• Core EPS (non-GAAP)* rose 24 percent to $1.73 on strong operating performance; GAAP EPS of $1.44
• Revenue of $18.9 billion reflects higher deliveries on the 737 and 777 offset by lower 787 deliveries
• Backlog grew to a record $392 billion, including $20 billion of net orders during the quarter
• Cash and marketable securities of $11.8 billion provide strong liquidity
• 2013 financial and deliveries outlook reaffirmed

Table 1. Summary Financial Results		First Quarter
(Dollars in Millions, except per share data)		2013				2012				Change
Revenues			$18,893				$19,383			(3)%
Non-GAAP*
Core Operating Earnings			$1,867				$1,773			5 %
Core Operating Margin		9.9%				9.1%				0.8 Pts
Core Earnings Per Share			$1.73				$1.40			24 %
Operating Cash Flow Before Pension Contributions			$524				$837			(37)%
GAAP
Earnings From Operations			$1,528				$1,565			(2)%
Operating Margin		8.1%				8.1%				0.0 Pts
Net Income			$1,106				$923			20 %
Earnings Per Share			$1.44				$1.22			18 %
Operating Cash Flow			$524				$837			(37)%

 

 

The Boeing Company (NYSE: BA) reported first-quarter core earnings per share (non-GAAP) increased 24 percent* to $1.73, driven by strong performance across the company’s businesses (Table 1). First-quarter 2013 results included the expected benefit of $0.19 per share for the 2012 research and development tax credit; first-quarter 2012 included a benefit of $0.11 per share related to a favorable court judgment on satellite litigation. First-quarter core operating earnings (non-GAAP) increased 14 percent* to $1.9 billion from the same period of the prior year when excluding the benefit of $131 million related to the favorable court judgment. First-quarter revenue was $18.9 billion, earnings from operations was $1.5 billion and earnings per share was $1.44. The company reaffirmed its 2013 financial and deliveries guidance.

“Strong core operating performance fueled by productivity gains and solid program execution drove higher company earnings and double-digit operating margins in both major businesses during the quarter,” said Boeing Chairman, President and Chief Executive Officer Jim McNerney. “Commercial Airplanes worked around the clock to resolve the 787 battery issue while also successfully increasing production rates on the 737 and 777 programs. Defense, Space & Security continued to perform exceptionally well, meeting tough affordability goals while investing in future growth.”

“Our first priority in the days ahead is to fully restore our customers’ 787 fleets to service and resume production deliveries. Our outlook for the year is positive, and our financial and delivery guidance is reaffirmed as we remain focused on the profitable ramp up in commercial airplane production rates, disciplined execution of our development programs, and continued growth in core, adjacent and international defense and space markets.”

 

Operating cash flow in the quarter was $0.5 billion, reflecting inventory build on the 787 program offset by timing of receipts and expenditures (Table 2).

 

 

Cash and investments in marketable securities totaled $11.8 billion at quarter-end (Table 3), down from $13.5 billion at the beginning of the year, primarily due to the pay-down of maturing debt. Debt was $9.2 billion, down from $10.4 billion at year-end, due to the maturities.

Total company backlog at year-end was a record $392 billion, up from $390 billion at the beginning of the year, and included net orders for the quarter of $20 billion.

Segment Results

Commercial Airplanes

 

Boeing Commercial Airplanes first-quarter revenue decreased to $10.7 billion on delivery mix and lower services revenue. First-quarter operating margin improved to 11.4%, reflecting the delivery mix and lower R&D, partially offset by higher period costs (Table 4).

During the quarter, Commercial Airplanes delivered the first 777 aircraft produced at a record production rate of 8.3-per-month and reached a four-year contract extension with the Society of Professional Engineering Employees in Aerospace (SPEEA). In April, Commercial Airplanes delivered the first 737 produced at a record production rate of 38-per-month.

In April, approval was given by the Federal Aviation Administration (FAA) for airlines to begin the process of returning the 787 to service with an enhanced battery system. The company is committed to the safety of all of our airplanes and has worked diligently alongside authorities to further enhance the safety of the 787.

Commercial Airplanes booked 209 net orders during the quarter. Backlog remains strong with more than 4,400 airplanes valued at a record $324 billion.

Boeing Defense, Space & Security

 

Boeing Defense, Space & Security’s (BDS) first-quarter revenue was $8.1 billion, while operating margin was 10.3 percent (Table 5).

Boeing Military Aircraft (BMA) first-quarter revenue was $4.1 billion, primarily reflecting lower revenue on the F-15 program, partially offset by higher C-17 and Apache deliveries. Operating margin increased to 10.5 percent, due to delivery mix. During the quarter, BMA delivered the first Indian Air Force C-17 to flight test and completed the second Phantom Eye flight.

Network & Space Systems (N&SS) first-quarter revenue increased to $2.0 billion, primarily driven by higher volume in satellite programs as well as the Space Launch System program. Operating margin increased to 8.0 percent, reflecting the increased volume and mix in satellite programs. During the quarter, N&SS was awarded a contract in the small satellite business and had a successful flight test of the Ground-based Midcourse Defense (GMD) system.

Global Services & Support (GS&S) first-quarter revenue was $2.0 billion, reflecting lower volume in integrated logistics. Operating margin increased to 12.1 percent, reflecting improved performance in maintenance, modification and upgrades.

Backlog at BDS was $68 billion, of which 42 percent represents orders with international customers.

Additional Financial Information

 

At quarter-end, Boeing Capital Corporation’s (BCC) net portfolio balance was $4.2 billion and debt-to-equity ratio was 5.0-to-1.

Unallocated items and eliminations in the first quarter of 2012 included a $131 million favorable court judgment on satellite litigation. Total pension expense for the first quarter was $791 million up from $655 million in the same period last year.

The company’s income tax expense was $332 million in the quarter, compared to $539 million in the same period of last year, as the expected $145 million benefit for the 2012 research and development credit was reflected in the first quarter of 2013.

Outlook

The company’s 2013 financial guidance (Table 7) is reaffirmed and reflects continued strong core performance, generating an expected 5 percent increase in core earnings per share (non-GAAP).

 

 

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.

Increase in Core Operating Earnings Excluding Favorable Court Judgment

The company is disclosing the increase in core operating earnings in first quarter of 2013 over first quarter of 2012 excluding the impact of the favorable court judgment in the first quarter of 2012. The company believes it is useful to occasionally exclude certain items that are not reflective of underlying business performance and that can distort period to period performance comparisons. Management uses similar measures for purposes of evaluating and forecasting underlying business performance.

Operating Cash Flow Before Pension Contributions

Operating cash flow before pension contributions is defined as GAAP operating cash flow less pension contributions. Management believes operating cash flow before pension contributions provides additional insights into underlying business performance. Management uses operating cash flow before pension contributions as a measure to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and operating cash flow before pension contributions.

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 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 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:  Troy Lahr or Matt Welch (312) 544-2140

Communications:   Chaz Bickers (312) 544-2002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE  Boeing