Boeing 2006 Annual Report Download - page 38

decrease in Shareholders’ equity. This decrease does not affect
cash flows or the funded status of our benefit plans. The
covenants for our debt and credit facilities were amended to
exclude the impacts of SFAS No. 158.
As of December 31, 2006, we were in compliance with the
covenants for our debt and credit facilities.
Disclosures About Contractual Obligations
and Commercial Commitments
The following table summarizes our known obligations to
make future payments pursuant to certain contracts as of
December 31, 2006, and the estimated timing thereof.
Contractual Obligations
Less than 1-3 3-5 After 5
(Dollars in millions) Total 1 year years years years
Long-term debt
(including
current portion) $««««9,405 $««1,322 $««1,260 $««1,519 $««5,304
Interest on debt* 6,195 557 992 814 3,832
Pension and other
postretirement
cash requirements 7,330 675 1,432 1,549 3,674
Capital lease obligations 153 59 31 20 43
Operating lease
obligations 1,064 239 301 164 360
Purchase obligations not
recorded on statement
of financial position 86,254 34,926 35,076 11,940 4,312
Purchase obligations
recorded on statement
of financial position 10,632 9,394 518 344 376
Total contractual
obligations $121,033 $47,172 $39,610 $16,350 $17,901
*Includes interest on variable rate debt calculated based on interest rates at
December 31, 2006. Variable rate debt was approximately 3% of our total debt
at December 31, 2006.
Pension and Other Postretirement Benefits Pension cash
requirements is an estimate of our minimum funding require-
ments, pursuant to ERISA regulations, although we may make
additional discretionary contributions. Estimates of other post-
retirement benefits are based on both our estimated future
benefit payments and the estimated contribution to the one
plan that is funded through a trust.
Purchase Obligations Purchase obligations represent contrac-
tual agreements to purchase goods or services that are legally
binding; specify a fixed, minimum or range of quantities; specify
a fixed, minimum, variable, or indexed price provision; and
specify approximate timing of the transaction. In addition, the
agreements are not cancelable without substantial penalty.
Purchase obligations include amounts recorded as well as
amounts that are not recorded on the statements of financial
position. Approximately 16% of the purchase obligations dis-
closed above are reimbursable to us pursuant to cost-type
government contracts.
Purchase Obligations Not Recorded on the Consolidated
Statement of Financial Position Production related purchase
obligations not recorded on the Consolidated Statement of
Financial Position include agreements for production goods,
tooling costs, electricity and natural gas contracts, property, plant
and equipment, and other miscellaneous production related
obligations. The most significant obligation relates to inventory
procurement contracts. We have entered into certain significant
inventory procurement contracts that specify determinable prices
and quantities, and long-term delivery timeframes. In addition, we
purchase raw materials on behalf of our suppliers. These agree-
ments require suppliers and vendors to be prepared to build and
deliver items in sufficient time to meet our production schedules.
The need for such arrangements with suppliers and vendors
arises from the extended production planning horizon for many
of our products. A significant portion of these inventory commit-
ments is supported by firm contracts and/or has historically
resulted in settlement through reimbursement from customers
for penalty payments to the supplier should the customer not
take delivery. These amounts are also included in our forecasts
of costs for program and contract accounting. Some inventory
procurement contracts may include escalation adjustments. In
these limited cases, we have included our best estimate of the
effect of the escalation adjustment in the amounts disclosed in
the table above.
Industrial Participation Agreements We have entered into various
industrial participation agreements with certain customers out-
side of the U.S. to facilitate economic flow back and/or technol-
ogy transfer to their businesses or government agencies as the
result of their procurement of goods and/or services from us.
These commitments may be satisfied by our placement of
direct work or vendor orders for supplies, opportunities to bid
on supply contracts, transfer of technology or other forms of
assistance. However, in certain cases, our commitments may
be satisfied through other parties (such as our vendors) who
purchase supplies from our non-U.S. customers. We do not
commit to industrial participation agreements unless a contract
for sale of our products or services is signed. In certain cases,
penalties could be imposed if we do not meet our industrial
participation commitments. During 2006, we incurred no such
penalties. As of December 31, 2006, we have outstanding
industrial participation agreements totaling $7.7 billion that
extend through 2019. Purchase order commitments associated
with industrial participation agreements are included in the table
above. To be eligible for such a purchase order commitment
from us, a country outside the U.S. or customer must have
sufficient capability to meet our requirements and must be
competitive in cost, quality and schedule.
Purchase Obligations Recorded on the Consolidated Statement
of Financial Position Purchase obligations recorded on the
Consolidated Statement of Financial Position primarily include
accounts payable and certain other liabilities including accrued
compensation and dividends payable.
36 The Boeing Company and Subsidiaries
Management’s Discussion and Analysis