ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
THE BOEING COMPANY |
Delaware | 91-0425694 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
100 N. Riverside Plaza, Chicago, IL | 60606-1596 | |
(Address of principal executive offices) | (Zip Code) |
(312) 544-2000 |
Large accelerated filer | ý | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
Part I. Financial Information (Unaudited) | Page | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. Other Information | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
(Dollars in millions, except per share data) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Sales of products | $18,512 | $19,885 | |||||
Sales of services | 2,464 | 2,747 | |||||
Total revenues | 20,976 | 22,632 | |||||
Cost of products | (15,363 | ) | (16,945 | ) | |||
Cost of services | (1,888 | ) | (2,136 | ) | |||
Boeing Capital interest expense | (13 | ) | (16 | ) | |||
Total costs and expenses | (17,264 | ) | (19,097 | ) | |||
3,712 | 3,535 | ||||||
Income from operating investments, net | 81 | 54 | |||||
General and administrative expense | (933 | ) | (888 | ) | |||
Research and development expense, net | (838 | ) | (917 | ) | |||
Gain on dispositions, net | 2 | 4 | |||||
Earnings from operations | 2,024 | 1,788 | |||||
Other income, net | 22 | 26 | |||||
Interest and debt expense | (87 | ) | (73 | ) | |||
Earnings before income taxes | 1,959 | 1,741 | |||||
Income tax expense | (508 | ) | (522 | ) | |||
Net earnings | $1,451 | $1,219 | |||||
Basic earnings per share | $2.36 | $1.85 | |||||
Diluted earnings per share | $2.34 | $1.83 | |||||
Cash dividends paid per share | $1.42 | $1.09 | |||||
Weighted average diluted shares (millions) | 621.2 | 665.8 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Net earnings | $1,451 | $1,219 | |||||
Other comprehensive income, net of tax: | |||||||
Currency translation adjustments | 34 | 23 | |||||
Unrealized gain/(loss) on certain investments, net of tax of ($1) and $1 | 1 | (2 | ) | ||||
Unrealized gain on derivative instruments: | |||||||
Unrealized gain arising during period, net of tax of ($28) and ($32) | 52 | 58 | |||||
Reclassification adjustment for losses included in net earnings, net of tax of ($9) and ($12) | 16 | 23 | |||||
Total unrealized gain on derivative instruments, net of tax | 68 | 81 | |||||
Defined benefit pension plans and other postretirement benefits: | |||||||
Amortization of prior service credits included in net periodic pension cost, net of tax of $16 and $7 | (28 | ) | (14 | ) | |||
Net actuarial gain/(loss) arising during the period, net of tax of ($1) and $181 | 3 | (328 | ) | ||||
Amortization of actuarial losses included in net periodic pension cost, net of tax of ($72) and ($72) | 132 | 131 | |||||
Settlements and curtailments included in net income, net of tax of $0 and ($6) | 11 | ||||||
Pension and postretirement (cost)/benefit related to our equity method investments, net of tax of $1 and ($4) | (2 | ) | 8 | ||||
Total defined benefit pension plans and other postretirement benefits, net of tax | 105 | (192 | ) | ||||
Other comprehensive income/(loss), net of tax | 208 | (90 | ) | ||||
Comprehensive income related to noncontrolling interests | 1 | ||||||
Comprehensive income, net of tax | $1,659 | $1,130 |
(Dollars in millions, except per share data) | March 31 2017 | December 31 2016 | |||||
Assets | |||||||
Cash and cash equivalents | $8,190 | $8,801 | |||||
Short-term and other investments | 1,015 | 1,228 | |||||
Accounts receivable, net | 9,335 | 8,832 | |||||
Current portion of customer financing, net | 580 | 428 | |||||
Inventories, net of advances and progress billings | 43,247 | 43,199 | |||||
Total current assets | 62,367 | 62,488 | |||||
Customer financing, net | 3,527 | 3,773 | |||||
Property, plant and equipment, net of accumulated depreciation of $17,156 and $16,883 | 12,842 | 12,807 | |||||
Goodwill | 5,342 | 5,324 | |||||
Acquired intangible assets, net | 2,496 | 2,540 | |||||
Deferred income taxes | 336 | 332 | |||||
Investments | 1,319 | 1,317 | |||||
Other assets, net of accumulated amortization of $527 and $497 | 1,444 | 1,416 | |||||
Total assets | $89,673 | $89,997 | |||||
Liabilities and equity | |||||||
Accounts payable | $11,964 | $11,190 | |||||
Accrued liabilities | 13,332 | 14,691 | |||||
Advances and billings in excess of related costs | 24,118 | 23,869 | |||||
Short-term debt and current portion of long-term debt | 367 | 384 | |||||
Total current liabilities | 49,781 | 50,134 | |||||
Deferred income taxes | 1,339 | 1,338 | |||||
Accrued retiree health care | 5,885 | 5,916 | |||||
Accrued pension plan liability, net | 19,796 | 19,943 | |||||
Other long-term liabilities | 2,285 | 2,221 | |||||
Long-term debt | 10,432 | 9,568 | |||||
Shareholders’ equity: | |||||||
Common stock, par value $5.00 – 1,200,000,000 shares authorized; 1,012,261,159 shares issued | 5,061 | 5,061 | |||||
Additional paid-in capital | 4,604 | 4,762 | |||||
Treasury stock, at cost - 406,468,802 and 395,109,568 shares | (38,320 | ) | (36,097 | ) | |||
Retained earnings | 42,165 | 40,714 | |||||
Accumulated other comprehensive loss | (13,415 | ) | (13,623 | ) | |||
Total shareholders’ equity | 95 | 817 | |||||
Noncontrolling interests | 60 | 60 | |||||
Total equity | 155 | 877 | |||||
Total liabilities and equity | $89,673 | $89,997 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Cash flows – operating activities: | |||||||
Net earnings | $1,451 | $1,219 | |||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Non-cash items – | |||||||
Share-based plans expense | 50 | 51 | |||||
Depreciation and amortization | 471 | 443 | |||||
Investment/asset impairment charges, net | 23 | 33 | |||||
Customer financing valuation benefit | 7 | (2 | ) | ||||
Gain on dispositions, net | (2 | ) | (4 | ) | |||
Other charges and credits, net | 52 | 84 | |||||
Changes in assets and liabilities – | |||||||
Accounts receivable | (769 | ) | (1,002 | ) | |||
Inventories, net of advances and progress billings | (31 | ) | (56 | ) | |||
Accounts payable | 616 | 960 | |||||
Accrued liabilities | (613 | ) | (467 | ) | |||
Advances and billings in excess of related costs | 249 | (435 | ) | ||||
Income taxes receivable, payable and deferred | 495 | 273 | |||||
Other long-term liabilities | (72 | ) | (116 | ) | |||
Pension and other postretirement plans | 10 | 79 | |||||
Customer financing, net | 232 | 276 | |||||
Other | (75 | ) | (61 | ) | |||
Net cash provided by operating activities | 2,094 | 1,275 | |||||
Cash flows – investing activities: | |||||||
Property, plant and equipment additions | (466 | ) | (748 | ) | |||
Property, plant and equipment reductions | 9 | 11 | |||||
Contributions to investments | (605 | ) | (204 | ) | |||
Proceeds from investments | 803 | 493 | |||||
Other | (3 | ) | 10 | ||||
Net cash used by investing activities | (262 | ) | (438 | ) | |||
Cash flows – financing activities: | |||||||
New borrowings | 872 | 115 | |||||
Debt repayments | (34 | ) | (128 | ) | |||
Stock options exercised | 174 | 42 | |||||
Employee taxes on certain share-based payment arrangements | (107 | ) | (76 | ) | |||
Common shares repurchased | (2,500 | ) | (3,501 | ) | |||
Dividends paid | (868 | ) | (717 | ) | |||
Net cash used by financing activities | (2,463 | ) | (4,265 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 20 | 12 | |||||
