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User avatar
scbriml
Posts: 18522
Joined: Wed Jul 02, 2003 10:37 pm

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 3:51 pm

morrisond wrote:
Yes they would definitely be in better shape - but the others are basically implying they were a basket case walking from a financial standpoint before MAX. That is simply untrue. Could they have been better Pre-Max - sure - but they were not a basket case.


No, I wouldn't say that.

Program accounting and stock buybacks are perfectly legitimate in the financial regime under which Boeing operates. But, in the perfect storm situation in which they now find themselves, their relentless pursuit of stock price and shareholder value looks less than inspired. Hindsight being the perfect science it always is.
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.
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 4:14 pm

morrisond wrote:
mjoelnir wrote:
morrisond wrote:

This very good article seems to suggest Pre-delivery payments are only about 15-30%. https://www.clydeco.com/insight/article ... payments-1



That may be low. That article talks about pre delivery payments compared to cross prices not real prices.

quote: i.e.: the price before discounts, credits, et cetera, which always serve in effect to reduce the aircraft’s list/base/gross price to varying degrees.

If we talk about 30% of gross price and the contract price is 50 % of gross price, the bigger part of the airplane is paid before delivery.


It may be - but it's not all as you suggest above and one airline might have kept paying but I would have to guess that that didn't continue on forever.

This article from 2016 suggests it takes Boeing just 9 days to build a 737 - I can see Airlines going above 50% at the point it enters Final assembly - but not before.

https://www.wired.com/2016/09/boeing-bu ... nine-days/


All the 400 airplanes had entered final assembly.

And Boeing holds end of 2019 51 billions of advances and progress billings, that is customer money already paid to Boeing for undelivered merchandise.
Comp[are that to Airbus with a similar backlog and they call it contract liabilities 26,426 million EUR.
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 4:57 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:

That may be low. That article talks about pre delivery payments compared to cross prices not real prices.

quote: i.e.: the price before discounts, credits, et cetera, which always serve in effect to reduce the aircraft’s list/base/gross price to varying degrees.

If we talk about 30% of gross price and the contract price is 50 % of gross price, the bigger part of the airplane is paid before delivery.


It may be - but it's not all as you suggest above and one airline might have kept paying but I would have to guess that that didn't continue on forever.

This article from 2016 suggests it takes Boeing just 9 days to build a 737 - I can see Airlines going above 50% at the point it enters Final assembly - but not before.

https://www.wired.com/2016/09/boeing-bu ... nine-days/


All the 400 airplanes had entered final assembly.

And Boeing holds end of 2019 51 billions of advances and progress billings, that is customer money already paid to Boeing for undelivered merchandise.
Comp[are that to Airbus with a similar backlog and they call it contract liabilities 26,426 million EUR.


Yes - A lot of that is explained by Boeing defenses backlog and progress billings and Boeing have more widebodies on order which I believe require heftier deposits.

You seriously believe all those airlines were making payments on all those MAX's while it was grounded while Boeing was comping them on the other side for the ones that were grounded that were already in the fleet?
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 5:15 pm

Boeing is suspending Widebodies for 14 days.

https://leehamnews.com/2020/03/23/boein ... de-bodies/
 
LJ
Posts: 5069
Joined: Wed Nov 17, 1999 8:28 pm

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 5:34 pm

Grizzly410 wrote:
However, if the loan is drawn to ensure liquidity in front of disruptions caused by the coronavirus, the credit line was taken due to 737MAX production halt and was planned to be drawn anyway. So coronavirus may have accelerated the cash need but nothing more, the reason behind the loan still lies in the stock buybacks + MAX debacle.


It depends, if you're smart, you arrange facilities in good times and use it as an insurance policy. It's plausible that Boeing knew it would need all money when it decided to get a credit liine. However, it's also plausible that Boeing didn't intend to draw the complete faciltiy. AFAIK the original facility was increased due to the fact that financial institutions were eager to loan money to Boeing. If the terms of the facilty were good for both parties, it's not strange that Boeing accepted the increased facility. In some respect Boeing did a perfect timiing of setting the facility in the market. A few weeks later and Boeing would had serious problems in getting the facility (or would be getting much less favourable conditions).
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 5:43 pm

morrisond wrote:
mjoelnir wrote:
morrisond wrote:

It may be - but it's not all as you suggest above and one airline might have kept paying but I would have to guess that that didn't continue on forever.

This article from 2016 suggests it takes Boeing just 9 days to build a 737 - I can see Airlines going above 50% at the point it enters Final assembly - but not before.

https://www.wired.com/2016/09/boeing-bu ... nine-days/


All the 400 airplanes had entered final assembly.

And Boeing holds end of 2019 51 billions of advances and progress billings, that is customer money already paid to Boeing for undelivered merchandise.
Comp[are that to Airbus with a similar backlog and they call it contract liabilities 26,426 million EUR.


Yes - A lot of that is explained by Boeing defenses backlog and progress billings and Boeing have more widebodies on order which I believe require heftier deposits.

You seriously believe all those airlines were making payments on all those MAX's while it was grounded while Boeing was comping them on the other side for the ones that were grounded that were already in the fleet?


Yes, most of the airlines will not risk breach of contract, they leave that to Boeing,

Posters here constantly overvalue the defense part of the business, without looking to deep into the financial reports. Being makes it's money to a bigger part with commercial airplanes and service for them.
Even with the 737 out of the running defense managed only 34% of the revenue and was beaten by global services in gross profit.
 
Sokes
Posts: 831
Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 7:11 pm

Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331
Why can't the world be a little bit more autistic?
 
User avatar
keesje
Posts: 13693
Joined: Thu Apr 12, 2001 2:08 am

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 7:33 pm

Sokes wrote:
Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331


We are starting to sound like broken records, but Boeing clearly felt they were untoucheable, above the law / normal pratices.

The cheering markets, analysts (full of forgetfulness now), press and politicians on their sides, confirming.

https://seekingalpha.com/article/421485 ... ndervalued
https://www.reuters.com/article/us-boei ... SKBN1EY1Z6
https://www.forbes.com/sites/michaelcan ... 29a665102c
https://seekingalpha.com/article/424014 ... -from-over

Back to old school income, debt, forecasting, assets.
"Never mistake motion for action." Ernest Hemingway
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 11:30 pm

Sokes wrote:
Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331



They suspended buybacks when the MAX was grounded - that was wall done pre-grounding.

In General cutting the Dividend is a Big no-no and they would never do that unless in real dire straits and they were not until Corvid.
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Mon Mar 23, 2020 11:34 pm

keesje wrote:
Sokes wrote:
Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331


We are starting to sound like broken records, but Boeing clearly felt they were untoucheable, above the law / normal pratices.

The cheering markets, analysts (full of forgetfulness now), press and politicians on their sides, confirming.

https://seekingalpha.com/article/421485 ... ndervalued
https://www.reuters.com/article/us-boei ... SKBN1EY1Z6
https://www.forbes.com/sites/michaelcan ... 29a665102c
https://seekingalpha.com/article/424014 ... -from-over

Back to old school income, debt, forecasting, assets.



The Forbes article was interesting - they were projecting $22 Billion in Free Cash Flow per year so buying back $10B in stock or issuing it as a special dividend would not be considered extreme.

They were not borrowing money to buy back stock unlike a lot of other US companies whose debts ballooned for that reason.
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 3:06 am

morrisond wrote:
keesje wrote:
Sokes wrote:
Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331


We are starting to sound like broken records, but Boeing clearly felt they were untoucheable, above the law / normal pratices.

The cheering markets, analysts (full of forgetfulness now), press and politicians on their sides, confirming.

https://seekingalpha.com/article/421485 ... ndervalued
https://www.reuters.com/article/us-boei ... SKBN1EY1Z6
https://www.forbes.com/sites/michaelcan ... 29a665102c
https://seekingalpha.com/article/424014 ... -from-over

Back to old school income, debt, forecasting, assets.



The Forbes article was interesting - they were projecting $22 Billion in Free Cash Flow per year so buying back $10B in stock or issuing it as a special dividend would not be considered extreme.

They were not borrowing money to buy back stock unlike a lot of other US companies whose debts ballooned for that reason.


What was projected does not really matter. The borrowing and resulting cash flow is shown in the annual accounts. But some posters seem to be impervious to facts and are still confusing Boeing's use of the concept of debt with borrowing. Debt at Boeing means financial markets only. Borrowing can be done from other entities.
 
Dieuwer
Topic Author
Posts: 2065
Joined: Tue Dec 26, 2017 6:27 pm

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 3:59 pm

Delusional Calhoun sticks BOTH feet in his mouth, makes threats:

I don't have a need for an equity stake," he told Maria Bartiromo. "If they forced it, we'd just look at all the other options, and we have got plenty.


But then argues....

Calhoun also said federal aid for Boeing – the nation's largest exporter – is "anything but corporate welfare," calling it the role of government.


https://www.foxbusiness.com/markets/boe ... oronavirus

So the role of goverment is to hand money to Boeing for free with no strings attached? That's the DEFINITION OF CORPORATE WELFARE!!
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 4:19 pm

mjoelnir wrote:
morrisond wrote:
keesje wrote:

We are starting to sound like broken records, but Boeing clearly felt they were untoucheable, above the law / normal pratices.

