The Toro Company Reports Record Second Quarter Results
-
Company achieves record second quarter sales of
$745 million , a 6 percent increase, driven by strong demand for professional segment products -
Quarterly net earnings increase 14 percent to a record
$1.51 per share -
The
Toro Company to celebrate the significant milestone of 100 years in business onJuly 10, 2014
“I’m proud of our team’s execution that delivered record sales and
earnings for the quarter despite challenging spring weather conditions
for the second straight year,” said
For the first six months,
“As we approach our Centennial and look ahead to the end of our Destination 2014 journey, we remain encouraged about both our business and prospects for achieving our goals,” said Hoffman. “Our portfolio of innovative products has us well-positioned to drive retail sales and strengthen our market share. We will keep a watchful eye on retail demand and field inventories across our businesses and make any necessary adjustments. In addition, we will benefit from increased pre-season snowthrower shipments, primarily in the fourth quarter, that are needed to replenish inventories diminished by strong customer demand last winter. As we strive to achieve our operating earnings goal, we will continue to pursue productivity improvements to leverage expenses and expand margins. While focused on things within our control, we remain mindful that Mother Nature may not deliver favorable summer growing conditions again this year or economic conditions may change, either of which could create potential challenges for our businesses and customers.”
The company continues to expect revenue growth for fiscal 2014 to be
about 5 to 6 percent, and net earnings per share to be about
SEGMENT RESULTS
Professional
-
Professional segment net sales for the second quarter totaled
$528.6 million , up 6.5 percent from the comparable fiscal 2013 period. Sales of landscape maintenance equipment increased on strong retail demand, including for our zero turn radius mowers. Golf equipment and irrigation product sales were up due to channel optimism and demand for new product offerings, including the INFINITY™ sprinklers and Multi Pro® advanced spraying system. Global micro irrigation sales increased with continued demand for more efficient solutions for agriculture and construction and rental equipment sales grew on channel demand for Toro® branded products. Slightly offsetting these increases were lower sales of professional products in international markets. For the first six months, professional segment net sales were$824 million , essentially flat with the comparable fiscal 2013 period. Sales benefited from strong retail demand for landscape maintenance equipment and increased demand for micro irrigation, construction and rental products, but were offset by sales in the first quarter of last fiscal year that benefited from the Tier 4 diesel engine transition and were not repeated this year. -
Professional segment earnings for the second quarter totaled
$122.4 million , up 9 percent from the comparable fiscal 2013 period. For the first six months, professional segment earnings were$169.8 million , down 1.8 percent from the comparable fiscal 2013 period.
Residential
-
Residential segment net sales for the second quarter totaled
$210.4 million , up 4.5 percent from the comparable fiscal 2013 period. Sales increased due to stronger domestic retail demand for our residential zero turn mowing products, as customers continued to transition to this mowing platform. International demand for walk power mowers, as well as domestic demand for electric blowers and trimmers, also benefited sales for the quarter. Offsetting these increases were lower shipments of domestic walk power mowers and decreased sales inAustralia due to unfavorable currency exchange and weather conditions. For the first six months, residential segment net sales were$357.9 million , up 11 percent from the comparable fiscal 2013 period. Sales for the period increased on strong retail demand for our snow products, primarily in the first quarter, due to significant snowfall across key North American markets, as well as increased channel and retail demand for residential zero turn mowing products and international demand for walk power mowers. -
Residential segment earnings for the second quarter totaled
$23.8 million , down 3.5 percent from the comparable fiscal 2013 period. For the first six months, residential segment earnings were$42 million , up 13.9 percent from the comparable fiscal 2013 period.
OPERATING RESULTS
Gross margin for the second quarter was 35.5 percent, a decrease of 30 basis points compared to the same fiscal 2013 period, primarily due to higher commodity costs and unfavorable currency exchange rates, somewhat offset by realized pricing. For the first six months, gross margin was 35.9 percent, a decrease of 50 basis points, primarily due to higher commodity costs, segment mix and unfavorable currency exchange rates, somewhat offset by realized pricing.
