Toro stock TTC is currently in Phase 18, the final stage of its 18-phase Adhishthana Cycle on the weekly charts. The stock has been trapped in a consolidation range for over 700 days, and based on the Adhishthana principles, this trend may persist through August 2026. Toro Stock: Poor Guna Triads at the Root of UnderperformanceWithin the Adhishthana framework, Phases 14, 15, and 16 form the Guna Triads. These phases determine whether a stock can reach Nirvana in Phase 18, the culmination of the cycle. For N ...

Earnings Per Share (EPS) of $1.24, surpassing the estimated $1.22 and showing improvement from the previous year.Revenue of $1.13 billion, exceeding estimates but falling short of the previous year's figures and the Zacks Consensus Estimate.Strong financial metrics including a Price-to-Earnings (P/E) ratio of 20.17 and a debt-to-equity ratio of 0.82, indicating a healthy financial standing.The Toro Company (NYSE:TTC) is a prominent player in the Zacks Tools - Handheld industry, known for its innovative solu ...

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ - The report contains forward-looking statements based on current expectations, which involve risks and uncertainties that could cause actual results to differ materially. These statements are identified by words like 'expect,' 'outlook,' 'guidance,' and relate to future performance, operating results, liquidity, financial condition, and impacts of macroeconomic factors[8](index=8&type=chunk) - Key risk factors include adverse economic conditions (e.g., uncertainty, slow growth, inflation, high interest rates, reduced consumer spending), geopolitical conflicts, seasonality, weather conditions, supply chain disruptions, inventory management issues, acquisition risks, ability to innovate, changes in product/geographic mix, competition, operational disruptions, labor market challenges, changes in distribution channels, credit risks, international operation risks (e.g., foreign currency, sanctions), legal/regulatory compliance, intellectual property, information security, ability to achieve financial projections (including AMP initiative), accounting/tax changes, stock price volatility, and climate/environmental scrutiny[9](index=9&type=chunk)[12](index=12&type=chunk) [Part I. Financial Information](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements, including earnings, balance sheets, cash flows, and notes [Condensed Consolidated Statements of Earnings (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings%20(Unaudited)) This section provides unaudited consolidated statements of earnings, detailing net sales, gross profit, and net earnings Condensed Consolidated Statements of Earnings (Unaudited) - Key Figures | Metric (Millions USD) | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Net sales | $1,131.3 | $1,156.9 | $3,444.2 | $3,507.8 | | Cost of sales | $749.5 | $754.1 | $2,290.1 | $2,307.5 | | Gross profit | $381.8 | $402.8 | $1,154.1 | $1,200.3 | | Operating earnings | $64.8 | $148.1 | $317.4 | $424.3 | | Net earnings | $53.5 | $119.3 | $243.1 | $329.0 | | Basic EPS | $0.54 | $1.15 | $2.43 | $3.16 | | Diluted EPS | $0.54 | $1.14 | $2.42 | $3.14 | - Net sales decreased by **2.2%** for the three months ended August 1, 2025, and by **1.8%** for the nine months ended August 1, 2025, compared to the prior year periods[14](index=14&type=chunk) - Net earnings significantly decreased by **55.1%** for the three months ended August 1, 2025, and by **26.1%** for the nine months ended August 1, 2025, primarily due to an **$81.1 million** non-cash impairment charge[14](index=14&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) This section presents unaudited consolidated statements of comprehensive income, including net earnings and other components Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Key Figures | Metric (Millions USD) | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Net earnings | $53.5 | $119.3 | $243.1 | $329.0 | | Other comprehensive income (loss), net of tax | | | | | | Foreign currency translation adjustments | $1.0 | $1.6 | $5.9 | $6.9 | | Derivative instruments, net of tax | $3.5 | $(8.7) | $2.6 | $(12.8) | | Total other comprehensive income (loss), net of tax | $4.5 | $(7.1) | $8.5 | $(5.9) | | Comprehensive income | $58.0 | $112.2 | $251.6 | $323.1 | - Comprehensive income decreased by **48.3%** for the three months ended August 1, 2025, and by **22.1%** for the nine months ended August 1, 2025, compared to the prior year periods[15](index=15&type=chunk) - Derivative instruments contributed positively to other comprehensive income in the current periods, reversing a loss from the prior year, indicating favorable hedging outcomes[15](index=15&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This section details unaudited consolidated balance sheets, outlining assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (Unaudited) - Key Figures | Metric (Millions USD) | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:----------------------|:------------|:------------|:-------------| | Total current assets | $1,794.1 | $1,913.9 | $1,764.9 | | Total assets | $3,519.8 | $3,731.4 | $3,582.8 | | Total current liabilities | $955.9 | $984.4 | $976.0 | | Long-term debt, less current portion | $1,012.2 | $966.6 | $911.8 | | Total stockholders' equity | $1,411.1 | $1,636.4 | $1,551.9 | | Total liabilities and stockholders' equity | $3,519.8 | $3,731.4 | $3,582.8 | - Total assets decreased by **5.7%** from August 2, 2024, to August 1, 2025, primarily driven by reductions in current assets and other intangible assets[16](index=16&type=chunk) - Total stockholders' equity decreased by **13.8%** from August 2, 2024, to August 1, 2025, mainly due to lower retained earnings and common stock outstanding[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section presents unaudited consolidated statements of cash flows, categorizing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (Nine Months Ended) | Metric (Millions USD) | Aug 1, 2025 | Aug 2, 2024 | |:----------------------|:------------|:------------| | Net cash provided by operating activities | $348.9 | $329.8 | | Net cash used in investing activities | $(50.7) | $(43.4) | | Net cash used in financing activities | $(298.1) | $(260.5) | | Net increase in cash and cash equivalents | $1.5 | $28.0 | - Net cash provided by operating activities increased by **5.8%** for the nine months ended August 1, 2025, compared to the prior year, primarily due to favorable working capital variations[18](index=18&type=chunk) - Net cash used in financing activities increased by **14.4%** for the nine months ended August 1, 2025, driven by higher common stock repurchases, partially offset by increased borrowings[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) This section provides unaudited consolidated statements of stockholders' equity, detailing changes in common stock, retained earnings, and comprehensive loss Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - Key Figures (Nine Months Ended) | Metric (Millions USD) | Oct 31, 2024 | Aug 1, 2025 | |:----------------------|:-------------|:------------| | Common Stock | $101.5 | $97.9 | | Retained Earnings | $1,496.4 | $1,350.7 | | Accumulated Other Comprehensive Loss | $(46.0) | $(37.5) | | Total Stockholders' Equity | $1,551.9 | $1,411.1 | - Total stockholders' equity decreased from **$1,551.9 million** as of October 31, 2024, to **$1,411.1 million** as of August 1, 2025, primarily due to cash dividends paid (**$113.8 million**) and common stock repurchases (**$295.7 million**), partially offset by net earnings (**$243.1 million**)[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed notes explaining the basis of presentation, accounting policies, and specific financial line items [Note 1. Basis of Presentation](index=9&type=section&id=1%20Basis%20of%20Presentation) This note outlines the preparation basis for unaudited financial statements, including GAAP compliance and seasonality - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with Form 10-Q instructions and U.S. GAAP, with all intercompany accounts and transactions eliminated[22](index=22&type=chunk) - Due to seasonality, operating results for the nine months ended August 1, 2025, cannot be annualized to predict full fiscal year 2025 results[23](index=23&type=chunk) - The company is evaluating the impact of several new FASB ASUs, including those related to credit losses (ASU 2025-05), expense disaggregation (ASU 2024-03), income tax disclosures (ASU 2023-09), and segment reporting (ASU 2023-07), which will become effective in fiscal years 2026, 2028, and 2025 respectively[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 2. Acquisitions and Divestitures](index=10&type=section&id=2%20Acquisitions%20and%20Divestitures) This note details the company's immaterial acquisitions and divestitures, including technology assets and product lines - In Q2 fiscal 2025, the company acquired certain technology assets and a U.S. underground construction equipment distributor. The acquisition was immaterial, with no goodwill or indefinite-lived intangible assets recorded[33](index=33&type=chunk) - In Q3 fiscal 2025, the company divested assets related to the auger boring product line (American Augers brand) and the Trencor brand, both previously part of the Professional segment. Both divestitures were immaterial[35](index=35&type=chunk)[36](index=36&type=chunk) [Note 3. Segment Data](index=11&type=section&id=3%20Segment%20Data) This note provides financial data by reportable segment, Professional and Residential, and 'Other' activities - The company operates in two reportable segments: Professional and Residential, with 'Other' activities including a domestic distribution company and corporate functions[37](index=37&type=chunk) Segment Net Sales and Earnings Before Income Taxes (Millions USD) | Segment | Three Months Ended Aug 1, 2025 (Net Sales) | Three Months