E-Z-GO 2009 Annual Report Download - page 21

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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
commercial and financial transactions; government contracts; lack of compliance with applicable laws and regulations; production partners;
product liability; patent and trademark infringement; employment disputes; 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 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.
If we fail to comply with the covenants contained in our various debt agreements, it may adversely affect our liquidity, results
of operations and financial condition.
Our credit facility contains affirmative and negative covenants, including (i) limitations on creation of liens on assets of Textron Inc. or of its
manufacturing subsidiaries; (ii) maintenance of existence and properties; and (iii) maintaining a maximum debt to capital ratio (as defined and
excluding our Finance segment) of 65%. The indentures governing our outstanding senior notes also contain covenants, including limitations on
creation of liens on certain principal manufacturing facilities and shares of stock of subsidiaries that own such facilities and restrictions on sale
and leaseback transactions with respect to such facilities. In addition, both the credit facility and the indentures provide that consolidations,
mergers or sale of all or substantially all of our assets may only be effected if certain provisions are complied with. Some of these covenants may
limit our ability to engage in certain financing structures, create liens, sell assets or effect a consolidation or merger.
Our credit facility also contains a cross-default provision that would trigger an event of default thereunder if we fail to pay or otherwise have a
continued default under other indebtedness of Textron Inc. or any of our subsidiaries, other than any of our subsidiaries that primarily are engaged
in the business of a finance company, of over $100 million. Similarly, the supplemental indenture governing our convertible notes contains a
cross-default provision that would trigger an event of default thereunder if we fail to pay or otherwise have a continued default under other
indebtedness of Textron Inc. or any of our subsidiaries, other than Textron Financial Corporation or its subsidiaries, of over $100 million.
Therefore, Cessna Finance Export Corporation, a subsidiary of Textron Inc. that is the borrower under the Ex-Im Bank Facility entered into on July
14, 2009, would be included within the cross-default provision of the supplemental indenture for the convertible notes, although not within the
similar provision in our credit facility. As a result, a failure to pay or a continued default under the Ex-Im Bank Facility, if the outstanding balance
thereunder exceeded $100 million, could give rise to an event of default with respect to our convertible notes.
In addition, a bankruptcy or monetary judgment in excess of $100 million against us or any of our subsidiaries that accounts for more than 5% of
our consolidated revenues or our consolidated assets, including our finance subsidiaries, also would result in an event of default under our credit
facility, and a bankruptcy against us or any of our non-finance “significant subsidiaries” (within the meaning of the Securities Exchange
Commission’s rules) also would result in an event of default under the indenture governing our convertible notes.
Our failure to comply with material provisions or covenants in the credit facility or the indentures, or the failure of certain of our subsidiaries to
comply with their debt agreements, could have a material adverse effect on our liquidity, results of operations and financial condition.
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.
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, environmental remediation, warranty
costs and litigation. These reserves are subject to adjustment from time to time depending on actual experience and/or current market conditions
and are subject to many uncertainties, including bankruptcy or other financial problems at key customers, as well as changing market conditions.
Item 1A. Risk Factors