“We are very encouraged by the positive start to the fiscal year, delivering record results for the first quarter,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “Our residential business benefitted from strong demand for zero-turn riding mowers. Strong sales of our landscape contractor equipment, increased demand for our specialty construction equipment and higher sales of golf irrigation products also contributed to the positive start to the fiscal year.”

“With an ongoing focus on innovation, we are excited about our new product lineup across our businesses for fiscal 2016. Most recently, our new golf equipment and irrigation products received a positive reception at the Golf Industry Show in San Diego, Calif., last week. New products such as the Workman light-duty vehicle and the enhanced product offerings for our INFINITY Series golf sprinkler were well received by those attending the show. We were also pleased by the excitement surrounding our new product offerings at the 2016 Sports Turf Managers Show that also took place in San Diego, Calif. Similarly, in the days ahead, the team will be busy preparing for the upcoming Rental Show in the end of February, where we expect to see positive opportunities in a key growth market.”

“Looking ahead to our primary selling season, we are well positioned across our businesses to drive retail sales and gain market share with our strong product portfolio. We remain optimistic as we prepare to execute on this positive momentum, while acknowledging the challenges we could encounter from a deteriorating economic environment or unfavorable weather conditions. However, as always, we will remain focused on those things within our control — delivering new product innovation, providing strong customer service and driving solid market performance.”

The company continues to expect revenue growth for fiscal 2016 to be about 4%, and now expects net earnings per share to be about $3.85 to $3.95 for the year. For the second quarter, the company expects net earnings per share to be about $1.75 to $1.80.

Segment Results

Professional

• Professional segment net sales for the first quarter were $338.8 million, flat to $339.7 million in the same period last year. Strong sales of landscape contractor equipment contributed positively to the results; however, this momentum was negatively impacted by unfavorable foreign currency exchange rates. Demand for the BOSS snow and ice management products was lower due to a lack of snowfall in the early winter months, which also affected the first quarter results.
• Professional segment earnings for the first quarter were $61.6 million, up $5.9 million from $55.7 million in the same period last year.

Residential

• Residential segment net sales for the first quarter were $144.3 million, up 7.1% from $134.7 million in the same period last year. This increase is primarily due to higher shipments of zero-turn riding mowers both domestically and internationally over the comparable period last fiscal year. Somewhat offsetting these increases were lower sales of snow product and walk power mowers compared to the same period last year.
• Residential segment earnings for the first quarter were $16.7 million, up $3.0 million from $13.7 million in the same period last year.

Operating Results

Gross margin as a percent of sales for the first quarter was 37.6%, an increase of 200 basis points from the same period last year. This increase was primarily due to the BOSS acquisition purchase accounting, which impacted the first quarter of fiscal 2015, resulting in a onetime adjustment. Productivity improvements, as well as lower commodity prices, also drove the improvement.

Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 26.5%, an increase of 30 basis points from the same period last year. This increase was due to slightly higher expense across various categories, primarily including advertising, warehousing and employee incentive expenses.

First quarter operating earnings as a percent of sales were 11.1%, compared to 9.4% for the same period last year.

The effective tax rate for the first quarter was 26.9%, compared to 26.3% in the same period last year. The benefit received from the retroactive reenactment of the Federal Research and Engineering Tax Credit for calendar year 2015 was consistent with the prior year.

Accounts receivable at the end of the first quarter were $190.3 million, down 7.3% from the same period last year. Net inventories were $422.0 million, up 15.8%  from the same period last year due to both residential snow throwers and BOSS snow plows, and residential and landscape contractor riding mower products. Trade payables were $211.2 million, up 8.0% from the same period last year.

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