Raytheon 2009 Annual Report Download - page 78

portfolio assumes an orderly disposition of these assets, consistent with our historical experience and strategy. The
tightening of credit markets and economic conditions have reduced the number of potential buyers who are able to
obtain financing and have negatively impacted the ability of existing borrowers to refinance their aircraft through a third
party. If the long-term market prospects for these aircraft were to significantly erode or cease, our valuation of these assets
would likely be less than the carrying value. We periodically evaluate potential alternative strategies for the disposal of
these assets. If we were to dispose of these assets in an other than orderly manner or sell the portfolio in its entirety, the
value realized would likely be less than the carrying value.
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 Network Centric Systems’ System for the Vigilance of the Amazon
(SIVAM) program. Loan repayments by the Brazilian Government were current at December 31, 2009.
Government contractors are subject to many levels of audit and investigation. Agencies that oversee contract
performance include: the Defense Contract Audit Agency, the Inspector General of the Department of Defense and other
departments and agencies, the Government Accountability Office, the Department of Justice and Congressional
Committees. The Department of Justice, from time to time, has convened grand juries to investigate possible
irregularities by us. We also provide products and services to customers outside of the U.S. and those sales are subject to
local government laws, regulations and procurement policies and practices. Our compliance with such local government
regulation or any applicable U.S. Government regulation (e.g., the Foreign Corrupt Practices Act and the International
Traffic in Arms Regulations) may also be investigated or audited. We do not expect these audits and investigations to
have a material adverse effect on our financial position, results of operations or liquidity, either individually or in the
aggregate.
We are currently conducting a self-initiated internal review of certain of our international operations, focusing on
compliance with the Foreign Corrupt Practices Act. In the course of the review, we have identified several possible areas
of concern relating to payments made in connection with certain international operations related to a jurisdiction where
we do business. We have voluntarily contacted the Securities and Exchange Commission and the Department of Justice
to advise both agencies that an internal review is underway. Because the internal review is ongoing, we cannot predict the
ultimate consequences of the review. Based on the information available to date, we do not believe that the results of this
review will have a material adverse effect on our financial condition, results of operations or liquidity.
In May 2006, international arbitration hearings commenced against us as the successor to the Hughes Electronics defense
business, in connection with certain claims brought in 2004 relating to an alleged 1995 Workshare Agreement. The
asserted claims involve breach of contract, intellectual property infringement and other related matters. The arbitration
panel stayed further proceedings, including the issuance of the liability decision on the non-IP claims presented during
the May 2006 hearing, while the parties engaged in settlement efforts. The parties were unable to conclude an enforceable
settlement, and in August 2009, the panel released its liability decision, rejecting some of MBDA’s non-IP claims, while
finding Raytheon liable for some other non-IP claims. We did not record any significant additional financial liability as a
result of our estimate of the impact of the decision. The proceedings will now resume to determine liability for the
asserted IP claims and to assess overall damages, if any. We believe that we have meritorious defenses to the remaining
asserted IP claims and intend to continue to contest them vigorously; however, an adverse resolution of this matter could
have a material effect on our results of operations.
ACCOUNTING STANDARDS
In 2009, we adopted required new accounting standards related to the following:
ⳮThe accounting and disclosure of noncontrolling interests as discussed in Note 7 within Item 8 of this Form 10-K;
ⳮThe disclosure of derivative instruments and hedging activities as discussed in Note 8 within Item 8 of this Form 10-K;
ⳮThe accounting and disclosure of certain nonfinancial assets and liabilities not recognized or disclosed at fair value on
a recurring basis, as discussed in Note 9 within Item 8 of this Form 10-K;
ⳮThe earnings per share (EPS) impact of instruments granted in share-based payment transactions as discussed in Note
12 within Item 8 of this Form 10-K;
ⳮThe disclosure of postretirement benefit plan assets as discussed in Note 14 within Item 8 of this Form 10-K; and
ⳮThe accounting for business combinations, which we have applied prospectively to business combinations with
acquisition dates after January 1, 2009.
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