Boeing Reports Strong Fourth-Quarter Results

Fourth-Quarter 2011

• Earnings per share rose to $1.84, driven by strong core performance
• EPS includes favorable tax settlement of $0.52 compared with $0.50 in 2010
• Revenue rose to $19.6 billion on increased commercial airplane deliveries

Full Year 2011

• Earnings per share increased 20 percent to $5.34 on record revenue of $68.7 billion
• Operating cash flow increased 36 percent to $4.0 billion
• Backlog grew to a record $356 billion including $103 billion of orders during the year

Outlook for 2012

• EPS guidance of between $4.05 and $4.25 reflects strong operating performance offset by $0.83 of higher pension expense
• Revenue guidance established at between $78 and $80 billion
• Operating cash flow guidance set at greater than $5.0 billion includes $1.5 billion of discretionary pension contributions

The Boeing Company reported fourth-quarter net income rose to $1.4 billion, or $1.84 per share, on revenue of $19.6 billion.  The results reflect continued strong core performance across the company's businesses, a $0.52 per share impact related to a favorable tax settlement, and higher pension expense.  Fourth-quarter 2010 results included a $0.50 per share favorable tax settlement.
Net income for the full year increased to $4.0 billion, or $5.34 per share, on revenue of $68.7 billion, which included the impact of the favorable tax settlement ($0.53 per share for the year). Full-year 2010 results included the $0.50 per share favorable tax settlement and a $0.20 per share tax charge resulting from health care legislation.

Earnings guidance for 2012 has been established at between $4.05 and $4.25 per share reflecting solid core performance and higher pension expense.  Revenue guidance for 2012 is between $78 and $80 billion.

"Strong fourth-quarter operating performance, record revenue and backlog, and expanded earnings and cash flow capped a year of substantial progress for Boeing in 2011," said Jim McNerney, Boeing chairman, president, and chief executive officer. "Major accomplishments of our team during the year included certifying and delivering the first 787s and 747-8s, winning the U.S. Air Force Tanker program, launching the 737 MAX, and securing both an important U.S. missile defense contract and a key agreement for F-15s to Saudi Arabia." 

"We enter 2012 with renewed momentum, and proven business and product strategies.  With a record backlog and intense focus on productivity, we are well positioned to deliver growth and increased competitiveness, even as we face constrained U.S. defense spending and pension headwinds.  Our priorities for the year are to continue with disciplined increases in production rates for our commercial airplane customers, and to build on our strong position in defense, space and security with aggressive pursuit of growth in core, adjacent and international markets," he said.  

Cash and investments in marketable securities totaled $11.3 billion at year-end, up from $9.2 billion at the beginning of the quarter.  Debt was unchanged in the quarter.

Total company backlog at year-end was a record $356 billion, up from $332 billion at the beginning of the quarter.  Net orders for the quarter were $42 billion and included a significant mix of wide-body commercial airplanes.  Backlog is up $34.6 billion from prior year-end, reflecting $103 billion of net orders in 2011.

Boeing Commercial Airplanes fourth-quarter revenue increased by 31 percent to $10.7 billion on higher delivery volume and mix.  Operating margin was 9.2 percent, reflecting lower R&D partially offset by the dilutive impact of initial 787 and 747-8 deliveries and higher period costs.

 
For the full year, revenue increased by 14 percent on higher delivery volume, increased services revenue and mix.  Operating margin was 9.7 percent, reflecting improved mix and lower R&D partially offset by higher period costs and the dilutive impact of initial 787 and 747-8 deliveries.

During the quarter, the first 747-8 Freighter was delivered to Cargolux and the 747-8 Intercontinental achieved FAA certification.  Also during the quarter, the company and the International Association of Machinists & Aerospace Workers reached agreement on a four-year contract extension primarily related to machinists in Puget Sound. 

At year-end, the company had over 1,000 orders and commitments for the 737 MAX, including 150 firm orders from launch customer Southwest Airlines.
Commercial Airplanes booked 379 net orders during the quarter and 805 during the full year.  Backlog remains strong with more than 3,700 airplanes valued at a record $296 billion.

