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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
March 31, 1998
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 April 30, 1998, there were 1,010,365,929 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 OPERATIONS
(Dollars in millions except per share data)
(Unaudited)
Three months ended
March 31
..............................................................................
1998 1997
..............................................................................
Sales and other operating revenues $12,941 $10,359
Operating costs and expenses 11,838 8,688
General and administrative expense 493 452
Research and development expense 487 479
Share-based plans 22 (98)
- ------------------------------------------------------------------------------
12,840 9,521
- ------------------------------------------------------------------------------
Earnings from operations 101 838
Other income, principally interest 85 103
Interest and debt expense (113) (131)
- ------------------------------------------------------------------------------
Earnings before income taxes 73 810
Income taxes 23 270
- ------------------------------------------------------------------------------
Net earnings $ 50 $ 540
==============================================================================
Basic earnings per share $.05 $.56
==============================================================================
Diluted earnings per share $.05 $.55
==============================================================================
Cash dividends per share $.14 $.14
==============================================================================
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)
March 31 December 31
1998 1997
..............................................................................
(Unaudited)
Assets
..............................................................................
Cash and cash equivalents $ 4,092 $ 4,420
Short-term investments 454 729
Accounts receivable 3,299 3,121
Current portion of customer and
commercial financing 212 261
Deferred income taxes 1,974 1,765
Inventories, net of advances and progress billings 9,155 8,967
- ------------------------------------------------------------------------------
Total current assets 19,186 19,263
Customer and commercial financing 4,435 4,339
Property, plant and equipment, net 8,528 8,391
Deferred income taxes 53 15
Goodwill 2,374 2,395
Prepaid pension expense 3,316 3,271
Other assets 342 350
- ------------------------------------------------------------------------------
$38,234 $38,024
==============================================================================
Liabilities and Shareholders' Equity
..............................................................................
Accounts payable and other liabilities $11,441 $11,548
Advances in excess of related costs 1,554 1,575
Income taxes payable 568 298
Short-term debt and current portion
of long-term debt 419 731
- ------------------------------------------------------------------------------
Total current liabilities 13,982 14,152
Accrued retiree health care 4,795 4,796
Long-term debt 6,430 6,123
Shareholders' equity:
Common shares, par value $5.00 -
1,200,000,000 shares authorized;
Shares issued - 1,011,793,426 and 1,000,029,538 5,059 5,000
Additional paid-in capital 1,744 1,090
Treasury shares, at cost - 323,515 and 164,667 (17) (9)
Retained earnings 8,197 8,147
Unearned compensation (16) (20)
ShareValue Trust shares -
37,737,677 and 26,385,260 (1,940) (1,255)
- ------------------------------------------------------------------------------
Total shareholders' equity 13,027 12,953
- ------------------------------------------------------------------------------
$38,234 $38,024
==============================================================================
See notes to consolidated financial statements.
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THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Three months ended
March 31
..............................................................................
1998 1997
..............................................................................
Cash flows - operating activities:
Net earnings $ 50 $ 540
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Share-based plans 22 (98)
Depreciation and amortization 408 348
Changes in assets and liabilities -
Short-term investments 275 (89)
Accounts receivable (178) (413)
Inventories, net of advances and progress billings (188) (408)
Accounts payable and other liabilities 40 324
Advances in excess of related costs (21) 168
Income taxes payable and deferred 23 373
Other assets (42) (391)
Accrued retiree health care (1) 3
- ------------------------------------------------------------------------------
Net cash provided by operating activities 388 357
- ------------------------------------------------------------------------------
Cash flows - investing activities:
Customer and commercial financing - additions (349) (93)
Customer and commercial financing - reductions 273 71
Property, plant and equipment, net additions (490) (351)
Other 21
- ------------------------------------------------------------------------------
Net cash used by investing activities (566) (352)
- ------------------------------------------------------------------------------
Cash flows - financing activities:
New borrowings 384 64
Debt repayments (389) (132)
Common shares purchased (33) (73)
Stock options exercised, other 30 41
Dividends paid (142) (126)
- ------------------------------------------------------------------------------
Net cash used by financing activities (150) (226)
- ------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (328) (221)
Cash and cash equivalents at beginning of year 4,420 5,469
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of first quarter $4,092 $5,248
==============================================================================
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 Interim 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 March 31,
1998, are not necessarily indicative of the operating results for the full
year. The interim financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in
the Company's 1997 Annual Report. Certain reclassifications have been made
to prior periods to conform with current reporting.
Note 2 - Recognition of Additional Forward Loss for the Next-Generation 737
Program
During the first quarter of 1998, the Company recognized a forward loss
pretax charge of $350 attributable to the Next-Generation 737 program. This
charge represents an increase to the forward loss charge of $700 recognized
by the Company in the third quarter of 1997. The cumulative forward loss of
$1,050 represents the amount by which the estimated production costs exceed
the estimated revenue for the first 400 units of the program. The
additional forward loss resulted principally from additional retrofit
activity costs attributable to flight test and certification requirements,
as well as the costs of increased resources to reduce out-of-sequence work
and process flow risks. As of March 31, 1998, the Company had delivered 15
Next-Generation 737 airplanes.
Note 3 - Earnings per Share
The weighted average number of shares outstanding (in millions) used to
compute basic earnings per share were 973.6 and 967.6 for the three-month
periods ended March 31, 1998 and 1997, and for computing diluted earnings
per share were 985.1 and 983.3 for the same respective three-month periods.
Basic earnings per share are calculated based on the weighted average number
of shares outstanding, excluding the outstanding shares held by the
ShareValue Trust. Diluted earnings per share are calculated based on the
same number of shares plus additional shares representing stock
distributable under share-based plans computed using the treasury stock
method.
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Note 4 - Income Taxes
The effective income tax provision rate of 31.5% for the first three months
of 1998 is lower than the statutory federal rate principally due to Foreign
Sales Corporation tax benefits. Partially offsetting this reduction are
state income taxes and non-deductible goodwill. Net income tax refunds were
$2 and $122 for the three months ended March 31, 1998 and 1997.
Note 5 - Accounts Receivable
Accounts receivable consisted of the following:
March 31 December 31
1998 1997
..............................................................................
U.S. Government contracts $ 2,313 $ 2,053
Other 986 1,068
- ------------------------------------------------------------------------------
$ 3,299 $ 3,121
==============================================================================
Note 6 - Inventories
Inventories consisted of the following:
March 31 December 31
1998 1997
..............................................................................
Commercial aircraft programs and
long-term contracts in progress $ 27,052 $ 26,566
Commercial spare parts, general stock
materials and other 1,836 1,869
- ------------------------------------------------------------------------------
28,888 28,435
Less advances and progress billings (19,733) (19,468)
- ------------------------------------------------------------------------------
$ 9,155 $ 8,967
==============================================================================
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Note 7 - Customer and Commercial Financing
Customer and commercial financing consisted of the following:
March 31 December 31
1998 1997
..............................................................................
Aircraft financing
Notes receivable $ 712 $ 651
Investment in sales-type/financing leases 1,641 1,646
Operating lease equipment, at cost,
less accumulated depreciation
of $250 and $254 1,293 1,289
Commercial equipment financing
Notes receivable 367 313
Investment in sales-type/financing leases 398 407
Operating lease equipment, at cost,
less accumulated depreciation
of $84 and $96 446 502
- ------------------------------------------------------------------------------
Less valuation allowance (210) (208)
- ------------------------------------------------------------------------------
$ 4,647 $ 4,600
==============================================================================
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.
Note 8 - Accounts Payable and Other Liabilities
Accounts payable and other liabilities consisted of the following:
March 31 December 31
1998 1997
..............................................................................
Accounts payable $ 5,734 $ 5,609
Accrued compensation and employee benefit costs 2,551 2,154
Lease and other deposits 511 819
Other 2,645 2,966
- ------------------------------------------------------------------------------
$ 11,441 $ 11,548
==============================================================================
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Note 9 - Debt
Short- and long-term debt consisted of the following:
March 31 December 31
1998 1997
..............................................................................
