Boeing’s Space Earnings Boosted by Commercial Satellite, NASA Revenue

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PARIS — Boeing Network and Space Systems on July 24 reported higher revenue and operating profit in the first six months of 2013, saying increased commercial satellite and NASA Space Launch System revenue more than compensated for a dip in sales of Delta rockets through United Launch Alliance.

In a filing with the U.S. Securities and Exchange Commission (SEC), parent company Boeing of Chicago also said it remains confident that it will recover at least part of the $112 million it is owed by bankrupt satellite wireless broadband operator LightSquared of the United States.

Boeing has built two large L-band mobile communications satellites for LightSquared. One is in orbit. Delivery of the second was been suspended with LightSquared’s Chapter 11 bankruptcy proceedings, which began in mid-2012. 

Dish Network of Englewood, Colo., has proposed to purchase LightSquared for some $2.2 billion. Depending on how regulators at the U.S. Federal Communications Commission react to a future LightSquared business plan, the company’s new owners may view the second satellite as an important asset.

Boeing said the second LightSquared satellite is all but assembled but remains in Boeing’s possession.

Boeing does not break out its space businesses in its financial reporting. Most of the space activity is inside the Network and Space Systems division, which reported a 4.6 percent increase in revenue, to $4.01 billion, for the six months ending June 30.

Operating profit for the division was 7.3 percent of revenue, up from 6.4 percent for the same period last year.

The increases were “principally attributable to higher revenue of $256 million in our commercial satellite programs, and higher revenues of $192 million on the Space Launch System,” whose contract was awarded in late 2012, Boeing said in its SEC filing.

Boeing’s 702 satellite product line has found success in the commercial market, winning orders from the Mexican government, Inmarsat of London and Intelsat of Luxembourg and Washington, among other customers.

Boeing is a 50 percent shareholder, with Lockheed Martin of Bethesda, Md., in United Launch Alliance (ULA) of Denver, which provides Boeing-developed Delta and Lockheed Martin-developed Atlas rockets to the U.S. government.

Boeing’s ULA-generated revenue in any given period will move up or down depending on ULA’s launch rate and the mix of Atlas and Delta missions. Boeing said that for the six months ending June 30, ULA revenue was down by $132 million compared with last year. But Boeing’s share in ULA earnings was $73 million for the period, up from $52 million a year ago.

Boeing and ULA continue to battle the U.S. Air Force over what the two companies say were underpriced Atlas rockets used for three U.S. Air Force missions. While ULA was responsible for selling the vehicles at the contracted price, Boeing has agreed to indemnify ULA against losses if the U.S. Air Force cannot be persuaded to increase payment for the three launches.

The matter is now before the Armed Services Board of Contract Appeals, where a hearing is scheduled for Nov. 18.

If the board agrees with the Air Force, Boeing could face a pretax charge of $278 million relating to the three launches.

Boeing has a separate petition with the U.S. Air Force before the Defense Contract Management Agency relating to whether certain costs related to ULA activities are reimbursable by the customer. Boeing has also filed a motion with the Court of Federal Claims, and said it could face up to $317 million in pretax losses and payments to ULA if it loses the argument.

 

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