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.

The Toro Company Reports First Quarter Results

• First quarter sales grow to $446 million driven by strong demand for snow products
• Net earnings per share of $0.44 delivered for the quarter
• Company well-positioned for primary selling season with innovative new product offerings

BLOOMINGTON, MN.-- Feb. 20 -- The Toro Company today reported net earnings of $25.9 million, or $0.44 per share, on net sales of $446 million for its fiscal 2014 first quarter ended January 31, 2014. In the comparable fiscal 2013 period, the company delivered net earnings of $31.4 million, or $0.53 per share, on net sales of $444.7 million.

“Significant snowfall across key North American markets this winter season spurred retail demand for our snow products—helping to drive sales for the quarter and providing a solid start to our 2014 fiscal year,” said Michael J. Hoffman, Toro’s chairman and chief executive officer.

“The combination of more abundant snow conditions, stronger international demand and solid execution by our team helped us to temper the challenging year-over-year quarterly comparisons we faced due to the Tier 4 diesel engine transition that accelerated sales of large turf equipment into our first quarter last year. In addition, we finished our first quarter more favorably situated in terms of field inventory levels as compared to last year, considering that pre-Tier 4 equipment sales last year went into our channel while snow products sold this year moved all the way through to end-user customers.”

“Looking ahead to our primary selling season, we are well-positioned across our businesses to drive retail sales and increase our market share. Golf course development and renovations continue to progress and customers and channel partners alike are excited about our innovative new equipment and irrigation offerings, including those featured at the recent Golf Industry Show—the Sand Pro® zero turn mechanical bunker rake, the Multi Pro® advanced spraying systems, and the INFINITY™ golf sprinklers with unique SMART ACCESS™ to internal components.

Landscape contractor equipment sales are poised to benefit from the additional revenues generated by contractors this winter, as well as the increased demand we expect for our zero turn radius mowers featuring new electronic fuel injection and onboard intelligence technologies. Global food demand and increased water use restrictions continue to drive the need for more efficient irrigation solutions for agriculture, including our new Neptune® thin wall drip line with flat emitter technology.

“Although we are optimistic, it is early in our fiscal year, our peak selling season is still in front of us and we remain mindful of the challenges we could face if we encounter unfavorable swings in economic or weather conditions. As such, we will continue to focus on the things we can control—product innovation, customer service, and market execution—as well as our Destination 2014 goals of driving revenue growth and further improving productivity.”

The company now expects revenue growth for fiscal 2014 to be about 5 to 6 percent, and net earnings per share to be about $2.90 to $2.95. For the second quarter, the company expects net earnings per share to be about $1.45 to $1.50.

SEGMENT RESULTS

Professional

Professional segment net sales for the first quarter totaled $295.5 million, down 10.2 percent from the same period last year. This decrease primarily was attributable to strong channel demand in the first quarter of last fiscal year that was not repeated this year for large turf equipment subject to the Tier 4 diesel engine emission requirements that began phasing in for products manufactured after January 1, 2013.

Sales benefitted from pre-season shipments of landscape maintenance equipment, including our zero turn radius products with electronic fuel injection and onboard intelligence technologies, in anticipation of retail demand. Rental and construction equipment sales grew on increased demand for our products, including recently acquired products newly introduced under the Toro brand. Global micro-irrigation sales increased with continued demand for more efficient irrigation solutions for agriculture. Worldwide golf irrigation sales benefitted as customers continued to select our innovative system offerings for new course projects and existing course renovations.

Professional segment earnings for the first quarter totaled $47.5 million, down 21.9 percent from the same period last year.

Residential

Residential segment net sales for the first quarter totaled $147.6 million, up 22.0 percent from the same period last year. This increase primarily was driven by retail demand for our snow products due to significant snowfall across key North American markets this winter season.

Sales also benefitted from pre-season shipments of domestic residential zero turn radius mowers in anticipation of the continuing transition of consumers to this mowing platform, as well as additional shipments of handheld solutions. Offsetting such increases were unfavorable currency exchange rates, primarily relating to the Australian dollar versus the U.S. dollar.

Residential segment earnings for the first quarter totaled $18.1 million, up 49.2 percent from the same period last year.

