Boeing Earnings 2019-06-30

BA 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-442



	THE BOEING COMPANY

(Exact name of registrant as specified in its charter)



Delaware			91-0425694
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

100 N. Riverside Plaza,	Chicago,	IL	60606-1596
(Address of principal executive offices)			(Zip Code)



	(312)	544-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405/ of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $5.00 Par Value	BA	New York Stock Exchange

As of July 17, 2019, there were 562,710,008 shares of common stock, $5.00 par value, issued and outstanding.

THE BOEING COMPANY

FORM 10-Q

For the Quarter Ended June 30, 2019

INDEX



Part I. Financial Information (Unaudited)		Page

Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Statements of Financial Position	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Equity	5
	Summary of Business Segment Data	7
	Note 1 - Basis of Presentation	8
	Note 2 - Acquisitions and Joint Ventures	9
	Note 3 - Earnings Per Share	9
	Note 4 - Income Taxes	11
	Note 5 - Inventories	11
	Note 6 - Contracts with Customers	11
	Note 7 - Customer Financing	12
	Note 8 - Investments	14
	Note 9 - Other Assets	14
	Note 10 - Leases	14
	Note 11 - Commitments & Contingencies	15
	Note 12 - Arrangements with Off-Balance Sheet Risk	19
	Note 13 - Debt	20
	Note 14 - Postretirement Plans	21
	Note 15 - Share-Based Compensation and Other Comprehensive Arrangements	22
	Note 16 - Shareholders' Equity	23
	Note 17 - Derivative Financial Instruments	24
	Note 18 - Fair Value Measurements	26
	Note 19 - Legal Proceedings	28
	Note 20 - Segment and Revenue Information	28
	Report of Independent Registered Public Accounting Firm	33

Forward-Looking Statements		34

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
	Consolidated Results of Operations and Financial Condition	36
	Commercial Airplanes	41
	Defense, Space & Security	44
	Global Services	47
	Boeing Capital	48
	Liquidity and Capital Resources	49
	Off-Balance Sheet Arrangements	50
	Contingent Obligations	50
	Non-GAAP Measures	51
	Critical Accounting Policies	52
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53

Item 4.	Controls and Procedures	53

Part II. Other Information

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	56

Item 6.	Exhibits	57

Signature		58

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



(Dollars in millions, except per share data)	Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018
Sales of products		$33,319			$42,385			$13,094			$21,565
Sales of services	5,349			5,255			2,657			2,693
Total revenues	38,668			47,640			15,751			24,258

Cost of products	(31,910		)	(34,252		)	(15,672		)	(17,436		)
Cost of services	(4,511		)	(4,075		)	(2,122		)	(2,083		)
Boeing Capital interest expense	(34		)	(33		)	(16		)	(17		)
Total costs and expenses	(36,455		)	(38,360		)	(17,810		)	(19,536		)
	2,213			9,280			(2,059		)	4,722
Income/(loss) from operating investments, net	5			80			(15		)	6
General and administrative expense	(1,856		)	(2,191		)	(672		)	(1,194		)
Research and development expense, net	(1,692		)	(1,591		)	(826		)	(827		)
Gain on dispositions, net	300			7			192			3
(Loss)/earnings from operations	(1,030		)	5,585			(3,380		)	2,710
Other income/(loss), net	213			51			107			(15		)
Interest and debt expense	(277		)	(211		)	(154		)	(109		)
(Loss)/earnings before income taxes	(1,094		)	5,425			(3,427		)	2,586
Income tax benefit/(expense)	301			(752		)	485			(390		)
Net (loss)/earnings		($793	)		$4,673			($2,942	)		$2,196

