Outdoor appliance maker The Toro Company reported record net earnings of U.S. $81.6 million, or $3.12 per diluted share, on record net sales of $1,496.6 million for the fiscal year ended Oct. 31, 2003. The company's fiscal 2003 results include an after- tax restructuring and other expense charge of $0.04 per diluted share and a gain of $0.08 per diluted share resulting from a legal settlement. For its fiscal 2003 fourth quarter ended Oct. 31, 2003, Toro reported net earnings of $5.6 million, or $0.21 per diluted share, on net sales of $310.3 million. Results for the fiscal 2003 fourth quarter included an after-tax restructuring and other expense charge totaling $0.01 per diluted share.
Kendrick B. Melrose, The Toro Company chairman and CEO, said that with its strong 2003 results, Toro achieved the 5.5-percent profit-after-tax goal of its three-year profit-improvement initiative.
"A tremendous company-wide effort made 2003 the best year in Toro's history," Mr. Melrose said. "The broad engagement of all our people in our '5 by Five' campaign has moved Toro to a high ranking position, on a profit-after-tax basis, when compared to our peer companies," said Melrose. "That achievement reflects the profit-improvement mentality now deeply ingrained in our corporate culture, a mentality that will be a key asset as we continue to strive for additional profitability improvement. With the conclusion of our '5 by Five' initiative, we are now challenging ourselves to build on its momentum to further improve profitability. Our new three-year campaign will add a major focus on stronger revenue growth through accelerated investments in new innovation initiatives, expanding current markets and strengthening our position with emerging and underserved customer groups."
Professional Segment Results
Fiscal 2003 net sales for the professional segment totaled $929.4 million, up 7.8 percent compared with fiscal 2002 with growth in almost all product categories. For the full year, operating earnings for the professional segment totaled $146.8 million, up 31.4 percent compared with fiscal 2002. The increase reflects the benefits of the company's profit improvement initiatives, lower currency support costs and lower manufacturing costs resulting from the transfer of certain production to lower cost facilities.
Compared with the fiscal 2002 fourth quarter, fiscal 2003 fourth-quarter professional segment sales increased 10.4 percent to $177.8 million. Professional segment operating earnings for the fiscal 2003 fourth quarter totaled $13.3 million, down 8.6 percent from $14.6 million in the fiscal 2002 fourth quarter. The decline reflects the impact of a write-down of certain automated manufacturing equipment that is being phased out in the move to a more cost effective process.
The sales growth in both the quarter and the year resulted primarily from a substantial increase in our landscape contractor equipment business, with particularly strong contributions from new products. For the full year, worldwide sales grew in all major product categories and benefited from favorable foreign currency exchange effects.
Residential Segment Results
For the year, residential segment sales totaled $506.5 million, up 6.8 percent compared with fiscal 2002. Fiscal 2003 operating earnings for the residential segment totaled $55.5 million, up 6.8 percent from fiscal 2002.
Residential segment sales for the fiscal 2003 fourth quarter totaled $110.3 million, up 19.3 percent from the fiscal 2002 fourth quarter. Operating earnings for the same period in the residential segment totaled $9.2 million, down 22.8 percent from the 2002 fourth quarter. The decline is attributable primarily to expenses associated with lowering production to better balance Toro inventory level with demand.
For both the quarter and the year, the increase in residential segment sales resulted from growth in walk power mower shipments. Walk power mower shipments benefited from successful promotional programs and continued strong retail demand in the dealer and mass channel. Residential segment sales in both periods also benefited from growth in Timecutter(R) Z riding mower shipments, strong initial stocking orders for the new line of Power Max(R) two-stage snow throwers and favorable currency exchange effects.
"We have more than doubled our profit after-tax yield from four years ago, thanks to the committed efforts of all Toro employees," Mr. Melrose said. "The success of this initiative provides a firm foundation for our next three-year campaign, which focuses on unleashing our people's energy to further improve our after-tax profitability while also accelerating top line growth. To drive this growth, we will be investing at a significantly higher level in innovation, technology and new product initiatives, as well as for business and brand development. These growth initiatives will benefit from the more operationally efficient platform we have built." Melrose said, "Toro also plans to achieve even higher levels of process and productivity improvement through the next generation initiative using 'Lean /No Waste' concepts in both our plant and office environments."
For fiscal 2004, Toro is currently targeting to deliver a 10 percent to 12 percent increase on fiscal 2003's $3.12 in diluted earnings per share with net sales growth of 7 percent to 9 percent. "Our major seasons have yet to begin, and because of the inevitable uncertainties related to weather, the economy and global geo- political issues, our outlook for fiscal 2004 is cautiously optimistic. As our 2003 results demonstrate, however, we are very dedicated to achieving our financial goals regardless of overall business conditions," said Melrose. For its fiscal first quarter, typically a small revenue period, Toro currently expects to report diluted earnings of $0.15 to $0.20 per share on net sales about equal with its fiscal 2003 first quarter.
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