Wednesday, 29 July 2020

Boeing Reports Second-Quarter Results


The Boeing Company has just issued its latest results for the second quarter of 2020, the American firm had a revenue of just $11.8 billion and reported an operating cash flow of - 
$5.3 billion and delivered only 20 commercial aircraft, down from 90 in the same period in 2019.  Indeed,  in the first 6 months of 2019, Boeing delivered 239 commercial planes,  in 2020 that reduced to 70, primarily because of the impacts of COVID-19 and the 737 MAX grounding.

"We remained focused on the health of our employees and communities while proactively taking action to navigate the unprecedented commercial market impacts from the COVID-19 pandemic," said Boeing President and Chief Executive Officer Dave Calhoun. "We're working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side."

In the second quarter, Boeing restarted production operations across key sites following temporary pauses to protect its workforce and introduce rigorous new health and safety procedures. Despite the challenges, Boeing continued to deliver across key commercial, defense, space and services programs. The company also resumed early stages of production on the 737 program with a focus on safety, quality and operational excellence. Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737, including completion of FAA certification flight tests.

To align to the sharp reduction in commercial market demand in light of COVID-19, the company is taking several actions including further adjusting commercial airplane production rates and reducing employment levels.

"The diversity of our balanced portfolio and our government services, defense and space programs provide some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities," Calhoun said. "We are taking the right action to ensure we're well positioned for the future by strengthening our culture, improving transparency, rebuilding trust and transforming our business to become a better, more sustainable Boeing. Air travel has always proven to be resilient - and so has Boeing."

  • inancial results continue to be significantly impacted by COVID-19 and the 737 MAX grounding
  • Revenue of $11.8 billion, GAAP loss per share of ($4.20) and core (non-GAAP)* loss per share of ($4.79)
  • Operating cash flow of ($5.3) billion; cash and marketable securities of $32.4 billion
  • Total backlog of $409 billion, including more than 4,500 commercial airplanes

 

Table 1. Summary Financial Results

Second Quarter




First Half



(Dollars in Millions, except per share data)

2020


2019


Change


2020


2019


Change













Revenues

$11,807


$15,751


(25)%


$28,715


$38,668


(26)%













GAAP












Loss From Operations

($2,964)


($3,380)


NM


($4,317)


($1,030)


NM

Operating Margin

(25.1)%


(21.5)%


NM


(15.0)%


(2.7)%


NM

Net Loss

($2,395)


($2,942)


NM


($3,036)


($793)


NM

Loss Per Share

($4.20)


($5.21)


NM


($5.31)


($1.40)


NM

Operating Cash Flow

($5,280)


($590)


NM


($9,582)


$2,198


NM

Non-GAAP*












Core Operating Loss

($3,319)


($3,745)


NM


($5,019)


($1,759)


NM

Core Operating Margin

(28.1)%


(23.8)%


NM


(17.5)%


(4.5)%


NM

Core Loss Per Share

($4.79)


($5.82)


NM


($6.49)


($2.60)


NM


*Non-GAAP measure; complete definitions of Boeing's non-GAAP measures are on page 6, "Non-GAAP Measures Disclosures."    


Table 2. Cash Flow

Second Quarter


First Half

(Millions)

2020


2019


2020


2019

Operating Cash Flow

($5,280)


($590)


($9,582)


$2,198

Less Additions to Property, Plant & Equipment

($348)


($421)


($776)


($922)

Free Cash Flow*

($5,628)


($1,011)


($10,358)


$1,276


*Non-GAAP measure; complete definitions of Boeing's non-GAAP measures are on page 6, "Non-GAAP Measures Disclosures."    

Operating cash flow was ($5.3) billion in the quarter, primarily reflecting lower commercial deliveries and services volume due to COVID-19 and the 737 MAX grounding, as well as timing of receipts and expenditures (Table 2).

