TTC - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen. And welcome to the Toro Company Second Quarter Earnings Conference Call. My name is Sabrina and I'll 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 today’s conference [Operator Instructions].

conference recorded this replay reminder, a is for being purposes. As Relations the now Heather to Investor for like would presentation Toro Hille, External Company. The to of conference, I today's turn over Communications for your Director and host Ms. proceed, Please Hille.

Heather Hille

morning. Thank you, and good

release are today measures, and by President, and begin Wire Our call On section in Investor can information copy Chairman be was and Officer measures. reconciliation a of this release, Web Information earnings Chief found statement the including Olson, We regarding our Chief Executive forward-looking issued as Rick site, our Renee and Officer. of a as morning customary Peterson, Treasurer earnings Business well with of non-GAAP policy, Vice non-GAAP thetorocompany.com. our Financial corporate financial the

make this statements we During business and financial and operating regarding will forward-looking results. call, future our

difficulties, aware predictive are the statements. of all making You and inherent uncertainties in risks

release risk not in statements. some Please our duty as from those that SEC our Our may as update our results to differ a detail actual do we that our factors note filings well to earnings important have predictions. the forward-looking of cause

how results Company the in call. believes views that, should over or earnings a and the measures operating to, in net release Rick. effective performance of adjusted of release. GAAP understand as superior to to, these for with contains to consisting call call our operations, Our our related will management net performance. as earnings this measures present The share an measures should in GAAP operating tax our per certain of measures to may earnings, considered and non-GAAP not the release reported I With now alternative schedule and be considered the in its this in turn the useful earnings be comparisons rate included presented related as non-GAAP in in measures conjunction performing are adjusted be diluted earnings and of business. past measures Such non-GAAP meaningful measures substitute of contained financial Reconciliations financial ongoing

Rick Olson

you, Thank listeners. good to our of all Heather, and morning

$X.XX $X.XX. to sales late delivered share modest contractor the grew earnings challenges a landscape notably earnings for earnings products, Golf $XXX.X increase despite Net net spring’s our arrival. drove sales posed to while X.X%. share and to our segment portfolio, Grounds adjusted the We record sales and for per have posted were by in growth second per reported are as Professional pleased professional increased and quarter million, quarter most

unusually due sales residential by XX.X% markets. cold segment Our to key primarily declined an April in

Following financial a the more discuss to-date, of our detail. brief and will operating states commentary Renee businesses our results in on

segment Our new powered our professional the inch Professionals landscape featuring business on value riders, based decks. contractor offerings solid performance zero-turn diesel units led including productivity new superior these for demand our XX provide.

Greens We The results by are additional contributed segment acquisition to Fairway Golf sales increased positive stand-on drive and growth. channel products made and the the Golf the demand. of to products Rich contribution professional to Grounds and businesses recent our quarter. due in also retail L.T. the pleased from continue

Solid large retail momentum continued mowers and demand our grounds of for rotary and vehicles reel offering. fueled

grounds won we addition, equipment with major the significant during cities bids In two quarter.

compact year. continued construction by XXXX TX led our businesses, positive spark specialty Next, have so core the construction retail our in and the utility quarter. helped The powering activity category momentum loaded as strong this economy ahead healthy in far the

We new our Mortar begun have ship also Mixer. to

Perrot drove new product our our and businesses. irrigation offerings Ag results in irrigation within growth Solid

regions, perform lighting, mobile replacements bid In irrigation, were is through performed condition. technology their but others contractor that Our we and we features and now in course Amazon control growth. Aqua-Traxx that lighting wins to to to well their commercial landscape SMRT well competitive unfavorable announce is devices Assistance business allows Ag Golf, FlowControl both other pleased weather steady Logic compatible users for our due residential Google projects. to capturing Alexa. widespread In new certain tape acceptance and with and and The slowed continued in in

our to our residential quarter. The the Moving products spring late during sales business. delayed spring of

of and the retail the trend driven help However, this month. started so extended inventory. weather that winter positive clear snowfall dealer at momentum snow did The far warming has end April

zero lines pleased publication. The receive a were favorable leading well. in power consumer in results turn walk many to and across international business experienced product also ratings We as our markets were reflected mower testing riding domestically

sales international range challenges. faced of weather Our a

ag, to continued projects number golf bids. irrigation of we and win Fortunately, as a other as well

and grounds gains. regionalized solid businesses contractor Our landscape also achieved

for the ProLine international our HXXX financial to discussion a professional are Direct products and the to results. turn compact our turn MyRIDE riders XXXX of Renee rotary call I now of our TX few detailed zero markets. mower, our innovative continued a gain across over more loader Collect utility Our ground will that with

