The Toro pany(TTC)2024-03-07 23:41Financial Data and Key Metrics Changes - Professional segment earnings for the first quarter were $112.8 million, down from $144.1 million last year, with earnings as a percentage of net sales at 14.9%, compared to 16.4% last year [2] - Interest expense for the quarter was $16.2 million, up $2.1 million from last year, primarily due to higher average interest rates and outstanding borrowings [3] - Consolidated net sales for the quarter were just over $1 billion, a decrease of 12.8% compared to last year, with adjusted diluted EPS at $0.64, down from $0.98 [95] Business Line Data and Key Metrics Changes - Professional segment net sales for the first quarter were $756.5 million, down 14.1% year-over-year, primarily due to lower shipments of zero-turn mowers and snow products [39] - Residential segment net sales for the first quarter were $240.1 million, down 9.3% compared to last year, driven by lower shipments of snow products and zero-turn mowers [83] - Adjusted gross margin for the quarter was 34.4%, slightly down from 34.5% in the same period last year, primarily due to unfavorable product mix within the residential segment [96] Market Data and Key Metrics Changes - The company expects continued strength in demand for underground and specialty construction products, supported by private and public spending addressing global issues [88] - For golf, the company anticipates sustained demand driven by new golfers and rounds played, with U.S. rounds played at the highest ever [17] - The company expects retail demand for landscape contractors to remain steady, with some price sensitivity, while homeowner demand is expected to stabilize in spring [18] Company Strategy and Development Direction - The company plans to fund $125 million in capital expenditures for new product investments and advanced manufacturing technologies [4] - The AMP initiative aims to deliver at least $100 million of annualized savings by fiscal 2027, focusing on productivity and operational excellence [10][16] - The company is committed to sustainability and innovation, developing products that drive productivity and reduce environmental impact [94] Management's Comments on Operating Environment and Future Outlook - Management is closely monitoring business and consumer confidence, spending patterns, and macroeconomic factors such as inflation and geopolitical events [7] - The company reaffirms its full-year fiscal 2024 net sales and adjusted diluted EPS guidance, expecting low single-digit total company net sales growth [42] - Management expressed confidence in the ability to drive long-term growth through strategic investments and maintaining a strong balance sheet [11][41] Other Important Information - Accounts receivables were $489.1 million, up 29.6% from a year ago, primarily due to timing of shipments [13] - Inventory was $1.18 billion, up 4% compared to last year, driven by higher finished goods balances [13] - Free cash flow in the quarter was a $111.3 million use of cash, primarily due to aligning production and inventory levels to demand [97] Q&A Session Summary Question: Clarification on DSOs and share repurchase activity - Management confirmed that DSOs were up due to initial sell-in to Lowe's and noted no share repurchase activity in the quarter, focusing on paying down the revolver first [23][52] Question: Outlook for the second half of the year - Management expressed confidence in the second half, expecting improved field inventory and increased output to address backlog [25] Question: Update on order patterns and cancellations - Management reported no significant order cancellations and noted healthy order growth, with slight progress in reducing backlog [104][130] Question: Insights on the underground business and market demand - Management highlighted strong market demand for underground and specialty construction, driven by significant funding for broadband and infrastructure projects [110][136] Question: Working capital trends and inventory management - Management expects to see working capital improvement throughout the year, with a focus on reducing inventory levels [146]