Boeing 2005 Annual Report Download - page 68

Notes to Consolidated Financial Statements
transaction as operating leases each with a term of seven
years and were recognizing rental income over the term of the
lease. As of December 31, 2004, the present value of the
remaining deferred lease income was $379, discounted at a
rate of 5.0%.
During April 2005, we received full repayment for the financing
arrangement from TRM. Additionally, we signed an agreement
to eliminate any ongoing obligations for TRM’s expenses effec-
tive April 28, 2005. As a result, during the second quarter of
2005, we were able to recognize the remaining deferred lease
income of $369 and repayment for the financing arrangement
of $42 as Revenue and charged the remaining net asset value
to Cost of services. This transaction resulted in earnings before
income taxes of $63 for the year ended December 31, 2005.
During 2001, we delivered four C-17 transport aircraft to the
United Kingdom Royal Air Force (UKRAF), which were
accounted for as operating leases. The lease term is seven
years, at the end of which the UKRAF has the right to purchase
the aircraft for a stipulated value, continue the lease for two
additional years or return the aircraft. Concurrent with the
negotiation of this lease, we, along with UKRAF, arranged to
assign the contractual lease payments to an independent finan-
cial institution. We received proceeds from the financial institu-
tion in consideration of the assignment of the future lease
receivables from the UKRAF. The assignment of lease receiv-
ables is non-recourse to us. The initial proceeds represented
the present value of the assigned total lease receivables dis-
counted at a rate of 6.6%. As of December 31, 2005 and
2004, the balance of $269 and $366 represented the present
value of the remaining deferred lease income.
Note 16 - Debt
We have $3,000 currently available under credit line agree-
ments. BCC is named a subsidiary borrower for up to $1,500
under these arrangements. Total debt interest incurred, includ-
ing amounts capitalized, was $713, $790, and $873 for the
years ended December 31, 2005, 2004 and 2003, respectively.
Interest expense recorded by BCC is reflected as a separate
line item on our Consolidated Statements of Operations, and is
included in earnings from operations. Total company interest
payments were $671, $722, and $775 for the years ended
December 31, 2005, 2004 and 2003, respectively. We continue
to be in full compliance with all covenants contained in our
debt or credit facility agreements, including those at BCC.
On June 6, 2002, BCC established a Euro medium-term note
program in the amount of $1,500. At December 31, 2005 and
2004, BCC had zero debt outstanding under the program such
that $1,500 would normally be available for potential debt
issuance. However, debt issuance under this program requires
that documentation, information and other procedures relating
to BCC and the program be updated within the prior twelve
months. In view of BCC’s cash position and other available
funding sources, BCC determined during 2004 that it was
unlikely they would need to use this program in the foreseeable
future. The program is thus inactive but available with updated
registration statements.
Short-term debt and current portion of long-term debt, con-
sisted of the following:
At December 31, 2005 At December 31, 2004
Consolidated BCC Consolidated BCC
Total Only Total Only
Senior Unsecured Debt Securities $1,015 $570 $1,131 $437
Capital lease obligations 54 45 71 53
Non-recourse debt and notes 39 4 36 4
Retail notes 77 77 62 62
Other notes 4 21
$1,189 $696 $1,321 $556
Debt consisted of the following:
December 31, December 31,
2005 2004
Boeing Capital Corporation debt:
Non-recourse debt and notes
3.560%–8.310% notes due through 2013 $ 80 $ 84
Senior debt securities
4.750%–7.380% due through 2013 4,367 4,441
Senior medium-term notes
4.760%–7.640% due through 2023 909 1,345
Capital lease obligations
1.670%–7.000% due through 2015 194 280
Retail notes
3.250%–6.350% due through 2013 772 874
Subtotal Boeing Capital Corporation debt $6,322 $7,024
Other Boeing debt:
Non-recourse debt and notes
Enhanced equipment trust $ 477 $ 509
Unsecured debentures and notes
200, 7.875% due Feb. 15, 2005 200
199, 0.000% due May 31, 2005* 195
300, 6.625% due Jun. 1, 2005 299
250, 6.875% due Nov. 1, 2006 250 250
175, 8.100% due Nov. 15, 2006 175 175
350, 9.750% due Apr. 1, 2012 349 349
600, 5.125% due Feb. 15, 2013 598 597
400, 8.750% due Aug.15, 2021 398 398
300, 7.950% due Aug. 15, 2024
(puttable at holder’s option on
Aug.15, 2012) 300 300
250, 7.250% due Jun. 15, 2025 247 247
250, 8.750% due Sep. 15, 2031 248 248
175, 8.625% due Nov. 15, 2031 173 173
400, 6.125% due Feb. 15, 2033 393 393
300, 6.625% due Feb. 15, 2038 300 300
100, 7.500% due Aug. 15, 2042 100 100
175, 7.875% due Apr. 15, 2043 173 173
125, 6.875% due Oct. 15, 2043 125 125
Senior medium-term notes
7.460% due through 2006 20 20
Capital lease obligations due through 2009 17 36
Other notes 62 89
Subtotal other Boeing debt $ 4,405 $ 5,176
Total debt $10,727 $12,200
*The $199 note due May 31, 2005, was a promissory note to
FlightSafety International for the purchase of its 50% interest in Alteon,
formerly FlightSafety Boeing Training International (FSBTI). The promis-
sory note carried a zero percent interest rate.
66 The Boeing Company and Subsidiaries