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The Boeing Company
2011 Annual Report
The Boeing Company
2011 Annual Report
73417bo_cvr 1 3/1/12 10:35 AM

Table of contents

  • Page 1
    The Boeing Company Company 2011 AnnualReport Report 201 1 Annual

  • Page 2
    ... largest aerospace company and leading manufacturer of commercial airplanes and defense, space and security systems. The top U.S. exporter, Boeing supports airlines and U.S. and allied government customers in more than 150 countries. Our products and tailored services include commercial and military...

  • Page 3
    ... to begin design and development of the core rocket stages and avionics system for NASA's new manned Space Launch System. - Opened our new 787 final assembly facility and delivery center in South Carolina; raised production rates to meet rising demand for all commercial airplane models; and...

  • Page 4
    ... in 2012-with a clearer view of our future and an unprecedented opportunity for growth in the years ahead. 2011 Review Our core production programs and services businesses in Boeing Commercial Airplanes and Boeing Defense, Space & Security performed exceptionally well in 2011, leading to operating...

  • Page 5
    ... Everett, Washington, facility. With improving performance throughout the supply chain, we raised the rate to 3.5 per month in the first quarter of 2012, and plan to increase the rate to 5 per month by year-end. Our new 787 final assembly facility in North Charleston, South Carolina, which opened...

  • Page 6
    ... owwortunities in core, adjacent and international markets deswite budgetary headwinds. Investing in Our Communities 26% $ in millions 39% 35% 2007 2008 2009 2010 2011 Employee Financial Giving 38.0 Charitable Grants 57.0 Business-related Donations 52.3 Total $147.3 We delivered 477 airwlanes...

  • Page 7
    ... our manufacturing and engineering base in South Carolina and other locations. Our priorities, then, for Commercial Airplanes are: First, steadily and profitably increase production rates to deliver our 3,771-airplane backlog; second, execute 787-9 and 737 MAX development efforts on plan; third...

  • Page 8
    ...help community partners achieve their goals in service to others. We also hired more than 1,800 military veterans, whose skills and experience matched our needs. Our Moment These are exciting times for the people of Boeing. With strong product-and-services strategies, a record backlog of orders, and...

  • Page 9
    ...Mr. Bell retires April 1, 2012, but plans on staying active in civic and business roles. James A. Bell Retiring Executive Vice President, Corporate President and Chief Financial Officer The Executive Council Our people are using the size and scope of our company to solve problems more quickly and...

  • Page 10
    ... Results In 2011, Boeing improved on each of our principal financial metrics. With strong product-and-services strategies, a record backlog of orders, and a commitment to innovation and continuous productivity improvement, we are positioned for significant and sustained growth in the years ahead...

  • Page 11
    ... stock outstanding as of February 1, 2012 was 745,720,763. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates information by reference to the registrant's definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year...

  • Page 12
    ...of Equity Securities ...Item 6. Selected Financial Data ...Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...Item 7A. Quantitative and Qualitative Disclosures About Market Risk ...Item 8. Financial Statements and Supplementary Data ...Item 9. Changes in...

  • Page 13
    ... Airplanes segment also offers aviation services support, aircraft modifications, spares, training, maintenance documents and technical advice to commercial and government customers worldwide. Boeing Defense, Space & Security Our BDS operations principally involve research, development, production...

  • Page 14
    ... solutions for our BDS government customers. BCC's portfolio consists of equipment under operating leases, finance leases, notes and other receivables, assets held for sale or re-lease and investments. Financial and Other Business Information See page 54 for the Summary of Business Segment Data...

  • Page 15
    ...343 million in 2011, 2010 and 2009, respectively. Research and development highlights for each of the major business segments are discussed in more detail in Segment Results of Operations and Financial Condition on pages 23 - 38. Employees Total workforce level at December 31, 2011 was approximately...

  • Page 16
    ... to compete with other airplane manufacturers by providing customers with greater value products, services, and support. We continue to leverage our extensive customer support services network which includes aviation support, spares, training, maintenance documents and technical advice for airlines...

  • Page 17
    ..., investment, exchange controls and repatriation of earnings. International sales are also subject to varying currency, political and economic risks. Raw Materials, Parts, and Subassemblies We are highly dependent on the availability of essential materials, parts and subassemblies from our suppliers...

  • Page 18
    ... Officers and Corporate Governance" in Part III. Other Information Boeing was originally incorporated in the State of Washington in 1916 and reincorporated in Delaware in 1934. Our principal executive offices are located at 100 N. Riverside Plaza, Chicago, Illinois 60606 and our telephone number...

