Toro 2013 Annual Report Download - page 18

end-user customers; higher short-term, mortgage, and other inter- otherwise reduce our cost of goods sold. Historically, we have miti-
est rates; and general economic and political conditions and gated commodity cost increases, in part, by collaborating with sup-
expectations. In the past, some of these factors have caused our pliers, reviewing alternative sourcing options, substituting materials,
distributors, dealers, and end-user customers to reduce spending engaging in internal cost reduction efforts, and increasing prices on
and delay or forego purchases of our products, which have had an some of our products, all as appropriate. However, we may not be
adverse effect on our net sales and earnings. If economic condi- able to fully offset such increased costs in the future. Further, if
tions and outlook in the U.S. and in other countries in which we our price increases are not accepted by our customers and the
conduct business do not further improve, or if they worsen, our net market, our net sales, profit margins, earnings, and market share
sales and earnings could be adversely affected in the future. could be adversely affected. Increases in our other costs of doing
business may also adversely affect our profit margins and busi-
Weather conditions may reduce demand for some of our ness. For example, an increase in fuel costs may result in an
products and adversely affect our net sales or otherwise increase in our transportation costs, which also could adversely
adversely affect our operating results. affect our operating results and business. Although most of the raw
materials and components used in our products are generally com-
From time to time, weather conditions in a particular geographic mercially available from a number of sources and in adequate sup-
region may adversely affect sales and field inventory levels of ply, certain components are sourced from single suppliers. Any
some of our products. For example, in the past, drought conditions disruption in the availability of such raw materials and components
have had an adverse effect on sales of certain mowing equipment from our suppliers, our inability to timely or otherwise obtain substi-
products, unusually rainy weather or severe drought conditions that tutes for such items, or any deterioration in our relationships with
result in watering bans have had an adverse effect on sales of our or the financial viability of our suppliers could adversely affect our
irrigation products, and lower snow fall accumulations in key mar- business.
kets have had an adverse effect on sales of our snow thrower
products. Similarly, adverse weather conditions in one season may Our professional segment net sales are dependent upon
negatively impact customer purchasing patterns and our net sales certain factors, including, golf course revenues and the
for some of our products in another season. For example, lower amount of investment in golf course renovations and
snow fall accumulations may result in lower winter season reve- improvements; the level of new golf course development
nues for landscape contractor professionals, causing such custom- and golf course closures; the level of homeowners who
ers to forego or postpone spring purchases of our mowing prod- outsource their lawn care; the level of residential and
ucts. To the extent that unfavorable weather conditions are commercial construction; continued acceptance of and
exacerbated by global climate change or otherwise, our sales and demand for micro-irrigation solutions for agricultural
other operating results may be affected to a greater degree than markets; the availability of cash or credit to professional
we have previously experienced. segment customers on acceptable terms to finance new
product purchases; and the amount of government
Increases in the cost, or disruption in the availability, of revenues, budget, and spending levels for grounds
raw materials and components that we purchase and/or maintenance equipment.
increases in our other costs of doing business, such as
transportation costs, may adversely affect our profit Our professional segment products are sold by distributors or deal-
margins and businesses. ers, or directly to government customers, rental companies, and
professional users engaged in maintaining and creating land-
We purchase raw materials such as steel, aluminum, petroleum- scapes, such as golf courses, sports fields, residential and com-
based resins, linerboard, and other commodities, and components, mercial landscapes, and governmental and municipal properties.
such as engines, transmissions, transaxles, hydraulics, and electric Accordingly, our professional segment net sales are impacted by
motors, for use in our products. In addition, we are a purchaser of golf course revenues and the amount of investment in golf course
components and parts containing various commodities, including renovations and improvements; the level of new golf course devel-
steel, aluminum, copper, lead, rubber, and others that are inte- opment and golf course closures; the level of homeowners who
grated into our end products. To the extent that commodity prices outsource their lawn care; continued acceptance of and demand
increase and we do not have firm pricing from our suppliers, or our for micro-irrigation solutions for agricultural markets; the level of
suppliers are not able to honor such prices, increases in the cost residential and commercial construction; availability of cash or
of such raw materials and components and parts may adversely credit on acceptable terms to finance new product purchases; and
affect our profit margins if we are unable to pass along to our the amount of government spending for new grounds maintenance
customers these cost increases in the form of price increases or equipment. Among other things, any one or a combination of the
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