• Boeing earned $477 million, or $.52 per share, in the third quarter, up $130 million, or 37 percent, from the prior year.
• Third quarter earnings per share:
 

EPS excluding non-recurring items	$.56
Non-recurring items	(.04)
EPS as reported	$.52



• Significant free cash flow of $.8 billion was generated, plus $.3 billion from disposition of non-core businesses and assets; 22.5 million shares were repurchased for $1 billion.
• Successfully negotiated two large, multi-year labor union contracts
• Company confirms 747 production rate at two per month through 2000
• Key wins:
• Won multi-year National Reconnaissance Office space-imaging contract
• Won Australian competition for airborne early warning and control system using 737 platform
• Received $2.5 billion order from China Airlines, Boeing's largest 747 freighter order
• Announced new Delta Airlines order for 18 737-800s
• Business expansion:
• Opened a new modification and upgrade center for tactical aircraft in Jacksonville, Fla.
• Launched global inventory management service with initial customer British Airways

Third quarter net earnings included, on an after-tax basis, a gain of $59 million, or $.07 per share, associated with the sale of Boeing Information Services, a non-core business, and a gain of $41 million, or $.04 per share, associated with receipt and subsequent sale of shares resulting from an initial public offering of an insurer. In addition, the quarter included a charge of $141 million, or $.15 per share associated with long-lead inventory on the F-15 fighter program. 

Boeing's third quarter earnings for the comparable period in 1998 were $347 million, or $.36 per share, which included certain non-recurring tax benefits of $57 million, or $.06 per share. 

Excluding these non-recurring items, third quarter earnings per share were $.56 and $.30 for 1999 and 1998 respectively, an increase of 87 percent year-over-year. Net margins for the quarter rose to 3.6 percent, compared to 2.7 percent for the same period in 1998. 

Earnings for the first nine months of 1999 were $1,647 million, or $1.76 per share, compared to $655 million, or $.67 per share, for the first nine months of 1998. Revenues for the nine month period were $42.8 billion, up 10 percent when compared to the first nine months of 1998. Net margins for the first nine months of 1999 were 3.8 percent compared to 1.7 percent in the first nine months of last year. 

Free cash flow, operating cash flow less capital expenditures, was very strong at $.8 billion for the third quarter and $2.3 billion for the nine months, reflecting continued improved performance. The company additionally generated $0.3 billion of cash during the quarter from the disposition of non-core businesses and assets. Cash and short-term investments were $2.8 billion after repurchasing 38.8 million shares for $1.7 billion during the first nine months of 1999. To date, the company has repurchased 74 million shares, or approximately one-half of the 15 percent authorized by the Board of Directors in August 1998. 

"Boeing continued on its flight plan in the third quarter. We won considerable new business. We are realizing significant performance improvement in production and are confident in our ability to deliver about 620 commercial airplanes this year," said Boeing Chairman and Chief Executive Officer Phil Condit. "Due in part to the improved Asian economy, we are able to maintain the 747 production rate at two per month through 2000. We also entered into new business opportunities which, when combined with some key contract wins, clearly indicate the exciting future of this company." 

Condit cited as examples the large, multi-year National Reconnaissance Office future imagery architecture contract, the opening of a new tactical aircraft modification and support facility in Jacksonville, Fla., and the global inventory network launched with British Airways. 

"The National Reconnaissance Office contract establishes our leadership position in the area of space imaging. Our ability to unseat a long-term incumbent demonstrates the strength of our merger with McDonnell Douglas and the acquisition of Rockwell's aerospace and defense businesses. This powerful combination opens up new opportunities across the board for Boeing going forward," Condit said. 

Commercial Airplanes: Commercial Airplanes operating earnings for the third quarter of 1999 were $501 million on revenues of $8.5 billion, compared with a loss of $142 million on revenues of $7.8 billion for the same period in 1998, all based on the unit cost of airplanes delivered. The 142 jet airplanes delivered in the third quarter brought Boeing's total for the first nine months of the year to 455, compared with 368 in the first nine months of 1998. The overall operating margin in the segment was 5.9 percent for the third quarter of 1999, compared with a negative 1.8 percent for the same period last year. Significant cost improvement on Next-Generation 737 and 777 more than offset a less favorable model mix. 

Milestones for the best-selling 737 included the 400th rollout of a Next-Generation 737 and delivery of the 3,500th 737. The Next Generation 737 received Federal Aviation Administration approval for 180-minute extended-range twin-engine operations. This extension from 120 minutes gives airlines the ability to offer economical point-to-point service, with the long-range twinjets providing more direct routes and shorter travel times for passengers. 

On Aug. 26, Boeing rolled out the 767-400ER, the first new jetliner of the millennium. The rollout was followed by its first flight on Oct. 9. This extended- range derivative provides higher capacity and excellent range capability. It also incorporates an all-new interior fashioned after the award-winning 777 and an upgraded flight deck. 

During the quarter, the Boeing 717 received joint certification from the U.S. FAA and Europe's Joint Aviation Authorities. The first 717 was delivered to launch customer AirTran on Sept. 23 and was put into revenue service earlier this month. Hawaiian Airlines announced its intent to purchase 13 717s with options for seven more, with first delivery in 2001. The 717 is the most cost-effective, most environmentally friendly and quietest airplane in its class-designed to serve high-frequency, short- to medium-range routes. 

