Toro Co (TTC) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Toro Company's first quarter earnings conference call. My name is Tanya. I will be your coordinator for today. At this point, all participants listen-only mode. We will be facilitating a question-and-answer session toward the end of this conference. (Operator Instructions). I would now like to turn the presence over to your host of today's conference, Mr Michael J Hoffman, Chairman and CEO of the Toro Company. Please proceed, Mr. Hoffman.

Thank you, Tanya. And good morning, everyone. We appreciate you joining us for our first quarter earnings conference call. Here with me this morning are Steve Wolfe, our Chief Financial Officer, Tom Larson, Vice President and Treasurer and John Wright, Director of Investor Relations.

Let's begin with our forward-looking statement policy. Please keep in mind in mind during the call we'll make certain forward-looking statements which are intended to assist you in understanding the Company's results. You're aware of the inherent risks and uncertainties in making predictive statements, particular in the current environment. 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 our corporate Web site, the torocompany.com.

Before we get to our results for the first quarter ended January 30th, 2009, I'd like to update you on a few key items since we last spoke. As you're all acutely aware, these are extraordinary times. In one way or another, each of us has been affected by the challenges of today's economic environment. Unfortunately, the recessionary conditions have showed no signs of abating and have only intensified. In response to the deteriorating market conditions, we've taken a number of actions to deal with the new reality of the global recession. We have further aligned production schedules for reduced demand, and are determined to lower inventory. We continue to scrutinize discretionary expenses and reduce spending. The freeze on on all open positions that we initiated early last year remains in place, and we completed a volunteer retirement program last December.

Unfortunately last week, we were forced to take additional action to reduce our office and salaried workforce by approximately a hundred employees. This was a very difficult decision, but one that became unavoidable given the harsh realities of the current business climate. Combined with previous measures, the Company has reduced its overall workforce by approximately 15% from the previous year, when the you include contractors, part-time and temporary employees. Beyond the reduction, we took additional actions that will affect all remaining employees, including the suspension of regularly scheduled salary increases, reduced officer salaries, changes in our vacation policy and the addition of four furlough days all for the remainder of fiscal 2009. We know these steps are painful, but yet they were necessary to keep us competitive during the difficult environment so we can resume our record of solid financial performance when the world economy begins to improve.

In addition, to aggressively managing costs, we remain committed to reducing our working capital needs, and the resulting improvements to our balance sheet stand out as a positive factor for us in this very difficult business environment. Our inventory levels are much lower, receivables are down considerably, and we have borrowed $60 million less than we did in last year's first quarter. Also, our field inventory levels are down on a year-over-year basis. So while we are disappointed with our results for the quarter, we know we are not alone in dealing with the current challenges. We will continue to manage the business in line with this new reality, and remain confident in the strength of our brands, our products, our people and our channel partners to effectively compete for our customers' business in the months ahead. I'll now turn it over to Steve to review the financial results for the first quarter. Steve.

Thanks, Mike, and good morning to everyone. For the quarter, net sales were down 16.2% to $340.2 million. Worldwide sales declined across most professional categories due the global recession that we're in. These declines were somewhat offset by stronger orders for snowthrower products and favorable pre-season shipments for our redesign lineup of Toro and Lawnboy walk power mowers. Net earnings for the quarter were $6.7 million or $0.18 per share, a decrease of 62% on a per-share basis compared to the same period last year. The earnings decline included a pre-tax charge of $1.3 million or $0.02 per share on an after after-tax basis to account for the workforce adjustments Mike talked about.

Let me turn now to our segment results. Starting with the Professional segment. Worldwide sales for the quarter were down 22.3% to $229.4 million. Shipments declined across most Professional product categories due the to the challenging market conditions and customers' reluctance to place orders in this time of economic uncertainty. Within the golf market, shipments of turf maintenance equipment and irrigation systems were done significantly, as existing courses delayed purchases of new equipment and the number of renovation projects and new golf course under construction slowed considerably. In addition, shipments of professionally installed residential and commercial irrigation products declined due to the ongoing pressure in housing and commercial construction, and finally, sales for Exmark and Toro products in the landscape contractor category were also down for the quarter. Partially offsetting the decline in shipments was strong initial stocking orders for our new platform of Zero Turn motors and a new Stand-On mower that launches us into an entirely new product category. Net earnings in the Professional segment for the quarter was $30.1 million, down 41.5% from the comparable fiscal 2008 period. The decline was primarily due to the significant sales decrease, fixed SG&A expense spread over lower sales volumes and higher manufacturing variances.

