Blount International: Market Expansion to Drive Growth in Earnings

Summary

•          Blount achieved revenue growth of 6.3% during its latest quarter. Earnings grew by 113%.
•          The market under which Blount operates is expanding.
•          Growth in order backlog confirms this.
•         The company is undervalued by 24%.

December 27 -- Blount International's share value has gone up by 23% in a year. The company manufactures and sell farm and forest equipment and replacement parts for professionals and consumers in select end-markets. Blount has been a top performer in the industry since a long time: the company's revenue growth has averaged 13.8% over the past three years, while the industry has seen its revenue grow at a far lesser rate of 7.5%. With the macro environment proving favorable for the company, this trend is expected to sustain ahead.

In this article, I will evaluate Blount's financial strength by reviewing its performance in the latest quarter. Later, I will discuss factors to support my quantified upside of the company.

Third Quarter

During the period, Blount achieved revenue growth of 6.3% as the top-line figure came to $245 million. The year-over-year increase was a result of healthy demand across most of the key markets under which the company operates. This led the volumes under the Forestry, Lawn, and Garden "FLAG" segment, and Farm, Ranch, and Agriculture "FRAG" segment to surge by 7% and 5% respectively. Sales in FLAG, which is the company's largest segment, remained unaffected by currency fluctuations during the period, but average pricing decline of $2 million hurt the revenue figure a little. The decline came due to a higher mix of sales to original equipment manufacturers as well as targeted price reductions in certain geographic markets.

Strong historical revenue growth and the results in the latest quarter confirm that Blount's industry hasn't stopped growing yet. FLAG, which generates 65% of the business for the company, saw its sales improve by 10.2% in Europe and Russia, and 7.1% in North America. The performance reflected the continued growth in demand in these markets. Sales in Asia were flat versus the third quarter of 2013. However, the improvement in performance revealed that the market was stabilizing in the region due to the benefits coming from better industry-wide conditions.

Adjusted EBITDA came at $38.2 million, compared to $34.9 million in the year-ago period. Apart from solid revenue growth, the main driver behind was a superior cost profile achieved in part by the closure of the company's least-efficient Forestry plant in Portland, as well as better utilization rates in the FLAG segment.

The net result was an earnings figure of 32 cents per share, which was more than double of what Blount achieved in 2013. Looking forward, analysts believe that the earnings trend will sustain due to the reasons discussed below.

Market Growth

Since Blount serves the forestry and agriculture industry through its products, it can be said that as long as theses sectors continue to grow, the demand for Blount's products will remains healthy. Fortunately, the global farm equipment market is forecast to grow by 4.7% in 2015. Growth within the global farm equipment market looks set to be driven by the booming economies of emerging nations, the rising world population, and declining arable land per person. Moreover, growing standards of living and increasing personal disposable income leading to massive urbanization will significantly drive the global demand for farming equipment ahead. Also, rising income from farms, particularly in the US, is expected to contribute to this growth as well.

A similar trend is expected to prevail in the forestry market, as the demand for pulp is expected to grow at a CAGR of 4.4% over the next two years. The reason behind is that population growth will increase the need for wood and wood-related products, including fuel wood. In addition, urbanization will increase the demand for charcoal when incomes are insufficient to procure alternative sources of energy.

The market conditions will ensure that Blount's top line remains healthy in the upcoming year. The gains have already begun pouring in as the total orders of the company stood at $168 million at the end of the latest quarter. FLAG open orders were $136 million, and were 17% higher compared to 2013. FRAG segment's orders also increased by about 3% to $1 million.

Bottom Line

Positive industry conditions in both the markets under which Blount operates, and strong backlog position has led the analysts to believe that the company will deliver earnings of $1.14 per share in 2015, which will provide year-over-year growth of 7.5% to the investors. The growth in earnings should sustain the stock-price trend ahead.

www.seekingalpha.com

Generac is Biztimes' Best in Business Corporation of the Year for 2014

December 22 -- Waukesha-based Generac Power Systems Inc. hired more than 200 people, revamped some of its manufacturing facilities, made two major acquisitions, and introduced several new products over the course of the past year.

In recognition of those accomplishments, Generac is the BizTimes Best in Business Corporation of the Year for 2014.

“We’ve more than doubled the size of the company in three years’ time,” said president and chief executive officer Aaron Jagdfeld.  “We continue to grow as a company, and this year we spent time playing catch up, building up infrastructure and staffing appropriately.”

