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FLALEFTY
Posts: 802
Joined: Tue Jan 31, 2006 11:33 am

Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 8:17 pm

keesje wrote:
Embraer obviously also looks for what is best for them, it has to be a win-win. They aren't up for the grabs.
https://www.reuters.com/article/us-heal ... SKBN216036

Some other aerospace company, more healthy, might make Embraer an offer they can't refuse.
Raytheon Collins, LM, NG, Comac, Leonardo, Safran, Dassault, CASA, KHI, Spirit, a JV of a few, who knows.

It has to be a credible, promising proposition & acceptable to authorities. Airbus making a move to cover 80-120 seats and
do a turboprop with Embraer seems e.g. not acceptable in terms of market competition.

Medium term the industry might see some shifts away from the the facto duopoly we saw in recent years.


If Boeing accepts a bailout by the Trump Administration, then it it highly likely that one of the contingencies will be to back out of the Embraer Commercial purchase.

Boeing is planning to grossly overpay for an Embraer operation that does not even build a new-generation regional jet that meets US airlines' scope clauses. Now perhaps if Boeing were healthier they might have had thoughts of tapping into Embraer's lower labor costs to set up another large airliner FAL in Brazil, but given the current circumstances, chances of that happening are slim and none.
 
hohd
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Joined: Sat May 17, 2008 1:03 am

Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 8:31 pm

Ok go ahead and bailout Boeing. But no more stock buybacks EVER. If they have excess cash, they can buy back stock and give 100% of the stock they bought to their workers as compensation. And yes US govt will have equity and every decision they make have to be approved by US government.
 
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keesje
Posts: 14000
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Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 9:26 pm

hohd wrote:
Ok go ahead and bailout Boeing. But no more stock buybacks EVER. If they have excess cash, they can buy back stock and give 100% of the stock they bought to their workers as compensation. And yes US govt will have equity and every decision they make have to be approved by US government.


Some sanity checks by qualified high but fixed salary people on behalf of tax payers seems overdue.
"Never mistake motion for action." Ernest Hemingway
 
mjoelnir
Posts: 9391
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 10:24 pm

morrisond wrote:
mjoelnir wrote:
morrisond wrote:

Very simply they have already spent that deferred cost and "Paid" for that Inventory. I has no cash cost to them to pay back that account - it is just a book keeping entry and does not impact cash flow.


They show the deferred cost as profits and inventory in their books. The profits they did not make and the inventory is non existent. They have not paid for the inventories, they paid the costs for the frames that have already been delivered. If the company would stop today, Boeing would have to declare 20 billion USD extra losses and reduce the inventory by 20 billion USD.
Simple mathematics.
You still believe in magic, like when you do not book cost it simply disappears.


And if they stopped today would it matter if the write off was $100B or $120B - it has zero relevance. That $20B in deferred cost does nothing to impact there future cash flow.

Cash flow is what matters - Not P&L on an income statement adjusted to pay less taxes than might have been.

Bankers lend on cash flow not on EPS. It is not magic - just reality.


I know you are fascinated by cash flow, but as it is, the cash is flowing out not in. It is typical for you to change the subject.

If we we look at the possibility of future cash flow, we look also at inventories. Inventories are there to be sold to produce a positive cash flow. At Boeing 20 billion of 70 billion inventories are deferred cost. A black hole masquerading as inventory. A 20 billion black hole.
 
morrisond
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Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 10:38 pm

Okay - let's look at inventories. Who has more completed inventory sitting on the ground they can sell for cash assuming eventual RTS?

Rumours are swirling that Boeing is not the only Aerospace company looking for funds.
 
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flyingphil
Posts: 312
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Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 11:03 pm

“Nikki Haley resigns from Boeing's board over bailout pursuit“
https://www.politico.com/amp/news/2020/ ... ign-138086

Interesting.. there is not a lot of sympathy for Boeing out there.
 
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FLALEFTY
Posts: 802
Joined: Tue Jan 31, 2006 11:33 am

Re: Boeing Financial Discussion 2020

Thu Mar 19, 2020 11:26 pm

flyingphil wrote:
“Nikki Haley resigns from Boeing's board over bailout pursuit“
https://www.politico.com/amp/news/2020/ ... ign-138086

Interesting.. there is not a lot of sympathy for Boeing out there.


Niki Haley was governor of South Carolina who was a key player in putting together the $800M+ tax and ground lease incentive plan for Boeing's 787 FAL at CHS. Her place on the Boeing board was a little "reward" for her part in this.
 
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scbriml
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Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 12:09 am

morrisond wrote:
Okay - let's look at inventories. Who has more completed inventory sitting on the ground they can sell for cash assuming eventual RTS?


That's not the 'advantage' it might have been a short while ago. MAX could RTS tomorrow, how many do you think they'd sell? :scratchchin:

Airlines that were desperate for new planes just a few weeks ago are now parking up huge numbers of planes. It will take a very long time before aviation gets back to pre-corona levels (assuming it does).
Time flies like an arrow. Fruit flies like a banana!
There are 10 types of people in the World - those that understand binary and those that don't.
 
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seahawk
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Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 7:47 am

What is the worth of those 737MAX?

It could be that many of them are actually worth next to nothing, as the airline (aka the customer) could have a right to huge compensations or would be free to cancel without a penalty. And with the demand by the customer now questionable the whole outlook changed.
And even that is after the regulators would allow the MAX to operate again.
 
mjoelnir
Posts: 9391
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 8:19 am

morrisond wrote:
scbriml wrote:
morrisond wrote:
Okay - let's look at inventories. Who has more completed inventory sitting on the ground they can sell for cash assuming eventual RTS?


That's not the 'advantage' it might have been a short while ago. MAX could RTS tomorrow, how many do you think they'd sell? :scratchchin:

Airlines that were desperate for new planes just a few weeks ago are now parking up huge numbers of planes. It will take a very long time before aviation gets back to pre-corona levels (assuming it does).


Totally agree - but the poster above was going on and on about how worthless 787 Deferred cost as part of inventory was - and it is and everyone else but them realize this.

The only good inventory right now is completed inventory that you probably don't have to shell out anymore money for.

They may not be able to sell many - but I'm sure the Government will help them with financing to help them clear inventory and get them back on their feet. Buy a MAX and the US gov't via the EX/Import will give you a 12 year 0% loan to finance it.

Or a better idea than just writing Boeing a cheque. The Government Buys Boeings MAX inventory and gets paid when they are delivered.

That could be a $15-20B boost to Boeing and probably a lot palatable than just writing them a cheque.


