The Toro Company Reports Record First Quarter Results

Selling, general and administrative (SG&A) expense as a percent of sales for the fiscal 2013 first quarter was up 30 basis points to 26.9 percent. The SG&A increase as a percent of sales reflects incremental costs associated with the acquisition of Astec and Stone, as well as start-up costs for the new distribution facility in Iowa.

First quarter operating earnings as a percent of sales were 10.4 percent compared to 8 percent a year ago.

First quarter interest expense was down 4 percent to $4.2 million due to lower average debt levels.

The effective tax rate for the quarter was 27.7 percent compared with 33.8 percent last year. The lower tax rate was primarily due to the retroactive extension of the Federal Research and Engineering Tax Credit.

Accounts receivable at the end of the fiscal 2013 first quarter totaled $180.3 million, up 2.7 percent from the same period last year, on a sales increase of 4.9 percent. Net inventories for the first quarter were $335.7 million, up 23.2 percent. The increase includes product to support the Tier 4 transition, snow throwers and inventory from the Astec and Stone acquisitions. Trade payables increased 10.9 percent for the first quarter to $168.3 million.

About The Toro CompanyThe 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.toro.com.

LIVE CONFERENCE CALL February 21, 10:00 a.m. CST www.thetorocompany.com/invest

The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CST on February 21, 2013. 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 HarborStatements 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
			February 1,					February 3,
			2013					2012
Net sales			$	444,661				$	423,835
Gross profit				165,817					146,651
Gross profit percent				37.3	%				34.6	%
Selling, general, and administrative expense				119,613					112,630
Operating earnings				46,204					34,021
Interest expense				(4,249	)				(4,428	)
Other income, net				1,443					493
Earnings before income taxes				43,398					30,086
Provision for income taxes				12,002					10,163
Net earnings			$	31,396				$	19,923
Basic net earnings per share			$	0.54				$	0.33
Diluted net earnings per share			$	0.53				$	0.33
Weighted average number of shares of common stock outstanding – Basic				58,480					59,986
Weighted average number of shares of common stock outstanding – Diluted				59,628					60,947

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
			February 1,					February 3,
Segment Net Sales			2013					2012
Professional			$	329,144				$	283,834
Residential				120,947					137,608
Other				(5,430	)				2,393
Total*			$	444,661				$	423,835
* Includes international sales of			$	141,591				$	149,462
			Three Months Ended
			February 1,					February 3,
Segment Earnings (Loss) Before Income Taxes			2013					2012
Professional			$	60,738				$	42,091
Residential				12,154					12,608
Other				(29,494	)				(24,613	)
Total			$	43,398				$	30,086

THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
			February 1,				February 3,
			2013				2012
ASSETS
Cash and cash equivalents			$	60,700			$	71,804
Receivables, net				180,317				175,498
Inventories, net				335,700				272,474
Prepaid expenses and other current assets				25,291				18,796
Deferred income taxes				63,878				61,900
Total current assets				665,886				600,472
Property, plant, and equipment, net				173,267				188,271
Deferred income taxes				—				75
Goodwill and other assets, net				144,990				148,189
Total assets			$	984,143			$	937,007
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt			$	250			$	2,078
Short-term debt				—				25,024
Accounts payable				168,334				151,836
Accrued liabilities				258,909				226,370
Total current liabilities				427,493				405,308
Long-term debt, less current portion				223,498				223,685
Deferred revenue				10,974				9,997
Deferred income taxes				2,804				1,368
Other long-term liabilities				6,531				7,920
Stockholders’ equity				312,843				288,729
Total liabilities and stockholders’ equity			$	984,143			$	937,007

THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
			Three Months Ended
			February 1,					February 3,
			2013					2012
Cash flows from operating activities:
Net earnings			$	31,396				$	19,923
Adjustments to reconcile net earnings to net cash used in operating activities:
Noncash income from finance affiliate				(1,353	)				(1,002	)
Provision for depreciation and amortization				13,517					12,960
Stock-based compensation expense				2,479					2,597
Decrease (increase) in deferred income taxes				335					(486	)
Other				(11	)				(21	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Receivables, net				(32,217	)				(27,888	)
Inventories, net				(83,794	)				(50,000	)
Prepaid expenses and other assets				(243	)				(2,118	)
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities				46,429					29,723
Net cash used in operating activities				(23,462	)				(16,312	)
Cash flows from investing activities:
Purchases of property, plant, and equipment, net				(3,233	)				(13,797	)
Proceeds from asset disposals				13					26
(Contributions to) distributions from finance affiliate, net				(2,484	)				13
Acquisition, net of cash acquired				—					(550	)
Net cash used in investing activities				(5,704	)				(14,308	)
Cash flows from financing activities:
(Repayments of) proceeds from short-term debt				(415	)				25,000
Repayments of long-term debt				(1,578	)				(1,479	)
Excess tax benefits from stock-based awards				3,442					5,071
Proceeds from exercise of stock options				3,602					5,208
Purchases of Toro common stock				(33,185	)				(4,865	)
Dividends paid on Toro common stock				(8,198	)				(6,607	)
Net cash (used in) provided by financing activities				(36,332	)				22,328
Effect of exchange rates on cash				342					(790	)
Net decrease in cash and cash equivalents				(65,156	)				(9,082	)
Cash and cash equivalents as of the beginning of the fiscal period				125,856					80,886
Cash and cash equivalents as of the end of the fiscal period			$	60,700				$	71,804

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