Raytheon 2009 Annual Report Download - page 24

government contracts. The remaining amount, including profits or incentive fees, is billed upon delivery and acceptance
of end items under the contract. For a discussion of certain risks associated with fixed price and cost reimbursement
contracts, see Item 1A “Risk Factors” of this Form 10-K.
U.S. Government contracts generally also permit the government to terminate the contract, in whole or in part, without
prior notice, at the government’s convenience or for default based on performance. If a contract is terminated for
convenience, the contractor is generally entitled to payments for its allowable costs and will receive some allowance for
profit on the work performed. If a contract is terminated for default, the contractor is generally entitled to payments for
its work that has been accepted by the government. The U.S. Government’s right to terminate its contracts has not had a
material adverse effect upon our operations or financial condition. For a discussion of the risks associated with the U.S.
Government’s right to terminate its contracts, see Item 1A “Risk Factors” of this Form 10-K.
U.S. Government programs generally are implemented by the award of individual contracts and subcontracts. Congress
generally appropriates funds on a fiscal year basis even though a program may extend across several fiscal years.
Consequently, programs are often only partially funded initially and additional funds are committed only as Congress
makes further appropriations. The contracts and subcontracts under a program generally are subject to termination for
convenience or adjustment if appropriations for such programs are not available or change. The U.S. Government is
required to equitably adjust a contract price for additions or reductions in scope or other changes ordered by it. For a
discussion of the risks associated with program funding and appropriations, see Item 1A “Risk Factors” and “Overview”
within Item 7 of this Form 10-K. In addition, because we are engaged in supplying technologically-advanced, cutting edge
defense-related products and services to the U.S. Government, we are subject to certain business risks, some of which are
specific to our industry. These risks include: the cost of obtaining and retaining 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. Our sales to the U.S. Government may be affected by
changes in procurement policies, budget considerations, changing concepts of national defense, political developments
abroad and other factors. See Item 1A “Risk Factors” and “Overview” within Item 7 of this Form 10-K for a more
detailed discussion of these and other related risks.
We are also involved in U.S. Government programs, principally through our IIS and SAS business segments, which are
classified by the U.S. Government and cannot be specifically described in this Form 10-K. The operating results of these
classified programs are included in our consolidated financial statements. The business risks and considerations
associated with these classified programs generally do not differ materially from those of our other U.S. Government
programs and products. Total classified sales were 13%, 12% and 13% of total net sales in 2009, 2008 and 2007,
respectively.
We are subject to government regulations and contract requirements which may differ from U.S. Government regulation
with respect to our sales to non-U.S. customers. See “International Sales” below for more information regarding our sales
outside of the U.S. and Item 1A “Risk Factors” for a discussion of the risks associated with international sales.
See “Sales to the U.S. Government” on page 9 of this Form 10-K for information regarding the percentage of our
revenues generated from sales to the U.S. Government.
International Sales
Our sales to customers outside the U.S. were $5.3 billion or 21% of total net sales in 2009, $4.6 billion or 20% of total net
sales in 2008, and $4.2 billion or 20% of total net sales in 2007. Included in sales to customers outside the U.S. were
foreign military sales through the U.S. Government of $2.8 billion, $1.8 billion and $1.5 billion, in 2009, 2008 and 2007,
respectively. International sales were principally in the fields of air defense systems, missile systems, airborne radars, naval
systems, air traffic control systems, missile defense systems, electronic equipment, computer software and systems,
homeland security solutions, personnel training, equipment maintenance and microwave communication and other
products and services permitted under the International Traffic in Arms Regulations (ITAR). Generally, we finance our
foreign subsidiary working capital requirements in the applicable countries. Sales and income from international
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