Generac, which held a few job fairs this year, hired 50 to 100 professional and technical positions in southeastern Wisconsin and 100 to 150 production-related positions at its Whitewater and Oshkosh facilities. In total, the company employs approximately 3,400.

Despite no recent major power outages or catalysts, Jagdfeld said Generac’s residential business has grown due to new products like the 22-kilowatt Guardian Series generator, which is the market’s largest air-cooled home standby generator, and the lightweight PowerPact automatic home standby generator.

Generac has also focused on building up business through the acquisition of Bismarck, N.D.-based MAC Inc., a mobile heater manufacturer, as well as the acquisition of some assets of Kearney, Neb.-based Pramac America LLC, a manufacturer and distributor of portable generators and water pumps. The former offers Generac new opportunities in the oil and gas markets, and the latter expands the company’s reach in retail markets, according to Jagdfeld.

Meanwhile, Generac has improved and modernized its manufacturing facilities through the implementation of multi-million dollar digital manufacturing lines.

Upgrades to the company’s facilities in Whitewater and Eagle are in different stages of completion, and the Jefferson facility is expected to begin going digital in 2015.

“The new manufacturing plants are about a higher level of sophistication and improving working conditions, quality and automation,” Jagdfeld said. “All of those things are more indicative of where manufacturing is heading in the longer term.”

As for 2015, Jagdfeld said he has an aggressive plan to keep Generac growing through a combination of organic and acquired growth.

“Going more global is definitely in our sights. Ninety percent of our sales are in North America right now, but our next legs of growth will come from international expansion, additional acquisitions, and trying to find new products and spaces where we want to be involved,” he said. “We will continue to grow like a weed, and we’re looking forward to 2015.  There are a lot of good things ahead for us.”

Hilary Dickinson       www.biztimes.com

ARI Network Services Announces Fiscal 2015 First Quarter Results

MILWAUKEE, Dec 11, 2014 -- ARI Network Services, Inc.,  an award-winning provider of data-driven software tools and marketing services that help dealers, distributors and manufacturers Sell More Stuff!™, reported financial results today for its fiscal 2015 first quarter ended October 31, 2014.

Highlights for the fiscal first quarter included:

• The company completed its acquisition of Tire Company Solutions, LLC ("TCS Technologies") on September 30, 2014, further consolidating its position as the leader in eCommerce-enabled websites and digital marketing services in the automotive tire and wheel industry.
• Total revenues for the first quarter of fiscal year 2015 were $9.1 million, which compares with $8.2 million for the same period last year and $8.5 million in 4Q14.
• Operating income was $0.3 million for the first quarter of fiscal 2015, compared with operating income of $0.2 million for the same period last year and $0.4 million in 4Q14.
• Net income was $104,000 or $0.01 per diluted share for the first quarter of fiscal 2015, compared with net income of $25,000 or $0.00 per share for the same period last year and $174,000 or $0.01 per share in 4Q14.
• EBITDA, a non-GAAP measure, adjusted for non-cash charges, was $1.2 million or 13.2% of revenue in the first quarter of fiscal year 2015. This compares with EBITDA of $1.0 million or 11.8% of revenue in the same period last year and $1.4 million or 16.1% of revenue in 4Q14.
• Cash generated from operations was $1.6 million for the first quarter of fiscal 2015, compared with ($26,000) for the same period last year and $1.3 million in 4Q14.

Fiscal Year 2015 First Quarter Financials

ARI experienced 11.7% revenue growth as it reported revenues of $9.1 million for the first quarter of fiscal year 2015 compared with $8.2 million for the same period last year. Recurring revenues for the first quarter of fiscal year 2015 were $8.2 million versus $7.7 million in the same period last year. Recurring revenue comprised 89.5% of total revenue for the first quarter versus 94.7% for the same period last year.

Gross margin for the first quarter of fiscal year 2015 was 80.8% versus 80.9% last year.

Operating income was $283,000 for the first quarter of fiscal year 2015, compared with operating income of $167,000 for the same period last year, a 69.5% increase. The increase in results from operations is attributed to cost efficiencies and reductions made in fiscal year 2014, partially offset by incremental costs in the quarter related to the acquisition of TCS Technologies.

The company reported net income of $104,000 or $0.01 per diluted share for the quarter, compared with a net income of $25,000 or $0.00 per share last year.

