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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 1996
Commission file number 1-442
THE BOEING COMPANY
7755 East Marginal Way South
Seattle, Washington 98108
Telephone: (206) 655-2121
State of incorporation: Delaware
IRS identification number: 91-0425694
The registrant has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and has been subject to such filing requirements
for the past 90 days.
As of July 31, 1996, there were 348,476,236 shares of common stock,
$5.00 par value, issued and outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in millions except per share data)
(Unaudited)
Six months ended Three months ended
June 30 June 30
- -------------------------------------------------------------------------------
1996 1995 1996 1995
- -------------------------------------------------------------------------------
Sales and other operating revenues $10,568 $10,595 $6,275 $5,558
Costs and expenses 9,930 10,056 5,791 5,245
Special retirement program expense 600 600
- -------------------------------------------------------------------------------
Earnings (loss) from operations 638 (61) 484 (287)
Other income, principally interest 128 87 71 56
Interest and debt expense (75) (79) (34) (39)
- -------------------------------------------------------------------------------
Earnings (loss) before
federal taxes on income 691 (53) 521 (270)
Federal taxes on income 104 (3) 53 (39)
- -------------------------------------------------------------------------------
Net earnings (loss) $ 587 $ (50) $ 468 $ (231)
===============================================================================
Earnings (loss) per share $1.70 $(.15) $1.35 $(.68)
===============================================================================
Cash dividends per share $ .53 $ .50 $ .28 $ .25
===============================================================================
See notes to consolidated financial statements.
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THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in millions except per share data)
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
(Unaudited)
Assets
- -------------------------------------------------------------------------------
Cash and cash equivalents $ 4,857 $ 3,730
Short-term investments 783
Accounts receivable 1,305 1,470
Current portion of customer financing 143 205
Deferred income taxes 651 840
Inventories 14,159 14,001
Less advances and progress billings (7,894) (7,068)
- -------------------------------------------------------------------------------
Total current assets 14,004 13,178
Customer financing 1,085 1,660
Property, plant and equipment, at cost 13,979 13,744
Less accumulated depreciation (7,628) (7,288)
Deferred income taxes 147 58
Other assets 1,058 746
- -------------------------------------------------------------------------------
$ 22,645 $ 22,098
===============================================================================
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------
Accounts payable and other liabilities $ 6,379 $ 6,245
Advances in excess of related costs 660 510
Income taxes payable 390 389
Current portion of long-term debt 22 271
- -------------------------------------------------------------------------------
Total current liabilities 7,451 7,415
Accrued retiree health care 2,503 2,441
Long-term debt 2,337 2,344
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 650 615
Retained earnings 8,139 7,746
Less treasury shares, at cost -
1996 - 3,526,566; 1995 - 5,304,135 (181) (209)
- -------------------------------------------------------------------------------
Total shareholders' equity 10,354 9,898
- -------------------------------------------------------------------------------
$ 22,645 $ 22,098
===============================================================================
See notes to consolidated financial statements.
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THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Six months ended
June 30
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
Cash flows - operating activities:
Net earnings (loss) $ 587 $ (50)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 496 539
Changes in assets and liabilities -
Short-term investments (783) 559
Accounts receivable 165 28
Inventories, net of advances and progress billings 668 (400)
Accounts payable and other liabilities 123 215
Advances in excess of related costs 150 (103)
Income taxes payable and deferred 101 125
Other assets (312) 286
Accrued retiree health care 62 75
- -------------------------------------------------------------------------------
Net cash provided by operating activities 1,257 1,274
- -------------------------------------------------------------------------------
Cash flows - investing activities:
Customer financing additions (400) (482)
Customer financing reductions 1,009 1,096
Plant and equipment, net additions (363) (381)
- -------------------------------------------------------------------------------
Net cash provided by investing activities 246 233
- -------------------------------------------------------------------------------
Cash flows - financing activities:
Debt financing (256) 11
Shareholders' equity -
Cash dividends paid (183) (171)
Treasury shares acquired (82)
Stock options exercised, other 145 52
Net cash used by financing activities (376) (108)
- -------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,127 1,399
Cash and cash equivalents at beginning of year 3,730 2,084
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of 2nd quarter $ 4,857 $ 3,483
===============================================================================
See notes to consolidated financial statements.
