The Toro Company Reports Record First Quarter Results
-
First quarter sales increase 10 percent to a record
$603.0 million -
Reported quarterly EPS of
$0.55 ; adjusted quarterly EPS of$0.51 , up 6.3 percent over comparable 2018 period adjusted EPS of$0.48 , includes$0.03 acquisition related expenses - Strength of new products across the portfolio drove positive performance for the quarter
“Our professional businesses delivered another good quarter, led by
strength in landscape contractor sales, increased golf and grounds
channel demand, and positive momentum in our BOSS® business,” said
“At recent industry trade shows, our team showcased several new products with the latest technology, designed to help our customers do their jobs more effectively. Key product lines like the Greensmaster® eTriFlex™ fully electric riding greensmower that effectively eliminates the potential for hydraulic leaks, while offering superior cutting performance, generated excitement among customers. The Outcross® 9060 continues to be a crowd favorite as customers learn more about the various attachments and versatility this machine offers to help address some of their biggest challenges. Our new Dingo® TXL 2000 also continues to impress with its vertical lifting capacity and telescoping arms for increased productivity and ease of use.
“We are very excited about the recent announcement regarding the acquisition of Charles Machine Works, known as 'The Underground Authority,' with a portfolio of businesses including Ditch Witch®, and other leading brands in the underground construction market. As mentioned during our conference call last week, this acquisition will align very well with our strategic priorities and will naturally complement our existing business. Similarly, the cultural alignment, commitment to innovation and the importance of community shared by the two companies, should position us well for a successful integration.
“Looking ahead, we remain committed to effectively balancing tariffs and related commodity pressures, with productivity gains and pricing strategies. While we maintain our prudent approach to expense management, we will not sacrifice important investments in new product development, technologies or operating efficiencies. These factors, paired with the good work and dedication of our team, positions us well to execute in the future.”
Assuming the acquisition of Charles Machine Works closes in the third
quarter, we expect adjusted earnings per share of
SEGMENT RESULTS
Professional
-
Professional segment net sales for the first quarter were
$455.0 million , up 12.7 percent from$403.7 million last year. Strong performance across our professional businesses drove positive results for the quarter. Our Exmark® businesses benefitted from strong sales of zero-turn mowers across the portfolio. In our golf and grounds business, increased shipments of our Groundsmaster® mowers and Workman utility vehicles generated momentum. Similarly, our BOSS® snow and ice management business also saw the benefits of favorable snowfall in key regions, as well as momentum generated by new products like the Exact Path™ drop spreader and the Drag Pro™. -
Professional segment earnings for the first quarter were
$88.0 million , up 15.9 percent from$75.9 million in the same period last year.
Residential
-
Residential segment net sales for the first quarter were
$145.2 million , up 1.9 percent from 142.5 million last year. Increased demand for snow throwers driven by higher snowfall totals across the Midwest and solid sales of walk power mowers led to the positive results for the quarter. -
Residential segment earnings for the first quarter were
$13.1 million , down 16.8 percent from$15.7 million in the comparable period last year.
OPERATING RESULTS
Gross margin as a percent of sales for the first quarter was 35.8 percent, a decrease of 150 basis points compared to the prior year. Increased commodity and tariff-related costs, as well as the unfavorable accounting impact related to the acquisition of a distributor partner within the first quarter contributed to the decline, partially offset by pricing and productivity improvements.
Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 24.2 percent, a decrease of 90 basis points from the same period last year. The decrease was primarily due to the prudent leveraging of expenses over higher sales volume. SG&A improvement was offset by continued investment in our key strategic initiatives, including new product development and acquisition related growth opportunities.
First quarter operating earnings as a percent of sales were 11.6 percent, a decrease of 60 basis points compared to 12.2 percent in the same period last year.
The effective tax rate for the first quarter was 15.0 percent, compared to 66.0 percent for the first quarter of last year. The fiscal 2018 first quarter reported tax rate was significantly impacted by one-time items associated with the enactment of U.S. tax reform. The fiscal 2019 first quarter adjusted tax rate was 21.2 percent. The company continues to expect its full year effective tax rate to be about 21.5 percent.
Accounts receivable at the end of the first quarter were
About The
The
LIVE CONFERENCE CALL
www.thetorocompany.com/invest
The
Use of Non-GAAP Financial Information
This press release and
our related earnings call contain certain non-GAAP financial measures,
consisting of “adjusted" effective tax rate, net earnings and net
earnings per diluted share as measures of our operating performance.
