Boeing says health care charge slashes profit

CHICAGO — President Barack Obama’s recently enacted health care legislation took its toll on Boeing Co. earnings as the Chicago-based aerospace company reported a $150 million non-cash charge, or $0.20 per share, for a future tax benefit that it will lose as a result of the new law.

The charge contributed to a 15 percent drop in Boeing’s net income of $519 million, or $0.70 per share, compared to prior-year results. Revenues at the aerospace company fell 8 percent to $15.2 billion as it delivered fewer airplanes to customers than in early 2009: 108 versus 121.

However, analysts were encouraged by signs that Boeing
operations are getting back on track and that the worst of its
development problems with the 787 Dreamliner aircraft and 747-8 jumbo
jet may be in the past.

Boeing said that it
intended to begin delivering both aircraft to customers by year’s end,
turning programs that have been a drain on its finances into sources of
revenue.

With global airlines recovering from the recent recession, Boeing
is seeing a strong surge in demand for its aircraft and will decide
this quarter whether to boost production of its top-seller, the 737
jet, this quarter, Boeing CEO Jim McNerney said Wednesday morning. The company has already announced plans to
speed production rates for the 777 and the new, stretched version of
the 747.

Late Tuesday evening, Boeing announced that it had received expanded type inspection authorization for the 787 from the FAA, which will clear the way for more of its engineers to participate in test-flights to collect data on the new aircraft.

Boeing also said it had
finalized the aerodynamic configuration of the 787. “We have completed
sufficient testing to decide that no additional changes to the external
lines or shape of the airplane are required,” said Scott Fancher, vice president and general manager of the 787 program.

Analysts were encouraged by the improving operating margin for Boeing’s commercial airplane business, 9.1 percent compared to 4.9 percent a year ago.

But observers continue to closely monitor the cash burned by Boeing
as it completes research and development costs on the new planes and
advances cash to suppliers who have been squeezed by the long delays to
both planes. Boeing and its suppliers aren’t fully paid until airplanes are delivered to customers.

Boeing reported negative free cash flow of $471 million for the quarter, but said it still has reserves of $10.4 billion in cash and short-term securities to draw from.

“This was a decent quarter for Boeing,” wrote analyst Rob Stallard of Macquarie Securities in a research report Wednesday morning. “In our view, the key is for Boeing
to keep executing to this forecast, particularly on the 787, and enjoy
the improving macro backdrop for global airlines (post volcano).”

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