27 Apr 22. The results from all the US Majors, particularly Boeing, reflected the COVID-19 effects as well as the supply chain disruption and general lowering of sales. Given the increased in orders following the Ukraine support from NATO and the US in particular, figures in the next quarter should reflect an uptick in sales and supply chain improvements as well as the end of the COVID pandemic.
27 Apr 22. Boeing shares plunge on array of charges, 737 MAX target in doubt.
Boeing Co (BA.N) unveiled $2.7bn in charges and added costs across its aircraft portfolio on Wednesday, and expressed doubts over hitting jet delivery targets as technical problems, inflation and supplier risks cloud its path toward recovery.
Shares of the U.S. planemaker fell to a nearly 1-1/2 year low after it posted a quarterly loss and announced it was halting 777X production through 2023 due to a fresh delay in its entry into service after certification problems and weak demand.
“Another dreadful set of results,” Agency Partners analyst Nick Cunningham said in a client note, adding that a “general sense of disarray continues”.
On the plus side, Boeing said it submitted a certification plan to U.S. air-safety regulators in a step toward resuming deliveries of its 787 Dreamliner, halted for nearly a year by inspections and repairs in a separate industrial headache costing about $5.5 bn. read more
The twin-aisled Dreamliner, along with its cash cow 737 MAX, are vital to Boeing’s ability to emerge from overlapping coronavirus and jet-safety crises, a path steepened by war in Ukraine.
Boeing did not specify when Boeing would resume Dreamliner deliveries. Reuters reported last week Boeing had advised key airlines and parts suppliers that the deliveries would resume in the second half of this year.
Boeing also confirmed a delay in handing over the first 777X jet to 2025, from the previous target of late 2023, but said it remained confident in the program.
“We’ve got to give ourselves the time and freedom to get this right,” Calhoun told analysts.
Calhoun said the halt in 777-9 production – which will add $1.5bn in fresh costs – was based on a longer safety certification timeline, a risk reported by Reuters in February.
He said the production pause would help minimize inventory and the number of jets requiring retrofits, while it adds to freighter capacity with a newly launched cargo spinoff of the 777X, the world’s largest twin-engine passenger plane.
“We are concerned that this delay (in 777X delivery) may allow airlines to cancel without penalty.” Citi Research analyst Charles Armitage said.
Boeing is facing an increasingly high-stakes battle to win certification of the largest variant of the 737 MAX before a new safety standard on cockpit alerts takes effect at year-end.
The deadline for changes was introduced as part of broader regulatory reforms at the Federal Aviation Administration following fatal 737 MAX crashes in 2018 and 2019.
“The intent of that legislation was never to stop the derivative product line with respect to the MAX,” Calhoun said. “So I believe our chances are good with respect to getting legislative relief. It doesn’t mean we’ll get them. And if we don’t, it’s a problem.”
Boeing reiterated it expects its 737 MAX production rate to reach 31 planes per month in the second quarter, a slight delay from what some analysts expected, though industry sources have not ruled out a slip. It has 320 of the jets in inventory.
Boeing said it was on track to return to positive cash flow in 2022 with no need for an immediate capital raise as it ramps up deliveries of the cash-cow narrow-body, though it faces risks in the crucial China market even as travel rebounds from the pandemic.
“Traffic is returning, and it’s returning in a pretty big way,” Calhoun said.
It reported a quarterly core loss per share of $2.75, compared with a loss of $1.53 per share a year ago. Revenue fell to $13.99bn from $15.22bn.
Like other aerospace companies, Boeing is grappling with supply chain logjams, inflation and fallout from war in Ukraine.
“Inflation continues to take a hard run at everything we do,” Calhoun told analysts.
It booked a $660m charge in the quarter on its VC-25B – commonly known as Air Force One – due to higher supplier costs and technical problems and schedule delays.
“Air Force One, I’m just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn’t have taken,” Calhoun said. “But we are where we are, and we’re going to deliver great airplanes. And we’re going to recognize the costs associated with it.”
Boeing also recorded $367m in charges for its T-7A Red Hawk trainer jet due to inflation, supply chain issues and pandemic impacts.
And it booked pre-tax charges of $212m due to the war in Ukraine and international sanctions against Russia, which pose risks to materials supply and aircraft orders.
Asked whether Boeing would hit a 500-aircraft delivery target for the 737 MAX this year, Chief Financial Officer Brian West said, “we probably won’t get quite all the way there.” (Source: Reuters)
27 Apr 22. General Dynamics profit rises 3% on strong demand for private jets. Gulfstream jet maker General Dynamics Corp (GD.N) on Wednesday posted a 3.1% rise in first-quarter profit, as demand for private air travel during the COVID-19 pandemic remained high.
Shares were unchanged in pre-market trading.
Cautious passengers who opted for private flights instead of commercial flights due to fears of contracting COVID-19 have helped drive U.S. private air traffic higher than pre-pandemic levels.
Business jet makers, eager to capitalize on that demand from wealthy travelers opting to fly private, have been ramping up production of their jets. The profit increase comes after the pandemic crippled many aerospace companies’ ability to procure as well as supply parts needed to produce products, creating shortages, reducing inventories and hammering profits amid a period of rising inflation. In the quarter the company delivered 25 Gulfstream business jets versus 28 a year ago. In March the company told the J.P. Morgan Industrials conference that its jet aviation business would likely be impacted by Western sanctions on Moscow after its invasion of Ukraine. Sales in the company’s aerospace unit marginally rose to $1.9bn from $1.89bn a year earlier, while overall revenue remained at $9.39bn. Net earnings rose to $730m, or $2.61 per share, in the first quarter, from $708m or $2.48 per share, a year earlier. General Dynamics’ reported earnings per share of $2.61 beat Wall Street analyst consensus of $2.51. The company’s revenue of $9.4bn also beat Wall Street analyst estimates of $9bn. (Source: Google/Reuters)
26 Apr 22. Raytheon cuts revenue forecast as suspension of Russia business hits sales. Aerospace and defense firm Raytheon Technologies Corp (RTX.N) lowered its full-year revenue forecast on Tuesday, blaming the loss of sales to Russia due to Western sanctions imposed over the war in Ukraine.
Shares in the U.S. company fell 1.7% in pre-market trading to $98.00.
As a large number of U.S. companies have severed ties with Russia following Moscow’s invasion of Ukraine and the introduction of Western sanctions, the aviation industry is among the sectors severely impacted.
Raytheon’s Chief Financial Officer Neil Mitchill told Reuters that lowering the 2022 revenue guidance by $750m “was strictly related to direct and indirect sales that are no longer allowed because of the global sanctions imposed on Russia.”
Raytheon expects full-year revenue to be between $67.75bn and $68.75bn, lower than its previous forecast of $68.5bn to $69.5bn.
About three quarters of that lost $750m revenue was direct sales of commercial equipment to Russia, Mitchill said, and the remainder was engine parts that would have been sold principally by Pratt & Whitney Canada.
