The Toro Company Reports Strong Fourth-Quarter and Full-Year Fiscal 2020 Results

Professional Segment Acquisitions and Residential Segment Performance Drive Results  

  • Q4 net sales of $841 million, up 14.5% year over year
  • FY20 net sales of $3.38 billion, up 7.7% versus last year; residential segment net sales up 24.1%
  • Q4 reported diluted EPS of $0.66; *Adjusted diluted EPS of $0.64, up 33.3% year over year
  • FY20 reported diluted EPS of $3.03; *Adjusted diluted EPS of $3.02, up 0.7% versus last year
  • FY21 guidance of *adjusted EPS in the range of $3.35 to $3.45 per diluted share

BLOOMINGTON, Minn.--(BUSINESS WIRE)--Dec. 16, 2020--

The Toro Company (NYSE: TTC) today reported results for its fiscal fourth-quarter and full-year periods ended October 31, 2020.

“Our strong fourth-quarter results were driven by continued sales growth in our residential segment and a rebound in our professional segment,” said Richard M. Olson, chairman and chief executive officer. “Residential sales were robust across all channels with strong demand for our new product lineup, accentuated by refreshed branding, an extended selling season, and stay-at-home trends. Improved demand for our professional products reflected greater business confidence from our customers and increased home investments. The integration of our Venture Products acquisition added another strong brand with multi-season products, contributing incremental sales in the quarter.”

“Our momentum and continued investments position us well for success in the new fiscal year,” continued Olson. “We have a strong portfolio of businesses and deep customer relationships, a dedicated team and channel partners, and innovative products and emerging technologies aligned with customer needs. We will remain sharply focused on business execution as we continue to face uncertainty due to the ongoing pandemic.”

“We will build upon our Sustainability Endures platform, our commitment to making a positive impact worldwide. Throughout last year, we put this commitment into action as we transformed how we do work and reimagined our business model from product innovation and production through customer service and support, all while keeping each other safe. In addition, we remain committed to driving future results through our enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people,” concluded Olson.

FOURTH-QUARTER FISCAL 2020 FINANCIAL HIGHLIGHTS

  • Net sales of $841.0 million, up 14.5% from $734.4 million in the fourth quarter of fiscal 2019.
  • Net earnings of $72.2 million, up 88.7% from $38.3 million in the fourth quarter of fiscal 2019; *Adjusted net earnings of $69.2 million, up 33.5% from $51.8 million in the fourth quarter of fiscal 2019.
  • Reported EPS of $0.66 per diluted share, up 88.6% from $0.35 per diluted share in the fourth quarter of fiscal 2019; *Adjusted EPS of $0.64 per diluted share, up 33.3% from $0.48 per diluted share in the fourth quarter of fiscal 2019.
  • As of October 31, 2020, the company had liquidity of about $1.1 billion.

FULL-YEAR FISCAL 2020 FINANCIAL HIGHLIGHTS

  • Net sales of $3.38 billion, up 7.7% from $3.14 billion in fiscal 2019.
  • Net earnings of $329.7 million, up 20.3% from $274.0 million in the prior-year period; *Adjusted net earnings of $327.7 million, up 1.1% from $324.3 million in fiscal 2019.
  • Reported EPS of $3.03 per diluted share, up 19.8% from $2.53 per diluted share in fiscal 2019; *Adjusted EPS of $3.02 per diluted share, up 0.7% from $3.00 per diluted share in fiscal 2019.
  • Returned $107.7 million to shareholders in dividends.

*Non-GAAP financial measure. Please see the tables provided for a reconciliation of historical non-GAAP financial measures to the most comparable GAAP measures.

OUTLOOK

The company is providing full-year fiscal 2021 guidance based on current visibility, although there continues to be considerable uncertainty given the potential effects of COVID-19 on demand levels and timing, its supply chain and the broader global economy.

For fiscal 2021, management expects 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. This estimated adjusted diluted EPS range excludes the benefit of the excess tax deduction for share-based compensation.

