Toro Co. (NYSE: TTC) Q4 2020 earnings call dated Dec. 16, 2020
Corporate Participants:
Nicholas Rhoads — Managing Director of Investor Relations
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Analysts:
Mike Shlisky — Colliers Securities — Analyst
Tim Wojs — Robert W. Baird — Analyst
Eric Bosshard — Cleveland Research — Analyst
Sam Darkatsh — Raymond James — Analyst
David MacGregor — Longbow Research — Analyst
Presentation:
Operator
Ladies and gentlemen, thank you for standing by and welcome to The Toro Company Fourth Quarter and Fiscal Year 2020 Earnings Conference Call.
[Operator Instructions] I will now hand the conference over to Nicholas Rhoads, Managing Director of Investor Relations. Please go ahead.
Nicholas Rhoads — Managing Director of Investor Relations
Thank you, Sara, and good morning. Our earnings release was issued this morning and a copy can be found in the Investor Information section of our corporate website, thetorocompany.com. On our call today are Rick Olson, Chairman and Chief Executive Officer; and Renee Peterson, Vice President, Treasurer, and Chief Financial Officer.
We begin with our customary forward-looking statement policy. During this call, we will make forward-looking statements regarding our business and future financial and operating results. You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our earnings release as well as our SEC filings, detail some of the important risk factors, including those related to COVID-19, that may cause our actual results to differ materially from those in our predictions. Please note that we do not have a duty to update our forward-looking statements.
In addition, during this call, we will reference certain non-GAAP financial measures. Reconciliations of historical non-GAAP financial measures to reported GAAP financial measures can be found in our earnings release or on our website. We believe these measures may be useful in performing meaningful comparisons of past and present operating results, to understand the performance of our ongoing operations and how management views the business. Non-GAAP financial measures should not be considered superior to, or a substitute for, the GAAP financial measures presented in our earnings release and this call.
With that, I will now turn the call over to Rick.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Thanks, Nick, and good morning. We are pleased to report robust results for fiscal 2020, highlighted by professional segment growth, primarily from incremental contribution from Charles Machine Works and Venture Products, a record performance from our Residential segment.
We owe our successful performance to our team, which demonstrated perseverance and ingenuity in this challenging year. We navigated COVID-induced manufacturing inefficiencies, including social distancing and workforce fluctuations. At the same time, we provided innovative solutions to meet demand from our retailers and customers.
Our employees managed these changes admirably, while working in significantly modified production environments or at home, as they balanced personal challenges resulting from the pandemic. I am beyond proud of our team and will remember this year as one that highlighted the way we lived our values, while caring for one another and serving our customers with determination.
Thank you to the entire team for their perseverance and ongoing commitment to work safely to drive our business forward. And to our channel partners, as essential businesses, you served our customers with dedication and passion. Together, we persevered to maintain and gain market share in key product categories with existing and new customers.
Execution in this challenging year continued to be guided by our enterprise strategic priorities of accelerating profitable growth, driving productivity and operational excellence, and empowering people. In addition, we enhanced our commitment to the well-being of our employees, service to our customers and support for our community. Ultimately, staying true to our values enabled us to deliver for our stakeholders.
For fiscal 2020, highlights include record growth in the Residential segment, successful introduction of new battery-powered products for residential and professional applications, increased investments in research and development in key technology areas, strong free cash flow; the continued return of value to shareholders via dividends and the launch of our Sustainability Endures Platform that documents our progress, aligned with long-held values and objectives, and profiles our continued efforts to address environmental, social and governance priorities.
I’ll now provide some commentary regarding key results by segment for the full year and fourth quarter, and Renee will go into more detail.
For fiscal 2020, Professional segment net sales were up 3% year over year and earnings were up 12%. Residential sales were up 24%, and earnings were up 75%. For the fourth quarter, Professional segment net sales were up 10% versus the same prior year period, and earnings were up 70%. Residential net sales were up 39% and earnings were up 90%.
I’ll now provide some insight into the demand environment for the quarter. In the Residential segment, we experienced a continuation of trends seen throughout much of fiscal 2020. Stay-at-home directives and the expansion and strength of our channel were key contributors to high demand for walk power mowers and zero-turn riding mowers. Innovative features, refreshed brand presence, and extended season sales provided additional momentum.
