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Boeing Company - Half-year Report

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Boeing Reports Second-Quarter Results

ARLINGTON, Va., July 27, 2022 /PRNewswire/ --

Second Quarter 2022

  • Operating cash flow of $0.1 billion; continue to expect positive free cash flow for 2022

  • Increased 737 production to 31 per month; working with FAA on final actions to resume 787 deliveries

  • Successfully completed CST-100 Starliner uncrewed Orbital Flight Test-2 (OFT-2)

  • Revenue of $16.7 billion; GAAP earnings per share of $0.32 and core (non-GAAP)* loss per share of ($0.37)

  • Total backlog of $372 billion; including over 4,200 commercial airplanes

Table 1. Summary Financial Results

Second Quarter

First Half

(Dollars in Millions, except per share data)

2022

2021

Change

2022

2021

Change

Revenues

$16,681

$16,998

(2) %

$30,672

$32,215

(5) %

GAAP

Earnings/(Loss) From Operations

$774

$1,023

(24) %

($395)

$940

NM

Operating Margin

4.6

%

6.0

%

(23) %

(1.3)

%

2.9

%

NM

Net Earnings/(Loss)

$160

$567

(72) %

($1,082)

$6

NM

Earnings/(Loss) Per Share

$0.32

$1.00

(68) %

($1.73)

$0.09

NM

Operating Cash Flow

$81

($483)

NM

($3,135)

($3,870)

NM

Non-GAAP*

Core Operating Earnings/(Loss)

$490

$755

(35) %

($962)

$402

NM

Core Operating Margin

2.9

%

4.4

%

(34) %

(3.1)

%

1.2

%

NM

Core (Loss)/Earnings Per Share

($0.37)

$0.40

NM

($3.11)

($1.12)

NM

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

The Boeing Company (NYSE: BA) reported second-quarter revenue of $16.7 billion, GAAP earnings per share of $0.32 and core loss per share (non-GAAP)* of ($0.37), driven by lower defense volume and unfavorable performance, partially offset by higher commercial volume (Table 1). Boeing recorded positive operating cash flow of $0.1 billion.

"We made important progress across key programs in the second quarter and are building momentum in our turnaround," said Dave Calhoun, Boeing President and Chief Executive Officer. "As we begin to hit key milestones, we were able to generate positive operating cash flow this quarter and remain on track to achieve positive free cash flow for 2022. While we are making meaningful progress, we have more work ahead. We will stay focused on safety, quality and transparency, as we drive stability, improve performance, and continue to invest in our future."

Table 2. Cash Flow

Second Quarter

First Half

(Millions)

2022

2021

2022

2021

Operating Cash Flow

$81

($483)

($3,135)

($3,870)

Less Additions to Property, Plant & Equipment

($263)

($222)

($612)

($513)

Free Cash Flow*

($182)

($705)

($3,747)

($4,383)

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

Operating cash flow improved to $0.1 billion in the quarter, reflecting higher commercial deliveries and timing of receipts and expenditures (Table 2).

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q2 22

Q1 22

Cash

$10.0

$7.4

Marketable Securities1

$1.4

$4.9

Total

$11.4

$12.3

Debt Balances:

The Boeing Company, net of intercompany loans to BCC

$55.7

$56.2

Boeing Capital, including intercompany loans

$1.5

$1.5

Total Consolidated Debt

$57.2

$57.7

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

Cash and investments in marketable securities decreased to $11.4 billion, compared to $12.3 billion at the beginning of the quarter, primarily driven by debt repayment (Table 3). The company has access to credit facilities of $14.7 billion which remain undrawn.

Total company backlog at quarter-end was $372 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes

Second Quarter

First Half

(Dollars in Millions)

2022

2021

Change

2022

2021

Change

Commercial Airplanes Deliveries

121

79

53 %

216

156

38 %

Revenues

$6,219

$6,015

3 %

$10,380

$10,284

1 %

Loss from Operations

($242)

($472)

NM

($1,101)

($1,328)

NM

Operating Margin

(3.9)

%

(7.8)

%

NM

(10.6)

%

(12.9)

%

NM

Commercial Airplanes second-quarter revenue increased to $6.2 billion, driven by higher 737 deliveries, partially offset by lower 787 deliveries (Table 4). Operating margin of (3.9)% also reflects abnormal costs and period expenses, including higher R&D expense.