FOURTH-QUARTER AND FULL-YEAR SEGMENT RESULTS

Professional Segment

  • Professional segment net sales for the fourth quarter were $644.0 million, up 9.5% compared with $588.2 million in the same period last year. This increase was primarily due to growth in shipments of landscape contractor zero-turn riding mowers and snow and ice management equipment, annual price adjustments and lower floor plan costs, as well as incremental sales from the Venture Products acquisition.

    For the fiscal 2020 full year, professional segment net sales were $2.52 billion, up 3.3% from $2.44 billion last year. The increase was mainly driven by incremental sales from the Charles Machine Works and Venture Products acquisitions, partially offset by reduced channel demand primarily as a result of COVID-19, for golf and grounds equipment, landscape contractor zero-turn riding mowers and rental, specialty and underground construction equipment.
  • Professional segment earnings for the fourth quarter were $104.2 million, up 70.2% compared with $61.2 million in the same period last year, and when expressed as a percentage of net sales, up 580 basis points to 16.2% from 10.4%. The increase was primarily due to annual price adjustments and lower floor plan costs, lower acquisition-related charges and benefits from productivity and synergy initiatives, partially offset by product mix.

    Full-year fiscal 2020 professional segment earnings were $426.6 million, up 12.0% compared with the prior fiscal year, and when expressed as a percentage of net sales, up 130 basis points to 16.9% from 15.6%. The increase was primarily driven by lower acquisition-related charges, net price realization and benefits from productivity and synergy initiatives. This increase was partially offset by higher selling, general and administrative (SG&A) expenses as a result of the Charles Machine Works and Venture Products acquisitions, manufacturing inefficiencies primarily due to COVID-19, and higher warranty costs in certain professional segment businesses.

Residential Segment

  • Residential segment net sales for the fourth quarter were $187.9 million, up 38.5% compared with $135.7 million in the same period last year. The increase was primarily due to strong retail demand for walk power and zero-turn riding mowers.

    For fiscal 2020, residential segment net sales were $820.7 million, up 24.1% compared with $661.3 million in the same period last year. The increase was mainly driven by incremental shipments of zero-turn riding and walk power mowers as a result of the company’s expanded mass retail channel, as well as strong retail demand for these products due to a new and enhanced product line, favorable weather, and stay-at-home trends.
  • Residential segment earnings for the fourth quarter were $26.4 million, up 90.2% compared with $13.9 million in the same period last year, and when expressed as a percentage of net sales, up 390 basis points to 14.1% from 10.2% a year ago.

    For fiscal 2020, residential segment earnings increased 74.5% to $113.7 million, compared with $65.2 million in the same period last year, and when expressed as a percentage of net sales, increased 390 basis points to 13.8% from 9.9% in fiscal 2019. The segment earnings margin increases for both the quarterly and full year periods were primarily driven by benefits from productivity and synergy initiatives and SG&A leverage.

OPERATING RESULTS

Gross margin for the fourth quarter was 35.7%, up 230 basis points compared with 33.4% for the same prior-year period. *Adjusted gross margin for the fourth quarter was 35.7%, up 120 basis points compared with 34.5% for the same prior-year period. The increases in gross margin and adjusted gross margin were primarily due to benefits from productivity and synergy initiatives, net price realization mainly in the professional segment, partially offset by product mix due to higher sales of residential segment products. Reported gross margin for the fourth quarter also was positively affected by lower acquisition-related charges compared with the prior-year period.

For full year fiscal 2020, gross margin was 35.2%, up 180 basis points compared with 33.4% for fiscal 2019. *Adjusted gross margin for fiscal 2020 was 35.4%, up 30 basis points compared with 35.1% for fiscal 2019. The increases in gross margin and adjusted gross margin were primarily driven by benefits from productivity and synergy initiatives and net price realization mainly in the professional segment, partially offset by product mix primarily due to higher sales of residential segment products as well as COVID-19 related manufacturing inefficiencies. Reported gross margin for the full year also was positively affected by lower acquisition-related charges compared with the prior-year period.