In the Residential segment, worldwide sales for the quarter were up less than 1% to $107 million. Despite the recessionary conditions, consumers' appetite for snow products remained healthy. In fact, worldwide demand for Toro snowthrowers improved significantly over last year due to lower field inventory entering the season, a powerful product lineup and strong early snowfall in Canada and key US markets, like the Midwest and the Northeast. We have sold out of our inventory and field inventory in most locations is in good shape, which bodes well for preseason orders for the next snow season. Within the Walk Power Mower category, shipments of Lawn Boy products were up as a result of expanded placement of a key retailer, while Toro products increased orders from our dealer channel due to better product availability this year. Both brands of Steel Deck Walk Power mowers were redesigned and repositioned to cover a broader range of price points and deliver greater value to our customers. These gains were somewhat offset by delayed shipments of consumer riding products, as customers shifted orders closer to retail demand.

Also, impacting our Residential segment results for the first quarter were lower international sales primarily due to the effects of unfavorable currency. Net earnings in the residential segment for the first quarter were $4.8 million, up 26.8% from the comparable fiscal 2008 period. The improvement was primarily driven by lower SG&A expense due to reduced spending for marketing, warehousing and engineering. Now, let's turn to our key operating results.

Starting with gross margin, gross margin decreased by 2 percentage point in the first quarter to 34.8%. The decline was primarily attributed to lower production volumes and efforts to reduce inventory levels, unfavorable product mix and increased commodity costs. A portion of the decline was offset by a drop in freight expenses. SG&A expenses for the quarter were down $12.6 million or 10.7%. However, as a percent of sales, SG&A expenses increased to 30.7% compared to 28.9% the first quarter of last year. While actual expenses declined, it was not enough to keep pace with the reduction of sales volume for the quarter. Interest expense was down $500,000 for the quarter, the result of significantly lower short-term borrowing levels and reduced interest rates, and our effective tax rate for the quarter was 33 .7% compared to 35.4% in the first quarter of last year. The decline was primarily due to the extension of the Federal Research and Engineering Tax Credit. And for fiscal year 2009, we now expect our tax rate to remain at approximately 33.7%.

Now, Mike touched on the working capital improvements that have strengthened our balance sheet, and the results are significant. A good proxy of field inventory is accounts receivable, which is down $46.7 million or 13.6% from last year's first quarter. And by closely managing production, we've lowered our net inventories by $57.2 million or 19.3%. And in these recessionary times, we all know liquidity is paramount, and I am pleased that our seasonal short-term borrowing needs are $60 million below where we were one year today.

On that note, let me conclude this section with a few comments on the credit environment for Toro, our channel partners and our customers. At Toro, we have a solid relationship with our credit line banks; and at the end of the first quarter, we have drawn only $25 million against our total domestic committed credit lines of 225 million. This compares to the $85 million, we had drawn at the end of last year's first quarter. As a result, our liquidity position appears to be more than sufficient heading into our peak selling season. And at this point, as future reference, last year we had $50 million of committed revolver that went unused at our peak borrowing time, and this year we are tracking substantially better in comparison to last year.

Regarding our channel partners, their financing is provided primarily by third parties and the Toro Credit Company, and currently, we have no major credit availability issues in this area. As for our end customers, credit for consumers and contractors has tightened noticeably compared to last year and may impact sales as we enter our primary selling season. The same applies to our golf and grounds customers for equipment leasing, so we've add added three additional financing providers to our Company-sponsored leasing program to alleviate credit availability concerns. That's all for the first quarter results. I'll now turn it back over to Mike for some discussion regarding our outlook.

