Professional Segment Acquisitions and
Residential Segment Performance Drive Results
- Q4 net sales of $841 million, up 14.5% year over year
- FY20 net sales of $3.38 billion, up 7.7% versus last year;
residential segment net sales up 24.1%
- Q4 reported diluted EPS of $0.66; *Adjusted diluted EPS of
$0.64, up 33.3% year over year
- FY20 reported diluted EPS of $3.03; *Adjusted diluted EPS of
$3.02, up 0.7% versus last year
- FY21 guidance of *adjusted EPS in the range of $3.35 to $3.45
per diluted share
The Toro Company (NYSE: TTC) today reported
results for its fiscal fourth-quarter and full-year periods ended
October 31, 2020.
“Our strong fourth-quarter results were driven by continued
sales growth in our residential segment and a rebound in our
professional segment,” said Richard M. Olson, chairman and chief
executive officer. “Residential sales were robust across all
channels with strong demand for our new product lineup, accentuated
by refreshed branding, an extended selling season, and stay-at-home
trends. Improved demand for our professional products reflected
greater business confidence from our customers and increased home
investments. The integration of our Venture Products acquisition
added another strong brand with multi-season products, contributing
incremental sales in the quarter.”
“Our momentum and continued investments position us well for
success in the new fiscal year,” continued Olson. “We have a strong
portfolio of businesses and deep customer relationships, a
dedicated team and channel partners, and innovative products and
emerging technologies aligned with customer needs. We will remain
sharply focused on business execution as we continue to face
uncertainty due to the ongoing pandemic.”
“We will build upon our Sustainability Endures platform, our
commitment to making a positive impact worldwide. Throughout last
year, we put this commitment into action as we transformed how we
do work and reimagined our business model from product innovation
and production through customer service and support, all while
keeping each other safe. In addition, we remain committed to
driving future results through our enterprise strategic priorities
of accelerating profitable growth, driving productivity and
operational excellence, and empowering people,” concluded
Olson.
FOURTH-QUARTER FISCAL 2020 FINANCIAL
HIGHLIGHTS
- Net sales of $841.0 million, up 14.5% from $734.4 million in
the fourth quarter of fiscal 2019.
- Net earnings of $72.2 million, up 88.7% from $38.3 million in
the fourth quarter of fiscal 2019; *Adjusted net earnings of $69.2
million, up 33.5% from $51.8 million in the fourth quarter of
fiscal 2019.
- Reported EPS of $0.66 per diluted share, up 88.6% from $0.35
per diluted share in the fourth quarter of fiscal 2019; *Adjusted
EPS of $0.64 per diluted share, up 33.3% from $0.48 per diluted
share in the fourth quarter of fiscal 2019.
- As of October 31, 2020, the company had liquidity of about $1.1
billion.
FULL-YEAR FISCAL 2020 FINANCIAL
HIGHLIGHTS
- Net sales of $3.38 billion, up 7.7% from $3.14 billion in
fiscal 2019.
- Net earnings of $329.7 million, up 20.3% from $274.0 million in
the prior-year period; *Adjusted net earnings of $327.7 million, up
1.1% from $324.3 million in fiscal 2019.
- Reported EPS of $3.03 per diluted share, up 19.8% from $2.53
per diluted share in fiscal 2019; *Adjusted EPS of $3.02 per
diluted share, up 0.7% from $3.00 per diluted share in fiscal
2019.
- Returned $107.7 million to shareholders in dividends.
*Non-GAAP financial measure. Please see the tables provided for
a reconciliation of historical non-GAAP financial measures to the
most comparable GAAP measures.
OUTLOOK
The company is providing full-year fiscal 2021 guidance based on
current visibility, although there continues to be considerable
uncertainty given the potential effects of COVID-19 on demand
levels and timing, its supply chain and the broader global
economy.
For fiscal 2021, management expects total net sales growth in
the range of 6.0% to 8.0% and *adjusted EPS in the range of $3.35
to $3.45 per diluted share. This estimated adjusted diluted EPS
range excludes the benefit of the excess tax deduction for
share-based compensation.