Ended Aug 2, 2024 (Net Sales) | Nine Months Ended Aug 1, 2025 (Net Sales) | Nine Months Ended Aug 2, 2024 (Net Sales) | |:--------------|:-------------------------------------------|:-------------------------------------------|:------------------------------------------|:------------------------------------------| | Professional | $930.8 | $880.9 | $2,713.7 | $2,643.0 | | Residential | $192.8 | $267.5 | $711.2 | $843.2 | | Other | $7.7 | $8.5 | $19.3 | $21.6 | | Total | $1,131.3 | $1,156.9 | $3,444.2 | $3,507.8 | | | Three Months Ended Aug 1, 2025 (Earnings) | Three Months Ended Aug 2, 2024 (Earnings) | Nine Months Ended Aug 1, 2025 (Earnings) | Nine Months Ended Aug 2, 2024 (Earnings) | | Professional | $198.5 | $165.7 | $527.8 | $469.2 | | Residential | $3.7 | $32.6 | $37.0 | $92.2 | | Other | $(144.4) | $(54.1) | $(272.2) | $(157.9) | | Total | $57.8 | $144.2 | $292.6 | $403.5 | - The 'Other' activities operating loss for the three and nine months ended August 1, 2025, includes an **$81.1 million** non-cash impairment charge related to the Spartan trade name[38](index=38&type=chunk)[39](index=39&type=chunk) [Note 4. Revenue](index=12&type=section&id=4%20Revenue) This note details net sales by product type and geographic market, and contract liabilities for deferred revenue Net Sales by Product Type and Geographic Market (Millions USD) | Category (3 Months Ended Aug 1, 2025) | Professional | Residential | Other | Total | |:--------------------------------------|:-------------|:------------|:------|:------| | Equipment | $815.7 | $192.6 | $6.3 | $1,014.6 | | Irrigation | $115.1 | $0.2 | $1.4 | $116.7 | | **Total Net Sales** | **$930.8** | **$192.8** | **$7.7** | **$1,131.3** | | United States | $755.2 | $169.2 | $7.7 | $932.1 | | International countries | $175.6 | $23.6 | — | $199.2 | | **Total Net Sales** | **$930.8** | **$192.8** | **$7.7** | **$1,131.3** | | Category (9 Months Ended Aug 1, 2025) | Professional | Residential | Other | Total | |:--------------------------------------|:-------------|:------------|:------|:------| | Equipment | $2,369.9 | $709.6 | $15.4 | $3,094.9 | | Irrigation | $343.8 | $1.6 | $3.9 | $349.3 | | **Total Net Sales** | **$2,713.7** | **$711.2** | **$19.3** | **$3,444.2** | | United States | $2,135.8 | $622.9 | $19.3 | $2,778.0 | | International countries | $577.9 | $88.3 | — | $666.2 | | **Total Net Sales** | **$2,713.7** | **$711.2** | **$19.3** | **$3,444.2** | - Contract liabilities for deferred revenue, primarily from extended warranty and service contracts, totaled **$31.9 million** as of August 1, 2025, up from **$29.6 million** as of October 31, 2024. The company expects to recognize **$2.7 million** of the October 31, 2024 balance in the remainder of fiscal 2025[42](index=42&type=chunk) [Note 5. Goodwill and Other Intangible Assets, Net](index=13&type=section&id=5%20Goodwill%20and%20Other%20Intangible%20Assets,%20Net) This note discusses goodwill and other intangible assets, including a trade name impairment charge and amortization estimates - During Q3 fiscal 2025, the company recorded an **$81.1 million** non-cash impairment charge for the indefinite-lived Spartan trade name intangible asset, fully impairing it, due to a decline in customer demand. This resulted in a **$19.7 million** income tax benefit[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) Goodwill by Reportable Segment (Millions USD) | Segment | Oct 31, 2024 | Aug 1, 2025 | |:-------------|:-------------|:------------| | Professional | $440.4 | $440.8 | | Residential | $9.9 | $10.0 | | Other | — | — | | Total | $450.3 | $450.8 | Other Intangible Assets, Net (Millions USD) | Category | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:--------------------------|:------------|:------------|:-------------| | Total finite-lived | $208.1 | $240.8 | $227.1 | | Indefinite-lived - trade names | $190.5 | $271.6 | $271.6 | | **Total other intangible assets, net** | **$398.6** | **$512.4** | **$498.7** | - Estimated amortization expense for finite-lived intangible assets for the remainder of fiscal 2025 is **$7.5 million**, with **$29.7 million** projected for fiscal 2026[48](index=48&type=chunk) [Note 6. Indebtedness](index=15&type=section&id=6%20Indebtedness) This note summarizes the company's indebtedness, including revolving credit, term loans, senior notes, and payment schedules Summary of Indebtedness (Millions USD) | Debt Type | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:------------------------------|:------------|:------------|:-------------| | Revolving credit facility | $115.0 | — | — | | Term loans | $395.0 | $470.0 | $400.0 | | Senior notes/debentures | $424.3 | $424.2 | $424.2 | | Total long-term debt | $1,032.2 | $991.9 | $921.8 | | Less: current portion | $20.0 | $25.3 | $10.0 | | Long-term debt, less current portion | $1,012.2 | $966.6 | $911.8 | - Total long-term debt increased to **$1,032.2 million** as of August 1, 2025, from **$921.8 million** as of October 31, 2024[49](index=49&type=chunk) - Significant principal payments are due in fiscal 2027 (**$270.0 million**) and fiscal 2029 (**$395.0 million**)[49](index=49&type=chunk) [Note 7. Inventories, Net](index=15&type=section&id=7%20Inventories,%20Net) This note details inventory composition and valuation methods, including raw materials, finished goods, and LIFO adjustments Inventories, Net (Millions USD) | Category | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:------------------------------|:------------|:------------|:-------------| | Raw materials and work in process | $377.4 | $395.2 | $384.8 | | Finished goods and service parts | $832.2 | $843.5 | $827.5 | | Total FIFO and average cost value | $1,209.6 | $1,238.7 | $1,212.3 | | Less: adjustment to LIFO value | $173.4 | $156.7 | $173.4 | | **Total inventories, net** | **$1,036.2**| **$1,082.0**| **$1,038.9** | - Total inventories, net decreased by **4.2%** from August 2, 2024, to August 1, 2025, primarily due to lower raw materials and work in process balances[51](index=51&type=chunk) - The company uses FIFO, average cost, and LIFO methods for inventory valuation and records adjustments for excess, slow-moving, and obsolete inventory[50](index=50&type=chunk) [Note 8. Property, Plant, and Equipment, Net](index=16&type=section&id=8%20Property,%20Plant,%20and%20Equipment,%20Net) This note outlines gross and net property, plant, and equipment values, accumulated depreciation, and depreciation methods Property, Plant, and Equipment, Net (Millions USD) | Category | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:------------------------------|:------------|:------------|:-------------| | Property, plant, and equipment, gross | $1,621.6 | $1,598.8 | $1,577.0 | | Less: accumulated depreciation | $992.5 | $963.1 | $932.2 | | **Property, plant, and equipment, net** | **$629.1** | **$635.7** | **$644.8** | - Net property, plant, and equipment decreased by **1.0%** from August 2, 2024, to August 1, 2025, primarily due to increased accumulated depreciation[53](index=53&type=chunk) - Depreciation is generally accounted for using the straight-line method over estimated useful lives ranging from **2 to 40 years**[52](index=52&type=chunk) [Note 9. Product Warranty Guarantees](index=16&type=section&id=9%20Product%20Warranty%20Guarantees) This note details changes in accrued product warranties, including balances, new accruals, payments, and adjustments Changes in Accrued Warranties (Millions USD) | Metric | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:------------------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Beginning balance | $155.8 | $151.4 | $150.2 | $143.9 | | Changes in accrual related to warranties issued during the period | $22.4 | $20.0 | $67.3 | $60.4 | | Payments made during the period | $(28.0) | $(23.9) | $(68.9) | $(64.0) | | Changes in accrual related to pre-existing warranties | $(0.4) | $0.2 | $1.2 | $7.4 | | **Ending balance** | **$149.8** | **$147.7** | **$149.8** | **$147.7** | - The ending balance of accrued warranties increased by **1.4%** from August 2, 2024, to August 1, 2025, for the nine-month period[56](index=56&type=chunk) - Warranty expense is recognized at the time of sale based on estimated future claims, historical costs, and sales trends, with periodic adjustments[55](index=55&type=chunk) [Note 10. Investment in Joint Venture](index=17&type=section&id=10%20Investment%20in%20Joint%20Venture) This note describes the company's equity investment in Red Iron Acceptance, LLC, a joint venture for customer inventory financing - The company holds a **45%** equity interest in Red Iron Acceptance, LLC, a joint venture with Huntington Distribution Finance, Inc., which provides customer inventory financing to distributors and dealers in the U.S[57](index=57&type=chunk)[58](index=58&type=chunk) Investment in Red Iron Joint Venture (Millions USD) | Metric | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:----------------------------|:------------|:------------|:-------------| | Total investment in Red Iron | $41.3 | $46.4 | $49.2 | - The company's investment in Red Iron decreased by **11.0%** from August 2, 2024, to August 1, 2025[58](index=58&type=chunk) [Note 11. Stock-Based Compensation](index=17&type=section&id=11%20Stock-Based%20Compensation) This note details stock-based compensation costs for various award types and valuation assumptions for stock options Stock-Based Compensation Costs (Millions USD) | Award Type | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Stock option awards | $2.6 | $3.2 | $6.9 | $11.3 | | Performance share awards | $1.3 | $(1.0) | $3.0 | $1.6 | | Restricted stock unit awards | $1.6 | $2.0 | $4.7 | $6.0 | | Unrestricted common stock awards | — | — | $0.7 | $0.6 | | **Total compensation cost** | **$5.5** | **$4.2** | **$15.3** | **$19.5** | - Total stock-based compensation cost increased by **31.0%** for the three months ended August 1, 2025, but decreased by **21.6%** for the nine months ended