<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 21, 1998
Date of Report
------------------------------
(Date of earliest event
reported)
THE BOEING COMPANY
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-442 91-0425694
- ------------------------ ------------------- ------------------
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
7755 East Marginal Way South
Seattle, Washington 98108
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(206) 655-2121
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
ITEM 5. OTHER EVENTS
On January 21, 1998, The Boeing Company ("Boeing") issued a news release
announcing that it would take a special fourth quarter charge to earnings of
$1.4 billion pretax associated with the former McDonnell Douglas Corporation
commercial aircraft product lines. A copy of this news release is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
On January 27, 1998, Boeing issued a news release with respect to its
results of operations for the 1997 fiscal year and for the fourth quarter of the
1997 fiscal year. A copy of this news release is attached hereto as Exhibit 99.2
and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired:
Not applicable
(b) Pro Forma Financial Information:
Not applicable
(c) Exhibits:
EXHIBIT NO. DESCRIPTION
99.1 News Release issued by The Boeing Company on January 21,
1998.
99.2 News Release issued by The Boeing Company on January 27,
1998.
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 hereunto duly authorized.
THE BOEING COMPANY
Dated: January 27, 1998
By /s/ Theodore J. Collins
-----------------------------
Name: Theodore J. Collins
Title: Senior Vice President,
General Counsel and Secretary
Form 8-K The Boeing Company Page 2
<PAGE> 3
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 News Release issued by The Boeing Company on January 21,
1998.
99.2 News Release issued by The Boeing Company on January 27,
1998.
Form 8-K The Boeing Company Page 3
<PAGE> 1
Exhibit 99.1
THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207
www.boeingmedia.com
BOEING ANNOUNCES SPECIAL FOURTH QUARTER EARNINGS CHARGE FOR DOUGLAS PRODUCTS
SEATTLE, Jan. 21, 1998 -- Phil Condit, Boeing chairman and chief
executive officer, reported today that the company will take a special fourth
quarter charge to earnings of $1.4 billion pretax associated with the former
McDonnell Douglas Corporation commercial aircraft product lines.
The charge principally represents an inventory valuation adjustment for
Douglas Products Division programs, based on post-merger assessments of market
conditions and related program decisions. Also included in the charge are
valuation adjustments in connection with customer financing assets and
commitments.
Condit said the special charge will result in a net loss for both the
fourth quarter and the full year of 1997. He noted that, absent the special
charge, earnings and cash flow from operations will be within the range of
investment analysts' expectations. Final 1997 operating results will be reported
January 27.
As previously announced, the MD-80 and MD-90 twinjets will continue to
be produced only until approximately mid-1999, and the MD-11 trijet market
opportunities continue to be principally limited to the freighter version. The
MD-95 program, now referred to as the Boeing 717 program, has been restructured
to take advantage of longer-term market opportunities for a 100-seat aircraft.
The company is continuing to assess potential opportunities for
improved utilization and consolidation of facilities across all segments of the
company. Future decisions regarding facilities conversions or consolidations
will be based on long-term business objectives. Within the Information, Space &
Defense Systems operating segment, any major restructuring actions will be
contingent on demonstration of cost savings for U.S. government programs.
###
C1583
Contact:
Larry McCracken (206) 655-6123
<PAGE> 1
Exhibit 99.2
THE BOEING COMPANY
P.O. Box 3707
Seattle, WA 98124-2207
www.boeingmedia.com
BOEING REPORTS 1997 FULL YEAR AND 4TH QUARTER RESULTS
<TABLE>
<CAPTION>
Year ended
December 31 4th Quarter
---------------------------- ----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(Dollars in millions except per share data)
Sales and other operating revenues $ 45,800 $ 35,453 $ 11,727 $ 9,977
Net earnings (loss) $ (178) $ 1,818 $ (498) $ 444
Earnings (loss) per share * $ (.18) $ 1.85 $ (.51) $ .46
Average shares (millions) * 984.5 981.9 985.5 969.2
Before special charge and ShareValue Trust accounting:
Net earnings $ 632 $ 1,905 $ 290 $ 528
Earnings per share * $ .63 $ 1.92 $ .29 $ .53
Average shares (millions) * 1,008.4 992.5 1,010.2 992.4
</TABLE>
* Diluted
SEATTLE, Jan. 27, 1998 - Sales of $45.8 billion and a net loss of $178 million
or $.18 per share for the full year of 1997 were reported by Phil Condit, Boeing
chairman and chief executive officer. The loss for the year was attributable to
the special charge in the fourth quarter for commercial aircraft product lines
of the former McDonnell Douglas Corporation of $1.4 billion pretax, or $.9
billion after tax, together with the production inefficiencies experienced on
other commercial aircraft programs resulting from the rapid increase in
production rates. The results reflect the combined operations resulting from the
merger with McDonnell Douglas Corporation, which was completed on Aug. 1, 1997.
