Raytheon 2013 Annual Report Download - page 27

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such a problem. Any of these events could have a negative impact on our results of operations, financial condition or liquidity.
In addition, we must comply with other procurement requirements, including restrictions on the use of certain chemicals in
the European Union and conducting diligence and providing disclosure regarding the use of certain minerals, known as conflict
minerals, which may impact our procurement practices and increase our costs.
We use estimates in accounting for many of our programs and changes in our estimates could adversely affect our future
financial results.
Contract accounting requires judgment relative to assessing risks, including risks associated with customer directed delays
and reductions in scheduled deliveries, unfavorable resolutions of claims and contractual matters, judgments associated with
estimating contract revenues and costs, and assumptions for schedule and technical issues. Due to the size and nature of many
of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. For
example, we must make assumptions regarding the length of time to complete the contract because costs also include expected
increases in wages and prices for materials; consider whether the intent of entering into multiple contracts was effectively to
enter into a single project in order to determine whether such contracts should be combined or segmented; consider incentives
or penalties related to performance on contracts in estimating sales and profit rates, and record them when there is sufficient
information for us to assess anticipated performance; and use estimates of award fees in estimating sales and profit rates based
on actual and anticipated awards. Because of the significance of the judgments and estimation processes described above, it
is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances
were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect our future results of
operations and financial condition.
For a complete discussion regarding how our financial statements can be affected by contract accounting policies, see “Critical
Accounting Estimates” beginning on page 33 within Item 7 of this Form 10-K.
Significant changes in key estimates and assumptions, such as discount rates and assumed long-term return on assets
(ROA), as well as our actual investment returns on our pension plan assets, and other actuarial factors could affect our
earnings, equity and pension contributions in future periods.
We must determine our pension and other postretirement benefit plans' expense or income which involves significant judgment,
particularly with respect to our discount rate, long-term ROA and other actuarial assumptions. If our assumptions change
significantly due to changes in economic, legislative, and/or demographic experience or circumstances, our pension and other
postretirement benefit plans' expense and funded status, and our cash contributions to such plans could negatively change
which would negatively impact our results of operations. In addition, differences between our actual investment returns and
our long-term ROA assumption would result in a change to our pension and other postretirement benefit plans' expense and
funded status and our required contributions to the plans. They may also be impacted by changes in regulatory, accounting
and other requirements applicable to pensions.
For a complete discussion regarding how our financial statements can be affected by pension and other postretirement benefit
plan accounting policies, see “Critical Accounting Estimates” beginning on page 33 within Item 7 of this Form 10-K.
We have made, and expect to continue to make, strategic acquisitions and investments, and these activities involve risks
and uncertainties.
In pursuing our business strategies, we continually review, evaluate and consider potential investments and acquisitions. We
undertake to identify acquisition or investment opportunities that will complement our existing products and services or
customer base, as well as expand our offerings and market reach. In evaluating such transactions, we are required to make
difficult judgments regarding the value of business opportunities, technologies and other assets, and the risks and cost of
potential liabilities. Furthermore, acquisitions and investments involve certain other risks and uncertainties, including the
difficulty in integrating newly-acquired businesses, the challenges in achieving strategic objectives and other benefits expected
from acquisitions or investments, the diversion of our attention and resources from our operations and other initiatives, the
potential impairment of acquired assets and liabilities, the performance of underlying products, capabilities or technologies
and the potential loss of key employees and customers of the acquired businesses.