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Boeing Reports Third-Quarter Financial Results

CHICAGO, Oct. 21 /PRNewswire-FirstCall/ --

  • Third-quarter revenue was $16.7 billion, 9 percent higher than last year's strike-affected quarter
  • Loss of $2.23 per share reflects $3.59 per share of expenses related to previously announced 787 cost reclassification and 747 charge, partially offset by solid performance in other commercial programs and the defense business
  • Operating cash flow increased to $1.2 billion
  • Backlog at $320 billion - nearly five times current annual revenues
  • 2009 guidance updated for 787 cost reclassification and 747 charge

    Table 1.  Summary Financial Results
                           Third Quarter               Nine Months
                           -------------               -----------
    (Dollars in
     Millions, except
     per share data)        2009      2008  Change     2009     2008  Change
    -----------------       ----      ----             ----     ----

    Revenues             $16,688   $15,293       9% $50,344  $48,245       4%
    Earnings/(Loss) From
     Operations          ($2,151)   $1,147      NA     $403   $4,193      NA
    Operating Margin       (12.9%)     7.5%     NA      0.8%     8.7%     NA
    Net Income/(Loss)    ($1,564)     $695      NA      $44   $2,758      NA
    Earnings/(Loss)
     per Share            ($2.23)    $0.96      NA    $0.06    $3.76      NA
    Operating Cash Flow   $1,197     ($442)     NA   $2,391   $1,240      93%

The Boeing Company (NYSE: BA) reported a third-quarter net loss of $1.6 billion, or $2.23 per share, as revenues rose 9 percent to $16.7 billion. Current period results reflect the previously announced reclassification to research and development (R&D) of costs incurred through July for the first three 787 flight-test airplanes ($2.46 per share), spending on those planes for August and September ($0.14 per share), and the 747 charge ($0.99 per share), partially offset by solid performance in other commercial airplane programs and the company's defense business (Table 1). Last year's strike and supplier production problems reduced year-ago revenue by an estimated $2.1 billion and earnings by an estimated $0.60 per share.

Revenues for the first nine months of 2009 rose 4 percent to $50.3 billion due to higher commercial deliveries and growth in the defense segment. Earnings for the first nine months declined to $0.06 per share, including the third-quarter impacts described above and a first-quarter $0.38 per share impact from reductions to future twin-aisle production rates and lower delivery price escalation forecasts in Commercial Airplanes.

Earnings guidance for 2009 has been adjusted to between $1.35 and $1.55 per share, from $4.70 to $5.00, to reflect the 787 and 747 impacts.

"The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business," said Boeing Chairman, President and Chief Executive Officer Jim McNerney. "We look forward to getting the 787 and 747-8 in the air soon and moving forward with flight test and certification for these two important programs."

Boeing's quarterly operating cash flow was $1.2 billion, which includes higher cash receipts than the year-ago period partially offset by continued investment in development programs (Table 2). For the first nine months of 2009, operating cash flow was $2.4 billion. Free cash flow* was $1.0 billion in the quarter and $1.4 billion year-to-date.

    Table 2.  Cash Flow
                                    Third Quarter    Nine Months
                                    -------------    -----------
    (Millions)                       2009   2008    2009     2008
    ----------                       ----   ----    ----     ----

    Operating Cash Flow(1)         $1,197  ($442) $2,391   $1,240
       Less Additions to Property,
        Plant & Equipment           ($229) ($422)  ($965) ($1,229)
                                    -----  -----   -----  -------
    Free Cash Flow*                  $968  ($864) $1,426      $11
    ----------------                 ----  -----  ------      ---

    (1) Operating cash flow for third quarter of 2009 includes a $60 million
        contribution to pension plans.  Operating cash flow for the first nine
        months includes a $60 million contribution to pension plans in 2009
        and $531 million in 2008.
    * Non-GAAP measure.  A complete definition and reconciliation of Boeing's
      use of non-GAAP measures, identified by an
      asterisk (*), is found on page 8, "Non-GAAP Measure Disclosure."

Cash and investments in marketable securities totaled $6.6 billion at September 30, up 31 percent from the end of the second quarter. The cash position was improved by the issuance of $1.95 billion in debt partially offset by investing cash flows of $1.0 billion for the purchase of 787 facilities in South Carolina and payment of Sea Launch guarantees (Table 3). The company did not acquire any of its shares in the quarter.