The cheering markets, analysts (full of forgetfulness now), press and politicians on their sides, confirming.

https://seekingalpha.com/article/421485 ... ndervalued
https://www.reuters.com/article/us-boei ... SKBN1EY1Z6
https://www.forbes.com/sites/michaelcan ... 29a665102c
https://seekingalpha.com/article/424014 ... -from-over

Back to old school income, debt, forecasting, assets.



The Forbes article was interesting - they were projecting $22 Billion in Free Cash Flow per year so buying back $10B in stock or issuing it as a special dividend would not be considered extreme.

They were not borrowing money to buy back stock unlike a lot of other US companies whose debts ballooned for that reason.


What was projected does not really matter. The borrowing and resulting cash flow is shown in the annual accounts. But some posters seem to be impervious to facts and are still confusing Boeing's use of the concept of debt with borrowing. Debt at Boeing means financial markets only. Borrowing can be done from other entities.


You are not stating facts you are stating your personal opinions. They were cash flow positive going forward when the MAX production lines were shutdown.

You have not shown anything that Boeing used funds from Suppliers or from Advances to fund there Share repurchases - you can't directly link the two and there increase is totally in keeping with the growth in backlog and annual deliveries. Boeing generated way more cash from sales than they spent on repurchases.
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 4:32 pm

morrisond wrote:
Sokes wrote:
Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331



They suspended buybacks when the MAX was grounded - that was wall done pre-grounding.

In General cutting the Dividend is a Big no-no and they would never do that unless in real dire straits and they were not until Corvid.
Returning money to shareholders is great, but what separates great companies from mediocre companies is that they plan ahead seeing where business trends in key market segments are headed, plan for bad times and save some money for a rainy day. This is not something that has been happening in the world of business where companies have been driven by stock price and shareholder value ahead of anything else. Boeing went as far as borrowing money to pay a dividend, a move that was there to maintain investor confidence, it was a horrible decision.

I still believe in simple business. Make something/offer a service, sell for a profit, save some money and pay shareholders part of it. The companies that are going to come out great out of this Covid situation, and potentially a recession will be businesses that have been saving and stashing cash.
 
744SPX
Posts: 119
Joined: Mon Jan 27, 2020 6:20 pm

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 5:05 pm

Dieuwer wrote:
Delusional Calhoun sticks BOTH feet in his mouth, makes threats:

I don't have a need for an equity stake," he told Maria Bartiromo. "If they forced it, we'd just look at all the other options, and we have got plenty.


But then argues....

Calhoun also said federal aid for Boeing – the nation's largest exporter – is "anything but corporate welfare," calling it the role of government.


https://www.foxbusiness.com/markets/boe ... oronavirus

So the role of goverment is to hand money to Boeing for free with no strings attached? That's the DEFINITION OF CORPORATE WELFARE!!


Unbelievable. Calhoun sounds more delusional than Muilenburg.
 
StTim
Posts: 3620
Joined: Thu Aug 08, 2013 7:39 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 5:53 pm

744SPX wrote:
Dieuwer wrote:
Delusional Calhoun sticks BOTH feet in his mouth, makes threats:

I don't have a need for an equity stake," he told Maria Bartiromo. "If they forced it, we'd just look at all the other options, and we have got plenty.


But then argues....

Calhoun also said federal aid for Boeing – the nation's largest exporter – is "anything but corporate welfare," calling it the role of government.


https://www.foxbusiness.com/markets/boe ... oronavirus

So the role of goverment is to hand money to Boeing for free with no strings attached? That's the DEFINITION OF CORPORATE WELFARE!!


Unbelievable. Calhoun sounds more delusional than Muilenburg.


They also (like all large corporations) lobby for reductions in corporation taxes. They really do want to have their cake and eat it.

This statement from Calhoun should really mean they do not get a bail out. Arrogance beyond belief!
 
User avatar
keesje
Posts: 13693
Joined: Thu Apr 12, 2001 2:08 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 5:56 pm

744SPX wrote:
Dieuwer wrote:
Delusional Calhoun sticks BOTH feet in his mouth, makes threats:

I don't have a need for an equity stake," he told Maria Bartiromo. "If they forced it, we'd just look at all the other options, and we have got plenty.


But then argues....

Calhoun also said federal aid for Boeing – the nation's largest exporter – is "anything but corporate welfare," calling it the role of government.


https://www.foxbusiness.com/markets/boe ... oronavirus

So the role of goverment is to hand money to Boeing for free with no strings attached? That's the DEFINITION OF CORPORATE WELFARE!!


Unbelievable. Calhoun sounds more delusional than Muilenburg.


Taking hostage (jobs, defense), challenging Trump, after having mismanaged, drained a strategic
industry, that receives billions in tax cuts, R&D, government and government-government orders every year.

I assume Calhoun follows Muilenberg soon.
Last edited by keesje on Tue Mar 24, 2020 6:01 pm, edited 1 time in total.
"Never mistake motion for action." Ernest Hemingway
 
cedarjet
Posts: 8750
Joined: Mon May 24, 1999 1:12 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 5:57 pm

The Max is done. Even as recently as December, pilots who had been given runaway MCAS training flunked sim rides (according to Bloomberg). So that’s still an issue (and they were American pilots, haters). There’s going to be a massive financial depression which will not only crush demand but cratered jet fuel prices will undermine the Max’s only advantage, efficiency.
fly Saha Air 707s daily from Tehran's downtown Mehrabad to Mashhad, Kish Island and Ahwaz
 
User avatar
Phosphorus
Posts: 829
Joined: Tue May 16, 2017 11:38 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 5:58 pm

Gremlinzzzz wrote:
morrisond wrote:
Sokes wrote:
Here some quotes from 2019 annual report:
https://s2.q4cdn.com/661678649/files/do ... Report.pdf

p.38:
"Financing Activities ...
Net borrowings were $13.2 billion in 2019, $1.4 billion in 2018 and $1.1 billion in 2017.
...
During 2019 and 2018 we repurchased 6.9 million and 26.1 million shares totaling $2.7 billion and $9.0
billion through our open market share repurchase program."


p.38:
"We increased our quarterly dividend from $1.71 to $2.055 in
December 2018, which resulted in $684 million of higher dividend payments in 2019 compared with 2018."

Why not, one can always ask the taxpayer for a bailout?


p.39:
"At December 31, 2019 and 2018, our pension plans were $15.9 billion and $15.3 billion underfunded as
measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are
more than 100% funded at December 31, 2019. We do not expect to make significant contributions to our
pension plans in 2020. We may be required to make higher contributions to our pension plans in future
years."

That doesn't sound good.


p.46 about B737MAX grounding:
"We have also made significant assumptions
regarding estimated costs expected to be incurred in 2020 and 2021 that should be included in program
inventory and those costs that should be expensed when incurred as abnormal production costs.
...
The cumulative impacts of changes
to assumptions regarding timing of return to service and timing of planned production rates have increased
the estimated costs to produce aircraft included in the current accounting quantity by approximately $6.3
billion, which will be recorded in program inventory.
In addition, the suspension of 737 MAX production
and lower production rates is expected to result in approximately $4.0 billion of abnormal production costs
in 2020 and 2021 that will be expensed as incurred. The increases in the estimated costs accounted for
as program inventory will reduce 737 program and overall BCAsegment operating margins in future periods
after deliveries resume. Production costs incurred while production is suspended and a portion of production
costs incurred while we gradually increase production rates to a normal level will be expensed as incurred
as abnormal costs and will not be included in program inventory.
...
We recorded an earnings charge and corresponding liability of $6.1 billion, in the second quarter of 2019,
in connection with an estimate of potential concessions and other considerations to customers for
disruptions related to the 737 MAX grounding and associated delivery delays. The second quarter estimate
of $6.1 billion was updated in the third and fourth quarters of 2019. The remaining liability of $7.4 billion
at December 31, 2019 represents our current best estimate of future concessions and other considerations
we expect to provide to customers."

So there are abnormal production costs of 4 billion $ which will be expensed as occured. Then there are another 6.3 billion $ additional cost which will be recorded as program inventory, which is an asset, just like the B787 deferred production cost. I find it unclear what type of cost is abnormal and which is an asset.
Moreover I find it unclear what already entered the accounts and what will enter the accounts in 2020/ 2021. It sounds like the 4 billion $ + 6,3 billion $ are going to enter in the accounts later. Why not already form some provisions? I wonder why it is formulated so unclear?
Boeing already added a liability of 7,4 billion $ to compensate customers. At least this looks like conservative accounting.

p.51: Net loss 0,6 billion $
p.52: comprehensive loss (after pension plans) 1,7 billion $
p.53: equity sank from +0,4 billion $ to -8,3 billion $
1,7 billion comprehensive loss + 2,7 billion share repurchase + 4,6 billion dividends (p.54) = 9 billion $.
+0,3 billion $ came from noncontrolling interest, whatever that means.


