25 Jul 2012 12:33
Boeing Reports Second-Quarter Results and Raises 2012 EPS Guidance CHICAGO, July 25, 2012 -- - Earnings per share rose to $1.27, reflecting strong core operating performance - Revenue grew to $20.0 billion on increased commercial airplane deliveries - Backlog of $374 billion includes $13 billion of new orders - $1.7 billion of operating cash flow before pension contributions* of $0.8 billion - Cash and marketable securities of $10.3 billion provide strong liquidity - 2012 EPS guidance increased to between $4.40 and $4.60 Table 1. Summary Financial Results Second Quarter Change First Half Change (Dollars in Millions, except per share data) 2012 2011 2012 2011 Revenues $20,005 $16,543 21% $39,388 $31,453 25% Earnings From Operations $1,548 $1,534 1% $3,118 $2,534 23% Operating Margin 7.7% 9.3% (1.6)Pts 7.9% 8.1% (0.2)Pts Net Income $967 $941 3% $1,890 $1,527 24% Earnings per Share $1.27 $1.25 2% $2.49 $2.04 22% Operating Cash Flow Before Pension Contributions* $1,671 $1,596 5% $2,508 $643 NM Operating Cash Flow $908 $1,596 (43%) $1,745 $643 NM * Non-GAAP measure. Complete definitions of Boeing's use of non-GAAP measures, identified by an asterisk (*), are found on page 7, "Non-GAAP Measure Disclosures."
The Boeing Company reported that second-quarter net income rose to $1.0 billion, or $1.27 per share, on revenue of $20.0 billion. Earnings per share rose 2 percent, reflecting continued strong core performance across the company's businesses, which more than offset higher pension expense (Table 1). Earnings per share guidance for 2012 increased to between $4.40 and $4.60 reflecting the strong core operating performance. The company also increased its revenue guidance to between $79.5 and $81.5 billion on higher Defense, Space & Security revenues, and reaffirmed its 2012 operating cash flow outlook.
"Increased revenues and strong operating performance across both our major businesses drove significantly improved first-half 2012 results for Boeing," said Chairman, President and Chief Executive Officer Jim McNerney. "Commercial airplane deliveries increased 27 percent in the second quarter, and our defense, space and security business also produced higher revenues and strong margins in a difficult market environment. As a result of this solid first-half performance, we have strengthened our outlook for the year, and our people remain focused on disciplined execution, quality and productivity, and meeting customer commitments," McNerney said.
Table 2. Cash Flow Second Quarter First Half (Millions) 2012 2011 2012 2011 Operating Cash Flow Before Pension Contributions* $1,671 $1,596 $2,508 $643 Add Pension Contributions ($763) ($763) Operating Cash Flow $908 $1,596 $1,745 $643 Less Additions to Property, Plant & Equipment ($356) ($345) ($780) ($762) Free Cash Flow* $552 $1,251 $965 ($119)
Boeing's quarterly operating cash flow before pension contributions* was $1.7 billion. Operating cash flow was $0.9 billion, with higher commercial airplane deliveries and strong operating performance more than offsetting continued investment in the 787 program and discretionary pension funding. Free cash flow* was $0.6 billion in the quarter (Table 2).
Table 3. Cash, Marketable Securities and Debt Balances Quarter-End (Billions) 2Q12 1Q12 Cash $6.3 $6.7 Marketable Securities[1] $4.0 $3.8 Total $10.3 $10.5 Debt Balances: The Boeing Company $8.6 $9.0 Boeing Capital Corporation $2.6 $2.6 Total Consolidated Debt $11.2 $11.6 [1] Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."
Cash and investments in marketable securities totaled $10.3 billion at quarter-end (Table 3), down from $10.5 billion at the beginning of the quarter. Debt was $11.2 billion, down from $11.6 billion at the beginning of the quarter.
Total company backlog at quarter-end was $374 billion, down from $380 billion at the beginning of the quarter, and included net orders for the quarter of $13 billion.
