Boeing 2005 Annual Report Download - page 63

Notes to Consolidated Financial Statements
Technologies Corporation for cash proceeds of approximately
$700 under an asset purchase agreement. This divestiture
includes assets and sites in California, Alabama, Mississippi,
and Florida. The Rocketdyne business primarily develops and
builds rocket engines and provides booster engines for the
space shuttle and the Delta family as well as propulsion sys-
tems for missile defense systems. We recorded the sale in the
quarter ending September 30, 2005, and the 2005 net pre-tax
gain of approximately $578, predominantly in the L&OS seg-
ment. In addition, we recorded a related pre-tax loss of $200
for estimated pension and postretirement curtailments and set-
tlements in the fourth quarter of 2005 in our Other segment.
On June 16, 2005, we completed the sale of substantially all of
the assets at our Commercial Airplanes facilities in Wichita,
Kansas and Tulsa and McAlester, Oklahoma under an asset
purchase agreement to a new entity which was subsequently
named Spirit Aerosystems, Inc. (Spirit) and is owned by Onex
Partners LP. Transaction consideration given to us included
cash of approximately $900, together with the transfer of cer-
tain liabilities and long-term supply agreements that provide us
with ongoing cost savings. The consolidated net loss on this
sale recorded in 2005 was $287, including pension and postre-
tirement impacts. We recognized a loss of $103 in 2005 in the
Consolidated Statement of Operations as Gain on dispositions,
net, of which $68 was recognized by the Commercial Airplanes
segment and $35 was recognized as Accounting
differences/eliminations and Unallocated expense. The remain-
ing loss of $184 related to estimated pension and postretire-
ment curtailments and settlements, was recorded in our Other
segment in the third quarter of 2005.
See Note 21 for discussion of the environmental indemnifica-
tion provisions of these agreements.
The following table summarizes the asset and liability balances
related to the Rocketdyne and Wichita/Tulsa divestitures for
2005:
Wichita/
Rocketdyne Tulsa
Assets
Accounts receivable $ 62
Inventory 72 $ 467
Property, plant and equipment 96 523
Other assets 3 38
Prepaid pension expense 228 250
$ 461 $ 1,278
Liabilities
Accounts payable $ 14 $ 48
Employment and other 13 46
Environmental 12
Accrued retiree health care liability 28 66
$ 67 $ 160
Note 9 - Discontinued Operations - Commercial Financial
Services
On May 24, 2004, Boeing Capital Corporation (BCC) entered
into a purchase and sale agreement with General Electric
Capital Corporation (GECC) to sell substantially all of the assets
related to its Commercial Financial Services (CFS) business and
the final asset sale closed on December 27, 2004. The assets
sold to GECC consisted of leases and financing arrangements
which had a carrying value of $1,872 as of May 31, 2004.
Part of the purchase and sale agreement with GECC includes a
loss sharing arrangement for losses that may exist at the end
of the initial financing terms of the transferred portfolio assets,
or, in some instances, prior to the end of the financing term,
such as certain events of default and repossession. The loss
sharing arrangement provides that cumulative net losses (if any)
are to be shared between BCC and GECC in accordance with
the following formula: (i) with respect to the first $150 of cumu-
lative net losses, BCC is liable to GECC for 80% of the amount
thereof (in such event GECC will bear 20% of such losses); (ii)
with respect to cumulative net losses between $150 and $275,
BCC is liable to GECC for 100% of such additional cumulative
net losses; and (iii) if cumulative losses exceed $275, GECC
bears 100% of the loss risk above $275. These provisions
effectively limit BCC’s exposure to any losses to $245. In the
event there are cumulative net gains on the portfolio, GECC is
required to make an earn-out payment to BCC in an amount
equal to 80% of such cumulative net gain.
Liability under the loss sharing arrangement was as follows for
the years ended December 31:
2005 2004
Accrued liability at beginning of year $90
Increase in reserve 25 $90
Payments made to GECC (34)
Accrued liability at end of year $81 $90
Operating results of the discontinued operations for the years
ended December 31 were as follows:
2005 2004 2003
Revenues $ 3 $96 $229
Income from discontinued operations 16 51
Provision for income tax (6) (18)
Income from discontinued operations,
net of taxes $10 $33
Net (loss) gain on disposal of
discontinued operations $(12) $66
Benefit (provision) for income taxes 5 (24)
Net (loss) gain on disposal of
discontinued operations, net of taxes $ (7) $42
The Boeing Company and Subsidiaries 61