E-Z-GO 2012 Annual Report Download - page 23

Textron Inc. Annual Report ● 2012 11
Weak demand for our aircraft products may continue to adversely affect our financial results.
As a result of the continued worldwide economic softness, we have experienced continued weak demand for our fixed-wing
aircraft, particularly our business jets. Soft demand for new and pre-owned jets could persist and could continue to adversely
impact the pricing of new jets and the valuation of pre-owned jets. We have accepted a higher proportion of trade-ins of pre-owned
jets in order to sell new jets, and we are winding down our fractional business jet ownership business. These two factors have
increased our inventory of pre-owned jets.
Concerns regarding the financial stability of certain Eurozone countries, the overall stability of the euro and the suitability of the
euro as a single currency may have an adverse impact on financial institutions and capital markets in Europe and globally which
could impede the ability of our customers to obtain financing to purchase our jets and helicopters and further reduce demand for
our products. In addition, both U.S. and foreign governments and government agencies regulate the aviation industry; they may
impose new regulations with additional aircraft security or other requirements or restrictions, including, for example, restrictions
and/or fees related to carbon emissions levels that may adversely impact demand for jets and/or helicopters. A prolonged weakness
in the markets for our commercial aircraft products could adversely impact our results of operations and our future prospects.
Difficult economic conditions could continue to affect the performance of our Finance segment and our losses may increase if
we are unable to successfully collect our finance receivables or realize sufficient value from collateral.
The financial performance of our Finance segment depends on the quality of loans, leases and other assets in its finance asset
portfolios. Portfolio quality may be adversely affected by several factors, including finance receivable underwriting procedures,
collateral value, geographic or industry concentrations, and the effect of general economic conditions on our customers’
businesses. The performance of our liquidating non-captive finance receivable portfolios may be adversely affected by other
variables, including changes in our liquidation strategy and changes in external factors affecting the value and/or marketability of
our assets. Valuations of the types of collateral securing our captive finance portfolio, particularly valuations of pre-owned 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, resulting in adverse effects on our cash
flow, profitability and financial condition.
We may need to obtain financing 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 and/or to support our
operations. Although we currently have access to the capital markets, our access and the cost of borrowings, is affected by a
number of factors including market conditions and the strength of our credit ratings. 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 and at a reasonable
cost both of which are dependent on a number of factors including market conditions and our credit ratings. 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,