August 1, 2025, compared to the prior year periods[59](index=59&type=chunk) Weighted-Average Valuation Assumptions for Stock Options | Metric | Fiscal 2025 (9 Months) | Fiscal 2024 (9 Months) | |:----------------------------|:-----------------------|:-----------------------| | Expected life of option (years) | 6.42 | 6.37 | | Expected stock price volatility | 28.08% | 26.76% | | Risk-free interest rate | 4.47% | 3.95% | | Expected dividend yield | 1.43% | 1.15% | | Per share weighted-average fair value at grant date | $25.52 | $30.39 | [Note 12. Stockholders' Equity](index=19&type=section&id=12%20Stockholders'%20Equity) This note details accumulated other comprehensive loss (AOCL) components, including foreign currency and derivative adjustments Components of Accumulated Other Comprehensive Loss (AOCL) (Millions USD) | Component | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:------------------------------|:------------|:------------|:-------------| | Foreign currency translation adjustments | $28.0 | $34.8 | $33.9 | | Pension benefits | $4.3 | $4.3 | $4.3 | | Cash flow derivative instruments | $5.2 | $3.8 | $7.8 | | **Total accumulated other comprehensive loss** | **$37.5** | **$42.9** | **$46.0** | - Total accumulated other comprehensive loss decreased by **12.5%** from August 2, 2024, to August 1, 2025, primarily due to favorable changes in cash flow derivative instruments and foreign currency translation adjustments[66](index=66&type=chunk) [Note 13. Per Share Data](index=20&type=section&id=13%20Per%20Share%20Data) This note presents weighted-average shares outstanding for basic and diluted EPS, including anti-dilutive stock option exclusions Weighted-Average Number of Shares of Common Stock Outstanding (Millions) | Share Type (Millions) | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Basic | 98.8 | 104.0 | 100.0 | 104.2 | | Diluted | 99.0 | 104.5 | 100.3 | 104.8 | - Diluted weighted-average shares outstanding decreased by **5.3%** for the three months and **4.3%** for the nine months ended August 1, 2025, compared to the prior year periods[67](index=67&type=chunk) - Stock option awards to purchase **2.5 million** shares (Q3 2025) and **2.1 million** shares (YTD 2025) were excluded from diluted EPS computation as they were anti-dilutive[67](index=67&type=chunk) [Note 14. Commitments and Contingencies](index=20&type=section&id=14%20Commitments%20and%20Contingencies) This note outlines inventory financing, contingent liabilities, supply chain finance, and ongoing litigation matters - The company has inventory financing arrangements with Red Iron, HCFC, and other third-party financial institutions for dealers and distributors[68](index=68&type=chunk) Receivables Financed and Outstanding (Millions USD) | Metric | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:--------------------------------------|:------------------------------|:------------------------------| | Net receivables financed (Red Iron) | $2,019.9 | $1,882.3 | | Net receivables financed (HCFC & others) | $505.7 | $442.0 | | Metric | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:--------------------------------------|:------------|:------------|:-------------| | Net receivables outstanding (Red Iron) | $821.1 | $927.8 | $979.6 | | Net receivables outstanding (HCFC & others) | $272.1 | $228.5 | $272.2 | - The company is contingently liable to repurchase up to **$30.7 million** of inventory as of August 1, 2025, under inventory repurchase agreements with financing institutions, with immaterial amounts repurchased in the current nine-month period[72](index=72&type=chunk) - Outstanding payment obligations financed by participating suppliers through a third-party supply chain finance program were **$73.9 million** as of August 1, 2025, a significant decrease from **$315.3 million** on August 2, 2024[73](index=73&type=chunk) - The company is involved in various litigation matters in the ordinary course of business, including product liability, environmental, commercial, employment, and patent claims. Management believes the outcome of these matters will not materially affect the company's financial position or results[74](index=74&type=chunk)[75](index=75&type=chunk) [Note 15. Leases](index=22&type=section&id=15%20Leases) This note details lease expenses for operating, short-term, and variable leases, including terms and discount rates Lease Expense (Millions USD) | Lease Type | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Operating lease expense | $9.5 | $8.9 | $27.0 | $27.5 | | Short-term lease expense | $1.1 | $1.3 | $3.6 | $3.4 | | Variable lease expense | $0.7 | $0.1 | $1.4 | $0.2 | | **Total lease expense** | **$11.3** | **$10.3** | **$32.0** | **$31.1** | - Total lease expense increased by **9.7%** for the three months and **2.9%** for the nine months ended August 1, 2025, compared to the prior year periods, driven by higher variable lease expenses[80](index=80&type=chunk) - The weighted-average remaining lease term for operating leases is **8.7 years**, with a weighted-average discount rate of **5.09%** as of August 1, 2025[80](index=80&type=chunk) Present Value of Operating Lease Liabilities (Millions USD) | Metric | Aug 1, 2025 | |:--------------------------------------|:------------| | Total future minimum operating lease payments | $133.9 | | Less: imputed interest | $24.5 | | **Present value of operating lease liabilities** | **$109.4** | [Note 16. Derivative Instruments and Hedging Activities](index=23&type=section&id=16%20Derivative%20Instruments%20and%20Hedging%20Activities) This note describes the company's use of forward currency contracts to hedge foreign exchange risk and their fair value - The company uses forward currency contracts to hedge foreign currency exchange rate risk, primarily for the Euro, Australian dollar, Canadian dollar, British pound, Mexican peso, Japanese yen, Chinese renminbi, and Romanian new leu[82](index=82&type=chunk)[84](index=84&type=chunk) Fair Value of Derivative Instruments (Millions USD) | Category | Aug 1, 2025 | Aug 2, 2024 | Oct 31, 2024 | |:------------------------------|:------------|:------------|:-------------| | Total derivative assets | $3.5 | $2.1 | $2.2 | | Total derivative liabilities | $7.1 | $1.3 | $5.5 | - As of August 1, 2025, the notional amount of outstanding forward currency contracts designated as cash flow hedging instruments was **$356.8 million**[89](index=89&type=chunk) - The company expects to reclassify approximately **$5.4 million** of losses from Accumulated Other Comprehensive Loss (AOCL) to earnings within the next twelve months[93](index=93&type=chunk) [Note 17. Fair Value Measurements](index=27&type=section&id=17%20Fair%20Value%20Measurements) This note categorizes financial assets and liabilities by fair value levels, focusing on derivatives and long-term debt - The company categorizes financial assets and liabilities into Level 1, 2, or 3 based on valuation inputs. Derivative instruments (forward currency contracts) are measured at fair value on a recurring basis using Level 2 observable market data[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) Fair Value Measurements of Financial Assets and Liabilities (Millions USD) | Category (Aug 1, 2025) | Fair Value | Level 1 | Level 2 | Level 3 | |:-----------------------|:-----------|:--------|:--------|:--------| | Assets: Forward currency contracts | $3.5 | — | $3.5 | — | | Liabilities: Forward currency contracts | $7.1 | — | $7.1 | — | - The carrying values of short-term financial instruments approximate their fair values. For fixed-rate long-term debt, the estimated gross fair value was **$527.9 million** compared to a gross carrying amount of **$524.3 million** as of August 1, 2025[104](index=104&type=chunk) [Note 18. Subsequent Events](index=29&type=section&id=18%20Subsequent%20Events) This note confirms no subsequent events require recognition or disclosure in the condensed consolidated financial statements - The company has evaluated all subsequent events and concluded that no events require recognition or disclosure in the Condensed Consolidated Financial Statements[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, results of operations, liquidity, and future factors [Company Overview](index=30&type=section&id=Company%20Overview) This section provides an overview of the company's business, strategic priorities, and key initiatives, including AMP and impairment - The Toro Company designs, manufactures, markets, and sells professional turf maintenance, irrigation, landscaping, snow/ice management, agricultural irrigation, construction, and residential yard products globally through various channels[108](index=108&type=chunk)[109](index=109&type=chunk) - The company's strategic priorities include accelerating profitable growth, driving productivity and operational excellence, and empowering its people, with a focus on alternative power, smart connected, and autonomous solutions[108](index=108&type=chunk) - The AMP (Amplifying Maximum Productivity) initiative, launched in Q1 fiscal 2024, aims for over **$100 million** in annualized cost savings by fiscal 2027, with cumulative savings of **$50.6 million** and anticipated annualized savings of **$74.5 million** as of Q3 fiscal 2025[112](index=112&type=chunk) - An **$81.1 million** non-cash impairment charge was recorded in Q3 fiscal 2025 for the Spartan trade name, fully impairing the asset, due to lower customer demand[113](index=113&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section analyzes consolidated financial performance, including net sales, gross margin, SG&A, tax rate, and inventory Consolidated Financial Performance (Millions USD, except EPS) | Metric | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Net sales | $1,131.3 | $1,156.9 | $3,444.2 | $3,507.8 | | Net earnings | $53.5 | $119.3 | $243.1 | $329.0 | | Diluted EPS | $0.54 | $1.14 | $2.42 | $3.14 | | Adjusted net earnings | $122.5 | $123.7 | $330.2 | $337.5 | | Adjusted diluted EPS | $1.24 | $1.18 | $3.29 | $3.22 | - Consolidated net sales decreased by **2.2%** for Q3 fiscal 2025 and **1.8%** for the nine months, primarily due to lower Residential segment shipments and prior year divestitures, partially offset by Professional segment growth and net price realization[115](index=115&type=chunk)[123](index=123&type=chunk) - Gross margin decreased by **110 basis points** to **33.7%** for Q3 fiscal 2025 and **70 basis points** to **33.5%** for the nine months, mainly due to lower net sales volume, higher material/manufacturing costs, and inventory valuation adjustments, partially offset by productivity and pricing[126](index=126&type=chunk)[127](index=127&type=chunk) - SG&A expense decreased by **7.4%** for Q3 fiscal 2025 and **2.6%** for the nine months, primarily due to cost savings measures and lower marketing costs[128](index=128&type=chunk) - The effective tax rate for Q3 fiscal 2025 was **7.4%**, down from **17.3%** in the prior year, mainly due to the non-cash impairment charge and a more favorable geographic mix of earnings[132](index=132&type=chunk) - Field inventory levels were higher at the end of Q3 fiscal 2025 compared to Q3 fiscal 2024, driven by increased underground construction products, partially offset by turf product destocking[121](index=121&type=chunk) - Order backlog decreased at the end of Q3 fiscal 2025 compared to Q4 fiscal 2024 due to improved manufacturing output and normalized order patterns, though demand for underground construction and golf/grounds products keeps backlog elevated[122](index=122&type=chunk) [Business Segments](index=34&type=section&id=Business%20Segments) This section details the financial performance of Professional and Residential segments, including net sales and earnings Segment Net Sales and Earnings (Millions USD) | Segment | Three Months Ended Aug 1, 2025 (Net Sales) | Three Months Ended Aug 2, 2024 (Net Sales) | Nine Months Ended Aug 1, 2025 (Net Sales) | Nine Months Ended Aug 2, 2024 (Net Sales) | |:--------------|:-------------------------------------------|:-------------------------------------------|:------------------------------------------|:------------------------------------------| | Professional | $930.8 (Up 5.7%) | $880.9 | $2,713.7 (Up 2.7%) | $2,643.0 | | Residential | $192.8 (Down 27.9%) | $267.5 | $711.2 (Down 15.7%) | $843.2 | | Other | $7.7 (Down 9.4%) | $8.5 | $19.3 (Down 10.6%) | $21.6 | | | Three Months Ended Aug 1, 2025 (Earnings) | Three Months Ended Aug 2, 2024 (Earnings) | Nine Months Ended Aug 1, 2025 (Earnings) | Nine Months Ended Aug 2, 2024 (Earnings) | | Professional | $198.5 (Up 19.8%) | $165.7 | $527.8 (Up 12.5%) | $469.2 | | Residential | $3.7 (Down 88.7%) | $32.6 | $37.0 (Down 59.9%) | $92.2 | | Other | $(144.4) (Down 166.9%) | $(54.1) | $(272.2) (Down 72.4%) | $(157.9) | - Professional segment net sales increased due to higher shipments of underground construction and golf and grounds products, and net price realization. Segment earnings margin increased to **21.3%** (Q3) and **19.4%** (YTD) due to productivity, pricing, and sales leverage[135](index=135&type=chunk)[136](index=136&type=chunk) - Residential segment net sales decreased significantly due to lower shipments broadly across the segment. Segment earnings margin decreased to **1.9%** (Q3) and **5.2%** (YTD) due to lower sales volume, higher costs, inventory adjustments, and increased sales promotions[137](index=137&type=chunk)[138](index=138&type=chunk) - Other activities' operating loss increased substantially due to the non-cash impairment charge and higher productivity initiative charges[140](index=140&type=chunk) [Financial Position](index=35&type=section&id=Financial%20Position) This section reviews working capital, cash flow, liquidity, indebtedness, cash dividends, and common stock repurchases - Working capital: Accounts receivable decreased by **11.2%**, inventory levels decreased by **4.2%**, and accounts payable decreased by **12.1%** as of Q3 fiscal 2025 compared to Q3 fiscal 2024[141](index=141&type=chunk) Cash Flow Summary (Nine Months Ended, Millions USD) | Cash Flow Activity | Aug 1, 2025 | Aug 2, 2024 | |:------------------------------|:------------|:------------| | Operating activities | $348.9 | $329.8 | | Investing activities | $(50.7) | $(43.4) | | Financing activities | $(298.1) | $(260.5) | - Liquidity: As of August 1, 2025, available liquidity was **$983.9 million**, comprising **$201.0 million** in cash and cash equivalents and **$782.9 million** available under the revolving credit facility[145](index=145&type=chunk) - Indebtedness: Total long-term debt (less current portion) increased to **$1,012.2 million** as of August 1, 2025, from **$966.6 million** in the prior year. The company is in compliance with debt covenants[146](index=146&type=chunk)[147](index=147&type=chunk) - Cash Dividends: The quarterly cash dividend increased by **5.6%** to **$0.38 per share** for Q3 fiscal 2025[148](index=148&type=chunk) - Common Stock Repurchases: The company repurchased **3,780,167 shares** for the first nine months of fiscal 2025, returning **$403.8 million** to shareholders (dividends + repurchases). **4,391,790 shares** remained available for repurchase[120](index=120&type=chunk)[149](index=149&type=chunk) [Non-GAAP Financial Measures](index=37&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures to GAAP, offering supplemental insights into core performance - Non-GAAP financial measures are provided to offer supplemental information on core operational performance and cash flows, excluding non-recurring or unpredictable charges like productivity initiatives and impairment charges[157](index=157&type=chunk) Reconciliation of Non-GAAP Financial Measures (Millions USD, except EPS) | Metric | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Nine Months Ended Aug 1, 2025 | Nine Months Ended Aug 2, 2024 | |:----------------------------|:-------------------------------|:-------------------------------|:------------------------------|:------------------------------| | Adjusted gross profit | $389.0 | $409.7 | $1,168.8 | $1,207.2 | | Adjusted gross margin | 34.4% | 35.4% | 33.9% | 34.4% | | Adjusted operating earnings | $154.0 | $159.0 | $428.4 | $443.5 | | Adjusted operating earnings margin | 13.6% | 13.7% | 12.4% | 12.6% | | Adjusted net earnings | $122.5 | $123.7 | $330.2 | $337.5 | | Adjusted diluted EPS | $1.24 | $1.18 | $3.29 | $3.22 | | Adjusted effective tax rate | 17.3% | 18.0% | 18.5% | 19.3% | Reconciliation of Non-GAAP Liquidity Measures (Nine Months Ended, Millions USD) | Metric | Aug 1, 2025 | Aug 2, 2024 | |:----------------------------|:------------|:------------| | Net cash provided by operating activities | $348.9 | $329.8 | | Less: Purchases of property, plant, and equipment, net of proceeds from insurance claim | $57.0 | $59.3 | | **Free cash flow** | **$291.9** | **$270.5** | | Net earnings, excluding non-cash impairment charge | $324.2 | $329.0 | | **Free cash flow conversion percentage** | **90.0%** | **82.2%** | - Free cash flow increased by **7.9%** for the nine months ended August 1, 2025, to **$291.9 million**, with a conversion percentage of **90.0%**, up from **82.2%** in the prior year[160](index=160&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms no material changes to critical accounting policies and estimates since the last annual report - There have been no material changes to the company's critical accounting policies and estimates since the Annual Report on Form 10-K for fiscal year ended October 31, 2024[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details market risk exposure, including foreign currency, interest rates, and commodity costs, and mitigation strategies [Foreign Currency Exchange Rate Risk](index=39&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) This section discusses foreign currency exchange rate exposure and the use of forward currency contracts for hedging - The company is exposed to foreign currency exchange rate risk from transactions in Euro, Australian dollar, Canadian dollar, British pound, Mexican peso, Japanese yen, Chinese renminbi, and Romanian new leu against the U.S. dollar, and Romanian new leu against the Euro[163](index=163&type=chunk) - A stronger U.S. dollar and Mexican peso generally have a negative impact on operating results, while weaker currencies have a positive effect[163](index=163&type=chunk) - The company uses forward currency contracts to hedge foreign currency risk, with a policy that prohibits speculative use. These derivatives offset changes in the values of underlying exposures[165](index=165&type=chunk) Outstanding Derivative Instruments (Millions USD) | Currency Pair | Notional Amount | Fair Value | Gain (Loss) at Fair Value | |:------------------------------|:----------------|:-----------|:--------------------------| | Buy U.S. dollar/Sell Australian dollar | $83.1 | $84.0 | $0.9 | | Buy U.S. dollar/Sell Canadian dollar | $48.4 | $48.5 | $0.1 | | Buy U.S. dollar/Sell Euro | $201.3 | $195.0 | $(6.3) | | Buy U.S. dollar/Sell British pound | $60.5 | $58.9 | $(1.6) | | Buy Mexican peso/Sell U.S. dollar | $64.1 | $67.4 | $3.3 | [Interest Rate Risk](index=40&type=section&id=Interest%20Rate%20Risk) This section addresses interest rate risk from variable rates on credit facilities and term loans, and hedging practices - Interest rate risk primarily stems from fluctuations in variable interest rates on the revolving credit facility and term loan credit agreements[167](index=167&type=chunk) - As of August 1, 2025, indebtedness included **$524.3 million** of gross fixed-rate long-term debt and **$510.0 million** of gross variable rate debt (**$395.0 million** term loans, **$115.0 million** revolving credit facility)[167](index=167&type=chunk) - The company generally does not use interest rate swaps to mitigate interest rate fluctuations[167](index=167&type=chunk) [Commodity Cost