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THE TORO COMPANY AND SUBSIDIARIES Consolidated Statements of Earnings (Dollars and shares in thousands, except per share data) Fiscal Years Ended October 31 Net sales Cost of sales 2017 2016 2015 S 2,505,176 $ 2,392.175 S 2,390,875 1,584,339 920,837 565,727 355,110 (19,113) 17,187 353,184 85,467 1,517,580 874,595 540,199 334,396 (19,336) 15,400 330,460 99,466 1,554,940 835,935 536,821 299,114 (18,757) 10,674 291,031 89,440 201,591 Gross profit Selling, general and administrative expense Operating earnings Interest expense Other income, net Earnings before income taxes Provision for income taxes Net earnings 267,717 S 230,994 S Basic net eamings per share of common stock 2.47 S 2.10 S 1.81 Diluted net earnings per share of common stock 2.41 $ 2.06 1.78 111,130 Weighted-average number ofshares of common stock outstanding Basic Weighted-average number of shares of common stock outstanding - Diluted Shares and per share data have been adjusted for prior periods presented to reflect a two-for-one stock split effective September 16, 2016 The financial statements should be read in conjunction with the Notes to Consolidated Financial Statements. 108,312 109,834 111,252 111,987 113,514 THE TORO COMPANY AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Dollars in thousands) Fiscal Years Ended October 31 Net eamings Other comprehensive income (loss) net of tax: 2017 2016 2015 267,717 $ 230,994 S 201,591 Foreign currency translation adjustments, net of tax of S0, $(161), and S(51), respectively Pension and retiree medical benefits, net oftax of $2,536, S(1,294), and $299, respectively Derivative instruments, net of tax of$(1,123). $(605), and S(933), respectively 10,127 (7,102) (973) (518) (8,593) (11,792) (120) (2,226) (14,138) 187,453 4,347 (158) Other comprehensive income (loss), net of tax Comprehensive income 14,316 282,033 $ 222,401 THE TORO COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) Fiscal Years Ended October 31 Cash flows from operating activities: Net eamings Adjustments to reconcile net eamings to net cash provided by operating activities 267,717 S 230,994 $ 201 Non-cash income from finance affiliate Distributions from finance affiliate, net Provision for depreciation, amortization and impairment loss Stock-based compensation expense Deferred income taxes (9.960) 8,050 64,986 (9,588) 9,848 64,097 10,637 10,075 (8,353) 63,143 10,836 (6,887) 202 er Changes in operating assets and liabilities, net of effect ofacquisitions: Receivables, net Inventories, net Prepaid expenses and other assets Accounts payable, accrued liabilities, deferred revenue and other long-term liabilities (17,701) 15,785 23,192 (905) 30,614 384,285 (25,647) (52,656) (3,424) 59,859 360,748 56,949 249,592 Net cash provided by operating activities Cash flows from investing activities Purchases of property, plant and equipment Proceeds from asset disposals Proceeds from sale of a business Purchase of noncontrolling interest Acquisitions, net of cash acquired (50,723) 199 (1,500) (83,758) 1,500 (198,329) (254,524) Net cash used in investing activities (48,913) Cash flows from financing activities Short-term debt repayments, net Payments on long-term debt Proceeds from exercise of stock option:s Payments of withholding taxes for stock awards Purchases of Toro common stock Dividends paid on Toro common stock (19,136) (24,107) 20,226 (2,013) (109,986) (65,890) (182,931) (7,227) (1,294) (159,354) (75,758) (245,268) (1,000) (105,964) (55,549) (181,820) Net cash used in financing activities Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents as of the beginning of the fiscal period Cash and cash equivalents as of the end of the fiscal period (1,846) 36,701 273,555 10,256 S 147,280 126,275 273,555 S (188,598) 314,873 126,275 Supplemental disclosures ofcash flow information Cash paid during the fiscal year for: Interest Income taxes 19457 $ 97,057 19,883$ 82,225 77,043 Shares issued in connection with stock-based compensation plans Payment obligations issued in connection with acquisitions THE TORO COMPANY AND SUBSIDIARIES Consolidated Statements of Stockholders' Equitv (Dollars in thousands, except per share data) Common Stock Retained Earnings Total Stockholders' Equity Accumulated Other Comprehensive Loss Balance as of October 31,2014 Cash dividends paid on common stock S0.50 per share Issuance of 1,096,972 shares for stock options exercised and restricted stock units vested Stock-based compensation expense Contribution of stock to a deferred compensation trust Purchase of 3,151,978 shares of common stock Excess tax benefits from stock-based awards Other comprehensive loss Net eamings Balance as of October 31,2015 Cash dividends paid on common stock S0.60 per share Issuance of 1,801,136 shares for stock options exercised and restricted stock units vested Stock-based compensation