The Toro Company (NYSE:TTC) today reported net earnings of $31 million, or $0.54 per share, on a net sales increase of 6.3 percent to $474.2 million for its 2015 first quarter ended January 30, 2015. In the comparable fiscal 2014 period, the company delivered net earnings of $25.9 million, or $0.44 per share, on net sales of $446 million.
“We are pleased to deliver record results for the quarter, which was not only the first of our fiscal year but also the first to include the BOSS® professional snow and ice management products as part of our expanded professional portfolio,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We are encouraged by the execution in that business and the sales it contributed to the quarter. Our integration efforts are progressing well and we continue to be optimistic about the prospects for future growth. Looking across our other professional businesses, shipments of worldwide golf and grounds equipment, landscape contractor turf equipment and rental products all increased in the quarter due to strong channel and retail demand for our innovative and productivity-enhancing offerings, helping to drive the double-digit revenue growth for that segment.”
“On the residential side of our business, we faced difficult first quarter comparisons due to last year’s early and abundant snowfalls that helped drive strong segment performance,” continued Hoffman. “This year, the robust pre-season demand that began in the second half of our 2014 fiscal year continued early in the quarter, but in-season demand was curtailed by a lack of snow events. The recent snowstorms that hit the Northeast and parts of Midwest at the end of our quarter, and are continuing to date, have helped to spur demand, drive retail sales, right-size field inventories and position us well for the pre-season next fall. All in, this is proving to be another successful snow season for us and one that helped our residential first quarter results, which otherwise were challenged by lower shipments of residential zero turn riding mowers due to supply inefficiencies and the ramp up of production of our highly anticipated new platform, as well as unfavorable currency exchange rates.”
“As we look ahead to our three key remaining tradeshows and beyond to our primary selling season, we believe we are well-positioned with a suite of new and innovative products that will help to drive retail sales and increase our market share across our businesses. For example, at the Golf Industry Show next week, our Reelmaster® hybrid fairway mower and INFINITY® golf sprinklers are just two of the many new and enhanced products that will attract the attention of worldwide golf customers as they visit our booth and make equipment and irrigation selections for use in the development and renovation of golf courses. At the Rental Show, which also is next week, we expect that the momentum from double-digit industry growth in 2014, combined with the excitement we expect to generate with the introduction of new products including our all-new Dingo® compact utility loader, will help to drive rental customer orders. Finally, in March, BOSS will exhibit at the NTEA Work Truck Show and unveil several new products and features that will further evidence its innovation leadership in the professional snow and ice management market.”
“With our peak selling season still in front of us, we are optimistic and hopeful that Mother Nature will deliver more normal spring conditions after two consecutive years in which it basically showed up in time to transition to the summer growing season. That said, we are mindful of the challenges our businesses and customers could face if, among other things, we encounter unfavorable swings in economic conditions, additional currency pressure or continued supply inefficiencies or disruptions resulting from U.S. West Coast port labor issues. We remain flexible and prepared to make adjustments across the enterprise as necessary and will continue to maintain our focus on the things we can control—investing in product innovation, delivering excellent customer service and executing in our markets.”
The company continues to expect revenue growth for fiscal 2015 to be about 8 to 10 percent, and now expects net earnings per share to be about $3.35 to $3.45. For the second quarter, the company expects net earnings per share to be about $1.58 to $1.63.
SEGMENT RESULTS
Professional
- Professional segment net sales for the first quarter totaled $339.7 million, up 15 percent from $295.5 million in the same period last year. The addition of the BOSS snow and ice management products to our professional portfolio helped to drive sales growth for the quarter. Worldwide golf and grounds sales increased on strong channel and retail demand for turf equipment. Sales of landscape maintenance equipment also grew with continued demand for our professional zero turn riding and walk-behind mowing platforms. Somewhat offsetting these increases were unfavorable currency exchange rates and lower international micro-irrigation sales primarily due to unfavorable economic conditions. Professional segment earnings for the first quarter totaled $55.7 million, up 17.3 percent from $47.5 million in the same period last year.
