Raytheon 2009 Annual Report Download - page 77

COMMITMENTS AND CONTINGENCIES
We are involved in various stages of investigation and cleanup related to remediation of various environmental sites. Our
estimate of total environmental remediation costs was $208 million and $157 million at December 31, 2009 and 2008,
respectively. Discounted at a weighted-average risk-free rate of 5.7%, we estimated the liability at December 31, 2009 and
2008 to be $139 million and $105 million, respectively, before U.S. Government recovery and had this amount accrued. A
portion of these costs are eligible for future recovery through the pricing of our products and services to the U.S.
Government. We consider such recovery probable based on government contracting regulations and our long history of
receiving reimbursement for such costs. Accordingly, we recorded $97 million and $69 million in contracts in process
through December 31, 2009 and 2008, respectively, for the estimated future recovery of these costs from the U.S.
Government. We also lease certain government-owned properties and are generally not liable for remediation of
preexisting environmental contamination at these sites; as a result, we generally do not reflect the provision for these
costs in our consolidated financial statements. Due to the complexity of environmental laws and regulations, the varying
costs and effectiveness of alternative cleanup methods and technologies, the uncertainty of insurance coverage and the
unresolved extent of our responsibility, it is difficult to determine the ultimate outcome of these matters; however, we do
not expect any additional liability to have a material adverse effect on our financial position, results of operations or
liquidity.
We issue guarantees and banks and surety companies issue, on our behalf, letters of credit and surety bonds to meet
various bid, performance, warranty, retention and advance payment obligations of us or our affiliates. Approximately
$227 million, $898 million and $203 million of these guarantees, letters of credit and surety bonds, for which there were
stated values, were outstanding at December 31, 2009, respectively, and $281 million, $1,012 million and $111 million
were outstanding at December 31, 2008, respectively. These instruments expire on various dates through 2020.
Additional guarantees of project performance for which there is no stated value also remain outstanding.
Included in guarantees and letters of credit described above were $80 million and $206 million at December 31, 2009,
respectively and $59 million and $180 million at December 31, 2008, respectively, related to our joint venture in Thales-
Raytheon Systems Co. Ltd. (TRS).
We provide these guarantees and letters of credit to TRS and other affiliates to assist these entities in obtaining financing
on more favorable terms, making bids on contracts and performing their contractual obligations. While we expect these
entities to satisfy their loans, project performance and other contractual obligations, their failure to do so may result in a
future obligation to us. At December 31, 2009 and 2008, we had an estimated liability of $6 million and $2 million,
respectively, related to these guarantees and letters of credit. We periodically evaluate the risk of TRS and other affiliates
failing to satisfy their loans, project performance and other contractual obligations described above. At December 31,
2009, we believe the risk that TRS and other affiliates will not be able to perform or meet their obligations is minimal for
the foreseeable future based on their current financial condition. All obligations were current at December 31, 2009.
Also included in guarantees and letters of credit described above were $10 million and $6 million at December 31, 2009,
respectively, and $86 million and $6 million at December 31, 2008, respectively, related to discontinued operations.
Our residual turbo-prop commuter aircraft portfolio has exposure to outstanding financing arrangements with the
aircraft serving as collateral. We have sold and leased commuter aircraft globally to thinly capitalized companies whose
financial condition could be significantly affected by a number of factors, including fuel and other costs, industry
consolidation, declining commercial aviation market conditions and the U.S. Government budget for the Essential Air
Service program. Based on recent economic trends, including tightening credit markets and volatile fuel costs, these
companies may increasingly experience difficulties meeting their financial commitments. At December 31, 2009 and
2008, our exposure on commuter aircraft assets held as inventory, collateral on notes or as leased assets, was
approximately $109 million relating to 106 aircraft and approximately $170 million relating to 127 aircraft, respectively.
The valuation of used aircraft in inventories, which are stated at cost, but not in excess of realizable value, requires
significant judgment. The valuation of used aircraft is also considered in assessing the realizable value of certain
commuter aircraft related assets which serve as collateral for the underlying financing arrangements. As part of the
assessment of realizable value, we evaluate many factors, including sales transaction history, current market conditions,
anticipated future market conditions and age and condition of the aircraft. The carrying value of our commuter aircraft
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