Boeing Posts Lower Third-Quarter Results on Reduced Commercial Deliveries
- Third-quarter revenues declined to $15.3 billion from $16.5 billion as labor strike and supplier production problems pushed airplane deliveries out of the quarter
- EPS declined to $0.96 per share, reduced by an estimated $0.60 on the lower deliveries and by $0.08 due to tax adjustments
- Backlog grew to a record $349 billion as near-term demand remains strong
- Updated financial guidance to be provided after strike concludes
Table 1. Summary Financial Results
(Millions, except per share data) 2008 2007 2008 2007
Revenues $15,293 $16,517 (7%) $48,245 $48,910 (1%)
Earnings From Operations $1,147 $1,499 (23%) $4,193 $4,314 (3%)
Operating Margin 7.5% 9.1% (1.6)Pts 8.7% 8.8% (0.1)Pts
Reported Net Income $695 $1,114 (38%) $2,758 $3,041 (9%)
Reported Earnings per Share $0.96 $1.44 (33%) $3.76 $3.92 (4%)
Operating Cash Flow ($442) $3,329 N.A. $1,240 $7,691 (84%)
Change Change
3rd Quarter Nine Months
CHICAGO, Oct. 22, 2008 – The Boeing Company’s [NYSE: BA] third-quarter net
income declined 38 percent, to $695 million, while earnings per share declined 33
percent to $0.96 per share, both reflecting an ongoing machinists' strike and supplier
production challenges on customer-furnished galleys for certain wide-body airplanes.
Those items reduced third-quarter commercial airplane deliveries by approximately 35
units and net earnings by an estimated $0.60 per share. Revenues for the quarter
declined 7 percent, to $15.3 billion (Table 1).
income declined 38 percent, to $695 million, while earnings per share declined 33
percent to $0.96 per share, both reflecting an ongoing machinists' strike and supplier
production challenges on customer-furnished galleys for certain wide-body airplanes.
Those items reduced third-quarter commercial airplane deliveries by approximately 35
units and net earnings by an estimated $0.60 per share. Revenues for the quarter
declined 7 percent, to $15.3 billion (Table 1).
"While the suspension of commercial airplane deliveries had a major impact on the
quarter, we effectively executed the remainder of our business and kept our focus on the
strong balance sheet we have built over the past few years," said Chairman, President
and CEO Jim McNerney. "That balance sheet, along with our broad-based, record $349
billion backlog, gives us exceptional flexibility for weathering an extended work stoppage
and for adapting to circumstances that may arise from the global financial crisis and
softening global economy."
Boeing will provide updated financial guidance and an assessment of the schedule
for its affected airplanes after the strike concludes.
quarter, we effectively executed the remainder of our business and kept our focus on the
strong balance sheet we have built over the past few years," said Chairman, President
and CEO Jim McNerney. "That balance sheet, along with our broad-based, record $349
billion backlog, gives us exceptional flexibility for weathering an extended work stoppage
and for adapting to circumstances that may arise from the global financial crisis and
softening global economy."
Boeing will provide updated financial guidance and an assessment of the schedule
for its affected airplanes after the strike concludes.
For the nine months of 2008, net income fell 9 percent to $2.8 billion, earnings per
share decreased 4 percent to $3.76 per share, and revenue fell 1 percent to $48.2 billion.
The operating margin was slightly lower at 8.7 percent. Results were impacted by the
lower commercial airplane deliveries and higher costs for AEW&C announced in the
second quarter, partially offset by lower pension and deferred compensation expenses.
There were no significant write-downs due to the global financial crisis.
share decreased 4 percent to $3.76 per share, and revenue fell 1 percent to $48.2 billion.
The operating margin was slightly lower at 8.7 percent. Results were impacted by the
lower commercial airplane deliveries and higher costs for AEW&C announced in the
second quarter, partially offset by lower pension and deferred compensation expenses.
There were no significant write-downs due to the global financial crisis.
Third-quarter operating cash outflow was $0.4 billion, reflecting the effects of the
labor strike and a planned increase in working capital requirements, mostly inventory for
787 (Table 2). Operating cash flow for the first nine months was $1.2 billion, and free
cash flow* was essentially zero. Total company backlog at quarter-end was $349 billion,
up 7 percent year-to-date driven by commercial airplane orders and new contract awards
at IDS.
labor strike and a planned increase in working capital requirements, mostly inventory for
787 (Table 2). Operating cash flow for the first nine months was $1.2 billion, and free
cash flow* was essentially zero. Total company backlog at quarter-end was $349 billion,
up 7 percent year-to-date driven by commercial airplane orders and new contract awards
at IDS.
Table 2. Cash Flow
(Millions) 2008 2007 2008 2007
Operating Cash Flow 1 ($442) $3,329 $1,240 $7,691
Less Additions to Property, Plant & Equipment ($422) ($417) ($1,229) ($1,282)
Free Cash Flow* ($864) $2,912 $11 $6,409
(Millions) 2008 2007 2008 2007
Operating Cash Flow 1 ($442) $3,329 $1,240 $7,691
Less Additions to Property, Plant & Equipment ($422) ($417) ($1,229) ($1,282)
Free Cash Flow* ($864) $2,912 $11 $6,409
1 Operating cash flow includes $531 in pension plan contributions in first nine months of 2008 and $563 in first nine months of 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 7, "Non-GAAP Measure Disclosure."