Comparable figures for the same period of 1996 were sales of $35.5 billion and
net earnings of $1,818 million or $1.85 per share.
The higher sales for 1997 reflect the increased deliveries in both the
commercial aircraft and the defense, space and information systems segments and
the inclusion in 1997 of the operations of the aerospace and defense units
acquired from Rockwell International Corporation in December 1996.
1
<PAGE> 2
Earnings for the full year of 1997, excluding the $1.4 billion pretax special
charge and $99 million pretax income from ShareValue Trust accounting, were $632
million, compared with $1,905 million for 1996. The reduction in earnings was
principally attributable to the commercial aircraft production inefficiencies
associated with the significant production rate increases. Additionally, 1997
results included increased research and development spending, merger-related
expense of $120 million, and increased debt expense. Partially offsetting these
factors were the earnings associated with the higher sales levels in 1997 and
increased other income. The 1996 results included $199 million after-tax income
related to the settlement of certain defense, space and information systems
segment contract issues and recognition of prior year tax benefits.
Sales for the fourth quarter of 1997 were $11.7 billion and earnings, excluding
the special charge and the ShareValue Trust accounting, were $290 million or
$.29 per share. Comparable figures for 1996 were sales of $10.0 billion and net
earnings of $528 million or $.53 per share. Fourth quarter 1997 net earnings
include the effect of the lower commercial aircraft profit margins associated
with production recovery and disruption inefficiencies.
Production problems being experienced on the commercial aircraft programs
reached unexpected levels late in the third quarter. The Company is in the midst
of an unprecedented production rate build-up for the 7-series commercial
aircraft programs, and has experienced raw material shortages, internal and
supplier parts shortages, and productivity inefficiencies associated with adding
thousands of new employees. These factors have resulted in significant
out-of-sequence work. The breadth and complexity of the entire commercial
aircraft production process, especially during this time of substantial
production rate increases, present a situation where disrupted process flows are
causing major inefficiencies throughout the entire process chain. The 747 and
737 production lines were halted for approximately one month early in the fourth
quarter. Process inefficiencies and work-arounds will continue until the entire
process is substantially back in balance, which is expected to occur in 1998.
In January 1998, the planned production rate for 7-series models is 40 airplanes
per month, up from a low of 18 airplanes per month in 1996. The current 40
aircraft per month production rate is planned to increase to 43 aircraft per
month during the second quarter. Thus far, the commercial aircraft group is on
plan with scheduled production rate increases. Production will continue to be
adjusted to reflect customer requirements and the Company's capabilities.
The Company recently completed an assessment of the financial impact of its
post-merger strategy decisions related to its McDonnell Douglas Corporation
commercial aircraft product lines and announced a special charge relative to
2
<PAGE> 3
these decisions on Jan. 21, 1998. The charge principally represents an inventory
valuation adjustment based on post-merger assessments of the market conditions
and related program decisions. Also included in the charge are valuation
adjustments in connection with customer financing assets and commitments. As
previously announced, the MD-80 and MD-90 twinjets will continue to be produced
only until approximately mid-1999, the MD-11 trijet market opportunities
continue to be principally limited to the freighter version, and the MD-95
program has been restructured to take advantage of the longer-term market
opportunities currently projected for a 100-seat aircraft and has been renamed
the 717-200 model.
