Notes to the Consolidated Financial Statements
(Dollars in millions, except per-share data and unless otherwise indicated)
Note 5 – Inventories and Equipment on Operating Leases, Net
Inventories at December 31, 2007 and 2006 were as follows (in millions):
| 2007 | 2006 | |||||
|
Finished goods |
$ | 1,099 | $ | 967 | ||
|
Work-in-process |
70 | 67 | ||||
|
Raw materials |
136 | 129 | ||||
|
Total Inventories |
$ | 1,305 | $ | 1,163 | ||
Equipment on operating leases and similar arrangements consists of our equipment rented to customers and depreciated to estimated residual value at the end of the lease term. The transfer of equipment from our inventories to equipment subject to an operating lease is presented in our Consolidated Statements of Cash Flows in the operating activities section as a non-cash adjustment. We recorded $66, $69 and $56 in inventory write-down charges for the years ended December 31, 2007, 2006 and 2005, respectively. Equipment on operating leases and the related accumulated depreciation at December 31, 2007 and 2006 were as follows (in millions):
| 2007 | 2006 | |||||||
|
Equipment on operating leases |
$ | 1,435 | $ | 1,246 | ||||
|
Less: Accumulated depreciation |
(848 | ) | (765 | ) | ||||
|
Equipment on operating leases, net |
$ | 587 | $ | 481 | ||||
Depreciable lives generally vary from three to four years consistent with our planned and historical usage of the equipment subject to operating leases. Depreciation and obsolescence expense for equipment on operating leases was $269, $230 and $205 for the years ended December 31, 2007, 2006 and 2005, respectively. Our equipment operating lease terms vary, generally from 12 to 36 months. Scheduled minimum future rental revenues on operating leases with original terms of one year or longer are (in millions):
| 2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | |||||
| $ 361 | $ 252 | $ 170 | $ 81 | $ 38 | $ 10 |
Total contingent rentals on operating leases, consisting principally of usage charges in excess of minimum contracted amounts, for the years ended December 31, 2007, 2006 and 2005 amounted to $117, $112 and $136, respectively.
