E-Z-GO 2007 Annual Report Download - page 28

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Textron Inc.
in the U.S. Government defense budget, including those related to Operation Iraqi Freedom, Operation Enduring Freedom and the Global War
on Terrorism; (g) changes in national or international funding priorities, U.S. and foreign military budget constraints and determinations, and
government policies on the export and import of military and commercial products; (h) legislative or regulatory actions impacting defense
operations; (i) the ability to control costs and successful implementation of various cost-reduction programs; (j) the timing of new product
launches and certifi cations of new aircraft products; (k) the occurrence of slowdowns or downturns in customer markets in which our products are
sold or supplied or where Textron Financial Corporation offers fi nancing; (l) changes in aircraft delivery schedules or cancellation of orders;
(m) the impact of changes in tax legislation; (n) the extent to which we are able to pass raw material price increases through to customers or offset
such price increases by reducing other costs; (o) our ability to offset, through cost reductions, pricing pressure brought by original equipment
manufacturer customers; (p) our ability to realize full value of receivables; (q) the availability and cost of insurance; (r) increases in pension
expenses and other postretirement employee costs; (s) Textron Financial Corporation’s ability to maintain portfolio credit quality; (t) Textron
Financial Corporation’s access to debt fi nancing at competitive rates; (u) uncertainty in estimating contingent liabilities and establishing reserves
to address such contingencies; (v) risks and uncertainties related to acquisitions and dispositions; (w) the effi cacy of research and development
investments to develop new products; (x) the launching of signifi cant new products or programs which could result in unanticipated expenses;
(y) bankruptcy or other fi nancial problems at major suppliers or customers that could cause disruptions in our supply chain or diffi culty in
collecting amounts owed by such customers; and (z) diffi culties or unanticipated expenses in connection with the consummation or integration
of acquisitions, potential diffi culties in employee retention following the acquisition and risks that the acquisition does not perform as planned
or disrupts our current plans and operations or that anticipated synergies and opportunities will not be realized.
Item 1A. Risk Factors
Our business, fi nancial condition and results of operations are subject to various risks, including those discussed below, which may affect
the value of our securities. The risks discussed below are those that we believe currently are the most signifi cant, although additional risks not
presently known to us or that we currently deem less signifi cant also may impact our business, fi nancial condition or results of operations,
perhaps materially.
We have customer concentration with the U.S. Government.
During 2007, we derived approximately 19% of our revenues from sales to a variety of U.S. Government entities. Our U.S. Government revenues
have continued to grow both organically and through acquisitions, such as our recent acquisition of UIC. Our ability to compete successfully for
and retain U.S. Government business is highly dependent on technical excellence, management profi ciency, strategic alliances, cost-effective
performance, and the ability to recruit and retain key personnel. Our revenues from the U.S. Government largely result from contracts awarded to
us under various U.S. Government programs, primarily defense-related programs. The funding of these programs is subject to congressional
appropriation decisions. Although multiple-year contracts may be planned in connection with major procurements, Congress generally
appropriates funds on a fi scal year basis even though a program may continue for several years. Consequently, programs often are only partially
funded initially, and additional funds are committed only as Congress makes further appropriations. The reduction or termination of funding, or
changes in the timing of funding, for a U.S. Government program in which we provide products or services would result in a reduction or loss of
anticipated future revenues attributable to that program, and could have a negative impact on our results of operations. While the overall level of
U.S. defense spending has increased in recent years for numerous reasons, including increases in funding of operations in Iraq and Afghanistan
and the U.S. Department of Defense’s military transformation initiatives, we can give no assurance that such spending will continue to grow or not
be reduced. Signifi cant changes in national and international priorities for defense spending could impact the funding, or the time of funding, of
our programs, which could negatively impact our results of operations and fi nancial condition.
U.S. Government contracts may be terminated at any time and may contain other unfavorable provisions.
The U.S. Government typically can terminate or modify any of its contracts with us either for its convenience or if we default by failing to perform
under the terms of the applicable contract. A termination arising out of our default could expose us to liability and have an adverse effect on our
ability to compete for future contracts and orders.
If any of our contracts are terminated by the U.S. Government, our backlog would be reduced, in accordance with contract terms, by the expected
value of the remaining work under such contracts, and our fi nancial condition and results of operations could be adversely affected. In addition,