OPERATING RESULTS

Gross margin for the first quarter was 36.7 percent, a decrease of 60 basis points compared to the same period last year, primarily due to product mix but also affected by unfavorable currency exchange rates and slightly higher commodity costs, somewhat offset by realized pricing.

Selling, general and administrative (SG&A) expense as a percent of sales for the first quarter was 27.6 percent, an increase of 70 basis points compared to the same period last year, primarily due to higher administrative expense, including health care costs, warranty expense, and incremental expense relating to our recently completed China micro-irrigation acquisition, somewhat offset by lower warehousing expense.

First quarter operating earnings as a percent of sales were 9.1% compared to 10.4% in the same period last year.

First quarter interest expense was down 11.7 percent to $3.8 million compared to the same period last year.

The effective tax rate for the first quarter was 33.2 percent compared with 27.7 percent in the same period last year when the company benefited from the retroactive reinstatement of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the first quarter totaled $199.8 million, up 10.8 percent from the same period last year. Net inventories were $304.9 million, down 9.2 percent from the same period last year. Trade payables were $192.7 million, up 14.5 percent compared to the same period last year.

About The Toro Company

The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions. With sales of more than $2 billion in fiscal 2013, Toro’s global presence extends to more than 90 countries through strong relationships built on integrity and trust, constant innovation and a commitment to helping customers enrich the beauty, productivity and sustainability of the land. Since 1914, the company has built a tradition of excellence around a number of strong brands to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties and agricultural fields. More information is available at www.thetorocompany.com.

Exmark Manufacturing Lending a Helping Hand

BEATRICE -- February 14 -- Founded in 1983, Exmark Manufacturing was one of a handful of companies that helped establish Beatrice as the ‘the lawn mower capital of the world.’

With more than 400 employees during peak production periods, Exmark is one of Gage County’s largest employers. It is also one of Gage County’s largest donators. Finance Director Patty Kaufman said the employees of Exmark want the company to be known as a place the community can turn for a helping hand.

“We want Beatrice to be able to count on us for community service. ” Kaufman said. “People can count on us for donations and those types of things. We want to be a good corporate citizen in Beatrice, Neb.”

Exmark has been giving back to the county for years, but it was the company’s 25-year anniversary in 2008 that sparked an increased passion for giving among Exmark employees.

“When our anniversary came along we put together a committee to celebrate our 25 years,” Kaufman said. “That was the start of our community giving committee. We got together and said ‘What could we do? We could have this big party, we could do fireworks.’ Someone came up with the idea of giving back and doing something really cool that the community will remember.”

That idea materialized in the form of Roszell Exmark Park. Located in the Glenover area of Beatrice, the park features basketball and tetherball courts, a playground area, a water fountain and a shelter with picnic tables.

“At the time, the park was out of code,” Kaufman explained. “It had a lot of very worn playground equipment. We tore a bunch of that out and put a bunch of new playground equipment in. We did a complete renovation of the entire area.”

Since that initial project, Exmark has donated funds to renovate a number of parks and playgrounds across Gage County.

“We did a renovation of Charles Park that included benches, Kaufman said. “We donated irrigation and all of the period lighting. In the Wymore Athletic Park we did a renovation to make that handicap accessible and built a retaining wall. They had some issues with the deterioration of a hill. Prairie Playground is the playground at the YMCA. We donated $25,000 to that in the first year of their fundraising. We really kick started their fundraising, and now they’ve been able to raise well over $100,000 for the renovation of that park.”

Exmark was a major contributor to the House of Orange, donating $50,000 to the new athletic complex. The company is also Gage County’s largest contributor to United Way.

“We actually provide them with over half of their total budget,” Kaufman explained. “We were able to give them $72,000 this year. That is phenomenal not only because we place such an emphasis on it, but that money is our employees’ money. It’s not just Exmark writing that check, that is our employees giving of themselves to the community.”

In addition to these large projects and contributions, Exmark also serves a number of smaller fundraisers and organizations, including food drives, ball teams, the Beatrice Mary Family YMCA and the Gage County Fair.

