Raytheon 2004 Annual Report Download - page 90

72
Notes to Consolidated Financial Statements (Continued)
the receivables sold of approximately 17 percent. The conduit obtained the funds to purchase the interest in the
receivables, other than the retained interest, by selling commercial paper to third-party investors. The Company
retained responsibility for the collection and administration of receivables. The Company continues to service the
sold receivables and charges the third party conduit a monthly servicing fee at market rates.
The Company accounted for the sale under Statement of Financial Accounting Standards No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. The gain was determined at the
date of transfer based upon the relative fair value of the assets sold and the interests retained. The Company
estimated the fair value at the date of transfer and at December 31, 2004 and 2003 based on the present value of
future expected cash flows using certain key assumptions, including collection period and a discount rate of 5.0%,
5.6%, and 5.0%, respectively. At December 31, 2004 a 10 and 20 percent adverse change in the collection period
and discount rate would not have a material effect on the Company’s financial position or results of operations.
At December 31, 2004 and 2003, the outstanding balance of securitized accounts receivable held by the third
party conduit totaled $204 million and $320 million, respectively, of which the Company’s subordinated retained
interest was $58 million and the fair value of the servicing asset was $4 million and $6 million, respectively.
The Company also maintained a program under which it sold general aviation and commuter aircraft long-term
receivables under a receivables purchase facility through the end of 2002. The Company bought out the receivables
that remained in the facility in 2002 for $1,029 million and brought the related assets onto the Company’s books.
The loss resulting from the sale of receivables into this facility in 2002 was $6 million.
In connection with the buyback of the off balance sheet receivables, the Company recorded the long-term
receivables at estimated fair value, which included an assessment of the value of the underlying aircraft. As a result
of this assessment, the Company adjusted the value of certain underlying aircraft, including both commuter and
Starship aircraft, some of which were written down to scrap value. There was no net income statement impact as a
result of this activity.
The increase in computer software in 2004 was due to the Company’s conversion of significant portions of its
existing financial systems to a new integrated financial package. Computer software amortization expense was $64
million, $52 million, and $54 million in 2004, 2003 and 2002, respectively. Accumulated amortization of computer
software was $261 million and $241 million at December 31, 2004 and 2003, respectively.
Investments, which are included in other assets, consisted of the following at December 31:
(In millions)
2004
Ownership % 2004 2003
Equity method investments:
Thales-Raytheon Systems Co. Ltd. 50.0 $87 $78
HRL Laboratories, LLC 33.3 30 30
Indra ATM S.L. 49.0 12 12
TelASIC Communications 23.5 37
Other n/a 79
139 136
Other investments 10 10
Total $149 $146
In 2001, the Company formed a joint venture, Thales-Raytheon Systems (TRS) that has two major operating
subsidiaries, one of which the Company controls and consolidates. TRS is a system of systems integrator and