FOURTH-QUARTER AND FULL-YEAR SEGMENT
RESULTS
Professional Segment
- Professional segment net sales for the fourth quarter were
$644.0 million, up 9.5% compared with $588.2 million in the same
period last year. This increase was primarily due to growth in
shipments of landscape contractor zero-turn riding mowers and snow
and ice management equipment, annual price adjustments and lower
floor plan costs, as well as incremental sales from the Venture
Products acquisition. For the fiscal 2020 full year, professional
segment net sales were $2.52 billion, up 3.3% from $2.44 billion
last year. The increase was mainly driven by incremental sales from
the Charles Machine Works and Venture Products acquisitions,
partially offset by reduced channel demand primarily as a result of
COVID-19, for golf and grounds equipment, landscape contractor
zero-turn riding mowers and rental, specialty and underground
construction equipment.
- Professional segment earnings for the fourth quarter were
$104.2 million, up 70.2% compared with $61.2 million in the same
period last year, and when expressed as a percentage of net sales,
up 580 basis points to 16.2% from 10.4%. The increase was primarily
due to annual price adjustments and lower floor plan costs, lower
acquisition-related charges and benefits from productivity and
synergy initiatives, partially offset by product mix. Full-year
fiscal 2020 professional segment earnings were $426.6 million, up
12.0% compared with the prior fiscal year, and when expressed as a
percentage of net sales, up 130 basis points to 16.9% from 15.6%.
The increase was primarily driven by lower acquisition-related
charges, net price realization and benefits from productivity and
synergy initiatives. This increase was partially offset by higher
selling, general and administrative (SG&A) expenses as a result
of the Charles Machine Works and Venture Products acquisitions,
manufacturing inefficiencies primarily due to COVID-19, and higher
warranty costs in certain professional segment businesses.
Residential Segment
- Residential segment net sales for the fourth quarter were
$187.9 million, up 38.5% compared with $135.7 million in the same
period last year. The increase was primarily due to strong retail
demand for walk power and zero-turn riding mowers. For fiscal 2020,
residential segment net sales were $820.7 million, up 24.1%
compared with $661.3 million in the same period last year. The
increase was mainly driven by incremental shipments of zero-turn
riding and walk power mowers as a result of the company’s expanded
mass retail channel, as well as strong retail demand for these
products due to a new and enhanced product line, favorable weather,
and stay-at-home trends.
- Residential segment earnings for the fourth quarter were $26.4
million, up 90.2% compared with $13.9 million in the same period
last year, and when expressed as a percentage of net sales, up 390
basis points to 14.1% from 10.2% a year ago. For fiscal 2020,
residential segment earnings increased 74.5% to $113.7 million,
compared with $65.2 million in the same period last year, and when
expressed as a percentage of net sales, increased 390 basis points
to 13.8% from 9.9% in fiscal 2019. The segment earnings margin
increases for both the quarterly and full year periods were
primarily driven by benefits from productivity and synergy
initiatives and SG&A leverage.
OPERATING RESULTS
Gross margin for the fourth quarter was 35.7%, up 230 basis
points compared with 33.4% for the same prior-year period.
*Adjusted gross margin for the fourth quarter was 35.7%, up 120
basis points compared with 34.5% for the same prior-year period.
The increases in gross margin and adjusted gross margin were
primarily due to benefits from productivity and synergy
initiatives, net price realization mainly in the professional
segment, partially offset by product mix due to higher sales of
residential segment products. Reported gross margin for the fourth
quarter also was positively affected by lower acquisition-related
charges compared with the prior-year period.
For full year fiscal 2020, gross margin was 35.2%, up 180 basis
points compared with 33.4% for fiscal 2019. *Adjusted gross margin
for fiscal 2020 was 35.4%, up 30 basis points compared with 35.1%
for fiscal 2019. The increases in gross margin and adjusted gross
margin were primarily driven by benefits from productivity and
synergy initiatives and net price realization mainly in the
professional segment, partially offset by product mix primarily due
to higher sales of residential segment products as well as COVID-19
related manufacturing inefficiencies. Reported gross margin for the
full year also was positively affected by lower acquisition-related
charges compared with the prior-year period.
SG&A expense as a percentage of net sales for the fourth
quarter decreased 290 basis points to 24.6% from 27.5% in the
prior-year period. The decrease was primarily due to restructuring
costs in the prior-year period that did not repeat and
cost-reduction measures, including decreased salaries and indirect
marketing expense, partially offset by increased warranty costs in
certain professional segment businesses.
