Raytheon 2012 Annual Report Download - page 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
100
Environmental remediation costs expected to be incurred are:
(In millions)
2013 $ 38
2014 18
2015 14
2016 12
2017 11
Thereafter 109
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 2023. 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:
(In millions) 2012 2011
Guarantees $ 255 $ 256
Letters of Credit 1,474 1,275
Surety Bonds 239 233
Included in guarantees and letters of credit described above were $108 million and $225 million, respectively, at December 31,
2012, and $109 million and $240 million, respectively, at December 31, 2011, related to our joint venture in TRS. 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, and meet their project performance and other contractual obligations, their failure to do so may result in a future
obligation to us. 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, 2012, 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, 2012. At December 31, 2012 and December 31, 2011, we had an
estimated liability of $4 million and $6 million, respectively, related to these guarantees and letters of credit.
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 System for the Vigilance of the Amazon (SIVAM) program being performed
by Network Centric Systems. Loan repayments by the Brazilian Government were current at December 31, 2012.
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, 2012, the aggregate amount
of our offset agreements had an outstanding notional value of approximately $5 billion. 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 been required to pay any such
penalties.
As a government contractor, we are subject to many levels of audit and investigation by the U.S. Government relating to our
contract performance and compliance with applicable rules and regulations. Agencies that oversee contract performance