E-Z-GO 2013 Annual Report Download - page 22

9 Textron Inc. Annual Report • 2013
• The timing of our new product launches or certifications of our new aircraft products;
• Our ability to keep pace with our competitors in the introduction of new products and upgrades with features and
technologies desired by our customers;
• Increases in pension expense or employee and retiree medical benefits;
• Continued demand softness or volatility in the markets in which we do business;
• The inability to complete announced acquisitions;
• Difficulty or unanticipated expenses in connection with integrating acquired businesses; and
• The risk that anticipated synergies and opportunities as a result of acquisitions will not be realized or the risk that
acquisitions do not perform as planned, including, for example, the risk that acquired businesses will not achieve revenue
projections.
Item 1A. RISK FACTORS
Our business, financial condition and results of operations are subject to various risks, including those discussed below, which may
affect the value of our securities. The risks discussed below are those that we believe currently are the most significant to our
business.
We have customer concentration with the U.S. Government; reduction in U.S. Government defense spending may adversely
affect our results of operations and financial condition.
During 2013, we derived approximately 30% of our revenues from sales to a variety of U.S. Government entities. Our revenues
from the U.S. Government largely result from contracts awarded to us under various U.S. Government defense-related programs.
The funding of these programs is subject to congressional appropriation decisions. Although multiple-year contracts may be
planned in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a
program may continue for several years. Consequently, programs often are only partially funded initially, and additional funds are
committed only as Congress makes further appropriations. If we incur costs in excess of funds committed on a contract, we are at
risk for non-reimbursement of those costs until additional funds are appropriated. The reduction, termination or delay in the
timing of funding for U.S. Government programs for which we currently provide or propose to provide products or services may
result in a loss of anticipated future revenues that could materially and adversely impact our results of operations and financial
condition. Significant changes in national and international priorities for defense spending could impact the funding, or the timing
of funding, of our programs, which could negatively impact our results of operations and financial condition.
Under the Budget Control Act of 2011, the U.S. Government committed to significantly reduce the federal deficit over ten years.
Notwithstanding the Bipartisan Budget Control Act of 2013, substantial spending cuts to the U.S. defense budget are likely in the
future. In addition, Congress and the Administration continue to debate the nation’s debt ceiling and other fiscal issues. The
outcome of that debate could have a significant impact on future defense spending plans. As a result, long-term funding for
various programs in which we participate, as well as future purchasing decisions by our U.S. Government customers, could be
reduced, delayed or cancelled. In addition, these cuts could adversely affect the viability of the suppliers and subcontractors under
our programs.
There are many variables in how these budget cuts could be implemented that make it difficult to determine specific impacts;
however, we expect that sequestration, as currently provided for under the Budget Control Act, would result in lower revenues,
profits and cash flows for our company. Such circumstances may also result in an impairment of our goodwill and intangible
assets. Because our Government contracts generally require us to continue to perform even if the U.S. Government is unable to
make timely payments; if the debt ceiling is not raised, and, as a result, the U.S. Government does not pay us on a timely basis, we
would need to finance our continued performance of the impacted contracts from our available cash resources, credit facilities
and/or access to the capital markets, if available. An extended delay in the timely payment by the U.S. Government could result in
a material adverse effect on our cash flows, results of operations and financial condition.
U.S. Government contracts may be terminated at any time and may contain other unfavorable provisions.
The U.S. Government typically can terminate or modify any of its contracts with us either for its convenience or if we default by
failing to perform under the terms of the applicable contract. In the event of termination for the U.S. Government’s convenience,
contractors are generally protected by provisions covering reimbursement for costs incurred on the contracts and profit on those
costs but not the anticipated profit that would have been earned had the contract been completed. A termination arising out of our
default for failure to perform could expose us to liability, including but not limited to, liability for re-procurement costs in excess
of the total original contract amount, net of the value of work performed and accepted by the customer under the contract. Such an
event could also have an adverse effect on our ability to compete for future contracts and orders. If any of our contracts are
terminated by the U.S. Government whether for convenience or default, our backlog and anticipated revenues would be reduced by
the expected value of the remaining work under such contracts. We also enter into “fee for service” contracts with the U.S.