Boeing 2006 Annual Report Download - page 59

The Boeing Company and Subsidiaries 57
Notes to Consolidated Financial Statements
Note 9 – Exit Activity and Divestitures
During August 2006, we decided that we would exit the
Connexion by Boeing high speed broadband communications
business. Our decision resulted in a pre-tax charge of $320,
which has been recognized in Loss/(gain) on dispositions/busi-
ness shutdown, net during 2006 as outlined below:
Contract termination costs 1$«142
Write-off of assets 2492
Early contract terminations 3(314)
Total $«320
1Included termination fees associated with operating leases as well as supplier
and customer costs
2Primarily included write-off of capital lease assets
3Primarily early terminations of capital lease obligations
As of December 31, 2006, $52 was recorded in Accounts
payable and other liabilities related to contract termination
costs, which we expect to pay in 2007 to complete the business
shutdown. The exit of the Connexion by Boeing business
resulted in cash expenditures of $177 during 2006.
On February 28, 2005, we completed the stock sale of Electron
Dynamic Devices Inc. (EDD) to L-3 Communications. EDD was
a separate legal entity wholly owned by us. The corresponding
net assets of the entity were $45 and a net pre-tax gain of
$25 was recorded in the Network and Space Systems (N&SS)
segment of IDS from the sale of the net assets. In addition,
there was a related pre-tax loss of $68 recorded in Accounting
differences/eliminations for net pension and other postretire-
ment benefit curtailments and settlements. In 2006, a $15 gain
was recorded for a subsequent purchase price adjustment on
the sale.
On August 2, 2005, we completed the sale of the Rocketdyne
Propulsion and Power (Rocketdyne) business to United
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 systems
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 N&SS segment. In
addition, we recorded a related pre-tax loss of $200 for esti-
mated pension and postretirement curtailments and settlements
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). Transaction considera-
tion given to us included cash of approximately $900, together
with the transfer of certain 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 postretirement 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 remaining loss of $184 related to
estimated pension and postretirement curtailments and
settlements, was recorded in our Other segment in the third
quarter of 2005. In 2006, a $15 gain was recorded for a
subsequent purchase price adjustment on the sale.
See Note 19 for discussion of the environmental indemnification
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 338
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
During 2004, BCC sold substantially all of the assets related to
its Commercial Financial Services business, which is reflected
as discontinued operations. Revenues were $3 and $96 for the
years ended December 31, 2005 and 2004.
Note 10 – Customer Financing
Customer financing at December 31 consisted of the following:
2006 2005
Aircraft financing
Notes receivable $1,790 $««2,292
Investment in sales-type/finance leases 2,914 3,036
Operating lease equipment, at cost,
less accumulated depreciation of
$913 and $881 4,159 4,617
Other equipment financing
Notes receivable 33 33
Operating lease equipment, at cost,
less accumulated depreciation of
$149 and $106 248 302
Less allowance for losses on receivables (254)(274)
$8,890 $10,006