And you are going on and on that booking an Inventory that does not exist does not matter. The booked inventory includes the produced 737MAX, they are not additional. Boeing also gets less for that inventory than you think, 50 billion in advanced and progress payments are on Boeing books, so most of the inventory is owned by the customers.
In some countries Boeing would already have to have called in the bankruptcy court, because the assets do not cover the liabilities and the hole is big.

Boeing is asking for a 60 billion USD bailout, most of that they need because of their stupid share buy back scheme in a badly run company, not because of the corona virus.
 
morrisond
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Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 4:48 pm

mjoelnir wrote:
morrisond wrote:
scbriml wrote:

That's not the 'advantage' it might have been a short while ago. MAX could RTS tomorrow, how many do you think they'd sell? :scratchchin:

Airlines that were desperate for new planes just a few weeks ago are now parking up huge numbers of planes. It will take a very long time before aviation gets back to pre-corona levels (assuming it does).


Totally agree - but the poster above was going on and on about how worthless 787 Deferred cost as part of inventory was - and it is and everyone else but them realize this.

The only good inventory right now is completed inventory that you probably don't have to shell out anymore money for.

They may not be able to sell many - but I'm sure the Government will help them with financing to help them clear inventory and get them back on their feet. Buy a MAX and the US gov't via the EX/Import will give you a 12 year 0% loan to finance it.

Or a better idea than just writing Boeing a cheque. The Government Buys Boeings MAX inventory and gets paid when they are delivered.

That could be a $15-20B boost to Boeing and probably a lot palatable than just writing them a cheque.


And you are going on and on that booking an Inventory that does not exist does not matter. The booked inventory includes the produced 737MAX, they are not additional. Boeing also gets less for that inventory than you think, 50 billion in advanced and progress payments are on Boeing books, so most of the inventory is owned by the customers.
In some countries Boeing would already have to have called in the bankruptcy court, because the assets do not cover the liabilities and the hole is big.

Boeing is asking for a 60 billion USD bailout, most of that they need because of their stupid share buy back scheme in a badly run company, not because of the corona virus.


Boeing and Industry are asking for a $60B bailout not Boeing itself.

Boeing would have been in the same position if they had simply paid out that $100B in the form of extra dividend which no one would be complaining about. Again I say they should have invested in new product - but I don't see Airlines wanting deliveries of those at this time either.

Pre-max Boeing had about as much Cash on the balance sheet scaled to it's size as it's biggest competitor when the buybacks stopped.

How about trying to provide solutions vs just attacking others. Your favourite Aerospace company will need some help soon as well.

There will probably be enough excess capacity out there that no one will need (or want) to take a new frame for some time. There will be enough Bankruptcies in the Airline Industry there will be plenty of newish NB's and WB's available for fire sale pricing, and with Oil so low much less incentive to buy newer more efficient frames.
 
mjoelnir
Posts: 9391
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 5:56 pm

morrisond wrote:
mjoelnir wrote:
morrisond wrote:

Totally agree - but the poster above was going on and on about how worthless 787 Deferred cost as part of inventory was - and it is and everyone else but them realize this.

The only good inventory right now is completed inventory that you probably don't have to shell out anymore money for.

They may not be able to sell many - but I'm sure the Government will help them with financing to help them clear inventory and get them back on their feet. Buy a MAX and the US gov't via the EX/Import will give you a 12 year 0% loan to finance it.

Or a better idea than just writing Boeing a cheque. The Government Buys Boeings MAX inventory and gets paid when they are delivered.

That could be a $15-20B boost to Boeing and probably a lot palatable than just writing them a cheque.


And you are going on and on that booking an Inventory that does not exist does not matter. The booked inventory includes the produced 737MAX, they are not additional. Boeing also gets less for that inventory than you think, 50 billion in advanced and progress payments are on Boeing books, so most of the inventory is owned by the customers.
In some countries Boeing would already have to have called in the bankruptcy court, because the assets do not cover the liabilities and the hole is big.

Boeing is asking for a 60 billion USD bailout, most of that they need because of their stupid share buy back scheme in a badly run company, not because of the corona virus.


Boeing and Industry are asking for a $60B bailout not Boeing itself.

Boeing would have been in the same position if they had simply paid out that $100B in the form of extra dividend which no one would be complaining about. Again I say they should have invested in new product - but I don't see Airlines wanting deliveries of those at this time either.

Pre-max Boeing had about as much Cash on the balance sheet scaled to it's size as it's biggest competitor when the buybacks stopped.

How about trying to provide solutions vs just attacking others. Your favourite Aerospace company will need some help soon as well.

There will probably be enough excess capacity out there that no one will need (or want) to take a new frame for some time. There will be enough Bankruptcies in the Airline Industry there will be plenty of newish NB's and WB's available for fire sale pricing, and with Oil so low much less incentive to buy newer more efficient frames.


Yes, Boeing could have been financial irresponsible in many different ways. That does not change the fact that using 43 billions USD over 6 years was financial irresponsible.

https://www.flightglobal.com/airframers ... 20.article

quote: Boeing is leading an effort to gain at least $60 billion in US federal government aid to support the US aerospace manufacturing sector which has been hurt by the rapid decline in air travel and subsequent plummet in demand for airliners.

You can perhaps inform me who else is building airliners in the USA. Is Boeing asking for money for the Airbus plant in Mobile perhaps?
 
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Polot
Posts: 10715
Joined: Thu Jul 28, 2011 3:01 pm

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 6:08 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:

And you are going on and on that booking an Inventory that does not exist does not matter. The booked inventory includes the produced 737MAX, they are not additional. Boeing also gets less for that inventory than you think, 50 billion in advanced and progress payments are on Boeing books, so most of the inventory is owned by the customers.
In some countries Boeing would already have to have called in the bankruptcy court, because the assets do not cover the liabilities and the hole is big.

Boeing is asking for a 60 billion USD bailout, most of that they need because of their stupid share buy back scheme in a badly run company, not because of the corona virus.


Boeing and Industry are asking for a $60B bailout not Boeing itself.

Boeing would have been in the same position if they had simply paid out that $100B in the form of extra dividend which no one would be complaining about. Again I say they should have invested in new product - but I don't see Airlines wanting deliveries of those at this time either.

Pre-max Boeing had about as much Cash on the balance sheet scaled to it's size as it's biggest competitor when the buybacks stopped.

How about trying to provide solutions vs just attacking others. Your favourite Aerospace company will need some help soon as well.

There will probably be enough excess capacity out there that no one will need (or want) to take a new frame for some time. There will be enough Bankruptcies in the Airline Industry there will be plenty of newish NB's and WB's available for fire sale pricing, and with Oil so low much less incentive to buy newer more efficient frames.


