Boeing Reports First-Quarter Earnings
– First-quarter net income was
– Revenue rose 3 percent to
– Operating cash flow was
– Backlog at
– 2009 earnings outlook reduced to reflect changes in commercial market; outlook for Integrated Defense Systems is reaffirmed on solid execution
Table 1. Summary Financial Results
First Quarter
-------------
(Millions, except per share data) 2009 2008 Change
--------------------------------- ---- ---- ------
Revenues $16,502 $15,990 3%
Earnings From Operations $1,025 $1,799 (43%)
Operating Margin 6.2% 11.3% (5.1)Pts
Reported Net Income $610 $1,211 (50%)
Reported Earnings per Share $0.86 $1.62 (47%)
Operating Cash Flow $193 $1,933 N.A.
Excluding the effects of a weakened commercial airplane market, solid execution on programs across Integrated Defense Systems and Commercial Airplanes underpinned the quarter’s results. Results were also impacted by a less favorable delivery mix in defense and higher expense for research and development.
“The expanded global economic downturn is presenting unprecedented challenges in our commercial airplane markets,” said Boeing Chairman, President, and Chief Executive Officer
Boeing’s quarterly revenue rose 3 percent to
Boeing lowered its 2009 earnings per share guidance to between
Total company backlog at quarter-end was
Table 2. Cash Flow
First Quarter
-------------
(Millions) 2009 2008
---------- ---- ----
Operating Cash Flow (1) $193 $1,933
Less Additions to Property, Plant & Equipment ($442) ($409)
----- -----
Free Cash Flow* ($249) $1,524
---------------- ----- ------
(1) Operating cash flow for the first quarter of 2008 includes a
$506 million contribution to pension plans.
* Non-GAAP measure. A complete definition and reconciliation
of Boeing's use of non-GAAP measures, identified by an
asterisk (*), is found on page 8, "Non-GAAP Measure
Disclosure."
Cash and investments in marketable securities totaled
Table 3. Cash, Marketable Securities and Debt Balances
Quarter-
End
--------
(Billions) 1Q09 4Q08
---------- ---- ----
Cash $4.2 $3.3
Marketable Securities(1) $0.5 $0.3
---- ----
Total $4.7 $3.6
Debt Balances:
The Boeing Company $5.7 $3.9
Boeing Capital Corporation $3.6 $3.6
---- ----
Total Consolidated Debt $9.3 $7.5
-------------------------- ---- ----
(1) Marketable securities consists primarily of investment-grade
instruments classified as "short-term investments" and
"investments."
Segment Results
Commercial Airplanes
Boeing Commercial Airplanes (BCA) first-quarter revenues rose to
Table 4. Commercial Airplanes Operating Results
First Quarter
-------------
(Millions, except
deliveries & margin percent) 2009 2008 Change
----------------------------- ---- ---- ------
Commercial Airplanes Deliveries 121 115 5%
Revenues $8,554 $8,161 5%
Earnings from Operations $417 $983 (58%)
Operating Margins 4.9% 12.0% (7.1)Pts
----------------- --- ---- --------
Margins on all programs were reduced by the lower price escalation forecasts, the decision to reduce 777 production rates for deliveries beginning in
BCA booked 28 gross orders during the quarter, but removed 32 others from its order book as previously disclosed. Contractual backlog was
Progress on the new 787 Dreamliner continues on the revised schedule announced in December. The company expects the first flight to occur in the second quarter of 2009 with deliveries to begin in the first quarter of 2010. Recent milestones include completion of build-verification tests on Airplane 1, clearance of all systems hardware and Rolls-Royce engines for first flight, completion of power-on for Airplane 2, and the beginning of final assembly for the sixth and final flight test airplane. The program saw orders for 32 airplanes cancelled by mutual agreement with customers during the quarter. Total firm orders are now 886 airplanes from 57 customers.
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) first-quarter revenues rose 2 percent to
Table 5. Integrated Defense Systems Operating Results
First Quarter
-------------
(Millions, except margin percent) 2009 2008 Change
--------------------------------- ---- ---- ------
Revenues
Boeing Military Aircraft $3,010 $3,202 (6%)
Network & Space Systems $2,678 $2,694 (1%)
Global Services & Support $2,032 $1,679 21%
------ ------ --
Total IDS Revenues $7,720 $7,575 2%
Earnings from Operations
Boeing Military Aircraft $282 $384 (27%)
Network & Space Systems $207 $267 (22%)
Global Services & Support $220 $209 5%
---- ---- --
Total IDS Earnings from Operations $709 $860 (18%)
Operating Margins 9.2% 11.4% (2.2)Pts
Boeing Military Aircraft delivered first-quarter operating earnings of
Network & Space Systems achieved significant milestones on several key development programs, including Future Combat System and Ground-based Midcourse Defense. Operating margin was 7.7 percent driven by strong performance across the segment’s array of programs partially offset by lower earnings on the United Launch Alliance joint venture. Last year’s results included a favorable settlement on a satellite program.
