The devastated commercial aircraft and satellite markets continue to batter Chicago-based Boeing Co., which said yesterday that it will take $1.18 billion in pre-tax charges for the first quarter.
Boeing said the charges will reduce net earnings by roughly $1.23 a share. Analysts have estimated the aviation giant would earn 42 cents a share in the quarter before charges, according to Thomson First Call.
About $931 million of the charges will be attributable to goodwill, or the amount of money Boeing now believes it overpaid for some assets considering the severe market conditions.
Nearly two-thirds of the goodwill impairment, or $590 million, came from acquisitions made in Boeing's satellite and rocket business. The rest was from acquisitions in its commercial aircraft unit.
Boeing took a roughly $2.4 billion pretax charge attributable to goodwill for similar reasons in the first quarter of 2002, when a new accounting rule first required such asset valuations.
The company will take another $251 million in pretax charges in the first quarter to strengthen reserves and revalue assets largely in its finance company, Boeing Capital Corp. It is the third quarter in a row that the unit - which leases and makes loans primarily to Boeing customers - has been hit with non-cash charges.
Several of Boeing Capital's customers, including bankrupt UAL Corp., the owner of United Airlines, are under intense financial pressure that required Boeing to either reduce its lease rates or write off the value of some airplanes.
Boeing remains committed to its finance business, said spokesman Russ Young. "It's a good business, but it's a really tough time. Airplanes continue to be good assets because you measure their life in decades, they're highly mobile and they have extra protection under U.S. bankruptcy laws," he said.
Analysts were not surprised by the sizable charge at Boeing, which earned $492 million last year and plans to release its first-quarter 2003 results April 23.
The announcement came after the markets closed yesterday with Boeing down 39 cents to $27.09 a share.
"I don't think any of this is really going to spook investors," said Peter Arment, an aerospace analyst at JSA Research Inc.
News of the charges came as Boeing hit another snag in its $17 billion plan to lease 100 of its 767 jets to the U.S. Air Force as refueling tankers because Defense Secretary Donald H. Rumsfeld now is seeking information on buying some of the planes, sources said yesterday.
Boeing and the Air Force have been hoping for months to get final clearance to proceed with the unique leasing agreement, which also would give the Air Force the option of buying the jets for $4 billion at the end of the lease.
Melissa Allison is a reporter for the Chicago Tribune, a Tribune Publishing newspaper. Wire services contributed to this article.