25 Apr 2012 15:03
Boeing Reports Strong First-Quarter Results
CHICAGO, April 25, 2012 --
* Earnings per share rose to $1.22, driven by strong core operating performance * Revenue grew to $19.4 billion on increased commercial airplane deliveries * Backlog rose to a record $380 billion including $42 billion of new orders * Operating cash flow increased to $0.8 billion on higher commercial airplane deliveries and increased orders * Cash and marketable securities of $10.5 billion provide strong liquidity * 2012 EPS guidance increased to between $4.15 and $4.35, reflecting a reduction in a litigation-related reserve
Table 1. Summary Financial Results
First Quarter (Dollars in Millions, 2012 2011 Change except per share data) Revenues $19,383 $14,910 30% Earnings From Operations $1,570 $1,000 57% Operating Margin 8.1% 6.7% 1.4 Pts Net Income $923 $586 58% Earnings per Share $1.22 $0.78 56% Operating Cash Flow $837 ($953) NM
The Boeing Company reported first-quarter net income rose to $0.9 billion, or $1.22 per share, on revenue of $19.4 billion. Earnings per share rose 56 percent, reflecting continued strong core performance across the company's businesses, which more than offset higher pension expense (Table 1). The results also include an increase in earnings of $0.11 per share related to a reduction in a litigation-related reserve. Earnings per share guidance for 2012 increased to between $4.15 and $4.35 to incorporate the reduction in the litigation-related reserve. The company reaffirmed its 2012 revenue and operating cash flow outlook.
"Strong core operating performance from our production programs and services businesses continues to drive expanded earnings, revenue and cash flow for Boeing," said Jim McNerney, chairman, president, and chief executive officer. "We also grew our record backlog with more than 300 firm orders for our new 737 MAX, a contract award for 84 new F-15s for Saudi Arabia, and other key wins."
"Our outlook for the year remains positive, and our team is focused on meetingour commitments to customers, profitably increasing commercial airplaneproduction and delivery rates, and building on our strong position in defense,space and security markets."Table 2. Cash Flow First Quarter (Millions) 2012 2011 Operating Cash Flow $837 ($953)
Less Additions to Property,
Plant & Equipment ($424) ($417) Free Cash Flow* $413 ($1,370)
*Non-GAAP measure. A complete definition of Boeing's use of non-GAAP measures, identified by an asterisk (*), is found on page 7, "Non-GAAP Measure
Disclosures."
Boeing's quarterly operating cash flow was $0.8 billion, with higher commercial airplane deliveries, increased orders and strong operating performance more than offsetting continued investment in the 787 program. Free cash flow* was $0.4 billion in the quarter (Table 2).
Table 3. Cash, Marketable Securities andDebt Balances Quarter-End (Billions) 1Q12 4Q11 Cash $6.7 $10.1
Marketable Securities (1) $3.8 $1.2
Total $10.5 $11.3 Debt Balances: The Boeing Company $9.0 $9.0
Boeing Capital Corporation $2.6 $3.4
Total Consolidated Debt $11.6 $12.4
(1) Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."
Cash and investments in marketable securities totaled $10.5 billion at quarter-end (Table 3), down from $11.3 billion at the beginning of the year. Debt was $11.6 billion, down from $12.4 billion at year-end, primarily due to Boeing Capital Corporation maturities.
Total company backlog at quarter-end was a record $380 billion, up from $356 billion at the beginning of the year. Net orders for the quarter were $42 billion, as backlog increased for both Commercial Airplanes and Defense, Space & Security.
Segment ResultsCommercial Airplanes
Table 4. Commercial Airplanes Operating Results
First Quarter (Dollars in Millions) 2012 2011 Change Commercial Airplanes Deliveries 137 104 32% Revenues $10,937 $7,118 54% Earnings from Operations $1,081 $509 NM Operating Margins 9.9% 7.2% 2.7 Pts
Boeing Commercial Airplanes first-quarter revenue increased by 54 percent to $10.9 billion on higher delivery volume and mix. Operating margin was 9.9 percent, reflecting the higher deliveries and lower R&D partially offset by higher period costs and the dilutive impact of 787 and 747-8 deliveries (Table 4).
