Toro 2014 Annual Report Download - page 16

foreign markets, thereby impacting their competitiveness. We pro-
Customers
vide pricing support, as needed, to foreign customers to remain
Overall, we believe that in the long-term we are not dependent on
competitive in international markets.
any single customer; however, the Residential segment of our bus-
iness is dependent on The Home Depot as a customer, which
Environmental Matters and Other Governmental
accounted for approximately 11 percent and 10 percent of our total
consolidated gross sales in fiscal 2014 and 2013, respectively. Regulation
While the loss of any substantial customer, including The Home We are subject to numerous international, federal, state, and other
Depot, could have a material adverse short-term impact on our governmental laws, rules, and regulations relating to, among
business, we believe that our diverse distribution channels and others, climate change; emissions to air and discharges to water;
customer base should reduce the long-term impact of any such restrictions placed on water usage and water availability; product
loss. and associated packaging; restricted substances, including ‘‘conflict
minerals’’ disclosure rules; import and export compliance, including
Backlog of Orders country of origin certification requirements; worker and product
Our backlog of orders is dependent upon when customers place user health and safety; energy efficiency; product life-cycles; out-
orders and is not necessarily an indicator of our expected results door noise laws; and the generation, use, handling, labeling, col-
for our fiscal 2015 net sales. The approximate backlog of orders as lection, management, storage, transportation, treatment, and dispo-
of October 31, 2014 and 2013 was $136.5 million and $91.2 mil- sal of hazardous substances, wastes, and other regulated
lion, respectively, an increase of 49.8 percent. This increase was materials. For example:
primarily due to strong orders of our professional segment prod-
•
The United States EPA, the California Air Resources Board, and
ucts subject to the continued phase-in of Tier 4 diesel engine similar regulators in other U.S. states and foreign jurisdictions in
emission requirements before we implement price increases for which we sell our products have phased in, or are phasing in,
products subject to these regulations. In addition, strong demand emission regulations setting maximum emission standards for
for snow thrower products late in fiscal 2014 also contributed to certain equipment. Specifically, the EPA adopted increasingly
the increase in our backlog of orders as of the end of fiscal 2014 stringent engine emission regulations, including Tier 4 emission
compared to the end of fiscal 2013. We expect the existing back- requirements applicable to diesel engines in specified horse-
log of orders will be filled in early fiscal 2015. power ranges that are used in some of our professional segment
products. Beginning January 1, 2013, such requirements
Competition expanded to additional horsepower categories and, accordingly,
Our products are sold in highly competitive markets throughout the applied to more of our products. Similar emission regulations are
world. The principal competitive factors in our markets are product also being considered in other markets in which we sell our
innovation, quality and reliability, pricing, product support and cus- products, such as the European Union (‘‘EU’’) and China.
tomer service, warranty, brand awareness, reputation, distribution,
•
The United States federal government, several U.S. states, and
shelf space, and financing options. We believe we offer total solu- certain international jurisdictions in which we sell our products,
tions and full service packages with high quality products that have including the EU and each of its member states, have imple-
the latest technology and design innovations. In addition, by selling mented one or more of the following: (i) product life-cycle laws,
our products through a network of distributors, dealers, hardware rules, or regulations, which are intended to reduce waste and
retailers, home centers, and mass retailers, we offer comprehen- environmental and human health impact, and require manufac-
sive service support during and after the warranty period. We com- turers to collect, dispose, and recycle certain products, including
pete in many product lines with numerous manufacturers, some of some of our products, at the end of their useful life, including the
which have substantially larger operations and financial resources Waste Electrical and Electronic Equipment (‘‘WEEE’’) directive or
than us. We believe that we have a competitive advantage similar product life-cycle management laws, rules, or regulations,
because we manufacture a broad range of product lines, we are which mandate the labeling, collection, and disposal of specified
committed to product innovation and customer service, we have a waste electrical and electronic equipment, including some of our
strong history in and focus on maintaining turf and landscapes, products; (ii) the Restriction on the use of Hazardous Sub-
and our distribution channels position us well to compete in various stances (‘‘RoHS’’) directive or similar substance level laws, rules,
markets. or regulations, which restrict the use of several specified hazard-
Internationally, our residential segment products face more com- ous materials in the manufacture of specific types of electrical
petition because many foreign competitors design, manufacture, and electronic equipment, including some of our products;
and market products in their respective countries. We experience (iii) the Registration, Evaluation, Authorization and Restriction of
this competition primarily in Europe. In addition, fluctuations in the Chemicals (‘‘REACH’’) directive or similar substance level laws,
value of the U.S. dollar may affect the price of our products in rules, or regulations that require notification of use of certain
10