Q4 2020 Toro Co Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the total company fourth quarter and fiscal year 2020 earnings Conference call.
At this time all participant lines are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to price Darden one on your telephone. Please be advised for today's conference is being recorded if you acquire any further assistance. Please press Star then zero.
Ill now hand, the conference over to Nicholas roads, managing director of Investor Relations. Please go ahead.
Thank you Sarah and good morning.
Our earnings release was issued this morning, and a copy can be found in the Investor information section of our corporate website, the Toro company Dot com.
On our call today, or originations chairman and Chief Executive Officer, Renee Peterson, Vice President Treasurer, and Chief Financial Officer.
We begin with our customary forward looking statement policy.
During this call we will make forward looking statements regarding our business and future financial and operating results.
Youre all aware of the inherent difficulties risks and uncertainties in making predictive statements.
In our earnings release, as well as our SBC filings detail some of the important risk factors, including those related to co in 19 that may cause our actual results to differ materially from those in our predictions. Please note that we do not have a duty to update our forward looking statements.
In addition, during this call we will reference certain non-GAAP financial measures reconciliations for historical non-GAAP financial measures to reported GAAP financial measures can be found other earnings release or on our website.
We believe these measures may be useful in performing meaningful comparison of past and present operating results to understand the performance of our ongoing operations and how management views the business.
Non-GAAP financial measures should not be considered superior to.
For a substitute for GAAP financial measures presented in our earnings release and this call.
With that I will now turn the call over to Rick.
Thanks, Nick and good morning.
We are pleased to report robust results for fiscal 2020 highlighted by professional segment growth primarily from incremental contributions from Charles machine works and venture products a record performance from our residential segment.
We are successful performance to our team, which demonstrated perseverance and ingenuity in this challenging year.
We navigated cold induced manufacturing inefficiencies, including social distancing and workforce fluctuations.
At the same time, we provided innovative solutions to meet demand from our retailers and customers.
Our employees manage these changes admirably, while working in significantly modified production environments for at home as day balanced personal challenges, resulting from a pandemic.
I am beyond proud of our team and will remember this year as one that highlighted the way we live our values for.
Caring for one another and serving our customers with determination.
Thank you to the entire team for your perseverance and ongoing commitment to work safely to drive our business forward into our channel partners as an essential businesses you served our customers with dedication and passion.
Together, we persevered to maintain and gain market share in key product categories with existing and new customers.
Execution in this challenging year continue to be guided by our enterprise strategic priorities.
Accelerating profitable growth driving productivity and operational excellence and empowering people.
In addition, we enhanced our commitment to the well being of our employees.
Service to our customers and support for our communities also.
Ultimately staying true to our values enabled us to deliver for our stakeholders.
For fiscal 2020 highlights include record growth in the residential segment.
Successful introduction of new battery powered products for residential and professional applications.
Increased investment in research and development in key technology areas strong free cash flow.
We continue to return value to shareholders via dividends.
And the launch of our sustainability endures platform the documents our progress Hawaiian with long held values and objectives and profiles. Our continued efforts to address environmental social and governance priorities.
I'll now provide some commentary regarding key results by segment for the full year and fourth quarter and Renee will go into more detail.
For fiscal 2020 professional segment net sales were up 3% year over year and earnings were up 12%.
Residential sales were up 24% and earnings were up 75%.
For the fourth quarter professional segment net sales were up 10% versus the same prior year period and earnings were up 70%.
Residential net sales were up 39% and earnings were up 90%.
I'll now provide some insight into the demand environment for the quarter.
In the residential segment, we experienced a continuation of trends seen throughout much of fiscal 2020.
Stay at home directives in the expansion and strength of our channel were key contributors to high demand for walk power mowers and zero turn riding mowers.
Innovative features refreshed brand presence and extended season sales provided additional momentum.
In the professional segment, we drove growth with increased demand for our landscape contractor snow and ice management golf irrigation rental and specialty construction and AG irrigation products.
