Raytheon 2006 Annual Report Download - page 124

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 17: Financial Instruments
At December 31, 2006, we recorded forward exchange contracts designated as cash flow hedges at their fair value.
Unrealized gains of $44 million were included in noncurrent assets and unrealized losses of $39 million were included in
current liabilities. Unrealized gains of $31 million were included in assets held for sale related to discontinued operations.
The offset was included in other comprehensive income, net of tax, of which approximately $3 million of net unrealized
losses are expected to be reclassified to earnings related to continuing operations over the next twelve months as the
underlying transactions mature and $16 million of net unrealized gains are expected to be reclassified to earnings related
to discontinued operations upon the sale of Raytheon Aircraft. Gains and losses resulting from these cash flow hedges
offset the foreign exchange gains and losses on the underlying assets or liabilities being hedged. The maturity dates of the
forward exchange contracts outstanding at December 31, 2006 extend through 2017. Certain immaterial contracts were
not designated as effective hedges and therefore were included in other expense. The amount charged to other expense
related to these contracts was less than $1 million in 2006, 2005 and 2004.
We enter into interest rate swaps, as described in Note 8: Notes Payable and Long-Term Debt. These interest rate swaps
were designated as fair value hedges. There was no hedge ineffectiveness in 2006, 2005 or 2004.
Major currencies and the approximate amounts associated with foreign exchange contracts consisted of the following at
December 31:
2006 2005
(In millions) Buy Sell Buy Sell
British Pounds $ 696 $297 $ 725 $483
Canadian Dollars 219 41 180 24
European Euros 113 9 94 25
Australian Dollars 34 6 69 31
Norwegian Kroner 10 — 10 1
Swiss Francs 31 86
Omani Rial 14 110
Arab Emirates Dirham 12 20 29
All other 5— 2—
Total $1,082 $360 $1,109 $609
Included in the table above are amounts associated with foreign exchange contracts to buy British Pounds of $408 million
at 2006 and to buy and sell British Pounds of $338 million and $10 million, respectively at 2005 related to discontinued
operations.
Buy amounts represent the U.S. dollar equivalent of commitments to purchase foreign currencies and sell amounts
represent the U.S. dollar equivalent of commitments to sell foreign currencies. Foreign exchange contracts that do not
involve U.S. dollars have been converted to U.S. dollars for disclosure purposes.
Foreign currency forward contracts, used to fix the dollar value of specific commitments and payments to international
vendors and the value of foreign currency denominated receipts, have maturities at various dates through 2017 as follows:
$897 million in 2007, $417 million in 2008, $43 million in 2009, $25 million in 2010, and $60 million thereafter.
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