For fiscal 2020, SG&A expense as a percentage of net sales
was 22.6%, down 40 basis points from 23.0% in fiscal 2019,
primarily due to cost-reduction measures, including decreased
salaries and elimination of the discretionary retirement fund
contribution, as well as lower transaction and integration costs
and reduced restructuring costs compared with the prior-year
period. This decrease was partially offset by incremental warranty
and engineering costs from the Charles Machine Works and Venture
Products acquisitions and higher warranty expense in certain
professional segment businesses, as well as a discretionary
employee recognition bonus.
Operating earnings as a percentage of net sales increased 520
basis points to 11.1% for the fourth quarter. *Adjusted operating
earnings as a percentage of net sales increased 270 basis points to
11.1% for the fourth quarter. For full year fiscal 2020, operating
earnings as a percentage of net sales were 12.6%, up 220 basis
points compared with 10.4% in fiscal 2019. *Adjusted operating
earnings as a percentage of net sales for fiscal 2020 were 12.8%,
down 10 basis points compared with 12.9% in fiscal 2019.
Interest expense was flat for the fourth quarter and increased
$4.3 million for fiscal 2020, each compared with the prior-year
periods.
The reported effective tax rates for the fourth quarter and full
year were 18.5% and 19.0%, respectively, compared with 12.4% and
14.9% for fiscal 2019, driven by a lower tax benefit related to the
excess tax deduction for share-based compensation, lower
foreign-derived intangible benefits and increased earnings in less
favorable tax jurisdictions. The *adjusted effective tax rates for
the fourth quarter and full year were 21.9% and 20.9%,
respectively, compared with 17.7% and 19.3% for fiscal 2019, driven
by lower foreign-derived intangible income tax benefits as compared
with fiscal 2019 and increased earnings in less favorable tax
jurisdictions.
Working capital at the end of the fourth quarter was down
compared with the end of the fourth quarter of the prior fiscal
year, primarily driven by an increase in accounts payable, a
decrease in accounts receivable and flat inventory.
LIVE CONFERENCE CALL December 16, 2020 at 10:00 a.m.
CST www.thetorocompany.com/invest
The Toro Company will conduct its earnings call and webcast for
investors beginning at 10:00 a.m. CST on December 16, 2020. The
webcast will be available 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, install audio software.
About The Toro Company
The Toro Company (NYSE: TTC) is a leading worldwide provider of
innovative solutions for the outdoor environment including turf and
landscape maintenance, snow and ice management, underground utility
construction, rental and specialty construction, and irrigation and
outdoor lighting solutions. With sales of $3.4 billion in fiscal
2020, The Toro Company’s global presence extends to more than 125
countries through a family of brands that includes Toro, Ditch
Witch, Exmark, BOSS Snowplow, Ventrac, American Augers, Subsite
Electronics, HammerHead, Trencor, Unique Lighting Systems,
Irritrol, Hayter, Pope, Lawn-Boy and Radius HDD. Through constant
innovation and caring relationships built on trust and integrity,
The Toro Company and its family of brands have built a legacy of
excellence by helping customers work on golf courses, sports
fields, construction sites, public green spaces, commercial and
residential properties and agricultural operations. For more
information, visit www.thetorocompany.com.
Use of Non-GAAP Financial Information
This press release and our related earnings call references
certain non-GAAP financial measures, which are not calculated or
presented in accordance with U.S. GAAP, as information supplemental
and in addition to the most directly comparable financial measures
calculated and presented in accordance with U.S. GAAP. The non-GAAP
financial measures included within this press release and our
related earnings call consist of gross profit, gross margin,
operating earnings, earnings before income taxes, net earnings, net
earnings per diluted share, and the effective tax rate, each as
adjusted, free cash flow, and free cash flow conversion as measures
of our operating performance.
The Toro Company uses these non-GAAP financial measures in
making operating decisions because it believes these non-GAAP
financial measures provide meaningful supplemental information
regarding core operational performance and provide the company with
a better understanding of how to allocate resources to both ongoing
and prospective business initiatives. Additionally, these non-GAAP
financial measures facilitate its internal comparisons for both
historical operating results and competitors' operating results by
factoring out potential differences caused by charges not related
to its regular ongoing business, including, without limitation,
non-cash charges, certain large and unpredictable charges,
acquisitions and dispositions, and tax positions. Further, the
company believes that these non-GAAP financial measures, when
considered in conjunction with the financial measures prepared in
accordance with U.S. GAAP, provide investors with useful
supplemental financial information to better understand its core
operational performance.
