Raytheon 2004 Annual Report Download - page 86

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68
Notes to Consolidated Financial Statements (Continued)
The Company also recorded $8 million of intangible assets and $160 million of goodwill (at Integrated Defense
Systems) in connection with this acquisition.
In 2003, the Company acquired the Aerospace and Defence Services business unit of Honeywell International
Inc. for $20 million in cash. Assets acquired included $4 million of contracts in process. Liabilities assumed
included $1 million of accounts payable and $2 million of other accrued expenses. The Company also recorded $8
million of intangible assets and $11 million of goodwill (at Technical Services) in connection with this acquisition.
In 2002, the Company acquired JPS Communications, Inc. for $10 million in cash. Assets acquired included $2
million of accounts receivable and $2 million of inventories. The Company also recorded $4 million of goodwill (at
Network Centric Systems) and $2 million of intangible assets in connection with this acquisition.
Pro forma financial information has not been provided for these acquisitions as they are not material either
individually or in the aggregate. In addition, the Company has entered into other acquisition and divestiture
agreements in the normal course of business that have not been separately disclosed as they are not material.
In 2002, the Company formed a joint venture with Flight Options, Inc. whereby the Company contributed its
Raytheon Travel Air fractional ownership business and loaned the new entity $20 million. In June 2003, the
Company participated in a financial recapitalization of Flight Options LLC (FO) and exchanged certain FO debt for
equity. The Company now owns approximately 65 percent of FO and is consolidating FO’s results in its financial
statements. The Company is recording 100 percent of FO’s losses since the Company has been meeting all FO’s
financing requirements. FO’s customers, in certain instances, have the contractual ability to require FO to buy back
their fractional share based on its current fair market value. The estimated value of this potential obligation was
approximately $575 million at December 31, 2004. Assets acquired included $83 million of inventories and $27
million of other current assets. Liabilities assumed included $97 million of notes payable and long-term debt, $90
million of advance payments, and $76 million of accounts payable and accrued expenses. The Company also
recorded $26 million of intangible assets and $127 million of goodwill (at the Other Segment) in connection with
this recapitalization.
In 2004, FO issued 7.4 million restricted common FO shares to certain key employees, representing 5.6 percent
of the total outstanding common shares of FO at December 31, 2004. In 2004, the restrictions on 6.8 million
restricted common shares lapsed. Also in 2004, FO issued 6.4 million stock options with an exercise price of $0.01
per share. In 2004, 1.5 million stock options expired and 0.1 million stock options were exercised, therefore, there
were 4.8 million stock options outstanding at December 31, 2004.
The Company merged with the defense business of Hughes Electronics Corporation (Hughes Defense) in
December 1997. In October 2001, the Company and Hughes Electronics agreed to a settlement regarding the
purchase price adjustment related to the Company’s merger with Hughes Defense. Under the terms of the merger
agreement, Hughes Electronics agreed to reimburse the Company approximately $635 million of its purchase price
over time, with the final payment received in 2002.