The Toro Company Reports Record Results for Fiscal 2012

  The Toro Company Reports Record Results for Fiscal 2012

  *Full-year sales increase to record $1.96 billion in fiscal 2012
  *Professional businesses grow over 7 percent on strength of golf, landscape
    and micro-irrigation
  *Operating earnings expand to 10.5 percent towards Destination 2014 target
  *Net earnings per share for the year up 16 percent to record $2.14

Business Wire

BLOOMINGTON, Minn. -- December 05, 2012

The Toro Company (NYSE: TTC) today reported net earnings of $129.5 million, or
$2.14 per share, on a net sales increase of 4 percent to $1,958.7 million for
its fiscal year ended October 31, 2012. In fiscal 2011, the company delivered
net earnings of $117.7 million, or $1.85 per share, on net sales of $1,884
million.

For the fourth quarter, Toro reported net earnings of $0.3 million, on a net
sales decrease of 7.8 percent to $339.3 million. In the comparable fiscal 2011
period, the company posted net earnings of $5 million, or $0.08 per share, on
net sales of $368.1 million.

Earnings per share figures for all periods reported have been adjusted to
reflect the company’s 2-for-1 stock split effective June 29, 2012.

“The Toro Company completed another record year with new highs for revenues
and earnings per share,” said Michael J. Hoffman, Toro’s chairman and chief
executive officer. “While pleased with our performance, it could have been
even better if not for limited snowfall around the world that reduced
snowthrower sales by almost 50 percent. Despite the weather challenge and a
continued sluggish worldwide economy, Toro made tremendous progress in 2012.
New products and good execution helped grow our positions in golf equipment,
landscape contractor and grounds, micro irrigation and residential mowing. Our
investments in acquisitions to enter new markets and expand capacity for micro
irrigation, are contributing and will fuel growth into the future. And our
efforts on productivity are starting to gain traction, as we delivered another
significant step towards our Destination 2014 operating earnings goal of 12
percent by the end of fiscal 2014.”

“For the quarter, retail sales activity for many of our products were strong
this fall, which helped get field inventories in good shape heading into the
upcoming season. The majority of the decline in sales for the quarter resulted
from the lack of snowthrower shipments due to soft preseason demand. Other
major product categories showed sales growth in the quarter, with positive
momentum heading into the new fiscal year.”

“We are early in our fiscal 2013, and mindful of the challenging world-wide
economic environment and, as always, acutely aware of the volatility of Mother
Nature. Nonetheless, the outlook for our end markets appears promising. Golf
rounds and revenues were up last year, housing and construction are showing
signs of improvement, and the agriculture market continues to adopt more
efficient methods of irrigation. While we hope for better weather for our
business, that is out of our control. We will concentrate on those actions
that have made us successful: developing innovative products, serving our
customers, executing in the marketplace, and engaging our employees to improve
profitability as we pursue our Destination 2014 goals of additional revenue
growth and further operating earnings expansion.”

The company expects revenue growth for fiscal 2013 to be about 4 to 5 percent,
and net earnings to be about $2.35 to $2.40 per share. For the first quarter,
the company expects net earnings to be about $0.40 to $0.45 per share,
positively impacted by anticipated accelerated purchases of diesel products in
advance of the Tier 4 price change.

SEGMENT RESULTS

Professional

  *Professional segment net sales for fiscal 2012 totaled $1,329.5 million,
    up 7.3 percent over last year. Sales of golf equipment and irrigation were
    up domestically on continued demand as golf courses replaced equipment and
    renovated aging irrigation systems. Landscape maintenance equipment
    increased on the success of new products and retail demand in markets not
    impacted by the drought. Micro irrigation sales in the Americas increased
    significantly on improved capacity and dealer expansion that enabled Toro
    to better meet growing demand for agricultural irrigation. Recent
    acquisitions also contributed incremental sales for the year.
    International economic issues, particularly Europe, negatively impacted
    the sales of most professional businesses for the year. For the fourth
    quarter, professional segment net sales were $228.6 million, up 5.6
    percent from the comparable fiscal 2011 period.
  *Professional segment earnings for fiscal 2012 totaled $232.1 million, up
    13.2 percent from the prior year. For the fourth quarter, professional
    segment earnings were $20.8 million, up 21.2 percent from the comparable
    fiscal 2011 period.

