TORO CO

Overview

Consolidated net sales for the third quarter of fiscal 2026 were $1,225.8 million, up 8.4 percent compared to $1,131.3 million in the third quarter of fiscal 2025. For the first nine months of fiscal 2026, consolidated net sales were $3,686.8 million, up 7.0 percent compared to $3,444.2 million from the same period in the prior fiscal year.

Professional segment net sales for the third quarter of fiscal 2026 were $1,012.6 million, up 8.8 percent compared to $930.8 million in the third quarter of fiscal 2025. For the first nine months of fiscal 2026, Professional net sales were $2,943.2 million, an increase of 8.5 percent compared to $2,713.7 million from the same period in the prior fiscal year.

Residential segment net sales for the third quarter of fiscal 2026 were $209.3 million, up 8.6 percent compared to $192.8 million in the third quarter of fiscal 2025. For the first nine months of fiscal 2026, Residential net sales were $725.7 million, an increase of 2.0 percent compared to $711.2 million from the same period in the prior fiscal year.

Net earnings for the third quarter of fiscal 2026 were $77.0 million, or $0.81 per diluted share, compared to $53.5 million, or $0.54 per diluted share, for the third quarter of fiscal 2025. Net earnings for the first nine months of fiscal 2026 were $290.3 million, or $2.99 per diluted share, compared to $243.1 million, or $2.42 per diluted share, from the same period in the prior fiscal year.

Adjusted net earnings for the third quarter of fiscal 2026 were $126.8 million, or $1.33 per diluted share, compared to $122.5 million, or $1.24 per diluted share, for the third quarter of fiscal 2025. Adjusted net earnings for the first nine months of fiscal 2026 were $354.8 million, or $3.66 per diluted share, compared to $330.2 million, or $3.29 per diluted share, from the same period in the prior fiscal year.

We maintained our tradition of paying quarterly cash dividends and increased our cash dividend for the third quarter of fiscal 2026 by 2.6 percent to $0.39 per share compared to $0.38 per share paid in the third quarter of fiscal 2025. 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 $470.9 million of cash to our stockholders during the first nine months of fiscal 2026.

Field inventory was higher as of the end of the third quarter of fiscal 2026 compared to the end of the third quarter of fiscal 2025 primarily due to replenished balances of underground construction products that have reached healthy levels.

Our order backlog represents unfulfilled customer orders at a point in time. Our order backlog as of the end of the third quarter of fiscal 2026 was similar to the end of the third quarter of fiscal 2025 as backlog has largely normalized.

Net Sales

Consolidated net sales for the third quarter of fiscal 2026 were $1,225.8 million, up 8.4 percent compared to $1,131.3 million in the third quarter of fiscal 2025. The increase was primary driven by higher Professional and Residential segment volume, net price realization, and the Tornado acquisition. For the year-to-date period of 2026, consolidated net sales were $3,686.8 million, up 7.0 percent compared to $3,444.2 million from the same period in the prior fiscal year. The increase was primarily driven by net price realization, the Tornado acquisition, and higher Professional segment volume.

Net sales in international markets increased by $32.7 million and $32.0 million for the third quarter and year-to-date periods of fiscal 2026, respectively. The increase for the third quarter comparison was primarily due to higher Professional segment volume and the Tornado acquisition.

Changes in foreign currency exchange rates resulted in an increase in our net sales of approximately $1.0 million and $13.0 million for the third quarter and year-to-date periods of fiscal 2026, respectively.

The following table summarizes our results of operations as a percentage of consolidated net sales:

Gross Profit and Gross Margin

Gross profit for the third quarter of fiscal 2026 was $418.1 million, up 9.5 percent compared to $381.8 million for the third quarter of fiscal 2025. Gross margin was 34.1 percent for the third quarter of fiscal 2026 compared to 33.7 percent for the third quarter of fiscal 2025, an increase of 40 basis points. The increase in gross margin for the third quarter comparison was primarily due to net price realization, productivity improvements, and net sales leverage, partially offset by higher material and manufacturing costs. Gross profit for the year-to-date period of fiscal 2026 was $1,237.3 million, up 7.2 percent compared to $1,154.1 million for the same period of fiscal 2025. Gross margin was 33.6 percent for the year-to-date period of fiscal 2026 compared to 33.5 percent from the same period in the prior fiscal year, an increase of 10 basis points. The increase in gross margin for the year-to-date comparison was primarily due to net price realization and productivity initiatives, partially offset by higher material and manufacturing costs and product mix.

