UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-442
THE BOEING COMPANY
(Exact name of registrant as specified in its charter)
| Delaware | 91-0425694 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 100 N. Riverside, Chicago, IL | 60606-1596 | |
| (Address of principal executive offices) | (Zip Code) | |
(312) 544-2000
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No
As of July 31, 2003, there were 800,162,781 shares of common stock, $5.00 par value, issued and outstanding.
1
THE BOEING COMPANY
FORM 10-Q
For the Quarter Ended June 30, 2003
| Part I. Financial Information (Unaudited) | Page | |||||
| Item 1. | Financial Statements | |||||
| Condensed Consolidated Statements of Operations | 3 | |||||
| Condensed Consolidated Statements of Financial Position | 4 | |||||
| Condensed Consolidated Statements of Cash Flows | 5 | |||||
| Notes to Condensed Consolidated Financial Statements | 6 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
49 | ||||
| Item 4. | Controls and Procedures | 49 | ||||
| Part II. Other Information | ||||||
| Item 1. | Legal Proceedings | 49 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 51 | ||||
| Item 5. | Other Information | 54 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 54 | ||||
| Review by Independent Public Accountants | 55 | |||||
| Independent Accountant’s Review Report | 56 | |||||
| Signature | 57 | |||||
| Section 302 Certification – CEO | 58 | |||||
| Section 302 Certification – CFO | 59 | |||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| (Dollars in millions except per share data) | Six months ended June 30 |
Three months ended 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 | ||||||||
See notes to condensed consolidated financial statements.
3
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Unaudited)
| (Dollars in millions except per share data) | June 30 2003 |
December 31 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 | |||||
See notes to condensed consolidated financial statements.
4
The Boeing Company and Subsidiaries
Condensed 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) |
||||||||
| Non-cash items: |
||||||||
| Impairment of goodwill |
913 | 2,410 | ||||||
| Share-based plans expense |
233 | 220 | ||||||
| Depreciation |
738 | 607 | ||||||
| Amortization of other acquired intangibles |
46 | 43 | ||||||
| Amortization of debt discount/premium and issuance costs |
8 | 6 | ||||||
| Pension income |
(99 | ) | (299 | ) | ||||
| Investment/asset impairment charges, net |
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 | ) | ||||