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# Problem-solving Skills
1 Critical problem
2 External analysis (SWOT)
3 Internal analysis (SWOT)
4 Alternative solutions (SWOT)
5 Decision (QSPM)
6 Implementation
Exceeds expectation
pts
Identify THE critical strategic problem.
2
Identify 6+ Opportunities and 6+ Threats. All 12+
6
factors are related to the critical problem.
Identify 6+ Strengths and 6+ Weaknesses. All 12+
6
factors are related to the critical problem.
Generate 6+ alternative solutions based on the internal
6
and external analyses, and targeted at the critical
problem.
Evaluate the top 3 alternatives and select the most
6
attractive alternative, based on how each alternative
address the S., W., O., and T.
Produce a step-by-step action plan to implement the
4
solution. The plan anticipates the most likely
stakeholder resistance.
Total Points for “exceeds expectation” =
30
e the SWOT matrix to generate alternative solutions:
1 List the firm’s key external opportunities
2 List the firm’s key external threats
3 List the firm’s key internal strengths
4 List the firm’s key internal weaknesses
5 Match internal strengths with external opportunities, and record the resultant SO Strategies
6 Match internal weaknesses with external opportunities, and record the resultant WO Strategies
7 Match internal strengths with external threats, and record the resultant ST Strategies
8 Match internal weaknesses with external threats, and record the resultant WT Strategies
native solutions and to select the most attractive solution for the critical problem.
1 Copy the Strengths, Weaknesses, Opportunities, and Threats from the SWOT Matrix, and paste them in the corresponding
2 Select the top 3 alternatives from the SWOT matrix, and copy/paste them into the correponding cells across the top row o
3 Assign weights to each key external and internal factor (0 -1):
Note that all the weights for Strength and Weakness factors should add up to 1, and all the weights for Opportunity and
The dummy numbers in the template are an example of how this works
4 Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implem
5 Determine the Attractiveness Scores (AS) ( 1- 4):
1 means that the alternative is a very “unattrative” option to address the factor, be it a strength, weakness, opportunity
4 means that the alternative is a very “attrative” option to address the factor, be it a strength, weakness, opportunity or
The dummy numbers in the template are an example of how this works
6 Compute the Total Attractiveness Scores (TAS)
7 Compute the Sum Total Attractiveness Score
8 In theory, the alternative with the highest Total Attrativeness Score is the one to be implemented.
Meets Expectation
Identify A strategic problem.
Identify 3-5 O and 3-5 T. All of the factors are related
the critical problem.
Identify 3-5 S and 3-5 W. All of the factors are related
the critical problem.
Generate 3-5 alternative solutions based on the
internal and external analyses, and targeted at the
critical problem.
Evaluate the top 2 alternatives and select the most
attractive alternative, based on how each alternative
address the S., W., O., and T.
pts
Does Not Meet Expectation
1 Fail to identify a problem.
Identify fewer than 3 O and 3T, OR, factors are
3
unrelated to the critical problem.
Identify fewer than 3 S and 3 W, OR, factors are
3
unrelated to the critical problem.
pts
0
1
1
3
Generate fewer than 3 alternatives, OR, the
alternatives are inconsistent with the critical problem..
1
3
Select an alternative without evaluating the
alternatives.
1
Produce a step-by-step action plan to implement the
solution.
2 Fail to produce an implemetation plan.
0
Total Points for “meets expectation” =
15 Total Credit for “does not meet expectation” =
4
ant SO Strategies
ltant WO Strategies
WT Strategies
T Matrix, and paste them in the corresponding cells in the left column of the QSPM
nto the correponding cells across the top row of the QSPM.
p to 1, and all the weights for Opportunity and Threat factors should add up to 1.
that the organization should consider implementing
actor, be it a strength, weakness, opportunity or threat;
tor, be it a strength, weakness, opportunity or threat;
ne to be implemented.
