波音 (BA) 2003 Q4 法說會逐字稿

Good day everyone and welcome to The Boeing Company's fourth quarter 2003 and year end results conference call.

Today's call is being recorded.

The management discussion and slide presentation, plus the analyst and media questions and answer sessions are being broadcast live over the Internet.

At this time for opening remarks and introductions I am turning the call over to Mr. David Donellek, Vice President of Investor Relations for The Boeing Company.

Please go ahead.

Thank you.

Welcome to the Boeing fourth quarter and full year 2003 earnings conference call.

I'm Dave Donellek, Vice President of Investor Relations.

You can follow our broadcast at our website, www.boeing.com.

If for any reason you are unable to reach us through the Internet please access our Investor Relations website later today when all information will be posted.

With me today are Harry Stonecipher, Boeing Chief Executive Officer; and James Bell, our Chief Financial Officer.

After brief comments by Harry and James we will take your questions.

As always we have provided detailed financial information in our press release issued earlier today.

To allow us more time for your questions, James will focus his comments on the highlights and drivers of financial performance, rather than a detailed review of the financial statements made available this morning.

We ask that you limit yourself to one single-part question.

Before we start I need to remind you that any projections and goals we may include in our discussions this morning are likely to involve risks and uncertainties.

These assumptions, the assumptions behind our projections and the factors that could cause actual results to vary are detailed in the news release we issued earlier this morning; and in our various filings with the Securities and Exchange Commission, and in the forward-looking statement at the end of this web presentation.

I urge you to read them thoroughly.

At this point I will turn the meeting over to Harry Stonecipher.

Thank you, Dave, and good morning to all of you.

Today we will review with you our fourth quarter and full year 2003 results.

I will begin this morning by sharing my perspective on 2003, then James will summarize the financial results and provide you with our outlook; then I will conclude by sharing with you my priorities for going forward.

We will then be happy to take your questions.

So let's get started right away with slide number 2.

The year 2003 was notable, both in terms of challenges we faced and performance we demonstrated in our businesses.

The vast majority of our businesses and people met their commitments and delivered exceptional value to our customers in the face of difficult industry conditions.

Boeing Commercial Airplanes continued to increase productivity and deliver excellent results in the midst of a significant market challenge.

While Integrated Defense Systems delivered strong growth and performance in most segments and captured over $50 billion worth of new orders.

The entire Boeing organization is focused on addressing the challenges that confronted us in 2003.

We are taking aggressive action to address the concerns of our U.S.

Government customers, and we are without question committed to restoring the hard-earned reputation of our company and our people.

In addition, we have put an intense focus on execution with the intent of taking Boeing to a new level of performance.

These are my highest priorities.

With our strong core businesses, excellent team, solid financial position, and our growth prospects, I am confident we will meet these challenges successfully.

Now let's move on and talk about the businesses starting with Commercial Airplanes on slide 3.

Commercial airlines turned in another outstanding and profitable year in 2003.

Despite significant market challenges, including the war in Iraq, the SARS epidemic, and the ongoing airline industry restructuring, Commercial Airplanes delivered 281 airplanes and solid profitability.

They did this by working closely with their customers, implementing lean processes, and improving asset utilization.

During the year they captured 240 gross orders, including key wins in China; as well as from Al Nippon Airways, AirTran, and Southwest Airlines.

Net orders in 2003 increased 35% to 239 airplanes driven by Commercial Airplanes continued leadership in the growing low-cost segment, with the 737 next-generation family of airplanes.

Commercial airplanes is well positioned for a recovery in their markets with great products and the right product strategy.

In December they took an important step towards realizing their strategy by gaining board approval to offer the 7E7 airplane to our customers.

The 7E7 is aimed at a $400 billion market for mid-sized airplanes over the next 20 years.

The airplane is designed to offer significant operating costs, environmental and passenger comfort improvements to the airlines and to the flying public.

I'm very proud of the progress the whole Commercial Airplanes team has made over the past several years and I'm excited about their future because they have positioned themselves both with products and their improving productivity to take great advantage of the market up-turn when it occurs.

Now let's look at a few 2003 highlights from our Integrated Defense Systems business on slide 4.

IDS delivered strong revenue and margin performance across the vast majority of it's business in the fourth quarter and in 2003.

Revenues grew by almost 10% to over $27 billion driven by strong growth in their network and support systems businesses.

The support systems business received an important recognition for their outstanding performance and operational excellence, when they were awarded the Malcolm Baldridge quality award during the fourth quarter.

This marks the second time that an IDS business has received the award in the past six years.

However, we continue to face challenges in our commercial satellite and launch businesses which impacted our performance during 2003.

We are focused intently on addressing these issues and restoring our reputation with our U.S.

Government customer.

Turning to new business, IDS had an exceptional year for orders capturing over $50 billion and substantially increasing their backlog.

Key achievements included completing negotiations and signing the development contract for the U.S.

Army's future combat system, also capturing the small diameter bomb program, and receiving a second multi-year contract for F/A-18 Super Hornets.

The wins, along with many others, have provided IDS with a solid revenue base and have positioned them very well for future growth.

IDS is intently focused on performance and execution, and I am confident they will deliver strong revenue and earnings growth over the next several years.

Taking a brief look at our other businesses on slide 5, we should note that Boeing Capital produced improved results in 2003 as they continued to operate in a challenging commercial aircraft financing environment.

Portfolio growth slowed substantially reflecting the change in strategy we announced late in the year to concentrate on supporting Boeing businesses.

On January 15th, we announced additional steps consistent with our new strategy, including the evaluation of strategic alternatives related to BCC's commercial equipment finance group.

Looking forward we expect BCC's growth to moderate, reflecting lower demand for financing and BCC's focus on managing risk and preserving value.

Connexion by Boeing and air traffic management also made progress in 2003.

Connexion by Boeing completed two well received service demonstrations and signed contracts to install it's service on 119 airplanes at several leading airlines.

Key customers include Lufthansa, SAS, Al Nippon Airways, and Japan Airlines.

They continue to prepare for a full scale service launch at the end of the first quarter.

Air traffic management also made progress during the year as support continues to build in Europe, Asia, and the U.S. for modernizing the global air traffic system.

Time will tell whether the support will translate into a robust requirement and a robust business.

Now, James will take you through the financial summary and outlook and after that I'll wrap up with a few comments about where I think we're going for the future.

James.

Thank you, Harry.

And good morning.

Let's begin with the financial summary on slide 7.

Our financial results for 2003 reflect good overall operating performance.

