TIDMBOE
Boeing Reports First-Quarter Results and Reaffirms 2016 Guidance
CHICAGO, April 27, 2016 --
* 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
Table 1. Summary First Quarter
Financial Results
(Dollars in 2016 2015 Change
Millions, except per
share data)
Revenues $22,632 $22,149 2%
Non-GAAP*
Core Operating $1,694 $2,132 (21)%
Earnings
Core Operating 7.5% 9.6% (2.1) Pts
Margin
Core Earnings Per $1.74 $1.97 (12)%
Share
GAAP
Earnings From $1,788 $2,019 (11)%
Operations
Operating Margin 7.9% 9.1% (1.2) Pts
Net Earnings $1,219 $1,336 (9)%
Earnings Per Share $1.83 $1.87 (2)%
Operating Cash Flow $1,231 $88 1,299%
* 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 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."
Table 2. Cash Flow First Quarter
(Millions) 2016 2015
Operating Cash Flow $1,231 $88
Less Additions to Property, Plant & Equipment ($748) ($574)
Free Cash Flow* $483 ($486)
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.
Table 3. Cash, Quarter-End
Marketable Securities
and Debt Balances
(Billions) Q1 16 Q4 15
Cash $7.9 $11.3
Marketable Securities1 $0.5 $0.8
Total $8.4 $12.1
Debt Balances:
The Boeing Company, net $7.6 $7.6
of intercompany loans to
BCC
Boeing Capital, $2.4 $2.4
including intercompany
loans
Total Consolidated Debt $10.0 $10.0
1 Marketable securities consists primarily of time
deposits due within one year classified as
"short-term investments."
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
Table 4. Commercial Airplanes First Quarter
(Dollars in Millions) 2016 2015 Change
Commercial Airplanes Deliveries 176 184 (4)%
Revenues $14,399 $15,381 (6)%
Earnings from Operations $1,033 $1,617 (36)%
Operating Margin 7.2% 10.5% (3.3) Pts
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
Table 5. First Quarter
Defense, Space &
Security
(Dollars in 2016 2015 Change
Millions)
Revenues1
Boeing Military $3,659 $2,726 34%
Aircraft
Network & Space $1,735 $1,732 -%
Systems
Global Services $2,562 $2,251 14%
& Support
Total BDS $7,956 $6,709 19%
Revenues
Earnings from
Operations1
Boeing Military $334 $259 29%
Aircraft
Network & Space $148 $167 (11)%
Systems
Global Services $340 $317 7%
& Support
Total BDS $822 $743 11%
Earnings from
Operations
Operating Margin 10.3% 11.1% (0.8) Pts
1 During the first quarter of 2016, certain programs were
realigned between Boeing Military Aircraft and Global Services
& Support.
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
Table 6. Additional Financial Information First Quarter
(Dollars in Millions) 2016 2015
Revenues
Boeing Capital $64 $86
Unallocated items, eliminations and other $213 ($27)
Earnings from Operations
Boeing Capital $5 $20
Unallocated pension/postretirement $94 ($113)
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Other unallocated items and eliminations ($166) ($248)
Other income/(loss), net $26 ($12)
Interest and debt expense ($73) ($61)
Effective tax rate 30.0% 31.3%
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.