Management Discussion

Roy W. Olivier, President and Chief Executive Officer of ARI, commented, "With our first quarter results, we are off to a great start for our fiscal year. We closed the TCS Technologies acquisition on September 30, 2014, and with the incremental revenue they contributed for the quarter, ARI revenue topped $9.0 million in quarterly revenue for the first time. In addition to the revenue growth, we were able to improve upon both our profit and EBITDA performance from the prior year."

William Nurthen, Chief Financial Officer, commented, "Our profit and EBITDA performance in the quarter was strong given we experienced more than $200,000 in charges related to the TCS Technologies acquisition in the quarter. In addition, we posted our largest quarterly cash flow from operations performance ever at $1.6 million. We are pacing well ahead of last year as this result represents more cash flow than we generated in the first three quarters of fiscal 2014."

About ARI

ARI Network Services, Inc. offers an award-winning suite of data-driven software tools and marketing services to help dealers, equipment manufacturers and distributors in selected vertical markets Sell More Stuff!™ – online and in-store. Our innovative products are powered by a proprietary data repository of enriched original equipment and aftermarket electronic content spanning more than 17 million active part and accessory SKUs and 750,000 equipment models. Business is complicated, but we believe our customers' technology tools don't have to be. We remove the complexity of selling and servicing new and used vehicle inventory, parts, garments and accessories (PG&A) for customers in the automotive tire and wheel aftermarket, power sports, outdoor power equipment, marine, home medical equipment, recreational vehicles and appliance industries. More than 23,500 equipment dealers, 195 distributors and 3,360 brands worldwide leverage our web and eCatalog platforms to Sell More Stuff!™ 

Husqvarna Sell BlueBird International to TEC International

CHARLOTTE, N.C., Dec. 10, 2014 -- Husqvarna Professional Products Inc., part of Husqvarna Group and TEC International, LLP jointly announced the sale of Bluebird International to TEC International.  The transaction transferred the BlueBird brand, sales and manufacturing to TEC.

Under the terms of the agreement, which closed on December 5, 2014, TEC International will continue to produce Husqvarna branded specialty turf equipment.

"The decision to sell Bluebird International is part of the Husqvarna Group's strategic plan, a strategy that seeks to reduce operational complexity, improve efficiency and give additional focus to our end customers (consumers and professionals) and our core brands," said Jeff Dewosky, Vice President-General Manager, NA, Husqvarna.

"The acquisition of BlueBird International complements our existing product lineup with an established line of turf equipment.  We look forward to further developing this well established brand and giving our customers a wider range of product offerings," said Nick Salvatore, Executive Vice President/COO, TEC International.

BlueBird products will continue to be sold through distributors, dealers and rental organizations, and all impacted partners have been notified of the change.

About Husqvarna

Husqvarna Group is the world's largest producer of outdoor power products including robotic lawn mowers, garden tractors, chainsaws and trimmers. The Group is also the European leader in consumer watering products and one of the world leaders in cutting equipment and diamond tools for the construction and stone industries. Founded in 1689 and celebrating 325 years of engineering innovation, the Group's products and solutions are sold via dealers and retailers to both consumers and professional users in more than 100 countries. Net sales in 2013 amounted to SEK 30 billion, and the Group had 14,000 employees on average in more than 40 countries.

About TEC International

TEC International is a world class developer and manufacturer of products for Outdoor Power Equipment and Power Generation industries with core competencies in research and development, new product engineering and design, global parts sourcing and lean cellular manufacturing. From its Auburn Hills, MI Headquarters, TEC provides cutting edge, innovative products for both domestic and international customers.   

MIT Startup LiquidPiston Develops Small Internal Combustion Engine That Packs a Punch

Rob Matheson | MIT News Office      http://newsoffice.mit.edu/                          

December 5, 2014 -- Noise, excessive vibration, and relative inefficiency are drawbacks of the piston-based internal combustion engines (ICE) that power today’s lawn and garden equipment, such as leaf blowers and lawn trimmers.

But now MIT startup LiquidPiston has developed a rotary ICE that it says is significantly smaller, lighter, and quieter, as well as 20 percent more fuel-efficient than the ICEs used in many such small-engine devices.