The problem is
It’s a problem because
Not addressing this problem would
1
2
3
4
5
6
7
8
9
10
Opportunities
1
2
3
4
5
6
7
8
9
10
1
2
3
Threats
1
2
3
4
5
6
7
8
9
10
1
2
3
Instructions for how to use the SWOT matrix to generate alternative solutions:
1 List the firm’s key external opportunities
2 List the firm’s key external threats
3 List the firm’s key internal strengths
4 List the firm’s key internal weaknesses
5 Match internal strengths with external opportunities, and record the resultant SO Strategies
6 Match internal weaknesses with external opportunities, and record the resultant WO Strategies
7 Match internal strengths with external threats, and record the resultant ST Strategies
8 Match internal weaknesses with external threats, and record the resultant WT Strategies
Strengths
1
2
3
4
5
6
7
8
9
10
SO Strategy
1
2
3
ST Strategy
resultant SO Strategies
he resultant WO Strategies
ant ST Strategies
ultant WT Strategies
1
2
3
Weaknesses
WO Strategy
WT Strategy
Key Factors
Opportunities
1
2
3
4
5
6
7
8
9
10
Threats
1
2
3
4
5
6
7
8
9
10
Total
Strengths
1
2
3
4
5
6
7
8
9
10
Weaknesses
1
2
3
4
5
6
7
8
9
10
Total
Instructions for how to use the QSPM to evaluate alternative solutions and to select the most attractive solution for the cri
1 Copy the Strengths, Weaknesses, Opportunities, and Threats from the SWOT Matrix, and paste them in the correspondin
2 Select the top 3 alternatives from the SWOT matrix, and copy/paste them into the correponding cells across the top row
3 Assign weights to each key external and internal factor (0 -1):
Note that all the weights for Strength and Weakness factors should add up to 1, and all the weights for Opportunity and
The dummy numbers in the template are an example of how this works
4 Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implem
5 Determine the Attractiveness Scores (AS) ( 1- 4):
1 means that the alternative is a very “unattrative” option to address the factor, be it a strength, weakness, opportunity
4 means that the alternative is a very “attrative” option to address the factor, be it a strength, weakness, opportunity or
The dummy numbers in the template are an example of how this works
6 Compute the Total Attractiveness Scores (TAS)
7 Compute the Sum Total Attractiveness Score
8 In theory, the alternative with the highest Total Attrativeness Score is the one to be implemented.
Weight
Alternative1
Alternative2
Alternative3
AS
AS
AS
TAS
TAS
INTERPRETATION – which alternative
TAS
0.3
0.3
0
0
0
0
0
0
0
0
1
2
0.3
0.6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.3
0.1
0
0
0
0
0
0
0
0
1
3
4
0.9
0.4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.3
0.3
0
0
0
0
0
0
0
0
1
2
0.3
0.6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.3
0.1
0
0
0
0
0
0
0
3
4
0.9
0.4
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
4.4
0
0
st attractive solution for the critical problem.
paste them in the corresponding cells in the left column of the QSPM
onding cells across the top row of the QSPM.
e weights for Opportunity and Threat factors should add up to 1.
nization should consider implementing
rength, weakness, opportunity or threat;
ngth, weakness, opportunity or threat;
0
0
ch alternative will you choose to implement?
Which group(s) of stakeholders will be affected by your choice of strategy?
1
2
3
4
5
What stakeholder resistance do you anticipate?
1
2
3
4
5
What would a step-by-step implementation plan look like for your strategy, with the stakeholder resistance considered?
1
2
3
4
5
6
7
8
9
10
tance considered?
College of Business Exit Case Analysis – Part B
Preparation & Grading Scheme:
Your grade on the Exit Case Analysis is based on how well you demonstrate your abilities in:

Problem Solving & Quantitative Analysis:
o Identify the critical problem in the case
o Use both qualitative and quantitative data to produce a SWOT analysis
 Identify 6+ major Strengths in the internal environment
 Identify 6+ major Weaknesses in the internal environment
 Identify 6+ major Opportunities in the external environment
 Identify 6+ major Threats in the external environment
 Generate 6+ alternatives
o Use the QSPM to select the 3 most attractive alternative to address the problem
o Produce a 3-year plan to implement the selected strategy
Format & Submission:
Your exam must be typed. You must use the template “ExitExamPartB – Template.” The only file type
acceptable for this exam is a MicroSoft Excel workbook.
