Toro 2012 Annual Report Download - page 20
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international pricing pressures; unprecedented distress in the worldwide credit markets. The failure
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laws and business practices favoring local companies; of one or more counterparties to our foreign currency exchange
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adverse currency exchange rate fluctuations; rate contracts to fulfill their obligations to us could adversely affect
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longer payment cycles and difficulties in enforcing agreements our operating results.
and collecting receivables through certain foreign legal systems;
Our business, properties, and products are subject to
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difficulties in enforcing or defending intellectual property rights;
governmental regulation with which compliance may
and
require us to incur expenses or modify our products or
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multiple, changing, and often inconsistent enforcement of laws,
operations and non-compliance may expose us to
rules, and regulations, including rules relating to environmental,
penalties. Governmental regulation may also adversely
health, and safety matters.
affect the demand for some of our products and our
Our international operations may not produce desired levels of
operating results.
net sales or one or more of the factors listed above may harm our
business and operating results. Any material decrease in our inter- Our business, properties, and products are subject to numerous
national sales or profitability could also adversely impact our oper- federal, international, states, and other governmental laws, rules,
ating results. and regulations relating to, among other things; climate change;
In addition, a portion of our international net sales are financed emissions to air and discharges to water; product and associated
by third parties. The termination of our agreements with these third packaging; restricted substances, including recently-promulgated
parties, any material change to the terms of our agreements with ‘‘conflict minerals’’ disclosure rules that are discussed in more
these third parties or in the availability or terms of credit offered to detail below; import and export compliance, including country of
our international customers by these third parties, or any delay in origin certification requirements; worker and product user health
securing replacement credit sources, could adversely affect our and safety; energy efficiency; product life-cycles; and the genera-
sales and operating results. tion, use, handling, labeling, collection, management, storage,
transportation, treatment, and disposal of hazardous substances,
Fluctuations in foreign currency exchange rates could wastes, and other regulated materials. Although we believe that we
result in declines in our reported net sales and net are in substantial compliance with currently applicable laws, rules,
earnings. and regulations, we are unable to predict the ultimate impact of
Because the functional currency of our foreign operations is the adopted or future laws, rules, and regulations on our business,
applicable local currency, we are exposed to foreign currency properties, or products. Any of these laws, rules, or regulations
exchange rate risk arising from transactions in the normal course may cause us to incur significant expenses to achieve or maintain
of business, such as sales and loans to wholly owned subsidiaries compliance, require us to modify our products, adversely affect the
as well as sales to third party customers, purchases from suppli- price of or demand for some of our products, and ultimately affect
ers, and bank lines of credit with creditors denominated in foreign the way we conduct our operations. Failure to comply with any of
currencies. Our reported net sales and net earnings are subject to these laws, rules, or regulations could lead to fines and other pen-
fluctuations in foreign currency exchange rates. Because our prod- alties, including restrictions on the importation of our products into,
ucts are manufactured or sourced primarily from the United States and the sale of our products in, one or more jurisdictions until
and Mexico, a stronger U.S. dollar and Mexican peso generally compliance is achieved. In addition, our competitors may adopt
have a negative impact on our operating results, while a weaker strategies with respect to regulatory compliance that differ signifi-
dollar and peso generally have a positive effect. Our primary for- cantly from our strategies. This may have the effect of changing
eign currency exchange rate exposure is with the Euro, the Austra- customer preferences and our markets in ways that we did not
lian dollar, the Canadian dollar, the British pound, the Mexican anticipate, which may adversely affect market demand for our
peso, the Japanese yen, the Chinese Yuan, and the Romanian products and, ultimately, our net sales and financial results.
New Leu against the U.S. dollar, as well as the Romanian New The EPA has adopted increasingly stringent engine emission
Leu against the Euro. While we actively manage the exposure of regulations, including Tier 4 emission requirements applicable to
our foreign currency market risk in the normal course of business diesel engines in specified horsepower ranges that are used in
by entering into various foreign exchange contracts, these instru- some of our products. Beginning January 1, 2013, such require-
ments involve risks and may not effectively limit our underlying ments expand to additional horsepower categories and, accord-
exposure from foreign currency exchange rate fluctuations or mini- ingly, apply to more of our products. Although we have developed
mize our net earnings and cash volatility associated with foreign plans to achieve substantial compliance with these Tier 4 require-
currency exchange rate changes. Further, a number of financial ments, these plans are subject to many variables including, among
institutions similar to those that serve as counterparties to our for- others, the ability of our suppliers to provide compliant engines on
eign exchange contracts have been adversely affected by the
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