Management believes these measures may be useful in performing
meaningful comparisons of past and present operating results, to
understand the performance of its ongoing operations and how management
views the business. Reconciliations of adjusted non-GAAP measures to
reported GAAP measures are included in the financial tables contained in
this press release. These measures, however, should not be construed as
an alternative to any other measure of performance determined in
accordance with GAAP.
The
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,”
“potential,” “pro forma,” or the negative thereof or 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
THE TORO COMPANY AND SUBSIDIARIES |
||||||||
Three Months Ended | ||||||||
February 1, |
February 2, |
|||||||
Net sales | $ | 602,956 | $ | 548,246 | ||||
Gross profit | 215,617 | 204,239 | ||||||
Gross profit percentage | 35.8 | % | 37.3 | % | ||||
Selling, general and administrative expense | 145,563 | 137,317 | ||||||
Operating earnings | 70,054 | 66,922 | ||||||
Interest expense | (4,742 | ) | (4,818 | ) | ||||
Other income, net | 4,708 | 4,281 | ||||||
Earnings before income taxes | 70,020 | 66,385 | ||||||
Provision for income taxes | 10,480 | 43,781 | ||||||
Net earnings | $ | 59,540 | $ | 22,604 | ||||
Basic net earnings per share of common stock | $ | 0.56 | $ | 0.21 | ||||
Diluted net earnings per share of common stock | $ | 0.55 | $ | 0.21 | ||||
Weighted-average number of shares of common stock outstanding — Basic | 106,258 | 107,225 | ||||||
Weighted-average number of shares of common stock outstanding — Diluted | 107,781 | 109,855 | ||||||
Segment Data (Unaudited) |
||||||||
Three Months Ended | ||||||||
Segment Net Sales | February 1, 2019 |
February 2, 2018 |
||||||
Professional | $ | 455,006 | $ | 403,669 | ||||
Residential | 145,158 | 142,507 | ||||||
Other | 2,792 | 2,070 | ||||||
Total net sales* | $ | 602,956 | $ | 548,246 | ||||
*Includes international net sales of: | $ | 141,545 | $ | 146,790 | ||||
Three Months Ended | ||||||||
Segment Earnings (Loss) | February 1, 2019 |
February 2, 2018 |
||||||
Professional | $ | 87,978 | $ | 75,912 | ||||
Residential | 13,072 | 15,713 | ||||||
Other | (31,030 | ) | (25,240 | ) | ||||
Total segment earnings | $ | 70,020 | $ | 66,385 | ||||
THE TORO COMPANY AND SUBSIDIARIES |
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February 1, 2019 |
February 2, 2018 |
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ASSETS |
||||||||
Cash and cash equivalents | $ | 249,965 | $ | 219,730 | ||||
Receivables, net | 225,528 | 198,736 | ||||||
Inventories, net | 416,650 | 439,343 | ||||||
Prepaid expenses and other current assets | 41,789 | 43,039 | ||||||
Total current assets | 933,932 | 900,848 | ||||||
Property, plant and equipment, net | 279,270 | 234,448 | ||||||
Deferred income taxes | 39,589 | 44,752 | ||||||
Goodwill and other assets, net | 370,023 | 336,758 | ||||||
Total assets | $ | 1,622,814 | $ | 1,516,806 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current portion of long-term debt | $ | — | $ | 13,000 | ||||
Accounts payable | 281,526 | 266,586 | ||||||
Accrued liabilities | 283,452 | 292,903 | ||||||
Total current liabilities | 564,978 | 572,489 | ||||||
Long-term debt, less current portion | 312,551 | 302,465 | ||||||
Deferred income taxes | 1,410 | 1,839 | ||||||
Other long-term liabilities | 49,478 | 59,232 | ||||||
Total stockholders’ equity | 694,397 | 580,781 | ||||||
Total liabilities and stockholders’ equity | $ | 1,622,814 | $ | 1,516,806 | ||||
THE TORO COMPANY AND SUBSIDIARIES |
||||||||
Three Months Ended | ||||||||
February 1, 2019 |
February 2, 2018 |
|||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 59,540 | $ | 22,604 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Non-cash income from finance affiliate | (2,429 | ) | (2,192 | ) | ||||
Contributions to finance affiliate, net | (459 | ) | (252 | ) | ||||
Provision for depreciation and amortization | 15,583 | 15,226 | ||||||
Stock-based compensation expense | 3,924 | 3,124 | ||||||
Deferred income taxes | (1,225 | ) | 19,682 | |||||
Other | — | (26 | ) | |||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||
Receivables, net | (31,331 | ) | (12,989 | ) | ||||
Inventories, net | (52,380 | ) | (107,017 | ) | ||||
Prepaid expenses and other assets | 8,119 | (2,588 | ) | |||||
Accounts payable, accrued liabilities, deferred revenue and other long-term liabilities | 26,643 | 72,523 | ||||||