Yes, Boeing could have been financial irresponsible in many different ways. That does not change the fact that using 43 billions USD over 6 years was financial irresponsible.

https://www.flightglobal.com/airframers ... 20.article

quote: Boeing is leading an effort to gain at least $60 billion in US federal government aid to support the US aerospace manufacturing sector which has been hurt by the rapid decline in air travel and subsequent plummet in demand for airliners.

You can perhaps inform me who else is building airliners in the USA. Is Boeing asking for money for the Airbus plant in Mobile perhaps?

US [commercial] aerospace manufacturing includes GE, UTC and all their subsidiaries (PW, Rockwell Collins, etc), Spirit AeroSystems, and I’m sure several other heavy hitters that I’m missing. Boeing and Airbus don’t make their planes from scratch.
 
ZBA2CGX
Posts: 124
Joined: Tue Mar 07, 2006 11:09 pm

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 6:20 pm

I think they should treat Boeing like Bombardier is being treated. Both companies have a made a series of dumb decisions and both should feel the pain of those decision.

Like Bombardier, force Boeing to sell off assets, divisions to pay down the debt and improve the balance sheet.

It will not be a popular opinion.
 
morrisond
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Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 6:29 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:

And you are going on and on that booking an Inventory that does not exist does not matter. The booked inventory includes the produced 737MAX, they are not additional. Boeing also gets less for that inventory than you think, 50 billion in advanced and progress payments are on Boeing books, so most of the inventory is owned by the customers.
In some countries Boeing would already have to have called in the bankruptcy court, because the assets do not cover the liabilities and the hole is big.

Boeing is asking for a 60 billion USD bailout, most of that they need because of their stupid share buy back scheme in a badly run company, not because of the corona virus.


Boeing and Industry are asking for a $60B bailout not Boeing itself.

Boeing would have been in the same position if they had simply paid out that $100B in the form of extra dividend which no one would be complaining about. Again I say they should have invested in new product - but I don't see Airlines wanting deliveries of those at this time either.

Pre-max Boeing had about as much Cash on the balance sheet scaled to it's size as it's biggest competitor when the buybacks stopped.

How about trying to provide solutions vs just attacking others. Your favourite Aerospace company will need some help soon as well.

There will probably be enough excess capacity out there that no one will need (or want) to take a new frame for some time. There will be enough Bankruptcies in the Airline Industry there will be plenty of newish NB's and WB's available for fire sale pricing, and with Oil so low much less incentive to buy newer more efficient frames.


Yes, Boeing could have been financial irresponsible in many different ways. That does not change the fact that using 43 billions USD over 6 years was financial irresponsible.

https://www.flightglobal.com/airframers ... 20.article

quote: Boeing is leading an effort to gain at least $60 billion in US federal government aid to support the US aerospace manufacturing sector which has been hurt by the rapid decline in air travel and subsequent plummet in demand for airliners.

You can perhaps inform me who else is building airliners in the USA. Is Boeing asking for money for the Airbus plant in Mobile perhaps?


So you are saying Boeing should have had about $53B of Cash on the balance sheet pre-max. That would put Airbus at about $30-35B? How much do they have on hand again?

Neither of them needed that level of cash.

Don't look too close but Airbus paid a lot in dividends and did Share buybacks as well. https://www.airbus.com/investors/share- ... ml#buyback
 
Sokes
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Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 6:35 pm

morrisond wrote:
And if they stopped today would it matter if the write off was $100B or $120B - it has zero relevance. That $20B in deferred cost does nothing to impact there future cash flow.

Cash flow is what matters - Not P&L on an income statement adjusted to pay less taxes than might have been.

Bankers lend on cash flow not on EPS. It is not magic - just reality.


The numbers I use in following example explain a principle. They are not real numbers.
Suppose next quarter it costs Boeing 100 million $ to build a B787 and they can sell it for 130 million $. Profit as well as cash flow is 30 million $/ plane.
However unfortunately 20 million $ per plane will have to be used to reduce deferred costs. The problem with deferred cost is that they are deferred, not disappeared. As deferred costs are an asset, assets shrink by 20 million $/ plane. The idea is to pay back debt with that money. It's possible to keep it cash flow neutral, but then equity has to be lowered by 20 million $/ plane.
I argue that 10 million instead of 30 million $/ plane cash flow and profit is left.

Some years back I looked at the Boeing stock and wondered why it is so expensive. I also wondered why banks would lend to them. Probably the stock market really looks mostly at cash flow. It's the best explanation I see for the volatility of the Boeing stock.
Why can't the world be a little bit more autistic?
 
morrisond
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Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 6:40 pm

Cash Flow from operations would be $30 Million - Profit would be $10 Million in your case. Whether or not they choose to pay back Debt is neither here nor there - a lot of the 787 Deferred Cost was paid for from Cash Flow originally - Boeings debt has remained relatively static over time and was not $30B higher at the beginning of the 787 Program.
 
Dmoney
Posts: 134
Joined: Tue Mar 17, 2020 9:53 am

Re: Boeing Financial Discussion 2020

Fri Mar 20, 2020 11:55 pm

Morrison's is right tho? Program accounting is appropriate for Boeing and while deferred cost matters it's not a cash cost. They've already "paid" for the program, there is a reason we look at free cash flow. If the don't hit their program numbers they've overstated their profit but it doesn't effect their cash.

Accountants are boring but you lads need to understand a little about finance. Accounting can be kind of elegant, it gives you tools to understand how money moves through a business.

Boeing is still the poster child for how capitalism is doomed but it's painful to watch yee discuss finances.
 
mjoelnir
Posts: 9391
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 1:30 am

Dmoney wrote:
Morrison's is right tho? Program accounting is appropriate for Boeing and while deferred cost matters it's not a cash cost. They've already "paid" for the program, there is a reason we look at free cash flow. If the don't hit their program numbers they've overstated their profit but it doesn't effect their cash.

Accountants are boring but you lads need to understand a little about finance. Accounting can be kind of elegant, it gives you tools to understand how money moves through a business.

Boeing is still the poster child for how capitalism is doomed but it's painful to watch yee discuss finances.


One more that is thinking that nothing else but cashflow matters. Why do you think that bookkeeping spends its time also with stating what a company earns and what it owes and owns.

Capitalism is not doomed. Gambling the stock market, while forgetting what the purpose of a company is, is the dangerous occupation. When Boeing would have kept to designing and selling superior frames, while making good profits, instead of watching their stock price as a main occupation, they would not be in the current mess.
 
Redsand187
Posts: 60
Joined: Sun Jan 26, 2014 10:47 pm

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:32 am

Polot wrote:
mjoelnir wrote:
morrisond wrote:

Boeing and Industry are asking for a $60B bailout not Boeing itself.

Boeing would have been in the same position if they had simply paid out that $100B in the form of extra dividend which no one would be complaining about. Again I say they should have invested in new product - but I don't see Airlines wanting deliveries of those at this time either.