Unsecured debentures and notes:
7 5/8% due Feb. 17, 1998 $ - $ 301
8 7/8% due Sep. 15, 1999 309 311
8.25% due Jul. 1, 2000 200 200
8 3/8% due Feb. 15, 2001 181 182
9.25% due Apr. 1, 2002 120 120
6 3/4% due Sep. 15, 2002 297 297
6.35% due Jun. 15, 2003 299 299
7 7/8% due Feb. 15, 2005 209 209
6 5/8% due Jun. 1, 2005 291 291
6.875% due Nov. 1, 2006 248 248
8 1/10% due Nov. 15, 2006 175 175
9.75% due Apr. 1, 2012 348 348
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
6 5/8% due Feb. 15, 2038 297
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
Senior debt securities,
5.0% - 9.4%, due through 2011 101 148
Senior medium-term notes,
5.5% - 13.6%, due through 2017 1,189 1,129
Subordinated medium-term notes,
6.1% - 9.4%, due through 2004 70 70
Capital lease obligations due through 2008 488 500
Other notes 263 262
- ------------------------------------------------------------------------------
$ 6,849 $ 6,854
==============================================================================
The Company has $3,000 currently available under credit line agreements with
a group of commercial banks. The Company has complied with the restrictive
covenants contained in various debt agreements. In addition, Boeing Capital
Corporation, a corporation wholly owned by the Company, has $240 available,
but unused, under a credit line agreement with a group of commercial banks.
Total debt interest, including amounts capitalized, was $130 and $144 for
the three-month periods ended March 31, 1998 and 1997, and interest payments
were $149 and $161, respectively.
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Note 10 - Shareholders' Equity
Changes in shareholders' equity for the three-month periods ended March 31,
1998 and 1997, consisted of the following:
(Shares in thousands)
..............................................................................
1998 1997
Shares Amount Shares Amount
..............................................................................
Common Stock
Beginning balance - January 1 1,000,030 $ 5,000 993,348 $ 4,967
Shares issued for the ShareValue Trust 11,253 56
Shares issued for incentive stock plans 510 3 1,148 5
- ------------------------------------------------------------------------------
Ending balance - March 31 1,011,793 $ 5,059 994,496 $ 4,972
==============================================================================
Additional paid-in capital
Beginning balance - January 1 $ 1,090 $ 920
Share-based compensation 22
Treasury shares issued for incentive
stock plans, net (9) (14)
Shares issued for incentive plans 28
Tax benefit related to incentive stock plans 7 12
Stock appreciation rights expired or surrendered 5 2
Shares issued for the ShareValue Trust 494
ShareValue Trust market value adjustment 135 (100)
- ------------------------------------------------------------------------------
Ending balance - March 31 $ 1,744 $ 848
==============================================================================
Treasury stock
Beginning balance - January 1 165 $ (9) 30 $ (1)
Treasury shares issued for incentive
stock plans, net (497) 25 (796) 42
Treasury shares acquired 656 (33) 1,400 (74)
Shares transferred from ShareValue Trust 6
- ------------------------------------------------------------------------------
Ending balance - March 31 324 $ (17) 640 $ (33)
==============================================================================
Retained earnings
Beginning balance - January 1 $ 8,147 $ 8,896
Net earnings 50 540
Cash dividends declared (24)
- ------------------------------------------------------------------------------
Ending balance - March 31 $ 8,197 $ 9,412
==============================================================================
Unearned compensation
Beginning balance - January 1 $ (20) $ (22)
New issuances (29)
Forfeitures 3
Amortization 1 6
- ------------------------------------------------------------------------------
Ending balance - March 31 $ (16) $ (45)
==============================================================================
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Note 10 - Shareholders' Equity (continued)
Changes in shareholders' equity for the three-month periods ended March 31,
1998 and 1997, consisted of the following:
(Shares in thousands)
..............................................................................
1998 1997
Shares Amount Shares Amount
..............................................................................
ShareValue Trust
Beginning balance - January 1 26,385 $(1,255) 26,120 $(1,258)
Shares transferred to treasury stock (6)
Shares acquired from dividend reinvestment 100 70
Shares issued from common stock 11,253 (550)
Market value adjustment (135) 100
Accrual of distributable appreciation (98)
- ------------------------------------------------------------------------------
Ending balance - March 31 37,738 $(1,940) 26,184 $(1,256)
==============================================================================
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", is required to be implemented in financial statements issued for
periods ending after December 15, 1997. For the quarters ended March 31,
1998 and 1997, the Company did not incur items to be reported in
'comprehensive income' that were not already included in the reported 'net
earnings.' As a result, comprehensive income and net earnings were the same
for these periods.
Note 11 - Share-Based Compensation
Beginning in the first quarter of 1998, the Company adopted the expense
recognition provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation." The adoption of SFAS
No. 123 will principally affect the accounting for Performance Share awards,
the ShareValue Trust plan, and stock options. Although the Company did not
grant stock options during the first quarter of 1998, future stock option
awards that are issued will result in an expense recognition based upon the
fair value under an appropriate option pricing model.
On February 23, 1998, the Company awarded approximately 3.9 million
Performance Shares to executive management. Performance Shares are
convertible to common stock at the time the stock price reaches and
maintains, for 20 consecutive days, certain threshold levels. These
threshold levels represent predetermined compound five-year growth rates
relative to the stock price on the date of the award. In accordance with
SFAS No. 123, the Company will recognize the associated expense over the
five-year award period.
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In July 1996, the Company established a self-sustaining, irrevocable 12-year
trust, the ShareValue Trust, designed to allow substantially all employees
to share in the results of increasing shareholder value over the long term.
In February 1998, the Company increased the term of the Trust from 12 years
to 14 years. The ShareValue Trust holds Boeing common stock, receives
dividends, and distributes to employees appreciation in value above a 3% per
annum threshold rate of return. The expense recognition method for the
ShareValue Trust plan under SFAS No. 123 is based upon the fair value of the
total expected distributions, determined by applying an option pricing
model. The fair value of the expected distributions under the option
pricing model is recognized over the life of the plan. As of March 31,
1998, the total increased value of the Trust exceeded the thresholds by
$114.
Note 12 - 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.
On January 7, 1991, the U.S. Navy notified the Company and General Dynamics
Corporation (the Team) that it was terminating for default the Team's
contract for development and initial production of the A-12 aircraft. The
Team filed a legal action to contest the Navy's default termination, to
assert its rights to convert the termination to one for "the convenience of
the Government," and to obtain payment for work done and costs incurred on
the A-12 contract but not paid to date. At March 31, 1998, inventories
included approximately $581 of recorded costs on the A-12 contract, against
which the Company has established a loss provision of $350. The amount of
the provision, which was established in 1990, was based on the Company's
belief, supported by an opinion of outside counsel, that the termination for
default would be converted to a termination for convenience, that the Team
would establish a claim for contract adjustments for a minimum of $250, that
there was a range of reasonably possible results on termination for
convenience, and that it was prudent to provide for what the Company then
believed was the upper range of possible loss on termination for
convenience, which was $350.
On December 19, 1995, the U.S. Court of Federal Claims ordered that the
Government's termination of the A-12 contract for default be converted to a
termination for convenience of the Government. On December 13, 1996, the
Court issued an opinion confirming its prior no-loss adjustment and no-
profit recovery order. On December 5, 1997, the Court issued an opinion
confirming its preliminary holding that plaintiffs were entitled to certain
adjustments to the contract funding, increasing the plaintiffs' possible
recovery to $1,200. On March 31, 1998, the Court entered a judgment,
pursuant to a March 30 opinion and order, determining that plaintiffs were
entitled to be paid that amount, plus statutory interest from June 26, 1991,
until paid.
Although the Government has appealed the resulting judgment, the Company
believes the judgment will be sustained. Final resolution of the A-12
litigation will depend on such appeals and possible further litigation, or
negotiations, with the Government. If sustained, however, the expected
damages judgment, including interest, could result in pretax income that
would more than offset the loss provision established in 1990.
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On October 31, 1997, a federal securities lawsuit was filed against the
Company in the U.S. District Court for the Western District of Washington,
in Seattle. The lawsuit names as defendants the Company and three of its
executive officers. Additional lawsuits of a similar nature have been filed
in the same court. These lawsuits were consolidated on February 24, 1998.
