Toro Posts Double Digit Increase in Third Quarter Net Sales and Earnings

BLOOMINGTON, Minn., Aug 27, 2002 /PRNewswire-FirstCall via COMTEX/ --

LIVE CONFERENCE CALL 10 a.m. CST www.toro.com/companyinfo/invest.html

The Toro Company (NYSE: TTC) today reported net earnings of $21.9 million or $1.68 per diluted share on net sales of $375.6 million for its fiscal third quarter ended August 2, 2002. In the comparable fiscal 2001 period, the company reported net earnings of $16.9 million or $1.30 per diluted share on net sales of $329.7 million. Adjusted to reflect the company's November 1, 2001 adoption of Statement of Financial Accounting Standards no. 142, "Goodwill and other Intangible Assets" (SFAS no. 142), net earnings for the third quarter of 2001 would have been $19.2 million or $1.47 per diluted share.

For the nine months ended August 2, 2002, Toro reported net earnings of $30.3 million or $2.34 per diluted share on net sales of $1,123.9 million. Results for the first nine months of fiscal 2002 included the following previously reported three items; a one-time foreign sales corporation tax benefit of $1.8 million or $.14 per share, a non-cash charge of $24.6 million or $1.90 per share, reflecting the cumulative effect of a change in accounting principle related to the adoption of SFAS no. 142, and restructuring and other expense of $6.7 million or $.52 per share. Adjusted to exclude these items, the company's net earnings per diluted share for the first nine months of fiscal 2002 totaled $4.62. In the comparable fiscal 2001 period, the company reported net earnings of $48.3 million or $3.68 per diluted share on net sales of $1,069.7 million. Results for the fiscal 2001 period include a benefit of $0.4 million or $.03 per diluted share related to the reversal of a prior accrual for the closing of a facility. Adjusted to exclude this unusual item and to reflect the company's November 1, 2001 adoption of SFAS no. 142, net earnings for the first nine months of fiscal 2002 was $54.3 million or $4.15 per diluted share.

The following table summarizes the adjustments affecting the period-to- period comparisons.

    3rd Quarter                           8/2/02     8/3/01         %
    Reported diluted earnings per share
   1.68       1.30         ---
    Non-amortization of goodwill            ---        .17         ---
    Adjusted diluted earnings per share
   1.68       1.47        14.3

    Year-to-date Nine Months                YTD        YTD          %
                                          8/2/02     8/3/01
    Reported diluted earnings per share
   2.34       3.68         ---
    Foreign sales corporation tax benefit  (.14)       ---         ---
    Non-amortization of goodwill            ---        .50         ---
    Cumulative effect of change in
     accounting principle                  1.90        ---         ---
    Restructuring and other expense         .52       (.03)        ---
    Adjusted diluted earnings per share
   4.62       4.15        11.3

"The quarter's results were most gratifying from the standpoint of growth in both revenues and earnings," remarked Ken Melrose, chairman and CEO of The Toro Company. He elaborated to say, "The sales growth of 14 percent was driven primarily by newly introduced products, coupled with lower costs resulting from our '5 by Five' initiatives, significantly outpacing our third quarter last year. Moreover, it was rewarding to see sales pick up so strongly after a sluggish first half due to unfavorable weather and high beginning inventories which are becoming in line. Sales in all areas are benefiting from our focus on introducing new products that deliver meaningful innovations in their categories. In addition, we have been able to sustain our double-digit earnings per share growth of 14.3 percent in the quarter in the face of increased profit pressure through the continued implementation of our '5 by Five' initiatives. As a result of this strong third quarter performance, we expect, as previously announced, our diluted earnings per share for the full year to reach $4.85 to $4.90 before unusual items." Melrose added, "It should also be noted that this past week Toro was a prominent partner with Hazeltine National Golf Club in the recently completed PGA Championship in Chaska, Minnesota. Toro provided not only all the irrigation and mowing equipment, but also our agronomy expertise to help Hazeltine host a most successful tournament."

