Toro's 1Q Earnings Exceed Previously Announced Expectations; Company Earns 12 Cents Before Goodwill Write-off and Restructuring Charges; Company Raises Expectations for Full Year

BLOOMINGTON, Minn., Feb 20, 2002 /PRNewswire-FirstCall via COMTEX/ --

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The Toro Company (NYSE: TTC) today announced results for the first quarter ended Feb. 1, 2002:

    -- Net earnings per dilutive share were 12 cents before the effects of
        previously announced one-time charges for restructuring and other
        expense, and goodwill write-off.  Restructuring and other expense
        charges were 53 cents per dilutive share, or $10.0 million.  Non-cash
        charges from the goodwill write-off were $1.97 per dilutive share, or
        $24.6 million.  The goodwill write-off was due to the required
        adoption of new goodwill valuation accounting rules issued by The
        Financial Accounting Standards Board. The reported net loss per
        dilutive share of $2.38 or $29.7 million includes the restructuring
        and other expense charges and the goodwill write-off discussed above.
    -- Revenues for the first quarter were $277.9 million, compared to $280.4
        million during the same period last year.
"We are very pleased that we were profitable in the first quarter, before one-time charges, despite an economic environment that we thought would cause us to lose money," said Kendrick B. Melrose, chairman and chief executive officer of The Toro Company. "Residential sales, led by the initial shipments of new, moderately priced Toro lawnmowers plus increased sales of blowers, trimmers, and retail irrigation, contributed to our better-than-expected performance. Moreover, a continued focus on operations efficiency helped us partially offset a slight overall sales decline for the quarter as compared to last year."

Melrose said the company is raising its expectations for the year due to a more favorable outlook for its key businesses. "Our momentum is still very good as we enter the important spring season," he explained. "We expect continued growth from both our professional and residential segments this year. The landscape contractor market continues to look healthy, and the prospects for the golf market should improve over last year. Our new consumer lawnmower strategy is off to an excellent start, and we expect it to play a significant part in our growth this year. Our '5 by Five,' profit improvement program is accelerating, and we expect its benefits to increase. As a result, we are raising our full year expectations, before restructuring and other expense and goodwill write-off, to a range between $4.75 and $4.85, with sales growth in the 5 to 7 percent range. We expect second quarter earnings to be between $2.65 to $2.75."

For the quarter just ended, professional segment sales declined to $175.8 million. The decrease was due primarily to field inventory management and is not much of an indicator of spring season sales trends. Commercial equipment, Toro branded turf irrigation, and landscape contractor sales were down, offset somewhat by increased sales from our Irritrol and World Wide Ag irrigation businesses. Operating profit for the professional segment rose to $19.0 million before restructuring and other expense charges of $10.0M. Earlier this month, Toro introduced several new products, services and systems that were well received at the annual Golf Course Superintendents Association of America Conference and Show in Orlando.

Residential segment sales increased to $92.2 million due partially to early season sales of the new line of Toro walk power mowers. Sales of blowers, trimmers and retail irrigation also improved helped by mild autumn weather which extended the season. Operating profit for the segment increased to $7.7 million for the quarter.

Distribution segment sales increased for the first quarter to $24.2 million due to the addition of sales of a company-owned distributor acquired in 2001.

Gross margin for the quarter improved to 34.3 percent from 32.6 percent for the same period last year. The improvement was due to "5 by Five" cost reduction efforts, cost benefits from moving some operations to Mexico, lower tooling costs, and favorable currency rates. Selling, general and administrative expense was up slightly as a percent of sales due principally to the acquisition costs of a company-owned distributor in 2001 and higher levels of bad debt expense somewhat offset by no longer amortizing goodwill.

In December 2001, Toro announced that it would adopt the new goodwill accounting rules issued by The Financial Accounting Standards Board for the first quarter of fiscal 2002. These rules relate to the treatment of goodwill and other intangible assets and require, among other things, that such intangible assets with indefinite useful lives no longer be amortized. The impact of this change is expected to improve Toro's earnings for fiscal 2002 by approximately 61 to 64 cents per dilutive share of which 12 cents occurred in the first quarter. The rules require that goodwill be reviewed periodically for potential impairment under a new valuation approach. The review resulted in the goodwill write-off charge this quarter.

Restructuring and other expense charges for the quarter involve the closing of facilities in Indiana and California. In addition, the company took a pre-tax asset impairment charge during the quarter for patents and non-compete agreements related to the Drip In Irrigation acquisition. The total of these restructuring and other expense charges for the first quarter of fiscal 2002 is $10.0 million. The dilutive EPS effect of these charges is $.53. However, we expect the savings going forward from this restructuring will be approximately $10 million pre-tax annually beginning in fiscal 2003. In the fiscal 2001, first quarter restructuring had a positive per dilutive share effect of 3 cents.

