TORO CO

Executive Summary

Our fiscal 2025 results included the following items of significance that are provided in summary format here and described in greater detail throughout the "Results of Operations," "Business Segments," and "Financial Position" sections:

•Consolidated net sales for fiscal 2025 were $4,510.4 million, a decrease of 1.6 percent compared to $4,583.8 million in fiscal 2024.

•Professional segment net sales for fiscal 2025 were $3,624.0 million, an increase of 1.9 percent compared to $3,556.9 million in fiscal 2024.

•Residential segment net sales for fiscal 2025 were $858.4 million, a decrease of 14.0 percent compared to $998.3 million in fiscal 2024.

•Gross margin was 33.4 percent in fiscal 2025, a decrease of 40 basis points compared to 33.8 percent in fiscal 2024.

•Adjusted gross margin was 34.1 percent in fiscal 2025, an increase of 20 basis points compared to 33.9 percent in fiscal 2024.

•SG&A expense as a percentage of net sales in fiscal 2025 was 22.5 percent, an increase of 30 basis points compared to 22.2 percent in fiscal 2024.

•Net earnings for fiscal 2025 were $316.1 million, or $3.17 per diluted share, compared to $418.9 million, or $4.01 per diluted share, in fiscal 2024.

•Adjusted net earnings for fiscal 2025 were $419.6 million, or $4.20 per diluted share, compared to $435.2 million, or $4.17 per diluted share, in fiscal 2024.

•Field inventory was lower as of the end of fiscal 2025 compared to the end of fiscal 2024, primarily due to decreased balances of golf and grounds and turf products, partially offset by higher balances of underground construction products.

•Our order backlog represents unfulfilled customer orders at a point in time. Our order backlog (including shipments beyond 12 months) decreased $0.4 billion to $0.8 billion as of October 31, 2025 from $1.2 billion as of October 31, 2024, primarily driven by improved manufacturing output and more normalized order patterns. Although we continue to see sustained demand for underground construction and golf and grounds products, we expect backlog to normalize by mid-fiscal 2026 given our improved manufacturing output and lower lead times.

We continued our history of paying quarterly cash dividends throughout fiscal 2025 and increased our fiscal 2025 quarterly cash dividend by 5.6 percent to $0.38 per share compared to $0.36 per share paid in fiscal 2024. We also repurchased shares of our common stock under our Board authorized stock repurchase program ("stock repurchase program"), thereby reducing our total shares of common stock outstanding. As a result of the combination of quarterly cash dividends and common stock repurchases, we returned $441.1 million of cash to our shareholders during fiscal 2025. As of October 31, 2025, we had a strong liquidity profile with available liquidity of $1,238.9 million, consisting of cash and cash equivalents of $341.0 million and availability under our revolving credit facility of $897.9 million.

Tariffs

The tariff environment is complex and evolving. Our business has incurred, and expects to continue to incur, additional costs as it relates to tariffs. We have taken and will continue to take action to mitigate inflationary pressures caused by tariffs through a combination of targeted price increases, strategic sourcing adjustments, manufacturing and product portfolio optimization, as well as our ongoing efforts to drive sustainable efficiency gains in our operations and administrative structures.

AMP Initiative

In the first quarter of fiscal 2024, we launched a significant productivity initiative named AMP, which is a multi-year initiative now on track to achieve at least $125 million of run-rate savings by fiscal 2027, up from the initial program estimate of at least $100 million. The program is driven by sustainable supply-base, design-to-value, route-to-market, and operational efficiency transformation. We expect to reinvest a portion of the savings from this initiative to drive further innovation and growth. As of the fourth quarter of fiscal 2025, the AMP initiative has delivered cumulative cost savings of $78.5 million and anticipated annualized cost savings of $86.2 million. Refer to the section titled "Non-GAAP Financial Measures" for information about the productivity initiative charges incurred to generate these savings.

Impairment of Spartan Trade Name

During the third quarter of fiscal 2025, we recorded an impairment charge of $81.1 million related to the indefinite-lived Spartan trade name intangible asset reported under the Professional segment. Subsequent to this impairment charge, the indefinite-lived Spartan trade name intangible asset is fully impaired, resulting in a carrying value of zero. This impairment charge is included in the Non-cash impairment charge caption on the Consolidated Statements of Earnings. The impairment charge resulted in a $19.7 million income tax benefit (deferred tax asset) associated with the remaining tax deductible basis of the intangible asset. For additional information regarding the impairment charge, refer to Note 5, Goodwill and Other Intangible Assets, in our Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Tax

On July 4, 2025, new U.S tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBB") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBB makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026 or later. The Company is currently evaluating the impact of the new legislation but does not expect it to have a material impact on the results of operations.