Thanks, Steve. In the introductory comments, we noted the global recession continues to intensify, and we expect these difficult conditions will continue for the remainder of our fiscal year. We've already covered the many actions we've taken to deal with this period of reduced demand and uncertainty. Despite the many unknowns, we will work diligently to drive retail demand and believe we can build momentum if mother nature provides a reasonable Spring for us. One of the ways we'll compete for business is through the merits of our new innovative products. Entering the primary selling season, our new products are at the highest level in recent history and that will help us. Products like the Toro Grand Stand, Toro Z Master G-3 and Next Laser Z referred to earlier have energized the channel and captured the interest of landscape contracter customers, who need productivity innovations they've come to expect from us.

For golf and grounds customers, we've recently introduced a new offering of heavy-duty Workman Utility vehicles, ProCore deep tine aerators and highly productive Groundsmaster rotary mowers. In the area of ground water management, our new precision spray nozzles are helping customers achieve optimal plant health with significantly less water. And for homeowners, our new lineup of Toro Lawnboy Walk Power mowers provide an expanded lineup at competitive prices. Together the strong combination of our trusted brands, innovative products, solid customer relationships will enable us to compete effectively for the business this season.

A little while ago, I shared an interesting conversation with a large commercial contractor in the southwest. While the construction side of their business had been quite sluggish, the landscape maintenance side has been solid. The point being, while construction equipment may sit idle during these difficult times, turf equipment remains in constant use as the grass continues to grow. Speaking of customer interaction, earlier this month we had the chance to visit with a number of our customers at the Golf Industry Show in New Orleans. Many golf courses will be operating on reduced budgets this year, but they remain hopeful that market conditions will improve later in the year, while overall show attendance was down, we were encouraged by the constant flow of serious buyers in our booth and the strong interest in our new product innovations.

I'm also pleased to announce that we just recently secured a contract with the US Army to provide golf course maintenance equipment and services to maintain their more than 50 golf facilities worldwide. This includes courses in the United States, Germany, Puerto Rico, Japan and Korea. This is a great win for Toro and a testament to our brand and product strength along with the dedicated efforts of the Toro team to secure this business. So looking forward, we expect the global recessionary conditions to continue for the remainder of this fiscal year. Given these conditions, the resulting impact to our business and corresponding outlook is more uncertain. While we are confident in our ability to hold or improve market share, there is a larger question as to just what degree our markets will contract. With that uncertainty, we now expect fiscal 2009 revenues to decline about 15% from fiscal 2008, and our net earnings to be approximately $1.75 to $2.00 per share. For our fiscal 2009 second quarter, we expect to record net earnings per share of $0.85 to $1.00. There is no doubt that fiscal 2009 will be one of the most challenging years we have faced in decades.

We don't know how long it will take for the markets and the world economy to rebound but we do know that the choices we make will determine our future position. While we continue to take appropriate actions in a short term to remain financial strong and competitive, we are mindful at the risk of damaging what will ultimately drive our success for the long term and we will manage the business accordingly. That concludes the formal portion of the Toro Company's fiscal 2009 first quarter results. Now, lets open it up for your questions.

Thank you. (Operator Instructions). Your first question will come from the line of Eric Bosshard with Cleveland Research. Please proceed.

Good morning.

Good morning, Eric.

Good morning, guys.

Good morning.

A couple questions. First, the SG&A performance in the quarter was quite impressive in terms of the year over year contraction. Two things. One, can you talk about, you know, how the SG&A is down as much as it is, 10 or $12 million in the quarter. If that is sustainable, sort of how is it done, and is it sustainable.

Secondly, the actions you've taken in the last 30 to 45 days, what's the incremental net benefit that we should expect from that as we go through the year?

Yes. This is Steve, Eric. That is the result of a couple things. One is spending, which you said, that's the primer piece, where we told you, I think, even at in our fourth quarter call in December that we were starting to watch open head counts. We were filling those very begrudgingly. In fact, we didn't fill many from December through now. So we're getting the benefit of some of that. The overall budget spending, you know, we've had several rounds of spending through our division divisions in terms of cutbacks and spending.