Net decrease in cash and cash equivalents | (611 | ) | (3,416 | ) | |||
Cash and cash equivalents at beginning of year | 8,801 | 11,302 | |||||
Cash and cash equivalents at end of period | $8,190 | $7,886 |
Boeing shareholders | |||||||||||||||||||||
(Dollars in millions, except per share data) | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Non- controlling Interests | Total | ||||||||||||||
Balance at January 1, 2016 | $5,061 | $4,834 | ($29,568 | ) | $38,756 | ($12,748 | ) | $62 | $6,397 | ||||||||||||
Net earnings | 1,219 | 1 | 1,220 | ||||||||||||||||||
Other comprehensive income, net of tax of $63 | (90 | ) | (90 | ) | |||||||||||||||||
Share-based compensation and related dividend equivalents | 54 | 54 | |||||||||||||||||||
Excess tax pools | 44 | 44 | |||||||||||||||||||
Treasury shares issued for stock options exercised, net | (8 | ) | 50 | 42 | |||||||||||||||||
Treasury shares issued for other share-based plans, net | (140 | ) | 80 | (60 | ) | ||||||||||||||||
Common shares repurchased | (3,501 | ) | (3,501 | ) | |||||||||||||||||
Balance at March 31, 2016 | $5,061 | $4,784 | ($32,939 | ) | $39,975 | ($12,838 | ) | $63 | $4,106 | ||||||||||||
Balance at January 1, 2017 | $5,061 | $4,762 | ($36,097 | ) | $40,714 | ($13,623 | ) | $60 | $877 | ||||||||||||
Net earnings | 1,451 | 1,451 | |||||||||||||||||||
Other comprehensive loss, net of tax of ($94) | 208 | 208 | |||||||||||||||||||
Share-based compensation and related dividend equivalents | 48 | 48 | |||||||||||||||||||
Treasury shares issued for stock options exercised, net | (42 | ) | 215 | 173 | |||||||||||||||||
Treasury shares issued for other share-based plans, net | (164 | ) | 62 | (102 | ) | ||||||||||||||||
Common shares repurchased | (2,500 | ) | (2,500 | ) | |||||||||||||||||
Balance at March 31, 2017 | $5,061 | $4,604 | ($38,320 | ) | $42,165 | ($13,415 | ) | $60 | $155 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Commercial Airplanes | $14,305 | $14,399 | |||||
Defense, Space & Security: | |||||||
Boeing Military Aircraft | 2,636 | 3,659 | |||||
Network & Space Systems | 1,564 | 1,735 | |||||
Global Services & Support | 2,332 | 2,562 | |||||
Total Defense, Space & Security | 6,532 | 7,956 | |||||
Boeing Capital | 92 | 64 | |||||
Unallocated items, eliminations and other | 47 | 213 | |||||
Total revenues | $20,976 | $22,632 | |||||
Earnings from operations: | |||||||
Commercial Airplanes | $1,215 | $1,033 | |||||
Defense, Space & Security: | |||||||
Boeing Military Aircraft | 321 | 334 | |||||
Network & Space Systems | 98 | 148 | |||||
Global Services & Support | 318 | 340 | |||||
Total Defense, Space & Security | 737 | 822 | |||||
Boeing Capital | 39 | 5 | |||||
Segment operating profit | 1,991 | 1,860 | |||||
Unallocated items, eliminations and other | 33 | (72 | ) | ||||
Earnings from operations | 2,024 | 1,788 | |||||
Other income, net | 22 | 26 | |||||
Interest and debt expense | (87 | ) | (73 | ) | |||
Earnings before income taxes | 1,959 | 1,741 | |||||
Income tax expense | (508 | ) | (522 | ) | |||
Net earnings | $1,451 | $1,219 |
Three months ended March 31 | |||||||
2017 | 2016 | ||||||
Increase/(Decrease) to Earnings from Operations | $32 | ($84 | ) | ||||
Increase/(Decrease) to Diluted EPS | $0.04 | ($0.09 | ) |
(In millions - except per share amounts) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Net earnings | $1,451 | $1,219 | |||||
Less: earnings available to participating securities | 2 | 2 | |||||
Net earnings available to common shareholders | $1,449 | $1,217 | |||||
Basic | |||||||
Basic weighted average shares outstanding | 614.4 | 659.6 | |||||
Less: participating securities | 0.8 | 1.0 | |||||
Basic weighted average common shares outstanding | 613.6 | 658.6 | |||||
Diluted | |||||||
Basic weighted average shares outstanding | 614.4 | 659.6 | |||||
Dilutive potential common shares(1) | 6.8 | 6.2 | |||||
Diluted weighted average shares outstanding | 621.2 | 665.8 | |||||
Less: participating securities | 0.8 | 1.0 | |||||
Diluted weighted average common shares outstanding | 620.4 | 664.8 | |||||
Net earnings per share: | |||||||
Basic | $2.36 | $1.85 | |||||
Diluted | 2.34 | 1.83 |
(1) | Diluted earnings per share includes any dilutive impact of stock options, restricted stock units, performance-based restricted stock units and performance awards. |
(Shares in millions) | Three months ended March 31 | ||||
2017 | 2016 | ||||
Performance awards | 5.6 | 7.6 | |||
Performance-based restricted stock units | 1.3 | 1.9 |
March 31 2017 | December 31 2016 | ||||||
Long-term contracts in progress | $13,684 | $12,801 | |||||
Commercial aircraft programs | 53,493 | 52,048 | |||||
Commercial spare parts, used aircraft, general stock materials and other | 5,410 | 5,446 | |||||
Inventory before advances and progress billings | 72,587 | 70,295 | |||||
Less advances and progress billings | (29,340 | ) | (27,096 | ) | |||
Total | $43,247 | $43,199 |
March 31 2017 | December 31 2016 | ||||||
Financing receivables: | |||||||
Investment in sales-type/finance leases | $1,501 | $1,482 | |||||
Notes | 899 | 807 | |||||
Total financing receivables | 2,400 | 2,289 | |||||
Operating lease equipment, at cost, less accumulated depreciation of $334 and $359 | 1,723 | 1,922 | |||||
Gross customer financing | 4,123 | 4,211 | |||||
Less allowance for losses on receivables | (16 | ) | (10 | ) | |||
Total | $4,107 | $4,201 |
Rating categories | March 31 2017 | December 31 2016 | |||||
BBB | $1,284 | $1,324 | |||||
BB | 540 | 538 | |||||
B | 530 | 383 | |||||
CCC | 46 | 44 | |||||
Total carrying value of financing receivables | $2,400 | $2,289 |
March 31 2017 | December 31 2016 | ||||||
717 Aircraft ($296 and $301 accounted for as operating leases) | $1,233 | $1,282 | |||||
747-8 Aircraft ($948 and $1,086 accounted for as operating leases) | 1,071 | 1,111 | |||||
MD-80 Aircraft (Accounted for as sales-type finance leases) | 263 | 259 | |||||
757 Aircraft ($42 and $43 accounted for as operating leases) | 241 | 246 | |||||
777 Aircraft ($16 and $0 accounted for as operating leases) | 177 | 165 | |||||
767 Aircraft ($80 and $85 accounted for as operating leases) | 161 | 170 | |||||
747-400 Aircraft ($82 and $149 accounted for as operating leases) | 144 | 149 | |||||
737 Aircraft ($100 and $103 Accounted for as operating leases) | 105 | 103 |
March 31 2017 | December 31 2016 | ||||||
Equity method investments (1) | 1,242 | 1,242 | |||||
Time deposits | 446 | 665 | |||||
Available-for-sale investments | 542 | 537 | |||||
Restricted cash & cash equivalents(2) | 74 | 68 | |||||
Other investments | 30 | 33 | |||||
Total | $2,334 | $2,545 |
(1) | Dividends received were $96 and $49 for the three months ended March 31, 2017 and 2016. |
(2) | Reflects amounts restricted in support of our workers’ compensation programs and insurance premiums. |
2017 | 2016 | ||||||
Beginning balance – January 1 | $562 | $566 | |||||
Reductions for payments made | (11 | ) | (7 | ) | |||
Changes in estimates | (26 | ) | 19 | ||||
Ending balance – March 31 | $525 | $578 |
2017 | 2016 | ||||||
Beginning balance – January 1 | $1,414 | $1,485 | |||||
Additions for current year deliveries | 70 | 92 | |||||
Reductions for payments made | (74 | ) | (79 | ) | |||
Changes in estimates | (65 | ) | (25 | ) | |||
Ending balance – March 31 | $1,345 | $1,473 |
Total | |||
April through December 2017 | $1,438 | ||
2018 | 3,528 | ||
2019 | 3,166 | ||