Chief executive Greg Hayes told analysts on a post earnings conference call that Raytheon had sold its share of a Russia-based heat exchanger joint venture with Boeing Co (BA.N)and Embraer SA (EMBR3.SA)as Russia’s invasion of Ukraine unfolded.
However, the company said revenue rose 3% to $15.72bn in the quarter, driven by a recovery in air travel demand, which boosted sales of its aerospace products and services.
Raytheon posted a net income of $1.08bn, or 72 cents per share, in the quarter ended March 31, compared with $753m, or 50 cents per share, last year.
Commercial aerospace sales rose on a rebound in demand after being depressed during a period of slower commercial air travel during the pandemic.
Compared to the same quarter a year ago, Collins Aerospace which makes jet parts saw sales rise 10%, and Pratt & Whitney which makes jet engines saw sales jump 12% despite slower military engine sales.
Sales at Raytheon’s defense-related businesses, Missiles & Defense, dropped 7% compared to the same quarter a year ago, and Raytheon Intelligence & Space saw sales fall 5% after the Global Training and Services business was sold to Vertex Aerospace.
Hayes said the company would not see a financial benefit from Ukraine-linked weapons orders in 2022. For example, Stinger and Javelin missile production could ramp up in 2022, but larger replenishments would be in 2023 or 2024, he said.
Raytheon’s adjusted earnings per share in the quarter were $1.15, versus Wall Street analysts’ $1.02 forecast, according to Refinitiv data. Revenue was $15.72bn with analysts forecasting $15.8bn according to Refinitiv data. (Source: Reuters)
28 Apr 22. Northrop reports lower revenue as labor, supply chain woes linger. U.S. weapons maker Northrop Grumman Corp (NOC.N) reported a fall in first-quarter sales and adjusted profit on Thursday, hit by labor shortages and supply chain issues.
An acute labor shortage due to the Omicron-led surge in coronavirus infections led to demand for workers far outpacing supply.
Northrop Grumman Corporation Chief Finiancial Officer David Keffertold Reuters on Thursday, “We experienced COVID-related labor and supply chain pressures in January, in particular through the height of the Omicron spread. Those pressures alleviated in February and March. In fact, in March, we saw a strong recovery.”
The company reported a 9.6% decline in revenue from its aeronautics unit, which makes the center fuselage for fighter jets.
However, Russia’s invasion of Ukraine in February has boosted defense spending demand in the U.S. as well as other countries as they shore up their defenses.
“An area that we see the likelihood of increased demand is across Europe, not just Eastern but Western Europe as well, in air and missile defense,” Keffer said.
U.S. President Joe Biden’s $5.79trn budget plan to Congress submitted last month includes calls for record peacetime military spending of $813bn, up from $778bn last year.
The company maintained its 2022 forecast, signaling sustained demand for its products aided by rising geopolitical tensions, with projected sales of between $36.20bn and $36.60bn.
It continues to expect full-year adjusted earnings per share of between $24.50 to $25.10.
Sales in Northrop’s space systems business gained 13.2% to $2.86bn, its third consecutive quarterly rise.
The company’s sale of its IT services in early 2021 also led to lower sales and profit in the first quarter, the company added.
Quarterly adjusted net earnings fell to $955m, or $6.10 per share, from about $1.08bn, or $6.57 per share, a year ago.
The company’s total sales fell to $8.80bn in the first quarter, from $9.16bn a year earlier. (Source: Reuters)
19 Apr 22. Ukraine war has boosted demand for missile defenses, Lockheed says. Russia’s attack on Ukraine, including regular barrages of rockets, has boosted demand for Lockheed Martin missile defense systems, the No. 1 U.S. weapons maker said on Tuesday.
“We’ve got demand signals for THAAD and PAC-3 from around the world,” Chief Executive Jim Taiclet said after Lockheed reported a drop in quarterly sales and profits. THAAD and PAC-3 refers to the Terminal High Altitude Area Defense (THAAD) missile defense system and the interceptors for Patriot missile systems.
“Especially when you see missiles hitting hospitals and situations like that, and train stations in Ukraine,” Taiclet said in explaining the demand, adding that governments were now thinking “that it’s worthwhile to have an effective missile defense capacity in your country.”
Lockheed said its quarterly revenue fell while quarterly profits dropped 5.7% as supply chain woes triggered by the COVID-19 pandemic were compounded by inflation pressure.
The company reaffirmed its full-year revenue outlook of about $66bn, which is in line with analysts estimates.
U.S. President Joe Biden’s record peacetime national defense budget request of $813bn was unveiled in March as Russia’s invasion of Ukraine has spurred demand for more military spending globally.
The pandemic crippled many aerospace companies’ ability to procure as well as supply parts needed to produce products, creating shortages, reducing inventories and hammering profits amid a period of rising inflation. Lockheed’s dual-use suppliers that cater to both commercial aviation and defense markets have also been impacted. Taiclet said inflation had hurt the company’s performance.
“The result should bring a focus to defense supply chain concerns, which may be evident elsewhere this quarter as well, though there did not seem to be major issues. In addition, management did not change 2022 guidance and with defense budget support and the war in Ukraine” raising defense spending appetites, temporary challenges could be limited, JP Morgan analyst Seth Seifman said in a note.
Shares in Lockheed were down $5.33, or 1.1%, at $462.21 at midday.
Lockheed’s Aeronautics unit, its biggest, which makes F-35 fighter jets saw its revenue rise 2% compared to the same quarter a year ago, but profits fell by 2% to $697m.
Lockheed reported 26 F-35 jet deliveries in the quarter compared with 17 a year earlier. Taiclet said Lockheed was working to increase F-35 sales for 2023.
Net earnings fell to $1.73bn, or $6.44 per share, in the first quarter ended March 27 from $1.84bn, or $6.56 per share, a year earlier.
Net sales fell about 8% to $14.96bn in the quarter.
During the quarter Lockheed abandoned its proposed $4.4bn purchase of rocket engine maker Aerojet Rocketdyne Holdings Inc (AJRD.N) after antitrust regulators sued to block the deal. (Source: Reuters)
Boeing
27 Apr 22. Boeing Reports First-Quarter Results.
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) bn; continue to expect positive cash flow for 2022
- Revenue of $14.0 bn; GAAP loss per share of ($2.06) and core (non-GAAP)* loss per share of ($2.75)
- Total backlog of $371 bn; including nearly 4,200 commercial airplanes
| Table 1. Summary Financial Results | First Quarter | |||||||||||||
| (Dollars in Ms, 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 $14.0bn, 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 $212m of pre-tax charges for impacts of the war in Ukraine (Table 1). Boeing recorded operating cash flow of ($3.2)bn.
“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 | ||||||||||
| (Ms) | 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) bn in the quarter due to unfavorable receipt timing (Table 2).
| Table 3. Cash, Marketable Securities and Debt Balances | Quarter-End | |||||||
| (Bns) | 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 $12.3bn, compared to $16.2bn 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 $14.7bn which remain undrawn.
Total company backlog at quarter-end was $371 bn.