Selling, general and administrative (SG&A) expense as a percent of sales for the second quarter was 17.9 percent, a decrease of 120 basis points compared to the same fiscal 2013 period. For the first six months, SG&A expense as a percent of sales was 21.5 percent, a decrease of 60 basis points. For both periods, the decrease primarily was due to lower administrative expense, including health care costs, somewhat offset by higher incentive expense.
Second quarter operating earnings as a percent of sales improved 90 basis points to 17.6 percent compared to the same fiscal 2013 period. For the first six months, operating earnings as a percentage of sales improved 10 basis points to 14.4 percent.
The effective tax rate for the second quarter was 32.6 percent, which is
the same as the effective tax rate for the comparable fiscal 2013
period. For the first six months, the effective tax rate increased to
32.7 percent from 31.3 percent in the comparable fiscal 2013 period when
the company benefited from the retroactive reinstatement of the
Accounts receivable at the end of the second quarter totaled
About The
The
LIVE CONFERENCE CALL
www.thetorocompany.com/invest
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
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,” and similar expressions or future
dates. Forward-looking statements involve risks and uncertainties that
could cause actual 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
(Financial tables follow)
THE TORO COMPANY AND SUBSIDIARIES |
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Condensed Consolidated Statements of Earnings (Unaudited) |
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(Dollars and shares in thousands, except per-share data) |
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Three Months Ended | Six Months Ended | |||||||||||||||
May 2, | May 3, | May 2, | May 3, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net sales | $ | 745,030 | $ | 704,486 | $ | 1,191,011 | $ | 1,149,147 | ||||||||
Gross profit | 264,540 | 252,301 | 428,054 | 418,118 | ||||||||||||
Gross profit percent | 35.5 | % | 35.8 | % | 35.9 | % | 36.4 | % | ||||||||
Selling, general, and administrative expense | 133,661 | 134,830 | 256,577 | 254,443 | ||||||||||||
Operating earnings | 130,879 | 117,471 | 171,477 | 163,675 | ||||||||||||
Interest expense | (3,683 | ) | (4,149 | ) | (7,436 | ) | (8,398 | ) | ||||||||
Other income, net | 1,920 | 2,995 | 3,830 | 4,438 | ||||||||||||
Earnings before income taxes | 129,116 | 116,317 | 167,871 | 159,715 | ||||||||||||
Provision for income taxes | 42,030 | 37,915 | 54,916 | 49,917 | ||||||||||||
Net earnings | $ | 87,086 | $ | 78,402 | $ | 112,955 | $ | 109,798 | ||||||||
Basic net earnings per share | $ | 1.54 | $ | 1.35 | $ | 1.99 | $ | 1.88 | ||||||||
Diluted net earnings per share | $ | 1.51 | $ | 1.32 | $ | 1.95 | $ | 1.85 | ||||||||
Weighted average number of shares of common stock outstanding – Basic |
56,493 |
58,132 |
56,758 |
58,308 |
||||||||||||
Weighted average number of shares of common stock outstanding – Diluted |
57,773 |
59,257 |
58,040 |
59,444 |
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Segment Data (Unaudited) |
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(Dollars in thousands) |
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Three Months Ended | Six Months Ended | |||||||||||||||
May 2, | May 3, | May 2, | May 3, | |||||||||||||
Segment Net Sales |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Professional | $ | 528,561 | $ | 496,436 | $ | 824,029 | $ | 825,580 | ||||||||
Residential | 210,377 | 201,390 | 357,947 | 322,337 | ||||||||||||
Other | 6,092 | 6,660 | 9,035 | 1,230 | ||||||||||||
Total * | $ | 745,030 | $ | 704,486 | $ | 1,191,011 | $ | 1,149,147 | ||||||||
* Includes international sales of | $ | 205,117 | $ | 212,005 | $ | 356,380 | $ | 353,596 | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
May 2, | May 3, | May 2, | May 3, | |||||||||||||
Segment Earnings (Loss) Before Income Taxes |
2014 | 2013 | 2014 | 2013 | ||||||||||||
Professional | $ | 122,367 | $ | 112,275 | $ | 169,830 | $ | 173,013 | ||||||||
