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, 2004
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 26, 2004, there were 839,434,130 shares of common stock, $5.00 par value, issued and outstanding.
(This number includes 42 million outstanding shares held by the ShareValue Trust which are not eligible to vote and not included in earnings per share calculations.)
1
FORM 10-Q
For the Quarter Ended June 30, 2004
INDEX
| Part I. Financial Information (Unaudited) | Page | |||||
| Item 1. |
||||||
| 3 | ||||||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
35 | ||||
| Item 3. |
62 | |||||
| Item 4. |
62 | |||||
| Part II. Other Information | ||||||
| Item 1. |
62 | |||||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
63 | ||||
| Item 4. |
64 | |||||
| Item 6. |
66 | |||||
| 67 | ||||||
| 68 | ||||||
| 69 | ||||||
| 70 | ||||||
| 71 | ||||||
| 72 | ||||||
| 73 | ||||||
| 74 | ||||||
2
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 |
||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||
| Sales and other operating revenues |
$ | 25,991 | $ | 24,916 | $ | 13,088 | $ | 12,717 | ||||||||
| Cost of products and services |
(21,586 | ) | (22,137 | ) | (10,875 | ) | (11,621 | ) | ||||||||
| Boeing Capital Corporation interest expense |
(173 | ) | (179 | ) | (89 | ) | (90 | ) | ||||||||
| 4,232 | 2,600 | 2,124 | 1,006 | |||||||||||||
| Income/(loss) from operating investments, net |
40 | 15 | 27 | 9 | ||||||||||||
| General and administrative expense |
(1,528 | ) | (1,393 | ) | (824 | ) | (788 | ) | ||||||||
| Research and development expense |
(996 | ) | (798 | ) | (522 | ) | (437 | ) | ||||||||
| Gain/(loss) on dispositions, net |
6 | 12 | 6 | 5 | ||||||||||||
| Share-based plans expense |
(283 | ) | (233 | ) | (164 | ) | (119 | ) | ||||||||
| Goodwill impairment |
(3 | ) | (913 | ) | (3 | ) | ||||||||||
| Impact of September 11, 2001, recoveries/(charges) |
15 | 12 | ||||||||||||||
| Earnings (loss) from continuing operations |
1,468 | (695 | ) | 644 | (312 | ) | ||||||||||
| Other income/(expense), net |
225 | 33 | 66 | 17 | ||||||||||||
| Interest and debt expense |
(169 | ) | (185 | ) | (85 | ) | (92 | ) | ||||||||
| Earnings (loss) before income taxes |
1,524 | (847 | ) | 625 | (387 | ) | ||||||||||
| Income tax (expense)/benefit |
(324 | ) | 161 | (39 | ) | 187 | ||||||||||
| Net earnings (loss) from continuing operations |
1,200 | (686 | ) | 586 | (200 | ) | ||||||||||
| Income from discontinued operations, net of taxes |
16 | 16 | 7 | 8 | ||||||||||||
| Net gain on disposal of discontinued operations, net of taxes |
14 | 14 | ||||||||||||||
| Net earnings (loss) |
$ | 1,230 | $ | (670 | ) | $ | 607 | $ | (192 | ) | ||||||
| Basic earnings (loss) per share from continuing operations |
$ | 1.49 | $ | (0.86 | ) | $ | 0.72 | $ | (0.25 | ) | ||||||
| Income from discontinued operations, net of taxes |
0.02 | 0.02 | 0.01 | 0.01 | ||||||||||||
| Net gain on disposal of discontinued operations, net of taxes |
0.02 | 0.02 | ||||||||||||||
| Basic earnings (loss) per share |
$ | 1.53 | $ | (0.84 | ) | $ | 0.75 | $ | (0.24 | ) | ||||||
| Diluted earnings (loss) per share from continuing operations |
$ | 1.48 | $ | (0.86 | ) | $ | 0.72 | $ | (0.25 | ) | ||||||
| Income from discontinued operations, net of taxes |
0.02 | 0.02 | 0.01 | 0.01 | ||||||||||||
| Net gain on disposal of discontinued operations, net of taxes |
0.02 | 0.02 | ||||||||||||||
| Diluted earnings (loss) per share |
$ | 1.52 | $ | (0.84 | ) | $ | 0.75 | $ | (0.24 | ) | ||||||
| Cash dividends paid per share |
$ | 0.37 | $ | 0.34 | $ | 0.20 | $ | 0.17 | ||||||||
| Average diluted shares (millions) |
811.2 | 800.1 | 812.3 | 800.1 | ||||||||||||
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 2004 |
December 31 2003 |
||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 6,184 | $ | 4,633 | ||||
| Accounts receivable |
4,598 | 4,466 | ||||||
| Current portion of customer financing |
732 | 857 | ||||||
