What changed in Boeing's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of Boeing's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+347 added−381 removedSource: 10-K (2024-01-31) vs 10-K (2023-01-27)
Top changes in Boeing's 2023 10-K
347 paragraphs added · 381 removed · 271 edited across 6 sections
- Item 7. Management's Discussion & Analysis+207 / −244 · 156 edited
- Item 1A. Risk Factors+89 / −89 · 72 edited
- Item 1. Business+36 / −34 · 31 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+8 / −6 · 5 edited
- Item 2. Properties+4 / −5 · 4 edited
Item 1. Business
Business — how the company describes what it does
31 edited+5 added−3 removed24 unchanged
Item 1. Business
Business — how the company describes what it does
31 edited+5 added−3 removed24 unchanged
2022 filing
2023 filing
Biggest changeWe are a leading producer of commercial aircraft and offer a family of commercial jetliners designed to meet a broad spectrum of global passenger and cargo requirements of airlines. This family of commercial jet aircraft in production includes the 737 narrow-body model and the 767, 777 and 787 wide-body models. We ended production of the 747 wide-body model in 2022.
Biggest changeCommercial Airplanes Segment This segment develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide. We are a leading producer of commercial aircraft and offer a family of commercial jetliners designed to meet a broad spectrum of global passenger and cargo requirements of airlines.
We intend to continue to compete with other aircraft manufacturers by providing customers with airplanes and services that deliver superior design, safety, efficiency and value to customers around the world. BDS faces strong competition primarily from Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, General Dynamics Corporation and SpaceX.
We intend to continue to compete with other aircraft manufacturers by providing customers with airplanes and services that deliver superior design, safety, quality, efficiency and value to customers around the world. BDS faces strong competition primarily from Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, General Dynamics Corporation and SpaceX.
Non-U.S. companies such as BAE Systems and Airbus Group continue to build a strategic presence in the U.S. market by strengthening 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 2023.
Non-U.S. companies such as BAE Systems and Airbus Group continue to build a strategic presence in the U.S. market by strengthening 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 2024.
We continue to work with a small number of sole-source suppliers to ensure continuity of supply for certain items. Suppliers We are dependent upon the ability of a large number of U.S. and non-U.S. suppliers and subcontractors to meet performance specifications, quality standards and delivery schedules at our anticipated costs.
We continue to work with a small number of sole-source suppliers to ensure continuity of supply for certain items. 4 Table of Contents Suppliers We are dependent upon the ability of a large number of U.S. and non-U.S. suppliers and subcontractors to meet performance specifications, quality standards and delivery schedules at our anticipated costs.
If any of our government contracts were to be terminated for default, generally the U.S. government would pay only for the work that has been accepted and could require us to pay the difference between the original contract price and the cost to re-procure the contract items, net of the work accepted from the original contract.
If any of our government contracts were to be terminated for default, generally the U.S. government would pay only for the work that has been accepted and could require us 3 Table of Contents to pay the difference between the original contract price and the cost to re-procure the contract items, net of the work accepted from the original contract.
The most important raw materials required for our aerospace products 4 Table of Contents are aluminum (sheet, plate, forgings and extrusions), titanium (sheet, plate, forgings and extrusions) and composites (including carbon and boron). Although alternative sources generally exist for these raw materials, qualification of the sources could take a year or more.
The most important raw materials required for our aerospace products are aluminum (sheet, plate, forgings and extrusions), titanium (sheet, plate, forgings and extrusions) and composites (including carbon and boron). Although alternative sources generally exist for these raw materials, qualification of the sources could take a year or more.
Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law.
Any forward-looking statement 5 Table of Contents speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law.
While our intellectual property rights in the aggregate are important to the operation of each of our businesses, we do not believe that our business would be materially affected by the expiration of any particular intellectual property right or termination of any particular intellectual property patent license agreement.
While our intellectual 1 Table of Contents property rights in the aggregate are important to the operation of each of our businesses, we do not believe that our business would be materially affected by the expiration of any particular intellectual property right or termination of any particular intellectual property patent license agreement.
Additionally, we hired approximately 23,000 new employees in 2022 for critical skills and had an offer acceptance rate of 78%. Employees are encouraged to provide feedback about their experience through ongoing employee engagement activities. Boeing actively listens to its employees via surveys ranging from pre-hire to exiting the company.
Additionally, we hired approximately 23,000 new employees in 2023 for critical skills and had an offer acceptance rate of 82%. Employees are encouraged to provide feedback about their experience through ongoing employee engagement activities. Boeing actively listens to its employees via surveys ranging from pre-hire to exiting the company.
We also support Business Resource Groups open to all employees with more than 15,000 participants across 170 chapters globally that focus on gender, race & ethnicity, generations, gender identity, sexual orientation, disability or veteran status.
We also support Business Resource Groups open to all employees with more than 15,000 participants across 176 chapters globally that focus on gender, race and ethnicity, generations, gender identity, sexual orientation, disability or veteran status.
During 2022, as a result of the Russia Ukraine war, we suspended purchasing titanium from Russia. This has not disrupted our operations as we have been able to use inventory on hand and identify alternative sources. Many major components and product equipment items are procured or subcontracted on a sole-source basis.
As a result of the Russia Ukraine war, we ceased purchasing titanium from Russia. This has not disrupted our operations as we have been able to use inventory on hand and identify alternative sources. Many major components and product equipment items are procured or subcontracted on a sole-source basis.
While we maintain an extensive qualification and performance surveillance system to control risk associated with such reliance on third parties, failure of suppliers or subcontractors to meet commitments could adversely affect production schedules and program/contract profitability, thereby jeopardizing our ability to fulfill commitments to our customers.
While we maintain an extensive qualification and performance surveillance system to control risk associated with such reliance on third parties, failure of suppliers or subcontractors to meet commitments has and could continue to adversely affect product quality, production schedules and program/contract profitability, thereby jeopardizing our ability to fulfill commitments to our customers.
BGS expects the market to remain highly competitive in 2023, and intends to grow market share by leveraging a high level of customer satisfaction and productivity. 3 Table of Contents Regulatory Matters Our businesses are heavily regulated in most of our markets.
BGS expects the market to remain highly competitive in 2024, and intends to grow market share by leveraging a high level of customer satisfaction and productivity. Regulatory Matters Our businesses are heavily regulated in most of our markets.
Our principal collective bargaining agreements and their current status are summarized in the following table: Union Percent of our Employees Represented Status of the Agreements with Major Union The International Association of Machinists and Aerospace Workers (IAM) 20% We have two major agreements; one expiring in September 2024 and one in July 2025.
Our principal collective bargaining agreements and their current status are summarized in the following table: Union Percent of our Employees Represented Status of Major Agreements with Union The International Association of Machinists and Aerospace Workers (IAM) 21% We have two major agreements; one with IAM District 751 (Washington) expiring in September 2024 and one with IAM District 837 (Missouri) expiring in July 2025.
The Society of Professional Engineering Employees in Aerospace (SPEEA) 10% We have two major agreements expiring in October 2026. The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) 1% We have one major agreement expiring in April 2027.
The Society of Professional Engineering Employees in Aerospace (SPEEA) 10% We have two major agreements; one with SPEEA Professional and one with SPEEA Technical, both expiring in October 2026. The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) 1% We have one major agreement with UAW District 1069 (Pennsylvania) expiring in April 2027.
Human Capital As of December 31, 2022 and 2021, Boeing’s total workforce was approximately 156,000 and 142,000 with 13% and 12% located outside of the U.S. As of December 31, 2022, our workforce included approximately 50,000 union members.
Human Capital As of December 31, 2023 and 2022, Boeing’s total workforce was approximately 171,000 and 156,000 with 14% and 13% located outside of the U.S. As of December 31, 2023, our workforce included approximately 57,000 union members.
Global Services Segment This segment provides services to our commercial and defense customers worldwide. BGS sustains aerospace platforms and systems with a full spectrum of products and services, including supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, pilot and maintenance training systems and services, technical and maintenance documents, and data analytics and digital services.
Global Services sustains aerospace platforms and systems with a full spectrum of products and services, including supply chain and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare parts, pilot and maintenance training systems and services, technical and maintenance documents, and data analytics and digital services.
In June of 2022, we released our second Global Equity, Diversity and Inclusion report with our workforce composition. As of December 2021, our U.S. workforce was comprised of approximately 23% women, 33% U.S. racial and ethnic minorities and 15% U.S. veterans.
In May 2023, we released our third Global Equity, Diversity and Inclusion report with our workforce composition. As of December 2022, our global workforce was comprised of approximately 24% women, and our U.S. workforce was comprised of 35% racial and ethnic minorities and 15% U.S. veterans.
Our 2022 report can be found on our website. 2 Table of Contents To attract and retain the best-qualified talent, we offer competitive benefits, including market-competitive compensation, healthcare, paid time off, parental leave, retirement benefits, tuition assistance, employee skills development, leadership development and rotation programs. In 2022, our voluntary resignation rate was approximately 4%.
To attract and retain the best-qualified talent, we offer competitive benefits, including market-competitive compensation, healthcare, paid time off, parental leave, retirement benefits, tuition assistance, employee skills development, leadership development and rotation programs. In 2023, our voluntary resignation rate was approximately 3%.
Item 1. Business The Boeing Company, together with its subsidiaries (herein referred to as “Boeing,” the “Company,” “we,” “us,” “our”), is one of the world’s major aerospace firms. We are organized based on the products and services we offer.
Item 1. Business The Boeing Company, together with its subsidiaries (herein referred to as “Boeing,” the “Company,” “we,” “us,” “our”), is one of the world’s major aerospace firms. We are organized based on the products and services we offer. We operate in three reportable segments: • Commercial Airplanes (BCA); • Defense, Space & Security (BDS); • Global Services (BGS).
New aircraft models and new derivative aircraft are required to obtain FAA certification prior to entry into service. Outside the U.S., similar requirements exist for airworthiness, installation and operational approvals. These requirements are generally administered by the national aviation authorities of each country and, in the case of Europe, coordinated by the European Union Aviation Safety Agency. Environmental.
Outside the U.S., similar requirements exist for airworthiness, installation and operational approvals. These requirements are generally administered by the national aviation authorities of each country and, in the case of Europe, coordinated by the European Union Aviation Safety Agency. Environmental.
In addition to owning a large portfolio of intellectual property, we also license intellectual property to and from third parties. For example, the U.S. government has licenses in our patents that are developed in performance of government contracts, and it may use or authorize others to use the inventions covered by such patents for government purposes.
For example, the U.S. government has licenses in our patents that are developed in performance of government contracts, and it may use or authorize others to use the inventions covered by such patents for government purposes.
We offer the ability for our people to pursue degree programs, professional certificates and individual courses in strategic fields of study from more than 300 accredited colleges and universities, online and across the globe through our tuition assistance program. Over 9,000 Boeing employees leverage these programs every year.
For 2023, Boeing employees completed approximately 6.9 million hours of learning. We offer the ability for our people to pursue degree programs, professional certificates and individual courses in strategic fields of study from approximately 500 accredited colleges and universities, online and across the globe through our tuition assistance program. Approximately 13,000 Boeing employees leveraged these programs in 2023.
These groups help foster inclusion among all teammates, build awareness, recruit and retain a diverse workforce and support the company in successfully operating in a global, multicultural business environment. We are committed to releasing an annual Global Equity, Diversity and Inclusion report in 2023 which will be updated with the latest year’s information.
These groups help foster inclusion among all teammates, build awareness, recruit and retain a diverse workforce and support the company in successfully operating in a global, multicultural business environment.
We are also dependent on the availability of energy sources, such as electricity, at affordable prices. Seasonality No material portion of our business is considered to be seasonal. Executive Officers of the Registrant See “Item 10. Directors, Executive Officers and Corporate Governance” in Part III.
We are closely monitoring developments, supporting our employees and customers, and will take mitigating actions as appropriate. Seasonality No material portion of our business is considered to be seasonal. Executive Officers of the Registrant See “Item 10. Directors, Executive Officers and Corporate Governance” in Part III.
These voluntary surveys provide aggregate trend reports for the company to address in real time and ensure Boeing maintains an employee-focused experience and culture. We also invest in rewarding performance and have established a multi-level recognition program for the purpose of acknowledging the achievements of excellent individual or team performance.
These voluntary surveys provide aggregate trend reports for the company to address in real time and ensure Boeing maintains an employee-focused experience and culture.
These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict.
Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict.
Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions generally identify these forward-looking statements.
Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions generally identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact.
We are committed to supporting our employees’ continuous development of professional, technical and leadership skills through access to digital learning resources and through partnerships with leading professional/technical societies and organizations around the world. For 2022, Boeing employees completed approximately 5.8 million hours of learning.
We also invest in rewarding performance and have established a multi-level recognition program for the purpose of acknowledging the achievements of excellent individual or team performance. 2 Table of Contents We are committed to supporting our employees’ continuous development of professional, technical and leadership skills through access to digital learning resources and through partnerships with leading professional/technical societies and organizations around the world.
