TIDMBOE
Boeing Reports Strong First-Quarter Results
CHICAGO, April 25, 2012 --
* Earnings per share rose to $1.22, driven by strong core operating
performance
* Revenue grew to $19.4 billion on increased commercial airplane deliveries
* Backlog rose to a record $380 billion including $42 billion of new orders
* Operating cash flow increased to $0.8 billion on higher commercial airplane
deliveries and increased orders
* Cash and marketable securities of $10.5 billion provide strong liquidity
* 2012 EPS guidance increased to between $4.15 and $4.35, reflecting a
reduction in a litigation-related reserve
Table 1. Summary Financial Results
First Quarter
(Dollars in Millions, 2012 2011 Change
except per share data)
Revenues $19,383 $14,910 30%
Earnings From Operations $1,570 $1,000 57%
Operating Margin 8.1% 6.7% 1.4 Pts
Net Income $923 $586 58%
Earnings per Share $1.22 $0.78 56%
Operating Cash Flow $837 ($953) NM
The Boeing Company (NYSE: BA) reported first-quarter net income rose to $0.9
billion, or $1.22 per share, on revenue of $19.4 billion. Earnings per share
rose 56 percent, reflecting continued strong core performance across the
company's businesses, which more than offset higher pension expense (Table 1).
The results also include an increase in earnings of $0.11 per share related to
a reduction in a litigation-related reserve. Earnings per share guidance for
2012 increased to between $4.15 and $4.35 to incorporate the reduction in the
litigation-related reserve. The company reaffirmed its 2012 revenue and
operating cash flow outlook.
"Strong core operating performance from our production programs and services
businesses continues to drive expanded earnings, revenue and cash flow for
Boeing," said Jim McNerney, chairman, president, and chief executive officer.
"We also grew our record backlog with more than 300 firm orders for our new 737
MAX, a contract award for 84 new F-15s for Saudi Arabia, and other key wins."
"Our outlook for the year remains positive, and our team is focused on meeting
our commitments to customers, profitably increasing commercial airplane
production and delivery rates, and building on our strong position in defense,
space and security markets."
Table 2. Cash Flow
First Quarter
(Millions) 2012 2011
Operating Cash Flow $837 ($953)
Less Additions to Property,
Plant & Equipment ($424) ($417)
Free Cash Flow* $413 ($1,370)
*Non-GAAP measure. A complete definition of Boeing's use of non-GAAP measures,
identified by an asterisk (*), is found on page 7, "Non-GAAP Measure
Disclosures."
Boeing's quarterly operating cash flow was $0.8 billion, with higher commercial
airplane deliveries, increased orders and strong operating performance more
than offsetting continued investment in the 787 program. Free cash flow* was
$0.4 billion in the quarter (Table 2).
Table 3. Cash, Marketable Securities and
Debt Balances
Quarter-End
(Billions) 1Q12 4Q11
Cash $6.7 $10.1
Marketable Securities (1) $3.8 $1.2
Total $10.5 $11.3
Debt Balances:
The Boeing Company $9.0 $9.0
Boeing Capital Corporation $2.6 $3.4
Total Consolidated Debt $11.6 $12.4
(1) Marketable securities consists primarily of time deposits due within one
year classified as "short-term investments."
Cash and investments in marketable securities totaled $10.5 billion at
quarter-end (Table 3), down from $11.3 billion at the beginning of the year.
Debt was $11.6 billion, down from $12.4 billion at year-end, primarily due to
Boeing Capital Corporation maturities.
Total company backlog at quarter-end was a record $380 billion, up from $356
billion at the beginning of the year. Net orders for the quarter were $42
billion, as backlog increased for both Commercial Airplanes and Defense, Space
& Security.
Segment Results
Commercial Airplanes
Table 4. Commercial Airplanes Operating Results
First Quarter
(Dollars in Millions) 2012 2011 Change
Commercial Airplanes
Deliveries 137 104 32%
Revenues $10,937 $7,118 54%
Earnings from
Operations $1,081 $509 NM
Operating Margins 9.9% 7.2% 2.7 Pts
Boeing Commercial Airplanes first-quarter revenue increased by 54 percent to
$10.9 billion on higher delivery volume and mix. Operating margin was 9.9
percent, reflecting the higher deliveries and lower R&D partially offset by
higher period costs and the dilutive impact of 787 and 747-8 deliveries (Table
4).
