Boeing Reports Second Quarter Results; Updates Outlook
- Defense and commercial airplane businesses performing
- Results include previously disclosed charges related to launch and
satellite businesses
- Second quarter net loss of $0.24 per diluted share includes previously
disclosed charges totaling $0.87 related to the company's Delta IV
program and certain satellite programs
- Revenues on track at $12.8 billion for the second quarter; 2003 revenue
guidance unchanged
- Strong operating cash flow of $845 million and free cash flow* of $672
million after discretionary pension contribution of $479 million; 2003
cash flow guidance unchanged
- Revising 2003 earnings per share outlook to reflect announced second
quarter charges partially offset by performance
- Revising 2004 outlook primarily to reflect updated commercial airplanes
deliveries and mix, reduced demand for commercial aviation services and
spares, and the revised launch and satellite outlook
Selected Operating Highlights - Second Quarter 2003:
- Received approval to proceed toward $14 billion system design and
development phase of the U.S. Army's Future Combat System; received U.S.
Air Force approval on $16 billion 767 Tanker program
- Continued solid Commercial Airplanes' operating performance on planned
lower deliveries of 74 airplanes; won 76 commercial airplane orders,
including 45 from All Nippon Airways; announced 7E7 systems technology
team, selected advanced composite materials for majority of primary
structure, and began wind-tunnel testing
- Signed service agreements to provide Connexion by Boeing(SM) service on
88 Lufthansa airplanes
Table 1. Summary Financial Results
(Millions, except per share data)
2nd Quarter Six Months
% %
2003 2002 Change 2003 2002 Change
Revenues $12,785 $13,858 (8%) $25,045 $27,679 (10%)
Reported Net Income /
(Loss) ($192) $779 (125%) ($670) ($470) (43%)
Reported Earnings /
(Loss) per Share ($0.24) $0.96 (125%) ($0.84) ($0.58) (45%)
Diluted EPS Impact of
Non-Cash SFAS 142
Goodwill Impairment
Charges ($1.02) ($2.26)
Adjusted Earnings per
Share* ($0.24) $0.96 (125%) $0.18 $1.68 (89%)
Average Diluted Shares
for EPS 800.1 808.1 800.1 807.9
* A complete definition and discussion of Boeing's use of non-GAAP
measures, identified by an asterisk (*), is attached at the end of the
release.
CHICAGO, July 23 /PRNewswire-FirstCall/ -- The Boeing Company (NYSE: BA)
reported a net loss for the second quarter of 2003 of $192 million, or $0.24
per share, on revenues of $12.8 billion. This compares with net earnings of
$779 million, or $0.96 per share, on revenues of $13.9 billion for the second
quarter of 2002.
On July 15, 2003, the company disclosed it would recognize charges related
to its launch and satellite businesses. These charges decreased net earnings
for the quarter by $693 million, or $0.87 per share.
"We took strong actions this quarter to recognize and address the
challenges in our commercial space businesses," said Boeing Chairman and Chief
Executive Officer Phil Condit. "Our strong defense portfolio again performed
well, and Commercial Airplanes and Boeing Capital Corporation are successfully
managing through the downturn for strong future returns."
As shown in Table 2, the company reported losses from operations totaling
$293 million in the second quarter compared with earnings from operations of
$1.2 billion in the second quarter of 2002. Previously announced charges
related to the satellite and launch businesses reduced earnings from
operations $1.1 billion. In addition, second quarter results reflect lower
planned commercial airplane deliveries and pension income, partially offset by
strong performance on military programs and ongoing production improvements at
Commercial Airplanes.
Table 2. Earnings from Operations & Margins
(Millions, except margin percent)
2nd Quarter Six Months
2003 2002 2003 2002
Earnings / (Losses) from Operations ($293) $1,176 ($666) $2,078
Add Back: Goodwill Impairment
Charges (a) $913 --(b)
Adjusted Earnings from Operations* ($293) $1,176 $247 $2,078
Operating Margin (2.3%) 8.5% (2.7%) 7.5%
Adjusted Operating Margin* (2.3%) 8.5% 1.0% 7.5%
(a) See segment results and Boeing press releases dated April 10, 2003,
and April 23, 2003, for additional information.
