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THE BOEING COMPANY
2013 ANNUAL REPORT

Table of contents

  • Page 1
    THE BOEING COMPANY 2013 ANNUAL REPORT

  • Page 2
    .... Our products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training. With corporate offices in Chicago, Boeing employs more...

  • Page 3
    ... 787 programs. Delivered 164 military aircraft, as well as 10,711 weapons systems and seven satellites, despite extremely challenging defense, space and security markets. Won 1,355 net new commercial airplane orders-the second-highest total in company history, establishing our largest backlog ever...

  • Page 4
    ...of our employees, our partners and our customers around the world. We extended our industry leadership in commercial airplanes; maintained our strong position in defense, space and security markets; achieved major milestones on key new development programs; and retired legacy and future risks to our...

  • Page 5
    ... Airplanes extended our global market-share leadership with an industry record 648 deliveries as we reached historic highs in planned production rates on the 737, 777 and 787 programs. Net new orders totaling 1,355 airplanes (the second-highest total in company history) increased our record backlog...

  • Page 6
    ... technology centers, new domestic and international engineering design centers for commercial airplanes, and information technology centers of excellence. This broader strategic footprint will ensure business continuity, improve productivity and expand access to global talent and technology. 2016...

  • Page 7
    ...to customer needs and replicating systems and technologies already proved and paid for on other programs to reduce costs and risk. The imperative now is to execute -to deliver on our lower-risk development agenda and to harvest our record backlog to fund those projects and provide increasing returns...

  • Page 8
    ... we increase production rates over that same period. In 2013, Boeing employees, retirees and our charitable trust invested more than $176 million to help improve lives and build better communities worldwide. We made the most of our resources by working in concert with community, business and public...

  • Page 9
    ... W. Hill President, Boeing International, Senior Vice President, Business Development and Strategy Back row, left to right: Timothy J. Keating Senior Vice President, Government Operations John J. Tracy Senior Vice President, Engineering, Operations & Technology, and Chief Technology Officer Thomas...

  • Page 10
    ... Record deliveries and strong core performance companywide contributed to a 9 percent increase in operating cash ï¬,ow. Comparison of Cumulative ‡ Five-Year Total Shareholder Returns Company/ Index Base Period 2008 Years Ending December 2010 2011 2012 3.0 4.0 2009 7.5 8.2 $400 2013 Boeing...

  • Page 11
    ...the aggregate market value of the common shares (based upon the closing price of these shares on the New York Stock Exchange) was approximately $77.2 billion. The number of shares of the registrant's common stock outstanding as of February 7, 2014 was 743,404,506. DOCUMENTS INCORPORATED BY REFERENCE...

  • Page 12
    THE BOEING COMPANY Index to the Form 10-K For the Fiscal Year Ended December 31, 2013 PART I Item Item Item Item Item Item PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Item 6. Selected Financial Data ...Item 7. Management's ...

  • 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
    ... our BDS government and commercial satellite 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 the Summary of Business Segment Data and...

  • Page 16
    ... their North American operations and partnering with U.S. defense companies. In addition, certain competitors have occasionally formed teams with other competitors to address specific customer requirements. BDS expects the trend of strong competition to continue into 2014 with many international...

  • Page 17
    ...a number of 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...

  • 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
    ... 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 other competitive factors, fuel prices, terrorism...

  • Page 20
    ... 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 production aircraft, we may face further profitability pressures on this program. If our commercial airplanes fail...

  • Page 21
    ..., or changes to existing requirements, could increase our compliance costs or otherwise have a material impact on the operating margins of our BDS business. These requirements may result in increased compliance costs, and we could be subject to additional costs in the form of withheld payments and...

  • Page 22
    ... beyond the supplier's control or as a result of performance problems or financial difficulties, could have a material adverse effect on our ability to meet commitments to our customers or increase our operating costs. We use estimates in accounting for many contracts and programs. Changes in our...

  • 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
    ... 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 contractual commitments at competitive rates, on commercially reasonable terms or in sufficient amounts. We...

  • 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
    ...our annual pension costs and/or result in a significant change to Shareholders' equity. For U.S. government contracts, we allocate pension costs to individual contracts based on U.S. Cost Accounting Standards which can also affect contract profitability. We also provide other postretirement benefits...

