The Toro Company, the Bloomington, MN, U.S.-based maker of lawn maintenance equipment, today reported net earnings of U.S. $42.0 million, or $1.61 per diluted share, on net sales of $495.8 million for its fiscal 2003 second quarter ended May 2, 2003.
In the comparable fiscal 2002 period, the company reported net earnings of $38.1 million, or $1.46 per diluted share, on net sales of $470.3 million. The results for the fiscal 2002 period included a tax benefit of $1.8 million, or $0.07 per diluted share. Excluding this tax benefit, the company's fiscal 2002 second-quarter adjusted net earnings totaled $36.4 million, or $1.39 per adjusted diluted share.
For the 6 months ended May 2, 2003, Toro reported net earnings of $49.0 million, or $1.89 per diluted share, on net sales of $791.8 million. The first-half results include a gain of $0.08 per diluted share resulting from a legal settlement recorded in the fiscal 2003 first quarter. Excluding this gain and restructuring income, the company's adjusted net earnings for the first 6 months of fiscal 2003 totaled $46.7 million or $1.80 per adjusted diluted share, up 22 percent from adjusted net earnings per diluted share for the comparable fiscal 2002 period.
Net earnings for the first 6 months of fiscal 2002 totaled $8.4 million, or $0.33 per diluted share, on net sales of $748.2 million. Adjusted net earnings per diluted share for the first 6 months of fiscal 2002 totaled $1.47 per adjusted diluted share and excluded the effects of three items: charges for restructuring and other expenses totaling $6.7 million, or $0.26 per diluted share; a net charge of $24.6 million, or $0.95 per diluted share, reflecting the cumulative effects of a change in accounting principle; and a foreign sales corporation tax benefit of $1.8 million, or $0.07 per diluted share.
Earnings per share for the fiscal 2002 periods have been adjusted to reflect the effects of a two-for-one split of the company's Common Stock effective April 1, 2003.
Kendrick B. Melrose, chairman and CEO, said Toro's second-quarter performance benefited from revenue growth, particularly in the Professional segment, as well as continuing favorable effects of the company's ongoing '5 by Five' profit improvement initiative. "Despite the very uncertain environment prevailing during our fiscal second quarter, we are pleased with the strong performance that has us comfortably on track to meet our full-year goals," said Mr. Melrose. "New products helped us deliver a 5.4 percent increase in revenue which was leveraged into higher earnings from '5 by Five', now in its third and final year. Performance for the quarter and the year to date also benefited slightly from favorable foreign currency exchange effects."
Compared with the fiscal 2002 second quarter, fiscal 2003 second-quarter Professional segment sales increased 8.2 percent to $314.1 million. Professional segment volumes for the landscape contractor equipment category increased significantly. Improved field inventory position and new product introductions for Toro wide area mowers and Exmark ZRTs drove strong revenue increases in this segment. Irrigation products, a new line of Toro Groundsmaster products, as well as expansion in retail distribution of Siteworks Systems also contributed to the increase. Operating earnings before restructuring and other income totaled $63.4 million for the quarter, up 19.0 percent from $53.2 million in the fiscal 2002 second quarter.
Residential segment sales for the fiscal 2003 second quarter totaled a disappointing $172.5 million. After two relatively strong months in the second quarter, a wet, cool April in several key markets slowed the overall growth in this segment, the company said. The segment finished the quarter with a modest gain of 1.6 percent compared to the fiscal 2002 second quarter, largely due to lower sales of walk power mowers and lawn and garden tractors. On the positive side, domestic and international orders for the Timecutter Z riding mowers and sales of new retail irrigation products were both strong. Operating profit before restructuring and other income for the fiscal 2003 second quarter totaled $24.2 million, up 20.8 percent from the comparable fiscal 2002 period.
Mr. Melrose said Toro's performance through the first half of its fiscal year has it well positioned to meet its earnings growth target for the full year. The company currently expects to report fiscal 2003 net earnings per share of $3.00 or better. This includes the $0.08 per diluted share benefit from a legal settlement recorded in the fiscal 2003 first quarter.
"With our second quarter performance, we demonstrated the sustainability of the benefits from our '5 by Five' initiative, as well as our ability to drive revenue growth in a difficult economy by introducing innovative new products," said Mr. Melrose. "Moreover, our ongoing improvements in overall operating performance are enabling us to invest more aggressively in new products, brand building, customer care and operations initiatives, therefore strengthening our market position."
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