Results from the fourth quarter were particularly strong in our major businesses.

During 2003 we achieved our expected revenues as growth in our Integrated Defense Systems business partially offset the impact of delivering 100 fewer commercial aircraft compared to 2002.

Earnings for 2003 reflect strong performance across our defense and Commercial Airplane businesses offset somewhat by the previously announced goodwill and commercial space charges, as well as lower pension income.

Earnings also reflect the $1.1 billion federal tax refund received in the fourth quarter.

Cash flows were strong and exceeded our expectations, highlighting our overall operating and financial strength.

Our backlog grew significantly after another outstanding year at IDS in capturing new business.

I will discuss a few highlights from the quarter and the year and take you through the financial outlook.

Now let's turn to slide 8.

Fourth quarter revenues for the company were over $13.2 billion, down 4% from the fourth quarter of 2002, primarily as a result of lower commercial airplane deliveries.

Revenue at IDS and BCC were up modestly.

Operating margins for the quarter fell to 5.1%, reflecting lower commercial airplane delivery, lower pension income, and higher expense for deferred stock compensation.

These impacts were partially offset by improved margin performance at IDS, BCA, and BCC.

Earnings per share were $1.37 for the quarter and included an 87 cent per share gain for the federal tax refund.

Excluding the tax refund fourth quarter earnings per share totaled 50 cents.

Operating cash flow in the quarter was very strong at $3.6 billion.

Each of our major businesses delivered solid cash performance for the quarter.

Operating cash flow included $1.1 billion from the federal tax refund, and the early receipt of approximately $500 million in customer progress payments and advances originally anticipated in 2004.

Turning to slide 9.

Total revenues for the full year were $50.5 billion, as revenue in our Integrated Defense Systems business increased almost 10% to $27.4 billion, partially offsetting lower deliveries and revenue at Commercial Airplanes.

Excluding the goodwill impairment in the first quarter, adjusted operating margins fell; primarily reflecting the commercial space charge in the second quarter and the 100 fewer deliveries at Commercial Airplanes.

For the year, the company earned 86 cents per share, up from 61 cents in 2002.

Turning to slide 10.

This slide shows a comparison of our 2003 reported EPS against the guidance we provided last October during our third quarter earnings call.

Adjusting for the goodwill charge and the tax refund, both of which were excluded from our October guidance, our 2003 results of $1 per share were at the high end of our range of expectations.

Moving to slide 11.

Boeing generated $3.9 billion of operating cash flow during 2003.

Operating cash flow for the year included a $1.7 billion of discretionary contributions to strengthen our pension plans, as well as, the $1.1 billion federal tax refund.

Operating cash flow reflected strong operating performance and the fact that the charges taken during the year were primarily non-cash.

Boeing continues to invest for the future, spending over $700 million on capital expenditures to upgrade equipment and facilities during the year.

Strong cash flow remains a hallmark for Boeing.

Moving to slide 12.

Our balance sheet remains strong, as we ended 2003 with a cash balance of $4.6 billion; up significantly from the $2.3 billion at the end of 2002.

Boeing debt grew modestly to $5.3 billion after a successful refinancing earlier in the year.

Boeing's capital debt declined slightly to $9.1 billion, driven by strong portfolio cash flows and the new strategy announced by BCC in 2003.

Consistent with that strategy we decreased Boeing Capital's debt to equity ratio from 5.7 to 1 at the end of 2002, to a conservative 4.7 to 1 at the end of 2003.

In the fourth quarter, Boeing took a $200 million non-cash charge to equity to reflect the market-driven changes to the value of our pension assets and liabilities, using a September 30th measurement date.

This charge was driven principally by the low interest rates on September 30th and did not impact reported earnings.

The impact on equity may be reversed in the future if either interest rates increase, plan returns improve, or we make additional cash contributions to our plan.

Financial strength and solid credit ratings remain a priority for Boeing.

We remain at the top of our industry peers with solid single A ratings.

Moving to slide 13.

During 2003 our total backlog grew 12% to $156 billion.

As Harry noted, IDS had a tremendous year winning over $50 billion in orders, including the contract for the U.S.

Army's future combat system, the F/A-18 multi-year production extension, the small diameter bomb development and production and the E/A-18-G development contract.

BCA's backlog remained solid at $64 billion.

With total backlog about three times our current revenue, Boeing businesses are well positioned to provide profitable growth in the future.

Now turning to slide 14, I'll discuss our pension outlook.

Starting in 2004 the impact of pension on earnings is expected to be negative due principally to lower overall market returns during the period 2001 to 2002 and lower interest rates.

We currently estimate pension expense will reduce earnings from operations by between $350 million and $400 million in 2004.

For 2005, our current estimate is that pension expense will reduce earnings from operations by approximately $600 to $700 million.

All these pension expenses are non-cash.

Over the next few years, pension plans related to Commercial Airplanes drive most of the pension expense.

As a result, only a modest amount of pension expense will be recovered through our government contracts.

We expect required cash funding for pensions during 2004 to be approximately $100 million, while required funding in 2005 is expected to be less than $500 million.

These requirements are included in our overall cash flow guidance.

However, because of our strong cash flow we will continue to evaluate making additional discretionary contributions to our pension plan.

Our pension outlook reflects updated assumptions for the current plan year.

Expected rate of return has been lowered to 8.75% from 9%.

The discount rate, which is reflective of interest rates on September 30th, 2003, our measurement date, has been adjusted to 6% from 6.5%.

You can find additional pension related information on our Investor Relations website.

Now let's turn to our financial outlook on slide 15.

Today we're updating our guidance for 2004 and providing a first look at 2005.

Broadly speaking, we expect revenue and earnings to increase in 2004 and 2005; primarily as a result of solid growth at IDS.

Commercial airplane revenues will decline modestly in 2004 and begin to grow again in 2005.

Our overall outlook reflects anticipated increases in pension expense, which are offset by operating performance.

Turning to our segment outlook.

Commercial airplane delivery forecast for 2004 has been updated from a range of 275 to 290 airplanes, to approximately 285 airplanes; and that 285 for '04 is essentially all sold out.

Deliveries in 2005 are expected to be about the same as 2004, so customer interest has increased over the past few months, particularly in the 737 next-generation family.

The 2005 delivery forecast is over 90% sold out at the 2004 level.

Commercial airplanes does not expect substantial delivery recovery until 2006.

Given this delivery outlook, Commercial Airplane revenues in 2004 are expected to be approximately $20 billion.

Revenues in 2005 are expected to be slightly higher, depending on the actual quantity and model types of the airplanes delivered.