Renee Peterson

Thank you, everyone. good and Rick, morning,

reported the a million a period earlier to morning, sales ago. net million for same for $XXX.X year we the were As compared $XXX.X quarter this record

versus $X,XXX.X were $XXX.X were $X,XXX.X delivered $X.XX XXXX. impact also six share net The to million net net the net the increase a or for of tax to million due first per million quarter in reform or We addressed $X.XX sales X.X% earnings net net per the million $X.XX to in achieved the of $XXX.X one-time of million decline $XXX.X record the share of of an we in earnings adjusted $XXX.X that per call. ago. Adjusted Year-to-date, compared last $X.XX of fiscal share comparable quarter net the is year or six per for U.S. earnings million or XXXX $X.XX period, months earnings second compared of We or share $X.XX earnings to of up sales XX.X%. share million earnings for first XXXX. compared months in $XXX.X per to

several segment professional were up quarter from for X.X% and Year-to-date last the The segment up for but earnings or to $X.XX adjusted the contractor share earnings adjusted months, sales the Please were were in a share our to sales share earnings $XXX.X $XXX adjusted release net of to million. million per up growth Grounds across the adjusted per million six GAAP XX.X% X.X% $XXX landscape reconciliation Professional $X,XXX in million. million year. $X.XX measures. comparable to million, increase XXXX first totaled the of XX.X%. was equipment. of particularly $XXX.X diluted and non-GAAP Golf $XXX.X Professional or see the earnings increases earnings to same per period, comparable an For period net for quarter our businesses, compared earnings due from

landscape professional the XX.X% products million, responsible same year. six earnings the $XXX.X months, Golf, growth. segment For period our last were the for a largely Ground to and first increase of were contractor Sales compared

Second XX.X% and turf totaled impacted average $XX negatively Residential last spring $XX.X segment earnings snowfall snow to earnings residential comparison the of our negative spring segment decreased million. million. million year’s reflects by caused demand XX.X% Year-to-date in to million. generated the year-to-date. Year-to-date early year. Below quarter million, from were season residential versus compounding a weather heightened late sales conditions. year year-over-year sales of down decrease effect reduced in of by residential start extent sales $XX and declined of course the thrower XX.X% favorable $XXX quarter early to the the The of this $XXX.X XX% last demand to products

by key as and offset XX Gross a reported price expense, improvement due to expense for and year-to-date, and a the XXX our including percent XX increase for the to Operating basis months. XX XX.X% XX.X% Segment of all sales an the the increased offset points by both basis was part product basis which development. currency were basis impacted XX.X%, increase earnings, basis results points new strategic XX.X% percent prudent decreased basis of quarter, lower the of to margin XX in first the XX.X% XX% as and investment initiatives, of incentive foreign key in points. for an Now by results. quarter XX.X% by partially realizations, The XX.X% expense XX to quarter was quarter increased periods the X.X% to slightly year-to-date. last decreased year. environment, of quarter, for SG&A The compared for second by quarter adjusted rate tax points second operating rate grew to the was XX% favorable by to year-to-date. year. The year. tax expense for by X.X% six the management partially XX.X% for to points by the sales Interest mix, compared and points last inflationary for but for

XX.X%, For the rate in the XX.X% was year. rate period tax first The tax recorded XX.X%, down year. up months, from XX.X% last adjusted same from was last the six

well in as driven tax U.S. the the share by increase benefit enacted re-measurement the associated about federal the of decrease with provisional Company was effective year-to-date year corporate rated the by including months based excludes the well first related The the by partially reported to by for deemed benefit repatriation tax tax and tax one-time compensation. charges estimate tax resulting with calculation rate. the a tax the the related lower enacted based from a tax fiscal offset and tax, XXXX excess benefit in benefit the reduction full U.S. of as tax to adjustments compensation compensation, federal based second adjusted share The driven the charges in lower by of tax reform, U.S. reminder, from tax for deferred tax share rate The of were rate related first were provisional in rates reform. six lower based benefit deductions for the as quarter the assets liabilities, the the rate rate income was quarter tax federal As for tax and driven the reform. to as onetime and share the to compensation. the offset the The tax tax tax reported XX%. reform, adjusted lower in The continues with adjusted rate reduction the quarter lower partially one-time tax

sales, X.X% balance the period for ago. increase million. increase was Net delayed a totaled the receivable This inventories of mainly end sheet. Accounts due the a XX percent the year for the to higher resulting spring. XX% to XX.X% same compared quarter the million, $XXX.X as quarter equivalent, At the a capital, increased an of to Turning $XXX.X of working the to XX.X% over was quarter, year from net month to average levels ago. start of Company’s turf

authorization. stock During there will the million approximately our X.X call under million X.X we repurchased authorization, and outstanding under of now Rick. I our to board shares quarter, about shares the second return are

Rick Olson

Renee. you, Thank

commitments, in April. weather results unfavorable tempered to consistent are We by delivered even pleased with have though our record sales were net

headwinds, we is second are we positioned half opportunities. Now strong to that the products on innovative our Despite demand are we and commodity well spring believe of the portfolios new underway, across current to take expected strong growth of on year. with businesses capitalize excited