Residential | 23,822 | 24,679 | 41,956 | 36,833 | ||||||||||||
Other | (17,073 | ) | (20,637 | ) | (43,915 | ) | (50,131 | ) | ||||||||
Total | $ | 129,116 | $ | 116,317 | $ | 167,871 | $ | 159,715 | ||||||||
THE TORO COMPANY AND SUBSIDIARIES |
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Condensed Consolidated Balance Sheets (Unaudited) |
||||||
(Dollars in thousands) |
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May 2, | May 3, | |||||
2014 | 2013 | |||||
ASSETS |
||||||
Cash and cash equivalents | $ | 129,909 | $ | 80,341 | ||
Receivables, net | 313,489 | 307,770 | ||||
Inventories, net | 302,477 | 309,998 | ||||
Prepaid expenses and other current assets | 29,218 | 30,434 | ||||
Deferred income taxes | 39,261 | 62,768 | ||||
Total current assets | 814,354 | 791,311 | ||||
Property, plant, and equipment, net | 192,751 | 177,060 | ||||
Deferred income taxes | 25,942 | — | ||||
Goodwill and other assets, net | 146,199 | 146,583 | ||||
Total assets | $ | 1,179,246 | $ | 1,114,954 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
Current portion of long-term debt | $ | 140 | $ | 250 | ||
Accounts payable | 235,971 | 203,710 | ||||
Accrued liabilities | 302,515 | 294,648 | ||||
Total current liabilities | 538,626 | 498,608 | ||||
Long-term debt, less current portion | 223,855 | 223,513 | ||||
Deferred revenue | 10,891 | 10,605 | ||||
Deferred income taxes | 5,969 | 2,898 | ||||
Other long-term liabilities | 14,355 | 6,287 | ||||
Stockholders’ equity | 385,550 | 373,043 | ||||
Total liabilities and stockholders’ equity | $ | 1,179,246 | $ | 1,114,954 | ||
THE TORO COMPANY AND SUBSIDIARIES |
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Condensed Consolidated Statements of Cash Flows (Unaudited) |
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(Dollars in thousands) |
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Six Months Ended | ||||||||
May 2, | May 3, | |||||||
2014 | 2013 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 112,955 | $ | 109,798 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||
Noncash income from finance affiliate | (3,377 | ) | (3,532 | ) | ||||
Provision for depreciation and amortization | 26,589 | 26,890 | ||||||
Stock-based compensation expense | 5,051 | 5,336 | ||||||
Decrease in deferred income taxes | 136 | 281 | ||||||
Other | (31 | ) | 81 | |||||
Changes in operating assets and liabilities, net of effect of acquisition: | ||||||||
Receivables, net | (156,423 | ) | (160,534 | ) | ||||
Inventories, net | (62,072 | ) | (59,082 | ) | ||||
Prepaid expenses and other assets | 4,285 | (3,486 | ) | |||||
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities |
150,836 |
120,896 |
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Net cash provided by operating activities | 77,949 | 36,648 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property, plant, and equipment | (32,682 | ) | (19,508 | ) | ||||
Proceeds from asset disposals | 115 | 73 | ||||||
Contributions to finance affiliate, net | (4,868 | ) | (4,669 | ) | ||||
Acquisition, net of cash acquired | (715 | ) | — | |||||
Net cash used in investing activities | (38,150 | ) | (24,104 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of short-term debt | (849 | ) | (415 | ) | ||||
Increase in (repayments of) long-term debt | 59 | (1,548 | ) | |||||
Excess tax benefits from stock-based awards | 6,657 | 4,577 | ||||||
Proceeds from exercise of stock options | 4,761 | 6,573 | ||||||
Purchases of Toro common stock | (81,694 | ) | (50,499 | ) | ||||
Dividends paid on Toro common stock | (22,670 | ) | (16,364 | ) | ||||
Net cash used in financing activities | (93,736 | ) | (57,676 | ) | ||||
Effect of exchange rates on cash and cash equivalents | 853 | (383 | ) | |||||
Net decrease in cash and cash equivalents | (53,084 | ) | (45,515 | ) | ||||
Cash and cash equivalents as of the beginning of the period | 182,993 | 125,856 | ||||||
Cash and cash equivalents as of the end of the period | $ | 129,909 | $ | 80,341 |
Source: The
The Toro Company
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