Boeing Reports First Quarter Results; Updates Outlook
CHICAGO, April 23 --
- Results reflect strong operating performance at Integrated Defense
Systems and Commercial Airplanes, partially offsetting severe
commercial markets downturn
- Reported earnings include previously disclosed non-cash charges to
revalue goodwill balances and customer financing assets
- Reported first quarter loss of $0.60 per share includes non-cash
charges totaling $1.02 per share to revalue goodwill balances, and
$0.20 per share to strengthen reserves and revalue certain customer
financing portfolio investments and assets, primarily at Boeing Capital
Corporation
- Adjusted earnings per share* totals $0.42, reflecting solid core
aerospace performance in challenging commercial and strong defense
markets
- Revenues remain solid at $12.3 billion for the first quarter; 2003
revenue guidance unchanged
- Negative operating cash flow of $428 million and free cash flow* of
$558 million primarily reflects receipts timing at Integrated Defense
Systems, and lower period orders at Commercial Airplanes; 2003 cash
flow guidance unchanged
- Revising 2003 adjusted earnings per share* guidance from $1.90-$2.10
to $1.70-$1.90; reflects first quarter non-cash charges related to the
customer financing portfolio totaling $0.20 per share
- GAAP 2003 earnings per share outlook $0.68 - $0.88 per share; reflects
first quarter non-cash charges related to the customer finance
portfolio ($0.20) and goodwill impairment ($1.02) totaling $1.22 per
share
Selected Operating Highlights - First Quarter 2003:
- Delivered strong Integrated Defense Systems operating results,
excluding goodwill charges, on an 18 percent increase in revenue;
completed first Delta IV EELV mission for the United States Air Force
- Maintained strong Commercial Airplanes operating performance, excluding
goodwill charges, on lower planned deliveries of 71 airplanes;
completed first flight of the extended-range 777 airplane and resumed
development of longer-range 777 airplane; won significant order from
Ryanair
- Conducted well-received consumer trials of Connexion by Boeing(SM)
high-speed internet service with Lufthansa and British Airways
Table 1. Summary Financial Results
(Millions, except per share data)
1Q03 1Q02 % Change
Revenues $12,260 $13,821 (11%)
Reported Net Loss ($478) ($1,249) 62%
Reported Loss per Share ($0.60) ($1.54) 61%
Diluted EPS Impact of Non-Cash SFAS 142
Goodwill Impairment Charges ($1.02) ($2.26)
Adjusted Earnings per Share* (1) $0.42 $0.72 (42%)
Average Diluted Shares for EPS 800.0 807.8
(1) Includes customer financing portfolio charges of $0.20 per share.
* 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.
The Boeing Company (NYSE: BA) reported a net loss of $478 million, or
$0.60 per share, for the first quarter of 2003 on revenues of $12.3 billion.
The loss included previously announced non-cash, after-tax charges totaling
$818 million, or $1.02 per share, related to the company's analysis of
goodwill impairment, and $159 million, or $0.20 per share, to strengthen
reserves and revalue assets in Boeing's customer finance portfolio. However,
the underlying performance of the company's aerospace businesses was strong.
Excluding the $1.02 impact of goodwill impairment charges, adjusted earnings
per share* totaled $0.42.
"During the first quarter we continued to run healthy businesses in
dynamic market conditions. Integrated Defense Systems delivered strong
results in its growing markets, and aggressive management at Boeing Commercial
Airplanes again resulted in solid performance," said Boeing Chairman and Chief
Executive Officer Phil Condit. Condit added, "Boeing Capital is managing
conservatively, and Boeing's balanced portfolio of aerospace businesses
underpins our continued strength and profitability."
As shown in Table 2 below, the company reported a first quarter 2003 loss
from operations of $373 million compared with earnings from operations of
$902 million in the first quarter of 2002. This included pre-tax non-cash
charges of $1.2 billion consisting of $913 million for goodwill impairment and
$251 million related to Boeing's finance portfolio. Excluding these charges,
the decrease was primarily the result of lower planned commercial airplane
deliveries and lower pension income, as expected. Performance and growth at
Integrated Defense Systems and production efficiencies at Commercial Airplanes
partially offset this reduction.