During the quarter, the first two GEnx-powered 787s were delivered. The first 747-8 Intercontinental VIP airplane was also delivered during the quarter.
Commercial Airplanes booked 412 net orders during the quarter, including 301 firm orders for the 737 MAX. Backlog remains strong with more than 4,000 airplanes valued at a record $308 billion.
Boeing Defense, Space & Security
Table 5. Defense, Space & Security Operating Results First Quarter (Dollars in Millions) 2012 2011 Change Revenues Boeing Military Aircraft $4,308 $3,392 27% Network & Space Systems $1,795 $2,346 (23%) Global Services & Support $2,130 $1,879 13% Total BDS Revenues $8,233 $7,617 8% Earnings from Operations Boeing Military Aircraft $437 $369 18% Network & Space Systems $73 $141 (48%) Global Services & Support $232 $161 44% Total BDS Earnings from Operations $742 $671 11% Operating Margins 9.0% 8.8% 0.2 Pts
Boeing Defense, Space & Security's first-quarter revenue increased to $8.2 billion, while operating margin was 9.0 percent (Table 5).
Boeing Military Aircraft (BMA) first-quarter revenue increased to $4.3 billion, primarily due to initial revenue for the F-15 Saudi Arabia contract. Operating margin was 10.1 percent, reflecting strong execution across various programs. During the quarter, BMA was awarded both domestic and international C-17 Globemaster III orders and delivered the first production P-8A Poseidon aircraft to the U.S. Navy.
Network & Space Systems (N&SS) first-quarter revenue decreased to $1.8 billion, driven by lower volume on Brigade Combat Team Modernization and timing on United Launch Alliance. Operating margin was 4.1 percent, primarily due to the lower volume and satellite mix. During the quarter, N&SS launched its new 702 small satellite product line with a contract for four units through a joint international agreement.
Global Services & Support (GS&S) first-quarter revenue increased to $2.1 billion, due to higher volume in integrated logistics. Operating margin was 10.9 percent, reflecting improved performance in integrated logistics. During the quarter, GS&S was awarded a performance-based logistics contract for the sustainment of the Republic of Korea Air Force fleet of F-15s.
Backlog at Defense, Space & Security increased by 20 percent to $72 billion on F-15 and C-17 order activity in the quarter, bringing backlog to more than two times the unit's projected 2012 revenue.
Additional Financial Information
Table 6. Additional Financial Information
First Quarter (Dollars in Millions) 2012 2011 Change Revenues Boeing Capital Corporation $125 $143 (13%) Other segment $24 $36 Unallocated items and eliminations $64 ($4) Earnings from Operations Boeing Capital Corporation $38 $52 (27%) Other segment expense ($79) ($22) Unallocated items and eliminations ($212) ($210) Other income, net $12 $13
Interest and debt expense ($119) ($130)
Effective tax rate 36.8% 33.4%
At quarter-end, Boeing Capital Corporation's (BCC) portfolio balance was $4.2 billion, down from $4.3 billion at the beginning of the year on portfolio run-off and asset sales. BCC's debt-to-equity ratio was 5.1-to-1, down from year-end, primarily due to the repayment of maturing debt.
The "Other" segment includes unallocated activities of Engineering, Operations and Technology, Shared Services Group as well as certain intercompany guarantees provided to BCC. Other segment expense of $79 million in the first quarter 2012 was primarily driven by higher asset impairment expense.
The loss in unallocated items and eliminations was essentially unchanged as a $131 million increase to earnings from a reduction in a litigation-related reserve was offset by higher pension expense. Total pension expense for the first quarter was $655 million, as compared to $526 million in the same period last year. A total of $466 million was allocated to the operating segments in the quarter, up from $431 million in the same period last year, and $189 million was recognized in unallocated items, compared to $95 million in the same period last year.
