Boeing Reports Strong Third-Quarter Results and Raises 2014 EPS Guidance

Core EPS (non-GAAP)* rose 19 percent to $2.14 on strong operating performance; GAAP EPS of $1.86

Revenue increased 7 percent to $23.8 billion reflecting higher deliveries

Backlog grew to a record $490 billion with over 5,500 commercial airplane orders

Solid operating cash flow before pension contributions* of $1.7 billion

Repurchased 8 million shares for $1 billion

2014 Core EPS guidance increased $0.20 to between $8.10 and $8.30

CHICAGO, Oct. 22, 2014 /PRNewswire/ --

Table 1. Summary Financial Results

Third Quarter

Nine months

(Dollars in Millions, except per share data)

2014

2013

Change

2014

2013

Change

Revenues

$23,784

$22,130

$66,294

$62,838

Non-GAAP*

Core Operating Earnings

$2,430

$2,143

13%

$6,516

$6,038

Core Operating Margin

10.2%

9.7%

0.5 Pts

9.8%

9.6%

0.2 Pts

Core Earnings Per Share

$2.14

$1.80

19%

$6.30

$5.20

21%

Operating Cash Flow Before Pension Contributions

$1,689

$4,308

(61)%

$4,610

$8,312

(45)%

GAAP

Earnings From Operations

$2,119

$1,803

18%

$5,448

$5,047

Operating Margin

8.9%

8.1%

0.8 Pts

8.2%

8.0%

0.2 Pts

Net Earnings

$1,362

$1,158

18%

$3,980

$3,352

19%

Earnings Per Share

$1.86

$1.51

23%

$5.36

$4.36

23%

Operating Cash Flow

$939

$2,808

(67)%

$3,860

$6,799

(43)%

* 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 third-quarter revenue increased 7 percent to $23.8 billion on higher deliveries (Table 1). Core earnings per share (non-GAAP) increased 19 percent* to $2.14, driven by strong performance across the company's businesses. Third-quarter core operating earnings (non-GAAP) increased 13 percent* to $2.4 billion from the same period of the prior year. GAAP earnings per share was $1.86 and GAAP earnings from operations was $2.1 billion.

Core earnings per share guidance for 2014 increased to between $8.10 and $8.30, from $7.90 to $8.10 on continued strong operating performance. GAAP earnings per share guidance for 2014 increased to between $6.90 and $7.10, from $6.85 to $7.05. Operating cash flow before pension contributions* guidance increased to greater than $7 billion. Commercial Airplanes operating margin guidance increased to approximately 10.5 percent.

"Continued strong operating performance across our production and services businesses drove significant growth in earnings-per-share, and enabled us to continue to capture new business, pushing our order backlog to a record $490 billion," said Boeing Chairman and CEO Jim McNerney. "We added net new orders for 501 commercial airplanes, launched the high-capacity 737 MAX 200, captured a NASA contract for the Commercial Crew program, and returned $1.5 billion to shareholders through dividends and share repurchases."

"With three solid quarters behind us and confidence in our ongoing performance, we are increasing our earnings per share outlook for 2014, as our team remains focused on providing value to our customers and shareholders, profitably ramping up airplane production, executing on our development programs, and driving productivity and affordability throughout the enterprise," McNerney said.

Table 2. Cash Flow

Third Quarter

Nine months

(Millions)

2014

2013

2014

2013

Operating Cash Flow Before Pension Contributions*

$1,689

$4,308

$4,610

$8,312

Pension Contributions

($750)

($1,500)

($750)

($1,513)

Operating Cash Flow

$939

$2,808

$3,860

$6,799

Less Additions to Property, Plant & Equipment

($622)

($484)

($1,568)

($1,460)

Free Cash Flow*

$317

$2,324

$2,292

$5,339

Operating cash flow before pension contributions* in the quarter was $1.7 billion, reflecting commercial airplane production rates, strong operating performance and timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 8 million shares for $1 billion, leaving $5.8 billion remaining under the current repurchase authorization expected to be completed over approximately the next one to two years. The company also paid $0.5 billion in dividends in the quarter.