Reconciliations of historical non-GAAP financial measures to the
most comparable U.S. GAAP financial measures are included in the
financial tables contained in this press release. These non-GAAP
financial measures, however, should not be considered superior to,
as a substitute for, or as an alternative to, and should be
considered in conjunction with, the U.S. GAAP financial measures
included within this press release and the company's related
earnings call. These non-GAAP financial measures may differ from
similar measures used by other companies.
The Toro Company cannot provide quantitative reconciliations of
forward-looking non-GAAP financial measures provided herein or in
its related earnings call without unreasonable effort because the
combined effect and timing of recognition of potential charges or
gains is inherently uncertain and difficult to predict. In
addition, since any adjustments could have a substantial effect on
U.S. GAAP measures of financial performance, such quantitative
reconciliations would imply a degree of precision and certainty
that could be confusing to investors. From a qualitative
perspective, it is anticipated that the differences between the
forward-looking non-GAAP financial measures and the most directly
comparable GAAP financial measure will consist of items similar to
those described in the financial tables later in this release,
including for example, acquisition-related costs, management
actions and tax impact of share-based compensation.
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. Forward looking
statements in this release include the company's fiscal 2021
financial guidance. Particular risks and uncertainties that may
affect the company’s operating results or financial position
include: COVID-19 related factors, risks and challenges, including
among others, the severity of COVID-19, its effect on the demand
for the company’s products and services, the ability of dealers,
retailers, and other channel partners that sell the company’s
products to remain open, availability of employees and their
ability to conduct work away from normal working locations and/or
under revised protocols, and the ability to receive commodities,
components, parts, and accessories on a timely basis through its
supply chain and at anticipated costs, and the ability of the
company to continue its production operations; adverse worldwide
economic conditions, including weakened consumer confidence;
disruption at or in proximity to its facilities or in its
manufacturing or other operations, or those in its distribution
channel customers, mass retailers or home centers where its
products are sold, or suppliers; fluctuations in the cost and
availability of commodities, components, parts, and accessories,
including steel, engines, hydraulics and resins; the effect of
abnormal weather patterns; the effect of natural disasters, social
unrest, and global pandemics; the level of growth or contraction in
its key markets; customer, government and municipal revenue,
budget, spending levels and cash conservation efforts; loss of any
substantial customer; inventory adjustments or changes in
purchasing patterns by customers; the company’s 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, trade regulation
and/or antidumping and countervailing duties petitions; foreign
currency exchange rate fluctuations; financial viability of and/or
relationships with the company’s distribution channel partners;
risks associated with acquisitions, including those related to the
recent acquisitions of Charles Machine Works and Venture Products,
Inc.; impairment of goodwill or other intangible assets; delays or
failures in implementing, and unanticipated charges, as a result
of, restructuring activities; management of alliances or joint
ventures, including Red Iron Acceptance, LLC; impact of laws,
regulations and standards, 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 the company’s most recent annual report
on Form 10-K, subsequent quarterly reports on Form 10-Q or current
reports on Form 8-K, and other filings with the Securities and
Exchange Commission. The company makes 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.