3rd Quarter Nine Months Cash and investments in marketable securities totaled $7.2 billion at quarter-end, down from the end of the second quarter, reflecting 787 inventory growth, strike impacts and previously announced business acquisitions (Table 3). The company also completed $589 million in scheduled repayments of BCC debt during the quarter.
3rd Quarter Nine Months Cash and investments in marketable securities totaled $7.2 billion at quarter-end, down from the end of the second quarter, reflecting 787 inventory growth, strike impacts and previously announced business acquisitions (Table 3). The company also completed $589 million in scheduled repayments of BCC debt during the quarter.
Table 3. Cash, Marketable Securities and Debt Balances
(Billions) 3Q08 2Q08
Cash $4.2 $5.6
Marketable Securities1 $3.0 $4.6
Total $7.2 $10.2
Debt Balances:
The Boeing Company $3.9 $3.9
Boeing Capital Corporation $3.7 $4.3
Total Consolidated Debt $7.6 $8.2
Quarter-End
(Billions) 3Q08 2Q08
Cash $4.2 $5.6
Marketable Securities1 $3.0 $4.6
Total $7.2 $10.2
Debt Balances:
The Boeing Company $3.9 $3.9
Boeing Capital Corporation $3.7 $4.3
Total Consolidated Debt $7.6 $8.2
Quarter-End
1 Marketable securities consists primarily of investments in high-quality fixed-income and asset-backed securities classified as "short-term investments" and "investments." At September 30, 2008, it also includes time deposits of $0.2 billion and no commercial paper classified as "short-term investments." At June 30, 2008, it also included time deposits of $1.2 billion and commercial paper of $0.2 billion classified as "short-term investments."
3
During the quarter, the company returned $0.8 billion to shareholders by
repurchasing 7.9 million shares for $519 million and paying $295 million in dividends.
Share repurchases in the first nine months totaled $2.6 billion for 34.5 million shares.
3
During the quarter, the company returned $0.8 billion to shareholders by
repurchasing 7.9 million shares for $519 million and paying $295 million in dividends.
Share repurchases in the first nine months totaled $2.6 billion for 34.5 million shares.
Segment Results
Commercial Airplanes
Boeing Commercial Airplanes (BCA) third-quarter revenues were $6.9 billion, 16
percent below the same period last year, driven by the fewer deliveries due to the strike
and supplier production challenges on customer-furnished galleys for certain wide-body
airplanes (Table 4). The labor strike has affected production of all airplane programs in
Seattle, Portland and Wichita. Earnings from operations declined to $394 million from
$945 million in the year-ago period due to the lower deliveries, the absence of supplier
R&D cost sharing payments and additional 747 program costs.
(Millions, except deliveries & margin percent) 2008 2007 2008 2007
Commercial Airplanes Deliveries 84 109 (23%) 325 329 (1%)
Revenues $6,946 $8,258 (16%) $23,674 $24,520 (3%)
Earnings from Operations $394 $945 (58%) $2,154 $2,611 (18%)
Operating Margins 5.7% 11.4% (5.7)Pts 9.1% 10.6% (1.5)Pts
Table 4. Commercial Airplanes Operating Results
Change Change
3rd Quarter Nine Months
For the first nine months, BCA revenues decreased 3 percent to $23.7 billion on
lower deliveries due to the strike and galley shortage. Operating earnings decreased 18
percent to $2.2 billion while margins were 9.1 percent, driven by the lower deliveries,
infrastructure cost absorption and additional 747 program costs that were partially offset
by lower research and development spending.
BCA booked 149 gross orders during the quarter and 625 during the first nine
months. Contractual backlog rose to a record $276 billion, increasing 8 percent year-todate
to approximately eight times BCA’s annual revenues.
The 787 Dreamliner made progress during the quarter despite the labor strike.
Key milestones included a successful hydraulic system test, landing gear test, and
pressurization test of the static airframe – the last, a key step in validating the structural
integrity of the airplane. The program also began testing the flight controls and began
final assembly of the fourth flight-test airplane. To date, the program has won 895 net
airplane orders from 58 customers.
4
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) third quarter revenues rose 6 percent
to $8.5 billion on higher volumes across all segments. Operating earnings rose 4
percent to $854 million, yielding an operating margin of 10.1 percent. The strike
reduced IDS operating margins by an estimated 0.4 points.
For the first nine months, IDS revenue increased to $24.0 billion, operating
earnings declined 4 percent to $2.4 billion and operating margins declined to 9.8
percent, including a reduction of 1.0 point due to the second-quarter AEW&C charge.
