Toro 2009 Annual Report Download - page 31

businesses intensified during the first half of fiscal 2009 as unem- customer relationships, even during these turbulent times, posi-
ployment swelled, resulting in a further decline in consumer confi- tioned us well for future growth as our markets recover.
dence and spending. Like many companies, our sales were nega-
Controlling Expenses
tively impacted by the deferral of large capital equipment
During fiscal 2009, we also focused on reducing expenses. Selling,
purchases, particularly in the golf market, as well as the delay or
general, and administrative (SG&A) expense was down $58.5 mil-
cancellation of new construction and large renovation projects. This
lion, or 12.9 percent, for fiscal 2009 compared to fiscal 2008 as
resulted in contracted markets with increased competitive pressure.
our employees responded well to our call to restrain spending and
The golf market was further impacted as course revenues and
implement tighter cost controls. In fiscal 2009, we reduced our
memberships declined, even though actual rounds played were
worldwide salaried and office workforce by approximately 220
essentially flat year over year. The challenges faced by our profes-
employees through workforce reduction programs and attrition,
sional segment were compounded by the unprecedented levels of
suspended regularly scheduled salary increases, reduced officers’
instability in the financial markets that resulted from the global
salaries, changed our vacation policy and related accrual, and
credit crisis, which led to difficulties for our customers to access
implemented four furlough days. We also reviewed our manufactur-
credit. During fiscal 2009, we also experienced significant foreign
ing and warehouse operations, resulting in efforts to close and
currency exchange rate fluctuations that negatively impacted our
consolidate facilities into other locations. We believe these actions
net sales by approximately $32 million in fiscal 2009. Given the
should provide a leaner, more efficient manufacturing and logistics
uncertainty in the economic environment, we remained focused on
model going forward. At the same time, we remained focused on
growing market share, controlling expenses, and effectively man-
innovation as a means of providing increased value to our
aging our assets.
customers.
Growing Market Share
Asset Management
One of our priorities for fiscal 2009 was to drive market share
In our quest to become an integrated Lean enterprise, we placed
gains. This was evidenced by our expanded product offering, com-
continued emphasis on asset management during fiscal 2009. This
mitment to innovation, and ability to capitalize on the evolving com-
is a continuous endeavor that we believe is fundamentally chang-
petitive landscape. While our markets contracted in fiscal 2009,
ing the way we do business. Our long-term asset management
information obtained from reputable third party sources, combined
goal is to reduce average net working capital as a percent of net
with our internal market assessment, leads us to believe that we
sales below 20 percent, or in the ‘‘teens.’’ We define net working
increased our overall market share in key product categories. For
capital as accounts receivable plus inventory less trade payables.
example, we increased our market share for Toro and Lawn-Boy
In fiscal 2009 and 2008, our average net working capital as a
walk power mowers as a result of additional product placement at
percentage of net sales was 26.2 percent and 27.5 percent,
a key retailer for a new and broader line of walk power mowers.
respectively.
Our riding products also gained market share, in part from our new
In fiscal 2009, we announced the formation of Red Iron Accept-
platform of Toro TITAN姞 zero-turning mowers that were well
ance, LLC (Red Iron), a joint venture between Toro and TCF
received by customers. In the landscape contractor market, we
Inventory Finance, Inc. (TCFIF). The purposes of establishing this
entered a new product category with the introduction of our Toro
joint venture are to provide inventory financing, including floor plan
GrandStand姠 premium stand-on mower. We also realized market
and open account receivable financing, of our products to distribu-
share growth with the introduction of our next generation Toro and
tors and dealers in the U.S. and to select distributors of our prod-
Exmark zero-turn radius riding mowers that feature more efficient
ucts in Canada, as well as to free up our working capital for strate-
designs with fewer parts. Our investment in the water management
gic purposes. Red Iron began financing floor plan receivables in
business also continued with our new line of Precision姠 Series
the fourth quarter of fiscal 2009. Red Iron also began financing
Spray nozzles, featuring our patented H2O Chip Technology that
open account receivables, as well as floor plan receivables previ-
reduces runoff and water use, our new line of Aqua-TraXX PBX
ously financed by a third party financing company, during our first
premium drip tape that gained ground as agricultural growers focus
quarter of fiscal 2010.
on conserving water, and the Turf Guard姞 wireless soil sensor that
During fiscal 2009, we reduced inventory levels in our plants and
more accurately manages turf health and water usage. Customer
warehouses, and our distribution channels also reduced their
reception was strong for our new Groundsmaster products and
inventory levels. Throughout the supply chain, we expect to con-
Workman utility vehicles. In addition, through focused marketing
tinue to reduce our costs as more of our products use common
efforts and building solid relationships with customers around the
components and we negotiate more favorable supplier agree-
world who value our brands and service, we captured market
ments. In fiscal 2009, we continued to roll-out a pull-based produc-
share in the sports fields and grounds and golf course markets.
tion system that we plan to implement companywide over time.
We believe that our commitment to product innovation and strong
25