E-Z-GO 2010 Annual Report Download - page 25

13
of the Securities and 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.
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 required contributions to those plans and related expenses are
driven by, among other things, our assumptions of the expected long-term rate of return on plan assets, the discount rate used for
future payment obligations and the rates of future cost growth. Additionally, as part of our annual evaluation of these plans, significant
changes in our assumptions, due to changes in economic, legislative and/or demographic experience or circumstances, or changes in
our actual investment returns could impact our unfunded status of the plans requiring us to substantially increase our pension liability
with a resulting decrease in shareholders’ equity. Changes in the funded status of these plans are recognized in other comprehensive
income (loss) in the year in which they occur. Also, changes in 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 would increase the risk that we will not be able to mitigate the rising costs of medical benefits. Moreover,
Congress recently has enacted a comprehensive healthcare law, and we are evaluating the potential impacts of this new law on our
costs. We expect that some of the requirements of this new law will increase our future costs. Increases to the costs of pension and
medical benefits could have an adverse effect on our financial results of operations.
Our business could be adversely affected by strikes or work stoppages and other labor issues.
Approximately 5,900 of our U.S. employees, or 24% of our total U.S. employees, are unionized, and approximately 2,500 of our non-
U.S. employees, or 33% of our total non-U.S. employees, are represented by organized councils. As a result, we may experience work
stoppages, which could negatively impact our ability to manufacture our products on a timely basis, resulting in strain on our
relationships with our customers and a loss of revenues. In addition, the presence of unions may limit our flexibility in responding to
competitive pressures in the marketplace, which could have an adverse effect on our financial results of operations.
In addition, the workforces of many of our customers and suppliers are represented by labor unions. Work stoppages or strikes at the
plants of our key customers could result in delayed or canceled orders for our products. Work stoppages and strikes at the plants of our
key suppliers could disrupt our manufacturing processes. Any of these results could adversely affect our financial results of
operations.
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. However, if we are unable to
effectively mitigate future pricing pressures through technological advances or by lowering our cost base through improved operating
and supply chain efficiencies, 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 write-downs or losses.
We establish reserves to cover uncollectable finance receivables and accounts receivable, excess or obsolete inventory, fair market
value write-downs 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.
Due to the nature of our manufacturing business, we may be subject to liability claims arising from accidents involving our products,
including claims for serious personal injuries or death caused by climatic factors or by pilot or driver error. In the case of litigation
matters for which reserves have not been established because the loss is not deemed probable, it is reasonably possible that 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. In addition, we cannot be certain that our reserves are adequate and that our insurance coverage will be sufficient to cover
one or more substantial claims. Furthermore, there can be no assurance that we will be able to obtain insurance coverage at acceptable
levels and costs in the future.