SG&A expense as a percentage of net sales for the fourth quarter decreased 290 basis points to 24.6% from 27.5% in the prior-year period. The decrease was primarily due to restructuring costs in the prior-year period that did not repeat and cost-reduction measures, including decreased salaries and indirect marketing expense, partially offset by increased warranty costs in certain professional segment businesses.

For fiscal 2020, SG&A expense as a percentage of net sales was 22.6%, down 40 basis points from 23.0% in fiscal 2019, primarily due to cost-reduction measures, including decreased salaries and elimination of the discretionary retirement fund contribution, as well as lower transaction and integration costs and reduced restructuring costs compared with the prior-year period. This decrease was partially offset by incremental warranty and engineering costs from the Charles Machine Works and Venture Products acquisitions and higher warranty expense in certain professional segment businesses, as well as a discretionary employee recognition bonus.

Operating earnings as a percentage of net sales increased 520 basis points to 11.1% for the fourth quarter. *Adjusted operating earnings as a percentage of net sales increased 270 basis points to 11.1% for the fourth quarter. For full year fiscal 2020, operating earnings as a percentage of net sales were 12.6%, up 220 basis points compared with 10.4% in fiscal 2019. *Adjusted operating earnings as a percentage of net sales for fiscal 2020 were 12.8%, down 10 basis points compared with 12.9% in fiscal 2019.

Interest expense was flat for the fourth quarter and increased $4.3 million for fiscal 2020, each compared with the prior-year periods.

The reported effective tax rates for the fourth quarter and full year were 18.5% and 19.0%, respectively, compared with 12.4% and 14.9% for fiscal 2019, driven by a lower tax benefit related to the excess tax deduction for share-based compensation, lower foreign-derived intangible benefits and increased earnings in less favorable tax jurisdictions. The *adjusted effective tax rates for the fourth quarter and full year were 21.9% and 20.9%, respectively, compared with 17.7% and 19.3% for fiscal 2019, driven by lower foreign-derived intangible income tax benefits as compared with fiscal 2019 and increased earnings in less favorable tax jurisdictions.

Working capital at the end of the fourth quarter was down compared with the end of the fourth quarter of the prior fiscal year, primarily driven by an increase in accounts payable, a decrease in accounts receivable and flat inventory.

LIVE CONFERENCE CALL
December 16, 2020 at 10:00 a.m. CST
www.thetorocompany.com/invest

The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CST on December 16, 2020. The webcast will be available at www.thetorocompany.com/invest. Webcast participants will need to complete a brief registration form and should allocate extra time before the webcast begins to register and, if necessary, install audio software.

About The Toro Company

The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative solutions for the outdoor environment including turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting solutions. With sales of $3.4 billion in fiscal 2020, The Toro Company’s global presence extends to more than 125 countries through a family of brands that includes Toro, Ditch Witch, Exmark, BOSS Snowplow, Ventrac, American Augers, Subsite Electronics, HammerHead, Trencor, Unique Lighting Systems, Irritrol, Hayter, Pope, Lawn-Boy and Radius HDD. Through constant innovation and caring relationships built on trust and integrity, The Toro Company and its family of brands have built a legacy of excellence by helping customers work on golf courses, sports fields, construction sites, public green spaces, commercial and residential properties and agricultural operations. For more information, visit www.thetorocompany.com.

Use of Non-GAAP Financial Information

This press release and our related earnings call references certain non-GAAP financial measures, which are not calculated or presented in accordance with U.S. GAAP, as information supplemental and in addition to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures included within this press release and our related earnings call consist of gross profit, gross margin, operating earnings, earnings before income taxes, net earnings, net earnings per diluted share, and the effective tax rate, each as adjusted, free cash flow, and free cash flow conversion as measures of our operating performance.

The Toro Company uses these non-GAAP financial measures in making operating decisions because it believes these non-GAAP financial measures provide meaningful supplemental information regarding core operational performance and provide the company with a better understanding of how to allocate resources to both ongoing and prospective business initiatives. Additionally, these non-GAAP financial measures facilitate its internal comparisons for both historical operating results and competitors' operating results by factoring out potential differences caused by charges not related to its regular ongoing business, including, without limitation, non-cash charges, certain large and unpredictable charges, acquisitions and dispositions, and tax positions. Further, the company believes that these non-GAAP financial measures, when considered in conjunction with the financial measures prepared in accordance with U.S. GAAP, provide investors with useful supplemental financial information to better understand its core operational performance.

