Raytheon 2011 Annual Report Download - page 100

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
92
In 2001, we formed a joint venture, TRS, which we account for using the equity method. TRS is a system of systems integrator
and provides fully customized solutions through the integration of command and control centers, radars, and communication
networks. We record our share of the TRS income or loss and other comprehensive income (loss) as a component of cost of
sales and AOCL, respectively. We record losses beyond the carrying amount of the investment only when we guarantee
obligations of the investee or commit to provide the investee further financial support.
TRS has two major operating subsidiaries, one of which, Thales-Raytheon Systems Co. LLC (TRS LLC), we control and
consolidate and is a component of our NCS segment, and the other one, Thales-Raytheon Systems Company S.A.S. (TRS
SAS), which we account for using the equity method through our investment in TRS. Of the $80 million investment in TRS,
$79 million represents undistributed earnings at December 31, 2011. Our consolidated statements of operations includes net
income, which represents net income attributable to Raytheon Company and net income attributable to noncontrolling interests
in subsidiaries. Our primary noncontrolling interest relates to TRS LLC. TRS LLC formed a joint venture with TRS SAS
called Air Command Systems International S.A.S. (ACSI), for which TRS LLC performs work. TRS LLC had $70 million
of receivables due from ACSI.
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 we perform for the joint venture
as an operating activity.
Periodically we enter into other equity method investments which are not related to our core operations. We record the income
or loss from these investments as a component of other (income) expense. We record losses beyond the carrying amount of
the investment only when we guarantee obligations of the investee or commit to provide the investee further financial support.
Note 8: Derivative Financial Instruments
Our primary market exposures are to interest rates and foreign exchange rates and we use certain derivative financial instruments
to help manage these exposures. We execute these instruments with financial institutions we judge to be credit-worthy, and
the majority of our foreign currency forward contracts are denominated in currencies of major industrial countries.
The fair value amounts of asset derivatives included in other assets, net and liability derivatives included in other accrued
expenses in our consolidated balance sheets related to foreign currency forward contracts consisted of the following at
December 31:
(In millions)
Derivatives designated as hedging instruments
Derivatives not designated as hedging instruments
Total
Asset Derivatives
2011
$ 11
1
$ 12
2010
$ 32
13
$ 45
Liability Derivatives
2011
$ 17
5
$ 22
2010
$ 28
13
$ 41
We recognized the following pretax gains (losses) related to foreign currency forward contracts designated as cash flow
hedges:
(In millions)
Effective Portion
Gain (loss) recognized in AOCL
Gain (loss) reclassified from AOCL to net sales
Gain (loss) reclassified from AOCL to cost of sales
Amount excluded from effectiveness assessment and ineffective portion
Gain (loss) recognized in cost of sales
2011
$ —
1
9
—
2010
$ 4
1
31
—