The Toro Company

1914–1997

Long respected as a manufacturer of premium-priced lawnmowers, snowblowers, and irrigation systems, The Toro Company touts itself as "one of the world's leading producers of integrated solutions for outdoor landscapes." Toro is an industry leader in both turf maintenance and underground irrigation capacities for golf courses, sports fields, and other "professional" establishments and holds a strong position in the homeowner and consumer markets with such brand name lines as Toro, Lawn Boy, Toro Wheel Horse, and Lawn Genie. An increasingly diversified Toro now generates more than 55 percent of its revenue from professional turf maintenance products, with residential products accounting for the balance. The company also generates an increasing share of its total revenues outside the United States&mdashout 22 percent in fiscal 1997.

Early History

Founded in Minneapolis in 1914, the Toro Motor Company was established by executives of the Bull Tractor Company&mdash¯ong them J.S. Clapper, Toro's first president&mdash′imarily to manufacture engines and other machined parts for use in the parent company's line of Bull tractors. When Bull Tractor folded in 1918&mdash⟩proximately the same time that Deere & Company and other competitors were fortifying their positions in the agricultural market--Toro was forced to fend for itself. The United States' entry into World War I in 1917, however, created a demand for steam engines for merchant supply ships, a need that Toro helped to fill through the conclusion of the war. In 1920 Toro Motor became Toro Manufacturing Company. The first product to carry the company's name was the Toro (two-row) cultivator that converted to a tractor. A widespread economic depression among American farmers during the early 1920s, however, left the company overstocked and in need of new products to sell. In 1921 the opportunity came for Toro to reinvent itself and become profitable for the long term. The greens committee chairman for an exclusive Minneapolis country club had approached the company with an unusual request: Could a specialized tractor replace the horse-powered system then used for cutting the greens and fairways? The solution was a tractor equipped with five 30-inch lawnmowers, which enabled the groundskeeper to cut a 12-foot wide swath in a third of the time required by the earlier method. This relatively simple invention led directly to the machine-driven, gang-reel mower, the forefather of the modern power mower industry.

By 1925 the Toro name had become synonymous with turf maintenance among nearly all of the major golf courses in the nation. Business was booming. The rapid growth of the company was due in large part to the establishment of a distributorship system in which regional business owners/sales representatives promoted quality Toro products while offering knowledgeable advice and service. In 1929, 13 distributorships were in place and Toro decided to go public, realizing that its research and development edge had to be maintained to thwart rising competition. The October 1929 stock market crash impeded the company's progress, but only temporarily.

In 1935 the company became Toro Manufacturing Corporation of Minnesota; two years later its engineers unveiled its most important product to date, the 76-inch Professional, an ingenious compromise between the maneuverability of walk-behind mowers and the speed and capacity of the large gang-reel units. The popular product was replaced ultimately by the Super-Pro and the 58-inch Pro.

In the years prior to World War II, the company succeeded in forming several overseas distributorships and in introducing its first power mower for the domestic consumer market. By 1942 sales had grown to $2 million and the company's commercial line--its mainstay--now served not only golf courses, but parks, schools, cemeteries, and estates. Like most American manufacturers during that period, Toro concentrated its resources on the war effort, contributing parts for tanks and other machinery. When 1945 came, Toro retooled under new owners.

By 1942 sales had grown to $2 million and the company's commercial line--its mainstay--now served not only golf courses, but parks, schools, cemeteries, and estates.

1945–1962

Aggressively Targeted Consumer Market Following World War II

Robert Gibson, Whitney Miller, and David Lilly, all veterans and all friends since their days at Dartmouth College, purchased the company in 1945 and fueled it for the next several years with youthful ambition and systematic expansion. To maintain the loyalty of their workers, who then numbered around 50, they named longtime employee Kenneth Goit as president. Following much-needed plant reorganization and modernization, the three owners led the company aggressively into the homeowner mower business, which market studies had shown to be a particularly promising area. From 1946 to 1950 sales climbed from $1.4 million to $7 million. Several factors contributed to this remarkable increase. The solid expansion of Toro's distribution network, which had grown to 88 members, who in turn sold to approximately 7,000 retailers, made the company a large-scale presence. In addition, the company developed and marketed Sportlawn, a popular walk-power reel mower. Finally, and most importantly, Toro acquired Milwaukee-based Whirlwind, Inc. in 1948. Whirlwind was a prominent manufacturer of a consumer rotary mower, a new design that Toro proceeded to enhance with safety features.

