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Boeing Reports Solid Third Quarter; Reaffirms Cash and Raises Revenue and EPS Guidance

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CHICAGO, Oct. 24, 2018 /PRNewswire/ --

  • Revenueincreased to$25.1 billion driven by higher defenseandservices volume
  • GAAP EPS of $4.07 and core EPS (non-GAAP)* of $3.58 on solid execution across the company
  • Strong operating
cash flow of $4.6 billion; repurchased 7.0 million shares for $2.5 billion
  • Total backlog grew to $491 billion, including more than 5,800 commercial airplanes
  • Cash and marketable securities of $10.0 billion provide strong liquidity
  • Reaffirmed cash guidance; raised revenue and EPS guidance; updated segment margin guidance
  • Table 1. Summary Financial
    Results

    Third Quarter

    Nine Months

    (Dollars in Millions, except per share
    data)

    2018

    2017

    Change

    2018

    2017

    Change

    Revenues

    $25,146

    $24,223

    4%

    $72,786

    $69,235

    5%

    GAAP

    Earnings From Operations

    $2,227

    $2,630

    (15)%

    $7,812

    $7,366

    6%

    Operating Margin

    8.9%

    10.9%

    (2.0) Pts

    10.7%

    10.6%

    0.1 Pts

    Net Earnings

    $2,363

    $1,810

    31%

    $7,036

    $5,138

    37%

    Earnings Per Share

    $4.07

    $2.99

    36%

    $11.95

    $8.39

    42%

    Operating Cash Flow

    $4,559

    $3,396

    34%

    $12,375

    $10,443

    19%

    Non-GAAP*

    Core Operating Earnings

    $1,890

    $2,284

    (17)%

    $6,793

    $6,317

    8%

    Core Operating Margin

    7.5%

    9.4%

    (1.9) Pts

    9.3%

    9.1%

    0.2 Pts

    Core Earnings Per Share

    $3.58

    $2.62

    37%

    $10.55

    $7.28

    45%

    *Non-GAAP measure; complete definitions of Boeing's non-GAAP measures are on page 7, "Non-GAAP Measures Disclosures."

    The Boeing Company [NYSE: BA] reported third-quarter revenue of $25.1 billion driven by higher defense volume and services growth (Table 1). GAAP earnings per share increased to $4.07 and core earnings per share (non-GAAP)* increased to $3.58 primarily driven by strong operating performance at Commercial Airplanes and a tax benefit related to a tax settlement ($0.71 per share). Results also reflect charges related to planned investments in the newly awarded T-X Trainer and MQ-25 programs ($0.93 per share). Boeing delivered strong operating cash flow of $4.6 billion, repurchased $2.5 billion of shares, and paid $1.0 billion of dividends.

    The company's revenue guidance increased $1.0 billion to between $98.0 and $100.0 billion, driven by defense volume and services growth, inclusive of the KLX acquisition. Operating cash flow guidance is reaffirmed at $15.0 to $15.5 billion. Full year GAAP earnings per share guidance is increased to between $16.90 and $17.10 from between $16.40 and $16.60 and core earnings per share (non-GAAP)* guidance is increased to between $14.90 and $15.10 from between $14.30 and $14.50 driven by a lower-than-expected tax rate and improved performance at Commercial Airplanes.

    "Our teams continued to perform at a high level during the quarter, driving solid operating performance and robust cash generation, and continuing to deliver on our One Boeing advantage by bringing the best of Boeing to our customers," said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg.

    "During the quarter we captured important new defense business, winning and investing in the MQ-25 and T-X programs and securing the MH-139 contract, clearly demonstrating the value Boeing brings to customers while positioning us well for future growth opportunities. Within the Commercial Airplanes business, the 777X static test airplane was completed and moved into test setup and the team's focus on execution across our production programs continued to drive outstanding performance and strong operating margins. Our Global Services business continues to deliver on total lifecycle value to our customers, with key wins in the quarter including P-8 Poseidon training contracts for the U.S. Navy and Royal Australian Air Force and an order from GECAS for 20 737-800 Boeing Converted Freighters. Additionally, we began integrating new data analytics tools, powered by Boeing AnalytX, into all Boeing Defence Australia support contracts, enhancing its position as a leading fleet services provider in the region."

