Boeing to Record Second Quarter Charge 
 
     Boeing Updates Assessment of Launch and Satellite Businesses in Weak 
                           Commercial Space Markets 
 
  Revised Assessment Not Expected to Have a Material Impact on the Company's 
                              Cash Flow Outlook 
 
    CHICAGO, July 15 -- The Boeing Company (NYSE: BA) announced today that as 
a result of continued weakness in the commercial space launch market, higher 
mission and launch costs on its Delta IV program, and cost growth in its 
satellite businesses, the company will recognize pre-tax charges of 
approximately $1.1 billion, or $0.87 per share, when it announces 
second quarter results on July 23.  
    Approximately $835 million, or $0.66 per share, of the charges are 
attributable to the company's Delta IV program and primarily reflect the 
company's updated -- and significantly lower -- assessment of global demand 
for launch services.   The lower program base reduces the profitability of 
currently contracted launches.  The charges also reflect higher mission costs, 
primarily related to government launch requirements.  Approximately  
$265 million, or $0.21 per share, reflects the loss to be reported by Boeing 
Satellite Systems for the quarter due to higher cost estimates to complete 
several satellite programs and write-downs of commercial inventory that 
recognizes current market conditions.  
    Approximately $135 million of the total charges are non-cash depreciation 
and inventory adjustments, as noted in the detailed discussion below.  The 
cash outlays associated with the remaining $965 million of charges will be 
incurred over the next seven years as the affected launch vehicles and 
satellite programs are completed and delivered.   
    The company will hold an analyst conference call today, July 15, at  
10:00 a.m. Eastern Daylight Time which will be accessible at the company's 
website, www.boeing.com .      
 
    A further discussion of the charges follows: 
 
    1) Delta IV Program ($835 million) 
    When the company began the Delta IV program in the 1990s, demand for 
commercial satellites and related launch services, particularly for 
telecommunications, was robust.  The company anticipated that strong 
commercial demand would help reduce the cost of launch vehicles for both 
commercial and government customers, and the company priced its vehicles 
accordingly.   
    During this period, Boeing also made substantial incremental investments 
in a second launch site on the U.S. west coast, a heavy-lift version of the 
Delta IV vehicle, and an all-new U.S. rocket engine.  These unique 
capabilities were developed to address U.S. government requirements and 
positioned the company to capture additional business. 
    However, over the last several years demand for commercial launches eroded 
while global launch capacity increased.   In light of the continuing severe 
downturn in the commercial launch market, the company has determined that a 
meaningful recovery of demand and pricing is unlikely for the foreseeable 
future.  As a result, in the second quarter of 2003 Boeing made a strategic 
decision to focus the Delta IV program on the government launch services 
market.  In conjunction with that decision, the company updated -- and reduced 
by nearly one-half -- its estimate of long-term demand for Delta IV launch 
vehicles.  This reduction eliminated nearer-term commercial launches 
previously forecast to occur over the next five years.  
    As a result, the company estimates it will incur higher per-unit labor, 
materials and business infrastructure costs due to lower annual launch rates 
over the next five years.  In addition, the company has experienced higher 
mission and launch costs, primarily to support government requirements, and 
has increased its estimates accordingly.  Because currently contracted and 
awarded launches are in a loss position, Boeing will recognize charges 
totaling approximately $835 million in the second quarter across its 24 
currently contracted and awarded Delta IV (including Evolved Expendable Launch 
Vehicle program) launches.   This estimate is based upon existing pricing in 
the company's contracted and awarded launches.   
    Of the charges totaling $835 million, approximately $90 million are  
non-cash charges related to the higher per-unit depreciation and amortization 
costs associated with the lower number of launches in the company's revised 
market outlook.  The remaining costs will be incurred as the contracted and 
awarded vehicles are built and delivered over the next seven years.    
 
    2) Boeing Satellite Systems ($265 Million) 
    Boeing Satellite Systems continues to experience cost growth on certain 
satellites in its current backlog.   Over the past two years, the company has 
continued to make management changes and implemented significant process 
improvements to reduce technical and cost risk on future satellite production. 
The company also recognized significant cost increases to complete currently 
contracted work based upon known requirements and previous experience.  
However, many satellites in the current backlog incorporate advanced 
technology and are the first of their kind to be built.  These factors are 
driving cost growth at higher than previously estimated trend levels.   
    As a result, the company is raising its estimates to complete and deliver 
in-process satellite backlog and will record charges totaling approximately 
$265 million in the second quarter.  Approximately $45 million of this amount 
reflects a higher provision for obsolete inventory related to weak demand for 
commercial satellites, and is non-cash. The cash expenditures associated with 
the remaining charges will be incurred as satellites on the affected programs 
are completed over the next two years. 
    Charges totaling approximately $195 million will be recorded in the Launch 
and Orbital Systems segment; the remaining $70 million is related to 
satellites for fixed-price military programs and will be recorded in the 
Network Systems segment, as summarized in the table below.   
 
