Boeing 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 Boeing annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

The Boeing Company
2012 Annual Report

Table of contents

  • Page 1
    The Boeing Company 2012 Annual Report

  • Page 2
    ...of thousands of skilled people working for Boeing suppliers worldwide. Contents Operational Summary Message From Our Chairman The Executive Council Financial Results Form 10-K Selected Programs, Products and Services Shareholder Information Board of Directors Company Officers 1 2 7 8 9 122 129 130...

  • Page 3
    ... Intercontinental to launch customer Lufthansa, the 1,000th 777 and a single-year record 415 deliveries for the 737 program. Completed delivery of 144 production military aircraft and 10 satellites, increasing Boeing Defense, Space & Security revenues from 2011. Won 1,203 commercial airplane orders...

  • Page 4
    ... than 10 percent. Boeing Commercial Airplanes restored our global market-share leadership with 601 deliveries- a 26 percent increase over 2011. We also led the industry with 1,203 net new orders, increasing our backlog to nearly 4,400 airplanes valued at a record $319 billion. Operating margins were...

  • Page 5
    ... learn from it and make our airplanes even better. The 787 will return to ï¬,ight and its game-changing value proposition for airline customers and their passengers will remain fully intact. Boeing Defense, Space & Security also performed exceptionally well in a difficult 2012 business environment...

  • Page 6
    ... normalized to revenue. Commercial Airplanes and Services Markets 2012-2021 ($ in billions) Commercial airplanes and services continue to provide attractive addressable markets valued at $3 trillion over 10 years. 4 Investing in Our Communities Boeing and its employees invested $179 million...

  • Page 7
    ... At Boeing Commercial Airplanes, our immediate imperative is to return the 787 ï¬,eet to service and resume production deliveries to customers. Our overall focus for 2013 is to continue harvesting the growth in our backlog by delivering the airplanes our customers need sooner, enabling us to invest...

  • Page 8
    ... for investment in new and improved products and technologies. Our 2013 Defense, Space & Security priorities are: extend and grow our core business by bringing improved capability and affordability to our customers; expand global sales and operations; successfully execute our development programs...

  • Page 9
    ..., Space & Security; John J. Tracy Senior Vice President, Engineering, Operations & Technology, and Chief Technology Officer; Shephard W. Hill President, Boeing International, Senior Vice President, Business Development and Strategy; Gregory D. Smith Executive Vice President and Chief Financial Of...

  • Page 10
    ... tax and pension expenses. Operating Cash Flow ($ in billions) Strong operating cash ï¬,ow was driven by increased deliveries at both Commercial Airplanes and Defense, Space & Security and strong core performance companywide. Comparison of Cumulative* Five-Year Total Shareholder Returns Company...

  • Page 11
    ...company (as defined in Rule 12b-2 of the Exchange Act). Yes As of June 30, 2012, there were 751,347,709 common shares outstanding held by nonaffiliates of the registrant, and the aggregate market value of the common shares (based upon the closing price of these shares on the New York Stock Exchange...

  • Page 12
    ... Accounting and Financial Disclosure ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...PART III Item 10. Directors, Executive Officers and Corporate Governance...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 13
    ..., Space & Security (BDS) business comprises three segments Boeing Military Aircraft (BMA), Network & Space Systems (N&SS) and Global Services & Support (GS&S); and Boeing Capital (BCC). Our Other segment includes the unallocated activities of Engineering, Operations & Technology (EO&T) and Shared...

  • Page 14
    ... provides customers with mission readiness through total support solutions. Our global services business sustains aircraft and systems with a full spectrum of products and services through integrated logistics, including supply chain management and engineering support; maintenance, modification...

  • Page 15
    ..., design, development and related test activities for defense systems, new and derivative jet aircraft including both commercial and military, advanced space and other company-sponsored product development. These are expensed as incurred including amounts allocable as reimbursable overhead costs on...

  • Page 16
    ... - as well as the daily cycle of gate-to-gate operations. This enables us to provide a high level of customer satisfaction and productivity. BDS faces strong competition in all market segments, primarily from Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company and General...

  • Page 17
    ... companies. Suppliers We are dependent upon the ability of a large number of suppliers and subcontractors to meet performance specifications, quality standards and delivery schedules at our anticipated costs. While we maintain an extensive qualification and performance surveillance system to control...

