- Strong performance in both the
professional and residential segments drove record revenue for the
quarter
- Net earnings per share for the quarter
reached a record $1.08
- Innovative new products well received
by customers
The Toro Company (NYSE: TTC) today reported net earnings of
$120.5 million, or $1.08 per share, on a net sales increase of 4.3
percent to $872.8 million for its 2017 second quarter ended May 5,
2017. In the comparable fiscal 2016 period, the company delivered
net earnings of $105.7 million, or $0.94 per share, on net sales of
$836.4 million.
For the first six months, Toro reported net earnings of $165.5
million, or $1.48 per share, on a net sales increase of 5 percent
to $1,388.6 million. In the comparable fiscal 2016 period, the
company posted net earnings of $144.9 million, or $1.29 per share,
on net sales of $1,322.8 million.
“Solid performance in both our professional and residential
segments contributed nicely to the revenue growth we achieved for
the quarter,” said Richard M. Olson, Toro’s president and chief
executive officer. “The golf equipment business continues to
perform well as customers enhance their fleets with innovative turf
solutions like the compact and lighter weight Reelmaster® fairway
mower and the Greensmaster® TriFlex™ hybrid mower, which delivers
the precision cutting capabilities of a walk greens mower with the
productivity of a riding unit. We are also pleased by the
performance of our rental and specialty construction businesses.
Expanding our product lineup, particularly in the rental channels,
has been successful.”
“The annual Toro Days sales event generated solid results in our
residential business for the quarter,” said Olson. “We saw strong
demand for our walk power mowers during the early part of spring
and that momentum continues. We are also particularly excited about
the new Personal Pace® PoweReverse™ mower with reverse assist for
ease of use and maneuvering. This revolutionary new design delivers
power where it’s needed by featuring a self-propel system that
activates in both forward and reverse.”
“As we look across all of our businesses, we are encouraged by
the retail momentum we are seeing, but we acknowledge that we still
have much of the key selling season ahead of us. I am pleased by
the steady progress we are making on our working capital
initiatives and the other Destination PRIME goals. As we enter the
second half of the fiscal year, we will continue to execute against
our customers’ expectations by delivering value-added innovations
in the markets and industries we serve, while maintaining
operational flexibility and prudently managing expenses.”
The company now expects revenue growth for fiscal 2017 to be
about 4.5 percent and net earnings per share to increase to about
$2.35. For the third quarter, the company expects net earnings per
share to be about $0.56.
SEGMENT RESULTS
Professional
- Professional segment net sales for the
second quarter totaled $610.9 million, up 2.6 percent from $595.2
million in the same period last year. The increase was due largely
to strong demand for products in our golf equipment and rental
businesses. For the first six months, professional segment net
sales were $982.7 million, up 5.2 percent from the comparable
fiscal 2016 period. For the year-to-date period, sales benefited
from momentum in our golf equipment and landscape contractor
businesses. Growth in our BOSS and specialty construction
businesses also contributed to the six month results.
- Professional segment earnings for the
second quarter totaled $149.0 million, up 5.2 percent from $141.6
million in the same period last year. For the first six months,
professional segment earnings were $217.2 million, up 6.9 percent
from the comparable fiscal 2016 period.
Residential
- Residential segment net sales for the
second quarter were $258.1 million, up 8.4 percent from $238.2
million in the same period last year. The sales increase was
primarily due to solid demand for our walk power mowers in the mass
channels and for zero-turn riding mowers in our dealer network. For
the first six months, residential segment net sales were $398.5
million, up 4.2 percent from the comparable fiscal 2016 period.
Increased sales of our walk power mowers have been a key factor in
driving performance year-to-date.
- Residential segment earnings for the
second quarter were $35.0 million, which is flat compared to the
same period last year. For the first six months, residential
segment earnings were $51.6 million, which is also flat compared to
the fiscal 2016 period. Higher freight costs and a specific product
warranty issue negatively impacted the results for both
periods.
OPERATING RESULTS
Gross margin as a percent of sales for the second quarter was
36.2 percent, which is consistent with the same period last year.