When you have completed your case analysis, please submit your analysis via Canvas Assignments: CB
Exit Case Analysis, by the deadline specified in BUS489. Failure to do this will result in a “0” on the
grade for this exam.
Plagiarism is not tolerated. If you use any statements from the case, please paraphrase them. Directly
copying statements from the case is NOT permitted, will be treated as an act of plagiarism, and will
result in a “0” on the grade for this exam.
1
Case Instructions:
The company in the case, Boeing, has hired you as a strategist to produce a strategic analysis on its
corporate strategies. The company had seen tremendous growth in the past but its operations have
encountered “turbulence” in recent years. The case starts with the company’s press release on its 2021
Q3 reports, Boeing company fact sheets, a Trefis analysis of Boeing’s value composition and how Boeing
compares against Lockheed Martin (1 of the top 2 competitors for Boeing), and ends with information
related to Airbus (the other of the top 2 competitors). All the information you need to analyze this case
is contained within the case file. Your analysis of this case should consist of 4 components (see the
template for the rubrics):
1. Critical Problem or Potential Critical Problem:
• Narrow down to ONE strategic problem.
• Start with “The problem is….” (Example: “High oil prices” is frequently considered a “problem,”
but it really is the cause of problems like low profit margin).
• Follow by “It’s a problem because…” (what, why where and how it is a problem)
• End with “Not addressing this problem would …” ( the consequences of negligence)
2. SWOT Analysis:
Use the SWOT matrix to present a summary of your internal and external assessments, and your
alternative solutions to the problem. Interpret the results of your analysis, precisely and concisely.
Specifically:
o Use both qualitative and quantitative data to produce a SWOT analysis
 Identify 6+ major Strengths in the internal environment
 Identify 6+ major Weaknesses in the internal environment
 Identify 6+ major Opportunities in the external environment
 Identify 6+ major Threats in the external environment
 Generate 6+ alternatives
3. Alternative solutions and decision:
Use the QSPM to select the most attractive of your top 3 alternative solutions. Discuss why it is
better than the other solutions, precisely and concisely.
4. Implementation:
o Produce a 3-year plan to implement the selected strategy, by specifying:
 Which group(s) of stakeholders will be affected by your choice of strategy?
 What stakeholder resistance do you anticipate?
 What would a step-by-step implementation plan look like for your strategy, with the
stakeholder resistance considered?
NOTE: The slides on how to build and use a SWOT and QSPM can be found on the BUS489 home page
on Canvas. The instructions are also included in the template.
2
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
All News ›
Boeing Reports Third-Quarter Results
Oct 27, 2021
CHICAGO, Oct. 27, 2021 /PRNewswire/ -Continued progress on global safe return to service of 737 MAX and focus on operational stability
Revenue of $15.3 billion, GAAP loss per share of ($0.19) and core (non-GAAP)* loss per share of ($0.60)
Operating cash flow of ($0.3) billion; cash and marketable securities of $20.0 billion
Commercial Airplanes backlog of $290 billion and added 93 net orders
Table 1. Summary Financial Results
Third Quarter
Nine Months
(Dollars in Millions, except per share data)
2021
2020
Change
2021
2020
Revenues
$15,278
$14,139
Earnings/(Loss) From Operations
$329
Operating Margin
Change
8%
$47,493
$42,854
11%
($401)
NM
$1,269
($4,718)
NM
2.2%
(2.8)%
NM
2.7%
(11.0)%
NM
Net Loss
($132)
($466)
NM
($126)
($3,502)
NM
Loss Per Share
($0.19)
($0.79)
NM
($0.10)
($6.10)
NM
Operating Cash Flow
($262)
($4,819)
NM
($4,132)
($14,401)
NM
Core Operating Earnings/(Loss)
$59
($754)
NM
$461
($5,773)
NM
Core Operating Margin
0.4%
(5.3)%
NM
1.0%
(13.5)%
NM
($0.60)
($1.39)
NM
($1.72)
($7.88)
NM
GAAP
Non-GAAP*
Core Loss Per Share
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”
The Boeing Company [NYSE: BA] reported third-quarter revenue of $15.3 billion, driven by higher commercial airplanes and services volume. GAAP loss per share of
($0.19) and core loss per share (non-GAAP)* of ($0.60) primarily reflects higher commercial volume (Table 1). Boeing recorded operating cash flow of ($0.3) billion.
