Boeing reported 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 US$847m. 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 US$814m after-tax charge 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. The company will also recognize a US$393m after-tax charge 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. In total, the company will record an after-tax earnings impact of US$2.1bn. On a pretax basis at the segment level, Boeing Commercial Airplanes will now record an earnings impact totaling US$2.78bn and the Boeing Military Aircraft segment of Boeing Defense, Space & Security will report an earnings impact of US$219m.
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[email protected]
Mailing Address
AviTrader Publications Corp.
Suite 305, South Tower
5811 Cooney Road
Richmond, BC V6X 3M1
Canada