Raytheon 2005 Annual Report Download - page 69

The Company has on file a shelf registration with the Securities and Exchange Commission for the issuance of up to $3.0
billion in debt securities, common or preferred stock, warrants to purchase any of the aforementioned securities, and/or
stock purchase contracts, under which $1.3 billion remained outstanding at December 31, 2005. The Company expects to
use a portion of the remaining availability under the shelf registration in connection with the issuance of common stock
warrants in its settlement of the securities class action lawsuit, described in Note L, Commitments and Contingencies of
the Notes to the Financial Statements.
In 2004, the Company entered into an agreement to sell certain general aviation finance receivables, with the buyer
assuming all servicing responsibilities. As part of the agreement, the Company retained a first loss deficiency guarantee of
7.5% of the receivable amount sold. In 2005 and 2004, the Company sold $5 million and $37 million, respectively, of
receivables under the agreement, with no associated gain or loss. Also in 2005 and 2004, the Company separately sold $18
million and $22 million, respectively, of general aviation finance receivables without any continuing involvement.
The Company’s need for, cost of, and access to funds are dependent on future operating results, as well as conditions
external to the Company. The Company expects that cash and cash equivalents, cash flow from operations, proceeds
from divestitures, and other available financing resources will be sufficient to meet anticipated operating, capital
expenditure, and debt service requirements during the next twelve months and for the foreseeable future. In addition, the
Company may, from time to time, utilize excess cash balances to repurchase debt or common stock as warranted by
market conditions.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has entered into off-balance sheet arrangements, including the sale of general aviation receivables. The
Company’s off-balance sheet arrangements are not material to its overall liquidity or capital resources, market risk
support or credit risk support. The Company also issues guarantees to third parties related to affiliates as described below
in Commitments and Contingencies.
In 2003, the Company sold $337 million of general aviation finance receivables to a qualifying special purpose entity
which in turn issued beneficial interests in these receivables to a commercial paper conduit, and retained a subordinated
interest in and servicing rights to the receivables. The Company received proceeds of $279 million and recognized a gain
of $2 million. The sale was non-recourse to the Company due to third party financial guarantees, and effectively reduced
the Company’s exposure to general aviation market risk for receivables by approximately 25%. At December 31, 2005 and
2004, the outstanding balance of securitized accounts receivable held by the third party conduit totaled $157 million and
$204 million, respectively, of which the Company’s subordinated retained interest was $59 million and $58 million,
respectively, net, and the fair value of the servicing asset was $2 million and $4 million, respectively.
In 1997, the Company provided a first loss guarantee of $133 million on $1.3 billion of U.S. Export-Import Bank loans
(maturing in 2015) to the Brazilian government related to the System for the Vigilance of the Amazon (SIVAM) program
being performed by the Company’s Network Centric Systems segment. The first interest payment became due and was
paid in 2005.
MAJOR AFFILIATED ENTITIES
Investments, which are included in other assets, consisted of the following at December 31:
(In millions)
2005
Ownership % 2005 2004
Equity method investments:
Thales-Raytheon Systems Co. Ltd. 50.0 $102 $87
HRL Laboratories, LLC 33.3 31 30
Indra ATM S.L. — —12
TelASIC Communications 17.1 —3
Other n/a 67
139 139
Other investments 710
Total $146 $149
47