Raytheon 2007 Annual Report Download - page 96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Risks and Uncertainties—We provide a wide range of technologically advanced products, services and solutions for
principally governmental customers in the U.S. and abroad, and are subject to certain business risks specific to that
industry. Sales to the government may be affected by changes in procurement policies, budget considerations, changing
concepts of national defense, political developments abroad and other factors.
Our consolidated financial statements are based on the application of generally accepted accounting principles which
require us to make estimates and assumptions about future events that affect the amounts reported in our financial
statements and accompanying notes. Future events and their effects cannot be determined with certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results could differ from those estimates and any
such differences may be material to our financial statements.
Note 2: Discontinued Operations
Income (loss) from discontinued operations consisted of the following results from Raytheon Aircraft, Flight Options, and
the Raytheon Engineers & Constructors and Aircraft Integration Systems businesses (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)
No interest expense was allocated to discontinued operations for the years ended December 31, 2007, 2006 and 2005
since there was no debt specifically attributable to discontinued operations or required to be repaid with proceeds from
the sales.
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.
The income from discontinued operations related to Raytheon Aircraft was as follows:
(In millions) 2007 2006 2005
Net sales $642 $2,983 $2,856
Operating expenses 587 2,720 2,681
Income before taxes 45 274 187
Federal and foreign income taxes 15 93 63
Income from discontinued operations, net of tax $30 $ 181 $ 124
Gain on sale, net of tax $986 $—$—
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