Toro Company (TTC)
F3Q12 Earnings Call
August 23, 2012, 11:00 am ET
Kurt Svendsen - MD, Corporate Communications & IR
Mike Hoffman - Chairman & CEO
Renee Peterson - VP, Finance & CFO
Eric Bosshard - Cleveland Research Company
Michael Wherley - Janney Capital
Robert Kosowski - Sidoti
Josh Chan - Raymond James
Jim Barrett - CL King & Associates
David MacGregor - Longbow Research
Previous Statements by TTC
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Good day ladies and gentlemen and welcome to the Toro Company third quarter earnings conference call. My name is Jasmine and I will be your coordinator for today. At this time, all participants are in a listen-only mode. (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 to Mr. Kurt D. Svendsen, Managing Director of Corporate Communications and Investor Relations for the Toro Company. Please proceed, Mr. Svendsen.
Thank you and good morning. Joining me for our third quarter and 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 section of our corporate website, thetorocompany.com.
I'll now turn the call over to Mike.
Thank you, Kurt and good morning to all of our listeners. The favorable spring weather conditions we enjoyed across much of the United States during the first half of the year took a dramatic turn this summer with a record setting heat wave and the worst drought the country has seen in over 50 years.
Extreme lack of moisture across most of the country coupled with the continuing global economic issues slowed the robust sales momentum we generated during our first two quarters. However our third quarter results still outpaced fiscal 2011 and we delivered improved revenues, gross margin and earnings per share in spite of the weather and economic challenges.
While net sales for the quarter only grew 1%, earnings per share increased 22%. For the first nine months, net sales increased 6.8% while earnings per share rose 21%. While currency exchange for the international business was somewhat negative, it had very little impact on the quarter and year-to-date results for the company.
As reported in our earnings release earlier this morning, the slowdown we experienced during the quarter, required an adjustment to our EPS guidance for the year 2010 which still represents a 14% of improvement over last year, even with the sense for investments we made for acquisitions this year. Renee will discuss our financial and operating results in more detail later in the call.
Several of our key businesses, most notably professional golf, landscape contractor and grounds and micro irrigation continued to perform well in North America. Our residential markets which are more immediately impacted by swings in mother nature saw industry-wide slowdowns due to the drought. Even with the drought, our overall year-to-date retail numbers remain favorable across most businesses.
International sales however had a tough quarter in virtually all areas. European economic troubles, excessive moisture in key Australian and Asian markets along with sluggish Asian golf development reduced sales for most of our Toro and co-products.
On a positive note, Japan's continued post tsunami recovery and strong residential product activity in the UK helped to somewhat to offset the international sales decline.
Moving on to our individual business segments. First in Golf, of course it continued systematic capital investments in new equipment to replace their fleets. And we saw continued benefit from delayed purchases during the recession. Confidence in the golf industry remains solid. The National Golf Foundation's monthly report show that the number of golf grounds played continues to grow. The increased revenues courses are experiencing this year will positively impact their future capital budgets and our sales opportunities for fiscal 2013. As courses are watering their greens and (inaudible) more to keep them healthy, the drought highlights the need for and the benefits of our water saving golf irrigation solutions.
We continue to probably serve many of the games leading courses as they host premiere events including the Olympic Club in San Francisco site of this year’s US Open, South Carolina’s Kailua Ocean Course home of the recent PGA Championship and stately Medinah Country Club located in the Chicago area where the Ryder Cup will be held in late next month.
Medinah is actually one of the Toro’s oldest accounts having purchased their very first Toro tractor back in 1925. All three of these exceptional venues use both our course maintenance equipment and irrigation systems. Helping prepare a course for such major tournament events provides an important stage for our industry leading products and services.
For instance at the US Open, the greens of the Olympic Club were manicured with the (inaudible) greens mower fleet made entirely of our Toro eFlex mowers, the industry’s first lithium ion battery powered greens mower. The exposure clearly generated enthusiasm and interest in this revolutionary new Toro product.