Raytheon 2015 Annual Report Download - page 27

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from U.S. 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, U.S. government security regulations,
employment practices, protection of the environment, accuracy of records and the recording of costs, and foreign corruption.
The penalties or sanctions resulting from any failure to comply with applicable requirements, including contract termination,
could have a negative impact on our results of operations, financial condition or liquidity, and could have a negative impact
on our reputation and ability to procure other U.S. government contracts in the future.
Issues with component availability, subcontractor performance or key supplier performance may affect our ability to
manufacture and deliver our products and services.
We are dependent upon the delivery by suppliers of materials and the assembly by subcontractors of major components and
subsystems used in our products in a timely and satisfactory manner and in full compliance with applicable terms and conditions.
Some products require relatively scarce raw materials. We also are subject to specific procurement requirements that limit the
types of materials we use and may, in effect, limit the suppliers and subcontractors we may utilize. These procurement
requirements include restrictions on the use of certain chemicals in the European Union and requirements for genuine original
equipment manufacturer parts. As we continue to seek further cost efficiencies throughout the enterprise, we may centralize
procurements in order to attain better pricing through strategic sourcing, which may increase our dependency on certain
suppliers. In some instances, we are dependent on sole-source suppliers. If certain component materials are not available or
if any of these suppliers or subcontractors otherwise fails to meet our needs or becomes insolvent, we may not have readily
available alternatives or alternatives at prices that meet the demands of our customers. While we enter into long-term or volume
purchase agreements with certain suppliers and take other actions, such as accelerating supplier payments commensurate with
value delivered, to ensure financial viability and the availability of needed materials, components and subsystems, we cannot
be sure that such items will be available in the quantities we require, if at all. In addition, some of our suppliers or subcontractors,
especially smaller entities, may be susceptible to changes in global economic conditions that could impair their ability to meet
their obligations to us. If we experience a material supplier or subcontractor problem, our ability to satisfactorily and timely
complete our customer obligations could be negatively impacted, which could result in reduced sales, termination of contracts
and damage to our reputation and relationships with our customers. We could also incur additional costs in addressing 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 conduct diligence and provide disclosure regarding the use of certain minerals, known as conflict minerals,
which may impact our procurement practices and increase our costs.
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 2015, our sales to customers outside the U.S. (including foreign military
sales through the U.S. government) accounted for 31% 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 International Traffic
in Arms Regulations (ITAR), the Export Administration Regulations (EAR), the Foreign Corrupt Practices Act (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 or
maintaining 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.