Toro 2015 Annual Report Download - page 19

earnings. Because our products are manufactured or sourced pri- and businesses. Historically, we have mitigated cost increases, in
marily from the U.S. and Mexico, a stronger U.S. dollar and Mexi- part, by collaborating with suppliers, reviewing alternative sourcing
can peso generally have a negative impact on our operating options, substituting materials, engaging in internal cost reduction
results, while a weaker dollar and peso generally have a positive efforts, and increasing prices on some of our products, all as
effect. In addition, currency exchange rate fluctuations may affect appropriate. However, we may not be able to fully offset such
the comparative prices between products we sell and products our increased costs in the future. Further, if our price increases are not
foreign competitors sell in the same market, which may adversely accepted by our customers and the market, our net sales, profit
affect demand for our products. Substantial exchange rate fluctua- margins, earnings, and market share could be adversely affected.
tions as a result of the strengthening of the U.S. dollar or other-
Disruption in the availability of raw materials and
wise, may have an adverse effect on our operating results, finan-
components used in our products may adversely affect
cial condition, and cash flows, as well as the comparability of our
our business.
consolidated financial statements between reporting periods. Our
primary foreign currency exchange rate exposure is with the Euro, Although most of the raw materials and components used in our
the Australian dollar, the Canadian dollar, the British pound, the products are generally commercially available from a number of
Mexican peso, the Japanese yen, the Chinese Renminbi, and the sources and in adequate supply, certain components are sourced
Romanian New Leu against the U.S. dollar, as well as the from single suppliers. Any disruption in the availability of raw
Romanian New Leu against the Euro. While we actively manage materials and components used in our products, our inability to
the exposure of our foreign currency market risk in the normal timely or otherwise obtain substitutes for such items, or any deteri-
course of business by entering into various foreign exchange con- oration in our relationships with or the financial viability of our sup-
tracts, these instruments involve risks and may not effectively limit pliers, could adversely affect our business.
our underlying exposure from foreign currency exchange rate fluc-
tuations or minimize our net earnings and cash volatility associated Our professional segment net sales are dependent upon
with foreign currency exchange rate changes. Further, a number of certain factors, including golf course revenues and the
financial institutions similar to those that serve as counterparties to amount of investment in golf course renovations and
our foreign exchange contracts were adversely affected by unprec- improvements; the level of new golf course development
edented distress in the worldwide credit markets during the past and golf course closures; the level of homeowners who
few years. The failure of one or more counterparties to our foreign outsource their lawn care; the level of residential and
currency exchange rate contracts to fulfill their obligations to us commercial construction; acceptance of and demand for
could adversely affect our operating results. micro-irrigation solutions for agricultural markets; the
integration of the BOSS business into our professional
Increases in the cost of raw materials and components segment; the demand for our products in the rental and
that we purchase and/or increases in our other costs of specialty construction market; the availability of cash or
doing business, such as transportation costs, may credit to professional segment customers on acceptable
adversely affect our profit margins and businesses. terms to finance new product purchases; and the
amount of government revenues, budget, and spending
We purchase raw materials such as steel, aluminum, petroleum
levels for grounds maintenance equipment.
and natural gas-based resins, linerboard, and other commodities,
and components, such as engines, transmissions, transaxles, Our professional segment products are sold by distributors or deal-
hydraulics, and electric motors, for use in our products. In addition, ers, or directly to government customers, rental companies, and
we are a purchaser of components and parts containing various professional users engaged in maintaining and creating properties
commodities, including steel, aluminum, copper, lead, rubber, and and landscapes, such as golf courses, sports fields, residential and
others that are integrated into our end products. To the extent that commercial properties and landscapes, and governmental and
commodity prices increase and we do not have firm pricing from municipal properties. Accordingly, our professional segment net
our suppliers, or our suppliers are not able to honor such prices, sales are impacted by golf course revenues and the amount of
increases in the cost of such raw materials and components and investment in golf course renovations and improvements; the level
parts may adversely affect our profit margins if we are unable to of new golf course development and golf course closures; the level
pass along to our customers these cost increases in the form of of homeowners who outsource their lawn care; acceptance of and
price increases or otherwise reduce our cost of goods sold. In demand for micro-irrigation solutions for agricultural markets; the
addition, increases in other costs of doing business may also integration of the BOSS business into our professional segment;
adversely affect our profit margins and businesses. For example, the demand for our products in the rental and specialty construc-
an increase in fuel costs may result in an increase in our transpor- tion market; the level of residential and commercial construction;
tation costs, which also could adversely affect our operating results availability of cash or credit on acceptable terms to finance new
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