In 1950 Lilly succeeded Goit as president. A number of firsts highlighted the decade, including Toro's pioneering lawn and garden television advertisements, the erection of a test facility in Bloomington, Minnesota, and the creation of the Wind Tunnel housing for its Whirlwind mower, which made rear-bagging feasible for the first time. Sales increases uniformly reached double-digit percentages, despite a lukewarm entry into snow-removal equipment and a poor performance by the Tomlee Tool Company, acquired in 1954.

Toro indisputably came of age in the 1960s, aided by the power of its ad campaigns and the strength of its research and development department. Its power mower line was widely regarded by the public as the standard in engineering excellence. After achieving this goal, the half-century-old company was ready for a new dynamism. The retirement of "Mr. Toro," a charismatic salesman named "Scotty" McLaren, also augured a change in direction. The invention of the single-stage Snow Pup snow-thrower in 1962 signaled the company's recommitment to establishing a winter product line, but the results were less than satisfactory (Toro would succeed eventually, years later, with the Snow Master). Further diversification within the golf market was another possibility. One campaign centered on the production of a deluxe golf car, the Golfmaster, that would utilize all of the company's significant design expertise. As Trace James reported in Toro: A Diamond History, "Toro had purchased the materials and manufactured the parts to build 1,000 Golfmasters. However, by the time the first 250 of these beauties came off the assembly line, they were so loaded with features that golf courses could not afford to buy them. Toro was left with work in progress for 750 cars." Through persistent sales efforts, however, the company was able to rid itself of all but four cars and turn a profit.

Expanded into Irrigation Products in 1962

Finally, in 1962, Toro purchased a company that would virtually ensure Toro's lasting preeminence in the golf course industry. California-based Moist O'Matic, a manufacturer of irrigation products, brought sales above the $20 million mark that year and ultimately gave Toro the number one position in golf course irrigation equipment. This same year the company relocated to its present headquarters in Bloomington. By the end of the decade, with a greatly strengthened commercial division and the introduction of the electric start feature for its consumer mowers, Toro's sales surpassed $50 million.

1971–1992

The 1970s began with David McLaughlin assuming the presidency from Lilly. Growth during the decade for The Toro Company (so named in 1971) was phenomenal. The consumer snow removal business, after persistent re-engineering and remarketing, began to thrive. Commercial turf maintenance, with the introduction of the all-hydraulic Greensmaster and Groundsmaster, experienced a renaissance. As a flurry of new products went on line, the Toro workforce swelled to substantially more than 1,000 employees. Net earnings from 1977 to 1979 almost tripled and sales reached an all-time high of $357.8 million. McLaughlin forged ahead with greatly expanded production of snowblowers. Suitable weather in which buyers could utilize the new product line proved elusive, however. Snow was a relative scarcity during the winters of 1980 and 1981 and, consequently, so were snowblower sales. Because Toro had positioned a full 40 percent of its business in this market, it suffered devastating losses, a total of $21.8 million between fiscal 1981 and fiscal 1982. To make matters worse, McLaughlin had moved Toro into the mass merchandising arena and away from its reliance on the dealer network--where lower sales but greater profits were the norm.

Further Diversified in the 1980s

Melrose replaced McLaughlin in 1981 and went to work quickly, cutting salaried staff by nearly half, closing plants, and instituting a "just-in-time" inventory system to prevent future overproduction. During the mid-1980s he systematically diversified, acquiring two lighting manufacturers and establishing an outdoor electrical appliance division. The 1986 purchase of Wheel Horse (a manufacturer of lawn tractors) and Toro's entry into the lawn aeration business helped push sales to more than $500 million the following year. Rounding out the decade was the company's 1989 purchase of one of its chief lawnmower competitors, Outboard Marine Corporation's Lawn Boy, for $98.5 million. Melrose, along with recently elected President Morris, had succeeded in reducing the company's dependency on snowthrower sales, which fell to just nine percent of revenues, while maintaining the Toro name as the industry market leader.

The investment community, however, remained oblivious, in large part, to the dramatic turnaround, and this was reflected in Toro's depressed stock price. Robert Magy, in his article "Toro's Second Season," recounted Melrose's befuddlement at the sluggish reaction of the investment community to Toro's recovery. This puzzlement led to the hiring in 1989 of a Chicago-based investor relations firm. "In October, the agency surveyed analysts and institutional investors in several major markets and discovered that few of them had any knowledge of Toro, and that among those who believed they did know something about the company, several thought it had collapsed early in the last decade." Thus work of a different sort, higher-profile public and investor relations, awaited Melrose. Although he quickly proved to be an effective and energetic company spokesperson, Melrose did err with overly optimistic earnings predictions.