Comprehensive loss was a surprising low 1,7 billion $. But the management extracted 7,3 billion $ through dividends and share buybacks in financial year 2019, during the MAX crisis.
Image
source: https://www.azquotes.com/quote/343331



They suspended buybacks when the MAX was grounded - that was wall done pre-grounding.

In General cutting the Dividend is a Big no-no and they would never do that unless in real dire straits and they were not until Corvid.
Returning money to shareholders is great, but what separates great companies from mediocre companies is that they plan ahead seeing where business trends in key market segments are headed, plan for bad times and save some money for a rainy day. This is not something that has been happening in the world of business where companies have been driven by stock price and shareholder value ahead of anything else. Boeing went as far as borrowing money to pay a dividend, a move that was there to maintain investor confidence, it was a horrible decision.

I still believe in simple business. Make something/offer a service, sell for a profit, save some money and pay shareholders part of it. The companies that are going to come out great out of this Covid situation, and potentially a recession will be businesses that have been saving and stashing cash.


we probably could go one step further with this. If there is a company out there, who (crystal ball, foresight, time travel, some other prescience) saw a major recession coming, and managed to shore up their balance sheet in time, create a great stash of cash to weather the storm, and possibly look for strategic opportunities? And this company is now has this stash of cash, and looks at Boeing, and sees some good parts of it, and wants to buy these. The government intervention (or even a realistic potential thereof) is actually denying this, properly managed company, of its opportunity, as Boeing sees government as a backstop. Even despite all the sins of the past -- buybacks, troubled airplane programs, etc., Too Big To Fail companies feel invulnerable, thus backstopped.
AN4 A40 L4T TU3 TU5 IL6 ILW I93 F50 F70 100 146 ARJ AT7 DH4 L10 CRJ ERJ E90 E95 DC-9 MD-8X YK4 YK2 SF3 S20 319 320 321 332 333 343 346 722 732 733 734 735 73G 738 739 744 74M 757 767 777
Ceterum autem censeo, Moscovia esse delendam
 
Scotron12
Posts: 430
Joined: Fri Mar 01, 2019 2:13 pm

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 5:59 pm

StTim wrote:
744SPX wrote:
Dieuwer wrote:
Delusional Calhoun sticks BOTH feet in his mouth, makes threats:



But then argues....



https://www.foxbusiness.com/markets/boe ... oronavirus

So the role of goverment is to hand money to Boeing for free with no strings attached? That's the DEFINITION OF CORPORATE WELFARE!!


Unbelievable. Calhoun sounds more delusional than Muilenburg.


They also (like all large corporations) lobby for reductions in corporation taxes. They really do want to have their cake and eat it.

This statement from Calhoun should really mean they do not get a bail out. Arrogance beyond belief!


It's a big "Fu*k You" to the American government. Plus he seems to be following in DMs footprint in sayjng the 737MAX RTS is just around the corner! Arrogant indeed.
 
smartplane
Posts: 1307
Joined: Fri Aug 03, 2018 9:23 pm

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 7:42 pm

morrisond wrote:
morrisond wrote:
FluidFlow wrote:

Hmm yeah I read through it and it is hard to tie the number down. It seems to be somekind of a slight overestimation.

What is the current rate for a new MAX? If we assume $50 million and a backlog of around 4500, we get $225bn. With the freighters + other wide bodies it is a bit harder but around 900 WBs at a value of around $120 million (787 and 767 a bit lower, 777X most probably way more), we have another $108bn. Then we are at around $333bn. Maybe it is a bit more, with MAX discounts due to delay maybe a bit less. Seems healthy if Boeing can keep the current orderbook.


Reading more I think the backlog includes Defense which might account for the difference.


Boeing defense Backlog $67 B last year plus whatever they signed since.

https://www.flightglobal.com/fixed-wing ... 20.article

Don't overlook that retrospective credits accumulate on every aircraft, including those already delivered from the same order (and sometimes more). Retrospective credits cannot be applied in anticipation. Retrospective credits can be applied in lieu of deposits and milestone payments, though maximum value is extracted when using for a new order. On a 10 aircraft tranche, the last 3-4 don't ultimately involve any positive cash flow for the OEM, sometimes even more if credits are being accumulated from more than one model contract, though for other reasons, this might not appear to be the case.

Post-RTS, when compensation is built in, if used to place additional orders (extracts maximum benefit), 5-7 aircraft in a 10 aircraft tranche could be funded by credits.

At some point, the Boeing board will want to (have to) 'disconnect', creating a new entity (Boeing 2020?), with none of the retrospective credit (incentives / compensation) baggage.
 
User avatar
Phosphorus
Posts: 829
Joined: Tue May 16, 2017 11:38 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 7:52 pm

smartplane wrote:
...
At some point, the Boeing board will want to (have to) 'disconnect', creating a new entity (Boeing 2020?), with none of the retrospective credit (incentives / compensation) baggage.

Actually, if indeed the Boeing company, as is, is in the negative equity situation, in many jurisdictions (apparently not in the US) it is the duty of the management to rush to the bankruptcy judge and self-report, lest they'll be liable for trading while insolvent.
It would make sense to file a pre-pack, with MAX a standalone company -- probably "legacy Boeing" and the "sin-eater". Rest of the business sold to strategic and/or financial investors (BCA and BDS maybe separately).
Then disconnect would be complete.
AN4 A40 L4T TU3 TU5 IL6 ILW I93 F50 F70 100 146 ARJ AT7 DH4 L10 CRJ ERJ E90 E95 DC-9 MD-8X YK4 YK2 SF3 S20 319 320 321 332 333 343 346 722 732 733 734 735 73G 738 739 744 74M 757 767 777
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LJ
Posts: 5069
Joined: Wed Nov 17, 1999 8:28 pm

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 8:30 pm

smartplane wrote:
At some point, the Boeing board will want to (have to) 'disconnect', creating a new entity (Boeing 2020?), with none of the retrospective credit (incentives / compensation) baggage.


Thus you mean that the customers will loose their compensation? If so, I wonder how the airlines will react should this happen. I doubt they will be pleased.
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Tue Mar 24, 2020 10:43 pm

Phosphorus wrote:
Gremlinzzzz wrote:
morrisond wrote:


They suspended buybacks when the MAX was grounded - that was wall done pre-grounding.

In General cutting the Dividend is a Big no-no and they would never do that unless in real dire straits and they were not until Corvid.
Returning money to shareholders is great, but what separates great companies from mediocre companies is that they plan ahead seeing where business trends in key market segments are headed, plan for bad times and save some money for a rainy day. This is not something that has been happening in the world of business where companies have been driven by stock price and shareholder value ahead of anything else. Boeing went as far as borrowing money to pay a dividend, a move that was there to maintain investor confidence, it was a horrible decision.

I still believe in simple business. Make something/offer a service, sell for a profit, save some money and pay shareholders part of it. The companies that are going to come out great out of this Covid situation, and potentially a recession will be businesses that have been saving and stashing cash.


we probably could go one step further with this. If there is a company out there, who (crystal ball, foresight, time travel, some other prescience) saw a major recession coming, and managed to shore up their balance sheet in time, create a great stash of cash to weather the storm, and possibly look for strategic opportunities? And this company is now has this stash of cash, and looks at Boeing, and sees some good parts of it, and wants to buy these. The government intervention (or even a realistic potential thereof) is actually denying this, properly managed company, of its opportunity, as Boeing sees government as a backstop. Even despite all the sins of the past -- buybacks, troubled airplane programs, etc., Too Big To Fail companies feel invulnerable, thus backstopped.
It was not hard to see that there was going to be a recession even before Covid 19. The worldwide economy was already slowing down despite central bank intervention worldwide. All these were legacy issues that stem from 2008 where failing companies should have been allowed to fail and economies allowed to reallocate cash in meaningful ways as happens in every economic meltdown. We have had more risk, more leverage.........no foresight needed to see that this was where we would have eventually ended up.
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 2:24 am

Gremlinzzzz wrote:
Phosphorus wrote:
Gremlinzzzz wrote:
Returning money to shareholders is great, but what separates great companies from mediocre companies is that they plan ahead seeing where business trends in key market segments are headed, plan for bad times and save some money for a rainy day. This is not something that has been happening in the world of business where companies have been driven by stock price and shareholder value ahead of anything else. Boeing went as far as borrowing money to pay a dividend, a move that was there to maintain investor confidence, it was a horrible decision.