  • Page 18
    ... Boeing. Forward-Looking Statements This report, as well as our Annual Report to Shareholders, quarterly reports, and other filings we make with the SEC, press releases and other written and oral communications, contains "forward-looking statements" within the meaning of the Private Securities...

  • Page 19
    ... sustained economic growth and political stability both in developed and emerging markets. Demand for our commercial aircraft is further influenced by airline profitability, availability of aircraft financing, world trade policies, government-to-government relations, technological changes, price and...

  • Page 20
    ... work and increased production costs, as well as delayed deliveries to customers, impacts to aircraft performance and/or increased warranty or fleet support costs. Further, if we cannot efficiently and cost-effectively incorporate design changes into already-completed 787 and 747-8 production...

  • Page 21
    ... complex designs. In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect our financial condition. Examples of significant BDS fixed-price development...

  • Page 22
    ... 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 for us to assess anticipated performance. Suppliers' assertions...

  • Page 23
    ... Commercial Airplanes business, we anticipate increasing competition among non-U.S. aircraft manufacturers and service providers in one or more of our market segments. In our BDS business, we anticipate that the effects of defense industry consolidation and new priorities, including long-term cost...

  • Page 24
    .... A number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt. These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings...

  • Page 25
    ... could affect our internal operations or our ability to deliver products and services to our customers. Any significant production delays, or any destruction, manipulation or improper use of our data, information systems or networks could impact our sales, increase our expenses and/or have...

  • Page 26
    ... associated with these benefits are also subject to assumptions, including estimates of the level of medical cost increases. For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see "Management's Discussion and Analysis...

  • Page 27
    ... by U.S. government landlord of 546 square feet. Other includes BCC; EO&T; SSG; and our Corporate Headquarters. At December 31, 2012, our segments occupied in excess of 74 million square feet of floor space at the following major locations: • • Commercial Airplanes - Greater Seattle, WA; North...

  • Page 28
    ... Consolidated Financial Statements, which is hereby incorporated by reference. BSSI/Telesat Canada On November 9, 2006, Telesat Canada (Telesat) and a group of its insurers served Boeing Satellite Systems International Inc. (BSSI) with an arbitration demand in connection with the constructive total...

  • Page 29
    ... information about purchases we made during the quarter ended December 31, 2012 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...

  • Page 30
    ... Backlog: Commercial Airplanes Defense, Space & Security:(1) Boeing Military Aircraft Network & Space Systems Global Services & Support Total Defense, Space & Security Total contractual backlog Cash dividends have been paid on common stock every year since 1942. (1) (2) (3) 2012 2011 2010...

  • Page 31
    ...rely on an extensive network of international partners, key suppliers and subcontractors. Our strategy is centered on successful execution in healthy core businesses - Commercial Airplanes and Defense, Space & Security (BDS) - supplemented and supported by Boeing Capital (BCC). Taken together, these...

  • Page 32
    ... 2012 increased by $467 million compared with 2011. Commercial Airplanes earnings increased by $1,216 million reflecting higher new airplane deliveries and lower research and development expense partially offset by higher fleet support costs, increased operating costs associated with business growth...

  • Page 33
    ... other Total 2012 ($81) (75) (787) (112) (336) ($1,391) 2011 ($83) (61) (269) (248) (327) ($988) 2010 ($136) (112) 54 (59) (482) ($735) Share-based plans expense decreased by $53 million in 2011 primarily due to the expiration of the ShareValue trust at June 30, 2010. Deferred compensation expense...

  • Page 34
    ...to tax benefits of $397 million and $371 million recorded in 2011 and 2010 as a result of federal income tax audit settlements. Federal income tax audits have been settled for all years prior to 2007. The absence of research and development tax credits also contributed to the higher tax rate in 2012...

  • Page 35
    ... government contract funding. The increase in contractual backlog during 2012 was due to commercial aircraft orders in excess of deliveries, partially reduced by cancellations of commercial airplane orders and changes in projected revenue escalation. The increase in contractual backlog during 2011...

  • Page 36
    ... and Japan are developing commercial jet aircraft in the market above 90 seats. Many of these competitors have historically enjoyed access to government-provided financial support, including "launch aid," which greatly reduces the commercial risks associated with airplane development activities and...