Boeing has nearly completed the global safe return to service of the 737 MAX and the fleet has flown more than 1.5 million total flight hours since late 2020. The 737 production rate increased to 31 airplanes per month during the quarter.

On the 787 program, the company continues to work with the FAA to finalize actions to resume deliveries and is readying airplanes for delivery. The program is producing at a very low rate and will continue to do so until deliveries resume, with an expected gradual return to five per month over time. The company still anticipates 787 abnormal costs of approximately $2 billion, with most being incurred by the end of 2023, including $283 million recorded in the quarter.

Commercial Airplanes secured orders for 169 737 MAX airplanes and 13 freighters, including seven 777-8 Freighters from Lufthansa Group. Commercial Airplanes delivered 121 airplanes during the quarter and backlog included over 4,200 airplanes valued at $297 billion.

Defense, Space & Security

Table 5. Defense, Space & Security

Second Quarter

First Half

(Dollars in Millions)

2022

2021

Change

2022

2021

Change

Revenues

$6,191

$6,876

(10) %

$11,674

$14,061

(17) %

Earnings/(loss) from Operations

$71

$958

(93) %

($858)

$1,363

NM

Operating Margin

1.1

%

13.9

%

(92) %

(7.3)

%

9.7

%

NM

Defense, Space & Security second-quarter revenue decreased to $6.2 billion and second-quarter operating margin decreased to 1.1 percent, primarily driven by charges on fixed-price development programs, including MQ-25 and Commercial Crew, as well as unfavorable performance on other programs and lower volume on derivative aircraft programs. The MQ-25 program recorded a $147 million charge primarily due to higher costs to meet certain technical requirements. The Commercial Crew program also recorded a $93 million charge, primarily driven by launch manifest updates and additional costs associated with OFT-2.

During the quarter, the CH-47F Chinook Block II was selected as the German government's future heavy-lift helicopter. Defense, Space & Security also successfully completed the CST-100 Starliner uncrewed OFT-2.

Backlog at Defense, Space & Security was $55 billion, of which 33% percent represents orders from customers outside the U.S.

Global Services

Table 6. Global Services

Second Quarter

First Half

(Dollars in Millions)

2022

2021

Change

2022

2021

Change

Revenues

$4,298

$4,067

6 %

$8,612

$7,816

10 %

Earnings from Operations

$728

$531

37 %

$1,360

$972

40 %

Operating Margin

16.9

%

13.1

%

29 %

15.8

%

12.4

%

27 %

Global Services second-quarter revenue increased to $4.3 billion and second-quarter operating margin increased to 16.9 percent primarily driven by higher commercial services volume and favorable mix.

During the quarter, Global Services received a contract for airlift flight dispatch services from the U.S. Air Force and was awarded a contract for avionics upgrades and cybersecurity support for the U.S. Navy. Global Services also delivered the first A-10 wing set to the U.S. Air Force.

Additional Financial Information

Table 7. Additional Financial Information

Second Quarter

First Half

(Dollars in Millions)

2022

2021

2022

2021

Revenues

Boeing Capital

$52

$78

$98

$138

Unallocated items, eliminations and other

($79)

($38)

($92)

($84)

Earnings/(Loss) from Operations

Boeing Capital

$27

$36

($9)

$57

FAS/CAS service cost adjustment

$284

$268

$567

$538

Other unallocated items and eliminations

($94)

($298)

($354)

($662)

Other income, net

$253

$199

$434

$389

Interest and debt expense

($650)

($673)

($1,280)

($1,352)

Effective tax rate

57.6

%

(3.3)

%

12.8

%

126.1

%

At quarter-end, Boeing Capital's net portfolio balance was $1.6 billion. The change in loss from other unallocated items and eliminations was primarily due to the recognition of deferred compensation income as compared to expense recorded in the second quarter 2021. The second quarter effective tax rate primarily reflects tax expense on pretax earnings and an increase to the valuation allowance.

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 Financial Accounting Standards (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.

Free Cash Flow

Free cash flow is GAAP operating cash flow reduced by capital expenditures for property, plant and equipment. 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 of free cash flow to GAAP operating cash flow.

