Raytheon 2007 Annual Report Download - page 82

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Our primary market exposures are to interest rates and foreign exchange rates.
We meet our working capital requirements with a combination of variable-rate short-term and fixed-rate long-term
financing. We enter into interest rate swap agreements with commercial and investment banks to manage interest rates
associated with our financing arrangements. We also enter into foreign currency forward contracts with commercial
banks to fix the dollar value of commitments and payments to international vendors and the value of foreign currency
denominated receipts. The market-risk sensitive instruments we use for hedging are entered into with commercial and
investment banks and are directly related to a particular asset, liability or transaction for which a firm commitment is in
place.
In 2007, we changed the presentation of our primary market risk exposures from a sensitivity analysis to tabular
presentation. We believe that the tabular presentation provides enhanced quantitative information regarding such
exposures.
The following tables provide information as of December 31, 2007 and 2006 about our market risk exposure associated
with changing interest rates. For long-term debt obligations, the table presents principal cash flows by maturity date and
average interest rates related to outstanding obligations. For interest rate swaps, the table presents notional principal
amounts and weighted-average interest rates by contractual maturity dates.
As of December 31, 2007
Principal Payments and Interest Rate Detail by Contractual Maturity Dates
(In millions, except percentages)
Long—Term Debt 2008 2009 2010 2011 2012 Thereafter Total Fair Value
Fixed Rate Debt — — — $ 453 $ 333 $1,503 $2,289 $2,446
Average Interest Rate — — — 4.85% 5.50% 6.50% 6.03%
As of December 31, 2006
Principal Payments and Interest Rate Detail by Contractual Maturity Dates
(In millions, except percentages)
Long—Term Debt 2007 2008 2009 2010 2011 Thereafter Total Fair Value
Fixed Rate Debt $ 688 $ 309 — $ 732 $ 453 $1,836 $4,018 $4,205
Average Interest Rate 6.36% 6.15% — 7.44% 4.85% 6.32% 6.35%
As of December 31, 2007
Aggregate Notional Amounts Associated with Interest Rate Swaps in Place
and Interest Rate Detail by Contractual Maturity Dates
(In millions, except percentages)
Interest Rate Swaps 2008 2009 2010 2011 2012 Thereafter Total Fair Value
Fixed to Variable — — — $ 250 — $ 325 $ 575 $10
Average Pay Rate — — — 4.05% — 4.22% 4.14%
Average Receive Rate — — — 4.09% — 4.80% 4.49%
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