Residential sales, up 40 percent for the quarter, were led by new products including the new walk behind mower line, sold through both The Home Depot and Toro dealers, as well as a new electric trimmer and DIY irrigation products. Retail demand for these products continues to be strong. The riding mower products, on the other hand, remain weak, partly because of the steps Toro has taken to reduce inventories in the field. Last year, as a result of strong demand, Toro shipped a large amount of snowthrowers in the fiscal 2001 third and fourth quarters. The mild snow season last year resulted in a larger than expected carryover of inventory. In keeping with its strategies of controlling field inventories, the company did not ship an appreciable amount of snowthrowers in the third quarter this year and will be shipping less in the fourth quarter as compared to last year.

Professional sales were up 6 percent for the quarter. In both grounds and golf, Toro is seeing customers order closer to retail demand reflecting their concerns about inventory. As a direct result of this "just in time" ordering strategy, sales were behind retail levels for most products, but still up in the third quarter. As with the residential areas, these sales increases are being driven by new product introductions for both equipment and irrigation.

The company-owned distributor business has also experienced double-digit revenue growth reflecting the continued turn-around in these markets. At the same time, the earnings increase reflects the increased emphasis on profitability in those operations.

International sales were up significantly for the quarter but remain flat with last year through the first nine-months of fiscal 2002. This reflects the strategy as mentioned before of shipping closer to the retail market, especially in the commercial business.

Gross margins in the quarter were lower than expected due to product mix with higher sales of lower margin residential products and increased manufacturing variances from production cuts in keeping with Toro's inventory management strategy. These pressures were partially offset by the continued emphasis on "5 by Five" initiatives in cost of goods sold.

Selling, general and administration expenses as a percentage of sales are lower than in the previous year reflecting the continued focus on "5 by Five," spreading fixed expenses over more sales and discontinuance of goodwill amortization. While emphasis continues on leveraging expenses, the company experienced higher warranty costs relating to certain products.

Toro's financial position strengthened as net cash provided by operating activities improved to a positive flow of $61.7 million for the first nine months of this year, compared to a negative $25.3 million in the same period last year. Better asset management, especially in the area of inventories, was primarily responsible for the improvement. The company's debt to total capital ratio of 35.8 percent for the third quarter was substantially lower than the 45.2 percent at this time last year. Available cash flow was used for stock repurchasing and to reduce short-term borrowing resulting in lower interest expense.

Toro is very pleased with its double-digit increases for both revenues and earnings for the third quarter. As stated before, Toro has raised its estimates for the year to $4.85 to $4.90. The company is confident that it can reach its estimated earnings for the entire year. The company's outlook beyond fiscal 2002 continues to be positive because of the improved operating fundamentals and market share positions for its businesses.

The Toro Company is a leading worldwide provider of outdoor maintenance and beautification products for home, recreation and commercial landscapes.

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. These forward-looking statements include statements regarding the outlook for the company's professional and residential businesses, benefits from the "5 By Five" profit improvement program; continued acceptance of new products; projected fiscal 2002 financial performance, including projected fiscal 2002 earnings of $4.85 to $4.90 per diluted share and earnings growth into the future; continued strong retail sales; the expected impact of new accounting principles on results of operations; expected change in channel partners field inventory levels and the potential contribution to results of operations of sales to large national retailers and local independent dealers, as well as assumptions underlying any of the foregoing.

Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in those statements. Among other things, earnings and revenue growth could be affected by continued global economic decline that began in 2000; additional economic uncertainty created by the threat of further terrorist acts and war, which may result in heightened security for import and export shipments of components or finished goods; further reductions in consumer spending including spending for travel and golf and unanticipated increased costs; the company's ability to continue to reduce expenses and implement all aspects of the "5 by Five" profit improvement program including expenses necessitated by threats of terrorism or war; the company's ability to achieve fiscal 2002 sales and earnings estimates; continuing problems in the design and manufacturing of irrigation products; whether the company is successful in selling its moderately priced walk power mowers; capital investments for a new production facility to satisfy the expected increase in demand for these products and increased dependence on selected national retailers; inflationary pressures and continued uncertainty and increased costs due to the continued strength for the dollar in foreign currency markets. In addition to the factors set forth in this paragraph, market, economic, financial, competitive, 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 statement.