The plaintiffs seek to represent a class of purchasers of Boeing stock
between July 21, 1997, and October 22, 1997, (the "Class Period"), including
recipients of Boeing stock in the McDonnell Douglas merger. July 21, 1997,
was the date on which the Company announced its second quarter results, and
October 22, 1997, was the date on which the Company announced charges to
earnings associated with production problems being experienced on commercial
aircraft programs. The lawsuits generally allege that the defendants
desired to keep the Company's share price as high as possible in order to
ensure that the McDonnell Douglas shareholders would approve the merger and,
in the case of two of the individual defendants, to benefit directly from
the sale of Boeing stock during the Class Period. The plaintiffs seek
compensatory damages and treble damages. The Company believes that the
allegations are without merit and that the outcome of these lawsuits will
not have a material adverse effect on its earnings, cash flow or financial
position.
Note 13 - Business Segment Data
Segment information for revenues, earnings, and research and development
consisted of the following:
March 31 March 31
For three-months ended 1998 1997
..............................................................................
Revenues:
Commercial Aircraft $ 7,966 $ 5,882
Information, Space and Defense Systems 4,772 4,320
Customer and Commercial Financing, Other 203 157
- ------------------------------------------------------------------------------
Operating revenues $ 12,941 $ 10,359
==============================================================================
Net earnings:
Commercial Aircraft $ (251) $ 309
Information, Space and Defense Systems 296 365
Customer and Commercial Financing, Other 126 94
Unallocated expense (48) (28)
Share-based plans (22) 98
- ------------------------------------------------------------------------------
Earnings from operations 101 838
Other income principally interest 85 103
Interest and debt expense (113) (131)
- ------------------------------------------------------------------------------
Earnings before taxes 73 810
Income taxes (23) (270)
- ------------------------------------------------------------------------------
Net earnings $ 50 $ 540
==============================================================================
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Note 13 - Business Segment Data (continued)
Segment information for revenues, earnings, and research and development
consisted of the following:
March 31 March 31
For three-months ended 1998 1997
..............................................................................
Research and development:
Commercial Aircraft $ 283 $ 336
Information, Space and Defense Systems 204 143
- ------------------------------------------------------------------------------
Total research and development expense $ 487 $ 479
==============================================================================
Unallocated expense includes goodwill amortization, capitalized interest
amortization, certain unallocated actuarial costs, and corporate costs not
allocated to other internal reporting entities.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenue
- -------
Sales of $12.9 billion for the first three months of 1998 were 25% higher
than sales for the comparable period of 1997. A total of 108 commercial jet
aircraft were delivered, compared with 77 in the first three months of 1997.
Approximately 550 commercial aircraft deliveries, including 225 of the
newer-model 737s and 777s, are currently projected for the full year 1998,
compared with 374 in 1997. Total sales for 1998 are projected to be in the
$55 billion range, compared with $45.8 billion in 1997.
Commercial jet aircraft deliveries were as follows:
First Three Months
------------------
Model 1998 1997
----- ---- ----
737 34 25
737 Next Generation 12
747 12 10
757 11 12
767 10 11 *
777 20 10
MD-80 2
MD-90 4 7 (2)
MD-11 3 (1) 2
---- ----
Total 108 77
==== ====
Commercial jet aircraft deliveries included deliveries under operating lease
which are identified by parentheses in the above table. Aircraft which are
accounted for as operating leases have minimal revenue recorded at the time
of delivery.
* Excludes one non-commercial 767 delivered to be modified as a 767 AWACS for
the Government of Japan.
==============================================================================
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
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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
conditions; 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.
==============================================================================
Information, Space and Defense Systems deliveries included the following:
First Three Months
------------------
1998 1997
---- ----
C-17 2 2
F-15 7 2
F-18 C/D 10 11
F-18 C/D Kits - 3
T-45TS 4 -
767 AWACS 2 -
Delta II 4 2
Earnings
- --------
Net earnings of $50 million for the first quarter of 1998 included a $350
million pretax forward loss ($219 million after-tax) on the
Next-Generation 737 program. Comparable net earnings for the same period of
1997 were $540 million. Excluding a credit associated with the Company's
ShareValue Trust, 1997 first quarter earnings were $476 million.
Research and development expense totaled $487 million for the quarter,
compared with $479 million for the same period of 1997. Commercial Aircraft
research and development expense for first quarter 1998 was lower than for
first quarter 1997, principally due to reduced spending on the Next-
Generation 737 models. Development continues on the 757-300, a stretched
derivative of the 757-200, which is scheduled to be delivered in early 1999;
the 767-400ER, a stretched version of the 767-300ER, which is scheduled to
be delivered in the year 2000; and the increased-capacity version 777-300,
with certification and first delivery scheduled for mid-1998. The 717-200
program (formerly the MD-95) continues in development, with flight test
scheduled to begin later this year and first delivery planned for mid-1999.
The Information, Space and Defense Systems segment had a higher level of
development expense on commercial space and communication activities,
including the Delta family of launch vehicles and other business
opportunities, compared with the 1997 first quarter.
Based on current programs and schedules, research and development expense
for the full year 1998 is projected to be in the $2.0 billion range,
compared with $1.9 billion in 1997.
The income tax provision for first quarter 1998 of 31.5% is lower than the
33.3% for the same period in 1997 due principally to an increase in Foreign
Sales Corporation tax benefits in 1998.
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Operating Profit
- ----------------
Commercial Aircraft Programs
The higher sales for the first quarter of 1998 were principally due to the
increased level of commercial aircraft deliveries. A total of 108
commercial jet aircraft were delivered, compared with 77 in the first
quarter of 1997. Although commercial aircraft deliveries and sales were
higher, the overall profit margin for the commercial aircraft segment was
significantly impacted by the model mix of deliveries, production
inefficiencies associated with the rapid increase in the commercial aircraft
production rates, continued pricing pressures and lower price-escalation
trends. With regard to model mix, most of the sales increase was
attributable to the new 777 and Next-Generation 737 programs. New
commercial aircraft programs have lower operating profit margins due to
higher unit production costs in the early years of a program. Additionally,
because of the production inefficiencies currently being experienced, the
Next-Generation 737 program is in a loss position for the initial program
quantity of 400 units. A forward loss of $700 million pretax was recognized
in 1997 for the Next-Generation 737 program.
Several factors contributed to the additional loss recognized for the Next-
Generation 737 program in 1998. Changes to the aircraft resulting from
flight test and certification requirements in the first quarter caused the
retrofit activity to be more extensive than originally anticipated. The
incorporation of these changes in all Next-Generation 737 production
aircraft requires more resources and overtime as the Next-Generation 737
production rate increases. In addition, changes in the projected mix of the
models offered, coupled with a lower price-escalation trend, reduced revenue
estimates for the first 400 units.
Performance to the production recovery plan for the Next-Generation 737
program during upcoming rate increases will determine whether further
charges are necessary. The production rate is increasing in the second
quarter of 1998 from seven aircraft per month to 14 per month and will
increase to 21 per month late in 1998. Cost and schedule performance on
other commercial aircraft models continues to be close to recovery plans,
although the lower price-escalation trend also affects the Company's
forecast of revenues for all commercial aircraft programs.
The Company continues to closely monitor the economic situation in Asia,
which has the potential to impact future deliveries, particularly widebody
models. Production will continue to be adjusted to reflect customer
requirements and the Company's capabilities.
The overall Commercial Aircraft segment operating profit margin, exclusive
of research and development expense and the additional Next-Generation 737
forward loss, was 4.8% for the first three months of 1998, compared with 11.0%
for the same period in 1997. The lower margin was attributable to the
production inefficiencies associated with the rapid increase in production
rates, the model mix of aircraft deliveries that included 10 more 777s and
12 Next-Generation 737s in first quarter 1998 than during the same period in
1997, and continued pricing pressure. Margins for the balance of 1998 will
continue to reflect the relatively high percentage of 777 and Next-
Generation 737 deliveries and previously announced production
inefficiencies, continued pricing pressures, and lower price-escalation
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trends. The Next-Generation 737 program is in a forward loss condition, and
there will be no gross profit for this program until the program-commitment
accounting quantity is extended beyond the initial 400 units. The timing of
extending the program-commitment accounting quantity will depend on the
successful execution of production recovery plans and production rate
increases in 1998.
