BA Boeing Co

CHICAGO, Jan. 28, 2015 /PRNewswire/ --

The Boeing Company [NYSE: BA] reported record fourth-quarter revenue of $24.5 billion on higher deliveries (Table 1) and core earnings per share (non-GAAP) that increased 23 percent* to $2.31, reflecting strong performance across the company. Fourth-quarter 2014 core operating earnings (non-GAAP)* increased to $2.3 billion and GAAP earnings from operations increased to $2.0 billion. Fourth-quarter 2013 results included a $406 million non-cash charge ($0.34 per share) related to the A-12 settlement.

Revenue rose 5 percent in the full year to a record $90.8 billion and core earnings per share (non-GAAP) increased 22 percent* to $8.60 on record deliveries. Full-year 2014 GAAP earnings per share was $7.38.

Core earnings per share guidance for 2015 is set at between $8.20 and $8.40, while GAAP earnings per share guidance is established at between $8.10 and $8.30. Revenue guidance is between $94.5 and $96.5 billion, including commercial deliveries of between 750 and 755. Operating cash flow is expected to be greater than $9.0 billion.

"Strong operating performance in the final quarter of 2014 propelled us to some of our best-ever results and sealed a fifth consecutive year of core operating earnings growth. By responding to strong demand with market-leading and proven products and capabilities, and delivering them more efficiently, we are strengthening a powerful business platform that is providing increased returns for our shareholders," said Boeing Chairman and Chief Executive Officer Jim McNerney.

"Our Commercial Airplanes business successfully increased production rates and set an industry record for annual deliveries while also growing its backlog to new highs on record new orders for the year. Our Defense, Space & Security team navigated a challenging market environment to achieve solid revenue and healthy margins while also winning significant new contracts," said McNerney.

"For 2015, we will continue to build on our commercial airplanes market leadership, strengthening and repositioning our defense, space and security business and working to better meet the needs of our customers by focusing on improving productivity, executing to development plans and delivering our industry-leading portfolio of innovative aerospace products and services."

Operating cash flow in the quarter was $5.0 billion, reflecting commercial airplane production rates, strong operating performance and timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 7.8 million shares for $1 billion and paid $0.5 billion in dividends. Based on the strong cash generation and outlook, in December, the board of directors increased the share repurchase authorization to a total of $12 billion, replacing the authorization approved in 2013 of which approximately $4.8 billion was remaining, and raised the quarterly dividend 25 percent. Share repurchases are expected to be made over the next two to three years.

Cash and investments in marketable securities totaled $13.1 billion at quarter-end (Table 3), up from $10.1 billion at the beginning of the quarter. Debt was $9.1 billion, up from $8.9 billion at the beginning of the quarter, primarily due to the issuance of new debt.

Total company backlog at quarter-end was a record $502 billion, up from $490 billion at the beginning of the quarter, and included net orders for the quarter of $37 billion. Backlog is up $61 billion from prior year-end, reflecting $152 billion of net orders in 2014.

Segment Results

Commercial Airplanes

Commercial Airplanes fourth-quarter revenue increased 15 percent to a record $16.8 billion on higher delivery volume and mix. Fourth-quarter operating margin was 9.3 percent, reflecting higher planned period costs and the dilutive impact of 787 deliveries partially offset by the delivery volume (Table 4).

During the quarter, the company began production on the fuselage stringers of the first 737 MAX airplane. The 737 program has won over 2,600 firm orders for the 737 MAX since launch. Also during the quarter, the company began final assembly of the 787-9 Dreamliner at the South Carolina facility and broke ground on the 777X composite centers in Everett and St. Louis.

Commercial Airplanes booked 432 net orders during the quarter with a record 1,432 orders in 2014. Backlog remains strong with nearly 5,800 airplanes valued at a record $440 billion.

Defense, Space & Security

Defense, Space & Security's fourth-quarter revenue was $7.6 billion with an operating margin of 12.1 percent (Table 5).

Boeing Military Aircraft (BMA) fourth-quarter revenue was $3.0 billion, reflecting lower planned F-15 and C-17 deliveries. Operating margin increased to 12.3 percent, reflecting strong operating performance. During the quarter, BMA completed the first flight of the 767-2C test aircraft for the KC-46 tanker program and Congress approved funding for 15 EA-18G Growlers.

Network & Space Systems (N&SS) fourth-quarter revenue was $2.2 billion, reflecting lower government satellite volume, and operating margin was 8.8 percent. During the quarter, N&SS completed the first two all-electric propulsion 702SP satellites.

Global Services & Support (GS&S) fourth-quarter revenue increased to $2.4 billion on higher volume in maintenance, modification and upgrades (MM&U). Operating margin increased to 14.9 percent reflecting strong operating performance across the segment and mix within MM&U. During the quarter, GS&S was awarded a 25-year order from the Australian government to train navy and army rotary wing aircrew.

Backlog at Defense, Space & Security was $62 billion, of which 36 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 fourth-quarter revenue decreased from the same period in the prior year due to the timing of eliminations for intercompany aircraft deliveries (Table 6).

Unallocated items, eliminations and other excluding unallocated pension/postretirement in the fourth quarter of 2013 included a $406 million charge associated with the A-12 settlement. Total pension expense for the fourth quarter was $772 million, up from $717 million in the same period of the prior year. The company's income tax expense was $464 million in the quarter, compared to $201 million in the same period of the prior year primarily due to higher earnings. Fourth-quarter 2014 results include the full year 2014 U.S. research and development tax credit of $188 million; fourth-quarter 2013 results include a $212 million benefit for a tax regulation change.

Outlook

The company's 2015 financial guidance (Table 7) reflects continued strong performance across the company.

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 14.

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.