Boeing 2005 Annual Report Download - page 77

Notes to Consolidated Financial Statements
Note 21 - Arrangements with Off-Balance Sheet Risk
We enter into arrangements with off-balance sheet risk in the
normal course of business, as discussed below. These
arrangements are primarily in the form of guarantees, EETCs
and ETC, and product warranties.
Third-party guarantees
The following tables provide quantitative data regarding our
third-party guarantees. The maximum potential payments rep-
resent a “worst-case scenario,” and do not necessarily reflect
our expected results. Estimated proceeds from collateral and
recourse represent the anticipated values of assets we could
liquidate or receive from other parties to offset our payments
under guarantees. The carrying amount of liabilities recorded
on the Consolidated Statements of Financial Position reflects
our best estimate of future payments we may incur as part of
fulfilling our guarantee obligations.
Estimated
Proceeds
Maximum from Carrying
Potential Collateral/ Amount of
As of December 31, 2005 Payments Recourse Liabilities*
Contingent repurchase
commitments $4,067 $4,059
Residual value guarantees 352 288 $115
Credit guarantees related to the
Sea Launch venture 490 294 196
Other credit guarantees 41 13 8
Performance guarantees 48 21 1
*Amounts included in Accounts payable and other liabilities
Estimated
Proceeds
Maximum from Carrying
Potential Collateral/ Amount of
As of December 31, 2004 Payments Recourse Liabilities*
Contingent repurchase
commitments
Residual value guarantees
Credit guarantees related to the
Sea Launch venture
Other credit guarantees
Performance guarantees
Equipment trust certificates
$3,751 $3,743
408 296 $212
510 306 204
60 19 10
64 21 1
28
*Amounts included in Accounts payable and other liabilities
Contingent repurchase commitments In conjunction with sign-
ing a definitive agreement for the sale of new aircraft (Sale
Aircraft), we have entered into contingent repurchase commit-
ments with certain customers wherein we agree to repurchase
the Sale Aircraft at a specified price, generally ten years after
delivery of the Sale Aircraft. Our repurchase of the Sale Aircraft
is contingent upon a future, mutually acceptable agreement for
the sale of additional new aircraft.
Residual value guarantees We have issued various residual
value guarantees principally to facilitate the sale of certain com-
mercial aircraft. Under these guarantees, we are obligated to
make payments to the guaranteed party if the related aircraft or
equipment fair values fall below a specified amount at a future
time. These obligations are collateralized principally by com-
mercial aircraft and expire in 3 to 13 years.
Credit guarantees related to the Sea Launch venture We have
issued credit guarantees to creditors of the Sea Launch ven-
ture, of which we are a 40% partner, to assist the venture in
obtaining financing. Under these credit guarantees, we are obli-
gated to make payments to a guaranteed party in the event
that Sea Launch does not make its loan payments. We have
substantive guarantees from the other venture partners, who
are obligated to reimburse us for their share (in proportion to
their Sea Launch ownership percentages) of any guarantee
payment we may make related to the Sea Launch obligations.
These guarantees expire within the next 10 years.
Other credit guarantees In addition, we have issued credit
guarantees, principally to facilitate the sale of commercial air-
craft. Under these arrangements, we are obligated to make
payments to a guaranteed party in the event that lease or loan
payments are not made by the original debtor or lessee. A sub-
stantial portion of these guarantees has been extended on
behalf of original debtors or lessees with less than investment-
grade credit. Our commercial aircraft credit-related guarantees
are collateralized by the underlying commercial aircraft. Current
outstanding credit guarantees expire within the next 10 years.
Performance guarantees We have outstanding performance
guarantees issued in conjunction with joint venture invest-
ments. Pursuant to these guarantees, we would be required to
make payments in the event a third-party fails to perform speci-
fied services. We have guarantees from the other venture part-
ners, who are obligated to reimburse us for a portion of any
guarantee payments we may make related to the performance
guarantee. Current performance guarantees expire within the
next 12 years.
Equipment trust certificate Relating to our ETC, we had poten-
tial obligations of $28 as of December 31, 2004 relating to
shortfall interest payments in the event that the interest rates in
the underlying agreements were reset below levels specified in
these agreements. These obligations would have ceased had
United defaulted on its interest payments to the trust. These
obligations were terminated in 2005.
Indemnifications Our sales agreement for EDD provides indem-
nification to L-3 Communications for third-party litigation and
damages relating to pre-closing environmental contamination.
The term of the indemnification is indefinite. Our sales agree-
ment for Rocketdyne contains similar indemnification provi-
sions. As it is impossible to assess whether there will be any
third-party litigation or damages in the future or the amounts
thereof, we cannot estimate the maximum potential amount of
future payments under these guarantees. Therefore, no liability
has been recorded.
The Boeing Company and Subsidiaries 75