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, in particular prospects for the landscape contractor and golf markets; benefits from the "5 By Five" profit improvement program; projected fiscal 2002 financial performance, including projected fiscal 2002 earnings; the expected impact of new accounting principles on results of operations; projected future savings from restructuring and other expense charges, and the potential contribution to results of operations of sales to The Home Depot and 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 The Home Depot as a customer; 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 Operations
           (Dollars and shares in thousands, except per-share data)

                                                     Three Months Ended
                                                  February 1,    February 2,
                                                       2002           2001

    Net sales                                      $ 277,915      $ 280,350
    Gross profit                                      95,307         91,381
      Gross profit percent                              34.3%          32.6%
    Selling, general, and administrative expense      89,012         87,618
    Restructuring and other expense (income)           9,953           (679)
      (Loss) earnings from operations                 (3,658)         4,442
    Interest expense                                  (5,320)        (5,276)
    Other income, net                                  1,334          2,903
      (Loss) earnings before income taxes             (7,644)         2,069
    Benefit (provision) for income taxes               2,523           (765)
      Net (loss) earnings before cumulative effect
       of change in accounting principle              (5,121)         1,304
    Cumulative effect of change in accounting
     principle, net of income tax benefit of $509    (24,614)            --
      Net (loss) earnings                          $ (29,735)     $   1,304

    Basic net (loss) earnings per share, before
     cumulative effect of change in
      accounting principle                         $   (0.41)     $    0.10
    Cumulative effect of change in accounting
     principle, net of income tax benefit              (1.97)            --
    Basic net loss (earnings) per share            $   (2.38)     $    0.10

    Dilutive net (loss) earnings per share, before
     cumulative effect of change in accounting
     principle                                     $   (0.41)     $    0.10
    Cumulative effect of change in accounting
     principle, net of income tax benefit              (1.97)            --
    Dilutive net (loss) earnings per share         $   (2.38)     $    0.10

    Weighted average number of shares of common
     stock outstanding - Basic                        12,500         12,753
    Weighted average number of shares of common
     stock outstanding - Dilutive                     12,500         13,062

                             Net Sales by Segment
                            (Dollars in thousands)

                                                      Three Months Ended
                                                  February 1,    February 2,
                                                      2002           2001

    Professional                                   $ 175,765      $ 183,614
    Residential                                       92,216         89,327
    Distribution                                      24,229         18,232
    Other                                            (14,295)       (10,823)
     * Total                                       $ 277,915      $ 280,350

    * Includes international sales of              $  63,095      $  68,733

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

                                                      Three Months Ended
                                                   February 1,   February 2,
                                                      2002            2001

    Professional                                   $   9,080      $  18,071
    Residential                                        7,706          6,492
    Distribution                                      (2,087)        (2,580)
    Other                                            (22,343)       (19,914)
     Total                                         $  (7,644)     $   2,069

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

                                                  February 1,    February 2,
                                                      2002            2001
    ASSETS
    Cash and cash equivalents                      $      46      $     636
    Receivables, net                                 302,189        306,497
    Inventories, net                                 274,524        252,233
    Prepaid expenses and other current assets         17,415          9,925
    Deferred income taxes                             34,261         43,912
      Total current assets                           628,435        613,203

    Property, plant, and equipment, net              144,445        135,892
    Deferred income taxes                              9,721          9,883
    Goodwill and other assets                         94,946        124,653
      Total assets                                 $ 877,547      $ 883,631

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current portion of long-term debt              $     513      $      21
    Short-term debt                                  113,938        113,398
    Accounts payable                                  75,656         75,792
    Other accrued liabilities                        172,744        170,930
      Total current liabilities                      362,851        360,141

    Long-term debt, less current portion             194,553        194,453
    Other long-term liabilities                        7,091          6,855
    Stockholders' equity                             313,052        322,182
      Total liabilities and stockholders' equity   $ 877,547      $ 883,631


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

                                                      Three Months Ended
                                                   February 1,    February 2,
                                                      2002            2001

    Cash flows from operating activities:
    Net (loss) earnings                           $ (29,735)        $ 1,304
     Adjustments to reconcile net (loss) earnings
      to net cash used in operating activities:


     Cumulative effect of change in accounting
      principle                                      24,614              --
     Noncash asset impairment writeoff                4,163              --
     Provision for depreciation and amortization      7,336           7,843
     Writedown of investments                            --             778
     Gain on disposal of property, plant, and
      equipment                                         (10)            (33)
     Increase in deferred income taxes                 (334)         (4,198)
     Tax benefits related to employee stock option
      transactions                                       --              81
     Changes in operating assets and liabilities    (84,430)        (95,123)
       Net cash used in operating activities        (78,396)        (89,348)

    Cash flows from investing activities:
     Purchases of property, plant, and equipment     (9,245)         (8,063)
     Proceeds from asset disposals                       62           2,065
     Decrease in investment in affiliates                --              50
     Increase in other assets                        (2,426)         (1,154)
     Acquisition, net of cash acquired                   --          (6,189)
       Net cash used in investing activities        (11,609)        (13,291)

    Cash flows from financing activities:
     Increase in short-term debt                     79,525         101,811
     Repayments of long-term debt                       (12)            (21)
     (Decrease) increase in other long-term
      liabilities                                       (57)             32
     Proceeds from exercise of stock options            661           1,253
     Purchases of common stock                       (1,415)           (146)
     Dividends on common stock                       (1,501)         (1,529)
       Net cash provided by financing activities     77,201         101,400

    Foreign currency translation adjustment             (26)            897

    Net decrease in cash and cash equivalents       (12,830)           (342)
    Cash and cash equivalents at beginning of
     period                                          12,876             978

    Cash and cash equivalents at end of period      $    46        $    636

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SOURCE The Toro Company

CONTACT:          Investor Relations, 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 Relations, Shelley Benedict,
                  +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

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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.