Toro 2008 Annual Report Download - page 15

against charges of infringement. While the ultimate results of the Working Capital
current cases are unknown at this time, we believe that the out- We fund our operations through a combination of cash and cash
come of these cases is unlikely to have a material effect on our equivalents and cash flows from operations. Wherever possible,
consolidated financial condition or results of operations. cash management is centralized and intercompany financing is
used to provide working capital to subsidiaries as needed. In addi-
Seasonality tion, our credit facilities are available for additional working capital
Sales of our residential products, which accounted for approxi- needs, acquisitions, or other investment opportunities.
mately 30 percent of total consolidated net sales in fiscal 2008, are
seasonal, with sales of lawn and garden products occurring primar- Distribution and Marketing
ily between February and May, and sales of snow removal equip- We market the majority of our products through approximately 45
ment occurring primarily between July and January. Opposite sea- domestic and 110 foreign distributors, as well as a large number of
sons in some global markets somewhat moderate this seasonality outdoor power equipment dealers, hardware retailers, home cen-
of residential product sales. Seasonality of professional product ters, and mass retailers in more than 90 countries worldwide.
sales also exists but is tempered because the selling season in the Residential products, such as walk power mowers, riding prod-
United States Sunbelt, in Southern states, and in our markets in ucts, and snow throwers, are sold to distributors, including
the Southern hemisphere continues for a longer portion of the year Toro-owned distributors, for resale to retail dealers in approxi-
than in Northern regions of the world. mately half of the United States. In certain markets, these same
Overall, worldwide sales levels are historically highest in our fis- residential products are also sold directly to dealers, hardware
cal second quarter and retail demand is generally highest in our retailers, home centers, and mass retailers. Home solutions prod-
fiscal third quarter. Typically, accounts receivable balances ucts and retail irrigation products are primarily sold directly to
increase between January and April as a result of higher sales home centers, mass retailers, hardware retailers, and dealers. We
volumes and extended payment terms made available to our cus- also sell selected residential products over the Internet. Internation-
tomers. Accounts receivable balances decrease between May and ally, residential products are sold direct to retail dealers and mass
December when payments are received. Our financing require- merchandisers in Australia, Belgium, Canada, and the United King-
ments are subject to variations due to seasonal changes in work- dom. In most other countries, products are mainly sold to distribu-
ing capital levels which typically increase in the first half of our tors for resale to dealers and mass retailers.
fiscal year and then decrease in the second half of our fiscal year. Professional products are sold mainly to distributors for resale to
Seasonal cash requirements of our business are financed from dealers, sports complexes, industrial facilities, contractors, munici-
operations and with our bank credit lines. Peak borrowing gener- palities, rental stores, and golf courses. We also sell some profes-
ally occurs between January and April. sional segment products directly to government customers and
The following table shows total consolidated net sales and net rental companies, as well as directly to end users in certain inter-
earnings for each fiscal quarter as a percentage of the total fiscal national markets. Selected residential/commercial irrigation prod-
year. ucts are also sold directly to professional irrigation distributors.
Compact utility loaders and attachments are sold directly to deal-
Fiscal 2008 Fiscal 2007 ers and large rental companies. Toro and Exmark landscape con-
tractor products are also sold direct to dealers in certain regions of
Net Net Net Net
Quarter Sales Earnings Sales Earnings the United States.
During fiscal 2008, we owned two domestic distribution compa-
First 22% 16% 20% 13% nies. Effective November 1, 2008, these two distribution companies
Second 34 52 37 53
Third 26 32 25 30 were merged together. Our primary purposes in owning domestic
Fourth 18 – 18 4 distributorships are to facilitate ownership transfers while improving
operations and to test and deploy new strategies and business
practices that could be replicated by our independent distributors.
Effects of Weather
These distribution companies sell professional and residential prod-
From time to time, weather conditions in a particular region or
ucts directly to retail dealers and customers in the United States
market may adversely or positively affect sales of some of our
and a majority of their revenues are derived from
products and field inventory levels and result in a negative or posi-
Toro-manufactured products.
tive impact on our future net sales. As the percentage of our net
Our distribution systems are intended to assure quality of sales
sales from outside the United States has continued to increase,
and market presence as well as effective after-purchase service
our dependency on weather in any one part of the world has
and support. We believe our distribution network provides a com-
decreased. Nonetheless, weather conditions could materially affect
petitive advantage in marketing and selling our products.
our future net sales.
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