Global Services & Support revenues increased 21 percent on higher volume in its broad portfolio of services and logistics programs. During the quarter, GS&S continued to generate double-digit operating margins of 10.8 percent. In this segment, the company captured contracts for V-22 performance-based logistics as well as maintenance and operations support for Ground-based Midcourse Defense.
IDS’ backlog is
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported first-quarter pre-tax earnings of
Table 6. Boeing Capital Corporation Operating Results
First
Quarter
--------
(Millions) 2009 2008 Change
---------- ---- ---- ------
Revenues $163 $185 (12%)
Earnings from Operations $37 $61 (39%)
Additional Information
The “Other” segment consists primarily of Boeing Engineering, Operations and Technology, as well as certain results related to the consolidation of all business units. Other segment expense was
Unallocated expense was
Total pension expense for the quarter increased to
Outlook
The 2009 financial guidance reflects challenging commercial and defense markets, as well as company plans to reduce discretionary spending and restructure various internal organizations to drive higher levels of productivity. The company expects to issue 2010 financial guidance later in the year.
Boeing’s 2009 revenue guidance is reaffirmed at
Commercial Airplanes’ 2009 delivery guidance remains at between 480 and 485 airplanes and is sold out. BCA’s 2009 revenue is unchanged between
Earlier this month, the U.S. Department of Defense outlined its 2010 budget priorities. Boeing will be evaluating the defense budget as it progresses through Congress to determine the potential future effects on our business outlook. The company has been anticipating changes in the U.S. defense budget for some time. The company continues to consider IDS well-positioned with a diverse portfolio of defense, space and security programs, and will increase its focus on international defense opportunities and pursuit of adjacent markets in the U.S. IDS guidance for 2009 remains unchanged with revenue between
Boeing Capital Corporation continues to expect that the aircraft finance portfolio will increase modestly as the amount of aircraft financing in 2009 will exceed normal portfolio runoff due to customer payments and depreciation.
Boeing’s 2009 R&D forecast is between
Table 7. Financial Outlook
(Billions, except per share data) 2009
--------------------------------- ----
The Boeing Company
Revenues $68 - $69
Earnings Per Share (GAAP) $4.70 - $5.00
Operating Cash Flow(1) > $2.5
Boeing Commercial Airplanes
Deliveries 480 - 485
Revenues $34 - $35
Operating Margin 8% - 8.5%
Integrated Defense Systems
Revenues
Boeing Military Aircraft ~ $14.0
Network & Space Systems ~ $11.5
Global Services & Support ~ $8.0
------
Total IDS Revenues $33 - $34
Operating Margin
Boeing Military Aircraft ~10%
Network & Space Systems ~9%
Global Services & Support ~11.5%
-----
Total IDS Operating Margin ~10%
Boeing Capital Corporation
Portfolio Size Modest increase
Revenue ~ $0.6
Return on Assets >1.0%
Research & Development $3.6 - $3.8
Capital Expenditures ~ $1.4
-------------------- ------
(1) After pension contributions of $0.5 billion and
assumed $1 billion for new aircraft financings in
2009.
Non-GAAP Measure Disclosure
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.