Risk](index=40&type=section&id=Commodity%20Cost%20Risk) This section outlines commodity cost exposure for various materials and strategies to mitigate these risks - The company is exposed to commodity cost changes for materials like steel, aluminum, petroleum, natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, and electrification components[168](index=168&type=chunk)[169](index=169&type=chunk) - Mitigation strategies include productivity initiatives (e.g., supplier collaboration, alternative sourcing, material substitution, Lean methods), internal cost reduction, and product price increases[170](index=170&type=chunk) - Failure of mitigation strategies to fully offset cost increases could lead to a decline in gross margins[170](index=170&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms effective disclosure controls and procedures and no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=41&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms management's conclusion on the effectiveness of disclosure controls and procedures as of the reporting date - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 1, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[171](index=171&type=chunk)[172](index=172&type=chunk) [Changes in Internal Control Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting during the three months ended August 1, 2025 - There were no changes in internal control over financial reporting during the three months ended August 1, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[173](index=173&type=chunk) [Part II. Other Information](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 14 for a description of the company's material legal proceedings in the ordinary course of business - The company is involved in various legal proceedings, including product liability, environmental, commercial, employment, and patent litigation, as detailed in Note 14, Commitments and Contingencies[175](index=175&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section states no material changes to risk factors previously disclosed in the company's most recent Annual Report on Form 10-K - No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended October 31, 2024[176](index=176&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details common stock repurchases made under the Board-authorized stock repurchase program during the third fiscal quarter Common Stock Repurchases (Third Quarter Ended August 1, 2025) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | Repurchased Under Publicly Announced Plans | Maximum Shares Remaining Under Plans | |:------------------------------|:-----------------------------------|:-----------------------------|:-------------------------------------------|:-------------------------------------| | May 3, 2025 through May 30, 2025 | 340,400 | $73.44 | 340,400 | 5,281,264 | | May 31, 2025 through July 4, 2025 | 350,806 | $71.26 | 350,806 | 4,930,458 | | July 5, 2025 through August 1, 2025 | 540,278 | $74.26 | 538,668 | 4,391,790 | | **Total** | **1,231,484** | **$73.18** | **1,229,874** | | - The company repurchased **1,229,874 shares** under its stock repurchase program during the third fiscal quarter, with **4,391,790 shares** remaining available for repurchase as of August 1, 2025[177](index=177&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section reports on Rule 10b5-1 and non-Rule 10b5-1 trading arrangements by directors and officers - No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the third quarter ended August 1, 2025[178](index=178&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, indentures, and certifications - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, various Indentures, an Offer Letter for Edric J. Funk, CEO/CFO certifications (Sarbanes-Oxley Act), and Inline XBRL financial data[180](index=180&type=chunk) [Signatures](index=44&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q filing - The report was signed on September 4, 2025, by Angela C. Drake, Vice President, Chief Financial Officer, who is also the principal financial and accounting officer[182](index=182&type=chunk)

Financial Data and Key Metrics Changes - The company reported total consolidated net sales of $1,130 million, down 2.2% year over year, with half of this decline attributed to prior year strategic divestitures of noncore assets [7][15][19] - Adjusted earnings per share for the quarter were $1.24, exceeding internal expectations and up from the same period last year [7][15] - Reported earnings per share included a non-cash impairment charge of $0.62 per diluted share, resulting in a reported EPS of $0.54 [15][19] - Free cash flow for the third quarter was $292 million, reflecting a year-over-year increase largely due to favorable changes in working capital [20][21] Business Line Data and Key Metrics Changes - Professional segment net sales were $931 million, up approximately 6% year over year, driven by higher shipments of underground construction and golf and grounds products [16][19] - Professional segment earnings for the third quarter were $199 million, up 20% year over year, resulting in an earnings margin of 21.3%, an increase from 18.8% in the prior year [16][19] - Residential segment net sales were $193 million, down 28% year over year, primarily due to lower shipments as homeowners deferred big-ticket purchases [17][19] - Residential segment earnings for the quarter were $4 million, or 1.9% of sales, compared to $33 million, or 12.2% of sales last year [17][19] Market Data and Key Metrics Changes - The company noted that channel inventory is clearing meaningfully, particularly in the residential segment, setting up a cleaner foundation for the 2026 selling season [8][17] - The professional segment continues to capture market share in areas experiencing structural growth, particularly in golf and infrastructure [10][12] Company Strategy and Development Direction - The company is focused on leveraging technology investments and operational excellence to drive significant value for customers and shareholders [5][9] - The AMP productivity program has delivered $75 million in annualized cost savings, with a target of at least $100 million by 2027 [9][27] - The company is strategically investing in value-generating technology and innovation while optimizing global supply chain operations [27][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory despite persistent headwinds in the residential segment, emphasizing the importance of operational improvements and cost control [5][9] - The company anticipates continued pressure from homeowner demand and channel caution affecting third-quarter results, but expects strong demand in the professional segment [22][24] - Full-year guidance expects total company net sales to be at the low end of the range of flat to down 3%, with professional segment revenue expected to be up slightly year over year [23][24] Other Important Information - The company has maintained its market share despite significant fluctuations in the market over the past few years [47] - The company is focused on returning value to shareholders while maintaining balance sheet flexibility for continued investment in technology innovation and new product development [22][30] Q&A Session Summary Question: How is the professional landscape channel performing amid consumer challenges? - Management noted that the professional landscape contractor business grew in the third quarter, driven by strong demand from contractors despite muted homeowner demand [34][35] Question: Is the strong margin in the professional segment sustainable? - Management confirmed that the strong margin performance was supported by a favorable mix and the AMP program, indicating potential for continued margin improvement [36][38] Question: Will interest rate cuts improve the residential outlook? - Management speculated that interest rate cuts could positively influence consumer confidence, potentially leading to increased big-ticket purchases [40] Question: What is the outlook for residential margins? - Management expects residential margins to be lower year over year, with a typical margin range of 8% to 10% anticipated in the future [51][52] Question: What are the expectations for year-end backlog and professional growth next year? - Management indicated that year-end backlog is expected to be substantially reduced, with continued good prospects for professional growth [54][56] Question: How is the AMP program progressing? - Management reported strong progress with the AMP initiative, tracking ahead of the $75 million savings goal, with discussions of a potential AMP 2.0 in the future [67] Question: What is the impact of tariffs on margins? - Management estimated that tariffs had a significant impact on costs, but they are implementing pricing and productivity measures to maintain margins [69][75] Question: What is the current status of inventory levels? - Management indicated that inventory levels are being managed prudently, with a focus on aligning dealer inventories for the upcoming selling season [104][113]

