FINANCIAL COMPARISON

BETWEEN
THE BOEING COMPANY
AND
LOCKHEED MARTIN
Keith L. Hohl
EMGT 452
Semester Project
14 December 1999
1
Table of Contents
1. Intro!ction"St!# $bjecti%e
2. &oein' (in)nci)l St)tement )n *n)l#sis
2.1. &)c+'ro!n )n Pro!ct Lines
2.2. ,onsoli)te &)l)nce )n Income St)tements
2.-. Di%ision)l (in)nci)l St)tements
2.4. .)tio )n Tren *n)l#sis
-. Loc+hee M)rtin (in)nci)l St)tement )n *n)l#sis
-.1. &)c+'ro!n )n Pro!ct Lines
-.2. ,onsoli)te &)l)nce )n Income St)tements
-.-. Di%ision)l (in)nci)l St)tements
-.4. .)tio )n Tren *n)l#sis
4. (in)nci)l ,om/)rison bet0een the T0o ,om/)nies
4.1. ,onsoli)te ,om/)risons
4.2. Milit)r# *ircr)1t )n S/)ce Di%isions ,om/)risons
5. S!mm)r#",oncl!sions
2. &iblio'r)/h#
3. List o1 T)bles
4. List o1 (i'!res
2
List of Tables
T516 ,onsoli)te (in)nci)l &)l)nce Sheet5The &oein' ,om/)n#
T526 ,onsoli)te Income St)tement5The &oein' ,om/)n#
T5-6 Di%ision)l (in)nci)l S!mm)r#5The &oein' ,om/)n#
T546 ,onsoli)te (in)nci)l .)tio *n)l#sis5The &oein' ,om/)n#
T556 ,onsoli)te (in)nci)l &)l)nce Sheet5Loc+hee M)rtin
T526 ,onsoli)te Income St)tement5 Loc+hee M)rtin
T536 Di%ision)l (in)nci)l S!mm)r#5 Loc+hee M)rtin
T546 ,onsoli)te (in)nci)l .)tio *n)l#sis5 Loc+hee M)rtin
-
List of Fi!"es
(516 Tot)l *ssets Di%ision)l Tren *n)l#sis5The &oein' ,om/)n#
(526 S)les Di%ision)l Tren *n)l#sis5The &oein' ,om/)n#
(5-6 7et E)rnin's Di%ision)l Tren *n)l#sis5The &oein' ,om/)n#
(546 7et ,)/it)l E8/enit!res Di%ision)l Tren *n)l#sis5The &oein' ,om/)n#
(556 Tot)l Li)bilities Di%ision)l Tren *n)l#sis5The &oein' ,om/)n#
(526 .ese)rch )n De%elo/ment Di%ision)l Tren *n)l#sis5The &oein' ,om/)n#
(536 Li9!iit# .)tio Tren *n)l#sis5The &oein' ,om/)n#
(546 *sset M)n)'ement .)tio Tren *n)l#sis5The &oein' ,om/)n#
(596 Tot)l *ssets Di%ision)l Tren *n)l#sis5 Loc+hee M)rtin
(51:6 S)les Di%ision)l Tren *n)l#sis5 Loc+hee M)rtin
(5116 7et E)rnin's Di%ision)l Tren *n)l#sis5Loc+hee M)rtin
(5126 7et ,)/it)l E8/enit!res Di%ision)l Tren *n)l#sis5 Loc+hee M)rtin
(51-6 Li9!iit# .)tio Tren *n)l#sis5 Loc+hee M)rtin
(5146 *sset M)n)'ement .)tio Tren *n)l#sis5 Loc+hee M)rtin
(5156 ,onsoli)te Tot)l *ssets (in)nci)l ,om/)rison
(5126 ,onsoli)te S)les (in)nci)l ,om/)rison
(5136 ,onsoli)te 7et E)rnin's (in)nci)l ,om/)rison
(5146 ,onsoli)te E)rnin's 1rom $/er)tions (in)nci)l ,om/)rison
(5196 ,onsoli)te E)rnin's /er Sh)re (in)nci)l ,om/)rison
(52:6 ,onsoli)te .et!rn on *ssets ;.$*< (in)nci)l ,om/)rison
(5216 ,onsoli)te .et!rn on E9!it# ;.$E< (in)nci)l ,om/)rison
(5226 ,onsoli)te Pro1it M)r'in (in)nci)l ,om/)rison
(52-6 ,onsoli)te In%entories (in)nci)l ,om/)rison
(5246 ,onsoli)te ,!rrent .)tio Li9!iit# (in)nci)l ,om/)rison
(5256 ,onsoli)te =!ic+ .)tio Li9!iit# (in)nci)l ,om/)rison
(5226 ,onsoli)te In%entor# T!rno%er 5*sset M)n)'ement .)tio (in)nci)l ,om/)rison
(5236 ,onsoli)te (i8e *sset >*sset M)n)'ement .)tio (in)nci)l ,om/)rison
(5246 ,onsoli)te Tot)l *sset >*sset M)n)'ement .)tio (in)nci)l ,om/)rison
(5296 ,onsoli)te D)# S)les $!tst)nin' 5*sset M)n)'ement .)tio (in)nci)l ,om/)rison
(5-:6 ,onsoli)te Debt .)tio5Debt M)n)'ement .)tio (in)nci)l ,om/)rison
(5-16 ,onsoli)te Times Interest E)rne .)tio5Debt M)n)'ement (in)nci)l ,om/)rison
(5-26 Di%ision)l S)les5Milit)r# *ircr)1t ? S/)ce (in)nci)l ,om/)rison
(5--6 Di%ision)l E&IT5 Milit)r# *ircr)1t ? S/)ce (in)nci)l ,om/)rison
(5-46 Di%ision)l Tot)l *ssets5 Milit)r# *ircr)1t ? S/)ce (in)nci)l ,om/)rison
(5-56 Di%ision)l 7et ,)/it)l E8/enit!res5 Milit)r# *ircr)1t ? S/)ce (in)nci)l ,om/)rison
4
#$ Int"o%!&tion'Ob(e&ti)e
This st!# 0ill 1in)nci)ll# com/)re The &oein' ,om/)n# )n the Loc+hee M)rtin ,or/or)tion b# !sin'
r)tio )n)l#sis o1 the 1994 &)l)nce )n Income st)tements o1 e)ch com/)n#. The st!# 0ill etermine
e)ch com/)n#@s c!rrent consoli)te )n i%ision)l 1in)nci)l /osition. The Milit)r# *ircr)1t )n S/)ce
Di%isions 0ill be 1in)nci)ll# com/)re bet0een The &oein' ,om/)n# ;&oein'< )n Loc+hee M)rtin
;LM<.