    Table 3.  Cash, Marketable Securities and Debt Balances
                                                             Quarter-
                                                                End
                                                             --------
    (Billions)                                               3Q09 2Q09
    ----------                                               ---- ----
    Cash                                                     $6.1 $4.6
    Marketable Securities(1)                                 $0.5 $0.4
                                                             ---- ----
       Total                                                 $6.6 $5.0

    Debt Balances:
    The Boeing Company                                       $7.6 $5.7
    Boeing Capital Corporation                               $3.4 $3.4
                                                             ---- ----
       Total Consolidated Debt                              $11.0 $9.1
    --------------------------                              ----- ----
    (1) Marketable securities consists primarily of investment-grade
        instruments classified as "short-term investments" and
        "investments."

Total company backlog at quarter-end was $320 billion, down 2 percent in the quarter, as backlog for both Commercial Airplanes and Integrated Defense Systems declined during the period.

Segment Results

Commercial Airplanes

Boeing Commercial Airplanes (BCA) third-quarter revenues increased 13 percent to $7.9 billion on higher deliveries partially offset by lower services volume, while last year's revenues were affected by a labor strike and supplier production problems. The current period operating loss of $2.8 billion reflects the previous 787 and 747 announcements mentioned above. R&D expense includes the $2.5 billion reclassification of costs incurred through July on the first three 787 flight test airplanes and $138 million of spending on those airplanes in August and September. The 747 forward-loss of $1.0 billion is due to increased production costs and difficult market conditions (Table 4).

For the first nine months of 2009, revenues rose to $24.9 billion on increased airplane deliveries, partially offset by lower volume in services. Operating earnings fell to a loss of $1.6 billion driven by the 787 and 747 impacts.

    Table 4. Commercial Airplanes Operating Results

                            Third Quarter               Nine Months
                            -------------               -----------
    (Dollars in Millions)    2009     2008  Change     2009      2008  Change
    ---------------------    ----     ----  ------     ----      ----  ------

    Commercial Airplanes
     Deliveries               113       84      35%     359       325      10%

    Revenues               $7,883   $6,946      13% $24,868   $23,674       5%
    Earnings/(Loss)
     from Operations      ($2,837)    $394      NA  ($1,603)   $2,154      NA

    Operating Margins       (36.0%)    5.7%     NA     (6.4%)     9.1%     NA
    -----------------       -----      ---      --     ----       ---      --

BCA booked 96 gross orders during the quarter while 17 others were removed from its order book. Contractual backlog was $254 billion, more than seven times BCA's expected 2009 revenues.

The 787 program has begun the previously announced reinforcement to an area within the side-of-body joint. First flight of the airplane remains on track to occur by the end of 2009, with first delivery scheduled for the fourth quarter of 2010. The company also recently completed its acquisition of the 787 production facility in South Carolina from Vought. Total firm orders are now 840 airplanes from 55 customers, including the previously disclosed ten-unit cancellation that occurred after quarter-end.

Integrated Defense Systems

Boeing Integrated Defense Systems (IDS) third-quarter revenues rose 3 percent to $8.7 billion on increased military aircraft deliveries and higher volume in services. Operating margins were 10.1 percent reflecting strong performance in Boeing Military Aircraft and Network & Space Systems (Table 5).

For the first nine months of 2009, IDS revenues increased by 5 percent to $25.1 billion on growth in Military Aircraft and Global Services segments as operating margins were 9.8 percent, increasing earnings 5 percent to $2.5 billion.

    Table 5.  Integrated Defense Systems Operating Results

                           Third Quarter              Nine Months
                           -------------              -----------
    (Dollars in Millions)   2009    2008  Change      2009     2008  Change
    ---------------------   ----    ----  ------      ----     ----  ------

    Revenues
       Boeing Military
        Aircraft          $3,951  $3,702       7%  $10,324  $10,169       2%
       Network & Space
        Systems           $2,711  $2,987      (9%)  $8,492   $8,485       0%
       Global Services &
        Support           $2,082  $1,808      15%   $6,298   $5,352      18%
                          ------  ------            ------   ------
    Total IDS Revenues    $8,744  $8,497       3%  $25,114  $24,006       5%

