Boeing 2007 Annual Report Download - page 59

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Notes to Consolidated Financial Statements
Note 8 – Customer Financing
Customer financing at December 31 consisted of the following:
2007 2006
Aircraft financing
Notes receivable $÷÷770 $1,790
Investment in sales-type/finance leases 2,676 2,914
Operating lease equipment, at cost,
less accumulated depreciation
of $1,024 and $913 3,601 4,159
Other equipment financing
Notes receivable 115 33
Operating lease equipment, at cost,
less accumulated depreciation
of $90 and $149 138 248
Less allowance for losses on receivables (195) (254)
$«7,105 $8,890
Interest rates on fixed-rate notes ranged from 5.50% to 10.33%,
and interest rates on variable-rate notes ranged from 6.92%
to 10.90%.
The components of investment in sales-type/finance leases at
December 31 were as follows:
2007 2006
Minimum lease payments receivable $«3,814 $«4,475
Estimated residual value of leased assets 751 701
Unearned income (1,889) (2,262)
$«2,676 $«2,914
Aircraft financing operating lease equipment primarily includes
jet and commuter aircraft. At December 31, 2007 and 2006,
aircraft financing operating lease equipment included $86 and
$259 of equipment available for re-lease. At December 31,
2007 and 2006, we had firm lease commitments for $86 and
$253 of this equipment.
When our Commercial Airplanes segment is unable to immedi-
ately sell used aircraft, it may place the aircraft under an oper-
ating 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 customer financing totaled $156 and $480 as of
December 31, 2007 and 2006.
Impaired receivables and the allowance for losses on those
receivables consisted of the following at December 31:
2007 2006
Impaired receivables with no
specific impairment allowance $197 $1,032
Impaired receivables with specific
impairment allowance 39 74
Allowance for losses on impaired receivables 13 20
The average recorded investment in impaired receivables as of
December 31, 2007, 2006 and 2005, was $589, $1,191, and
$1,196, 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 demon-
strated by the customer. Interest income recognized on such
receivables was $50, $104, and $90 for the years ended
December 31, 2007, 2006 and 2005, respectively.
The change in the allowance for losses on receivables for the
years ended December 31, 2007, 2006 and 2005, consisted
of the following:
Allowance for
Losses
Beginning balance – January 1, 2005 $(403)
Customer financing valuation benefit/(provision) (73)
Reduction in customer financing assets 202
Ending balance – December 31, 2005 (274)
Customer financing valuation benefit/(provision) (32)
Reduction in customer financing assets 52
Ending balance – December 31, 2006 (254)
Customer financing valuation benefit/(provision) 60
Other (1)
Ending balance – December 31, 2007 $(195)
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 concentra-
tion of various model aircraft. Aircraft financing related to major
aircraft concentrations at December 31 were as follows:
2007 2006
717 Aircraft ($719 and $760 accounted
for as operating leases)* $2,472 $2,595
757 Aircraft ($836 and $904 accounted
for as operating leases)* 1,064 1,167
767 Aircraft ($196 and $201 accounted
for as operating leases) 599 740
MD-11 Aircraft ($528 and $555 accounted
for as operating leases)* 528 645
737 Aircraft ($485 and $550 accounted
for as operating leases) 518 583
777 Aircraft ($0 accounted for as
operating leases) 96 718
*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:
2007 2006 2005
Boeing Capital Corporation $33 $53 $33
Other Boeing 15 7 10
$48 $60 $43
The Boeing Company and Subsidiaries