(Financial tables follow)
THE TORO COMPANY AND
SUBSIDIARIES
Consolidated Statements of
Earnings (Unaudited)
(Dollars and shares in
thousands, except per-share data)
Three Months Ended
Twelve Months Ended
October 31, 2020
October 31, 2019
October 31, 2020
October 31, 2019
Net sales
$
840,957
$
734,379
$
3,378,810
$
3,138,084
Cost of sales
540,562
489,312
2,189,036
2,090,121
Gross profit
300,395
245,067
1,189,774
1,047,963
Gross margin
35.7
%
33.4
%
35.2
%
33.4
%
Selling, general and administrative
expense
206,914
201,761
763,417
722,934
Operating earnings
93,481
43,306
426,357
325,029
Interest expense
(8,037)
(8,395)
(33,156)
(28,835)
Other income, net
3,123
8,787
13,869
25,939
Earnings before income taxes
88,567
43,698
407,070
322,133
Provision for income taxes
16,371
5,432
77,369
48,150
Net earnings
$
72,196
$
38,266
$
329,701
$
273,983
Basic net earnings per share of common
stock
$
0.67
$
0.36
$
3.06
$
2.57
Diluted net earnings per share of common
stock
$
0.66
$
0.35
$
3.03
$
2.53
Weighted-average number of shares of
common stock outstanding — Basic
107,945
107,166
107,658
106,773
Weighted-average number of shares of
common stock outstanding — Diluted
108,947
108,414
108,663
108,090
Segment Data
(Unaudited)
(Dollars in thousands)
Three Months Ended
Twelve Months Ended
Segment Net Sales
October 31, 2020
October 31, 2019
October 31, 2020
October 31, 2019
Professional
$
644,029
$
588,180
$
2,523,452
$
2,443,448
Residential
187,938
135,735
820,745
661,274
Other
8,990
10,464
34,613
33,362
Total net sales*
$
840,957
$
734,379
$
3,378,810
$
3,138,084
*Includes international net sales of:
$
170,115
$
177,599
$
678,116
$
724,931
Three Months Ended
Twelve Months Ended
Segment Earnings (Loss)
October 31, 2020
October 31, 2019
October 31, 2020
October 31, 2019
Professional
$
104,175
$
61,225
$
426,560
$
380,914
Residential
26,436
13,898
113,669
65,151
Other
(42,044)
(31,425)
(133,159)
(123,932)
Total segment earnings
$
88,567
$
43,698
$
407,070
$
322,133
THE TORO COMPANY AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
October 31, 2020
October 31, 2019
ASSETS
Cash and cash equivalents
$
479,892
$
151,828
Receivables, net:
Customers, net of allowances
223,105
220,534
Receivables from finance affiliate
12,619
21,873
Other
25,411
26,361
Total receivables, net
261,135
268,768
Inventories, net
652,433
651,663
Prepaid expenses and other current
assets
34,188
50,632
Total current assets
1,427,648
1,122,891
Property, plant and equipment, net
467,919
437,317
Goodwill
424,075
362,253
Other intangible assets, net
408,305
352,374
Right-of-use assets
78,752
—
Investment in finance affiliate
19,745
24,147
Deferred income taxes
6,466
6,251
Other assets
20,318
25,314
Total assets
$
2,853,228
$
2,330,547
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt
$
99,873
$
79,914
Accounts payable
363,953
319,230
Short-term lease liabilities
15,447
—
Accrued liabilities:
Warranty
107,121
96,604
Advertising and marketing programs
98,883
103,417
Compensation and benefit costs
58,789
76,862
Insurance
13,452
11,164
Interest
10,065
9,903
Other
88,214
59,876
Total accrued liabilities
376,524
357,826
Total current liabilities
855,797
756,970
Long-term debt, less current portion
691,250
620,899
Long-term lease liabilities
66,641
—
Deferred income taxes
70,435
50,579
Other long-term liabilities
54,277
42,521
Stockholders' equity:
Preferred stock
—
—
Common stock
107,583
106,742
Retained earnings
1,041,507
784,885
Accumulated other comprehensive loss
(34,262)
(32,049)
Total stockholders' equity
1,114,828
859,578
Total liabilities and stockholders'
equity
$
2,853,228
$
2,330,547
THE TORO COMPANY AND
SUBSIDIARIES
Consolidated Statements of
Cash Flows (Unaudited)
(Dollars in thousands)
Twelve Months Ended
October 31, 2020
October 31, 2019
Cash flows from operating activities:
Net earnings
$
329,701
$
273,983
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Non-cash income from finance affiliate
(7,663)
(11,948)
Distributions from finance affiliate,
net
12,066
10,343
Depreciation of property, plant and
equipment
76,108
69,314
Amortization of other intangible
assets
19,507
18,384
Fair value step-up adjustment to acquired
inventory
3,951
39,368
Stock-based compensation expense
15,408
13,429
Deferred income taxes
2,269
(6,190)
Other
492
6,357
Changes in operating assets and
liabilities, net of the effect of acquisitions:
Receivables, net
15,206
(11,042)
Inventories, net
20,963
(104,832)
Prepaid expenses and other assets
11,828
9,747
Accounts payable, accrued liabilities,
deferred revenue and other liabilities
39,538
30,458
Net cash provided by operating
activities
539,374
337,371
Cash flows from investing activities:
Purchases of property, plant and
equipment
(78,068)
(92,881)
Proceeds from asset disposals
216
4,669
Proceeds from sale of a business
—
12,941
Investments in unconsolidated entities
—
(200)
Acquisitions, net of cash acquired
(138,225)
(697,471)
Net cash used in investing activities
(216,077)
(772,942)
Cash flows from financing activities:
Borrowings under debt arrangements
636,025
900,000
Repayments under debt arrangements
(546,025)
(511,000)
Proceeds from exercise of stock
options
22,198
29,336
Payments of withholding taxes for stock
awards
(2,146)
(2,662)
Purchases of TTC common stock
—
(20,043)
Dividends paid on TTC common stock
(107,698)
(96,133)
Net cash provided by financing
activities
2,354
299,498
Effect of exchange rates on cash and cash
equivalents
2,413
(1,223)
Net increase (decrease) in cash and cash
equivalents
328,064
(137,296)
Cash and cash equivalents as of the
beginning of the fiscal period
151,828
289,124
Cash and cash equivalents as of the end of
the fiscal period
$
479,892
$
151,828
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 United States ("U.S. 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 U.S.