Segment Results
Commercial Airplanes
| Table 4. Commercial Airplanes | First Quarter | |||||||
| (Dollars in Ms) | 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 bn 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 m 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 bn, with most being incurred by the end of 2023, including $312m 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 bn 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 bn.
Defense, Space & Security
| Table 5. Defense, Space & Security | First Quarter | |||||||
| (Dollars in Ms) | 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 bn 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 $660m charge, primarily driven by higher supplier costs, higher costs to finalize technical requirements and schedule delays. The T-7A Red Hawk program recorded $367m 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 $60bn, of which 33% percent represents orders from customers outside the U.S.
Global Services
| Table 6. Global Services | First Quarter | |||||||||||||
| (Dollars in Ms) | 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 $4.3bn 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 Ms) | 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 $1.6bn. 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.
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.
General Dynamics
27 Apr 22. General Dynamics Reports First-Quarter 2022 Financial Results.
- Net earnings of $730 m on revenue of $9.4 bn
- Diluted EPS of $2.61, up 5.2% year over year
- Cash from operating activities of $2 bn
- Highest Aerospace backlog in more than a decade
General Dynamics (NYSE: GD) today reported first-quarter 2022 net earnings of $730m on revenue of $9.4bn. Diluted earnings per share (EPS) were $2.61, a 5.2% increase from the year-ago quarter.
“Aerospace backlog grew for the fifth consecutive quarter, driven by continued strong Gulfstream demand, while operating discipline and growth in aviation services increased the group’s margins,” said Phebe N. Novakovic, chairman and chief executive officer. “Our defense segments delivered solid performance on key programs across the portfolios.”
Cash
Net cash provided by operating activities in the quarter totaled $2bn, or 270% of net earnings. The company invested $141m in capital expenditures, paid $330m in dividends, and used $294m to repurchase shares, ending the quarter with $2.9bn in cash and equivalents on hand.
Backlog
Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1-to-1 for the quarter. In addition to company-wide backlog of $87.2 bn, estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $41.8bn. Total estimated contract value, the sum of all backlog components, was $129bn.
Aerospace backlog grew $1.3bn in the quarter to $17.6bn, up 8.1%.
Significant awards in the quarter for the three defense segments included a contract with a maximum potential value of $4.5bn over 10 years from the National Geospatial-Intelligence Agency to provide hybrid cloud services and information technology design, engineering, and operations and sustainment services; a contract with a maximum potential value of $660m from the Environmental Protection Agency for managed application, information, networking, enterprise and security services; $340m from the U.S. Army to produce Stryker maneuver short-range air defense (M-SHORAD) vehicles; $325 m from the Army to upgrade Abrams main battle tanks; $260 m from the U.S. Navy to provide maintenance and repair services for an Arleigh Burke-class guided-missile destroyer and a Wasp-class amphibious assault ship; $235m from the Army to provide spare parts, inventory management and support services for the Stryker wheeled combat vehicle program; $230m to produce Piranha armored combat vehicles for Switzerland; and $260m for several key classified contracts.
Lockheed Martin
Lockheed Martin Reports First Quarter 2022 Financial Results
- Net sales of $15.0bn
- Net earnings of $1.7bn, or $6.44 per share
- Cash from operations of $1.4 bn and free cash flow of $1.1bn
- Returned $2.8bn of cash to shareholders through share repurchases and dividends
- Reaffirms 2022 financial outlook
19 Apr 22. Lockheed Martin Corporation [NYSE: LMT] today reported first quarter 2022 net sales of $15.0bn, compared to $16.3bn in the first quarter of 2021. Net earnings in the first quarter of 2022 were $1.7 bn, or $6.44 per share, compared to $1.8bn, or $6.56 per share, in the first quarter of 2021. Cash from operations was $1.4 bn in the first quarter of 2022, compared to $1.7bn in the first quarter of 2021. Free cash flow was $1.1bn in the first quarter of 2022, compared to $1.5bn in the first quarter of 2021.
“Lockheed Martin had a solid start to the year by delivering margin expansion and free cash flow above our expectations despite recent Covid-surge impacts on our operations and supply chain. We remain confident in our guidance for the remainder of the year and our growth outlook beyond,” said Lockheed Martin Chairman, President and CEO James Taiclet.
“Global events this quarter marked a dramatic change in the geopolitical environment and demonstrated the tremendous importance of an effective deterrent to aggression by major nation-states, and mutual defense among the United States and its allies. The men and women of Lockheed Martin are fully dedicated to enhancing this deterrence capability by effectively delivering on our existing platform programs and systems, while accelerating the integration of digital world technologies to enable true Joint All Domain Operations for our customers.”
Summary Financial Results
The following table presents the company’s summary financial results.
| (in ms, except per share data) | Quarters Ended1 | |||||
| March 27, 2022 |
March 28, 2021 |
|||||
| Net sales | $ 14,964 | $ 16,258 | ||||
| Business segment operating profit2 | $ 1,656 | $ 1,749 | ||||
| Unallocated items | ||||||
| FAS/CAS operating adjustment | 426 | 489 | ||||
| Severance and restructuring charges3 | — | (36) | ||||
| Other, net4 | (149) | (20) | ||||
| Total unallocated items | 277 | 433 | ||||
| Consolidated operating profit | $ 1,933 | $ 2,182 | ||||
| Net earnings3,4,5 | $ 1,733 | $ 1,837 | ||||
| Diluted earnings per share3,4,5 | $ 6.44 | $ 6.56 | ||||
| Cash from operations | $ 1,410 | $ 1,748 | ||||
| Capital expenditures | (268) | (281) | ||||
| Free cash flow2 | $ 1,142 | $ 1,467 | ||||
| 1 | The corporation closes its books and records on the last Sunday of the calendar quarter to align its financial closing with its business processes, which was on March 27 for the first quarter of 2022 and March 28 for the first quarter of 2021. The consolidated financial statements and tables of financial information included herein are labeled based on that convention. This practice only affects interim periods, as the corporation’s fiscal year ends on Dec. 31. | |||||
| 2 | Business segment operating profit and free cash flow are non-GAAP measures. See the “Use of Non-GAAP Financial Measures” section of this news release for more information. | |||||
| 3 | Net earnings for the first quarter of 2021 includes severance and restructuring charges of $36m ($28m, or $0.10 per share, after-tax) for previously announced actions at Rotary and Mission Systems (RMS) business segment. | |||||
| 4 | Net earnings for the first quarters of 2022 and 2021 include net losses of $101m ($76 m, or $0.28 per share, after-tax) and $10m ($8m, or $0.03 per share, after-tax) due to declines in the fair value of investments held in a trust for deferred compensation plans. | |||||
| 5 | Net earnings for the first quarters of 2022 and 2021 include net gains of $103 m ($77m, or $0.29 per share, after-tax) and $68m ($51m, or $0.18 per share, after-tax) due to increases in the fair value of investments held in the Lockheed Martin Ventures Fund. | |||||
2022 Financial Outlook
The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, pension risk transfer transactions, financing transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the company’s actual results, refer to the “Forward-Looking Statements” section in this news release.
