Some companies restate finances as deadline falls

SEATTLE (AP) -- Even as Boeing's largest customer retrenches and U.S. airlines continue to struggle, the company's commercial jet division says its already-halved production plans have not changed and that overseas markets are offering glimmers of hope.

But analysts said the future of Boeing Commercial Airplanes is going to increasingly depend on its ability to be the aircraft maker of choice for low-cost carriers.

American Airlines, Boeing's biggest customer, announced Tuesday a major restructuring that includes cutting 7,000 jobs by March 2003 and retiring its fleet of Fokker 100 jets. It also said in a statement that it has deferred deliveries of 35 Boeing aircraft in 2002.

and will try to defer or cancel new deliveries going forward.

The deferrals -- two 777s, five 767s, and 28 737s -- had been announced last year, said Marty Heires, an American Airlines spokesman. He said the airline is continuing talks with Boeing on deferring or canceling orders for another 67 jets scheduled for delivery between 2003 and 2008.

But Boeing spokesman Tom Ryan said American's cutbacks were expected and factored into the aerospace company's decision to slash production in half following the Sept. 11 terrorist attacks. He said Boeing's delivery forecasts for 2003 haven't changed, but he would not speculate beyond that.

''We've had a long time to think about this since 9-11,'' said Ryan. ''A lot of this news that you're seeing is not out of the blue.''

After falling 8 percent Tuesday, Boeing's stock continued its dive Wednesday, when it closed at $36.75 on the New York Stock Exchange, down 71 cents, or 1.9 percent. The stock traded a year ago at a 52-week high of $56.70.

The airline industry is reeling. US Airways filed for Chapter 11 bankruptcy protection on Sunday. Some analysts believe United Airlines, another big Boeing customer, will be next to file.

American is Boeing's largest customer, having taken delivery of 950 planes from Boeing and McDonnell Douglas, which Boeing bought in 1997.

Boeing isn't the only supplier to feel their pain. Companies like United Technologies Corp., the maker of Pratt & Whitney aircraft engines, closed down $1.12 a share at $61.35 Wednesday on the New York Stock Exchange.

Chicago-based Boeing still plans to deliver about 380 airplanes in 2002 and between 275 and 300 in 2003, Ryan said. The company also doesn't plan to go beyond the approximately 30,000 layoffs expected to be cut from the work force by the end of the year.

Ryan acknowledged the U.S. airline industry is not recovering as fast as the company had thought, and that Boeing is more optimistic about the Asian market. About 70 percent of Boeing's planes go to airlines outside the United States, he said.

More than that, aerospace manufacturers and suppliers are facing an industry that has been largely reshaped by low-cost carriers.

''Everyone has been saying the one bright spot is discount carriers, without recognizing that discount carriers are not growth. They're restructuring,'' said Richard Aboulafia, aviation director for the Teal Group. Orders from low-fare carriers come at the expense of orders from larger carriers like United he said, noting that Boeing's single biggest order in 2002 has been for 100 737s from discount carrier Ryan Air.

''Everyone's business is more and more cost-focused,'' he said.

Both Boeing and Airbus need to cut their costs super aggressively to allow them to earn a positive return on capital, said Nicholas Heymann, senior vice president for Prudential Securities. ''There's a huge squeeze coming on the suppliers,'' he said.

Boeing officials have said they think production will bottom out in mid-2003, but the latest airline problems could push that date back, said Bob Toomey, an analyst with Dain Rauscher.

But there could be a silver lining, he added: ''The positives are that finally this could push the domestic carriers to deal in a more constructive way with their structural and financial problems. Ultimately a healthier customer base is a better thing.''

The challenge for Boeing is to elbow out Airbus, Aboulafia said.

''I think Boeing needs to make it clear: Airbus is the company of engineering for engineering's sake and luxury for luxury's sake and we produce buses with wings -- good reliable solid buses with wings. This is the industry of the future,'' he said.

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On the Net:

http://www.boeing.com

HEAD:Boeing hurts

BYLINE1:By MARCY GORDON

BYLINE2:AP Business Writer

WASHINGTON -- Investors jarred by a wave of accounting scandals were jostled by smaller ripples Wednesday as several big companies restated their finances against a deadline to swear to the accuracy of financial reports.