“We are driving stability across our operations, investing in our future and positioning our teams to deliver for our customers as the market recovers,” said Boeing
President and Chief Executive Officer David Calhoun. “Commercial market demand continues to gain traction with broad-based vaccine distribution and border
protocols beginning to open. Going forward, supply chain capacity and global trade will be key drivers of our industry and the broader economy’s recovery. Our
portfolio across commercial, defense, space and services is well positioned, and we’re focused on improving performance, while advancing technologies and digital
manufacturing capabilities to drive our next generation of products and a sustainable future.”
Table 2. Cash Flow
(Millions)
Third Quarter
2021
Operating Cash Flow
Less Additions to Property, Plant & Equipment
Free Cash Flow*
Nine Months
2020
2021
2020
($262)
($4,819)
($4,132)
($14,401)
($245)
($262)
($758)
($1,038)
($507)
($5,081)
($4,890)
($15,439)
*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”
Operating cash flow improved to ($0.3) billion in the quarter, reflecting higher commercial deliveries, higher order receipts, and lower expenditures (Table 2). Operating
cash flow was also favorably impacted by a $1.3 billion income tax refund in the quarter.
Table 3. Cash, Marketable Securities and Debt Balances
(Billions)
Quarter-End
Q3 21
Q2 21
Cash
$9.8
$8.2
Marketable Securities 1
$10.2
$13.1
$20.0
$21.3
The Boeing Company, net of intercompany loans to BCC
$60.9
$62.1
Boeing Capital, including intercompany loans
$1.5
$1.5
$62.4
$63.6
Total
Debt Balances:
Total Consolidated Debt
1 Marketable securities consists primarily of time deposits due within one year classified as “short-term investments.”
Cash and investments in marketable securities decreased to $20.0 billion, compared to $21.3 billion at the beginning of the quarter, primarily driven by debt
repayment and operating cash outflows (Table 3). Debt was $62.4 billion, down from $63.6 billion at the beginning of the quarter due to the repayment of maturing
debt.
https://investors.boeing.com/investors/investor-news/press-release-details/2021/Boeing-Reports-Third-Quarter-Results/default.aspx
1/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
Total company backlog at quarter-end was $367 billion.
Segment Results
Commercial Airplanes
Table 4. Commercial Airplanes
Third Quarter
(Dollars in Millions)
2021
Commercial Airplanes Deliveries
Nine Months
2020
Change
2021
2020
Change
85
28
204%
241
98
146%
Revenues
$4,459
$3,596
24%
$14,743
$11,434
29%
Loss from Operations
($693)
($1,369)
NM
($2,021)
($6,199)
NM
Operating Margin
(15.5)%
(38.1)%
NM
(13.7)%
(54.2)%
NM
Commercial Airplanes third-quarter revenue increased to $4.5 billion primarily driven by higher 737 deliveries, partially offset by lower 787 deliveries. Third-quarter
operating margin improved to (15.5) percent primarily due to higher deliveries (Table 4).
Boeing is continuing to make progress on the global safe return to service of the 737 MAX. Since the FAA’s approval to return the 737 MAX to operations in
November 2020, Boeing has delivered more than 195 737 MAX aircraft and airlines have returned more than 200 previously grounded airplanes to service. 31 airlines
are now operating the 737 MAX, safely flying over 206,000 revenue flights totaling more than 500,000 flight hours (as of October 24, 2021). The 737 program is
currently producing at a rate of 19 per month and continues to progress towards a production rate of 31 per month in early 2022, and the company is evaluating the
timing of further rate increases.