*$ Boein Finan&ial State+ent an% Anal,sis
2.1 Background and Product Lines
The &oein' ,om/)n# is the l)r'est m)n!1)ct!rer o1 commerci)l jetliners )n Milit)r# )ircr)1t in the
0orl. The &oein' ,om/)n# is i%ie into the 1ollo0in' i%isionsA ;1< The ,ommerci)l *ir/l)ne
Gro!/B ;2<. The Milit)r# *ircr)1t )n Missile Gro!/B ;-<. S/)ce )n ,omm!nic)tions Gro!/B )n ;4<.
The ,!stomer )n ,ommerci)l (in)ncin' Gro!/. E)ch 'ro!/ is res/onsible 1or cert)in Pro!cts )n the
res!ltin' 1in)nci)l /er1orm)nce.
The ,ommerci)l *ir/l)ne 'ro!/ /ro!ct line incl!es the 1ollo0in' /ro!cts6 3-3B 343B 353B 323B333B
313B MD511B MD54:B )n MD59: jetliners. ,h)nces )re %er# 'oo th)t in one@s recent tr)%els th)t #o!
0ere /)ssen'er in one o1 these &oein' jets.
The Milit)r# *ircr)1t )n Missiles Pro!ct lines incl!es the 1ollo0in'6 (14,"D )n (14E"( HornetB (15E
E)'leB *C4& H)rrier II Pl!sB T45 Gosh)0+B ,513 Globem)ster IIIB C522 $s/re#B ,H543 ,hinoo+ Helico/terB
.*H522 ,om)ncheB *H524D */)che Lon'bo0B Sl)m5E. Missile )n DD*M missile. The /ro!ct lines sho0
the e8tent in 0hich the Milit)r# *ircr)1t )n Missiles /ro%ie 1or the 7)tion@s e1ense.
The S/)ce )n ,omm!nic)tions Gro!/ Pro!ct lines incl!es the 1ollo0in'6 S/)ce Sh!ttleB Delt) II
roc+etsB Delt) III roc+etsB Delt) IC roc+etsB Intern)tion)l S/)ce St)tionB 7MD Interce/torB 323 *E*,SB
*irborne L)serB Se) L)!nchB )n Glob)l Positionin' S#stem. S/)ce )n comm!nic)tion is the i%ision in
0hich h)s the hi'hest 'ro0th /otenti)l 1or &oein'.
2.2 Consolidated Divisional Financial Statements
T)ble T51 sho0s the &oein' ,om/)n# ,onsoli)te (in)nci)l &)l)nce Sheet 1or 199251994 )n the
recent 1999 thir =!)rter E)rnin's .e/ort. The &)l)nce sheet t)+es into the )cco!nt 1or the mer'ers )n
)c9!isitions o1 The .oc+0ell *eros/)ce )n De1ense ,om/)n# in Dec 1992 )n McDonnell Do!'l)s
,or/or)tion in *!'!st 1993. The &)l)nce sheet /ro%ies ) sn)/shot o1 the &oein' ,om/)n# )t ) /oint o1
time. Thro!'ho!t the rem)iner o1 this re/ortB )n)l#sis 0ill be b)se !/on time enin' -1 December
1994 since 1999 Thir =!)rter com/)rison )t) 1rom the Loc+hee M)rtin ,or/or)tion co!l not be
1o!n.
The o%er)ll tot)l )ssets not incl!in' the thir =tr E)rnin's re/ort sho0s th)t the tot)l )ssets )re
ecre)sin' since its /e)+ in 1993. It sho0s th)t )//ro8im)tel# 44F o1 the 1994 tot)l )ssets )re the
cl)ssi1ie !ner the ,!rrent )ssets. ,!rrent )ssets less in%entories )re the most li9!i o1 )ll the )ssets.
The c!rrent )ssets )re ecre)sin' o%er the three5#e)r time /erio.
The c!rrent li)bilities )re )lso ecre)sin' o%er the three5#e)r time /erio in 0hich c!rrent li)bilities
)cco!nt 1or -3F o1 the tot)l li)bilities. The lon'5 term ebt is )lso ecre)sin' o%er the three #e)r time
/erio )cco!ntin' 1or j!st 12F o1 the tot)l li)bilities.
T)bleT52 sho0s the &oein' ,om/)n# ,onsoli)te Income St)tement 1or 1992 >1994 )n the recent
1999 thir =!)rter E)rnin's .e/ort. The Gbottom lineBH E)rnin' /er sh)re )t ) is)//ointin' I1.12 1or
5
1994. The income st)tement sho0s th)t e%en tho!'h S)les )re incre)sin'B the cost o1 o/er)tions )re
incre)sin' more th)n the s)les c)!sin' the E)rnin's /er sh)re to be ecre)se.