I still believe in simple business. Make something/offer a service, sell for a profit, save some money and pay shareholders part of it. The companies that are going to come out great out of this Covid situation, and potentially a recession will be businesses that have been saving and stashing cash.


we probably could go one step further with this. If there is a company out there, who (crystal ball, foresight, time travel, some other prescience) saw a major recession coming, and managed to shore up their balance sheet in time, create a great stash of cash to weather the storm, and possibly look for strategic opportunities? And this company is now has this stash of cash, and looks at Boeing, and sees some good parts of it, and wants to buy these. The government intervention (or even a realistic potential thereof) is actually denying this, properly managed company, of its opportunity, as Boeing sees government as a backstop. Even despite all the sins of the past -- buybacks, troubled airplane programs, etc., Too Big To Fail companies feel invulnerable, thus backstopped.
It was not hard to see that there was going to be a recession even before Covid 19. The worldwide economy was already slowing down despite central bank intervention worldwide. All these were legacy issues that stem from 2008 where failing companies should have been allowed to fail and economies allowed to reallocate cash in meaningful ways as happens in every economic meltdown. We have had more risk, more leverage.........no foresight needed to see that this was where we would have eventually ended up.


Great post and I totally agree - we papered over the problems of 2008/2009 with more debt - never a great solution.

The only good thing is that all Governments are in the same boat. At some point we will have to write off all the world's debt and start from scratch. If they all do it at the same time - currencies should remain relatively stable to each other - and who is going to say no if everyone does it? The Martians? Money is just a construct - it's not real.

Forgive everyones debt's and and clamp down hard on new lending so inflation doesn't become a big problem.

Otherwise if we don't do the above we are headed towards Massive deflation and Negative interest rates everywhere for most Governments. Either presently or after a short post Covid recovery due to all the stimulus.
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 3:43 am

morrisond wrote:
Gremlinzzzz wrote:
Phosphorus wrote:

we probably could go one step further with this. If there is a company out there, who (crystal ball, foresight, time travel, some other prescience) saw a major recession coming, and managed to shore up their balance sheet in time, create a great stash of cash to weather the storm, and possibly look for strategic opportunities? And this company is now has this stash of cash, and looks at Boeing, and sees some good parts of it, and wants to buy these. The government intervention (or even a realistic potential thereof) is actually denying this, properly managed company, of its opportunity, as Boeing sees government as a backstop. Even despite all the sins of the past -- buybacks, troubled airplane programs, etc., Too Big To Fail companies feel invulnerable, thus backstopped.
It was not hard to see that there was going to be a recession even before Covid 19. The worldwide economy was already slowing down despite central bank intervention worldwide. All these were legacy issues that stem from 2008 where failing companies should have been allowed to fail and economies allowed to reallocate cash in meaningful ways as happens in every economic meltdown. We have had more risk, more leverage.........no foresight needed to see that this was where we would have eventually ended up.


Great post and I totally agree - we papered over the problems of 2008/2009 with more debt - never a great solution.

The only good thing is that all Governments are in the same boat. At some point we will have to write off all the world's debt and start from scratch. If they all do it at the same time - currencies should remain relatively stable to each other - and who is going to say no if everyone does it? The Martians? Money is just a construct - it's not real.

Forgive everyones debt's and and clamp down hard on new lending so inflation doesn't become a big problem.

Otherwise if we don't do the above we are headed towards Massive deflation and Negative interest rates everywhere for most Governments. Either presently or after a short post Covid recovery due to all the stimulus.
This is not the way it is going to happen. Nations that are owed money expect that they will see a return. Citizens, and pension funds that have invested in bonds need to be paid i.e. there always is a cost to money.

We will see some deflation, but that will be followed by inflation and hyperinflation; at current that inflation is in housing and the stock market, but when it hits main street, you will have issues. In the short to medium term, the dollar will strengthen because there is a lot of dollar denominated debt, but in the longer term, it will be nothing. As the Fed continues to print money and expands its balance sheet, so too will the dollar continue to lose value and it is only a matter of time before nations lose trust in it. You would then see massive inflation in the USA, and the only way to stop that is an increase in interest rates.

We will have a change in system and I think it will be going back to gold backed currencies; same thing that Nixon got out of because he was defaulting on commitments. For companies like Boeing, that would be one of the worst things that could happen because defense spending will go down, and the cost to borrow longer term will go up.
 
Sokes
Posts: 831
Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 6:42 am

morrisond wrote:
At some point we will have to write off all the world's debt and start from scratch. ...and who is going to say no if everyone does it? The Martians? Money is just a construct - it's not real.

Can you tell me where you park your car? I want to steal it.
Who should complain? The Martians?
Your car is just a construct-it's not real.

morrisond wrote:
Forgive everyones debt's and and clamp down hard on new lending so inflation doesn't become a big problem.
Otherwise if we don't do the above we are headed towards Massive deflation and Negative interest rates everywhere for most Governments. Either presently or after a short post Covid recovery due to all the stimulus.


Believers in strong money usually oppose deficit spending as well as low interests. Reagan is an interesting character in this respect.
IIRC when Ronald Reagan became President, he increased interest. The economy contracted for some time, but afterwards the stagflation was defeated.
At the same time Reagan's deficit spending was a nightmare for believers in strong money.

The reason why interest rates are not increased is that it would lead to a huge redistribution of wealth. Many companies won't be able to pay higher interest.
Specially those who gamble at financial markets will be screwed. Those are important donors to political parties.

Maybe Reagan had figured it out. Maybe one can only increase interests for a significant amount if at the same time there is huge demand from government side.
Why can't the world be a little bit more autistic?
 
Sokes
Posts: 831
Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 7:14 am

Gremlinzzzz wrote:
... Citizens, and pension funds that have invested in bonds need to be paid i.e. there always is a cost to money.

One can always change to unfunded system:
"Pension arrangements provided by the state in most countries in the world are unfunded, with benefits paid directly from current workers' contributions and taxes. This method of financing is known as pay-as-you-go.[13] The social security systems of many European countries are unfunded,[14] having benefits paid directly out of current taxes and social security contributions, although several countries have hybrid systems which are partially funded. Spain set up the Social Security Reserve Fund and France set up the Pensions Reserve Fund; in Canada the wage-based retirement plan (CPP) is partially funded, with assets managed by the CPP Investment Board while the U.S. Social Security system is partially funded by investment in special U.S. Treasury Bonds.

In a funded plan, contributions from the employer, and sometimes also from plan members, are invested in a fund towards meeting the benefits. All plans must be funded in some way, even if they are pay-as-you-go, so this type of plan is more accurately known as pre-funded. The future returns on the investments, and the future benefits to be paid, are not known in advance, so there is no guarantee that a given level of contributions will be enough to meet the benefits."
https://en.wikipedia.org/wiki/Pension#Funding

I believe the American obsession with the stock market because of pensions make the laborers above 40 years of age traitors of their class.
I'm just guessing the 40 year cut off.

Gremlinzzzz wrote:
...
We will see some deflation, but that will be followed by inflation and hyperinflation; at current that inflation is in housing and the stock market...

Inflation statistics do not include price increases in properties. Is this because those who designed the statistic were unaware that people have to live somewhere or was it kept out as ample money supply for quite some time only inflates asset prices like houses in San Francisco, India or Boeing stock?
It is only once investors realize that evaluations in assets don't fit economic reality that large scale inflation starts.

Gremlinzzzz wrote:
...
We will have a change in system and I think it will be going back to gold backed currencies; same thing that Nixon got out of because he was defaulting on commitments. ...

Suppose world economy in a given year increases 3%. How to get 3% more gold? Suppose it's technological possible, but it requires a higher price of gold. Deflate all currencies by 10%?

Another reason against gold standard:
Suppose a certain industry looses 1% per year competitiveness against foreign manufacturers. If inflation is 3%, those workers can still get a 2% salary increase.
Without inflation, one would have to cut salaries by 1% per year. Unions won't agree.

Milton Friedman suggested an increase of money supply by a fixed percentage. He preferred 2%, but said even up to 5%/ year is o.k. That money is simply created on a government bank account. Banks could only give out money which they have as deposits or as equity. Interest rates would be decided by the market, not the government.
I believe Friedman was wrong about 2% for the reason I wrote above. Moreover the political left prefers higher increase of money supply. So 5% is a good compromise, gives the government funds and has a reasonable level of inflation.

The problem with this system is that governments can't bail out political donors with gambling losses.
Why can't the world be a little bit more autistic?
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 8:06 am

Sokes wrote:
Gremlinzzzz wrote:
... Citizens, and pension funds that have invested in bonds need to be paid i.e. there always is a cost to money.

One can always change to unfunded system:
"Pension arrangements provided by the state in most countries in the world are unfunded, with benefits paid directly from current workers' contributions and taxes. This method of financing is known as pay-as-you-go.[13] The social security systems of many European countries are unfunded,[14] having benefits paid directly out of current taxes and social security contributions, although several countries have hybrid systems which are partially funded. Spain set up the Social Security Reserve Fund and France set up the Pensions Reserve Fund; in Canada the wage-based retirement plan (CPP) is partially funded, with assets managed by the CPP Investment Board while the U.S. Social Security system is partially funded by investment in special U.S. Treasury Bonds.

