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Form 8-K TORO CO For: Aug 18

August 18, 2016 8:30 AM EDT

 

 

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 18, 2016

 

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

 

55420

(Address of principal executive offices)

 

(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:

 

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 August 18, 2016, The Toro Company announced its earnings for the three and nine months ended July 29, 2016.

 

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.

 

Item 8  —  Other Events

 

Item 8.01 Other Events.

 

On August 18, 2016, the Company also announced that its Board of Directors has declared a two-for-one stock split to be effected in the form of a 100 percent stock dividend.  The stock dividend will be distributed September 16, 2016, to shareholders of record as of September 1, 2016.

 

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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 August 18, 2016 (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: August 18, 2016

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 August 18, 2016 (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 Third Quarter Earnings; Declares 2-for-1 Stock Split

 

·                  Net earnings per share for the quarter up 6.4 percent to a record $1.00

·                  Record operating results driven by solid professional segment performance

·                  Board of Directors declares two-for-one-stock split

 

BLOOMINGTON, Minn. (August 18, 2016) — The Toro Company (NYSE: TTC) today reported net earnings of $55.8 million, or $1.00 per share, on net sales of $601 million, a decrease of 1.4 percent, for its fiscal third quarter ended July 29, 2016. In the comparable fiscal 2015 period, the company delivered net earnings of $53.3 million, or $0.94 per share, on net sales of $609.6 million.

 

For the first nine months, Toro reported net earnings of $200.8 million, or $3.58 per share, on a net sales increase of 0.7 percent to $1.924 billion.  In the comparable fiscal 2015 period, the company posted net earnings of $178 million, or $3.13 per share, on net sales of $1.910 billion.

 

“In spite of challenging weather and currency conditions and the resulting impact on our revenues, we are pleased to deliver another solid quarter achieving record earnings.  The strong performance within our professional businesses driven by new product introductions and outstanding execution by the team, fueled growth in that segment for the quarter,” said Michael J. Hoffman, Toro’s chairman and chief executive officer.  “We see positive momentum in our golf equipment and irrigation businesses as we gain share in key markets.  Additionally, our specialty construction and rental businesses are experiencing solid growth and are benefitting from new product introductions like the Dingo® TX 1000 compact utility loader.”

 

“With mixed consumer retail activity in the quarter, as was felt across the industry, we were encouraged by overall retail demand for our walk power and zero turn riding mower products during the summer months,” said Hoffman.  “We performed well despite sluggish sales in certain regions that experienced challenging weather conditions.”

 

“With the fourth quarter underway, we continue to see positive retail sales across our businesses.  Additionally, in our snow and ice management businesses, we are well positioned with new innovative products as the preseason begins.  I would like to take this opportunity to thank our worldwide employees and channel partners for their hard work and dedication.  It is their tireless commitment to excellence that drives the company’s steady performance.”

 



 

The company is narrowing its full-year earnings outlook to about $3.95 to $4.00 per share.  Full-year revenue growth expectations for fiscal 2016 have also been narrowed to flat to up 1 percent.

 

Toro also announced today that its Board of Directors has declared a two-for-one split of the company’s common stock, which will be effected in the form of a 100 percent stock dividend.  The stock dividend will be distributed on September 16, 2016 to shareholders of record as of September 1, 2016.

 

SEGMENT RESULTS

 

Professional

 

·                  Professional segment net sales for the third quarter totaled $427.8 million, up 1.4 percent from $422 million in the same period last year. For the first nine months, professional segment net sales were $1.362 billion, up 3.6 percent from the comparable fiscal 2015 period. Momentum generated in our golf equipment and irrigation businesses produced positive results for the quarter and the year.  Additionally, continued demand for products such as our Dingo TX 1000 compact utility loader in both the rental and specialty construction businesses contributed to the growth for both periods.  For the quarter, these gains were offset by lower channel demand for our landscape contractor equipment.

 

·                  Professional segment earnings for the third quarter totaled $89.1 million, up 8.3 percent from $82.3 million in the same period last year. For the first nine months, professional segment earnings were $292.3 million, up 13.0 percent from $258.7 million in the comparable fiscal 2015 period.

