Toro 2015 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2015 Toro annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 86

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86

Commodity Risk. We are subject to market risk from fluctuating increase selling prices of our products or obtain manufacturing effi-
market prices of certain purchased commodity raw materials ciencies to offset increases in commodity costs. Further information
including steel, aluminum, petroleum and natural gas-based resins, regarding rising prices for commodities is presented in Part II,
and linerboard. In addition, we are a purchaser of components and Item 7, ‘‘Management’s Discussion and Analysis of Financial Con-
parts containing various commodities, including steel, aluminum, dition and Results of Operations’’ of this report in the section enti-
copper, lead, rubber, and others that are integrated into our end tled ‘‘Inflation.’’ We enter into fixed-price contracts for future
products. While such materials are typically available from numer- purchases of natural gas in the normal course of operations as a
ous suppliers, commodity raw materials are subject to price fluctu- means to manage natural gas price risks. In fiscal 2015, our manu-
ations. We generally buy these commodities and components facturing facilities entered into these fixed-price contracts for
based upon market prices that are established with the vendor as approximately 50 percent of their monthly-anticipated usage.
part of the purchase process. We generally attempt to obtain firm Equity Price Risk. The trading price volatility of our common
pricing from most of our suppliers for volumes consistent with stock impacts compensation expense related to our stock-based
planned production. To the extent that commodity prices increase compensation plans. Further information is presented in Note 10 of
and we do not have firm pricing from our suppliers, or our suppli- the Notes to Consolidated Financial Statements regarding our
ers are not able to honor such prices, we may experience a stock-based compensation plans.
decline in our gross margins to the extent we are not able to
43