BLOOMINGTON, Minn. — The Toro Co. (NYSE: TTC) reports net earnings of $231.0 million, or $2.06 per share, on a net sales increase of 0.1% to $2.392 billion for its fiscal year ended October 31, 2016. In fiscal 2015, the company delivered net earnings of $201.6 million, or $1.78 per share for the year, on net sales of $2.391 billion.
For the fourth quarter, Toro reported net earnings of $30.2 million or $0.27 per share, on a net sales decrease of 2.6% to $468.4 million. In the comparable 2015 period, the company posted net earnings of $23.6 million on net sales of $480.8 million.
Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective September 16, 2016.
The company also announced that its board of directors has declared a quarterly cash dividend of $0.175 per share, a 16.7% increase from its previous quarterly dividend rate of $0.15 per share. This dividend is payable on January 12, 2017 to shareholders of record on December 27, 2016. For the fiscal year, the company returned almost $178 million to shareholders through the payment of $65.9 million in dividends and the repurchase of approximately 2.7 million shares of common stock.
“We are pleased to announce record earnings for fiscal 2016, driven by consistent performance and growth in our professional businesses,” says Richard M. Olson, Toro’s president and chief executive officer. “New product introductions across the portfolio were favorably received and we made notable progress in reducing our inventory levels. Despite challenges presented by negative currency conditions and a lack of in-season snowfall, we benefitted from solid demand for our golf equipment and irrigation products and we gained share in those markets. Similarly, we saw increased momentum in our landscape contractor, specialty construction and rental businesses due to the success of new products such as the TITAN HD zero turn mower and the Dingo TX 1000.”
“I am proud of our team’s efforts to increase productivity while prudently managing expenses, all of which helped drive our performance,” says Olson. “It is the collective contributions of our engaged employees that make these results possible. I would like to thank our entire team, including our channel partners worldwide. It is their dedication and commitment that helps us achieve these consistent results.”
“With fiscal 2017 already underway, we remain committed to delivering innovative products and serving customers across our businesses. As anticipated, pre-season demand for snow and ice management products was affected by the lack of snowfall last winter. However, mild autumn conditions extended the growing season in several areas, which benefitted our turf maintenance businesses. Recent weather patterns appear promising, and we are encouraged by the resulting retail activity. We will pay careful attention to inventory levels while ensuring we remain responsive to customer demand. As we embark on the last year of our Destination Prime employee initiative, we are committed to growth and profitability, while maintaining focus on working capital management. As always, we recognize that unfavorable weather conditions could negatively impact demand throughout the year, but we will maintain a steady approach in executing on our initiatives in the months ahead.”
For fiscal 2017, the company expects revenue growth to be about 3-4%, and net earnings to be about $2.20 to $2.26 per share. For the first quarter, the company expects net earnings to be about $0.34 to $0.36 per share.
SEGMENT RESULTS
Professional
- Professional segment net sales for fiscal 2016 totaled $1.705 billion, up 4.0% from $1.640 billion last year. Strong performance across our professional businesses drove the positive results for the year. Solid demand for our golf equipment, Toro branded landscape contractor equipment, as well as the success of the Dingo TX 1000 contributed to the growth for the year. For the fourth quarter, professional segment net sales were $343.5 million, up 5.6% from the comparable fiscal 2015 period. The growth was driven largely by the strong demand for golf products paired with favorable weather conditions experienced in the quarter. The sales growth for both periods was somewhat offset by the lighter snowfall during the 2016 winter season.
- Professional segment earnings for fiscal 2016 totaled $352.1 million, up 14.3% from $308.0 million from the prior year. For the fourth quarter, professional segment earnings were $59.7 million, up from $49.3 million in the comparable fiscal 2015 period.
Residential
- Residential segment net sales for fiscal 2016 were $669.1 million, down 7.8% from $725.7 million last year. Mild in-season winter conditions paired with a soft snow pre-season to wrap up the fiscal year are the main contributors to the decline. For the fourth quarter, residential segment net sales were $118.8 million, down 19.2% from the comparable fiscal 2015 period. A decrease in sales of residential snow products was the largest contributing factor to the decline. The negative sales impact for both periods was somewhat offset by strong demand for our walk power mowers.
- Residential segment earnings for fiscal 2016 totaled $73.7 million, down 13.3% from fiscal 2015. For the fourth quarter, residential segment earnings were $9.2 million, down from $15.8 million in the comparable fiscal 2015 period.
Operating Results
Gross margin as a percent of sales for fiscal 2016 was up 160 basis points from last year to 36.6%. For the fourth quarter, gross margin as a percent of sales increased 170 basis points to 36.8%. For both periods, favorable commodity costs and enhanced productivity, as well as segment mix, contributed to the increases. These increases were partially offset by the impacts of unfavorable currency exchange rates for both the quarter and the fiscal year.
Selling, general and administrative (SG&A) expense as a percent of sales for fiscal 2016 increased 10 basis points to 22.6% compared to last year. For the fourth quarter, SG&A expense as a percent of sales increased 10 basis points to 27.5%.
Operating earnings as a percent of sales for fiscal 2016 improved 150 basis points from last year to 14.0%. For the fourth quarter, operating earnings improved 160 basis points to 9.3% of sales.
The effective tax rate for fiscal 2016 was 30.1%, compared to 30.7% last year. The decrease was due to favorable one-time adjustments and the permanent extension of the domestic research tax credit.
Accounts receivable at the end of fiscal 2016 totaled $163.3 million, down 7.8% from last year. Net inventories were $307.0 million, down 8.2% from last year. Trade payables were $174.7 million, up 14.9% from last year.