“If you think of handheld tools — for example, a chain saw or hedge trimmer — after about a half hour you don’t want to use it anymore because your hand feels like it’s going to fall off,” says Alexander Shkolnik PhD ’10, president of LiquidPiston and co-inventor of the engine. “Our engine has no vibration at all and it’s a lot quieter. It should be a much nicer user experience all around.”

LiquidPiston’s 70-cubic-centimeter engine, the X Mini, produces about 3.5 horsepower at 10,000 RPM; at 4 pounds, it’s also about 30 percent smaller than the four-stroke, 50-cubic-centimeter piston ICEs it aims to replace. When fully complete, Shkolnik says, the X Mini could churn out about 5 horsepower at 15,000 revolutions per minute, and weigh 3 pounds.

The engine runs the novel high-efficiency hybrid cycle (HEHC) — developed by Shkolnik and his physicist father, Nikolay — that achieves combustion at constant volume and overexpansion for greater energy extraction. With only two moving parts, a rotor and shaft, and no poppet valves — commonly used in other four-stroke ICEs to control fuel intake — the engine also has reduced noise, vibration, and harshness characteristics, Shkolnik says.

Initial applications will be handheld lawn and garden equipment, Shkolnik says. But the engine can be scaled and modified for other applications, including mopeds, drones, marine power equipment, robotics, range extenders, and auxiliary power units for boats, planes, and other vehicles. The company has also demonstrated proof-of-concept for high-efficiency diesel versions of the engine, including the 70-horsepower X1 and the 40-horsepower X2, for generator and other applications. The company hopes to eventually develop small diesel versions of the X Mini engine for military applications.

“If you look at a 3-kilowatt military generator, it’s a 270-pound gorilla that takes five people to move around,” Shkolnik says. “You can imagine if we can make that into a 15-pound device, it’s pretty revolutionary for them.”

Shkolnik presented a paper on both the X2 and X Mini on Nov. 19 at the Society of Automotive Engineers’ 2014 Small Engine Technology Conference and Exhibition in Italy.

An inverse Wankel

The X Mini is essentially an upgrade in design and efficiency of the compact Wankel rotary engine, invented in the 1950s and used today in sports cars, boats, and some aircraft.

In the Wankel, a rounded triangle rotor spins in an eccentric orbit within an oval chamber, with each rotation producing three power strokes — where the engine generates force. In the X Mini, an oval rotor spins within a modified, rounded triangular housing.

“We’ve inverted everything about the traditional rotary engine, and now we can execute this new thermodynamic cycle [HEHC] and solve all the problems that were plaguing the traditional Wankel engine” for small-engine applications, Shkolnik says.

A Wankel engine, for instance, uses a long combustion chamber (like a thin crescent moon), which contributes to poor fuel economy — as the flame can’t reach trailing edges of the chamber and gets quenched by the chamber’s large surface area. The X Mini’s combustion chamber is rounder and fatter, so the flame burns over less surface area.

Air and fuel intake and gas exhaust in the X Mini occur through two ports in the rotor, opened or closed as the rotor revolves, removing the need for valves. Asymmetrical location of these ports slightly delays the exhaust process during expansion. This allows for HEHC’s overexpansion process — from the Atkinson thermodynamic cycle, used in some hybrid cars — where gas is expanded in the chamber until there’s no pressure, allowing the engine more time to extract energy from fuel. This design also accommodates HEHC’s “constant volume combustion” — from the Otto thermodynamic cycle, used in spark-ignition piston engines — where compressed gas is held in the chamber for an extended period, letting the air and fuel mix and ignite completely before expanding, resulting in increased expansion pressures and higher efficiency.

“It takes a long time to burn fuel in an engine,” Shkolnik says. “In most engines, by the time you’re burning fuel, you’re expanding gases, and you’re losing efficiency from the combustion process. We keep combusting while the rotor is at the top of the chamber and force combustion under those conditions. It’s much more efficient that way.”

Additionally, the X Mini has relocated the apex seals, leading to decreased oil consumption. In Wankels, apex seals join the edges of the triangular rotor, where they slide and move. Lubricating them requires supplying the air-fuel mixture with large amounts of oil that burns and leaks, increasing emissions and oil consumption. In the X Mini, however, these seals are located in the triangular-shaped housing that stays put. “Now we can supply tiny amounts of oil through the stationary housing, exactly how much oil the seal needs, and you’re not burning any oil and you’re not losing any oil to the environment,” Shkolnik says.

