Raytheon 2004 Annual Report Download - page 97

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79
Notes to Consolidated Financial Statements (Continued)
 :   
At December 31, 2004, the Company had commitments under long-term leases requiring annual rentals on a net
lease basis as follows:
(In millions)
2005 $340
2006 263
2007 207
2008 159
2009 107
Thereafter 283
Rent expense in 2004, 2003, and 2002 was $236 million, $223 million, and $245 million, respectively. In the
normal course of business, the Company leases equipment, office buildings, and other facilities under leases that
include standard escalation clauses for adjusting rent payments to reflect changes in price indices, as well as renewal
options.
At December 31, 2004, the Company had commitments under an agreement to outsource a significant portion
of its information technology function requiring minimum annual payments as follows:
(In millions)
2005 $71
2006 68
2007 68
2008 68
2009 68
Thereafter –
In connection with certain aircraft sales, the Company has offered trade-in incentives whereby the customer will
receive a pre-determined trade-in value if they purchase another aircraft from the Company. The difference
between the value of these trade-in incentives, the majority of which expire by the end of 2006, and the current
estimated fair value of the underlying aircraft was approximately $4 million at December 31, 2004. There is a high
degree of uncertainty inherent in the assessment of the likelihood and value of trade-in commitments.
The Company self-insures for losses and expenses for aircraft product liability up to a maximum of $10 million
per occurrence and $50 million annually. Insurance is purchased from third parties to cover excess aggregate
liability exposure from $50 million to $1.25 billion. This coverage also includes the excess of liability over $10
million per occurrence. The aircraft product liability reserve was $38 million and $33 million at December 31, 2004
and 2003, respectively.
The Company is involved in various stages of investigation and cleanup related to remediation of various
environmental sites. The Company’s estimate of total environmental remediation costs expected to be incurred is
$130 million. Discounted at a weighted-average risk-free rate of 5.8 percent, the Company estimates the liability to
be $92 million before U.S. government recovery and had this amount accrued at December 31, 2004. A portion of
these costs are eligible for future recovery through the pricing of products and services to the U.S. government. The