Raytheon 2009 Annual Report Download - page 44

like to decrease future reliance on emergency supplemental appropriations, and plans to fund OCO with non-emergency
appropriations as much as practicable, starting in FY 2010. However, it still plans to request and account for these OCO
funds separate from the base budget to maintain visibility and oversight over war costs. Thus far, $128 billion has been
provided for OCO in FY 2010, but $33 billion in additional funding has been requested in an emergency supplemental
appropriation to provide for the increase in troop levels for Afghanistan. This funding is expected to be approved by
Congress in the late spring or summer.
Looking forward, we expect the DoD base budget to increase in the near term, albeit at lower rates than in recent years.
Preliminary estimates provided by the Administration indicate modest growth in the DoD base budget, and the Secretary
of Defense has publicly advocated for even higher levels. In regard to funding for OCO, the cost of troop increases for
Afghanistan may well outweigh any net savings from the reduced U.S. presence in Iraq in the near term. Declines in OCO
funding are not likely to be significant in FY 2010, if they occur at all, and future levels of OCO funding will be closely
tied to force levels in both Iraq and Afghanistan.
Projected defense spending levels are uncertain and become increasingly difficult to predict for periods beyond the near-
term. We believe that the DoD budget and priorities will be affected by several factors, including the following:
ⳮExternal threats to our national security, including potential security threats posed by terrorists, emerging nuclear
states and other countries;
ⳮFunding for on-going operations in Iraq and Afghanistan, which will require funding above and beyond the DoD base
budget for their duration;
ⳮFuture priorities of the Administration which could result in changes in the DoD budget overall and various
allocations within the DoD budget; and
ⳮThe overall health of the U.S. and world economies and the state of governmental finances.
With respect to other parts of the U.S. Government beyond the DoD, we have contracts with a wide range of agencies,
including the Department of Homeland Security (DHS), the Department of Justice (DoJ), the Department of State, the
Department of Energy, the Intelligence Community, the National Aeronautics and Space Administration (NASA), the
Federal Aviation Administration (FAA) and the National Science Foundation (NSF). Similar to the budget environment
for the DoD, we expect the Administration will have to take deficit considerations into account when determining
spending priorities for these agencies. Our relationship with these agencies, however, generally is determined more by
specific program requirements than by a direct correlation to the overall funding levels for these agencies.
For more information on the risks and uncertainties that could impact the U.S. Government’s demand for our products
and services, see Item 1A “Risk Factors” of this Form 10-K.
International Considerations
In 2009, our sales to customers outside of the U.S. accounted for approximately 21% of our total net sales (including
foreign military sales through the U.S. Government). Internationally, the growing threat of additional terrorist activity,
emerging nuclear states and conventional military threats have led to an increase in demand for defense products and
services and homeland security solutions. While recent global economic challenges have affected the defense and
homeland security budgets of some countries, notably in Europe, we currently anticipate that many international defense
budgets will grow faster than the U.S. defense budget.
International customers are also expected to continue to adopt similar defense modernization initiatives as the U.S. DoD.
We believe this trend will continue as many international customers are facing the same threat environment as the United
States and they wish to assure that their forces and systems will be interoperable with U.S. and North Atlantic Treaty
Organization (NATO) forces. However, international demand 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. For more
information on the risks and uncertainties that could impact international demand for our products and services, see
Item 1A “Risk Factors” of this Form 10-K.
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