- 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
The Toro Company (NYSE: TTC) today reported net earnings of
$59.5 million, or $0.55 per share, on a net sales increase of 10
percent to $603 million for its first quarter ended February 1,
2019. In the comparable fiscal 2018 period, the company delivered
net earnings of $22.6 million, or $0.21 per share, on net sales of
$548.2 million. Adjusted 2019 first quarter net earnings were $55.2
million, or $0.51 per share, compared to adjusted net earnings of
$52.1 million, or $0.48 per share in the comparable 2018 period, an
increase of 6.3 percent, including $0.03 of acquisition related
expenses in 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 Richard M. Olson, Toro’s chairman and chief
executive officer. “New products were again the key to success, as
customers responded favorably to the latest lineup of our Exmark®
Lazer®, and Radius® zero-turn riding mowers, and the BOSS®
Stainless Steel XT V-Plow, which offers enhanced productivity and
maneuverability for operators. Recent snow events in key regions
also helped bolster sales of both professional and residential snow
and ice management products in the quarter.
“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 $1.15 to
$1.20 for the second quarter. This includes an estimated $0.07 for
the impact of acquisition-related expenses and share repurchase
curtailment. These items are in addition to the $0.03 of
acquisition expense incurred in the first quarter. This results in
an adjusted earnings per share estimate of $1.66 to $1.71 for the
first six months, which equates to operational performance of $1.76
to $1.81, excluding acquisition-related impacts. We expect to
update our guidance at, or after, the closing of the
acquisition.
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 $225.5
million, up 13.5 percent from last year. Net inventories were
$416.7 million, down 5.2 percent from last year. Trade payables
were $281.5 million, up 5.6 percent from the comparable 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 maintenance, snow and ice management,
landscape, rental and specialty construction equipment, and
irrigation and outdoor lighting solutions. With sales of $2.6
billion in fiscal 2018, Toro’s global presence extends to more than
125 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, sports fields, public green spaces, commercial
and residential properties and agricultural operations. For
more information, visit www.thetorocompany.com.
LIVE CONFERENCE CALLFebruary 21, 2019 at 10:00 a.m.
CSTwww.thetorocompany.com/invest
The Toro Company will conduct its earnings call and webcast for
investors beginning at 10:00 a.m. CST on February 21, 2019. 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.
Use of Non-GAAP Financial InformationThis 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 Toro Company does not attempt to provide reconciliations of
forward-looking non-GAAP EPS guidance to projected GAAP EPS
guidance because the combined impact and timing of recognition of
these potential charges or gains is inherently uncertain and
difficult to predict and is unavailable without unreasonable
efforts. In addition, we believe such reconciliations would imply a
degree of precision and certainty that could be confusing to
investors. Such items could have a substantial impact on GAAP
measures of financial performance.
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, including those related to our
pending acquisition of The Charles Machine Works, Inc., such as
delays in completing the acquisition or not completing it at all,
delays or failure by us in achieving the net sales, earnings and
any cost or revenue synergies expected from the acquisition, delays
and challenges in integrating the businesses after the acquisition
is completed, business disruptions due to the acquisition, and
unanticipated liabilities or exposures for which we have not been
indemnified or may not recover; 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, accounting, 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
SUBSIDIARIESCondensed Consolidated Statements of Earnings
(Unaudited)(Dollars and shares in thousands, except
per-share data)
Three Months Ended
February 1,2019
February 2,2018
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)(Dollars
in thousands)
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
SUBSIDIARIESCondensed Consolidated Balance Sheets
(Unaudited)(Dollars in thousands)
February
1,2019 February 2,2018
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
SUBSIDIARIESCondensed Consolidated Statements of Cash Flows
(Unaudited)(Dollars in thousands)
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
SUBSIDIARIESReconciliation 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 United States ("GAAP"), as
information supplemental and in addition to the most directly
comparable financial measures presented in the accompanying press
release that are calculated and presented in accordance with GAAP.
Such non-GAAP financial measures should not be considered superior
to, as a substitute for, or as an alternative to, and should be
considered in conjunction with, the GAAP financial measures
presented in the accompanying press release. The non-GAAP financial
measures in the accompanying press release may differ from similar
measures used by other companies.
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 February 1,
2019 and February 2, 2018. The company 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.
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 1,2019
February 2,2018
February 1,2019 February
2,2018 February 1,2019
February 2,2018 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.
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.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190221005101/en/
Investor RelationsHeather HilleDirector, Investor
Relations(952) 887-8923, heather.hille@toro.com
Media RelationsBranden HappelSenior Manager, Public
Relations(952) 887-8930, branden.happel@toro.com
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