  • Page 37
    ...fund product development, gain market share through pricing and/or improve earnings. We are focused on improving our processes and continuing cost-reduction efforts. We continue to leverage our extensive customer support services network which includes aviation support, spares, training, maintenance...

  • Page 38
    ... fleet support costs, increased operating costs associated with business growth, other period costs and decreased earnings from commercial aviation services. The decrease in operating margins from 9.7% in 2011 to 9.6% in 2012 was primarily due to the dilutive effect of the 787 and 747-8 deliveries...

  • Page 39
    ... number of commercial jet aircraft deliveries plus undelivered firm orders. 737 2012 Program accounting quantities Undelivered units under firm orders Cumulative firm orders 2011 Program accounting quantities Undelivered units under firm orders Cumulative firm orders 2010 Program accounting...

  • Page 40
    ... cumulative deliveries to 49. We continued to incorporate engineering and other design changes identified during flight testing into already completed aircraft. Beginning in June 2012, airplanes coming out of final assembly have not required change incorporation at our Everett modification center...

  • Page 41
    ... prior to airplane delivery and continue 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...

  • Page 42
    ... Cyber Security; Space; Special Operations; and Unmanned Systems in implementing the nation's security posture. We anticipated this shift in U.S. DoD priorities and aligned our strategy accordingly. As such, we have been developing organic and inorganic capabilities to better serve our customers and...

  • Page 43
    ... backlog Unobligated backlog 2012 $32,607 40% $3,068 9.4% $55,068 $16,407 2011 $31,976 47% $3,158 9.9% $46,354 $13,687 2010 $31,943 50% $2,875 9.0% $48,364 $16,822 Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery...

  • Page 44
    ..., lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense (GMD), Proprietary and Space Launch Systems programs. Some of our development programs are contracted on a fixed-price basis. Many...

  • Page 45
    ... International Tanker program and lower research and development costs also contributed to the earnings improvements. Backlog BMA total backlog in 2012 increased by 25% from 2011, primarily due to F-15 and C-17 orders. Total backlog in 2011 decreased by 6% from 2010, primarily due to 2011 deliveries...

  • Page 46
    ... the ULA joint venture in 2012, 2011 and 2010, respectively. Operating earnings in 2012 include a $39 million gain related to the termination and settlement of USA's defined benefit pension plans. 2012 2011 2010 1 1 3 1 2012 $7,584 9% $478 6.3% $9,692 $6,917 2011 $8,654 13% $679 7.8% $9,024 $6,424...

  • Page 47
    ... Financial Statements. Global Services & Support Operating Results (Dollars in millions) Years ended December 31, Revenues % of total company revenues Earnings from operations Operating margins Contractual backlog Unobligated backlog Revenues GS&S revenues increased by 3% in 2012 and by 1% in 2011...

  • Page 48
    ...239 million during 2012 and 2011. While we may be required to fund a number of new aircraft deliveries in 2013, we expect financing will be available at reasonable prices from broad and globally diverse sources. Aircraft values and lease rates are impacted by the number and type of aircraft that are...

  • Page 49
    ...as a % of total receivables Debt Debt-to-equity ratio 2012 $4,066 2.0% $2,511 5.0-to-1 2011 $4,315 2.3% $3,400 6.3-to-1 BCC's customer financing and investment portfolio at December 31, 2012 decreased from December 31, 2011 primarily due to normal portfolio run-off and asset sales, partially offset...

  • Page 50
    ... receivables in 2011. Lower environmental expense of $82 million in 2012 compared with 2011 was largely offset by higher costs related to BCC guarantees and increases in other costs. Other segment operating earnings for the year ended December 31, 2011 increased by $393 million compared with 2010...

  • Page 51
    ... short-term. In 2012 and 2011, we had 1,007,706 and 350,778 shares transferred to us from employees for tax withholding and did not repurchase any shares through our open market share repurchase program. In December 2012, we announced the resumption of this program with repurchases expected to total...

  • Page 52
    ..., 2012 and 2011. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers. Historically, we have not been required to fund significant amounts of outstanding...

  • Page 53
    ... in cost, quality and schedule. Income Tax Obligations As of December 31, 2012, our net liability for income taxes payable, including uncertain tax positions, was $111 million. We are not able to reasonably estimate the timing of future cash flows related to uncertain tax positions. Our income tax...

