The Toro Company Reports Record First Quarter Results

  • First quarter sales increase 10 percent to a record $603.0 million
  • Reported quarterly EPS of $0.55; adjusted quarterly EPS of $0.51, up
    6.3 percent over comparable 2018 period adjusted EPS of $0.48,
    includes $0.03 acquisition related expenses
  • Strength of new products across the portfolio drove positive
    performance for the quarter

BLOOMINGTON, Minn.–(BUSINESS WIRE)–The Toro Company (NYSE: TTC) today reported net earnings of $59.5
million, or $0.55 per share, on a net sales increase of 10 percent to
$603 million for its first quarter ended February 1, 2019. In the
comparable fiscal 2018 period, the company delivered net earnings of
$22.6 million, or $0.21 per share, on net sales of $548.2 million.
Adjusted 2019 first quarter net earnings were $55.2 million, or $0.51
per share, compared to adjusted net earnings of $52.1 million, or $0.48
per share in the comparable 2018 period, an increase of 6.3 percent,
including $0.03 of acquisition related expenses in the quarter.

“Our professional businesses delivered another good quarter, led by
strength in landscape contractor sales, increased golf and grounds
channel demand, and positive momentum in our BOSS® business,” said
Richard M. Olson, Toro’s chairman and chief executive officer. “New
products were again the key to success, as customers responded favorably
to the latest lineup of our Exmark® Lazer®, and Radius® zero-turn riding
mowers, and the BOSS® Stainless Steel XT V-Plow, which offers enhanced
productivity and maneuverability for operators. Recent snow events in
key regions also helped bolster sales of both professional and
residential snow and ice management products in the quarter.

“At recent industry trade shows, our team showcased several new products
with the latest technology, designed to help our customers do their jobs
more effectively. Key product lines like the Greensmaster® eTriFlex™
fully electric riding greensmower that effectively eliminates the
potential for hydraulic leaks, while offering superior cutting
performance, generated excitement among customers. The Outcross® 9060
continues to be a crowd favorite as customers learn more about the
various attachments and versatility this machine offers to help address
some of their biggest challenges. Our new Dingo® TXL 2000 also continues
to impress with its vertical lifting capacity and telescoping arms for
increased productivity and ease of use.

“We are very excited about the recent announcement regarding the
acquisition of Charles Machine Works, known as ‘The Underground
Authority,’ with a portfolio of businesses including Ditch Witch®, and
other leading brands in the underground construction market. As
mentioned during our conference call last week, this acquisition will
align very well with our strategic priorities and will naturally
complement our existing business. Similarly, the cultural alignment,
commitment to innovation and the importance of community shared by the
two companies, should position us well for a successful integration.

“Looking ahead, we remain committed to effectively balancing tariffs and
related commodity pressures, with productivity gains and pricing
strategies. While we maintain our prudent approach to expense
management, we will not sacrifice important investments in new product
development, technologies or operating efficiencies. These factors,
paired with the good work and dedication of our team, positions us well
to execute in the future.”

Assuming the acquisition of Charles Machine Works closes in the third
quarter, we expect adjusted earnings per share of $1.15 to $1.20 for the
second quarter. This includes an estimated $0.07 for the impact of
acquisition-related expenses and share repurchase curtailment. These
items are in addition to the $0.03 of acquisition expense incurred in
the first quarter. This results in an adjusted earnings per share
estimate of $1.66 to $1.71 for the first six months, which equates to
operational performance of $1.76 to $1.81, excluding acquisition-related
impacts. We expect to update our guidance at, or after, the closing of
the acquisition.



  • Professional segment net sales for the first quarter were $455.0
    million, up 12.7 percent from $403.7 million last year. Strong
    performance across our professional businesses drove positive results
    for the quarter. Our Exmark® businesses benefitted from strong sales
    of zero-turn mowers across the portfolio. In our golf and grounds
    business, increased shipments of our Groundsmaster® mowers and Workman
    utility vehicles generated momentum. Similarly, our BOSS® snow and ice
    management business also saw the benefits of favorable snowfall in key
    regions, as well as momentum generated by new products like the Exact
    Path™ drop spreader and the Drag Pro™.
  • Professional segment earnings for the first quarter were $88.0
    million, up 15.9 percent from $75.9 million in the same period last


  • Residential segment net sales for the first quarter were $145.2
    million, up 1.9 percent from 142.5 million last year. Increased demand
    for snow throwers driven by higher snowfall totals across the Midwest
    and solid sales of walk power mowers led to the positive results for
    the quarter.
  • Residential segment earnings for the first quarter were $13.1 million,
    down 16.8 percent from $15.7 million in the comparable period last


Gross margin as a percent of sales for the first quarter was 35.8
percent, a decrease of 150 basis points compared to the prior year.
Increased commodity and tariff-related costs, as well as the unfavorable
accounting impact related to the acquisition of a distributor partner
within the first quarter contributed to the decline, partially offset by
pricing and productivity improvements.

