Boeing Reports Strong First-Quarter Results

Core EPS (non-GAAP) rose 12 percent* to $1.97 on strong operating performance; GAAP EPS of $1.87
Revenue increased 8 percent to $22.1 billion reflecting higher commercial deliveries
Backlog remains strong at $495 billion with over 5,700 commercial airplane orders
Repurchased 17 million shares for $2.5 billion
Cash & marketable securities of $9.6 billion provide strong liquidity
2015 financial and deliveries outlook reaffirmed

CHICAGO, April 22, 2015 /PRNewswire/ --













Table 1. Summary Financial Results


First Quarter



(Dollars in Millions, except per share data)


2015


2014


Change








Revenues



$22,149



$20,465


8%








Non-GAAP*







Core Operating Earnings



$2,132



$2,095


2%

Core Operating Margin


9.6%


10.2%


(0.6) Pts

Core Earnings Per Share



$1.97



$1.76


12%

GAAP







Earnings From Operations



$2,019



$1,542


31%

Operating Margin


9.1%


7.5%


1.6 Pts

Net Earnings



$1,336



$965


38%

Earnings Per Share



$1.87



$1.28


46%

Operating Cash Flow



$88



$1,112


(92)%



* Non-GAAP measures. Complete definitions of Boeing's non-GAAP measures are on page 6, "Non-GAAP Measures Disclosures."

The Boeing Company [NYSE: BA] reported first-quarter revenue increased 8 percent to $22.1 billion on higher commercial deliveries (Table 1). Core earnings per share (non-GAAP) increased 12 percent* to $1.97, reflecting strong performance across the company, and GAAP earnings per share was $1.87. The Company reaffirmed its 2015 financial and deliveries guidance.

"With disciplined execution and a sharp focus on productivity, we are meeting increasing customer commitments while profitably growing our business," said Boeing Chairman and Chief Executive Officer Jim McNerney. "The strong operational and financial performance reinforces our ability to continue providing competitive returns for our shareholders while investing in technology and our people."

"Our outlook for the full year remains positive as our teams work to efficiently deliver our portfolio of industry-leading aerospace products and services. We are also maximizing the expertise of our talented people across the company to accelerate development program milestones and improve affordability for our customers."










Table 2. Cash Flow


First Quarter

(Millions)


2015


2014

Operating Cash Flow


$88


$1,112

Less Additions to Property, Plant & Equipment


($574)


($497)

Free Cash Flow*


($486)


$615

Operating cash flow in the quarter was $0.1 billion, reflecting timing of receipts and expenditures, commercial airplane production rates and strong operating performance (Table 2). During the quarter, the company repurchased 17 million shares for $2.5 billion, leaving $9.5 billion remaining under the current repurchase authorization which is expected to be completed over approximately the next two to three 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.










Table 3. Cash, Marketable Securities and Debt Balances


Quarter-End

(Billions)


Q1 15


Q4 14

Cash


$8.6


$11.7

Marketable Securities1


$1.0


$1.4

Total


$9.6


$13.1

Debt Balances:





The Boeing Company, net of intercompany loans to BCC


$6.6


$6.7

Boeing Capital, including intercompany loans


$2.4


$2.4

Total Consolidated Debt


$9.0


$9.1

1 Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."

Cash and investments in marketable securities totaled $9.6 billion at quarter-end (Table 3), down from $13.1 billion at the beginning of the year, primarily due to the share repurchases and timing of cash flows. Debt was $9.0 billion, down from $9.1 billion at the beginning of the year.

Total company backlog at quarter-end was $495 billion, down from $502 billion at the beginning of the year, and included net orders for the quarter of $15 billion.

Segment Results

Commercial Airplanes











Table 4. Commercial Airplanes


First Quarter



(Dollars in Millions)


2015


2014


Change








Commercial Airplanes Deliveries


184


161


14%








Revenues


$15,381


$12,737


21%

Earnings from Operations


$1,617


$1,502


8%

Operating Margin


10.5%


11.8%


(1.3) Pts

Commercial Airplanes first-quarter revenue increased 21 percent to $15.4 billion on higher delivery volume and mix (Table 4). First-quarter operating margin was 10.5 percent, reflecting the dilutive impact of higher 787 deliveries.

During the quarter, Commercial Airplanes captured orders for 52 737 MAX airplanes. The 737 program has won over 2,700 firm orders for the 737 MAX since launch. Also during the quarter, the company opened a new Propulsion Systems facility at Boeing South Carolina that will initially support the 737 MAX and 777X, delivered the first Boeing South Carolina-built 787-9 Dreamliner and received 330-minute ETOPS certification on the 747-8 Intercontinental.

