Network & Space Systems second-quarter revenue was $2.4 billion, reduced by expected lower volume on Brigade Combat Team Modernization and Ground-based Midcourse Defense (GMD). Operating margin was 7.1 percent reflecting solid performance across the segment's array of programs. During the quarter, GMD successfully completed a two stage flight test and the first Global Positioning System IIF-1 satellite was launched.
Global Services & Support (GS&S) revenue decreased by 3 percent to $2.0 billion on lower maintenance modifications and upgrades volume. Operating margin was 9.2 percent, impacted by lower margins on integrated logistics and maintenance modifications and upgrades. In this segment, the C-130 Avionics Modernization
Program entered production and the company was awarded contracts for the FAA Next-Generation Air Transportation System, and the US Air Force KC-10 cockpit upgrade.
Backlog at Defense, Space & Security is $60.6 billion, approximately two times the unit's projected 2010 revenue. The backlog declined by $3.6 billion as run-off of multi-year contracts exceeded additions to backlog in the quarter.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported second-quarter pre-tax earnings of $55 million compared to $36 million in the same period last year (Table 6). Earnings improvement was primarily driven by lower asset impairments and provision for loss requirements. During the quarter, BCC's portfolio balance declined to $5.3 billion, down from $5.7 billion at year end, on normal run-off, asset pre-payments and depreciation. BCC's debt-to-equity ratio decreased to 5.3-to-1.
Table 6. Boeing Capital Corporation Operating Results | |||||||
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| Second Quarter |
| First Half |
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(Dollars in Millions) | 2010 | 2009 | Change | 2010 | 2009 | Change | |
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Revenues | $162 | $167 | (3%) | $324 | $330 | (2%) | |
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Earnings from Operations | $55 | $36 | 53% | $101 | $73 | 38% | |
Additional Information
The "Other" segment consists primarily of Boeing Engineering, Operations and Technology, as well as certain results related to the financial consolidation of all business units. Other segment expense was $72 million in the second quarter, up from $46 million in the same period last year driven by higher environmental remediation expense.
Total pension expense for the second quarter was $283 million, as compared to $207 million in the same period last year. A total of $305 million was recognized in the operating segments in the quarter (up from $229 million in the same period last year), partially offset by a $22 million contribution to earnings in unallocated items.
Unallocated expense was $70 million, down from $154 million in the same quarter last year, driven by lower deferred compensation expense.
Interest expense for the quarter was $132 million, up from $80 million in the same period last year due to debt issued in 2009.
Outlook
2010 financial guidance (Table 7) is reaffirmed for revenue, earnings per share, and operating cash flow, although the business segment margin guidance has been adjusted. Capital expenditures guidance has been decreased.
Boeing's 2010 revenue guidance is reaffirmed at $64 billion to $66 billion. Earnings guidance for 2010 remains at $3.50 to $3.80 per share and continues to include some provision for risks. Operating cash flow guidance is reaffirmed at approximately zero in 2010, as the company continues to build inventory on key commercial development programs.
The company continues to expect that 2011 revenue will be higher than 2010, primarily driven by projected 787 and 747-8 deliveries. Combining higher projected deliveries with spending plans for R&D investments and other factors, operating cash flow in 2011 is still expected to be greater than $5 billion .