First flight and commencement of the certification process for the 717
aircraft (formally known as the MD-95), a short-haul, high-frequency 100-
seat aircraft, will begin later this year. Although market acceptance and
certification issues will be important factors to the success of the 717
program, supplier-partner performance represents a substantial risk to the
financial performance of the program.
Information, Space and Defense Systems (ISDS) Programs
Sales in the first quarter of 1998 were 10.5% higher than the same quarter
of 1997, principally due to the timing of military aircraft deliveries and
the addition of two deliveries of the Company's Delta II launch vehicle.
Total ISDS sales for the year are expected to be slightly higher than 1997.
Operating margins declined from 8.4% to 6.2%, principally due to increased
research and development expense associated with commercial space and
communication activities and joint venture development costs for the Sea
Launch and the Bell Boeing 609 Civil Tiltrotor programs.
Information, Space and Defense Systems operating revenues for the first
quarter of 1998 were $4.8 billion, an increase of $.5 billion compared with
the same period in 1997. The segment consists of four business units,
McDonnell Aircraft and Missile Systems, Space Transportation, Information
and Communications Systems, and Phantom Works, with first quarter operating
revenues of 60%, 19%, 19% and 2%, respectively, of total segment revenues.
The overall Information, Space and Defense Systems segment operating profit
margin, exclusive of research and development expense and joint venture
development costs expensed as incurred ($58 million in 1998, compared with
$17 million in 1997), was 11.7% in first quarter 1998, compared with 12.2%
for the same period in 1997. Joint venture development costs are primarily
associated with the Sea Launch and Civil Tiltrotor programs.
The Company has announced its intention to sell its single-engine commercial
helicopter business to Bell Helicopter Textron, subject to regulatory
approval. The proposed sale to Bell follows a strategic decision to exit
the market for commercial helicopters. As part of that strategy, the
Company is transferring its interest in the Bell Boeing 609 Civil Tiltrotor
to Bell and has assumed a subcontractor role in the development program.
Facilities Consolidation
- ------------------------
The Company recently announced a plan to streamline facilities, focus
manufacturing and assembly operations, and eliminate redundant laboratories.
By the end of the year 2000, these phased actions, along with other business
initiatives, are expected to result in a reduction of approximately 18
million square feet, more than 15% of current utilization. The
restructuring costs of the announced consolidation, principally in the
17
<PAGE> 18
Information, Space and Defense Systems segment, will result in substantial
net savings that will largely accrue to the U.S. Government customer on
future contracts and will help the Company remain competitive for new
business opportunities. These decisions will not require the Company to
take a one-time special charge.
Liquidity and Capital Resources
- -------------------------------
The Company's financial liquidity position remains strong, with cash and
short-term investments totaling $4.5 billion at March 31, 1998, and total
long-term debt at 34% of total shareholders' equity plus debt. The Company
continues to maintain its $3.0 billion revolving credit line.
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 funding) was as follows (dollars in
billions):
March 31 Dec. 31
1998 1997
-------- -------
Commercial Aircraft $ 92.4 $ 93.8
Information, Space and Defense Systems 28.5 27.8
------ ------
Total $120.9 $121.6
====== ======
Unobligated U.S. Government contract funding not included in backlog totaled
$23.4 billion at March 31, 1998, and $26.1 billion at December 31, 1997.
Accounting for Share-Based Plans
- --------------------------------
Beginning in the first quarter of 1998, the Company adopted the expense
recognition provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation." The adoption of SFAS
No. 123 will principally affect the accounting for Performance Share awards,
the ShareValue Trust plan, and stock options. Although the Company did not
grant stock options during the first quarter of 1998, future stock option
awards that are issued will result in an expense recognition based upon the
fair value under an appropriate option pricing model.
On February 23, 1998, the Company awarded approximately 3.9 million
Performance Shares to executive management. Performance Shares are
convertible to common stock at the time the stock price reaches and
maintains, for 20 consecutive days, certain threshold levels. These
threshold levels represent predetermined compound five-year growth rates
relative to the stock price on the date of the award. In accordance with
SFAS No. 123, the Company will recognize the associated expense over the
five-year award period.
18
<PAGE> 19
The ShareValue Trust is a 14-year irrevocable trust that holds Boeing common
stock, receives dividends, and distributes to employees appreciation in
value above a 3% per annum threshold rate of return. The expense
recognition method for the ShareValue Trust plan under SFAS No. 123 is based
upon the fair value of the total expected distributions, determined by
applying an option pricing model. The fair value of the expected
distributions under the option pricing model is recognized over the life of
the plan.
The various share-based plans are expected to result in a combined pretax
expense of approximately $150 million for 1998. The level of share-based
plans expense will increase in subsequent years as additional grants are
made. Although expense is recognized, these plans will not impact future
cash flow except for the associated tax implications.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has financial instruments that are subject to interest rate
risk, principally short-term investments, fixed-rate notes receivable
attributable to customer financing, and debt obligations issued at a fixed
rate. Historically, the Company has not experienced material gains or
losses due to interest rate changes when selling short-term investments or
fixed-rate notes receivable. Additionally, the Company uses interest rate
swaps to manage exposure to interest rate changes. Based on the current
holdings of short-term investments and fixed-rate notes, as well as underlying
swaps, the exposure to interest rate risk is not considered to be material.
Fixed-rate debt obligations issued by the Company are generally not callable
until maturity.
The Company is subject to foreign currency exchange rate risk relating to
receipts from customers and payments to suppliers in foreign currencies. As
a general policy, the Company substantially hedges foreign currency
commitments of future payments and receipts by purchasing foreign currency-
forward contracts. As of March 31, 1998, the notional value of such
derivatives was $503 million, with a net unrealized gain of $10 million.
Less than one percent of receipts and expenditures are contracted in foreign
currencies, and the Company does not consider the market risk exposure
relating to currency exchange to be material.
-----
REVIEW BY INDEPENDENT ACCOUNTANTS
The consolidated statement of financial position as of March 31, 1998, the
consolidated statements of operations for the three-month periods ended
March 31, 1998 and 1997, and the consolidated statements of cash flows for
the three-month periods ended March 31, 1998 and 1997, have been reviewed by
the registrant's independent accountants, Deloitte & Touche LLP, whose
report covering their review of the financial statements follows.
Deloitte & Touche LLP was furnished the report of other independent
accountants concerning the review of the interim financial information of
McDonnell Douglas Corporation for the three-month period ended March 31,
1997. This independent accountants' review report also follows.
19
<PAGE> 20
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 (the "Company") as of March
31, 1998, and the related consolidated statements of operations and cash
flows for the three-month periods ended March 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management.
The accompanying 1997 consolidated financial statements give retroactive
effect to the merger of the Company and McDonnell Douglas Corporation
(McDonnell Douglas), which has been accounted for as a pooling of interests.
We were furnished with the report of other accountants on their review of
the interim financial information of McDonnell Douglas for the three-month
period ended March 31, 1997; total McDonnell Douglas revenues constituted
31% of consolidated total revenues for such period.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review and the reports of other accountants, 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, 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows
for the year then ended (not presented herein); and in our report dated
January 27, 1998, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated statements of financial position as of December
31, 1997, 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
April 22, 1998
20
<PAGE> 21
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Shareholders and Board of Directors
McDonnell Douglas Corporation
We have reviewed the condensed consolidated balance sheet of McDonnnell
Douglas Corporation and consolidated subsidiaries (MDC) as of March 31, 1997,
and the related condensed consolidated statements of earnings and cash flows
for the three-month periods ended March 31, 1997 and 1996 (not presented
herein). These financial statements are the responsibility of MDC's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and 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, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of MDC as of December 31, 1996, and
the related consolidated statement of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein), and in
our report dated January 22, 1997, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the
information set forth in the condensed consolidated balance sheet as of
December 31, 1996, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
April 16, 1997
/s/ Ernst & Young LLP
Ernst & Young LLP
St. Louis, Missouri
21
<PAGE> 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 12 to the Consolidated Financial Statements for a
discussion of the A-12 termination and a federal securities lawsuit
filed against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on
April 27, 1998.
