BLOOMINGTON, Minn. — The Toro Co. (NYSE: TTC) today repora net earnings of $79.0 million, or $0.73 per share, on a net sales increase of 4.4% to $655.8 million for its third quarter ended August 3, 2018. Adjusted 2018 third quarter net earnings were $73.5 million, or $0.68 per share, compared to adjusted net earnings of $65.5 million, or $0.58 per share in the comparable 2017 period, an increase of 17.2%.
For the first nine months, Toro reported net earnings of $232.9 million, or $2.14 per share, on a net sales increase of 3.1% to $2,079.3 million. Due to the one-time impacts of U.S. tax reform, the first nine months reported net earnings were slightly lower than the comparable 2017 reported net earnings of $233.9 million, on net sales of $2,016.5 million. For the first nine months, adjusted net earnings were $255.9 million, or $2.35 per share, compared to adjusted net earnings of $215.0 million, or $1.93 per share, in the comparable 2017 period, an increase of 21.8%.
Third quarter operating earnings as a percent of sales were 14.2%, an improvement of 20 basis points compared to 14.0%in the same period last year. Operating earnings as a percent of sales for the first nine months was 15.9%, an improvement of 60 basis points compared to the same period last year.
The reported tax rate for the third quarter was 15.3% compared to 22.6 percent last year. The adjusted tax rate for the third quarter was 21.2% compared to the adjusted tax rate of 25.9% in the same period last year. For the quarter, the adjusted tax rate excludes the benefit of the excess tax deduction for share-based compensation, as well as adjustments to the provisional tax items recorded in the first quarter of fiscal 2018. For the first nine months, the reported tax rate was 29.2%, up from 23.6% in the same period last year. The adjusted tax rate was 22.2%, down from 29.8% for the comparable period. The adjusted rates were significantly impacted by the enactment of U.S. tax reform as previously reported. The unfavorable impact of one-time charges associated with the provisional re-measurement of deferred tax assets and liabilities, and provisional calculation of the deemed repatriation tax, were partially offset by the benefit resulting from the reduction in the federal corporate tax rate. The company continues to estimate that its full fiscal year adjusted 2018 effective income tax rate will be about 23%.
“As anticipated, we saw strong demand for our walk power and zero-turn mowers as our residential business rebounded nicely after the slow start to spring,” said Richard M. Olson, Toro’s chairman and chief executive officer. “The success of new products also helped bolster sales in our landscape contractor businesses, which drove professional segment revenue growth for the quarter. New products like the Exmark Radius, the Toro TITAN HD and the new diesel-powered zero-turn mowers in our landscape contractor businesses, have been well received by customers,” said Olson.
“Looking ahead, both our BOSS Snowplow and residential snow businesses have strong orders in hand and are well positioned for the coming season. We are excited about new innovative product introductions like the Toro Power Max HD two-stage snow thrower and the BOSS rear-mounted plow that allows the operator to efficiently pull and clear snow for enhanced productivity. Other customer favorites, like the EXT extendable plow and our line of V-box spreaders, continue to build momentum.”
“In an environment of increasing input costs, particularly for steel and freight, we are committed to leveraging operational efficiencies, with a continued emphasis on productivity to mitigate the inflationary pressures. Further, we have implemented price increases across our businesses. We expect to realize the full effect of current pricing and productivity measures in fiscal 2019. With the fourth quarter underway, we remain focused on our strategic priorities, including investing in product and process innovations for the long term. The team’s dedication and execution in these areas have us well positioned to deliver on our commitment for another record year.”
In view of the foregoing, the company now expects adjusted net earnings per share to be about $2.66 to $2.69 for fiscal 2018, which reflects the net near-term impact of recently announced and enacted trade policy changes, tariffs and related inflationary pressures on our input costs. These adjusted estimates exclude the one-time charges associated with U.S. tax reform and the benefit of the excess tax deduction for share-based compensation. The company continues to expect revenue growth for fiscal 2018 to be about 4%.
- Professional segment net sales for the third quarter were $482.5 million, up 3.0% from $468.6 million last year. Strong sales of our landscape contractor equipment was the key driver of the positive results for the quarter. The new zero-turn mowers introduced this year in both the Exmark and Toro landscape businesses have been well received by customers. For the first nine months, professional segment net sales were $1,546.5 million, up 6.6% from the comparable 2017 period. Strong demand for landscape contractor zero-turn mowers, large reel golf and grounds equipment, and our rental and specialty construction equipment all contributed to the results for the period.
- Professional segment earnings for the third quarter were $97.7 million, up 0.4% from $97.4 million in the same period last year. Professional segment earnings for the first nine months were $338.6 million, up 7.6% from $314.5 million compared to the same period last year.
- Residential segment net sales for the third quarter were $166.5 million, up 9.5% from $152.1 million last year. Favorable weather in our key turf selling season in North America resulted in strong channel demand for our walk power and zero-turn riding mower categories for the quarter. For the first nine months, residential segment net sales were $521.2 million, down 5.4% from $550.7 million last year. Below average snowfall early in the season and a late start to spring negatively impacted sales of our residential turf and snow thrower products for the period.
- Residential segment earnings for the third quarter were $16.0 million, up 40.9% from $11.4 million in the comparable period last year. Residential segment earnings for the first nine months were $58.0 million, down 7.9% from $63.0 million in the same period last year.
- Residential segment sales up 9.5%, rebounding nicely from the late start to spring
- Reported quarterly EPS of $0.73; adjusted quarterly EPS of $0.68, up 17.2% over comparable 2017 period adjusted EPS of $0.58
- Third quarter net sales increase 4.4% to a record $655.8 million