Raytheon 2011 Annual Report Download - page 30

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22
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 have completed 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 identified possible areas of concern involving certain practices
related to operations in a foreign jurisdiction where we do business. We voluntarily disclosed and shared the results of our
review with the Securities and Exchange Commission and the Department of Justice. 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.
On August 18, 2010, the U.K. Border Agency (UKBA) initiated arbitration proceedings in the London Court of International
Arbitration against Raytheon Systems Limited (RSL) in connection with the parties' dispute with respect to the UKBA's
termination of RSL for cause on a program. The UKBA claimed that RSL had failed to perform on certain key milestones
and other matters and that the UKBA was entitled to recovery of certain losses incurred and previous payments made to RSL.
In March 2011, the UKBA gave notice that it had presented a demand to draw on the approximately $80 million of letters of
credit provided by RSL upon the signing of the contract with the UKBA in 2007. At RSL's request, the Arbitration Tribunal
initially issued an interim order restraining the drawdown but, following a hearing on the issue, lifted the restraint and concluded
that any decision on the UKBA's right to call on the letters of credit is inextricably intertwined with the ultimate decision on
the merits in the arbitration. The Tribunal also preserved RSL's right to claim damages should RSL later establish that the
drawdown was not valid. To date, the UKBA has submitted claims in the arbitration for damages and clawback of previous
payments of approximately £415 million (approximately $645 million based on foreign exchange rates as of December 31,
2011) excluding any credit for capability delivered or draw on the letters of credit. RSL has submitted in the arbitration its
defenses to the UKBA claim as well as substantial counterclaims in the amount of approximately £500 million (approximately
$777 million based on foreign exchange rates as of December 31, 2011) against the UKBA for the collection of receivables
and damages.
RSL is pursuing vigorously the collection of all receivables for the program and damages in connection with the wrongful
termination and mounting a strong defense to the UKBA's alleged claims for losses and previous payments. We believe the
remaining receivables and other assets are probable of recovery in litigation or arbitration. We currently do not believe it is
probable that RSL is liable for losses, previous payments (which includes the $80 million related to the drawdown on the
letters of credit), clawback or other claims asserted by the UKBA. If we fail to collect the receivable balances or are required
to make payments against claims or other losses asserted by the UKBA in excess of the amounts we have recorded, it could
have a material adverse effect on our financial position, results of operations or liquidity. Arbitration hearings are scheduled
to commence in late 2012 and we expect to have a decision in 2013.
Additional information regarding arbitration with the UKBA is contained in “Commitments and Contingencies” within Item 7
and “Note 11: Commitments and Contingencies” within Item 8 of this Form 10-K.
In addition, various other claims and legal proceedings generally incidental to the normal course of business are pending or
threatened against us. While we cannot predict the outcome of these matters, in the opinion of management, any liability
arising from them will not have a material adverse effect on our financial position, results of operations or liquidity.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.