Record first quarter revenues, up 10.6%, driven by strong demand across both professional and residential businesses.

The Toro Company  reported net earnings of $19.9 million, or $0.65 per share, on net sales of $423.8 million for its fiscal first quarter ended February 3, 2012. In the comparable fiscal 2011 period, the company delivered net earnings of $17.3 million, or $0.53 per share, on net sales of $383.2 million.

“Retail sales of our golf and landscape contractor equipment have been very good year-to-date, and we have momentum heading into the spring selling season,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “Looking beyond our existing business, our most recently announced acquisition of the Astec underground products presents substantial opportunities in adjacent markets. As always, now begins the challenge of successfully integrating the acquisition into the company’s operations.”

In the past three months, Toro completed acquisitions of the Astec Underground’s equipment line of horizontal directional drills, trenchers, and vibratory plows for the underground utilities market and the Graden golf greens roller product line. The Astec products expand Toro’s offering to landscape and irrigation contractors and provide entry into new global markets, while the Graden greens rollers add to Toro’s strong position in golf equipment worldwide. Combined, these new products are expected to add about one percent to sales to the current fiscal year.

SEGMENT RESULTS\

Professional
Professional segment net sales for the fiscal 2012 first quarter totaled $283.8 million, up 9.9 percent from the same period last year. Shipments of golf equipment were up worldwide as customers continue to invest in maintenance products for their courses. Micro-irrigation sales continue to be strong on growing acceptance amongst growers of drip irrigation technologies and our related increased capacities. The sales growth in the quarter was also aided by the addition of revenue from Unique Lighting Systems, which was acquired a year ago.
Professional segment earnings totaled $42.1 million, up 11 percent from $37.9 million last year.

Residential
Residential segment net sales for the fiscal 2012 first quarter totaled $137.6 million, up 11.6 percent from the same period last year. Consumers’ continued enthusiastic acceptance of our residential zero turn riding product, and retailers’ desire to take walk power mower products earlier generated strong shipments of spring goods. Additionally, sales of Pope products in Australia grew significantly, as a result of improved weather conditions. The unseasonable winter weather reduced in-season demand for snow products, negatively impacting sales of snowthrowers and service parts.
Residential segment earnings for the fiscal 2012 first quarter totaled $12.6 million, up 10.9 percent from $11.4 million in the same period last year.

OPERATING RESULTS
Gross margin for the fiscal 2012 first quarter decreased 110 basis points from last year to 34.6 percent. The margin decline was primarily the result of product mix and freight expense.

Selling, general and administrative (SG&A) expense as a percent of sales for the fiscal 2012 first quarter was down 200 basis points to 26.6 percent. The decline in SG&A as a percent of sales reflects further leveraging of costs over improved sales volumes and higher warranty expense in last year’s first quarter.

Operating earnings as a percent of sales for the first quarter were 8 percent compared to 7.1 percent last year.

First quarter interest expense was up 7.6 percent to $4.4 million.

The effective tax rate for the quarter was 33.8 percent compared with 29.3 percent last year. The higher tax rate was mainly due to the expiration of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the fiscal 2012 first quarter totaled $175.5 million, up 2.5 percent from the same period last year, on a sales increase of 10.6 percent. Net inventories for the first quarter were $272.5 million, up 13.7 percent. Trade payables increased 1.4 percent for the first quarter to $151.8 million.

OUTLOOK
“As we head into our primary selling season, customers are optimistic about the year ahead, based on early channel demand,” said Hoffman. “Mindful of potential swings in economic and weather patterns, we remain focused on being a flexible, high quality supplier to our channel partners as we work with them to serve the needs of our end-user customers around the world. Once again this year, we will be bringing both professional and residential customers a number of exciting and innovative new products like the Toro® TimeMaster® 30” residential walk power mower.”

Factoring in the stronger sales growth from the first quarter and the acquisitions recently announced the company now expects a revenue increase for fiscal 2012 of about 6 to 7 percent. The company also expects fiscal 2012 net earnings to be about $4.20 per share which includes a $0.10-$0.15 negative EPS impact for integration investments related to the acquisition of the Astec products. For the second quarter, the company expects to report net earnings of about $2.10 per share.
“As we head into our primary selling season, customers are optimistic about the year ahead, based on early channel demand,” said Hoffman. “Mindful of potential swings in economic and weather patterns, we remain focused on being a flexible, high quality supplier to our channel partners as we work with them to serve the needs of our end-user customers around the world. Once again this year, we will be bringing both professional and residential customers a number of exciting and innovative new products like the Toro® TimeMaster® 30” residential walk power mower.”

Factoring in the stronger sales growth from the first quarter and the acquisitions recently announced the company now expects a revenue increase for fiscal 2012 of about 6 to 7 percent. The company also expects fiscal 2012 net earnings to be about $4.20 per share which includes a $0.10-$0.15 negative EPS impact for integration investments related to the acquisition of the Astec products. For the second quarter, the company expects to report net earnings of about $2.10 per share.