  • Page 19
    ...profits from those customers. Our Commercial Airplanes business depends on our ability to develop new aircraft, achieve planned production rate increases across multiple programs and maintain a healthy production system. The design and production of airplanes is complex and requires exotic materials...

  • Page 20
    ... production costs and/or lower program revenues. If we fail to deliver aircraft to our customers on time or meet contractual performance requirements, we could experience order cancellations or other significant financial exposures, or a reduction of the profitability of our Commercial Airplanes...

  • Page 21
    ... financial condition. For example, in late 2011 the U.S. DoD published new regulations with stringent requirements and criteria to increase Government oversight of six key business systems of all prime contractors: accounting, earned value management, purchasing, material management and accounting...

  • Page 22
    ... or program because costs also include expected increases in wages and employee benefits, material prices and allocated fixed costs. Incentives or penalties related to performance on contracts are considered in estimating sales and profit rates, and are recorded when there is sufficient information...

  • Page 23
    ...total program. Several factors determine accounting quantity, including firm orders, letters of intent from prospective customers and market studies. Changes to customer or model mix, production costs and rates, learning curve, escalation, costs of derivative aircraft, supplier performance, customer...

  • Page 24
    ... the aircraft on reasonable terms, or if the types of aircraft that are concentrated in our portfolio suffer greater than expected declines in value, our earnings, cash flows and/or financial position could be materially adversely affected. We may be unable to obtain debt to fund our operations and...

  • Page 25
    ... our future sales and financial condition or increase our costs and expenses. Our business may be impacted by disruptions including threats to physical security, information technology or cyber-attacks or failures, damaging weather or other acts of nature and pandemics or other public health crises...

  • Page 26
    ... as the discount rate, the expected long-term rate of return on plan assets and expected future medical inflation. Changes to these assumptions and differences between projected and actual performance can have a significant effect on our annual pension and other post retirement costs and/or result...

  • Page 27
    ... and other productive uses, of which approximately 96% was located in the United States. The following table provides a summary of the floor space by business as of December 31, 2011: (Square feet in thousands) Commercial Airplanes Boeing Defense, Space & Security Other** Total * ** Owned Leased 36...

  • Page 28
    On April 20, 2011, the National Labor Relations Board (NLRB) issued a complaint regarding our decision to build a 787 final assembly plant in North Charleston, South Carolina. On December 8, 2011 the IAM requested that its charge be withdrawn, and on December 9, 2011 the NLRB withdrew the charge and...

  • Page 29
    ... December 31, 2011 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act: (Dollars in millions, except per share data) (a) (b) (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares That May Yet...

  • Page 30
    ...term and other investments Total debt Customer financing assets Shareholders' equity(2) Per share Common shares outstanding (in millions)(3) Contractual Backlog: Commercial Airplanes Boeing Defense, Space & Security:(1) Boeing Military Aircraft Network & Space Systems Global Services & Support Total...

  • Page 31
    ...'s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Results of Operations and Financial Condition Overview We are a global market leader in design, development, manufacture, sale and support of commercial jetliners, military aircraft, satellites, missile defense...

  • Page 32
    ... to the expiration of the ShareValue trust at June 30, 2010. Deferred compensation expense decreased by $51 million and $46 million in 2011 and 2010. The year over year changes in deferred compensation expense are primarily driven by changes in our stock price and broad stock market conditions. 20

  • Page 33
    ... statements and federal cost accounting standards required to be utilized by our business segments for U.S. government contracting purposes. We recorded net periodic benefit cost related to pensions and other postretirement benefits of $3,127 million, $1,864 million and $1,816 million in 2011, 2010...

  • Page 34
    ... of our 767 commercial aircraft. This contract is a fixed-price incentive firm contract valued at $4.9 billion and involves highly complex designs. Changes to our estimated cost to perform the work could result in a material charge. This contract contains production options. If all options under the...

  • Page 35
    ... acceptable profit margins. Continued access to global markets remains vital to our ability to fully realize our sales potential and long-term investment returns. Approximately 15% of Commercial Airplanes' contractual backlog, in dollar terms, is with U.S. airlines. We face aggressive international...

  • Page 36
    ...such initiatives targeting overhead cost savings, a reduction in its development cycle and a significant increase in overall productivity through 2012. If the U.S. dollar strengthens, Airbus can use the improved efficiency to fund product development, gain market share through pricing and/or improve...