Early 1990s Struggles

Toro's 1990 introduction of the Toro Recycler (a high-performance mulching mower) and its high expectations for Lawn Boy as a lower-priced complement to the existing product line were among the many reasons why Melrose anticipated the company would achieve billion-dollar status by 1992. Instead, the company saw sales drop from $750 million in 1990 to $711 million in 1991 to $635 million in 1992. A series of profit projections, all of which had to be revised downward, seriously dampened the company's credibility during the early part of this period. Particularly harsh criticism came from Star Tribune writer Tony Carideo. "With each piece of negative news, Toro has trotted out explanations: A bad economy. Not enough rain. Too much rain. Not enough snow. A really bad economy. Well, maybe. But how about this? Toro makes a product that costs too much because there's a lot of R&D and advertising cost in it and because it's sold through an antiquated distributor-dealer network that raises the price even higher." Carideo's article appeared January 28, 1992, just after Toro had announced a major consolidation and restructuring of its Lawn Boy and Toro businesses, including a plant closing and some 450 layoffs.

1992–1998

Restructuring charges for fiscal 1992 led to a net loss of $21.7 million for the year. Recognizing that its current mix of products left it vulnerable to the cyclicality of the consumer market (not to mention the weather), Toro executives determined to place a greater emphasis on a wide range of professional turf-related product areas. Expanding upon its irrigation lines, Toro entered the fertilizer market in 1992 with the Toro BioPro brand environmentally friendly liquid fertilizer. A further step into this arena came in 1996 when the company acquired Liquid Ag Systems Inc., a pioneer in "fertigation" systems that simultaneously watered and fertilized tuft areas, including farmland. In 1994 Toro began manufacturing recycling equipment for landscape contractors and housing developers when it acquired Olathe Manufacturing and formed a new Recycling Equipment Division. Among the initial products offered by the division was a grinding machine that turned tree stumps into sawdust, which could simply be plowed right into the ground.

Toro significantly bolstered its irrigation lines during this period through acquisitions. In December 1996 the company acquired the James Hardie Irrigation Group from James Hardie Industries Limited of Australia for $118 million, one of Toro's largest acquisitions ever. Hardie's irrigation business was strongest in agricultural markets and commercial markets other than golf courses, which was Toro's major market. Hardie also made drip irrigation systems, a rapidly growing area and one that expanded upon Toro's irrigation lines. Another positive aspect of the acquisition was Hardie's strong international presence. The purchase made Toro the world's largest supplier of irrigation products and systems. The February 1998 acquisition of Drip In Irrigation further expanded Toro's drip irrigation lines.

Two additional 1997 acquisitions expanded Toro's professional product offerings still further. In September Toro bought the manufacturing, sales, and distribution rights to Dingo Digging Systems; the Dingo utility loader, designed for landscape contractors, was a versatile and compact product featuring more than 35 attachments. In November the company purchased Beatrice, Nebraska-based Exmark Manufacturing Company, Inc., a maker of mid-sized walk-behind power mowers and zero-turning-radius (ZTR) riding mowers for professional landscape contractors.

1998 "Profit Improvement Plan"

Thanks to its increasing emphasis on professional products and a more aggressive pursuit of overseas markets, Toro had rebounded nicely from the dark days of the early 1990s. By fiscal 1997 net sales surpassed $1 billion for the first time and net earnings were a healthy $36.5 million. The 1998 fiscal year, however, did not start out so rosy, primarily because of its consumer product lines, the sales of which fell 8.5 percent in 1997. In May 1998 Toro initiated a "profit improvement plan" aimed mainly at overhauling its struggling consumer business. In addition to scaling back significantly on the number of models it offered in the areas of mowers, tractors, and other garden equipment, Toro closed a manufacturing plant in Sardis, Mississippi, and sold its recycling equipment business to Leeds, Alabama-based Precision Husky Corporation, having determined that this particular product line was incompatible with the company's core products. Perhaps the most dramatic change came in the form of the expansion of Toro's distribution network for Toro-branded lawnmowers to include selected home retail centers for the first time. This shift was likely long overdue given consumers' increasing preference for shopping at mass merchant outlets.

At the turn of the millennium, Toro was a company significantly different from that of just a decade earlier. The increasing emphasis on professional turf maintenance products provided the company with a steady income and profit generating force not nearly as susceptible to the vicissitudes of the consumer market--in particular, the consumer market for such seasonal items as lawnmowers and snowthrowers. A turnaround of its consumer business through the profit improvement plan should enable Toro to weather any early 21st-century storms.