Commercial airplane margins in 2004 on a program accounting basis are expected to range from 4.5 to 5.5%.

In 2005, program accounting margins are expected to be in the same range as 2004.

Operating margins include significant increases in R&D for the 7E7 development.

Operating margins before this investment are expected to increase annually during the guidance period.

IDS defense systems revenues for 2004 are expected to grow to between $29.2 and $30.6 billion, then increase by approximately 10% in 2005.

This guidance is driven by continued strong growth in our integrated battle space, missile defense, and aerospace support markets.

We anticipate that aircraft and weapons systems programs will grow modestly, while commercial satellite and launch markets are expected to remain challenging during the outlook period.

Integrated Defense Systems margins are forecasted to be in the 9 to 9.5% range in 2004.

Margins are expected to improve to slightly below 10% in 2005.

Turning to Boeing Capital.

Revenue guidance for 2004 is approximately $1.2 billion; 2005 revenue is also forecasted at the same level.

Boeing Capital portfolio is expected to grow by less than $500 million in both 2004 and 2005.

This guidance assumes the gradual runoff of the commercial equipment finance portfolio and excludes the impact of any sale or disposition of the CFS unit.

Boeing Capital's annual return on assets is expected to be approximately 1% in 2004 and to be greater than 1% in 2005.

Additional segment guidance is provided in our press release which you can find on Boeing's website.

Now putting all that together, Boeing's revenue guidance for 2004 is unchanged at plus or minus $52 billion.

For 2005 our initial revenue guidance is in the range of $55 to $57 billion.

Important drivers will be the rate of growth and performance on key defense programs, and the number and mix of commercial airplanes we deliver.

Our earnings per share guidance for 2004 remains at $1.75 to $1.95 per share as IDS earnings growth help offset increasing pension expense totally between 27 and 31 cents per share.

For 2005 our initial guidance is $1.95 to $2.20 per share reflecting continued growth at IDS, as well as, slightly higher revenue and earnings at Commercial Airplanes.

These improvements offset continued growth in pension expense which increases to between 46 cents and 54 cents per share.

Guidance for 2004 and 2005 include the impact of our share-based plan expense which totaled approximately 35 cents a share in 2003, and is expected to grow modestly during the guidance period.

Beginning with this quarter, we are moving all of our guidance to GAAP and will provide operating cash flow guidance in our perspective on capital expenditures in place of free cash flow.

For 2004 we are revising operating cash flow guidance from greater than $3.5 billion to a range of $3 billion to $3.5 billion.

This reflects the acceleration of approximately $500 million of customer advances and progress payments at Commercial Airplanes and IDS from 2004 into 2003.

Following historical patterns, we expect operating cash flow to be stronger in the second half of 2004.

Capital expenditures for the year are expected to be approximately $1 billion.

For 2005 we expect operating cash flow to be greater than $4.5 billion, with capital expenditures expected to be in the $1.5 billion range.

The growth in 2005 capital expenditures primarily reflect investments to support Connexion by Boeing and the 7E7 program.

Okay, with that I will give it back to Harry for some concluding remarks.

Harry.

Thank you, James.

It's going to be very easy and very quick.

Summary at this point for looking forward, and the chart says it all.

As we have the right strategy, we don't see any change in the strategy.

The thing we need to do is focus on execution.

We're committed to the highest standards of integrity and we will spend an awful lot of time restoring our reputation for our integrity and excellence with our customers, our partners, and our employees.

All of our businesses are well positioned for growth.

The execution inside will determine how fast that growth comes.

The market up-turn for commercial and the continuing strength of the defense and space markets will let The Boeing Company grow and return to financial health, the likes of which we have not seen in a long time.

We are investing for the future.

We have the balance sheet that permits us to invest for the future, and we intend to be sure that we find growth opportunities, inside and possibly outside; but right now we are focused internally, surely on executing the fine businesses that we already have.

Now we'd be happy to take your questions.

Thank you.

To ask a question on today's conference please press the star key followed by 1 on your touch-tone phone.

Again, star 1 for questions.

If you are on a speakerphone please make sure your mute function is turned off to allow the signal to reach our equipment.

And in the interest of time we do ask that you limit yourself to one single-part question.

Once again, star 1 we will pause to give everyone a chance to signal.

We will take our first question from Heidi Wood of Morgan Stanley.

Good morning.

Harry, a question for you.

Can you update us on the status of tanker and give us an idea of how you're spending your time between D.C. and BCAG?

Well, I had an early surge to BCAG to be sure that we got to 7E7 launched, and I think I've been out to Seattle three times since I've been on the job for various reasons, but I'm spending a lot of time in the Pentagon and on the hill.

There's a number of things we can't rush or influence right now, and that is that there's an IG investigation going on in the Pentagon.

That's going to have to finish, in my opinion, before anything will move forward.

As there's no lack of determination to have a tanker, I don't find that with anyone that I talk to.

And they're simply trying to be sure that all the decks are cleared from the integrity standpoint, so that they can move forward.

So we're kind of waiting for that to happen.

I think you're probably aware we also have a further examination going on inside the company by Senator Rudman and his law firm looking into it, and we expect to have a second report out to the board of directors in February.

So those things have to kind of finish, I believe, before the tanker program will move forward under the terms that we've put forward.

Contracts are ready to be signed, but simply I think everyone wants to be sure that we don't have any difficulty going forward once they are signed.

Thank you.

Our next question comes from George Shapiro with Smith Barney.

Yeah, good morning.

I wanted to pursue the commercial margins seem abnormally high relative to my expectation, and I think your guidance as well.

One thing I noticed was that the 777 program had a increase in the deferred production this quarter versus what would normally be expected as a decrease at this state in the program, and I was wondering if there was any operating gains from the sale of some of the aircraft that you had mentioned at BCC in the number in the quarter.

No, George, it was primarily because we had a accounting quantity extension of 50 aircraft, 777s, and that's why you saw the increase in deferred costs and a slight increase in the margins.

Okay.

Thanks.

Our next question comes from Nick Fothergill with Bank of America.

Please go ahead.

The question really is on the defense businesses.

Missile defense, future combat systems, joint tactical radars, all come with pretty impressive margins, even at the R&D level.

Some of your competing companies recently showed there's quite a lot of margin pressure even at the R&D level, as certainly incentive fees are being lost as programs drift to the right and delays take place.

Can you reassure us, Harry, that this is not happening in your company and that will you continue to be able to deliver good margin up side from these defense programs?

Well, we think so.

