Toro 2012 Annual Report Download - page 19
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product availability issues if we underestimate or overestimate A significant percentage of our consolidated net sales
demand, which could negatively impact our net sales and hinder are generated outside of the United States, and we
our ability to meet customer demand. intend to continue to expand our international
Additionally, lower sales of professional segment products that operations. Our international operations require
carry higher profit margins than our residential segment products significant management attention and financial
could negatively impact our profit margins and net earnings. resources, expose us to difficulties presented by
international economic, political, legal, accounting, and
Our residential segment net sales are dependent upon business factors, and may not be successful or produce
mass retailers and home centers, such as The Home desired levels of net sales.
Depot, Inc. as a major customer, the amount of product We currently manufacture our products in the United States, Mex-
placement at retailers, consumer confidence and ico, Australia, the United Kingdom, Italy, and Romania for sale
spending levels, and changing buying patterns of throughout the world. We maintain sales offices in the United
customers. States, Belgium, the United Kingdom, France, Australia, Singapore,
The elimination or reduction of shelf space assigned to our resi- Japan, China, Italy, Korea, and Germany. Our net sales outside
dential products by retailers could adversely affect our residential the United States were 30.3 percent, 32.3 percent, and 31.8 per-
segment net sales. Our residential segment net sales are also cent of our total consolidated net sales for fiscal 2012, 2011, and
dependent upon buying patterns of customers. For example, as 2010, respectively. International markets have, and will continue to
consumers purchase products at home centers and mass retailers be, a focus for us for revenue growth. We believe many opportuni-
that offer broader and lower price points, this has resulted in ties exist in the international markets, and over time, we intend for
increased demand and sales of our residential segment products international net sales to comprise a larger percentage of our total
purchased at retailers, such as The Home Depot, which accounted consolidated net sales. Several factors, including weakened inter-
for approximately 11 to 13 percent of our total consolidated net national economic conditions or the impact of sovereign debt
sales in each of fiscal 2012, 2011, and 2010. We believe that our defaults by certain European countries, could adversely affect our
diverse distribution channels and customer base should reduce the international net sales. Additionally, the expansion of our existing
long-term impact on us if we were to lose The Home Depot or any international operations and entry into additional international mar-
other substantial customer. However, the loss of any substantial kets require significant management attention and financial
customer, a significant reduction in sales to The Home Depot or resources. Many of the countries in which we sell our products, or
other customers, or our inability to respond to future changes in otherwise have an international presence are, to some degree,
buying patterns of customers or new distribution channels could subject to political, economic, and/or social instability, including
have a material adverse impact on our business and operating drug cartel-related violence, which may disrupt our production
results. Changing buying patterns of customers also could result in activities and maquiladora operations based in Juarez, Mexico. Our
reduced sales of one or more of our residential segment products, international operations expose us and our representatives, agents,
resulting in increased inventory levels. Our residential lawn and and distributors to risks inherent in operating in foreign jurisdic-
garden products are generally manufactured throughout the year tions. These risks include:
and our residential snow removal products are generally manufac-
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increased costs of customizing products for foreign countries;
tured in the summer and fall months but may be extended into the
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difficulties in managing and staffing international operations and
winter months depending upon demand. However, our production increases in infrastructure costs including legal, tax, accounting,
levels and inventory management goals for our residential segment and information technology;
products are based on estimates of retail demand for our products,
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the imposition of additional U.S. and foreign governmental con-
taking into account production capacity, timing of shipments, and trols or regulations; new or enhanced trade restrictions and
field inventory levels. If we overestimate or underestimate demand restrictions on the activities of foreign agents, representatives,
during a given season, we may not maintain the appropriate inven- and distributors; and the imposition of increases in, costly and
tory levels, which could negatively impact our net sales or working lengthy import and export licensing and other compliance
capital, and hinder our ability to meet customer demand. requirements, customs duties and tariffs, import and export quo-
tas and other trade restrictions, license obligations, and other
non-tariff barriers to trade;
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the imposition of U.S. and/or international sanctions against a
country, company, person, or entity with whom we do business
that would restrict or prohibit our continued business with the
sanctioned country, company, person, or entity;
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