Table 2. Earnings from Operations & Margins
(Millions, except margin percent)
1Q03 1Q02
Earnings / (Losses) from Operations ($373) $902
Add Back: Goodwill Impairment Charges (1) $913 --(2)
Adjusted Earnings from Operations* $540 $902
Operating Margin (3.0%) 6.5%
Adjusted Operating Margin* 4.4% 6.5%
(1) See segment results and Boeing press release dated April 10, 2003, for
additional information. This amount reflects a downward revision of
$18 million from the press release dated April 10, which reported
$931 million.
(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.
Deferred stock compensation pre-tax expense decreased $49 million during
the quarter due to the decline in the company's stock price from December 31
through March 31. This resulted in a $0.04 benefit to earnings per share.
Pre-tax expense for share-based plans totaled $114 million and reduced
earnings per share by $0.09. Netted together, consolidated stock compensation
expenses lowered first quarter earnings per share by a total of $0.05.
As shown in Table 3 below, the company reported negative operating cash
flow and negative free cash flow* for the quarter. This reflects receipts
timing and inventory growth at Integrated Defense Systems, lower period orders
at Boeing Commercial Airplanes, and higher tax payments. As noted in the
Outlook section, free cash flow* guidance for 2003 remains unchanged. The
company did not contribute cash to its pension plans in either period.
Table 3. Cash Flow
(Millions)
1Q03 1Q02(1)
Operating Cash Flow ($428) $761
Less Property, Plant & Equipment, Net ($130) ($223)
Free Cash Flow* ($558) $538
(1) 1Q02 numbers reflect reclassifications previously disclosed in 2002
results.
Cash and short-term investment balances at the end of the first quarter
totaled $2.0 billion, down slightly from the end of 2002. Consolidated debt
increased to $15.0 billion, reflecting the successful $1.0 billion long-term
bond issue of The Boeing Company completed in February.
Table 4. Quarter-End Cash and Debt Balances
(Billions)
1Q03 4Q02
Cash $2.0 $2.3
Debt Balances:
The Boeing Company $5.1 $4.4
Boeing Capital Corporation $9.3 $9.4
Non-Recourse Customer Financing $0.6 $0.6
Total Consolidated Debt $15.0 $14.4
Segment Results
Boeing Commercial Airplanes
Commercial Airplanes continues to aggressively manage for profitability
through the unprecedented downturn in its markets. During the quarter they
remained focused on resizing operations, improving efficiency, and pursuing a
disciplined product development strategy, including a new 7E7 airplane.
Commercial Airplanes results are summarized in Table 5 below.
Table 5. Commercial Airplanes Operating Results
(Millions, except deliveries & margin percent)
1Q03 1Q02 % Change
Commercial Airplanes Deliveries 71 110 (35%)
Revenues $5,697 $8,313 (31%)
Earnings/(Losses) from Operations(1) ($112) $639 (118%)
Add Back: Goodwill Impairment Charges $341 --
Adjusted Earnings from Operations* $229 $639 (64%)
Operating Margins (2.0%) 7.7%
Adjusted Operating Margins* 4.0% 7.7%
(1) As previously announced, Commercial Airplanes is reporting segment
earnings from operations on a program accounting basis starting with
the first quarter of 2003. The 1Q02 results in the table have been
recast to reflect the program accounting methodology. Supplemental
data for all of 2002 recast using the program accounting methodology
is attached. Additional information on earnings from operations
calculated using the unit cost method formerly reported is disclosed
at Boeing's Investor Relations website ( www.boeing.com ).
