Toro 2008 Annual Report Download - page 16

Our current marketing strategy is to maintain distinct brands and after the warranty period. We compete in many product lines with
brand identification for Toro, Exmark, Irritrol, Hayter, Pope, numerous manufacturers, many of which have greater operations
Lawn-Boy, and Lawn Genie products. and financial resources than us. We believe that we have a com-
We advertise our residential products during appropriate sea- petitive advantage because we manufacture a broad range of
sons throughout the year on television, radio, in print, and via the product lines, we are committed to product innovation and cus-
Internet. Professional products are advertised in print and through tomer service, we focus on Lean manufacturing methods, we have
direct mail programs, as well as on the Internet. Most of our adver- a strong focus in maintaining landscapes, and our distribution
tising emphasizes our brand names. Advertising is purchased by channels position us well to compete in various markets.
the company as well as through cooperative programs with distrib- Internationally, residential segment products face more competi-
utors, dealers, hardware retailers, home centers, and mass tion where foreign competitors manufacture and market products in
retailers. their respective countries. We experience this competition primarily
in Europe and Asia. In addition, fluctuations in the value of the
Customers U.S. dollar may affect the price of our products in foreign markets,
Overall, we believe that in the long-term we are not dependent on thereby impacting their competitiveness. We provide pricing sup-
any single customer. However, The Home Depot accounted for port to foreign customers, as needed, to remain competitive in
approximately 10 percent of our total consolidated net sales in fis- international markets.
cal 2008. The residential segment of our business is dependent on
The Home Depot as a customer. While the loss of any substantial Environmental Matters and
customer, including The Home Depot, could have a material Other Governmental Regulation
short-term impact on our business, we believe that our diverse We are subject to numerous federal, state, international, and other
distribution channels and customer base should reduce the governmental laws, rules, and regulations relating to, among
long-term impact of any such loss. others, climate change; emissions to air and discharges to water;
product content and packaging; export compliance; worker and
Backlog of Orders product user health and safety; and the generation, use, handling,
Our backlog of orders is dependent upon when customers place labeling, collection, management, storage, transportation, treat-
orders, and not necessarily an indicator of our expected results for ment, and disposal of hazardous substances, wastes, and other
the first quarter of fiscal 2009 or our fiscal 2009 sales growth. The regulated materials. For example:
approximate backlog of orders believed to be firm as of Octo-
•
The California Air Resources Board (CARB) has phased in cer-
ber 31, 2008 and 2007 was $77.9 million and $70.0 million, tain emission regulations setting maximum emission standards
respectively, an increase of 11.3 percent. This increase was pri- for certain off-road equipment and similar regulations will be
marily the result of our international customers placing orders in phased in between 2009 and 2012 by the United States Environ-
the fourth quarter of fiscal 2008 compared to fiscal 2007 when they mental Protection Agency (EPA).
placed their orders in the first quarter of fiscal 2008 rather than the
•
The European Union (EU), and each of its member states, has
fourth quarter of fiscal 2007. This increase was somewhat offset by implemented the Waste Electrical and Electronic Equipment
lower backlog of orders from our domestic customers who are (WEEE) directive, which mandates the labeling, collection, and
purchasing product closer to retail demand, which we expect is the disposal of certain waste electrical and electronic equipment,
result of the current recessionary economy. We expect the existing and Restriction on the use of Hazardous Substances (RoHS)
backlog of orders will be filled in early fiscal 2009. directive, which restricts the use of six hazardous materials in
the manufacture of various types of electrical and electronic
Competition equipment.
Our products are sold in highly competitive markets throughout the
•
Our residential products are subject to various federal, state and
world. The principal competitive factors in our markets are pricing, international laws, rules and regulations that are designed to
product innovation, quality and reliability, product support and cus- protect consumers and we are subject to the administrative juris-
tomer service, warranty, brand awareness, reputation, distribution, diction of the Consumer Product Safety Commission.
shelf space, and financing options. Pricing volatility has become an Although we believe that we are in substantial compliance with
increasingly important competitive factor for a majority of our prod- applicable laws, rules and regulations, we are unable to predict the
ucts. We believe we offer total solutions and full service packages ultimate impact of adopted or future laws, rules, and regulations on
with high quality products that have the latest technology and our business. Such laws, rules, or regulations may cause us to
design innovations. Also, by selling our products through a network incur significant expenses to achieve or maintain compliance, may
of distributors, dealers, hardware retailers, home centers, and require us to modify our products, may adversely affect the
mass retailers, we offer comprehensive service support during and demand for some of our products, and may ultimately affect the
8