Good day, ladies and gentlemen, and welcome to the Toro Company First Quarter Earnings Conference Call. My name is Sean, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference, Mr. Kurt Svendsen, Managing Director of Corporate Communications and Investor Relations for the Toro Company. Please proceed, Mr. Svendsen.

Thank you, and good morning. Joining me of our first quarter earnings call are Mike Hoffman, Chairman and Chief Executive Officer; Renee Peterson, Chief Financial Officer; Tom Larson, Vice President and Treasurer; and Blake Grams, Vice President and Controller. We begin with our customary forward-looking statement policy. During this call, we will make certain forward-looking statements, which are intended to assist you in understanding the company's results. You are all aware of the inherent difficulties, risks and uncertainties in making predictive statements. The Safe Harbor portion of the company's earnings release, as well as SEC filings detail some of the important risk factors that may cause actual results to differ from those in our predictions. Our earnings release was issued this morning by Business Wire. A copy can be found in the Investor Information section of our corporate website, thetorocompany.com. I will now turn the call over to Mike.

Thank you, Kurt, and good morning to all listeners. Fiscal 2013 is off to a solid start on the strength of another record-setting performance that reached new first quarter highs for both sales and earnings. The strong quarter results were largely driven by accelerated demand for large turf equipment, early end user purchases of professional equipment and continued growth in Micro-Irrigation sales. Our residential business, on the other hand, slowed because of relatively low snowfall levels in North America through January, impeded snow thrower retail activity. Recent snowfall across our primary snow markets, including the record-breaking blizzard that struck the Northeast, is helping clear field inventories and generate additional revenue for our contracted customers as well. Even today, snow is falling across the Midwest. So for the first quarter, net sales increased nearly 5%, while net earnings grew to -- grew by close to 60%. During the first quarter, we returned $33 million to shareholders through repurchases of shares. Since our last earnings call, our Board of Directors authorized a repurchase of an additional 5 million shares of common stocks. Additionally, the Board raised a quarterly cash dividend to $0.14 per share, an increase consistent with our dividend compound growth rate of over 28% since 2004. Renée will discuss our financial and operating results in more detail later in the call. Turning to our business segments. We just completed the annual trade show season, featuring the leading shows, including the Golf Industry Show, which some of you attended. We were pleased by the universally positive reaction to our latest products by both existing and prospective customers at the shows, as well as the optimism they expressed for the year ahead. Conditions in the domestic golf industry provided clear justification for such optimism. In 2012, rounds of golf played achieved the…

Thank you, Mike, and good morning, everyone. As we reported earlier this morning, net sales for the quarter were a record $444.7 million compared to $423.8 million for the same period a year ago. We also delivered record net earnings of $31.4 million or $0.53 per share compared to $0.33 in the first quarter of fiscal 2012. Professional segment sales were up 16% for the quarter to $329.1 million, largely in response to the previously mentioned channel demand generated by the Tier 4 transition. Professional net earnings for the quarter totaled $60.7 million, a 44.3% increase over last year. Our residential segment sales for the quarter were down 12.1% to $120.9 million, which is entirely attributable to reduced shipments of snow throwers due to weather conditions in North America. Net earnings in the residential segment for the quarter totaled $12.2 million, down 3.6% from last year. Now to our key operating results. First quarter gross margin improved 270 basis points to 37.3%. The increase is attributable to product mix between and within segments, pricing and the benefits of our ongoing productivity efforts. We expect gross margins to normalize through the year. For the full year, we continue to expect margins compared to last year to be about higher by about 40 basis points. SG&A expense as a percent of sales increased by 30 basis points for the quarter. This increase reflects anticipated incremental costs associated with the Astec and Stone Construction acquisition and increased warehousing due to the startup of our renewed distribution facility in Iowa. For the full year, we continue to expect SG&A compared to last year to be flat to slightly higher as a percent of sale. Operating earnings as a percent of sales for the quarter were 10.4% compared to 8% a year ago. As we…