    Outlook & Summary 
    Boeing does not expect these charges to have a material impact on the 
company's consolidated cash flow guidance, as the related costs are spread 
over the next seven years.  The company will discuss its financial outlook in 
more detail when it releases second quarter results.   
    Boeing will continue to manage its launch services and satellite 
businesses to market realities.  As previously announced, the company 
continues to reduce employment, consolidate facilities and implement best 
engineering and manufacturing practices to reduce costs and position the 
business for future returns. 
 
    A summary of the charges is provided in the table below:  
 
     Boeing Integrated Defense Systems      
     Pre-Tax Earnings Impact                
     (Millions)                 Launch & Orbital      Network        Total 
                                     Systems          Systems 
     Delta IV Program (a)             ~$835                         ~$835 
     
     Boeing Satellite Systems (b)     ~$195            ~$70         ~$265 
     
     Total                          ~$1,030            ~$70       ~$1,100 
 
     (a) Approximately $90 million of the Delta IV-related charges are  
         non-cash. 
     (b) Approximately $45 million of the BSS charges recorded through Launch  
         and Orbital Systems charges are non-cash. 
         All estimates subject to final audit.  
  
    Forward-Looking Information Is Subject to Risk and Uncertainty 
    Certain statements in this release may constitute "forward-looking" 
statements within the meaning of the Private Litigation Reform Act of 1995.  
Words such as "expects," "intends," "plans," "projects," "believes," 
"estimates," and similar expressions are used to identify these forward-
looking statements.  Forward-looking statements in this release include, but 
are not limited to, our assessment of the markets for our products, statements 
discussing the growth of our business segments, and the statements contained 
in the "Outlook" section of this release.  These statements are not guarantees 
of future performance and involve risks, uncertainties and assumptions that 
are difficult to predict.  Forward-looking statements are based upon 
assumptions as to future events that may not prove to be accurate.  Actual 
outcomes and results may differ materially from what is expressed or 
forecasted in these forward-looking statements.  As a result, these statements 
speak only as of the date they were made and we undertake no obligation to 
publicly update or revise any forward-looking statements, whether as a result 
of new information, future events or otherwise.  Our actual results and future 
trends may differ materially depending on a variety of factors, including the 
continued impact of the commercial aviation downturn on overall production, as 
well as the impact on production or production rates for specific commercial 
airplane models, the continued operation, viability and growth of major 
airline customers and non-airline customers (such as the U.S. Government); 
adverse developments in the value of collateral securing customer and other 
financings; the occurrence of any significant collective bargaining labor 
dispute; tax settlements with the U.S. Government; the Company's successful 
execution of internal performance plans, production rate increases and 
decreases (including any reduction in or termination of an aircraft product), 
acquisition and divestiture plans, and other cost-reduction and productivity 
efforts; charges from any future SFAS 142 review; an adverse development in 
rating agency credit ratings or assessments; the actual outcomes of certain 
pending sales campaigns and U.S. and foreign government procurement 
activities, including the timing of procurement of tankers by the U.S. 
Department of Defense; the cyclical nature of some of the Company's 
businesses; unanticipated financial market changes which may impact pension 
plan assumptions; domestic and international competition in the defense, space 
and commercial areas; continued integration of acquired businesses; 
performance issues with key suppliers, subcontractors and customers; factors 
that could result in significant and prolonged disruption to air travel 
worldwide (including the status of and impacts flowing from the war in Iraq 
and future terrorist attacks); any additional impacts from the attacks of 
September 11, 2001; global trade policies; worldwide political stability; 
domestic and international economic conditions; price escalation; the outcome 
of political and legal processes, including uncertainty regarding government 
funding of certain programs; changing priorities or reductions in the U.S. 
Government or foreign government defense and space budgets; termination of 
government or commercial contracts due to unilateral government or customer 
action or failure to perform; legal, financial and governmental risks related 
to international transactions; legal proceedings, including U.S. Government 
proceedings and investigations and commercial litigation related to the 
Evolved Expendable Launch Vehicle Program; and other economic, political and 
technological risks and uncertainties. Additional information regarding these 
factors is contained in the Company's SEC filings, including, without 
limitation, the Company's Annual Report on Form 10-K for the year ended 
December 31, 2002 and Form 10-Q for the period ending March 31, 2003. 
 
SOURCE  The Boeing Company 
    -0-                             07/15/2003 
    /CONTACT:  Investor Relations, Paul Kinscherff or Bob Kurtz,  
+1-312-544-2140, or Communications, John Dern, +1-312-544-2002, all for 
Boeing/ 
    /Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/109119.html/ 
    /Web site:  http://www.boeing.com / 
    (BA) 
 
 
 







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