Raytheon 2009 Annual Report Download - page 69

In 2009, our CAS expense increased by $150 million more than our FAS expense, resulting in a FAS/CAS Pension
Adjustment of $27 million of income in 2009 versus $123 million of expense in 2008. The $272 million increase in our
CAS expense was driven primarily by negative asset returns in 2008, which caused certain plans to no longer be fully
funded under CAS. Our FAS expense also increased by $122 million. The primary components of the change in FAS
expense included an increase of $297 million due to the lower than expected return on pension assets during 2008,
partially offset by a decrease of $106 million due to the expected return on our discretionary cash contribution to our
plans in 2008 as well as the expected return on the expected cash contributions in 2009. In addition, the FAS expense
decreased by $47 million due to the recognition of previous historical asset returns which were greater than the expected
return.
In 2008, our FAS expense decreased by $169 million compared to 2007. The primary components of the change in FAS
expense included a decrease of $88 million due to the recognition of previous years’ historical asset returns, which were
greater than the expected return and a decrease of $66 million due to the expected return on our discretionary cash
contributions to our plans in 2007 as well as the expected return on the expected cash contributions in 2008.
For 2010, we currently expect our FAS expense will increase more than our CAS expense, which will increase the FAS/
CAS Pension Adjustment. We expect the FAS/CAS Pension Adjustment to be approximately $220 million of expense
driven by the difference in amortization periods under FAS and CAS, as discussed above, of the net unrecognized
liability, principally due to the negative 2008 asset returns. This expected increase in FAS expense in excess of CAS
expense is subject to our annual update, generally planned in the third quarter, of our actuarial estimate of the unfunded
benefit obligation for both FAS and CAS for final 2009 census data. After 2010, the FAS/CAS Pension Adjustment is more
difficult to predict because future FAS and CAS expense is based on a number of key assumptions for future periods.
Differences between those assumptions and future actual results could significantly change both FAS and CAS expense in
future periods. However, based solely on our current assumptions at December 31, 2009 and without an adjustment for
the Harmonization Rule, it appears our FAS expense will continue to exceed our CAS expense until 2013 driven by the
difference in amortization periods under FAS and CAS, as discussed above, of the unfunded benefit obligation,
principally due to the negative 2008 asset returns.
Corporate and Eliminations
Corporate and Eliminations includes corporate expenses and intersegment sales and profit eliminations. Corporate
expenses represent unallocated costs and certain other corporate costs not considered part of management’s evaluation of
reportable segment operating performance, including the net costs associated with our residual commuter aircraft
portfolio.
The components of total net sales related to Corporate and Eliminations were as follows:
(In millions) 2009 2008 2007
Intersegment sales eliminations $(2,004) $(1,884) $(1,776)
Corporate 30 (21) 74
Total $(1,974) $(1,905) $(1,702)
The components of operating income related to Corporate and Eliminations were as follows:
(In millions) 2009 2008 2007
Intersegment profit eliminations $ (173) $ (166) $ (160)
Corporate (70) (116) (73)
Total $ (243) $ (282) $ (233)
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