The company's effective tax rate was 36.8% in the quarter, up from 33.4%in the same period last year partly due to the expiration of the R&D tax credit legislation, which the company expects Congress to consider for extension later this year.
Outlook
The company's 2012 financial guidance (Table 7) reflects continued strong core performance offset by higher pension expense and other items. Earnings per share guidance for 2012 increased to between $4.15 and $4.35 to incorporate the earnings from the reduction in the litigation-related reserve. All other financial guidance is reaffirmed.
Table 7. Financial Outlook 2012 (Dollars in Billions, except per-share data) The Boeing Company Revenue $78 - 80 Earnings Per Share (GAAP) $4.15 - 4.35 Operating Cash Flow (1) > $5.0 Boeing Commercial Airplanes Deliveries (2) 585 - 600 Revenue $47.5 - 49.5 Operating Margin 8.5% - 9%
Boeing Defense, Space & Security
Revenue Boeing Military Aircraft ~ $15.0 Network & Space Systems ~ $7.25 Global Services & Support ~ $8.0 Total BDS Revenue $30.0 - 30.5 Operating Margin Boeing Military Aircraft ~ 9.25% Network & Space Systems ~ 7.5% Global Services & Support ~ 10.5% Total BDS Operating Margin > 9.0% Boeing Capital Corporation Portfolio Size Lower Revenue ~ $0.4 Return on Assets ~ 0.5% Research & Development $3.3 - 3.5 Capital Expenditures ~ $2.0 Pension Expense (3) $2.6
(1) After discretionary cash pension contributions of $1.5 billion and assuming new aircraft financings under $0.5 billion.
(2) 2012 is sold out and includes an expected 70 to 85 787 and 747-8 deliveries, of which approximately half are 787 aircraft.
(3) Approximately $1.0 billion is expected to be recorded in unallocated items and eliminations.
Non-GAAP Measure Disclosures
Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures (indicated by an asterisk *) used in this report provide investors with important perspectives into the company's ongoing business performance. The company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. The following definitions are provided:
Free Cash Flow
Free cash flow is defined as GAAP operating cash flow less capital expenditures for property, plant and equipment additions. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow internally to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and free cash flow.
Caution Concerning Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: (1) general conditions in the economy and our industry, including those due to regulatory changes; (2) our reliance on our commercial airline customers; (3) our commercial development programs, planned production rate increases across multiple commercial airline programs and the overall health of our aircraft production system; (4) changing acquisition priorities of the U.S. government; (5) our dependence on U.S. government contracts; (6) our reliance on fixed-price contracts; (7) our reliance on cost-type contracts; (8) uncertainties concerning contracts that include in-orbit incentive payments; (9) our dependence on our subcontractors and suppliers, as well as the availability of raw materials, (10) changes in accounting estimates; (11) changes in the competitive landscape in our markets; (12) our non-U.S. operations, including sales to non-U.S. customers; (13) potential adverse developments in new or pending litigation and/or government investigations; (14) customer and aircraft concentration in Boeing Capital's customer financing portfolio; (15) changes in our ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments; (16) realizing the anticipated benefits of mergers, acquisitions, joint ventures/ strategic alliances or divestitures; (17) the adequacy of our insurance coverage to cover significant risk exposures; (18) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks or natural disasters; (19) work stoppages or other labor disruptions; (20) significant changes in discount rates and actual investment return on pension assets; (21) potential environmental liabilities; and (22) threats to the security of our or our customers' information.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