First, continue growing conditions. cease our are of our landscape momentum should strong coupling to the spread businesses in Contractors and other the turn riding up behind current lineup. mowers products zero keep in light to contractor

anticipate momentum portfolio productivity good with Our to of channel news half We so keep generating drive and for management enthusiastic partners aerators, extends revenue. and job line rental product solid is fiscal growth for the are to our we greater profitability. are the spreaders, of help and are equipment. snow on acquired stand line contractors our construction stand-on services The second reason retail Market a and about and and continued ice complements the year-to-date poised specialty to products L.T. XXXX. through and remain on Rich saw contractors is business. we one professional sprayers, help forecast This recently positive our designed and

productivity snow performance. like TX to innovative depend construction products ice rental Tracked to Buggy season state-of-the-art Similarly, snow know on increase viewed and mower by the them and mixers year. mortar as optimize our Our help important and professional the for later XXXX, our spreaders management Mud contractors contractors this prepare are can new and they tools and to

XXXX we products orders demand were strong preseason winter at solid the on Our National in and show for March. the Truck next based Equipment Association introduced new for interest

also plow revenues the back drag spring new is drop golf players businesses great received Current courses spreader, our bringing our optimistic. and customers. The to Our and outlook are response clubs. and new both to conditions for from Golf Grounds

The market market are and will our vehicle later The municipal bids Solid and that the presenting opportunities we prime new list pull-behind events golf they quarter in for and Toro the year. to Shoal courses sales. counting England, to the Wentworth Also, on Outcross during of renowned include when Andrews turf they Shinnecock ground rest permit at championship. host some equipment in their Broadmoor are the as of Creek honored culminating most Scotland as for rotary Carnoustie remains preparing healthy Alabama, with hit The Scotland of Course irrigation to third St host Hills are this Toro in New members trusted prepared host and around of Colorado, a the conditions plain courses in the in maintenance products year. create the and York, during open Golf the XXXth in by exceptional Old the major majority and in a Links world top park

to serve honored are venues. We premier such golf

opportunities ahead. solid anticipate businesses irrigation Our

We from Green the before of to This the detect report Sight leading provider our accordingly. favorable adjust benefitting new and helps infinity satellite available revenues and for craft utilization play, Sight and and of based more of treatment our kits, grow. days sensing clients with our control become are nicely. visible, Sales savings will water analytics. drone chemicals. our turf sprinklers continue more weather issues all through systems, two-wire relationship Green conditions also course efficient As customers increase self to is and Customers growing turf golf intelligence are smart Agronomics. enables field remote it realizing

Next, year the innovative irrigation our irrigation, tape of we prospects overall in strong second control the for Ag across flow remains starting are the drift for the orders. of a bank good Ag half Americas. does as Demand with

We track are to strategy that report is integration planned. irrigation professional our Perrot on pleased as products

month, graded to walk value network. of should cooperates. mowers well. this several products distributor line Like the currently the as industry products, residential professional spring as spurred rainfall are which more leading should zero long for in our has product, turf and through weather continue of turn favorable our retail of power temperatures top our Sales We offerings, of perform and U.S. our the riders launching

this new thrower exciting introductions preparing also for snow are We later year.

growth that XXXX, both The partners tagline one more economic remains TX-XXXX, the our constant. more the Finally, that, accelerating themes ground golf businesses innovation, challenges we existing operational ProLine priorities outlook channel offer irrigation make empowering of of and advance on riders address our leveraging additional possible. customers for all project and opportunities. positioned secure interconnected; our first, and drive for efficient and are future to emerging and costs; even In driving international scale our interests solid and resources; customers sales cultural well positive the through in golf by continued Vision These opportunities excellence our wins, rental our a Favorable and capitalize numerous turn fixed zero of funding MyRIDE, our compete personally we to customer on our when These conditions, new making demand needs, value responsible XXXX for opportunities come helps thing people offsetting marketplace commitment, for Company's of us our be a new belief Vision focus equipment with key strategic year. everything competitive are customers that growth, the customer and and The conclusion, productivity It's and initiative, people. arise. finally, more reads, support or teams to my and creates that use and profitable of goal stakeholders. of future. resolve whatever our of and productivity us employee our is highlight each priorities serving our costs, do HXXX

on The want for deliver another are thank work. and record steadfast Company employees and year. their to partners to them Our success. our channel critical commitment I track is hard to

in sales. fully May residential strength the to on and in retail by professional ongoing rebound We momentum of driven the are capitalize generated

$X.XX now snow per light and falls about created inventories of for depletion April field commodity to growth adjusted X% be has orders. preseason snow earnings conditions by net about March the spring the and late to Company of promising Additionally, XXXX $X.XX revenue headwinds, for expected thrower share. In of delayed expects fiscal with the

the the questions For U.S. third estimates this share the the remarks. about of excess per to $X.XX benefits for at formal time. our of And $X.XX. one-time will quarter, adjusted we reform net with adjusted charges share and compensation. tax Company earnings This the concludes based take tax These associated expects deduction exclude

