Raytheon 2011 Annual Report Download - page 80

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72
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market exposures are to interest rates and foreign exchange rates.
We generally supplement our working capital requirements with a combination of variable-rate short-term and fixed-rate long-
term financing. We enter into foreign currency forward contracts with commercial banks to fix the foreign currency exchange
rates on specific commitments and payments to vendors and customer receipts. We may enter into interest rate swap agreements
with commercial and investment banks to manage interest rates associated with our financing arrangements. The market-risk
sensitive instruments we use for hedging are entered into with commercial and investment banks and are directly related to a
particular asset, liability or transaction for which a firm commitment is in place.
The following tables provide information as of December 31, 2011 and December 31, 2010 about our market risk exposure
associated with changing interest and exchange rates. For long-term debt obligations, the table presents principal cash flows
by maturity date and average interest rates related to outstanding obligations. There were no interest rate swaps outstanding
at December 31, 2011 and December 31, 2010.
As of December 31, 2011
Principal Payments and Interest Rate Detail by Contractual Maturity Dates
(In millions, except percentages)
Long—Term Debt
Fixed-rate debt
Average interest rate
2012
$ —
—
2013
$ —
—
2014
$ 575
1.400%
2015
$ 400
1.625%
2016
$ —
—
Thereafter
$ 3,683
4.932%
Total
$ 4,658
4.21%
Fair Value
$ 5,121
As of December 31, 2010
Principal Payments and Interest Rate Detail by Contractual Maturity Dates
(In millions, except percentages)
Long—Term Debt
Fixed-rate debt
Average interest rate
2011
$ —
—
2012
$ —
—
2013
$ —
—
2014
$ —
—
2015
$ 400
1.625%
Thereafter
$ 3,258
4.962%
Total
$ 3,658
4.60%
Fair Value
$ 3,783
In addition, the aggregate notional amount of the outstanding foreign currency forward contracts was $941 million and $1,258
million at December 31, 2011 and December 31, 2010, respectively.
Unrealized gains of $12 million and $45 million were included in non-current assets and unrealized losses of $22 million and
$41 million were included in current liabilities at December 31, 2011 and December 31, 2010, respectively. For foreign
currency forward contracts designated and qualifying for hedge accounting, we record the effective portion of the gain or loss
on the derivative in accumulated other comprehensive loss, net of tax, and reclassify it into earnings in the same period or
periods during which the hedged revenue or cost of sales transaction affects earnings. Realized gains and losses resulting from
these cash flow hedges offset the foreign currency exchange gains and losses on the underlying assets or liabilities being
hedged. We believe our exposure due to changes in foreign currency rates is not material due to our hedging policy.