E-Z-GO 2007 Annual Report Download - page 29

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Item 1A. Risk Factors
on those contracts for which we are teamed with others and are not the prime contractor, the U.S. Government could terminate a prime contract
under which we are a subcontractor, irrespective of the quality of our products and services as a subcontractor.
As a U.S. Government contractor, we are subject to a number of procurement rules and regulations.
We must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. Government
contracts. These laws and regulations, among other things, require certifi cation and disclosure of all cost and pricing data in connection with
contract negotiation, defi ne allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S.
Government contracts and restrict the use and dissemination of classifi ed information and the exportation of certain products and technical data.
Our U.S. Government contracts contain provisions that allow the U.S. Government to unilaterally suspend us from receiving new contracts
pending resolution of alleged violations of procurement laws or regulations, reduce the value of existing contracts, issue modifi cations to a
contract and control and potentially prohibit the export of our products, services and associated materials. A violation of specifi c laws and
regulations could result in the imposition of fi nes and penalties or the termination of our contracts and, under certain circumstances, suspension
or debarment from future contracts for a period of time. These laws and regulations affect how we do business with our customers and, in some
instances, impose added costs on our business.
Cost overruns on U.S. Government contracts could subject us to losses or adversely affect our future business.
Contract and program accounting require judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions
for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is
complicated and subject to many variables. Assumptions have to be made regarding the length of time to complete the contract because costs
include expected increases in wages and prices for materials. Incentives or penalties related to performance on contracts are considered in
estimating sales and profi t rates and are recorded when there is suffi cient information for us to assess anticipated performance. Estimates of
award fees also are used in estimating sales and profi t rates based on actual and anticipated awards. Because of the signifi cance of these estimates,
it is likely that different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes
in underlying assumptions, circumstances or estimates may adversely affect our future fi nancial results of operations.
Under fi xed-price contracts, we receive a fi xed price irrespective of the actual costs we incur, and, consequently, any costs in excess of the fi xed
price are absorbed by us. Under time and materials contracts, we are paid for labor at negotiated hourly billing rates and for certain expenses.
Under cost reimbursement contracts, which are subject to a contract-ceiling amount, we are reimbursed for allowable costs and paid a fee, which
may be fi xed or performance based. However, if our costs exceed the contract ceiling or are not allowable under the provisions of the contract or
applicable regulations, we may not be able to obtain reimbursement for all such costs. Under each type of contract, if we are unable to control
costs we incur in performing under the contract, our fi nancial condition and results of operations could be adversely affected. Cost overruns also
may adversely affect our ability to sustain existing programs and obtain future contract awards.
Delays in aircraft delivery schedules or cancellation of orders may adversely affect our fi nancial results.
Aircraft customers, including sellers of fractional share interests, may respond to weak economic conditions by delaying delivery of orders or
canceling orders. Weakness in the economy may result in fewer hours fl own on existing aircraft and, consequently, lower demand for spare parts
and maintenance. Weak economic conditions also may cause reduced demand for used business jets or helicopters. We may accept used aircraft
on trade-in that would be subject to fl uctuations in the fair market value of the aircraft while in inventory. Reduced demand for new and used
aircraft, spare parts and maintenance can have an adverse effect on our fi nancial results of operations.
Developing new products and technologies entails signifi cant risks and uncertainties.
Delays or cost overruns in the development and acceptance of new products, or certifi cation of new aircraft products and other products, could
affect our fi nancial results of operations. These delays could be caused by unanticipated technological hurdles, production changes to meet
customer demands, unanticipated diffi culties in obtaining required regulatory certifi cations of new aircraft products, coordination with joint
venture partners or failure on the part of our suppliers to deliver components as agreed. We also could be adversely affected if the general effi cacy
of our research and development investments to develop products is less than expected. Furthermore, because of the lengthy research and
development cycle involved in bringing certain of our products to market, we cannot predict the economic conditions that will exist when any new
product is complete. A reduction in capital spending in the aerospace or defense industries could have a signifi cant effect on the demand for new
products and technologies under development, which could have an adverse effect on our fi nancial performance or results of operations.