Form 8-K BOEING CO For: Jan 30

January 30, 2019 7:54 AM


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

 CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): January 30, 2019
 
THE BOEING COMPANY
(Exact name of registrant as specified in its charter)
 
 Commission file number 1-442
 
 
Delaware
 
91-0425694
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
100 N. Riverside, Chicago, IL
 
60606-1596
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
 
 
(312) 544-2000
 
 
(Registrant's telephone number, including area code)
 
 
 
 
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
c
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
c
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
c
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
c
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company c
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. c





Item 2.02 Results of Operations and Financial Condition
On January 30, 2019, The Boeing Company issued a press release reporting its financial results for the fourth quarter of 2018. A copy of the Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.


Item 9.01 Financial Statements and Exhibits
(d) Exhibits
 
Exhibit No.
 
Description
 
 
 
 
 
99.1
 




2



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
           



 
 
THE BOEING COMPANY
 
 
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/ Robert E. Verbeck
 
 
 
 
Robert E. Verbeck
 
 
 
 
 
 
 
 
 
Senior Vice President, Finance and Corporate Controller
 
 
 
 
January 30, 2019
 
 
          

3
Exhibit 99.1
 


pressreleaseheadera02.jpg
Boeing Reports Record 2018 Results and Provides 2019 Guidance
Fourth Quarter 2018
Record revenue of $28.3 billion and record operating profit of $4.2 billion driven by higher volume
Record GAAP EPS of $5.93 and record core EPS (non-GAAP)* of $5.48 on strong performance
Full-Year 2018
Record revenue of $101.1 billion reflecting strong growth across the portfolio
Record GAAP EPS of $17.85 and record core EPS (non-GAAP)* of $16.01 driven by solid execution
Record operating cash flow of $15.3 billion; repurchased 26.1 million shares for $9.0 billion
Total backlog remains robust at $490 billion, including nearly 5,900 commercial airplanes
Cash and marketable securities of $8.6 billion provide strong liquidity
Outlook for 2019
Revenue guidance of between $109.5 and $111.5 billion reflects higher volume across all businesses
GAAP EPS of between $21.90 and $22.10; core EPS (non-GAAP)* of between $19.90 and $20.10
Operating cash flow expected to increase to between $17.0 and $17.5 billion
Table 1. Summary Financial Results
 
Fourth Quarter
 
 
 
Full Year
 
 
(Dollars in Millions, except per share data)
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 

$28,341

 

$24,770

 
14%
 

$101,127

 

$94,005

 
8%
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
 
 
 
 
 
 
 
 
 
 
 
 
Earnings From Operations
 

$4,175

 

$2,978

 
40%
 

$11,987

 

$10,344

 
16%
Operating Margin
 
14.7
%
 
12.0
%
 
2.7 Pts
 
11.9
%
 
11.0
%
 
0.9 Pts
Net Earnings
 

$3,424

 

$3,320

 
3%
 

$10,460

 

$8,458

 
24%
Earnings Per Share
 

$5.93

 

$5.49

 
8%
 

$17.85

 

$13.85

 
29%
Operating Cash Flow
 

$2,947

 

$2,903

 
2%
 

$15,322

 

$13,346

 
15%
Non-GAAP*
 
 
 
 
 
 
 
 
 
 
 
 
Core Operating Earnings
 

$3,867

 

$2,589

 
49%
 

$10,660

 

$8,906

 
20%
Core Operating Margin
 
13.6
%
 
10.5
%
 
3.1 Pts
 
10.5
%
 
9.5
%
 
1.0 Pts
Core Earnings Per Share
 

$5.48

 

$5.07

 
8%
 

$16.01

 

$12.33

 
30%
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures."    
CHICAGO, January 30, 2019 – The Boeing Company [NYSE: BA] reported fourth-quarter revenue of $28.3 billion, GAAP earnings per share of $5.93 and core earnings per share (non-GAAP)* of $5.48, all company records. These results reflect record commercial deliveries, higher defense and services volume and strong performance which outweighed favorable tax impacts recorded in the fourth quarter of 2017 (Table 1). Boeing generated operating cash flow of $2.9 billion, repurchased 1.6 million shares for $0.6 billion, paid $1.0 billion of dividends and completed the acquisition of KLX.
Revenue was a record $101.1 billion for the full year reflecting higher commercial deliveries and increased volume across the company. Records for GAAP earnings per share of $17.85 and core earnings per share (non-GAAP)* of $16.01 were driven by higher volume, improved mix and solid execution.


