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, 2024
or
| 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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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):
| ☒ | 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 ☒
As of July 24, 2024, there were 616,167,165 shares of common stock, $5.00 par value, issued and outstanding.
THE BOEING COMPANY
FORM 10-Q
For the Quarter Ended June 30, 2024
INDEX
| Part I. Financial Information (Unaudited) | Page | |||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Part II. Other Information | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
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 | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Sales of products | $ | $ | $ | $ | |||||||||||||||||||
| Sales of services | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Cost of products | ( | ( | ( | ( | |||||||||||||||||||
| Cost of services | ( | ( | ( | ( | |||||||||||||||||||
| Total costs and expenses | ( | ( | ( | ( | |||||||||||||||||||
| Income from operating investments, net | |||||||||||||||||||||||
| General and administrative expense | ( | ( | ( | ( | |||||||||||||||||||
| Research and development expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Gain on dispositions, net | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Interest and debt expense | ( | ( | ( | ( | |||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax benefit | |||||||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
| Less: net loss attributable to noncontrolling interest | ( | ( | |||||||||||||||||||||
| Net loss attributable to Boeing Shareholders | ($ | ($ | ($ | ($ | |||||||||||||||||||
| Basic loss per share | ($ | ($ | ($ | ($ | |||||||||||||||||||
| Diluted loss per share | ($ | ($ | ($ | ($ | |||||||||||||||||||
| Weighted average diluted shares (millions) | |||||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
1
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 | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net loss | ($ | ($ | ($ | ($ | |||||||||||||||||||
Other comprehensive (loss)/income, net of tax: | |||||||||||||||||||||||
| Currency translation adjustments | ( | ( | |||||||||||||||||||||
| Derivative instruments: | |||||||||||||||||||||||
Unrealized losses arising during period, net of tax of $ | ( | ( | ( | ( | |||||||||||||||||||
Reclassification adjustment for losses/(gains) included in net loss, net of tax of ($ | ( | ||||||||||||||||||||||
Total unrealized (loss)/gain on derivative instruments, net of tax | ( | ( | ( | ||||||||||||||||||||
| Defined benefit pension plans and other postretirement benefits: | |||||||||||||||||||||||
Net actuarial (loss)/gain arising during the period, net of tax of $ | ( | ( | |||||||||||||||||||||
Amortization of actuarial losses/(gains) included in net periodic benefit cost, net of tax of ($ | ( | ( | |||||||||||||||||||||
Amortization of prior service credits included in net periodic benefit cost, net of tax of $ | ( | ( | ( | ( | |||||||||||||||||||
Pension and postretirement cost related to our equity method investments, net of tax of ($ | |||||||||||||||||||||||
| Total defined benefit pension plans and other postretirement benefits, net of tax | ( | ( | ( | ||||||||||||||||||||
Other comprehensive (loss)/income, net of tax | ( | ( | ( | ||||||||||||||||||||
| Comprehensive loss, net of tax | ( | ( | ( | ( | |||||||||||||||||||
Less: Comprehensive loss related to noncontrolling interest | ( | ( | |||||||||||||||||||||
| Comprehensive loss attributable to Boeing Shareholders, net of tax | ($ | ($ | ($ | ($ | |||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
2
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Unaudited)
| (Dollars in millions, except per share data) | June 30 2024 | December 31 2023 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term and other investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Unbilled receivables, net | |||||||||||
| Current portion of financing receivables, net | |||||||||||
| Inventories | |||||||||||
| Other current assets, net | |||||||||||
| Total current assets | |||||||||||
| Financing receivables and operating lease equipment, net | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
| Goodwill | |||||||||||
| Acquired intangible assets, net | |||||||||||
| Deferred income taxes | |||||||||||
| Investments | |||||||||||
Other assets, net of accumulated amortization of $ | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Advances and progress billings | |||||||||||
| Short-term debt and current portion of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Accrued retiree health care | |||||||||||
| Accrued pension plan liability, net | |||||||||||
| Other long-term liabilities | |||||||||||
| Long-term debt | |||||||||||
| Total liabilities | |||||||||||
| Shareholders’ equity: | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock, at cost — | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ deficit | ( | ( | |||||||||
| Noncontrolling interests | ( | ||||||||||
| Total equity | ( | ( | |||||||||
| Total liabilities and equity | $ | $ | |||||||||
See Notes to the Condensed Consolidated Financial Statements.
