Raytheon 2007 Annual Report Download - page 80

We provide these guarantees and letters of credit to TRS and other affiliates to assist these entities in connection with
obtaining financing on more favorable terms, making bids on contracts and performing their contractual obligations.
While we expect these entities to satisfy their loans, project performance and other contractual obligations, their failure to
do so may result in a future obligation for us.
Also included in guarantees and letters of credit above was $85 million and $21 million at December 31, 2007, related to
discontinued operations. Included in guarantees, letters of credit and surety bonds above was $83 million, $92 million
and $11 million at December 31, 2006 related to discontinued operations.
Our residual commuter aircraft portfolio has exposure to outstanding financing arrangements with the aircraft serving as
collateral. We have sold aircraft to thinly capitalized companies whose financial condition could be significantly affected
by sustained higher fuel costs, industry consolidation and declining commercial aviation market conditions. At
December 31, 2007 and December 31, 2006, our exposure on commuter aircraft assets held as inventory, collateral on
notes or as leased assets, was approximately $250 million relating to 156 aircraft and approximately $325 million relating
to 192 aircraft, respectively. The valuation of used aircraft in inventories, which are stated at cost, but not in excess of
realizable value, requires significant judgment. The valuation of used aircraft is also considered in assessing the realizable
value of certain commuter-related assets which serve as collateral for the underlying financing arrangements. As part of
the assessment of realizable value, we evaluate many factors including current market conditions, future market
conditions, the age and condition of the aircraft, and availability levels for the aircraft in the market. The carrying value of
commuter aircraft assets assumes an orderly disposition of these assets, consistent with our historical experience and
strategy to dispose of these residual assets. If we were to dispose of these assets in an other than orderly disposition or sell
the business in its entirety, the value realized would likely be less than the carrying value.
Government contractors are subject to many levels of audit and investigation. Agencies that oversee contract
performance include: the Defense Contract Audit Agency, the Inspector General of the Department of Defense and other
departments and agencies, the Government Accountability Office, the Department of Justice and Congressional
Committees. The Department of Justice, from time to time, has convened grand juries to investigate possible
irregularities by the Company. Individually and in the aggregate, these audits and investigations are not expected to have
a material adverse effect on our financial position, results of operations or liquidity.
The following is a schedule of our contractual obligations outstanding at December 31, 2007:
(In millions) Total
Less than
1 year
1–3
years
4–5
years
After
5 years
Debt(1) $ 2,289 $ — $ — $ 786 $1,503
Interest payments 1,510 138 276 243 853
Operating leases(2) 1,001 292 393 176 140
Purchase obligations 7,604 5,527 1,675 355 47
Total $12,404 $5,957 $2,344 $1,560 $2,543
(1) Debt includes scheduled principal payments only.
(2) Capital lease payments are not material.
We adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
as of January 1, 2007. As of December 31, 2007, the total amount of net unrecognized tax benefits for uncertain tax
positions and the accrual for the related interest was $370 million. We are unable to make a reasonably reliable estimate
when cash settlement, if any, will occur with a tax authority as the timing of examinations and ultimate resolution of
those examinations is uncertain.
Purchase obligations in the table above represent agreements with suppliers to purchase goods or services that are
enforceable and legally binding. We enter into contracts with customers, primarily the U.S. government, which entitles us
to full recourse for costs incurred, including purchase obligations, in the event the contract is terminated by the customer
for convenience. These purchase obligations are included above notwithstanding the amount for which we are entitled to
full recourse from our customers.
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