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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
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
Securities registered pursuant to Section 12(b) of the Act:
Class of Security: Registered on
-------------------------- ------------------------------
Common Stock, $5 par value New York Stock Exchange
The Stock Exchange, London
The Swiss Stock Exchanges
of Zurich, Basle and Geneva
Amsterdam Stock Exchange, N.V.
Tokyo Stock Exchange
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.
A disclosure of one delinquent filer pursuant to Item 405 of Regulation S-K
will be contained in the registrant's definitive proxy statement incorporated
by reference in Part III of this Form 10-K.
As of January 31, 1994, there were 340,235,981 common shares outstanding, and
the aggregate market value of the common shares (based upon the closing price
of these shares on the New York Stock Exchange) held by nonaffiliates of the
registrant was approximately $14.7 billion.
Part I and Part II incorporate information by reference from certain portions
of the Company's 1993 Annual Report to Shareholders. Part III incorporates
information by reference from the registrant's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after
the close of the fiscal year.
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1 of 109 Exhibit index is on page 22
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PART I
Item 1. Business
The Boeing Company, together with its subsidiaries (herein referred to as the
"Company"), is one of the world's major aerospace firms. The Company operates
primarily in two industry segments: Commercial Aircraft, and Defense and Space.
Commercial Aircraft operations - conducted principally through Boeing Commercial
Airplane Group - involve development, production and marketing of commercial jet
transports and providing related support services, principally to commercial
customers. Defense and Space operations - conducted principally through Boeing
Defense & Space Group - involve research, development, production, modification
and support of military aircraft and helicopters and related systems, space
systems and missile systems. Defense and Space operations are principally with
the U.S. Government.
With respect to the Commercial Aircraft segment, the Company is a leading
producer of commercial transport aircraft and offers a family of commercial
jetliners designed to meet a broad spectrum of passenger and cargo requirements
of domestic and foreign airlines. This family of jet transport aircraft
currently includes the 737 and 757 standard-body models series and the 747 and
767 wide-body models series. In early 1992, the Company sold the de Havilland
division of Boeing of Canada, which produced turboprop commuter aircraft.
The Company continues development of the 777 twinjet, a new jet transport
which will seat from 375 to 400 passengers in two classes and will fill a market
segment between the 767-300 and 747-400 models. It will feature a new wing,
wide-body fuselage and the latest high-efficiency turbofan engines. This new
twinjet will continue to require substantial investments in development,
tooling and inventory, leading up to initial deliveries in mid-1995.
Principal ongoing activities in the Defense and Space segment include Space
Station development and other space related activities, production and
remanufacturing of CH-47 helicopters, F-22 fighter aircraft engineering
and manufacturing development activities, B-2 bomber subcontract work,
V-22 Osprey tiltrotor transport development and test activities, E-3
Airborne Warning and Control System (AWACS) updates and the new 767-based
AWACS, RAH-66 Comanche helicopter development activities, Avenger air defense
system deliveries, updating and modifying various military aircraft and
systems, and classified projects. The Space Station, F-22 fighter, RAH-66
Comanche helicopter, and V-22 Osprey tiltrotor transport are developmental
programs currently being conducted primarily under cost-reimbursement-type
contracts. The Company's activities on the F-22, RAH-66, and V-22 programs
are under joint venture teaming arrangements with other companies.
The Company conducts various other activities representing only a small
portion of the Company's total activities, primarily developing large-scale
information systems and conducting management services, principally for
government agencies. In 1993, the Company discontinued its involvement
with the U.S. Government's strategic petroleum reserve.
Commercial jet transports are normally sold on a firm fixed-price basis with
an indexed price escalation clause. Defense and space developmental programs
are normally performed under cost-reimbursement-type contracts, but certain
developmental programs have been under fixed-price arrangements in the recent
past. Developmental contracts often contain incentives related to cost
performance and/or awards for other contract milestone accomplishments.
Defense and space production programs are generally performed under firm
fixed-price contracts or fixed-price contracts containing incentive
provisions related to costs.
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Revenues, operating profits and other financial data of the Company's major
industry segments for the three years ended December 31, 1993, are set forth
on pages 51 and 52 of the Company's 1993 Annual Report to Shareholders and are
incorporated herein by reference.
The worldwide market for commercial jet transports is predominantly driven by
long-term trends in airline passenger traffic. The principal factors in
long-term traffic growth are sustained economic growth in developed and
emerging markets and political stability. Demand for the Company's products
is further influenced by profitability of the airline industry, the
globalization and consolidation of the industry, airport and air traffic
control infrastructure, noise regulations, product development and strategy,
and price and other competitive factors.
The Company's ability to deliver jet transports on schedule is dependent upon
a variety of factors, including availability of raw materials, performance of
suppliers and subcontractors, and certifications by the Federal Aviation
Administration. The introduction of new commercial aircraft programs and major
derivatives involves increased risks associated with meeting development,
production and certification schedules.
The Company experienced no significant shortages of raw materials essential to
its business during 1993 and does not anticipate any shortages of critical
commodities over the longer term, although this is difficult to assess because
many factors causing such possible shortages are outside its control.
The Company is highly dependent on its suppliers and subcontractors in order
to meet commitments to its customers. Many major components and equipment
items for the Company's products are procured from or subcontracted to various
domestic and foreign companies. Although the Company has periodically
experienced certain problems with supplier and subcontractor performance,
these situations have been manageable.
While the Company owns numerous patents and has licenses under patents owned
by others relating to its products and their manufacture, it does not believe
that its business would be materially affected by the expiration of any patents
or termination of any patent license agreements. The Company has no trademarks,
franchises or concessions that are considered to be of material importance to
the conduct of its business.
The Company is a major supplier to U.S. Government agencies, principally
the Department of Defense (DoD) and the National Aeronautics and Space
Administration (NASA). This portion of the Company's business is highly sen-
sitive to shifts in the national economy, changing national priorities, fluc-
tuations in the defense and space budgets, and Government procurement policies.
The Company's backlog of firm contractual orders (in billions) at December 31
follows:
1993 1992
---- ----
Commercial Aircraft $69.0 $82.0
Defense and Space 4.2 5.6
Other industries .3 .3
----- -----
Total $73.5 $87.9
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Not included in firm contractual backlog are purchase options and announced
orders for which definitive contracts have not been executed and orders from
customers which have filed for bankruptcy protection. Additionally, U.S.
Government and foreign military firm backlog is limited to amounts obligated to
contracts. Unobligated U.S. Government contract values not included in backlog
totaled $6.9 billion and $7.6 billion as of December 31, 1993 and 1992.
In evaluating the Company's contractual backlog for commercial customers,
certain risk factors should be considered. Many of the orders extend out
several years, with approximately 60% of the contractual backlog for commercial
jet airplanes scheduled to be delivered after 1995. Changes in the economic
environment and the financial condition of airlines can result in customer
requests for rescheduling or cancellation of contractual orders.
Contracts with the U.S. Government are subject to termination for default or
for convenience by the Government if deemed in its best interests. Contracts
which are terminated for convenience generally provide for payments to a
contractor for its costs and a proportionate share of profit for work
accomplished through the date of termination. Contracts which are terminated
for default generally provide that the Government pays only for the work it
has accepted, can require the contractor to pay the difference between the
original contract price and the cost to reprocure the contract items net of
the value of the work accepted from the original contractor, and can hold a
contractor liable for damages. (See Item 3 - Legal Proceedings regarding the
Government's partial termination of the Peace Shield program for alleged
default.) A termination for default, if upheld, also may adversely affect a
contractor's ability to compete successfully for other Government contracts.
The Commercial Aircraft segment is highly competitive. The Company's
commercial aircraft sales are subject to intense competition from aircraft
manufactured by other companies, both foreign and domestic, including foreign
companies which are nationally owned or subsidized. To meet competition, the
Company maintains a continuous program directed toward enhancing the performance
and capability of its products and has a family of commercial aircraft to meet
varied and changing airline requirements. The Company continually evaluates
opportunities to improve current models, and conducts ongoing marketplace
assessments to ensure that its family of jet transports is well positioned to
meet future requirements of the airline industry. The fundamental strategy is to
maintain a broad product line responsive to changing market conditions by
maximizing commonality within and across the Boeing family of airplanes. The
major focus of development activities over the past three years has been the 777
wide-body twinjet which is scheduled to enter airline service in mid-1995. The
777 is designed to meet airline requirements for an efficient, comfortable,
high-capacity airplane to be used in domestic and intra-regional markets. A
long-range version of the 777 is being offered for delivery in late 1996, and
the aircraft could be further developed for greater capability including
additional range and a stretched fuselage. During 1993 the Company began
development activities on the next generation of the 737 family of
short-to-medium-range jetliners that will provide greater range,
increased speed, and reduced noise and emissions while maintaining 737 family
commonality. The first next-generation 737, designated the 737-700, is the
middle-sized member of the 737 family. Customer orders will determine the
sequence and timing of the introduction of the smaller 737-600 and the
larger 737-800.
The Company continues to assess the market potential for new or derivative
aircraft that are larger and have more range than the 747-400. Because of
a relatively limited market and the heavy resource investment levels
required, the Company signed an agreement with four European aerospace
companies in 1993 to study the feasibility of developing a new aircraft
capable of carrying between 550 and 800 passengers.
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While product development activities are principally oriented toward
maintaining and enhancing the competitiveness of the Boeing subsonic fleet,
the Company is also involved in studies to understand the technological and
economic issues associated with development of commercial supersonic
aircraft.
During 1993, announced new orders for the Company's commercial jet transports
totaled 247 aircraft, which represented approximately 75% of the dollar value
of total new announced orders during the year. In terms of revenue, the
Company's commercial jet transport deliveries represented approximately 60% of
total market deliveries during the five-year period ended December 31, 1993.
The U.S. Government defense market environment is one in which continued
intense competition among defense contractors can be expected, especially in
light of the shrinking defense budget. The Company's ability to successfully
retain and compete for such business is highly dependent on its technical
excellence, demonstrated management proficiency, strategic alliances, and
cost-effective performance.
Company-sponsored research and development not recoverable under contracts
and charged directly to earnings as incurred amounted to $1,661 million,
$1,846 million, and $1,417 million in 1993, 1992 and 1991, respectively. In
1994, research and development expense is projected to increase somewhat
relative to 1993, principally in support of the 777, the 737-700, and other
commercial jet transport programs and research.
The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of materials
into the environment. The Company believes its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and the consequent financial liability to the Company. Compliance with
environmental laws and regulations requires continuing management effort and
expenditures by the Company. Compliance with environmental laws and
regulations has not had in the past, and, the Company believes, will not have
in the future, material effects on the capital expenditures, earnings, or
competitive position of the Company.
The Company had approximately 123,000 employees at January 31, 1994, including
approximately 1,600 in Canada.
Sales outside the United States (principally export sales from domestic
operations) by geographic area are included on page 51 of the Company's
1993 Annual Report to Shareholders and incorporated herein by reference.
Less than 3% of total sales were derived from non-U.S. operations of the
Company for each of the three years in the period ended December 31, 1993.
Approximately 62% of the Company's contractual backlog at December 31, 1993,
in terms of dollar value was with non-U.S. customers. Sales outside the
United States are influenced by international relationships and U.S.
Government foreign policy. Relative profitability is not significantly
different from that experienced in the domestic market.
Approximately 18% of accounts receivable and customer financing combined
consisted of amounts due from customers outside the United States. These
amounts are payable in U.S. dollars, and, in management's opinion, related
risks are adequately covered by allowance for losses. The Company has not
experienced materially adverse financial consequences as a result of sales
and financing activities outside the United States.
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Item 2. Properties
The locations and approximate floor areas of the Company's principal operating
properties at year end 1993, are indicated in the following table. The table
also indicates the approximate portions which are Company-owned or leased
from others.
Floor area
(thousands of square feet)
--------------------------
Company-
owned Leased
--------- ------
United States:
Seattle, Washington, and
surrounding area 44,811 8,742
Wichita, Kansas 11,669 1,144
Philadelphia, Pennsylvania 3,166 497
Portland, Oregon 1,007 70
Huntsville, Alabama 641 157
Oakridge, Tennessee 490 0
Sunnyvale, California 461 357
Corinth & Irving, Texas 433 33
Macon, Georgia 399 0
Spokane, Washington 394 0
Vienna, Virginia 335 99
Moses Lake, Washington 252 484
Glasgow, Montana 180 0
Canada:
Winnipeg, Manitoba 522 40
Arnprior, Ontario 162 57
With the exception of the Glasgow Industrial Airport located in Glasgow,
Montana, which is Company-owned, runways and taxiways used by the Company
are located on airport properties owned by others and are used by the Company
jointly with others. The Company's rights to use such facilities are provided
for under long-term leases with municipal, county or other government
authorities. In addition, the U.S. Government furnishes the Company certain
office space, installations and equipment at Government bases for use in
connection with various activities.
Facilities at the principal locations support both major industry segments.
Work related to a given program may be assigned to various locations, based
upon periodic review of shop loads and production capability.
During 1993, net additions to property, plant and equipment totaled $1,317
million. Annual plant and equipment additions over the next two years are
projected to be substantially below the 1993 expenditure level.
The Company's properties are generally well maintained and in good operating
condition. There are no significant unused facilities. Existing facilities
are sufficient to meet the Company's near-term operating requirements.
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Item 3. Legal Proceedings
Various legal proceedings, claims and investigations are pending against the
Company related to products, contracts and other matters. Except for the items
discussed below, most of these legal proceedings are related to matters covered
by insurance.
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 un-
der 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 million of Peace Shield unliquidated progress pay-
ments 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 million 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.
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The Company is subject to several U.S. Government investigations of business
and cost classification practices. One investigation involves a grand jury
proceeding as to whether or not certain costs were charged to the proper
overhead accounts. No charges have been filed in this matter, and based on the
facts known to it, the Company believes it would have defenses if any were
filed. The investigations could result in civil, criminal or administrative
proceedings. Such proceedings, if any, could involve claims by the Government
for fines, penalties, compensatory and treble damages, restitution and/or for-
feitures. Based upon Government procurement regulations, a contractor, or one
or more of its operating divisions or subdivisions, can also be suspended or
debarred from Government contracts if proceedings result from the inves-
tigations. The Company believes, based upon all available information, that
the outcome of Government investigations will not have a materially adverse
effect on its financial position or results of operations.
The Company is subject to federal and state requirements for protection of
the environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations over the
past 10 years.
The Company routinely assesses, based on in-depth studies, expert analyses and
legal reviews, its contingencies, obligations and commitments for remediation
of contaminated sites, including assessments of ranges and probabilities of
recoveries from other responsible parties who have and have not agreed to a
settlement and recoveries from insurance carriers. The Company's policy is to
immediately accrue and charge to current expense identified exposures related
to environmental remediation sites based on conservative estimates of
investigation, cleanup and monitoring costs to be incurred.
The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact to
the Company's financial position. With respect to results of operations,
related charges have averaged less than 2% of annual net earnings. Such
accruals as of December 31, 1993, without consideration for the related
contingent recoveries from insurance carriers, are less than 2% of total
liabilities.
Based on all known facts and expert analyses, the Company believes it is not
reasonably likely that identified environmental contingencies will result in
additional costs that would have a materially adverse impact to the Company's
financial position or operating results and cash flow trends.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1993.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information required by this item is included on page 56 and the inside back
cover of the Company's 1993 Annual Report to Shareholders and is incorporated
herein by reference.
Item 6. Selected Financial Data
Information required by this item is included on page 55 of the Company's
1993 Annual Report to Shareholders and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information required by this item is included on pages 25-36 of the Company's
1993 Annual Report to Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements and supplementary data,
included in the Company's 1993 Annual Report to Shareholders at the pages
indicated, are incorporated herein by reference:
Consolidated Statements of Net Earnings - years ended December 31, 1993,
1992 and 1991: Page 38.
Consolidated Statements of Financial Position - December 31, 1993
and 1992: Page 39.
Consolidated Statements of Cash Flows - years ended December 31, 1993,
1992 and 1991: Page 40.
Notes to Consolidated Financial Statements: Pages 41-53.
Independent Auditors' Report: Page 37.
Supplementary data regarding quarterly results of operations: Page 54.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Executive Officers
No family relationships exist between any of the executive officers listed
below, or directors or director nominees.
Age
Name (at 2/28/94) Positions and offices held and business experience
---- ------------ -------------------------------------------------
F. A. Shrontz 62 Chairman of the Board since 1988. Chief Executive
Officer since 1986; Director since 1985. President
from 1985 until 1988.
P. M. Condit 52 President since 1992. Prior thereto Executive Vice
President and General Manager - 777 Division,
Boeing Commercial Airplane Group from 1989. Prior
thereto Executive Vice President of Boeing
Commercial Airplane Group from 1986.
D. P. Beighle 61 Senior Vice President since 1986. Secretary from
1981 until 1991.
L. W. Clarkson 55 Corporate Vice President - Planning &
International Development since 1992. Prior
thereto Senior Vice President - Government &
International Affairs of Boeing Commercial
Airplane Group from 1988.
D. D. Cruze 63 Senior Vice President - Operations since 1990.
Prior thereto Vice President - Operations from
1985.
B. E. Givan 57 Senior Vice President and Chief Financial Officer
since 1990. Prior thereto Vice President -
Finance from 1988. Prior thereto Vice President -
Financial Operations and Treasurer from 1986.
C. G. King 59 President - Boeing Defense & Space Group since
May 1993. Prior thereto Executive Vice President -
Boeing Defense & Space Group since 1991. Prior
thereto Executive Vice President - Military
Airplane Division of Boeing Defense & Space Group
since April 1990. Prior thereto President - Boeing
Advanced Systems since January 1990. Prior thereto
Executive Vice President - Boeing Advanced Systems
since 1987.
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Age
Name (at 2/28/94) Positions and offices held and business experience
---- ------------ -------------------------------------------------
L. G. McKean 58 Vice President - Human Resources since 1990. Prior
thereto Staff Vice President - Human Resources
from 1989. Prior thereto Staff Vice President -
Labor Relations from 1988. Prior thereto
Director - Labor Relations from 1987.
J. D. Warner 54 President - Boeing Computer Services since July
1993. Prior thereto Executive Vice President -
Boeing Computer Services since March 1993. Prior
thereto Vice President, Computing - Boeing
Commercial Airplane Group since 1991. Prior
thereto Vice President - Engineering Division of
Boeing Commercial Airplane Group since 1989.
Prior thereto Program Manager - B-2 Program of
Boeing Advanced Systems since 1987.
A. D. Welliver 60 Senior Vice President - Engineering and Technology
since 1990. Prior thereto Vice President -
Engineering and Technology from 1986.
R. B. Woodard 51 President - Boeing Commercial Airplane Group since
December 1993. Prior thereto Executive Vice
President - Boeing Commercial Airplane Group since
March 1993. Prior thereto Vice President and
General Manager - Renton Division of Boeing
Commercial Airplane Group since 1991. Prior
thereto President - de Havilland division of
Boeing of Canada since 1987.
Other information required by Item 10 involving the identification and
election of directors and Section 16(a) compliance is incorporated by
reference from the registrant's definitive proxy statement, which will be filed
with the Commission within 120 days after the close of the fiscal year.
Item 11. Executive Compensation *
Item 12. Security Ownership of Certain Beneficial Owners and Management *
Item 13. Certain Relationships and Related Transactions *
* Information required by Items 11, 12, and 13 is incorporated by reference
from the registrant's definitive proxy statement, which will be filed with the
Commission within 120 days after the close of the fiscal year.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of documents filed as part of this report:
1. Financial Statements
All consolidated financial statements of the Company as set forth
under Item 8 of this report on Form l0-K.
2. Financial Statement Schedules
Schedule Description Page
-------- ----------- ----
V Property, Plant and Equipment 17
VI Accumulated Depreciation of Property,
Plant and Equipment 18
VIII Valuation and Qualifying Accounts 19
X Supplementary Income Statement Information 20
The auditors' report with respect to the above-listed financial
statement schedules appears on page 16 of this report. All other
financial statements and schedules not listed are omitted either
because they are not applicable, not required, or the required
information is included in the consolidated financial statements.
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3. Exhibits
(3) Articles of Incorporation and By-Laws.
(i) Restated Certificate of Incorporation. (Exhibit (3) of the
Form 10-K of the Company for the year ended December 31, 1991
(herein referred to as "1991 Form 10-K").)
(ii) By-Laws, as amended and restated on October 25, 1993. Filed
herewith.
(4) Instruments Defining the Rights of Security Holders, Including
Indentures.
(i) Indenture, dated as of March 1, 1986, between the Company
and The Chase Manhattan Bank (National Association), Trustee.
(Exhibit (4) of the 1991 Form 10-K.)
(ii) Indenture, dated as of August 15, 1991, between the Company and
The Chase Manhattan Bank (National Association), Trustee.
(Exhibit (4) to the Company's Current Report on Form 8-K dated
August 27, 1991.)
(iii) Rights Agreement, dated as of July 27, 1987, between the Company
and The First National Bank of Boston, Rights Agent. Incorporated
by reference to the Company's Registration Statement on
Form 8-A filed July 20, 1987. (File No. 1-442.)
(10) Material Contracts.
o The Boeing Company Bank Credit Agreement.
(i) Agreement Amended and Restated as of June 30, 1993. (Exhibit
(10) of the Form 10-Q of the Company for the quarter ended
September 30, 1993.)
o Management Contracts and Compensatory Plans.
(ii) 1984 Stock Option Plan.
(a) Plan, as amended. (Exhibit (19) of the Form l0-Q of the
Company for the quarter ended September 30, 1989.)
(b) Forms of stock option agreements. (Exhibit (10)(vi)(b)
of the 1992 Form 10-K.)
(iii) 1988 Stock Option Plan.
(a) Plan, as amended on December 14, 1992. (Exhibit
(10)(vii)(a) of the 1992 Form 10-K.)
(b) Form of Notice of Terms of Stock Option Grant. (Exhibit
(10)(vii)(b) of the 1992 Form 10-K.)
(iv) 1992 Stock Option Plan for Nonemployee Directors.
(a) Plan. (Exhibit (19) of the Form 10-Q of the Company for
the quarter ended March 31, 1992.)
(b) Form of Stock Option Agreement. (Exhibit (10)(viii)(b)
of the 1992 Form 10-K.)
(v) Supplemental Benefit Plan for Employees of the Company.
Plan, as amended. (Exhibit (10)(iii)(d) of the 1991 Form 10-K.)
(vi) Supplemental Retirement Plan for Executives of the Company.
Plan, as amended. (Exhibit (10)(iii)(e) of the 1990 Form 10-K.)
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(vii) Deferred Compensation Plan for Employees of The Boeing Company.
Plan, as amended on October 25, 1993. Filed herewith.
(viii) Deferred Compensation Plan for Directors of The Boeing Company.
Plan, as amended on October 25, 1993. Filed herewith.
(ix) 1993 Incentive Stock Plan for Employees
(a) Plan, as amended on December 13, 1993. Filed herewith.
(b) Form of Notice of Stock Option Grant.
(i) Regular Annual Grant. Filed herewith.
(ii) Supplemental Grant. Filed herewith.
(x) Incentive Compensation Plan for Officers and Employees of the
Company and Subsidiaries. Plan, as amended. (Exhibit (19) of
the Form l0-Q of the Company for the quarter ended
September 30, 1990.)
(xi) SAR Deferral Arrangements of the Company.
(a) Form of SAR Deferral Agreement. (Exhibit (10)(iii)(i) of
the 1990 Form 10-K.)
(b) Plan for Employees, as amended. (Exhibit (19) of the Form
10-Q of the Company for the quarter ended September 30,
1989.)
(c) Form of SAR deferral election notice. (Exhibit (10)(xiv)(c)
of the 1992 Form 10-K.)
(12) Computation of Ratio of Earnings to Fixed Charges. Page 21.