(b) At the Annual Meeting, in an uncontested election, four
nominees of the Board of Directors were elected directors for
three-year terms expiring on the date of the annual meeting in
2001. The votes were as follows (in thousands):
For Withheld
-------- ----------
John H. Biggs 763,927 13,546
John E. Bryson 759,826 17,647
Charles M. Pigott 759,516 17,958
Rozanne L. Ridgway 759,039 18,434
The terms of the following directors continued after the annual
meeting:
Philip M. Condit Paul E. Gray Donald E. Petersen
Kenneth M. Duberstein John F. McDonnell Harry C. Stonecipher
John B. Fery William J. Perry George H. Weyerhaeuser
(c) A management proposal to amend The Boeing Company 1997
Incentive Stock Plan for Employees was approved. A
shareholder proposal to commission a subcommittee of the Board
of Directors to develop criteria for the bidding, acceptance,
and implementation of military contracts was defeated. A
shareholder proposal to request the Board adopt human rights
criteria for its business operations in or with the People's
Republic of China was defeated. A shareholder proposal
requesting annual election of the entire Board of Directors
was defeated. A shareholder proposal requesting cumulative
voting in the election of directors was defeated. A
shareholder proposal requesting creation of the position of
independent lead director was defeated. A shareholder
proposal recommending that the Company obtain shareholder
approval of political contributions in excess of $10,000
annually to a political party and publish in its annual report
22
<PAGE> 23
all political contributions for the past year was defeated. A
shareholder proposal requesting the Board of Directors hire an
investment banker to explore the sale of Douglas Products
Division was defeated. The votes on these proposals were as
follows (in thousands):
For Against Abstentions Nonvotes
---- ------- ----------- --------
1997 Incentive Stock Plan 719,672 47,330 10,471 N/A
Military sales criteria 43,173 498,946 40,397 194,958
People's Republic of China 68,773 463,011 52,683 193,006
Directors' annual election 240,481 332,748 11,233 193,012
Cumulative voting for directors 154,590 408,961 20,917 193,005
Independent lead director 138,659 414,904 30,904 193,005
Political contributions 52,874 503,599 27,995 193,006
Sale of Douglas Products 30,016 540,983 13,438 193,036
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts.
Management Contracts and Compensatory Plans.
(i) Supplemental Benefit Plan for Employees of The
Boeing Company, as amended February 22, 1998. Filed
herewith.
(ii) Deferred Compensation Plan for Employees of The
Boeing Company, as amended February 23, 1998. Filed
herewith.
(iii)1997 Incentive Stock Plan for Employees, as amended
April 27, 1998. Filed herewith.
(15) Letters from independent accountants regarding unaudited
interim financial information. Page 25.
(27) Financial Data Schedule for the three-month period ending
March 31, 1998. Filed herewith.
(27.1) Financial Data Schedules, as restated for the
following periods (filed herewith):
For the twelve-month period ending December 31, 1995
For the three-month period ending March 31, 1996
For the six-month period ending June 30, 1996
For the nine-month period ending September 30, 1996
For the twelve-month period ending December 31, 1996
For the three-month period ending March 31, 1997
For the six-month period ending June 30, 1997
(b) Reports on Form 8-K
Three reports on Form 8-K were filed to report, under Item 5,
events of January 21 and January 27, 1998; January 30, 1998; and
March 20, March 24, April 6, and April 10, 1998.
23
<PAGE> 24
- - - - - - -
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)
May 12, 1998 /s/ Gary W. Beil
---------------- ----------------------------
(Date) Gary W. Beil
Vice President and Controller
24
<PAGE> 25
EXHIBIT (15)
Letter from Independent Accountants Regarding
Unaudited Interim Financial Information
The Boeing Company and Subsidiaries
The consolidated statement of financial position as of March 31, 1998, the
consolidated statements of operations for the three-month periods ended
March 31, 1998 and 1997, and the statements of cash flows for the three-
month periods ended March 31, 1998 and 1997, have been reviewed by the
registrant's independent accountants, Deloitte & Touche LLP, whose letter
regarding such unaudited interim financial information follows.
Deloitte & Touche LLP was furnished the report of other independent
accountants regarding such unaudited interim financial information of McDonnell
Douglas Corporation for the three-month period ended March 31, 1997. This
independent accountants' report also follows.
May 11, 1998
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 (the "Company")
for the three-month periods ended March 31, 1998 and 1997, as indicated in
our report dated April 22, 1998; because we did not perform an audit, we
expressed no opinion on that information. The 1997 information gives
retroactive effect to the 1997 merger of the Company and McDonnell Douglas
Corporation ("McDonnell Douglas"), which has been accounted for as a pooling
of interests. We were furnished with the reports of other accountants on
their review of the interim financial statements of McDonnell Douglas for
the three-month period ended March 31, 1997.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, is
incorporated by reference in Registration Statement Nos. 2-48576, 33-25332,
33-31434, 33-43854, 33-58798, 333-03191, 333-16363, 333-26867, 333-32461,
333-32499, 333-32491, and 333-32567 of The Boeing Company 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
25
<PAGE> 26
May 8, 1998
Board of Directors and Shareholders
The Boeing Company
Seattle, Washington
We are aware of the inclusion in the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 of The Boeing Company, which is incorporated by
reference in Registration Statement Nos. 2-48576, 33-25332, 33-31434, 33-43854,
33-58798, 333-03191, 333-16363, 333-26867, 333-32461, 333-32499, 333-32491, and
333-32567 of The Boeing Company on Form S-8, of our report dated April 16, 1997
related to the condensed consolidated financial statements of McDonnell Douglas
Corporation and consolidated subsidiaries, not separately presented herein, for
the quarter ended March 31, 1997.
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
statement prepared or certified by accountants within the meaning of Sections 7
or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
Ernst & Young LLP
St. Louis, Missouri
26
<PAGE> 27
Exhibit (10) (i)
SUPPLEMENTAL BENEFIT PLAN
FOR EMPLOYEES OF
THE BOEING COMPANY
(As Amended and Restated on February 22 1998)
Section 1. Purpose of the Plan.
The Supplemental Benefit Plan for Employees of The Boeing Company (the Plan)
was established effective January 1, 1978 by The Boeing Company (the Company).
The purpose of the Plan is to supplement the benefits of certain employees
under the Company's Employee Retirement Plan, Voluntary Investment Plan and
Financial Security Plan to the extent that such benefits are reduced by the
limitations on benefits and contributions imposed by Section 415 of the
Internal Revenue Code of 1986 (the Code). For the period January 1, 1987
through May 31, 1987, the purpose of the Plan shall also be to supplement the
limitation on Elective Deferrals imposed by Section 402(g)(1) of the Code, to
the extent such deferrals for certain employees are required to be reduced.
Effective January 1, 1989, the purpose of the Plan shall be expanded to also
supplement the benefits of certain employees to the extent such benefits are
curtailed because their Compensation exceeds the annual compensation limit
permitted under Section 401(a)(17) of the Code. It is intended that the Plan
shall be an Excess Benefit Plan as defined in Section 3(36) of the Employee
Retirement Income Security Act of 1974 (ERISA) to the extent benefits are paid
in excess of the limits imposed by Section 415 of the Code, and to the extent
any part of the Plan is not an Excess Benefit Plan, it is intended that the
Plan be maintained primarily for the purpose of providing deferred compensation
to a select group of management or highly compensated employees under Sections
201(2), 301(a)(3), and 401(a)(1) of ERISA.
Section 2. Eligibility and Participation.
Participation and eligibility shall be limited to those Executive Payroll
(formerly known as 90-Series) employees of the Company, or an affiliate or
subsidiary, who are participants in the Company's Employee Retirement Plan,
Voluntary Investment Plan or Financial Security Plan and whose benefits
thereunder are affected by the limitations on benefits or contributions imposed
by Section 415 and 401(a)(17) of the Code. Such persons shall be referred to
as Participants.
