E-Z-GO 2007 Annual Report Download - page 31

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Item 1A. Risk Factors
commercial paper borrowings, issuances of medium-term notes and other term debt securities, and syndication and securitization of receivables.
Additional liquidity is provided to our Finance group through bank lines of credit. Much of the capital markets funding is made possible by the
maintenance of credit ratings that are acceptable to investors. If the credit ratings of our Finance group were to be lowered, it might face higher
borrowing costs, a disruption of its access to the capital markets or both. Our Finance group also could lose access to fi nancing for other reasons,
such as a general disruption of the capital markets. Any disruption of our Finance group’s access to the capital markets could adversely affect its
business and our profi tability.
If our Finance group is unable to maintain portfolio credit quality, our fi nancial performance could be adversely affected.
A key determinant of fi nancial performance of our Finance group is its ability to maintain the quality of loans, leases and other credit products in
its fi nance asset portfolios. Portfolio quality may adversely be affected by several factors, including fi nance receivable underwriting procedures,
collateral quality, geographic or industry concentrations, or general economic downturns. Any inability by our Finance group to successfully
collect its fi nance receivable portfolio and to resolve problem accounts may adversely affect our cash fl ow, profi tability and fi nancial 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
private transactions; government contracts; lack of compliance with applicable laws and regulations; production partners; product liability;
employment; and environmental, safety and health matters. Under federal 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 fi nancial 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 fi nancial 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 our Finance group, we establish reserves in our Manufacturing group 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
fi nancial 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 fi nancial results of many of these factors depends, in some cases, on our ability to obtain insurance covering potential losses at
reasonable rates.
Currency, raw material price and interest rate fl uctuations may adversely affect our results.
We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates, raw material prices and interest
rates. We monitor and manage these exposures as an integral part of our overall risk management program. In some cases, we purchase
derivatives or enter into contracts to insulate our fi nancial results of operations from these fl uctuations. Nevertheless, changes in currency
exchange rates, raw material prices and interest rates can have substantial adverse effects on our fi nancial results of operations.
We may be unable to effectively mitigate pricing pressures.
In some markets, particularly where we deliver component products and services to original equipment manufacturers, we face ongoing customer
demands for price reductions, which sometimes are contractually obligated. In some cases, we are able to offset these reductions through
technological advances or by lowering our cost base through improved operating and supply chain effi ciencies. However, if we are unable to
effectively mitigate future pricing pressures, our fi nancial results of operations could be adversely affected.
Failure to perform by our subcontractors or suppliers could adversely affect our performance.
We rely on other companies to provide raw materials, major components and subsystems for our products. Subcontractors also perform services
that we provide to our customers in certain circumstances. We depend on these subcontractors and vendors to meet our contractual obligations
to our customers. Our ability to meet our obligations to our customers may be adversely affected if suppliers do not provide the agreed-upon
supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Such events