Reconciliations of historical non-GAAP financial measures to the most comparable U.S. GAAP financial measures are included in the financial tables contained in this press release. These non-GAAP financial measures, however, should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the U.S. GAAP financial measures included within this press release and the company's related earnings call. These non-GAAP financial measures may differ from similar measures used by other companies.

The Toro Company cannot provide quantitative reconciliations of forward-looking non-GAAP financial measures provided herein or in its related earnings call without unreasonable effort because the combined effect and timing of recognition of potential charges or gains is inherently uncertain and difficult to predict. In addition, since any adjustments could have a substantial effect on U.S. GAAP measures of financial performance, such quantitative reconciliations would imply a degree of precision and certainty that could be confusing to investors. From a qualitative perspective, it is anticipated that the differences between the forward-looking non-GAAP financial measures and the most directly comparable GAAP financial measure will consist of items similar to those described in the financial tables later in this release, including for example, acquisition-related costs, management actions and tax impact of share-based compensation.

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. Forward looking statements in this release include the company's fiscal 2021 financial guidance. Particular risks and uncertainties that may affect the company’s operating results or financial position include: COVID-19 related factors, risks and challenges, including among others, the severity of COVID-19, its effect on the demand for the company’s products and services, the ability of dealers, retailers, and other channel partners that sell the company’s products to remain open, availability of employees and their ability to conduct work away from normal working locations and/or under revised protocols, and the ability to receive commodities, components, parts, and accessories on a timely basis through its supply chain and at anticipated costs, and the ability of the company to continue its production operations; adverse worldwide economic conditions, including weakened consumer confidence; disruption at or in proximity to its facilities or in its manufacturing or other operations, or those in its distribution channel customers, mass retailers or home centers where its products are sold, or suppliers; fluctuations in the cost and availability of commodities, components, parts, and accessories, including steel, engines, hydraulics and resins; the effect of abnormal weather patterns; the effect of natural disasters, social unrest, and global pandemics; the level of growth or contraction in its key markets; customer, government and municipal revenue, budget, spending levels and cash conservation efforts; loss of any substantial customer; inventory adjustments or changes in purchasing patterns by customers; the company’s 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, trade regulation and/or antidumping and countervailing duties petitions; foreign currency exchange rate fluctuations; financial viability of and/or relationships with the company’s distribution channel partners; risks associated with acquisitions, including those related to the recent acquisitions of Charles Machine Works and Venture Products, Inc.; impairment of goodwill or other intangible assets; delays or failures in implementing, and unanticipated charges, as a result of, restructuring activities; management of alliances or joint ventures, including Red Iron Acceptance, LLC; impact of laws, regulations and standards, 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 the company’s most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q or current reports on Form 8-K, and other filings with the Securities and Exchange Commission. The company makes 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.

(Financial tables follow)

THE TORO COMPANY AND SUBSIDIARIES

Consolidated Statements of Earnings (Unaudited)

(Dollars and shares in thousands, except per-share data)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

October 31, 2020

 

October 31, 2019

 

October 31, 2020

 

October 31, 2019

Net sales

 

$

840,957

 

 

$

734,379

 

 

$

3,378,810

 

 

$

3,138,084

 

Cost of sales

 

540,562

 

 

489,312

 

 

2,189,036

 

 

2,090,121

 

Gross profit

 

300,395

 

 

245,067

 

 

1,189,774

 

 

1,047,963

 

Gross margin

 

35.7

%

 

33.4

%

 

35.2

%

 

33.4

%

Selling, general and administrative expense

 

206,914

 

 

201,761

 

 

763,417

 

 

722,934

 

Operating earnings

 

93,481

 

 

43,306

 

 

426,357

 

 

325,029

 

Interest expense

 

(8,037)

 

 

(8,395)

 

 

(33,156)

 

 

(28,835)

 

Other income, net

 

3,123

 

 