During the first quarter, deliveries of commercial airplanes decreased
35 percent to 71 airplanes, and revenues fell 31 percent to $5.7 billion when
compared with the first quarter of 2002. Reported period losses of
$112 million included non-cash charges for goodwill impairment totaling
$341 million, as previously announced. Commercial Airplanes adjusted earnings
from operations* totaled $229 million as continued strong operating
performance partially offset the impact of significantly lower deliveries and
revenues. Adjusted operating margins* were 4.0 percent in the period compared
to 7.7 percent for the first quarter last year.
Commercial Airplanes received 32 gross orders during the quarter.
Contractual backlog totaled $65.8 billion compared with $68.2 billion at the
end of 2002.
Integrated Defense Systems
Integrated Defense Systems delivered strong revenue growth and excellent
operating performance in the quarter. Revenues increased 18 percent to
$6.3 billion, up from $5.3 billion in the first quarter of 2002. Reported
operating earnings of $31 million include the charge for goodwill impairment
of $572 million. Excluding this charge, adjusted earnings from operations*
rose 49 percent to $603 million compared with the first quarter of 2002.
Higher deliveries at Aircraft and Weapon Systems, revenue and margin growth at
Network Systems and Support Systems, and improved performance at Launch and
Orbital Systems all contributed to an outstanding quarter.
Integrated Defense Systems results are summarized below and reflect the
new segment reporting structure effective January 1, 2003, as previously
disclosed. A description of each of the segments and pro-forma financial
results encompassing the prior four quarters are attached as supplemental
information to this release.
Table 6. Integrated Defense Systems Operating Results
(Millions, except margin percent)
1Q03 1Q02 % Change
Revenues
Aircraft and Weapon Systems $2,684 $2,209 22%
Network Systems $1,954 $1,583 23%
Support Systems $965 $766 26%
Launch and Orbital Systems $658 $746 (12%)
Total IDS Revenues $6,261 $5,304 18%
Earnings/(Losses) from Operations
Aircraft and Weapon Systems $381 $294 30%
Network Systems $134 $110 22%
Support Systems $109 $51 114%
Launch and Orbital Systems (1) ($593) ($50) N.M.
Total IDS Earnings from Operations $31 $405 (92%)
Add Back: Goodwill Impairment Charges $572 --
Adjusted Earnings from Operations* $603 $405 49%
Operating Margins 0.5% 7.6%
Adjusted Operating Margins* 9.6% 7.6%
(1) 1Q03 results include SFAS 142 goodwill impairment charges totaling
$572 million. "N.M." = Not Meaningful
Aircraft and Weapon Systems again delivered strong financial results.
Revenues for the quarter rose 22 percent to almost $2.7 billion on higher
C-17, F/A-18, and JDAM deliveries. Performance remained excellent with
operating margins at 14.2 percent, up from 13.3 percent in 2002, and included
continuing investment in the 767 tanker program.
Network Systems results for the first quarter reflect continuing strong
growth in homeland security, intelligence, and DOD network-centric programs as
revenues rose 23 percent to $2.0 billion. Operating margins totaled 6.9
percent, similar to the first quarter of 2002.
Support Systems delivered strong growth with revenues up 26 percent to
nearly $1.0 billion on significant increases in tactical and transport
aircraft spares and modernization. The revenue growth and excellent operating
performance drove operating margins up sharply to 11.3 percent from
6.7 percent in the first quarter of 2002. Unfavorable performance on a
modernization and upgrade contract affected 2002 results.
Excluding the charge for goodwill impairment, Launch and Orbital Systems
adjusted operating losses* narrowed significantly to $21 million in the first
quarter when compared with the first quarter of 2002. Revenues fell 12
percent on fewer satellite deliveries partially offset by one Delta IV
delivery. Launch and Orbital Systems had four successful launches during the
quarter. Boeing continues to resize the business to its markets and announced
plans to consolidate launch vehicle manufacturing and assembly in Alabama.
Contractual backlog at the end of the quarter increased slightly to
$36.5 billion compared with $36.0 billion at the end of 2002.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) results are summarized in Table 7 below.