Strong product offerings favorable weather and stay at home trends drove retail demand throughout the quarter and provided momentum going into fiscal 2021.
The Toro company is sustainably strong.
The pandemic year, a 2020 improved by focusing on our enterprise strategic priorities and living our enduring values were able to deliver strong results.
Our performance this year was only possible because of the resilience and flexibility of our team.
The manner in which our operations and businesses Resourcefully responded to customer demands and the dedication our channel partners.
As a result, I'm optimistic about our momentum going into the new fiscal year.
With that I will turn the call over to Renee for a more detailed discussion of our financial results.
Thank you Rick and good morning, everyone. During the fourth quarter, we continued to build on our sales momentum in both the residential and professional segments ex.
Could you do well operationally and investing in innovation to position the Toro company for long term growth.
We did so in a challenging and unpredictable environment.
We grew fourth quarter net sales by 14.5% to $841 million.
Reported EPS was 66 cents.
And adjusted EPS was 64 cents per diluted share.
This compares with reported EPS of 35 cents.
Net adjusted EPS of 48 cents per diluted share for the comparable quarter last year.
For the full year net sales increased 7.7% to $3.38 billion right.
Reported EPS was $3.03 for diluted share up from $2.53 last year.
Full year, adjusted EPS was $3.02 per diluted share up from $3 a year ago.
Now to the segment results.
Residential segment net sales for the fourth quarter were up 38.5% to $187.9 million.
Mainly driven by strong retail demand for walk power in zero turn riding mowers.
For full year fiscal 2020 net sales for the residential segment increased 24.1% to $820.7 million.
The increase was mainly driven by incremental shipments of zero turn riding and walk power mowers as a result of our expanded mass channel as.
As well as strong retail demand for these products due to new and enhanced product features.
Favorable weather and stay at home trends.
Residential segment earnings for the quarter were up 90.2% to a record $26.4 million.
This reflects a 390 basis point year over year increase to 14.1%.
When expressed as a percentage of net sales.
This improvement was largely driven by productivity and synergy initiatives.
And EPS unique expense reduction and leverage on higher sales volume.
For the year residential segment earnings increased 74.5% to a record $113.7 million.
On a percentage of net sales basis segment earnings increased 390 basis points to 13.8%.
This was a record setting year for the residential segment and the team deserves a well earned recognition.
Professional segment net sales for the fourth quarter were up 9.5% to $644 million.
This increase was primarily due to growth in shipments of landscape contractor zero turn riding mowers, and snow and ice management equipment.
Annual pricing adjustments and lower floor plan costs.
As well as incremental sales from the venture products acquisition.
For the full year professional segment net sales increased 3.3% to $2.52 billion.
Professional segment earnings for the fourth quarter were up 17.2%.
Two $104.2 million.
And when expressed as a percent of net sales in.
Increased 580 basis points to 16.2%.
This increase was primarily due to.
Annual pricing adjustments and lower floorplan costs low.
Lower acquisition related charges.
And benefits from productivity and synergy initiatives.
This was partially offset by product mix.
For the full year professional segment earnings increased 12% compared to fiscal 2019.
When expressed as a percent of net sales segment earnings increased 130 basis points to 16.9% from last year.
Turning to our operating results, we reported gross margin for the fourth quarter of 35.7%.
An increase of 230 basis points over the prior year period.
Adjusted gross margin was 35.7% up 120 basis points over the prior year.
The increases in gross margin and adjusted gross margin were primarily due to the benefits from productivity and synergy initiatives.
And net price realization, mainly within the professional segment.
This was partially offset by product mix.
Reported gross margin was positively affected by lower acquisition related charges compared with the prior year period.
For the full year reported gross margin was 35.2%.
180 basis points compared with 33.4% in fiscal 2019.
Adjusted gross margin was 35.4%.
From 35.1% in fiscal 2019.