In the Professional segment, we drove growth with increased demand for our landscape contractor, snow and ice management, golf irrigation, rental and specialty construction, and ag irrigation products.
Strong product offerings, favorable weather and stay-at-home trends drove retail demand throughout the quarter and provided momentum going into fiscal 2021.
The Toro Company is sustainably strong. The pandemic year of 2020 proved that by focusing on our enterprise strategic priorities and living our enduring values, we are able to deliver strong results.
Our performance this year was only possible because of the resilience and flexibility of our team, the manner in which our operations and businesses resourcefully responded to customer demands, and the dedication of our channel partners. As a result, I’m optimistic about our momentum going into the new fiscal year.
With that, I will turn the call over to Renee for a more detailed discussion of our financial results.
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Thank you, Rick, and good morning, everyone. During the fourth quarter, we continued to build on our sales momentum in both the Residential and Professional segments, while executing well operationally and investing in innovation to position The Toro Company for long-term growth.
We did sell in a challenging and unpredictable environment. We grew fourth quarter net sales by 14.5% to $841 million. Reported EPS was $0.66 and adjusted EPS was $0.64 per diluted share. This compares with reported EPS of $0.35 and adjusted EPS of $0.48 per diluted share for the comparable quarter of last year.
For the full year, net sales increased 7.7% to $3.38 billion. Reported EPS was $3.03 per diluted share, up from $2.53 last year. Full year adjusted EPS was $3.02 per diluted share, up from $3 a year ago.
Now, to the segment results. Residential segment net sales for the fourth quarter were up 38.5% to $187.9 million, mainly driven by strong retail demand for walk power and zero-turn riding mowers.
Full year fiscal 2020 net sales for the Residential segment increased 24.1% to $820.7 million. The increase was mainly driven by incremental shipments of zero-turn riding and walk power mowers as a result of our expanded mass channel, as well as strong retail demand for these products due to new and enhanced product features, favorable weather and stay-at-home trends.
Residential segment earnings for the quarter were up 90.2% to a record $26.4 million. This reflects a 390-basis point year-over-year increase to 14.1% when expressed as a percentage of net sales.
This improvement was largely driven by productivity and synergy initiatives and SG&A expense reduction and leverage on higher sales volume. For the year, Residential segment earnings increased 74.5% to a record $113.7 million. On a percent of net sales basis, segment earnings increased 390 basis points to 13.8%. This was a record setting year for the Residential segment and the team deserves well-earned recognition.
Professional segment net sales for the fourth quarter were up 9.5% to $644 million. This increase was primarily due to growth in shipments of landscape contractor, zero-turn riding mowers and snow and ice management equipment, annual pricing adjustments and lower floor plan costs, as well as incremental sales from the Venture Products acquisition.
For the full year, Professional segment net sales increased 3.3% to $2.52 billion. Professional segment earnings for the fourth quarter were up 70.2% to $104.2 million, and when expressed as a percent of net sales, increased 580 basis points to 15.2%. This increase was primarily due to annual pricing adjustments and lower floor plan costs, lower acquisition-related charges, and benefits from productivity and synergy initiatives. This was partially offset by product mix.
For the full year, Professional segment earnings increased 12% compared to fiscal 2019. When expressed as a percent of net sales, segment earnings increased 130 basis points to 15.9% from last year.
Turning to our operating results. We reported gross margin for the fourth quarter of 35.7%, an increase of 230 basis points over the prior year period. Adjusted gross margin was 35.7%, up 120 basis points over the prior year. The increases in gross margin and adjusted gross margins were primarily due to the benefits from productivity and synergy initiatives and net price realizations, mainly within the Professional segment. This was partially offset by product mix.
Reported gross margin was positively affected by lower acquisition-related charges compared with the prior year period. For the full year, reported gross margin was 35.2%, up 180 basis points compared with 33.4% in fiscal 2019. Adjusted gross margin was 35.4%, up from 35.1% in fiscal 2019.