In a funded plan, contributions from the employer, and sometimes also from plan members, are invested in a fund towards meeting the benefits. All plans must be funded in some way, even if they are pay-as-you-go, so this type of plan is more accurately known as pre-funded. The future returns on the investments, and the future benefits to be paid, are not known in advance, so there is no guarantee that a given level of contributions will be enough to meet the benefits."
https://en.wikipedia.org/wiki/Pension#Funding

I believe the American obsession with the stock market because of pensions make the laborers above 40 years of age traitors of their class.
I'm just guessing the 40 year cut off.

Gremlinzzzz wrote:
...
We will see some deflation, but that will be followed by inflation and hyperinflation; at current that inflation is in housing and the stock market...

Inflation statistics do not include price increases in properties. Is this because those who designed the statistic were unaware that people have to live somewhere or was it kept out as ample money supply for quite some time only inflates asset prices like houses in San Francisco, India or Boeing stock?
It is only once investors realize that evaluations in assets don't fit economic reality that large scale inflation starts.

Gremlinzzzz wrote:
...
We will have a change in system and I think it will be going back to gold backed currencies; same thing that Nixon got out of because he was defaulting on commitments. ...

Suppose world economy in a given year increases 3%. How to get 3% more gold? Suppose it's technological possible, but it requires a higher price of gold. Deflate all currencies by 10%?

Another reason against gold standard:
Suppose a certain industry looses 1% per year competitiveness against foreign manufacturers. If inflation is 3%, those workers can still get a 2% salary increase.
Without inflation, one would have to cut salaries by 1% per year. Unions won't agree.

Milton Friedman suggested an increase of money supply by a fixed percentage. He preferred 2%, but said even up to 5%/ year is o.k. That money is simply created on a government bank account. Banks could only give out money which they have as deposits or as equity. Interest rates would be decided by the market, not the government.
I believe Friedman was wrong about 2% for the reason I wrote above. Moreover the political left prefers higher increase of money supply. So 5% is a good compromise, gives the government funds and has a reasonable level of inflation.

The problem with this system is that governments can't bail out political donors with gambling losses.
Technology and commerce have a way of trying to bring down the cost of doing business and cost to manufacture, and in a system where everything works well, deflation is the natural tendency.

So who really needs inflation? It is governments because inflation is a hidden tax, and in an interest rate environment where real interest rates are lower than inflation, the biggest borrowers also benefit because in nominal terms they are paying less over time. Who does not want to pay less for food, or healthcare? Are we not paying less and less over time for what is more capable tech compared to what we had two decades ago?

All of this comes to a stop when the dollar starts plummeting (and it is a matter or when rather than if) and at that time, the US government will have no other option than to increase interest rates to find buyers for bonds. It will be sovereign debt crisis that will be followed by stagflation. The opposite that could happen is that they keep printing, and the dollar value is decimated. This would be great for borrowers, but the USA would have a currency that no one wants in exchange for goods and services, so how does that work for a country that has huge trade imbalances? Everything they have done thus far is to inject liquidity at any signal that interest rates may be going up, and if this is a prolonged crisis, where do they get takers for bonds going forward?
It is so easy to forget that money is supposed to be a store of value where you can save that which you have spent on labor or services today, to spend tomorrow. Inflation kills that value, and poor interest returns mean that people should not save, hence no money kept aside for bad times. Those pension funds that are supposed to get a set return, wont meet their obligations either when stocks are cratering.

The easiest thing to do would be to let businesses that are not healthy to fail. Allow for money to be redistributed to sectors of the economy that have better yields rather than gambling we see in the stock market. Allow money to be borrowed at market rate that reflects risk instead of having them so low that any reckless company can borrow for short term wins as opposed to planning for long term, sustainable, profitable venture. Try and apply this to aviation and you will see a lot of this easy money has been a driving factor in the mushrooming and rapid expansion of airlines that cannot survive even mild turbulence. How many do you see now asking for government bailouts? Asking mainly governments that have no money to do the one thing that they have always done, conjure up money from thin air and try and sustain what should have been a business that ought to have the foresight to save money for tough times, reduce debt during the 'boom' years.

Gold/Silver have been used in trade for a long time, and when you consider the old age, they have been used for over 5000 years. What we have had since the 70's when Nixon got off the gold standard is a pure fiat currency system where paper backed with nothing of value is seen as a store of wealth.
 
User avatar
keesje
Posts: 13693
Joined: Thu Apr 12, 2001 2:08 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 8:52 am

A generation was brainwashed to forget what grandma told them about debts and saving for tough times.

They believed the analysts, advisers, goeroe's didn't have their own agenda's.

Don't worry about McNerney & Muilenberg, they are ok.

Translating loans & subisies into stock value / salary while everyone took a Beauty Sleep.

Short term capitalism won and did we make money, wow.

Now we need to be bailed out by Xi Jinping?
"Never mistake motion for action." Ernest Hemingway
 
Sokes
Posts: 831
Joined: Sat Mar 09, 2019 4:48 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 11:09 am

Gremlinzzzz wrote:
Technology and commerce have a way of trying to bring down the cost of doing business and cost to manufacture, and in a system where everything works well, deflation is the natural tendency.

So who really needs inflation? It is governments because inflation is a hidden tax, and in an interest rate environment where real interest rates are lower than inflation, the biggest borrowers also benefit because in nominal terms they are paying less over time. Who does not want to pay less for food, or healthcare? Are we not paying less and less over time for what is more capable tech compared to what we had two decades ago?

I answered in my last post why a small inflation, let's say 2-3%, is necessary.
If you need one more reason: During times of deflation people tend to delay purchases. While frugal living may be good for an individual, it's a nightmare for the economy.

Gremlinzzzz wrote:
...
It is so easy to forget that money is supposed to be a store of value where you can save that which you have spent on labor or services today, to spend tomorrow. Inflation kills that value, and poor interest returns mean that people should not save, hence no money kept aside for bad times. ...

Isn't it normal that a storage looses value? Storing food is out of question. What about value storage in a house? That also needs maintenance. One can argue that fields don't loose value. Are you interested in ploughing fields? Gold doesn't change. But is it useful? Copper may be a nice value storage.

If basic needs are not satisfied people are willing to pay high real interest, e.g. if there is not enough housing. I believe that capitalism satisfies needs and once these are met I see no reason why interest rate after inflation shouldn't be slightly negative. On the other side cheap interest rate leads to stupid investments like another car factory when there already is excess manufacturing capacity in the world. So what to do?
I believe in markets. The interest rate should be decided by the market and not by some politician who wants to bail out his donor friends.
You may focus on the word "believe". I don't think this was tried. I have no evidence to support this believe. In other words: I believe it should be tried.

IIRC no government ever paid back all it's debt. Debt is inherent unstable. Those who save may have a salary above their consumption needs and moreover two flats to rent out. The guy who rents the flat buys his car on credit. The more debt the second person takes, the less his free income. For how many years can that work?
https://en.wikipedia.org/wiki/Jubilee_(biblical)

Gremlinzzzz wrote:
The easiest thing to do would be to let businesses that are not healthy to fail. Allow for money to be redistributed to sectors of the economy that have better yields rather than gambling we see in the stock market.

I believe you speak of redistribution of the means of production. I agree with you. I believe the movie "Wall Street" with Michael Douglas was about redistribution of means of production including land. The movie showed only the perspective of the laborer who looses his job in the transaction. That on this underutilized land better jobs or housing is created was not shown in the movie.
Well, people love to get upset about things instead of seeing the good that comes out of change.
The Hindus have an own god for it, Shiva the destroyer.

Gremlinzzzz wrote:
... How many do you see now asking for government bailouts? Asking mainly governments that have no money to do the one thing that they have always done, conjure up money from thin air and try and sustain what should have been a business that ought to have the foresight to save money for tough times, reduce debt during the 'boom' years.

It's not businesses' task to reduce debt. It's the businesses' task to invest. And I don't speak of share buybacks.
But basically we agree. Boeing should have used cash flow to pay for losses from the early B787s. At the same time they should have taken new credits for MOM or a new narrowbody. Actually in Boeing's case you are right. Engine makers are too busy to attend to Boeing for a new design. So Boeing should have reduced liabilities to have a strong balance sheet once the engine makers can attend.

Gremlinzzzz wrote:
Gold/Silver have been used in trade for a long time, and when you consider the old age, they have been used for over 5000 years. What we have had since the 70's when Nixon got off the gold standard is a pure fiat currency system where paper backed with nothing of value is seen as a store of wealth.

What was the rate of growth in these 5000 years? Old is gold or gold is old?
Why can't the world be a little bit more autistic?
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 11:50 am

morrisond wrote:
mjoelnir wrote:
morrisond wrote:


The Forbes article was interesting - they were projecting $22 Billion in Free Cash Flow per year so buying back $10B in stock or issuing it as a special dividend would not be considered extreme.

They were not borrowing money to buy back stock unlike a lot of other US companies whose debts ballooned for that reason.


What was projected does not really matter. The borrowing and resulting cash flow is shown in the annual accounts. But some posters seem to be impervious to facts and are still confusing Boeing's use of the concept of debt with borrowing. Debt at Boeing means financial markets only. Borrowing can be done from other entities.


You are not stating facts you are stating your personal opinions. They were cash flow positive going forward when the MAX production lines were shutdown.