    Earnings from
     Operations
       Boeing Military
        Aircraft            $486    $388      25%   $1,160     $929      25%
       Network & Space
        Systems             $252    $302     (17%)    $698     $806     (13%)
       Global Services &
        Support             $147    $164     (10%)    $612     $616      (1%)
                            ----    ----              ----     ----
    Total IDS Earnings
     from Operations        $885    $854       4%   $2,470   $2,351       5%

    Operating Margins       10.1%   10.1%   -Pts       9.8%     9.8%   -Pts


Boeing Military Aircraft (BMA) third-quarter revenue rose 7 percent to $4.0 billion and operating margin expanded to 12.3 percent, reflecting improved delivery mix and strong execution across its programs. During the quarter, BMA delivered 34 aircraft, the third P-8A achieved its first flight, the P-8 India contract was finalized, and the Chinook program received a 15-aircraft contract from Canada.

Network & Space Systems third-quarter revenues were $2.7 billion primarily driven by lower volume on intelligence and security systems, missile defense, and combat systems. Operating margin was 9.3 percent reflecting strong performance across the segment's array of programs partially offset by a less favorable contract mix. During the quarter, key flight milestones were achieved on Directed Energy programs, and the company was awarded contracts to provide four of its new 702B satellite to Intelsat.

Global Services & Support (GS&S) revenues increased 15 percent on higher volume across its broad portfolio of services and logistics products. During the quarter, GS&S operating margins were 7.1 percent driven by a contract adjustment and less favorable contract mix. In this segment, the company was awarded contracts for A-10 modernization as part of a $1.6 billion lifecycle program support contract and a UK Chinook modernization contract.

IDS' backlog is $65.8 billion, nearly two times expected 2009 revenues. The reduction in backlog was primarily due to termination of the manned ground vehicle portion of the Future Combat Systems contract due to changing US defense priorities.

Boeing Capital Corporation

Boeing Capital Corporation (BCC) reported third-quarter pre-tax earnings of $39 million compared to $37 million in the same period last year (Table 6). During the quarter, BCC's portfolio balance declined slightly to $6.1 billion, down from $6.3 billion at the end of the second quarter, on normal portfolio run-off through customer payments and depreciation, partially offset by $153 million in new aircraft financings and other volume. BCC contributed $48 million in cash dividends to the company during the quarter. BCC's debt-to-equity ratio was unchanged at 5.0-to-1.

    Table 6.  Boeing Capital Corporation Operating Results
                               Third               Nine
                               Quarter            Months
                              --------           -------
    (Dollars in Millions)    2009 2008 Change   2009 2008 Change
    ---------------------    ---- ---- ------   ---- ---- ------

    Revenues                 $166 $171     (3%) $496 $535     (7%)

    Earnings from Operations  $39  $37      5%  $112 $143    (22%)

Additional Information

The "Other" segment consists primarily of Boeing Engineering, Operations and Technology, as well as certain results related to the financial consolidation of all business units. Other segment expense was $36 million in the third quarter.

Total pension expense for the quarter was $230 million, as compared to $176 million in the same period last year. A total of $254 million was recognized in the operating segments in the quarter (up from $125 million in the same period last year), partially offset by a $24 million contribution to earnings in unallocated items.

Unallocated expense was $202 million driven by higher deferred compensation expense partially offset by lower unallocated pension expense, up from $90 million in the same quarter last year which included a more favorable insurance adjustment.

Interest expense for the quarter was $92 million, up from $49 million in the same period last year due to additional debt issued in 2009. Other income (expense) decreased $59 million driven by lower interest earned on cash balances.

Outlook

The 2009 financial guidance is updated to include the previously disclosed 787 cost reclassification and 747 charge (Table 7).

Boeing's 2009 revenue guidance is reaffirmed at $68 billion to $69 billion. Earnings-per-share guidance for 2009 has been reduced to between $1.35 and $1.55 per share from $4.70 to $5.00 per share for the 787 cost reclassification and 747 charge. Operating cash flow guidance is reaffirmed at greater than $2.5 billion, including discretionary pension contributions of approximately $0.5 billion and an assumption of $0.8 billion for new commercial airplane financings. The company will issue financial guidance for 2010 with its fourth-quarter 2009 results.

