The Toro Company Reports Record Second Quarter Results

  The Toro Company Reports Record Second Quarter Results

  *Sales increase to record $704 million for the quarter
  *Quarterly net earnings per share up 17 percent to a record $1.32
  *Late spring impacts momentum in quarter
  *Company tempers sales growth expectations and maintains earnings outlook

Business Wire

BLOOMINGTON, Minn. -- May 23, 2013

The Toro Company (NYSE: TTC) today reported net earnings of $78.4 million, or
$1.32 per share, on a net sales increase of 1.9 percent to $704.5 million for
its fiscal second quarter ended May 3, 2013. In the comparable fiscal 2012
period, the company delivered net earnings of $68.8 million, or $1.13 per
share, on net sales of $691.5 million.

For the first six months, Toro reported net earnings of $109.8 million, or
$1.85 per share, on a net sales increase of 3 percent to $1,149.1 million. In
the comparable fiscal 2012 period, the company posted net earnings of $88.7
million, or $1.46 per share, on net sales of $1,115.3 million.

“We achieved record sales and earnings in the quarter, despite this year’s
challenging weather pattern compared to a year ago,” said Michael J. Hoffman,
Toro’s chairman and chief executive officer. “In 2012, we enjoyed ideal spring
conditions with a warm, early start to the season, while this year much of
North America and Europe have dealt with unusually cold weather. These
conditions delayed sales, especially of our residential products which are
more immediately impacted by weather. Improved market conditions for some of
our professional customers, combined with new products and solid execution,
fueled shipment growth that offset the delay of our residential shipments.
Through the first six months, our golf and micro irrigation businesses have
been strong, and our professional sales in Europe and Asia are ahead of last
year. While our earnings benefited from mix and timing, I’m pleased to see our
productivity efforts yielding results on the path to our Destination 2014
operating earnings goal.”

“Even with a marginal winter season and late start to spring, we remain
cautiously optimistic about the remainder of the year,” said Hoffman. “Retail
activity in our residential business started to pick up in late April, and the
momentum is continuing in May. Looking forward, we face favorable comparisons
to last year, when much of the United States struggled with drought conditions
during the summer months. Since we are not likely to make up all of the impact
from the late start to spring, including a resulting increase in field
inventory, we are tempering our revenue growth expectations for the year.
Despite lower sales growth, we are maintaining our earnings outlook on the
strength of productivity gains and favorable commodity trends, somewhat offset
by anticipated pressures from mix and manufacturing utilization in the second
half of the year.”

The company now expects revenue growth for fiscal 2013 to be about 3 to 4
percent, and continues to expect net earnings to be about $2.40 to 2.45 per
share, or an increase of about 12 to 15 percent over fiscal 2012.

SEGMENT RESULTS

Professional

  *Professional segment net sales for the second quarter totaled $496.4
    million, up 8.9 percent from the prior year period. Shipments of landscape
    contractor equipment increased on channel demand in anticipation of the
    upcoming season. Rental and construction equipment sales were up on strong
    rental customer demand and incremental sales from the Stone acquisition.
    Worldwide sales of golf equipment and irrigation increased on improved
    budgets that enabled customers to replace aging fleets and systems with
    new innovative products. Global micro irrigation sales increased on
    continued demand for more efficient irrigation solutions for agriculture.
    For the first six months, professional segment net sales were $825.6
    million, up 11.6 percent from the comparable fiscal 2012 period.
  *Professional segment earnings for the second quarter totaled $112.3
    million, up 13.8 percent from the prior year period. For the first six
    months, professional segment earnings were $173.0 million, up 22.9 percent
    from the comparable fiscal 2012 period.

Residential

  *Residential segment net sales for the second quarter totaled $201.4
    million, down 13.2 percent from the prior year period. Unfavorable weather
    delayed the start of the spring goods selling season, negatively impacting
    the sales of walk power mowers and riding products. For the first six
    months, residential segment net sales were $322.3 million, down 12.8
    percent from the comparable fiscal 2012 period. The year-to-date sales
    results were largely attributable to the unusually mild winter and the
    late start to spring.
  *Residential segment earnings for the second quarter totaled $24.7 million,
    down 13.5 percent from the prior year period. For the first six months,
    residential segment earnings were $36.8 million, down 10.4 percent from
    the comparable fiscal 2012 period.

OPERATING RESULTS

Gross margin for the second quarter improved 180 basis points to 35.8 percent
due to segment mix, coupled with productivity gains and selective price
increases. For the first six months, gross margin was up 210 basis points to
36.4 percent.

