The Boeing (BA)
Q3 2012 Earnings Call
October 24, 2012 10:30 am ET
Stephanie Pope - Vice President of Investor Relations
Previous Statements by BA
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Gregory D. Smith - Chief Financial Officer and Executive Vice President
Thomas J. Downey - Senior Vice President of Communications
Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division
Joseph B. Nadol - JP Morgan Chase & Co, Research Division
Ronald J. Epstein - BofA Merrill Lynch, Research Division
Howard A. Rubel - Jefferies & Company, Inc., Research Division
Carter Copeland - Barclays Capital, Research Division
Douglas S. Harned - Sanford C. Bernstein & Co., LLC., Research Division
Cai Von Rumohr - Cowen and Company, LLC, Research Division
Robert Spingarn - Crédit Suisse AG, Research Division
Heidi Rolande Wood - Morgan Stanley, Research Division
Jason M. Gursky - Citigroup Inc, Research Division
Noah Poponak - Goldman Sachs Group Inc., Research Division
David E. Strauss - UBS Investment Bank, Research Division
Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's Third Quarter 2012 Earnings Conference Call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst and media question-and-answer sessions are being broadcast live over the Internet.
At this time for opening remarks and introductions, I'm turning the call over to Ms. Stephanie Pope, Vice President of Investor Relations for the Boeing Company. Ms. Pope, please go ahead.
Thank you, and good morning. Welcome to Boeing's Third Quarter 2012 Earnings Call. I am Stephanie Pope and with me today are Jim McNerney, Boeing's Chairman, President and Chief Executive Officer; and Greg Smith, Boeing's Chief Financial Officer.
After comments by Jim and Greg, we will take your questions. [Operator Instructions]
As always, we have provided detailed financial information in our press release issued earlier today. And as a reminder, you can follow today's broadcast and slide presentation through our website 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 and our various SEC filings and in the forward-looking disclaimers at the end of this web presentation.
Now I will turn the call over to Jim McNerney.
W. James McNerney
Thank you, Stephanie, and good morning, everybody. Let me start today by addressing the business environment, followed by some thoughts on our strong performance during the quarter. After that, Greg will walk you through our financial results and outlook. And then as Stephanie said, we'd be glad to take your questions.
Starting with the business environment on Slide 2. While varying degrees of economic uncertainty continue across global markets, Boeing's growth forecast remains positive. Strong core demand for Commercial Airplanes continues, split roughly equally by worldwide fleet growth on one hand and a healthy replacement cycle, fueled by the compelling economics and rapid return on investment that comes from replacing older, less efficient airplanes with the dramatically more efficient new technology airplanes we are building today.
Our Commercial Airplane backlog grew in the third quarter to $307 billion with conversions of 737 MAX commitments to firm orders fueling that growth. Net new orders for the year exceed 925 airplanes, and we expect a continued flow of order traffic through year end.
With approximately 4,100 airplanes on order, our backlog represents the most diverse customer set we have ever experienced. We have an unparalleled balance by geographic region and product type with about 2/3 of the order book committed to airlines based outside of the U.S. and Europe, a major shift from just a decade ago.
Also supporting our positive outlook, requests for deferrals and cancellations this year remain at or below historical averages. In fact, we continue to receive customer requests to accelerate deliveries of our fuel-efficient aircraft, giving us the ability to rebalance our delivery skyline when deferrals or cancellations occur.
Overall, the Commercial Airplane market remains very attractive and Boeing is positioned exceptionally well. Our superior lineup of innovative new products and services deliver unmatched fuel efficiency and operational performance, supporting our airline customers as they deal with high oil prices and the pressures of the current environment.
Turning to Defense, Space & Security. Notwithstanding the ongoing threat of U.S. budget sequestration, the overall Defense environment remains mixed, with the declines in U.S. spending that we've been anticipating for several years being mitigated in part by growing demand in international markets. As you know, and as our results have shown, our teams have gone great lengths to maximize operating efficiencies and reduce our infrastructure cost to compete effectively in a more austere U.S. budget environment. We've also engaged our supply chain to further advance our affordability drive given the high levels of supplier content in our products and services. We remain committed to these actions to ensure both our near-term performance and long-term competitiveness, while delivering greater value to budget-constrained customers and continuing to fund investment in next-generation capabilities.
These efforts also are fundamental to our success in international defense markets, where growth is being driven by evolving regional security issues and the modernization of aging inventories. We expect our substantial share gains made with international customers in recent years to continue, generating up to 30% of our Defense revenues in the near future.
With our portfolio of proven, reliable and affordable systems and services, combined with a track record of strong execution and innovation, we believe we are well positioned for continued success in this challenging environment.