 |  |
| Notes
to Consolidated Financial Statements | | |
|
| |
| Other acquisitions in 2000 included Jeppesen Sanderson, Inc. on October 4,
2000, for $1,524 in cash, Continental Graphics Corp. on September 1, 2000, for
$183 in cash, and Autometric, Inc. on August 2, 2000, for $119 in cash. |
| The following is a summary of the Company’s significant acquisitions
in 2000 along with the purchase price and the allocation of the purchase price
to IPR&D and intangible assets: | | |
| | | | | |
| | Purchase
Price | IPR&D | Goodwill | Other
Intangible
Assets | |
 | |
| Hughes space and communications businesses | | Jeppesen
Sanderson, Inc. | | Continental Graphics Corp. |
| Autometric, Inc. | |
|
|
|
| |
 | |
| The fair value amount of $500 of in-process research and development
(IPR&D) attributed to the Hughes acquisition in 2000 discussed below was determined
by an independent valuation using the income approach. | | Thirteen
projects were included in the valuation, of which the principal projects were
based on the following: technologies associated with high-efficiency solar cells
and satellite battery technology ($189), phased array and digital processing technology
to provide high-speed broadband service ($89), and xenon-ion systems for satellite
engine propulsion ($82). The fair value of identifiable intangibles was also determined
by an independent valuation primarily using the income approach. The following
risk-adjusted discount rates were used to discount the project cash flows: solar
cells and satellite battery technology, 17%; phased array and digital processing
technology to provide high-speed broadband service, 18%; xenon-ion systems for
satellite engine propulsion, 18%; all other projects, 18.2% weighted average.
Operating margins were assumed to be similar to historical margins of similar
products. The size of the applicable market was verified for reasonableness with
outside research sources. The projects were in various stages of completion ranging
from approximately 31% to 92% complete as of the valuation date. As of December
31, 2001, the percentages complete by project were as follows: solar cells and
satellite battery technology, 80%; phased array and digital processing technology,
95%; xenon-ion systems for satellite engine propulsion, 90%. The stage of completion
for each project was estimated by evaluating the cost to complete, complexity
of the technology and time to market. The projects are anticipated to be completed
between 2002 and 2004. The estimated cost to complete the projects is $50. |
| The discount rates stated previously are higher than the Company’s
weighted average cost of capital due to the inherent uncertainties in the estimates
described previously, including the uncertainty surrounding the successful completion
of the purchased in-process technology, the useful life of such technology, the
profitability levels of such technology and the uncertainty of the timing of the
related product introduction and then-existing competing products. If these projects
are not successfully developed, the future revenue and profitability of Boeing
Satellite Systems may be adversely affected. Additionally, the value of the other
intangible assets acquired may become impaired. | | The fair value
amount of $45 of IPR&D attributed to the acquisition of Jeppesen Sanderson,
Inc., was determined by an independent valuation. The acquired IPR&D technology
consists primarily of three software projects that will work together to store
information and extract it for use in various products sold by Jeppesen. The technology
will allow the production of end user aeronautical information with forward and
backward date effectivity, and will allow the extraction of the information on
a near real time basis. Furthermore, the technology will allow the creation of
packages of aeronautical information, which can be tailored to individual customers
worldwide. These acquired IPR&D projects were completed during 2001, with
the full range and production of the technology anticipated in the first quarter
of 2002. The completed technology can only be used for its specific and intended
purpose and as such no alternative future uses exist. The valuation methodology
was determined using the income approach, and a risk-adjusted discount rate of
15% was used to discount the project cash flow. During the year ended December
31, 2001, Jeppesen had completed all IPR&D projects for a total cost of $18. |
| Other acquisitions resulting in the recognition of IPR&D during 2000
using a similar income approach included Continental Graphics Corp. ($7 IPR&D)
and Autometric, Inc. ($5 IPR&D). | | Note
7 – Equity Income from Joint Ventures | | Equity in income
from joint ventures represents the Company’s share of income or losses from
joint venture arrangements accounted for under the equity method. |
| The principal joint venture arrangements are United Space Alliance, FlightSafety
Boeing Training International (FSBTI), and Sea Launch. The Company has a 50% partnership
with Lockheed Martin in United Space Alliance, which is responsible for all ground
processing of the Space Shuttle fleet and for space-related operations with the
U.S. Air Force. Income from the United Space Alliance joint venture was $72, $60
and $48 for the years ended December 31, 2001, 2000 and 1999, respectively. The
Company is entitled to 50% of the earnings of FSBTI, a partnership with FlightSafety
International Inc., which provides pilot and crew training. Income from the FSBTI
joint venture was $12, $43 and $21 for the years ended December 31, 2001, 2000
and 1999, respectively. | | |
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