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Boeing Reports Record Revenues, Earnings, Cash Flow & Backlog for 2007
Fourth-quarter revenue held at
Boeing raised its 2008 earnings per share guidance to between
"Our 2007 results demonstrate the kind of quality financial performance we can achieve through our simultaneous focus on growth and productivity," said Chairman, President and Chief Executive Officer Jim McNerney. "We added substantial backlog, made major efficiency gains, and executed well on our production and services programs. Despite some development program challenges, we are a strong company growing stronger, and we expect continued improvement in our financial results in 2008 and beyond."
Full-year operating cash flow grew 28 percent to a record
Table 2. Cash Flow 4th Quarter Full Year (Millions) 2007 2006 2007 2006 Operating Cash Flow (1) $1,893 $2,441 $9,584 $7,499 Less Additions to Property, Plant & Equipment ($449) ($588) ($1,731) ($1,681) Free Cash Flow* $1,444 $1,853 $7,853 $5,818 (1) Operating cash flow includes $580 pension plans contribution in full-year 2007 and $522 in full-year 2006.
Cash and investments in marketable securities totaled
Table 3. Cash, Marketable Securities and Debt Balances Quarter-End (Billions) 4Q07 3Q07 Cash $7.0 $8.9 Marketable Securities (1) $5.1 $3.3 Total $12.1 $12.2 Debt Balances: The Boeing Company $3.9 $3.9 Boeing Capital Corporation $4.3 $4.7 Total Consolidated Debt $8.2 $8.6 (1) Marketable securities consists primarily of investments in high-quality fixed-income and asset-backed securities classified as \"short-term investments\" and \"investments.\" At December 31, 2007, it also includes time deposits of $1.0 billion and commercial paper of $0.8 billion classified as \"short-term investments.\" Segment Results
Commercial Airplanes
Boeing Commercial Airplanes (BCA) fourth-quarter revenues increased 17 percent to
Table 4. Commercial Airplanes Operating Results (Millions, except deliveries & margin 4th Quarter Full Year percent) 2007 2006 Change 2007 2006 Change Commercial Airplanes Deliveries 112 103 9% 441 398 11% Revenues $8,866 $7,606 17% $33,386 $28,465 17% Earnings from Operations $973 $665 46% $3,584 $2,733 31% Operating Margins 11.0% 8.7% 2.3 Pts 10.7% 9.6% 1.1 Pts
For the full year, BCA revenues rose 17 percent to
BCA booked 520 gross orders during the quarter and a record 1,423 during the year. Contractual backlog rose to a record
Progress on the new 787 Dreamliner continues on the revised schedule announced earlier this month. Boeing continues to address challenges associated with assembly of the first airplanes, including start-up issues in our factory and in our extended global supply chain. The company expects the first flight to occur around the end of the second quarter of 2008 with first delivery in early 2009. The program won a record 369 787 orders in 2007, bringing total firm orders since launch to 857 airplanes from 56 customers.
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) expanded operating margins more than 100 basis points to 11.7 percent in the fourth-quarter on revenue of
For the full year, IDS grew operating earnings by 13 percent to
Table 5. Integrated Defense Systems Operating Results (Millions, except 4th Quarter Full Year margin percent) 2007 2006 Change 2007 2006 Change Revenues Precision Engagement & Mobility Systems $3,622 $4,259 (15%) $13,685 $14,107 (3%) Network & Space Systems $2,891 $3,414 (15%) $11,696 $11,941 (2%) Support Systems $1,857 $2,014 (8%) $6,699 $6,391 5% Total IDS Revenues $8,370 $9,687 (14%) $32,080 $32,439 (1%) Earnings (Loss) from Operations Precision Engagement & Mobility Systems $397 $293 35% $1,629 $1,208 35% Network & Space Systems $295 $467 (37%) $891 $952 (6%) Support Systems $286 $267 7% $920 $872 6% Total IDS Earnings from Operations $978 $1,027 (5%) $3,440 $3,032 13% Operating Margins 11.7% 10.6% 1.1 Pts 10.7% 9.3% 1.4 Pts