8,787

 

 

13,869

 

 

25,939

 

Earnings before income taxes

 

88,567

 

 

43,698

 

 

407,070

 

 

322,133

 

Provision for income taxes

 

16,371

 

 

5,432

 

 

77,369

 

 

48,150

 

Net earnings

 

$

72,196

 

 

$

38,266

 

 

$

329,701

 

 

$

273,983

 

 

 

 

 

 

 

 

 

 

Basic net earnings per share of common stock

 

$

0.67

 

 

$

0.36

 

 

$

3.06

 

 

$

2.57

 

 

 

 

 

 

 

 

 

 

Diluted net earnings per share of common stock

 

$

0.66

 

 

$

0.35

 

 

$

3.03

 

 

$

2.53

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common stock outstanding — Basic

 

107,945

 

 

107,166

 

 

107,658

 

 

106,773

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares of common stock outstanding — Diluted

 

108,947

 

 

108,414

 

 

108,663

 

 

108,090

 

Segment Data (Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended

 

Twelve Months Ended

Segment Net Sales

 

October 31,
2020

 

October 31,
2019

 

October 31,
2020

 

October 31,
2019

Professional

 

$

644,029 

 

 

$

588,180 

 

 

$

2,523,452 

 

 

$

2,443,448 

 

Residential

 

187,938 

 

 

135,735 

 

 

820,745 

 

 

661,274 

 

Other

 

8,990 

 

 

10,464 

 

 

34,613 

 

 

33,362 

 

Total net sales*

 

$

840,957 

 

 

$

734,379 

 

 

$

3,378,810 

 

 

$

3,138,084 

 

 

 

 

 

 

 

 

 

 

*Includes international net sales of:

 

$

170,115 

 

 

$

177,599 

 

 

$

678,116 

 

 

$

724,931 

 

 
 

 

 

Three Months Ended

 

Twelve Months Ended

Segment Earnings (Loss)

 

October 31,
2020

 

October 31,
2019

 

October 31,
2020

 

October 31,
2019

Professional

 

$

104,175 

 

 

$

61,225 

 

 

$

426,560 

 

 

$

380,914 

 

Residential

 

26,436 

 

 

13,898 

 

 

113,669 

 

 

65,151 

 

Other

 

(42,044)

 

 

(31,425)

 

 

(133,159)

 

 

(123,932)

 

Total segment earnings

 

$

88,567 

 

 

$

43,698 

 

 

$

407,070 

 

 

$

322,133 

 

THE TORO COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

 

 

 

October 31,
2020

 

October 31,
2019

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

479,892

 

 

$

151,828

 

Receivables, net:

 

 

 

 

Customers, net of allowances

 

223,105

 

 

220,534

 

Receivables from finance affiliate

 

12,619

 

 

21,873

 

Other

 

25,411

 

 

26,361

 

Total receivables, net

 

261,135

 

 

268,768

 

Inventories, net

 

652,433

 

 

651,663

 

Prepaid expenses and other current assets

 

34,188

 

 

50,632

 

Total current assets

 

1,427,648

 

 

1,122,891

 

Property, plant and equipment, net

 

467,919

 

 

437,317

 

Goodwill

 

424,075

 

 

362,253

 

Other intangible assets, net

 

408,305

 

 

352,374

 

Right-of-use assets

 

78,752

 

 

 

Investment in finance affiliate

 

19,745

 

 

24,147

 

Deferred income taxes

 

6,466

 

 

6,251

 

Other assets

 

20,318

 

 

25,314

 

Total assets

 

$

2,853,228

 

 

$

2,330,547

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current portion of long-term debt

 

$

99,873

 

 

$

79,914

 

Accounts payable

 

363,953

 

 

319,230

 

Short-term lease liabilities

 

15,447

 

 

 

Accrued liabilities:

 

 

 

 

Warranty

 

107,121

 

 

96,604

 

Advertising and marketing programs

 

98,883

 

 

103,417

 

Compensation and benefit costs

 

58,789

 

 

76,862

 

Insurance

 

13,452

 

 

11,164

 

Interest

 

