Raytheon 2004 Annual Report Download - page 31

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control, government security regulations, employment practices, the protection of the environment, the accuracy of
records and the recording of costs.
Under many government contracts, the Company is required to maintain facility and personnel security
clearances complying with DoD requirements.
Companies which are engaged in supplying defense-related equipment to the Government are subject to certain
business risks, some of which are peculiar to that industry. Among these are: the cost of obtaining trained and
skilled employees; the uncertainty and instability of prices for raw materials and supplies; the problems associated
with advanced designs, which may result in unforeseen technological difficulties and cost overruns; and the intense
competition and the constant necessity for improvement in facilities and personnel training. Sales to the
Government may be affected by changes in procurement policies, budget considerations, changing concepts of
national defense, political developments abroad and other factors. See the “Risk Factors” section beginning on page
11 of this Form 10-K, for a description of additional business risks.
See “Sales to the United States Government” on page 8 of this Form 10-K for information regarding the
percentage of the Company’s revenues generated from sales to the Government.
BACKLOG
The Company’s backlog of orders was $32.5 billion at December 31, 2004 and $27.5 billion at December 31, 2003.
The 2004 amount includes backlog of approximately $25.5 billion from the Government compared with $21.4
billion at the end of 2003.
Approximately $3.8 billion of the overall backlog figure represents direct orders from foreign governments.
Approximately $1.3 billion of the overall backlog represents non-government foreign backlog.
Approximately $18.3 billion of the 2004 year-end backlog is not expected to be filled during the following twelve
months. For additional information related to backlog figures, see “Segment Results” within Item 7 of this Form
10-K.
RESEARCH AND DEVELOPMENT
During 2004, Raytheon expended $491 million on research and development efforts compared with $487 million in
2003 and $449 million in 2002. These expenditures principally have been for product development for the
Government and for aircraft products. In addition, Raytheon conducts funded research and development activities
under Government contracts which is included in net sales. For additional information related to research and
development efforts, see “Note A – Accounting Policies” within Item 8 of this Form 10-K.
RAW MATERIALS, SUPPLIERS AND SEASONALITY
Delivery of raw materials and supplies to Raytheon is generally satisfactory. Raytheon is sometimes dependent, for a
variety of reasons, upon sole-source suppliers for procurement requirements which may create difficulties in
meeting production and delivery obligations because of delays in delivery or reliance on such suppliers. In the case
of Raytheon Aircraft, production of certain aircraft and spare parts are dependent on the successful performance of
suppliers under international supply contracts. In recent years, revenues in the second half of the year have
generally exceeded revenues in the first half. The timing of Government awards, the availability of Government
funding, product deliveries and customer acceptance are among the factors affecting the periods in which revenues
are recorded. Management expects this trend to continue in 2005.