Toro 2009 Annual Report Download - page 20

adverse impact on our ability to produce sufficient inventory of our
Fluctuations in foreign currency exchange rates could
products or may require us to incur additional expenses in order to
result in declines in our reported net sales and net
produce sufficient inventory, and therefore, may adversely affect
earnings.
our net sales and operating results. Any disruption or delay at our
Because the functional currency of our foreign operations is the manufacturing facilities, including a work slowdown, strike, or simi-
applicable local currency, we are exposed to foreign currency lar action at any one of our three facilities operating under a col-
exchange rate risk arising from transactions in the normal course lective bargaining agreement or the failure to renew or enter into
of business, such as sales and loans to wholly owned subsidiaries new collective bargaining agreements, including two such agree-
as well as sales to third party customers, purchases from suppli- ments that expire in fiscal 2010, could impair our ability to meet
ers, and bank lines of credit with creditors denominated in foreign the demands of our customers, and our customers may cancel
currencies. Our reported net sales and net earnings are subject to orders or purchase products from our competitors, which could
fluctuations in foreign currency exchange rates. Because our prod- adversely affect our business and operating results. Our operating
ucts are manufactured or sourced primarily from the United States results may also be adversely affected if we are unable to
and Mexico, a stronger U.S. dollar and Mexican peso generally cost-effectively expand existing and move production between
has a negative impact on results from operations, while a weaker manufacturing facilities as needed from time to time.
dollar and peso generally has a positive effect. Our primary foreign
currency exchange rate exposure is with the EU Euro, the Austra- We intend to grow our business through additional
lian dollar, the Canadian dollar, the British pound, the Mexican acquisitions and alliances, stronger customer relations,
peso, and the Japanese yen against the U.S. dollar. While we and new joint ventures and partnerships, which are risky
actively manage the exposure of our foreign currency market risk and could harm our business.
in the normal course of business by entering into various foreign
One of our growth strategies is to drive growth in our businesses
exchange contracts, these instruments may not effectively limit our
and accelerate opportunities to expand our global presence
underlying exposure from currency exchange rate fluctuations or
through targeted acquisitions, alliances, stronger customer rela-
minimize our net earnings and cash volatility associated with for-
tions, and new joint ventures and partnerships that add value while
eign currency exchange rate changes. Further, a number of finan-
considering our existing brands and product portfolio. The benefits
cial institutions similar to those that serve as counterparties to our
of an acquisition or new joint venture or partnership may take more
foreign exchange contracts have been adversely affected by the
time than expected to develop or integrate into our operations, and
unprecedented distress in the worldwide credit markets. The failure
we cannot guarantee that previous or future acquisitions, alliances,
of one or more counterparties to our foreign currency exchange
joint ventures, or partnerships will in fact produce any benefits. In
rate contracts to fulfill their obligations to us could adversely affect
addition, acquisitions, alliances, joint ventures, and partnerships
our operating results.
involve a number of risks, including:
•
diversion of management’s attention;
We manufacture our products at and distribute our
•
difficulties in integrating and assimilating the operations and
products from several locations in the United States and
products of an acquired business or in realizing projected effi-
internationally. Any disruption at any of these facilities
ciencies, cost savings, and synergies;
or our inability to cost-effectively expand existing and/or
•
potential loss of key employees or customers of the acquired
move production between manufacturing facilities could
businesses or adverse effects on existing business relationships
adversely affect our business and operating results.
with suppliers and customers;
We manufacture most of our products at seven locations in the
•
adverse impact on overall profitability if acquired businesses do
United States, two locations in Mexico, and one location in each of not achieve the financial results projected in our valuation
Australia, Italy, and the United Kingdom. We also have several models;
locations that serve as distribution centers, warehouses, test facili-
•
reallocation of amounts of capital from other operating initiatives
ties, and corporate offices. In addition, we have agreements to and/or an increase in our leverage and debt service require-
manufacture products at several third-party manufacturers. These ments to pay the acquisition purchase prices, which could in turn
facilities may be affected by natural or man-made disasters. In the restrict our ability to access additional capital when needed or to
event that one of our manufacturing facilities was affected by a pursue other important elements of our business strategy;
disaster, we could be forced to shift production to one of our other
•
inaccurate assessment of undisclosed, contingent or other liabili-
manufacturing facilities. Although we purchase insurance for dam- ties or problems, unanticipated costs associated with an acquisi-
age to our property and disruption of our business from casualties, tion, and an inability to recover or manage such liabilities and
such insurance may not be sufficient to cover all of our potential costs; and
losses. Any disruption in our manufacturing capacity could have an
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