SG&A expense as a percent of net sales decreased 290 basis points to 24.6% for the quarter. This decrease was primarily due to restructuring costs in the prior year period that did not repeat, and cost reduction measures, including decreased salaries and indirect marketing expense. This was partially offset by increased warranty costs in certain Professional segment businesses.
For the full year, SG&A expense as a percent of net sales was 22.6%, down 40 basis points from fiscal 2019. Operating earnings as a percent of net sales for the fourth quarter increased 520 basis point to 11.1%.
Adjusted operating earnings as a percent of net sales increased 270 basis points to 11.1%. For fiscal 2020, operating earnings as a percent of net sales were 12.6%, up 220 basis points compared with 10.4% last year. Adjusted operating earnings as a percent of net sales for the full year were 12.8% compared with 12.9% a year ago.
Interest expense of $8 million for the fourth quarter was flat compared with a year ago. Interest expense for the full year was $33.2 million, up $4.3 million over last year, driven by increased borrowings as a result of our Professional segment acquisitions.
The reported effective tax rate was 18.5% for the fourth quarter, and the adjusted effective tax rate was 21.9%. For the full year, the reported effective tax rate was 19% and the adjusted effective tax rate was 20.9%.
Turning to the balance sheet and cash flow. At the end of the year, our liquidity was $1.1 billion. This included cash and cash equivalents of $480 million and full availability under our $600 million revolving credit facility. We have no significant debt maturities until April of 2022.
Accounts receivable totaled $261.1 million, down 2.8% from a year ago. Inventory was flat with a year ago at $652.4 million. We have plans to build inventory in the fourth quarter to partially mitigate potential supply chain and manufacturing constraints. Instead, the additional production allowed us to fulfill stronger than expected retail demand and satisfy customer needs.
Accounts payable increased 14% to $364 million from a year ago. Full year free cash flow was $461.3 million with a reported net earnings conversion ratio of 140%. This positive performance was primarily due to favorable net working capital, the increase in reported net earnings and reduced capital expenditures.
Given our strong cash generation in fiscal 2020, we have already paid down $50 million of debt in November. We also expect to resume share repurchases in fiscal 2021.
In fiscal 2020, our disciplined capital allocation strategy continued to include investing in organic and M&A growth opportunities, maintaining an effective capital structure and returning cash to shareholders. We also focus on near-term liquidity.
For fiscal 2021, our capital priorities remain the same and include reinvesting in our businesses to support sustainable long-term growth — both organically and through acquisitions — returning cash to shareholders through dividends and share repurchases and repaying debt to maintain our leverage goals. In addition to the $50 million debt pay down in November, we also recently increased our quarterly cash dividend by 5%.
We are providing full-year fiscal 2021 guidance at this time based on current visibility. Note that there continues to be considerable uncertainty given the potential effects of COVID-19. This includes potential effects on demand levels and timings, our supply chain and the broader economy.
I will share the guidance highlights and Rick will cover the macro trends and key factors that we will be watching throughout the fiscal year.
For fiscal 2021, we expect net sales growth in the range of 6% to 8%. This includes four months of incremental sales from the Venture Products acquisition. We expect continued recovery in Professional segment end market. The strongest growth will be in the second and third quarter, as those comparable periods last year were most impacted by the pandemic.
We expect Residential segment end markets to return to low single-digit growth, following an exceptionally strong fiscal 2020. We anticipate a stronger first half than second, given our fiscal 2020 performance.
Looking at profitability, we expect moderate improvement in fiscal 2021 adjusted operating earnings as a percent of net sales compared with fiscal 2020. This assumes continued productivity and synergy benefits and lower COVID-related manufacturing inefficiencies. We expect these benefits to be partially offset by material, wage and freight inflation as well as the reinstatement of salaries, incentive and discretionary employee-related costs that were reduced or eliminated in fiscal 2020.
In the Professional segment, we expect earnings as a percent of net sales to improve versus fiscal 2020 due to better volume leverage. In the Residential segment, we expect earnings as a percent of net sales to be similar to fiscal 2020 on comparable volumes.
We expect full year adjusted EPS in the range of $3.35 to $3.45 per diluted share. This adjusted EPS estimate excludes the benefit of the excess tax deduction for share-based compensation.