Table 3. Cash, Marketable Securities and Debt Balances	Quarter-End
(Billions)	Q3 14		Q2 14
Cash		$6.7		$7.5
Marketable Securities¹		$3.4		$3.8
Total		$10.1		$11.3
Debt Balances:
The Boeing Company, net of intercompany loans to BCC		$6.4		$6.4
Boeing Capital, including intercompany loans		$2.5		$2.5
Total Consolidated Debt		$8.9		$8.9

¹ Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."

Cash and investments in marketable securities totaled $10.1 billion at quarter-end (Table 3), down from $11.3 billion at the beginning of the quarter. Debt was $8.9 billion, unchanged from the beginning of the quarter.

Total company backlog at quarter-end was a record $490 billion, up from $440 billion at the beginning of the quarter, and included net orders for the quarter of $73 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes

Third Quarter

Nine months

(Dollars in Millions)

2014

2013

Change

2014

2013

Change

Commercial Airplanes Deliveries

186

170

528

476

11%

Revenues

$16,110

$13,987

15%

$43,151

$38,301

13%

Earnings from Operations

$1,797

$1,617

11%

$4,849

$4,289

13 %

Operating Margin

11.2%

11.6%

(0.4) Pts

11.2%

0.0 Pts

Commercial Airplanes third-quarter revenue increased 15 percent to a record $16.1 billion on higher deliveries. Third-quarter operating margin was 11.2 percent, reflecting the dilutive impact of 787 and 747-8 deliveries and higher period costs partially offset by the delivery volume and continued strong operating performance (Table 4).

During the quarter, the company launched the 737 MAX 200 with a commitment from Ryanair for 100 airplanes. The 737 program has won nearly 2,300 firm orders for the 737 MAX since launch. Due to the continued strong demand for the 737 family of airplanes, the company intends to increase the 737 production rate from 42 to 47 per month in 2017, with recently announced plans to increase to 52 per month in 2018. Also during the quarter, the first GEnx-powered 787-9 Dreamliner was delivered.

Commercial Airplanes booked 501 net orders during the quarter. Backlog remains strong with over 5,500 airplanes valued at a record $430 billion.

Defense, Space & Security

Table 5. Defense, Space & Security

Third Quarter

Nine months

(Dollars in Millions)

2014

2013

Change

2014

2013

Change

Revenues¹

Boeing Military Aircraft

$3,537

$3,438

$10,518

$11,059

(5)%

Network & Space Systems

$2,027

$2,231

(9)%

$5,823

$6,240

(7)%

Global Services & Support

$2,349

$2,377

(1)%

$6,952

$7,043

(1)%

Total BDS Revenues

$7,913

$8,046

(2)%

$23,293

$24,342

(4)%

Earnings from Operations¹

Boeing Military Aircraft

$440

$245

80%

$937

$1,058

(11)%

Network & Space Systems

$189

$193

(2)%

$507

$486

Global Services & Support

$227

$235

(3)%

$772

$737

Total BDS Earnings from Operations

$856

$673

27%

$2,216

$2,281

(3)%

Operating Margin

10.8%

8.4%

2.4 Pts

9.5%

9.4%

0.1 Pts

¹During the first quarter of 2014, certain programs were realigned between Boeing Military Aircraft and Global Services & Support.

Defense, Space & Security's third-quarter revenue was $7.9 billion with an operating margin of 10.8 percent (Table 5).

Boeing Military Aircraft (BMA) third-quarter revenue was $3.5 billion, reflecting higher P-8 deliveries. Operating margin increased to 12.4 percent, reflecting improved performance. During the quarter, BMA delivered the first U.S Army Multiyear II configured Chinook.