10,065

 

 

9,903

 

Other

 

88,214

 

 

59,876

 

Total accrued liabilities

 

376,524

 

 

357,826

 

Total current liabilities

 

855,797

 

 

756,970

 

Long-term debt, less current portion

 

691,250

 

 

620,899

 

Long-term lease liabilities

 

66,641

 

 

 

Deferred income taxes

 

70,435

 

 

50,579

 

Other long-term liabilities

 

54,277

 

 

42,521

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Preferred stock

 

 

 

 

Common stock

 

107,583

 

 

106,742

 

Retained earnings

 

1,041,507

 

 

784,885

 

Accumulated other comprehensive loss

 

(34,262)

 

 

(32,049)

 

Total stockholders' equity

 

1,114,828

 

 

859,578

 

Total liabilities and stockholders' equity

 

$

2,853,228

 

 

$

2,330,547

 

THE TORO COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

 

Twelve Months Ended

 

 

October 31,
2020

 

October 31,
2019

Cash flows from operating activities:

 

 

 

 

Net earnings

 

$

329,701

 

 

$

273,983

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

Non-cash income from finance affiliate

 

(7,663)

 

 

(11,948)

 

Distributions from finance affiliate, net

 

12,066

 

 

10,343

 

Depreciation of property, plant and equipment

 

76,108

 

 

69,314

 

Amortization of other intangible assets

 

19,507

 

 

18,384

 

Fair value step-up adjustment to acquired inventory

 

3,951

 

 

39,368

 

Stock-based compensation expense

 

15,408

 

 

13,429

 

Deferred income taxes

 

2,269

 

 

(6,190)

 

Other

 

492

 

 

6,357

 

Changes in operating assets and liabilities, net of the effect of acquisitions:

 

 

 

 

Receivables, net

 

15,206

 

 

(11,042)

 

Inventories, net

 

20,963

 

 

(104,832)

 

Prepaid expenses and other assets

 

11,828

 

 

9,747

 

Accounts payable, accrued liabilities, deferred revenue and other liabilities

 

39,538

 

 

30,458

 

Net cash provided by operating activities

 

539,374

 

 

337,371

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property, plant and equipment

 

(78,068)

 

 

(92,881)

 

Proceeds from asset disposals

 

216

 

 

4,669

 

Proceeds from sale of a business

 

 

 

12,941

 

Investments in unconsolidated entities

 

 

 

(200)

 

Acquisitions, net of cash acquired

 

(138,225)

 

 

(697,471)

 

Net cash used in investing activities

 

(216,077)

 

 

(772,942)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings under debt arrangements

 

636,025

 

 

900,000

 

Repayments under debt arrangements

 

(546,025)

 

 

(511,000)

 

Proceeds from exercise of stock options

 

22,198

 

 

29,336

 

Payments of withholding taxes for stock awards

 

(2,146)

 

 

(2,662)

 

Purchases of TTC common stock

 

 

 

(20,043)

 

Dividends paid on TTC common stock

 

(107,698)

 

 

(96,133)

 

Net cash provided by financing activities

 

2,354

 

 

299,498

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

2,413

 

 

(1,223)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

328,064

 

 

(137,296)

 

Cash and cash equivalents as of the beginning of the fiscal period

 

151,828

 

 

289,124

 

Cash and cash equivalents as of the end of the fiscal period

 

$

479,892

 

 

$

151,828

 

THE TORO COMPANY AND SUBSIDIARIES
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 ("U.S. 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 U.S. GAAP. The company uses these non-GAAP financial measures in making operating decisions because the company believes these non-GAAP financial measures provide meaningful supplemental information regarding the company's core operational performance and provide the company with a better understanding of how to allocate resources to both ongoing and prospective business initiatives. Additionally, these non-GAAP financial measures facilitate management's internal comparisons to both the company's historical operating results and to the company's competitors' operating results by factoring out potential differences caused by charges not related to the company's regular, ongoing business, including, without limitation, non-cash charges, certain large and unpredictable charges, acquisitions and dispositions, legal settlements, and tax positions. Further, the company believes that such non-GAAP financial measures, when considered in conjunction with the company's financial measures prepared in accordance with U.S. GAAP, provide investors with useful supplemental financial information to better understand the company's core operational performance. 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 most directly comparable U.S. GAAP financial measures presented in the accompanying press release. The non-GAAP financial measures presented in the accompanying press release may differ from similar measures used by other companies.