And then, the other thing is we had just an unusual item in that we had a distributor change cost in last year's first quarter. We didn't have that this year, that makes that number look a little bigger. But to your point, those should be sustainable. Those are things we will continue to look at as we go forward to see if we need to do even more. And that is the thing that drove us, as you mentioned earlier, our announcement last week in terms of the overall cost cutting that we had done in terms of head reductions, salary freezes, that sort of thing. Those dollars are somewhere in the $16 million range in terms of the sustainable benefit. That's what we should expect, and we will continue to watch that to see if there's anything else we need to do in any of those categories as we get further into the year.

And is that 16 million, is that a net of expenses to implement that, and is that a run rate that we should start to think that is appearing coming in the second quarter?

Yes. That should be. You have to really go through the pieces. There's some things that are in there one time. There's some things that are on ongoing; but for your -- for your purposes, we factored that into the guidance that we've given you here going forward.

Secondly, in terms of the guidance -- the mid teens revenue contraction, you gave the earnings guidance for the second quarter, but should we think about a kind of similar mid teens contraction in the second quarter as we saw in the first quarter, and it's there for the year, or might the second quarter be worse? Can you give us a little clarity on that?

Yes. We've not given anything in that regard, Eric, in terms of top line.

Is there any reason to think that 2Q was different than 3Q? I mean, those were the three big quarters remaining for the year. Is there anything different in those quarters in terms of how things are expected to play out?

Not significantly, but again, we're just going to give EPS guidance at this point.

Okay. And then, lastly, just on the currency impact, the international business was down about 20%, and I think that you had commented that a good portion of that was currency. Can you give us a little bit of color on how much of that was currency?

Yes.. A little less than half was currency. The dollar amount, actually, was a little over $12 million was currency.

Perfect. Thank you.

Thank you, Eric.

And your next question will come from the line of Jim Lucas with Janney Montgomery Scott. Please proceed.

Morning, guys. First question, Steve. Could you just give a little bit of color on the other income line? That tended to fluctuate quarter to quarter and, you know, with income versus expense this time around, what was in there, and what does that look like going forward?

There are three main pieces to that that drove the numbers this quarter. That's interest income, finance charges and currency. So when you look at -- you look at those three, those do fluctuate from time to time. Our finance -- or interest income was down from last year, because we had more cash at this time. Rates are a little higher. Finance charges are relatively equal, and then currency was a negative. So it's those three pieces that drive it. And it does fluctuate from time to time, depending on what's happening with rates and what's happening with the cash and what type of interest income.

Okay.

You can -- just from -- I think we've told you, as kind of a standing rule, that's where in the $3 to $4 million range from year to year. Doesn't fluctuate too much from that.

Okay. And big picture question here. When you said the initial guidance, I mean, clearly, hopefully, we're now in the epicenter of this whatever is going on around the world right now. But when you look at December, when you set the initial guidance versus where you are today, what has changed? And built into your contingency plans, what -- how much worse would it have to get before you implement the next round of contingency plans?

Jim, this is Mike. I'll take a shot at that. I think it's pretty clear that from, you know, the beginning of December to date now, things have gotten substantially worse. They continue to -- I think the word we've used and many others have used, continue to intensify. As we talk, we pay close attention to our end markets and as golf courses, for example, go through their budgeting process, that doesn't take place until the New Year starts. That wasn't that long ago. We started getting more signals there would be from a capital stand point, delays, potential reductions within the, the golf industry, and I would say that -- as you see, these are challenging times. For us, we haven't seen that to that degree for decades. And while golf is not immune, we've finally reached the point where whether that was membership driven or just, again, budget driven, they were looking to delay capital purchases. We know they didn't delay forever. Golf courses continue to have to operate. But we can -- as well talked in quarters past, they can, for a period, just like landscapers.

So that business is a really important piece of business for us, is under some pressure. Landscape contractors maybe a little more need driven, and we have a lot of new products there. They've had -- a number of them have had good seasons, so while, again, we think there will still be some pressure in that market, there's reasons for some optimism on the new product side and, you know, the revenues they generated from snow.

