Boeing 2006 Annual Report Download - page 60

58 The Boeing Company and Subsidiaries
Notes to Consolidated Financial Statements
The components of investment in sales-type/finance leases at
December 31 were as follows:
2006 2005
Minimum lease payments receivable $«4,475 $«4,778
Estimated residual value of leased assets 701 690
Unearned income (2,262)(2,432)
$«2,914 $«3,036
Interest rates on fixed-rate notes ranged from 5.99% to
11.42%, and interest rates on variable-rate notes ranged from
7.40% to 11.43%.
Aircraft financing operating lease equipment primarily includes
jet and commuter aircraft. At December 31, 2006 and 2005,
aircraft financing operating lease equipment included $259 and
$11 of equipment available for re-lease. At December 31, 2006
and 2005, we had firm lease commitments for $253 and $6 of
this equipment.
When our Commercial Airplanes segment is unable to immedi-
ately sell used aircraft, it may place the aircraft under an operating
lease. It may also finance the sale of new aircraft with a note
receivable. The carrying amount of the Commercial Airplanes
segment used aircraft under operating leases and aircraft sales
financed with notes receivable included as a component of cus-
tomer financing totaled $480 and $640 as of December 31, 2006
and 2005.
Impaired receivables and the allowance for losses on those
receivables consisted of the following at December 31:
2006 2005
Impaired receivables with no specific
impairment allowance $1,032 $1,008
Impaired receivables with specific
impairment allowance 74 503
Allowance for losses on
impaired receivables 20 51
The average recorded investment in impaired receivables as
of December 31, 2006, 2005 and 2004, was $1,191, $1,196,
and $1,940, respectively. Income recognition is generally
suspended for receivables at the date full recovery of income
and principal becomes doubtful. Income is recognized when
receivables become contractually current and performance is
demonstrated by the customer. Interest income recognized on
such receivables was $104, $90, and $118 for the years
ended December 31, 2006, 2005 and 2004, respectively.
The change in the allowance for losses on receivables for the
years ended December 31, 2006, 2005 and 2004, consisted of
the following:
Allowance for
Losses
Beginning balance – January 1, 2004 $(404)
Charge to costs and expenses (45)
Reduction in customer financing assets 46
Ending balance – December 31, 2004 (403)
Charge to costs and expenses (73)
Reduction in customer financing assets 202
Ending balance – December 31, 2005 $(274)
Charge to costs and expenses (32)
Reduction in customer financing assets 52
Ending balance – December 31, 2006 $(254)
Aircraft financing is collateralized by security in the related
asset. The value of the collateral is closely tied to commercial
airline performance and may be subject to reduced valuation
with market decline. Our financing portfolio has a concentration
of various model aircraft. Aircraft financing related to major
aircraft concentrations at December 31 were as follows:
2006 2005
717 Aircraft ($760 and $621 accounted
for as operating leases)* $2,595 $2,490
757 Aircraft ($904 and $958 accounted
for as operating leases)* 1,167 1,245
767 Aircraft ($201 and $309 accounted
for as operating leases) 740 910
MD-11 Aircraft ($555 and $580 accounted
for as operating leases)* 645 672
737 Aircraft ($550 and $705 accounted
for as operating leases) 583 796
*Out of production aircraft
We recorded charges related to customer financing asset
impairment in operating earnings, primarily as a result of
declines in projected future cash flows. These charges for the
years ended December 31 were as follows:
2006 2005 2004
BCC Segment $53 $33 $27
Other Boeing 710 2
$60 $43 $29
As of December 31, 2006, Northwest Airlines, Inc. (Northwest)
has filed for bankruptcy protection and the bankruptcy court
has approved the restructured terms of certain obligations
owed to us. At December 31, 2006 and 2005, Northwest