1.0.0.3falseCommitments and Contingenciesfalse1$falsefalseSharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli020lll_CommitmentsAndContingenciesAbstractlllfalsenadurationstringCommitments and Contingencies.falsefalsefalsefalsefalsetruefalsefalsefalse1falsefalse00falsefalseCommitments and Contingencies.false31us-gaap_CommitmentsAndContingenciesDisclosureTextBlockus-gaaptruenadurationstringNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 19 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
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<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff; text-align: left">
<tr>
<td width="5%"></td>
<td width="95%"></td>
</tr>
<tr valign="top">
<td>
<b><font style="font-family: 'Times New Roman', Times">19.  </font></b>
</td>
<td>
<b><font style="font-family: 'Times New Roman', Times">Commitments
and Contingencies</font></b>
</td>
</tr>
</table>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff">
<b><i><font style="font-family: 'Times New Roman', Times">Non-Cancelable
Operating Leases</font></i></b>
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
The Company leases certain facilities and equipment under
agreements expiring at various dates through 2028. Certain
leases contain renewal options or escalation clauses providing
for increased rental payments based upon maintenance, utility
and tax increases. No lease agreement imposes a restriction on
the Company’s ability to pay dividends, engage in debt or
equity financing transactions, or enter into further lease
agreements.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
The following table presents future minimum payments under
non-cancelable operating leases with initial or remaining terms
in excess of one year at December 31, 2009.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="67%"> </td><!-- colindex=01 type=maindata -->
<td width="2%"> </td><!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=02 type=lead -->
<td width="7%" align="right"> </td><!-- colindex=02 type=body -->
<td width="1%" align="left"> </td><!-- colindex=02 type=hang1 -->
<td width="3%"> </td><!-- colindex=03 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=03 type=lead -->
<td width="7%" align="right"> </td><!-- colindex=03 type=body -->
<td width="1%" align="left"> </td><!-- colindex=03 type=hang1 -->
<td width="3%"> </td><!-- colindex=04 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=04 type=lead -->
<td width="5%" align="right"> </td><!-- colindex=04 type=body -->
<td width="1%" align="left"> </td><!-- colindex=04 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
<b>Real Estate</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
<b>Equipment</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
<b>Total</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="10" align="center" valign="bottom">
<b>(in millions)</b>
</td>
<td>
 
</td>
</tr>
<tr style="line-height: 3pt; font-size: 1pt">
<td> 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
2010
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
151
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
23
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
174
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
2011
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
147
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
16
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
163
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
2012
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
100
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
12
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
112
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
2013
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
77
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
7
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
84
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
2014
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
67
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
6
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
73
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Thereafter
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
166
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
23
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
189
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Total minimum payments required
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
708
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
87
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
795
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Less: Sublease rentals under non-cancelable leases
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
25
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
—
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
25
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td style="border-top: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Net minimum payments required
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
  683
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
  87
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
  770
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 1pt">
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td style="border-top: 3px double #000000">
 
</td>
<td>
 
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
Rent expense, net of sublease income, was $170 million for
2009, $166 million for 2008 and $162 million for 2007.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff">
<b><i><font style="font-family: 'Times New Roman', Times">Letters
of Credit</font></i></b>
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
The Company enters into standby letters of credit with financial
institutions covering performance and financial guarantees
pursuant to contractual arrangements with certain customers. The
Company had total
outstanding letters of credit aggregating to $360 million,
of which, $32 million reduces the amount available to the
Company under the Revolving Credit Facility at December 31,
2009, and $372 million, of which, $60 million reduced
the amount of available borrowings under the revolving credit
facility at December 31, 2008. These letters of credit may
be drawn upon in the event of the Company’s nonperformance.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff">
<b><i><font style="font-family: 'Times New Roman', Times">Guarantees</font></i></b>