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THE BOEING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
(Unaudited)
Note 1 - Consolidated Financial Statements
The consolidated interim financial statements included in this report have
been prepared by the Company without audit. In the opinion of management,
all adjustments necessary for a fair presentation are reflected in the
interim financial statements. Such adjustments are of a normal and
recurring nature. The results of operations for the period ended June 30,
1996, are not necessarily indicative of the operating results for the full
year. The interim financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the
Company's 1995 Annual Report.
Note 2 - Earnings per Share
Earnings per share are computed on the basis of the weighted average
number of shares outstanding during the period. The weighted average
number of shares was 345.3 million and 341.4 million for the six-month
periods ended June 30, 1996 and 1995. There was no material dilutive
effect on earnings per share due to common stock equivalents.
Note 3 - Federal Taxes on Income
The federal income tax provision rate of 15.0% for the first six months of
1996 is lower than the statutory rate principally due to a 13.8% reduction
attributable to a $95 one-time tax benefit related to prior years'
investment tax credits recognized in the second quarter and a 4.9%
reduction attributable to Foreign Sales Corporation tax benefits. For the
first six months of 1995, the federal income tax provision rate was 6.0%,
reflecting reductions from the statutory rate amounting to 17.5% for
research and experimentation tax credit and 12.5% for Foreign Sales
Corporation tax benefits. For 1995, the $600 pretax charge to earnings
for the special retirement program resulted in higher relative percentage
reductions to the statutory tax rate.
Net income tax refunds were $31 and $133 for the six months ended June 30,
1996 and 1995.
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Note 4 - Accounts Receivable
Accounts receivable consisted of the following:
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
Accounts receivable under
U.S. Government contracts $ 953 $ 1,059
Accounts receivable from commercial
and foreign military customers 352 411
- -------------------------------------------------------------------------------
$ 1,305 $ 1,470
===============================================================================
Note 5 - Inventories
Inventories consisted of the following:
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
Commercial jet transport programs
and long-term contracts in progress $13,193 $13,107
Commercial spare parts, general stock
materials and other 966 894
- -------------------------------------------------------------------------------
$14,159 $14,001
===============================================================================
Note 6 - Customer Financing
Long-term customer financing, less current portion, consisted of the following:
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
Notes receivable $ 366 $ 721
Investment in sales-type leases 321 351
Operating lease aircraft, at cost,
less accumulated depreciation
of $206 and $326 498 688
- -------------------------------------------------------------------------------
1,185 1,760
Less valuation allowance (100) (100)
- -------------------------------------------------------------------------------
$ 1,085 $ 1,660
===============================================================================
Financing for aircraft is collateralized by security in the related asset,
and historically the Company has not experienced a problem in accessing
such collateral when necessary.
Sales and other operating revenues for the first six months of 1996 and
1995 included interest income of $26 and $94 associated with notes
receivable and sales-type leases.
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Note 7 - Other Assets
Other assets consisted of the following:
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
Prepaid pension expense $ 920 $698
Investments, other 138 48
- -------------------------------------------------------------------------------
$1,058 $746
===============================================================================
Note 8 - Accounts Payable and Other Liabilities
Accounts payable and other liabilities consisted of the following:
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
Accounts payable $3,072 $3,017
Accrued compensation and employee benefit costs 1,408 1,374
Lease and other deposits 486 508
Other 1,413 1,346
- -------------------------------------------------------------------------------
$6,379 $6,245
===============================================================================
Note 9 - Long-Term Debt
Long-term debt consisted of the following:
June 30 December 31
1996 1995
- -------------------------------------------------------------------------------
Unsecured debentures and notes:
8 3/8% due Mar. 1, 1996 $ - $ 250
6.35% due Jun. 15, 2003 299 299
8 1/10% due Nov. 15, 2006 175 175
8 3/4% due Aug. 15, 2021 398 398
7.95% due Aug. 15, 2024 300 300
7 1/4% due Jun. 15, 2025 247 247
8 3/4% due Sep. 15, 2031 248 248
8 5/8% due Nov. 15, 2031 173 173
7.50% due Aug. 15, 2042 100 100
7 7/8% due Apr. 15, 2043 173 173
6 7/8% due Oct. 15, 2043 125 125
Other notes 121 127
Less current portion (22) (271)
- -------------------------------------------------------------------------------
$2,337 $2,344
===============================================================================
The Company has $2,000 currently available under credit line agreements
with a group of commercial banks. Under these agreements, there are
compensating balance arrangements, and retained earnings totaling $1,653
are free from dividend restrictions. The Company has complied with the
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restrictive covenants contained in debt agreements.
