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SMALL BUSINESS
Boeing Reports Second-Quarter Financial Results, Reaffirms Guidance
CHICAGO, July 23 /PRNewswire-FirstCall/ --
Table 1. Summary Financial Results (Millions, except 2nd Quarter First Half per share data) 2008 2007 Change 2008 2007 Change Revenues $16,962 $17,028 (0%) $32,952 $32,393 2% Earnings From Operations $1,247 $1,506 (17%) $3,046 $2,815 8% Operating Margin 7.4% 8.8% (1.4)Pts 9.2% 8.7% 0.5 Pts Reported Net Income $852 $1,050 (19%) $2,063 $1,927 7% Reported Earnings per Share $1.16 $1.35 (14%) $2.79 $2.48 13% Operating Cash Flow ($251) $3,634 N.A. $1,682 $4,362 (61%)
The Boeing Company's (NYSE: BA) second-quarter earnings per share
decreased 14 percent to
For the first half of 2008, revenue grew 2 percent to
Boeing reaffirmed its 2008 earnings per share guidance of between
"While we faced some challenges this quarter that affected our results, we
remain confident in our outlook for the remainder of this year and 2009," said
Chairman, President and CEO
Second-quarter operating cash flow was
Table 2. Cash Flow 2nd Quarter First Half (Millions) 2008 2007 2008 2007 Operating Cash Flow (1) ($251) $3,634 $1,682 $4,362 Less Additions to Property, Plant & Equipment ($398) ($414) ($807) ($865) Free Cash Flow* ($649) $3,220 $875 $3,497
(1) Operating cash flow includes $517 in pension plan contributions in first half of 2008 and $523 in first half 2007, both mostly in 1Q. * Non-GAAP measure. A complete definition and reconciliation of Boeing's use of non-GAAP measures, identified by an asterisk (*), is found on page 8, "Non-GAAP Measure Disclosure."
Cash and investments in marketable securities totaled
Table 3. Cash, Marketable Securities and Debt Balances Quarter-End (Billions) 2Q08 1Q08 Cash $5.6 $7.7 Marketable Securities(1) $4.6 $4.4 Total $10.2 $12.1 Debt Balances: The Boeing Company $3.9 $3.9 Boeing Capital Corporation $4.3 $4.3 Total Consolidated Debt $8.2 $8.2
(1) Marketable securities consists primarily of investments in high-quality fixed-income and asset-backed securities classified as "short-term investments" and "investments." At June 30, 2008, it also includes time deposits of $1.2 billion and commercial paper of $0.2 billion classified as "short-term investments." At March 31, 2008, it also included time deposits of $1.5 billion and commercial paper of $0.1 billion classified as "short-term investments."
Segment Results Commercial Airplanes
Boeing Commercial Airplanes (BCA) second-quarter revenues were
Table 4. Commercial Airplanes Operating Results (Millions, except deliveries & margin 2nd Quarter First Half percent) 2008 2007 Change 2008 2007 Change Commercial Airplanes Deliveries 126 114 11% 241 220 10% Revenues $8,567 $8,707 (2%) $16,728 $16,262 3% Earnings from Operations $777 $960 (19%) $1,760 $1,666 6% Operating Margins 9.1% 11.0% (1.9)Pts 10.5% 10.2% 0.3 Pts
For the first half, BCA revenues rose 3 percent to
BCA booked 187 gross orders during the quarter and 476 during the first
half. Contractual backlog rose to a record
Progress on the new 787 Dreamliner continues on the revised schedule announced in April. Having completed the power-on milestone, the program is in the final stages of assembly of the first airplane in preparation for flight test. While Boeing continues to address challenges associated with assembly of the initial airplanes, the program has achieved meaningful improvements in the completeness of structure and systems installation. The company completed its acquisition of a 50 percent equity interest in Global Aeronautica which will allow Boeing to exercise greater operational control of this key 787 integration facility. The risks that are always inherent in the latter stages of new airplane program production still remain. The company expects the first flight of the 787 to occur in the fourth quarter of 2008 with first delivery in the third quarter of 2009. To date, the program has won orders for 896 airplanes from 58 customers.
