• Company delivers net earnings per share of $0.32, up $0.14 from prior year period
• Field inventory levels continue to decline
• Improved earnings and working capital drive better cash flow from operations

BLOOMINGTON, Minn., Feb 18, 2010 (BUSINESS WIRE) -- The Toro Company (NYSE: TTC) today reported net earnings of $10.9 million, or $0.32 per share, on net sales of $331.4 million for its fiscal first quarter ended January 29, 2010. In the comparable fiscal 2009 period, the company reported net earnings of $6.7 million, or $0.18 per share, on net sales of $340.2 million. Financial results for last year's first quarter were reduced by a pre-tax charge of $1.3 million, or $0.02 per share on an after-tax basis, to account for workforce adjustments.

"Even with a slight decline in net sales, the leaner cost structure we put in place last year helped improve our profitability," said Michael J. Hoffman, Toro's chairman and chief executive officer. "Additionally, field inventories are down significantly and our customers, channel partners and key retailers are excited about our new product offerings for the coming season. On another positive note, our cash flow strengthened as a result of higher earnings and driving improvement in all three areas of working capital including reducing accounts receivable, lowering inventory and increasing trade payables."

SEGMENT RESULTS

Professional

• Professional segment net sales for the fiscal 2010 first quarter totaled $212.8 million, down 7.2 percent compared with the same period last year. While retail sales activity suggests that demand is starting to move in the right direction, shipments were lower across most professional categories as customers aligned their orders closer to the selling season, leading to a further reduction in field inventories. Declines in the segment were somewhat offset by increased worldwide shipments for micro irrigation products as agricultural growers look to conserve water resources and improve crop yields.
• Professional segment earnings for the fiscal 2010 first quarter were $25.8 million, down $4.3 million from last year's first quarter.

Residential

• Residential segment net sales for the fiscal 2010 first quarter totaled $116.8 million, up 9.1 percent compared with the same period last year. Sales benefited from strong orders of irrigation products in Australia as a result of improved weather conditions, and increased worldwide shipments for snowthrowers.
• Residential segment earnings for the fiscal 2010 first quarter were $13.4 million, up $8.6 million from last year's first quarter.

REVIEW OF OPERATIONS

Gross margin for the fiscal 2010 first quarter was 35.1 percent, up 30 basis points from 34.8 percent in last year's first quarter. The improvement in gross margin reflects the benefit of lower commodity costs, favorable currency movements and cost reduction efforts, which were partially offset by unfavorable product mix.

Selling, general and administrative (SG&A) expenses for the fiscal 2010 first quarter declined $8.0 million, or 7.6 percent, compared with last year's first quarter. As a percentage of net sales, SG&A expenses declined to 29.2 percent compared with 30.7 percent in the same period last year. The decline in SG&A expenses, in both dollars and as a percent of net sales, resulted primarily from cost structure actions taken in fiscal 2009, most of them subsequent to the close of last year's first quarter. The decline in SG&A was somewhat offset by higher incentive costs.

Interest expense for the fiscal 2010 first quarter was $4.2 million, down 2.6 percent compared with last year's first quarter.

The effective tax rate for the fiscal 2010 first quarter was 33.6 percent compared with 33.7 in last year's first quarter.

Accounts receivable at the end of the fiscal 2010 first quarter totaled $167.3 million, down $130.7 million or 43.9 percent from last year's first quarter, on a sales decline of 2.6 percent. The majority of the difference is attributable to the sale of receivables to the Red Iron Acceptance joint venture. Net inventories were $191.1 million for the fiscal 2010 first quarter, down $47.6 million or 20.0 percent from last year's first quarter. Trade payables were $109.6 million, up $20 million or 22.3 percent from last year's first quarter, driven mostly by a supply chain initiative.

BUSINESS OUTLOOK

"After a very difficult fiscal 2009, we are encouraged with how the new fiscal year has begun. With the peak selling season still ahead, we remain guarded in our market outlook, but believe our many new products will help drive retail sales and share gains," said Hoffman. "Given our leaner cost structure, and continued focus on innovation and asset management, we believe we are well positioned to benefit from a recovery in retail demand as our markets improve."

The company now expects fiscal 2010 net earnings per share to be about $2.15 on revenues comparable with fiscal 2009. For its fiscal 2010 second quarter, the company expects to report net earnings per share of about $1.15.

The Toro Company is a leading worldwide provider of outdoor maintenance equipment and beautification products to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields.

LIVE CONFERENCE CALL
February 18, 10:00 a.m. CST
www.thetorocompany.com/invest

The Toro Company will conduct a conference call and webcast for investors beginning at 10:00 a.m. Central Standard Time (CST) on February 18, 2010.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, including steel, resins and other commodities; 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 markets, including the golf market; 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 profitability goal for our one-year initiative called "5 in ONE, Back on Course!" which is intended to improve our after-tax return on sales; our increased dependence on international sales and the risks attendant to international operations; 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 alliancesor 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; the occurrence of litigation or claims, including the previously disclosed pending litigation against the company and other defendants that challenges the horsepower ratings of lawnmowers, of which the company is currently unable to assess whether the litigation would have a material adverse effect on the company's consolidated operating results or financial condition, although an adverse result might be material to operating results in a particular reporting period. 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
John Wright, 952-887-8865
Director, Investor Relations
invest@toro.com
or
Media Relations
Branden Happel, 952-887-8930
Manager, Public Relations
pr@toro.com