BA Boeing Co

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

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.

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.

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

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

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

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.

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.

Operating Cash Flow Before Pension Contributions

Operating cash flow before pension contributions is defined as GAAP operating cash flow without 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 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 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: