Toro strives to innovate as recession hurts sales

Executives at Toro Co. expressed optimism Wednesday that a new line of mower products will help them ride out the recession.

Bright red mowers, including the new GrandStand stand-on commercial mower, were on display at the company's Bloomington headquarters during Toro's annual meeting.

Michael Hoffman, CEO and chairman, told shareholders that the GrandStand is quick and has the "mobility of a walk-behind" mower. It's targeted to professional landscapers and has a list price of $7,000 to $7,500.

A month ago, Hoffman projected that revenue will decline 15 percent in Toro's fiscal 2009, which ends in October. Sales of big-ticket equipment, such as mowers used on golf courses, are being hurt by the global recession.

So Hoffman said Wednesday that Toro is preparing to temporarily lay off 235 employees at its Tomah, Wis., plant. The layoffs will occur in mid-April, and workers are expected to return to their jobs sometime between June and August.

Hoffman, a 32-year Toro veteran, said the current economic woes remind him of 1981, when then-president Ken Melrose guided the company when it appeared to be on "its last legs."

In an interview, Hoffman recalled that Melrose "regrounded us back to our values, the values of customer relationships and product innovation."

In Toro's fiscal 2009 first quarter that ended in January, the company produced net income of $6.7 million on net sales of $340 million. Residential sales were up slightly, but sales in the professional products division plunged 22.3 percent.

In such a tough climate, Hoffman said that it's even more important to invest in research and development. He emphasized that Toro has increased its spending on new product development for seven years in a row, passing $60 million in 2008.

The result: A variety of new products being marketed ahead of another new mowing season.

For commercial users, Toro is introducing a 16-foot Toro Groundsmaster rotary mower that Hoffman said can mow an acre in less than 5 minutes.

Toro, which sells lawn mowers at Home Depot and Toro dealerships, has a new

Toro is selling a patented spray nozzle that reduces overall water use by up to 30 percent. The company says the nozzle saves money as well as preserves a natural resource.

Toro, which got its start in 1914 by manufacturing tractor engines, has been steadily building its international sales, which now account for about one-third of its revenue. Toro provided equipment and irrigation systems for the "Birds Nest" stadium at the 2008 Beijing Olympic Games.

But the world economy has slowed considerably since then. "Liquidity is paramount," Hoffman told shareholders. "We are using significantly less of our credit lines, and currently have nearly $200 million of borrowing capacity available."

On Wednesday, Toro's board declared a regular quarterly cash dividend of 15 cents per share.

During the brief annual meeting, three board members were reelected to three-year terms. They are Janet Cooper, 55, former senior vice president and treasurer of Qwest Communications; Gary Ellis, 52, chief financial officer of Medtronic Inc., and Gregg Steinhafel, 54, CEO of Target Corp.