Boeing 2006 Annual Report Download - page 78

76 The Boeing Company and Subsidiaries
Notes to Consolidated Financial Statements
We have insurance coverage to respond to this
arbitration request and have notified responsible insurers.
On May 26, 2006, a group of these insurers filed a declaratory
judgment action in the Circuit Court of Cook County asserting
certain defenses to coverage and requesting a declaration of
their obligation under Boeing’s insurance and reinsurance poli-
cies relating to the Thuraya ICC arbitration. We believe the
insurers’ position lacks merit and intend to vigorously litigate
the coverage issue.
BSSI/Telesat Canada
On November 9, 2006, Telesat Canada and its insurers
served BSSI with an arbitration demand alleging breach of
contract, gross negligence, and willful misconduct in connection
with the constructive total loss of Anik F1, a model 702 satellite
manufactured by BSSI. Telesat and its insurers seek over $385
in damages and $10 in lost profits. On December 1, 2006, we
filed an action in the Ontario Superior Court of Justice, Ottawa,
Canada, to enjoin the arbitration. We believe that the claims
asserted by Telesat and its insurers lack merit, but we have
notified our insurance carriers of the demand.
BSSI/Superbird-6 Litigation
On December 1, 2006, BSSI was served with an arbitration
demand in subrogation brought by insurers for Space
Communications Corporation alleging breach of warranty,
breach of contract and gross negligence relating to the
Superbird-6 communications satellite, which suffered a low
perigee event shortly after launch in April 2004. The low orbit
allegedly damaged the satellite, and a subsequent decision to
de-orbit the satellite was made less than 12 months after
launch. The model 601 satellite was manufactured by BSSI and
delivered for launch by International Launch Services on an
Atlas launch vehicle. The insurers seek to recover in excess of
$215 from BSSI. We believe the insurers’ claims lack merit and
intend to vigorously defend against them.
Note 23 – Other Commitments and Contingencies
As of December 31, 2006 and 2005 we had $86,254 and
$58,532 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, 2006, the amounts of production related
purchase obligations for each of the next five years were as
follows: $34,926 in 2007, $20,988 in 2008, $14,088 in 2009,
$7,817 in 2010, and $4,123 in 2011.
Financing commitments related to aircraft on order, including
options, totaled $10,164 and $13,496 as of December 31, 2006
and 2005. 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.
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 $1,162 and
$1,395 as of December 31, 2006 and 2005. Based on the best
market information available at the time, it was probable that
we would be obligated to perform on trade-in commitments
with net amounts payable to customers totaling $19 and $72
as of December 31, 2006 and 2005. The estimated fair value of
trade-in aircraft related to probable contractual trade-in commit-
ments was $19 and $50 as of December 31, 2006 and 2005.
Probable losses of $22 have been charged to Cost of products
and were included in Accounts payable and other liabilities as
of December 31, 2005. These trade-in commitment agree-
ments have expiration dates from 2008 through 2015.
As of December 31, 2006 and 2005, future lease commitments
on aircraft and other commitments not recorded on the
Consolidated Statements of Financial Position totaled $323 and
$371. These lease commitments extend through 2020. As of
December 31, 2006, the future lease commitments on aircraft
for each of the next five years were as follows: $44 in 2007,
$47 in 2008, $25 in 2009, $20 in 2010, and $18 in 2011. Our
intent is to recover these lease commitments through sublease
arrangements. As of December 31, 2006 and 2005, Accounts
payable and other liabilities included $65 and $76 attributable
to adverse commitments under these lease arrangements.
We and Lockheed have agreed to make available to ULA a
line of credit in the amount of up to $200 each as may be
necessary from time to time to support ULA’s Expendable
Launch Vehicle business during the five year period following
December 1, 2006. ULA did not request any funds under the
line of credit as of December 31, 2006.
McDonnell Douglas Corporation insured its executives with
Company Owned Life Insurance (COLI), which are life insurance
policies with a cash surrender value. Although we do not
use COLI currently, these obligations from the merger with
McDonnell Douglas 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. As of December 31, 2006
and 2005, the cash surrender value was $288 and $259 and
the total loans were $279 and $252. As we have the right to
offset the loans against the cash surrender value of the policies,
we present the net asset in Other assets on the Consolidated
Statements of Financial Position as of December 31, 2006
and 2005.
The costs incurred and expected to be incurred in connection
with environmental remediation activities have not had, and are
not expected to have, a material adverse effect on us. With
respect to results of operations, related charges have averaged
less than 1% of historical annual revenues. Although not
considered probable or reasonably estimable at this time, it is
reasonably possible that we may incur additional remediation
charges because of regulatory complexities and the risk of