Raytheon 2012 Annual Report Download - page 97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
89
(In millions) Year Ended December 31, 2010
Before-
Tax
Amount
Tax
(Expense)
Benefit
Net-of-Tax
Amount
Foreign exchange translation $ (18)$ — $(18)
Cash flow hedges and interest rate locks (42) 15 (27)
Unrealized gain (loss) on investments, and other, net (13) — (13)
Pension and other employee benefit plans:
Net change in initial net obligation 4 (1) 3
Prior service (cost) credit arising during period (15) 5 (10)
Net loss arising during period (968) 339 (629)
Amortization of prior service cost (credit) included in net periodic pension
expense (32) 11 (21)
Amortization of net actuarial loss included in net income 601 (211) 390
Effect of exchange rates 5 (2) 3
Pension and other employee benefit plans, net (405) 141 (264)
Other comprehensive income (loss) $ (478) $ 156 $ (322)
Accumulated other comprehensive loss (AOCL) consisted of the following at December 31:
(In millions) 2012 2011
Pension and other employee benefit plans $(7,833)$(7,008)
Foreign exchange translation 60 25
Cash flow hedges and interest rate locks (5)(13)
Unrealized gain (loss) on investments, and other, net (10)(5)
Total $(7,788)$(7,001)
The defined benefit pension and other employee benefit plans is shown net of tax benefits of $4,218 million and $3,768 million
at December 31, 2012 and December 31, 2011, respectively. The cash flow hedges and interest rate locks are shown net of
tax benefits of $2 million and $7 million at December 31, 2012 and December 31, 2011, respectively. The unrealized gains
on investments and other are shown net-of-tax benefits of $4 million and $3 million at December 31, 2012 and December 31,
2011, respectively. We expect approximately $2 million of after-tax net unrealized gains on our cash flow hedges at
December 31, 2012, to be reclassified into earnings at then-current values over the next twelve months as the underlying
hedged transactions occur.
Material amounts reclassified out of AOCL were related to amortization of net actuarial loss associated with our pension and
other employee benefit plans and were $942 million, $795 million and $601 million before tax in 2012, 2011 and 2010,
respectively, and $612 million, $516 million and $390 million net of tax in 2012, 2011 and 2010, respectively. This component
of AOCL is included in the calculation of net periodic benefit cost (see Note 14: Pension and Other Employee Benefits for
additional details).
Translation of Foreign Currencies—Assets and liabilities of foreign subsidiaries are translated at current exchange rates
and the effects of these translation adjustments are reported as a component of AOCL in equity. Deferred taxes are not
recognized for translation-related temporary differences of foreign subsidiaries as their undistributed earnings are considered
to be indefinitely reinvested. Income and expenses in foreign currencies are translated at the average exchange rate during
the period. Foreign exchange transaction gains and losses in 2012, 2011 and 2010 were not material.
Treasury Stock—During 2012, our Board of Directors authorized the retirement of all outstanding treasury shares directly
held by the Company. As a result, all outstanding treasury shares directly held by the Company were retired in the fourth
quarter of 2012, with an offsetting reduction in common stock for the par value and the remaining amount offset in additional
paid-in-capital. In addition, our Board of Directors authorized all future share repurchases to be retired immediately upon
repurchase. We account for treasury stock under the cost method. Upon retirement the excess over par value is charged against
additional paid-in capital. The remaining treasury stock activity relates primarily to stock-based compensation awards and
the related shares withheld to settle employee tax obligations. To conform to the current year presentations, all prior period