Raytheon 2014 Annual Report Download - page 17

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adjustment if appropriations for such programs are not available or change. The U.S. Government is required to equitably
adjust a contract price for additions or reductions in scope or other changes ordered by it. For a discussion of the risks associated
with program funding and appropriations, see Item 1A “Risk Factors” and “Overview” within Item 7 of this Form 10-K. In
addition, because we are engaged in supplying technologically-advanced, cutting edge defense-related products and services
to the U.S. Government, we are subject to certain business risks, some of which are specific to our industry. These risks
include: the cost of obtaining and retaining trained and skilled employees; the uncertainty and instability of prices for raw
materials and supplies; the problems associated with advanced designs, which may result in unforeseen technological
difficulties and cost overruns; and the intense competition and the constant necessity for improvement in facility utilization
and personnel training. Our sales to the U.S. Government may be affected by changes in procurement policies, budget
considerations, changing priorities for national defense, political developments abroad and other factors. See Item 1A “Risk
Factors” and “Overview” within Item 7 of this Form 10-K for a more detailed discussion of these and other related risks.
We are also involved in U.S. Government programs, principally through our IIS and SAS business segments, that are classified
by the U.S. Government and cannot be specifically described in this Form 10-K. The operating results of these classified
programs are included in the applicable business segment's and our consolidated results of operations. The business risks and
considerations associated with these and our international classified programs generally do not differ materially from those
of our other U.S. Government and international programs and products. Total classified sales were 15% in 2014 and 2013,
and 16% in 2012.
We are subject to government regulations and contract requirements that may differ from U.S. Government regulation with
respect to our sales to non-U.S. customers. See “International Sales” below for more information regarding our sales outside
of the U.S. and Item 1A “Risk Factors” for a discussion of the risks associated with international sales.
See “Sales to the U.S. Government” on page 6 of this Form 10-K for information regarding the percentage of our revenues
generated from sales to the U.S. Government.
International Sales
(In millions, except percentages) 2014 2013 2012
Total international sales(1) $ 6,541 $ 6,446 $ 6,232
Total international sales as a Percentage of Total Net Sales(1) 29% 27% 26%
(1) Includes foreign military sales through the U.S. Government of $2,962 million, $3,062 million and $3,196 million in 2014, 2013 and 2012, respectively.
International sales were principally in the areas of air and missile defense systems, missile systems, airborne radars, naval
systems, air traffic control systems, electronic equipment, computer software and systems, personnel training, equipment
maintenance and microwave communications technology, and other products and services permitted under the International
Traffic in Arms Regulations (ITAR). Generally, we internally fund our foreign subsidiary working capital requirements in the
applicable countries. Sales and income from international operations and investments are subject to U.S. Government laws,
regulations and policies, including the ITAR and the Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws
and the export laws and regulations described below. They are also subject to foreign government laws, regulations and
procurement policies and practices, which may differ from U.S. Government regulation, including import-export control,
technology transfer, investments, exchange controls, repatriation of earnings and requirements to expend a portion of program
funds in-country through manufacturing agreements or other financial support obligations, known as offset obligations. In
addition, embargoes, international hostilities and changes in currency and commodity values can also impact our international
sales. Exchange restrictions imposed by various countries could restrict the transfer of funds between countries, us and our
subsidiaries. We have acted to protect ourselves against various risks through insurance, foreign exchange contracts, contract
provisions, government guarantees and/or progress payments. Our international sales in functional currencies other than the
U.S. dollar were approximately $1.1 billion and $1.2 billion in 2014 and 2013, respectively, the majority of which were in
British pounds and Australian dollars with the remainder primarily in euros and Canadian dollars. See total net sales and
property, plant and equipment by geographical area set forth in “Note 15: Business Segment Reporting” within Item 8 of this
Form
In connection with certain foreign sales, we utilize the services of sales representatives who are paid commissions in return
for services rendered.