Basic (loss)/earnings per share		($1.40	)		$7.97			($5.21	)		$3.77

Diluted (loss)/earnings per share		($1.40	)		$7.88			($5.21	)		$3.73

Weighted average diluted shares (millions)	566.6			592.9			565.3			588.7

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



(Dollars in millions)	Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018
Net (loss)/earnings		($793	)		$4,673			($2,942	)		$2,196
Other comprehensive income, net of tax:
Currency translation adjustments	(2		)	(57		)	(3		)	(84		)
Unrealized gain on certain investments, net of tax of $0, ($1), $0 and ($1)	1			3						1
Unrealized (loss)/gain on derivative instruments:
Unrealized loss arising during period, net of tax of $5, $26, $8 and $26	(17		)	(93		)	(28		)	(91		)
Reclassification adjustment for (gains)/losses included in net earnings, net of tax of $1, ($2), $0 and ($1)	(3		)	10			(1		)	6
Total unrealized (loss)/gain on derivative instruments, net of tax	(20		)	(83		)	(29		)	(85		)
Defined benefit pension plans and other postretirement benefits:
Amortization of prior service credits included in net periodic pension cost, net of tax of $13, $20, $7 and $10	(45		)	(71		)	(22		)	(35		)
Net actuarial gain arising during the period, net of tax of $0, $0, $0 and $0				1						1
Amortization of actuarial losses included in net periodic pension cost, net of tax of ($65), ($122), ($33) and ($62)	233			438			115			219
Settlements and curtailments included in net income, net of tax of $0, ($3), $0 and ($3)				6						6
Pension and postretirement cost related to our equity method investments, net of tax of ($2), $1, $0 and $0	8			(3		)
Total defined benefit pension plans and other postretirement benefits, net of tax	196			371			93			191
Other comprehensive income, net of tax	175			234			61			23
Comprehensive loss related to noncontrolling interests	(7		)	(10		)	(7		)	(9		)
Comprehensive (loss)/income, net of tax		($625	)		$4,897			($2,888	)		$2,210

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Financial Position

(Unaudited)



(Dollars in millions, except per share data)	June 30 2019			December 31 2018
Assets
Cash and cash equivalents		$9,167			$7,637
Short-term and other investments	439			927
Accounts receivable, net	3,291			3,879
Unbilled receivables, net	10,247			10,025
Current portion of customer financing, net	171			460
Inventories	68,492			62,567
Other current assets	3,304			2,335
Total current assets	95,111			87,830
Customer financing, net	2,139			2,418
Property, plant and equipment, net of accumulated depreciation of $18,855 and $18,568	12,601			12,645
Goodwill	8,051			7,840
Acquired intangible assets, net	3,761			3,429
Deferred income taxes	357			284
Investments	1,142			1,087
Other assets, net of accumulated amortization of $523 and $503	3,099			1,826
Total assets		$126,261			$117,359
Liabilities and equity
Accounts payable		$15,267			$12,916
Accrued liabilities	20,042			14,808
Advances and progress billings	52,523			50,676
Short-term debt and current portion of long-term debt	4,357			3,190
Total current liabilities	92,189			81,590
Deferred income taxes				1,736
Accrued retiree health care	4,486			4,584
Accrued pension plan liability, net	14,831			15,323
Other long-term liabilities	4,839			3,059
Long-term debt	14,859			10,657
Shareholders’ equity:
Common stock, par value $5.00 – 1,200,000,000 shares authorized; 1,012,261,159 shares issued	5,061			5,061
Additional paid-in capital	6,638			6,768
Treasury stock, at cost - 449,558,553 and 444,619,970 shares	(54,932		)	(52,348		)
Retained earnings	52,819			55,941
Accumulated other comprehensive loss	(14,908		)	(15,083		)
Total shareholders’ equity	(5,322		)	339
Noncontrolling interests	379			71
Total equity	(4,943		)	410
Total liabilities and equity		$126,261			$117,359