Based on current visibility, we anticipate adjusted EPS to be higher in the first half of fiscal 2020 versus the year ago period. The majority of the increase will be in the second quarter. For the second half of fiscal 2021, we expect adjusted EPS to be comparable with the same period of fiscal 2020.
We expect depreciation and amortization for fiscal 2021 of about $95 million. We anticipate capital expenditures of about $115 million, as we continue to invest in projects that support our enterprise strategic priorities. We anticipate fiscal 2021 free cash flow conversion in the range of 90% to 100% of reported net earnings.
In fiscal ’21, we’ll continue to execute and adapt to changing environments as we maintain a balance of focusing on the short-term while never losing sight of our long-term strategic priorities. We look forward to capitalizing on many exciting growth opportunities in fiscal ’21 and beyond. I will now turn the call back to Rick.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Thanks, Renee. Looking ahead, we’ll be watching a number of macro trends, such as the trajectory and duration of COVID-related impacts, including potential global supply chain disruptions and continuing social distancing restrictions impacting production, global economic recovery factors driving general consumer and business confidence and commodity trends and weather patterns for the winter and spring season.
As these trends evolve, we are well positioned for growth within our specific market categories and are closely watching a number of key drivers. For our Residential and certain Professional businesses, customer interest in home investments; for landscape contractors, improvement in business confidence; for snow and ice management, demand within our new and refreshed product categories; for golf, the anticipation of another strong year for rounds played and the return of food and beverage and event revenue; for grounds equipment, the budgets of municipal and other tax supported entities and their impact on capital equipment purchases; for underground, the funding of 5G and broadband build out and critical need infrastructure rehab and replacement; and for rental and specialty construction, the resumption of fleet upgrades and replacements.
We have a strong and innovative portfolio of products to address these market opportunities. Some recently introduced products that will continue to drive our business, include TITAN, Z Master, and TimeCutter zero-turn riding mowers for homeowners and contractors; the Flex-Force 60-volt lithium-ion suite of products, including our walk power mower, snow thrower, hedge trimmer, chainsaw and power shovel; the BOSS Snowrator and Ventrac Sidewalk Snow Vehicle; the Greensmaster eTriFlex all electric and hybrid riding Greensmowers; the Ditch Witch JT24 Horizontal Directional Drill; the Toro e-Dingo electric and Dingo TXL 2000 stand-on skid steers, and the Ditch Witch SK3000 stand-on skid steer.
The enthusiastic customer response to these products demonstrates the success of our innovation efforts and we will continue to focus on key technologies like, alternative power, smart connected and autonomous products.
Lastly, we have concluded our three-year Vision 2020 employee initiative. For fiscal 2021, we have implemented a new one-year employee initiative. Our stretch enterprise-wide performance goals include net sales of $3.7 billion and adjusted operating earnings of at least $485 million.
In closing, for fiscal 2021 and beyond, we believe our diverse portfolio of businesses and strong customer relationships, position us to grow. Our productivity and synergy initiatives will drive profitability and fund investments. Our investments in innovative products and emerging technologies will enable us to meet the evolving needs of our customers and, more than ever, our team is the key to The Toro Company’s continued success.
Thank you to our people for your continued dedication and resilience and to our channel partners, customers and shareholders, for your continued support.
With that, Renee and I will take your questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Our first question comes from the line of Mike Shlisky with Colliers Securities. Your line is now open.
Mike Shlisky — Colliers Securities — Analyst
Good morning, everybody.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Good morning, Mike.
Mike Shlisky — Colliers Securities — Analyst
Hey. So, I think you had mentioned much in your comments, but can you give us a feel for the — like the — target market for like acquisitions for 2021? You got plenty of capital available to you, it seems. Are you seeing the targets out there at these evaluations or is this not the right time to be buying somebody in your sector?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Good question, Mike. And it’s really — our approach continues to be the same with acquisitions. It’s a continuous process for us. So even after we completed some of the recent acquisitions, that didn’t stop us from continuing conversations with potential future opportunities. And I would say we are incredibly pleased with the last two acquisitions, Charles Machine Works and VPI.
We continue to look for similar opportunities. I don’t know that the environment is any different, notably, than it has been over the last few years, but it’s really just a matter of us finding the opportunities and aligning with the desires of those companies to do something. So it’s really continuation of the same process. We continue to actively look for opportunities within our capital deployment policy.
