United States
Securities and Exchange Commission
Washington, D.C. 20549
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Form 10-Q
|X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
OR
|_| Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to _________________
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BOEING CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 95-2564584 0-10795
(State or other jurisdiction of (I.R.S. Employer (Commission File No.)
Incorporation or Organization) Identification No.)
500 Naches Ave., SW, 3rd Floor - Renton, Washington 98055
(Address of principal executive offices)
(425) 393-2914
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) 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 (2) has been subject to such filing requirements
for the past 90 days. Yes |X| No |_|
Common shares outstanding at August 14, 2000: 50,000 shares
Registrant meets the conditions set forth in General Instruction H(1)(a) and (b)
to Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
<PAGE>
Part I
Item 1. Financial Statements
<TABLE>
<CAPTION>
Boeing Capital Corporation and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
(Dollars in millions, except stated value and par value) 2000 1999
------------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Financing receivables:
<S> <C> <C>
Investment in finance leases $ 1,628.9 $ 1,372.8
Notes receivable 1,135.7 708.0
------------------------------------
2,764.6 2,080.8
Allowance for losses on financing receivables (146.1) (60.7)
------------------------------------
2,618.5 2,020.1
Cash and cash equivalents 41.1 26.9
Equipment under operating leases, net 1,475.5 828.2
Equipment held for sale or re-lease 54.9 66.0
Accounts due from Boeing and BCSC 5.1 2.6
Other assets 90.0 99.8
------------------------------------
$ 4,285.1 $ 3,043.6
====================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Short-term notes payable $ 520.1 $ 271.0
Accounts payable and accrued expenses 38.0 38.5
Other liabilities 129.9 96.5
Deferred income taxes 442.0 427.5
Long-term debt:
Senior 1,696.1 1,741.8
Intercompany 858.5 -
Subordinated 44.9 44.9
------------------------------------
3,729.5 2,620.2
------------------------------------
Commitments and contingencies - Note 3
Shareholder's equity:
Preferred stock - no par value; authorized 100,000 shares:
Series A; $5,000 stated value; authorized, issued and
outstanding 10,000 shares 50.0 50.0
Common stock - $100 par value; authorized 100,000
shares; issued and outstanding 50,000 shares 5.0 5.0
Capital in excess of par value 184.6 89.5
Income retained for growth 316.0 278.9
------------------------------------
555.6 423.4
------------------------------------
$ 4,285.1 $ 3,043.6
====================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Income and Income Retained for Growth
(Unaudited)
Three months ended Six months ended
June 30, June 30,
(Dollars in millions) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Finance lease income $ 36.6 $ 28.8 $ 69.4 $ 58.0
Interest income on notes receivable 27.9 12.7 54.8 25.3
Operating lease income, net of depreciation
expense 31.7 16.6 63.1 33.3
Net gain on disposal or re-lease of assets 5.0 6.4 8.1 13.8
Other 3.5 0.6 4.0 1.0
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104.7 65.1 199.4 131.4
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EXPENSES
Interest expense 53.0 31.5 109.1 64.5
Provision for losses 2.5 1.9 4.8 3.6
Operating expenses 8.3 2.7 15.7 5.1
Other 7.6 4.7 8.4 5.1
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71.4 40.8 138.0 78.3
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Income before provision for income taxes 33.3 24.3 61.4 53.1
Provision for income taxes 12.2 9.1 22.5 20.2
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Net income 21.1 15.2 38.9 32.9
Income retained for growth at beginning of
period 295.8 245.0 278.9 236.2
Dividends (0.9) (8.9) (1.8) (17.8)
===================================================================
Income retained for growth at end of period $ 316.0 $ 251.3 $ 316.0 $ 251.3
===================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30,
(Dollars in millions) 2000 1999
-------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 38.9 $ 32.9
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense - equipment under operating leases 46.5 37.8
Net gain on disposal or re-lease of assets (8.1) (13.8)
Provision for losses 4.8 3.6
Change in assets and liabilities:
Accounts with Boeing and BCSC 12.8 (5.8)