(13) Portions of the 1993 Annual Report to Shareholders incorporated
by reference herein. Filed herewith.
(22) List of Company Subsidiaries. Filed herewith.
(24) Independent Auditors' Consent and Report on Schedules for use in
connection with filings of Form S-8 under the Securities Act
of 1933. Page 16.
(b) Reports on Form 8-K filed during quarter ended December 31, 1993:
On November 2, 1993, the Company filed a Current Report on Form 8-K,
including as an exhibit under Item 7, the Terms Agreement dated
October 12, 1993, among The Boeing Company, CS First Boston Corporation,
Merrill Lynch, Pierce, Fenner & Smith and Salomon Brothers Inc, as
Representatives of the Underwriters, in connection with the issuance
of $125,000,000 aggregate principal amount of 6-7/8% Debentures Due 2043.
14 of 109
<PAGE> 15
Signatures
Pursuant to the requirements of Section 13 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, on the date indicated.
THE BOEING COMPANY
(Registrant)
By: /s/ Frank Shrontz By: /s/ B. E. Givan
------------------------------- ------------------------------
Frank Shrontz - Chairman of the B. E. Givan - Senior Vice
Board, Chief Executive Officer President and Chief Financial
and Director Officer
By: /s/ T. M. Budinich
-------------------------------
T. M. Budinich - Vice President
and Controller
Date: February 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Robert A. Beck /s/ Stanley Hiller, Jr.
- --------------------------- ---------------------------------
Robert A. Beck - Director Stanley Hiller, Jr. - Director
/s/ Philip M. Condit /s/ George M. Keller
- --------------------------- ---------------------------------
Philip M. Condit - Director and President George M. Keller - Director
/s/ John B. Fery /s/ Donald E. Petersen
- --------------------------- ---------------------------------
John B. Fery - Director Donald E. Petersen - Director
/s/ Paul E. Gray /s/ Charles M. Pigott
- --------------------------- ---------------------------------
Paul E. Gray - Director Charles M. Pigott - Director
/s/ Harold J. Haynes /s/ Rozanne L. Ridgway
- --------------------------- ---------------------------------
Harold J. Haynes - Director Rozanne L. Ridgway - Director
---------------------------------
Date: February 28, 1994 George H. Weyerhaeuser - Director
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<PAGE> 16
Independent Auditors' Consent and Report on Schedules
Board of Directors and Shareholders
The Boeing Company:
We consent to the incorporation by reference in Registration Statement Nos.
2-48576, 2-93923, 33-25332, 33-31434, 33-43854, and 33-58798 on Form S-8
of our report dated January 24, 1994, on the consolidated financial statements
of The Boeing Company and subsidiaries, in The Boeing Company's 1993 Annual
Report to Shareholders and incorporated by reference in this Annual Report on
Form 10-K for the year ended December 31, 1993. We also consent to the
incorporation of the following report on schedules and the reference to us
appearing under the heading "Experts" in the Registration Statements.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedules of The Boeing Company,
listed in Item 14 (a) 2 in this Annual Report on Form 10-K for the year ended
December 31, 1993. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects, the information set forth therein.
/s/ Deloitte & Touche
Deloitte & Touche
Seattle, Washington
March 10, 1994
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<PAGE> 17
SCHEDULE V - Property, Plant and Equipment
The Boeing Company and Subsidiaries
Years ended December 31, 1993, 1992 and 1991
(Dollars in millions)
Column A Column B Column C Column D Column E Column F
- -------------- ---------- --------- ----------- -------- -----------
Balance at Additions Other Balance at
Classification January 1 at Cost Retirements Changes* December 31
- -------------- ---------- --------- ----------- -------- -----------
1993
- ----
Land $ 399 $ 3 $ (5) $ - $ 397
Buildings and fixtures 4,192 1,125 (31) - 5,286
Machinery and equipment 6,085 788 (373) - 6,500
Construction in progress 1,617 (568) - - 1,049
------- ------ ------ ----- -------
$12,293 $1,348 $(409) $ - $13,232
======= ====== ===== ===== =======
1992
- ----
Land $ 415 $ 2 $ - $ (18) $ 399
Buildings and fixtures 3,487 798 (29) (64) 4,192
Machinery and equipment 5,533 960 (345) (63) 6,085
Construction in progress 1,165 452 - - 1,617
------- ------ ----- ----- -------
$10,600 $2,212 $(374) $(145) $12,293
======= ====== ===== ===== =======
1991
- ----
Land $ 380 $ 35 $ - $ - $ 415
Buildings and fixtures 3,147 376 (36) - 3,487
Machinery and equipment 4,817 949 (233) - 5,533
Construction in progress 647 518 - - 1,165
------- ------ ----- ----- -------
$ 8,991 $1,878 $(269) $ - $10,600
======= ====== ===== ===== =======
*Sale of the de Havilland division of Boeing of Canada.
DEPRECIATION
Property, plant and equipment are recorded at cost and depreciated over
useful lives, principally on accelerated methods. Amortization of leasehold
improvements is based on the shorter of the physical life of the improvements
or the period of the lease. The asset lives used for depreciation computation
are as follows:
Buildings and fixtures 5 to 45 years
Machinery and equipment 3 to 11 years
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<PAGE> 18
SCHEDULE VI - Accumulated Depreciation of Property, Plant and Equipment
The Boeing Company and Subsidiaries
Years ended December 31, 1993, 1992 and 1991
(Dollars in millions)
Column A Column B Column C Column D Column E Column F
- -------------- ---------- ---------- ----------- -------- -----------
Additions
charged to
Balance at costs and Other Balance at
Classification January 1 expenses Retirements Changes* December 31
- -------------- ---------- ---------- ----------- -------- -----------
1993
- ----
Buildings and fixtures $1,455 $224 $ (21) $ - $1,658
Machinery and equipment 4,114 729 (357) - 4,486
------ ---- ----- ----- ------
$5,569 $953 $(378) $ - $6,144
====== ==== ===== ===== ======
1992
- ----
Buildings and fixtures $1,326 $162 $ (16) $ (17) $1,455
Machinery and equipment 3,744 708 (306) (32) 4,114
------ ---- ----- ----- ------
$5,070 $870 $(322) $ (49) $5,569
====== ==== ===== ===== ======
1991
- ----
Buildings and fixtures $1,206 $149 $ (29) $ - $1,326
Machinery and equipment 3,337 619 (212) - 3,744
------ ---- ----- ----- ------
$4,543 $768 $(241) $ - $5,070
====== ==== ===== ===== ======
*Sale of the de Havilland division of Boeing of Canada.
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<PAGE> 19
SCHEDULE VIII - Valuation and Qualifying Accounts
The Boeing Company and Subsidiaries
Allowance for Doubtful Accounts and Customer Financing
(Deducted from assets to which they apply)
Years ended December 31, 1993, 1992 and 1991
(Dollars in millions)
Column A Column B Column C Column D Column E
- ----------- ---------- ------------------------ ----------- -----------
Additions
------------------------
(1) (2) Deductions
Collection from
Charged to of accounts reserves
Balance at costs and previously (accounts Balance at
Description January 1 expenses charged off charged off) December 31
- ----------- ---------- ---------- ----------- ----------- -----------
1993 $103 $31 $ - $ 8 $126
1992 83 30 - 10 103
1991 52 38 - 7 83
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<PAGE> 20
SCHEDULE X - Supplementary Income Statement Information
The Boeing Company and Subsidiaries
Years ended December 31, 1993, 1992 and 1991
(Dollars in millions)
Column A Column B
-------- --------
Item Charged to costs and expenses
---- -----------------------------
1993 1992 1991
---- ---- ----
1. Maintenance and repairs $513 $583 $658
3. Taxes, other than payroll
and income taxes 414 374 386
Items omitted are less than 1% of total sales.
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<PAGE> 21
EXHIBIT (12) - Computation of Ratio of Earnings to Fixed Charges
The Boeing Company and Subsidiaries
(Dollars in millions)
Year ended December 31,
--------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ----
Earnings before
federal taxes on income $1,821 $2,256 $2,204 $1,972 $922
Fixed charges excluding
capitalized interest 75 62 66 58 49
Amortization of previously
capitalized interest 31 22 13 13 12
Less undistributed earnings
of affiliates 1 1 (1) (5) (15)
Plus distributed earnings
of affiliates - - - 5 21
------ ------ ------ ------ ----
Earnings available for
fixed charges $1,928 $2,341 $2,282 $2,043 $989
====== ====== ====== ====== ====
Fixed charges:
Interest expense $ 39 $ 14 $ 13 $ 6 $ 6
Interest capitalized during
the period 150 119 44 22 18
Rentals deemed
representative of an
interest factor 36 48 53 52 43
------ ------ ------ ------ ----
Total fixed charges $ 225 $ 181 $ 110 $ 80 $ 67
====== ====== ====== ====== ====
Ratio of earnings to fixed
charges 8.6 12.9 20.8 25.5 14.8
====== ====== ====== ====== ====
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<PAGE> 22
EXHIBITS FILED WITH THIS REPORT ON FORM 10-K
Commission File Number 1-442
THE BOEING COMPANY
Exhibit Index Annual
Report
to
Share- Form
holders 10-K
Exhibit Description Page Page
- -------------- ------------------------------------------------- ------- ----
(3)(ii) By-Laws, as amended and restated October 25, 1993 63
(10)(vii) Deferred Compensation Plan for Employees of
The Boeing Company, as amended October 25, 1993 82
(10)(viii) Deferred Compensation Plan for Directors of
The Boeing Company, as amended October 25, 1993 88
(10)(ix)(a) 1993 Incentive Stock Plan for Employees, as
amended on December 13, 1993 93
(10)(ix)(b)(i) 1993 Incentive Stock Plan for Employees - Notice
of Stock Option Grant for Regular Annual Grant 99
(10)(ix)(b)(ii) 1993 Incentive Stock Plan for Employees - Notice
of Stock Option Grant for Supplemental Grant 102
(12) Computation of Ratio of Earnings to Fixed Charges 21
(13) Portions of the 1993 Annual Report to Shareholders
incorporated by reference in Part I and Part II
Market for Registrant's Common Equity and
Related Stockholder Matters * 62
Selected Financial Data 55 61
Management's Discussion and Analysis of
Financial Position and Results of Operations 25 23
Consolidated Statements of Net Earnings 38 39
Consolidated Statements of Financial Position 39 40
Consolidated Statements of Cash Flows 40 41
Notes to Consolidated Financial Statements 41 42
Independent Auditors' Report 37 38
Supplementary Data Regarding Quarterly Results
of Operations 54 60
(22) List of Company Subsidiaries 105
(24) Independent Auditors' Consent and Report on
Schedules for use in connection with Filings of
Form S-8 under the Securities Act of 1933. 16
Appendix of graphic and image material pursuant
to Rule 304(a) of Regulation S-T 107
*Listed on inside back cover of annual report
22 of 109
<PAGE> 23
Exhibit (13)
Portions of the 1993 Annual Report to Shareholders
incorporated by reference in Part I and Part II
23 of 109
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
REVENUES
Operating revenues for 1993 were $25.4 billion compared to $30.2 billion and
$29.3 billion for 1992 and 1991. Commercial aircraft products and services
accounted for 81%, 80% and 78% of total operating revenues for the years 1993,
1992 and 1991. The Company's commercial jet transport market share was
approximately 60% in terms of sales value for each of the three years.
Commercial jet transport deliveries by model:
1993 1992 1991
- -------------------------------------------------
737 152 218 215
747 56 61 64
757 71 99 80
767 51 63 62
- -------------------------------------------------
Total 330 441 421
=================================================
Commercial production rates were at 32 1/2 aircraft per month at the beginning
of 1993 and ended the year at 23 per month. In early 1994, the 747 production
rate was reduced from 5 to 3 per month. 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 the first quarter
of 1995, the 767 rate will be increased from 3 to 4 per month in the first
quarter of 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. Production of the new 777 model is on
schedule to support the flight test program starting in mid-1994, and production
activity will continue to build until initial deliveries begin in mid-1995.
Commercial jet transport deliveries for 1994 are currently projected to be in
the 260 range. Commercial transportation sales trends are discussed further in
the Commercial Aircraft Market Environment section on pages 29-32.
Sales by industry segment:
[Graphic and image material item Number 1
See appendix on page 107 for description.]
Sales by type of customer:
[Graphic and image material item Number 2
See appendix on page 107 for description.]
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<PAGE> 25
Defense and space segment revenues were $4.4 billion for 1993, down from
$5.4 billion and $5.8 billion for 1992 and 1991, respectively. Reduced B-2
bomber subcontract work was the major contributor to the lower sales in 1993.
Several program terminations that occurred in 1991 and 1992 contributed to the
decline in sales in 1992 compared with 1991, partially offset by increased sales
in the B-2 program and the F-22 fighter aircraft program. The Company's defense
and space business is broadly diversified, and no program other than B-2
accounted for more than 10% of total 1991-1993 defense and space revenues.
B-2 bomber subcontract work, which accounted for less than 20% of total
1991-1993 defense and space business revenues, will continue to decline over
the next few years.
The principal contributors to 1993 defense and space sales included B-2 bomber
subcontract work, production and remanufacturing of CH-47 helicopters, F-22
fighter aircraft engineering and manufacturing development activities, Space
Station work packages, E-3 Airborne Warning and Control System (AWACS) updates,
A-6 composite wing production (terminated for convenience by the Government
during 1993), RAH-66 Comanche helicopter development activities, KC-135 tanker
update modifications, V-22 Osprey tiltrotor transport development and test
activities, Avenger air-defense system deliveries, and B-1B bomber avionics.
U.S. Government classified projects also continued to contribute to defense and
space segment revenues. The Company's activities on the F-22, RAH-66 and V-22
programs are under joint venture teaming arrangements with other companies.
NASA's selection of Boeing Defense & Space Group as the prime contractor for
the restructured Space Station program will result in an increase of
approximately 10% in defense and space segment sales in 1994 compared with 1993,
based on current programs and schedules. However, U.S. Government defense and
space programs continue to be subject to funding constraints, and further
program stretch-outs or curtailments are possible. Defense and space sales
trends are discussed further in the Defense and Space Market Environment
section on page 32.
Based on current programs and schedules, the Company projects total 1994
sales to be in the $21 billion range.
EARNINGS
Net earnings for 1993 on a comparable basis with the prior two years were
as follows:
(dollars in millions) 1993 1992 1991
- -------------------------------------------------------------------------
Net earnings as reported $1,244 $552 $1,567
Effect of SFAS No. 106 accounting change
for retiree health care:
- Cumulative adjustment for transition
obligation 1,002
- Pro-forma current period cost (70)
- -------------------------------------------------------------------------
Net earnings on a comparable basis $1,244 $1,554 $1,497
=========================================================================
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<PAGE> 26
The Company elected to implement Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," in the fourth quarter of 1992, resulting in the accrual of a
cumulative adjustment for retiree health care costs for active employees. The
Company's previous practice was to accrue retiree health care liability upon
an employee's retirement. Although the new accounting standard results in a
higher level of retiree health care costs being recognized, there is no impact
on the Company's cash flow requirements as there are no current plans to fund
the accrued obligation.
The $310 million decrease in net earnings for 1993 compared to 1992,
excluding the cumulative effect of the SFAS No. 106 accounting change, was
primarily due to lower commercial aircraft sales, together with lower
corporate investment income and continued high levels of research and
development expenditures, principally for the new 777 jet transport program.
These factors were partially offset by improved defense and space earnings
despite lower sales, and increased income from customer financing.
The $57 million increase in net earnings for 1992 compared to 1991, on a
comparable basis adjusted for the SFAS No. 106 accounting change, was primarily
due to increased commercial aircraft sales and improved cost performance,
particularly in the defense and space segment. These factors were partially
offset by higher research and development expense (principally increased 777
program expenditures), lower corporate investment income and a higher effective
federal income tax rate.
Net earnings for 1991 were $182 million higher than 1990 earnings, primarily
due to increased commercial aircraft sales, a lower defense and space segment
operating loss and a lower effective federal income tax rate. These factors
were partially offset by higher research and development expense (principally
increased 777 program expenditures) and lower corporate investment income.
The effective federal income tax rates were 31.7%, 31.1% and 28.9% for 1993,
1992 and 1991, respectively. Relative to the statutory rates, the lower
effective tax rates for the three years were due primarily to tax-exempt income
benefits from export sales, and research and development benefits in 1991.
(See Note 6 to the Consolidated Financial Statements.)
Essentially all of the Company's business is performed under contract, and
therefore operating results trends are not significantly influenced by the
effect of changing prices. Additional information relating to sales and
earnings contributions by business segment can be found in Note 14 to the
Consolidated Financial Statements.
Although 1994 sales are projected to be lower than 1993 sales, operating
profit margins, exclusive of research and development expenditures for new
and derivative jet transport models, are expected to be substantially
maintained through the efficiencies gained by process improvements in all
aspects of the Company's operations. However, because of the impact of
commercial aircraft research and development expenditures discussed below
together with the lower sales level, there will be a significant decline
in net earnings as a percent of sales for 1994.
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<PAGE> 27
RESEARCH AND DEVELOPMENT ACTIVITIES
Research and development expenditures charged directly to earnings include
design, developmental and related test activities for new and derivative
commercial jet transports, other company-sponsored product development,
and basic defense and space research and development not recoverable under
U.S. Government flexibly priced contracts.
Research and development expensed:
[Graphic and image material item Number 3
See appendix on page 107 for description.]
The principal commercial developmental program during the 1991-1993 time
period has been the new 777 wide-body twinjet. Structural design activities
on the 777 program peaked in 1992, resulting in the lower level of research
and development charges in 1993 compared to 1992. The 777 development program
has now transitioned from primarily structural and systems design activities
to primarily systems integration and test activities. Flight testing will begin
in mid-1994, leading to initial deliveries in mid-1995. The principal
commercial developmental projects with significant expenditures in 1994 include
the 777 base model, the extended-range version of the 777 for which deliveries
begin in late 1996, initial structural design activities on the 737-700 for
which deliveries begin in late 1997, and the freighter version of the 767 to be
delivered in the fourth quarter of 1995. The first freighter version of the
747-400, in development since 1989, was delivered in the fourth quarter of 1993.
The major developmental programs in the defense and space segment, funded
principally under cost-reimbursement-type contracts, include Space Station
work packages, F-22 fighter aircraft, V-22 Osprey tiltrotor transport and
RAH-66 Comanche helicopter.
The total amount of research and development expenditures charged to expense
is projected to increase somewhat in 1994 from the $1.7 billion level in 1993.
CONTINUOUS QUALITY IMPROVEMENT
The Company remains strongly committed to continuous quality improvement in
all aspects of its business and to maintaining a strong focus on customer needs,
including product capabilities, technology, in-service economics and product
support. Major long-term productivity gains are being aggressively pursued as
substantial resources have been and will continue to be invested in training,
restructuring of processes, technology, and organizational realignment.
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<PAGE> 28
In connection with the 777 developmental program, such measures have included
early application of substantial resources for integrated product teams, design
interface with customer representatives, use of advanced three-dimensional
digital product definition and digital pre-assembly computer applications, and
increased use of automated manufacturing processes. Although these measures
have required significant current investments, substantial long-term benefits
are anticipated from reductions in design changes, less rework, and improved
quality of internally manufactured and supplier parts. Major process
improvements and promising pilot projects are also being pursued on other
commercial and military programs to improve quality, reduce inventory and
shorten cycle times.
BACKLOG
Contractual backlog:
[Graphic and image material item Number 4
See appendix on page 107 for description.]
Total contractual backlog of unfilled orders at December 31, 1993, was
$73.5 billion, compared with $87.9 billion at the end of 1992. Of the total
1993 backlog, $70.5 billion or 96% was for commercial customers (including
foreign governments) and $3.0 billion or 4% was for the U.S. Government.
Comparable figures at the end of 1992 were $82.6 billion or 94% commercial,
and $5.3 billion or 6% U.S. Government. Not included in contractual backlog
are purchase options and announced orders for which definitive contracts have
not been executed and orders from customers which have filed for bankruptcy
protection.
U.S. Government and foreign military backlog is limited to amounts obligated
to contracts. Unobligated U.S. Government contract values not included in
backlog at December 31, 1993 and 1992, totaled $6.9 billion and $7.6 billion.
In evaluating the Company's contractual backlog for commercial customers,
certain risk factors should be considered. Many of the orders extend out
several years, with approximately 60% of the contractual backlog for commercial
jet airplanes scheduled to be delivered after 1995. Continuation of the weak
economic environment in many areas of the world could result in additional
customer requests for rescheduling or possible cancellation of contractual
orders.
COMMERCIAL AIRCRAFT MARKET ENVIRONMENT
- --------------------------------------
The worldwide market for commercial jet transports is predominantly driven
by long-term trends in airline passenger traffic. The principal factors in
long-term traffic growth are sustained economic growth in developed and emerging
markets and political stability. Demand for the Company's products is further
influenced by profitability of the airline industry, the globalization and
consolidation of the industry, limitations of airport and air traffic control
infrastructure, noise regulations, product development and strategy, and price
and other competitive factors.
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<PAGE> 29
PASSENGER TRAFFIC TRENDS
Worldwide airline passenger traffic declined in 1991 - the first annual
decline since the start of the jet era - due principally to the economic and
political impacts of the Persian Gulf conflict. Passenger traffic in 1992 was
approximately 8% higher than the depressed levels of 1991 for the airline
industry worldwide, excluding Aeroflot of the Commonwealth of Independent
States (CIS). Relative to 1990 levels, 1992 worldwide airline passenger traffic
represented an increase of approximately 5%. The growth in worldwide airline
passenger traffic in 1993 over 1992 was approximately 3 1/2%. For the three-
year period 1991-1993, the average annual growth rate for worldwide passenger
traffic was approximately 3%, significantly below the long-term historical
growth rate. Worldwide economic growth rates in general were similarly below
long-term historical averages during this period.
Passenger traffic gains by U.S. airlines in 1992 were approximately 6 1/2%,
largely due to aggressive price discounting that resulted in no revenue growth
and significant operating losses in the aggregate. In 1993 passenger traffic
of U.S. carriers increased approximately 3 1/2%; however, revenue was up
approximately 7%. As a result, U.S. airlines realized an operating profit in
the aggregate for 1993, in contrast to their significant operating losses in
1992 and 1991.
European airline passenger traffic increased approximately 8% in 1993, but
revenue yields remained weak, reflecting current economic conditions. With the
exception of Japan, which experienced no growth in airline passenger traffic in
1993, Asia continues to experience high traffic growth. Passenger traffic
growth in Asian countries other than Japan grew approximately 7% in 1993.
World air travel:
[Graphic and image material item Number 5
See appendix on page 108 for description.]
The above graph shows the growth in world air travel, excluding traffic of
former Soviet Union airlines, as measured by revenue passenger miles from
1970 through 1993, and the Company's forecast of world air travel through the
year 2010. The forecasted revenue passenger miles represent an average annual
growth rate of somewhat over 5%, compared with the long-term historical annual
growth rate of nearly 7% through 1993. The forecasted average annual growth
rate, although lower than the historical rate, results in greater annual
increases in the absolute number of revenue passenger miles because of the
growing volume to which the annual growth rates apply.
Based on this long-term forecast of air traffic growth - taking into
consideration increasing utilization levels of the worldwide fleet and
requirements to replace older aircraft - the Company estimates the total
commercial jet transport market through the year 2010, including existing
aircraft orders, at approximately $800 billion in 1994 dollars. However,
the realization of this market forecast under economically rational
circumstances depends on the customer airlines' ability to achieve and sustain
reasonable levels of profits over the long term.