  • Page 54
    ...to our Consolidated Financial Statements. Critical Accounting Policies Contract Accounting We use contract accounting to determine revenue, cost of sales, and profit for almost all of our BDS business. Contract accounting involves a judgmental process of estimating the total sales and costs for each...

  • Page 55
    ... cost of sales percentage for the total remaining program to the amount of sales recognized for airplanes delivered and accepted by the customer. Factors that must be estimated include program accounting quantity, sales price, labor and employee benefit costs, material costs, procured part costs...

  • Page 56
    ... production costs over the accounting quantity for each program. Because of the higher unit production costs experienced at the beginning of a new program and substantial investment required for initial tooling and other non-recurring costs, new commercial aircraft programs, such as the 787 program...

  • Page 57
    ... values of the 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...

  • Page 58
    ... discount rate, the expected long-term rate of asset return, and medical trend rate (rate of growth for medical costs). Future changes in assumptions or differences between actual and expected outcomes can significantly affect our future annual expense, projected benefit obligations and Shareholders...

  • Page 59
    ... be material for our fixed-rate debt. Foreign Currency Exchange Rate Risk We are subject to foreign currency exchange rate risk relating to receipts from customers and payments to suppliers in foreign currencies. We use foreign currency forward and option contracts to hedge the price risk associated...

  • Page 60
    ...Financial Instruments ...Note 19 - Significant Group Concentrations of Risk ...Note 20 - Fair Value Measurements ...Note 21 - Legal Proceedings ...Note 22 - Segment Information ...Note 23 - Quarterly Financial Data ...Note 24 - Subsequent Events ...Reports of Independent Registered Public Accounting...

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

  • Page 62
    ... ($74), $38 and ($34) Total defined benefit pension plans & other postretirement benefits, net of tax Other comprehensive loss, net of tax Comprehensive income/(loss) related to non-controlling interest Comprehensive income, net of tax 2012 $3,900 17 2011 $4,018 (35) (2) 2010 $3,307 16 25 (5) 20...

  • Page 63
    ... retiree health care Accrued pension plan liability, net Non-current income taxes payable Other long-term liabilities Long-term debt Shareholders' equity: Common stock, par value $5.00 - 1,200,000,000 shares authorized; 1,012,261,159 shares issued Additional paid-in capital Treasury stock, at cost...

  • Page 64
    ... Accounts payable Accrued liabilities Advances and billings in excess 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...

  • Page 65
    ... data) Balance January 1, 2010 Net earnings Other comprehensive loss, net of tax of $1,092 Share-based compensation and related dividend equivalents ShareValue Trust activity ShareValue Trust termination Excess tax pools Treasury shares issued for stock options exercised, net Treasury shares issued...

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

  • Page 67
    ... 31, 2012, 2011 and 2010 (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
    ... when awarded. Program Accounting Our Commercial Airplanes segment predominantly uses program accounting to account for cost of sales related to its programs. Program accounting is applicable to products manufactured for delivery under production-type contracts where profitability is realized over...

  • Page 69
    ... maintenance training, field service support, engineering services, and technical data and documents. Fleet support activity begins prior to aircraft delivery as the customer receives training, manuals, and technical consulting support. This activity continues throughout the aircraft's operational...

  • Page 70
    ... 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 and several actuarial assumptions, the most significant of which are the discount rate, the long-term rate of asset return, and medical...

  • Page 71
    ..., 2012 and 2011. Inventories Inventoried costs on commercial aircraft programs and long-term contracts include direct engineering, production and tooling and other non-recurring costs, and applicable overhead, which includes fringe benefits, production related indirect and plant management salaries...

  • Page 72
    ... of average unit cost or market. We review our commercial spare parts and general stock materials quarterly to identify impaired inventory, including excess or obsolete inventory, based on historical sales trends, expected production usage, and the size and age of the aircraft fleet using the part...

  • Page 73
    ... of discounted cash flows represents the amount of the impairment. Our finite-lived acquired intangible assets are amortized on a straight-line basis over their estimated useful lives as follows: developed technology, from 5 to 14 years; product know-how, from 3 to 30 years; customer base, from...

  • Page 74
    ... in the financial statements and measured at fair value regardless of the purpose or intent of holding them. We use derivative instruments to principally manage a variety of market risks. For derivatives designated as hedges of the exposure to changes in fair value of the recognized asset or...

  • Page 75
    ...how long we will hold an asset subject to 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...