“We place a lot of emphasis on (the fair) because it’s probably the largest event of the year in Gage County,” Kaufman said. “One of the things we started doing years ago was to produce a T-shirt. Our graphic designer here does a design, and we give those away free to every 4-H and FFA member. We also have employees out there every morning picking up trash at the fair. We have people setting up the stage, doing judging or setting up State Fair Square. We’re really involved with that, and we encourage all our employees to be involved.”

Kaufman said much of Exmark’s passion for giving comes from its parent company, Toro.

“That’s really where we get our spirit of giving,” Kaufman explained. “It’s really embedded in their corporation. They’re actually celebrating 100 years this year. They provide us with several programs that we’re able to give to our community.”

Exmark’s latest community service project was the construction of a healing garden at Beatrice Community Hospital. Kaufman said the garden is beneficial for patients, visitors and hospital staff.

“We went to (the hospital) with this idea because we saw some things in the news how green space and beautiful outdoor spaces with flowers and butterflies and birds can really enhance a person’s stay at the hospital,” Kaufman said. “This space has benches and a gazebo. There are two water features with a bubbler and a huge rock where water comes over to create soothing sounds.”

Toro has a number of incentives put in place to encourage community service. One of those incentives is Dollars for Doers, a program where Toro will donate money in exchange for volunteer hours.

“This is a great Toro program where if an employee gives 30 volunteer hours to an organization, then Toro will write a $300 check to that organization,” Kaufman explained. “We have checks going out to volunteer fire departments, area schools and the Beatrice Backpack Program.

Kaufman said Exmark’s sense of community service is truly driven by its employees, whom have a great passion for giving back to their communities.

“There’s so much pride of our employees in these projects. We see this continuing for many years to come.”

Austin Buckner      www.beatricedailysun.com 

Toro, CPSC, Recalls Timemaster and Turfmaster Lawn Mowers Due to Injury Hazard

December 10, 2013

Consumers should stop using this product unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product.

Recall Summary

Name of product:

TimeMaster and TurfMaster lawn mowers

Hazard:

The mower’s blade can break and injure the user and others nearby

Recall Details

Units

About 34,500 in the United States and 1,600 in Canada

Description

This recall involves 2013 Toro TimeMaster 30” and 2013 Toro TurfMaster 30” lawn mowers with the following model and serial numbers: Model number 20199 with serial numbers ranging from 313000101 to 313020271; model number 20200 with serial numbers ranging from 313000101 to 313007366; and, model number 22200 with serial numbers ranging from 313000101 to 313007146.  The phrases “TimeMaster” or “TurfMaster” and “Toro” are printed on the front of the black and red mower. “Toro” is also printed on the side of the mower. The model and serial numbers are located on a decal affixed to the engine base above the left rear tire.

Incidents/Injuries

Toro has received ten reports of blades breaking. No injuries have been reported.

Remedy

Consumers should immediately stop using the recalled mowers and contact Toro for a free repair.

Sold at

Toro dealers nationwide from November 2012 through October 2013 for between $999 and $1,799. 

Distributor

The Toro Co., of Bloomington, Minn.

Manufactured in

Mexico

The Toro Company Expands Headquarters

BLOOMINGTON, MN - Sep. 5, 2013 - The Toro Company. a leading worldwide provider of turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions, broke ground today on a $25 million expansion in Bloomington, Minnesota that the company has called home for over 50 years. The project begins the process of expanding the company’s product development and test capacities, demonstrating its continued commitment to innovation.

“We are investing in our Bloomington facility to enable our businesses to continue to meet the needs of our customers,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “With the anticipated growth of our businesses, through ongoing product development and the addition of recent acquisitions taking us into new markets, this investment will help to expand our technical capacity and further the innovation our customers expect. As we celebrate our Centennial next year, this project will help position us for the future and reinforce our commitment to innovation, our customers, and our employees.”

The 75,000-square foot expansion is scheduled for completion in the summer of 2014. Toro moved to its Bloomington, MN, location in 1952, opening a research and development facility, and later its headquarters in 1962. The last major addition to the facility came in 1997.

The construction effort is being led by Minneapolis-based Ryan Companies US, Inc. and LEO A DALY LLP is the architect on the project.

About The Toro Company

The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions. With sales of more than $1.9 billion in fiscal 2012,

Toro’s global presence extends to more than 90 countries through strong relationships built on integrity and trust, constant innovation, and a commitment to helping customers enrich the beauty, productivity and sustainability of the land.