3
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| (Dollars in millions) | Six months ended June 30 | ||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows – operating activities: | |||||||||||
| Net loss | ($ | ($ | |||||||||
| Adjustments to reconcile net loss to net cash (used)/provided by operating activities: | |||||||||||
| Non-cash items – | |||||||||||
| Share-based plans expense | |||||||||||
| Treasury shares issued for 401(k) contribution | |||||||||||
| Depreciation and amortization | |||||||||||
| Investment/asset impairment charges, net | |||||||||||
| Gain on dispositions, net | ( | ( | |||||||||
| Other charges and credits, net | ( | ||||||||||
| Changes in assets and liabilities – | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Unbilled receivables | ( | ( | |||||||||
| Advances and progress billings | |||||||||||
| Inventories | ( | ( | |||||||||
| Other current assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued liabilities | ( | ( | |||||||||
| Income taxes receivable, payable and deferred | ( | ( | |||||||||
| Other long-term liabilities | ( | ( | |||||||||
| Pension and other postretirement plans | ( | ( | |||||||||
| Financing receivables and operating lease equipment, net | |||||||||||
| Other | |||||||||||
| Net cash (used)/provided by operating activities | ( | ||||||||||
| Cash flows – investing activities: | |||||||||||
| Payments to acquire property, plant and equipment | ( | ( | |||||||||
| Proceeds from disposals of property, plant and equipment | |||||||||||
| Acquisitions, net of cash acquired | ( | ||||||||||
| Contributions to investments | ( | ( | |||||||||
| Proceeds from investments | |||||||||||
| Supplier notes receivable | ( | ( | |||||||||
| Purchase of distribution rights | ( | ||||||||||
| Other | ( | ||||||||||
| Net cash used by investing activities | ( | ( | |||||||||
| Cash flows – financing activities: | |||||||||||
| New borrowings | |||||||||||
| Debt repayments | ( | ( | |||||||||
| Stock options exercised | |||||||||||
| Employee taxes on certain share-based payment arrangements | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| Net cash provided/(used) by financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net decrease in cash & cash equivalents, including restricted | ( | ( | |||||||||
| Cash & cash equivalents, including restricted, at beginning of year | |||||||||||
| Cash & cash equivalents, including restricted, at end of period | |||||||||||
| Less restricted cash & cash equivalents, included in Investments | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See Notes to the Condensed Consolidated Financial Statements.
4
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Equity
For the six months ended June 30, 2024 and 2023
(Unaudited)
| Boeing shareholders | |||||||||||||||||||||||
| (Dollars in millions) | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Non- controlling Interests | Total | ||||||||||||||||
| Balance at January 1, 2023 | $ | $ | ($ | $ | ($ | $ | ($ | ||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||||||||
Other comprehensive loss, net of tax of $ | ( | ( | |||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
Treasury shares issued for stock options exercised, net | ( | ||||||||||||||||||||||
Treasury shares issued for other share-based plans, net | ( | ( | |||||||||||||||||||||
| Treasury shares issued for 401(k) contribution | |||||||||||||||||||||||
Subsidiary shares purchased from noncontrolling interests | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | ($ | $ | ($ | $ | ($ | ||||||||||||||||
| Balance at January 1, 2024 | $ | $ | ($ | $ | ($ | $ | ($ | ||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||||||||
Other comprehensive loss, net of tax of $ | ( | ( | |||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
Treasury shares issued for other share-based plans, net | ( | ( | |||||||||||||||||||||
| Treasury shares issued for 401(k) contribution | |||||||||||||||||||||||
| Other changes in noncontrolling interests | |||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | ($ | $ | ($ | ($ | ($ | ||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
5
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Equity
For the three months ended June 30, 2024 and 2023
(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, 2023 | $ | $ | ($ | $ | ($ | $ | ($ | ||||||||||||||||
Net loss | ( | ( | |||||||||||||||||||||
Other comprehensive loss, net of tax of $ | ( | ( | |||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
Treasury shares issued for stock options exercised, net | ( | ||||||||||||||||||||||
Treasury shares issued for other share-based plans, net | ( | ||||||||||||||||||||||
| Treasury shares issued for 401(k) contribution | |||||||||||||||||||||||
Subsidiary shares purchased from noncontrolling interests | ( | ( | |||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | ($ | $ | ($ | $ | ($ | ||||||||||||||||
| Balance at April 1, 2024 | $ | $ | ($ | $ | ($ | ($ | ($ | ||||||||||||||||
| Net loss | ( | ( | |||||||||||||||||||||
Other comprehensive income, net of tax of ($ | |||||||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
| Treasury shares issued for other share-based plans, net | ( | ||||||||||||||||||||||
| Treasury shares issued for 401(k) contribution | |||||||||||||||||||||||
Other changes in noncontrolling interests | |||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | ($ | $ | ($ | ($ | ($ | ||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
6
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 | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Commercial Airplanes | $ | $ | $ | $ | |||||||||||||||||||
| Defense, Space & Security | |||||||||||||||||||||||
| Global Services | |||||||||||||||||||||||
| Unallocated items, eliminations and other | ( | ( | ( | ( | |||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
| Loss from operations: | |||||||||||||||||||||||
| Commercial Airplanes | ($ | ($ | ($ | ($ | |||||||||||||||||||
| Defense, Space & Security | ( | ( | ( | ( | |||||||||||||||||||
| Global Services | |||||||||||||||||||||||
| Segment operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Unallocated items, eliminations and other | ( | ( | ( | ( | |||||||||||||||||||
| FAS/CAS service cost adjustment | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Interest and debt expense | ( | ( | ( | ( | |||||||||||||||||||
| Loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax benefit | |||||||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
| Less: net loss attributable to noncontrolling interest | ( | ( | |||||||||||||||||||||
| Net loss attributable to Boeing Shareholders | ($ | ($ | ($ | ($ | |||||||||||||||||||
This information is an integral part of the Notes to the Condensed Consolidated Financial Statements. See Note 19 for further segment results.
