Toro 2014 Annual Report Download - page 41

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A decrease in sales of walk power mowers due to adverse The other segment net sales in fiscal 2013 were even at
spring weather conditions in fiscal 2013 that negatively impacted $21.8 million compared to fiscal 2012.
demand and our sales during the key selling period. Operating Loss. Operating loss for the other segment in fiscal
2014 increased by 7.8 percent compared to fiscal 2013. This loss
Somewhat offsetting the decreases in residential segment net
increase was primarily attributable to higher incentive compensa-
sales were:
tion expense, higher foreign currency exchange rate losses, and
•
Increased sales of Pope irrigation products in Australia as a
recovery for a litigation settlement in fiscal 2013 that was not dupli-
result of dry weather conditions in that region.
cated in fiscal 2014.
•
Higher shipments and demand of zero-turn radius riding mowers
Operating loss for the other segment in fiscal 2013 decreased by
and handheld trimmer and blower products due to positive cus-
4.3 percent compared to fiscal 2012. This loss decrease was pri-
tomer response to newly introduced and enhanced products, as
marily attributable to litigation recovery in fiscal 2013, lower foreign
well as favorable fall weather conditions.
currency exchange rate losses, and an increase in income from
Operating Earnings. Operating earnings for the residential seg- our equity investment in Red Iron.
ment in fiscal 2014 increased 24.0 percent compared to fiscal
2013. Expressed as a percentage of net sales, residential segment FINANCIAL CONDITION
operating margins increased 100 basis points to 11.4 percent in Working Capital
fiscal 2014 compared to 10.4 percent in fiscal 2013. The following
In fiscal 2014, we continued to place emphasis on improving asset
factors impacted residential segment operating earnings:
utilization, with a focus on reducing the amount of working capital
•
Slightly lower gross margins from higher commodity prices and
in the supply chain, adjusting production plans, and maintaining or
costs related to a supplier component rework issue, partially off-
improving order replenishment and service levels to end users. As
set by production efficiencies on increased sales volumes.
a result of our efforts, our average net working capital (accounts
•
Lower SG&A expense rate attributable to leveraging fixed SG&A
receivable plus inventory less trade payables) as a percentage of
costs over higher sales volumes.
net sales decreased to 15.1 percent as of the end of fiscal 2014
Operating earnings for the residential segment in fiscal 2013
compared to 16.6 percent as of the end of fiscal 2013.
increased 7.2 percent compared to fiscal 2012. Expressed as a
The following table highlights several key measures of our work-
percentage of net sales, residential segment operating margins
ing capital performance.
increased 90 basis points to 10.4 percent in fiscal 2013 compared
to 9.5 percent in fiscal 2012. The following factors impacted resi- (Dollars in millions)
dential segment operating earnings: Fiscal years ended October 31 2014 2013
•
Higher gross margins from cost reduction efforts and lower com- Average cash and cash equivalents $156.9 $123.0
modity costs, somewhat offset by unabsorbed manufacturing Average receivables, net 208.1 198.9
costs from lower plant utilization as we cut production due to Average inventories, net 306.2 298.0
lower sales volumes of snow thrower products and walk power Average accounts payable 185.2 158.3
Average days outstanding for receivables 35.0 35.6
mowers.
Average inventory turnover (times) 4.57 4.42
•
Higher SG&A expense rate due to fixed SG&A costs over lower
sales volumes, somewhat offset by lower warranty expense. The following factors impacted our working capital:
•
Higher other income due to a recovery from a litigation settle-
•
Average net receivables increased by 4.6 percent in fiscal 2014
ment in fiscal 2013. compared to fiscal 2013 as a result of higher sales volumes. Our
average days outstanding for receivables slightly decreased to
Other 35.0 days in fiscal 2014 compared to 35.6 days in fiscal 2013.
(Dollars in millions)
•
Average inventories slightly increased by 2.8 percent in fiscal
Fiscal years ended October 31 2014 2013 2012 2014 compared to fiscal 2013. However, inventory levels as of
Net sales $ 22.7 $ 21.8 $ 21.8 the end of fiscal 2014 compared to the end of fiscal 2013 were
% change from prior year 4.2% 0.0% 3.6%
up by $34.5 million, or 14.4 percent, as we built inventory in
Operating loss $(96.8) $(89.7) $(93.7)
anticipation of strong demand for certain products, including
Net Sales. Net sales for the other segment includes sales from products impacted by the continued phase-in of applicable Tier 4
our wholly owned domestic distribution companies less sales from diesel engine emission requirements and other regulations in
the Professional and Residential segments to those distribution Europe.
companies. The other segment net sales in fiscal 2014 were up by
$0.9 million compared to fiscal 2013 due to higher sales volumes
at our company-owned distribution companies.
35