SGT expense as a percent of net sales decreased 290 basis points to 24.6 for Sam for the quarter.
This decrease was primarily due to restructuring costs in the prior year period that did not repeat and.
Cost reduction measures, including decreased salaries and indirect marketing expense.
This was partially offset by increased warranty costs and certain professional segment businesses.
For the full year EPS, you need expense as a percent of net sales was 22.6%.
Down 40 basis points from fiscal 2019.
Operating earnings as a percent of net sales for the fourth quarter increased 520 basis points to 11.1%.
Adjusted operating earnings as a percent of net sales increased 270 basis points to 11.1%.
For fiscal 2020.
Operating earnings as a percent of net sales.
For 12.6%.
Up 220 basis points compared with 10.4% last share.
Adjusted operating earnings as a percent of net sales for the full year were 12.8%.
Compared with 12.9% a year ago.
Interest expense of $8 million for the fourth quarter was flat compared with a year ago.
Interest expense for the full year was $33.2 million up $4.3 million overlaps share.
Moving by increased borrowings as a result of our professional segment acquisitions.
The reported effective tax rate was 18.5% for the fourth quarter and the adjusted effective tax rate was 21.9%.
For the full year, the reported effective tax rate was 19% and the.
Adjusted effective tax rate was 20.9%.
Turning to the balance sheet and cash flow.
At the end of the year, our liquidity was $1.1 billion.
This included cash and cash equivalents of $480 million and full availability under our $600 million revolving credit facility.
We have no significant debt maturities until April of 2022.
Accounts receivable totaled $261.1 million down.
Down 2.8% from a year ago.
Inventory was flat with a year ago at $652.4 million we.
We have plans to build inventory in the fourth quarter to partially mitigate potential supply chain and manufacturing constraints in.
Instead, the additional production allowed us to fulfill stronger than expected retail demand and satisfy customer needs.
Accounts payable increased 14% to $364 million from a year ago.
Full year free cash flow was $461.3 million with a reported net earnings conversion ratio of 140%.
This positive performance was primarily due to favorable net working capital.
The increase in reported net earnings.
And reduced capital expenditures.
Given our strong cash generation in fiscal 2020, we have already paid down 50 million of debt in November.
We also expect to resume share repurchases in fiscal 2021.
In fiscal 2020, our disciplined capital allocation strategy continue to include investing in organic and M&A growth opportunities maintain.
Maintaining an effective capital structure and returning cash to shareholders.
We also focused on near term liquidity.
For fiscal 2021, our capital priorities remain the same.
Include reinvesting in our businesses to support sustainable long term growth, both organically and through acquisitions.
Returning cash to shareholders through dividends and share repurchases.
And repaying debt to maintain our leverage goals.
In addition to the $50 million debt Paydown in November we also recently increased our quarterly cash dividend by 5%.
We are providing full year fiscal 2021 guidance at this time based on current visibility.
Note that there continues to be considerable uncertainty given the potential effects of co 19.
This includes potential effects on demand levels from timing.
Our supply chain and the broader economy.
I will share the guidance highlights and Rick will cover the macro trends and key factors that we will be watching throughout the fiscal year.
For fiscal 2021, we expect net sales growth in the range of 6% to 8%.
This concludes for months of incremental sales from the venture product acquisition.
We expect continued recovery in professional segment end markets.
For the strongest growth will be in the second and third quarters as those comparable periods last year were most impacted by the pandemic.
We expect residential segment end markets to return to low single digit growth Bob.
Following an exceptionally strong fiscal 2020.
We anticipate a stronger first happen second day.
Given our fiscal 2020 performance.
Looking at profitability, we expect moderate improvement in fiscal 2021, adjusted operating earnings as a percent of net sales compared with fiscal 2020.
This assumes continued productivity and synergy benefits and lower corporate related manufacturing inefficiencies.
We expect these benefits to be partially offset by material wage and freight inflation.
As well as the reinstatement of salary incentive and discretionary employer related costs.
