Raytheon 2009 Annual Report Download - page 70

The increase in total net sales and operating income related to Corporate in 2009 compared to 2008 and the decrease in
total net sales and operating income related to Corporate in 2008 compared to 2007 was primarily due to the increase in
estimated future CAS pension costs at December 31, 2008 as discussed below.
As discussed above in Critical Accounting Estimates, pension costs as calculated under CAS are a component of our
estimated costs to complete each of our U.S. Government contracts. On an annual basis, we update our estimate of future
CAS pension costs based upon actual asset returns and other actuarial factors. When these estimated future costs
increase, which occurred at December 31, 2008, driven mainly by the significant decline in the value of our pension assets
in 2008, the estimated costs to complete each existing contract increases. The amounts of revenue and profit which are
recognizable based upon our estimated percent complete and expected margins on our contracts, principally on our
fixed-price contracts, were reduced. In 2008, we recorded a cumulative catch-up adjustment for this reduction in revenue
and profit of $69 million as part of Corporate and Eliminations consistent with our internal management reporting and
performance evaluation. The components of the adjustment were as follows:
(In millions)
Integrated Defense Systems $20
Intelligence and Information Systems 7
Missile Systems 14
Network Centric Systems 12
Space and Airborne Systems 12
Technical Services 4
Total $69
DISCONTINUED OPERATIONS
(Loss) income from discontinued operations, net of tax consisted of the following results from Raytheon Aircraft
Company (Raytheon Aircraft), Flight Options LLC (Flight Options) and Other Discontinued Operations:
Pretax After-tax
(In millions) 2009 2008 2007 2009 2008 2007
Gain on sale of Raytheon Aircraft $— $— $1,598 $— $ — $986
Raytheon Aircraft discontinued operations 86457830
Loss on sale of Flight Options —— (73) —— (44)
Flight Options discontinued operations (2) — (112) (1) — (88)
Other Discontinued Operations (6) (1) 8 (7) (10) 1
Total $— $ 5 $1,466 $ (1) $ (2) $885
From time to time, we have disposed of certain businesses, including our Raytheon Aircraft, Flight Options, Raytheon
Engineers & Constructors and Aircraft Integration Systems businesses. As a result, we present Raytheon Aircraft, Flight
Options and our other previously disposed businesses (Other Discontinued Operations) as discontinued operations for
all periods. All residual activity relating to our disposed businesses appears in discontinued operations.
In 2007, we sold Raytheon Aircraft for $3,318 million in gross proceeds, $3,117 million, net. We recorded a gain on sale
of $986 million, net of $612 million of federal, foreign and state income taxes.
In 2007, we sought and received a number of initial bids to purchase Flight Options. These initial bids were below our
previous estimates of Flight Options’ 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 year, we
recorded an impairment charge of $84 million pretax, $69 million after-tax in 2007, which included all of Flight Options’
remaining goodwill and a portion of its other intangible assets. Subsequently, we sold Flight Options and recorded a loss
on sale of $73 million pretax, $44 million after-tax. In connection with the sale of Flight Options, we recorded a note
receivable for $9 million, which was subsequently collected in 2008.
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