7
The Boeing Company and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Dollars in millions, except per share amounts or as otherwise stated)
(Unaudited)
Note 1 – Basis of Presentation
The condensed consolidated interim financial statements included in this report have been prepared by management of The Boeing Company (herein referred to as “Boeing”, the “Company”, “we”, “us”, or “our”). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The results of operations for the period ended June 30, 2024, are not necessarily indicative of the operating results for the full year. The interim financial statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, included in our 2023 Annual Report on Form 10-K. We added a new financial statement line item to the Condensed Consolidated Statements of Cash Flows for cash invested in Supplier notes receivable and reclassified the corresponding amounts in the prior period financial statements to conform to the current period presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Goodwill
We performed our annual goodwill impairment test as of April 1, 2024, using a qualitative assessment. We determined the fair value of each of our reporting units substantially exceeded their respective carrying values.
Long-term Contracts
Substantially all contracts at our Defense, Space & Security (BDS) segment and certain contracts at our Global Services (BGS) segment are long-term contracts with the U.S. government and other customers that generally extend over several years. Changes in estimated revenues, cost of sales, and the related effect on operating income are recognized using a cumulative catch-up adjustment which recognizes, in the current period, the cumulative effect of the changes on current and prior periods based on a long-term contract’s percentage-of-completion. When the current estimates of total revenues and costs at completion for a long-term contract indicate a loss, a provision for the entire reach-forward loss on the long-term contract is recognized.
The table below reflects the impact of net cumulative catch-up adjustments for changes in estimated revenues and costs at completion across all long-term contracts, including the impact to Loss from operations from changes in estimated losses on unexercised options.
| (In millions - except per share amounts) | Six months ended June 30 | Three months ended June 30 | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Decrease to Revenue | ($ | ($ | ($ | ($ | |||||||||||||||||||
Increase to Loss from operations | ($ | ($ | ($ | ($ | |||||||||||||||||||
Increase to Diluted loss per share | ($ | ($ | ($ | ($ | |||||||||||||||||||
Note 2 – Spirit Acquisition
On June 30, 2024, we entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which we have agreed to acquire Spirit AeroSystems Holdings, Inc. (Spirit) in an all-stock transaction at
8
an equity value of approximately $4,700 , or $37.25 per share of Spirit Class A Common Stock. The transaction will include the assumption of Spirit's net debt at closing.
Each share of Spirit common stock will be exchanged for a number of shares of Boeing common stock equal to an exchange ratio between 0.18 and 0.25 , calculated as $37.25 divided by the volume weighted average share price of Boeing shares over the 15 -trading-day period ending on the second trading day prior to the closing (subject to a floor of $149.00 per share and a ceiling of $206.94 per share). Spirit stockholders will receive 0.25 Boeing shares for each of their Spirit shares if the volume-weighted average price is at or below $149.00 , and 0.18 Boeing shares for each of their Spirit shares if the volume-weighted average price is at or above $206.94 per share.
Boeing's acquisition of Spirit will include substantially all Boeing-related commercial operations, as well as certain other operations.
Spirit has also entered into a binding term sheet with Airbus SE (Airbus) setting forth the terms upon which Airbus will, assuming the parties enter into definitive agreements and receive all required regulatory approvals, acquire certain commercial work packages that Spirit performs for Airbus concurrently with the closing of the Boeing-Spirit merger. In addition, Spirit is proposing to sell certain of its operations, including those in Belfast, Northern Ireland (non-Airbus operations); Prestwick, Scotland; Subang, Malaysia; Biddeford, Maine; and Woonsocket, Rhode Island.
The transaction is expected to close mid-2025 and is subject to the sale of the Spirit operations related to certain Airbus commercial work packages and the satisfaction of customary closing conditions, including regulatory and Spirit stockholder approvals.