| Income taxes receivable |
199 | |||||||
| Deferred income taxes |
1,729 | 1,716 | ||||||
| Inventories, net of advances and progress billings |
4,255 | 5,338 | ||||||
| Assets of discontinued operations |
571 | 2,135 | ||||||
| Total current assets |
18,069 | 19,344 | ||||||
| Customer financing |
10,823 | 10,052 | ||||||
| Property, plant and equipment, net |
8,252 | 8,339 | ||||||
| Goodwill |
1,923 | 1,913 | ||||||
| Other acquired intangibles, net |
1,006 | 1,035 | ||||||
| Prepaid pension expense |
10,416 | 8,542 | ||||||
| Deferred income taxes |
1,352 | 1,242 | ||||||
| Other assets |
2,442 | 2,519 | ||||||
| $ | 54,283 | $ | 52,986 | |||||
| Liabilities and Shareholders’ Equity |
||||||||
| Accounts payable and other liabilities |
$ | 14,198 | $ | 13,514 | ||||
| Advances in excess of related costs |
3,473 | 3,464 | ||||||
| Income taxes payable |
725 | 277 | ||||||
| Short-term debt and current portion of long-term debt |
2,575 | 1,144 | ||||||
| Total current liabilities |
20,971 | 18,399 | ||||||
| Accrued retiree health care |
5,847 | 5,745 | ||||||
| Accrued pension plan liability |
6,629 | 6,629 | ||||||
| Deferred lease income |
803 | 775 | ||||||
| Long-term debt |
11,084 | 13,299 | ||||||
| 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 |
3,212 | 2,880 | ||||||
| Treasury shares, at cost – 171,344,867 and 170,388,053 |
(8,359 | ) | (8,322 | ) | ||||
| Retained earnings |
15,300 | 14,407 | ||||||
| Accumulated other comprehensive income/ (loss) |
(4,152 | ) | (4,145 | ) | ||||
| ShareValue Trust Shares – 41,537,823 and 41,203,694 |
(2,111 | ) | (1,740 | ) | ||||
| Total shareholders’ equity |
8,949 | 8,139 | ||||||
| $ | 54,283 | $ | 52,986 | |||||
See notes to condensed consolidated financial statements.
4
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| (Dollars in millions) | Six months ended June 30 |
|||||||
| 2004 | 2003 | |||||||
| Cash flows – operating activities: |
||||||||
| Net earnings/(loss) |
$ | 1,230 | $ | (670 | ) | |||
| Adjustments to reconcile net earnings/(loss) |
||||||||
| to net cash (used)/provided by operating activities: |
||||||||
| Non-cash items: |
||||||||
| Impairment of goodwill |
3 | 913 | ||||||
| Share-based plans expense |
283 | 233 | ||||||
| Depreciation |
634 | 713 | ||||||
| Amortization of other acquired intangibles |
46 | 46 | ||||||
| Amortization of debt discount/premium and issuance costs |
8 | 8 | ||||||
| Pension expense/(income) |
150 | (99 | ) | |||||
| Investment/asset impairment charges, net |
60 | 56 | ||||||
| Customer financing valuation provision |
39 | 179 | ||||||
| Net gain on disposal of discontinued operations |
(21 | ) | ||||||
| Gain on dispositions, net |
(6 | ) | (21 | ) | ||||
| Other charges and credits, net |
(5 | ) | 49 | |||||
| Non-cash adjustments related to discontinued operations |
26 | 37 | ||||||
| Changes in assets and liabilities – |
||||||||
| Accounts receivable |
(119 | ) | 82 | |||||
| Inventories, net of advances, progress billings and reserves |
276 | (331 | ) | |||||
| Accounts payable and other liabilities |
435 | 392 | ||||||
| Advances in excess of related costs |
9 | (155 | ) | |||||
| Income taxes receivable, payable and deferred |
483 | (503 | ) | |||||
| Deferred lease income |
28 | (42 | ) | |||||
| Prepaid pension expense |
(2,013 | ) | (479 | ) | ||||
| Goodwill |
(2 | ) | ||||||
| Other acquired intangibles, net |
(1 | ) | ||||||
| Accrued retiree health care |
102 | 151 | ||||||
| Other |
(101 | ) | (142 | ) | ||||
| Net cash provided by operating activities |
1,544 | 417 | ||||||
| Cash flows – investing activities: |
||||||||
| Customer financing and properties on lease, additions |
(395 | ) | (1,035 | ) | ||||
| Customer financing and properties on lease, reductions |
150 | 446 | ||||||
| Discontinued operations customer financing, reductions |
106 | 117 | ||||||
| Property, plant and equipment, net additions |
(294 | ) | (303 | ) | ||||
| Acquisitions, net of cash | ||||||||