  • Page 76
    ... to specifications and defects in material and design. The majority of our warranties are issued by our Commercial Airplanes segment. Generally, aircraft sales are accompanied by a three to four-year standard warranty for systems, accessories, equipment, parts, and software manufactured by...

  • Page 77
    ... our capabilities to address the C4ISR, cyber and intelligence markets. Argon's results of operations from the acquisition date are included in the Network & Space Systems (N&SS) segment. Goodwill has been recorded in N&SS, Global Services & Support (GS&S) and Boeing Military Aircraft (BMA) segments...

  • Page 78
    ... by reportable segment for the years ended December 31, 2012, 2011 and 2010 were as follows: Commercial Airplanes $2,083 18 9 $2,110 (4) $2,106 12 7 $2,125 $1,041 $1,041 Boeing Military Aircraft $848 193 Network & Space Systems $1,102 345 14 $1,461 16 (4) $1,473 (1) $1,472 Global Services & Support...

  • Page 79
    ... Customer base Developed technology Other Total Amortization expense for acquired finite-lived intangible assets for the years ended December 31, 2012 and 2011 was $213 and $203. Estimated amortization expense for the five succeeding years is as follows: 2013 - $191; 2014 - $185; 2015 - $176; 2016...

  • Page 80
    ...(Shares in millions) Years ended December 31, Stock options Performance Awards Note 5 - Income Taxes The components of earnings before income taxes were: Years ended December 31, U.S. Non-U.S. Total 2012 $5,647 263 $5,910 2011 $5,083 310 $5,393 2010 $4,310 197 $4,507 2012 23.6 4.9 2011 21.1 1.5 2010...

  • Page 81
    ... U.S. state Total current Deferred tax expense U.S. federal Non-U.S. U.S. state Total deferred Total income tax expense 2012 $657 52 19 728 1,209 (13) 83 1,279 $2,007 2011 ($605) 93 (22) (534) 1,856 (8) 68 1,916 $1,382 2010 $13 80 (137) (44) 969 (13) 284 1,240 $1,196 Net income tax payments were...

  • Page 82
    ... Retiree health care accruals Inventory and long-term contract methods of income recognition, fixed assets and other (net of valuation allowance of $27 and $27) Partnerships and joint ventures Other employee benefits accruals In-process research and development related to acquisitions Net operating...

  • Page 83
    ... (1) Commercial Airplanes customers Reinsurance receivables Other Less valuation allowance Total (1) 2012 $2,788 1,196 903 509 294 (82) $5,608 2011 $2,950 1,100 827 585 384 (53) $5,793 Excludes U.S. government contracts The following table summarizes our accounts receivable under long-term...

  • Page 84
    ..., used aircraft, general stock materials and other Inventory before advances and progress billings Less advances and progress billings Total Long-Term Contracts in Progress Long-term contracts in progress included Delta launch program inventory that is being sold at cost to United Launch Alliance...

  • Page 85
    ... Aircraft Programs At December 31, 2012 and 2011, commercial aircraft programs inventory included the following amounts related to the 787 program: $21,289 and $16,098 of work in process (including deferred production costs at December 31, 2012 of $15,929 and $10,753), $1,908 and $1,770 of supplier...

  • Page 86
    ... customer based upon publicly available information and information obtained directly from our customers. 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...

  • Page 87
    ...906 631 485 394 321 307 Out-of-production aircraft Disclosure omitted from 2011 financial statements Charges related to customer financing asset impairment for the years ended December 31 were as follows: 2012 $73 (15) $58 2011 $109 (36) $73 2010 $85 85 $170 Boeing Capital Other Boeing Total 75

  • Page 88
    ...192 40 2015 $135 16 2016 $111 3 2017 $94 1 Minimum operating lease payments, net of sublease amounts Minimum capital lease payments, net of sublease amounts Accounts payable related to purchases of property, plant and equipment were $234 and $200 for the years ended December 31, 2012 and 2011. 76

  • Page 89
    ...50% 50% Investment Balance 2012 2011 $946 28 163 $1,137 (1 ) Network & Space Systems Network & Space Systems Primarily Commercial Airplanes $983 (147) 167 $1,003 (2) The positive balance at December 31, 2012 reflects the termination and settlement of the defined benefit pension plans during the...