Since 1914, the company has built a tradition of excellence around a number of strong brands to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields. More information is available at www.toro.com .

The Toro Company Reports Record 1st Quarter Results

·         First quarter revenues grow 4.9 percent to a record $444.7 million

·         Net earnings per share up over 60 percent to a record $0.53

·         Company raising full-year earnings guidance; well positioned entering key selling season

·         Commitment to building micro irrigation global presence continues with acquisition in China

BLOOMINGTON, Minn.-- Feb. 21, 2013-- The Toro Company today reported net earnings of $31.4 million, or $0.53 per share, on a net sales increase of 4.9 percent to $444.7 million for its fiscal first quarter ended February 1, 2013.

In the comparable fiscal 2012 period, the company delivered net earnings of$19.9 million, or $0.33 per share, on net sales of $423.8 million. The “per share” data for the comparative periods has been adjusted to reflect a two-for-one stock split effective June 29, 2012.

“Our record-setting first quarter, driven by particularly strong channel demand for large turf equipment and the continued growth of micro irrigation sales, propelled us to a solid start for the year,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “Our financial performance benefitted from both accelerated sales related to pre-Tier 4 product shipments and early professional end-user demand, along with positive effects of our productivity initiatives.”

“The optimistic outlook of customers across our businesses is encouraging, as we prepare for our primary selling season,” said Hoffman. “Barring new economic headwinds, we anticipate the momentum our golf, landscape contractor and micro irrigation businesses enjoyed this past quarter will carry into spring.

Our residential business retail potential looks solid as well. Recent snowfall across our primary snow markets, including the record-breaking blizzard that struck the Northeast, generated additional revenue for our contractor customers and is helping clear field inventories, thus boosting prospects for our autumn pre-season snow sales.”

“Additionally, along with positive market conditions,” Hoffman added, “our latest professional and residential product innovations, like the Reelmaster® 3550-D (the lightest golf fairway mower on the market), new 30” professional walk power mowers for landscape contractors and the newly Toro-branded products from our Astec and Stone Construction acquisitions from 2012, are helping create further opportunities.”

The Toro Company is also announcing today that it has entered into an agreement to acquire a Chinese micro-irrigation company, subject to applicable regulatory approval and other customary closing conditions. Terms of the transaction were not disclosed. Hoffman commented, “Although small, this acquisition will help strengthen our presence in China, a critical growth market, by establishing a micro irrigation base of operations.”

The company continues to expect revenue growth of about 4 to 5 percent for fiscal 2013. With the expectations that the accelerated margin and earnings benefit of the Tier 4 transition will moderate through the year, the earnings expectations are being raised largely to reflect the benefit of tax rate improvement discussed below. The company now expects fiscal 2013 net earnings to be about $2.40 to $2.45 per share. For the second quarter the company expects to report net earnings per share of about $1.20.

SEGMENT RESULTS

Professional

·    Professional segment net sales for the first quarter totaled $329.1 million, up 16 percent from the same period last year. Domestic shipments of large turf equipment were up due to channel demand. The early successful launch of products from the Astec and Stone acquisitions, also contributed to the professional businesses’ strong quarter. Furthermore, increased capacity enabled the company to capitalize on steadily growing demand for micro-irrigation systems to meet the ever-growing global food requirements. Results in the professional segment were somewhat offset by soft international sales activity.

·    Professional segment earnings totaled $60.7 million, up 44.3 percent from $42.1 million last year.

Residential

·    Residential segment net sales for the first quarter totaled $120.9 million, down 12.1 percent from the first quarter last year. The decline reflects reduced retail demand for snow products due to unseasonable winter weather in North America. However, residential segment results benefitted from improved sales of Pope products in Australia.

·    Residential segment earnings for the fiscal 2013 first quarter totaled $12.2 million, down 3.6 percent from $12.6 million in the same period last year.

OPERATING RESULTS

Gross margin for the fiscal 2013 first quarter increased 270 basis points from last year to 37.3 percent. The margin growth was primarily the result of product mix, pricing, and progress on our productivity efforts.