2020 | 1,901 | ||
2021 | 1,634 | ||
Thereafter | 2,400 | ||
$14,067 |
Maximum Potential Payments | Estimated Proceeds from Collateral/Recourse | Carrying Amount of Liabilities | ||||||||||||||||||
March 31 2017 | December 31 2016 | March 31 2017 | December 31 2016 | March 31 2017 | December 31 2016 | |||||||||||||||
Contingent repurchase commitments | $1,306 | $1,306 | $1,306 | $1,306 | $9 | $9 | ||||||||||||||
Indemnifications to ULA: | ||||||||||||||||||||
Contributed Delta program launch inventory | 72 | 77 | ||||||||||||||||||
Contract pricing | 261 | 261 | 7 | 7 | ||||||||||||||||
Other Delta contracts | 196 | 216 | 5 | 5 | ||||||||||||||||
Credit guarantees | 29 | 29 | 26 | 27 | 2 | 2 |
Pension | Other Postretirement Benefits | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Service cost | $101 | $163 | $26 | $32 | |||||||||||
Interest cost | 748 | 764 | 57 | 65 | |||||||||||
Expected return on plan assets | (961 | ) | (999 | ) | (2 | ) | (2 | ) | |||||||
Amortization of prior service (credits)/costs | (10 | ) | 10 | (34 | ) | (31 | ) | ||||||||
Recognized net actuarial loss | 201 | 197 | 3 | 6 | |||||||||||
Settlement/curtailment/other losses | 1 | 15 | |||||||||||||
Net periodic benefit cost | $80 | $150 | $50 | $70 | |||||||||||
Net periodic benefit cost included in Earnings from operations | $334 | $629 | $85 | $88 |
Currency Translation Adjustments | Unrealized Gains and Losses on Certain Investments | Unrealized Gains and Losses on Derivative Instruments | Defined Benefit Pension Plans & Other Postretirement Benefits | Total (1) | |||||||||||||||
Balance at January 1, 2016 | ($39 | ) | ($197 | ) | ($12,512 | ) | ($12,748 | ) | |||||||||||
Other comprehensive income/(loss) before reclassifications | 23 | (2 | ) | 58 | (320 | ) | (241 | ) | |||||||||||
Amounts reclassified from AOCI | 23 | 128 | (2) | 151 | |||||||||||||||
Net current period Other comprehensive income/(loss) | 23 | (2 | ) | 81 | (192 | ) | (90 | ) | |||||||||||
Balance at March 31, 2016 | ($16 | ) | ($2 | ) | ($116 | ) | ($12,704 | ) | ($12,838 | ) | |||||||||
Balance at January 1, 2017 | ($143 | ) | ($2 | ) | ($127 | ) | ($13,351 | ) | ($13,623 | ) | |||||||||
Other comprehensive income before reclassifications | 34 | 1 | 52 | 1 | 88 | ||||||||||||||
Amounts reclassified from AOCI | 16 | 104 | (2) | 120 | |||||||||||||||
Net current period Other comprehensive income | 34 | 1 | 68 | 105 | 208 | ||||||||||||||
Balance at March 31, 2017 | ($109 | ) | ($1 | ) | ($59 | ) | ($13,246 | ) | ($13,415 | ) |
(2) | Primarily relates to amortization of actuarial losses for the three months ended March 31, 2017 and 2016 totaling $132 and $131 (net of tax of $(72) and ($72)). These are included in the net periodic pension cost of which a portion is allocated to production as inventoried costs. See Note 17. |
Notional amounts (1) | Other assets | Accrued liabilities | ||||||||||||||||
March 31 2017 | December 31 2016 | March 31 2017 | December 31 2016 | March 31 2017 | December 31 2016 | |||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||
Foreign exchange contracts | $2,497 | $2,584 | $72 | $34 | ($154 | ) | ($225 | ) | ||||||||||
Interest rate contracts | 125 | 125 | 6 | 6 | ||||||||||||||
Commodity contracts | 22 | 53 | 3 | 7 | (8 | ) | (5 | ) | ||||||||||
Derivatives not receiving hedge accounting treatment: | ||||||||||||||||||
Foreign exchange contracts | 470 | 465 | 18 | 21 | (11 | ) | (17 | ) | ||||||||||
Commodity contracts | 729 | 648 | ||||||||||||||||
Total derivatives | $3,843 | $3,875 | 99 | 68 | (173 | ) | (247 | ) | ||||||||||
Netting arrangements | (56 | ) | (45 | ) | 56 | 45 | ||||||||||||
Net recorded balance | $43 | $23 | ($117 | ) | ($202 | ) |
(1) | Notional amounts represent the gross contract/notional amount of the derivatives outstanding. |
Three months ended March 31 | |||||||
2017 | 2016 | ||||||
Effective portion recognized in Other comprehensive income/(loss), net of taxes: | |||||||
Foreign exchange contracts | $56 | $62 | |||||
Commodity contracts | (4 | ) | (4 | ) | |||
Effective portion reclassified out of Accumulated other comprehensive loss into earnings, net of taxes: | |||||||
Foreign exchange contracts | (15 | ) | (21 | ) | |||
Commodity contracts | (1 | ) | (2 | ) | |||
Forward points recognized in Other income, net: | |||||||
Foreign exchange contracts | 1 | 2 | |||||
Undesignated derivatives recognized in Other income, net: | |||||||
Foreign exchange contracts | 5 | 2 |
March 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Money market funds | $2,074 | $2,074 | $2,858 | $2,858 | |||||||||||||||||||
Available-for-sale investments: | |||||||||||||||||||||||
Commercial paper | 118 | $118 | 162 | $162 | |||||||||||||||||||
Corporate notes | 319 | 319 | 271 | 271 | |||||||||||||||||||
U.S. government agencies | 57 | 57 | 63 | 63 | |||||||||||||||||||
Other | 48 | 48 | 46 | 46 | |||||||||||||||||||
Derivatives | 43 | 43 | 23 | 23 | |||||||||||||||||||
Total assets | $2,659 | $2,122 | $537 | $3,423 | $2,904 | $519 | |||||||||||||||||
Liabilities | |||||||||||||||||||||||
Derivatives | ($117 | ) | ($117 | ) | ($202 | ) | ($202 | ) | |||||||||||||||
Total liabilities | ($117 | ) | ($117 | ) | ($202 | ) | ($202 | ) |
2017 | 2016 | ||||||||||||||
Fair Value | Total Losses | Fair Value | Total Losses | ||||||||||||
Operating lease equipment | $31 | ($11 | ) | $40 | ($8 | ) | |||||||||
Property, plant and equipment | 9 | (1 | ) | (4 | ) | ||||||||||
Acquired intangible assets | 12 | (10 | ) | ||||||||||||
Investments | 1 | (11 | ) | ||||||||||||
Total | $41 | ($23 | ) | $52 | ($22 | ) |
Fair Value | Valuation Technique(s) | Unobservable Input | Range Median or Average | ||||
Operating lease equipment | $31 | Market approach | Aircraft value publications | $58 - $73(1) Median $69 | |||
Aircraft condition adjustments | ($38) - $0(2) Net ($38) |
(1) | The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process. |
(2) | The negative amount represents the sum for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments. |
March 31, 2017 | ||||||||||||
Carrying Amount | Total Fair Value | Level 1 | Level 2 | Level 3 | ||||||||
Assets | ||||||||||||
Notes receivable, net | $ | 899 | $ | 906 | $ | 906 | ||||||
Liabilities | ||||||||||||
Debt, excluding capital lease obligations | (10,670 | ) | (12,066 | ) | (11,935 | ) | (131 | ) |
December 31, 2016 | ||||||||||||
Carrying Amount | Total Fair Value | Level 1 | Level 2 | Level 3 | ||||||||
Assets | ||||||||||||
Notes receivable, net | $ | 807 | $ | 803 | $ | 803 | ||||||
Liabilities | ||||||||||||
Debt, excluding capital lease obligations | (9,815 | ) | (11,209 | ) | (11,078 | ) | (131 | ) |
Three months ended March 31 | |||||||
2017 | 2016 | ||||||
Commercial Airplanes | $597 | $428 | |||||
Boeing Capital | 5 | 5 | |||||
Total | $602 | $433 |
Three months ended March 31 | |||||||
2017 | 2016 | ||||||
Share-based plans | ($21 | ) | ($23 | ) | |||
Deferred compensation | (50 | ) | 16 | ||||
Amortization of previously capitalized interest | (31 | ) | (30 | ) | |||
Eliminations and other unallocated items | (180 | ) | (129 | ) | |||
Sub-total | (282 | ) | (166 | ) | |||
Pension | 255 | 45 | |||||
Postretirement | 60 | 49 | |||||
Pension and Postretirement | 315 | 94 | |||||
Total | $33 | ($72 | ) |
March 31 2017 | December 31 2016 | ||||||
Commercial Airplanes | $55,916 | $55,527 | |||||
