Boeing 2005 Annual Report Download - page 28

Management’s Discussion and Analysis
program, and 50,657 shares were repurchased in stock swaps.
There were no share repurchases in 2003. There were no debt
issuances during 2005 and 2004. We issued approximately $1
billion of debt in 2003 to refinance corporate debt that matured
in 2002 and 2003. Additionally, in 2003, we received proceeds
of $1 billion under our September 13, 2002 shelf registration.
On July 26, 2004, BCC redeemed $1 billion face value of its
outstanding senior notes, which had a carrying value of $999
million. BCC recognized a net loss of $42 million related to this
early debt redemption (See Note 16). Debt maturities were $1.3
billion in 2005, $1.1 billion in 2004, and $1.8 billion in 2003.
Credit Ratings
Our credit ratings are summarized below:
Fitch Moody’s Standard &
Poor’s
Long-term:
Boeing/BCC A+ A3 A
Short-term:
Boeing/BCC F-1 P-2 A-1
On January 25, 2006, Moody’s placed both Boeing and BCC’s
credit ratings (Senior Unsecured Long-term ratings and Short-
term ratings) under review for possible upgrade.
Capital Resources
We and BCC have commercial paper programs that continue
to serve as significant potential sources of short-term liquidity.
Throughout 2005 and at December 31, 2005, neither we nor
BCC had any commercial paper borrowings outstanding.
We believe we have substantial borrowing capacity. Currently,
we have $3.0 billion ($1.5 billion exclusively available for BCC)
of unused borrowing limits under revolving credit line agree-
ments. (See Note 16). In November 2005, we rolled over the
364-day revolving credit facility, reducing it from $2.0 billion to
$1.5 billion. Currently, there is $750 million allocated to BCC.
We also rolled over the 5-year credit facility we established in
November 2003, maintaining the total size of $1.5 billion, of
which $750 million remains allocated to BCC. We also have
$1.0 billion that remains available from a shelf registration filed
with the SEC on March 23, 2004 and BCC has an additional
$3.4 billion available for issuance. We believe our internally gen-
erated liquidity, together with access to external capital
resources, will be sufficient to satisfy existing commitments and
plans, and also to provide adequate financial flexibility to take
advantage of potential strategic business opportunities should
they arise within the next year.
As of December 31, 2005, we were in compliance with the
covenants for our debt and credit facilities.
Disclosures about Contractual Obligations
and Commercial Commitments
The following table summarizes our known obligations to make
future payments pursuant to certain contracts as of December
31, 2005, and the estimated timing thereof.
Contractual obligations
Less than 1 – 3 3– 5 After 5
(Dollars in millions) Total 1 year years years years
Long-term debt (including
current portion) $10,489 $ 1,136 $ 2,018 $ 1,194 $ 6,141
Interest on debt* 6,859 638 1,067 913 4,241
Capital lease obligations 210 53 87 18 52
Operating lease obligations 1,995 283 381 260 1,071
Purchase obligations not
recorded on statement
of financial position:
Production related 58,532 24,599 22,060 9,169 2,704
Pension and other
post retirement
cash requirements 6,847 629 1,349 1,446 3,423
Purchase obligations
recorded on statement
of financial position 7,952 6,625 455 467 405
Total contractual
obligations $92,884 $33,963 $27,417 $13,467 $18,037
*Includes interest on variable rate debt calculated based on interest rates at
December 31, 2005. Variable rate debt was approximately 3% of our total debt at
December 31, 2005.
Purchase obligations Purchase obligations represent contrac-
tual agreements to purchase goods or services that are legally
binding; specify a fixed, minimum or range of quantities; specify
a fixed, minimum, variable, or indexed price provision; and
specify approximate timing of the transaction. In addition, the
agreements are not cancelable without a substantial penalty.
Long-term debt, interest on debt, capital leases, and operating
leases are shown in the above table regardless of whether they
meet the characteristics of purchase obligations. Purchase obli-
gations include amounts recorded as well as amounts that are
not recorded on the statements of financial position.
Approximately 24% of the purchase obligations disclosed
above are reimbursable to us pursuant to cost-type govern-
ment contracts.
Purchase obligations not recorded on the Consolidated
Statement of Financial Position
Pension and other postretirement benefits Pension cash require-
ments is an estimate of our minimum funding requirements,
pursuant to the ERISA regulations, although we may make
additional discretionary contributions. Estimates of other postre-
tirement benefits are based on both our estimated future bene-
fit payments and the estimated contribution to the one plan that
is funded through a trust.
Production related Production related purchase obligations
include agreements for production goods, tooling costs, elec-
tricity and natural gas contracts, property, plant and equipment,
and other miscellaneous production related obligations. The
most significant obligation relates to inventory procurement
contracts. We have entered into certain significant inventory
procurement contracts that specify determinable prices and
quantities, and long-term delivery timeframes. In addition, we
purchase raw materials on behalf of our suppliers. These agree-
ments require suppliers and vendors to be prepared to build
26 The Boeing Company and Subsidiaries