Raytheon 2015 Annual Report Download - page 82

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72
government contracting. U.S. government investigations often take years to complete and many result in no adverse action
against us. Our final allowable incurred costs for each year are also subject to audit and have from time to time resulted in
disputes between us and the U.S. government with litigation resulting at the Court of Federal Claims (COFC) or the Armed
Services Board of Contract Appeals (ASBCA) or their related courts of appeals. In addition, the DoJ has, from time to time,
convened grand juries to investigate possible irregularities by us. We also provide products and services to customers outside
of the U.S. and those sales are subject to local government laws, regulations, and procurement policies and practices. Our
compliance with such local government regulations or any applicable U.S. government regulations (e.g., the Foreign Corrupt
Practices Act (FCPA) and the International Traffic in Arms Regulations (ITAR)) may also be investigated or audited. Other
than as specifically disclosed herein, we do not expect these audits, investigations or disputes to have a material effect on our
financial position, results of operations or liquidity, either individually or in the aggregate.
We do not currently expect the economic downturn in Greece to have a material impact on our financial position, results of
operations or liquidity. We have less than 1% of our sales in Greece and less than $100 million in U.S. dollar denominated
contracts in process. We currently believe all of these amounts to be collectible; however, if circumstances change, we could
be required to write off some or all of the contracts in process balance.
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.
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, 2015 and December 31, 2014 about our market risk exposure
associated with changing interest 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,
2015 and December 31, 2014.
Principal payments and interest rate detail for long-term debt by contractual maturity dates as of December 31, 2015 and
December 31, 2014, respectively, were as follows:
(In millions, except
percentages) 2016 2017 2018 2019 2020 Thereafter Total Fair Value
Fixed-rate debt $ — $ — $ 591 $ — $ 1,500 $ 3,292 $ 5,383 $ 5,826
Average interest rate — — 6.549% — 3.550% 4.229% 4.295%
(In millions, except
percentages) 2015 2016 2017 2018 2019 Thereafter Total Fair Value
Fixed-rate debt $ — $ — $ — $ 591 $ — $ 4,792 $ 5,383 $ 5,936
Average interest rate — — — 6.549% — 4.017% 4.295%
In addition, the aggregate notional amount of the outstanding foreign currency forward contracts was $1,076 million and $926
million at December 31, 2015 and December 31, 2014, respectively. The net notional exposure of these contracts was
approximately $117 million and $57 million at December 31, 2015 and December 31, 2014, respectively.
For foreign currency forward contracts designated and qualifying for hedge accounting, we record the effective portion of the