Defense, Space & Security: | |||||||
Boeing Military Aircraft | 6,774 | 6,698 | |||||
Network & Space Systems | 6,360 | 6,113 | |||||
Global Services & Support | 4,506 | 4,020 | |||||
Total Defense, Space & Security | 17,640 | 16,831 | |||||
Boeing Capital | 4,025 | 4,139 | |||||
Unallocated items, eliminations and other | 12,092 | 13,500 | |||||
Total | $89,673 | $89,997 |
FORWARD-LOOKING STATEMENTS | |
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. | |
Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: | |
(1) | general conditions in the economy and our industry, including those due to regulatory changes; |
(2) | our reliance on our commercial airline customers; |
(3) | the overall health of our aircraft production system, planned production rate increases across multiple commercial airline programs, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; |
(4) | changing budget and appropriation levels and acquisition priorities of the U.S. government; |
(5) | our dependence on U.S. government contracts; |
(6) | our reliance on fixed-price contracts; |
(7) | our reliance on cost-type contracts; |
(8) | uncertainties concerning contracts that include in-orbit incentive payments; |
(9) | our dependence on our subcontractors and suppliers as well as the availability of raw materials; |
(10) | changes in accounting estimates; |
(11) | changes in the competitive landscape in our markets; |
(12) | our non-U.S. operations, including sales to non-U.S. customers; |
(13) | potential adverse developments in new or pending litigation and/or government investigations; |
(14) | customer and aircraft concentration in Boeing Capital’s customer financing portfolio; |
(15) | changes in our ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments; |
(16) | realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures; |
(17) | the adequacy of our insurance coverage to cover significant risk exposures; |
(18) | potential business disruptions, including those related to physical security threats, information technology or cyber attacks, epidemics, sanctions or natural disasters; |
(19) | work stoppages or other labor disruptions; |
(20) | significant changes in discount rates and actual investment return on pension assets; |
(21) | potential environmental liabilities; and |
(22) | threats to the security of our or our customers’ information. |
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” on pages 6 through 14 of our most recent Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 9, 10, and 16 to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Current Reports on Form 8-K. Any forward-looking information speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law. | |
(Dollars in millions, except per share data) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $20,976 | $22,632 | |||||
GAAP | |||||||
Earnings from operations | $2,024 | $1,788 | |||||
Operating margins | 9.6 | % | 7.9 | % | |||
Effective income tax rate | 25.9 | % | 30.0 | % | |||
Net earnings | $1,451 | $1,219 | |||||
Diluted earnings per share | $2.34 | $1.83 | |||||
Non-GAAP (1) | |||||||
Core operating earnings | $1,709 | $1,694 | |||||
Core operating margins | 8.1 | % | 7.5 | % | |||
Core earnings per share | $2.01 | $1.74 |
(1) | These measures exclude certain components of pension and other postretirement benefit expense. See page 43 for important information about these non-GAAP measures and reconciliations to the most comparable GAAP measures. |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Commercial Airplanes | $14,305 | $14,399 | |||||
Defense, Space & Security | 6,532 | 7,956 | |||||
Boeing Capital | 92 | 64 | |||||
Unallocated items, eliminations and other | 47 | 213 | |||||
Total | $20,976 | $22,632 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Commercial Airplanes | $1,215 | $1,033 | |||||
Defense, Space & Security | 737 | 822 | |||||
Boeing Capital | 39 | 5 | |||||
Unallocated pension and other postretirement benefit income | 315 | 94 | |||||
Other unallocated items and eliminations | (282 | ) | (166 | ) | |||
Earnings from operations (GAAP) | $2,024 | $1,788 | |||||
Unallocated pension and other postretirement benefit income | (315 | ) | (94 | ) | |||
Core operating earnings (Non-GAAP) | $1,709 | $1,694 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Share-based plans | ($21 | ) | ($23 | ) | |||
Deferred compensation | (50 | ) | 16 | ||||
Eliminations and other unallocated items | (211 | ) | (159 | ) | |||
Sub-total (included in core operating earnings*) | (282 | ) | (166 | ) | |||
Pension | 255 | 45 | |||||
Postretirement | 60 | 49 | |||||
Pension and other postretirement benefit income(excluded from core operating earnings*) | 315 | 94 | |||||
Total | $33 | ($72 | ) |
(Dollars in millions) | Three months ended March 31 | ||||||
Pension Plans | 2017 | 2016 | |||||
Service cost | $101 | $163 | |||||
Interest cost | 748 | 764 | |||||
Expected return on plan assets | (961 | ) | (999 | ) | |||
Amortization of prior service costs | (10 | ) | 10 | ||||
Recognized net actuarial loss | 201 | 197 | |||||
Settlement/curtailment/other losses | 1 | 15 | |||||
Net periodic benefit cost | $80 | $150 |
(Dollars in millions) | Three months ended March 31 | ||||||
Pension Plans | 2017 | 2016 | |||||
Allocated to business segments | ($589 | ) | ($674 | ) | |||
Unallocated items, Eliminations and other | 255 | 45 | |||||
Total | ($334 | ) | ($629 | ) |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Earnings from operations | $2,024 | $1,788 | |||||
Other income, net | 22 | 26 | |||||
Interest and debt expense | (87 | ) | (73 | ) | |||
Earnings from operations | 1,959 | 1,741 | |||||
Income tax expense | (508 | ) | (522 | ) | |||
Net earnings from continuing operations | $1,451 | $1,219 |
(Dollars in millions) | Three months ended March 31 | |||||||||
2017 | 2016 | Change | ||||||||
Cost of sales | $17,264 | $19,097 | ($1,833 | ) | ||||||
Cost of sales as a % of Revenues | 82.3 | % | 84.4 | % | (2.1 | %) |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Commercial Airplanes | $636 | $671 | |||||
Defense, Space & Security | 213 | 258 | |||||
Other | (11 | ) | (12 | ) | |||
Total | $838 | $917 |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Total contractual backlog | $461,549 | $458,277 | |||||
Unobligated backlog | 17,955 | 15,215 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $14,305 | $14,399 | |||||
Earnings from operations: | $1,215 | $1,033 | |||||
Operating margins | 8.5 | % | 7.2 | % |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Contractual backlog | $415,086 | $416,198 | |||||
Unobligated backlog | 1,810 | 160 |
737 | * | 747 | † | 767 | 777 | 787 | Total | ||||||||||
Deliveries during the first three months of 2017 | 113 | (5) | 1 | (1) | 2 | 21 | 32 | 169 | |||||||||
Deliveries during the first three months of 2016 | 121 | (5) | 1 | 1 | 23 | 30 | 176 | ||||||||||
Cumulative deliveries as of 3/31/2017 | 6,316 | 1,529 | 1,098 | 1,481 | 532 | ||||||||||||
Cumulative deliveries as of 12/31/2016 | 6,203 | 1,528 | 1,096 | 1,460 | 500 |
† | Aircraft accounted for as revenues by Commercial Airplanes and as operating leases in consolidation identified by parentheses |
Program | |||||||||||||||||
As of 3/31/2017 | 737 | 747* | 767 | 777 | 777X | 787 | |||||||||||
Program accounting quantities | 9,200 | 1,555 | 1,159 | 1,625 | ** | 1,300 | |||||||||||
