Good day, ladies and gentlemen, and welcome to The Toro Company Fiscal 2014 Fourth Quarter and Full Year Earnings Conference Call. My name is Brittany, and I'll be the 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, Ms. Amy Dahl, Managing Director of Corporate Communications and Investor Relations for The Toro Company. Please proceed, Ms. Dahl.

Thank you, Brittany, and good morning. Our earnings release was issued earlier this morning by Business Wire, and a copy can be found on the Investor Information page of our corporate website, thetorocompany.com. Joining me for this earnings call are Mike Hoffman, our Chairman and Chief Executive Officer; Renee Peterson, Vice President, Treasurer and Chief Financial Officer; and Tom Larson, Vice President and Corporate Controller. We begin with our customary forward-looking statement policy. During this call, we'll make forward-looking statements regarding our business and future financial and operating results. You are all aware of the inherent difficulties, risks and uncertainties in making predictive statements. Our earnings release as well as our SEC filings detail some of the important risk factors that may cause our actual results to differ from those in our predictions. Please note that we do not have a duty to update our forward-looking statements. And with that, I will now turn the call over to Mike.

Thank you, Amy, and greetings to all our listeners. This morning we were pleased to report that the company delivered record-setting results for the 2013 fiscal year, including records for revenues, operating earnings and earnings per share. We achieved a 4.2% increase in net sales, surpassing the $2 billion level for the first time in our company's history. Our operating earnings grew to $230.7 million, and we delivered earnings per share of $2.62. Crossing the $2 billion revenue mark is a gratifying way to help kick off the coming year in which we will celebrate another important milestone, the 100th anniversary of our founding on July 10, 1914. As we prepare for our second century, the company's focus on both creating and returning value to our shareholders remain steadfast. Renee will detail our financial and operating results in a few minutes. Turning to our individual businesses. First, as you may recall, our golf equipment sales got off to a very strong start during the first half of the year and in particular during the first quarter. The early surge was fueled by channel demand for pre-Tier 4 products. As we commented then, this would even out later in the year, and it did. While our early professional golf equipment shipments showed little sign of being hampered by the adverse weather, golf course revenues felt the pinch as conditions kept golfers off the links. According to the PGA tracking reports, the industry's days open for play were down nationally by 6.7% for the year, which translates to approximately 17 fewer golfing days than in 2012. Golfers, however, proved their resilience as rounds played for the year declined by only 5%. As weather conditions improved during the latter half of the year, play increased, which helped golf course total revenues recover and…

Thank you, Mike, and good morning, everyone. Sales for fiscal 2013 grew to $2,041,400,000 compared to $1,958,700,000 for fiscal 2012. We achieved net earnings for the year of $154.8 million or $2.62 per share. This compares to fiscal 2012 earnings of $129.5 million or $2.14 per share. Net sales for the quarter were $382.4 million compared to $339.3 million for the same period a year ago. We delivered net earnings of $5 million or $0.08 per share compared to breaking even in the fourth quarter of fiscal 2012. For the first quarter of 2014, we expect net earnings of about $0.35 per share compared to $0.53 per share during the first quarter of fiscal 2013, when demand for pre-Tier 4 product significantly accelerated shipments into the quarter, which as we stated at the time, will not be repeated in fiscal 2014. This year, we expect those sales to return to a more traditional second and third quarter pattern. In addition, you might recall that in the first quarter last year, we realized a $0.05 benefit to our earnings per share from the retroactive reenactment of the domestic research tax credit, which also will not be repeated in the first quarter of fiscal 2014. For the year, we repurchased approximately 2 million shares of company stock at an average price of about $46 for a total cost of about $99 million. This includes roughly 420,000 shares in the fourth quarter at $23 million. At year end, we had approximately 4.3 million shares outstanding under authorization. We expect the reduction in the number of diluted shares will be somewhat less in the year ahead than in fiscal 2013. Our professional segment sales were up 7.2% to $1,425,300,000 for the year. This includes 11.9% growth for the quarter to $255.8 million. Strong demand…