Other assets 9.8 (2.0)
Accounts payable and accrued expenses (1.9) (2.2)
Other liabilities 2.9 9.8
Deferred income taxes (2.8) 8.5
Other, net (7.0) (0.6)
-------------------------------------
95.9 68.2
-------------------------------------
INVESTING ACTIVITIES
Net change in short-term notes and leases receivable (81.3) (36.0)
Purchase of net assets from Boeing (1,261.9) -
Purchase of equipment for operating leases (59.1) (18.7)
Proceeds from disposition of equipment and leases receivable 54.8 87.5
Collection of notes and leases receivable 505.6 164.1
Acquisition of notes and leases receivable (285.8) (197.7)
-------------------------------------
(1,127.7) (0.8)
-------------------------------------
FINANCING ACTIVITIES
Net change in short-term notes payable 249.1 (48.8)
Long-term debt:
Intercompany issuance for purchase of net assets from Boeing 1,261.9 -
Proceeds 51.6 145.0
Repayments (559.8) (145.9)
Payment of cash dividends (1.8) (17.8)
Capital contribution from Boeing 45.0 -
-------------------------------------
1,046.0 (67.5)
-------------------------------------
Net increase (decrease) in cash and cash equivalents 14.2 (0.1)
Cash and cash equivalents at beginning of year 26.9 20.3
=====================================
Cash and cash equivalents at end of period $ 41.1 $ 20.2
=====================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Boeing Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30,
(Dollars in millions) 2000
---------------------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES FOR STOCK TRANSFER INCLUDED IN THE
PORTFOLIO ACQUISITION (SEE NOTE 1):
<S> <C>
Acquisition of leases receivable $ (170.0)
==========================
Acquisition of accounts payable $ 1.4
==========================
Acquisition of intercompany payables $ 60.1
==========================
Acquisition of long-term debt $ 58.4
==========================
Capital contribution from Boeing for stock transfer $ 50.1
==========================
There were no non-cash investing and financing activities for the six months
ended June 30, 1999.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Boeing Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
Note 1 -- Basis of Presentation
Boeing Capital Corporation (formerly McDonnell Douglas Finance Corporation) (the
"Company") is a wholly owned subsidiary of Boeing Capital Services Corporation
("BCSC"), which is a wholly owned subsidiary of McDonnell Douglas Corporation
("McDonnell Douglas"), which in turn is wholly owned by The Boeing Company
("Boeing"). The accompanying unaudited consolidated financial statements have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management of the Company, the
accompanying consolidated financial statements reflect all adjustments
(consisting of normal recurring accruals) which are necessary to present fairly
the consolidated balance sheets and the related consolidated statements of
income and income retained for growth and cash flows for the interim periods
presented. Operating results for the six-month period ended June 30, 2000, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. The statements should be read in conjunction with the
notes to the consolidated financial statements included in the Company's Form
10-K for the year ended December 31, 1999.
As of March 31, 2000, the Company acquired certain tangible assets and assumed
certain liabilities of Boeing and certain subsidiaries of Boeing, pursuant to a
Term Sheet dated as of January 1, 2000 as well as various definitive asset
transfer agreements dated as of March 31, 2000 (collectively referred to as the
"Transfer Agreements"). Under the terms of the Transfer Agreements, the Company
acquired, effective as of January 1, 2000, a significant portion of Boeing's
customer financing portfolio, including lease and loan agreements and the
related receivables and assets (the "Portfolio"). The purchase price was paid in
the form of promissory notes, dated January 1, 2000, in the aggregate principal
amount of $1,261.9 million, together with an equity contribution to the Company
of $50.1 million. The Company has recorded an intercompany receivable for $17.3
million from Boeing in consideration for which the Company will assume Boeing's
deferred taxes with respect to the Portfolio. The statements should be read in
conjunction with the notes to the Statements of Net Assets Acquired and
Statements of Revenues, Direct Expenses and Identified Corporate Expenses
included in the Company's Form 8-K dated April 13, 2000.
