The Toro Company Reports Record First Quarter Results
First quarter sales increase 6.3 percent to a record $548.2 million
Professional businesses deliver strong results driving quarterly performance
Reported EPS of $0.21, which includes a one-time $0.30 EPS reduction due to U.S. tax reform
Adjusted EPS of $0.48, a 29.7 percent increase over the prior year adjusted EPS of $0.37
Revised 2018 guidance includes the ongoing lower corporate tax rate but excludes the one-time charges associated with U.S. tax reform and also excludes the benefit of the excess tax deduction for share-based compensation
February 22, 2018 08:30 AM Eastern Standard Time
BLOOMINGTON, Minn.--(BUSINESS WIRE)--The Toro Company (NYSE: TTC) today reported net earnings of $22.6 million or $0.21 per share on a net sales increase of 6.3 percent to $548.2 million for its first quarter ended February 2, 2018. Due to the one-time impacts of U.S. tax reform, reported first quarter net earnings were lower than the comparable 2017 reported net earnings of $45.0 million or $0.41 per share on net sales of $515.8 million. Adjusted 2018 first quarter net earnings were $52.1 million, or $0.48 per share, which includes $0.06 benefit from the lower corporate tax rate, partially offset by $0.03 attributed to the excess tax deduction for share-based compensation, compared to adjusted net earnings of $40.1 million, or $0.37 per share in the comparable 2017 period, an increase of 29.7 percent. Please see the tables and information below for a reconciliation of non-GAAP adjusted net earnings and adjusted diluted earnings per share to the comparable GAAP measures.
$TTC revenues in Q1 increased 6.3% to record $548.2 million, driven by strength across our professional businesses
First quarter operating earnings as a percent of sales were 12.2 percent, an improvement of 50 basis points compared to 11.7 percent in the same period last year. The reported tax rate for the first quarter was 66.0 percent compared to 24.5 percent last year. The quarter was significantly impacted by the enactment of U.S. tax reform. The increase was driven by the provisional re-measurement of deferred tax assets and liabilities, and provisional calculation of the deemed repatriation tax, which resulted in discrete tax charges of $20.5 million and $12.6 million, respectively. The unfavorable impact of these one-time charges was partially offset by the benefit resulting from the reduction in the federal corporate tax rate. The adjusted tax rate for the first quarter was 21.5 percent, compared to the adjusted tax rate of 32.7 percent in the same period last year. The adjusted tax rates exclude the one-time charges associated with U.S. tax reform and the benefit of the excess tax deduction for share-based compensation. The company currently estimates that its full fiscal year adjusted 2018 effective income tax rate will be about 23 percent. For fiscal 2019 the company currently estimates that its adjusted effective income tax rate will be about 21 to 23 percent.
“Fiscal 2018 is off to a good start, achieving record operating performance in the first quarter,” said Richard M. Olson, Toro’s chairman and chief executive officer. “We continue to build momentum in the professional segment driven by increased demand for product offerings across the portfolio worldwide. Our landscape contractor businesses benefitted from strong orders for our professional zero-turn mowers, led by our Exmark® line which recently expanded its RED Technology platform. This new technology enables unprecedented communication among key mower systems to increase machine efficiency, ease of use, and long term durability.”
“We are seeing positive trends in our golf business with increased sales of greens mowers and large reel units that feature our Toro® EdgeSeries™ reels. Customers are impressed by the enhanced quality of cut and reduced maintenance costs these reels deliver. The new Outcross™ 9060 also generated excitement at the recent Golf Industry Show. This new turf-friendly machine features smart technology designed to simplify operation providing greater flexibility in the deployment of labor.”
“As we head into our key selling season, we are prepared to address customer demand by executing consistently and efficiently. With our new Vision 2020
The company continues to expect revenue growth for fiscal 2018 to exceed 4 percent, and now expects adjusted net earnings per share to be about $2.67 to $2.73 for the year. For the second quarter, the company expects adjusted net earnings per share to be about $1.17 to $1.22. These adjusted estimates exclude the one-time charges associated with U.S. tax reform and the benefit of the excess tax deduction for share-based compensation.
SEGMENT RESULTS
Professional
Professional segment net sales for the first quarter were $403.7 million, up 8.6 percent from $371.8 million last year. Strong performance across our professional portfolio drove the positive results for the quarter. Sales of zero-turn riding mowers in our landscape business increased as the channel prepares for the selling season ahead. Demand for golf equipment also contributed to the results as courses make investments in their fleets and irrigation systems. Finally, increased sales of our ag irrigation products also had a positive impact on the quarterly performance. Partially offsetting the revenue growth was the BOSS® snow and ice management business, which was affected by lower than average snowfall in key customer markets.
Professional segment earnings for the first quarter were $75.9 million, up 11.4 percent from $68.2 million in the same period last year.
Residential
Residential segment net sales for the first quarter were $142.5 million, up 1.5 percent from $140.4 million last year. Channel demand for our zero-turn riding mowers, in preparation for the selling season, drove the results for the quarter. Below average snowfall early in the season, paired with below average snow events in the Midwest, negatively impacted sales of our residential snow thrower product lineup for the quarter. However, late season snowfall did generate favorable retail activity, which helped to further reduce channel inventories at quarter end.
Residential segment earnings for the first quarter were $15.7 million, down 5.1 percent from $16.6 million in the comparable period last year.
OPERATING RESULTS
Gross margin as a percent of sales for the first quarter was 37.3 percent, a decrease of 20 basis points compared to last year. Increased commodity costs and unfavorable product mix within the segments largely contributed to the decline, somewhat offset by the impacts of foreign currency.
Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 25.1 percent, a decrease of 70 basis points from the same period last year. The decrease was primarily due to the leveraging of expenses over higher sales volume.
Accounts receivable at the end of the first quarter were $198.7 million, up 8.1 percent from last year. This increase was due largely to higher sales volume and the impacts of foreign currency exchange rates in the year over year comparison. Net inventories were $439.3 million, up 9.3 percent from last year. This increase was mainly due to higher anticipated planned sales in several businesses and the impacts of foreign currency exchange rates in the year over year comparison. Trade payables were $266.6 million, up 14.7 percent from the comparable period last year.
The Toro Company Reports Record First Quarter Results | Business Wire