    "This strong underlying performance, along with growth across our businesses we've seen throughout the year, give us confidence to raise our 2018 revenue and earnings guidance and reaffirm our operating cash flow guidance."

    Table 2. Cash Flow

    Third Quarter

    Nine Months

    (Millions)

    2018

    2017

    2018

    2017

    Operating Cash Flow

    $4,559

    $3,396

    $12,375

    $10,443

    Less Additions to Property, Plant & Equipment

    ($457)

    ($399)

    ($1,227)

    ($1,304)

    Free Cash Flow*

    $4,102

    $2,997

    $11,148

    $9,139

    *Non-GAAP measure; complete definitions of Boeing's non-GAAP measures are on page 7, "Non-GAAP Measures Disclosures."

    Operating cash flow in the quarter increased to $4.6 billion, primarily driven by timing of receipts and expenditures as well as planned higher commercial airplane production rates and strong operating performance (Table 2). During the quarter, the company repurchased 7.0 million shares for $2.5 billion, leaving $9.6 billion remaining under the current repurchase authorization which is expected to be completed over approximately the next 12 to 18 months. The company also paid $1.0 billion in dividends in the quarter, reflecting a 20 percent increase in dividends per share compared to the same period of the prior year.

    Table 3. Cash, Marketable Securities and Debt Balances

    Quarter-End

    (Billions)

    Q3 18

    Q2 18

    Cash

    $8.0

    $8.1

    Marketable Securities1

    $2.0

    $1.7

    Total

    $10.0

    $9.8

    Debt Balances:

    The Boeing Company, net of intercompany loans to BCC

    $9.4

    $9.6

    Boeing Capital, including intercompany loans

    $2.5

    $2.5

    Total Consolidated Debt

    $11.9

    $12.1

    1Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."

    Cash and investments in marketable securities totaled $10.0 billion, compared to $9.8 billion at the beginning of the quarter (Table 3). Debt was relatively stable at $11.9 billion.

    Total company backlog at quarter-end was $491 billion, up from $488 billion at the beginning of the quarter, and included net orders for the quarter of $28 billion.

    Segment Results

    Commercial Airplanes

    Table 4. Commercial Airplanes

    Third Quarter

    Nine Months

    (Dollars in Millions)

    2018

    2017

    Change

    2018

    2017

    Change

    Commercial Airplanes Deliveries

    190

    202

    (6)%

    568

    554

    3%

    Revenues

    $15,276

    $15,393

    (1)%

    $43,409

    $42,626

    2%

    Earnings from Operations

    $2,023

    $1,513

    34%

    $5,175

    $3,665

    41%

    Operating Margin

    13.2%

    9.8%

    3.4 Pts

    11.9%

    8.6%

    3.3 Pts

    Commercial Airplanes third-quarter revenue of $15.3 billion was relatively unchanged, reflecting lower deliveries largely offset by mix (Table 4). Third-quarter operating margin increased to 13.2 percent, reflecting higher 787 margin and strong operating performance on production programs, partially offset by $112 million of cost growth on the KC-46 Tanker program due to higher than expected effort to meet customer requirements to support delivery of the initial aircraft, as well as due to incremental delays in certification and testing.

    During the quarter, Commercial Airplanes delivered 190 airplanes, including 57 737 MAX airplanes. The 777X program remains on track for delivery in 2020 as the static test airplane was completed and moved into test setup and the first two flight test airplanes were in production.

    Commercial Airplanes booked 171 net orders during the quarter, valued at $13 billion. The 787 program has captured more than 100 orders in 2018 and nearly 1,400 orders since its launch. Backlog remains robust with more than 5,800 airplanes valued at $413 billion. Commercial Airplanes revenue guidance is reaffirmed at between $59.5 and $60.5 billion and margin guidance is increased to between 12% and 12.5% from greater than 11.5% on strong performance.