Financial Data and Key Metrics Changes - The Toro Company reported total consolidated net sales of $1.13 billion for Q3 2025, a decrease of 2.2% year over year, with half of this decline attributed to prior year strategic divestitures of noncore assets [6][13][14] - Adjusted earnings per share (EPS) for the quarter were $1.24, exceeding internal expectations and up from $0.60 in the same period last year [5][13] - Reported EPS was $0.54, which included a non-cash impairment charge of $0.62 per diluted share, totaling $81 million pretax [13][14] - The company's gross margins were reported at 33.7% and adjusted gross margins at 34.4%, compared to 34.8% and 35.4% respectively in the same period last year [17] Business Line Data and Key Metrics Changes - Professional segment net sales were $931 million, up 6% year over year, driven by higher shipments in underground construction and golf and grounds products [14][15] - Professional segment earnings increased by 20% year over year to $199 million, resulting in an earnings margin of 21.3%, up from 18.8% in the prior year [14][15] - Residential segment net sales were $193 million, down 28% year over year, primarily due to lower shipments as homeowners deferred big-ticket purchases [15][16] - Residential segment earnings for the quarter were $4 million, or 1.9% of sales, compared to $33 million, or 12.2% of sales last year [16] Market Data and Key Metrics Changes - The company noted that channel inventory is clearing meaningfully, particularly in the residential segment, setting up a cleaner foundation for the 2026 selling season [7][15] - The professional segment continues to capture market share in areas experiencing structural growth, particularly in golf and infrastructure [9][22] Company Strategy and Development Direction - The Toro Company is focused on leveraging technology investments and operational excellence to drive value for customers and shareholders [5][6] - The company is intensifying operational improvements to control costs and identify additional efficiency opportunities, with a goal of delivering at least $100 million in annualized cost savings by 2027 [8][20] - The company is strategically investing in value-generating technology and innovation while optimizing global supply chain operations [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory despite headwinds in the residential segment, citing strong positioning in the professional segment and ongoing demand for innovative products [5][6] - The company anticipates continued pressure from homeowner demand and channel caution affecting residential results, but expects professional segment revenue to be up slightly year over year [19][20] - Full year guidance indicates total company net sales expected to be at the low end of the range of flat to down 3%, with adjusted diluted EPS projected at about $4.15 [20][21] Other Important Information - The company has invested $90 million in share repurchases year to date, reflecting confidence in cash generation and commitment to returning value to shareholders [19] - The AMP productivity program has delivered $75 million in annualized cost savings to date, with expectations to exceed the initial target of $100 million by 2027 [8][64] Q&A Session Summary Question: Impact of consumer challenges on professional segment - Management noted that the professional landscape contractor business grew in Q3, driven by strong demand from contractors despite muted homeowner demand [30][31] Question: Sustainability of professional segment margins - Management confirmed that the strong margins in the professional segment were supported by a favorable mix and the AMP program, which contributed to cost savings [32][34][35] Question: Residential market outlook with potential interest rate cuts - Management speculated that interest rate cuts could positively influence consumer confidence and spending on big-ticket items, but emphasized the need for sustained improvements [36] Question: Market share and growth prospects with major retailers - Management stated that the company has maintained market share despite market volatility and is optimistic about growth prospects with key retailers like Lowe's and Tractor Supply [42][43] Question: Expectations for residential margins - Management expects residential margins to be lower year over year, with a typical range of 8% to 10%, but does not anticipate reaching that range in fiscal 2025 [48] Question: Year-end backlog and professional growth prospects - Management indicated that year-end backlog is expected to be reduced as the company normalizes order cycles, with continued good prospects for professional growth [51][53] Question: Tariff impacts and mitigation strategies - Management discussed successful tariff mitigation efforts and the expectation to maintain margins through productivity measures and careful pricing [65][72] Question: Inventory levels and alignment with demand - Management acknowledged that while progress has been made in aligning inventory levels with demand, there is still work to be done, particularly in the underground segment [102][110]

Financial Performance - The Toro Company's Q3 2025 net sales were $1,131.3 million, a decrease of 2.2% compared to $1,156.9 million in Q3 2024[25] - Adjusted diluted EPS for Q3 2025 was $1.24, a 5.1% increase from $1.18 in Q3 2024[25] - The company repurchased $90 million of its common stock during Q3 2025[6] - The company updated its full-year fiscal 2025 adjusted diluted EPS guidance to approximately $4.15[6] Segment Results - Professional segment net sales increased by 5.7%, from $880.9 million in Q3 2024 to $930.8 million in Q3 2025[27] - Professional segment earnings margin increased by 250 bps, from 18.8% in Q3 2024 to 21.3% in Q3 2025[27] - Residential segment net sales decreased by 27.9%, from $267.5 million in Q3 2024 to $192.8 million in Q3 2025[30] - Residential segment earnings margin decreased by 1030 bps, from 12.2% in Q3 2024 to 1.9% in Q3 2025[30] Cost Savings and Efficiency - The company's AMP initiative is expected to deliver at least $100 million in incremental annualized cost savings by fiscal 2027[22] - Approximately $4 million of run-rate savings were achieved in Q3 2025 through the AMP initiative[24] Tariff Mitigation - The company estimates fiscal 2025 tariff headwinds to be approximately $70 million, down from a prior estimate of approximately $90 million[7] - The company is on track to mitigate 100% of tariff headwinds for full-year 2025[9]

Toro (TTC) came out with quarterly earnings of $1.24 per share, beating the Zacks Consensus Estimate of $1.22 per share. This compares to earnings of $1.18 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +1.64%. A quarter ago, it was expected that this landscaping, maintenance and irrigation equipment maker would post earnings of $1.38 per share when it actually produced earnings of $1.42, delivering a surprise of +2.9%.Over t ...

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) [Q3 Fiscal Year 2025 Performance Overview](index=1&type=section&id=1.1%20Q3%20Fiscal%202025%20Performance%20Overview) The Toro Company exceeded adjusted earnings expectations in Q3 FY2025, driven by strong Professional Segment performance with 6% growth and 250 basis points of margin expansion, despite Residential Segment headwinds, with the AMP productivity plan contributing to cost savings - Adjusted earnings exceeded expectations, primarily driven by the strong performance of the Professional Segment, which achieved **6% growth** and **250 basis points of margin expansion**[2](index=2&type=chunk) - Underground construction, golf, and grounds businesses were key drivers of net sales and profitability this quarter[3](index=3&type=chunk) - The AMP productivity plan is progressing well, projected to achieve at least **$100 million** in run-rate savings by 2027[3](index=3&type=chunk) [Key Financial Highlights (Q3)](index=1&type=section&id=1.2%20Key%20Financial%20Highlights%20(Q3)) Q3 FY2025 net sales decreased by 2% year-over-year to $1.13 billion, partly due to last year's non-core asset divestiture, with reported diluted EPS at $0.54 including a non-cash impairment charge related to the Spartan business, while adjusted diluted EPS grew 5% to $1.24, as Professional Segment profit growth offset Residential Segment declines Q3 Fiscal Year 2025 Key Financial Data | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | | :----- | :--------------- | :--------------- | :------- | | Net Sales | $1.13 billion | $1.16 billion | (2)% | | Reported Diluted EPS | $0.54 | $1.14 | (53)% | | Adjusted Diluted EPS | $1.24 | $1.18 | 5% | - Reported diluted EPS includes a non-cash impairment charge of **($0.62)** per share (pre-tax **($81) million**) reflecting the impact on the Spartan business due to soft homeowner demand and slower-than-expected market recovery[3](index=3&type=chunk) - The company continues to drive free cash flow improvement through favorable net working capital in the third quarter[3](index=3&type=chunk) [Outlook & Fiscal Year 2025 Guidance](index=2&type=section&id=2.%20Outlook%20%26%20Fiscal%202025%20Guidance) [Fiscal Year 2025 Guidance](index=2&type=section&id=2.1%20Fiscal%202025%20Guidance) Management anticipates total company net sales and adjusted diluted EPS for FY2025 to be at the lower end of previous guidance: net sales flat to down 3%, and adjusted diluted EPS of approximately $4.15, with the AMP plan currently saving $75 million annually, targeting at least $100 million by 2027 Fiscal Year 2025 Company Guidance | Metric | FY2025 Guidance | | :----- | :----------- | | Net Sales | Flat to down 3% | | Adjusted Diluted EPS | Approx. $4.15 | - This guidance is based on current visibility, including anticipated tariff impacts, and is at the lower end of the previously provided range[5](index=5&type=chunk) - The AMP plan currently saves **$75 million** annually, targeting at least **$100 million** by 2027, contributing to earnings growth without revenue expansion[4](index=4&type=chunk) [Factors Influencing Outlook](index=2&type=section&id=2.2%20Factors%20Influencing%20Outlook) The FY2025 guidance reflects macroeconomic factors leading to increased homeowner and channel caution and lower volumes; continued strong demand and stable supply in underground construction, golf, and grounds businesses; and weather patterns consistent with historical averages for the remainder of the year - Macroeconomic factors are leading to decreased sales volumes and increased caution among homeowners and channels[6](index=6&type=chunk) - Continued strong demand and stable supply are observed in the underground construction, golf, and grounds businesses[6](index=6&type=chunk) - Weather patterns for the remainder of the year are expected to be consistent with historical averages[6](index=6&type=chunk) [Third-Quarter Fiscal Year 2025 Operating Results](index=2&type=section&id=3.