(Millions, except margin percent) 2008 2007 2008 2007
Revenues
Boeing Military Aircraft $3,777 $3,379 12% $10,326 $10,122 2%
Network & Space Systems $2,984 $2,953 1% $8,479 $8,633 (2%)
Global Services & Support $1,736 $1,673 4% $5,201 $4,939 5%
Total IDS Revenues $8,497 $8,005 6% $24,006 $23,694 1%
Earnings (Loss) from Operations
Boeing Military Aircraft $373 $413 (10%) $922 $1,251 (26%)
Network & Space Systems $301 $165 82% $805 $570 41%
Global Services & Support $180 $244 (26%) $624 $640 (3%)
Total IDS Earnings from Operations $854 $822 4% $2,351 $2,461 (4%)
Operating Margins 10.1% 10.3% (0.2)Pts 9.8% 10.4% (0.6)Pts
Table 5. Integrated Defense Systems Operating Results
3rd Quarter
Change
Nine Months
Change
1
Boeing Military Aircraft reported third-quarter revenues of $3.8 billion, 12 percent
higher than the prior year, on a favorable mix of aircraft deliveries. Operating margins
were 9.9 percent for the quarter, reduced by an estimated 1.0 point due to the strike.
For the quarter, revenues in Network & Space Systems increased slightly to $3.0
billion. Operating margins of 10.1 percent were due to solid performance across the
segment's broad array of programs.
Global Services & Support revenues rose 4 percent to $1.7 billion on growth in
integrated logistics. The business's outstanding program performance was offset by
contract mix and disposition of contract matters, causing operating earnings to fall 26
percent to $180 million and the operating margin to decrease to 10.4 percent.
The IDS backlog increased during the quarter to $73.0 billion. Significant new
awards in the quarter included a Chinook multi-year contract, Qatar's C-17 order and an
International Space Station contract extension.
5
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported third-quarter pre-tax earnings of $37
million, down from $61 million in the same period last year which included a significantly
larger portfolio (Table 6). BCC’s portfolio balance at the end of the quarter was $6.1 billion,
down from $6.5 billion at the beginning of the year primarily on normal portfolio run-off and
depreciation. BCC contributed $146 million in cash dividends to Boeing during the quarter
and $220 million in the first nine months. BCC’s debt-to-equity ratio remained steady at
5.0-to-1.
(Millions) 2008 2007 2008 2007
Revenues $171 $197 (13%) $535 $619 (14%)
Pre-Tax Income $37 $61 (39%) $143 $204 (30%)
Table 6. Boeing Capital Corporation Operating Results
3rd Quarter
Change
Nine Months
Change
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 $48 million in the third quarter, up slightly from $44 million
in the same period last year.
Unallocated expense was $90 million, down from $285 million last year.
Deferred compensation expense was $109 million lower due to changes in Boeing stock
price and broad stock market conditions. Unallocated pension expense was lower by
$98 million.
Total pension expense was $176 million, down from $278 million in the same
quarter last year, of which $51 million was recorded in unallocated expense and the
balance was recorded as expense in the business segments.
Income tax expense was $470 million, including $57 million in adjustments that
drove the effective income tax rate to 41 percent in the quarter. These adjustments
reduced net income by $0.08 per share.
6
Outlook
Due to the uncertain length of the labor strike, Boeing will update its financial
guidance after conclusion of the strike upon completing an assessment of future results.
The company continues to focus on maintaining its financial strength and
improving business performance. Market demand for deliveries of new, fuel-efficient
commercial airplanes remains strong, exceeding the available supply. Although it has
not financed any new airplane deliveries since 2006, the company expects that it may
need to finance some deliveries beginning in 2009, though it is not in a position to
identify which specific deliveries will need manufacturer financing. Boeing has made
backstop financing commitments for 3% of the commercial airplanes backlog – mostly
for 787s – associated with delivery positions through the end of the next decade.
Boeing expects total US defense spending growth to moderate, but is focused on
improving the outlook for individual programs by keeping them operationally healthy,
relevant to the warfighter and supported by well-informed customers.
7
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.
8
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 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 December 31, 2007 and our Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2008 and June 30, 2008.