That were reduced or eliminated in fiscal 2020.
In the professional segment, we expect earnings as a percentage of net sales to improve versus fiscal 2020 due to better volume leverage.
In the residential segment, we expect earnings as a percentage of net sales to be similar to fiscal 2020 and comparable volumes.
We expect full year adjusted EPS in the range of 335 to 345 per diluted share.
This adjusted EPS estimate excludes the benefit of the excess tax deduction for share based compensation.
Based on current visibility, we anticipate adjusted EPS to be higher in the first half of fiscal 2021 versus the year ago period.
The majority of the increase will be in the second quarter.
For the second half of fiscal 2021, we expect adjusted EPS to be comparable with the same period of fiscal 2020.
We expect depreciation and amortization for fiscal 2021 of about $95 million.
We anticipate capital expenditures of about $115 million as we continue to invest in projects that support our enterprise strategic priorities.
We anticipate fiscal 2021 free cash flow conversion in the range of 90% to 100% of reported net earnings.
In fiscal 21, we'll continue to execute and adapt to changing environments as we maintain a balance of focusing on the short term, while never losing sight of our long term strategic priorities.
We look forward to capitalizing on many exciting growth opportunities in fiscal 21 and beyond I will.
I'll now turn the call back to Rick.
Thanks Renee.
Looking ahead, we will be watching a number of macro trends such as the trajectory and duration of co venture related impacts, including potential global supply chain disruptions and continuing social distancing restrictions impacting production.
Global economic recovery factors, driving general consumer and business confidence and commodity trends and weather patterns for the winter and spring seasons.
As these trends evolve we are well positioned for growth within our specific market categories and are closely watching a number of key drivers.
For our residential and certain professional businesses customer interest in home investments.
For landscape contractors improvement in business confidence for snow and ice management demand within our new and refreshed product categories.
For golf the anticipation of another strong year for rounds played and the return of food and beverage and event revenue.
For grounds equipment, the budgets of municipal and other tax supported entities and their impact on capital equipment purchases.
For underground the funding of Fiveg and broadband build out and critical need infrastructure rehab and replacement.
And for rental and specialty construction, the resumption of fleet upgrades and replacements.
We have a strong innovative portfolio of products to address these market opportunities from recently introduced products that will continue to drive our business include tightening the master and Timecutter zero turn riding mowers for homeowners and contractors.
For the Flexfours 60 volt lithium ion suite of products, including our walk power mower snow thrower hedge trimmer chain saw and power shovel.
The boss Snow Raider and been tracked sidewalk snow vehicle.
The Greensmaster he tried flex all electric and hybrid writing Greens bars.
The ditch, which J T 24 horizontal directional drill bits.
The Toro he'd dingo electric and Dingo, TX fell 2000 stand on skid steers.
And the debt switch SK 3000 stand on skid steer.
The enthusiastic customer response to these products demonstrates the success of our innovation efforts and we will continue to focus on key technologies like alternative power smart connected and autonomous products.
Lastly, we have concluded our three year vision 2020 employee initiative for fiscal 2021, we have implemented a new one year employee initiative.
Our stretch enterprise wide performance goals include net sales of $3.7 billion and adjusted operating earnings of at least $485 million.
In closing.
For fiscal 2021, and beyond we believe our diverse portfolio of businesses and strong customer relationships position us to growth.
Our productivity and synergy initiatives will drive profitability and fund investments.
Our investments in innovative products and emerging technologies will enable us to meet the evolving needs of our customers.
More than ever our team is the key to the Toro company's continued success.
Thank you to our people for their continued dedication and resilience into our channel partners customers and shareholders for your continued support.
With that Ron and I will take your questions.
Thank you.
As a reminder to ask a question you would need to press Star then one on your telephone to withdraw your question. Please press the pound key.
Our first question comes from the line of Mike Shlisky with co. Your Securities. Your line is now open.
Good morning, everybody.
Mike.
Hey.
