Toro 2011 Annual Report Download - page 18

Our professional segment net sales are dependent upon Our residential segment net sales are dependent upon
golf course revenues and the amount of investment in mass retailers and home centers, such as The Home
golf course renovations and improvements; the level of Depot, Inc. as a major customer, the amount of product
new golf course development and golf course closures; placement at retailers, consumer confidence and
the level of homeowners who outsource their lawn care; spending levels, and changing buying patterns of
the level of residential and commercial construction; the customers.
availability of credit to professional segment customers The elimination or reduction of shelf space assigned to our resi-
on acceptable terms to finance new product purchases; dential products by retailers could adversely affect our residential
and amount of government revenues, budget, and segment net sales. Our residential segment net sales are also
spending levels for grounds maintenance equipment. dependent upon buying patterns of customers. For example, as
Our professional segment products are sold by distributors or deal- consumers purchase products at home centers and mass retailers
ers, or directly to government customers, rental companies, and that offer broader and lower price points, this has resulted in
professional users engaged in maintaining and creating land- increased demand and sales of our residential segment products
scapes, such as golf courses, sports fields, residential and com- purchased at retailers, such as The Home Depot, which accounted
mercial landscapes, and governmental and municipal properties. for approximately 11 to 14 percent of our total consolidated net
Accordingly, our professional segment net sales are impacted by sales in each of fiscal 2011, 2010, and 2009. We believe that our
golf course revenues and the amount of investment in golf course diverse distribution channels and customer base should reduce the
renovations and improvements; the level of new golf course devel- long-term impact on us if we were to lose The Home Depot or any
opment and golf course closures; the level of homeowners’ who other substantial customer. However, the loss of any substantial
outsource their lawn care; the level of residential and commercial customer, a significant reduction in sales to The Home Depot or
construction; availability of cash or credit on acceptable terms to other customers, or our inability to respond to future changes in
finance new product purchases; and the amount of government buying patterns of customers or new distribution channels could
spending for new grounds maintenance equipment. Among other have a material adverse impact on our business and operating
things, any one or a combination of the following factors could results. Changing buying patterns of customers also could result in
have an adverse effect on our professional segment net sales: reduced sales of one or more of our residential segment products,
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reduced levels of investment in golf course renovations and resulting in increased inventory levels. Our residential lawn and
improvements and new golf course development; reduced num- garden products are generally manufactured throughout the year
ber of golf rounds played at public and private golf courses and our residential snow removal products are generally manufac-
resulting in reduced revenue for such golf courses; decreased tured in the summer and fall months but may be extended into the
membership at private golf courses resulting in reduced revenue winter months depending upon demand. However, our production
and, in certain cases, financial difficulties for such golf courses; levels and inventory management goals for all residential segment
and increased number of golf course closures, any one of which products are based on estimates of retail demand for our products,
or any combination of which could result in a decrease in spend- taking into account production capacity, timing of shipments, and
ing and demand for our products; field inventory levels. If we overestimate or underestimate demand
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reduced consumer and business spending, causing homeowners during a given season, we may not maintain the appropriate inven-
and landscape contractor professionals to forego or postpone tory levels, which could negatively impact our net sales or working
purchases of our products; capital, and hinder our ability to meet customer demand.
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low or reduced levels of commercial and residential construction,
A significant percentage of our consolidated net sales
resulting in a decrease in demand for our products;
are generated outside of the United States, and we
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reduced tax revenue, increased governmental expenses in other
intend to continue to expand our international
areas, tighter government budgets and government deficits, gen-
operations. Our international operations require
erally resulting in reduced government spending for grounds
significant management attention and financial
maintenance equipment; and
resources, expose us to difficulties presented by
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product availability issues if we underestimate or overestimate
international economic, political, legal, accounting, and
demand, which could negatively impact our net sales and hinder
business factors, and may not be successful or produce
our ability to meet customer demand.
desired levels of net sales.
Additionally, lower sales of professional segment products that
carry higher profit margins than our residential segment products We currently manufacture our products in the United States, Mex-
could negatively impact our profit margins and net earnings. ico, Australia, the United Kingdom, and Italy for sale throughout
the world and, in late fiscal 2011, we completed the construction of
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