Precision Engagement & Mobility Systems expanded fourth-quarter operating margin to 11.0 percent on lower revenue of
Network & Space Systems achieved significant milestones on several key programs. Operating margin expanded to 10.2 percent in the quarter driven by strong performance across the segment's broad array of programs, including Future Combat Systems and Ground-based Midcourse Defense, which captured 100 percent of award fees. Revenues fell to
Support Systems again generated strong profits on its broad portfolio of services and logistics programs. Operating margin grew to 15.4 percent on solid program execution and contract mix, while revenues for the quarter fell to
IDS' backlog at quarter-end grew to
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported fourth-quarter pre-tax earnings of
Table 6. Boeing Capital Corporation Operating Results 4th Quarter Full Year (Millions) 2007 2006 Change 2007 2006 Change Revenues $196 $241 (19%) $815 $1,025 (20%) Pre-Tax Income $30 $37 (19%) $234 $291 (20%)
Additional Information
The "Other" segment consists primarily of Boeing Engineering, Operations and Technology and the Connexion business (which was exited at the end of 2006), as well as certain results related to the consolidation of all business units. Other segment expense was
Unallocated share-based-plans expense was
Outlook
The company's financial guidance summarized in Table 7 reflects strong business performance forecasts at IDS and BCA, increasing commercial airplane deliveries, continued investment in new airplane development and company-wide productivity gains. As previously disclosed, Boeing will provide complete financial guidance for 2009 when the company issues its first-quarter 2008 earnings report in late April, which will follow the assessment of the impact of the previously announced 787 schedule changes.
Boeing's 2008 revenue guidance is now between
For 2009, the outlook for the company's defense business and in-production commercial airplane programs remains very strong. As a result, the company continues to expect strong earnings per share growth in 2009.
Commercial Airplanes now expects to deliver between 475 and 480 airplanes in 2008 and is sold out, down slightly from 480 to 490 airplanes to reflect the rescheduling of initial 787 deliveries into 2009. BCA revenue guidance for 2008 is now
IDS revenue guidance for 2008 is unchanged at
Boeing's total R&D forecast for 2008 is unchanged at between
The company's non-cash pension expense is expected to be approximately
Table 7 Financial Outlook (Billions, except per share data) 2008 The Boeing Company Revenues $67 - $68 Earnings Per Share (GAAP) $5.70 - $5.85 Operating Cash Flow (1) > $2.5 Boeing Commercial Airplanes Deliveries 475 - 480 Revenues $34.5 - $35 Operating Margin ~ 11.5% Integrated Defense Systems Revenues Precision Engagement & Mobility Systems ~ $13.5 Network & Space Systems ~ $12 Support Systems ~ $7 Total IDS Revenues $32 - $33 Operating Margin Precision Engagement & Mobility Systems ~ 11% Network & Space Systems ~ 9% Support Systems ~ 12.5% Total IDS Operating Margin ~ 10.5% Boeing Capital Corporation Portfolio Size Lower Revenue ~ $0.7 Return on Assets ~ 1.5% Research & Development $3.2 - $3.4 Capital Expenditures ~ $1.8 (1) After forecast pension contributions of $0.5 billion in 2008.
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:
Adjusted Earnings per Share
Adjusted earnings per share is defined as GAAP diluted earnings per share adjusted for certain significant charges or credits. Management believes adjusted earnings per share is important to understanding the company's on-going operations and provide additional insights into underlying business performance. Significant charges or credits are described in the attachments to this release which provide reconciliations between GAAP earnings per share and adjusted earnings per share.
