Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Note 11 – Inventory

Inventories at December 31 consisted of the following:

2001

2000

Commercial aircraft programs

Long-term contracts in progress

Commercial spare parts, used aircraft, general stock materials and other

$10,138

7,614

2,629

$10,898

8,456

2,075

Less advances and progress billings

20,381

(13,461)

21,429

(14,577)

$ 6,920

$ 6,852

Inventory production costs incurred on in-process and delivered units in excess of the estimated average cost of such units determined as described in Note 1 represent deferred production costs. As of December 31, 2001, there were no significant excess deferred production costs or unamortized tooling costs not recoverable from existing firm orders for commercial programs.

Inventory costs at December 31, 2001, included unamortized tooling of $821 and $305 relating to the 777 and Next-Generation 737 programs respectively, and excess deferred production costs of $863 and $429 relating to the 777 and Next-Generation 737 programs. Inventory costs at December 31, 2000, included unamortized tooling of $1,135 and $447 relating to the 777 and Next-Generation 737 programs and excess deferred production costs of $1,121 and $635 relating to the 777 and Next-Generation 737 programs. Firm backlog for both the 777 and Next-Generation 737 programs is sufficient to recover all significant amounts of excess deferred production costs as of December 31, 2001; however, such deferred costs are recognized over the current program accounting quantity in effect at the date of reporting. There are no excess deferred production costs or unamortized tooling for the 717 program.

Used aircraft in inventory totaled $316 and $45 as of December 31, 2001 and 2000.

Interest capitalized as construction-period tooling costs amounted to $8, $12 and $17 in 2001, 2000 and 1999, respectively.

Inventory balances included $233 and $231 subject to claims or other uncertainties primarily relating to the A-12 program as of December 31, 2001 and 2000. See Note 27.

The estimates underlying the average costs of deliveries reflected in the inventory valuations may differ materially from amounts eventually realized for the reasons outlined in Note 28.

Note 12 – Customer and Commercial Financing

Customer and commercial financing at December 31 consisted of the following:

2001

2000

Aircraft financing

Notes receivable

Investment in sales-type/financing leases

Operating lease equipment, at cost, less accumulated depreciation of $337 and $305

Commercial equipment financing

Notes receivable

Investment in sales-type/financing leases

Operating lease equipment, at cost, less accumulated depreciation of $85 and $95


$ 1,398
2,796
3,846

1,008
776
716


$ 593
1,119
3,376

915
697
432

Less valuation allowance

(142)

(173)

$10,398

$6,959

Impairment of financing assets having a carrying value of $192 in 2001 and $152 in 2000 have been recognized in conformity with SFAS No.114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No.118, Accounting by Creditors for Impairment of a Loan – Income Recognition and Disclosure. Included in this carrying value is $52 and $21 attributable to impaired assets for which there is a related allowance for credit losses, and $140 and $131 attributable to impaired assets for which there is no related allowance for credit losses in 2001 and 2000. The total valuation allowance related to these assets was $8 and $18 in 2001 and 2000. The impact to interest income is not significant. The valuation allowance is subject to change depending on estimates of collectability and realizability of the customer financing balances.

Customer and commercial financing assets that are leased by the Company under capital leases and have been subleased to others totaled $437 and $461 as of December 31, 2001 and 2000. Commercial equipment financing under operating lease consists principally of corporate aircraft, machine tools, ocean-going vessels, production equipment, and other equipment which the Company expects will maintain strong collateral and residual values.

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