Toro Reports Record Net Earnings for 2005

BLOOMINGTON, Minn. – The Toro Co. today reports record net earnings of $114.1 million on record net sales of more than $1.779 billion for the fiscal year ended Oct. 31, 2005. In fiscal 2004, the company reported net earnings of $102.7 million on net sales of more than $1.652 billion. Earnings and for the quarter were down slightly year-over-year. For the fourth quarter, Toro reports net earnings of $6.6 million, on net sales of $337.1 million compared with net earnings of $6.9 million on net sales of $336.9 million in the fiscal 2004 fourth quarter.

"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 Hoffman, The Toro Co.’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.”

Hoffman said 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, international sales increased 29.1 percent over 2004 and accounted for nearly 25 percent of total revenue, up from 21 percent in 2004,” Hoffman noted. “In particular, international sales of residential products increased more than 50 percent. Increasingly strong growth from our international business is consistent with our overall growth strategy and efforts to increase international revenue to a higher percentage of overall company revenue.”

Hoffman goes on to say that increased international revenue also helped Toro offset challenges faced by unfavorable weather during 2005, which impacted the company’s domestic residential segment.

SEGMENT RESULTS. For the residential segment, Toro reports that net sales were up 5.2 percent from 2004 to $583.3 million. Segment sales for the quarter, however, totaled $111.1 million and were down 5.3 percent from the same period last year. For the fiscal year, earnings for the residential segment decreased 18.8 percent from 2004, totaling $50.2 million.

In the professional segment, Toro says fiscal year sales totaled $1.145 billion, up 11.3 percent from last year. Growth in the professional segment was driven by new products, a strong showing in the golf course maintenance equipment and landscape contractor mowing markets, and broad-based strength in international markets. The Hayter acquisition also helped this market segment; fourth quarter 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 million compared to $18.6 million in the corresponding quarter last year.

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," Hoffman said. "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 board of directors voted to increase the quarterly dividend from 6 cents to 9 cents per common share, payable Jan. 12, 2006 to shareholders of record on Dec. 16.

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,” Hoffman said. “Our revenue growth initiatives coupled with our continued emphasis on reducing waste and driving down costs are improving the company's overall earnings power."

The company currently expects to report a 12- to 15-percent increase in fiscal 2006 net earnings per share on revenue growth of 8 percent, 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 25 to 28 cents.