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) reported second-quarter revenue of
For the first half, IDS revenue declined slightly to
Table 5. Integrated Defense Systems Operating Results
(Millions, except 2nd Quarter First Half margin percent) 2008 2007 Change 2008 2007 Change Revenues Precision Engagement & Mobility Systems $3,293 $3,416 (4%) $6,549 $6,743 (3%) Network & Space Systems $2,802 $2,902 (3%) $5,495 $5,680 (3%) Support Systems $1,839 $1,654 11% $3,465 $3,266 6% Total IDS Revenues $7,934 $7,972 (0%) $15,509 $15,689 (1%)
Earnings (Loss) from Operations Precision Engagement & Mobility Systems $160 $405 (60%) $549 $838 (34%) Network & Space Systems $237 $257 (8%) $504 $405 24% Support Systems $240 $193 24% $444 $396 12% Total IDS Earnings from Operations $637 $855 (25%) $1,497 $1,639 (9%)
Operating Margins 8.0% 10.7% (2.7)Pts 9.7% 10.4% (0.7)Pts
Precision Engagement & Mobility Systems, which was just renamed Boeing
Military Aircraft, reported second-quarter revenues slightly lower at
For the quarter, revenues in Network & Space Systems declined slightly to
Support Systems again generated strong growth and profitability on its
broad portfolio of services and logistics programs. Revenues rose 11 percent
to
The IDS backlog at quarter-end was
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported second-quarter pre-tax earnings
of
Table 6. Boeing Capital Corporation Operating Results 2nd Quarter First Half (Millions) 2008 2007 Change 2008 2007 Change Revenues $179 $209 (14%) $364 $422 (14%) Pre-Tax Income $45 $70 (36%) $106 $143 (26%)
Additional Information
The "Other" segment consists primarily of Boeing Engineering, Operations
and Technology as well as certain results related to the consolidation of all
business units. Other segment expense was
Unallocated expense was
Total pension expense was
Outlook
The financial guidance issued in April is unchanged, other than an adjustment between IDS segment margins that is referenced below. The guidance reflects expectations for strong business performance in BCA and IDS, increasing commercial airplane deliveries, decreasing investment in new airplane development, and company-wide productivity gains.
Boeing's 2008 revenue guidance is
Commercial Airplanes' 2008 delivery guidance remains between 475 and 480
airplanes and is sold out. BCA revenue guidance for 2008 remains
IDS revenue guidance for 2008 is
Boeing's 2008 R&D forecast is between
The company's non-cash pension expense is expected to be approximately
Table 7. Financial Outlook (Billions, except per share data) 2008 2009
The Boeing Company Revenues $67 - $68 $72 - $73 Earnings Per Share (GAAP) $5.70 - $5.85 $6.80 - $7.00 Operating Cash Flow(1) > $2.5 > $6
Boeing Commercial Airplanes Deliveries 475 - 480 500 - 505 Revenues $34.5 - $35 $37 - $38 Operating Margin ~ 11.5% ~ 11.5%
Integrated Defense Systems Revenues Precision Engagement & Mobility Systems ~ $13.5 Moderate Growth Network & Space Systems ~ $12 Moderate Growth Support Systems ~ $7 Moderate Growth Total IDS Revenues $32 - $33 $33.5 - $34.5
Operating Margin Precision Engagement & Mobility Systems ~ 10.5% Low Double Digit Network & Space Systems ~ 9% High Single Digit Support Systems ~ 13% Low Double Digit Total IDS Operating Margin ~ 10.5% > 10.5%
Boeing Capital Corporation Portfolio Size Lower Lower Revenue ~ $0.7 ~ $0.6 Return on Assets ~ 1.5% ~ 1.5%
Research & Development $3.6 - $3.8 $3.1 - $3.3 Capital Expenditures ~ $1.8 ~ $1.7
(1) After pension contributions of $0.5 billion in the first quarter of 2008 and $0.5 billion forecast in 2009.
Non-GAAP Measure Disclosure
Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures (indicated by an asterisk *) used in this report provide investors with important perspectives into the company's ongoing business performance. The company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. The following definitions are provided:
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 internally to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and free cash flow.
