Toro 2013 Annual Report Download - page 37

Gross Margin. Gross margin increased by 60 basis points to other income, net. Operating loss for the Other segment includes
34.4 percent in fiscal 2012 from 33.8 percent in fiscal 2011. This earnings (loss) from our wholly owned domestic distribution com-
improvement was mainly the result of the following factors: panies, corporate activities, other income, and interest expense.
•
Price increases on some of our products. The following information provides perspective on our business
•
Lower manufacturing costs from higher plant utilization, mainly segments’ net sales and operating results.
related to increased production and demand for our products.
Professional
•
Rework costs in fiscal 2011 for a non-safety quality issue that
Professional segment net sales represented 70 percent of consoli-
affected a large number of our residential segment walk power
dated net sales for fiscal 2013, 68 percent for fiscal 2012, and
mowers that was not duplicated in fiscal 2012.
66 percent for fiscal 2011. The following table shows the profes-
Somewhat offsetting those positive factors were: sional segment net sales, operating earnings, and operating earn-
•
Higher average prices paid for commodities in fiscal 2012 com- ings as a percent of net sales.
pared to fiscal 2011.
(Dollars in millions)
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Unfavorable product mix and lower gross margins on product Fiscal years ended October 31 2013 2012 2011
sales from acquisitions in fiscal 2012 compared to fiscal 2011.
Net sales $1,425.3 $1,329.5 $1,239.1
Selling, General, and Administrative Expense. SG&A expense % change from prior year 7.2% 7.3% 14.2%
rate in fiscal 2012 decreased by 10 basis points to 23.9 percent Operating earnings $ 254.4 $ 232.1 $ 205.0
As a percent of net sales 17.9% 17.5% 16.5%
compared to 24.0 percent in fiscal 2011 due to fixed SG&A costs
spread over higher sales volumes. However, the increase in SG&A Net Sales. Worldwide net sales for the professional segment in
expense of $15.3 million was driven mainly by incremental costs fiscal 2013 were up by 7.2 percent compared to fiscal 2012 prima-
from acquisitions of $7.2 million and higher self-insured health care rily as a result of the following factors:
expenses from unfavorable claims experience. Somewhat offset-
•
Successful introduction of new and enhanced products that were
ting those increases in SG&A expense were a decline in marketing well received by customers and resulted in increased sales and
expenses of $6.3 million due mainly to incentive programs in fiscal demand, particularly for landscape contractor equipment.
2011 that were not duplicated to the same degree in fiscal 2012
•
Higher global sales of our micro-irrigation products from contin-
and lower incentive compensation expense of $4.2 million attributa- ued market growth and demand for our drip irrigation solutions
ble to lower than planned financial results in fiscal 2012. for agricultural markets, as well as additional manufacturing
Interest Expense. Interest expense for fiscal 2012 slightly capacity that increased production and enabled higher sales of
decreased by 0.4 percent compared to fiscal 2011 as a result of our micro-irrigation products.
lower average debt levels.
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Increased sales and demand in the rental and construction mar-
ket from broadening our customer base as part of our acquisi-
Other Income, Net. Other income for fiscal 2012 was $7.6 mil-
tions in fiscal 2012, improved market conditions, and new prod-
lion compared to $7.3 million in fiscal 2011, an increase of
uct introductions.
$0.3 million, or 3.4 percent. This increase in other income, net was
•
Incremental sales of $6.4 million from acquisitions.
due mainly to an increase in income from our equity investment in
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Increased sales of golf and grounds equipment and irrigation
Red Iron, somewhat offset by lower interest income in fiscal 2012
systems as a result of price increases, higher demand, and golf
compared to fiscal 2011.
renovation projects in the U.S., as well as golf projects in Asia
Provision for Income Taxes. The effective tax rate for fiscal and the EMEA region. Additionally, our domestic field inventory
2012 was 34.0 percent compared to 32.7 percent in fiscal 2011. levels were up as of the end of fiscal 2013 compared to the end
The increase in the effective tax rate was primarily the result of the of fiscal 2012 due, in part, to anticipated strong retail demand in
expiration of the domestic research tax credit on December 31, fiscal 2014 for our professional segment products subject to
2011. Tier 4 diesel engine emission requirements, as well as the
expansion of our rental and construction business from recent
PERFORMANCE BY BUSINESS SEGMENT acquisitions.
As more fully described in Note 12 of the Notes to Consolidated
Somewhat offsetting those sales increases were lower sales of our
Financial Statements, we operate in three reportable business seg-
retail irrigation products as a result of reduced product placement
ments: Professional, Residential, and Distribution. Our Distribution
at a key customer.
segment, which consists of our company-owned domestic distribu-
Worldwide net sales for the professional segment in fiscal 2012
torships, has been combined with our corporate activities and is
were up by 7.3 percent compared to fiscal 2011 primarily from the
shown as ‘‘Other.’’ Operating earnings for our Professional and
successful introduction of new and enhanced products, and higher
Residential segments are defined as earnings from operations plus
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