Selling, general and administrative (SG&A) expense as a percent of sales
increased 50 basis points for the second quarter to 19.1 percent. For the
first six months, SG&A expense increased 40 basis points as a percent of sales
to 22.1 percent. For both periods, the increase in SG&A as a percent of sales
was a result of higher warehousing expense, incremental costs from
acquisitions, increased engineering spending, and higher health insurance
costs.

Operating earnings as a percent of sales increased 130 basis points to 16.7
percent for the second quarter, and was up 170 basis points to 14.3 percent
for the year to date.

The effective tax rate for the second quarter was 32.6 percent compared with
34.1 percent in the same period last year. For the year to date comparison,
the tax rate decreased to 31.3 percent from 34 percent. The decrease in both
periods was primarily the result of the reenactment of the Federal Research
and Engineering Tax Credit.

Accounts receivable at the end of the second quarter totaled $307.8 million,
up 12.8 percent from the prior year period. Net inventories were $310 million,
up 23.6 percent from last year’s second quarter. Trade payables were $203.7
million, up 3.7 percent compared with last year.

About The Toro Company
The Toro Company (NYSE: TTC) is a leading worldwide provider of innovative
turf, landscape, rental and construction equipment, and irrigation and outdoor
lighting solutions. With sales of more than $1.9 billion in fiscal 2012,
Toro’s global presence extends to more than 90 countries through strong
relationships built on integrity and trust, constant innovation, and a
commitment to helping customers enrich the beauty, productivity and
sustainability of the land. Since 1914, the company has built a tradition of
excellence around a number of strong brands to help customers care for golf
courses, sports fields, public green spaces, commercial and residential
properties, and agricultural fields. More information is available at
www.thetorocompany.com.

LIVE CONFERENCE CALL
May 23, 10:00 a.m. CDT
www.thetorocompany.com/invest

The Toro Company will conduct its earnings call and webcast for investors
beginning at 10:00 a.m. CDT on May 23, 2012. 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 or persistent
unemployment and weakened consumer confidence; the threat of 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 and components, including steel, engines,
hydraulics, resins and other commodities and components; 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 key markets; 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 revenue growth,
operating earnings and employee engagement goals of our multi-year employee
initiative called “Destination 2014”; our increased dependence on
international sales and the risks attendant to international operations and
markets, including political, economic and/or social instability in the
countries in which we manufacture or sell our products resulting in
contraction or disruption of such markets; 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 alliances or 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, and Tier 4 emissions requirements; 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; and the occurrence of litigation or
claims. In addition, factors that could affect completion of the proposed
acquisition of a micro-irrigation business in China including whether and when
the required regulatory approvals will be obtained, and whether and when the
other closing conditions will be satisfied. 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.


THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(Dollars and shares in thousands, except per-share data)
                                              
                     Three Months Ended          Six Months Ended
                     May 3,       May 4,        May 3,         May 4,
                     2013          2012          2013            2012
Net sales            $ 704,486     $ 691,485     $ 1,149,147     $ 1,115,320
Gross profit           252,301       235,422       418,118         382,073
Gross profit           35.8    %     34.0    %     36.4      %     34.3      %
percent
Selling, general,
and administrative    134,830     128,922     254,443       241,552   
expense
Operating earnings     117,471       106,500       163,675         140,521
Interest expense       (4,149  )     (4,165  )     (8,398    )     (8,593    )
Other income, net     2,995       2,057       4,438         2,550     
Earnings before        116,317       104,392       159,715         134,478
income taxes
Provision for         37,915      35,574      49,917        45,737    
income taxes
Net earnings         $ 78,402     $ 68,818     $ 109,798      $ 88,741    
                                                                 
Basic net earnings   $ 1.35       $ 1.15       $ 1.88         $ 1.48      
per share
                                                                 
Diluted net          $ 1.32       $ 1.13       $ 1.85         $ 1.46      
earnings per share
                                                                 
Weighted average
number of shares
of common stock        58,132        59,878        58,308          59,933
outstanding –
Basic
                                                                 
Weighted average
number of shares
of common stock        59,257        60,960        59,444          60,961
outstanding –
Diluted
                                                                             

Shares and per share data have been adjusted for all periods presented to
reflect a two-for-one stock split effective June 29, 2012.