Total Company revenues for 1998 are projected to be in the $55 billion range,
compared with $45.8 billion in 1997. Commercial jet aircraft deliveries for 1998
are currently expected to be about 550 aircraft, including approximately 225 of
the newer-model 737s and 777s. First quarter 1998 deliveries will be somewhat
lower than subsequent quarters of the year, reflecting production recovery,
certification change incorporation on the first 28 737-700s, and customer
requirements. The Company is closely monitoring the economic situation in Asia,
which may have potential impact on future deliveries.
Research and development expense for the year ended 1997 was $1,924 million or
$291 million higher than the comparable period in 1996. The 1997 increase in
research and development expense is primarily attributable to the defense, space
and information systems segment, with the inclusion in 1997 of the aerospace and
defense units acquired from Rockwell in December 1996, and spending in
commercial space and communication activities. Research and development expense
in 1998 will be influenced by the timing of potential commercial aircraft
widebody derivative programs. Increases are planned in commercial space and
communication activities in the defense, space and information systems segment,
primarily driven by company-funded development of launch vehicles and other
space and communication opportunities. Based on current programs and plans,
research and development expense for 1998 is expected to be in the $2.0 billion
range.
Since the August 1997 merger of Boeing and McDonnell Douglas, the Information,
Space & Defense Systems group has been actively working to identify and capture
benefits arising from the integration of the two companies and the aerospace and
defense units acquired from Rockwell. Extensive review of total capability is in
progress, and detailed plans to optimize asset utilization throughout the
Company will be implemented during 1998. The business group has organized itself
for greater customer focus and enhanced program efficiencies, and the
integration activity is progressing well.
3
<PAGE> 4
Earnings declined in the defense, space and information systems segment from the
prior year, primarily due to increased company-sponsored research and
development expense and increased joint venture development expense associated
with the Sea Launch and Civil Tiltrotor programs. Government funding for all
major U.S. programs within the defense, space and information systems segment
remains steady. The International Space Station program continues on plan for a
midyear first-element launch. The first Delta III rocket launch is also planned
for midyear. The 36th C-17 delivered to the U.S. Air Force in December and nine
C-17s are scheduled to deliver in 1998.
The Company is continuing to assess potential opportunities for improved
utilization and consolidation of facilities across all parts of the Company.
Future decisions regarding facilities conversions or consolidations will be
based on long-term business objectives. Within the defense, space and
information systems segment, any major restructuring actions will be contingent
on demonstration of cost savings for U.S. Government programs and the Company.
The $1.4 billion special charge in the fourth quarter does not include any costs
that might be associated with these future decisions.
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; continued integration of McDonnell
Douglas Corporation; product performance risks associated with regulatory
certifications of the Company's commercial aircraft by the U.S. Government and
foreign governments; other regulatory uncertainties; collective bargaining labor
disputes; performance issues with key suppliers and subcontractors; governmental
export and import policies; factors that result in significant and prolonged
disruption to air travel worldwide; global trade policies; worldwide political
stability and economic 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.
* * * * * * *
4
<PAGE> 5
OPERATING AND FINANCIAL DATA
DELIVERIES
<TABLE>
<CAPTION>
Twelve Months 4th Quarter
------------------- -----------------
Commercial jet aircraft 1997 1996 1997 1996
--- -- -- --
<S> <C> <C> <C> <C>
737 132 76 39 23
737 Next-Generation 3 3
747 39 26 9 10
757 46 42 12 8
767 41 * 42 * 7 13
777 59 32 10 8
MD-80 16 12 5 1
MD-90 26 24 10 16
MD-11 12 15 7 5
--- -- -- --
Total 374 269 102 84
=== === === ==
</TABLE>
Defense, space and information systems
<TABLE>
<S> <C> <C> <C> <C>
C-17 7 6 2 1
F-15 19 11 9 2
F/A-18 C/D 46 32 9 5
F/A-18 C/D Kits 20 9 11 3
T-45TS 11 9 3 1
Delta II 12 11 3 3
</TABLE>
<TABLE>
<CAPTION>
CONTRACTUAL BACKLOG Dec. 31 Sep. 30 Dec. 31
-------- -------- --------
(Dollars in billions) 1997 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Commercial aircraft $ 93.8 $ 83.5 $ 86.2
Defense, space and information systems 27.8 25.3 28.0
-------- -------- --------
Total backlog $ 121.6 $ 108.8 $ 114.2
======== ======== ========
</TABLE>
* Excludes one non-commercial 767 each year delivered to be modified as 767
AWACS for the Government of Japan.
