We are a leading supplier of a broad range of products used in a substantial number
of aerospace and defense platforms. We also are a major supplier of subsystems
on many platforms, including those for secure communication networks, mobile satellite
communications, information security systems, shipboard communications, naval
power systems, fuzes and safety and arming devices for missiles and munitions,
microwave assemblies for radars and missiles, telemetry and instrumentation and
airport security systems. We also are a prime system contractor for aircraft modernization
and maintenance, Intelligence, Surveillance and Reconnaissance (ISR) collection
platforms, simulation and training, and government systems support services. Our
businesses employ proprietary technologies and capabilities, and we believe our
businesses have leading positions in their respective primary markets. Our customers
include the U.S. Department of Defense (DoD) and its prime contractors, certain
U.S. Government intelligence agencies, major aerospace and defense contractors,
foreign governments, commercial customers and certain other U.S. federal, state
and local government agencies.
We have four reportable segments: (1) Secure Communications & ISR; (2)
Training, Simulation & Support Services; (3) Aviation Products & Aircraft
Modernization; and (4) Specialized Products.
Major Customers
Direct and indirect sales to the DoD provided approximately 69.3% of our sales.
Approximately 61.2% of our sales to the DoD were directly to the customer, and
approximately 38.8% of our sales to the DoD were indirect to its prime contractors
and subcontractors.
Our U.S. Government sales are predominantly derived from contracts with agencies
of, and prime contractors to, the U.S. Government. Various U.S. Government agencies
and contracting entities exercise independent and individual purchasing decisions,
subject to annual appropriations by the U.S. Congress.
Research and Development
We conduct research and development activities that consist of projects involving
basic research, applied research, development, and systems and other concept
studies. We employ scientific, engineering and other personnel to improve our
existing product-lines and develop new products and technologies. We employed
approximately 19,100 engineers, a substantial portion of whom hold advanced
degrees.
Raw Materials
In manufacturing our products, we use our own production capabilities as well
as a diverse base of third party suppliers and subcontractors. Although aspects
of certain of our businesses require relatively scarce raw materials, we have
not experienced difficulty in our ability to procure raw materials, components,
sub-assemblies and other supplies required in our manufacturing processes.
Competition
We encounter intense competition in all of our businesses. We believe that
we are a significant supplier for many of the products that we manufacture and
services we provide in our DoD, government and commercial businesses.
Defense and Government Business
In some instances, we are the incumbent supplier or have been the sole provider
for many years for certain programs. We refer to such contracts as "sole-source"
contracts. In such cases, there may be other suppliers who have the capability
to compete for the programs involved, but they can only enter or reenter the
market if the customer chooses to reopen or re-compete the particular program
to competition.
We believe that the U.S. defense industry structure contains three tiers of
defense contractors. The first tier is dominated by five large prime system
contractors: The Boeing Company, Lockheed Martin Corporation, Northrop Grumman
Corporation, Raytheon Company and General Dynamics Corporation, all of whom
compete for major platform programs. The second tier defense contractors are
generally smaller products and niche subsystems contractors and is comprised
of traditional aerospace and defense companies, as well as the non-core aerospace
and defense businesses of certain larger industrial conglomerates.
Some of the defense contractors in the second tier also compete for platform
programs. We believe the second tier includes L-3, Honeywell International Inc.,
Rockwell Collins Inc., Harris Corporation, ITT Industries, Inc., the North American
operations of BAE Systems PLC, Alliant Techsystems Inc., United Technologies
Corporation, Computer Science Corporation, Science Applications International
Corporation, and United Defense Industries Inc. The third tier, represents the
vendor base and supply chain for niche products and is comprised of numerous
smaller publicly and privately owned aerospace and defense contractors.
We believe we are the aerospace and defense supplier with the broadest and
most diverse product portfolio. We supply our products and services to all of
the five prime system contractors and in several cases directly to the end customers.
We primarily compete with third tier contractors and certain of the second tier
contractors. However, we also compete directly with the large prime system contractors
for certain products and subsystems where they have vertically integrated businesses,
and in the areas of aircraft modernization and maintenance, ISR, simulation
and training, and government services, where L-3 is a system supplier. We are
larger than all of the third tier contractors and believe we have greater resources
than all of them.
We believe that most of our businesses enjoy the number one or number two competitive
position in their respective market niches. We believe that the primary competitive
factors for our businesses are technology, research and development capabilities,
quality, cost, market position and past performance. In addition, our ability
to compete for non "sole source" contracts often requires us to "team"
with one or more of the prime system contractors that bid and compete for major
platform programs.
Furthermore, our ability to "team" with a prime system contractor
is often dependent upon the outcome of a competitive process for subcontracts
awarded by the prime contractors. We believe that we will continue to be a successful
participant in the business areas in which we compete, based upon the quality
and cost competitiveness of our products and services.
Commercial Activities
In these markets, we compete with various companies, several of which are listed
below:
• Rockwell Collins, Inc.;
• Honeywell International Inc.;
• Globecomm Systems, Inc.;
• Smiths Industries; and
• ViaSat, Inc.;
• Airspan Networks, Inc.
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