Residential
- Residential segment net sales for the first quarter were $134.7 million, down 8.7 percent from $147.6 million in the same period last year. This decrease primarily was due to lower shipments of residential zero turn riding mowers resulting from supply inefficiencies and the ramp up of production of our highly anticipated new platform that offers either dual lever or steering wheel controls, as well as lower international sales of residential products due to unfavorable currency exchange rates and weather conditions in Australia. Somewhat offsetting these decreases were higher pre-season domestic sales of walk power mowers due to expanded channel placement and increased demand for our innovative product line-up, including the new all-wheel drive model. Sales of our residential snow thrower products also were up modestly. Residential segment earnings for the first quarter were $13.7 million, down $4.4 million from $18.1 million the same period last year.
OPERATING RESULTS
Gross margin as a percent of sales for the first quarter was 35.6 percent, a decrease of 110 basis points from the same period last year. This decrease primarily was due to the purchase accounting impact of the BOSS acquisition and unfavorable currency exchange rates, somewhat offset by favorable segment mix.
Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 26.2 percent, a decrease of 140 basis points from the same period last year. This decrease was due to lower expense as a percent of sales across various expense categories, including warranty, warehousing, administrative and incentive expenses.
First quarter operating earnings as a percent of sales were 9.4 percent, compared to 9.1 percent for the same period last year.
First quarter interest expense was $4.7 million, up $1 million from the same period last year, primarily due to the additional long-term debt issued in connection with the BOSS acquisition.
The effective tax rate for the first quarter was 26.3 percent, compared to 33.2 percent in the same period last year, primarily due to the retroactive reenactment of the domestic research tax credit for calendar year 2014.
Accounts receivable at the end of the first quarter totaled $205.3 million, up 2.7 percent from the same period last year. Net inventories were $364.4 million, up 19.5 percent from the same period last year. Trade payables were $195.6 million, up 1.5 percent from the same period last year.
About The Toro Company
The Toro Company (NYSE: TTC) is a
leading worldwide provider of innovative solutions for the outdoor
environment, including turf, snow and ground engaging equipment and
irrigation and outdoor lighting solutions. With sales of $2.2 billion in
fiscal 2014, Toro’s global presence extends to more than 90 countries.
Through constant innovation and caring relationships built on trust and
integrity, Toro and its family of brands have built a legacy of
excellence by helping customers care for golf courses, landscapes,
sports fields, public green spaces, commercial and residential
properties and agricultural fields. For more information, visit www.thetorocompany.com.
LIVE CONFERENCE CALL
February 19, 2015 at 10:00 a.m. CST
www.thetorocompany.com/invest
The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CST on February 19, 2015. The webcast will be available at www.streetevents.com or at www.thetorocompany.com/invest. Webcast participants will need to complete a brief registration form and should allocate extra time before the webcast begins to register and, if necessary, download and install audio software.
Forward-Looking Statements
This news release contains
forward-looking statements, which are being made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on management’s current
assumptions and expectations of future events, and often can be
identified by words such as "expect,” “strive,” “looking ahead,”
“outlook,” “guidance,” “forecast,” “goal,” “optimistic,” “anticipate,”
“continue,” “plan,” “estimate,” “project,” “believe,” “should,” “could,”
“will,” “would,” “possible,” “may,” “likely,” “intend,” “can,” “seek,”
and similar expressions. Forward-looking statements involve risks and
uncertainties that could cause actual events and results to differ