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
The Company, from time to time, enters into contractual
guarantees that arise in connection with its business
acquisitions, dispositions, and other contractual arrangements
in the normal course of business.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
In connection with the Company’s acquisition of MAPPS in
2005, the Company acquired a 47.5% interest in FAST Holdings
Limited (FAST), a joint venture corporation. FAST has been
contracted to provide and operate training facilities and
equipment for the United Kingdom’s Astute
Class Submarine Training Service program. The Company has
guaranteed 50% of certain bank debt borrowed by FAST to finance
its activities on this program. At December 31, 2009, the
Company’s guarantee amounted to $46 million. The
Company will be released from the guarantee upon customer
acceptance of all contract deliverables, which is expected to
occur no later than 2010.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
The Company has two existing real estate lease agreements, which
include residual guarantee amounts, expiring on August 31,
2010 and are accounted for as operating leases. On or before the
lease expiration date, the Company can exercise options under
the lease agreements to either renew the leases, purchase both
properties for $28 million, or sell both properties on
behalf of the lessor (the “Sale Option”). If the
Company elects the Sale Option, the Company must pay the lessor
a residual guarantee amount of $23 million for both
properties, on or before the lease expiration date. In addition,
at the time both properties are sold, the Company must pay the
lessor a supplemental rent payment equal to the gross sales
proceeds in excess of the residual guarantee, provided that such
amount shall not exceed $5 million. For these real estate
lease agreements, if the gross sales proceeds are less than the
sum of the residual guarantee amount and the supplemental rent
payment, the Company is required to pay a supplemental rent
payment to the extent the reduction in the fair value of the
properties is demonstrated by an independent appraisal to have
been caused by the Company’s failure to properly maintain
the properties. The aggregate residual guarantee amounts equal
$23 million and are included in the future minimum payments
under non-cancelable real estate operating lease payments
relating to the expiration dates of such leases.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
The Company has a contract to provide and operate for the
U.S. Air Force (USAF) a full-service training facility,
including simulator systems adjacent to a USAF base in Oklahoma.
The Company acted as the construction agent on behalf of the
third-party owner-lessors for procurement and construction for
the simulator systems, which were completed and delivered in
August 2002. The Company, as lessee, entered into operating
lease agreements for a term of 15 years for the simulator
systems with the owner-lessors. At the end of the lease term,
the Company may elect to purchase the simulator systems at fair
market value, which can be no less than $7 million and no
greater than $21 million. If the Company does not elect to
purchase the simulator systems on the date of expiration
(July 15, 2017), the Company shall pay to the lessor, as
additional rent, $3 million and return the simulator
systems to the lessors.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff">
<b><i><font style="font-family: 'Times New Roman', Times">U.S.
and Foreign Government Procurement Regulations</font></i></b>
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
A substantial majority of the Company’s revenues are
generated from providing products and services under legally
binding agreements, or contracts, with U.S. Government and
foreign government customers. U.S. Government contracts are
subject to extensive legal and regulatory requirements, and,
from time to time, agencies of the U.S. Government
investigate whether such contracts were and are being conducted
in accordance with these requirements. The Company is currently
cooperating with the U.S. Government on several
investigations from which civil, criminal or administrative
proceedings could result and give rise to fines, penalties,
compensatory and treble damages, restitution
<font style="white-space: nowrap">and/or</font>
forfeitures. The Company does not currently anticipate that any
of these investigations will have a material adverse effect,
individually or in the aggregate, on its consolidated financial
position, results of operations or cash flows. However, under
U.S. Government regulations, an indictment of the Company
by a federal grand jury could result in the Company being
suspended for a period of time from eligibility for awards of
new government contracts or in a loss of export privileges. A
conviction could result in debarment from contracting with the
federal government for a specified term. In addition, all of the
Company’s U.S. Government contracts: (1) are
subject to audit and various pricing and cost controls,
(2) include standard provisions for termination for the
convenience of the U.S. Government or for default, and
(3) are subject to cancellation if funds for contracts
become unavailable. Foreign government contracts generally
include comparable provisions relating to terminations for
convenience and default, as well as other procurement clauses
relevant to the foreign government.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff">
<b><i><font style="font-family: 'Times New Roman', Times">Environmental
Matters</font></i></b>
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff">
Management continually assesses the Company’s obligations
with respect to applicable environmental protection laws,
including those obligations assumed in connection with certain
business acquisitions. While it is difficult to determine the
timing and ultimate cost to be incurred by the Company in order
to comply with these laws, based upon available internal and
external assessments, with respect to those environmental loss
contingencies of which management is aware, the Company believes
that, after considering amounts accrued there are no
environmental loss contingencies that, individually or in the
aggregate, would be material to the Company’s consolidated
results of operations. The Company accrues for these
contingencies when it is probable that a liability has been
incurred and the amount of the liability can be reasonably
estimated.