Mike Shlisky — Colliers Securities — Analyst
Okay, great. And you had also mentioned some tailwind from the weather. I didn’t hear if it was Professional or not. We had a pretty big hurricane season this past season here in the U.S. It was record season. Could you give any additional business or interest in — to Ditch Witch or other rental business, at least regionally, for some projects that came about post-hurricanes?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
There would be a minor effect from the hurricanes themselves. But what happens is the hurricanes actually bring moisture into the South, and that’s a very common pattern for us to extend our selling season into the fall is where we have continued growing temperatures in the South and plenty of moisture. So, that contributed to the — especially the retail for Residential and for our contractor businesses, just because there was a lot of growing grass in the South. That extended our season and contributed to the results for the fourth quarter.
Mike Shlisky — Colliers Securities — Analyst
Okay. And then, maybe turning to Residential again. Over the last month or two, we’ve been seeing additional lock downs, parts of the world have been gradually shifting in and out of having people stay at home more often than they had in prior months. Is there any way — can you tie that back, are you seeing any increased retail sell-through in places where the lockdowns are getting more intense, where everyone has got to stay-at-home and focus on their homes? Or is it different, one where in the cold weather months when this have been — compared to the spring-summer, you had some pretty decent organic results last time?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
We haven’t necessarily tied into specific areas where there are more or less restrictive directives in place. We do know that in the fourth quarter — and we continue to see the momentum — there is a benefit from — continues to be a benefit from the stay-at-home directives. That again is on top of the things that we’ve done internally. So it’s really a balance between those factors, both external and what we’ve done with the product line, with the channel expansion and with just everything like brand messaging and those types of initiatives are getting some really nice traction. And so, we see that continuing.
We do — we’ve built into the plan for 2021, the tapering off of those effects and going back to a more cyclical growth rate for Residential, but that’s on top of a new base, so we’ll continue to capture the gains that we have experienced this last year.
Mike Shlisky — Colliers Securities — Analyst
Got it. That makes sense. Thanks so much, guys. Happy holidays.
Operator
Thank you. Our next question comes from the line of Tim Wojs with Robert W. Baird. Your line is now open.
Tim Wojs — Robert W. Baird — Analyst
Yes, hey. Hey, everybody. Good morning.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Good morning.
Tim Wojs — Robert W. Baird — Analyst
Just a couple of questions from me, I guess. I guess, first, I don’t know if it’s easier to go around by business, but Rick, if you could just kind of kind of run through where you see channel inventories right now as you kind of exit ’20 and head into 2021 in the preseason?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Sure. Channel inventory is — just in general — are in very good shape. You might think in some of the areas if there were challenges on the Pro side, those would be areas where you might have higher field inventory. In fact, we are in great shape, pretty much across the board. If anything, there are some categories where we would prefer to have higher field inventory. I think we expected that to be the case in the fourth quarter. We expect it to build out a little bit. But the fact that we’re building additional product allows — allowed us to meet additional retail demand and we’ll continue to work on getting those inventories where we’d like to see them, probably through the first half of 2021.
Tim Wojs — Robert W. Baird — Analyst
Okay. Okay, that’s helpful. And then in terms of the kind of 6% to 8% growth that you outlined, is there a way to frame what your expectation would be around price capture, just acknowledging that raw materials and some input costs are going to be higher this year than they have in the last couple of years?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes. We always continue to price to market, not to cost. And we would anticipate a kind of normal range of pricing adjustments, I would say 1% to 2% is the normal, maybe a little bit — probably balanced from that perspective, more of that certainly in the Pro. Residential, normally, we do not see that type of price adjustments.
Tim Wojs — Robert W. Baird — Analyst
Okay. Okay and then just the last one for me, just — you’re giving full year guidance here, obviously a lot of moving parts and uncertainty. I guess when you step back, where do you feel like you’re trying to be more conservative or cautious? And I guess, if current trends would continue, where would you see any source of potential upside relative to your expectations?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes, maybe I can start.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Sure.