Commercial Airplanes' 2009 delivery guidance remains at between 480 and 485 airplanes and is sold out. BCA's 2009 revenue is unchanged at between $34 billion and $35 billion, and operating margin is expected to be between (3) percent and (2.5) percent due to the previously discussed 787 and 747 impacts.

IDS guidance for 2009 remains unchanged with revenue between $33 billion and $34 billion and operating margins of approximately 10 percent.

Boeing Capital Corporation now expects that the aircraft finance portfolio will be stable as the amount of new aircraft financing in 2009 will approximate normal portfolio runoff due to customer payments and depreciation.

Boeing's 2009 R&D forecast is between $6.6 billion and $6.8 billion, up from $3.6 billion to $3.8 billion, driven by the 787 cost reclassification, an operating model adjustment to better balance BCA R&D efforts going forward, and higher IDS R&D. Capital expenditures for 2009 are expected to be approximately $1.3 billion, down from approximately $1.4 billion. The company's non-cash pension expense is expected to be approximately $0.9 billion in 2009. The third-quarter tax benefit related to the 787 cost reclassification and 747 charge was 30.6 percent, and the full-year tax benefit for both impacts is expected to be approximately 37 percent.

    Table 7.  Financial Outlook
    (Dollars in Billions, except per-share
     data)                                            2009
    ---------------------------------------           ----

    The Boeing Company
      Revenues                                     $68 - $69
      Earnings Per Share (GAAP)                  $1.35 - $1.55
      Operating Cash Flow(1)                         > $2.5

    Boeing Commercial Airplanes
      Deliveries                                  480 - 485
      Revenues                                    $34 - $35
      Operating Margin                          (3)% - (2.5)%

    Integrated Defense Systems
      Revenues
        Boeing Military Aircraft                  ~ $14.0
        Network & Space Systems                    ~ $11
        Global Services & Support                  ~ $8.5
                                                   ------
      Total IDS Revenues                          $33 - $34

      Operating Margin
        Boeing Military Aircraft                   ~10.5%
        Network & Space Systems                     ~8.5%
        Global Services & Support                    ~11%
                                                     ---
      Total IDS Operating Margin                     ~10%

    Boeing Capital Corporation
      Portfolio Size                               Stable
      Revenue                                     ~ $0.6
      Return on Assets                              >1.0%

    Research & Development                       $6.6 - $6.8
    Capital Expenditures                           ~ $1.3
    --------------------                           ------

    (1) After pension contributions of $0.5 billion and assumed $0.8
        billion for new aircraft financings in 2009.

Non-GAAP Measure Disclosure

Management believes that the non-GAAP (Generally Accepted Accounting Principles) measures (indicated by an asterisk *) used in this report provide investors with important perspectives into the company's ongoing business performance. The company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. The following definitions are provided:

Free Cash Flow

Free cash flow is defined as GAAP operating cash flow less capital expenditures for property, plant and equipment additions. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow internally to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and free cash flow.

