Boeing 2007 Annual Report Download - page 63

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Notes to Consolidated Financial Statements
Contingent Repurchase Commitments We have entered into
contingent repurchase commitments with certain customers in
conjunction with signing a definitive agreement for the sale of
new aircraft (Sale Aircraft). Under these commitments, we
agreed to repurchase the Sale Aircraft at a specified price,
generally ten years after delivery of the Sale Aircraft. Our repur-
chase of the Sale Aircraft is contingent upon a future, mutually
acceptable agreement for the sale of additional new aircraft
Indemnifications to ULA In December 2006, we agreed to
indemnify ULA against potential losses that ULA may incur
from certain contracts contributed by us. In the event ULA is
unable to obtain certain additional contract pricing to which
we believe ULA is entitled, we will be responsible for any short-
fall and may record up to $332 in pre-tax losses. The term of
the indemnification is tied to the resolution of this matter with
the customer.
In December 2006, we agreed to indemnify ULA in the event
that $1,375 of Delta launch program inventories included in
contributed assets and $1,860 of Delta program inventories
subject to an inventory supply agreement are not recoverable
from existing and future orders. The term of the inventory in-
demnification extends to December 31, 2020. Since inception,
ULA sold $443 of inventories that were contributed by us.
Residual Value Guarantees We have issued various residual
value guarantees principally to facilitate the sale of certain
commercial aircraft. Under these guarantees, we are obligated
to make payments to the guaranteed party if the related air-
craft or equipment fair values fall below a specified amount at
a future time. These obligations are collateralized principally by
commercial aircraft and expire in 1 to 11 years.
Credit Guarantees Related to the Sea Launch Venture We
issued credit guarantees to creditors of the Sea Launch ven-
ture, of which we are a 40% partner, to assist the venture in
obtaining financing. Under these credit guarantees, we are
obligated to make payments to a guaranteed party in the event
that Sea Launch does not make its loan payments. We have
substantive guarantees from the other venture partners, who
are obligated to reimburse us for their share (in proportion to
their Sea Launch ownership percentages) of any guarantee
payment we may make related to the Sea Launch obligations.
These guarantees expire within the next 8 years.
Other Credit Guarantees We have issued credit guarantees,
principally to facilitate the sale of commercial aircraft. Under
these arrangements, we are obligated to make payments to a
guaranteed party in the event that lease or loan payments are
not made by the original lessee or debtor. A substantial portion
of these guarantees has been extended on behalf of original
lessees or debtors with less than investment-grade credit. Our
commercial aircraft credit-related guarantees are collateralized
by the underlying commercial aircraft. Current outstanding
credit guarantees expire within the next 13 years.
Performance Guarantees We have outstanding performance
guarantees issued in conjunction with joint venture invest-
ments. Pursuant to these guarantees, we would be required
to make payments in the event a third-party fails to perform
specified services. We have guarantees from the other venture
partners, who are obligated to reimburse us for a portion of
any guarantee payments we may make related to the perform-
ance guarantee. Current performance guarantees expire within
the next 10 years.
Other Indemnifications In conjunction with our sales of the EDD
and Rocketdyne businesses and the sale of our Commercial
Airplanes facilities in Wichita, Kansas and Tulsa and McAlester,
Oklahoma in 2005, we provided indemnifications to the buyers
relating to pre-closing environmental contamination and certain
other items. The terms of the indemnifications are indefinite. As
it is impossible to assess whether there will be damages in the
future or the amounts thereof, we cannot estimate the maxi-
mum potential amount of future payments under these guaran-
tees. Therefore, no liability has been recorded.
Industrial Revenue Bonds
Industrial Revenue Bonds (IRBs) issued by the City of Wichita
are used to finance the purchase and/or construction of real
and personal property at our Wichita site. Tax benefits associ-
ated with IRBs include a ten-year property tax abatement and a
sales tax exemption from the Kansas Department of Revenue.
We record the property on our Consolidated Statements of
Financial Position, along with a capital lease obligation to repay
the proceeds of the IRB. We have also purchased the IRBs and
therefore are the bondholders as well as the borrower/lessee
of the property purchased with the IRB proceeds.
The capital lease obligation and IRB asset are recorded net in
the Consolidated Statements of Financial Position pursuant to
FIN 39, Offsetting of Amounts Related to Certain Contracts.
As of December 31, 2007 and 2006, the assets and liabilities
associated with the City of Wichita IRBs were $1,217 and $1,419.
Note 13 – Other Commitments and Contingencies
Environmental Matters
At December 31, 2007 and 2006, the aggregate amount
of liabilities recorded relative to environmental matters were
as follows:
Environmental
Liabilities
Beginning balance– January 1, 2006 $532
Changes in estimate 122
Reductions for payments made (72)
Ending balance– December 31, 2006 582
Changes in estimate 168
Reductions for payments made (71)
Ending balance – December 31, 2007 $679
The liabilities recorded represent our best estimate of costs
expected to be incurred to remediate, operate, and maintain
sites over periods of up to 30 years. Although not considered
probable, it is reasonably possible that we may incur additional
charges because of regulatory complexities, higher than
expected costs and the risk of unidentified contamination.
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