01—Abstract
Summary
Summary of the 10-Q filed July 25, 2012. Cited figures are marked; the original filing is the authoritative source.
Boeing Company (BA) reported strong revenue growth in its second quarter and first half of 2012, driven primarily by a significant increase in Commercial Airplanes segment sales due to higher new airplane deliveries.
Total revenues rose by 25%a year-over-year for the first six months. Earnings from operations also saw a substantial increase, largely benefiting from the Commercial Airplanes segment and a favorable litigation resolution. However, operating margins slightly declined compared to the prior year, partly due to increased pension costs and higher expenses associated with new aircraft programs like the 787 and 747-8.
The company continues to manage significant long-term commitments and potential contingencies, including various legal proceedings and environmental remediation liabilities. Cash flow from operations improved significantly year-over-year, though the company utilized more cash for investing activities, primarily related to investments in time deposits. Boeing maintains substantial borrowing capacity and believes its liquidity and access to capital are sufficient to meet its obligations and strategic opportunities.
02—Key points
Key Highlights
- Total revenues increased by 25% to $39.4 billion for the six months ended June 30, 2012, compared to $31.5 billion in the prior year period.
- Commercial Airplanes segment revenue surged by 43% to $22.8 billion for the six months, driven by higher new airplane deliveries.
- Earnings from operations increased by $584 million to $3.1 billion for the first six months, aided by strong performance in Commercial Airplanes and a favorable litigation resolution.
- The company made a significant discretionary pension contribution of $763 million in the second quarter of 2012.
- Net cash provided by operating activities improved significantly to $1.7 billion for the six months ended June 30, 2012, up from $0.6 billion in the prior year.
- Total contractual backlog stood at $354.6 billion as of June 30, 2012, an increase from $339.7 billion at the end of 2011.
- The company continues to face potential financial risks and contingencies related to legal proceedings, particularly the A-12 litigation, and program execution risks on new aircraft like the 787 and 747-8.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2012, Boeing Co kept $0.05.
- Revenue$20.00B100.0%
- Cost of revenue−$16.75B83.7%
- Gross profit$3.26B16.3%
- Operating costs−$1.72B8.6%
- Operating income$1.54B7.7%
- Interest, other & tax−$575.0M2.9%
- Net income$967.0M4.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2012filed July 25, 2012Financial Statements
Q2 FY2012 against Q2 FY2011
| Line item | Q2 FY2012Q2 FY2011 | Change |
|---|---|---|
| Revenue | $20.00B$16.54B | +20.9% |
| Cost of Revenue | $16.75B$13.20B | +26.9% |
| Gross Profit | $3.26B$3.34B | −2.5% |
| R&D Expenses | $857.00M$1.05B | −18.1% |
| Operating Income | $1.54B$1.53B | +0.5% |
| Net Income | $967.00M$941.00M | +2.8% |
| EPS (Basic) | $1.28$1.27 | +0.8% |
| EPS (Diluted) | $1.27$1.25 | +1.6% |
| Shares Outstanding (Basic) | 755.90M745.50M | +1.4% |
| Shares Outstanding (Diluted) | 759.60M752.60M | +0.9% |
05—Questions
Frequently Asked Questions
What was the primary driver of Boeing's revenue growth in this period?
The primary driver of Boeing's revenue growth was a significant increase in deliveries from its Commercial Airplanes segment. This segment saw a 43% revenue increase for the six-month period due to higher new airplane sales.
What is the status of the 787 program and its financial impact?
The 787 program continues to face challenges related to production rate increases, change incorporation, and global supply chain management. While the company is working to mitigate these risks and improve profitability, the program has recorded low margins through June 30, 2012, and carries a risk of future customer claims, supplier assertions, or reach-forward losses if risks are not mitigated.
How are pension obligations affecting the company's results?
Pension costs are a significant factor. The company made a discretionary pension contribution of $763 million in the second quarter of 2012. Unallocated pension costs, driven by higher amortization of actuarial losses and lower discount rates, increased significantly, impacting earnings from operations.
What are the major legal or contingent liabilities Boeing is managing?
Boeing is involved in several significant legal proceedings, most notably the ongoing A-12 litigation which could result in substantial additional losses. Other contingencies include environmental remediation liabilities, potential issues related to ULA indemnifications, and product warranty obligations.
06—Continue