Toro 2007 Annual Report Download - page 26

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facilities may be affected by natural or man-made disasters. In the
event that one of our manufacturing facilities was affected by a
disaster, we could be forced to shift production to one of our other
manufacturing facilities. Although we purchase insurance for
damage to our property and disruption of our business from casu-
alties, such insurance may not be sufficient to cover all of our
potential losses. Any disruption in our manufacturing capacity
could have an adverse impact on our ability to produce sufficient
quantities of our products or may require us to incur additional
expenses in order to produce sufficient quantities, and therefore
may adversely affect our net sales and operating results. Any
disruption or delay at our manufacturing facilities, including a work
slowdown, strike, or similar action at any one of our three facilities
operating under a collective bargaining agreement or the failure to
renew or enter into a new collective bargaining agreement, could
impair our ability to meet the demands of our customers and our
customers may cancel orders or purchase products from our
competitors, which could adversely affect our business and operat-
ing results. Our operating results may also be adversely affected if
we are unable to cost-effectively expand existing and move pro-
duction between manufacturing facilities as needed from time to
time.
We intend to grow our business through additional
acquisitions and alliances, stronger customer relations,
and new partnerships, which are risky and could harm
our business.
One of our growth strategies is to drive growth in our businesses
and accelerate opportunities to expand our global presence
through targeted acquisitions, alliances, stronger customer
relations, and new partnerships that complement our existing
brands and product portfolio. In February 2005, we completed the
acquisition of certain assets and assumed certain liabilities of
Hayter Limited in the United Kingdom, and in August 2007 we
completed the acquisition of the stock of Rain Master Irrigation
Systems, Inc. The benefits of an acquisition or new partnership
may take more time than expected to develop or integrate into our
operations, and we cannot guarantee that our Hayter acquisition,
our Rain Master acquisition, or any future acquisitions, alliances,
or joint ventures will in fact produce any benefits. In addition,
acquisitions, alliances, joint ventures, and partnerships involve a
number of risks, including:
• diversion of management’s attention;
• difficulties in integrating and assimilating the operations and
products of an acquired business or in realizing projected effi-
ciencies, cost savings, and synergies;
• potential loss of key employees or customers of the acquired
businesses or adverse effects on existing business relationships
with suppliers and customers;
• adverse impact on overall profitability if acquired businesses do
not achieve the financial results projected in our valuation
models;
• reallocation of amounts of capital from other operating initiatives
and/or an increase in our leverage and debt service require-
ments to pay the acquisition purchase prices, which could in
turn restrict our ability to access additional capital when needed
or to pursue other important elements of our business strategy;
• inaccurate assessment of undisclosed, contingent or other
liabilities or problems, unanticipated costs associated with an
acquisition, and an inability to recover or manage such liabilities
and costs; and
• incorrect estimates made in the accounting for acquisitions,
incurrence of non-recurring charges, and write-off of significant
amounts of goodwill or other assets that could adversely affect
our operating results.
Our ability to grow through acquisitions will depend, in part, on
the availability of suitable acquisition candidates at an acceptable
price, our ability to compete effectively for these acquisition candi-
dates, and the availability of capital and personnel to complete
such acquisitions and run the acquired business effectively. These
risks could be heightened if we complete a large acquisition or
several acquisitions within a relatively short period of time. In
addition, some acquisitions may require the consent of the lenders
under our credit agreements. We cannot predict whether such
approvals would be forthcoming or the terms on which the lenders
would approve such acquisitions. Any potential acquisition could
impair our operating results.
We rely on our management information systems for
inventory management, distribution, and other
functions. If our information systems fail to adequately
perform these functions or if we experience an
interruption in their operation, our business and
operating results could be adversely affected.
The efficient operation of our business is dependent on our man-
agement information systems. We rely on our management
information systems to effectively manage accounting and financial
functions, manage manufacturing and supply chain processes,
and maintain our research and development data. The failure of
our management information systems to perform properly could
disrupt our business and product development and could result in
decreased sales, increased overhead costs, excess inventory, and
product shortages, causing our business and operating results to
suffer. In addition, our management information systems, including
our computer systems, Internet web sites, telecommunications,
and data networks, are vulnerable to damage or interruption from
natural or man-made disasters, terrorist attacks and attacks by
computer viruses or hackers, or power loss. Any such interruption
could adversely affect our business and operating results.