    Defense, Space & Security

    Table 5. Defense, Space &
    Security

    Third Quarter

    Nine Months

    (Dollars in Millions)

    2018

    2017

    Change

    2018

    2017

    Change

    Revenues

    $5,729

    $5,050

    13%

    $17,084

    $15,304

    12%

    Earnings from Operations

    ($245)

    $486

    NM

    $925

    $1,649

    NM

    Operating Margin

    (4.3)%

    9.6%

    (13.9) Pts

    5.4%

    10.8%

    (5.4) Pts

    Defense, Space & Security third-quarter revenue increased to $5.7 billion driven by increased volume across government satellites, KC-46 Tanker, F/A-18 and weapons (Table 5). Third-quarter operating margin was (4.3) percent, primarily reflecting $691 million of charges related to planned investments in the T-X and MQ-25 programs and $64 million related to cost growth on the KC-46 Tanker program.

    During the quarter, Defense, Space & Security won key franchise program awards, including the T-X Trainer and MH-139 helicopter for the U.S. Air Force, the MQ-25 unmanned aircraft for the U.S. Navy, and the fourth KC-46 Tanker production lot. Significant milestones during the quarter included first flights of the Apache and Chinook for the Indian Air Force and receipt of Supplemental Type Certification for the KC-46 Tanker program, signifying completion of FAA certification. We also completed the acquisition of Millennium Space Systems, which will provide customers with advanced small-satellite technologies and flexible solutions.

    Backlog at Defense, Space & Security was $58 billion, of which 31 percent represents orders from customers outside the U.S. Defense, Space & Security revenue guidance increased to between $22.5 and $23.0 billion from between $22.0 and $23.0 billion driven by higher volume and margin guidance is adjusted to greater than 6.5% from between 10% and 10.5% primarily to account for the investments in the business.

    Global Services

    Table 6. Global Services

    Third Quarter

    Nine Months

    (Dollars in Millions)

    2018

    2017

    Change

    2018

    2017

    Change

    Revenues

    $4,091

    $3,579

    14%

    $12,124

    $10,784

    12%

    Earnings from Operations

    $543

    $495

    10%

    $1,790

    $1,687

    6%

    Operating Margin

    13.3%

    13.8%

    (0.5) Pts

    14.8%

    15.6%

    (0.8) Pts

    Global Services third-quarter revenue increased to $4.1 billion, primarily driven by higher parts volume (Table 6). Third-quarter operating margin was 13.3 percent reflecting mix and higher period costs.

    During the quarter, Global Services was awarded P-8 training contracts for the U.S. Navy and Royal Australian Air Force, captured an order from GECAS for 20 737-800 converted freighters, and completed the first P-8A heavy maintenance check for the U.S. Navy. Global Services also secured contracts for F/A-18 spares for the Defense Logistics Agency and KC-46 Tanker services for Lots 3 and 4. In early October, Global Services completed the acquisition of KLX, which will enhance our services business and allow us to deliver greater value to customers.

    Global Services revenue guidance increased to between $16.0 and $16.5 billion from between $15.5 and $16.0 billion driven by higher volume and margin guidance is reaffirmed at approximately 15.5%.

    Additional Financial Information

    Table 7. Additional Financial Information

    Third Quarter

    Nine Months

    (Dollars in Millions)

    2018

    2017

    2018

    2017

    Revenues

    Boeing Capital

    $77

    $70

    $214

    $234

    Unallocated items, eliminations and other

    ($27)

    $131

    ($45)

    $287

    Earnings from Operations

    Boeing Capital

    $27

    $23

    $71

    $87

    FAS/CAS service cost adjustment

    $337

    $346

    $1,019

    $1,049

    Other unallocated items and eliminations

    ($458)

    ($233)

    ($1,168)

    ($771)

    Other income, net

    $12

    $40

    $63

    $91

    Interest and debt expense

    ($106)

    ($87)

    ($317)

    ($267)

    Effective tax rate

    (10.8)%

    29.9%

    6.9%

    28.5%

    At quarter-end, Boeing Capital's net portfolio balance was $3.1 billion. Revenue in other unallocated items and eliminations decreased primarily due to the 2017 sale of aircraft previously leased to customers. The change in earnings from other unallocated items and eliminations is primarily due to timing of expense allocations. The effective tax rate for the third quarter decreased from the same period in the prior year primarily due to a $412 million benefit related to a 2013-2014 tax settlement and the reduction of the federal tax rate to 21%.

