Raytheon 2007 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2007 Raytheon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 134

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134

In 2006, TS booked $198 million for the Nuclear Weapons Safety and Security (NWSS) program. Backlog remained
relatively consistent between 2006 and 2005.
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations consisted of the following results from Raytheon Aircraft and Flight
Options, and Raytheon Engineers & Constructors and Aircraft Integration Systems (Other Discontinued Operations):
Pretax After-tax
(In millions) 2007 2006 2005 2007 2006 2005
Gain on sale of Raytheon Aircraft $1,598 $— $— $986 $— $—
Raytheon Aircraft discontinued operations 45 274 187 30 181 124
Loss on sale of Flight Options (73) ——(44) ——
Flight Options discontinued operations (112) (103) (113) (88) (80) (80)
Other Discontinued Operations 8(7) (74) 1(5) (71)
Total $1,466 $ 164 $ — $885 $ 96 $(27)
Raytheon Aircraft—In 2007, we completed the sale of Raytheon Aircraft to Hawker Beechcraft Inc., a new company
formed by GS Capital Partners, an affiliate of Goldman Sachs, and Onex Partners, for $3,318 million in gross proceeds,
which resulted in net proceeds of $3,117 million. The primary difference between the gross and net proceeds was a $131
million final purchase price adjustment for cash retained by us through the closing of the transaction. We recorded a gain
on sale in 2007 of $986 million, net of $612 million of federal, foreign and state taxes. We retained certain assets and
liabilities of Raytheon Aircraft after the sale. At December 31, 2007, $61 million was included in non-current assets
related to a residual interest in certain receivables sold by Raytheon Aircraft through 2006 and $32 million was included
in current liabilities related to certain environmental and product liabilities. Any future income statement and cash flow
activity related to these retained assets and liabilities will be included in discontinued operations. We also retained certain
U.K. pension assets and obligations for a limited number of U.K. pension plan participants. The related pension assets
and obligations are included in our pension disclosures.
Flight Options—As a result of the decision to sell Flight Options LLC (FO) and the subsequent sale in November 2007,
we recorded charges in the third and fourth quarters of 2007 totaling $157 million pretax, $113 million after-tax. These
charges are included in discontinued operations and described in further detail below. In connection with the sale, we
recorded a note receivable for $9 million and retained certain liabilities, primarily consisting of aircraft lease obligations
of $23 million. Any future income statement and cash flow activity related to these retained liabilities will be included in
discontinued operations.
In the third quarter of 2007 in connection with our on-going evaluation of our long-term strategy regarding FO, we
sought and received a number of initial bids to purchase the business. These initial bids were below our previous
estimates of FO’s fair value, which was based upon its projected discounted cash flows. As a result of receiving these
external indications of market value and other conditions and events that occurred during the third quarter of 2007, we
evaluated whether FO’s long-lived assets and its goodwill were impaired. We used the held in use asset recovery model for
this evaluation since all the criteria to meet the held for sale accounting treatment had not been met at the end of the
third quarter. Based on the results of this analysis, we recorded an impairment charge in the third quarter of 2007 of $84
million pretax, $69 million after-tax, which included all of FO’s remaining goodwill and a portion of its other intangible
assets.
In the fourth quarter of 2007, when our Board of Directors approved the sale of FO and we met the held for sale criteria,
we recorded a loss on sale of $73 million pretax, $44 million after-tax. This additional charge was not recorded until the
held for sale accounting treatment was met, as the carrying value of the individual underlying long-lived assets was less
than or equal to their estimated fair value at the end of the third quarter of 2007.
In 2006 and 2005, we recorded goodwill impairment charges of $55 million pretax, $48 million after-tax and $22 million
pretax, $19 million after-tax, respectively. The goodwill impairment charges in 2006 and 2005 were based upon our
46