Raytheon 2004 Annual Report Download - page 45

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and payment under certain outstanding Company guarantees or other support agreements in connection with the
Jindal, Posven, Ratchaburi, Saltend, Ilijan and Red Oak construction contracts of the former Raytheon Engineers &
Constructors businesses (RE&C) that the Company sold to Washington Group International, Inc. (WGI) in 2000.
These contracts were rejected by WGI in bankruptcy. The existing claims against the Company support agreements
involving the Jindal, Ratchaburi, Illijan and Saltend contracts have been settled or otherwise resolved. The claims
against the Company and its support agreements involving the Posven contracts also have been resolved, with the
exception of two subcontractor-related disputes. Additionally, several other proceedings have been commenced
against the Company by parties that had contractual relationships with certain former indirect subsidiaries of the
Company which comprised its engineering and construction business. These former indirect subsidiaries were
transferred to WGI in the sale of the engineering and construction business to WGI. The plaintiffs in these
proceedings have alleged that the Company is responsible to them on various theories including alter ego liability
and the assignment to, and/or the assumption by, the Company of the former indirect subsidiaries’ obligations.
While the Company cannot predict the outcome of these matters, in the opinion of management, any liability
arising from them will not have a material adverse effect on the Company’s financial position, liquidity or results of
operations after giving effect to provisions already recorded.
The Company is involved in various stages of investigation and cleanup relative to remediation of various
environmental sites. All appropriate costs expected to be incurred in connection therewith have been accrued. Due
to the complexity of environmental laws and regulations, the varying costs and effectiveness of alternative cleanup
methods and technologies, the uncertainty of insurance coverage and the unresolved extent of the Company’s
responsibility, it is difficult to determine the ultimate outcome of these matters. However, in the opinion of
management, any liability is not expected to have a material effect on the Company’s financial position, liquidity or
results of operations. Additional information regarding the effect of compliance with environmental protection
requirements and the resolution of environmental claims against the Company and its operations is contained in
Item 1 “Business-Environmental Regulation,” “Risk Factors and Forward Looking Statements” beginning on page
11 of this Report, in “Commitments and Contingencies” within Item 7 of this Form 10-K and in “Note L –
Commitments and Contingencies” within Item 8 of this Form 10-K.
The Company is responsible for properties and facilities that are subject to litigation and other proceedings
arising under the provisions relating to the protection of the environment. In December 2004, the Company
commenced settlement discussions with the South Coast Air Quality Management District in the State of California
for alleged violations of District regulations. In correspondence contemplating legal proceedings, the South Coast
Air Quality Management District alleged that the Company violated certain requirements regarding permitting and
emissions reporting at three of the Company’s California facilities. The resolution of all of these claims is not
expected to have a material adverse effect on the Company’s financial position and results of operations.
Accidents involving personal injuries and property damage occur in general aviation travel. When permitted by
appropriate government agencies, Raytheon Aircraft investigates many accidents that may be related to its products
involving fatalities or serious injuries. Through a relationship with FlightSafety International, Raytheon Aircraft
provides initial and recurrent pilot and maintenance training services to reduce the frequency of accidents
involving its products.
Raytheon Aircraft is a defendant in a number of product liability lawsuits that allege personal injury and
property damage and seek substantial recoveries including, in some cases, punitive and exemplary damages.
Raytheon Aircraft maintains partial insurance coverage against such claims and maintains a level of uninsured risk
determined by management to be prudent. Additional information regarding aircraft product liability insurance is
contained in “Note L – Commitments and Contingencies” within Item 8 of this Form 10-K.
The insurance policies for product liability coverage held by Raytheon Aircraft do not exclude punitive damages,
and it is the position of Raytheon Aircraft and its counsel that punitive damage claims are therefore covered.