Table 7. Boeing Capital Corporation Operating Results
(Millions)
1Q03 1Q02 % Change
Revenues $283 $228 24%
Pre-Tax Income/(Loss) (1) ($113) $66 (271%)
(1) Includes financing-related interest expense of $111 million and
$90 million for 1Q03 and 1Q02 respectively. Supplemental data for 2002
reported with interest expense included is attached.
Revenues increased 24 percent to $283 million as a result of portfolio
growth during 2002. Including the previously announced charges totaling
$193 million for strengthening reserves and revaluing certain assets, BCC
recorded a pre-tax loss, including interest expense, of $113 million compared
with pre-tax income of $66 million in the first quarter of 2002. Additional
charges related to the customer financing portfolio totaling $58 million were
recorded in Boeing's "Other" segment during the quarter as a result of
corporate guarantees to Boeing Capital.
BCC increased its allowance for losses on finance leases and notes
receivable to 5.3 percent of receivables, up from 3.5 percent at the end of
2002. In addition, the customer financing portfolio declined slightly during
the quarter to $11.7 billion, compared to $11.8 billion at the end of 2002 and
$10.3 billion at the end of the first quarter of 2002. This decrease reflects
lower new business volume and transaction timing. New business volume
totaling just under $0.4 billion was offset by slightly higher asset run-off
and depreciation.
At quarter-end, approximately 76 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 2002, and 70 percent at the
end of 2001. Leverage, as measured by the ratio of debt-to-equity, was a
conservative 5.6-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 $121 million driven in part by the charges noted above
related to customer financing activities; these totaled $58 million.
During the first quarter, Connexion by Boeing achieved a key milestone as
it conducted initial commercial service demonstrations on transatlantic
Lufthansa and British Airways flights. Boeing's Air Traffic Management unit
continued to build support for a modernized global air traffic management
system.
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-$54
Earnings Per Share (GAAP) $0.68-$0.88 $2.10-$2.30
Add back: Goodwill Impairment Charges $1.02
Adjusted Earnings Per Share* $1.70-$1.90 $2.10-$2.30
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 continues to monitor conditions in its key markets. In the
commercial aviation market, the war in Iraq, increased security costs, the
emergence of severe acute respiratory syndrome (SARS) and airline industry
restructuring together create a dynamic environment; it is too early to reach
conclusions regarding the ultimate impact. However, the downturn remains
severe, with trends varying between carriers and regions, and has reduced
demand across all airplane models. In the company's commercial space markets,
demand for launch services and satellites also remains soft. The company is
aggressively managing its commercial businesses to address market realities.
At the same time, the company's defense and non-commercial space markets
are expected to remain quite strong. Boeing is well positioned to support
customer requirements, including the transformation of the military.
Integrated Defense Systems' missile defense, homeland security, intelligence,
and DOD network-centric businesses are expected to grow. Aircraft, weapons,
and aerospace support programs are expected to deliver results similar to the
strong levels achieved in 2002. Thus, strength in defense and non-commercial
space markets will continue to somewhat offset the downturn in the company's
commercial aviation and space markets.
At Boeing Capital Corporation, revenues are expected to increase due to
prior-year portfolio growth and current-year financing requirements. BCC will
focus on minimizing risk and preserving value through careful transaction
structuring and portfolio management.
Boeing Commercial Airplanes' forecast deliveries for 2003 and 2004 are
unchanged. The delivery forecast for 2003 is approximately 280 airplanes and
is virtually sold out. The delivery forecast for 2004 remains between 275 and
300 airplanes, with a gradual market recovery beginning in 2005. The 2004
delivery forecast is approximately 85 percent sold for 2004 at the lower end
of the range.
Boeing revenue guidance for 2003 and 2004 is unchanged. Revenue guidance
remains at +/- $49 billion for 2003, and $52 billion to $54 billion for 2004.