You have not shown anything that Boeing used funds from Suppliers or from Advances to fund there Share repurchases - you can't directly link the two and there increase is totally in keeping with the growth in backlog and annual deliveries. Boeing generated way more cash from sales than they spent on repurchases.


Cash flow positive going forward is not a reality, at it's best it is a prediction. You are confusing a prediction with the reality.

I can not do anything about you just making declarations without backing it up by numbers out of the financial reports.

Between 2013 and 2019 accounts payable and Advances and billings in excess of related costs increased by together by 35 billion USD. That is cash flowing into the company and accounted for in the cash flow statement.
Just tell me, where did that cash go? Investments? Developments? White tails? Or share buy backs.

Dividends paid is an outflow of cash. Share buy backs is an outflow of cash.

Net earnings is the cash produced in a company. To lazy to calculate the deferred cost out. In million USD:

2013 net earnings 4,585, stock bought back (2,801), dividends payed (1,467) = 317
2014 net earnings 5,446, stock bought back (6,001), dividends payed (2,115) = (2,670)
2015 net earnings 5,176, stock bought back (6,751), dividends payed (2,490) = (4065)
2016 net earnings 4,895, stock bought back (7,001), dividends payed (2,756) = (4,862)
2017 net earnings 8,458, stock bought back (9,236), dividends payed (3,417) = (4,195) Restated net earnings up from 8,197
2018 net earnings 10,460, stock bought back (9,000) , dividends payed (3,946) = (2,486)
2019 net earnings (636), stock bought back (2,651), dividends payed (4,630) = (7,917)

Over the years 2013 to 2019 dividends paid and share buy backs produced an outflow of 25.878 million USD cash over and above net earnings.
If that cash was not provided by borrowing and there I include customers and suppliers, where does the cash come from?

Cash from operation includes changes in accounts payable and advances and billings in excess of related costs, so it includes borrowing.
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 2:06 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:

What was projected does not really matter. The borrowing and resulting cash flow is shown in the annual accounts. But some posters seem to be impervious to facts and are still confusing Boeing's use of the concept of debt with borrowing. Debt at Boeing means financial markets only. Borrowing can be done from other entities.


You are not stating facts you are stating your personal opinions. They were cash flow positive going forward when the MAX production lines were shutdown.

You have not shown anything that Boeing used funds from Suppliers or from Advances to fund there Share repurchases - you can't directly link the two and there increase is totally in keeping with the growth in backlog and annual deliveries. Boeing generated way more cash from sales than they spent on repurchases.


Cash flow positive going forward is not a reality, at it's best it is a prediction. You are confusing a prediction with the reality.

I can not do anything about you just making declarations without backing it up by numbers out of the financial reports.

Between 2013 and 2019 accounts payable and Advances and billings in excess of related costs increased by together by 35 billion USD. That is cash flowing into the company and accounted for in the cash flow statement.
Just tell me, where did that cash go? Investments? Developments? White tails? Or share buy backs.

Dividends paid is an outflow of cash. Share buy backs is an outflow of cash.

Net earnings is the cash produced in a company. To lazy to calculate the deferred cost out. In million USD:

2013 net earnings 4,585, stock bought back (2,801), dividends payed (1,467) = 317
2014 net earnings 5,446, stock bought back (6,001), dividends payed (2,115) = (2,670)
2015 net earnings 5,176, stock bought back (6,751), dividends payed (2,490) = (4065)
2016 net earnings 4,895, stock bought back (7,001), dividends payed (2,756) = (4,862)
2017 net earnings 8,458, stock bought back (9,236), dividends payed (3,417) = (4,195) Restated net earnings up from 8,197
2018 net earnings 10,460, stock bought back (9,000) , dividends payed (3,946) = (2,486)
2019 net earnings (636), stock bought back (2,651), dividends payed (4,630) = (7,917)

Over the years 2013 to 2019 dividends paid and share buy backs produced an outflow of 25.878 million USD cash over and above net earnings.
If that cash was not provided by borrowing and there I include customers and suppliers, where does the cash come from?

Cash from operation includes changes in accounts payable and advances and billings in excess of related costs, so it includes borrowing.


And if Net Earnings were anywhere associated with the reality of what a Company actually makes in this day and age and not a highly manipulated number then your analysis would make more sense.

The market long ago (rightly or wrongly - and I would agree with you - mostly wrongly) stopped looking at Net Earnings and started focusing on cash flow as the Net Number is more a concept than a fixed reality.

Numbers can be manipulated to show whatever you want and get whatever outcome you want.

In terms of Cash flow - various estimates place Boeing's cash savings at $1-1.3 Billion per month with MAX production stoppage - while still supporting their suppliers and Airline customers.

They burned $2.7B in free cash flow in the last quarter of 2019.

https://investors.boeing.com/investors/ ... fault.aspx

https://www.reuters.com/article/us-boei ... SKBN1YL0HS

That is how I got to Positive Cash flow going forward.

With Covid - I don't think a lot of there Airline customers will have a leg to stand on for delay compensation anymore as they probably really don't want those frames to RTS as they don't need the capacity and with where Fuel is - less costly to run old ones.

However the only real thing that matters this morning is that it looks like Boeing will restart MAX production on May 6. They would not do that unless they had assurance that it would be cleared to RTS again. The US needs the jobs and needs the MAX line to restart. I don't think it's going to be nearly as good as pre-Covid but it will be a restart and you can see Governments supporting deliveries with loan guarantees.

I have no idea if it will make it into the final version of the Bill winding it's way through the Senate - but it sounds like the DEM's are going to force Airlines to replace older Dirtier from an emissions standpoint airplanes.

The stock price is up 40-50% from it's bottom and looks like it will open at about $150 per share (currently over $140 as I started typing this reply before the markets opened up).

They may not need a bailout - just some loan guarantees - which there biggest competitor implicitly gets due to who owns it shares.

When MAX starts delivering again we can see what happens with cash flow and figure out how much of those frames have already been paid for.

I'll make a prediction that in the 12 months following MAX delivery restart - Boeing's cash flow will be quite large assuming there customers can finance their frames.
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 3:18 pm

Sokes wrote:
Gremlinzzzz wrote:
Technology and commerce have a way of trying to bring down the cost of doing business and cost to manufacture, and in a system where everything works well, deflation is the natural tendency.

So who really needs inflation? It is governments because inflation is a hidden tax, and in an interest rate environment where real interest rates are lower than inflation, the biggest borrowers also benefit because in nominal terms they are paying less over time. Who does not want to pay less for food, or healthcare? Are we not paying less and less over time for what is more capable tech compared to what we had two decades ago?

I answered in my last post why a small inflation, let's say 2-3%, is necessary.
If you need one more reason: During times of deflation people tend to delay purchases. While frugal living may be good for an individual, it's a nightmare for the economy.

Gremlinzzzz wrote:
...
It is so easy to forget that money is supposed to be a store of value where you can save that which you have spent on labor or services today, to spend tomorrow. Inflation kills that value, and poor interest returns mean that people should not save, hence no money kept aside for bad times. ...

Isn't it normal that a storage looses value? Storing food is out of question. What about value storage in a house? That also needs maintenance. One can argue that fields don't loose value. Are you interested in ploughing fields? Gold doesn't change. But is it useful? Copper may be a nice value storage.

If basic needs are not satisfied people are willing to pay high real interest, e.g. if there is not enough housing. I believe that capitalism satisfies needs and once these are met I see no reason why interest rate after inflation shouldn't be slightly negative. On the other side cheap interest rate leads to stupid investments like another car factory when there already is excess manufacturing capacity in the world. So what to do?
I believe in markets. The interest rate should be decided by the market and not by some politician who wants to bail out his donor friends.
You may focus on the word "believe". I don't think this was tried. I have no evidence to support this believe. In other words: I believe it should be tried.

IIRC no government ever paid back all it's debt. Debt is inherent unstable. Those who save may have a salary above their consumption needs and moreover two flats to rent out. The guy who rents the flat buys his car on credit. The more debt the second person takes, the less his free income. For how many years can that work?
https://en.wikipedia.org/wiki/Jubilee_(biblical)

Gremlinzzzz wrote:
The easiest thing to do would be to let businesses that are not healthy to fail. Allow for money to be redistributed to sectors of the economy that have better yields rather than gambling we see in the stock market.

I believe you speak of redistribution of the means of production. I agree with you. I believe the movie "Wall Street" with Michael Douglas was about redistribution of means of production including land. The movie showed only the perspective of the laborer who looses his job in the transaction. That on this underutilized land better jobs or housing is created was not shown in the movie.
Well, people love to get upset about things instead of seeing the good that comes out of change.
The Hindus have an own god for it, Shiva the destroyer.

Gremlinzzzz wrote:
... How many do you see now asking for government bailouts? Asking mainly governments that have no money to do the one thing that they have always done, conjure up money from thin air and try and sustain what should have been a business that ought to have the foresight to save money for tough times, reduce debt during the 'boom' years.

