KUALA LUMPUR, July 23 (Bernama) -- American airplane and defense firm, Boeing's second-quarter earnings per share increased 22 percent to US$1.41 per share, as revenues rose one percent to US$17.2 billion, driven by growth in defense programs and strong performance in defense and commercial airplanes.

Year-ago results included a US$0.22 per share charge on the Airborne Early Warning & Control (AEW&C) program, it said in a statement from Chiacago, United States on Wednesday.

It said revenues for the first six months of 2009 rose two percent to US$33.7 billion, while earnings for the first half declined to US$2.27 per share, including a $0.38 first-quarter impact from reductions to future twin-aisle production rates and delivery price escalation forecasts.

Earnings guidance for 2009 remains unchanged between US$4.70 and US$5.00 per share, it said.

According to Boeing, the 787 program is currently assessing schedule and financial implications from the previously announced requirement to reinforce an area within the side-of-body joint.

The company also expects to issue a new 787 schedule during the third quarter, at which time earnings guidance will be reevaluated.

"Our continued focus on productivity improvements and disciplined cash management drove solid overall results for the quarter," said Boeing Chairman, President and Chief Executive Officer Jim McNerney.

"While market and development program execution challenges remain with us, we are doing what's necessary to emerge from the current economic environment as a stronger company that's better positioned to grow and improve its financial performance over time," he said.

Boeing's quarterly operating cash flow was $1.0 billion, which includes continued investment in development programs and lower advances from commercial airplane orders.

For the first half of 2009, operating cash flow was US$1.2 billion, while free cash flow was US$0.7 billion in the quarter and US$0.5 billion in the first half.

It said total company backlog at quarter-end was US$328 billion, down three percent in the quarter, as the value of deliveries exceeded net orders during the period.

Cash and investments in marketable securities totaled US$5.0 billion at quarter-end, up six percent from the end of the first quarter.

While debt declined modestly due to maturities of Boeing Capital Corporation debt, the company did not acquire any of its shares in the second quarter.

Going by segments, the Boeing Commercial Airplanes (BCA) second-quarter revenues decreased two percent to US$8.4 billion on slightly lower airplane deliveries and lower volume in services.

Operating earnings increased five percent and margins rose to 9.7 percent due to lower research and development expense partially offset by the lower services volume.

For the first half of 2009, revenues rose to US$17.0 billion on increased airplane deliveries, partially offset by lower volume in services.

Operating earnings fell by 30 percent to US$1.2 billion while margins contracted to 7.3 percent, driven by the first-quarter charge on the 747 program related to pending reduction in twin-aisle production rates and unfavorable delivery price escalation forecasts.

Boeing said BCA booked 57 gross orders during the quarter while 52 others were removed from its order book.

Contractual backlog was US$257 billion, more than seven times BCA's expected 2009 revenues, it said.

It noted that the 787 program has identified a technical solution to the previously announced requirement to reinforce an area within the side-of-body joint, and is currently evaluating alternative ways to implement that solution.

The company expects to complete its assessment of the schedule and financial implications during the third quarter. Recent milestones include completion of gauntlet and low-speed taxi tests on the first flight test aircraft.

It also recently announced its agreement to acquire Vought's South Carolina facility which supports the 787 program.

Included in gross inventory for the company is approximately US$7.9 billion of 787 work-in-process inventory, cash advances made to suppliers and tooling costs.

The program had new orders for 13 airplanes during the quarter and cancelled orders for 41 others, with total firm orders are now 850 airplanes from 56 customers.

Meanwhile, Boeing Integrated Defense Systems (IDS) second-quarter revenues rose nine percent to US$8.7 billion, as the operating margins of 10.1 percent reflect strong performance across all defense segments.

For the first half of 2009, IDS revenues increased by six percent to US$16.4 billion and earnings increased six percent, bringing operating margins to 9.7 percent.

Boeing Military Aircraft second-quarter revenue rose three percent to US$3.4 billion and operating margin was 11.7 percent, reflecting higher rotorcraft volume and strong execution across its programs.

The year-ago quarter included a charge on the AEW&C program, it said.

During the quarter, the P-8A had its first flight, the KC-767 tanker achieved initial operational capability in Japan, and the Apache Block III manned aircraft demonstrated control of an unmanned aircraft system.