  • Page 90
    ... related to partner loans made to Sea Launch, we could incur additional pre-tax charges of up to $356. Note 12 - Liabilities, Commitments and Contingencies Accrued Liabilities Accrued liabilities at December 31 consisted of the following: Accrued compensation and employee benefit costs Environmental...

  • Page 91
    ... related to aircraft on order, including options and those proposed in sales campaigns, totaled $18,083 and $15,866 as of December 31, 2012 and 2011. The estimated earliest potential funding dates for these commitments as of December 31, 2012 are as follows: 2013 2014 2015 2016 2017 Thereafter Total...

  • Page 92
    ...a material effect on our results of operations, financial position and/or cash flows. 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
    ... to offset the loans against the cash surrender value of the policies, we present the net asset in Other assets on the Consolidated Statements of Financial Position as of December 31, 2012 and 2011. Note 13 - Arrangements with Off-Balance Sheet Risk We enter into arrangements with off-balance sheet...

  • Page 94
    ... costs. The USAF issued a final decision denying ULA's certified claim in May 2012. On June 14, 2012, Boeing and ULA filed a suit in the Court of Federal Claims seeking recovery of the deferred support and production costs from the U.S. government. On November 9, 2012, the U.S. government filed...

  • Page 95
    ... capitalized, was $625, $683 and $729 for the years ended December 31, 2012, 2011 and 2010, respectively. Interest expense recorded by BCC is reflected as a separate line item on our Consolidated Statements of Operations, and is included in Earnings from operations. Total Company interest payments...

  • Page 96
    ... by customer financing assets totaling $461. Scheduled principal payments for debt and minimum capital lease obligations for the next five years are as follows: Boeing Capital Other Boeing Total Note 15 - Postretirement Plans The majority of our employees are covered by defined benefit pension plans...

  • Page 97
    ... Interest cost Expected return on plan assets Amortization of prior service costs Recognized net actuarial loss Settlement and curtailment loss Net periodic benefit cost Net periodic benefit cost included in Earnings from operations 2012 $1,649 3,005 (3,831) 225 1,937 25 $3,010 $2,407 Pension 2011...

  • Page 98
    ..., (71) net Benefits paid (2,669) Exchange rate adjustment 8 Ending balance at fair value $56,178 Amounts recognized in statement of financial position at December 31 consist of: Pension plan assets, net $5 Other accrued liabilities (71) Accrued retiree health care Accrued pension plan liability, net...

  • Page 99
    ...year and the net periodic benefit cost for the subsequent year. December 31, Discount rate: Pension Other postretirement benefits Expected return on plan assets Rate of compensation increase 2012 3.80% 3.30% 7.50% 4.00% 2011 4.40% 4.00% 7.75% 3.90% 2010 5.30% 4.90% 7.75% 5.20% 2012 $75,851 69,272 56...

  • Page 100
    ... 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 objectives for our long-term investment strategy include...

  • Page 101
    ... and 3.5% for global equity, currency overlay and commodities at December 31, 2012 and 2011. Risk Management In managing the plan assets, we review and manage risk associated with funded status risk, interest rate risk, market risk, counterparty risk, liquidity risk and operational risk. Liability...

  • Page 102
    ...Assets Liabilities Global strategies Hedge funds Total Cash Receivables Payables Total $14,363 4,921 752 1,770 1,045 2,346 220 36 (23) 2,687 56 (55) $17 1 1 December 31, 2012 Level 1 Level 2 Level 3 $14,360 4,921 191 1,770 1,045 2,329 219 35 (23) 463 56 (55) 561 Total December 31, 2011 Level 1 Level...

  • Page 103
    ... and real assets, hedge funds and global strategies, do not have readily determinable market values given the specific investment structures involved and the nature of the underlying investments. For the December 31, 2012 and 2011 plan asset reporting, publicly traded asset pricing was used where...

  • Page 104
    ...is comprised of approximately 60% equities and 40% debt securities. The index fund 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. 92

  • Page 105
    ... to our OPB plans in 2013. Estimated Future Benefit Payments The table below reflects the total pension benefits expected to be paid from the plans or from our assets, including both our share of the benefit cost and the participants' share of the cost, which is funded by participants' contributions...

  • Page 106
    ...issued primarily to our executives. The share-based plans expense and related income tax benefit were as follows: Years ended December 31, Stock options Restricted stock units and other awards ShareValue Trust Share-based plans expense Income tax benefit Stock Options In February 2012, 2011 and 2010...

