BLOOMINGTON, Minn. — The Toro Co. (NYSE: TTC) reports net earnings of $45.0 million, or $0.41 per share, on a net sales increase of 6.1% to $515.8 million for its first quarter ended February 3, 2017. In the comparable fiscal 2016 period, the company delivered net earnings of $39.3 million, or $0.35 per share, on net sales of $486.4 million.
“The company is off to a solid start for the year with record results for the first quarter,” says Richard M. Olson, Toro’s president and chief executive officer. “Growth in the professional segment was a key driver with new product offerings in multiple areas. The landscape contractor businesses experienced strong demand for the new lines of professional zero-turn mowers. Also contributing to the momentum were strong sales in our golf, BOSS snow and ice management and specialty construction businesses.”
“We continue to focus on delivering new products with customer-valued innovation. The new TITAN HD and Exmark Radius mowers have been well-received by landscape professionals and acreage owners. Demand remains strong for the new BOSS EXT extendable plows and the lighter HTX plows for half-ton trucks as well as V-Box spreaders. In our micro-irrigation business, we are pleased by the success of our Aqua-Traxx tape products with flow control. Finally, at the recent Golf Industry and Sports Turf Manager Shows, excitement continues for the GTX utility vehicle line that combines tremendous versatility with uncompromising ride quality.”
“Another important element in our strong results for the quarter was the team’s focus on productivity and management of inventory and expenses, all of which helped us make good progress on our Destination Prime initiative. As the year progresses we will maintain an emphasis on these efforts. As always, we will remain committed to delivering innovative solutions to the industries we serve, while being mindful of the impacts that unfavorable weather or market conditions could present. We are well positioned to maintain flexibility in our operations while successfully serving our customers and generating profitable growth.”
The company continues to expect revenue growth for fiscal 2017 to be about 3-4%, and now expects net earnings per share to be about $2.25 to $2.30 for the year. For the second quarter, the company expects net earnings to be about $1.00 per share.
SEGMENT RESULTS
Professional
- Professional segment net sales for the first quarter were $371.8 million, up 9.7% from $338.8 million last year. Strong performance across our professional businesses drove the positive results for the quarter. New product introductions such as the Toro-branded TITAN HD and the Exmark-branded Radius zero-turn riding mowers have been well received by customers, which generated positive momentum for the quarter. Similarly, our BOSS snow and ice management business also saw the benefits of new products paired with favorable snowfall across much of the Midwest.
- Professional segment earnings for the first quarter were $68.2 million, up 10.7% from $61.6 million in the same period last year.
Residential
- Residential segment net sales for the first quarter were $140.4 million, down 2.7% from $144.3 million last year. Retail demand for our line of snowthrowers, including the new SnowMaster, was positive in North America. Sales of walk power mowers were also favorable in southern climates. As expected, the results were impacted by a shift in demand for zero turn riding mowers experienced in the comparable period last year. This prior shift was not repeated in the current quarter due to improved product availability and a return to more normalized shipment timing.
- Residential segment earnings for the first quarter were $16.6 million, down slightly from $16.7 million in the comparable period last year.
OPERATING RESULTS
Gross margin as a percent of sales for the first quarter was 37.5%, a decrease of 10 basis points compared to last year. Unfavorable currency exchange rates and increased commodity costs largely contributed to the decline, partially offset by productivity improvements.
Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 25.8%, a decrease of 70 basis points from the same period last year. The decrease was primarily due to the leveraging of expenses over higher sales volume.
First quarter operating earnings as a percent of sales were 11.7%, an improvement of 60 basis points compared to 11.1 percent in the same period last year.
The effective tax rate for the first quarter was 24.5%, compared to 26.9% last year. This rate reflects a discrete tax benefit of approximately $4.9 million related to share based compensation due to early adoption of a new accounting standard. The company now expects its full year effective tax rate to be about 28.5 percent.
Accounts receivable at the end of the first quarter were $183.9 million, down 3.4 percent from last year. Net inventories were $402.1 million, down 4.7% from last year. Trade payables were $232.4 million, up 10.0% from the comparable period last year.
