Boeing Co. (BA) — Q1 2022 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2022, compared with Q1 2021. Boeing operates Commercial Airplanes (BCA), Defense, Space & Security (BDS), Global Services (BGS), and Boeing Capital (BCC). Deloitte reviewed the interim financial statements; this was not an audit.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $13.99 billion | $15.22 billion |
| GAAP operating loss / margin | $1.17 billion / (8.4%) | $83 million / (0.5%) |
| Net loss attributable to Boeing shareholders | $1.22 billion | $537 million |
| Diluted loss per share | $2.06 | $0.92 |
| Operating cash flow | $(3.22) billion | $(3.39) billion |
| Cash and cash equivalents at period end | $7.41 billion | $7.06 billion |
| Debt at period end | $57.7 billion | $58.1 billion at Dec. 31, 2021 |
Cash and short-term investments totaled $12.3 billion, down from $16.2 billion at year-end 2021. Boeing reported $14.7 billion of unused revolving credit capacity. Total equity was a deficit of $15.3 billion. The filing reports cost of sales at 97.5% of revenue, versus 90.7% a year earlier; it does not provide a consolidated gross-margin figure.
Non-GAAP core operating loss was $1.45 billion, versus $353 million; core loss per share was $2.75, versus $1.53. These measures exclude specified pension and postretirement costs and should be considered alongside GAAP results.
Material changes versus Q1 2021
- Revenue declined 8%, principally because BDS revenue fell $1.70 billion; BCA revenue decreased $108 million. BGS revenue grew $565 million, supported by higher commercial services volume.
- BDS swung from $405 million of operating earnings to a $929 million loss, reflecting charges on the VC-25B, T-7A, KC-46A and MQ-25 programs. BCA’s operating loss was broadly unchanged at $859 million; BGS operating earnings rose to $632 million from $441 million.
- Operating cash use improved modestly year over year, but inventory consumed $1.2 billion of cash. Cash and short-term investments fell $3.9 billion from December 31, 2021.
- Backlog declined to $370.8 billion from $377.5 billion at year-end. Boeing estimated 34% would convert to revenue through 2023 and 86% through 2026, while noting significant timing uncertainty.
Outlook, risks and unusual items
- Management expected negative operating cash flow until commercial deliveries ramp up and believed available liquidity would fund operations for the foreseeable future, based on its estimates and assumptions. It did not provide conventional full-year numerical revenue or earnings guidance in the supplied filing text.
- Management expected commercial air travel to return to 2019 levels in 2023–2024, with an uneven recovery. COVID-19 effects, supply-chain constraints, labor shortages and inflation were affecting production and costs.
- 787 deliveries remained paused amid production-quality inspections and rework; about 115 aircraft were in inventory. Boeing expected approximately $2 billion of cumulative abnormal 787 production costs, mostly by the end of 2023. Further delays or rate reductions could cause additional losses.
- The 737 MAX had not returned to service in China. Boeing expected China deliveries to resume in 2022 subject to regulatory approvals, and planned to raise production to 31 aircraft per month in Q2. About 320 MAX aircraft were in inventory; most were expected to be delivered by the end of 2023.
- In April 2022, after quarter-end, Boeing decided to pause 777X-9 production during 2022 and 2023, with approximately $1.5 billion of expected abnormal costs beginning in Q2. First 777X-9 delivery was then expected in 2025; first 777X-8 freighter delivery was expected in 2027.
- Q1 included a $660 million increase in the VC-25B reach-forward loss, bringing the cumulative loss to $1.146 billion; a $300 million increase in estimated future T-7A production losses; a $165 million KC-46A charge; and a $78 million increase in the MQ-25 reach-forward loss. Management warned further losses were possible.
- The war in Ukraine resulted in $212 million of Q1 earnings charges, primarily asset impairments, and increased expected credit losses in Boeing Capital. Boeing suspended business in Russia and warned of possible future supply-chain effects.
- Other exposures include $653 million of environmental remediation liabilities, $12.8 billion of financing commitments (all related to customers Boeing believed were below investment grade), and ongoing 737 MAX-related litigation and government investigations. Boeing could not estimate a loss range for certain legal matters.
Important facts for investors to verify
- Progress toward FAA approval and resumption of 787 deliveries, including rework costs, production stability and delivery timing.
- 737 MAX delivery and production ramp assumptions, especially regulatory approvals and delivery resumption in China.
- Whether the 777X pause and certification timetable lead to costs beyond the announced estimate or additional program losses.
- Further cost growth, schedule delays or reach-forward losses on fixed-price defense programs, particularly VC-25B, T-7A, KC-46A and MQ-25.
- Cash burn, liquidity and debt trends as inventory builds and deliveries recover; management’s liquidity assessment depends on forecasts and access to financing.
- Developments in Boeing’s legal and regulatory proceedings, environmental obligations, supply chain, and customer financing exposures.