LiquidPiston’s “roadmap”

An interest in robotics and artificial intelligence led Shkolnik to MIT as a PhD student in electrical engineering and computer science in 2003. That year, Nikolay Shkolnik filed his first HEHC patent, and his son learned about the MIT $50K Entrepreneurship Competition (now $100K) in a class that focused on tech entrepreneurship. They teamed up with students at the MIT Sloan School of Management to create a business plan and pitch an HEHC engine in the 2004 competition, where they took home the $10,000 runner-up prize to launch LiquidPiston.

The competition itself proved helpful to the father-and-son entrepreneurs — who, at that point, had no startup experience. In building a detailed business plan and learning how to explain their technology to investors, “It really showed us a roadmap for what to do and we were forced to think through a lot about issues we were going to face,” Shkolnik says.

Over the next six years, Shkolnik helped his father develop the LiquidPiston engine out of the family garage, using skills he honed in MIT’s Robot Locomotion Group, led by Russell Tedrake, an associate professor of electrical engineering and computer science. “It was a lot of optimization, and control, and simulations, and modeling,” he says. “All those same techniques are applicable to designing an engine.”

Shkolnik attributes much of LiquidPiston’s development to the extended MIT community. During the $50K, venture capitalist Bill Frezza ’76, SM ’78 mentored the team; his firm then became an early investor. MIT Sloan team members Brian Roughan MBA ’05, Jennifer Andrews Burke MBA ’05, and Vikram Sahney MBA ’05 conducted market research, wrote the business plan, worked on business development, and pitched the company to investors.

Mentors from MIT’s Venture Mentoring Service (VMS) — including the late Dave Staelin, who founded the VMS — also guided LiquidPiston’s growth, offering advice on product development, hiring, and seeking venture capital. (So far, the company has earned more than $15 million in funding.)

In 2006, after analyzing dozens of engine iterations, LiquidPiston earned a $70,000 military grant to produce an initial diesel-engine prototype. (Today, LiquidPiston has analyzed and patented about 60 different engine designs to embody HEHC.)

Due to overwhelming feedback from power equipment manufacturers — calling for lighter, quieter, vibration-free engines — LiquidPiston recently pivoted to the X Mini, which it developed and released in the last six months. The company has now received interest from potential customers, and is speaking to engine manufacturers interested in licensing the X Mini technology.

“In addition to improving existing engine applications,” Shkolnik explains, “the X Mini may enable entirely new applications not currently possible with current engine or battery technology.”

Early next year, the company plans to host a competition to solicit ideas from the public surrounding these new uses for the X Mini. “We want to get the creative juices flowing and open up to the wider community to see if there’s something interesting,” Shkolnik says.  

Rob Matheson | MIT News Office      http://newsoffice.mit.edu/  

Tom Johnstone Proposed as New Chairman of the Board for Husqvarna AB

STOCKHOLM, Dec 04, 2014 -- Regulatory News: Husqvarna AB’s Chairman of the Board, Lars Westerberg, has announced that he declines re-election to the Board of Husqvarna AB.

Lars Westerberg has served as the Chairman of Board of Husqvarna AB from January, 2006. During his chairmanship the Company became a listed company on the Nasdaq OMX Stockholm stock exchange, in June, 2006.

The Nomination Committee has proposed Tom Johnstone as new Chairman of the Board of Husqvarna AB. Tom Johnstone has served on the Board of Husqvarna AB since January, 2006. Tom Johnstone is the President and CEO of SKF AB until December 31, 2014. He was born in 1955 and holds a Master of Arts degree, the University of Glasgow, Honorary Doctor’s degree in Business Administration, the University of South Carolina, USA and Honorary Doctor’s degree in Science, the Cranfield University, UK. He is also Board member of Investor AB.

The Nomination Committee will in due time before the Annual General Meeting (“AGM”) prepare further proposals for the AGM in 2015, including proposals for the Chairman of the AGM, Board members, remuneration for Board members and auditor, and to the extent deemed necessary, tasks for and the composition of the Nomination Committee for the AGM in 2016.

The AGM of Husqvarna AB (publ) will be held in Jönköping, Sweden on April 21, 2015.