2.3Divisional Financial Statements
T)ble T5- sho0s the &oein' ,om/)n#@s Di%isions )n selecte 1in)nci)l )t). The 1in)nci)l )t)
incl!es Tot)l *ssetsB Tot)l Li)bilitiesB S)lesB 7et E)rnin'sB De/reci)tionB .ese)rch )n
De%elo/mentB 7et ,)/it)l E8/enit!res )n ,ontr)ct!)l b)c+lo'. Ho0e%erB !e to l)c+ o1 )t)
)%)il)bilit# 1rom the Loc+hee M)rtin cor/or)tionB the Di%ision)l S!mm)r# com/)rison 0ill onl#
be /er1orme on Tot)l *ssetsB S)lesB E)rnin's be1ore Income )n T)8es ;E&IT< )n 7et ,)/it)l
E8/enit!res.
-4F o1 the tot)l )ssets )re )lloc)te to the ,ommerci)l *ircr)1t i%ision 0hile 14F o1 the tot)l
)ssets )re )lloc)te to the Milit)r# *ircr)1t )n S/)ce Di%isions )s sho0n in 1i'!re (51.
The ,ommerci)l *ircr)1t i%ision )n Milit)r# *ircr)1t )n S/)ce i%isions )cco!nte 1or 2-F
)n -5F res/ecti%el# o1 the tot)l com/)n# S)les )s sho0n in (i'!re (52. This is %er# im/ort)nt
correl)tion to be !se l)ter on this re/ort !rin' r)tio )n)l#sis.
In 1994B the Milit)r# *ircr)1t )n S/)ce Di%isions contrib!te )//ro8im)tel# 1-3F to the o%er)ll
7et e)rnin's )s sho0n in 1i'!re (5-. E%en tho!'h the ,ommerci)l *ircr)1t i%ision h)s the
m)jorit# o1 S)lesB the ,ommerci)l *ircr)1t i%ision onl# contrib!te 2F to the o%er)ll net
e)rnin's. This 'l)rin' st)tistic sho0s the Milit)r# *ircr)1t )n S/)ce Di%isions )re b)sic)ll#
s!//ortin' the entire cor/or)tion. This co!l be one o1 the m)jor re)sons 0h# the &oein'
,or/or)tion so!'ht o!t )n )c9!ire .oc+0ell )n McDonnell Do!'l)s ,or/or)tions since the
m)jorit# o1 these t0o cor/or)tions b!siness 0)s Milit)r# )n S/)ce )//lic)tions.
(or 7et ,)/it)l E8/enit!resB The ,ommerci)l *ircr)1t )n Milit)r# *ircr)1t )n S/)ce
contrib!te to 44F )n -:F res/ecti%el# to 7et ,)/it)l e8/enit!re )s sho0n in 1i'!re (54.
Since S)les )n ,ost o1 o/er)tions )re hi'h 1or the ,ommerci)l *ircr)1t i%isionB it is not
s!r/risin' th)t this i%ision is s/enin' )//ro8im)tel# h)l1 o1 the c)/it)l e8/enit!res.
(i'!re (55 )n (52 sho0 the Di%ision)l Tot)l Li)bilities )n .ese)rch )n De%elo/ment Tren
)n)l#sis res/ecti%el#. (or 1994B the ,ommerci)l *ircr)1t Di%ision cl)ime 54F o1 the )%)il)ble
1!nin' e%en tho!'h its S)les )n ,ost o1 o/er)tions )re incre)sin'. So the 9!estion is the 54F
o1 the 1!nin' bein' s/en on ne0 /ro!cts in lie! o1 re!cin' costs o1 o/er)tionsJ (rom the
limite )t) )%)il)bleB it seems to me th)t the 1!nin' is bein' !se 0ith ne0 /ro!ct
e%elo/ment in conj!nction 0ith S)les in lie! o1 cost re!ction /ro!ct enh)ncements.
2.4 Ratio and Trend nal!sis
T)ble T54 sho0s the consoli)te 1in)nci)l r)tios s!mm)r#. Li9!iit#B *sset M)n)'ementB Debt
M)n)'ementB )n Pro1it)bilit# r)tios 0ere 'ener)teB )n)l#KeB )n com/)re to simil)r in!str#
)%er)'es. E)ch o1 the m)in r)tios 0)s 'r)/he )n brie1 e8/l)n)tion )ccom/)nie e)ch 'r)/h.
Li9!iit# r)tios b)sic)ll# e1ine ho0B in this c)seB the &oein' ,om/)n# c)n meet its Short 5Term
obli')tions. The *sset M)n)'ement r)tio sho0s ho0 e11ecti%el# the 1irm m)n)'es its )ssets. The
Debt M)n)'ement r)tios sho0 ho0 ) 1irm !ses ebt 1in)ncin'. *n 1in)ll#B the Pro1it)bilit#
r)tios sho0s ho0 e11ecti%e )re the 1irms o/er)tions. The /ro1it)bilit# r)tio is ) s!mm)tion o1 the
e11ects o1 the Li9!iit#B *sset M)n)'ementB )n Debt m)n)'ement r)tios.