On June 24, the Fiscal Year 2009 Supplemental Defense Spending bill was signed, authorizing funding for an additional eight C-17s for the U.S. Air Force.

Network & Space Systems second-quarter revenues increased 11 percent primarily driven by growth in the Space and Intelligence Systems business.

Operating margin was 7.7 percent reflecting strong performance across the segment's array of programs, partially offset by a previously announced $35 million charge related to the Se! a Launch bankruptcy filing.

During the quarter, key flight milestones were achieved on Directed Energy programs as the Airborne Laser tracking system engaged an accelerating target and the Advanced Tactical Laser fired a high power laser successfully hitting a ground target.

Also, the Joint Tactical Radio Station Ground Mobile Radio network demonstrated its scalability in a fielded environment.

Global Services & Support (GS&S) revenues increased 17 percent on higher volume across its broad portfolio of services and logistics products.

During the quarter, GS&S continued to generate double-digit operating margins of 11.2 percent.

In this segment, the company was awarded contracts for unmanned Intelligence Surveillance Reconnaissance services, an armored-vehicle recovery system, and B-52 sustainment, modernization and upgrades.

IDS' backlog is US$70.0 billion, more than two times expected 2009 revenues. New orders during the quarter included Chinooks for an international customer, A-10 sustainment and modernization, and multiple support and proprietary contracts.

On another note, Boeing Capital Corporation (BCC) reported second-quarter pre-tax earnings of US$36 million compared to US$45 million in the same period last year due to higher reserves and impairments.

During the quarter, BCC's portfolio balance rose to US$6.3 billion (up from US$6.0 billion at the end of the first quarter) on US$429 million in new aircraft financings and other volume, partially offset by normal portfolio run-off through customer payments and depreciation.

BCC contributed $10 million in cash dividends to the company during the quarter and its debt-to-equity ratio was unchanged at 5.0-to-1.

Boeing asid the 'Other' segment consists primarily of Boeing Engineering, Operations and Technology, as well as certain results related to the consolidation of all business units.

Other segment expense was US$46 million in the second quarter, reduced from US$135 million of expense in the same period last year which included US$82 million for increased aircraft financing reserves that were recorded at the consolidated level.

Unallocated expense was US$154 million, up from US$77 million in the same quarter last year driven by higher deferred compensation and share-based plans expenses, partially offset by lower unallocated pension expense.

Boeing said total pension expense for the quarter was US$207 million, as compared to US$216 million in the same period last year.

A total of US$229 million was recognized in the operating segments in the quarter (up from US$140 million in the same period last year), partially offset by a US$22 million contribution to earnings in unallocated items, it said.

On the company's outlook, Boeing said the 2009 financial guidance continues to reflect a challenging market environment as well as company plans to reduce discretionary spending and restructure various internal organizations to improve productivity.

The company said it will reevaluate financial guidance upon completion of the 787 schedule assessment, and expects to issue 2010 financial guidance later in the year.

Boeing's 2009 revenue guidance is reaffirmed at US$68 billion to US$69 billion, and earnings-per-share guidance for 2009 remains at US$4.70 to US$5.00 per share.

Operating cash flow is still expected to be greater than US$2.5 billion, including discretionary pension contributions of approximately US$0.5 billion and an assumption of US$1 billion for new commercial airplane financings.

Commercial Airplanes' 2009 delivery guidance remains at between 480 and 485 airplanes and is sold out.

BCA's 2009 revenue is unchanged at between US$34 billion and US$35 billion, and operating margin remains at between 8 percent and 8.5 percent.

IDS guidance for 2009 remains unchanged with revenue between US$33 billion and US$34 billion and operating margins of approximately 10 percent.

Boeing Capital Corporation continues to expect that the aircraft finance portfolio will increase modestly as the amount of new aircraft financing in 2009 will exceed normal portfolio runoff due to customer payments and depreciation.

Boeing's 2009 research and development forecast is between US$3.6 billion and US$3.8 billion.

The firm said 2009 capital expenditures are expected to be approximately US$1.4 billion and its non-cash pension expense is expected to be approximately US $0.9 billion in 2009.

-- BERNAMA