Raytheon 2006 Annual Report Download - page 41

Competition
We directly participate in most major areas of development in the defense and government electronics, space,
information technology and technical services and support markets. Technical superiority, reputation, price, past
performance, delivery schedules, financing and reliability are among the principal competitive factors considered by
customers in these markets. We compete worldwide with a number of U.S. and international companies in these markets,
some of which may have more extensive or more specialized engineering, manufacturing and marketing capabilities than
we do in some areas. The on-going consolidation of the U.S. and global defense, space and aerospace industries continues
to intensify competition and has reduced the number of principal prime contractors in the U.S. As a result of this
consolidation, we frequently partner on various programs with our major suppliers, some of whom are, from time to
time, competitors on other programs.
Patents and Licenses
We own an intellectual property portfolio which includes, by way of example, many United States and foreign patents, as
well as unpatented know-how, trademarks and copyrights, all of which contribute to the preservation of our competitive
position in the market. In certain instances, we have augmented our technology base by licensing the proprietary
intellectual property of others. We also license our intellectual property to others. While our intellectual property rights
in the aggregate are important to the operation of Raytheon, we do not believe that any existing patent, license or other
intellectual property right is of such importance that its loss or termination would have a material adverse effect on our
business, taken as a whole.
Employment
As of December 31, 2006 and December 31, 2005, we had approximately 80,000 employees, including the employees of
Raytheon Aircraft. Approximately 15% of our employees are unionized. We consider our union-management
relationships to be generally satisfactory. However, from November 2006 to January 2007, members of the International
Association of Machinists at a Missile Systems site conducted a work stoppage. During 2006, no other work stoppages
have occurred at any of our sites. In addition, in March 2006, pilots at Flight Options voted to be represented by the
International Brotherhood of Teamsters. Flight Options is engaged in good faith negotiations with the union to reach a
mutually acceptable initial labor agreement for its pilots.
International Sales
Our sales to customers outside the U.S. were $3.7 billion or 18% of total sales in 2006, $3.4 billion or 18% of total sales in
2005 and $3.3 billion or 18% of total sales in 2004. Included in sales to customers outside the U.S. were foreign military
sales through the U.S. government of $1.3 billion, $1.1 billion and $1.0 billion, in 2006, 2005 and 2004, respectively.
International sales were principally in the fields of air defense systems, air traffic control systems, electronic equipment,
computer software and systems, personnel training, equipment maintenance and microwave communication. Generally,
we finance our foreign subsidiary working capital requirements in the applicable countries. Sales and income from
international operations and investments are subject to changes in currency values, domestic and foreign government
policies (including requirements to expend a portion of program funds in-country) and regulations, embargoes and
international hostilities. Exchange restrictions imposed by various countries could restrict the transfer of funds between
countries and between Raytheon and its subsidiaries. We have acted to protect ourself against most undue risks through
insurance, foreign exchange contracts, contract provisions, government guarantees or progress payments. See revenues
derived from external customers and long-lived assets by geographical areas set forth in “Note 15: Business Segment
Reporting” within Item 8 of this Form 10-K.
In connection with certain foreign sales, we utilize the services of sales representatives who are paid commissions in
return for services rendered.
The export from the U.S. of many of our products may require the issuance of a license by either the U.S. Department of
State under the Arms Export Control Act of 1976 (formerly the Foreign Military Sales Act), the U.S. Department of
Commerce under the Export Administration Act and its implementing regulations as kept in force by the International
Emergency Economic Powers Act of 1977 (“IEEPA”), or the U.S. Department of the Treasury under IEEPA or the
Trading with the Enemy Act of 1917. Such licenses may be denied for reasons of U.S. national security or foreign policy.
In the case of certain exports of defense equipment and services, the Department of State must notify Congress at least 15
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