Toro 2015 Annual Report Download - page 39

increase was partially offset by a discrete benefit relating to the
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Lower sales of micro-irrigation products due to unfavorable for-
change in tax accounting method filed that allowed us to recoup eign currency exchange rate fluctuations and continued adverse
basis for previously disposed assets and changes in the mix of political and economic conditions in key international markets.
international earnings. Our domestic field inventory levels of our professional segment
products were higher as of the end of fiscal 2015 compared to the
PERFORMANCE BY BUSINESS SEGMENT end of fiscal 2014 due, in part, to strong sales from new product
As more fully described in Note 12 of the Notes to Consolidated introductions and anticipated retail demand.
Financial Statements, we operate in three reportable business seg- Worldwide net sales for the professional segment in fiscal 2014
ments: Professional, Residential, and Distribution. Our Distribution were up by 3.7 percent compared to fiscal 2013 primarily as a
segment, which consists of our company-owned domestic distribu- result of the following factors:
torships, has been combined with our corporate activities and is
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Strong sales and demand for landscape contractor equipment,
shown as ‘‘Other.’’ Operating earnings for our Professional and including new and enhanced products, as contractors invested in
Residential segments are defined as earnings from operations plus turf maintenance equipment.
other income, net. Operating loss for the Other segment includes
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Higher global sales of our micro-irrigation products from market
earnings (loss) from our wholly owned domestic distribution com- growth and demand for more efficient watering solutions for
panies, corporate activities, other income, and interest expense. agriculture.
The following information provides perspective on our business
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Increased golf product sales mainly due to the successful intro-
segments’ net sales and operating results. duction of new and enhanced products, such as our new INFIN-
ITY sprinklers, that were well received by customers, as well as
Professional new international golf course projects.
Professional segment net sales represented 69 percent of consoli-
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Increased sales and demand for rental and specialty construc-
dated net sales for fiscal 2015, 68 percent for fiscal 2014, and tion equipment, including products that we introduced under the
70 percent for fiscal 2013. The following table shows the profes- Toro brand.
sional segment net sales, operating earnings, and operating earn-
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Improved price realization and incremental sales of $2.8 million
ings as a percent of net sales. from acquisitions.
Operating Earnings. Operating earnings for the professional
(Dollars in millions) segment in fiscal 2015 increased 11.5 percent compared to fiscal
Fiscal years ended October 31 2015 2014 2013 2014 primarily due to higher sales volumes. Expressed as a per-
Net sales $1,639.7 $1,477.6 $1,425.3 centage of net sales, professional segment operating margins
% change from prior year 11.0% 3.7% 7.2% slightly increased by 10 basis points to 18.8 percent in fiscal 2015
Operating earnings $ 308.0 $ 276.3 $ 254.4 compared to 18.7 percent in fiscal 2014. The following factors
As a percent of net sales 18.8% 18.7% 17.9%
impacted professional segment operating earnings as a percentage
Net Sales. Worldwide net sales for the professional segment in of net sales for fiscal 2015:
fiscal 2015 were up by 11.0 percent compared to fiscal 2014 pri-
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Lower gross margin in fiscal 2015 compared to fiscal 2014
marily as a result of the following factors: mainly due to unfavorable foreign currency exchange rate move-
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Incremental sales from the acquisition of the BOSS business of ments and the purchase accounting impact for the acquisition of
$128.5 million. the BOSS business, as previously discussed.
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Higher shipments of landscape contractor equipment, including
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A decline in SG&A expense rate in fiscal 2015 compared to
new and enhanced products, as contractors continued to invest fiscal 2014 due to further leveraging fixed SG&A costs over
in turf maintenance equipment. higher sales volumes.
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Increased sales driven by strong demand and market growth for Operating earnings for the professional segment in fiscal 2014
rental and specialty construction equipment, as well as positive increased 8.6 percent compared to fiscal 2013 primarily due to
customer response for new products we introduced in that higher sales volumes and an improvement in gross margin.
market. Expressed as a percentage of net sales, professional segment
operating margins increased 80 basis points to 18.7 percent in
Somewhat offsetting those positive factors were: fiscal 2014 compared to 17.9 percent in fiscal 2013. The following
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Unfavorable foreign currency exchange rate fluctuations. factors impacted professional segment operating earnings as a
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A decline in sales of irrigation products due to unfavorable percentage of net sales for fiscal 2014:
weather conditions in key markets.
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Higher gross margin in fiscal 2014 compared to fiscal 2013 as a
result of improved price realization and cost reduction efforts.
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