  • Page 27
    ... engineering, administration 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, 2013: (Square feet in thousands) Commercial Airplanes Defense, Space & Security Other(2) Total...

  • Page 28
    ... quarter ended December 31, 2013 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...

  • Page 29
    ... Contractual 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) 2013 2012 2011...

  • Page 30
    ... Consolidated Results of Operations and Financial Condition Overview We are a global market leader in design, development, manufacture, sale, service and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services. We are one...

  • Page 31
    ...& Space Systems (N&SS) and Global Services & Support (GS&S) segments offset by lower revenues in the Boeing Military Aircraft (BMA) segment. The change in unallocated items and eliminations primarily reflects the timing of eliminations for intercompany aircraft deliveries. Revenues in 2012 increased...

  • Page 32
    ... in 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...

  • Page 33
    ... million in 2013, 2012 and 2011, respectively. The increase in net periodic benefit cost related to pension is primarily due to higher amortization of actuarial losses and higher service costs driven by lower discount rates. Unallocated pension expense in 2013 reflects the pension curtailment charge...

  • Page 34
    ... the years ended December 31, 2013, 2012 and 2011, respectively. Our 2013 effective tax rate was lower due to research tax credits for the 2013 and 2012 tax years that were both recorded in 2013 and research and experimental regulations issued by the Internal Revenue Service in 2013 which resulted...

  • Page 35
    ..., Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Defense, Space & Security Total contractual backlog Unobligated backlog 2013 $372,980 24,825 9,832 15,024 49,681 $422,661 $18,267 2012 $317,287 29,226 10,078 15,764 55,068 $372,355 $17,873 2011...

  • Page 36
    ... cost pressures for all airlines and price pressure on our products. Major productivity gains are essential to ensure a favorable market position at acceptable profit margins. Continued access to global markets remains vital to our ability to fully realize our sales potential and longterm investment...

  • Page 37
    ... competitors can use the improved efficiency to 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...

  • Page 38
    ...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. Backlog Firm backlog represents orders for products and services...

  • Page 39
    ... end of 2015. We continue to have a number of unsold 747 production positions and remain focused on obtaining additional orders, reducing out-of-sequence work, improving supply chain efficiency and implementing cost-reduction efforts. If market and production risks cannot be mitigated, the program...

  • Page 40
    ... management of our manufacturing operations and extended global supply chain, completion and integration of traveled work, as well as the incorporation of the 787-9 derivative into the manufacturing process. In addition, we continue to work with our customers and suppliers to assess the specific...

  • Page 41
    ... in lower margins (or a material charge if an airplane program has or is determined to have reach-forward losses) include the following: changes to the program accounting quantity, customer and model mix, production costs and rates, changes to price escalation factors in aircraft purchase contracts...

  • Page 42
    ... contracts or programs. Any of these impacts could have a material effect on the results of the Company's operations, financial position and/or cash flows. In addition to the risks described above, if Congress is unable to pass appropriations bills in a timely manner, a government shutdown could...

  • Page 43
    ... 2011, certain programs were realigned among BDS segments. Business segment data for all periods presented have been adjusted to reflect the realignment. Operating Results (Dollars in millions) Years ended December 31, Revenues % of total company revenues Earnings from operations Operating margins...

  • Page 44
    ... and Space Launch Systems 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 during development, we may experience schedule delays and cost impacts, which could increase our...

  • Page 45
    ... deliveries on the P-8A and Apache programs and reach-forward loss provisions in 2011 on the KC-767 International Tanker program. These increases were partially offset by fewer aircraft deliveries on the C-17 program and higher research and development costs. The increase in earnings includes net...

  • Page 46
    ... the Space Launch Systems program. These increases were partially offset by lower earnings from our United Space Alliance (USA) joint venture reflecting a gain of $39 million recorded in the third quarter of 2012 related to the termination and settlement of USA's defined benefit pension plans. The...

  • Page 47
    ... years, partially offset by government and commercial satellite contract awards. N&SS total backlog increased by 7% in 2012 compared with 2011 primarily due to the contract award for the Space Launch System program, partially offset by current year deliveries and sales on contracts awarded in prior...