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q2 20


Q1 20

Cash

$20.0


$15.0

Marketable Securities1

$12.4


$0.5

Total

$32.4


$15.5

Debt Balances:




The Boeing Company, net of intercompany loans to BCC

$59.5


$36.9

Boeing Capital, including intercompany loans

$1.9


$2.0

Total Consolidated Debt

$61.4


$38.9


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

Cash and investments in marketable securities increased to $32.4 billion, compared to $15.5 billion at the beginning of the quarter, driven by the issuance of new debt (Table 3). Debt was $61.4 billion, up from $38.9 billion at the beginning of the quarter due to the issuance of new debt, partially offset by repayment of maturing debt.

Total company backlog at quarter-end was $409 billion.

Commercial Airplanes

Table 4. Commercial Airplanes

Second Quarter




First Half



(Dollars in Millions)

2020


2019


Change


2020


2019


Change













Commercial Airplanes Deliveries

20


90


(78)%


70


239


(71)%













Revenues

$1,633


$4,722


(65)%


$7,838


$16,544


(53)%

Loss from Operations

($2,762)


($4,946)


NM


($4,830)


($3,773)


NM

Operating Margin

(169.1)%


(104.7)%


NM


(61.6)%


(22.8)%


NM

Commercial Airplanes second-quarter revenue and operating margin decreased reflecting lower delivery volume, partially offset by a lower 737 MAX customer consideration charge of $551 million in the quarter compared to a $5.6 billion charge in the same period last year. Second-quarter operating margin was also negatively impacted by $712 million of abnormal production costs related to the 737 program, $468 million of severance expense and $133 million of abnormal production costs from the temporary suspension of operations in response to COVID-19.

The 737 program resumed early stages of production in May and expects to continue to produce at low rates for the remainder of 2020. The COVID-19 pandemic has significantly impacted air travel and reduced near-term demand, resulting in lower production and delivery rate assumptions. Commercial Airplanes expects to gradually increase the 737 production rate to 31 per month by the beginning of 2022, with further gradual increases to correspond with market demand. Estimated potential concessions and other considerations to customers related to the 737 MAX grounding increased by $551 million in the quarter. There was no material change to estimated abnormal production costs.

Commercial Airplanes has further updated its production rate assumptions this quarter to reflect impacts of COVID-19 on its demand outlook, and will continue to assess them on an ongoing basis. The 787 production rate will be reduced to 6 per month in 2021. The 777/777X combined production rate will be gradually reduced to 2 per month in 2021, with 777X first delivery targeted for 2022. At this time, production rate assumptions have not changed on the 767 and 747 programs.

Commercial Airplanes delivered 20 airplanes during the quarter, and backlog included over 4,500 airplanes valued at $326 billion.



The Boeing Company and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



Six months ended

June 30


Three months ended

June 30

(Dollars in millions, except per share data)

2020


2019


2020


2019

Sales of products

$23,254


$33,319


$9,063


$13,094

Sales of services

5,461


5,349


2,744


2,657

Total revenues

28,715


38,668


11,807


15,751









Cost of products

(25,091)


(31,910)


(10,378)


(15,672)

Cost of services

(4,632)


(4,511)


(2,589)


(2,122)

Boeing Capital interest expense

(23)


(34)


(11)


(16)

Total costs and expenses

(29,746)


(36,455)


(12,978)


(17,810)


(1,031)


2,213


(1,171)


(2,059)

(Loss)/income from operating investments, net

(47)


5


(45)


(15)

General and administrative expense

(2,034)


(1,856)


(1,161)


(672)

Research and development expense, net

(1,297)


(1,692)


(625)


(826)

Gain on dispositions, net

92


300


38


192

Loss from operations

(4,317)


(1,030)


(2,964)


(3,380)

Other income, net

206


213


94


107

Interest and debt expense

(815)


(277)


(553)


(154)

Loss before income taxes

(4,926)


(1,094)


(3,423)


(3,427)

