This summary is based on the first quarter fiscal 2008 earnings call conducted by The Boeing Company (BA) on April 23, 2008.
Management:
Vice President of Investor Relations: Diana Sans
Chairman, President, Chief Executive Officer: Jim McNerney
Chief Financial Officer: James A. Bell
Senior Vice President of Communications: Tom Downey
Key Investors Issues
- EPS were $1.62 per share compared to $1.13 per share last year.
- Profit was $1.2 billion compared to $877 million in the year-ago quarter.
- Revenue rose 4% to $16 billion.
First Quarter Highlights
Earnings per share increased 43% to $1.62 as net income rose 38% to $1.2 billion and operating margin rose to 11.3%, driven by solid overall execution in both its commercial airplane and defense businesses as well as lower unallocated costs.
Boeing''s quarterly revenue rose 4% to $16 billion while its operating cash flow more than doubled to $1.9 billion reflecting the strong operating earnings and higher commercial airplane orders. Free cash flow increased to $1.5 billion.
Total company backlog at quarter-end reached a record $346 billion, up 32% in the last year, with growth driven by commercial airplane and V-22 multi-year orders.
- Cash and investments in marketable securities totaled $12.1 billion at quarter-end, up 49% from the same period last year but unchanged during the first quarter. The company spent $1.2 billion to acquire 15.6 million of its shares, enabled by the recent $7 billion share repurchase authorization.
- The company contributed $506 million to its pension plans.
Boeing Commercial Airplanes (BCA) revenues rose to $8.2 billion on an 8% increase in airplane deliveries and higher services volume, partially offset by lower aircraft trading volume.
- Operating earnings grew 39% to $983 million while margins expanded to 12%, driven by higher delivery volume and services sales and lower R&D spending. The company delivered its 1,400th 747 airplane and its 700th 777 airplane.
- BCA booked 289 gross orders.
- Contractual backlog rose to $271 billion, increasing to more than seven times BCA''s expected 2008 revenues.
- Progress on the new 787 Dreamliner continues on the revised schedule announced earlier this month. As reported at that time, Boeing continues to address slower-than-expected completion of work that traveled from supplier facilities into Boeing''s final assembly line and unanticipated rework. The company expects the first flight to occur in the fourth quarter of 2008 with first deliveries to begin in the third quarter of 2009. Recent milestones include successful completion of structural testing of the horizontal stabilizer, completion of full-scale test flights in simulators, completion of integration testing required for putting electrical power on the airplane, and airworthiness certification of the General Electric engine. The program won 75 orders in the quarter, and total firm orders since launch rose to 892 airplanes from 57 customers.
Boeing Integrated Defense Systems (IDS) expanded operating margins by 120 basis points to 11.4% on revenues of $7.6 billion.
- IDS results reflect strong execution in all segments and extensive productivity improvements.
- Precision Engagement & Mobility Systems delivered operating earnings of $389 million on $3.3 billion in revenue. Revenue was affected by fewer deliveries on several aircraft programs offset by initial deliveries of two KC-767 international tankers and higher F-15 deliveries. Operating margin was 11.9% reflecting product mix and aircraft deliveries in the quarter. In this segment, the company captured a multi-year contract for V-22s and a CH-47 contract. The Air Force awarded the initial KC-X Tanker contract to Northrop Grumman-EADS; Boeing has filed a protest of that award with the Government Accountability Office.
- Network & Space Systems achieved milestones on several key programs. Operating margin nearly doubled to 9.9% driven by strong performance across the segment''s array of programs and a favorable settlement on a satellite program. Last year''s results were affected by adjustments related to the United Launch Alliance joint venture and revised cost estimates on a satellite program.
- Support Systems continue to generate strong profits on its broad portfolio of services and logistics programs. Operating margin was a strong 12.5%, reflecting solid program execution and contract mix. In this segment, the company captured the first multi-year sustainment contract for the F-22 Raptor fleet.
- The IDS backlog increased to $74.8 billion driven by the new V-22 multi-year procurement contract. IDS'' backlog is currently more than two times expected 2008 revenues.
Boeing Capital Corporation (BCC) reported pre-tax earnings of $61 million compared to $73 million in the same period last year which included a larger portfolio.
- BCC''s portfolio balance at the end of the quarter was $6.3 billion, down 20% from $7.9 billion last year primarily on customer prepayments, normal portfolio run-off and depreciation. BCC contributed $35 million in cash dividends to the company during the quarter. BCC''s debt-to-equity ratio was unchanged at 5.0-to-1.
- The Other segment consists primarily of Boeing Engineering, Operations and Technology, as well as certain results related to the consolidation of all business units. Other segment expense was $50 million, reduced from $55 million of expense in the same period last year.
- Unallocated expense was $55 million, down from $199 million in the same quarter last year, driven by lower deferred compensation and pension expense.
- Total pension expense decreased by $61 million to $191 million, of which $124 million was allocated to BCA and IDS, and the remaining $67 million recorded as unallocated expense.
Fiscal 2008 Outlook
