Global Services & Support (GS&S) revenues increased 17 percent on higher volume across its broad portfolio of services and logistics products. During the quarter, GS&S continued to generate double-digit operating margins of 11.2 percent. In this segment, the company was awarded contracts for unmanned Intelligence Surveillance Reconnaissance services, an armored-vehicle recovery system, and B-52 sustainment, modernization and upgrades.
IDS' backlog is $70.0 billion, more than two times expected 2009 revenues. New orders during the quarter included Chinooks for an international customer, A-10 sustainment and modernization, and multiple support and proprietary contracts.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported second-quarter pre-tax earnings of $36 million compared to $45 million in the same period last year due to higher reserves and impairments (Table 6). During the quarter, BCC's portfolio balance rose to $6.3 billion (up from $6.0 billion at the end of the first quarter) on $429 million in new aircraft financings and other volume, partially offset by normal portfolio run-off through customer payments and depreciation. BCC contributed $10 million in cash dividends to the company during the quarter. BCC's debt-to-equity ratio was unchanged at 5.0-to-1.
Table 6. Boeing Capital Corporation Operating Results
Second Quarter First Half
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(Millions) 2009 2008 Change 2009 2008 Change
---------- ---- ---- ---- ----
Revenues $167 $179 (7%) $330 $364 (9%)
Earnings from Operations $36 $45 (20%) $73 $106 (31%)
Additional Information
The "Other" segment consists primarily of Boeing Engineering, Operations and Technology, as well as certain results related to the consolidation of all business units. Other segment expense was $46 million in the second quarter, reduced from $135 million of expense in the same period last year which included $82 million for increased aircraft financing reserves that were recorded at the consolidated level.
Unallocated expense was $154 million, up from $77 million in the same quarter last year driven by higher deferred compensation and share-based plans expenses, partially offset by lower unallocated pension expense.
Total pension expense for the quarter was $207 million, as compared to $216 million in the same period last year. A total of $229 million was recognized in the operating segments in the quarter (up from $140 million in the same period last year), partially offset by a $22 million contribution to earnings in unallocated items.
Outlook
The 2009 financial guidance continues to reflect a challenging market environment as well as company plans to reduce discretionary spending and restructure various internal organizations to improve productivity. The company will reevaluate financial guidance upon completion of the 787 schedule assessment, and expects to issue 2010 financial guidance later in the year.
Boeing's 2009 revenue guidance is reaffirmed at $68 billion to $69 billion (Table 7). Earnings-per-share guidance for 2009 remains at $4.70 to $5.00 per share. Operating cash flow is still expected to be greater than $2.5 billion, including discretionary pension contributions of approximately $0.5 billion and an assumption of $1 billion for new commercial airplane financings.
Commercial Airplanes' 2009 delivery guidance remains at between 480 and 485 airplanes and is sold out. BCA's 2009 revenue is unchanged at between $34 billion and $35 billion, and operating margin remains at between 8 percent and 8.5 percent.
IDS guidance for 2009 remains unchanged with revenue between $33 billion and $34 billion and operating margins of approximately 10 percent.
Boeing Capital Corporation continues to expect that the aircraft finance portfolio will increase modestly as the amount of new aircraft financing in 2009 will exceed normal portfolio runoff due to customer payments and depreciation.
Boeing's 2009 R&D forecast is between $3.6 billion and $3.8 billion. 2009 capital expenditures are expected to be approximately $1.4 billion. The company's non-cash pension expense is expected to be approximately $0.9 billion in 2009.
Table 7. Financial Outlook (1)
(Billions, except per share data) 2009
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The Boeing Company
Revenues $68 - $69
Earnings Per Share (GAAP) $4.70 - $5.00
Operating Cash Flow (2) > $2.5
Boeing Commercial Airplanes
Deliveries 480 - 485
Revenues $34 - $35
Operating Margin 8% - 8.5%
Integrated Defense Systems
Revenues
Boeing Military Aircraft ~ $14.0
Network & Space Systems ~ $11.5
Global Services & Support ~ $8.0
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Total IDS Revenues $33 - $34
Operating Margin
Boeing Military Aircraft ~ 10%
Network & Space Systems ~ 9%
Global Services & Support ~ 11.5%
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Total IDS Operating Margin ~ 10%
Boeing Capital Corporation
Portfolio Size Modest increase
Revenue ~ $0.6
Return on Assets > 1.0%
Research & Development $3.6 - $3.8
Capital Expenditures ~ $1.4
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(1) The company will re-evaluate financial guidance upon
completion of the 787 schedule assessment.
(2) After pension contributions of $0.5 billion and assumed
$1 billion for new aircraft financings in 2009.
