Toro 2015 Annual Report Download - page 38

Interest Expense. Interest expense for fiscal 2015 increased changes in foreign currency exchange rates reduced our total
$3.3 million compared to fiscal 2014 due to higher levels of debt net sales by approximately $5 million in fiscal 2014.
as a result of borrowings that were used to pay the purchase price Gross Margin. Gross margin slightly increased by 10 basis
for the BOSS business. points to 35.6 percent in fiscal 2014 from 35.5 percent in fiscal
Other Income, Net. Other income, net consists mainly of our 2013. This improvement was mainly the result of the following
proportionate share of income or losses from equity investments factors:
(affiliates), currency exchange rate gains and losses, litigation set-
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Improved price realization.
tlements and recoveries, interest income, and retail financing reve-
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Cost reduction efforts from productivity and process improve-
nue. Other income for fiscal 2015 was $10.7 million compared to ment initiatives.
$8.7 million in fiscal 2014, an increase of $2.0 million. This Somewhat offsetting those positive factors were:
increase in other income, net was primarily due to higher earnings
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Lower proportion of professional segment sales that carry higher
from our equity investment in Red Iron of $1.1 million and lower average gross margins than our residential segment.
foreign currency exchange rate losses of $0.7 million in fiscal 2015
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Unfavorable foreign currency exchange rate movements.
compared to fiscal 2014.
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Slightly higher prices paid for commodities in fiscal 2014 com-
Provision for Income Taxes. The effective tax rate for fiscal pared to fiscal 2013, mainly for steel and resins.
2015 was 30.7 percent compared to 32.2 percent in fiscal 2014.
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Costs for a supplier component rework issue that impacted cer-
The decrease in the effective tax rate was attributable to the bene- tain walk power mowers.
fit in the first quarter of fiscal 2015 for the retroactive re-enactment Selling, General, and Administrative Expense. SG&A expense
of the federal research credit for calendar 2014 and higher earn- increased $16.0 million, or 3.2 percent, in fiscal 2014 compared to
ings in lower tax jurisdictions. fiscal 2013. SG&A expense rate in fiscal 2014 decreased 70 basis
Based on information available as of this filing, including the per- points to 23.5 percent compared to 24.2 percent in fiscal 2013 due
manent extension of the federal research credit, we anticipate our to fixed SG&A costs spread over higher sales volumes. However,
fiscal 2016 tax rate to be slightly lower than our fiscal 2015 tax the increase in SG&A expense of $16.0 million was driven mainly
rate. by the following factors:
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Increased sales and marketing expense of $6 million.
Fiscal 2014 Compared With Fiscal 2013
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Investments in engineering and new product development that
Net Sales. Worldwide net sales in fiscal 2014 were $2,172.7 mil- resulted in higher expense of $5 million.
lion compared to $2,041.4 million in fiscal 2013, an increase of
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Higher incentive compensation expense of $4 million as a result
6.4 percent. This net sales improvement was attributable to the of improved financial performance.
following factors:
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Incremental costs from acquisitions of approximately $2 million.
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Increased sales of professional segment products due to strong Somewhat offsetting those increases in SG&A expense was a
demand for landscape contractor equipment, demand for our drip decline in product liability expense of $2 million from favorable
irrigation solutions in agricultural markets, and the successful intro- claims experience.
duction of new and enhanced products that were well received by
Interest Expense. Interest expense for fiscal 2014 decreased by
customers, including products in the golf market and rental and spe-
4.8 percent compared to fiscal 2013 as a result of higher capital-
cialty construction equipment market. Additionally, improved price
ized interest from capital projects.
realization, as well as incremental sales from acquisitions of
$2.8 million, contributed to our net sales growth in fiscal 2014. Other Income, Net. Other income for fiscal 2014 was $8.7 mil-
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Increased sales of residential segment products due to strong ship- lion compared to $12.3 million in fiscal 2013, a decrease of
ments and demand for snow thrower products and parts as a result $3.5 million. This decrease in other income, net was primarily due
of heavy snow falls during the 2013-2014 snow season in key mar- to recovery for a litigation settlement of $3 million in fiscal 2013
kets and strong preseason demand for the 2014-2015 snow season. that was not duplicated in fiscal 2014 and higher foreign currency
Additionally, higher shipments and demand for our zero-turn radius exchange rate losses of $0.3 million in fiscal 2014 compared to
riding mowers and increased sales of electric trimmers and blowers fiscal 2013.
contributed to our sales growth. However, residential segment net Provision for Income Taxes. The effective tax rate for fiscal
sales in Australia were down due to unfavorable weather conditions 2014 was 32.2 percent compared to 31.7 percent in fiscal 2013.
and foreign currency exchange rate changes. The increase in the effective tax rate was attributable to the benefit
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Our overall net sales in international markets slightly increased in fiscal 2013 for the retroactive reenactment of the domestic
by 1.2 percent in fiscal 2014 compared to fiscal 2013. However, research tax credit, which expired on December 31, 2013. This
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