| (in ms, except per share data) | Current 2022 Outlook1 | |||
| Net sales | ~$66,000 | |||
| Business segment operating profit2 | ~$7,175 | |||
| Total FAS/CAS pension adjustment3 | ~$2,260 | |||
| Diluted earnings per share | ~$26.70 | |||
| Cash from operations | ≥$7,900 | |||
| Capital expenditures | ~$(1,900) | |||
| Free cash flow2 | ≥$6,000 | |||
| 1 | The company’s current 2022 financial outlook does not include the impacts of potential pension risk transfer and refinancing transactions that the company may execute opportunistically as early as the second quarter, subject to market conditions. It also does not include any future gains or losses related to changes in valuations of the company’s investments held in the Lockheed Martin Ventures Fund and assumes continued accelerated payments to suppliers, with a focus on small and at-risk businesses. In addition, the outlook reflects known impacts from the COVID-19 pandemic based on the company’s understanding at the time of this news release and its experience to date. However, the company cannot predict how the pandemic will evolve or what impact it will continue to have. Therefore, no additional impacts to the company’s operations or its supply chain as a result of continued disruption from, or policies in response to, COVID-19 for periods subsequent to the time of this news release have been incorporated into the company’s current 2022 financial outlook. The ultimate impacts of COVID-19 on the company’s financial results for 2022 and beyond remain uncertain and there can be no assurance that the company’s underlying assumptions are correct. | |||
| 2 | Business segment operating profit and free cash flow are non-GAAP measures. See the “Use of Non-GAAP Financial Measures” section of this news release for more information. | |||
| 3 | Total FAS/CAS pension adjustment is presented as a single amount and includes total expected U.S. Government cost accounting standards (CAS) pension cost of approximately $1.8 bn and total expected financial accounting standards (FAS) pension income of approximately $460 m. CAS pension cost and the service cost component of FAS pension income are included in operating profit. The non-service cost components of FAS pension income are included in non-operating income. For additional detail regarding the pension amounts reported in operating and non-operating results, refer to the supplemental table included at the end of this news release. | |||
Cash Flows and Capital Deployment Activities
Cash from operations in the first quarter of 2022 was $1.4bn. Capital expenditures were $268m, resulting in free cash flow of $1.1bn. The decreases in operating and free cash flows from the first quarter of 2021 were primarily due to lower segment operating profit and changes in working capital due to timing.
The company’s capital deployment activities in the first quarter of 2022 included the following:
- paying cash dividends of $767m; and
- paying $2.0 bn to repurchase 4.7m shares (including 0.6m shares received upon settlement of an accelerated share repurchase agreement (ASR) in April 2022).
Segment Results
The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.
| (in ms) | Quarters Ended | |||||
| March 27,
2022 |
March 28,
2021 |
|||||
| Net sales | ||||||
| Aeronautics | $ 6,401 | $ 6,387 | ||||
| Missiles and Fire Control | 2,452 | 2,749 | ||||
| Rotary and Mission Systems | 3,552 | 4,107 | ||||
| Space | 2,559 | 3,015 | ||||
| Total net sales | $ 14,964 | $ 16,258 | ||||
| Operating profit | ||||||
| Aeronautics | $ 679 | $ 693 | ||||
| Missiles and Fire Control | 384 | 396 | ||||
| Rotary and Mission Systems | 348 | 433 | ||||
| Space | 245 | 227 | ||||
| Total business segment operating profit | 1,656 | 1,749 | ||||
| Unallocated items | ||||||
| FAS/CAS operating adjustment | 426 | 489 | ||||
| Severance and restructuring charges | — | (36) | ||||
| Other, net | (149) | (20) | ||||
| Total unallocated items | 277 | 433 | ||||
| Total consolidated operating profit | $ 1,933 | $ 2,182 | ||||
Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts. Increases in profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.
The company’s consolidated net adjustments not related to volume, including net profit booking rate adjustments, represented approximately 24% of total segment operating profit in the first quarter of 2022, as compared to 28% in the first quarter of 2021.
Aeronautics
| (in ms) | Quarters Ended | |||||
| March 27,
2022 |
March 28,
2021 |
|||||
| Net sales | $ 6,401 | $ 6,387 | ||||
| Operating profit | 679 | 693 | ||||
| Operating margin | 10.6% | 10.9% | ||||
Aeronautics’ net sales during the first quarter of 2022 were comparable to the same period in 2021. Net sales increased by approximately $80m for the F-16 program due to higher volume on production contracts that was partially offset by an unfavorable profit adjustment on a modernization contract. This increase was offset by lower net sales of approximately $65m for the F-35 program due to lower net favorable profit adjustments and volume on production contracts that were partially offset by an unfavorable profit adjustment on a development contract in the first quarter of 2021 that did not recur in the first quarter of 2022.
Aeronautics’ operating profit during the first quarter of 2022 decreased $14m, or 2%, compared to the same period in 2021. The decrease was primarily attributable to lower operating profit of approximately $50m for the F-35 program due to lower net favorable profit adjustments and volume on production contracts that were partially offset by an unfavorable profit adjustment on a development contract in the first quarter of 2021 that did not recur in the first quarter of 2022; and about $25m for the F-16 program due to an unfavorable profit adjustment on a modernization contract. These decreases were partially offset by an increase of approximately $30m for the F-22 program due to higher net favorable profit adjustments; and about $20m for classified contracts due to higher net favorable profit adjustments. Adjustments not related to volume, including net profit booking rate adjustments, were $25m lower in the first quarter of 2022 compared to the same period in 2021.
Missiles and Fire Control
| (in ms) | Quarters Ended | |||||
| March 27,
2022 |
March 28,
2021 |
|||||
| Net sales | $ 2,452 | $ 2,749 | ||||
| Operating profit | 384 | 396 | ||||
| Operating margin | 15.7% | 14.4% | ||||
MFC’s net sales during the first quarter of 2022 decreased $297m, or 11%, compared to the same period in 2021. The decrease was primarily attributable to lower net sales of approximately $115m for integrated air and missile defense programs due to lower volume and net favorable profit adjustments (Terminal High Altitude Area Defense (THAAD) and Patriot Advanced Capability-3 (PAC-3)); about $80 m for tactical and strike missile programs due to lower volume (air dominance weapon systems, Army Tactical Missile System (ATACMS) and hypersonics); and approximately $75m for sensors and global sustainment programs due to lower volume (Special Operations Forces Global Logistics Support Services (SOF GLSS) and lower volume and net favorable profit adjustments on Sniper Advanced Targeting Pod (SNIPER®)), partially offset by the effect of a favorable profit adjustment on an international program as a result of a requirements modification in the first quarter of 2022.