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<PAGE> 30
AIRLINE PROFITABILITY
The domestic and international airline industry in aggregate achieved a
general long-term growth trend of positive operating profits from 1970 through
1989, although with significantly reduced operating profits or operating losses
during the 1979-1983 period. That long-term profitability trend has again been
seriously disrupted, especially with respect to the major U.S. airlines. From
1990-1992, the U.S. airline industry incurred very substantial losses.
Additionally, the major non-U.S. airlines experienced operating losses in the
aggregate during 1992. Through a combination of passenger traffic growth,
improved revenue yields, lower fuel costs, aggressive cost reduction measures
and other productivity improvements, both U.S. and non-U.S. airlines realized
positive operating profits in 1993 in the aggregate. Net profits, which include
interest expense on debt obligations, however, were negative for the fourth
consecutive year for the U.S. airline industry.
Until the airline industry can achieve sustained levels of acceptable
profitability, future orders of the Company's commercial jet transports will be
restricted. Many airlines have taken aggressive cost reduction measures, and
the airline industry has continued to move toward more consolidation and
integration of operations. These actions, coupled with rational fare structures
and continued passenger traffic growth, are important factors in returning the
airline industry to profitability and improved financial health.
Airline industry profits - for core airline operations:
[Graphic and image material item Number 6
See appendix on page 108 for description.]
INDUSTRY COMPETITIVENESS
As all jet transport manufacturers face declining production rates,
competitive pressures for new orders continue to be intense in terms of pricing
and other conditions. With respect to pricing pressures, the Company's
continuous quality improvement and cost reduction efforts are intended to enable
the Company to maintain market share at satisfactory margins.
In July 1992 the U.S. Government and the European Community announced
agreement on interpreting the commercial aircraft code of the General Agreement
on Tariffs and Trade (GATT). The 1992 agreement limits direct European
government development support subsidies to 33% and prohibits government
production loans and government-subsidized sales arrangements. While Boeing
would have preferred a ban on all government subsidies for commercial airplane
programs, the controls embodied in the 1992 agreement were considered important
in limiting future government support to the Company's European competitor.
A new multi-lateral subsidies code was incorporated in the GATT agreement
reached in December 1993 limiting government subsidies by all countries
covered by the GATT. The more restrictive 1992 bilateral agreement remains in
effect for the European Community. Further limiting of government subsidies
to foreign aircraft manufacturing companies remains a primary goal of Boeing
to ensure fair competition.
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<PAGE> 31
The aircraft manufacturing industry in the former Soviet Union (FSU) can
be expected to capture the predominant share of the future FSU market,
although current instability makes that market environment unpredictable.
However, the Company believes the FSU market is large and diverse, and presents
significant sales opportunities over the longer term. With regard to the
commercial jet transport market outside the FSU, the FSU aircraft manufacturing
industry, as well as those in certain Asian countries, has the potential of
increasing competition, either independently or through alliances. Although
this represents an added degree of uncertainty, the Company believes it will
be able to maintain its long-term favorable market share through its wide range
of product offerings and technological improvements, its broad-based network of
domestic and international suppliers and program participants, its extensive
customer service system, opportunities for strategic alliances, and continued
emphasis on quality and continuous process improvements.
WORLD AIRCRAFT FLEET
Excess capacity in the worldwide aircraft fleet has contributed to the
decline in sales and backlog. Approximately 800 commercial jet transports on
average were in storage status during 1993. However, due to noise constraints
and the inferior operating economics of older aircraft, only about one-half of
the stored aircraft are expected to be put back into commercial service. More
than 70% of the inactive aircraft do not meet the Federal Aviation
Administration's more stringent Stage III noise requirements and have an average
age of well over 20 years. The average age of the inactive aircraft meeting
Stage III noise requirements is approximately 10 years.
Nearly 40% of the 10,500 jet aircraft in the non-FSU worldwide commercial
fleet do not meet noise requirements scheduled to come into effect by the end
of the decade. Compliance with the new requirements, where feasible, requires
modifications to older aircraft. The costs of these modifications, coupled
with increasing maintenance costs and inferior operating economics associated
with older aircraft, are projected to result in the retirement of up to 3,500
commercial jet transports by the year 2010 and therefore create substantial
new aircraft demand.
PRODUCT OFFERINGS
The Company continually evaluates opportunities to improve current models,
and conducts ongoing marketplace assessments to ensure that its family of jet
transports is well positioned to meet future requirements of the airline
industry. The fundamental strategy is to maintain a broad product line
responsive to changing market conditions by maximizing commonality within and
across the Boeing family of airplanes. The Company expects to continue leading
the industry in customer satisfaction by offering products that exhibit the
highest standards of quality, safety, technical excellence, economic
performance, and in-service support.
The major focus of development activities over the past three years has been
the 777 wide-body twinjet which is scheduled to enter airline service in
mid-1995. The new 777 model is designed to meet airline requirements for an
efficient, comfortable, high-capacity airplane to be used in domestic and
intra-regional markets. An extended-range version of the 777 is being offered
for delivery in late 1996, and the aircraft could be further developed for
greater capability, including additional range and a stretched fuselage.
Orders for 147 and options for 108 777s had been announced by 16 customers as
of year end 1993.
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<PAGE> 32
During 1993 the Company began development activities on the next generation
of the 737 family of short-to-medium-range jetliners that will provide greater
range, increased speed, and reduced noise and emissions while maintaining 737
family commonality. The first next-generation 737, designated the 737-700, is
the middle-sized member of the 737 family. Customer orders will determine the
sequence and timing of the introduction of the smaller 737-600 and the larger
737-800. Approximately 40% of the dollar value of the projected commercial
jet transport deliveries through the year 2010 is expected to be in the size
category that includes the 737 family. The improved operational capabilities
and commonality benefits should give the new 737s significant competitive
advantages. Initial 737-700 deliveries are scheduled for late 1997.
Other derivatives recently developed or presently in development include the
freighter version of the 747-400, in development since 1989 and first delivered
in 1993, and the freighter version of the 767 for which deliveries begin
in 1995.
The Company continues to assess the market potential for new or derivative
aircraft that are larger and have more range than the 747-400. Because of a
relatively limited market and the heavy resource investment levels required,
the Company signed an agreement with four European aerospace companies in 1993
to study the feasibility of developing a new aircraft capable of carrying
between 550 and 800 passengers.
While product development activities are principally oriented toward
maintaining and enhancing the competitiveness of the Boeing subsonic fleet, the
Company is also involved in studies to understand the technological and
economic issues associated with development of commercial supersonic aircraft.
At this time, environmental issues such as takeoff noise and emissions at high
altitude appear manageable.
SUMMARY
Although significant market uncertainties exist - especially with respect
to near-term economic conditions, the airline industry's profitability and
financial health, and the intense competitive environment - the long-term
market outlook remains favorable. The Company is well positioned in all
segments of the commercial jet transport market, and intends to remain the
airline industry's preferred supplier through emphasis on quality processes,
customer satisfaction and product offerings.
DEFENSE AND SPACE MARKET ENVIRONMENT
- ------------------------------------
Changing defense priorities and severe federal government budget pressures
have significantly changed the market environment for the defense and space
segment. Over the three-year period 1991-1993, total U.S. Government defense
and space funding declined approximately 20% in inflation-adjusted dollars,
and further declines are projected over the next few years. As a consequence,
some of the Company's programs have been subject to stretch-out, curtailment
or termination. Although a number of programs remain subject to future
stretch-out and curtailment, the Company's defense and space business is
broadly diversified and includes a number of priority developmental programs
and candidate programs for system upgrade or modification. Internationally,
defense budgets have also moderated; however, there continue to be opportunities
for the sale of Boeing systems to foreign governments.
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<PAGE> 33
Major defense and space contract awards during 1993 included NASA's selection
of Boeing as the prime contractor for the restructured Space Station program,
and the initial contract for two 767 Airborne Warning and Control Systems
(AWACS) for the government of Japan. The selection as prime contractor for
the Space Station program is an acknowledgment of Boeing Defense & Space Group's
ability to effectively manage large, complex integration projects, and
represents an assignment of great importance to both the Company and the
country's manned space program. Boeing will be responsible for the design,
development, physical integration, test and launch preparation of the Space
Station, as well as completing the original work package to build the habitat
and laboratory modules. The 767 AWACS program is expected to provide
substantial business opportunities over the long term. Japanese officials have
indicated they intend to seek funding for two additional 767 AWACS in 1994,
and the Company continues to discuss 767 AWACS requirements with other
countries. In addition to the 767 AWACS, other longer-term defense and space
business opportunities associated with the Company's commercial aircraft include
U.S. military airlift and tankers. The Pentagon's Defense Acquisition Board is
presently evaluating potential future acquisition of commercial wide-body
aircraft such as the 747 and 767 to supplement the military airlift fleet.
A larger percentage of the Company's defense and space business was under
cost-reimbursement-type contracts in 1993 compared to 1991 and 1992. The
current major developmental programs, principally the Space Station, F-22
fighter, RAH-66 Comanche helicopter and V-22 Osprey tiltrotor aircraft,
primarily involve cost-reimbursement-type contracts.
In addition to the developmental programs mentioned above, the major
revenue-producing programs for 1994 include production and remanufacturing
of CH-47 helicopters, continuing B-2 bomber subcontract work, production
of the Avenger air-defense system, updating and modifying various military
aircraft and systems, 767 AWACS, other program support and classified project
activities.
The current defense and space market is characterized by aggressive
competition for the fewer opportunities that remain and significant
restructuring throughout the industry in the form of consolidations,
acquisitions, relocations and organizational realignment. The Company
continues to examine whether its long-term strategy is best pursued through
internal means or through acquisitions, dispositions or alliances. During
1991 and 1992, a major organizational consolidation and restructuring of the
Company's various defense and space divisions was accomplished, positioning
the new Defense & Space Group to effectively compete in this new market
environment. Joint venture arrangements with other companies are expected to
continue to be common for major developmental programs and the follow-on
production activities. Currently, the Company's activities in the F-22, V-22
and RAH-66 developmental programs are under joint venture arrangements.
OTHER BUSINESS ACTIVITIES
- -------------------------
Other business activities include developing large-scale information systems
and conducting management services through Boeing Computer Services, principally
for government agencies. An information systems contract to enhance the
readiness of the Army Reserve and National Guard units is projected to be the
single largest contributor to other business sales for the next few years. In
early 1993, the Company elected to discontinue its involvement with the U.S.
Government's strategic petroleum reserve program.
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<PAGE> 34
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The primary factors that affect the Company's investment requirements and
liquidity position, other than operating results associated with current sales
activity, include the timing of new and derivative commercial jet transport
programs which require both high developmental expenditures and initial
inventory buildup; cyclical growth and expansion requirements; requirements to
provide customer financing assistance; and the timing of federal income tax
payments.
CASH FLOW SUMMARY
Following is a summary of cash flow (based on changes in cash and short-
term investments) to highlight and facilitate discussion of the principal
cash flow elements.
(dollars in billions) 1993 1992 1991
- -------------------------------------------------------------------------
Cash flow from earnings (a) $ 2.4 $ 2.7 $ 2.4
Facilities and equipment expenditures (b) (1.3) (2.2) (1.9)
Net decrease in gross inventory 0.6 2.0 1.0
Reductions in customer advances (1.3) (2.1) (0.6)
-------------------------
Net inventory change (c) (0.7) (0.1) 0.4
Net changes in receivables, liabilities,
and deferred income taxes (d) (0.4) 1.0 (0.9)
Pension funding in excess of expense (0.1) (0.2) (0.4)
Net increase in customer financing (e) (0.9) (1.1) (0.1)
Disbursement for cash dividends and
treasury stock acquisition (0.3) (0.4) (0.4)
- -------------------------------------------------------------------------
Net cash flow before new debt (1.3) (0.3) (0.9)
Long-term debt issued 0.8 0.5 1.0
- -------------------------------------------------------------------------
(Decrease) Increase in cash and
short-term investments (0.5) 0.2 0.1
=========================================================================
Cash and short-term investments at end of year $ 3.1 $ 3.6 $ 3.4
=========================================================================
(a) Cash flows from earnings as presented here are adjusted for non-cash
charges for depreciation and retiree health care accruals. The Company
has not funded Statement of Financial Accounting Standards No. 106 retiree
health care accruals and at this time has no plan to fund these accruals
in the future.
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<PAGE> 35
(b) Facilities and equipment expenditures were at historic highs during
1991 and 1992, primarily in support of the new 777 program. Additionally,
productivity investments and facilities expansions in support of the record
commercial production rate levels in the 1991-1992 time period contributed
substantially to these capital asset expenditures. Expenditures in 1993 were
down sharply as the 777 program facilities expansions were substantially
completed. Facilities and equipment expenditures are projected to continue
to decline over the next two years.
(c) The reduction in gross inventory in 1991 was primarily attributable to
defense and space activities. During both 1992 and 1993, inventory balances on
the 737, 747, 757 and 767 commercial jet transport programs declined substan-
tially due to production rate reductions and improvements in production inven-
tory flow times, offset by substantial inventory and tooling buildup on the new
777 program. Defense and space segment inventories also declined in 1993. Pri-
marily because of declining delivery rates, slower order activity, and program
buildup on the 777 program during 1992 and 1993, the ratio of commercial cus-
tomer advances to commercial gross inventory declined. Consequently, the reduc-
tions in commercial gross inventory were more than offset by reductions in cus-
tomer advances, resulting in a net cash requirement. With regard to defense and
space contract activity, the ratio of progress billings to gross inventory did
not significantly change during this period. Inventory buildup for the 777 pro-
gram is projected to continue through mid-1995 when deliveries of the new 777
begin, partially offset by further reductions on the other commercial programs.
(d) Over the three-year period 1991-1993, changes in accounts receivable,
accounts payable, other liabilities and deferred taxes required $0.3 billion
in cash flows in the aggregate. Reductions in customer advances in excess of
related costs of $0.9 billion over that three-year period represented the
largest individual negative cash flow factor. As of year end 1990, excess
customer advances totaled $1.1 billion, primarily associated with commercial
aircraft order activity, and have been declining since that time. Offsetting
this principal negative cash flow factor were the effects of reductions in
accounts receivable and increases in accounts payable and other liabilities.
Cash generated from reductions in accounts receivable totaled $0.4 billion,
principally associated with U.S. Government contract activity in 1992.
Increases in accounts payable and other liabilities provided $0.7 billion over
the three-year period, primarily due to increased levels of lease and other
deposits from customers.
Federal income tax payments over the past several years have substantially
exceeded the tax provisions on book income, due principally to certain tax
law changes previously enacted, resulting in the acceleration of the
recognition of taxable income related to long-term contracts and inventory
costing. Federal income tax payments for the 1994-1995 time period are
projected to exceed income tax expense by approximately $1 billion as
remaining contracts executed under prior tax regulations are completed.
(e) The increase in customer financing has been largely driven by the
commercial aircraft market conditions discussed above. The Company has
outstanding commitments of approximately $4.0 billion to arrange or
provide financing related to aircraft on order or under option. However,
not all these commitments are likely to be utilized. The Company will
sell a portion of customer financing assets from time to time when capital
markets are favorable in order to maintain maximum capital resource
flexibility. Outstanding loans and commitments are secured by the underlying
aircraft.
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<PAGE> 36
Property, plant and equipment - net additions:
[Graphic and image material item Number 7
See appendix on page 109 for description.]
Customer financing - net additions:
[Graphic and image material item Number 8
See appendix on page 109 for description.]
LIQUIDITY AND CAPITAL RESOURCES SUMMARY
The $2.3 billion of long-term debt added over the prior three years is
unsecured, with maturities ranging from 10 to 50 years. Total borrowings
as of year end 1993 amounted to 23% of total book capital (shareholders'
equity plus borrowings), and the Company believes that it has substantial
additional long-term borrowing capability. A $3.0 billion revolving credit
line agreement with a group of major banks remains available, but unused.
In aggregate, cash and short-term investments are projected to decrease
through mid-1995 due principally to the inventory buildup on the new 777 jet
transport, customer financing commitments, and federal income tax payments.
No additional debt issuances are anticipated at this time.
The Company believes its internally generated liquidity, together with
access to external capital resources, will be sufficient to satisfy existing
commitments and plans, and to provide adequate financial flexibility to take
advantage of potential strategic business opportunities should they arise.
_______
CONTINGENT ITEMS
As discussed in Note 13 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. 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 $605 million of 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.
The Company continues to be subject to ongoing U.S. Government investigations
of business practices and cost classifications. These proceedings could
involve claims by the Government for damages, and under certain circumstances
a contractor can be suspended or debarred from Government contracts. The
Company believes, based upon all available information, that the outcome of
the Government investigations will not have a materially adverse effect on its
financial position or results of operations.
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<PAGE> 37
The Company is subject to federal and state requirements for protection of
the environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations over the
past 10 years. The costs incurred and expected to be incurred in connection
with such activities have not had, and are not expected to have, a material
impact to the Company's financial position. With respect to results of
operations, related charges have averaged less than 2% of annual net earnings,
and have not exceeded 3 1/2% in any given year.
The Company routinely assesses, based on in-depth studies, expert analyses
and legal reviews, its contingencies, obligations and commitments to clean up
sites, including assessments of the probability of recoveries from other
responsible parties who have and have not agreed to a settlement and recoveries
from insurance carriers. The Company's policy is to immediately recognize
identified exposures related to environmental cleanup sites based on
conservative estimates of investigation, cleanup, and monitoring costs
to be incurred.
Based on all known facts and expert analyses, the Company believes it is
not reasonably likely that identified environmental contingencies will result
in a materially adverse impact on the Company's financial position or
operating results and cash flow trends.
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<PAGE> 38
INDEPENDENT AUDITORS' REPORT
January 24, 1994
Board of Directors
and Shareholders
The Boeing Company
Seattle, Washington
We have audited the accompanying consolidated
statements of financial position of The Boeing Company
and subsidiaries as of December 31, 1993 and 1992, and
the related statements of net earnings and cash flows
for each of the three years in the period ended
December 31, 1993. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of The Boeing Company and subsidiaries as of
December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three
years in the period ended December 31, 1993, in
conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, in
1992 the Company changed its method of accounting for
postretirement benefits other than pensions.
/s/ Deloitte & Touche
Deloitte & Touche
Seattle, Washington
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<PAGE> 39
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in millions except per share data)
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Sales and other operating revenues $25,438 $30,184 $29,314
Costs and expenses 23,747 28,144 27,360
- ------------------------------------------------------------------------------
Earnings from operations 1,691 2,040 1,954
Other income, principally interest 169 230 263
Interest and debt expense (39) (14) (13)
- ------------------------------------------------------------------------------
Earnings before federal taxes on income and
cumulative effect of change in accounting 1,821 2,256 2,204
Federal taxes on income 577 702 637
- ------------------------------------------------------------------------------
Earnings before cumulative effect of change
in accounting 1,244 1,554 1,567
Cumulative effect to January 1, 1992, of
change in accounting for postretirement
benefits other than pensions (1,002)
- ------------------------------------------------------------------------------
Net earnings $ 1,244 $ 552 $ 1,567
==============================================================================
Earnings per share:
Before cumulative effect of change
in accounting $3.66 $ 4.57 $4.56
Cumulative effect to January 1, 1992, of
change in accounting for postretirement
benefits other than pensions (2.95)
- ------------------------------------------------------------------------------
$3.66 $ 1.62 $4.56
==============================================================================
Cash dividends per share $1.00 $ 1.00 $1.00
==============================================================================
See notes to consolidated financial statements.
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<PAGE> 40
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in millions except per share data)
December 31, 1993 1992
- ------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 2,342 $ 2,711
Short-term investments 766 903
Accounts receivable 1,615 1,428
Current portion of customer financing 218 229
Deferred income taxes 800 115
Inventories 10,485 11,073
Less advances and progress billings (7,051) (8,372)
- ------------------------------------------------------------------------------
Total current assets 9,175 8,087
Customer financing 2,959 2,066
Property, plant and equipment, at cost 13,232 12,293
Less accumulated depreciation (6,144) (5,569)
Deferred income taxes 63 212
Other assets 1,165 1,058
- ------------------------------------------------------------------------------
$20,450 $18,147
==============================================================================
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $ 5,854 $ 5,248
Advances in excess of related costs 226 639
Income taxes payable 434 232
Current portion of long-term debt 17 21
- ------------------------------------------------------------------------------
Total current liabilities 6,531 6,140
Accrued retiree health care 2,148 2,004
Long-term debt 2,613 1,772
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 413 418
Retained earnings 7,180 6,276
Less treasury shares, at cost -
1993 - 9,118,995; 1992 - 9,836,313 (356) (384)
- ------------------------------------------------------------------------------
Total Shareholders' equity 8,983 8,056
- ------------------------------------------------------------------------------
$20,450 $18,147
==============================================================================
See notes to consolidated financial statements.
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<PAGE> 41
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Cash flows - operating activities:
Net earnings $ 1,244 $ 552 $ 1,567
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Effect of cumulative change in accounting
for postretirement benefits other
than pensions 1,002
Depreciation and amortization -
Plant and equipment 953 870 768
Leased aircraft, other 72 91 58
Deferred income taxes (536) (26) 95
Gain/undistributed earnings - affiliates (1) (13) 1
Changes in operating assets and liabilities -
Accounts receivable (187) 635 (41)
Inventories, net of advances and progress
billings (733) (138) 458
Accounts payable and other liabilities 606 229 (140)
Advances in excess of related costs (413) (28) (416)
Federal taxes on income 202 206 (453)
Change in prepaid pension expense (134) (202) (403)
Change in accrued retiree health care 144 184 40
- ------------------------------------------------------------------------------
Net cash provided by operating activities 1,217 3,362 1,534
- ------------------------------------------------------------------------------
Cash flows - investing activities:
Short-term investments 137 (388) 623
Customer financing additions (1,560) (1,156) (223)
Customer financing reductions 626 16 123
Plant and equipment, net additions (1,317) (2,160) (1,850)
Proceeds from sale of affiliate 50
Other 8 (19) (3)
- ------------------------------------------------------------------------------
Net cash used by investing activities (2,106) (3,657) (1,330)
- ------------------------------------------------------------------------------
Cash flows - financing activities:
Debt financing 837 482 993
Shareholders' equity -
Cash dividends paid (340) (340) (343)
Treasury shares acquired (109) (127)
Stock options exercised, other 23 35 23
- ------------------------------------------------------------------------------
Net cash provided by financing activities 520 68 546
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (369) (227) 750
Cash and cash equivalents at beginning of year 2,711 2,938 2,188
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,342 $ 2,711 $ 2,938
==============================================================================
See notes to consolidated financial statements.
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<PAGE> 42
THE BOEING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1993, 1992 and 1991
(Dollars in millions except per share data)
Note 1 - Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of all sub-
sidiaries. Intercompany profits, transactions and balances have been eliminated
in consolidation.
Sales and other operating revenues
Sales under commercial programs and U.S. Government and foreign military
fixed-price contracts are generally recorded as deliveries are made. For
certain fixed-price contracts that require substantial performance over a long
time period before deliveries begin, sales are recorded based upon attainment of
scheduled performance milestones. Sales under cost-reimbursement contracts are
recorded as costs are incurred and fees are earned. Certain U.S. Government
contracts contain profit incentives based upon performance as compared to
predetermined targets. Incentives based on cost are recorded currently. Other
incentives are included in revenues when awards or penalties are established,
or when amounts can reasonably be determined. Income associated with customer
financing activities is included in sales and other operating revenues.
Inventories and cost of deliveries
Inventoried costs on long-term commercial programs and U.S. Government and
foreign military contracts include direct engineering, production and tooling
costs, and applicable overhead. In addition, for U.S. Government fixed-price-
incentive contracts, inventoried costs include research and development and
general and administrative expenses estimated to be recoverable. Inventoried
costs are generally reduced by the estimated average cost of deliveries.
