Arrangements With Off-Balance Sheet Risk

9 Months Ended

Sep. 30, 2018

Arrangements With Off-Balance Sheet Risk

Arrangements with Off-Balance Sheet Risk

We enter into arrangements with off-balance sheet risk in the normal course of business, primarily in the form of guarantees.

The following table provides quantitative data regarding our third party guarantees. The maximum potential payments represent a “worst-case scenario,” and do not necessarily reflect amounts that we expect to pay. Estimated proceeds from collateral and recourse represent the anticipated values of assets we could liquidate or receive from other parties to offset our payments under guarantees. The carrying amount of liabilities represents the amount included in Accrued liabilities.



	Maximum Potential Payments				Estimated Proceeds from Collateral/Recourse				Carrying Amount of Liabilities
	September 30 2018		December 31 2017		September 30 2018		December 31 2017		September 30 2018		December 31 2017
Contingent repurchase commitments		$1,729		$1,605		$1,729		$1,605				$9
Indemnifications to ULA:
Contributed Delta program launch inventory	52		72
Contract pricing	261		261							$7	7
Other Delta contracts	176		191
Credit guarantees	106		109		51		55		16		16

Contingent Repurchase Commitments The repurchase price specified in contingent repurchase commitments is generally lower than the expected fair value at the specified repurchase date. Estimated proceeds from collateral/recourse in the table above represent the lower of the contracted repurchase price or the expected fair value of each aircraft at the specified repurchase date.

Indemnifications to ULA In 2006, we agreed to indemnify ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360 of Boeing Delta launch program inventory included in contributed assets plus $1,860 of inventory subject to an inventory supply agreement which ends on March 31, 2021. ULA has yet to consume $327 of inventory associated with sold missions.

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 USAF for certain satellite missions. In 2009, ULA, through its subsidiary United Launch Services, filed a claim and notice of appeal before the Armed Services Board of Contract Appeals (ASBCA) for a contract adjustment for the price of these missions. In 2016, the ASBCA ruled that ULA is entitled to additional contract pricing for these missions and remanded to the parties to

negotiate appropriate pricing. If ULA is ultimately unsuccessful in obtaining additional pricing, we may be responsible for an indemnification payment up to $261 and may record up to $280 in pre-tax losses associated with these missions.

Potential payments for Other Delta contracts include $85 related to deferred support costs and $91 related to deferred production costs. In June 2011, the Defense Contract Management Agency (DCMA) notified ULA that it had determined that $271 of deferred support costs are not recoverable under government contracts. In December 2011, the DCMA notified ULA of the potential non-recoverability of an additional $114 of deferred production costs. ULA and Boeing believe that all costs are recoverable and in November 2011, ULA filed a certified claim with the USAF for collection of deferred support and production costs. The USAF issued a final decision denying ULA’s certified claim in May 2012. In 2012, Boeing and ULA, through its subsidiary United Launch Services, filed a suit in the Court of Federal Claims seeking recovery of the deferred support and production costs from the U.S. government, which subsequently asserted a counterclaim for credits that it alleges were offset by deferred support cost invoices. We believe that the U.S. government’s counterclaim is without merit. The discovery phase of the litigation completed in 2017. Boeing filed a motion for summary judgment for full recovery of its costs on November 17, 2017, asking the court to award full recovery without a trial. The court denied Boeing’s motion on August 29, 2018, holding that a trial is necessary. Boeing has asked the court to allow an immediate appeal of its decision before trial to the U.S. Court of Appeals for the Federal Circuit. If, contrary to our belief, it is determined that some or all of the deferred support or production costs are not recoverable, we could be required to record pre-tax losses and make indemnification payments to ULA for up to $317 of the costs questioned by the DCMA.

Other Indemnifications In conjunction with our sales of Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and our BCA facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma, we agreed to indemnify, for an indefinite period, the buyers for costs relating to pre-closing environmental conditions and certain other items. We are unable to assess the potential number of future claims that may be asserted under these indemnifications, nor the amounts thereof (if any). As a result, we cannot estimate the maximum potential amount of future payments under these indemnities and therefore, no liability has been recorded. To the extent that claims have been made under these indemnities and/or are probable and reasonably estimable, liabilities associated with these indemnities are included in the environmental liability disclosure in Note 10.

Credit Guarantees We have issued credit guarantees where we are obligated to make payments to a guaranteed party in the event that the original lessee or debtor does not make payments or perform certain specified services. Generally, these guarantees have been extended on behalf of guaranteed parties with less than investment-grade credit and are collateralized by certain assets. Current outstanding credit guarantees expire through 2036.

Strategic Partnership with Embraer

On July 5, 2018, we and Embraer S.A. (Embraer) announced the signing of a Memorandum of Understanding to establish a strategic partnership between the two companies. The non-binding agreement proposes the formation of a joint venture comprising the commercial aircraft and services business of Embraer, which joint venture would be owned 80 percent by us. The transaction values 100 percent of Embraer’s commercial aircraft operations at $4.75 billion and contemplates a value of $3.8 billion for our 80 percent ownership stake in the joint venture. We expect to work with Embraer to finalize the financial and operational details of the strategic partnership and negotiate definitive transaction agreements in the coming months. Once definitive transaction agreements have been executed, the transaction would then be subject to shareholder and regulatory approvals, including approval from the Government of Brazil, as well as other customary closing conditions. Assuming approvals are received in a timely manner, we expect that the transaction will close by the end of 2019.