A Tradition of Innovation. Shaping the Future
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THE TORO COMPANY 2017 Annual Report The Toro Company 8111 Lyndale Avenue South Bloomington, MN 55420-1196 952-888-8801 www.thetorocompany.com A TRADITION OF INNOVATION. SHAPING THE FUTURE. Annual Report 2017_guts.indd 1-3 1/15/18 10:17 AM On the cover: St Andrews Links in Scotland, The Home of Golf, trusts in Toro as the official provider of turf equipment and irrigation solutions to deliver best-in-class course conditions. For utility and underground contractors, Toro’s new DD2226 directional drill delivers added power for tough drilling conditions and features the innovative Most commonly used on golf course greens SmartTouch™ control mode that streamlines pipe and tees, Toro’s Multi Pro® 1750 now handling with the touch of a single button to reduce cycle features the innovative GeoLink® system. times and increase overall productivity. t With GPS technology and individual nozzle control, customers can achieve more precise and consistent coverage to eliminate overspray and significantly reduce overall application costs. u Loaded with innovative features, Toro’s PoweReverse® SmartStow® Personal Pace® mower The durable and ultra-efficient line of BOSS® HTX V-plow and straight- allows you to mow challenging yards with less effort blade snowplows are built to handle the toughest of jobs with the best in both forward and reverse operation, while also combination of strength and weight. Featuring SL3 LED headlights with storing the machine upright with no gas or oil leaks. Ice Shield Technology to prevent snow and ice buildup on the lens, the Coupled with the MyToro® app and new Bluetooth- BOSS HTX snowplow brings all of the power and innovation enabled PUC® technology, users can track hours of contractors and homeowners expect. t operation, maintenance schedules and more – all from a smartphone. u The most productive commercial zero-turn mower Exmark has ever produced, the all-new Exmark® Lazer Z® Diesel features a 96-inch UltraCut™ Flex Wing cutting deck that can mow in excess of 10 acres per hour. This innovative machine also raises the bar for operator comfort, fuel efficiency, and Designed for landscape professionals, the Harrier® 41 Pro marks cut quality with two 24-inch wing decks that flex up and the newest addition to the Hayter® rear-roller mower line that has down to follow uneven terrain. u been popular in the U.K. market for more than 30 years. Featuring an all-new design that improves performance and grass collection, the Harrier 41 Pro provides a high-quality, striped turf finish in small to medium grassed areas. t Through the acquisition of Perrot-branded products, the new Toro® TS120 Series impact sprinklers can achieve a Taking irrigation efficiency to the next level, Toro’s throwing distance of up to 125 feet for irrigating both comprehensive Lynx® Central Control System natural and synthetic turf on golf courses, sports fields and combines access to real-time information, precision race tracks. Serviceable from the top of the sprinkler control options, and convenience through mobile without the need for digging, they also allow for an optional connectivity to better manage turf health and water TurfCup™ to seamlessly blend with the field. t resources. Expanded capabilities through the new Lynx Smart Hub, Lynx Smart Satellite and Lynx Dash provide even greater functionality and control. u Annual Report 2017_guts.indd 4-6 1/15/18 10:18 AM Richard M. Olson, Chairman and Chief Executive Officer To our valued shareholders, End markets Fiscal 2017 was another strong year for The Toro Our winning formula of delivering superior innovation Company with record net sales, operating earnings, and superior customer care helped drive solid results net earnings and earnings per share. Driven by solid across the Company. Much of our success during fiscal performance across our golf and grounds, landscape 2017 was fueled by balanced growth across many of our contractor, rental and specialty construction businesses, Professional businesses, where we saw continued we delivered record sales for the year of $2.505 billion demand for our new and innovative product offerings. and achieved net earnings of $267.7 million, or $2.41 Within the markets of golf, sports fields and grounds, per share. We also expanded operating earnings to demand for our Reelmaster® 5010-H hybrid fairway $355.1 million. mower, our Greensmaster® TriFlex ® greens mowers and With 2017 marking the end of our three-year Destination our Groundsmaster® Series mowers, along with our PRIME employee initiative, I am proud of our team’s versatile Workman® GTX light-duty utility vehicle, drove accomplishments in the areas of sales, profitability and strong retail gains for the year and helped us continue to working capital. We achieved operating earnings of 14.2 build market share in key categories. percent, surpassing our goal of more than 13 percent, Helping customers realize their objectives by delivering and regained momentum in both sales growth and superior results through innovation and service, we