Toro 2010 Annual Report Download - page 20

parties, any material change to the terms of our agreements with disasters and other external events, including drug cartel-related
these third parties or in the availability or terms of credit offered to violence that may disrupt our production activities and maquiladora
our international customers by these third parties, or any delay in operations based in Juarez, Mexico. In the event that one of our
securing replacement credit sources, could adversely affect our manufacturing facilities was affected by a disaster or other event,
sales and operating results. we could be forced to shift production to one of our other manufac-
turing facilities. Although we purchase insurance for damage to our
Fluctuations in foreign currency exchange rates could property and disruption of our business from casualties, such
result in declines in our reported net sales and net insurance may not be sufficient to cover all of our potential losses.
earnings. Any disruption in our manufacturing capacity could have an
adverse impact on our ability to produce sufficient inventory of our
Because the functional currency of our foreign operations is the
products or may require us to incur additional expenses in order to
applicable local currency, we are exposed to foreign currency
produce sufficient inventory, and therefore, may adversely affect
exchange rate risk arising from transactions in the normal course
our net sales and operating results. Any disruption or delay at our
of business, such as sales and loans to wholly owned subsidiaries
manufacturing facilities, including a work slowdown, strike, or simi-
as well as sales to third party customers, purchases from suppli-
lar action at any one of our three facilities operating under a col-
ers, and bank lines of credit with creditors denominated in foreign
lective bargaining agreement or the failure to renew or enter into
currencies. Our reported net sales and net earnings are subject to
new collective bargaining agreements, including one such agree-
fluctuations in foreign currency exchange rates. Because our prod-
ment that expires in fiscal 2011, could impair our ability to meet
ucts are manufactured or sourced primarily from the United States
the demands of our customers, and our customers may cancel
and Mexico, a stronger U.S. dollar and Mexican peso generally
orders or purchase products from our competitors, which could
has a negative impact on our operating results, while a weaker
adversely affect our business and operating results.
dollar and peso generally has a positive effect. Our primary foreign
Our operating results may also be adversely affected if we are
currency exchange rate exposure is with the EU Euro, the Austra-
unable to cost-effectively open and manage new manufacturing
lian dollar, the Canadian dollar, the British pound, the Mexican
and distribution facilities, and move production between such facili-
peso, and the Japanese yen against the U.S. dollar. While we
ties as needed from time to time. In fiscal 2010, we purchased
actively manage the exposure of our foreign currency market risk
land in Eastern Europe where we intend to build a manufacturing
in the normal course of business by entering into various foreign
facility for micro-irrigation products. If the facility does not produce
exchange contracts, these instruments involve risks and may not
the anticipated manufacturing and operational efficiencies, or if the
effectively limit our underlying exposure from currency exchange
micro-irrigation products to be produced at this facility are not
rate fluctuations or minimize our net earnings and cash volatility
accepted into new geographic markets at expected levels, we may
associated with foreign currency exchange rate changes. Further,
not recover the costs of the new facility and our operating results
a number of financial institutions similar to those that serve as
may be adversely affected.
counterparties to our foreign exchange contracts have been
adversely affected by the unprecedented distress in the worldwide We intend to grow our business through acquisitions
credit markets. The failure of one or more counterparties to our and alliances, stronger customer relations, and new joint
foreign currency exchange rate contracts to fulfill their obligations ventures and partnerships, which are risky and could
to us could adversely affect our operating results. harm our business.
We manufacture our products at and distribute our One of our growth strategies is to drive growth in our businesses
products from several locations in the United States and and accelerate opportunities to expand our global presence
internationally. Any disruption at any of these facilities through targeted acquisitions and alliances, stronger customer rela-
or in our inability to cost-effectively expand existing, tions, and new joint ventures and partnerships that add value while
open and manage new, and/or move production between considering our existing brands and product portfolio. The benefits
manufacturing facilities could adversely affect our of an acquisition or new alliance, joint venture, or partnership may
business and operating results. take more time than expected to develop or integrate into our
operations, and we cannot guarantee that previous or future acqui-
We currently manufacture most of our products at seven locations
sitions, alliances, joint ventures, or partnerships will in fact produce
in the United States, two locations in Mexico, and one location in
any benefits. In addition, acquisitions, alliances, joint ventures, and
each of Australia, Italy, and the United Kingdom. We also have
partnerships involve a number of risks, including:
several locations that serve as distribution centers, warehouses,
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diversion of management’s attention;
test facilities, and corporate offices. In addition, we have agree-
ments to manufacture products at several third-party manufactur-
ers. These facilities may be affected by natural or man-made
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