E-Z-GO 2011 Annual Report Download - page 25

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 more than $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 TFC or its subsidiaries, of more than $100 million. Therefore, Cessna Finance Export Corporation, a
subsidiary of Textron Inc. that is the borrower under our Export-Import Bank facilities, and Textron Aviation Finance Corporation,
a subsidiary of Textron Inc. that is the borrower under our Export Development Canada (EDC) facilities, 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 any one or more of these facilities, if related to aggregate
outstanding indebtedness of $100 million or more, 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 could 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 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 adversely 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, we
expect that some of the requirements of the new comprehensive healthcare 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 6,200 of our U.S. employees, or 25% of our total U.S. employees, are unionized, and approximately 2,600 of our
non-U.S. employees, or 32% 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. In particular, the uncertainty with respect to the ability of certain European countries to continue to
service their sovereign debt obligations and the related European financial restructuring efforts may cause the value of the euro to
fluctuate. Currency variations also contribute to variations in sales of products and services in impacted jurisdictions. For example,
in the event that one or more European countries were to replace the euro with another currency, our sales into such countries, or
into Europe generally, would likely be adversely affected until stable exchange rates are established. Accordingly, fluctuations in
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14 Textron Inc. Annual Report • 2011