# # #
Contact:
Investor Relations: Diana Sands or Rob Young (312) 544-2140
Communications: Todd Blecher (312) 544-2002
9
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Nine months ended Three months ended
September 30 September 30
(Dollars in millions except per share data) 2008 2007 2008 2007
Sales of products $40,393 $42,193 $12,407 $14,177
Sales of services 7,852 6,717 2,886 2,340
Total revenues 48,245 48,910 15,293 16,517
Cost of products (32,736) (33,471) (10,311) (11,331)
Cost of services (6,179) (5,386) (2,176) (1,803)
Boeing Capital Corporation interest expense (173) (225) (54) (73)
Total costs and expenses (39,088) (39,082) (12,541) (13,207)
9,157 9,828 2,752 3,310
Income from operating investments, net 195 100 72 11
General and administrative expense (2,350) (2,735) (740) (931)
Research and development expense, net (2,811) (2,857) (937) (869)
Gain/(loss) on dispositions/business shutdown, net 2 (22) (22)
Earnings from operations 4,193 4,314 1,147 1,499
Other income, net 257 355 55 139
Interest and debt expense (145) (139) (49) (47)
Earnings before income taxes 4,305 4,530 1,153 1,591
Income tax expense (1,565) (1,499) (470) (482)
Net earnings from continuing operations 2,740 3,031 683 1,109
Net gain on disposal of discontinued operations,
net of taxes of $10, $6, $6, and $2 18 10 12 5
Net earnings $2,758 $3,041 $695 $1,114
Basic earnings per share from continuing operations $3.78 $3.98 $0.95 $1.46
Net gain on disposal of discontinued operations, net of taxes 0.02 0.02 0.02 0.01
Basic earnings per share $3.80 $4.00 $0.97 $1.47
Diluted earnings per share from continuing operations $3.74 $3.91 $0.94 $1.43
Net gain on disposal of discontinued operations, net of taxes 0.02 0.01 0.02 0.01
Diluted earnings per share $3.76 $3.92 $0.96 $1.44
Cash dividends paid per share $1.20 $1.05 $0.40 $0.35
Weighted average diluted shares (millions) 734.2 776.2 721.9 773.4
10
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
September 30 December 31
(Dollars in millions except per share data) 2008 2007
Assets
Cash and cash equivalents $ 4,186 $ 7,042
Short-term investments 591 2,266
Accounts receivable, net 5,814 5,740
Current portion of customer financing, net 193 328
Deferred income taxes 2,408 2,341
Inventories, net of advances and progress billings 11,149 9,563
Total current assets 24,341 27,280
Customer financing, net 5,989 6,777
8,686 8,265
Goodwill 3,530 3,081
Other acquired intangibles, net 2,208 2,093
Deferred income taxes 183 197
Investments 3,717 4,111
Pension plan assets, net 6,497 5,924
Other assets, net of accumulated amortization of $389 and $385 1,368 1,258
Total assets $ 56,519 $ 58,986
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $ 16,427 $ 16,676
Advances and billings in excess of related costs 11,793 13,847
Income taxes payable 752 253
Short-term debt and current portion of long-term debt 390 762
Total current liabilities 29,362 31,538
Deferred income taxes 1,435 1,190
Accrued retiree health care 7,165 7,007
Accrued pension plan liability, net 1,102 1,155
Non-current income taxes payable 1,132 1,121
Other long-term liabilities 392 516
Long-term debt 7,217 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 3,792 4,757
Treasury shares, at cost – 278,118,187 and 244,217,170 (17,425) (14,842)
Retained earnings 23,360 21,376
Accumulated other comprehensive loss (4,466) (4,596)
ShareValue Trust shares – 28,192,067 and 31,362,850 (1,608) (2,752)
Total shareholders’ equity 8,714 9,004
Total liabilities and shareholders’ equity $ 56,519 $ 58,986
Property, plant and equipment, net of accumulated depreciation of
$12,257 and $11,915
11
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30
(Dollars in millions) 2008 2007
Cash flows - operating activities:
Net earnings $ 2,758 $ 3,041
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash items –
Share-based plans expense 159 266
Depreciation 952 975
Amortization of other acquired intangibles 122 116
Amortization of debt discount/premium and issuance costs 8 7
Investment/asset impairment charges, net 21 5
Customer financing valuation provision/(benefit) 73 (52)
Gain on disposal of discontinued operations (28) (16)
(Gain)/loss on dispositions/business shutdown, net (2) 22
Other charges and credits, net 83 120
Excess tax benefits from share-based payment arrangements (100) (141)
Changes in assets and liabilities –
Accounts receivable (145) (358)
Inventories, net of advances and progress billings (1,670) (146)
Accounts payable and other liabilities 172 470
Advances and billings in excess of related costs (2,061) 747
Income taxes receivable, payable and deferred 733 1,195
Other long-term liabilities (157) 1
Pension and other postretirement plans (159) 287
Customer financing, net 628 1,254
Other (147) (102)
Net cash provided by operating activities 1,240 7,691
Cash flows - investing activities:
Property, plant and equipment additions (1,229) (1,282)
Property, plant and equipment reductions 16 22
Acquisitions, net of cash acquired (490) (75)
Contributions to investments (6,372) (2,673)
Proceeds from investments 8,399 2,563
Purchase of distribution rights (151) (152)
Net cash provided/(used) by investing activities 173 (1,597)
Cash flows - financing activities:
New borrowings 5 28
Debt repayments (616) (1,007)