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements in this report may be “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “targets,” and similar expressions are used to identify these forward-looking statements. Forward-looking statements are based upon assumptions about future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak to events only as of the date they are made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by federal securities laws. Specific factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, those set forth below and other important factors disclosed previously and from time to time in our other filings with the Securities and Exchange Commission: the effect of economic conditions in
CONTACT:
Investor Relations: Diana Sands or Rob Young (312) 544-2140
Communications: Todd Blecher (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) 2009 2008
------------------------------------------- ---- ----
Sales of products $13,835 $13,688
Sales of services 2,667 2,302
----------------- ----- -----
Total revenues 16,502 15,990
Cost of products (11,579) (10,788)
Cost of services (2,119) (1,755)
Boeing Capital Corporation interest expense (47) (62)
------------------------------------------- --- ---
Total costs and expenses (13,745) (12,605)
------------------------ ------- -------
2,757 3,385
Income from operating investments, net 32 58
General and administrative expense (791) (775)
Research and development expense, net (970) (869)
Loss on dispositions/business shutdown, net (3)
------------------------------------------- -- -----
Earnings from operations 1,025 1,799
Other (loss)/income, net (36) 100
Interest and debt expense (57) (46)
------------------------- --- ---
Earnings before income taxes 932 1,853
Income tax expense (317) (647)
------------------ ---- ----
Net earnings from continuing operations 615 1,206
Net (loss)/gain on disposal of discontinued
operations, net of taxes of $3 and ($3) (5) 5
------------------------------------------- -- -
Net earnings $610 $1,211
============ ==== ======
Basic earnings per share from continuing
operations $0.88 $1.63
Net (loss)/gain on disposal of discontinued
operations, net of taxes (0.01) 0.01
------------------------------------------- ----- ----
Basic earnings per share $0.87 $1.64
======================== ===== =====
Diluted earnings per share from continuing
operations $0.87 $1.61
Net (loss)/gain on disposal of discontinued
operations, net of taxes (0.01) 0.01
------------------------------------------- ----- ----
Diluted earnings per share $0.86 $1.62
========================== ===== =====
Cash dividends paid per share $0.42 $0.40
============================= ===== =====
Weighted average diluted shares (millions) 707.4 747.4
========================================== ===== =====
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
March 31 December 31
(Dollars in millions except per share data) 2009 2008
------------------------------------------- ---- ----
Assets
Cash and cash equivalents $4,237 $3,268
Short-term investments 213 11
Accounts receivable, net 6,238 5,602
Current portion of customer
financing, net 353 425
Deferred income taxes 1,114 1,046
Inventories, net of advances and progress
billings 15,649 15,612
----------------------------------------- ------ ------
Total current assets 27,804 25,964
Customer financing, net 5,854 5,857
Property, plant and equipment, net of
accumulated depreciation of $12,402 and
$12,280
8,798 8,762
Goodwill 3,654 3,647
Other acquired intangibles, net 2,627 2,685
Deferred income taxes 3,880 4,114
Investments 1,261 1,328
Pension plan assets, net 12 16
Other assets, net of accumulated
amortization of $437 and $400 1,450 1,406
-------------------------------- ----- -----
$55,340 $53,779
===================================== ======= =======
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $17,553 $17,435
Advances and billings in excess of
related costs 11,527 12,737
Income taxes payable 355 41
Short-term debt and current portion of
long-term debt 530 560
-------------------------------------- --- ---
Total current liabilities 29,965 30,773
Deferred income taxes
Accrued retiree health care 7,336 7,322
Accrued pension plan liability, net 8,484 8,383
Non-current income taxes payable 1,035 1,154
Other long-term liabilities 287 337
Long-term debt 8,742 6,952
Shareholders' equity:
Common shares, par value $5.00 -
1,200,000,000 shares authorized;
1,012,261,159 and 1,012,261,159
shares issued 5,061 5,061
Additional paid-in capital 3,289 3,456
Treasury shares, at cost -
286,098,252 and 285,661,944 (17,756) (17,758)
Retained earnings 23,284 22,675
Accumulated other comprehensive loss (13,511) (13,525)
ShareValue Trust shares - 28,861,019
and 28,460,769 (1,029) (1,203)
------------------------------------- ------ ------
Total Boeing shareholders' equity (662) (1,294)
Noncontrolling interest 153 152
----------------------- --- ---
Total shareholders' equity (509) (1,142)
--------------------------------- ---- ------
$55,340 $53,779
======= =======
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three months
ended
March 31
(Dollars in millions) 2009 2008
--------------------- ---- ----
Cash flows - operating activities:
Net earnings $610 $1,211
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Non-cash items -
Share-based plans expense 60 45
Depreciation 335 322
Amortization of other acquired
intangibles 49 40
Amortization of debt discount/premium and
issuance costs 2 2
Investment/asset impairment
charges, net 21
Customer financing valuation
provision/(benefit) 9 (6)