2
T)ble T54 sho0s e)ch ini%i!)l r)tioB the r)tio e1initionB the 1999 in!str# )%er)'eB )n ho0
&oein' ,om/)n# /er1orme !rin' the three5 #e)r /erio. 7ote the l)st entr# o1 T)ble T54 e)ls
0ith the &et) coe11icient. The &et) coe11icient 1or the &oein' ,om/)n# is 1.1:. The &et)
coe11icient is m)r+et ris+ o1 the stoc+. So 0ith ) &et) coe11icient o1 1.1:B The &oein' ,om/)n#
stoc+ is 1:F more ris+# th)n the )%er)'e ris+ stoc+ ;the )%er)'e ris+ stoc+ h)s ) &et) coe11icient
o1 1.::<
(i'!re (53 sho0s the Li9!iit# .)tio Tren )n)l#sis. The li9!iit# r)tio incl!es the ,!rrent
.)tio )n the =!ic+ r)tios. &oth r)tios )re lo0er th)n the in!str# )%er)'e. (or the &oein'
,om/)n#B the 'r)/h sho0s th)t the &oein' ,om/)n# 0o!l h)%e to li9!i)te its in%entor# in
orer to /)#o11 its c!rrent li)bilities. In%entories )re the le)st li9!i o1 )ll )ssets. In orer to
/)#o11 it creitors in 1!llB the &oein' ,om/)n# co!l li9!i)te its c!rrent )ssets )t 21F o1 boo+
%)l!e.
(i'!re (54 sho0s the *sset M)n)'ement .)tio Tren *n)l#sis. The *sset M)n)'ement r)tios
incl!e the In%entor# T!rno%erB Tot)l *sset T!rno%erB )n (i8e *sset T!rno%er .)tios. The
in%entor# T!rno%er r)tio is hi'her th)n the In!str# )%er)'e th)t sho0s th)t the in%entor# sol o!t
)n restoc+e 2.3- times ) #e)r. Since S)les is )t )n )ll5time hi'h 1or the &oein' ,om/)n#B this
co!l me)n th)t there is short)'e o1 in%entor# in orer to +ee/ !/ 0ith the S)les.
The (i8e *sset T!rno%er .)tio is sli'htl# lo0er th)n the in!str# )%er)'e. ,om/)re to other
in!str#B The &oein' ,om/)n# is not e11ecti%el# !tiliKin' its /l)nt )n e9!i/ment. This co!l be
res!lt o1 the .oc+0ell )n McDonnell Do!'l)s mer'ers")c9!isitions. In m# o/inionB it 0ill t)+e
some time 1or &oein' to !tiliKe it )ssets 1rom the mer'er since the &oein' ,om/)n# is loc)te in
t0ent#5se%en st)tes. The &oein' ,om/)n# h)s 're)t /otenti)l here to re!ce its /l)nt )n
e9!i/ment )ssets )n to !tiliKe e8istin' )ssets to the 1!llest.
The Tot)l *sset T!rno%er .)tio is hi'her th)n the in!str# )%er)'e. This is /rob)bl# !e to the
,ommerci)l *ircr)1t i%ision /ro!cin' s!ch l)r'e %ol!me o1 S)les com/)re to the tot)l )sset
in%estment.
7ot incl!e in the *sset M)n)'ement .)tio Tren )n)l#sis 'r)/h b!t is incl!e in the *sset
M)n)'ement r)tios )n)l#sis is The D)# S)les $!tst)nin' r)tio. This r)tio e%)l!)tes )cco!nt
recei%)bles /)#ments. (or the &oein' ,om/)n#B P)#ments )re bein' recei%e 2.5 times 9!ic+er
th)n the in!str# )%er)'e )t short 21 )#s. This hi'h r)te co!l be the res!lt o1 l)r'e n!mber o1
,ommerci)l )ircr)1t bein' /ro!ce. D)t) 0)s not )%)il)ble to loo+ )t the ini%i!)l i%isions.
The Debt M)n)'ement .)tios )re not 'r)/he. The Debt M)n)'ement .)tios incl!e the Debt
)n Times Interest E)rne r)tios. The Debt r)tio ienti1ies ho0 &oein' is 1in)nce. &oein' is
sli'hter hi'her th)n the in!str# )%er)'e. ,reitors h)%e 1in)nce 22F o1 the tot)l 1in)ncin'.
(rom this r)tioB ,reitors m)# m)+e it costl# 1or &oein' to borro0 )ition)l 1!ns 0itho!t
r)isin' more e9!it# c)/it)l. Ho0e%er 1rom T)ble T51B lon'5term ebt o%er the l)st three #e)rs h)s
been eclinin'.
The Times Interest E)rne r)tio o1 the Debt M)n)'ement r)tios is &oein'@s )bilit# to /)# interest.
&oein' h)s s!11icient 1!ns to meet )nn!)l interest costs e%en i1 o/er)tin' income eclines.
The Pro1it)bilit# .)tios incl!e Pro1it M)r'inB .et!rn on *ssets ;.$*<B .et!rn on E9!it# ;.$E<
)n &)sic E)rnin' Po0er. Pro1it M)r'ins )n .$* )re lo0 b!t im/ro%in' o%er the three5 #e)r
/erio. This is ) res!lt o1 cost o1 o/er)tions too hi'hB ins!11icient !se o1 e8istin' /l)nt )n
e9!i/mentB )n lon' )n short5term ebts )re too hi'h. &oein' nees to 1in 0)#s to im/ro%e in
3
these )re)s in orer to obt)in res/ect)ble Pro1it M)r'ins )n .$*. E%ientl# 1rom the mer'ers
)n )c9!isitionsB &oein' is be'innin' to t)+e )%)nt)'e o1 its mer'e )ssets )n becomin' to
!tiliKe )n consoli)te its o/er)tions. This is )lso rele%)nt th)t the 'ener)l tot)l em/lo#ment h)s
been re!ce b# more th)n se%en tho!s)n /eo/le b# the en o1 1994.
The &)sic E)rnin' Po0er /ro1it)bilit# .)tio me)s!res &oein'@s e)rnin' /o0er o1 its )ssetsB
be1ore the in1l!ence o1 t)8es )n 1in)ncin'. It is !se 1or com/)rin' 1irms 0ith i11erent t)8
sit!)tions )n 1in)nci)l le%er)'e. In this c)seB &oein' 0ill be com/)re to Loc+hee M)rtin l)ter
in this re/ort.