Pre-max Boeing had about as much Cash on the balance sheet scaled to it's size as it's biggest competitor when the buybacks stopped.

How about trying to provide solutions vs just attacking others. Your favourite Aerospace company will need some help soon as well.

There will probably be enough excess capacity out there that no one will need (or want) to take a new frame for some time. There will be enough Bankruptcies in the Airline Industry there will be plenty of newish NB's and WB's available for fire sale pricing, and with Oil so low much less incentive to buy newer more efficient frames.


Yes, Boeing could have been financial irresponsible in many different ways. That does not change the fact that using 43 billions USD over 6 years was financial irresponsible.

https://www.flightglobal.com/airframers ... 20.article

quote: Boeing is leading an effort to gain at least $60 billion in US federal government aid to support the US aerospace manufacturing sector which has been hurt by the rapid decline in air travel and subsequent plummet in demand for airliners.

You can perhaps inform me who else is building airliners in the USA. Is Boeing asking for money for the Airbus plant in Mobile perhaps?

US [commercial] aerospace manufacturing includes GE, UTC and all their subsidiaries (PW, Rockwell Collins, etc), Spirit AeroSystems, and I’m sure several other heavy hitters that I’m missing. Boeing and Airbus don’t make their planes from scratch.

While it's true all $60B isn't to go into Boeing's coffers. It is solely for Boeing's own benefit. Not only do they need money to keep their business afloat, they need money to keep the entire supply chain from collapsing. The duopoly doesn't allow for sub-tier suppliers to insulate themselves from the failure of one of the market directors.

This situation is a complete national security risk. The failure of Boeing, or even a huge reduction in their size will result in the failure of sub-tier suppliers who also supply the defense industry.
 
morrisond
Posts: 2774
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:51 am

mjoelnir wrote:
Capitalism is not doomed. Gambling the stock market, while forgetting what the purpose of a company is, is the dangerous occupation. When Boeing would have kept to designing and selling superior frames, while making good profits, instead of watching their stock price as a main occupation, they would not be in the current mess.


Finally we agree on something. I have been saying this for years about Boeing and why I haven't owned it for years.

Hopefully the crew of Clowns who runs the company after this one takes this to heart - then I might buy it again.
 
morrisond
Posts: 2774
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:52 am

Redsand187 wrote:
Polot wrote:
mjoelnir wrote:

Yes, Boeing could have been financial irresponsible in many different ways. That does not change the fact that using 43 billions USD over 6 years was financial irresponsible.

https://www.flightglobal.com/airframers ... 20.article

quote: Boeing is leading an effort to gain at least $60 billion in US federal government aid to support the US aerospace manufacturing sector which has been hurt by the rapid decline in air travel and subsequent plummet in demand for airliners.

You can perhaps inform me who else is building airliners in the USA. Is Boeing asking for money for the Airbus plant in Mobile perhaps?

US [commercial] aerospace manufacturing includes GE, UTC and all their subsidiaries (PW, Rockwell Collins, etc), Spirit AeroSystems, and I’m sure several other heavy hitters that I’m missing. Boeing and Airbus don’t make their planes from scratch.

While it's true all $60B isn't to go into Boeing's coffers. It is solely for Boeing's own benefit. Not only do they need money to keep their business afloat, they need money to keep the entire supply chain from collapsing. The duopoly doesn't allow for sub-tier suppliers to insulate themselves from the failure of one of the market directors.

This situation is a complete national security risk. The failure of Boeing, or even a huge reduction in their size will result in the failure of sub-tier suppliers who also supply the defense industry.



A lot of those suppliers make parts for Airbus as well. Is there production not stopped right now?
 
Sokes
Posts: 1851
Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 3:17 am

morrisond wrote:
Cash Flow from operations would be $30 Million - Profit would be $10 Million in your case. Whether or not they choose to pay back Debt is neither here nor there - a lot of the 787 Deferred Cost was paid for from Cash Flow originally

Reduced deferred cost means reduced assets.
Equity = assets - liabilities
Cash is also an asset. If they don't spend the money on share buybacks assets remain the same. But now it's a cash asset, not some funny asset in the book.You are right. Cash flow is 30 million $/ plane, profit is 10 million $/ plane.


morrisond wrote:

Boeings debt has remained relatively static over time and was not $30B higher at the beginning of the 787 Program.

The earliest annual report on Boeing's web page is from 2010. Let's see if debt remained relatively static.

Annual report 2010 shows 65,8 billion $ liabilities with 2,8 billion equities.
What you call debt is 1 billion $ short term debt and 11,5 billion $ long term debt.
p.51, https://s2.q4cdn.com/661678649/files/do ... report.pdf

Annual report 2018 shows 117 billion $ liability with 0,4 billion $ equity.
What you call debt is 3,2 billion $ short term debt and 10,7 billion $ long term debt.
p.50, https://s2.q4cdn.com/661678649/files/do ... -Final.pdf

So yes, your definition of debt remained relatively static. However total liabilities increased from 66 to 117 billion $. I choose 2018 as all the undelivered Max inflate assets as well as liabilities.

At any rate I look at equity and profit more than on cash flow or debt. I believe it's a safer type of investment. Obviously that doesn't apply to companies like Tesla.
Why can't the world be a little bit more autistic?
 
Sokes
Posts: 1851
Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 4:33 am

Sokes wrote:
[
Suppose next quarter it costs Boeing 100 million $ to build a B787 and they can sell it for 130 million $. Profit as well as cash flow is 30 million $/ plane.
However unfortunately 20 million $ per plane will have to be used to reduce deferred costs. The problem with deferred cost is that they are deferred, not disappeared. As deferred costs are an asset, assets shrink by 20 million $/ plane. The idea is to pay back debt with that money. It's possible to keep it cash flow neutral, but then equity has to be lowered by 20 million $/ plane.


As Morrisond rightly pointed out, my last sentence is wrong. Deferred cost as an asset is replaced by cash as an asset. Equity does not have to be lowered.
Cash flow is +30 million $, profit 10 million $/ plane.
Why can't the world be a little bit more autistic?
 
Scotron12
Posts: 496
Joined: Fri Mar 01, 2019 2:13 pm

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 7:00 am

Boeing has suspended dividends & share buybacks until further notice. Also Calhoun will take no pay for the rest of this year.

I don't like the until.further notice part. Hopefully any assistance given has stipulations of NO buybacks. Period!

https://www.seattletimes.com/business/b ... -industry/
 
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Phosphorus
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 7:15 am

This debate is a good one, as long as the company in question is a going concern.
Forensic accountants often do not have this benefit, and need to balance the books with hard assets -- because liabilities are there already, and not planning to dissipate.
So for these kind of folks, there is a sea of difference between a tangible asset of 20bn$ (can be sold at a discount, but still sold) -- or better a pile of cash of 20bn$, and an intangible asset of 20bn$. For them, an intangible unsellable asset is just a hole in the balance sheet.