  • Page 48
    ... both in-production and out-of-production aircraft types. Of these parked aircraft, approximately 20% are not expected to return to service. At the end of 2012 and 2011, 10% and 9.4% of the western-built commercial jet aircraft were parked. Aircraft valuations could decline if significant numbers of...

  • Page 49
    ... financial data for BCC as of December 31: (Dollars in millions) Customer financing and investment portfolio, net Other assets, primarily cash and short-term investments Total assets Other liabilities, primarily deferred income taxes Debt, including intercompany loans Equity Total liabilities...

  • Page 50
    ...guarantees and increases in other costs. Liquidity and Capital Resources Cash Flow Summary (Dollars in millions) Years ended December 31, Net earnings Non-cash items Changes in working capital Net cash provided by operating activities Net cash (used)/provided by investing activities Net cash used by...

  • Page 51
    ... investment in commercial airplane program inventory, primarily 787 inventory. Advances and progress billings increased by $3.9 billion in 2013, $1.9 billion in 2012 and $5 billion in 2011, primarily due to payments from commercial airplane customers. Discretionary contributions to our pension plans...

  • Page 52
    ... (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 obligations...

  • Page 53
    ... a purchase order commitment from us, a foreign supplier must have sufficient capability to meet our requirements and must be competitive in cost, quality and schedule. Income Tax Obligations As of December 31, 2013, our net asset for income taxes receivable, including uncertain tax positions, was...

  • Page 54
    ...48 4,551 $4,599 Commercial aircraft financing commitments include commitments to provide financing related to aircraft on order, under option for deliveries or proposed as part of sales campaigns based on estimated earliest potential funding dates. Based on historical experience, we anticipate that...

  • Page 55
    ... the impact of unallocated pension and other postretirement benefit expenses which represent costs not attributable to business segments - see Note 21 to our Consolidated Financial Statements. Management uses core operating earnings, core operating margin and core earnings per share for purposes of...

  • Page 56
    ... 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, major component costs, overhead costs, program tooling 44

  • Page 57
    .../estimates, supplier performance, or other circumstances may adversely or positively affect financial performance in future periods. If combined cost of sales percentages for commercial airplane programs for all of 2013 had been estimated to be lower by 1%, it would have increased pre-tax income for...

  • Page 58
    ...31, 2013. Change in discount rate Increase 25 bps ($2,043) (227) Change in discount rate Decrease 25 bps $2,543 279 (Dollars in millions) Pension plans Projected benefit obligation Net periodic pension cost Pension expense is also sensitive to changes in the expected long-term rate of asset return...

  • Page 59
    ... price risk associated with firmly committed and forecasted foreign denominated payments and receipts related to our ongoing business. Foreign currency forward and option contracts are sensitive to changes in foreign currency exchange rates. At December 31, 2013, a 10% increase in the exchange rate...

  • Page 60
    ...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 2 - Goodwill and Acquired Intangibles ...Note 3 - Earnings Per Share ...Note 4 - Income Taxes ...Note...

  • 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 Gain...

  • Page 62
    ... pension cost, net of tax of ($849), ($752) and ($523) Settlements and curtailments included in net income, net of tax of ($33), ($9) and ($25) Pension and postretirement benefit/(cost) related to our equity method investments, net of tax ($13), ($74) and $38 Total defined benefit pension plans...

  • 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
    ... rights and other asset financing Stock options exercised, other Excess tax benefits from share-based payment arrangements Employee taxes on certain share-based payment arrangements Common shares repurchased Dividends paid Net cash used by financing activities Effect of exchange rate changes on cash...

  • Page 65
    ... per share data) Balance at January 1, 2011 Net earnings Other comprehensive loss, net of tax of $1,555 Share-based compensation and related dividend equivalents Excess tax pools Treasury shares issued for stock options exercised, net Treasury shares issued for other share-based plans, net Treasury...

  • Page 66
    ..., Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Defense, Space & Security Boeing Capital Other segment Unallocated items and eliminations Earnings from operations Other income, net Interest and debt expense Earnings before income taxes Income tax...

  • Page 67
    ... ended December 31, 2013, 2012 and 2011 (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...

  • Page 68
    ... associated with military aircraft and helicopter contracts, ongoing maintenance of International Space Station, and technical and flight operation services for commercial aircraft. Service revenue and associated cost of sales from pay-in-advance subscription fees are deferred and recognized as...

