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		7		6			—
CH-47 Chinook (Renewed)	1		9		—			5
F-15 Models	3		5		3			1
F/A-18 Models	9		10		4			3
KC-46 Tanker	6		12		1			5
P-8 Models	6		8		3			5
Commercial and Civil Satellites	—		1		—			1
Military Satellites	—		—		—			—
Total backlog (Dollars in millions)				June 30 2020				December 31 2019
Commercial Airplanes				$325,674				$376,593
Defense, Space & Security				64,286				63,691
Global Services				18,168				22,902
Unallocated items, eliminations and other				522				217
Total backlog				$408,650				$463,403
Contractual backlog				$385,389				$436,473
Unobligated backlog				23,261				26,930
Total backlog				$408,650				$463,403

The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
(Unaudited)

The tables provided below reconcile the non-GAAP financial measures core operating loss, core operating margin, and core loss per share with the most directly comparable GAAP financial measures, loss from operations, operating margin, and diluted loss 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)	Second Quarter 2020				Second Quarter 2019
	$ millions		Per Share		$ millions		Per share
Revenues	11,807				15,751
Loss from operations (GAAP)	(2,964)				(3,380)
Operating margin (GAAP)	(25.1)%				(21.5%)
FAS/CAS service cost adjustment:
Pension FAS/CAS service cost adjustment	(258)				(275)
Postretirement FAS/CAS service cost adjustment	(97)				(90)
FAS/CAS service cost adjustment	(355)				(365)
Core operating loss (non-GAAP)	($3,319)				($3,745)
Core operating margin (non-GAAP)	(28.1)%				(23.8%)
Diluted loss per share (GAAP)			($4.20)				($5.21)
Pension FAS/CAS service cost adjustment	($258)		(0.46)		($275)		(0.49)
Postretirement FAS/CAS service cost adjustment	(97)		(0.17)		(90)		(0.16)
Non-operating pension expense	(84)		(0.14)		(94)		(0.17)
Non-operating postretirement expense	14		0.02		26		0.05
Provision for deferred income taxes on adjustments 1	89		0.16		91		0.16
Subtotal of adjustments	($336)		($0.59)		($342)		($0.61)
Core loss per share (non-GAAP)			($4.79)				($5.82)
Weighted average diluted shares (in millions)			566.4				565.3

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

The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
(Unaudited)

The tables provided below reconcile the non-GAAP financial measures core operating loss, core operating margin, and core loss per share with the most directly comparable GAAP financial measures, loss from operations, operating margin, and diluted loss 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)	First Half 2020				First Half 2019
	$ millions		Per Share		$ millions		Per Share
Revenues	28,715				38,668
Loss from operations (GAAP)	(4,317)				(1,030)
Operating margin (GAAP)	(15.0)%				(2.7%)
FAS/CAS service cost adjustment:
Pension FAS/CAS service cost adjustment	(513)				(549)
Postretirement FAS/CAS service cost adjustment	(189)				(180)
FAS/CAS service cost adjustment	(702)				(729)
Core operating loss (non-GAAP)	($5,019)				($1,759)
Core operating margin (non-GAAP)	(17.5)%				(4.5%)
Diluted loss per share (GAAP)			($5.31)				($1.40)
Pension FAS/CAS service cost adjustment	($513)		(0.91)		($549)		(0.97)
Postretirement FAS/CAS service cost adjustment	(189)		(0.33)		(180)		(0.32)
Non-operating pension expense	(171)		(0.30)		(187)		(0.32)
Non-operating postretirement expense	27		0.05		53		0.09
Provision for deferred income taxes on adjustments 1	178		0.31		181		0.32
Subtotal of adjustments	($668)		($1.18)		($682)		($1.20)
Core loss per share (non-GAAP)			($6.49)				($2.60)
Weighted average diluted shares (in millions)			566.1				566.6

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

 

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