Toro 2015 Annual Report Download - page 14

and sand spreaders occurring primarily between April and Decem-
Patents and Trademarks
ber, which also resulted in a greater variability of sales volumes
We own patents, trademarks, and trade secrets related to our
due to dependency on snow falls for these products.
products in the U.S. and certain countries outside the U.S. in
Overall, our worldwide sales levels are historically highest in our
which we conduct business. We expect to apply for future patents
fiscal second quarter and retail demand is generally highest in our
and trademarks, as appropriate, in connection with the develop-
fiscal third quarter. Typically, our accounts receivable balances
ment of innovative new products, services, and enhancements.
increase between January and April because of higher sales
Although we believe that, in the aggregate, our patents are valua-
volumes and extended payment terms made available to our cus-
ble, and patent protection is beneficial to our business and com-
tomers. Accounts receivable balances typically decrease between
petitive positioning, our patent protection will not necessarily deter
May and December when payments are received. Our financing
or prevent competitors from attempting to develop similar products.
requirements are subject to variations due to seasonal changes in
We are not materially dependent on any one or more of our pat-
working capital levels, which typically increase in the first half of
ents. However, certain Toro trademarks that contribute to our iden-
our fiscal year and decrease in the second half of our fiscal year.
tity and the recognition of our products and services, including the
Seasonal cash requirements of our business are financed from a
Toro name and logo, are an integral part of our business.
combination of cash balances, cash flows from operations, and
We regularly review certain patents issued by the United States
short-term borrowings under our credit facilities.
Patent and Trademark Office (‘‘USPTO’’) and international patent
The following table shows total consolidated net sales and net
offices to help avoid potential liability with respect to others’ pat-
earnings for each fiscal quarter as a percentage of the total fiscal
ents. Additionally, we periodically review competitors’ products to
year.
prevent possible infringement of our patents by others. We believe
these activities help us minimize our risk of being a defendant in
patent infringement litigation. We are currently involved in patent Fiscal 2015 Fiscal 2014
litigation cases where we are asserting our patents against com- Net Net Net Net
petitors and defending against patent infringement assertions by Quarter Sales Earnings Sales Earnings
others. Such cases are at varying stages in the litigation process. First 20% 15% 21% 15%
Second 35 47 34 50
Similarly, we periodically monitor various trademark registers and
Third 25 26 26 29
the market to prevent infringement of and damage to our trade- Fourth 20 12 19 6
marks by others. From time to time, we are involved in trademark
oppositions where we are asserting our trademarks against third
Effects of Weather
parties who are attempting to establish rights in trademarks that
From time to time, weather conditions in particular geographic
are confusingly similar to ours. We believe these activities help
regions or markets may adversely or positively affect sales of
minimize risk of harm to our trademarks, and help maintain distinct
some of our products and field inventory levels and result in a
products and services that we believe are well regarded in the
negative or positive impact on our future net sales. If the percent-
marketplace.
age of our net sales from outside the U.S. increases, our depen-
dency on weather in any one part of the world decreases. None-
Seasonality
theless, weather conditions could materially affect our future net
Sales of our residential products, which accounted for 30 percent
sales.
of total consolidated net sales in fiscal 2015, are seasonal, with
sales of lawn and garden products occurring primarily between
Working Capital
February and June, depending upon seasonal weather conditions
Our businesses are seasonally working capital intensive and
and demand for our products. Sales of snow thrower products
require funding for purchases of raw materials used in production;
occur primarily between July and January, depending upon prior
replacement parts inventory; payroll and other administrative costs;
season snow falls, preseason demand, and product availability.
capital expenditures; establishment of new facilities; expansion,
Opposite seasons in global markets in which we sell our products
renovation, and upgrading of existing facilities; as well as for
somewhat moderate this seasonality of our residential product
financing receivables from customers that are not financed with
sales. Seasonality of professional product sales also exists but is
Red Iron Acceptance, LLC (‘‘Red Iron’’), our joint venture with TCF
tempered because the selling season in the Southern U.S. and our
Inventory Finance, Inc. (‘‘TCFIF’’). We fund our operations through
markets in the Southern hemisphere continue for a longer portion
a combination of cash and cash equivalents, cash flows from oper-
of the year than in Northern regions of the world. The addition of
ations, short-term borrowings under our credit facilities, and
the BOSS business added a portfolio of counter-seasonal products
to our professional segment with our sales of snowplows and salt
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