Selling, general and administrative (SG&A) expense as a percent of sales for the fiscal 2013 first quarter was up 30 basis points to 26.9 percent. The SG&A increase as a percent of sales reflects incremental costs associated with the acquisition of Astec and Stone, as well as start-up costs for the new distribution facility in Iowa.

First quarter operating earnings as a percent of sales were 10.4 percent compared to 8 percent a year ago.

First quarter interest expense was down 4 percent to $4.2 million due to lower average debt levels.

The effective tax rate for the quarter was 27.7 percent compared with 33.8 percent last year. The lower tax rate was primarily due to the retroactive extension of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the fiscal 2013 first quarter totaled $180.3 million, up 2.7 percent from the same period last year, on a sales increase of 4.9 percent. Net inventories for the first quarter were $335.7 million, up 23.2 percent. The increase includes product to support the Tier 4 transition, snow throwers and inventory from the Astec and Stone acquisitions. Trade payables increased 10.9 percent for the first quarter to $168.3 million.

About The Toro Company
The Toro Company is a leading worldwide provider of innovative turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions. With sales of more than $1.9 billion in fiscal 2012, Toro’s global presence extends to more than 90 countries through strong relationships built on integrity and trust, constant innovation, and a commitment to helping customers enrich the beauty, productivity and sustainability of the land. Since 1914, the company has built a tradition of excellence around a number of strong brands to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields. More information 

Toro CEO Discusses Fiscal 1st Quarter 2012 Results - Earnings Call Excerpts

Earnings call discussions by a company’s CEO offers insight into their (management’s) view of what the future may look like for the company they lead.  The knowledge and understanding you gain makes this well worth the time it takes to read.        “OPE-In-The-Know”

Michael J. Hoffman, Toro CEO

February 23 -- As reported in this morning’s first quarter earnings release, we achieved a solid start to the year based on strong showings in both our professional and residential businesses. Net sales for the quarter increased 10.6% while earnings per share increased 22.6%.

Since our last earnings call in December, we announced two acquisitions that will enable us to increase our presence within the golf market and expand into a promising new business. The first announced on December 9th involved a greens roller product line from Graden USA. The practice of rolling greens provides a smooth finish to the grass, thus enhancing the quality and playability of the putting surface, as well as helping to improve the health of the greens.

This acquisition fills an important gap in our golf line and bolsters our leadership in greens maintenance, a position we established back in 1924 with the introduction of our first greens mower. The new lines rollout has been well-received by our distributors and golf course customers.

The second acquisition announced on February 10th included the utility and underground product assets of Astec Industries. This acquisition allows us to offer a new range of Toro products to both current and new customers, and to enter a new category closely aligned to our existing businesses.

The products acquired include horizontal directional drills, trenchers and vibratory plows. The line covers a functional gamut from creating trenches for new residential and professional irrigation systems to installing, repairing or replacing utility lines while minimizing the collateral impact by going underneath landscapes or structures. Potential customers include landscape and irrigation contractors, municipalities, as well as telecommunications and utility companies.

The Astec Products are particularly exciting given the synergy with our site work systems products and an addressable market for horizontal drills and trenches of about $500 million. As a company, we tend to enjoy significant market share in most of our businesses. Just because we have those types of market shares in the turf and irrigation arena, it doesn’t guarantee that we can do it in the ground engaging space.

But if we can execute successfully – and we intend to – this opportunity holds potential market and share growth well in to the future. It will take successful product innovation to take share away from existing competitors, but we have recent examples of where we have done just that.

For both F12 and F13, we anticipate a combined effect from these acquisitions of less than 1% of revenues due to manufacturing transitions and tier-four constraints, and the potential integration and development cost of $0.10 to $0.15 against EPS. However, we believe these additions will be very meaningful in the long run. The integration and development clause include investment and bringing the line into compliance with tier-four emission standards, channel development, product enhancements, and modifications to our manufacturing and testing facilities to accommodate some of the products that are larger than our traditional offerings.

Returning to our existing business, the first quarter offered encouraging signs across both our professional and residential segments. Golfers took advantage of the mild winter leading to an increase in the number of rounds played in November and December according to the National Golf Foundation. While the foundation have not yet reported numbers for January, in December, rounds played increased by more than 30%.

