Boeing 2007 Annual Report Download - page 65

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Notes to Consolidated Financial Statements
is reasonably possible that we will decide in 2008 to complete
production of the C-17 if further orders are not received. We
are still evaluating the full financial impact of a potential pro-
duction shut-down, including any recovery that would be avail-
able from the government. Such recovery from the government
would not include the costs incurred by us resulting from the
second quarter direction to key suppliers to begin working on
the additional 10 aircraft.
Department of Defense Office of the
Inspector General Audit
We have been advised by the Department of Defense Office of
the Inspector General (DoD OIG) that it is conducting an audit
of the application of economic price adjustment (EPA) clauses
included in our multi-year contracts for the C-17, F-18, and
Apache programs. A final audit report has not been issued and
the actions, if any, that our U.S. government customers may
take in response to the audit are unknown at this time, as is
any potential financial impact in the future.
Satellites
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 which was collected during the
second and third quarter of 2007. New Skies Satellites B.V.
(New Skies) declined to exercise its option to purchase a
replacement spacecraft due to its assertion that we anticipato-
rily breached the contract. We believe that had New Skies
exercised its option, we would have fulfilled our contractual
responsibilities. We do not expect New Skies’ assertion to
materially impact our consolidated results of operations, finan-
cial position, or cash flows.
In certain launch and satellite sales contracts, we include provi-
sions that specify that we bear risk of loss associated with the
launch phase through acceptance in orbit by the customer. We
have historically purchased insurance to cover these exposures
when allowed under the terms of the contract and when eco-
nomically advisable. The current insurance market reflects high
premium rates and also suffers from a lack of capacity to handle
all insurance requirements. We make decisions on the procure-
ment of insurance based on our analysis of risk. There is one
contractual launch scheduled in 2008 for which full insurance
coverage may not be available or, if available, could be prohibi-
tively expensive. We will continue to review this risk. We estimate
that the potential uninsured amount for this launch could
approach $350 depending on the nature of the uninsured event.
Financing Commitments
Financing commitments totaled $8,350 and $10,164 as of
December 31, 2007 and 2006. We anticipate that a significant
portion of these commitments will not be exercised by the cus-
tomers as we continue to work with third party financiers to
provide alternative financing to customers.
In connection with the formation of ULA, we and Lockheed
each committed to provide up to $25 in additional capital con-
tributions and we each have agreed to extend a line of credit
to ULA of up to $200 to support its working capital require-
ments 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.
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 agree-
ments and surety bonds aggregated approximately $4,973 as
of December 31, 2007 and approximately $4,368 at
December 31, 2006.
Company Owned Life Insurance
McDonnell Douglas Corporation insured its executives with
Company Owned Life Insurance (COLI), which are life insur-
ance 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, 2007
and 2006, the cash surrender value was $310 and $288
and the total loans were $298 and $279. 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, 2007 and 2006.
Note 14 – Debt
Total debt interest incurred, including amounts capitalized, was
$591, $657, and $713 for the years ended December 31, 2007,
2006 and 2005, respectively. Interest expense recorded by
BCC is reflected as a separate line item on our Consolidated
Statements of Operations, and is included in earnings from
operations. Total company interest payments were $616,
$657, and $671 for the years ended December 31, 2007,
2006 and 2005, respectively.
We have $3,000 currently available under credit line agree-
ments. We have given BCC exclusive access to $1,500 under
these arrangements. We continue to be in full compliance with
all covenants contained in our debt or credit facility agree-
ments, including those at BCC.
On March 23, 2004, we filed a shelf registration with the
Securities and Exchange Commission (SEC) for $1,000 for
the issuance of debt securities and underlying common stock.
The entire amount remains available for potential debt
issuance. BCC has $3,421 that remains available from shelf
registrations filed with the SEC. Both of BCC’s shelf registra-
tions expire in November 2008. The availability of funding
under these shelf registrations is dependent on investor
demand and market conditions.
The Boeing Company and Subsidiaries