Forward-Looking Information Is Subject to Risk and Uncertainty

Certain statements in this report may be "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "intends," "plans," "projects," "believes," "estimates," "targets," "anticipates," and similar expressions are used to identify these forward-looking statements. Forward-looking statements are based upon assumptions about future events that may not prove to be accurate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak to events only as of the date they are 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, except as required by federal securities laws. Specific factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, those set forth below and other important factors disclosed previously and from time to time in our other filings with the Securities and Exchange Commission: the effect of economic conditions in the United States and globally; the impact on our accounts receivable, customer financing portfolios and allowance for losses of customer defaults and changes in customer credit ratings, credit default rates and collateral values; the impact on our revenues and operating results of changes to indices included in indexed price escalation clauses included in our contracts with commercial airplane and defense customers; the successful execution of our Commercial Airplanes and Integrated Defense Systems backlog; the effects of customers canceling, modifying and/or rescheduling contractual orders and advance payments; the timing and effects of any decisions to increase or decrease the rate of commercial airplane production; the timing and effects of decisions to complete or launch a Commercial Airplanes program; the ability to successfully develop and timely produce the 787 and 747-8 aircraft; the ability of our suppliers and, as applicable, subcontractors to successfully and timely perform their obligations; the effect on our revenues of political and legal processes, changing defense priorities, and associated budget reductions by U.S. and international government customers affecting Boeing defense programs; our relationship with our union-represented workforce and the negotiation of collective bargaining agreements; the impact of volatile fuel prices and the airline industry's response; the effect of trade and globalization on long-term growth in passenger and cargo traffic; the effect of world trade and credit availability on air cargo traffic; the effect of declines in aircraft valuations; the impact of airline traffic volumes and revenue yields on near-term global airline profitability; the impact on our revenues or operating results of airline bankruptcies; the availability of commercial and government financing and the extent to which we are called upon to fund outstanding financing commitments or satisfy other financing requests, and our ability to satisfy those requirements; the continuation of historical costs for fleet support services; the receipt of estimated award and incentive fees on U.S. government contracts; the future demand for commercial satellites and projections of future order flow; the potential for technical or quality issues on development programs, including the Airborne Early Warning and Control program, International KC-767 Tanker, other fixed-price development programs, or commercial satellite programs, to affect schedule and cost estimates, or cause us to incur a material charge or experience a termination for default; the outcome of any litigation and/or government investigation in which we are a party, and other contingencies; returns on pension fund assets, impacts of future interest rate changes on pension obligations and rising healthcare costs; our ability to access external capital resources to fund our operations; the amounts and effects of underinsured operations, including satellite launches; our ability to recover the proportionate amounts owed to us from the other Sea Launch partners; and the scope, nature or impact of acquisition or disposition activity and investment in any joint ventures/strategic alliances, including Sea Launch and United Launch Alliance, and indemnifications and guarantees related thereto.

    Contact:
    Investor Relations:    Diana Sands or Rob Young (312) 544-2140
    Communications:        (312) 544-2002

                        The Boeing Company and Subsidiaries
                       Consolidated Statements of Operations
                                    (Unaudited)
                                             Nine months     Three months
                                                ended            ended
                                             September 30      September 30
    (Dollars in millions, except
     per share data)                          2009     2008     2009     2008
    ----------------------------              ----     ----     ----     ----
    Sales of products                      $42,098  $40,393  $13,967  $12,407
    Sales of services                        8,246    7,852    2,721    2,886
    -----------------                        -----    -----    -----    -----
    Total revenues                          50,344   48,245   16,688   15,293

    Cost of products                       (35,432) (32,736) (12,273) (10,311)
    Cost of services                        (6,468)  (6,179)  (2,165)  (2,176)
    Boeing Capital Corporation
     interest expense                         (132)    (173)     (42)     (54)
    --------------------------                ----     ----      ---      ---
    Total costs and expenses               (42,032) (39,088) (14,480) (12,541)
    ------------------------               -------  -------  -------  -------
                                             8,312    9,157    2,208    2,752
    Income from operating investments, net     186      195       84       72
    General and administrative expense      (2,584)  (2,350)    (868)    (740)
    Research and development expense, net   (5,504)  (2,811)  (3,574)    (937)
    (Loss)/gain on dispositions, net            (7)       2       (1)
    --------------------------------            --       --       --    -----
    Earnings/(loss) from operations            403    4,193   (2,151)   1,147
    Other income/(loss), net                     7      257       (4)      55
    Interest and debt expense                 (229)    (145)     (92)     (49)
    -------------------------                 ----     ----      ---      ---
    Earnings/(loss) before income taxes        181    4,305   (2,247)   1,153
    Income tax (expense)/benefit              (129)  (1,565)     687     (470)
    ----------------------------              ----   ------      ---     ----
    Net earnings/(loss)
     from continuing
     operations                                 52    2,740   (1,560)     683
    Net (loss)/gain on disposal
     of discontinued
     operations, net of
     taxes of $5, ($10), $2
     and ($6)                                   (8)      18       (4)      12
    ---------------------------                 --       --       --       --
    Net earnings/(loss)                        $44   $2,758  $(1,564)    $695
    ===================                        ===   ======  =======     ====

    Basic earnings/(loss)
     per share from
     continuing operations                   $0.08    $3.78   $(2.22)   $0.95
    Net (loss)/gain on disposal
     of discontinued
     operations, net of taxes                (0.01)    0.02    (0.01)    0.02
    ---------------------------              -----     ----    -----     ----
    Basic earnings/(loss) per share          $0.07    $3.80   $(2.23)   $0.97
    ===============================          =====    =====   ======    =====