Segment Results Commercial Airplanes Table 4. Commercial Airplanes Operating Results Second Quarter Change First Half Change (Dollars in Millions) 2012 2011 2012 2011 Commercial Airplanes Deliveries 150 118 27% 287 222 29% Revenues $11,843 $8,843 34% $22,780 $15,961 43% Earnings from Operations $1,211 $920 32% $2,292 $1,429 60% Operating Margins 10.2% 10.4% (0.2) Pts 10.1% 9.0% 1.1 Pts
Boeing Commercial Airplanes second-quarter revenue increased by 34 percent to $11.8 billion on higher delivery volume. Operating margin was 10.2 percent, reflecting higher period costs and the dilutive impact of 787 and 747-8 deliveries partially offset by the higher deliveries and lower R&D (Table 4).
During the quarter, final assembly of the first 787 built in South Carolina was completed and the first 747-8 Intercontinental passenger airplane was delivered.
Commercial Airplanes booked 28 net orders during the quarter. Backlog remains strong with approximately 4,000 airplanes valued at $302 billion.
Boeing Defense, Space & Security Table 5. Defense, Space & Security Operating Results Second Quarter Change First Half Change (Dollars in Millions) 2012 2011 2012 2011 Revenues Boeing Military Aircraft $4,130 $3,642 13% $8,438 $7,034 20% Network & Space Systems $1,887 $2,078 (9%) $3,682 $4,424 (17%) Global Services & Support $2,175 $1,968 11% $4,305 $3,847 12% Total BDS Revenues $8,192 $7,688 7% $16,425 $15,305 7% Earnings from Operations Boeing Military Aircraft $363 $386 (6%) $800 $755 6% Network & Space Systems $126 $192 (34%) $199 $333 (40%) Global Services & Support $259 $220 18% $491 $381 29% Total BDS Earnings from Operations $748 $798 (6%) $1,490 $1,469 1% Operating Margins 9.1% 10.4% (1.3)Pts 9.1% 9.6% (0.5)Pts
Boeing Defense, Space & Security's second-quarter revenue increased to $8.2 billion, while operating margin was 9.1 percent (Table 5).
Boeing Military Aircraft (BMA) second-quarter revenue increased to $4.1 billion, primarily due to higher delivery volume. Operating margin decreased 1.8 points to 8.8 percent, as strong execution across various programs was more than offset by an inventory adjustment on A160. During the quarter, BMA was awarded the Apache Block III low rate initial production contract with the U.S. Army.
Network & Space Systems (N&SS) second-quarter revenue decreased to $1.9 billion, driven by lower volume on Brigade Combat Team Modernization. Operating margin was 6.7 percent, reflecting lower earnings in United Launch Alliance. During the quarter, N&SS was awarded its first international cybersecurity contract.
Global Services & Support (GS&S) second-quarter revenue increased to $2.2 billion, due to higher volume in integrated logistics. Operating margin was 11.9 percent, reflecting improved performance in maintenance, modification and upgrades. During the quarter, GS&S was awarded the F-15 Singapore follow-on performance-based logistics contract.
Backlog at Defense, Space & Security remained at $72 billion, more than two times the unit's projected 2012 revenue.
Additional Financial Information Table 6. Additional Financial Information Second Quarter Change First Half Change (Dollars in Millions) 2012 2011 2012 2011 Revenues Boeing Capital Corporation $99 $147 (33%) $224 $290 (23%) Other segment $42 $38 $66 $74 Unallocated items and eliminations ($171) ($173) ($107) ($177) Earnings from Operations Boeing Capital Corporation $31 $62 (50%) $69 $114 (39%) Other segment expense ($50) ($58) ($129) ($80) Unallocated items and eliminations ($392) ($188) ($604) ($398) Other income, net $10 $14 $22 $27 Interest and debt expense ($112) ($123) ($231) ($253) Effective tax rate 33.1% 33.9% 35.0% 33.7%
At quarter-end, Boeing Capital Corporation's (BCC) portfolio balance was $4.1 billion, down from $4.2 billion at the beginning of the quarter on portfolio run-off and asset sales. BCC's debt-to-equity ratio was 5.0-to-1.