The company continues to focus 787 production resources on conducting inspections and rework and continues to engage in detailed discussions with the FAA
regarding required actions for resuming delivery. The current 787 production rate is approximately two airplanes per month. The company expects to continue at this
rate until deliveries resume and then return to five per month over time. The low production rates and rework are expected to result in approximately $1 billion of
abnormal costs, of which $183 million was recorded in the quarter.
Commercial Airplanes secured orders for 70 737 MAX, 24 freighter, and 12 787 airplanes. Commercial Airplanes delivered 85 airplanes during the quarter and
backlog included over 4,100 airplanes valued at $290 billion.
Defense, Space & Security
Table 5. Defense, Space & Security
Third Quarter
(Dollars in Millions)
2021
Revenues
Nine Months
2020
Change
2021
2020
Change
$6,617
$6,848
(3)%
$20,678
$19,478
6%
Earnings from Operations
$436
$628
(31)%
$1,799
$1,037
73%
Operating Margin
6.6%
9.2%
(28)%
8.7%
5.3%
64%
Defense, Space & Security third-quarter revenue decreased to $6.6 billion and third-quarter operating margin decreased to 6.6 percent, primarily due to a $185
million earnings charge on the Commercial Crew program driven by the second uncrewed Orbital Flight Test now anticipated in 2022 and the latest assessment of
remaining work.
During the quarter, Defense, Space & Security secured awards for five P-8A Poseidon aircraft for the German Navy and four CH-47F Block II Chinook helicopters for
the U.S Army, as well as a Joint Direct Attack Munition contract for the U.S. Air Force. Defense, Space & Security also conducted the MQ-25 unmanned aerial
refueling of a U.S. Navy E-2D and F-35C, and delivered a total of 37 aircraft during the quarter, including the first CH-47F Chinook to the Royal Australian Army.
Backlog at Defense, Space & Security was $58 billion, of which 33 percent represents orders from customers outside the U.S.
Global Services
Table 6. Global Services
(Dollars in Millions)
Revenues
Third Quarter
2021
Nine Months
2020
Change
2021
2020
Change
$4,221
$3,694
14%
$12,037
$11,810
2%
Earnings from Operations
$644
$271
138%
$1,616
$307
426%
Operating Margin
15.3%
7.3%
110%
2.6%
415%
13.4%
Global Services third-quarter revenue increased to $4.2 billion and third-quarter operating margin increased to 15.3 percent primarily driven by higher commercial
services volume. Operating margin was also favorably impacted by lower severance costs and mix of products and services.
During the quarter, Global Services captured orders for 12 additional 737-800 converted freighters for BBAM, an award for performance-based logistics support of
the global C-17 fleet, and a modification award for Chinook infra-red suppression systems for the U.K. Armed Forces. Global Services also announced a partnership
to expand capacity for 767-300 Boeing Converted Freighters and was selected to provide training to the United Aviate Academy.
Additional Financial Information
Table 7. Additional Financial Information
(Dollars in Millions)
Third Quarter
2021
Nine Months
2020
2021
2020
Revenues
Boeing Capital
$71
$71
$209
$205
Unallocated items, eliminations and other
($90)
($70)
($174)
($73)
Boeing Capital
$42
$30
$99
$47
FAS/CAS service cost adjustment
$270
$353
$808
$1,055
Other unallocated items and eliminations
($370)
($314)
($1,032)
($965)
$30
$119
$419
$325
Interest and debt expense
($669)
($643)
($2,021)
($1,458)
Effective tax rate
57.4%
49.6%
62.2%
40.1%
Earnings/(Loss) from Operations
Other income, net
https://investors.boeing.com/investors/investor-news/press-release-details/2021/Boeing-Reports-Third-Quarter-Results/default.aspx
2/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
At quarter-end, Boeing Capital’s net portfolio balance was $1.8 billion. The earnings from FAS/CAS service cost adjustment primarily reflects an increase in the CAS
discount rate driven by pension relief provisions in the American Rescue Plan Act of 2021. Interest and debt expense increased due to higher debt balances. The
change in other income was driven by a pension settlement charge recorded during the quarter. The third quarter 2021 effective tax rate primarily reflects a lower pretax loss compared to the prior period, as well as benefits from R&D tax credits.