The .et!rn on E9!it# ;.$E< is m!ch hi'her th)n .$* )n m!ch hi'her th)n the in!str#
)%er)'e. &oein' !se its ebt e11ecti%el# so th)t net income is incre)sin' 0hile ,ommon E9!it#
is ecre)sin'.

-$ Lo&./ee% Ma"tin Finan&ial State+ent an% Anal,sis
3.1 Background and Product Lines
The Loc+hee M)rtin ;LM< ,or/or)tion is i%ie into the 1ollo0in' m)jor i%isions6 ;1< S/)ce
Str)te'ic MissilesB ;2<. ElectronicsB ;-<. *eron)!ticsB ;4<. In1orm)tion )n Ser%icesB )n ;5<
Ener'# )n other. E)ch i%ision is res/onsible 1or cert)in /ro!cts )n the res!ltin' 1in)nci)l
/er1orm)nce.
The S/)ce )n Str)te'ic Missile Gro!/ /ro!ct line incl!es *tl)s )n Trient &)llistic Missile
s#stemsB Trient L)!nch %ehiclesB S/)ce Sh!ttleB )n .e!s)ble L)!nch %ehicles.
The Electronics Gro!/ /ro!ct lines incl!es *EGIS Ee)/on S#stemsB L*7TI.7 T)r'etin'
s#stemsB L$,**S sm)rt m!nitions s#stemB )n L$S*T Ee)/on s#stem
The *eron)!tics 'ro!/ /ro!ct lines incl!e (12 ()lconB (22 .)/torB (5113*B )n ,51-:
Herc!les Milit)r# )ircr)1t
The In1orm)tion )n Ser%ices Gro!/ /ro%ie /ro!cts )n ser%ices 1or 7*S*B LS *rm#B
Immi'r)tion )n 7)t!r)liK)tion Ser%ices ;I7S< )n LS Str)te'ic ,omm)n.
The Ener'# )n $ther Gro!/ /ro%ie /ro!cts )n ser%ices 1or LS De/)rtment o1 Ener'#.
3.2 Consolidated Balance and "ncome Statements
T)ble T55 sho0s LM ,onsoli)te (in)nci)l &)l)nce sheet 1or 199251994. The b)l)nce sheet
t)+es into the 1or the mer'ers )n )c9!isitions o1 Lor)l Electronics ,or/or)tion in */ril 1992B
M)rtin M)riett) ,or/or)tion in M)rch 1995B )n Gener)l D#n)mics (ort Eorth Di%ision )n GE
*eros/)ce in 199-.
The o%er)ll tot)l )ssets sho0 th)t there h)s been no si'ni1ic)nt mo%ement o%er the l)st three
#e)rs. It sho0s th)t )//ro8im)tel# -3F o1 the 1994 tot)l )ssets )re cl)ssi1ie !ner c!rrent
)ssets. *')in c!rrent )ssets )re rem)inin' 1)irl# const)nt o%er the three5 #e)r /erio.
The c!rrent li)bilities )re incre)sin' o%er the three5#e)r /erio in 0hich c!rrent li)bilities )cco!nt
1or -2F o1 the tot)l li)bilities. Lon' term ebt is ecre)sin' o%er the three5 #e)r /erio
)cco!ntin' 1or -1F o1 the tot)l li)bilities.
4
T)ble T52 sho0s LM ,onsoli)te Income st)tement 1or 199251994 )n the recent 1999 thir
9!)rter E)rnin's .e/ort. The bottom line E)rnin's /er sh)re is I2.22 1or 1994. The income
st)tement sho0s th)t e%en tho!'h S)les 0ere ecre)sin' com/)re to 1993 /e)+B the cost o1
o/er)tions ecre)se c)!sin' the E)rnin's /er sh)re to incre)se.
3.3 Divisional Financial Statements
T)ble T53 sho0s LM@s i%isions )n Selecte 1in)nci)l )t). The 1in)nci)l )t) incl!es Tot)l
*ssetsB S)lesB E)rnin's be1ore Income )n T)8es ;E&IT< )n 7et ,)/it)l E8/enit!res.
-2F o1 the tot)l )ssets )re )lloc)te to the Electronics Di%ision 0hile -2F o1 the tot)l )ssets )re
)lloc)te to *eron)!tic )n S/)ce Di%isions )s sho0n in (i'!re (59.
The *eron)!tics )n S/)ce Di%isions )cco!nte 1or 51F o1 the tot)l com/)n# S)les )s sho0n in
(i'!re (51:.
In 1994B The *eron)!tics )n S/)ce Di%isions contrib!te 25F to the o%er)ll 7et E)rnin's
be1ore Interest )n T)8es )s sho0n in (i'!re (511.
(or 7et c)/it)l E8/enit!resB the *eron)!tics )n S/)ce Di%isions contrib!te 52F to the net
,)/it)l e8/enit!res )s sho0n in 1i'!re (512.
3.4 Ratio and Trend nal!sis
T)ble T54 sho0s the consoli)te 1in)nci)l r)tios s!mm)r#. Li9!iit#B *sset M)n)'ementB Debt
M)n)'ementB )n Pro1it)bilit# r)tios 0ere 'ener)teB )n)l#KeB )n com/)re to simil)r in!str#
)%er)'es. E)ch o1 the m)in r)tios 0)s 'r)/he )n brie1 e8/l)n)tion )ccom/)nie e)ch 'r)/h.
E)ch o1 the r)tio e1initions 0)s e8/l)ine !ner the &oein'@s .)tio )n Tren )n)l#sis section.
T)ble T54 sho0s e)ch ini%i!)l r)tioB the r)tio e1initionB the 1999 in!str# )%er)'eB )n ho0
LM /er1orme !rin' the three5 #e)r /erio. 7ote the l)st entr# o1 T)ble T54 e)ls 0ith the &et)
coe11icient. The &et) coe11icient 1or LM is :.4:. The &et) coe11icient is m)r+et ris+ o1 the stoc+.