Productivity improvements were offset by commodity headwinds and
the impacts of segment mix, which contributed to the quarterly
results. For the first six months, gross margin as a percent of
sales was 36.7 percent, also consistent with the comparable period
last year. Commodity cost increases offset productivity
improvements, which contributed to the results year-to-date.
Selling, general and administrative (SG&A) expense as a
percent of sales for the second quarter was 18.0 percent, an
increase of 30 basis points from the same period last year. Higher
incentive and warranty costs were the main factors behind the
increase. For the first six months, SG&A expense as a percent
of sales was 20.9 percent, which is consistent with the comparable
period last year.
Operating earnings as a percent of sales for the second quarter
was 18.3 percent, a decrease of 20 basis points year over year.
Operating earnings as a percent of sales for the first six months
was 15.8 percent, which is the same as the comparable period last
year.
The effective tax rate for the second quarter was 23.9 percent,
down from 31.5 percent year over year. For the first six months,
the effective tax rate was 24.1 percent, down from 30.3 percent in
the same period last year. The resulting change is driven by
adoption of the new share based accounting standard this fiscal
year.
Accounts receivable at the end of the second quarter totaled
$328.5 million, down 0.4 percent compared to last year. Net
inventories were $341.6 million, down 7.4 percent and trade
payables were $273.6 million, up 5.0 percent compared to the same
period last year.
About The Toro CompanyThe 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 $2.4
billion in fiscal 2016, 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 CALLMay 25, 2017 at 10:00 a.m.
CDTwww.thetorocompany.com/invest
The Toro Company will conduct its earnings call and webcast for
investors beginning at 10:00 a.m. CDT on May 25, 2017. 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 StatementsThis 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 Juarez, Mexico; fluctuations in the cost
and availability of raw materials and components, including steel,
engines, hydraulics and resins; 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 relations, operations and
markets, including political, economic and/or social instability
and conflict, tax and trade policies in the U.S. and other
countries in which we manufacture or sell our products, and
implications of the United Kingdom’s process for exiting the
European Union; 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; 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,
conflict mineral disclosure, taxation, trade and tariffs,
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 make no
commitment to revise or update any forward-looking statements in
order to reflect events or circumstances occurring or existing
after the date any forward-looking statement is made.
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 May 5, April
29, May 5, April 29,
2017 2016
2017 2016 Net sales $ 872,767 $ 836,441
$ 1,388,606 $ 1,322,839 Gross profit 316,314 303,187 509,794
485,841 Gross profit percent 36.2 % 36.2 % 36.7 % 36.7 % Selling,
general, and administrative expense 157,018
148,097
289,928 276,912 Operating
earnings 159,296 155,090 219,866 208,929 Interest expense (4,676 )
(4,721 ) (9,559 ) (9,375 ) Other income, net
3,701 3,873
7,567 8,385 Earnings before
income taxes 158,321 154,242 217,874 207,939 Provision for income
taxes 37,846
48,561 52,409
62,997 Net earnings $ 120,475
$ 105,681 $ 165,465
$ 144,942
Basic net
earnings per share of common stock $ 1.11
$ 0.96 $ 1.53
$ 1.32
Diluted net
earnings per share of common stock $ 1.08
$ 0.94 $ 1.48
$ 1.29 Weighted-average number of shares of
common stock outstanding — Basic 108,203 109,808 108,419 109,918
Weighted-average number of shares of common stock
outstanding — Diluted 111,138
111,972 111,451
112,154
Shares and per share data have been
adjusted for all periods presented to reflect a two-for-one stock
split effective September 16, 2016.