                      THE TORO COMPANY AND SUBSIDIARIES
          Condensed Consolidated Statements of Earnings (Unaudited)
           (Dollars and shares in thousands, except per-share data)

                               Three Months Ended          Nine Months Ended
                             August 2,     August 3,    August 2,    August 3,
                               2002          2001         2002         2001
    Net sales                $375,632      $329,744   $1,123,861   $1,069,707
    Gross profit              128,939       118,106      386,299      366,517
      Gross profit percent       34.3%         35.8%        34.4%        34.3%
    Selling, general, and
     administrative expense    92,412        88,115      285,689      277,178
    Restructuring and other
     expense (income)             ---           ---        9,953         (679)
      Earnings from operations 36,527        29,991       90,657       90,018
    Interest expense           (4,656)       (6,177)     (15,224)     (17,890)
    Other income, net             848         3,062        3,916        4,526
      Earnings before income
       taxes                   32,719        26,876       79,349       76,654
    Provision for income taxes 10,797         9,944       24,410       28,362
      Net earnings before
       cumulative effect of
       change in accounting
       principle               21,922        16,932       54,939       48,292
    Cumulative effect of
     change in accounting
     principle, net of
     income tax benefit of
     $509                         ---           ---      (24,614)         ---
      Net earnings            $21,922       $16,932      $30,325      $48,292

    Basic net earnings per
     share, before cumulative
     effect of change in
     accounting principle       $1.74         $1.34        $4.37        $3.79
    Cumulative effect of
     change in accounting
     principle, net of income
     tax benefit                  ---           ---        (1.96)         ---
    Basic net earnings per
     share                      $1.74         $1.34        $2.41        $3.79

    Diluted net earnings per
     share, before cumulative
     effect of change in
     accounting principle       $1.68         $1.30        $4.24        $3.68
    Cumulative effect of
     change in accounting
     principle, net of income
     tax benefit                  ---           ---        (1.90)         ---
    Diluted net earnings per
     share                      $1.68         $1.30        $2.34        $3.68

    Weighted average number
     of shares of common stock
     outstanding - Basic       12,609        12,644       12,568       12,741

    Weighted average number
     of shares of common stock
     outstanding - Dilutive    13,049        13,009       12,960       13,108


                       Net Sales by Segment (Unaudited)
                            (Dollars in thousands)

                            Three Months Ended          Nine Months Ended
                          August 2,     August 3,    August 2,     August 3,
                            2002          2001         2002          2001
    Professional          $235,301      $222,569     $701,267      $700,954
    Residential            119,907        85,460      381,858       330,338
    Distribution            50,452        43,575      118,825       104,088
    Other                  (30,028)      (21,860)     (78,089)      (65,673)
      Total*              $375,632      $329,744   $1,123,861    $1,069,707

    * Includes
       international
       sales of            $60,024       $52,786     $209,398      $205,170


          Earnings (Loss) Before Income Taxes by Segment (Unaudited)
                            (Dollars in thousands)

                            Three Months Ended          Nine Months Ended
                          August 2,     August 3,    August 2,     August 3,
                            2002          2001         2002          2001
    Professional           $34,822       $37,702      $97,119      $105,259
    Residential             12,161         5,100       39,938        29,973
    Distribution             2,311           192        1,961       (1,117)
    Other                  (16,575)      (16,118)     (59,669)      (57,461)
      Total                $32,719       $26,876      $79,349       $76,654


                      THE TORO COMPANY AND SUBSIDIARIES
              Condensed Consolidated Balance Sheets (Unaudited)
                            (Dollars in thousands)

                                                    August 2,       August 3,
                                                      2002            2001
    ASSETS
    Cash and cash equivalents                             $6            $90
    Receivables, net                                 341,891        335,697
    Inventories, net                                 209,320        245,569
    Prepaid expenses and other current assets         10,832         10,544
    Deferred income taxes                             36,477         45,000
      Total current assets                           598,526        636,900

    Property, plant, and equipment, net              154,515        138,145
    Deferred income taxes                              9,721          9,883
    Goodwill and other assets                         93,908        123,800
      Total assets                                  $856,670       $908,728