Contact:
Investor Relations: Stephanie Pope or Jennifer Mack (312) 544-2140 Communications: Chaz Bickers (312) 544-2002
The Boeing Company and Subsidiaries Consolidated Statements of Operations (Unaudited) Three months ended March 31 (Dollars in millions, except per share data) 2012 2011 Sales of products $16,685 $11,894 Sales of services 2,698 3,016 Total revenues 19,383 14,910 Cost of products (13,661) (9,506) Cost of services (2,380) (2,510) Boeing Capital interest expense (28) (33) Total costs and expenses (16,069) (12,049) 3,314 2,861
Income from operating investments, net 46 62
General and administrative expense (955) (866)
Research and development expense, net (835) (1,057)
Earnings from operations 1,570 1,000 Other income, net 12 13 Interest and debt expense (119) (130) Earnings before income taxes 1,463 883 Income tax expense (539) (295)
Net earnings from continuing operations 924 588
Net loss on disposal of discontinued
operations, net of taxes of $1 and $1 (1) (2)
Net earnings $923 $586 Basic earnings per share from $1.23 $0.79 continuing operations Net loss on disposal of discontinued operations, net of taxes Basic earnings per share $1.23 $0.79 Diluted earnings per share from $1.22 $0.78 continuing operations Net loss on disposal of discontinued operations, net of taxes Diluted earnings per share $1.22 $0.78 Cash dividends paid per share $0.44 $0.42
Weighted average diluted shares
(millions) 759.6 749.0 The Boeing Company and Subsidiaries Consolidated Statements of Financial Position (Unaudited) March 31 December 31
(Dollars in millions, except per share data) 2012 2011
Assets Cash and cash equivalents $ 6,718 $10,049 Short-term and other investments 3,798 1,223 Accounts receivable, net 6,475 5,793 Current portion of customer financing, net 372 476 Deferred income taxes 30 29
Inventories, net of advances and progress
billings 32,738 32,240 Total current assets 50,131 49,810 Customer financing, net 4,139 4,296 Property, plant and equipment, net of
accumulated depreciation of $14,204 and $13,993 9,399 9,313
Goodwill 4,950 4,945 Acquired intangible assets, net 2,993 3,044 Deferred income taxes 5,791 5,892 Investments 1,037 1,043
Other assets, net of accumulated amortization of
$762 and $717 1,765 1,643 Total assets $ 80,205 $ 79,986 Liabilities and equity Accounts payable $ 9,041 $ 8,406 Accrued liabilities 10,943 12,239
Advances and billings in excess of related costs 15,336 15,496
Deferred income taxes and income taxes payable 3,178 2,780
Short-term debt and current portion of long-term debt 2,807 2,353 Total current liabilities 41,305 41,274 Accrued retiree health care 7,498 7,520 Accrued pension plan liability, net 16,730 16,537 Non-current income taxes payable 192 122 Other long-term liabilities 543 907 Long-term debt 8,817 10,018 Shareholders' equity: Common stock, par value $5.00 - 1,200,000,000 shares authorized; 1,012,261,159 shares issued 5,061 5,061 Additional paid-in capital 3,977 4,033 Treasury stock, at cost - 263,535,351 and 267,556,388 shares (16,364) (16,603) Retained earnings 28,447 27,524 Accumulated other comprehensive loss (16,094) (16,500) Total shareholders' equity 5,027 3,515 Noncontrolling interest 93 93 Total equity 5,120 3,608 Total liabilities and equity $ 80,205 $ 79,986 The Boeing Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31 (Dollars in millions) 2012 2011 Cash flows - operating activities: Net earnings $ 923 $ 586 Adjustments to reconcile net earnings to net cash provided/(used) by operating activities: Non-cash items - Share-based plans expense 50 51 Depreciation and amortization 426 384 Investment/asset impairment charges, net 36 10 Customer financing valuation provision (15) Loss on disposal of discontinued operations 2 3 Other charges and credits, net 150 113 Excess tax benefits from share-based payment arrangements (40) (22) Changes in assets and liabilities - Accounts receivable (729) (633) Inventories, net