Table 7. 2016 Current
Financial Outlook
(Dollars in Billions, Guidance
except per share data)
The Boeing Company
Revenue $93.0 - 95.0
Core Earnings Per $8.15 - 8.35
Share*
GAAP Earnings Per $8.45 - 8.65
Share
Operating Cash Flow $10.0
Commercial Airplanes
Deliveries 740 - 745
Revenue $64.0 - 65.0
Operating Margin 9.0%
Defense, Space &
Security
Revenue
Boeing Military $12.3
Aircraft
Network & Space $7.3
Systems
Global Services & $9.4
Support
Total BDS Revenue $28.5 - 29.5
Operating Margin
Boeing Military 10.0%
Aircraft
Network & Space 9.0%
Systems
Global Services & 11.5%
Support
Total BDS Operating >10.0%
Margin
Boeing Capital
Portfolio Size Stable
Revenue $0.3
Pre-Tax Earnings $0.05
Research & Development $3.6
Capital Expenditures $2.8
Pension Expense 1 $2.1
Effective Tax Rate 30.0%
1 Approximately ($0.1) billion is expected to be recorded
in unallocated items and eliminations
* 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 Ben Hackman
(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 2016 2015
share data)
Sales of products $19,885 $19,485
Sales of services 2,747 2,664
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Total revenues 22,632 22,149
Cost of products (16,945) (16,380)
Cost of services (2,136) (2,100)
Boeing Capital interest expense (16) (16)
Total costs and expenses (19,097) (18,496)
3,535 3,653
Income from operating investments, 54 79
net
General and administrative expense (888) (945)
Research and development expense, net (917) (769)
Gain on dispositions, net 4 1
Earnings from operations 1,788 2,019
Other income/(loss), net 26 (12)
Interest and debt expense (73) (61)
Earnings before income taxes 1,741 1,946
Income tax expense (522) (610)
Net earnings $1,219 $1,336
Basic earnings per share $1.85 $1.89
Diluted earnings per share $1.83 $1.87
Cash dividends paid per share $1.09 $0.91
Weighted average diluted shares 665.8 714.2
(millions)
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
(Dollars in millions, except per share data) March 31 December 31
2016 2015
Assets
Cash and cash equivalents $7,886 $11,302
Short-term and other investments 466 750
Accounts receivable, net 9,711 8,713
Current portion of customer financing, net 258 212
Inventories, net of advances and progress billings 47,266 47,257
Total current assets 65,587 68,234
Customer financing, net 2,980 3,358
Property, plant and equipment, net of accumulated 12,269 12,076
depreciation of $16,476 and $16,286
Goodwill 5,132 5,126
Acquired intangible assets, net 2,594 2,657
Deferred income taxes 267 265
Investments 1,297 1,284
Other assets, net of accumulated amortization of 1,421 1,408
$478 and $451
Total assets $91,547 $94,408
Liabilities and equity
Accounts payable $11,558 $10,800
Accrued liabilities 12,790 14,014
Advances and billings in excess of related costs 23,926 24,364
Short-term debt and current portion of long-term 1,243 1,234
debt
Total current liabilities 49,517 50,412
Deferred income taxes 2,297 2,392
Accrued retiree health care 6,614 6,616
Accrued pension plan liability, net 18,196 17,783
Other long-term liabilities 2,096 2,078
Long-term debt 8,721 8,730
Shareholders' equity:
Common stock, par value $5.00 - 1,200,000,000 shares 5,061 5,061
authorized; 1,012,261,159 shares issued
Additional paid-in capital 4,784 4,834
Treasury stock, at cost - 372,446,158 and (32,939) (29,568)
345,637,354 shares
Retained earnings 39,975 38,756
Accumulated other comprehensive loss (12,838) (12,748)
Total shareholders' equity 4,043 6,335
Noncontrolling interests 63 62
Total equity 4,106 6,397
Total liabilities and equity $91,547 $94,408
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
March 31
(Dollars in millions) 2016 2015
Cash flows - operating activities:
Net earnings $1,219 $1,336
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Non-cash items -
Share-based plans expense 51 50
Depreciation and amortization 443 459
Investment/asset impairment charges, net 33 17
Customer financing valuation benefit (2) (2)
Gain on dispositions, net (4) (1)
Other charges and credits, net 84 76
Excess tax benefits from share-based payment (44) (112)
arrangements
Changes in assets and liabilities -
Accounts receivable (1,002) (389)
Inventories, net of advances and progress billings (56) (1,822)
Accounts payable 960 848
Accrued liabilities (467) (900)
Advances and billings in excess of related costs (435) (422)
Income taxes receivable, payable and deferred 273 443
Other long-term liabilities (116) (82)
Pension and other postretirement plans 79 608
Customer financing, net 276 31
Other (61) (50)
Net cash provided by operating activities 1,231 88
