Boeing Reports Second-Quarter 2020 Results

  • Financial 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.”    

The Boeing Company [NYSE: BA] reported second-quarter revenue of $11.8 billion, GAAP loss per share of ($4.20) and core loss per share (non-GAAP) of ($4.79), primarily reflecting the impacts of COVID-19 and the 737 MAX grounding (Table 1). Boeing recorded operating cash flow of ($5.3) billion.

“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.”

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.

Segment Results

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.

Defense, Space & Security

Table 5. Defense, Space & Security

Second Quarter

First Half

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$6,588

$6,579

$12,630

$13,166

(4)%

Earnings from Operations

$600

$975

(38)%

$409

$1,827

(78)%

Operating Margin

9.1%

14.8%

(5.7) Pts

3.2%

13.9%

(10.7) Pts

Defense, Space & Security second-quarter revenue was $6.6 billion, reflecting COVID-19 impact on derivative aircraft programs, partially offset by higher volume across the remainder of the portfolio (Table 5). Second-quarter operating margin decreased to 9.1 percent primarily due to a gain on sale of property in the second quarter of 2019 and a $151 million KC-46A Tanker charge primarily driven by additional fixed cost allocation resulting from lower commercial airplane production volume due to COVID-19.

During the quarter, Defense, Space & Security received an award for three additional MQ-25 unmanned aerial refueling aircraft for the U.S. Navy, as well as contracts for Cruise Missile Systems for the U.S. Navy and a contract for 24 AH-64E Apache helicopters for the Kingdom of Morocco. Defense, Space & Security completed Critical Design Review for the T-7A advanced trainer, achieved first flight and delivery of the F/A-18 U.S. Navy Block III Super Hornet, and achieved first flight of the F-15 Qatar Advanced aircraft. Defense, Space & Security also delivered the 100th U.S. Navy P-8A Poseidon, the 400th V-22 Osprey, and the 2,500th AH-64 Apache.

Backlog at Defense, Space & Security was $64 billion, of which 31 percent represents orders from customers outside the U.S.

Global Services

Table 6. Global Services

Second Quarter

First Half

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$3,488

$4,543

(23)%

$8,116

$9,162

(11)%

(Loss)/Earnings from Operations

($672)

$687

NM

$36

$1,340

NM

Operating Margin

(19.3)%

15.1%

NM

0.4%

14.6%

NM

Global Services second-quarter revenue decreased to $3.5 billion, driven by lower commercial services volume due to COVID-19, partially offset by higher government services volume (Table 6). Second-quarter operating margin decreased to (19.3) percent primarily due to lower commercial services volume, less favorable mix of products and services, and $923 million of charges related to asset impairments and severance costs as a result of the COVID-19 market environment.

During the quarter, Global Services was awarded a contract modification for P-8A integrated logistics support for the U.S. Navy. Global Services captured an order for four 767-300 freighter conversions for DHL and was awarded a contract for F-15 pre-delivery training support for the Qatar Emiri Air Force. Global Services also delivered the first F/A-18 Super Hornet test aircraft modified for the U.S. Navy Blue Angels.

Additional Financial Information

Table 7. Additional Financial Information

Second Quarter

First Half

(Dollars in Millions)

2020

2019

2020

2019

Revenues

Boeing Capital

$69

$75

$134

$141

Unallocated items, eliminations and other

$29

($168)

($3)

($345)

Earnings from Operations

Boeing Capital

($7)

$37

$17

$57

FAS/CAS service cost adjustment

$355

$365

$702

$729

Other unallocated items and eliminations

($478)

($498)

($651)

($1,210)

Other income, net

$94

$107

$206

$213

Interest and debt expense

($553)

($154)

($815)

($277)

Effective tax rate

30.0%

14.2%

38.4%

27.5%

At quarter-end, Boeing Capital’s net portfolio balance was $2.1 billion. Revenue from other unallocated items and eliminations increased primarily due to reserves related to cost accounting litigation recorded in the second quarter of 2019. Interest and debt expense increased due to higher debt balances. The second quarter effective tax rate reflects tax benefits related to the 5 year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act as well as the impact of pre-tax losses.

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.

SOURCE Boeing