Boeing 2005 Annual Report Download - page 62

Notes to Consolidated Financial Statements
Note 7 - Inventories
Inventories at December 31 consisted of the following:
2005 2004
Long-term contracts in progress $«14,194 $«12,999
Commercial aircraft programs 7,745 6,072
Commercial spare parts, used aircraft,
general stock materials and other,
net of reserves 2,235 1,890
24,174 20,961
Less advances and progress billings (16,234) (14,453)
$«««7,940 $««6,508
As of December 31, 2004 we reclassified performance based
payments and payments in excess of inventoriable costs con-
sisting of ($3,044) of long-term contracts in progress and $783
of advances and progress billings from Inventories to Advances
and billings in excess of related costs on our Consolidated
Statements of Financial Position. (See Note 14)
Included in long-term contracts in progress inventories at
December 31, 2005, and 2004, are Delta program inventories
of $1,000 and $900, respectively, that are not currently recov-
erable from existing orders; however, based on the Mission
Manifest (estimated quantities and timing of launch missions for
existing and anticipated contracts), we believe we will recover
these costs. These costs include deferred production costs
and unamortized tooling described below.
As a normal course of our Commercial Airplanes segment pro-
duction process, our inventory may include a small quantity of
airplanes that are completed but unsold. As of December 31,
2005 and 2004, the value of completed but unsold aircraft in
inventory was insignificant. Inventory balances included $234
subject to claims or other uncertainties primarily relating to the
A-12 program as of December 31, 2005 and 2004. See Note
24.
Included in commercial aircraft program inventory and directly
related to the sales contracts for the production of aircraft are
amounts paid or credited in cash or other consideration (early
issued sales consideration), to airline customers totaling $1,080
and $665 as of December 31, 2005 and 2004. As of
December 31, 2005 and 2004, the amount of early issue sales
consideration, net of advance of deposits, included in commer-
cial aircraft program inventory amounted to $194 and $123,
which related to one financially troubled customer; however, we
believe these amounts are fully recoverable as of December 31,
2005.
Deferred production costs represent commercial aircraft pro-
grams and integrated defense programs inventory production
costs incurred on in-process and delivered units in excess of
the estimated average cost of such units. As of December 31,
2005 and 2004, all significant excess deferred production costs
or unamortized tooling costs are recoverable from existing firm
orders for the 777 program. The Delta program costs are not
currently recoverable from existing orders; however based on
the Mission Manifest (estimated quantities and timing of launch
missions for existing and anticipated contracts) we believe we
will recover these costs. The deferred production costs and
unamortized tooling included in Commercial Airplane’s 777 pro-
gram and IDS’ Delta program inventory are summarized in the
following table:
2005 2004
Deferred production costs:
777 Program $683 $703
Delta II & IV Programs 271 221
Unamortized tooling:
777 Program 411 485
Delta II & IV Programs 194 257
As of December 31, 2005 and 2004, the balance of deferred
production costs and unamortized tooling related to commer-
cial aircraft programs, except the 777 program, was insignifi-
cant relative to the programs’ balance-to-go cost estimates.
During the years ended December 31, 2005 and 2004,
Commercial Airplanes purchased $102 and $298 of used air-
craft. Used aircraft in inventories totaled $66 and $162 as of
December 31, 2005 and 2004.
When our Commercial Airplanes segment is unable to immedi-
ately sell used aircraft, it may place the aircraft under an oper-
ating lease. It may also finance the sale of new or used aircraft
with a short-term note receivable. The carrying amount of the
Commercial Airplanes segment used aircraft under operating
leases and aircraft sales financed with note receivables
included as a component of Customer Financing totaled $640
and $958 as of December 31, 2005 and 2004.
During 2002 we were selected by the US Air Force (USAF) to
supply 100 767 Tankers and entered into a preliminary agree-
ment with the USAF for the procurement of the 100 Tankers.
On January 14, 2005 we announced our plan to recognize pre-
tax charges totaling $275 related to the USAF 767 Tanker pro-
gram. The charge, which was a result of our quarter and
year-end reviews, reflected our updated assessment of secur-
ing the specific USAF 767 Tanker contract that was being
negotiated, given the continued delay and then likely re-com-
petition of the contract. As a result, as of December 31, 2004,
we expensed $179 (Commercial Airplanes) and $47 (IDS)
related to the USAF 767 Tanker contract for Commercial air-
craft programs and Long-term contracts in progress, which
was included in Cost of products. As of December 31, 2005,
there were no additional costs incurred related to the 767
United States Air Force Tanker program.
Note 8 - Divestitures
On February 28, 2005 we completed the stock sale of Electron
Dynamic Devices Inc. (EDD) to L-3 Communications. EDD was
a separate legal entity wholly owned by us. The corresponding
net assets of the entity were $45 and a net pre-tax gain of $25
was recorded in the Launch and Orbital Systems (L&OS) seg-
ment of IDS from the sale of the net assets. In addition, there
was a related pre-tax loss of $68 recorded in Accounting differ-
ences/eliminations for net pension and other postretirement
benefit curtailments and settlements.
On August 2, 2005 we completed the sale of the Rocketdyne
Propulsion and Power (Rocketdyne) business to United
60 The Boeing Company and Subsidiaries