    Outlook

    The Company's 2018 guidance is updated below (Table 8).

    Table 8. 2018 Financial Outlook

    Current

    Prior

    (Dollars in Billions, except per share data)

    Guidance

    Guidance

    The Boeing Company

    Revenue

    $98.0 - 100.0

    $97.0 - 99.0

    GAAP Earnings Per Share

    $16.90 - 17.10

    $16.40 - 16.60

    Core Earnings Per Share*

    $14.90 - 15.10

    $14.30 - 14.50

    Operating Cash Flow

    $15.0 - 15.5

    $15.0 - 15.5

    Commercial Airplanes

    Deliveries

    810 - 815

    810 - 815

    Revenue

    $59.5 - 60.5

    $59.5 - 60.5

    Operating Margin

    12.0 - 12.5%

    >11.5%

    Defense, Space & Security

    Revenue

    $22.5 - 23.0

    $22.0 - 23.0

    Operating Margin

    >6.5%

    10.0 - 10.5%

    Global Services

    Revenue

    $16.0 - 16.5

    $15.5 - 16.0

    Operating Margin

    ~15.5%

    ~15.5%

    Boeing Capital

    Portfolio Size

    Stable

    Stable

    Revenue

    ~$0.2

    ~$0.2

    Pre-Tax Earnings

    ~$0.08

    ~$0.07

    Research & Development

    ~$3.5

    ~$3.7

    Capital Expenditures

    ~$2.0

    ~$2.2

    Pension Expense 1

    ~$0.2

    ~$0.1

    Effective Tax Rate

    ~9.5%

    ~16.0%

    *Non-GAAP measure; complete definitions of Boeing's non-GAAP measures are on page 7, "Non-GAAP Measures Disclosures."

    1 Approximately $1.4 billion of pension expense is expected to be allocated to the business segments

    Non-GAAP Measures Disclosures

    We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company's ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:

    Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

    Core operating earnings is defined as GAAP earnings from operations excluding the FAS/CAS service cost adjustment. The FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of the FAS/CAS service cost adjustment and Non-operating pension and postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to Commercial Airplanes and BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. Management uses core operating earnings, core operating margin and core earnings/per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude non-service pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation between the GAAP and non-GAAP measures is provided on pages 14-15.

    Free Cash Flow

    Free cash flow is defined as GAAP operating cash flow without 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 as a measure to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and free cash flow.

    Caution Concerning Forward-Looking Statements

    This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions generally identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that 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 airline customers; (3) the overall health of our aircraft production system, planned commercial aircraft production rate changes, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; (4) changing budget and appropriation levels and 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) our dependence on our subcontractors and suppliers, as well as the availability of raw materials; (10) changes in accounting estimates; (11) changes in the competitive landscape in our markets; (12) our non-U.S. operations, including sales to non-U.S. customers; (13) threats to the security of our or our customers' information; (14) potential adverse developments in new or pending litigation and/or government investigations; (15) customer and aircraft concentration in our customer financing portfolio; (16) changes in our ability to obtain debt on commercially reasonable terms and at competitive rates; (17) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (18) the adequacy of our insurance coverage to cover significant risk exposures; (19) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, sanctions or natural disasters; (20) work stoppages or other labor disruptions; (21) substantial pension and other postretirement benefit obligations; (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 or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

    Contact:

    Investor Relations:

    Maurita Sutedja or Ben Hackman (312) 544-2140

    Communications:

    Allison Bone (312) 544-2002

    The Boeing Company and Subsidiaries

    Consolidated Statements of Operations

    (Unaudited)

    In the first quarter of 2018, we adopted the following Accounting Standards Updates (ASU), which are reflected in the unaudited Consolidated Financial Statements on pages 9-15: ASU 2014-09, Revenue from Contracts with Customers (Topic 606); ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost; ASU 2016-18 Statement of Cash Flows (Topic 230) Restricted Cash; and ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

    Nine months ended
    September 30

    Three months ended
    September 30

    (Dollars in millions, except per share data)

    2018

    2017

    2018

    2017

    Sales of products

    $64,848

    $61,667

    $22,463

    $21,782

    Sales of services

    7,938

    7,568

    2,683

    2,441

    Total revenues

    72,786

    69,235

    25,146

    24,223

    Cost of products

    (53,134)

    (50,936)

    (18,882)

    (18,050)

    Cost of services

    (6,215)

    (5,742)

    (2,140)

    (1,879)

    Boeing Capital interest expense

    (51)

    (53)

    (18)

    (27)

    Total costs and expenses

    (59,400)

    (56,731)

    (21,040)

    (19,956)

    13,386

    12,504

    4,106

    4,267

    Income from operating investments, net

    112

    169

    32

    49

    General and administrative expense

    (3,345)

    (2,890)

    (1,154)

    (918)

    Research and development expense, net

    (2,417)

    (2,417)

    (826)

    (768)

    Gain on dispositions, net

    76

    69

    Earnings from operations

    7,812

    7,366

    2,227

    2,630

    Other income, net

    63

    91

    12

    40

    Interest and debt expense

    (317)

    (267)

    (106)

    (87)

    Earnings before income taxes

    7,558

    7,190

    2,133

    2,583

    Income tax (expense)/benefit

    (522)

    (2,052)

    230

    (773)

    Net earnings

    $7,036

    $5,138

    $2,363

    $1,810

    Basic earnings per share

    $12.08

    $8.49

    $4.11

    $3.03

    Diluted earnings per share

    $11.95

    $8.39

    $4.07

    $2.99

    Cash dividends paid per share

    $5.13

    $4.26

    $1.71

    $1.42

    Weighted average diluted shares (millions)

    588.9

    612.8

    580.8

    606.3

    The Boeing Company and Subsidiaries

    Consolidated Statements of Financial Position

    (Unaudited)

    (Dollars in millions, except per share data)

    September 30

    December 31

    2018

    2017

    Assets

    Cash and cash equivalents

    $8,034

    $8,813

    Short-term and other investments

    1,956

    1,179

    Accounts receivable, net

    2,893

    2,894

    Unbilled receivables, net

    9,936

    8,194

    Current portion of customer financing, net

    431

    309

    Inventories

    62,038

    61,388

    Other current assets

    2,398

    2,417

    Total current assets

    87,686

    85,194

    Customer financing, net

    2,785

    2,756

    Property, plant and equipment, net of accumulated depreciation of $18,328 and $17,641

    12,571

    12,672

    Goodwill

    5,722

    5,559

    Acquired intangible assets, net

    2,530

    2,573

    Deferred income taxes

    323

    321

    Investments

    1,190

    1,260

    Other assets, net of accumulated amortization of $466 and $482

    1,852

    2,027

    Total assets

    $114,659

    $112,362

    Liabilities and equity

    Accounts payable

    $13,663

    $12,202

    Accrued liabilities

    12,869

    13,069

    Advances and progress billings

    51,496

    48,042

    Short-term debt and current portion of long-term debt

    1,389

    1,335

    Total current liabilities

    79,417

    74,648

    Deferred income taxes

    1,738

    2,188

    Accrued retiree health care

    5,394

    5,545

    Accrued pension plan liability, net

    15,927

    16,471

    Other long-term liabilities

    2,905

    2,015

    Long-term debt

    10,487

    9,782

    Shareholders' equity:

    Common stock, par value $5.00 – 1,200,000,000 shares authorized; 1,012,261,159 shares issued