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 was $50 million in the quarter.
The loss in unallocated items and eliminations increased due to higher pension expense. Total pension expense for the second quarter was $593 million, as compared to $389 million in the same period last year.
Outlook
The company's 2012 financial guidance (Table 7) has been updated to reflect the strong core performance in both businesses.
Table 7. Financial Outlook (Dollars in Billions, except per-share data) 2012 The Boeing Company Revenue $79.5 - 81.5 Earnings Per Share (GAAP) $4.40 - 4.60 Operating Cash Flow[1] > $5.0 Boeing Commercial Airplanes Deliveries [2] 585 - 600 Revenue $47.5 - 49.5 Operating Margin ~ 9.0% Boeing Defense, Space & Security Revenue Boeing Military Aircraft ~ $16.0 Network & Space Systems ~ $7.25 Global Services & Support ~ $8.5 Total BDS Revenue $31.5 - 32.0 Operating Margin Boeing Military Aircraft ~ 9.25% Network & Space Systems ~ 6.5% Global Services & Support ~ 11.0% 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] $2.5 [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 $0.8 billion is expected to be recorded in unallocated items and eliminations.
Earnings per share guidance for 2012 increased to between $4.40 and $4.60, up from between $4.15 and $4.35, reflecting the strong core operating performance. Total company 2012 revenue increased to between $79.5 and $81.5 billion, from between $78 and $80 billion, on higher Defense, Space & Security revenues.
Commercial Airplanes' operating margin improved to approximately 9 percent, from between 8.5 and 9 percent, reflecting the strong core performance.
Defense, Space & Security's revenue increased to between $31.5 and $32 billion, from between $30 and $30.5 billion, reflecting increased volume.
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:
Operating Cash Flow Before Pension Contributions
Operating cash flow before pension contributions is defined as GAAP operating cash flow less pension contributions. Management believes operating cash flow before pension contributions provides additional insights into underlying business performance. Table 2 provides a reconciliation between GAAP operating cash flow and operating cash flow before pension contributions.
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) Six months ended Three months ended June 30 June 30 (Dollars in millions, except per share data) 2012 2011 2012 2011 Sales of products $34,026 $25,534 $17,341 $13,640 Sales of services 5,362 5,919 2,664 2,903 Total revenues 39,388 31,453 20,005 16,543 Cost of products (28,420) (20,329) (14,759) (10,823) Cost of services (4,342) (4,858) (1,962) (2,348) Boeing Capital interest expense (47) (62) (19) (29) Total costs and expenses (32,809) (25,249) (16,740) (13,200) 6,579 6,204 3,265 3,343 Income from operating investments, net 91 150 45 88 General and administrative expense (1,858) (1,736) (903) (870) Research and development expense, net (1,692) (2,104) (857) (1,047) (Loss)/gain on dispositions, net (2) 20 (2) 20 Earnings from operations 3,118 2,534 1,548 1,534 Other income, net 22 27 10 14 Interest and debt expense (231) (253) (112) (123) Earnings before income taxes 2,909 2,308 1,446 1,425 Income tax expense (1,018) (778) (479) (483) Net earnings from continuing operations 1,891 1,530 967 942 Net loss on disposal of discontinued operations, net of taxes of $1, $1, $0 and $0 (1) (3) (1) Net earnings $1,890 $1,527 $967 $941 Basic earnings per share from continuing operations $2.51 $2.06 $1.28 $1.27 Net loss on disposal of discontinued operations, net of taxes Basic earnings per share $2.51 $2.06 $1.28 $1.27 Diluted earnings