Commercial Airplanes booked 110 net orders during the quarter. Backlog remains strong with over 5,700 airplanes valued at $435 billion.

Defense, Space & Security










Table 5. Defense, Space & Security

First Quarter



(Dollars in Millions)

2015


2014


Change

Revenues1






Boeing Military Aircraft

$2,744


$3,455


(21)%

Network & Space Systems

$1,732


$1,876


(8)%

Global Services & Support

$2,233


$2,302


(3)%

Total BDS Revenues

$6,709


$7,633


(12)%

Earnings from Operations1






Boeing Military Aircraft

$261


$332


(21)%

Network & Space Systems

$167


$168


(1)%

Global Services & Support

$315


$278


13%

Total BDS Earnings from Operations

$743


$778


(4)%

Operating Margin

11.1%


10.2%


0.9 Pts

1 During the first quarter of 2015, certain programs were realigned between Boeing Military Aircraft and Global Services & Support.

Defense, Space & Security's first-quarter revenue was $6.7 billion with an operating margin of 11.1 percent (Table 5).

Boeing Military Aircraft (BMA) first-quarter revenue was $2.7 billion, reflecting planned timing of deliveries and mix; operating margin was 9.5 percent. During the quarter, BMA was awarded contracts for 43 Apache helicopters.

Network & Space Systems (N&SS) first-quarter revenue was $1.7 billion, reflecting lower satellites and missile defense system program volume partially offset by higher volume on the Commercial Crew program. Operating margin increased to 9.6 percent on strong performance related to our United Launch Alliance joint venture. During the quarter, the first two all-electric Boeing 702SP satellites were launched on a single rocket.

Global Services & Support (GS&S) first-quarter revenue was $2.2 billion, reflecting slightly lower volume in integrated logistics. Operating margin increased to 14.1 percent on strong operating performance and program mix. During the quarter, GS&S was awarded a combat logistics support agreement with the U.S. Defense Logistics Agency.

Backlog at Defense, Space & Security was $60 billion, of which 37 percent represents orders from international customers.

Additional Financial Information










Table 6. Additional Financial Information


First Quarter

(Dollars in Millions)


2015


2014

Revenues





Boeing Capital


$86


$82

Unallocated items, eliminations and other


($27)


$13

Earnings from Operations





Boeing Capital


$20


$44

Unallocated pension/postretirement


($113)


($553)

Other unallocated items and eliminations


($248)


($229)

Other (loss)/income, net


($12)


$9

Interest and debt expense


($61)


($92)

Effective tax rate


31.3%


33.9%

At quarter-end, Boeing Capital's net portfolio balance was $3.4 billion, down from $3.5 billion at the beginning of the year (Table 6). Total pension expense for the first quarter was $785 million, down from $1,035 million in the same period of the prior year. Unallocated pension expense in 2014 included a $334 million non-cash charge related to retirement plan changes.

Outlook

The company's 2015 financial and delivery guidance (Table 7) is reaffirmed and reflects continued strong performance across the company.



Table 7. 2015 Financial Outlook


(Dollars in Billions, except per share data)

2015



The Boeing Company


Revenue

$94.5 - 96.5

Core Earnings Per Share*

$8.20 - 8.40

GAAP Earnings Per Share

$8.10 - 8.30

Operating Cash Flow

> $9



Commercial Airplanes


Deliveries

750 - 755

Revenue

$64.5 - 65.5

Operating Margin

9.5% - 10.0%





Defense, Space & Security (revised for business realignment)


Revenue


Boeing Military Aircraft

~$12.5

Network & Space Systems

~$8.0

Global Services & Support

~$9.5



Total BDS Revenue

$29.5 - 30.5



Operating Margin


Boeing Military Aircraft

~9.5%

Network & Space Systems

~9.0%

Global Services & Support

~11.0%



Total BDS Operating Margin

9.75% - 10.0%



Boeing Capital


Portfolio Size

Stable

Revenue

~$0.3

Pre-Tax Earnings

~$0.05



Research & Development

~ $3.5

Capital Expenditures

~ $2.8

Pension Expense 1

~ $2.1

Effective Tax Rate 2

~ 30.5%

1 Approximately $0.3 billion is expected to be recorded in unallocated items and eliminations

2 Assumes the extension of the research and development tax credit

* Non-GAAP measures. Complete definitions of Boeing's non-GAAP measures are on page 6, "Non-GAAP Measures Disclosures."

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.