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements in this report may constitute "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Words such as "expects," "intends," "plans," "projects," "believes,"
"estimates," and similar expressions are used to identify these forward-
looking statements. These statements are not guarantees of future performance
and involve risks, uncertainties and assumptions that are difficult to
predict. Forward-looking statements in this press release include, among
others, statements regarding future results as a result of our growth and
productivity initiatives, our 2008 and 2009 financial outlook and the benefits
of the IDS structure. Forward-looking statements are based upon assumptions as
to future events that may not prove to be accurate. Actual outcomes and
results may differ materially from what is expressed or forecasted in these
forward-looking statements. As a result, these statements speak only as of the
date they were made and we undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. Our actual results and future trends may differ
materially depending on a variety of factors, including the continued
operation, viability and growth of major airline customers and non-airline
customers (such as the U.S. Government); adverse developments in the value of
collateral securing customer and other financings; the occurrence of any
significant collective bargaining labor dispute; our successful execution of
internal performance plans including our company-wide growth and productivity
initiatives, production rate increases and decreases (including any reduction
in or termination of an aircraft product), availability of raw materials,
acquisition and divestiture plans, and other cost-reduction and productivity
efforts; charges from any future SFAS No. 142 review; ability to meet
development, production and certification schedules for the 787 program and
the ability to meet scheduled deliveries of the 787 airplane; technical or
quality issues in development programs (affecting schedule and cost estimates)
or in the satellite industry; an adverse development in rating agency credit
ratings or assessments; the actual outcomes of certain pending sales campaigns
and U.S. and foreign government procurement activities, including the
uncertainty associated with the procurement of tankers by the U.S. Department
of Defense (DoD) and funding of the C-17 program; the cyclical nature of some
of our businesses; unanticipated financial market changes which may impact
pension plan assumptions; domestic and international competition in the
defense, space and commercial areas; continued integration of acquired
businesses; performance issues with key suppliers, subcontractors and
customers; significant disruption to air travel worldwide (including future
terrorist attacks); global trade policies; worldwide political stability;
domestic and international economic conditions; price escalation; the outcome
of political and legal processes, changing priorities or reductions in the
U.S. Government or foreign government defense and space budgets; termination
of government or commercial contracts due to unilateral government or customer
action or failure to perform; legal, financial and governmental risks related
to international transactions; legal and investigatory proceedings; tax
settlements with the IRS and various states; U.S. Air Force review of
previously awarded contracts; costs associated with the exit of the Connexion
by Boeing business; and other economic, political and technological risks and
uncertainties. Additional information regarding these factors is contained in
our SEC filings, including, without limitation, our Annual Report on Form 10-K
for the year ended
The Boeing Company and Subsidiaries Consolidated Statements of Operations (Unaudited)
Six months ended Three months ended June 30 June 30 (Dollars in millions except per share data) 2008 2007 2008 2007 Sales of products $27,986 $28,016 $14,298 $14,787 Sales of services 4,966 4,377 2,664 2,241 Total revenues 32,952 32,393 16,962 17,028