Thank you, Renee. We expect the positive environment for turf equipment purchases to continue. Golf courses and grounds customers are in better financial shape coming into 2013. Growth will come from continued interest in our innovative offerings, as customers look to replace aging fleets. The demand for riding greens mowers is strong, and customers are telling us that our new Triplex rider is exceeding their expectations for quality of cut and versatility. The newly acquired greens roller is catching on quickly. Last fall, it was difficult to keep up with demand, but we are now in a good supply position for this product. The launch of our new lightweight fairway mower is doing exceptionally well. Customers are anxious for it to begin shipping in April, and our new Multi Pro sprayer has garnered a lot of attention at the recent Golf Industry Show. As one customer stated, "You've solved every issue I had with my current sprayer. I can't wait to get one." Courses' improved financials also hold promise for golf irrigation as clubs can now fund much-needed replacement in renovation projects. We are tracking more projects in 2013 that existed at this time last year. We also recently released version 2.1 of our unequaled Lynx Central Control System. The Lynx is simple to use, yet affords superintendents full control of their irrigation system, which enables them to improve playing conditions while saving both time and money. The Lynx, with its many recent enhancements, provides superintendents more than just a powerful course management tool, it provides them peace of mind. Like golf, several factors point to a favorable growth into environment for the landscape contractor business. Improvements in housing and the state of the economy appear to be helping fuel expansion of contractors business and their service portfolios. Contractors report…

[Operator Instructions] Okay, your first question comes from the line of Robert Kosowsky from Sidoti & Company. Robert A. Kosowsky - Sidoti & Company, LLC: I guess, first off on the micro-irrigation acquisition you did in China. Do you currently have or sell product into China and is this something we're going to have to open up capacity? Any kind of comments you can make on the competitive landscape in the region right now.

Yes. Well, first, yes, we do today sell some micro-irrigation products into China. So this will be building on that, but this gives us more of a base of operations, if you will, and a platform to grow from. The Chinese market continues to evolve, not surprisingly. It's -- you contrast it to say the North American market, the quality of their products -- the demand for higher-quality products in North America is a more China will go through that evolution. We want to be there to help move it up the continuum to higher-quality products, and those are clearly the Toro ones. Robert A. Kosowsky - Sidoti & Company, LLC: Okay. And then, otherwise, and as far as the margin expansion, can you maybe give us some numbers in the quarter as to what was product mix, what was productivity improvements you've seen for Destination 2014? Any benefit maybe from price versus raw material cost? Just any kind of better quantification or order of magnitude on what was the swing factors in the quarter?

Well, rob, when we look at the gross margin expansion, the biggest driver within the quarter was both segment and product line mix. As we spoke about, the pre-Tier 4 transition is the driver, and we expect that to moderate throughout the remainder of the year. We do have some impact of price versus our material costs, and then certainly, our ongoing efforts around productivity. And in order of magnitude, those are probably in the right order. Again, the mix being most significant, and which will moderate as we go through the year. Robert A. Kosowsky - Sidoti & Company, LLC: Okay, that's helpful. And then also 2 last questions. First off, Australia, you mentioned some strength there, but I thought there was a drought, so was it more on the irrigation side?

It was, yes. It was, as we mentioned earlier, it was the Pope products, which was a brand that came to us by way of the Irritrol acquisition several years ago. And the bulk of that Pope-branded product is irrigation products. Robert A. Kosowsky - Sidoti & Company, LLC: Okay, and then just one final question in Astec and then I'll jump off. So you're starting to introduce now a new suite of products that are branded as Toro and, I guess, Astec and Stone as well. Is this like a healthy bit of new products coming out right now or are you still a little bit restrained by the fact that you haven't owned the business for that long? And also an update or a reminder of what you're doing with the manufacturing for those assets.

Yes. Well, the products are largely the Astec and Stone products converted to Toro and under the Toro brand, and there will certainly be some enhancements to those products. The Astec products now have been integrated or are in the process of being integrated into the Tomah operation in Wisconsin, where our large turf products are made. So that's going very well. And the Stone products that were formerly made in New York have now transitioned into our Beatrice, Nebraska operation. And they are again, underway, and production has commenced on a number of those products that will be shipping this quarter. So both integrations always are challenging, but both integrations have gone well, and the team has an a very good job of the operations side and as well as the customer-facing side. Robert A. Kosowsky - Sidoti & Company, LLC: Okay. So we'll look for the pace of new products to pick up pace in following years as you get to know the assets a little bit better?

