Raytheon 2004 Annual Report Download - page 96

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78
Notes to Consolidated Financial Statements (Continued)
In 2004, 2003, and 2002, domestic income (loss) before taxes was $559 million, $493 million, and $(12) million,
respectively, and foreign income before taxes was $20 million, $8 million, and $75 million, respectively. Income
reported for federal and foreign tax purposes differs from pretax accounting income due to differences between
U.S. Internal Revenue Code or foreign tax law requirements and the Company’s accounting practices. No provision
has been made for deferred taxes on undistributed earnings of non-U.S. subsidiaries as these earnings have been
indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability on these undistributed
earnings is not practicable. Net cash (payments) refunds were $(5) million, $(13) million, and $145 million in 2004,
2003, and 2002, respectively.
The American Jobs Creation Act of 2004, (the “Act”) was enacted on October 22, 2004. The Act repealed and
provided transitional relief for the exclusion of extraterritorial income for transactions after December 31, 2004.
The Act also provides a deduction for income derived from qualifying domestic production activities; the
deduction is phased in over a 5 year period at rates of 3% in years 2005 and 2006, 6% in years 2007, 2008, and 2009
and 9% thereafter. The Company anticipates a significant tax benefit from this provision. The Act also extended the
carryover period for foreign tax credits from 5 to 10 years and reinstated the research and development tax credit.
The Company recorded a tax benefit of $42 million in 2004 related to the extension of the carryover period.
Deferred federal and foreign income taxes consisted of the following at December 31:
(In millions) 2004 2003
Current deferred tax assets
Other accrued expenses $ 299 $ 289
Accrued salaries and wages 122 105
Contracts in process and inventories 48 72
Deferred federal and foreign income taxes–current $ 469 $ 466
Noncurrent deferred tax assets (liabilities)
Net operating loss and foreign tax credit carryforwards $ 428 $ 631
Pension benefits 427 310
Other retiree benefits 123 226
Depreciation and amortization (880) (703)
Revenue on leases and other (27) (127)
Deferred federal and foreign income taxes-noncurrent $71 $ 337
There were $3 million and $12 million of taxes refundable included in prepaid expenses and other current assets
at December 31, 2004 and 2003, respectively. Federal tax (expenses) benefits related to discontinued operations
were $(20) million and $91 million at December 31, 2004 and 2003, respectively, and were included in deferred
federal and foreign income taxes in the table above.
At December 31, 2004, the Company had net operating loss carryforwards of $835 million that expire in 2020
through 2023, foreign tax credit carryforwards of $108 million that expire in 2009 through 2014, and research tax
credit carryforwards of $31 million that expire in 2018 to 2024. The Company believes it will be able to utilize all of
these carryforwards over the next 4 to 5 years.