Toro 2010 Annual Report Download - page 30

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Professional segment net sales, which represented over 64 per- fiscal 2010 was down to 25.1 percent compared to 26.0 percent
cent of our total consolidated net sales in fiscal 2010, grew in fiscal 2009.
12.4 percent to $1,085.5 million in fiscal 2010 compared to fiscal
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We continued to place emphasis on, and take proactive mea-
2009 due to strong sales in the golf market and customer sures related to, reducing working capital and improving asset
acceptance of new products introduced, particularly for land- management. As a result of these efforts, we achieved our
scape contractor equipment. long-term goal to reduce average net working capital (accounts
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Our residential segment net sales were also up by 10.7 percent receivable plus inventory less trade payables) as a percent of
to $589.7 million in fiscal 2010 compared to fiscal 2009 as a net sales below 20 percent, or ‘‘to the teens,’’ in fiscal 2010. Our
result of continued strong demand for our products and addi- average net working capital as a percent of net sales as of the
tional product placement for our zero-turn radius riding mowers. end of fiscal 2010 was 13.9 percent. Our domestic field inven-
Shipments of snow thrower products also increased due to tory levels were also slightly down as of the end of fiscal 2010
strong demand from heavy snow falls during the winter season compared to the end of fiscal 2009 due in part to our continued
of 2009-2010 and the timing of the introduction for our rede- focus to improve field inventory management.
signed offering of snow thrower products.
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We continued our history of paying cash dividends and we
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International net sales for fiscal 2010 were up 10.3 percent to increased our fiscal 2010 quarterly cash dividend by 20 percent
$537.6 million compared to fiscal 2009, due to increased to $0.18 per share compared to our quarterly cash dividend in
demand as a result of new golf development projects, mainly in fiscal 2009 of $0.15 per share.
Asia, additional manufacturing capacity that increased production
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Our stock repurchase program returned a significant amount of
and sales of our water conserving products for agricultural mar- cash to our shareholders during fiscal 2010, which reduced our
kets to meet growing worldwide demand, and improved eco- number of shares outstanding. This reduction resulted in a bene-
nomic conditions in certain international markets resulting in fit to our diluted net earnings per share of approximately $0.22
increased demand for our products. Approximately $12 million of per share in fiscal 2010 compared to fiscal 2009.
this net sales growth was the result of the weakening of the U.S.
Outlook for Fiscal 2011
dollar compared to other currencies in which we transact busi-
While worldwide economic uncertainty remains, we are
ness. International net sales comprised 31.8 percent of our total
encouraged by the financial results we achieved in fiscal 2010. We
consolidated net sales in fiscal 2010 compared to 32.0 percent
understand the path to economic recovery will occur at different
in fiscal 2009 and 32.4 percent in fiscal 2008.
times and at different rates across our markets and the regions of
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Fiscal 2010 net earnings rose 48.4 percent to $93.2 million com-
the world in which we compete. As a result, we have taken, and
pared to fiscal 2009, and diluted net earnings per share
continue to take, proactive measures to manage through this vola-
increased 61.3 percent to $2.79 compared to fiscal 2009. Our
tile economic environment to ensure we are positioned to drive
one-year initiative, ‘‘5 in One: Back on Course,’’ was successful
strong financial results and gain market share throughout the
as we surpassed our goal of five percent profit after tax as a
recovery. We believe the key drivers for our fiscal 2011 financial
percentage of net sales for fiscal 2010 by achieving 5.5 percent
performance will include, among many others, the following main
profit after tax as a percentage of net sales.
factors:
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Gross margin was 34.1 percent in fiscal 2010, up 60 basis
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We intend to continue to focus on international markets to grow
points from 33.5 percent in fiscal 2009. As we experienced
our revenues. We plan to continue investing in new products
increased demand for our products in fiscal 2010, our manufac-
designed specifically for international markets and in infrastruc-
turing costs were lower from increased plant utilization, which
ture around the world that will connect us more closely to inter-
benefited our gross margin in fiscal 2010 compared to fiscal
national customers, increasing our global presence. For exam-
2009. In addition, our gross margin for fiscal 2010 was positively
ple, during fiscal 2011, we plan to open a new facility in Eastern
impacted by increased sales of our higher-margin products as
Europe to manufacture micro-irrigation products as we anticipate
compared to fiscal 2009 and continued cost reduction efforts.
market demand for our water conserving products to increase in
However, higher commodity prices in fiscal 2010 compared to
and around that geographic region, which should reduce trans-
fiscal 2009 hindered our gross margin growth rate.
portation and other manufacturing costs and increase operating
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Although selling, general, and administrative (‘‘SG&A’’) expense
efficiencies. Sales in Australia and Asia were strong in fiscal
was up 7.4 percent in fiscal 2010 compared to fiscal 2009, pri-
2010 and we expect continued growth in fiscal 2011 in those
marily from higher employee incentive compensation related to
regions of the world. A long-term goal is for international sales to
improved financial performance, most other SG&A costs were
comprise a larger percentage of our total consolidated net sales.
down, reflecting structural cost reductions and continued spend-
ing discipline. SG&A expense as a percentage of net sales in
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