per share from continuing operations $2.49 $2.04 $1.27 $1.25 Net loss on disposal of discontinued operations, net of taxes Diluted earnings per share $2.49 $2.04 $1.27 $1.25 Cash dividends paid per share $0.88 $0.84 $0.44 $0.42 Weighted average diluted shares (millions) 760.7 750.8 762.0 752.6 The Boeing Company and Subsidiaries Consolidated Statements of Financial Position (Unaudited) June 30 December 31 (Dollars in millions, except per 2012 2011 share data) Assets Cash and cash equivalents $ 6,305 $ 10,049 Short-term and other investments 4,002 1,223 Accounts receivable, net 5,894 5,793 Current portion of customer financing, net 344 476 Deferred income taxes 30 29 Inventories, net of advances and progress billings 35,033 32,240 Total current assets 51,608 49,810 Customer financing, net 4,068 4,296 Property, plant and equipment, net of accumulated depreciation of $14,385 and $13,993 9,453 9,313 Goodwill 4,955 4,945 Acquired intangible assets, net 2,980 3,044 Deferred income taxes 5,781 5,892 Investments 1,004 1,043 Other assets, net of accumulated amortization of $440 and $717 1,746 1,643 Total assets $ 81,595 $ 79,986 Liabilities and equity Accounts payable $ 9,273 $ 8,406 Accrued liabilities 11,699 12,239 Advances and billings in excess of related costs 15,344 15,496 Deferred income taxes and income taxes payable 3,668 2,780 Short-term debt and current portion of long-term debt 2,466 2,353 Total current liabilities 42,450 41,274 Accrued retiree health care 7,478 7,520 Accrued pension plan liability, net 16,164 16,537 Non-current income taxes payable 226 122 Other long-term liabilities 650 907 Long-term debt 8,735 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 4,018 4,033 Treasury stock, at cost - 260,913,450 and 267,556,388 shares (16,202) (16,603) Retained earnings 28,743 27,524 Accumulated other comprehensive loss (15,816) (16,500) Total shareholders' equity 5,804 3,515 Noncontrolling interest 88 93 Total equity 5,892 3,608 Total liabilities and equity $ 81,595 $ 79,986 The Boeing Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30 (Dollars in millions) 2012 2011 Cash flows - operating activities: Net earnings $ 1,890 $ 1,527 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash items - Share-based plans expense 99 96 Depreciation and amortization 848 816 Investment/asset impairment charges, net 45 16 Customer financing valuation provision (1) (65) Loss on disposal of discontinued operations 2 4 Loss/(gain) on dispositions, net 2 (20) Other charges and credits, net 361 223 Excess tax benefits from share-based payment arrangements (39) (32) Changes in assets and liabilities - Accounts receivable (310) (747) Inventories, net of advances and progress billings (2,737) (4,889) Accounts payable 742 1,134 Accrued liabilities (594) (268) Advances and billings in excess of related costs (152) 626 Income taxes receivable, payable and deferred 705 685 Other long-term liabilities (15) 54 Pension and other postretirement plans 686 1,199 Customer financing, net 216 210 Other (3) 74 Net cash provided by operating activities 1,745 643 Cash flows - investing activities: Property, plant and equipment additions (780) (762) Property, plant and equipment reductions 16 19 Acquisitions, net of cash acquired (18) (16) Contributions to investments (6,396) (4,454) Proceeds from investments 3,596 5,902 Receipt of economic development program funds 69 Purchase of distribution rights (6) Net cash (used)/provided by investing activities (3,588) 758 Cash flows - financing activities: New borrowings 24 36 Debt repayments (1,233) (851) Repayments of distribution rights financing (72) (406) Stock options exercised, other 