Boeing Reports Third Quarter Earnings
Boeing today announced its third quarter earnings. With the 747-8 program both being delayed and falling into a forward loss position earlier this month, the numbers were always going to make grim reading.
The key numbers from the third quarter earnings are as follows:
• Third-quarter revenue was $16.7 billion, 9 percent higher than last year’s strike-affected quarter
• Loss of $2.23 per share reflects $3.59 per share of expenses related to previously announced 787 cost reclassification and 747 charge, partially offset by solid performance in other commercial programs and the defense business
• Operating cash flow increased to $1.2 billion
• Backlog at $320 billion - nearly five times current annual revenues
• 2009 guidance updated for 787 cost reclassification and 747 charge
With the 747-8F planned first flight slipping into early next year, earnings were saddled with the 787 reclassification that pushed EPS to between $1.35 and $1.55, despite third quarter revenue being higher year-on-year by around 9%.
Importantly, Boeing’s cash balance increased from $5bn to $6.6bn, despite the purchase of the Vought Aircraft facilities in South Carolina.
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“The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business,” said Boeing Chairman, President and Chief Executive Officer Jim McNerney.
Below were the key highlights discuss in the earnings call:
Jim McNerney - CEO
• Earnings dominated by 787 charges
• Double digit margins
• Strong despite market pressure
• $2.6bn expense on R&D for 787
• Rework & disruption on 747-8
• Engineering resources limited
• Very challenging cargo market
• Action plan in place to recover 747-8
• EIS of 747-8F planned for Q4 FY10
• Better discipline on 747-8 Intercontinental
• 75% engineering design released on 747-8 Intercontinental
• Significant progress on 787
• Validated stringer modification
• Pleased with progress
• Repeat of 787 gauntlet tests
• EIS of 787-8 Q4 FY10
• Modest churn of orders, backlog remains strong
• Can & must do better on development programs
• Jim Albaugh fully engaged in BCA activity
• Deliveries on track for this year (480-485)
• IDS delivered 34 airplanes, 2 satellites, first flight of 3rd P8-A Poseidon
• 7200 jobs cut vs 2008 baseline
• Environment challenging
• Rate increases on hold
• 777 rate down to 5/month from June 2010
• 85 deferrals in Q3 2009
• 130 deferrals in first half of 2009
• Deferrals same as last quarter
• Evaluating 737 production rate
• Boeing Capital Corp (BCC) expects to finance $800m this year, down from $1bn
• 6 flight test 787s – one will fly each month after first flight of ZA001
• Taking a hard look at KC-X tanker competition
• WTO ruling – playing field is not level
• All share responsibility for 787 delays – “We’re a team”
• Evaluating 787 second line between Everett, WA and Charleston, SC
• Decision due in a couple of weeks
• Will work to minimise work duplication
• Gotta figure out how to reduce risk
• Balance sheet would be stronger had we not had strike last year
James Bell – CFO
• Revenue up 9% YoY
• Loss of $2.23 per share
• BCA revenue up 13%
• $592m for Vought Aircraft facility in South Carolina
• $6bn for work in progress, non-recurring costs on 787
• $1bn 747-8 charge: $643m on higher production costs, $352m on market conditions and maintaining production rate at 1.5 month
• 17 cancellations, 96 orders during Q3 2009
• $254bn BCA backlog, 7 times current annual revenue
• $66bn IDS backlog
• BCC evaluating debt issue
• No shares bought during Q3
• $300m paid in dividends
• $6.6bn in cash
• EPS fall on revenue of $68-69bn
• Cash flow to improve in 2011 on higher deliveries
• Expenses down from $1.4bn to $1.3bn
• Oversold 737 slots driving production rate
19 comments October 21st, 2009
