01—Abstract
Summary
Summary of the 10-Q filed July 24, 2019. Cited figures are marked; the original filing is the authoritative source.
Boeing Co. reported a net loss of $793 milliona for the six months ended June 30, 2019, a significant shift from a net earning of $4,673 million in the prior year period.
This downturn is largely attributable to a substantial earnings charge of $5,610 millionb recorded in the second quarter related to customer concessions and disruptions caused by the 737 MAX grounding. Total revenues also saw a considerable decrease of $8,972 million year-over-year, driven by lower deliveries across segments, particularly in Commercial Airplanes, exacerbated by the aforementioned charge. The grounding of the 737 MAX has had a profound impact, leading to reduced production rates, increased production costs, and a significant hit to operating margins.
While the Defense, Space & Security and Global Services segments showed revenue growth, this was not enough to offset the steep decline in Commercial Airplanes. The company's liquidity remains a concern, with net cash provided by operating activities decreasing significantly due to increased inventory related to the 737 MAX production halt and lower advances. Boeing has taken steps to manage its financial position, including suspending its share repurchase program and increasing its debt.
Despite these challenges, Boeing maintains a substantial backlog of $474,251 millionc. The company is actively working with regulatory authorities to address the 737 MAX issues and expects regulatory approval for its return to service in early Q4 2019, with a gradual ramp-up of production thereafter. Investors should closely monitor the timing and conditions of the 737 MAX's return to service, potential further cost impacts, and the company's ability to navigate ongoing regulatory investigations and legal proceedings.
02—Key points
Key Highlights
- Net loss of $793 million for the first six months of 2019, a stark contrast to a $4,673 million profit in the prior year, primarily due to a significant charge related to the 737 MAX grounding.
- Total revenues decreased by $8,972 million to $38,668 million for the first six months of 2019, largely driven by a $5,610 million charge in Q2 related to 737 MAX customer concessions and delivery disruptions.
- Commercial Airplanes (BCA) segment experienced a substantial operating loss of $3,773 million for the six months, impacted by the 737 MAX grounding, lower deliveries, and increased production costs.
- Defense, Space & Security (BDS) and Global Services (BGS) segments showed revenue growth, increasing by $642 million and $1,115 million respectively for the six months, driven by derivative aircraft, satellites, weapons, and the KLX acquisition for BGS.
- Net cash provided by operating activities significantly decreased to $2.2 billion from $7.8 billion in the prior year, impacted by increased inventory due to the 737 MAX production halt and lower advances.
- Boeing has suspended its share repurchase program and increased its debt, issuing $1.5 billion in March and $3.5 billion in May 2019.
- The company incurred a large earnings charge of $5,610 million in Q2 2019 related to estimated potential concessions and other considerations to customers impacted by the 737 MAX grounding and delivery delays.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2019, Boeing Co lost $0.19.
- Revenue$15.75B100.0%
- Cost of revenue−$17.81B113.1%
- Gross profit−$2.06B13.1%
- Operating costs−$1.32B8.4%
- Operating income−$3.38B21.5%
- Interest, other & tax$438.0M2.8%
- Net income−$2.94B18.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed July 24, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $15.75B$24.26B | −35.1% |
| Cost of Revenue | $17.81B$19.54B | −8.8% |
| Gross Profit | -$2.06B$4.72B | −143.6% |
| R&D Expenses | $826.00M$827.00M | −0.1% |
| Operating Income | -$3.38B$2.71B | −224.7% |
| Net Income | -$2.94B$2.20B | −234.0% |
| EPS (Basic) | $-5.21$3.77 | −238.2% |
| EPS (Diluted) | $-5.21$3.73 | −239.7% |
| Shares Outstanding (Basic) | 565.30M582.60M | −3.0% |
| Shares Outstanding (Diluted) | 564.70M588.00M | −4.0% |
05—Questions
Frequently Asked Questions
What is the primary reason for Boeing's net loss in the first half of 2019?
The primary reason for Boeing's net loss of $793 million in the first six months of 2019 was a significant earnings charge of $5,610 million recorded in the second quarter. This charge relates to estimated potential concessions and other considerations to customers for disruptions and delivery delays associated with the grounding of the 737 MAX aircraft.
How has the 737 MAX grounding impacted Boeing's financial performance?
The 737 MAX grounding has severely impacted Boeing's financial performance. It led to a significant reduction in revenue due to suspended deliveries, an increase in production costs, a substantial earnings charge for customer concessions, and a decrease in net cash provided by operating activities due to higher inventory levels and lower advances. This has resulted in a net loss for the period, a reversal from the prior year's profit.
Are there any signs of recovery or positive performance in other segments?
While the Commercial Airplanes segment is heavily impacted by the 737 MAX issues, the Defense, Space & Security (BDS) and Global Services (BGS) segments showed revenue growth in the first six months of 2019. BDS benefited from higher revenues in derivative aircraft, satellites, and weapons, while BGS saw growth driven by the acquisition of KLX, Inc. and international government services.
What is Boeing's outlook regarding the return to service of the 737 MAX?
Boeing anticipates regulatory approval for the 737 MAX's return to service in the U.S. and other jurisdictions to begin in early Q4 2019. The company plans a gradual increase in the production rate from 42 aircraft per month to 57 per month in 2020. However, the timing and conditions of the return to service remain uncertain and are subject to regulatory authorities.
06—Continue