Lawn and garden appliance maker The Toro Company reported record fiscal second quarter net earnings of U.S. $62 million, or $1.33 per diluted share, on net sales of $628.4 million for the quarter ended April 29, 2005. In the comparable fiscal 2004 period, the company reported net earnings of $52.2 million, or $1.00 per diluted share, on net sales of $548 million.
For the 6 months ended April 29, 2005, Toro reported net earnings of $73.1 million, or $1.55 per diluted share, on net sales of $975.4 million compared with net earnings of $61.5 million, or $1.18 per diluted share, on net sales of $861.6 million in the first six months of fiscal 2004.
Earnings per share figures for all periods reported have been adjusted to reflect the effects of a 2-for-1 stock split effective March 28, 2005.
Kendrick B. Melrose, Toro's executive chairman, said strong shipments of both professional and residential products, especially in international markets, were responsible for the 14.70percent increase in second quarter net sales. Excluding the effects of Hayter Ltd., a U.K.-based manufacturer of residential and commercial mowing equipment that Toro acquired in February 2005, net sales would have increased 11.4 percent. International sales increased 41.1 percent compared with the fiscal 2004 second quarter as a result of strong international demand and contributions from Hayter Ltd.
"We continued to realize impressive results from our leadership position in the professional segment markets, where demand from landscape contractor, golf course and other commercial customers remained strong," said Mr. Melrose. "Moreover, international sales increased from growth in the residential and golf markets, a host of innovative products introduced across several markets, and the relative weakness of the U.S. dollar."
Mr. Melrose noted that, as in the company's fiscal 2005 first quarter, net earnings for the second quarter benefited from double-digit revenue growth and the leveraging of selling, general and administrative expense (SG&A) resulting, in part, from substantial progress on the company's "No Waste" profitability improvement initiative.
Compared with the prior year, fiscal 2005 second-quarter Professional segment sales increased 14.9 percent to $389.1 million. For the second consecutive year, volume increased in nearly all product categories. In addition, net sales for the 2005 second quarter included contributions from Hayter's professional products.
Residential segment sales for the second quarter totaled $227.7 million, up 16.9 percent compared with last year's second quarter. Strong shipments of both Toro(R) and Lawn-Boy(R) brand walk power mowers and contributions from Hayter were the primary sources of sales growth in the quarter and more than offset the decline in retail irrigation and riding mower sales compared with last year's second quarter, the company said.
Commenting on Toro's outlook for the rest of 2005, Mr. Melrose cautioned that sales to homeowners during most of the second quarter were below the company's expectations, due to unfavorable weather in the U.S. market. "Reorder volume for residential products in our fiscal third quarter will likely be adversely affected," he said. "If the remainder of the spring retail season does not return to more favorable weather soon, our third-quarter earnings target will be at risk. Nonetheless, on the assumption of normal weather patterns resuming for the balance of the season, we are raising our earnings outlook for fiscal 2005 modestly."
Mr. Melrose said he is confident Toro will report another strong year as it continues to focus on its profit improvement and growth initiative, international expansion strategies, and the development and introduction of innovative new products.
"As we assimilate the year's positive and negative prospects, we now expect net earnings per diluted share for fiscal 2005 to exceed last year's record levels by 15 to 18 percent," Mr. Melrose said. "Due to the uncertainty of the second quarter's retail effect on the third quarter's shipment levels, we are maintaining our sales growth guidance of 9 to 11 percent."
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