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Toro Reports Q2 Sales and Net Earnings
May 26, 2004
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Outdoor appliance maker The Toro Company reported record net earnings of U.S. $52.2 million, or $2.00 per diluted share, on record net sales of $548.0 million for its fiscal 2004 second quarter ended April 30, 2004. In its fiscal 2003 second quarter, Toro reported net earnings of $42.0 million, or $1.61 per diluted share, on net sales of $495.8 million.

For the 6 months ended April 30, 2004, Toro reported net earnings of $61.5 million, or $2.36 per diluted share, on net sales of $861.6 million. In the comparable fiscal 2003 period, Toro reported net earnings of $49.0 million, or $1.89 per diluted share, on net sales of $791.8 million. The company's results for the 2003 period included a one-time gain of $0.08 per diluted share resulting from a legal settlement.

"We delivered the strongest quarter performance in our company's 90-year history," said Kendrick B. Melrose, Toro's chairman and CEO. "Our financial results continue to be driven by strong sales growth, primarily from products introduced within the past two years, coupled with improved operating effectiveness and asset management."

Mr. Melrose said sharp growth in walk power mower shipments to the mass channel, increased shipments in nearly all professional segment product categories and strong growth in international shipments drove the 10.5-percent increase in second quarter net sales.

"In our fiscal year to date, we have also benefited from generally favorable weather, including above-average winter snowfalls, a better spring than last year and a stronger economy," he said. The company also said improved margins, higher shipments during the quarter, and favorable foreign currency effects all contributed to the strong second quarter profitability.

Segment Results
PROFESSIONAL—For the second quarter, fiscal 2004 professional segment sales increased 7.8 percent to $338.5 million compared with the same period last year. Segment sales increased in most product categories compared with the prior year quarter.

International professional segment sales for the fiscal 2004 second quarter increased at double-digit rates compared with the corresponding 2003 period, even excluding favorable foreign currency effects.

Professional segment earnings for the fiscal 2004 second quarter totaled $71.7 million, up 13.1 percent from the fiscal 2003 second quarter. Toro said the professional segment profitability benefited from improved margins on most products, leveraging of expenses and favorable foreign currency effects.

RESIDENTIAL—Residential segment sales for the fiscal 2004 second quarter totaled $194.8 million, up 13.0 percent compared with fiscal 2003 second quarter. The company said strong retail demand of its Toro(R) brand walk power mowers was the strongest contributor of the increase.

International residential segment sales for the fiscal 2004 second quarter increased 6.6 percent compared with the fiscal 2003 second quarter. Toro said most of the increase was attributable to strong demand for Pope(R) brand irrigation products in Australia.

Residential segment earnings for the fiscal 2004 second quarter totaled $26.7 million, up 9.7 percent compared with the fiscal 2003 second quarter. Sales growth outpaced earnings growth primarily due to a change in the sales mix toward lower-margin products, the company reported.

DISTRIBUTION—Worldwide distribution segment sales for the fiscal 2004 second quarter totaled $44.9 million, up 27.0 percent compared with fiscal 2003 second quarter. The outdoor appliance maker said strong demand and the previously announced acquisition of a distributor in March 2003 resulted in increased sales at Toro's company-owned distributors. Distribution segment earnings for the fiscal 2004 second quarter increased to $1.6 million from $0.6 million in the fiscal 2003 second quarter as a result of higher sales volume.

Business Outlook
"Our results through the first half of our fiscal year have put us ahead of our initial expectations for fiscal 2004 and our momentum for the rest of the year is strong," Mr. Melrose said. "We continue to face rising supplier prices for steel and other commodities, so we have accelerated our profitability improvement efforts to help balance these unexpected cost increases. At the same time, we continue to invest in key growth initiatives to help ensure our sales growth outperforms the market."

Mr. Melrose noted that although there are still the usual weather uncertainties, the company is raising its estimates to an 8- to 10-percent increase for fiscal 2004 net sales and an 18 percent to 23 percent increase in net earnings per share, up from the 14 percent to 18 percent earnings increase Toro expected at the end of the first quarter.

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