Segment Results
Commercial Airplanes
Boeing Commercial Airplanes (BCA) second-quarter revenues decreased 2 percent to $8.4 billion on slightly lower airplane deliveries and lower volume in services. Operating earnings increased 5 percent and margins rose to 9.7 percent due to lower research and development expense partially offset by the lower services volume (Table 4).
For the first half of 2009, revenues rose to $17.0 billion on increased airplane deliveries, partially offset by lower volume in services. Operating earnings fell by 30 percent to $1.2 billion while margins contracted to 7.3 percent, driven by the first-quarter charge on the 747 program related to pending reduction in twin-aisle production rates and unfavorable delivery price escalation forecasts.
Table 4. Commercial Airplanes Operating Results (Millions, except Second Quarter First Half deliveries & margin -------------- ---------- percent) 2009 2008 Change 2009 2008 Change --------------------- ---- ---- ---- ---- Commercial Airplanes Deliveries 125 126 (1%) 246 241 2% Revenues $8,431 $8,567 (2%) $16,985 $16,728 2% Earnings from Operations $817 $777 5% $1,234 $1,760 (30%) Operating Margins 9.7% 9.1% 0.6Pts 7.3% 10.5% (3.2)Pts ----------------- --- --- ------ --- ---- --------
BCA booked 57 gross orders during the quarter while 52 others were removed from its order book. Contractual backlog was $257 billion, more than seven times BCA's expected 2009 revenues.
The 787 program has identified a technical solution to the previously announced requirement to reinforce an area within the side-of-body joint, and is currently evaluating alternative ways to implement that solution. The company expects to complete its assessment of the schedule and financial implications during the third quarter. Recent milestones include completion of gauntlet and low-speed taxi tests on the first flight test aircraft. The company also recently announced its agreement to acquire Vought's South Carolina facility which supports the 787 program. Included in gross inventory for the company is approximately $7.9 billion of 787 work-in-process inventory, cash advances made to suppliers and tooling costs. The program had new orders for 13 airplanes during the quarter and cancelled orders for 41 others. Total firm orders are now 850 airplanes from 56 customers.
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) second-quarter revenues rose 9 percent to $8.7 billion. Operating margins of 10.1 percent reflect strong performance across all defense segments (Table 5).
For the first half of 2009, IDS revenues increased by 6 percent to $16.4 billion and earnings increased 6 percent, bringing operating margins to 9.7 percent.
Table 5. Integrated Defense Systems Operating Results Second Quarter First Half (Millions, except -------------- ---------- margin percent) 2009 2008 Change 2009 2008 Change ------------------ ---- ---- ---- ---- Revenues Boeing Military Aircraft $3,363 $3,265 3% $6,373 $6,467 (1%) Network & Space Systems $3,103 $2,804 11% $5,781 $5,498 5% Global Services & Support $2,184 $1,865 17% $4,216 $3,544 19% ------ ------ ------ ------ Total IDS Revenues $8,650 $7,934 9% $16,370 $15,509 6% Earnings from Operations Boeing Military Aircraft $392 $157 150% $674 $541 25% Network & Space Systems $239 $237 1% $446 $504 (12%) Global Services & Support $245 $243 1% $465 $452 3% ---- ---- ---- ---- Total IDS Earnings from Operations $876 $637 38% $1,585 $1,497 6% Operating Margins 10.1% 8.0% 2.1Pts 9.7% 9.7% - Pts -----------------
Boeing Military Aircraft second-quarter revenue rose 3 percent to $3.4 billion and operating margin was 11.7 percent, reflecting higher rotorcraft volume and strong execution across its programs. The year-ago quarter included a charge on the AEW&C program. During the quarter the P-8A had its first flight, the KC-767 tanker achieved initial operational capability in Japan, and the Apache Block III manned aircraft demonstrated control of an unmanned aircraft system. On June 24, the Fiscal Year 2009 Supplemental Defense Spending bill was signed, authorizing funding for an additional eight C-17s for the U.S. Air Force.
Network & Space Systems second-quarter revenues increased 11 percent primarily driven by growth in the Space and Intelligence Systems business. Operating margin was 7.7 percent reflecting strong performance across the segment's array of programs, partially offset by a previously announced $35 million charge related to the Sea Launch bankruptcy filing. During the quarter, key flight milestones were achieved on Directed Energy programs as the Airborne Laser tracking system engaged an accelerating target and the Advanced Tactical Laser fired a high power laser successfully hitting a ground target. Also, the Joint Tactical Radio Station Ground Mobile Radio network demonstrated its scalability in a fielded environment.