Loss/(gain) on disposal of
discontinued operations 8 (8)
Loss on dispositions/business
shutdown, net 3
Other charges and credits, net 63 56
Excess tax benefits from share-based
payment arrangements (5) (43)
Changes in assets and liabilities -
Accounts receivable (869) 197
Inventories, net of advances and
progress billings (82) (604)
Accounts payable and other
liabilities 475 628
Advances and billings in excess of
related costs (1,210) 113
Income taxes receivable, payable and
deferred 534 502
Other long-term liabilities (51) (127)
Pension and other
postretirement plans 304 (419)
Customer financing, net 21 72
Other (84) (48)
---------------------------------------------- --- ---
Net cash provided by operating
activities 193 1,933
---------------------------------------------- --- -----
Cash flows - investing activities:
Property, plant and equipment additions (442) (409)
Property, plant and equipment reductions 25 9
Acquisitions, net of cash acquired (30) (40)
Contributions to investments (200) (2,958)
Proceeds from investments 49 3,630
Other (95)
---------------------------------------------- ---- ---
Net cash (used)/provided by
investing activities (598) 137
------------------------------------------- ---- ---
Cash flows - financing activities:
New borrowings 1,827 5
Debt repayments (71) (32)
Stock options exercised, other 15
Excess tax benefits from share-based
payment arrangements 5 43
Employee taxes on certain share-based
payment arrangements (15)
Common shares repurchased (50) (1,158)
Dividends paid (305) (306)
---------------------------------------------- ---- ----
Net cash provided/(used) by
financing activities 1,391 (1,433)
---------------------------------------------- ----- ------
Effect of exchange rate changes on cash and
cash equivalents (17) 28
---------------------------------------------- --- --
Net increase in cash and cash equivalents 969 665
Cash and cash equivalents at beginning of year 3,268 7,042
---------------------------------------------- ----- -----
Cash and cash equivalents at end of period $4,237 $7,707
============================================== ====== ======
The Boeing Company and Subsidiaries
Summary of Business Segment Data
(Unaudited)
Three months
ended
March 31
(Dollars in millions) 2009 2008
--------------------- ---- ----
Revenues:
Commercial Airplanes $8,554 $8,161
Integrated Defense Systems:
Boeing Military Aircraft 3,010 3,202
Network and Space Systems 2,678 2,694
Global Services and Support 2,032 1,679
--------------------------------- ----- -----
Total Integrated Defense Systems 7,720 7,575
Boeing Capital Corporation 163 185
Other 39 75
Unallocated items and eliminations 26 (6)
---------------------------------- -- --
Total revenues $16,502 $15,990
================= ======= =======
Earnings from operations:
Commercial Airplanes $417 $983
Integrated Defense Systems:
Boeing Military Aircraft 282 384
Network and Space Systems 207 267
Global Services and Support 220 209
--------------------------------- --- ---
Total Integrated Defense Systems 709 860
Boeing Capital Corporation 37 61
Other (23) (50)
Unallocated items and eliminations (115) (55)
---------------------------------- ---- ---
Earnings from operations 1,025 1,799
Other (loss)/income, net (36) 100
Interest and debt expense (57) (46)
---------------------------- --- ---
Earnings before income taxes 932 1,853
Income tax expense (317) (647)
--------------------- ---- ----
Net earnings from continuing operations 615 1,206
Net (loss)/gain on disposal of discontinued
operations, net of taxes of $3 and ($3) (5) 5
------------------------------------------- -- -
Net earnings 610 1,211
=============== === =====
Research and development expense:
Commercial Airplanes $711 $633
Integrated Defense Systems:
Boeing Military Aircraft 130 125
Network and Space Systems 86 76
Global Services and Support 34 34
--------------------------------- -- --
Total Integrated Defense Systems 250 235
Other 9 1
-------- - -
Total research and development expense $970 $869
========================================= ==== ====
Unallocated items and eliminations:
Share-based plans $(57) $(30)
Deferred compensation 23 61
Pension 23 (67)
Postretirement (23) (20)
Capitalized interest (15) (13)
Other (66) 14
-------- --- --
Total $(115) $(55)
===== ===== ====
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Three months ended
Deliveries March 31
---------- --------
Commercial Airplanes 2009 2008
-------------------- ---- ----
737 Next-Generation 91 87
747 4 4
767 3 3
777 23 21
--- -- --
Total 121 115
========= === ===
--------------------------
Integrated Defense Systems
--------------------------
Boeing Military Aircraft
F/A-18 Models 10 10
F-15 4 4
C-17 Globemaster 3 3
KC-767 Tanker 1 2
CH-47 Chinook 2
T-45TS Goshawk 2 1
AH-64 Apache 5
Network and Space Systems
Commercial and Civil Satellites 1
Military Satellites 1
March 31 December 31
Contractual backlog (Dollars in billions) 2009 2008
----------------------------------------- ---- ----
Commercial Airplanes $266.0 $278.6
Integrated Defense Systems:
Boeing Military Aircraft 28.2 25.7
Network and Space Systems 8.9 8.9
Global Services and Support 11.6 10.7
-------------------------------- ---- ----
Total Integrated Defense Systems 48.7 45.3
----------------------------------- ---- ----
Total contractual backlog $314.7 $323.9
========================= ====== ======
Unobligated backlog $24.7 $28.2
=================== ===== =====
Total backlog $339.4 $352.1
============= ====== ======
Workforce 160,900 162,200
========= ======= =======
SOURCE Boeing Company