Boeing 2010 Annual Report Download - page 45

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Research and Development The BMA segment continues to focus research and development
resources to leverage customer knowledge, technical expertise and system integration of manned and
unmanned systems that provide innovative solutions to meet the warfighter’s enduring needs.
Research and development expense remained flat in 2010 but in 2009 increased by 20% over 2008
primarily due to increased prototyping activities which were partially offset by lower international tanker
development costs. Research and development activities utilize our capabilities in architectures,
system-of-systems integration and weapon systems technologies to develop solutions which are
designed to better prepare us to meet customers’ needs in U.S. and international growth areas such
as: military-commercial derivatives, rotorcraft, global strike, missiles and unmanned airborne systems,
and surveillance and engagement systems. The products of our research and development support
both new manned and unmanned systems as well as enhanced versions of existing fielded products.
Investments support vertical integration of our product line in areas such as autonomous operation of
unmanned systems, advanced sensors and electronic warfare. These efforts focus on increasing
mission effectiveness, interoperability, reliability and reducing the cost of ownership.
Backlog BMA total backlog in 2010 decreased 6% from 2009, primarily due to deliveries and sales on
multi-year contracts awarded in prior years partially offset by a multi-year contract award on the F/A-18
program. Total backlog in 2009 was virtually unchanged from 2008. Backlog increases due to 2009
orders for C-17, P-8I and Chinook aircraft were offset by revenues recognized on multi-year contracts
received in prior years with the largest decrease in the F/A-18 program.
Additional Considerations
AEW&C The AEW&C development program, also known as Wedgetail in Australia, Peace Eagle in
Turkey and Peace Eye in the Republic of Korea, consists of 737-700 aircraft outfitted with a variety of
command and control and advanced radar systems, some of which have never been installed on an
airplane before. Wedgetail includes six aircraft and Peace Eagle and Peace Eye include four aircraft
each. During 2010, 2009 and 2008, we recorded charges increasing the reach-forward losses on the
AEW&C programs in Australia and Turkey by $174 million, $133 million and $308 million, respectively.
These charges reflect technical performance issues associated with the test program, delivery
schedule delays, subsystem development issues, and additional time for integration testing. During
2010, four Wedgetail aircraft were delivered to Australia with initial customer acceptance. Final
customer acceptance for all six Wedgetail aircraft is scheduled to be completed by the end of 2011. In
January 2011, the Peace Eagle program began the formal test phase. These are advanced and
complex fixed-price development programs involving technical challenges at the individual subsystem
level and in the overall integration of these subsystems into a reliable and effective operational
capability. We believe that the cost and revenue estimates incorporated in the financial statements are
appropriate; however, the technical complexity of the programs creates financial risk as additional
completion costs may be necessary or scheduled delivery dates could be delayed.
KC-767 International Tanker The KC-767 International Tanker program includes four aircraft for the
Italian Air Force and four aircraft for the Japanese Air Self Defense Force. During 2010, 2009 and
2008, we recorded charges increasing the reach-forward losses in the KC-767 International Tanker
program by $53 million, $78 million and $85 million, respectively. The final delivery to Japan was made
in December 2009 and first delivery to Italy was made in December 2010. The Italian KC-767 Tanker
program is ongoing, and while we believe the revenue and cost estimates incorporated in the financial
statements are appropriate, the technical complexity of the program creates financial risk as additional
completion and development costs may be necessary or remaining scheduled delivery dates could be
delayed.
C-17 See the discussion of the C-17 program in Note 11 to our Consolidated Financial Statements.
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