01—Abstract
Summary
Summary of the 10-Q filed April 23, 2014. Cited figures are marked; the original filing is the authoritative source.
Boeing Company's first quarter 2014 report shows a revenue increase of 8% year-over-year to $20.465 billiona, primarily driven by a 19% surge in Commercial Airplanes revenue.
While overall "Earnings from operations" saw a modest increase of $14 million to $1.542 billionb, the "Defense, Space & Security" segment experienced a decline in earnings. The company reported net earnings of $965 million, or $1.28 per diluted share, a decrease from $1.106 billion or $1.44 per diluted share in the prior year's quarter. Significant factors influencing the results include higher research and development expenses in Commercial Airplanes and a substantial increase in unallocated pension and postretirement benefit expenses, particularly due to curtailment charges.
The company also repurchased $2.5 billionc in stock during the quarter, impacting cash flow. Key operational metrics and segment performance highlight a strong rebound in the Commercial Airplanes division, signaling robust demand for its products, contrasted with a dip in the Defense, Space & Security segment which faces ongoing uncertainties in U.S. government spending and defense appropriations.
Investors should monitor the impact of R&D investments on future profitability and the significant pension-related expenses. The company's substantial backlog of $422.69 billiond provides a degree of revenue visibility, although risks associated with fixed-price contracts, program execution, and geopolitical factors remain.
02—Key points
Key Highlights
- Total revenues increased by 8% to $20.465 billion, driven by a 19% increase in Commercial Airplanes revenue due to higher aircraft deliveries.
- Earnings from operations saw a slight increase of $14 million to $1.542 billion, with Commercial Airplanes earnings up significantly, while Defense, Space & Security (BDS) earnings decreased.
- Net earnings decreased to $965 million ($1.28/share) from $1.106 billion ($1.44/share) in the prior year, impacted by higher R&D and increased pension/postretirement expenses.
- The company repurchased $2.5 billion of its stock during the quarter, leading to a significant use of cash from financing activities.
- Inventories increased by $2.029 billion to $44.941 billion, primarily driven by continued investment in the 787 program.
- The backlog of unfilled orders remained strong at $422.69 billion, indicating substantial future revenue potential.
- The effective income tax rate increased to 33.9% from 23.1% in the prior year, largely due to the expiration of the U.S. research and development tax credit.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2014, Boeing Co kept $0.05.
- Revenue$20.46B100.0%
- Cost of revenue−$17.30B84.5%
- Gross profit$3.17B15.5%
- Operating costs−$1.63B8.0%
- Operating income$1.54B7.5%
- Interest, other & tax−$577.0M2.8%
- Net income$965.0M4.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2014filed April 23, 2014Financial Statements
Q1 FY2014 against Q1 FY2013
| Line item | Q1 FY2014Q1 FY2013 | Change |
|---|---|---|
| Revenue | $20.46B$18.89B | +8.3% |
| Cost of Revenue | $17.30B$15.76B | +9.8% |
| Gross Profit | $3.17B$3.14B | +1.0% |
| R&D Expenses | $809.00M$705.00M | +14.8% |
| Operating Income | $1.54B$1.53B | +0.9% |
| Net Income | $965.00M$1.11B | −12.7% |
| EPS (Basic) | $1.30$1.45 | −10.3% |
| EPS (Diluted) | $1.28$1.44 | −11.1% |
| Shares Outstanding (Basic) | 745.00M763.30M | −2.4% |
| Shares Outstanding (Diluted) | 752.50M766.60M | −1.8% |
05—Questions
Frequently Asked Questions
What drove the revenue increase in the first quarter of 2014?
The primary driver for the 8% revenue increase to $20.465 billion was the Commercial Airplanes segment, which saw a 19% surge in revenue. This was primarily due to a higher volume of airplane deliveries.
Why did net earnings decrease despite higher revenues?
Net earnings decreased from $1.106 billion to $965 million. This was influenced by several factors, including increased research and development expenses in the Commercial Airplanes segment, and a significant increase in unallocated pension and other postretirement benefit expenses, particularly due to curtailment charges related to changes in retirement plans.
What is the outlook for the Defense, Space & Security (BDS) segment?
The BDS segment experienced a decrease in both revenue and earnings from operations. This is attributed to lower revenues in the Boeing Military Aircraft and Network & Space Systems segments. The segment's performance is subject to uncertainties surrounding U.S. government spending levels and defense appropriations, including potential sequestration cuts.
How did the company manage its cash flow during the quarter?
Operating activities generated $1.112 billion in cash, an improvement from the prior year, mainly due to increases in accounts payable and customer payments, though offset by higher inventory growth. Investing activities provided $406 million in cash, largely from investment proceeds. However, financing activities used $3.668 billion, significantly impacted by $2.5 billion in share repurchases.
06—Continue