Boeing's Bad Balance Sheet May Doom It

Feb.11.09 | About: The Boeing (BA)

Much has been written about Boeing's murky future. Will its customers cancel orders? Will the 787 ever be delivered? What new production snafu will happen next? However, little has been mentioned about its crumbling balance sheet.

In two previous articles, I wrote about Boeing's weakening financials (Boeing Can't Afford Another Strike and Boeing Headed The Way Of GM?) and predicted a miserable Q4. Boeing did not disappoint. Its balance sheet saw tremendous asset destruction this quarter. Below are a series of graphs depicting the blow-up.

Cash and cash equivalents were more than halved from Q4 2007 to Q4 2008. (See graph Cash and cash equivalents)

Short term investments went from $2.3 billion to practically zero. (See graph Short Term Investments).

Pension plan assets tumbled from $5.9 billion to nothing. (See graph Pension Plan Assets).

In the meantime, inventory climbed from $9.6 to $15.6 billion on the halt in commercial plane production. (See graph Inventory).

...while goodwill and other intangibles rose from $5.2 to $6.3 billion (not much to hold onto). (See graph Goodwill and Other Intangibles).

The liability side grew. Pension plan liabilities soared from $1.2 to $8.4 billion. Ouch! (See graph Pension Plan Liabilities).

All in all, tangible equity dropped from $2.7 to a minus $6.8 billion, a sad $9.5 billion loss. (See graph Tangible Equity).

Boeing goes into 2009 with a weak balance sheet. It needed its cash, investments, and pension plan assets, all victims of strikes, production misteps, and a falling stock market. Those cushions are now gone. It faces a large $7 billion debt.

Moreover, it now faces a whole new problem in the form of an $8.4 billion pension liability that dwarfs its debt. So far this year, Boeing has lost $9.5 billion in tangible equity. That's not how you want to enter one of the most trying times in our nation's economic history.

Disclosure: Short BA