As a result of the non-cash charges this quarter, the company is revising
its earnings per share guidance. On a GAAP basis, the company's 2003 earnings
per share outlook ranges from $0.68 - $0.88 per share. The GAAP earnings per
share outlook reflects non-cash charges totaling $1.22 per share recognized in
the first quarter. This includes the charges for goodwill impairment ($1.02
per share) and the customer financing portfolio ($0.20 per share).
The company's 2003 adjusted earnings per share* guidance, which adds back
the charges for goodwill to better reflect the results of current period
operating activities, has been revised from $1.90 - $2.10 per share to $1.70 -
$1.90 per share. The downward revision reflects the first quarter non-cash
charges totaling $0.20 per share related to the customer financing portfolio.
Earnings per share guidance for 2004 remains unchanged at $2.10 - $2.30.
Earnings per share guidance for 2004 includes an estimated unfavorable
impact of $0.15 - $0.25 per share from pension expense. This compares to an
estimated favorable impact of approximately $0.05 per share from pension
income in 2003. These amounts are unchanged from prior guidance. As noted,
the actual impact of pensions on 2004 earnings per share could differ and
depends on market conditions and plan performance.
As noted in Table 8, operating cash flows are 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, and for 2004 at
greater than $2.5 billion. Following historical patterns, Boeing expects 2003
cash flows to be significantly greater in the second half of 2003 than in the
first half. The pension funding outlook included in these totals remains
unchanged from the prior quarter. The company expects to make discretionary
funding contributions in 2003. Free cash flow* guidance for 2004 includes
pre-tax pension contributions totaling approximately $1.0 billion.
Boeing expects research and development to remain between 3.0 and 3.5
percent of sales including the investment to develop a new mid-size commercial
airplane.
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 these adjusted financial results provide investors with an important
perspective on the current underlying operating performance of the business by
identifying the impact of non-cash adjustments related to past acquisitions.
Adjusted Earnings per Share
Boeing defines adjusted earnings per share as GAAP earnings per share
(EPS) less SFAS 142 goodwill charges. Table 1 provides a
reconciliation between 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
provide reconciliations between 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
provide reconciliations between 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. 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. 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 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 settlement 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 the timing of 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 the status of and 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; 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.
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three months ended
(Dollars in millions except per share data) March 31
2003 2002
Sales and other operating revenues $12,260 $13,821
Cost of products and services (10,538) (11,571)
Boeing Capital Corporation interest expense (111) (90)
1,611 2,160
Income from operating investments, net 6 11
General and administrative expense (612) (672)
Research and development expense (361) (459)
Gain on dispositions, net 7
Share-based plans expense (114) (104)
Goodwill impairment (913)
Impact of September 11, 2001, (charges)/recoveries 3 (34)
Earnings (loss) from operations (373) 902
Other income/(expense), net 19 12
Interest and debt expense (93) (82)
Earnings (loss) before income taxes (447) 832
Income tax expense (31) (254)
Net earnings (loss) before cumulative effect of
accounting change (478) 578
Cumulative effect of accounting change, net of tax (1,827)
Net earnings (loss) $(478) $(1,249)
Basic earnings (loss) per share before cumulative
effect of accounting change $(0.60) $0.72
Cumulative effect of accounting change, net of tax (2.28)
Basic earnings (loss) per share $(0.60) $(1.56)