For mature commercial programs, average cost of deliveries is based on the
estimated total cost of units committed to production. For commercial programs
in the early production stages, average cost of deliveries is based on the
estimated total cost of units representing what is believed to be a conservative
market projection. For U.S. Government and foreign military contracts, average
cost of deliveries is based on the estimated total cost of contractual units. To
the extent the total of such costs is expected to exceed the total estimated
sales price, charges are made to current earnings to reduce inventoried costs
to estimated realizable value.
In accordance with industry practice, inventoried costs include amounts
relating to programs and contracts with long production cycles, a portion of
which is not expected to be realized within one year.
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<PAGE> 43
Commercial spare parts and general stock materials are stated at average cost
not in excess of realizable value.
Research and development, general and administrative expenses
Research and development (including the Company-sponsored share of research
and development activity conducted in connection with cost-share contracts) and
general and administrative expenses are charged directly to earnings as incurred
except to the extent estimated to be directly recoverable under U.S. Government
flexibly priced contracts.
Interest expense
Interest and debt expense is presented net of amounts capitalized. Interest
expense is subject to capitalization as a construction-period cost of property,
plant and equipment and major commercial program tooling.
Postretirement benefits
The Company's funding policy for pension plans is to contribute, at a minimum,
the statutorily required amount to an irrevocable trust. Benefits under the
plans are generally based on years of credited service, age at retirement and
average of last five years' earnings. The actuarial cost method used in
determining the net periodic pension cost is the projected unit credit method.
In the fourth quarter of 1992, the Company adopted retroactive to January 1,
1992, the provisions of Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
using the immediate recognition transition option. SFAS No. 106 requires accrual
of these benefits during an employee's service period. Prior to 1992, post-
retirement benefits consisting of retiree health care were accrued for eligible
retirees and qualifying dependents. The effect of the immediate recognition of
the transition obligation was a decrease to 1992 earnings on an after-tax basis
of $1,002, or $2.95 per share based on the annual average shares outstanding.
This accounting change increased 1992 pre-tax costs by $123. The retiree health
care obligation is unfunded.
Taxes on income
In 1992, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under the
asset and liability method prescribed by SFAS No. 109, deferred income taxes
are provided for the temporary differences between the financial reporting basis
and the tax basis of assets and liabilities. These deferred taxes are measured
by the provisions of currently enacted tax laws. Because the Company had
previously adopted SFAS No. 96, the adoption of SFAS No. 109 does not have a
material effect on the Consolidated Statements of Net Earnings.
State taxes on income, which are relatively minor in amount, are included in
general and administrative expense.
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<PAGE> 44
Cash and short-term investments
Cash and cash equivalents consist of highly liquid instruments such as
certificates of deposit, time deposits, treasury notes and other money market
instruments which generally have maturities of less than three months. Short-
term investments are carried at cost, which approximates market value.
Capital assets
Property, plant and equipment are recorded at cost and depreciated over
useful lives, principally by accelerated methods. Applicable interest costs are
capitalized with respect to plant and equipment additions.
Contingent stock repurchase commitment
The Company has issued put options on 5,000,000 shares of its stock,
exercisable on specific dates in 1994, giving another party the right to sell
shares of Boeing stock to the Company at contractually specified prices. The
balance of the temporary equity account is the amount the Company would be
obligated to pay if all the put options were exercised. The proceeds from the
issuance of the put options were accounted for as paid-in capital.
Per share data
Net earnings per share are computed based on the weighted average number
of shares outstanding of 339,736,640, 340,217,888 and 343,355,917 for the years
ended December 31, 1993, 1992 and 1991, respectively. There is no material
dilutive effect on net earnings per share due to common stock equivalents.
Note 2 - Accounts Receivable
Accounts receivable at December 31 consisted of the following:
1993 1992
- ------------------------------------------------------------------------------
Amounts receivable under U.S. Government contracts $1,182 $1,035
Accounts receivable from commercial and foreign
military customers 433 393
- ------------------------------------------------------------------------------
$1,615 $1,428
==============================================================================
Accounts receivable included the following as of December 31, 1993 and 1992,
respectively: amounts not currently billable of $325 and $209 ($192 and $132 not
expected to be collected in one year) relating primarily to sales values
recorded upon attainment of performance milestones that differ from contractual
billing milestones and withholds on U.S. Government contracts; $271 and $241
($240 and $192 not expected to be collected in one year) relating to claims and
other amounts on U.S. Government contracts subject to future settlement; and
$57 and $33 of other receivables not expected to be collected in one year.
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<PAGE> 45
Note 3 - Inventories
Inventories at December 31, 1993 and 1992, consisted of $9,557 and $10,141
relating to long-term commercial programs and U.S. Government and foreign
military contracts, and $928 and $932 relating to commercial spare parts,
general stock materials and other inventories. General and administrative
and research and development expenses included in inventories represented
approximately 1% of total inventories.
All commercial jet transport programs except the 777 are being accounted for
as mature programs as described in Note 1. As of December 31, 1993, there were
no significant deferred production costs not recoverable from existing firm
orders. Inventory costs relating to long-term commercial jet transport programs
included net unamortized tooling of $2,887 and $1,646 at December 31, 1993 and
1992; of these amounts, $2,299 and $867 related to the 777 program. For mature
commercial programs, substantially all of such costs will be amortized over
existing firm orders. For the 777 program, the number of units for determining
production costs in excess of aggregate estimated average cost and over which
total tooling costs will be amortized and absorbed in cost of sales will be
established when deliveries commence. As of January 24, 1994, 134 777s were
under firm contract.
Additionally, as of December 31, 1993 and 1992, inventory balances included
$457 and $581 subject to claims or other uncertainties related to U.S.
Government contracts, principally for the Peace Shield program. (See Note 13.)
Interest capitalized as construction-period tooling costs amounted to $50
and $53 in 1993 and 1992.
Note 4 - Customer Financing
Long-term customer financing, less current portion, at December 31 consisted
of the following:
1993 1992
- ------------------------------------------------------------------------------
Notes receivable $1,396 $1,305
Investment in sales-type/financing leases 768 111
Operating lease aircraft, at cost, less accumulated
depreciation of $220 and $168 895 720
- ------------------------------------------------------------------------------
3,059 2,136
Less valuation allowance (100) (70)
- ------------------------------------------------------------------------------
$2,959 $2,066
==============================================================================
Financing for aircraft is collateralized by security in the related asset, and
historically the Company has not experienced a problem in accessing such
collateral. The operating lease aircraft category includes new and used jet and
commuter aircraft, spare engines and spare parts.
45 of 109
<PAGE> 46
Principal payments from notes receivable and sales-type/financing leases for the
next five years are as follows:
1994 1995 1996 1997 1998
------------------------------------
$218 $377 $86 $46 $55
====================================
Certain notes currently bear interest at fixed rates of 7.9% to 10.3%, while
the remainder are at variable interest rates up to 1.75% above the prime rate.
Sales and other operating revenues included interest income associated with
notes receivable and sales-type/financing leases of $153, $57 and $46 for 1993,
1992 and 1991, respectively.
Note 5 - Property, Plant and Equipment
Property, plant and equipment at December 31 consisted of the following:
1993 1992
- ------------------------------------------------------------------------------
Land $ 397 $ 399
Buildings 5,286 4,193
Machinery and equipment 6,500 6,084
Construction in progress 1,049 1,617
- ------------------------------------------------------------------------------
$13,232 $12,293
==============================================================================
Interest capitalized as construction-period property, plant and equipment costs
amounted to $100, $66 and $44 in 1993, 1992 and 1991, respectively.
Note 6 - Taxes on Income
In 1992, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." State taxes
on income, which are relatively minor in amount, are included in general and
administrative expense.
The provision for federal taxes on income consisted of the following:
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Taxes paid or currently payable $1,113 $728 $542
Change in deferred taxes other than SFAS No. 106
cumulative transition effect (536) (26) 109
Amortization of investment credit (14)
- ------------------------------------------------------------------------------
$ 577 $702 $637
==============================================================================
46 of 109
<PAGE> 47
The provisions for federal taxes on income were less than those which result
from application of the statutory corporate tax rates due to the following:
1993 1992 1991
- ------------------------------------------------------------------------------
Statutory tax rate 35.0 % 34.0 % 34.0 %
Foreign Sales Corporation tax benefit (3.3) (3.8) (3.2)
Rate change impact on deferred balances (0.5)
Research benefit (1.8)
Amortization of investment credit (0.6)
Other 0.5 0.9 0.5
- ------------------------------------------------------------------------------
Effective tax rate 31.7 % 31.1 % 28.9 %
==============================================================================
The research benefit recognized in 1991 related to benefits earned in prior
years.
The net deferred tax assets (liabilities) resulted from temporary tax
differences associated with the following:
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Inventory and long-term contract methods of
income recognition $ 381 $(182) $(199)
Postretirement benefits accruals 429 393 (118)
Employee benefits accruals 223 215 203
Customer financing (158) (76) (67)
Domestic International Sales Corporation (12) (23) (34)
- ------------------------------------------------------------------------------
$ 863 $ 327 $(215)
==============================================================================
The temporary tax difference associated with inventory and long-term contract
methods of income recognition encompasses related costing differences,
including timing and depreciation differences.
A valuation allowance was not required due to the nature of and circumstances
associated with the temporary tax differences.
Income taxes have been settled with the Internal Revenue Service for all years
through 1978. It is the Company's position that adequate provision has been
made for all amounts due for the years 1979 through 1993. Federal income tax
payments and transfers were $908, $518 and $993 in 1993, 1992 and 1991,
respectively.
Note 7 - Other Assets
Other assets at December 31 consisted of the following:
1993 1992
- ------------------------------------------------------------------------------
Prepaid pension expense $ 981 $ 847
Investments and other assets 184 211
- ------------------------------------------------------------------------------
$1,165 $1,058
==============================================================================
47 of 109
<PAGE> 48
Note 8 - Accounts Payable and Other Liabilities
Accounts payable and other liabilities at December 31 consisted of the
following:
1993 1992
- ------------------------------------------------------------------------------
Accounts payable $2,731 $2,869
Employee compensation and benefits 1,005 997
Lease and other deposits 708 275
Other 1,410 1,107
- ------------------------------------------------------------------------------
$5,854 $5,248
==============================================================================
Note 9 - Long-Term Debt
Long-term debt at December 31 consisted of the following:
1993 1992
- ------------------------------------------------------------------------------
Unsecured debentures and notes:
8 3/8% due Mar. 1, 1996 $ 249 $ 249
6.35% due Jun. 15, 2003 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
8 3/4% due Sep. 15, 2031 248 248
8 5/8% due Nov. 15, 2031 173 173
7.865% due Aug. 15, 2042 100 100
7 7/8% due Apr. 15, 2043 173
6 7/8% due Oct. 15, 2043 125
Other notes 143 150
Less current portion (17) (21)
- ------------------------------------------------------------------------------
$2,613 $1,772
==============================================================================
The $300 debentures due August 15, 2024, are redeemable at the holder's option
on August 15, 2012. All other debentures and notes are not redeemable prior to
maturity. The $100 notes due August 15, 2042, were issued to a private investor,
and the interest rate of 7.865% is a synthetic rate reflecting the effect of
interest rate swaps simultaneously entered into with the private investor.
Maturities of long-term debt for the next five years are as follows:
1994 1995 1996 1997 1998
------------------------------------
$17 $13 $269 $9 $11
====================================
Interest payments were $175, $120 and $32 in 1993, 1992 and 1991,
respectively.
The Company has a $3,000 credit line currently available under an agreement
with a group of commercial banks. Under this agreement, there are compensating
balance arrangements, and retained earnings totaling $1,186 are free from
dividend restrictions. The Company has complied with restrictive covenants
contained in the various debt agreements.
48 of 109
<PAGE> 49
Note 10 - Postretirement Plans
Pensions
The Company has various noncontributory plans covering substantially all
employees. All major plans are funded and have plan assets that exceed
accumulated benefit obligations. The following table reconciles the plans'
funded status to the prepaid expense balance at December 31.
1993 1992
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $(7,196) $(6,081)
Nonvested (547) (436)
- ------------------------------------------------------------------------------
Accumulated benefit obligation (7,743) (6,517)
Effect of projected future salary increases (1,299) (1,397)
- ------------------------------------------------------------------------------
Projected benefit obligation (9,042) (7,914)
Plan assets at fair value - primarily equities, fixed
income obligations and cash equivalents 9,180 8,326
- ------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 138 412
Unrecognized net actuarial loss 467 139
Unrecognized prior service cost 476 410
Unrecognized net asset at January 1, 1987, being recognized
over the plans' average remaining service lives (100) (114)
- ------------------------------------------------------------------------------
Prepaid pension expense recognized in the Consolidated
Statements of Financial Position $ 981 $ 847
==============================================================================
The pension provision included the following components:
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Service cost (current period attribution) $ 307 $ 293 $ 299
Interest accretion on projected benefit obligation 632 594 561
Actual return on plan assets (923) (483) (972)
Net deferral and amortization of actuarial
losses (gains) 257 (140) 427
- ------------------------------------------------------------------------------
Net pension provision $ 273 $ 264 $ 315
==============================================================================
The actuarial present value of the projected benefit obligation at December
31, 1993, 1992 and 1991, respectively, was determined using a weighted average
discount rate of 7.25%, 8.25% and 8.25%, and a rate of increase in future
compensation levels of 5.0%, 6.0% and 6.0%. The expected long-term rate of
return on plan assets was 8.5% at December 31, 1993, 1992 and 1991.
49 of 109
<PAGE> 50
The pension plans have been amended to provide that, in the event there is a
change in control of the Company which is not approved by the Board of Directors
and the plans are terminated within five years thereafter, the assets in the
plans first will be used to provide the level of retirement benefits required by
the Employee Retirement Income Security Act, and then any surplus will be used
to fund a trust to continue present and future payments under the post-
retirement medical and life insurance benefits in the Company's group insurance
programs.
Although the Company has no intention of doing so, should it terminate certain
of its pension plans under conditions where the plan's assets exceed the plan's
obligations, the Company has an agreement with the Government whereby the
Government is entitled to a fair allocation of any of the plan's reverted
assets based on plan contributions that were reimbursed under Government
contracts. Also, the Revenue Reconciliation Act of 1990 imposes a 20% non-
deductible excise tax on the gross assets reverted if the Company establishes a
qualified replacement plan or amends the terminating plan to provide for
benefit increases; otherwise, a 50% tax is applied. Any net amount retained by
the Company is treated as taxable income.
The Company has certain unfunded and partially funded plans with a projected
benefit obligation of $169 and $109; plan assets of $23 and $0; and unrecog-
nized prior service costs and actuarial losses of $70 and $46 as of December 31,
1993 and 1992, respectively, based on actuarial assumptions consistent with the
funded plans. The net provision for the unfunded plans was $22 and $15 for 1993
and 1992.
The principal defined contribution plans are the Company-sponsored 401(k)
plans and a funded plan for unused sick leave. Under the terms of the Company-
sponsored 401(k) plans, eligible employees are allowed to contribute up to 12%
of their base pay. The Company contributes amounts equal to 50% of the
employee's contribution to a maximum of 4% of the employee's pay, subject to
statutory limitations. The provision for these defined contribution plans in
1993, 1992 and 1991 was $213, $221 and $205, respectively.
Other postretirement benefits
In the fourth quarter of 1992, the Company adopted retroactive to January 1,
1992, the provisions of Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
using the immediate recognition transition option. SFAS No. 106 requires
accrual of these benefits during an employee's service period. Prior to 1992,
postretirement benefits were accrued for eligible retirees upon retirement. The
Company's postretirement benefits other than pensions consist of health care
coverage for eligible retirees and qualifying dependents. Except for employees
covered by the United Auto Workers bargaining agreement for whom lifetime
benefits are provided, retiree health care is provided principally until age
65. At January 1, 1992, the accumulated postretirement benefit obligation was
$1,819; however, $301 of this obligation had been previously accrued, resulting
in a pre-tax transition obligation adjustment of $1,518. The effect of the
immediate recognition of the transition obligation was a decrease to first
quarter 1992 net earnings of $1,002 and a deferred tax benefit of $516.
50 of 109
<PAGE> 51
The retiree health care cost provision was $230, $257 and $105 for 1993, 1992
and 1991, respectively. The components of expense for 1993 and 1992 were as
follows:
Year ended December 31, 1993 1992
- ------------------------------------------------------------------------------
Service cost (current period attribution) $ 92 $110
Interest accretion on accumulated postretirement benefit
obligation 144 147
Net deferral and amortization of actuarial gains (6)
- ------------------------------------------------------------------------------
Net provision for retiree health care $230 $257
==============================================================================
Benefit costs were calculated based on assumed cost growth for retiree health
care costs of a 12.0% annual rate for 1994, decreasing to a 5.25% annual growth
rate by the year 2003. A 1% increase or decrease in the assumed annual trend
rates would increase or decrease the accumulated postretirement benefit ob-
ligation by $218 and $227 as of December 31, 1993 and 1992, with a corresponding
effect on the postretirement benefit expense of $39 and $43 for 1993 and 1992.
The accumulated postretirement benefit obligation at December 31, 1993 and 1992,
was determined using a weighted average discount rate of 7.25% and 8.25%.
The accumulated postretirement benefit obligation at December 31 consisted of
the following components:
1993 1992
- ------------------------------------------------------------------------------
Retirees and dependents $ 534 $ 485
Fully eligible active plan participants 364 358
Other active plan participants 923 872
- ------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 1,821 1,715
Unrecognized net actuarial gain 327 289
- ------------------------------------------------------------------------------
Accrued postretirement benefit obligation $2,148 $2,004
==============================================================================
Note 11 - Research and Development, General and Administrative Expenses
Expenses charged directly to earnings as incurred included the following:
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Research and development $1,661 $1,846 $1,417
General and administrative 1,102 1,232 1,291
==============================================================================
51 of 109
<PAGE> 52
<TABLE>
Note 12 - Shareholders' Equity
Changes in shareholders' equity consisted of the following:
<CAPTION>
Common Stock
---------------- Additional Treasury Stock
Par Paid-In Retained ----------------
(Shares in thousands) Shares Value Capital Earnings Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 349,257 $1,746 $581 $4,840 5,683 $(194)
==================================================================================================================
Net earnings 1,567
Cash dividends paid (343)
Treasury shares acquired 2,915 (127)
Treasury shares issued for stock options (5) (629) 21
Tax benefit related to stock options 3
Stock appreciation rights expired or surrendered 4
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 349,257 $1,746 $583 $6,064 7,969 $(300)
==================================================================================================================
Net earnings 552
Cash dividends paid (340)
Treasury shares acquired 2,497 (109)
Treasury shares issued for stock options (10) (630) 25
Tax benefit related to stock options 4
Cash received on put options 15
Transfer to contingent stock repurchase provision (175)
Stock appreciation rights expired or surrendered 1
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 349,257 $1,746 $418 $6,276 9,836 $(384)
==================================================================================================================
Net earnings 1,244
Cash dividends paid (340)
Treasury shares issued for stock options (11) (717) 28
Tax benefit related to stock options 3
Stock appreciation rights expired or surrendered 3
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 349,257 $1,746 $413 $7,180 9,119 $(356)
==================================================================================================================
</TABLE>
In July 1987, the Company adopted a Stockholder Rights Plan and declared a
dividend distribution of one Right for each outstanding share of common stock.
Under certain conditions, each Right may be exercised to purchase one one-
hundredth of a share of Series A Junior Participating Preferred Stock at a
purchase price of $150, subject to adjustment. The Rights will be exercisable
only if a person or group has acquired, or obtained the right to acquire, 20%
or more of the outstanding shares of common stock; following the commencement
of a tender or exchange offer for 30% or more of such outstanding shares of
52 of 109
<PAGE> 53
common stock; or after the Board of Directors of the Company declares any
person, alone or together with affiliates and associates, to be an Adverse
Person. If the Board of Directors declares an Adverse Person, or a person or
group acquires more than 30% of the then outstanding shares of common stock
(except pursuant to an offer which the independent Directors determine to be
fair to and otherwise in the best interests of the Company and its share-
holders), each Right will entitle its holder to receive, upon exercise, common
stock (or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right. The
Company will be entitled to redeem the Rights at 5 cents per Right at any time
prior to the earlier of the expiration of the Rights in August 1997 or ten days
following the time that a person has acquired or obtained the right to acquire a
20% position. The Company may not redeem the Rights if the Board of Directors
has previously declared a person to be an Adverse Person. The Rights do not
have voting or dividend rights, and until they become exercisable, have no
dilutive effect on the earnings of the Company.
Changes in stock options and stock appreciation rights (SARs), issued to
officers and other employees at exercise prices equal to market value of the
stock at grant date, consisted of the following:
(Shares in thousands)
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Number of shares under option:
Outstanding at beginning of year 12,001 8,123 7,526
Granted 2,531 4,748 1,597
Exercised (743) (630) (630)
Cancelled or expired (278) (98) (69)
Exercised as SARs (246) (142) (301)
- ------------------------------------------------------------------------------
Outstanding at end of year 13,265 12,001 8,123
==============================================================================
Exercisable at end of year 5,715 4,985 4,488
==============================================================================
Stock appreciation rights:
Outstanding at end of year 1,703 2,174 2,398
Exercisable at end of year 1,480 1,658 1,660
==============================================================================
Number of shares authorized for future
stock option grants at end of year 16,695 5,513 10,166
==============================================================================
The ranges of exercise prices per share for options outstanding were as follows:
December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
High $60.06 $60.06 $60.06
Low $12.63 $10.70 $ 5.56
==============================================================================
The Company has authorized 10,000,000 shares of $1 par preferred stock, none
of which has been issued.
53 of 109
<PAGE> 54
Note 13 - Contingencies
Various legal proceedings, claims and investigations are pending against the
Company related to products, contracts and other matters. Except for the items
discussed below, most of these legal proceedings are related to matters covered
by insurance.
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.
54 of 109
<PAGE> 55
The Company is subject to several U.S. Government investigations of business
and cost classification practices. One investigation involves a grand jury
proceeding as to whether or not certain costs were charged to the proper
overhead accounts. No charges have been filed in this matter, and based on the
facts known to it, the Company believes it would have defenses if any were
filed. The investigations could result in civil, criminal or administrative
proceedings. Such proceedings, if any, could involve claims by the Government
for fines, penalties, compensatory and treble damages, restitution and/or
forfeitures. Based upon Government procurement regulations, a contractor, or
one or more of its operating divisions or subdivisions, can also be suspended or
debarred from Government contracts if proceedings result from the inves-
tigations. The Company believes, based upon all available information, that the
outcome of Government investigations will not have a materially adverse effect
on its financial position or results of operations.
The Company is subject to federal and state requirements for protection of
the environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and per-
vasiveness, such requirements have resulted in the Company being involved with
related legal proceedings, claims and remediation obligations over the past 10
years.
The Company routinely assesses, based on in-depth studies, expert analyses
and legal reviews, its contingencies, obligations and commitments for remedi-
ation of contaminated sites, including assessments of ranges and probabilities
of recoveries from other responsible parties who have and have not agreed to a
settlement and recoveries from insurance carriers. The Company's policy is to
immediately accrue and charge to current expense identified exposures related
to environmental remediation sites based on conservative estimates of inves-
tigation, cleanup and monitoring costs to be incurred.
The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact to the
Company's financial position. With respect to results of operations, related
charges have averaged less than 2% of annual net earnings. Such accruals as of
December 31, 1993, without consideration for the related contingent recoveries
from insurance carriers, are less than 2% of total liabilities.
Based on all known facts and expert analyses, the Company believes it is not
reasonably likely that identified environmental contingencies will result in
additional costs that would have a materially adverse impact to the Company's
financial position or operating results and cash flow trends.
55 of 109
<PAGE> 56
Note 14 - Industry Segment Information
The Company operates in two principal industries: Commercial Aircraft, and
Defense and Space. Commercial Aircraft operations principally involve develop-
ment, production and marketing of commercial jet transports and providing
related support services, principally to the commercial airline industry.