The pro forma unaudited consolidated results of operations as though the
Portfolio had been acquired as of January 1, 1999 are estimated as follows:
<TABLE>
<CAPTION>
Six Months
(Dollars in millions) Ended June 30, 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Revenues $ 209.6
Net income $ 7.1
</TABLE>
These unaudited pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
would have actually resulted had the combinations been in effect on January 1,
1999, or of future results of operations.
Note 2 -- Credit Agreements and Long-Term Debt
As of March 27, 2000, $1.0 billion of the 364-day revolving credit line of
Boeing has been made available to the Company. This new credit facility replaces
the Company's former $240.0 million credit line, which was terminated on March
30, 2000.
The provisions of the most restrictive debt covenant prohibit the payment of
cash dividends by the Company to the extent that the Company's consolidated
assets would be less than 115% of its consolidated liabilities after dividend
payments.
Note 3 -- Commitments and Contingencies
Litigation
On November 1, 1996, The Allen Austin Harris Group, Inc. (the "Plaintiff") filed
a complaint in the Superior Court of the State of California, County of Alameda,
against the Company, McDonnell Douglas, McDonnell Douglas Aerospace - Middle
East Limited and the Selah Group, Inc. (the "Defendants"). The Plaintiff, which
had hoped to establish a manufacturing plant abroad with various assistance from
the Defendants, seeks more than $57.0 million in alleged damages (primarily
consisting of lost profits) based on various theories. The Company believes it
has meritorious defenses to all of the Plaintiff's allegations, but is unable to
determine at this stage of discovery if the litigation will have any future
material adverse effect on the Company's earnings, cash flow or financial
position.
The Company is a party to litigation in the United States District Court,
Southern District of Florida, entitled McDonnell Douglas Finance Corporation
adv. Aviaco International Leasing, Inc., Aviaco Traders International, Inc. and
Craig L. Dobbin with Related Counter-Claims (collectively referred to as
"Aviaco"). The foregoing litigation arose out of an action brought by the
Company in July 1991 seeking remedies on account of defaults by the other
parties to the litigation under loan and related documents involving a $17.9
million loan made by the Company. In January 1994, in response to the Company's
foreclosure of two aircraft and a related aircraft lease agreement which had
been collateral for the loan, Aviaco filed a counter-claim against the Company,
asserting nine claims for alleged damages relating to the Company's foreclosure
based on various tort and contractual theories.
The case proceeded to jury trial on the three of nine claims which survived the
Company's Motion for Summary Judgment. The case was submitted to the jury on
October 16, 1997. On October 17, 1997, the jury returned a verdict in favor of
Aviaco awarding aggregate damages of approximately $12.2 million, including
damages of approximately $10.0 million for the failure to exercise reasonable
care with regard to the related lease agreement.
In December 1997, the Company filed a Motion for Judgment as a Matter of Law,
arguing, among other things, to set aside the $10.0 million award as not being
supported by the record evidence or by applicable law. On February 13, 1998, the
Judge ruled in favor of the Company and set aside the $10.0 million award.
On March 2, 1998, the Judge entered a Final Judgment against the Company in the
aggregate amount, including prejudgment interest, of approximately $2.8 million
with post judgment interest thereon at the rate of 5.42% per annum. Aviaco
appealed the Final Judgment to the United States Court of Appeals for the
Eleventh Circuit. On June 8, 2000, the Court of Appeals affirmed the Final
Judgment. In July 2000, Aviaco filed a petition for rehearing. Taking into
account amounts reserved for this litigation, the Company does not expect such
litigation to have any material adverse effect on its earnings, cash flow or
financial position.
A number of other legal proceedings and claims are pending or have been asserted
against the Company. A substantial number of such legal proceedings and claims
are covered by third parties, including insurance companies. The Company
believes that the final outcome of such proceedings and claims will not have a
material adverse effect on its earnings, cash flow or financial position.
Other
Viacao Aerea Rio-Grandense ("VARIG") accounted for $348.2 million (8.2% of total
Company portfolio) as of June 30, 2000. VARIG has defaulted on its obligations
under leases within the Portfolio in recent years, which has resulted in
deferrals and restructurings. Taking into account collateral values, as well as
certain first loss deficiency and lease rental guaranties, which Boeing has
provided to the Company covering a portion of the VARIG obligations, it is not
expected that the VARIG transactions will have a material adverse effect on the
Company's earnings, cash flow or financial position.