Total debt interest, including amounts capitalized, was $103 and $109 for
the six-month periods ended June 30, 1996 and 1995, and interest payments
were $108 and $102.
Note 10 - Shareholders' Equity
Changes in shareholders' equity for the six-month periods ended June 30,
1996 and 1995, consisted of the following:
(Shares in thousands)
- -------------------------------------------------------------------------------
Common Stock
------------ Additional Treasury Stock
Par Paid-In Retained --------------
Shares Value Capital Earnings Shares Amount
- -------------------------------------------------------------------------------
Balance - December 31, 1994 349,257 $1,746 $586 $7,696 8,378 $(328)
- -------------------------------------------------------------------------------
Net earnings (50)
Treasury shares issued for
incentive stock plans, net (7) (171) (1,181) 46
Incentive stock plan accrual 5
Tax benefit related
to incentive stock plans 5
Stock appreciation rights
expired or surrendered 3
- -------------------------------------------------------------------------------
Balance - June 30, 1995 349,257 $1,746 $592 $7,475 7,197 $(282)
===============================================================================
- -------------------------------------------------------------------------------
Balance - December 31, 1995 349,257 $1,746 $615 $7,746 5,304 $(209)
- -------------------------------------------------------------------------------
Net earnings 587
Cash dividends declared (194)
Treasury shares issued for
incentive stock plans, net (5) (2,761) 110
Treasury shares acquired 983 (82)
Tax benefit related to
incentive stock plans 34
Stock appreciation rights
expired or surrendered 6
- -------------------------------------------------------------------------------
Balance - June 30, 1996 349,257 $1,746 $650 $8,139 3,526 $(181)
===============================================================================
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Note 11 - Contingencies
Various legal proceedings, claims and investigations related to products,
contracts and other matters are pending against the Company. Most
significant 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. In conjunction with this
notice, the Government demanded the repayment of unliquidated progress
payments in the amount of $605, plus interest. In June 1991, the
Government selected another contractor to perform the work which was the
subject of the contracts that were terminated for default, and the
Government could have asserted claims related to the reprocurement. The
Company filed a complaint in the United States Court of Federal Claims
seeking to overturn the default termination and to obtain payment on a
claim for equitable adjustment of the contract terms (the "Contract
Claim").
During the second quarter of 1996, this litigation and associated issues
on the Peace Shield program were settled, and all terminations for default
have been converted to terminations for convenience. The settlement has
resulted in the release of all Government claims, including any potential
Government claim for excess cost of reprocurement or other damages, has
removed any basis for the Government's claim for the $605 in unliquidated
progress payments, and has resulted in final determination of payments due
on the Contract Claim.
Note 12 - Subsequent Events
Boeing ShareValue Trust
On July 11, 1996, the Company announced that it has established a $1
billion stock investment trust for an incentive program, called the
ShareValue Program, that allows employees to share in the results of their
efforts to increase shareholder value over the long term. The 12-year
irrevocable trust, called the Boeing ShareValue Trust, will hold Boeing
common stock. Funding of the $1 billion trust investment, which is based
on the average price of Boeing stock on June 28, 1996, of $88 3/8, will
consist of 11,315,417 shares. The Company has contributed approximately
3.5 million shares of treasury stock to the trust, and the trustee will be
acquiring the balance of the shares on the open market with cash
contributed by the Company. Because all potential distributions to
participants will be defined by and limited to appreciation of shares held
by the ShareValue Trust, the program is fully self-sufficient and does not
represent any future uncertainty, risk or obligations affecting the
Company's own future cash flows.
Acquisition Agreement for Rockwell Aerospace and Defense Business Units
The Company announced on August 1, 1996, that Boeing and Rockwell
International Corporation signed a definitive agreement under which Boeing
will acquire most of Rockwell's aerospace and defense business units. Boeing
will issue approximately $860 million of its common stock, assume $2.165
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billion of Rockwell debt and assume certain retiree obligations of
Rockwell. The transaction is subject to approval by Rockwell's
shareholders, consent from its debtholders, certain regulatory approvals
and other provisions generally required in similar transactions. A special
Rockwell shareholders' meeting will be held in November, and the
transaction is expected to be completed shortly thereafter.