And then going back to the consumer business. Consumers have delayed some purchases over the last two or three years. We know that. It's somewhat need driven. To an earlier point in our remarks, if mother nature is reasonable this Spring -- we always know that's a big if; but last spring was not a particularly good spring from a weather standpoint. So if it's reasonable this year coupled with the expanded product marketing at much better price points, like in the area of walk power mowers, we're positioned, I think, to take advantage of that, and they may be enough to offset, some of the economic pressures that we're facing, but there's -- that's a pretty significant part of it.

Okay. And with regard to the pricing environment, you know, round-trip on commodity, been able to reset at the consumer level, and on the professional side you had the price increase at the end of last year. You know, in the weekend demand environment, what does pricing look like for you as the year progresses?

Well, we'll try to preserve the price that we've realized. Yet we recognize that as markets contract and people compete for a smaller pie, that puts pressure on that, and the bottom line is we will make sure we hold or grow our market share. So that may -- that may require us to borrow from some of that pricing that we put in place last year. We're prepared to do that.

Okay. And when you look at -- as you've said, things continuing to get worse and you look at citing things earlier in the call, such as the customers reluctant to order. Credit risk not so much with the customer, but the end user level, overall lack of demand. If you had to weigh what it is from a lack of demand standpoint, how do you characterize from a major bucket standpoint.

I think the number one thing would be uncertainty, whether that's the consumer or the professional customer. It's what's in front of us. When do we begin to see, if you will, the bottom -- or if we're at the bottom, do we see things moving back in the right direction. So to your point, financing is a factor, but we've worked hard to make sure that we have alternatives there for our channel partners. It will still be a factor, but I think the number-one factor is consumer and professional customers just being careful.

Finally, in terms of your production. In terms of you've been hurt on the absorption side the last couple of quarters. Clearly working diligently to right-size the cost structure. At what point do you feel that the gross margin contraction begins to stabilize? Is that next quarter? Is that three quarters out? Can you just help us understand from where your production schedules lie right now?

Yes. I guess I would -- Steve can add to this. I would say that we put even a stronger focus on managing our inventory and are prepared to make the necessary production cuts and the consequences that goes with that -- that obviously creates a headwind. We've talked about a significant part of our cost of goods is in materials. We faced significant challenges there last year as we saw the commodity increases. We'll continue to work on reducing that, getting that back. So hopefully, they may be offset to some degree, so we don't, to your point, see a lot of gross margin erosion.

I'd just add, Jim, the bottom line is we want to adjust those production schedules, so we don't end up with a lot of inventory in our barns. So we will be watching those regularly to see what the demand looks like, making sure we've got those matched properly. And on your comment about gross margin and when does that start to even off. A big part of that will depend on where commodities go. And as we said, we think the first half will be a little tougher in terms of commodities, because we're still working off some prices that -- from some of our component suppliers that they bought at higher prices, but the back half, we should get some benefit of that. So depends a lot on whether those commodity prices stay where they are now.

Okay. Great. Thanks, guys.

Thank you, Jim.

And your next question will come from the line of Sam Darkatsh with Raymond James. Please proceed.

Good morning, Mike, Steve. How are you?

Good, Sam.

Good morning, Sam.

Just a little bit more color with some of the questions that Jim just asked. The down 15 in terms of sales. I should say sales dollars year on year, can you help us with what that implies in terms of unit volume versus pricing versus foreign exchange.

Well, just kind of a high level, Sam, pricing will somewhat more than offset the currency headwinds we're experiencing. The vast majority of that is simply organic reduction.

Okay. So if currency -- I guess, Steve, you would be in tune with this. If the dollar remains where it is versus your market basket, what would the current impact be on sales for a year on year basis for the fiscal year?

You're talking top line now?

Yes, sir.

I think that's pretty hard -- we had talked before, but that's pretty difficult to determine. But what we've done from a currency standpoint, as I think you know, is we try to go out at the beginning of the year and hedge as much as can to protect our plan. And we do that. Sometimes it works to your advantage. Sometimes it works against you.