Segment Data (Unaudited)
(Dollars in thousands)
                                              
                     Three Months Ended          Six Months Ended
                    May 3,       May 4,        May 3,         May 4,
Segment Net Sales    2013          2012          2013            2012
Professional         $ 496,436     $ 455,945     $ 825,580       $ 739,779
Residential            201,390       231,897       322,337         369,505
Other                 6,660       3,643       1,230         6,036     
Total *              $ 704,486    $ 691,485    $ 1,149,147    $ 1,115,320 
                                                                 
* Includes
international        $ 212,005     $ 197,386     $ 353,596       $ 346,848
sales of
                                                 
                     Three Months Ended          Six Months Ended
                     May 3,        May 4,        May 3,          May 4,
Segment Earnings
(Loss) Before        2013          2012          2013            2012
Income Taxes
Professional         $ 112,275     $ 98,701      $ 173,013       $ 140,792
Residential            24,679        28,518        36,833          41,126
Other                 (20,637 )    (22,827 )    (50,131   )    (47,440   )
Total                $ 116,317    $ 104,392    $ 159,715      $ 134,478   
                                                                 

THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
                                                        
                                             May 3,        May 4,
                                             2013          2012
ASSETS
Cash and cash equivalents                    $ 80,341      $ 82,572
Receivables, net                               307,770       272,819
Inventories, net                               309,998       250,804
Prepaid expenses and other current assets      30,434        23,281
Deferred income taxes                         62,768       62,209
Total current assets                          791,311      691,685
                                                           
Property, plant, and equipment, net            177,060       184,620
Goodwill and other assets, net                146,583      153,049
Total assets                                 $ 1,114,954   $ 1,029,354
                                                           
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt            $ 250         $ 1,858
Short-term debt                                —             7
Accounts payable                               203,710       196,382
Accrued liabilities                           294,648      278,491
Total current liabilities                     498,608      476,738
                                                           
Long-term debt, less current portion           223,513       223,701
Deferred revenue                               10,605        9,347
Deferred income taxes                          2,898         1,380
Other long-term liabilities                    6,287         7,614
Stockholders’ equity                          373,043      310,574
Total liabilities and stockholders’ equity   $ 1,114,954   $ 1,029,354
                                                           

THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
                                                 
                                                   Six Months Ended
                                                   May 3,        May 4,
                                                   2013           2012
Cash flows from operating activities:
Net earnings                                       $ 109,798      $ 88,741
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Noncash income from finance affiliate                (3,532   )     (2,802   )
Provision for depreciation and amortization          26,890         25,664
Stock-based compensation expense                     5,336          5,031
Decrease (increase) in deferred income taxes         281            (396     )
Other                                                81             (121     )
Changes in operating assets and liabilities, net
of effect of acquisitions:
Receivables, net                                     (160,534 )     (126,215 )
Inventories, net                                     (59,082  )     (21,270  )
Prepaid expenses and other assets                    (3,486   )     (5,066   )
Accounts payable, accrued liabilities, deferred     120,896      125,929  
revenue, and other long-term liabilities
Net cash provided by operating activities           36,648       89,495   
                                                                  
Cash flows from investing activities:
Purchases of property, plant, and equipment          (19,508  )     (21,905  )
Proceeds from asset disposals                        73             96
Contributions to finance affiliate, net              (4,669   )     (3,559   )
Acquisitions, net of cash acquired                  —            (9,663   )
Net cash used in investing activities               (24,104  )    (35,031  )
                                                                  
Cash flows from financing activities:
Repayments of short-term debt                        (415     )     (922     )
Repayments of long-term debt                         (1,548   )     (1,670   )
Excess tax benefits from stock-based awards          4,577          6,879
Proceeds from exercise of stock options              6,573          13,268
Purchases of Toro common stock                       (50,499  )     (56,067  )
Dividends paid on Toro common stock                 (16,364  )    (13,228  )
Net cash used in financing activities               (57,676  )    (51,740  )
                                                                  
Effect of exchange rates on cash and cash           (383     )    (1,038   )
equivalents
                                                                  
Net (decrease) increase in cash and cash             (45,515  )     1,686
equivalents
Cash and cash equivalents as of the beginning of    125,856      80,886   
the period
                                                                  
Cash and cash equivalents as of the end of the     $ 80,341      $ 82,572   
period
                                                                  

Contact:

The Toro Company
Investor Relations
Kurt Svendsen, 952-887-8630
Managing Director, Corporate Communications and Investor Relations
kurt.svendsen@toro.com
or
Media Relations
Branden Happel, 952-887-8930
Senior Manager, Public Relations
branden.happel@toro.com