Residential

  *Residential segment net sales for fiscal 2012 were $607.4 million, down
    from $623.9 million in fiscal 2011. Snow thrower sales were down about 50
    percent for the year due to the lack of snowfall last winter and the
    resulting soft preseason demand in the fourth quarter. Shipments of walk
    power mowers and riding products were up for the year due in part to the
    successful launch of the TimeMaster™ 30 inch walk power mower. For the
    fourth quarter, residential segment net sales were $102 million, down 28.9
    percent from the comparable fiscal 2011 period due to reduced demand for
    snowthrowers.
  *Residential segment earnings for fiscal 2012 totaled $57.9 million, up
    $3.5 million or 6.4 percent from fiscal 2011, when a pre-tax charge of
    $4.7 million to account for one-time costs associated with a rework issue
    affecting walk power mowers resulted in a decline in earnings. For the
    fourth quarter, residential segment earnings were $6.7 million, down from
    $11.9 million in the comparable fiscal 2011 period.

OPERATING RESULTS

Gross margin for fiscal 2012 improved 60 basis points from last year to 34.4
percent. The majority of the margin expansion was due to realized price,
coupled with productivity improvement, somewhat offset by higher materials
costs. For the fourth quarter, gross margin was up 100 basis points to 33.3
percent.

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 Company
The 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 Harbor
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 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         33.3    %       32.3    %       34.4      %       33.8      %
percent
Selling,
general, and        108,792       109,580       467,481         452,160   
administrative
expense
Operating            4,107           9,207           205,613           184,487
earnings
Interest             (4,115  )       (4,374  )       (16,906   )       (16,970   )
expense
Other income,       2,324         2,749         7,555           7,309     
net
Earnings
before income        2,316           7,582           196,262           174,826
taxes
Provision for       2,065         2,547         66,721          57,168    
income taxes
Net earnings       $ 251          $ 5,035        $ 129,541        $ 117,658   
                                                                     
Basic net
earnings per       $ 0.00         $ 0.08         $ 2.18           $ 1.88      
share
                                                                     
Diluted net
earnings per       $ 0.00         $ 0.08         $ 2.14           $ 1.85      
share
                                                                     
Weighted
average number
of shares of
common               58,836          61,242          59,446            62,534

stock
outstanding –
Basic
                                                                     
Weighted
average number
of shares of
common               60,162          62,074          60,618            63,594

stock
outstanding –
Diluted
                                                                                 

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       2012            2011            2012              2011
Sales
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     $ 113,842       $ 120,651       $ 594,313         $ 607,915
sales of
                                                  
                  Three Months Ended              Fiscal Years Ended
                  October 31,     October 31,     October 31,       October 31,
Segment
Earnings          2012            2011            2012              2011
(Loss) Before
Income Taxes
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       53,634          48,506
impairment losses
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              28,663        (17,295  )
liabilities
Net cash provided by operating activities          185,798       113,877  
                                                                  
Cash flows from investing activities:
Purchases of property, plant, and equipment,        (43,242 )       (57,447  )
net
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            44,970          (96,480  )
equivalents
Cash and cash equivalents as of the beginning      80,886        177,366  
of the fiscal year
                                                                  
Cash and cash equivalents as of the end of        $ 125,856      $ 80,886   
the fiscal year

Contact:

The Toro Company
Investor Relations:
Kurt Svendsen, 952-887-8630
Managing Director, Corporate Communications and Investor Relations
kurt.svendsen@toro.com
or
Media Relations:
Branden Happel, 952-887-8930
Senior Manager, Public Relations
branden.happel@toro.com
 
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