Contact:






Investor Relations:


Troy Lahr or Rob Martin (312) 544-2140

Communications:


Bernard Choi (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)

2015



2014


Sales of products


$19,485




$18,015


Sales of services

2,664



2,450


Total revenues

22,149



20,465






Cost of products

(16,380)



(15,258)


Cost of services

(2,100)



(2,020)


Boeing Capital interest expense

(16)



(18)


Total costs and expenses

(18,496)



(17,296)



3,653



3,169


Income from operating investments, net

79



59


General and administrative expense

(945)



(877)


Research and development expense, net

(769)



(809)


Gain on dispositions, net

1





Earnings from operations

2,019



1,542


Other (loss)/income, net

(12)



9


Interest and debt expense

(61)



(92)


Earnings before income taxes

1,946



1,459


Income tax expense

(610)



(494)


Net earnings


$1,336




$965






Basic earnings per share


$1.89




$1.30






Diluted earnings per share


$1.87




$1.28






Cash dividends paid per share


$0.91




$0.73






Weighted average diluted shares (millions)

714.2



754.1


 

The Boeing Company and Subsidiaries

Consolidated Statements of Financial Position

(Unaudited)









(Dollars in millions, except per share data)

March 31
2015



December 31
2014


Assets




Cash and cash equivalents


$8,655




$11,733


Short-term and other investments

976



1,359


Accounts receivable, net

8,087



7,729


Current portion of customer financing, net

184



190


Deferred income taxes

17



18


Inventories, net of advances and progress billings

48,502



46,756


Total current assets

66,421



67,785


Customer financing, net

3,301



3,371


Property, plant and equipment, net of accumulated depreciation of $15,880 and $15,689

11,172



11,007


Goodwill

5,105



5,119


Acquired intangible assets, net

2,809



2,869


Deferred income taxes

6,485



6,576


Investments

1,154



1,154


Other assets, net of accumulated amortization of $506 and $479

1,328



1,317


Total assets


$97,775




$99,198


Liabilities and equity




Accounts payable


$11,497




$10,667


Accrued liabilities

11,958



13,343


Advances and billings in excess of related costs

22,752



23,175


Deferred income taxes and income taxes payable

8,916



8,603


Short-term debt and current portion of long-term debt

133



929


Total current liabilities

55,256



56,717


Accrued retiree health care

6,789



6,802


Accrued pension plan liability, net

17,362



17,182


Non-current income taxes payable

352



358


Other long-term liabilities

1,081



1,208


Long-term debt

8,905



8,141


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

4,657



4,625


Treasury stock, at cost -- 318,257,541 and 305,533,606 shares

(25,513)



(23,298)


Retained earnings

37,516



36,180


Accumulated other comprehensive loss

(13,815)



(13,903)


Total shareholders' equity

7,906



8,665


Noncontrolling interests

124



125


Total equity

8,030



8,790


Total liabilities and equity


$97,775




$99,198


 

The Boeing Company and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)










Three months ended March 31

(Dollars in millions)

2015



2014


Cash flows -- operating activities:




Net earnings


$1,336




$965


Adjustments to reconcile net earnings to net cash provided by operating activities:




Non-cash items -




Share-based plans expense

50



52


Depreciation and amortization

459



448


Investment/asset impairment charges, net

17



29


Customer financing valuation benefit

(2)



(23)


Gain on disposal of discontinued operations




(1)


Gain on dispositions, net

(1)





Other charges and credits, net

76



47


Excess tax benefits from share-based payment arrangements

(112)



(68)


Changes in assets and liabilities --




Accounts receivable

(389)



(792)


Inventories, net of advances and progress billings

(1,822)



(2,049)


Accounts payable

848



1,350


Accrued liabilities

(900)



(1,385)


Advances and billings in excess of related costs

(422)



1,085


Income taxes receivable, payable and deferred

443



455


Other long-term liabilities

(82)



(124)


Pension and other postretirement plans

608



733


Customer financing, net

31



408


Other

(50)



(18)


Net cash provided by operating activities

88



1,112


Cash flows -- investing activities:




Property, plant and equipment additions

(574)



(497)


Property, plant and equipment reductions




15


Contributions to investments

(807)



(2,737)


Proceeds from investments

1,159



3,625


Other

8





Net cash (used)/provided by investing activities

(214)



406


Cash flows -- financing activities:




New borrowings

761



51


Debt repayments

(813)



(757)


Stock options exercised

231



109


Excess tax benefits from share-based payment arrangements

112



68


Employee taxes on certain share-based payment arrangements

(87)



(84)


Common shares repurchased

(2,500)



(2,500)


Dividends paid

(639)



(540)


Other




(15)


Net cash used by financing activities

(2,935)



(3,668)


Effect of exchange rate changes on cash and cash equivalents

(17)



4


Net decrease in cash and cash equivalents

(3,078)



(2,146)


