10-KPeriod: FY2016

BOEING CO Annual Report, Year Ended Dec 31, 2016

Filed February 8, 2017For Securities:BABA-PA

Summary

Boeing's 2016 10-K filing reveals a company navigating a dynamic aerospace and defense landscape. Total revenues saw a slight decrease to $94.6 billion compared to the previous year, primarily driven by a dip in the Commercial Airplanes segment, which still represents the largest portion of sales. The Defense, Space & Security (BDS) segment also experienced a revenue decline, influenced by lower performance in Boeing Military Aircraft (BMA) and Network & Space Systems (N&SS). Despite revenue pressures, the company continued to invest heavily in Research and Development, totaling $4.6 billion, indicating a commitment to future product innovation. Significant charges related to program cost overruns, particularly on the KC-46A Tanker and 747 programs, impacted earnings from operations, leading to a decrease to $5.8 billion. The company also incurred a substantial reclassification of 787 flight test aircraft costs to R&D. These financial pressures, coupled with ongoing competition and government spending uncertainties, highlight key challenges for investors. However, Boeing's substantial backlog of $458 billion provides a degree of revenue visibility. The company also demonstrated a commitment to shareholder returns through significant share repurchases and dividend payments.

Financial Highlights

55 data points
Beta

Revenue

$93.50B

15.5% Gross Margin

Net Income

$5.03B

5.4% Net Margin

EPS (Diluted)

$7.83

Total Assets

$90.00B

Cash & Equivalents

$8.80B

Free Cash Flow

$7.88B

Financial Statements
Beta
Revenue$93.50B
Cost of Revenue$79.03B
Gross Profit$14.47B
R&D Expenses$4.63B
Operating Income$6.53B
Net Income$5.03B
EPS (Basic)$7.92
EPS (Diluted)$7.83
Shares Outstanding (Basic)636.50M
Shares Outstanding (Diluted)642.80M

Key Highlights

  • 1Total revenues for 2016 were $94.6 billion, a decrease of 1.6% from 2015, driven by lower deliveries in Commercial Airplanes and reduced revenues in the Defense, Space & Security (BDS) segment.
  • 2Earnings from operations decreased to $5.8 billion in 2016 from $7.4 billion in 2015, impacted by significant charges on programs like the KC-46A Tanker ($1.1 billion) and the 747 program.
  • 3Research and Development expenses increased significantly by 30% to $4.6 billion in 2016, largely due to the reclassification of $1.2 billion in 787 flight test aircraft costs to R&D.
  • 4The Commercial Airplanes segment, while down slightly in revenue, remains the largest segment, generating $65.1 billion in revenue. However, its earnings from operations fell by 39% to $3.1 billion due to higher R&D and program charges.
  • 5The Defense, Space & Security (BDS) segment reported revenues of $29.5 billion, a 2.6% decrease, with earnings from operations declining 8% to $3.0 billion, affected by unfavorable contract adjustments and program charges.
  • 6The company's contractual backlog remained substantial at $458.3 billion at year-end 2016, down slightly from $476.6 billion in 2015, indicating strong future revenue potential.
  • 7Boeing continued its capital return program, repurchasing $7.0 billion of common stock and paying $2.9 billion in dividends during 2016.

Frequently Asked Questions

Boeing's primary revenue drivers remained its Commercial Airplanes segment, which generated $65.1 billion in revenue, and its Defense, Space & Security (BDS) segment, which generated $29.5 billion. Despite slight revenue decreases in both segments compared to 2015, these two divisions formed the vast majority of the company's total $94.6 billion in revenue.

The decrease in earnings from operations was primarily due to significant program-specific charges and cost overruns. Notably, reach-forward losses on the KC-46A Tanker program amounted to $1.1 billion, and the 747 program also incurred substantial losses. Additionally, Boeing reclassified $1.2 billion in costs for 787 flight test aircraft from inventory to research and development expense, impacting profitability.

Boeing maintains a substantial contractual backlog of $458.3 billion, providing significant revenue visibility. However, the company faces risks associated with program execution, cost overruns (as seen in the KC-46A and 747 programs), and increasing competition. Boeing is actively pursuing cost-reduction efforts and process improvements to mitigate these risks. The company is also heavily investing in R&D for new aircraft like the 737 MAX and 777X, which carry their own development and production risks.

Boeing had total debt of $10.0 billion at the end of 2016, remaining stable from the prior year. The company generated strong operating cash flow of $10.5 billion in 2016, an increase from 2015. This robust cash flow supported significant share repurchases ($7.0 billion) and dividend payments ($2.9 billion), demonstrating a commitment to returning capital to shareholders.