  • Page 69
    ...in Sales of services on the Consolidated Statements of Operations. For sales-type/finance leases, we record an asset at lease inception. This asset is recorded at the aggregate future minimum lease payments, estimated residual value of the leased equipment, and deferred incremental direct costs less...

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

  • Page 71
    ... to Accounts payable were $108 and $159 at December 31, 2013 and 2012. 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...

  • Page 72
    ...for the estimated loss on all undelivered units in the accounting quantity. Used aircraft purchased by the Commercial Airplanes segment and general stock materials are stated at cost not in excess of net realizable value. See 'Aircraft Valuation' within this Note for a discussion of our valuation of...

  • Page 73
    Long-lived assets held for sale are stated at the lower of cost or fair value less cost to sell. Long-lived assets held for use are subject to an impairment assessment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no ...

  • 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
    ...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 76
    ... certain other assets in which the customer has an equity interest and use the proceeds to cover the shortfall. Each quarter we review customer credit ratings, published historical credit default rates for different rating categories, and multiple third-party aircraft value publications as a basis...

  • Page 77
    ... certain suppliers to compensate us for amounts paid to customers for failure of supplied equipment to meet specified performance targets. Claims against suppliers under these agreements are included in Inventories and recorded as a reduction in Cost of products at delivery of the related aircraft...

  • Page 78
    ... goodwill by reportable segment for the years ended December 31, 2013, 2012 and 2011 were as follows: Commercial Airplanes $2,110 (4) $2,106 12 7 $2,125 (17) $2,108 $1,041 Boeing Military Aircraft $1,041 Network & Space Systems $1,461 16 (4) $1,473 (1) $1,472 41 $1,513 Global Services & Support $325...

  • Page 79
    ... per share amounts) Years ended December 31, Net earnings Less: earnings available to participating securities Net earnings available to common shareholders Basic Basic weighted average shares outstanding Less: participating securities Basic weighted average common shares outstanding Diluted Basic...

  • Page 80
    ..., 2013. As tax law changes are recognized in the period in which new legislation is enacted, the 2012 research tax credit of $145 was recorded in the first quarter of 2013. Our 2012 effective tax rate was higher than 2011, primarily due to tax benefits of $397 recorded in 2011 as a result of federal...

  • Page 81
    ... Retiree health care accruals Inventory and long-term contract methods of income recognition, fixed assets and other (net of valuation allowance of $20 and $27) Partnerships and joint ventures Other employee benefits accruals In-process research and development related to acquisitions Net operating...

  • Page 82
    ... Statements of Financial Position were as follows: interest of $12 and $11 and penalties of $8 and $11. The amounts of interest benefit included in the Consolidated Statements of Operations were $4, $43, and $94 for the years ended December 31, 2013, 2012 and 2011, respectively. The interest benefit...

  • Page 83
    ...or related to outstanding claims as of December 31: Unbillable 2013 2012 $1,550 $1,316 1,020 730 $2,570 $2,046 Claims 2013 2012 $3 $26 61 63 $64 $89 Current Expected to be collected after one year Total Under contract accounting unbillable receivables on long-term contracts arise when the sales or...

  • Page 84
    ..., 2013 and 2012, commercial aircraft programs inventory included the following amounts related to the 787 program: $27,576 and $21,289 of work in process (including deferred production costs of $21,620 and $15,929), $2,189 and $1,908 of supplier advances, and $3,377 and $2,339 of unamortized tooling...

  • Page 85
    ... in sales-type/finance leases at December 31 were as follows: Minimum lease payments receivable Estimated residual value of leased assets Unearned income Total 2013 $1,731 543 (575) $1,699 2012 $1,987 544 (681) $1,850 Operating lease equipment primarily includes large commercial jet aircraft and...

  • Page 86
    ... 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 credit rating...

  • Page 87
    ...-of-production aircraft Charges related to customer financing asset impairment for the years ended December 31 were as follows: 2013 $67 14 $81 2012 $73 (15) $58 2011 $109 (36) $73 Boeing Capital Other Boeing Total Scheduled receipts on customer financing are as follows: Year Principal payments on...

  • Page 88
    ...: 2014 $223 61 2015 $171 37 2016 $142 22 2017 $120 14 2018 $95 0 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 $213 and $234 for the years ended December...