Cash flows - investing activities:
Property, plant and equipment additions (748) (574)
Property, plant and equipment reductions 11
Contributions to investments (204) (807)
Proceeds from investments 493 1,159
Other 10 8
Net cash used by investing activities (438) (214)
Cash flows - financing activities:
New borrowings 115 761
Debt repayments (128) (813)
Stock options exercised 42 231
Excess tax benefits from share-based payment 44 112
arrangements
Employee taxes on certain share-based payment (76) (87)
arrangements
Common shares repurchased (3,501) (2,500)
Dividends paid (717) (639)
Net cash used by financing activities (4,221) (2,935)
Effect of exchange rate changes on cash and cash 12 (17)
equivalents
Net decrease in cash and cash equivalents (3,416) (3,078)
Cash and cash equivalents at beginning of year 11,302 11,733
Cash and cash equivalents at end of period $7,886 $8,655
The Boeing Company and Subsidiaries
Summary of Business Segment Data
(Unaudited)
Three months ended
March 31
(Dollars in millions) 2016 2015
Revenues:
Commercial Airplanes $14,399 $15,381
Defense, Space & Security:
Boeing Military Aircraft 3,659 2,726
Network & Space Systems 1,735 1,732
Global Services & Support 2,562 2,251
Total Defense, Space & Security 7,956 6,709
Boeing Capital 64 86
Unallocated items, eliminations and other 213 (27)
Total revenues $22,632 $22,149
Earnings from operations:
Commercial Airplanes $1,033 $1,617
Defense, Space & Security:
Boeing Military Aircraft 334 259
Network & Space Systems 148 167
Global Services & Support 340 317
Total Defense, Space & Security 822 743
Boeing Capital 5 20
Segment operating profit 1,860 2,380
Unallocated items, eliminations and other (72) (361)
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April 27, 2016 07:34 ET (11:34 GMT)
Earnings from operations 1,788 2,019
Other income/(loss), net 26 (12)
Interest and debt expense (73) (61)
Earnings before income taxes 1,741 1,946
Income tax expense (522) (610)
Net earnings $1,219 $1,336
Research and development expense, net:
Commercial Airplanes $671 $543
Defense, Space & Security 258 224
Other (12) 2
Total research and development expense, net $917 $769
Unallocated items, eliminations and other:
Share-based plans ($23) ($21)
Deferred compensation 16 (58)
Amortization of previously capitalized interest (30) (29)
Eliminations and other unallocated items (129) (140)
Sub-total (included in core operating earnings) (166) (248)
Pension 45 (152)
Postretirement 49 39
Total unallocated items, eliminations and other ($72) ($361)
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries Three months ended
March 31
Commercial Airplanes 2016 2015
737 121 121
747 1 4
767 1 5
777 23 24
787 30 30
Total 176 184
Note: Deliveries under operating lease are identified by parentheses.
Defense, Space & Security
Boeing Military Aircraft
AH-64 Apache (New) 7 6
AH-64 Apache (Remanufactured) 11 10
C-17 Globemaster III 3 1
CH-47 Chinook (New) 3 6
CH-47 Chinook (Renewed) 9 4
F-15 Models 4 1
F/A-18 Models 8 11
P-8 Models 4 2
Global Services & Support
AEW&C
C-40A 1
Network & Space Systems
Commercial and Civil Satellites 1
Military Satellites
Contractual backlog (Dollars in billions) March 31 December 31
2016
2015
Commercial Airplanes $423.0 $431.4
Defense, Space & Security:
Boeing Military Aircraft 22.1 19.9
Network & Space Systems 8.0 7.4
Global Services & Support 17.1 17.9
Total Defense, Space & Security 47.2 45.2
Total contractual backlog $470.2 $476.6
Unobligated backlog $9.8 $12.7
Total backlog $480.0 $489.3
Workforce 159,100 161,400
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
2016 2015 2016
Revenues $22,632 $22,149
GAAP Earnings From Operations $1,788 $2,019
GAAP Operating Margin 7.9% 9.1%
Unallocated Pension/ ($94) $113 ($300)
Postretirement Expense
Core Operating Earnings $1,694 $2,132
(non-GAAP)
Core Operating Margin 7.5% 9.6%
(non-GAAP)
Increase/(Decrease) in GAAP (11%)
Earnings From Operations
Increase/(Decrease) in Core (21%)
Operating Earnings (non-GAAP)
GAAP Diluted Earnings Per $1.83 $1.87 $8.45 -
Share $8.65
Unallocated Pension/ ($0.09) $0.10 ($0.30)
Postretirement Expense1
Core Earnings Per Share $1.74 $1.97 $8.15 -
(non-GAAP) $8.35
Weighted Average Diluted 665.8 714.2 645 - 650
Shares (millions)
Increase/(Decrease) in GAAP (2%)
Earnings Per Share
Increase/(Decrease) in Core (12%)
Earnings Per Share (non-GAAP)
1 Earnings per share impact is
presented net of the federal
statutory tax rate of 35.0 percent.
END
(END) Dow Jones Newswires
April 27, 2016 07:34 ET (11:34 GMT)
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