United Technologies 2012 Annual Report Download - page 75

Notes to Consolidated Financial Statements 2012 ANNUAL REPORT 73
The following is the expected maturity of commercial aero-
space industry assets and commitments as of December 31, 2012:
(DOLLARS IN MILLIONS) Committed 2013 2014 2015 2016 2017 Thereafter
Notes and leases receivable $ 584 $ 99 $ 99 $ 68 $ 44 $ 59 $ 215
Commercial aerospace financing commitments $ 3,237 $ 339 $ 785 $ 365 $ 464 $ 334 $ 950
Other commercial aerospace commitments 7,628 736 567 629 676 638 4,382
Collaboration partners’ share (2,027) (252) (287) (228) (193) (165) (902)
Total commercial commitments $ 8,838 $ 823 $ 1,065 $ 766 $ 947 $ 807 $ 4,430
Other commercial aerospace commitments include
amounts related to our agreement with Embraer, which we
announced on January 8, 2013, to power the next generation
Embraer E-Jet family.
In exchange for the increased ownership and collaboration
interests and intellectual property license, Pratt & Whitney paid
Rolls-Royce $1.5 billion at closing with additional payments due to
Rolls-Royce contingent upon each hour flown by the V2500-
powered aircraft in service as of June 29, 2012 during the fifteen
year period following closing of the purchase. These payments will
be capitalized as a collaboration intangible asset and amortized in
relation to the economic benefits received over the projected
remaining 30 year life of the V2500 program. The flight hour pay-
ments are included in other commercial aerospace commitments in
the table above.
Our financing obligations with customers are contingent
upon maintenance of certain levels of financial condition by the
customers. In addition, we have residual value and other guaran-
tees of $346 million as of December 31, 2012.
We have long-term aftermarket maintenance contracts with
commercial aerospace industry customers for which revenue is
recognized in proportion to actual costs incurred relative to total
expected costs to be incurred over the respective contract periods.
Billings, however, are typically based on factors such as engine
flight hours. The timing differences between the billings and the
maintenance costs incurred generates both deferred assets and
deferred revenues. Deferred assets under these long-term after-
market contracts totaled $391 million and $235 million at
December 31, 2012 and 2011, respectively, and are included in
“Other assets” in the accompanying Consolidated Balance Sheet.
Deferred revenues generated totaled $2,760 million and $1,708 mil-
lion at December 31, 2012 and 2011, respectively, and are
included in “Accrued liabilities” and “Other long-term liabilities” in
the accompanying Consolidated Balance Sheet.
The increases reflected above as of December 31, 2012,
as compared to December 31, 2011, primarily reflect the impacts of
the Goodrich acquisition and our consolidation of IAE. See Note 2
for further discussion related to acquisitions.
Reserves related to aerospace receivables and financing
assets were $210 million and $169 million at December 31, 2012
and 2011, respectively. Reserves related to financing commitments
and guarantees were $67 million and $73 million at December 31,
2012 and 2011, respectively.
NOTE 6: INVENTORIES & CONTRACTS IN PROGRESS
(DOLLARS IN MILLIONS) 2012 2011
Raw materials $ 1,861 $ 1,321
Work-in-process 4,151 3,175
Finished goods 3,205 3,078
Contracts in progress 7,354 6,899
16,571 14,473
Less:
Progress payments, secured by lien, on U.S.
Government contracts (274) (422)
Billings on contracts in progress (6,760) (6,254)
$ 9,537 $ 7,797
Raw materials, work-in-process and finished goods are net
of valuation reserves of $866 million and $884 million as of
December 31, 2012 and 2011, respectively. As of December 31,
2012 and 2011, inventory also includes capitalized contract devel-
opment costs of $823 million and $776 million, respectively, related
to certain aerospace programs. These capitalized costs will be
liquidated as production units are delivered to the customer. The
capitalized contract development costs within inventory principally
relate to capitalized costs on Sikorsky’s CH-148 contract with the
Canadian Government. The CH-148 is a derivative of the H-92, a
military variant of the S-92 helicopter.
Contracts in progress principally relate to elevator and
escalator contracts and include costs of manufactured compo-
nents, accumulated installation costs and estimated earnings on
incomplete contracts.
Our sales contracts in many cases are long-term contracts
expected to be performed over periods exceeding twelve months.
At both December 31, 2012 and 2011, approximately 66% of total
inventories and contracts in progress have been acquired or manu-
factured under such long-term contracts, a portion of which is not
scheduled for delivery within the next twelve months.