Repayments of distribution rights financing (210)
Stock options exercised, other 43 196
Excess tax benefits from share-based payment arrangements 100 141
Employee taxes on certain share-based payment arrangements (81)
Common shares repurchased (2,583) (1,817)
Dividends paid (901) (826)
Net cash used by financing activities (4,243) (3,285)
Effect of exchange rate changes on cash and cash equivalents (26) 21
Net (decrease)/increase in cash and cash equivalents (2,856) 2,830
Cash and cash equivalents at beginning of year 7,042 6,118
Cash and cash equivalents at end of period $ 4,186 $ 8,948
12
The Boeing Company and Subsidiaries
Summary of Business Segment Data
(Unaudited)
Nine months ended Three months ended
September 30 September 30
(Dollars in millions) 2008 2007 2008 2007
Revenues:
Commercial Airplanes $ 23,674 $ 24,520 $ 6,946 $ 8,258
Integrated Defense Systems:
Boeing Military Aircraft 10,326 10,122 3,777 3,379
Network and Space Systems 8,479 8,633 2,984 2,953
Global Services and Support 5,201 4,939 1,736 1,673
Total Integrated Defense Systems 24,006 23,694 8,497 8,005
Boeing Capital Corporation 535 619 171 197
Other 527 234 300 77
Accounting differences/eliminations (497) (157) (621) (20)
Total revenues $ 48,245 $ 48,910 $ 15,293 $ 16,517
Earnings from operations:
Commercial Airplanes $ 2,154 $ 2,611 $ 394 945
Integrated Defense Systems:
Boeing Military Aircraft 922 1,251 373 413
Network and Space Systems 805 570 301 165
Global Services and Support 624 640 180 244
Total Integrated Defense Systems 2,351 2,461 854 822
Boeing Capital Corporation 143 204 37 61
Other (233) (165) (48) (44)
Unallocated expense (222) (797) (90) (285)
Earnings from operations 4,193 4,314 1,147 1,499
Other income, net 257 355 55 139
Interest and debt expense (145) (139) (49) (47)
Earnings before income taxes 4,305 4,530 1,153 1,591
Income tax expense (1,565) (1,499) (470) (482)
Net earnings from continuing operations 2,740 3,031 683 1,109
Net gain on disposal of discontinued operations,
net of taxes of $10, $6, $6, and $2 18 10 12 5
Net earnings $ 2,758 $ 3,041 $ 695 $ 1,114
Research and development expense:
Commercial Airplanes $ 2,108 $ 2,192 $ 705 $ 635
Integrated Defense Systems:
Boeing Military Aircraft 362 340 121 118
Network and Space Systems 227 223 73 80
Global Services and Support 112 77 38 28
Total Integrated Defense Systems 701 640 232 226
Other 2 25 8
Total research and development expense $ 2,811 $ 2,857 $ 937 $ 869
Unallocated expense:
Share-based plans expense $ (115) $ (227) $ (70) $ (58)
Deferred compensation expense 136 (117) 55 (54)
Pension ( 194) (420) (51) (149)
Post-retirement ( 60) (93) (20) (34)
Capitalized interest ( 38) (36) (11) (13)
Other 4 9 96 7 23
Total $ (222) $ (797) $ (90) $ (285)
13
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries
Commercial Airplanes 2008 2007 2008 2007
737 Next-Generation 254 250 67 81
747 13 12 4 5
767 8 9 2 3
777 50 58 11 20
Total 325 329 84 109
Integrated Defense Systems
Boeing Military Aircraft
F/A-18 Models 33 33 12 11
F-15E Eagle 11 6 7 3
C-17 Globemaster 12 12 4 4
KC-767 Tanker 2
CH-47 Chinook 8 7 4 1
T-45TS Goshawk 5 7 2 2
AH-64 Apache 2 17 1 9
C-40A Clipper 2
Network and Space Systems
Delta II 1 2 1 1
Commercial and Civil Satellites 1 3
Military Satellites 1 1
September 30 June 30 March 31 December 31
Contractual backlog (Dollars in billions) 2008 2008 2008 2007
Commercial Airplanes $275.9 $274.5 $271.2 $255.2
Integrated Defense Systems:
Boeing Military Aircraft 24.0 23.8 23.1 23.0
Network and Space Systems 7.6 11.0 10.5 9.2
Global Services and Support 9.8 10.7 10.8 9.6
Total Integrated Defense Systems 41.4 45.6 44.4 41.8
Total contractual backlog $317.3 $320.1 $315.6 $297.0
Unobligated backlog $32.1 $26.0 $30.6 $30.2
Total backlog $349.4 $346.1 $346.2 $327.2
Workforce 164,200 163,900 161,500 159,300
September 30 September 30
Nine months ended Three months ended
Commercial Airplanes
Boeing Commercial Airplanes (BCA) third-quarter revenues were $6.9 billion, 16
percent below the same period last year, driven by the fewer deliveries due to the strike
and supplier production challenges on customer-furnished galleys for certain wide-body
airplanes (Table 4). The labor strike has affected production of all airplane programs in
Seattle, Portland and Wichita. Earnings from operations declined to $394 million from
$945 million in the year-ago period due to the lower deliveries, the absence of supplier
R&D cost sharing payments and additional 747 program costs.
(Millions, except deliveries & margin percent) 2008 2007 2008 2007
Commercial Airplanes Deliveries 84 109 (23%) 325 329 (1%)
Revenues $6,946 $8,258 (16%) $23,674 $24,520 (3%)
Earnings from Operations $394 $945 (58%) $2,154 $2,611 (18%)
Operating Margins 5.7% 11.4% (5.7)Pts 9.1% 10.6% (1.5)Pts
Table 4. Commercial Airplanes Operating Results
Change Change
3rd Quarter Nine Months
For the first nine months, BCA revenues decreased 3 percent to $23.7 billion on
lower deliveries due to the strike and galley shortage. Operating earnings decreased 18
percent to $2.2 billion while margins were 9.1 percent, driven by the lower deliveries,
infrastructure cost absorption and additional 747 program costs that were partially offset
by lower research and development spending.