World Airways, Inc. ("World") accounted for $170.4 million (4.0% of total
Company portfolio) and $170.2 million (5.9% of total Company portfolio) at June
30, 2000 and December 31, 1999, respectively. Based on publicly available
reports, World reported net income of $0.6 million for the second quarter of
2000 and a quarter-end cash position of $20.0 million, which is a 72% increase
over its cash position at the end of 1999. World, however, is still reporting a
total net loss of $4.1 million for the first half of 2000. McDonnell Douglas
provides first loss deficiency and lease rental guaranties to the Company for
certain obligations of World under various lease agreements between the Company
and World. Taking into account the guaranties and collateral values, it is not
expected that the World transactions will have a material adverse effect on the
Company's earnings, cash flow or financial position.
Trans World Airlines, Inc. ("TWA") accounted for $146.4 million (3.5% of total
Company portfolio) and $147.3 million (5.1% of total Company portfolio) at June
30, 2000 and December 31, 1999, respectively. In April 1999, Moody's rating
agency lowered TWA's Outlook from Stable to Negative. Based on publicly
available information, in the second quarter of 2000, TWA incurred another net
loss. McDonnell Douglas provides first loss deficiency guaranties to the Company
for certain obligations of TWA under the various lease agreements between the
Company and TWA. At June 30, 2000, the maximum aggregate coverage under such
guaranties was $41.5 million. As of the date hereof, TWA is current on its
payment obligations to the Company. If, however, TWA were to default on its
payment obligations to the Company, this could have a material adverse effect on
the Company's earnings, cash flow or financial position.
At June 30, 2000, the Company had commitments to provide leasing and other
financing totaling $1,339.1 million, $1,059.5 million of which related to
financing new Boeing commercial aircraft. The Company anticipates that not all
of these commitments will be utilized and that it will be able to arrange for
third-party investors to assume a portion of the remaining commitments.
In conjunction with prior asset dispositions and certain guaranties, at June 30,
2000, the Company was subject to a maximum contingent liability of $43.7
million. Based on trends to date, any losses related to such exposure are not
expected by the Company to be significant.
The Company leases aircraft under capital leases which have been subleased to
others. At June 30, 2000, the Company had guaranteed the repayment of $3.6
million in capital lease obligations associated with a 50% partner.
Item 2. Management's Analysis of Results of Operations
--------------------------------------------------------------------------------
Forward-Looking Information Is Subject to Risk and Uncertainty
From time to time, the Company may make certain statements that contain
projections or "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
Certain statements in this Form 10-Q, and particularly in Notes 2 and 3 of the
Notes to Consolidated Financial Statements, Item 2 of Part I and Items 1 and 5
of Part II, may contain forward-looking information. The subject matter of such
statements may include, but not be limited to, the impact on the Company of
strategic decisions of Boeing, the level of new financing opportunities made
available to the Company by Boeing, future earnings, costs, expenditures,
losses, residual values and various business environment trends. In addition to
those contained herein, forward-looking statements and projections may be made
by management of the Company orally or in writing including, but not limited to,
various sections of the Company's filings with the Securities and Exchange
Commission under the Securities Act of 1933 and the Securities Exchange Act of
1934.
Actual results and trends in the future may differ materially from projections
depending on a variety of factors including, but not limited to, the Company's
relationship with Boeing, as well as strategic decisions of Boeing relating to
the Company, the capital equipment requirements of United States and foreign
businesses, capital availability and cost, changes in laws and tax benefits, the
tax position of Boeing (including the applicability of the alternative minimum
tax), competition from other financial institutions, the Company's successful
execution of internal operating plans particularly including implementation of
the Company's directive from Boeing to lead the Boeing-wide customer financing
efforts, defaults by customers, regulatory uncertainties and legal proceedings.
--------------------------------------------------------------------------------
Finance lease income increased $11.4 million (19.7%) from the first six months
of 1999, primarily attributable to a comparable increase in finance leases as a
result of the Portfolio acquisition (see Note 1 of the Notes to Consolidated
Financial Statements in Item 1).
