Toro Company reports strong fiscal Q1 results; net sales rise 13.7%

The Toro Company (NYSE: TTC) has reported results for its fiscal first quarter ended Jan. 29, 2021.

“We began fiscal 2021 with strong momentum across our professional and residential businesses,” said Richard M. Olson, chairman and chief executive officer. “This drove double-digit top-line growth in the current dynamic environment, primarily due to higher shipments of professional landscape contractor zero-turn riding mowers and robust retail demand for residential snow equipment and Flex-Force battery-powered products. Incremental sales from the Venture Products acquisition also contributed to first-quarter growth. We expanded profitability in the quarter by executing on our productivity initiatives and through disciplined cost management. We continued to provide innovative products that align with the needs of our customers, and invested in key technology areas including alternative power, smart connected and autonomous, to drive long-term sustainable growth. We are grateful to our team and channel partners for their perseverance in serving our customers while remaining focused on keeping each other safe.”

OPEI, Rick Olson, Toro, chairman, board of directors
Richard M. Olson

FIRST-QUARTER FISCAL 2021 FINANCIAL HIGHLIGHTS

  • Net sales of $873.0 million, up 13.7% from $767.5 million in the first quarter of fiscal 2020.
  • Net earnings of $111.3 million, up 58.8% from $70.1 million in the first quarter of fiscal 2020; *adjusted net earnings of $93.2 million, up 33.8% from $69.7 million in the first quarter of fiscal 2020.
  • Reported EPS of $1.02 per diluted share, up 56.9% from $0.65 per diluted share in the first quarter of fiscal 2020; *adjusted EPS of $0.85 per diluted share, up 32.8% from $0.64 per diluted share in the first quarter of fiscal 2020.
  • Deployed $90.0 million to pay down debt and returned $59.8 million to shareholders through regular dividends and the resumption of share repurchases; liquidity of approximately $1.0 billion as of January 29, 2021.

OUTLOOK

“Looking ahead to the remainder of the fiscal year, we are encouraged by continuing positive demand trends. As we enter the key selling season for many of our professional businesses, we are well positioned with our suite of new products to capitalize on the recovery occurring across core markets. We also expect to see ongoing retail demand for our innovative residential segment all-season product lineup. Our guidance is based on current visibility and certain potential effects of COVID-19. We are actively managing a dynamic supply chain and cost inflation environment. We intend to deliver profitable growth by focusing on our enterprise strategic priorities and the needs of our customers,” concluded Olson.

The company is reaffirming its full-year fiscal 2021 guidance of total net sales growth in the range of 6.0% to 8.0% and adjusted EPS in the range of $3.35 to $3.45 per diluted share.

FIRST-QUARTER SEGMENT RESULTS

Professional Segment

Professional segment net sales for the first quarter were $650.2 million, up 9.3% compared with $594.7 million in the same period last year. The increase was primarily due to higher shipments of landscape contractor zero-turn riding mowers and incremental sales from the Venture Products acquisition, partially offset by decreased sales of underground construction equipment to oil and gas markets and timing of international shipments of golf and grounds equipment.

Professional segment earnings for the first quarter were $116.8 million, up 14.0% compared with $102.5 million in the same period last year, and when expressed as a percentage of net sales, up 80 basis points to 18.0% from 17.2%. The increase was primarily due to sales volume leverage and productivity and synergy initiatives, partially offset by manufacturing cost pressures and product mix.

Residential Segment

Residential segment net sales for the first quarter were $217.7 million, up 31.3% compared with $165.8 million in the same period last year. The increase was primarily due to strong retail demand for snow equipment and Flex-Force battery-powered products, as well as increased shipments of walk power mowers.

Residential segment earnings for the first quarter were $32.1 million, up 48.9% compared with $21.6 million in the same period last year, and when expressed as a percentage of net sales, up 170 basis points to 14.7% from 13.0% a year ago. The increase was primarily due to sales volume leverage and productivity and synergy initiatives, partially offset by manufacturing cost pressures and product mix.

OPERATING RESULTS

Gross margin for the first quarter was 36.1%, down 140 basis points compared with 37.5% for the same prior-year period. Adjusted gross margin for the first quarter was 36.1%, down 150 basis points compared with 37.6% for the same prior-year period. The decreases in gross margin and adjusted gross margin were primarily due to manufacturing cost pressures and product mix, partially offset by productivity and synergy initiatives.

SG&A as a percentage of net sales for the first quarter decreased 570 basis points to 19.9% from 25.6% in the prior-year period. The decrease was primarily due to sales volume leverage, a favorable one-time legal settlement and lower indirect marketing expenses as a result of reduced meeting, travel and entertainment costs.

Operating earnings as a percentage of net sales increased 430 basis points to 16.2% for the first quarter of fiscal 2021. Adjusted operating earnings as a percentage of net sales increased 210 basis points to 14.2% for the first quarter of fiscal 2021.

Interest expense was down $0.6 million for the first quarter of fiscal 2021, driven by lower interest rates.

The reported effective tax rate for the first quarter was 18.1% compared with 18.6% for the same period in fiscal 2020, primarily driven by higher tax benefits from the excess tax deduction for share-based compensation. The adjusted effective tax rate for the first quarter was 21.5% compared with 21.0% for the first quarter of fiscal 2020, primarily driven by the geographic mix of earnings.

— Dave McMahon, editor, dmcmahon at epgmediallc.com

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