Toro Reports Fiscal 2010 First Quarter Results

BLOOMINGTON, Minn., Feb 18, 2010 -- The Toro Company (NYSE: TTC) today reported net earnings of $10.9 million, or $0.32 per share, on net sales of $331.4 million for its fiscal first quarter ended January 29, 2010. In the comparable fiscal 2009 period, the company reported net earnings of $6.7 million, or $0.18 per share, on net sales of $340.2 million. Financial results for last year's first quarter were reduced by a pre-tax charge of $1.3 million, or $0.02 per share on an after-tax basis, to account for workforce adjustments.

"Even with a slight decline in net sales, the leaner cost structure we put in place last year helped improve our profitability," said Michael J. Hoffman, Toro's chairman and chief executive officer. "Additionally, field inventories are down significantly and our customers, channel partners and key retailers are excited about our new product offerings for the coming season. On another positive note, our cash flow strengthened as a result of higher earnings and driving improvement in all three areas of working capital including reducing accounts receivable, lowering inventory and increasing trade payables."

SEGMENT RESULTS

Professional

• Professional segment net sales for the fiscal 2010 first quarter totaled $212.8 million, down 7.2 percent compared with the same period last year. While retail sales activity suggests that demand is starting to move in the right direction, shipments were lower across most professional categories as customers aligned their orders closer to the selling season, leading to a further reduction in field inventories. Declines in the segment were somewhat offset by increased worldwide shipments for micro irrigation products as agricultural growers look to conserve water resources and improve crop yields.
• Professional segment earnings for the fiscal 2010 first quarter were $25.8 million, down $4.3 million from last year's first quarter.

Residential

• Residential segment net sales for the fiscal 2010 first quarter totaled $116.8 million, up 9.1 percent compared with the same period last year. Sales benefited from strong orders of irrigation products in Australia as a result of improved weather conditions, and increased worldwide shipments for snowthrowers.
• Residential segment earnings for the fiscal 2010 first quarter were $13.4 million, up $8.6 million from last year's first quarter.

REVIEW OF OPERATIONS

Gross margin for the fiscal 2010 first quarter was 35.1 percent, up 30 basis points from 34.8 percent in last year's first quarter. The improvement in gross margin reflects the benefit of lower commodity costs, favorable currency movements and cost reduction efforts, which were partially offset by unfavorable product mix.

Selling, general and administrative (SGA) expenses for the fiscal 2010 first quarter declined $8.0 million, or 7.6 percent, compared with last year's first quarter. As a percentage of net sales, SG&A expenses declined to 29.2 percent compared with 30.7 percent in the same period last year. The decline in SG&A expenses, in both dollars and as a percent of net sales, resulted primarily from cost structure actions taken in fiscal 2009, most of them subsequent to the close of last year's first quarter. The decline in SG&A was somewhat offset by higher incentive costs.

Interest expense for the fiscal 2010 first quarter was $4.2 million, down 2.6 percent compared with last year's first quarter.

The effective tax rate for the fiscal 2010 first quarter was 33.6 percent compared with 33.7 in last year's first quarter.

Accounts receivable at the end of the fiscal 2010 first quarter totaled $167.3 million, down $130.7 million or 43.9 percent from last year's first quarter, on a sales decline of 2.6 percent. The majority of the difference is attributable to the sale of receivables to the Red Iron Acceptance joint venture. Net inventories were $191.1 million for the fiscal 2010 first quarter, down $47.6 million or 20.0 percent from last year's first quarter. Trade payables were $109.6 million, up $20 million or 22.3 percent from last year's first quarter, driven mostly by a supply chain initiative.

BUSINESS OUTLOOK

"After a very difficult fiscal 2009, we are encouraged with how the new fiscal year has begun. With the peak selling season still ahead, we remain guarded in our market outlook, but believe our many new products will help drive retail sales and share gains," said Hoffman. "Given our leaner cost structure, and continued focus on innovation and asset management, we believe we are well positioned to benefit from a recovery in retail demand as our markets improve."

The company now expects fiscal 2010 net earnings per share to be about $2.15 on revenues comparable with fiscal 2009. For its fiscal 2010 second quarter, the company expects to report net earnings per share of about $1.15.

The Toro Company is a leading worldwide provider of outdoor maintenance equipment and beautification products to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties, and agricultural fields.