71 80 Excess tax benefits from share-based payment arrangements 39 32 Employee taxes on certain share-based payment arrangements (68) (18) Dividends paid (658) (620) Net cash used by financing activities (1,897) (1,747) Effect of exchange rate changes on cash and cash equivalents (4) 37 Net decrease in cash and cash equivalents (3,744) (309) Cash and cash equivalents at beginning of year 10,049 5,359 Cash and cash equivalents at end of period $ 6,305 $ 5,050 The Boeing Company and Subsidiaries Summary of Business Segment Data (Unaudited) Six months ended Three months ended June 30 June 30 (Dollars in millions) 2012 2011 2012 2011 Revenues: Commercial Airplanes $ 22,780 $ 15,961 $ 11,843 $ 8,843 Defense, Space & Security: Boeing Military Aircraft 8,438 7,034 4,130 3,642 Network & Space Systems 3,682 4,424 1,887 2,078 Global Services & Support 4,305 3,847 2,175 1,968 Total Defense, Space & Security 16,425 15,305 8,192 7,688 Boeing Capital 224 290 99 147 Other segment 66 74 42 38 Unallocated items and eliminations (107) (177) (171) (173) Total revenues $ 39,388 $ 31,453 $ 20,005 $ 16,543 Earnings from operations: Commercial Airplanes $ 2,292 $ 1,429 $ 1,211 $ 920 Defense, Space & Security: Boeing Military Aircraft 800 755 363 386 Network & Space Systems 199 333 126 192 Global Services & Support 491 381 259 220 Total Defense, Space & Security 1,490 1,469 748 798 Boeing Capital 69 114 31 62 Other segment (129) (80) (50) (58) Unallocated items and eliminations (604) (398) (392) (188) Earnings from operations 3,118 2,534 1,548 1,534 Other income, net 22 27 10 14 Interest and debt expense (231) (253) (112) (123) Earnings before income taxes 2,909 2,308 1,446 1,425 Income tax expense (1,018) (778) (479) (483) Net earnings from continuing operations 1,891 1,530 967 942 Net loss on disposal of discontinued operations, net of taxes of $1, $1, $0 and $0 (1) (3) (1) Net earnings $ 1,890 $ 1,527 $ 967 $ 941 Research and development expense, net: Commercial Airplanes $ 1,104 $ 1,558 $ 560 $ 771 Defense, Space & Security: Boeing Military Aircraft 289 250 144 125 Network & Space Systems 219 217 112 110 Global Services & Support 54 56 25 27 Total Defense, Space & Security 562 523 281 262 Other 26 23 16 14 Total research and development expense, net $ 1,692 $ 2,104 $ 857 $ 1,047 Unallocated items and eliminations: Share-based plans $ (41) $ (44) $ (19) $ (22) Deferred compensation (34) (60) 2 (10) Pension (404) (158) (215) (63) Post-retirement (49) (33) (30) (14) Capitalized interest (37) (31) (16) (16) Eliminations and other (39) (72) (114) (63) Total $ (604) $ (398) $ (392) $ (188) The Boeing Company and Subsidiaries Operating and Financial Data (Unaudited) Six months ended Three months ended Deliveries June 30 June 30 Commercial Airplanes 2012 2011 2012 2011 737 208 181 109 94 747 13 7 767 13 9 6 5 777 42 32 22 19 787 11 6 Total 287 222 150 118 Defense, Space & Security Boeing Military Aircraft F/A-18 Models 24 25 12 12 F-15 Models 8 8 3 4 C-17 Globemaster 5 7 3 4 KC-767 International Tanker 1 CH-47 Chinook 22 16 12 9 AH-64 Apache 3 3 AEW&C 2 2 P-8A Poseidon 1 Network & Space Systems Commercial and Civil Satellites 1 Military Satellites 3 1 1 1 June 30 March 31 December 31 Contractual 2012 2012 2011 backlog(Dollars in billions) Commercial Airplanes $300.4 $305.3 $293.3 Defense, Space & Security: Boeing Military Aircraft 29.7 29.0 24.1 Network & Space Systems 9.9 10.1 9.0 Global Services & Support 14.6 14.2 13.3 Total Defense, Space & Security 54.2 53.3 46.4 Total contractual backlog $354.6 $358.6 $339.7 Unobligated backlog $19.2 $21.2 $15.8 Total backlog $373.8 $379.8 $355.5 Workforce 174,200 172,200 171,700
SOURCE Boeing