Boeing Reports Second-Quarter Results
27-Jul-2016 Boeing Reports Second-Quarter Results
- Revenue increased to $24.8 billion on strong commercial deliveries and services growth
- Loss of $0.37 per share (GAAP) and core (non-GAAP)* loss of $0.44 per share reflect $3.23 per share impact related to previously announced 787 R&D reclassification and 747 & Tanker charges
- Strong operating cash flow of $3.2 billion; repurchased 15 million shares for $2.0 billion
- Backlog remains robust at $472 billion with nearly 5,700 commercial airplane orders
- Cash and marketable securities of $9.3 billion provide strong liquidity
- Reaffirmed cash & revenue guidance; EPS reflects reclassification, charges, solid performance & tax
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Table 1. Summary Financial Results |
Second Quarter |
First Half |
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|
(Dollars in Millions, except per share data) |
2016 |
2015 |
Change |
2016 |
2015 |
Change |
|||||||||||
|
Revenues |
$24,755 |
$24,543 |
1% |
$47,387 |
$46,692 |
1% |
|||||||||||
|
GAAP |
|||||||||||||||||
|
Earnings/(Loss) From Operations |
($419) |
$1,683 |
(125)% |
$1,369 |
$3,702 |
(63)% |
|||||||||||
|
Operating Margin |
(1.7)% |
6.9% |
(8.6) Pts |
2.9% |
7.9% |
(5.0) Pts |
|||||||||||
|
Net Earnings/(Loss) |
($234) |
$1,110 |
(121)% |
$985 |
$2,446 |
(60)% |
|||||||||||
|
Earnings/(Loss) Per Share |
($0.37) |
$1.59 |
(123)% |
$1.51 |
$3.46 |
(56)% |
|||||||||||
|
Operating Cash Flow |
$3,234 |
$3,297 |
(2)% |
$4,465 |
$3,385 |
32% |
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|
Non-GAAP* |
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|
Core Operating Earnings/(Loss) |
($488) |
$1,713 |
(128)% |
$1,206 |
$3,845 |
(69)% |
|||||||||||
|
Core Operating Margin |
(2.0)% |
7.0% |
(9.0) Pts |
2.5% |
8.2% |
(5.7) Pts |
|||||||||||
|
Core Earnings/(Loss) Per Share |
($0.44) |
$1.62 |
(127)% |
$1.35 |
$3.59 |
(62)% |
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|
* |
Non-GAAP measures. Complete definitions of Boeing's non-GAAP measures are on page 7, "Non-GAAP Measures Disclosures." |
The Boeing Company [NYSE: BA] reported second-quarter revenue of $24.8 billion on strong commercial deliveries and services growth (Table 1). GAAP loss per share of $0.37 and core loss per share (non-GAAP)* of $0.44 reflect the previously announced 787 cost reclassification ($1.33 per share) and charges on the 747 program ($1.28 per share) and the KC-46 Tanker program ($0.62 per share), partially offset by solid execution and higher volume.
"The underlying operating performance of the company remains solid with our commercial and defense teams again delivering strong revenues and operating cash flow. Actions taken during the quarter that impacted our earnings were the right, proactive steps to reduce risk and strengthen our position for the future," said Chairman, President and Chief Executive Officer Dennis Muilenburg.
"Our strong cash generation also supported our ongoing commitment to invest in product innovation and in our people, and return substantial cash to shareholders through stock repurchases and dividends."
"As we look forward to the second half of the year, we anticipate continued strong operating performance across our production and services programs on generally healthy demand for our broad portfolio of market-leading offerings. Our commercial airplane development programs remain on track and we have successfully completed the flight testing required for customer approval of key KC-46 production milestones."
"Overall our teams remain intensely focused on improving productivity and quality, building out our large and diverse backlog, investing in future growth, and delivering increasing value to all of our stakeholders."
GAAP earnings per share guidance for 2016 has been adjusted to between $6.40 and $6.60 from $8.45 and $8.65 and core earnings per share (non-GAAP)* guidance has been adjusted to between $6.10 and $6.30 from $8.15 and $8.35 to reflect the impact of the 787 R&D reclassification and the 747 and Tanker charges, solid performance and tax benefits.
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Table 2. Cash Flow |
Second Quarter |
First Half |
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|
(Millions) |
2016 |
2015 |
2016 |
2015 |
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|
Operating Cash Flow |
$3,234 |
$3,297 |
$4,465 |
$3,385 |
||||||||||||
|
Less Additions to Property, Plant & Equipment |
($671) |
($692) |
($1,419) |
($1,266) |
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|
Free Cash Flow* |
$2,563 |
$2,605 |
$3,046 |
$2,119 |
||||||||||||
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* |
Non-GAAP measures. Complete definitions of Boeing's non-GAAP measures are on page 7, "Non-GAAP Measures Disclosures." |
Operating cash flow in the quarter was $3.2 billion, largely reflecting commercial airplane production rates and solid operating performance (Table 2). During the quarter, the company repurchased 15.3 million shares for $2.0 billion, leaving $8.5 billion remaining under the current repurchase authorization which is expected to be completed over approximately the next two years. The company also paid $691 million in dividends in the quarter, reflecting an approximately 20 percent increase in dividends per share compared to the same period of the prior year.
