Toro 2015 Annual Report Download - page 20

product purchases; and the amount of government spending for centers or our inability to respond to future changes in buying pat-
new grounds maintenance equipment. Among other things, any terns of customers or new distribution channels could have a
one or a combination of the following factors could have an material adverse impact on our business and operating results.
adverse effect on our professional segment net sales: Changing buying patterns of customers could also result in
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reduced levels of investment in golf course renovations and reduced sales of one or more of our residential segment products,
improvements and new golf course development; reduced num- resulting in increased inventory levels.
ber of golf rounds played at public and private golf courses
Changes in our product mix impact our financial
resulting in reduced revenue for such golf courses; decreased
performance, including profit margins and net earnings.
membership at private golf courses resulting in reduced revenue
and, in certain cases, financial difficulties for such golf courses; Our professional segment products generally have higher profit
and increased number of golf course closures, any one of which margins than our residential segment products. Our financial per-
or any combination of which could result in a decrease in spend- formance, including our profit margins and net earnings, can be
ing and demand for our products; impacted depending on the mix of products we sell during a given
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reduced consumer and business spending, causing homeowners period. For example, if we experience lower sales of our profes-
and landscape contractor professionals to forego or postpone sional segment products that generally carry higher profit margins
purchases of our products; than our residential segment products, our financial performance,
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low or reduced levels of commercial and residential construction, including profit margins and net earnings, could be negatively
resulting in a decrease in demand for our products; impacted.
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a decline in acceptance of and demand for micro-irrigation solu-
tions for agricultural markets and our products in the rental and We intend to grow our business through acquisitions
specialty construction market; and and alliances, stronger customer relations, and new joint
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reduced tax revenue, increased governmental expenses in other ventures and partnerships, which could be risky and
areas, tighter government budgets and government deficits, gen- may harm our business, reputation, financial condition,
erally resulting in reduced government spending for grounds and operating results.
maintenance equipment.
One of our growth strategies is to drive growth in our businesses
and accelerate opportunities to expand our global presence
Our residential segment net sales are dependent upon
through targeted acquisitions and alliances, stronger customer rela-
consumers buying our residential segment products at
tions, and new joint ventures and partnerships that add value while
dealers, mass retailers, and home centers, such as The
supplementing our existing brands and product portfolio. Our ability
Home Depot, Inc., the amount of product placement at
to grow through acquisitions will depend, in part, on the availability
mass retailers and home centers; consumer confidence
of suitable candidates at acceptable prices, terms, and conditions,
and spending levels, and changing buying patterns of
our ability to compete effectively for acquisition candidates, and the
customers.
availability of capital and personnel to complete such acquisitions
The elimination or reduction of shelf space assigned to our resi- and run the acquired business effectively. Any acquisition, alliance,
dential products or other changes to the placement of our products joint venture, or partnership could impair our business, financial
by mass retailers and home centers, such as The Home Depot, condition, reputation, and operating results. The benefits of an
could adversely affect our residential segment net sales. Our resi- acquisition, such as our acquisition of the BOSS business, or new
dential segment net sales also are dependent upon buying pat- alliance, joint venture, or partnership may take more time than
terns of customers. For example, as consumers purchase products expected to develop or integrate into our operations, and we can-
at home centers and mass retailers that offer broader and lower not guarantee that previous or future acquisitions, alliances, joint
price points than dealers, we have experienced increased demand ventures, or partnerships will, in fact, produce any benefits. Such
and sales of our residential segment products purchased at mass acquisitions, alliances, joint ventures, and partnerships may involve
retailers and home centers. The Home Depot is a substantial cus- a number of risks, including:
tomer of ours, which accounted for approximately 10 to 11 percent
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diversion of management’s attention;
of our total consolidated gross sales in each of fiscal 2015, 2014,
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disruption to our existing operations and plans;
and 2013. We believe that our diverse distribution channels and
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inability to effectively manage our expanded operations;
customer base should reduce the long-term impact on us if we
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difficulties or delays in integrating and assimilating information
were to lose The Home Depot or any other substantial customer. and financial systems, operations, and products of an acquired
However, the loss of any substantial customer, a significant reduc- business or other business venture or in realizing projected effi-
tion in sales to The Home Depot or other customers, or our inabil- ciencies, growth prospects, cost savings, and synergies;
ity to maintain adequate product placement at retailers and home
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