01—Abstract
Summary
Summary of the 10-K filed February 8, 2017. Cited figures are marked; the original filing is the authoritative source.
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 billiona 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 billionb. 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 billionc provides a degree of revenue visibility. The company also demonstrated a commitment to shareholder returns through significant share repurchases and dividend payments.
02—Key points
Key Highlights
- Total 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.
- Earnings 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.
- Research 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.
- The 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.
- The 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.
- The 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.
- Boeing continued its capital return program, repurchasing $7.0 billion of common stock and paying $2.9 billion in dividends during 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Boeing Co kept $0.05.
- Revenue$93.50B100.0%
- Cost of revenue−$79.03B84.5%
- Gross profit$14.47B15.5%
- Operating costs−$7.94B8.5%
- Operating income$6.53B7.0%
- Interest, other & tax−$1.49B1.6%
- Net income$5.03B5.4%
Where FY2016 revenue went
$93.50B- Cost of revenue: $79.03B, 85% of revenue
- Net income: $5.03B, 5.4% of revenue
- R&D: $4.63B, 4.9% of revenue
- Other operating costs: $3.32B, 3.5% of revenue
- Interest, other & tax: $1.49B, 1.6% of revenue
Kept 5.4% as net incomeNet income $5.03B · 5.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 8, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $93.50B$96.11B | −2.7% |
| Cost of Revenue | $79.03B$82.09B | −3.7% |
| Gross Profit | $14.47B$14.03B | +3.2% |
| R&D Expenses | $4.63B$3.33B | +38.9% |
| Operating Income | $6.53B$7.44B | −12.3% |
| Net Income | $5.03B$5.18B | −2.7% |
| EPS (Basic) | $7.92$7.52 | +5.3% |
| EPS (Diluted) | $7.83$7.44 | +5.2% |
| Shares Outstanding (Basic) | 636.50M688.00M | −7.5% |
| Shares Outstanding (Diluted) | 642.80M695.00M | −7.5% |
05—Questions
Frequently Asked Questions
What were Boeing's primary revenue drivers in 2016?
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.
What factors led to the decrease in Boeing's earnings from operations in 2016?
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.
How is Boeing managing its significant backlog and future program risks?
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.
What is Boeing's financial position regarding debt and cash flow?
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.
06—Continue