The Merger Agreement contains certain termination rights, including that either Boeing or Spirit may terminate the Merger Agreement if, subject to certain limitations, the transaction has not been consummated by March 31, 2025 (subject to three automatic three-month extensions if on each such date all of the closing conditions except those relating to regulatory approvals have been satisfied or waived) (the Outside Date). Additionally, Spirit may terminate the Merger Agreement under specified circumstances to accept an unsolicited Superior Proposal (as defined in the Merger Agreement) from a third party, and we may terminate the Merger Agreement if, before Spirit stockholder approval has been obtained, the Spirit Board of Directors changes its recommendation that Spirit’s stockholders adopt the Merger Agreement.
The Merger Agreement provides that Spirit will be required to pay Boeing a termination fee of $150 if the Merger Agreement is terminated under specified circumstances in which the Spirit Board of Directors changes its recommendation that Spirit’s stockholders adopt the Merger Agreement, Spirit terminates the Merger Agreement in order to accept a Superior Proposal as set forth in the Merger Agreement, or Spirit consummates a Qualifying Transaction (as defined in the Merger Agreement) following the termination of the Merger Agreement.
The Merger Agreement also provides that we will be required to pay Spirit a termination fee of $300 if the Merger Agreement is terminated by Spirit or Boeing under certain specified circumstances as a result of the parties' failure to obtain the required regulatory approvals by the Outside Date or in the event that any law or order related to the required regulatory approvals or any applicable antitrust law or foreign investment law prohibits the consummation of the Merger.
Note 3 – Earnings Per Share
Basic and diluted earnings per share are computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings.
Basic earnings per share is calculated by taking net earnings attributable to Boeing Shareholders, less
9
earnings available to participating securities, divided by the basic weighted average common shares outstanding.
Diluted earnings per share is calculated by taking net earnings attributable to Boeing Shareholders, less earnings available to participating securities, divided by the diluted weighted average common shares outstanding. Diluted weighted average common shares outstanding is calculated using the treasury stock method.
The elements used in the computation of Basic and Diluted loss per share were as follows:
| (In millions - except per share amounts) | Six months ended June 30 | Three months ended June 30 | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net loss attributable to Boeing Shareholders | ($ | ($ | ($ | ($ | |||||||||||||||||||
| Less: earnings available to participating securities | |||||||||||||||||||||||
Net loss available to common shareholders | ($ | ($ | ($ | ($ | |||||||||||||||||||
| Basic | |||||||||||||||||||||||
Basic weighted average shares outstanding | |||||||||||||||||||||||
Less: participating securities(1) | |||||||||||||||||||||||
Basic weighted average common shares outstanding | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
Diluted weighted average shares outstanding | |||||||||||||||||||||||
Less: participating securities(1) | |||||||||||||||||||||||
Diluted weighted average common shares outstanding | |||||||||||||||||||||||
Net loss per share: | |||||||||||||||||||||||
Basic | ($ | ($ | ($ | ($ | |||||||||||||||||||
Diluted | ( | ( | ( | ( | |||||||||||||||||||
(1)Participating securities include certain instruments in our deferred compensation plan.
The following table represents potential common shares that were not included in the computation of Diluted loss per share because the effect was antidilutive based on their strike price or the performance condition was not met.
| (Shares in millions) | Six months ended June 30 | Three months ended June 30 | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Performance restricted stock units | |||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
Note 4 – Income Taxes
We computed our 2024 interim tax provision using an estimated annual effective tax rate of (11.1 %), adjusted for discrete items. Our 2024 estimated annual effective tax rate is primarily driven by taxes on non-U.S. operations. The effective tax rates were 5.2 % and 35.9 % for the six months ended June 30, 2024 and 2023. The effective tax rate for the three months ended June 30, 2024, was 5.0 % and reflects additional tax expense to adjust prior quarter's results to the annual effective tax rate offset by discrete tax
10
benefits of $335 recorded in the second quarter related to the settlement of the 2018-2020 federal tax audit, which is after an associated $155 valuation allowance expense.
As of December 31, 2023, we had recorded valuation allowances of $4,550 primarily for certain domestic deferred tax assets, and certain domestic net operating losses, tax credit and interest carryforwards. To measure the valuation allowance, the Company estimated in what year each of its deferred tax assets and liabilities would reverse using systematic and logical methods to estimate the reversal patterns. Based on these methods, deferred tax liabilities are assumed to reverse and generate taxable income over the next 5 to 10 years while deferred tax assets related to pension and other postretirement benefit obligations are assumed to reverse and generate tax deductions over the next 15 to 20 years. The valuation allowance results from not having sufficient income from deferred tax liability reversals in the appropriate future periods to support the realization of deferred tax assets.