5
<PAGE> 6
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Twelve months ended Three months ended
December 31 December 31
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales and other operating revenues $ 45,800 $ 35,453 $ 11,727 $ 9,977
Operating costs and expenses 40,644 29,383 10,226 8,292
General and administrative expense 2,187 1,819 564 541
Research and development expense 1,924 1,633 460 412
Special charge 1,400 1,400
-------- -------- -------- --------
$ 46,155 $ 32,835 $ 12,650 $ 9,245
======== ======== ======== ========
Earnings (loss) from operations (355) 2,618 (923) 732
Other income, principally interest 428 388 125 117
Interest and debt expense (513) (393) (148) (98)
ShareValue Trust 99 (133) 141 (129)
-------- -------- -------- --------
Earnings (loss) before income taxes (341) 2,480 (805) 622
Income taxes (163) 662 (307) 178
-------- -------- -------- --------
Net earnings (loss) $ (178) $ 1,818 $ (498) $ 444
======== ======== ======== ========
Basic earnings (loss) per share $ (.18) $ 1.88 $ (.51) $ .46
======== ======== ======== ========
Diluted earnings (loss) per share $ (.18) $ 1.85 $ (.51) $ .46
======== ======== ======== ========
Cash dividends per share $ .56 $ .55 $ .14 $ .14
======== ======== ======== ========
</TABLE>
Excluding the fourth quarter special charge and ShareValue Trust accounting:
<TABLE>
<S> <C> <C> <C> <C>
Net earnings $ 632 $ 1,905 $ 290 $ 528
Diluted earnings per share $ .63 $ 1.92 $ .29 $ .53
</TABLE>
Note: All references to earnings (loss) per share in the text of this press
release refer to diluted earnings per share.
6
<PAGE> 7
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
December 31 September 30 December 31
ASSETS 1997 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash and cash equivalents $ 4,420 $ 4,820 $ 5,469
Short-term investments 729 730 883
Accounts receivable 3,121 3,312 2,870
Current portion of customer
and commercial financing 261 354 774
Deferred income taxes 1,399 1,393 1,362
Inventories, net of advances and
progress billings 8,967 10,543 9,151
-------- -------- --------
Total current assets 18,897 21,152 20,509
Customer and commercial financing 4,339 3,641 3,114
Property, plant and equipment, net 8,391 8,314 8,266
Deferred income taxes 381 152 143
Goodwill 2,395 2,418 2,478
Prepaid pension expense 3,271 3,270 3,014
Other assets 350 427 356
-------- -------- --------
$ 38,024 $ 39,374 $ 37,880
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and other liabilities $ 11,548 $ 11,404 $ 9,901
Advances in excess of related costs 1,575 1,971 1,714
Income taxes payable 298 361 474
Short-term debt and current portion of
long-term debt 731 608 637
-------- -------- --------
Total current liabilities 14,152 14,344 12,726
Accrued retiree health care 4,796 4,807 4,800
Long-term debt 6,123 6,353 6,852
-------- -------- --------
Total liabilities 25,071 25,504 24,378
Common stock less treasury shares 6,081 6,225 5,886
Retained earnings 8,147 8,925 8,896
Unearned compensation (20) (22) (22)
ShareValue Trust (1,255) (1,258) (1,258)
-------- -------- --------
Total shareholders' equity 12,953 13,870 13,502
-------- -------- --------
$ 38,024 $ 39,374 $ 37,880
======== ======== ========
</TABLE>
7
<PAGE> 8
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996
------- -------
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES:
Net earnings (loss) $ (178) $ 1,818
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Special charge 1,400
ShareValue Trust (99) 133
Depreciation 1,354 1,241
Amortization of goodwill and intangibles 104 25
Changes in assets and liabilities
