BLOOMINGTON, Minn.--(BUSINESS WIRE)--The Toro Company (NYSE: TTC) today reported net earnings of $55.8 million, or $1.00 per share, on net sales of $601 million, a decrease of 1.4 percent, for its fiscal third quarter ended July 29, 2016. In the comparable fiscal 2015 period, the company delivered net earnings of $53.3 million, or $0.94 per share, on net sales of $609.6 million.
For the first nine months, Toro reported net earnings of $200.8 million, or $3.58 per share, on a net sales increase of 0.7 percent to $1.924 billion. In the comparable fiscal 2015 period, the company posted net earnings of $178 million, or $3.13 per share, on net sales of $1.910 billion.
“In spite of challenging weather and currency conditions and the resulting impact on our revenues, we are pleased to deliver another solid quarter achieving record earnings. The strong performance within our professional businesses driven by new product introductions and outstanding execution by the team, fueled growth in that segment for the quarter,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We see positive momentum in our golf equipment and irrigation businesses as we gain share in key markets. Additionally, our specialty construction and rental businesses are experiencing solid growth and are benefitting from new product introductions like the Dingo® TX 1000 compact utility loader.”
“With mixed consumer retail activity in the quarter, as was felt across the industry, we were encouraged by overall retail demand for our walk power and zero turn riding mower products during the summer months,” said Hoffman. “We performed well despite sluggish sales in certain regions that experienced challenging weather conditions.”
“With the fourth quarter underway, we continue to see positive retail sales across our businesses. Additionally, in our snow and ice management businesses, we are well positioned with new innovative products as the preseason begins. I would like to take this opportunity to thank our worldwide employees and channel partners for their hard work and dedication. It is their tireless commitment to excellence that drives the company’s steady performance.”
The company is narrowing its full-year earnings outlook to about $3.95 to $4.00 per share. Full-year revenue growth expectations for fiscal 2016 have also been narrowed to flat to up 1 percent.
Toro also announced today that its Board of Directors has declared a two-for-one split of the company’s common stock, which will be effected in the form of a 100 percent stock dividend. The stock dividend will be distributed on September 16, 2016, to shareholders of record as of September 1, 2016.
SEGMENT RESULTS
Professional
- Professional segment net sales for the third quarter totaled $427.8 million, up 1.4 percent from $422 million in the same period last year. For the first nine months, professional segment net sales were $1.362 billion, up 3.6 percent from the comparable fiscal 2015 period. Momentum generated in our golf equipment and irrigation businesses produced positive results for the quarter and the year. Additionally, continued demand for products such as our Dingo TX 1000 compact utility loader in both the rental and specialty construction businesses contributed to the growth for both periods. For the quarter, these gains were offset by lower channel demand for our landscape contractor equipment.
- Professional segment earnings for the third quarter totaled $89.1 million, up 8.3 percent from $82.3 million in the same period last year. For the first nine months, professional segment earnings were $292.3 million, up 13.0 percent from $258.7 million in the comparable fiscal 2015 period.
Residential
- Residential segment net sales for the third quarter were $167.8 million, down 4.6 percent from $176 million in the same period last year. For the first nine months, residential segment net sales were $550.3 million, down 4.9 percent from the comparable fiscal 2015 period. The sales decline for the quarter was due primarily to reduced worldwide channel demand for walk power and riding mowers. The decrease was somewhat offset by higher shipments of snow products in the quarter. Decreased worldwide sales of zero turn riding mowers and snow product contributed to the decline for the year.
- Residential segment earnings for the third quarter were $12.8 million, down 37.9 percent from $20.6 million from the same period last year. For the first nine months, residential segment earnings were $64.5 million, down 6.7 percent from the comparable fiscal 2015 period.
OPERATING RESULTS
Gross margin as a percent of sales for the third quarter was 36.0 percent, an increase of 50 basis points from the same period last year. The increase was primarily due to favorable commodities, enhanced productivity and segment mix. For the first nine months, gross margin as a percent of sales was 36.5 percent, an increase of 160 basis points from the same period last year, also primarily due to favorable commodities, enhanced productivity and segment mix. These gains were offset by the impact of unfavorable currency exchange rates in both periods.
