Toro Company (The) (TTC)

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Toro Company (TTC)

F3Q09 (Qtr End 06/31/09) Earnings Call

August 20, 2009 11:00 am ET


Steve Wolfe - VP and CFO

Mike Hoffman - Chairman and CEO


Jim Lucas - Janney Montgomery Scott

Sam Darkatsh - Raymond James

James Bank - Sidoti & company

Jim Barrett - C.L. King & Associates

Mark Rupe - Longbow Research



Welcome to the Toro Company third quarter Earnings Call. My name is [Jerry] and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference, Mr. Steve Wolfe, Vice President and Chief Financial Officer of the Toro Company. Please proceed Mr. Wolfe.

Steve Wolfe

Well, thank you, Jerry, and good morning, everyone. Joining me this morning for our third quarter earnings conference call are Mike Hoffman, Chairman and Chief Executive Officer, Tom Larson, Vice President and Treasurer, and John Wright, Director of Investor Relations.

We begin with our customary forward-looking statements policy. Please keep in mind that during the call we'll make certain forward-looking statements, which are intended to assist you in understanding the company's results. You're all aware of the inherent difficulties, risks and uncertainties and making predictive statements, particularly in the current environment.

So 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 that are in our predictions. Our earnings release was issued this morning by Business Wire and can also be found in the Investor section of the corporate website

With that opening, I'll now turn it over to Mike.

Mike Hoffman

Thank you, Steve, and good morning everyone. For Toro and the industry this has been a year marked by many challenges. As we near the end of our primarily selling season, economic conditions have shown little sign of improvement and continue to significantly impact our top and bottom-line results.

Now despite these pressures, we're executing soundly in areas such as spending control, inventory management and working capital improvement. Steve and I will shed further light on those in just a minute, but first let me share our overall results, and then Steve will discuss our segment and operating performance.

As you saw in this morning's release, we reported that net sales were down 19.8% to $394.9 million for our third quarter. On the earnings front, we posted net income of $19.8 million for the quarter or $0.54 per share, compared to $0.99 per share in the same period last year.

The earnings decline for the quarter includes several one-time charges for our workforce adjustments, a valuation allowance for deferred tax assets and legal matters. Together these add up to $0.15 per share on an after-tax basis.

For the first nine months, net sales were down 19.7% to $1,234.9 million. In addition, net earnings for the first ninth months were $63.4 million or $1.73 per share, down from $3.06 per share in the comparable fiscal 2008 period.

When looking at our markets, the themes discussed earlier this year are still true today, that is the softness continues with limited near-term recovery. Like many companies, our sales have been impacted by the deferral of large capital equipment purchases, particularly in golf, along with new course construction and large renovation projects being delayed.

This has resulted in a contracted market with increased competitive pressure. I am pleased to say we're effectively dealing with many challenges we face and are actually holding or gaining share across our markets, a testament to our talented people, strong products and a great group of partners building solid end-user customer relationships, from depo to dealers to golf and grounds equipment and irrigation distributors around the world, they make a real difference.

Speaking of golf, I'm sure many of you watched the PGA Championship last week that drew crowds of near 40,000 for practice rounds and the four-day tournament. That culminated with South Korean Y.E. Yang coming from behind to win his first major and the first by an Asian-born golfer. This will be good for golf in Asia and good for golf around the world. For us this tournament was especially rewarding as it took place here in Minnesota at Hazeltine National Golf Club, where Toro is proud to be the official supplier of turf and irrigation systems.

As you might expect, golf course conditions are critical to the success of such events, so a lot of credit goes to certified golf course superintendent Jim Nicole and his team who did a fabulous job of preparing the course and dealing with the challenging conditions.

I should also mention that Jim is a new user of Toro Turf Guard wireless soil sensors and is realizing the many benefits of this technology, including more accurately managing turf [health] and water usage. So on behalf of the entire Toro organization, we congratulate Jim and his team and look forward to helping them as they prepare Hazeltine National to host the 2016 Ryder cup.

In contrast to the Professional segment, our residential business has been relatively positive. We experienced a reasonable spring and benefited from several new product offerings at dealers and our primarily mass retailer. What we are seeing is a mother nature has to a certain extent, helped offset the poor economy.

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