  • Page 37
    ... rate change from 7 to 5 per month beginning in June 2010 and no deliveries on the 747 program due to the transition from the 747-400 to the 747-8 derivative. The increase in revenues from commercial aviation services business was primarily due to increased sales of spares. Commercial airplanes...

  • Page 38
    ... 737 Program The accounting quantity for the 737 program increased by 1,200 units in 2011 due to the program's normal progress of obtaining additional orders and delivering airplanes. During 2010, we announced plans to increase monthly production from 31.5 to 35 airplanes per month beginning in 2012...

  • Page 39
    ... planned increases in 787 production rates while continuing to satisfy customer mission and performance requirements. We also continue to monitor and address challenges associated with aircraft assembly, including management of our extended global supply chain, incorporation of design changes...

  • Page 40
    ... throughout the operational life of the airplane. They include flight and maintenance training, field service support costs, engineering services, information services and systems and technical data and documents. The costs for fleet support are expensed as incurred and have been historically less...

  • Page 41
    ... or a material charge if a program has or is determined to have reach-forward losses. These include: changes to the program accounting quantity, customer and model mix, production costs and rates, capital expenditures and other costs associated with increasing or adding new production capacity...

  • Page 42
    ...not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow-on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily...

  • Page 43
    ...these programs include Family of Beyond Line-of-Sight Terminals, P-8A and Proprietary programs. Some of our development programs are contracted on a fixed-price basis. Many of these programs have highly complex designs. As technical or quality issues arise, we may experience schedule delays and cost...

  • Page 44
    ... on increasing mission effectiveness, interoperability, reliability and reducing the cost of ownership. Backlog BMA total backlog in 2011 decreased by 6% from 2010, primarily due to current year deliveries and sales on multi-year contracts awarded in prior years partially offset by BMA's share of...

  • Page 45
    ... 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...

  • Page 46
    ... systems. Along with increased funding to support these network-enabled capabilities, we also maintained our investment levels in missile defense, directed energy and advanced exploration systems. Backlog N&SS total backlog decreased 14% in 2011 compared with 2010 primarily due to termination...

  • Page 47
    ... the development and implementation of innovative tools, processes and systems which will deliver affordable readiness solutions to our customers. Backlog GS&S total backlog decreased by 3% in 2011 compared with 2010 primarily due to revenues recognized on multi-year contracts awarded in prior years...

  • Page 48
    ... by increased financing availability from other sources, such as capital markets, lessors, and banks from other regions of the world. Aircraft values and lease rates are impacted by the number and type of aircraft that are currently out of service. Approximately 2,000 western-built commercial jet...

  • Page 49
    ... under operating lease. At December 31, 2011 and 2010, BCC had $521 million and $583 million of assets that were held for sale or re-lease, of which $476 million and $28 million had either executed term sheets with deposits or firm contracts to be sold or placed on lease. Additionally, aircraft...

  • Page 50
    ... totaled $1,713 million up from $1,125 million in 2010. Capital spending in 2011 is higher than 2010 due to the construction of a 787 final assembly factory and related site buildings in North Charleston, South Carolina, higher spending to support commercial airplane production rate increases...

  • Page 51
    ... as short-term. In 2011 and 2010, we had 350,778 and 494,939 shares transferred to us from employees for tax withholding and did not repurchase any shares through our open market share repurchase program. During 2009, cash used in our open market share repurchase program totaled $50 million...

  • Page 52
    ...After 5 years (Dollars in millions) Long-term debt (including current portion) Interest on debt(1) Pension and other postretirement cash requirements Capital lease obligations Operating lease obligations Purchase obligations not recorded on the Consolidated Statements of Financial Position Purchase...

  • Page 53
    ... certain customers outside of the U.S. to facilitate economic flow back and/or technology transfer to their businesses or government agencies as the result of their procurement of goods and/or services from us. These commitments may be satisfied by our placement of direct work or vendor orders for...

  • Page 54
    ... product or service plus profit. Federal acquisition regulations provide guidance on the types of cost that will be reimbursed in establishing contract price. Total contract cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, business...

  • Page 55
    ... or positively affect financial performance in future periods. If combined cost of sales percentages for commercial airplane programs, excluding the 747 and 787 programs, for all of 2011 had been estimated to be higher or lower by 1%, it would have increased or decreased pre-tax income for the year...

  • Page 56
    ...determining the expected undiscounted cash flow including the expected future lease rates, lease terms, residual value of the asset, periods in which the asset may be held in preparation for a follow-on lease, maintenance costs, remarketing costs and the remaining economic life of the asset. When we...

