BOE.L Regulatory News (BOE)

BOEING COMPANY - Half-yearly Report

PR Newswire

London, July 22

Boeing Reports Second-Quarter Results

-- Revenue increased 11 percent to $24.5 billion reflecting record commercial deliveries-- Core EPS (non-GAAP)* of $1.62; GAAP EPS of $1.59-- Strong operating cash flow of $3.3 billion on higher volume and improved productivity-- Backlog remains strong at $489 billion with nearly 5,700 commercial airplane orders-- Repurchased 14 million shares for $2.0 billion-- Cash & marketable securities of $9.6 billion provide strong liquidity-- EPS guidance updated for KC-46 charge that offset strong performance; cash guidance unchanged

CHICAGO, July 22, 2015 --

The Boeing Company [NYSE: BA] reported second-quarter revenue increased 11 percent to $24.5 billion on record commercial deliveries (Table 1). Second quarter 2015 results included the previously announced $536 million after-tax charge ($0.77 per share) on the KC-46 Tanker program reflecting higher estimated costs. Core earnings per share (non-GAAP)* guidance for 2015 has been adjusted to between $7.70 and $7.90 per share, from $8.20 and $8.40, to reflect the impact of the second quarter 2015 KC-46 Tanker charge ($0.77 per share), partially offset by strong performance ($0.27 per share). GAAP earnings per share has been adjusted to between $7.60 and $7.80, from $8.10 and $8.30.

"Record commercial airplane deliveries to customers worldwide drove solid revenue growth, and the strength of our overall portfolio and diligent focus produced significant operating cash flow during the quarter," said Boeing President and Chief Executive Officer Dennis Muilenburg. "Strong operating performance across our commercial and defense production programs partially offset the tanker charge and enabled us to maintain our commitments to return cash to our shareholders and invest in innovation and our people."

"Overall, our outlook for the second half of the year remains positive. On the tanker program, we are investing the necessary resources to keep this vitally important program on schedule for our customer. We have a clear understanding of the work to be done and we are confident that the long-term financial value of the program will reward our additional investment."

"With our sustained focus on productivity and growth, we will continue to profitably deliver on our large and diverse backlog, capture new orders, and deliver increasing value to all of our stakeholders."

Operating cash flow in the quarter was $3.3 billion, reflecting commercial airplane production rates and strong operating performance (Table 2). During the quarter, the company repurchased 14 million shares for $2.0 billion, leaving $7.5 billion remaining under the current repurchase authorization which is expected to be completed over approximately the next two years. The company also paid $0.6 billion in dividends in the quarter, reflecting an approximately 25 percent increase in dividends per share compared to the same period of the prior year.

Cash and investments in marketable securities totaled $9.6 billion and debt totaled $9.0 billion, both unchanged from the beginning of the quarter (Table 3).

Total company backlog at quarter-end was $489 billion, down from $495 billion at the beginning of the quarter, and included net orders for the quarter of $18 billion.

Segment Results

Commercial Airplanes

Commercial Airplanes second-quarter revenue increased 18 percent to $16.9 billion on higher delivery volume and mix (Table 4). Second-quarter operating margin was 7.1 percent, reflecting the previously announced $513 million pre-tax charge on the KC-46 Tanker program and the dilutive impact of higher 787 and 747 deliveries partially offset by strong performance on production programs.

During the quarter, Commercial Airplanes captured orders for 116 737 MAX airplanes. The 737 program has won over 2,800 firm orders for the 737 MAX since launch. Also during the quarter, the company started assembly of the first 737 MAX airplane and the 787-10 program completed its Critical Design Review which indicated the program's design is sound and development is on schedule.

Commercial Airplanes booked 171 net orders during the quarter. Backlog remains strong with nearly 5,700 airplanes valued at $431 billion.

Defense, Space & Security

Defense, Space & Security's second-quarter revenue was $7.5 billion. Second quarter operating margin was 7.2 percent, reflecting the previously announced $322 million pre-tax charge recorded at BMA on the KC-46 Tanker program partially offset by strong performance on production programs and mix (Table 5).

Boeing Military Aircraft (BMA) second-quarter revenue was $3.5 billion, reflecting planned timing of deliveries and mix. Operating margin was 3.5 percent, reflecting the KC-46 Tanker program charge partially offset by strong performance on production programs. During the quarter, BMA was awarded contracts for six C-17 Globemaster III airlifters.

Network & Space Systems (N&SS) second-quarter revenue was $1.9 billion and operating margin was unchanged at 7.8 percent. During the quarter, NASA awarded Boeing the first ever commercial contract for a human spaceflight mission as part of the existing Commercial Crew contract.

Global Services & Support (GS&S) second-quarter revenue was $2.1 billion, reflecting lower volume in Aircraft Modernization and Sustainment. Operating margin increased to 12.8 percent on improved program mix. During the quarter, GS&S was awarded an F-15 international services contract extension.

Backlog at Defense, Space & Security was $58 billion, of which 39 percent represents orders from international customers.

Additional Financial Information

At quarter-end, Boeing Capital's net portfolio balance was $3.3 billion, down from $3.4 billion at the beginning of the quarter (Table 6). Total pension expense for the second quarter was $523 million, down from $693 million in the same period of the prior year. Other unallocated items and eliminations totaled $50 million at quarter end, down from $174 million in the same period of the prior year, primarily due to lower elimination of intercompany profit and deferred compensation expense. The company's effective income tax rate was 31.6 percent at quarter end, up from 3.7 percent in the same period of the prior year. The second quarter 2014 effective income tax rate included $524 million in tax benefits.

Outlook

The company's 2015 financial and delivery guidance (Table 7) reflects the impact of the KC-46 Tanker charge and continued strong performance across the company.

Non-GAAP Measures Disclosures

We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company's ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:

Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

Core operating earnings is defined as GAAP earnings from operations excluding unallocated pension and post-retirement expense. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of unallocated pension and post-retirement expense. Unallocated pension and post-retirement expense represents the portion of pension and other post-retirement costs that are not recognized by business segments for segment reporting purposes. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude unallocated pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation between the GAAP and non-GAAP measures is provided on page 13.

Free Cash Flow

Free cash flow is defined as GAAP operating cash flow without 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 as a measure 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) the overall health of our aircraft production system, planned production rate increases across multiple commercial airline programs, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; (4) changing budget and appropriation levels and 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, epidemics, sanctions 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.

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