Toro 2008 Annual Report Download - page 19

and components used in our products are commercially available
ITEM 1A. RISK FACTORS
from a number of sources and in adequate supply, any disruption
in the availability of such raw materials and components, our
The following are significant factors known to us that could materi-
inability to obtain substitutes for such items, or any deterioration in
ally adversely affect our business, operations, industry, financial
our relationships with or the financial viability of our suppliers could
position, or future financial performance.
adversely affect our business. Increases in our other costs of doing
Economic conditions and outlook in the United States business may also adversely affect our profit margins and busi-
and around the world could adversely affect our net ness. For example, an increase in fuel costs may result in an
sales and earnings. increase in our transportation costs, which also could adversely
affect our operating results and business.
Demand for our products depends upon economic conditions and
outlook, including but not limited to economic growth rates; golf Weather conditions may reduce demand for some of our
course development, renovation and improvement; home owner- products and adversely affect our net sales.
ship, construction, and sales; consumer spending levels; financing
From time to time, weather conditions in a particular geographic
availability and terms for our distributors, dealers, and end-user
region may adversely affect sales of some of our products and
customers; employment rates; interest rates; inflation; consumer
field inventory levels. For example, in the past, drought conditions
confidence; and general economic and political conditions and
have had an adverse effect on sales of certain mowing equipment
expectations in the United States and the foreign economies in
products, unusually rainy weather or severe drought conditions that
which we conduct business. Slow or negative growth rates, infla-
result in watering bans have had an adverse effect on sales of our
tionary pressures, higher commodity costs and fuel prices, slow
irrigation products, and lower snow fall accumulations have had an
downs or reductions in golf course development, renovation and
adverse effect on sales of our snow thrower products. To the
improvement, slow downs or reductions in home construction and
extent that such unfavorable weather conditions are exacerbated
sales, increased home foreclosures, reduced credit availability or
by global climate change or otherwise, our sales may be affected
unfavorable credit terms for our distributors, dealers, and end-user
to a greater degree than we have previously experienced.
customers, higher short-term and mortgage interest rates,
increased unemployment rates, and continued recessionary eco-
Our professional segment net sales are dependent upon
nomic conditions and outlook could cause consumers to continue
the level of residential and commercial construction, the
to reduce spending, which may cause them to delay or forego
level of homeowners’ outsourcing lawn care, the amount
purchases of our products and could have an adverse effect on
of investment in golf course renovations and
our net sales and earnings.
improvements, new golf course development, golf
course closures, the amount of government spending,
Increases in the cost and availability of raw materials
and other factors.
and components that we purchase and increases in our
other costs of doing business, such as transportation Our professional segment products are sold by distributors or deal-
costs, may adversely affect our profit margins and ers, or directly to government customers, rental companies, and
business. professional users engaged in maintaining and creating land-
scapes, such as golf courses, sports fields, municipal properties,
We purchase raw materials such as steel, aluminum, fuel,
and residential and commercial landscapes. Accordingly, our pro-
petroleum-based resins, linerboard, and other commodities, and
fessional segment net sales are dependent upon the level of resi-
components, such as engines, transmissions, transaxles, hydrau-
dential and commercial construction, the level of homeowners’ out-
lics, and electric motors, for use in our products. Increases in the
sourcing lawn care, the amount of investment in golf course
cost of such raw materials and components may adversely affect
renovations and improvements, new golf course construction, avail-
our profit margins if we are unable to pass along to our customers
ability of credit to finance product purchases, and the amount of
these cost increases in the form of price increases or otherwise
government spending. Among other things, any one or a combina-
reduce our cost of goods sold. Historically, internal cost reduction
tion of the following could have an adverse effect on our profes-
efforts, as well as proactive vendor negotiations, alternate sourcing
sional segment net sales:
options, and moderate price increases on some of our products,
•
reduced tax revenue, increased governmental expenses in other
have offset a portion of increased raw material and component
areas, tighter government budgets and government deficits, gen-
costs. However, we may not be able to offset increased costs in
erally resulting in reduced government spending for grounds
the future. Further, if our price increases are not accepted by our
maintenance equipment;
customers and the market, our net sales and our market share
could be adversely affected. Although most of the raw materials
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