Toro 2009 Annual Report Download - page 11

agreement. Riding products primarily consist of zero-turn radius see Note 12 of the notes to our consolidated financial statements,
mowers that save homeowners time by using their superior in the section entitled ‘‘Segment Data,’’ included in Part II, Item 8,
maneuverability to cut around obstacles more quickly and easily ‘‘Financial Statements and Supplementary Data’’ of this report.
than tractor technology. We also sell lawn and garden tractor mod-
Engineering and Research
els, as well as a rear engine riding mower manufactured and sold
We are committed to an ongoing engineering program dedicated to
in the European market. Many models are available with a variety
developing innovative new products and improvements in the qual-
of engines, decks, transmissions, and accessories. In fiscal 2009,
ity and performance of existing products. However, a focus on
we introduced the all new Toro TITAN姞 heavy-duty residential
innovation also carries certain risks that new technology could be
zero-turn mowers, combining user-friendly features with features
slow to be accepted or not accepted by the marketplace. We
inspired by those found on our commercial zero-turn mowers.
attempt to mitigate this risk through our focus on and commitment
Home Solutions Products. We design and market home solutions to understanding our customers’ needs and requirements. We are
products under the Toro and Pope brand names, including electric investing more time upfront with customers, using ‘‘Voice of the
and battery operated flexible line grass trimmers, electric blower- Customer’’ tools to ensure we develop innovative products that
vacuums, electric blowers, and electric snow throwers. In Australia, meet or exceed customer expectations. We also use Design for
we also design and market underground and hose-end retail irriga- Manufacturing and Assembly (DFMA) tools to ensure early manu-
tion products under the Pope brand name. facturing involvement in new product designs to reduce production
Gas Snow Removal Products. We manufacture and market a costs. DFMA focuses on reducing the number of parts required to
range of gas-powered single-stage and two-stage snow thrower assemble new products as well as designing products to move
models. Single-stage snow throwers are walk behind units with more efficiently through the manufacturing process. We are also
lightweight two- and four-cycle gasoline engines. Most single-stage making improvements to our new product development system as
snow thrower models include Power Curve姞 snow thrower technol- part of our Lean initiatives to shorten development time, reduce
ogy and some feature our Quick Shoot姠 control system that costs, and improve quality.
enables operators to quickly change snow throwing direction. Our Our engineering expenses are primarily incurred in connection
innovative pivoting scraper also keeps the rotor in constant contact with the development of new products that may have additional
with the pavement. Our two-stage snow throwers are generally applications or represent extensions of existing product lines,
designed for relatively large areas of deep, heavy snow and use improvements to existing products, and cost reduction efforts. Our
four-cycle engines. Our two-stage snow throwers include a line of expenditures for engineering and research were $52.7 million
innovative models featuring the Power Max姞 auger system for (3.5 percent of net sales) in fiscal 2009, $63.0 million (3.4 percent
enhanced performance and the Quick Stick姞 chute control of net sales) in fiscal 2008, and $59.9 million (3.2 percent of net
technology. sales) in fiscal 2007.
Financial Information about Foreign Operations Manufacturing and Production
and Business Segments In some areas of our business we serve as a fully integrated man-
We manufacture our products in the United States, Mexico, Austra- ufacturer, while in others we are primarily an assembler. We have
lia, Italy, and the United Kingdom for sale throughout the world and strategically identified specific core manufacturing competencies for
maintain sales offices in the United States, Belgium, the United vertical integration and have chosen outside vendors to provide
Kingdom, France, Australia, Singapore, Japan, China, Italy, and other services. We design component parts in cooperation with our
Korea. New product development is pursued primarily in the United vendors, contract with them for the development of tooling, and
States. Our net sales outside the United States were 32.0 percent, then enter into agreements with these vendors to purchase compo-
32.4 percent, and 29.0 percent of total consolidated net sales for nent parts manufactured using the tooling. In addition, our vendors
fiscal 2009, 2008, and 2007, respectively. regularly test new technologies to be applied to the design and
A portion of our cash flow is derived from sales and purchases production of component parts. Manufacturing operations include
denominated in foreign currencies. To reduce the uncertainty of robotic and computer-automated equipment to speed production,
foreign currency exchange rate movements on these sales and reduce costs, and improve the quality, fit, and finish of products.
purchase commitments, we enter into foreign currency exchange Operations are also designed to be flexible enough to accommo-
contracts for select transactions. For additional information regard- date product design changes that are necessary to respond to
ing our foreign currency exchange contracts, see Part II, Item 7A, market demand.
‘‘Quantitative and Qualitative Disclosures about Market Risk’’ of In order to utilize our manufacturing facilities and technology
this report. For additional financial information regarding our foreign more effectively, we pursue continuous improvements in our manu-
operations and each of our three reportable business segments, facturing processes with the use of Lean methods that are
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