(b) Upon adopting SFAS 142 in the first quarter of 2002, the company
recorded a transitional goodwill impairment charge of $2.4 billion,
$1.8 billion net of tax, presented as a cumulative effect of
accounting change. This charge did not impact 1Q02 reported earnings
from operations.
Deferred stock compensation pre-tax expense increased $59 million during
the quarter due to the increase in the company's stock price from March 31
through June 30. This resulted in a $0.05 unfavorable impact to earnings per
share. Pre-tax expense for share-based plans totaled $120 million and reduced
earnings per share by $0.09. Taken together, consolidated stock compensation
expenses lowered second quarter earnings per share by a total of $0.14.
As shown in Table 3, the company generated operating cash flow of $845
million and free cash flow* of $672 million during the quarter. The company
made a discretionary cash contribution to its pension plans of $479 million,
which reduced second quarter operating cash flow. This compares with a $325
million discretionary contribution in the second quarter of 2002.
Table 3. Cash Flow
(Millions) 2nd Quarter Six Months
2003 2002 2003 2002
Operating Cash Flow (a) $845 $925 $417 $1,686
Less Property, Plant &
Equipment, Net ($173) ($240) ($303) ($463)
Free Cash Flow* $672 $685 $114 1,223
(a) 2Q03 operating cash flow includes $564 million of cash received from
customer financing transactions and classified as Operating Cash Flow
compared to $695 million in 2Q02. 2002 operating cash flow reflects
previously disclosed reclassification of certain cash flows into
investing activities.
As shown in Table 4, cash and debt balances at the end of the quarter were
down slightly from the first quarter of 2003.
Table 4. Quarter-End Cash and Debt Balances
(Billions)
2Q03 1Q03
Cash $1.9 $2.0
Debt Balances:
The Boeing Company $4.8 $5.1
Boeing Capital Corporation $9.2 $9.3
Non-Recourse Customer Financing $0.5 $0.6
Total Consolidated Debt $14.5 $15.0
Segment Results
Boeing Commercial Airplanes
Commercial Airplanes continues to aggressively manage for profitability
through the unprecedented downturn in its markets while focusing on the
future. During the quarter, Commercial Airplanes continued to resize
operations, improve efficiency, and pursue a disciplined product development
strategy, including the new 7E7 airplane. As part of resizing operations,
after the quarter Commercial Airplanes announced additional employment
reductions of 4,000 to 5,000 people, bringing year-end employment estimates in
the range of 55,000 to 56,000. Commercial Airplanes results are summarized in
Table 5.
Table 5. Commercial Airplanes Operating Results
(Millions, except deliveries & margin percent)
2nd Quarter Six Months
% %
2003 2002 Change 2003 2002 Change
Commercial Airplanes
Deliveries 74 112 (34%) 145 222 (35%)
Revenues $5,819 $7,662 (24%) $11,516 $15,975 (28%)
Earnings / (Losses) from
Operations $313 $560 (44%) $201 $1,199 (83%)
Add Back: Goodwill
Impairment Charges $341
Adjusted Earnings from
Operations* $313 $560 (44%) $542 $1,199 (55%)
Operating Margins 5.4% 7.3% 1.7% 7.5%
Adjusted Operating Margins* 5.4% 7.3% 4.7% 7.5%
During the second quarter, deliveries of commercial airplanes decreased 34
percent to 74 airplanes, and revenues fell 24 percent to $5.8 billion when
compared with the second quarter of 2002. Earnings from operations totaled
$313 million, and reflect significantly lower deliveries and revenues and
higher pension expense, offset by good performance and lower R&D spending.
Operating margins were 5.4 percent in the period compared to 7.3 percent for
the second quarter last year.
Commercial Airplanes received 76 gross orders during the quarter.
Contractual backlog grew slightly to $66.0 billion through June 30 compared
with $65.8 billion at the end of the first quarter.
Integrated Defense Systems
Integrated Defense Systems' revenues increased 7 percent to $6.6 billion,
up from $6.1 billion in the second quarter of 2002. Reported operating losses
totaled $429 million compared with earnings from operations of $639 million in
the second quarter of 2002 due to the previously disclosed charges recognized
primarily in the Launch and Orbital Systems segment. Because of the charges,
operating margins for the quarter were negative 6.5 percent compared with 10.4
percent for the same period last year. Aircraft, weapon, military support and
network-centric programs continued to perform well. Integrated Defense
Systems results are summarized below in Table 6.
