Boeing Co. — Form 10-Q summary
Reporting period: Quarter and six months ended June 30, 2021. Financial statements are unaudited; the independent accountant performed a review, not an audit.
Financial performance
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $17.0 billion | $11.8 billion | $32.2 billion | $28.7 billion |
| Operating earnings/(loss) | $1.023 billion | ($2.964 billion) | $940 million | ($4.317 billion) |
| Operating margin | 6.0% | (25.1%) | 2.9% | (15.0%) |
| Net earnings/(loss) attributable to Boeing shareholders | $587 million | ($2.376 billion) | $50 million | ($3.004 billion) |
| Diluted EPS | $1.00 | ($4.20) | $0.09 | ($5.31) |
| Operating cash flow | Not provided by quarter in this filing | ($3.870 billion) | ($9.582 billion) |
Revenue and reported operating results improved substantially year over year, reflecting higher aircraft deliveries and the absence of significant prior-year charges. First-half 2021 was nearly breakeven at the pretax level, with a $23 million pretax loss; a $29 million income tax benefit resulted in $50 million of earnings attributable to Boeing shareholders. The effective tax rate was unusually high for the half (126.1%) because of the near-breakeven pretax result and discrete tax items.
First-half operating cash use improved from the prior year but remained significant. Cash and cash equivalents were $8.3 billion, with $13.1 billion of short-term and other investments at June 30; management reported combined cash and short-term investments of $21.3 billion. Total debt was approximately $63.6 billion, including $6.5 billion classified as short-term. Shareholders’ equity remained in deficit at $16.7 billion. Boeing had $14.8 billion of unused revolving credit capacity and reported compliance with debt covenants.
Segments and changes versus prior year
- Commercial Airplanes (BCA): First-half revenue was $10.3 billion, up from $7.8 billion; operating loss narrowed to $1.3 billion from $4.8 billion. Results benefited from resumed 737 MAX deliveries and lower expenses, but 787 deliveries were reduced by production issues. BCA recorded $1.083 billion of abnormal 737 MAX production costs in the first half.
- Defense, Space & Security (BDS): First-half revenue rose to $14.1 billion from $12.6 billion and operating earnings rose to $1.4 billion from $409 million, mainly reflecting higher KC-46A revenue and the absence of prior-year program charges. Boeing recorded a $318 million increase to the VC-25B reach-forward loss in Q1 2021.
- Global Services (BGS): First-half revenue declined to $7.8 billion from $8.1 billion, while operating earnings increased to $972 million from $36 million. The comparison benefited from substantial COVID-related charges in Q2 2020; commercial services remained below pre-pandemic levels.
- Boeing Capital: First-half revenue was $138 million and operating earnings were $57 million, up from $17 million, primarily due to lower asset impairment expense.
Total backlog was $363.5 billion, essentially unchanged from December 31, 2020. Commercial Airplanes backlog included $21.6 billion of aircraft order cancellations during the first half, primarily involving 737 MAX and 787 aircraft.
Liquidity, outlook, risks and unusual items
- Management expects negative operating cash flow until commercial deliveries ramp up and said it believes Boeing can fund operations for the foreseeable future, based on its current assumptions and liquidity access. In Q1, Boeing issued $9.8 billion of senior notes and used the proceeds to repay a similar amount of term-loan borrowings; $4.0 billion of that delayed-draw term loan remained due in February 2022. Dividends and share repurchases remained suspended.
- Boeing expected commercial air travel to return to 2019 levels in 2023–2024, with a further few years for the industry to return to long-term trend growth. It expected 737 production to rise to 31 aircraft per month in early 2022. The first 777X delivery was expected in late 2023.
- 787 deliveries were paused in May amid inspections and rework. Boeing had about 100 787s in inventory at June 30, expected fewer than half to be delivered by year-end, and said the production rate would temporarily be below five per month while rework proceeded. About 390 737 MAX aircraft remained in inventory; Boeing expected to deliver about half of the inventory held at December 31, 2020 by year-end, subject to regulatory approvals.
- The 737 MAX remained grounded in certain non-U.S. jurisdictions, including China. Boeing identified regulatory timing, customer cancellations or deferrals, aircraft remarketing, supply-chain disruption and COVID-19 demand uncertainty as material risks. It could not reasonably estimate potential additional financial impacts from some of these uncertainties.
- The 737 MAX customer-concessions liability was $4.0 billion at June 30. Boeing reported $1.5 billion of customer compensation payments during the first half and also paid approximately $0.7 billion under its U.S. Department of Justice Deferred Prosecution Agreement. That agreement requires total payments of $2.51 billion and compliance and monitoring measures.
- The 777X had a $6.493 billion reach-forward loss recorded in Q4 2020; Boeing recorded no increase in the first half of 2021 but warned that delays, demand changes, production-rate changes or certification issues could cause further losses. Environmental remediation liabilities were $582 million; the high end of the estimated reasonably possible remediation range exceeded recorded liabilities by $1.055 billion.
Investor verification priorities
- Track 737 MAX approvals—particularly in China—deliveries, inventory reduction and the adequacy of the $4.0 billion customer-concessions estimate.
- Verify progress on 787 inspections, FAA discussions, rework costs, delivery resumption and inventory recovery.
- Monitor operating cash use, delivery-driven cash-flow improvement, near-term debt maturities and available liquidity.
- Assess whether the 777X and fixed-price defense programs remain within current cost, schedule and loss estimates.
- Follow commercial-aircraft demand, order cancellations, backlog conversion and the pace of airline-industry recovery.