-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Tzase/2Xve9RvBeljgMU79g+eLEd3PBRyqUg3H1JnFaSVpLCmCu1Q8aPUBDYvO/D pMmhHzSBaMz42FjWGa+rhg== 0000012927-94-000015.txt : 19940816 0000012927-94-000015.hdr.sgml : 19940816 ACCESSION NUMBER: 0000012927-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOEING CO CENTRAL INDEX KEY: 0000012927 STANDARD INDUSTRIAL CLASSIFICATION: 3721 IRS NUMBER: 910425694 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00442 FILM NUMBER: 94542449 BUSINESS ADDRESS: STREET 1: P O BOX 3707 M/S 1F-31 CITY: SEATTLE STATE: WA ZIP: 98108 BUSINESS PHONE: 2066552121 MAIL ADDRESS: STREET 1: 7755 EAST MARGINAL WAY SOUTH CITY: SEATTLE STATE: WA ZIP: 98124 FORMER COMPANY: FORMER CONFORMED NAME: BOEING AIRPLANE CO DATE OF NAME CHANGE: 19730725 10-Q 1 FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1994 1 ............................................................................... ............................................................................... SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 Commission file number 1-442 THE BOEING COMPANY 7755 East Marginal Way South Seattle, Washington 98108 Telephone: (206) 655-2121 State of incorporation: Delaware IRS identification number: 91-0425694 The registrant 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 and has been subject to such filing requirements for the past 90 days. As of July 31, 1994, there were 340,697,330 shares of common stock, $5.00 par value, issued and outstanding. ............................................................................... ............................................................................... 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements THE BOEING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET EARNINGS (Dollars in millions except per share data) (Unaudited) Six months ended Three months ended June 30 June 30 1994 1993 1994 1993 - - ------------------------------------------------------------------------------- Sales $11,741 $14,629 $5,396 $7,985 Costs and expenses 11,038 13,618 5,126 7,404 - - ------------------------------------------------------------------------------- Earnings from operations 703 1,011 270 581 Other income, principally interest 49 98 24 47 Interest and debt expense (57) (8) (29) (3) - - ------------------------------------------------------------------------------- Earnings before federal taxes on income 695 1,101 265 625 Federal taxes on income 181 350 43 199 - - ------------------------------------------------------------------------------- Net earnings $ 514 $ 751 $ 222 $ 426 =============================================================================== Earnings per share $1.51 $2.21 $ .65 $1.25 =============================================================================== Cash dividends per share $ .50 $ .50 $ .25 $ .25 =============================================================================== See notes to consolidated financial statements. 1 3 THE BOEING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Dollars in millions except per share data) June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- (Unaudited) Assets - - -------------------------------------------------------------------------- Cash and cash equivalents $ 2,438 $ 2,342 Short-term investments 971 766 Accounts receivable 1,510 1,615 Current portion of customer financing 390 218 Deferred income taxes 1,124 800 Inventories 10,048 10,485 Less advances and progress billings (6,169) (7,051) - - -------------------------------------------------------------------------- Total current assets 10,312 9,175 Customer financing 2,829 2,959 Property, plant and equipment, at cost 13,459 13,232 Less accumulated depreciation (6,462) (6,144) Deferred income taxes 63 Other assets 1,466 1,165 - - -------------------------------------------------------------------------- $21,604 $20,450 ========================================================================== Liabilities and Shareholders' Equity - - -------------------------------------------------------------------------- Accounts payable and other liabilities $ 6,204 $ 5,854 Advances in excess of related costs 219 226 Income taxes payable 794 434 Current portion of long-term debt 21 17 - - -------------------------------------------------------------------------- Total current liabilities 7,238 6,531 Deferred income taxes 25 Accrued retiree health care 2,216 2,148 Long-term debt 2,608 2,613 Contingent stock repurchase commitment 175 175 Shareholders' equity: Common shares, par value $5.00 - 600,000,000 shares authorized; 349,256,792 shares issued 1,746 1,746 Additional paid-in capital 409 413 Retained earnings 7,524 7,180 Less treasury shares, at cost - 1994 - 8,625,524; 1993 - 9,118,995 (337) (356) - - -------------------------------------------------------------------------- Total shareholders' equity 9,342 8,983 - - -------------------------------------------------------------------------- $21,604 $20,450 ========================================================================== See notes to consolidated financial statements. 