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



(Dollars in millions)	Six months ended June 30
	2019			2018
Cash flows – operating activities:
Net (loss)/earnings		($793	)		$4,673
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash items –
Share-based plans expense	104			98
Depreciation and amortization	1,067			1,008
Investment/asset impairment charges, net	70			44
Customer financing valuation adjustments	249			(2		)
Gain on dispositions, net	(300		)	(7		)
Other charges and credits, net	145			112
Changes in assets and liabilities –
Accounts receivable	588			62
Unbilled receivables	(222		)	(1,675		)
Advances and progress billings	1,842			2,931
Inventories	(5,233		)	408
Other current assets	(887		)	2
Accounts payable	2,002			682
Accrued liabilities	4,959			(922		)
Income taxes receivable, payable and deferred	(921		)	269
Other long-term liabilities	(509		)	(65		)
Pension and other postretirement plans	(390		)	(57		)
Customer financing, net	347			(97		)
Other	80			352
Net cash provided by operating activities	2,198			7,816
Cash flows – investing activities:
Property, plant and equipment additions	(922		)	(770		)
Property, plant and equipment reductions	331			41
Acquisitions, net of cash acquired	(492		)
Contributions to investments	(496		)	(1,537		)
Proceeds from investments	758			1,028
Purchase of distribution rights	(20		)	(56		)
Other	(12		)	(1		)
Net cash used by investing activities	(853		)	(1,295		)
Cash flows – financing activities:
New borrowings	11,670			3,648
Debt repayments	(6,422		)	(2,708		)
Contributions from noncontrolling interests	7			20
Stock options exercised	47			61
Employee taxes on certain share-based payment arrangements	(238		)	(236		)
Common shares repurchased	(2,651		)	(5,965		)
Dividends paid	(2,317		)	(1,997		)
Net cash provided/(used) by financing activities	96			(7,177		)
Effect of exchange rate changes on cash and cash equivalents, including restricted	(2		)	(36		)
Net increase/(decrease) in cash & cash equivalents, including restricted	1,439			(692		)
Cash & cash equivalents, including restricted, at beginning of year	7,813			8,887
Cash & cash equivalents, including restricted, at end of period	9,252			8,195
Less restricted cash & cash equivalents, included in Investments	85			74
Cash and cash equivalents at end of period		$9,167			$8,121

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Equity

For the six months ended June 30, 2019 and 2018

(Unaudited)



	Boeing shareholders
(Dollars in millions, except per share data)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total
Balance at January 1, 2018		$5,061		$6,804			($43,454	)		$49,618			($16,373	)		$57			$1,713
Net earnings									4,673						(10		)	4,663
Other comprehensive income, net of tax of ($81)												234						234
Share-based compensation and related dividend equivalents			115						(17		)							98
Treasury shares issued for stock options exercised, net			(32		)	95												63
Treasury shares issued for other share-based plans, net			(211		)	(18		)										(229		)
Common shares repurchased						(5,965		)										(5,965		)
Cash dividends declared ($3.42 per share)									(1,971		)							(1,971		)
Changes in noncontrolling interests															20			20
Balance at June 30, 2018		$5,061		$6,676			($49,342	)		$52,303			($16,139	)		$67			($1,374	)

Balance at January 1, 2019		$5,061		$6,768			($52,348	)		$55,941			($15,083	)		$71			$410
Net loss									(793		)				(7		)	(800		)
Other comprehensive income, net of tax of ($48)												175						175
Share-based compensation and related dividend equivalents			120						(16		)							104
Treasury shares issued for stock options exercised, net			(39		)	82												43
Treasury shares issued for other share-based plans, net			(211		)	(15		)										(226		)
Common shares repurchased						(2,651		)										(2,651		)
Cash dividends declared ($4.11 per share)									(2,313		)							(2,313		)
Changes in noncontrolling interests															315			315
Balance at June 30, 2019		$5,061		$6,638			($54,932	)		$52,819			($14,908	)		$379			($4,943	)

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Equity

For the three months ended June 30, 2019 and 2018

(Unaudited)



	Boeing shareholders
(Dollars in millions, except per share data)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total
Balance at April 1, 2018		$5,061		$6,624			($46,396	)		$52,095			($16,162	)		$76			$1,298
Net earnings									2,196						(9		)	2,187
Other comprehensive income, net of tax of ($31)												23						23
Share-based compensation and related dividend equivalents			70						(17		)							53
Treasury shares issued for stock options exercised, net			(7		)	20												13
Treasury shares issued for other share-based plans, net			(11		)	(1		)										(12		)
Common shares repurchased						(2,965		)										(2,965		)
Cash dividends declared ($3.42 per share)									(1,971		)							(1,971		)
Balance at June 30, 2018		$5,061		$6,676			($49,342	)		$52,303			($16,139	)		$67			($1,374	)