Short-term investments 154 (874)
Accounts receivable (251) 182
Inventories, net of advances and progress billings (1,008) 306
Accounts payable and other liabilities 1,490 514
Advances in excess of related costs (139) 441
Income taxes payable and deferred (451) (55)
Other assets (272) (246)
Accrued retiree health care (4) 126
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,100 3,611
------- -------
CASH FLOWS - INVESTING ACTIVITIES:
Customer and commercial financing - additions (1,889) (1,212)
Customer and commercial financing - reductions 1,030 1,482
Property, plant and equipment, net additions (1,391) (971)
Other 15
------- -------
NET CASH USED BY INVESTING ACTIVITIES (2,250) (686)
------- -------
CASH FLOWS - FINANCING ACTIVITIES:
New borrowings 232 1,051
Debt repayments (867) (1,160)
ShareValue Trust (891)
Common shares issued 268
Stock options exercised, other 166 215
Common shares purchased (141) (718)
Dividends paid (557) (480)
------- -------
NET CASH USED BY FINANCING ACTIVITIES (899) (1,983)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,049) 942
------- -------
Cash and cash equivalents at beginning of year $ 5,469 $ 4,527
------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,420 $ 5,469
======= =======
</TABLE>
8
<PAGE> 9
Note: The following business segment information reflects the adoption of
Statement of Financial Accounting Standard No. 131, "Disclosures about Segments
of an Enterprise and Related Information."
THE BOEING COMPANY AND SUBSIDIARIES
BUSINESS SEGMENT DATA
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
Year ended December 31
-------------------------
1997 1996
-------- --------
<S> <C> <C>
Revenue:
Commercial aircraft $ 26,929 $ 19,916
Defense, space and information systems 18,125 14,934
Customer and commercial financing, other 746 603
-------- --------
Operating revenues $ 45,800 $ 35,453
======== ========
Operating profit (loss) by segment:
Commercial aircraft $ (1,837) $ 956
Defense, space and information systems 1,317 1,387
Customer and commercial financing, other 381 329
-------- --------
Operating profit (loss) $ (139) $ 2,672
======== ========
Corporate investment income $ 428 $ 388
Interest and debt expense (513) (393)
Unallocated expense (216) (54)
ShareValue Trust 99 (133)
-------- --------
Pretax earnings (loss) $ (341) $ 2,480
======== ========
Net earnings (loss) $ (178) $ 1,818
======== ========
Effective income tax rate 47.8% 26.7%
Research and development:
Commercial aircraft $ 1,208 $ 1,156
Defense, space and information systems 716 477
-------- --------
Total research and development expense $ 1,924 $ 1,633
======== ========
</TABLE>
9
<PAGE> 10
Commercial aircraft revenue of $26.9 billion for the twelve months ended Dec.
31, 1997, included seven MD-80, five MD-90 and one MD-11 aircraft which were
accounted for as operating leases, with minimal revenue recorded at the time of
delivery. Commercial aircraft revenue of $19.9 billion for the same period in
1996 included one MD-80, two MD-90s and two MD-11s which were accounted for as
operating leases, and certain 7-series aircraft previously on operating lease
which were converted to sales. Defense, space and information systems segment
revenues of $18.1 billion and $14.9 billion for 1997 and 1996 were impacted by a
99-day strike at the St. Louis facilities, which ended in mid-September 1996 and
delayed some deliveries from 1996 to 1997. Defense, space and information
systems segment 1997 revenues include the first full year of the operations of
the aerospace and defense units acquired from Rockwell International Corporation
in December 1996.
