What is the primary reason for the reported net loss in the first six months of 2002?

The primary reason for the net loss of $470 million in the first six months of 2002 was the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, which requires an impairment-only approach for goodwill. This resulted in a significant transitional goodwill impairment charge of $1.827 billion (net of tax), reported as a cumulative effect of an accounting change. Excluding this charge, the company would have reported net earnings.

How have sales been impacted in the first half of 2002?

Sales for the first six months of 2002 decreased by 3.9% to $27.7 billion compared to $28.8 billion in the same period of 2001. This decline was mainly due to a reduction in commercial aircraft deliveries, which fell by 15.6% from 263 units to 222 units.

What is the status of the A-12 aircraft contract litigation?

The A-12 aircraft contract termination litigation remains ongoing. While the company believes the current loss provision is adequate, there remains a potential for significant additional loss, estimated at approximately $1.45 billion pre-tax, if the appellate court upholds certain trial court rulings regarding default termination and unliquidated progress payments. The company is pursuing its appeal and believes its position is contrary to the trial court's findings.

How is Boeing managing its debt and liquidity?

Boeing had $816 million in cash and cash equivalents as of June 30, 2002. The company has access to $4.5 billion in unused revolving credit facilities and $4.0 billion in commercial paper programs. Excluding its financing subsidiary, Boeing Capital Corporation (BCC), total debt represented 32% of total shareholders' equity plus debt. The company also monitors its pension plans, noting that while currently fully funded, future contributions may be necessary due to market conditions.

BA/BA-PA 10-Q Quarterly Report Q2 FY2002 — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-Q filed August 12, 2002. Cited figures are marked; the original filing is the authoritative source.

Boeing Company reported a net loss of $470 million^a for the first six months of 2002, a significant shift from the $2.077 billion net earnings in the same period of 2001.

This loss is primarily attributable to a $1.827 billion^b charge related to the adoption of SFAS No. 142, which changed the accounting for goodwill from amortization to an impairment-only approach. Excluding this accounting change, adjusted net earnings were $1.357 billion for the six months. Sales for the first six months of 2002 decreased by 3.9% to $27.7 billion, largely due to a reduction in commercial aircraft deliveries.

The company delivered 222 commercial aircraft compared to 263 in the prior year's period. Despite challenges, Boeing maintained its full-year delivery projection of 380 aircraft. The company also highlighted ongoing legal matters, including a significant potential exposure related to the A-12 aircraft contract termination, though it believes current provisions are adequate.

02—Key points

Key Highlights

Reported a net loss of $470 million for the six months ended June 30, 2002, compared to net earnings of $2.077 billion in the prior year period.
Adopted SFAS No. 142, resulting in a $1.827 billion goodwill impairment charge (cumulative effect of accounting change), significantly impacting reported net loss.
Sales for the six months decreased by 3.9% to $27.7 billion, driven by a 15.6% decline in commercial aircraft deliveries (222 vs. 263).
Maintained its full-year commercial aircraft delivery forecast at 380 units, down from 527 in 2001.
Operating earnings from continuing operations for the second quarter of 2002 were $1.275 billion, down from $1.367 billion in Q2 2001.
The company is actively managing significant legal proceedings, notably the A-12 aircraft contract termination, with potential but unquantified future losses.
Boeing Capital Corporation (BCC) reported operating earnings of $327 million for the first six months of 2002, an increase from $292 million in the prior year period, excluding interest expense.

03—Questions

Frequently Asked Questions

What is the primary reason for the reported net loss in the first six months of 2002?
The primary reason for the net loss of $470 million in the first six months of 2002 was the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, which requires an impairment-only approach for goodwill. This resulted in a significant transitional goodwill impairment charge of $1.827 billion (net of tax), reported as a cumulative effect of an accounting change. Excluding this charge, the company would have reported net earnings.
How have sales been impacted in the first half of 2002?
Sales for the first six months of 2002 decreased by 3.9% to $27.7 billion compared to $28.8 billion in the same period of 2001. This decline was mainly due to a reduction in commercial aircraft deliveries, which fell by 15.6% from 263 units to 222 units.
What is the status of the A-12 aircraft contract litigation?
The A-12 aircraft contract termination litigation remains ongoing. While the company believes the current loss provision is adequate, there remains a potential for significant additional loss, estimated at approximately $1.45 billion pre-tax, if the appellate court upholds certain trial court rulings regarding default termination and unliquidated progress payments. The company is pursuing its appeal and believes its position is contrary to the trial court's findings.
How is Boeing managing its debt and liquidity?
Boeing had $816 million in cash and cash equivalents as of June 30, 2002. The company has access to $4.5 billion in unused revolving credit facilities and $4.0 billion in commercial paper programs. Excluding its financing subsidiary, Boeing Capital Corporation (BCC), total debt represented 32% of total shareholders' equity plus debt. The company also monitors its pension plans, noting that while currently fully funded, future contributions may be necessary due to market conditions.

04—Continue

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