REVIEW BY INDEPENDENT ACCOUNTANTS
The consolidated statement of financial position as of June 30, 1996, and
the consolidated statements of net earnings and cash flows for the six-
month periods ended June 30, 1996 and 1995, have been reviewed by the
registrant's independent accountants, Deloitte & Touche LLP, whose report
covering their review of the financial statements follows.
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
The Boeing Company
Seattle, Washington
We have reviewed the accompanying consolidated statement of financial
position of The Boeing Company and subsidiaries as of June 30, 1996, and
the related consolidated statements of net earnings and cash flows for the
six-month periods ended June 30, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position of The Boeing
Company and subsidiaries as of December 31, 1995, and the related
consolidated statements of net earnings, shareholders' equity, and cash
flows for the year then ended (not presented herein); and in our report
dated January 25, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated statement of financial
position as of December 31, 1995, is fairly stated, in all material
respects, in relation to the consolidated statement of financial position
from which it has been derived.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
August 1, 1996
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Sales for the first six months of 1996 were $10.6 billion, approximately
the same as in the comparable period of 1995. Second quarter commercial
aircraft sales included the sale of certain aircraft previously on
operating leases. Approximately 215 commercial aircraft deliveries are
currently projected for the full year 1996, compared with 206 in 1995.
Total sales for 1996 are projected to be in the $22 billion range,
compared with $19.5 billion in 1995.
Sales by business segment were as follows ($ in millions):
First Six Months Second Quarter
---------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
Commercial aircraft $ 7,738 $ 7,781 $4,722 $4,096
Defense and space 2,830 2,814 1,553 1,462
------- ------- ------ ------
Total $10,568 $10,595 $6,275 $5,558
======= ======= ====== ======
Commercial jet transport deliveries were as follows:
First Six Months Second Quarter
---------------- --------------
Model 1996 1995 1996 1995
----- ---- ---- ---- ----
737 38 55 23 26
747 11 16 8 8
757 19 27 12 13
767 19 16 12 8
777 15 5 7 5
--- --- --- ---
Total 102 119 62 60
=== === === ===
Net earnings of $587 million for the first six months of 1996 were 35%
higher than earnings for the comparable period of 1995, excluding the 1995
special retirement program charge. Earnings for the first half of 1996
included the settlement of various defense and space segment contract
issues, resulting in an $81 million after-tax increase to earnings, and
recognition of tax benefits related to prior years' investment tax credits
amounting to $95 million.
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- -------------------------------------------------------------------------------
| Forward-Looking Information Is Subject to Risk and Uncertainty |
| Certain statements in the financial discussion and analysis by management |
| contain "forward-looking" information that involves risk and uncertainty, |
| including projections for deliveries, sales, research and development |
| expense, and other trend projections. Actual future results and trends |
| may differ materially depending on a variety of factors, including the |
| Company's successful execution of internal performance plans; product |
| performance risks associated with regulatory certifications of the |
| Company's commercial aircraft by the U.S. Government and foreign |
| governments; other regulatory uncertainties; collective bargaining labor |
| disputes, performance issues with key suppliers and subcontractors; |
| governmental export and import policies; factors that result in |
| significant and prolonged disruption to air travel worldwide; global trade |
| policies; worldwide political stability and economic growth; changing |
| priorities or reductions in the U.S. Government defense and space budgets; |
| termination of government contracts due to unilateral government action or |
| failure to perform; and legal proceedings. |
- -------------------------------------------------------------------------------
The effective income tax rate of 15.0% for the first six months of 1996
reflects the recognition of the $95 million in tax benefits related to
prior years' investment tax credits. Without the investment tax credit
benefit, the effective income tax rate would have been 28.8% for the first
half of 1996, which is expected to be representative for the balance of
1996. The 6% effective income tax rate for 1995 was the result of a
research and experimentation tax credit, together with the lower level of
pretax earnings due to the $600 million pretax charge to earnings for the
special retirement program. The research and experimentation tax credit
provisions expired in 1995.