So 0ith ) &et) coe11icient o1 :.4:B LM stoc+ is 2:F less ris+# th)n the )%er)'e ris+ stoc+ ;the
)%er)'e ris+ stoc+ h)s ) &et) coe11icient o1 1.::<
(i'!re (51- sho0s the Li9!iit# .)tio Tren )n)l#sis. The li9!iit# r)tio incl!es the ,!rrent
.)tio )n the =!ic+ r)tios. &oth r)tios )re si'ni1ic)ntl# lo0er th)n the in!str# )%er)'e
si'ni1#in' ) rel)ti%el# 0e)+ li9!iit# /osition. (or LMB the 'r)/h sho0s th)t LM 0o!l h)%e to
li9!i)te its in%entor# in orer to /)#o11 its c!rrent li)bilities. In%entories )re the le)st li9!i o1
)ll )ssets. In orer to /)#o11 it creitors in 1!llB LM co!l li9!i)te its c!rrent )ssets )t 93F o1
boo+ %)l!e.
(i'!re (514 sho0s the *sset M)n)'ement .)tio Tren *n)l#sis. The *sset M)n)'ement r)tios
incl!e the In%entor# T!rno%erB Tot)l *sset T!rno%erB )n (i8e *sset T!rno%er .)tios. The
in%entor# T!rno%er r)tio is hi'her th)n the In!str# )%er)'e th)t sho0s th)t the in%entor# sol o!t
)n restoc+e 2.12 times ) #e)r.
The (i8e *sset T!rno%er .)tio is sli'htl# )bo%e th)n the in!str# )%er)'e. ,om/)re to other
in!str#B LM is )s e11ecti%e !tiliKin' its /l)nt )n e9!i/ment )s other corres/onin' in!stries b!t
still room 1or im/ro%ement. This co!l be res!lt o1 the mer'ers")c9!isitions )c9!ire more th)n
three #e)rs )'o.
9
The Tot)l *sset T!rno%er .)tio is lo0er th)n the in!str# )%er)'e. This is /rob)bl# !e LM
'ener)tin' less s)les th)n tot)l )sset in%estment. 7ote th)t S)les b)sic)ll# rem)ine 1l)t !rin'
this three5 #e)r /erio.
7ot incl!e in the *sset M)n)'ement .)tio Tren )n)l#sis 'r)/h b!t is incl!e in the *sset
M)n)'ement r)tios )n)l#sis is The D)# S)les $!tst)nin' r)tio. This r)tio e%)l!)tes )cco!nt
recei%)bles /)#ments. (or LMB P)#ments )re bein' recei%e 1i%e )#s lon'er th)n the in!str#
)%er)'e o1 1i1t#5t0o )#s. Im/ro%ement in this )re) is ) m!st i1 7et E)rnin's is e8/ecte to
incre)se.
The Debt M)n)'ement .)tios )re not 'r)/he. The Debt M)n)'ement .)tios incl!e the Debt
)n Times Interest E)rne r)tios. The Debt r)tio ienti1ies ho0 LM is 1in)nce. &oein' is
sli'hter hi'her th)n the in!str# )%er)'e. ,reitors h)%e 1in)nce 23F o1 the tot)l 1in)ncin'.
(rom this r)tioB ,reitors m)# m)+e it costl# 1or LM to borro0 )ition)l 1!ns 0itho!t r)isin'
more e9!it# c)/it)l. Ho0e%er 1rom T)ble T55B lon'5term ebt o%er the l)st three #e)rs l)st been
eclinin'.
The Times Interest E)rne r)tio o1 the Debt M)n)'ement r)tios is LM@s )bilit# to /)# interest.
LM h)s s!11icient 1!ns to meet )nn!)l interest costs e%en i1 o/er)tin' income eclines.
The Pro1it)bilit# .)tios incl!e Pro1it M)r'inB .et!rn on *ssets ;.$*<B .et!rn on E9!it# ;.$E<
)n &)sic E)rnin' Po0er. Pro1it M)r'ins )n .$* )re lo0 )n eclinin' o%er the three5 #e)r
/erio. This is ) res!lt o1 cost o1 o/er)tions too hi'hB ins!11icient !se o1 e8istin' /l)nt )n
e9!i/mentB )n lon' )n short5term ebts )re too hi'h. LM nees to 1in 0)#s to im/ro%e in
these )re)s in orer to obt)in res/ect)ble Pro1it M)r'ins )n .$*. E%ientl# 1rom the mer'ers
)n )c9!isitionsB LM h)s not t)+en 1!ll )%)nt)'e o1 its mer'e )ssets )n consoli)tion o1 its
o/er)tions. 7ote6 'ener)l tot)l em/lo#ment h)s been re!ce b# more th)n t0ent#51i%e tho!s)n
/eo/le b# the en o1 1994 !rin' this three5#e)r /erio.
The &)sic E)rnin' Po0er /ro1it)bilit# .)tio me)s!res LM@s e)rnin' /o0er o1 its )ssetsB be1ore
the in1l!ence o1 t)8es )n 1in)ncin'. It is !se 1or com/)rin' 1irms 0ith i11erent t)8 sit!)tions
)n 1in)nci)l le%er)'e. The &)sic E)rnin' /o0er is eclinin'.
The .et!rn on E9!it# ;.$E< is m!ch hi'her th)n .$* )n m!ch hi'her th)n the in!str#
)%er)'e. Ho0e%er .$E )n .$* )re eclinin' since net income is ecre)sin' )n ,ommon
e9!it# is incre)sin'.