1


“Across the enterprise our team delivered strong core operating performance and customer focus, driving record revenues, earnings and cash flow and further extending our global aerospace industry leadership in 2018,” said Boeing Chairman, President and Chief Executive Officer Dennis Muilenburg. “Our financial performance provided a firm platform to further invest in new growth businesses, innovation and future franchise programs, as well as in our people and enabling technologies. In the last 5 years, we have invested nearly $35 billion in key strategic areas of our business, all while increasing cash returns to shareholders.”
“Our One Boeing focus, clear strategies for growth, and leading positions in large and growing markets, give us confidence for continued strong performance, revenue expansion and solid execution across all three businesses, which is reflected in our 2019 guidance."
“We remain focused on executing on our production and development programs as well as our growth strategy while driving further productivity, quality and safety improvements, investing in our team and creating more value and opportunity for our customers, shareholders and employees.”
Table 2. Cash Flow
 
Fourth Quarter
 
Full Year
(Millions)
 
2018
 
2017
 
2018
 
2017
Operating Cash Flow
 

$2,947

 

$2,903

 

$15,322

 

$13,346

Less Additions to Property, Plant & Equipment
 

($495
)
 

($435
)
 

($1,722
)
 

($1,739
)
Free Cash Flow*
 

$2,452

 

$2,468

 

$13,600

 

$11,607

*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures."    
Operating cash flow was $2.9 billion in the quarter and $15.3 billion for the full year, reflecting planned higher commercial airplane production rates and strong operating performance as well as timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 1.6 million shares for $0.6 billion, paid $1.0 billion in dividends, and completed the acquisition of KLX. For the full year, the company repurchased 26.1 million shares for $9.0 billion and paid $3.9 billion in dividends. Based on strong cash generation and confidence in the company's outlook, the board of directors in December increased the quarterly dividend per share by 20 percent and replaced the existing share repurchase program with a new $20 billion authorization.
Table 3. Cash, Marketable Securities and Debt Balances
 
Quarter-End
(Billions)
 
Q4 18
 
Q3 18
Cash
 

$7.7

 

$8.0

Marketable Securities1
 

$0.9

 

$2.0

Total
 

$8.6

 

$10.0

Debt Balances:
 
 
 
 
The Boeing Company, net of intercompany loans to BCC
 

$11.3

 

$9.4

Boeing Capital, including intercompany loans
 

$2.5

 

$2.5

Total Consolidated Debt
 

$13.8

 

$11.9

1 Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."
Cash and investments in marketable securities totaled $8.6 billion, compared to $10.0 billion at the beginning of the quarter (Table 3). Debt was $13.8 billion, up from $11.9 billion at the beginning of the quarter primarily due to the issuance of new debt following the KLX acquisition.
Total company backlog at quarter-end was relatively unchanged at $490 billion and included net orders for the quarter of $27 billion.

2


Segment Results
Commercial Airplanes
Table 4. Commercial Airplanes
 
Fourth Quarter
 
 
 
Full Year
 
 
(Dollars in Millions)
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial Airplanes Deliveries
 
238

 
209

 
14%
 
806

 
763

 
6%
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 

$17,306


15,388

 
12%
 

$60,715

 

$58,014

 
5%
Earnings from Operations
 

$2,704



$1,787

 
51%
 

$7,879

 

