E-Z-GO 2010 Annual Report Download - page 22

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delinquencies and foreclosures as customers elect to discontinue payments on loan balances that exceed asset values. Bankruptcy
proceedings involving our borrowers may prevent or delay our ability to exercise our rights and remedies and realize the full value of
our collateral. Our losses may increase if our collateral cannot be realized or is liquidated at prices not sufficient to recover the full
amount of our finance receivable portfolio. If these negative market conditions persist or worsen, the Finance segment may experience
further deterioration in its ability to successfully collect its finance receivables or realize sufficient value from collateral, which may
adversely affect our cash flow, profitability and financial condition.
Payments required under our Support Agreement with TFC could restrict our use of capital.
During the past several years, we have made quarterly capital contributions to TFC, as required under the terms of our Support
Agreement with TFC, to maintain both the fixed charge coverage ratio required by the Support Agreement and the leverage ratio
required by TFC’s credit facility. A summary of the capital contributions paid to TFC and dividends received from TFC is provided on
page 29. We will likely be required to make additional capital contributions to TFC in the future in order to maintain this ratio. While
capital contributions to TFC may not increase the aggregate amount of outstanding consolidated indebtedness of Textron and TFC,
such contributions could restrict our allocation of available capital for other purposes. In addition, recently, from time to time, TFC
has borrowed from us to meet its liquidity needs, and is expected to require further borrowings from us for its liquidity needs in the
future, depending upon market conditions. TFC’s need for borrowings from us could restrict our use of funds for other purposes.
Failure to maintain credit ratings acceptable to investors may increase the cost of our funding and may adversely affect our access
to the capital markets.
The major rating agencies regularly evaluate us, including TFC, for purposes of assigning credit ratings. Our ability to access the
credit markets, and the cost of these borrowings, is affected by the strength of our credit ratings and current market conditions.
Failure to maintain credit ratings that are acceptable to investors may adversely affect the cost and other terms upon which we are able
to obtain financing, as well as our access to the capital markets.
We may need to obtain financing in order to meet our debt obligations in the future; such financing may not be available to us on
satisfactory terms, if at all.
We may periodically need to obtain financing in order to meet our debt obligations as they come due. Although we currently have
access to the capital markets, we may not be able to refinance our credit facilities or maturing debt at the time that such financing is
necessary at terms that are acceptable to us, or at all. If we cannot obtain adequate sources of credit on favorable terms, or at all, our
business, operating results, and financial condition could be adversely affected.
Our ability to fund our captive financing activities at economically competitive levels depends on our ability to borrow and the cost
of borrowing in the credit markets.
Our Finance segment’s ability to continue to offer customer financing for the products that we manufacture, and the long-term
viability and profitability of the captive finance business, is largely dependent on our ability to obtain funding at a reasonable
cost. This ability and cost, in turn, are dependent on our credit ratings and are subject to credit market volatility. If we are unable to
continue to offer customer financing or if we are unable to offer competitive customer financing, it could negatively impact our
Manufacturing group’s ability to generate sales, which could adversely affect our results of operations and financial condition.
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. In addition, we outsource certain support functions,
including certain global information technology infrastructure services to third-party service providers. We depend on these vendors,
subcontractors and service providers to meet our contractual obligations to our customers and conduct our operations.
Our ability to meet our obligations to our customers may be adversely affected if suppliers or subcontractors 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. Likewise, the quality of our products may be adversely impacted if companies to whom we delegate manufacture of
major components or subsystems for our products, or from whom we acquire such items, do not provide components or subsystems
which meet required specifications and perform to our and our customers’ expectations. Our suppliers may be less likely than us to be
able to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as
financial problems that limit their ability to conduct their operations. 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 raw material, product or service. In particular, in the
aircraft industry, most vendor parts are certified by the regulatory agencies as part of the overall Type Certificate for the aircraft being
produced by the manufacturer. If a vendor does not or cannot supply its parts, then the manufacturer’s production line may be stopped
until the manufacturer can design, manufacture and certify a similar part itself or identify and certify another similar vendor’s part,
resulting in significant delays in the completion of aircraft.
Such events may adversely affect our financial results, damage our reputation and relationships with our customers, result in
regulatory actions and/or result in product liability claims. Likewise, any disruption of our information technology systems or other
outsourced processes or functions could have a material adverse impact on our operations and our financial results.