 

Residential

 

·                  Residential segment net sales for the third quarter were $167.8 million, down 4.6 percent from $176 million in the same period last year. For the first nine months, residential segment net sales were $550.3 million, down 4.9 percent from the comparable fiscal 2015 period. The sales decline for the quarter was due primarily to reduced worldwide channel demand for walk power and riding mowers.  The decrease was somewhat offset by higher shipments of snow products in the quarter.  Decreased worldwide sales of zero turn riding mowers and snow product contributed to the decline for the year.

 

·                  Residential segment earnings for the third quarter were $12.8 million, down 37.9 percent from $20.6 million from the same period last year. For the first nine months, residential segment earnings were $64.5 million, down 6.7 percent from the comparable fiscal 2015 period.

 

OPERATING RESULTS

 

Gross margin as a percent of sales for the third quarter was 36.0 percent, an increase of 50 basis points from the same period last year. The increase was primarily due to favorable commodities, enhanced productivity and segment mix. For the first nine months, gross margin as a percent of sales was 36.5 percent, an increase of 160 basis points from the same period last year, also primarily due to favorable commodities, enhanced productivity and segment mix.  These gains were offset by the impact of unfavorable currency exchange rates in both periods.

 

Selling, general and administrative (SG&A) expense as a percent of sales for the third quarter was 22.4 percent, a decrease of 10 basis points from the same period last year. For the first nine months, SG&A expense as a percent of sales was 21.4 percent, an increase of 20 basis points from the comparable period last year.

 

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Operating earnings as a percent of sales for the third quarter was 13.6 percent, an increase of 60 basis points from the comparable period last year. Operating earnings as a percent of sales for the first nine months was 15.1 percent, an increase of 140 basis points from the same period last year.

 

The effective tax rate for the third quarter was 30.9 percent, compared to 31.3 percent last year. For the first nine months, the effective tax rate was 30.5 percent, compared to 30.4 percent in the same period last year.

 

Accounts receivable at the end of the third quarter totaled $202.4 million, down 11.2 percent compared to last year. Net inventories were $327.1 million, down 6.6 percent and trade payables were $172.2 million, up 1.3 percent compared to 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 $2.4 billion in fiscal 2015, 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

August 18, 2016 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 August 18, 2016. 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,” “potential,” “pro forma,” or the negative thereof or 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; the impact of abnormal weather patterns, including unfavorable weather conditions 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, tax policies in the countries in which we manufacture or sell our products, and implications of the United Kingdom’s vote to exit the European Union; foreign currency exchange rate fluctuations; our relationships with our distribution channel partners, including the financial viability of our distributors

 

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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, 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 make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances occurring or existing after the date any forward-looking statement is made.

 

(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

 

Nine Months Ended

 

 

 

July 29,

 

July 31,

 

July 29,

 

July 31,

 

 

 

2016

 

2015

 

2016

 

2015

 

Net sales

 

$

600,980

 

$

609,615

 

$

1,923,819

 

$

1,910,068

 

Gross profit

 

216,617

 

216,390

 

702,458

 

667,361

 

Gross profit percent

 

36.0

%

35.5

%

36.5

%

34.9

%

Selling, general, and administrative expense

 

134,664

 

136,985

 

411,576

 

405,079

 

Operating earnings

 

81,953

 

79,405

 

290,882

 

262,282

 

Interest expense

 

(4,646

)

(4,587

)

(14,021

)

(14,071

)

Other income, net

 

3,480

 

2,798

 

11,865

 

7,515

 

Earnings before income taxes

 

80,787

 

77,616

 

288,726

 

255,726

 

Provision for income taxes

 

24,965

 

24,292

 

87,962

 

77,689

 

Net earnings

 

$

55,822

 

$

53,324

 

$

200,764

 

$

178,037

 

 

 

 

 

 

 

 

 

 

 

Basic net earnings per share of common stock

 

$

1.02

 

$

0.96

 

$

3.65

 

$

3.19

 

 

 

 

 

 

 

 

 

 

 

Diluted net earnings per share of common stock

 

$

1.00

 

$

0.94

 

$

3.58

 

$

3.13

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common stock outstanding — Basic

 

54,983

 

55,310

 

54,973

 

55,739

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common stock outstanding — Diluted

 

56,056

 

56,552

 

56,077

 

56,953

 

 

Segment Data (Unaudited)
(Dollars in thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 29,

 

July 31,

 

July 29,

 

July 31,

 

Segment Net Sales

 

2016

 

2015

 

2016

 

2015

 

Professional

 

$

427,784

 