Selling, General, and Administrative ("SG&A") Expense

SG&A expense increased $23.9 million, or 10.1 percent, for the third quarter of fiscal 2026 and increased $41.3 million, or 5.5 percent, for the year-to-date period of fiscal 2026 compared to the same respective periods of fiscal 2025. As a percentage of net sales, SG&A expense increased 40 basis points for the third quarter of fiscal 2026 and decreased 30 basis points for the year-to-date period of fiscal 2026 compared to the same respective periods of fiscal 2025. The increase in SG&A expense as a percentage of net sales for the third quarter was primarily due to higher incentive expenses. The decrease in the year-to-date comparison was primarily due to net sales leverage, partially offset by higher incentive expenses.

Non-Cash Impairment Charges

We recorded non-cash impairment charges of $43.1 million within our Other activities related to the planned closure of our Monterrey manufacturing facility and the write-down of assets associated with the exit of a residential mower platform product line in the third quarter and year-to-date period of fiscal 2026. In the third quarter and year-to-date period of fiscal 2025, we recorded a non-cash impairment charge of $81.1 million within our Other activities related to the Spartan trade name.

Interest Expense

Interest expense decreased $1.3 million and $3.1 million for the third quarter and year-to-date periods of fiscal 2026, respectively, compared to the same respective periods of fiscal 2025. The decreases in interest expense for the third quarter and year-to-date comparisons were primarily due to lower average interest rates and lower average outstanding borrowings.

Other Income, Net

Other income, net decreased $2.6 million and increased $1.6 million for the third quarter and year-to-date periods of fiscal 2026, respectively, compared to the same respective periods of fiscal 2025. The decrease in other income, net for the third quarter comparison was primarily due to lower income from our Red Iron joint venture, a less favorable net impact from foreign currency, and derivative instruments. The increase in the year-to-date comparison was primarily due to net gains on sale of assets, partially offset by lower income from our Red Iron joint venture.

Income Tax Provision

The effective tax rate for the third quarter and year-to date periods of fiscal 2026 was 28.0 percent and 23.0 percent, respectively, compared to 7.4 percent and 16.9 percent, respectively, in the third quarter of fiscal 2025, primarily due to the impact of non-recurring adjustments and a less favorable geographic mix of earnings. The adjusted effective tax rate for the third quarter and year to date periods of fiscal 2026 was 22.4 percent and 21.9 percent, respectively, compared to an adjusted effective tax rate of 17.3 percent and 18.5 percent, respectively, in the third quarter of fiscal 2025, primarily driven by a less favorable geographic mix of earnings.

Net Earnings

Net earnings for the third quarter of fiscal 2026 were $77.0 million, or $0.81 per diluted share, compared to $53.5 million, or $0.54 per diluted share, for the third quarter of fiscal 2025. Adjusted net earnings for the third quarter of fiscal 2026 were $126.8 million, or $1.33 per diluted share, compared to $122.5 million, or $1.24 per diluted share, for the third quarter of fiscal 2025, an increase of 7.3 percent per diluted share. The increase in net earnings per diluted share for the third quarter comparison was primarily due to the non-cash impairment charge in the prior year and higher Professional and Residential segment profit in the current year, partially offset by higher productivity initiative charges and higher tax expenses in the current quarter.

Net earnings for the first nine months of fiscal 2026 were $290.3 million, or $2.99 per diluted share, compared to $243.1 million, or $2.42 per diluted share, for the same period of fiscal 2025. Adjusted net earnings for the first nine months of fiscal 2026 were $354.8 million, or $3.66 per diluted share, compared to $330.2 million, or $3.29 per diluted share, for the same year-to-date period of fiscal 2025, an increase of 11.2 percent per diluted share. The increase in net earnings per diluted share for the year-to-date comparison was primarily due to the prior year non-cash impairment charge, and higher Professional and Residential segment profit, partially offset by higher productivity initiative charges and higher tax expense.