Table 6. Integrated Defense Systems Operating Results
(Millions, except margin percent)
2nd Quarter Six Months
% %
2003 2002 Change 2003 2002 Change
Revenues
Aircraft and Weapon
Systems $2,540 $2,634 (4%) $5,224 $4,843 8%
Network Systems $2,233 $1,971 13% $4,187 $3,554 18%
Support Systems $1,019 $866 18% $1,984 $1,632 22%
Launch and Orbital
Systems $770 $677 14% $1,428 $1,423 0%
Total IDS Revenues $6,562 $6,148 7% $12,823 $11,452 12%
Earnings / (Losses) from
Operations
Aircraft and Weapon
Systems $372 $365 2% $753 $659 14%
Network Systems (b) $101 $144 (30%) $235 $254 (7%)
Support Systems $107 $93 15% $216 $144 50%
Launch and Orbital
Systems (a) (b) ($1,009) $37 N.M. ($1,602) ($13) N.M.
Total IDS Earnings from
Operations ($429) $639 (167%) ($398) $1,044 (138%)
Add Back: Goodwill
Impairment Charges -- -- $572 --
Adjusted Earnings from
Operations* ($429) $639 (167%) $174 $1,044 (83%)
Operating Margins (6.5%) 10.4% (3.1%) 9.1%
Adjusted Operating
Margins* (6.5%) 10.4% 1.4% 9.1%
(a) 1Q03 results includes SFAS 142 goodwill impairment charges totaling
$572 million.
(b) 2Q03 results include previously disclosed charges of ~$1,030 million
at Launch and Orbital Systems, and ~$70 million at Network Systems.
"N.M." = Not Meaningful
Aircraft and Weapon Systems again delivered strong profitability.
Revenues for the quarter fell 4 percent to almost $2.5 billion on lower
rotorcraft deliveries partially offset by higher JDAM deliveries. Performance
remained excellent with operating margins at 14.6 percent, up from 13.9
percent in 2002, and included continuing investment in the 767 Tanker program.
Network Systems results for the second quarter reflected continued growth
in its homeland security and Department of Defense (DoD) network-centric
program base as revenues rose 13 percent to $2.2 billion. Operating margins
were 4.5 percent, down from 7.3 percent last year, due to previously disclosed
cost growth on DoD satellite programs. Margins on missile defense,
intelligence, and network-centric programs improved from the second quarter of
2002.
Support Systems delivered strong growth with revenues up 18 percent to
just over $1.0 billion on significant increases in tactical and transport
aircraft spares and modernization. Operating margins remained excellent at
10.5 percent compared with 10.7 percent in the second quarter of 2002.
Launch and Orbital Systems revenues for the quarter were up 14 percent to
$770 million on higher satellite deliveries. Charges recognized during the
period, as previously announced, resulted in an operating loss of
approximately $1 billion.
Contractual backlog at the end of the quarter increased to $38.8 billion
compared with $36.5 billion at the end of the first quarter. Unobligated
backlog rose by over $10 billion; this primarily reflects the U.S. Army
decision to proceed to the system design and development phase of its Future
Combat System.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) results are summarized in Table 7 below.
Table 7. Boeing Capital Corporation Operating Results
(Millions)
2nd Quarter Six Months
% %
2003 2002 Change 2003 2002 Change
Revenues $287 $255 13% $570 $483 18%
Pre-Tax Income/(Loss) (a) $72 $73 (1%) ($41) $139 (129%)
(a) Includes financing-related interest expense of $111 million and $99
million for 2Q03 and 2Q02, respectively.
Year-to-date financing-related interest expense totaled $222 million
for 2003 and $189 million for 2002.
During the quarter, revenues increased 13 percent to $287 million as a
result of portfolio growth during 2003. Pre-tax income, including interest
expense, totaled $72 million compared with $73 million in the second quarter
of 2002. The slight decline primarily reflects higher depreciation expenses
when compared with the second quarter of 2002, largely offset by increased
revenues.
