Boeing Reports Third Quarter Results; Updates Outlook
-- Results reflect continued strong performance of defense and commercial
airplane businesses and include the previously disclosed decision to
complete 757 production
-- Third quarter earnings of $0.32 per diluted share reflects strong
overall performance offset by previously disclosed charge of $0.14 per
diluted share to complete production of the 757
-- Revenues on track at $12.2 billion for the third quarter, reflecting
planned lower commercial airplane deliveries offset by expected growth
at Integrated Defense Systems
-- Strong program cash flows in the quarter supported $1.2 billion
discretionary pension contribution, strengthening pension plans and
reducing future contribution requirements; operating cash flow was a
negative $0.2 billion after these contributions; cash balance at
quarter-end totaled $1.7 billion
-- Revenue guidance for 2003 is being increased on strong defense sales;
the earnings per share outlook is being revised to reflect the 757
program decision; cash flow guidance is being revised to reflect
pension contributions in the quarter
-- The 2004 outlook for growing revenues, earnings, and cash flow remains
unchanged
Selected Operating Highlights - Third Quarter 2003:
-- Delivered 7.7 percent Integrated Defense Systems' operating margins on
12 percent revenue growth; completed partner selection for the
$15 billion system design and development phase of the U.S. Army's
Future Combat System; won important contract award for the Small
Diameter Bomb program; signed Greece as the eighth international
customer for the Apache attack helicopter
-- Delivered solid Commercial Airplanes' operating performance on planned
lower deliveries of 65 airplanes as the intense focus on lean
continues to generate positive results; won 51 commercial airplane
orders, including 34 from AirTran, a leading low-cost carrier;
continued to refine proposed 7E7 airplane to deliver superior
performance and comfort
-- Signed agreement to provide Connexion by Boeing(SM) service on 11 SAS
airplanes
Table 1. Summary Financial Results
(Millions, except per share data)
3rd Quarter % Nine Months %
2003 2002 Change 2003 2002 Change
Revenues $12,242 $12,690 (4%) $37,287 $40,368 (8%)
Reported Net Income /
(Loss) $256 $372 (31%) ($414) ($98) (322%)
Reported Earnings /
(Loss) per Share $0.32 $0.46 (30%) ($0.52) ($0.12) (333%)
Diluted EPS Impact of
Non-Cash SFAS 142
Goodwill Impairment
Charges ($1.02) ($2.26)
Adjusted Earnings per
Share* $0.32 $0.46 (30%) $0.50 $2.14 (77%)
Average Diluted Shares
for EPS 808.8 808.3 800.1 808.6
* 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, Oct. 29 /PRNewswire-FirstCall/ -- The Boeing Company (NYSE: BA)
reported net income for the third quarter of 2003 of $256 million, or $0.32
per share, on revenues of $12.2 billion. This compares with net earnings of
$372 million, or $0.46 per share, on revenues of $12.7 billion for the third
quarter of 2002.
On Oct. 16, 2003, the company announced it will complete production of the
757 jetliner during 2004 after delivering more than 1000 units over 20 years.
The company recognized a charge related to this decision that reduced third
quarter operating earnings $184 million, or $0.14 per share.
"This quarter we continued to build a strong long-term future with
disciplined program management and decisive action," said Boeing Chairman and
Chief Executive Officer Phil Condit. "Development of the technical and
business case for a 7E7 program remained on track, and our decision to
complete production of the 757 reflects both market conditions and the
evolution of our product line. We also positioned our defense business for
continued long-term growth and performance by completing partner selection on
the Future Combat Systems program and moving forward with the Small Diameter
Bomb program."
As shown in Table 2, the company's third quarter earnings from operations
totaled $433 million. Operating earnings reflected solid results from
military and commercial airplane programs, which partially offset the 757
charge, planned lower commercial airplane deliveries, and lower pension
income.
