TORO CO

July 31, 2026

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by United States ("U.S.") generally accepted accounting principles ("GAAP") for complete financial statements. Unless the context indicates otherwise, the terms "company" or "TTC" refer to The Toro Company and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated from the unaudited Condensed Consolidated Financial Statements.

In the opinion of management, the unaudited Condensed Consolidated Financial Statements include all adjustments, consisting primarily of recurring accruals, considered necessary for the fair presentation of the company's consolidated financial position, results of operations, and cash flows for the periods presented. Due to seasonality within the industries in which the company's businesses operate, among other factors, operating results for the nine months ended July 31, 2026 cannot be annualized to determine the expected results for the fiscal year ending October 31, 2026.

The company’s fiscal year ends on October 31 and quarterly results are reported based on three-month periods that generally end on the Friday closest to the calendar quarter end. For comparative purposes, however, the company’s second and third quarters always include exactly 13 weeks of results so that the quarter end date for these two quarters is not necessarily the Friday closest to the calendar month end.

For further information regarding the company's basis of presentation, refer to the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements included in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2025. The policies described in that report are used for preparing the company's quarterly reports on Form 10-Q.

Accounting Policies and Estimates

In preparing the Condensed Consolidated Financial Statements in conformity with U.S. GAAP, management must make decisions that impact the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures, including disclosures of contingent assets and liabilities. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Estimates are used in determining, among other items, sales promotion and incentive accruals, incentive compensation accruals, income tax accruals, inventory valuation, warranty accruals, allowances for current expected credit losses, pension accruals, self-insurance accruals, legal accruals, right-of-use assets and lease liabilities, useful lives for tangible and finite-lived intangible assets, future cash flows associated with impairment testing for goodwill, indefinite-lived intangible assets and other long-lived assets, and valuations of the assets acquired and liabilities assumed in a business combination or an asset acquisition, when applicable. These estimates and assumptions are based on management’s best estimates and judgments at the time they are made and are generally derived from management's understanding and analysis of the relevant and current circumstances, historical experience, and actuarial and other independent external third-party specialist valuations, when applicable. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances, including the economic environment. Management adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with certainty, actual amounts could differ significantly from those estimated at the time the Condensed Consolidated Financial Statements are prepared.

Par Value Common Stock

On March 17, 2026, the company filed a Certificate of Amendment of the Restated Certificate of Incorporation, which decreased the par value of all the company's capital stock, including the company's common stock and authorized "blank check" preferred stock from $1.00 to $0.01 per share (the "Par Value Amendment"), which was approved by the company's stockholders on March 17, 2026. The Par Value Amendment had no impact on the value of the company’s capital stock, including the company's common stock. In addition, the Par Value Amendment had no effect on the dollar amount of the company’s total stockholders’ equity. The Par Value Amendment did not change the number of authorized shares of common stock or the company's preferred stock nor did it have any impact on the company's outstanding common stock or any options or rights to purchase the company's common stock. The Par Value Amendment had no effect on the rights of the holders of the company's common stock or the company's authorized preferred stock, none of which are currently outstanding, except for reducing the minimum amount per share the company must receive upon the issuance of any shares of the company's capital stock from $1.00 to $0.01 per share.

New Accounting Pronouncements

In September 2025, the Financial Accounting Standards Board ("FASB") issued accounting standard update ("ASU") No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which is intended to modernize the accounting for software costs that are accounted for under Subtopic 350-40 by replacing the stage-based model with a principles-based approach. The amended guidance will become effective for the company's fiscal 2029 annual period and interim periods beginning with the first quarter of fiscal 2029. Early adoption is permitted. The company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which is intended to improve guidance on the measurement of credit losses on accounts receivable and contract assets. The amended guidance is optional and, if the company elects the practical expedient, will become effective for the company's fiscal 2027 annual period and interim periods beginning with the first quarter of fiscal 2027. Early adoption is permitted. The company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve disclosures about a public business entity’s expenses by requiring disaggregated quantitative disclosure, in the notes to the financial statements, of prescribed expense categories included within relevant income statement expense captions. The amended guidance will become effective for the company's fiscal 2028 annual period, and interim periods beginning with the first quarter of fiscal 2029. The company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to income tax disclosures, which is designed to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amended guidance will become effective for the company's fiscal 2026 annual period. The company is currently evaluating the impact of this new standard on its Condensed Consolidated Financial Statements and related disclosures.

The company believes that all other recently issued accounting pronouncements from the FASB that the company has not noted above will not have a material impact on its Condensed Consolidated Financial Statements or do not apply to its operations.