Intangible assets could be a good thing. But not always.
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LJ
Posts: 5354
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 7:19 am

morrisond wrote:
A lot of those suppliers make parts for Airbus as well. Is there production not stopped right now?


Only 2 production lines in France and Spain have been closed. Both are scheduled to reopen this next week, though French unions urged Airbus to keep the Toulouse plant closed for the time being. The plants in Germany, USA and China are all open, though there can be issues if the French plant remains closed for more than the expected 4 days.

Scotron12 wrote:
Boeing has suspended dividends & share buybacks until further notice. Also Calhoun will take no pay for the rest of this year.

I don't like the until.further notice part. Hopefully any assistance given has stipulations of NO buybacks. Period!


Didn't Trump mention that any money received from a bail out should not be used for share buybacks? As such I think that we can expect that this will be included in the package.
 
LJ
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 8:07 am

Dmoney wrote:
Morrison's is right tho? Program accounting is appropriate for Boeing and while deferred cost matters it's not a cash cost. They've already "paid" for the program, there is a reason we look at free cash flow. If the don't hit their program numbers they've overstated their profit but it doesn't effect their cash.

Accountants are boring but you lads need to understand a little about finance. Accounting can be kind of elegant, it gives you tools to understand how money moves through a business. .


Accounting is boring and unimportant till you run into problems. If you look how fast S&P downgrades Boeing credit ratings, it almost looks as if some in the finance community praise you when there are no problems, but suddenly remember the balance sheet when you're in trouble. It's true, one can operate with negative equity if the cash flow is still ppositive (or you've someone to finance it), but the consequences of negative equity when it all stops can be resulting in having the cash flow problems as it can hit its ability to finance its operations. I'm not familar with the debt convenants Boeing has with its financiers, but a BBB rating can already trigger additional collateral requirements, but should it become non-investment (just 2 notches away) then it will surely trigger many negative consequences (as some companies are forbidden to invest in such companies). To be honest, despite what Boeing management has done in the past, I don't think Boeing deserves going into junk terrotiry. Then again, any company receiving a bail out is de facto insolvent and its credit score should reflect that.

BTW isn't it an idea that Boing decreases the deferred cost considerably as nobody would care if it would have a loss anyway? Or would USGAAP prevent this from happening?
 
Scotron12
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 9:16 am

LJ wrote:
morrisond wrote:
A lot of those suppliers make parts for Airbus as well. Is there production not stopped right now?


Only 2 production lines in France and Spain have been closed. Both are scheduled to reopen this next week, though French unions urged Airbus to keep the Toulouse plant closed for the time being. The plants in Germany, USA and China are all open, though there can be issues if the French plant remains closed for more than the expected 4 days.

Scotron12 wrote:
Boeing has suspended dividends & share buybacks until further notice. Also Calhoun will take no pay for the rest of this year.

I don't like the until.further notice part. Hopefully any assistance given has stipulations of NO buybacks. Period!


Didn't Trump mention that any money received from a bail out should not be used for share buybacks? As such I think that we can expect that this will be included in the package.


I just take issue with the phrase "until further notice". It's like a kid saying "Yes Mom...I won't do it again" until the next time!

I feel Boeing could be a bit more contrite in their language. Maybe it's just me or they are talking from prepared scripts from the mountain of legalese that are dictated to them??
 
Sokes
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 9:50 am

Another way to look at bailouts:
"You could help your rich friends get richer by cutting their taxes and bailing them out when they gamble and loose."
https://www.youtube.com/watch?v=Bx6lhTj0iV4&t=22s

If you think Boeing's 60 billion $ proposed help for the industry isn't related to that joke please discuss, don't report.
After all freedom of speech is what separates democracies from dictatorships.
Why can't the world be a little bit more autistic?
 
LJ
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 10:25 am

Scotron12 wrote:
I feel Boeing could be a bit more contrite in their language. Maybe it's just me or they are talking from prepared scripts from the mountain of legalese that are dictated to them??


The latter is most likely. If they don't know if and when they may do a buyback again, the term "until further notice" is the most correct. Moreover, nobody makes bad news for shareholders worse by being precise.
 
Dmoney
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 11:20 am

Please stop saying crazy things about finance. Why are buybacks bad but dividends good in this bizzaro world? Buybacks are just a more tax efficient method of returning value to shareholders. And what's with the obsession with the balance sheet which you clearly don't understand. Yes it does all come back to cash flow.... Tooling and factories assets don't have any value if they can't produce something which creates future cashflows. The value of the assets are entirely based on what they produce.

Yes, Capitalism is doomed. It's inherently prone to crisis. The profit level has been declining since the 70s and even smashing the unions hasn't restored it. Wood for the trees friends.
 
mjoelnir
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 11:27 am

The main danger of program for cost accounting is, that it makes a company look richer than it is. It counts profits not made and assets that do not exists.
When people now spend the profits not yet made, it gets dangerous.
The good cash flow excuse is just an excuse for behaving irresponsibly.

Share buy backs replaces capital owned by the shareholders, equity, with capital owned by creditors.

Share buy backs were banned and should be banned again, or at least limited to a rather small percentage of the nominal stock.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 12:28 pm

LJ wrote:
Dmoney wrote:
Morrison's is right tho? Program accounting is appropriate for Boeing and while deferred cost matters it's not a cash cost. They've already "paid" for the program, there is a reason we look at free cash flow. If the don't hit their program numbers they've overstated their profit but it doesn't effect their cash.

Accountants are boring but you lads need to understand a little about finance. Accounting can be kind of elegant, it gives you tools to understand how money moves through a business. .


Accounting is boring and unimportant till you run into problems. If you look how fast S&P downgrades Boeing credit ratings, it almost looks as if some in the finance community praise you when there are no problems, but suddenly remember the balance sheet when you're in trouble. It's true, one can operate with negative equity if the cash flow is still ppositive (or you've someone to finance it), but the consequences of negative equity when it all stops can be resulting in having the cash flow problems as it can hit its ability to finance its operations. I'm not familar with the debt convenants Boeing has with its financiers, but a BBB rating can already trigger additional collateral requirements, but should it become non-investment (just 2 notches away) then it will surely trigger many negative consequences (as some companies are forbidden to invest in such companies). To be honest, despite what Boeing management has done in the past, I don't think Boeing deserves going into junk terrotiry. Then again, any company receiving a bail out is de facto insolvent and its credit score should reflect that.

