Toro 2009 Annual Report Download - page 14

distributorships are to facilitate ownership transfers while improving service, pricing, warranty, brand awareness, reputation, distribu-
operations and to test and deploy new strategies and business tion, shelf space, and financing options. Pricing volatility has
practices that could be replicated by our independent distributors. become an increasingly important competitive factor for a majority
Our distribution systems are intended to assure quality of sales of our products. We believe we offer total solutions and full service
and market presence as well as effective after-purchase service packages with high quality products that have the latest technology
and support. We believe our distribution network provides a com- and design innovations. Also, by selling our products through a
petitive advantage in marketing and selling our products in part network of distributors, dealers, hardware retailers, home centers,
because our primary distribution network is focused on selling and and mass retailers, we offer comprehensive service support during
marketing our products and also because of long-term relation- and after the warranty period. We compete in many product lines
ships they have established and experienced personnel they utilize with numerous manufacturers, many of which have greater opera-
to deliver high levels of customer satisfaction. tions and financial resources than us. We believe that we have a
Our current marketing strategy is to maintain distinct brands and competitive advantage because we manufacture a broad range of
brand identification for Toro姞, Exmark姞, Irritrol姞, Hayter姞, Pope姞, product lines, we are committed to product innovation and cus-
Lawn-Boy姞, and Lawn Genie姞 products. tomer service, we focus on Lean manufacturing methods, we have
We advertise our residential products during appropriate sea- a strong focus in maintaining landscapes, and our distribution
sons throughout the year on television, on the radio, in print, and channels position us well to compete in various markets.
via the Internet. Professional products are advertised in print and Internationally, residential segment products face more competi-
through direct mail programs, as well as on the Internet. Most of tion where foreign competitors manufacture and market products in
our advertising emphasizes our brand names. Advertising is pur- their respective countries. We experience this competition primarily
chased by us as well as through cooperative programs with distrib- in Europe. In addition, fluctuations in the value of the U.S. dollar
utors, dealers, hardware retailers, home centers, and mass may affect the price of our products in foreign markets, thereby
retailers. impacting their competitiveness. We provide pricing support to for-
eign customers, as needed, to remain competitive in international
Customers markets.
Overall, we believe that in the long-term we are not dependent on
any single customer. However, The Home Depot accounted for Environmental Matters and
approximately 14 percent of our total consolidated gross sales in Other Governmental Regulation
fiscal 2009. The residential segment of our business is dependent We are subject to numerous federal, state, international, and other
on The Home Depot as a customer. While the loss of any substan- governmental laws, rules, and regulations relating to, among
tial customer, including The Home Depot, could have a material others, climate change; emissions to air and discharges to water;
adverse short-term impact on our business, we believe that our product and associated packaging; import and export compliance,
diverse distribution channels and customer base should reduce the including country of origin certification requirements; worker and
long-term impact of any such loss. product user health and safety; and the generation, use, handling,
labeling, collection, management, storage, transportation, treat-
Backlog of Orders ment, and disposal of hazardous substances, wastes, and other
Our backlog of orders is dependent upon when customers place regulated materials. For example:
orders, and not necessarily an indicator of our expected results for
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The United States Environmental Protection Agency (EPA), the
the first quarter of fiscal 2010 or our fiscal 2010 net sales. The California Air Resources Board, and similar regulators in other
approximate backlog of orders believed to be firm as of Octo- U.S. states and foreign jurisdictions in which we sell our prod-
ber 31, 2009 and 2008 was $85.1 million and $77.9 million, ucts have phased in, or are phasing in, certain emission regula-
respectively, an increase of 9.2 percent. This increase was primar- tions setting maximum emission standards for certain equipment.
ily the result of open orders for snow thrower products due to the
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Certain U.S. states and foreign jurisdictions in which we sell our
timing of the introduction for a new redesigned offering of snow products, including the European Union (EU), and each of its
thrower products that shipped in the first quarter of fiscal 2010. We member states, have implemented (i) the Waste Electrical and
expect the existing backlog of orders will be filled in early fiscal Electronic Equipment (WEEE) directive or similar substance level
2010. laws, rules, or regulations, which mandate the labeling, collec-
tion, and disposal of certain waste electrical and electronic
Competition equipment, (ii) the Restriction on the use of Hazardous Sub-
Our products are sold in highly competitive markets throughout the stances (RoHS) directive or similar substance level laws, rules,
world. The principal competitive factors in our markets are product or regulations, which restrict the use of several specified hazard-
innovation, quality and reliability, product support and customer ous materials in the manufacture of specific types of electrical
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