Table 2. Earnings from Operations & Margins
(Millions, except margin percent) 3rd Quarter Nine Months
2003 2002 2003 2002
Earnings / (Losses) from Operations $433 $454 ($233) $2,532
Add Back: Goodwill Impairment
Charges (1) $913 -- (2)
Adjusted Earnings from Operations* $433 $454 $680 $2,532
Operating Margin 3.5% 3.6% (0.6%) 6.3%
Adjusted Operating Margin* 3.5% 3.6% 1.8% 6.3%
(1) See SEC filings, including press releases dated April 10, 2003, and
April 23, 2003, for additional information.
(2) 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.
Pre-tax expense for share-based plans totaled $115 million and reduced
earnings per share by $0.09 in the third quarter. This reflects non-cash
expenses attributable to the company's equity compensation plans. Deferred
stock compensation expense attributable to vested and undistributed
performance shares, which is separately determined based on the quarterly
change in the company's stock price, did not impact earnings per share as
company's stock price on September 30 was little changed from June 30.
During the quarter, the company generated strong cash flows that it used
to make a $1.2 billion discretionary cash contribution to its pension plans.
Including the contribution, the company's third quarter operating cash flow
was negative $168 million, and free cash flow* was negative $343 million, as
shown in Table 3. As a result of the contribution, future pension funding
requirements will be reduced, depending on plan and market performance.
Table 3. Cash Flow
(Millions) 3rd Quarter Nine Months
2003 2002 2003 2002
Operating Cash Flow (1) (2) ($168) $1,280 $249 $2,966
Less Property, Plant & Equipment,
Net ($175) ($123) ($478) ($586)
Free Cash Flow* ($343) $1,157 ($229) $2,380
(1) Includes year-to-date pension contributions totaling $0.3B in
2002 and $1.7B in 2003. (2) 3Q03 operating cash flow includes $67
million of cash received from customer financing transactions and
classified as Operating Cash Flow compared to ($65) million in 3Q02.
2002 operating cash flow reflects previously disclosed reclassification
of certain cash flows into investing activities.
As shown in Table 4, the company's cash balance remained strong at
$1.7 billion. Boeing debt was flat at $4.8 billion while debt at Boeing
Capital grew modestly, consistent with customer-financing portfolio growth.
Table 4. Quarter-End Cash and Debt Balances
(Billions) Quarter-End
3Q03 2Q03
Cash $1.7 $1.9
Debt Balances:
The Boeing Company $4.8 $4.8
Boeing Capital Corporation $9.5 $9.2
Non-Recourse Customer Financing $0.6 $0.6
Total Consolidated Debt $14.9 $14.6
Segment Results
Boeing Commercial Airplanes
Commercial Airplanes continued to aggressively manage for profitability
through the continuing downturn in its markets, while positioning itself for
long-term strength. Third-quarter results reflect solid operating performance
on planned lower delivery volumes, offset both by the impact associated with
the decision to complete 757 production as well as pension expense.
Commercial Airplanes made further progress on resizing operations and
improving efficiency while moving forward with its disciplined product
development strategy. Commercial Airplanes' results are summarized in Table
5.
Table 5. Commercial Airplanes Operating Results
(Millions, except deliveries
& margin percent) 3rd Quarter % Nine Months %
2003 2002 Change 2003 2002 Change
Commercial Airplanes Deliveries 65 73 (11%) 210 295 (29%)
Revenues $5,049 $6,063 (17%) $16,565 $22,038 (25%)
Earnings / (Losses) from
Operations $35 $334 (90%) $236 $1,533 (85%)
Add Back: Goodwill
Impairment Charges $341
Adjusted Earnings from
Operations* $35 $334 (90%) $577 $1,533 (62%)
Operating Margins 0.7% 5.5% 1.4% 7.0%
Adjusted Operating Margins* 0.7% 5.5% 3.5% 7.0%
During the third quarter, deliveries of commercial airplanes decreased 11
percent to 65 airplanes, and revenues fell 17 percent to $5.0 billion, when
compared with the third quarter of 2002. Reported earnings from operations
totaled $35 million and operating margins were 0.7 percent. Third quarter
earnings and margins reflect expenses totaling $184 million attributable to
completing production of the 757.
