Toro 2015 Annual Report Download - page 37

products due to continued market growth and increased demand
RESULTS OF OPERATIONS
for our innovative product offerings and newly introduced prod-
Fiscal 2015 net earnings were $201.6 million compared to
ucts. However, sales of irrigation products were down primarily
$173.9 million in fiscal 2014, an increase of 15.9 percent. Fiscal
due to unfavorable weather conditions in key markets, and sales
2015 diluted net earnings per share were $3.55, an increase of
of micro-irrigation products were lower due to unfavorable for-
17.5 percent from $3.02 per share in fiscal 2014. The primary fac-
eign currency exchange rates and continued adverse political
tors contributing to the net earnings improvement were higher net
and economic conditions in key international markets.
sales, leveraging fixed SG&A costs over higher sales volumes, and
•
Increased sales of residential segment products due to strong
a decrease in our effective tax rate. However, these improvements
shipments and demand for our newly introduced zero-turn radius
were partially offset by a decline in our gross margin rate and an
riding and walk power mower products and expanded product
increase in interest expense. Our net earnings per diluted share
placement. However, residential segment net sales in Australia
were also benefited by $0.05 per share in fiscal 2015 compared to
were down due to unfavorable foreign currency exchange rate
fiscal 2014 as a result of reduced shares outstanding from repur-
changes.
chases of our common stock.
•
Our overall net sales in international markets slightly decreased
Fiscal 2014 net earnings were $173.9 million compared to
by 1.9 percent in fiscal 2015 compared to fiscal 2014 due to
$154.8 million in fiscal 2013, an increase of 12.3 percent. Fiscal
unfavorable foreign currency exchange rate fluctuations that
2014 diluted net earnings per share were $3.02, an increase of
reduced our total net sales by approximately $47 million in fiscal
15.3 percent from $2.62 per share in fiscal 2013. The primary fac-
2015.
tors contributing to the net earnings improvement were higher net
sales, a slight increase in gross profit, and leveraging fixed SG&A Gross Margin. Gross margin represents gross profit (net sales
costs over higher sales volumes. However, these increases were less cost of sales) as a percentage of net sales. See Note 1 of the
partially offset by a reduction in other income and a higher effec- Notes to Consolidated Financial Statements, in the section entitled
tive tax rate. Our net earnings per diluted share were also bene- ‘‘Cost of Sales,’’ for a description of expenses included in cost of
fited by $0.08 per share in fiscal 2014 compared to fiscal 2013 as sales. Gross margin decreased by 60 basis points to 35.0 percent
a result of reduced shares outstanding from repurchases of our in fiscal 2015 from 35.6 percent in fiscal 2014. This decline was
common stock. mainly the result of the following factors:
The following table summarizes our results of operations as a
•
Unfavorable foreign currency exchange rate movements.
percentage of our consolidated net sales.
•
Purchase accounting impact of the incremental charge for the
sale of inventory that was written-up to fair value as a result of
the acquisition of the BOSS business.
Fiscal years ended October 31 2015 2014 2013 Somewhat offsetting those negative factors were:
Net sales 100.0% 100.0% 100.0%
•
Improved price realization.
Cost of sales (65.0) (64.4) (64.5)
•
Costs for a supplier component rework issue that impacted cer-
Gross margin 35.0 35.6 35.5 tain walk power mowers in fiscal 2014 that was not repeated in
SG&A expense (22.5) (23.5) (24.2)
fiscal 2015.
Operating earnings 12.5 12.1 11.3
Interest expense (0.8) (0.7) (0.8) Selling, General, and Administrative Expense. SG&A expense
Other income, net 0.4 0.4 0.6 increased $26.7 million, or 5.2 percent, in fiscal 2015 compared to
Provision for income taxes (3.7) (3.8) (3.5) fiscal 2014. See Note 1 of the Notes to Consolidated Financial
Net earnings 8.4% 8.0% 7.6% Statements, in the section entitled ‘‘Selling, General, and Adminis-
trative Expense,’’ for a description of expenses included in SG&A
Fiscal 2015 Compared With Fiscal 2014 expense. SG&A expense rate represents SG&A expense as a per-
centage of net sales. SG&A expense rate in fiscal 2015 decreased
Net Sales. Worldwide net sales in fiscal 2015 were $2,390.9 mil- 100 basis points to 22.5 percent compared to 23.5 percent in fiscal
lion compared to $2,172.7 million in fiscal 2014, an increase of 2014 due to fixed SG&A costs spread over higher sales volumes.
10.0 percent. This net sales change was attributable to the follow- However, the increase in SG&A expense of $26.7 million was
ing factors: driven mainly by the following factors:
•
Increased sales of professional segment products driven by the
•
Incremental SG&A expense of $19 million from the BOSS
acquisition of the BOSS business resulted in incremental net business.
sales of $128.5 million for fiscal 2015. In addition, our profes-
•
Increased administrative expenses of $7 million.
sional segment net sales were positively impacted by higher
•
Continued investments in engineering and new product develop-
shipments of landscape contractor and specialty equipment ment that resulted in higher expense of $2 million.
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