China Airlines ordered 13 747-400 freighters. This order and recent economic indicators in Asia are encouraging signs that the economic situation in the region is improving - a positive move in an important Boeing market. 

The company continues to expand the reach of its commercial airplane services businesses - announcing a new global inventory management service, delivery of maintenance documents via the web, and a 757 freighter conversion program for DHL with Boeing providing the planes via a multi-year lease, as well as maintaining them. 

Military Aircraft and Missiles: Military Aircraft and Missiles earned $102 million on revenues of $2.8 billion in the third quarter, compared to $370 million of earnings on revenues of $3.2 billion during the same period last year. The segment's operating margin was 3.7 percent for the quarter, down from 11.5 percent in the comparable period for 1998. Increased deliveries of the C-17 were offset by fewer F-15 deliveries and a non-recurring pretax charge of $225 million related to long-lead inventory for the F-15 fighter program. The defense appropriations conference committee recently approved additional U.S. Air Force F-15 procurement. Boeing's tactical aircraft, transport, rotorcraft, and missile programs have received strong support in the Department of Defense fiscal year 2000 budget process. 

Boeing announced an expansion to its aerospace support business by establishing a new modification and upgrade center for tactical aircraft in Jacksonville, Fla. Also in the aerospace support business, the facility for large aircraft in San Antonio has reached near capacity in the past 12 months, its first year of operation. In a major milestone toward flight testing next year, Boeing connected electrical power to its first Joint Strike Fighter demonstrator aircraft and successfully mated the wing to the second airframe. 

Space and Communications: Space and Communications earned $137 million on revenues of $1.7 billion, compared to a loss of $8 million on revenues of $1.6 billion for the same period in 1998. The segment operating margin for the third quarter was 8.2 percent, compared with negative .5 percent for the same period in 1998, which included higher research and development expense primarily related to the Delta IV launch vehicle, and joint venture development costs for the Sea Launch program. This year's third quarter included a pretax gain of approximately $95 million on the sale of Boeing Information Services. 

In addition to the National Reconnaissance Office contract, a Boeing-led team won the competition to provide Australia with the next generation airborne early warning and control system. The program includes seven 737 AEW&C systems plus ground support, training and mission support worth more than $1 billion. 

During the quarter, three Delta II launches set a record by deploying 17 satellites in 68 days. On Oct. 9, Sea Launch successfully conducted the launch of the first commercial satellite from a floating platform at sea. Boeing is a 40 percent partner in the enterprise. 

Due to significant customer program delays in the commercial satellite market, the company expects to see a softening in the commercial launch business. 

After the close of the quarter, a Boeing-led team - on its initial attempt -successfully destroyed a ballistic missile target in space with a prototype interceptor missile. Using only kinetic energy, and at closure speeds of more than 15,000 miles per hour, this was a key targeting and tracking milestone for the National Missile Defense program. 

Managing for Value: Announced during the first quarter of this year, the Boeing Managing for Value program is designed to develop a company-wide culture to continuously improve financial performance and growth. This effort is focused on achieving long-term shareholder returns in the top quartile of S&P 500 companies. In July, Boeing announced the Value Scorecard that includes four public performance metrics, as well as guidance on top-level financial results. 

"We are making progress in driving a value-oriented discipline deep into the organization so that we are using a common language, common methodologies and a common way of operating and measuring results," Chief Financial Officer Debby Hopkins reported. "We are on track with our commitments for improving inventory turns, facility consolidations, overhead cost management and supplier base consolidation." 

Based on current schedules and plans for 1999, which include commercial airplane deliveries in the range of 620, consolidated revenues are projected to be approximately $58 billion. The company's operating margin is now projected to be in the range of 5.5% - 6.0%, an increase of .5% from the previous projection for the full year, due to improved performance. Free cash flow is currently projected to be greater than $3.0 billion for 1999, an increase of $.5 billion from the previous projection, also reflecting the company's strong performance. 

Based on current schedules and plans for 2000, commercial aircraft deliveries are projected to be in a range of 480, and consolidated revenues are projected to be in the range of $49 billion. The company's operating margin for 2000 is projected to be in the range of 5.5% - 6.5%, also an increase from the previous projection. Free cash flow is currently projected to be greater than 2.5 billion for 2000, an increase of $.5 billion from the previous projection. 

Value Scorecard - Third Quarter 1999

Performance Initiatives	1999 Goal	2000 Goal	Challenge
Inventory turns	2.9	3.0	4.0
Facility consolidation (in millions)	122 ft2	109 ft2	95 ft2
Overhead reduction (in millions)	$600	$1,600	$2,100
Supplier base	31,000	25,000	18,000
	1999  Projections	2000 Projections	Challenge
Revenue (in billions)	$58	$49
Operating margins	5.5% - 6%	5.5% - 6.5%	> 10%
Free cash flow (in billions)	> $3.0	> $2.5

Editors' Note: The Value Scorecard and a series of charts (which include segment data and projections) may be found, for a limited time, on Boeing's web site: www.boeing.com.