Operator

[Operator Research. with comes Mahoney Tom first Instructions] of Cleveland Your line question from

now Your open. line is

Tom Mahoney

to Can in the growth to where you that gap Pro compare compare you has year-to-date market Could year-to-date And drivers the XXXX? the X% widened, I are that guess if where the segment? relative trend? of the --

Rick Olson

markets the landscape markets segments, then it's to talked and golf golf, growing terms Our replacement very we economy have of the professional being And the of segment really a but systems of of number in strong, we key say market, in continues irrigation construction so And lot so and market would demand be some Z market are the confidence rental be for that. includes as the different a I markets, would the drive equipment. and not both that for about helpfully, new individual drivers cancellation driver contractor just equipments. both but to of a necessarily the continues very particularly, irrigation

those not the the market faster growth. combination businesses and healthy some there fast the are are those are of themselves, and terms parts in drivers So is some but of as and that growing

Tom Mahoney

the anything of as back those should look drivers? outperformance the you of the into expect Is on we there half individual sustaining year

Rick Olson

to And segment, talked I back we we -- back year, to would track this May, segment. have we think, at expect pickup the would point. the as our in on the for for the residential prepared remarks, be the in half back professional of about

making growing, up I residential probably for would normalize would the segment the professional more the be spring. late think segment So and

Tom Mahoney

I clarify weather residential just wanted and Pro probably on question increase, been then to inventory a that seen driven you’ve years than And then that. more in I driven, just heard disconnect? there've to correctly, then sure past is just the different make And when than

Renee Peterson

inventory inventory… is or So your our related question to channel

Tom Mahoney

increase… Your inventory

Renee Peterson

we it significantly would we season. just is seen the different past related through to velocity that our what reorders we the late spring. normalize to into that that and is see of So isn't haven't at We QX we similar up, as would than a see expect not as adjust to it's we we’ve would year compare momentum the inventory What get And the seen we same and go in we've what to have seen would as we be normally the in what would seen. late the expect in as situation, through spring unusual. retail past, data to all it continues. we When

Operator

you. And Global. comes Thank next from question the Mike Seaport line the Shlisky of with

Your line now open. is

Mike Shlisky

bids those Just grounds a during you've orders still are if past those you come? I are quick those or this big won shipments one was to two with quarter cities wondering those that yet that start, mentioned. to shipped

Rick Olson

It's really combination. a

have So tend to shipped yet some some have to of of and products the term be products contracts. ship, the longer and they

package delivery, several be rolls spread usually a probably it delivered necessarily out periods, So would there time, but not a it all gets will it's into in be for of across period especially. -- one one over that big municipality

Mike Shlisky

here any And been as any just net-net in what lost, to pass given then a of quarter weather? have the weather Just us you to quarter? and you And through way get may you the turning due you sense as what in as lost have there could second Is just quantify to residential way to a to be think the us business to might percent quantify, back what give what weather? the by impacts. might able for the

Rick Olson

weather of can did do specific get similar. we spring, you history look XXXX, we where real with that if being not have a And at pattern in without of it. back of timing see we there, I lot history. suggests were we patterns it’s a Mike, it -- mean shift that but somewhat the the all a this, like necessarily And

and get suggests XX gap May retail a to of to will if have of back we So very, to But days you that lose good start back. it off work hard But I to are very we're closing is it’s that rapidly. history going to sales say it. all tough period all get

Renee Peterson

And consumer weather that's that people as question, the more was the tend the particular, more at the segment segment, which specific time. responsive because that to is that weather -- residential influenced by condition and point your is occurring to to buy, in in more

Rick Olson

shoveling specific here, more Or am for buy likely a to lawnmower. to your sidewalk be I April,

Mike Shlisky

far just there that L.T. And synergies Can by -- need line Rich And Toro do all already like what other to builds done did? or with you what you winter may running didn’t some is curious about Rich. might you? know did detail little time, up before, next one to and on then of the anything I'm be -- is integration is that here us going a you squeezing BOSS standalone there it in you the have I rolls more have that as have I basis that to is be product is be or already -- it you am bit around? curious or anything as Or what one as it give Or to have that to it? as operating

Rick Olson

which tank designed product which the raider, sidewalk, efficiently for application it products contractor product be products would are properties. Mike, our and core very would and Rich, that professional is The on that’s that a about and use included the especially we application to clear larger there. contractor residential They’re dry we’ve commercial bulk is to have and line. to to the plow called landscape down core got. system landscape complementary stand contractors snow snow a equipment them, material perfect a complement line landscape The is that our excited also would L.T. treat very

have which the the the also well. a and this roads, well. product also or property the clear or stand-on the is clear to high for as -- designed may as is contract they would snow, contractor sidewalk contractor driveway And of have a clearing the So the may have productivity