BCA booked 149 gross orders during the quarter and 625 during the first nine
months. Contractual backlog rose to a record $276 billion, increasing 8 percent year-todate
to approximately eight times BCA’s annual revenues.
The 787 Dreamliner made progress during the quarter despite the labor strike.
Key milestones included a successful hydraulic system test, landing gear test, and
pressurization test of the static airframe – the last, a key step in validating the structural
integrity of the airplane. The program also began testing the flight controls and began
final assembly of the fourth flight-test airplane. To date, the program has won 895 net
airplane orders from 58 customers.
4
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) third quarter revenues rose 6 percent
to $8.5 billion on higher volumes across all segments. Operating earnings rose 4
percent to $854 million, yielding an operating margin of 10.1 percent. The strike
reduced IDS operating margins by an estimated 0.4 points.
For the first nine months, IDS revenue increased to $24.0 billion, operating
earnings declined 4 percent to $2.4 billion and operating margins declined to 9.8
percent, including a reduction of 1.0 point due to the second-quarter AEW&C charge.
(Millions, except margin percent) 2008 2007 2008 2007
Revenues
Boeing Military Aircraft $3,777 $3,379 12% $10,326 $10,122 2%
Network & Space Systems $2,984 $2,953 1% $8,479 $8,633 (2%)
Global Services & Support $1,736 $1,673 4% $5,201 $4,939 5%
Total IDS Revenues $8,497 $8,005 6% $24,006 $23,694 1%
Earnings (Loss) from Operations
Boeing Military Aircraft $373 $413 (10%) $922 $1,251 (26%)
Network & Space Systems $301 $165 82% $805 $570 41%
Global Services & Support $180 $244 (26%) $624 $640 (3%)
Total IDS Earnings from Operations $854 $822 4% $2,351 $2,461 (4%)
Operating Margins 10.1% 10.3% (0.2)Pts 9.8% 10.4% (0.6)Pts
Table 5. Integrated Defense Systems Operating Results
3rd Quarter
Change
Nine Months
Change
1
Boeing Military Aircraft reported third-quarter revenues of $3.8 billion, 12 percent
higher than the prior year, on a favorable mix of aircraft deliveries. Operating margins
were 9.9 percent for the quarter, reduced by an estimated 1.0 point due to the strike.
For the quarter, revenues in Network & Space Systems increased slightly to $3.0
billion. Operating margins of 10.1 percent were due to solid performance across the
segment's broad array of programs.
Global Services & Support revenues rose 4 percent to $1.7 billion on growth in
integrated logistics. The business's outstanding program performance was offset by
contract mix and disposition of contract matters, causing operating earnings to fall 26
percent to $180 million and the operating margin to decrease to 10.4 percent.
The IDS backlog increased during the quarter to $73.0 billion. Significant new
awards in the quarter included a Chinook multi-year contract, Qatar's C-17 order and an
International Space Station contract extension.
5
Boeing Capital Corporation
Boeing Capital Corporation (BCC) reported third-quarter pre-tax earnings of $37
million, down from $61 million in the same period last year which included a significantly
larger portfolio (Table 6). BCC’s portfolio balance at the end of the quarter was $6.1 billion,
down from $6.5 billion at the beginning of the year primarily on normal portfolio run-off and
depreciation. BCC contributed $146 million in cash dividends to Boeing during the quarter
and $220 million in the first nine months. BCC’s debt-to-equity ratio remained steady at
5.0-to-1.
(Millions) 2008 2007 2008 2007
Revenues $171 $197 (13%) $535 $619 (14%)
Pre-Tax Income $37 $61 (39%) $143 $204 (30%)
Table 6. Boeing Capital Corporation Operating Results
3rd Quarter
Change
Nine Months
Change
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 $48 million in the third quarter, up slightly from $44 million
in the same period last year.
Unallocated expense was $90 million, down from $285 million last year.
Deferred compensation expense was $109 million lower due to changes in Boeing stock
price and broad stock market conditions. Unallocated pension expense was lower by
$98 million.
Total pension expense was $176 million, down from $278 million in the same
quarter last year, of which $51 million was recorded in unallocated expense and the
balance was recorded as expense in the business segments.
Income tax expense was $470 million, including $57 million in adjustments that
drove the effective income tax rate to 41 percent in the quarter. These adjustments
reduced net income by $0.08 per share.
6
Outlook
Due to the uncertain length of the labor strike, Boeing will update its financial
guidance after conclusion of the strike upon completing an assessment of future results.
The company continues to focus on maintaining its financial strength and
improving business performance. Market demand for deliveries of new, fuel-efficient
commercial airplanes remains strong, exceeding the available supply. Although it has
not financed any new airplane deliveries since 2006, the company expects that it may
need to finance some deliveries beginning in 2009, though it is not in a position to
identify which specific deliveries will need manufacturer financing. Boeing has made
backstop financing commitments for 3% of the commercial airplanes backlog – mostly
for 787s – associated with delivery positions through the end of the next decade.
Boeing expects total US defense spending growth to moderate, but is focused on
improving the outlook for individual programs by keeping them operationally healthy,
relevant to the warfighter and supported by well-informed customers.
7
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.
8
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 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 December 31, 2007 and our Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2008 and June 30, 2008.