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Table 3. Cash, Marketable Securities and Debt Balances |
Quarter-End |
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|
(Billions) |
Q2 16 |
Q1 16 |
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|
Cash |
$8.6 |
$7.9 |
||||||
|
Marketable Securities1 |
$0.7 |
$0.5 |
||||||
|
Total |
$9.3 |
$8.4 |
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|
Debt Balances: |
||||||||
|
The Boeing Company, net of intercompany loans to BCC |
$8.7 |
$7.6 |
||||||
|
Boeing Capital, including intercompany loans |
$2.3 |
$2.4 |
||||||
|
Total Consolidated Debt |
$11.0 |
$10.0 |
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1 |
Marketable securities consists primarily of time deposits due within one year classified as "short-term investments." |
Cash and investments in marketable securities totaled $9.3 billion, up from $8.4 billion at the beginning of the quarter. Debt was $11.0 billion, up from the beginning of the quarter, primarily due to the issuance of new debt (Table 3).
Total company backlog at quarter-end was $472 billion, down from $480 billion at the beginning of the quarter, and included net orders for the quarter of $17 billion.
Segment Results
Commercial Airplanes
|
Table 4. Commercial Airplanes |
Second Quarter |
First Half |
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|
(Dollars in Millions) |
2016 |
2015 |
Change |
2016 |
2015 |
Change |
||||||||||
|
Commercial Airplanes Deliveries |
199 |
197 |
1% |
375 |
381 |
(2)% |
||||||||||
|
Revenues |
$17,456 |
$16,877 |
3% |
$31,855 |
$32,258 |
(1)% |
||||||||||
|
Earnings/(Loss) from Operations |
($973) |
$1,206 |
(181)% |
$60 |
$2,823 |
(98)% |
||||||||||
|
Operating Margin |
(5.6)% |
7.1% |
(12.7) Pts |
0.2% |
8.8% |
(8.6) Pts |
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Commercial Airplanes second-quarter revenue increased 3 percent to $17.5 billion on higher volume and mix (Table 4). Second-quarter operating margin was negative 5.6 percent, reflecting previously announced R&D reclassification of $1,235 million on the 787 program, a pre-tax charge of $1,188 million on the 747 program, and a pre-tax charge of $354 million on the KC-46 Tanker program. The results also reflect higher planned R&D and solid execution. Second-quarter operating margin excluding the reclassification and charges (non-GAAP)* was 10.3%.
During the quarter, the 787 program reached a 12 per month delivery rate and the company opened the new 777X Composite Wing Center in Everett. The 737 program rolled out the first two 737 MAX production airplanes and has captured over 3,200 orders for the 737 MAX since launch, including an order for 100 737 MAX 200 airplanes from Vietjet during the quarter. The 737 MAX development program is progressing smoothly and entry into service is being accelerated.
Commercial Airplanes booked 152 net orders during the quarter. Backlog remains strong with nearly 5,700 airplanes valued at $417 billion.
Defense, Space & Security
|
Table 5. Defense, Space & Security |
Second Quarter |
First Half |
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|
(Dollars in Millions) |
2016 |
2015 |
Change |
2016 |
2015 |
Change |
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|
Revenues1 |
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|
Boeing Military Aircraft |
$2,979 |
$3,474 |
(14)% |
$6,638 |
$6,200 |
7% |
|||||||||||||||||
|
Network & Space Systems |
$1,810 |
$1,938 |
(7)% |
$3,545 |
$3,670 |
(3)% |
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|
Global Services & Support |
$2,385 |
$2,132 |
12% |
$4,947 |
$4,383 |
13% |
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|
Total BDS Revenues |
$7,174 |
$7,544 |
(5)% |
$15,130 |
$14,253 |
6% |
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|
Earnings from Operations1 |
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|
Boeing Military Aircraft |
$175 |
$121 |
45% |
$509 |
$380 |
34% |
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|
Network & Space Systems |
$153 |
$151 |
1% |
$301 |
$318 |
(5)% |
|||||||||||||||||
|
Global Services & Support |
$265 |
$274 |
(3)% |
$605 |
$591 |
2% |
|||||||||||||||||
|
Total BDS Earnings from Operations |
$593 |
$546 |
9% |
$1,415 |
$1,289 |
10% |
|||||||||||||||||
|
Operating Margin |
8.3% |
7.2% |
1.1 Pts |
9.4% |
9.0% |
0.4 Pts |
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|
1 |
During the first quarter of 2016, certain programs were realigned between Boeing Military Aircraft and Global Services & Support. |
Defense, Space & Security's second-quarter revenue was $7.2 billion. Second-quarter operating margin was 8.3 percent, reflecting the previously announced $219 million pre-tax charge recorded at Boeing Military Aircraft on the KC-46 Tanker program (Table 5).
Boeing Military Aircraft (BMA) second-quarter revenue was $3.0 billion, reflecting lower planned C-17 and Chinook deliveries. Operating margin was 5.9 percent, reflecting the KC-46 Tanker charge. During the quarter, BMA was awarded contracts for 24 Apache and 12 Chinook helicopters.
Network & Space Systems (N&SS) second-quarter revenue was $1.8 billion. Operating margin increased to 8.5 percent, reflecting performance and timing on United Launch Alliance launches.
Global Services & Support (GS&S) second-quarter revenue increased to $2.4 billion, reflecting higher volume in Aircraft Modernization & Sustainment. Operating margin was 11.1 percent largely reflecting contract mix.
Backlog at Defense, Space & Security was $55 billion, of which 37 percent represents orders from international customers.