The Toro pany(US:TTC)2020-09-03 21:33Financial Data and Key Metrics Changes - The company achieved third quarter net sales of $841 million, a 0.3% increase year-over-year, with reported and adjusted EPS at $0.82 compared to $0.56 and $0.83 last year [21][22] - Year-to-date net sales increased by 5.6% to $2.54 billion, with diluted EPS rising to $2.37 from $2.18 in the same period of the previous year [22] - Gross margin for the third quarter was 35%, up 330 basis points year-over-year, while adjusted gross margin decreased by 70 basis points to 35.2% [29][30] Business Line Data and Key Metrics Changes - Residential segment net sales grew by 38.3% to $205 million, driven by strong demand for zero-turn riding and walk power mowers [24] - Professional segment net sales decreased by 7.9% to $623.6 million, impacted by reduced channel demand due to COVID-19 [27] - Residential segment operating earnings increased by 76.7% to $28.5 million, reflecting a 300 basis point increase in operating margin to 13.9% [25][26] Market Data and Key Metrics Changes - The residential segment saw record sales of zero-turn mowers, which doubled in the quarter, while the professional segment showed improved demand in landscape contractor and irrigation markets [14][15] - Improved retail demand reduced field inventory, setting the company up well for preseason shipments [16] Company Strategy and Development Direction - The company launched the Sustainability Endures platform to enhance its commitment to social, environmental, and financial impact [17] - The focus remains on innovation and adapting to changing market dynamics, with a balanced business model to drive growth [19][47] Management's Comments on Operating Environment and Future Outlook - Management noted uncertainty due to COVID-19 but expressed optimism about future growth driven by strong residential demand and recovery in professional markets [41][50] - The company anticipates continued year-over-year growth in the residential market, with professional markets benefiting from a return to normal buying patterns [41] Other Important Information - The company maintained a strong liquidity position of $992 million at the end of the third quarter, with cash and cash equivalents of $394 million [23] - The cash dividend was increased by 11.1% to $0.25 per share, reflecting confidence in the financial position [38] Q&A Session Summary Question: Update on Tractor Supply initiative - Management reported a successful first year with Tractor Supply, with broad-based growth across channels [58][59] Question: Financial strain on professional dealerships - Management indicated that while professional businesses faced challenges, they did not see widespread financial threats, with many dealers utilizing the CARES Act [62] Question: Supply chain issues with engine suppliers - Management acknowledged the situation with Briggs & Stratton but stated that they have multiple engine suppliers and are prepared for 2021 [63][64] Question: Impact of budget constraints on business - Management highlighted potential impacts on municipal budgets affecting maintenance priorities, particularly in golf and parks [94] Question: Inventory levels across segments - Field inventories are below last year, which management views as a success given the circumstances, with plans to build inventory in the fourth quarter [98][101] Question: Capital expenditures focus - Management indicated that CapEx is focused on productivity, cost reduction, and new product development [105][107]