Raytheon 2009 Annual Report Download - page 29

is terminated for convenience, we would generally be entitled to payments for our allowable costs and would receive
some allowance for profit on the work performed. If one of our contracts is terminated for default, we would generally be
entitled to payments for our work that has been accepted by the government. A termination arising out of our default
could expose us to liability and have a negative impact on our ability to obtain future contracts and orders. Furthermore,
on contracts for which we are a subcontractor and not the prime contractor, the U.S. Government could terminate the
prime contract for convenience or otherwise, irrespective of our performance as a subcontractor.
Our government contracts also typically involve the development, application and manufacture of advanced defense and
technology systems and products aimed at achieving challenging goals. New technologies may be untested or unproven.
In some instances, product requirements or specifications may be modified. As a result, we may experience technological
and other performance difficulties, which may result in delays, setbacks, cost overruns and product failures, in
connection with performing our government contracts.
Our international business is subject to geo-political and economic factors, regulatory requirements and other risks.
Our international business exposes us to geo-political and economic factors, regulatory requirements and other risks
associated with doing business in foreign countries. These risks differ from and potentially may be greater than those
associated with our domestic business. In addition, our exposure to such risks may increase if our international business
continues to grow as we anticipate.
Our international business is sensitive to changes in the priorities and budgets of international customers, which may be
driven by changes in threat environments and potentially volatile worldwide economic conditions, regional and local
economic and political factors, as well as U.S. foreign policy. Our international sales are subject to U.S. laws, regulations
and policies, including the International Traffic in Arms Regulations (ITAR) and the Foreign Corrupt Practices Act and
other export laws and regulations. They are also subject to local government laws, regulations and procurement policies
and practices which may differ from U.S. Government regulations, including regulations relating to import-export
control, investments, exchange controls and repatriation of earnings, as well as to varying currency, geo-political and
economic risks. Our international contracts may include requirements on specific in-country purchases, manufacturing
agreements or financial support obligations, known as offsets, and provide for penalties if we fail to meet such
requirements. We also are exposed to risks associated with using foreign representatives and consultants for international
sales and operations and teaming with international subcontractors, partners and suppliers in connection with
international programs. As a result of these factors, we could experience award and funding delays on international
programs and could incur losses on such programs which could negatively impact our results of operations and financial
condition.
Sales of our products outside of the U.S. require U.S. Government authorization and such authorizations may be delayed
or withheld.
Due to the nature of our products, we must first obtain licenses and authorizations from various U.S. Government
agencies before we are permitted to sell our products outside of the U.S. For example, the U.S. Department of State must
notify Congress at least 15-60 days, depending on the size and location of the sale, prior to authorizing certain sales of
defense equipment and services to foreign governments. During that time, Congress may take action to block the
proposed sale. We can give no assurance that we will continue to be successful in obtaining the necessary licenses or
authorizations or that Congress will not prevent or delay certain sales. Any significant impairment of our ability to sell
products outside of the U.S. could negatively impact our results of operations and financial condition.
Competition within our markets may reduce our revenues and market share.
We operate in highly competitive markets and our competitors may have more extensive or more specialized engineering,
manufacturing and marketing capabilities than we do in some areas. We anticipate increasing competition in our core
markets as a result of defense industry consolidation, which has enabled companies to enhance their competitive position
and ability to compete against us. In addition, as discussed in more detail above, projected U.S. defense spending levels
for periods beyond the near-term are uncertain and difficult to predict. Changes in U.S. defense spending may potentially
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