01—Abstract
Summary
Summary of the 10-K filed February 9, 2012. Cited figures are marked; the original filing is the authoritative source.
Boeing's 2011 10-K filing reflects a year of robust revenue growth, primarily driven by a strong performance in the Commercial Airplanes segment, which saw increased deliveries of key models like the 787 and 747-8.
This segment's recovery from prior-year setbacks, notably the 787 production costs, is a significant positive for investors. The Boeing Defense, Space & Security (BDS) segment demonstrated stability, with revenues largely in line with the prior year.
However, investors should note the company's commentary on increasing defense budget pressures and the U.S. government's shifting priorities, which may present headwinds for BDS in the future. The company's extensive backlog across both segments provides a degree of revenue visibility, though risks related to program cost overruns and production rate challenges, particularly on the 787 and 747-8, remain critical factors to monitor.
02—Key points
Key Highlights
- Revenue increased by 7% to $68.7 billion, driven by a 13.6% rise in Commercial Airplanes revenue due to higher aircraft deliveries and services.
- Commercial Airplanes segment earnings from operations significantly improved by $489 million, turning a prior year loss into a profit, largely due to increased deliveries and reduced R&D expenses.
- Boeing Defense, Space & Security (BDS) segment earnings from operations increased by $283 million, reflecting improved performance in Military Aircraft and Global Services & Support.
- The company delivered its first 787 Dreamliner aircraft in September 2011, with two additional deliveries in Q4 2011, marking a significant milestone despite ongoing production challenges.
- Contractual backlog grew by 11.7% to $339.7 billion, providing strong revenue visibility for future periods.
- Boeing announced plans to increase production rates for the 737 program, indicating confidence in future demand.
- The company continues to manage significant pension and postretirement benefit obligations, with a combined underfunding of $26.4 billion on a GAAP basis at year-end 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Boeing Co kept $0.06.
- Revenue$68.73B100.0%
- Cost of revenue−$55.89B81.3%
- Gross profit$12.85B18.7%
- Operating costs−$7.02B10.2%
- Operating income$5.82B8.5%
- Interest, other & tax−$1.80B2.6%
- Net income$4.02B5.8%
Where FY2011 revenue went
$68.73B- Cost of revenue: $55.89B, 81% of revenue
- Net income: $4.02B, 5.8% of revenue
- R&D: $3.92B, 5.7% of revenue
- Other operating costs: $3.11B, 4.5% of revenue
- Interest, other & tax: $1.80B, 2.6% of revenue
Kept 5.8% as net incomeNet income $4.02B · 5.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 9, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $68.73B$64.31B | +6.9% |
| Cost of Revenue | $55.89B$51.84B | +7.8% |
| Gross Profit | $12.85B$12.46B | +3.1% |
| R&D Expenses | $3.92B$4.12B | −4.9% |
| Operating Income | $5.82B$4.97B | +17.1% |
| Net Income | $4.02B$3.31B | +21.5% |
| EPS (Basic) | $5.39$4.49 | +20.0% |
| EPS (Diluted) | $5.34$4.45 | +20.0% |
| Shares Outstanding (Basic) | 744.10M735.00M | +1.2% |
| Shares Outstanding (Diluted) | 750.60M741.20M | +1.3% |
05—Questions
Frequently Asked Questions
What were the key drivers of Boeing's revenue growth in 2011?
Boeing's revenue growth in 2011 was primarily driven by a significant increase in deliveries within its Commercial Airplanes segment. This was bolstered by the introduction into service of the 787-8 and 747-8 Freighter, favorable delivery mix, and higher commercial aviation services revenues.
What are the main risks highlighted in the 10-K filing for Boeing?
Key risks identified include reliance on the cyclical commercial airline industry, potential cost overruns on firm fixed-price contracts, dependence on a limited number of commercial airline customers, and challenges in achieving planned production rate increases for new aircraft programs like the 787 and 747-8. For the defense segment, risks include shifts in U.S. government spending priorities and potential budget cuts, as well as strong competition.
How is Boeing managing its significant pension and postretirement obligations?
Boeing manages these obligations by contributing to trust funds that hold plan assets. The company uses actuarial assumptions to estimate future obligations and costs. While the plans were underfunded on a GAAP basis, the company's strategy includes making discretionary contributions to improve funded status. The sensitivity analyses provided highlight the impact of changes in discount rates and other economic factors on these obligations.
What is the significance of the 787 program's production challenges for investors?
The 787 program faced significant production challenges, including delays and the need to incorporate design changes into already manufactured aircraft. These issues led to higher costs and impacted margins. While the first deliveries occurred in 2011, ongoing efforts to increase production rates and manage the global supply chain are critical for future profitability and investor confidence. The company explicitly notes the program's low single-digit profit margin and the potential for further financial impact from future challenges.
06—Continue