BCC’s portfolio consists of equipment under operating leases, sales-type/finance leases, notes and other receivables, assets held for sale or re-lease and investments. 1 Table of Contents Intellectual Property We own numerous patents and have licenses for the use of patents owned by others, which relate to our products and their manufacture.
Intellectual Property We own numerous patents and have licenses for the use of patents owned by others, which relate to our products and their manufacture. In addition to owning a large portfolio of intellectual property, we also license intellectual property to and from third parties.
Development continues on the 777X program and the 737-7 and 737-10 derivatives.
This family of commercial jet aircraft in production includes the 737 narrow-body model and the 767, 777 and 787 wide-body models. Development continues on the 777X program and the 737-7 and 737-10 derivatives.
Removed
We operate in four reportable segments: • Commercial Airplanes (BCA); • Defense, Space & Security (BDS); • Global Services (BGS); • Boeing Capital (BCC). Commercial Airplanes Segment This segment develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide.
Added
Global Services Segment This segment provides services to our commercial and defense customers worldwide.
Removed
Boeing Capital Segment BCC seeks to ensure that Boeing customers have the financing they need to buy and take delivery of their Boeing product, while managing overall financing exposure.
Added
On January 10, 2024, the FAA notified us that it has initiated an investigation into our quality control system.
Removed
Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. 5 Table of Contents Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that may not prove to be accurate.
Added
This was followed by the FAA announcing actions to increase its oversight of us, including conducting (1) an audit involving the 737-9 production line and suppliers to evaluate compliance with approved quality procedures, (2) increased monitoring of 737-9 in-service events, and (3) an assessment of safety risks around delegated authority and quality oversight, and examination of options to move these functions under independent third parties.
Added
On January 24, 2024, the FAA stated that it will not approve production rate increases or additional production lines for the 737 MAX until it is satisfied that we are in full compliance with required quality control procedures. New aircraft models and new derivative aircraft are required to obtain FAA certification prior to entry into service.
Added
We are also dependent on the availability of energy sources, such as electricity, at affordable prices. The current conflict in Israel and the Gaza Strip has the potential to impact certain of our suppliers, and has impacted some operations for our airline and lessor customers.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
72 edited+17 added−17 removed56 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
72 edited+17 added−17 removed56 unchanged
2022 filing
2023 filing
Biggest changeRisks Related to Legal and Regulatory Matters The outcome of litigation and of government inquiries and investigations involving our business is unpredictable and an adverse decision in any such matter could have a material effect on our financial position and results of operations. We are involved in a number of litigation matters.
Biggest changeAny significant production delays, or any destruction, manipulation or improper use of Boeing’s or our suppliers’ data, information systems or networks could impact our sales, increase our expenses and/or have an adverse effect on the reputation of Boeing and of our products and services. 14 Table of Contents Risks Related to Legal and Regulatory Matters The outcome of litigation and of government inquiries and investigations involving our business is unpredictable, and an adverse decision in any such matter could have a material effect on our financial position and results of operations.
In addition, on development programs such as the 777X, 737-7 and 737-10 we are subject to risks with respect to the timing and conditions of aircraft certification, including potential gaps between when aircraft are certified in various jurisdictions, changes in certification processes and our estimates with respect to timing of future certifications, which could have an impact on overall program status.
In addition, on development programs such as the 777X, 737-7 and 737-10 we are subject to risks with respect to the timing and conditions of aircraft certification, including potential gaps between when aircraft are certified in various jurisdictions, changes in certification processes and our estimates with respect to the timing of future certifications, which could have an impact on overall program status.
As a result, we are subject to risks of doing business internationally, including: • changes in regulatory requirements or other executive branch actions, such as Executive Orders; • changes in the global trade environment, including disputes with authorities in non-U.S. jurisdictions, including international trade authorities, that could impact sales and/or delivery of products and services outside the U.S. and/or impose costs on our customers in the form of tariffs, duties or penalties attributable to the importation of Boeing products and services; • changes to U.S. and non-U.S. government policies, including sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements; • fluctuations in international currency exchange rates; • volatility in international political and economic environments and changes in non-U.S. national priorities and budgets, which can lead to delays or fluctuations in orders; • the complexity and necessity of using non-U.S. representatives and consultants; • the uncertainty of the ability of non-U.S. customers to finance purchases, including the availability of financing from the Export-Import Bank of the United States; • uncertainties and restrictions concerning the availability of funding credit or guarantees; • imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions (such as those imposed on Russia) and other trade restrictions; • the difficulty of management and operation of an enterprise spread over many countries; • compliance with a variety of non-U.S. laws, as well as U.S. laws affecting the activities of U.S. companies abroad; and • unforeseen developments and conditions, including terrorism, war, epidemics and international tensions and conflicts.
We are subject to risks of doing business internationally, including: • changes in regulatory requirements or other executive branch actions, such as Executive Orders; • changes in the global trade environment, including disputes with authorities in non-U.S. jurisdictions, including international trade authorities, that could impact sales and/or delivery of products and services outside the U.S. and/or impose costs on our customers in the form of tariffs, duties or penalties attributable to the importation of Boeing products and services; • changes to U.S. and non-U.S. government policies, including sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements; • fluctuations in international currency exchange rates; • volatility in international political and economic environments and changes in non-U.S. national priorities and budgets, which can lead to delays or fluctuations in orders; • the complexity and necessity of using non-U.S. representatives and consultants; • the uncertainty of the ability of non-U.S. customers to finance purchases, including the availability of financing from the Export-Import Bank of the United States; • uncertainties and restrictions concerning the availability of funding credit or guarantees; • imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions (such as those imposed on Russia) and other trade restrictions; • the difficulty of management and operation of an enterprise spread over many countries; • compliance with a variety of non-U.S. laws, as well as U.S. laws affecting the activities of U.S. companies abroad; and • unforeseen developments and conditions, including terrorism, war, epidemics and international tensions and conflicts.
Impacts from future potential deterioration in trade relations between the U.S. and one or more other countries, could have a material adverse impact on our financial position, results of operations and/or cash flows. 10 Table of Contents We use estimates and make assumptions in accounting for contracts and programs.
Impacts from future potential deterioration in geopolitical or trade relations between the U.S. and one or more other countries could have a material adverse impact on our financial position, results of operations and/or cash flows. 10 Table of Contents We use estimates and make assumptions in accounting for contracts and programs.
Finally, from time to time, in alignment with our sustainability priorities, we establish and publicly announce goals and commitments to improve our environmental performance, such as our recent operational goals in areas of GHG emissions, energy, water and waste.
Finally, from time to time, in alignment with our sustainability priorities, we establish and publicly announce goals and commitments to improve our environmental performance, such as our operational goals in areas of GHG emissions, energy, water and waste.
We are subject to various U.S. federal, state, local and non-U.S. laws and regulations related to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes.
We are subject to various U.S. federal, state, local and non-U.S. laws and regulations related to environmental protection, including the discharge, treatment, storage, disposal and remediation of pollutants, hazardous substances and wastes.
We are mitigating import costs through Duty Drawback Customs procedures. Overall, the U.S.-China trade relationship remains stalled as economic and national security concerns continue to be a challenge. China is a significant market for commercial aircraft. Boeing has long-standing relationships with our Chinese customers, who represent a key component of our commercial aircraft backlog.
We are mitigating import costs through Duty Drawback Customs procedures. Overall, the U.S.-China trade relationship remains stalled as economic and national security concerns continue to be a challenge. China is a significant market for commercial aircraft and we have long-standing relationships with our Chinese customers, who represent a key component of our commercial aircraft backlog.
There can be no assurance that we will be able to compete successfully against our current or future competitors or that the competitive pressures we face will not result in reduced revenues and market share. 9 Table of Contents We derive a significant portion of our revenues from non-U.S. sales and are subject to the risks of doing business in other countries.
There can be no assurance that we will be able to compete successfully against our current or future competitors or that the competitive pressures we face will not result in reduced revenues and market share. We derive a significant portion of our revenues from non-U.S. sales and are subject to the risks of doing business in other countries.
Our portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably 717 and 747-8 aircraft, and among customers that we believe have less than investment-grade credit.
Our portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably 717 aircraft, and among customers that we believe have less than investment-grade credit.
For example, liabilities arising from the use of certain of our products, such as aircraft technologies, space systems, spacecraft, satellites, missile systems, 16 Table of Contents weapons, cybersecurity, border security systems, anti-terrorism technologies and/or air traffic management systems may not be insurable on commercially reasonable terms.
For example, liabilities arising from the use of certain of our products, such as aircraft technologies, space systems, spacecraft, satellites, missile systems, weapons, cybersecurity, border security systems, anti-terrorism technologies and/or air traffic management systems may not be insurable on commercially reasonable terms.
Our revenue estimates are based on current expectations with respect to these escalation formulas, but the actual escalation amounts are outside of our control. Escalation factors can fluctuate significantly from period to period. Changes in escalation amounts can significantly impact revenues and operating margins in our Commercial Airplanes business.
Our revenue estimates are based on current expectations with respect to these escalation formulas, but the actual escalation amounts are outside of our control. Escalation factors can fluctuate significantly from period to period. Changes in escalation amounts can significantly impact revenues and operating margins in our BCA business.
Changes in environmental and climate change laws or regulations could lead to additional operational restrictions and compliance requirements upon us or our products, require new or additional investment in product designs, result in carbon offset investments or otherwise could negatively impact our business and/or competitive position.
Changes in environmental and climate change laws or regulations could lead to additional operational restrictions and compliance requirements upon us or our products, require new or additional investments in production systems or product designs, result in additional carbon offset investments or otherwise negatively impact our business and/or competitive position.
Our Commercial Airplanes business depends on our ability to maintain a healthy production system, ensure every airplane in our production system conforms to our exacting specifications, achieve planned production rate targets, successfully develop and certify new aircraft or new derivative aircraft, and meet or exceed stringent performance and reliability standards.
Our Commercial Airplanes business depends on our ability to maintain a healthy production system, ensure every airplane in our production system conforms to exacting specifications, 6 Table of Contents achieve planned production rate targets, successfully develop and certify new aircraft or new derivative aircraft, and meet or exceed stringent performance and reliability standards.
Physical impacts of climate change, increasing global chemical restrictions and bans, and water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities.
Physical impacts of climate change, increasing global chemical restrictions and bans, and 15 Table of Contents water and waste requirements may drive increased costs to us and our suppliers and impact our production continuity and data facilities.
Our BDS and BGS defense businesses generated approximately 60% and 69% of their 2022 revenues from fixed-price contracts. While fixed-price contracts enable us to benefit from performance improvements, cost reductions and efficiencies, they also subject us to the risk of reduced margins or incurring losses if we are unable to achieve estimated costs and revenues.
Our BDS and BGS defense businesses generated approximately 58% and 65% of their 2023 revenues from fixed-price contracts. While fixed-price contracts enable us to benefit from performance improvements, cost reductions and efficiencies, they also subject us to the risk of reduced margins or incurring losses if we are unable to achieve estimated costs and revenues.
In addition, fleet decisions, airline consolidations or financial challenges involving any of our major commercial airline customers could significantly reduce our revenues and limit our opportunity to generate profits from those customers. 6 Table of Contents Airlines also are experiencing increased fuel and other costs, and the global economy is experiencing high inflation.
In addition, fleet decisions, airline consolidations or financial challenges involving any of our major commercial airline customers could significantly reduce our revenues and limit our opportunity to generate profits from those customers. Airlines also are experiencing increased fuel and other costs, and the global economy has experienced high inflation.
For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see “Management's Discussion and Analysis – Critical Accounting Policies & Estimates – Pension Plans” on page 50 of this Form 10-K.
For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see “Management's Discussion and Analysis – Critical Accounting Estimates – Pension Plans” on pages 47 - 48 of this Form 10-K.
In 2022, 40% of our revenues were earned pursuant to U.S. government contracts, which include FMS through the U.S. government. Business conducted pursuant to such contracts is subject to extensive procurement regulations and other unique risks. Our sales to the U.S. government are subject to extensive procurement regulations, and changes to those regulations could increase our costs.
In 2023, 37% of our revenues were earned pursuant to U.S. government contracts, which include Foreign Military Sales (FMS) through the U.S. government. Business conducted pursuant to such contracts is subject to extensive procurement regulations and other unique risks. Our sales to the U.S. government are subject to extensive procurement regulations, and changes to those regulations could increase our costs.
If production rate changes at any of our 7 Table of Contents commercial aircraft assembly facilities are delayed or create significant disruption to our production system, or if our suppliers cannot timely deliver components to us at the cost and rates necessary to achieve our targets, we may be unable to meet delivery schedules and/or the financial performance of one or more of our programs may suffer.
If production rate changes at any of our commercial aircraft assembly facilities are delayed or create significant disruption to our production system, or if our suppliers cannot timely deliver components that comply with design specifications to us at the cost and rates necessary to achieve our targets, we may be unable to meet delivery schedules and/or the financial performance of one or more of our programs may suffer.