Husqvarna Group

Husqvarna Group is the world’s largest producer of outdoor power products including robotic lawn mowers, garden tractors, chainsaws and trimmers. The Group is also the European leader in consumer watering products and one of the world leaders in cutting equipment and diamond tools for the construction and stone industries. The Group’s products and solutions are sold via dealers and retailers to both consumers and professional users in more than 100 countries. Net sales in 2013 amounted to SEK 30 billion, and the Group had 14,000 employees on average in more than 40 countries.

The Toro Company Reports Record Fiscal 2014 Results

Fiscal 2014 sales increase 6.4 percent to a record $2.2 billion Net earnings per share for the year up 15 percent to a record $3.02 Quarterly cash dividend increased 25 percent to $0.25 per share Company achieves Destination 2014 goals and launches next employee initiative BOSS® acquisition closed and integration progressing well

BLOOMINGTON, Minn. -- Dec. 4, 2014-- The Toro Company today reported net earnings of $173.9 million, or $3.02 per share, on a net sales increase of 6.4 percent to $2.173 billion for its fiscal year ended October 31, 2014. In fiscal 2013, the company delivered net earnings of $154.8 million, or $2.62 per share, on net sales of $2.041 billion.

For the fourth quarter, Toro reported net earnings of $10.9 million, or $0.19 per share, on a net sales increase of 8.3 percent to $414.1 million. In the comparable fiscal 2013 period, the company posted net earnings of $5 million on net sales of$382.4 million.

The company also announced that its board of directors has declared a quarterly cash dividend of $0.25 per share, a 25 percent increase from its previous quarterly dividend rate of $0.20 per share. This dividend is payable on January 12, 2015, to shareholders of record on December 23, 2014.

“Fiscal 2014 was a significant year for The Toro Company for many reasons,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “We delivered record sales, operating earnings and earnings per share, which enabled us to successfully achieve our Destination 2014 revenue and profitability targets. We celebrated our Centennial and officially launched the company’s second century.

We entered into and subsequently closed the largest acquisition in our history with the addition of the BOSS^® professional snow and ice management business. Finally, we returned almost $150 million to our shareholders through the payment of $45 million in dividends and the repurchase of more than 1.6 million shares of our common stock.”

“I’d like to thank the entire team for their dedication and execution throughout the year. Their passion for innovation and customer service helped to drive retail sales across our portfolio. On the residential side of our business, we delivered double-digit revenue growth fueled by abundant snow conditions in key North American markets early in 2014 that generated strong in-season sales of our snow thrower products. Low field inventories and pent-up consumer demand set the stage for the robust snow pre-season that began late this summer and continues to date.

The residential business also saw gains from solid retail demand for our residential zero turn mowers, as homeowners continue to transition to these more efficient cutting platforms. Turning to our professional businesses, contractors who also benefited from the snow season made early investments in landscape maintenance equipment, helping to drive our sales.

New product features and favorable summer growing conditions provided additional momentum for the category. In golf, innovative new product offerings—including our new INFINITY™ sprinklers—helped us to expand our worldwide market-leading equipment and irrigation positions. We also continued to develop and grow our newer micro-irrigation, rental and specialty construction businesses.”

“In addition to driving revenue growth, our enterprise focus on improving productivity and leveraging expenses is yielding results. It is the combination of all of these efforts that enabled us to deliver record results for the year and successfully complete our four-year Destination 2014 journey. I am proud of the levels of performance that our team was able to achieve through this initiative, including growing organic revenues more than $430 million over the four-years and establishing a new level of operating earnings performance at 12.1 percent of sales as of the end of fiscal 2014. None of that would have been possible without the remarkable contributions of all of our engaged employees and channel partners around the world.”

“Looking ahead to fiscal 2015, we are cautiously optimistic. Our end markets are sound. Contractors will seek productivity-enhancing solutions for maintaining turf and managing snow and ice. Golf course renovations and development will progress in key markets. Around the world, customers will transition to more efficient methods of irrigation, particularly for agricultural use. Commercial and residential development and infrastructure improvements will continue, and homeowners will replace their lawn, snow and handheld products.”

“We are well positioned to capitalize on market growth and drive share gains with new and innovative product offerings across our businesses and additional product placements with key customers. We are encouraged by expected retail demand but, as always, will keep a watchful eye on field inventory levels and other market conditions. We are excited about the addition of BOSS to our portfolio and are focused on a successful integration, which is progressing well and helped by the cultural alignment among our two companies.