Diluted earnings (loss) per share before cumulative
effect of accounting change $(0.60) $0.72
Cumulative effect of accounting change, net of tax (2.26)
Diluted earnings (loss) per share $(0.60) $(1.54)
Cash dividends paid per share $0.17 $0.17
Average diluted shares (millions) 800.0 807.8
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
March 31 December 31
(Dollars in millions except per share data) 2003 2002
Assets
Cash and cash equivalents $1,993 $2,333
Accounts receivable 4,929 5,007
Current portion of customer and commercial
financing 1,324 1,289
Deferred income taxes 2,042 2,042
Inventories, net of advances, progress billings
and reserves 6,426 6,184
Total current assets 16,714 16,855
Customer and commercial financing, net 10,866 10,922
Property, plant and equipment, net 8,614 8,765
Goodwill 1,910 2,760
Other acquired intangibles, net 1,105 1,128
Prepaid pension expense 6,713 6,671
Deferred income taxes 2,247 2,272
Other assets 3,058 2,969
$51,227 $52,342
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $13,006 $13,739
Advances in excess of related costs 2,734 3,123
Income taxes payable 893 1,134
Short-term debt and current portion of
long-term debt 1,801 1,814
Total current liabilities 18,434 19,810
Accrued retiree health care 5,510 5,434
Accrued pension plan liability 6,271 6,271
Deferred lease income 521 542
Long-term debt 13,207 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 1,850 2,141
Treasury shares, at cost -
171,154,669 and 171,834,950 (8,361) (8,397)
Retained earnings 13,784 14,262
Accumulated other comprehensive income (4,023) (4,045)
ShareValue Trust shares -
40,639,185 and 40,373,809 (1,025) (1,324)
Total shareholders' equity 7,284 7,696
$51,227 $52,342
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
March 31
(Dollars in millions) 2003 2002
Cash flows - operating activities:
Net earnings $(478) $(1,249)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Non-cash items:
Impairment of goodwill 913 2,410
Share-based plans expense 114 104
Depreciation 343 300
Amortization of other acquired intangibles 23 22
Amortization of debt discount/premium and
issuance costs 4 3
Pension income (42) (158)
Investment/asset impairment charges 52 46
Customer and commercial financing valuation
provision 170 8
Gain on dispositions, net (7)
Other charges and credits, net 27 12
Changes in assets and liabilities --
Accounts receivable 25 (525)
Inventories, net of advances, progress billings
and reserves (275) 529
Accounts payable and other liabilities (589) (53)
Advances in excess of related costs (389) (433)
Income taxes payable and deferred (303) (479)
Deferred lease income (21) (20)
Accrued retiree health care 76 53
Other (71) 191
Net cash provided (used) by operating activities (428) 761
Cash flows - investing activities:
Customer financing and properties on lease,
additions (536) (1,064)
Customer financing and properties on lease,
reductions 254 410
Property, plant and equipment, net additions (130) (223)
Acquisitions, net of cash acquired (71)
Proceeds from dispositions 62
Contributions to investment in strategic and
non-strategic operations (7) (294)
Proceeds from investment in strategic and
non-strategic operations 21 34
Net cash used by investing activities (407) (1,137)
Cash flows - financing activities:
New borrowings 1,037 740
Debt repayments (415) (246)
Stock options exercised, other 16 34
Dividends paid (143) (142)
Net cash provided by financing activities 495 386
Net increase (decrease) in cash and cash equivalents (340) 10
Cash and cash equivalents at beginning of year 2,333 633
Cash and cash equivalents at end of 1st quarter $1,993 $643
The Boeing Company and Subsidiaries
Business Segment Data
(Unaudited)
Three months ended
(Dollars in millions) March 31
2003 2002
Revenues:
Commercial Airplanes $5,697 $8,313
Integrated Defense Systems:
Aircraft and Weapon Systems 2,684 2,209
Network Systems 1,954 1,583
Support Systems 965 766
Launch and Orbital Systems 658 746
Total Integrated Defense Systems 6,261 5,304
Boeing Capital Corporation 283 228
Other 230 126
Accounting differences/eliminations (211) (150)
Operating revenues $12,260 $13,821
Earnings (loss) from operations:
Commercial Airplanes $(112) $639
Integrated Defense Systems:
Aircraft and Weapon Systems 381 294
Network Systems 134 110
Support Systems 109 51