Commercial Airplanes received 51 gross orders during the quarter.
Contractual backlog totaled $65.1 billion on September 30 compared with
$66.0 billion at the end of the second quarter.
Integrated Defense Systems
Integrated Defense Systems delivered strong revenue growth and solid
operating performance for the quarter. Revenues increased 12 percent to
$7.3 billion, up from $6.5 billion in the third quarter of 2002. Reported
operating earnings totaled $561 million compared with earnings from operations
of $406 million in the third quarter of 2002. Operating margins for the
quarter were 7.7 percent compared with 6.3 percent for the same period last
year. Aircraft and weapon, support, and network systems 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)
Operating Results 3rd Quarter % Nine Months %
2003 2002 Change 2003 2002 Change
Revenues
Aircraft and Weapon
Systems $2,953 $2,884 2% $8,177 $7,727 6%
Network Systems $2,327 $2,024 15% $6,514 $5,578 17%
Support Systems $1,053 $885 19% $3,037 $2,517 21%
Launch and Orbital
Systems $959 $700 37% $2,387 $2,123 12%
Total IDS Revenues $7,292 $6,493 12% $20,115 $17,945 12%
Earnings / (Losses) from
Operations
Aircraft and Weapon
Systems $351 $317 11% $1,104 $976 13%
Network Systems (2) $151 $76 99% $386 $330 17%
Support Systems $117 $126 (7%) $333 $270 23%
Launch and Orbital
Systems (1) (2) ($58) ($113) N.M. ($1,660) ($126) N.M.
Total IDS Earnings from
Operations $561 $406 38% $163 $1,450 (89%)
Add Back: Goodwill
Impairment Charges -- -- $572 --
Adjusted Earnings from
Operations* $561 $406 38% $735 $1,450 (49%)
Operating Margins 7.7% 6.3% 0.8% 8.1%
Adjusted Operating Margins* 7.7% 6.3% 3.7% 8.1%
(1) 1Q03 results includes SFAS 142 goodwill impairment charges totaling
$572 million.
(2) 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 delivered another quarter of strong
profitability. Revenues for the quarter rose 2 percent to just under
$3.0 billion on increased JDAM volume. Performance remained excellent with
operating margins at 11.9 percent, up from 11.0 percent in 2002, and included
continuing investment in the 767 Tanker program.
Network Systems results for the third quarter reflected continued growth
in its Department of Defense (DoD) network-centric and homeland security
program base as revenues rose 15 percent to $2.3 billion. Operating margins
were 6.5 percent and reflected strong program performance offset by a
$47 million pre-tax non-cash charge related to the Resource 21 venture based
on NASA's decision not to award an imagery contract. Period results in 2002
included a $100 million charge related to the development of the 737 Airborne
Early Warning & Control aircraft.
Support Systems delivered strong growth with revenues up 19 percent to
almost $1.1 billion on significant increases in spares for tactical aircraft,
maintenance and modifications on transport aircraft, and integrated logistic
support and services. Operating margins remained strong at 11.1 percent
compared with 14.2 percent in the third quarter of 2002, which benefited from
a gain related to the divestiture of an equity investment.
Launch and Orbital Systems revenues for the quarter were up 37 percent to
just under $1.0 billion on increased Delta IV deliveries and higher satellite
sales. Operating losses were $58 million and reflect development cost on the
Delta IV heavy demonstration vehicle and slight cost growth on current
commercial satellite programs. This compares to a loss of $113 million in
third quarter of 2002, which included the non-cash write-down of a
$100 million equity investment in Teledesic, LLC.
At the end of the quarter, contractual backlog was $34.4 billion compared
with $38.8 billion at the end of the second quarter; unobligated backlog
totaled $44.3 billion.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) continues to focus on minimizing risk and
preserving value with prudently structured transactions and portfolio
management. BCC results are summarized in Table 7.
