Toro 2009 Annual Report Download - page 32

The pull model is based on retail sales that trigger replenishment decrease in electric blower product sales. Sales of snow thrower
cycles throughout the supply chain. As manufacturing becomes products were also down due to the timing of the introduction for
better synchronized with customer demand, we expect inventory a new redesigned offering of snow thrower products that shipped
reductions at our facilities. We expect that our continued focus on to customers in the first quarter of fiscal 2010. Somewhat offset-
asset management will improve customer satisfaction by delivering ting this net sales decline was increased shipments of walk
the right products to the right customer – at just the right time – to power mowers due to additional product placement at a key
meet demand. retailer and a new and broader line of walk power mowers.
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Gross margin was 33.5 percent in fiscal 2009, down from
Summary of Fiscal 2009 Results 34.8 percent in fiscal 2008. As we experienced decreased
Fiscal 2009 was a difficult year with significant decreases in net demand for our products in fiscal 2009 as a result of the reces-
sales and net earnings compared to fiscal 2008. Our fiscal 2009 sionary economic conditions, we cut production to align it with
results included the following items of significance: the decline in sales volumes and to reduce inventory levels. This
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Net sales for fiscal 2009 decreased by 18.9 percent to lower plant utilization resulted in higher manufacturing costs that
$1,523.4 million compared to fiscal 2008. This decrease was pri- negatively impacted our gross margin in fiscal 2009 compared to
marily attributable to decreased demand largely resulting from fiscal 2008. In addition, our gross margin for fiscal 2009 was
the global recessionary economic conditions that adversely hampered by a decrease in sales of our higher-margin products
impacted both domestic and international sales. Consequently, and a stronger U.S. dollar compared to other currencies in which
we did not achieve our revenue growth GrowLean initiative goal we transact business.
to grow net sales at an average rate of 8 percent or more over a
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While we have been reducing our expenses during this difficult
three year period, as our average annual net sales declined time, the decline in net sales was greater than the rate we were
6.0 percent over the three-year period ended October 31, 2009. able to reduce SG&A costs. Although SG&A expense was down
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International net sales for fiscal 2009 were down $121.1 million, 12.9 percent in fiscal 2009 compared to fiscal 2008, SG&A
or nearly 20 percent, compared to fiscal 2008, also due to expense as a percentage of net sales in fiscal 2009 was
decreased demand largely as a result of recessionary conditions 26.0 percent compared to 24.2 percent in fiscal 2008.
around the world that adversely impacted our key international
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During our fourth fiscal quarter, we formed Red Iron, a joint ven-
markets. Approximately $32 million of this net sales decline was ture with TCFIF. The purposes of establishing Red Iron are to
the result of the strengthening of the U.S. dollar compared to provide inventory financing for our distributors and dealers in the
other currencies in which we transact business. International net U.S. and Canada, as well as free up working capital as part of
sales comprised 32.0 percent of our total consolidated net sales our asset management initiative. In fiscal 2009, we sold
in fiscal 2009 compared to 32.4 percent in fiscal 2008 and $72.8 million of floor plan receivables to Red Iron.
29.0 percent in fiscal 2007.
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Despite the difficult economic conditions we faced in fiscal 2009,
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Fiscal 2009 net earnings decreased 47.5 percent to $62.8 million we improved our asset management with a 14.9 percent decline
compared to fiscal 2008, and diluted net earnings per share in our inventory to $176.3 million as of the end of fiscal 2009.
declined 44.2 percent to $1.73 compared to fiscal 2008. Our Our domestic field inventory levels were also down as of the end
after-tax return on sales for fiscal 2009 was 4.1 percent com- of fiscal 2009 compared to the end of fiscal 2008 due in part to
pared to 6.4 percent in fiscal 2008. We did not achieve our our continued focus to improve field inventory management.
GrowLean profitability goal of attaining a consistent after-tax
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We continued to generate strong cash flows from operations.
return on sales of 7 percent or more over a three year period, as Net cash provided by operating activities was $251.5 million in
our average after-tax return on sales for the three-year period fiscal 2009 compared to $215.7 million in fiscal 2008, an
ended October 31, 2009 was 6.2 percent. increase of 16.6 percent, due mainly to the sale of our floor plan
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Professional segment net sales, which represented over 60 per- receivables to Red Iron.
cent of our total consolidated net sales in fiscal 2009, were sig-
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We declared a cash dividend of $0.15 per share each quarter in
nificantly down by 25.9 percent in fiscal 2009 compared to fiscal fiscal 2009.
2008 due to decreased demand resulting largely as a conse-
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We continued with our stock repurchase program in fiscal 2009
quence of the global recessionary conditions, despite positive which reduced our number of shares outstanding. This reduction
customer response to new products we introduced. resulted in a benefit to our diluted net earnings per share of
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Our residential segment net sales were down slightly by 1.9 per- approximately $0.10 in fiscal 2009 compared to fiscal 2008.
cent in fiscal 2009 compared to fiscal 2008. This decline was
primarily attributable to lower demand for riding products as a Outlook for Fiscal 2010
result of the poor economic conditions, despite customer accept- Fiscal 2009 was a difficult year as we faced the worst global
ance for a new line of zero-turning riding mowers, and a recession in decades. We are uncertain when we will begin to see
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