Defense and Space operations involve research, development, production, mod-
ification and support of military aircraft and related systems, space systems
and missile systems. No single product line in the Defense and Space segment
represented more than 10% of consolidated revenues, operating profits or
identifiable assets.
Foreign sales by geographic area consisted of the following:
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Asia $ 8,870 $ 7,108 $ 5,458
Europe 4,698 7,165 8,745
Oceania 635 1,911 1,659
Africa 264 430 558
Western Hemisphere 149 872 1,436
- ------------------------------------------------------------------------------
$14,616 $17,486 $17,856
==============================================================================
Defense sales were approximately 6%, 3% and 5% of total sales in Europe for
1993, 1992 and 1991, respectively. Defense sales were approximately 2%, 5% and
5% of total sales in Asia for 1993, 1992 and 1991, respectively. Exclusive of
these amounts, Defense and Space sales were principally to the U.S. Government.
Financial information by segment for the three years ended December 31, 1993,
is summarized on page 57. Corporate income consists principally of interest
income from corporate investments. Corporate expense consists of noncapitalized
interest on debt and other general corporate expenses. Corporate assets consist
principally of cash, cash equivalents, short-term investments and deferred
income taxes.
56 of 109
<PAGE> 57
Year ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
Revenues
Commercial Aircraft $20,568 $24,133 $22,970
Defense and Space 4,407 5,429 5,846
Other industries 463 622 498
- ------------------------------------------------------------------------------
Operating revenues 25,438 30,184 29,314
Corporate income 169 230 263
- ------------------------------------------------------------------------------
Total revenues $25,607 $30,414 $29,577
==============================================================================
Operating profit
Commercial Aircraft $ 1,646 $ 1,990 $ 2,246
Defense and Space 219 204 (102)
Other industries 16 27 (2)
- ------------------------------------------------------------------------------
Operating profit 1,881 2,221 2,142
Corporate income 169 230 263
Corporate expense (229) (195) (201)
- ------------------------------------------------------------------------------
Earnings before taxes $ 1,821 $ 2,256 $ 2,204
==============================================================================
Identifiable assets at December 31
Commercial Aircraft $12,686 $10,178 $ 7,806
Defense and Space 3,525 3,687 4,262
Other industries 202 264 196
- ------------------------------------------------------------------------------
16,413 14,129 12,264
Corporate 4,037 4,018 3,660
- ------------------------------------------------------------------------------
Consolidated assets $20,450 $18,147 $15,924
==============================================================================
Depreciation
Commercial Aircraft $ 710 $ 598 $ 484
Defense and Space 230 241 269
Other industries 67 73 51
- ------------------------------------------------------------------------------
Total depreciation $ 1,007 $ 912 $ 804
==============================================================================
Capital expenditures, net
Commercial Aircraft $ 1,120 $ 1,890 $ 1,445
Defense and Space 164 212 317
Other industries 33 58 88
- ------------------------------------------------------------------------------
Total capital expenditures, net $ 1,317 $ 2,160 $ 1,850
==============================================================================
57 of 109
<PAGE> 58
Note 15 - Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business, principally relating to customer financing
activities. Off-balance-sheet risk items include financing commitments,
extensions of credit, credit guarantees, tax benefit transfers, foreign govern-
ment expropriation guarantees, interest rate swaps, and agreements with other
financing parties to participate in long-term receivables with interest rate
terms different from those of the related receivable.
Irrevocable financing commitments related to aircraft on order, including
options, scheduled for delivery through 2002 totaled $3,963 as of December 31,
1993. The Company anticipates that not all of these commitments will be utilized
and that it will be able to arrange for third-party investors to assume a
portion of the remaining commitments, if necessary.
The Company's exposure to credit and market-related losses related to credit
guarantees, tax benefit transfers, and foreign government expropriation
guarantees totaled $28 as of December 31, 1993.
The Company has entered into interest rate swaps with third-party investors
whereby the interest rate terms differ from those of the original receivable.
These interest rate swaps related to $458 of customer financing receivables as
of December 31, 1993. In addition, participation in customer financing
receivables by third-party investors with interest rate terms different from
the original receivable totaled $83.
Note 16 - Significant Group Concentrations of Credit Risk
Substantially all financial instruments are with commercial airline customers
and the U.S. Government. As of December 31, 1993, virtually all off-balance-
sheet financial instruments described in Note 15 related to commercial aircraft
customers. Of the $3,897 in accounts receivable and customer financing
receivables included in the Consolidated Statements of Financial Position,
$2,583 related to commercial aircraft customers and $1,182 related to the U.S.
Government. Financing for aircraft is collateralized by security in the related
asset, and historically, the Company has not experienced a problem in accessing
such collateral.
58 of 109
<PAGE> 59
Note 17 - Disclosures about Fair Value of Financial Instruments
The carrying values of cash equivalents and short-term investments are
representative of fair value because of the short maturity of those instruments.
Certain receivable balances will be collected over an extended period;
consequently, the fair value of accounts receivable is estimated to be lower
than the carrying value by $60 and $50 as of December 31, 1993 and 1992,
reflecting a discounted value due to deferred collection. The carrying value of
accounts payable is estimated to approximate fair value.
There are generally no quoted market prices available for customer financing
notes receivable. The net fair value of such notes is estimated to approximate
the net carrying value based upon interest rates and risk-related rate spreads
as of December 31, 1993.
The carrying amount of long-term debt was $2,630 and $1,793 as of December 31,
1993 and 1992. The fair value of long-term debt, based on current market rates
for debt of the same risk and maturities, was estimated at $2,870 and $1,880 as
of December 31, 1993 and 1992. The Company's long-term debt, however, is
generally not callable until maturity.
With regard to financial instruments with off-balance-sheet risk, it is not
practicable to estimate the fair value of future financing commitments, and all
other off-balance-sheet financial instruments are estimated to have only a
nominal fair value. The terms and conditions reflected in the outstanding
guarantees and commitments for financing assistance are not materially different
from those that would have been negotiated as of December 31, 1993.
59 of 109
<PAGE> 60
<TABLE>
Quarterly Financial Data
<CAPTION>
(Unaudited)
(Dollars in millions except per share data)
1993 1992
- ----------------------------------------------------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other operating revenues $5,656 $5,153 $7,985 $6,644 $7,497 $6,897 $7,823 $7,967
Earnings from operations 434 246 581 430 476 440 573 551
Net earnings (loss):
Before cumulative effect of accounting change 304 189 426 325 357 345 432 420
Cumulative effect of accounting change (1,002)
- ----------------------------------------------------------------------------------------------------------------------
304 189 426 325 357 345 432 (582)
Net earnings (loss) per share:
Before cumulative effect of accounting change .89 .56 1.25 .96 1.05 1.02 1.27 1.23
Cumulative effect of accounting change (2.94)
- ----------------------------------------------------------------------------------------------------------------------
.89 .56 1.25 .96 1.05 1.02 1.27 (1.71)
Cash dividends per share .25 .25 .25 .25 .25 .25 .25 .25
Market price:
High 44.75 40.75 41.00 40.88 40.25 42.13 47.50 54.63
Low 35.50 36.25 34.25 33.38 33.13 34.13 38.63 43.38
Quarter end 43.25 38.38 37.00 35.00 40.13 36.75 39.88 43.88
======================================================================================================================
</TABLE>
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Five Year Summary
(Dollars in millions except per share data)
(Share data restated for applicable stock splits)
OPERATIONS 1993 1992 1991 1990 1989
Sales and other operating revenues
Commercial Aircraft $20,568 $24,133 $22,970 $21,230 $14,305
Defense and Space 4,407 5,429 5,846 5,862 5,429
Other industries 463 622 498 503 542
- ---------------------------------------------------------------------------
Total 25,438 30,184 29,314 27,595 20,276
- ---------------------------------------------------------------------------
Net earnings 1,244 1,554** 1,567 1,385 675*
Per share 3.66 4.57** 4.56 4.01 1.96*
Percent of sales 4.9% 5.2% 5.3% 5.0% 3.3%
- ---------------------------------------------------------------------------
Cash dividends paid $ 340 $ 340 $ 343 $ 328 $ 269
Per share 1.00 1.00 1.00 .95 .77 7/9
- ---------------------------------------------------------------------------
Other income, principally interest 169 230 263 448 347
- ---------------------------------------------------------------------------
Research and development expensed 1,661 1,846 1,417 827 754
General and administrative expensed 1,102 1,232 1,291 1,246 1,066
- ---------------------------------------------------------------------------
Additions to plant and equipment 1,317 2,160 1,850 1,586 1,362
Depreciation of plant and equipment 953 870 768 636 584
- ---------------------------------------------------------------------------
Salaries and wages 5,766 6,318 6,502 6,487 6,082
Average employment 134,400 148,600 159,100 161,700 159,200
===========================================================================
FINANCIAL POSITION AT DECEMBER 31
Total assets $20,450 $18,147 $15,924 $14,591 $13,278
Working capital 2,601 1,947 2,462 1,396 1,689
Net plant and equipment 7,088 6,724 5,530 4,448 3,481
- ---------------------------------------------------------------------------
Cash and short-term investments 3,108 3,614 3,453 3,326 1,863
Total debt 2,630 1,793 1,317 315 280
Customer financing 3,177 2,295 1,197 1,133 868
- ---------------------------------------------------------------------------
Shareholders' equity 8,983 8,056 8,093 6,973 6,131
Per share 26.41 23.74 23.71 20.30 17.73
Common shares outstanding in millions 340.1 339.4 341.3 343.6 345.8
===========================================================================
CONTRACTUAL BACKLOG
Commercial $70,497 $82,649 $92,826 $91,475 $73,974
U.S. Government 3,031 5,281 5,090 5,719 6,589
- ---------------------------------------------------------------------------
Total $73,528 $87,930 $97,916 $97,194 $80,563
===========================================================================
* Exclusive of the cumulative effect of adopting Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes." Net earnings
including the effect were $973 or $2.82 per share.
** Exclusive of the cumulative effect of adopting Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Net earnings including the effect were
$552 or $1.62 per share.
Cash dividends have been paid on common stock every year since 1942.
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Market for Registrant's Common Equity and Related Stockholder Matters
Shareholder & Investor Information
The Boeing Company General Offices
7755 East Marginal Way South
Seattle, Washington 98108
(206) 655-2121
Shareholder Inquires Transfer Agent and Registrar
The First National Bank of Boston
Our transfer agent is responsible for our shareholder records, issuance of
stock certificates, and distribution of our dividends and IRS Form 1099.
Requests concerning these matters are most efficiently answered by
corresponding directly with The First National Bank of Boston at the
following address:
The Boeing Company
c/o The First National Bank of Boston
Mail Stop 45-02-09
P.O. Box 644
Boston, Massachusetts 02102-0644
Telephone:(617) 575-2900 or (800) 442-2001
Pre-recorded information concerning various shareholder account matters is
available toll-free from Boeing Shareholder Services at (800) 457-7723.
Written inquiries may be sent to
The Boeing Company
Shareholder Services
Mrs. Michelle Hayes
P.O. Box 3707, Mail Stop 10-13
Seattle, Washington 98124-2207
Annual Meeting
The annual meeting of Boeing shareholders will be held in the auditorium of
the Company's 2-22 building, located at 7755 East Marginal Way South,
Seattle, Washington, on April 25, 1994. Formal notice of the meeting, proxy
statement, form of proxy and annual report were mailed to shareholders
starting about March 15, 1994.
Stock Exchange Listings
The company's common stock is traded principally on the New York Stock
Exchange; the trading symbol is BA. Boeing common stock is also listed on
the Amsterdam, Brussels, London, Swiss and Tokyo stock exchanges. Ad-
ditionally, the stock is traded on the Boston, Cincinnati, Midwest and
Philadelphia exchanges. The number of shareholders of record as of
January 31, 1994, was 101,219.
General Auditors
Deloitte and Touche
700 Fifth Avenue, Suite 4500
Seattle, Washington 98104-5044
(206) 292-1800
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Exhibit (3)
By-Laws, as amended and restated October 25, 1993
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BY-LAWS OF
THE BOEING COMPANY
ARTICLE I Stockholders' Meetings
SECTION 1. Annual Meetings.
The Annual Meeting of the stockholders shall be held on the last Monday in
the month of April in each year, or, if that day be a legal holiday, on the
next succeeding day not a legal holiday, at 11:00 a.m., for the election of
directors and the transaction of such other business as may come before the
meeting.
SECTION 2. Special Meetings.
A special meeting of the stockholders may be called at any time by the Board
of Directors, or by stockholders holding together at least twenty-five
percent of the outstanding shares of stock entitled to vote, except as
otherwise provided by statute or by the Certificate of Incorporation or any
amendment thereto.
SECTION 3. Place of Meeting.
All meetings of the stockholders of the Corporation shall be held at such
place or places within or without the State of Delaware as may from time to
time be fixed by the Board of Directors or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
SECTION 4. Notice of Meetings.
Except as otherwise required by statute and as set forth below, notice of
each annual or special meeting of stockholders shall be given to each
stockholder of record entitled to vote at such meeting not less than thirty
nor more than sixty (or the maximum number permitted by applicable law) days
before the meeting date. If the Corporation has an Interested Stockholder
as defined in Article EIGHTH of the Certificate of Incorporation, notice of
each special meeting of stockholders shall be given to each stockholder of
record entitled to vote at such meeting not less than fifty-five nor more
than sixty (or the maximum number permitted by applicable law) days before
the meeting date, unless the calling of such meeting is ratified by the
affirmative vote of a majority of the Continuing Directors as defined in
Article EIGHTH of the Certificate of Incorporation, in which case notice of
such special meeting shall be given to each stockholder of record entitled
to vote at such meeting not less than thirty nor more than sixty (or the
maximum number permitted by applicable law) days before the meeting date.
Such notice shall be given by delivering to each stockholder a written or
printed notice thereof either personally or by mailing such notice in a
postage-prepaid envelope addressed to the stockholder's address as it
appears on the stock books of the Corporation. Except as otherwise required
by statute, no publication of any notice of a meeting of stockholders shall
be required. Every notice of a meeting of stockholders shall state the
place, date, and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
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SECTION 5. Waivers of Notice.
Whenever any notice is required to be given to any stockholder under the
provisions of these By-Laws, the Certificate of Incorporation, or the
Delaware General Corporation Law, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
The attendance of a stockholder at a meeting, in person or by proxy, shall
constitute a waiver of notice of such meeting, except when a stockholder
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 6. Quorum.
At all meetings of stockholders, except when otherwise provided by statute
or by the Certificate of Incorporation or any amendment thereto, or by the
By-Laws, the presence, in person or by proxy duly authorized, of the holders
of one-third of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business; and except as otherwise
provided by statute or rule of law, or by the Certificate of Incorporation
or any amendment thereto, or by the By-Laws, the vote, in person or by
proxy, of the holders of a majority of the shares constituting such quorum
shall be binding upon all stockholders of the Corporation. In the absence
of a quorum, a majority of the shares present in person or by proxy and
entitled to vote may adjourn any meeting, from time to time but not for a
period of more than thirty days at any one time, until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the
meeting as originally called. Unless otherwise provided by statute, no
notice of an adjourned meeting need be given.
SECTION 7. Proxies.
7.1 Appointment. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy. Such authorization may be accomplished by (a) the
stockholder or such stockholder's authorized officer, director, employee, or
agent executing a writing or causing his or her signature to be affixed to
such writing by any reasonable means, including facsimile signature, or (b)
by transmitting or authorizing the transmission of a telegram, cablegram, or
other means of electronic transmission to the intended holder of the proxy
or to a proxy solicitation firm, proxy support service, or similar agent
duly authorized by the intended proxy holder to receive such transmission;
provided, that any such telegram, cablegram, or other electronic
transmission must either set forth or be accompanied by information from
which it can be determined that the telegram, cablegram, or other electronic
transmission was authorized by the stockholder. Any copy, facsimile
telecommunication, or other reliable reproduction of the writing or
transmission by which a stockholder has authorized another person to act as
proxy for such stockholder may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication, or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
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7.2 Delivery to Corporation; Duration. A proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting or the
delivery to the Corporation of the consent to corporate action in writing.
A proxy shall become invalid three years after the date of its execution,
unless otherwise provided in the proxy. A proxy with respect to a specified
meeting shall entitle the holder thereof to vote at any reconvened meeting
following adjournment of such meeting but shall not be valid after the final
adjournment thereof.
SECTION 8. Inspectors of Election.
8.1 Appointment. In advance of any meeting of stockholders, the Board of
Directors of the Corporation shall appoint one or more persons to act as
inspectors of election at such meeting and to make a written report thereof.
The Board of Directors may designate one or more persons to serve as
alternate inspectors to serve in place of any inspector who is unable or
fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the chairman of such meeting shall appoint one or more persons
to act as inspector of elections at such meeting.
8.2 Duties. The inspectors shall: (a) ascertain the number of shares of
the Corporation outstanding and the voting power of each such share; (b)
determine the shares represented at the meeting and the validity of proxies
and ballots; (c) count all votes and ballots; (d) determine and retain for a
reasonable period of time a record of the disposition of any challenges made
to any determination by them; and (e) certify their determination of the
number of shares represented at the meeting and their count of the votes and
ballots. Each inspector of election shall, before entering upon the
discharge of his or her duties, take and sign an oath to faithfully execute
the duties of inspector with strict impartiality and according to the best
of his or her ability. The inspectors of election may appoint or retain
other persons or entities to assist them in the performance of their duties.
8.3 Determination of Proxy Validity. The validity of any proxy or ballot
executed for a meeting of stockholders shall be determined by the inspectors
of election in accordance with the applicable provisions of the Delaware
General Corporation Law as then in effect. In determining the validity of
any proxy transmitted by telegram, cablegram, or other electronic
transmission, the inspectors shall record in writing the information upon
which they relied in making such determination.
SECTION 9. Fixing the Record Date.
9.1 Meetings. For the purpose of determining stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date
shall not precede the date on which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall be not fewer
than thirty nor more than sixty (or the maximum number permitted by
applicable law) days before the date of such meeting. If the corporation
has an Interested Stockholder as defined in Article EIGHTH of the
Certificate of Incorporation, the record date for each special meeting of
stockholders shall be not fewer than fifty-five nor more than sixty (or the
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maximum number permitted by applicable law) days before the meeting date,
unless the calling of such meeting is ratified by the affirmative vote of a
majority of the Continuing Directors, as defined in Article EIGHTH of the
Certificate of Incorporation. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice
of and to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day
on which the meeting is held. A determination of stockholders of record
entitled to notice of and to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
9.2 Consent to Corporate Action Without a Meeting. For the purpose of
determining the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date on which the resolution fixing
the record date is adopted by the Board of Directors, and which date shall
not be more than ten (or the maximum number permitted by applicable law)
days after the date on which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by Chapter 1 of the Delaware
General Corporation Law as now or hereafter amended, shall be the first date
on which a signed written consent setting forth the action taken or proposed
to be taken is delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an
officer or agent of the Corporation having custody of the records of
proceedings of meetings of stockholders. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by Chapter
1 of the Delaware General Corporation Law as now or hereafter amended, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the
day on which the Board of Directors adopts the resolution taking such prior
action.
9.3 Dividends, Distributions, and Other Rights. For the purpose of
determining the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders entitled
to exercise any rights in respect of any change, conversion, or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date on which
the resolution fixing the record date is adopted, and which record date
shall be not more than sixty (or the maximum number permitted by applicable
law) days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
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9.4. Voting List. At least ten days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting shall be
made, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. This list shall be open to examination by any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at such
meeting for inspection by any stockholder who is present.
SECTION 10. Action by Stockholders Without a Meeting.
Subject to the provisions of Article NINTH of the Certificate of
Incorporation, any action which could be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting
forth the action so taken, are (a) signed by the holders of outstanding
stock having not fewer than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and (b) delivered to the
Corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the records of proceedings of meetings of stockholders.
Delivery made to the Corporation's registered office shall be by hand or by
certified mail or registered mail, return receipt requested. Every written
consent shall bear the date of signature of each stockholder who signs the
consent and no written consent shall be effective to take the corporate
action referred to therein unless written consents signed by a sufficient
number of stockholders to take such action are delivered to the Corporation,
in the manner required by this section, within sixty (or the maximum number
permitted by applicable law) days of the date of the earliest dated consent
delivered to the Corporation in the manner required by this section. The
validity of any consent executed by a proxy for a stockholder pursuant to a
telegram, cablegram, or other means of electronic transmission transmitted
to such proxy holder by or upon the authorization of the stockholder shall
be determined by or at the direction of the Secretary of the Corporation. A
written record of the information upon which the person making such
determination relied shall be made and kept in the records of the
proceedings of the stockholders. Any such consent shall be inserted in the
minute book as if it were the minutes of a meeting of the stockholders.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
SECTION 11. Business for Stockholders' Meetings.
11.1 Business at Annual Meetings. In addition to the election of
directors, other proper business may be transacted at the annual meeting of
stockholders, provided that such business is properly brought before such
meeting. To be properly brought before an annual meeting, business must be
(a) brought by or at the direction of the Board of Directors, or (b) brought
before the meeting by a stockholder pursuant to written notice thereof, in
accordance with Section 12 of this Article I, and received by the Secretary
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not fewer than sixty nor more than ninety days prior to the date specified
in Section 1 of this Article I for such annual meeting. Any such
stockholder notice shall set forth (i) the name and address of the
stockholder proposing such business; (ii) a representation that the
stockholder is entitled to vote at such meeting and a statement of the
number of shares of the Corporation which are beneficially owned by the
stockholder; (iii) a representation that the stockholder intends to appear
in person or by proxy at the meeting to propose such business; and (iv) as
to each matter the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, the language of the
business matter (if appropriate), and any material interest of the
stockholder in such business. No business shall be conducted at any annual
meeting of stockholders except in accordance with this Section 11.1. If the
facts warrant, the Board of Directors, or the chairman of an annual meeting
of stockholders, shall determine and declare (a) that a proposal does not
constitute proper business to be transacted at the meeting or (b) that
business was not properly brought before the meeting in accordance with the
provisions of this Section 11.1 and, if, in either case, it is so
determined, any such business shall not be transacted. The procedures set
forth in this Section 11.1 for business to be properly brought before an
annual meeting by a stockholder are in addition to, and not in lieu of, the
requirements set forth in Rule 14a-8 under Section 14 of the Securities
Exchange Act of 1934, or any successor provision.
11.2 Business at Special Meetings. At any special meeting of the
stockholders, only such business as is specified in the notice of such
special meeting given by or at the direction of the person or persons
calling such meeting, in accordance with Section 2 of this Article I, shall
come before such meeting.
SECTION 12. Notice to Corporation.
Any written notice required to be delivered by a stockholder to the
Corporation pursuant to Section 11.1 of this Article I or Section 2.1 of
Article II must be given, either by personal delivery or by registered or
certified mail, postage prepaid, to the Secretary at the Corporation's
executive offices in the City of Seattle, State of Washington.
ARTICLE II Board of Directors
SECTION 1. Number and Term of Office.
The number of directors shall be thirteen, but the number may be increased,
or decreased to not less than three, from time to time, either by the
directors by adoption of a resolution to such effect or by the stockholders
by amendment of the By-Laws in accordance with Article VIII hereof. The
directors shall be divided into three classes, each of which shall be
composed as nearly as possible of one-third of the directors. Each director
shall serve for the term to which the director was elected, and until a
successor shall have been elected and qualified or until the director's
prior death, resignation, or removal. At each annual election, directors
shall be chosen for a full three-year term to succeed those whose terms
expire.
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SECTION 2. Nomination and Election.