Income tax benefit

1,890


301


1,028


485

Net loss

(3,036)


(793)


(2,395)


(2,942)

Less: net loss attributable to noncontrolling interest

(32)




(19)



Net loss attributable to Boeing Shareholders

($3,004)


($793)


($2,376)


($2,942)









Basic loss per share

($5.31)


($1.40)


($4.20)


($5.21)









Diluted loss per share

($5.31)


($1.40)


($4.20)


($5.21)









Weighted average diluted shares (millions)

566.1


566.6


566.4


565.3

 

The Boeing Company and Subsidiaries

Consolidated Statements of Financial Position

(Unaudited)


(Dollars in millions, except per share data)

June 30

2020


December 31

2019

Assets




Cash and cash equivalents

$19,992


$9,485

Short-term and other investments

12,438


545

Accounts receivable, net

2,793


3,266

Unbilled receivables, net

8,570


9,043

Current portion of customer financing, net

115


162

Inventories

83,745


76,622

Other current assets, net

2,624


3,106

Total current assets

130,277


102,229

Customer financing, net

2,054


2,136

Property, plant and equipment, net of accumulated depreciation of $19,863 and $19,342

12,182


12,502

Goodwill

8,064


8,060

Acquired intangible assets, net

3,019


3,338

Deferred income taxes

729


683

Investments

1,066


1,092

Other assets, net of accumulated amortization of $617 and $580

5,481


3,585

Total assets

$162,872


$133,625

Liabilities and equity




Accounts payable

$13,700


$15,553

Accrued liabilities

22,493


22,868

Advances and progress billings

53,367


51,551

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

2,922


7,340

Total current liabilities

92,482


97,312

Deferred income taxes

404


413

Accrued retiree health care

4,427


4,540

Accrued pension plan liability, net

15,663


16,276

Other long-term liabilities

2,821


3,422

Long-term debt

58,457


19,962

Total liabilities

174,254


141,925

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

6,648


6,745

Treasury stock, at cost - 447,840,938 and 449,352,405 shares

(54,829)


(54,914)

Retained earnings

47,478


50,644

Accumulated other comprehensive loss

(16,025)


(16,153)

Total shareholders' equity

(11,667)


(8,617)

Noncontrolling interests

285


317

Total equity

(11,382)


(8,300)

Total liabilities and equity

$162,872


$133,625

 

The Boeing Company and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



Six months ended

June 30

(Dollars in millions)

2020


2019

Cash flows – operating activities:




Net loss

($3,036)


($793)

Adjustments to reconcile net loss to net cash (used)/provided by operating activities:




Non-cash items – 




Share-based plans expense

115


104

Depreciation and amortization

1,103


1,067

Investment/asset impairment charges, net

280


70

Customer financing valuation adjustments

9


249

Gain on dispositions, net

(92)


(300)

Other charges and credits, net

815


145

Changes in assets and liabilities – 




Accounts receivable

143


588

Unbilled receivables

285


(222)

Advances and progress billings

1,822


1,842

Inventories

(6,741)


(5,233)

Other current assets

433


(887)

Accounts payable

(3,181)


2,002

Accrued liabilities

514


4,959

Income taxes receivable, payable and deferred

(1,894)


(921)

Other long-term liabilities

(109)


(509)

Pension and other postretirement plans

(357)


(390)

Customer financing, net

62


347

Other

247


80

  Net cash (used)/provided by operating activities

(9,582)


2,198

Cash flows – investing activities:




Property, plant and equipment additions

(776)


(922)

Property, plant and equipment reductions

96


331

Acquisitions, net of cash acquired



(492)

Contributions to investments

(12,557)


(496)

Proceeds from investments

543


758

Purchase of distribution rights



(20)

Other

8


(12)

  Net cash used by investing activities

(12,686)


(853)

Cash flows – financing activities:




New borrowings

42,302


11,670

Debt repayments

(8,265)


(6,422)