  • Page 57
    ... related operations using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future sales and operating costs, based primarily on existing firm orders, expected future orders, contracts with suppliers, labor agreements, and general market conditions. Changes in...

  • Page 58
    ... sensitive to changes in the expected long-term rate of asset return. A decrease or increase of 25 basis points in the expected long-term rate of asset return would have increased or decreased 2011 net periodic pension expense by $124 million. We expect 2012 net periodic pension cost to increase by...

  • Page 59
    ...unchanged from year-end 2011 and that they are all subject to immediate re-pricing. Historically, we have not experienced material gains or losses on our investments or customer financing assets and liabilities due to interest rate changes. Based on the portfolio of other Boeing fixed-rate debt, the...

  • Page 60
    ... Consolidated Financial Statements Consolidated Statements of Operations ...Consolidated Statements of Financial Position ...Consolidated Statements of Cash Flows ...Consolidated Statements of Equity ...Summary of Business Segment Data ...Note 1 - Summary of Significant Accounting Policies ...Note...

  • Page 61
    ... (Dollars in millions, except per share data) Years ended December 31, Sales of products Sales of services Total revenues Cost of products Cost of services Boeing Capital Corporation interest expense Total costs and expenses Income from operating investments, net General and administrative expense...

  • Page 62
    The Boeing Company and Subsidiaries Consolidated Statements of Financial Position (Dollars in millions, except per share data) December 31, Assets Cash and cash equivalents Short-term and other investments Accounts receivable, net Current portion of customer financing, net Deferred income taxes ...

  • Page 63
    ... of related costs Income taxes receivable, payable and deferred Other long-term liabilities Pension and other postretirement plans Customer financing, net Other Net cash provided by operating activities Cash flows - investing activities: Property, plant and equipment additions Property, plant and...

  • Page 64
    ... Consolidated Statements of Equity Boeing shareholders Additional Common Paid-In Treasury Stock Capital Stock $5,061 Accumulated ShareOther NonValue Retained Comprehensive controlling Trust Earnings Loss Interest ($13,525) $152 2 159 30 38 154 1,267 1,312 (Dollars in millions, except per share data...

  • Page 65
    ...) Boeing shareholders Accumulated Additional ShareOther NonCommon Paid-In Treasury Value Retained Comprehensive controlling Stock Capital Stock Trust Earnings Loss Interest $5,061 $3,866 ($17,187) $24,784 4,018 (13) (2) (16) (35) (2,676) ($13,758) $96 (1) (Dollars in millions, except per share data...

  • Page 66
    ... Statements Summary of Business Segment Data (Dollars in millions) Years ended December 31, Revenues: Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation...

  • Page 67
    ... 31, 2011, 2010 and 2009 (Dollars in millions, except per share data) Note 1 - Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The Consolidated Financial Statements included in this report have been prepared by management of The Boeing Company (herein...

  • Page 68
    ...: support agreements associated with military aircraft and helicopter contracts, ongoing maintenance of International Space Station and Space Shuttle, commercial Delta launches and technical and flight operation services for commercial aircraft. Service revenue and associated cost of sales from pay...

  • Page 69
    ... safe aircraft operation to the operators of all our commercial airplane models. Collectively known as fleet support services, these activities and services include flight and maintenance training, field service support, engineering services, and technical data and documents. Fleet support activity...

  • Page 70
    ... postretirement benefit plans are generally based on age at retirement and years of service and, for some pension plans, benefits are also based on the employee's annual earnings. The net periodic cost of our pension and other postretirement plans is determined using the projected unit credit method...

  • Page 71
    ...mainly of uncleared checks, to Accounts payable. Negative balances reclassified to Accounts payable were $132 and $209 at December 31, 2011 and 2010. Inventories Inventoried costs on commercial aircraft programs and long-term contracts include direct engineering, production and tooling and other non...

  • Page 72
    ... on historical sales trends, expected production usage, and the size and age of the aircraft fleet using the part. Impaired inventories are charged to Cost of products in the period the impairment occurs. Included in inventory for commercial aircraft programs are amounts paid or credited in cash, or...

  • Page 73
    ...' digits. Capitalized internal use software is included in Other assets and amortized using the straight line method over five years. We periodically evaluate the appropriateness of remaining depreciable lives assigned to long-lived assets, including assets that may be subject to a management plan...

  • Page 74
    ... a cash flow hedge is reported in earnings immediately. We also hold certain instruments for economic purposes that are not designated for hedge accounting treatment. For these derivative instruments, the changes in their fair value are also recorded in earnings immediately. Aircraft Valuation Used...