Hey, Jim had mentioned much from your comments, but can you give us a feel for the for the for the.
The the.
Target market for like acquisitions for 2021 are you got plenty of capital available to you and Steve are you seeing good targets out there I think the valuations or is this not the right time to me to be buying somebody in your sector.
Good good question, Mike and really our approach continues to be the same what acquisitions. Its a continuous process for us. So even after we completed some other recent acquisitions that didnt stop us from continuing conversations with.
Essential for.
For opportunities and I would say.
We are incredibly pleased with the last two acquisitions trials for frameworks and bps.
We continue to look for similar opportunities I don't know that.
The environment is any different notably.
It has been over the last few years.
It's really just a matter of us finding the opportunities.
Aligning with the desires of those those companies to do something so it's really a continuation of the same process. We continue to actively look for opportunities within our within our capital deployment.
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Okay great.
And you had also mentioned.
Some tailwind from the weather I Didnt hear if there was a professional or not.
You had a pretty big.
Hurricane season, this past season here in new assets.
Record Stephen can you get any additional business or interest in other debts with each other.
Rental business needs regionally.
For some projects that came about.
Sorry. Thanks.
No there there would be a minor effect from the hurricanes themselves, but what happens is the hurricanes actually bring moisture into the sales and that's a very common pattern for us to extend our selling season into the fall is where we have.
Continued growing temperatures and the cells and plenty of moisture for that contributed to the especially for the retail.
For.
For residential and for our contractor businesses for us because there was a lot of a lot of growing grass.
So that extended our season and contributed to the results for the fourth quarter.
Okay.
And then maybe turning to residential again.
Over the last month to even see additional lockdowns parts of the world for then gradually shifting in and out of.
Hey people stay at home more revenue than it has in prior months.
Is there any way you cut it back are you seeing any increased.
Retail sell through in places, where the Lockdowns are getting more more more intense for everyone's got to stay home.
Focus on their homes or is it different one way the colder weather months from this having compared to the spring summer you had some pretty decent organic.
Organic growth was that.
We haven't necessarily tied into specific areas, where there are more or less.
Restrictive.
Directives in place, we do know that in.
In the fourth quarter, and we continue to see the momentum there is a benefit from continues to be a benefit from the stay at home.
Directives that again is on top of the things that we've done internally. So it's really a balance between those factors both external and what we've done with the product line with the channel expansion and what's just everything like brand messaging.
So the types of initiatives are getting some really nice traction.
And we see that continuing we do.
We've built into the plan for 2021, the tapering off of those effects and going back to a more.
For gold growth rate for residential that that's on top of.
A new base, so well continue to capture the games.
Last year.
Got it that makes sense. Thanks, so much guys happy holidays.
Okay.
Thank you.
Next question comes from the line of Jim will just with Robert W. Baird. Your line is now open.
Yeah, Hey, Hey, everybody good morning.
Good morning.
Just a couple of questions from me I guess I guess first.
Yes, I don't know if it's easier to go round by business, but but Rick if you could just kind of kind of run through.
Where you see channel inventories right now as you kind of exit 20 and head into 2021 in the preseason.
Sure.
Channel inventories just in general are in very good shape.
You might think in some of the areas that there were challenges on the price, but those would be areas, where you might have higher field inventory. In fact, we are in great shape pretty.
Pretty much across the board.
If anything there are some categories, where we'd for we would prefer to have higher field inventory I think we expected that to be the case in the fourth quarter.
We expect that to build out a little bit, but the fact that we were building additional product allow that allowed us to meet additional retail demand.
We will continue to work on getting those inventories, where we'd like to see them probably through the first half of 2021.
Okay. Okay. That's helpful and then in terms of the kind of 6% to 8%.
You know growth that you outlined is there way to frame what your expectation would be around price capture just just acknowledging that raw materials from some input costs are going to be higher this year than to have the last couple of years.