Distributors report excellent preseason activity as golf courses continue replacing aging equipment. Golf equipment retail is even ahead of last year’s strong activities. Momentum is being generated around a host of new mowing and maintenance products we unveiled in 2011, enabling us to continue to extend our market share lead.

The landscape contractor segment capitalized on the unseasonably warm weather and much needed rain in certain drought-stricken sections of the South and Southwest, where contractors have seen their loan and maintenance reawakened. Both The Toro and Exmark landscape contractor businesses are seeing healthy shipments and early retail activity as contractors are beginning to replace worn out equipment with innovative products recently launched by both brands.

Example of these new introductions include Toro’s 2000 Series commercial zero turn riding equipment for both acreage owners and contractors and Exmark’s turf management line featuring both Walk-Behind and Stand On Aerators, Turf Rakes and Slicer/Seeders. It’s worth noting that while snowbelt contractors often spent winter months plowing snow, some weathered the winter well due to the contracts they hold that pay for the season and not by actual plowing activity, resulting in lower cost and more profits this year because of the lower snowfall.

Impervious to weather conditions, Indianapolis’ beautiful Lucas Field triumphantly hosted Super Bowl 46. The Toro sports fields and grounds team once again proudly contributed to the event success, by helping prepare the field of play. While Lucas Field sports artificial turf, Toro work with utility vehicles, ProForce blowers and key personnel were on duty hauling equipment and staff and preparing the playing surface.

While perhaps not as glamorous as the Super Bowl experience, the sports field and grounds business is also finding alternate paths to success, by meeting the needs of local government agencies. Municipalities still feeling the effects of shrinking budgets are taking reliable solutions to increase the productivity of their reduced workforces.

Toro’s industry-leading large rotary mowing equipment has presented a timely solution for local authorities and sparked sales for this growth category. In some cases, municipalities are in stronger buying positions than a year ago since reduced snow removal expenses free up funds that some will use for new spring equipment purchases.

Although many homeowners have yet to fire up their snow (inaudible) this winter, our residential business posted first quarter gains. While early in the season, spring retail is off to a good start. Consumers’ and retailers’ enthusiastic acceptance of our cutting-edge zero turn riding products and walk power mowers generated early demand for shipment of spring goods to dealers and the Home Depot alike.

Our residential business also benefited from stronger demand for our Pope branded products in Australia, where weather was a major problem for the first quarter last year. As you might imagine, winter’s failure to make a meaningful appearance so far this year in much of the snowbelt came to what had been a promising start. Heavy snowfalls last year along with an early Eastern blizzard this winter fueled heavy snow Toro shipments and retailed through November.

However, once the moderate temperature trend set in, retail demand in shipments of both whole goods and parts subsided. Barring winter suddenly returning with intense vengeance, inventory in both field and Toro warehouses will likely be somewhat heavier at season end. Consequently, third and fourth quarter preseason snow shipments are expected to be somewhat less than last year.

As you know, due to its potential volatility, we managed the snow business to prevent the type of costly scenarios we experienced in the early 80s. While we admittedly would have preferred more typical seasonal weather conditions, our current position is readily manageable. In a business related to market served by our newly acquired Astec products, our site work system sales were up for the quarter as a result of strong demand from rental companies that are benefitting from improved construction environment.

As we witnessed during the rental tradeshow earlier this month, rental companies have a very optimistic outlook as they prepare to replace aging equipment. During the show, we unveiled our new STX-38 dedicated stump grinder. Rental professionals, contractors and arborists have asked for a machine that provides greater productivity to tackle larger tree stumps. This latest addition to our tree care equipment line answers their call with more horsepower, easy controls and faster transport speeds.

The STX-38 is planned to be produced and shipped in the second half of the year. In addition to the robust purchases by rental firms, our position in the business was recently affirmed by our being named the 2011 Lawn and Garden Supplier by the rental team of the True Value Company.

I have a few comments regarding our micro-irrigation results. Superior product, increased capacity and timely delivery helped us capture new sales and additional market share as growers continue to adopt more efficient means of irrigating their crops and conserving precious water resources. Speaking of capturing new sales and market share on January 30th, the first shipment of Toro Aqua-Traxx cape rolled out of our new plant in Romania to serve the Eastern European market.