  • Page 75
    ...assets under operating leases and held for sale or re-lease We evaluate for impairment assets under operating lease or assets held for sale or re-lease when events or changes in circumstances indicate that the expected undiscounted cash flow from the asset may be less than the carrying value. We use...

  • Page 76
    ...operating lease before it is sold, the expected future lease rates, lease terms, residual value of the asset, periods in which the asset may be held in preparation for a follow-on lease, maintenance costs, remarketing costs and the remaining economic life of the asset. We record assets held for sale...

  • Page 77
    ... claims level. Estimated costs of these additional warranty issues are considered changes to the initial liability estimate. We provide guarantees to certain commercial airplane customers which include compensation provisions for failure to meet specified aircraft performance targets. We account for...

  • Page 78
    ... operations from the acquisition date are included in our Commercial Airplanes segment. The final allocation of the purchase price is as follows: Inventory Property, plant and equipment Goodwill Finite-lived intangible assets(1) Accounts payable Accrued liabilities Other long-term liabilities Total...

  • Page 79
    Note 3 - Goodwill and Acquired Intangibles Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2011, 2010 and 2009 were as follows: Boeing Network Global Commercial Military & Space Services Airplanes Aircraft Systems & Support Balance at January 1, 2009...

  • Page 80
    ... shares in the future. (Shares in millions) Years ended December 31, Stock options Performance Awards ShareValue Trust Performance Shares Stock Units Note 5 - Income Taxes The components of earnings before income taxes were: Years ended December 31, U.S. Non-U.S. Total Income tax expense/(benefit...

  • Page 81
    ... and development related to acquisitions Net operating loss, credit and capital loss carryovers (net of valuation allowance of $74 and $78) Pension asset Customer and commercial financing Unremitted earnings of non-U.S. subsidiaries Other net unrealized losses Net deferred tax assets(1) (1) 2010...

  • Page 82
    ... would extend the credit. If the Research and Development credit is not extended there would be an unfavorable impact to our 2012 effective income tax rate. For the years ended December 31, 2011, 2010 and 2009, the Research and Development credit reduced our effective tax rate by 2.7%, 3.5%, and 10...

  • Page 83
    ... December 31 consisted of the following: 2011 Long-term contracts in progress Commercial aircraft programs Commercial spare parts, used aircraft, general stock materials and other Inventory before advances and progress billings Less advances and progress billings Total 2010 $ 13,587 $ 14,400 35,080...

  • Page 84
    ... expected future orders. Commercial aircraft program inventory included amounts credited in cash or other consideration (early issue sales consideration), to airline customers totaling $2,564 and $1,970 at December 31, 2011 and 2010. As a normal course of our Commercial Airplanes segment production...

  • Page 85
    ... in sales-type/finance leases at December 31 were as follows: 2011 Minimum lease payments receivable Estimated residual value of leased assets Unearned income Total 2010 $2,272 $ 2,879 541 619 (776) (1,226) $2,037 $ 2,272 Operating lease equipment primarily includes large commercial jet aircraft...

  • Page 86
    ...our allowance for losses on receivables. Our rating categories are comparable to those used by the major credit rating agencies. The customer financing valuation benefit recorded in 2011 was primarily driven by changes in the internal credit rating categories assigned to our receivable balances from...

  • Page 87
    ...: 2011 2010 2009 Boeing Capital Corporation Other Boeing Total Scheduled receipts on customer financing are as follows: Year Principal payments on notes receivable Sales-type/finance lease payments receivable Operating lease equipment payments receivable 2012 2013 2014 2015 2016 Beyond 2016 $243...

  • Page 88
    ... on operating leases Minimum capital lease payments, net of sublease amounts 2012 2013 2014 2015 2016 $202 $180 $152 $100 $81 15 91 14 73 13 25 13 6 10 1 Accounts payable related to purchases of property, plant and equipment were $200 and $265 for the years ended December 31, 2011 and 2010. Note...

  • Page 89
    ... Accrued Compensation and employee benefit costs Environmental Product warranties Forward loss recognition(1) Other Total (1) Forward loss recognition in 2011 relates primarily to the Airborne Early Warning and Control program (AEW&C). $1,934 of loss related to the 747 Program included in the 2010...

  • Page 90
    ... the sale of new aircraft (Sale Aircraft), we have entered into specified-price trade-in commitments with certain customers that give them the right to trade in used aircraft upon the purchase of Sale Aircraft. The total contractual trade-in value was $273 and $295 as of December 31, 2011 and 2010...

