Toro reports fiscal year results

BLOOMINGTON, Minn. -- The Toro Company has reported net earnings of $173.9 million, or $3.02 per share, on a net sales increase of 6.4 percent to $2.173 billion for its fiscal year ended October 31, 2014. In fiscal 2013, the company delivered net earnings of $154.8 million, or $2.62 per share, on net sales of $2.041 billion.

For the fourth quarter, Toro reported net earnings of $10.9 million, or $0.19 per share, on a net sales increase of 8.3 percent to $414.1 million. In the comparable fiscal 2013 period, the company posted net earnings of $5 million on net sales of $382.4 million.

The company also announced that its board of directors has declared a quarterly cash dividend of $0.25 per share, a 25 percent increase from its previous quarterly dividend rate of $0.20 per share. This dividend is payable on January 12, 2015, to shareholders of record on December 23, 2014.

“Fiscal 2014 was a significant year for The Toro Company for many reasons,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We delivered record sales, operating earnings and earnings per share, which enabled us to successfully achieve our Destination 2014 revenue and profitability targets. We celebrated our Centennial and officially launched the company’s second century. We entered into and subsequently closed the largest acquisition in our history with the addition of the BOSS professional snow and ice management business. Finally, we returned almost $150 million to our shareholders through the payment of $45 million in dividends and the repurchase of more than 1.6 million shares of our common stock.”

The company expects revenue growth for fiscal 2015 to be about eight to 10 percent, and net earnings to be about $3.30 to $3.40 per share. For the first quarter, the company expects net earnings to be about $0.47 per share.

Segment results

Professional
Professional segment net sales for fiscal 2014 totaled $1.478 billion, up 3.7 percent over last year. Sales of landscape maintenance equipment increased on strong retail demand for its zero turn mowers and new products introduced during the year. Global micro irrigation sales increased with continued demand for more efficient irrigation solutions for agriculture. Ground engaging and rental equipment sales grew on increased demand for its products. Worldwide golf sales were up as existing golf courses continued to replace aging irrigation systems and equipment with its product offerings, including the new INFINITY sprinklers, and new international golf course projects were awarded to it. For the fourth quarter, professional segment net sales were $268.9 million, up 5.1 percent from the comparable fiscal 2013 period.

Professional segment earnings for fiscal 2014 totaled $276.3 million, up 8.6 percent from the prior year. For the fourth quarter, professional segment earnings were $31.6 million, up from $21.8 million in the comparable fiscal 2013 period.

Residential
Residential segment net sales for fiscal 2014 were $672.4 million, up 13.1 percent from last year. Sales of its snow thrower products increased due to strong in-season retail demand driven by abundant snowfall across key North American markets early in fiscal 2014 and robust pre-season demand that began late this summer and continued through the end of its fiscal year. Sales of domestic residential zero turn riding products grew on continued retail demand for these mowing platforms. Increased demand for its handheld solutions also contributed to residential segment net sales for the fiscal year. Somewhat offsetting these increases were lower sales of its products in Australia due to unfavorable currency exchange rates and weather conditions. For the fourth quarter, residential segment net sales were $138.8 million, up 19 percent from the comparable fiscal 2013 period.

Residential segment earnings for fiscal 2014 totaled $76.9 million, up 24 percent from fiscal 2013. For the fourth quarter, residential segment earnings were $16.3 million, up from $10.1 million in the comparable fiscal 2013 period.

Operating results

Gross margin as a percent of sales for fiscal 2014 improved 10 basis points from last year to 35.6 percent. For the fourth quarter, gross margin as a percent of sales increased 90 basis points to 34.5 percent. For both periods, the increases primarily were due to realized pricing and productivity improvements somewhat offset by unfavorable segment mix, unfavorable currency exchange rates and slightly higher commodity costs.

Selling, general and administrative (SG&A) expense as a percent of sales for fiscal 2014 decreased 70 basis points from last year to 23.5 percent. For the fourth quarter, SG&A expense as a percent of sales decreased 160 basis points to 29.8 percent. For both periods, the decreases primarily were due to the leveraging of expenses over higher sales volumes.

Other income for fiscal 2014 was $8.7 million, down $3.5 million from last year. This decrease primarily was due to a one-time legal recovery realized in fiscal 2013 that was not repeated this year, as well as higher foreign currency losses this year.

Operating earnings as a percent of sales for fiscal 2014 improved 80 basis points from last year to 12.1 percent. For the fourth quarter, operating earnings improved 250 basis points to 4.7 percent of sales.

Interest expense for fiscal 2014 was $15.4 million, down 4.8 percent from last year. For the fourth quarter, interest expense totaled $4.4 million, an increase of 11.7 percent from the same period last year.

The effective tax rate for fiscal 2014 was 32.2 percent compared to 31.7 percent last year when the company benefited from the retroactive reinstatement of the domestic research tax credit.

Accounts receivable at the end of fiscal 2014 totaled $158.2 million, up 1 percent from last year. Net inventories were $274.6 million, up 14.4 percent from last year. Trade payables were $124.3 million, down 8.7 percent from last year.

Average net working capital (accounts receivable plus net inventory less trade payables) as a percent of net sales as of the end of fiscal 2014 was 15.1 percent compared to 16.6 percent as of the end of last year.