A significant portion of our customer financing portfolio is concentrated among certain customers and in certain types of Boeing aircraft, which exposes us to concentration risks. A significant portion of our customer financing portfolio is concentrated among certain customers and in distinct geographic regions.
A significant portion of our customer financing portfolio is concentrated among certain customers and in certain types of Boeing aircraft, which exposes us to concentration risks. A significant portion of our customer financing portfolio, which is comprised of financing receivables and operating lease equipment, is concentrated among certain customers and in distinct geographic regions.
In 2022, non-U.S. customers, which includes foreign military sales (FMS), accounted for approximately 41% of our revenues. We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future.
In 2023, non-U.S. customers, which include foreign military sales (FMS), accounted for approximately 42% of our revenues. We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future.
For additional information on our accounting policies for recognizing sales and profits, see our discussion under “Management’s Discussion and Analysis – Critical Accounting Policies & Estimates – Accounting for Long-term Contracts/Program Accounting” on pages 48 - 49 and Note 1 to our Consolidated Financial Statements on pages 59 - 69 of this Form 10-K.
For additional information on our accounting policies for recognizing sales and profits, see our discussion under “Management’s Discussion and Analysis – Critical Accounting Estimates – Accounting for Long-term Contracts/Program Accounting” on pages 46 - 47 and Note 1 to our Consolidated Financial Statements on pages 57 - 67 of this Form 10-K.
Potential pension contributions include both mandatory amounts required under the Employee Retirement Income Security Act and discretionary contributions to improve the plans' funded status. The extent of future contributions depends heavily on market factors such as the discount rate and the actual return on plan assets.
Many of our employees have earned benefits under defined benefit pension plans. Potential pension contributions include both mandatory amounts required under the Employee Retirement Income Security Act and discretionary contributions to improve the plans' funded status. The extent of future contributions depends heavily on market factors such as the discount rate and the actual return on plan assets.
Although under Generally Accepted Accounting Principles in the United States of America (GAAP) the timing of periodic pension and other postretirement benefit expense and plan contributions are not directly related, the key economic factors that affect GAAP expense would also likely affect the amount of cash or stock we would contribute to our plans.
Although under Generally Accepted Accounting Principles in the United States of America (GAAP) the timing of periodic pension and other postretirement benefit expense and plan contributions are not directly related, the key economic factors that affect GAAP expense would also likely affect the amount of cash or stock we would contribute to our plans. 16 Table of Contents Our insurance coverage may be inadequate to cover all significant risk exposures.
As of December 31, 2022, our debt totaled $57.0 billion of which approximately $14.5 billion of principal payments on outstanding debt will become due over the next three years. In addition, as of December 31, 2022, our airplane financing commitments totaled $16.1 billion.
As of December 31, 2023, our debt totaled $52.3 billion of which approximately $17.7 billion of principal payments on outstanding debt will become due over the next three years. In addition, as of December 31, 2023, our airplane financing commitments totaled $17.0 billion.
A cyberattack or security breach, whether experienced directly or through our supply chain, could, among other serious consequences, result in loss of intellectual property; unauthorized access to various categories of sensitive, proprietary or customer data; disruption or degradation of business operations, or compromise of products or services.
A cyber-related attack or security breach, whether experienced directly or through our supply chain or third party-service providers, could, among other serious consequences, result in loss of intellectual property; allow unauthorized access to or cause the publication of various categories of sensitive, proprietary or customer data; cause disruption or degradation of our business operations; compromise our products or services; and/or result in reputational harm.
Our insurance coverage may be inadequate to cover all significant risk exposures. We are exposed to liabilities that are unique to the products and services we provide. We maintain insurance for certain risks and, in some circumstances, we may receive indemnification from the U.S. government.
We are exposed to liabilities that are unique to the products and services we provide. We maintain insurance for certain risks and, in some circumstances, we may receive indemnification from the U.S. government. The amount of our insurance coverage may not cover all claims or liabilities, and we may be forced to bear substantial costs.
While some of these products are shielded from liability within the U.S. under the SAFETY Act provisions of the 2002 Homeland Security Act, no such protection is available outside the U.S., potentially resulting in significant liabilities.
While some of these products are shielded from liability within the U.S. under the SAFETY Act provisions of the 2002 Homeland Security Act, no such protection is available outside the U.S., potentially resulting in significant liabilities. The amount of insurance coverage we maintain may be inadequate to cover these or other claims or liabilities.
Congressional appropriations process due to fiscal constraints, changes in U.S. national security strategy and/or priorities or other reasons. Further uncertainty with respect to ongoing programs could also result in the event that the U.S. government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations.
Further uncertainty with respect to ongoing programs could also result in the event that the U.S. government finances its operations through temporary funding measures such as “Continuing Resolutions” rather than full-year appropriations.
The commercial aircraft business is extremely complex, involving extensive coordination and integration with U.S and non-U.S. suppliers, highly-skilled labor performed by thousands of employees of ours and other partners, and stringent and evolving regulatory requirements and performance and reliability standards.
The commercial aircraft business is extremely complex, involving extensive coordination and integration with U.S. and non-U.S. suppliers, highly-skilled labor performed by thousands of employees of ours and other partners, and stringent and evolving regulatory requirements and performance and reliability standards. We have experienced and may continue to experience production quality issues, including in our supply chain.
Many of our suppliers are experiencing inflationary pressures, as well as disruptions due to the lingering impacts of COVID-19, global supply chain constraints, and labor instability.
Many of our suppliers are experiencing inflationary pressures, as well as resource constraints and disruptions due to production quality issues, global supply chain constraints, and labor instability.
We plan to gradually increase 737 production rates based on market demand and supply chain capacity. In addition, we continue to seek opportunities to reduce the costs of building our aircraft, including working with our suppliers to reduce supplier costs, identifying and implementing productivity improvements and optimizing how we manage inventory.
In addition, we continue to seek opportunities to reduce the costs of building our aircraft, including working with our suppliers to reduce supplier costs, identifying and implementing productivity improvements and optimizing how we manage inventory.
A number of our customers have contractual remedies, including compensation for late deliveries or rights to reject individual airplane deliveries based on delivery delays. Delays on the 737, 777X and 787 programs have resulted in, and may continue to result in, customers having the right to terminate orders, be compensated for late deliveries and/or substitute orders for other Boeing aircraft.
Delays on the 737, 777X and 787 programs have resulted in, and may continue to result in, customers having the right to terminate orders, be compensated for late deliveries and/or substitute orders for other Boeing aircraft.
In our BCA business, we face aggressive international competition intent on increasing market share. In our BDS business, we anticipate that the effects of defense industry consolidation, shifting acquisition and budget priorities, and continued cost pressure at our U.S. DoD and non-U.S. customers will intensify competition for many of our BDS products.
In our BDS business, we anticipate that the effects of defense industry consolidation, shifting acquisition and budget priorities, and continued cost pressure at our U.S. DoD and non-U.S. customers will intensify competition for many of our BDS products. Our BGS segment faces competition from many of the same strong U.S. and non-U.S. competitors facing BCA and BDS.
Our BGS segment faces competition from many of the same strong U.S. and non-U.S. competitors facing BCA and BDS. Furthermore, we are facing increased international competition and cross-border consolidation of competition, and U.S. procurement and compliance requirements that could limit our ability to be cost-competitive in the international market.
Furthermore, we are facing increased international competition and cross-border consolidation of competition, and U.S. procurement and compliance requirements that could limit our ability to be cost-competitive in the 9 Table of Contents international market.
Increasing aircraft performance standards, increasing sustainability disclosure requirements in the U.S. and globally, and requirements on manufacturing and product air pollutant emissions, especially greenhouse gas (GHG) emissions, may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.
Increasingly stringent aircraft performance standards and requirements including but not limited to manufacturing and product air pollutant emissions, potential carbon pricing mechanisms, and sustainability disclosure requirements in the U.S. and other jurisdictions may result in increased costs or reputational risks and could limit our ability to manufacture and/or market certain of our products at acceptable costs, or at all.
Future investment priority changes or budget cuts, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations, and/or delays of existing contracts or programs, or future program opportunities.
Future investment priority changes or budget cuts, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations, and/or delays of existing contracts or programs or future program opportunities. Any of these impacts could have a material effect on our financial position, results of operations and/or cash flows.
Our business may be impacted by disruptions including threats to physical security or our information technology systems, extreme weather (including effects of climate change) or other acts of nature, and pandemics or other public health crises. Any of these disruptions could affect our internal operations or our suppliers’ operations and delay delivery of products and services to our customers.
Business disruptions could seriously affect our future sales and financial condition or increase our costs and expenses. Our business may be impacted by disruptions including threats to physical security or our information technology systems, extreme weather (including effects of climate change) or other acts of nature, and pandemics or other public health crises.
Our increased debt balance resulted in downgrades to our credit ratings in 2020, and our ratings remained unchanged in 2022 and 2021. If we require additional funding in order to pay off existing debt, address further impacts to our business related to market developments, fund outstanding financing commitments or meet other business requirements, our market liquidity may not be sufficient.
If we require additional funding in order to pay off existing debt, address further impacts to our business related to market developments, fund outstanding financing commitments or meet other business requirements, our market liquidity may not be sufficient. These risks will be particularly acute if we are subject to further credit rating downgrades such as those we experienced in 2020.
DoD and other government agencies (including NASA), including changes to national security and defense priorities, and tension between modernization investments, sustainment investments, and investments in new technologies or emergent capabilities.
In addition, there continues to be uncertainty with respect to future acquisition priorities and program-level appropriations for the U.S. DoD and other government agencies (including NASA), including changes to national security and defense priorities, and tension between modernization investments, sustainment investments, and investments in new technologies or emergent capabilities.
These matters may divert financial and management resources that would otherwise be used to benefit our operations. No assurances can be given that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits, or future lawsuits, could have a material impact on our financial position and results of operations.
We are involved in a number of litigation matters. These matters may divert financial and management resources that would otherwise be used to benefit our operations. No assurances can be given that the results of these matters will be favorable to us.
Competition within our markets and with respect to the products we sell may reduce our future contracts and sales. The markets in which we operate are highly competitive and one or more of our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas.
The markets in which we operate are highly competitive and one or more of our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas. In our BCA business, we face aggressive international competition intent on increasing market share.
If we were unable to protect against the unauthorized access, release and/or corruption of our customers’ and/or suppliers’ confidential, classified or personally identifiable information, our reputation could be damaged, and/or we could face financial or other losses. Business disruptions could seriously affect our future sales and financial condition or increase our costs and expenses.
If we were unable to protect against the unauthorized access, release or corruption of our customers’ or suppliers’ confidential, classified or personally identifiable information, we could suffer a loss of business, face regulatory actions or face financial or other losses that could materially affect our business strategy, results of operations or financial condition.
We and our suppliers will need to continue to adjust successfully to these changing acquisition priorities and policies or our revenues and market share could be impacted.
If we and our suppliers 8 Table of Contents are unable to adjust to these changing acquisition priorities and policies, our revenues and market share could be impacted.
Developing and manufacturing commercial aircraft that meet or exceed our performance and reliability standards and/or potentially required sustainability standards, as well as those of customers and regulatory agencies, can be costly and technologically challenging. These challenges are particularly significant with newer aircraft programs.
If our commercial aircraft fail to satisfy performance and reliability requirements and/or potentially required sustainability standards, we could face additional costs and/or lower revenues. Developing and manufacturing commercial aircraft that meet or exceed our performance and reliability standards and/or potentially required sustainability standards, as well as those of customers and regulatory agencies, can be costly and technologically challenging.
While these measures are designed to prevent, detect and respond to unauthorized activity, there is no guarantee that they will be sufficient to prevent or mitigate the risk of a cyberattack or the potentially serious reputational, operational, or financial impacts that may result.
While these measures are designed to prevent, detect, respond to, and mitigate unauthorized activity, there is no guarantee that they will be sufficient to prevent or mitigate the risk of a cyber-related attack or incident, or allow us to detect, report or respond adequately in a timely manner.
We may experience additional work stoppages in the future, which could adversely affect our business. We cannot predict how stable our union relationships, currently with 11 U.S. labor organizations and 12 non-U.S. labor organizations, will be or whether we will be able to meet the unions’ requirements without impacting our financial condition.
We cannot predict how stable our union relationships, currently with 10 U.S. labor organizations and 4 non-U.S. labor organizations, will be or whether we will be able to meet the unions’ requirements without impacting our financial condition. The unions may also limit our flexibility in managing our workforce and operations. Union actions at suppliers can also affect us.
To address these risks, we maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems and management oversight. We also have established a Cybersecurity Governance Council to strengthen governance and coordination of cybersecurity activities.
To address these risks, we maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems, contractual arrangements, tools and related services, and management and Board oversight.
These factors have contributed to significant earnings charges on a number of fixed-price development programs which are expected to adversely affect cash flows in future periods, and may result in future earnings charges and adverse cash flow effects. New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance.
We continue to experience production disruptions and inefficiencies due to technical challenges, supplier disruption and factory performance. These factors have contributed to significant earnings charges on a number of fixed-price development programs which are expected to adversely affect cash flows in future periods, and may result in future earnings charges and adverse cash flow effects.
