Toro 2011 Annual Report Download - page 21

represent a significant component of our future net sales. We may adversely affected. We also cannot be certain that our products or
not be able to compete as effectively with our competitors, and technologies have not infringed or will not infringe the proprietary
ultimately satisfy the needs and preferences of our customers, rights of others. Any such infringement could cause third parties,
unless we can continue to enhance existing products and develop including our competitors, to bring claims against us, resulting in
new innovative products in the markets in which we compete. significant costs, possible damages and substantial uncertainty.
Product development requires significant financial, technological, We could also be forced to develop an alternative that could be
and other resources. Although we have implemented Lean manu- costly and time-consuming, or acquire a license, which we might
facturing and other productivity improvement initiatives to provide not be able to do on terms favorable to us, or at all.
investment funding for product enhancements and new products, We also rely on trade secrets and proprietary know-how that we
we cannot be certain that we will be able to continue to do so in seek to protect, in part, by confidentiality agreements with our
the future. Product improvements and new product introductions employees and consultants. These agreements may be breached,
also require significant research, planning, design, development, and we may not have adequate remedies for any such breach.
engineering, and testing at the technological, product, and manu- Even if these confidentiality agreements are not breached, our
facturing process levels and we may not be able to timely develop trade secrets may otherwise become known or be independently
and introduce product improvements or new products. Our compet- developed by competitors.
itors’ new products may beat our products to market, be higher
We manufacture our products at and distribute our
quality or more reliable, be more effective with more features
products from several locations in the United States and
and/or less expensive than our products, obtain better market
internationally. Any disruption at any of these facilities
acceptance, or render our products obsolete. Any new products
or in our inability to cost-effectively expand existing,
that we develop may not receive market acceptance or otherwise
open and manage new, and/or move production between
generate any meaningful net sales or profits for us relative to our
manufacturing facilities could adversely affect our
expectations based on, among other things, existing and antici-
business and operating results.
pated investments in manufacturing capacity and commitments to
fund advertising, marketing, promotional programs, and research We currently manufacture most of our products at seven locations
and development. in the United States, two locations in Mexico, and one location in
each of Australia, Italy, the United Kingdom, and Romania. We
Our reliance upon patents, trademark laws, and also have several locations that serve as distribution centers,
contractual provisions to protect our proprietary rights warehouses, test facilities, and corporate offices. In addition, we
may not be sufficient to protect our intellectual property have agreements to manufacture products at several third-party
from others who may sell similar products. Our products manufacturers. These facilities may be affected by natural or
may infringe the proprietary rights of others. man-made disasters and other external events, including drug car-
We hold patents relating to various aspects of our products and tel-related violence that may disrupt our production activities and
believe that proprietary technical know-how is important to our bus- maquiladora operations based in Juarez, Mexico. In the event that
iness. Proprietary rights relating to our products are protected from one of our manufacturing facilities was affected by a disaster or
unauthorized use by third parties only to the extent that they are other event, we could be forced to shift production to one of our
covered by valid and enforceable patents or are maintained in con- other manufacturing facilities. Although we maintain insurance for
fidence as trade secrets. We cannot be certain that we will be damage to our property and disruption of our business from casu-
issued any patents from any pending or future patent applications alties, such insurance may not be sufficient to cover all of our
owned by or licensed to us or that the claims allowed under any potential losses. Any disruption in our manufacturing capacity could
issued patents will be sufficiently broad to protect our technology. have an adverse impact on our ability to produce sufficient inven-
In the absence of enforceable patent protection, we may be vulner- tory of our products or may require us to incur additional expenses
able to competitors who attempt to copy our products or gain in order to produce sufficient inventory, and therefore, may
access to our trade secrets and know-how. Others may initiate adversely affect our net sales and operating results. Any disruption
litigation to challenge the validity of our patents, or allege that we or delay at our manufacturing facilities, including a work slowdown,
infringe their patents, or they may use their resources to design strike, or similar action at any one of our three facilities operating
comparable products that do not infringe our patents. We may under a collective bargaining agreement or the failure to renew or
incur substantial costs if our competitors initiate litigation to chal- enter into new collective bargaining agreements, could impair our
lenge the validity of our patents, or allege that we infringe their ability to meet the demands of our customers, and our customers
patents, or if we initiate any proceedings to protect our proprietary may cancel orders or purchase products from our competitors,
rights. If the outcome of any such litigation is unfavorable to us, which could adversely affect our business and operating results.
our business, operating results, and financial condition could be
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