2 4 THE BOEING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions) (Unaudited) Six months ended June 30 - - ----------------------------------------------------------------------------- 1994 1993 - - ----------------------------------------------------------------------------- Cash flows - operating activities: Net earnings $ 514 $ 751 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 483 484 Changes in assets and liabilities - Accounts receivable 105 (260) Inventories, net of advances and progress billings (445) 289 Accounts payable and other liabilities 350 463 Advances in excess of related costs (7) (127) Income taxes payable and deferred 124 201 Other assets (301) (268) Accrued retiree health care 68 81 - - ----------------------------------------------------------------------------- Net cash provided by operating activities 891 1,614 - - ----------------------------------------------------------------------------- Cash flows - investing activities: Short-term investments (205) 341 Customer financing additions (324) (1,279) Customer financing reductions 252 137 Plant and equipment, net additions (361) (772) Other (3) - - ----------------------------------------------------------------------------- Net cash used by investing activities (638) (1,576) - - ----------------------------------------------------------------------------- Cash flows - financing activities: Debt financing (1) 471 Shareholders' equity - Cash dividends paid (170) (170) Stock options exercised, other 14 7 - - ----------------------------------------------------------------------------- Net cash provided (used) by financing activities (157) 308 - - ----------------------------------------------------------------------------- Net increase in cash and cash equivalents 96 346 Cash and cash equivalents at beginning of year 2,342 2,711 - - ----------------------------------------------------------------------------- Cash and cash equivalents at end of 2nd quarter $2,438 $ 3,057 ============================================================================= See notes to consolidated financial statements. 3 5 THE BOEING COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions) (Unaudited) Note 1 - Consolidated Financial Statements The consolidated interim financial statements included in this report have been prepared by the Company without audit. In the opinion of management, all adjustments necessary for a fair presentation are reflected in the interim financial statements. Such adjustments are of a normal and recurring nature. The results of operations for the period ended June 30, 1994, are not necessarily indicative of the operating results for the full year. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's 1993 Annual Report. Note 2 - Earnings per Share Earnings per share are computed on the basis of the weighted average number of shares outstanding during the period. The weighted average number of shares was 340.4 million and 339.6 million for the six-month periods ended June 30, 1994 and 1993, respectively. There was no material dilutive effect on earnings per share due to common stock equivalents. Note 3 - Federal Taxes on Income The provisions for federal taxes on income for the six-month periods ended June 30, 1994 and 1993, were reduced by $43 and $30 applicable to Foreign Sales Corporation tax benefits and by $27 and $0 applicable to research and development credit, representing reductions from the statutory tax rate of 10.0% and 2.7%, respectively. Income tax payments were $55 and $189 for the six months ended June 30, 1994 and 1993. Note 4 - Accounts Receivable Accounts receivable consisted of the following: June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- Amounts receivable under U.S. Government contracts $1,174 $1,182 Accounts receivable from commercial and foreign military customers 336 433 - - -------------------------------------------------------------------------- $1,510 $1,615 ========================================================================== Accounts receivable at June 30, 1994 and December 31, 1993 included amounts not currently billable of $546 and $596, respectively, principally relating to sales values recorded upon attainment of scheduled performance milestones that differ from contractual billing milestones, withholds on U.S. Government contracts, and other amounts on U.S. Government contracts subject to future settlement. 4 6 Note 5 - Inventories Inventories consisted of the following: June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- Inventoried costs relating to long-term commercial programs and U.S. Government and foreign military contracts, less estimated average cost of deliveries $ 9,166 $ 9,557 Commercial spare parts, general stock materials and other 882 928 - - -------------------------------------------------------------------------- $10,048 $10,485 ========================================================================== Note 6 - Customer Financing Long-term customer financing, less current portion, consisted of the following: June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- Notes receivable $1,172 $1,396 Investment in sales-type/financing leases 918 768 Operating lease aircraft, at cost, less accumulated depreciation of $248 and $220 839 895 - - -------------------------------------------------------------------------- 2,929 3,059 Less valuation allowance (100) (100) - - -------------------------------------------------------------------------- $2,829 $2,959 ========================================================================== Financing