Boeing 2005 Annual Report Download - page 79

Notes to Consolidated Financial Statements
We also have a similar arrangement in place with the
Development Authority of Fulton County, Georgia where we are
both borrower and bondholder. Tax benefits associated with
these IRBs are the provision of a ten-year partial property tax
abatement.
The capital lease obligation and IRB asset are recorded net in
the Consolidated Statements of Financial Position pursuant to
FIN 39, Offsetting of Amounts Related to Certain Contracts. As
of December 31, 2005 and 2004, the assets and liabilities
associated with the City of Wichita IRBs were $1,416 and
$2,852, and the amounts associated with the Fulton County
IRBs were $17 and $19.
Other commitments
As of December 31, 2005 and 2004 we had $58,532 and
$44,676 of production related purchase obligations not
recorded on the Consolidated Statement of Financial Position.
Such obligations include agreements for production goods,
tooling costs, electricity and natural gas contracts, property,
plant and equipment, inventory procurement contracts, and
other miscellaneous production related obligations. As of
December 31, 2005, the amounts of production related pur-
chase obligations for each of the next five years were as fol-
lows: $24,599 in 2006, $14,826 in 2007, $7,234 in 2008,
$5,429 in 2009, and $3,740 in 2010.
Financing commitments related to aircraft on order, including
options, scheduled for delivery through 2012 totaled $13,496
and $6,661 as of December 31, 2005 and 2004. We anticipate
that not all of these commitments will be utilized and that we
will be able to arrange for third-party investors to assume a
portion of the remaining commitments, if necessary.
As of December 31, 2005 and 2004, future lease commitments
on aircraft and other commitments not recorded on the
Consolidated Statements of Financial Position totaled $371
and $483. These lease commitments extend through 2020,
and our intent is to recover these lease commitments through
sublease arrangements. As of December 31, 2005 and 2004,
Accounts payable and other liabilities included $76 and $89
attributable to adverse commitments under these lease
arrangements.
In conjunction with signing a definitive agreement for the sale of
new aircraft (Sale Aircraft), we have entered into specified-price
trade-in commitments with certain customers that give them
the right to trade in their used aircraft for the purchase of Sale
Aircraft. The total contractual trade-in value was $1,395 and
$1,167 as of December 31, 2005 and 2004. Based on the
best market information available at the time, it was probable
that we would be obligated to perform on trade-in commit-
ments with net amounts payable to customers totaling $72 and
$116 as of December 31, 2005 and 2004. The estimated fair
value of trade-in aircraft related to probable contractual trade-in
commitments was $50 and $91 as of December 31, 2005 and
2004. Probable losses of $22 and $25 have been charged to
Cost of products and were included in Accounts payable and
other liabilities as of December 31, 2005 and 2004.
On March 31, 2005, we executed a Purchase and Sale
Agreement to sell certain investments in technology related
funds and partnerships of $63 with related capital commitment
obligations of $76. During 2005, we have closed the sale on
investments of $50 reducing the remaining commitment obliga-
tions for those being sold to $13. (See Note 12 for details of
the sale.)
McDonnell Douglas Corporation insured its executives with
Company Owned Life Insurance (COLI), which are life insur-
ance policies with a cash surrender value. Although we do not
use COLI currently, these obligations from the merger with
McDonnell Douglas Corporation are still a commitment at this
time. We have loans in place to cover costs paid or incurred to
carry the underlying life insurance policies. During the third
quarter of 2005, we terminated 4 out of 5 outstanding COLI
policies. The termination had no material impact on the
Consolidated Statements of Operations in 2005. As of
December 31, 2005 and 2004, the cash surrender value was
$259 and $1,468 and the total loans were $252 and $1,356.
As we have the right to offset the loans against the cash sur-
render value of the policies, we present the net asset in Other
assets on the Consolidated Statements of Financial Position as
of December 31, 2005 and 2004.
Commitments for the future purchase of capital assets unpaid
at year end were $1,132 and $959 for the years ended
December 31, 2005 and 2004. The majority of these commit-
ments relate to the development of the Large Cargo Freighter,
787 buildup, and the purchase of computing servers.
Note 22 - Significant Group Concentrations of Risk
Credit risk
Financial instruments involving potential credit risk are predomi-
nantly with commercial aircraft customers and the U.S.
Government. Of the $15,252 in Accounts receivable and
Customer financing included in the Consolidated Statements of
Financial Position as of December 31, 2005, $9,711 related to
commercial aircraft customers ($221 of Accounts receivable
and $9,490 of Customer financing) and $2,797 related to the
U.S. Government. Of the $9,490 of aircraft customer financing,
$8,917 related to customers we believe have less than invest-
ment-grade credit. AirTran Airways, United, and AMR
Corporation were associated with 18%, 11% and 12%,
respectively, of our aircraft financing portfolio. Financing for air-
craft is collateralized by security in the related asset, and histor-
ically we have not experienced a problem in accessing such
collateral.
As of December 31, 2005, off-balance sheet financial instru-
ments described in Note 21 predominantly related to commer-
cial aircraft customers. $12,045 of financing commitments
related to aircraft on order including options related to cus-
tomers we believe have less than investment-grade credit.
The Boeing Company and Subsidiaries 77