10-QPeriod: Q1 FY2013

BOEING CO Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 24, 2013For Securities:BABA-PA

Summary

Boeing Co. reported first-quarter 2013 results showing a slight decrease in total revenues to $18.89 billion from $19.38 billion in the prior year, primarily driven by a decline in Commercial Airplanes revenue. This was influenced by the suspension of 787 Dreamliner deliveries due to battery issues and lower commercial aviation services. Defense, Space & Security (BDS) revenues also saw a slight dip. Despite the revenue dip, net earnings increased to $1.11 billion from $923 million in Q1 2012, and diluted earnings per share rose to $1.44 from $1.22. This improvement was largely attributed to a lower effective income tax rate, significantly benefiting from the retroactive reinstatement of the U.S. research and development tax credit. Core operating earnings, a non-GAAP measure excluding certain pension and postretirement costs, also showed an increase, reflecting strong performance in Commercial Airplanes and BDS segments. However, the company faces ongoing challenges, including the costly investigation and modification of the 787 battery system, potential impacts from U.S. government sequestration on defense spending, and continued pressures on the 747 program due to market conditions. The company's liquidity remains robust with significant borrowing capacity and a substantial backlog.

Financial Highlights

52 data points
Beta

Revenue

$18.89B

16.6% Gross Margin

Net Income

$1.11B

5.9% Net Margin

EPS (Diluted)

$1.44

Total Assets

$90.45B

Cash & Equivalents

$8.34B

Free Cash Flow

$3.00M

Financial Statements
Beta
Revenue$18.89B
Cost of Revenue$15.76B
Gross Profit$3.14B
R&D Expenses$705.00M
Operating Income$1.53B
Net Income$1.11B
EPS (Basic)$1.45
EPS (Diluted)$1.44
Shares Outstanding (Basic)763.30M
Shares Outstanding (Diluted)766.60M

Key Highlights

  • 1Total revenues decreased by 3% to $18.89 billion compared to $19.38 billion in Q1 2012, primarily due to a 2% decrease in Commercial Airplanes revenue.
  • 2Net earnings increased by 20% to $1.11 billion from $923 million in the prior year, driven by a lower effective tax rate, notably due to the R&D tax credit.
  • 3Diluted earnings per share (EPS) rose to $1.44 from $1.22 in Q1 2012.
  • 4Core operating earnings (a non-GAAP measure) increased to $1.87 billion from $1.77 billion, reflecting operational improvements in key segments.
  • 5The 787 Dreamliner program faced delivery suspensions due to battery incidents, leading to related investigation and modification costs, impacting Commercial Airplanes revenue.
  • 6The company highlighted the impact of U.S. government sequestration on defense spending, creating uncertainty for the Defense, Space & Security segment.
  • 7Boeing maintained a strong contractual backlog of $373.6 billion as of March 31, 2013.

Frequently Asked Questions

The decrease in total revenues was primarily driven by a 2% decline in Commercial Airplanes revenue, largely due to the suspension of 787 Dreamliner deliveries following battery incidents and lower commercial aviation services spares revenue. Defense, Space & Security revenues also saw a slight decrease.

The 787 battery incidents led to a suspension of deliveries and incurred significant costs for investigation, testing, and modification of the delivered aircraft. This negatively impacted Commercial Airplanes revenue and increased engineering support costs.

The increase in net earnings was significantly boosted by a lower effective income tax rate. This was largely due to the retroactive reinstatement of the U.S. research and development tax credit for 2012, which provided a substantial benefit in the first quarter of 2013.

The company noted that U.S. government sequestration, implemented in March 2013, is expected to reduce defense spending. While specific program impacts are still being determined, reductions, cancellations, or delays could materially affect the segment's results. However, the segment's earnings from operations did increase year-over-year.