Boeing 2010 Annual Report Download - page 47

Additional Considerations
United Launch Alliance On December 1, 2006, we and Lockheed Martin Corporation (Lockheed)
created a 50/50 joint venture named United Launch Alliance L.L.C. ULA combines the production,
engineering, test and launch operations associated with U.S. government launches of Boeing Delta
and Lockheed Atlas rockets. We initially contributed net assets of $914 million at December 1, 2006.
The book value of our investment exceeded our proportionate share of ULA’s net assets. This
difference is expensed ratably in future years. Based on the adjusted contributions and the conformed
accounting policies established by ULA, this amortization is expected to be approximately $15 million
annually for the next 14 years.
In connection with the formation of ULA, we and Lockheed each committed to provide up to $200
million to support ULA’s working capital requirements through December 1, 2011. We and Lockheed
transferred performance responsibility for certain U.S. government contracts to ULA as of the closing
date. We and Lockheed agreed to jointly guarantee the performance of those contracts to the extent
required by the U.S. government. We and Lockheed have also each committed to provide ULA with up
to $232 million of additional capital contributions in the event ULA does not have sufficient funds to
make a required payment to us under an inventory supply agreement. See Note 11 to our
Consolidated Financial Statements.
We agreed to indemnify ULA through December 31, 2020 against potential non-recoverability and
non-allowability of $1,360 million of Boeing Delta launch program inventory included in contributed
assets plus $1,860 million of inventory subject to an inventory supply agreement which ends on
March 31, 2021. Since inception, ULA has consumed $1,201 million of inventory that was contributed
by us. ULA has made advance payments of $420 million to us and we have recorded revenues and
cost of sales of $166 million under the inventory supply agreement through December 31, 2010. ULA is
continuing to assess the future of the Delta II program beyond what is currently on contract. In the
event ULA is unable to sell additional Delta II inventory, our earnings could be reduced by up to $70
million.
We agreed to indemnify ULA against potential losses that ULA may incur in the event ULA is unable to
obtain certain additional contract pricing from the U.S. Air Force (USAF) for four satellite missions. We
believe ULA is entitled to additional contract pricing. In December 2008, ULA submitted a claim to the
USAF to re-price the contract value for two satellite missions. In March 2009, the USAF issued a denial
of that claim and in June 2009, ULA filed an appeal. During 2009, the USAF exercised its option for a
third satellite mission. During the third quarter of 2010, ULA submitted a claim to the USAF to re-price
the contract value of the third mission. The USAF did not exercise an option for a fourth mission prior
to expiration. If ULA is unsuccessful in obtaining additional pricing, we may be responsible for a portion
of the shortfall and may record up to $283 million in pre-tax losses associated with the three missions,
representing up to $261 million for the indemnification payment and up to $22 million for our portion of
additional contract losses incurred by ULA.
Sea Launch See the discussion of the Sea Launch receivables in Note 6 to our Consolidated Financial
Statements.
Satellites See the discussions of Boeing Satellite Systems International, Inc. (BSSI) in Note 20 to our
Consolidated Financial Statements.
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