Any of these impacts could have a material effect on the results of the Company’s financial position, results of operations and/or cash flows. 8 Table of Contents In addition, as a result of the significant ongoing uncertainty with respect to both U.S. defense spending and the evolving nature of the national security threat environment, we also expect the U.S.
As a result of the significant ongoing uncertainty with respect to both U.S. defense spending and the evolving nature of the national security threat environment, we also expect the U.S.
Substantial pension and other postretirement benefit obligations have a material impact on our earnings, shareholders’ equity and cash flows from operations, and could have significant adverse impacts in future periods. Many of our employees have earned benefits under defined benefit pension plans.
The occurrence of any or all of these events may adversely affect our ability to fund our operations and contractual or financing commitments. Substantial pension and other postretirement benefit obligations have a material impact on our earnings, shareholders’ equity and cash flows from operations, and could have significant adverse impacts in future periods.
The timeliness of FY24 and future appropriations for government departments and agencies remains a recurrent risk. A lapse in appropriations for government departments or agencies would result in a full or partial government shutdown, which could impact the Company’s operations.
A lapse in appropriations for government departments or agencies would result in a full or partial government shutdown, which could impact our operations. In the event of a prolonged shutdown, requirements to furlough employees in the U.S.
The net present value of in-orbit incentive fees we ultimately expect to realize is recognized as revenue in the construction period.
In both cases, the in-orbit incentive payment is at risk if the satellite does not perform to specifications for up to 15 years after acceptance. The net present value of in-orbit incentive fees we ultimately expect to realize is recognized as revenue in the construction period.
If we fail to achieve or improperly report on our progress toward achieving our sustainability goals and commitments, the resulting negative publicity could adversely affect our reputation and/or our access to capital. 15 Table of Contents Risks Related to Financing and Liquidity 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.
Risks Related to Financing and Liquidity 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 depend, in part, upon the issuance of debt to fund our operations and contractual commitments.
We derive a substantial portion of our revenue from the U.S. government, primarily from defense related programs with the United States Department of Defense (U.S. DoD).
Changes in levels of U.S. government defense spending or acquisition priorities, as well as significant delays in U.S. government appropriations, could negatively impact our business, financial position and results of operations. We derive a substantial portion of our revenue from the U.S. government, primarily from defense related programs with the United States Department of Defense (U.S. DoD).
For example, we suspended purchasing titanium from Russia during 2022 as a result of the Russia Ukraine war. We believe we have sufficient material and parts to avoid production disruptions in the near-term, but future impacts to our production from disruptions in our supply chain are possible. In some instances, we depend upon a single source of supply.
We continue proactively working to ensure sufficient material and parts to avoid potential near-term production disruptions, while also working to mitigate the risk of future impacts from disruptions to our supply chain. In some instances, we depend upon a single source of supply.
Programs whose contracts are primarily cost-type include Ground-based Midcourse Defense, Proprietary and Space Launch System programs. We enter into contracts that include in-orbit incentive payments that subject us to risks. Contracts in the commercial satellite industry and certain government satellite contracts include in-orbit incentive payments.
In these cases the associated financial risks are primarily reduced award or incentive fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of programs with cost-type contracts include Ground-based Midcourse Defense, Proprietary and Space Launch System programs. We enter into contracts that include in-orbit incentive payments that subject us to risks.
Any failure of any Boeing aircraft to satisfy performance or reliability requirements could result in disruption to our operations, higher costs and/or lower revenues. Changes in levels of U.S. government defense spending or acquisition priorities could negatively impact our financial position and results of operations.
These challenges are particularly significant with newer aircraft programs. Any failure of any Boeing aircraft to satisfy performance or reliability requirements could result in disruption to our operations, higher costs and/or lower revenues.
Estimating costs to complete fixed-price development contracts is generally subject to more uncertainty than fixed-price production contracts. Many of these development programs have highly complex designs. In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect our financial condition.
Estimating costs to complete fixed-price development contracts is generally subject to more uncertainty than fixed-price production contracts. Many of these development programs have highly complex designs and technical challenges.
These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings and/or changes in demand for our products and services. The occurrence of any or all of these events may adversely affect our ability to fund our operations and contractual or financing commitments.
A number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt. These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings and/or changes in demand for our products and services.
In addition, we 14 Table of Contents are subject to extensive regulation under the laws of the United States and its various states, as well as other jurisdictions in which we operate.
An adverse resolution of any of these lawsuits, or future lawsuits, could have a material impact on our financial position and results of operations. In addition, we are subject to extensive regulation under the laws of the United States and its various states, as well as other jurisdictions in which we operate and/or market our products.
Some of these are development programs that have complex design and technical challenges. These cost-type programs typically have award or incentive fees that are subject to uncertainty and may be earned over extended periods. In these cases the associated financial risks are primarily in reduced fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise.
Our BDS and BGS defense businesses generated approximately 42% and 35% of their 2023 revenues from cost-type contracting arrangements. Some of these are development programs that have complex design and technical challenges. These cost-type programs typically have award or incentive fees that are subject to uncertainty and may be earned over extended periods.
Risks Related to Labor Some of our and our suppliers’ workforces are represented by labor unions, which may lead to work stoppages. Approximately 50,000 employees, which constitute 32% of our total workforce, were union represented as of December 31, 2022. We experienced a work stoppage in 2008 when a labor strike halted commercial aircraft and certain BDS program production.
Some of our and our suppliers’ workforces are represented by labor unions, which may lead to work stoppages. Approximately 57,000 employees, which constitute 33% of our total workforce, were union represented as of December 31, 2023 under collective bargaining agreements with varying durations and expiration dates.
These in-orbit payments may be paid over time after final satellite acceptance or paid in full prior to final satellite acceptance. In both cases, the in-orbit incentive payment is at risk if the satellite does not perform to specifications for up to 15 years after acceptance.
Contracts in the commercial satellite industry and certain government satellite contracts include in-orbit incentive payments. These in-orbit payments may be paid over time after final satellite acceptance or paid in full prior to final satellite acceptance.
While this incident has not had a material impact on us, future incidents like this one could have material impact on our business, operations, and reputation. In addition, we manage information and information technology systems for certain customers and/or suppliers. Many of these customers and/or suppliers face similar security threats.
In addition, we manage information and information technology systems for certain customers and suppliers. Many of these customers and suppliers face similar security threats.
If our estimated costs exceed our estimated price, we recognize reach-forward losses which can significantly affect our reported results. For example, during the year ended December 31, 2022, BDS recorded additional losses on several fixed price development programs. We continue to experience near-term production disruptions and inefficiencies due to supplier disruption, labor instability and factory performance.
If our estimated costs exceed our estimated price, we recognize reach-forward losses which can significantly affect our reported results. For example, during the year ended December 31, 2023, BDS recorded $1,585 million of additional losses on its five most significant fixed-price development programs (Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, and VC-25B Presidential Aircraft).
We rely extensively on information technology systems and networks to operate our company and meet our business objectives.
We rely extensively on information technology systems and networks to operate our company and meet our business objectives. We face various cyber security threats, including attempts to gain unauthorized access to our systems and networks, denial-of-service attacks, threats to our information technology infrastructure, ransomware and phishing attacks, and attempts to gain unauthorized access to our company-, customer- and employee-sensitive information.
The unions may also limit our flexibility in dealing with our workforce. Union actions at suppliers can also affect us. Work stoppages and instability in our union relationships could delay the production and/or development of our products, which could strain relationships with customers and result in lower revenues. Item 1B. Unresolved Staff Comments Not applicable 17 Table of Contents
Work stoppages and instability in our union relationships could delay the production and/or development of our products, which could strain relationships with customers and result in lower revenues. Competition within our markets and with respect to our products and services may reduce our future contracts and sales.
We and our suppliers are experiencing supply chain disruptions as a result of the lingering impacts of COVID-19, global supply chain constraints, and labor instability. We and our suppliers are also experiencing inflationary pressures. We continue to monitor the health and stability of the supply chain as we ramp up production.
We and our suppliers are experiencing supply chain disruptions and constraints, labor instability and inflationary pressures. We continue to monitor the health and stability of 7 Table of Contents the supply chain. These factors have and may continue to reduce overall productivity and adversely impact our financial position, results of operations and cash flows.
Alternatively, Congress may fund government departments and agencies with one or more Continuing Resolutions; however, this would restrict the execution of certain program activities and delay new programs or competitions. In addition, long-term uncertainty remains with respect to overall levels of defense spending in FY24 and beyond.
The government may also constrain discretionary spending by instituting enforceable spending caps. The timeliness of annual appropriations for U.S. government departments and agencies remains a recurrent risk. Congress may fund government departments and agencies with one or more continuing resolutions, which could delay new programs or competitions and/or negatively impact the execution of certain program activities.
To the extent the FAA or similar regulatory agencies outside the U.S. implement more stringent regulations, we may incur additional compliance costs. In addition, the introduction of new aircraft programs and/or derivatives, such as the 777X, 737-7 and 737-10, involves increased risks associated with meeting development, testing, certification and production schedules.
We are currently unable to reasonably estimate what impact the January 5, 2024 Alaska Airlines accident and the related FAA actions will have on our financial position, results of operations and cash flows. The introduction of new aircraft programs and/or derivatives, such as the 777X, 737-7 and 737-10, involves risks associated with meeting development, testing, certification and production schedules.
We have provisioned for the estimated costs associated with the safety enhancements and do not expect those costs to be material. If we experience delays in achieving certification and/or incorporating safety enhancements, future revenues, cash flows and results of operations could be adversely impacted. Comparable agencies in other countries may adopt similar changes.
If we experience delays in achieving certification and/or incorporating safety enhancements, our financial position, results of operations and cash flows would be adversely impacted. A number of our customers have contractual remedies, including compensation for late deliveries or rights to reject individual airplane deliveries based on delivery delays.
Removed
The FAA has been working to implement safety reforms such as the 2018 FAA Reauthorization Act and the 2020 Aircraft Certification, Safety and Accountability Act (ACSAA). One of these, section 116 of the ACSAA prohibited the FAA from issuing a type certificate to aircraft after December 27, 2022 unless the aircraft’s flight crew alerting system met certain specifications.
Added
On January 10, 2024, the FAA notified us that it has initiated an investigation into our quality control system.
Removed
The Consolidated Appropriations Act, 2023 amended Section 116 of the ACSAA, such that applications for original or amended type certifications that were submitted to the FAA prior to December 27, 2020, including those of the 737-7 and 737-10, are no longer subject to the crew alerting specifications of Section 116.
Added
This was followed by the FAA announcing actions to increase its oversight of us, including conducting (1) an audit involving the 737-9 production line and suppliers to evaluate compliance with approved quality procedures, (2) increased monitoring of 737-9 in-service events, and (3) an assessment of safety risks around delegated authority and quality oversight, and examination of options to move these functions under independent third parties.
Removed
Additionally, beginning one year after the FAA issues the type certificate for the 737-10, any new 737 MAX aircraft must include certain safety enhancements to be issued an original airworthiness certification by the FAA. These enhancements are included in Boeing’s application for the certification for the 737-10, and the sufficiency of these enhancements will be determined by the FAA.
Added
On January 24, 2024, the FAA stated that it will not approve production rate increases or additional production lines for the 737 MAX until it is satisfied that we are in full compliance with required quality control procedures.
Removed
Beginning three years after the issuance of a type certificate for the 737-10, all previously delivered 737 MAX aircraft must be retrofitted with these safety enhancements. As the holder of the type certificate, Boeing is required to bear any costs of these safety enhancement retrofits.
Added
We are following the lead of the FAA as we work through the certification process, and the FAA will ultimately determine the timing of certification and entry into service. In addition, the development schedules of the 737-7 and 737-10 could be impacted by actions resulting from the Alaska Airlines accident.
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Item 2. Properties
Properties — owned and leased real estate
4 edited+0 added−1 removed2 unchanged
Item 2. Properties
Properties — owned and leased real estate
4 edited+0 added−1 removed2 unchanged
2022 filing
2023 filing
Biggest changeThe following table provides a summary of the floor space by business as of December 31, 2022: (Square feet in thousands) Owned Leased Government Owned Total Commercial Airplanes 39,586 6,673 46,259 Defense, Space & Security 22,643 5,090 27,733 Global Services 1,201 7,591 8,792 Other (1) 1,821 2,476 315 4,612 Total 65,251 21,830 315 87,396 (1) Other includes sites used for corporate offices, enterprise research and development and common internal services.
Biggest changeThe following table provides a summary of the floor space by business as of December 31, 2023: (Square feet in thousands) Owned Leased Government Owned Total Commercial Airplanes 39,919 7,795 47,714 Defense, Space & Security 22,849 4,404 27,253 Global Services 1,265 7,004 8,269 Other (1) 2,205 2,809 315 5,329 Total 66,238 22,012 315 88,565 (1) Other includes sites used for corporate offices, enterprise research and development and common internal services. 19 Table of Contents At December 31, 2023, the combined square footage at the following major locations totaled more than 82 million square feet: • Commercial Airplanes – Greater Seattle, WA; China; Greater Charleston, SC; Greater Los Angeles, CA; Greater Portland, OR; Greater Salt Lake City, UT; Australia: Canada and Germany • Defense, Space & Security – Greater St.