We think we've contracted them correctly, and by the way I think our peers in the industry have as well.

It comes down to execution, and I think, Nick, that what we're showing is that we do know how to execute, and many, many of our programs are right on track and, of course, everyone's familiar with the areas where we did stumble, and we are still looking at how we get our Boeing satellite systems back up on the deck, because setting there bobbling along, even in spite of the big write-off as the current earnings for that business is unacceptable, and so we have some work to do there.

But fortunately that's a pretty small piece of our business, and these very large contracts that you talked about, I've personally reviewed two out of the three, since I've been here.

I'm very pleased with it, and I think it looks great going forward.

Thank you, Harry.

Thank you, and we will take our next question from Chris Mecray with Deutsche Bank.

Back on commercial margins, I wonder if you could just spend a minute and review what your plans are in terms of cost reduction going forward in a period of relatively stable production and how that might trend through in terms of gains in '04 and '05 just generally?

Well, I'm not sure we can give you a number as to how it goes, but the fellows are driving forward the order of 5% improvement in productivity every year, as they still have a lot of work to do in terms of reducing the assets that they have employed, and I have to tell you, as someone who's been away for 18 months, I was on the board, of course, and watching it.

I'm truly impressed that the strides that they've taken to change the paradigm in the commercial business, and that's what's required, because people just aren't willing to pay the kind of prices for airplanes that they've been willing to pay in the past because of the pressures that they're seeing.

So I think look for 5% a year improvement in productivity.

Thank you.

Our next question comes from Cai Von Rumohr with SG Cowen.

Go ahead.

Yes, good quarter, guys.

James, you mentioned, you know, kind of in your margin assumptions for 2004 and '05 in Commercial the significant ramp in 7E7 spending.

Could you all share with us kind of your plans for what sort of spending we'll see in '04 and '05, what's baked into your plan, and where R&D for the total company would be in those years?

We're still looking at, in terms of R&D spending in the, for '04, in the 3.5 to 3.75% of revenue range; and that has in it incorporated the levels we're going to spend for the 7E7.

Thank you.

Our next question comes from Joe Nadol with JP Morgan.

Go ahead.

Thanks, good morning.

Harry, my question is with regard to the very large cash balance you've accumulated on the balance sheet and also there have been a couple of other items that have hit the news waves, Wichita, and the BCC commercial portfolio.

Could you talk about how you're thinking about other moves and what you're going to do with that cash?

Well, you know as you've probably asked me that question before, and everybody has, and I've always had the same answer; that says there's at least three things you can do for it, and it's called dividends, stock buyback, and acquisitions, and so right now we're focused internally, and so investing in our internal performance and becoming more efficient at what we're doing is the only idea we have for the moment.

So I don't want people going away from this call believing that we're looking at major acquisitions or anything, because of the cash we have.

Right now, we're going to run the businesses very well that we already have.

Of course, as James mentioned in his part of the review, we will be looking at making, should we make some more discretionary investments in our pension plan, which we did last year; and that appears to be a very good investment for us.

So we'll be looking at that as well.

Thank you.

And our next question is from Steve Binder with Bear Stearns.

Go ahead, please.

Good morning.

You know, James, can you maybe just touch on -- there was, you know, I think the question on program margins has been focused on already, but there's a pretty big jump from third to fourth quarter with respect to program margins while unit cost margins actually trended lower in Q4.

You mentioned the program extension, the block extension on the 777.

Were there any other block extensions on your other programs, and or were there any cost estimate revisions in some of those blocks?

There were a couple of other block extensions.

We did extend the 747 block by, I think it was 25 aircraft we had two 757s that also were added.

We had a downer on tanker of about 25 also which reflects the shift in schedule.

But what you saw, I think, was a change in model mix that had better earnings and we had higher deliveries quarter-over-quarter, and it was the continued good performance that we've seen out of B C A.

Just to clarify, Steve, on the 747 we extended that by 12, not 25.

12, I'm sorry.

Thank you.

Our next question comes from Byron Callan of Merrill Lynch.

Go ahead.

Good morning.

Nice numbers.

James, just on 2005 you have a pretty big jump in the cash from operations assumption to $4.5 billion.

How much of that is from advances that you might receive on new airplane orders?

Are you guys signaling that you really expect to see a dramatic up turn?

Was that 2005?

2005, yes.

Yeah, we are planning on seeing some -- the market recover in 2006 from an orders standpoint which would mean advances would show up in the 2005 time frame.

Can you quantify what's baked into that assumption, that $4.5 billion?

No.

Thanks.

I think what you're seeing, though, also, Byron, is continued strong performance out of IDS that's contributing to steady, growing basis to that cash flow.

Thank you.

Our next question comes from Jon Rogers with D.A. Davidson.

Go ahead, please.

Good morning.

Could you talk a little bit about what the airline customers are telling you in terms of, I guess, pricing?

Are you seeing any potential that at least they're leveling off here?

This is Harry.

I don't think so.

I don't think they're ever going to give us that signal, Jon.

It's good to hear from you again.

Yeah.

These folks are struggling.

We have really the low-cost carriers that are doing quite well, but many of our big customers worldwide are struggling with their own pricing; and so they certainly aren't amenable to giving us a higher price.

I think it's getting to be, you know, a really tough business that says you have to drive costs down every year; and our folks have figured that out, and they're working on it, and so if you aren't driving your costs down you just aren't going to be successful going forward.

Thanks.

And we will take our next question from Sam Pearlstein with Jefferies & Company.

Go ahead, please.

Good morning.

Can you talk a little bit about, I guess, the network systems business in terms of why there was such a high incremental margin this quarter in terms of the profit growth year-over-year; and then also just I would have thought there were a lot of development programs in that particular segment.

Then why the margins look so strong over the next two-year period in that business as well.

Well, they're very unique businesses.

Quite frankly we have the best of industry working in those areas, and the -- when you see good earnings in that area it means the execution was good and the award fees were very good.

So we've contracted properly and if we perform, we're going to be permitted to make higher margins than we are used to historically; but if you don't perform, then you're going to get whacked in the head.

So I think the performance has been very good.

I can tell you it's been very good in that area.

So the results are very good.

And it's -- the type of contracting that's going on in this area is -- it gives some very good returns for performing; and we like that way.

Thank you.

And our next question comes from Jim Higgins with CSFB.

Go ahead, please.

Yes, hi.

On the commercial side, if there have been recent surprises, it is that the low-cost carriers appear to be showing some signs that maybe their growth is too aggressive and not as profitable as it used to be.