Selling, general and administrative (SG&A) expense as a percent of sales
for the first quarter was 24.2 percent, a decrease of 90 basis points
from the same period last year. The decrease was primarily due to the
prudent leveraging of expenses over higher sales volume. SG&A
improvement was offset by continued investment in our key strategic
initiatives, including new product development and acquisition related
growth opportunities.

First quarter operating earnings as a percent of sales were 11.6
percent, a decrease of 60 basis points compared to 12.2 percent in the
same period last year.

The effective tax rate for the first quarter was 15.0 percent, compared
to 66.0 percent for the first quarter of last year. The fiscal 2018
first quarter reported tax rate was significantly impacted by one-time
items associated with the enactment of U.S. tax reform. The fiscal 2019
first quarter adjusted tax rate was 21.2 percent. The company continues
to expect its full year effective tax rate to be about 21.5 percent.

Accounts receivable at the end of the first quarter were $225.5 million,
up 13.5 percent from last year. Net inventories were $416.7 million,
down 5.2 percent from last year. Trade payables were $281.5 million, up
5.6 percent from the comparable period 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 maintenance, snow and ice management,
landscape, rental and specialty construction equipment, and irrigation
and outdoor lighting solutions. With sales of $2.6 billion in fiscal
2018, Toro’s global presence extends to more than 125 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, sports fields,
public green spaces, commercial and residential properties and
agricultural operations. For more information, visit

February 21, 2019 at 10:00 a.m. CST

The Toro Company will conduct its earnings call and webcast for
investors beginning at 10:00 a.m. CST on February 21, 2019. The webcast
will be available at
or at
Webcast participants will need to complete a brief registration form and
should allocate extra time before the webcast begins to register and, if
necessary, download and install audio software.

Use of Non-GAAP Financial Information
This press release and
our related earnings call contain certain non-GAAP financial measures,
consisting of “adjusted” effective tax rate, net earnings and net
earnings per diluted share as measures of our operating performance.
Management believes these measures may be useful in performing
meaningful comparisons of past and present operating results, to
understand the performance of its ongoing operations and how management
views the business. Reconciliations of adjusted non-GAAP measures to
reported GAAP measures are included in the financial tables contained in
this press release. These measures, however, should not be construed as
an alternative to any other measure of performance determined in
accordance with GAAP.

The Toro Company does not attempt to provide reconciliations of
forward-looking non-GAAP EPS guidance to projected GAAP EPS guidance
because the combined impact and timing of recognition of these potential
charges or gains is inherently uncertain and difficult to predict and is
unavailable without unreasonable efforts. In addition, we believe such
reconciliations would imply a degree of precision and certainty that
could be confusing to investors. Such items could have a substantial
impact on GAAP measures of financial performance.

Forward-Looking Statements
This news release contains
forward-looking statements, which are being made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on management’s current
assumptions and expectations of future events, and often can be
identified by words such as “expect,” “strive,” “looking ahead,”
“outlook,” “guidance,” “forecast,” “goal,” “optimistic,” “anticipate,”
“continue,” “plan,” “estimate,” “project,” “believe,” “should,” “could,”
“will,” “would,” “possible,” “may,” “likely,” “intend,” “can,” “seek,”
“potential,” “pro forma,” or the negative thereof or similar
expressions. Forward-looking statements involve risks and uncertainties
that could cause actual events and results to differ materially from
those projected or implied. Particular risks and uncertainties that may
affect our operating results or financial position include: worldwide
economic conditions, including slow or negative growth rates in global
and domestic economies and weakened consumer confidence; disruption at
our manufacturing or distribution facilities, including drug
cartel-related violence affecting our maquiladora operations in Juarez,
Mexico; fluctuations in the cost and availability of raw materials and
components, including steel, engines, hydraulics and resins; the impact
of abnormal weather patterns, including unfavorable weather conditions
exacerbated by global climate change or otherwise; the impact of natural
disasters and global pandemics; the level of growth or contraction in
our key markets; government and municipal revenue, budget and spending
levels; dependence on The Home Depot as a customer for our residential
business; elimination of shelf space for our products at dealers or
retailers; inventory adjustments or changes in purchasing patterns by
our customers; our ability to develop and achieve market acceptance for
new products; increased competition; the risks attendant to
international relations, operations and markets, including political,
economic and/or social instability and conflict, tax and trade policies
in the U.S. and other countries in which we manufacture or sell our
products, and implications of the United Kingdom’s process for exiting
the European Union; foreign currency exchange rate fluctuations; our
relationships with our distribution channel partners, including the
financial viability of our distributors and dealers; risks associated
with acquisitions, including those related to our pending acquisition of
The Charles Machine Works, Inc., such as delays in completing the
acquisition or not completing it at all, delays or failure by us in
achieving the net sales, earnings and any cost or revenue synergies
expected from the acquisition, delays and challenges in integrating the
businesses after the acquisition is completed, business disruptions due
to the acquisition, and unanticipated liabilities or exposures for which
we have not been indemnified or may not recover; management of our
alliances or joint ventures, including Red Iron Acceptance, LLC; the
costs and effects of enactment of, changes in and compliance with laws,
regulations and standards, including those relating to consumer product
safety, accounting, taxation, trade and tariffs, healthcare, and
environmental, health and safety matters; unforeseen product quality
problems; loss of or changes in executive management or key employees;
the occurrence of litigation or claims, including those involving
intellectual property or product liability matters; and other risks and
uncertainties described in our most recent annual report on Form 10-K,
subsequent quarterly reports on Form 10-Q, and other filings with the
Securities and Exchange Commission. We make no commitment to revise or
update any forward-looking statements in order to reflect events or
circumstances occurring or existing after the date any forward-looking
statement is made.


