Boeing Reports Fourth-Quarter 2010 Results and 2011 Guidance

CHICAGO, Jan. 26, 2011 /PRNewswire-FirstCall/ —

Fourth-Quarter 2010

Earnings per share of $1.56, including favorable tax settlement, on revenue of $16.6 billion
Operating cash flow of $1.1 billion reflects strong operating performance

Full Year 2010

Earnings per share of $4.45 on revenue of $64.3 billion
Operating cash flow of $3.0 billion and cash and marketable securities of $10.5 billion provide strong liquidity
Backlog grew to $321 billion including $69 billion of new orders during the year

Outlook

2011 EPS guidance of between $3.80 and $4.00 reflects solid core performance, higher pension expense and the recently revised 787 schedule

The Boeing Company (NYSE: BA) reported fourth-quarter net income of $1.2 billion, or $1.56 per share, on revenue of $16.6 billion.  The results reflect solid performance across the company’s core programs, a favorable tax settlement (+$0.50 per share), and a special one-time contribution to Boeing’s charitable trust (-$0.05 per share) (Table 1).

Net income for the full year was $3.3 billion, or $4.45 per share, on revenue of $64.3 billion, which included the $0.45 per share net impact of the favorable tax settlement and the charitable trust contribution.  First-quarter 2010 included a $0.20 per share tax charge on health care legislation.  Earnings per share for 2009 of $1.84 included a combined $3.58 per share impact due to the 787 R&D reclassification and 747 charges.

Earnings guidance for 2011 has been established at between $3.80 and $4.00 per share reflecting solid core performance, higher pension expense, the revised 787 schedule and the current defense contracting environment.

“Boeing delivered strong operating performance and exceptional cash generation from core production and services businesses in 2010, which helped mitigate the impact of development program challenges,” said Jim McNerney, Boeing chairman, president and chief executive officer.  “We’re entering 2011 well-positioned for growth, with a large order book, increasing global demand for commercial airplanes, greater clarity around our domestic defense outlook, and significant international defense sales opportunities.  Our focus for the year is to deliver the 787 and 747-8; manage disciplined increases in commercial airplane production rates and drive improved competitiveness and financial performance throughout the business.”

Boeing’s quarterly operating cash flow was $1.1 billion, reflecting strong operating performance while continuing to invest in development programs.  For the full year, operating cash flow was $3.0 billion.  Free cash flow* was $0.7 billion in the quarter and $1.8 billion for the year (Table 2).

Cash and investments in marketable securities totaled $10.5 billion at year-end (Table 3), up 5 percent in the quarter.  Debt was essentially unchanged in the quarter, and the company did not acquire any of its shares.

Total company backlog at year-end was $321 billion, unchanged from the prior quarter and up 2 percent from the prior year.

Segment Results

Commercial Airplanes

Boeing Commercial Airplanes fourth-quarter revenue decreased by 11 percent to $8.2 billion on lower expected 777 and 747 airplane deliveries.  Operating margin was 7.7 percent, reflecting the lower deliveries and higher R&D and other period costs (Table 4).

For the full year, revenue decreased by 7 percent to $31.8 billion on the lower expected 777 and 747 airplane deliveries.  Commercial Airplanes operating earnings were $3.0 billion on higher planned R&D spending.  The prior-year results were impacted by the reclassification of 787 R&D costs of $2.7 billion and 747 charges totaling $1.4 billion.

Commercial Airplanes booked 180 gross orders during the quarter while 22 orders were removed from its order book.  This contrasts with the year-ago period when net orders were 62 airplanes.  For the full year, net orders were 530 airplanes.  Contractual backlog remains strong with 3,443 airplanes valued at $256 billion.

The 787 program experienced an in-flight electrical incident on a test flight in November.   As disclosed last week, first delivery is now expected in the third quarter of 2011 and includes the time required to produce, install and test updated software and new electrical power distribution panels in the flight test and production airplanes.  Total firm orders for the 787 at year-end were 847 airplanes from 57 customers.

Flight testing of the 747-8 Freighter progressed during the quarter, and the first two Intercontinental passenger models had electrical power successfully turned on.  Delivery of the first 747-8 Freighter is planned for mid-2011.

Boeing Capital Corporation

Boeing Capital Corporation (BCC) reported fourth-quarter pre-tax earnings of $6 million compared to $14 million in the same period last year (Table 6).  For the full year, pre-tax earnings were $152 million, up from $126 million last year.  During the quarter, BCC’s portfolio balance declined to $4.7 billion, down from $5.7 billion at the beginning of the year and $5.0 billion at the end of third quarter, on run-off, pre-payments and asset sales.  BCC’s debt-to-equity ratio was unchanged at 5.0-to-1.

Outlook

The company’s 2011 financial guidance (Table 7) reflects solid core operating performance, higher pension expense, the recently revised 787 schedule and the current defense contracting environment.

Boeing’s 2011 revenue guidance is between $68 and $71 billion and reflects the initial 787 and 747-8 deliveries.  Earnings guidance for 2011 is established at between $3.80 and $4.00 per share.  Total pension expense in 2011 is expected to be $1.8 billion or $1.58 per share, an increase of $0.58 per share from 2010.  Operating cash flow is expected to be greater than $2.5 billion in 2011, including $0.5 billion of discretionary pension contributions.

Commercial Airplanes’ 2011 deliveries guidance is expected to be between 485 and 500 airplanes and is sold out.  It includes the first 787 and 747-8 deliveries (combined 25 to 40 units), which are expected to begin in the third quarter of 2011 and mid-2011, respectively.  Commercial Airplanes’ 2011 revenue is expected to be between $36 and $38 billion with operating margins between 7.5 and 8.5 percent.

Defense, Space & Security’s revenue for 2011 is expected to be between $31.5 and $33 billion with operating margins between 8.5 and 9 percent.

Boeing Capital Corporation expects that its aircraft finance portfolio will continue to reduce in 2011, as new aircraft financing of less than $0.5 billion is expected to be lower than normal portfolio runoff through customer payments and depreciation.

Boeing’s 2011 R&D forecast is between $3.7 and $3.9 billion.  Capital expenditures for 2011 are expected to be approximately $2.3 billion.

Boeing Commercial Airplanes

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 Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “may,” “will,” “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, but are not limited to, statements we make regarding our guidance relating to 2011 financial and operating performance, 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 customers, our suppliers and the worldwide market; (3) our commercial development programs, including the 787 and 747-8 commercial aircraft programs; (4) changing 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) changes in accounting estimates; (10) our ability to develop new technologies; (11) significant changes in discount rates and actual investment return on pension assets; (12) our ability to attract, retain and develop qualified personnel; (13) work stoppages or other labor disruptions; (14) changes in the competitive landscape in our markets; (15) our non-U.S. operations, including sales to non-U.S. customers; (16) potential adverse developments in new or pending litigation and/or government investigations; (17) customer and aircraft concentration in Boeing Capital Corporation’s customer financing portfolio; (18) changes in our ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments; (19) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (20) the adequacy of our insurance coverage to cover significant risk exposures; (21) potential business disruptions related to physical security threats, information technology attacks or natural disasters; and (22) potential environmental liabilities.

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 any forward-looking statement, except as required by law.

Contact:

Investor Relations:  Scott Fitterer or Jennifer Mack (312) 544-2140
Communications:  Chaz Bickers (312) 544-2002

SOURCE The Boeing Company