The overall operating earnings margin, exclusive of research and
development expense and settlement of contract issues, was 10.6% for the
first half of 1996, compared with 12.0% for the same period in 1995,
excluding the impact of the special retirement program. The lower margin
was primarily attributed to a model mix of commercial aircraft deliveries
that included 15 777s in the first six months of 1996, compared with 5
777s in the first half of 1995. With regard to the 777 program, new
commercial jet transport programs normally have lower operating profit
margins than established programs due to initial tooling amortization and
higher unit production costs in the early years of a program.
Research and development expense totaled $597 million for the first six
months of 1996, compared with $735 million for the same period in 1995,
primarily due to reduced expenditures on the 777 program. Based upon
current programs and schedules, research and development expense for the
full year 1996 is projected to be in the $1.2 billion range, compared with
$1.3 billion in 1995.
Airline order activity continues to be encouraging, reflecting continued
increased growth in passenger traffic, load factors, yields and
profitability being experienced by the airline industry as a whole. The
Company recently announced planned 737 production rate changes during
1997, from 10 airplanes per month to 17 airplanes per month by the
beginning of 1998. Planned production rates will continue to be adjusted
to match customer orders.
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Program development continues on schedule for the long-range 777-200
and the stretched version 777-300. Certification and first delivery of the
long-range 777-200 are scheduled for early 1997. The 777-300 reached the
25% product definition milestone in June. Similarly, the development and
production of the 737-700, the first of the three new 737 derivative
models, is progressing on schedule, with first delivery scheduled for
October 1997.
The Company is talking with customers about developing an aircraft that is
larger and has more range than the 747-400. Because of a limited market
for aircraft of this size and range and the very substantial investment
levels that would be required to develop and produce an all-new commercial
jet transport, the only economically viable option appears to be a 747
derivative aircraft. A management team has been formed to focus on
development of potential derivatives.
Defense & Space Group milestones during the second quarter included
settlement of Peace Shield and other contract issues and the award of the
Low-Rate Initial Production (LRIP) V-22 contract to Bell-Boeing, valued at
$1.38 billion including options, by the U.S. Naval Air Systems Command.
Under the contract Bell-Boeing will build 16 aircraft, with first
deliveries to the U.S. Marine Corps planned for 1999. The Bell-Boeing
team has been under an Engineering & Manufacturing Development (EMD)
contract since 1994 to build four production-representative aircraft and
modify two Full-Scale Development (FSD) aircraft for qualification of the
design. Also in the second quarter, one non-commercial 767 was delivered,
the third of four that will be modified as 767 AWACS for the Government of
Japan.
Liquidity and Capital Resources
Cash and short-term investments increased by $1.9 billion during the first
six months of 1996. In addition to the significant positive cash flow
generated from earnings, the increase reflects the sale of customer
financing assets and the reduction of inventory levels on established
programs associated with the recovery from the 10-week labor strike in the
fourth quarter of 1995. Although further sales of customer financing
assets will occur as circumstances allow, there may also be new customer
financings related to outstanding commitments. Production rate increases
planned for all commercial aircraft programs will result in increasing
inventory levels.
The Company's financial liquidity position remains strong, with cash and
short-term investments totaling $5.6 billion at June 30, 1996, and total
long-term debt at 19% of total shareholders' equity plus debt. The
Company continues to maintain its $2.0 billion revolving credit line.
Boeing ShareValue Trust
The Company's fundamental goal with respect to growth and profitability is
now defined as increasing shareholder value over the long term. In support
of this, the Company has established a $1 billion stock investment trust
for an incentive program, called the ShareValue Program, that allows
employees to share in the results of their efforts to increase shareholder
value over the long term.
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The 12-year irrevocable trust, called the Boeing ShareValue Trust,
will hold Boeing common stock. Funding of the $1 billion trust investment,
which is based on the average price of Boeing stock on June 28, 1996, of
$88 3/8, will consist of 11,315,417 shares. The Company has contributed
approximately 3.5 million shares of treasury stock to the trust, and the
trustee will be acquiring the balance of the shares on the open market
with cash contributed by the Company.
The trust investment is divided into two overlapping periods, with an
initial $500 million fund in each period - both beginning July 1, 1996.