Yes, we always continue to price to market not to cost and we would anticipate a kind of normal range of pricing adjustments I would say you know.
1% to 2% of the normal maybe a little bit.
Probably probably balance from that perspective more of that certainly in the pro residential normally we do not.
I don't see that type of price adjustment.
Okay. Okay, and then just the last one for me just you're giving for your guidance you're obviously.
A lot of moving parts and certainly I guess when you step back.
Where do you feel like you are trying to be more conservative or cautious and I guess, if current trends would continue where would you see any sources of potential upside relative to your expectations.
Yeah, maybe I can start for it and if you want to add on to it.
As we looked at it we try to provide kind of a balance perspective, you're right. There's a lot of moving pieces.
But we had good momentum in Q4 and coming into the year. So that that helps to provide a good base for some optimism, but we recognize there's still a lot, especially in the first half for the year I'm related to co bid and the impact it would have an EPS and also on our supply base. So I think.
For the natural had a fantastic year as we talked about we do expect that to normalize for continued to grow from that new base.
And professional coming back strong.
As we go through the year. So I mean, some of those variables could change and either we could be a little bit lower a little bit higher but when we tried to do with our guidance provide balance.
Balance perspective.
Okay, Okay, great well nice job on the on the finished share and good luck on 21.
Thank you.
Thank you. Our next question comes from the line of Eric for short with Cleveland Research. Your line is now open.
Okay.
Good morning.
Good morning, Bob.
A follow up on the residential certainly.
Agree that would characterize 2020 is a great year.
Curious in your visibility and conviction and growing from a exceptional year of growth.
What gives you confidence up against tough comparisons that are unique year that.
You are on a path to.
Be able to grow that business.
I think it ties back to the earlier comments, which.
Some other factors are external but.
Many of the factors that drove the growth for this last year are.
Internal on the results of that of.
Of that team and the work that they've done so.
So we've got.
We have a new distribution partner channel with tractor supply and the biggest one across the board as the new products that we've introduced and everything that goes along with that I think it's interesting. If you look at 2020 the growth was quite balanced across the channel So nice.
Strictly.
Just purely incremental tractor supply for example, but we grew our distributor business as well or dealer business and.
For our longtime partner the home depot.
For care with the home depot, there continue to be great partners assets.
We see more opportunities going forward.
And as you know keep in mind, it's a it's a very large markets and that's largely replacement oriented. So they're just every year there's opportunities to continue to.
To replace product that's been on the fuel for a long time.
Okay and then.
Thank you. That's that's helpful. And then secondly in terms of co bid.
Costs 20.
21, obviously, you had spending that you see for this year.
Scientists and some other factors.
Net standpoint.
As you all work through the numbers would you.
Do you end up spending more in 20 or less than 20, other how does that.
Compare how should we think about that compare for Ali influences margins of 21.
Yes from a from a corporate standpoint, we did experience for manufacturing inefficiencies and assets.
20, and we do expect for those will be less in 21.
Primarily.
In the second half, we should see that improvement with some of the restrictions and social distancing and other things we are assuming well will become more relaxed. However, it is important to note also that we did take some cost actions quickly in fiscal 2000, when we saw the pandemic develop.
Some of those will have been reinstated as we go into fiscal 21, such as salaries everyone.
Together, we all took a salary reduction that's been reinstated we would reset incentive.
To a more normal level and there'll be there'll be some resumption of travel and different trade shows and things like that however.
However, you know Eric will continue our focus on synergy and productivity and trying to drive those cost actions and as we talked about market based pricing. So all of that kind of included in our guidance as we look forward, but there are some pluses and minuses that we've we've tried to call out for that year.
For the change.
That's great. Thank you.
Thank you. Thank you.
Next question comes from the line of Sam Darkatsh with Raymond James Your line is now open.
Good morning, Rick Good morning, Renee how are you.
Morning for dual wall.
Couple of follow up questions if I could.
Renee if you mentioned this in your prepared remarks, and I missed that I apologize I was scribbling as fast as I could.
