Honeywell 2004 Annual Report Download - page 20

Sales to the U.S. Government (principally by our Aerospace segment), acting through its various departments and agencies and
through prime contractors, amounted to $3,464, $3,111 and $2,730 million in 2004, 2003 and 2002, respectively, which included sales
to the U.S. Department of Defense, as a prime contractor and subcontractor, of $2,808, $2,564 and $2,046 million in 2004, 2003 and
2002, respectively. U.S. defense spending increased in 2004 and is also expected to increase in 2005.
In addition to normal business risks, companies engaged in supplying military and other equipment to the U.S. Government are
subject to unusual risks, including dependence on Congressional appropriations and administrative allotment of funds, changes in
governmental procurement legislation and regulations and other policies that may reflect military and political developments,
significant changes in contract scheduling, complexity of designs and the rapidity with which they become obsolete, necessity for
constant design improvements, intense competition for U.S. Government business necessitating increases in time and investment for
design and development, difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated
technical work and other factors characteristic of the industry. Changes are customary over the life of U.S. Government contracts,
particularly development contracts, and generally result in adjustments of contract prices.
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