Toro 2014 Annual Report Download - page 25

rules, or regulations could result in harm to our reputation and/or experience lower market demand for our products that may, ulti-
could lead to fines and other penalties, including restrictions on the mately, adversely affect our net sales, profit margins, and overall
importation of our products into, and the sale of our products in, financial results.
one or more jurisdictions until compliance is achieved. In addition,
Climate change and climate change regulations may
our competitors may adopt strategies with respect to regulatory
adversely impact our operations.
compliance that differ significantly from our strategies. This may
have the effect of changing customer preferences and our markets There is growing concern from members of the scientific commu-
in ways that we did not anticipate, which may adversely affect nity and the general public that an increase in global average tem-
market demand for our products and, ultimately, our net sales and peratures due to emissions of greenhouse gases (‘‘GHG’’) and
financial results. Other changes in laws and regulations also may other human activities have or will cause significant changes in
adversely affect our operating results, including, (i) taxation and tax weather patterns and increase the frequency and severity of natu-
policy changes, tax rate changes, new tax laws, revised tax law ral disasters. We are currently subject to rules limiting emissions
interpretations, or expiration of the domestic research tax credit, and other climate related rules and regulations in certain jurisdic-
which individually or in combination may cause our effective tax tions where we operate. In addition, we may become subject to
rate to increase or, (ii) new, recently enacted, or revised healthcare additional legislation and regulation regarding climate change, and
laws or regulations, which may cause us to incur higher employee compliance with any new rules could be difficult and costly. Con-
healthcare and related costs. cerned parties, such as legislators, regulators, and non-govern-
mental organizations, are considering ways to reduce GHG emis-
Increasingly stringent engine emission regulations could sions. Foreign, federal, state and local regulatory and legislative
impact our ability to sell certain of our products into the bodies have proposed various legislative and regulatory measures
market and appropriately price certain of our products, relating to climate change, regulating GHG emissions and energy
which could negatively affect our competitive position policies. If such legislation is enacted, we could incur increased
and financial results. energy, environmental and other costs and capital expenditures to
The EPA adopted increasingly stringent engine emission regula- comply with the limitations. Due to uncertainty in the regulatory
tions, including Tier 4 emission requirements applicable to diesel and legislative processes, as well as the scope of such require-
engines in specified horsepower ranges that are used in some of ments and initiatives, we cannot currently determine the effect
our products. Beginning January 1, 2013, such requirements such legislation and regulation may have on our products and
expanded to additional horsepower categories and, accordingly, operations.
apply to more of our products. Although we have developed plans
We are required to comply with the ‘‘conflict minerals’’
to achieve substantial compliance with Tier 4 diesel engine emis-
rules promulgated by the SEC, which impose costs on
sion requirements, these plans are subject to many variables
us and could raise reputational and other risks.
including, among others, the ability of our suppliers to provide
compliant engines on a timely basis or our ability to meet our As required under the Dodd-Frank Wall Street Reform and Con-
production schedule. If we are unable to successfully execute such sumer Protection Act, the SEC adopted rules regarding disclosure
plans, our ability to sell our products into the market may be inhib- of the use of certain minerals, known as ‘‘conflict minerals,’’ which
ited, which could adversely affect our competitive position and are mined from the Democratic Republic of the Congo and adjoin-
financial results. To the extent in which we are able to implement ing countries, as well as procedures regarding manufacturers’
price increases to cover or partially offset costs related to efforts to discover the origin of such minerals and metals produced
research, development, engineering, and other expenses to design from those minerals. These conflict minerals are commonly
Tier 4 diesel engine compliant products in the form of price referred to as ‘‘3TG’’ and include tin, tantalum, tungsten, and gold.
increases to our customers, and/or our competitors implement dif- The conflict minerals rules required us to engage in due diligence
ferent strategies with respect to compliance with Tier 4 diesel efforts for the 2013 and 2014 calendar years and subsequent
engine emission requirements, we may experience lower market years, with our initial disclosures that we filed with the SEC on
demand for our products that may, ultimately, adversely affect our June 2, 2014, and subsequent disclosures required no later than
profit margins, net sales, and overall financial results. Alternatively, May 31 of each following year. We have, and we expect that we
if our competitors implement different strategies with respect to will continue to, incur additional costs and expenses, which may be
compliance with Tier 4 requirements that, either in the short term significant in order to comply with these rules, including for (i) due
or over the long term, enable them to limit price increases, intro- diligence to determine whether conflict minerals are necessary to
duce product modifications that gain widespread market accept- the functionality or production of any of our products and, if so,
ance, or otherwise changing customer preferences and buying pat- verify the sources of such conflict minerals; and (ii) any changes
terns in ways that we do not currently anticipate, we may
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