BLOOMINGTON, Minn.--(BUSINESS WIRE)--The Toro Company (NYSE: TTC) today reported net earnings of $267.7 million, or $2.41 per share, on a net sales increase of 4.7 percent to $2.505 billion for its fiscal year ended October 31, 2017. In fiscal 2016, the company delivered net earnings of $231.0 million, or $2.06 per share for the year, on net sales of $2.392 billion.
For the fourth quarter, Toro reported net earnings of $33.8 million or $0.31 per share, on a net sales increase of 4.3 percent to $488.6 million. In the comparable 2016 period, the company posted net earnings of $30.2 million on net sales of $468.4 million.
The company also announced that its board of directors has declared a quarterly cash dividend of $0.20 per share, a 14.3 percent increase from its previous quarterly dividend rate of $0.175 per share. This dividend is payable on January 10, 2018, to shareholders of record on December 22, 2017. For the fiscal year, the company returned nearly $236.0 million to shareholders through the payment of approximately $75.8 million in dividends and the repurchase of approximately 2.7 million shares of common stock.
“Fiscal 2017 was another record year for The Toro Company. We experienced solid sales growth fueled by new and innovative product offerings across our businesses,” said Richard M. Olson, Toro’s chairman and chief executive officer. “Strong performance in our golf, landscape contractor and rental businesses continued with the success of new products such as the Exmark® Radius® zero-turn riding mowers, the Greensmaster® series of greens mowers and the Dingo® TX 1000 compact utility loader. We continue to gain momentum in those markets and we are encouraged by retail trends. Our BOSS® snow and ice management business also had a strong year driven by the continued success of the EXT extendable plows and the V-Box spreaders, which elevate performance and enhance productivity.”
“Sales in our international business were up 5.6 percent for the year driven by our Australia-based Pope® residential product offerings and by the newly acquired Perrot line of professional irrigation products. We are pleased with the integration of Perrot and we are optimistic about the growth opportunity for that business as we expand distribution more broadly. Balanced performance across our professional turf product categories also bolstered international sales.”
“For the fourth quarter, our residential business generated solid growth with sales up 3.2 percent driven in part by the success of our Pope line and increased shipments of zero-turn riding mowers. Turning to our snow business, field inventory levels are in good shape and we are well prepared to address customers’ needs in the winter months ahead.”
“Fiscal 2017 marks the end of our three-year Destination PRIME initiative. I am proud of our team’s accomplishments. We achieved record revenue, exceeded profitability goals and made significant progress on improving working capital. With the launch of our new initiative, Vision 2020, we will once again focus on driving profitable growth with an emphasis on innovation and serving our customers, which will generate further momentum for the organization. It is the collective efforts of our employees that make these initiatives a success. I look forward to working together as we kickoff the next chapter.”
For fiscal 2018, the company expects revenue growth to exceed 4 percent, and net earnings to be about $2.57 to $2.63 per share. For the first quarter, the company expects net earnings to be about $0.42 to $0.44 per share.
SEGMENT RESULTS
Professional
- Professional segment net sales for fiscal 2017 totaled $1.812 billion, up 6.2 percent from $1.705 billion last year. Strong performance across our professional businesses drove the positive results for the year. Solid demand for our Toro and Exmark branded landscape contractor equipment, golf, rental and specialty construction and our BOSS product line-ups were all contributing factors. For the fourth quarter, professional segment net sales were $360.4 million, up 4.9 percent from the comparable fiscal 2016 period. The growth was driven largely by the success of newly introduced products in our landscape contractor businesses and higher sales in our golf and specialty construction markets.
- Professional segment earnings for fiscal 2017 totaled $379.5 million, up 7.8 percent from $352.1 million from the prior year. For the fourth quarter, professional segment earnings were $65.0 million, up from $59.7 million in the comparable fiscal 2016 period.
Residential
- Residential segment net sales for fiscal 2017 were $673.2 million, up 0.6 percent from $669.1 million last year. Despite mild in-season winter conditions and an inconsistent start to the spring months, increased sales of our Pope products and higher shipments of snow products, contributed to the favorable full year results. For the fourth quarter, residential segment net sales were $122.6 million, up 3.2 percent from the comparable fiscal 2016 period. Momentum in our international business drove the performance for the quarter with increased sales of our Pope product line in Australia.
- Residential segment earnings for fiscal 2017 totaled $74.7 million, up 1.4 percent from fiscal 2016. For the fourth quarter, residential segment earnings were $11.7 million, up from $9.2 million in the comparable fiscal 2016 period.
OPERATING RESULTS
Gross margin as a percent of sales for fiscal 2017 was up 20 basis points from last year to 36.8 percent. Margin improvement for the year was driven by favorable operational productivity and segment mix, partially offset by commodity headwinds and increased freight costs. For the fourth quarter, gross margin as a percent of sales increased 90 basis points to 37.7 percent. Margin improvement for the quarter was driven by favorable operational productivity and foreign currency exchange rates, partially offset by higher commodity costs.