materially from those projected or implied. Particular risks and
uncertainties that may affect our operating results or financial
position include: worldwide economic conditions, including slow or
negative growth rates in global and domestic economies and weakened
consumer confidence; disruption at our manufacturing or distribution
facilities, including drug cartel-related violence affecting our
maquiladora operations in Juarez, Mexico; fluctuations in the cost and
availability of raw materials and components, including steel, engines,
hydraulics and resins, resulting from the U.S. West Coast port situation
or otherwise; the impact of abnormal weather patterns, including
unfavorable weather conditions exacerbated by global climate change or
otherwise; the impact of natural disasters and global pandemics; the
level of growth or contraction in our key markets; government and
municipal revenue, budget and spending levels; dependence on The Home
Depot as a customer for our residential business; elimination of shelf
space for our products at dealers or retailers; inventory adjustments or
changes in purchasing patterns by our customers; our ability to develop
and achieve market acceptance for new products; increased competition;
the risks attendant to international operations and markets, including
political, economic and/or social instability and tax policies in the
countries in which we manufacture or sell our products; foreign currency
exchange rate fluctuations; our relationships with our distribution
channel partners, including the financial viability of our distributors
and dealers; risks associated with acquisitions, including the recent
acquisition of the BOSS® professional snow and ice management
business; management of our alliances or joint ventures, including Red
Iron Acceptance, LLC; the costs and effects of enactment of, changes in
and compliance with laws, regulations and standards, including those
relating to consumer product safety, Tier 4 emissions requirements,
conflict mineral disclosure, taxation, healthcare, and environmental,
health and safety matters; unforeseen product quality problems; loss of
or changes in executive management or key employees; the occurrence of
litigation or claims, including those involving intellectual property or
product liability matters; and other risks and uncertainties described
in our most recent annual report on Form 10-K, subsequent quarterly
reports on Form 10-Q, and other filings with the Securities and Exchange
Commission. We undertake no obligation to update forward-looking
statements made herein to reflect events or circumstances after the date
hereof.
THE TORO COMPANY AND SUBSIDIARIES | ||||||||||
Condensed Consolidated Statements of Earnings (Unaudited) | ||||||||||
(Dollars and shares in thousands, except per-share data) | ||||||||||
Three Months Ended | ||||||||||
January 30, | January 31, | |||||||||
2015 | 2014 | |||||||||
Net sales | $ | 474,211 | $ | 445,981 | ||||||
Gross profit | 168,999 | 163,514 | ||||||||
Gross profit percent | 35.6 | % | 36.7 | % | ||||||
Selling, general, and administrative expense | 124,577 | 122,916 | ||||||||
Operating earnings | 44,422 | 40,598 | ||||||||
Interest expense | (4,716 | ) | (3,753 | ) | ||||||
Other income, net | 2,267 | 1,910 | ||||||||
Earnings before income taxes | 41,973 | 38,755 | ||||||||
Provision for income taxes | 11,023 | 12,886 | ||||||||
Net earnings | $ | 30,950 | $ | 25,869 | ||||||
Basic net earnings per share | $ | 0.55 | $ | 0.45 | ||||||
Diluted net earnings per share | $ | 0.54 | $ | 0.44 | ||||||
Weighted average number of shares of common stock outstanding – Basic | 56,043 | 57,020 | ||||||||
Weighted average number of shares of common stock outstanding – Diluted | 57,242 | 58,306 | ||||||||
Segment Data (Unaudited) | ||||||||||
(Dollars in thousands) | ||||||||||
Three Months Ended | ||||||||||
January 30, | January 31, | |||||||||
Segment Net Sales | 2015 | 2014 | ||||||||
Professional | $ | 339,706 | $ | 295,468 | ||||||
Residential | 134,743 | 147,570 | ||||||||
Other | (238 | ) | 2,943 | |||||||
Total* | $ | 474,211 | $ | 445,981 | ||||||
* Includes international sales of | $ | 142,901 | $ | 151,263 | ||||||
Three Months Ended | ||||||||||
