Raytheon 2006 Annual Report Download - page 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 2006, we had foreign tax credit carryforwards of $65 million that expire in 2009 through 2015. We
believe we will be able to utilize substantially all of these carryforwards over the next 4 to 5 years.
Note 12: Commitments and Contingencies
At December 31, 2006, we had commitments under long-term leases requiring annual rentals on a net lease basis as
follows:
(In millions)
2007 $317
2008 270
2009 193
2010 144
2011 83
Thereafter 172
Rent expense in 2006, 2005 and 2004 was $284 million, $262 million and $250 million, respectively. In the normal course
of business, we lease 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, 2006, we had commitments under an agreement to outsource a significant portion of our information
technology function requiring minimum annual payments as follows:
(In millions)
2007 $68
2008 68
2009 68
2010 —
2011 —
Thereafter —
We self-insure 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, which is not part of our pending sale of Raytheon Aircraft, was $22 million and $33 million at
December 31, 2006 and 2005, respectively.
We are involved in various stages of investigation and cleanup related to remediation of various environmental sites. Our
estimate of total environmental remediation costs expected to be incurred is $107 million. Discounted at a weighted-
average risk-free rate of 5.7%, we estimate the liability to be $75 million before U.S. government recovery and had this
amount accrued at December 31, 2006. 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 government contracting regulations and our long history of receiving reimbursement for
such costs. Accordingly, we have recorded $47 million at December 31, 2006 for the estimated future recovery of these
costs from the U.S. government, which is included in contracts in process. We lease certain government-owned
properties and are 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 our 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 our financial position, results of
operations or liquidity.
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