With line-up. the our industry one perfect close had think very individual the but line completes designed really up They’ve to L.T. a have for themselves. of a customers, customer they the small with fit had. sprayers, understood that the set model a very to a contractors this was the So not we when product that perfect synergies, the leading We regard really existing there. in our so perfect products had plant for. they fit dialed-in spreader they They’ve -- plants. -- of the the with that talk is outgrown facility looking category. that they that up a the you to products Rich, what owner they are by are It’s probably very of in card, had and And the a an product relationship for

Indiana, as currently capabilities product to the we’re products the existing plant take and rest our to complete we there, which will add absorb plant line small it’s our for capabilities help and facilities overhead well. into in to So operating fixed have of the the but leverage a the hours

a actually perfect fit. it’s So

Renee Peterson

most after we’ll Mike, get moving that, the or busy likely year and through Yes, year we next be maybe season.

we’ll that -- we be facility. to our of Rick planning mid-year. So that the in moving as said, current we’ll able But fixed integration leveraging and will take investment we're advantage be be

Rick Olson

make The Mike, sales. we miss that priority, sure to top is don’t

we sure orders to we’ve of complete the bank this we expectations. at transition that got sure the making gap make and We’re do point when are exceeding bridge products that a our can that

Mike Shlisky

that. on up follow just So a

already meaning well? the into as as -- today putting as [indiscernible] the channel channel Toro pretty it Rich goes, channel exists As L.T. far is

Rick Olson

existing optimize Rich had. There and is L.T. that whatever would is we’re through a existing the contractor but product our get the looking to to be at continuation company primary channel, channel and ways preexisting the best through that customers our channels landscape supply with channel the

Operator

Thank Company. you. the with next question from Dougherty and Jon Fisher And comes

Your line is now open.

Jon Fisher

mix, First assume gross the comments, of ordered thank it topic drivers. margins? contribution in Is the the way to the margin price, in gross FX, safe them the relative was you your in outperformance you for impact that margins, breakdown prepared

Renee Peterson

correct. is that Yes,

Jon Fisher

think And about the something be QX the at compensation. mean, I’m in performance? impact throughout I on it it, was Or that that I would incentive you front, that I in it guess heard your then point I guess comments And since of this type prepared to mattered. just repeat surprised SG&A. I there SG&A would reduced Is year, the on specific mentioned year?

Renee Peterson

those outlook. we at the always year Yes, every based of on make and end Jon, adjustments at total look would our quarter our accruals,

were And It versus as our make not is it’s we performance accruing not that. -- So in to routine our performance, looking we’re just we're at mind, when it's to year-over-year -- our we’re accruing keep guidance, we adjusting, would basis. make adjustments to a -- important we we’re really really plan. those on

changes adjust we that as forward estimate go and we’ll So as well. our as

it’s we that do. something So routinely

because out, called driver it was for we So it SG&A a to the quarter.

Jon Fisher

slight assume sticking slight as improvement that going pace this way year year-over-year, the be with in improvement, ahead of we’re strong fiscal last six margin And of then months improvement, in to to than SG&A or this for operating a revenues slight still performance commentary margins year-over-year into margins better year math, was quarter. just The gross this on margins, I should be coming think the Or improvement? margin the margins? improvement. slight is of I’m interpreting to Are performance willing slight you we year-over-year just percent

Renee Peterson

half gross bit different are For we the second the of of mix products is year. anticipating a for what margin, little

rebound continue had As commented, Rick the in spring. we’re the to see given products expecting late residential to

based translates half is commodities as and FX favorable an favorable that that, see impact half, from of the the mix little a the expect to timing in the do had perspective, the how just residential in to not we we a second more of on of as margin we stronger input half second that expect be So probably the first segment would in which, our the half. We and the to P&Ls, cost year, year. would second less in

in that part, We for have total see the overall, seeing -- do be expect in pricing expecting part, play. into be year a the we’re realized seen will year. see will feel comments, gross residential half, year-over-year, mix we and as to year. his strong mentioned gross of not continue do half remaining because standpoint, will we first margin to for on another in on we probably as second likely we’re as And But SG&A pricing. similar leverage see margin, the from realized because we're some we record coming will what track SG&A, Rick in

So for we'll our year. in that overall, profit operating overall do think see improvement we the

Rick Olson

spring winter coming comment of dial a key do did the that not one add disciplined investments our back month, just would The the out SG&A. when playing somewhat our we we and thing our was we're positioned initiatives. about were and saw I very out we

R&D, as that. we make picked sales, percent a preserve of sure So slightly we that and up

Jon Fisher

of to that was down for were guidance as inputs I coming the is inputs hear, know Flowing or just there were rest for the what still into year. tick just it's quarter. earning about, into down talk investing planned the adjusted through management's a is last guidance you're year, earnings year? but a taking slightly. slight it couple to the of good outlook you you that had just wondering the That's guidance of the versus what rest the other Can into are there margins slight thoughts reduced