BCC's customer financing portfolio grew modestly to $12.0 billion, up from
$11.7 billion at the end of the first quarter and $11.1 billion in the second
quarter of 2002. The increase reflected new business volume totaling $0.6
billion offset by $0.3 billion of asset run-off and depreciation. The
allowance for losses on finance lease and note receivables at quarter-end was
5.2 percent compared to 5.3 percent at the end of the first quarter.
At quarter-end, approximately 78 percent of Boeing Capital Corporation's
portfolio was related to Boeing products and services (primarily commercial
aircraft) compared with 76 percent at the end of the first quarter.
Leverage, as measured by the ratio of debt-to-equity, declined during the
quarter from 5.6-to-1 to 5.3-to-1.
"Other" Segment
The "Other" segment consists chiefly of the Connexion by Boeing(SM), Air
Traffic Management, and Boeing technology units, as well as certain results
related to the consolidation of all business units. Losses from operations
for the quarter totaled $57 million as Connexion by Boeing prepares to launch
full-scale service in 2004.
During the second quarter, Connexion by Boeing completed successful
consumer trials with Lufthansa and British Airways, and signed an initial
service agreement with Lufthansa for 88 aircraft. Boeing's Air Traffic
Management unit continued to build support for a modernized global air traffic
management system, signing an agreement with the Air Traffic Alliance to
cooperate on several projects around the world.
Outlook
The outlook below in Table 8 reflects the company's current assessment of
the markets for its products and services during the guidance period.
Table 8. Financial Outlook
(Billions, except per share data) 2003 2004
Revenues +/-$49 +/-$52
Earnings Per Share (GAAP) ($0.07) - $0.03 $1.75 - $1.95
Add back: Goodwill Impairment Charges $1.02
Adjusted Earnings Per Share* $0.95 - $1.05 $1.75 - $1.95
Operating Cash Flow $3.0 - $3.5 > $3.5
Less: Property, Plant & Equipment, Net +/-$1 +/-$1
Free Cash Flow* $2.0 - $2.5 > $2.5
The company actively monitors conditions in its key markets. In the
commercial aviation market, while there have been some encouraging signs, the
downturn remains severe and continues to dampen demand across all airplane
types, particularly the 757. The timing of a civil aviation industry recovery
remains uncertain and is unlikely to begin before 2005.
In commercial space, the outlook for launch services and satellites
remains poor, as reflected in the company's decision to focus Delta IV on the
government launch market. The company is managing these businesses to address
market realities and deliver solid future returns.
At the same time, the company expects its defense and non-commercial space
businesses to perform well in their growing markets. Boeing Integrated
Defense Systems expects continued growth and performance in its Network
Systems segment, which contains missile defense, homeland security,
intelligence, and DoD network-centric businesses. The Aircraft and Weapon and
Support segments are expected to deliver results similar to the strong levels
achieved in 2002. Thus, strength in defense and non-commercial space markets
should continue to partially offset the downturn in the company's commercial
aviation and space markets.
Boeing Commercial Airplanes' deliveries forecast for 2003 is unchanged.
The delivery forecast for 2003 remains approximately 280 airplanes and is
virtually sold out. The delivery forecast for 2004 has been narrowed from
between 275 and 300 airplanes to between 275 and 290 airplanes. The 2004
delivery forecast is now approximately 90 percent sold at the lower end of the
range. Commercial Airplanes expects demand for aircraft services and spares
to remain soft due to severe market conditions.
Boeing Capital Corporation portfolio growth is expected to slow as
airplane delivery rates remain at depressed levels. BCC is focused on
minimizing risk and preserving value with prudently structured transactions
and portfolio management.
The outlook for 2003 revenues is unchanged at +/- $49 billion. The
company is revising its 2004 revenue outlook from $52 - $54 billion to +/- $52
billion. This revision reflects commercial airplane deliveries as well as
lower spares and services volume. The revision also reflects the updated
commercial space outlook, including the reduced Delta IV manifest.
The company is revising its 2003 earnings per share guidance to
incorporate the charges recognized in the second quarter totaling $0.87 per
share, partially offset by good performance in other business segments. On a
GAAP basis, 2003 earnings per share guidance is revised from $0.68 - $0.88 per
share to ($0.07) - $0.03 per share. Adjusted earnings per share* guidance
has been revised from $1.70 - $1.90 per share to $0.95 - $1.05 per share. The
company's 2003 adjusted earnings per share* guidance adds back the charges for
goodwill impairment ($1.02 per share) recognized in the first quarter to
better reflect the results of current period operating activities.