Cost of products (22,425) (22,140) (11,637) (11,709) Cost of services (4,003) (3,583) (2,248) (1,827) Boeing Capital Corporation interest expense (119) (152) (57) (73) Total costs and expenses (26,547) (25,875) (13,942) (13,609) 6,405 6,518 3,020 3,419 Income from operating investments, net 123 89 65 50 General and administrative expense (1,610) (1,804) (835) (976) Research and development expense, net (1,874) (1,988) (1,005) (989) Gain on dispositions/business shutdown, net 2 2 2 Earnings from operations 3,046 2,815 1,247 1,506 Other income, net 202 216 102 125 Interest and debt expense (96) (92) (50) (46) Earnings before income taxes 3,152 2,939 1,299 1,585 Income tax expense (1,095) (1,017) (448) (536) Net earnings from continuing operations 2,057 1,922 851 1,049 Net gain on disposal of discontinued operations, net of taxes of $4, $4, $1, and $1 6 5 1 1 Net earnings $2,063 $1,927 $852 $1,050
Basic earnings per share from continuing operations $2.82 $2.52 $1.18 $1.38 Net gain on disposal of discontinued operations, net of taxes 0.01 0.01 Basic earnings per share $2.83 $2.53 $1.18 $1.38
Diluted earnings per share from continuing operations $2.78 $2.47 $1.16 $1.35 Net gain on disposal of discontinued operations, net of taxes 0.01 0.01 Diluted earnings per share $2.79 $2.48 $1.16 $1.35 Cash dividends paid per share $0.80 $0.70 $0.40 $0.35 Weighted average diluted shares (millions) 740.0 777.3 732.8 777.0
The Boeing Company and Subsidiaries Consolidated Statements of Financial Position (Unaudited)
(Dollars in millions except per June 30 December 31 share data) 2008 2007 Assets Cash and cash equivalents $5,619 $7,042 Short-term investments 1,752 2,266 Accounts receivable, net 5,809 5,740 Current portion of customer financing, net 198 328 Deferred income taxes 2,414 2,341 Inventories, net of advances and progress billings 10,145 9,563 Total current assets 25,937 27,280 Customer financing, net 6,370 6,777 Property, plant and equipment, net of accumulated depreciation of $12,313 and $11,915 8,585 8,265 Goodwill 3,232 3,081 Other acquired intangibles, net 2,223 2,093 Deferred income taxes 276 197 Investments 4,017 4,111 Pension plan assets, net 6,445 5,924 Other assets, net of accumulated amortization of $439 and $385 1,425 1,258 $58,510 $58,986 Liabilities and Shareholders' Equity Accounts payable and other liabilities $17,431 $16,676 Advances and billings in excess of related costs 12,682 13,847 Income taxes payable 416 253 Short-term debt and current portion of long-term debt 916 762 Total current liabilities 31,445 31,538 Deferred income taxes 1,433 1,190 Accrued retiree health care 7,159 7,007 Accrued pension plan liability, net 1,083 1,155 Non-current income taxes payable 1,148 1,121 Other long-term liabilities 408 516 Long-term debt 7,240 7,455 Shareholders' equity: Common shares, par value $5.00 - 1,200,000,000 shares authorized; 1,012,261,159 and 1,012,261,159 shares issued 5,061 5,061 Additional paid-in capital 4,093 4,757 Treasury shares, at cost - 268,841,528 and 244,217,170 (16,834) (14,842) Retained earnings 22,669 21,376 Accumulated other comprehensive loss (4,299) (4,596) ShareValue Trust shares - 31,690,733 and 31,362,850 (2,096) (2,752) Total shareholders' equity 8,594 9,004 $58,510 $58,986
The Boeing Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
Six months ended June 30 (Dollars in millions) 2008 2007 Cash flows - operating activities: Net earnings $ 2,063 $ 1,927 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash items - Share-based plans expense 98 191 Depreciation 643 676 Amortization of other acquired intangibles 81 77 Amortization of debt discount/premium and issuance costs 4 6 Customer financing valuation provision/(benefit) 80 (35) Gain on disposal of discontinued operations (10) (9) Gain on dispositions/business shutdown, net (2) Other charges and credits, net 78 78 Excess tax benefits from share-based payment arrangements (45) (107) Changes in assets and liabilities - Accounts receivable (129) (761) Inventories, net of advances and progress billings (649) (428) Accounts payable and other liabilities 616 842 Advances and billings in excess of related costs (1,166) 68 Income taxes receivable, payable and deferred 275 821 Other long-term liabilities (149) (4) Pension and other postretirement plans (281) 41 Customer financing, net 278 1,107 Other (103) (128)
