Raytheon 2011 Annual Report Download - page 23

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As a U.S. Government contractor, we are subject to extensive procurement rules and regulations and changes in such
rules, regulations and business practice could negatively affect current programs and potential awards.
Government contractors must also comply with specific procurement regulations and other requirements. These requirements,
although customary in government contracts, impact our performance and compliance costs. In addition, current U.S.
Government budgetary constraints could lead to changes in the procurement environment, including the DoD's initiatives
focused on efficiencies, affordability and cost growth and other changes to its procurement practices such as changes in
payment term preferences. If and to the extent such changes occur as a result of these initiatives or otherwise, they could
impact our results of operations and liquidity, and could affect whether and, if so, how we pursue certain opportunities and
the terms under which we are able to do so.
In addition, failure to comply with the procurement regulations and requirements could result in reductions of the value of
contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our
results of operations and financial condition. Our failure to comply with these regulations and requirements could also lead
to suspension or debarment, for cause, from government contracting or subcontracting for a period of time. Among the causes
for debarment are violations of various statutes, including those related to procurement integrity, export control, government
security regulations, employment practices, protection of the environment, accuracy of records and the recording of costs,
and foreign corruption. The termination of a government contract as a result of any of these acts could have a negative impact
on our results of operations and financial condition and could have a negative impact on our reputation and ability to procure
other government contracts in the future.
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 2011, our sales to customers outside the U.S. (including foreign military sales through the U.S.
Government) accounted for 25% of our total net sales. 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 and geo-political
uncertainties, which may be driven by changes in threat environments and potentially volatile worldwide economic conditions,
various regional and local economic and political factors, risks and uncertainties, 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), the
Foreign Corrupt Practices Act, and other export laws and regulations. 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. We can give no assurance that we will continue to be successful in obtaining the necessary licenses or authorizations
or that certain sales will not be prevented or delayed. Any significant impairment of our ability to sell products outside of the
U.S. could negatively impact our results of operations and financial condition.
Our international sales 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. International contract
laws, regulations and contractual terms differ from those of the U.S. and may be interpreted differently by foreign courts. Our
international contracts may include industrial cooperation agreements requiring specific in-country purchases, manufacturing
agreements or financial support obligations, known as offset obligations, and provide for penalties if we fail to meet such
requirements. Our international contracts may also be subject to termination at the customer's convenience or for default based
on performance, and may be subject to funding risks. 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.
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,