Raytheon 2013 Annual Report Download - page 22

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ITEM 1A. RISK FACTORS
This Form 10-K and the information we are incorporating by reference contain forward-looking statements within the meaning
of federal securities laws, including information regarding our financial outlook, future plans, objectives, business prospects,
products and services, trends and anticipated financial performance including with respect to our liquidity and capital resources,
our backlog, our pension expense and funding, the impact of new accounting pronouncements, our unrecognized tax benefits
and the impact and outcome of audits and legal and administrative proceedings, claims, investigations, commitments and
contingencies, as well as information regarding domestic and international defense spending and budgets. You can identify
these statements by the fact that they include words such as “will,” “believe,” “anticipate,” “expect,” “estimate,” “intend,”
“plan,” or variations of these words, or similar expressions. These forward-looking statements are not statements of historical
facts and represent only our current expectations regarding such matters. These statements inherently involve a wide range
of known and unknown uncertainties. Our actual actions and results could differ materially from what is expressed or implied
by these statements. Specific factors that could cause such a difference include, but are not limited to, those set forth below
and other important factors disclosed previously and from time to time in our other filings with the SEC. Given these factors,
as well as other variables that may affect our operating results, you should not rely on forward-looking statements, assume
that past financial performance will be a reliable indicator of future performance, nor use historical trends to anticipate results
or trends in future periods. We expressly disclaim any obligation or intention to provide updates to the forward-looking
statements and the estimates and assumptions associated with them.
We depend on the U.S. Government for a substantial portion of our business and changes in government defense spending
and priorities could have consequences on our financial position, results of operations and business.
In 2013, U.S. Government sales, excluding foreign military sales, accounted for approximately 72% of our total net sales.
Our revenues from the U.S. Government largely result from contracts awarded to us under various U.S. Government programs,
primarily defense-related programs with the DoD, as well as a broad range of programs with the Intelligence Community and
other departments and agencies. The funding of our programs is subject to the overall U.S. Government budget and
appropriation decisions and processes which are driven by numerous factors, including geo-political events, macroeconomic
conditions, and the ability of the U.S. Government to enact relevant legislation, such as appropriations bills and accords on
the debt ceiling.
U.S. Government appropriations have and likely will continue to be affected by larger U.S. Government budgetary issues and
related legislation. In 2011, the Congress enacted the Budget Control Act of 2011, as amended by the American Taxpayer
Relief Act of 2012 (BCA) and, pursuant to the terms of the BCA, a sequestration went into effect on March 1, 2013 resulting
in a 7.8% reduction to the DoD budget for FY 2013, excluding funding for military personnel, and a total reduction of
approximately $500 billion over the FY 2013–FY 2021 period. The Bipartisan Budget Act of 2013 amended the BCA and
reduced the amount of the sequestration by a total of $63 billion for FY 2014 and FY 2015. The final FY 2014 DoD base
budget (excluding funding for operations in Afghanistan) appropriation enacted into law in January 2014 is approximately
$497 billion, which is similar to the level of funding for the DoD in FY 2013 after sequestration and FY 2015 is expected to
be funded at a similar level. Under the current terms of the BCA as amended, future funding reductions would result in a total
of approximately $300 billion in reduced DoD funding over the FY 2016–FY 2021 period. Unless Congress and the
Administration agree to further amend or revoke the BCA, the DoD will be required to operate under the amended BCA
funding levels for the foreseeable future. In addition, the U.S. Government has, on a number of occasions, been unable to
complete its budget process before the end of its fiscal year (September 30), which resulted in it operating under a Continuing
Resolution (CR) for extended periods, as well as a brief partial shutdown of the U.S. Government in October 2013.
As a result, future U.S. Government defense spending levels are difficult to predict. Significant changes in defense spending,
changes in U.S. Government priorities, policies and requirements, could have a material adverse effect on our results of
operations, financial condition or liquidity.
In addition, we are involved in programs that are classified by the U.S. Government, principally through our IIS and SAS
business segments, which have security requirements that place limits on our ability to discuss our performance on these
programs, including any risks, disputes and claims.