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Boeing Weathers Profit Storm
By GEORGE TIBBITS
.c The Associated Press
SEATTLE (AP) -- Boeing Co. weathered a tough year of aircraft production delays, lost business and lawsuits, but finished 1998 with a profit that was better than Wall Street expected and signs that its factories are returning to health.
The worst seems to be over for the world's biggest aerospace company, Philip M. Condit, chairman and chief executive officer, said Tuesday in releasing financial results for the fourth quarter and all of 1998.
''We have made progress and the current plans reflect that progress, but we still have a ways to go,'' Condit said.
Boeing earned $465 million, or 48 cents a share, for the final three months of 1998 compared with a loss of $498 million, or 51 cents a share, a year earlier. The 1997 loss reflected a special charge of $876 million for commercial aircraft product lines of the former McDonnell Douglas Corp., which Boeing acquired that year.
The results bettered the average 42 cents a share estimated by analysts surveyed by First Call. But with problems remaining on the horizon, Boeing's stock fell 2.8 percent Tuesday, dropping $1 to close at $35 a share on the New York Stock Exchange.
Revenue for the quarter rose to $17.1 billion, up 46 percent from $11.7 billion.
The next few years won't be easy for Boeing, with depressed economies in Asia, lingering production difficulties and declining aircraft orders, Condit said.
Chief among Boeing's goals, he said, is to increase operating profit margins on its commercial jetliners, which were zero last year, to 3 percent or better in 1999 and 2000.
There is little Boeing can do to increase revenues since planes are ordered years in advance, company President Harry Stonecipher said, but he hopes to significantly cut costs.
The company forecasts total revenue of $58 billion in 1999, dropping to about $49 billion in 2000 when it expects to deliver about 480 commercial jets.
Boeing already has announced plans to reduce its worldwide employment from a high of 238,000 this year to between 185,000 and 195,000 by the end of 2000.
For the year, Boeing earned $1.1 billion, or $1.15 a share, on revenue of $56.2 billion, compared with a loss of $178 million, or 18 cents a share, on revenue of $45.8 billion in 1997.
Problems with parts shortages, snarled assembly lines, delays in the bringing out the new-generation 737 and other production woes cost the company billions of dollars in 1997 and continued through 1998.
Boeing Commercial Airplane Group has reduced parts shortages and assembly line snags, and is close to delivering all aircraft on schedule, though overtime remains high, said division president Alan Mulally.
Last week, Boeing agreed to pay $15 million to settle two class-action discrimination lawsuits filed last year by past and present black employees.
The company delivered 559 commercial jetliners in 1998, up from 374 a year earlier, but the company was still feeling effects of the Asian financial crisis, which caused airlines to postpone aircraft purchases. Archrival Airbus Industrie also captured a number of key orders.
Boeing helped some airlines take delivery of new jets in late 1998 by offering short-term operating leases, and the company is carrying $1.2 billion more in customer financing than at the end of 1997.
The company said commercial aircraft revenue for the year was $35.5 billion, up $8.6 billion from 1997. Because of pricing pressures and the mix of aircraft delivered, earnings for that segment were just $63 million for the year, though far better than commercial aircraft's loss of $1.8 billion in 1997.
''Certainly it is a dramatic move to the better, but it is just one small step,'' said Deborah Hopkins, Boeing's newly named chief financial officer.
Boeing is delivering more 777 and new-generation 737 models, planes that have higher production costs than rolling out more versions of older models. The new 737 models have yet to turn a profit.
The same pressures will continue in 1999, when the company expects to deliver 620 aircraft.
Jetliner orders have slowed dramatically over the past year, due in great part to the financial uncertainty in Asia.
''There are very clearly signs that at least in areas of Asia there has been measurable stabilization,'' Condit said. ''We're seeing airline traffic up on a year-over-year basis. But there's a very big asterisk -- it's up over very depressed levels of a year ago.''
He said he expects orders to remain ''significantly down'' because of the continuing economic situation, but that Boeing has ''a big, strong backlog'' of 1,786 jets on order.
Boeing took orders for 656 airliners worth $42 billion in 1998.
AP-NY-01-26-99 1758EST
Boeing <BA.N> sees progress to upper end of ranges
SEATTLE, Jan 26 (Reuters) - Boeing Co. Chairman and Chief Executive Officer Phil Condit said Tuesday the company is making progress toward achieving the "upper end of projected ranges" for 1999 and 2000 earnings.
In a conference call with analysts monitored by Reuters, Condit also said he would not rule out a possible bid by the Seattle-based aerospace giant for a European defense company.
"I would not rule it out," he said in response to a question about European consolidation. "There are a lot of ways that could play, and I'm not going to say where I think it will happen."
Condit and several other Boeing executives said the company is making progress toward the upper end of its projected earnings of $1.5 billion to $1.8 billion next year, for an operating margin of 4 percent to 5 percent. The company has projected operating profits of 3.5 to 5 percent of revenues for 2000.
In 1998 Boeing earned $1.12 billion on revenues of $56.2 billion and reported an operating profit margin of 2.8 percent.
Boeing commercial airplane group President Alan Mulally said he expected orders to decline this year from last year's level of 656 jets worth $42.1 billion due to economic weakness in some parts of the world, particularly Asia.
He declined to be more specific, although he said he expected orders to remain generally flat in 2000 before moving up again in 2001.
And he said the company believes the Asian situation is "generally stabilizing," giving the company increasing confidence it can meet its profit projections.
Separately Boeing's new chief financial officer Debby Hopkins said the company's newest airplane models, the 777 and next-generation 737 have turned profitable on a cash basis. She said the company would spread out unamortized tool costs over an additional, unspecified number planes.
15:35 01-26-99
Boeing Sees Profit in 1999, 2000 Toward Top End of Forecasts
Seattle, Jan. 26 (Bloomberg) -- Boeing Co., the world's biggest aircraft maker, expects to deliver profit near the top of forecasts in the next two years, Chairman and Chief Executive Phil Condit said.
''We're making progress toward the upper end of our projected ranges for 1999 and 2000,'' Condit told analysts on a conference call.
Boeing said in December it would earn between $1.5 billion and $1.8 billion this year, less than an earlier forecast of $2 billion. It has said profit could decline in 2000 as commercial-jet deliveries drop a projected 23 percent. It blamed recessions in Asia for the reduced forecasts.
''The Asia situation is stabilizing and those market projections look pretty good,'' said Alan Mulally, head of Boeing's commercial-airplane group. ''We have a solid base on the revenues going forward so we can really start to work the costs and the productivity.''
Boeing also said today it had fourth-quarter profit before gains and charges of $435 million, or 45 cents a share, up 50 percent from $290 million, or 29 cents, in the fourth quarter of 1997.
14:47:17 01/26/1999
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