Pontifications: The see

Mar 29, 2024

It’s All In The Numbers—————————-

About that inventory:

This is in the most recent 10-Q

https://s2.q4cdn.com/661678649/files/doc_financials/2023/q2/522fee3f-9240-4f24-b46f-0ab8c29472df.pdf

‘At June 30, 2023 and December 31, 2022, commercial aircraft programs inventory included the following amounts related to the 737 program:deferred production costs of $4,739 and $2,955’

$1.784 billion.

Why has the DPB increased on the 737 Max program by that much over the past 6 months?

Why didn’t you expense the other $1.784 billion?

(rhetorical question)

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‘At June 30, 2023 and December 31, 2022, commercial aircraft programs inventory included the following amounts related to the 787 program:deferred production costs of $12,193 and $12,689’

$496 million.

787 deliveries during the same period?

31.

That means each Dreamliner delivery is reducing the DPB by $16 million. At that rate it’ll take 762 aircraft to zero out the production balance. If nothing goes wrong.

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‘Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airlinecustomers totaling $3,625 and $3,586 at June 30, 2023 and December 31, 2022.’

$39 million.

That much extra was given to airlines in compensation (or early issue blah blah) during the first 6 months.

And that, for Boeing – is in Inventory. They increased an Asset account by $39 million, by giving away compensation to customers. Not an expense. Not as a decrease to sales. Not as a discount to customers.

It’s an asset.

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Program Highlights (how to fool people)

This is the bad news, with the spin:

‘BCA loss from operations was $998 million for the six months ended June 30, 2023 compared with $1,116 million in the same period in 2022reflecting higher 737 and 787 deliveries, partially offset by higher spending on research and development and abnormal production costs.’

The way they make it sound, is that they spent all this money on R&D – because spending on R&D is a good thing, right? Abnormal production costs are secondary.

Then comes the inescapable truth:

‘Abnormal production costs for the six months ended June 30, 2023 were $955 million including $693 million related to the 787 program and$262 million related to the 777X program. Abnormal production costs for the six months ended June 30, 2022 were $885 million, including $595million related to the 787 program, $188 million related to the 737 program and $102 million related to the 777X program.’

Abnormal production costs: $955 millionR&D Spending: $43 millionLoss from Operations: $998 million.

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Another point to ponder:

2022 H1 Abnormal Production costs: $885 million2023 H1 Abnormal Production costs: $955 million