Did you give sales.
Sales and EPS expectations for specific to the first quarter.
We did not given some of the variability that we're seeing.
We felt we wanted to provide guidance. So we gave guidance for.
For the full year, but we did not specifically break out anything for the first quarter, we think theres still going to be from your as there is for sure for line on any time some variability between quarters.
And just.
Encourage people to look at it over over the whole year, we just feel like I said good about the momentum that we thank you for coming into the quarter. So we would like to talk about that we would expect EPS to be stronger in the first half in part because Sam that's where we saw the biggest impact in Q2 up coated.
And that we would expect second half EPS to be comparable line on somewhat comparable sales volume.
Helpful and then.
Terrific operational performance in the fourth quarter in both the pro in resi segment.
From a corporate overhead standpoint, it was higher than at least I had I don't know about others on the call.
Was there something going on in that line item that caused.
A little bit of a higher overhead.
<unk> expense in the quarter and how should we look at overhead specific for fiscal 21.
Yes, I think this may be part of what's causing the variance from your perspective is in fiscal Q for fiscal 2019, we had about a $6 million post retirement benefits that we saw that would flow through other.
And for that.
There is a large factor within that particular line items and then as.
As we have talked about this would be consistent throughout the year for fiscal 20, but we saw some.
Favorability in our negotiated for planned rates that we saw an improvement in revenue and gross margin.
That was offset in part by a decline in other income that also with flow through the other.
Area. So those would be probably the two factors going forward.
Pension for that post retirement was a one time situation and we've gone through the change as far as the Red Iron for plans. So you would see that continue in the same way that you saw in fiscal 2000.
We will see from some.
From reinstatement of some cost of going through other and that would be related to certain items, we talked about with salary increases. The return of incentive is from a more normal level and we have some benefit in healthcare.
I think as people kind of deferred some of those discretionary items that we would assume we would start to return.
In 21, so those would be some items to consider as well.
So.
If I could ask a specific question then so where should we from a modeling standpoint look at corporate overhead as a cost excluding other income non interest expense, which you fold into the for line item obviously.
It wouldn't be up year over year again, driven by some of the cost actions that we took that we'd be reinstated, but it's really the return of the salary and incentives and then again, the healthcare would flow through that area as well.
Okay, so perhaps a similar rate as sales to ticket.
Rough estimate.
Yes, we didnt give guidance specifically on that.
But I mean, those other factors that would be driving.
Got it and then last question for me if I could I think last quarter, you indicated expectations of roughly call it 25% incremental margins in fiscal 21.
My math might be suspect, but it looks like your guidance.
Presume something a little bit lower from that.
The spin, including your stretch goal.
Which I think this is coming in at somewhere in the high teens.
Help me understand why or what sort of factors influence that besides normal conservative C.
As to why incrementals might be a little bit below.
Normal 25%, especially if you were thinking about would be the case, just a few months ago.
As we look at kind of our guidance, we would consider certainly the mix.
With professional we think will be a stronger growth rates in residential for residential continually.
At a low.
Great performance level, we'll continue our focus on productivity and synergy initiatives.
We do expect to have still some manufacturing inefficiencies although.
The lower interest.
At year over year.
We do have the reinstatement of from the cost that we just talked about being salaries incentives and health care and then we are expecting to be in a more inflationary environment as well.
It was one of the areas that every time you open up the newspaper you read more about it.
We're also anticipating some inflation in resin.
And it's in freight cost that we've built in and then we talked about pricing already so that all factors into our guidance and there is a level of uncertainty it though as I said earlier, we're trying to give a balance perspective.
With our with our guidance, but recognize there are still a lot of moving pieces.
Please for the first half for the year and we'll see you.
[laughter].
Very helpful.
Everybody's space safety, well and have a terrific holiday season. Thank.
Using that for you.
Thank you. Our next question comes from the line of David Macgregor with Longbow Research. Your line is now open.