  • Page 91
    ... $9,865 as of December 31, 2011 and 2010. The estimated earliest potential funding dates for these commitments as of December 31, 2011 are as follows: Total 2012 2013 2014 2015 2016 Thereafter $ 1,562 1,207 2,217 3,639 2,475 4,766 $15,866 Standby Letters of Credit and Surety Bonds We have entered...

  • Page 92
    ... associated products and services. We expect this order to be under contract in 2012. Company Owned Life Insurance McDonnell Douglas Corporation insured its executives with Company Owned Life Insurance (COLI), which are life insurance policies with a cash surrender value. Although we do not use COLI...

  • Page 93
    ...of Boeing Capital Corporation's (BCC) Commercial Financial Services business, BCC is involved in a loss sharing arrangement for losses on transferred portfolio assets, such as asset sales, provisions for loss or asset impairment charges offset by gains from asset sales. At December 31, 2011 and 2010...

  • Page 94
    ... Consolidated Statements of Financial Position. As of December 31, 2011 and 2010, the net assets associated with the City of Wichita IRBs were $783 and $822. Note 14 - Debt On August 1, 2011, BCC issued notes totaling $750, which included $500 bearing an interest rate of 2.125% due August 15, 2016...

  • Page 95
    ... customer financing assets totaling $592. Scheduled principal payments for debt and capital lease obligations for the next five years are as follows: 2012 Boeing Capital Corporation Other Boeing Total Note 15 - Postretirement Plans The majority of our employees are covered by defined benefit pension...

  • Page 96
    ...2010 2009 Years ended December 31, Service cost Interest cost Expected return on plan assets Amortization of prior service costs Recognized net actuarial loss Settlement/curtailment/transfer loss Net periodic benefit cost Net periodic benefit cost included in Earnings from operations 2011 Pension...

  • Page 97
    ... return on plan assets Company contribution Plan participants' contributions Settlement/curtailment/acquisitions/dispositions, net Benefits paid Exchange rate adjustment Ending balance at fair value Amounts recognized in Consolidated Statement of Financial Position at December 31 consist of: Pension...

  • Page 98
    ... will remain level beyond that 30-year point. The present value of each plan's benefits is calculated by applying the spot/discount rates to projected benefit cash flows. All bonds are U.S. issues, with a minimum outstanding of $50. The pension fund's expected return on plan assets assumption is...

  • Page 99
    ...Plan Assets Investment Strategy The overall objective of our pension assets is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and address other cash requirements of the pension fund. Specific investment...

  • Page 100
    ... asset classes or markets, primarily using long-short positions in derivatives and physical securities. Hedge fund strategy types include, but are not limited to event driven, relative value, long-short and market neutral. A welldiversified number of hedge funds are held. Investment managers...

  • Page 101
    ... using significant non-observable inputs. December 31, 2011 Total Level 1 Level 2 Level 3 December 31, 2010 Total Level 1 Level 2 Level 3 Fixed income securities: Corporate $13,921 $13,910 $ 11 $13,038 $13,034 $ 4 U.S. government and agencies 4,500 4,500 3,734 3,734 Mortgage backed and asset...

  • Page 102
    ... table. Private equity valuations are reported by the fund manager and are based on the valuation of the underlying investments, which include inputs such as cost, operating results, discounted future cash flows and market based comparable data. Real estate and real asset fund values are primarily...

  • Page 103
    ...is valued using a market approach based on the quoted market price of an identical instrument (Level 1). The expected rate of return on these assets does not have a material effect on the net periodic benefit cost. Cash Flows Contributions Required pension contributions under the Employee Retirement...

  • Page 104
    ... a change in control of the Company which is not approved by the Board of Directors and the plans are terminated within five years thereafter, the assets in the plan first will be used to provide the level of retirement benefits required by ERISA, and then any surplus will be used to fund a trust to...

  • Page 105
    .... At December 31, 2011, there was $89 of total unrecognized compensation cost related to the Stock Option plan which is expected to be recognized over a weighted average period of 1.8 years. The grant date fair value of stock options vested during the years ended December 31, 2011, 2010 and 2009 was...

  • Page 106
    ... using the Black-Scholes option-pricing model with the following assumptions: Weighted-Average Grant Date Fair Value Per Share $17.96 $15.70 $11.12 Grant Year 2011 2010 2009 Grant Expected Expected Dividend Risk Free Date Life Volatility Yield Interest Rate 2/22/2011 2/22/2010 2/23/2009 6 years...

