Raytheon 2006 Annual Report Download - page 49

Some of our workforce is represented by labor unions so our business could be harmed in the event of a prolonged work
stoppage.
Approximately 12,000 of our employees, including the employees of Raytheon Aircraft, are unionized, which represented
approximately 15% of our employees at December 31, 2006. As a result, we may experience work stoppages, which could
adversely affect our business. We cannot predict how stable our union relationships, currently with 9 different U.S. labor
organizations and 4 different non-U.S. labor organizations, will be or whether we will be able to successfully negotiate
successor agreements without impacting our financial condition. In addition, the presence of unions may limit our
flexibility in dealing with our workforce. Work stoppages could negatively impact our ability to manufacture our
products on a timely basis, which could negatively impact our results of operations and financial condition.
We may be unable to adequately protect our intellectual property rights, which could affect our ability to compete.
We own many United States and foreign patents and patent applications, and have rights in unpatented know-how,
trademarks and copyrights. On occasion, we have applied for semiconductor chip mask work registrations. The U.S.
government has licenses in our patents and certain other intellectual property that are developed in performance of
government contracts, and it may use or authorize others to use such patents and intellectual property for government
purposes. There can be no assurance that any of our patents and other intellectual property will not be challenged,
invalidated or circumvented by third parties. In some instances, we have augmented our technology base by licensing the
proprietary intellectual property of others. In the future, we may not be able to obtain necessary licenses on commercially
reasonable terms. We enter into confidentiality and invention assignment agreements with our employees and enter into
non-disclosure agreements with our suppliers and appropriate customers so as to limit access to and disclosure of our
proprietary information. These measures may not suffice to deter misappropriation or independent third party
development of similar technologies. Moreover, the protection provided to our intellectual property by the laws and
courts of foreign nations may not be as advantageous to us as the remedies available under U.S. law.
Our operations expose us to the risk of material environmental liabilities.
We use and generate large quantities of hazardous substances and wastes in our manufacturing operations. As a result, we
are subject to potentially material liabilities related to personal injuries or property damages that may be caused by
hazardous substance releases and exposures. For example, we are investigating and remediating contamination related to
our current or past practices at numerous properties and, in some cases, have been named as a defendant in related
personal injury or “toxic tort” claims.
We are also subject to increasingly stringent laws and regulations that impose strict requirements for the proper
management, treatment, storage and disposal of hazardous substances and wastes, restrict air and water emissions from
our manufacturing operations, including government-owned facilities we manage, and require maintenance of a safe
workplace. These laws and regulations can impose substantial fines and criminal sanctions for violations, and require the
installation of costly pollution control equipment or operational changes to limit pollution emissions and/or decrease the
likelihood of accidental hazardous substance releases. In addition, if we were convicted of a violation of the Federal Clean
Air Act or the Clean Water Act, the facility involved in the violation could not be used in performing any U.S.
government contract awarded during the violation period. We incur, and expect to continue to incur, substantial capital
and operating costs to comply with these laws and regulations. In addition, new laws and regulations, stricter
enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of
new clean-up requirements could require us to incur costs in the future that would have a negative effect on our financial
condition or results of operations.
We face certain significant risk exposures and potential liabilities that may not be adequately covered by indemnity or
insurance.
A significant portion of our business relates to designing, developing and manufacturing advanced defense and
technology systems and products. New technologies may be untested or unproven. In addition, we may incur significant
liabilities that are unique to our products and services, including missile systems, command and control systems, and air
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