Net cash provided by operating activities 1,682 4,362
Cash flows - investing activities: Property, plant and equipment additions (807) (865) Property, plant and equipment reductions 16 17 Acquisitions, net of cash acquired (94) (75) Contributions to investments (5,606) (1,838) Proceeds from investments 6,238 1,611 Other (148) (62)
Net cash used by investing activities (401) (1,212)
Cash flows - financing activities: New borrowings 5 10 Debt repayments (154) (893) Stock options exercised, other 41 151 Excess tax benefits from share-based payment arrangements 45 107 Common shares repurchased (2,064) (946) Dividends paid (606) (552) Net cash used by financing activities (2,733) (2,123) Effect of exchange rate changes on cash and cash equivalents 29 11 Net (decrease)/increase in cash and cash equivalents (1,423) 1,038 Cash and cash equivalents at beginning of year 7,042 6,118 Cash and cash equivalents at end of period $ 5,619 $ 7,156
The Boeing Company and Subsidiaries Summary of Business Segment Data (Unaudited)
Six months ended Three months ended June 30 June 30 (Dollars in millions) 2008 2007 2008 2007 Revenues: Commercial Airplanes $16,728 $16,262 $8,567 $8,707 Integrated Defense Systems: Precision Engagement and Mobility Systems 6,549 6,743 3,293 3,416 Network and Space Systems 5,495 5,680 2,802 2,902 Support Systems 3,465 3,266 1,839 1,654 Total Integrated Defense Systems 15,509 15,689 7,934 7,972 Boeing Capital Corporation 364 422 179 209 Other 227 157 152 81 Accounting differences/eliminations 124 (137) 130 59 Total revenues $32,952 $32,393 $16,962 $17,028
Earnings from operations: Commercial Airplanes $1,760 $1,666 $777 960 Integrated Defense Systems: Precision Engagement and Mobility Systems 549 838 160 405 Network and Space Systems 504 405 237 257 Support Systems 444 396 240 193 Total Integrated Defense Systems 1,497 1,639 637 855 Boeing Capital Corporation 106 143 45 70 Other (185) (121) (135) (66) Unallocated expense (132) (512) (77) (313) Earnings from operations 3,046 2,815 1,247 1,506 Other income, net 202 216 102 125 Interest and debt expense (96) (92) (50) (46) Earnings before income taxes 3,152 2,939 1,299 1,585 Income tax expense (1,095) (1,017) (448) (536) Net earnings from continuing operations 2,057 1,922 851 1,049 Net gain on disposal of discontinued operations, net of taxes of $4, $4, $1, and $1 6 5 1 1 Net earnings $2,063 $1,927 $852 $1,050
Research and development expense: Commercial Airplanes $1,403 $1,557 $770 $769 Integrated Defense Systems: Precision Engagement and Mobility Systems 241 222 115 111 Network and Space Systems 154 143 78 73 Support Systems 74 49 41 25 Total Integrated Defense Systems 469 414 234 209 Other 2 17 1 11 Total research and development expense $1,874 $1,988 $1,005 $989
Unallocated expense: Share-based plans expense $(45) $(169) $(15) $(133) Deferred compensation expense 81 (63) 20 (53) Pension (143) (271) (76) (141) Post-retirement (40) (59) (20) (27) Capitalized interest (27) (23) (14) (14) Other 42 73 28 55 Total $(132) $(512) $(77) $(313)
The Boeing Company and Subsidiaries Operating and Financial Data (Unaudited)
Six months ended Three months ended Deliveries June 30 June 30 Commercial Airplanes 2008 2007 2008 2007 737 Next-Generation 187 169 100 86 747 9 7 5 4 767 6 6 3 3 777 39 38 18 21 Total 241 220 126 114
Integrated Defense Systems Precision Engagement and Mobility Systems F/A-18 Models 21 22 11 11 F-15E Eagle 4 3 3 C-17 Globemaster 8 8 5 4 KC-767 Tanker 2 CH-47 Chinook 4 6 2 1 T-45TS Goshawk 3 5 2 3 AH-64 Apache 1 8 1 4 C-40A Clipper 2 1
Network and Space Systems Commercial and Civil Satellites 1 3 1
June 30 March 31 December 31 Contractual backlog (Dollars in billions) 2008 2008 2007 Commercial Airplanes $274.5 $271.2 $255.2 Integrated Defense Systems: Precision Engagement and Mobility Systems 23.8 23.1 23.0 Network and Space Systems 11.0 10.5 9.2 Support Systems 10.7 10.8 9.6 Total Integrated Defense Systems 45.6 44.4 41.8 Total contractual backlog $320.1 $315.6 $297.0 Unobligated backlog $26.0 $30.6 $30.2 Total backlog $346.1 $346.2 $327.2 Workforce 163,900 161,500 159,300
SOURCE The Boeing Company
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