Non-GAAP Measures Disclosures
We supplement the reporting of our financial information determined under Generally Accepted Accounting Principles in the United States of America (GAAP) with
certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are
unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company’s
ongoing business performance. 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. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely
on any single financial measure. The following definitions are provided:
Core Operating Earnings, Core Operating Margin and Core Earnings Per Share
Core operating earnings is defined as GAAP earnings from operations excluding the FAS/CAS service cost adjustment. 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 operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is
defined as GAAP diluted earnings per share excluding the net earnings per share impact of the FAS/CAS service cost adjustment and Non-operating pension and
postretirement expenses. Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost.
Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to Commercial Airplanes and BGS businesses
supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S.
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.
Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business
performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude non-service
pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation
between the GAAP and non-GAAP measures is provided on pages 13-14.
Free Cash Flow
Free cash flow is GAAP operating cash flow reduced by capital expenditures for property, plant and equipment. Management believes free cash flow provides
investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to
support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures
as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business
performance and overall liquidity. Table 2 provides a reconciliation of free cash flow to GAAP operating cash flow.
Caution Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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. 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. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among
these factors are risks related to: (1) the COVID-19 pandemic and related industry impacts, including with respect to our operations, our liquidity, the health of our
customers and suppliers, and future demand for our products and services; (2) the 737 MAX, including the timing and conditions of remaining 737 MAX regulatory
approvals, lower than planned production rates and/or delivery rates, and increased considerations to customers and suppliers; (3) general conditions in the
economy and our industry, including those due to regulatory changes; (4) our reliance on our commercial airline customers; (5) the overall health of our aircraft
production system, planned commercial aircraft production rate changes, our commercial development and derivative aircraft programs, and our aircraft being
subject to stringent performance and reliability standards; (6) changing budget and appropriation levels and acquisition priorities of the U.S. government; (7) our
dependence on U.S. government contracts; (8) our reliance on fixed-price contracts; (9) our reliance on cost-type contracts; (10) uncertainties concerning contracts
that include in-orbit incentive payments; (11) our dependence on our subcontractors and suppliers, as well as the availability of raw materials; (12) changes in
accounting estimates; (13) changes in the competitive landscape in our markets; (14) our non-U.S. operations, including sales to non-U.S. customers; (15) threats to
the security of our or our customers’ information; (16) potential adverse developments in new or pending litigation and/or government investigations; (17) customer
and aircraft concentration in our customer financing portfolio; (18) changes in our ability to obtain debt financing on commercially reasonable terms and at
competitive rates; (19) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (20) the adequacy of our insurance
coverage to cover significant risk exposures; (21) potential business disruptions, including those related to physical security threats, information technology or cyberattacks, epidemics, sanctions or natural disasters; (22) work stoppages or other labor disruptions; (23) substantial pension and other postretirement benefit
obligations; and (24) potential environmental liabilities.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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.
