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30
Defense, Space & Security
Business Environment and Trends
United States Government Defense Environment Overview U.S. government appropriation levels
remain subject to significant uncertainty. In August 2011, the Budget Control Act (The Act) established
limits on U.S. government discretionary spending, including a reduction of defense spending by
approximately $490 billion between the 2012 and 2021 U.S. government fiscal years. The Act also provided
that the defense budget would face “sequestration” cuts of up to an additional $500 billion during that same
period to the extent that discretionary spending limits are exceeded. The impact of sequestration cuts was
reduced with respect to FY2014 and FY2015 following the enactment of The Bipartisan Budget Act in
December 2013. However, significant uncertainty remains with respect to overall levels of defense spending
and it is likely that U.S. government discretionary spending levels will continue to be subject to significant
pressure, including risk of future sequestration cuts.
In addition, there continues to be significant uncertainty with respect to program-level appropriations for
the U.S. Department of Defense (U.S. DoD) and other government agencies (including the National
Aeronautics and Space Administration) within the overall budgetary framework described above. While
the FY2014 appropriations finalized in January 2014 included funding for Boeing’s major programs,
uncertainty remains about how defense budgets in FY2015 and beyond will affect Boeing’s programs.
Future budget cuts, including cuts mandated by sequestration, or future procurement decisions associated
with the appropriations process could result in reductions, cancellations, and/or delays of existing 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 result which could have impacts above and beyond those resulting
from budget cuts or sequestration impacts. For example, requirements to furlough employees in the U.S.
DoD or other government agencies could result in payment delays, impair our ability to perform work on
existing contracts, and/or negatively impact future orders.
International Environment Overview The international market continues to be driven by complex and
evolving security challenges and the need to modernize aging equipment and inventories, while faced
with constrained budgets. In Europe, the continuing financial challenges are forcing governments to institute
austerity measures negatively impacting defense spending in the near term.
The strongest opportunities for BDS in 2014 will be the Middle East and Asia Pacific regions where the
relative financial strength of these economies, coupled with a broad spectrum of evolving threats, will result
in procurement of defense and security systems.