MFC’s operating profit during the first quarter of 2022 decreased $12m, or 3%, compared to the same period in 2021. The decrease was primarily attributable to lower operating profit of approximately $45m for integrated air and missile defense programs due to lower net favorable profit adjustments and volume (THAAD and PAC-3), and about $10m for tactical and strike missile programs due to lower volume (ATACMS and hypersonics). These decreases were partially offset by an increase of about $50m for sensors and global sustainment programs primarily due to the effect of a favorable profit adjustment on an international program described above, partially offset by lower net favorable profit adjustments (SNIPER). Adjustments not related to volume, including net profit booking rate adjustments, were $15m higher in the first quarter of 2022 compared to the same period in 2021.
Rotary and Mission Systems
| (in ms) | Quarters Ended | |||||
| March 27,
2022 |
March 28,
2021 |
|||||
| Net sales | $ 3,552 | $ 4,107 | ||||
| Operating profit | 348 | 433 | ||||
| Operating margin | 9.8% | 10.5% | ||||
RMS’ net sales during the first quarter of 2022 decreased $555 m, or 14%, compared to the same period in 2021. The decrease was primarily attributable to lower net sales of approximately $315m for training and logistics solutions (TLS) programs primarily due to the delivery of an international pilot training system in the first quarter of 2021 that did not recur in the first quarter of 2022; about $150 m for integrated warfare systems and sensors (IWSS) programs due to lower volume (Littoral Combat Ship (LCS), TPQ-53, and Aegis); approximately $50m for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to lower volume; and approximately $40 m for Sikorsky helicopter programs due to lower production volume on the Black Hawk and VH-92A programs that was partially offset by higher production volume on the Combat Rescue Helicopter (CRH), Seahawk and CH-53K programs.
RMS’ operating profit during the first quarter of 2022 decreased $85m, or 20%, compared to the same period in 2021. The decrease was primarily attributable to approximately $35m for various C6ISR programs due to lower net favorable profit adjustments, about $30m for IWSS programs due to lower net favorable profit adjustments (Aegis); and approximately $15 m for Sikorsky helicopter programs due to lower net favorable profit adjustments (Black Hawk). Operating profit for TLS programs was comparable due to the delivery of an international pilot training system in the first quarter of 2021 that did not recur in the first quarter of 2022, offset by higher net favorable profit adjustments on various other programs. Adjustments not related to volume, including net profit booking rate adjustments, were $55m lower in the first quarter of 2022 compared to the same period in 2021.
Space
| (in ms) | Quarters Ended | |||||
| March 27,
2022 |
March 28,
2021 |
|||||
| Net sales | $ 2,559 | $ 3,015 | ||||
| Operating profit | 245 | 227 | ||||
| Operating margin | 9.6% | 7.5% | ||||
Space’s net sales during the first quarter of 2022 decreased $456 m, or 15%, compared to the same period in 2021. The decrease was primarily attributable to lower net sales of approximately $440m due to the previously announced renationalization of the Atomic Weapons Establishment (AWE) program on June 30, 2021, which was no longer included in the company’s financial results beginning in the third quarter of 2021; and about $95m for commercial civil space programs due to lower volume (Orion and human lander system (HLS) programs). These decreases were partially offset by higher net sales of about $100m for strategic and missile defense programs due to higher development volume (Next Generation Interceptor (NGI)).
Space’s operating profit during the first quarter of 2022 increased $18m, or 8%, compared to the same period in 2021. The increase was primarily attributable to approximately $35 m of higher equity earnings from the company’s investment in United Launch Alliance (ULA) driven by higher launch volume. This increase was partially offset by a decrease of approximately $30 m for commercial civil space programs due to lower net favorable profit adjustments and volume (the HLS program). Operating profit for the AWE program was comparable as its operating profit in the first quarter of 2021 was mostly offset by accelerated amortization expense for intangible assets as a result of the renationalization. Adjustments not related to volume, including net profit booking rate adjustments, were $25m lower in the first quarter of 2022 compared to the same period in 2021.
Total equity earnings/(losses) (primarily ULA) represented approximately $30m, or 12%, of Space’s operating profit in the first quarter of 2022, compared to approximately $(5)m, or (2)%, in the first quarter of 2021.
Income Taxes
The company’s effective income tax rate was 15.9% and 16.9% for the quarters ended March 27, 2022 and March 28, 2021. The rate for the first quarter of 2022 is lower due to increased tax deductions for employee equity awards and foreign derived intangible income compared to the first quarter of 2021. The rates for both periods also benefited from the research and development tax credit and dividends paid to the corporation’s defined contribution plans with an employee stock ownership plan feature.
Business segment operating profit
Business segment operating profit represents operating profit from the company’s business segments before unallocated income and expense. This measure is used by the company’s senior management in evaluating the performance of its business segments and is a performance goal in the company’s annual incentive plan. Business segment operating margin is calculated by dividing business segment operating profit by sales. The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.
| (in ms) |
Current 2022 Outlook |
||||
| Business segment operating profit (non-GAAP) | ~$7,175 | ||||
| FAS/CAS operating adjustment1 | ~1,705 | ||||
| Other, net | ~(500) | ||||
| Consolidated operating profit (GAAP) | ~$8,380 | ||||
| 1 | Reflects the amount by which expected total CAS pension cost of $1.8bn, exceeds the expected FAS pension service cost of $95 m. Excludes $555 m of expected non-service FAS pension income. Refer to the supplemental table “Selected Financial Data” included in this news release for a detail of the FAS/CAS operating adjustment. | ||||
Free cash flow
Free cash flow is cash from operations less capital expenditures. The company’s capital expenditures are comprised of equipment and facilities infrastructure and information technology (inclusive of costs for the development or purchase of internal-use software). The company uses free cash flow to evaluate its business performance and overall liquidity and is a performance goal in the company’s annual and long-term incentive plans. The company believes free cash flow is a useful measure for investors because it represents the amount of cash generated from operations after reinvesting in the business and that may be available to return to stockholders and creditors (through dividends, stock repurchase and debt repayments) or available to fund acquisitions. The entire free cash flow amount is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt.
Total FAS/CAS pension adjustment – adjusted
Total FAS/CAS pension adjustment for 2021 is used in one of the supplemental tables to this release. It has been adjusted for a noncash, non-operating pension settlement charge of $1.7 bn recognized in the third quarter of 2021. Management believes that the exclusion of the pension settlement charge related to the accelerated recognition of actuarial losses previously included in accumulated other comprehensive loss for certain pension plans as a result of the purchase of group annuity contracts from an insurance company, is useful to understanding the company’s underlying business performance and comparing performance from period to period.
Northrop Grumman
28 Apr 22. Northrop Grumman Reports First Quarter 2022 Financial Results.
- Sales of $8.8bn; Organic Sales Decrease 2 Percent
- Operating Margin Rate of 10.2 Percent, Segment Operating Margin Rate1 of 11.8 Percent
- Diluted Earnings per Share of $6.10
- 2022 Company-Level Guidance Unchanged
Northrop Grumman Corporation (NYSE: NOC) reported first quarter 2022 sales of $8.8bn, as compared with $9.2bn in the first quarter of 2021. First quarter 2022 organic sales1 decreased 2 percent. First quarter 2022 net earnings totaled $955 m, or $6.10 per diluted share, as compared with $2.2 bn, or $13.43 per diluted share, in the first quarter of 2021. First quarter 2021 results included a net after-tax benefit of $1.1 bn, or $6.86 per diluted share, related to the IT services divestiture.