Last year that actually worked against us because the dollar continued to weaken and we had hedged it at lower rates. This year, we hope to get a little benefit from that as the dollar is now strengthening -- or, I mean, weakening. It's tough to say dollarwise. We've not given a number out in terms of what that would be.

You're talking about on a transaction basis as opposed to the translation basis?

Yes, transaction.

Okay. On a translation basis, it would be, I guess, more straightforward, though.

We don't hedge translations for the most part.

Right. So I'm getting about 3%, 3.5% or so for the year. Is that kind of in the ballpark for a translation basis?

Sounds a little high.

Okay. So you're thinking that selling prices then would be probably in that 2% to 3% range then.

Yes. Probably the bottom end of that, more the bottom end.

So if sales volumes are expected to be down about 15, your production. I know Deer yesterday mentioned in their CC&E business their production is going to be considerably lower than their unit volumes in their CC&E business by a difference of about 5% or 6% or so. Is that a similar plan to what you guys have in terms of production being down about 20% this year?

Yes. As we said earlier, we want to reduce inventory in this process here. We don't want to end up with a lot of additional inventory. So our production will be less than the sales number -- the demand number that we gave you.

Okay.

So you're not far off with the number you're talking about.

Okay. And then commodities, have they changed versus the $20 million inflation that there was back in December. Has that changed meaningfully or not really all that much?

No. We're hoping that's going to get better. We've got our people really focused going out to our vendors and getting everything in terms of prices that have dropped whether it's deals or resins. We've had some success, but it's still early in the year, too.

Okay. Thank you, gentlemen.

Thanks, Sam.

Your next question will come from the line of Mark Ruplele with Longbow Research. Please proceed.

Hey, guys. Heading into this year, international golf seemed to be one of the positive off sets to the weakness here in the US. And also you indicated today that budgets came in at the first of the year that were different than that. I'm just curious to see that if kind of on a country basis or region basis, were any of the international golf areas positive during this quarter in the outlook positive, or is everything pretty much completely down right now.

This is Mike. I guess I'd say, Mark, that international golf is still a relative positive. The fact is that there continues to be new golf construction -- significant new golf construction around the world far more than there is in the US. And when I was commenting earlier on golf budgets, that was more in the domestic context.

Okay.

So even with that said, it's reduced, right? So if you go to a place like Dubai, it was crazy in terms of what was going on in construction when oil was a $150 a barrel. It's slowed somewhat, but construction continues. And in Asia, construction continues. Those markets are still -- they still have positive economic growth. Not quite to the level they were at. So again, it's just on a relative basis, shifted down somewhat, still stronger than within the US.

Okay. And then just secondly, on the riding products, I believe you said on the call that -- something to the effect that orders being shipped closer to the season. Is there any risk in some of those not actually happening?

Well, I think not in the short run. In the long run, as we ship those products in, you know, our plans, our projections are based on sell-through and replenishment and sell-through and replenishment. It's not the early orders that are at risk, it's the replenishment orders depending on how retail tracks. Again, we're a Company very focused on retails, because we know as we take care of retail with our partners, everything else will take care of itself.

Okay. Perfect. Thank you.

Thank you.

Your next question with come from the line of Jim Barrett with CL King and Associates. Please proceed.

Good morning, everyone.

Good morning, Jim.

Mike, can you talk about your product development, your R&D? Given your retrenchment, can you give us a general sense as to what degree R&D is participating in that SG&A reduction?

That's a good question. I think it ties to the last comment in our prepared remarks, and that is, while they certainly have a part to play, in these times, in some respects, innovation is even more important and so as we have over the last several of years increased R&D as a percent of sales year over year over year, and that's been going on five or six years now. It's clear in this environment it probably has to flatten out. But what you won't see is a dramatic cutback in R&D, as a percent of sales. That's too important to our long long-term health.

Okay. Good. And can you comment on how the municipal and institutional markets are holding up in this environment?

