited from the addition of the BOSS snow and ice management products to our professional portfolio, higher sales of landscape maintenance mowing and turf management equipment, and strong demand for our golf turf maintenance equipment and vehicles. Somewhat offsetting the sales growth in both periods were unfavorable currency exchange rates.

 

·                  Professional segment earnings for the first quarter totaled $120.8 million, down 1.3 percent from $122.4 million in the same period last year. For the first six months, professional segment earnings were $176.5 million, up 3.9 percent from the comparable fiscal 2014 period.

 

Residential

 

·                  Residential segment net sales for the second quarter were $267.9 million, up 27.3 percent from $210.4 million in the same period last year. For the first six months, residential segment net sales were $402.6 million, up 12.5 percent from the comparable fiscal 2014 period. The sales growth in both periods benefited from strong retail demand for, and expanded retail placement of, our innovative product line-up that included our new platform of residential zero-turn riding mowers and new all-wheel drive walk power mower. The year-to date period also benefited from demand for residential snow thrower products. Somewhat offsetting growth in both the quarter and year-to-date periods were unfavorable currency exchange rates.

 

·                  Residential segment earnings for the second quarter were $34.8 million, up 46.2 percent from $23.8 million the same period last year. For the first six months, residential segment earnings were $48.6 million, up 15.8 percent from the comparable fiscal 2014 period.

 

OPERATING RESULTS

 

Gross margin as a percent of sales for the second quarter was 34.1 percent, a decrease of 140 basis points from the same period last year. Half of this decrease was due to unfavorable currency exchange rates and the other half was due to the segment mix impact of stronger sales in our residential segment. For the first six months, gross margin as a percent of sales was 34.7 percent, a decrease of 120 basis points from the same period last year, primarily due to unfavorable currency exchange rates.

 

Selling, general and administrative (SG&A) expense as a percent of sales for the second quarter was 17.3 percent, a decrease of 60 basis points from the same period last year. For the first six months, SG&A

 

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expense as a percent of sales was 20.6 percent, a decrease of 90 basis points from the same period last year. For both periods, these decreases were due to the leveraging of expenses over higher sales volumes.

 

Operating earnings as a percent of sales for the second quarter was 16.8 percent, a decrease of 80 basis points from the same period last year. Operating earnings as a percent of sales for the first six months was 14.1 percent, a decrease of 30 basis points from the same period last year.

 

Interest expense for the second quarter was $4.8 million, up $1.1 million from the same period last year, and interest expense for the first six months was $9.5 million, up $2 million from the same period last year.  For both periods, the increases primarily were due to the additional long-term debt issued in connection with the BOSS acquisition.

 

The effective tax rate for the second quarter was 31.1 percent, compared to 32.6 percent in the same period last year. For the first six months, the effective tax rate was 30 percent, compared to 32.7 percent in the same period last year, primarily due to the benefit realized in our first quarter from the retroactive reenactment of the domestic research tax credit for calendar year 2014.

 

Accounts receivable at the end of the second quarter totaled $351.6 million, up 12.2 percent compared to the end of the same period last year. Net inventories were $341.4 million, up 12.9 percent compared to the end of the same period last year. Trade payables were $256.4 million, up 8.7 percent compared to the end of the same period last year.

 

About The Toro Company

 

The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative solutions for the outdoor environment, including turf, snow and ground engaging equipment and irrigation and outdoor lighting solutions. With sales of $2.2 billion in fiscal 2014, Toro’s global presence extends to more than 90 countries.  Through constant innovation and caring relationships built on trust and integrity, Toro and its family of brands have built a legacy of excellence by helping customers care for golf courses, landscapes, sports fields, public green spaces, commercial and residential properties and agricultural fields. For more information, visit www.thetorocompany.com.

 

LIVE CONFERENCE CALL

May 21, 2015 at 10:00 a.m. CDT

www.thetorocompany.com/invest

 

The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CDT on May 21, 2015. 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.

 

Forward-Looking Statements

 

This news release contains forward-looking statements, which are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current assumptions and expectations of future events, and often can be identified by words such as “expect,” “strive,” “looking ahead,” “outlook,” “guidance,” “forecast,” “goal,” “optimistic,” “anticipate,” “continue,” “plan,” “estimate,” “project,” “believe,” “should,” “could,” “will,” “would,” “possible,” “may,” “likely,” “intend,” “can,” “seek,” and similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual events and results to differ materially from those projected or implied. Particular risks and uncertainties that may affect our operating results or financial position include: worldwide economic conditions, including slow or negative growth rates in global and domestic economies and weakened consumer confidence; disruption at our manufacturing or distribution facilities, including drug cartel-related violence affecting our maquiladora operations in Juarez, Mexico; fluctuations in the cost and availability of raw materials and components, including steel, engines, hydraulics and resins, resulting from the U.S. West Coast port situation or otherwise; the impact of abnormal weather patterns, including unfavorable weather conditions

 

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exacerbated by global climate change or otherwise; the impact of natural disasters and global pandemics; the level of growth or contraction in our key markets; government and municipal revenue, budget and spending levels; dependence on The Home Depot as a customer for our residential business; elimination of shelf space for our products at dealers or retailers; inventory adjustments or changes in purchasing patterns by our customers; our ability to develop and achieve market acceptance for new products; increased competition; the risks attendant to international operations and markets, including political, economic and/or social instability and tax policies in the countries in which we manufacture or sell our products; foreign currency exchange rate fluctuations; our relationships with our distribution channel partners, including the financial viability of our distributors and dealers; risks associated with acquisitions, including our acquisition of the BOSS® professional snow and ice management business; management of our alliances or joint ventures, including Red Iron Acceptance, LLC; the costs and effects of enactment of, changes in and compliance with laws, regulations and standards, including those relating to consumer product safety, Tier 4 emissions requirements, conflict mineral disclosure, taxation, healthcare, and environmental, health and safety matters; unforeseen product quality problems; loss of or changes in executive management or key employees; the occurrence of litigation or claims, including those involving intellectual property or product liability matters; and other risks and uncertainties described in our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission. We undertake no obligation to update forward-looking statements made herein to reflect events or circumstances after the date hereof.

