This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Boeing Co. (BA) on January 30, 2008.
Management:
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Chairman, President, CEO: Jim McNerney
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Chief Financial Officer: James A. Bell
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SVP of Corporate Communications: Tom Downey
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Vice President of Investor Relations: Dave Dohnalek
Key Investors Issues
- Revenues were unchanged from 2006 at $17.5 billion.
- Earnings grew 4.8% to $1.03 billion or $1.36 a share.
- Debt dropped 14% from the same period last year driven primarily by lower debt levels at BCC.
Full Year Highlights:
- Total company revenues grew 8% to a record $66.4 billion driven by higher commercial airplane deliveries and stable revenues in the defense business.
- Reported earnings grew 84% to a record $4.1 billion or $5.28 per share.
- The firm repurchased 29 million shares or $2.8 million.
Fourth Quarter Highlights
Revenues were stable at $17.5 billion as growth and commercial airplane revenue was offset by lower revenues at IDS due to lower military aircraft delivery and formation of the ULA joint venture in late 2006.
- Earnings grew 4.8% to $1.03 billion or $1.36 a share from $980 million or $1.29 a share in the prior year as a result of a decline in costs and expenses.
- Operating margins increased to 8.7%, an improvement of 210-basis points over the same period last year driven by company-wide productivity gains.
- Operating cash flow of $1.9 billion reflects the strong earnings growth, excellent working capital management and a record volume of commercial airplane orders.
- The firm used over $890 million of cash to repurchase 9.4 million shares.
The risk profile on the pension plans was reduced by transitioning asset allocation to less volatile asset classes.
- Cash and liquid investment balances were $12.1 billion which is up 30% from the same time last year.
- Debt dropped 14% to $8.2 billion from the same period last year driven primarily by lower debt levels at BCC.
Total company backlog grew to a record of $327 billion driven by a third consecutive record order year for commercial airplanes business and by key defense program wins at IDS.
- IDS captured nine of the 11 major competitions, an outstanding success rate in the industry and these wins included key orders for the tracking and data relay satellites, joint cargo, aircraft, AEWC in Korea and two important pieces of NASA’s Ares program.
- Company wide productivity improvements helped generate the cash to invest in major growth areas such as the 787 and the 747-8.
The firm also made progress on commercial derivative aircraft programs including the P8A Poseidon and the international tankers.
- The firm successfully integrated several services acquisitions during the year, which has accelerated the strong organic growth and is now generating more than $10 billion of annual revenue in this area.
- During the year, the firm increased the dividend by 14% and authorized a new $7 billion share repurchase program.
- The fundamental technology of the 787 is sound but the challenge is resolving start up issues in the factory and in the supply chain as they relate to completing airplane number one in initial full rate production.
- Only 11% of the company’s $255 billion backlog is from airlines based in the US, as the majority of the backlog is with customers outside the US including fast-growing regions like Asia, the Pacific rim and the Middle East.
Performance of Business Segments:
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BCA continues to properly manage its production ramp up while achieving record orders and invest in its growth.
- It delivered 112 airplanes, while revenues grew 17% driven by a 9% increase in airplane deliveries and double digit growth in airplane services.
- Margins expanded 230-basis points to 11% due to productivity improvements which more than offset higher R&D spending in the absence of supplier cost sharing payments.
- The 787 Program is moving towards First Flight around the end of the second quarter and entry into service in early 2009, with 857 firm orders from 56 customers.
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IDS delivered doubled digit operating margins of 11.7% on $8.4 billion of revenue, driven by outstanding performance in all segments.
- Revenues declined due to the timing of aircraft delivery and the formation of ULA joint venture near the end of 2006.
- The segment added to its large contractual backlog by winning the vast majority of major competitions it entered last year and was selected for the NASA Ares 1 instrument and avionics contract and won the tracking and data relay satellite award.
- It also added to its international backlog by booking additional F15 orders from the government of Singapore.
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Boeing Capital generated pre-tax income of $30 million while its portfolio declined 20% as planned to $6.5 billion.
- It contributed $408 million in cash dividends to the company during 2007 as the aircraft financing markets remained healthy.
- Centralized cost declined as the management actions taken last year to address these costs continue to bear fruit.