Thank you, Renee. We're gratified to have delivered record revenues, operating earnings and earnings per share along with increasing our dividend for 2014. While there are no guarantees of favorable weather and economic conditions, we look forward to delivering another strong showing in fiscal 2014 by focusing on those things we can control. Our positive outlook is based in part and our belief that customers will continue to respond to our steady introductions of innovative products and services to, as our purpose statement pledges, help them enhance the beauty, productivity and sustainability of the land. Since 1914, innovation has been the lifeblood of this company and is appropriately identified as such in the tagline of our official centennial logo, A Century of Innovation. In fact, as you know, we have a standing goal of driving 35% of sales annually from new products, which we defined as products introduced in the current and previous 2 fiscal years. During fiscal 2013, our new product sales were slightly below our target level, which was due in part to the significant investment we made to meet Tier 4 compliance standards. We are projecting new product sales in fiscal 2014 will once again exceed our goal. Our commitment to innovation is reflected in the recognition several of our latest product and service innovations have received from a number of authoritative bodies. Our SmartSpeed Zs also received a 2013 Innovation Award from HANDY Club magazine of America. Irrigation Association recognized our new Evolution series controller with a new product award at the 2013 Irrigation Show in November, and this was the third year in a row we brought home a new product contest award from the irrigation industry's premier annual show. In November, the Minnesota High Tech Association honored Toro for providing superior technology innovation and…

[Operator Instructions] And your first question comes from the line of Sam Darkatsh. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: So just several quick questions. I recognize or I understand that you are anticipating up to 50 basis points of gross margin improvement in fiscal '14. However, I imagine that Q1 is going to be pretty heavily pressured based on the comparison of the Tier 4 impacts from last year. Can you give us a sense, Renee, of what Q1 gross margins might look like, even if it's a ballpark?

Yes. You're correct, Sam, that the mix will be difficult to compare to last year where we had acceleration from a Tier 1 standpoint. What I would say is it's probably best to look at our margins over the year. And again, then I would reiterate the 50-basis-point expansion is the way to think about it. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: So then a normal gross margin expansion. If you had backed out of Q1, might it be closer to 100 basis points? Because I know you have very limited inflation and you're going to have some pricing that's likely to go through. So I would imagine that a normal gross margin expansion in that type of environment might be closer to 100 basis points. If we backed out Q1, might that be the case?

I don't think we have that here, Sam. I think the -- and just to be clear on pricing, we will have less price impact in 2014 than we did in '13. So we're looking at about a point of realization, and some of that will play out, obviously, over the year. So I think it really more boils down to the mix, and the mix will shift from more professional products to likely more residential products, particularly if we get some snowfall as we hope to get. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Which leads, Mike, to my second question perfectly. The 4% to 5%, how should we look at that resi versus pro and U.S. versus international to give us a sense of how that mix might shake out?

Yes, that's a good question. We have expectations that all of our businesses will grow, so it's not a -- it's not an 80-20. We don't break that out, but it's not an 80-20 where we expect the professional business to swing one way or the other. I guess I'd say all-in, the -- because there are some growth drivers on the professional side, that would pull the average up a bit and residential maybe a little bit the other way, but they're not dramatically different. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Okay. And last question if I could. You've signaled that your share repurchases in 2014 might be more modest and your dividend both in absolute terms and in terms of payout is going up. First question would be, are they related? And second question would be, Mike, is that a signaling that perhaps either with the stock where it is or the opportunities for capital employment internally, be it truly internally or bit it through M&A, might be a little bit more modest going forward?

It's an interesting question. I think this is one of those speaks to the power of and, right, share buybacks and the dividend. I'll be clear. By raising this dividend and even the guideline, that right now has about a $10 million impact when last year we bought back $100 million of stock. And so I think this is more a signal of our commitment and expectation of ongoing strong cash flow. I think it's -- again, it is both proves our yield somewhat. We're kind of at the edge there, we thought. And so I think we still maintain, as Renee said, we still maintain our priorities, which have been the case for several years, that our preference would be to find the right opportunities to grow the company by looking outside for acquisitions. But as you well know, that takes 2, and it can be lumpy. And we still, even with this dividend change, have a great deal of capacity to do that. And lacking that, we will then continue our practice of returning that to shareholders with strong share repurchases as appropriate. So I wouldn't read terribly much into the dividend. It's a good -- I mean it's a -- I think it's a commitment, again, back to the strong cash flow that we was going to ratch that up a bit.

And your next question comes from the line of Jim Barrett. James Barrett - CL King & Associates, Inc., Research Division: Mike, could you talk a bit about Precision Sense? How big an opportunity is that? And it's my understanding there's thought of turning -- of providing that as a service to your customers. And if that's the case, what kind of service infrastructure will be required to make that happen?