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<b><i><font style="font-family: 'Times New Roman', Times">Litigation
Matters</font></i></b>
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The Company has been subject to and is involved in litigation,
government investigations, proceedings, claims or assessments
and various contingent liabilities incidental to its businesses,
including those specified below. Furthermore, in connection with
certain business acquisitions, the Company has assumed some or
all claims against, and liabilities of, the acquired business,
including both asserted and unasserted claims and liabilities.
In accordance with the accounting standard for contingencies,
the Company records a liability when management believes that it
is both probable that a liability has been incurred and the
Company can reasonably estimate the amount of the loss.
Generally, the loss is recorded at the amount the Company
expects to resolve the liability. The estimated amounts of
liabilities recorded for pending and threatened litigation is
disclosed in Note 8. Amounts recoverable from insurance
contracts or third parties are recorded as assets when deemed
probable. At December 31, 2009, the Company did not record
any amounts for recoveries from insurance contracts or third
parties in connection with the amount of liabilities recorded
for pending and threatened litigation. Legal defense costs are
expensed as incurred. The Company believes it has recorded
adequate provisions for its litigation matters. The Company
reviews these provisions quarterly and adjusts these provisions
to reflect the impact of negotiations, settlements, rulings,
advice of legal counsel and other information and events
pertaining to a particular matter. While it is reasonably
possible that an unfavorable outcome may occur in one or more of
the following matters, unless otherwise stated below, the
Company believes that it is not probable that a loss has been
incurred in any of these matters. An estimate of loss or range
of loss is disclosed for a particular litigation matter when
such amount or amounts can be reasonably estimated and no loss
has been accrued. The Company believes that any damage amounts
claimed in the specific matters discussed below are not
meaningful indicators of potential liability. Although the
Company believes that it has valid defenses with respect to
legal matters and investigations pending against it, litigation
is inherently unpredictable, including those that are expected
to be resolved with jury trials, for which outcomes are
difficult to predict. Therefore, it is possible that the
financial position, results of operations or cash flows of the
Company could be materially adversely affected in any particular
period by the unfavorable resolution of one or more of these or
other contingencies.
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<i>Kalitta Air.</i> On January 31, 1997, a predecessor of
Kalitta Air filed a lawsuit in the U.S. District Court for
the Northern District of California (the trial court) asserting,
among other things, negligence and negligent misrepresentation
against Central Texas Airborne Systems, Inc. (CTAS), a
predecessor to L-3 Integrated Systems, in connection with work
performed by a predecessor to CTAS to convert two Boeing 747
aircraft from passenger configuration to cargo freighters. The
work was performed using Supplemental Type Certificates (STCs)
issued in 1988 by the Federal Aviation Administration (FAA). In
1996, following completion of the work, the FAA issued an
airworthiness directive with respect to the STCs that
effectively grounded the aircraft. On August 11, 2000, the
trial court granted CTAS’ motion for summary judgment as to
negligence, dismissing that claim. In January 2001, after a
ruling by the trial court that excluded certain evidence from
trial, a jury rendered a unanimous defense verdict in favor of
CTAS on the negligent misrepresentation claim. On
December 10, 2002, the U.S. Court of Appeals for the
Ninth Circuit (the Court of Appeals) reversed the trial
court’s decisions as to summary judgment and the exclusion
of evidence, and remanded the case for a new trial on both the
negligence and negligent misrepresentation claims. The retrial
ended on March 2, 2005 with a deadlocked jury and mistrial.