January 30, | January 31, | |||||||||
Segment Earnings (Loss) Before Income Taxes | 2015 | 2014 | ||||||||
Professional | $ | 55,659 | $ | 47,463 | ||||||
Residential | 13,727 | 18,134 | ||||||||
Other | (27,413 | ) | (26,842 | ) | ||||||
Total | $ | 41,973 | $ | 38,755 | ||||||
THE TORO COMPANY AND SUBSIDIARIES | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
January 30, | January 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 82,914 | $ | 104,025 | ||||
Receivables, net | 205,287 | 199,829 | ||||||
Inventories, net | 364,390 | 304,921 | ||||||
Prepaid expenses and other current assets | 41,084 | 35,507 | ||||||
Deferred income taxes | 40,414 | 38,590 | ||||||
Total current assets | 734,089 | 682,872 | ||||||
Property, plant, and equipment, net | 214,783 | 189,186 | ||||||
Deferred income taxes | 25,629 | 25,776 | ||||||
Goodwill and other assets, net | 347,667 | 141,761 | ||||||
Total assets | $ | 1,322,168 | $ | 1,039,595 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current portion of long-term debt | $ | 20,340 | $ | 140 | ||||
Short-term debt | 47,000 | - | ||||||
Accounts payable | 195,569 | 192,727 | ||||||
Accrued liabilities | 245,299 | 250,560 | ||||||
Total current liabilities | 508,208 | 443,427 | ||||||
Long-term debt, less current portion | 364,662 | 223,839 | ||||||
Deferred revenue | 10,812 | 10,513 | ||||||
Deferred income taxes | - | 5,969 | ||||||
Other long-term liabilities | 24,646 | 14,407 | ||||||
Stockholders’ equity | 413,840 | 341,440 | ||||||
Total liabilities and stockholders’ equity | $ | 1,322,168 | $ | 1,039,595 | ||||
THE TORO COMPANY AND SUBSIDIARIES | ||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
(Dollars in thousands) | ||||||||||
Three Months Ended | ||||||||||
January 30, | January 31, | |||||||||
2015 | 2014 | |||||||||
Cash flows from operating activities: | ||||||||||
Net earnings | $ | 30,950 | $ | 25,869 | ||||||
Adjustments to reconcile net earnings to net cash used in operating activities: | ||||||||||
Noncash income from finance affiliate | (1,460 | ) | (1,266 | ) | ||||||
Provision for depreciation and amortization | 14,849 | 13,285 | ||||||||
Stock-based compensation expense | 2,684 | 2,541 | ||||||||
(Increase) decrease in deferred income taxes | (152 | ) | 3,231 | |||||||
Other | (21 | ) | 5 | |||||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||
Receivables, net | (50,390 | ) | (44,118 | ) | ||||||
Inventories, net | (80,283 | ) | (66,825 | ) | ||||||
Prepaid expenses and other assets | (4,745 | ) | (4,705 | ) | ||||||
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities | 65,177 | 59,389 | ||||||||
Net cash used in operating activities | (23,391 | ) | (12,594 | ) | ||||||
Cash flows from investing activities: | ||||||||||
Purchases of property, plant, and equipment | (10,099 | ) | (18,085 | ) | ||||||
Proceeds from asset disposals | 23 | 28 | ||||||||
Contributions to finance affiliate, net | (385 | ) | (1,404 | ) | ||||||
Acquisitions, net of cash acquired | (197,782 | ) | (715 | ) | ||||||
Net cash used in investing activities | (208,243 | ) | (20,176 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Increase in (repayments of) short-term debt | 25,717 | (849 | ) | |||||||
(Repayments of) increase in long-term debt | (130 | ) | 30 | |||||||
Excess tax benefits from stock-based awards | 3,140 | 5,527 | ||||||||
Proceeds from exercise of stock options | 2,379 | 3,076 | ||||||||
Purchases of Toro common stock | (14,678 | ) | (42,013 | ) | ||||||
Dividends paid on Toro common stock | (14,014 | ) | (11,381 | ) | ||||||
Net cash provided by (used in) financing activities | 2,414 | (45,610 | ) | |||||||
Effect of exchange rates on cash and cash equivalents | (2,739 | ) | (588 | ) | ||||||
Net decrease in cash and cash equivalents | (231,959 | ) | (78,968 | ) | ||||||
Cash and cash equivalents as of the beginning of the fiscal period | 314,873 | 182,993 | ||||||||
Cash and cash equivalents as of the end of the fiscal period | $ | 82,914 | $ | 104,025 | ||||||
Contacts:
Investor Relations:
Amy Dahl,
952-887-8917
Managing Director, Corporate Communications and
Investor Relations
amy.dahl@toro.com
or
Media
Relations:
Branden Happel, 952-887-8930
Senior Manager,
Public Relations
branden.happel@toro.com