Toro 2011 Annual Report Download - page 37

somewhat offset by lower manufacturing costs from higher plant higher foreign currency exchange rate losses in fiscal 2011 as
utilization, mainly related to increased demand for our products. compared to fiscal 2010.
•
An increase in SG&A expense mainly from an increase in war- Operating loss for the other segment in fiscal 2010 increased by
ranty expense due to special warranty modifications, as well as 15.7 percent compared to fiscal 2009. This loss increase was pri-
higher spending for marketing, warehousing, and engineering. marily attributable to an increase in employee incentive compensa-
However, a decline in product liability expense somewhat offset tion expense due to improved financial performance in fiscal 2010,
the increase in SG&A expense. as compared to fiscal 2009, and the elimination of TCC floor plan
Operating earnings for the residential segment in fiscal 2010 costs. Somewhat offsetting those factors was a decline in
increased 25.0 percent compared to fiscal 2009. Expressed as a expenses incurred in fiscal 2009 for several legal matters that were
percentage of net sales, residential segment operating margins not duplicated in fiscal 2010, income from our investment in Red
improved to 9.8 percent in fiscal 2010 compared to 8.7 percent in Iron, overall reduced spending from our leaner cost structure as a
fiscal 2009 due to an improvement in gross margins primarily from result of actions we implemented in fiscal 2009, as well as elimina-
increased sales volumes of higher-margin products and the resulting tion of costs incurred in fiscal 2009 for workforce adjustments.
effects of cost reduction efforts. These favorable benefits were
FINANCIAL CONDITION
somewhat offset by higher commodity costs, an increase in freight
expense, and higher manufacturing costs due to operating inefficien-
Working Capital
cies as a result of higher than anticipated customer demand. In
The following table highlights several key measures of our working
addition, SG&A expense increased from higher spending for market-
capital performance.
ing, product liability, incentive compensation, and warehousing costs.
Other (Dollars in millions)
Fiscal years ended October 31 2011 2010
(Dollars in millions) Average cash and cash equivalents $114.6 $175.3
Fiscal years ended October 31 2011 2010 2009 Average receivables, net 188.7 174.4
Net sales $ 21.0 $ 15.2 $ 24.8 Average inventories, net 242.5 188.7
% change from prior year 37.7% (38.5)% (20.5)% Average accounts payable 149.0 128.3
Operating loss $(84.6) $(90.4) $(78.2) Average days outstanding for receivables 37 38
Average inventory turnover (times) 5.14 5.90
Net Sales. Net sales for the other segment includes sales from Average net receivables increased 8.2 percent in fiscal 2011
our wholly owned domestic distribution companies less sales from compared to fiscal 2010 due mainly to higher sales volumes. Our
the professional and residential segments to those distribution average days outstanding for receivables improved to 37 days in
companies. In fiscal 2009, the other segment also included elimi- fiscal 2011 compared to 38 days in fiscal 2010 primarily as a result
nation of the professional and residential segments’ floor plan of floor plan and certain open account receivables being financed
interest costs from TCC. With the establishment of Red Iron begin- with Red Iron, our financing joint venture with TCFIF, instead of
ning in fiscal 2010, net sales for the other segment no longer directly with us. Average net inventories increased by 28.5 percent
includes corporate financing activities, including the elimination of in fiscal 2011 compared to fiscal 2010 as we prebuilt inventory
floor plan costs from TCC, which results in lower net sales for the during fiscal 2011, mainly for residential turf products, in anticipa-
other segment. The other segment net sales in fiscal 2011 tion of higher demand, which did not occur as expected due pri-
increased 37.7 percent compared to fiscal 2010 due to incremental marily to unfavorable weather conditions. As a result, average
sales from the addition of a U.S. Western-based distribution com- inventory turnover decreased by 12.9 percent in fiscal 2011 com-
pany that was acquired on October 29, 2010. pared to fiscal 2010. Average accounts payable increased by
The other segment net sales in fiscal 2010 decreased 38.5 per- 16.1 percent in fiscal 2011 compared to fiscal 2010, driven by
cent compared to fiscal 2009 as a result of the elimination of TCC higher average inventory levels and production, as well as our sup-
floor plan interest costs, as well as lower net sales at our wholly ply chain initiatives. As a result of the combination of these
owned Midwestern distributorship. increases, our average net working capital (accounts receivable
Operating Loss. Operating loss for the other segment in fiscal plus inventory less trade payables) as a percentage of net sales
2011 decreased by 6.5 percent compared to fiscal 2010. This loss was 15.0 percent as of the end of fiscal 2011 compared to
decrease was primarily attributable to improved profitability of our 13.9 percent as of the end of fiscal 2010.
wholly owned domestic distribution companies and an increase in In fiscal 2012, we intend to continue our efforts on efficient asset
income from affiliates. Somewhat offsetting those factors were management, with an increased focus on minimizing the amount of
working capital in the supply chain and maintaining or improving
31