Consolidated Statements of Earnings (Unaudited)

and shares in thousands, except per-share data)

    Three Months Ended

February 1,


February 2,

Net sales $ 602,956   $ 548,246
Gross profit 215,617 204,239
Gross profit percentage 35.8 % 37.3 %
Selling, general and administrative expense     145,563       137,317  
Operating earnings 70,054 66,922
Interest expense (4,742 ) (4,818 )
Other income, net     4,708       4,281  
Earnings before income taxes 70,020 66,385
Provision for income taxes     10,480       43,781  
Net earnings   $ 59,540     $ 22,604  
Basic net earnings per share of common stock   $ 0.56     $ 0.21  
Diluted net earnings per share of common stock   $ 0.55     $ 0.21  
Weighted-average number of shares of common stock outstanding — Basic 106,258 107,225
Weighted-average number of shares of common stock outstanding —
    107,781       109,855  

Segment Data (Unaudited)
(Dollars in thousands)

    Three Months Ended
Segment Net Sales   February 1,
  February 2,
Professional $ 455,006   $ 403,669
Residential 145,158 142,507
Other     2,792       2,070  
Total net sales*   $ 602,956     $ 548,246  
*Includes international net sales of:   $ 141,545     $ 146,790  
    Three Months Ended
Segment Earnings (Loss)   February 1,
  February 2,
Professional $ 87,978 $ 75,912
Residential 13,072 15,713
Other     (31,030 )     (25,240 )
Total segment earnings   $ 70,020     $ 66,385  

Consolidated Balance Sheets (Unaudited)

(Dollars in

    February 1,
  February 2,


Cash and cash equivalents $ 249,965 $ 219,730
Receivables, net 225,528 198,736
Inventories, net 416,650 439,343
Prepaid expenses and other current assets     41,789       43,039  
Total current assets     933,932       900,848  
Property, plant and equipment, net 279,270 234,448
Deferred income taxes 39,589 44,752
Goodwill and other assets, net     370,023       336,758  
Total assets   $ 1,622,814     $ 1,516,806  


Current portion of long-term debt $ $ 13,000
Accounts payable 281,526 266,586
Accrued liabilities     283,452       292,903  
Total current liabilities     564,978       572,489  
Long-term debt, less current portion 312,551 302,465
Deferred income taxes 1,410 1,839
Other long-term liabilities     49,478       59,232  
Total stockholders’ equity     694,397       580,781  
Total liabilities and stockholders’ equity   $ 1,622,814     $ 1,516,806  

Consolidated Statements of Cash Flows (Unaudited)

in thousands)