BTW isn't it an idea that Boing decreases the deferred cost considerably as nobody would care if it would have a loss anyway? Or would USGAAP prevent this from happening?



I am a portfolio manager and have been involved with the Markets for 30 years now and thankfully have successfully managed through every crisis including this one in which as of Friday I was up about 10% for my clients.

If you think Boeing is full of Clown's and Monkey's you would be shocked by the lack of knowledge in my industry and how it changes definitions to further the relentless push of stock market prices. I can't remember when it changed but at one point in time your debt had to rated BBB Plus to be considered Investment Grade. In order to further Companies abilities to borrow at good rates that standard has slackened over time. A lot of it has been for buying back stock which I do think is a really bad idea - it's okay if it's from Cash Flow and not really different from doing one time special dividends. If the company really doesn't need the money from operations it should give it to its owners assuming it has a sufficient cushion for operations. How big that cushion need to be is open for debate. People prefer buybacks as they don't want to pay the tax on the Special Dividend.

Arguably what Boeing should be doing is selling stock in the market to fund its operations and support itself and its suppliers who are mostly publicly traded as well should be doing the same thing. The share prices are not at zero. If Boeing sells 20% of it's shares at this time that is probably somewhere around $15-18B - the stock price might actually go up as People would not be fearful of them going out of business. They could also probably get a loan (Banks have basically unlimited lending power right now) secured by the MAX inventory.

It should not require a handout. There are ways around it.

But then again it's one set of clowns and monkeys lobbying an even bigger set of clown's and monkey's for a handout who seem to be lower on the intelligence scale.

There was one policy response that all Governments should have done at the beginning of this crisis as it is just a moment in time and at this point it looks like it fortunately will not be fatal enough to meaningfully reduce the labour capacity of any country.

The correct policy response would have been to Guarantee or help Companies fund all payrolls worldwide (with the promise Companies would not lay anyone off or fire them) and send people home for a Holiday for 30 days to break the back of this, instead of trying to support them once they had already been fired.

In most countries if a Company has $1 in payroll expense .55-.65 goes to the employee and the rest to the Government to pay for benefits and taxes.

If the Government had simply rebated what was paid for the previous month and foregone any contributions for the current that would have almost fully funded most payrolls for the first 30 days of the crisis - if the crisis had gone beyond 30 days then a companies payroll cost would only be 55-65% of what it was before.

Now we have chaos, panic and opportunity. This will be hugely disruptive - however I do think we will get past this and the eventual loss of life hopefully not that much worse than a very bad flu season or two.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 12:38 pm

mjoelnir wrote:
The main danger of program for cost accounting is, that it makes a company look richer than it is. It counts profits not made and assets that do not exists.
When people now spend the profits not yet made, it gets dangerous.
The good cash flow excuse is just an excuse for behaving irresponsibly.

Share buy backs replaces capital owned by the shareholders, equity, with capital owned by creditors.

Share buy backs were banned and should be banned again, or at least limited to a rather small percentage of the nominal stock.


However in this case Boeing was not spending the profits they had not made yet. They invested an extra $30B in the 787 accounting block to get it going. This came from cash flow - it was not borrowed.

I think you quoted Boeing as having spent $43B in the last six years or so on share buybacks - for most of that time they were reporting lower than actual earnings as they were paying back that accounting block.

Where is the Boeing debt that they used to buy back stock? Debt has increased but that was due to the MAX crisis and building more inventory that they hope they will be able to sell at some point.
 
Sokes
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:03 pm

morrisond wrote:
However in this case Boeing was not spending the profits they had not made yet. They invested an extra $30B in the 787 accounting block to get it going. This came from cash flow - it was not borrowed.
...
Where is the Boeing debt that they used to buy back stock? Debt has increased but that was due to the MAX crisis and building more inventory that they hope they will be able to sell at some point.

Did you read my post 271?
Sokes wrote:
So yes, your definition of debt remained relatively static. However total liabilities increased from 66 to 117 billion $. I choose 2018 as all the undelivered Max inflate assets as well as liabilities.

From 2010 to 2018 liabilities increased 51 billion $.
Assets increased from 69 to 117 billion $. Assets already increased 3 billion $ less than liabilities.

p.73 of 2010 report:
"As of December 31, 2010 and 2009 commercial aircraft programs inventory included the following
amounts related to the 787 program: $9,461 and $3,885 of work in process (including deferred
production costs)"
https://s2.q4cdn.com/661678649/files/do ... report.pdf

That means in 2010 deferred production cost was at the most 9,4 billion $, actually less. I shall continue to calculate with 9 billion $ as Boeing seems unable to be more precise in a 142 page annual report.

4Q2018 deferred production cost of B787: 23 billion $.
http://www.boeing.com/investors/account ... production

So between 2010 an 2018 B787 deferred production cost increased at least 14 billion $.

So at least 14 billion $ new liabilities was used to build "deferred production cost" inventory. Add the 3 billion $ which liabilities increased over assets.
Does this answer your question "Where is the Boeing debt that they used to buy back stock?" ?
Why can't the world be a little bit more autistic?
 
mjoelnir
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:29 pm

morrisond wrote:
mjoelnir wrote:
The main danger of program for cost accounting is, that it makes a company look richer than it is. It counts profits not made and assets that do not exists.
When people now spend the profits not yet made, it gets dangerous.
The good cash flow excuse is just an excuse for behaving irresponsibly.

Share buy backs replaces capital owned by the shareholders, equity, with capital owned by creditors.

Share buy backs were banned and should be banned again, or at least limited to a rather small percentage of the nominal stock.


However in this case Boeing was not spending the profits they had not made yet. They invested an extra $30B in the 787 accounting block to get it going. This came from cash flow - it was not borrowed.

I think you quoted Boeing as having spent $43B in the last six years or so on share buybacks - for most of that time they were reporting lower than actual earnings as they were paying back that accounting block.

Where is the Boeing debt that they used to buy back stock? Debt has increased but that was due to the MAX crisis and building more inventory that they hope they will be able to sell at some point.


Boeing's liabilities increased, that is borrowing. To me it is the same if you borrow, from the banks, customers (increased prepayments), suppliers (paying late), employees pension funds or whatever. I do not play your just looking at debt game.

Boeing used equity to buy back stock. Equity that they did not have.

Liabilities in 2018 117 and in 2013 77.7 billion USD. An increase of about 40 billion USD. That is were the share buy backs come from.

I agree with Sokes, I was just looking at a different time line. The years when most of the share buy backs happened.

Boeing's huge free cash flow in those years is because they stopped paying their bills on time, to say it bluntly.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:42 pm

Sokes wrote:
morrisond wrote:
However in this case Boeing was not spending the profits they had not made yet. They invested an extra $30B in the 787 accounting block to get it going. This came from cash flow - it was not borrowed.
...
Where is the Boeing debt that they used to buy back stock? Debt has increased but that was due to the MAX crisis and building more inventory that they hope they will be able to sell at some point.