Undelivered units under firm orders | 4,506 | 23 | 106 | 124 | 306 | 679 | |||||||||||
Cumulative firm orders | 10,822 | 1,552 | 1,204 | 1,605 | 306 | 1,211 |
Program | |||||||||||||||||
As of 12/31/2016 | 737 | 747 | 767 | 777 | 777X | 787 | |||||||||||
Program accounting quantities | 9,000 | 1,555 | 1,159 | 1,625 | ** | 1,300 | |||||||||||
Undelivered units under firm orders | 4,452 | 28 | 93 | 136 | 306 | 700 | |||||||||||
Cumulative firm orders | 10,655 | 1,556 | 1,189 | 1,596 | 306 | 1,200 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $6,532 | $7,956 | |||||
Earnings from operations | $737 | $822 | |||||
Operating margins | 11.3 | % | 10.3 | % |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Contractual backlog | $46,463 | $42,079 | |||||
Unobligated backlog | 16,145 | 15,055 |
Three months ended March 31 | |||
2017 | 2016 | ||
F/A-18 Models | 6 | 8 | |
F-15 Models | 3 | 4 | |
C-17 Globemaster III | 3 | ||
CH-47 Chinook (New) | 3 | 3 | |
CH-47 Chinook (Renewed) | 9 | 9 | |
AH-64 Apache (New) | 3 | 7 | |
AH-64 Apache (Remanufactured) | 13 | 11 | |
P-8 Models | 4 | 4 | |
Total | 41 | 49 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $2,636 | $3,659 | |||||
Earnings from operations | $321 | $334 | |||||
Operating margins | 12.2 | % | 9.1 | % |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Contractual backlog | $23,387 | $21,415 | |||||
Unobligated backlog | 6,578 | 4,026 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $1,564 | $1,735 | |||||
Earnings from operations | $98 | $148 | |||||
Operating margins | 6.3 | % | 8.5 | % |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Contractual backlog | $6,017 | $5,054 | |||||
Unobligated backlog | 7,848 | 8,293 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $2,332 | $2,562 | |||||
Earnings from operations | $318 | $340 | |||||
Operating margins | 13.6 | % | 13.3 | % |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Contractual backlog | $17,059 | $15,610 | |||||
Unobligated backlog | 1,719 | 2,736 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $92 | $64 | |||||
Earnings from operations | $39 | $5 | |||||
Operating margins | 42 | % | 8 | % |
(Dollars in millions) | March 31 2017 | December 31 2016 | |||||
Customer financing and investment portfolio, net | $3,994 | $4,109 | |||||
Other assets, primarily cash and short-term investments | 609 | 346 | |||||
Total assets | $4,603 | $4,455 | |||||
Other liabilities, primarily deferred income taxes | $930 | $1,007 | |||||
Debt, including intercompany loans | 3,063 | 2,864 | |||||
Equity | 610 | 584 | |||||
Total liabilities and equity | $4,603 | $4,455 | |||||
Debt-to-equity ratio | 5.0-to-1 | 4.9-to-1 |
(Dollars in millions) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Net earnings | $1,451 | $1,219 | |||||
Non-cash items | 601 | 605 | |||||
Changes in working capital | 42 | (549 | ) | ||||
Net cash provided by operating activities | 2,094 | 1,275 | |||||
Net cash used by investing activities | (262 | ) | (438 | ) | |||
Net cash used by financing activities | (2,463 | ) | (4,265 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 20 | 12 | |||||
Net decrease in cash and cash equivalents | (611 | ) | (3,416 | ) | |||
Cash and cash equivalents at beginning of year | 8,801 | 11,302 | |||||
Cash and cash equivalents at end of period | $8,190 | $7,886 |
(Dollars in millions, except per share data) | Three months ended March 31 | ||||||
2017 | 2016 | ||||||
Revenues | $20,976 | $22,632 | |||||
Earnings from operations, as reported | $2,024 | $1,788 | |||||
Operating margins | 9.6 | % | 7.9 | % | |||
Unallocated pension income | ($255 | ) | ($45 | ) | |||
Unallocated other postretirement benefit income | ($60 | ) | ($49 | ) | |||
Unallocated pension and other postretirement benefit income | ($315 | ) | ($94 | ) | |||
Core operating earnings (non-GAAP) | $1,709 | $1,694 | |||||
Core operating margins (non-GAAP) | 8.1 | % | 7.5 | % | |||
Diluted earnings per share, as reported | $2.34 | $1.83 | |||||
Unallocated pension benefit income | (0.41 | ) | (0.07 | ) | |||
Unallocated other postretirement benefit income | (0.10 | ) | (0.07 | ) | |||
Provision for deferred income taxes on adjustments (1) | $0.18 | $0.05 | |||||
Core earnings per share (non-GAAP) | $2.01 | $1.74 | |||||
Weighted average diluted shares (in millions) | 621.2 | 665.8 |
(1) | The income tax impact is calculated using the tax rate in effect for the non-GAAP adjustments. |
(Dollars in millions, except per share data) | |||||||||||||
(a) | (b) | (c) | (d) | ||||||||||
Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (2) | ||||||||||
1/1/2017 thru 1/31/2017 | 6,360,054 | $160.50 | 6,227,792 | $13,000 | |||||||||
2/1/2017 thru 2/29/2017 | 7,023,382 | 170.16 | 6,543,759 | 11,890 | |||||||||
3/1/2017 thru 3/31/2017 | 2,146,174 | 182.33 | 2,139,518 | 11,500 | |||||||||
Total | 15,529,610 | $167.89 | 14,911,069 |
(1) | We purchased an aggregate of 14,911,069 shares of our common stock in the open market pursuant to our repurchase program and 618,541 shares transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. We did not purchase shares in swap transactions. |
(2) | On December 12, 2016, we announced a new repurchase plan for up to $14 billion of common stock, replacing the plan previously authorized in 2015. |
10.1 | Form of Notice of Terms of Restricted Stock Units |
10.2 | Form of Notice of Terms of Performance-Based Restricted Stock Units |
10.3 | Form of Performance Award Notice |
10.4 | Form of Notice of Terms of Supplemental Restricted Stock Units |
12 | Computation of Ratio of Earnings to Fixed Charges. |
15 | Letter from Independent Registered Public Accounting Firm regarding unaudited interim financial information. |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance Document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
THE BOEING COMPANY | ||
(Registrant) | ||
April 26, 2017 | /s/ Robert E. Verbeck | |
(Date) | Robert E. Verbeck – Senior Vice President, Finance and Corporate Controller |
To: | «Name» |
1. | RSU Award. You have been awarded «RSU_Units» Restricted Stock Units. Each Restricted Stock Unit (RSU) corresponds to one share of Boeing stock. Your RSUs are awarded pursuant to The Boeing Company 2003 Incentive Stock Plan, as amended and restated from time to time (the “Plan”) and the award is subject to the terms of the Plan. If there is any inconsistency between the terms of this notice and the terms of the Plan, the Plan’s terms will control. A summary of the Plan accompanies this notice. |
2. | RSU Account. The Company will maintain a record of the number of awarded RSUs in an account established in your name. |
3. | Vesting of RSUs. Your RSUs will vest «Three Years from Grant Date» or, if earlier, on the date your employment with the Company terminates because of retirement, layoff, disability, or death. |
4. | Stock Issuance at Vesting. At the time your RSUs vest, the Company will issue to you shares of Boeing stock equal in number to the vested number of whole RSUs in your account, after deduction of shares to cover appropriate taxes and other charges as described in paragraph 11.2. |
5. | Dividends Credited on Your RSUs. |
6. | Adjustment in Number of RSUs. The number of RSUs in your account will be adjusted proportionately for any increase or decrease in the number of issued shares of Boeing stock resulting from any stock split, combination or exchange of shares, consolidation, spin-off or recapitalization of shares, or any similar capital adjustment or the payment of any stock dividend. |