 

(Financial tables follow)

 

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THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings (Unaudited)

(Dollars and shares in thousands, except per-share data)

 

		Three Months Ended						Six Months Ended
		May 1, 2015			May 2, 2014			May 1, 2015			May 2, 2014
Net sales		$	826,242		$	745,030		$	1,300,453		$	1,191,011
Gross profit		281,972			264,540			450,971			428,054
Gross profit percent		34.1		%	35.5		%	34.7		%	35.9		%
Selling, general, and administrative expense		143,517			133,661			268,094			256,577
Operating earnings		138,455			130,879			182,877			171,477
Interest expense		(4,768		)	(3,683		)	(9,484		)	(7,436		)
Other income, net		2,450			1,920			4,717			3,830
Earnings before income taxes		136,137			129,116			178,110			167,871
Provision for income taxes		42,374			42,030			53,397			54,916
Net earnings		$	93,763		$	87,086		$	124,713		$	112,955
Basic net earnings per share		$	1.68		$	1.54		$	2.23		$	1.99
Diluted net earnings per share		$	1.64		$	1.51		$	2.18		$	1.95
Weighted average number of shares of common stock outstanding — Basic		55,864			56,493			55,954			56,758
Weighted average number of shares of common stock outstanding — Diluted		57,073			57,773			57,157			58,040

 

Segment Data (Unaudited)

(Dollars in thousands)

 

		Three Months Ended						Six Months Ended
		May 1, 2015			May 2, 2014			May 1, 2015			May 2, 2014
Segment Net Sales
Professional		$	552,774		$	528,561		$	892,480		$	824,029
Residential		267,867			210,377			402,610			357,947
Other		5,601			6,092			5,363			9,035
Total *		$	826,242		$	745,030		$	1,300,453		$	1,191,011

 

* Includes international sales of

$

195,384

$

205,117

$

338,285

$

356,380

 

		Three Months Ended						Six Months Ended
		May 1, 2015			May 2, 2014			May 1, 2015			May 2, 2014
Segment Earnings (Loss) Before Income Taxes
Professional		$	120,815		$	122,367		$	176,474		$	169,830
Residential		34,838			23,822			48,565			41,956
Other		(19,516		)	(17,073		)	(46,929		)	(43,915		)
Total		$	136,137		$	129,116		$	178,110		$	167,871

 

 

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

 

		May 1, 2015			May 2, 2014
ASSETS
Cash and cash equivalents		$	109,295		$	129,909
Receivables, net		351,602			313,489
Inventories, net		341,440			302,477
Prepaid expenses and other current assets		38,210			29,218
Deferred income taxes		43,202			39,261
Total current assets		883,749			814,354
Property, plant, and equipment, net		219,941			192,751
Deferred income taxes		26,416			25,942
Goodwill and other assets, net		349,021			146,199
Total assets		$	1,479,127		$	1,179,246
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt		$	23,444		$	140
Short-term debt		24,900			—
Accounts payable		256,391			235,971
Accrued liabilities		314,505			302,515
Total current liabilities		619,240			538,626
Long-term debt, less current portion		361,428			223,855
Deferred revenue		11,244			10,891
Deferred income taxes		—			5,969
Other long-term liabilities		24,211			14,355
Stockholders’ equity		463,004			385,550
Total liabilities and stockholders’ equity		$	1,479,127		$	1,179,246

 

 

THE TORO COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

		Six Months Ended
		May 1, 2015			May 2, 2014
Cash flows from operating activities:
Net earnings		$	124,713		$	112,955
Adjustments to reconcile net earnings to net cash provided by operating activities:
Noncash income from finance affiliate		(3,709		)	(3,377		)
Provision for depreciation, amortization, and impairment loss		30,613			26,589
Stock-based compensation expense		5,090			5,051
(Increase) decrease in deferred income taxes		(1,107		)	136
Other		(47		)	(31		)
Changes in operating assets and liabilities, net of effect of acquisition:
Receivables, net		(193,552		)	(156,423		)
Inventories, net		(56,099		)	(62,072		)
Prepaid expenses and other assets		(5,168		)	4,285
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities		194,514			150,836
Net cash provided by operating activities		95,248			77,949
Cash flows from investing activities:
Purchases of property, plant, and equipment		(27,261		)	(32,682		)
Proceeds from asset disposals		57			115
Contributions to finance affiliate, net		(4,512		)	(4,868		)
Acquisitions, net of cash acquired		(198,329		)	(715		)
Net cash used in investing activities		(230,045		)	(38,150		)
Cash flows from financing activities:
Repayments of short-term debt		(1,283		)	(849		)
(Repayments of) increase in long-term debt		(276		)	59
Excess tax benefits from stock-based awards		5,057			6,657
Proceeds from exercise of stock options		5,168			4,761
Purchases of Toro common stock		(49,323		)	(81,694		)
Dividends paid on Toro common stock		(27,975		)	(22,670		)
Net cash used in financing activities		(68,632		)	(93,736		)
Effect of exchange rates on cash and cash equivalents		(2,149		)	853
Net decrease in cash and cash equivalents		(205,578		)	(53,084		)
Cash and cash equivalents as of the beginning of the period		314,873			182,993
Cash and cash equivalents as of the end of the period		$	109,295		$	129,909