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
And Rick, if you want to add on to it. As we looked at it, we try to provide kind of a balanced perspective. There’s a lot of moving pieces. We thought we had good momentum in Q4 and coming into the year, so that that helps. It’s a pretty good base, there’s some optimism. But we recognize there’s still a lot, especially in the first half of the year, related to COVID, and the impacts it could have on us and also on our supply base.
So, I think Residential had a fantastic year. As we talked about, we do expect that to normalize, continue to grow from that new base and Professional coming back strong as we go through the year. So, I mean, some of those variables could change and either we could be a little bit lower, a little bit higher. But what we try to do with our guidance is provide a balanced perspective.
Tim Wojs — Robert W. Baird — Analyst
Okay. Okay, great. Well, nice job on the finished year and good luck on ’21.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Eric Bosshard with Cleveland Research. Your line is now open.
Eric Bosshard — Cleveland Research — Analyst
Good morning.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Good morning.
Eric Bosshard — Cleveland Research — Analyst
A follow-up on the Residential. Certainly agree that would characterize 2020 is a great year. Curious in your visibility and conviction in growing from a exceptional year of growth. What gives you confidence of against tough comparisons that are unique here, that you’re on a path to be able to grow that business?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
I think it ties back to the earlier comments, which some of the factors are external, but many of the factors that drove the growth this last year are internal, and the results of that team and the work that they’ve done. So we’ve got, we have new distribution partner channel with Tractor Supply. And the biggest one across the board is the new products that we’ve introduced and everything that goes along with that.
I think it’s interesting if you look at 2020, the growth was quite balanced across the channels, so it’s not strictly — just purely incremental of Tractor Supply, for example. But we grew our distributor business as well, our dealer business and for our longtime partners at Home Depot, we had a terrific year with the Home Depot. They continue to be great partners and we see more opportunities going forward.
And keep in mind, it’s a very large market and it’s largely replacement-oriented, so there — just every year, there’s opportunities to continue to replace product that’s been in the field for a long time.
Eric Bosshard — Cleveland Research — Analyst
Thank you. That’s helpful. And then secondly, in terms of the COVID costs in ’20 — in ’21. Obviously, you had spending that you deferred this year and I think you spoke of the incentives and some other factors. From a net standpoint, as you all work through the numbers, did you end up spending more in ’20 or less in ’20? And then how does that compare how should we be thinking about that compare for how it influences margins in ’21?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes, from a COVID standpoint, we did experience some manufacturing inefficiencies in fiscal ’20, and we do expect that those will be less in ’21, primarily in the second half. We should see that improvement with some of the restrictions and social distancing and other things, we are assuming, will become more relaxed.
However, it’s important to note, also, that we did take some cost actions quickly in fiscal ’20, when we saw the pandemic develop, and some of those will have been reinstated as we go into fiscal ’21, such as salaries. Everyone — together, we all took a salary reduction. That’s been reinstated. We would reset incentives to a more normal level. And there’ll be some resumption of travel and different trade shows and things like that.
However, you know, Eric, we’ll continue our focus on synergy and productivity and trying to drive those cost actions and — as we talked — about market-based pricing. So all of that’s kind of included in our guidance, as we look forward, but there are some pluses and minuses that we’ve tried to call out, so that you’re aware of the changes.
Eric Bosshard — Cleveland Research — Analyst
Perfect. That’s great. Thank you.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Thank you.
Operator
Thank you. Our next question comes from the line of Sam Darkatsh with Raymond James. Your line is now open.
Sam Darkatsh — Raymond James — Analyst
Good morning, Rick. Good morning, Rene. How are you?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Good morning, Sam. We’re doing well.
Sam Darkatsh — Raymond James — Analyst
A couple of follow-up questions, if I could. And Renee, if you mentioned this in your prepared remarks and I missed it, I apologize. I was scribbling as fast as I could. Did you give sales and EPS expectations specific to the first quarter?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
We did not. Given some of the variability that we’re seeing, we found — we wanted to provide guidance, so we gave guidance for the full year, but we did not specifically break out anything for the first quarter. We think there is still going to be some — as there is, we’re sure, on any time, some variability between quarters, and encourage people to look at it over, over the whole year. And we do feel, like I said, good about the momentum that we saw in Q4 coming into the quarter. So, we would — we did talk about that. We would expect EPS to be stronger in the first half, in part because, Sam, that’s where we saw the biggest impact in Q2 of COVID, and that we would expect second half EPS to be comparable and somewhat comparable sales volume.