7. | Termination Due to Retirement, Layoff, Disability, or Death. In the event your employment is terminated by reason of retirement, layoff, disability, or death, your RSU payout, including any dividend equivalent RSUs, will be prorated based on the number of full and partial calendar months you spent on the active payroll during the three-year performance period (beginning with the first full calendar month after the date of grant). Payment for this award will be made as soon as administratively possible, but not later than 60 days after your termination of employment. For purposes of this award, “retirement” means a voluntary termination of employment under the conditions that satisfy the definition of “retirement” under the terms of a defined benefit pension plan maintained by the Company or one of its subsidiaries in which you participate. If you are an executive who is not eligible to participate in a defined benefit pension plan, “retirement” means termination of employment voluntarily by you after you have attained either (i) age 55 with 10 years of service, or (ii) age 62 with one year of service. For purposes of this award, "disability" means a disability entitling you to benefits under the long-term disability policy sponsored by the Company or one of its subsidiaries that applies to you. |
8. | Forfeiture Upon Other Terminations. In the event your employment is terminated before the vesting date of the award for reasons (including for cause and resignation) other than those described in paragraph 7, all RSUs (and all associated dividend equivalent RSUs) granted hereunder shall immediately be forfeited by you and canceled. |
9. | Specified Employees. If you are a Specified Employee (as defined in the Deferred Compensation Plan for Employees of The Boeing Company) at the time of vesting, and were eligible for retirement on the date of grant or became so eligible between the date of grant and the vesting date described in paragraph 3, distributions upon vesting due to retirement, layoff or disability will be delayed until six months after the date of vesting based on Internal Revenue Code Section 409A. |
10. | Leave of Absence. Unless otherwise required by law, in the event you have an authorized leave of absence at any time during the vesting period which absence extends beyond three full calendar months (including any absence that began before the grant date), your RSU payout, including any dividend equivalent RSUs, will be prorated based on the number of full and partial calendar months you spent on the active payroll during the three-year performance period (beginning with the first full calendar month after the date of grant). |
11. | RSU Award Payable in Stock. |
12. | Transfer. RSUs are not transferable except by will or applicable laws of descent and distribution. |
13. | Clawback and Forfeiture Policy. |
To: | «Name» |
1. | PBRSU Award. You have been awarded «PBRSU_Units» Performance-Based Restricted Stock Units. Each Performance-Based Restricted Stock Unit (“PBRSU”) corresponds to one share of Boeing stock. Your PBRSUs are awarded pursuant to The Boeing Company 2003 Incentive Stock Plan, as amended and restated from time to time (the “Plan”) and the award is subject to the terms of the Plan, including the maximum award provisions. If there is any inconsistency between the terms of this notice and the terms of the Plan, the Plan’s terms will control. A summary of the Plan accompanies this notice. |
2. | PBRSU Account. The Company will maintain a record of the number of awarded PBRSUs in an account established in your name. |
3. | Vesting Provisions: |
Relative Total Shareholder Return Ranking over Measurement Period | Payout % Level |
91st Percentile or Higher | 200% |
81st - 90th Percentile | 175% |
71st - 80th Percentile | 150% |
61st - 70th Percentile | 125% |
51st - 60th Percentile | 100% |
41st - 50th Percentile | 75% |
31st - 40th Percentile | 50% |
21st - 30th Percentile | 25% |
0 - 20th Percentile | 0% |
4. | Dividend Equivalents Credited on Your PBRSUs. |
5. | Adjustment in Number of PBRSUs. The number of PBRSUs in your account will be adjusted proportionately for any increase or decrease in the number of issued shares of Boeing stock resulting from any stock split, combination or exchange of shares, consolidation, spin-off or recapitalization of shares, or any similar capital adjustment or the payment of any stock dividend. |
6. | Termination Due to Retirement, Layoff, Disability, or Death. In the event your employment is terminated by reason of retirement, layoff, disability, or death, your PBRSU payout, including any dividend equivalent PBRSUs, will be prorated based on the number of full and partial calendar months you spent on the active payroll during the Measurement Period (beginning with the first full calendar month after the Grant Date). Payout for the award will be made at the same time as payment would have been made had you not had a termination of employment and will in all respects be subject to the Company’s actual Relative Total Shareholder Return achievement for the full Measurement Period. For purposes of this award, “retirement” means a voluntary termination of employment under the conditions that satisfy the definition of “retirement” under the terms of a defined benefit pension plan maintained by the Company or one of its subsidiaries in which you participate. If you are not a participant in such a defined benefit pension plan, “retirement” means termination of employment voluntarily by you after you have attained either (i) age 55 with 10 years of service, or (ii) age 62 with one year of service. For purposes of this award, “disability” means a disability entitling you to benefits under the long-term disability policy sponsored by the Company or one of its subsidiaries that applies to you. |
7. | Forfeiture Upon Other Terminations. In the event your employment is terminated prior to the Vesting Date for any reason (including for cause and resignation) other than those reasons described in Section 6, all unvested PBRSUs (and all associated dividend equivalent PBRSUs) granted hereunder shall immediately be forfeited by you and canceled. |
8. | Leave of Absence. Unless otherwise required by law, in the event you have an authorized leave of absence at any time during the Measurement Period which absence extends beyond three full calendar months (including any absence that began before the Grant Date), your PBRSU payout, including any dividend equivalent PBRSUs, will be prorated based on the number of full and partial calendar months you spent on the active payroll during the Measurement Period (beginning with the first full calendar month after the Grant Date). Payout for the award will be made at the same time as payment would have been made without regard to any leave of absence, and will in all respects be subject to the Company’s actual Relative Total Shareholder Return achievement for the full Measurement Period. |
9. | PBRSU Award Payable in Stock. |
10. | Transfer. PBRSUs are not transferable except by will or applicable laws of descent and distribution. |
11. | Clawback and Forfeiture Policy. |