Renee Peterson

hard what particular, with made you're spring, related to exactly back. little from is get late earlier residential comments really in that primarily to in sales It a a bit that outlook the and all It’s standpoint of the Rick saying. lower

But a late you back. look lower offset based tried, the seeing of incorporate of as experience all some past spring, actions, again, on but we fact our And not the taking that we on at outlook, bit that price then all majority timing commodity get that the revenue little we based that with actions the to based just the don’t that. pressure realized price see of of margin the on we're immediately. So

Rick Olson

We're environment. seeing generally more inflationary

year. variability are that tariffs is is leaders, making step. flowing reduction, the so freight just discussion regard that it type be on last team have specific productivity business will all, whole sourcing talked pricing atmosphere plant with we exactly around given later of actions we're factors our over their commodity front, our our more hard But that's pricing general likely see that conference, with all where are weekend. our quarterly with earlier taking this directors, of met that that's this there is a week first lot the year. week one transactional that to offset cost. about, significant of So and initiatives increased this is good There progress news even and we on this increasing. to and we've first for lean with of service cost which And work, But tremendous last one We parts, already of and plant we increased some

So combination trying to offset we're effects. two the of those

Renee Peterson

guidance. So we May… at we're mean But that as our I into all look went of in at where

Rick Olson

course. a really news we're The rounds standpoint from having month to a ground terrific Last golf May affected business. year fee off last that cold think in year, play also courses. wet more at is you start residential affected a it courses May of good but business they residential this and May if year, time, are about we daily in the talked did last for the as that And a retail than this golf

haven't turned gap of closed good both on have the those we path. a yet positive, So or

Renee Peterson

looking there either this the way are when So the we things go the could at point that we're trying use some information have, in best guidance. to season. Jon, we’re at But

Jon Fisher

along segment, first two segment. reduction. the I question the this should to long-term do we a rate you Thank on GDP segment growth I off. the X% Sure, rate would has to growth out Like growth more global next or line we the deceleration into months, Rich, that. given segment, just to macro when it late how professional appreciate I'll slight the the on to to and Is everything question X% segment? was see type, long-term for times look is years. going look the years last two the that is two the we And growth. sign the roughly outperformance said, call expect, a professional to last XX just two lines professional years, And to be could the how with more three you. global given see X% last performing, next strong in sustainable and for it the something in out cycle are. And slight three of been just in potentially which X% the it if on professional we follow-on GDP sustainable which How the

Rick Olson

be but I where say company professional is side type it the of there segment there rates we the would growth digit on would segment growth is a professional be the of of company, If the that mid is range a side. upper would professional say the upper single within our the growth thing biggest rate. segment, is the on

lot to landscape you and not market you of soon. cycle. The cycle So think golf overtime where got And market in have especially residential this to has replacement end a element point, look we ultimately you've that anyway. the growth, an coming developments. legs, new it's at -- renewing of anytime so But are largely contractors with business, that internationally is a at the still an Z replacement becomes

irrigation the on all methods used precision of versus look So of penetration business are you is of and our certainly lot business, the BOSS at lot left irrigation of has today. and a business, Ag Rental growing potential scale opportunity end that of that upper faster construction are rate. has if growth, the for growth business our other on side specialty our a those

Operator

next The you. with line Thank of from comes Raymond Darkatsh James. Sam question

now is open. Your line

Unidentified Analyst

impact of guidance? for This of the the annual questions congratulation Couple of quarter. on here. you is filling give what a the in us for L.T. Rich is Josh and Could sense Sam, clean-up

Renee Peterson

Yes, to Rich the was L.T. material acquisition us. not

as Rick didn't this the is breakeven it, it guidance, the into expect overall we're really But we that as next step it from to on we When leverage the at amount. it the inventory year. out help work a impacts see up to in portfolio. would to guidance. It we said, the excited product of be disclose for incorporated moving and It's QX year. the we our quarter. facility standpoint us cost. does impact So cost inventory will round through accretive about for basically Toro are a specifically be it because dollar to we look about We talked more In purchase that particular, and to the in able accounting that will help impact

Rick Olson

would on line markets. I mass product year, just specific thing it the other L.T. in addition our acquisition But increases is comment key Rich. critical of to related like The much you can last our Perrot look at

Sports bigger Perrot the and become in business. a of we So the Fields and case Grounds deal

complementary major share they and irrigation. for sell venues, the So that market equipment sports have complements area high contributes we very there, the irrigation equipment. in to That that

and at our look the it mass will but can accretive which you lines, our to to as really well. also categories growth key be So critical business adds individual was

Unidentified Analyst

inflation. you in a And of there, for little then mentioned more about what and have do might exposures more availability headwinds you or what it some Is response? you talk Could types from freight you both? cost on

Rick Olson

freight was increases some is first now. that any all had something we’re last freight year. a half, for bit The inefficiencies are that little we in any parties right because that think I people something the experiencing product Freight ship that muted effect us

deals not to as out ship out new the going the impact than less So quantities, us. truckload to great market for we to We had contractor was landscape in dealers those were chose that year-over-year and cetera. et

in didn't the the actual affect see but we first year-over-year, up much the half. amount going rates So as

efficient. about contains We're making that said. what we're truckload is a right be we're that it sure all how using In we're that we working quantities very terms about and ship, challenge I it’s and doing shipping most efficient now. what lanes probably are to But it, facing just of

Operator

and with Mondillo comes from the And question Thank the next Company. you. line of Sidoti Joe

now is line Your open.