$5,452

 
45%
Operating Margin
 
15.6
%

11.6
%
 
4.0 Pts
 
13.0
%
 
9.4
%
 
3.6 Pts
Commercial Airplanes fourth-quarter revenue increased to $17.3 billion reflecting higher deliveries and favorable mix (Table 4). Fourth-quarter operating margin increased to 15.6 percent, driven by higher 737 volume and strong operating performance on production programs, including higher 787 margins.
During the quarter, Commercial Airplanes delivered 238 airplanes, including the delivery of the 787th 787 Dreamliner and the first 737 MAX Boeing Business Jet. The 737 program delivered 111 MAX airplanes in the fourth quarter, including the first MAX delivery from the China Completion Center, and delivered 256 MAX airplanes in 2018. The first 777X flight test airplane completed final body join and power-on, and the program remains on track for flight testing this year and first delivery in 2020.
Commercial Airplanes booked 262 net orders during the quarter, valued at $16 billion. Backlog remains robust with nearly 5,900 airplanes valued at $412 billion.
Defense, Space & Security
Table 5. Defense, Space & Security
 
Fourth Quarter
 
 
 
Full Year
 
 
(Dollars in Millions)
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 

$6,111

 

$5,257

 
16%
 

$23,195

 

$20,561

 
13%
Earnings from Operations
 

$669

 

$544

 
23%
 

$1,594

 

$2,193

 
(27%)
Operating Margin
 
10.9
%
 
10.3
%
 
0.6 Pts
 
6.9
%
 
10.7
%
 
(3.8) Pts
Defense, Space & Security fourth-quarter revenue increased to $6.1 billion driven by increased volume across F/A-18, satellites, and weapons (Table 5). Fourth-quarter operating margin increased to 10.9 percent, primarily reflecting favorable mix.
During the quarter, Defense, Space & Security was awarded contracts for the second KC-46 Tanker to Japan, a joint ground system to provide tactical satellite communications for the U.S. Air Force and to modernize 17 Chinooks for Spain. Defense, Space & Security also completed a successful test for the U.S. Air Force's Minuteman III and unveiled the SB>1 DEFIANT helicopter for the U.S. Army. In January, the first two KC-46 Tankers were delivered to the U.S. Air Force.
Backlog at Defense, Space & Security was $57 billion, of which 30 percent represents orders from customers outside the U.S.

3


Global Services
Table 6. Global Services
 
Fourth Quarter
 
 
 
Full Year
 
 
(Dollars in Millions)
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 

$4,894

 

$3,797

 
29%
 

$17,018

 

$14,581

 
17%
Earnings from Operations
 

$732

 

$559

 
31%
 

$2,522

 

$2,246

 
12%
Operating Margin
 
15.0
%
 
14.7
%
 
0.3 Pts
 
14.8
%
 
15.4
%
 
(0.6) Pts
Global Services fourth-quarter revenue increased to $4.9 billion, primarily driven by higher parts volume including the acquisition of KLX (Table 6). Fourth-quarter operating margin increased to 15.0 percent reflecting improved performance, partially offset by higher period costs.
During the quarter, Global Services was awarded Performance Based Logistics contracts for C-17 and F-22 for the U.S. Air Force and F-15 for Qatar as well as contracts for F/A-18 services for the U.S Navy. Global Services was also selected by Shenzhen Airlines to provide crew management solutions, making them the first airline in China to utilize Boeing AnalytX-powered services. Significant milestones during the quarter included the first KC-46 training flight with the U.S. Air Force. In addition, Global Services successfully began integrating KLX and began operations of the Auxiliary Power Unit joint venture with Safran.
Additional Financial Information
Table 7. Additional Financial Information
 
Fourth Quarter
 
Full Year
(Dollars in Millions)
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
 
Boeing Capital
 

$60

 

$73

 

$274

 

$307

Unallocated items, eliminations and other
 

($30
)
 

$255

 

($75
)
 

$542

Earnings from Operations
 
 
 
 
 
 
 
 
Boeing Capital
 

$8

 

$27

 

$79

 

$114

FAS/CAS service cost adjustment
 

$308

 

$389

 

$1,327

 

$1,438

Other unallocated items and eliminations
 

($246
)
 

($328
)
 

($1,414
)
 

($1,099
)
Other income, net
 

$29

 

$32

 

$92

 

$123

Interest and debt expense
 

($158
)
 

($93
)
 

($475
)
 

($360
)
Effective tax rate
 
15.4
%
 
(13.8
)%
 
9.9
%
 
16.3
%
At quarter-end, Boeing Capital's net portfolio balance was $2.8 billion. Revenue in other unallocated items and eliminations decreased primarily due to the timing of eliminations for intercompany aircraft deliveries and 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 fourth quarter increased from the same period in the prior year primarily due to the favorable impacts from the enactment of the Tax Cuts and Jobs Act recorded in the fourth quarter of 2017.


