Tue, Mar 09, 2010
Additional Provision to be Booked
The Customer Nations and EADS have come to a principle
agreement regarding the A400M military transport aircraft with the
intention to amend the original contract accordingly in the coming
weeks.
EADS had threatened to scrap the program if the customer
government were unable to reach an agreement on funding the cost
overruns associated with the new airlifter.
In this principle agreement, the Customer Nations agree to:
- Increase the price of the contract by $2.73 billion.
- Waive all liquidated damages related to current delays.
- Provide an additional amount of $2 billion in exchange for a
participation in future export sales (Export Levy Facilities).
- Accelerate pre-delivery payments in the period of 2010 to 2014,
a new schedule of which will be finalized in the amended
contract.
Based on this agreement, an estimate at completion of updated
revenues and costs including an assessment of risks, reviewed by
the EADS Board of Directors, leads to an increase of the A400M loss
provision of $2.45 billion pre tax for the full year 2009. The
update of the provision is based on a management assessment taking
into consideration the principle agreement between EADS and the
seven Nations.
EADS EBIT and net income will be negative in 2009 after
incorporating this charge. Results will be released at EADS' Full
Year 2009 disclosure on 9 March 2010, including notes to the
financial statements to be released with the full year accounts
comprising of more information about details of the principle
agreement including underlying management assessment. If
substantial changes on the assessment were to occur, EADS
performance could be significantly impacted. EADS will provide
further information of the amended contract once the negotiations
are finalized.
The A400M cash flow profile for the coming years is still to be
negotiated in the contract amendment; all parties are willing to
mitigate negative cash impacts as far as possible.
EADS considers that this agreement provides a sound basis for a
successful evolution of the A400M program. EADS will strive to
identify opportunities to significantly reduce risks in the A400M
program and to deliver a state-of-the-art product within the new
frame of the contract. EADS thanks the nations for the decisive
support they are bringing to the program through this
agreement.
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