During the quarter, the first two GEnx-powered 787s were delivered. The first
747-8 Intercontinental VIP airplane was also delivered during the quarter.
Commercial Airplanes booked 412 net orders during the quarter, including 301
firm orders for the 737 MAX. Backlog remains strong with more than 4,000
airplanes valued at a record $308 billion.
Boeing Defense, Space & Security
Table 5. Defense, Space & Security Operating
Results
First Quarter
(Dollars in Millions) 2012 2011 Change
Revenues
Boeing Military
Aircraft $4,308 $3,392 27%
Network & Space Systems $1,795 $2,346 (23%)
Global Services &
Support $2,130 $1,879 13%
Total BDS Revenues $8,233 $7,617 8%
Earnings from Operations
Boeing Military Aircraft $437 $369 18%
Network & Space Systems $73 $141 (48%)
Global Services &
Support $232 $161 44%
Total BDS Earnings from
Operations $742 $671 11%
Operating Margins 9.0% 8.8% 0.2 Pts
Boeing Defense, Space & Security's first-quarter revenue increased to $8.2
billion, while operating margin was 9.0 percent (Table 5).
Boeing Military Aircraft (BMA) first-quarter revenue increased to $4.3 billion,
primarily due to initial revenue for the F-15 Saudi Arabia contract. Operating
margin was 10.1 percent, reflecting strong execution across various programs.
During the quarter, BMA was awarded both domestic and international C-17
Globemaster III orders and delivered the first production P-8A Poseidon
aircraft to the U.S. Navy.
Network & Space Systems (N&SS) first-quarter revenue decreased to $1.8 billion,
driven by lower volume on Brigade Combat Team Modernization and timing on
United Launch Alliance. Operating margin was 4.1 percent, primarily due to the
lower volume and satellite mix. During the quarter, N&SS launched its new 702
small satellite product line with a contract for four units through a joint
international agreement.
Global Services & Support (GS&S) first-quarter revenue increased to $2.1
billion, due to higher volume in integrated logistics. Operating margin was
10.9 percent, reflecting improved performance in integrated logistics. During
the quarter, GS&S was awarded a performance-based logistics contract for the
sustainment of the Republic of Korea Air Force fleet of F-15s.
Backlog at Defense, Space & Security increased by 20 percent to $72 billion on
F-15 and C-17 order activity in the quarter, bringing backlog to more than two
times the unit's projected 2012 revenue.
Additional Financial Information
Table 6. Additional Financial Information
First Quarter
(Dollars in Millions) 2012 2011 Change
Revenues
Boeing Capital
Corporation $125 $143 (13%)
Other segment $24 $36
Unallocated items and
eliminations $64 ($4)
Earnings from Operations
Boeing Capital
Corporation $38 $52 (27%)
Other segment expense ($79) ($22)
Unallocated items and
eliminations ($212) ($210)
Other income, net $12 $13
Interest and debt expense ($119) ($130)
Effective tax rate 36.8% 33.4%
At quarter-end, Boeing Capital Corporation's (BCC) portfolio balance was $4.2
billion, down from $4.3 billion at the beginning of the year on portfolio
run-off and asset sales. BCC's debt-to-equity ratio was 5.1-to-1, down from
year-end, primarily due to the repayment of maturing debt.
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 of $79 million in the first
quarter 2012 was primarily driven by higher asset impairment expense.
The loss in unallocated items and eliminations was essentially unchanged as a
$131 million increase to earnings from a reduction in a litigation-related
reserve was offset by higher pension expense. Total pension expense for the
first quarter was $655 million, as compared to $526 million in the same period
last year. A total of $466 million was allocated to the operating segments in
the quarter, up from $431 million in the same period last year, and $189
million was recognized in unallocated items, compared to $95 million in the
same period last year.
The company's effective tax rate was 36.8% in the quarter, up from 33.4%in the
same period last year partly due to the expiration of the R&D tax credit
legislation, which the company expects Congress to consider for extension later
this year.
Outlook
The company's 2012 financial guidance (Table 7) reflects continued strong core
performance offset by higher pension expense and other items. Earnings per
share guidance for 2012 increased to between $4.15 and $4.35 to incorporate the
earnings from the reduction in the litigation-related reserve. All other
financial guidance is reaffirmed.
