Toro 2010 Annual Report Download - page 36

fiscal 2010 we achieved our long-term goal to reduce average net
FINANCIAL CONDITION
working capital (accounts receivable plus inventory less trade pay-
Working Capital ables) as a percentage of net sales at a level below 20 percent, or
We have taken proactive measures to improve working capital utili- ‘‘to the teens.’’ Our average net working capital as a percentage of
zation, including managing our assets, controlling costs, and net sales as of the end of fiscal 2010 was 13.9 percent.
adjusting production plans. As such, our financial condition remains We expect average receivables to increase slightly and average
strong. We continue to place emphasis on asset management, days outstanding for receivables in fiscal 2011 to remain flat as
with a focus on minimizing the amount of working capital in the compared to fiscal 2010. We anticipate average inventory turnover
supply chain and maintaining or improving order replenishment and to decline in fiscal 2011 compared to fiscal 2010 as demand
service levels to end users. In connection with the established of exceeded our expectations in fiscal 2010 resulting in lower than
Red Iron, our financing joint venture with TCFIF, we sold certain average inventory levels. Therefore, we expect to increase our
receivables, including floor plan and open account receivables, average inventory levels in fiscal 2011 to meet anticipated higher
from most U.S. and Canadian distributors and dealers of our prod- demand for our products. We also anticipate average accounts
ucts at a purchase price equal to the face value of the receivables payable to increase slightly in fiscal 2011 compared to fiscal 2010
or the purchase price paid for such receivables. Red Iron began driven by our supply chain initiatives.
financing floor plan receivables in the fourth quarter of fiscal 2009.
Capital Expenditures and
Red Iron also began financing open account receivables, as well
Other Long-Term Assets
as floor plan receivables previously financed by a third party
Fiscal 2010 capital expenditures of $48.7 million were 28.4 percent
financing company, during our first quarter of fiscal 2010. The sale
higher compared to fiscal 2009. This increase was primarily attribu-
of these receivables enables us to use our working capital for stra-
table to production equipment and tooling expenditures for new
tegic purposes, such as research and development of innovative
products, as well as investments in additional manufacturing
new products, improvements in the quality and performance of
capacity that increased production for our water conserving prod-
existing products, strategic acquisitions and investments, and
ucts. Capital expenditures for fiscal 2011 are anticipated to be
return value to shareholders through share repurchases and cash
approximately $60 million as we expect to continue to invest in
dividends.
new product tooling, replacement production equipment, expansion
The following table highlights several key measures of our work-
of our vertical integration capabilities, as well as a new micro-irri-
ing capital performance.
gation manufacturing facility in Eastern Europe.
Long-term assets as of October 31, 2010 were $300.6 million
(Dollars in millions)
Fiscal years ended October 31 2010 2009 compared to $290.5 million as of October 31, 2009, a slight
increase of 3.5 percent. This increase was due primarily to the
Average cash and cash equivalents $175.3 $ 86.2
Average receivables, net 174.4 273.6 addition of intangible assets from an acquisition.
Average inventories, net 188.7 213.3
Average accounts payable 128.3 87.2 Capital Structure
Average days outstanding for receivables 38 66 The following table details the components of our total capitaliza-
Average inventory turnover 5.90x 4.75x tion and key ratios.
Average net receivables decreased 36.3 percent in fiscal 2010
compared to fiscal 2009, and average days outstanding for receiv- (Dollars in millions)
ables decreased to 38 days in fiscal 2010 compared to 66 days in October 31 2010 2009
fiscal 2009 due mainly to the sale of our floor plan and open Short-term debt $ 1.0 $ 4.5
account receivables to Red Iron during the fourth quarter of fiscal Long-term debt, including current portion 225.5 228.8
2009 and the first quarter of fiscal 2010, respectively. Average net Stockholders’ equity 275.8 315.2
Debt-to-capitalization ratio 45.1% 42.5%
inventories decreased 11.5 percent in fiscal 2010 compared to fis-
cal 2009, and average inventory turnover improved by 24.2 per- Our debt-to-capitalization ratio was higher in fiscal 2010 com-
cent in fiscal 2010 compared to fiscal 2009 as we continued our pared to fiscal 2009 due to a decrease in stockholders’ equity as
focus on improving asset management and greater than expected we continued to repurchase shares of our common stock.
demand during fiscal 2010. In addition, as part of our working capi-
tal initiative, average accounts payable increased 47.1 percent in Liquidity and Capital Resources
fiscal 2010 compared to fiscal 2009, driven by our supply chain Our businesses are seasonally working capital intensive and
initiatives and higher levels of production due to increased demand require funding for purchases of raw materials used in production,
for our products. As a result of the culmination of these efforts, in replacement parts inventory, payroll and other administrative costs,
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