Network & Space Systems (N&SS) third-quarter revenue was $2.0 billion, reflecting timing on United Launch Alliance (ULA) launches and lower government satellite volume. Operating margin increased to 9.3 percent, reflecting strong performance. During the quarter, N&SS was awarded a contract for NASA's Commercial Crew program.

Global Services & Support (GS&S) third-quarter revenue was $2.3 billion on lower volume, and operating margin was 9.7 percent reflecting delivery mix. During the quarter, GS&S delivered the first upgraded French Airborne Warning and Control System (AWACS) aircraft.

Backlog at Defense, Space & Security was $60 billion, of which 37 percent represents orders with international customers.

Additional Financial Information

Table 6. Additional Financial Information

Third Quarter

Nine months

(Dollars in Millions)

2014

2013

2014

2013

Revenues

Boeing Capital

$91

$94

$263

$303

Unallocated items, eliminations and other

($330)

($413)

($108)

Earnings from Operations

Boeing Capital

($11)

$35

$66

$98

Unallocated items, eliminations and other excluding unallocated pension/postretirement

($212)

($182)

($615)

($630)

Unallocated pension/postretirement

($311)

($340)

($1,068)

($991)

Other income/(loss), net

($9)

$19

$11

$41

Interest and debt expense

($79)

($95)

($252)

($290)

Effective tax rate

32.9%

32.8%

23.6%

30.1%

At quarter-end, Boeing Capital's net portfolio balance was $3.5 billion. Unallocated items, eliminations and other third-quarter revenue decreased from the same period in the prior year due to the elimination of intersegment revenue for two aircraft delivered under operating leases (Table 6). Total pension expense for the third quarter was $715 million, down from $775 million in the same period of the prior year.

Outlook

The company's 2014 financial guidance (Table 7) reflects continued strong performance in both businesses.



Table 7. 2014 Financial Outlook	Current	Prior
(Dollars in Billions, except per share data)	Guidance	Guidance

The Boeing Company
Revenue	$87.5 - 90.5	$87.5 - 90.5
Core Earnings Per Share*	$8.10 - 8.30	$7.90 - 8.10
GAAP Earnings Per Share	$6.90 - 7.10	$6.85 - 7.05
Operating Cash Flow Before Pension Contributions*	> $7	~ $7
Operating Cash Flow ¹	> $6.25	~ $6.25

Commercial Airplanes
Deliveries ²	715 - 725	715 - 725
Revenue	$57.5 - 59.5	$57.5 - 59.5
Operating Margin	~ 10.5%	> 10.0%

Defense, Space & Security (revised for business realignment)
Revenue
Boeing Military Aircraft	~ $13.7	~ $14.2
Network & Space Systems	~ $7.7	~ $7.7
Global Services & Support	~ $9.1	~ $8.6

Total BDS Revenue	$30 - 31	$30 - 31

Operating Margin
Boeing Military Aircraft	~ 9.0%	~ 9.0%
Network & Space Systems	~ 8.5%	~ 8.5%
Global Services & Support	~ 11.0%	~ 11.0%

Total BDS Operating Margin	~ 9.5%	~ 9.5%

Boeing Capital
Portfolio Size	Lower	Lower
Revenue	~ $0.3	~ $0.3
Pre-Tax Earnings	~ $0.05	~ $0.05

Research & Development	~ $3.2	~ $3.2
Capital Expenditures	~ $2.3	~ $2.5
Pension Expense ³	~ $3.3	~ $3.2
Effective Tax Rate ⁴	~ 23%	~ 23%

¹ After discretionary cash pension contributions of $0.75 billion for the current and prior guidance and assuming new aircraft financings of approximately $0.5 billion for the current guidance and under $0.5 billion for the prior guidance

² Assumes approximately 110 787 deliveries for the current and prior guidance

³ Approximately $1.5 billion for the current guidance and $1.3 billion for the prior guidance is expected to be recorded in unallocated items and eliminations

⁴ Assumes the extension of the research and development tax credit

* Non-GAAP measures. Complete definitions of Boeing's non-GAAP measures are on page 6, "Non-G

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