The Toro Company Reports Record Second Quarter Earnings
- Strong professional sales drive record operating results for the quarter
-
Net earnings per share for the quarter up 15.2 percent to a record
$1.89 - Early spring retail momentum slowed by less favorable weather late in the quarter
For the first six months, Toro reported net earnings of
Earlier this week, the company announced that its board of directors had
declared a quarterly cash dividend of
“We were pleased by the strong sales in our professional segment,
particularly for our landscape contractor and golf products at the start
of our key selling season,” said
“On the residential side of the business, warmer spring weather early in the quarter was offset by poor weather in the later part of the quarter, which negatively impacted sales,” said Hoffman. “Our second quarter results were also negatively impacted by lower sales of residential riding products due to channel demand pulled forward in the first quarter driven by supply issues last year. We have higher inventory levels of riding mowers than normal because we wanted to ensure we were a better supplier to our customers this year, in light of the prior year manufacturing and availability issues.”
“Now, in the midst of our key selling season for spring and summer products, we are encouraged by solid retail demand across our businesses and the strong margin improvement in both segments. However, we acknowledge that the mild winter conditions we experienced earlier this fiscal year resulted in higher inventory levels at both the company and in the field. This along with expected softer preseason retail demand for snow products will present a headwind in the second half for shipments of our residential snow and BOSS® professional snow and ice management equipment. Going forward, we will increase our efforts on those things within our control, including reducing inventory levels for the second half of the fiscal year.”
The company now expects revenue growth for fiscal 2016 to be flat to up
two percent and net earnings per share to increase to about
SEGMENT RESULTS
Professional
-
Professional segment net sales for the second quarter totaled
$595.2 million , up 7.7 percent from$552.8 million in the same period last year. The increase was due largely to strong demand for landscape contractor, golf and specialty construction equipment. For the first six months, professional segment net sales were$934.0 million , up 4.7 percent from the comparable fiscal 2015 period. For the year-to-date period, sales benefited from strong demand for both Toro® and Exmark® branded landscape contractor equipment. Continued growth in our specialty construction business also contributed to the six month results. The sales growth for the quarter was somewhat offset by lower sales of irrigation. International sales year to date have declined due to the impact of unfavorable currency exchange rates. -
Professional segment earnings for the second quarter totaled
$141.6 million , up 17.2 percent from$120.8 million in the same period last year. For the first six months, professional segment earnings were$203.2 million , up 15.2 percent from the comparable fiscal 2015 period.
Residential
-
Residential segment net sales for the second quarter were
$238.2 million , down 11.1 percent from$267.9 million in the same period last year. The sales decrease was primarily due to reduced channel demand for our zero turn riding mowers. The decline was somewhat offset by higher sales of our walk power mowers driven by demand for new products, including our all-wheel drive and SmartStow® mowers. For the first six months, residential segment net sales were$382.5 million , down 5.0 percent from the comparable fiscal 2015 period. -
Residential segment earnings for the second quarter were
$35.0 million , up 0.4 percent from$34.8 million the same period last year. For the first six months, residential segment earnings were$51.7 million , up 6.5 percent from the comparable fiscal 2015 period.
OPERATING RESULTS
Gross margin as a percent of sales for the second quarter was 36.2 percent, an increase of 210 basis points from the same period last year. The increase was due to favorable commodity costs, productivity improvements and product mix, with stronger sales in our professional segment. For the first six months, gross margin as a percent of sales was 36.7 percent, an increase of 200 basis points from the same period last year, again due to favorable commodity costs, productivity and product mix.
Selling, general and administrative (SG&A) expense as a percent of sales for the second quarter was 17.7 percent, an increase of 40 basis points from the same period last year. For the first six months, SG&A expense as a percent of sales was 20.9 percent, an increase of 30 basis points in the comparable period last year.
Operating earnings as a percent of sales for the second quarter was 18.5 percent, an increase of 170 basis points year over year. Operating earnings as a percent of sales for the first six months was 15.8 percent, an increase of 170 basis points from the same period last year.