The total amount of unrecognized tax benefits of $1,131 as of December 31, 2023, decreased by $625 in the second quarter due to the settlement of the 2018-2020 federal tax audit, as discussed above.
Federal income tax audits have been settled for all years prior to 2021. The Internal Revenue Service is expected to begin the 2021-2023 federal tax audit in the second quarter of 2025. We are also subject to examination in major state and international jurisdictions for the 2010-2022 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.
Note 5 – Allowances for Losses on Financial Assets
The changes in allowances for expected credit losses for the six months ended June 30, 2024 and 2023, consisted of the following:
| Accounts receivable | Unbilled receivables | Other current assets | Financing receivables | Other assets | Total | |||||||||||||||
| Balance at January 1, 2023 | ($ | ($ | ($ | ($ | ($ | ($ | ||||||||||||||
| Changes in estimates | ( | ( | ||||||||||||||||||
| Write-offs | ||||||||||||||||||||
| Recoveries | ||||||||||||||||||||
Balance at June 30, 2023 | ($ | ($ | ($ | ($ | ($ | ($ | ||||||||||||||
| Balance at January 1, 2024 | ($ | ($ | ($ | ($ | ($ | ($ | ||||||||||||||
| Changes in estimates | ( | ( | ( | ( | ( | |||||||||||||||
| Write-offs | ||||||||||||||||||||
| Recoveries | ||||||||||||||||||||
Balance at June 30, 2024 | ($ | ($ | ($ | ($ | ($ | ($ | ||||||||||||||
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Note 6 – Inventories
Inventories consisted of the following:
| June 30 2024 | December 31 2023 | ||||||||||
| Commercial aircraft programs | $ | $ | |||||||||
| Long-term contracts in progress | |||||||||||
Capitalized precontract costs(1) | |||||||||||
Commercial spare parts, used aircraft, general stock materials and other | |||||||||||
| Total | $ | $ | |||||||||
(1)Capitalized precontract costs at June 30, 2024 and December 31, 2023, included amounts related to T-7A Red Hawk Production Options, Commercial Crew, and KC-46A Tanker. See Note 10.
Commercial Aircraft Programs
At June 30, 2024 and December 31, 2023, commercial aircraft programs inventory included the following amounts related to the 737 program: deferred production costs of $7,638 and $6,011 and unamortized tooling and other non-recurring costs of $880 and $792 . At June 30, 2024, $8,480 of 737 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders, and $38 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.
At June 30, 2024 and December 31, 2023, commercial aircraft programs inventory included the following amounts related to the 777X program: $6,072 and $4,638 of work in process (including deferred production costs of $2,612 and $1,792 ) and $4,218 and $4,063 of unamortized tooling and other non-recurring costs. We expensed abnormal production costs of $262 during the six months ended June 30, 2023. In the fourth quarter of 2023, the 777X program resumed production, and as a result, there were no abnormal production costs during the six months ended June 30, 2024.
At June 30, 2024 and December 31, 2023, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $12,336 and $12,384 , $1,563 and $1,764 of supplier advances, and $1,441 and $1,480 of unamortized tooling and other non-recurring costs. At June 30, 2024, $11,618 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders, and $2,159 is expected to be recovered from units included in the program accounting quantity that represent expected future orders. We expensed abnormal production costs of $157 and $693 during the six months ended June 30, 2024 and 2023.
Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $4,546 and $4,126 at June 30, 2024 and December 31, 2023.
Note 7 – Contracts with Customers
Unbilled receivables increased from $8,317 at December 31, 2023, to $9,660 at June 30, 2024, primarily driven by revenue recognized at BDS in excess of billings.
Advances and progress billings increased from $56,328 at December 31, 2023, to $58,151 at June 30, 2024, primarily driven by advances on orders received at Commercial Airplanes (BCA).
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Note 8 – Financing Receivables and Operating Lease Equipment
Financing receivables and operating lease equipment, net consisted of the following:
| June 30 2024 | December 31 2023 | ||||||||||
| Financing receivables: | |||||||||||
| Investment in sales-type leases | $ | $ | |||||||||
| Notes | |||||||||||
Total financing receivables | |||||||||||
| Less allowance for losses on receivables | |||||||||||
| Financing receivables, net | |||||||||||
Operating lease equipment, at cost, less accumulated depreciation of $ | |||||||||||
| Total | $ | $ | |||||||||
Financing arrangements typically range in terms from 1 to 12 years and may include options to extend or terminate. Certain leases include provisions to allow the lessee to purchase the underlying aircraft at a specified price. At June 30, 2024 and December 31, 2023, $14 and $44 were determined to be uncollectible financing receivables and placed on non-accrual status. The allowance for losses on financing receivables decreased primarily due to cash collections during the six months ended June 30, 2024.
