Raytheon 2004 Annual Report Download - page 89

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71
Notes to Consolidated Financial Statements (Continued)
 :  
Other assets, net consisted of the following at December 31:
(In millions) 2004 2003
Long-term receivables
Due from customers in installments to 2015 $315 $ 464
Other, principally due through 2007 70 40
Sales-type leases, due in installments to 2011 86 50
Computer software, net 479 456
Pension-related intangible asset 186 199
Investments 149 146
Other noncurrent assets 705 498
Total $1,990 $1,853
The Company provides long-term financing to its aircraft customers. The underlying aircraft serve as collateral
for general aviation and commuter aircraft receivables. The Company maintains reserves for estimated
uncollectible aircraft-related long-term receivables. The balance of these reserves was $28 million and $60 million at
December 31, 2004 and 2003, respectively. The reserves for estimated uncollectible aircraft-related long-term
receivables represent the Company’s current estimate of future losses. The Company established these reserves
based on an overall evaluation of identified risks. As a part of that evaluation, the Company evaluated certain
specific receivables and considered factors including extended delinquency and requests for restructuring, among
other things. Long-term receivables included commuter aircraft receivables of $281 million and $363 million at
December 31, 2004 and 2003, respectively.
The Company accrues interest on aircraft-related long-term receivables in accordance with the terms of the
underlying notes. When an aircraft-related long-term receivable is over 90 days past due, the Company generally
stops accruing interest. At December 31, 2004 and 2003, there were $27 million and $37 million, respectively, of
aircraft-related long-term receivables on which the Company was not accruing interest. Interest payments related
to these receivables are credited to income when received. Once a past-due receivable has been brought current, the
Company begins to accrue interest again. Interest deemed to be uncollectible is written off at the time the
determination is made.
In 2004, the Company entered into an agreement to sell certain general aviation finance receivables, with the
buyer assuming all servicing responsibilities. As part of the agreement, the Company retained a first loss deficiency
guarantee of 7.5% of the receivable amount sold. In 2004, $37 million of receivables were sold under the agreement,
with no associated gain or loss. Also in 2004, the Company sold $22 million of general aviation finance receivables
without any continuing involvement.
In 2003, the Company sold an undivided interest in $337 million of general aviation finance receivables, received
proceeds of $279 million, retained a subordinated interest in and servicing rights to the receivables, and recognized
a gain of $2 million. In connection with the sale, the Company formed a qualifying special purpose entity (QSPE)
for the sole purpose of buying these receivables. The Company irrevocably, and without recourse, transferred the
receivables to the QSPE which in turn, issued beneficial interests in these receivables to a commercial paper
conduit. The transaction involves a third party guarantee of the conduit investment. The assets of the QSPE are not
available to pay the claims of the Company or any other entity. The Company retained a subordinated interest in