Do you see this as being a passing phenomenon, or do you think there are any potential implications for longer term demand from them because of this?

Personally I think that what you've seen is you've seen a shift from the majors to the low-cost carriers through the downturn, bopping along the bottom here; and, of course, I think what you're describing is that they had year over year over year over year very big growth, and maybe it was a little aggressive as an assumption.

So they're having to adjust some, and we're working with all of our customers to deal with it, for the most part they're dealing with assumptions out in 2006 and beyond.

Right.

So it's a very dynamic market, as you know, and so they are really-- rather than expanding the market, in some areas is they're taking market share away from some of the majors.

Low-cost carriers have really been a major instrument of market expansion for years, and will continue to, in my opinion.

Great.

Air travel is the fastest, safest, lowest cost way to go anywhere, so we expect that to continue.

Thank you.

And our next question comes from David Strauss with UBS.

Go ahead, please.

Mr. Strauss, your line is open.

Can you hear me?

Yes.

Good morning.

Could you give an update on the status of the 717 program and what is contemplated in your guidance for that program?

The guidance says that the program goes ahead.

We have some competitions going on right now; as we're continuing to deliver airplanes and the people who use it are having great success with it.

The biggest user of 717 is actually one of the better performing airlines around, and the thing that keeps the market depressed in there is people aren't very interested in 100-passenger airplanes, because of the scope clause everyone either wants to get down below 80 passengers; or when they look at 100 and think, my goodness, if I can find 40 or 50 more passengers then my cost per seat goes down, and, of course, then we're happy to sell them the 737.

But the 717 is performing very well for the people that have it.

It's just that the 100-passenger market is very soft, and right now we have that program in our forecast; and it's in there at fundamentally break even, no income basis, you know, so it's not going to generate any margins, but it's going ahead.

Thank you.

Our next question comes from Peter Jacobs with Ragen, MacKenzie.

Go ahead, please.

Good morning, gentlemen.

My question pertains to the 767 tanker program, and I'm just curious what kind of risk is in the financial projections that you've laid out for '04 and '05 if this thing does not get the green light in '04; or even worse yet just doesn't fly at all.

Could you help quantify that impact that it could have on those projections, please?

Yeah, you know, through 2003, we've incurred a about $270 million in cost in trying to execute the program and hold the current schedule.

And we're at burn rate of about $90 million a quarter.

So as Harry said earlier we feel pretty strongly we're going to get this deal done, so we believe that that risk is somewhat moderated by the fact that we will get a contract sometime this year.

But there's the revenue and earnings impact as well, won't there be?

No, not yet.

We're still assuming that we're going to get the contract done, and that we will get those revenues will be realized and we have shifted the schedule and the delivery of when those will occur and that's reflected in the guidance.

Outside of the '05 time frame?

Yes.

Yeah.

Yes.

Next question comes from Rob Spingarn with Wachovia Securities.

Good morning.

Could you talk about the sustainability of the support systems revenue run rate and the sensitivity there to the margin?

I assume some of the run-up is based on the activity we're seeing overseas.

Yes, I suppose that a lot of it is; but these folks have garnered a lot of new contracts as well, in terms of activities that we have and ongoing maintenance.

So but, certainly, the activities of deployment have probably increased that some, and I, off the top of my head, I don't know that I could quantify that.

Do you have any thoughts?

No.

It's a very good question as we'll try and drag some of that out and if you'll call the IR people I'm sure they will be able to expand on it for you.

I just don't know sitting here.

Thank you.

We will take our next question from Robert Toomey with RBC Dain Rauscher.

Good morning.

Harry in your prepared comments towards the end you made a statement to the effect that you feel long-term that the improvement in Boeing performance will be the likes of which the company has not seen in a number of years.

Can you comment on your -- how that might ultimately be reflected in margin performance, say in the next, you know, over the next several years, three or four years, particularly in a stronger revenue growth space for commercial business?

I can tell you where we were trying to go, and we were headed off there until we hit the bump in the road of the events external to the company.

That is that Phil Condit and I set a goal for this company to earn 7% after tax, and everybody says, why did you set that goal?

Well, we set it because The Boeing Company has never achieved that in it's history.

The closest it came was in 1978 and '79 where the after-tax earnings were 6.8, 6.9%.

So in terms of operating the business that we have, we should be able to achieve those kinds of results and my mind has not changed on that subject at all, so that's where we're headed.

Thank you.

I don't know how long it's going to take us to get there, but you may be sure that that is the target.

Thank you.

And our next question comes from Joe Campbell with Lehman Brothers.

Go ahead, please.

Good morning.

Harry, my same old question basically about program accounting and it's impact.

In the third quarter of this year to the fourth quarter, the unit cost margin in Alan's business fell by a point, yet the GAAP suggested that the margins doubled from 4% to 8%.

When we go out to your guidance in '05, particularly, the company will be looking in it's block sizes into '06 and '07; and if you have big step-ups in '06 and ''07 then it will allow the margins in '05 to be much bigger.

So the question is, the guidance you gave us assumes -- has to have assumptions for GAAP because of program accounting stuff, about '06 and '07, and I'm trying to figure out whether the guidance you gave us already reflects a big pickup in program accounting because of the recovery or whether it basically reflects the same sort of, this year it only contributed a half a percent to the margin.

No, Joe, in the program accounting assumptions we are assuming the recovery.

We are assuming that the market comes back, and that's why you're seeing the better margins in program, because we're assuming the production rates are going to get back up and our deliveries are going to get back up.

So there's no big pickup in unit, it's all in program.

Don't understand that question.

You know, this is Harry, when I look at it, I keep trying to understand why the earnings aren't better, and then I have to remind myself about the pension impact all the time, because it ends up being $500 million between '03 and '05, for example, that order of magnitude.

So earnings are being held down, reported earnings are being held down by pension expense impact, from a plus 11% to a minus, I don't know, 50%, or 50 cents a share.

Does that lead -- lend any light to the, Joe, at all?

Or are you strictly on a program accounting quest?

I think the other thing to remember, too, is that R&D is kicking up.

Right.

Over that period, and so that's having a depressive impact on the margins.

That's why you're seeing them stay kind of flattish.

If you look at a pre-R&D, kind of operating margin at BCA, you'd see it going up over that forecast period, so that's another element of that.

Thank you.

Our next question comes from Robert Friedman with Standard & Poor's.

Go ahead, please.

Oh, yes, I guess this question is for Mr. Bell.

What is the portion of the customer financing and leasing section of the investing subsection of the cash flow statement, both on purchases and disposals?

I don't understand the question.

