E-Z-GO 2008 Annual Report Download - page 25

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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 our Finance segment, 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 of these matters on our financial results depends, in some cases, on our ability to obtain insurance covering
potential losses at reasonable rates.
Currency, raw material price and interest rate fluctuations 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 financial results of operations from these fluctuations. Nevertheless, changes in currency
exchange rates, raw material prices and interest rates can have substantial adverse effects on our financial 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 efficiencies. However, if we are unable to
effectively mitigate future pricing pressures, our financial 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
may adversely affect our financial results of operations or damage our reputation and relationships with our customers. The risk of these adverse
effects may be greater in circumstances where we rely on only one or two subcontractors or suppliers for a particular product or service.
The increasing costs of certain employee and retiree benefits could adversely affect our results.
Our earnings and cash flow may be impacted by the amount of income or expense we expend or record for employee benefit plans. This is
particularly true for our defined benefit pension plans, where the contributions to those plans are driven by, among other things, our assumptions
of the rate of return on plan assets, the discount rate used for future payment obligations and the rates of future cost growth. If the actual
investment return and rates prove materially different from our assumptions, this could adversely impact the amount of pension expense and
require larger contributions to the plans. Also, changing pension legislation and regulations could increase the cost associated with our defined
benefit pension plans. In addition, medical costs are rising at a rate faster than the general inflation rate. Continued medical cost inflation in
excess of the general inflation rate increases the risk that we will not be able to mitigate the rising costs of medical benefits. Increases to the costs
of pension and medical benefits could have an adverse effect on our financial results of operations.
Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability.
We are subject to income taxes in both the U.S. and various non-U.S. jurisdictions, and our domestic and international tax liabilities are subject to
the allocation of income among these different jurisdictions. Our effective tax rates could be adversely affected by changes in the mix of earnings
in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws, which could
affect our profitability. In particular, the carrying value of deferred tax assets is dependent on our ability to generate future taxable income. In
addition, the amount of income taxes we pay is subject to audits in various jurisdictions, and a material assessment by a tax authority could affect
our profitability.
Item 1A. Risk Factors