Table 7. Boeing Capital Corporation Operating Results
(Millions) 3rd Quarter % Nine Months %
2003 2002 Change 2003 2002 Change
Revenues $344 $236 46% $914 $718 27%
Pre-Tax Income/(Loss) (1) $108 ($93) N.M. $67 $46 46%
(1) Includes financing-related interest expense of $110 million and
$108 million for 3Q03 and 3Q02, respectively. Year-to-date financing-
related interest expense totaled $332 million for 2003 and
$297 million for 2002.
During the quarter, revenues and pre-tax income increased to $344 million
and $108 million, respectively, primarily as a result of portfolio growth
during the second half of 2002. BCC third-quarter revenues and income also
reflect the sale of certain financing assets, which resulted in a $45 million
gain in the period. This gain was partially offset by non-cash charges
totaling $34 million, primarily to revalue selected operating lease assets.
In the third quarter of 2002, comparable results included pre-tax charges of
$149 million to strengthen reserves and revalue certain investments.
BCC's customer-financing portfolio grew modestly in the quarter to
$12.2 billion, up from $12.0 billion at the end of the second quarter and
$11.5 billion in the third quarter of 2002. The increase reflected new
business volume totaling $0.6 billion offset by $0.4 billion of asset run-off
and depreciation. The allowance for losses on finance lease and note
receivables at quarter-end was 4.6 percent compared to 5.2 percent at the end
of the second quarter.
At quarter-end, approximately 78 percent of BCC's portfolio was related to
Boeing products and services (primarily commercial aircraft), unchanged from
the end of the second quarter. During the quarter, BCC agreed to restructure
the terms of its loans and leases with United Airlines. The company does not
expect the revised terms will have a material adverse effect on earnings, cash
flow or financial position. Leverage, as measured by the ratio of debt-to-
equity, declined during the quarter from 5.3-to-1 to 5.2-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. Third-quarter losses from
operations totaled $55 million primarily reflecting investment in Connexion by
Boeing as well as net adjustments relating to customer financing activities
with an unfavorable impact totaling $14 million. This compares to
$191 million in the third quarter of 2002, which included a $101 million
charge related to customer-financing activities subject to Boeing company
guarantees.
Connexion by Boeing continues to prepare for launch of commercial service
in 2004, while Air Traffic Management builds support for a modernized global
air traffic management system. During the third quarter, Connexion by Boeing
signed an initial service agreement with SAS for 11 aircraft and a memorandum
of understanding with All Nippon Airlines.
Outlook
Table 8 reflects the company's current assessment of its financial outlook
during the guidance period.
Table 8. Financial Outlook
(Billions, except per share data) 2003 2004
Revenues +/- $50 +/- $52
Earnings Per Share (GAAP) ($0.12)-($0.02) $1.75 - $1.95
Add back: Goodwill Impairment Charges $1.02
Adjusted Earnings Per Share* $0.90 - $1.00 $1.75 - $1.95
Operating Cash Flow $2.0 - $2.5 >$3.5
Less: Property, Plant & Equipment, Net +/- $1 +/- $1
Free Cash Flow* $1.0 - $1.5 >$2.5
The company actively monitors conditions in its key markets. In the
commercial aviation market the airline industry environment remains mixed with
trends varying between carriers and regions. A number of low-cost carriers
continue to gain market share, remain profitable and are ordering new
airplanes. Although there have been encouraging signs, the downturn remains
severe and many airlines continue to incur losses that dampen demand across
all airplane types. The timing of a civil aviation delivery recovery remains
uncertain and will likely be no earlier than 2005.
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 Systems segments are also expected to continue delivering strong
results. Strength in defense and non-commercial space markets should continue
to partially offset the downturn in the company's commercial aviation and
space markets, and drive revenue growth in 2004. The company's outlook
contemplates signing the proposed contract in 2003 to deliver 100 767 tankers
to the U.S. Air Force.
Boeing Commercial Airplanes' delivery forecast for 2003 is unchanged at
approximately 280 airplanes. The delivery forecast for 2004 is also unchanged
at between 275 and 290 airplanes and is essentially sold out at the lower end
of the range. Commercial Airplanes expects demand for aircraft services and
spares to remain soft due to severe market conditions.