Charges recognized during the first half of 2003 totaled $2.09 per share,
of which $1.33 per share are non-cash. These include $1.02 per share for
goodwill impairment, $0.20 per share to revalue the customer financing
portfolio, and $0.11 per share related to depreciation and inventory
adjustments in the company's Delta IV and commercial satellite businesses.
Cash charges for the period totaled $0.76 per share, and are spread over the
next seven years.
The company is revising its 2004 earnings per share outlook from $2.10 -
$2.30 to $1.75 - $1.95 per share. This primarily reflects the updated 2004
revenue outlook, as well as the updated 2004 outlook for launch and satellite
program profitability.
The company's cash flow outlook is unchanged. Operating cash flow is
expected to be $3.0 to $3.5 billion in 2003 and greater than $3.5 billion in
2004. Free cash flow* guidance remains unchanged for 2003 at $2.0 to $2.5
billion after $479 million of discretionary pension contributions funded
during the second quarter. The company may make additional discretionary
funding contributions in 2003. For 2004, free cash flow* guidance is
unchanged at greater than $2.5 billion and includes pre-tax pension
contributions totaling up to $1.0 billion, as previously disclosed.
The company's outlook does not contemplate any outcome associated either
with the current procurement investigation or lawsuit related to the Evolved
Expendable Launch Vehicle.
Boeing expects research and development to remain between 3.0 and 3.5
percent of sales during the guidance period.
Non-GAAP Measure Disclosure
The following definitions are provided for non-GAAP (Generally Accepted
Accounting Principles) measures (indicated by an asterisk *) used by the
company within this disclosure. Boeing does not intend for the information to
be considered in isolation or as a substitute for the related GAAP measures.
Other companies may define the measures differently.
Adjusted Financial Results
Boeing reports adjusted earnings per share, earnings from operations, and
operating margins excluding SFAS 142 goodwill charges. Management believes
that because goodwill is a non-cash charge related to past acquisitions,
adjusting the company's financial results to exclude goodwill provides
investors with a clearer perspective on the current underlying operating
performance of the company. Management uses earnings from operations
excluding goodwill charges as an internal measure of business operating
performance.
Adjusted Earnings per Share
Boeing defines adjusted earnings per share as GAAP earnings per share
(EPS) less SFAS 142 goodwill charges. Table 1 reconciles GAAP EPS and
adjusted EPS.
Adjusted Earnings from Operations (or Adjusted Operating Losses)
Boeing defines adjusted earnings from operations as GAAP earnings from
operations less SFAS 142 goodwill charges. Tables 2, 5, 6, and 8 reconcile
GAAP earnings from operations and adjusted earnings from operations.
Adjusted Operating Margin
Boeing defines adjusted operating margin as the adjusted earnings from
operations (defined above) divided by revenues. Tables 2, 5, and 6 reconcile
GAAP operating margins and adjusted operating margins.
Free Cash Flow
Free cash flow is defined as GAAP operating cash flow less capital
expenditures for property, plant, and equipment, net. GAAP operating cash
flow includes intercompany cash received from the sale of aircraft by Boeing
Commercial Airplanes (BCA) for customers who receive financing from Boeing
Capital Corporation (BCC). The year-to-date contribution to operating cash
flow related to customer deliveries of Boeing airplanes financed by Boeing
Capital Corporation totals approximately $0.9 billion, compared to just under
$1.4 billion for the first half of 2002.
GAAP investing cash flow includes a reduction in cash for the intercompany
cash paid by BCC to BCA, as well as an increase in cash for amounts received
from third parties, primarily customers paying amounts due on aircraft
financing transactions. The majority of BCC's customer financing is funded by
debt and cash flow from BCC operations.
Management believes free cash flow provides investors with an important
perspective on the cash available for shareholders, debt repayment, and
acquisitions after making the capital investments required to support ongoing
business operations and long term value creation. Free cash flow does not
represent the residual cash flow available for discretionary expenditures as
it excludes certain mandatory expenditures such as repayment of maturing debt.