• | “Relative Total Shareholder Return” means the Company’s TSR relative to the TSR of the Peer Companies. Relative Total Shareholder Return will be determined by ranking the Company and the Peer Companies from highest to lowest according to their respective TSRs. After this ranking, the percentile performance of the Company relative to the Peer Companies will be determined as follows: |
P = 1 | — | R - 1 |
N - 1 |
• | “TSR” means, for the Company and each of the Peer Companies, the company’s total shareholder return, expressed as a percentage, which will be calculated by dividing (i) the Closing Average Share Value by (ii) the Opening Average Share Value and subtracting one from the quotient. |
• | “Opening Average Share Value” means the average Share Value over the trading days in the Opening Average Period. |
• | “Opening Average Period” means the 20 trading days immediately following the Grant Date. |
• | “Accumulated Shares” means, for a given trading day, the sum of (i) one (1) share and (ii) the cumulative number of shares of the company’s common stock purchasable with dividends declared on the company’s common stock to that point during the Measurement Period, assuming same day reinvestment of such dividends at the closing price on the ex-dividend date. |
• | “Closing Average Share Value” means the average Share Value over the trading days in the Closing Average Period. |
• | “Closing Average Period” means the 20 trading days immediately preceding the Vesting Date. |
• | “Share Value” means, with respect to a given trading day, the closing price of the company’s common stock multiplied by the Accumulated Shares for such trading day. |
• | “Peer Companies” means the following companies: |
3M | Ford | Lockheed Martin |
AT&T | General Dynamics | Northrop Grumman |
Caterpillar | General Electric | Procter & Gamble |
Chevron | Honeywell | Raytheon |
Cisco Systems | IBM | United Parcel Services |
E. I. du Pont de Nemours | Intel | United Technologies |
EADS (Airbus) | Johnson & Johnson | Verizon Communications |
Exxon Mobil |
• | Each Peer Company’s “common stock” shall mean that series of common stock that is publicly traded on a registered U.S. exchange or, in the case of a non-U.S. company, an equivalent non-U.S. exchange. For purposes of calculating TSR, the value on any given trading day of any Peer Company shares traded on a foreign exchange will be converted to U.S. dollars. |
• | The following example illustrates the calculation of TSR for Boeing with Grant Date of January 1, 2014 and Vesting Date of January 1, 2017. |
Opening Average | Closing Average | |||||||||
Date | Close | Ex- Div. | Accum. Shares | Share Value | Date | Close | Ex- Div. | Accum. Shares | Share Value | |
1/30/2014 | $126.53 | $0.00 | 1 | $126.53 | 12/30/2016 | $155.68 | $0.00 | 1.0849655 | $168.91 | |
1/29/2014 | $129.78 | $0.00 | 1 | $129.78 | 12/29/2016 | $155.69 | $0.00 | 1.0849655 | $168.92 | |
1/28/2014 | $137.09 | $0.00 | 1 | $137.09 | 12/28/2016 | $156.10 | $0.00 | 1.0849655 | $169.36 | |
1/27/2014 | $137.36 | $0.00 | 1 | $137.36 | 12/27/2016 | $157.48 | $0.00 | 1.0849655 | $170.86 | |
1/24/2014 | $136.65 | $0.00 | 1 | $136.65 | 12/23/2016 | $157.81 | $0.00 | 1.0849655 | $171.22 | |
1/23/2014 | $141.31 | $0.00 | 1 | $141.31 | 12/22/2016 | $157.46 | $0.00 | 1.0849655 | $170.84 | |
1/22/2014 | $144.37 | $0.00 | 1 | $144.37 | 12/21/2016 | $157.48 | $0.00 | 1.0849655 | $170.86 | |
1/21/2014 | $141.67 | $0.00 | 1 | $141.67 | 12/20/2016 | $156.39 | $0.00 | 1.0849655 | $169.68 | |
1/17/2014 | $140.46 | $0.00 | 1 | $140.46 | 12/19/2016 | $156.18 | $0.00 | 1.0849655 | $169.45 | |
1/16/2014 | $140.21 | $0.00 | 1 | $140.21 | 12/16/2016 | $154.50 | $0.00 | 1.0849655 | $167.63 | |
1/15/2014 | $140.62 | $0.00 | 1 | $140.62 | 12/15/2016 | $153.77 | $0.00 | 1.0849655 | $166.84 | |
1/14/2014 | $140.01 | $0.00 | 1 | $140.01 | 12/14/2016 | $154.47 | $0.00 | 1.0849655 | $167.59 | |
1/13/2014 | $140.70 | $0.00 | 1 | $140.70 | 12/13/2016 | $156.66 | $0.00 | 1.0849655 | $169.97 | |
1/10/2014 | $141.90 | $0.00 | 1 | $141.90 | 12/12/2016 | $157.16 | $0.00 | 1.0849655 | $170.51 | |
1/9/2014 | $142.13 | $0.00 | 1 | $142.13 | 12/9/2016 | $156.49 | $0.00 | 1.0849655 | $169.79 | |
1/8/2014 | $140.82 | $0.00 | 1 | $140.82 | 12/8/2016 | $155.39 | $0.00 | 1.0849655 | $168.59 | |
1/7/2014 | $140.51 | $0.00 | 1 | $140.51 | 12/7/2016 | $154.14 | $0.00 | 1.0849655 | $167.24 | |
1/6/2014 | $138.41 | $0.00 | 1 | $138.41 | 12/6/2016 | $152.24 | $0.00 | 1.0849655 | $165.18 | |
1/3/2014 | $137.62 | $0.00 | 1 | $137.62 | 12/5/2016 | $152.16 | $0.00 | 1.0849655 | $165.09 | |
1/2/2014 | $136.67 | $0.00 | 1 | $136.67 | 12/2/2016 | $152.25 | $0.00 | 1.0849655 | $165.19 |
To: | «Name» |
1. | Target Value of Performance Awards. The Performance Award target value (or “initial value”) will be based on a multiple of your salary as of December 31, 20XX, with the multiple determined by your executive grade. The target value will be expressed as a number of units (rounded to the nearest unit), each of which has an initial value equal to $100. |
2. | Performance Measure. For the 20XX-20XX Performance Period, the performance measure will be based on the 20XX Long-Range Business Plan. The Committee retains discretion in calculating actual performance to exclude the impact of extraordinary and/or non-recurring items deemed not reflective of the Company’s core operating performance. Such non-recurring items may include, but are not limited to, exogenous events, acquisitions, divestitures, changes in accounting principles, or “extraordinary items” determined under generally accepted accounting principles (GAAP). |
3. | Final Award Determination. Final amounts payable will be determined following the end of the Performance Period. The amount payable may be anywhere from $0 to $200 per unit, depending on the Company’s performance against plan for the period ending on December 31, 20XX. The final award will range from 0% to a maximum of 200% of the Performance Award target value, as outlined below. There will be straight-line interpolation to determine payouts between minimum and target, and target and maximum. |
Achievement (% of Plan) | |||||
Level of Performance | Final Performance Award Unit Value | Free Cash Flow (50% Weighting) | Core Earnings Per Share (25% Weighting) | Revenue (25% Weighting) | Payout Factor (% of Target Award) |
Maximum | $200 | ____% | ____% | ____% | 200% |
Target | $100 | Plan | Plan | Plan | 100% |
Minimum | $0 | ____% | ____% | ____% | 0% |
4. | Continued Employment. Subject to the terms and conditions outlined under section 5, this Performance Award is granted on the condition that you remain employed by the Company from the Grant Date through the entire Performance Period. You will not have any right to payment of any award unless and until all terms, conditions, and provisions of the Performance Award program that affect you have been complied with as specified herein, including certification of the final award amount by the Committee. Your Performance Awards, however, shall not impose upon the Company any obligation to retain you in its employ for any given period or upon any specific terms of employment. |
5. | Termination Due to Retirement, Layoff, Disability, or Death. In the event your employment is terminated by reason of retirement, layoff, disability, or death, you shall continue to be eligible to participate in the Performance Period, provided |