It doesn't. This is a product that gets taken, Jim, to golf courses or to other venues, sports fields and such. It's pulled behind a vehicle that provides a number of measurements and feedback that then gets put together in a report to help customers manage their turf. It's -- I would say, to start with, it's not a material number. It does make us more important to the customer. Clearly, it's something innovative. Whether it'll become a major service, that's something we're going to explore. I think that we believe the kind of all -- that whole sensing technology around all of our products is going to continue to ratchet up, sensing technology with irrigation systems, sensing technology on our products. I talked a little bit about that as we went through some of the new products. And this is sensing technology kind of into the turf itself. So time will tell. It is something very innovative. Our customers have reacted positively about the idea and some of the reporting, but it's just getting started. So I can't -- it does make us more important to customers, and we think that in itself is worth a lot. James Barrett - CL King & Associates, Inc., Research Division: Understood. And do any of your competitors -- are they introducing a competitive-type product?

Not to my knowledge. I think we're kind of alone in the space right now. James Barrett - CL King & Associates, Inc., Research Division: Good. And then on a separate note, could you discuss the current outlook for growth in golf course construction in China?

Yes. I think that continues. We talked about this in the past, and so there was a slowdown. Some of that was the government playing a role. It stabilized. It's not as though there's been a tripling or -- of that of the courses, but there continues to be new golf course construction and interest there. And so when we look at golf, obviously, the domestic market is a large market, but we're not going to see the growth there. We'll see more of the growth internationally. Clearly, China's adding to that growth. So worldwide golf as we look at the business is in good shape. And to whatever degree we see some modest contraction here in the U.S. is more than offset by what we see growing outside. And Asia would be key to that, but it goes beyond Asia. Brazil is only a couple of years away for the Olympics. There are golf course being developed down there. I'm pleased to say that Toro irrigation will be used on the one that the Americans and others, athletes around the world will be playing on. So we continue to expect to see growth.

And your next question comes from the line of Eric Bosshard.

This is Tom Mahoney on for Eric this morning. Coming into 2013, kind of looking back at the guidance that you guys gave coming into the year, you outperformed that by about 10%. Can you go back to the year, what were the key drivers of the upside through the year? And then kind of looking out to 2014, as you go through those buckets, how are you thinking about those buckets going forward into 2014, looking for any areas of upside potential there?

Tom, I'll answer that question, and Mike can chime in as we go through it. But first of all, when we look at the year, the factors that have really contributed to our margin expansion have been related to price. And as Mike mentioned earlier, we probably have a lower realized price in F '14 than we saw in '13, where we saw 2 points of realized price. Commodities have been relatively stable. As I had mentioned, we expect that also to continue through '14. And we'll see, we'll see what happens from a commodities standpoint. Mix was favorable for us in fiscal 2013 where the professional business grew greater than the residential business. And then I think in both years, what we're seeing is the impact of our productivity initiative. So we're focused on that internally as well as working with our supply base on productivity.

And then, you were expecting pro growth ahead of residential as a mix benefit again in '14?

No. As we look forward in '14, it's probably more balanced growth. As Mike had commented a moment ago, both will grow, maybe a little bit awaiting on the professional side. Productivity will continue as well. We'll continue to focus on that throughout our Destination 2014 initiative but also beyond that. That's an ongoing focus area for us.

Got it. And then as you look back at in the 4% growth in 2013, can you talk about that performance from a market share perspective and anything you've seen in the competitive environment going forward?

Yes. I think we would look kind of across the portfolio and feel pretty good about our respective performance in each of the areas, and we look -- we pay very close attention to that. So in professional, the golf business, Toro maintains strong position, strong share, strong results on the irrigation side where we compete. I think we saw probably improving -- improvement with -- in some of the riders, the consumer Z riders; maybe a little bit of erosion on the walkers in that we had more limited placement last year of Lawn-Boy. But the good news as we look forward is that will be expanded. So -- and that -- we know the importance of that. You take care of market share, that's key to our driving profitable growth. And so all-in, market share-wise, we would feel it was a solid year for us. And obviously now our focus is on 2014.

And your next question comes from the line of David MacGregor.

I guess just with respect to the first quarter revenue decline assumed in the $0.35 guidance, is it easier to talk about how you expect to comp against the first quarter of 2011? And is there any way you can give us some kind of sense of how that comp might look?

Yes. Well, both '11 and '12, right? So it's --'13, as we said, was an anomaly and...