%20Third-Quarter%20Fiscal%202025%20Operating%20Results) Q3 Fiscal Year 2025 Consolidated Operating Metrics | Metric | Q3 FY2025 | Q3 FY2024 | Change (bps) | | :----- | :--------------- | :--------------- | :----------- | | Gross Margin | 33.7% | 34.8% | (110) | | Adjusted Gross Margin | 34.4% | 35.4% | (100) | | SG&A as a % of Net Sales | 20.8% | 22.0% | (120) | | Operating Earnings as a % of Net Sales | 5.7% | 12.8% | (710) | | Adjusted Operating Earnings as a % of Net Sales | 13.6% | 13.7% | (10) | [Consolidated Operating Performance](index=2&type=section&id=3.1%20Consolidated%20Operating%20Performance) Q3 FY2025 gross margin and adjusted gross margin decreased year-over-year, primarily impacted by lower net sales, higher material and manufacturing costs, and inventory valuation adjustments, partially offset by productivity improvements and net price realization, while SG&A as a percentage of net sales improved, and operating earnings and adjusted operating earnings margins varied [Gross Margin and Operating Earnings](index=3&type=section&id=3.1.1%20Gross%20Margin%20and%20Operating%20Earnings) Q3 FY2025 gross margin decreased by 110 basis points to 33.7% (adjusted 34.4%), primarily due to lower sales volumes, increased material and manufacturing costs, and inventory valuation adjustments, partially offset by productivity improvements and net price realization, while SG&A as a percentage of net sales improved from 22.0% to 20.8% year-over-year, mainly driven by cost savings and reduced marketing expenses Gross Margin and SG&A Changes | Metric | Q3 FY2025 | Q3 FY2024 | Change (bps) | | :----- | :--------------- | :--------------- | :----------- | | Gross Margin | 33.7% | 34.8% | (110) | | Adjusted Gross Margin | 34.4% | 35.4% | (100) | | SG&A as a % of Net Sales | 20.8% | 22.0% | (120) | - Gross margin decline was primarily due to lower net sales, higher material and manufacturing costs, and inventory valuation adjustments, partially offset by productivity improvements, net price realization, and product mix optimization[9](index=9&type=chunk) - SG&A improvement was mainly driven by cost savings initiatives and reduced marketing expenses, partially offset by lower net sales[10](index=10&type=chunk) [Interest Expense and Effective Tax Rate](index=3&type=section&id=3.1.2%20Interest%20Expense%20and%20Effective%20Tax%20Rate) Q3 interest expense slightly increased to $15.1 million, primarily due to higher average outstanding borrowings despite a lower average interest rate, while the reported effective tax rate significantly decreased to 7.4%, mainly influenced by the non-cash impairment charge and a more favorable geographic earnings mix, with the adjusted effective tax rate at 17.3% Interest Expense and Effective Tax Rate Changes | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :----- | :--------------- | :--------------- | :----- | | Interest Expense | $15.1 million | $14.5 million | +$0.6 million | | Reported Effective Tax Rate | 7.4% | 17.3% | (990) bps | | Adjusted Effective Tax Rate | 17.3% | 18.0% | (70) bps | - The decrease in reported effective tax rate was primarily due to the impact of the non-cash impairment charge and a more favorable geographic earnings mix[12](index=12&type=chunk) [Segment Performance](index=3&type=section&id=3.2%20Segment%20Performance) The Professional Segment achieved strong growth in both net sales and earnings, primarily driven by increased shipments of underground construction and golf and grounds products, while the Residential Segment experienced significant declines in both net sales and earnings due to soft homeowner demand [Professional Segment](index=3&type=section&id=3.2.1%20Professional%20Segment) Professional Segment net sales grew 5.7% to $930.8 million, primarily driven by increased shipments of underground construction and golf and grounds products and net price realization, with segment earnings increasing to $198.5 million, representing 21.3% of net sales, up from 18.8% last year, benefiting from productivity improvements, net price realization, sales leverage, and cost savings Professional Segment Performance | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | | :----- | :--------------- | :--------------- | :------- | | Net Sales | $930.8 million | $880.9 million | 5.7% | | Segment Earnings | $198.5 million | $165.7 million | 19.8% | | Earnings as a % of Net Sales | 21.3% | 18.8% | +250 bps | - Net sales growth was primarily driven by increased shipments of underground construction and golf and grounds products and net price realization, partially offset by last year's divested businesses[14](index=14&type=chunk) - Profitability improvement was mainly due to productivity enhancements, net price realization, net sales leverage, cost savings initiatives, and reduced marketing expenses, partially offset by higher material and manufacturing costs[14](index=14&type=chunk) [Residential Segment](index=3&type=section&id=3.2.2%20Residential%20Segment) Residential Segment net sales decreased by 27.9% to $192.8 million, primarily due to lower homeowner demand leading to reduced shipments across the segment, with segment earnings significantly declining to $3.7 million, representing 1.9% of net sales, down from 12.2% last year, mainly impacted by lower sales volumes, higher material and manufacturing costs, inventory valuation adjustments, and increased sales promotions and incentives Residential Segment Performance | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | | :----- | :--------------- | :--------------- | :------- | | Net Sales | $192.8 million | $267.5 million | (27.9)% | | Segment Earnings | $3.7 million | $32.6 million | (88.7)% | | Earnings as a % of Net Sales | 1.9% | 12.2% | (1030) bps | - Net sales decline was primarily due to decreased homeowner demand leading to reduced shipments across the segment[14](index=14&type=chunk) - Profitability decline was mainly driven by lower net sales, higher material and manufacturing costs, inventory valuation adjustments, and increased sales promotions and incentives, partially offset by productivity improvements and cost savings initiatives[14](index=14&type=chunk) [Financial Statements](index=6&type=section&id=4.%20Financial%20Statements) [Condensed Consolidated Statements of Earnings](index=6&type=section&id=4.1%20Condensed%20Consolidated%20Statements%20of%20Earnings) The condensed consolidated statements of earnings show a significant decrease in net earnings for both the three and nine-month periods ended August 1, 2025, primarily due to reduced net sales and the impact of non-cash impairment charges, with diluted EPS also declining substantially Condensed Consolidated Statements of Earnings Summary | Metric | Three Months Ended August 1, 2025 | Three Months Ended August 2, 2024 | Nine Months Ended August 1, 2025 | Nine Months Ended August 2, 2024 | | :----- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | Net Sales | $1,131.3 million | $1,156.9 million | $3,444.2 million | $3,507.8 million | | Gross Profit | $381.8 million | $402.8 million | $1,154.1 million | $1,200.3 million | | Operating Earnings | $64.8 million | $148.1 million | $317.4 million | $424.3 million | | Net Earnings | $53.5 million | $119.3 million | $243.1 million | $329.0 million | | Diluted EPS | $0.54 | $1.14 | $2.42 | $3.14 | - A non-cash impairment charge of **$81.1 million** was recorded for both the three and nine-month periods ended August 1, 2025[25](index=25&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=4.2%20Condensed%20Consolidated%20Balance%20Sheets) As of August 1, 2025, total company assets were $3.5198 billion, a decrease from $3.7314 billion on August 2, 2024, with key changes including reductions in accounts receivable, inventory, and other intangible assets, while goodwill remained stable, and total shareholders' equity also decreased Condensed Consolidated Balance Sheets Summary | Asset/Liability | August 1, 2025 | August 2, 2024 | October 31, 2024 | | :-------------- | :---------- | :---------- | :----------- | | Total Assets | $3,519.8 million | $3,731.4 million | $3,582.8 million | | Cash and Cash Equivalents | $201.0 million | $221.1 million | $199.5 million | | Inventories, Net | $1,036.2 million | $1,082.0 million | $1,038.9 million | | Other Intangible Assets, Net | $398.6 million | $512.4 million | $498.7 million | | Total Current Liabilities | $955.9 million | $984.4 million | $976.0 million | | Long-Term Debt, Less Current Portion | $1,012.2 million | $966.6 million | $911.8 million | | Total Shareholders' Equity | $1,411.1 million | $1,636.4 million | $1,551.9 million | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=4.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine-month period ended August 1, 2025, net cash provided by operating activities increased to $348.9 million from $329.8 million in the prior year, while net cash used in investing and financing activities both increased, primarily due to higher common stock repurchases and debt repayments Condensed Consolidated Statements of Cash Flows Summary | Cash Flow Activity | Nine Months Ended August 1, 2025 | Nine Months Ended August 2, 2024 | | :----------------- | :--------------------- | :--------------------- | | Net Cash Provided by Operating Activities | $348.9 million | $329.8 million | | Net Cash Used in Investing Activities | ($50.7) million | ($43.4) million | | Net Cash Used in Financing Activities | ($298.1) million | ($260.5) million | | Net Increase in Cash and Cash Equivalents | $1.5 million | $28.0 million | | Cash and Cash Equivalents at End of Period | $201.0 million | $221.1 million | - Common stock repurchases significantly increased to **$290 million** during the current nine-month period, compared to **$109.2 million** in the prior year period[31](index=31&type=chunk) [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=5.