Toro 2009 Annual Report Download - page 23

energy or water usage, or if, as a result of such legislation, cus- and attention of our management and could result in adverse pub-
tomers perceive our product offerings to be relatively more or less licity, either of which could significantly harm our operating results
attractive than our competitors’ product offerings. We cannot cur- and financial condition. In addition, an unfavorable resolution or
rently predict whether any such legislation will be enacted, what outcome could have a material adverse effect on our operating
any such legislation’s specific terms and conditions would encom- results or financial condition.
pass, how any such legislation would impact the competitive land-
If we are unable to retain our key employees and attract
scape within our markets, or how, if at all, any such legislation
and retain other qualified personnel, we may not be able
might ultimately affect customer demand for our products or our
to meet strategic objectives and our business could
operating results.
suffer.
We are subject to product liability claims, product Our ability to meet our strategic objectives and otherwise grow our
quality issues, and other litigation from time to time that business will depend to a significant extent on the continued contri-
could adversely affect our operating results or financial butions of our leadership team. Our future success will also
condition. depend in large part on our ability to identify, attract, and retain
The manufacture, sale, and usage of our products expose us to other highly qualified managerial, technical, sales and marketing,
significant risks associated with product liability claims. If a product and customer service personnel. Competition for these individuals
liability claim or series of claims is brought against us for uninsured is intense, and we may not succeed in identifying, attracting, or
liabilities or in excess of our insurance coverage, and it is ulti- retaining qualified personnel. The loss or interruption of services of
mately determined that we are liable, our business could suffer. any of our key personnel, the inability to identify, attract, or retain
While we instruct our customers on the proper usage of our prod- qualified personnel in the future, delays in hiring qualified person-
ucts, we cannot ensure that they will implement our instructions nel, or any employee work slowdowns, strikes, or similar actions
accurately or completely. If our products are defective or used could make it difficult for us to conduct and manage our business
incorrectly by our customers, injury may result and this could give and meet key objectives, which could harm our business, financial
rise to product liability claims against us or adversely affect our condition, and operating results.
brand image or reputation. Any losses that we may suffer from any
The terms of our credit arrangements and the indentures
liability claims, and the effect that any product liability litigation may
governing our senior notes and debentures could limit
have upon the reputation and marketability of our products, may
our ability to conduct our business, take advantage of
have a negative impact on our business and operating results.
business opportunities and respond to changing
Some of our products or product improvements were developed
business, market, and economic conditions.
relatively recently and defects or risks that we have not yet identi-
Additionally, we are subject to counterparty risk in our
fied may give rise to product liability claims. Additionally, we could
credit arrangements.
experience a material design or manufacturing failure in our prod-
ucts, a quality system failure, other safety issues, or heightened Our credit arrangements and the indentures governing our 6.625%
regulatory scrutiny that could warrant a recall of some of our prod- senior notes and 7.800% debentures include a number of financial
ucts. A recall of some of our products could also result in and operating restrictions. For example, our credit arrangements
increased product liability claims. Unforeseen product quality contain financial covenants that, among other things, require us to
problems in the development and production of new and existing maintain a minimum interest coverage ratio and a maximum debt
products could also result in loss of market share, reduced sales, to total capitalization ratio. Our credit arrangements and/or inden-
and higher warranty expense. tures also contain provisions that restrict our ability, subject to
We are also subject to other litigation from time to time that specified exceptions, to, among other things:
could adversely affect our operating results or financial condition.
•
make loans or investments, including acquisitions;
For example, we are currently one of several defendants in law-
•
create liens or other encumbrances on our assets;
suits filed in various federal and state courts in which the plaintiffs
•
sell assets;
are alleging that the horsepower labels on the products the plain-
•
engage in mergers or consolidations; and
tiffs purchased were inaccurate. For additional information regard-
•
pay dividends that are significantly higher than those currently
ing this lawsuit, see Part I, Item 3, ‘‘Legal Proceedings’’ of this being paid, make other distributions to our shareholders or
report. In the event that settlement discussions do not result in an redeem shares of our common stock.
executed or court approved settlement agreement and these law- These provisions may limit our ability to conduct our business,
suits go to trial, even if the plaintiffs’ claims are found to be without take advantage of business opportunities, and respond to changing
merit, we have incurred, and expect to continue to incur, substan- business, market, and economic conditions. In addition, they may
tial costs in defending the lawsuit. The lawsuit could divert the time
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