Louis, MO; Greater Seattle, WA; Greater Los Angeles, CA; Philadelphia, PA; Mesa, AZ; Huntsville, AL; Oklahoma City, OK; Heath, OH; Greater Washington, DC; Australia; Greater Portland, OR; Houston, TX; and Kennedy Space Center • Global Services – San Antonio, TX; Greater Miami, FL; Dallas, TX; Great Britain; China; Jacksonville, FL; and Germany • Other – Chicago, IL; India; Greater Los Angeles, CA; Greater St.
Louis, MO; Greater Seattle, WA; Greater Los Angeles, CA; Philadelphia, PA; Mesa, AZ; Huntsville, AL; Oklahoma City, OK; Heath, OH; Greater Washington, DC; Australia; Houston, TX; Kennedy Space Center and Greater Portland, OR • Global Services – San Antonio, TX; Greater Dallas, TX; Great Britain; Greater Miami, FL; China; Jacksonville, FL; and Germany • Other – India; Chicago, IL; Greater Los Angeles, CA; Greater St.
For a discussion of contingencies related to legal proceedings, see Note 21 to our Consolidated Financial Statements, which is hereby incorporated by reference. Item 4. Mine Safety Disclosures Not applicable 18 Table of Contents PART II
For a discussion of contingencies related to legal proceedings, see Note 21 to our Consolidated Financial Statements, which is hereby incorporated by reference. Item 4. Mine Safety Disclosures Not applicable 20 Table of Contents PART II
Item 2. Properties We had approximately 87 million square feet of floor space on December 31, 2022 for manufacturing, warehousing, engineering, administration and other productive uses, of which approximately 88% was located in the United States.
Item 2. Properties We had approximately 89 million square feet of floor space on December 31, 2023 for manufacturing, warehousing, engineering, administration and other productive uses, of which approximately 86% was located in the United States.
Removed
At December 31, 2022, the combined square footage at the following major locations totaled more than 81 million square feet: • Commercial Airplanes – Greater Seattle, WA; China; Greater Charleston, SC; Greater Portland, OR; Greater Los Angeles, CA; Greater Salt Lake City, UT; Australia and Canada • Defense, Space & Security – Greater St.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−0 removed0 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−0 removed0 unchanged
2022 filing
2023 filing
Biggest changeWe did not purchase any shares of our common stock in the open market pursuant to a repurchase program. (2) On March 21, 2020, the Board of Directors terminated its prior authorization to repurchase shares of the Company's outstanding common stock. Share repurchases under this open market repurchase program have been suspended since April 2019.
Biggest changeWe did not purchase any shares of our common stock in the open market pursuant to a repurchase program. Item 6. [Reserved] 21 Table of Contents
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market for our common stock is the New York Stock Exchange where it trades under the symbol BA. As of January 20, 2023, there were 88,322 shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market for our common stock is the New York Stock Exchange where it trades under the symbol BA. As of January 24, 2024, there were 84,633 shareholders of record.
Issuer Purchases of Equity Securities The following table provides information about purchases we made during the quarter ended December 31, 2022 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) (d) Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (2) 10/1/2022 thru 10/31/2022 4,578 $138.33 11/1/2022 thru 11/30/2022 2,371 142.24 12/1/2022 thru 12/31/2022 18,793 181.13 Total 25,742 $169.94 (1) A total of 25,742 shares were transferred to us from employees in satisfaction of tax withholding obligations associated with the vesting of restricted stock units during the period.
Issuer Purchases of Equity Securities The following table provides information about purchases we made during the quarter ended December 31, 2023 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) (d) Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs 10/1/2023 thru 10/31/2023 7,546 $190.17 11/1/2023 thru 11/30/2023 12,373 192.12 12/1/2023 thru 12/31/2023 1,428,309 246.44 Total 1,448,228 $245.68 (1) A total of 1,448,228 shares were transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
156 edited+51 added−88 removed44 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
156 edited+51 added−88 removed44 unchanged
2022 filing
2023 filing
Biggest changeCore operating loss increased by $615 million in 2022 compared with 2021 and decreased by $10,075 million in 2021 compared with 2020 primarily due to changes in Segment operating loss as described above. 23 Table of Contents Unallocated Items, Eliminations and Other The most significant items included in Unallocated items, eliminations and other are shown in the following table: (Dollars in millions) Years ended December 31, 2022 2021 2020 Share-based plans ($114) ($174) ($120) Deferred compensation 117 (126) (93) Amortization of previously capitalized interest (95) (107) (95) Research and development expense, net (278) (184) (240) Eliminations and other unallocated items (1,162) (676) (1,807) Unallocated items, eliminations and other ($1,532) ($1,267) ($2,355) Share-based plans expense decreased by $60 million in 2022 and increased by $54 million in 2021.
Biggest changeUnallocated Items, Eliminations and Other The most significant items included in Unallocated items, eliminations and other (expense)/income are shown in the following table: (Dollars in millions) Years ended December 31, 2023 2022 2021 Share-based plans $62 ($114) ($174) Deferred compensation (188) 117 (126) Amortization of previously capitalized interest (95) (95) (107) Research and development expense, net (315) (278) (184) Eliminations and other unallocated items (1,223) (1,134) (636) Unallocated items, eliminations and other ($1,759) ($1,504) ($1,227) Share-based plans expense decreased by $176 million in 2023 and $60 million in 2022, primarily due to fewer share-based grants and the timing of corporate allocations in 2023.
Inventory improvements were driven by higher 737 MAX deliveries and resumption of 787 deliveries in 2022. Additionally, in 2022 and 2021 we received income tax refunds of $1.5 billion and $1.7 billion. Cash provided by Advances and progress billings was $0.1 billion in 2022, as compared with $2.5 billion of cash provided in 2021.
Inventory improvements were driven by higher 737 MAX deliveries and resumption of 787 deliveries in 2022. Additionally, in 2022 and 2021 we received income tax refunds of $1.5 billion and $1.7 billion. Cash provided by Advances and progress billings was $0.1 billion in 2022 as compared with $2.5 billion in 2021.
The majority of these long-term contracts are with the U.S. government where the price is generally based on estimated cost to produce the product or service plus profit. Federal Acquisition Regulations provide guidance on the types of cost that will be reimbursed in establishing contract price.
The majority of these long-term contracts are with the U.S. government where the price is generally based on the estimated cost to produce the product or service plus profit. Federal Acquisition Regulations provide guidance on the types of cost that will be reimbursed in establishing contract price.
Non-GAAP Measures Core Operating Loss, Core Operating Margin and Core Loss Per Share Our Consolidated Financial Statements are prepared in accordance with GAAP which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently.
Non-GAAP Measures Core Operating Earnings/(Loss), Core Operating Margin and Core Earnings/(Loss) Per Share Our Consolidated Financial Statements are prepared in accordance with GAAP which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently.
In developing total program estimates, all of these items within the accounting quantity must be considered. 30 Table of Contents The following table provides details of the accounting quantities and firm orders by program as of December 31. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders.
In developing total program estimates, all of these items within the accounting quantity must be considered. 31 Table of Contents The following table provides details of the accounting quantities and firm orders by program as of December 31. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders.
Cost of sales is recognized as incurred, and revenue is determined by adding a proportionate amount of the estimated profit to the amount reported as cost of sales. Due to the size, duration and nature of many of our long-term contracts, the estimation of total sales and costs through completion is complicated and subject to many variables.
Cost of sales is recognized as incurred, and revenue is determined by adding a proportionate amount of the estimated profit to the amount reported as cost of sales. Due to the size, duration and nature of many of our long-term contracts, the estimation of total revenues and costs through completion is complicated and subject to many variables.
We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Core operating earnings, core operating margin and core earnings per share exclude the FAS/CAS service cost adjustment.
We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Core operating earnings/(loss), core operating margin and core earnings/(loss) per share exclude the FAS/CAS service cost adjustment.
The $3.4 billion reduction in non-cash items in 2022 is primarily driven by the $3.5 billion reach-forward loss on the 787 program that was recorded in 2021. Net loss for 2022 was $5.1 billion compared with net loss of $4.3 billion in 2021.
The $3.4 billion reduction in non-cash items in 2022 was primarily driven by the $3.5 billion reach-forward loss on the 787 program that was recorded in 2021. Net loss for 2022 was $5.1 billion compared with net loss of $4.3 billion in 2021.
Management believes these core earnings measures provide investors additional insights into operational performance as unallocated pension and other postretirement benefit cost primarily represent costs driven by market factors and costs not allocable to U.S. government contracts. 46 Table of Contents Reconciliation of Non-GAAP Measures to GAAP Measures The table below reconciles the non-GAAP financial measures of core operating loss, core operating margins and core loss per share with the most directly comparable GAAP financial measures of loss from operations, operating margins and diluted loss per share.
Management believes these core earnings measures provide investors additional insights into operational performance as unallocated pension and other postretirement benefit cost primarily represent costs driven by market factors and costs not allocable to U.S. government contracts. 44 Table of Contents Reconciliation of Non-GAAP Measures to GAAP Measures The table below reconciles the non-GAAP financial measures of core operating earnings/(loss), core operating margins and core earnings/(loss) per share with the most directly comparable GAAP financial measures of Earnings/(loss) from operations, operating margins and Diluted earnings/(loss) per share.
If the combined gross margins for our profitable long-term contracts had been estimated to be higher or lower by 1% during 2022, it would have increased or decreased pre-tax income for the year by approximately $300 million. Program Accounting Program accounting requires the demonstrated ability to reliably estimate revenues, costs and gross profit margin for the defined program accounting quantity.
If the combined gross margins for our profitable long-term contracts had been estimated to be higher or lower by 1% during 2023, it would have increased or decreased pre-tax income for the year by approximately $300 million. Program Accounting Program accounting requires the demonstrated ability to reliably estimate revenues, costs and gross profit margin for the defined program accounting quantity.
BCA loss from operations decreased by $4,105 million primarily due to the absence in 2022 of the $3,460 million reach-forward loss taken on the 787 program in 2021, higher 737 deliveries and lower abnormal production costs, partially offset by higher research and development spending, charges related to the war in Ukraine and other period expenses.
BCA loss from operations decreased by $4,036 million primarily due to the absence in 2022 of the $3,460 million reach-forward loss taken on the 787 program in 2021, higher 737 deliveries and lower abnormal production costs, partially offset by higher research and development spending, charges related to the war in Ukraine and other period expenses.
Reductions to the estimated loss are included in the gross profit margin for undelivered units in the accounting quantity whereas increases to the estimated loss are recorded as an earnings charge in the period in which the loss is determined. The 767, 777X, and 787 programs had near break-even or single digit margins at December 31, 2022.
Reductions to the estimated loss are included in the gross profit margin for undelivered units in the accounting quantity whereas increases to the estimated loss are recorded as an earnings charge in the period in which the loss is determined. The 767, 777X, and 787 programs had near break-even or single digit margins at December 31, 2023.
Our long-term contracts typically represent a single distinct performance obligation due to the highly interdependent and interrelated nature of the underlying goods and/or services and the significant service of integration that we provide. Accounting for long-term contracts involves a judgmental process of estimating the total sales, costs, and profit for each performance obligation.
Our long-term contracts typically represent a single distinct performance obligation due to the highly interdependent and interrelated nature of the underlying goods and/or services and the significant service of integration that we provide. Accounting for long-term contracts involves a judgmental process of estimating the total revenue, costs, and profit for each performance obligation.
Revenue and cost estimates for all significant long-term contract performance obligations are reviewed and reassessed quarterly. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the performance obligation’s inception to date revenues, cost of sales and profit in the period in which such changes are made.
Revenue and cost estimates for all significant long-term contract performance obligations are reviewed and reassessed quarterly. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the contract’s inception to date revenues, cost of sales and profit in the period in which such changes are made.
A program consists of the estimated number of units (accounting quantity) of a product to be produced in a continuing, long-term production effort for 48 Table of Contents delivery under existing and anticipated contracts. The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates.
A program consists of the estimated number of units (accounting quantity) of a product to be produced in a continuing, long-term production effort for 46 Table of Contents delivery under existing and anticipated contracts. The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates.
The $6.9 billion improvement in cash provided by operating activities in 2022 is primarily driven by improved changes in assets and liabilities of $11.1 billion, partially offset by lower non-cash items of $3.4 billion and higher net loss of $0.8 billion.
The $6.9 billion improvement in cash provided by operating activities in 2022 was primarily driven by improved changes in assets and liabilities of $11.1 billion, partially offset by lower non-cash items of $3.4 billion and higher net loss of $0.8 billion.
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 and other non-recurring costs, and warranty costs.
