Toro Reports Record 2005 Net Sales and Earnings

Net Earnings Per Diluted Share Up 21.3%

Board Raises Quarterly Dividend From $0.06 to $0.09 Per Common Share

LIVE CONFERENCE CALL
December 7, 10:00 a.m. CT
www.thetorocompany.com/invest

BLOOMINGTON, Minn., Dec. 7 /PRNewswire-FirstCall/ -- The Toro Company (NYSE: TTC) today reported record net earnings of $114.1 million, or $2.45 per diluted share, on record net sales of $1,779.4 million for the fiscal year ended October 31, 2005. In fiscal 2004, the company reported net earnings of $102.7 million, or $2.02 per diluted share, on net sales of $1,652.5 million.

For the fiscal 2005 fourth quarter ended October 31, Toro reported net earnings of $6.6 million, or $0.14 per diluted share, on net sales of $337.1 million compared with net earnings of $6.9 million, or $0.14 per diluted share, on net sales of $336.9 million in the fiscal 2004 fourth quarter.

Earnings per share figures for all periods have been adjusted to reflect the effects of a 2-for-1 stock split which was effective March 28, 2005.

The company's Board of Directors voted to increase the quarterly dividend from $0.06 to $0.09 per common share, payable Jan. 12, 2006 to shareholders of record on Dec. 16, 2005.

"The Toro Company delivered excellent results in 2005 on the strength of a broad and growing business portfolio and our continued emphasis on profitability improvement initiatives," said Michael J. Hoffman, The Toro Company's president and chief executive officer. "While the overall business environment was less favorable in 2005 than in 2004, we were nevertheless able to deliver financial performance in line with our goals for sales growth and profit improvement set out in our three-year '6+8' initiative," said Hoffman.

Hoffman noted that double-digit growth in sales for the professional segment and international business overall helped offset slower sales in the domestic residential segment. "Including contributions from the acquisition of Hayter, Ltd., international sales increased 29.1 percent over 2004 and accounted for nearly 25 percent of total revenues, up from 21 percent in 2004. In particular, international sales of residential products increased more than 50 percent," said Hoffman. "Increasingly strong growth from our international business is consistent with our overall growth strategy and efforts to increase international revenues to a higher percentage of overall company revenues. The results from accelerating our international growth provided better balance in our business that, in 2005, helped mitigate the effect of unfavorable weather primarily impacting our domestic residential segment."

SEGMENT RESULTS

Segment data are provided in the table following the "Condensed Consolidated Statements of Earnings."

Professional

Fiscal year segment net sales totaled $1,145.4 million, up 11.3 percent compared with 2004. Growth in the professional segment was driven by new products, the company's continued leadership in golf course maintenance equipment and landscape contractor mowing products, broad-based strength in international markets and the acquisition of Hayter. Fourth quarter segment sales increased 7.1 percent.

For the fiscal year, professional segment earnings totaled $207.4 million an increase of 19.8 percent compared with fiscal 2004. Segment earnings for the quarter totaled $24.0 million compared to $18.6 million in the corresponding quarter last year.

Residential

Fiscal year segment net sales totaled $583.3 million, up 5.2 percent from fiscal 2004. Growth in residential international sales, including contributions from the Hayter acquisition, more than offset weakness in the domestic residential segment in the second half of the fiscal year. Residential segment sales for the fiscal 2005 fourth quarter totaled $111.1 million, down 5.3 percent from the fiscal 2004 fourth quarter.

For the fiscal year, residential segment earnings totaled $50.2 million, a decrease of 18.8 percent from fiscal 2004. Segment earnings for the fiscal 2005 fourth quarter were $6.7 million compared with $9.1 million in the same period last year.

REVIEW OF OPERATIONS

For the fiscal year, gross margin was 34.6 percent compared with 35.9 percent in fiscal 2004. The decline resulted primarily from higher commodity costs and the impact of the Hayter acquisition. In the fourth quarter, gross margin was 33.8 percent compared with 34.8 percent in the same period last year.

SG&A expense as a percentage of net sales improved to 24.3 percent in fiscal 2005 compared with 25.9 percent in fiscal 2004. The improvement resulted from lower incentive compensation and warranty costs, as well as expense leveraging accomplished through continued implementation of lean and no-waste efforts throughout the company. For the fiscal 2005 fourth quarter, SG&A expenses were 30.3 percent of net sales compared with 30.6 percent of net sales in the fiscal 2004 fourth quarter.

Interest expense for fiscal 2005 totaled $17.7 million compared with $15.5 million in fiscal 2004. The company's effective tax rate for fiscal 2005 was 33.0 percent.

Accounts receivable at the end of fiscal 2005 totaled $295.7 million, up $15.1 million or 5.4 percent higher than the end of fiscal 2004. Net inventory at year-end totaled $235.3 million, up $8.1 million or 3.6 percent. The increases in year-end accounts receivable and inventories are primarily the result of the Hayter acquisition which was completed in the second quarter of fiscal 2005.