Selling, general and administrative (SG&A) expense as a percent of sales for fiscal 2017 was 22.6 percent, consistent with last year. For the fourth quarter, SG&A expense as a percent of sales increased 50 basis points to 28.0 percent. The quarterly increase was mainly driven by higher incentive program expenses.
Operating earnings as a percent of sales for fiscal 2017 improved 20 basis points from last year to 14.2 percent. For the fourth quarter, operating earnings improved 40 basis points to 9.7 percent of sales.
The effective tax rate for fiscal 2017 was 24.2 percent, compared to 30.1 percent last year. The effective tax rate for the fourth quarter was 27.9 percent compared to 27.6 percent in the prior year. The change in the tax rate for the full year was mainly driven by adoption of the new share based accounting standard this fiscal year.
Accounts receivable at the end of fiscal 2017 totaled $183.1 million, up 12.1 percent from last year. Net inventories were $329.0 million, up 7.2 percent compared to the prior year. Trade payables were $211.8 million, up 21.2 percent from the prior 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 $2.5 billion in
fiscal 2017, 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, landscapes,
sports fields, public green spaces, commercial and residential
properties and agricultural fields. For more information, visit www.thetorocompany.com.
LIVE CONFERENCE CALL
December 7, 2017 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 7, 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 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 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, 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 SUBSIDIARIES | ||||||||||||||||||||
| Condensed Consolidated Statements of Earnings (Unaudited) | ||||||||||||||||||||
| (Dollars and shares in thousands, except per-share data) | ||||||||||||||||||||
| Three Months Ended | Fiscal Years Ended | |||||||||||||||||||
| October 31, | October 31, | October 31, | October 31, | |||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Net sales | $ | 488,627 | $ | 468,356 | $ | 2,505,176 | $ | 2,392,175 | ||||||||||||
| Gross profit | 184,258 | 172,137 | 920,837 | 874,595 | ||||||||||||||||
| Gross profit percent | 37.7 | % | 36.8 | % | 36.8 | % | 36.6 | % | ||||||||||||
| Selling, general and administrative expense | 136,798 | 128,623 | 565,727 | 540,199 | ||||||||||||||||
| Operating earnings | 47,460 | 43,514 | 355,110 | 334,396 | ||||||||||||||||
| Interest expense | (4,804 | ) | (5,315 | ) | (19,113 | ) | (19,336 | ) | ||||||||||||
| Other income, net | 4,271 | 3,535 | 17,187 | 15,400 | ||||||||||||||||
| Earnings before income taxes | 46,927 | 41,734 | 353,184 | 330,460 | ||||||||||||||||
| Provision for income taxes | 13,079 | 11,504 | 85,467 | 99,466 | ||||||||||||||||
| Net earnings | $ | 33,848 | $ | 30,230 | $ | 267,717 | $ | 230,994 | ||||||||||||
| Basic net earnings per share of common stock | $ | 0.31 | $ | 0.28 | $ | 2.47 | $ | 2.10 | ||||||||||||
| Diluted net earnings per share of common stock | $ | 0.31 | $ | 0.27 | $ | 2.41 | $ | 2.06 | ||||||||||||
| Weighted-average number of shares of common stock outstanding — Basic | 107,929 | 109,546 | 108,312 | 109,834 | ||||||||||||||||
| Weighted-average number of shares of common stock outstanding — Diluted | 110,731 | 111,667 | 111,252 | 111,987 | ||||||||||||||||
| Segment Data (Unaudited) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Three Months Ended | Fiscal Years Ended | |||||||||||||||||||
| October 31, | October 31, | October 31, | October 31, | |||||||||||||||||
| Segment Net Sales | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| Professional | $ | 360,436 | $ | 343,483 | $ | 1,811,705 | $ | 1,705,312 | ||||||||||||
| Residential | 122,596 | 118,801 | 673,247 | 669,131 | ||||||||||||||||
| Other | 5,595 | 6,072 | 20,224 | 17,732 | ||||||||||||||||
| Total* | $ | 488,627 | $ | 468,356 | $ | 2,505,176 | $ | 2,392,175 | ||||||||||||
| *Includes International Sales of: | $ | 139,610 | $ | 129,011 | $ | 611,927 | $ | 579,588 | ||||||||||||
| Three Months Ended | Fiscal Years Ended | |||||||||||||||||||
| October 31, | October 31, | October 31, | October 31, | |||||||||||||||||
| Segment Earnings (Loss) Before Income Taxes | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| Professional | $ | 64,951 | $ | 59,749 | $ | 379,496 | $ | 352,060 | ||||||||||||
| Residential | 11,739 | 9,197 | 74,704 | 73,691 | ||||||||||||||||