The effective tax rate for the second quarter was 31.5 percent, compared to 31.1 percent year over year. For the first six months, the effective tax rate was 30.3 percent, compared to 30.0 percent in the same period last year.
Accounts receivable at the end of the second quarter totaled
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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 | ||||||||||||||||||||
Condensed Consolidated Statements of Earnings (Unaudited) | ||||||||||||||||||||
(Dollars and shares in thousands, except per-share data) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
April 29, | May 1, | April 29, | May 1, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Net sales | $ | 836,441 | $ | 826,242 | $ | 1,322,839 | $ | 1,300,453 | ||||||||||||
Gross profit | 303,187 | 281,972 | 485,841 | 450,971 | ||||||||||||||||
Gross profit percent | 36.2 | % | 34.1 | % | 36.7 | % | 34.7 | % | ||||||||||||
Selling, general, and administrative expense | 148,097 | 143,517 | 276,912 | 268,094 | ||||||||||||||||
Operating earnings | 155,090 | 138,455 | 208,929 | 182,877 | ||||||||||||||||
Interest expense | (4,721 | ) | (4,768 | ) | (9,375 | ) | (9,484 | ) | ||||||||||||
Other income, net | 3,873 | 2,450 | 8,385 | 4,717 | ||||||||||||||||
Earnings before income taxes | 154,242 | 136,137 | 207,939 | 178,110 | ||||||||||||||||
Provision for income taxes | 48,561 | 42,374 | 62,997 | 53,397 | ||||||||||||||||
Net earnings | $ | 105,681 | $ | 93,763 | $ | 144,942 | $ | 124,713 | ||||||||||||
Basic net earnings per share of common stock | $ | 1.92 | $ | 1.68 | $ | 2.64 | $ | 2.23 | ||||||||||||
Diluted net earnings per share of common stock | $ | 1.89 | $ | 1.64 | $ | 2.58 | $ | 2.18 | ||||||||||||
|
||||||||||||||||||||
Weighted-average number of shares of common stock outstanding – Basic |
54,904 | 55,864 | 54,959 | 55,954 | ||||||||||||||||
Weighted-average number of shares of common stock outstanding – Diluted |
55,986 | 57,073 | 56,077 | 57,157 | ||||||||||||||||
Segment Data (Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
April 29, | May 1, | April 29, | May 1, | |||||||||||||||||
Segment Net Sales | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Professional | $ | 595,209 | $ | 552,774 | $ | 934,045 | $ | 892,480 | ||||||||||||
Residential | 238,231 | 267,867 | 382,515 | 402,610 | ||||||||||||||||
Other | 3,001 | 5,601 | 6,279 | 5,363 | ||||||||||||||||
Total* | $ | 836,441 | $ | 826,242 | $ | 1,322,839 | $ | 1,300,453 | ||||||||||||
*Includes international sales of: | $ | 196,338 | $ | 195,384 | $ | 323,584 | $ | 338,285 | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
April 29, | May 1, | April 29, | May 1, | |||||||||||||||||
Segment Earnings (Loss) Before Income Taxes | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Professional | $ | 141,623 | $ | 120,815 | $ | 203,215 | $ | 176,474 | ||||||||||||
Residential | 34,988 | 34,838 | 51,727 | 48,565 | ||||||||||||||||
Other | (22,369 | ) | (19,516 | ) | (47,003 | ) | (46,929 | ) | ||||||||||||
Total | $ | 154,242 | $ | 136,137 | $ | 207,939 | $ | 178,110 | ||||||||||||
THE TORO COMPANY AND SUBSIDIARIES | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
April 29, |
May 1, |
|||||||
2016 | 2015 | |||||||
ASSETS |
||||||||
Cash and cash equivalents | $ | 174,639 | $ | 109,295 | ||||
Receivables, net | 329,837 | 351,602 | ||||||
Inventories, net | 369,070 | 341,440 | ||||||
Prepaid expenses and other current assets | 36,683 | 38,210 | ||||||
Deferred income taxes | 39,878 | 43,202 | ||||||
Total current assets | 950,107 | 883,749 | ||||||