After waiting until the last minute, scores of major corporations rushed to comply with a new government order holding top executives' feet to the fire by requiring them to vouch in writing for the veracity of recent financial reports.

The unprecedented requirement was designed to restore confidence in corporate America that was shattered by the scandals at Enron, WorldCom, Adelphia and many big other companies, and brought down accounting giant Arthur Andersen.

In a major revision Wednesday, Household International Inc., the nation's No. 2 consumer finance concern, disclosed that it earned $386 million less than previously reported over the last nine years. Investors were unperturbed, boosting Household's stock by 29 cents to $38.09 by the close of trading on the New York Stock Exchange.

The company, which issues MasterCard and Visa credit cards and makes home equity and car loans, said the restatement came after its new auditors reviewed its accounting for ''complex'' credit-card contracts.

The market was unruffled, however, by the restatements -- fewer than a dozen companies made them as of Wednesday afternoon -- and staged a late-day rally sending the Dow Jones industrials up about 260 points.

Analysts suggested many investors may have gained confidence from the flood of certifications by company executives coming into the Securities and Exchange Commission.

Still, all the results weren't in, since there was a time lag between companies submitting statements to the SEC and their posting on the agency's Web site. Companies can get an automatic five-day extension.

CEOs and chief financial officers who falsely certify their company reports could be prosecuted and imprisoned. The SEC order does not spell out, however, what would happen to companies that miss either the deadline or the five-day extension.

The leaders of approximately 700 corporations were required to file the sworn statements by 5:30 p.m. EDT Wednesday, and more than 300 companies -- from Ace Hardware to Yum Brands Inc. -- had done so more than an hour before the deadline.

In response to the accounting scandals of recent months, the SEC in late June ordered 947 companies -- all with annual revenues exceeding $1.2 billion -- to submit the sworn statements. About 250 of them have deadlines later this year because they operate on a fiscal year rather than a calendar year.

No longer can CEOs blame the company's auditors or say they were unfamiliar with its finances, as former Enron chief executive Jeffrey Skilling did in testimony to Congress earlier this year.

''Honesty in business is the new patriotism,'' Treasury Secretary Paul O'Neill said in a speech Wednesday in Portland, Ore. ''There is nothing better business leaders can do for this country right now than restore faith in the system that has made it great.''

The company that started a season of scandals, collapsed energy-trader Enron Corp., certified Wednesday the accuracy of the financial reports it filed since entering bankruptcy proceedings in December. But the company said it could not vouch for any reports before then.

Given the numerous investigations and lawsuits, limited resources and the absence of an independent auditor, ''a restatement of prior reported financial information is not feasible and will not be completed,'' Stephen Cooper, Enron's interim CEO, said in a statement filed with the SEC.

Telecom giant WorldCom Inc., which became the biggest corporate bankruptcy in U.S. history on July 21, a month after disclosing it had falsely inflated profits by nearly $4 billion, is not certifying its reports. Last week, WorldCom said it had found another $3.3 billion in improper accounting discovered, bringing total to $7.15 billion. Qwest Communications, under investigation for its accounting of $1.1 billion in revenue, was also not certifying its reports.

In addition to Household, companies making restatements this week: Convenience-store retailer The Pantry Inc., which said it had found an ''inadvertent'' $8 million accounting error in its reports for the first and second quarters. And Interpublic Group of Cos., a major advertising business, said it had identified $68.5 million in expenses that had not been properly accounted for. The company is restating its earnings back to 1997 to reflect the overlooked expenses, mostly incurred in its European operations.

The sworn statements from the executives -- beginning with ''To the best of my knowledge'' -- are meant to vouch for the accuracy of reports for the quarter ended June 30 or any other second quarter for companies not on a calendar-year system.

The statements and earnings reports will be filed to the SEC on a rolling basis. Companies that use a calendar year for reporting results were required to submit them by Wednesday. The rest, using fiscal-year reporting, must file on the first date they normally would be required to submit their annual or quarterly reports -- from mid-September through December.

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Associated Press writer Elizabeth Wolfe contributed to this report.

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On the Net:

The 947 companies and their filing status: http://www.sec.gov/rules/extra/ceocfo.htm