Selling, general and administrative (SG&A) expense as a percent of sales for the third quarter was 22.4 percent, a decrease of 10 basis points from the same period last year. For the first nine months, SG&A expense as a percent of sales was 21.4 percent, an increase of 20 basis points from the comparable period last year.
Operating earnings as a percent of sales for the third quarter was 13.6 percent, an increase of 60 basis points from the comparable period last year. Operating earnings as a percent of sales for the first nine months was 15.1 percent, an increase of 140 basis points from the same period last year.
The effective tax rate for the third quarter was 30.9 percent, compared to 31.3 percent last year. For the first nine months, the effective tax rate was 30.5 percent, compared to 30.4 percent in the same period last year.
Accounts receivable at the end of the third quarter totaled $202.4 million, down 11.2 percent compared to last year. Net inventories were $327.1 million, down 6.6 percent and trade payables were $172.2 million, up 1.3 percent compared to the same period last year.
About The Toro Company
The 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 2015, 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 CALL
August 18, 2016 at 10:00 a.m. CDT
www.thetorocompany.com/invest
The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CDT on August 18, 2016. 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 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 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 operations and markets, including political, economic
and/or social instability, tax policies in the countries in which we
manufacture or sell our products, and implications of the United
Kingdom’s vote to exit 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 our acquisition
of the BOSS® professional snow and ice management business; 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, 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 | Nine Months Ended | |||||||||||||||||||
| July 29, | July 31, | July 29, | July 31, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Net sales | $ | 600,980 | $ | 609,615 | $ | 1,923,819 | $ | 1,910,068 | ||||||||||||
| Gross profit | 216,617 | 216,390 | 702,458 | 667,361 | ||||||||||||||||
| Gross profit percent | 36.0 | % | 35.5 | % | 36.5 | % | 34.9 | % | ||||||||||||
| Selling, general, and administrative expense | 134,664 | 136,985 | 411,576 | 405,079 | ||||||||||||||||
| Operating earnings | 81,953 | 79,405 | 290,882 | 262,282 | ||||||||||||||||
| Interest expense | (4,646 | ) | (4,587 | ) | (14,021 | ) | (14,071 | ) | ||||||||||||
| Other income, net | 3,480 | 2,798 | 11,865 | 7,515 | ||||||||||||||||
| Earnings before income taxes | 80,787 | 77,616 | 288,726 | 255,726 | ||||||||||||||||
| Provision for income taxes | 24,965 | 24,292 | 87,962 | 77,689 | ||||||||||||||||
| Net earnings | $ | 55,822 | $ | 53,324 | $ | 200,764 | $ | 178,037 | ||||||||||||
| Basic net earnings per share of common stock | $ | 1.02 | $ | 0.96 | $ | 3.65 | $ | 3.19 | ||||||||||||
| Diluted net earnings per share of common stock | $ | 1.00 | $ | 0.94 | $ | 3.58 | $ | 3.13 | ||||||||||||
|
Weighted-average number of shares of common stock outstanding – Basic |
54,983 | 55,310 | 54,973 | 55,739 | ||||||||||||||||
|
Weighted-average number of shares of common stock outstanding – Diluted |
56,056 | 56,552 | 56,077 | 56,953 | ||||||||||||||||
| Segment Data (Unaudited) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| July 29, | July 31, | July 29, | July 31, | |||||||||||||||||
| Segment Net Sales | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Professional | $ | 427,784 | $ | 421,994 | $ | 1,361,829 | $ | 1,314,474 | ||||||||||||
| Residential | 167,815 | 175,977 | 550,330 | 578,587 | ||||||||||||||||
| Other | 5,381 | 11,644 | 11,660 | 17,007 | ||||||||||||||||
|
Total* |
$ | 600,980 | $ | 609,615 | $ | 1,923,819 | $ | 1,910,068 | ||||||||||||
| *Includes international sales of: | $ | 126,993 | $ | 136,626 | $ | 450,577 | $ | 474,911 | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| July 29, | July 31, | July 29, | July 31, | |||||||||||||||||
