Boeing to recognise USD2.1bn after tax earnings impact for 2Q2016

Boeing announced (21-Jul-2016) it will recognise an impact to earnings across three programmes, when it announces its 2Q2016 results on 27-Jul-2016. In total, the company will record an after-tax earnings impact of USD2.1 billion. On a pretax basis at the segment level, Boeing Commercial Airplanes will now record an earnings impact totaling USD2.78 billion and the Boeing Military Aircraft segment of Boeing Defense, Space & Security will report an earnings impact of USD219 million. Details include:

• 787 programme: Boeing has 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 6700 flight and ground testing hours combined. Costs associated with these aircraft were reclassified from 787 programme inventory to research and development expense resulting in a non-cash after-tax charge of USD847 million (USD1.33 per share);
• 747-8 programme: 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 one per month in 2019. A USD814 million after-tax charge (USD1.28 per share) will be booked on the programme, reflecting 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;
• KC-46 Tanker programme: Boeing will recognise a USD393 million after-tax charge (USD0.62 per share), reflecting higher costs associated with previously announced programme schedule and technical challenges.

Guidance for 2016 revenue and cash is reaffirmed and the company will update earnings per share guidance at its 2Q2016 earnings release. Boeing CFO and EVP of corporate development & strategy Greg Smith characterised the decisions as "prudent actions that reflect market realities, reduce future financial risk and ultimately drive value to our shareholders." [more - original PR]