0$ Finan&ial Co+1a"ison bet2een t/e T2o Co+1anies
4.1 Consolidated Com#arisons
The rem)iner o1 this re/ort 0ill be !tiliKin' ,ol!mn )n b)r ch)rts to em/h)siKe the
common)lit# )n i11erences bet0een ,onsoli)te &oein' )n ,onsoli)te LM.
(i'!re (515 com/)res the consoli)te Tot)l *ssets. &oein'@s tot)l )ssets )re 1.-: times 're)ter
th)n LM. &oein'@s )ssets )re ecre)sin' 0hile LM@s )re rem)inin' ro!'hl# the s)me.
(i'!re (512 ,om/)re the consoli)te S)les. &oein' S)les )re incre)sin' 0hile LM S)les rem)in
1l)t. In 1994B &oein' S)les )re more th)n o!ble LM S)les. Ho0e%er &oein' S)les )re hi'her
1:
!e to ,ommerci)l *ircr)1t i%ision th)t LM oes not h)%e. I1 the ,ommerci)l S)les )re
remo%eB then S)les 1i'!res 1or both com/)nies 0o!l be 1)irl# close.
(i'!re (513 com/)res the consoli)te 7et E)rnin's. LM o/er)tions )re m!ch more e11icient
th)n &oein's o%er this three5#e)r /erio since LM e)rnin's )re ne)rl# the s)me )s &oein'@s.
7ote &oein' h) more th)n o!ble the s)les in 1994 )n #et onl# sli'ht i11erence in e)rnin's.
Ho0e%er LM e)rnin' tren is ecre)sin' o%er this three5#e)r /erio.
(i'!re (514 com/)res the consoli)te E)rnin's 1rom $/er)tions. LM cost o1 o/er)tions is m!ch
lo0er th)n &oein'@s. LM e)rnin's rem)in consistent 0ith 1l)t s)les recei/ts. &oein' nees m!ch
im/ro%ement in this )re).
(i'!re (519 com/)res the consoli)te E)rnin' /er sh)re. LM h)s 'ener)ll# hi'her e)rnin's /er
sh)re th)n &oein' 1or re)sonin' st)te on e)rlier 1i'!res. *')in &oein' nee m!ch im/ro%ement
in this )re).
(i'!re (52: com/)res the consoli)te .$*. (i'!re (52: sho0s th)t LM h)s o!t /er1orme
&oein' since &oein' mer'e 0ith McDonnell Do!'l)s )n .oc+0ell. Ho0e%erB LM@s .$* h)s
been ecre)sin' o%er this three5#e)r time /erio.
(i'!re (521 com/)res the ,onsoli)te .$E. (i'!re (521 sho0s th)t LM h)s been
o!t/er1ormin' &oein' b# si'ni1ic)nt m)r'ins. Ho0e%erB LM@s .$E h)s been eclinin' since its
/e)+ in 1993. *')inB the 1i'!re sho0s th)t LM h)s been more e11icient )t its o/er)tions
com/)re to &oein'.
(i'!re (522 com/)res the ,onsoli)te /ro1it m)r'in. The 1i'!re sho0s th)t LM@s /ro1it m)r'ins
)re ecre)sin' b!t still si'ni1ic)ntl# )he) o1 &oein'. *')in LM h)s ) more e11icient o/er)tion
com/)re to &oein'.
(i'!re (52- com/)res the consoli)te In%entories. The 1i'!re sho0s th)t LM in%entories )re
incre)sin' 0hile &oein'@s in%entories )re ecre)sin'. LM in%entor# to tot)l )sset r)tio is 5:F
less th)n &oein'@s.
(i'!re (524 com/)res the consoli)te li9!iit# ,!rrent r)tio. The 1i'!re sho0s th)t both
com/)nies h)%e ) rel)ti%e 0e)+ li9!iit# /osition com/)re to the in!str# )%er)'e. Ho0e%er
LM )n &oein' h)s )//ro8im)tel# -4F )n 2:F res/ecti%el# o1 its li)bilities committe to lon'
)n short term ebt.
(i'!re (525 com/)res the consoli)te li9!iit# =!ic+ r)tio. The 1i'!re sho0s th)t both
com/)nies r)tio is ecre)sin'. &oth com/)nies 0o!l h)%e to li9!i)te its in%entor# in orer to
/)#o11 it c!rrent li)bilities.
(i'!re (522 com/)res the in%entor# t!rno%er r)tio. It sho0s th)t both com/)nies in%entor# 0)s
sol o!t )n restoc+e hi'her th)n the in!str# )%er)'e. LM r)tio is hi'her th)n &oein'. The
(i'!re co!l sho0 th)t ) short)'e o1 neee in%entor# to s!//ort s)les 1or &oein' co!l be
/otenti)l in1l!ence here since &oein' h) e8/erience recor s)les !rin' 1994.
(i'!re (523 com/)res the consoli)te (i8e *sset .)tio. The 1i'!re sho0s th)t LM is
e11ecti%el# !sin' its /l)nt )n e9!i/ment com/)re to the in!str# )%er)'e )n to &oein'.
&oein' re9!ires im/ro%ement to better !tiliKe its /l)nt )n e9!i/ment.
11
(i'!re (524 com/)res the ,onsoli)te Tot)l *sset .)tio. The 1i'!re sho0s th)t LM is
'ener)tin' s)les less th)n tot)l )sset in%estment com/)re to the in!str# )%er)'e. &oein' on the
other h)nB is 'ener)tin' more s)les th)n tot)l )sset in%estment.
(i'!re (529 com/)res the consoli)te D)# S)les $!tst)nin' .)tio. &oein'@s r)te is
o!tst)nin' com/)re to the in!str# )%er)'e 0hile LM r)te e8cee the in!str# )%er)'e.