“Northrop Grumman’s first quarter results reflect strong performance and were in line with our expectations,” said Kathy Warden, chair, chief executive officer and president. “Recent global geopolitical events underscore the relevance of our capabilities. Our strategy remains focused on maintaining technology leadership and delivering our customers the innovative and affordable solutions they need to protect freedoms, deter broader aggression, and contain global conflicts”
Transaction-adjusted Net Earnings and Transaction-adjusted EPS
First quarter 2021 net earnings benefited from a gain on the sale of the company’s IT services business. Excluding the gain on sale of the business, associated federal and state income tax expenses, transaction costs, as well as the make-whole premium for early debt redemption from first quarter 2021 net earnings, first quarter 2022 transaction-adjusted net earnings decreased 11 percent and transaction-adjusted EPS1 decreased 7 percent.
First quarter 2022 net earnings do not include any transaction-related adjustments. Transaction adjusted net earnings and transaction-adjusted EPS1 are measures the company uses to compare performance to prior periods and for EPS guidance.
Sales
First quarter 2022 sales decreased $360m due, in part, to a $162m reduction in sales related to the IT services divestiture. First quarter 2022 organic sales decreased $198m, or 2 percent, primarily due to lower sales at Aeronautics Systems and Defense Systems, partially offset by higher sales at Space Systems. First quarter 2022 organic sales reflect the continuation from 2021 of a tightened labor market as well as some temporal COVID-19-related headwinds early in the quarter related to supply chain and labor disruption.
Operating Income and Margin Rate First quarter 2022 operating income decreased $1.9bn, or 68 percent, primarily due to a $2.0bn pre-tax gain on sale and $192m of unallocated corporate expenses recognized in the prior year associated with the IT services divestiture. Operating income also decreased due to a $65m reduction in the FAS/CAS operating adjustment and $58m of lower segment operating income.
First quarter 2022 operating margin rate declined to 10.2 percent reflecting the items above. Segment Operating Income and Margin Rate First quarter 2022 segment operating income decreased $58m, or 5 percent. First quarter 2021 segment operating income included $20m from the IT services business, as well as a benefit of approximately $100m due to the impact of lower overhead rates on the company’s fixed price contracts.
Segment operating margin rate decreased to 11.8 percent from 12.0 percent and reflects a lower operating margin rate at Space Systems, partially offset by higher operating margin rates at Aeronautics Systems and Defense Systems. Federal and Foreign Income Taxes The first quarter 2022 effective tax rate decreased to 16.5 percent from 27.2 percent primarily due to additional federal income taxes in the prior year resulting from the IT services divestiture.
Cash Flows
First quarter 2022 cash used in operating activities increased $422m, and first quarter transaction-adjusted free cash flow1 decreased $500m, principally due to increases in trade working capital.
The net use of cash during the first quarter is consistent with the company’s historical timing of operating cash flows, which are generally more heavily weighted towards the second half of the year. Awards and Backlog First quarter 2022 net awards totaled $8.5bn and backlog totaled $75.8bn.
Significant first quarter new awards include $2.5 bn for restricted programs (primarily at Aeronautics Systems and Mission Systems), $1.3bn for Commercial Resupply Service Missions, $0.7 bn for the Space Development Agency Tranche 1 Transport Layer and $0.6bn for F-35 at Aeronautics Systems.
Segment Operating Results
AERONAUTICS SYSTEMS
Three Months Ended March 31
Sales
First quarter 2022 sales decreased $287m, or 10 percent, due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs and the E-2, Triton and F/A-18 production programs. Operating Income First quarter 2022 operating income was comparable to the prior year period.
Operating margin rate increased to 11.4 percent from 10.3 percent primarily due to a $67m favorable EAC adjustment on the engineering, manufacturing and development phase of the B-21 program largely related to performance incentives, partially offset by the previously described overhead rate benefit to fixed price contracts in the prior year.
DEFENSE SYSTEMS
Three Months Ended March 31
Sales
First quarter 2022 sales decreased $279m due, in part, to a $106m reduction in sales related to the IT services divestiture. First quarter 2022 organic sales decreased $173m, or 12 percent, principally due to lower scope on an international training program as well as lower volume on the Advanced Anti-Radiation Guided Missile (AARGM) and Precision Guided Kit (PGK) programs due to timing of ramp-up on follow-on production lots. These reductions were partially offset by higher volume on an international weapons program. Operating Income First quarter 2022 operating income decreased $22m, or 12 percent, due, in part, to a $14m reduction in operating income related to the IT services divestiture. Lower organic sales volume was partially offset by a higher operating margin rate, which increased to 12.1 percent from 11.3 percent primarily due to improved performance at Battle Management and Missile Systems.
MISSION SYSTEMS
Three Months Ended March 31
Sales
First quarter 2022 sales decreased $92m due, in part, to a $42m reduction in sales related to the IT services divestiture. First quarter 2022 organic sales1 decreased $50m, or 2 percent, primarily due to lower volume on Navigation, Targeting and Survivability programs, as well as lower volume on airborne radar and electronic warfare programs. These decreases were partially offset by an increase in restricted sales, higher volume on the Ground/Air Task-Oriented Radar program, as well as higher intercompany volume largely related to ramp-up on the Ground Based Strategic Deterrent (GBSD) program. Operating Income First quarter 2022 operating income decreased $12m, or 3 percent, principally due to lower sales. Operating margin rate was comparable to the prior year period and reflects improved performance on Maritime/Land Systems and Sensors and Navigation, Targeting and Survivability programs, partially offset by the previously described overhead rate benefit to fixed price contracts in the prior year.
SPACE SYSTEMS
Three Months Ended March 31
Sales
First quarter 2022 sales increased $334m, or 13 percent, and includes a $16m reduction in sales related to the IT services divestiture. First quarter 2022 organic sales1 increased $350m, or 14 percent, due to higher sales in both the Launch & Strategic Missiles and Space business areas. Launch & Strategic Missiles sales increased primarily due to ramp-up on development programs, including a $130 m increase on the Next Generation Interceptor program and a $117m increase on GBSD. Space sales were driven by higher volume on CRS and restricted programs, partially offset by lower volume on the James Webb Space Telescope after its successful launch in December 2021.
Operating Income
First quarter 2022 operating income decreased $15m, or 5 percent, due to a lower operating margin rate, partially offset by higher sales volume. Operating margin rate decreased to 9.1 percent from 10.9 percent primarily due to lower net EAC adjustments on commercial space programs as well as the previously described overhead rate benefit to fixed price contracts in the prior year.