for aircraft is collateralized by security in the related asset, and historically the Company has not experienced a problem in accessing such collateral when necessary. Sales for the first six months of 1994 and 1993 included interest income of $88 and $68 associated with notes receivable and sales-type/financing leases. Note 7 - Other Assets Other assets consisted of the following: June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- Prepaid pension expense $1,282 $ 981 Investments, other 184 184 - - -------------------------------------------------------------------------- $1,466 $1,165 ========================================================================== 5 7 Note 8 - Accounts Payable and Other Liabilities Accounts payable and other liabilities consisted of the following: June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- Accounts payable $3,006 $2,731 Employee compensation and benefits 1,056 1,005 Lease and other deposits 634 708 Other 1,508 1,410 - - -------------------------------------------------------------------------- $6,204 $5,854 ========================================================================== Note 9 - Long-Term Debt Long-term debt consisted of the following: June 30 December 31 1994 1993 - - -------------------------------------------------------------------------- Unsecured debentures and notes: 8 3/8% due Mar. 1, 1996 $ 250 $ 249 6.35% due Jun. 15, 2003 299 299 8 1/10% due Nov. 15, 2006 175 175 8 3/4% due Aug. 15, 2021 398 398 7.95% due Aug. 15, 2024 300 300 7 1/4% due Jun. 15, 2025 247 247 8 3/4% due Sep. 15, 2031 248 248 8 5/8% due Nov. 15, 2031 173 173 7.50% due Aug. 15, 2042 100 100 7 7/8% due Apr. 15, 2043 173 173 6 7/8% due Oct. 15, 2043 125 125 Other notes 141 143 Less current portion (21) (17) - - -------------------------------------------------------------------------- $2,608 $2,613 ========================================================================== Interest rate swaps were entered into simultaneously with the issuance of the $100 debentures due August 15, 2042, resulting in a synthetic interest rate of 7.865%. The Company has a $3,000 credit line currently available under a credit agreement with a group of commercial banks. Under this agreement, there are compensating balance arrangements, and retained earnings totaling $1,306 are free from dividend restrictions. The Company has complied with restrictive covenants contained in debt agreements. Total debt interest, including amounts capitalized, was $108 and $81 for the six-month periods ended June 30, 1994 and 1993, and interest payments were $106 and $71, respectively. 6 8 Note 10 - Shareholders' Equity Changes in shareholders' equity for the six-month periods ended June 30, 1994 and 1993 consisted of the following: (Shares in thousands)
Common Stock ------------ Additional Treasury Stock Par Paid-In Retained --------------- Shares Value Capital Earnings Shares Amount - - ----------------------------------------------------------------------------------------- Balance - December 31, 1992 349,257 $1,746 $418 $6,276 9,836 $(384) - - ----------------------------------------------------------------------------------------- Net earnings 751 Cash dividends declared (170) Treasury shares issued for stock options, net (4) (262) 10 Tax benefit related to stock options 1 Stock appreciation rights expired or surrendered 1 - - ----------------------------------------------------------------------------------------- Balance - June 30, 1993 349,257 $1,746 $416 $6,857 9,574 $(374) ========================================================================================= - - ----------------------------------------------------------------------------------------- Balance - December 31, 1993 349,257 $1,746 $413 $7,180 9,119 $(356) - - ----------------------------------------------------------------------------------------- Net earnings 514 Cash dividends declared (170) Treasury shares issued for stock options, net (7) (493) 19 Tax benefit related to stock options 2 Stock appreciation rights expired or surrendered 1 - - ----------------------------------------------------------------------------------------- Balance - June 30, 1994 349,257 $1,746 $409 $7,524 8,626 $(337) =========================================================================================
7 9 Note 11 - Contingencies In January 1991, the Company received from the U.S. Government a notice of partial termination for default which terminated most of the work required under contracts to develop and install a new air defense system for Saudi Arabia, known as the Peace Shield program. The Government has filed with the Company a demand for repayment of $605 of Peace Shield unliquidated progress payments plus interest commencing January 25, 1991. In February 1991, the Company submitted a request for a deferred payment agreement which, if granted, would formally defer the Company's potential obligation to repay the $605 of unliquidated progress payments until the conclusion of the appeal process. In June 1991, the Government selected another contractor to perform the work which is the subject of the contracts that have been terminated for default, and the Government will likely assert claims related to the reprocurement. The Company does not expect the Government to assert such claims prior to completion of