Raytheon 2009 Annual Report Download - page 99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The pretax derivative gains and losses in our consolidated statement of operations for the twelve months ended
December 31, 2009, related to our foreign currency forward contracts were as follows:
Derivatives in Cash Flow Hedging Relationships
Gain (Loss)
Recognized in
Other
Comprehensive
Income on
Effective Portion of
Derivative
Gain (Loss) on Effective
Portion of Derivative
Reclassified from
Accumulated Other
Comprehensive Loss
Ineffective Portion of Gain (Loss)
on Derivative and Amount
Excluded from Effectiveness
Testing Recognized in Income
(In millions) Amount Location Amount Location Amount
Foreign currency forward $55 Net sales $(7) Cost of sales $—
Derivatives Not Designated as Hedging
Instruments
Location of
Gain (Loss)
Recognized in
Income on
Derivative
Gain (Loss)
Recognized in
Income on
Derivative
Foreign currency forward contracts Cost of sales $ 4
The notional amounts of outstanding foreign exchange forward contracts consisted of the following at:
December 31, 2009 December 31, 2008
(In millions) Buy Sell Buy Sell
British Pounds $407 $498 $382 $489
Canadian Dollars 212 46 189 27
Euros 190 35 87 1
All other 176 53 146 40
Total $985 $632 $804 $557
Buy amounts represent the U.S. Dollar equivalent of commitments to purchase foreign currencies and sell amounts
represent the U.S. Dollar equivalent of commitments to sell foreign currencies. Foreign exchange contracts that do not
involve U.S. Dollars have been converted to U.S. Dollars for disclosure purposes.
Foreign currency forward contracts, used to fix the dollar value of specific commitments and payments to international
vendors and the value of foreign currency denominated receipts, have maturities at various dates through 2020 as follows:
$990 million in 2010, $316 million in 2011, $145 million in 2012, $76 million in 2013 and $90 million thereafter.
Our foreign exchange contracts contain off-set, or netting provisions, to mitigate credit risk in the event of counterparty
default, including payment default and cross default. At December 31, 2009, these netting provisions effectively reduced
our exposure to approximately $35 million, which is spread across numerous highly rated counterparties.
Fair value hedges - We periodically enter into interest rate swap agreements with commercial and investment banks to
manage interest rates associated with our financing arrangements. The $575 million notional value of the interest rate
swaps that were outstanding at December 31, 2008 effectively converted $250 million of our 4.85% Notes due 2011,
which we repurchased in the fourth quarter of 2009, and $325 million of our 5.375% Notes due 2013 that were
outstanding at December 31, 2008 to variable-rate debt based on the six-month LIBOR. We terminated these interest rate
swap agreements in the first quarter of 2009, and collected cash of $37 million related to the early termination. In 2009,
we recorded $16 million of income as a reduction to interest expense related to the amortization of the gain on the
termination of our interest rate swaps, including $6 million of accelerated amortization related to the 4.85% Notes due
2011 as a result of their repurchase in the fourth quarter of 2009. We will include the amortization of the remaining $21
million gain as a reduction to interest expense over the remaining life of the related debt. There were no interest rate
swaps outstanding at December 31, 2009.
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