Management uses free cash flow internally to assess both business performance
and overall Boeing liquidity. Table 3 provides a reconciliation between GAAP
operating cash flow and free cash flow.
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements in this release may constitute "forward-looking"
statements within the meaning of the Private Litigation Reform Act of 1995.
Words such as "expects," "intends," "plans," "projects," "believes,"
"estimates," and similar expressions are used to identify these forward-
looking statements. Forward-looking statements in this release include, but
are not limited to, our assessment of the markets for our products, statements
discussing the growth of our business segments, and the statements contained
in the "Outlook" section of this release. These statements are not guarantees
of future performance and involve risks, uncertainties and assumptions that
are difficult to predict. Forward-looking statements are based upon
assumptions as to future events that may not prove to be accurate. Actual
outcomes and results may differ materially from what is expressed or
forecasted in these forward-looking statements. As a result, these statements
speak only as of the date they were made and we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Our actual results and future
trends may differ materially depending on a variety of factors, including the
continued impact of the commercial satellite downturn, the impact of the
commercial aviation downturn on overall production, as well as the impact on
production or production rates for specific commercial airplane models, the
continued operation, viability and growth of major airline customers and non-
airline customers (such as the U.S. Government); adverse developments in the
value of collateral securing customer and other financings; the occurrence of
any significant collective bargaining labor dispute; tax settlements with the
U.S. Government; the Company's successful execution of internal performance
plans, production rate increases and decreases (including any reduction in or
termination of an aircraft product), acquisition and divestiture plans, and
other cost-reduction and productivity efforts; charges from any future SFAS
142 review; an adverse development in rating agency credit ratings or
assessments; the actual outcomes of certain pending sales campaigns and U.S.
and foreign government procurement activities, including procurement of
tankers by the U.S. Department of Defense; the cyclical nature of some of the
Company's businesses; unanticipated financial market changes which may impact
pension plan assumptions; domestic and international competition in the
defense, space and commercial areas; continued integration of acquired
businesses; performance issues with key suppliers, subcontractors and
customers; factors that could result in significant and prolonged disruption
to air travel worldwide (including impacts flowing from the war in Iraq and
future terrorist attacks); any additional impacts from the attacks of
September 11, 2001; global trade policies; worldwide political stability;
domestic and international economic conditions; price escalation; the outcome
of political and legal processes, including uncertainty regarding government
funding of certain programs; changing priorities or reductions in the U.S.
Government or foreign government defense and space budgets; termination of
government or commercial contracts due to unilateral government or customer
action or failure to perform; legal, financial and governmental risks related
to international transactions; legal proceedings, including U.S. Government
proceedings and investigations and commercial litigation related to the
Evolved Expendable Launch Vehicle Program; and other economic, political and
technological risks and uncertainties. Additional information regarding these
factors is contained in the Company's SEC filings, including, without
limitation, the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 and Form 10-Q for the period ending March 31, 2003.
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions except Six months ended Three months ended
per share data) June 30 June 30
2003 2002 2003 2002
Sales and other operating revenues $25,045 $27,679 $12,785 $13,858
