Raytheon 2012 Annual Report Download - page 80

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COMMITMENTS AND CONTINGENCIES
Environmental Matters—We are involved in various stages of investigation and cleanup related to remediation of various
environmental sites. Our estimate of the liability of total environmental remediation costs includes the use of a discount rate
and takes into account that a portion of these costs is eligible for future recovery through the pricing of our products and
services to the U.S. Government. We consider such recovery probable based on government contracting regulations and our
long history of receiving reimbursement for such costs, and accordingly have recorded the estimated future recovery of these
costs from the U.S. Government within contracts in process. Our estimates regarding remediation costs to be incurred were
as follows at December 31:
(In millions, except percentages) 2012 2011
Total remediation costs—undiscounted $ 202 $ 227
Weighted-average risk-free rate 5.6% 5.6%
Total remediation costs—discounted $ 131 $ 152
Recoverable portion 86 105
We also lease certain government-owned properties and are generally not liable for remediation of preexisting environmental
contamination at these sites; as a result, we generally do not provide for these costs in our consolidated financial statements.
Due to the complexity of environmental laws and regulations, the varying costs and effectiveness of alternative cleanup
methods and technologies, the uncertainty of insurance coverage and the unresolved extent of our responsibility, it is difficult
to determine the ultimate outcome of environmental matters; however, we do not expect any additional liability to have a
material adverse effect on our financial position, results of operations or liquidity.
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 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, 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.