Table 7. Financial Outlook 2012
(Dollars in Billions, except
per-share data)
The Boeing Company
Revenue $78 - 80
Earnings Per Share (GAAP) $4.15 - 4.35
Operating Cash Flow (1) > $5.0
Boeing Commercial Airplanes
Deliveries (2) 585 - 600
Revenue $47.5 - 49.5
Operating Margin 8.5% - 9%
Boeing Defense, Space & Security
Revenue
Boeing Military Aircraft $15.0
Network & Space Systems $7.25
Global Services & Support $8.0
Total BDS Revenue $30.0 - 30.5
Operating Margin
Boeing Military Aircraft 9.25%
Network & Space Systems 7.5%
Global Services & Support 10.5%
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) $2.6
(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 $1.0 billion is expected to be recorded in unallocated items
and eliminations.
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:
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)
Three months ended
March 31
(Dollars in millions, except
per share data) 2012 2011
Sales of products $16,685 $11,894
Sales of services 2,698 3,016
Total revenues 19,383 14,910
Cost of products (13,661) (9,506)
Cost of services (2,380) (2,510)
Boeing Capital interest expense (28) (33)
Total costs and expenses (16,069) (12,049)
3,314 2,861
Income from operating investments, net 46 62
General and administrative expense (955) (866)
Research and development expense, net (835) (1,057)
Earnings from operations 1,570 1,000
Other income, net 12 13
Interest and debt expense (119) (130)
Earnings before income taxes 1,463 883
Income tax expense (539) (295)
Net earnings from continuing operations 924 588
Net loss on disposal of discontinued
operations, net of taxes of $1 and $1 (1) (2)
Net earnings $923 $586
Basic earnings per share from $1.23 $0.79
continuing operations
Net loss on disposal of discontinued
operations, net of taxes
Basic earnings per share $1.23 $0.79
Diluted earnings per share from $1.22 $0.78
continuing operations
Net loss on disposal of discontinued
operations, net of taxes
Diluted earnings per share $1.22 $0.78
Cash dividends paid per share $0.44 $0.42
Weighted average diluted shares
(millions) 759.6 749.0
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
March 31 December 31
(Dollars in millions, except per share data) 2012 2011
Assets
Cash and cash equivalents $ 6,718 $10,049
Short-term and other investments 3,798 1,223
Accounts receivable, net 6,475 5,793
Current portion of customer financing, net 372 476
Deferred income taxes 30 29
Inventories, net of advances and progress
billings 32,738 32,240
Total current assets 50,131 49,810
Customer financing, net 4,139 4,296
Property, plant and equipment, net of
accumulated depreciation of $14,204 and $13,993 9,399 9,313
Goodwill 4,950 4,945
Acquired intangible assets, net 2,993 3,044
Deferred income taxes 5,791 5,892
Investments 1,037 1,043
Other assets, net of accumulated amortization of
$762 and $717 1,765 1,643
Total assets $ 80,205 $ 79,986
Liabilities and equity
Accounts payable $ 9,041 $ 8,406
Accrued liabilities 10,943 12,239
Advances and billings in excess of related costs 15,336 15,496
Deferred income taxes and income taxes payable 3,178 2,780
Short-term debt and current portion of
long-term debt 2,807 2,353
Total current liabilities 41,305 41,274
Accrued retiree health care 7,498 7,520
Accrued pension plan liability, net 16,730 16,537
Non-current income taxes payable 192 122
Other long-term liabilities 543 907
Long-term debt 8,817 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 3,977 4,033
Treasury stock, at cost - 263,535,351 and
267,556,388 shares (16,364) (16,603)
Retained earnings 28,447 27,524
Accumulated other comprehensive loss (16,094) (16,500)
Total shareholders' equity 5,027 3,515
Noncontrolling interest 93 93
Total equity 5,120 3,608
Total liabilities and equity $ 80,205 $ 79,986
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
March 31
(Dollars in millions) 2012 2011
Cash flows - operating activities:
Net earnings $ 923 $ 586
Adjustments to reconcile net earnings to net cash
provided/(used) by operating activities:
Non-cash items -
Share-based plans expense 50 51
Depreciation and amortization 426 384
Investment/asset impairment charges, net 36 10
Customer financing valuation provision (15)