Joe Mondillo

factors mentioned quarter to segment of golf. you couple ask, one that growth times, driving professional to was saw the within within a wanted the you I the it

wondering, Just that accelerating this take golf single-digit beyond low is growth in we point? that as at can and growth that above rates

Rick Olson

I to but I replacement cycle single driven the years, that talked digits. us, project But terms what and think a good market. we've this also done is there that for we we especially very wouldn't last the in several about, would driven well innovations start. off year there introduced It's change we this by is low it's to of

So courses labor. which year it’s is the later designed product smart an called availability of just a now, tractor for new introduced, turf our a challenge availability the And right to but a product that this and when specifically it's is that's skilled golf give it's Outcross, top tractor addresses of labor example, applications.

So the it of tasks. complex vastly simplifies most some

in value. a through point can that growth that the the And So cycle accelerate a we that customers we're point innovations the there's in cycle. of good our replacement introduction

we So I that number that numbers forward. in still if try those way. beat you’re would with But stick to looking

Joe Mondillo

that I the landscaping business. maybe grow last high And that. likely than then think, of just exceptionally, the The seen years, very on side several we’ve market even most higher single-digits

-- last if that at years? you age point? the are you of equipment seen where several just Could you talk And we’ve -- that’s you there? rates you given consistently think about think where wondering this the sustainable over do out average sustainable just Just that’s

Rick Olson

there like there’re, are my of factors a lot there. Yes comments golf, about

both landscape product about so be the does wings by market And take that diesel more on deck And that trailer. Toro we’re thing substantially to fits to has contractor’s example, categories continue share market our a like introducing XX. it But our in the flip typically with year, new as that this the the and continue side, and math. the also entering good in Exmark platform we the inch overall to adds well. And on that it So versus up, traditional productivity. grow, as not clever that has but largest XX a is the would

to are they getting productivity, higher other XX% minimally and or infrastructure realize than trailers have much they but use we’re So can that. to product, be that reports don’t the buy new to the able

So innovations value, and that that’s customers is really therefore bigger where taking the products providing growing a and piece market. we of focus

Joe Mondillo

to and guess, has average had any way downward would I introducing age out age the equipment you average all several that trending the strong. track there of Is that I can imagine, years. if market everyone new seeing, the the equipment there, is been so growing competition of you’re last over innovative given products

a and in be if growth wondering may factor some at to Just point be that’s slower going time?

Rick Olson

right that change changed, I don’t age I information a in businesses don’t of front that access that But reason be of equipment in information any to believe have driver. has significant the or have me. our to that We would with have that of terms necessarily

In fact, companies larger the routine mode. changeover landscape are contractor of some in

equipment over every can market. secondary on two goes the be to it they’re rolling that to But years three the four every plan. then and So or the -- depending equipment

So we equipment something different. information, specific we -- I that of have driving the have don’t the necessarily in do any to but And age that’s access it. see changes don’t in

Joe Mondillo

topic. at same This year, the or you’ve I the heard, tax pulling least if accelerated the actual performance benefits, wondering lower on then positive rate, data anecdotally of some And you’ve whether am is depreciation forward seen. that just driving your that

Renee Peterson

most people because that most a product, the have buying people Joe, heard advance well replacement from because more to It’s a -- not as purchases. we’re they the driver we need perspective. hearing product major are

being driver. hearing we’re not that a So as

at hasn’t something point But been time, that hearing customers. from our and trying if in to that that to this are determine we’re We that sensitive is.

Joe Mondillo

And you for I’m typical question wondering me buy if just me. preseason could remind then last when just the BOSS is?

Renee Peterson

process. ordering through They going are their now right

other preseason… And orders QX already actually perspective of then from a part the preseason and some have is shipped their

Rick Olson

in think it’s July timeframe. I probably

Renee Peterson

Yes.

