Boeing to Recognize Charge for the
KC-46 Tanker Program in Second Quarter
Company maintains commitment to U.S. Air Force delivery
schedule
EPS guidance for 2015 to be updated on July
22
2015 cash and revenue guidance will remain unchanged
CHICAGO, July 17, 2015 -- The Boeing Company [NYSE: BA]
announced today it will recognize a charge on the KC-46 aerial
refueling tanker program when it announces second-quarter 2015
results on July 22.
The after-tax charge of $536
million ($0.77 per share)
reflects higher estimated engineering and manufacturing costs to
complete development, certification and initial production of the
tanker aircraft, while holding to the program schedule for initial
production deliveries in 2017. The KC-46 tanker is being designed,
developed and tested under a fixed-price Engineering, Manufacturing
and Development (EMD) contract.
"While we are disappointed with this charge, we are investing
the necessary resources to keep this vitally important program on
schedule for our customer, and meet our commitments for delivering
the initial 18 tankers to the U.S. Air Force by August 2017 and building 179 tankers by 2027,"
said Boeing President and Chief Executive Officer Dennis Muilenburg. "We have a clear
understanding of the work to be done, and believe strongly that the
long-term financial value of the KC-46 program will reward our
additional investment."
Increased company investment in the program primarily is being
driven by required rework on the airplane's integrated fuel system
that was identified as Boeing prepared for and conducted test and
verification of that system during the second quarter. The added
investment will support the engineering redesign, manufacturing
retrofit and qualification and certification of the fuel system
changes, and the conclusion of ground and flight testing on the
program.
The KC-46 fuel system is a complex, integrated system that
provides fuel to the aircraft's engines and the capabilities to
refuel other aircraft in flight. It is the final major system to be
qualified in the KC-46 development program. Non-fuel system-related
qualification testing is now more than 90 percent complete, and the
overall ground and flight test program continues to progress, with
initial airworthiness flight tests successfully completed in the
second quarter.
Boeing continues to forecast an $80
billion global market for refueling tankers and anticipates
that KC-46 program profitability will be achieved during the
production phase.
On a pre-tax basis at the segment level, Boeing Commercial
Airplanes will report a charge of $513
million and the Boeing Military Aircraft segment of Boeing
Defense, Space & Security will report a charge of $322 million.
The company will update guidance on Wednesday, July 22 and expects an adjustment to
2015 EPS guidance that will reflect the impact of the Tanker
charge. However, the company expects that revenue and cash flow
guidance for the year will remain unchanged.
Caution Concerning Forward-Looking
Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Words such as "may," "should," "expects," "intends,"
"projects," "plans," "believes," "estimates," "targets,"
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cause actual results to differ materially and adversely from these
forward-looking statements. Among these factors are risks related
to: (1) general conditions in the economy and our industry,
including those due to regulatory changes; (2) our reliance on our
commercial airline customers; (3) the overall health of our
aircraft production system, planned production rate increases
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(7) our reliance on cost-type contracts; (8) uncertainties
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Contact:
Investor Relations: Troy Lahr or
Rob Martin (312) 544-2140
Communications: Bernard Choi (312)
544-2002