4


Outlook
Effective in the first quarter of 2019, the Company is making a change to the accounting for military derivative aircraft. Revenues and costs associated with military derivative aircraft were previously reported in the Commercial Airplanes and Defense, Space & Security segments. Beginning in 2019, all revenues and costs associated with military derivative aircraft will be reported in the Defense, Space & Security segment. An additional exhibit is included on page 15 with restated 2018 results adjusted for the change in accounting for military derivative aircraft as well as the realignment of certain programs between Global Services and Defense, Space & Security. The Company has provided this comparable information in the exhibit and below to help investors understand the 2019 financial outlook (Table 8).
Table 8. 2019 Financial Outlook
 
 
Restated
 
As Reported
(Dollars in Billions, except per share data)
2019
 
2018 Results
 
2018 Results
 
 
 
 
 
 
The Boeing Company
 
 
 
 
 
Revenue
$109.5 - 111.5
 
 
 
 
 
 
 
 
 
 
GAAP Earnings Per Share
$21.90 - 22.10
 
 
 
 
Core Earnings Per Share*
$19.90 - 20.10
 
 
 
 
 
 
 
 
 
 
Operating Cash Flow
$17.0 - $17.5B
 
 
 
 
 
 
 
 
 
 
Commercial Airplanes
 
 
 
 
 
Deliveries 1
895 - 905
 
 
 
 
Revenue
$64.5 - 65.5
 
$57.5
 
$60.7
Operating Margin
14.5% - 15.0%
 
13.6%
 
13.0%
 
 
 
 
 
 
Defense, Space & Security
 
 
 
 
 
Revenue
$26.5 - 27.5
 
$26.4
 
$23.2
Operating Margin
>11.0%
 
6.3%
 
6.9%
 
 
 
 
 
 
Global Services
 
 
 
 
 
      Revenue
$18.5 - 19.0
 
$17.1
 
$17.0
      Operating Margin
>15.0%
 
14.9%
 
14.8%
 
 
 
 
 
 
Boeing Capital Portfolio Size
Stable
 
 
 
 
Research & Development
~$4.1
 
 
 
 
Capital Expenditures
~$2.3
 
 
 
 
Pension Expense 2
~$0.0
 
 
 
 
Effective Tax Rate
~16%
 
 
 
 
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”
1 Continues to include intercompany deliveries related to military derivative aircraft
2 Approximately $1.1 billion of pension expense is expected to be allocated to the business segments



5



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 13-14.
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.



6




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 Keely Moos (312) 544-2140
Communications:
  
Allison Bone (312) 544-2002


7



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 8-14: 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.

Twelve months ended December 31
 
Three months ended December 31
(Dollars in millions, except per share data)
2018

 
2017

 
2018

 
2017

Sales of products

$90,229

 

$83,740

 

$25,381

 

$22,073

Sales of services
10,898

 
10,265

 
2,960

 
2,697

Total revenues
101,127

 
94,005

 
28,341

 
24,770


 
 
 
 
 
 
 
Cost of products
(72,922
)
 
(68,879
)
 
(19,788
)
 
(17,943
)
Cost of services
(8,499
)
 
(7,663
)
 
(2,284
)
 
(1,921
)
Boeing Capital interest expense
(69
)
 
(70
)
 
(18
)
 
(17
)
Total costs and expenses
(81,490
)
 
(76,612
)
 
(22,090
)
 
(19,881
)

19,637

 
17,393

 
6,251

 
4,889

Income/(loss) from operating investments, net
111

 
204

 
(1
)
 
35

General and administrative expense
(4,567
)
 
(4,095
)
 
(1,222
)
 
(1,205
)
Research and development expense, net
(3,269
)
 
