Raytheon 2004 Annual Report Download - page 33

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Raytheon utilizes the services of sales representatives and distributors in connection with certain foreign sales.
Normally representatives are paid commissions and distributors are granted resale discounts in return for services
rendered.
The export from the U.S. of many of Raytheon’s products may require the issuance of a license by the U.S.
Department of State under the Arms Export Control Act of 1976, as amended (formerly the Foreign Military Sales
Act); or by the U.S. Department of Commerce under the Export Administration Act, as amended, and its
implementing Regulations as kept in force by the International Emergency Economic Powers Act of 1977, as
amended (“IEEPA”); or by the U.S. Department of the Treasury under IEEPA or the Trading with the Enemy Act of
1917, as amended. Such licenses may be denied for reasons of U.S. national security or foreign policy. In the case of
certain exports of defense equipment and services, the Department of State must notify Congress at least 15 or 30
days (depending on the identity of the country that will utilize the equipment and services) prior to authorizing
such exports. During that time, the Congress may take action to block a proposed export by joint resolution which
is subject to Presidential veto.
ENVIRONMENTAL REGULATION
The Company’s operations are subject to and affected by a variety of federal, state and local environmental
protection laws and regulations. The Company has provided for the estimated cost to complete remediation where
the Company has determined that it is probable that the Company will incur such costs in the future to address
environmental impact at current or formerly owned operating facilities or at sites where it has been named a
Potentially Responsible Party (PRP) by the Environmental Protection Agency or similarly designated by other
environmental agencies. It is difficult to estimate the timing and ultimate amount of environmental cleanup costs
to be incurred in the future due to the uncertainties regarding the extent of the required cleanup and the status of
the law, regulations, and their interpretations.
In order to assess the potential impact on the Company’s financial statements, management estimates the
possible remediation costs that reasonably could be incurred by the Company. Such estimates take into
consideration the professional judgment of the Company’s environmental professionals and, when necessary,
consultation with outside environmental specialists. In most instances, only a range of reasonably possible costs can
be estimated.
If the Company is ultimately found to have liability at those sites where we have been designated a PRP, the
Company expects that the actual costs of remediation will be shared with other liable PRPs. Generally, PRPs that
are ultimately determined to be responsible parties are strictly liable for site clean-up and usually agree among
themselves to share, on an allocated basis, the costs and expenses for investigation and remediation of hazardous
materials. Under existing environmental laws, however, responsible parties may be jointly and severally liable and,
therefore, potentially liable for the full cost of funding such remediation. In the unlikely event that the Company is
required to fund the entire cost of such remediation, the statutory framework provides that the Company may
pursue rights of contribution from the other PRPs. The amounts the Company records do not reflect the fact that it
may recover some of the environmental costs the Company has incurred through insurance or from other PRPs.
The Company manages various government-owned facilities on behalf of the government. At such facilities,
environmental compliance and remediation costs have historically been the responsibility of the government and the
Company relied (and continues to rely with respect to past practices) upon government funding to pay such costs.
While the government remains responsible for capital and operating costs associated with environmental
compliance, responsibility for fines and penalties associated with environmental noncompliance, are typically borne
by either the government or the contractor, depending on the contract and the relevant facts. Fines and penalties
are unallowable costs under the contracts pursuant to which such facilities are managed.