GAAP. The company uses these non-GAAP financial measures in making
operating decisions because the company believes these non-GAAP
financial measures provide meaningful supplemental information
regarding the company's core operational performance and provide
the company with a better understanding of how to allocate
resources to both ongoing and prospective business initiatives.
Additionally, these non-GAAP financial measures facilitate
management's internal comparisons to both the company's historical
operating results and to the company's competitors' operating
results by factoring out potential differences caused by charges
not related to the company's regular, ongoing business, including,
without limitation, non-cash charges, certain large and
unpredictable charges, acquisitions and dispositions, legal
settlements, and tax positions. Further, the company believes that
such non-GAAP financial measures, when considered in conjunction
with the company's financial measures prepared in accordance with
U.S. GAAP, provide investors with useful supplemental financial
information to better understand the company's core operational
performance. 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 most directly
comparable U.S. GAAP financial measures presented in the
accompanying press release. The non-GAAP financial measures
presented in the accompanying press release may differ from similar
measures used by other companies.
The following table provides a reconciliation of financial
measures calculated and reported in accordance with U.S. GAAP to
the most directly comparable non-GAAP financial measures included
within the accompanying press release for the three and twelve
month periods ended October 31, 2020 and October 31, 2019:
Three Months Ended
Twelve Months Ended
October 31, 2020
October 31, 2019
October 31, 2020
October 31, 2019
Gross profit
$
300,395
$
245,067
$
1,189,774
$
1,047,963
Acquisition-related costs1
—
7,267
3,950
42,958
Management actions2
—
1,199
857
10,316
Non-GAAP gross profit
$
300,395
$
253,533
$
1,194,581
$
1,101,237
Gross margin
35.7
%
33.4
%
35.2
%
33.4
%
Acquisition-related costs1
—
%
1.0
%
0.2
%
1.4
%
Management actions2
—
%
0.1
%
—
%
0.3
%
Non-GAAP gross margin
35.7
%
34.5
%
35.4
%
35.1
%
Operating earnings
$
93,481
$
43,306
$
426,357
$
325,029
Acquisition-related costs1
—
11,275
6,183
62,333
Management actions2
—
7,163
857
16,311
Non-GAAP operating earnings
$
93,481
$
61,744
$
433,397
$
403,673
Earnings before income taxes
$
88,567
$
43,698
$
407,070
$
322,133
Acquisition-related costs1
—
11,275
6,183
62,333
Management actions2
—
8,019
857
17,167
Non-GAAP earnings before income taxes
$
88,567
$
62,992
$
414,110
$
401,633
Net earnings
$
72,196
$
38,266
$
329,701
$
273,983
Acquisition-related costs1
99
9,347
5,021
51,149
Management actions2
(5)
6,454
677
13,817
Tax impact of share-based
compensation3
(3,102)
(2,159)
(7,652)
(13,677)
U.S. Tax Reform4
—
(86)
—
(1,012)
Non-GAAP net earnings
$
69,188
$
51,822
$
327,747
$
324,260
Three Months Ended
Twelve Months Ended
October 31, 2020
October 31, 2019
October 31, 2020
October 31, 2019
Diluted EPS
$
0.66
$
0.35
$
3.03
$
2.53
Acquisition-related costs1
—
0.09
0.05
0.47
Management actions2
—
0.06
0.01
0.13
Tax impact of share-based
compensation3
(0.02)
(0.02)
(0.07)
(0.12)
U.S. Tax Reform4
—
—
—
(0.01)
Non-GAAP diluted EPS
$
0.64
$
0.48
$
3.02
$
3.00
Effective tax rate
18.5
%
12.4
%
19.0
%
14.9
%
Acquisition-related costs1
(0.1)
%
(0.4)
%
—
%
(0.3)
%
Management actions2
—
%
0.6
%
—
%
0.1
%
Tax impact of share-based
compensation3
3.5
%
4.9
%
1.9
%
4.3
%
U.S. Tax Reform4
—
%
0.2
%
—
%
0.3
%
Non-GAAP effective tax rate
21.9
%
17.7
%
20.9
%
19.3
%
1
On March 2, 2020, the company completed
the acquisition of Venture Products, Inc. ("Venture Products") and
on April 1, 2019, the company completed the acquisition of The