Interest on notes receivable increased $29.5 million (116.6%) from the first six
months of 1999, primarily attributable to new volume of commercial finance
(formerly referred to as commercial equipment leasing and financing) notes
receivable and an increase in notes receivable as a result of the Portfolio
acquisition.
Net operating lease income increased $29.8 million (89.5%) from the first six
months of 1999, primarily attributable to an increase in operating leases as a
result of the Portfolio acquisition.
Gain on disposal or re-lease of assets decreased $5.7 million (41.3%) from the
first six months of 1999, primarily attributable to $5.5 million of income from
two sales within the commercial finance portfolio in the first half of 1999. The
remaining decrease is attributable to other sales within the commercial aircraft
portfolio and commercial finance portfolio in the first six months of 1999.
Other income increased $3.0 million (300.0%) from the first six months of 1999,
primarily attributable to fee income of $2.1 million and $1.1 million in
intercompany interest income earned on cash received by Boeing on the Company's
behalf for payments on leases and loans included in the Portfolio acquisition.
Interest expense increased $44.6 million (69.2%) from the first six months of
1999, primarily attributable to the debt issued in connection with the Portfolio
acquisition and a higher level of borrowings in 2000 as a result of increased
financing activity.
Provision for losses increased $1.2 million (33.3%) from the first six months of
1999, primarily attributable to the increase in financing receivables as a
result of the Portfolio acquisition.
Operating expenses increased $10.6 million (207.8%) from the first six months of
1999, primarily attributable to the addition of employees and nonrecurring
professional service fees incurred in early 2000 for various project assistance.
Other expenses increased $3.3 million (64.7%) from the first six months of 1999,
primarily attributable to a $6.7 million write-off of charges relating to the
discontinuation of a new lease administration system conversion project in the
second quarter of 2000, as compared to a $4.2 million write-down taken on
aircraft returned to the Company in the second quarter of 1999.
Impact of Boeing's Customer Financing Consolidation
In 1999, the commercial aircraft financing group had negligible new business
volume largely due to the fact that the Company was awaiting the decision made
by Boeing in the fourth quarter of 1999 that the Company would have
responsibility for Boeing's customer financing efforts. Now that such decision
has been made, the Company is expected to experience a very significant increase
in new commercial aircraft financing volume compared with prior years.
As of March 31, 2000, the Company acquired certain tangible assets and assumed
certain liabilities of Boeing and certain subsidiaries of Boeing, pursuant to a
Term Sheet dated as of January 1, 2000 as well as the various definitive asset
transfer agreements dated as of March 31, 2000. Under the terms of the Transfer
Agreements, the Company acquired, effective as of January 1, 2000, a significant
portion of Boeing's customer financing portfolio, including lease and loan
agreements and the related receivables and assets. The purchase price was paid
in the form of promissory notes, dated January 1, 2000, in the aggregate
principal amount of $1,261.9 million, together with an equity contribution to
the Company of $50.1 million. The Company has recorded an intercompany
receivable for $17.3 million from Boeing in consideration for which the Company
will assume Boeing's deferred taxes with respect to the Portfolio.
A portion of Boeing's unfunded commercial aircraft financing commitments
existing as of June 30, 2000 of approximately $3,700.0 million may be funded by
the Company, on a transaction by transaction basis, subject to approval of each
transaction by the Company's investment committee (which may require credit
enhancements from Boeing or other parties or other conditions the Company deems
necessary to meet the Company's investment requirements).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Omitted pursuant to instruction H(2).
Part II
Item 1. Legal Proceedings
On November 1, 1996, The Allen Austin Harris Group, Inc. (the "Plaintiff") filed
a complaint in the Superior Court of the State of California, County of Alameda,
against the Company, McDonnell Douglas, McDonnell Douglas Aerospace - Middle
East Limited and the Selah Group, Inc. (the "Defendants"). The Plaintiff, which
had hoped to establish a manufacturing plant abroad with various assistance from
the Defendants, seeks more than $57.0 million in alleged damages (primarily
consisting of lost profits) based on various theories. The Company believes it
has meritorious defenses to all of the Plaintiff's allegations, but is unable to
determine at this stage of discovery if the litigation will have any future
material adverse effect on the Company's earnings, cash flow or financial
position.