(3,179
)
 
(852
)
 
(762
)
Gain/(loss) on dispositions, net
75

 
21

 
(1
)
 
21

Earnings from operations
11,987

 
10,344

 
4,175

 
2,978

Other income, net
92

 
123

 
29

 
32

Interest and debt expense
(475
)
 
(360
)
 
(158
)
 
(93
)
Earnings before income taxes
11,604

 
10,107

 
4,046

 
2,917

Income tax (expense)/benefit
(1,144
)
 
(1,649
)
 
(622
)
 
403

Net earnings

$10,460

 

$8,458

 

$3,424

 

$3,320

 
 
 
 
 
 
 
 
Basic earnings per share

$18.05

 

$14.03

 

$6.00

 

$5.57

 
 
 
 
 
 
 
 
Diluted earnings per share

$17.85

 

$13.85

 

$5.93

 

$5.49

 
 
 
 
 
 
 
 
Weighted average diluted shares (millions)
586.2

 
610.7

 
577.5

 
605.1






8



The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited) 
(Dollars in millions, except per share data)
December 31
2018

 
December 31
2017

Assets
 
 
 
Cash and cash equivalents

$7,637

 

$8,813

Short-term and other investments
927

 
1,179

Accounts receivable, net
3,879

 
2,894

Unbilled receivables, net
10,025

 
8,194

Current portion of customer financing, net
460

 
309

Inventories
62,567

 
61,388

Other current assets
2,335

 
2,417

Total current assets
87,830

 
85,194

Customer financing, net
2,418

 
2,756

Property, plant and equipment, net
12,645

 
12,672

Goodwill
7,840

 
5,559

Acquired intangible assets, net
3,429

 
2,573

Deferred income taxes
284

 
321

Investments
1,087

 
1,260

Other assets, net of accumulated amortization of $503 and $482
1,826

 
2,027

Total assets

$117,359

 

$112,362

Liabilities and equity

 

Accounts payable

$12,916

 

$12,202

Accrued liabilities
14,808

 
13,069

Advances and progress billings
50,676

 
48,042

Short-term debt and current portion of long-term debt
3,190

 
1,335

Total current liabilities
81,590

 
74,648

Deferred income taxes
1,736

 
2,188

Accrued retiree health care
4,584

 
5,545

Accrued pension plan liability, net
15,323

 
16,471

Other long-term liabilities
3,059

 
2,015

Long-term debt
10,657

 
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
6,768

 
6,804

Treasury stock, at cost
(52,348
)
 
(43,454
)
Retained earnings
55,941

 
49,618

Accumulated other comprehensive loss
(15,083
)
 
(16,373
)
Total shareholders’ equity
339

 
1,656

Noncontrolling interests
71

 
57

Total equity
410

 
1,713

Total liabilities and equity

$117,359

 

$112,362




9



The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Twelve months ended December 31
(Dollars in millions)
2018

 
2017

Cash flows – operating activities:
 
 
 
Net earnings

$10,460

 

$8,458

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Non-cash items – 
 
 
 
Share-based plans expense
202

 
202

Depreciation and amortization
2,114

 
2,047

Investment/asset impairment charges, net
93

 
113

Customer financing valuation (benefit)/expense
(3
)
 
2

(Gain)/loss on dispositions, net
(75
)
 
(21
)
Other charges and credits, net
247

 
293

Changes in assets and liabilities – 
 
 
 
Accounts receivable
(795
)
 
(840
)
Unbilled receivables
(1,826
)
 
(1,600
)
Advances and progress billings
2,636

 
4,700

Inventories
568

 
(1,403
)
Other current assets
98

 
(19
)
Accounts payable
2

 
130

Accrued liabilities
1,117

 
335

Income taxes receivable, payable and deferred
(180
)
 
656

Other long-term liabilities
87

 
94

Pension and other postretirement plans
(153
)
 
(582
)
Customer financing, net
120

 
1,041

Other
610

 
(260
)
Net cash provided by operating activities
15,322

 
13,346

Cash flows – investing activities:
 
 
 
Property, plant and equipment additions
(1,722
)
 
