Toro 2014 Annual Report Download - page 19

and end-user customers; higher short-term, mortgage, and other pass along to our customers these cost increases in the form of
interest rates; and general economic and political conditions and price increases or otherwise reduce our cost of goods sold. Histori-
expectations. In the past, some of these factors have caused our cally, we have mitigated commodity cost increases, in part, by col-
distributors, dealers, and end-user customers to reduce spending laborating with suppliers, reviewing alternative sourcing options,
and delay or forego purchases of our products, which have had an substituting materials, engaging in internal cost reduction efforts,
adverse effect on our net sales and earnings. If economic condi- and increasing prices on some of our products, all as appropriate.
tions and outlook in the U.S. and in other countries in which we However, we may not be able to fully offset such increased costs
conduct business do not continue to improve, or if they worsen, in the future. Further, if our price increases are not accepted by
our net sales and earnings could be adversely affected in the our customers and the market, our net sales, profit margins, earn-
future. ings, and market share could be adversely affected. Increases in
our other costs of doing business may also adversely affect our
Weather conditions may reduce demand for some of our profit margins and businesses. For example, an increase in fuel
products and adversely affect our net sales or otherwise costs may result in an increase in our transportation costs, which
adversely affect our operating results. also could adversely affect our operating results and businesses.
From time to time, weather conditions in a particular geographic Disruption in the availability of raw materials and
region may adversely affect sales, demand, and field inventory components used in our products may adversely affect
levels of some of our products. For example, in the past, drought our business.
conditions have had an adverse effect on sales of certain mowing
equipment products, unusually rainy weather or severe drought Although most of the raw materials and components used in our
conditions that result in watering bans have had an adverse effect products are generally commercially available from a number of
on sales of our irrigation products, and lower snow fall accumula- sources and in adequate supply, certain components are sourced
tions in key markets have had an adverse effect on sales of our from single suppliers. Any disruption in the availability of raw
snow thrower products and may have an adverse effect on sales materials and components from our suppliers, our inability to timely
of products of our BOSS professional snow and ice management or otherwise obtain substitutes for such items, or any deterioration
business. Similarly, adverse weather conditions in one season may in our relationships with or the financial viability of our suppliers
negatively impact customer purchasing patterns and our net sales could adversely affect our business.
for some of our products in another season. For example, lower
Our professional segment net sales are dependent upon
snow fall accumulations may result in lower winter season reve-
certain factors, including, golf course revenues and the
nues for landscape contractor professionals, causing such custom-
amount of investment in golf course renovations and
ers to forego or postpone spring purchases of our mowing prod-
improvements; the level of new golf course development
ucts. To the extent that unfavorable weather conditions are
and golf course closures; the level of homeowners who
exacerbated by global climate change or otherwise, our sales and
outsource their lawn care; the level of residential and
operating results may be affected to a greater degree than we
commercial construction; acceptance of and demand for
have previously experienced.
micro-irrigation solutions for agricultural markets; the
Increases in the cost of raw materials and components integration of the BOSS business into our professional
that we purchase and/or increases in our other costs of portfolio; the demand for our products in the rental and
doing business, such as transportation costs, may specialty construction market; the availability of cash or
adversely affect our profit margins and businesses. credit to professional segment customers on acceptable
terms to finance new product purchases; and the
We purchase raw materials such as steel, aluminum, petroleum amount of government revenues, budget, and spending
and natural gas-based resins, linerboard, and other commodities, levels for grounds maintenance equipment.
and components, such as engines, transmissions, transaxles,
hydraulics, and electric motors, for use in our products. In addition, Our professional segment products are sold by distributors or deal-
we are a purchaser of components and parts containing various ers, or directly to government customers, rental companies, and
commodities, including steel, aluminum, copper, lead, rubber, and professional users engaged in maintaining and creating properties
others that are integrated into our end products. To the extent that and landscapes, such as golf courses, sports fields, residential and
commodity prices increase and we do not have firm pricing from commercial properties and landscapes, and governmental and
our suppliers, or our suppliers are not able to honor such prices, municipal properties. Accordingly, our professional segment net
increases in the cost of such raw materials and components and sales are impacted by golf course revenues and the amount of
parts may adversely affect our profit margins if we are unable to investment in golf course renovations and improvements; the level
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