    5,061

    5,061

    Additional paid-in capital

    6,714

    6,804

    Treasury stock, at cost - 443,262,126 and 421,222,326 shares

    (51,781)

    (43,454)

    Retained earnings

    54,666

    49,618

    Accumulated other comprehensive loss

    (15,949)

    (16,373)

    Total shareholders' equity

    (1,289)

    1,656

    Noncontrolling interests

    80

    57

    Total equity

    (1,209)

    1,713

    Total liabilities and equity

    $114,659

    $112,362

    The Boeing Company and Subsidiaries

    Consolidated Statements of Cash Flows

    (Unaudited)

    Nine months ended
    September 30

    (Dollars in millions)

    2018

    2017

    Cash flows – operating activities:

    Net earnings

    $7,036

    $5,138

    Adjustments to reconcile net earnings to net cash provided by operating activities:

    Non-cash items –

    Share-based plans expense

    150

    151

    Depreciation and amortization

    1,531

    1,470

    Investment/asset impairment charges, net

    63

    75

    Customer financing valuation (benefit)/expense

    (3)

    4

    Gain on dispositions, net

    (76)

    Other charges and credits, net

    158

    196

    Changes in assets and liabilities –

    Accounts receivable

    10

    (558)

    Unbilled receivables

    (1,732)

    (1,805)

    Advances and progress billings

    3,457

    4,714

    Inventories

    (173)

    (800)

    Other current assets

    (5)

    (337)

    Accounts payable

    1,181

    780

    Accrued liabilities

    890

    (102)

    Income taxes receivable, payable and deferred

    (252)

    1,507

    Other long-term liabilities

    1

    25

    Pension and other postretirement plans

    (89)

    (550)

    Customer financing, net

    (175)

    634

    Other

    403

    (99)

    Net cash provided by operating activities

    12,375

    10,443

    Cash flows – investing activities:

    Property, plant and equipment additions

    (1,227)

    (1,304)

    Property, plant and equipment reductions

    117

    30

    Acquisitions, net of cash acquired

    (250)

    Contributions to investments

    (2,145)

    (2,815)

    Proceeds from investments

    1,369

    2,612

    Purchase of distribution rights

    (56)

    (131)

    Other

    (5)

    7

    Net cash used by investing activities

    (2,197)

    (1,601)

    Cash flows – financing activities:

    New borrowings

    4,696

    876

    Debt repayments

    (4,029)

    (83)

    Contributions from noncontrolling interests

    35

    Stock options exercised

    70

    291

    Employee taxes on certain share-based payment arrangements

    (247)

    (118)

    Common shares repurchased

    (8,415)

    (7,500)

    Dividends paid

    (2,976)

    (2,575)

    Net cash used by financing activities

    (10,866)

    (9,109)

    Effect of exchange rate changes on cash and cash equivalents, including restricted

    (37)

    73

    Net decrease in cash & cash equivalents, including restricted

    (725)

    (194)

    Cash & cash equivalents, including restricted, at beginning of year

    8,887

    8,869

    Cash & cash equivalents, including restricted, at end of period

    8,162

    8,675

    Less restricted cash & cash equivalents, included in Investments

    128

    106

    Cash and cash equivalents at end of period

    $8,034

    $8,569

    The Boeing Company and Subsidiaries

    Summary of Business Segment Data

    (Unaudited)

    Nine months ended
    September 30

    Three months ended
    September 30

    (Dollars in millions)

    2018

    2017

    2018

    2017

    Revenues:

    Commercial Airplanes

    $43,409

    $42,626

    $15,276

    $15,393

    Defense, Space & Security

    17,084

    15,304

    5,729

    5,050

    Global Services

    12,124

    10,784

    4,091

    3,579

    Boeing Capital

    214

    234

    77

    70

    Unallocated items, eliminations and other

    (45)

    287

    (27)

    131

    Total revenues

    $72,786

    $69,235

    $25,146

    $24,223

    Earnings/(loss) from operations:

    Commercial Airplanes

    $5,175

    $3,665

    $2,023

    $1,513

    Defense, Space & Security

    925

    1,649

    (245)

    486

    Global Services

    1,790

    1,687

    543

    495

    Boeing Capital

    71

    87

    27

    23

    Segment operating profit

    7,961

    7,088

    2,348

    2,517

    Unallocated items, eliminations and other

    (1,168)

    (771)

    (458)

    (233)

    FAS/CAS service cost adjustment

    1,019

    1,049

    337

    346

    Earnings from operations

    7,812

    7,366

    2,227

    2,630

    Other income, net

    63

    91

    12

    40

    Interest and debt expense

    (317)

    (267)

    (106)

    (87)

    Earnings before income taxes

    7,558

    7,190

    2,133

    2,583

    Income tax (expense)/benefit

    (522)

    (2,052)

    230

    (773)

    Net earnings

    $7,036

    $5,138

    $2,363

    $1,810

    Research and development expense, net:

    Commercial Airplanes

    $1,616

    $1,755

    $517

    $538

    Defense, Space & Security

    613

    599

    211

    207

    Global Services

    119

    101

    48

    38

    Other

    69

    (38)

    50

    (15)

    Total research and development expense, net

    $2,417

    $2,417

    $826

    $768

    Unallocated items, eliminations and other:

    Share-based plans

    ($60)

    ($67)

    ($24)

    ($21)

    Deferred compensation

    (112)

    (174)

    (56)

    (78)

    Amortization of previously capitalized interest

    (67)

    (68)

    (19)

    (22)

    Eliminations and other unallocated items

    (929)

    (462)

    (359)

    (112)

    Sub-total (included in core operating earnings)

    (1,168)

    (771)

    (458)

    (233)

    Pension FAS/CAS service cost adjustment

    780

    811

    260

    271

    Postretirement FAS/CAS service cost adjustment

    239

    238

    77

    75

    FAS/CAS service cost adjustment

    $1,019

    $1,049

    $337

    $346

    Total

    ($149)

    $278

    ($121)

    $113

    The Boeing Company and Subsidiaries

    Operating and Financial Data

    (Unaudited)

    Deliveries

    Nine months ended
    September 30

    Three months ended
    September 30

    Commercial Airplanes

    2018

    2017

    2018

    2017

    737

    407

    381

    138

    145

    747

    5

    8

    (1)

    2

    4

    767

    13

    7

    4

    2

    777

    37

    58

    12

    16

    787

    106

    100

    34

    35

    Total

    568

    554

    190

    202

    Note: Aircraft accounted for as revenues by BCA and as a note receivable in consolidation identified by parentheses

    Defense, Space & Security

    AH-64 Apache (New)

    8

    3

    AH-64 Apache (Remanufactured)

    12

    43

    6

    15

    CH-47 Chinook (New)

    11

    6

    2

    2

    CH-47 Chinook (Renewed)

    14

    28

    6

    9

    F-15 Models

    8

    11

    3

    4

    F/A-18 Models

    10

    18

    5

    6

    P-8 Models

    10

    14

    2

    5

    Commercial and Civil Satellites

    1

    3

    1

    Military Satellites

    Total backlog (Dollars in millions)

    September 30

    December 31

    2018

    2017

    Commercial Airplanes

    $413,064

    $410,526

    Defense, Space & Security

    57,875

    44,049

    Global Services

    20,240

    19,605

    Total backlog

    $491,179

    $474,180

    Contractual backlog

    $462,468

    $456,524

    Unobligated backlog

    28,711

    17,656

    Total backlog

    $491,179

    $474,180

    The Boeing Company and Subsidiaries

    Reconciliation of Non-GAAP Measures

    (Unaudited)

    The tables provided below reconcile the non-GAAP financial measures core operating earnings, core operating margin, and core earnings per share with the most directly comparable GAAP financial measures, earnings from operations, operating margin, and diluted earnings per share. See page 7 of this release for additional information on the use of these non-GAAP financial measures.

