Raytheon 2014 Annual Report Download - page 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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delivered, damages and other monetary relief. The Tribunal reserved ruling on costs and on the quantification of interest
payable to RSL for a later date.
On September 15, 2014, the UKBA filed a challenge to the award in the London High Court. RSL is vigorously opposing
such challenge. The payment of amounts awarded to RSL is now pending resolution of the challenge. Due to the inherent
uncertainties of arbitration and litigation, no amounts regarding this matter were recorded in our financial results for the year
ended December 31, 2014.
On June 29, 2012 and July 13, 2012, we received a contracting officer’s final decision (COFD) for 2004 and 2005 incurred
costs at SAS. The COFDs demand a total payment of $241 million for costs, interest and penalties associated with several
issues, the largest of which relates to specific research and development and capital projects undertaken by SAS between
2000 and 2005. To date, no COFDs have been provided for 2000 to 2003 periods at SAS on these issues. The Government
alleges that the costs incurred on the projects should have been charged directly to U.S. Government contracts rather than
through indirect rates and that these costs should not be recoverable. We strongly disagree with the Government's position.
We have requested a deferment of the payment and in February and May 2013, we filed complaints in the U.S. COFC
challenging the 2004 and 2005 COFDs, respectively. Due to the inherent uncertainties of litigation, we cannot estimate a
range of potential loss. We believe that we appropriately charged the disputed costs based on government accounting standards
and applicable precedent and properly disclosed our approach to the Government. We also believe that in many cases, the
statute of limitations has run on the issues. Based upon the foregoing, we do not expect the results of the COFDs to have a
material impact on our financial position, results of operations or liquidity.
In addition, various other claims and legal proceedings generally incidental to the normal course of business are pending or
threatened against, or initiated by, us. We do not expect any of these proceedings to result in any additional liability or gains
that would materially affect our financial position, results of operations or liquidity. In connection with certain of our legal
matters, we may be entitled to insurance recovery for qualified legal costs. We do not expect any insurance recovery to have
a material impact on the financial exposure that could result from these matters.
Product Warranty—We provide for product warranties in conjunction with certain product sales for which we recognize
revenue upon delivery.
Activity related to product warranty accruals was as follows:
(In millions) 2014 2013 2012
Beginning balance $ 30 $ 33 $ 38
Provisions for warranties 93 5
Warranty services provided (7)(6)(10)
Ending balance $ 32 $ 30 $ 33
We account for warranty provision costs incurred under our long-term contracts using the cost-to-cost measure of progress
as contracts costs, as the estimation of these costs is integral in determining the price of the related long-term contracts. The
table above excludes these costs.
Note 11: Stockholders’ Equity
The changes in shares of our common stock outstanding were as follows:
(In millions) 2014 2013 2012
Beginning balance 314.5 328.1 338.9
Stock plans activity 1.4 2.4 5.8
Stock repurchases (8.6)(16.0)(16.6)
Ending balance 307.3 314.5 328.1
On May 27, 2010, our stockholders approved the Raytheon 2010 Stock Plan pursuant to which we may grant restricted stock
awards, restricted stock units, stock grants, stock options and stock appreciation rights.