    Three Months Ended
    February 1,
  February 2,
Cash flows from operating activities:  
Net earnings $ 59,540 $ 22,604
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Non-cash income from finance affiliate (2,429 ) (2,192 )
Contributions to finance affiliate, net (459 ) (252 )
Provision for depreciation and amortization 15,583 15,226
Stock-based compensation expense 3,924 3,124
Deferred income taxes (1,225 ) 19,682
Other (26 )
Changes in operating assets and liabilities, net of effect of
Receivables, net (31,331 ) (12,989 )
Inventories, net (52,380 ) (107,017 )
Prepaid expenses and other assets 8,119 (2,588 )
Accounts payable, accrued liabilities, deferred revenue and other
long-term liabilities
    26,643       72,523  
Net cash provided by operating activities     25,985       8,095  
Cash flows from investing activities:
Purchases of property, plant and equipment (14,180 ) (10,784 )
Proceeds from asset disposals 3
Investment in unconsolidated entities (150 )
Acquisitions, net of cash acquired     (12,498 )      
Net cash used in investing activities     (26,825 )     (10,784 )
Cash flows from financing activities:
Payments on long-term debt (18,017 )
Proceeds from exercise of stock options 7,569 4,436
Payments of withholding taxes for stock awards (1,872 ) (3,077 )
Purchases of Toro common stock (20,043 ) (50,066 )
Dividends paid on Toro common stock     (23,923 )     (21,425 )
Net cash used in financing activities     (38,269 )     (88,149 )
Effect of exchange rates on cash and cash equivalents     (50 )     312  
Net decrease in cash and cash equivalents     (39,159 )     (90,526 )
Cash and cash equivalents as of the beginning of the fiscal period     289,124       310,256  
Cash and cash equivalents as of the end of the fiscal period   $ 249,965     $ 219,730  

Reconciliation of
Non-GAAP Financial Measures (Unaudited)

(Dollars in
thousands, except per-share data)

The company has provided non-GAAP financial measures, which are not
calculated or presented in accordance with accounting principles
generally accepted in the United States (“GAAP”), as information
supplemental and in addition to the most directly comparable financial
measures presented in the accompanying press release that are calculated
and presented in accordance with GAAP. Such non-GAAP financial measures
should not be considered superior to, as a substitute for, or as an
alternative to, and should be considered in conjunction with, the GAAP
financial measures presented in the accompanying press release. The
non-GAAP financial measures in the accompanying press release may differ
from similar measures used by other companies.

The following table provides reconciliations of financial measures
calculated and reported in accordance with GAAP as well as adjusted
non-GAAP financial measures presented in the accompanying press release
for the three month periods ended February 1, 2019 and February 2, 2018.
The company believes these measures may be useful in performing
meaningful comparisons of past and present operating results, to
understand the performance of its ongoing operations, and how management
views the business.

The following is a reconciliation of our net earnings, diluted earnings
per share (“EPS”), and effective tax rate to our adjusted net earnings,
adjusted diluted EPS, and adjusted effective tax rate:

    Net Earnings   Diluted EPS   Effective Tax Rate
Three Months Ended  

February 1,


February 2,

  February 1,
  February 2,
  February 1,
  February 2,
As Reported – GAAP $ 59,540   $ 22,604 $ 0.55   $ 0.21 15.0 %   66.0 %
Impacts of tax reform:
Net deferred tax asset revaluation1 20,513 0.19 % (30.9 )%
Deemed repatriation tax2 12,600 0.11 % (19.0 )%
Benefit of the excess tax deduction for share-based compensation3     (4,361 )     (3,576 )     (0.04 )     (0.03 )   6.2 %   5.4 %
As Adjusted – Non-GAAP   $ 55,179     $ 52,141     $ 0.51     $ 0.48     21.2 %   21.5 %

1 Signed into law on December 22, 2017, the Tax Cuts
and Jobs Act (“Tax Act”), reduced the U.S. federal corporate tax
rate from 35.0 percent to 21.0 percent, effective January 1, 2018,
which resulted in a blended U.S. federal statutory tax rate for
the company of 23.3 percent for the fiscal year ended October 31,
2018. This reduction in rate required the re-measurement of the
company’s net deferred taxes as of the date of enactment, which
resulted in a non-cash charge of $20.5 million during the three
month period ended February 2, 2018.


2 The Tax Act imposed a one-time deemed repatriation
tax on the company’s historical undistributed earnings and profits
of foreign affiliates, which resulted in a charge of $12.6 million
during the three month period ended February 2, 2018, payable over
eight years.


3 In the first quarter of fiscal 2017, the company
adopted Accounting Standards Update No. 2016-09, Stock-based
Compensation: Improvements to Employee Share-based Payment
, which requires that any excess tax deduction for
share-based compensation be immediately recorded within income tax
expense. The company recorded discrete tax benefits of $4.4
million and $3.6 million as excess tax deductions for share-based
compensation during the three month periods ended February 1, 2019
and February 2, 2018, respectively.



Investor Relations
Heather Hille
Director, Investor
(952) 887-8923,

Media Relations
Branden Happel
Senior Manager, Public
(952) 887-8930,

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