E-Z-GO 2013 Annual Report Download - page 25

Textron Inc. Annual Report • 2013 12
Our business could be negatively impacted by information technology disruptions and security threats.
Our information technology (IT) and related systems are critical to the smooth operation of our business and essential to our ability
to perform day to day operations. From time to time we update and/or replace IT systems used by our businesses. The
implementation of new systems can present temporary disruptions of business activities as existing processes are transitioned to
the new systems, resulting in productivity issues, delays in production, shipments or other business operations. In addition, we
outsource certain support functions, including certain global IT infrastructure services, to third-party service providers. Any
disruption of such outsourced processes or functions also could have a material adverse impact on our operations. In addition, as a
U.S. defense contractor, we face certain security threats, including threats to our IT infrastructure, unlawful attempts to gain access
to our proprietary or classified information and threats to the physical security of our facilities and employees, as do our customers,
suppliers, subcontractors and joint venture partners. Cybersecurity threats, such as malicious software, attempts to gain
unauthorized access to information, and other security breaches, are persistent, continue to evolve and require highly skilled IT
resources. While we have experienced cyber attacks, we have not suffered any material losses relating to such attacks, and we
believe our threat detection and mitigation processes and procedures are robust. Due to the evolving nature of these security
threats, the possibility of any future material incidents cannot be completely mitigated. An IT system failure, issues related to
implementation of new IT systems or breach of data security could disrupt our operations, cause the loss of business information
or compromise confidential information. Such an incident also could require significant management attention and resources and
increased costs, and could adversely affect our competitiveness and our results of operations.
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 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 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 or other 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 our research and development investments are less successful than expected or if we do not adequately protect the
intellectual property developed through these 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, the market for our product offerings may not 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.
We are subject to the risks of doing business in foreign countries.
Conducting business internationally, including U.S. exports, exposes us to different and additional risks than if we conducted our
business solely within the U.S. 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; technology transfer; 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 initially 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. 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 results of operations. 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 revenues and
profitability.