Boeing 2012 Annual Report Download - page 92

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for these financing commitments based upon the terms, such as collateralization and interest rates, under
which funding would be provided.
Standby Letters of Credit and Surety Bonds
We have entered into standby letters of credit agreements and surety bonds with financial institutions
primarily relating to the guarantee of our future performance on certain contracts. Contingent liabilities on
outstanding letters of credit agreements and surety bonds aggregated approximately $4,545 and $6,199
as of December 31, 2012 and 2011.
Commitments to ULA
We and Lockheed Martin Corporation have each committed to provide ULA with up to $494 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 7.
C-17
At December 31, 2012, our backlog included 5 C-17 aircraft under contract with the U.S. Air Force (USAF)
and international orders for 10 C-17 aircraft. We are currently producing C-17 aircraft at a rate of 10 per
year. Should additional orders not materialize, it is reasonably possible that we will decide in 2013 to end
production of the C-17 at a future date. We are still evaluating the full financial impact of a potential
production shutdown, including pension curtailment charges, and any recovery that would be available
from the U.S. government. Such recovery from the U.S. government would not include the costs incurred
by us resulting from our direction to suppliers to begin working on aircraft beyond those currently under
contract. At December 31, 2012, we had approximately $245 of inventory expenditures and potential
termination liabilities to suppliers associated with 12 aircraft for international customers not currently under
contract.
U.S. Government Defense Budget/Sequestration
In August 2011, the Budget Control Act reduced the United States Department of Defense (U.S. DoD) top
line budget by approximately $490 billion through 2021. In addition, U.S. government expenditures are
subject to the potential for further reductions, generally referred to as “sequestration”. Sequestration would
result in additional reductions of approximately $500 billion from the defense top line budget through 2021.
The Office of Management and Budget (OMB) has estimated that sequestration would reduce non-exempt
defense discretionary accounts during U.S. government fiscal year 2013 by approximately 9.4% (excluding
military personnel accounts). The OMB has further stated that the budget for Overseas Contingency
Operations and any unobligated balances in prior year funds would be included in aggregate reductions,
but has otherwise indicated that it cannot yet assess the impact of sequestration at the program, project,
and activity level. The U.S. DoD has indicated that such reductions might require the termination of certain,
as yet undetermined, procurement programs and other U.S. government customers, such as NASA and
various intelligence agencies, may be required to take comparable actions. Any such impacts could have
a material effect on our results of operations, financial position and/or cash flows.
Company Owned Life Insurance
McDonnell Douglas Corporation insured its executives with Company Owned Life Insurance (COLI), which
are life insurance 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,
2012 and 2011, the cash surrender value was $423 and $397 and the total loans were $400 and $377.