Boeing

CHICAGO, April 27, 2016 /PRNewswire/ --

• Revenue increased to $22.6 billion
• Solid core EPS (non-GAAP)* of $1.74 after $0.24 KC-46 charge; GAAP EPS of $1.83
• Strong operating cash flow of $1.2 billion; repurchased 28.6 million shares for $3.5 billion
• Backlog remains robust at $480 billion with over 5,700 commercial airplane orders
• Revenue, margins, EPS and operating cash flow guidance reaffirmed

The Boeing Company [NYSE: BA] reported first-quarter revenue increased 2 percent to $22.6 billion (Table 1). Core earnings per share (Non-GAAP)* of $1.74 reflect solid core operating performance that offset a $156 million after-tax charge ($0.24 per share) on the KC-46 Tanker program to maintain schedule with concurrency between late-stage development testing and the transition to initial production. GAAP earnings per share was $1.83.

The company's full year guidance is reaffirmed, primarily driven by improved performance.

"Higher year-over-year deliveries of military aircraft and continued solid operating performance on core production programs drove revenue growth and strong cash flow for Boeing in the first quarter," said Chairman, President and Chief Executive Officer Dennis Muilenburg. "This performance enabled our ongoing investments in new product innovation and in our people, and the return of significant cash to shareholders through stock repurchases and dividends."  

"Overall, we are pleased with our performance trends and our outlook for the year remains positive. On the tanker program, we are making the investments necessary to meet our customer commitments, deliver the initial production aircraft on schedule, and transition the program into full production," said Muilenburg.

"Our teams are focused intensely on delivering on our existing commitments including the production ramp-up associated with our large and diverse backlog, accelerating progress on quality, safety and productivity improvements company wide, returning greater value to shareholders through profitable growth, and investing in the future as we enter our second century in business."

Operating cash flow in the quarter was $1.2 billion, reflecting commercial airplane production rates, solid core operating performance and the timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 28.6 million shares for $3.5 billion, leaving $10.5 billion remaining under the current repurchase authorization which is expected to be completed over approximately the next two years. The company also paid $0.7 billion in dividends, reflecting an approximately 20 percent increase in dividends per share compared to the same period of the prior year.

Cash and investments in marketable securities totaled $8.4 billion, down from $12.1 billion at the beginning of the quarter, primarily due to share repurchases and the timing of cash flows. Debt was $10.0 billion, unchanged from the beginning of the quarter (Table 3).

Total company backlog at quarter-end was $480 billion, down from $489 billion at the beginning of the quarter, and included net orders for the quarter of $13 billion.

Segment Results

Commercial Airplanes

Commercial Airplanes first-quarter revenue decreased to $14.4 billion on lower delivery volume (Table 4). First-quarter operating margin was 7.2 percent, reflecting the $162 million pre-tax charge on the KC-46 Tanker program, higher R&D, mix and a $70 million pre-tax charge on the 747 program.

During the quarter, the company completed first flight of the 737 MAX. The 737 program has captured nearly 3,100 orders for the 737 MAX since launch. Also during the quarter, the company began major assembly of the 787-10 ahead of schedule and launched the Next-Generation 737 freighter conversion program.

Commercial Airplanes booked 121 net orders during the quarter. Backlog remains strong with over 5,700 airplanes valued at $424 billion.

Defense, Space & Security

Defense, Space & Security's first-quarter revenue was $8.0 billion. First quarter operating margin was 10.3 percent, reflecting the $81 million pre-tax charge recorded at BMA on the KC-46 Tanker program partially offset by strong performance on production programs (Table 5).

Boeing Military Aircraft (BMA) first-quarter revenue increased to $3.7 billion, reflecting higher F-15 and C-17 deliveries. Operating margin was 9.1 percent, reflecting the KC-46 Tanker program charge partially offset by delivery mix. All four planned KC-46 test aircraft are now flying, and during the first quarter the KC-46 demonstrated its refueling capabilities with multiple other aircraft types. Also during the quarter, BMA was awarded a contract from the U.S. Navy for 20 P-8A Poseidon aircraft and a contract from the U.S. Army for 117 Apache helicopters.

Network & Space Systems (N&SS) first-quarter revenue was $1.7 billion. Operating margin was 8.5 percent, reflecting timing on United Launch Alliance launches. During the quarter, N&SS successfully launched the first of six Boeing-built Intelsat Epic satellites.

Global Services & Support (GS&S) first-quarter revenue increased to $2.6 billion, reflecting higher volume in Aircraft Modernization & Sustainment and Training Systems. Operating margin was 13.3 percent, reflecting program mix. During the quarter, GS&S was awarded a NATO contract for C-17 training.

Backlog at Defense, Space & Security was $56 billion, of which 37 percent represents orders from international customers.

Additional Financial Information

At quarter-end, Boeing Capital's net portfolio balance was $3.2 billion, down from the beginning of the quarter. Unallocated items and eliminations first quarter revenue reflects the payoff of two aircraft previously financed by Boeing Capital. Total pension expense for the first quarter was $629 million, down from $785 million in the same period of the prior year. Other unallocated items and eliminations decreased from the same period in the prior year primarily due to lower deferred compensation expense.

Outlook

The company's 2016 financial and delivery guidance (Table 7) is reaffirmed and reflects continued solid 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.

Contact:

SOURCE Boeing