Net Income Declines 38 Percent On Halted Deliveries
We expected the news to be grim... and it is. Boeing announced
Wednesday income declined 38 percent in the third quarter of 2008,
to $695 million... while earnings per share declined 33 percent to
$0.96 per share.
The planemaker said both hits reflect
the ongoing strike by workers represented by the
International Association of Machinists, and "supplier
production challenges on customer-furnished galleys for certain
wide-body airplanes." Combined, those items reduced third-quarter
commercial airplane deliveries by approximately 35 units and net
earnings by an estimated $0.60 per share. Revenues for the quarter
declined 7 percent, to $15.3 billion.
"While the suspension of commercial airplane deliveries had a
major impact on the quarter, we effectively executed the remainder
of our business and kept our focus on the strong balance sheet we
have built over the past few years," said Chairman, President and
CEO Jim McNerney. "That balance sheet, along with our broad-based,
record $349 billion backlog, gives us exceptional flexibility for
weathering an extended work stoppage and for adapting to
circumstances that may arise from the global financial crisis and
softening global economy."
Boeing says it will provide updated
financial guidance and an assessment of the schedule for its
affected airplanes after the strike concludes... which few see as a
likely occurrence in the foreseeable future, as both sides have
taken an increasingly hard line in mediated talks. A new round of
those talks is scheduled to start Thursday.
For the nine months of 2008, net income fell 9 percent to $2.8
billion, earnings per share decreased 4 percent to $3.76 per share,
and revenue fell 1 percent to $48.2 billion. The operating margin
was slightly lower at 8.7 percent.
"There were no significant write-downs due to the global
financial crisis," Boeing added.
On the commercial side, Boeing's third-quarter revenues were
$6.9 billion, 16 percent below the same period last year, driven by
the fewer deliveries due to the strike and supplier production
challenges. The labor strike has affected production of all
airplane programs in Seattle, Portland and Wichita, according to
the planemaker. Earnings from operations declined to $394 million
from $945 million in the year-ago period due to the lower
deliveries, the absence of supplier R&D cost sharing payments
and additional 747 program costs.
For the first nine months, BCA revenues decreased 3 percent to
$23.7 billion on lower deliveries due to the strike and galley
shortage. Operating earnings decreased 18 percent to $2.2 billion
while margins were 9.1 percent, driven by the lower deliveries,
infrastructure cost absorption and additional 747 program costs
that were partially offset by lower research and development
spending.
BCA booked 149 gross orders during the quarter and 625 during
the first nine months. Contractual backlog rose to a record $276
billion, increasing 8 percent year-to-date to approximately eight
times BCA’s annual revenues.
In better news for the company, Boeing Integrated Defense
Systems (IDS) third quarter revenues rose 6 percent to $8.5 billion
on higher volumes across all segments. Operating earnings rose 4
percent to $854 million, yielding an operating margin of 10.1
percent. The strike reduced IDS operating margins by an estimated
0.4 points.
That's a marked shift from last year... when IDS weighed down
Boeing's sizable good fortunes in the commercial segment.
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