2.1 Nomination. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors.
Nominations for the election of directors may be made (a) by or at the
direction of the Board of Directors, or (b) by any stockholder of record
entitled to vote for the election of directors at such meeting; provided,
however, that a stockholder may nominate persons for election as directors
only if written notice (in accordance with Section 12 of Article I) of such
stockholder's intention to make such nominations is received by the
Secretary not later than (i) with respect to an election to be held at an
annual meeting of the stockholders, not fewer than sixty nor more than
ninety days prior to the date specified in Section 1 of Article I for such
annual meeting, and (ii) with respect to an election to be held at a special
meeting of the stockholders for the election of directors, the close of
business on the seventh business day following the date on which notice of
such meeting is first given to stockholders. Any such stockholders' notice
shall set forth (a) the name and address of the stockholder who intends to
make a nomination; (b) a representation that the stockholder is entitled to
vote at such meeting and a statement of the number of shares of the
Corporation which are beneficially owned by the stockholder; (c) a
representation that the stockholder intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice;
(d) as to each person the stockholder proposes to nominate for election or
re-election as a director, the name and address of such person and such
other information regarding such nominee as would be required in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had such nominee been nominated by the Board of Directors, and a
description of any arrangements or understandings, between the stockholder
and such nominee and any other persons (including their names), pursuant to
which the nomination is to be made; and (e) the consent of each such nominee
to serve as a director if elected. If the facts warrant, the Board of
Directors, or the chairman of a stockholders meeting at which directors are
to be elected, shall determine and declare that a nomination was not made in
accordance with the foregoing procedure and, if it is so determined, the
defective nomination shall be disregarded. The right of stockholders to
make nominations pursuant to the foregoing procedure is subject to the
rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation. The procedures
set forth in this Section 2.1 for nomination for the election of directors
by stockholders are in addition to, and not in lieu or limitation of, (a)
any procedures now in effect or hereafter adopted by or at the direction of
the Board of Directors or any committee thereof and (b) the requirements set
forth in Rule 14a-11 under Section 14 of the Securities Exchange Act of
1934, or any successor provision.
2.2 Election. At each election of directors, the persons receiving the
greatest number of votes shall be the directors.
SECTION 3. Place of Meeting.
Meetings of the Board of Directors, or of any committee thereof, may be held
either within or without the State of Delaware.
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SECTION 4. Annual Meeting.
Each year the Board of Directors shall meet in connection with the annual
meeting of stockholders for the purpose of electing officers and for the
transaction of other business. No notice of such meeting is required. Such
annual meeting may be held at any other time or place which shall be
specified in a notice given as hereinafter provided for special meetings of
the Board, or in a consent and waiver of notice thereof, signed by all the
directors.
SECTION 5. Stated Meetings.
The Board of Directors may, by resolution adopted by affirmative vote of a
majority of the whole Board, from time to time appoint the time and place
for holding stated meetings of the Board, if by it deemed advisable; and
such stated meetings shall thereupon be held at the time and place so
appointed, without the giving of any special notice with regard thereto. In
case the day appointed for a stated meeting shall fall upon a legal holiday,
such meeting shall be held on the next following day, not a legal holiday,
at the regularly appointed hour. Except as otherwise provided in the By-
Laws, any and all business may be transacted at any stated meeting.
SECTION 6. Special Meetings.
6.1 Convenors and Notice. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board or any two
directors. Notice of a special meeting of the Board of Directors, stating
the place, day, and hour of the meeting, shall be given to each director in
writing (by mail, wire, facsimile, or personal delivery) or orally (by
telephone or in person).
6.2 Waiver of Notice. With respect to a special meeting of the Board of
Directors, a written waiver, signed by a director, shall be deemed
equivalent to notice to that director. A director's attendance at a meeting
shall constitute that director's waiver of notice of such meeting, except
when the director attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the waiver of notice of such
meeting.
SECTION 7. Quorum and Manner of Acting.
Except as herein otherwise provided, forty percent of the total number of
directors fixed by or in the manner provided in these By-Laws at the time of
any stated or special meeting of the Board or, if vacancies exist on the
Board of Directors, forty percent of such number of directors then in
office, provided, however, that such number may not be less than one-third
of the total number of directors fixed by or in the manner provided in these
By-Laws, shall constitute a quorum for the transaction of business; and,
except as otherwise required by statute or by the Certificate of Incorporation
or any amendment thereto, or by the By-Laws, the act of a majority of the
directors present at any such meeting at which a quorum is present shall be the
act of the Board of Directors. In the absence of a quorum, a majority of the
directors present may adjourn any meeting, from time to time, until a quorum is
present. No notice of any adjourned meeting need be given.
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SECTION 8. Chairman of the Board.
The Chairman of the Board shall preside, when present, at all meetings of
the Board, except as otherwise provided by law.
SECTION 9. Resignations.
Any director of the Corporation may resign at any time by giving written
notice thereof to the Secretary. Such resignation shall take effect at the
time specified therefor or if the time is not specified, upon delivery
thereof; and, unless otherwise specified with respect thereto, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 10. Removal of Directors.
Any director may be removed solely for cause by the affirmative vote of the
holders of record of a majority of the outstanding shares of stock entitled
to vote, at a meeting of the stockholders called for the purpose; and the
vacancy on the Board caused by any such removal may be filled by the
stockholders at such meeting or at any subsequent meeting.
SECTION 11. Filling of Vacancies Not Caused by Removal.
In case of any increase in the number of directors, or of any vacancy
created by death or resignation, the additional director or directors may be
elected or, as the case may be, the vacancy or vacancies may be filled,
either (a) by the Board of Directors at any meeting, (i) if the Corporation
has an Interested Stockholder as defined in Article EIGHTH of the
Certificate of Incorporation, by the affirmative vote of a majority of the
Continuing Directors, as defined in Article EIGHTH, or (ii) if the
Corporation does not have an Interested Stockholder, by the affirmative vote
of a majority of the remaining directors, though less than a quorum; or (b)
by the stockholders entitled to vote, either at an annual meeting or at a
special meeting thereof called for the purpose, by the affirmative vote of a
majority of the outstanding shares entitled to vote at such meeting.
SECTION 12. Directors' Fees.
The Board of Directors shall have authority to determine from time to time
the amount of compensation which shall be paid to its members for attendance
at meetings of the Board or of any committee of the Board.
SECTION 13. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if all members of the Board or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
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ARTICLE III Board Committees
SECTION 1. Audit Committee.
In addition to any committees appointed pursuant to Section 2 of this
Article, there shall be an Audit Committee, appointed annually by the Board
of Directors, consisting of at least three directors who are not members of
management. It shall be the responsibility of the Audit Committee to review
the scope and results of the annual independent audit of books and records
of the Corporation and its subsidiaries, to review compliance with all
corporate policies which have been approved by the Board of Directors, and
to discharge such other responsibilities as may from time to time be
assigned to it by the Board of Directors. The Audit Committee shall meet at
such times and places as the members deem advisable, and shall make such
recommendations to the Board of Directors as they consider appropriate.
SECTION 2. Other Committees.
The Board of Directors may appoint standing or temporary committees and
invest such committees with such powers as it may see fit, with power to
subdelegate such powers if deemed desirable by the Board of Directors; but
no such committee shall have the power or authority of the Board of
Directors to
(a) amend the Certificate of Incorporation,
(b) adopt a plan of merger or consolidation,
(c) recommend to the stockholders the sale, lease, or exchange or other
disposition of all or substantially all of the property and assets
of the Corporation other than in the usual and regular course of
business,
(d) recommend to the stockholders a voluntary dissolution or a
revocation thereof,
(e) amend these By-Laws,
(f) declare a dividend, or
(g) authorize the issuance of stock.
The Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member.
SECTION 3. Quorum and Manner of Acting.
A majority of the number of directors composing any committee of the Board
of Directors, as established and fixed by resolution of the Board of
Directors, shall constitute a quorum for the transaction of business at any
meeting of such committee but, if less than a majority are present at a
meeting, a majority of such directors present may adjourn the meeting from
time to time without further notice. The act of a majority of the members of
a committee present at a meeting at which a quorum is present shall be the
act of such committee.
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ARTICLE IV Officers and Agents: Terms, Compensation, Removal, Vacancies
SECTION 1. Officers.
The elected officers of the Corporation shall be a Chairman of the Board
(who shall be a director), a President (who shall be a director), and one or
more Vice Presidents (each of whom may be assigned by the Board of Directors
or the Chief Executive Officer an additional title descriptive of the
functions assigned to such officer and one or more of whom may be designated
Executive or Senior Vice President). The Board may also elect one or more
Vice Chairmen. The Board of Directors shall also designate either the
Chairman of the Board or the President as the Chief Executive Officer of the
Corporation. The Board of Directors shall appoint a Controller, a
Secretary, and a Treasurer. Any number of offices, whether elective or
appointive, may be held by the same person. The Chief Executive Officer
may, by a writing filed with the Secretary, designate titles as officers for
employees and agents and appoint Assistant Secretaries and Assistant
Treasurers, as, from time to time, may appear to be necessary or advisable
in the conduct of the affairs of the Corporation and may, in the same
manner, terminate or change such titles.
SECTION 2. Term of Office.
So far as practicable, all elected officers shall be elected at the annual
meeting of the Board in each year, and shall hold office until the annual
meeting of the Board in the next subsequent year and until their respective
successors are chosen. The Controller, Secretary, and Treasurer shall hold
office at the pleasure of the Board.
SECTION 3. Salaries of Elected Officers.
The salaries paid to the elected officers of the Corporation shall be
authorized or approved by the Board of Directors.
SECTION 4. Bonuses.
None of the officers, directors, or employees of the Corporation or any of
its subsidiary corporations shall at any time be paid any bonus or share in
the earnings or profits of the Corporation or any of its subsidiary
corporations except pursuant to a plan approved by affirmative vote of two-
thirds of the members of the Board of Directors.
SECTION 5. Removal of Elected and Appointed Officers.
Any elected or appointed officer may be removed at any time, either for or
without cause, by affirmative vote of a majority of the whole Board of
Directors, at any meeting called for the purpose.
SECTION 6. Vacancies.
If any vacancy occurs in any office, the Board of Directors may elect or
appoint a successor to fill such vacancy for the remainder of the term.
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ARTICLE V Officers' Duties and Powers
SECTION 1. Chairman of the Board.
The Chairman of the Board shall preside, when present, at all meetings of
the stockholders (except as otherwise provided by statute) and at all
meetings of the Board of Directors. The Chairman shall have general power
to execute bonds, deeds, and contracts in the name of the Corporation; to
affix the corporate seal; to sign stock certificates; and to perform such
other duties and services as shall be assigned to or required of the
Chairman by the Board of Directors.
SECTION 2. President.
The President shall have general power to execute bonds, deeds, and contracts
in the name of the Corporation and to affix the corporate seal; to sign stock
certificates; during the absence or disability of the Chairman of the Board to
exercise the Chairman's powers and to perform the Chairman's duties; and to per-
form such other duties and services as shall be assigned to or required of the
President by the Board of Directors; provided, that if the office of President
is vacant, the Chairman shall exercise the duties ordinarily exercised by the
President until such time as a President is elected or appointed.
SECTION 3. Chief Executive Officer.
The officer designated by the Board of Directors as the Chief Executive
Officer of the Corporation shall have general and active control of its
business and affairs. The Chief Executive Officer shall have general power
to appoint or designate all employees and agents of the Corporation whose
appointment or designation is not otherwise provided for and to fix the
compensation thereof, subject to the provisions of these By-Laws; to remove
or suspend any employee or agent who shall not have been elected or
appointed by the Board of Directors or other body; to suspend for cause any
employee, agent, or officer, other than an elected officer, pending final
action by the body which shall have appointed such employee, agent, or
officer; and to exercise all the powers usually pertaining to the office
held by the Chief Executive Officer of a corporation.
SECTION 4. Vice Presidents and Controller.
The several Vice Presidents and the Controller shall perform all such duties
and services as shall be assigned to or required of them, from time to time,
by the Board of Directors or the Chief Executive Officer, respectively.
SECTION 5. Secretary.
The Secretary shall attend to the giving of notice of all meetings of stock-
holders and of the Board of Directors and shall keep and attest true records of
all proceedings thereat. The Secretary shall have charge of the corporate seal
and have authority to attest any and all instruments or writings to which the
same may be affixed and shall keep and account for all books, documents, papers,
and records of the Corporation relating to its corporate organization. The
Secretary shall have authority to sign stock certificates and shall generally
perform all the duties usually appertaining to the office of secretary of a
corporation. In the absence of the Secretary, an Assistant Secretary or
Secretary pro tempore shall perform the duties of the Secretary.
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SECTION 6. Treasurer.
The Treasurer shall have the care and custody of all moneys, funds, and
securities of the Corporation, and shall deposit or cause to be deposited
all funds of the Corporation in accordance with directions or authorizations
of the Board of Directors or the Chief Executive Officer. The Treasurer
shall have power to sign stock certificates, to indorse for deposit or
collection, or otherwise, all checks, drafts, notes, bills of exchange, or
other commercial paper payable to the Corporation, and to give proper
receipts or discharges therefor. In the absence of the Treasurer, an
Assistant Treasurer shall perform the duties of the Treasurer.
SECTION 7. Additional Powers and Duties.
In addition to the foregoing especially enumerated duties and powers, the
several officers of the Corporation shall perform such other duties and
exercise such further powers as may be provided in these By-Laws or as the
Board of Directors may from time to time determine, or as may be assigned to
them by any superior officer.
SECTION 8. Disaster Emergency Powers of Acting Officers.
If, as a result of a disaster or other state of emergency, the Chief
Executive Officer is unable to perform the duties of that office, (a) the
powers and duties of the Chief Executive Officer shall be performed by the
employee with the highest base salary who shall be available and capable of
performing such powers and duties and, if more than one such employee has
the same base salary, by the employee whose surname begins with the earliest
letter of the alphabet among the group of those employees with the same base
salary; and (b) the officer performing such duties shall continue to perform
such powers and duties until the Chief Executive Officer becomes capable of
performing those duties or until the Board of Directors shall have elected a
new Chief Executive Officer or designated another individual as Acting Chief
Executive Officer; and (c) such officer shall have the power in addition to
all other powers granted to the Chief Executive Officer by these By-Laws and
by the Board of Directors to appoint an acting President, acting Vice
President - Finance, acting Controller, acting Secretary, and acting
Treasurer, if any of the persons duly elected to any such office is not by
reason of such disaster or emergency able to perform the duties of such
office, each of such acting appointees to serve in such capacities until the
officer for whom the appointee is acting becomes capable of performing the
duties of such office or until the Board of Directors shall have designated
another individual to perform such duties or have elected another person to
fill such office; and (d) any such acting officer so appointed shall be
entitled to exercise all powers vested by the By-Laws or the Board of
Directors in the duly elected officer for whom the acting officer is acting;
and (e) anyone transacting business with this Corporation may rely upon a
certification by any two officers of the Corporation that a specified
individual has succeeded to the powers of the Chief Executive Officer and
that such person has appointed other acting officers as herein provided and
any person, firm, corporation, or other entity to which such certification
has been delivered by such officers may continue to rely upon it until
notified of a change in writing signed by two officers of this Corporation.
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ARTICLE VI Stock and Transfers of Stock
SECTION 1. Stock Certificates.
Every stockholder shall be entitled to a certificate, signed by the Chairman
of the Board or the President or a Vice President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, certifying
the number of shares owned by the stockholder in the Corporation. Any and
all of the signatures on a certificate may be a facsimile. If any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he or she were such
officer, transfer agent, or registrar at the date of issue.
SECTION 2. Transfer Agents and Registrars.
The Board of Directors may, in its discretion, appoint responsible banks or
trust companies in the Borough of Manhattan, in the City of New York, State
of New York, and in such other city or cities as the Board may deem
advisable, from time to time, to act as transfer agents and registrars of
the stock of the Corporation; and, when such appointments shall have been
made, no stock certificate shall be valid until countersigned by one of such
transfer agents and registered by one of such registrars.
SECTION 3. Transfers of Stock.
Shares of stock may be transferred by delivery of the certificates therefor,
accompanied either by an assignment in writing on the back of the
certificates or by written power of attorney to sell, assign, and transfer
the same, signed by the record holder thereof; but no transfer shall affect
the right of the Corporation to pay any dividend upon the stock to the
holder of record thereof, or to treat the holder of record as the holder in
fact thereof for all purposes, and no transfer shall be valid, except
between the parties thereto, until such transfer shall have been made upon
the books of the Corporation.
SECTION 4. Lost Certificates.
The Board of Directors may provide for the issuance of new certificates of
stock to replace certificates of stock lost, stolen, mutilated, or
destroyed, or alleged to be lost, stolen, mutilated, or destroyed, upon such
terms and in accordance with such procedures as the Board of Directors shall
deem proper and prescribe.
ARTICLE VII
Miscellaneous
SECTION 1. Fiscal Year.
The fiscal year of the Corporation shall be the calendar year.
SECTION 2. (Repealed in its entirety by vote of the stockholders, May 5, 1975.)
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SECTION 3. Signing of Negotiable Instruments.
All bills, notes, checks, or other instruments for the payment of money
shall be signed or countersigned by such officer or officers and in such
manner as from time to time may be prescribed by resolution (whether general
or special) of the Board of Directors.
SECTION 4. Indemnification of Directors and Officers.
4.1 Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved (including,
without limitation, as a witness) in any actual or threatened action, suit,
or proceeding, whether civil, criminal, administrative, or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was
a director or officer of the Corporation or that, being or having been such
a director or officer or an employee of the Corporation, he or she is or was
serving at the request of an executive officer of the Corporation as a
director, officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official
capacity as such a director, officer, employee, or agent or in any other
capacity while serving as such a director, officer, employee, or agent,
shall be indemnified and held harmless by the Corporation to the full extent
permitted by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), or by other applicable
law as then in effect, against all expense, liability, and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) actually and reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall
continue as to an indemnitee who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the indemnitee's heirs,
executors, and administrators; provided, however, that except as provided in
Section 4.2 with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized or ratified by the
Board of Directors of the Corporation. The right to indemnification
conferred in this Section 4.1 shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that an advancement of
expenses incurred by an indemnitee in his her capacity as a director or
officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal that such indemnitee is not entitled to be indemnified for such
expenses under this Section 4.1 or otherwise; and provided, further, that an
advancement of expenses shall not be made if the Corporation's Board of
Directors makes a good faith determination that such payment would violate
law or public policy.
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4.2 Right of Indemnitee to Bring Suit. If a claim under Section 4.1 is not
paid in full by the Corporation within sixty days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the Corporation
to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall also be entitled to be paid the expense of
prosecuting or defending such suit. The indemnitee shall be presumed to be
entitled to indemnification under this Section 4 upon submission of a
written claim (and, in an action brought to enforce a claim for an
advancement of expenses, where the required undertaking has been tendered to
the Corporation), and thereafter the Corporation shall have the burden of
proof to overcome the presumption that the indemnitee is not so entitled.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances, nor an actual determination by
the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the indemnitee is not entitled to
indemnification shall be a defense to the suit or create a presumption that
the indemnitee is not so entitled.
4.3 Nonexclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Section 4 shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, provisions of the Certificate of Incorporation, By-Laws, agreement,
vote of stockholders or disinterested directors, or otherwise.
Notwithstanding any amendment to or repeal of this Section 4, or of any of
the procedures established by the Board of Directors pursuant to Section
4.7, any indemnitee shall be entitled to indemnification in accordance with
the provisions hereof and thereof with respect to any acts or omissions of
such indemnitee occurring prior to such amendment or repeal.
4.4 Insurance, Contracts, and Funding.
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee, or agent of the Corporation or another
corporation, partnership, joint venture, trust, or other enterprise against
any expense, liability, or loss, whether or not the Corporation would have
the power to indemnify such person against such expense, liability, or loss
under the Delaware General Corporation Law. The Corporation may, without
further stockholder approval, enter into contracts with any indemnitee in
furtherance of the provisions of this Section 4 and may create a trust fund,
grant a security interest, or use other means (including, without
limitation, a letter of credit) to ensure the payment of such amounts as may
be necessary to effect indemnification as provided in this Section 4.
4.5 Persons Serving Other Entities. Any person who is or was a director, of-
ficer, or employee of the Corporation who is or was serving (i) as a director or
officer of another corporation of which a majority of the shares entitled to
vote in the election of its directors is held by the Corporation or (ii) in an
executive or management capacity in a partnership, joint venture, trust, or
other enterprise of which the Corporation or a wholly owned subsidiary of the
Corporation is a general partner or has a majority ownership shall be deemed to
be so serving at the request of an executive officer of the Corporation and
entitled to indemnification and advancement of expenses under Section 4.1.
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4.6 Indemnification of Employees and Agents of the Corporation. The
Corporation may, by action of its Board of Directors, authorize one or more
executive officers to grant rights to advancement of expenses to employees
or agents of the Corporation on such terms and conditions as such officer or
officers deem appropriate under the circumstances. The Corporation may, by
action of its Board of Directors, grant rights to indemnification and
advancement of expenses to employees or agents or groups of employees or
agents of the Corporation with the same scope and effect as the provisions
of this Section 4 with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation; provided, however,
that an undertaking shall be made by an employee or agent only if required
by the Board of Directors.
4.7 Procedures for the Submission of Claims. The Board of Directors may
establish reasonable procedures for the submission of claims for
indemnification pursuant to this Section 4, determination of the entitlement
of any person thereto, and review of any such determination. Such
procedures shall be set forth in an appendix to these By-Laws and shall be
deemed for all purposes to be a part hereof.
ARTICLE VIII Amendments
SECTION 1. Amendment of the By-Laws: General.
Except as herein otherwise expressly provided, the By-Laws of the
Corporation may be altered or repealed in any particular and new By-Laws,
not inconsistent with any provision of the Certificate of Incorporation or
any provision of law, may be adopted, either by the affirmative vote of the
holders of record of a majority in number of the shares present in person or
by proxy and entitled to vote at an annual meeting of stockholders or at a
special meeting thereof, the notice of which special meeting shall include
the form of the proposed alteration or repeal or of the proposed new By-
Laws, or a summary thereof; or either
(a) by the affirmative vote of a majority of the whole Board of
Directors at any meeting thereof, or
(b) by the affirmative vote of all the directors present at any meeting
at which a quorum, less than a majority, is present;
provided, in either of the latter cases, that the notice of such meeting
shall include the form of the proposed alteration or repeal or of the
proposed new By-Laws, or a summary thereof.
SECTION 2. Amendments as to Compensation and Removal of Officers.
Notwithstanding anything contained in these By-Laws to the contrary, the
affirmative vote of the holders of record of a majority of the Voting Stock,
as defined in Article EIGHTH of the Certificate of Incorporation, at a
meeting of the stockholders called for the purpose, shall be required to
alter, amend, repeal, or adopt any provision inconsistent with Sections 3,.
4 and 5 of Article IV hereof, notice of which meeting shall include the form
of the proposed amendment, or a summary thereof.
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SECTION 3. Amendments as to Shareholder Meetings, Directors.
Notwithstanding anything contained in these By-Laws to the contrary, either
(a) the affirmative vote of a majority of the Continuing Directors, as
defined in Article EIGHTH of the Certificate of Incorporation, or (b) the
affirmative vote of the holders of record of at least seventy-five percent
of the Voting Stock, as defined in Article EIGHTH of the Certificate of
Incorporation, shall be required to alter, amend, repeal, or adopt any
provision inconsistent with Sections 1, 2, and 4 of Article I and Sections
1, 10, and 11 of Article II.
SECTION 4. Amendment of this Article VIII.
Notwithstanding anything contained in these By-Laws to the contrary, either
(a) the recommendation of a majority of the Continuing Directors, as defined
in Article EIGHTH of the Certificate of Incorporation, together with the
affirmative vote of the holders of record of a majority of the Voting Stock,
as defined in Article EIGHTH of the Certificate of Incorporation, or (b) the
affirmative vote of the holders of record of at least seventy-five percent
of the Voting Stock, as defined in Article EIGHTH of the Certificate of
Incorporation, shall be required to alter, amend, repeal, or adopt any
provision inconsistent with this Article VIII.