    Diluted earnings/(loss) per share
     from continuing operations              $0.07    $3.74   ($2.22)   $0.94
    Net (loss)/gain on disposal
     of discontinued
     operations, net of taxes                (0.01)    0.02    (0.01)    0.02
    ---------------------------              -----     ----    -----     ----
    Diluted earnings/(loss) per share        $0.06    $3.76   $(2.23)   $0.96
    =================================        =====    =====   ======    =====
    Cash dividends paid per share            $1.26    $1.20    $0.42    $0.40
    =============================            =====    =====    =====    =====
    Weighted average diluted
     shares (millions)                       708.1    734.2    701.3    721.9
    ========================                 =====    =====    =====    =====



                      The Boeing Company and Subsidiaries
                 Consolidated Statements of Financial Position
                                  (Unaudited)

                                                   September 30  December 31
    (Dollars in millions except per share data)         2009         2008
    -------------------------------------------         ----         ----
    Assets
    Cash and cash equivalents                          6,095       $3,268
    Short-term investments                               351           11
    Accounts receivable, net                           6,718        5,602
    Current portion of customer financing, net           341          425
    Deferred income taxes                                741        1,046
    Inventories, net of advances and
     progress billings                                15,981       15,612
    --------------------------------                  ------       ------
            Total current assets                      30,227       25,964
    Customer financing, net                            5,923        5,857
    Property, plant and equipment, net of
     accumulated depreciation of
     $12,742 and $12,280                               8,912        8,762
    Goodwill                                           4,293        3,647
    Other acquired intangibles, net                    2,920        2,685
    Deferred income taxes                              3,835        4,114
    Investments                                        1,120        1,328
    Pension plan assets, net                              20           16
    Other assets, net of accumulated
     amortization of $511 and $400                     1,417        1,406
    --------------------------------                   -----        -----
            Total assets                             $58,667      $53,779
            ============                             =======      =======
    Liabilities and shareholders' equity
    Accounts payable                                   7,053       $5,871
    Other accrued liabilities                         12,217       11,564
    Advances and billings in excess
     of related costs                                 11,792       12,737
    Income taxes payable                                  14           41
    Short-term debt and current
     portion of long-term debt                           973          560
    ---------------------------                          ---          ---
            Total current liabilities                 32,049       30,773
    Accrued retiree health care                        7,344        7,322
    Accrued pension plan liability, net                8,553        8,383
    Non-current income taxes payable                     998        1,154
    Other long-term liabilities                          535          337
    Long-term debt                                    10,065        6,952
    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                     3,956        3,456
        Treasury shares, at cost -
         285,761,457 and 285,661,944                 (17,733)     (17,758)
        Retained earnings                             22,104       22,675
        Accumulated other comprehensive loss         (12,821)     (13,525)
        ShareValue Trust shares -
         29,338,820 and 28,460,769                    (1,595)      (1,203)
        --------------------------                    ------       ------
        Total Boeing shareholders' equity             (1,028)      (1,294)
           Noncontrolling interest                       151          152
    ------------------------------                       ---          ---
           Total shareholders' equity                   (877)      (1,142)
    ---------------------------------                   ----       ------
           Total liabilities and
            shareholders' equity                     $58,667      $53,779
    ============================                     =======      =======



                  The Boeing Company and Subsidiaries
                 Consolidated Statements of Cash Flows
                              (Unaudited)