Well, on the municipal side, one of the things that happens with that market is it tends to be a bit of a lagging market, and so their budgets have been set based on earlier tax revenues, and I think we'll see a little less impact in the short-term, but ultimately we'll see an impact there, as many of these municipalities and state governments deal with serious budget issues. So there will be some impact, maybe somewhat less in '09 than '010.

And finally, could you comment on the Company's capital allocation process going forward? You bought back relatively few shares in the quarter? What are your thoughts during this recession as to buying back stock?

This is Steve. Needless to say, we have taken a conservative position in that regard, and I think we have a lot of companies out there -- people are trying to preserve liquidity. When we kind of look at our priorities today with everything going on, as unclear as the crystal ball can be. One thing is clear. If you don't have liquidity, all the rest doesn't matter, because you're not around. So our stock repurchase program would reflect. That we've taken a very conservative approach for the year. We still do have plenty of authorization left on our last Board approval. We've still got over 2 million shares on that authorization, but we will use those very sparingly until the whole market situation clears up a lit.

Okay. And considering the fact a good chunk of your debt is not due for quite some time. Steve, does that mean you will simply accumulate cash as opposed to paying down your notes?

Yes. Looking for opportunities. We're obviously being conservatives as we said in terms of liquidity. But these times, often times create good opportunities. So we've certainly got our eyes open there. And there's something that we find that can use some of that cash and still preserve our liquidity, we would certainly want to do that.

Okay. Well, thank you both.

(Operator Instructions). And your next question comes from the line of James Banks, with Sidoti & Company. Please proceed.

Hello. Good morning.

Good morning, James.

Something struck with my phone with the star 1. So I apologize if this was asked. I only have one question left. John Deere's consumer commercial division. I believe they referenced that this year would be down 15%, which tracks 25% decline in the first quarter that they saw. So is your guidance here more market-driven, or is this the order placement that you guys are seeing right now?

Well, again, James we look at -- from a where do we expect retail to be and how does that translate all the way back from a demand standpoint and all the way back to operations. So as we look toward the rest of '09, our selling has been okay. We're closely watching, to see how retail will track. As I said earlier, on the residential side, replenishment is a key part of that. It is a key part of that on the professional side as well. Steve mentioned in the earlier remarks, snow is a good piece of business. Small, but still a good piece of business. As we closed out a strong snow year this year, you know, that bodes well for the third and fourth quarter. So I guess all in, we need to keep tracking like we are, and it kind of gets back to the larger question of, if this recession were to intensify substantially more, well then obviously, we would have issues as most companies would.

All right. Fair enough. Steve, sorry. There's roughly 2 million left on the share repurchase, but then there's roughly 1.5 bought back in the first quarter.

We bought very little back in the first quarter. It's a little over 2 million, 2.3 million is the authorization that's left.

How much was bought back in the first quarter?

Very few.

Oh, okay. Just nominal.

Under a couple million bucks, a million, a million and a half.

Okay.

A lot of that had to do with options and that sort of thing.

Okay.

Terrific. That's all I have. Everything else has been answered. Thank you.

Thank you.

And your next question is a follow-up question coming from the line of Mr Eric Bosshard with Cleveland Research. Please proceed.

Steve, just to be clear, if the current economic conditions sustain through the balance of the year, do you think you're going to buy any stock?

That's a good question. I think, we will look to see how comfortable we are with the environment. This, as I said, goes back to liquidity. We want to make sure we don't end up in the position -- we're seeing some companies today that can't borrow and pay their bills. So things are as weak as they are. We're going to watch our liquidity, and one good place to get that, as you know, is not buying back stock.

So we'll watch it as we go, but we need to be comfortable that doing that is the right investment and is the right thing to do from a liquidity standpoint.

Fair enough. Thank you.

You're welcome.

And there are no further questions at this time. This concludes the question-and-answer session. I would now like to turn the call back over to Mr Michael J Hoffman for closing remarks.

Thank you, Tanya. And once again, thank you, for all our listeners and for your questions and interest in the Toro Company. We appreciate your confidence and trust and will look forward to talking with you again in late May to discuss our second quarter results. Thank you, and have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. And have a great day.