6. | Other Terminations. In the event your employment is terminated prior to payment of the Performance Award for reasons (including for cause and resignation) other than those described in section 5, the Performance Award granted hereunder shall immediately be forfeited by you and canceled. |
7. | Leave of Absence. Unless otherwise required by law, in the event you have an authorized leave of absence at any time during the Performance Period which absence extends beyond three full calendar months (including any absence that began before the Grant Date), your Performance Award payout will be prorated based on the number of full and partial calendar months you spent on the active payroll during the Performance Period. |
8. | Form and Timing of Payment of Performance Awards. Any payment of the Performance Awards shall be made in either cash or shares of Boeing stock, at the Committee’s discretion. The Performance Award payment shall be made within a reasonable time following the end of the Performance Period. For certain eligible participants, amounts to be paid in connection with Performance Awards may be deferred in accordance with the Company’s deferred compensation plan then in place. |
9. | Beneficiaries. A participant may designate one or more beneficiaries to receive Performance Award distributions upon the death of the participant. If no beneficiary has been designated, all such amounts shall be paid to the personal representative of the participant. The form of beneficiary designation shall be determined by the Committee. |
10. | Transferability. This Performance Award is not transferable by you, whether voluntarily or involuntarily, by operation of law or otherwise, except as provided in the Plan. If any assignment, pledge, transfer, or other disposition, voluntary or involuntary, of this Performance Award shall be made, or if any attachment, execution, garnishment, or lien shall be issued against or placed upon the Performance Award, then your right to the Performance Award shall immediately cease and terminate and you shall promptly forfeit to the Company the Performance Award awarded under this notice. |
11. | Successors. All obligations of the Company under the Performance Award program shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, or consolidation, or otherwise, of all or substantially all the business and/or assets of the Company. |
12. | Amendment, Modification and Termination. The Board of Directors (or its delegate) has the authority to amend, modify, or terminate the Performance Award program. No termination, amendment, or modification may adversely affect in any material way any Performance Award previously granted without the written consent of the participant involved. |
13. | Clawback and Forfeiture Policy. |
To: | «Name» |
1. | RSU Award. You have been awarded «Number of Units» Restricted Stock Units. Each Restricted Stock Unit (RSU) corresponds to one share of Boeing stock. Your RSUs are awarded pursuant to “The Boeing Company 2003 Incentive Stock Plan” as amended and restated from time to time (the “Plan”) and the award is subject to the terms of the Plan. If there is any inconsistency between the terms of this notice and the terms of the Plan, the Plan’s terms will control. A summary of the Plan accompanies this notice. |
2. | RSU Account. The Company will maintain a record of the number of awarded RSUs in an account established in your name. |
3. | Vesting of RSUs. Fifty percent (50%) of the RSUs along with the related dividend equivalents (as defined in paragraph 5.1) will vest on «Three Years from Grant Date». The remainder of the RSUs along with the related dividend equivalents will vest on «Four Years From Grant Date». You must be employed by the Company or one of its subsidiaries on the vesting date, in order for the RSUs to vest. Notwithstanding the foregoing, if your employment with the Company terminates before a vesting date because of layoff, disability, or death, all of the RSUs will vest. |
4. | Stock Issuance at Vesting. At the time your RSUs vest, the Company will issue to you shares of Boeing stock equal in number to the vested number of whole RSUs in your account, after deduction of shares to cover appropriate taxes and other charges as described in paragraph 9.2. |
5. | Dividends Credited on Your RSUs. |
6. | Adjustment in Number of RSUs. The number of RSUs in your account will be adjusted proportionately for any increase or decrease in the number of issued shares of Boeing stock resulting from any stock split, combination or exchange of shares, consolidation, spin-off or recapitalization of shares, or any similar capital adjustment or the payment of any stock dividend. |
7. | Termination Due to Layoff, Disability, or Death. In the event your employment is terminated by reason of layoff, disability, or death, your RSU payout, including any dividend equivalent RSUs, will vest. Payment for such awards will be made as soon as administratively possible, but not later than 60 days after your termination of employment. |
8. | Forfeiture of Non-Vested RSUs. If your employment with the Company or a subsidiary of the Company terminates before a vesting date for the award for any reason (including for cause and resignation) other than layoff, disability (as defined in paragraph 3), or death, your nonvested RSUs granted hereunder will be immediately forfeited and canceled. Dividend equivalent RSUs will be forfeited and canceled along with the RSUs with which they are associated. |
9. | RSU Award Payable in Stock. |
10. | Transfer. RSUs are not transferable except by will or applicable laws of descent and distribution. |
11. | Clawback and Forfeiture Policy. |
Three months ended | Years ended December 31, | ||||||||||||||
March 31, 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||
Earnings before income taxes | $1,959 | $5,568 | $7,155 | $7,137 | $6,232 | ||||||||||
Fixed charges excluding capitalized interest | 113 | 422 | 391 | 455 | 514 | ||||||||||
Amortization of previously capitalized interest | 31 | 94 | 90 | 72 | 74 | ||||||||||
Net adjustment for earnings from affiliates | 6 | 11 | (34 | ) | 7 | 13 | |||||||||
Earnings available for fixed charges | $2,109 | $6,095 | $7,602 | $7,671 | $6,833 | ||||||||||
Fixed charges: | |||||||||||||||
Interest and debt expense(1) | $100 | $365 | $339 | $402 | $461 | ||||||||||
Interest capitalized during the period | 33 | 170 | 158 | 102 | 87 | ||||||||||
Rentals deemed representative of an interest factor | 13 | 57 | 52 | 53 | 53 | ||||||||||
Total fixed charges | $146 | $592 | $549 | $557 | $601 | ||||||||||
Ratio of earnings to fixed charges | 14.4 | 10.3 | 13.8 | 13.8 | 11.4 |
(1) | Amount does not include tax-related interest expense which is reported as a component of Income tax expense in our Condensed Consolidated Statements of Operations. |
1. | I have reviewed this quarterly report on Form 10-Q of The Boeing Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Dennis A. Muilenburg |
1. | I have reviewed this quarterly report on Form 10-Q of The Boeing Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Gregory D. Smith |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Dennis A. Muilenburg |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Gregory D. Smith |
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