                                                   Nine months ended
                                                      September 30
    (Dollars in millions)                             2009    2008
    ---------------------                             ----    ----
    Cash flows - operating activities:
        Net earnings                                   $44  $2,758
        Adjustments to reconcile net
         earnings to net cash provided
         by operating activities:
          Non-cash items -
               Share-based plans expense               180     159
               Depreciation                          1,047     952
               Amortization of other
                acquired intangibles                   152     122
               Amortization of debt discount/
                premium and issuance costs               7       8
               Investment/asset
                impairment charges, net                 66      21
               Customer financing
                valuation provision                     31      73
               Loss/(gain) on disposal of
                discontinued operations                 13     (28)
               Loss/(gain) on dispositions, net          7      (2)
               Other charges and credits, net          170      83
               Excess tax benefits from share-based
                payment arrangements                    (5)   (100)
           Changes in assets and liabilities -
               Accounts receivable                    (818)   (145)
               Inventories, net of advances and
                progress billings                     (582) (1,670)
               Accounts payable                      1,169     742
               Other accrued liabilities             1,091    (570)
               Advances and billings in excess
                of related costs                      (961) (2,061)
               Income taxes receivable,
                payable and deferred                   133     733
               Other long-term liabilities              (3)   (157)
               Pension and other
                postretirement plans                   819    (159)
               Customer financing, net                (204)    628
               Other                                    35    (147)
    ----------------                                    --    ----
                    Net cash provided by
                     operating activities            2,391   1,240
    -------------------------------------            -----   -----
    Cash flows - investing activities:
        Property, plant and equipment additions       (965) (1,229)
        Property, plant and
         equipment reductions                           25      16
        Acquisitions, net of cash acquired            (639)   (490)
        Contributions to investments                  (728) (6,372)
        Proceeds from investments                      606   8,399
        Payments on Sea Launch guarantees             (448)
        Purchase of distribution rights                       (151)
    -----------------------------------             ------    ----
                    Net cash (used)/provided by
                     investing activities           (2,149)    173
    -------------------------------------------     ------     ---
    Cash flows - financing activities:
        New borrowings                               3,772       5
        Debt repayments                               (256)   (616)
        Repayments of distribution
         rights financing                                     (210)
        Stock options exercised, other                   8      43
        Excess tax benefits from share-based
         payment arrangements                            5     100
        Employee taxes on certain share-based
         payment arrangements                          (19)    (81)
        Common shares repurchased                      (50) (2,583)
        Dividends paid                                (915)   (901)
    ------------------                                ----    ----
                    Net cash provided/(used) by
                     financing activities            2,545  (4,243)
    -------------------------------------------      -----  ------
    Effect of exchange rate changes on cash
     and cash equivalents                               40     (26)
    ---------------------------------------             --     ---
    Net increase/(decrease) in cash
     and cash equivalents                            2,827  (2,856)
    Cash and cash equivalents at
     beginning of year                               3,268   7,042
    ----------------------------                     -----   -----
    Cash and cash equivalents at end of period      $6,095  $4,186
    ==========================================      ======  ======

    Non-cash investing and
     financing activities:
       Purchase of distribution rights                $316    $180
    ==================================                ====    ====



                        The Boeing Company and Subsidiaries
                         Summary of Business Segment Data
                                    (Unaudited)

                                               Nine months     Three months
                                                  ended           ended
                                              September 30      September 30
    (Dollars in millions)                     2009     2008     2009     2008
    ---------------------                     ----     ----     ----     ----
    Revenues:
       Commercial Airplanes                $24,868  $23,674   $7,883   $6,946
       Integrated Defense Systems:
          Boeing Military Aircraft          10,324   10,169    3,951    3,702
          Network and Space Systems          8,492    8,485    2,711    2,987
          Global Services and Support        6,298    5,352    2,082    1,808
    ---------------------------------        -----    -----    -----    -----
       Total Integrated Defense Systems     25,114   24,006    8,744    8,497
       Boeing Capital Corporation              496      535      166      171
       Other segment                           125      527       51      300
       Unallocated items and eliminations     (259)    (497)    (156)    (621)
    -------------------------------------     ----     ----     ----     ----
       Total revenues                      $50,344  $48,245  $16,688  $15,293
    =================                      =======  =======  =======  =======