In addition, those employees of the Company, or an affiliate or subsidiary, who
are participants in the Company's Employee Retirement Plan, Voluntary
Investment Plan or Financial Security Plan and whose benefits thereunder are
affected by the limitations on benefits or contributions imposed by Section 415
of the Code, shall be Participants in this Plan effective on or after January
1, 1997 if they earn annual base compensation of at least $90,000 or, if
greater, the dollar amount set forth in Section 414(q)(1)(B) of the Code as
adjusted by the Secretary of the Treasury. Annual base compensation for this
purpose means the employee's Basic Annual Compensation Rate determined under
the Company's Employee Retirement Plan. Such Participants shall be eligible
only for the benefits determined under Section 3 calculated with respect to the
limits under Section 415 of the Code.
Section 3. Plan Benefits.
Except as provided in Section 2, each Participant shall be entitled to
benefits under this Plan as follows:
27
<PAGE> 28
(a) Employee Retirement Plan. With respect to the Employee Retirement Plan,
the benefits under this Plan shall be the difference between the actual
benefits of a Participant under the Employee Retirement Plan and the
benefits that would have been payable under that plan except for the
limitations on benefits imposed by Sections 415 and 401(a)(17) of the
Code. The benefits payable under this Plan with respect to the Employee
Retirement Plan shall be payable to the Participant or to any other
person who is receiving or entitled to receive benefits with respect to
the Participant under the Employee Retirement Plan, and shall be paid in
the same form, at the same times and for the same period as benefits are
paid with respect to the Participant under the Employee Retirement Plan.
Notwithstanding the foregoing, if the Actuarial Equivalent of the benefit
payable under this Plan with respect to the Employee Retirement Plan is
$10,000 or less, the Actuarial Equivalent value of the benefit shall be
paid in the form of an automatic lump sum at the same time as benefits
begin or are paid under the Employee Retirement Plan. Actuarial
Equivalent is defined in the Employee Retirement Plan. This paragraph
applies to Participants who retire or begin receiving termination
benefits under the Employee Retirement Plan on or after February 1, 1997,
and for this purpose the Actuarial Equivalent shall be determined as of
the Participant's Retirement Date under the Employee Retirement Plan.
This paragraph shall also apply to Participants who are receiving
benefits under this Plan as of February 1, 1997, and for this purpose the
Actuarial Equivalent shall be determined with respect to each
participant's remaining benefits payable under this Plan determined as of
February 1, 1997.
(b) Voluntary Investment Plan and Financial Security Plan. With respect to
the Voluntary Investment Plan and the Financial Security Plan (the
"individual account plans"), the benefits under this Plan shall be
determined separately for each such plan and for each year for which the
contributions and other additions to the Account of a Participant are
reduced because of Sections 415, 401(a)(17) and 402(g)(1) of the Code
from what they would otherwise have been except for that provision. The
benefits under this Plan with respect to a particular year shall be the
additional benefit that would have been payable under the individual
account plan to which the aforesaid reduction is applicable if the
reduction on contributions and other additions had not been made. All amounts
deferred under this Plan shall be credited to the Supplemental Benefit Plan
accounts of Participants at the time such amounts would otherwise have been
credited to their accounts under the individual account plans. Interest shall
be credited to each Participant's account balance at the same time and at the
same rate of interest as is established for the period involved under the
Deferred Compensation Plan for Employees of The Boeing Company.
Benefits under this Plan shall be payable to the Participant, or to any
person receiving or entitled to receive benefits with respect to the
Participant, in the following forms:
(1) Lump Sum Distribution
The Participant may elect (i) to receive the balance in his or her
Account in a lump sum to be paid the first January following the
calendar year in which the Participant's termination of employment
occurs, or (ii) to defer any distribution from his or her Account.
The amount of such distribution will be based on the value of the
28
<PAGE> 29
Participant's Account determined as of the date of payment.
A Participant who has deferred receiving distribution of his or her
Account may elect to receive the balance in a lump sum payable the
first January following the calendar year in which such request for
distribution is received by the Committee.
(2) Installment Payment
The Participant may elect to receive the balance in his or her
Account in annual installment payments between 1 and 15 years. 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 the first
January of such year. Payments will begin the first January
following the calendar year in which the Participant's termination
of employment occurs and continue until the full balance in the
Participant's Account has been paid.
A Participant who has deferred receiving distribution of his or her
Account may elect to receive the balance in installment payments to
begin the first January following the calendar year in which the
election was submitted to the Committee.
Participants who elect installment payments under this section may
revoke their election before installment payments begin. Once
installment payments begin, Participants may not change this payment
option unless the Committee determines there is a substantial
hardship not capable of being alleviated through the use of other
resources reasonably available to the Participant.
Payment of benefits under this Plan will begin not later than the first January
following the calendar year in which the Participant would have attained age
70 1/2. If a Participant has not made an election under (1) or (2) above,
the Participant or any person receiving or entitled to receive benefits with
respect to the Participant, shall be deemed to have elected the Installment
Payment option for a period of 15 years.
Notwithstanding the foregoing, if the balance in the Participant's Account is
$10,000 or less, the balance shall be paid in the form of an automatic lump sum
to be paid the first January following the calendar year in which the
Participant's termination of employment occurs. This paragraph applies to
Participants who retire or begin receiving termination benefits under this Plan
on or after October 1, 1997. This paragraph shall also apply to Participants
(or any person eligible for benefits with respect to the Participant) who have
an Account balance under this Plan as of October 1, 1997.
Section 4. Funding.
The Plan shall be unfunded, and the benefits under the Plan shall be paid only
from the general assets of the Company.
29
<PAGE> 30
Section 5. Administration.
The Plan shall be administered by the Compensation Committee of the Board of
Directors of The Boeing Company. No member of the Committee shall become a
Plan Participant. The Committee shall make such rules, interpretations,
determinations of fact and computations as it may deem appropriate. Any
decision of the Committee with respect to the Plan, including (without
limitation) any determination of eligibility to participate in the Plan and any
calculation of plan benefits, shall be conclusive and binding on all persons.
The Committee shall submit to the Board of Directors periodic reports covering
the operation of the Plan.
Section 6. Amendment and Termination.
The Boeing Company shall have the authority to amend or terminate the Plan at
any time. In the event of Plan amendment or termination, a Participant's
benefits under the Plan shall not be less than the Plan benefits to which the
Participant would be entitled if the Participant had terminated employment
immediately prior to such amendment or termination of the Plan.
Section 7. Employment Rights.
Nothing in the Plan shall be deemed to give any person any right to remain in
the employ of the Company or affect any right of the Company to terminate a
person's employment with or without cause.
Section 8. Employee Rights.
No benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge, execution,
attachment, garnishment, or any other legal process, and any attempt to do so
shall be void.
30
<PAGE> 31
Exhibit (10) (ii)
DEFERRED COMPENSATION PLAN FOR EMPLOYEES OF THE BOEING COMPANY
(As Amended and Restated on February 23, 1998)
1. Purpose. The purpose of this Deferred Compensation Plan (the "Plan") for
employees of The Boeing Company (the "Company") and its subsidiaries is
to provide a means by which eligible employees may defer payment of base
salaries and awards made under incentive compensation plans sponsored by
the Company or its subsidiaries.
2. Eligibility. Any Executive Payroll employee, including those employed by
a subsidiary of the Company, if such employee is paid on a U.S. dollar-
based payroll, shall be eligible to participate in this Plan.
3. Elections. An eligible employee may elect deferrals, by executing and
delivering to the Company a notice which shall state:
in the case of salary deferrals, the percentage of the
Participant's base salary (but not more than 50% thereof) to be
deferred in each regular pay period, and
in the case of deferrals of incentive compensation awards payable
in cash, the percentage of the award to be deferred (which shall be
all or any portion thereof), and
in the case of incentive compensation awards payable other than in
cash, an election to defer such award (such election to apply to
all of each non-cash award), and
with respect to any of the above elections, the method for
crediting investment earnings on deferred amounts.