Factors that must be estimated include program accounting quantity, sales price, production rates, labor and employee benefit costs, material costs, procured part costs, major component costs, overhead costs, program tooling and other non-recurring costs, and warranty costs.
Under program accounting, cost of sales for each commercial aircraft program equals the product of (i) revenue recognized in connection with customer deliveries and (ii) the estimated cost of sales percentage applicable to the total remaining program. For long-term contracts, the amount reported as cost of sales is recognized as incurred.
Under program accounting, cost of sales for each commercial aircraft program equals the product of (i) revenue recognized in connection with customer deliveries and (ii) the 26 Table of Contents estimated cost of sales percentage applicable to the total remaining program. For long-term contracts, the amount reported as cost of sales is recognized as incurred.
These commitments may be satisfied by our local operations there, placement of direct work or vendor orders for supplies, opportunities to bid on supply contracts, transfer of technology or other forms of assistance. However, in certain cases, our commitments may be satisfied through other parties (such as our vendors) who purchase supplies from our non-U.S. customers.
These commitments may be satisfied by our local operations there, placement of direct work or vendor orders for supplies, opportunities to bid on supply contracts, transfer of technology or other forms of assistance. However, in some instances, our commitments may be satisfied through other parties (such as our vendors) who purchase supplies from our non-U.S. customers.
Total sales estimates are based on negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, incentive and award provisions associated with technical performance, and price adjustment clauses (such as inflation or index-based clauses).
Total revenue estimates are based on negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, incentive and award fee provisions associated with technical performance, and price adjustment clauses (such as inflation or index-based clauses).
A decrease or increase of 25 basis points in the expected long-term rate of asset return would have increased or decreased 2022 net periodic pension cost by $158 million. See Note 16 of the Notes to our Consolidated Financial Statements, which includes the discount rate and expected long-term rate of asset return assumptions for the last three years.
A decrease or increase of 25 basis points in the expected long-term rate of asset return would have increased or decreased 2023 net periodic pension cost by $150 million. See Note 16 of the Notes to our Consolidated Financial Statements, which includes the discount rate and expected long-term rate of asset return assumptions for the last three years.
(3) The income tax impact is calculated using the U.S. corporate statutory tax rate. 47 Table of Contents Critical Accounting Policies & Estimates Accounting for Long-term Contracts Substantially all contracts at BDS and certain contracts at BGS are long-term contracts.
(3) The income tax impact is calculated using the U.S. corporate statutory tax rate. 45 Table of Contents Critical Accounting Estimates Accounting for Long-term Contracts Substantially all contracts at BDS and certain contracts at BGS are long-term contracts.
Ending production of the 747 did not have a material impact on our financial position, results of operations or cash flows. 767 Program The accounting quantity for the 767 program increased by 24 units during 2022 due to the program's normal progress of obtaining additional orders and delivering airplanes.
Ending production of the 747 did not have a material impact on our financial position, results of operations or cash flows. 767 Program The accounting quantity for the 767 program increased by 12 units during 2023 due to the program's normal progress of obtaining additional orders and delivering airplanes.
BGS’ major customer, the U.S. government, remains subject to the spending limits and uncertainty described on page 35, which could restrict the execution of certain program activities and delay new programs or competitions. Industry Competitiveness Aviation services is a competitive market with many domestic and international competitors.
BGS’ major customer, the U.S. government, remains subject to the spending limits and uncertainty, which could restrict the execution of certain program activities and delay new programs or competitions. Industry Competitiveness Aviation services is a competitive market with many domestic and international competitors.
Factors that could result 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 due to changes in the inflation rate or other economic indicators, performance or reliability issues involving completed aircraft, capital expenditures and other costs associated with increasing or adding new production capacity, learning curve, additional change incorporation, achieving anticipated cost reductions, the addition of regulatory requirements in connection with certification in one or more jurisdictions, flight test and certification schedules, costs, schedule and demand for new airplanes and derivatives and status of customer claims, supplier claims or assertions and other contractual negotiations.
Factors that could result in lower margins (or a material charge if an airplane program has or is determined to have reach-forward losses) include: changes to the program accounting quantity, customer and model mix, production costs and rates, changes to price escalation factors due to changes in the inflation rate or other economic indicators, performance or reliability issues involving completed aircraft, capital expenditures and other costs associated with increasing or adding new production capacity, learning curve, additional change incorporation, rework or safety enhancements, operational and supply chain challenges, achieving anticipated cost reductions, additional regulatory requirements in connection with certification in one or more jurisdictions, flight test and certification schedules, costs, schedule and demand for new airplanes and derivatives and status of customer claims, supplier claims or assertions and other contractual negotiations.
Risk remains that we may be required to record additional reach-forward losses in future periods. Global Services Business Environment and Trends The aerospace markets we serve include parts distribution, logistics and other inventory services; maintenance, engineering and upgrades; training and professional services; and data analytics and digital services. During 2022, commercial services volume at BGS recovered to pre-pandemic levels.
Risk remains that we may be required to record additional reach-forward losses in future periods. Global Services Business Environment and Trends The aerospace markets we serve include parts distribution, logistics and other inventory services; maintenance, engineering and upgrades; training and professional services; and data analytics and digital services. In 2023, commercial services volume at BGS exceeded pre-pandemic levels.
Airlines are using data analytics to plan flight operations and predictive maintenance to improve their productivity and efficiency. Airlines continue to look for opportunities to reduce the size and cost of their spare parts inventory, frequently outsourcing spares management to third parties. The demand outlook for our government services business has remained stable in 2022.
Airlines are using data analytics to plan flight operations and predictive maintenance to improve 37 Table of Contents their productivity and efficiency. Airlines continue to look for opportunities to reduce the size and cost of their spare parts inventory, frequently outsourcing spares management to third parties. The demand outlook for our government services business has remained stable in 2023.
Additional Considerations The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from employees and other partners. Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging, such as the 787 production issues and associated rework.
Additional Considerations The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from employees and other partners. Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging.
The increase in Accrued liabilities is primarily driven by the accrued losses on BDS fixed-price development programs, lower payments to 737 MAX customers in 2022, and a $0.7 billion 40 Table of Contents payment in 2021 consistent with the terms of the Deferred Prosecution Agreement between Boeing and the U.S. Department of Justice.
The increase in Accrued liabilities was primarily driven by the accrued losses on BDS fixed-price development programs, lower payments to 737 MAX customers in 2022, and a $0.7 billion payment in 2021 consistent with the terms of the Deferred Prosecution Agreement between Boeing and the U.S. Department of Justice.
In addition, the introduction of new aircraft and derivatives, such as the 777X, 737-7 and 737-10, involves increased risks associated with meeting development, production and certification schedules. These challenges include increased global regulatory scrutiny of all development aircraft in the wake of the 737 MAX accidents.
In addition, the introduction of new aircraft and derivatives, such as the 777X, 737-7 and 737-10, involves increased risks associated with meeting development, production and certification schedules. These challenges include significant global regulatory scrutiny of all development aircraft.
At December 31, 2022, we were in compliance with the covenants for our debt and credit facilities.
At December 31, 2023, we were in compliance with the covenants for our debt and credit facilities.
Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid.
Government Cost Accounting Standards (CAS), which employ different actuarial 43 Table of Contents assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid.
The demand outlook for our government services business remains stable. At BDS, we continue to see stable demand reflecting the important role our products and services have in ensuring our national security. Outside of the U.S., we are seeing similar solid demand as governments prioritize security, defense technology and global cooperation given evolving threats.
At BDS, we continue to see stable demand reflecting the important role our products and services have in ensuring our national security. Outside of the U.S., we are seeing similar solid demand as governments prioritize security, defense technology and global cooperation given evolving threats.
We expect BGS commercial revenues to remain strong in future quarters as the commercial airline industry continues to recover. Over the long-term, as the size of the worldwide commercial airline fleet continues to grow, so does demand for aftermarket services designed to increase efficiency and extend the economic lives of aircraft.
We expect BGS commercial revenues to remain strong in future quarters as the commercial airline industry transitions from recovery to growth. Over the long-term, as the size of the worldwide commercial airline fleet continues to grow, so does demand for aftermarket services designed to increase efficiency and extend the economic lives of aircraft.
Over the next decade, we 37 Table of Contents expect U.S. growth to remain flat and non-U.S. fleets, led by Middle East and Asia Pacific customers, to add rotorcraft and commercial derivative aircraft at faster rates.
Over the next decade, we expect U.S. growth to remain flat and non-U.S. fleets, led by Middle East and Asia Pacific customers, to add rotorcraft and commercial derivative aircraft at faster rates.
Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $752 million at December 31, 2022. For additional information, see Note 13 to our Consolidated Financial Statements.
Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $844 million at December 31, 2023. For additional information, see Note 13 to our Consolidated Financial Statements.
Customer financing commitments totaled $16.1 billion and $12.9 billion at December 31, 2022 and 2021. The increase relates to new financing commitments. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers.
Customer financing commitments totaled $17.0 billion and $16.1 billion at December 31, 2023 and 2022. The increase relates to new financing commitments. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers.
These risks will be particularly acute if we are subject to further credit rating downgrades. The occurrence of any or all of these events may adversely affect our ability to fund our operations and financing or contractual commitments. Any future borrowings may affect our credit ratings and are subject to various debt covenants.
These risks will be particularly acute if we are subject to further credit rating downgrades such as those we experienced in 2020. The occurrence of any or all of these events may adversely affect our ability to fund our operations and financing or contractual commitments. Any future borrowings may affect our credit ratings and are subject to various debt covenants.
The FAS/ 45 Table of Contents CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core earnings per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement expenses.
The FAS/CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. Core earnings/(loss) per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement expenses.
The Company had deferred income tax liabilities of $9,306 million at December 31, 2022 that will partially offset deferred income tax assets and result in higher taxable income in future years and increase income taxes payable. Tax law determines whether future reversals of temporary differences will result in taxable and deductible amounts that offset each other in future years.
The Company had deferred income tax liabilities of $10,363 million at December 31, 2023 that will partially offset deferred income tax assets and result in higher taxable income in future years and increase income taxes payable. Tax law determines whether future reversals of temporary differences will result in taxable and deductible amounts that offset each other in future years.
In certain cases, penalties could be imposed if we do not meet our industrial participation commitments. During 2022, we incurred no such penalties. As of December 31, 2022, we had outstanding industrial participation agreements 44 Table of Contents totaling $24.8 billion that extend through 2034. Purchase order commitments associated with industrial participation agreements are included in purchase obligations.
In certain cases, penalties could be imposed if we do not meet our industrial participation commitments. During 2023, we incurred no such penalties. As of December 31, 2023, we had outstanding industrial participation agreements totaling $24.5 billion that extend through 2034. Purchase order commitments associated with industrial participation agreements are included in purchase obligations.
The Pension FAS/CAS service cost adjustments recognized in Loss from operations were benefits of $849 million in 2022, $882 million in 2021 and $1,024 million in 2020. The lower benefits in 2022 and 2021 were primarily due to reductions in allocated pension cost year over year.
The Pension FAS/CAS service cost adjustments recognized in Loss from operations were benefits of $799 million in 2023, $849 million in 2022 and $882 million in 2021. The lower benefits in 2023 and 2022 were primarily due to reductions in allocated pension cost year over year.
Results of Operations (Dollars in millions) Years ended December 31, 2022 2021 2020 Revenues $23,162 $26,540 $26,257 % of total company revenues 35 % 43 % 45 % (Loss)/earnings from operations ($3,544) $1,544 $1,539 Operating margins (15.3) % 5.8 % 5.9 % Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results.
Results of Operations (Dollars in millions) Years ended December 31, 2023 2022 2021 Revenues $24,933 $23,162 $26,540 % of total company revenues 32 % 35 % 43 % (Loss)/earnings from operations ($1,764) ($3,544) $1,544 Operating margins (7.1) % (15.3) % 5.8 % Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results.
We expect less than 20 percent of the worldwide fleet of military aircraft to be retired and replaced over the next ten years, driving increased demand for services to maintain aging aircraft and enhance aircraft capability.
We expect approximately 30 percent of the worldwide fleet of military aircraft to be retired and replaced over the next ten years, driving increased demand for services to maintain aging aircraft and enhance aircraft capability.
Concessions paid to 737 MAX customers totaled $1.0 billion and $2.5 billion during 2022 and 2021. Growth in Accounts Payable in 2022 is a source of cash while reductions in Accounts Payable in 2021 were a use of cash generally reflecting increases in production rates.
Concessions paid to 737 MAX customers totaled $1.0 billion and $2.5 billion during 2022 and 2021. Growth in Accounts payable in 2022 was a source of cash while reductions in Accounts payable in 2021 was a use of cash, 39 Table of Contents generally reflecting increases in production rates.
The majority of employees that had participated in defined benefit pension plans have transitioned to a company-funded defined contribution retirement savings plan. Accounting rules require an annual measurement of our projected obligation and plan assets. These measurements are based upon several assumptions, including the discount rate and the expected long-term rate of asset return.
The majority of employees that had participated in defined benefit pension plans have transitioned to a company-funded defined contribution retirement savings plan. Accounting rules require an annual measurement of our projected obligation and plan assets. These measurements are based upon several assumptions.