Loss on disposal of discontinued operations 2 3
Other charges and credits, net 150 113
Excess tax benefits from share-based
payment arrangements (40) (22)
Changes in assets and liabilities -
Accounts receivable (729) (633)
Inventories, net of advances and progress
billings (497) (2,622)
Accounts payable 506 969
Accrued liabilities (1,032) (736)
Advances and billings in excess of related costs (160) 40
Income taxes receivable, payable and deferred 333 217
Other long-term liabilities (45) (66)
Pension and other postretirement plans 724 617
Customer financing, net 196 102
Other (6) 49
Net cash provided/(used) by operating activities 837 (953)
Cash flows - investing activities:
Property, plant and equipment additions (424) (417)
Property, plant and equipment reductions 4 14
Acquisitions, net of cash acquired (16)
Contributions to investments (3,718) (1,644)
Proceeds from investments 1,135 4,701
Receipt of economic development program funds 69
Net cash (used)/provided by investing activities (3,003) 2,707
Cash flows - financing activities:
New borrowings 20 14
Debt repayments (811) (812)
Repayments of distribution rights financing (72) (392)
Stock options exercised, other 28 24
Excess tax benefits from share-based payment
arrangements 40 22
Employee taxes on certain share-based payment
arrangements (64) (15)
Dividends paid (328) (309)
Net cash used by financing activities (1,187) (1,468)
Effect of exchange rate changes on cash and cash
equivalents 22 25
Net (decrease)/increase in cash and cash equivalents (3,331) 311
Cash and cash equivalents at beginning of year 10,049 5,359
Cash and cash equivalents at end of period $ 6,718 $ 5,670
The Boeing Company and Subsidiaries
Summary of Business Segment Data
(Unaudited)
Three months ended
March 31
(Dollars in millions) 2012 2011
Revenues:
Commercial Airplanes $ 10,937 $ 7,118
Defense, Space & Security:
Boeing Military Aircraft 4,308 3,392
Network & Space Systems 1,795 2,346
Global Services & Support 2,130 1,879
Total Defense, Space & Security 8,233 7,617
Boeing Capital 125 143
Other segment 24 36
Unallocated items and eliminations 64 (4)
Total revenues $ 19,383 $ 14,910
Earnings from operations:
Commercial Airplanes $ 1,081 $ 509
Defense, Space & Security:
Boeing Military Aircraft 437 369
Network & Space Systems 73 141
Global Services & Support 232 161
Total Defense, Space & Security 742 671
Boeing Capital 38 52
Other segment (79) (22)
Unallocated items and eliminations (212) (210)
Earnings from operations 1,570 1,000
Other income, net 12 13
Interest and debt expense (119) (130)
Earnings before income taxes 1,463 883
Income tax expense (539) (295)
Net earnings from continuing operations 924 588
Net loss on disposal of discontinued operations,
net of taxes of $1 and $1 (1) (2)
Net earnings $ 923 $ 586
Research and development expense, net:
Commercial Airplanes $ 544 $ 787
Defense, Space & Security:
Boeing Military Aircraft 145 125
Network & Space Systems 107 107
Global Services & Support 29 29
Total Defense, Space & Security 281 261
Other segment 10 9
Total research and development expense, net $ 835 $1,057
Unallocated items and eliminations:
Share-based plans $ (22) $ (22)
Deferred compensation (36) (50)
Pension (189) (95)
Post-retirement (19) (19)
Capitalized interest (21) (15)
Eliminations and other 75 (9)
Total $ (212) $ (210)
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Three months ended
Deliveries March 31
Commercial Airplanes 2012 2011
737 99 87
747 6
767 7 4
777 20 13
787 5
Total 137 104
Defense, Space & Security
Boeing Military Aircraft
F/A-18 Models 12 13
F-15 Models 5 4
C-17 Globemaster 2 3
KC-767 International Tanker 1
CH-47 Chinook 10 7
P-8A Poseidon 1
Network & Space Systems
Commercial and Civil
Satellites 1
Military Satellites 2
March 31 December 31
Contractual backlog 2012 2011
(Dollars in billions)
Commercial Airplanes $305.3 $293.3
Defense, Space &
Security:
Boeing Military Aircraft 29.0 24.1
Network & Space Systems 10.1 9.0
Global Services & Support 14.2 13.3
Total Defense, Space & Security 53.3 46.4
Total contractual backlog $358.6 $339.7
Unobligated backlog $21.2 $15.8
Total backlog $379.8 $355.5
Workforce 172,200 171,700
SOURCE Boeing
END
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