Operator

Research. next the Thank line Longbow you. Macgregor question from with David comes The

Your line open. is now

David Macgregor

How Can we just X% start of by that sales the talking FX? the is year? for about much guidance

Renee Peterson

the been will same, which do, moderate. the point. FX we of will mean, as remain do what rates has FX through year, the a know second Year-to-date, I anticipate, half assuming don’t they I right that We about go

last benefit, were the expect we rates year. don’t FX same where to of because So see just

for So year-to-date, less that the be it year. will than

David Macgregor

full year. the For

to goes is there EBITDA Renee, on. on So the that you’re as about XXX way quantify you the expecting the revenue moderate that line? year any and at bps to number you’re year-to-date can

Renee Peterson

our what Well, half experience of roughly been EBITDA line. impacts the is FX about has

David Macgregor

become just versus year, a model question you about maybe the to half. little in your raw with a on more for price then a couple expect here, second the pricing. just for balance really that and secondly bit also talked And margin expectations here sequentially cost. of second and And headwind regard you pressure little Does the material you questions margin quarter? of some more -- expect a a become to But us the for in the you little gross

some but cost the productivity. to You supplement also the -- like it's expect inflation. price a also you calculus, need offset you sounds It complicate to fully productivity the

do to to how I understand question going is half, up? step lift drive underway So Or you that are initiatives a is you’re how volume expecting? major pick have you guess the incremental that a productivity up out. in second got productivity this the discrete that Help me big any models

Renee Peterson

an that our of the do more as parts. commodities, and Maybe is it starting and with We of buying we’re buying a in the not half more input second will of part be the timing. impact model lot that year, expect of commodity we’re pressures

buy commodities us. usually it And P&L some when you that when to when impact so of inventory. change, there it And is then goes actually for through to hits your time also takes versus translate the

our about in orders pricing period. of there action, translates some we when guidance, some gross that within But factored put is in is into residential of already in price. as fact which into as we more agreements pressure well the do segment the because mean that not take talked to taken with expect we've So do then also price, place, all we that higher, would we being that margin. have mix taken, I We -- have earlier call price expect that some price the immediately a

get So period it that price. price future, in will exact would announce not that we effective of in the all we but that the

far occurs productivity. So as on somewhat that that lag there is as -- is always of also there. And focused we're productivity,

of number we're point results. lean just are initiatives based continuing for integrated and to in favorable we're of those underway, will some starting So are that impact that ongoing point in half to key any and something in time. that not around a also underway continued at at second projects initiatives We've we several generate that on see us for us in activities any but time are invest business planning the have productivity

Rick Olson

And the productivity the expectations guidance. for into built improvements are our

Renee Peterson

Yes.

David Macgregor

elasticity prices raise Are the about all at you price you as side? concerned residential on

Renee Peterson

a are said, always from more points. question, there have certain In our we get the of residential the price of we will residential and Pro it Well, more -- the price great is that's because side. side versus side,

we to point do get to need that different that a we right the a focus can innovation, continue features be offers also that able the environment. better on needs, what is is ability to is different, product more introduce raise again if price But there So because product meet at to that in focus limited there customer have the area. that margin a we in have particular to is And simply price just we ability that situation. in productivity an get and to

efforts improving And so that their cost as group of does focus quality, on reduction, more reducing warranty well.

Rick Olson

both comments areas it personal where But to or residential And pace, it's price about, the on things other are harder from that and like the on residential the our talked professional myRIDE side we both do competitors. distinguish side. long the does on have integration true a time standpoint. the we from we in or that And work PowerReverse the get competitive

David Macgregor

to growth have growth? segment share talk And professional X% then, about the how just Rick, can you might contributed

Rick Olson

I the for all in would of shift. the to categories. all not at it Share the factor is mentally category. factor a growth, It in our -- factor say in be it movement one single is a categories time, it through point the all I'm thinking but market tends dramatic it's is a

David Macgregor

dealer talk is a by consequence. of a Toro having of bit realized business. has And gain as that's of our competitors integrating a been is there as guess, there lot thought trouble share about one we opportunity checks, little I a been a your that maybe

guess the I benefit that? magnitude and trying I opportunity think my of impacting to business able so now, guess be your it's -- And you that right longer I arms much am from around you’d get just just how to how

Rick Olson

been, for I market, golf example not of in are two -- we've in sure am they I am the talking year or improvement. which about. been the tune time. we’ve terms some a point a But it’s on in per not integrating, for steady sure specifically

Operator

please session. closing Ms. remarks. to question-and-answer the Hille, concludes This proceed

Heather Hille

Thank in your Toro. and you for questions interest

Thank quarter a have discuss We our will August good to again third in you day. talk and with you results.

Operator

participation presentation, Thank day. may you conference. concludes in for you disconnect. This the your Good today's now

Heather Hille	Director of Investor Relations and External Communications
Rick Olson	Chairman and Chief Executive Officer
Renee Peterson	Vice President, Treasurer and Chief Financial Officer
Tom Mahoney	Cleveland Research
Mike Shlisky	Seaport Global
Jon Fisher	Dougherty and Company
Sam Darkatsh	Raymond James
Joe Mondillo	Sidoti and Company
David Macgregor	Longbow Research

The Toro Company (TTC) 24 May 182018 Q2 Earnings call transcript