  • Page 107
    ... Dividend Risk Free Grant Date Fair Yield Interest Rate Value Per Share 2.4% 1.1% $16.89 2.3% 2.5% $17.96 3.0% 2.9% $15.70 Grant Year 2012 2011 2010 Grant Date 2/27/2012 2/22/2011 2/22/2010 The expected volatility of the stock options is based on a combination of our historical stock volatility...

  • Page 108
    ... funds including a Boeing stock unit account. Total expense related to deferred compensation was $75, $59 and $112 in 2012, 2011 and 2010, respectively. As of December 31, 2012 and 2011, the deferred compensation liability which is being marked to market was $1,104 and $1,093. ShareValue Trust...

  • Page 109
    ... 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 net change in fair value of the derivatives and the hedged items is reported in BCC interest expense. 2012 ($17...

  • Page 110
    ..., for risk management purposes that are not receiving hedge accounting treatment. Notional Amounts and Fair Values The notional amounts and fair values of derivative instruments in the Consolidated Statements of Financial Position as of December 31 were as follows: Notional amounts(1) 2012 2011...

  • Page 111
    ...in 2013. 747 and 787 Commercial Airplane Programs The development and initial production of new commercial airplanes and new commercial airplane derivatives, which include the 747 and 787, entail significant commitments to customers and suppliers as well as substantial investments in working capital...

  • Page 112
    ... value and asset classification of the related assets as of the impairment date: 2012 Fair Total Value Losses Equipment under operating leases & Assets held for sale or re-lease Property, plant and equipment Other assets, Acquired intangible assets, Cost investment Total 100 2011 Fair Total Value...

  • Page 113
    ... at fair value on the Consolidated Statement of Financial Position at December 31 were as follows: 2012 Carrying Total Fair Amount Value 2011 Carrying Total Fair Amount Value Level 1 Level 2 Level 3 Assets Accounts receivable, net Notes receivable, net Liabilities Debt, excluding capital lease...

  • Page 114
    ... other deposits, commercial paper, money market funds, Accounts payable and long-term payables. The carrying values of those items, as reflected in the Consolidated Statements of Financial Position, approximate their fair value at December 31, 2012 and 2011. The fair value of assets and liabilities...

  • Page 115
    ... entitled to receive payment of approximately $1,187, including interest from June 26, 1991. Employment, Labor and Benefits Litigation We have been named as a defendant in two pending class action lawsuits filed in the U.S. District Court for the District of Kansas, each related to the 2005 sale of...

  • Page 116
    ... case on August 24, 2012. Note 22 - Segment Information We operate in five principal segments: Commercial Airplanes; Boeing Military Aircraft (BMA), Network & Space Systems (N&SS), and Global Services & Support (GS&S), collectively Defense, Space & Security; and Boeing Capital. All other activities...

  • Page 117
    ... provides customers with mission readiness through total support solutions. Our global services business sustains aircraft and systems with a full spectrum of products and services through integrated logistics, including supply chain management and engineering support; maintenance, modification...

  • Page 118
    ...years ended December 31, 2012, 2011 and 2010, respectively. For segment reporting purposes, we record Commercial Airplanes segment revenues and cost of sales for airplanes transferred to other segments. Such transfers may include airplanes accounted for as operating leases and considered transferred...

  • Page 119
    ... and investments, net deferred tax assets, capitalized interest and assets held by SSG as well as intercompany eliminations. Assets Segment assets are summarized in the table below. December 31, Commercial Airplanes Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global...

  • Page 120
    ... 2013, the Federal Aviation Administration issued an airworthiness directive to address potential battery risk on the 787 and required U.S. aircraft operators to suspend operations of all 787 aircraft. International government regulators also issued directives to the same effect. We are working with...

  • Page 121
    ... Board of Directors and 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, 2012 and 2011, and the related consolidated statements of operations...

  • 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, 2012, based on criteria established in Internal Control...

  • Page 123
    ... adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by...

  • Page 124
    ... Officer of Commercial Airplanes since June 2012. Mr. Conner joined Boeing in 1977, and his previous positions include Senior Vice President of Sales and Customer Support of Commercial Airplanes from August 2011 to June 2012; Vice President and General Manager, Supply Chain Management and Operations...