(1,739
)
Property, plant and equipment reductions
120

 
92

Acquisitions, net of cash acquired
(3,230
)
 
(324
)
Contributions to investments
(2,607
)
 
(3,569
)
Proceeds from investments
2,898

 
3,607

Purchase of distribution rights
(69
)
 
(131
)
Other
(11
)
 
6

Net cash used by investing activities
(4,621
)
 
(2,058
)
Cash flows – financing activities:
 
 
 
New borrowings
8,548

 
2,077

Debt repayments
(7,183
)
 
(953
)
Contributions from noncontrolling interests
35

 


Stock options exercised
81

 
311

Employee taxes on certain share-based payment arrangements
(257
)
 
(132
)
Common shares repurchased
(9,000
)
 
(9,236
)
Dividends paid
(3,946
)
 
(3,417
)
Net cash used by financing activities
(11,722
)
 
(11,350
)
Effect of exchange rate changes on cash and cash equivalents, including restricted
(53
)
 
80

Net (decrease) / increase in cash & cash equivalents, including restricted
(1,074
)
 
18

Cash & cash equivalents, including restricted, at beginning of year
8,887

 
8,869

Cash & cash equivalents, including restricted, at end of period
7,813

 
8,887

Less restricted cash & cash equivalents, included in Investments
176

 
74

Cash and cash equivalents at end of period

$7,637

 

$8,813





10



The Boeing Company and Subsidiaries
Summary of Business Segment Data
(Unaudited)
 
Twelve months ended December 31
 
Three months ended December 31
(Dollars in millions)
2018

 
2017

 
2018

 
2017

Revenues:
 
 
 
 
 
 
 
Commercial Airplanes

$60,715

 

$58,014

 

$17,306

 

$15,388

Defense, Space & Security
23,195

 
20,561

 
6,111

 
5,257

Global Services
17,018

 
14,581

 
4,894

 
3,797

Boeing Capital
274

 
307

 
60

 
73

Unallocated items, eliminations and other
(75
)
 
542

 
(30
)
 
255

Total revenues

$101,127

 

$94,005

 

$28,341

 

$24,770

Earnings from operations:
 
 
 
 
 
 
 
Commercial Airplanes

$7,879

 

$5,452

 

$2,704

 

$1,787

Defense, Space & Security
1,594

 
2,193

 
669

 
544

Global Services
2,522

 
2,246

 
732

 
559

Boeing Capital
79

 
114

 
8

 
27

Segment operating profit
12,074

 
10,005

 
4,113

 
2,917

Unallocated items, eliminations and other
(1,414
)
 
(1,099
)
 
(246
)
 
(328
)
FAS/CAS service cost adjustment
1,327

 
1,438

 
308

 
389

Earnings from operations
11,987

 
10,344

 
4,175

 
2,978

Other income/(loss), net
92

 
123

 
29

 
32

Interest and debt expense
(475
)
 
(360
)
 
(158
)
 
(93
)
Earnings before income taxes
11,604

 
10,107

 
4,046

 
2,917

Income tax expense
(1,144
)
 
(1,649
)
 
(622
)
 
403

Net earnings

$10,460

 

$8,458

 

$3,424

 

$3,320

 
 
 
 
 
 
 
 
Research and development expense, net:
 
 
 
 
 
 
 
Commercial Airplanes

$2,188

 

$2,247

 

$572

 

$492

Defense, Space & Security
788

 
834

 
175

 
235

Global Services
161

 
140

 
42

 
39

Other
132

 
(42
)
 
63

 
(4
)
Total research and development expense, net

$3,269

 

$3,179

 

$852

 

$762

 
 
 
 
 
 
 
 
Unallocated items, eliminations and other:
 
 
 
 
 
 
 
Share-based plans

($76
)
 

($77
)
 

($16
)
 

($10
)
Deferred compensation
(19
)
 
(240
)
 
93

 
(66
)
Amortization of previously capitalized interest
(92
)
 
(96
)
 
(25
)
 
(28
)
Eliminations and other unallocated items
(1,227
)
 
(686
)
 
(298
)
 
