First Quarter 2022
- 737 production and deliveries continue to increase; submitted 787 certification plan to the FAA
- Launched 777-8 Freighter; now anticipate first 777–9 delivery in 2025
- Recorded charges on fixed–price defense development programs as well as for impacts of the war in Ukraine
- Operating cash flow of ($3.2) billion; continue to expect positive cash flow for 2022
- Revenue of $14.0 billion; GAAP loss per share of ($2.06) and core (non-GAAP)* loss per share of ($2.75)
- Total backlog of $371 billion; including nearly 4,200 commercial airplanes
| Table 1. Summary Financial Results | First Quarter | |||||||||||||
| (Dollars in Millions, except per share data) | 2022 | 2021 | Change | |||||||||||
| Revenues | $13,991 | $15,217 | (8)% | |||||||||||
| GAAP | ||||||||||||||
| Loss From Operations | ($1,169) | ($83) | NM | |||||||||||
| Operating Margin | (8.4)% | (0.5)% | NM | |||||||||||
| Net Loss | ($1,242) | ($561) | NM | |||||||||||
| Loss Per Share | ($2.06) | ($0.92) | NM | |||||||||||
| Operating Cash Flow | ($3,216) | ($3,387) | NM | |||||||||||
| Non-GAAP* | ||||||||||||||
| Core Operating Loss | ($1,452) | ($353) | NM | |||||||||||
| Core Operating Margin | (10.4)% | (2.3)% | NM | |||||||||||
| Core Loss Per Share | ($2.75) | ($1.53) | NM |
| *Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.” |
The Boeing Company [NYSE: BA] reported first-quarter revenue of $14.0 billion, driven by lower defense volume and charges on fixed-price defense development programs, partially offset by commercial services volume. GAAP loss per share of ($2.06) and core loss per share (non-GAAP)* of ($2.75) also reflect $212 million of pre-tax charges for impacts of the war in Ukraine (Table 1). Boeing recorded operating cash flow of ($3.2) billion.
“While the first quarter of 2022 brought new challenges for our world, industry and business, I am proud of our team and the steady progress we’re making toward our key commitments,” said Dave Calhoun, Boeing president and chief executive officer. “We increased 737 MAX production and deliveries and made important progress on the 787 by submitting our certification plan to the FAA. Despite the pressures on our defense and commercial development programs, we remain on track to generate positive cash flow for 2022, and we’re focused on our performance as we work through certification requirements and mature several key programs to production. Leading with safety and quality, we’re taking the right actions to drive stability throughout our operations, deliver on our commitments to customers and position Boeing for a sustainable future.”
| Table 2. Cash Flow | First Quarter | ||||||||||
| (Millions) | 2022 | 2021 | |||||||||
| Operating Cash Flow | ($3,216) | ($3,387) | |||||||||
| Less Additions to Property, Plant & Equipment | ($349) | ($291) | |||||||||
| Free Cash Flow* | ($3,565) | ($3,678) |
| *Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.” |
Operating cash flow was ($3.2) billion in the quarter due to unfavorable receipt timing (Table 2).
| Table 3. Cash, Marketable Securities and Debt Balances | Quarter-End | |||
| (Billions) | Q1 22 | Q4 21 | ||
| Cash | $7.4 | $8.0 | ||
| Marketable Securities1 | $4.9 | $8.2 | ||
| Total | $12.3 | $16.2 | ||
| Debt Balances: | ||||
| The Boeing Company, net of intercompany loans to BCC | $56.2 | $56.6 | ||
| Boeing Capital, including intercompany loans | $1.5 | $1.5 | ||
| Total Consolidated Debt | $57.7 | $58.1 |
| 1 Marketable securities consist primarily of time deposits due within one year classified as “short-term investments.” |
Cash and investments in marketable securities decreased to $12.3 billion, compared to $16.2 billion at the beginning of the quarter, primarily driven by operating cash outflows and debt repayment (Table 3). The company has access to credit facilities of $14.7 billion which remain undrawn.
Total company backlog at quarter-end was $371 billion.
Segment Results
Commercial Airplanes
| Table 4. Commercial Airplanes | First Quarter | |||||
| (Dollars in Millions) | 2022 | 2021 | Change | |||
| Commercial Airplanes Deliveries | 95 | 77 | 23% | |||
| Revenues | $4,161 | $4,269 | (3)% | |||
| Loss from Operations | ($859) | ($856) | NM | |||
| Operating Margin | (20.6)% | (20.1)% | NM |
Commercial Airplanes first-quarter revenue of $4.2 billion decreased slightly, primarily due to timing of wide-body deliveries, partially offset by higher 737 deliveries (Table 4). Operating margin of (20.6)% also reflects abnormal costs and period expenses, including charges for impacts of the war in Ukraine and higher research and development expense.
Boeing has nearly completed the global safe return to service of the 737 MAX and the fleet has flown more than one million total flight hours since late 2020. The 737 production rate continues to increase and is expected to increase to 31 airplanes per month during the second quarter.