expense Contribution of stock to a deferred compensation trust Purchase of 2,675,575 Excess tax benefits from stock-based awards Other comprehensive loss Net eamings Balance as of October 31,2016 Cash dividends paid on common stock -S0.70 per share Issuance of 1,185,601 shares for stock options exercised and restricted stock units vested Stock-based compensation expense Contribution of stock to a deferred compensation trust 111,356 313,076 $ 15,705) S 408,727 (55,549) 8,236 10,836 967 (55,549) 1,098 10,836 967 (103,812) (106,964) 8,459 (14,138) 201,591 462,165 (65,890) 8,459 (14,138) 201,591 382,706 (65,890) 109,302 (29,843) 1,801 19,026 10,637 10,637 shares of common stock (2,676) (109,323) 12,495 (111,999) 12,495 (8,593) 230,994 550,035 (75,758) (8,593) 230,994 480,044 (75,758) 108,427 (38,436) 820 (2.130) rchase of 2,730,022 shares of common stock Cumulative effect adjustment ASU 2016-16 Other comprehensive income Net eamings Balance as of October 31,2017 (157,918) (2,361) (160,648) (2,361) 267,717 617,092 1431 267,717 34,329 S 106,883 S (24,120 S Shares and per share data have been adjusted for prior periods presented to reflect a two-for-one stock split effective September 16, 2016 Exercise 3-1 Net Profit Margin % (Profitability) A. when calculating the 2017 Net Profit Margin %, which financial statement line items are used for the: 1. Numerator? -The line item name on Toro's financial statement and the $ amount. Denominator? - The line item name on Toro's financial statement and the $ amount. 2. B. Calculate Toro's Net Profit Margin % for 2017, Round your percent answer to 2 decimal places C. The Net Profit Margin % is a(n): up-arrow indicator t down-arrow indicator up-down-arrow indicator D. On the Answer Sheet under your answer for item B. is Toro's 2016 Net Profit Margin %. which year, 2017 or 2016, had a better Net Profit Margin %? Exercise 3-2 Total Assets Turnover Ratio (Efficiency) A. When calculating the 2017 Total Assets Turnover Ratio, which financial statement line items are used for the: 1. Numerator? - The line item name on Toro's financial statement and the $ amount. 2. Denominator? - The line item name on Toro's financial statement and the S amounts. B. Calculate Toro's Total Assets Turnover Ratio for 2017. Round Average Total Assets to a whole number. Round your final answer to 2 decimal places. C. The Total Assets Turnover Ratio is a(n): tup-arrow indicatordown-arrow indicator up-down-arrow indicator D. On the Answer Sheet under your answer for item B. is Toro's 2016 Total Assets Turnover Ratio. Which year, 2017 or 2016, had a better Total Assets Turnover Ratio? Exercise 3-3 Assets-to-Equity Ratio (Leverage) A. When calculating the 2017 Assets-to-Equity Ratio, which financial statement line items are used for the: 1. Numerator? -The line item name on Toro's financial statement and the $ amounts. 2. Denominator?- The line item name on Toro's financial statement and the $ amounts. B. Calculate Toro's Assets-to-Equity Ratio for 2017. Round Average Total Assets and Average Total Stockholders' Equity to whole numbers. Round your final answer to 2 decimal places. C. The Assets-to-Equity Ratio is a(n) t up-arrow indicatordown-arrow indicatorup-down-arrow indicator Which year, 2017 or 2016, had more financial leverage? when calculating the 2017 Return on Equity %, which financial statement line items are D. On the Answer Sheet under your answer for item B. is Toro's 2016 Assets-to-Equity Ratio. Exercise 3-4 Return on Equity % used for the 1. Numerator? - The line item name on Toro's financial statement and the $amount. 2. Denominator? - The line item name on Toro's financial statement and the $ amounts. B. Calculate Toro's Return on Equity % for 2017, Round Average Total Stockholders' Equity to a whole number. Round your percent answer to 2 decimal places. C. The Return on Equity % is a(n): tup-arrow indicator -down-arrow indicator up-down-arrow indicator D. On the Answer Sheet under your answer for item B. is Toro's 2016 Return on Equity % Which year, 2017 or 2016, had a better Return on Equity %? Exercise 3-5 Return on Assets % A. When calculating the 2017 Return on Assets %, which financial statement line items are used for the 1. Numerator? - The line item name on Toro's financial statement and the $ amount. 2. Denominator?-The line item name on Toro's financial statement and the $ amounts B. Calculate Toro's Return on Assets % for 2017, Round AverageTotal Assets to a whole number. Round your percent answer to 2 decimal places. C. The Return on Assets % is a(n) tup-arrow indicator -down-arrow indicator tup-down-arrow indicator D. On the Answer Sheet under your answer for item B. is Toro's 2016 Return on Assets %. which year, 2017 or 2016, had a better Return on Assets % Exercise 3-6 A. Utilizing the information from Exercises 3-1 to 3-4, comment on Toro's DuPont Analysis for 2017 compared to 2016