  • Page 107
    ... incentive awards. Participants can diversify deferred compensation among 19 investment funds including a Boeing stock unit account. Total expense related to deferred compensation was $59, $112 and $158 in 2011, 2010 and 2009, respectively. As of December 31, 2011 and 2010, the deferred compensation...

  • Page 108
    ...potentially unfavorable price changes for items used in production. These include commitments to purchase electricity at fixed prices through 2016. Fair Value Hedges Interest rate swaps under which we agree to pay variable rates of interest are designated as fair value hedges of fixed-rate debt. The...

  • Page 109
    ...cash flow hedges, we expect to reclassify gains of $4 (pre-tax) out of Accumulated other comprehensive loss into earnings during the next 12 months. Ineffectiveness related to our hedges was insignificant for the years ended December 31, 2011 and 2010. We have derivative instruments with credit-risk...

  • Page 110
    ... investments in working capital, infrastructure and research and development. Performance issues or cost overruns on these programs, which currently include the 787 and 747-8, could have a material impact on our consolidated results and financial position in 2012. Other Risk As of December 31, 2011...

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    ... 31, 2010 Total Level 1 Level 2 Level 3 $3,337 $3,337 15 10 227 $ 227 $5 $ 155 $ 155 $(131) $(131) $5 $5 $5 $3,579 $3,347 $ 227 $ (115) $ (115) $(115) $(115) Money market funds and available-for-sale equity securities are valued using a market approach based on the quoted market prices of...

  • Page 112
    ...using a Black Futures Options formula and include such assumptions as the expected value of the aircraft on the settlement date, volatility of aircraft prices, time until settlement and the risk free discount rate. The fair value of the credit guarantees is estimated based on the expected cash flows...

  • Page 113
    ... Navy (the Navy) notified McDonnell Douglas Corporation (now merged into The Boeing Company) and General Dynamics Corporation (together, the Team) that it was terminating for default the Team's contract for development and initial production of the A-12 aircraft. The Team had full responsibility for...

  • Page 114
    ... 16, 2004, our wholly owned subsidiary, Boeing Satellite Systems International, Inc. (BSSI) filed a complaint for declaratory relief against ICO Global Communications (Operations), Ltd. (ICO) in Los Angeles County Superior Court seeking a declaration that ICO's prior termination of two contracts for...

  • Page 115
    ...November 13, 2009, plaintiff shareholders filed a putative securities fraud class action against The Boeing Company and two of our senior executives in federal district court in Chicago. This lawsuit arose from our June 2009 announcement that the first flight of the 787 Dreamliner would be postponed...

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    ...the litigation. Note 22 - Segment Information We operate in five principal segments: Commercial Airplanes; Boeing Military Aircraft, Network & Space Systems, and Global Services & Support, collectively Boeing Defense, Space & Security; and Boeing Capital Corporation. All other activities fall within...

  • Page 117
    ... 5% of operating assets were located outside the United States as of December 31, 2011 and 2010. The information in the following tables is derived directly from the segments' internal financial reporting used for corporate management purposes. Research and Development Expense Years ended December...

  • Page 118
    ...Total Capital Expenditures Years ended December 31, Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Other segment Unallocated items and eliminations Total 2011 2010 2009 2011 2010...

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    ... tables below. Assets December 31, Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total 2011 2010 $35...

  • Page 120
    ... Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total Note 23 - Quarterly Financial Data (Unaudited) 2011 2010...

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    ... Shareholders of The Boeing Company Chicago, Illinois We have audited the accompanying consolidated statements of financial position of The Boeing Company and subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of operations, equity, and cash flows...

  • Page 122
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of The Boeing Company Chicago, Illinois We have audited the internal control over financial reporting of The Boeing Company and subsidiaries (the "Company") as of December 31, 2011, based on criteria established in Internal Control...

  • Page 123
    ... appropriate to allow timely decisions regarding required disclosure. (b) Management's Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules...

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    ...Airplanes Communications; Corporate Vice President, Internal and Executive Communications; and General Manager of Communications and Community Relations for Military Aircraft and Missile Systems unit. President, Boeing International since November 2007 and Senior Vice President, Business Development...

  • Page 125
    ... Company. Prior to that, he held a number of positions at Boeing including CFO, Shared Services Group; Controller, Shared Services Group; Senior Director, Internal Audit; and leadership roles in supply chain, factory operations and program management. Mr. Smith serves on the board of Boeing Capital...

