Toro 2009 Annual Report Download - page 17

component, and other costs. However, we may not be able to fully
ITEM 1A.RISK FACTORS
offset any such increased costs in the future. Further, if our price
increases are not accepted by our customers and the market, our
The following are significant factors known to us that could materi-
net sales, earnings, and market share could be adversely affected.
ally adversely affect our business, operating results, financial con-
Although most of the raw materials and components used in our
dition, or future financial performance.
products are commercially available from a number of sources and
Economic conditions and outlook in the United States in adequate supply, any disruption in the availability of such raw
and around the world could continue to adversely affect materials and components, our inability to timely or otherwise
our net sales and earnings. obtain substitutes for such items, or any deterioration in our rela-
tionships with or the financial viability of our suppliers could
Demand for our products depends upon economic conditions and adversely affect our business. Increases in our other costs of doing
outlook, which include but are not limited to recessionary condi- business may also adversely affect our profit margins and busi-
tions in the U.S. and other regions around the world and worldwide ness. For example, an increase in fuel costs may result in an
slow or negative economic growth rates; slow down or reductions increase in our transportation costs, which also could adversely
in levels of golf course development, renovation, and improvement; affect our operating results and business.
slow down or reductions in levels of home ownership, construction,
and home sales; consumer spending levels; credit availability and Weather conditions may reduce demand for some of our
credit terms for our distributors, dealers, and end-user customers; products and adversely affect our net sales.
short-term, mortgage, and other interest rates; unemployment
From time to time, weather conditions in a particular geographic
rates; interest rates; inflation; consumer confidence; and general
region may adversely affect sales of some of our products and
economic and political conditions and expectations in the U.S. and
field inventory levels. For example, in the past, drought conditions
the foreign economies in which we conduct business. Slow or neg-
have had an adverse effect on sales of certain mowing equipment
ative economic growth rates; inflationary pressures; higher com-
products, unusually rainy weather or severe drought conditions that
modity costs and fuel prices; slow downs or reductions in golf
result in watering bans have had an adverse effect on sales of our
course development, renovation, and improvement; slow downs or
irrigation products, and lower snow fall accumulations in key mar-
reductions in home construction and sales; home foreclosures;
kets have had an adverse effect on sales of our snow thrower
reduced credit availability or unfavorable credit terms for our dis-
products. To the extent that such unfavorable weather conditions
tributors, dealers, and end-user customers; higher short-term, mort-
are exacerbated by global climate change or otherwise, our sales
gage, and other interest rates; unemployment rates; and recession-
may be affected to a greater degree than we have previously
ary economic conditions and outlook could cause our distributors,
experienced.
dealers, and end-user customers to reduce spending, which may
cause them to delay or forego purchases of our products and
Our professional segment net sales are dependent upon
could have an adverse effect on our net sales and earnings.
the level of residential and commercial construction, the
level of homeowners’ outsourcing lawn care, the amount
Increases in the cost, or disruption in the availability, of
of investment in golf course renovations and
raw materials and components that we purchase and
improvements, new golf course development, golf
increases in our other costs of doing business, such as
course closures, the amount of government spending,
transportation costs, may adversely affect our profit
and other factors.
margins and business.
Our professional segment products are sold by distributors or deal-
We purchase raw materials such as steel, aluminum, fuel, petro-
ers, or directly to government customers, rental companies, and
leum-based resins, linerboard, and other commodities, and compo-
professional users engaged in maintaining and creating land-
nents, such as engines, transmissions, transaxles, hydraulics, and
scapes, such as golf courses, sports fields, municipal properties,
electric motors, for use in our products. Increases in the cost of
and residential and commercial landscapes. Accordingly, our pro-
such raw materials and components may adversely affect our profit
fessional segment net sales are impacted by the level of residen-
margins if we are unable to pass along to our customers these
tial and commercial construction, the level of homeowners’ out-
cost increases in the form of price increases or otherwise reduce
sourcing lawn care, the amount of investment in golf course
our cost of goods sold. Historically, we have used internal cost
renovations and improvements, new golf course construction, avail-
reduction efforts, proactive vendor negotiations, alternate sourcing
ability of credit to finance product purchases, and the amount of
options, substitute materials, and moderate price increases on
some of our products to offset a portion of increased raw material,
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