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) the COVID-19 pandemic and related industry impacts, including with respect to our operations, our liquidity, the health of our customers and suppliers, and future demand for our products and services; (2) the 737 MAX, including the timing and conditions of remaining 737 MAX regulatory approvals, lower than planned production rates and/or delivery rates, and additional considerations to customers and suppliers; (3) general conditions in the economy and our industry, including those due to regulatory changes; (4) our reliance on our commercial airline customers; (5) 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; (6) changing budget and appropriation levels and acquisition priorities of the U.S. government; (7) our dependence on U.S. government contracts; (8) our reliance on fixed-price contracts; (9) our reliance on cost-type contracts; (10) uncertainties concerning contracts that include in-orbit incentive payments; (11) our dependence on our subcontractors and suppliers, as well as the availability of raw materials; (12) changes in accounting estimates; (13) changes in the competitive landscape in our markets; (14) our non-U.S. operations, including sales to non-U.S. customers; (15) threats to the security of our, our customers' and/or our suppliers' information; (16) potential adverse developments in new or pending litigation and/or government investigations; (17) customer and aircraft concentration in our customer financing portfolio; (18) changes in our ability to obtain debt financing on commercially reasonable terms and at competitive rates; (19) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (20) the adequacy of our insurance coverage to cover significant risk exposures; (21) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, sanctions or natural disasters; (22) work stoppages or other labor disruptions; (23) substantial pension and other postretirement benefit obligations; (24) potential environmental liabilities; and (25) effects of climate change and legal, regulatory or market responses to such change.

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:

Matt Welch or Keely Moos (312) 544-2140

Communications:

Michael Friedman media@boeing.com

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)

2022

2021

2022

2021

Sales of products

$25,436

$26,672

$14,009

$14,154

Sales of services

5,236

5,543

2,672

2,844

Total revenues

30,672

32,215

16,681

16,998

Cost of products

(23,696)

(23,895)

(12,284)

(12,263)

Cost of services

(4,495)

(4,483)

(2,269)

(2,316)

Boeing Capital interest expense

(13)

(18)

(6)

(9)

Total costs and expenses

(28,204)

(28,396)

(14,559)

(14,588)

2,468

3,819

2,122

2,410

(Loss)/income from operating investments, net

(3)

75

17

38

General and administrative expense

(1,531)

(2,072)

(668)

(1,040)

Research and development expense, net

(1,331)

(996)

(698)

(497)

Gain on dispositions, net

2

114

1

112

(Loss)/earnings from operations

(395)

940

774

1,023

Other income, net

434

389

253

199

Interest and debt expense

(1,280)

(1,352)

(650)

(673)

(Loss)/earnings before income taxes

(1,241)

(23)

377

549

Income tax benefit/(expense)

159

29

(217)

18

Net (loss)/earnings

(1,082)

6

160

567

Less: net loss attributable to noncontrolling interest

(56)

(44)

(33)

(20)

Net (loss)/earnings attributable to Boeing Shareholders

($1,026)

$50

$193

$587

Basic (loss)/earnings per share

($1.73)

$0.09

$0.32

$1.00

Diluted (loss)/earnings per share

($1.73)

$0.09

$0.32

$1.00

Weighted average diluted shares (millions)

592.8

588.6

596.4

590.2

The Boeing Company and Subsidiaries

Consolidated Statements of Financial Position

(Unaudited)

(Dollars in millions, except per share data)

June 30
2022

December 31
2021

Assets

Cash and cash equivalents

$10,090

$8,052

Short-term and other investments

1,358

8,192

Accounts receivable, net

2,996

2,641

Unbilled receivables, net

9,394

8,620

Current portion of customer financing, net

159

117

Inventories

79,917

78,823

Other current assets, net

2,086

2,221

Total current assets

106,000

108,666

Customer financing, net

1,542

1,695

Property, plant and equipment, net of accumulated depreciation of $20,971 and
$20,538

10,617

10,918

Goodwill

8,055

8,068

Acquired intangible assets, net

2,431

2,562

Deferred income taxes

106

77

Investments

981

975

Other assets, net of accumulated amortization of of $864 and $975

5,747

5,591

Total assets

$135,479

$138,552

Liabilities and equity

Accounts payable

$9,575

$9,261

Accrued liabilities

17,752

18,455

Advances and progress billings

52,066

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