Toro 2015 Annual Report Download - page 36

markets are expected to slightly increase in fiscal 2016 as com-
Destination PRIME
pared to fiscal 2015, as we also anticipate continued positive
Our current multi-year initiative, ‘‘Destination PRIME,’’ began our
customer response generated from new products. Precision irri-
journey into our second century. Similar to our previous Destina-
gation products remain a long-term focus for us as continued
tion 2014 initiative, this three-year initiative is intended to help us
market growth and demand for efficient watering solutions is
drive revenue and earnings growth and further improve productiv-
expected to drive demand for our products. We expect our
ity, while also continuing our century-long commitment to innova-
increased manufacturing capacity and infrastructure that
tion, relationships, and excellence. Through our Destination PRIME
expanded our market presence for micro-irrigation products to
initiative, we will strive to achieve our goals by pursuing a progres-
contribute to our anticipated sales growth of micro-irrigation
sion of milestones for organic revenue growth, operating earnings,
products in fiscal 2016. We also expect our residential segment
and working capital.
net sales in fiscal 2016 to be similar to our sales volumes in
Organic Revenue Growth. We intend to pursue strategic growth fiscal 2015 as we anticipate positive momentum to continue in
of our existing businesses and product categories with an annual fiscal 2016 from new products released in fiscal 2015.
organic revenue growth goal. The organic revenue growth goal of
•
We intend to continue to focus on our international markets to
our Destination PRIME initiative is to achieve at least five percent grow revenues, and our long-term goal is for our international
organic revenue growth each fiscal year of this initiative. We define sales to comprise a larger percentage of our total consolidated
organic revenue growth as the increase in net sales, less net sales net sales. We plan to continue investing in new products with a
from acquisitions that occurred in the prior twelve-month period. In worldwide focus and leverage our infrastructure around the
fiscal 2015, we fell short of this goal by achieving 4.1 percent world, connecting us more closely to our customers and increas-
organic revenue growth. ing our global presence. However, uncertainty with the econo-
Operating Earnings Growth. The operating earnings goal is to mies of key international markets is expected to linger into fiscal
raise operating earnings as a percentage of net sales to 13 per- 2016, which may hamper our international net sales growth. We
cent or higher by the end of fiscal 2017. In fiscal 2015, we made expect international net sales to be slightly up in fiscal 2016
progress towards this goal as we realized 12.5 percent of operat- compared to fiscal 2015 unless foreign currency exchange rates
ing earnings as a percentage of net sales. further decline, which could adversely affect our international net
sales in fiscal 2016.
Working Capital. The working capital goal of our Destination
•
We expect net earnings and diluted net earnings per share to be
PRIME initiative is to drive down average net working capital as a up in fiscal 2016 compared to fiscal 2015, driven mainly by our
percentage of net sales to 13 percent or lower by the end of fiscal anticipated sales growth, improvement in our gross margin rate,
2017. In fiscal 2015, our average net working capital as a percent- and continued leveraging of our SG&A costs. Additionally, we
age of net sales was 16.0 percent. anticipate a further reduction in our diluted shares outstanding
due to anticipated continued repurchases of our common stock.
Outlook for Fiscal 2016
•
As announced on December 3, 2015, our Board of Directors
As we move into fiscal 2016, we intend to build on the positive increased our fiscal 2016 first quarter cash dividend by 20 per-
momentum from fiscal 2015 and continue with our commitment to cent to $0.30 per share compared to the quarterly cash dividend
providing an array of innovative products and services to custom- paid in the first quarter of fiscal 2015 and authorized the repur-
ers around the world. We expect to focus on capitalizing market chase of up to an additional 4,000,000 shares of our common
opportunities and driving profitability with investments aimed at stock in open-market or in privately negotiated transactions.
generating customer demand and gaining market share. We
•
In fiscal 2015, our average net working capital was higher than
believe our fiscal 2016 financial performance will include, among our expectations. Therefore, in fiscal 2016, we plan to place
many others, the following main factors: increased emphasis on improving asset utilization with a focus
•
We anticipate fiscal 2016 net sales in our professional segment on reducing the amount of working capital in the supply chain.
to increase compared to fiscal 2015 due, in part, to the momen- We anticipate our average net working capital as a percentage
tum of demand generated by the positive reception of our land- of net sales in fiscal 2016 to decrease as compared to fiscal
scape contractor equipment products introduced in fiscal 2015, 2015, in part, as we continue to transition certain receivables to
as well as continued growth in the landscape contractor market. our Red Iron joint venture. Additionally, we also anticipate aver-
We also expect continued growth in the rental equipment market age inventory levels to be lower in fiscal 2016 compared to fiscal
and strong demand for new rental and specialty construction 2015.
equipment products. Sales in the golf and grounds and irrigation
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