Raytheon 2006 Annual Report Download - page 78

multicurrency revolving credit facility. There were no borrowings under the facility at December 31, 2006 and $53
million at December 31, 2005. In addition, other uncommitted bank lines totaled $15 million and $6 million at
December 31, 2006 and 2005, respectively. There were no amounts outstanding under these lines of credit at
December 31, 2006 and 2005. Compensating balance arrangements are not material.
Our credit ratings were assigned by Fitch’s at F2 for short-term borrowing and BBB for senior debt, by Moody’s at P-2 for
short-term borrowing and Baa2 for senior debt and by Standard and Poor’s at A-2 for short-term borrowing and BBB+
for senior debt. In January 2007, Fitch’s raised our credit rating for senior debt to BBB+.
In May 2006, we filed a shelf registration with the SEC for the issuance of up to $2.0 billion in debt securities, common or
preferred stock and warrants to purchase the aforementioned securities. In June 2006, we used approximately $450
million under the shelf registration to register the common stock to be issued upon the exercise of the warrants issued as
part of the settlement of the securities class action lawsuit described in Note 12, Commitments and Contingencies of the
Notes to the Financial Statements. At December 31, 2006, our shelf registrations aggregated $5.0 billion of which $3.3
billion remained available.
In 2004, in accordance with the terms of the 8.25%, $50 par value equity security units we issued in 2001, we issued
27.0 million shares of common stock and received proceeds of $863 million.
Our need for, cost of and access to funds are dependent on future operating results, as well as other external conditions.
We expect 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.
OFF-BALANCE SHEET ARRANGEMENTS
We have entered into off-balance sheet arrangements, including the sale of general aviation receivables. Such
arrangements are not material to our overall liquidity or capital resources, market risk support or credit risk support. We
also issue guarantees to third parties on behalf of our affiliates as described below in Commitments and Contingencies.
In 2006, we sold $67 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 sale was non-recourse to us due to third party financial guarantees. At December 31, 2006 and
2005, the outstanding balance of securitized accounts receivable held by the third party conduit totaled $173 million and
$157 million, respectively, of which our subordinated retained interest was $60 million and $59 million, respectively, net,
and the fair value of the servicing liability was $1 million and the servicing asset was $2 million, respectively.
In 1997, we 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 Network Centric Systems. Loan repayments by the Brazilian government were current at December 31, 2006.
In addition, we have 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 we receive a subcontract from the
joint venture in the joint venture’s capacity as prime contractor. Accordingly, we record the work it performs for the joint
venture as an operating activity.
COMMITMENTS AND CONTINGENCIES
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
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