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 2007 and 2008 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 companywide 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) (Dollars in millions except Twelve months ended Three months ended per share data) December 31 December 31 2007 2006 2007 2006 Sales of products $57,049 $52,644 $14,856 $15,105 Sales of services 9,338 8,886 2,621 2,436 Total revenues 66,387 61,530 17,477 17,541 Cost of products (45,375) (42,490) (11,904) (12,180) Cost of services (7,732) (7,594) (2,346) (2,185) Boeing Capital Corporation interest expense (295) (353) (70) (86) Total costs and expenses (53,402) (50,437) (14,320) (14,451) 12,985 11,093 3,157 3,090 Income from operating investments, net 188 146 88 51 General and administrative expense (3,531) (4,171) (796) (1,094) Research and development expense, net (3,850) (3,257) (993) (937) Gain/(loss) on dispositions/ business shutdown, net 38 (226) 60 42 Settlement with U.S. Department of Justice, net of accruals (571) Earnings from operations 5,830 3,014 1,516 1,152 Other income, net 484 420 129 124 Interest and debt expense (196) (240) (57) (37) Earnings before income taxes 6,118 3,194 1,588 1,239 Income tax expense (2,060) (988) (561) (259) Net earnings from continuing operations 4,058 2,206 1,027 980 Net gain on disposal of discontinued operations, net of taxes of $9, $5, $3 and $5 16 9 6 9 Net earnings $4,074 $2,215 $1,033 $989 Basic earnings per share from continuing operations $5.36 $2.88 $1.38 $1.29 Net gain on disposal of discontinued operations, net of taxes 0.02 0.01 0.01 0.01 Basic earnings per share $5.38 $2.89 $1.39 $1.30 Diluted earnings per share from continuing operations $5.26 $2.84 $1.35 $1.28 Net gain on disposal of discontinued operations, net of taxes 0.02 0.01 0.01 0.01 Diluted earnings per share $5.28 $2.85 $1.36 $1.29 Cash dividends paid per share $1.40 $1.20 $0.35 $0.30 Weighted average diluted shares (millions) 772.5 787.6 761.0 782.5 The numerator used to compute diluted earnings per share is as follows: Net earnings $4,074 $2,215 $1,033 $989 Expense related to diluted shares 2 27 17 Total numerator $4,076 $2,242 $1,033 $1,006 The Boeing Company and Subsidiaries Consolidated Statements of Financial Position (Unaudited) December 31 December 31 (Dollars in millions except per share data) 2007 2006 Assets Cash and cash equivalents $7,042 $6,118 Short-term investments 2,266 268 Accounts receivable, net 5,740 5,285 Current portion of customer financing, net 328 370 Deferred income taxes 2,107 2,837 Inventories, net of advances and progress billings 9,563 8,105 Total current assets 27,046 22,983 Customer financing, net 6,777 8,520 Property, plant and equipment, net of accumulated depreciation of $11,915 and $11,635 8,265 7,675 Goodwill 3,081 3,047 Other acquired intangibles, net 2,093 1,698 Deferred income taxes 217 1,051 Investments 4,111 4,085 Pension plan assets, net 5,924 1,806 Other assets, net of accumulated amortization of $385 and $272 1,258 929 $58,772 $51,794 Liabilities and Shareholders' Equity Accounts payable and other liabilities $16,676 $16,201 Advances and billings in excess of related costs 13,847 11,449 Income taxes payable 253 670 Short-term debt and current portion of long-term debt 762 1,381 Total current liabilities 31,538 29,701 Deferred income taxes 976 Accrued retiree health care 7,007 7,671 Accrued pension plan liability, net 1,155 1,135 Non-current income taxes payable 1,121 Other long-term liabilities 516 391 Long-term debt 7,455 8,157 Shareholders' equity: Common shares, par value $5.00 - 1,200,000,000 shares authorized; Shares issued - 1,012,261,159 and 1,012,261,159 5,061 5,061 Additional paid-in capital 4,757 4,655 Treasury shares, at cost - 244,217,170 and 223,522,176 (14,842) (12,459) Retained earnings 21,376 18,453 Accumulated other comprehensive loss (4,596) (8,217) ShareValue Trust Shares - 31,362,850 and 30,903,026 (2,752) (2,754) Total shareholders' equity 9,004 4,739 Total liabilities and shareholders' equity $58,772 $51,794 The Boeing Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Twelve months ended (Dollars in millions) December 31 2007 2006 Cash flows - operating activities: Net earnings $4,074 $2,215 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash items - Share-based plans expense 287 743 Depreciation 1,334 1,445 Amortization of other acquired intangibles 152 100 Amortization of debt discount/premium and issuance costs (1) 14 Pension expense 1,082 746 Investment/asset impairment charges, net 51 118 Customer financing