Tornado Infrastructure Equipment Ltd. ("Tornado Infrastructure Equipment")

On December 8, 2025 ("closing date"), pursuant to an Arrangement Agreement ("Purchase Agreement") dated October 6, 2025, the company completed its acquisition of Tornado Infrastructure Equipment, a publicly held Canadian company and a manufacturer in the hydrovac excavation solutions industry. Tornado Infrastructure Equipment manufactures hydrovac excavation solutions and industrial equipment solutions for the underground construction, power transmission and energy markets and provides innovative product offerings that broaden and strengthen the company's Professional segment and expand its dealer network.

The Tornado Infrastructure Equipment acquisition was structured as an equity purchase, pursuant to which the company acquired 100 percent of the equity interests of the legal entities that comprised Tornado Infrastructure Equipment, with the legal entities continuing as surviving entities and wholly-owned subsidiaries of the company. As part of the acquisition, the company also acquired the real property used by Tornado Infrastructure Equipment. The cash consideration, net of cash acquired, was $210.3 million ("purchase price"). The company funded the purchase price with borrowings under its existing revolving credit facility. As a result of the acquisition, the company incurred immaterial acquisition-related transaction costs during the three and nine month periods ended July 31, 2026. Acquisition-related transaction costs are recorded within selling, general and administrative expense within the Condensed Consolidated Statements of Earnings.

Preliminary Fair Value Measurements

The company accounted for the acquisition in accordance with the accounting standards codification guidance which requires identifiable assets acquired and liabilities assumed to be measured at their estimated fair values as of the closing date. As of July 31, 2026, the company has substantially completed its process for measuring the fair values of the assets acquired and liabilities assumed based on information available as of the closing date, with the primary exception of the valuation of income taxes. The company expects to finalize its valuation and complete the fair value measurements as soon as practicable but no later than one year from the closing date of the acquisition, as required.

The following table summarizes the preliminary initial and updated estimated fair values assigned to the assets acquired and liabilities assumed, and the adjustments made from the initial preliminary fair values. These preliminary fair values are based on internal company and independent external third-party valuations and are subject to change as certain asset and liability valuations are finalized. The following allocation reflects management's assessment as of July 31, 2026:

The goodwill recognized is primarily attributable to the value of the workforce, the reputation of Tornado Infrastructure Equipment, expected future cash flows, and expected synergies, including customer and dealer growth opportunities, integrating and expanding existing product lines, and cost reduction initiatives. Key areas of expected cost reduction synergies include increased purchasing power for commodities, components, parts, and supply chain consolidation. The goodwill resulting from the acquisition of Tornado Infrastructure Equipment was recognized within the company's Professional segment and is the primary driver for the increase in the company's Professional segment goodwill to $566.5 million as of July 31, 2026 from $440.9 million as of October 31, 2025. Goodwill is non-deductible for tax purposes. Fair value measurements did not materially impact the company's Condensed Consolidated Statements of Earnings for the three and nine month periods ended July 31, 2026.

Other Intangible Assets Acquired

The preliminary fair value measurement of the net assets acquired resulted in the recognition of $77.7 million of other intangible assets as of the closing date. The fair values of the acquired developed technology, customer-related, and backlog intangible assets were determined using the income approach whereby an intangible asset's fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. The useful lives of the other intangible assets were determined based on the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors that may limit the useful life of the respective intangible asset. As of the closing date, the acquired finite-lived intangible assets had a weighted average useful life of 11.7 years. The fair values of the customer-related and backlog intangible assets were determined using the excess earnings method and were based on the expected operating cash flows attributable to the respective intangible asset, which were determined by deducting expected economic costs, including operating expenses and contributory asset charges, from the revenue expected to be generated from the respective intangible asset. As of the closing date of the acquisition, the weighted-average useful life of the customer-related and backlog intangible assets were determined to be 13.7 years and 6 months, respectively. The fair values of the finite-lived developed technology and indefinite-lived trade names were determined using the relief from royalty method, which is based on the hypothetical royalty stream that would be received if the company were to license the respective developed technology or trade name and were based on expected future revenues from the respective developed technology or trade name. As of the closing date of the acquisition, the weighted-average useful life of the developed technology was determined to be 5.0 years.

Amortization expense for the finite-lived intangible assets resulting from the acquisition of Tornado Infrastructure Equipment for the three and nine month periods ended July 31, 2026 was $(1.1) million and $5.2 million, which reflects adjustments to the preliminary fair value measurement during the measurement period.