Certainly. And we bought -- at the end of the day, we bought a portfolio from both, and we didn't commercialize everything that came in the portfolio. As we've talked in the past, when I say we bought a portfolio, it didn't cost as much to buy it. So we have some options we will be considering as we move forward.

And your next question comes from the line of Jim Barrett, CL King and Associates. James Barrett - CL King & Associates, Inc., Research Division: Mike, I did have some further questions on Chinese irrigation. Can you, first of all, talk about the competitive environment in China? How many of your competitors currently have plants there, currently, if any?

Okay. Well, first, I'd say, the competitive environment -- the major players are in China, just as we are today. I can't tell you exactly how many plants each of them have. I would also say that the Chinese market is more fragmented as well because of the, as I commented earlier, call it, the entry-level tier of less than high-quality product, which is not unusual in China and so many different businesses. And that will, we believe, continue to evolve to the more-precise, higher-quality product. And so we will be taking some of our products in there. We'll be using this acquisition then as a kind of a platform or base to grow from. But the major players are there today. And it was also fragmented with a lot of little players. James Barrett - CL King & Associates, Inc., Research Division: Okay. Well, it sounds like you're not buying technology. Are you buying distribution and a sales force in China on micro-irrigation?

We're getting that and an opportunity to use that to expand. But we're also getting a suite of products. I wouldn't characterize it as new technology, how advanced some of that is. But it will be a good fit with our products. James Barrett - CL King & Associates, Inc., Research Division: And when I -- separately, when I evaluate the Astec and Stone Construction acquisitions, is future growth in those verticals likely to come mainly from internally developed new products? Or do you foresee a pipeline of bolt-on acquisitions?

Yes. Well, I would say the first place growth will come from this -- from the existing products and the much higher level of performance we believe we can bring to it, for both Astec and Stone. So as we commercialize the products that we've brought into the portfolio from those acquisitions, the expectation is we will perform better and we will take some significant share within the space. There are good competitors out there, but we'll work very hard to earn that consideration and earn that share. James Barrett - CL King & Associates, Inc., Research Division: And as part of the near to intermediate term growth in those 2 businesses simply growing distribution, were they national in scope or did they have pockets of no distribution?

I would say there was weakness in operations at their former places and there was weakness in customer-facing distribution and service. And so that's, obviously, if we execute well -- as we execute well, that -- part of that is driving our share opportunity. So it will be those things. Certainly, we will be looking to do organic development in addition to the products we're integrating into the operations right now. And as always, and more broadly than in this arena, we will continue to look for the right acquisitions to potentially bolt on or add to the company's portfolio. James Barrett - CL King & Associates, Inc., Research Division: Okay. And then, finally, Renee, a question for you. The divisional sales breakout. Other net sales were a negative $5.4 million. Can you just explain that?

Sure. Our Other segment is where we record the impact of intercompany sales. And as we had talked about earlier, we did have strong channel demand for the Tier 4 transition product, and the same is true from our company-owned distributors. So that's the elimination of those intercompany sales to Toro-owned distribution.

The next question we have comes from Mark Herbek of Cleveland Research.

First question on the China acquisition. Renee, you mentioned that it's having some impact in 2013 on earnings. Can you give us some sense for how much the impact is versus your guidance 90 days ago?

It's a slight impact. It's not terribly large. As Mike said, it's more of a strategic importance of the acquisition. So it's not a large strike, but it is a small drag on our earnings.

Can you give us a range?

$0.01 to $0.02.

Okay. If you -- and then second question. If you look at the first quarter results and the second quarter guidance, it looks like you're going to have better-than-expected earnings in the first half, but you didn't necessarily raise by a corresponding amount following 1Q. So I guess, the question is, has anything changed in your 3Q and 4Q outlooks versus 90 days ago?