the reprocurement contract, which was originally scheduled for late 1995. Management's position, supported by outside legal counsel which specializes in government procurement law, is that the grounds for default asserted by the Government in the Peace Shield termination are not legally supportable. Accordingly, management and counsel are of the opinion that on appeal the termination for default has a substantial probability of being converted to termination for the convenience of the Government, which would eliminate any Government claim for cost of reprocurement or other damages. Additionally, the Company has a legal basis for a claim for equitable adjustment to the prices and schedules of the contracts (the "Contract Claim"). Many of the same facts underlie both the Contract Claim and the Company's appeal of the Government's termination action. The Company has filed its complaint in the United States Claims Court to overturn the default termination in order to obtain payment of the Contract Claim. The parties are currently litigating jurisdictional issues related to the complaint, and are engaged in discovery. Trial is currently scheduled for March 1997. The Company expects that its position will ultimately be upheld with respect to the termination action and that it will prevail on the Contract Claim. The Company's financial statements have been prepared on the basis of a conservative estimate of the revised values of the Peace Shield contracts including the Contract Claim and the Company's position that the termination was for the convenience of the Government. At this time, the Company cannot reasonably estimate the length of time that will be required to resolve the termination appeal and the Contract Claim. In the event that the Company's appeal of the termination for default is not successful, the Company could realize a pre-tax loss on the program approximating the value of the unliquidated progress payments plus related interest and potential damages assessed by the Government. REVIEW BY INDEPENDENT ACCOUNTANTS The consolidated statement of financial position as of June 30, 1994, the con- solidated statements of net earnings for the three-month and six-month periods ended June 30, 1994 and 1993, and the related consolidated statements of cash flows for the three-month and six-month periods ended June 30, 1994 and 1993, have been reviewed by the registrant's independent accountants, Deloitte & Touche, whose report covering their review of the financial statements follows: 8 10 INDEPENDENT ACCOUNTANTS' REVIEW REPORT Board of Directors and Shareholders The Boeing Company Seattle, Washington We have reviewed the accompanying consolidated statement of financial position of The Boeing Company and subsidiaries as of June 30, 1994, the related consolidated statements of net earnings for the three-month and six-month periods ended June 30, 1994 and 1993, and the related consolidated statements of cash flows for the six-month periods ended June 30, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We previously audited, in accordance with generally accepted auditing standards, the consolidated statement of financial position of The Boeing Company and subsidiaries as of December 31, 1993, and the related consolidated statements of net earnings, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 24, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial position as of December 31, 1993, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived. /s/ Deloitte & Touche Deloitte & Touche Seattle, Washington July 26, 1994 9 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Sales of $11.7 billion for the first half of 1994 were 20% below sales for the comparable period of 1993 due to fewer commercial jet transport deliveries. Commercial jet transport deliveries totaled 149 in the first half of 1994 and are projected to be in the 260 aircraft range for the full year, consistent with previously announced commercial production rate reductions. Sales for the year are expected to be in the $21 billion range. Sales by business segment were as follows ($ in millions): First Six Months Second Quarter ---------------- -------------- 1994 1993 1994 1993 ---- ---- ---- ---- Commercial transportation $ 9,335 $12,239 $4,117 $6,742 Defense and space 2,243 2,133 1,207 1,126 Other 163 257 72 117 ------- ------- ------ ------ Total $11,741 $14,629 $5,396 $7,985 ======= ======= ====== ====== Commercial jet transport deliveries were as follows: First Six Months Second Quarter ---------------- -------------- Model 1994 1993 1994 1993 ----- ---- ---- ---- ---- 737 71 92 32 48 747 25 32 10 17 757 30 46 14 23 767 23 32 11 21 --- --- --- --- Total 149 202 67 109 === === === === The 747 production rate was reduced from 5 to 3 per month during the first quarter. Based on current production schedules, the 737 rate will be reduced from 10 to 8 1/2 per month in the fourth quarter of 1994, the 757 rate will be reduced from 5 to 4 per month in early 1995, the 767 rate will be increased from 3 to 4 per month in early 1995, and the 747 rate will be reduced from 3 to 2 per month in January 1995. Planned production rates will continue to be adjusted as necessary to match customer orders. Net earnings of $514 million for the first six months of 1994 were $237 million lower than the comparable period