Toro 2012 Annual Report Download - page 13
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Please find page 13 of the 2012 Toro annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.continue into fiscal 2013. Historically, we have mitigated, and we patents are valuable, and patent protection is beneficial to our bus-
currently expect to continue to mitigate, commodity cost increases iness and competitive positioning, our patent protection will not
in part by engaging in proactive vendor negotiations, reviewing necessarily deter or prevent competitors from attempting to
alternative sourcing options, substituting materials, engaging in develop similar products. We are not materially dependent on any
internal cost reduction efforts, and increasing prices on some of one or more of our patents. However, certain Toro trademarks that
our products, all as appropriate. contribute to our identity and the recognition of our products and
Most of the components of our products are also affected by services, including the Toro name and logo, are an integral part
commodity cost pressures and are commercially available from a of our business, and their loss could have a material adverse
number of sources. In fiscal 2012, we experienced no significant effect on our business and operating results.
work stoppages because of shortages of raw materials or com- We regularly review certain patents issued by the United States
modities. The highest raw material and component costs are gen- Patent and Trademark Office (‘‘USPTO’’) and international patent
erally for steel, engines, hydraulic components, transmissions, offices to prevent possible infringement of our patents by others.
plastic resin, and electric motors, all of which we purchase from Additionally, we periodically review competitors’ products to help
several suppliers around the world. avoid potential liability with respect to others’ patents. We believe
these activities help us minimize our risk of being a defendant in
Service and Warranty patent infringement litigation. We are currently involved in patent
Our products are warranted to ensure customer confidence in litigation cases where we are asserting our patents against com-
design, workmanship, and overall quality. Warranty coverage is petitors and defending against patent infringement assertions by
generally for specified periods of time and on select products’ others.
hours of usage, and generally covers parts, labor, and other Similarly, we periodically monitor various trademark registers and
expenses for non-maintenance repairs. Warranty coverage gener- the market to prevent infringement of and damage to our trade-
ally does not cover operator abuse or improper use. An authorized marks by others. We are currently involved in trademark opposi-
company distributor or dealer must perform warranty work. Distrib- tions where we are asserting our trademarks against third parties
utors and dealers submit claims for warranty reimbursement and who are attempting to establish rights in trademarks that are con-
are credited for the cost of repairs, labor, and other expenses as fusingly similar to ours. We believe these activities help minimize
long as the repairs meet our prescribed standards. Warranty risk of harm to our trademarks, and help maintain distinct products
expense is accrued at the time of sale based on the type and and services that we believe are well regarded in the marketplace.
estimated number of products under warranty, historical average
costs incurred to service warranty claims, the trend in the historical Seasonality
ratio of claims to sales, the historical length of time between the Sales of our residential products, which accounted for 31 percent
sale and resulting warranty claim, and other minor factors. Special of total consolidated net sales in fiscal 2012, are seasonal, with
warranty reserves are also accrued for major rework campaigns. sales of lawn and garden products occurring primarily between
Service support outside of the warranty period is provided by February and May, depending upon seasonal weather conditions
authorized distributors and dealers at the customer’s expense. We and demand for our products. Sales of snow removal products
sell extended warranty coverage on select products for a pre- occur primarily between July and January, depending upon sea-
scribed period after the original warranty period expires. sonal snow falls, product availability, and demand for our snow
removal products. Opposite seasons in global markets in which we
Product Liability sell our products somewhat moderate this seasonality of our resi-
We have rigorous product safety standards and continually work to dential product sales. Seasonality of professional product sales
improve the safety and reliability of our products. We monitor for also exists, but is tempered because the selling season in the
accidents and possible claims and establish liability estimates Southern U.S. and in our markets in the Southern hemisphere con-
based on internal evaluations of the merits of individual claims. We tinues for a longer portion of the year than in Northern regions of
purchase excess insurance coverage for catastrophic product liabil- the world.
ity claims for incidents that exceed our self-insured retention levels. Overall, worldwide sales levels are historically highest in our fis-
cal second quarter and retail demand is generally highest in our
Patents and Trademarks fiscal third quarter. Typically, accounts receivable balances
We own patents, trademarks, and trade secrets related to our increase between January and April because of higher sales
products in the United States and certain countries outside the volumes and extended payment terms made available to our cus-
United States in which we conduct business. We expect to apply tomers. Accounts receivable balances typically decrease between
for future patents and trademarks, as appropriate, in connection May and December when payments are received. Our financing
with the development of innovative new products, services, and requirements are subject to variations due to seasonal changes in
enhancements. Although we believe that, in the aggregate, our
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