E-Z-GO 2005 Annual Report Download - page 29

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Item 1. Business of Textron
Our business could be adversely affected by strikes or work stoppages and other labor issues.
Approximately 18,500 of our employees are unionized, which represented approximately 40% of our employees at December 31, 2005, including
employees of the discontinued business of Textron Fastening Systems. As a result, we may experience work stoppages, which could negatively
impact our ability to manufacture our products on a timely basis, resulting in strain on our relationships with our customers and a loss of rev-
enues. In addition, the presence of unions may limit our flexibility in responding to competitive pressures in the marketplace, which could have an
adverse effect on our financial results of operations.
In addition to our workforce, the workforces of many of our customers and suppliers are represented by labor unions. Work stoppages or strikes at
the plants of our key customers could result in delayed or cancelled orders for our products. Work stoppages and strikes at the plants of our key
suppliers could disrupt our manufacturing processes. Any of these results could adversely affect our financial results of operations.
Our Textron Finance borrowing group’s business is dependent on its continuing access to the capital markets.
Our financings are conducted through two borrowing groups, Textron Finance and Textron Manufacturing. Textron Finance consists of Textron
Financial Corporation and its subsidiaries, which are the entities through which we operate in the Finance segment. Textron Finance relies on its
access to the capital markets to fund asset growth, fund operations and meet debt obligations and other commitments. Textron Finance raises
funds through commercial paper borrowings, issuances of medium-term notes and other term debt securities, and syndication and securitization
of receivables. Additional liquidity is provided to Textron Finance through bank lines of credit. Much of the capital markets funding is made possi-
ble by the maintenance of credit ratings that are acceptable to investors. If the credit ratings of Textron Finance were to be lowered, it might face
higher borrowing costs, a disruption of its access to the capital markets or both. Textron Finance could also lose access to financing for other rea-
sons, such as a general disruption of the capital markets. Any disruption of Textron Finance’s access to the capital markets could adversely affect
its business and our profitability.
If Textron Finance is unable to maintain portfolio credit quality, our financial performance could be adversely affected.
A key determinant of financial performance at Textron Finance will be its ability to maintain the quality of loans, leases and other credit products in
its finance asset portfolios. Portfolio quality may adversely be affected by several factors, including finance receivable underwriting procedures,
collateral quality, geographic or industry concentrations, or general economic downturns. Any inability by Textron Finance to successfully collect
its finance receivable portfolio and to resolve problem accounts may adversely affect our cash flow, profitability, and financial condition.
We are subject to legal proceedings and other claims.
We are subject to legal proceedings and other claims arising out of the conduct of our business, including proceedings and claims relating to pri-
vate sector transactions; government contracts; production partners; product liability; employment; and environmental contamination. Under fed-
eral government procurement regulations, certain claims brought by the U.S. Government could result in our being suspended or debarred from
U.S. Government contracting for a period of time. On the basis of information presently available, we do not believe that existing proceedings and
claims will have a material effect on our financial position or results of operations. However, litigation is inherently unpredictable, and we could
incur judgments or enter into settlements for current or future claims that could adversely affect our financial position or our results of operations
in any particular period.
The levels of our reserves are subject to many uncertainties and may not be adequate to cover writedowns or losses.
In addition to reserves at Textron Finance, we establish reserves in our manufacturing segments to cover uncollectible accounts receivable,
excess or obsolete inventory, fair market value writedowns on used aircraft and golf cars, recall campaigns, warranty costs and litigation. These
reserves are subject to adjustment from time to time depending on actual experience and are subject to many uncertainties, including bankruptcy
or other financial problems at key customers.
In the case of litigation matters for which reserves have not been established because the loss is not deemed probable, it is reasonably possible
such matters could be decided against us and could require us to pay damages or make other expenditures in amounts that are not presently
estimable.
The effect on our financial results of many of these factors depends in some cases on our ability to obtain insurance covering potential losses at
reasonable rates.