  • Page 89
    ... money market funds(1) Available-for-sale investments Equity method investments (2) Restricted cash(3) Other investments Total (1) Reflects amounts pledged in lieu of letters of credit as collateral in support of our workers' compensation programs. These funds can become available within 30 days...

  • Page 90
    ... and employee benefit costs Environmental Product warranties Forward loss recognition Dividends payable Other Total Environmental The following table summarizes environmental remediation activity during the years ended December 31, 2013 and 2012. Beginning balance - January 1 Reductions for payments...

  • Page 91
    ... related to aircraft on order, including options and those proposed in sales campaigns, totaled $17,987 and $18,083 as of December 31, 2013 and 2012. The estimated earliest potential funding dates for these commitments as of December 31, 2013 are as follows: 2014 2015 2016 2017 2018 Thereafter Total...

  • Page 92
    ... value of the policies, we present the net asset in Other assets on the Consolidated Statements of Financial Position as of December 31, 2013 and 2012. United States Government Defense Environment Overview U.S. government appropriation levels remain subject to significant uncertainty. In August 2011...

  • Page 93
    ... may be material. The combination of production challenges, change incorporation, schedule delays and customer and supplier impacts has created significant pressure on 787 program profitability. If risks related to this program, including risks associated with planned production rate increases, or...

  • Page 94
    ... to indemnify ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360 of Boeing Delta launch program inventory included in contributed assets plus $1,860 of inventory subject to an inventory supply agreement which ends on March 31, 2021. Since inception...

  • Page 95
    ... Capital Corporation related to the sale of Boeing Capital'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...

  • Page 96
    ... Statements of Operations, and is included in Earnings from operations. Total Company interest payments were $551, $614 and $626 for the years ended December 31, 2013, 2012 and 2011, respectively. We have $4,845 currently available under credit line agreements, of which $2,392 is a 364-day...

  • Page 97
    ... Benefits 2013 2012 2011 $148 $146 $221 263 313 484 (6) (7) (6) (180) (197) (96) 95 119 178 (1) 3 $320 $373 $784 $353 $543 $692 2014 $1,562 2015 $888 2016 $1,075 2017 $58 2018 $638 Years ended December 31, Service cost Interest cost Expected return on plan assets Amortization of prior service costs...

  • Page 98
    .../curtailment/other Benefits paid Exchange rate adjustment Ending balance at fair value Amounts recognized in statement of financial position at December 31 consist of: Other assets Other accrued liabilities Accrued retiree health care Accrued pension plan liability, net Net amount recognized...

  • Page 99
    ... plans, are used to calculate the benefit obligation at December 31 of each 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 2013 4.80% 4.20% 7.50% 4.00% 2012...

  • Page 100
    ... pension fund. Specific investment objectives for our long-term investment strategy include reducing the volatility of pension assets relative to pension liabilities, achieving a competitive, total investment return, achieving diversification between and within asset classes and managing other risks...

  • Page 101
    ... capitalize on inefficiencies identified across different 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 multi-strategy. Investment managers...

  • Page 102
    ... and preferred stock Common/collective/pooled funds Derivatives: Assets Liabilities Private equity (1) Real estate and real assets: Real estate Real assets Derivatives: Assets Liabilities Global strategies Hedge funds Total Cash Receivables Payables Total (1) December 31, 2013 Level 1 Level 2 Level...

  • Page 103
    ...on specific terms and conditions of the individual funds. Investments in private equity, private debt, real estate, real assets, global strategies, and hedge funds are primarily calculated and reported by the General Partner (GP), fund manager or third party administrator. Pension assets invested in...

  • Page 104
    ...Into/(Out of) 2012 Level 3 Balance ($7) 358 (3) $3 561 2,916 January 1, 2012 Balance Fixed income securities: Corporate Mortgage backed and asset backed Municipal Private equity Real estate and real assets: Real estate Real assets Global strategies Hedge funds Total $11 11 3 2,859 Net Realized and...

  • Page 105
    ... 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. Cash Flows Contributions Required pension contributions...

  • Page 106
    ... awards Share-based plans expense Income tax benefit Stock Options In February 2013, 2012 and 2011, we granted to our executives 6,591,968, 6,114,922 and 5,426,910 options, respectively. The options have been granted with an exercise price equal to the fair market value of our stock on the date of...