(i'!re (5-: com/)res the consoli)te Debt r)tio. &oth com/)nies ebt r)tio is hi'her th)n the
in!str# )%er)'e. ,reitors h)%e s!//lie )//ro8im)tel# 23F o1 the tot)l 1in)ncin'.
(i'!re (5-1 com/)res the consoli)te Times Interest E)rne .)tio. &oth com/)nies h)%e
s!11icient 1!ns to meet their )nn!)l interest costs i1 o/er)tin' incomes ecline.
4.2 $ilitar! ircra%t and S#ace Divisions Com#arisons
(i'!re (5-2 com/)res the Milit)r# *ircr)1t )n S/)ce i%isions S)les. The 1i'!re sho0s th)t
&oein' )n LM S)les )re ne)rl# e9!)l. 7ote &oein' o%er)ll s)les e8cee LM b# 1.2 times. LM
s)les ho0e%er )re ecre)sin' 0hile &oein'@s )re incre)sin'.
(i'!re (5-- com/)res the Milit)r# *ircr)1t )n S/)ce i%isions E&IT. The 1i'!re sho0s ne)rin'
e9!)l E&IT 1or both com/)nies. Met both com/)nies cl)ime )n o%er)ll E)rnin's Loss /er sh)re
1or 1993. The 1i'!re sho0s th)t in 1993 the Milit)r# *ircr)1t )n S/)ce i%isions /re%ente e%en
1!rther recore losses.
(i'!re (5-4 com/)res the Milit)r# )ircr)1t )n S/)ce Di%isions tot)l )ssets. LM tot)l )ssets )re
incre)sin' 0hile &oein'@s tot)l )ssets )re ecre)sin'. The 1i'!re e8/l)ins 0hile .$* is
incre)sin' )t &oein' )n ecre)sin' )t LM.
(i'!re (5-5 com/)res the Milit)r# *ircr)1t )n s/)ce Di%ision 7et ,)/it)l E8/enit!res. 7et
,)/it)l e8/enit!res 1or both com/)nies )re incre)sin' 0ith &oein' sli'htl# more th)n LM. &oth
com/)nies )re tr#in' to re!ce its cost o1 o/er)tion b# moerniK)tion o1 its /l)nt )n e9!i/ment.
3$4 S!++a",'Con&l!sions
The &oein' ,om/)n# /ro1it)bilit# is incre)sin' b!t not )t in!str# )%er)'es or better. &oein' is still
!ner /er1ormin' the S ? P 5:: )%er)'e. $%er the l)st three #e)rsB &oein' h)s re!ce its lon' term
ebtB re!ce its o%er)ll in%entoriesB lo0ere its o/er)tin' costsB incre)se its !s)'e o1 1i8e )ssetsB
im/ro%e )cco!nt recei%)bles /)#mentsB )n h)s 'ener)te more S)les th)n tot)l in%estments. &oein'
nees to 1!rther re!ce its o/er)tin' costs )n 1!rther im/ro%e on )sset !tiliK)tion.
LM /ro1it)bilit# is ecre)sin' )n !ner /er1ormin' the S ? P 5:: )%er)'e. LM S)les )re ecre)sin'B 7et
income ecre)sin'B cost o1 o/er)tions incre)sin' )n short term ebt incre)sin'. *ll o1 these 1)ctors 0ill
be contrib!tin' to /oor 1999 /er1orm)nce. LM nees to re!ce its o/er)tin' costB re!ce time o1 )cco!nt
.ecei%e)ble /)#mentsB )n incre)se S)les to st)rt /ro!cin' /ositi%e e11ects on .$* )n .$E.
S!r/risin'l#B the Milit)r# *ircr)1t )n S/)ce Di%isions o1 &oth &oein' )n LM )re %er# simil)r in S)lesB
E&ITB Tot)l *ssetsB )n 7et ,)/it)l E8/enit!res. These i%isions h)%e been contrib!tin' si'ni1ic)ntl# to
e)ch o1 the com/)nies 7et E)rnin's )n S)les. $ther i%isions 0ithin e)ch com/)n# sho!l be loo+in'
)t the Milit)r# *ircr)1t )n S/)ce i%isions in orer to 'et their res/ecti%e i%ision in sh)/e.
12
Biblio"a1/,
1. *nn!)l St)tement o1 St!iesB 199451999. .M*. P)'es 4425443.
2. *lm)n)c o1 &!siness )n In!stri)l (in)nci)l .)tios51999 eition. -:
th
eition. Tro#B LeoB
/h. P)'es 12:5121.
-. The C)l!e Line In%estment S!r%e#B P)rt I S!mm)r# ? ine8. 19 7o%ember 1999 iss!e. P)'e 5 ? 1-.
4. The C)l!e Line In%estment S!r%e# Eition 4B P)rt -. 1 $ctober 1999 iss!e. P)'es 555 )n
522.
5. The &oein' ,om/)n# 1994 *nn!)l .e/ort.
2. The &oein' ,om/)n# 1993 *nn!)l .e/ort.
3. Loc+hee M)rtin 1994 *nn!)l .e/ort.
4. Loc+hee M)rtin 1993 *nn!)l .e/ort.
9. The &oein' com/)n# 1999(irst =!)rter .es!lts 7e0s .ele)se.
1:. The &oein' ,om/)n# 1999 Secon =!)rter .es!lts 7e0s .ele)se.
11. The &oein' ,om/)n# 1999 thir =!)rter .es!lts 7e0s .ele)se.
12. Loc+hee M)rtin 1999 (irst =!)rter .es!lts 7e0s .ele)se.
1-. Loc+hee M)rtin 1999 Secon =!)rter .es!lts 7e0s .ele)se.
14. Loc+hee M)rtin 1999 Thir =!)rter .es!lts 7e0s .ele)se.
1-