The Toro Company (TTC)
F3Q2011 Earnings Call
August 18, 2011 11:00 am ET
Kurt Svendsen – Director of Investor and Public Relations
Michael Hoffman – Chairman and CEO
Blake Grams – VP, Corporate Controller
Tom Larson – VP and Treasurer
Mark Rupe – Longbow Research
Mark [ph] – Cleveland Research
Michael Wherley – Janney Montgomery Scott
Josh [ph] – Raymond James
Robert Kosowsky – Sidoti & Company
Jim Barrett – CL King & Associates
Previous Statements by TTC
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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. Kurt Svendsen, Director of Investor and Public Relations of The Toro Company. Please proceed, Mr. Svendsen.
Thank you Elisa and good morning everyone. Joining me this morning for our third quarter earnings call are Mike Hoffman, Chairman and Chief Executive Officer; Tom Larson, Vice President and Treasurer; and Blake Grams, Vice President and Corporate Controller.
Let me now begin with our customary forward-looking statement policy. Please keep in mind, during the 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. 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 in our predictions. Our earnings release was issued this morning by Business Wire and can also be found in the Investor Information section of the corporate website, thetorocompany.com.
With that, I will turn the call over to Mike.
Thanks Kurt, and good morning everyone. As you know Steve Wolfe, who served as Toro’s CFO for the past 14 years retired at the end of July after more than 25 years with the company. I’m sure Steve is listening today from his cabin in northern Minnesota. I speak for everyone at Toro in saying we have deep gratitude for Steve’s many contributions and steady leadership.
Without question his financial stewardship played a significant role in putting the company in a great position for his successor now to help drive future growth and profitability. We are very excited to welcome Renee Peterson as Toro’s next Chief Financial Officer and Vice President of Finance. Renee joins us from Eaton Corporation, where she most recently served as Vice President of Finance and planning for the company’s largest standalone business Eaton’s $4 billion truck and automotive segments.
Renee, a native of Minnesota, is a smart, genuine and focused individual, attributes that make her a great cultural fit here at Toro. She brings extensive experience in providing financial leadership for global businesses, along with a proven track record for championing innovative approaches in process improvements and cost controls. She is well prepared to help further our ongoing drive to expand our global reach and improve sales and profits as part of our destination 2014 initiative. Renee starts next Monday and looks forward to meeting with you in the months ahead.
Turning to our results for the third quarter, net sales grew over 9% to $501 million, driven by balanced growth across both our professional and residential businesses, with currency having a positive impact of about 2 percentage points in the quarter. On the earnings front, we posted net income of $35.1 million or $1.11 per share compared to $1.01 per share last year, while sales and earnings per share were records for the third quarter.
And if not for an unusually large rework issue, the quarter’s earnings would have been much better. As we reported this morning, quarterly earnings were negatively impacted by a pre-tax charge of $4.5 million or $0.09 per share on an after-tax basis to account for an one-time expense related to walk power mower rework issue.
For the first nine months, net sales were up 12% to $1,515.9 million, and we reported earnings of $112.6 million or $3.51 per share. While pleased with our results for the quarter, what is most impressive is what we accomplished despite a couple of negative macro trends that challenged both Toro and our customers. In addition to increasingly sluggish economic conditions, ongoing adverse weather has been a significant headwind. At the end of our second quarter, we were talking about a late cool spring, and May is starting to show promise.
Whether then turning cooler than normal in many parts of the US followed by extreme temperatures in July. Southern markets for example have faced excessive heat and moderate to severe drought conditions, resulting in dormant grass that doesn’t require mowing thus slowing retail. Fortunately some of our Northern markets experienced mentionable rainfall that kept the turf growing.
So before I take you through our segment results to discuss a few headlines within our businesses, I would like to take a minute and provide an update on a couple of recent acquisitions. Back in late June we acquired Lawn Solutions to add key product categories in turf renovation to our global line up, including aerators, seeders, power rakes and brush cutters.