Deferred Income Taxes – Valuation Allowance The Company had deferred income tax assets of $12,301 million at December 31, 2022 that can be used in future years to offset taxable income and reduce income taxes payable.
Deferred Income Taxes – Valuation Allowance The Company had deferred income tax assets of $14,743 million at December 31, 2023 that can be used in future years to offset taxable income and reduce income taxes payable.
To be eligible for such a purchase order commitment from us, a non-U.S. supplier must have sufficient capability to meet our requirements and must be competitive in cost, quality and schedule. Off-Balance Sheet Arrangements We are a party to certain off-balance sheet arrangements including certain guarantees. For discussion of these arrangements, see Note 14 to our Consolidated Financial Statements.
To be eligible for such a purchase order commitment from us, a non-U.S. supplier must have sufficient capability to meet our requirements and must be competitive in cost, quality and schedule. Off-Balance Sheet Arrangements We are a party to certain off-balance sheet arrangements including certain guarantees.
See further discussion of the 737 MAX in Note 7 and Note 13 to our Consolidated Financial Statements . 747 Program We completed production of the 747 in the fourth quarter of 2022 and delivery of the last aircraft is expected to occur in early 2023.
See further discussion of the 737 MAX in Note 7, Note 13 and Note 23 to our Consolidated Financial Statements . 747 Program We completed production of the 747 in the fourth quarter of 2022 and delivery of the last aircraft occurred in February 2023.
One or more of these factors could result in additional reach-forward losses on the 777X program in future periods. 787 Program During the fourth quarter of 2022, we increased the accounting quantity for the 787 program by 100 units due to the program’s normal progress of obtaining additional orders and delivering aircraft.
One or more of these factors could result in reach-forward losses in future periods. 787 Program The accounting quantity for the 787 program increased by 100 units during 2023 due to the program's normal progress of obtaining additional orders and delivering airplanes.
The increased income in 2021 compared to 2020 was primarily due to lower interest cost and higher expected return on plan assets, partially offset by higher amortization of net actuarial losses and higher settlement charges.
The decreased income in 2023 compared to 2022 was primarily due to higher interest cost and lower expected return on plan assets, partially offset by lower amortization of net actuarial losses. The increased income in 2022 compared to 2021 was primarily due to lower amortization of net actuarial losses in 2022 and a settlement loss recorded in 2021.
Fleet Support We provide the operators of our commercial aircraft with assistance and services to facilitate efficient and safe airplane operation. Collectively known as fleet support services, these activities and services begin prior to airplane delivery and continue throughout the operational life of the airplane.
The costs associated with the remaining rework are not expected to be significant. Fleet Support We provide the operators of our commercial aircraft with assistance and services to facilitate efficient and safe airplane operation. Collectively known as fleet support services, these activities and services begin prior to airplane delivery and continue throughout the operational life of the airplane.
BGS earnings from operations increased by $710 million in 2022 compared with 2021 primarily due to higher commercial services volume and favorable mix, partially offset by lower government services performance. Loss from operations decreased by $9,865 million in 2021 compared with 2020 primarily due to lower losses at BCA and higher earnings at BGS.
BGS earnings from operations increased by $710 million in 2022 compared with 2021 primarily due to higher commercial services volume and favorable mix, partially offset by lower government services performance.
With government support, Airbus has historically invested heavily to create a family of products to compete with ours. After the acquisition of a majority share of Bombardier’s C Series (now A220) in 2018, Airbus continues to expand in the 100-150 seat transcontinental market.
They offer competitive products and have access to most of the same customers and suppliers. With government support, Airbus has historically invested heavily to create a family of products to compete with ours. After the acquisition of a majority share of Bombardier’s C Series (now A220) in 2018, Airbus continues to expand in the 100-150 seat transcontinental market.
The Company’s valuation allowance of $3,162 million at December 31, 2022 primarily relates to pension and other postretirement benefit obligation deferred tax assets, tax credits and other carryforwards that are assumed to reverse beyond the period in which reversals of deferred tax liabilities are assumed to occur.
The Company’s valuation allowance of $4,550 million at December 31, 2023 primarily relates to pension and other postretirement benefit obligation deferred tax assets, tax net operating losses, tax credits and interest carryforwards that are assumed to reverse beyond the period in which reversals of deferred tax liabilities are assumed to occur.
The following discussions of comparative results among periods should be viewed in this context. 35 Table of Contents Deliveries of new-build production units, including remanufactures and modifications, were as follows: Years ended December 31, 2022 2021 2020 F/A-18 Models 14 21 20 F-15 Models 12 16 4 CH-47 Chinook (New) 19 15 27 CH-47 Chinook (Renewed) 9 5 3 AH-64 Apache (New) 25 27 19 AH-64 Apache (Remanufactured) 50 56 52 MH-139 Grey Wolf 4 KC-46 Tanker 15 13 14 P-8 Models 12 16 15 Commercial Satellites 4 Military Satellites 1 Total 165 169 154 Revenues BDS revenues in 2022 decreased by $3,378 million compared with 2021 primarily due to charges on development programs.
The following discussions of comparative results among periods should be viewed in this context. 35 Table of Contents Deliveries of new-build production units, including remanufactures and modifications, were as follows: Years ended December 31, 2023 2022 2021 F/A-18 Models 22 14 21 F-15 Models 9 12 16 T-7A Red Hawk 3 CH-47 Chinook (New) 11 19 15 CH-47 Chinook (Remanufactured) 9 9 5 AH-64 Apache (New) 20 25 27 AH-64 Apache (Remanufactured) 57 50 56 MH-139 Grey Wolf 2 4 KC-46 Tanker 13 15 13 P-8 Models 11 12 16 Commercial Satellites 5 4 Military Satellites 1 Total 162 165 169 Revenues BDS revenues in 2023 increased by $1,771 million compared with 2022.
Research and Development The following table summarizes our Research and development expense: (Dollars in millions) Years ended December 31, 2022 2021 2020 Commercial Airplanes $1,510 $1,140 $1,385 Defense, Space & Security 945 818 713 Global Services 119 107 138 Other 278 184 240 Total $2,852 $2,249 $2,476 Research and development expense increased by $603 million in 2022 compared with 2021 primarily due to higher research and development expenditures on 777X, 737 MAX, as well as BCA and enterprise investments in product development.
Research and Development The following table summarizes our Research and development expense: (Dollars in millions) Years ended December 31, 2023 2022 2021 Commercial Airplanes $2,036 $1,510 $1,140 Defense, Space & Security 919 945 818 Global Services 107 119 107 Other 315 278 184 Total $3,377 $2,852 $2,249 Research and development expense increased by $525 million in 2023 compared with 2022 primarily due to higher research and development expenditures on the 777X program as well as other BCA and enterprise investments in product development.
At the end of 2022, 28% of BDS backlog was attributable to non-U.S. customers.
At the end of 2023, 29% of BDS backlog was attributable to non-U.S. customers.
We continue to monitor the potential for any extra costs that may result from the remaining global tariffs. We are complying with all U.S. and other government export control restrictions and sanctions imposed on certain businesses and individuals in Russia. We continue to monitor and evaluate additional sanctions and export restrictions that may be imposed by the U.S.
We are complying with all U.S. and other government export control restrictions and sanctions imposed on certain businesses and individuals in Russia. We continue to monitor and evaluate additional sanctions and export restrictions that may be imposed by the U.S.
Backlog excludes options and BCC orders as well as orders where customers have the unilateral right to terminate. A number of our customers may have contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date. We address customer claims and requests for other contractual relief as they arise.
Backlog excludes options and Boeing customer financing orders as well as orders where customers have the unilateral right to terminate. A number of our customers may have contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date.
BCA total backlog of $329,824 million at December 31, 2022 increased from $296,882 million at December 31, 2021, reflecting new orders in excess of deliveries and price escalation, offset by order cancellations and by an increase in the value of existing orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog.
BCA total backlog of $440,507 million at December 31, 2023 increased from $329,824 million at December 31, 2022, reflecting new orders in excess of deliveries and a decrease in the value of existing orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog, partially offset by order cancellations.
Capital expenditures totaled $1.2 billion in 2022, compared with $1.0 billion in 2021 and $1.3 billion in 2020. We expect capital expenditures in 2023 to be higher than in 2022. Financing Activities Cash used by financing activities was $1.3 billion during 2022, compared with $5.6 billion during 2021 and cash provided of $35.0 billion in 2020.
Capital expenditures totaled $1.5 billion in 2023, compared with $1.2 billion in 2022 and $1.0 billion in 2021. We expect capital expenditures to grow in 2024 compared with 2023. Financing Activities Cash used by financing activities was $5.5 billion during 2023, compared with $1.3 billion during 2022, and $5.6 billion in 2021.
The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements) and a limitation on consolidated debt as a percentage of total capital (as defined in the credit agreements).
The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements) and a limitation on consolidated debt as a percentage of total capital (as defined in the credit agreements). When considering debt covenants, we continue to have substantial borrowing capacity.
While we believe the cost and revenue estimates incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure. 34 Table of Contents Defense, Space & Security Business Environment and Trends United States Government Defense Environment Overview The Consolidated Appropriations Act, 2023, enacted in December 2022, provided fiscal year 2023 (FY23) appropriations for government departments and agencies, including $817 billion for the U.S.
While we believe the cost and revenue estimates incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure. 34 Table of Contents Defense, Space & Security Business Environment and Trends United States Government Defense Environment Overview In March 2023, the U.S. government released the President's budget request for FY24, which requested $842 billion in funding for the U.S.
Earnings From Operations BGS earnings from operations in 2022 increased by $710 million compared with 2021, primarily due to higher commercial services volume and favorable mix, partially offset by lower government services performance. The net unfavorable impact of cumulative contract catch-up adjustments in 2022 was $148 million worse than the net favorable impact in the prior year.
The net unfavorable impact of cumulative contract catch-up adjustments in 2023 was $16 million worse than the net favorable impact in the prior year comparable period. BGS revenues in 2022 increased by $1,283 million compared with 2021 primarily due to higher commercial services volume, partially offset by lower government services volume and performance.
Total cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, business base and other economic projections. Factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, anticipated labor agreements, and lingering impacts of COVID-19.
Total cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, business base and other economic projections. Factors that influence these estimates include inflationary trends, technical and schedule risk, internal and supplier performance trends, production quality, labor instability, global supply chain constraints, business volume assumptions, asset utilization, and anticipated labor agreements.
(Loss)/earnings From Operations BDS loss from operations in 2022 of $3,544 million decreased by $5,088 million compared with earnings from operations of $1,544 million in 2021 primarily due to unfavorable impacts of cumulative contract catch-up adjustments ($4,284 million more unfavorable in 2022 than 2021).
BDS loss from operations in 2022 of $3,544 million decreased by $5,088 million compared with earnings from operations of $1,544 million in 2021 primarily due to unfavorable impacts of cumulative contract catch-up adjustments ($4,284 million more unfavorable in 2022 than 2021). Volume and mix and higher research and development also contributed to the year over year earnings decline.
Liquidity and Capital Resources Cash Flow Summary (Dollars in millions) Years ended December 31, 2022 2021 2020 Net loss ($5,053) ($4,290) ($11,941) Non-cash items 4,426 7,851 10,866 Changes in assets and liabilities 4,139 (6,977) (17,335) Net cash provided/(used) by operating activities 3,512 (3,416) (18,410) Net cash provided/(used) by investing activities 4,370 9,324 (18,366) Net cash (used)/provided by financing activities (1,266) (5,600) 34,955 Effect of exchange rate changes on cash and cash equivalents (73) (39) 85 Net increase/(decrease) in cash & cash equivalents, including restricted 6,543 269 (1,736) Cash & cash equivalents, including restricted, at beginning of year 8,104 7,835 9,571 Cash & cash equivalents, including restricted, at end of year $14,647 $8,104 $7,835 Operating Activities Net cash provided by operating activities was $3.5 billion during 2022, compared with net cash used by operating activities of $3.4 billion during 2021.
Liquidity and Capital Resources Cash Flow Summary (Dollars in millions) Years ended December 31, 2023 2022 2021 Net loss ($2,242) ($5,053) ($4,290) Non-cash items 4,113 4,426 7,851 Changes in assets and liabilities 4,089 4,139 (6,977) Net cash provided/(used) by operating activities 5,960 3,512 (3,416) Net cash (used)/provided by investing activities (2,437) 4,370 9,324 Net cash used by financing activities (5,487) (1,266) (5,600) Effect of exchange rate changes on cash and cash equivalents 30 (73) (39) Net (decrease)/increase in cash & cash equivalents, including restricted (1,934) 6,543 269 Cash & cash equivalents, including restricted, at beginning of year 14,647 8,104 7,835 Cash & cash equivalents, including restricted, at end of year $12,713 $14,647 $8,104 Operating Activities Net cash provided by operating activities was $6.0 billion during 2023 compared with $3.5 billion during 2022.