Cost of products and services (22,184) (23,103) (11,646) (11,532)
Boeing Capital Corporation interest
expense (222) (189) (111) (99)
2,639 4,387 1,028 2,227
Income from operating investments, net 15 40 9 29
General and administrative expense (1,403) (1,293) (791) (621)
Research and development expense (798) (844) (437) (385)
Gain on dispositions, net 12 42 5 42
Share-based plans expense (233) (220) (119) (116)
Goodwill impairment (913)
Impact of September 11, 2001,
recoveries/(charges) 15 (34) 12
Earnings (loss) from operations (666) 2,078 (293) 1,176
Other income/(expense), net 29 40 10 28
Interest and debt expense (185) (162) (92) (80)
Earnings (loss) before income taxes (822) 1,956 (375) 1,124
Income tax (expense)/benefit 152 (599) 183 (345)
Net earnings (loss) before cumulative
effect of accounting change (670) 1,357 (192) 779
Cumulative effect of accounting
change, net of tax (1,827)
Net earnings (loss) $(670) $(470) $(192) $779
Basic earnings (loss) per share before
cumulative effect of accounting
change $(0.84) $1.69 $(0.24) $0.97
Cumulative effect of accounting
change, net of tax (2.28)
Basic earnings (loss) per share $(0.84) $(0.59) $(0.24) $0.97
Diluted earnings (loss) per share
before cumulative effect of
accounting change $(0.84) $1.68 $(0.24) $0.96
Cumulative effect of accounting
change, net of tax (2.26)
Diluted earnings (loss) per share $(0.84) $(0.58) $(0.24) $0.96
Cash dividends paid per share $0.34 $0.34 $0.17 $0.17
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
(Dollars in millions except per share June 30 December 31
data) 2003 2002
Assets
Cash and cash equivalents $1,879 $2,333
Accounts receivable 5,235 5,007
Current portion of customer and
commercial financing 909 1,289
Deferred income taxes 2,042 2,042
Inventories, net of advances,
progress billings and reserves 6,384 6,184
Total current assets 16,449 16,855
Customer and commercial financing, net 11,419 10,922
Property, plant and equipment, net 8,521 8,765
Goodwill 1,910 2,760
Other acquired intangibles, net 1,081 1,128
Prepaid pension expense 7,249 6,671
Deferred income taxes 2,196 2,272
Other assets 2,826 2,969
$51,651 $52,342
Liabilities and Shareholders' Equity
Accounts payable and other
liabilities $14,120 $13,739
Advances in excess of related costs 2,968 3,123
Income taxes payable 653 1,134
Short-term debt and current portion
of long-term debt 1,505 1,814
Total current liabilities 19,246 19,810
Accrued retiree health care 5,585 5,434
Accrued pension plan liability 6,271 6,271
Deferred lease income 500 542
Long-term debt 13,083 12,589
Shareholders' equity:
Common shares, par value $5.00 -
1,200,000,000 shares authorized;
Shares issued 1,011,870,159
and 1,011,870,159 5,059 5,059
Additional paid-in capital 2,341 2,141
Treasury shares, at cost
170,935,405 and 171,834,950 (8,350) (8,397)
Retained earnings 13,306 14,262
Accumulated other comprehensive income (3,985) (4,045)
ShareValue Trust shares
40,835,627 and 40,373,809 (1,405) (1,324)
Total shareholders' equity 6,966 7,696
$51,651 $52,342
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30
(Dollars in millions) 2003 2002
Cash flows - operating activities:
Net earnings (loss) $(670) $(470)
Adjustments to reconcile net earnings (loss)
to net cash provided (used) by operating
activities:
Non-cash items:
Impairment of goodwill 913 2,410
Share-based plans expense 233 220
Depreciation 738 604
Amortization of other acquired
intangibles 46 46
Amortization of debt discount/premium
and issuance costs 8 6
Pension income (99) (299)
Investment/asset impairment charges 56 46
Customer and commercial financing
valuation provision 179 17
Gain on dispositions, net (12) (42)
Other charges and credits, net 53 12
Changes in assets and liabilities
Accounts receivable 82 (545)
Inventories, net of advances, progress
billings and reserves (331) 1,119
Accounts payable and other liabilities 392 (225)
Advances in excess of related costs (155) (1,013)
Income taxes payable and deferred (503) (45)
Deferred lease income (42) (39)
Prepaid pension expense (479) (340)
Accrued retiree health care 151 92
Other (143) 132
Net cash provided (used) by
operating activities 417 1,686
Cash flows - investing activities:
Customer financing and properties
on lease, additions (1,035) (2,003)
