Boeing Expected to Post Net Loss for 1st Quarter

Boeing Co. said Thursday that its first-quarter net earnings would be reduced by $994 million, or $1.23 a share, mainly because of an accounting charge to reflect the sharply declining value of companies it acquired in the last seven years.

As a result, analysts expect the Chicago-based aerospace and defense giant to post a net loss for the first quarter. Earlier estimates were that Boeing would earn about 42 cents a share. Boeing expects to report the first-quarter results April 23.

Boeing made the announcement after stock markets closed. During regular trading Thursday, Boeing’s shares fell 39 cents to $27.09 on the New York Stock Exchange. In after-hours trading, its shares slipped to $26.49.

Analysts said investors may not react too strongly to the news, since Boeing took a similar, though much larger, charge last year because of accounting rule changes. Boeing said the latest charge does “not affect business operations.”

In the first quarter last year, Boeing took a $1.8-billion charge to write down changes in the value of goodwill, or the premium paid on top of the value of assets of companies it acquired. As a result, Boeing posted a loss of $1.25 billion, or $1.54 a share.

The company said $835 million of the first-quarter 2003 charge would reflect a continuing drop in the value of Boeing’s stock, which was used to acquire various companies, including Rockwell International, McDonald Douglas and the satellite unit of Hughes Electronics in El Segundo.

Battered by a slump in sales of commercial aircraft and satellites, Boeing shares have dropped almost 40% since the Sept. 11 terrorist attacks.

Under new accounting rules, companies must reassess any potential effect on the value of goodwill each year. For Boeing, the review date would have been April 1, but it was moved up to January because of a reorganization of its defense business.

In addition to the write-down of goodwill, Boeing said the $994-million charge against earnings would include $159 million, or 20 cents a share, to boost reserves in its financing unit. With the slump in air travel, airlines have been taking aircraft financed by the unit out of service, reducing their value. At the same time, Boeing has had to reduce lease rates on operating aircraft.

Last year, the airline industry lost about $11 billion, and several airlines filed for bankruptcy protection as orders for commercial aircraft slowed dramatically.

Although the commercial aircraft business continues to struggle, Boeing’s cash flow, a critical barometer of its health, has remained strong, thanks to the company’s defense unit, analysts said.

“It’s related to the new goodwill accounting rules, so it’s not a large worry,” said Craig Fraser, analyst with Fitch Ratings Ltd. “But we still want to find if there is any underlying problem.”

According to a Thomson First Call survey of 17 analysts, Boeing was expected to post earnings of 35 to 53 cents a share in the first quarter, with a consensus average of 42 cents.