It's not businesses' task to reduce debt. It's the businesses' task to invest. And I don't speak of share buybacks.
But basically we agree. Boeing should have used cash flow to pay for losses from the early B787s. At the same time they should have taken new credits for MOM or a new narrowbody. Actually in Boeing's case you are right. Engine makers are too busy to attend to Boeing for a new design. So Boeing should have reduced liabilities to have a strong balance sheet once the engine makers can attend.

Gremlinzzzz wrote:
Gold/Silver have been used in trade for a long time, and when you consider the old age, they have been used for over 5000 years. What we have had since the 70's when Nixon got off the gold standard is a pure fiat currency system where paper backed with nothing of value is seen as a store of wealth.

What was the rate of growth in these 5000 years? Old is gold or gold is old?

1. It is wrong to think that deflation is something that makes people delay purchases. Look at air travel as an example; first came deregulation, and this is something that forced airlines to compete on price. lower prices allowed for more people to travel. Then came increased engine reliability that allowed two engine jets to fly over the Atlantic and the Pacific, the savings which were happily passed down to passengers, and then you have the ever increasing engine efficiency and the advent of the low cost carriers. In tech, more and more affordable phones are hitting the market and they can do most of what people desire i.e. communicate via text, call, mail, and various entertainment related tasks, cost of internet is down so as to attract mass market acceptance. Today, people are paying less than they did for a lot when you consider where inflation adjusted statistics.

It is all because tech has made everything easier, and improvements to AI and robotics are only going to drive costs lower, and prices lower in a world where margins on a lot of commodities are razor thin. This is everywhere. In Nepal, there is a doctor that has reduced the price of making consumables such that it is far cheaper for him to offer eye surgery. This is something he could have never done, and on his own, but his investment allows him to offer a service to some of the poorest in the world. Deflation is the natural tendency, and deflation is good for all consumers.

2. Government interest rates always need to be higher than inflation rate. There is a cost to borrowing that involves the calculation of what inflation is, the risk attached to loaning the money to any party, and a premium that should make it worth the time. That is simple economics on how banking works.

3. The expansion of gold has been an almost constant 2%. People that do not like honest economics, and those that would print colored paper to acquire things of far greater value are the only ones that have issue with it, the ones that make a lot of money in the absence of an asset based currency system.
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 3:26 pm

morrisond wrote:
mjoelnir wrote:
morrisond wrote:

You are not stating facts you are stating your personal opinions. They were cash flow positive going forward when the MAX production lines were shutdown.

You have not shown anything that Boeing used funds from Suppliers or from Advances to fund there Share repurchases - you can't directly link the two and there increase is totally in keeping with the growth in backlog and annual deliveries. Boeing generated way more cash from sales than they spent on repurchases.


Cash flow positive going forward is not a reality, at it's best it is a prediction. You are confusing a prediction with the reality.

I can not do anything about you just making declarations without backing it up by numbers out of the financial reports.

Between 2013 and 2019 accounts payable and Advances and billings in excess of related costs increased by together by 35 billion USD. That is cash flowing into the company and accounted for in the cash flow statement.
Just tell me, where did that cash go? Investments? Developments? White tails? Or share buy backs.

Dividends paid is an outflow of cash. Share buy backs is an outflow of cash.

Net earnings is the cash produced in a company. To lazy to calculate the deferred cost out. In million USD:

2013 net earnings 4,585, stock bought back (2,801), dividends payed (1,467) = 317
2014 net earnings 5,446, stock bought back (6,001), dividends payed (2,115) = (2,670)
2015 net earnings 5,176, stock bought back (6,751), dividends payed (2,490) = (4065)
2016 net earnings 4,895, stock bought back (7,001), dividends payed (2,756) = (4,862)
2017 net earnings 8,458, stock bought back (9,236), dividends payed (3,417) = (4,195) Restated net earnings up from 8,197
2018 net earnings 10,460, stock bought back (9,000) , dividends payed (3,946) = (2,486)
2019 net earnings (636), stock bought back (2,651), dividends payed (4,630) = (7,917)

Over the years 2013 to 2019 dividends paid and share buy backs produced an outflow of 25.878 million USD cash over and above net earnings.
If that cash was not provided by borrowing and there I include customers and suppliers, where does the cash come from?

Cash from operation includes changes in accounts payable and advances and billings in excess of related costs, so it includes borrowing.


And if Net Earnings were anywhere associated with the reality of what a Company actually makes in this day and age and not a highly manipulated number then your analysis would make more sense.

The market long ago (rightly or wrongly - and I would agree with you - mostly wrongly) stopped looking at Net Earnings and started focusing on cash flow as the Net Number is more a concept than a fixed reality.

Numbers can be manipulated to show whatever you want and get whatever outcome you want.

In terms of Cash flow - various estimates place Boeing's cash savings at $1-1.3 Billion per month with MAX production stoppage - while still supporting their suppliers and Airline customers.

They burned $2.7B in free cash flow in the last quarter of 2019.

https://investors.boeing.com/investors/ ... fault.aspx

https://www.reuters.com/article/us-boei ... SKBN1YL0HS

That is how I got to Positive Cash flow going forward.

With Covid - I don't think a lot of there Airline customers will have a leg to stand on for delay compensation anymore as they probably really don't want those frames to RTS as they don't need the capacity and with where Fuel is - less costly to run old ones.

However the only real thing that matters this morning is that it looks like Boeing will restart MAX production on May 6. They would not do that unless they had assurance that it would be cleared to RTS again. The US needs the jobs and needs the MAX line to restart. I don't think it's going to be nearly as good as pre-Covid but it will be a restart and you can see Governments supporting deliveries with loan guarantees.

I have no idea if it will make it into the final version of the Bill winding it's way through the Senate - but it sounds like the DEM's are going to force Airlines to replace older Dirtier from an emissions standpoint airplanes.

The stock price is up 40-50% from it's bottom and looks like it will open at about $150 per share (currently over $140 as I started typing this reply before the markets opened up).

They may not need a bailout - just some loan guarantees - which there biggest competitor implicitly gets due to who owns it shares.

When MAX starts delivering again we can see what happens with cash flow and figure out how much of those frames have already been paid for.

I'll make a prediction that in the 12 months following MAX delivery restart - Boeing's cash flow will be quite large assuming there customers can finance their frames.


Yes I know that net earnings are inflated at Boeing, that makes the case worse. That is why USA companies balked at taking up IFRS, the ability to show inflated profits would be removed.

Yes I know that the markets do not look at net earnings and they do not even look at cash flow, they look at free cash flow.

Free cash flow is an indication how much it is possible to squeeze out of a corporation in the short term. The markets are not interested in the long term survival or health of a company. Capex, development cost most things that are needed for a long term survival lower free cash flow.

You can not see the problem with letting year after year more cash flow out of a company than is made. When a healthy equity goes negative during those years.

I asked you to tell me where the cash comes from, that is so easily burned at Boeing, it would be best with some numbers. But you are not able to do it without realising that Boeing burned borrowed money. So you will not answer.
Last edited by mjoelnir on Wed Mar 25, 2020 3:39 pm, edited 1 time in total.
 
Newark727
Posts: 1642
Joined: Tue Dec 29, 2009 6:42 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 3:27 pm

Gremlinzzzz wrote:
3. The expansion of gold has been an almost constant 2%. People that do not like honest economics, and those that would print colored paper to acquire things of far greater value are the only ones that have issue with it, the ones that make a lot of money in the absence of an asset based currency system.


It seems to me that this category includes nearly every economics expert who isn't on Ron Paul's mailing list...
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 3:40 pm

mjoelnir wrote:
morrisond wrote:
mjoelnir wrote:

Cash flow positive going forward is not a reality, at it's best it is a prediction. You are confusing a prediction with the reality.

I can not do anything about you just making declarations without backing it up by numbers out of the financial reports.

Between 2013 and 2019 accounts payable and Advances and billings in excess of related costs increased by together by 35 billion USD. That is cash flowing into the company and accounted for in the cash flow statement.
Just tell me, where did that cash go? Investments? Developments? White tails? Or share buy backs.

Dividends paid is an outflow of cash. Share buy backs is an outflow of cash.

Net earnings is the cash produced in a company. To lazy to calculate the deferred cost out. In million USD:

2013 net earnings 4,585, stock bought back (2,801), dividends payed (1,467) = 317
2014 net earnings 5,446, stock bought back (6,001), dividends payed (2,115) = (2,670)
2015 net earnings 5,176, stock bought back (6,751), dividends payed (2,490) = (4065)
2016 net earnings 4,895, stock bought back (7,001), dividends payed (2,756) = (4,862)
2017 net earnings 8,458, stock bought back (9,236), dividends payed (3,417) = (4,195) Restated net earnings up from 8,197
2018 net earnings 10,460, stock bought back (9,000) , dividends payed (3,946) = (2,486)
2019 net earnings (636), stock bought back (2,651), dividends payed (4,630) = (7,917)

Over the years 2013 to 2019 dividends paid and share buy backs produced an outflow of 25.878 million USD cash over and above net earnings.
If that cash was not provided by borrowing and there I include customers and suppliers, where does the cash come from?