The Company is a party to litigation in the United States District Court,
Southern District of Florida, entitled McDonnell Douglas Finance Corporation
adv. Aviaco International Leasing, Inc., Aviaco Traders International, Inc. and
Craig L. Dobbin with Related Counter-Claims (collectively referred to as
"Aviaco"). The foregoing litigation arose out of an action brought by the
Company in July 1991 seeking remedies on account of defaults by the other
parties to the litigation under loan and related documents involving a $17.9
million loan made by the Company. In January 1994, in response to the Company's
foreclosure of two aircraft and a related aircraft lease agreement which had
been collateral for the loan, Aviaco filed a counter-claim against the Company,
asserting nine claims for alleged damages relating to the Company's foreclosure
based on various tort and contractual theories.
The case proceeded to jury trial on the three of nine claims which survived the
Company's Motion for Summary Judgment. The case was submitted to the jury on
October 16, 1997. On October 17, 1997, the jury returned a verdict in favor of
Aviaco awarding aggregate damages of approximately $12.2 million, including
damages of approximately $10.0 million for the failure to exercise reasonable
care with regard to the related lease agreement.
In December 1997, the Company filed a Motion for Judgment as a Matter of Law,
arguing, among other things, to set aside the $10.0 million award as not being
supported by the record evidence or by applicable law. On February 13, 1998, the
Judge ruled in favor of the Company and set aside the $10.0 million award.
On March 2, 1998, the Judge entered a Final Judgment against the Company in the
aggregate amount, including prejudgment interest, of approximately $2.8 million
with post judgment interest thereon at the rate of 5.42% per annum. Aviaco
appealed the Final Judgment to the United States Court of Appeals for the
Eleventh Circuit. On June 8, 2000, the Court of Appeals affirmed the Final
Judgment. In July 2000, Aviaco filed a petition for rehearing. Taking into
account amounts reserved for this litigation, the Company does not expect such
litigation to have any material adverse effect on its earnings, cash flow or
financial position.
A number of other legal proceedings and claims are pending or have been asserted
against the Company, many of which are covered by third parties, including
insurance companies. The Company believes that the final outcome of such
proceedings and claims will not have a material adverse effect on its earnings,
cash flow or financial position.
Item 2. Changes in Securities and Use of Proceeds
Omitted pursuant to instruction H(2).
Item 3. Defaults Upon Senior Securities
Omitted pursuant to instruction H(2).
Item 4. Submission of Matters to a Vote of Security Holders
Omitted pursuant to instruction H(2).
Item 5. Other Information
Summarized below is information on borrowing operations, portfolio balances, new
business volume, analysis of allowance for losses on financing receivables and
credit loss experience, and receivable write-offs, net of recoveries by segment.
Borrowing Operations
On October 10, 1997, the Company filed with the Securities and Exchange
Commission ("SEC") a Form S-3 Registration Statement for a public shelf
registration of $1.2 billion of its debt securities (SEC File No. 333-37635). On
October 31, 1997, the SEC declared such Registration Statement to be effective.
The Company has authorized the sale and issuance from time to time at the
Company's discretion of such debt securities in the form of Company's Series X
medium-term notes for the registered amount of $1.2 billion. As of June 30,
2000, the Company issued $1,060.0 million in aggregate principal amount of such
notes, at interest rates ranging from 5.35% to 7.64% and with maturities ranging
from nine months to 14 years.
On July 7, 1999, the Company filed with the SEC a Form S-3 Registration
Statement (SEC File No. 333-82391) for a public shelf registration of $2.5
billion of its debt securities. On July 20, 2000, the Company filed Amendment
No. 1 to Form S-3 Registration Statement which will permit the Company to
offer the $2.5 billion together with the remaining $140.0 million from the
October 10, 1997 Registration Statement (SEC File No. 333-37635), pursuant to
Rule 429. The Company plans to request the SEC to declare such amended
Registration Statements to be effective in the third quarter of 2000.
