Raytheon 2010 Annual Report Download - page 90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pro forma financial information has not been provided for these acquisitions as they are not material either individually
or in the aggregate.
We funded each of the above acquisitions using cash on hand. The operating results of these businesses have been
included with our consolidated results as of the respective closing dates of the acquisitions. The purchase price of these
businesses has been allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess
purchase price recorded as goodwill. We completed these acquisitions to enhance our technology and cybersecurity
portfolio. Tax deductible goodwill related to these acquisitions totaled $76 million.
A rollforward of goodwill by segment was as follows:
(In millions)
Integrated
Defense
Systems
Intelligence
and
Information
Systems
Missile
Systems
Network
Centric
Systems
Space
and
Airborne
Systems
Technical
Services Total
Balance at December 31, 2008 $765 $1,575 $3,431 $2,362 $2,664 $865 $11,662
Adjustment for acquisitions — — — 254 — — 254
Effect of foreign exchange rates and other 2 — 1 — (1) 4 6
Balance at December 31, 2009 767 1,575 3,432 2,616 2,663 869 11,922
Adjustment for acquisitions — 125 — — — — 125
Effect of foreign exchange rates and other (2) (2) — — — 2 (2)
Balance at December 31, 2010 $765 $1,698 $3,432 $2,616 $2,663 $871 $12,045
Note 4: Discontinued Operations
In pursuing our business strategies we have divested certain non-core businesses, investments and assets when
appropriate. All residual activity relating to our previously-disposed businesses appears in discontinued operations.
We retained certain assets and liabilities of our previously disposed businesses. At December 31, 2010 and December 31,
2009, we had $41 million and $71 million, respectively, of assets primarily related to our retained interest in general
aviation finance receivables previously sold by Raytheon Aircraft Company (Raytheon Aircraft). At December 31, 2010
and December 31, 2009, we had $113 million and $57 million, respectively, of liabilities primarily related to non-income
tax obligations, certain environmental and product liabilities, various contract obligations and aircraft lease obligations.
We also have certain income tax obligations relating to these disposed businesses, which we include in our income tax
disclosures. In the fourth quarter of 2010, IRS appeals proceedings failed to resolve the federal excise tax dispute related
to the treatment of monthly management fees, and as a result, the IRS assessed Flight Options for excise taxes. In the
divestiture of Flight Options, Raytheon agreed to indemnify Flight Options in the event Flight Options was assessed and
paid these excise taxes. This indemnification obligation gave rise to our retained non-income tax obligation. In 2011,
Flight Options paid the assessment and we indemnified Flight Options given our indemnification obligation. As a result,
in the fourth quarter of 2010 we recorded a $39 million, net of the federal tax benefit, in discontinued operations. On
behalf of Flight Options, we intend to vigorously contest the matter through litigation and, if successful, we would be
entitled to recover substantially all of the amounts paid. We also retained certain U.K. pension assets and obligations for a
limited number of U.K. pension plan participants as part of the Raytheon Aircraft sale, which we include in our pension
disclosures.
As further described in Note 15: Income Taxes, during the year ended December 31, 2010, we recorded a $280 million
reduction in our unrecognized tax benefits, which included a decrease of $89 million in tax expense from discontinued
operations, including interest, primarily related to our previous disposition of Raytheon Engineers and Constructors
(RE&C).
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