(224
)
Sub-total (included in core operating earnings)
(1,414
)
 
(1,099
)
 
(246
)
 
(328
)
Pension FAS/CAS service cost adjustment
1,005

 
1,127

 
225

 
316

Postretirement FAS/CAS service cost adjustment
322

 
311

 
83

 
73

FAS/CAS service cost adjustment

$1,327



$1,438



$308



$389

Total

($87
)
 

$339



$62



$61


11



The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
  
Deliveries
 
Twelve months ended December 31
 
Three months ended December 31
 
Commercial Airplanes
 
2018

 
2017

 
2018

 
2017

 
737
 
580

 
529

 
173

 
148

 
747
 
6


14

(1
)
1


6


767
 
27

 
10

 
14

 
3

 
777
 
48

 
74

 
11

 
16

 
787
 
145

 
136

 
39

 
36

 
Total
 
806

 
763

 
238

 
209

 
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)
 

 
11

 

 
3

 
AH-64 Apache (Remanufactured)
 
23

 
57

 
11

 
14

 
CH-47 Chinook (New)
 
13

 
9

 
2

 
3

 
CH-47 Chinook (Renewed)
 
17

 
35

 
3

 
7

 
F-15 Models
 
10

 
16

 
2

 
5

 
F/A-18 Models
 
17

 
23

 
7

 
5

 
P-8 Models
 
16

 
19

 
6

 
5

 
Commercial and Civil Satellites
 
1

 
3

 

 

 
Military Satellites
 
1

 
1

 
1

 
1

 
Total backlog (Dollars in millions)
 
December 31
2018

 
December 31
2017

Commercial Airplanes
 

$412,307

 

$410,986

Defense, Space & Security
 
57,166

 
44,049

Global Services
 
21,008

 
19,605

Total backlog
 

$490,481

 

$474,640

 
 
 
 
 
Contractual backlog
 

$462,070

 

$456,984

Unobligated backlog
 
28,411

 
17,656

Total backlog
 

$490,481

 

$474,640


12



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 6 of this release for additional information on the use of these non-GAAP financial measures.
(Dollars in millions, except per share data)

Fourth Quarter 2018

Fourth Quarter 2017


$ millions

Per Share


$ millions

Per Share

Revenues

28,341




24,770



Earnings from operations (GAAP)

4,175




2,978



Operating margins

14.7
%



12.0
%













FAS/CAS service cost adjustment:










Pension FAS/CAS service cost adjustment

(225
)



(316
)


Postretirement FAS/CAS service cost adjustment

(83
)



(73
)


FAS/CAS service cost adjustment

(308
)



(389
)


Core operating earnings (non-GAAP)


$3,867





$2,589



Core operating margins (non-GAAP)

13.6
%



10.5
%













Diluted earnings per share (GAAP)




$5.93





$5.49

Pension FAS/CAS service cost adjustment


($225
)
(0.39
)


($316
)
(0.52
)
Postretirement FAS/CAS service cost adjustment

(83
)
(0.14
)

(73
)
(0.12
)
Non-operating pension expense

(45
)
(0.08
)

(29
)
(0.05
)
Non-operating postretirement expense

24

0.04


32

0.05

Provision for deferred income taxes on adjustments 1

69

0.12


135

0.22

Subtotal of adjustments


($260
)

($0.45
)


($251
)

($0.42
)
Core earnings per share (non-GAAP)




$5.48





$5.07












Weighted average diluted shares (in millions)



577.5




605.1

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
























13



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 6 of this release for additional information on the use of these non-GAAP financial measures.
(Dollars in millions, except per share data)
2019 Guidance
 
Full Year 2018
 
Full Year 2017
 
$ millions
Per Share
 
$ millions

Per Share

 
$ millions

Per Share

Revenues
 
 
 
101,127

 
 
94,005

 
Earnings from operations (GAAP)
 
 
 
11,987

 
 
10,344

 
Operating margins
 
 
 
11.9
%
 
 
11.0
%
 
 
 
 
 
 
 
 
 
 
FAS/CAS service cost adjustment:
 
 
 
 
 
 
 
 
Pension FAS/CAS service cost adjustment
 
 
 