As of March 27, 2000, $1.0 billion of the 364-day revolving credit line of
Boeing has been made available to the Company. This new credit facility replaces
the Company's former $240.0 million credit line, which was terminated on March
30, 2000. A copy of the Revolving Credit Agreement and related Borrower
Subsidiary Letter are included with this report on Form 10-Q as Exhibit 10.
Portfolio Balances
<TABLE>
<CAPTION>
Portfolio balances for the Company's financial reporting segments are summarized
as follows:
June 30, December 31,
(Dollars in millions) 2000 1999
--------------------------------------------------------------------------------------------------------------
Commercial Aircraft Financing
Boeing commercial aircraft financing
<S> <C> <C>
Finance leases $ 925.9 $ 744.7
Operating leases 1,104.0 470.0
Notes receivable 338.9 51.8
-----------------------------------
2,368.8 1,266.5
-----------------------------------
Other commercial aircraft financing
Finance leases 114.7 119.8
Operating leases 25.6 21.3
Notes receivable 2.8 3.2
-----------------------------------
143.1 144.3
-----------------------------------
Commercial Finance
Finance leases 588.3 508.3
Operating leases 345.9 336.9
Notes receivable 793.5 652.4
-----------------------------------
1,727.7 1,497.6
-----------------------------------
Other 0.5 0.6
===================================
$ 4,240.1 $ 2,909.0
===================================
</TABLE>
<TABLE>
<CAPTION>
New Business Volume
New business volume is summarized as follows:
Six months ended
June 30,
(Dollars in millions) 2000 1999
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Boeing commercial aircraft financing $ 2.0 $ 2.5
Commercial finance 343.0 212.4
-----------------------------------
$ 345.0 $ 214.9
===================================
</TABLE>
<TABLE>
<CAPTION>
Analysis of Allowance for Losses on Financing Receivables and Credit Loss
Experience
June 30, December 31,
(Dollars in millions) 2000 1999
--------------------------------------------------------------------------------------------------------------
Allowance for losses on financing receivables at beginning
<S> <C> <C>
of year $ 60.7 $ 62.1
Provision for losses 4.8 7.4
Net recoveries (write-offs) 0.4 (8.8)
Allowance acquired from Boeing 80.2 -
------------------------------------
Allowance for losses on financing receivables at end of
period $ 146.1 $ 60.7
====================================
Allowance as a percentage of total receivables 5.3% 2.9%
Net write-offs as percent of average receivables - % 0.4%
More than 90 days delinquent:
Amount of delinquent installments $ 2.5 $ 0.1
Total receivables due from delinquent obligors 48.8 0.8
Total receivables due from delinquent obligors
as a percentage of total receivables 1.8% 0.1%
</TABLE>
Receivable Write-offs, Net of Recoveries by Segment
Commercial aircraft financing had no net write-offs of receivables for the six
months ended June 30, 2000 or 1999. Commercial finance had net recoveries of
receivables of $0.4 million for the six months ended June 30, 2000 and had net
write-offs of $5.6 million for the six months ended June 30, 1999.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 10.1 Revolving Credit Agreement.
Exhibit 10.2 Borrower Subsidiary Letter.
Exhibit 12 Computation of Ratio of Income to Fixed Charges.
Exhibit 27 Financial Data Schedule.
B. Reports on Form 8-K
Form 8-K dated April 13, 2000 to report under Item 2, the Portfolio
acquisition and to report under Item 7 the pro forma financial
information of the Portfolio acquisition.
<PAGE>
Signatures
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, its principal financial officer and by its principal accounting
officer, thereunto duly authorized.
Boeing Capital Corporation
August 14, 2000 /S/ STEVEN W. VOGEDING
__________________________________
Steven W.Vogeding
Vice President and Chief Financial
Officer (Principal Financial Officer) and
Registrant's Authorized Officer
/S/ MAURA R. MIZUGUCHI
__________________________________
Maura R. Mizuguchi
Controller (Principal Accounting Officer)
