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U.S. MAJORS REPORT IN LINE WITH EXPECTATIONS

25 Oct 06. The Boeing Company (NYSE: BA – News) today reported third quarter net earnings of $694m, or $0.89 per share, compared with $1,011m, or $1.26 per share, a year ago

Special items that affected core operating results include the previously disclosed $0.22 per share charge this quarter to exit the Connexion business, and benefits totaling $0.93 per share a year ago for tax settlements and asset sales. Adjusting for these items, third-quarter adjusted earnings per share was $1.11 compared to $0.33 for the same period last year. The year-ago figure was not adjusted for the impact of a labor strike, which reduced earnings in that period by an estimated $0.25 to $0.30 per share.

Revenue for the quarter rose 19 percent to $14.7bn (2005: $12.4bn). Boeing updated its earnings per share guidance for 2006 to between $2.40 and $2.50 per share, which reflects the termination charges for Connexion offset by better performance across Boeing’s businesses. Boeing increased its 2007 EPS guidance by $0.20 per share to between $4.45 and $4.65, reflecting the discontinuance of its Connexion investment, contributions from the Aviall acquisition and additional performance improvements.

Revenue guidance for 2007 is increased to between $65.5bn and $66.0 billion driven by additional services revenue from Aviall.

“Our strong performance during the third quarter and our growth outlook for 2007 underscore what Boeing can accomplish by an unwavering focus on execution and meeting our commitments,” said Boeing Chairman, President and Chief Executive Officer Jim McNerney. “As we continue to drive our growth and productivity efforts, we aim to achieve a new level of consistently strong financial performance.”

Third-quarter operating cash flow was $0.6bn driven by strong business performance, partially offset by a $615m payment for the previously announced settlement with the U.S. Department of Justice. For the first nine months of 2006, operating cash flow was $5.1bn, and free cash flow* was $4.0bn driven by strong operating and working capital performance.

Boeing’s backlog at quarter-end grew to a record $229bn, up 4 percent from the end of the second quarter and 12 percent for the first nine months of 2006, reflecting strong orders for Boeing’s commercial airplane products.

Cash and investments in marketable securities totaled $8.2bn at the end of the third quarter, down from $10.6bn at the end of the second quarter. Principal uses of cash during the quarter included the purchase of Aviall Inc. for $2.2bn (including debt), the previously mentioned legal settlement, share repurchases and planned investment increases in Boeing’s core businesses. In August, Boeing’s board of directors authorized a new share repurchase program for up to $3bn of common stock. The company repurchased 8.0 million shares for $627m during the quarter and 19.8 million shares for $1.6bn during the first nine months of the year. This leaves $2.8bn available under the current repurchase authorization. The company contributed $513m to its pension plans during the first nine months of the year. Total consolidated debt decreased during the quarter to $10.1bn due to the cancellation of capital leases associated with Connexion.

Integrated Defense Systems

Boeing Integrated Defense Systems (IDS) revenues increased 4 percent during the quarter to $7.8bn on higher Precision Engagement & Mobility Systems and Support Systems volume. Operating margins were 11.3 percent, compared to 17.6 percent in the same quarter last year when IDS benefited from a $569m gain from selling Rocketdyne. Without that gain, adjusted IDS operating margins for the year-ago quarter would have been 9.9 percent. For the first nine months of 2006, IDS revenues were $22.8bn. Operating margins were 8.8 percent and were reduced by 2.2 points due to the $496 million charge taken in the second quarter for an international airborne early warning and con

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