Raytheon 2014 Annual Report Download - page 23

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Our international business is subject to geopolitical and economic factors, regulatory requirements and other risks.
Our international business exposes us to geopolitical and economic factors, regulatory requirements, increasing competition
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 2014, our sales to customers outside the U.S. (including foreign military
sales through the U.S. Government) accounted for 29% 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, which may be driven
by changes in threat environments, geopolitical uncertainties, volatility in worldwide economic conditions, and various regional
and local economic and political factors, including volatility in energy prices, changes in U.S. foreign policy, and other risks
and uncertainties. Our international sales are subject to U.S. laws, regulations and policies, including the ITAR, the FCPA,
and other anti-corruption and export laws and regulations. We maintain policies and controls to comply with such laws and
regulations and exercise oversight of such compliance. However, any failure by us or others working on our behalf to comply
with these laws and resolutions could result in criminal, civil or administrative penalties, including fines, suspension or
debarment from government contracts or suspension of our ability to export our products. In addition, 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, financial condition or liquidity.
Our international sales are also subject to local government laws, regulations, and procurement policies and practices which
may differ from U.S. Government regulations. These include regulations relating to import-export control, technology transfer,
investments, exchange controls and repatriation of earnings. Furthermore, our international sales contracts may be subject to
non-U.S. contract laws and regulations and include contractual terms that differ from those of similar contracts in the U.S. or
terms that may be interpreted differently by foreign courts. These 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. In addition, the timing of orders,
customer negotiations, governmental approvals and notifications from our international customers can be less predictable than
from our domestic customers, and this may lead to variations in international bookings and sales each year. We must also
manage a certain degree of exposure to the risk of currency fluctuations.
Our international business faces substantial competition from both U.S. companies and foreign companies. In some instances,
foreign companies may receive loans, marketing subsidies and other assistance from their governments which may not be
available to U.S. Government contractors. In addition, foreign companies may be subject to fewer restrictions on technology
transfer than U.S. Government contractors.
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. Approvals of offset thresholds and requirements may be subjective, time consuming and may delay
contract awards, and may, in certain countries, require the creation of a joint venture with a local company, which may control
the venture. This may result in our being liable for violations of law for actions taken by these entities such as laws related to
anti-corruption, import and export, or local laws which may differ from U.S. laws and requirements. Such offset obligations
are generally multi-year arrangements and may provide for penalties in the event we fail to perform in accordance with the
offset requirements. We also are exposed to risks associated with using third-party 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 financial penalties, award and funding delays on
international programs and could incur losses on such programs which could negatively impact our results of operations,
financial condition or liquidity.
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 including import
and export, security, contract pricing and cost, contract termination and adjustment, audit and product integrity requirements.
These requirements, although customary in U.S. Government contracts, impact our performance and compliance costs. In