Stephen Rosenman

A Plea for Better Balance (Sheets)

The lack of solid equity in companies is widespread. I chose M, BA, and VZ for the discussion. They are not unusual. Even "stalwarts" like IBM have negative tangible equity. What is worrisome is that many of these mature companies have deepening tangible equity holes. For example, VZ has dropped from a negative $13 billion to a negative $59 billion in a little over 2 years. It seems prudent to me that mature large companies would build their equity: cash, stock, property, factories. I have no problem with "paying up" for an acquisition. Once accomplished the acquirer should turn its attention to turning new business into real equity. Too often, companies merely to keep acquiring with total disregard of their balance sheets. You or I would be cut off. These companies instead are rewarded with renewed credit lines.

Boeing's Bad Balance Sheet May Doom It

To ba-fact-checker: Pension fund assets, net did go from $5.9 billion to almost zero. See their earnings release. This is, indeed, the amount that is overfunded as you know. BA has relied on its pension fund overfunding as an asset. It no longer can. Instead its pension fund liability grew as noted in the article. Again, as noted, the balance sheet has deteriorated greatly from a number of perspectives. Investors need to look at the loss in net assets in BA's balance sheet in order to determine how likely the company will thrive in today's difficult economic environment.

Boeing's Bad Balance Sheet May Doom It

Tatertot: Tangible equity for 2004 was $8.5 billion, 2005 dropped to $8.2 billion, 2006 went to zero, 2007 $2.7 billion. Now we are at minus $6.8 billion. That's a 5 year trend, almost a $4 billion dollar a year loss in tangible equity on average a year. The trend is worrisome.
Opa-opa: This is a discussion about the balance sheet. However, looking at the above drops in tangible equity, it seems clear that BA has not been able to use its sales to keep its balance sheet in order.

Boeing's Bad Balance Sheet May Doom It

To lbrtkng:

www.google.com/search?...

The balance sheet pension asset or liability is equal to the difference between pension assets and the actuary’s estimate of pension liability plus or minus the unrecognized (unamortized) portions of past and prior service costs, actuarial/experience gains or losses.

In other words, pension assets - liabilities are apples to apples.

Boeing's Bad Balance Sheet May Doom It

To lbrtkng: Per SEC 10K, BA has incurred an $8.4 billion pension liability, largely owing to over a $7 billion loss (read sour investments). Its pension overfunding has disappeared, a $5.9 billion gone. Therefore, the apples, oranges, together become one big tomato of a $13 billion + drop in equity.
Where are those acquisitions on the balance sheet? More goodwill, intangibles, and plants.
As to 2 points, the market usually compares year over year earnings. This is a comparison to year over year equity, its breakdown into components of the asset and balance sheet.

Boeing's Bad Balance Sheet May Doom It

Opa-opa: "Doom" title was chosen by Seeking Alpha, not me.
The future for BA is dimmer in great part because it has lost a vast amount of its assets. For those of us who have followed this company, it's pretty sad. Back, in 2005, tangible equity was $8.5 billion.
Now it's in the hole $6.8 billion. That's $15.3 billion in damages in 4 years! Who else could wreck so much equity and prosper?
As to the future? Negative free cash flow, currency issues. higher salaries and health costs (from strike), customers walking or renegotiating contracts after BA's failure to deliver, decreased air travel, quality issues with fasteners, likely more 787 delays, pension plan pressure, all should create more than their share of problems for BA.

Boeing's Bad Balance Sheet May Doom It

tatertot: I wanted to dramatize the collapse of BA's assets in one year. The market totally ignored the balance sheet. It will take a herculean effort to repair the balance sheet. Also the investing public ignored the looming problem BA faces with its new pension plan problems: pension plan assets went from $5.9 billion positive to a $8.4 billion liability. Someone needs to fire the guy in charge of the pension plan.

Note above remark is a swing of $13 billion in the pension plan.

Boeing's Bad Balance Sheet May Doom It

Tatertot: I wanted to dramatize the collapse of BA's assets in one year. The market totally ignored the balance sheet. It will take a herculean effort to repair the balance sheet. Also the investing public ignored the looming problem BA faces with its new pension plan problems: pension plan assets went from $5.9 billion to a $8.4 billion liability. Someone needs to fire the guy in charge of the pension plan.

Boeing: Intrinsically Undervalued

problems start with your assumptions: revenue (order cancellations in a worsening global economy) and EBITDA (BA has given up substantial wage concessions that will hit their margins).

Time to Buy Airline Stocks?

Think one should look at PCP which has had steady profits, revenues, and improving (fabulous) margins.l Keeps putting out great numbers, goes up, and then gets dumped with everything connected to aerospace. A steal at current stock price.