Contributions from noncontrolling interests



7

Stock options exercised

27


47

Employee taxes on certain share-based payment arrangements

(164)


(238)

Common shares repurchased



(2,651)

Dividends paid

(1,158)


(2,317)

  Net cash provided by financing activities

32,742


96

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

(11)


(2)

Net increase in cash & cash equivalents, including restricted

10,463


1,439

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

9,571


7,813

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

20,034


9,252

Less restricted cash & cash equivalents, included in Investments

42


85

Cash and cash equivalents at end of period

$19,992


$9,167

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

Effective at the beginning of 2020, certain programs were realigned between our Defense, Space & Security segment and Unallocated items, eliminations and other. Business segment data for 2019 has been adjusted to reflect the realignment.


Six months ended

June 30


Three months ended

June 30

(Dollars in millions)

2020


2019


2020


2019

Revenues:








Commercial Airplanes

$7,838


$16,544


$1,633


$4,722

Defense, Space & Security

12,630


13,166


6,588


6,579

Global Services

8,116


9,162


3,488


4,543

Boeing Capital

134


141


69


75

Unallocated items, eliminations and other

(3)


(345)


29


(168)

Total revenues

$28,715


$38,668


$11,807


$15,751

Earnings/(loss) from operations:








Commercial Airplanes

($4,830)


($3,773)


($2,762)


($4,946)

Defense, Space & Security

409


1,827


600


975

Global Services

36


1,340


(672)


687

Boeing Capital

17


57


(7)


37

Segment operating loss

(4,368)


(549)


(2,841)


(3,247)

Unallocated items, eliminations and other

(651)


(1,210)


(478)


(498)

FAS/CAS service cost adjustment

702


729


355


365

Loss from operations

(4,317)


(1,030)


(2,964)


(3,380)

Other income, net

206


213


94


107

Interest and debt expense

(815)


(277)


(553)


(154)

Loss before income taxes

(4,926)


(1,094)


(3,423)


(3,427)

Income tax benefit

1,890


301


1,028


485

Net loss

(3,036)


(793)


(2,395)


(2,942)

Less: Net loss attributable to noncontrolling interest

(32)




(19)



Net loss attributable to Boeing Shareholders

($3,004)


($793)


($2,376)


($2,942)

Research and development expense, net:








Commercial Airplanes

$786


$1,062


$361


$498

Defense, Space & Security

330


374


167


190

Global Services

65


73


35


33

Other

116


183


62


105

Total research and development expense, net

$1,297


$1,692


$625


$826

Unallocated items, eliminations and other:








Share-based plans

($43)


($36)


($25)


($22)

Deferred compensation

73


(129)


(120)


(27)

Amortization of previously capitalized interest

(50)


(45)


(27)


(21)

Customer financing impairment



(250)





Research and development expense, net

(116)


(183)


(62)


(105)

Eliminations and other unallocated items

(515)


(567)


(244)


(323)

Sub-total (included in core operating loss)

(651)


(1,210)


(478)


(498)

Pension FAS/CAS service cost adjustment

513


549


258


275

Postretirement FAS/CAS service cost adjustment

189


180


97


90

FAS/CAS service cost adjustment

702


729


$355


$365

Total

$51


($481)


($123)


($133)

 

The Boeing Company and Subsidiaries

Operating and Financial Data

(Unaudited)


Deliveries

 Six months ended

June 30


Three months ended

June 30


Commercial Airplanes

2020


2019


2020



2019


737

9


113


4



24


747

1


4


1



2


767

14


22


4



10


777

10


22

(1)

4



12


787

36


78


7



42


Total

70


239


20



90


Note: Aircraft accounted for as revenues by BCA and as operating leases in consolidation identified by parentheses









Defense, Space & Security








AH-64 Apache (New)

11


10


9



4


AH-64 Apache (Remanufactured)

32


35


18



13


C-17 Globemaster III






C-40A






CH-47 Chinook (New)

15