Raytheon 2009 Annual Report Download - page 76

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certain defense contractors, the new funding rules become effective when the Harmonization Rule goes into effect or no
later than 2011. It is expected that the final Harmonization rule will provide a framework to make more similar the CAS
requirements and the ERISA requirements, as revised by the Pension Protection Act.
Interest payments include interest on debt that is redeemable at our option.
As of December 31, 2009 and December 31, 2008, the total amount of unrecognized tax benefits for uncertain tax
positions and the accrual for the related interest, net of the federal benefit, was $549 million and $478 million,
respectively, and was included in accrued retiree benefits and other long-term liabilities. We are unable to make a
reasonably reliable estimate of when a cash settlement, if any, will occur with a tax authority as the timing of
examinations and ultimate resolutions of those examinations is uncertain.
OFF-BALANCE SHEET ARRANGEMENTS
We have entered into off-balance sheet arrangements, including the sale of general aviation receivables. Such
arrangements are not material to our overall liquidity or capital resources, market risk support or credit risk support as
detailed below. We also issue guarantees to third parties on behalf of our affiliates as described below in Commitments
and Contingencies.
We previously sold undivided interests in general aviation finance receivables, while retaining subordinated interests in
and servicing rights to the receivables. We irrevocably, and without recourse, transferred the receivables to a qualifying
special-purpose entity (QSPE), General Aviation Receivables Corporation (GARC), formed in 2003, which in turn, issued
beneficial interests in these receivables to a commercial paper conduit. The conduit obtained the funds to purchase the
interest in the receivables, other than the retained interest, by selling commercial paper to third-party investors. At
December 31, 2009 and 2008, the outstanding balance of securitized accounts receivable held by the third party conduit
totaled $73 million and $99 million, respectively, of which our subordinated retained interest was $67 million and $66
million, respectively, and the fair value of the servicing liability was less than $1 million at December 31, 2008. There was
no servicing liability at December 31, 2009. The underlying aircraft serve as collateral for these accounts receivable. We
estimated the fair value of the subordinated retained interest at December 31, 2009 and 2008 based on the present value
of future expected cash flows using certain key assumptions, including collection period and a discount rate of 5.3% and
4.4%, respectively. At December 31, 2009, a 10% and 20% adverse change in the collection period and discount rate
would not have a material effect on our financial position or results of operations. In January 2010, we adopted the
required new accounting standards which amend the accounting and disclosure requirements for transfers of financial
assets and consolidation of variable interest entities (VIEs). Among other things, these accounting standards eliminate the
concept of a QSPE and the related exception for applying the consolidation guidance. As a result, on January 1, 2010 we
consolidated GARC, which did not have a material impact on our consolidated financial statements and resulted in:
ⳮThe removal of our $67 million investment in GARC previously reported in other assets, net, and
ⳮThe addition of long and short-term notes receivable, net of $68 million, current and long-term notes payable of $2
million, and an increase in retained earnings of less than $1 million, net of tax.
In 1997, we provided a first loss guarantee of $133 million on $1.3 billion of U.S. Export-Import Bank loans (maturing in
2015) to the Brazilian Government related to the System for the Vigilance of the Amazon (SIVAM) program being
performed by NCS. Loan repayments by the Brazilian Government were current at December 31, 2009.
In addition, we have entered into certain joint ventures formed specifically to facilitate a teaming arrangement between
two contractors for the benefit of the customer, generally the U.S. Government, whereby we receive a subcontract from
the joint venture in the joint venture’s capacity as prime contractor. Accordingly, we record the work the joint venture
performs as an operating activity.
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