The following table provides a reconciliation of financial measures calculated and reported in accordance with U.S. GAAP to the most directly comparable non-GAAP financial measures included within the accompanying press release for the three and twelve month periods ended October 31, 2020 and October 31, 2019:

 

 

Three Months Ended

 

Twelve Months Ended

 

 

October 31, 2020

 

October 31, 2019

 

October 31, 2020

 

October 31, 2019

Gross profit

 

$

300,395

 

 

$

245,067

 

 

$

1,189,774

 

 

$

1,047,963

 

Acquisition-related costs1

 

 

 

7,267

 

 

3,950

 

 

42,958

 

Management actions2

 

 

 

1,199

 

 

857

 

 

10,316

 

Non-GAAP gross profit

 

$

300,395

 

 

$

253,533

 

 

$

1,194,581

 

 

$

1,101,237

 

 

 

 

 

 

 

 

 

 

Gross margin

 

35.7

%

 

33.4

%

 

35.2

%

 

33.4

%

Acquisition-related costs1

 

%

 

1.0

%

 

0.2

%

 

1.4

%

Management actions2

 

%

 

0.1

%

 

%

 

0.3

%

Non-GAAP gross margin

 

35.7

%

 

34.5

%

 

35.4

%

 

35.1

%

 

 

 

 

 

 

 

 

 

Operating earnings

 

$

93,481

 

 

$

43,306

 

 

$

426,357

 

 

$

325,029

 

Acquisition-related costs1

 

 

 

11,275

 

 

6,183

 

 

62,333

 

Management actions2

 

 

 

7,163

 

 

857

 

 

16,311

 

Non-GAAP operating earnings

 

$

93,481

 

 

$

61,744

 

 

$

433,397

 

 

$

403,673

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

$

88,567

 

 

$

43,698

 

 

$

407,070

 

 

$

322,133

 

Acquisition-related costs1

 

 

 

11,275

 

 

6,183

 

 

62,333

 

Management actions2

 

 

 

8,019

 

 

857

 

 

17,167

 

Non-GAAP earnings before income taxes

 

$

88,567

 

 

$

62,992

 

 

$

414,110

 

 

$

401,633

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

72,196

 

 

$

38,266

 

 

$

329,701

 

 

$

273,983

 

Acquisition-related costs1

 

99

 

 

9,347

 

 

5,021

 

 

51,149

 

Management actions2

 

(5)

 

 

6,454

 

 

677

 

 

13,817

 

Tax impact of share-based compensation3

 

(3,102)

 

 

(2,159)

 

 

(7,652)

 

 

(13,677)

 

U.S. Tax Reform4

 

 

 

(86)

 

 

 

 

(1,012)

 

Non-GAAP net earnings

 

$

69,188

 

 

$

51,822

 

 

$

327,747

 

 

$

324,260

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

October 31, 2020

 

October 31, 2019

 

October 31, 2020

 

October 31, 2019

Diluted EPS

 

$

0.66

 

 

$

0.35

 

 

$

3.03

 

 

$

2.53

 

Acquisition-related costs1

 

 

 

0.09

 

 

0.05

 

 

0.47

 

Management actions2

 

 

 

0.06

 

 

0.01

 

 

0.13

 

Tax impact of share-based compensation3

 

(0.02)

 

 

(0.02)

 

 

(0.07)

 

 

(0.12)

 

U.S. Tax Reform4

 

 

 

 

 

 

 

(0.01)

 

Non-GAAP diluted EPS

 

$

0.64

 

 

$

0.48

 

 

$

3.02

 

 

$

3.00

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

18.5

%

 

12.4

%

 

19.0

%

 

14.9

%

Acquisition-related costs1

 

(0.1)

%

 

(0.4)

%

 

%

 

(0.3)