We're looking at each other because we're having trouble --.

Okay.

The operating leased aircraft assets that were purchased in '03 and any sales of operating leased aircraft in '03.

I think what you see is, if you're talking about some of the aircraft that are sold by BCA that end up being -- sold to customers and end up being financed at BCC, some of that comes out in the sort of other and elimination in the revenue, if that's what you're getting at.

But are you talking about the actual cash flow statement sections that deals with customer financing?

Yep.

I just don't understand the question.

Well, I mean, I like adding back all -- I like including in the cap ex any operating -- any assets, any aircraft purchased by Boeing for purposes of leasing to others.

So the BCC purchases?

Yes, I would imagine it's in BCC.

We actually disclose in a note, I think it's table 3 of the press release --.

Exactly.

-- that kind of details those figures directly, so I think if you look at footnote 2 to the cash flow, table 3 on the press release, that should answer your question.

Okay, thank you.

Thank you.

Our next question comes as a follow-up from Heidi Wood with Morgan Stanley.

Please go ahead.

Yes, Harry, question for you on this other in Connexion spending.

When does that peak?

Because over the last three years you've spent over $1.2 billion, and we're just wondering when we're going to get a pay back on this.

Connexion, number one, as we expand the fleet we'll continue to invest in that, so we're investing in a big base there.

Originally this plan was to have the airlines as a bigger part of the -- as a partner, and they were going to do a lot of the investing in putting the equipment in and everything.

Of course, after 9/11, the airlines were not solvent enough to invest in this thing, so the character of the investment changed, which puts a bigger load on us.

We still believe in the business, and I have reviewed the plan in great detail since I've been here, and -- but it does have a long string on it.

So it's beyond '05 before you're going to see anything good out of Connexion, but we like the trial that we have, we like the enthusiasm of some very major airlines, and so we're going right ahead.

But that $449 million in expense this year is -- do we peak this year, or are you saying that you're -- you're going to peak in '05?

For Connexion?

I mean for the overall business.

I mean, that, you know, air-traffic control, connection is part of it; but what I'm talking about, Harry, when you look at the P & L, that area continues to rise as an expense item for you; 424 in '02.

It will continue to rise through the period.

Through '05.

Oh, yes.

Yes.

What's the peak level of that number, then?

I mean, is it going to half a billion?

We're not going to go there.

That's about the sixth question you sneaked in there, Heidi.

I love you for it.

I'm just trying to get clarification on what I'm trying to ask.

Thanks a lot.

All right.

And our next question comes from -- as a follow-up from George Shapiro with Smith Barney.

Go ahead.

James, is it possible that you could give us what -- how much the commercial margin would be down if you assumed deliveries were flat in the '06 timeframe?

No.

We don't believe that.

We haven't ran those numbers, at least I don't have them.

We probably did some stress test of it, but pretty much we have built in there the recovery of the market and our program assumptions, and that's what we believe is going to happen.

Okay.

I won't get Harry mad at me by asking another question.

I don't get mad at you for asking questions.

Just trying to keep order in the house.

[ LAUGHTER ]

Also, I get tense when I don't know the answer.

You know that.

[ LAUGHTER ] Thanks.

We've got time for one more question.

We will take our final question from Cai Von Rumohr as a follow-up, from SG Cowen.

Go ahead, please.

Yes, you talked of R&D at 3.4 to 3.7% in '04, but you've given a forecast for the totals in '05; but you haven't told us where R&D might be, and could you give us any guidance on the 7E7 given that I think the tanker spending will be down in '05?

Well, we did give you guidance in '05 what the R&D spending levels would be.

We said it's 3.5 to 4% of revenue.

We think that will have both the 7E7 ramp up and the ramp-down of the tanker.

Okay.

Thank you.

That's included in that percentage.

Thank you.

And that does complete the analyst question-and-answer session.

For members of the media, I will now return you to The Boeing Company for introductory remarks by Mr. Todd Hollen, Vice President of Communications.

Mr. Hollen, please go ahead.

We'll continue with the media questions for Harry and James.

If you have any questions after the session is over, please call our media team at 312-544-2002.

We are ready for the first question and let's go forward.

Thank you.

Once again star 1 to signal for a question.

We will take our first question from Melissa Allison with the Chicago Tribune.

I have kind of a silly question.

You changed your Commercial Airplane guidance for 2005 and said there would be no recovery until 2006.

That's a little different from what we've been hearing and I wondered why you changed that?

I'm not sure that it's different at all.

We've always said that we thought orders would pick up in '05 and deliveries in '06, and that's -- that guidance is unchanged.

I think just to clarify a little bit, we had said before that we didn't expect it to be any earlier than '05, now we're saying we expect it to begin happening in '06.

I just wondered if there was anything that had gone into that or if it's just a matter of semantics.

No, it's just our team's view of how the airlines are recovering.

We are encouraged by the fact that traffic is finally getting back to pre-9/11 levels in some areas, and also the profitability of some of the airlines is improving; but, you know, we're already inside lead time for delivering in '05, so faced with the realities that it hasn't started to recover is-- that tends to make you shove it out.

The economy is showing signs of recovery in many, many areas, and so we're encouraged; and there's an awful lot of capacity that's parked that has to come back in, and that's what really makes it tough to forecast how this is going to go.

Our folks are trying to count every airplane and look at every nuance of the market, and this is our latest assessment.

Thank you.

And our next question comes from Chris Stectowicz with Reuters.

Go ahead, please.

Good morning.

Wondering if you could tell us what are the revenue assumptions for '04 and '05 based on the tanker deal?

There's no revenue in either of those years, I don't think, for the tanker deal.

For the U.S. tanker deal.

We have other tanker deals.

We have Japan and Italy which we're -- I happen to have been in Wichita yesterday looking at the Italian tanker that's being worked on down there.

For the U.S. tanker deal there are no revenues in '04 or '05.

And are we asking follow-ups on this call?

Sure.

Go ahead.

I'm wondering, given the delays in that program, is there a point that that begins to affect production on the 767 line and the backlog is about 25 now, and 16 of those are from A & A and J A S, which could presumably switched to 77 orders down the road, so is there a concern that the production might be impacted here?

We're not assuming any impact right now, but if the tanker program doesn't go ahead then it certainly will have an impact how we look at the 767 line; and it will for sure raise the cost of operating that line, but we will go ahead and complete our commitments to our customers and then, you know, when people stop buying it, it shuts down.

That's what happened to the 757.

So that's kind of the way we're looking at it, but for the time being, we are confident that the tanker deal will ultimately go in some form or other, and we're counting on it, and, in fact, we're working on the first tanker as moving down the line.

