E-Z-GO 2011 Annual Report Download - page 22

continuing to liquidate, has been and may continue to be adversely affected by the market for golf courses in the U.S. and general
economic conditions. Valuations of the types of collateral securing our captive finance portfolio, particularly valuations of used
aircraft, have decreased over the past several years and may continue to decrease if weak economic conditions continue. Declining
collateral values could result in greater delinquencies, credit losses and foreclosures if customers elect to discontinue payments on
loan balances that exceed asset values or, in the case of assets in our liquidating portfolios, if they are unable to obtain alternative
sources of financing at loan maturity. 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. Significant delay or difficulty in executing the
continued liquidation of our liquidating portfolios and/or substantial losses in any of our finance asset portfolios could negatively
impact the ability of our Finance segment to generate the cash necessary to service its debt, including intercompany debt, resulting
in adverse effects on our cash flow, profitability and financial condition.
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. 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. 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. We depend on these suppliers and subcontractors 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, and result in regulatory actions
and/or litigation.
Our business could be negatively impacted by information technology security threats and other disruptions.
As a U.S. defense contractor, we face certain security threats, including threats to our information technology infrastructure and
unlawful attempts to gain access to our proprietary or classified information. Our information technology networks and related
systems are critical to the smooth operation of our business and essential to our ability to perform day to day operations. An
information technology system failure or breach of data security could disrupt our operations, cause the loss of business
information or the compromise of confidential information, require significant management attention and resources and could have
a material adverse effect on our results of operations. In addition, we outsource certain support functions, including certain global
information technology infrastructure services, to third-party service providers. Any disruption of such outsourced processes or
functions also could have a material adverse impact on our results of operations.
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