Again, as always, Mark, we want you to look at Toro for the year and we've got a couple of small quarters and a couple of large quarters, and 2 large ones remain in front of us. And so obviously, we're factoring in the tax benefit. But beyond that, nothing has changed that much since we talked with you in December. Now snow is going to be a little bit more of a headwind. On the one hand, the season has been soft to date. We see some inventory clearing out now as -- a little bit as we kind of closed out the snow season. And it was a small part of our sales, but at the end of the day, every point is a point. And so we would expect now that next year's pre-season to be solid. What we had hoped for it. I think, when we've talked with you in December and based on some of the forecasts, we'd hope to have both solid in-season and a solid pre-season. So that's a bit of a headwind, if you will. Renee has already mentioned the China. That's small. Beyond that, we're looking at the spring conditions and that's holding in our plans. Europe is still a question mark, but it hasn't moved materially, one way or the other, since we last talked. So I think, our numbers are pretty consistent with what we've talked about on the last call.

So outside of snow being softer than expected, it sounds like the majority or the rest of the end markets are playing out as expected to this point?

Yes. I think, that's -- we would say that. We've mentioned just a little bit ago, golf retail, sound. Landscape retail is sound. The residential retail, the large part of that, is in front of us. But their indications with our channel demand and sell-in and products that we're offering this year, that looks good. So we're staying the course on our numbers other than factoring in the tax.

The next question comes from Josh Borstein, Longbow Research.

Could you talk a little bit about your alternatives to T4, not necessarily the pre-Tier 4, but alternatives, such as the gas-powered mower, that I think, you came up with? And just your sense of what the appetite is right now for Tier 4-compliant equipment versus this alternative Tier 4 equipment.

Yes. We think this is going to be -- the story is going to continue to unfold. It's going to be a little, I wouldn't say messy, but as we try to anticipate and serve customers how they want to be served. So we have some good alternatives. There are some products that could fall underneath the 25-horsepower requirement in leveraging technology there. There's some products even within the Tier 4 band that we're able to apply some, call it, smart power technology that's actually bringing innovation. Sometimes out of challenges like this, you can come up with some incremental innovation to drive a better customer value proposition. Having products that have gas engine alternatives to diesel, we believe, will play a role there. We saw some of those and heard about some of those at the golf show. The customer response to that has been relatively favorable. But it'll be a mix. SO some customers will still want to stick with all-diesel and some will have alternatives for them. There'll be some customers on the other book and they will simply want the latest in Tier 4 kind of products, the greenest products they can get. There's costs that are associated with that, but we expect the demand from that, too. So this is going to take some time to shake out. I just would say that our team here has done a really good job in listening to customers and trying to make sure we have good alternatives and good response while staying very much in compliance with the requirements. There are regulatory requirements around this, and our team understands that well and make sure we comply.

And then on the irrigation side, you had mentioned you were seeing an uptick in quotes. In your guidance, do you have quotes converting into orders baked a certain number of those converting into orders into your guidance? Or is there any potential upside there if more of those quotes convert than you had anticipated?

Yes. We always have that -- some of that business factored in these processes -- they're long processes, and you're working with owners and architects and consultants and even the decision point on whether they're going to pull the trigger or not or whose brand they're going to use. And it's a -- there's only a couple of players in this space, largely. And so, yes, we clearly have additional business factored in there. But we look at early indicators and the activity. As I say, these are long projects and the early indicators are that, that the portfolio is a little stronger than it was a year ago. So that gives us some encouragement that 2013 will be -- we'll see an increase on the golf irrigation side.

And is that because just there's a greater amount of quotes out there? Or in addition, do you think you're taking market share?

Well, as you know, we have a very high market share in that space. But when you can measure every deal, we believe we are moving the market share in the right direction.

Okay, great. And then just last one for me on your raw material cost outlook for 2013, with respect to steel engines, hydraulics, what your outlook is.

Josh, from a steel perspective, year-to-date steel has been favorable, but as we look forward, we do expect that will continue to increase. Resins tends to fluctuate more than anything based on the price of oil. From an engine standpoint, we tend to lock in to a total year engine contract, so our pricing doesn't change substantially throughout the year. And then hydraulics has been pretty steady. I mean, not real significant changes from a hydraulic standpoint.

Okay. And the price increases that you put in through the year, is that just enough to cover any increases that you anticipate?