of 1993, primarily due to the lower sales volume, lower corporate investment income, and higher interest expense. These factors were partially offset by a lower effective federal income tax rate. 10 12 Debt interest expense for the first six months of 1994 was $57 million compared with $8 million for the same period of 1993. The high level of new investments in facilities, equipment and tooling during 1993 had resulted in most of the Company's debt interest being capitalized on in-process construction in 1993, as required by Statement of Financial Accounting Standards No. 34. Because of the reduced levels of new investments in facilities and equipment in 1994, a substantial portion of the total debt interest in 1994 will not be capitalized. Debt interest in the first half of 1994 and 1993, including amounts capitalized, totaled $108 million and $81 million. The effective income tax rate is currently estimated at 26.0% for 1994, as reflected in the 1994 year-to-date earnings. This compares to 31.8% reported for the first half of 1993 and 31.7% for the full year 1993. The effective tax rate as of June 30, 1994, is lower than the statutory rate of 35.0% due to tax-exempt income benefits associated with export sales (representing a reduction of 6.2%) and research and development tax credit (representing a reduction of 3.8%), partially offset by other permanent differences (representing an increase of 1.0%). For the first half of 1994, research and development expense was $892 million, approximately the same level as in the first half of 1993. For the full year of 1994, research and development expense is projected to be higher than the $1.7 billion for 1993. In addition to extensive systems integration and test activities on the initial 777 model, the principal commercial developmental programs with significant expenditures in 1994 are the extended-range version of the 777 which begins deliveries in late 1996, the 737-700 which begins deliveries in late 1997, and the freighter version of the 767 to be delivered in the fourth quarter of 1995. Although commercial aircraft unit production rates were down approximately 35% in the aggregate from the levels a year ago, the combined operating profit margin on commercial aircraft programs, before research and development expense, has been maintained through efficiencies gained by process improvements in all aspects of operations. The lower aggregate sales currently projected for 1995 for the mature commercial jet transport programs will be substantially offset by the initial deliveries of the new 777 jet transport; however, the overall commercial operating profit margin, exclusive of research and development expense, is expected to decline somewhat as the mix of commercial sales changes. The Company continues to explore major process improvement opportunities for which initial investments can provide substantial long-term economic benefits. The new 777, scheduled to begin passenger service in May 1995, began the most comprehensive flight test program in commercial aviation history with its first flight on June 12. A total of nine 777s with three engine types (Pratt & Whitney PW4084, General Electric GE90 and Rolls-Royce Trent 800) will be included in the flight test program, involving over 4,800 flight cycles. Early flight test results have been very encouraging. The 777 program continues to meet its major milestones and achieve anticipated benefits from digital pre- assembly computer design, new producibility processes and advanced systems- integration testing capabilities. 11 13 The diversified programs in the Defense and Space segment continue to contribute solid performance. The Space Station Alpha program is now being managed by Boeing Defense & Space Group as prime contractor, and funding uncertainties have been reduced with a favorable funding vote in the U.S. House of Representatives in late June, and in the U.S. Senate in early August. Major assembly of the first 767 military derivative began in June for the first of two Airborne Warning and Control Systems (AWACS) ordered by the government of Japan in 1993. The government of Japan order is anticipated to be increased by two additional 767 AWACS later this year. While total commercial aircraft deliveries are expected to remain at relatively low levels through 1995 compared to recent years, the Company remains optimistic about the longer-term global market opportunities as worldwide economic conditions and airline operating results improve. The Company's continued high investment level in new products and processes will help ensure a favorable competitive position as the longer-term market opportunities develop. Liquidity and Capital Resources The Company's financial liquidity position has remained strong, with cash and short-term investments totaling $3.4 billion at June 30, 1994, and total long-term debt at 22% of total shareholder equity plus debt. The Company continues to maintain its $3.0 billion revolving credit line. Cash and short-term investments are projected to decrease over the next several quarters. 