  • Page 107
    ...-Average Dividend Risk Free Grant Date Fair Yield Interest Rate Value Per Share 2.6% 1.0% $15.85 2.4% 1.1% $16.89 2.3% 2.5% $17.96 Grant Year 2013 2012 2011 Grant Date 2/25/2013 2/27/2012 2/22/2011 The expected volatility of the stock options is based on a combination of our historical stock...

  • Page 108
    ... for the year ended December 31, 2013 is as follows: Incentive Program Restricted Stock Units Number of units: Outstanding at beginning of year Granted Dividends Forfeited Distributed Outstanding at end of year Unrecognized compensation cost Weighted average remaining contractual life (years) Other...

  • Page 109
    ... 16 - Shareholders' Equity On October 29, 2007, the Board approved the repurchase of up to $7,000 of common stock (the 2007 Program). At December 31, 2013, $810 in shares may still be repurchased under the Program. On December 16, 2013, the Board approved a new repurchase plan (the 2013 Program) for...

  • Page 110
    ... the years ended December 31, 2013 2012 and 2011 totaling $1,516, $1,304 and $909 (net of tax of ($849), ($752) and ($523)) which is included in the net periodic pension cost of which a portion is allocated to production as inventoried costs. See Note 14. Note 17 - Derivative Financial Instruments...

  • Page 111
    ..., 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) 2013 2012...

  • Page 112
    ...79) ($79) ($84) ($84) ($84) ($84) Money market funds and available-for-sale equity securities are valued using a market approach based on the quoted market prices of identical instruments. Available-for-sale debt investments are primarily valued using an income approach based on benchmark yields...

  • Page 113
    ... attributes covered by third party publications, or on the expected net sales price for the aircraft. Property, plant and equipment was primarily valued using an income approach based on the discounted cash flows associated with the underlying assets. For Level 3 assets that were measured at fair...

  • 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, 2013 and 2012. The fair value of assets and liabilities...

  • Page 115
    ... its rights to convert the termination to one for "the convenience of the government," and to obtain payment for work done and costs incurred on the A-12 contract but not paid to date. The U.S. Court of Federal Claims held that the default termination decision could not be sustained and on March...

  • Page 116
    ... made by Boeing in 2008 to the case's class certification order. On January 21, 2011, the Seventh Circuit reversed the district court's class certification order and decertified the class. The Seventh Circuit remanded the case to the district court for further proceedings. On September 19, 2013, the...

  • Page 117
    ... satellite launch vehicles; and space exploration. Our GS&S segment 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...

  • Page 118
    ... financial reporting used for corporate management purposes. Depreciation and Amortization Years ended December 31, Commercial Airplanes Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Defense, Space & Security Boeing Capital Corporation...

  • Page 119
    ...Expenditures Years ended December 31, Commercial Airplanes Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Defense, Space & Security Other segment Unallocated items and eliminations Total 2013 $694 186 96 48 330 323 751 $2,098 2012 $665 153...

  • Page 120
    ... on benefits paid. Prior year allocations have not been adjusted. Assets Segment assets are summarized in the table below. December 31, Commercial Airplanes Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Defense, Space & Security Boeing...

  • Page 121
    ...a company-funded retirement savings plan in lieu of participation in the defined benefit pension plan. IAM 751-represented employees hired on or after January 3, 2014 will be immediately covered by the company-funded retirement savings plan. The defined benefit pension plan changes will be accounted...

  • Page 122
    ... financial position of The Boeing Company and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2013. The financial statements...

  • Page 123
    ... have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2013 of the Company and our report dated February 14, 2014 expressed an unqualified opinion on those...

  • Page 124
    ... in the Securities and Exchange Commission's rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. (b) Management's Report on Internal Control...

  • Page 125
    ...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 126
    ... of Global Investor Relations at Raytheon 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. Chief...

  • Page 127
    ... Statement, and that information is incorporated by reference herein. Codes of Ethics. 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...

  • Page 128
    ...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 129
    ... 16, 2013). (ii) (10) Material Contracts. 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 130
    ... Benefits Plan, as amended and restated effective January 1, 2010 (Exhibit (10)(xxix) to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). (xiv) The Boeing Company 2003 Incentive Stock Plan. (a) (b) (c) (d) (e) Plan, as amended and restated effective February 21, 2011...