    (Dollars in millions, except per share data)

    2018 Guidance

    Third Quarter 2018

    Third Quarter 2017

    $ millions

    Per Share

    $ millions

    Per Share

    $ millions

    Per Share

    Revenues

    25,146

    24,223

    Earnings from operations (GAAP)

    2,227

    2,630

    Operating margins

    8.9%

    10.9%

    FAS/CAS service cost adjustment:

    Pension FAS/CAS service cost adjustment

    (260)

    (271)

    Postretirement FAS/CAS service cost adjustment

    (77)

    (75)

    FAS/CAS service cost adjustment

    ~($1,395)

    (337)

    (346)

    Core operating earnings (non-GAAP)

    $1,890

    $2,284

    Core operating margins (non-GAAP)

    7.5%

    9.4%

    Diluted earnings per share (GAAP)

    $16.90 - 17.10

    $4.07

    $2.99

    Pension FAS/CAS service cost adjustment

    ~($1,395)

    ($260)

    (0.45)

    ($271)

    (0.45)

    Postretirement FAS/CAS service cost adjustment

    (77)

    (0.13)

    (75)

    (0.12)

    Non-operating pension expense

    ~($90)

    (50)

    (0.09)

    (26)

    (0.05)

    Non-operating postretirement expense

    29

    0.05

    31

    0.05

    Provision for deferred income taxes on adjustments 1

    75

    0.13

    119

    0.20

    Subtotal of adjustments

    ($2.00)

    ($283)

    ($0.49)

    ($222)

    ($0.37)

    Core earnings per share (non-GAAP)

    $14.90 - 15.10

    $3.58

    $2.62

    Weighted average diluted shares (in millions)

    585 - 590

    580.8

    606.3

    1 The income tax impact is calculated using the U.S. corporate statutory tax rate.

    The Boeing Company and Subsidiaries

    Reconciliation of Non-GAAP Measures

    (Unaudited)

    The tables provided below reconcile the non-GAAP financial measures core operating earnings, core operating margin, and core earnings per share with the most directly comparable GAAP financial measures, earnings from operations, operating margin, and diluted earnings per share. See page 7 of this release for additional information on the use of these non-GAAP financial measures.

    (Dollars in millions, except per share data)

    2018 Guidance

    Nine Months 2018

    Nine Months 2017

    $ millions

    Per Share

    $ millions

    Per Share

    $ millions

    Per Share

    Revenues

    72,786

    69,235

    Earnings from operations (GAAP)

    7,812

    7,366

    Operating margins

    10.7%

    10.6%

    FAS/CAS service cost adjustment:

    Pension FAS/CAS service cost adjustment

    (780)

    (811)

    Postretirement FAS/CAS service cost adjustment

    (239)

    (238)

    FAS/CAS service cost adjustment

    ~($1,395)

    (1,019)

    (1,049)

    Core operating earnings (non-GAAP)

    $6,793

    $6,317

    Core operating margins (non-GAAP)

    9.3%

    9.1%

    Diluted earnings per share (GAAP)

    $16.90 - 17.10

    $11.95

    $8.39

    Pension FAS/CAS service cost adjustment

    ~($1,395)

    ($780)

    (1.32)

    ($811)

    (1.32)

    Postretirement FAS/CAS service cost adjustment

    (239)

    (0.41)

    (238)

    (0.39)

    Non-operating pension expense

    ~($90)

    (98)

    (0.17)

    (88)

    (0.15)

    Non-operating postretirement expense

    77

    0.13

    91

    0.15

    Provision for deferred income taxes on adjustments 1

    218

    0.37

    366

    0.60

    Subtotal of adjustments

    ($2.00)

    ($822)

    ($1.40)

    ($680)

    ($1.11)

    Core earnings per share (non-GAAP)

    $14.90 - 15.10

    $10.55

    $7.28

    Weighted average diluted shares (in millions)

    585 - 590

    588.9

    612.8

    1 The income tax impact is calculated using the U.S. corporate statutory tax rate.

    SOURCE Boeing

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