BLOOMINGTON, Minn. – Feb. 24, 2005 – The Toro Company (NYSE: TTC) has reported net earnings of $11.2 million, or $0.47 per diluted share, on net sales of $346.9 million for its fiscal 2005 first quarter ended January 28, 2005. In its fiscal 2004 first quarter, the company reported net earnings of $9.3 million, or $0.36 per diluted share, on net sales of $313.6 million.

"Our strong momentum continued into the new fiscal year as our ongoing efforts to increase sales and improve profitability benefited overall performance," said Kendrick B. Melrose, The Toro Company Chairman and Chief Executive Officer. Melrose said results for Toro's first quarter, typically the seasonally smallest sales period, were fueled by double-digit sales growth in its Professional segment as well as in international sales of both Professional and Residential products.

"International net sales, commensurate with our growth strategy, increased nearly 19.0% compared with last year." First quarter net income increased on strong revenue growth coupled with a decline in sales, general and administrative (SG&A) expenses as a percentage of sales resulting primarily from lower warranty costs and the effects of the company-wide 'No Waste' initiatives.

Segment Results

Segment data is provided in the table following the "Condensed Consolidated Statements of Earnings." The Distribution segment results have been consolidated into the Other segment as the financial results for this reporting segment no longer meet the quantitative thresholds for separate reporting. Other segment results are detailed in the attached table.

Professional

Compared with the prior year, fiscal 2005 first quarter professional segment sales increased 18.1% to $245.2 million. Volume increased in nearly all product categories, reflecting Toro's leadership position in professional segment products, positive market conditions and strong retail demand. "At the recent Golf Industry Show our customers expressed increasing optimism about the golf business and many are forecasting a successful year," said Melrose.

"While new course construction remains slow, investments in course renovations and improvements continue to drive demand for our equipment, services and systems. This same optimism was prevalent at other industry tradeshows during the quarter, where landscape contractors and sports turf professionals were very bullish about their business and the outlook for this season."

Earnings for the first quarter totaled $38.9 million, up 36.6% compared with $28.4 million in the prior year first quarter resulting from higher sales volume and improved leveraging of expenses.

Residential

Residential segment sales for the first quarter totaled $95.9 million, down 2.1% from last year's first quarter. A late-arriving snow season in many parts of the country helped boost retail sales for snow throwers, but not early enough to keep the expected shipments for mowers and riding products moving into the channels.

Earnings for the first quarter totaled $4.4 million, down 46.8% compared with the same period last year. The decline resulted primarily from lower than expected sales as well as steel and other commodity price increases not present in the first quarter of fiscal 2004.

Review of Operations

Gross margin for the first quarter was 35.1% compared with 35.9% in the first quarter of fiscal 2004. The decline results primarily from the impact of higher costs for steel and other commodities, which the company began to incur late in the first half of fiscal 2004. The impact on profitability of the higher materials costs has been partially offset by price increases as well as cost reductions as a result of the company's '6+8' profit improvement and growth initiatives.

SG&A expenses for the first quarter declined to 29.5% of net sales, compared with 30.6% in the same period last year. The improvement resulted from lower warranty costs reflecting improvements in product quality, as well as 'No Waste' efforts in the office environments.

Interest expense for the first quarter totaled $3.8 million compared with $3.9 million in the same period last year. Toro also continues to benefit from improved asset utilization. Despite a 10.6% increase in consolidated net sales in the first quarter, net inventories grew only 2.0% compared with the end of fiscal 2004 first quarter and accounts receivable increased only 2.1%.

Business Outlook

"Thanks to our strong performance in a seasonally slow period with particularly acute weather-related volatility, we are reaffirming our earnings outlook for fiscal 2005," said Melrose. "To date, we have contained much of the impact of higher commodity costs on our profits by continuing to work at reducing costs and leveraging expenses. We are in the early stage of year two of our '6+8' profitability improvement and sales growth initiative, and we expect further benefits from our efforts in the balance of the year.

"We are comfortable with our field inventory levels and expect top-line growth to continue to benefit from strong new product acceptance as customers anticipate a favorable spring selling season."

After the close of the fiscal 2005 first quarter, the company completed the acquisition of Hayter Ltd., a manufacturer of high-quality consumer and commercial mowing products with strong market positions throughout the United Kingdom. "With this acquisition, we have gained a significant foothold in the municipal and high-end residential turf markets, consistent with our long-term strategy to expand our international business," said Melrose.

For fiscal 2005, the company continues to expect net earnings per diluted share to grow 12% to 15% compared with 2004. The company does not expect the Hayter acquisition to have a material effect on fiscal 2005 earnings, however the acquisition should contribute to fiscal 2005 sales, and the company is now projecting sales growth of 9% to 11% for the year.

For its fiscal 2005 second quarter, Toro expects to report net earnings per diluted share of $2.30 to $2.40.

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

Source: The Toro Company
http://www.thetorocompany.com/invest