Property, plant, and equipment, net | 222,069 | 219,941 | ||||||
Long-term deferred income taxes | 28,535 | 26,416 | ||||||
Goodwill and other assets, net | 342,030 | 349,021 | ||||||
Total assets | $ | 1,542,741 | $ | 1,479,127 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current portion of long-term debt | $ | 23,286 | $ | 23,444 | ||||
Short-term debt | - | 24,900 | ||||||
Accounts payable | 260,504 | 256,391 | ||||||
Accrued liabilities | 316,811 | 314,505 | ||||||
Total current liabilities | 600,601 | 619,240 | ||||||
Long-term debt, less current portion | 337,909 | 361,428 | ||||||
Deferred revenue | 11,565 | 11,244 | ||||||
Other long-term liabilities | 30,058 | 24,211 | ||||||
Total stockholders' equity | 562,608 | 463,004 | ||||||
Total liabilities and stockholders' equity | $ | 1,542,741 | $ | 1,479,127 | ||||
THE TORO COMPANY AND SUBSIDIARIES | ||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
(Dollars in thousands) | ||||||||||
Six Months Ended | ||||||||||
April 29, | May 1, | |||||||||
2016 | 2015 | |||||||||
Cash flows from operating activities: | ||||||||||
Net earnings |
$ |
144,942 | $ | 124,713 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||
Non-cash income from finance affiliate | (4,551 | ) | (3,709 | ) | ||||||
Provision for depreciation, amortization, and impairment loss | 31,526 | 30,613 | ||||||||
Stock-based compensation expense | 5,197 | 5,090 | ||||||||
Decrease/(increase) in deferred income taxes | 253 | (1,107 | ) | |||||||
Other | (464 | ) | (47 | ) | ||||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||
Receivables, net | (150,072 | ) | (193,552 | ) | ||||||
Inventories, net | (37,418 | ) | (56,099 | ) | ||||||
Prepaid expenses and other assets | (91 | ) | (5,168 | ) | ||||||
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities | 147,832 | 194,514 | ||||||||
Net cash provided by/(used in) operating activities | 137,154 | 95,248 | ||||||||
Cash flows from investing activities: | ||||||||||
Purchases of property, plant, and equipment | (22,622 | ) | (27,261 | ) | ||||||
Proceeds from asset disposals | 203 | 57 | ||||||||
Contributions to finance affiliate, net | (2,865 | ) | (4,512 | ) | ||||||
Proceeds from sale of a business | 1,500 | - | ||||||||
Acquisitions, net of cash acquired | - | (198,329 | ) | |||||||
Net cash provided by/(used in) investing activities | (23,784 | ) | (230,045 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Repayments of short-term debt | (1,161 | ) | (1,283 | ) | ||||||
(Repayments of)/increase in long-term debt | (16,788 | ) | (276 | ) | ||||||
Excess tax benefits from stock-based awards | 11,285 | 5,057 | ||||||||
Proceeds from exercise of stock options | 14,684 | 5,168 | ||||||||
Purchases of Toro common stock | (41,018 | ) | (49,323 | ) | ||||||
Dividends paid on Toro common stock | (33,005 | ) | (27,975 | ) | ||||||
Net cash provided by/(used in) financing activities | (66,003 | ) | (68,632 | ) | ||||||
Effect of exchange rates on cash and cash equivalents | 997 | (2,149 | ) | |||||||
Net increase/(decrease) in cash and cash equivalents | 48,364 | (205,578 | ) | |||||||
Cash and cash equivalents as of the beginning of the fiscal period | 126,275 | 314,873 | ||||||||
Cash and cash equivalents as of the end of the fiscal period | $ | 174,639 | $ | 109,295 | ||||||
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Source: The
The Toro Company
Investor Relations:
Heather
Hille, 952-887-8923
Director, Investor Relations
heather.hille@toro.com
or
Media
Relations
Branden Happel, 952-887-8930
Senior Manager,
Public Relations
branden.happel@toro.com