Raytheon 2011 Annual Report Download - page 77

69
Environmental remediation costs expected to be incurred are:
(In millions)
2012
2013
2014
2015
2016
Thereafter
$ 48
26
16
13
12
112
Financing Arrangements and Other—We issue guarantees and banks and surety companies issue, on our behalf, letters of
credit and surety bonds to meet various bid, performance, warranty, retention and advance payment obligations of us or our
affiliates. These instruments expire on various dates through 2022. Additional guarantees of project performance for which
there is no stated value also remain outstanding. The stated values outstanding consisted of the following at December 31,
2011 and December 31, 2010:
(In millions)
Guarantees
Letters of Credit
Surety Bonds
2011
$ 256
1,275
233
2010
$ 281
1,067
213
Included in guarantees and letters of credit described above were $109 million and $240 million, respectively, at December 31,
2011, and $134 million and $256 million, respectively, at December 31, 2010, related to our Thales-Raytheon Systems Co.
Ltd. (TRS) joint venture. We provide these guarantees and letters of credit to TRS and other affiliates to assist these entities
in obtaining financing on more favorable terms, making bids on contracts and performing their contractual obligations. While
we expect these entities to satisfy their loans, project performance and other contractual obligations, their failure to do so may
result in a future obligation to us. At December 31, 2011 and December 31, 2010, we had an estimated liability of $6 million
and $9 million, respectively, related to these guarantees and letters of credit. We periodically evaluate the risk of TRS and
other affiliates failing to satisfy their loans, project performance and meet other contractual obligations described above. At
December 31, 2011, we believe the risk that TRS and other affiliates will not be able to perform or meet their obligations is
minimal for the foreseeable future based on their current financial condition. All obligations were current at December 31,
2011.
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, 2011.
We have entered into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to obtaining
orders for our products and services from certain customers in foreign countries. At December 31, 2011, the aggregate amount
of our offset agreements had an outstanding notional value of approximately $5 billion. To the extent we have entered into
purchase obligations that satisfy our offset agreements, those amounts are included in the Contractual Obligations table on
page 67. These agreements are designed to return economic value to the foreign country by requiring the contractor to engage
in activities supporting local defense or commercial industries, promoting a balance of trade, developing in-country technology
capabilities, or addressing other local development priorities. Offset agreements may be satisfied through activities that do
not require a direct cash payment, including transferring technology, providing manufacturing, training and other consulting
support to in-country projects, and the purchase by third parties (e.g., our vendors) of supplies from in-country vendors. These
agreements may also be satisfied through our use of cash for activities such as subcontracting with local partners, purchasing
supplies from in-country vendors, providing financial support for in-country projects, and making investments in local ventures.
Such activities may also vary country-by-country depending upon requirements as dictated by their governments. We typically
do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied
against our offset agreements are based on negotiations with the customers and typically require cash outlays that represent
only a fraction of the notional value in the offset agreements. Offset programs usually extend over several or more years and
may provide for penalties in the event we fail to perform in accordance with offset requirements. We have historically not