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Boeing Reports Strong Third-Quarter Results and Raises 2013 EPS Guidance

  • Core EPS (non-GAAP)* rose 16 percent to $1.80 on strong operating performance; GAAP EPS of $1.51
  • Revenue increased 11 percent to $22.1 billion reflecting higher commercial deliveries
  • Backlog grew to a record $415 billion, including $27 billion of net orders during the quarter
  • Operating cash flow before pension contributions* increased to $4.3 billion
  • 2013 Core EPS guidance increased to between $6.50 and $6.65; GAAP EPS to between $5.40 and $5.55
Table 1. Summary Financial Results Third Quarter Nine Months
(Dollars in Millions, except per share data) 2013 2012 Change 2013 2012 Change
Revenues $22,130 $20,008 11% $62,838 $59,396 6%
Non-GAAP*
Core Operating Earnings $2,143 $1,793 20% $6,038 $5,353 13%
Core Operating Margin 9.7 % 9.0 % 0.7 Pts 9.6 % 9.0 % 0.6 Pts
Core Earnings Per Share $1.80 $1.55 16% $5.20 $4.43 17%
Operating Cash Flow Before Pension Contributions $4,308 $2,346 84% $8,312 $4,854 71%
GAAP
Earnings From Operations $1,803 $1,559 16% $5,047 $4,666 8%
Operating Margin 8.1 % 7.8 % 0.3 Pts 8.0 % 7.9 % 0.1 Pts
Net Earnings $1,158 $1,032 12% $3,352 $2,922 15%
Earnings Per Share $1.51 $1.35 12% $4.36 $3.84 14%
Operating Cash Flow $2,808 $1,596 76% $6,799 $3,341 104%

* Non-GAAP measures (core operating earnings, core operating margin and core earnings per share) exclude certain components of pension and post retirement benefit expense that the company believes are not reflective of underlying business performance. Complete definitions of Boeing’s non-GAAP measures are on page 6, „Non-GAAP Measures Disclosures.”

The Boeing Company (NYSE: BA) reported third-quarter core earnings per share (non-GAAP) increased 16 percent* to $1.80, driven by strong performance across the company’s businesses (Table 1). Third-quarter core operating earnings (non-GAAP) increased 20 percent* to $2.1 billion from the same period of the prior year. Third-quarter revenue was $22.1 billion, GAAP earnings from operations was $1.8 billion and earnings per share was $1.51. Core earnings per share guidance increased to between $6.50 and $6.65 and

GAAP earnings per share guidance increased to between $5.40 and $5.55, reflecting the strong performance. The company also increased its 2013 operating cash flow outlook to greater than $7 billion, which includes $1.5 billion of discretionary pension contributions, and reaffirmed its 2013 revenue guidance.

„Consistently strong operating performance is driving higher earnings, revenue and cash flow as we deliver on our record backlog and return increased value to shareholders,” said Boeing Chairman, President and CEO Jim McNerney. „During the quarter, Commercial Airplanes completed the first flight of the 787-9 and delivered 170 airplanes, while Defense, Space & Security maintained solid performance and captured $7 billion in new orders. Despite the uncertainty of the U.S. defense market, overall our customer-focused business strategies and disciplined execution on our programs are producing the results we expect, and our strong year-to-date performance and positive outlook allow us to increase our 2013 guidance for earnings and operating cash flow.”

Table 2. Cash Flow Third Quarter Nine Months
(Millions) 2013 2012 2013 2012
Operating Cash Flow Before Pension Contributions* $4,308 $2,346 $8,312 $4,854
 Pension Contributions ($1,500) ($750) ($1,513) ($1,513)
Operating Cash Flow $2,808 $1,596 $6,799 $3,341
Less Additions to Property, Plant & Equipment ($484) ($428) ($1,460) ($1,208)
Free Cash Flow* $2,324 $1,168 $5,339 $2,133

Operating cash flow before pension contributions* in the quarter was $4.3 billion, reflecting higher commercial airplane production rates, strong core operating performance and timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 7.6 million shares for $0.8 billion and paid $0.4 billion in dividends, reflecting an 11 percent increase in dividends paid compared to the same period of the prior year.