Great.

Thanks.

And our next question comes from Kevin Dunn with The Financial Times.

Go ahead, please.

Hello.

You mentioned that in your outlook statement that airline interest is slowly increasing, although demand for the 717 remains low.

Yes.

Is that an indication at all of doubts over the continuing of that production?

No, I think it's nothing more than people's assessment of the size aircraft that they need, and as I tell people, the good news is we're selling more 100-passenger airplanes than anybody else.

The bad news is we're not selling very many.

So it's a sizing situation, I think, and at least that's our assessment of it.

So if you're not selling many of them and there isn't that much interest in them, how long do you think you can keep this line working?

Oh, it works just fine.

It will keep working as long as people buy them.

When they stop buying them, we'll shut it down.

We have ongoing campaigns.

Yeah, there's ongoing campaigns, and if those are successful it will continue on.

The moment that it stops, it stops.

And I'm not trying to be flip or glib about it at all, but we have recent experience; as recently as about nine months ago where we realized that the 757 is coming to a halt, and so we stopped it.

And actually it will stop.

We made a decision to stop.

It will stop in like September of this year.

Yes, absolutely.

That's why I wondered whether this was flagging out that 717 is perhaps in danger of going the same way.

Well, at the risk of us both repeating ourselves --.

No, it's okay.

If they stop buying it, or as the previous questioner or the 767, you know, there's only orders for 25 or so there, when those run out they'll both have to stop.

In this statement today you mention that you received 240 gross orders last year.

Your website now says that you received 250 gross orders.

I'm just wondering if you can take me through what the difference is apart from it being ten.

I'm looking at a lot of people around the table, and I don't see anyone volunteering to answer it.

We'll have to get into that.

Call the guys downstairs.

We can get into the details of that.

I think it's just a definitional thing, but the 240 is the right number.

Yeah, we feel 240 is the right number but call us and we'll get you those differences.

Thanks for pointing it out.

Appreciate it.

Thank you.

Our next question comes from Peter Pay with the Los Angeles times.

Go ahead, please.

Good morning.

I have a question for you on the launch and orbital systems business.

It looks like the contractual backlog is down by more than half.

Have you guys hit bottom in that area, or do you sense more pressure there?

Well, you know, as we said, that market is pretty challenged.

There haven't been a lot of new orders in the commercial space arena at all, so we are working off our existing backlog, and so it's down.

Do you see it continuing?

We see it continuing to be a challenge, and but we're still in the business.

I've got a follow-up question for Harry.

You talked about how you're spending a lot more time at the Pentagon and on the hill.

What are you telling these folks?

Could you give us --.

I'm telling them fundamentally that if they have a problem with us, I want to know what it is, and we're going to work on every one of them.

Once again, trying to deal with this perception that we're a bunch of crooks; and that's, you know, that's an exaggeration, but people forget that the issues at hand that have come up we found all those ourselves and reported them in accordance with the DII.

So that's the way we do, and as we find issues, we report them to our customer, and start the investigations.

So I'm just going around trying to find out where the nay sayers are; and I'm not finding nay sayers, quite frankly.

I've been in this job now for two months, roughly, and I've yet to have anyone say a nasty thing to me.

So I'm working-- every time somebody points to someone that may have an issue with us, I'm there.

And that's what I've been doing, and it's trying to -- you know-- many times once people can look into your eyes and ask you the questions they want to ask, then the climate changes dramatically.

So that's what I'm trying to do.

Do you think these ethical questions are behind you now?

Oh, no, I don't think they're all behind us.

This is an ongoing thing that I think requires a lot of demonstration of will, and will to return to the reputation that we've enjoyed over the years.

Until we see that that's returning grossly and fast, then I won't be satisfied.

I expect to still be spending a lot of time on that issue.

Thank you.

Thank you.

And our next question comes from Lynn Lunsford with the Wall Street Journal.

Please go ahead.

Good morning.

Hello, Lynn.

One quick question with regard to your work in Washington.

What's the status of the EELV investigation and what you're doing about getting off of suspension there?

Well, we're waiting on the second Redmond report, is what we call it here, which will be reported to the board of directors.

We're expecting it to be reported in the February board meeting, or in February.

When that happens, then we will turn the results of that over to the officials.

They have some investigations of their own going on, which we think that their examination of the situation will also be finished sometime in February.

We expect to be able to resolve that issue by the end of February or early March, is my current assessment of that.

By the way, I have personally been there and spoken with the officials that are involved in this whole process of suspension.

One of the first things I did when I took this job.

Thank you.

Thank you.

And our next question comes from David Bowermaster with Seattle Times.

Follow-up on the previous two questions.

Harry, I'm wondering if you've had a chance yet to talk with Senator McCain since he's obviously been one of the most vocal critics on the 767?

I have spoken with Senator McCain in a social setting ago couple of times and it was a very satisfactory exchange, and I fundamentally said to him that I want to talk with you about how we get Boeing and myself out of the penalty box.

As I say, it was a social setting, and the senator and I will be getting together here in the next several days to talk through once again, whatever issues that he has on his mind, because whatever issues he has, I have to address.

Are you expecting him to hold additional hearings this year?

I don't have any way to judge that.

I know that he made some statements about that late last year, and I don't know -- I don't have any indication of what his thinking is on that subject.

Okay.

Thanks.

Uh-huh.

Thank you.

And our next question comes from Darrell Hasler with Bloomberg News.

Go ahead, please.

Mr. Hasler, your line is open.

Sorry, I was on mute.

I wanted to know, Harry, if you could tell me anything in terms of interest for the 7E7, if you can talk about what kind of customers seem most interested at all?

Well, I think there are customers in Europe that are interested, there are customers in Asia that are interested, and there are customers in the U.S. that are interested.

Alan and his team are fully engaged on that subject, and I'm going to engage personally in a couple of areas on the subject.

Launch orders could come out in the next two or three months?

I think so.

We're hopeful that that's the case, and, you know, it's a tough environment for our airline customers, and so as they sort through what they want to do and how fast they want to do it we want to be right there with them.

Any kind of minimum in your mind on how many launch orders you would want just to get the program going?

Yes.

Could you tell me what this is?

No.

Okay.

Thanks.

Thank you.

Thank you.

Our next question comes from Francine Knolls with the Chicago Sun Times.

Go ahead, please.

Good morning, gentlemen.

Actually, my question was just answered.

It was regarding the 7E7 and how that's going.

Thank you.

Thank you.