Sam Darkatsh — Raymond James — Analyst
Helpful. And then terrific operational performance in the fourth quarter in both the Pro and Resi segment. From a corporate overhead standpoint, it was higher than at least I had, I don’t know about others on the call. Was there something going on in that line item that caused a little bit of a higher overhead expense in the quarter and how should we look at overhead specific to fiscal ’21?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes, I think this may be part of what’s causing the variance from your perspective, is in fiscal Q4 of fiscal 2019, we had about a $6 million post-retirement benefits that we saw that would have flowed through Other, and so that is a large factor within that particular line item. And then as we have talked about, this would be consistent throughout the year for fiscal ’20. So, we saw some favorability in our renegotiated floor plan rates that we saw as an improvement in revenue and gross margin. That was offset in part by a decline in Other income. That also would flow through that Other area.
So those would be probably the two factors, going forward, that pension for that post-retirement was a one-time situation and we’ve gone through the change as far as the Red Iron floor plans. So, you would see that continue in the same way that you saw in fiscal ’20.
We will see some reinstatement of some costs of flowing through Other, and that would be related to some of the items we talked about with salary increases, the return of incentives to a more normal level. And we have some benefit in health care. I think as people kind of deferred some of those discretionary items, that we would assume would start to return in ’21. So those would be some items to consider as well.
Sam Darkatsh — Raymond James — Analyst
So, if I could ask a specific question then, so where should we, from a modeling standpoint, look at corporate overhead as a cost excluding other income and interest expense, which you fold into the line item, obviously?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
It would be up year-over-year, again driven by some of the cost actions that we took that would be reinstated. It’s really the return of the salary and the incentives and then, again, the health care would flow through that area as well.
Sam Darkatsh — Raymond James — Analyst
Okay. So up perhaps a similar rate as sales to give a rough estimate?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes, we didn’t give guidance specifically on that, but I mean those are the factors that would be driving it.
Sam Darkatsh — Raymond James — Analyst
Got it. And then last question from me, if I could. I think last quarter you indicated expectations of roughly, call it, 25% incremental margins in fiscal ’21. My math might be suspect, but it looks like your guidance presume something a little bit lower than that, including your stretch goal, which I think is coming in somewhere in the high teens.
Help me understand why or what sort of factors have influenced that besides normal conservativity as to why incrementals might be a little bit below normal 25%, especially if you were thinking that would be the case just a few months ago?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes, as we look at of our guidance, we would consider certainly the mix with Professional we think will be a stronger growth rate than Residential, but Residential continuing at a great performance level. We’ll continue our focus on productivity and synergy initiatives. We do expect to have still some manufacturing inefficiencies, although they will be lower. We anticipate year-over-year.
We do have the reinstatement of some of the costs that we just talked about being salaries, incentives and health care. And then we are expecting to be in a more inflationary environment as well. Steel is one of the areas that every time we open up the newspaper, you read more about it. We’re also anticipating some inflation in resins and it’s in freight costs that we’ve built in and then we talked about pricing already.
So, that all factors into our guidance and there is a lot of uncertainty. So as I said earlier, we’re trying to give a balanced perspective with our guidance, but recognize there are still a lot of moving pieces, at least for the first half of the year and we’ll see a balanced second half.
Sam Darkatsh — Raymond James — Analyst
Very helpful. Everybody, stay safe, be well and have a terrific holiday season.
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Thank you.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Thank you. You too.
Operator
Thank you. Our next question comes from the line of David MacGregor with Longbow Research. Your line is now open.
David MacGregor — Longbow Research — Analyst
Yes, good morning, everyone.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Good morning.
