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| Management’s Discussion and
Analysis |
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| If, contrary to the Company’s belief, the decision
of the trial court on termination were sustained on appeal,
the
Company would incur an additional loss of approximately
$275 million, consisting principally of remaining inventory
costs and adjustments. And if, contrary to the Company’s
belief, the appeals court further held that a money
judgment should be entered against the Team in the amount
of the unliquidated progress payments, the Team
would be required to pay the Government $1,350 million
plus statutory interest from February 1991 (currently
totaling approximately $970 million). Under this outcome,
the Company would be obligated to pay one half of
these amounts. The additional loss to the Company would
total approximately $1,430 million in pretax charges,
consisting principally of the repayment obligations and
the remaining inventory costs and adjustments. |
| The Company believes that the loss provision established
by McDonnell Douglas in 1990 continues to provide
adequately for the reasonably possible reduction in value
of A-12 net contracts in process as of December 31,
2001. Final resolution of the A-12 litigation will depend
upon the outcome of further proceedings or possible
negotiations with the Government. |
| On October 31, 1997, a federal securities lawsuit was
filed against the Company in the U.S. District Court for
the
Western District of Washington, in Seattle. The lawsuit
names as defendants the Company and three of its then
executive officers. Additional lawsuits of a similar nature
have been filed in the same court. These lawsuits were
consolidated on February 24, 1998. The lawsuits generally
allege that the defendants desired to keep the Company’s
share price as high as possible in order to ensure that
the McDonnell Douglas shareholders would approve the
merger and, in the case of the individual defendants,
to benefit directly from the sale of Boeing stock during
the
period from April 7, 1997 through October 22, 1997. By
order dated May 1, 2000, the Court certified two subclasses
of plaintiffs in the action: a. all persons or entities
who purchased Boeing stock or call options or who sold
put
options during the period from July 21, 1997 through October
22, 1997, and b. all persons or entities who purchased
McDonnell Douglas stock on or after April 7, 1997, and
who held such stock until it converted to Boeing
stock pursuant to the merger. The plaintiffs sought compensatory
damages and treble damages. On September 17,
2001, the Company reached agreement with class counsel
to settle the lawsuit for $92.5 million. The settlement
will
have no effect on the Company’s earnings, cash flow
or financial position, as it is within insurance limits.
The settlement
is conditioned on notice to the class members and Court
approval, which is expected to occur in 2002. |
| On February 25, 2000, a purported class action lawsuit
alleging gender discrimination and harassment was filed
against The Boeing Company, Boeing North American, Inc.,
and McDonnell Douglas Corporation. The complaint,
filed with the United States District Court in Seattle,
alleges that the Company has engaged in a pattern and
practice of unlawful discrimination, harassment and retaliation
against females over the course of many years.
The complaint, Beck v. Boeing, names 28 women who have
worked for Boeing in the Puget Sound area;
Wichita, Kansas; St. Louis, Missouri; and Tulsa, Oklahoma.
On March 15, 2000, an amended complaint was
filed naming an additional 10 plaintiffs, including the
first from California. The lawsuit attempts to represent
all
women who currently work for the Company, or who have
worked for the Company in the past several years. |
| The Company has denied the allegation that it has engaged
in any unlawful “pattern and practice.” Plaintiffs’
motion for class certification was filed in May 2001.
The class they sought included salaried employees in Puget
Sound, Wichita, St. Louis, and Long Beach, and hourly
employees in Puget Sound, Wichita, and St. Louis. |
| On October 19, 2001, the court granted class certification
to a segment of the population sought by the plaintiffs.
The court ruled that the action could proceed on the basis
of two limited subclasses: a. all non-executive
salaried women (including engineers) in the Puget Sound
area, and b. all hourly women covered by the Machinists’
Bargaining Agreement in the Puget Sound area. The claims
to be litigated are alleged gender discrimination in
compensation and promotion. The court also held that the
plaintiffs could not seek back pay. Rather, should
liability be found, the potential remedies include some
form of injunctive relief as well as punitive damages.
The
U.S. Ninth Circuit Court of Appeals has accepted the Company’s
interlocutory appeal of the class certification
decision, particularly the ruling that leaves open the
possibility of punitive damages. The Company intends to
continue its aggressive defense of these cases. It is
not possible to predict what impact, if any, these cases
could have on the financial statements. |
| Business Environment and Trends |
| Commercial Airplanes Business
Environment and Trends |
| The worldwide market for commercial jet airplanes continues
to be predominantly driven by long-term trends in
airline passenger traffic. The principal factors underlying
long-term traffic growth are sustained economic growth,
both in developed and emerging countries, and political
stability. Demand for the Company’s commercial airplanes
is further influenced by airline industry profitability,
world trade policies, government-to-government relations,
environmental constraints imposed upon airplane operations,
technological changes, and price and other
competitive factors. |
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