valuation (benefit)/ provision (60) 32 Gain on disposal of discontinued operations (25) (14) Gain on dispositions/business shutdown (38) 226 Other charges and credits, net 197 82 Excess tax benefits from share-based payment arrangements (144) (395) Changes in assets and liabilities - Accounts receivable (392) (244) Inventories, net of advances and progress billings (1,558) 444 Accounts payable and other liabilities 928 (744) Advances and billings in excess of related costs 2,369 1,739 Income taxes receivable, payable and deferred 1,290 933 Other long-term liabilities 71 (62) Pension contributions (580) (522) Accrued retiree health care (664) 114 Customer financing, net 1,458 718 Other (247) (189) Net cash provided by operating activities 9,584 7,499 Cash flows - investing activities: Property, plant and equipment additions (1,731) (1,681) Property, plant and equipment reductions 59 225 Acquisitions, net of cash acquired (75) (1,854) Proceeds from dispositions 123 Contributions to investments (5,710) (2,815) Proceeds from investments 3,817 2,850 Other (182) (34) Net cash used by investing activities (3,822) (3,186) Cash flows - financing activities: New borrowings 40 1 Debt repayments (1,406) (1,681) Stock options exercised, other 209 294 Excess tax benefits from share-based payment arrangements 144 395 Common shares repurchased (2,775) (1,698) Dividends paid (1,096) (956) Net cash used by financing activities (4,884) (3,645) Effect of exchange rate changes on cash and cash equivalents 46 38 Net increase/(decrease) in cash and cash equivalents 924 706 Cash and cash equivalents at beginning of year 6,118 5,412 Cash and cash equivalents at end of period $7,042 $6,118 Non-cash investing and financing activities: Capital lease obligations incurred $357 The Boeing Company and Subsidiaries Summary of Business Segment Data (Unaudited) Twelve months ended Three months ended (Dollars in millions) December 31 December 31 2007 2006 2007 2006 Revenues: Commercial Airplanes $33,386 $28,465 $8,866 $7,606 Integrated Defense Systems: Precision Engagement and Mobility Systems 13,685 14,107 3,622 4,259 Network and Space Systems 11,696 11,941 2,891 3,414 Support Systems 6,699 6,391 1,857 2,014 Total Integrated Defense Systems 32,080 32,439 8,370 9,687 Boeing Capital Corporation 815 1,025 196 241 Other 280 299 62 81 Accounting differences/ eliminations (174) (698) (17) (74) Total revenues $66,387 $61,530 $17,477 $17,541 Earnings from operations: Commercial Airplanes $3,584 $2,733 $973 $665 Integrated Defense Systems: Precision Engagement and Mobility Systems 1,629 1,208 397 293 Network and Space Systems 891 952 295 467 Support Systems 920 872 286 267 Total Integrated Defense Systems 3,440 3,032 978 1,027 Boeing Capital Corporation 234 291 30 37 Other (243) (738) (165) (93) Unallocated expense (1,185) (1,733) (300) (484) Settlement with U.S. Department of Justice, net of accruals (571) Earnings from operations 5,830 3,014 1,516 1,152 Other income, net 484 420 129 124 Interest and debt expense (196) (240) (57) (37) Earnings before income taxes 6,118 3,194 1,588 1,239 Income tax expense (2,060) (988) (561) (259) Net earnings from continuing operations 4,058 2,206 1,027 980 Net gain on disposal of discontinued operations, net of taxes of $9, $5, $3 and $5 16 9 6 9 Net earnings $4,074 $2,215 $1,033 $989 Research and development expense: Commercial Airplanes $2,962 $2,390 $770 $722 Integrated Defense Systems: Precision Engagement and Mobility Systems 447 392 109 104 Network and Space Systems 300 301 69 76 Support Systems 104 98 30 26 Total Integrated Defense Systems 851 791 208 206 Other 37 76 15 9 Total research and development expense $3,850 $3,257 $993 $937 Twelve months ended Three months ended December 31 December 31 Unallocated expense 2007 2006 2007 2006 Share-based plans $(233) $(680) $(6) $(140) Deferred compensation (51) (211) 66 (80) Pension (561) (369) (141) (67) Post-retirement (125) (103) (32) (43) Capitalized interest (53) (48) (17) (15) Other (162) (322) (170) (139) Total $(1,185) $(1,733) $(300) $(484) The Boeing Company and Subsidiaries Operating and Financial Data (Unaudited) Twelve months ended Three months ended Deliveries December 31 December 31 Commercial Airplanes 2007 2006 2007 2006 717 5(3) 737 Next-Generation 330 302 80 79 747 16 14 4 3 767 12 12 3 3 777 83 65 25 18 Total 441 398 112 103 Note: Commercial Airplanes deliveries by model include deliveries under operating lease, which are identified by parentheses. Integrated Defense Systems Precision Engagement and Mobility Systems F/A-18 Models 44 