Boeing 2006 Annual Report Download - page 79

The Boeing Company and Subsidiaries 77
Notes to Consolidated Financial Statements
unidentified contamination. Although not considered probable,
should we incur remediation charges at the high level of the
range of potential exposure, the additional charges would be
less than 2% of historical annual revenues.
As part of the 2004 purchase and sale agreement with
General Electric Capital Corporation related to the sale of BCC’s
Commercial Financial Services business, we are involved in a
loss sharing arrangement for losses that may exist at the end
of the initial financing terms of transferred portfolio assets, or,
in some instances, prior to the end of the financing term, such
as certain events of default and repossession. The maximum
exposure to loss associated with the loss sharing arrangement
is $218. As of December 31, 2006 and 2005, the accrued
liability under the loss sharing arrangement was $78 and $81.
Due to lack of demand for the 717 and 757 airplanes, we have
concluded production of these airplanes. The last 717 and 757
airplanes were delivered in the second quarter of 2006 and
2005, respectively. The following table summarizes the termina-
tion liability remaining in Accounts payable and other liabilities.
December 31, Change in December 31,
Termination liability 2005 Payments Estimate Other* 2006
Supplier termination $239 $(190)$(4)$45
Production disruption
and shutdown
related 33
Pension/
postretirement
related 43 4 $(47)
Severance 19 (11) 1 9
Total $304 $(201)$«1 $(47)$57
*Represents transfer to prepaid pension expense.
The above liability was determined based on available information
and we make revisions to our estimates accordingly as new
information becomes available.
The Boeing-built NSS-8 satellite was declared a total loss due
to an anomaly during launch on January 30, 2007. The NSS-8
satellite was insured for $200. We believe the NSS-8 loss
was the result of an insured event and have so notified our
insurance carriers.
As of December 31, 2006, we have delivered 159 of the 190
C-17s ordered by the USAF, with final deliveries scheduled for
2009. Despite pending orders, which would extend deliveries
of the C-17 to mid-2009, it is reasonably possible that we will
decide in 2007 to suspend work on long-lead items from
suppliers and/or to complete production of the C-17 if further
orders are not received. We are still evaluating the full financial
impact of a production shutdown, including any recovery that
would be available from the government.
We have entered into standby letters of credit agreements
and surety bonds with financial institutions primarily relating
to the guarantee of future performance on certain contracts.
Contingent liabilities on outstanding letters of credit agreements
and surety bonds aggregated approximately $4,368 as of
December 31, 2006 and approximately $3,957 at
December 31, 2005.
Note 24 – Segment Information
We operate in five principal segments: Commercial Airplanes;
Precision Engagement and Mobility Systems, Network and
Space Systems, and Support Systems, collectively IDS; and
BCC. All other activities fall within the Other segment, principally
made up of Engineering, Operations and Technology (formerly,
Boeing Technology), Connexion by BoeingSM and our Shared
Services Group. On August 17, 2006, we announced that we
would exit the Connexion by BoeingSM high speed broadband
communications business having completed a detailed business
and market analysis. (See Note 9). Our primary profitability
measurements to review a segment’s operating results are
earnings from operations and operating margins. See page 45
for Summary of Business Segment Data, which is an integral
part of this Note.
Our Commercial Airplanes operation principally involves
development, production and marketing of commercial jet
aircraft and providing related support services, principally to
the commercial airline industry worldwide.
Our IDS operations principally involve research, development,
production, modification and support of the following products
and related systems: military aircraft, both land-based and
aircraft-carrier-based, including fighter, transport and attack
aircraft with wide mission capability, and vertical/short takeoff
and landing capability; helicopters and missiles, space systems,
missile defense systems, satellites and satellite launching
vehicles, and information and battle management systems.
Although some IDS products are contracted in the commercial
environment, the primary customer is the U.S. Government.
In 2006, we realigned IDS into three capabilities-driven
businesses: Precision Engagement and Mobility Systems,
Network and Space Systems, and Support Systems. As part
of the realignment, certain advanced systems and research
and development activities previously included in the Other
segment transferred to the new IDS segments. Business
segment data for all periods presented has been adjusted to
reflect the new segments.