The company is increasing its revenue outlook for 2003 from
+/- $49 billion to +/- $50 billion. The revision primarily reflects continued
revenue strength in the company's military programs. The company's 2004
revenue outlook is unchanged at +/- $52 billion.
The company is revising its 2003 earnings per share guidance to reflect
the results of the quarter. On a GAAP basis, 2003 earnings per share guidance
is revised from ($0.07) to $0.03 per share to ($0.12) to ($0.02) per share.
Adjusted earnings per share* guidance is also revised from $0.95 - $1.05 per
share to $0.90 to $1.00 per share. The company's 2003 adjusted earnings per
share* guidance adds back the non-cash charges for goodwill impairment ($1.02
per share) recognized in the first quarter. Earnings per share guidance for
2004 remains unchanged at $1.75 to $1.95 per share.
The company is also revising its cash flow guidance to reflect its
$1.2 billion of discretionary pension contributions in the third quarter. For
2003, operating cash flow guidance is revised from $3.0 to $3.5 billion to
$2.0 to $2.5 billion. Similarly, the company is revising free cash flow*
guidance for 2003 from $2.0 to $2.5 billion to $1.0 to $1.5 billion. For
2004, operating cash flow guidance remains unchanged at greater than $3.5
billion with free cash flow* guidance unchanged at greater than $2.5 billion.
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 $1.4 billion, compared to just under
$2.2 billion for the first three quarters 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 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 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; our successful execution of
internal performance plans, production rate increases and decreases (including
any reduction in or termination of an aircraft product, including the 717, 757
and 767 models), 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 the timing of procurement of tankers by the
U.S. Department of Defense; the cyclical nature of some of our 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 the status of and impacts flowing from continued warfare 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 our SEC filings, including, without limitation, our
Annual Report on Form 10-K for the year ended December 31, 2002 and Form 10-Q
for the period ending March 31, 2003 and June 30, 2003.
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in millions except Nine months ended Three months ended
per share data) September 30 September 30
2003 2002 2003 2002
Sales and other operating
revenues $37,287 $40,368 $12,242 $12,690
Cost of products and services (32,635) (34,128) (10,451) (11,025)
Boeing Capital Corporation
interest expense (332) (297) (110) (108)
4,320 5,943 1,681 1,557
Income from operating
investments, net 33 33 18 (8)
General and administrative
expense (2,141) (1,908) (738) (615)
Research and development
expense (1,212) (1,215) (414) (371)
Gain on dispositions, net 12 46 0 4
Share-based plans expense (348) (333) (115) (113)
Goodwill impairment (913) 0 0 0
Impact of September 11, 2001,
recoveries/(charges) 16 (34) 1 0
Earnings (loss) from
operations (233) 2,532 433 454
Other income/(expense), net 30 38 1 (2)
Interest and debt expense (268) (239) (83) (77)
Earnings (loss) before income
taxes (471) 2,331 351 375
Income tax (expense)/benefit 57 (602) (95) (3)
Net earnings (loss) before
cumulative effect of
accounting change (414) 1,729 256 372
Cumulative effect of
accounting change, net of
tax 0 (1,827) 0 0
Net earnings (loss) $(414) $(98) $256 $372
Basic earnings (loss) per
share before cumulative
effect of accounting change $(0.52) $2.16 $0.32 $0.47
Cumulative effect of
accounting change, net of
tax 0.00 (2.28) 0.00 0.00
Basic earnings (loss) per
