BLOOMINGTON, Minn.--(BUSINESS WIRE)--Aug. 23, 2012-- The Toro Company (NYSE: TTC) today reported net earnings of $40.5 million, or $0.67 per share, on a net sales increase of 0.6 percent to $504.1 million for its fiscal third quarter ended August 3, 2012. In the comparable fiscal 2011 period, the company delivered net earnings of $35.1 million, or $0.55 per share, on net sales of $501 million.
For the first nine months, Toro reported net earnings of $129.3 million, or $2.13 per share, on a net sales increase of 6.8 percent to $1,619.4 million. In the comparable fiscal 2011 period, the company posted net earnings of $112.6 million, or $1.76 per share, on net sales of $1,515.9 million.
Earnings per share figures for all periods reported have been adjusted to reflect the effects of a 2-for-1 stock split effective June 29, 2012.
“In May, we anticipated a slowdown in the second half of our fiscal year due to a more challenging economic environment and the impact the early start to spring had on the business. What we didn’t predict was the worst drought in over 50 years,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We were still able to deliver favorable third quarter results in comparison to last year, but the combined impact of economic and weather conditions resulted in additional slowing of retail momentum and an increase in field inventory.”
“Despite the recent drought conditions, there continues to be many positives in our businesses. Our market positions remain strong, benefitting from a strong portfolio of new products. Year-to-date retail continues to be ahead of last year for many of our businesses including golf and micro irrigation. Even walk power mower sales are ahead of last year. And our internal focus on quality, cost and productivity helped deliver improved operating performance.”
“Given the effects of recent weather conditions, the ongoing economic struggles in Europe, and the desire to right size field inventory levels, we are adjusting our fourth quarter guidance as we prepare the company for a successful 2013.”
The company now expects revenue growth for fiscal 2012 to be about 4 to 5 percent and net earnings to be about $2.10 per share, which continues to include the $0.08 negative earnings per share impact for investments related to the Astec and Stone product-line acquisitions.
- Professional segment net sales for the third quarter totaled $361.1 million, up 4.4 percent from the prior year period. Sales of landscape maintenance equipment increased on the strength of new products and continued demand in markets not impacted by drought. Domestic sales of golf equipment and irrigation were up on new products and continued golf industry confidence. Micro irrigation sales increased domestically as demand continues for better solutions for agricultural irrigation. Recent acquisitions - including Astec Underground, Stone Construction Equipment and Unique Lighting Systems - also contributed to sales. International economic issues and unfavorable currency exchange negatively impacted the sales of all professional businesses. For the first nine months, professional segment net sales were $1,100.9 million, up 7.7 percent from the comparable fiscal 2011 period
- Professional segment earnings for the third quarter totaled $70.5 million, up 9.6 percent from the prior year period. For the first nine months, professional segment earnings were $211.3 million, up 12.5 percent from the comparable fiscal 2011 period.
- Residential segment net sales for the third quarter totaled $135.9 million, down 7.9 percent from the prior year period. As expected, snow blower sales were lower for the quarter due to anticipated soft preseason demand. Shipments of walk power mowers were up slightly for the quarter, while sales of residential riding products were down. Sales of Toro’s new string and hedge trimmers also contributed incrementally to the quarter. For the first nine months, residential segment net sales were $505.4 million, up 5.2 percent from the comparable fiscal 2011 period.
- Residential segment earnings for the third quarter totaled $10 million, up 116.6 percent from our fiscal 2011 third quarter, when a pre-tax charge of $4.5 million to account for one-time costs associated with a rework issue affecting a large number of walk power mowers resulted in a decline in earnings. For the first nine months, residential segment earnings were $51.2 million, up 20.3 percent from the comparable fiscal 2011 period.
Gross margin for the quarter improved 180 basis points to 35.3 percent due to realized pricing offsetting higher materials costs, a stronger professional/residential mix, and the absence of last year’s walk power mower rework impact. For the first nine months, gross margin was up 40 basis points to 34.6 percent.
Selling, general and administrative (SG&A) expense as a percent of sales increased 60 basis points for the third quarter to 23.2 percent. For the first nine months, SG&A expense improved 50 basis points as a percent of sales to 22.1 percent.
Operating earnings as a percent of sales increased 120 basis points to 12.1 percent for the third quarter, and was up 90 basis points to 12.5 percent for the year to date.
Interest expense for the third quarter was $4.2 million, down 2.2 percent compared to the prior year period. For the first nine months, interest expense totaled $12.8 million, up 1.5 percent from the same period last year.
The effective tax rate for the third quarter was 31.8 percent compared with 32.9 percent in the same period last year. Year to date, the tax rate increased to 33.3 percent from 32.8 percent due to the expiration of the Federal Research and Engineering Tax Credit.
Accounts receivable at the end of the third quarter totaled $197 million, down 1 percent from the prior year period, on a sales increase of nearly 1 percent. Net inventories were $234.8 million, up 1 percent from last year’s third quarter. Trade payables were $124.2 million, down 2 percent compared with last year.