Raytheon 2004 Annual Report Download - page 65

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In 1995, through the acquisition of E-Systems, Inc., the Company invested in Space Imaging and currently has a
31 percent equity investment in Space Imaging LLC. In 2002, the Company recorded a $175 million charge to
write-off the Company’s investment in Space Imaging and accrue for payment under the Company’s guarantee of a
Space Imaging credit facility that matured in March 2003. In the first quarter of 2003, the Company paid $130
million related to the credit facility guarantee. In exchange for this payment, the Company received a note from
Space Imaging for this amount that the Company has valued at zero.
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
provides fully customized solutions through the integration of command and control centers, radars, and
communication networks. HRL Laboratories is a scientific research facility whose staff engages in the areas of space
and defense technologies. Indra develops flight data processors for air traffic control automation systems. TelASIC
Communications delivers high performance, cost-effective radio frequency (RF), analog mixed signal, and digital
solutions for both the commercial and defense electronics markets.
In addition, the Company has entered into joint ventures formed specifically to facilitate a teaming arrangement
between two contractors for the benefit of the customer, generally the U.S. government, whereby the Company
receives a subcontract from the joint venture in the joint venture’s capacity as prime contractor. Accordingly, the
Company records the work it performs for the joint venture as operating activity.
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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 estimated 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 recovery
of environmental cleanup costs from the U.S. government is considered probable based on the Company’s long
history of receiving reimbursement for such costs. Accordingly, the Company has recorded $59 million at December
31, 2004 for the estimated future recovery of these costs from the U.S. government, which is included in contracts in
process. The Company leases certain government-owned properties and is generally not liable for environmental
remediation at these sites, therefore, no provision has been made in the financial statements for these costs. Due to the
complexity of environmental laws and regulations, the varying costs and effectiveness of alternative cleanup methods
and technologies, the uncertainty of insurance coverage, and the unresolved extent of the Company’s responsibility, it
is difficult to determine the ultimate outcome of these matters, however, any additional liability is not expected to
have a material adverse effect on the Company’s financial position or results of operations.