Boeing's corporate headquarters has been coasting along with an interim chief executive for almost two months. Yet the company's operating...
Boeing’s corporate headquarters has been coasting along with an interim chief executive for almost two months. Yet the company’s operating divisions are still firing on all cylinders, generating more than $1.8 billion in cash flow from $13 billion in revenue last quarter.
The strong operating performance was offset by one-time charges and noncash expenses, taking profits in the quarter down 14 percent from last year. But in a teleconference with analysts and reporters, Chief Financial Officer and interim Chief Executive James Bell was pleased with the results.
“We delivered strong performance in the first quarter and are on track to deliver significant growth in 2005 and 2006.”
Bell also gave some details on Boeing’s investment for the 787. It will spend 4 percent of its total revenue this year, about $2.3 billion, on research and development — “the bulk of that you can assume is 787,” Bell said. The figure includes about $600 million provided by Boeing’s global risk-sharing partners. R&D spending is likely to ramp up, peaking in 2006 and 2007, he said.
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Boeing will spend a further $1.5 billion this year and about $1.7 billion in capital expenditures next year on advanced production equipment for the 787 and defense-division projects. Wall Street welcomed the steadiness apparent in yesterday’s financial results, which come after last month’s resignation of CEO Harry Stonecipher and a series of procurement scandals. Boeing’s stock closed at $59.66, touching its highest point since June 2001.
“This company’s gone through a series of unfortunate events over the last 24 months,” said financial analyst Howard Rubel of Jeffries & Co. “There’s a lot of hard work going into making the company run better. They are getting rid of distractions.”
Boeing may at least face large fines over the two biggest procurement scandals — the company’s illegal hiring of an Air Force officer linked to the 767 tanker deal and the possession of Lockheed documents used to win a rocket contract.
Former CEO Phil Condit resigned in December 2003 over the tanker scandal; then his replacement Stonecipher stunned observers last month when he stepped down over an affair with a woman executive.
But the company’s operations are clearly bigger than any man at the top.
“There’s a lot of strong individuals that have made this (financial performance) happen,” Rubel said. “I’m happy with what they’ve done and there’s more good things to happen.”
Boeing put its copious cash into pension-fund contributions, paying down debt, and investment in new programs.
In the conference call, Bell highlighted the double-digit profit margins on the defense side of the company and a strong sales surge on the commercial side that could well mean Boeing will beat Airbus in airplane orders this year for the first time since 2000.
He forecast total revenue of $58 billion for the year, rising to $62 billion or $63 billion in 2006.
For the year, Bell forecast commercial profit margins of 5.5 percent, rising to 6.5 percent next year as deliveries, revenue and profits pick up.
He warned that Boeing workers in Wichita, facing wage cuts and possible job losses from the pending acquisition deal by Canadian firm Onex, could face bigger job losses if they reject the deal and stay with Boeing.
For Boeing workers in the Puget Sound area, Bell reiterated that the fate of the 767 and the 747 production lines in Everett will be decided this summer. While airlines are interested in the proposed 747 Advanced derivative, he said, Boeing needs new orders for its 747 to bridge the gap to production of the proposed 747.
The jumbo jet now has a backlog of only 28 orders, enough to keep the line open a couple of years at current rates.
In a separate interview yesterday, Boeing defense division chief James Albaugh expressed frustration at the delay in producing a Pentagon study on the need for new Air Force tankers, without which there can be no tanker deal and no 767.
“Without some additional orders, the 767 line will be shut down and it will be down for many, many months at best,” he said. “If anybody’s holding out a promise that there won’t be a shutdown of the 767 line, they haven’t been paying attention.”
Bell was asked when Boeing is likely to have a new CEO.
“The board is not consulting me on the CEO search or keeping me posted,” he replied. “They’ll take the time necessary.”
Dominic Gates: 206-464-2963 or email@example.com.
Seattle Times reporter Alicia Mundy contributed to this report.