of advances and progress billings (497) (2,622) Accounts payable 506 969 Accrued liabilities (1,032) (736) Advances and billings in excess of related costs (160) 40 Income taxes receivable, payable and deferred 333 217 Other long-term liabilities (45) (66) Pension and other postretirement plans 724 617 Customer financing, net 196 102 Other (6) 49 Net cash provided/(used) by operating activities 837 (953) Cash flows - investing activities: Property, plant and equipment additions (424) (417) Property, plant and equipment reductions 4 14 Acquisitions, net of cash acquired (16) Contributions to investments (3,718) (1,644) Proceeds from investments 1,135 4,701 Receipt of economic development program funds 69 Net cash (used)/provided by investing activities (3,003) 2,707 Cash flows - financing activities: New borrowings 20 14 Debt repayments (811) (812) Repayments of distribution rights financing (72) (392) Stock options exercised, other 28 24 Excess tax benefits from share-based payment arrangements 40 22 Employee taxes on certain share-based payment arrangements (64) (15) Dividends paid (328) (309) Net cash used by financing activities (1,187) (1,468)
Effect of exchange rate changes on cash and cash
equivalents 22 25 Net (decrease)/increase in cash and cash equivalents (3,331) 311 Cash and cash equivalents at beginning of year 10,049 5,359 Cash and cash equivalents at end of period $ 6,718 $ 5,670 The Boeing Company and Subsidiaries Summary of Business Segment Data (Unaudited) Three months ended March 31 (Dollars in millions) 2012 2011 Revenues: Commercial Airplanes $ 10,937 $ 7,118 Defense, Space & Security: Boeing Military Aircraft 4,308 3,392 Network & Space Systems 1,795 2,346 Global Services & Support 2,130 1,879 Total Defense, Space & Security 8,233 7,617 Boeing Capital 125 143 Other segment 24 36 Unallocated items and eliminations 64 (4) Total revenues $ 19,383 $ 14,910 Earnings from operations: Commercial Airplanes $ 1,081 $ 509 Defense, Space & Security: Boeing Military Aircraft 437 369 Network & Space Systems 73 141 Global Services & Support 232 161 Total Defense, Space & Security 742 671 Boeing Capital 38 52 Other segment (79) (22) Unallocated items and eliminations (212) (210) Earnings from operations 1,570 1,000 Other income, net 12 13 Interest and debt expense (119) (130) Earnings before income taxes 1,463 883 Income tax expense (539) (295) Net earnings from continuing operations 924 588
Net loss on disposal of discontinued operations,
net of taxes of $1 and $1 (1) (2) Net earnings $ 923 $ 586 Research and development expense, net: Commercial Airplanes $ 544 $ 787 Defense, Space & Security: Boeing Military Aircraft 145 125 Network & Space Systems 107 107 Global Services & Support 29 29 Total Defense, Space & Security 281 261 Other segment 10 9 Total research and development expense, net $ 835 $1,057 Unallocated items and eliminations: Share-based plans $ (22) $ (22) Deferred compensation (36) (50) Pension (189) (95) Post-retirement (19) (19) Capitalized interest (21) (15) Eliminations and other 75 (9) Total $ (212) $ (210) The Boeing Company and Subsidiaries Operating and Financial Data (Unaudited) Three months ended Deliveries March 31 Commercial Airplanes 2012 2011 737 99 87 747 6 767 7 4 777 20 13 787 5 Total 137 104 Defense, Space & Security Boeing Military Aircraft F/A-18 Models 12 13 F-15 Models 5 4 C-17 Globemaster 2 3 KC-767 International Tanker 1 CH-47 Chinook 10 7 P-8A Poseidon 1 Network & Space Systems Commercial and Civil Satellites 1 Military Satellites 2 March 31 December 31 Contractual backlog 2012 2011 (Dollars in billions) Commercial Airplanes $305.3 $293.3 Defense, Space & Security: Boeing Military Aircraft 29.0 24.1 Network & Space Systems 10.1 9.0 Global Services & Support 14.2 13.3 Total Defense, Space & Security 53.3 46.4 Total contractual backlog $358.6 $339.7 Unobligated backlog $21.2 $15.8 Total backlog $379.8 $355.5 Workforce 172,200 171,700 SOURCE Boeing
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