Guidance
Financial guidance, as well as outlook, trends, expectations and other forward looking statements provided by the company for 2022 and beyond, reflect the company’s judgment based on the information available to the company at the time of this release. The company’s 2022 financial guidance and outlook beyond 2022 reflect what the company currently anticipates will be the impacts on the company from the global COVID-19 pandemic (including related effects on the broader economic environment), based on what the company understands today and what the company has experienced to date. However, the company cannot predict how the pandemic will evolve or what impact it will continue to have, including the potential impact of another variant of COVID-19, another surge of cases, or a prolonged recovery period, and there can be no assurance that the company’s underlying assumptions are correct. As discussed more fully in the company’s Form 10-K and in the recent Form 10-Q, and among other factors, disruptions to the company’s operations or those of its customers, supply chain and logistics challenges, effects on the labor market and our workforce, including labor shortages, vaccine mandates and other evolving government requirements, additional liabilities, disruptions in the financial markets and inflation, impacts on programs or payments, and changes in our customers’ priorities, resources and requirements, relating to the global COVID-19 pandemic, today and as it may evolve, can be expected to affect the company’s ability to achieve guidance or meet expectations. In addition, global events, such as the conflict in Ukraine, and the government budget, appropriations and procurement priorities and processes can impact our customers, programs and financial results. These events, priorities and processes, including the timing of appropriations and the occurrence of an extended continuing resolution and/or prolonged government shutdown, as well as a breach of the debt ceiling, extraordinary measures taken in connection with a breach, changes in support for our programs, or changes in federal corporate tax or securities laws and regulations, can impact the company’s ability to achieve guidance or meet expectations.
Raytheon Technologies
Raytheon Technologies Reports Q1 2022 Results
Strong EPS growth and margin expansion driven by Commercial Aerospace
26 April 22. Raytheon Technologies Corporation (NYSE: RTX) reported first quarter 2022 results and updated its 2022 outlook.
First quarter 2022
- Sales of $15.7bn, up 3 percent versus prior year including 4 percent organic growth
- GAAP EPS from continuing operations of $0.74, up 45 percent versus prior year, including $0.41 of acquisition accounting adjustments and net significant and/or non-recurring charges
- Adjusted EPS of $1.15, up 28 percent versus prior year
- Operating cash flow from continuing operations of $476m; Free cash flow of $37m
- Achieved approximately $90m of incremental RTX gross cost synergies
- Repurchased $743m of RTX shares
Outlook for full year 2022
- Sales of $67.75 – $68.75 bn, down from $68.5 – $69.5bn. Driven by global sanctions on Russia.
- Confirms adjusted EPS of $4.60 – $4.80
- Confirms free cash flow of approximately $6.0 bn. Assumes the legislation requiring R&D capitalization for tax purposes is deferred beyond 2022.
- Confirms share repurchase of at least $2.5 bn of RTX shares
“The strong commercial aerospace recovery and our focus on operational execution enabled us to deliver both top-line growth and margin expansion year-over-year. As a result, adjusted EPS and free cash flow exceeded our expectations in the first quarter,” said Raytheon Technologies Chairman and CEO Greg Hayes. “We remain confident in the long-term outlook for our businesses, supported by the return to travel and growing global defense budgets. Now more than ever, we are committed to investing in next-generation technologies and serving our customers to meet their mission-critical needs across aerospace and defense.”
First quarter 2022
Raytheon Technologies reported first quarter sales of $15.7bn, up 3 percent over the prior year, including 4 points of organic sales growth partially offset by 1 point of net acquisitions and divestitures headwind. GAAP EPS from continuing operations of $0.74 was up 45 percent versus the prior year and included $0.41 of acquisition accounting adjustments and net significant and/or non-recurring charges. This includes $0.25 of acquisition accounting adjustments primarily related to intangible amortization, $0.14 related to the cessation of our business activities in Russia, and $0.02 of restructuring. Adjusted EPS of $1.15 was up 28 percent versus prior year.
The company recorded net income from continuing operations in the first quarter of $1.1bn, up 43 percent versus prior year and included $620m of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $1.7bn, up 26 percent versus prior year. Operating cash flow from continuing operations in the first quarter was $476 m. Capital expenditures were $439 m, resulting in free cash flow of $37 m.
| Summary Financial Results – Continuing Operations | |||||||||||
| 1st Quarter | |||||||||||
| ($ in ms, except EPS) | 2022 | 2021 | % Change | ||||||||
| Reported | |||||||||||
| Sales | $ 15,716 | $ 15,251 | 3% | ||||||||
| Net Income | $ 1,103 | $ 772 | 43% | ||||||||
| EPS | $ 0.74 | $ 0.51 | 45% | ||||||||
| Adjusted | |||||||||||
| Sales | $ 15,716 | $ 15,251 | 3% | ||||||||
| Net Income | $ 1,723 | $ 1,370 | 26% | ||||||||
| EPS | $ 1.15 | $ 0.90 | 28% | ||||||||
| Operating Cash Flow from Continuing Operations | $ 476 | $ 723 | (34)% | ||||||||
| Free Cash Flow | $ 37 | $ 336 | (89)% | ||||||||
Backlog and Bookings
Backlog at the end of the first quarter was $154 bn, of which $92bn was from commercial aerospace and $62bn was from defense.
Notable defense bookings during the quarter included:
- $1.2bn in classified bookings including a strategic competitive award at Raytheon Missiles & Defense (RMD)
- $1.1bn of classified bookings at Raytheon Intelligence & Space (RIS)
- $651m for a SPY-6 production and sustainment contract for the U.S. Navy at RMD
- $384m for Excalibur Rapid Demonstration Phase 2 for the U.S. Army at RMD
- $311m on Next-Generation Overhead Persistent Infrared GEO missile warning and defense for the U.S. Space Force at RIS
- $251m for tanker production Lots 7 and 8 at Pratt & Whitney
- $219m for AIM-9X Sidewinder for the U.S. Navy, U.S. Air Force and international customers at RMD
- $218m for Patriot engineering services for the U.S. Army and international customers at RMD
Segment Results
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
| Collins Aerospace | ||||||||||
| 1st Quarter | ||||||||||
| ($ in ms) | 2022 | 2021 | Change | |||||||
| Reported | ||||||||||
| Sales | $ 4,824 | $ 4,370 | 10% | |||||||
| Operating Profit | $ 440 | $ 314 | 40% | |||||||
| ROS | 9.1% | 7.2% | 190 | bps | ||||||
| Adjusted | ||||||||||
| Sales | $ 4,824 | $ 4,370 | 10% | |||||||
| Operating Profit | $ 584 | $ 332 | 76% | |||||||
| ROS | 12.1% | 7.6% | 450 | bps | ||||||
Collins Aerospace had first quarter 2022 adjusted sales of $4,824m, up 10 percent versus the prior year. The increase in sales was driven by a 39 percent increase in commercial aftermarket and a 12 percent increase in commercial OE, which more than offset a 12 percent decline in military. The increase in commercial sales was driven primarily by the recovery of commercial air traffic which has resulted in higher flight hours, aircraft fleet utilization and narrowbody OE volume. This was partially offset by supply chain constraints on military programs as well as expected declines in F-35 volume.
