Boeing 2007 Annual Report Download - page 38

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Management’s Discussion and Analysis
Credit Ratings
Our credit ratings are summarized below:
Standard &
Fitch Moody’s Poor’s
Long-term:
Boeing/BCC A+ A2 A+
Short-term:
Boeing/BCC F1 P-1 A-1
On September 12, 2007, Fitch Ratings revised its ratings out-
look to positive from stable, citing continuation of strong orders
and production ramp-up of large commercial aircraft, in addi-
tion to an over-funded status of our pension plans, debt reduc-
tion and stronger than expected cash flows. The ratings were
reaffirmed at A+ for long-term borrowings and F1 for short-
term borrowings. On January 16, 2008, Fitch Ratings changed
their outlook on the A+ rating to stable from positive, citing the
impact of delays in the 787 program.
Capital Resources
We and BCC have commercial paper programs that continue
to serve as significant potential sources of short-term liquidity.
Throughout 2007 and at December 31, 2007, neither we nor
BCC had any commercial paper borrowings outstanding.
We believe we have substantial borrowing capacity. Currently,
we have $3,000 million ($1,500 million exclusively available for
BCC) of unused borrowing on revolving credit line agreements.
In 2007, we renewed the 364-day revolving credit facility and
the 5-year credit facility, of which $500 million and $1,000 mil-
lion is allocated to BCC. BCC has an aggregate of $3,421 mil-
lion available for issuance from shelf registrations filed with the
SEC, which are due to expire in November 2008. We believe
our internally generated liquidity, together with access to
external capital resources, will be sufficient to satisfy existing
commitments and plans, and also to provide adequate finan-
cial flexibility to take advantage of potential strategic business
opportunities should they arise within the next year.
We and Lockheed have agreed to make available to ULA a line
of credit in the amount of up to $200 million 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, 2007.
In accordance with Statement of Financial Accounting
Standards No. 158,
Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans—an amendment of
FASB Statements No. 87, 88, 106 and 132(R)
(SFAS 158), we
recognize the funded status of our defined benefit pension and
other postretirement plans, with a corresponding after-tax
adjustment to Accumulated other comprehensive loss. The
2007 annual remeasurement of our pension and other post-
retirement plans resulted in a net $3,441 million increase in
Shareholders’ equity.
As of December 31, 2007, 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, 2007, 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) $««««8,114 $«««««746 $««1,197 $««2,090 $««4,081
Interest on debt* 5,607 507 910 684 3,506
Pension and other
post retirement
cash requirements 7,403 675 1,441 1,549 3,738
Capital lease obligations 103 19 22 22 40
Operating lease
obligations 1,086 221 297 158 410
Purchase obligations
not recorded on
statement of
financial position 104,023 37,922 40,785 18,281 7,035
Purchase obligations
recorded on statement
of financial position 10,827 9,829 598 396 4
Total contractual
obligations $137,163 $49,919 $45,250 $23,180 $18,814
*Includes interest on variable rate debt calculated based on interest rates at
December 31, 2007. Variable rate debt was approximately 3% of our total debt
at December 31, 2007.
Income Tax Obligations
As of December 31, 2007, our total liability for income taxes
payable, including uncertain tax positions, was $1,374 million,
of which $253 million we expect to pay in the next twelve
months. We are not able to reasonably estimate the timing
of future cash flows related to the remaining $1,121 million.
Our income tax obligations are excluded from the table above.
See Note 4.
Pension and Other Postretirement Benefits
Pension cash requirements are based on an estimate of our
minimum funding requirements, pursuant to ERISA regulations,
although we may make additional discretionary contributions.
Estimates of other postretirement benefits are based on both
our estimated future benefit payments and the estimated con-
tributions to a single plan that is funded through a trust.
Purchase Obligations
Purchase obligations represent contractual 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
11% of the purchase obligations disclosed above are reim-
bursable to us pursuant to cost-type government contracts.
The Boeing Company and Subsidiaries