Boeing Financial Statement Analysis

Financial Statement Analysis Project

The Boeing Company

November 11, 2004

Table of Contents

I. Firm, Industry, and Environment 4

A. Description of firm and environment 4

B. Discussion of competitive environment 6

C. Economic climate and outlook 8

D. Other relevant factors, e.g. governmental regulations, labor relations, litigation, etc. 8

II. Evaluation of Balance Sheet 10

A. Description of asset structure 11

a. Current Assets 11

b. Customer and commercial financing 12

c. Property, plant and equipment, net 12

d. Goodwill and Other acquired intangibles, net 13

e. Prepaid pension expense 13

f. Deferred income tax 13

g. Other assets 14

B. Description of liabilities 14

a. Current Liabilities 14

b. Accrued retiree health care and Accrued Pension plan liability 14

c. Deferred lease income 14

C. Description of capital (equity) structure 15

D. Ratio Analysis of Financial Statements 15

a. Liquidity Ratios 16

b. Debt Management / Leverage Ratios 16

c. Activity Ratios 17

d. Profitability Ratios 18

III. Evaluation of Income Statement 19

A. Profitability measures (from the ratio analysis above) 19

B. Changes in accounts and categories 19

IV. Analysis of Cash Flows 20

A. Ability to generate cash flows in the future 20

B. Capacity to meet obligations for cash 20

C. External financing needs 21

D. Management of investing activities 23

E. Implementation of financing and investing strategies 24

V. Evaluation of Financial Statements 24

A. Common Size Statements 24

a. Common Size Balance Sheet 25

b. Common Size Income Statement 26

B. Short-term debt and liquidity 27

C. Capital structure and long-term solvency 27

D. Operating/sales performance 28

VI. Outlook, Summary, and Conclusions 28

A. Outlook for performance 28

B. Investment potential 28

C. Credit assessment 29

D. Strategies to improve performance 29

E. Summary and conclusions 29

VII. References 30

VIII. Appendix A - Calculations 31

I. Firm, Industry, and Environment

A. Description of firm and environment

The Boeing Company is the world's leading aerospace company and a top US exporter in terms of sales. Boeing provides products and services to customers in 145 countries.

The Boeing Company (Boeing Corporation) is, perhaps, best known for its line of civilian aircraft, the most famous being the Boeing 747 Boeing is the world's second leading weapons manufacturer and the main contractor for the Space Shuttle.

The Boeing Company operates in four principal segments: Commercial Airplanes, Military Aircraft and Missile Systems, Space and Communications and Boeing Capital Corporation (BCC). Commercial Airplanes operations principally involve development, production and marketing of commercial jet aircraft and providing related support services. Military Aircraft and Missile Systems operations principally involve research, development, production, modification and support of military aircraft, both land-based and aircraft-carrier-based, as well as helicopters and missiles. Space and Communications operations principally involve research, development, production, modification and support of space systems, missile defense systems, satellites and satellite launching vehicles, rocket engines and information and battle management systems. BCC is primarily engaged in the financing of commercial and private aircraft and commercial equipment.

Among the models Boeing has produced are the B-17 Flying Fortress, 1935; the B-52 Stratofortress (1952); the Chinook helicopter (1961); the first jetliner, the Boeing 707 (1957); the jumbo jet or Boeing 747 (1969); the jetfoil (1975); and the 777-300 jetliner (1997).

The company was founded in 1916 near Seattle, Washington, by William E Boeing, as the Pacific Aero Products Company. Renamed the following year, the company built its first seaplane and in 1919 set up an airmail service between Seattle and Victoria, Canada.

Boeing bought US aircraft manufacturers McDonnell Douglas in 1997 for $16.3 billion, to create the world's largest aerospace company, manufacturing about three-quarters of the world's commercial airliners. The same year it unveiled its 777-300 jetliner, the world's longest and largest twin-engine aircraft of its kind. The company employed 198,900 people worldwide in 2001.

The Boeing Company is the 800-pound gorilla of US aerospace. The world's largest aerospace company, Boeing is neck-and-neck with Airbus as the #1 maker of large commercial jets, and is the #3 defense contractor behind Lockheed Martin and Northrop Grumman. It has two major segments: Commercial Airplanes and Integrated Defense Systems. Boeing's commercial