$

421,994

 

$

1,361,829

 

$

1,314,474

 

Residential

 

167,815

 

175,977

 

550,330

 

578,587

 

Other

 

5,381

 

11,644

 

11,660

 

17,007

 

Total*

 

$

600,980

 

$

609,615

 

$

1,923,819

 

$

1,910,068

 

 


*Includes international sales of:

 

$

126,993

 

$

136,626

 

$

450,577

 

$

474,911

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

July 29,

 

July 31,

 

July 29,

 

July 31,

 

Segment Earnings (Loss) Before Income Taxes

 

2016

 

2015

 

2016

 

2015

 

Professional

 

$

89,096

 

$

82,253

 

$

292,311

 

$

258,727

 

Residential

 

12,767

 

20,566

 

64,494

 

69,131

 

Other

 

(21,076

)

(25,203

)

(68,079

)

(72,132

)

Total

 

$

80,787

 

$

77,616

 

$

288,726

 

$

255,726

 

 

5



 

THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)

 

 

 

July 29,

 

July 31,

 

 

 

2016

 

2015

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

277,243

 

$

110,335

 

Receivables, net

 

202,389

 

227,806

 

Inventories, net

 

327,114

 

350,194

 

Prepaid expenses and other current assets

 

39,658

 

39,743

 

Deferred income taxes

 

39,062

 

43,339

 

Total current assets

 

885,466

 

771,417

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

220,876

 

220,322

 

Long-term deferred income taxes

 

26,154

 

26,364

 

Goodwill and other assets, net

 

334,966

 

341,848

 

Total assets

 

$

1,467,462

 

$

1,359,951

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current portion of long-term debt

 

$

22,627

 

$

23,279

 

Short-term debt

 

 

5,189

 

Accounts payable

 

172,156

 

169,927

 

Accrued liabilities

 

318,628

 

300,576

 

Total current liabilities

 

513,411

 

498,971

 

 

 

 

 

 

 

Long-term debt, less current portion

 

334,658

 

358,053

 

Deferred revenue

 

11,958

 

11,324

 

Other long-term liabilities

 

29,585

 

26,430

 

Total stockholders’ equity

 

577,850

 

465,173

 

Total liabilities and stockholders’ equity

 

$

1,467,462

 

$

1,359,951

 

 

6



 

THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)

 

 

 

Nine Months Ended

 

 

 

July 29,

 

July 31,

 

 

 

2016

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings

 

$

200,764

 

$

178,037

 

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

 

 

 

 

 

Non-cash income from finance affiliate

 

(7,302

)

(6,223

)

Provision for depreciation, amortization, and impairment loss

 

46,332

 

45,944

 

Stock-based compensation expense

 

7,723

 

7,815

 

Decrease/(increase) in deferred income taxes

 

256

 

(2,096

)

Other

 

(464

)

(67

)

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

Receivables, net

 

(23,699

)

(74,916

)

Inventories, net

 

3,428

 

(67,902

)

Prepaid expenses and other assets

 

(2,108

)

(5,563

)

Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities

 

63,977

 

92,985

 

Net cash provided by/(used in) operating activities

 

288,907

 

168,014

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property, plant, and equipment

 

(34,601

)

(37,544

)

Proceeds from asset disposals

 

232

 

77

 

Distributions from finance affiliate, net

 

3,594

 

1,928

 

Proceeds from sale of a business

 

1,500

 

 

Acquisitions, net of cash acquired

 

 

(198,329

)

Net cash provided by/(used in) investing activities

 

(29,275

)

(233,868

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repayments of short-term debt

 

(1,161

)

(16,283

)

(Repayments of)/increase in long-term debt

 

(20,713

)

(3,831

)

Excess tax benefits from stock-based awards

 

15,078

 

7,808

 

Proceeds from exercise of stock options

 

19,691

 

8,615

 

Purchases of Toro common stock

 

(69,189

)

(90,993

)

Dividends paid on Toro common stock

 

(49,488

)

(41,794

)

Net cash provided by/(used in) financing activities

 

(105,782

)

(136,478

)

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(2,882

)

(2,206

)

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

150,968

 

(204,538

)

Cash and cash equivalents as of the beginning of the fiscal period

 

126,275

 

314,873

 

Cash and cash equivalents as of the end of the fiscal period

 

$

277,243

 

$

110,335

 

 

###

 

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