Boeing Co. (BA)
Q3 2009 Earnings Call Transcript
October 21, 2009 10:30 a.m. ET

Executives

Diana Sands - Vice President, Investor Relations
W. James McNerney Jr. - Chairman, President and Chief Executive Officer
James A. Bell - Corporate President, Executive Vice President and Chief Financial Officer
Thomas J. Downey - Senior Vice President, Communications

Analysts

Douglas Harned of Sanford C. Bernstein
Robert Spingarn - Credit Suisse
Heidi Wood - Morgan Stanley
Ronald Epstein - Banc of America/Merrill Lynch
Cai von Rumohr - Cowen and Company
Joseph Campbell - Barclays Capital
Itay Michaeli - Citigroup
Howard Rubel - Jefferies & Co.
Joseph Nadol - J.P. Morgan
Robert Stallard - Macquarie Research Equities
David Strauss - UBS
Troy Lahr - Stifel Nicolaus & Company, Inc.
Susanna Ray - Bloomberg News
Ann Keeton - Dow Jones Newswires
Jon Ostrower - Flight International Magazine
Michael Mecham - Aviation Week
Dominic Gates - Seattle Times
Steve Wilhelm - Puget Sound Business Journal

Presentation

Operator

Thank you for standing by. Good day, everyone. And welcome to The Boeing Company’s third quarter 2009 earnings conference call. Today’s call is being recorded. The management discussion and slide presentation, plus the analysts and media question-and-answer sessions are being broadcast live over the internet.

At this time for opening remarks and introductions, I’m turning the call over to Ms. Diana Sands, Vice President of Investor Relations for the Boeing Company. Ms. Sands, please go ahead.

Diana Sands

Thank you. Good morning. Welcome to Boeing’s third quarter earnings call. I’m Diana Sands and with me today are Jim McNerney, Boeing’s Chairman, President and Chief Executive Officer; and James Bell, Boeing’s Corporate President and Chief Financial Officer.

After comments by Jim and James we’ll take your questions. As always we ask that you limit yourself to one question to be fair to others on the call. We have provided detailed financial information in our press release issued today and as a reminder you can follow today’s broadcast and slide presentation through our website at boeing.com.

Before we begin, I need to remind you that any projections and goals we may include in our discussion this morning are likely to involve risks which are detailed in our news release and our various SEC filings and in the forward-looking disclosures at the end of this web presentation.

Now I’ll turn the call over to Jim McNerney.

W. James McNerney Jr.

Thank you, Diana. And good morning. Let me start this morning with my perspective of our performance for the quarter and a look at the business environment as we see it today. After that James will walk you through our financials and then we will be glad to take your questions.

Starting with slide two, our third quarter financial results were clearly dominated by the previously announced 787 cost reclassification and the 747 charge. But excluding those impacts the double-digit margin performance of our two core businesses continues to be strong even despite ongoing market pressures.

As we discussed in August, our decision to reclassify costs on the first three 787 flight test airplanes through R&D expense was based on our conclusion those planes have no commercial market value beyond the development effort. The costs through September for those aircraft resulted in adding $2.6 billion of R&D expense to the third quarter results. I’ll talk more about the 787 in just a few moments.

Earlier this month we announced a $1 billion charge on our 747-8 program due to increased production costs and difficult market conditions, because this program is in a loss position, costs associated with these factors were immediately recorded in the third quarter for future 747-8 deliveries.

When we began assembling the first 747-8 freighter in the third quarter, we encountered significantly more rework and disruption than we expected both in our Everett factory and in supplier factories. The root cause is something we talked about in the past. The engineering on this program was late to mature and that was compounded by the limited availability of engineering resources.