Net cash provided by operating activities | 25,985 | 8,095 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant and equipment | (14,180 | ) | (10,784 | ) | ||||
Proceeds from asset disposals | 3 | — | ||||||
Investment in unconsolidated entities | (150 | ) | — | |||||
Acquisitions, net of cash acquired | (12,498 | ) | — | |||||
Net cash used in investing activities | (26,825 | ) | (10,784 | ) | ||||
Cash flows from financing activities: | ||||||||
Payments on long-term debt | — | (18,017 | ) | |||||
Proceeds from exercise of stock options | 7,569 | 4,436 | ||||||
Payments of withholding taxes for stock awards | (1,872 | ) | (3,077 | ) | ||||
Purchases of Toro common stock | (20,043 | ) | (50,066 | ) | ||||
Dividends paid on Toro common stock | (23,923 | ) | (21,425 | ) | ||||
Net cash used in financing activities | (38,269 | ) | (88,149 | ) | ||||
Effect of exchange rates on cash and cash equivalents | (50 | ) | 312 | |||||
Net decrease in cash and cash equivalents | (39,159 | ) | (90,526 | ) | ||||
Cash and cash equivalents as of the beginning of the fiscal period | 289,124 | 310,256 | ||||||
Cash and cash equivalents as of the end of the fiscal period | $ | 249,965 | $ | 219,730 | ||||
THE TORO COMPANY AND SUBSIDIARIES
Reconciliation of
Non-GAAP Financial Measures (Unaudited)
(Dollars in
thousands, except per-share data)
The company has provided non-GAAP financial measures, which are not
calculated or presented in accordance with accounting principles
generally accepted in
The following table provides reconciliations of financial measures
calculated and reported in accordance with GAAP as well as adjusted
non-GAAP financial measures presented in the accompanying press release
for the three month periods ended
The following is a reconciliation of our net earnings, diluted earnings per share ("EPS"), and effective tax rate to our adjusted net earnings, adjusted diluted EPS, and adjusted effective tax rate:
Net Earnings | Diluted EPS | Effective Tax Rate | ||||||||||||||||||||
Three Months Ended |
February 1, |
February 2, |
February 1, 2019 |
February 2, 2018 |
February 1, 2019 |
February 2, 2018 |
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As Reported - GAAP | $ | 59,540 | $ | 22,604 | $ | 0.55 | $ | 0.21 | 15.0 | % | 66.0 | % | ||||||||||
Impacts of tax reform: | ||||||||||||||||||||||
Net deferred tax asset revaluation1 | — | 20,513 | — | 0.19 | — | % | (30.9 | )% | ||||||||||||||
Deemed repatriation tax2 | — | 12,600 | — | 0.11 | — | % | (19.0 | )% | ||||||||||||||
Benefit of the excess tax deduction for share-based compensation3 | (4,361 | ) | (3,576 | ) | (0.04 | ) | (0.03 | ) | 6.2 | % | 5.4 | % | ||||||||||
As Adjusted - Non-GAAP | $ | 55,179 | $ | 52,141 | $ | 0.51 | $ | 0.48 | 21.2 | % | 21.5 | % | ||||||||||
1 Signed into law on December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act"), reduced the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent, effective January 1, 2018, which resulted in a blended U.S. federal statutory tax rate for the company of 23.3 percent for the fiscal year ended October 31, 2018. This reduction in rate required the re-measurement of the company's net deferred taxes as of the date of enactment, which resulted in a non-cash charge of $20.5 million during the three month period ended February 2, 2018. |
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2 The Tax Act imposed a one-time deemed repatriation tax on the company's historical undistributed earnings and profits of foreign affiliates, which resulted in a charge of $12.6 million during the three month period ended February 2, 2018, payable over eight years. |
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3 In the first quarter of fiscal 2017, the company adopted Accounting Standards Update No. 2016-09, Stock-based Compensation: Improvements to Employee Share-based Payment Accounting, which requires that any excess tax deduction for share-based compensation be immediately recorded within income tax expense. The company recorded discrete tax benefits of $4.4 million and $3.6 million as excess tax deductions for share-based compensation during the three month periods ended February 1, 2019 and February 2, 2018, respectively. |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20190221005101/en/
Source: The
Investor Relations
Heather Hille
Director, Investor
Relations
(952) 887-8923, heather.hille@toro.com
Media Relations
Branden Happel
Senior Manager, Public
Relations
(952) 887-8930, branden.happel@toro.com