# # #
Contact:
Investor Relations: Diana Sands or Rob Young (312) 544-2140
Communications: Todd Blecher (312) 544-2002
9
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Nine months ended Three months ended
September 30 September 30
(Dollars in millions except per share data) 2008 2007 2008 2007
Sales of products $40,393 $42,193 $12,407 $14,177
Sales of services 7,852 6,717 2,886 2,340
Total revenues 48,245 48,910 15,293 16,517
Cost of products (32,736) (33,471) (10,311) (11,331)
Cost of services (6,179) (5,386) (2,176) (1,803)
Boeing Capital Corporation interest expense (173) (225) (54) (73)
Total costs and expenses (39,088) (39,082) (12,541) (13,207)
9,157 9,828 2,752 3,310
Income from operating investments, net 195 100 72 11
General and administrative expense (2,350) (2,735) (740) (931)
Research and development expense, net (2,811) (2,857) (937) (869)
Gain/(loss) on dispositions/business shutdown, net 2 (22) (22)
Earnings from operations 4,193 4,314 1,147 1,499
Other income, net 257 355 55 139
Interest and debt expense (145) (139) (49) (47)
Earnings before income taxes 4,305 4,530 1,153 1,591
Income tax expense (1,565) (1,499) (470) (482)
Net earnings from continuing operations 2,740 3,031 683 1,109
Net gain on disposal of discontinued operations,
net of taxes of $10, $6, $6, and $2 18 10 12 5
Net earnings $2,758 $3,041 $695 $1,114
Basic earnings per share from continuing operations $3.78 $3.98 $0.95 $1.46
Net gain on disposal of discontinued operations, net of taxes 0.02 0.02 0.02 0.01
Basic earnings per share $3.80 $4.00 $0.97 $1.47
Diluted earnings per share from continuing operations $3.74 $3.91 $0.94 $1.43
Net gain on disposal of discontinued operations, net of taxes 0.02 0.01 0.02 0.01
Diluted earnings per share $3.76 $3.92 $0.96 $1.44
Cash dividends paid per share $1.20 $1.05 $0.40 $0.35
Weighted average diluted shares (millions) 734.2 776.2 721.9 773.4
10
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
September 30 December 31
(Dollars in millions except per share data) 2008 2007
Assets
Cash and cash equivalents $ 4,186 $ 7,042
Short-term investments 591 2,266
Accounts receivable, net 5,814 5,740
Current portion of customer financing, net 193 328
Deferred income taxes 2,408 2,341
Inventories, net of advances and progress billings 11,149 9,563
Total current assets 24,341 27,280
Customer financing, net 5,989 6,777
8,686 8,265
Goodwill 3,530 3,081
Other acquired intangibles, net 2,208 2,093
Deferred income taxes 183 197
Investments 3,717 4,111
Pension plan assets, net 6,497 5,924
Other assets, net of accumulated amortization of $389 and $385 1,368 1,258
Total assets $ 56,519 $ 58,986
Liabilities and Shareholders' Equity
Accounts payable and other liabilities $ 16,427 $ 16,676
Advances and billings in excess of related costs 11,793 13,847
Income taxes payable 752 253
Short-term debt and current portion of long-term debt 390 762
Total current liabilities 29,362 31,538
Deferred income taxes 1,435 1,190
Accrued retiree health care 7,165 7,007
Accrued pension plan liability, net 1,102 1,155
Non-current income taxes payable 1,132 1,121
Other long-term liabilities 392 516
Long-term debt 7,217 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 3,792 4,757
Treasury shares, at cost – 278,118,187 and 244,217,170 (17,425) (14,842)
Retained earnings 23,360 21,376
Accumulated other comprehensive loss (4,466) (4,596)
ShareValue Trust shares – 28,192,067 and 31,362,850 (1,608) (2,752)
Total shareholders’ equity 8,714 9,004
Total liabilities and shareholders’ equity $ 56,519 $ 58,986
Property, plant and equipment, net of accumulated depreciation of
$12,257 and $11,915
11
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30
(Dollars in millions) 2008 2007
Cash flows - operating activities:
Net earnings $ 2,758 $ 3,041
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash items –
Share-based plans expense 159 266
Depreciation 952 975
Amortization of other acquired intangibles 122 116
Amortization of debt discount/premium and issuance costs 8 7
Investment/asset impairment charges, net 21 5
Customer financing valuation provision/(benefit) 73 (52)
Gain on disposal of discontinued operations (28) (16)
(Gain)/loss on dispositions/business shutdown, net (2) 22
Other charges and credits, net 83 120
Excess tax benefits from share-based payment arrangements (100) (141)
Changes in assets and liabilities –
Accounts receivable (145) (358)
Inventories, net of advances and progress billings (1,670) (146)
Accounts payable and other liabilities 172 470
Advances and billings in excess of related costs (2,061) 747