  • Page 131
    ... Ratio of Earnings to Fixed Charges. (14) Codes of Ethics. (i) (ii) (iii) The Boeing Company Code of Ethical Business Conduct for Members of the Board of Directors (www.boeing.com/corp_gov/conduct_for_directors.pdf). The Boeing Company Code of Conduct for Finance Employees (www.boeing.com/ corp_gov...

  • 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 14, 2014. THE BOEING COMPANY (Registrant) By: /s/ Diana L. Sands Diana L. Sands - Vice President of Finance and Corporate Controller...

  • Page 133
    ... 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 14, 2014. /s/ W. James McNerney, Jr. W. James McNerney, Jr. - Chairman and Chief Executive Officer (Principal Executive...

  • Page 134
    ... of earnings from operations, operating margins and diluted earnings per share. See page 43 of Form 10-K. U.S. dollars in millions except per share data 2013 2012 2011 2010 2009 Revenues Earnings from operations, as reported** Operating margins** Unallocated pension and other postretirement...

  • Page 135
    ... to 15,750 kilometers), providing 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 The Boeing 767 Freighter Also available is the 767-2C...

  • Page 136
    ...operations, giving them a competitive edge in their markets. Commercial Aviation Services offers the industry's largest and most comprehensive support products and services portfolio, known as the Boeing Edge. The portfolio spans the airplane life cycle-acquisition, readying for service, maintenance...

  • Page 137
    ... company continues to provide system-level Performance-Based Logistics sustainment services for the entire ï¬,eet, including material management and depot maintenance support. 2013 deliveries: 10* and sustainment. The Republic of Korea operates four Peace Eye AEW&C aircraft for which Boeing provides...

  • Page 138
    ... V launch vehicle for initial CST-100 test ï¬,ights in 2016. With extensive experience developing, deploying and defending complex systems for customers and our own global network, Boeing possesses a unique understanding of network security needs, challenges and solutions. Boeing also operates two...

  • Page 139
    ... reduced operating costs. With more than 500 years of on-orbit GPS service to date, Boeing continues to develop affordable solutions for future GPS capabilities. Global Services & Support (GS&S) Defence UK Ltd., Boeing Defence Australia, and Alsalam Aircraft Company, a joint venture headquartered...

  • Page 140
    ...updated satellite bus structure and simplified propulsion system. Two satellites have been launched to date and are delivering video, The space station is the largest, most complex international scientific project in history. Inhabited continuously since 2000, its crews conduct research to support...

  • Page 141
    ... Navy announced Initial Operational Capability and the first aircraft deployment in 2013. In 2013, Boeing received its fourth low-rate initial production contract for 13 aircraft, which will bring the total ï¬,eet to 37. The PAC-3 Missile Seeker uses hit-to-kill technology to intercept and destroy...

  • Page 142
    ... satellite launch services to the U.S. government. The joint venture also launches commercial missions on behalf of Boeing Launch Services. ULA launched 11 successful missions in 2013. unmanned vehicles such as ScanEagle and Integrator. Boeing and Insitu's technology and related support systems...

  • Page 143
    ... company's products and services to commercial and government customers worldwide. Working with Boeing's business units, Boeing Capital is dedicated to helping customers obtain efficient product financing primarily in the commercial markets. To ensure adequate availability of capital for aircraft...

  • Page 144
    ...shareholder information) 312-544-2660 (8 a.m. to 4:30 p.m. Central Time) Investor Relations Contact The Boeing Company Mail Code 5003-2001 100 North Riverside Plaza Chicago, IL 60606-1596 To Request an Annual Report, Proxy Statement, Form 10-K or Form 10-Q, Contact: Mail Services The Boeing Company...

  • Page 145
    ..., Jr. Chairman 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...

  • Page 146
    ... Vice President, Communications Shephard W. Hill President, Boeing International Senior Vice President, Business Development and Strategy Timothy J. Keating Senior Vice President, Government Operations Michael F. Lohr* Vice President, Assistant General Counsel and Corporate Secretary J. Michael...

  • Page 147
    ... world while growing 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. THE BOEING COMPANY 2013 ANNUAL REPORT Visit us...

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