Toro 2010 Annual Report Download - page 23

demand for our products relative to the product offerings of our other defendants in which it is alleged that the horsepower labels
competitors. For example, any fiscal-stimulus or other legislative on the products the plaintiffs purchased were inaccurate. For addi-
enactment that impacts the lawn and garden, outdoor power equip- tional information regarding this lawsuit, see Note 13 of the Notes
ment, or irrigation industries generally by promoting the purchase, to Consolidated Financial Statements under the heading ‘‘Litiga-
such as through customer rebate or other incentive programs, of tion’’ included in Item 8, Financial Statements and Supplementary
certain types of mowing or irrigation equipment or other products Date of this report.
that we sell, could impact us positively or negatively, depending on
If we are unable to retain our key employees and attract
whether we manufacture products that meet the specified legisla-
and retain other qualified personnel, we may not be able
tive criteria, including in areas such as fuel efficiency, alternative
to meet strategic objectives and our business could
energy or water usage, or if, as a result of such legislation, cus-
suffer.
tomers perceive our product offerings to be relatively more or less
attractive than our competitors’ product offerings. We cannot cur- Our ability to meet our strategic objectives and otherwise grow our
rently predict whether any such legislation will be enacted, what business will depend to a significant extent on the continued contri-
any such legislation’s specific terms and conditions would encom- butions of our leadership team. Our future success will also
pass, how any such legislation would impact the competitive land- depend in large part on our ability to identify, attract, and retain
scape within our markets, or how, if at all, any such legislation other highly qualified managerial, technical, sales and marketing,
might ultimately affect customer demand for our products or our and customer service personnel. Competition for these individuals
operating results. is intense, and we may not succeed in identifying, attracting, or
retaining qualified personnel. The loss or interruption of services of
We are subject to product liability claims, product any of our key personnel, the inability to identify, attract, or retain
quality issues, and other litigation from time to time that qualified personnel in the future, delays in hiring qualified person-
could adversely affect our operating results or financial nel, or any employee work slowdowns, strikes, or similar actions
condition. could make it difficult for us to conduct and manage our business
The manufacture, sale, and usage of our products expose us to and meet key objectives, which could harm our business, financial
significant risks associated with product liability claims. If a product condition, and operating results.
liability claim or series of claims is brought against us for uninsured
The terms of our credit arrangements and the indentures
liabilities or in excess of our insurance coverage, and it is ulti-
governing our senior notes and debentures could limit
mately determined that we are liable, our business could suffer.
our ability to conduct our business, take advantage of
While we instruct our customers on the proper usage of our prod-
business opportunities and respond to changing
ucts, we cannot ensure that they will implement our instructions
business, market, and economic conditions.
accurately or completely. If our products are defective or used
Additionally, we are subject to counterparty risk in our
incorrectly by our customers, injury may result and this could give
credit arrangements.
rise to product liability claims against us or adversely affect our
brand image or reputation. Any losses that we may suffer from any Our credit arrangements and the indentures governing our 6.625%
liability claims, and the effect that any product liability litigation may senior notes and 7.800% debentures include a number of financial
have upon the reputation and marketability of our products, may and operating restrictions. For example, our credit arrangements
have a negative impact on our business and operating results. contain financial covenants that, among other things, require us to
Some of our products or product improvements were developed maintain a minimum interest coverage ratio and a maximum debt
relatively recently and defects or risks that we have not yet identi- to earnings before interest, taxes, depreciation, and amortization
fied may give rise to product liability claims. Additionally, we could ratio. Our credit arrangements and/or indentures also contain provi-
experience a material design or manufacturing failure in our prod- sions that restrict our ability, subject to specified exceptions, to,
ucts, a quality system failure, other safety issues, or heightened among other things:
regulatory scrutiny that could warrant a recall of some of our prod-
•
make loans or investments, including acquisitions;
ucts. A recall of some of our products could also result in
•
create liens or other encumbrances on our assets;
increased product liability claims. Unforeseen product quality
•
sell assets;
problems in the development and production of new and existing
•
engage in mergers or consolidations; and
products could also result in loss of market share, reduced sales,
•
pay dividends that are significantly higher than those currently
and higher warranty expense. being paid, make other distributions to our shareholders or
We are also subject to other litigation from time to time that redeem shares of our common stock.
could adversely affect our operating results or financial condition,
including without limitation the pending litigation against us and
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