A notice of election will remain in effect until changed with respect to
future deferrals by a notice to the Company increasing or decreasing the
percentage of future salary or cash awards under incentive compensation
plans to be deferred, terminating an election to defer non-cash incentive
compensation awards, or changing the method for crediting investment
earnings on future deferrals. Any election or change in election must be
made by December 1 to be effective for a salary deferral for the
following year, or for any cash or non-cash incentive compensation award
to be made by the Committee in the following year, or for changing the
earnings credit method for deferrals made in the following year:
provided, that participants as of February 1, 1998 may by April 17, 1998
file elections with the Company which (subject to Committee approval)
shall be effective with respect to salary paid after May 1, 1998 and
incentive compensation awards made after February 1, 1998. Any such
election, if approved by the Committee, shall supersede any election
previously made.
A Participant may request that the Committee approve cancellation of a
salary deferral election during the year for which such deferral was
elected. No such request shall be approved except upon a showing of
substantial hardship not capable of being alleviated through the use of
other resources reasonably available to the Participant. If approved,
such cancellation shall have prospective effect only, from the date of
such approval.
31
<PAGE> 32
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. Company Matching Contributions. To the extent that the Company or any
subsidiary makes a matching contribution with respect to all or part of
any amounts deferred under this Plan, each such matching contribution
shall be deferred together with the Participant deferral to which it
relates, and shall be subject to all of the Participant elections
(including default elections) with respect to such deferral. Any
matching contribution made pursuant to this Section 4 shall be canceled
and forfeited if the employee leaves the employment of the Company or a
subsidiary for any reason other than retirement under a retirement plan
sponsored by the Company or a subsidiary, disability as determined by the
Company or subsidiary, layoff, or death.
5. Earnings Credits on Deferred Amounts. All amounts deferred under the
Plan, and any matching Company or subsidiary contribution with respect
thereto, shall be credited to the Participant's account at the time at
which they would otherwise first have become payable to the Participant
or, if earlier, the time at which the Participant's interest in the award
becomes vested. Non-cash awards shall be credited to the Participant's
account at the time at which they would otherwise first have become
distributable to the Participant.
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. A Participant's account shall be credited
monthly with interest on all amounts in that account during the preceding
month.
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 Method. A 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 amount credited to such account, based on the Fair
Market Value of the Company's common stock on the day the account is so
credited (or on the next business day on which the New York Stock
Exchange (the "Exchange") is open, if the Exchange is closed on the day
the account is credited) excluding commissions, taxes, and other charges.
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" means the mean of the high and
32
<PAGE> 33
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, with 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.
6. 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, or such later date as may be otherwise determined by the
Committee, immediately following the year in which the Participant
reaches age 70-1/2. A Participant may submit in 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. 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 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.
-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.
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.
Distributions from a Participant's Stock Unit account shall be paid in
cash: provided, that following a Participant's termination of employment,
distributions from the Stock Unit account may be made in stock at the
33
<PAGE> 34
written election of the Participant. 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.
A Participant may request that amounts credited to the Participant's
account under the Plan be distributed prior to the Participant's
termination of employment with the Company, or that an approved method of
payment 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 incentive compensation award 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 dividends
credited thereon, which were deferred in the calendar year in which the
request for distribution is submitted.
The Committee may establish guidelines for its own use and the use of its
delegates 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 distributions in stock, required withholding and any other deductions
will be taken from the common stock which would have been received.
7. Beneficiaries. A Participant may designate one or more beneficiaries to
receive distributions from the Plan, upon the Participant's death. If no
beneficiary has been designated, all such amounts shall be paid to the
Participant's personal representative. 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 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
Participant's account will be distributed at the time and in the manner
34
<PAGE> 35
approved by the Committee.
8. 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 of the Company. 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.
9. 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 rights
shall be no greater than the rights of a general unsecured creditor of the
Company.
Except to the extent provided in the final paragraph of Section 6 of the
Plan, the right of a Participant, 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.
10. Powers of Compensation Committee. The Compensation Committee (the
"Committee") of the Board of Directors of the Company shall have full
power and authority to construe and interpret this Plan. The Committee
may from time to time delegate such of its functions hereunder as it may
determine, to one or more of the officers of the Company, on such terms
and conditions as the Committee may decide. Decisions of the Committee or
its delegates shall be final and binding upon the Participants, their
legal representatives and beneficiaries. Action by the Committee or its
delegates on any election or request made by a Participant pursuant to the
Plan shall be subject to the sole discretion of the Committee or such
delegates.
35
<PAGE> 36
Exhibit (10) (iii)
The Boeing Company 1997 Incentive Stock Plan for Employees
(as Amended and Restated Effective April 27, 1998)
1. Purpose.
The purpose of this 1997 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 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 Compensation Committee.
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 sole discretion, to determine all matters relating
to awards under the Plan, including selection of the individuals to be granted
awards, the type of awards granted, 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 Other Plans.
The Committee shall also have authority to grant awards as an alternative to or
as the form of payment for grants or rights earned or due under other
compensation plans or arrangements of the Company, including the plan of any
entity acquired by the Company.
2.3 Delegation to Stock Plan Committee.
Except for the power to amend the Plan as provided in Section 12, the Board or
the Committee, in its sole discretion, may delegate the Committee's authority
and duties under the Plan to the Stock Plan Committee of the Board or to such
other 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 from time to time
establish, except that only the Committee may make any determinations regarding
awards to participants who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act").
2.4 Finality of Committee Determinations.
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.
36
<PAGE> 37
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 (as defined in
Section 6.2), 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").
4. Shares Subject to the Plan.
4.1 Number and Source.
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, or a Board committee to which the Board may
delegate such authority, may from time to time determine. Subject to adjustment
as provided in Sections 4.3 and 5, the aggregate number of shares that may be
issued under the Plan shall not exceed thirty million (30,000,000). Subject to
adjustment as provided in Sections 4.3 and 5, the aggregate number of shares
that may be issued under awards granted pursuant to Section 6.4 that are not
subject to restrictions based on the achievement of specified performance goals
shall not exceed six million (6,000,000). The aggregate number of shares that
may be covered by awards granted to any one individual in any one calendar year
shall not exceed one million two hundred thousand (1,200,000).
4.2 Shares Available.
Any shares subject to an award granted under the Plan that is forfeited,
terminated or canceled or, in the case of awards granted under Section 6.4, any
shares that do not vest shall again be available for the granting of awards
under the Plan. In instances where a stock appreciation right is settled in
cash, the shares covered by such award shall remain available for the granting
of other awards. Likewise, the payment of cash dividends and dividend
equivalents paid in cash in conjunction with outstanding awards shall not be
counted against the shares available for issuance.
4.3 Acquisitions.
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 three million
(3,000,000) shares in the event the Company acquires any other corporation or
business entity and the Company agrees to assume the acquired entity's
obligations for outstanding employee stock options or stock grant commitments or
otherwise grants awards to employees in connection with such acquisition.
5. Adjustment of Shares Available.
The aggregate numbers and kind of shares available for awards under the Plan,
the maximum number and kind of shares that may be subject to awards to any
individual under the Plan, the number and kind of shares covered by each
outstanding award, and the exercise price per share (but not the total price)
for stock options, stock appreciation rights or similar awards outstanding under
the Plan shall all be proportionately adjusted for any increase or decrease in
37
<PAGE> 38
the number of issued shares of Common Stock resulting from any split-up,
combination or exchange of shares, consolidation, spin-off or recapitalization
of shares or any like capital adjustment or the payment of any stock dividend.
6. Awards.
6.1 Types of Awards.
The Committee shall have the authority, in its sole discretion, to determine the
type or types of awards to be granted to employees under the Plan. Such awards
may include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options (as defined in Section 6.2), stock appreciation rights or restricted
stock awards. Such awards may be granted either alone, in addition to or in
tandem with any other type of award granted under the Plan.
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 not be 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" as to a particular day equals the mean of the high
and low per share trading prices for the Common Stock as reported for such day
in The Wall Street Journal or such other source as the Committee deems
reliable. The Committee shall set the term of each stock option, but no
Incentive Stock Option shall be exercisable more than 10 years after the date
such 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 granted to a particular individual become
exercisable for the first time during any calendar year (under the Plan and
all other stock option plans of the Company) exceeds $100,000 (or such
corresponding amount as may be set by the Code), such options shall be treated
as Nonqualified Stock Options.