Balance at April 1, 2019		$5,061		$6,573			($54,630	)		$58,090			($14,969	)		$107			$232
Net loss									(2,942		)				(7		)	(2,949		)
Other comprehensive income, net of tax of ($18)												61						61
Share-based compensation and related dividend equivalents			73						(16		)							57
Treasury shares issued for stock options exercised, net			(3		)	5												2
Treasury shares issued for other share-based plans, net			(5		)	3												(2		)
Common shares repurchased						(310		)										(310		)
Cash dividends declared ($4.11 per share)									(2,313		)							(2,313		)
Changes in noncontrolling interests															279			279
Balance at June 30, 2019		$5,061		$6,638			($54,932	)		$52,819			($14,908	)		$379			($4,943	)

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Summary of Business Segment Data

(Unaudited)



(Dollars in millions)	Six months ended June 30						Three months ended June 30
	2019			2018			2019			2018
Revenues:
Commercial Airplanes		$16,544			$26,897			$4,722			$13,952
Defense, Space & Security	13,223			12,581			6,612			6,100
Global Services	9,162			8,047			4,543			4,097
Boeing Capital	141			137			75			72
Unallocated items, eliminations and other	(402		)	(22		)	(201		)	37
Total revenues		$38,668			$47,640			$15,751			$24,258
(Loss)/earnings from operations:
Commercial Airplanes		($3,773	)		$3,197			($4,946	)		$1,785
Defense, Space & Security	1,822			1,133			975			376
Global Services	1,340			1,251			687			604
Boeing Capital	57			44			37			24
Segment operating (loss)/profit	(554		)	5,625			(3,247		)	2,789
Unallocated items, eliminations and other	(1,205		)	(722		)	(498		)	(

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$354.13	563	$199,240

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-07-29	Other Events, Exhibits
8-K	2019-07-24	Earnings, Exhibits
8-K	2019-07-18	Earnings, Exhibits
8-K	2019-06-26	Other Events
8-K	2019-05-01	Officers, Exhibits
8-K	2019-04-30	Other Events, Exhibits
8-K	2019-04-29	Shareholder Vote
8-K	2019-04-29	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-04-24	Earnings, Exhibits
8-K	2019-04-05	Other Events, Exhibits
8-K	2019-02-26	Other Events, Exhibits
8-K	2019-02-13	Other Events, Exhibits
8-K	2019-01-30	Earnings, Exhibits
8-K	2019-01-24	Other Events
8-K	2019-01-24	Other Events
8-K	2018-12-17	Other Events, Exhibits
8-K	2018-10-29	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2018-10-24	Earnings, Exhibits
8-K	2018-10-22	Amend Bylaw, Exhibits
8-K	2018-07-25	Earnings, Exhibits
8-K	2018-07-13	Other Events, Exhibits
8-K	2018-07-05	Other Events, Exhibits
8-K	2018-06-07	Enter Agreement, Exhibits
8-K	2018-04-30	Shareholder Vote
8-K	2018-02-21	Other Events, Exhibits
8-K	2018-01-31	Earnings, Exhibits

MOR	MorphoSys AG	2,770
PQG	PQ Group Holdings	2,120
TTEC	TTEC Holdings	1,760
TPGH	TPG Pace Holdings	581
GNTY	Guaranty Bancshares	333
AMBR	Amber Road	272
DVD	Dover Motorsports	74
ILCC	International Leaders Capital	0
BMTM	Bright Mountain Media	0
UB	Mufg Americas Holdings	0

EX-10.1	a201906jun3010qexhibit101.htm
EX-15	a201906jun3010qexhibit15.htm
EX-31.1	a201906jun3010qexhibit311.htm
EX-31.2	a201906jun3010qexhibit312.htm
EX-32.1	a201906jun3010qexhibit321.htm
EX-32.2	a201906jun3010qexhibit322.htm