Cash and cash equivalents at beginning of year

11,733



9,088


Cash and cash equivalents at end of period


$8,655




$6,942


 

The Boeing Company and Subsidiaries

Summary of Business Segment Data

(Unaudited)










Three months ended March 31

(Dollars in millions)

2015



2014


Revenues:




Commercial Airplanes


$15,381




$12,737


Defense, Space & Security:




Boeing Military Aircraft

2,744



3,455


Network & Space Systems

1,732



1,876


Global Services & Support

2,233



2,302


Total Defense, Space & Security

6,709



7,633


Boeing Capital

86



82


Unallocated items, eliminations and other

(27)



13


Total revenues


$22,149




$20,465


Earnings from operations:




Commercial Airplanes


$1,617




$1,502


Defense, Space & Security:




Boeing Military Aircraft

261



332


Network & Space Systems

167



168


Global Services & Support

315



278


Total Defense, Space & Security

743



778


Boeing Capital

20



44


Unallocated items, eliminations and other

(361)



(782)


Earnings from operations

2,019



1,542


Other (loss)/income, net

(12)



9


Interest and debt expense

(61)



(92)


Earnings before income taxes

1,946



1,459


Income tax expense

(610)



(494)


Net earnings


$1,336




$965






Research and development expense, net:




Commercial Airplanes


$543




$529


Defense, Space & Security

224



280


Other

2





Total research and development expense, net


$769




$809






Unallocated items, eliminations and other:




Share-based plans


($21)




($24)


Deferred compensation

(58)



7


Amortization of previously capitalized interest

(29)



(18)


Eliminations and other unallocated items

(140)



(194)


Sub-total (included in core operating earnings)


(248)




(229)


  Pension


(152)




(576)


  Postretirement


39




23


Total unallocated items, eliminations and other


($361)




($782)


 


The Boeing Company and Subsidiaries

Operating and Financial Data

(Unaudited)








Deliveries


Three months ended
March 31

Commercial Airplanes


2015



2014


737


121



115


747


4



4


767


5





777


24



24


787


30



18


Total


184



161


Note: Deliveries under operating lease are identified by parentheses.














Defense, Space & Security





Boeing Military Aircraft





AH-64 Apache (New)


6



10


AH-64 Apache (Remanufactured)


10



14


C-17 Globemaster III


1



3


CH-47 Chinook (New)


6



17


CH-47 Chinook (Renewed)


4





F-15 Models


1



4


F/A-18 Models


11



11


P-8 Models


2










Global Services & Support





AEW&C





1


C-40A


1










Network & Space Systems





Commercial and Civil Satellites






Military Satellites



















Contractual backlog (Dollars in billions)


March 31
2015



December 31
2014


Commercial Airplanes



$435.0




$440.1


Defense, Space & Security:





  Boeing Military Aircraft


21.3



21.1


  Network & Space Systems


9.4



8.9


  Global Services & Support


16.9



16.9


Total Defense, Space & Security


47.6



46.9


Total contractual backlog



$482.6




$487.0


Unobligated backlog



$12.5




$15.3


Total backlog



$495.1




$502.3


Workforce


163,100



165,500











 

The Boeing Company and Subsidiaries

Reconciliation of Non-GAAP Measures

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

(Unaudited)


The tables provided below reconcile the non-GAAP financial measures core operating earnings, core operating margin and core earnings per share with the most directly comparable GAAP financial measures, earnings from operations, operating margin and diluted earnings per share. See page 6 of this release for additional information on the use of these non-GAAP financial measures.














First Quarter


Guidance


2015


2014


2015

Revenues


$22,149




$20,465










GAAP Earnings From Operations


$2,019




$1,542




GAAP Operating Margin

9.1%



7.5%










Unallocated Pension/Postretirement Expense


$113




$553




$110


Core Operating Earnings (non-GAAP)


$2,132




$2,095




Core Operating Margin (non-GAAP)

9.6%



10.2%










Increase/(Decrease) in GAAP Earnings From Operations

31%






Increase/(Decrease) in Core Operating Earnings (non-GAAP)

2%












GAAP Diluted Earnings Per Share


$1.87




$1.28



$8.10 - $8.30


Unallocated Pension/Postretirement Expense1


$0.10




$0.48




$0.10


Core Earnings Per Share (non-GAAP)


$1.97




$1.76



$8.20 - $8.40








Weighted Average Diluted Shares (millions)

714.2



754.1



695 - 700


Increase/(Decrease) in GAAP Earnings Per Share

46%







Increase/(Decrease) in Core Earnings Per Share (non-GAAP)

12%








1Earnings per share impact is presented net of the federal statutory tax rate of 35.0 percent.

 

SOURCE Boeing

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