Raytheon 2007 Annual Report Download - page 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 2007, we had commitments under an agreement to outsource a significant portion of our information
technology function requiring minimum annual payments as follows:
(In millions)
2008 $68
2009 68
2010 and thereafter —
Insurance is purchased from third parties to cover aggregate liability exposure up to $1.25 billion. The aircraft product
liability reserve, which was not part of our sale of Raytheon Aircraft, was $16 million and $22 million at December 31,
2007 and 2006, respectively. We previously self-insured for losses and expenses for aircraft product liability up to a
maximum of $10 million per occurrence and $50 million annually and insurance was purchased from third parties to
cover excess aggregate liability exposure from $50 million to $1.25 billion as well as the excess liability over $10 million
per occurrence.
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 $149 million. Discounted at a weighted-
average risk-free rate of 5.7%, we estimate the liability to be $99 million before U.S. government recovery and had this
amount accrued at December 31, 2007. 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 $64 million at December 31, 2007 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 consolidated 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.
Environmental remediation costs expected to be incurred are:
(In millions)
2008 $29
2009 17
2010 13
2011 11
2012 8
Thereafter 71
We issue guarantees and have banks and surety companies issue, on our behalf, letters of credit and surety bonds to meet
various bid, performance, warranty, retention and advance payment obligations of us or our affiliates. Approximately
$261 million, $910 million and $104 million of these guarantees, letters of credit and surety bonds, for which there were
stated values, were outstanding at December 31, 2007, respectively, and $311 million, $702 million and $120 million were
outstanding at December 31, 2006, respectively. These instruments expire on various dates through 2015. Additional
guarantees of project performance for which there is no stated value also remain outstanding.
Included in guarantees and letters of credit above was $39 million and $193 million at December 31, 2007, respectively
and $92 million and $157 million at December 31, 2006, respectively related to our joint venture in Thales-Raytheon
Systems Co. Ltd. (TRS).
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