Table 3. Cash, Marketable Securities and Debt Balances Quarter-End
(Billions) Q3 13 Q2 13
Cash $10.0 $8.7
Marketable Securities1 $5.9 $5.6
Total $15.9 $14.3
Debt Balances:
The Boeing Company, net of intercompany loans to BCC $7.0 $7.0
Boeing Capital Corporation, including intercompany loans $2.6 $2.6
Total Consolidated Debt $9.6 $9.6

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

Cash and investments in marketable securities totaled $15.9 billion at quarter-end (Table 3), up from $14.3 billion at the beginning of the quarter. Debt was $9.6 billion, unchanged from the beginning of the quarter.

Total company backlog at quarter-end was a record $415 billion, up from $410 billion at the beginning of the quarter, and included net orders for the quarter of $27 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes Third Quarter Nine Months
(Dollars in Millions) 2013 2012 Change 2013 2012 Change
Commercial Airplanes Deliveries 170 149 14% 476 436 9%
Revenues $13,987 $12,186 15% $38,301 $34,966 10%
Earnings from Operations $1,617 $1,153 40% $4,289 $3,445 24 %
Operating Margins 11.6 % 9.5 % 2.1 Pts 11.2 % 9.9 % 1.3 Pts

Boeing Commercial Airplanes third-quarter revenue increased to $14.0 billion and operating margin improved to 11.6 percent on higher delivery volume and continued strong operating performance (Table 4).

During the quarter, the 787-9 completed first flight. With the successful launch of the 787-10 and continued strong demand for the 787 family of airplanes, the company intends to increase the 787 production rate from 10 to 12 per month in 2016, with plans to increase to 14 per month before the end of the decade.

Commercial Airplanes booked 200 net orders during the quarter. Backlog remains strong with nearly 4,800 airplanes valued at a record $345 billion.

Boeing Defense, Space & Security

Table 5. Defense, Space & Security Third Quarter Nine Months
(Dollars in Millions) 2013 2012 Change 2013 2012 Change
Revenues
Boeing Military Aircraft $3,543 $3,710 (5)% $11,541 $11,982 (4)%
Network & Space Systems $2,231 $2,055 9% $6,240 $5,887 6%
Global Services & Support $2,272 $2,074 10% $6,561 $6,395 3%
Total BDS Revenues $8,046 $7,839 3% $24,342 $24,264
Earnings from Operations
Boeing Military Aircraft $221 $424 (48)% $1,024 $1,176 (13)%
Network & Space Systems $193 $179 8% $486 $424 15%
Global Services & Support $259 $224 16% $771 $717 8%
Total BDS Earnings from Operations $673 $827 (19)% $2,281 $2,317 (2)%
Operating Margins 8.4 % 10.5 % (2.1) Pts 9.4 % 9.5 % (0.1) Pts

Boeing Defense, Space & Security’s third-quarter revenue was $8.0 billion, while operating margin was 8.4 percent (Table 5).

Boeing Military Aircraft (BMA) third-quarter revenue was $3.5 billion, primarily reflecting lower delivery volume. Operating margin decreased to 6.2 percent, impacted by mix and one-time charges on the F-15 and C-17 programs. During the quarter, BMA was awarded a low-rate initial production award for 13 P-8A Poseidon aircraft.

Network & Space Systems (N&SS) third-quarter revenue was $2.2 billion, reflecting higher sales of Delta inventory and revenue in the Space Launch System program, and operating margin was 8.7 percent. During the quarter, N&SS was awarded a contract by Mexico’s Satmex for an additional 702 small satellite.

Global Services & Support (GS&S) third-quarter revenue was $2.3 billion, due to higher volume in maintenance, modifications & upgrades. Operating margin was 11.4 percent, reflecting strong performance. During the quarter, GS&S achieved first flight on the QF-16 unmanned aircraft and was also awarded a contract by the U.S. Air Force for 56 additional replacement wings for the A-10 aircraft.

Backlog at Defense, Space & Security was $70 billion, of which 38 percent represents orders with international customers.