Charles Machine Works, Inc. ("CMW"). Acquisition-related costs for
the twelve month period ended October 31, 2020 represent
transaction costs incurred for the company's acquisition of Venture
Products, as well as integration costs and charges incurred for the
take-down of the inventory fair value step-up amounts resulting
from purchase accounting adjustments related to the acquisitions of
Venture Products and CMW. No acquisition-related costs were
incurred during the three month period ended October 31, 2020.
Acquisition-related costs for the three and twelve month periods
ended October 31, 2019 represent transaction and integration
costs, as well as charges incurred for the take-down of the
inventory fair value step-up amount and amortization of the backlog
intangible asset resulting from purchase accounting adjustments
related to the company's acquisition of CMW.
2
During the third quarter of fiscal 2019,
the company announced the wind down of its Toro-branded large
horizontal directional drill and riding trencher product line
("Toro underground wind down"). Additionally, during the fourth
quarter of fiscal 2019, the company incurred charges for a
corporate restructuring event and a loss on the divestiture of a
used underground construction equipment business. Management
actions for the twelve month period ended October 31, 2020
represent inventory write-down charges incurred for the Toro
underground wind down. No charges were incurred for the three month
period ended October 31, 2020 related to the Toro underground
wind down. Management actions for the three and twelve month
periods ended October 31, 2019 represent charges incurred for
the Toro underground wind down, including charges related to the
write-down of inventory, anticipated inventory retail support
activities, and accelerated depreciation on fixed assets; the
corporate restructuring event, including employee severance
charges; and the divestiture of a used underground construction
equipment business, including the loss on the sale of the
business.
3
The accounting standards codification
guidance governing employee stock-based compensation requires that
any excess tax deduction for share-based compensation be
immediately recorded within income tax expense. Employee
stock-based compensation activity, including the exercise of stock
options under The Toro Company Amended and Restated 2010 Equity and
Incentive Plan, can be unpredictable and can significantly impact
the company's net earnings, diluted EPS, and effective tax rate.
These amounts represent the discrete tax benefits recorded as
excess tax deductions for share-based compensation during the three
and twelve month periods ended October 31, 2020 and
October 31, 2019.
4
Signed into law on December 22, 2017,
Public Law No. 115-97 ("Tax Act" or "U.S. Tax Reform"), reduced the
U.S. federal corporate tax rate from 35.0 percent to 21.0 percent,
effective January 1, 2018. This reduction in rate required the
re-measurement of the company's net deferred taxes as of the date
of enactment. The Tax Act also imposed a one-time deemed
repatriation tax on the company's historical undistributed earnings
and profits of foreign affiliates. During the three and twelve
month periods ended October 31, 2019, the company recorded a
tax benefit of $0.1 million and $1.0 million, respectively, related
to a prior year true-up of the Tax Act. The Tax Act did not impact
the company's Results of Operations for the three and twelve month
periods ended October 31, 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201216005223/en/
Investor Relations Nicholas Rhoads Managing Director,
Investor Relations (952) 887-8865, nicholas.rhoads@toro.com
Media Relations Branden Happel Senior Manager, Public
Relations (952) 887-8930, branden.happel@toro.com
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