Income taxes receivable, payable and deferred 733 1,195
Other long-term liabilities (157) 1
Pension and other postretirement plans (159) 287
Customer financing, net 628 1,254
Other (147) (102)
Net cash provided by operating activities 1,240 7,691
Cash flows - investing activities:
Property, plant and equipment additions (1,229) (1,282)
Property, plant and equipment reductions 16 22
Acquisitions, net of cash acquired (490) (75)
Contributions to investments (6,372) (2,673)
Proceeds from investments 8,399 2,563
Purchase of distribution rights (151) (152)
Net cash provided/(used) by investing activities 173 (1,597)
Cash flows - financing activities:
New borrowings 5 28
Debt repayments (616) (1,007)
Repayments of distribution rights financing (210)
Stock options exercised, other 43 196
Excess tax benefits from share-based payment arrangements 100 141
Employee taxes on certain share-based payment arrangements (81)
Common shares repurchased (2,583) (1,817)
Dividends paid (901) (826)
Net cash used by financing activities (4,243) (3,285)
Effect of exchange rate changes on cash and cash equivalents (26) 21
Net (decrease)/increase in cash and cash equivalents (2,856) 2,830
Cash and cash equivalents at beginning of year 7,042 6,118
Cash and cash equivalents at end of period $ 4,186 $ 8,948
12
The Boeing Company and Subsidiaries
Summary of Business Segment Data
(Unaudited)
Nine months ended Three months ended
September 30 September 30
(Dollars in millions) 2008 2007 2008 2007
Revenues:
Commercial Airplanes $ 23,674 $ 24,520 $ 6,946 $ 8,258
Integrated Defense Systems:
Boeing Military Aircraft 10,326 10,122 3,777 3,379
Network and Space Systems 8,479 8,633 2,984 2,953
Global Services and Support 5,201 4,939 1,736 1,673
Total Integrated Defense Systems 24,006 23,694 8,497 8,005
Boeing Capital Corporation 535 619 171 197
Other 527 234 300 77
Accounting differences/eliminations (497) (157) (621) (20)
Total revenues $ 48,245 $ 48,910 $ 15,293 $ 16,517
Earnings from operations:
Commercial Airplanes $ 2,154 $ 2,611 $ 394 945
Integrated Defense Systems:
Boeing Military Aircraft 922 1,251 373 413
Network and Space Systems 805 570 301 165
Global Services and Support 624 640 180 244
Total Integrated Defense Systems 2,351 2,461 854 822
Boeing Capital Corporation 143 204 37 61
Other (233) (165) (48) (44)
Unallocated expense (222) (797) (90) (285)
Earnings from operations 4,193 4,314 1,147 1,499
Other income, net 257 355 55 139
Interest and debt expense (145) (139) (49) (47)
Earnings before income taxes 4,305 4,530 1,153 1,591
Income tax expense (1,565) (1,499) (470) (482)
Net earnings from continuing operations 2,740 3,031 683 1,109
Net gain on disposal of discontinued operations,
net of taxes of $10, $6, $6, and $2 18 10 12 5
Net earnings $ 2,758 $ 3,041 $ 695 $ 1,114
Research and development expense:
Commercial Airplanes $ 2,108 $ 2,192 $ 705 $ 635
Integrated Defense Systems:
Boeing Military Aircraft 362 340 121 118
Network and Space Systems 227 223 73 80
Global Services and Support 112 77 38 28
Total Integrated Defense Systems 701 640 232 226
Other 2 25 8
Total research and development expense $ 2,811 $ 2,857 $ 937 $ 869
Unallocated expense:
Share-based plans expense $ (115) $ (227) $ (70) $ (58)
Deferred compensation expense 136 (117) 55 (54)
Pension ( 194) (420) (51) (149)
Post-retirement ( 60) (93) (20) (34)
Capitalized interest ( 38) (36) (11) (13)
Other 4 9 96 7 23
Total $ (222) $ (797) $ (90) $ (285)
13
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries
Commercial Airplanes 2008 2007 2008 2007
737 Next-Generation 254 250 67 81
747 13 12 4 5
767 8 9 2 3
777 50 58 11 20
Total 325 329 84 109
Integrated Defense Systems
Boeing Military Aircraft
F/A-18 Models 33 33 12 11
F-15E Eagle 11 6 7 3
C-17 Globemaster 12 12 4 4
KC-767 Tanker 2
CH-47 Chinook 8 7 4 1
T-45TS Goshawk 5 7 2 2
AH-64 Apache 2 17 1 9
C-40A Clipper 2
Network and Space Systems
Delta II 1 2 1 1
Commercial and Civil Satellites 1 3
Military Satellites 1 1
September 30 June 30 March 31 December 31
Contractual backlog (Dollars in billions) 2008 2008 2008 2007
Commercial Airplanes $275.9 $274.5 $271.2 $255.2
Integrated Defense Systems:
Boeing Military Aircraft 24.0 23.8 23.1 23.0
Network and Space Systems 7.6 11.0 10.5 9.2
Global Services and Support 9.8 10.7 10.8 9.6
Total Integrated Defense Systems 41.4 45.6 44.4 41.8
Total contractual backlog $317.3 $320.1 $315.6 $297.0
Unobligated backlog $32.1 $26.0 $30.6 $30.2
Total backlog $349.4 $346.1 $346.2 $327.2
Workforce 164,200 163,900 161,500 159,300
September 30 September 30
Nine months ended Three months ended
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