Raytheon 2005 Annual Report Download - page 36

ITEM 1A. RISK FACTORS
This Form 10-K and the information we are incorporating by reference contain forward-looking statements within the
meaning of federal securities laws, including information regarding the Company’s 2006 financial outlook, future plans,
objectives, business prospects and anticipated financial performance. You can identify these statements by the fact that
they include words such as “will,” “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” or variations of these
words, or similar expressions. These forward-looking statements are not statements of historical facts and represent only
our current expectations regarding such matters. These statements inherently involve a wide range of known and
unknown uncertainties. The Company’s actual actions and results could differ materially from what is expressed or
implied by these statements. Specific factors that could cause such a difference include, but are not limited to, those set
forth below and other important factors disclosed previously and from time to time in our other filings with the
Securities and Exchange Commission. Given these factors, as well as other variables that may affect our operating results,
you should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of
future performance, nor use historical trends to anticipate results or trends in future periods. We expressly disclaim any
obligation or intention to provide updates to the forward-looking statements and the estimates and assumptions
associated with them.
We depend on the U.S. government for a significant portion of our sales, and the impairment of this relationship or
changes in government defense spending could have severe consequences on our business.
Approximately 74% of our net sales in 2005 were to the U.S. government. Therefore, any significant disruption or
deterioration of our relationship with the U.S. government could adversely affect our current government contracts and
our ability to procure new government contracts, which could significantly reduce our revenues and negatively impact
our financial condition and operations. We compete with other government contractors for a limited number of
government programs and for uncertain levels of funding. Our competitors continuously engage in efforts to expand
their business relationships with the U.S. government at our expense. Accordingly, despite our efforts to maintain and
broaden our relationships with it, the U.S. government may choose to use other contractors for its limited number of
programs.
In addition, our revenues from the U.S. government largely result from contracts awarded under various defense
programs. The funding of our programs is subject to the overall U.S. government budget and appropriation decisions
and processes and our programs must compete for funding with non-defense programs and other defense programs in
which we are not involved. U.S. government budget decisions, including defense spending, are based on changing
government priorities and objectives, which are driven by numerous factors, including geo-political events and
macroeconomic conditions, and are beyond our control. In recent years, the overall level of U.S. defense spending has
increased for numerous reasons, including increases in funding of operations in Iraq and Afghanistan and the U.S.
Department of Defense’s military transformation initiatives. We can give no assurance that U.S. defense spending will
continue to grow. Significant changes to U.S. defense spending could have long-term consequences for our size and
structure. In addition, as a result of changing government priorities and requirements, defense spending could shift away
from certain programs to other programs or into new areas and the timing of funding of certain programs could change.
Shifts or reductions in defense spending or changes in timing could result in the reduction or elimination of, or the delay
in, funding of one or more of our defense programs, which could negatively impact our results of operations and
financial condition.
A substantial majority of our business is governed by U.S. government contracts, which are subject to continued
appropriations by Congress and termination.
In our government and defense businesses, we act as a prime contractor or major subcontractor for many different U.S.
government programs. A program generally is implemented by the award of individual contracts and subcontracts and is
subject to congressional appropriations. Congress generally appropriates funds on a fiscal year basis even though a
program may extend for several years. Consequently, programs are often only partially funded initially, and additional
funds are committed only as Congress makes further appropriations. U.S. government contracts and subcontracts under
a program are subject to termination or adjustment if appropriations for such program are not available or change.
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