| Other | (29,763 | ) | (27,212 | ) | (101,016 | ) | (95,291 | ) | ||||||||||||
| Total | $ | 46,927 | $ | 41,734 | $ | 353,184 | $ | 330,460 | ||||||||||||
| THE TORO COMPANY AND SUBSIDIARIES | ||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
| (Dollars in thousands) | ||||||||
| October 31, | October 31, | |||||||
| 2017 | 2016 | |||||||
|
ASSETS |
||||||||
| Cash and cash equivalents | $ | 310,256 | $ | 273,555 | ||||
| Receivables, net | 183,073 | 163,265 | ||||||
| Inventories, net | 328,992 | 307,034 | ||||||
| Prepaid expenses and other current assets | 37,565 | 35,155 | ||||||
| Total current assets | 859,886 | 779,009 | ||||||
| Property, plant, and equipment, net | 235,230 | 222,038 | ||||||
| Long-term deferred income taxes | 64,083 | 57,228 | ||||||
| Goodwill and other assets, net | 334,588 | 326,297 | ||||||
| Total assets | $ | 1,493,787 | $ | 1,384,572 | ||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current portion of long-term debt | $ | 26,258 | $ | 22,484 | ||||
| Accounts payable | 211,752 | 174,668 | ||||||
| Accrued liabilities | 283,786 | 266,687 | ||||||
| Total current liabilities | 521,796 | 463,839 | ||||||
| Long-term debt, less current portion | 305,629 | 328,477 | ||||||
| Deferred revenue | 24,761 | 11,830 | ||||||
| Long-term deferred income taxes | 1,726 | — | ||||||
| Other long-term liabilities | 22,783 | 30,391 | ||||||
| Total stockholders’ equity | 617,092 | 550,035 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,493,787 | $ | 1,384,572 | ||||
| THE TORO COMPANY AND SUBSIDIARIES | ||||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | ||||||||||
| (Dollars in thousands) | ||||||||||
| Fiscal Years Ended | ||||||||||
| October 31, | October 31, | |||||||||
| 2017 | 2016 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net earnings | $ | 267,717 | $ | 230,994 | ||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||
| Non-cash income from finance affiliate | (9,960 | ) | (9,588 | ) | ||||||
| Distributions from finance affiliate, net | 8,050 | 9,848 | ||||||||
| Provision for depreciation and amortization | 64,986 | 64,097 | ||||||||
| Stock-based compensation expense | 13,517 | 10,637 | ||||||||
| Provision for deferred income taxes | (6,887 | ) | 10,075 | |||||||
| Other | 202 | (464 | ) | |||||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||
| Receivables, net | (17,701 | ) | 15,785 | |||||||
| Inventories, net | (15,611 | ) | 23,192 | |||||||
| Prepaid expenses and other assets | (3,424 | ) | (905 | ) | ||||||
| Accounts payable, accrued liabilities, deferred revenue and other long-term liabilities | 59,859 | 30,614 | ||||||||
| Net cash provided by operating activities | 360,748 | 384,285 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Purchases of property, plant and equipment | (58,276 | ) | (50,723 | ) | ||||||
| Proceeds from asset disposals | 199 | 310 | ||||||||
| Proceeds from sale of a business | — | 1,500 | ||||||||
| Purchase of noncontrolling interest | (1,500 | ) | — | |||||||
| Acquisition, net of cash acquired | (24,181 | ) | — | |||||||
| Net cash used in investing activities | (83,758 | ) | (48,913 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Short-term debt repayments, net | — | (1,161 | ) | |||||||
| Payments on long-term debt | (19,136 | ) | (24,107 | ) | ||||||
| Proceeds from exercise of stock options | 10,274 | 20,226 | ||||||||
| Payments of withholding taxes for stock awards | (1,294 | ) | (2,013 | ) | ||||||
| Purchases of Toro common stock | (159,354 | ) | (109,986 | ) | ||||||
| Dividends paid on Toro common stock | (75,758 | ) | (65,890 | ) | ||||||
| Net cash used in financing activities | (245,268 | ) | (182,931 | ) | ||||||
| Effect of exchange rates on cash and cash equivalents | 4,979 | (5,161 | ) | |||||||
| Net increase in cash and cash equivalents | 36,701 | 147,280 | ||||||||
| 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 | $ | 310,256 | $ | 273,555 | ||||||
The company early adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, retrospectively effective November 1, 2016. The adoption of this guidance changed the classification for "Distributions from finance affiliate, net" from an investing activity to an operating activity on the Consolidated Statements of Cash Flows. The adoption of this guidance resulted in a $8,050 and $9,848 increase in cash flows from operating activities for the twelve months ended October 31, 2017 and October 31, 2016, respectively.
