BLOOMINGTON, Minn., May 19, 2011 (BUSINESS WIRE) --

The Toro Company (NYSE: TTC) today reported net earnings of $60.3 million, or $1.88 per share, on net sales of $631.6 million for its fiscal second quarter ended April 29, 2011. In the comparable fiscal 2010 period, the company reported net earnings of $45.7 million, or $1.34 per share, on net sales of $ 562.8 million.

For the first six months, Toro reported net earnings of $77.5 million, or $2.41 per share, on net sales of $1.01 billion. In the comparable fiscal 2010 period, the company posted net earnings of $56.6 million, or $1.65 per share, on net sales of $894.2 million.

"We are very pleased with our second quarter performance as our execution serving the professional markets led to significant revenue and earnings growth, putting Toro on an early trajectory towards our Destination 2014 organic growth and profitability goals," said Michael J. Hoffman, Toro's chairman and chief executive officer. "We are especially excited about the golf business. Customers are choosing Toro's innovative products to replace aging equipment and irrigation systems, and to support new golf development projects around the world. As for our residential business, the late start to spring delayed retail sales resulting in us carrying more inventory; however, we expect demand to return with the recent, warmer weather."

SEGMENT RESULTS

Professional

• Professional segment net sales for the second quarter totaled $418.3 million, up 19.7 percent from the prior year period. Worldwide orders for golf equipment and irrigation systems were up on improved market conditions, successful product introductions, and new course development around the world - particularly in Asia. Shipments of landscape maintenance equipment were higher on strength of new products, even with a slow start to spring that delayed some purchases. Other contributors to growth in the quarter included strong global sales for micro irrigation products on increased demand and added capacity, along with a rebound in the rental business. For the first six months, professional segment net sales were $676.6 million, up 20.3 percent from the comparable fiscal 2010 period.

• Professional segment earnings for the second quarter totaled $85.6 million, up 26.6 percent from the prior year period. For the first six months, professional segment earnings were $123.5 million, up 32.2 percent from the comparable fiscal 2010 period.

Residential

• Residential segment net sales for the second quarter totaled $209.6 million, down slightly from the prior year period. Cool, wet weather dampened sales for walk power mowers. These declines were somewhat offset by strong acceptance for Toro's new line of innovative zero turn mowers, with shipments up significantly for the quarter. For the first six months, residential segment net sales were $332.9 million, up 1.9 percent from the comparable fiscal 2010 period.
• Residential segment earnings for the second quarter totaled $26.5 million, up 5.7 percent from the prior year period. For the first six months, residential segment earnings were $37.9 million, down 1.6 percent from the comparable fiscal 2010 period.

OPERATING RESULTS

Gross margin for the second quarter and first six months was up 50 basis points, respectively, to 33.8 percent and 34.5 percent. The margin improvement was primarily driven by favorable mix and higher production volumes, which were somewhat offset by rising freight and commodity costs.

Selling, general and administrative (SG&A) expense as a percent of sales improved 150 basis points for the second quarter to 19 percent. The decline in SG&A as a percent of sales reflects further leveraging of costs over increased sales volumes. For the first six months, SG&A expense improved 110 basis points as a percent of sales to 22.6 percent.

Operating earnings as a percent of sales increased 200 basis points to 14.8 percent for the second quarter, and was up 160 basis points to 11.9 percent for the year to date.

Interest expense for the second quarter was $4.2 million, down 2 percent from prior year period. For the first six months, interest expense totaled $8.3 million, down 2.5 percent from the same period last year.

The effective tax rate for the second quarter was 33.4 percent compared with 33.6 percent in the same period last year. For the year to date, the tax rate declined to 32.6 percent from 33.6 percent last year, primarily the result of the retroactive extension of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the second quarter totaled $278.5 million, up 6.8 percent from the prior year period, on a sales increase of 12.2 percent. Net inventories were $259.8 million, up 49 percent from last year's second quarter. Inventories increased in response to last year's availability issues, coupled with the impact of delayed residential product shipments due to unfavorable spring weather. Trade payables were $202.6 million, up 18.3 percent compared with last year.