share $(0.52) $(0.12) $0.32 $0.47
Diluted earnings (loss) per
share before cumulative
effect of accounting change $(0.52) $2.14 $0.32 $0.46
Cumulative effect of
accounting change, net of
tax 0.00 (2.26) 0.00 0.00
Diluted earnings (loss) per
share $(0.52) $(0.12) $0.32 $0.46
Cash dividends paid per share $0.51 $0.51 $0.17 $0.17
Average diluted shares
(millions) 800.1 808.6 808.8 808.3
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Unaudited)
(Dollars in millions except per share September 30 December 31
data) 2003 2002
Assets
Cash and cash equivalents $1,733 $2,333
Accounts receivable 4,422 5,007
Current portion of customer and
commercial financing 788 1,289
Deferred income taxes 2,042 2,042
Inventories, net of advances,
progress billings and reserves 6,630 6,184
Total current assets 15,615 16,855
Customer and commercial financing, net 11,964 10,922
Property, plant and equipment, net 8,451 8,765
Goodwill 1,910 2,760
Other acquired intangibles, net 1,058 1,128
Prepaid pension expense 8,504 6,671
Deferred income taxes 2,045 2,272
Other assets 2,708 2,969
$52,255 $52,342
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $13,538 $13,739
Advances in excess of related costs 3,272 3,123
Income taxes payable 584 1,134
Short-term debt and current portion
of long-term debt 1,550 1,814
Total current liabilities 18,944 19,810
Accrued retiree health care 5,657 5,434
Accrued pension plan liability 6,271 6,271
Deferred lease income 713 542
Long-term debt 13,320 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 2,450 2,141
Treasury shares, at cost -
170,741,772 and 171,834,950 (8,340) (8,397)
Retained earnings 13,561 14,262
Accumulated other comprehensive income (3,975) (4,045)
ShareValue Trust shares -
41,021,428 and 40,373,809 (1,405) (1,324)
Total shareholders' equity 7,350 7,696
$52,255 $52,342
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30
(Dollars in millions) 2003 2002
Cash flows - operating activities:
Net earnings (loss) $(414) $(98)
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 348 333
Depreciation 1,012 939
Amortization of other
acquired intangibles 69 65
Amortization of debt
discount/premium and issuance costs 10 7
Pension income (140) (427)
Investment/asset
impairment charges, net 94 312
Customer and commercial
financing valuation provision 222 146
Gain on dispositions, net (12) (46)
Other charges and credits, net 29 (2)
Changes in assets and liabilities -
Accounts receivable 532 (36)
Inventories, net of advances, progress
billings and reserves (718) 652
Accounts payable and other liabilities (35) (346)
Advances in excess of related costs 149 (715)
Income taxes payable and deferred (418) 4
Deferred lease income 171 (60)
Prepaid pension expense (1,693) (340)
Accrued retiree health care 223 127
Other (93) 41
Net cash provided by
operating activities 249 2,966
Cash flows - investing activities:
Customer financing and properties
on lease, additions (1,793) (2,788)
Customer financing and properties
on lease, reductions 878 1,050
Property, plant and equipment,
net additions (478) (586)
Acquisitions, net of cash acquired 289 0
Proceeds from dispositions 158 121
Contributions to investment in
strategic and non-strategic operations (62) (501)
Proceeds from investment in
strategic and non-strategic
operations 146 137
Net cash used by
investing activities (862) (2,567)
Cash flows - financing activities:
New borrowings 1,803 2,447
Debt repayments (1,385) (1,403)
Stock options exercised, other 24 54
Dividends paid (429) (428)
Net cash provided by
financing activities 13 670
Net increase (decrease) in cash and
cash equivalents (600) 1,069
Cash and cash equivalents at
beginning of year 2,333 633
Cash and cash equivalents at end of
third quarter $1,733 $1,702
The Boeing Company and Subsidiaries