Collins Aerospace recorded adjusted operating profit of $584m in the quarter, up 76 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket, which more than offset lower military sales volume and higher SG&A expense.
| Pratt & Whitney | ||||||||||
| 1st Quarter | ||||||||||
| ($ in ms) | 2022 | 2021 | Change | |||||||
| Reported | ||||||||||
| Sales | $ 4,529 | $ 4,030 | 12% | |||||||
| Operating Profit | $ 151 | $ 20 | 655% | |||||||
| ROS | 3.3% | 0.5% | 280 | bps | ||||||
| Adjusted | ||||||||||
| Sales | $ 4,529 | $ 4,030 | 12% | |||||||
| Operating Profit | $ 308 | $ 40 | 670% | |||||||
| ROS | 6.8% | 1.0% | 580 | bps | ||||||
Pratt & Whitney had first quarter 2022 adjusted sales of $4,529m, up 12 percent versus the prior year. The increase in sales was driven by a 37 percent increase in commercial aftermarket and a 12 percent increase in commercial OE, which more than offset an 11 percent decrease in military. The increase in commercial sales was primarily due to higher shop visits and related spare part sales, and favorable large commercial engine mix. The decrease in military sales was driven primarily by F135 production contract award timing and lower expected production volume that more than offset higher F135 aftermarket volume.
Pratt & Whitney recorded adjusted operating profit of $308m in the quarter, up 670 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume, favorable large commercial OE mix and higher Pratt Canada OE volume. This was partially offset by higher SG&A and E&D as well as lower military sales volume.
| Raytheon Intelligence & Space | ||||||||||
| 1st Quarter | ||||||||||
| ($ in ms) | 2022 | 2021 | Change | |||||||
| Reported | ||||||||||
| Sales | $ 3,572 | $ 3,765 | (5)% | |||||||
| Operating Profit | $ 378 | $ 388 | (3)% | |||||||
| ROS | 10.6% | 10.3% | 30 | bps | ||||||
| Adjusted | ||||||||||
| Sales | $ 3,572 | $ 3,765 | (5)% | |||||||
| Operating Profit | $ 378 | $ 388 | (3)% | |||||||
| ROS | 10.6% | 10.3% | 30 | bps | ||||||
RIS had first quarter 2022 adjusted sales of $3,572m, down 5 percent versus the prior year. The decrease in sales was primarily driven by the divestiture of the Global Training and Services business. Excluding the impact of acquisitions and divestitures, sales were down slightly versus prior year. Lower sales in command/control and communications as well as sensing and effects were nearly offset by higher sales in classified cyber programs.
RIS recorded adjusted operating profit of $378m, down 3 percent versus the prior year. The decrease in adjusted operating profit was primarily driven by the impact of the Global Training and Services divestiture, partially offset by net productivity across various programs.
| Raytheon Missiles & Defense | |||||
| 1st Quarter | |||||
| ($ in ms) | 2022 | 2021 | Change | ||
| Reported | |||||
| Sales | $ 3,527 | $ 3,793 | (7)% | ||
| Operating Profit | $ 387 | $ 496 | (22)% | ||
| ROS | 11.0% | 13.1% | (210) | bps | |
| Adjusted | |||||
| Sales | $ 3,527 | $ 3,793 | (7)% | ||
| Operating Profit | $ 387 | $ 496 | (22)% | ||
| ROS | 11.0% | 13.1% | (210) | bps | |
RMD had first quarter 2022 adjusted sales of $3,527m, down 7 percent versus prior year. The decrease in sales was primarily driven by continuing supply chain constraints and declines on certain Land Warfare and Air Defense programs.
RMD recorded adjusted operating profit of $387m, down 22 percent versus the prior year. The decrease in adjusted operating profit was driven primarily by lower net program efficiencies and unfavorable program mix.
Textron
28 Apr 22. Textron Reports First Quarter 2022 Results
- EPS of $0.88, up $0.18 from adjusted EPS in the first quarter of 2021
- Aviation backlog $5.1bn, up $1.0 bn from year-end 2021
- Net cash from operating activities of $225 m, up $118 m from the first quarter of 2021
Textron Inc. (NYSE: TXT) today reported first quarter 2022 net income of $0.88 per share, compared with $0.75 per share, or $0.70 per share of adjusted net income, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, in the first quarter of 2021.
“In the quarter, we saw higher overall revenues, net operating profit and cash generation as compared to last year’s first quarter,” said Textron Chairman and CEO Scott C. Donnelly. “At Textron Aviation, we saw continued strong order momentum with backlog growth of $1bn and solid execution with segment profit margin of 11.6%.”
Cash Flow
Net cash provided by operating activities of the manufacturing group for the first quarter was $225 m, compared to $107 m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $209 m for the first quarter, compared to $71m last year.
In the quarter, Textron returned $157 m to shareholders through share repurchases.
First Quarter Segment Results
Textron Aviation
Revenues at Textron Aviation of $1.0bn were up $175m from the first quarter of 2021, largely due to higher aircraft and aftermarket volume.
Textron Aviation delivered 39 jets in the quarter, up from 28 last year, and 31 commercial turboprops, up from 14 in last year’s first quarter.
Segment profit was $121m in the first quarter, up $74m from a year ago, largely due to the impact from higher volume and mix of $55m and favorable pricing, net of inflation of $16m.
Textron Aviation backlog at the end of the first quarter was $5.1 bn.
Bell
Bell revenues were $834 m, down $12m from last year, due to lower commercial revenues of $32m, largely reflecting the mix of aircraft sold during the periods, partially offset by higher military revenues of $20m.
Bell delivered 25 commercial helicopters in the quarter, up from 17 last year.
Segment profit of $98 m was down $7m, primarily reflecting lower volume and mix described above, partially offset by a favorable impact from performance.
Bell backlog at the end of the first quarter was $4.8bn.
Textron Systems
Revenues at Textron Systems were $273m, down $55m from last year’s first quarter due to lower volume of $59m, primarily reflecting the impact of the U.S. Army’s withdrawal from Afghanistan on our fee-for-service and aircraft support contracts.
Segment profit of $33m was down $18m from a year ago, largely due to the impact of lower volume and mix of $11m and an unfavorable impact from performance of $9 m, primarily reflecting lower net favorable program adjustments related to our fee-for-service contracts.
Textron Systems’ backlog at the end of the first quarter was $2.1bn.
Industrial
Industrial revenues were $838m, up $13 m from last year, primarily due to a favorable impact of $46 m from pricing, principally in the Specialized Vehicles product line, partially offset by lower volume and mix in the Fuel Systems and Functional Components product line due to the impact of global supply chain shortages on our auto OEM customers.
Segment profit of $43 m was down $4m from the first quarter of 2021, primarily due to the lower volume and mix described above.
Finance
Finance segment revenues were $16m, and profit was $ m.
(Source: BUSINESS WIRE)