Sorry. Yes, I wanted to get past the Tier 4 and get to the year before that. I apologize.

Past -- well, no. That's what I was saying. So fiscal '12 was the -- is the, I think, the comparison you're really asking for?

Yes, yes.

And so fiscal '12, this looks more like that. And now we -- obviously, in our number last year, we had not only the Tier 4 impact, but we had the R&E pickup in there. So I think what we would say is, as we always say, let's not focus too much on the quarter. This is a small quarter. We need to focus on the year. That's how we manage the business, kind of 2 larger quarters and 2 kind of smaller quarters. And so we'll get back to -- this is now back to more normal course there. I mean I think you'll see our guidance reflected the growth in our annual guidance, and that will come back into the second, particularly the second and third quarter. There is a little variability in -- it's a small quarter, the Q1 we're in. Snow could play a bigger role there. We'll see. So we think at this point that's -- we're just trying to get it back on track. It's not a really apples-and-apples comparison to first quarter of '13.

Right. Okay, and then thinking about I guess the full year, as you think across your various lines of business, where within your guidance are you expecting the greatest revenue acceleration?

Well, from a revenue standpoint, as you know, we've talked about the investments we've made, particularly in smaller businesses. So, again, a smaller parts of the portfolio, but they can accelerate because they're -- we're trying to turn them into bigger businesses. And that is particularly in the rental and light construction as well as the micro-irrigation, right? The other business, the core businesses around golf, around landscape contractors, residential, if you will, they're all solid businesses, and they've been expect to grow too. But the accelerators would be those newer businesses.

And then just on the -- just follow-up on Sam's question on the M&A. I guess -- can you just talk about what's in the funnel right now? It does look as though by bumping up the payout ratio that maybe the M&A opportunity isn't coming through quite as quickly as you'd anticipated it. Is it just because the opportunities just aren't there? Or is it valuations? Or maybe you can give us some more granularity around that?

Yes. Well, it would be a very consistent discussion. As we've said in the past, much of the M&A we would look at given our size company are private companies. And until mom or dad or whoever is ready to sell, you can't force it. Well, you could force it, but then usually you regret it. And so we're very disciplined about the process. We've been very consistent in our messaging around this. We have some good people working on it, looking for those opportunities. I don't think the funnel is any less full or fuller than it was 1 year ago or 5. I mean obviously the downturn did play a role there. So we will continue to work it. Our messaging has been very consistent here. One of the -- they will -- it will happen, but it's by nature lumpy. And so, again, I would say, as said to Sam, don't read too much into this dividend. We're talking about annually $10 million here. Whereas you look at -- that 10% of what we repurchased in shares in 2013 does move our yield up, that makes it a little more attractive there. It's kind of a signal of our ongoing strong cash flow. So we think it's a -- again, it's the power of and. We think we can do this dividend and continue to do share repurchases but our priority remains to look for the acquisitions just -- be really nice to be able to just schedule, but that's not the way it works.

Okay. And then just finally on those acquisitions, you've gone through a rebranding there. It sounded like it was positive. I just thought I'd ask. Are you seeing any kind of deceleration or maybe acceleration as a consequence of the rebranding?

Rebranding, I'm not sure.

For the Astec.

Oh, the Astec.

Astec to Toro?

Yes. I'm sorry. Well, that -- as we talked in the past, that was a business that didn't, from a financial standpoint, was not a major investment. We bought a portfolio of products and drawings. We have gone through the process of integrating them into our plans, and they're all being made in Red. In fact at the ICU show that I mentioned earlier, we called out it's time for instead of a revolution a Red-volution. And the guys did a terrific job on launching that. But with that said, we're a very -- a small player. There are 2 kind of heavyweight players in that space. So it's going to be steady work to earn that, both in the product, in innovation and building the channel, but they're doing a lot. I will say the business, the fellow running it and his team are doing a lot of good work on getting things headed in the right direction so -- but there won't be -- it won't be like throwing a switch. This is something -- will be something we have to earn.

And at this time, there are no further questions. I would like to turn the call over to Mike Hoffman for closing remarks.

Well, thank you, Brittany. And thanks to all our listeners and those who've asked questions and your ongoing interest in Toro. We wish everyone a pleasant and safe holiday season. And we will look forward to talking with you again in February, where we will discuss our first quarter results. So thank you, and goodbye.

Ladies and gentlemen, that concludes the presentation for today's conference. You may now all disconnect, and have a wonderful day.