Launch and Orbital Systems (593) (50)
Total Integrated Defense Systems 31 405
Boeing Capital Corporation (113) 66
Other (121) (52)
Accounting differences/eliminations 25 69
Share-based plans expense (114) (104)
Unallocated (expense)/income 31 (121)
Earnings (loss) from operations (373) 902
Other income/(expense), net 19 12
Interest and debt expense (93) (82)
Earnings (loss) before income taxes (447) 832
Income tax expense (31) (254)
Net earnings (loss) before cumulative effect
of accounting change $(478) $578
Effective income tax rate (6.9%) 30.5%
Research and development expense:
Commercial Airplanes $157 $223
Integrated Defense Systems:
Aircraft and Weapon Systems 78 73
Network Systems 42 60
Support Systems 15 10
Launch and Orbital Systems 48 67
Total Integrated Defense Systems 183 210
Other 21 26
Total research and development expense $361 $459
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries 1st Quarter
Commercial Airplanes 2003 2002
717 3(2) 3
737 Next-Generation* 41 59(1)
747 6 8
757 5 12
767 9(1) 12
777 7 16
Total 71 110
* Includes one intercompany C-40 aircraft for 1Q 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 1 -
C-17 5 3
F/A-18E/F 11 10
T-45TS 4 2
CH-47 (New Builds) - 2
Apache (New Builds) - 5
C-40 1 -
Launch and Orbital Systems:
Delta II 1 1
Delta IV 1 -
Satellites 1 3
March 31 December 31
Contractual backlog (Dollars in billions) 2003 2002
Commercial Airplanes $65.8 $68.2
Integrated Defense Systems:
Aircraft and Weapon Systems 16.0 15.9
Network Systems 6.1 6.7
Support Systems 5.8 5.2
Launch and Orbital Systems 8.6 8.2
Total Integrated Defense Systems 36.5 36.0
Total contractual backlog $102.3 $104.2
Unobligated backlog $33.1 $34.7
Workforce 164,000 166,000
The Boeing Company and Subsidiaries
Supplemental 2002 Business Segment Data
In the first quarter of 2003 Boeing is changing how it reports certain
operating segments. The purpose of the change is to further enhance
transparency and investor understanding of the company's financial results. In
order to facilitate the reporting transition, Boeing is providing the attached
2002 supplemental data which recasts prior period results into the company's
new segment reporting format. The company's 2002 financial results as
reported in its 10-K filing are unchanged.
Revisions to the company's segment reporting, which are effective for the
period ending March 31, 2003, are described below.
I. Integrated Defense Systems
The formation of the Integrated Defense Systems (IDS) business unit
was announced in July 2002. The IDS business unit combines the Company's
Military Aircraft and Missile Systems and Space and Communications
reporting segments. IDS has capabilities in defense, intelligence,
communication and space. IDS is a recognized leader in providing end-to-
end services for large-scale systems that combine sophisticated
communications networks with air, land, sea and space-based platforms for
global military, government and commercial customers.
Beginning in 2003, The Boeing Company will report IDS in the following
four segments: Aircraft and Weapon Systems; Support Systems; Network
Systems; and Launch and Orbital Systems. The Aircraft and Weapon Systems
and Support Systems segments comprise what was principally the former
Military Aircraft and Missile Systems unit. The Network Systems and Launch
and Orbital Systems segments comprise what was principally the former
Space and Communications unit. A brief description of each of the new
reporting segments is as follows:
Aircraft and Weapon Systems
This segment includes military aircraft, transport aircraft,
rotorcraft, tanker aircraft, unmanned vehicles, and missile systems.
Network Systems
This segment includes programs focused on battlefield management;
command, control and communications systems; missile defense systems;
homeland security; and intelligence, surveillance and reconnaissance
systems.
Support Systems
This segment includes training systems, spares, technical data,
modernization, upgrades, maintenance, modifications, logistic support
services and life cycle customer support.
Launch and Orbital Systems
This segment includes launch vehicles, commercial satellite programs,
propulsion and power systems, and human space flight and exploration
including the United Space Alliance venture.