42 11 10 T-45TS Goshawk 9 13 2 2 F-15E Eagle 12 12 6 9 C-17 Globemaster 16 16 4 4 CH-47 Chinook 10 2 3 2 AH-64 Apache 17 31 10 C-40A Clipper 3 1 1 Network and Space Systems Delta II 3 2 1 1 Delta IV 3 1 Commercial and Civil Satellites 3 4 1 Military Satellites 1 Contractual backlog (Dollars December 31 September 30 December 31 in billions) 2007 2007 2006 Commercial Airplanes $255.2 $224.4 $174.3 Integrated Defense Systems: Precision Engagement and Mobility Systems 23.0 22.1 24.8 Network and Space Systems 9.2 7.0 7.8 Support Systems 9.6 9.4 9.7 Total Integrated Defense Systems 41.8 38.5 42.3 Total contractual backlog $297.0 $262.9 $216.6 Unobligated backlog $30.2 $32.2 $33.7 Total backlog $327.2 $295.1 $250.3 Workforce 159,300 158,500 154,000 The Boeing Company and Subsidiaries Reconciliation of Non-GAAP Measures Adjusted Earnings Per Share (Unaudited) In addition to disclosing results that are determined in accordance with U.S. generally accepted accounting principles (GAAP), the company also discloses non-GAAP results that exclude certain significant charges or credits that are important to an understanding of the company's ongoing operations. The company provides reconciliations of its non-GAAP financial reporting to the most comparable GAAP reporting. The company believes that discussion of results excluding certain significant charges or credits provides additional insights into underlying business performance. Adjusted earnings per share is not a measure recognized under GAAP. The determination of significant charges or credits may not be comparable to similarly titled measures used by other companies and may vary from quarter to quarter. Three months ended Dollars in millions except per share data December 31 2007 2006 GAAP Diluted earnings per share $1.36 $1.29 Business Shutdown/Divestitures 0.02 a Net gain on Discontinued Operations, Net of Taxes (0.01)b (0.01)b Adjusted earnings per share * \"Core Earnings\" per share $1.35 $1.30 Weighted average diluted shares (millions) 761.0 782.5 a Represents the net earnings per share impact related to exit of the Connexion by Boeing business ($40 pre-tax charge) and the EDD divestiture which was completed in 2005 ($15 pre-tax benefit). The per share amount for the fourth quarter is presented net of income taxes at 37.3% b Represents an after-tax adjustment to the 2004 sale of assets from BCC's Commercial Financial Services to General Electric Capital Corporation. The Boeing Company and Subsidiaries Reconciliation of Non-GAAP Measures Adjusted Earnings Per Share (Unaudited) In addition to disclosing results that are determined in accordance with U.S. generally accepted accounting principles (GAAP), the company also discloses non-GAAP results that exclude certain significant charges or credits that are important to an understanding of the company's ongoing operations. The company provides reconciliations of its non-GAAP financial reporting to the most comparable GAAP reporting. The company believes that discussion of results excluding certain significant charges or credits provides additional insights into underlying business performance. Adjusted earnings per share is not a measure recognized under GAAP. The determination of significant charges or credits may not be comparable to similarly titled measures used by other companies and may vary from quarter to quarter. Twelve months ended Dollars in millions except per share data December 31 2007 2006 GAAP Diluted earnings per share $5.28 $2.85 Global settlement with U.S. Department of Justice 0.75 a Business Shutdown/Divestitures 0.24 b Net gain on Discontinued Operations, Net of Taxes (0.02)c (0.01)c Adjusted earnings per share * \"Core Earnings\" per share $5.26 $3.83 Weighted average diluted shares (millions) 772.5 787.6 a Represents the net earnings per share impact for the global settlement of the Evolved Expendable Launch Vehicle (EELV) and Druyun matters with the U.S. Department of Justice ($571 pre-tax charge and reversal of a tax benefit of $16, which was recorded on previous accruals of $44 at 37.3%). No tax benefit was recognized relating to global settlement. b Represents the net earnings per share impact related to exit of the Connexion by Boeing business ($320 pre-tax charge) and the EDD divestiture which was completed in 2005 ($15 pre-tax benefit). The per share amount is presented net of income taxes at 37.3% c Represents an after-tax adjustment to the 2004 sale of assets from BCC's Commercial Financial Services to General Electric Capital Corporation.
SOURCE The Boeing Company
