Boeing Co. (BA) — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2021. Dollar amounts are in millions unless stated otherwise. The interim financial statements were reviewed by Deloitte; this was not an audit.
Business context and results
Boeing operates Commercial Airplanes (BCA), Defense, Space & Security (BDS), Global Services (BGS), and Boeing Capital (BCC). Results remained affected by COVID-19 travel demand, the 737 MAX’s continuing grounding in some jurisdictions, and 787 production quality issues and rework.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $15,278 | $14,139 | $47,493 | $42,854 |
| Operating earnings/(loss), GAAP | $329 | ($401) | $1,269 | ($4,718) |
| Operating margin, GAAP | 2.2% | (2.8)% | 2.7% | (11.0)% |
| Net loss attributable to Boeing shareholders | ($109) | ($449) | ($59) | ($3,453) |
| Diluted loss per share | ($0.19) | ($0.79) | ($0.10) | ($6.10) |
| Operating cash flow | Not separately presented | Not separately presented | ($4,132) | ($14,401) |
Financial position and segment performance
- At September 30, cash and cash equivalents were $9.8 billion and short-term and other investments were $10.2 billion, or approximately $20.0 billion combined. Combined cash and short-term investments were $25.6 billion at December 31, 2020.
- Total debt was $62.4 billion, down from $63.6 billion at year-end 2020; $5.4 billion was classified as short-term. Total liabilities were $161.1 billion, exceeding total assets of $146.8 billion; shareholders’ deficit was $14.4 billion.
- Current assets were $116.9 billion versus current liabilities of $85.8 billion. Boeing reported $14.8 billion of unused revolving-credit capacity and stated it was in compliance with debt and credit-facility covenants.
- Nine-month segment revenue and operating earnings/(loss): BCA $14.7 billion and ($2.0 billion); BDS $20.7 billion and $1.8 billion; BGS $12.0 billion and $1.6 billion; BCC $209 million and $99 million.
- Total backlog was $367.1 billion at September 30, up from $363.4 billion at year-end. Boeing expected about 25% to convert to revenue through 2022 and 78% through 2025, while warning that conversion timing was uncertain.
Material changes and unusual items
- Nine-month revenue rose $4.6 billion year over year, chiefly from higher 737 MAX deliveries and improved BDS and BGS revenue. The prior-year comparison included substantial pandemic-related and program charges.
- Operating cash use improved by $10.3 billion year over year, but remained negative. Boeing attributed the improvement principally to near break-even earnings and improved working capital; lower deliveries and inventory pressures continued to weigh on cash generation.
- Commercial Airplanes recorded a nine-month operating loss of $2.0 billion. Its costs included $1.5 billion of abnormal 737 MAX production costs and $183 million of abnormal 787 costs. The 777X had a previously recorded $6.5 billion reach-forward loss; no increase was recorded in the first nine months of 2021.
- BDS results included a $185 million third-quarter increase to the Commercial Crew reach-forward loss and a $318 million first-quarter increase to the VC-25B reach-forward loss.
- A pension-plan remeasurement produced a $1.6 billion actuarial gain in other comprehensive income. Boeing also recorded a $117 million gain associated with the deconsolidation of HorizonX.
- The nine-month income tax benefit was $207 million. Boeing received $1.3 billion of tax refunds in Q3, primarily related to CARES Act net operating loss carrybacks; the company said near-break-even pretax results made a reliable annual effective tax-rate estimate impracticable.
Outlook, risks and contingencies
- Management expected negative operating cash flows until commercial deliveries ramped up and believed it was probable Boeing could fund operations for the foreseeable future, based on its estimates and access to liquidity. It planned to repay the remaining $4.0 billion delayed-draw term loan in Q4 2021.
- Boeing expected commercial air travel to return to 2019 levels in 2023–2024, with industry recovery to long-term trend growth taking several additional years. It expected 737 production to reach 31 aircraft per month in early 2022, subject to demand and supply-chain capacity.
- 787 deliveries remained paused pending inspections, rework and FAA discussions. Boeing expected about $1 billion of cumulative abnormal 787 production costs, including approximately $800 million in future quarters, and expected production to remain at two per month until deliveries resumed.
- Boeing anticipated first delivery of the 777X in late 2023. It was working toward Chinese regulatory approval for the 737 MAX by year-end 2021, with deliveries expected to follow in Q1 2022; timing and conditions remained uncertain.
- The 737 MAX customer-concessions liability was $3.4 billion at September 30. Boeing noted that further delays, cancellations, remarketing costs, production changes, or adverse customer negotiations could materially affect results and cash flow.
- The January 2021 Department of Justice deferred prosecution agreement requires $2.51 billion in payments and enhanced compliance measures. Related lawsuits and government investigations, including an SEC investigation, remained ongoing; Boeing said potential losses beyond specified matters could not be reasonably estimated.
- Other material exposures include fixed-price defense development programs, environmental remediation liabilities of $629 million, $13.3 billion of aircraft financing commitments, and uncertainty over future U.S. government appropriations.
Most important facts for investors to verify
- Whether 787 deliveries resume and production quality issues, rework costs, and inventory accumulation stabilize.
- Whether 737 MAX regulatory approvals and deliveries—particularly in China—meet management’s assumptions, and whether customer concessions or cancellations increase.
- Actual quarterly operating cash flow, delivery-driven cash recovery, and progress on the planned term-loan repayment.
- Whether the late-2023 777X delivery target and defense-program cost estimates remain achievable without further reach-forward losses.
- How backlog converts to revenue and cash, given the filing’s stated uncertainty and the size of undelivered aircraft inventory.
- Developments in 737 MAX litigation and investigations, the deferred prosecution agreement, and other contingent obligations.