%20Non-GAAP%20Financial%20Measures%20Reconciliation) [Reconciliation of Non-GAAP Performance Measures](index=9&type=section&id=5.1%20Reconciliation%20of%20Non-GAAP%20Performance%20Measures) The company provides reconciliation tables for various non-GAAP performance measures, including adjusted gross profit, operating earnings, net earnings, and diluted EPS, calculated by adjusting for productivity initiatives and non-cash impairment charges, demonstrating that adjusted performance is higher than reported GAAP figures Non-GAAP Performance Measures Reconciliation Summary (Three Months Ended August 1, 2025) | Metric | GAAP Reported | Adjustments (Productivity + Impairment) | Adjusted Non-GAAP | | :-------------------------------------- | :------- | :--------------------------------------- | :----------- | | Gross Profit | $381.8 million | $7.2 million (Productivity) | $389.0 million | | Operating Earnings | $64.8 million | $8.1 million (Productivity) + $81.1 million (Impairment) | $154.0 million | | Net Earnings | $53.5 million | $7.7 million (Productivity, after-tax) + $61.4 million (Impairment, after-tax) - $0.1 million (Share-based compensation tax impact) | $122.5 million | | Diluted EPS | $0.54 | $0.08 (Productivity, after-tax) + $0.62 (Impairment, after-tax) + $0.00 (Share-based compensation tax impact) | $1.24 | - A non-cash impairment charge of **$81.1 million** (pre-tax) had a significant impact on reported GAAP earnings[33](index=33&type=chunk) [Reconciliation of Non-GAAP Liquidity Measures](index=10&type=section&id=5.2%20Reconciliation%20of%20Non-GAAP%20Liquidity%20Measures) For the nine-month period ended August 1, 2025, free cash flow increased to $291.9 million from $270.5 million in the prior year, with the free cash flow conversion rate improving from 82.2% to 90.0%, indicating enhanced ability to convert adjusted net earnings into cash Non-GAAP Liquidity Measures Reconciliation Summary (Nine Months Ended) | Metric | August 1, 2025 | August 2, 2024 | | :------------------------- | :---------- | :---------- | | Net Cash Provided by Operating Activities | $348.9 million | $329.8 million | | Less: Purchases of Property, Plant and Equipment, Net of Insurance Claim Proceeds | $57.0 million | $59.3 million | | Free Cash Flow | $291.9 million | $270.5 million | | Net Earnings, Excluding Non-Cash Impairment Charge | $324.2 million | $329.0 million | | Free Cash Flow Conversion Rate | 90.0% | 82.2% | [Non-GAAP Adjustments Footnotes](index=10&type=section&id=5.3%20Non-GAAP%20Adjustments%20Footnotes) This section details the rationale for non-GAAP adjustments, including the 'Amplify Productivity' (AMP) initiative, non-cash impairment charges related to the Spartan trademark, and the tax impact of share-based compensation - AMP initiative expenses primarily include severance and termination benefits, facility exit costs, AMP dedicated personnel compensation, third-party consulting fees, and product line exit costs, which are considered unusual, non-recurring operating expenses[35](index=35&type=chunk) - At the end of Q3 FY2025, the company recorded a non-cash impairment charge related to the Spartan trademark[35](index=35&type=chunk) - The tax impact of share-based compensation refers to discrete tax benefits recorded as excess tax deductions for share-based compensation, which amounts may be unpredictable[35](index=35&type=chunk) [Corporate Information & Disclosures](index=4&type=section&id=6.%20Corporate%20Information%20%26%20Disclosures) [About The Toro Company](index=4&type=section&id=6.1%20About%20The%20Toro%20Company) The Toro Company is a leading global provider of outdoor environment solutions, with $4.6 billion in net sales for FY2024, operating in over 125 countries through its brands, offering solutions for turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting - The company is a leading global provider of outdoor environment solutions, covering turf and landscape maintenance, snow and ice management, underground utility construction, rental and specialty construction, and irrigation and outdoor lighting solutions[16](index=16&type=chunk) - FY2024 net sales were **$4.6 billion**, operating in over **125** countries through brands like Toro, Ditch Witch, Exmark, and Spartan[16](index=16&type=chunk) [Use of Non-GAAP Financial Information (Methodology)](index=4&type=section&id=6.2%20Use%20of%20Non-GAAP%20Financial%20Information%20(Methodology)) This section explains the company's use of non-GAAP financial measures to supplement GAAP information, providing insights into core operating performance and cash flow, utilized for internal decision-making, liquidity assessment, and facilitating comparisons by excluding non-recurring or unpredictable expenses and gains, with no quantitative reconciliation provided for FY2025 adjusted diluted EPS guidance due to inherent uncertainties and unpredictability of certain excluded items - Non-GAAP financial measures, such as adjusted gross profit, operating earnings, diluted EPS, and free cash flow, supplement GAAP information, providing useful insights into core operating performance and cash flow[17](index=17&type=chunk)[18](index=18&type=chunk) - These measures aid in operational decision-making, liquidity assessment, and internal and competitor performance comparisons by excluding non-cash, significant, and/or unpredictable expenses and gains unrelated to regular, ongoing business[18](index=18&type=chunk) - The company does not provide a quantitative reconciliation for its FY2025 adjusted diluted EPS guidance, citing the unreasonable efforts exception under Regulation S-K Item 10(e)(1)(i)(B), as certain excluded items are inherently uncertain and difficult to predict[20](index=20&type=chunk)[21](index=21&type=chunk) [Forward-Looking Statements](index=5&type=section&id=6.3%20Forward-Looking%20Statements) This press release contains forward-looking statements based on management's current assumptions and expectations of future events, subject to risks and uncertainties that could cause actual events and results to differ materially from projections, and the company undertakes no obligation to revise or update any forward-looking statements - Forward-looking statements are based on management's current assumptions and expectations but involve risks and uncertainties that could cause actual events and results to differ materially from projections[22](index=22&type=chunk) - Specific risks and uncertainties include adverse global economic conditions (including inflationary pressures and high interest rates), weather impacts, customer spending levels, commodity cost fluctuations, manufacturing or operational disruptions, acquisition and disposition risks (including potential future impairment charges for the Spartan trademark), the impact of the AMP initiative, geopolitical factors, and changes in government policies and regulations[22](index=22&type=chunk) [Live Conference Call Details](index=4&type=section&id=6.4%20Live%20Conference%20Call%20Details) The Toro Company will host an earnings conference call and webcast on September 4, 2025, at 10:00 AM CT, with webcast participants required to complete a brief registration form - The earnings conference call and webcast are scheduled for September 4, 2025, at **10:00 AM CT**[15](index=15&type=chunk) - The webcast will be available at www.thetorocompany.com/invest, requiring participants to complete a registration[15](index=15&type=chunk)

Financial Performance & Goals - In fiscal year 2021, The Toro Company (TTC) achieved net sales of $3.96 billion[19] - The company aims to exceed $5 billion in net sales by the end of fiscal year 2024 through organic growth[60] - The company also aims to exceed $750 million in annual adjusted operating earnings by the end of fiscal year 2024[60] - For the second quarter of fiscal year 2022, net sales reached $1.25 billion, an increase of 8.7% compared to the same period in fiscal year 2021[71] - For the first six months of fiscal year 2022, net sales were $2.182 billion, a 7.9% increase year-over-year[72] - The company anticipates net sales growth of 14% to 16% for fiscal year 2022[76] Segment Breakdown (Fiscal Year 2021) - Professional segment accounted for 74% of net sales, totaling $2.93 billion, with segment earnings at 17.3%[20] - Residential segment accounted for 26% of net sales, totaling $1.01 billion, with segment earnings at 12.0%[20] - In terms of geographic market, 79% of sales were from the United States, and 21% were international[20] Capital Allocation & Returns - The company targets a gross debt-to-EBITDA ratio of 1-2x[80] - The company's return on average invested capital for fiscal year 2021 was 20.8%[86] - The company's return on average equity for fiscal year 2021 was 32.7%[86]

Company Overview - Toro (TTC) is headquartered in Bloomington and operates in the Consumer Discretionary sector, experiencing a price change of -7.97% year-to-date [3] - The company currently pays a dividend of $0.76 per share, resulting in a dividend yield of 2.06%, which is slightly below the Tools - Handheld industry's yield of 2.15% and above the S&P 500's yield of 1.54% [3] Dividend Performance - Toro's annualized dividend of $1.52 has increased by 5.6% from the previous year, with a history of five dividend increases over the last five years, averaging an annual increase of 10.22% [4] - The company's current payout ratio is 36%, indicating that it distributes 36% of its trailing 12-month earnings per share as dividends [4] Earnings Outlook - For the fiscal year, Toro is expected to achieve solid earnings growth, with the Zacks Consensus Estimate for 2025 projected at $4.23 per share, reflecting a 1.44% increase from the previous year [5] Investment Considerations - Toro is considered a compelling investment opportunity due to its strong dividend profile and current Zacks Rank of 3 (Hold), appealing to income investors despite the challenges posed by rising interest rates [7]