CHICAGO, July 21, 2016 /PRNewswire/ -- The Boeing
Company [NYSE: BA] announced today it will recognize an impact to
earnings across three programs when it announces second-quarter
2016 results on July 27.
On the 787 program, the company decided not to invest funds for
the refurbishment and sale of the two remaining unsold flight test
aircraft that were scheduled to be introduced into the modification
line. These two aircraft were produced in 2009 and have been used
extensively for flight and ground testing, with both airplanes
achieving more than 6,700 flight and ground testing hours combined.
Costs associated with these aircraft were reclassified from 787
program inventory to research and development expense resulting in
a non-cash after-tax charge of $847
million ($1.33 per share).
To account for current and anticipated weakness in the air cargo
market, the company plans to continue producing 747-8 aircraft at a
rate of 0.5 per month and no longer increase the production rate to
1.0 per month in 2019. An $814
million after-tax charge ($1.28 per share) on the 747 program reflects a
lower estimated total of 747-8 Freighter aircraft to be produced in
the program accounting quantity and lower estimated revenues on
future aircraft sales.
"These are the right, proactive decisions to strengthen our
business going forward," said Boeing Chairman, President and Chief
Executive Officer Dennis Muilenburg.
"Our investment in 787 flight test airplanes paved the way for the
growing Dreamliner fleet today and helped refine improvements for
other platforms. On the 747 program, we continue to monitor the air
cargo market and aggressively drive productivity and cost reduction
as we work to win additional orders to support ongoing
production."
Boeing Chief Financial Officer and Executive Vice President of
Corporate Development & Strategy Greg
Smith characterized the decisions as "prudent actions that
reflect market realities, reduce future financial risk and
ultimately drive value to our shareholders."
The company will also recognize a $393
million after-tax charge ($0.62 per share) on the KC-46 Tanker program.
This charge reflects higher costs associated with previously
announced program schedule and technical challenges, including
implementation of the hardware solution to resolve the refueling
boom axial load issue identified during flight testing, delays in
the certification process and concurrency between late-stage
development testing and initial production.
"This additional investment in the KC-46 supports the delivery
timeline for the initial production aircraft and our transition to
full-rate production," said Muilenburg. "With the aircraft recently
refueling an F-16, A-10 and C-17, we have now completed all
necessary Milestone C testing to receive customer approval to enter
production - a major step forward for this multi-decade production
and support program. We remain confident in the long-term value of
the KC-46 for our customers and our shareholders."
In total, the company will record an after-tax earnings impact
of $2.1 billion. On a pretax basis at
the segment level, Boeing Commercial Airplanes will now record an
earnings impact totaling $2.78
billion and the Boeing Military Aircraft segment of Boeing
Defense, Space & Security will report an earnings impact of
$219 million.
Guidance for 2016 revenue and cash is reaffirmed and the company
will update earnings per share guidance on July 27.
Caution Concerning Forward-Looking Statements
Certain statements in this release may be "forward-looking"
within the meaning of the Private Securities Litigation Reform Act
of 1995. Words such as "expects," "intends," "plans," "projects,"
"believes," "estimates," "anticipates," and similar expressions are
used to identify these forward-looking statements. Examples of
forward-looking statements include statements relating to our
future plans, business prospects, financial condition and operating
results, as well as any other statement that does not directly
relate to any historical or current fact. Forward-looking
statements are based on our current expectations and assumptions,
which may not prove to be accurate. These statements are not
guarantees and are subject to risks, uncertainties, and changes in
circumstances that are difficult to predict. Actual outcomes and
results may differ materially from these forward-looking
statements. As a result, these statements speak only as of the date
they are made and we undertake no obligation to update or revise
any forward-looking statement, except as required by federal
securities laws. Specific factors that could cause actual results
to differ materially from forward-looking statements include, but
are not limited to, the effect of economic conditions in
the United States and
globally, general industry conditions as they may impact us or
our customers, and our reliance on our commercial customers, our
U.S. government customers, our suppliers and the worldwide market,
as well as the other important factors disclosed previously and
from time to time in our filings with the Securities and Exchange
Commission.
Contact:
Bernard Choi or Chaz Bickers (312) 544-2002 (Communications)
Troy Lahr or Ben Hackman (312) 544-2140 (Investor
Relations)
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SOURCE Boeing