Business Segment Data
(Unaudited)
Nine months ended Three months ended
(Dollars in millions) September 30 September 30
2003 2002 2003 2002
Revenues:
Commercial Airplanes $16,565 $22,038 $5,049 $6,063
Integrated Defense
Systems:
Aircraft and Weapon
Systems 8,177 7,727 2,953 2,884
Network Systems 6,514 5,578 2,327 2,024
Support Systems 3,037 2,517 1,053 885
Launch and Orbital
Systems 2,387 2,123 959 700
Total Integrated
Defense Systems 20,115 17,945 7,292 6,493
Boeing Capital
Corporation 914 718 344 236
Other 667 361 152 105
Accounting differences
/ eliminations (974) (694) (595) (207)
Operating revenues $37,287 $40,368 $12,242 $12,690
Earnings (loss) from
operations:
Commercial Airplanes $236 $1,533 $35 $334
Integrated Defense Systems:
Aircraft and Weapon
Systems 1,104 976 351 317
Network Systems 386 330 151 76
Support Systems 333 270 117 126
Launch and Orbital
Systems (1,660) (126) (58) (113)
Total Integrated
Defense Systems 163 1,450 561 406
Boeing Capital
Corporation 67 46 108 (93)
Other (233) (288) (55) (191)
Accounting differences
/ eliminations 50 244 (29) 107
Share-based plans
expense (348) (333) (115) (113)
Unallocated
(expense)/income (168) (120) (72) 4
Earnings (loss) from
operations (233) 2,532 433 454
Other income/(expense), net 30 38 1 (2)
Interest and debt
expense (268) (239) (83) (77)
Earnings (loss) before
income taxes (471) 2,331 351 375
Income tax
(expense)/benefit 57 (602) (95) (3)
Net earnings (loss)
before cumulative
effect of accounting
change $(414) $1,729 $256 $372
Effective income tax rate 12.1% 25.8% 27.1% 0.8%
Research and development
expense:
Commercial Airplanes $486 $613 $172 $177
Integrated Defense Systems:
Aircraft and Weapon
Systems 266 201 100 65
Network Systems 140 96 45 46
Support Systems 47 33 14 11
Launch and Orbital Systems 181 182 47 48
Total Integrated
Defense Systems 634 512 206 170
Other 92 90 36 24
Total research and
development expense $1,212 $1,215 $414 $371
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries
Commercial Nine Months 3rd Quarter
Airplanes 2003 2002 2003 2002
717 9 (8) 13 3 (3) 5
737 Next-Generation* 126 169 (2) 41 39
747 14 19 (1) 4 6
757 13 25 4 6
767 21 (4) 28 (1) 5 (3) 6 (1)
777 27 41 8 11
Total 210 295 65 73
* Intercompany deliveries included in the above:
- Nine months ended September 30, 2003 - two C-40 737 aircraft, one
Wedgetail AEW&C System 737 aircraft, and one 767 Tanker Transport
non-United States Air Force (USAF) aircraft.
- Nine months ended September 30, 2002 - three C-40 737 aircraft.
- Three months ended September 30, 2003 - two C-40 737 aircraft and one
767 Tanker Transport non-USAF aircraft.
- Three months ended September 30, 2002 - one C-40 737 aircraft.
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 3 2 1 1
C-17 13 12 4 5
F/A-18E/F 34 30 14 11
T-45TS 11 10 4 3
CH-47 (New Builds) - 6 - 2
Apache (New Builds) - 15 - 1
C-40 1 1 - -
Launch and Orbital Systems:
Delta II 4 3 2 1
Delta IV 2 - 1 -
Satellites 3 4 - -
Contractual backlog (Dollars
in billions) September June March December
30 30 31 31
2003 2003 2003 2002
Commercial Airplanes $65.1 $66.0 $65.8 $68.2
Integrated Defense Systems:
Aircraft and Weapon
Systems 18.3 19.4 16.0 15.9
Network Systems 5.8 5.3 6.1 6.7
Support Systems 5.5 5.5 5.8 5.2
Launch and Orbital Systems 4.8 8.6 8.6 8.2
Total Integrated Defense
Systems 34.4 38.8 36.5 36.0
Total contractual backlog $99.5 $104.8 $102.3 $104.2
Unobligated backlog $44.3 $43.7 $33.1 $34.7
Workforce 156,000 160,000 164,000 166,000
SOURCE Boeing Company
-0- 10/29/2003
/CONTACT: Paul Kinscherff of Boeing Company, +1-312-544-2140/
/First Call Analyst: Paul Kinscherff/
/Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/109119.html/
/Web site: http://www.boeing.com /
(BA)
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