01—Abstract
Summary
Summary of the 10-Q filed July 29, 2020. Cited figures are marked; the original filing is the authoritative source.
Boeing Co. (BA) reported a significant net loss of $3.004 billiona for the six months ended June 30, 2020, a substantial increase from the $793 million net loss in the same period of the prior year.
This performance was heavily impacted by the ongoing grounding of the 737 MAX aircraft and the unprecedented global disruption caused by the COVID-19 pandemic. Total revenues declined by approximately 26% year-over-year for the six-month period, reflecting reduced deliveries and lower demand across all segments, particularly in Commercial Airplanes. The company has taken proactive steps to bolster liquidity, including drawing down a $13.8 billionb term loan facility and issuing $25 billion in senior notes, resulting in a substantial increase in cash and debt levels.
However, operating cash flow remains negative, and significant cost-saving measures, including workforce reductions and suspended share repurchases and dividends, have been implemented. The company anticipates a multi-year recovery for the aerospace industry, with commercial air travel not expected to return to 2019 levels for approximately three years.
02—Key points
Key Highlights
- Significant Net Loss: Boeing reported a consolidated net loss of $3.004 billion for the six months ended June 30, 2020, a substantial deterioration from the prior year's loss of $793 million.
- Revenue Decline: Total revenues decreased by 25.8% to $28.715 billion for the six months ended June 30, 2020, compared to $38.668 billion in the same period last year, primarily due to lower commercial airplane deliveries and COVID-19 impacts.
- Liquidity Enhancement Measures: The company secured significant liquidity by drawing down a $13.8 billion term loan and issuing $25 billion in senior notes, increasing its cash and short-term investments to $32.4 billion, though debt also rose to $61.4 billion.
- Negative Operating Cash Flow: Net cash used by operating activities was $9.582 billion for the first half of 2020, indicating ongoing cash burn, with expectations of continued negative operating cash flows until delivery ramp-ups.
- 737 MAX and COVID-19 Impacts: Both the grounding of the 737 MAX and the COVID-19 pandemic continue to exert substantial adverse effects on revenues, operations, and future demand, with an expected three-year recovery period for air travel to 2019 levels.
- Cost Reductions and Suspensions: Boeing has implemented workforce reductions, suspended share repurchases and dividends, and reduced discretionary spending and R&D to manage costs and conserve cash.
- Commercial Airplanes Segment Weakness: The Commercial Airplanes segment reported a significant operating loss of $4.830 billion for the six months, heavily impacted by 737 MAX issues, COVID-19 disruptions, abnormal production costs, and customer concessions.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2020, Boeing Co lost $0.20.
- Revenue$11.81B100.0%
- Cost of revenue−$12.98B109.9%
- Gross profit−$1.17B9.9%
- Operating costs−$1.79B15.2%
- Operating income−$2.96B25.1%
- Interest, other & tax$588.0M5.0%
- Net income−$2.38B20.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed July 29, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $11.81B$15.75B | −25.0% |
| Cost of Revenue | $12.98B$17.81B | −27.1% |
| Gross Profit | -$1.17B-$2.06B | +43.1% |
| R&D Expenses | $625.00M$826.00M | −24.3% |
| Operating Income | -$2.96B-$3.38B | +12.3% |
| Net Income | -$2.38B-$2.94B | +19.2% |
| EPS (Basic) | $-4.20$-5.21 | +19.4% |
| EPS (Diluted) | $-4.20$-5.21 | +19.4% |
| Shares Outstanding (Basic) | 565.90M565.30M | +0.1% |
| Shares Outstanding (Diluted) | 565.90M564.70M | +0.2% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Boeing's financial performance in the second quarter of 2020?
The primary drivers were the continued grounding of the 737 MAX aircraft and the severe disruption to the global aerospace industry caused by the COVID-19 pandemic. These factors led to significantly reduced revenues, lower aircraft deliveries, increased production costs, and substantial operating losses, particularly within the Commercial Airplanes segment.
How has Boeing managed its liquidity in response to the challenging environment?
Boeing took significant steps to enhance its liquidity. This included fully drawing on a $13.8 billion delayed draw term loan facility and issuing $25 billion in fixed-rate senior notes. These actions substantially increased its cash and short-term investment balance, though it also led to a higher overall debt level.
What is Boeing's outlook for the aerospace industry and its own recovery?
Boeing anticipates a challenging near-to-medium term environment. It expects commercial air travel to take approximately three years to return to 2019 levels, with a few additional years for the industry to resume its long-term growth trend. The company is adjusting its production rates and operational plans to align with this expected recovery timeline.
What measures is Boeing taking to address its financial performance and operational challenges?
Boeing is implementing several measures, including reducing production rates for certain commercial aircraft programs, workforce reductions through voluntary and involuntary layoffs, cutting discretionary spending, deferring R&D and capital expenditures, and working with customers and suppliers to manage cash flow. The company has also suspended share repurchases and dividends.
06—Continue