II. Commercial Airplanes
Beginning in 2003, Commercial Airplanes will report operating earnings
on a program accounting basis. The company is making this change to
increase the visibility of Commercial Airplanes' contribution to
consolidated earnings and to enhance reporting consistency across its
businesses. Previously, Commercial Airplanes earnings from operations
were reported on a unit cost basis, and a reconciliation to program
accounting earnings results were separately included in the "accounting
differences and eliminations" line. With this change, Commercial
Airplanes program accounting results are immediately visible and a
reconciliation will no longer be necessary to determine segment
contributions to consolidated earnings.
III. Boeing Capital Corporation
Beginning in 2003, the company will report Boeing Capital Corporation
segment earnings from operations net of financing related interest costs.
Previously, financing related interest expense was separately reported as
a reduction to consolidated earnings from operations. The company is
making this change to more clearly present the operating results of Boeing
Capital Corporation's financing activities.
The Boeing Company
Supplemental 2002 Business Segment Data
(Unaudited)
Sales and other operating revenues
(Dollars in millions) Q1 Q2 Q3 Q4 YTD 2002
Commercial Airplanes $8,313 $7,662 $6,063 $6,349 $28,387
Integrated Defense Systems:
Aircraft and Weapon Systems $2,209 $2,634 $2,884 $2,842 10,569
Network Systems 1,583 1,971 2,024 2,535 8,113
Support Systems 766 866 885 967 3,484
Launch and Orbital Systems 746 677 700 668 2,791
Total Integrated Defense
Systems 5,304 6,148 6,493 7,012 24,957
Boeing Capital Corporation 228 254 236 276 994
Other 126 130 105 183 544
Accounting
difference/eliminations (150) (337) (207) (119) (813)
$13,821 $13,857 $12,690 $13,701 $54,069
Net earnings (loss)
(Dollars in millions) Q1 Q2 Q3 Q4 YTD 2002
Commercial Airplanes $639 $560 $334 $484 $2,017
Integrated Defense Systems:
Aircraft and Weapon Systems $294 $365 $317 $293 1,269
Network Systems 110 144 176 116 546
Support Systems 51 93 126 106 376
Launch and Orbital Systems (50) 37 (213) 44 (182)
Total Integrated Defense
Systems 405 639 406 559 2,009
Boeing Capital Corporation 66 73 (93) 26 72
Other (52) (45) (191) (136) (424)
Accounting
difference/eliminations 69 68 107 180 424
Share-based plans (104) (116) (113) (114) (447)
Unallocated expense (121) (3) 4 (73) (193)
Earnings (loss) from operations 902 1,176 454 926 3,458
Other income, principally
interest 12 28 (2) 4 42
Interest and debt expense (82) (80) (77) (81) (320)
Earnings (loss) before taxes 832 1,124 375 849 3,180
Income taxes 254 345 3 259 861
$578 $779 $372 $590 $2,319
For the year ended December 31, 2002
Depreciation
(Dollars in millions) and Capital Contractual
Assets Liabilities Amortization Expenditures Backlog
Commercial Airplanes $9,843 $6,075 $463 $135 $68,159
Integrated Defense
Systems:
Aircraft and Weapon
Systems 1,477 1,138 146 182 15,862
Network Systems 3,865 1,161 72 75 6,700
Support Systems 784 371 16 16 5,286
Launch and Orbital
Systems 6,627 2,235 243 264 8,166
Total Integrated
Defense Systems 12,753 4,905 477 537 36,014
Boeing Capital
Corporation 11,840 345 230
Other 3,213 586 44 29
Unallocated 14,693 32,735 295 300
$52,342 $44,646 $1,509 $1,001 $104,173
SOURCE The Boeing Company
-0- 04/23/2003
/CONTACT: Investor Relations, Paul Kinscherff or Bob Kurtz,
+1-312-544-2140, or Communications, John Dern or Anne Eisele, +1-312-544-2002,
all of Boeing/
/First Call Analyst: Paul Kinscherff, +1-312-544-2140/
/FCMN Contact: maritza.avila@boeing.com /
/Company News On-Call: http://www.prnewswire.com/comp/109119.html /
/Web site: http://www.boeing.com /
(BA)
END