The overall commercial aircraft segment operating profit margin, exclusive of
research and development expense and the Douglas Products Division special
charge, was less than 3% for the twelve months of 1997, compared with more than
10% for the prior two years. The lower overall commercial operating profit
margin was attributable to the production inefficiencies associated with the
rapid increase in production rates, the model mix of aircraft deliveries that
included 27 more 777s in 1997 than in 1996, and continued pricing pressure.
Margins for 1998 will be impacted by the relatively high percentage of 777 and
Next-Generation 737 deliveries and previously announced production
inefficiencies and pricing pressure. With regard to the 777 and Next-Generation
737 programs, new and major derivative commercial jet aircraft programs normally
have lower operating profit margins due to initial tooling amortization and
higher unit production costs in the early years of a program.
The overall defense, space and information systems segment operating profit
margin, exclusive of research and development expense, joint venture development
costs expensed as incurred ($102 million in 1997, compared with $53 million in
1996) and contract settlements, was approximately 12% in both 1997 and 1996.
Joint venture development costs are primarily associated with the Sea Launch and
Civil Tiltrotor programs.
The defense, space and information 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 prior year. Commercial aircraft research and development expense for
1997 included the certification and first delivery of the 737-700 to Southwest
Airlines in the fourth quarter; development efforts on the 737-600 and -800
models; development of the 757-300, a stretched derivative of the 757-200, which
is scheduled to be delivered to launch customer Condor-Flugdienst in early 1999;
and development of the 767-400ER, a stretched
10
<PAGE> 11
version of the 767-300ER, which is scheduled to be delivered to launch customer
Delta Airlines in the year 2000. The 717-200 program (formerly the MD-95)
continues in development, with first delivery to AirTran in 1999.
Interest and debt expense was $120 million higher due to the debt assumed in the
Rockwell acquisition and increases associated with the Boeing Capital
Corporation subsidiary. In the fourth quarter of 1997, the Company made a
fixed-spread tender offer for the 9-1/4% notes due April 1, 2002. As a result of
the offer, the Company retired $230 million in debt and recognized a pretax
expense of $29 million which is included in interest and debt expense.
The income tax provision for 1997 results in a tax benefit because the provision
is applied to a pretax loss. The relatively high income tax rate of 47.8%
reflects additional benefits, principally Foreign Sales Corporation tax
benefits. These benefits were partially offset by the nondeductibility of
goodwill and merger costs. The 1996 effective income tax rate of 26.7% reflects
the recognition of tax benefits of $125 million related to prior years as well
as Foreign Sales Corporation tax benefits. The effective income tax rate for
1998 is expected to be in the 35% range.
Contractual backlog increased in the fourth quarter of 1997 due to the
previously announced orders from American, Delta and Continental Airlines being
converted to definitive contracts. Not included in contractual backlog are
purchase options and announced orders for which definitive contracts have not
been executed. U.S. Government and foreign military backlog is limited to
amounts obligated to contracts. Unobligated amounts under U.S. Government
contracts not included in backlog at Dec. 31, 1997, total $26.1 billion,
compared with $28.9 billion at Sept. 30, 1997, and $29.7 billion at Dec. 31,
1996.
ShareValue Trust Accounting
The ShareValue Trust is a 12-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. In accordance with generally
accepted accounting principles, the change in the potential distributable
appreciation is reflected in earnings on a quarterly basis, and shares of the
Trust are not considered outstanding for financial reporting purposes. Because
the Trust is fully funded and is solely responsible for making any potential
distributions, the Company supplementally discloses earnings and earnings per
share excluding the ShareValue Trust accounting impact, while recognizing the
shares held by the Trust as outstanding. Since inception of the Trust in July
1996, the distributable appreciation charged or credited to earnings on an
after-tax basis is as follows:
11
<PAGE> 12
<TABLE>
<CAPTION>
Quarter Cumulative
------ ------
<S> <C> <C>
(Dollars in millions)
1996
3rd quarter $ 3 $ 3
4th quarter 84 87
1997
1st quarter (64) 23
2nd quarter 65 88
3rd quarter 21 109
4th quarter (88) 21
</TABLE>
###
C1585
Contact:
Larry McCracken (206) 655-6123
12