On July 22, 2005, the trial court granted CTAS’ motion
for judgment as a matter of law as to negligence, dismissing
that claim, and denied CTAS’ motion for judgment as a
matter of law as to negligent misrepresentation. On
October 8, 2008, the Court of Appeals reversed the trial
court’s dismissal of the negligence claim and affirmed the
trial court’s ruling as to the negligent misrepresentation
claim. As a result, the case was remanded to the trial court to
reconsider the negligence claim and for further proceedings on
the negligent misrepresentation claim. The trial court held a
new hearing on CTAS’ motion to dismiss the negligence claim
on April 30, 2009, after which it determined to take the
matter under advisement. The case is currently scheduled to go
to a third trial on November 1, 2010. The parties have
participated in court-ordered mediations from time to time, and
are expected to participate in future court-ordered mediations
prior to trial, but to date such mediations have not resulted in
a mutually acceptable resolution of this matter. In connection
with these mediations, Kalitta Air has claimed it may seek
damages at the third trial of between $430 million and
$900 million, including between $200 million and
$240 million of pre-judgment interest. CTAS’ insurance
carrier has accepted defense of this matter and has retained
counsel, subject to a reservation of rights by the insurer to
dispute its obligations under the applicable insurance policies
in the event of a finding against L-3. The Company believes that
it has meritorious defenses to the claims asserted and the
damages sought and intends to defend itself vigorously.
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<i>Korean Lot II Program.</i> On April 4, 2005,
Lockheed Martin Corporation (Lockheed) filed a lawsuit in the
U.S. District Court for the Northern District of Georgia
alleging misappropriation of proprietary information and breach
of a license agreement. The complaint alleges that L-3
Integrated Systems (L-3 IS) is in breach of its license
agreement with Lockheed and is infringing on Lockheed’s
intellectual property rights as a result of its performance of a
subcontract awarded to L-3 IS for the Korean Lot II
program. On May 21, 2009, a jury found in favor of Lockheed
and awarded $30 million on the misappropriation claim,
approximately $7 million on the breach of license agreement
claim, plus legal fees and expenses. On July 2, 2009,
Lockheed filed a motion with the court seeking a final judgment,
approximately $17 million in legal fees and expenses and an
injunction prohibiting L-3’s further use of the
intellectual property that was the basis of the jury’s
award. On August 3, 2009, L-3 IS filed a motion for
judgment in its favor notwithstanding the verdict and opposing
the relief sought by Lockheed in its July 2nd motion. The court
held a hearing on the motions on September 2, 2009. On
August 28, 2009, L-3 IS filed another motion seeking
dismissal or a retrial of the case on various grounds. The court
has ordered further briefing by the parties with respect to the
issues raised in the August 28th motion and has
advised the parties that it will resolve these issues before it
considers the matters raised in the other outstanding motions.
The Company believes that the verdict and the damages awarded
are inconsistent with the law and evidence presented, and
intends to appeal in the event of an adverse decision on the
motions.
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<i>Aircrew Training and Rehearsal Support (ATARS)
Investigation.</i> Following a lawsuit filed by Lockheed on
April 6, 2006 in the U.S. District Court for the
Middle District of Florida against the Company and certain
individuals related to the ATARS II Program (which was settled
in November 2007), the Company received Grand
Jury subpoenas in November 2006 and December 2007 in connection
with an investigation being conducted by the United States
Attorney for the Middle District of Florida, Orlando Division.
The subpoenas request the production of documents related to
Lockheed’s allegations or produced in the civil litigation.
The Company is cooperating fully with the U.S. Government.
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<i>Titan Government Investigation.</i> In October 2002, The
Titan Corporation (Titan) received a grand jury subpoena from
the Antitrust Division of the DoJ requesting the production of
documents relating to information technology services performed
for the U.S. Air Force at Hanscom Air Force Base in
Massachusetts and Wright-Patterson Air Force Base in Ohio. Titan
was informed that other companies who have performed similar
services had received subpoenas as well. The Company acquired
Titan in July 2005. On September 20, 2006, counsel for the
Company was informed by the New York Field Office of the
DoJ’s Criminal Antitrust Division that it was considering
indictment. Additionally, a former Titan employee received a
letter from the DoJ indicating that he was a target of the
investigation. In December 2008, the DoJ contacted the Company
to arrange additional employee interviews concerning a teaming
agreement relating to the Wright-Patterson Air Force Base
procurement. In January 2010, counsel for the Company was again
informed by the New York Field Office that it was considering
indictment. If the Field Office recommends indictment then,
under normal DoJ procedures, Titan (now known as
<font style="white-space: nowrap">L-3</font>
Services, Inc.) will be afforded an opportunity to make a
presentation to the Criminal Antitrust Division in
Washington, D.C. before the DoJ acts on the recommendation.