Customer financing and properties
on lease, reductions 563 760
Property, plant and equipment,
net additions (303) (463)
Acquisitions, net of cash acquired (71)
Proceeds from dispositions 100 52
Contributions to investment in
strategic and non-strategic
operations (78) (401)
Proceeds from investment in
strategic and non-strategic
operations 67 63
Net cash provided (used) by investing
activities (757) (1,992)
Cash flows - financing activities:
New borrowings 1,143 1,276
Debt repayments (991) (549)
Stock options exercised, other 20 47
Dividends paid (286) (285)
Net cash provided (used) by financing
activities (114) 489
Net increase (decrease) in cash and
cash equivalents (454) 183
Cash and cash equivalents at
beginning of year 2,333 633
Cash and cash equivalents at end of
second quarter $1,879 $816
The Boeing Company and Subsidiaries
Business Segment Data
(Unaudited)
Six months ended Three months ended
(Dollars in millions) June 30 June 30
2003 2002 2003 2002
Revenues:
Commercial Airplanes $11,516 $15,975 $5,819 $7,662
Integrated Defense Systems:
Aircraft and Weapon Systems 5,224 4,843 2,540 2,634
Network Systems 4,187 3,554 2,233 1,971
Support Systems 1,984 1,632 1,019 866
Launch and Orbital Systems 1,428 1,423 770 677
Total Integrated Defense Systems 12,823 11,452 6,562 6,148
Boeing Capital Corporation 570 483 287 255
Other 515 256 285 130
Accounting differences /
eliminations (379) (487) (168) (337)
Operating revenues $25,045 $27,679 $12,785 $13,858
Earnings (loss) from operations:
Commercial Airplanes $201 $1,199 $313 $560
Integrated Defense Systems:
Aircraft and Weapon Systems 753 659 372 365
Network Systems 235 254 101 144
Support Systems 216 144 107 93
Launch and Orbital Systems (1,602) (13) (1,009) 37
Total Integrated Defense Systems (398) 1,044 (429) 639
Boeing Capital Corporation (41) 139 72 73
Other (178) (97) (57) (45)
Accounting differences /
eliminations 79 137 54 68
Share-based plans expense (233) (220) (119) (116)
Unallocated (expense)/income (96) (124) (127) (3)
Earnings (loss) from operations (666) 2,078 (293) 1,176
Other income/(expense), net 29 40 10 28
Interest and debt expense (185) (162) (92) (80)
Earnings (loss) before income taxes (822) 1,956 (375) 1,124
Income tax (expense)/benefit 152 (599) 183 (345)
Net earnings (loss) before
cumulative effect of accounting
change $(670) $1,357 $(192) $779
Effective income tax rate 18.5% 30.6% 48.8% 30.7%
Research and development expense:
Commercial Airplanes $314 $436 $157 $213
Integrated Defense Systems:
Aircraft and Weapon Systems 166 136 88 63
Network Systems 95 50 53 (10)
Support Systems 33 22 18 12
Launch and Orbital Systems 134 134 86 67
Total Integrated Defense Systems 428 342 245 132
Other 56 66 35 40
Total research and development
expense $798 $844 $437 $385
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries Six Months 2nd Quarter
Commercial Airplanes 2003 2002 2003 2002
717 6 (5) 8 3 (3) 5
737 Next-Generation* 85 130 (2) 44 71 (1)
747 10 13 (1) 4 5 (1)
757 9 19 4 7
767 16 (1) 22 7 10
777 19 30 12 14
Total 145 222 74 112
* Includes one intercompany C-40 737 aircraft in the 1st quarter 2002
and one in the 2nd quarter 2002
Note: Commercial Airplanes deliveries by model include deliveries under
operating lease, which are identified by parentheses.
Integrated Defense Systems
Aircraft and Weapon Systems:
F-15 2 1 1 1
C-17 9 7 4 4
F/A-18E/F 20 19 9 9
T-45TS 7 7 3 5
CH-47 (New Builds) 4 2
Apache (New Builds) 14 9
C-40 1 1 - 1
Launch and Orbital Systems:
Delta II 2 2 1 1
Delta IV 1 -
Satellites 3 4 2 1
Contractual backlog (Dollars June 30 March 31 December 31
in billions) 2003 2003 2002
Commercial Airplanes $66.0 $65.8 $68.2
Integrated Defense Systems:
Aircraft and Weapon Systems 19.4 16.0 15.9
Network Systems 5.3 6.1 6.7
Support Systems 5.5 5.8 5.2
Launch and Orbital Systems 8.6 8.6 8.2
Total Integrated Defense Systems 38.8 36.5 36.0
Total contractual backlog $104.8 $102.3 $104.2
Unobligated backlog $43.7 $33.1 $34.7
Workforce 160,000 164,000 166,000
SOURCE The Boeing Company
-0- 07/23/2003
/CONTACT: Investor Relations, Paul Kinscherff or Bob Kurtz,
+1-312-544-2140, or Communications, John Dern, +1-312-544-2002, all of Boeing
Company/
/Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/109119.html/
/Web site: http://www.boeing.com /
(BA)
END