Toro Sales Up Slightly Through July, Outlook Improves

Toro recovers from late start to spring, Tier 4 diesel engine transition complicating professional business.

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The Toro Company has reported net earnings of $40.1 million on a net sales increase of 1.2% to $509.9 million for its fiscal third quarter ended August 2, 2013.

For the first nine months of its fiscal year, Toro reported net earnings of $149.9 million on a net sales increase of 2.4% to $1.659 billion.

“For the quarter, our results were strengthened by a summer growing season with favorable temperatures and precipitation levels as compared to last year’s severe drought conditions,” said Michael Hoffman, Toro’s chairman and chief executive officer. “The more desirable weather helped us drive retail sales across most of our businesses and, in particular, our residential business. In addition to realizing sales delayed in the prior quarter by adverse spring weather conditions, our residential business benefited from increased demand for our new and innovative products, including our Timecutter zero-turn-radius riding products and our recently introduced line of lithium-ion battery-powered string and hedge trimmers.

“As anticipated, the Tier 4 diesel engine transition—which caused a significant portion of our professional sales to be accelerated into our first quarter from later quarters as we’ve historically seen—continued to impact the quarterly results for our professional business," Hoffman continued. "Year-to-date our results are solid and our business fundamentals remain sound. Our golf and landscape contractor businesses are benefitting from innovative and high-performing equipment offerings valued by our end-user customers, we continue to grow our micro-irrigation business around the world, and we realized additional sales from increased customer demand for our rental products and newly introduced Toro-branded underground and construction products."

Improved Outlook

“Looking ahead, although we are always mindful of the challenges that Mother Nature can create for us, as well as continuing expectations for slow worldwide economic growth, we remain cautiously optimistic about the remainder of our year," Hoffman said. "We expect favorable sales comparisons to last year’s fourth quarter when limited prior-season snowfall in North America and Europe significantly affected demand for our snowthrower products. Turning to field inventory, despite elevated positions held through the second quarter due to the planned execution of the Tier 4 transition and the resulting impact of the poor spring weather conditions, we believe that recent retail efforts have reduced field inventories across our product lines and at these improved levels we are well positioned for the future. Lastly, we expect that momentum from our productivity efforts and favorable commodity trends, somewhat offset by product mix, should drive additional earnings gains. As a result, today we are refining our full-year revenue outlook and increasing our earnings expectations.”

The company now expects revenue growth for fiscal 2013 to be about 4% and net earnings to be about 2.55 per share, or an increase of about 19% over fiscal 2012.

Professional Segment Highlights

Professional segment net sales for the third quarter totaled $343.9 million, down 4.8% from the prior year period. The quarterly sales decrease primarily was attributable to the Tier 4 diesel engine transition and related acceleration of a significant portion of Toro's professional sales into its first quarter from later quarters as historically experienced.

Offsetting the decrease, though, were shipments of landscape contractor equipment which benefited from increased demand for Toro zero turn-radius products driven by more favorable weather conditions this quarter compared to the drought conditions last year, as well as newly introduced product offerings. Rental and construction equipment sales were up on increased product demand. Global micro-irrigation sales increased on continued demand for more efficient irrigation solutions for agriculture.

For the first nine months, professional segment net sales were $1.1694 billion, up 6.2% from the comparable fiscal 2012 period.

Residential Segment Highlights

Residential segment net sales for the third quarter totaled $155.5 million, up 14.4% from the prior year period. Favorable temperatures and precipitation levels in the quarter led to sales increases across all summer product categories, including riding products, walk power mowers, and handheld trimmer and blower products. For the first nine months, residential segment net sales were $477.8 million, down 5.5% from the comparable fiscal 2012 period. The year-to-date sales results largely were attributable to the unusually mild 2012/2013 winter season and the late start to spring.

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