Did you read my post 271?
Sokes wrote:
So yes, your definition of debt remained relatively static. However total liabilities increased from 66 to 117 billion $. I choose 2018 as all the undelivered Max inflate assets as well as liabilities.

From 2010 to 2018 liabilities increased 51 billion $.
Assets increased from 69 to 117 billion $. Assets already increased 3 billion $ less than liabilities.

p.73 of 2010 report:
"As of December 31, 2010 and 2009 commercial aircraft programs inventory included the following
amounts related to the 787 program: $9,461 and $3,885 of work in process (including deferred
production costs)"
https://s2.q4cdn.com/661678649/files/do ... report.pdf

That means in 2010 deferred production cost was at the most 9,4 billion $, actually less. I shall continue to calculate with 9 billion $ as Boeing seems unable to be more precise in a 142 page annual report.

4Q2018 deferred production cost of B787: 23 billion $.
http://www.boeing.com/investors/account ... production

So between 2010 an 2018 B787 deferred production cost increased at least 14 billion $.

So at least 14 billion $ new liabilities was used to build "deferred production cost" inventory. Add the 3 billion $ which liabilities increased over assets.
Does this answer your question "Where is the Boeing debt that they used to buy back stock?" ?


No because 787 Deferred Production cost peaked at over $30B and is now under $20B.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 2:46 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:
The main danger of program for cost accounting is, that it makes a company look richer than it is. It counts profits not made and assets that do not exists.
When people now spend the profits not yet made, it gets dangerous.
The good cash flow excuse is just an excuse for behaving irresponsibly.

Share buy backs replaces capital owned by the shareholders, equity, with capital owned by creditors.

Share buy backs were banned and should be banned again, or at least limited to a rather small percentage of the nominal stock.


However in this case Boeing was not spending the profits they had not made yet. They invested an extra $30B in the 787 accounting block to get it going. This came from cash flow - it was not borrowed.

I think you quoted Boeing as having spent $43B in the last six years or so on share buybacks - for most of that time they were reporting lower than actual earnings as they were paying back that accounting block.

Where is the Boeing debt that they used to buy back stock? Debt has increased but that was due to the MAX crisis and building more inventory that they hope they will be able to sell at some point.


Boeing's liabilities increased, that is borrowing. To me it is the same if you borrow, from the banks, customers (increased prepayments), suppliers (paying late), employees pension funds or whatever. I do not play your just looking at debt game.

Boeing used equity to buy back stock. Equity that they did not have.

Liabilities in 2018 117 and in 2013 77.7 billion USD. An increase of about 40 billion USD. That is were the share buy backs come from.

I agree with Sokes, I was just looking at a different time line. The years when most of the share buy backs happened.

Boeing's huge free cash flow in those years is because they stopped paying their bills on time, to say it bluntly.


No it's because they booked so many orders and took in lots of deposits - you will see the same thing on Airbus's balance sheet.
 
Sokes
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 3:21 pm

morrisond wrote:

No because 787 Deferred Production cost peaked at over $30B and is now under $20B.


I was gracious with Boeing to choose 2018. I did so because no stored Max to inflate the balance sheet. That time they at least had positive equity.

I get tired. You think Boeing's balance sheet is great? Good for you. You can buy stock much cheaper now.
Good luck!
Why can't the world be a little bit more autistic?
 
TaromA380
Posts: 363
Joined: Sun Sep 11, 2005 12:35 am

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 3:45 pm

Scotron12 wrote:
Boeing has suspended dividends & share buybacks until further notice. Also Calhoun will take no pay for the rest of this year.

Wait a minute, how is it possible ? I mean does Calhoun's job terms allows it ? Or else that's an abuse.

Imagine you are an employee and the hierarchy tells you that from now on till the 31th of December you're supposed to work for free. This cannot be real.
 
User avatar
Polot
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 3:55 pm

TaromA380 wrote:
Scotron12 wrote:
Boeing has suspended dividends & share buybacks until further notice. Also Calhoun will take no pay for the rest of this year.

Wait a minute, how is it possible ? I mean does Calhoun's job terms allows it ? Or else that's an abuse.

Imagine you are an employee and the hierarchy tells you that from now on till the 31th of December you're supposed to work for free. This cannot be real.

If Calhoun does not like the terms he is free to leave-he is not required to work for free. But he is probably the one who offered to forego pay to the board.

I doubt Calhoun is personally hurting for money, even if he gets no pay from CEO job for next 9 months.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 4:02 pm

Sokes wrote:
morrisond wrote:

No because 787 Deferred Production cost peaked at over $30B and is now under $20B.


I was gracious with Boeing to choose 2018. I did so because no stored Max to inflate the balance sheet. That time they at least had positive equity.

I get tired. You think Boeing's balance sheet is great? Good for you. You can buy stock much cheaper now.
Good luck!


No - I never said it was great - you are just looking at the wrong things that have almost zero relevance in the world of finance outside a textbook.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 4:04 pm

Polot wrote:
TaromA380 wrote:
Scotron12 wrote:
Boeing has suspended dividends & share buybacks until further notice. Also Calhoun will take no pay for the rest of this year.

Wait a minute, how is it possible ? I mean does Calhoun's job terms allows it ? Or else that's an abuse.

Imagine you are an employee and the hierarchy tells you that from now on till the 31th of December you're supposed to work for free. This cannot be real.

If Calhoun does not like the terms he is free to leave-he is not required to work for free. But he is probably the one who offered to forego pay to the board.

I doubt Calhoun is personally hurting for money, even if he gets no pay from CEO job for next 9 months.



He won't be doing it for free - he probably just did the math and any options he was granted at prices when he became CEO are essentially worthless. He will take new ones probably at whatever post bailout price Boeing is trading at. He is not being altruistic.
 
TaromA380
Posts: 363
Joined: Sun Sep 11, 2005 12:35 am

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 4:16 pm

So, if Calchoun doesn't want to work for free and leaves, who else would like to replace him for free till the end of the year ?
 
LJ
Posts: 5354
Joined: Wed Nov 17, 1999 8:28 pm

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 4:50 pm

morrisond wrote:
If the company really doesn't need the money from operations it should give it to its owners assuming it has a sufficient cushion for operations. How big that cushion need to be is open for debate. People prefer buybacks as they don't want to pay the tax on the Special Dividend.