Contact:
Investor Relations:
Matt Welch or Keely Moos (312) 544-2140
Communications:
Michael Friedman media@boeing.com
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Nine months ended
Three months ended
September 30
September 30
2021
2020
2021
2020
Sales of products
$39,224
$34,656
$12,552
$11,402
Sales of services
8,269
8,198
2,726
2,737
(Dollars in millions, except per share data)
https://investors.boeing.com/investors/investor-news/press-release-details/2021/Boeing-Reports-Third-Quarter-Results/default.aspx
3/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
Total revenues
47,493
42,854
15,278
14,139
Cost of products
(35,166)
(36,001)
(11,271)
(10,910)
Cost of services
(6,771)
(6,817)
(2,288)
(2,185)
(25)
(33)
(7)
(10)
(41,962)
(42,851)
(13,566)
(13,105)
5,531
3
1,712
1,034
195
(61)
120
(14)
General and administrative expense
(3,169)
(2,989)
(1,097)
(955)
Research and development expense, net
(1,571)
(1,871)
(575)
(574)
283
200
169
108
1,269
(4,718)
329
(401)
419
325
30
119
Interest and debt expense
(2,021)
(1,458)
(669)
(643)
Loss before income taxes
(333)
(5,851)
(310)
(925)
Income tax benefit
207
2,349
178
459
Net loss
(126)
(3,502)
(132)
(466)
Less: net loss attributable to noncontrolling interest
(67)
(49)
(23)
(17)
Net loss attributable to Boeing Shareholders
($59)
($3,453)
($109)
($449)
Basic loss per share
($0.10)
($6.10)
($0.19)
($0.79)
Diluted loss per share
($0.10)
($6.10)
($0.19)
($0.79)
Weighted average diluted shares (millions)
587.3
566.3
589.0
566.6
September 30
December 31
2021
2020
Cash and cash equivalents
$9,764
$7,752
Short-term and other investments
10,231
17,838
Accounts receivable, net
2,247
1,955
Unbilled receivables, net
10,009
7,995
76
101
Inventories
81,897
81,715
Other current assets, net
2,664
4,286
116,888
121,642
Customer financing, net
1,795
1,936
Property, plant and equipment, net of accumulated depreciation of $20,442 and $20,507
11,113
11,820
Goodwill
8,070
8,081
Acquired intangible assets, net
2,631
2,843
Deferred income taxes
74
86
Investments
963
1,016
5,312
4,712
$146,846
$152,136
Accounts payable
$10,151
$12,928
Accrued liabilities
18,974
22,171
Advances and progress billings
51,269
50,488
Short-term debt and current portion of long-term debt
5,377
1,693
85,771
87,280
Deferred income taxes
1,185
1,010
Accrued retiree health care
3,957
4,137
Accrued pension plan liability, net
11,435
14,408
Other long-term liabilities
1,722
1,486
Long-term debt
57,042
61,890
161,112
170,211
Common stock, par value $5.00 – 1,200,000,000 shares authorized; 1,012,261,159 shares issued
5,061
5,061
Additional paid-in capital
8,796
7,787
Boeing Capital interest expense
Total costs and expenses
Income/(loss) from operating investments, net
Gain on dispositions, net
Earnings/(loss) from operations
Other income, net
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
(Dollars in millions, except per share data)
Assets
Current portion of customer financing, net
Total current assets
Other assets, net of accumulated amortization of of $916 and $729
Total assets
Liabilities and equity
Total current liabilities
Total liabilities
Shareholders’ equity:
https://investors.boeing.com/investors/investor-news/press-release-details/2021/Boeing-Reports-Third-Quarter-Results/default.aspx
4/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
Treasury stock, at cost – 424,789,354 and 429,941,021 shares
(52,030)
(52,641)
Retained earnings
38,551
38,610
Accumulated other comprehensive loss
(14,818)
(17,133)
(14,440)
(18,316)
174
241
(14,266)
(18,075)
$146,846
$152,136
Total shareholders’ deficit
Noncontrolling interests
Total equity
Total liabilities and equity
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30
2021
2020
($126)
($3,502)
Share-based plans expense
677
165
Treasury shares issued for 401(k) contribution
951
(Dollars in millions)
Cash flows – operating activities:
Net loss
Adjustments to reconcile net loss to net cash used by operating activities:
Non-cash items –
1,610
1,668
