Boeing

CHICAGO, Oct. 27, 2021 /PRNewswire/ --

• Continued progress on global safe return to service of 737 MAX and focus on operational stability
• Revenue of $15.3 billion, GAAP loss per share of ($0.19) and core (non-GAAP)* loss per share of ($0.60)
• Operating cash flow of ($0.3) billion; cash and marketable securities of $20.0 billion
• Commercial Airplanes backlog of $290 billion and added 93 net orders

The Boeing Company [NYSE: BA] reported third-quarter revenue of $15.3 billion, driven by higher commercial airplanes and services volume. GAAP loss per share of ($0.19) and core loss per share (non-GAAP)* of ($0.60) primarily reflects higher commercial volume (Table 1). Boeing recorded operating cash flow of ($0.3) billion.

"We are driving stability across our operations, investing in our future and positioning our teams to deliver for our customers as the market recovers," said Boeing President and Chief Executive Officer David Calhoun. "Commercial market demand continues to gain traction with broad-based vaccine distribution and border protocols beginning to open. Going forward, supply chain capacity and global trade will be key drivers of our industry and the broader economy's recovery. Our portfolio across commercial, defense, space and services is well positioned, and we're focused on improving performance, while advancing technologies and digital manufacturing capabilities to drive our next generation of products and a sustainable future."

Operating cash flow improved to ($0.3) billion in the quarter, reflecting higher commercial deliveries, higher order receipts, and lower expenditures (Table 2). Operating cash flow was also favorably impacted by a $1.3 billion income tax refund in the quarter.

Cash and investments in marketable securities decreased to $20.0 billion, compared to $21.3 billion at the beginning of the quarter, primarily driven by debt repayment and operating cash outflows (Table 3). Debt was $62.4 billion, down from $63.6 billion at the beginning of the quarter due to the repayment of maturing debt.

Total company backlog at quarter-end was $367 billion.

Segment Results

Commercial Airplanes

Commercial Airplanes third-quarter revenue increased to $4.5 billion primarily driven by higher 737 deliveries, partially offset by lower 787 deliveries. Third-quarter operating margin improved to (15.5) percent primarily due to higher deliveries (Table 4).

Boeing is continuing to make progress on the global safe return to service of the 737 MAX. Since the FAA's approval to return the 737 MAX to operations in November 2020, Boeing has delivered more than 195 737 MAX aircraft and airlines have returned more than 200 previously grounded airplanes to service. 31 airlines are now operating the 737 MAX, safely flying over 206,000 revenue flights totaling more than 500,000 flight hours (as of October 24, 2021). The 737 program is currently producing at a rate of 19 per month and continues to progress towards a production rate of 31 per month in early 2022, and the company is evaluating the timing of further rate increases.

The company continues to focus 787 production resources on conducting inspections and rework and continues to engage in detailed discussions with the FAA regarding required actions for resuming delivery. The current 787 production rate is approximately two airplanes per month. The company expects to continue at this rate until deliveries resume and then return to five per month over time. The low production rates and rework are expected to result in approximately $1 billion of abnormal costs, of which $183 million was recorded in the quarter.

Commercial Airplanes secured orders for 70 737 MAX, 24 freighter, and 12 787 airplanes. Commercial Airplanes delivered 85 airplanes during the quarter and backlog included over 4,100 airplanes valued at $290 billion.

Defense, Space & Security

Defense, Space & Security third-quarter revenue decreased to $6.6 billion and third-quarter operating margin decreased to 6.6 percent, primarily due to a $185 million earnings charge on the Commercial Crew program driven by the second uncrewed Orbital Flight Test now anticipated in 2022 and the latest assessment of remaining work.

During the quarter, Defense, Space & Security secured awards for five P-8A Poseidon aircraft for the German Navy and four CH-47F Block II Chinook helicopters for the U.S Army, as well as a Joint Direct Attack Munition contract for the U.S. Air Force. Defense, Space & Security also conducted the MQ-25 unmanned aerial refueling of a U.S. Navy E-2D and F-35C, and delivered a total of 37 aircraft during the quarter, including the first CH-47F Chinook to the Royal Australian Army.

Backlog at Defense, Space & Security was $58 billion, of which 33 percent represents orders from customers outside the U.S.

Global Services

Global Services third-quarter revenue increased to $4.2 billion and third-quarter operating margin increased to 15.3 percent primarily driven by higher commercial services volume. Operating margin was also favorably impacted by lower severance costs and mix of products and services.

During the quarter, Global Services captured orders for 12 additional 737-800 converted freighters for BBAM, an award for performance-based logistics support of the global C-17 fleet, and a modification award for Chinook infra-red suppression systems for the U.K. Armed Forces. Global Services also announced a partnership to expand capacity for 767-300 Boeing Converted Freighters and was selected to provide training to the United Aviate Academy.

Additional Financial Information

At quarter-end, Boeing Capital's net portfolio balance was $1.8 billion. The earnings from FAS/CAS service cost adjustment primarily reflects an increase in the CAS discount rate driven by pension relief provisions in the American Rescue Plan Act of 2021. Interest and debt expense increased due to higher debt balances. The change in other income was driven by a pension settlement charge recorded during the quarter. The third quarter 2021 effective tax rate primarily reflects a lower pre-tax loss compared to the prior period, as well as benefits from R&D tax credits.

Non-GAAP Measures Disclosures

We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (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 the FAS/CAS service cost adjustment. The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. 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 the FAS/CAS service cost adjustment and Non-operating pension and postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to Commercial Airplanes and BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. 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 non-service 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 pages 13-14.

Free Cash Flow

Free cash flow is GAAP operating cash flow reduced by capital expenditures for property, plant and equipment. 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 of free cash flow to GAAP operating 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 generally 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 expectations and assumptions that we believe to be reasonable when made, but that 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) the COVID-19 pandemic and related industry impacts, including with respect to our operations, our liquidity, the health of our customers and suppliers, and future demand for our products and services; (2) the 737 MAX, including the timing and conditions of remaining 737 MAX regulatory approvals, lower than planned production rates and/or delivery rates, and increased considerations to customers and suppliers; (3) general conditions in the economy and our industry, including those due to regulatory changes; (4) our reliance on our commercial airline customers; (5) the overall health of our aircraft production system, planned commercial aircraft production rate changes, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; (6) changing budget and appropriation levels and acquisition priorities of the U.S. government; (7) our dependence on U.S. government contracts; (8) our reliance on fixed-price contracts; (9) our reliance on cost-type contracts; (10) uncertainties concerning contracts that include in-orbit incentive payments; (11) our dependence on our subcontractors and suppliers, as well as the availability of raw materials; (12) changes in accounting estimates; (13) changes in the competitive landscape in our markets; (14) our non-U.S. operations, including sales to non-U.S. customers; (15) threats to the security of our or our customers' information; (16) potential adverse developments in new or pending litigation and/or government investigations; (17) customer and aircraft concentration in our customer financing portfolio; (18) changes in our ability to obtain debt financing on commercially reasonable terms and at competitive rates; (19) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (20) the adequacy of our insurance coverage to cover significant risk exposures; (21) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, sanctions or natural disasters; (22) work stoppages or other labor disruptions; (23) substantial pension and other postretirement benefit obligations; and (24) potential environmental liabilities.

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.

The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
(Unaudited)

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

The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
(Unaudited)

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

SOURCE Boeing