The company generated $174.1 million in cash from operations in fiscal 2005 compared with $175.3 million in fiscal 2004.

During fiscal 2005, the company repurchased approximately 3.9 million of its common shares for an aggregate purchase price of approximately $157.0 million.

BUSINESS OUTLOOK

Commenting on Toro's outlook for fiscal 2006, Hoffman said Toro remains on track to achieve the after-tax profit margin and sales growth goals of the company's three-year '6+8' initiative.

"In fiscal 2004, the first year of this program, we benefited from favorable conditions in most markets, and we turned in a record financial performance," said Hoffman. "In fiscal 2005, we faced tougher challenges in the form of increasing commodity costs and less favorable market and weather conditions - particularly in North America. We were nevertheless able to deliver financial performance in line with our long-term goals thanks to continued focus on investment in new products, innovation and technology, contributions from international markets and ongoing emphasis on implementing lean principles and reducing waste. Our year end balance sheet is strong, and we continue to generate healthy cash flows to fund future growth and investments. Recognizing that the company is positioned to sustain continued strong financial performance, the company's Board of Directors voted to increase our quarterly dividend."

The company is also well-positioned to resume stronger top line growth in fiscal 2006. "With our diverse mix of businesses, steady stream of new products and wider market coverage, we are better able to generate top line growth. Our revenue growth initiatives coupled with our continued emphasis on reducing waste and driving down costs are improving the company's overall earnings power," said Hoffman.

The company currently expects to report a 12 to 15 percent increase in fiscal 2006 net earnings per share on revenue growth of 8%, not including any future acquisitions. For its fiscal 2006 first quarter, typically the smallest revenue period, Toro expects to report diluted earnings per share of $0.25 to $0.28.

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

The Toro Company will conduct a conference call and webcast for investors beginning at 10:00 a.m. Central Time (CST) on December 7, 2005. The webcast will be available at http://www.streetevents.com or at http://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. These uncertainties include factors that affect all businesses operating in a global market as well as matters specific to Toro. Particular risks and uncertainties facing the company's overall financial position at the present include the threat of further terrorist acts and war, which may result in contraction of the U.S. and worldwide economies; slow growth rate in global and domestic economies, resulting in rising unemployment and weakened consumer confidence; our ability to achieve the goals for the '6+8' growth and profit improvement initiative which is intended to improve our revenue growth and after-tax return on sales; the company's ability to achieve sales and earnings per share growth in fiscal 2006; our ability to successfully integrate acquisitions and manage alliances; ability of management to manage around unplanned events; unforeseen product quality problems in the development and production of new and existing products; fluctuations in the cost and availability of raw materials, including steel and other commodities; rising cost of transportation; level of growth in the golf market; increased dependence on The Home Depot as a customer for the residential segment; reduced government spending for grounds maintenance equipment due to reduced tax revenue and tighter government budgets; increased competition; elimination of shelf space for our products at retailers; financial viability of distributors and dealers; market acceptance of existing and new products; unforeseen inventory adjustments or changes in purchasing patterns by our customers; the impact of abnormal weather patterns; and 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, 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      Fiscal Years Ended
                               October 31, October 31, October 31, October 31,
                                 2005(1)     2004(2)      2005(1)    2004(2)

    Net sales                   $337,091    $336,864   $1,779,387  $1,652,508
    Gross profit                 113,799     117,379      615,366     593,070
       Gross profit percent         33.8%       34.8%        34.6%       35.9%
    Selling, general, and
     administrative expense      102,264     103,215      432,640     427,845
       Earnings from operations   11,535      14,164      182,726     165,225
    Interest expense              (4,280)     (4,046)     (17,733)    (15,523)
    Other income, net              2,554         224        5,279       3,531
       Earnings before
        income taxes               9,809      10,342      170,272     153,233
    Provision for income taxes     3,237       3,413       56,190      50,567
       Net earnings               $6,572      $6,929     $114,082    $102,666

    Basic net earnings per share    $.15        $.15        $2.55       $2.11

    Diluted net earnings per share  $.14        $.14        $2.45       $2.02

    Weighted average number of
     shares of common stock
     outstanding - Basic          43,543      46,766       44,714      48,728

    Weighted average number of
     shares of common stock
     outstanding - Dilutive       45,384      48,843       46,539      50,766


    Shares and per share data have been adjusted for all periods presented to
    reflect a two-for-one stock split effective
    March 28, 2005.

    1) Prepared under the accounting provisions of Statement of Financial
       Accounting Standard No. 123 (Revised 2004), "Share-Based Payment."
    2) Prepared under the accounting provisions of Accounting Principles Board
       Opinion No. 25, "Accounting for Stock Issued to Employees,"
       (APB No. 25), and related Interpretations.