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Exhibit (10)(vii)
Deferred Compensation Plan for Employees
of The Boeing Company as amended October 25, 1993
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DEFERRED COMPENSATION PLAN FOR
EMPLOYEES OF THE BOEING COMPANY
1. Purpose. The purpose of the Deferred Compensation Plan for Employees of
The Boeing Company (the "Plan") is to provide for deferment of payment
of all or a portion of awards made to an employee under the Company's
Incentive Compensation and Performance Award Plans.
2. Eligibility. Any employee eligible to receive an award under the
Incentive Compensation Plan or the Performance Award Plan is eligible to
elect to participate in this Plan.
3. Election to Participate. An eligible employee may elect to defer awards
made thereafter, by executing and delivering to the Company a notice
which shall state the percentage of the award to be deferred, and the
method for crediting investment earnings on deferred amounts.
An election to participate will remain in effect until participation in
the Plan terminates, or until the election is changed by a notice to the
Company increasing or decreasing the percentage of future awards to be
deferred, or changing the method for crediting investment earnings on
future deferrals.
An election or change in election must be made by December 1 to be
effective for an award made under the Incentive Compensation Plan in the
following year, and by on or before December 1 of the year preceding the
year in which the service is performed for which a Participant may earn
an award under the Performance Award Plan.
If a Participant terminates participation in this Plan, all amounts
accumulated in the Participant's account prior to termination will
continue to be held subject to the Plan.
For purposes of the Plan, a "Participant" means an employee or former
employee having an account under the Plan.
4. Earnings Credits on Deferred Amounts. All amounts deferred under the
Plan shall be credited to the Participant's Plan account at the time an
award is made.
Each account shall be credited with earnings thereon, under the Interest
Credit method or the Stock Unit method, at the election of the
Participant, such election to be irrevocable once made. In the absence
of an election, the Interest Credit method shall be used.
Interest Credit Method. As of March 31, June 30, September 30, and
December 31 each year, a Participant's account shall be credited with
interest on all amounts in that account during the preceding quarter.
Interest will be computed during each calendar year at the mean between
the high and the low during the first eleven months of the preceding
year of yields on Aa-rated Industrial Bonds as reported by Moody's
Investors Service, Inc., rounded to the nearest 1/4th of one percent.
The Company will notify Participants annually of the established
interest rate.
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Stock Unit Method. At the time an award is made, the Participant's
Stock Unit account shall be credited with the number of shares of the
Company's common stock that could be purchased with the award, based on
the Fair Market Value of such stock on the day of the award (or on the
next business day on which the Exchange is open, if the Exchange is
closed on the day of the award) excluding commissions, taxes, and other
charges; and such number (carried to two decimal places) shall be
recorded as stock units in the Participant's account, for bookkeeping
purposes only. For purposes of the Plan, "Fair Market Value" equals the
mean of the high and low per share trading prices for the common stock
of the Company as reported in The Wall Street Journal for the "New York
Stock Exchange - Composite Transactions" for a single trading day. The
number of stock units in an account shall be appropriately adjusted to
reflect stock splits, stock dividends, and other like adjustments in the
Company's common stock.
Each Participant's Stock Unit account periodically shall be credited
with the number of shares of the Company's common stock that could be
purchased, as set forth in the preceding paragraph, by an amount equal
to the cash dividends that would be payable on the number of shares of
the Company's common stock that equals the number of stock units in a
Participant's Stock Unit account. The Company will notify Participants
annually of the number of stock units, and the dividend equivalents,
credited to their Stock Unit account.
The Committee may authorize an irrevocable one-time election by
Participants, to elect the Stock Unit method for Plan balances as of
December 31, 1993.
5. Payment. The timing and manner of distribution of amounts held under
the Plan shall be determined by the Committee in its sole discretion,
but distributions shall commence no later than the January 15
immediately following the year in which the Participant reaches age
70-1/2. For Participants subject to Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder ("Section
16"), distributions shall commence no earlier than as set forth in this
section. A Participant may submit an election to the Committee, stating
the number of years over which the Participant requests that payment be
made (which shall be between 1 and 15 years), the initial year of
payment , and the payment option (in the case of payments to be made
over 2 or more years). The election shall be submitted to the Committee
by not later than December 1 of the year following the year of
termination of the Participant's employment by the Company.
Distributions shall be made in accordance with the election unless the
Committee determines that the distribution should be made at some
different time or in some different manner.
The payment options (in the case of payments to be made over 2 or more
years) shall be as follows:
Approximately Equal Option. The amount payable to the Participant
each year shall be computed by the Company so that the aggregate
amount of cash or stock in a Participant's account under the Plan
shall be distributed in approximately equal installments in each
year for which deferred compensation payments are to be made; or
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Fractional Option. The amount payable to the Participant each
year shall be computed by multiplying a fraction, the numerator of
which is one and the denominator of which is the number of years
remaining in the distribution period, by the balance in the
account on January 1 of such year.
Under either option, the Participant's account shall be debited at the
time of payment, which shall be on or before January 15 of each year.
An approved payment period and payment option shall be applicable to the
Participant's total aggregate deferred compensation accounts under the
Plan, including any accounts previously maintained that have been
combined into an account under this Plan. Participants who have filed
elections prior to January 1, 1993, may by December 1, 1993, revise such
elections (subject to Committee approval) to reflect the payment periods
and payment options permitted by the foregoing provisions, or may cancel
such elections and defer making an election until such time as is
permitted by the foregoing provisions.
Distributions from a Participant's Stock Unit account shall be paid in
cash. Following a Participant's termination of employment (or for
Participants subject to Section 16 , following the period the
Participant is so subject and for any required Section 16 reporting
period thereafter), distributions may be made in stock at the written
election of the Participant, subject to Committee approval. The cash
distribution shall equal the cash value, on the date as of which the
distribution is calculated (which shall be the first business day in
January unless some other date is prescribed by the Committee), of the
number of whole shares of Company common stock then distributable to
such Participant, based on the Fair Market Value of such stock on that
date, or the next day on which the Exchange is open, if the Exchange is
closed on the date the distribution is calculated. Any distribution in
stock shall be in whole shares of the Company's common stock equal in
number to the whole number of stock units credited to the Participant's
account under the Stock Unit method. No fractional shares shall be
distributed and any account balance remaining after a stock distribution
shall be paid in cash.
Except as provided below with respect to the Stock Unit accounts of
Participants subject to Section 16, a Participant may request that
amounts credited to his account under the Plan be distributed prior to
the termination of his employment with the Company, or that an approved
method of payment of his Plan account be changed. Any such request
shall set forth the reason therefor, and is subject to approval by the
Committee in its sole and absolute discretion. Any request for a
distribution prior to termination of employment must be submitted to the
Committee by no later than December 1 of the year prior to the year in
which the distribution is requested to be made. No request for
distribution prior to termination of employment will be approved if the
Participant also has elected to defer any portion of an award under the
Company's Incentive Compensation or Performance Award Plans to be made
in the calendar year in which the requested distribution is to be made.
A Participant may request that any or all amounts accumulated under this
Plan be distributed except for any amounts, and any interest or dividend
equivalents credited thereon, which were deferred in the calendar year
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in which the request for distribution is submitted. To the extent
required for exemption from Section 16, distributions prior to
termination of employment shall not be permitted under this Plan from
amounts deferred to a Stock Unit account by a Participant who is subject
to Section 16, except in the case of the Participant's disability.
Disability, for these purposes, shall mean a condition entitling the
Participant to Disability Retirement under the Company's Retirement
Plan. For Participants subject to Section 16, no change to the timing
of or payment option for payments from a Stock Unit account shall be
considered or allowed during the period the Participant is subject to
Section 16 and for any required Section 16 reporting period thereafter.
The Committee may establish guidelines for its own use in considering
any such request or any other request or election under the Plan, but
such guidelines shall not in any way limit the Committee's discretion in
acting upon a request or election, or in determining the timing and
manner of any distributions to be made under the Plan.
Distributions under the Plan shall be subject to withholding for taxes
and other charges, as required by law, and the Company shall deduct from
any such distribution any amounts owed by the Participant to the
Company. For those distributions in stock, required withholding will be
taken from the common stock which would have been received.
6. Beneficiaries. A Participant may designate one or more beneficiaries to
receive distributions from the Plan, upon the death of the Participant.
If no beneficiary has been designated, all such amounts shall be paid to
the personal representative of the Participant. Except as provided in
the following paragraph, the death of a Participant shall not affect the
timing or manner of distributions from the Participant's account.
A Participant may elect that one or more fixed payments be made from his
account under the Plan, to his personal representative or designated
beneficiary, following his death. Such payments, if approved by the
Committee, shall be made within 15 months after the Participant's death.
Any amounts thereafter remaining in the account will be distributed at
the time and in the manner approved by the Committee.
7. Termination or Amendment of the Plan. This Plan may be terminated,
modified, or amended from time to time by resolution of the Board of
Directors. If the Plan is terminated, all amounts accumulated prior to
termination will continue to remain subject to the provisions of the
Plan as if the Plan had not been terminated.
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8. Participant's Rights. Amounts deferred and accumulated under the Plan
remain the property of the Company, and no Participant or other person
shall acquire any property interest in the account or any other assets
of the Company on account of participation in the Plan, the
Participant's rights being limited to receiving from the Company the
payments provided for in the Plan. The Plan is unfunded, and to the
extent that any Participant acquires a right to receive payments from
the Plan, such right shall be no greater than the right of an unsecured
creditor of the Company.
Except to the extent provided in the final paragraph of Section 5 of the
Plan, the right of a Participant, his legal representative or
beneficiary to receive payments from the Plan shall not be subject to
anticipation, sale, assignment, pledge, encumbrance or charge, nor shall
such right be liable for or subject to the debts, contracts, liabilities
or torts of the Participant, his legal representative or beneficiaries.
9. Powers of Compensation Committee. The Compensation Committee of the
Board of Directors (the "Committee") shall have full power and authority
to construe and interpret this Plan. Decisions of the Committee shall
be final and binding upon the Participants, their legal representatives
and beneficiaries. Approval by the Committee of any election or request
made by a Participant pursuant to the Plan shall be subject to the sole
discretion of the Committee.
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Exhibit (10)(viii)
Deferred Compensation Plan for Directors
of The Boeing Company as amended October 25, 1993
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DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF THE BOEING COMPANY
1. Purpose. The purpose of the Deferred Compensation Plan for Directors of
The Boeing Company (the "Plan") is to provide for deferral of payment of
all or a portion of any annual fees, meeting fees, or both, payable to
members of the Board of Directors of The Boeing Company (the "Company").
2. Eligibility. Any member of the Company's Board of Directors entitled to
compensation as a director is eligible to elect to participate in the
Plan.
3. Election to Participate. A director may elect to defer all or a
specified percentage of annual fees, meeting fees, or both, that may
thereafter become payable, by executing and delivering to the Company a
notice which states the percentage of the fees to be deferred and the
deferral account to which the fees are to be credited. An election or
change in election must be made by December 1 to be effective for fees
to be paid in the following year.
An election to participate will remain in effect until participation in
the Plan terminates, or until the election is changed by a notice to the
Company increasing or decreasing the percentage of fees to be deferred,
or changing the account for future deferrals. If a Director or former
Director having an account under the Plan (a "Participant") terminates
participation in the Plan, all amounts accumulated in the Participant's
account(s) prior to termination will continue to be held subject to the
Plan.
4. Deferral Accounts. All fees deferred under the Plan shall be credited
to the Participant either in an Interest Credit deferral account or in a
Stock Unit deferral account, at the election of the Participant, such
election to be irrevocable once made. In the absence of an election,
the Interest Credit deferral account shall be credited. Fees shall be
credited at the time the fees otherwise are payable.
Each Participant's account(s) shall be credited with earnings thereon as
follows:
Interest Credit Deferral Account. As of March 31, June 30,
September 30, and December 31 each year, a Participant's Interest Credit
deferral account shall be credited with interest on all amounts in that
account during the preceding quarter.
Interest will be computed during each calendar year at the mean between
the high and the low during the first eleven months of the preceding
year of yields on Aa-rated Industrial Bonds as reported by Moody's
Investors Service, Inc., rounded to the nearest 1/4th of one percent.
The Company will notify Participants annually of the established
interest rate.
Stock Unit Deferral Account. At the time the fee is credited, the
Participant's Stock Unit deferral account shall be credited with the
number of shares of the Company's common stock that could be purchased
with the fee, based on the Fair Market Value of such stock on the day
the fee is credited (or on the next business day on which the Exchange
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is open, if the Exchange is closed on the day the fee is credited),
excluding commissions, taxes, and other charges; and such number
(carried to two decimal places) shall be recorded as stock units in the
Participant's account, for bookkeeping purposes only. For purposes of
the Plan, "Fair Market Value" equals the mean of the high and low per
share trading prices for the common stock of the Company as reported in
The Wall Street Journal for the "New York Stock Exchange - Composite
Transactions" for a single trading day. The number of stock units in an
account shall be appropriately adjusted to reflect stock splits, stock
dividends, and other like adjustments in the Company's common stock.
Each Participant's Stock Unit deferral account periodically shall be
credited with the number of shares of the Company's common stock that
could be purchased, as set forth in the preceding paragraph, by an
amount equal to the cash dividends that would be payable on the number
of shares of the Company's common stock that equals the number of stock
units in a Participant's Stock Unit deferral account. The Company will
notify Participants annually of the number of stock units, and the
dividend equivalents, credited to their Stock Unit deferral account.
The Committee may authorize an irrevocable one-time election by
Participants to elect the Stock Unit deferral account for Plan balances
as of December 31, 1993.
5. Payment. The timing and manner of distribution of amounts held under
the Plan shall be determined by the Committee in its sole discretion,
but distributions shall commence no earlier than as set forth in this
section. Distributions must commence no later than the January 15
immediately following: (a) the year in which the Participant reaches
age 70-1/2 or, (b) if the Participant continues service on the Board
beyond such age, the year the Participant retires from the Board or
otherwise terminates service from the Board. A Participant may submit
an election to the Committee, stating the number of years over which the
Participant requests that payment be made (which shall be between 1
and 15 years), the initial year of payment, and the payment option (in
the case of payments to be made over 2 or more years). The election
shall be submitted to the Committee by not later than December 1 of the
year in which the Participant retires from the Board or otherwise
terminates service from the Board. The distribution shall be made in
accordance with the election unless the Committee determines that the
distribution should be made at some different time or in some different
manner.
The payment options (in the case of payments to be made over 2 or more
years) shall be as follows:
Approximately Equal Option. The amount payable to the Participant
each year shall be computed so that the aggregate amount of cash
or stock in a Participant's account(s) under the Plan shall be
distributed in approximately equal installments in each year for
which deferred compensation payments are to be made; or
Fractional Option. The amount payable to the Participant each
year shall be computed by multiplying a fraction, the numerator of
which is one and the denominator of which is the number of years
remaining in the distribution period, by the balance in the
account(s) on January 1 of such year.
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Under either option, the Participant's account(s) shall be debited at
the time of payment, which shall be on or before January 15 of each
year.
An approved payment period and payment option shall be applicable to the
Participant's total aggregate deferred compensation accounts under the
Plan, including any accounts previously maintained that have been
combined into an account under this Plan. Participants who have filed
elections prior to January 1, 1993, may by December 1, 1993, revise such
elections (subject to Committee approval) to reflect the payment periods
and payment options permitted by the foregoing provisions, or may cancel
such elections and defer making an election until such time as is
permitted by the foregoing provisions.
Distributions of amounts from a Stock Unit deferral account shall be
paid in cash during any period in which the Participant is subject to
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder ("Section 16"), and for any required Section 16
reporting period thereafter. Following such period, distributions from
the Stock Unit deferral account may be made in stock at the written
election of the Participant, subject to Committee approval. Any cash
distribution shall equal the cash value, on the date as of which the
distribution is calculated (which shall be the first business day in
January unless some other date is prescribed by the Committee), of the
number of whole shares of Company common stock then distributable to
such Participant, based on the Fair Market Value of such stock on that
date or the next day on which the Exchange is open, if the Exchange is
closed on the date the distribution is calculated. Any distributions in
stock shall be in whole shares of the Company's common stock equal to
the whole number of stock units credited to the Participant's Stock Unit
deferral account. No fractional shares shall be distributed and any
account balance remaining after a stock distribution shall be paid in
cash.
A Participant may request that amounts (except for any amounts, and any
interest credited thereon, which were deferred in the calendar year in
which the request for distribution is submitted) credited to the
Participant's Interest Credit deferral account be distributed during the
Participant's term of office as a director of the Company, or that an
approved method of payment of the account be changed. Any such request
must be submitted to the Committee by no later than December 1 of the
year prior to the year in which the distribution is requested to be
made, must set forth the reason therefor, and is subject to approval by
the Committee in its sole and absolute discretion. Distributions during
a Participant's term of office as a director of the Company shall not be
permitted under the Plan from amounts deferred to a Stock Unit deferral
account, except in the case of the Participant's disability.
Disability, for these purposes, shall mean a condition entitling the
Participant to Disability Retirement under the Company's Retirement Plan
as if such Retirement Plan were applicable to the Participant. No
change to the timing of or payment option for payments from the Stock
Unit deferral account shall be considered or allowed during the period
the Participant is subject to Section 16 and for any required Section 16
reporting period thereafter.
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The Committee may establish guidelines for its own use in considering
any such request or any other request or election under the Plan, but
such guidelines shall not in any way limit the Committee's discretion in
acting upon a request or election, or in determining the timing and
manner of any distributions to be made under the Plan.
6. Beneficiaries. A Participant may designate one or more beneficiaries to
receive distributions from the Plan, upon the death of the Participant.
If no beneficiary has been designated, all such amounts shall be paid to
the personal representative of the Participant. Except as provided in
the following paragraph, the death of a Participant shall not affect the
timing or manner of distributions from the Participant's account(s).
A Participant may elect that one or more fixed payments be made from the
Participant's account(s) under the Plan, to the Participant's personal
representative or designated beneficiary, following the Participant's
death. Such payments, if approved by the Committee, shall be made
within 15 months after the Participant's death. Any amounts thereafter
remaining in the account(s) will be distributed at the time and in the
manner approved by the Committee.
7. Termination or Amendment of the Plan. The Plan may be terminated,
modified, or amended from time to time by resolution of the Board of
Directors. If the Plan is terminated, all amounts accumulated prior to
termination will continue to remain subject to the provisions of the
Plan as if the Plan had not been terminated.
8. Participants' Rights. Amounts deferred and accumulated under the Plan
remain the property of the Company, and no Participant or other person
shall acquire any property interest in the account(s) or any other
assets of the Company on account of participation in the Plan, a
Participant's rights being limited to receiving from the Company the
payments provided for in the Plan. The Plan is unfunded, and to the
extent that any Participant acquires a right to receive payments from
the Plan, such right shall be no greater than the right of an unsecured
creditor of the Company.
Except to the extent provided in the final paragraph of Section 5 of the
Plan, the right of a Participant, the Participant's legal representative
or beneficiary to receive payments from the Plan shall not be subject to
anticipation, sale, assignment, pledge, encumbrance or charge, nor shall
such right be liable for or subject to the debts, contracts, liabilities
or torts of the Participant, or the Participant's legal representative
or beneficiaries.
9. Powers of Compensation Committee. The Compensation Committee of the
Board of Directors (the "Committee") shall have full power and authority
to construe and interpret the Plan. No member of the Committee shall
act on any matter concerning such member's participation in the Plan or
such member's account(s) under the Plan. Decisions of the Committee
shall be final and binding upon the Participants, their legal
representatives and beneficiaries. Approval by the Committee of any
election or request made by a Participant pursuant to the Plan shall be
subject to the sole discretion of the Committee.
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Exhibit (10)(ix)(a)
1993 Incentive Stock Plan for Employees
as amended on December 13, 1993
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THE BOEING COMPANY
1993 Incentive Stock Plan for Employees
As Amended December 13, 1993
1. Purpose.
The purpose of this 1993 Incentive Stock Plan for Employees (the "Plan")
is to attract, retain and motivate key employees by providing them the
opportunity to acquire a proprietary interest in the The Boeing Company
(the "Company") and to link their interests and efforts to the long-term
interests of the Company's shareholders.
2. Plan Administration.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"). Except
for the terms and conditions explicitly set forth in the Plan, the
Committee shall have the authority, in its discretion, to determine all
matters relating to awards under the Plan, including selection of the
individuals to be granted awards, the type of awards, the number of
shares of the Company's Common Stock (the "Common Stock") subject to an
award, all terms, conditions, restrictions and limitations, if any, of an
award and the terms of any award agreement or notice.
2.2 The Committee shall also have the authority to grant awards in
fulfillment of commitments previously made for stock-based awards under
the "Incentive Compensation Plan for Officers and Employees of The Boeing
Company and Subsidiaries."
2.3 Except for the power to amend the Plan as provided in Section 12, the
Board or the Committee, in its discretion, may delegate the Committee's
authority and duties under the Plan to a committee appointed by the Board
consisting of one or more senior executive officers of the Company who
are also members of the Board, under such conditions and limitations as
the Board or the Committee may establish, except that only the Committee
may make any determinations regarding grants or awards to participants
who are subject to Section 16 of the Securities Exchange Act of 1934 (the
"1934 Act").
2.4 All decisions made by the Committee or its delegate pursuant to the
provisions of the Plan and all determinations and selections made by the
Committee or its delegate pursuant to such provisions and related orders
or resolutions of the Board shall be final and conclusive.
3. Eligibility.
Any employee of the Company shall be eligible to receive an award under
the Plan. For purposes of this Section 3, the "Company," with respect to
all awards under the Plan other than Incentive Stock Options, includes
any entity that is directly or indirectly controlled by
the Company or any entity in which the Company has a significant equity
interest, as determined by the Committee. With respect to Incentive
Stock Options, the "Company" includes any parent or subsidiary of the
Company in accordance with Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
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4. Shares Subject to the Plan.
4.1 The stock offered under the Plan shall be shares of Common Stock and may
be unissued shares or shares now held or subsequently acquired by the
Company as treasury shares, as the Board may from time to time determine.
Subject to adjustment as provided in Sections 4.3 and 5, the aggregate
number of shares to be delivered under the Plan shall not exceed fourteen
million (14,000,000) shares, of which no more than an aggregate of two
million (2,000,000) shares shall be available for issuance pursuant to
stock awards granted under Section 6.4.
4.2 Any shares subject to any award granted under the Plan which is
forfeited, is terminated or expires unexercised shall again be available
for award under the Plan, subject to the limitations contained in
applicable laws and regulations.
4.3 The Board, in its sole discretion, may increase the aggregate number of
shares of Common Stock to be delivered under Section 4.1 by up to two
million (2,000,000) shares in the event that the Company acquires any
other corporation or business entity and the Company agrees to assume
outstanding employee stock options or stock grant commitments of the
acquired entity or otherwise grants awards to employees in connection
with such acquisition.
5. Adjustment of Shares Available.
The aggregate number of shares available for awards under the Plan, the
number of shares covered by each outstanding award, and the exercise
price per share thereof (but not the total price) of each such award
shall all be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from any split-up or
consolidation of shares or any like capital adjustment or the payment of
any stock dividend.
6. Awards.
6.1 The Committee shall have the authority, in its sole discretion, to
determine the type or types of award(s) to be granted to employees. Such
awards may include, but are not limited to, Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights granted in tandem
with all or a portion of related stock options under the Plan or Stock
Awards. Subject to adjustment as provided in Section 5 hereof, no more
than 3% of the number of shares authorized by Section 4.1, which equates
to 420,000 shares, may be issued to any one individual in any one year.