The components of investment in sales-type leases consisted of the following:
| June 30 2024 | December 31 2023 | ||||||||||
| Gross lease payments receivable | $ | $ | |||||||||
| Unearned income | ( | ( | |||||||||
| Net lease payments receivable | |||||||||||
| Unguaranteed residual assets | |||||||||||
| Total | $ | $ | |||||||||
Financing interest income received for the six months ended June 30, 2024 and 2023, was $4 and $62 . Financing interest income received for the three months ended June 30, 2024 and 2023, was $2 and $58 .
Our financing receivable balances at June 30, 2024 by internal credit rating category and year of origination consisted of the following:
| Rating categories | Current | 2023 | 2022 | 2021 | 2020 | Prior | Total | ||||||||||||||||
| BBB | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| B | |||||||||||||||||||||||
| CCC | |||||||||||||||||||||||
| Total carrying value of financing receivables | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
At June 30, 2024, our allowance for losses related to receivables with ratings of CCC, B and BBB. We applied default rates that averaged 100.0 %, 0.0 % and 0.4 %, respectively, to the exposure associated with those receivables.
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Financing Receivables Exposure
The majority of our financing receivables and operating lease equipment portfolio is concentrated in the following aircraft models:
| June 30 2024 | December 31 2023 | ||||||||||
717 Aircraft (Accounted for as sales type leases) | $ | $ | |||||||||
747-8 Aircraft (Accounted for as sales-type leases) | |||||||||||
737 Aircraft ($ | |||||||||||
777 Aircraft (Accounted for as operating leases) | |||||||||||
747-400 Aircraft (Accounted for as sales-type leases) | |||||||||||
Operating lease equipment primarily includes large commercial jet aircraft.
Lease income recorded in Sales of services on the Condensed Consolidated Statements of Operations for the six months ended June 30, 2024 and 2023, included $21 and $29 of interest income from sales-type leases and $32 and $27 from operating lease payments. Lease income recorded in Sales of services on the Condensed Consolidated Statements of Operations for the three months ended June 30, 2024 and 2023, included $11 and $14 of interest income from sales-type leases and $14 and $16 from operating lease payments.
Variable lease payments for sales-type leases recognized in interest income for the six and three months ended June 30, 2024 and 2023, were insignificant. Variable lease payments on operating leases for the six and three months ended June 30, 2024 and 2023, were insignificant.
Profit at the commencement of sales-type leases was recorded in Sales of services for the six months ended June 30, 2024 and 2023, in the amount of $4 and $20 . Profit at commencement of sales-type leases was recorded in Sales of services for the three months ended June 30, 2024 and 2023, was $4 and $8 .
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Note 9 – Investments
Our investments, which are recorded in Short-term and other investments or Investments, consisted of the following:
| June 30 2024 | December 31 2023 | ||||||||||
Time deposits (1) | $ | $ | |||||||||
Equity method investments (2) | |||||||||||
Available-for-sale debt investments (1) | |||||||||||
| Equity and other investments | |||||||||||
Restricted cash & cash equivalents (1)(3) | |||||||||||
| Total | $ | $ | |||||||||
(1)Primarily included in Short-term and other investments on our Condensed Consolidated Statements of Financial Position.
(2)Dividends received were $37 and $17 during the six and three months ended June 30, 2024 and $5
(3)Reflects amounts restricted in support of our workers’ compensation programs and insurance premiums.
Contributions to investments and Proceeds from investments on our Condensed Consolidated Statements of Cash Flows primarily relate to time deposits and available-for-sale debt investments. Cash used for the purchase of time deposits during the six months ended June 30, 2024 and 2023, was $1,298 and $9,165 . Cash proceeds from the maturities of time deposits during the six months ended June 30, 2024 and 2023, were $2,845 and $5,274 .
Allowance for losses on available-for-sale debt investments are assessed quarterly. All instruments are considered investment grade, and we have not recognized an allowance for credit losses as of June 30, 2024.
Note 10 – Liabilities, Commitments and Contingencies
737 MAX Customer Concessions and Other Considerations
During the first quarter of 2024, we recorded an earnings charge of $443 , net of insurance recoveries, in connection with estimated considerations to customers for disruption related to the Alaska Airlines 737-9 accident and 737-9 grounding. This charge is reflected in the financial statements as a reduction to revenue.
