Toro 2015 Annual Report Download - page 12

Home Solutions Products. We design and market home solu- reportable business segments, see Note 12 of the Notes to Con-
tions products under the Toro and Pope brand names, including solidated Financial Statements, in the section entitled ‘‘Segment
yard tools such as electric, gas, and cordless grass trimmers; elec- Data,’’ included in Part II, Item 8, ‘‘Financial Statements and Sup-
tric and cordless hedge trimmers; and electric, gas, and cordless plementary Data’’ of this report.
blower-vacuums. In Australia, we also design and market garden
product offerings, such as underground and hose-end retail irriga- Engineering and Research
tion products under the Pope brand name. In fiscal 2015, we intro- We are committed to an ongoing engineering program dedicated to
duced the Ultra Blower Vac and UltraPlus Blower Vac, which is developing innovative new products and improvements in the qual-
three machines in one; a powerful blower, high speed vacuum, ity and performance of existing products. However, a focus on
and leaf shredder that features a metal impeller and an infinite innovation also carries certain risks that new technology could be
variable speed air flow. slow to be accepted or not accepted by the marketplace. We
attempt to mitigate these risks through our focus on and commit-
Snow Thrower Products. We manufacture and market a range ment to understanding our customers’ needs and requirements.
of gas-powered single-stage and two-stage snow thrower models, We invest time upfront with customers, using ‘‘Voice of the Cus-
as well as a range of electric snow thrower models. Single-stage tomer’’ tools, to help us develop innovative products that are
snow throwers are walk behind units with lightweight four-cycle intended to meet or exceed customer expectations. We use
gasoline engines. Most single-stage snow thrower models include Design for Manufacturing and Assembly (‘‘DFM/A’’) tools to ensure
Power Curve snow thrower technology, and some feature our early manufacturing involvement in new product designs intended
Quick Shoot control system that is designed to enable operators to reduce production costs. DFM/A focuses on reducing the num-
to quickly change snow-throwing direction. Our pivoting scraper is ber of parts required to assemble new products, as well as design-
designed to keep the rotor in constant contact with the pavement. ing products to move more efficiently through the manufacturing
Our two-stage snow throwers are generally designed for relatively process. We strive to make improvements to our new product
large areas of deep and heavy snow. Our two-stage snow throw- development system as part of our continuing focus on Lean meth-
ers include a line of models featuring our patented Anti-Clogging ods to shorten development time, reduce costs, and improve
System and Quick Stick chute control technology. Our electric quality.
snow throwers are lightweight and ideal for clearing up to six Our engineering expenses are primarily incurred in connection
inches of snow from decks, steps, sidewalks, and small driveways. with the development of new products that may have additional
In fiscal 2015, we introduced the Toro SnowMaster snow applications or represent extensions of existing product lines,
thrower, which features auger technology designed to increase effi- improvements to existing products, and cost reduction efforts. Our
ciency by clearing more snow per minute. expenditures for engineering and research were $73.6 million
(3.1 percent of net sales) in fiscal 2015, $69.7 million (3.2 percent
Financial Information about International Operations of net sales) in fiscal 2014, and $64.6 million (3.2 percent of net
and Business Segments sales) in fiscal 2013.
We currently manufacture our products in the United States
(‘‘U.S.’’), Mexico, Australia, the United Kingdom, Italy, Romania, Manufacturing and Production
and China for sale throughout the world. We maintain sales offices We have strategically identified specific core manufacturing compe-
in the United States, Belgium, the United Kingdom, Australia, Sin- tencies for vertical integration, such as injection molding, extrusion,
gapore, Japan, China, Italy, Korea, and Germany. New product welding, painting, machining, and aluminum die casting, and have
development is pursued primarily in the United States. Our net chosen outside vendors to provide other services. We design com-
sales outside the U.S. were 25.5 percent, 28.7 percent, and ponent parts in cooperation with our vendors, contract with them
30.1 percent of total consolidated net sales for fiscal 2015, 2014, for the development of tooling, and then enter into agreements
and 2013, respectively. with these vendors to purchase component parts manufactured
A portion of our cash flow is derived from sales and purchases using the tooling. In addition, our vendors regularly test new tech-
denominated in foreign currencies. To reduce the uncertainty of nologies to be applied in the design and production of component
foreign currency exchange rate movements on these sales and parts. Manufacturing operations include robotic and computer-auto-
purchase commitments, we enter into foreign currency exchange mated equipment intended to speed production, reduce costs, and
contracts for select transactions. For additional information regard- improve the quality, fit, and finish of our products. Operations are
ing our foreign currency exchange contracts, see Part II, Item 7A, also designed to be flexible enough to accommodate product
‘‘Quantitative and Qualitative Disclosures about Market Risk’’ of design changes that are necessary to respond to market condi-
this report. For additional financial information regarding our inter- tions and changing customer requirements.
national operations and geographical areas, and each of our three
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