Toro 2010 Annual Report Download - page 34

68 percent for fiscal 2008. The following table shows the profes- A stronger average U.S. dollar compared to most other currencies
sional segment net sales, operating earnings, and operating earn- in which we transact business also negatively impacted our net
ings as a percent of net sales. sales. Our domestic field inventory levels were also down as of the
end of fiscal 2009 as compared to the end of fiscal 2008 as our
shipments declined more than retail demand, as well as improved
(Dollars in millions)
Fiscal years ended October 31 2010 2009 2008 field inventory management.
Net sales $1,085.5 $965.9 $1,304.1 Operating Earnings. Operating earnings for the professional
% change from prior year 12.4% (25.9)% 0.9% segment in fiscal 2010 increased 36.2 percent compared to fiscal
Operating earnings $ 173.8 $127.6 $ 233.4
2009. Expressed as a percentage of net sales, professional seg-
As a percent of net sales 16.0% 13.2% 17.9%
ment operating margins increased to 16.0 percent in fiscal 2010
Net Sales. Worldwide net sales for the professional segment in compared to 13.2 percent in fiscal 2009. The following factors
fiscal 2010 were up by 12.4 percent compared to fiscal 2009 pri- impacted professional segment operating earnings:
marily from higher shipments for most domestic and international
•
Higher gross margins in fiscal 2010 compared to fiscal 2009 as
product categories as a result of improved economic conditions a result of increased sales volumes and lower manufacturing
and a significant reduction in field inventory levels during fiscal costs from increased plant utilization due to increased demand
2009 that was not duplicated in fiscal 2010. In addition, profes- for our products, combined with our continued cost reduction
sional segment sales increased due to the following other factors: efforts. However, increased freight expense driven by higher fuel
•
Higher shipments of worldwide golf maintenance equipment and prices and rising commodity prices hampered our professional
irrigation systems as customers increased capital spending after segment gross margin improvement.
delayed investments during the past two fiscal years from poor
•
A decline in SG&A expense rate in fiscal 2010 compared to
economic conditions and new golf development projects, particu- fiscal 2009 due mainly to leveraging SG&A costs over higher
larly in Asia, as well as the positive customer response for new sales volumes.
products we introduced. Operating earnings for the professional segment in fiscal 2009
•
Strong sales of landscape contractor equipment as a result of decreased 45.3 percent compared to fiscal 2008. Expressed as a
the successful introduction of new products that were well percentage of net sales, professional segment operating margins
received by customers. decreased to 13.2 percent in fiscal 2009 compared to 17.9 percent
•
Increased net sales of micro-irrigation products due to our in fiscal 2008. The operating profit decline was due mainly to lower
investments in additional manufacturing capacity that increased gross margins as a result of higher manufacturing costs from lower
production of our water conserving products to meet the growing plant utilization as we cut production to align it with the decline in
worldwide market demand. sales volumes, a stronger average U.S. dollar compared to most
•
A weaker average U.S. dollar compared to most other curren- other currencies in which we transact business, and higher tooling
cies in which we transact business. costs from investments in tools for new products. A higher SG&A
Our domestic field inventory levels of our professional segment expense rate also hampered operating earnings due mainly to
products were slightly down as of the end of fiscal 2010 as com- fixed SG&A costs spread over lower sales volumes, as well as
pared to the end of fiscal 2009 due to continued field inventory higher product liability expense.
management.
Worldwide net sales for the professional segment in fiscal 2009 Residential
were significantly down by 25.9 percent compared to fiscal 2008 Residential segment net sales represented 35 percent of consoli-
primarily from lower shipments for most domestic and international dated net sales for fiscal 2010 and fiscal 2009, and 30 percent for
product categories due to decreased demand largely as a result of fiscal 2008. The following table shows the residential segment net
the worldwide recessionary economic conditions during fiscal 2009. sales, operating earnings, and operating earnings as a percent of
Sales of golf maintenance equipment and irrigation systems net sales.
declined as customers delayed investments in new equipment at
existing golf courses and new golf course construction slowed, and (Dollars in millions)
sales of residential/commercial irrigation systems were down as a Fiscal years ended October 31 2010 2009 2008
result of weakness in the housing and commercial construction Net sales $589.7 $532.7 $542.9
% change from prior year 10.7% (1.9)% 0.3%
markets. In addition, landscape contractor equipment net sales
Operating earnings $ 58.0 $ 46.4 $ 35.3
decreased, despite the fact that our new products, which included As a percent of net sales 9.8% 8.7% 6.5%
our next generation of zero-turn radius riding mowers and Toro
GrandStand stand-on mowers, were well received by customers.
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