We launched a new employee initiative, Destination PRIME, which will provide momentum to help us drive growth and further improve productivity over the next three years, while also continuing our century-long commitment to innovation, relationships and excellence. Despite our optimism, we are certainly mindful of the challenges that unfavorable weather and economic conditions can create for our businesses and customers. We will remain flexible and are prepared to make adjustments across the enterprise as necessary.”

The company expects revenue growth for fiscal 2015 to be about 8 to 10 percent, and net earnings to be about $3.30 to $3.40 per share. For the first quarter, the company expects net earnings to be about $0.47 per share.

SEGMENT RESULTS

Professional

•          Professional segment net sales for fiscal 2014 totaled $1.478 billion, up 3.7 percent over last year. Sales of landscape maintenance equipment increased on strong retail demand for our zero turn mowers and new products introduced during the year. Global micro irrigation sales increased with continued demand for more efficient irrigation solutions for agriculture. Ground engaging and rental equipment sales grew on increased demand for our products. Worldwide golf sales were up as existing golf courses continued to replace aging irrigation systems and equipment with our innovative product offerings, including our new INFINITY™ sprinklers, and new international golf course projects were awarded to us. For the fourth quarter, professional segment net sales were $268.9 million, up 5.1 percent from the comparable fiscal 2013 period.
•          Professional segment earnings for fiscal 2014 totaled $276.3 million, up 8.6 percent from the prior year. For the fourth quarter, professional segment earnings were $31.6 million, up from $21.8 million in the comparable fiscal 2013 period.

    

Residential

•          Residential segment net sales for fiscal 2014 were $672.4 million, up 13.1 percent from last year. Sales of our snow thrower products increased due to strong in-season retail demand driven by abundant snowfall across key North American markets early in fiscal 2014 and robust pre-season demand that began late this summer and continued through the end of our fiscal year. Sales of domestic residential zero turn riding products grew on continued retail demand for these mowing platforms. Increased demand for our handheld solutions also contributed to residential segment net sales for the fiscal year. Somewhat offsetting these increases were lower sales of our products inAustralia due to unfavorable currency exchange rates and weather conditions. For the fourth quarter, residential segment net sales were $138.8 million, up 19 percent from the comparable fiscal 2013 period.
•           Residential segment earnings for fiscal 2014 totaled $76.9 million, up 24 percent from fiscal 2013. For the fourth quarter, residential segment earnings were $16.3 million, up from $10.1 million in the comparable fiscal 2013 period.

OPERATING RESULTS

Gross margin as a percent of sales for fiscal 2014 improved 10 basis points from last year to 35.6 percent. For the fourth quarter, gross margin as a percent of sales increased 90 basis points to 34.5 percent. For both periods, the increases primarily were due to realized pricing and productivity improvements somewhat offset by unfavorable segment mix, unfavorable currency exchange rates and slightly higher commodity costs.

Selling, general and administrative (SG&A) expense as a percent of sales for fiscal 2014 decreased 70 basis points from last year to 23.5 percent. For the fourth quarter, SG&A expense as a percent of sales decreased 160 basis points to 29.8 percent. For both periods, the decreases primarily were due to the leveraging of expenses over higher sales volumes.

Other income for fiscal 2014 was $8.7 million, down $3.5 million from last year. This decrease primarily was due to a one-time legal recovery realized in fiscal 2013 that was not repeated this year, as well as higher foreign currency losses this year.

Operating earnings as a percent of sales for fiscal 2014 improved 80 basis points from last year to 12.1 percent. For the fourth quarter, operating earnings improved 250 basis points to 4.7 percent of sales.

Interest expense for fiscal 2014 was $15.4 million, down 4.8 percent from last year. For the fourth quarter, interest expense totaled $4.4 million, an increase of 11.7 percent from the same period last year.

The effective tax rate for fiscal 2014 was 32.2 percent compared to 31.7 percent last year when the company benefited from the retroactive reinstatement of the domestic research tax credit.

Accounts receivable at the end of fiscal 2014 totaled $158.2 million, up 1 percent from last year. Net inventories were $274.6 million, up 14.4 percent from last year. Trade payables were $124.3 million, down 8.7 percent from last year.

Average net working capital (accounts receivable plus net inventory less trade payables) as a percent of net sales as of the end of fiscal 2014 was 15.1 percent compared to 16.6 percent as of the end of last year.

About the Toro Company

The Toro Company (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.