%

Management actions2

 

%

 

0.6

%

 

%

 

0.1

%

Tax impact of share-based compensation3

 

3.5

%

 

4.9

%

 

1.9

%

 

4.3

%

U.S. Tax Reform4

 

%

 

0.2

%

 

%

 

0.3

%

Non-GAAP effective tax rate

 

21.9

%

 

17.7

%

 

20.9

%

 

19.3

%

1

 

On March 2, 2020, the company completed the acquisition of Venture Products, Inc. ("Venture Products") and on April 1, 2019, the company completed the acquisition of The Charles Machine Works, Inc. ("CMW"). Acquisition-related costs for the twelve month period ended October 31, 2020 represent transaction costs incurred for the company's acquisition of Venture Products, as well as integration costs and charges incurred for the take-down of the inventory fair value step-up amounts resulting from purchase accounting adjustments related to the acquisitions of Venture Products and CMW. No acquisition-related costs were incurred during the three month period ended October 31, 2020. Acquisition-related costs for the three and twelve month periods ended October 31, 2019 represent transaction and integration costs, as well as charges incurred for the take-down of the inventory fair value step-up amount and amortization of the backlog intangible asset resulting from purchase accounting adjustments related to the company's acquisition of CMW.

 

2

 

During the third quarter of fiscal 2019, the company announced the wind down of its Toro-branded large horizontal directional drill and riding trencher product line ("Toro underground wind down"). Additionally, during the fourth quarter of fiscal 2019, the company incurred charges for a corporate restructuring event and a loss on the divestiture of a used underground construction equipment business. Management actions for the twelve month period ended October 31, 2020 represent inventory write-down charges incurred for the Toro underground wind down. No charges were incurred for the three month period ended October 31, 2020 related to the Toro underground wind down. Management actions for the three and twelve month periods ended October 31, 2019 represent charges incurred for the Toro underground wind down, including charges related to the write-down of inventory, anticipated inventory retail support activities, and accelerated depreciation on fixed assets; the corporate restructuring event, including employee severance charges; and the divestiture of a used underground construction equipment business, including the loss on the sale of the business.

 

3

 

The accounting standards codification guidance governing employee stock-based compensation requires that any excess tax deduction for share-based compensation be immediately recorded within income tax expense. Employee stock-based compensation activity, including the exercise of stock options under The Toro Company Amended and Restated 2010 Equity and Incentive Plan, can be unpredictable and can significantly impact the company's net earnings, diluted EPS, and effective tax rate. These amounts represent the discrete tax benefits recorded as excess tax deductions for share-based compensation during the three and twelve month periods ended October 31, 2020 and October 31, 2019.

 

4

 

Signed into law on December 22, 2017, Public Law No. 115-97 ("Tax Act" or "U.S. Tax Reform"), reduced the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent, effective January 1, 2018. This reduction in rate required the re-measurement of the company's net deferred taxes as of the date of enactment. The Tax Act also imposed a one-time deemed repatriation tax on the company's historical undistributed earnings and profits of foreign affiliates. During the three and twelve month periods ended October 31, 2019, the company recorded a tax benefit of $0.1 million and $1.0 million, respectively, related to a prior year true-up of the Tax Act. The Tax Act did not impact the company's Results of Operations for the three and twelve month periods ended October 31, 2020.

 

Investor Relations
Nicholas Rhoads
Managing Director, Investor Relations
(952) 887-8865, nicholas.rhoads@toro.com

Media Relations
Branden Happel
Senior Manager, Public Relations
(952) 887-8930, branden.happel@toro.com

Source: The Toro Company

Our Company

At The Toro Company, we take great pride in helping our customers enrich the beauty, productivity, and sustainability of the land. Founded in 1914, The Toro Company was built on a tradition of quality and caring relationships. Today, the company 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. Through a strong network of professional distributors, dealers and retailers in more than 125 countries, we proudly offer a wide range of products across a family of global brands to help golf courses, professional contractors, groundskeepers, agricultural growers, rental companies, government and educational institutions, and homeowners – in addition to many leading sports venues and historic sites around the world.