777 program inventory will continue to increase until deliveries begin in mid-1995. There will also be additional investment in customer financing, some of which may be partially offset through sales of existing customer financing receivables. Federal income tax payments are projected to substantially exceed income tax expense through 1995, principally due to completion of contracts executed under prior tax regulations. As discussed in Note 11 to the Consolidated Financial Statements, the U.S. Government has terminated for alleged default most of the work required under contracts for a new Saudi Arabia air defense system known as the Peace Shield program. The Government has demanded that the Company repay $605 million of Peace Shield unliquidated progress payments and has selected another contractor to perform the terminated work. Management believes that the Government's grounds for default are not legally supportable and on appeal the Government's position will be overturned. In February 1991, the Company submitted a request for a deferred payment agreement which, if granted, would formally defer the Company's potential obligation to repay the $605 million of unliquidated progress payments until the conclusion of the appeal process. The Company has filed its complaint in the United States Claims Court to overturn the default termination, submitted a Contract Claim for equitable adjustment to the contract prices and schedules, and requested that repayment of the unliquidated progress payments be deferred. The Company's financial statements assume that the termination for default will be overturned and that the Contract Claim will be settled in the Company's favor. If the Company's appeal of the termination for default is not successful, the Company could realize a pre-tax loss on the program approximating the value of the unliquidated progress payments plus related interest and potential damages. 12 14 Backlog Contractual backlog, which excludes purchase options and announced orders for which definitive contracts have not been executed, unobligated Government contract values, and orders from customers that have filed for bankruptcy protection, was as follows ($ in billions): June 30 March 31 Dec. 31 1994 1994 1993 ------- -------- ------- Commercial aircraft $65.5 $67.4 $69.0 Defense and space, other 5.7 5.3 4.5 ----- ----- ----- Total $71.2 $72.7 $73.5 ===== ===== ===== Unobligated U.S. Government contract values not included in backlog totaled $6.8 billion at June 30, 1994, and $6.9 billion at December 31, 1993. 13 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 11 to the Consolidated Financial Statements for a discussion of the Peace Shield termination. On April 29, 1994, the Company reached a settlement with the U.S. Government concerning its investigations of cost classification practices. The settlement had previously been anticipated and will have no material impact on the Company's results of operations. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: (12) Computation of Ratios of Earnings to Fixed Charges. Page 15. (15) Letter from independent accountants regarding unaudited interim financial information. Page 16. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter covered by this report. - - - - - - - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE BOEING COMPANY ------------------ (Registrant) August 8, 1994 /s/ T. M. Budinich - - -------------- ----------------------------- (Date) T. M. Budinich Vice President and Controller 14 16 EXHIBIT (12) Computation of Ratio of Earnings to Fixed Charges The Boeing Company and Subsidiaries (Dollars in millions) Six months ended June 30, ------------------------- 1994 1993 ---- ---- Earnings before federal taxes on income $695 $1,101 Fixed charges excluding capitalized interest 75 32 Amortization of previously capitalized interest 18 15 ---- ------ Earnings available for fixed charges $788 $1,148 ==== ====== Interest expense $ 57 $ 8 Interest capitalized during the period 51 73 Rentals deemed representative of an interest factor 18 24 ---- ---- Total fixed charges $126 $105 ==== ==== Ratio of earnings to fixed charges 6.3 10.9 === ==== 15 17 EXHIBIT (15) Letter from Independent Accountants Regarding Unaudited Interim Financial Information The Boeing Company and Subsidiaries The consolidated statement of financial position as of June 30, 1994, the related consolidated statements of net earnings for the three-month and six- month periods ended June 30, 1994 and 1993, and the related statements of cash flows for the six-month periods ended June 30, 1994 and 1993, have been reviewed by the registrant's independent accountants, Deloitte & Touche, whose letter regarding such unaudited interim financial information follows: July 26, 1994 The Boeing Company Seattle, Washington We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of The Boeing Company and subsidiaries for the periods ended June 30, 1994 and 1993, as indicated in our report dated July 26, 1994; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which was included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, is incorporated by reference in Registration Statement No. 33-46540 on Form S-3 and Prospectuses and in Registration Statement Nos. 2-48576, 2-93923, 33-25332, 33-31434, 33-43854 and 33-58798 on Form S-8. We also are aware that the aforementioned reports, pursuant to Rule 436(c) under the Securities Act of 1933, are not considered part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Deloitte & Touche Deloitte & Touche Seattle, Washington 16 -----END PRIVACY-ENHANCED MESSAGE-----