The following table summarizes changes in the 737 MAX customer concessions and other considerations liability during the six months ended June 30, 2024 and 2023.
| 2024 | 2023 | ||||||||||
| Beginning balance – January 1 | $ | $ | |||||||||
| Reductions for payments made | ( | ( | |||||||||
| Reductions for concessions and other in-kind considerations | ( | ( | |||||||||
| Changes in estimates | ( | ||||||||||
| Ending balance – June 30 | $ | $ | |||||||||
At June 30, 2024, $92 of the liability balance remains subject to negotiations with customers. The contracted amount includes $208 expected to be paid in cash in 2024, while the remaining amounts are primarily expected to be liquidated by lower customer delivery payments.
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Environmental
The following table summarizes changes in environmental remediation liabilities during the six months ended June 30, 2024 and 2023.
| 2024 | 2023 | ||||||||||
| Beginning balance – January 1 | $ | $ | |||||||||
| Reductions for payments made, net of recoveries | ( | ( | |||||||||
| Changes in estimates | |||||||||||
| Ending balance – June 30 | $ | $ | |||||||||
The liabilities recorded represent our best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites, including operation and maintenance over periods of up to 30 years. It is reasonably possible that we may incur costs that exceed these recorded amounts because of regulatory agency orders and directives, changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios that includes the high end of a range of reasonably possible cost estimates for all remediation sites for which we have sufficient information based on our experience and existing laws and regulations. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. At June 30, 2024 and December 31, 2023, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $964 and $1,030 .
Product Warranties
The following table summarizes changes in product warranty liabilities recorded during the six months ended June 30, 2024 and 2023.
| 2024 | 2023 | ||||||||||
| Beginning balance – January 1 | $ | $ | |||||||||
| Additions for current year deliveries | |||||||||||
| Reductions for payments made | ( | ( | |||||||||
| Changes in estimates | ( | ||||||||||
| Ending balance – June 30 | $ | $ | |||||||||
Commercial Aircraft Trade-In Commitments
In conjunction with signing definitive agreements for the sale of new aircraft, we have entered into trade-in commitments with certain customers that give them the right to trade in used aircraft at a specified price. The probability that trade-in commitments will be exercised is determined by using both quantitative information from valuation sources and qualitative information from other sources. The probability of exercise is assessed quarterly, or as events trigger a change, and takes into consideration the current economic and airline industry environments. Trade-in commitments, which can be terminated by mutual consent with the customer, may be exercised only during the period specified in the agreement, and require advance notice by the customer.
Trade-in commitment agreements at June 30, 2024, have expiration dates from 2024 through 2030. At June 30, 2024 and December 31, 2023, total contractual trade-in commitments were $1,375 and $1,415 . As of June 30, 2024 and December 31, 2023, we estimated it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $434 and $407 and the fair value of the related trade-in aircraft was $434 and $407 .
Financing Commitments
Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled $17,356 and $17,003 as of June 30, 2024 and
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December 31, 2023. The estimated earliest potential funding dates for these commitments as of June 30, 2024 are as follows:
| Total | |||||
July through December 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
Total | $ | ||||
As of June 30, 2024, $14,030 of these financing commitments relate to customers we believe have less than investment-grade credit. We have concluded that no reserve for future potential losses is required for these financing commitments based upon the terms, such as collateralization and interest rates, under which funding would be provided.
Other Financial Commitments
We have financial commitments to make additional capital contributions totaling $262 to certain joint ventures over the next nine years .
Standby Letters of Credit and Surety Bonds
We have entered into standby letters of credit and surety bonds with financial institutions primarily relating to the guarantee of our future performance on certain contracts and security agreements. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $3,184 and $4,548 as of June 30, 2024 and December 31, 2023.
Supply Chain Financing Programs
The Company has supply chain financing programs in place under which participating suppliers may elect to obtain payment from an intermediary. The Company confirms the validity of invoices from participating suppliers and agrees to pay the intermediary an amount based on invoice totals. The majority of amounts payable under these programs are due within 30 to 90 days but may extend up to 12 months. At June 30, 2024 and December 31, 2023, Accounts payable included $2.7 billion and $2.9 billion payable to suppliers who have elected to participate in these programs. We do not believe that future changes in the availability of supply chain financing would have a significant impact on our liquidity.
Recoverable Costs on Government Contracts
Our final incurred costs for each year are subject to audit and review for allowability by the U.S. government, which can result in payment demands related to costs they believe should be disallowed. We work with the U.S. government to assess the merits of claims and where appropriate reserve for amounts disputed. If we are unable to satisfactorily resolve disputed costs, we could be required to record an earnings charge and/or provide refunds to the U.S. government.
Fixed-Price Contracts
Long-term contracts that are contracted on a fixed-price basis could result in losses in future periods. Certain of the fixed-price contracts are for the development of new products, services and related technologies. This development work scope is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. The operational and technical complexities of fixed-price development contracts create financial risk, which could trigger
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additional earnings charges, termination provisions, order cancellations, or other financially significant exposure.