On the 787, the company has submitted the certification plan to the FAA. Rework has been completed on the initial airplanes and the company continues to work closely with the FAA on timing of resuming deliveries. The program is producing at a very low rate and will continue to do so until deliveries resume, with an expected gradual return to five per month over time. The company continues to anticipate 787 abnormal costs of approximately $2 billion, with most being incurred by the end of 2023, including $312 million recorded in the quarter.
During the quarter, the company launched the 777-8 Freighter with an order from Qatar Airways. Delivery of the first 777-9 airplane is now expected in 2025, which reflects an updated assessment of the time required to meet certification requirements. To minimize inventory and the number of airplanes requiring change incorporation, the 777-9 production rate ramp is being adjusted, including a temporary pause through 2023. This will result in approximately $1.5 billion of abnormal costs beginning in the second quarter of this year and continuing until 777-9 production resumes. The 777 program is also leveraging the adjustment to the 777-9 production rate ramp to add 777 Freighter capacity starting in late 2023.
Commercial Airplanes delivered 95 airplanes during the quarter and backlog included nearly 4,200 airplanes valued at $291 billion.
Defense, Space & Security
| Table 5. Defense, Space & Security | First Quarter | |||||
| (Dollars in Millions) | 2022 | 2021 | Change | |||
| Revenues | $5,483 | $7,185 | (24)% | |||
| (Loss)/earnings from Operations | ($929) | $405 | NM | |||
| Operating Margin | (16.9)% | 5.6% | NM |
Defense, Space & Security first-quarter revenue decreased to $5.5 billion and first-quarter operating margin decreased to (16.9) percent, primarily driven by lower volume and charges on fixed-price development programs, including VC-25B and T-7A Red Hawk. The VC-25B program recorded a $660 million charge, primarily driven by higher supplier costs, higher costs to finalize technical requirements and schedule delays. The T-7A Red Hawk program recorded $367 million in charges, primarily driven by ongoing supplier negotiations impacted by supply chain constraints, COVID-19 and inflationary pressures.
During the quarter, Defense, Space & Security captured an award for 6 MH-47G Block II Chinook rotorcraft for U.S. Army Special Operations. Defense, Space & Security completed mission profile flights on the SB>1 DEFIANT and completed the 400th test flight on the T-7A Red Hawk. Also in the quarter, Defense, Space & Security began build of the first P-8A for the Royal New Zealand Air Force and delivered 41 aircraft.
Backlog at Defense, Space & Security was $60 billion, of which 33% percent represents orders from customers outside the U.S.
Global Services
| Table 6. Global Services | First Quarter | |||||||||||||
| (Dollars in Millions) | 2022 | 2021 | Change | |||||||||||
| Revenues | $4,314 | $3,749 | 15% | |||||||||||
| Earnings from Operations | $632 | $441 | 43% | |||||||||||
| Operating Margin | 14.6% | 11.8% | 24% |
Global Services first-quarter revenue increased to $4.3 billion and first-quarter operating margin increased to 14.6 percent primarily driven by higher commercial volume and favorable mix.
During the quarter, Global Services secured a fuel-saving digital solutions contract for Etihad Airways’ 787 fleet and was awarded a contract for KC-135 horizontal stabilizers from the U.S. Air Force. Global Services captured a 767 converted freighter order from Air Transport Services Group and also announced plans to create additional capacity for 767 converted freighters.
Additional Financial Information
| Table 7. Additional Financial Information | First Quarter | ||||||||||
| (Dollars in Millions) | 2022 | 2021 | |||||||||
| Revenues | |||||||||||
| Boeing Capital | $46 | $60 | |||||||||
| Unallocated items, eliminations and other | ($13) | ($46) | |||||||||
| (Loss)/Earnings from Operations | |||||||||||
| Boeing Capital | ($36) | $21 | |||||||||
| FAS/CAS service cost adjustment | $283 | $270 | |||||||||
| Other unallocated items and eliminations | ($260) | ($364) | |||||||||
| Other income, net | $181 | $190 | |||||||||
| Interest and debt expense | ($630) | ($679) | |||||||||
| Effective tax rate | 23.2% | 1.9% |
At quarter-end, Boeing Capital’s net portfolio balance was $1.6 billion. Earnings from operations at Boeing Capital decreased primarily due to a provision for losses related to the war in Ukraine. The change in loss from other unallocated items and eliminations was primarily due to decreased share-based plan expense and deferred compensation expense as compared to the first quarter 2021. The first quarter effective tax rate primarily reflects the tax benefit of pretax losses and realizable R&D tax credits.
Non-GAAP Measures Disclosures
We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company’s ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:
Core Operating Earnings, Core Operating Margin and Core Earnings Per Share
Core operating earnings is defined as GAAP earnings from operations excluding the FAS/CAS service cost adjustment. The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of the FAS/CAS service cost adjustment and Non-operating pension and postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to Commercial Airplanes and BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude non-service pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation between the GAAP and non-GAAP measures is provided on pages 13.
Free Cash Flow
Free cash flow is GAAP operating cash flow reduced by capital expenditures for property, plant and equipment. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity. Table 2 provides a reconciliation of free cash flow to GAAP operating cash flow.
