Raytheon 2003 Annual Report Download - page 48

RAYTHEON COMPANY 333
Notes to Consolidated Financial Statements (Continued) 33333333333333333333333333333333333333333333
Inventories at Raytheon Aircraft, Raytheon Airline Aviation
Services, and Flight Options totaled $1,603 million at
December 31, 2003 (consisting of $647 million of finished goods,
$717 million of work in process, and $239 million of materials and
parts) and $1,612 million at December 31, 2002 (consisting of
$557 million of finished goods, $761 million of work in process,
and $294 million of materials and parts).
Included in inventories was $103 million and $76 million at
December 31, 2003 and 2002, respectively, related to the Horizon
aircraft. The Company anticipates certification of the Horizon aircraft
in the third quarter of 2004 and first delivery by year end 2004.
333NOTE G: PROPERTY, PLANT, AND
EQUIPMENT
Property, plant, and equipment consisted of the following at
December 31:
(In millions) 2003 2002
Land $90$91
Buildings and leasehold improvements 1,769 1,606
Machinery and equipment 3,592 3,083
Equipment leased to others 189 189
5,640 4,969
Less accumulated depreciation and amortization (2,929) (2,573)
Total $ 2,711 $ 2,396
Depreciation expense was $333 million, $305 million, and
$289 million in 2003, 2002, and 2001, respectively. Accumulated
depreciation of equipment leased to others was $25 million and
$39 million at December 31, 2003 and 2002, respectively.
In 1998, the Company entered into a $490 million property sale
and five-year operating lease (synthetic lease) facility under which
property, plant, and equipment was sold and leased back to the
Company. In 2003, the lease facility expired and the Company bought
back the assets remaining in the lease facility for $125 million.
Future minimum lease payments from non-cancelable aircraft
operating leases, which extend to 2014, amounted to $73 million
at December 31, 2003 and were due as follows :
(In millions)
2004 $17
2005 11
2006 10
2007 8
2008 7
Thereafter 20
333NOTE H: OTHER ASSETS
Other assets, net consisted of the following at December 31:
(In millions) 2003 2002
Long-term receivables
Due from customers in installments to 2015 $ 464 $ 969
Other, principally due through 2005 40 17
Sales-type leases, due in installments to 2013 50 135
Computer software, net 456 397
Pension-related intangible asset 199 217
Investments 146 154
Other noncurrent assets 498 344
Total $1,853 $2,233
The Company provides long-term financing to its aircraft cus-
tomers. The underlying aircraft serve as collateral for general avia-
tion and commuter aircraft receivables. The Company maintains
reserves for estimated uncollectible aircraft-related long-term
receivables. The balance of these reserves was $60 million and
$69 million at December 31, 2003 and 2002, 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 considered certain specific receivables and considered
factors including extended delinquency and requests for restruc-
turing, among other things. Long-term receivables included com-
muter aircraft receivables of $363 million and $680 million at
December 31, 2003 and 2002, respectively.
The Company accrues interest on long-term aircraft customer
receivables in accordance with the terms of the underlying notes.
When a long-term aircraft receivable is over 90 days past due, the
Company generally stops accruing interest. At December 31,
2003 and 2002, there were $37 million and $38 million, respec-
tively, of long-term aircraft receivables on which the Company was
not accruing interest. Interest payments related to these receiv-
ables are credited to income when received. Once a receivable has
been brought current, the Company begins to accrue interest
again. Interest deemed to be uncollectible is written off at the time
that determination is made.
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 connec-
tion with the sale, the Company formed a qualifying special purpose
entity (QSPE) for the sole purpose of buying these receivables. The