(1,005
)
 
 
(1,127
)
 
Postretirement FAS/CAS service cost adjustment
 
 
 
(322
)
 
 
(311
)
 
FAS/CAS service cost adjustment
~($1,335)
 
 
(1,327
)
 
 
(1,438
)
 
Core operating earnings (non-GAAP)
 
 
 

$10,660

 
 

$8,906

 
Core operating margins (non-GAAP)
 
 
 
10.5
%
 
 
9.5
%
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share (GAAP)
 
$21.90 - 22.10
 
 

$17.85

 
 

$13.85

Pension FAS/CAS service cost adjustment
~($1,335)
 
 

($1,005
)
(1.71
)
 

($1,127
)
(1.84
)
Postretirement FAS/CAS service cost adjustment
 
 
(322
)
(0.55
)
 
(311
)
(0.51
)
Non-operating pension expense
~($90)
 
 
(143
)
(0.24
)
 
(117
)
(0.19
)
Non-operating postretirement expense
 
 
101

0.17

 
123

0.20

Provision for deferred income taxes on adjustments 1
 
 
 
287

0.49

 
501

0.82

Subtotal of adjustments
 
($2.00)
 

($1,082
)

($1.84
)
 

($931
)

($1.52
)
Core earnings per share (non-GAAP)
 
$19.90 - 20.10
 
 

$16.01

 
 

$12.33

 
 
 
 
 
 
 
 
 
Weighted average diluted shares (in millions)
560 - 565
 
 
 
586.2

 
 
610.7

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


















14



The Boeing Company and Subsidiaries
Summary of Business Segment Data - Restated
(Unaudited)
The restated amounts below reflect the change in accounting for military derivative aircraft as well as the realignment of certain programs between Global Services and Defense, Space & Security.
(Dollars in millions)
2018

 
Q4 2018

 
Q3 2018

 
Q2 2018

 
Q1 2018

 
2017

Revenues:
 
 
 
 
 
 
 
 
 
 
 
Commercial Airplanes

$57,499

 

$16,531

 

$14,071

 

$13,952

 

$12,945

 

$54,612

Defense, Space & Security
26,392

 
6,874

 
6,937

 
6,100

 
6,481

 
23,938

Global Services
17,056

 
4,908

 
4,101

 
4,097

 
3,950

 
14,611

Boeing Capital
274

 
60

 
77

 
72

 
65

 
307

Unallocated items, eliminations and other
(94
)
 
(32
)
 
(40
)
 
37

 
(59
)
 
537

Total revenues
101,127

 
28,341

 
25,146

 
24,258

 
23,382

 
94,005

Earnings from operations:
 
 
 
 
 
 
 
 
 
 
 
Commercial Airplanes
7,830

 
2,600

 
2,033

 
1,785

 
1,412

 
5,285

Defense, Space & Security
1,657

 
771

 
(247
)
 
376

 
757

 
2,383

Global Services
2,536

 
737

 
548

 
604

 
647

 
2,251

Boeing Capital
79

 
8

 
27

 
24

 
20

 
114

Segment operating profit
12,102

 
4,116

 
2,361

 
2,789

 
2,836

 
10,033

Unallocated items, eliminations and other
(1,442
)
 
(249
)
 
(471
)
 
(396
)
 
(326
)
 
(1,127
)
FAS/CAS service cost adjustment
1,327

 
308

 
337

 
317

 
365

 
1,438

Earnings from operations
11,987

 
4,175

 
2,227

 
2,710

 
2,875

 
10,344

Other income/(loss), net
92

 
29

 
12

 
(15
)
 
66

 
123

Interest and debt expense
(475
)
 
(158
)
 
(106
)
 
(109
)
 
(102
)
 
(360
)
Earnings before income taxes
11,604

 
4,046

 
2,133

 
2,586

 
2,839

 
10,107

Income tax (expense)/benefit
(1,144
)
 
(622
)
 
230

 
(390
)
 
(362
)
 
(1,649
)
Net earnings

$10,460

 

$3,424

 

$2,363

 

$2,196

 

$2,477

 

$8,458




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