The program requires a minimum return on investment or threshold rate of
3% per year, compounded annually, on the fund's starting value, before
distributions will be made. Period 1 runs two years, through June 1998;
Period 2 runs four years, through June 2000. All subsequent investment
periods will be four years in length. Distributions to participants are
possible every two years, and will be in the form of Boeing stock. All
shares not distributed will be retained for subsequent investment periods.
Because all potential distributions to participants will be defined by and
limited to appreciation of shares held by the ShareValue Trust, the
program is fully self-sufficient and does not represent any future
uncertainty, risk or obligations affecting the Company's own future cash
flows.
Employees of The Boeing Company and most of its subsidiaries are eligible
to participate in the ShareValue program if they do not already
participate in an executive incentive plan. Participation by represented
employees is pending acceptance by their unions. Participation by
subsidiary employees is pending approval by their respective board of
directors or management.
Acquisition Agreement for Rockwell Aerospace and Defense Business Units
The Company announced on August 1, 1996, that Boeing and Rockwell
International Corporation have signed a definitive agreement under which
Boeing will acquire most of Rockwell's aerospace and defense business units.
Boeing will issue approximately $860 million of its common stock, assume
$2.165 billion of Rockwell debt and assume certain retiree obligations of
Rockwell. The transaction is subject to approval by Rockwell's
shareholders, consent from its debtholders, certain regulatory approvals
and other provisions generally required in similar transactions. A special
Rockwell shareholders' meeting will be held in November, and the
transaction is expected to be completed shortly thereafter.
The acquisition is expected to strengthen the strategic position of the
Company's defense and space segment, particularly with respect to space
systems and information/battle management systems.
The major product groups of the divisions to be acquired are rocket
propulsion including the Space Shuttle main engine; Space Station electric
power; Space Shuttle integration, logistics and operations; Global
Positioning System satellites; ICBM systems; tactical missiles; sensors;
B1-B bomber; commercial aerostructures; aircraft and helicopter
modifications; airborne laser and electro-optics; space defense and
advanced programs. The Rockwell aerospace and defense units currently
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have annual sales of approximately $3.2 billion, including sales to
Boeing, and approximately 21,000 employees.
Backlog
Contractual backlog of unfilled orders (which excludes purchase options
and announced orders for which definitive contracts have not been
executed, and unobligated Government contract values) was as follows
($ in billions):
June 30 March 31 Dec. 31
1996 1996 1995
------- -------- -------
Commercial aircraft $76.3 $74.6 $66.5
Defense and space 5.2 5.6 5.8
------- -------- -------
Total $81.5 $80.2 $72.3
======= ======== =======
Unobligated U.S. Government contract values not included in backlog
totaled $6.5 billion at June 30, 1996, $7.5 billion at March 31, 1996, and
$7.6 billion at December 31, 1995.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 11 to the Consolidated Financial Statements for a
discussion of the settlement of the Peace Shield termination and
claims.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: (15) Letter from independent accountants
regarding unaudited interim financial
information. Page 17.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the
quarter covered by this report.
- - - - - - -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BOEING COMPANY
-----------------------------
(Registrant)
August 9, 1996
--------------- -----------------------------
(Date) Gary W. Beil
Vice President and Controller
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EXHIBIT (15)
Letter from Independent Accountants Regarding
Unaudited Interim Financial Information
The Boeing Company and Subsidiaries
The consolidated statement of financial position as of June 30, 1996, the
consolidated statements of net earnings for the six-month periods ended
June 30, 1996 and 1995, and the statements of cash flows for the six-month
periods ended June 30, 1996 and 1995, have been reviewed by the
registrant's independent accountants, Deloitte & Touche LLP, whose letter
regarding such unaudited interim financial information follows.
August 1, 1996
The Boeing Company
Seattle, Washington
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited
interim financial information of The Boeing Company and subsidiaries for
the periods ended June 30, 1996 and 1995, as indicated in our report dated
August 1, 1996; because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is
incorporated by reference in Registration Statement No. 33-46540 on Form
S-3 and Prospectuses and in Registration Statement Nos. 2-48576, 2-93923,
33-25332, 33-31434, 33-43854, 33-58798, and 333-03191 on Form S-8.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the
Registration Statements prepared or certified by an accountant or a report
prepared or certified by an accountant within the meaning of Sections 7
and 11 of that Act.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
18
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