6.2 Stock Options. The Committee may grant stock options designated as
"Incentive Stock Options," which comply with the provisions of Section
422 of the Code or any successor statutory provision, or "Nonqualified
Stock Options." The price at which shares may be purchased upon exercise
of a particular option shall be determined by the Committee but shall be
no less than 100% of the Fair Market Value of such shares at the time
such option is granted. For purposes of the Plan, "Fair Market Value"
equals the mean of the high and low per share trading prices for the
Common Stock as reported in The Wall Street Journal for the New York
Stock Exchange Composite Transactions for a single trading day. The term
of each stock option shall be set by the Committee, but no Incentive
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Stock Option shall be exercisable more than ten years after the date such
stock option is granted and, to the extent the aggregate Fair Market
Value (determined as of the date the option is granted) of Common Stock
with respect to which Incentive Stock Options are exercisable for the
first time during any calendar year (under this Plan and all other stock
option plans of the Company) exceeds $100,000, such options shall be
treated as Nonqualified Stock Options.
6.3 Stock Appreciation Rights. The Committee may grant "Stock Appreciation
Rights" to employees who have been or are granted stock options under the
Plan. In exchange for the surrender in whole or in part of the privilege
of exercising the related option to purchase shares of the Common Stock,
the granted Stock Appreciation Right shall entitle an employee to payment
of an amount equal to the appreciation in value of the surrendered option
(the excess of the Fair Market Value of such option at the time of
surrender over its aggregate exercise price). Such payment may be made in
cash or in shares of Common Stock valued at the Fair Market Value as of the
date of the surrender, or partly in cash and partly in shares of Common
Stock, as determined by the Committee in its sole discretion. The
Committee may establish an arrangement under which employees may defer any
such cash payment to a future date or dates under terms similar to the
terms of the Company's Deferred Compensation Plan (including the accrual of
interest on deferred amounts), provided that an employee's election to
defer under any such arrangement shall be made (a) on or before the date of
grant of the Stock Appreciation Right being surrendered or (b) subject to
approval by the Committee, before the date on which the employee becomes
vested in the related option being surrendered. The Committee may
establish a maximum appreciation value payable for Stock Appreciation
Rights. For Stock Appreciation Rights exercised during any ten-day window
period following the Company's release of quarterly financial information,
the Committee may, in its sole discretion, establish a uniform Fair Market
Value of the Common Stock for such period. The uniform Fair Market Value
shall not be less than the Fair Market Value otherwise available to an
optionee and shall not be greater than the highest daily mean price during
such ten-day period of the sales prices of the Common Stock as reported in
The Wall Street Journal; provided, however, that with respect to Stock
Appreciation Rights granted in connection with Incentive Stock Options, the
Fair Market Value shall not exceed the maximum fair market value
permissible under Section 422 of the Code.
6.4 Stock Awards. The Committee may grant "Stock Awards" under the Plan in
Common Stock or denominated in units of Common Stock. Such awards may be
granted either alone, in addition to, or in tandem with any other type of
award granted under the Plan. The Committee, in its discretion, may make
such awards either noncontingent or contingent upon attainment of certain
performance objectives to be achieved during a period of time, or upon
continuous service with the Company. The measure of whether and to what
degree such objectives have been attained and the resulting awards will
be determined by the Committee. The Committee may choose, at the time of
the grant of the award or any time thereafter up to the time of payment
of the award, to include as part of such award an entitlement to receive
dividends or dividend equivalents, subject to such terms as the Committee
may establish. All dividends or dividend equivalents which are not paid
currently may, at the Committee's discretion, accrue interest and be paid
to the participant if and when and to the extent that such award is paid.
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7. Option Exercise.
7.1 Each award agreement or notice for a stock option or Stock Appreciation
Right shall contain a provision that the option or right shall not be
exercisable unless the optionee remains in the employ of the Company at
least twelve months after the granting of the option.
7.2 No shares shall be delivered pursuant to the exercise of any option or
Stock Appreciation Right, in whole or in part, until qualified for
delivery under such securities laws and regulations as may be deemed by
the Committee to be applicable thereto and until, in the case of the
exercise of an option, payment in full of the option price thereof (in
cash or stock as provided in Section 7.4) is received by the Company. No
holder of an option or Stock Appreciation Right, legal representative,
legatee, or distributee shall be or be deemed to be a holder of any
shares subject to such option or Stock Appreciation Right unless and
until such person or entity has received a certificate or certificates
therefor.
7.3 No option may at any time be exercised with respect to a fractional share.
In the event that shares are issued pursuant to the exercise of a Stock
Appreciation Right, no fractional share shall be issued; however, a
fractional Stock Appreciation Right may be exercised for cash.
7.4 An employee who owns shares of Common Stock may use the previously
acquired shares, whose value shall be determined as the Fair Market Value
of such shares on the date the stock option is exercised, as a form of
payment to exercise stock options under the Plan. The Committee, in its
discretion, may restrict or rescind this right by notice to a participant
in the Plan. An option may be exercised with stock only by surrendering
to the Company whole shares of Common Stock having a Fair Market Value
equal to or less than the exercise price. If an option is exercised by
surrender of stock having a Fair Market Value less than the exercise
price, the employee must pay the difference in cash.
8. Transferability.
The right of any award recipient to exercise an award granted under the
Plan shall, during the lifetime of such award recipient, be exercisable
only by such award recipient and shall not be assignable or transferable
by such award recipient other than by will or the laws of descent and
distribution.
9. Withholding Taxes.
The Company shall have the right to deduct from any settlement of an
award made under the Plan, including the delivery or vesting of shares,
an amount sufficient to cover with-holding required by law for any
federal, state or local taxes or to take such other action as may be
necessary to satisfy any such withholding obligations, including the
withholding from any other cash amounts due or to become due from the
Company to the participant an amount equal to such taxes.
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10. Termination of Employment.
The terms and conditions under which an award may be exercised following
termination of a participant's employment with the Company shall be
determined by the Committee, provided, that if a participant's employment
with the Company terminates for any reason within twelve months of the
date of grant of a stock option or Stock Appreciation Right, such option
or right shall expire as of the date of such termination of employment
and the participant and the participant's legal representative shall
forfeit any and all rights pertaining to such award.
11. Term of the Plan.
The Plan shall become effective as of May 1, 1993 and shall remain in
full force and effect through April 30, 1998 unless sooner terminated by
the Board. After termination of the Plan, no future awards may be
granted but awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions and the terms and
conditions of the Plan.
12. Plan Amendment.
The Committee or the Board may amend, suspend or terminate the Plan at
any time, provided that no such amendment shall be made without approval
of the Company's stockholders if such approval is required to comply with
Rule 16b-3 under the 1934 Act or the Delaware General Corporation Law or,
with respect to Incentive Stock Options, Section 422 of the Code or any
successor provision.
13. Section 16(b) Compliance.
It is the intention of the Company that the Plan shall comply in all
respects with Rule 16b-3 under the 1934 Act and, if any Plan provision is
later found not to be in compliance with Section 16 of the 1934 Act, the
provision shall be deemed null and void, and in all events the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Board, in its
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are
officers subject to Section 16 of the 1934 Act without so restricting,
limiting or conditioning the Plan with respect to other participants.
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Exhibit (10)(ix)(b)(i)
1993 Incentive Stock Plan for Employees -
Notice of Stock Option Grant for Regular Annual Grant
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NOTICE OF TERMS OF
STOCK OPTION GRANT
________ _, 1993
To: __________________
SSN: __________________
We are pleased to inform you that you have been selected by the Compensation
Committee of the Board of Directors of The Boeing Company ("the Compensation
Committee") to receive an option to purchase ________ shares of the Company's
common stock at an exercise price of $______ per share.
The grant of this option is made pursuant to The Boeing Company 1993 Incentive
Stock Plan for Employees of The Boeing Company, (the "Plan"). A copy of the
Plan is attached and incorporated into this notice by reference. The terms
and conditions of the option grant are set forth in the Plan and in this
notice. Exercise of all or part of this stock option constitutes acceptance
of all the terms and conditions of the option grant.
For purposes of this notice the term "Company" means The Boeing Company and/or
any subsidiary company designated by the Compensation Committee as eligible to
participate in the Plan. The term "retirement" means retirement under
conditions which satisfy the terms in the Company retirement plan or the
applicable subsidiary plan.
Type of Option:
Of this option, _______ shares are granted as Incentive Stock Options and
subject to the rules governing Incentive Stock Options; and, ____ shares
are granted as a Non-Qualified Stock Options.
Date of Grant: The date of the grant of the stock option is , 1993
Term of the Stock Option:
1. The stock option will terminate and all rights to exercise the stock option
will terminate completely if you do not remain employed by the Company for
at least one year from the date of grant regardless of the reason for your
termination.
2. If you remain employed by the Company for at least one year from the date
of grant, this stock option will terminate and all rights to exercise this
stock option will terminate at the earliest of the following dates:
a. 24 months from the date of termination, if you terminate your employment
prior to age 62 because of disability, retirement, or death;
b. 48 months from the date of termination, if you terminate your employment
at or after age 62 because of disability, retirement, or death;
c. On the day after you terminate your employment with the Company, if you
terminate for reasons other than disability, retirement, or death; or
d. 10 years from the date of grant.
100 of 109
<PAGE> 101
Vesting Rules: If you do not remain employed by the Company for one year
after the date of grant, the stock option does not vest and may not be
exercised. If you remain employed by the Company for one year from the date
of grant, and the stock option has not otherwise terminated, the stock option
shall vest and may be exercised according to the following schedule:
Date After Which Stock Option Portion of Grant That Incentive Non-Qualified
May be Exercised Becomes Exercisable Stock Option Stock Option
- ----------------------------- --------------------- ------------ -------------
One year after the date of grant 40% _____ _____
Three years after date of grant 30% _____ _____
Five years after date of grant 30% _____ _____
If you terminate your employment with the Company one year or more after the
date the option was granted (and your termination is due to retirement,
disability, or death), any nonexercisable portion of the Incentive Stock
Option or the Non-Qualified Stock Option covered by this notice will become
100% exercisable one day after your termination date; provided, however, that
the total option exercise price of the Incentive Stock Options which became
exercisable during the calendar year in which you terminate (including any
Incentive Stock Options which became exercisable in that year from previous
stock option grants you may have received) may not exceed $100,000 (or such
greater amount as established by the Internal Revenue Service) and the balance
will be exercisable as non-qualified stock options.
Exercise: During your lifetime only you, your guardian or your legal
representative may exercise the stock option. The Plan permits exercise of
the stock option by the personal representative of your estate or the
beneficiary thereof following your death.
Transfer: The stock option is not transferable except by will or the
applicable laws of descent and distribution.
Method of Exercise of Stock Option: The stock option or any part thereof may
be exercised by giving written notice of exercise to the Secretary of the Com-
pany, which notice shall (a) state the number of full shares to be purchased,
and (b) be accompanied by payment in full for the number of shares to be pur-
chased. The date such notice and payment are received by the office of the
Secretary shall be the date of exercise of shares.
Payment may be made either in the form of cash, check, Company stock, or any
combination thereof unless otherwise restricted by the Compensation Committee.
The Company will issue and deliver to you or in accordance with your
instructions at the earliest practicable date after exercise a certificate or
certificates for the number of shares purchased; provided, however, that if
any federal or state law or regulation or a securities exchange listing the
Company's shares requires the Company to take any action with respect to the
exercised shares before issuance thereof, then the date for issuance and
delivery of such shares shall be extended for the period of time necessary to
take such action.
Very truly yours,
THE BOEING COMPANY
Secretary
101 of 109
<PAGE> 102
Exhibit (10)(ix)(b)(ii)
1993 Incentive Stock Plan for Employees -
Notice of Stock Option Grant for Supplemental Grant
102 of 109
<PAGE> 103
NOTICE OF TERMS OF
STOCK OPTION GRANT
________ _, 1993
To: __________________
SSN: __________________
We are pleased to inform you that you have been selected by the Compensation
Committee of the Board of Directors of The Boeing Company ("the Compensation
Committee") to receive an option to purchase ______ shares of the Company's
common stock at an exercise price of $__.____ per share.
The grant of this option is made pursuant to The Boeing Company 1993 Incentive
Stock Plan for Employees, as amended (the "Plan"). A copy of the Plan is
attached and incorporated into this notice by reference. The terms and
conditions of the option grant are set forth in the Plan and in this notice.
Exercise of all or part of this stock option constitutes acceptance of all the
terms and conditions of the option grant.
Type of Option:
All of these stock option shares are granted as Non-Qualified Stock Options.
Date of Grant: The date of the grant of the stock option is ___________, 1993.
Term of the Stock Option:
1. The stock option will terminate and all rights to exercise the stock option
will terminate completely if you do not remain employed by the Company for
at least one year from the date of grant regardless of the reason for your
termination.
2. If you remain employed by the Company for at least one year from the date
of grant, this stock option will terminate and all rights to exercise this
stock option will terminate upon the earlier of: (a) 5 years from the date
of grant, or (b) the date you terminate employment if such termination is
for reasons other than disability, death or retirement under conditions
which satisfy the terms of the Company retirement plan.
3. This stock option shall automatically terminate if the Compensation
Committee determines, in its sole and absolute discretion, that such option
is included in "applicable employee remuneration" within the meaning of
Section 13211 of Public Law 103-66.
103 of 109
<PAGE> 104
Vesting Rules: If you do not remain employed by the Company for one year
after the date of grant, the stock option does not vest and may not be
exercised. If you remain employed by the Company for one year from the date
of grant, and the stock option has not otherwise terminated, the stock option
shall vest and may be exercised according to the following schedule:
Cumulative
When Stock Option Total of Stock
May be Exercised Option Grant
When the stock reaches $_____ a share*
_______ stock options are exercisable. ______
When the stock reaches $_____ a share*
_______ stock options are exercisable. ______
When the stock reaches $_____ a share*
_______ stock options are exercisable. ______
* Over any 20 consecutive trading days, the closing price of Boeing Common
Stock must average a value equal to or exceeding the applicable share price.
(The share price of Boeing Common Stock will be the daily closing price as
reported in The Wall Street Journal for the New York Stock Exchange Composite
Transactions.)
Exercise: During your lifetime only you, your guardian or your legal
representative may exercise the stock option. The Plan permits exercise of
the stock option by the personal representative of your estate or the
beneficiary thereof following your death.
Transfer: The stock option is not transferable except by will or the
applicable laws of descent and distribution.
Method of Exercise of Stock Option: The stock option or any part thereof may
be exercised by giving written notice of exercise to the Secretary of the
Company, which notice shall (a) state the number of full shares to be
purchased, and (b) be accompanied by payment in full for the number of shares
to be purchased. The date such notice and payment are received by the office
of the Secretary shall be the date of exercise of the stock option as to such
number of shares.
Payment may be made either in the form of cash, check, Company stock, or any
combination thereof unless otherwise restricted by the Compensation Committee.
The Company will issue and deliver to you or in accordance with your
instructions at the earliest practicable date after exercise a certificate or
certificates for the number of shares purchased; provided, however, that if
any federal or state law or regulation or a securities exchange listing the
Company's shares requires the Company to take any action with respect to the
exercised shares before issuance thereof, then the date for issuance and
delivery of such shares shall be extended for the period of time necessary to
take such action.
Very truly yours,
THE BOEING COMPANY
Secretary
104 of 109
<PAGE> 105
Exhibit (22)
List of Company Subsidiaries
THE BOEING COMPANY
SUBSIDIARIES (ALL WHOLLY-OWNED)
Page 1 of 2
Place of Date
Name Incorporation Incorporated
- ------------------------------------------------------------------------------
Aileron Inc. Delaware 1989
*Aldford Limited Bermuda 1993
Aldford-1 Corporation Delaware 1993
*Amwell Limited Bermuda 1993
Amwell-1 Corporation Delaware 1993
*Andsell Limited Bermuda 1993
Andsell-1 Corporation Delaware 1993
ARGOSystems, Inc. California 1969
*Arneway Limited Bermuda 1993
Arneway-1 Corporation Delaware 1993
*A.S.I. Electronics (in process of dissolution) California 1977
Astro Limited Bermuda 1975
Astro-II, Inc. Vermont 1984
*Beaufoy Limited Bermuda 1993
Beaufoy-1 Corporation Delaware 1993
BCS Richland, Inc. Washington 1975
BE&C Engineers, Inc. Delaware 1978
BOECON Corporation Washington 1973
Boeing Aerospace Operations, Inc. Washington 1972
Boeing Agri-Industrial Company Oregon 1973
*Boeing Canada Technology Ltd. Ontario 1929
Boeing China, Inc. Delaware 1986
Boeing Commercial Space Development Company Delaware 1987
BOEING DEFENSE & SPACE-CORINTH CO. Delaware 1987
BOEING DEFENSE & SPACE-IRVING CO. Delaware 1979
Boeing Defense & Space - Oak Ridge, Inc. Delaware 1980
Boeing Domestic Sales Corporation Washington 1974
Boeing Equipment Holding Company Washington 1968
Boeing Financial Corporation Washington 1965
Boeing Georgia, Inc. Delaware 1980
Boeing Information Services, Inc. Delaware 1981
Boeing International Corporation Delaware 1953
Boeing International Sales Corporation Washington 1971
Boeing Investment Company, Inc. Delaware 1985
Boeing Leasing Company Delaware 1988
Boeing Louisiana, Inc. Delaware 1986
Boeing Middle East Limited Delaware 1982
Boeing Mississippi, Inc. Delaware 1985
Boeing Nevada, Inc. Delaware 1989
*Second-tier subsidiaries
**Third-tier subsidiaries
105 of 109
<PAGE> 106
THE BOEING COMPANY
SUBSIDIARIES (ALL WHOLLY-OWNED)
Page 2 of 2
Place of Date
Name Incorporation Incorporated
- ------------------------------------------------------------------------------
Boeing of Canada Ltd. Delaware 1986
Boeing Offset Company, Inc. Delaware 1985
Boeing Operations International, Incorporated Delaware 1981
Boeing Petroleum Services, Inc. Delaware 1984
Boeing Sales Corporation Guam 1984
Boeing Sales Corporation, Limited Bermuda 1993
Boeing Technology International, Inc. Washington 1973
*Braham Limited Bermuda 1993
Braham-1 Corporation Delaware 1993
Energy Enterprises, Inc. Delaware 1991
*Gainford Limited Bermuda 1993
Gainford-1 Corporation Delaware 1993
Gaucho-1 Inc. Delaware 1994
*Grape Limited Bermuda 1993
Grape Corporation Delaware 1993
Hanway Corporation Delaware 1993
Longacres Park, Inc. Washington 1948
Mandarin-1 Corporation Delaware 1993
Mandarin-2 Corporation Delaware 1993
Mandarin-3 Corporation Delaware 1993
Mandarin-4 Corporation Delaware 1993
Mandarin-5 Corporation Delaware 1993
Mandarin-6 Corporation Delaware 1993
Montana Aviation Research Company Delaware 1991
RGL-1 Corporation Delaware 1993
RGL-2 Corporation Delaware 1993
RGL-3 Corporation Delaware 1993
RGL-4 Corporation Delaware 1993
RGL-5 Corporation Delaware 1993
RGL-6 Corporation Delaware 1993
Rainier Aircraft Leasing, Inc. Delaware 1992
*UTL Canada, Inc. (in process of dissolution) Canada 1987
**2433265 Manitoba Ltd. Manitoba 1989
*692567 Ontario Limited Ontario 1986
*757UA, Inc. Delaware 1989
*767ER, Inc. Delaware 1987
*Second-tier subsidiaries
**Third-tier subsidiaries
106 of 109
<PAGE> 107
Appendix of graphic and image material pursuant
to Rule 304(a) of Regulation S-T
Graphic and image material item Number 1
A bar chart for the five years 1989-1993 indicating sales by industry
segment (dollars in billions):
1989 1990 1991 1992 1993
Commercial Aircraft 14.305 21.230 22.970 24.133 20.568
Defense and Space 5.429 5.862 5.846 5.429 4.407
Other 0.542 0.503 0.498 0.622 0.463
Total 20.276 27.595 29.314 30.184 25.438
Graphic and image material item Number 2
A bar chart for the five years 1989-1993 indicating sales by type of
customer (dollars in billions):
1989 1990 1991 1992 1993
Foreign 11.029 16.109 17.856 17.486 14.616
Domestic Commercial 3.965 6.049 5.896 7.245 6.413
U. S. Government 5.282 5.437 5.562 5.453 4.409
Total 20.276 27.595 29.314 30.184 25.438
Graphic and image material item Number 3
A bar chart of research and development expensed for the five
years 1989-1993 (dollars in billions):
1989 - 0.754; 1990 - 0.827; 1991 - 1.417; 1992 - 1.846; 1993 - 1.661
Graphic and image material item Number 4
A bar chart for the five years 1989-1993 indicating contractual backlog
by type of customer (dollars in billions):
1989 1990 1991 1992 1993
Commercial 73.974 91.475 92.826 82.649 70.497
U. S. Government 6.589 5.719 5.090 5.281 3.031
Total 80.563 97.194 97.916 87.930 73.528
107 of 109
<PAGE> 108
Graphic and image material item Number 5
A line chart plotting world air travel - as measured by revenue passenger
miles in billions, excluding former Soviet Union airlines - for the
years 1970-2010. Years 1970-1993 are designated as historical, years
1994-2010 are designated as forecast. The two lines graphed are
total revenue passenger miles and U.S. revenue passenger miles.
Relevant plot points (revenue passenger miles in billions):
U.S. Total U.S. Total
Revenue Revenue Revenue Revenue
Passenger Passenger Passenger Passenger
Year Miles Miles Year Miles Miles
-------- --------- --------- -------- --------- ---------
1970 148.3 284.0 1993 513.6 1270.2
1975 173.3 427.9 1994 520.8 1343.0
1980 260.6 652.0 1995 568.3 1427.8
1985 351.1 831.1 2000 706.5 1894.3
1990 472.3 1158.3 2005 896.1 2428.9
1991 463.2 1131.1 2010 1073.4 3070.3
1992 493.8 1224.2
Graphic and image material item Number 6
A bar chart for the twenty-four years 1970-1993 indicating airline industry
profits for core airline operations for both U.S. major airlines and
non-U.S. airlines (Inflation-adjusted dollars in billions):
U.S. major Non-U.S. U.S. major Non-U.S.
Year Airlines Airlines Year Airlines Airlines
-------- ---------- -------- -------- ---------- --------
1970 0.169 1.442 1982 (1.022) 0.781
1971 1.065 0.996 1983 0.498 2.612
1972 1.788 0.820 1984 2.898 4.206
1973 1.673 1.953 1985 1.699 3.825
1974 1.973 0.235 1986 1.105 4.613
1975 0.285 1.565 1987 2.326 6.790
1976 1.659 3.477 1988 3.266 9.164
1977 1.954 3.919 1989 1.506 7.382
1978 2.718 3.738 1990 (2.587) 0.902
1979 0.411 1.062 1991 (2.346) 1.261
1980 (0.390) (0.722) 1992 (2.402) (0.477)
1981 (0.720) (0.387) 1993 0.800 1.858
1993 is indicated to be an estimate
108 of 109
<PAGE> 109
Graphic and image material item Number 7
A bar chart for the five years 1989-1993 indicating both (1) property, plant
and equipment - net additions and (2) depreciation (dollars in billions):
1989 1990 1991 1992 1993
Net additions 1.362 1.586 1.850 2.160 1.317
Depreciation 0.584 0.636 0.768 0.870 0.953
Graphic and image material item Number 8
A bar chart for the five years 1989-1993 indicating both customer
financing - net additions (dollars in billions):
1989 - (.263); 1990 - 0.264; 1991 - 0.065; 1992 - 1.098; 1993 - 0.881
109 of 109