David MacGregor — Longbow Research — Analyst
I wonder if you could just walk us through, Rick, through the various businesses within the Professional segment, and just talk, if you could, about what you’re seeing in terms of improving forward visibility; which segments are you seeing maybe a little more evidence of progress, which are maybe a little more uncertain at this point? And I got a couple of follow-ups.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Sure, I can do that. First of all, I mean let’s just talk about Golf. Golf has had an incredible year from a player’s standpoint. If you look at August through October, rounds played were up 20%, 25% and 30% in October, outstanding at year-to-date rounds played being up about 10.7% and headed towards probably 12% or 13%. So be the, probably the second largest increase year-over-year of golf in the history of record-keeping, so that has to be a positive for golf even longer term. But we also know that as restrictions are released, some of that play will drop off, but there have been a lot of new golfers introduced to the game that — and there will definitely be a residual effect of some of them continuing to play.
So bottom line, the basis for golf is very strong. The pieces that have yet to come back would be the question marks surrounding municipal golf, resort golf, and then just continued confidence to resume capital acquisitions and that’s started. So, bottom line, Golf is coming back. It’s not fully back yet. And there are a few questions, to get the answers are –.
From a LCE standpoint, landscape contractor gaining really good momentum. That came back nicely and it’s on a track to continue doing so ahead. Had a strong fourth quarter and good momentum going into the year.
Rental in 2020, it was all about the independent rental companies, a lot of home projects, small contractors that rented equipment for those homeowners. And now we see the national accounts coming back into the buying cycle as well, largely driven by growing construction trends right now as well.
So, I’ll go through a few others. Charles Machine Works communications businesses is back very strong, have snapped back, really, I would say a whole full level at this point, driven by the factors that we’ve talked about before: 5G, Broadband build out and even repair and replacement of infrastructure, as well some of those projects have resumed.
Oil and gas as the portion of that business, that is a little bit more of a question mark. But just within the last couple of weeks, we’ve seen some positive signs of that coming back as well.
Irrigation. Irrigation had a strong year in 2020. We expect that to continue. Some of that was tied to stay-at-home initiatives and home investments, but the Golf business was very strong. Didn’t really miss a beat, even projects that we canceled were quickly backfilled by projects that were in queue.
The BOSS business continues to be very strong. We’re looking at — we’re all watching the weather, we’re all very interested in winter storm Gail, I believe it’s called. And that will be the largest storm in the Northeast in the last probably five years. That’s good for BOSS and it’s good for our Residential business. We have products that are staged there and more products headed to the area. And so that’s looking good, and I think did most of the areas. But if I missed something, please let me know and I’ll comment on it.
David MacGregor — Longbow Research — Analyst
No, that was a great run through. Thanks for that. Very helpful. Within the Pro, you talked about revenue growth of 9.5%. It seems like organic — would organic been something closer to maybe a 6% number? And if so, how much of that organic growth was price versus volume?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
Yes, for the quarter, I think organic was right round at the level that you said, although maybe a little bit lower than that. And for any particular quarter, it’s hard to measure the specifics for us around price. We would say again for the year, it was in the normal range between one and two points, close to the middle of that range. But that will be more consistent throughout.
David MacGregor — Longbow Research — Analyst
And 1% to 2% was for the full year you’re saying?
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
For the full year, yes.
David MacGregor — Longbow Research — Analyst
Right, right. Okay, thanks for that. And then just go off, if we could zero-in on that just for a second, and thanks for the color, Rick. But within your comments you noted that municipal and resort golf were still, from a capex standpoint, lagging a little behind. What would those two segments represent as a percentage of your overall Golf business? Can you give us some approximation or some context there?
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Yes, we don’t usually break it down that specifically. It would be in a few — this is rough estimate on my part. It’s in the probably 10% range.
David MacGregor — Longbow Research — Analyst
Okay. Great. That’s all I got. Thanks very much. Have a great holiday.
Renee J. Peterson — Vice President, Treasurer and Chief Financial Officer
You too. Thank you.
Richard M. Olson — Chairman of the Board, President and Chief Executive Officer
Thank you.
Operator
Thank you. There are no further questions at this time, I will now turn the call back to Nick for closing remarks
Nicholas Rhoads — Managing Director of Investor Relations
Thanks for your questions and interest in The Toro Company, and our best wishes for happy holidays to each of you. We look forward to talking to you again in March to discuss our results for the first quarter. Thanks, everybody.
Operator
[Operator Closing Remarks]