Yes, good morning, everyone I'm wondering.
I Wonder if you could just walk us through risks through the various businesses within the professional segment.
And just talk if you could about.
For what you're seeing in terms of improving for visibility.
Which segments are you seeing.
Maybe a little more evidence of progress, which are maybe a little more uncertain at this point and I got a couple of follow ups.
Sure I can do that.
First of all I mean, let's just talk about golf golf has had an incredible year from other players standpoint. If you look at August through October rounds played were up 2025 and 30% in October now standing at year today rounds played being up about 10.
0.7 percentage and headed towards probably 12 or 13 for me the probably the second largest increase year over year of golf player for the history of record keeping so that has to be a positive for golf even longer term, but we also know that has restrictions are relieve some of that stuff.
Play it will drop off but there have been a lot of new golfers introduced.
To the game that and there will definitely be a residual effect of some of them can change points. So bottom line the basis for golf is very strong.
The pieces that have yet to come back would be.
Questions Mark for his remarks routing municipal golf.
Resort Golf and then just.
Continued confidence to to resume capital acquisitions and that started and so bottom line golf is coming back its not fully back and there are a few questions Jim to answer there.
From a healthy eastend for standpoint landscape contractor.
Any really good momentum that came back nicely and is on track to continue doing so had a strong fourth quarter and good momentum going into the year.
Rental.
In 2020.
All about independent rental companies a lot of home projects small contractors that rented equipment for those for homeowners and now we see the national accounts coming back in.
Second to and from buying.
Buying cycle as well.
Mostly driven by growing construction trends right now as well so.
See you go through a few others Charles machine works.
Communications business is back very strong have snapped back.
No really I would say at full level at this point driven by the factors that we've talked about for Fiveg broadband build out.
And even repair and replacement of infrastructure as well some of those projects and resumed oil and gas is the portion of that business a little bit more question for mark, but just within the last couple of weeks, we've seen some positive signs for that coming back as well.
So.
You're gaining irrigation had a strong year in 2020, we expect that to continue some of it was tied to.
Stay at home initiatives and home investments, but the golf business was very strong didnt really Miss a beat given project from cancelled we're quickly backfill by for projects over in Q.
The boss business continues to be very strong we're looking that so for all watching the weather were all very interested in.
Winter Storm, Gail I believe it's called and that will be the GAAP.
Barges storm is even the northeast in the last probably five years thats good for boss and it's good for our residential business. We have a product that is stage, there and more products had it for the area.
And so that that's looking good.
And I think Jim.
Moving to elsevier's, but if I Miss something please.
No no comments on no that was a great run through thanks for that very helpful.
Within the pro you talked about revenue growth of 9.5% it seems like organic.
Organic been something closer to maybe a 6% number.
And if so how much of that organic growth was price versus volume.
Yes for on the quarter I think organic was right around that level that you settle for maybe a little bit lower than that and for any particular quarter. It's hard to measure the specific for us around from price.
We would say you know again for the year was it was in the normal range between one and two points close close to the middle of that range.
But that would be more consistent throughout.
In 1% to 2% was for the full year, you're saying for.
For the full year, yes, great great. Okay. Thanks for that and then just go off I. If we consider went on that just for a second and thanks for the color Ricky.
In your comments you noted that.
This pull and resort golf was still from a capex standpoint, lagging a little behind.
What would those two segments represent as a percentage of your overall golf business can you give us some approximation for.
Some context there.
Yes, we we don't usually break it down specifically you would be in the future.
This is a rough estimates on my part it's in the 10% range.
Okay great.
Great.
That's what I got thanks, very much for great all right.
You too. Thank you. Thank you.
Thank you there are no further questions at this time I will now turn the call back to Nick Rose for closing remarks.
Thanks for your questions interest for the total company in our best wishes for a happy holidays to each of you.
We look forward to talking again in March to discuss our results for the first quarter. Thanks, everybody.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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