This is probably the root of the problem. Many do not have a financial cushion and the dominating assumption is/was that these cushions are a waste of money. I work for a large financial firm and one of my specialities is liquidity reporting. I know you cannot compare a financial firm to a "real company" like Boeing, but the attitide prior to the financial crisis of 2008 was probably identical to what you see with other companies and many households. Prior to 2008 liquidity and financial stability would be considered a bad thing for financial firms. After 2008 we know better. I'm not going to say that anyone should have a cushion to ensure that one can bear a mega crisis like COVID-19, but Boeings issues were there prior to COVID-19, just less. Hopefully some companies have learned, though I fear that aftfer a year of 5 people tend to forget that it can go wrong again.

morrisond wrote:
Arguably what Boeing should be doing is selling stock in the market to fund its operations and support itself and its suppliers who are mostly publicly traded as well should be doing the same thing. The share prices are not at zero. If Boeing sells 20% of it's shares at this time that is probably somewhere around $15-18B - the stock price might actually go up as People would not be fearful of them going out of business.


That woould mean that Boeing management takes an action which goes against shareholders (at least on the short term). However, one can argue what's worse, dillution or getting a bail put with conditions attached.

morrisond wrote:
They could also probably get a loan (Banks have basically unlimited lending power right now) secured by the MAX inventory.


The most important question is, how much of Boeings assets is already collateralised? Assets on a balance sheet are worthless (unless they generate cash flows) if the are either already collateralised or cannot be collateralised.

morrisond wrote:
The correct policy response would have been to Guarantee or help Companies fund all payrolls worldwide (with the promise Companies would not lay anyone off or fire them) and send people home for a Holiday for 30 days to break the back of this, instead of trying to support them once they had already been fired.


Actually that's what's hapenning in many European countries (though in a different format).

morrisond wrote:
Now we have chaos, panic and opportunity. This will be hugely disruptive - however I do think we will get past this and the eventual loss of life hopefully not that much worse than a very bad flu season or two.


It can be worse. I work for a very large financial firm and it's relatively quiet at the place where I work, someting which is totally different from the crisis in 2008 (where I saw much more panic in management).
 
User avatar
PW100
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 5:00 pm

Dmoney wrote:
Please stop saying crazy things about finance. Why are buybacks bad but dividends good in this bizzaro world? Buybacks are just a more tax efficient method of returning value to shareholders.


That position was not widely supported, even prior to the current troubles . . .

https://www.theatlantic.com/magazine/archive/2019/08/the-stock-buyback-swindle/592774/
Immigration officer: "What's the purpose of your visit to the USA?" Spotter: "Shooting airliners with my Canon!"
 
mjoelnir
Posts: 9391
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 6:39 pm

morrisond wrote:
mjoelnir wrote:
morrisond wrote:

However in this case Boeing was not spending the profits they had not made yet. They invested an extra $30B in the 787 accounting block to get it going. This came from cash flow - it was not borrowed.

I think you quoted Boeing as having spent $43B in the last six years or so on share buybacks - for most of that time they were reporting lower than actual earnings as they were paying back that accounting block.

Where is the Boeing debt that they used to buy back stock? Debt has increased but that was due to the MAX crisis and building more inventory that they hope they will be able to sell at some point.


Boeing's liabilities increased, that is borrowing. To me it is the same if you borrow, from the banks, customers (increased prepayments), suppliers (paying late), employees pension funds or whatever. I do not play your just looking at debt game.

Boeing used equity to buy back stock. Equity that they did not have.

Liabilities in 2018 117 and in 2013 77.7 billion USD. An increase of about 40 billion USD. That is were the share buy backs come from.

I agree with Sokes, I was just looking at a different time line. The years when most of the share buy backs happened.

Boeing's huge free cash flow in those years is because they stopped paying their bills on time, to say it bluntly.


No it's because they booked so many orders and took in lots of deposits - you will see the same thing on Airbus's balance sheet.


When we look at the year 2013, that I looked at for comparison, Boeing had this big backlog of 787 orders, that has shrunk by now. of course replaced by a big backlog of 737MAX.
The main prepayments are made when the time gets near to the frames being produced, not the payment with the order. So the serious money for the 737MAX orders have still to come in.

Boeing increased prepayments against better conditions. At the same time Boeing asked suppliers for longer payment delays, I assume accepting worse conditions.
Dennis Muilenburg went on a binge buying back shares and he used every available dollar for it. Prepayments and progress payments should not disappear in share buy backs, they should be used to pay suppliers.

If you do not get it what it means to go to serious negative equity, even if it is hidden by the through deferred cost inflated inventories, it is useless to discuss this further.
 
morrisond
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Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 7:56 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:

Boeing's liabilities increased, that is borrowing. To me it is the same if you borrow, from the banks, customers (increased prepayments), suppliers (paying late), employees pension funds or whatever. I do not play your just looking at debt game.

Boeing used equity to buy back stock. Equity that they did not have.

Liabilities in 2018 117 and in 2013 77.7 billion USD. An increase of about 40 billion USD. That is were the share buy backs come from.

I agree with Sokes, I was just looking at a different time line. The years when most of the share buy backs happened.

Boeing's huge free cash flow in those years is because they stopped paying their bills on time, to say it bluntly.


No it's because they booked so many orders and took in lots of deposits - you will see the same thing on Airbus's balance sheet.


When we look at the year 2013, that I looked at for comparison, Boeing had this big backlog of 787 orders, that has shrunk by now. of course replaced by a big backlog of 737MAX.
The main prepayments are made when the time gets near to the frames being produced, not the payment with the order. So the serious money for the 737MAX orders have still to come in.

Boeing increased prepayments against better conditions. At the same time Boeing asked suppliers for longer payment delays, I assume accepting worse conditions.
Dennis Muilenburg went on a binge buying back shares and he used every available dollar for it. Prepayments and progress payments should not disappear in share buy backs, they should be used to pay suppliers.

If you do not get it what it means to go to serious negative equity, even if it is hidden by the through deferred cost inflated inventories, it is useless to discuss this further.


Agreed - until you understand why negative equity is meaningless it is pointless. They were buying back stock at a price higher than what they initially sold it at. Look at the 2018 Year end the last year Pre-MAX - Treasury stock on the balance sheet keeps getting more and more negative.

It's an accounting entry it has no meaning. Boeing generated $15B from Operations in 2018 and bought back $9B in stock. They did not steal it from Customers or suppliers. They didn't need the cash.

I'm sure Airbus has the same terms with its suppliers who are more or less the same.
 
morrisond
Posts: 2774
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Sat Mar 21, 2020 7:58 pm

mjoelnir wrote:
[
The main prepayments are made when the time gets near to the frames being produced, not the payment with the order. So the serious money for the 737MAX orders have still to come in.


I thought you were arguing above that Boeings MAX inventory would not bring them that much money as the customers had basically paid for them already.

Customers stopped paying when it was grounded.
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