It is not known whether an indictment of L-3 Services or any of
its current or former employees will occur. If it does occur, it
is possible that L-3 Services could be suspended or debarred
from conducting business with the U.S. Government. The
Company is cooperating fully with the U.S. Government.
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<i>CyTerra Government Investigation.</i> Since November 2006,
CyTerra has been served with civil and Grand Jury subpoenas by
the DoD Office of the Inspector General and the DoJ and has been
asked to facilitate employee interviews. The Company is
cooperating fully with the U.S. Government. The Company
believes that it is entitled to indemnification for any course
of defense related to this matter out of, and has made a claim
against, a $15 million escrow fund established in
connection with the Company’s acquisition of CyTerra in
March 2006.
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<i>Bashkirian Airways.</i> On July 1, 2004, lawsuits were
filed on behalf of the estates of 31 Russian children in the
state courts of Washington, Arizona, California, Florida, New
York and New Jersey against Honeywell, Honeywell TCAS, Thales
USA, Thales France, the Company and Aviation
Communications & Surveillance Systems (ACSS), which is
a joint venture of L-3 and Thales. The suits relate to the crash
over southern Germany of Bashkirian Airways Tupelov TU 154M
aircraft and a DHL Boeing 757 cargo aircraft. On-board the
Tupelov aircraft were 9 crew members and 60 passengers,
including 45 children. The Boeing aircraft carried a crew of
two. Both aircraft were equipped with Honeywell/ACSS Model 2000,
Change 7 Traffic Collision and Avoidance Systems (TCAS). Sensing
the other aircraft, the on-board DHL TCAS instructed the DHL
pilot to descend, and the Tupelov on-board TCAS instructed the
Tupelov pilot to climb. However, the Swiss air traffic
controller ordered the Tupelov pilot to descend. The Tupelov
pilot disregarded the on-board TCAS and put the Tupelov aircraft
into a descent striking the DHL aircraft in midair at
approximately 35,000 feet. All crew and passengers of both
planes were lost. Investigations by the National Transportation
Safety Board after the crash revealed that both TCAS units were
performing as designed. The suits allege negligence and strict
product liability based upon the design of the units and the
training provided to resolve conflicting commands and seek
approximately $315 million in damages, including
$150 million in punitive damages. The Company’s
insurers have accepted defense of the matter and retained
counsel, subject to a reservation of rights by the insurers to
dispute their obligations under the applicable insurance
policies in the event of an adverse finding. The matters were
consolidated in the U.S. District Court for the District of
New Jersey, which has dismissed the actions on the basis of
forum non conveniens. The plaintiffs re-filed a complaint on
April 23, 2007 with the Barcelona Court’s Registry in
Spain. The trial for this matter was completed on April 22,
2009, and the parties are awaiting the court’s decision.
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<i>Gol Airlines.</i> A complaint was filed on November 7,
2006 in the U.S. District Court for the Eastern District of
New York against ExcelAire, Joseph Lepore, Jan Paul Paladino,
and Honeywell. On October 23, 2007, an amended complaint
was filed to include Lockheed, Raytheon, Amazon Technologies and
ACSS. The complaints relate to the September 29, 2006
airplane crash over Brazil of a Boeing
<font style="white-space: nowrap">737-800</font>
operated by GOL Linhas Aereas Inteligentes, S.A. and an Embraer
600 business jet operated by ExcelAire. The complaints allege
that ACSS designed the Traffic Collision and Avoidance System
(TCAS) on the ExcelAire jet, and assert claims of negligence,
strict products liability and breach of warranty against ACSS
based on the design of the TCAS and the instructions provided
for its use. The complaints seek unspecified monetary damages,
including punitive damages. The Company’s insurers have
accepted defense of this matter and have retained counsel,
subject to a reservation of rights by the insurers to dispute
their obligations under the applicable insurance policies in the
event of an adverse finding. On July 2, 2008, the District
Court dismissed the actions on the basis of forum non conveniens
on the grounds that Brazil was the location of the accident and
is more convenient for witnesses and document availability. On
December 2, 2009, the U.S. Court of Appeals for the
Second Circuit upheld this decision. Some of the plaintiffs
re-filed their complaints in the Lower Civil Court in the
Judicial District of Peixoto de Azevedo in Brazil on
July 3, 2009.
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