| Segment Earnings (Loss) Before Income Taxes | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Professional | $ | 89,096 | $ | 82,253 | $ | 292,311 | $ | 258,727 | ||||||||||||
| Residential | 12,767 | 20,566 | 64,494 | 69,131 | ||||||||||||||||
| Other | (21,076 | ) | (25,203 | ) | (68,079 | ) | (72,132 | ) | ||||||||||||
| Total | $ | 80,787 | $ | 77,616 | $ | 288,726 | $ | 255,726 | ||||||||||||
| THE TORO COMPANY AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
| (Dollars in thousands) | ||||||||
| July 29, | July 31, | |||||||
| 2016 | 2015 | |||||||
|
ASSETS |
||||||||
| Cash and cash equivalents | $ | 277,243 | $ | 110,335 | ||||
| Receivables, net | 202,389 | 227,806 | ||||||
| Inventories, net | 327,114 | 350,194 | ||||||
| Prepaid expenses and other current assets | 39,658 | 39,743 | ||||||
| Deferred income taxes | 39,062 | 43,339 | ||||||
| Total current assets | 885,466 | 771,417 | ||||||
| Property, plant, and equipment, net | 220,876 | 220,322 | ||||||
| Long-term deferred income taxes | 26,154 | 26,364 | ||||||
| Goodwill and other assets, net | 334,966 | 341,848 | ||||||
| Total assets | $ | 1,467,462 | $ | 1,359,951 | ||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current portion of long-term debt | $ | 22,627 | $ | 23,279 | ||||
| Short-term debt | - | 5,189 | ||||||
| Accounts payable | 172,156 | 169,927 | ||||||
| Accrued liabilities | 318,628 | 300,576 | ||||||
| Total current liabilities | 513,411 | 498,971 | ||||||
| Long-term debt, less current portion | 334,658 | 358,053 | ||||||
| Deferred revenue | 11,958 | 11,324 | ||||||
| Other long-term liabilities | 29,585 | 26,430 | ||||||
| Total stockholders' equity | 577,850 | 465,173 | ||||||
| Total liabilities and stockholders' equity | $ | 1,467,462 | $ | 1,359,951 | ||||
| THE TORO COMPANY AND SUBSIDIARIES | ||||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
| (Dollars in thousands) | ||||||||||
| Nine Months Ended | ||||||||||
| July 29, | July 31, | |||||||||
| 2016 | 2015 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net earnings | $ | 200,764 | $ | 178,037 | ||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||
| Non-cash income from finance affiliate | (7,302 | ) | (6,223 | ) | ||||||
| Provision for depreciation, amortization, and impairment loss | 46,332 | 45,944 | ||||||||
| Stock-based compensation expense | 7,723 | 7,815 | ||||||||
| Decrease/(increase) in deferred income taxes | 256 | (2,096 | ) | |||||||
| Other | (464 | ) | (67 | ) | ||||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||
| Receivables, net | (23,699 | ) | (74,916 | ) | ||||||
| Inventories, net | 3,428 | (67,902 | ) | |||||||
| Prepaid expenses and other assets | (2,108 | ) | (5,563 | ) | ||||||
| Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities | 63,977 | 92,985 | ||||||||
| Net cash provided by/(used in) operating activities | 288,907 | 168,014 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Purchases of property, plant, and equipment | (34,601 | ) | (37,544 | ) | ||||||
| Proceeds from asset disposals | 232 | 77 | ||||||||
| Distributions from finance affiliate, net | 3,594 | 1,928 | ||||||||
| Proceeds from sale of a business | 1,500 | - | ||||||||
| Acquisitions, net of cash acquired | - | (198,329 | ) | |||||||
| Net cash provided by/(used in) investing activities | (29,275 | ) | (233,868 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Repayments of short-term debt | (1,161 | ) | (16,283 | ) | ||||||
| (Repayments of)/increase in long-term debt | (20,713 | ) | (3,831 | ) | ||||||
| Excess tax benefits from stock-based awards | 15,078 | 7,808 | ||||||||
| Proceeds from exercise of stock options | 19,691 | 8,615 | ||||||||
| Purchases of Toro common stock | (69,189 | ) | (90,993 | ) | ||||||
| Dividends paid on Toro common stock | (49,488 | ) | (41,794 | ) | ||||||
| Net cash provided by/(used in) financing activities | (105,782 | ) | (136,478 | ) | ||||||
| Effect of exchange rates on cash and cash equivalents | (2,882 | ) | (2,206 | ) | ||||||
| Net increase/(decrease) in cash and cash equivalents | 150,968 | (204,538 | ) | |||||||
| 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 | $ | 277,243 | $ | 110,335 | ||||||