Boeing Defense, Space & Security's fourth-quarter revenue increased by 4 percent to $8.5 billion, while operating margin was 10.2 percent.
For the full year, revenue was unchanged at $32.0 billion.  Operating margin increased to 9.9 percent, driven by higher Boeing Military Aircraft (BMA) margins.
BMA fourth-quarter revenue increased to $3.9 billion, due to Airborne Early Warning & Control (AEW&C) mix and higher KC-767 International Tanker deliveries partially offset by fewer C-17 deliveries.  Operating margin increased to 9.5 percent, reflecting strong execution across various programs.  Fourth-quarter 2010 included charges for higher costs on the AEW&C program.  During the quarter, the U.S. Government and Saudi Arabia reached agreement on the purchase of 84 new F-15SA aircraft and upgrades to an additional 70 F-15Ss.  Additionally, BMA was awarded the P-8A low rate initial production lot II production award from the U.S. Navy.

Network & Space Systems (N&SS) fourth-quarter revenue decreased to $2.0 billion, due to lower volume driven by termination of the Brigade Combat Team Modernization program. Operating margin decreased to 8.6 percent, reflecting higher R&D.  During the quarter, N&SS was awarded the development and sustainment contract for Ground-based Midcourse Defense from the U.S. Missile Defense Agency.  Also during the quarter, N&SS delivered the first 702 medium power satellite.

Global Services & Support (GS&S) fourth-quarter revenue increased to $2.6 billion, due to higher revenues in integrated logistics.  Operating margin decreased to 12.6 percent, reflecting the current defense contracting environment.  During the quarter, GS&S was awarded the C-17 Globemaster III Integrated Sustainment Program from the U.S. Air Force.
Backlog at Defense, Space & Security was $60 billion. 

At year-end, Boeing Capital Corporation's (BCC) portfolio balance was $4.3 billion, unchanged from the beginning of the quarter and down from $4.7 billion at the start of the year.  BCC's earnings decreased due to a smaller portfolio and higher asset impairments.  BCC's debt-to-equity ratio was unchanged at 6.2-to-1.

The "Other" segment includes unallocated activities of Engineering, Operations and Technology, Shared Services Group as well as certain intercompany guarantees provided to BCC.  Other segment earnings of $43 million in the fourth quarter 2011 were driven by assigning an upgraded credit rating category to certain financing receivables.

The loss in unallocated items and eliminations increased due to higher pension and deferred compensation expense partially offset by a charitable trust contribution that impacted fourth-quarter 2010.  Total pension expense for the fourth quarter was $344 million, as compared to $254 million in the same period last year.  A total of $291 million was allocated to the operating segments in the quarter, up from $244 million in the same period last year, and $53 million was recognized in unallocated items, compared to $10 million in the same period last year.

The company's income tax expense of $57 million in the quarter (compared to a benefit of $163 million in the same period last year) included a $397 million non-cash gain due to an IRS settlement for tax years 2004 through 2006.  Fourth-quarter 2010 included a $371 million non-cash gain due to an IRS settlement and a benefit of $154 million due to the extension of the R&D credit.
Outlook

The company's 2012 financial guidance reflects continued strong core performance, generating a 7 percent increase in adjusted earnings per share*, which is offset by higher pension expense and other items.

Boeing's 2012 revenue guidance is between $78 and $80 billion.  Earnings guidance for 2012 is established at between $4.05 and $4.25 per share.  Total pension expense in 2012 is expected to be $2.6 billion (of which approximately $1.0 billion is expected to be recorded in unallocated items and eliminations) or $2.21 per share, an increase of $0.83 per share from 2011.  Operating cash flow is expected to be greater than $5.0 billion in 2012, including $1.5 billion of discretionary pension contributions. 

Commercial Airplanes' 2012 deliveries are expected to be between 585 and 600 airplanes and is sold out.  This includes an expected 70 to 85 787 and 747-8 deliveries, of which approximately half are 787 aircraft.  Commercial Airplanes' 2012 revenue is expected to be between $47.5 and $49.5 billion with operating margins between 8.5 and 9 percent. 

Defense, Space & Security's revenue for 2012 is expected to be between $30.0 and $30.5 billion with operating margins greater than 9.0 percent. 

Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2012, as new aircraft financing of less than $0.5 billion is expected to be lower than normal portfolio runoff through customer payments and depreciation.  BCC's debt-to-equity ratio is expected to return to 5.0-to-1 in the first quarter of 2012 due to the repayment of maturing debt.

Boeing's 2012 R&D forecast is between $3.3 and $3.5 billion.  Capital expenditures for 2012 are expected to be approximately $2.0 billion. 
Non-GAAP Measure Disclosures Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures 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. 

*Editor's Note: Information Provided by The Boeing Company.