  • Page 126
    ... of Structural Technologies, Prototyping, and Quality for Phantom Works; and General Manager of Engineering for Military Aircraft and Missiles. Information relating to our directors and nominees will be included under the caption "Election of Directors" in the 2012 Proxy Statement for our Annual...

  • Page 127
    ...two equity compensation plans that provide for the issuance of common stock to officers and other employees, directors and consultants. Each of these compensation plans was approved by our shareholders. The following table sets forth information regarding outstanding options and shares available for...

  • Page 128
    ...(10) Material Contracts. The Boeing Company Bank Credit Agreements (i) 364-Day Credit Agreement, dated as of November 10, 2011, among The Boeing Company, the Lenders party thereto, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC as joint lead arrangers and joint book managers, JPMorgan...

  • Page 129
    ... 1, 2010 (Exhibit (10)(xxix) to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). The Boeing Company 2003 Incentive Stock Plan. (a) Plan, as amended and restated effective February 21, 2011 (Exhibit 10 to the Company's Quarterly Report on Form 10-Q dated March 31, 2011...

  • Page 130
    ...year ended December 31, 2010). (xvii) Supplemental Executive Retirement Plan for Employees of The Boeing Company, as amended and restated on January 1, 2008 (Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 10, 2007). (xviii) The Boeing Company Elected Officer Annual Incentive...

  • Page 131
    (101) Interactive Data Files. (101.INS) XBRL Instance Document (101.SCH) XBRL Taxonomy Extension Schema... of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the Company or its subsidiaries are not filed herewith. Pursuant to this regulation, we hereby...

  • Page 132
    ... of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 9, 2012. THE BOEING COMPANY (Registrant) By: Diana L. Sands - Vice President of Finance & Corporate Controller 120

  • Page 133
    ...requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 9, 2012. W. James McNerney, Jr. - Chairman, President and Chief Executive Officer and Director (Principal Executive...

  • Page 134
    ...ficer, Renton, Washington, USA The Boeing 737 is the world's best-selling family of commercial jetliners. Today's Next-Generation 737-700, -800 and -900ER models incorporate the latest advanced technology and design features that improve fuel efficiency and reduce operating costs while delivering...

  • Page 135
    ... value of their ï¬,eets and operations, giving them a competitive edge in their markets. Commercial Aviation Services offers the broadest range of support products and services in the industry. These span the life cycle of the airplane: acquisition, readying for service, maintenance and engineering...

  • Page 136
    ... to helping customers' long-term mission of enhancing the security of applications, mobile environments and networks that support critical infrastructures. Boeing designs, integrates and operates cyber defense systems for the U.S. Department of Defense and other government agencies, while protecting...

  • Page 137
    ... to develop a family of multi-mission-capable satellite communications terminals to enable information exchange and command and control decisions among ground, air and space platforms. In 2011, the program completed a number of important testing milestones, including Since 1978, Boeing has delivered...

  • Page 138
    ... Programs, Products and Services Boeing Defense, Space & Security Global Services & Support continued Global Services & Support provides best-value mission readiness to its customers through total support solutions. The global business sustains aircraft and systems with a full spectrum of products...

  • Page 139
    ..., in 2010 and the final three tankers during 2011. Boeing provides support services including line and heavy aircraft maintenance, support equipment, spares, repairs, warehousing, ï¬,ight and maintenance training, field service engineering, and technical publications support. 2011 deliveries...

  • Page 140
    ...edge training solutions, custom Using the combined assets of the Boeing Delta and Lockheed Martin Atlas launch vehicle programs (including mission management, support, engineering, vehicle production, test and launch operations, and people), ULA's primary Boeing's unmanned programs provide customers...

  • Page 141
    ... history, account statements and tax reporting documents, change their address, certify their tax identification number, replace checks, request duplicate statements, make additional investments and download a variety of forms related to stock transactions. If you are a registered shareholder and...

  • Page 142
    ... and Chief Executive Officer, The Boeing Company Boeing director since 2001 Committee: Special Programs (Chair) Susan C. Schwab Professor, University of Maryland School of Public Policy; Former U.S. Trade Representative Boeing director since 2010 Committees: Audit; Finance Ronald A. Williams Former...

  • Page 143
    ... customers' problems, and the benefits that result for our customers and our world. Visit www.boeing.com/stories. For more information on Boeing's impact on innovation, scan this QR code with your smart phone or visit www.boeing. com/stories. Printed in the USA The Boeing Company Annual Report...

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