6.3 Stock Appreciation Rights.
The Committee may grant stock appreciation rights to employees, either in tandem
with stock options that have been or are granted under the Plan or with respect
to a number of shares on which an option is not granted. A stock appreciation
right shall entitle the holder to receive, with respect to each share of stock
as to which the right is exercised, payment in an amount equal to the excess of
the share's Fair Market Value on the date the right is exercised over its
Fair Market Value on the date the right was granted. 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 a maximum appreciation value payable for stock appreciation rights.
6.4 Restricted Stock Awards.
(a) The Committee may grant restricted stock awards under the Plan
in Common Stock or denominated in units of Common Stock. The Committee, in its
sole discretion, will make such awards subject to conditions and restrictions,
as set forth in the instrument evidencing the award, which may be based on
38
<PAGE> 39
continuous service with the Company or the attainment of certain performance
goals related to profits, profit growth, profit-related return ratios, cash flow
or shareholder returns, where such goals may be stated in absolute terms or
relative to comparison companies or indices to be achieved during a period of
time. No more than three million (3,000,000) shares may be issued subject to
restrictions based on continuous employment for less than three years (except
where employment is terminated because the employee dies, retires, is laid off
or becomes disabled).
(b) The Committee may choose, at the time of granting an award or
at 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 that are not paid currently may, in the Committee's sole
discretion, accrue interest and be paid to the participant if, when and to the
extent such award is paid.
6.5 Payment; Deferral.
Awards granted under the Plan may be settled through cash payments, the delivery
of Common Stock or the granting of awards or combinations thereof as the
Committee shall determine. Any award settlement, including payment deferrals,
may be subject to such conditions, restrictions and contingencies as the
Committee shall determine. The Committee may permit or require the deferral of
any award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such credits to deferred stock unit
equivalents.
7. Option Exercise.
7.1 Employment Requirement.
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 Company's employ at least 12 months after the
granting of the option or right.
7.2 Precondition to Stock Issuance.
No shares shall be delivered pursuant to the exercise of any stock 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, or any legal representative, legatee or distributee shall be
or be deemed to be a holder of any shares subject to such option or right unless
and until such shares are issued.
7.3 No Fractional Shares.
No stock option may at any time be exercised with respect to a fractional share.
No fractional share shall be issued in the event shares are issued pursuant to
the exercise of a stock appreciation right; however, a fractional stock
appreciation right may be exercised for cash.
39
<PAGE> 40
7.4 Form of Payment.
An optionee may exercise a stock option using as the form of payment (a) cash or
cash equivalent (b) stock-for-stock payment (as described in Section 7.5),
(c) any combination of the above or (d) such other means as the Committee may
approve.
7.5 Stock for Stock.
An optionee who owns Common Stock may use such shares, the value of which 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 sole discretion, may restrict or rescind this right
by notice to optionees. A stock option may be exercised in such manner only by
tendering (actually or by attestation) 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 such recipient's lifetime, be exercisable only by such recipient,
and shall not be assignable or transferable by such recipient other than by will
or the laws of descent and distribution.
9. Withholding Taxes; Other Deductions.
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, (a) an amount
sufficient to cover withholding as required by law for any federal, state or
local taxes and (b) any amounts due from the recipient of such award to the
Company or to any subsidiary of the Company or to take such other action as may
be necessary to satisfy any such withholding or other obligations, including
withholding from any other cash amounts due or to become due from the Company to
such recipient an amount equal to such taxes or obligations.
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 12 months of the grant date 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, 1997 and shall remain in full force
and effect through April 30, 2007, unless sooner terminated by the Board. After
the Plan is terminated, no future awards may be granted but awards previously
granted shall remain outstanding in accordance with their applicable terms and
40
<PAGE> 41
conditions and the Plan's terms and conditions.
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 the approval of the
Company's shareholders (a) that would increase the number of shares available
for issuance in accordance with Section 4 or (b) if such approval is required
(i) to comply with Section 422 of the Code with respect to Incentive Stock
Options or (ii) for purposes of Section 162(m) of the Code.
13. Bifurcation of the Plan.
Notwithstanding anything in the Plan to the contrary, the Board, in its sole
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.
41
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
The Boeing Company
Restated Financial Data Schedule
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-30-1996 JUN-30-1996 SEP-30-1996
<CASH> 4,527 4,950 5,259 5,183
<SECURITIES> 0 145 783 939
<RECEIVABLES> 3,342 2,549 2,794 2,693
<ALLOWANCES> 172 175 178 181
<INVENTORY> 9,125 9,483 8,599 8,530
<CURRENT-ASSETS> 18,104 18,898 18,848 18,743
<PP&E> 17,756 17,932 18,022 18,108
<DEPRECIATION> 9,829 10,074 10,229 10,368
<TOTAL-ASSETS> 31,877 33,391 32,551 32,259
<CURRENT-LIABILITIES> 10,614 10,995 10,838 10,918
<BONDS> 5,401 5,417 5,322 5,411
0 0 0 0
0 0 0 0
<COMMON> 4,946 4,924 4,899 4,876
<OTHER-SE> 7,581 8,400 7,993 7,561
<TOTAL-LIABILITY-AND-EQUITY> 31,877 33,391 32,551 32,259
<SALES> 32,960 7,047 16,467 25,476
<TOTAL-REVENUES> 32,960 7,047 16,467 25,576
<CGS> 0 0 0 0
<TOTAL-COSTS> 33,276 6,628 15,239 23,590
<OTHER-EXPENSES> 0 0 0 4
<LOSS-PROVISION> 28 8 16 24
<INTEREST-EXPENSE> 280 102 199 295
<INCOME-PRETAX> (412) 396 1,194 1,858
<INCOME-TAX> (376) 134 286 484
<INCOME-CONTINUING> (36) 262 908 1,374
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (36) 262 908 1,374
<EPS-PRIMARY> (0.04) .27 .93 1.41
<EPS-DILUTED> (0.04) .26 .92 1.39
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.2
The Boeing Company
Restated Financial Data Schedule
</LEGEND>
<RESTATED>
<S> <C>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997
<CASH> 5,469 5,248 5,580
<SECURITIES> 883 972 968
<RECEIVABLES> 3,681 3,675 3,436
<ALLOWANCES> 184 184 184
<INVENTORY> 9,151 9,585 10,124
<CURRENT-ASSETS> 20,509 20,961 21,338
<PP&E> 18,725 18,973 18,993
<DEPRECIATION> 10,459 10,657 10,685
<TOTAL-ASSETS> 37,880 38,801 39,250
<CURRENT-LIABILITIES> 12,726 13,534 13,969
<BONDS> 7,489 6,566 6,204
0 0 0
0 0 0
<COMMON> 4,967 4,972 4,974
<OTHER-SE> 8,535 8,926 9,300
<TOTAL-LIABILITY-AND-EQUITY> 37,880 38,801 39,250
<SALES> 35,453 10,359 22,702
<TOTAL-REVENUES> 35,453 10,359 22,702
<CGS> 0 0 0
<TOTAL-COSTS> 32,835 9,619 21,155
<OTHER-EXPENSES> 133 2 98
<LOSS-PROVISION> 27 0 0
<INTEREST-EXPENSE> 393 131 243
<INCOME-PRETAX> 2,480 810 1,485
<INCOME-TAX> 662 270 469
<INCOME-CONTINUING> 1,818 540 1,016
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,818 540 1,016
<EPS-PRIMARY> 1.88 .56 1.05
<EPS-DILUTED> 1.85 .55 1.03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,092
<SECURITIES> 454
<RECEIVABLES> 4,226
<ALLOWANCES> 235
<INVENTORY> 9,155
<CURRENT-ASSETS> 19,186
<PP&E> 19,606
<DEPRECIATION> 11,078
<TOTAL-ASSETS> 38,234
<CURRENT-LIABILITIES> 13,982
<BONDS> 6,849
0
0
<COMMON> 5,059
<OTHER-SE> 7,968
<TOTAL-LIABILITY-AND-EQUITY> 38,234
<SALES> 12,941
<TOTAL-REVENUES> 12,941
<CGS> 0
<TOTAL-COSTS> 12,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> 73
<INCOME-TAX> 23
<INCOME-CONTINUING> 50
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
