The Boeing Company (BA)
Q3 2010 Earnings Call Transcript
October 20, 2010 10:30 am ET
Scott Fitterer – IR
Jim McNerney – Chairman, President and CEO
James Bell – EVP, Corporate President and CFO
Tom Downey – SVP, Communications
Cai von Rumohr – Cowen & Company
Howard Rubel – Jefferies
Ronald Epstein – Bank of America
David Strauss – UBS
Doug Harned – Sanford Bernstein
Noah Poponak – Goldman Sachs
Robert Spingarn – Credit Suisse
Joe Nadol – JPMorgan
Troy Lahr – Stifel Nicolaus
Peter Arment – Gleacher & Company
J.B. Groh – D.A. Davidson
Robert Stallard – Royal Bank of Canada
Myles Walton – Deutsche Bank
Ken Herbert – Wedbush Securities
John Reeves [ph] – Citi
Carter Leake – Davenport and Co.
George Shapiro – Access 342
Susanna Ray – Bloomberg
Aubrey Cohen – Seattle PI
Hal Weitzman – Financial Times
Dominic Gates – Seattle Times
Paul Merrion – Crain's Chicago Business
Previous Statements by BA
» Boein Q2 2010 Earnings Call Transcript
» The Boeing Company Q1 2010 Earnings Call Transcript
» The Boeing Company Q4 2009 Earnings Call Transcript
At this time, for opening remarks and introductions, I’m turning the call over to Mr. Scott Fitterer, Vice President of Investor Relations for the Boeing Company. Mr. Fitterer, please go ahead.
Thank you and good morning. Welcome to Boeing’s third quarter earnings call. I am Scott Fitterer, and with me today are Jim McNerney, Boeing’s Chairman, President and Chief Executive Officer; and James Bell, Boeing’s Corporate President and Chief Financial Officer. After comments by Jim and James, we’ll take your questions.
In fairness to others on the call, we ask that you please limit yourself to one question. As always, we have provided detailed financial information in our press release issued earlier today. As a reminder, you can follow today’s broadcast and slide presentation through our Web site at boeing.com.
Before we begin, I need to remind you that any projections and goals we may include in our discussions this morning are likely to involve risks, which are detailed in our news release, in our various SEC filings, and in the forward-looking disclosures at the end of this web presentation.
Now, I’ll turn the call over to Jim McNerney.
Thank you, Scott, and good morning. Let me begin with a few brief comments on the business environment, followed by some thoughts on our performance during the third quarter, after that James will walk you through the specifics of our results and then we will be glad to take your questions.
Starting with the business environment on slide number 2; although the pace of the global economic recovery has moderated in certain areas, we continue to see growth in air travel worldwide. This growth is being experienced in all regions, with emerging markets continuing to show the strongest recovery and both passenger and freighter markets rebounding more sharply than originally anticipated.
While the growth, that said, has begun to moderate, as last year at this time the industry started to expand from its low recessionary levels, yields remained strong due to the disciplined capacity management by the airlines over the past few years.
In response to the resurgence in air travel growth and strong demand from our customers, we recently announced our third 737 production rate increase this year to 38 airplanes per month, beginning in the second quarter of 2013.
This decision was supported by our current backlog of over 2,000 737s, existing options we expect customers to exercise and ongoing sales campaigns. Demand for 777s, 787s and 747-8s continue to support the production rate plans we had previously announced.
In commercial services, we are starting to see an increase in airline discretionary spending, for example, in airplane modifications. But we anticipate a prolonged recovery in this market as compared to prior cycles.
On the Defense side, our U.S. government customers continue to face budget pressures while at the same time trying to meet extensive current requirements. Last month the Department of Defense released details of its approach for achieving major efficiency and productivity gains in defense spending.
Without a doubt, we recognized that we are in an era of significant fiscal constraint with our U.S. Government customers. In return, we are accelerating our efforts to aggressively manage costs and drive further productivity to support our customers’ objectives and remain competitive with our industry peers.
In addition to rightsizing our overhead and indirect costs, we remain focused on the following key areas in Defense, Space & Security. First, extending our existing programs by bringing capability and affordability to our customers; second, capturing a growing share of international and services opportunities; and finally, accelerating our repositioning with investments in adjacent markets.
A key win for extending existing programs this quarter was the new multi-year contract for 124 F/A-18 and EA-18G aircraft from the U.S. Navy. On this and other programs, we are working to partner with our customers to provide innovation and value in support of their shifting priorities and budget constraints.
Internationally, there is a clear window of opportunity for our multi-role fighter aircraft and other products as our international customers confront the need to transition to the next level of capabilities. Recent reports of a large U.S. Government sale of F-15s, Apache helicopters and other systems to Saudi Arabia, serve as one example of the near-term potential in the international defense marketplace.
Also, during the quarter, we closed on our previously announced acquisitions of Argon ST and Narus, which strengthen our capabilities in cyber security and C4ISR. We will continue to pursue opportunities in adjacent markets and look to accelerate our repositioning with prudent investments like these.