Toro 2011 Annual Report Download - page 19

our new manufacturing facility in Romania. We maintain sales Our international operations may not produce desired levels of
offices in the United States, Belgium, the United Kingdom, France, net sales or one or more of the factors listed above may harm our
Australia, Singapore, Japan, China, Italy, Korea, and Germany. business and operating results. Any material decrease in our inter-
Our net sales outside the United States were 32.3 percent, national sales or profitability could also adversely impact our oper-
31.8 percent, and 32.0 percent of our total consolidated net sales ating results.
for fiscal 2011, 2010, and 2009, respectively. International markets In addition, a portion of our international net sales are financed
have, and will continue to be, a focus for us for revenue growth. by third parties. The termination of our agreements with these third
We believe many opportunities exist in the international markets, parties, any material change to the terms of our agreements with
and over time, we intend for international net sales to comprise a these third parties or in the availability or terms of credit offered to
larger percentage of our total consolidated net sales. Several fac- our international customers by these third parties, or any delay in
tors, including weakened international economic conditions or the securing replacement credit sources, could adversely affect our
impact of sovereign debt defaults by certain European countries, sales and operating results.
could adversely affect our international net sales. Additionally, the
Fluctuations in foreign currency exchange rates could
expansion of our existing international operations and entry into
result in declines in our reported net sales and net
additional international markets require significant management
earnings.
attention and financial resources. Many of the countries in which
we sell our products, or otherwise have an international presence Because the functional currency of our foreign operations is the
are, to some degree, subject to political, economic, and/or social applicable local currency, we are exposed to foreign currency
instability, including drug cartel-related violence, which may disrupt exchange rate risk arising from transactions in the normal course
our production activities and maquiladora operations based in Jua- of business, such as sales and loans to wholly owned subsidiaries
rez, Mexico. Our international operations expose us and our repre- as well as sales to third party customers, purchases from suppli-
sentatives, agents, and distributors to risks inherent in operating in ers, and bank lines of credit with creditors denominated in foreign
foreign jurisdictions. These risks include: currencies. Our reported net sales and net earnings are subject to
•
increased costs of customizing products for foreign countries; fluctuations in foreign currency exchange rates. Because our prod-
•
difficulties in managing and staffing international operations and ucts are manufactured or sourced primarily from the United States
increases in infrastructure costs including legal, tax, accounting, and Mexico, a stronger U.S. dollar and Mexican peso generally
and information technology; have a negative impact on our operating results, while a weaker
•
the imposition of additional U.S. and foreign governmental con- dollar and peso generally have a positive effect. Our primary for-
trols or regulations; new or enhanced trade restrictions and eign currency exchange rate exposure is with the EU Euro, the
restrictions on the activities of foreign agents, representatives, Australian dollar, the Canadian dollar, the British pound, the Mexi-
and distributors; and the imposition of our increases in, costly can peso, the Japanese yen, and the Chinese Yuan against the
and lengthy import and export licensing and other compliance U.S. dollar. We also have exposure with the Romanian New Lei
requirements, customs duties and tariffs, import and export quo- against the Euro and the U.S. dollar as a result of our new manu-
tas and other trade restrictions, license obligations, and other facturing facility in Romania. While we actively manage the expo-
non-tariff barriers to trade; sure of our foreign currency market risk in the normal course of
•
the imposition of U.S. and/or international sanctions against a business by entering into various foreign exchange contracts,
country, company, person, or entity with whom we do business these instruments involve risks and may not effectively limit our
that would restrict or prohibit our continued business with the underlying exposure from currency exchange rate fluctuations or
sanctioned country, company, person, or entity; minimize our net earnings and cash volatility associated with for-
•
international pricing pressures; eign currency exchange rate changes. Further, a number of finan-
•
laws and business practices favoring local companies; cial institutions similar to those that serve as counterparties to our
•
adverse currency exchange rate fluctuations; foreign exchange contracts have been adversely affected by the
•
longer payment cycles and difficulties in enforcing agreements unprecedented distress in the worldwide credit markets. The failure
and collecting receivables through certain foreign legal systems; of one or more counterparties to our foreign currency exchange
•
difficulties in enforcing or defending intellectual property rights; rate contracts to fulfill their obligations to us could adversely affect
and our operating results.
•
multiple, changing, and often inconsistent enforcement of laws,
rules, and regulations, including rules relating to environmental,
health, and safety matters.
13