Toro Company (The) (TTC)

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Toro Company (TTC)

F4Q09 Earnings Call

December 08, 2009 11:00 am ET


Steve Wolfe - Vice President & Chief Financial Officer

Mike Hoffman - Chairman & Chief Executive Officer


Jim Lucas - Janney Montgomery Scott

Sam Darkatsh - Raymond James

Mark - Cleveland Research Company

Jim Barrett - C.L. King & Associates

Seaver Wang - HFP Capital Markets LLC

James Bank - Sidoti and Company

[Andy White] - Longbow Research



Good day ladies and gentlemen and welcome to the Toro Company Fourth Quarter Earnings Conference Call. My name is Gerri and I will be your coordinator 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 today’s conference. (Operator Instructions)

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

Steve Wolfe

Well, thank you Gerri, and good morning to everyone. Joining me this morning for our year-end 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 statement policy. Please keep in mind that during our 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 in making predictive statements.

So our 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 and can also be found in the Investor information section of our corporate website

I now would like to turn the call over to Mike.

Mike Hoffman

Thank you Steve, and good morning everyone. When I am looking back over this past year it was out of question one of the most difficult economic environments in decades.

Moving through the year, our professional end markets were hardest hit by the recession as customers deferred purchases in light of their business revenue declines, and despite many market challenges we were pleased to see our residential business perform better than expected and as we close the year and now begin fiscal 2010, and as others have said, the situation today seems less worse than a year ago. For Toro, we have begun seeing gradual signs of stabilization in our markets.

So, while, fiscal 2009 results were down significantly from the prior year, we are encouraged with how we executed against key priorities in what we achieved given the market realities we experienced. Early last year, we recognized it would be a difficult year and set three clear priorities. One, insures strong liquidity, two, focus on our customers and grow market share, and three, manage through the short-term challenges without materially impacting the long-term health of the organization.

These priorities and our resulting actions helped maintain our competitiveness, so as our markets recover we could take advantage of our strong position. Steve will discuss our liquidity priority shortly, but let me take a minute to talk about the other two I just mentioned.

First, as we saw signals of market contraction, we were determined to stay focused on the needs of our customers and seize the opportunity to gain market share. We have always tried to innovate our competition and this year was no exception. Once again, we surpassed our goal of having at least 35% of our total sales come from new products. In fact, this year, we had the highest level of new products in recent history, topping 50% of total sales.

Our products alone did not fully counter the recession. However, our innovation truly made a difference in helping us take share in most of our markets.

Leading the way into professional segment was our versatile line of Toro Grandstand mowers, providing entry into an entirely new category. This machine energized the channel during the time of uncertainty and provided landscapers with the flexibility and productivity that really benefited them this year.

In other innovative product gaining traction in our irrigation business is our precision series spray nozzles. With growing worldwide sensitivity to managing water as a precious resource, this breakthrough technology represents a significant differentiator over the competition by reducing water usage up to 30%.

In the residential segment, our redesigned line of Toro and completely new offering of Lawn-Boy Steel Deck Walk Power Mowers and a broader range of price points resulted in significant share growth in walk power mower category.

In riding products, dealer acceptance of our new platform of Toro TITAN zero-turn mowers was much improved over last year’s line up, nearly twice as many dealers carry the all new TITAN in 2009 as a previous year models in 2008. This speaks volumes to the value of this product that it offers customers and our continued strength in this important category as the residential market transitions from traditional tractors to new generation zero-turn mowers.

Going forward, we expect this innovation momentum to continue in the market place as the products introduced in fiscal 2009 gain momentum and we introduce even more new products in fiscal 2010. This impressive effort is born out of our choice to preserve our investments in new product development to fuel future innovations, while we needed to adjust R&D spending for the year, due to contracting revenues, our spending as a percentage of sales for fiscal 2009 was up slightly to 3.5% of our revenues, marking the sixth consecutive year of increased investment as a percent of our total sales.

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