E-Z-GO 2011 Annual Report Download - page 23

Developing new products and technologies entails significant risks and uncertainties.
To continue to grow our revenues and segment profit, we must successfully develop new products and technologies or modify our
existing products and technologies for our current and future markets. Our future performance depends, in part, on our ability to
identify emerging technological trends and customer requirements in our current and future markets and to develop and maintain
competitive products and services. Delays or cost overruns in the development and acceptance of new products, or certification of
new aircraft and other products, could affect our financial results of operations. These delays could be caused by unanticipated
technological hurdles, production changes to meet customer demands, unanticipated difficulties in obtaining required regulatory
certifications of new aircraft products, coordination with joint venture partners or failure on the part of our suppliers to deliver
components as agreed. Changes in environmental laws and regulations, for example, those enacted in response to climate change
concerns and other actions known as “green initiatives,” could lead to the necessity for new or additional investment in product
designs or manufacturing processes and could increase environmental compliance expenditures, including costs to defend
regulatory reviews. We also could be adversely affected if the general efficacy of our research and development investments to
develop products is less than expected or if we do not adequately protect the intellectual property developed through our research
and development efforts. Likewise, new products and technologies could generate unanticipated safety or other concerns resulting
in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us.
Furthermore, because of the lengthy research and development cycle involved in bringing certain of our products to market, we
cannot predict the economic conditions that will exist when any new product is complete. A reduction in capital spending in the
aerospace or defense industries could have a significant effect on the demand for new products and technologies under
development, which could have an adverse effect on our financial condition and results of operations. In addition, there can be no
assurance that the market for our offerings will develop or continue to expand as we currently anticipate. Furthermore, we cannot
be sure that our competitors will not develop competing technologies which gain market acceptance in advance of our products. A
significant failure in our new product development efforts or the failure of our products or services to achieve market acceptance
more rapidly than our competitors could have an adverse effect on our financial condition and results of operations.
Our business is subject to the risks of doing business in foreign countries.
Our international business, including U.S. exports, exposes us to certain unique and potentially greater risks than our domestic
business. Our exposure to such risks increases as our international business continues to grow. Our international business is subject
to U.S. and local government regulations and procurement policies and practices, which may change from time to time, including
regulations relating to import-export control; environmental, health and safety; investments; exchange controls; and repatriation of
earnings or cash settlement challenges, as well as to varying currency, geopolitical and economic risks. These international risks
may be especially significant with respect to aerospace and defense products for which we sometimes first must obtain licenses
and authorizations from various U.S. Government agencies before we are permitted to sell our products outside the U.S. Any
significant impairment of our ability to sell products outside the U.S. could negatively impact our results of operations and
financial condition. Additionally, some international government customers require contractors to agree to specific in-country
purchases, manufacturing agreements or financial support arrangements, known as offsets, as a condition for a contract award. The
contracts generally extend over several years and may include penalties if we fail to meet the offset requirements, which could
adversely impact our revenues, profitability and cash flows. Additionally, we are facing increasing competition in our international
markets from foreign and multinational firms that may have certain home country advantages over us; as a result, our ability to
compete successfully in those markets may be adversely affected, which could negatively impact our profitability.
We maintain manufacturing facilities, services centers, supply centers and other facilities worldwide, including in various
emerging market countries. We also have entered into, and expect to continue to enter into, joint venture arrangements in
emerging market countries, some of which may require guaranties or other commitments. We expect that our investment in
emerging market countries will continue to increase. Emerging market operations can present many risks in addition to those
discussed above, including civil disturbances, economic and government instability, terrorism and related safety concerns, health
concerns, cultural differences in employment and business practices, the imposition of exchange controls and risks associated with
inadequate infrastructures to deal with natural disasters. The impact of any one or more of these or other factors could adversely
affect our business, financial condition or operating results.
We also are exposed to risks associated with using foreign representatives and consultants for international sales and operations
and teaming with international subcontractors and suppliers in connection with international programs. In many foreign countries,
particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and
regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we implement policies and procedures designed
to facilitate compliance with these laws, any such violation by any of our international representatives, consultants, subcontractors
or suppliers, even if prohibited by our policies, could have an adverse effect on our business and reputation.
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12 Textron Inc. Annual Report • 2011