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Q1 2013 Earnings Call
February 21, 2013 11:00 am ET
Kurt Svendsen - Managing Director of Corporate Communications and Investor Relations
Michael J. Hoffman - Chairman, Chief Executive Officer and President
Renee J. Peterson - Chief Financial officer and Vice President of Finance
Thomas J. Larson - Vice President and Treasurer
Robert A. Kosowsky - Sidoti & Company, LLC
James Barrett - CL King & Associates, Inc., Research Division
Mark Herbek - Cleveland Research Company
Joshua Borstein - Longbow Research LLC
Sam Darkatsh - Raymond James & Associates, Inc., Research Division
Previous Statements by TTC
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Thank you, and good morning. Joining me of our first quarter earnings call are Mike Hoffman, Chairman and Chief Executive Officer; Renee Peterson, Chief Financial Officer; Tom Larson, Vice President and Treasurer; and Blake Grams, Vice President and Controller. We begin with our customary forward-looking statement policy. During this call, we will make certain forward-looking statements, which are intended to assist you in understanding the company's results. You are all aware of the inherent difficulties, risks and uncertainties in making predictive statements. The Safe Harbor portion of the company's earnings release, as well as SEC filings detail some of the important risk factors that may cause actual results to differ from those in our predictions. Our earnings release was issued this morning by Business Wire. A copy can be found in the Investor Information section of our corporate website, thetorocompany.com. I will now turn the call over to Mike.
Michael J. Hoffman
Thank you, Kurt, and good morning to all listeners. Fiscal 2013 is off to a solid start on the strength of another record-setting performance that reached new first quarter highs for both sales and earnings. The strong quarter results were largely driven by accelerated demand for large turf equipment, early end user purchases of professional equipment and continued growth in Micro-Irrigation sales. Our residential business, on the other hand, slowed because of relatively low snowfall levels in North America through January, impeded snow thrower retail activity. Recent snowfall across our primary snow markets, including the record-breaking blizzard that struck the Northeast, is helping clear field inventories and generate additional revenue for our contracted customers as well. Even today, snow is falling across the Midwest. So for the first quarter, net sales increased nearly 5%, while net earnings grew to -- grew by close to 60%. During the first quarter, we returned $33 million to shareholders through repurchases of shares. Since our last earnings call, our Board of Directors authorized a repurchase of an additional 5 million shares of common stocks. Additionally, the Board raised a quarterly cash dividend to $0.14 per share, an increase consistent with our dividend compound growth rate of over 28% since 2004. Renée will discuss our financial and operating results in more detail later in the call. Turning to our business segments. We just completed the annual trade show season, featuring the leading shows, including the Golf Industry Show, which some of you attended. We were pleased by the universally positive reaction to our latest products by both existing and prospective customers at the shows, as well as the optimism they expressed for the year ahead. Conditions in the domestic golf industry provided clear justification for such optimism. In 2012, rounds of golf played achieved the largest 1-year gain since 2000. The additional cash flow of courses earned has led to early-season purchasing of equipment. As expected, customers are buying now due in part to the Tier 4 transition. Tier 4 refers to emission requirements affecting our products with diesel engines greater than 25 horsepower, but less than 75 horsepower that became effective January 1 last month. These new emission requirements lead to price increases on certain products in order to cover additional costs associated with the new technology. However, beyond Tier 4, customers have demonstrated a strong appetite for products across the category, resulting in some customers pulling up fleet purchases. Courses continue to catch up on purchases that were put off in recent years. As a result, golf retail sales are up nicely over the first quarter of 2012. Domestic golf irrigation has also been experiencing encouraging quoting activity that has our distribution channel feeling positive about the market outlook for the replacement of older systems. We won several irrigation projects during the quarter, with a competitive take away ratio that suggests our share is in good shape. The landscape contractor business got off to a good start as well by capitalizing on promising weather conditions in certain regions of the United States. A significant portion of the demand has come from southern states where shipments in retail are tracking well compared to recent years. Thanks to slightly higher-than-normal precipitation levels and warmer-than-usual weather patterns. The action also reflects professional landscape contractors' growing optimism over the economy. Similar to golf, our sports field and professional grounds customers are moving up purchases of large turf equipment. Retail sales for the business are ahead compared to last year at this time. The grounds numbers for the quarter were further bolstered by our capturing several large municipal deals. Next, our professional rental and construction business has been busy with the launch of the new offerings related to the Stone and Astec acquisitions of 2012. Both integrations continue to be on schedule. The newest Stone produces were well received during both the World of Concrete and the American Rental Association shows held recently in Las Vegas.