                      THE TORO COMPANY AND SUBSIDIARIES
                           Segment Data (Unaudited)
                            (Dollars in thousands)

                           Three Months Ended         Fiscal Years Ended
    Segment Net Sales    October 31, October 31,  October 31,   October 31,
                             2005        2004         2005          2004

    Professional          $208,562    $194,811    $1,145,361    $1,028,941
    Residential            111,103     117,382       583,291       554,334
    Other                   17,426      24,671        50,735        69,233
        Total *           $337,091    $336,864    $1,779,387    $1,652,508

    * Includes
      international
      sales of             $84,922     $73,074      $440,644      $341,360


    Segment Earnings
     (Loss) Before         Three Months Ended         Fiscal Years Ended
     Income Taxes        October 31, October 31,  October 31,   October 31,
                             2005        2004         2005          2004

    Professional           $24,016     $18,632      $207,398      $173,111
    Residential              6,667       9,086        50,160        61,777
    Other                  (20,874)    (17,376)      (87,286)      (81,655)
        Total               $9,809     $10,342      $170,272      $153,233


              Condensed Consolidated Balance Sheets (Unaudited)
                            (Dollars in thousands)

                                                     October 31, October 31,
                                                         2005        2004
    ASSETS
    Cash and cash equivalents                          $41,402     $90,756
    Receivables, net                                   295,683     280,577
    Inventories, net                                   235,347     227,200
    Prepaid expenses and other current assets           16,084      16,931
    Deferred income taxes                               58,558      53,064
       Total current assets                            647,074     668,528

    Property, plant, and equipment, net                167,277     164,665
    Goodwill and other assets                          102,386      98,907
       Total assets                                   $916,737    $932,100

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current portion of long-term debt                      $46         $45
    Short-term debt                                        325       1,099
    Accounts payable                                    87,952      87,147
    Accrued liabilities                                252,879     235,791
       Total current liabilities                       341,202     324,082

    Long-term debt, less current portion               175,000     175,046
    Long-term deferred income taxes                        872       3,837
    Deferred revenue and other long-term
     liabilities                                         9,629       8,316
    Stockholders' equity                               390,034     420,819
       Total liabilities and stockholders' equity     $916,737    $932,100


                        THE TORO COMPANY AND SUBSIDIARIES

           Condensed Consolidated Statements of Cash Flows (Unaudited)
                              (Dollars in thousands)

                                                       Fiscal Years Ended
                                                     October 31, October 31,
                                                         2005        2004
    Cash flows from operating activities:
    Net earnings                                      $114,082    $102,666
      Adjustments to reconcile net
       earnings to net cash provided by
       operating activities:
      Non-cash asset impairment (recovery)                  23        (726)
      Equity losses from investments                     1,468         781
      Provision for depreciation and amortization       42,829      36,093
      Gain on disposal of property, plant,
       and equipment                                      (260)       (216)
      Stock-based compensation expense                   9,312      17,128
      (Increase) decrease in deferred income taxes      (8,635)        551
      Changes in operating assets and liabilities:
        Receivables, net                                 7,381     (10,558)
        Inventories, net                                (1,210)       (310)
        Prepaid expenses and other assets                  462      (4,391)
        Accounts payable, accrued expenses,
         and deferred revenue                            8,631      34,274
            Net cash provided by operating
             activities                                174,083     175,292

    Cash flows from investing activities:
      Purchases of property, plant, and equipment      (37,432)    (40,812)
      Proceeds from asset disposals                      2,740       2,098
      Increase in investments in affiliates               (757)     (1,278)
      Decrease in other assets                           1,550       1,118
      Proceeds from sale of businesses                     765         578
      Acquisition, net of cash acquired                (35,285)          -
            Net cash used in investing activities      (68,419)    (38,296)

    Cash flows from financing activities:
      Increase in short-term debt                         (774)     (1,039)
      Repayments of long-term debt                         (45)     (3,830)
      Excess tax benefits from share-based
       arrangements                                      5,989       9,857
      Proceeds from exercise of stock options            8,164      14,307
      Purchases of Toro common stock                  (156,972)   (169,821)
      Dividends paid on Toro common stock              (10,755)     (5,839)
            Net cash used in financing activities     (154,393)   (156,365)

    Effect of exchange rates on cash                      (625)       (162)

    Net decrease in cash and cash equivalents          (49,354)    (19,531)
    Cash and cash equivalents as of the
     beginning of the fiscal year                       90,756     110,287

    Cash and cash equivalents as of the
     end of the fiscal year                            $41,402     $90,756


SOURCE The Toro Company
12/07/2005
CONTACT: Investor Relations, Stephen P. Wolfe, Vice President, CFO,
+1-952-887-8076, John Wright, Director, Investor Relations, +1-952-887-8865,
or Media Relations, Connie Kotke, +1-952-887-8984, pr@toro.com , all of The
Toro Company
Company News On-Call: http://www.prnewswire.com/comp/103025.html
Web site: http://www.thetorocompany.com
(TTC)

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.