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current portion of long-term debt                $15,824           $471
    Short-term debt                                    8,011         94,384
    Accounts payable                                  67,099         56,096
    Other accrued liabilities                        216,523        205,481
      Total current liabilities                      307,457        356,432

    Long-term debt, less current portion             178,768        194,431
    Other long-term liabilities                        7,429          7,263
    Stockholders' equity                             363,016        350,602
      Total liabilities and stockholders' equity    $856,670       $908,728


                      THE TORO COMPANY AND SUBSIDIARIES
         Condensed Consolidated Statements of Cash Flows (Unaudited)
                            (Dollars in thousands)

                                                        Nine Months Ended
                                                      August 2,      August 3,
                                                           2002      2001
    Cash flows from operating activities:
    Net earnings                                     $30,325        $48,292
      Adjustments to reconcile net earnings to
       net cash provided by (used in) operating
       activities:
      Cumulative effect of change in accounting
       principle                                      24,614            ---
      Noncash asset impairment writeoff                4,163            ---
      Provision for depreciation and amortization     20,609         26,508
      Writedown of investments                           ---          1,778
      Gain on disposal of property, plant, and
       equipment                                        (718)           (46)
      Increase in deferred income tax asset           (2,550)        (5,286)
      Tax benefits related to employee stock option
       transactions                                    1,420          4,501
      Changes in operating assets and liabilities:
        Receivables, net                             (70,214)       (79,558)
        Inventories, net                              25,341        (36,792)
        Prepaid expenses and other current assets        257          2,147
        Accounts payable and other accrued
         liabilities                                  28,431         13,187
          Net cash provided by (used in) operating
           activities                                 61,678        (25,269)

    Cash flows from investing activities:
      Purchases of property, plant, and equipment    (32,866)       (23,376)
      Proceeds from asset disposals                    2,055          2,181
      Decrease in investment in affiliates               ---            154
      Increase in other assets                        (2,847)        (3,027)
      Acquisitions, net of cash acquired                 ---         (8,549)
        Net cash used in investing activities        (33,658)       (32,617)

    Cash flows from financing activities:
      (Decrease) increase in short-term debt         (26,402)        79,190
      Repayments of long-term debt                      (486)           (64)
      Increase in other long-term liabilities            280            440
      Proceeds from exercise of stock options         11,827         15,548
      Purchases of common stock                      (22,558)       (33,559)
      Dividends on common stock                       (4,538)        (4,605)
        Net cash (used in) provided by financing
         activities                                  (41,877)        56,950

    Foreign currency translation adjustment              987             48

    Net decrease in cash and cash equivalents        (12,870)          (888)
    Cash and cash equivalents at beginning of period  12,876            978

    Cash and cash equivalents at end of period            $6            $90


                    MAKE YOUR OPINION COUNT -  Click Here
               http://tbutton.prnewswire.com/prn/11690X68526613
SOURCE The Toro Company

CONTACT:          Investors, Stephen P. Wolfe, Vice President, CFO,
                  +1-952-887-8076, or Stephen D. Keating, Assistant Treasurer, Director,
                  Investor Relations, +1-952-887-8526, or Media, Shelley Benedict, Media
                  Relations, +1-952-887-8930, or pr@toro.com , all of The Toro Company
                  /Company News On-Call:
                  http://www.prnewswire.com/gh/cnoc/comp/103025.html 

URL:              http://www.toro.com/companyinfo/invest.html 
                  http://www.toro.com 
http://www.prnewswire.com
Copyright (C) 2002 PR Newswire.  All rights reserved.

Our Company

At The Toro Company, we take great pride in helping our customers enrich the beauty, productivity, and sustainability of the land. Founded in 1914, The Toro Company was built on a tradition of quality and caring relationships. Today, the company is a leading worldwide provider of innovative solutions for the outdoor environment including turf maintenance, snow and ice management, landscape, rental and specialty construction equipment, and irrigation and outdoor lighting solutions. Through a strong network of professional distributors, dealers and retailers in more than 125 countries, we proudly offer a wide range of products across a family of global brands to help golf courses, professional contractors, groundskeepers, agricultural growers, rental companies, government and educational institutions, and homeowners – in addition to many leading sports venues and historic sites around the world.