VC-25B Presidential Aircraft
The Company’s firm fixed-price contract for the Engineering and Manufacturing Development (EMD) effort on the U.S. Air Force’s (USAF) VC-25B Presidential Aircraft, commonly known as Air Force One, is a $4 billion program to develop and modify two 747-8 commercial aircraft. During 2023, we increased the reach-forward loss on the contract by $482 driven by engineering changes to support the build and installation process; the resolution of supplier negotiations; and factory performance related to labor instability. During the three months ended June 30, 2024, we increased the reach-forward loss on the contract by $250 primarily driven by higher than anticipated costs due to engineering design changes related to wiring and other structural requirements. Risk remains that we may record additional losses in future periods.
KC-46A Tanker
In 2011, we were awarded a contract from the USAF to design, develop, manufacture, and deliver four next generation aerial refueling tankers as well as priced options for 13 annual production lots totaling 179 aircraft. Since 2016, the USAF has authorized ten low rate initial production (LRIP) lots for a total of 139 aircraft. The EMD contract and authorized LRIP lots total approximately $27 billion as of June 30, 2024. The KC-46A Tanker is a derivative of the 767 commercial airplane program with the majority of the manufacturing costs being incurred in the 767 factory and the remaining costs being incurred in the military finishing and delivery centers.
During 2023, we increased the reach-forward loss on the KC-46A Tanker program by $309 primarily resulting from factory disruption and additional rework due to a supplier quality issue. During the first quarter of 2024, we increased the reach-forward loss by $128 , primarily due to factory disruption associated with supply chain constraints. During the three months ended June 30, 2024, we increased the reach-forward loss on the contract by $391 primarily reflecting higher than anticipated factory disruption, including supply chain constraints and parts shortages. As of June 30, 2024, we had approximately $139 of capitalized precontract costs and $205 of potential termination liabilities to suppliers related to future production lots. Risk remains that we may record additional losses in future periods.
MQ-25
In the third quarter of 2018, we were awarded the MQ-25 EMD contract by the U.S. Navy. The contract is a fixed-price contract that now includes development and delivery of seven aircraft and test articles at a contract price of $890 . In connection with winning the competition, we recognized a reach-forward loss of $291 in the third quarter of 2018. During 2023, we increased the reach-forward loss by $231 primarily driven by production and flight testing delays as well as higher than anticipated production costs to complete EMD aircraft attributable to factory performance. During the first quarter of 2024, we were awarded a cost-type contract modification totaling $657 for two additional test aircraft plus other scope increases. Risk remains that we may record additional losses in future periods.
T-7A Red Hawk EMD Contract & Production Options
In 2018, we were awarded the T-7A Red Hawk program. The EMD portion of the contract is a $860 fixed-price contract and includes five aircraft and seven simulators. The production portion of the contract includes 11 production lots for aircraft and related services for 346 T-7A Red Hawk aircraft that we believe are probable of being exercised. We expect the first production and support contract option to be exercised in 2025.
During 2023, we increased the reach-forward loss on the T-7A Red Hawk program by $275 primarily reflecting higher estimated production costs. During the first quarter of 2024, we increased the reach-forward loss on the T-7A Red Hawk program by $94 primarily reflecting further increases in estimated production costs. During the three months ended June 30, 2024, we increased the reach-forward loss on
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the program by $278 primarily driven by higher than anticipated costs to meet certain technical and support requirements, and flight test program inefficiencies and delays. At June 30, 2024, we had approximately $258 of capitalized precontract costs and $451 of potential termination liabilities to suppliers related to future production lots. Risk remains that we may record additional losses in future periods.
Commercial Crew
National Aeronautics and Space Administration (NASA) has contracted us to design and build the CST-100 Starliner spacecraft to transport crews to the International Space Station (ISS). In the second quarter of 2022, we successfully completed the uncrewed Orbital Flight Test. During 2023, we increased the reach-forward loss by $288 primarily as a result of delaying the Crewed Flight Test (CFT) following notification by a parachute supplier of an issue identified through testing. The CFT launched on June 5, 2024, and docked with the ISS. The Starliner spacecraft had a minimum mission duration of 8 days. Its return to Earth was delayed to allow time to perform further testing of propulsion system anomalies. As a result of the CFT delays, during the three months ended June 30, 2024, we increased the reach-forward loss on the program by $125 . At June 30, 2024, we had approximately $238 of capitalized precontract costs and $148 of potential termination liabilities to suppliers related to fixed-price unauthorized future missions. Risk remains that we may record additional losses in future periods.
Note 11 – Arrangements with Off-Balance Sheet Risk
We enter into arrangements with off-balance sheet risk in the normal course of business, primarily in the form of guarantees.