were working capital improvement. excited to reach new long-term agreements with some of Focused on creating and returning value to our golf’s most renowned venues. This included historic shareholders, we delivered nearly $236 million to courses, such as St Andrews Links in Scotland and shareholders for the year through the repurchase of Torrey Pines Golf Course in San Diego, as they look to $159.35 million of our common stock and the payment further build on their rich heritage and manage their of $75.8 million in dividends. Additionally, our Board of courses in a sustainable manner. We were also honored Directors increased the quarterly cash dividend in to help support newer venues, such as Erin Hills in December 2017 to $0.20 per share. We will continue Wisconsin as they hosted the 2017 U.S. Open our disciplined approach to pursuing opportunities Championship, and to be named the official turf that focus on returning value to our shareholders, equipment and irrigation partner of our hometown and driving profitable growth both organically and professional soccer team, the Minnesota United. through acquisitions. Annual Report 2017_guts.indd 1 1/11/18 9:17 AM Our leadership in the water management arena was experienced significant contributions from the Perrot- recognized by the Environmental Protection Agency’s branded line of long-distance and impact sprinklers WaterSense® program for the third consecutive year. We acquired through our purchase of German-based were pleased to receive a 2017 Excellence Award Regnerbau Calw GmbH in January 2017. for innovation and education in promoting efficient Within our residential business, sales for the year were water utilization. up, driven by favorable early season snowfall and Our landscape contractor businesses trended positively demand for our popular TimeCutter® HD zero-turn riding with benefit from a number of new product mowers that included a number of updates for introductions that drove solid retail activity through increased operator comfort, durability and performance. late summer and into the fall months. This included the next-generation Exmark® Radius® and Toro® Outlook TITAN® HD zero-turn riding mowers, with features designed to increase productivity, comfort and fuel As we look ahead, we believe that we are well efficiency. Similarly, contractor enthusiasm for our positioned for fiscal 2018 with a number of exciting new latest BOSS® snow and ice management products, products and service innovations. Several of those including the continued success of the EXT extendable introductions include our latest technologies in smart plows and V-Box spreaders, helped increase shipments systems that are designed to make our customers’ work for the year. easier and more productive. As momentum in commercial and residential For the golf, sports fields and grounds markets, construction continued throughout 2017, so did demand anticipation is running high among our channel partners in our rental and specialty construction businesses. and turf managers for the introduction of the first-of-its- Sales of our industry-leading Dingo® TX 1000 compact kind Toro® Outcross™ 9060 utility tractor. More turf- utility loaders remained strong, boosted by favorable friendly than a tractor and more powerful than a utility market conditions and growing customer interest in our vehicle, this highly versatile machine performs a innovative equipment offerings. We also experienced multitude of tasks with ease through a smart favorable reception from the rental market for our programmable attachment system and automotive-like all-new tracked MB-2500 Mud Buggy® with the capability controls. The Outcross will be joined by other exciting of carrying up to 2,500 pounds of material. These golf, sports fields and grounds innovations that we plan innovations and others continued to grow our position to introduce in fiscal 2018. and build trust among contractors, and construction and Our landscape contractor businesses also anticipate a rental companies. solid year with early excitement around a number of With continued investment in permanent and high-value new products. This includes the all-new Exmark® agricultural crops, and the growing importance of water Lazer Z® Diesel and Toro® Z Master® 7500-D Series use efficiency, our agriculture irrigation business saw mowers, both featuring a 96-inch cutting deck with two increased sales for the year driven by demand in Latin wing decks that flex up and down to minimize scalping America, the United States and Mexico. Although our on uneven terrain and raise the bar for productivity. other irrigation businesses faced challenging weather Another example of smart technologies improving conditions that delayed projects in North America, we customer satisfaction and fleet efficiency is the Annual Report 2017_guts.indd 2 1/11/18 9:17 AM enhanced onboard intelligence systems on select and operational excellence, and empowering our people Toro and Exmark mowers. These mowers are with an emphasis on serving customers with innovative designed to increase productivity through defined products and solutions.