Well, we price to market. So we don't price specifically related to cost. But we have stated before, we have about a 2% net price realization factored into our guidance.

Your next question comes from the line of Sam Darkatsh, Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: I'm laughing at all the acquisition questions you're getting. I think somewhere, John Wright has going to be wiping away a tear of sentiment here.

Well said. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Two or 3 questions here. First off, international sales, down 5% in the quarter. Although, I think this was the last quarter of fairly difficult year-on-year comparisons that -- now I know you'd characterized the outlook as mixed. Should we expect or do you expect international sales, over the next 3 quarters, to be up on a year-on-year basis based on the easier comparisons? Or are there other headwinds that might create a still down year-over-year results?

I would say, we would expect it start to move in the right direction, not -- I know we talked about this in the last call, not a step change, either way. But so much of that is going to be dependent, and Europe is the largest part of that on just what happens with the kind of the economic environment over there. So I understand your point on the comps. We need the golf business over there and the grounds business over there, and residential is a little -- it's a smaller part of the business, but a little bit of a wildcard there. We'll see. But right now we're not expecting it to be a headwind for the remainder of 2013, but not strong growth. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Got you. Second question. Your #1 competitor in a lot of your businesses, John Deere, recently took their expectations for the industry growth down from 5% to now flat, which I guess, was unusual because we're a little bit out of a season, so I'm not sure where when that outlook necessarily would've been driven by. But I respect that you don't want to talk specifically about what John Deere might be seeing, but why might there be folks in the industry that have a more sober outlook on what industry growth may now look like compared to where it was 3 months ago and why do you perhaps, not share that level of sobriety?

Yes, well, I guess, I'm not sure exactly what's factored into their -- and obviously, their mix of business, even within this space, is different than our mix of business. So as we go through the categories, which we've talked about, golf, for, us is favorable. The optimism across the grounds and landscape contractor arena is relatively favorable. Residential is a bit of a wildcard, and that's a part of our business, a significant part of some of these other folks' businesses, too. Maybe that's being factored in as a -- to a degree, more expensive consumer durables, right? So maybe bigger part of business from some of them, smaller for us. I can't answer that. All I can say is our -- nothing has, since we talked in December, has changed to cause us to say, boy, we think golf is going to face more headwinds, or landscape is going to face more headwinds or even residential. Now residential is a bit of the wildcard in -- and we've talked about the snow piece. So small part of our business, but that's been a headwind to date. Although -- I shouldn't even say to date, that's through the first quarter. But what's going on in February has been very positive from the Northeast to about a number of the snowfalls, if you will, in the Midwest and even out West. That will set the stage better for this -- the fall season. So I guess, that's as much as I can say. We're -- we stay in close touch with our customers and our channel partners and we're going to work very hard to execute. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Last question, Renee, I noticed that your share repurchase activity was roughly similar to where it was last quarter, from a dollar standpoint. I know, for obvious reasons, why you wouldn't want to say specifically where you -- what your formula might be for share repurchase. But how valuation-sensitive is your share repurchase activity? Do you see it continuing at this sort of pace for a while?

Sam, this is Tom. I'll speak to that. We've got a couple of different models that we use to kind of evaluate what prices we'd be willing to buy shares back at. So we've got one that's basically a discounted cash flow model that takes in future earnings expectations, P/E ratios and other factors and balances that against our cost of capital. And of course, then we also factor that against our other opportunities as well. So that's something we're constantly evaluating and checking our assumptions around that, and then we tend to put in programs based on what the results of that modeling is. Yes, our share purchases, as Renee said, we bought back about 33 million shares in the last quarter and that was at an average price of just under $43. So one way of saying, we do have models for that, that we're constantly evaluating. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: And so, I guess, paraphrasing, as long as no further acquisitions of some sort of size or note come about, that this pace, all else equal, probably should be maintained for a while?

Yes. I think, that's fair to say.

We have no questions at this time, so I'd like to turn it over to Mike Hoffman for closing remarks. Please proceed.

Well thank you, Sean. And to our participants, thank you for your thoughtful questions. To our listeners, thank you for your interest in Toro, and we will look forward to talking with all of you again in May to discuss our second quarter results, so thank you, and have a great day.

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