Additional Financial Information

Table 6. Additional Financial Information Third Quarter Nine Months
(Dollars in Millions) 2013 2012 2013 2012
Revenues
Boeing Capital Corporation $94 $101 $303 $339
Other segment $26 $27 $80 $79
Unallocated items and eliminations ($23) ($145) ($188) ($252)
Earnings from Operations
Boeing Capital Corporation $35 $28 $98 $100
Other segment income/(expense) $44 ($74) ($57) ($217)
  Unallocated items and eliminations included in core operating earnings ($226) ($141) ($573) ($292)
  Unallocated pension/postretirement expense ($340) ($234) ($991) ($687)
Other income, net $19 $17 $41 $39
Interest and debt expense ($95) ($110) ($290) ($330)
Effective tax rate 32.8 % 29.5 % 30.1 % 33.1 %

At quarter-end, Boeing Capital Corporation’s (BCC) net portfolio balance was $4.1 billion and debt-to-equity ratio was 5.0-to-1. Other segment earnings improved $118 million in the quarter primarily due to an insurance recovery. Unallocated items and eliminations included in core operating earnings increased in the third quarter of 2013 partly due to higher deferred compensation expense as a result of stock price appreciation. Total pension expense for the third quarter was $775 million, up from $583 million in the same period last year. Unallocated pension expense included a charge related to the previously announced decision to end C-17 production in 2015 offset by a one-time prior period pension adjustment.

Outlook

The company’s 2013 financial guidance (Table 7) has been updated to reflect continued strong performance in both businesses, generating an expected 12 percent year over year increase in core earnings per share (non-GAAP).

Table 7. Financial Outlook
(Dollars in Billions, except per share data) 2013
The Boeing Company
     Revenue $83 – 86
       Core Earnings Per Share* $6.50 – 6.65
     Earnings Per Share $5.40 – 5.55
       Operating Cash Flow Before Pension Contributions* > $8.5
Operating Cash Flow 1 > $7
Boeing Commercial Airplanes
Deliveries 2 635 – 645
     Revenue $51 – 53
     Operating Margin > 10.0%
Boeing Defense, Space & Security
Revenue
  Boeing Military Aircraft ~$16.0
  Network & Space Systems ~$7.8
  Global Services & Support ~$8.2
Total BDS Revenue $31.5 – 32.5
Operating Margin
  Boeing Military Aircraft ~ 9.0%
  Network & Space Systems ~ 7.5%
  Global Services & Support ~ 11.5%
Total BDS Operating Margin > 9.25%
Boeing Capital Corporation
Portfolio Size Lower
Revenue ~ $0.4
Pre-Tax Earnings ~ $0.05
Research & Development ~ $3.2
Capital Expenditures ~ $2.3
Pension Expense 3 ~ $3.2
Effective Tax Rate ~ 31%

1 After discretionary cash pension contributions of $1.5 billion and assuming new aircraft financings under $0.5 billion.

2 Assumes greater than 60 787 deliveries.

3 Approximately $1.4 billion is expected to be recorded in unallocated items and eliminations.

* Non-GAAP measures. Complete definitions of Boeing’s use of non-GAAP measures are on page 6, „Non-GAAP Measures Disclosures.”

Core earnings per share guidance for 2013 increased to between $6.50 and $6.65, up from between $6.20 and $6.40, and earnings per share guidance increased to between $5.40 and $5.55, up from between $5.10 and $5.30, both reflecting the strong operating performance. Total company 2013 operating cash flow before pension contributions (non-GAAP) is now expected to be greater than $8.5 billion, up from greater than $8.0 billion. Operating cash flow is now expected to be greater than $7 billion in 2013, up from greater than $6.5 billion, including $1.5 billion of discretionary pension contributions.

Commercial Airplanes' operating margin increased to greater than 10.0 percent, up from greater than 9.5 percent. Defense, Space & Security’s operating margin increased to greater than 9.25 percent, up from greater than 9.0 percent, reflecting higher margins in Global Services & Support.

Boeing Capital Corporation revenue increased to approximately $0.4 billion, up from approximately $0.3 billion. Research and development expense for 2013 is now expected to be approximately $3.2 billion, down from approximately $3.3 billion.

Source / Author: Boeing

Autor: Redakcja Świat

Redakcja Świat