Cash from operation includes changes in accounts payable and advances and billings in excess of related costs, so it includes borrowing.


And if Net Earnings were anywhere associated with the reality of what a Company actually makes in this day and age and not a highly manipulated number then your analysis would make more sense.

The market long ago (rightly or wrongly - and I would agree with you - mostly wrongly) stopped looking at Net Earnings and started focusing on cash flow as the Net Number is more a concept than a fixed reality.

Numbers can be manipulated to show whatever you want and get whatever outcome you want.

In terms of Cash flow - various estimates place Boeing's cash savings at $1-1.3 Billion per month with MAX production stoppage - while still supporting their suppliers and Airline customers.

They burned $2.7B in free cash flow in the last quarter of 2019.

https://investors.boeing.com/investors/ ... fault.aspx

https://www.reuters.com/article/us-boei ... SKBN1YL0HS

That is how I got to Positive Cash flow going forward.

With Covid - I don't think a lot of there Airline customers will have a leg to stand on for delay compensation anymore as they probably really don't want those frames to RTS as they don't need the capacity and with where Fuel is - less costly to run old ones.

However the only real thing that matters this morning is that it looks like Boeing will restart MAX production on May 6. They would not do that unless they had assurance that it would be cleared to RTS again. The US needs the jobs and needs the MAX line to restart. I don't think it's going to be nearly as good as pre-Covid but it will be a restart and you can see Governments supporting deliveries with loan guarantees.

I have no idea if it will make it into the final version of the Bill winding it's way through the Senate - but it sounds like the DEM's are going to force Airlines to replace older Dirtier from an emissions standpoint airplanes.

The stock price is up 40-50% from it's bottom and looks like it will open at about $150 per share (currently over $140 as I started typing this reply before the markets opened up).

They may not need a bailout - just some loan guarantees - which there biggest competitor implicitly gets due to who owns it shares.

When MAX starts delivering again we can see what happens with cash flow and figure out how much of those frames have already been paid for.

I'll make a prediction that in the 12 months following MAX delivery restart - Boeing's cash flow will be quite large assuming there customers can finance their frames.


Yes I know that net earnings are inflated at Boeing, that makes the case worse.


They were at the beginning of 787 production but the last few years understated - which basically nets out. It depends on what year to what year you are looking at.

Are you Ignoring that it looks like Cash Flow would have been positive going forward with the stoppage in MAX production?
 
frmrCapCadet
Posts: 3703
Joined: Thu May 29, 2008 8:24 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 3:42 pm

“If they force it, we just look at all the other options, and we’ve got plenty of them,” Calhoun said. This I got from Washington Post I believe, but widely reported.

If Boeing has plenty of other options why not take him at his word, and allow him to use one of those options. Also support workers and suppliers why may be impacted. Also prepare for Boeing to go bankrupt and engineer an appropriate buyer.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 4:29 pm

Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 4:35 pm

morrisond wrote:
Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.

It would be poor form. They bought some of those shares at a steep premium. Selling them now for less is a poir business move with interest rates qhere they are.
 
Scotron12
Posts: 430
Joined: Fri Mar 01, 2019 2:13 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 4:42 pm

frmrCapCadet wrote:
“If they force it, we just look at all the other options, and we’ve got plenty of them,” Calhoun said. This I got from Washington Post I believe, but widely reported.

If Boeing has plenty of other options why not take him at his word, and allow him to use one of those options. Also support workers and suppliers why may be impacted. Also prepare for Boeing to go bankrupt and engineer an appropriate buyer.


Well said! Let Calhoun put his money where his mouth is. To me he is an arrogant SOB..which mirrors the whole Boeing leadership.

It's like Boeing is giving the whole USA the middle finger!
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 4:57 pm

Gremlinzzzz wrote:
morrisond wrote:
Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.

It would be poor form. They bought some of those shares at a steep premium. Selling them now for less is a poir business move with interest rates qhere they are.


Sure with Government Guarantees on that debt why not - just borrow more - more debt fixes all things....
 
planecane
Posts: 1504
Joined: Thu Feb 09, 2017 4:58 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 4:58 pm

morrisond wrote:
Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.


I wish I would have bought some stock when it was around $100. My wife wouldn't let me because she is mad at them over the MAX issue.
 
Gremlinzzzz
Posts: 19
Joined: Fri Jan 24, 2020 4:28 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 5:25 pm

morrisond wrote:
Gremlinzzzz wrote:
morrisond wrote:
Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.

It would be poor form. They bought some of those shares at a steep premium. Selling them now for less is a poir business move with interest rates qhere they are.


Sure with Government Guarantees on that debt why not - just borrow more - more debt fixes all things....
What matters is margins. The US government has no choice but to keep interest rates down. If anything, they have shown that that is what they will try and do until they have no more wiggle room.

In such an environment, it makes sense to borrow rather than sell shares that you bought back at a premium, and hope that you can get out of that debt before shit hits the fan.
 
morrisond
Posts: 2495
Joined: Thu Jan 07, 2010 12:22 am

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 5:43 pm

planecane wrote:
morrisond wrote:
Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.


I wish I would have bought some stock when it was around $100. My wife wouldn't let me because she is mad at them over the MAX issue.


Don't worry too much - I suspect that we have not seen the bottom. Although we might have seen the bottom on Monday - this is most likely a Wave 4 ABC relief rally - if it is Wave 5 Down is about to happen where the market could go back to 1,800-1,900 on the S&P 500 to where it was in 2015 and Boeing a lot lower than before.

We are still probably 2 weeks away from peak fear due to loss of life. The jobless claims tomorrow morning will be atrocious. It will just be a function of how many claims State Unemployment Offices were able to process - it could easily by 5 million + in initial jobless claims tomorrow which would trigger the next wave down. In reality it's probably more like 8-10 million. Economists are only predicting 1,000,000.

In Canada where we have about 1/10 of the population of the states we had 1,000,000 layoffs this week and it will be worse next week.

Boeing traded at about $80 per share in 2013 - that seems like a potentially good low. Just a guess - but I say at least 50/50 you get a chance to buy it a lot lower than today.
 
planecane
Posts: 1504
Joined: Thu Feb 09, 2017 4:58 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 5:47 pm

morrisond wrote:
planecane wrote:
morrisond wrote:
Boeing is trading at $165ish right now - if they sold back some of the shares they bought back from the market previously right now they could easily raise $10-15 Billion.

There has been $8B in trading in Boeing just today.


I wish I would have bought some stock when it was around $100. My wife wouldn't let me because she is mad at them over the MAX issue.


Don't worry too much - I suspect that we have not seen the bottom. Although we might have seen the bottom on Monday - this is most likely a Wave 4 ABC relief rally - if it is Wave 5 Down is about to happen where the market could go back to 1,800-1,900 on the S&P 500 to where it was in 2015 and Boeing a lot lower than before.

We are still probably 2 weeks away from peak fear due to loss of life. The jobless claims tomorrow morning will be atrocious. It will just be a function of how many claims State Unemployment Offices were able to process - it could easily by 5 million + in initial jobless claims tomorrow which would trigger the next wave down. In reality it's probably more like 8-10 million. Economists are only predicting 1,000,000.

In Canada where we have about 1/10 of the population of the states we had 1,000,000 layoffs this week and it will be worse next week.

Boeing traded at about $80 per share in 2013 - that seems like a potentially good low. Just a guess - but I say at least 50/50 you get a chance to buy it a lot lower than today.


Agree. I would have sold today and taken a 33% profit!
 
Northpole
Posts: 75
Joined: Wed Oct 10, 2018 7:55 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 6:05 pm

Well it seems they just got some 17 Bilion dollars from the US taxpayers
 
744SPX
Posts: 119
Joined: Mon Jan 27, 2020 6:20 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 6:10 pm

Northpole wrote:
Well it seems they just got some 17 Bilion dollars from the US taxpayers


Unbelievable.
Just waiting (and hoping) for some massive MAX order cancellations. No way is production going to restart by May. That's just Boeing blowing smoke to further manipulate their stock value so some people can make some quick money and recover their losses.
 
SteinarN
Posts: 171
Joined: Mon Dec 29, 2014 1:26 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 6:44 pm

Northpole wrote:
Well it seems they just got some 17 Bilion dollars from the US taxpayers


Do you have a link?
 
Northpole
Posts: 75
Joined: Wed Oct 10, 2018 7:55 pm

Re: Boeing Financial Discussion 2020

Wed Mar 25, 2020 6:51 pm

SteinarN wrote:
Northpole wrote:
Well it seems they just got some 17 Bilion dollars from the US taxpayers


Do you have a link?


It is a Swedish Business Magazine called " Dagens Industri " which quotes an article in todays Washington Post... in short it says something like : 2.000 Billion Us dollars to " industries related to the Nations safety " > of which some 17 Billion Us dollars are aimed direct at / to Boeing. So I assume the article in todays Washington Post could bring some light ...
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