And our next question comes from Molly McMillan with Wichita Eagle.

Go ahead.

Hi, good morning, my question is for Harry.

Hi, Harry.

How are you?

Fine.

When you were in Wichita you didn't have time or haven't addressed the media since the news in the Seattle Times broke over the weekend.

Wondering, Jeff Turner put out a memo to employees that said a summary of what you had to say was that Wichita has a great future with The Boeing Company.

That statements kind of falls short of saying whether that future is with employees with Boeing itself or with another company that might be working on Boeing products.

I guess what is the -- what's the plan for Wichita as you see it now?

Well, the plan for Wichita at present, and, you know, I've talked with -- we've got a problem.

Somebody's got a phone line open.

Is it open in your office?

I don't think so.

Okay.

There's a big echo for some reason.

I'm sorry.

But I've explained to the Governor and to congressional delegation and to the employees to the extent that I can that we don't have any changed plan for Wichita right now.

In fact, since we did the merger, the acquisition of Rockwell and the merger of McDonnell Douglas one thing that we've had is we have had too big a footprint, too many assets employed.

So as we started doing that in 199 -- actually, pre-merger, in '96 we started looking at what the new Boeing company would look like, and so that's been ongoing.

Then in '98, as Alan took over the commercial business, he had a team that started looking at how could the commercial business be more competitive; and that has involved, you know, what are we going to build ourselves, where are we going to build it, can someone else do that for us, and so those studies have been ongoing and continue to go on.

The thing that we said and the thing that got all out of context this week was suddenly everybody had us closing the Wichita plant.

We can't run this company with the Wichita plant closed.

There are 12,500 very able people working down there every day, doing great work I might add, because that's the one thing I did for two hours and a half on whatever day I was down there, day before yesterday, I guess, and they're doing great work.

But, as the commercial guys have ongoing studies about what they are going to own, as do the military folks; and, you know, when that happens, we will engage with the employees, the unions involved, the communities, the Congress, and the state politicians, and we'll all be part of this decision, whatever it is.

So perhaps I'm pontificating a bit on the issue, but the long answer and the short answer is there's been no decision made to do anything with Wichita other than what it's doing.

Are there studies going on?

You bet.

Wichita though, whether there's a Boeing sign on the side of the building or another sign on the side of the building, is very important to the future of The Boeing Company.

I would also add that this is a commercial study.

A commercial airplane company study.

We have lots of things going on in Wichita in the military area, and we're adding to it as we have put the tanker program in there and we're bidding on the MMA, the multi-mission aircraft, and -- which is a 737 derivative which will also require lots of effort out of the Wichita plant.

So does that make any sense at all in terms of trying to clarify the situation?

Well, I guess what you're saying is you've made no decisions but you're still open.

Absolutely.

We're not trying to fish tail on it at all, but I want to make no mistake about it that, you know, we study these things for every location that we have.

So don't be threatened by it.

We're just doing the responsible thing of trying to make ourselves more competitive all the time, because those people who do not, will find someone else taking their business.

And so that's what we're trying to do.

Okay.

Are you -- are any suiters talking to you about looking at it?

Have you gotten that far?

None whatsoever.

There are very few people that have the wherewithal to even buy the place if it were for sale.

If you think about it, it's a huge place, and an important place.

So I've had absolutely zero conversations with anybody about buying Wichita.

Okay.

And to my knowledge, no one else has.

Okay.

Okay?

All right.

Could I ask you one more question about something else?

Sure.

How is the selection for the strut and the sales for the 7E7 proceeding?

Any decisions been made where those may be built?

I had a great review with the folks out on the floor there, had a good time with them.

They're doing good work.

I said, you know, I know you're doing a selling job on me, but they don't even give me a vote on the subject.

They're competing hard, I know, with the program guys, and that decision will get made by Michael Bear and his team who run the 7E7 program.

One last question.

On the tankers, the modification of those, I guess assuming that program moves forward, would all of those be modified in Wichita, or would they do the first few and maybe those would be put other places or what's the plan?

Don't have any plan to put them anyplace other than Wichita.

What we like to do is do more of the work on them in line, in the commercial line, but fundamentally we don't have a way to do that right now.

I was just down there.

I would encourage you maybe to go talk with the folks at the plant and see if you can see the extent of the work that has to be done on one of these tankers, because the first Italian tanker, which is a 767 tanker, is current being modified right there as we speak.

I tell you, I thought I knew everything that had to be done, but I was amazed at all the work that has to be done to convert this from a brand-new 767 into a tanker.

So you might want to go look at that.

Thanks very much.

You bet.

And our next question is a follow-up from Chris Stectowicz with Reuters.

Go ahead, please.

Actually, my question has been answered, I'll let somebody else go.

We will take our next question from Dominic Gates with the Seattle Times.

This will be our last question for the day, folks.

Hello, question for Harry.

Yes.

Hi, can we go back to the Wichita situation for a minute?

Sure.

Of course, I wrote the story.

Let me, first of all, agree with you, a lot of stuff was taken out of context after that story was published.

Nobody talked about closing the plant.

I certainly didn't, and work goes on.

But I just want to clarify your answer to Molly.

Nothing is imminent, but you consider it possible, and you talked about the possibility of somebody else's signs, not Boeing, being on the factory wall.

I want to try and clarify something for you really clearly so we don't make it any more mistakes on it okay?

Okay.

It's only been about two years that the rumors that were published in your same paper was that we were closing Renton.

Do you remember that story?

Well, I wasn't at the paper then.

I understand, but -- and I'm trying to make a point, because the place just got it's hair on fire because, quote, we're closing Renton, when, in fact, what we were doing is reducing the footprint.

Renton is a totally different place today than it was then because the folks have done great work.

We're going to have these things come up because, as I've said as, plainly as I can that we study the future of every facility that we own at some point in time.

Now, some of them it doesn't take very long to make decisions about, some of them it takes a longer time to do.

So we are studying that, and we'll continue to, and when I say "we," I'm not studying it.

The guys who own the businesses are studying it.

When they get through studying it, if they want to do something, they come tromping into headquarters and talk with the folks responsible for asset sales and purchases and talk with them.

Mr. Bell is very involved in that process.

So that's kind of what's going on.

It's really unfortunate.

I can't tell you how destructive your article was.

It destroyed my whole day, day before yesterday.

Thank you.

And that does conclude today's question-and-answer session.

Thank you, ladies and gentlemen.

If you have any questions, please call our media team.

Thank you.

And that does conclude today's conference.

We do appreciate your participation.

You may now disconnect.