OUTLOOK

"Economic trends in our markets remain positive; however, weather and commodities are proving to be more challenging this year," said Hoffman. "While uncertain how the delayed start to spring will play out across our markets, we are encouraged by the success of our innovative new products and execution in the marketplace. Given our strong performance to date, we are increasing our full-year revenue and earnings outlook."

The company now expects net earnings for fiscal 2011 to be about $3.60 per share on a revenue increase of about 10 to 12 percent.

About The Toro Company
The Toro Company is a leading worldwide provider of turf and landscape maintenance equipment, and precision irrigation systems, to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields.

LIVE CONFERENCE CALL
May 19, 10:00 a.m. CDT
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=62289&eventID=4023004

The Toro Company will conduct a conference call and webcast for investors beginning at 10:00 a.m. Central Standard Time (CDT) on May 19, 2011.The webcast will be available at www.streetevents.com or at www.thetorocompany.com/invest.Webcast participants will need to complete a brief registration form and should allocate extra time before the webcast begins to register and, if necessary, download and install audio software.

Safe Harbor
Statements made in this news release, which are forward-looking, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied. These uncertainties include factors that affect all businesses operating in a global market as well as matters specific to Toro. Particular risks and uncertainties that may affect the company's operating results or overall financial position at the present include: slow or negative growth rates in global and domestic economies, resulting in rising unemployment and weakened consumer confidence; the threat of further terrorist acts and war, which may result in contraction of the U.S. and worldwide economies; drug cartel-related violence, which may disrupt our production activities and maquiladora operations based in Juarez, Mexico; fluctuations in the cost and availability of raw materials and components, including steel, engines, hydraulics, resins and other commodities and components; fluctuating fuel and other costs of transportation; the impact of abnormal weather patterns, natural disasters and global pandemics; the level of growth or contraction in our key markets; government and municipal revenue, budget and spending levels, which may negatively impact our grounds maintenance equipment business in the event of reduced tax revenues and tighter government budgets; dependence on The Home Depot as a customer for the residential segment; elimination of shelf space for our products at retailers; inventory adjustments or changes in purchasing patterns by our customers; market acceptance of existing and new products; increased competition; our ability to achieve the revenue growth, operating earnings and employee engagement goals of our new, multi-year, employee initiative called "Destination 2014"; our increased dependence on international sales and the risks attendant to international operations and markets, including our ability to successfully develop a new micro-irrigation manufacturing facility in Romania and political, economic and/or social instability in the countries in which we sell our products resulting in contraction or disruption of such markets; credit availability and terms, interest rates and currency movements including, in particular, our exposure to foreign currency risk; our relationships with our distribution channel partners, including the financial viability of distributors and dealers; our ability to successfully achieve our plans for and integrate acquisitions and manage alliances or joint ventures, including Red Iron Acceptance, LLC; the costs and effects of changes in tax, fiscal, government and other regulatory policies, including rules relating to environmental, health and safety matters; unforeseen product quality or other problems in the development, production and usage of new and existing products; loss of or changes in executive management or key employees; ability of management to manage around unplanned events; our reliance on our intellectual property rights and the absence of infringement of the intellectual property rights of others; and the occurrence of litigation or claims. In addition to the factors set forth in this paragraph, market, economic, financial, competitive, legislative, governmental, weather, production and other factors identified in Toro's quarterly and annual reports filed with the Securities and Exchange Commission, could affect the forward-looking statements in this press release. Toro undertakes no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this release.

SOURCE: The Toro Company

The Toro Company
Investor Relations:
Kurt Svendsen, 952-887-8630
Director, Investor and Public Relations
invest@toro.com
or
Media Relations:
Branden Happel, 952-887-8930
Manager, Public Relations
pr@toro.com