    Earnings/(loss) from operations:
       Commercial Airplanes                $(1,603)  $2,154  $(2,837)    $394
       Integrated Defense Systems:
          Boeing Military Aircraft           1,160      929      486      388
          Network and Space Systems            698      806      252      302
          Global Services and Support          612      616      147      164
    ---------------------------------          ---      ---      ---      ---
       Total Integrated Defense Systems      2,470    2,351      885      854
       Boeing Capital Corporation              112      143       39       37
       Other segment                          (105)    (233)     (36)     (48)
       Unallocated items and eliminations     (471)    (222)    (202)     (90)
    -------------------------------------     ----     ----     ----      ---
    Earnings/(loss) from operations            403    4,193   (2,151)   1,147
       Other income/(loss), net                  7      257       (4)      55
       Interest and debt expense              (229)    (145)     (92)     (49)
    ----------------------------              ----     ----      ---      ---
       Earnings/(loss) before income taxes     181    4,305   (2,247)   1,153
       Income tax (expense)/benefit           (129)  (1,565)     687     (470)
    -------------------------------           ----   ------      ---     ----
       Net earnings/(loss) from
        continuing operations                   52    2,740   (1,560)     683
       Net (loss)/gain on disposal
        of discontinued
        operations, net of taxes
        of $5, ($10),
        $2 and ($6)                             (8)      18       (4)      12
    ------------------------------              --       --       --       --
       Net earnings/(loss)                     $44   $2,758  $(1,564)    $695
    ======================                     ===   ======  =======     ====

    Research and development expense, net:
       Commercial Airplanes                 $4,642   $2,108   $3,272     $705
       Integrated Defense Systems:
          Boeing Military Aircraft             430      361      143      121
          Network and Space Systems            293      227      108       73
          Global Services and Support          126      113       42       38
    ---------------------------------          ---      ---       --       --
       Total Integrated Defense Systems        849      701      293      232
       Other segment                            13        2        9
    ----------------                            --       --       --     ----
       Total research and development
         expense, net                       $5,504   $2,811   $3,574     $937
    =================================       ======   ======   ======     ====

    Unallocated items and eliminations:
       Share-based plans expense             $(140)   $(115)    $(24)    $(70)
       Deferred compensation expense          (134)     136      (88)      55
       Pension                                  69     (194)      24      (51)
       Post-retirement                         (61)     (60)     (17)     (20)
       Capitalized interest                    (42)     (38)     (15)     (11)
       Other                                  (163)      49      (82)       7
    --------                                  ----       --      ---       --
       Total                                 $(471)   $(222)   $(202)    $(90)
    ========                                 =====    =====    =====     ====



                 The Boeing Company and Subsidiaries
                    Operating and Financial Data
                             (Unaudited)

                                             Nine       Three
                                            months      months
                                             ended       ended
                                          September   September
    Deliveries                                30          30
    ----------                            ---------   ---------
    Commercial Airplanes                  2009  2008  2009  2008
    --------------------                  ----  ----  ----  ----
         737 Next-Generation               280   254    90    67
         747                                 6    13           4
         767                                10     8     4     2
         777                                63    50    19    11
    ---------                               --    --    --    --
        Total                              359   325   113    84
    =========                              ===   ===   ===    ==

    --------------------------
    Integrated Defense Systems
    --------------------------
    Boeing Military Aircraft
         F/A-18 Models                      36    33    13    12
         F-15E Eagle                        10    11     4     7
         C-17 Globemaster                   12    12     5     4
         KC-767 Tanker                       1     2
         CH-47 Chinook                       4     8     3     4
         T-45TS Goshawk                      6     5     2     2
         AH-64 Apache                       20     2     7     1

    Network and Space Systems
         Delta II                                  1           1
         Delta IV                            1
         Commercial and Civil Satellites     2     1
         Military Satellites                 3           2



                                   September  June    March   December
    Contractual backlog               30       30       31        31
     (Dollars in billions)            2009    2009     2009      2008
    ----------------------            ----    ----     ----      ----
       Commercial Airplanes         $253.9  $257.4   $266.0    $278.6
       Integrated Defense
        Systems:
          Boeing Military
           Aircraft                   26.1    28.2     28.2      25.7
          Network and
           Space Systems               7.8     8.0      8.9       8.9
          Global Services
           and Support                11.1    11.7     11.6      10.7
    ---------------------             ----    ----     ----      ----
       Total Integrated
        Defense Systems               45.0    47.9     48.7      45.3
    -------------------               ----    ----     ----      ----
    Total contractual backlog       $298.9  $305.3   $314.7    $323.9
    =========================       ======  ======   ======    ======
    Unobligated backlog              $21.1   $22.5    $24.7     $28.2
    ===================              =====   =====    =====     =====
    Total backlog                   $320.0  $327.8   $339.4    $352.1
    =============                   ======  ======   ======    ======
    Workforce                      158,300 158,700  160,900   162,200
    =========                      ======= =======  =======   =======



SOURCE Boeing

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