BLOOMINGTON, Minn. — The Toro Co. today reported net earnings of $31 million, or $0.54 per share, on a net sales increase of 6.3%  to $474.2 million for its 2015 first quarter ended January 30, 2015. In the comparable fiscal 2014 period, the company delivered net earnings of $25.9 million, or $0.44 per share, on net sales of $446 million.

“We are pleased to deliver record results for the quarter, which was not only the first of our fiscal year but also the first to include the BOSS professional snow and ice management products as part of our expanded professional portfolio,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We are encouraged by the execution in that business and the sales it contributed to the quarter. Our integration efforts are progressing well and we continue to be optimistic about the prospects for future growth. Looking across our other professional businesses, shipments of worldwide golf and grounds equipment, landscape contractor turf equipment and rental products all increased in the quarter due to strong channel and retail demand for our innovative and productivity-enhancing offerings, helping to drive the double-digit revenue growth for that segment.”

“On the residential side of our business, we faced difficult first quarter comparisons due to last year’s early and abundant snowfalls that helped drive strong segment performance,” continued Hoffman. “This year, the robust pre-season demand that began in the second half of our 2014 fiscal year continued early in the quarter, but in-season demand was curtailed by a lack of snow events. The recent snowstorms that hit the Northeast and parts of Midwest at the end of our quarter, and are continuing to date, have helped to spur demand, drive retail sales, right-size field inventories and position us well for the pre-season next fall. All in, this is proving to be another successful snow season for us and one that helped our residential first quarter results, which otherwise were challenged by lower shipments of residential zero turn riding mowers due to supply inefficiencies and the ramp up of production of our highly anticipated new platform, as well as unfavorable currency exchange rates.”

“As we look ahead to our three key remaining tradeshows and beyond to our primary selling season, we believe we are well-positioned with a suite of new and innovative products that will help to drive retail sales and increase our market share across our businesses. For example, at the Golf Industry Show next week, our Reelmaster hybrid fairway mower and INFINITY golf sprinklers are just two of the many new and enhanced products that will attract the attention of worldwide golf customers as they visit our booth and make equipment and irrigation selections for use in the development and renovation of golf courses. At the Rental Show, which also is next week, we expect that the momentum from double-digit industry growth in 2014, combined with the excitement we expect to generate with the introduction of new products including our all-new Dingo compact utility loader, will help to drive rental customer orders. Finally, in March, BOSS will exhibit at the NTEA Work Truck Show and unveil several new products and features that will further evidence its innovation leadership in the professional snow and ice management market.”

“With our peak selling season still in front of us, we are optimistic and hopeful that Mother Nature will deliver more normal spring conditions after two consecutive years in which it basically showed up in time to transition to the summer growing season. That said, we are mindful of the challenges our businesses and customers could face if, among other things, we encounter unfavorable swings in economic conditions, additional currency pressure or continued supply inefficiencies or disruptions resulting from U.S. West Coast port labor issues. We remain flexible and prepared to make adjustments across the enterprise as necessary and will continue to maintain our focus on the things we can control—investing in product innovation, delivering excellent customer service and executing in our markets.”

The company continues to expect revenue growth for fiscal 2015 to be about 8 to 10%, and now expects net earnings per share to be about $3.35 to $3.45. For the second quarter, the company expects net earnings per share to be about $1.58 to $1.63.

SEGMENT RESULTS

Professional

• Professional segment net sales for the first quarter totaled $339.7 million, up 15% from $295.5 million in the same period last year. The addition of the BOSS snow and ice management products to our professional portfolio helped to drive sales growth for the quarter. Worldwide golf and grounds sales increased on strong channel and retail demand for turf equipment. Sales of landscape maintenance equipment also grew with continued demand for our professional zero turn riding and walk-behind mowing platforms. Somewhat offsetting these increases were unfavorable currency exchange rates and lower international micro-irrigation sales primarily due to unfavorable economic conditions. Professional segment earnings for the first quarter totaled $55.7 million, up 17.3% from $47.5 million in the same period last year.

Residential

• Residential segment net sales for the first quarter were $134.7 million, down 8.7% from $147.6 million in the same period last year. This decrease primarily was due to lower shipments of residential zero turn riding mowers resulting from supply inefficiencies and the ramp up of production of our highly anticipated new platform that offers either dual lever or steering wheel controls, as well as lower international sales of residential products due to unfavorable currency exchange rates and weather conditions in Australia. Somewhat offsetting these decreases were higher pre-season domestic sales of walk power mowers due to expanded channel placement and increased demand for our innovative product line-up, including the new all-wheel drive model. Sales of our residential snow thrower products also were up modestly. Residential segment earnings for the first quarter were $13.7 million, down $4.4 million from $18.1 million the same period last year.

OPERATING RESULTS

Gross margin as a percent of sales for the first quarter was 35.6%, a decrease of 110 basis points from the same period last year. This decrease primarily was due to the purchase accounting impact of the BOSS acquisition and unfavorable currency exchange rates, somewhat offset by favorable segment mix.

Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 26.2%, a decrease of 140 basis points from the same period last year. This decrease was due to lower expense as a percent of sales across various expense categories, including warranty, warehousing, administrative and incentive expenses.

First quarter operating earnings as a percent of sales were 9.4%, compared to 9.1% for the same period last year.

First quarter interest expense was $4.7 million, up $1 million from the same period last year, primarily due to the additional long-term debt issued in connection with the BOSS acquisition.

The effective tax rate for the first quarter was 26.3%, compared to 33.2% in the same period last year, primarily due to the retroactive reenactment of the domestic research tax credit for calendar year 2014.

Accounts receivable at the end of the first quarter totaled $205.3 million, up 2.7% from the same period last year. Net inventories were $364.4 million, up 19.5% from the same period last year. Trade payables were $195.6 million, up 1.5% from the same period last year.

About The Toro Co.
The Toro Co. (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 $2.2 billion in fiscal 2014, 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.

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,” and 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, resulting from the U.S. West Coast port situation or otherwise; 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 and tax policies in the countries in which we manufacture or sell our products; 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 the recent 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, Tier 4 emissions requirements, 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 undertake no obligation to update forward-looking statements made herein to reflect events or circumstances after the date hereof.