Segment Data (Unaudited) (Dollars in
thousands) Three Months
Ended Six Months Ended May 5,
April 29, May 5, April 29, Segment
Net Sales 2017 2016
2017 2016 Professional $ 610,896 $ 595,209 $
982,705 $ 934,045 Residential 258,134 238,231 398,524 382,515 Other
3,737 3,001
7,377 6,279 Total* $ 872,767
$ 836,441 $ 1,388,606 $
1,322,839
*Includes International Sales of: $ 201,641
$ 196,359 $ 332,883 $
323,602
Three Months Ended
Six Months Ended May 5, April 29,
May 5, April 29, Segment Earnings (Loss) Before
Income Taxes 2017 2016
2017 2016 Professional $ 149,011 $ 141,623 $
217,177 $ 203,215 Residential 35,047 34,988 51,605 51,727 Other
(25,737 ) (22,369 )
(50,908 ) (47,003 ) Total $ 158,321
$ 154,242 $ 217,874 $ 207,939
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
May 5, April 29,
2017 2016
ASSETS
Cash and cash equivalents $ 265,191 $ 174,639 Receivables, net
328,524 329,837 Inventories, net 341,576 369,070 Prepaid expenses
and other current assets 41,272 36,683
Total current assets 976,563 910,229
Property, plant, and equipment, net 224,277 222,069
Long-term deferred income taxes 57,117 68,413 Goodwill and other
assets, net 340,801 338,943 Total
assets $ 1,598,758 $ 1,539,654
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current portion of long-term debt $ 23,105 $ 23,286 Short-term debt
832 — Accounts payable 273,600 260,504 Accrued liabilities
324,878 316,811 Total current liabilities
622,415 600,601 Long-term debt,
less current portion 311,957 334,822 Deferred revenue 24,948 11,565
Other long-term liabilities 31,667
30,058 Total stockholders’ equity 607,771
562,608 Total liabilities and stockholders’ equity $
1,598,758 $ 1,539,654
THE TORO COMPANY AND
SUBSIDIARIES Condensed Consolidated Statements of
Cash Flows (Unaudited) (Dollars in thousands)
Six Months Ended May 5,
April 29, 2017
2016 Cash flows from operating activities: Net
earnings $ 165,465 $ 144,942 Adjustments to reconcile net earnings
to net cash provided by operating activities: Non-cash income from
finance affiliate (4,686 ) (4,551 ) Provision for depreciation,
amortization, and impairment loss 34,548 31,526 Stock-based
compensation expense 6,629 5,197 Decrease in deferred income taxes
136 253 Other — (464 ) Changes in operating assets and liabilities,
net of effect of acquisitions: Receivables, net (164,495 ) (150,072
) Inventories, net (30,100 ) (37,418 ) Prepaid expenses and other
assets (9,709 ) (91 ) Accounts payable, accrued liabilities,
deferred revenue, and other long-term liabilities
172,643 159,117 Net cash
provided by operating activities 170,431
148,439 Cash flows from
investing activities: Purchases of property, plant, and equipment
(22,273 ) (22,622 ) Proceeds from asset disposals — 203
Distributions from finance affiliate, net (2,708 ) (2,865 )
Proceeds from sale of a business — 1,500 Acquisition, net of cash
acquired (24,181 ) —
Net cash (used in) investing activities
(49,162 ) (23,784 ) Cash flows from
financing activities: Increase in short-term debt 832 — Repayments
of short-term debt — (1,161 ) Repayments of long-term debt (15,930
) (16,788 ) Proceeds from exercise of stock options 8,222 14,684
Purchases of Toro common stock (84,962 ) (41,018 ) Dividends paid
on Toro common stock (37,936 )
(33,005 ) Net cash (used in) financing activities
(129,774 ) (77,288 )
Effect of exchange rates on cash and cash equivalents
141 997 Net
(decrease)/increase in cash and cash equivalents
(8,364 ) 48,364 Cash and cash
equivalents as of the beginning of the fiscal period
273,555 126,275 Cash and
cash equivalents as of the end of the fiscal period $
265,191 $ 174,639
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170525005167/en/
The Toro CompanyInvestor Relations:Heather Hille,
952-887-8923Director, Investor
Relationsheather.hille@toro.comorMedia Relations:Branden
Happel, 952-887-8930Senior Manager, Public
Relationsbranden.happel@toro.com
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