Substantially all contracts at our BDS segment and certain contracts at our BGS segment are long-term contracts with the U.S. government and other customers that generally extend over several years.
Substantially all contracts at our BDS segment and certain contracts at our BGS segment are long-term contracts with the U.S. government and other customers that generally extend over several years. Cost of sales for commercial spare parts is recorded at average cost.
We continue to experience near-term production disruptions and inefficiencies due to supplier disruption, labor instability and factory performance. These factors have contributed to significant earnings charges on a number of fixed-price development programs which are expected to adversely affect cash flows in future periods.
We continue to experience production disruptions and inefficiencies due to technical challenges, supplier disruption and factory performance. These factors have contributed to significant earnings charges on fixed-price development programs as well as on a number of mature programs which are continuing to adversely affect margins and cash flows.
Volume and mix and higher research and development also contributed to the year over year earnings decline. Charges of fixed price development programs in 2022 included VC-25B ($1,452 million), KC-46A Tanker ($1,374 million), MQ-25 ($579 million), T-7A Red Hawk Production Options ($552 million), T-7A Red Hawk Engineering, Manufacturing and Development (EMD) ($203 million), and Commercial Crew ($288 million).
Charges 36 Table of Contents on fixed-price development programs in 2022 included VC-25B ($1,452 million), KC-46A Tanker ($1,374 million), MQ-25 ($579 million), T-7A Red Hawk Production Options ($552 million), T-7A Red Hawk Engineering and Manufacturing Development (EMD) ($203 million), and Commercial Crew ($288 million).
Research and development expense decreased by $227 million in 2021 compared with 2020 primarily due to lower BCA and enterprise investments in product development and lower spending on the 777X program. 26 Table of Contents Backlog Our backlog at December 31 was as follows: (Dollars in millions) Years ended December 31, 2022 2021 Commercial Airplanes $329,824 $296,882 Defense, Space & Security 54,373 59,828 Global Services 19,338 20,496 Unallocated items, eliminations and other 846 293 Total Backlog $404,381 $377,499 Contractual backlog $381,977 $356,362 Unobligated backlog 22,404 21,137 Total Backlog $404,381 $377,499 Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, orders where customers have the unilateral right to terminate, and unobligated U.S. and non-U.S. government contract funding.
Research and development expense increased by $603 million in 2022 compared with 2021 primarily due to higher research and development expenditures on 777X, 737 MAX, as well as BCA and enterprise investments in product development. 27 Table of Contents Backlog Our backlog at December 31 was as follows: (Dollars in millions) Years ended December 31, 2023 2022 Commercial Airplanes $440,507 $329,824 Defense, Space & Security 59,012 54,373 Global Services 19,869 19,338 Unallocated items, eliminations and other 807 846 Total Backlog $520,195 $404,381 Contractual backlog $497,094 $381,977 Unobligated backlog 23,101 22,404 Total Backlog $520,195 $404,381 Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, orders where customers have the unilateral right to terminate, and unobligated U.S. and non-U.S. government contract funding.
If we remain unable to deliver 737 MAX aircraft in China for an extended period of time, and/or entry into service of the 777X, 737-7 and/or 737-10 is further delayed, we may experience reductions to backlog and/or significant order cancellations.
If we are unable to deliver aircraft to customers in China consistent with our assumptions, and/or entry into service of the 777X, 737-7 and/or 737-10 is further delayed, we may experience reductions to backlog and/or significant order cancellations.
The net favorable impact of cumulative contract catch-up adjustments in 2021 was $98 million lower than the prior year . 38 Table of Contents Backlog BGS total backlog of $19,338 million at December 31, 2022 decreased by 6% from $20,496 million at December 31, 2021, primarily due to revenue recognized on contracts awarded in prior years.
The net unfavorable impact of cumulative contract catch-up adjustments in 2022 was $148 million worse than the net favorable impact in the prior year. 38 Table of Contents Backlog BGS total backlog of $19,869 million at December 31, 2023 increased by 3% from $19,338 million at December 31, 2022, primarily due to the timing of awards, partially offset by revenue recognized on contracts awarded in prior years.
Factors that influence these estimates include production rates, internal and subcontractor performance trends, learning curve, change incorporation, regulatory requirements in connection with certification, flight test and certification schedules, performance or reliability issues involving completed aircraft, customer and/or supplier claims or assertions, asset utilization, anticipated labor agreements, inflationary or deflationary trends, and lingering impacts of COVID-19.
Factors that influence these estimates include production rates, internal and supplier performance trends, production quality, labor instability, global supply chain constraints, learning curve, change incorporation, rework or safety enhancements, regulatory requirements, flight test and certification requirements and schedules, performance or reliability issues involving completed aircraft, customer and/or supplier claims or assertions, asset utilization, anticipated labor agreements, and inflationary or deflationary trends.
BCA deliveries, including intercompany deliveries, as of December 31 were as follows: 737 * 747 767 * 777 787 Total 2022 Cumulative deliveries 8,132 1,572 1,271 1,701 1,037 Deliveries 387 (13) 5 33 (15) 24 31 480 2021 Cumulative deliveries 7,745 1,567 1,238 1,677 1,006 Deliveries 263 (16) 7 32 (13) 24 14 340 2020 Cumulative deliveries 7,482 1,560 1,206 1,653 992 Deliveries 43 (14) 5 30 (11) 26 53 157 * Intercompany deliveries identified by parentheses Loss From Operations BCA loss from operations was $2,370 million in 2022 compared with $6,475 million in 2021 reflecting higher 737 deliveries and lower abnormal production costs, partially offset by higher research and development spending, charges related to the war in Ukraine and other period expenses.
BCA deliveries, including intercompany deliveries, as of December 31 were as follows: 737 * 747 767 * 777 787 Total 2023 Cumulative deliveries 8,528 1,573 1,303 1,727 1,110 Deliveries 396 (9) 1 32 (14) 26 73 528 2022 Cumulative deliveries 8,132 1,572 1,271 1,701 1,037 Deliveries 387 (13) 5 33 (15) 24 31 480 2021 Cumulative deliveries 7,745 1,567 1,238 1,677 1,006 Deliveries 263 (16) 7 32 (13) 24 14 340 * Intercompany deliveries identified by parentheses Loss From Operations BCA loss from operations was $1,635 million in 2023 compared with $2,341 million in 2022 reflecting higher deliveries and lower period expenses including lower abnormal production costs, partially offset by higher spending on research and development.
We are currently producing at a combined rate of 3 aircraft per month. 777 and 777X Programs The accounting quantity for the 777 program increased by 40 units during 2022 due to the program's normal progress of obtaining additional orders and delivering airplanes. We are currently producing at a combined production rate of 3 per month for the 777/777X programs.
Program Highlights 737 Program The accounting quantity for the 737 program increased by 800 units during 2023 due to the program's normal progress of obtaining additional orders and delivering airplanes. We are currently producing at a rate of 38 per month.
These factors include continued production disruption due to labor instability and supply chain disruption, customer negotiations, further production rate adjustments for the 777X or other commercial aircraft programs, contraction of the accounting quantity and potential risks associated with the testing program and the timing of aircraft certification.
These factors include aircraft certification requirements and timing, change incorporation on completed aircraft, production disruption due to labor instability and supply chain disruption, customer negotiations, further 33 Table of Contents production rate adjustments for the 777X or other commercial aircraft programs, and contraction of the accounting quantity.
(Dollars in millions, except per share data) Years ended December 31, 2022 2021 2020 Revenues $66,608 $62,286 $58,158 Loss from operations, as reported ($3,547) ($2,902) ($12,767) Operating margins (5.3) % (4.7) % (22.0) % Pension FAS/CAS service cost adjustment (1) ($849) ($882) ($1,024) Postretirement FAS/CAS service cost adjustment (1) (294) (291) (359) FAS/CAS service cost adjustment (1) ($1,143) ($1,173) ($1,383) Core operating loss (non-GAAP) ($4,690) ($4,075) ($14,150) Core operating margins (non-GAAP) (7.0) % (6.5) % (24.3) % Diluted loss per share, as reported ($8.30) ($7.15) ($20.88) Pension FAS/CAS service cost adjustment (1) (1.43) (1.50) (1.80) Postretirement FAS/CAS service cost adjustment (1) (0.49) (0.49) (0.63) Non-operating pension expense (2) (1.47) (0.91) (0.60) Non-operating postretirement expense (2) (0.10) 0.03 Provision for deferred income taxes on adjustments (3) 0.73 0.61 0.63 Core loss per share (non-GAAP) ($11.06) ($9.44) ($23.25) Weighted average diluted shares (in millions) 595.2 588.0 569.0 (1) FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.
(Dollars in millions, except per share data) Years ended December 31, 2023 2022 2021 Revenues $77,794 $66,608 $62,286 Loss from operations, as reported ($773) ($3,519) ($2,870) Operating margins (1.0) % (5.3) % (4.6) % Pension FAS/CAS service cost adjustment (1) ($799) ($849) ($882) Postretirement FAS/CAS service cost adjustment (1) (257) (294) (291) FAS/CAS service cost adjustment (1) ($1,056) ($1,143) ($1,173) Core operating loss (non-GAAP) ($1,829) ($4,662) ($4,043) Core operating margins (non-GAAP) (2.4) % (7.0) % (6.5) % Diluted loss per share, as reported ($3.67) ($8.30) ($7.15) Pension FAS/CAS service cost adjustment (1) (1.32) (1.43) (1.50) Postretirement FAS/CAS service cost adjustment (1) (0.42) (0.49) (0.49) Non-operating pension expense (2) (0.87) (1.47) (0.91) Non-operating postretirement expense (2) (0.10) (0.10) Provision for deferred income taxes on adjustments (3) 0.57 0.73 0.61 Core loss per share (non-GAAP) ($5.81) ($11.06) ($9.44) Weighted average diluted shares (in millions) 606.1 595.2 588.0 (1) FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.
A 25 basis point change in the discount rate would not have a significant impact on pension cost. However, net periodic pension cost is sensitive to changes in the expected long-term rate of asset return.
The projected benefit obligation would decrease by $1,280 million or increase by $1,425 million if the discount rate increased or decreased by 25 basis points. A 25 basis point change in the discount rate would not have a significant impact on pension cost. However, net periodic pension cost is sensitive to changes in the expected long-term rate of asset return.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
5 edited+3 added−1 removed2 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
5 edited+3 added−1 removed2 unchanged
2022 filing
2023 filing
Biggest changeForeign Currency Exchange Rate Risk We are subject to foreign currency exchange rate risk relating to receipts from customers and payments to suppliers in foreign currencies. We use foreign currency forward contracts to hedge the price risk associated with firmly committed and forecasted foreign denominated payments and receipts related to our ongoing business.
Biggest changeWe use foreign currency forward contracts to hedge the price risk associated with firmly committed and forecasted foreign denominated payments and receipts related to our ongoing business. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
Consistent with the use of these contracts to neutralize the effect of market price fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying transactions being hedged. When taken together, these commodity purchase contracts and the offsetting swaps do not create material market risk. 51 Table of Contents
Consistent with the use of these contracts to neutralize the effect of market price fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying transactions being hedged. When taken together, these commodity purchase contracts and the offsetting swaps do not create material market risk.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We have financial instruments that are subject to interest rate risk, principally fixed- and floating-rate debt obligations, and customer financing assets and liabilities. The investors in our fixed-rate debt obligations do not generally have the right to demand we pay off these obligations prior to maturity.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We have financial instruments that are subject to interest rate risk, principally fixed-rate debt obligations. The investors in our fixed-rate debt obligations do not generally have the right to demand we pay off these obligations prior to maturity.
At December 31, 2022, a 10% increase or decrease in the market price in our commodity derivatives would have increased or decreased our unrealized losses by $70 million.
At December 31, 2023, a 10% increase or decrease in the market price in our commodity derivatives would have increased or decreased our unrealized losses by $37 million.
Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates. At December 31, 2022, a 10% increase or decrease in the exchange rate in our portfolio of foreign currency contracts would have increased or decreased our unrealized losses by $232 million.
At December 31, 2023, a 10% increase or decrease in the exchange rate in our portfolio of foreign currency contracts would have increased or decreased our unrealized losses by $361 million.
Removed
Therefore, exposure to interest rate risk is not believed to be material for our fixed-rate debt. As of December 31, 2022, we do not have any significant floating-rate debt obligations. Historically, we have not experienced material gains or losses on our customer financing assets and liabilities due to interest rate changes.
Added
Therefore, exposure to interest rate risk is not believed to be material for our fixed-rate debt. Foreign Currency Exchange Rate Risk We are subject to foreign currency exchange rate risk relating to receipts from customers and payments to suppliers in foreign currencies.
Added
Market Risk Participants in deferred compensation plans can diversify the deferred amounts among investment funds which are subject to potential changes in fair value. As of December 31, 2023, the deferred compensation liability, which is being marked to market, was $1.6 billion.
Added
A 10% change in the fair value of these investment funds would increase or decrease the liability by $164 million. Changes in the liability are recorded in operating earnings. 49 Table of Contents