01—Abstract
Summary
Summary of the 10-K filed January 31, 2020. Cited figures are marked; the original filing is the authoritative source.
Boeing's 2019 10-K filing reveals a challenging year, marked by a significant net loss of $636 milliona, a sharp contrast to the previous year's profit.
This downturn is primarily attributed to the ongoing grounding of the 737 MAX aircraft, which led to a substantial revenue reduction and an $8.26 billionb charge for customer concessions and delivery delays. The company also announced a temporary suspension of 737 MAX production starting in January 2020. Despite these headwinds in the Commercial Airplanes (BCA) segment, the Defense, Space & Security (BDS) and Global Services (BGS) segments demonstrated resilience, with BDS earnings increasing due to lower development program charges and BGS showing revenue growth driven by acquisitions and services.
However, the overall financial performance was heavily impacted by the 737 MAX crisis, resulting in negative operating cash flow and a significant increase in debt. Investors should closely monitor the timeline for the 737 MAX's return to service, production rate recovery, and the company's ability to manage ongoing litigation and government investigations.
The company's backlog remained substantial at $463.4 billionc, providing some visibility into future revenues, but the near-term outlook is dominated by the 737 MAX issues. Management's focus remains on safely returning the aircraft to service, improving operational efficiency, and managing costs amidst a highly competitive aerospace market.
02—Key points
Key Highlights
- Reported a net loss of $636 million for the year ended December 31, 2019, a significant shift from a net earning of $10.46 billion in 2018.
- The 737 MAX grounding resulted in a substantial revenue decrease in the Commercial Airplanes segment and an $8.26 billion charge for customer concessions and delivery delays.
- Announced a temporary suspension of 737 MAX production starting in January 2020 due to the ongoing grounding and uncertainty surrounding its return to service.
- Defense, Space & Security (BDS) segment earnings increased by $951 million, driven by lower charges on development programs.
- Global Services (BGS) segment revenue increased by $1.41 billion, primarily due to the acquisition of KLX Inc. and growth in government services.
- Operating cash flow turned negative, at ($2.45 billion) in 2019, compared to a positive $15.32 billion in 2018, significantly impacted by the 737 MAX grounding.
- Total backlog remained strong at $463.4 billion, but is subject to potential impacts from the 737 MAX situation.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Boeing Co lost $0.01.
- Revenue$76.56B100.0%
- Cost of revenue−$72.09B94.2%
- Gross profit$4.47B5.8%
- Operating costs−$6.44B8.4%
- Operating income−$1.98B2.6%
- Interest, other & tax$1.34B1.7%
- Net income−$636.0M0.8%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed January 31, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $76.56B$101.13B | −24.3% |
| Cost of Revenue | $72.09B$81.49B | −11.5% |
| Gross Profit | $4.47B$19.64B | −77.3% |
| R&D Expenses | $3.22B$3.27B | −1.5% |
| Operating Income | -$1.98B$11.99B | −116.5% |
| Net Income | -$636.00M$10.46B | −106.1% |
| EPS (Basic) | $-1.12$18.05 | −106.2% |
| EPS (Diluted) | $-1.12$17.85 | −106.3% |
| Shares Outstanding (Basic) | 566.00M579.90M | −2.4% |
| Shares Outstanding (Diluted) | 565.40M585.50M | −3.4% |
05—Questions
Frequently Asked Questions
What was Boeing's financial performance in 2019, and what were the main drivers?
Boeing reported a net loss of $636 million for 2019, a significant decline from a net profit of $10.46 billion in 2018. The primary driver for this loss was the grounding of the 737 MAX aircraft, which led to reduced deliveries, a substantial revenue charge for customer concessions, and a temporary suspension of production. While the Defense, Space & Security and Global Services segments showed some positive performance, they could not offset the impact of the Commercial Airplanes segment's challenges.
How does the 737 MAX grounding impact Boeing's financials and operations?
The 737 MAX grounding has had a profound negative impact. It directly led to a significant reduction in BCA segment revenue and a large charge of $8.26 billion for customer concessions and delivery delays. The company also had to reduce production rates and eventually suspend 737 MAX production starting in January 2020. This situation has also contributed to negative operating cash flow and increased uncertainty regarding future revenue and profitability until the aircraft is cleared for return to service and production ramps up.
What is the outlook for Boeing's different business segments?
The Commercial Airplanes (BCA) segment faced severe challenges due to the 737 MAX grounding, impacting revenues and margins. The Defense, Space & Security (BDS) segment showed improved earnings, driven by lower development charges and continued demand for its military products. The Global Services (BGS) segment experienced revenue growth, bolstered by the KLX acquisition and increased demand for aftermarket services. The Boeing Capital (BCC) segment's performance was modest, reflecting its financing support role.
What is Boeing's current financial position regarding debt and liquidity?
Boeing's financial position shows an increase in total debt, rising to $27.3 billion in 2019 from $13.8 billion in 2018, partly to manage liquidity impacts from the 737 MAX grounding. The company also experienced negative operating cash flow for the year. While Boeing has access to significant borrowing capacity through its credit lines, the increased debt and negative cash flow are key areas for investors to monitor.
06—Continue