  • Page 125
    ... 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 Corporation. Senior Vice...

  • Page 126
    .... We have adopted (1) The Boeing Company Code of Ethical Business Conduct for the Board of Directors; (2) The Boeing Company Code of Conduct for Finance Employees which is applicable to our Chief Financial Officer (CFO), Controller and all finance employees; and (3) The Boeing Code of Conduct that...

  • Page 127
    ... "Stock Ownership Information" in the 2013 Proxy Statement, and that information is incorporated by reference herein. Equity Compensation Plan Information We currently maintain two equity compensation plans that provide for the issuance of common stock to officers and other employees, directors and...

  • 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
    ... 28, 2007). (ix) Deferred Compensation Plan for Directors of The Boeing Company, as amended and restated effective January 1, 2008 (Exhibit 10.2 to the Company's Current Report on Form 8-K dated October 28, 2007). Incentive Compensation Plan for Employees of The Boeing Company and Subsidiaries, as...

  • Page 130
    ...) Notice of Terms of Restricted Stock Units dated December 17, 2012 (Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 17, 2012). (12) Computation of Ratio of Earnings to Fixed Charges. (14) Code of Ethics. (i) (ii) (iii) The Boeing Company Code of Ethical Business Conduct for...

  • Page 131
    ...Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (99) Additional Exhibits. (i) (101) Commercial Program Method of Accounting (Exhibit (99)(i) to the 1997 Form 10K). Interactive Data Files. (101.INS) (101.SCH) (101.CAL) (101...

  • Page 132
    ... 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 11, 2013. THE BOEING COMPANY (Registrant) By: /s/ Diana L. Sands Diana L. Sands - Vice President of Finance & Corporate Controller...

  • Page 133
    ...Smith - Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Lawrence W. Kellner Lawrence W. Kellner - Director /s/ Diana L. Sands Diana L. Sands - Vice President of Finance & Corporate Controller (Principal Accounting Officer) /s/ Edward M. Liddy Edward M. Liddy...

  • 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
    ... dramatic savings in fuel use and operating costs. The 787 is the most advanced and efficient commercial airplane in its class, setting new standards for environmental performance and passenger comfort. The 787 family Boeing is committed to helping customers around the world maximize the value of...

  • Page 136
    ...International Space Station. Boeing's system also will be Boeing understands today's cyber challenges and is committed to delivering innovative, integrated intelligence and security solutions that add value to information for its customers, including U.S. government agencies and international public...

  • Page 137
    ... 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 2012, the program's contract was converted to a fixedprice structure to complete development. Boeing finished a number of...

  • Page 138
    ... Global Services & Support provides customers with best-value mission readiness through total support solutions. The global business sustains aircraft and systems with a full spectrum of products and services including aircraft maintenance, modification and upgrades; supply chain management...

  • Page 139
    ... Programs, Products and Services Boeing Defense, Space & Security Maintenance, Modifications and Upgrades (MM&U) continued MM&U operates at centers strategically located throughout the United States and around the world, providing high-quality, rapid cycle time and affordable aircraft services...

  • Page 140
    ... and develops more than 350 trainers for 24 aircraft platforms using the latest technologies to ensure that students have Using the combined assets of the Boeing Delta and Lockheed Martin Atlas launch vehicle programs (including mission management, support, engineering, vehicle production, test and...

  • Page 141
    ... change of address. Annual Meeting The 2013 annual meeting of Boeing shareholders is scheduled to be held on Monday, April 29, 2013. Please refer to our proxy statement for additional information. Shareholder Services Contact The Boeing Company Mail Code 5003-1001 100 North Riverside Plaza Chicago...

  • Page 142
    ... Executive Officer, Nortel Networks Corporation Boeing director since 2004 Committees: Compensation; Governance, Organization and Nominating Company Officers Raymond L. Conner Executive Vice President, President and Chief Executive Officer, Boeing Commercial Airplanes Wanda K. Denson-Low Senior...

  • Page 143
    ... shareholder and customer value in a competitive global marketplace. Visit us at boeing.com to learn more about Boeing and how extraordinary innovations in our products and services are helping solve the world's toughest problems. Visit us at boeing.com/ investorrelations to view our annual reports...

  • Page 144
    The Boeing Company 100 North Riverside Plaza Chicago, IL 60606-1596 USA