Investment/asset impairment charges, net
72
317
Customer financing valuation adjustments
(3)
12
Gain on dispositions, net
(283)
(200)
Other charges and credits, net
(82)
912
Accounts receivable
(280)
125
Unbilled receivables
(2,010)
56
Advances and progress billings
781
428
Inventories
508
(9,653)
Other current assets
279
319
Accounts payable
(3,565)
(3,303)
Accrued liabilities
(3,168)
967
Income taxes receivable, payable and deferred
1,011
(2,404)
Other long-term liabilities
(168)
(149)
Pension and other postretirement plans
(731)
(556)
Customer financing, net
170
108
Other
225
289
(4,132)
(14,401)
Property, plant and equipment additions
(758)
(1,038)
Property, plant and equipment reductions
385
275
Depreciation and amortization
Changes in assets and liabilities –
Net cash used by operating activities
Cash flows – investing activities:
(6)
Acquisitions, net of cash acquired
Contributions to investments
(27,902)
(25,846)
Proceeds from investments
35,664
9,772
6
14
7,389
(16,823)
New borrowings
9,822
42,362
Debt repayments
(11,049)
(8,792)
Stock options exercised
36
31
Employee taxes on certain share-based payment arrangements
(47)
(169)
Other
Net cash provided/(used) by investing activities
Cash flows – financing activities:
Dividends paid
(1,158)
Net cash (used)/provided by financing activities
(1,238)
32,274
(34)
26
Net increase in cash & cash equivalents, including restricted
1,985
1,076
Cash & cash equivalents, including restricted, at beginning of year
7,835
9,571
Cash & cash equivalents, including restricted, at end of period
9,820
10,647
Less restricted cash & cash equivalents, included in Investments
56
83
$9,764
$10,564
Effect of exchange rate changes on cash and cash equivalents, including restricted
Cash and cash equivalents at end of period
The Boeing Company and Subsidiaries
Summary of Business Segment Data
https://investors.boeing.com/investors/investor-news/press-release-details/2021/Boeing-Reports-Third-Quarter-Results/default.aspx
5/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
(Unaudited)
Nine months ended
Three months ended
September 30
September 30
2021
2020
2021
2020
Commercial Airplanes
$14,743
$11,434
$4,459
$3,596
Defense, Space & Security
20,678
19,478
6,617
6,848
Global Services
12,037
11,810
4,221
3,694
Boeing Capital
209
205
71
71
Unallocated items, eliminations and other
(174)
(73)
(90)
(70)
$47,493
$42,854
$15,278
$14,139
($2,021)
($6,199)
($693)
($1,369)
Defense, Space & Security
1,799
1,037
436
628
Global Services
1,616
307
644
271
Boeing Capital
99
47
42
30
Segment operating earnings/(loss)
1,493
(4,808)
429
(440)
Unallocated items, eliminations and other
(1,032)
(965)
(370)
(314)
FAS/CAS service cost adjustment
808
1,055
270
353
Earnings/(loss) from operations
1,269
(4,718)
329
(401)
419
325
30
119
Interest and debt expense
(2,021)
(1,458)
(669)
(643)
Loss before income taxes
(333)
(5,851)
(310)
(925)
Income tax benefit
207
2,349
178
459
Net loss
(126)
(3,502)
(132)
(466)
Less: Net loss attributable to noncontrolling interest
(67)
(49)
(23)
(17)
Net loss attributable to Boeing Shareholders
($59)
($3,453)
($109)
($449)
Commercial Airplanes
$817
$1,107
$293
$321
Defense, Space & Security
530
494
193
164
Global Services
80
110
30
45
Other
144
160
59
44
$1,571
$1,871
$575
$574
($171)
($80)
($29)
($37)
Deferred compensation
(86)
34
8
(39)
Amortization of previously capitalized interest
(66)
(69)
(22)
(19)
Research and development expense, net
(144)
(160)
(59)
(44)
Eliminations and other unallocated items
(565)
(690)
(268)
(175)
Sub-total (included in core operating loss)
(1,032)
(965)
(370)
(314)
Pension FAS/CAS service cost adjustment
576
773
192
260
Postretirement FAS/CAS service cost adjustment
232
282
78
93
FAS/CAS service cost adjustment
808
1,055
$270
$353
($224)
$90
($100)
$39
(Dollars in millions)
Revenues:
Total revenues
Earnings/(loss) from operations:
Commercial Airplanes
Other income, net
Research and development expense, net:
Total research and development expense, net
Unallocated items, eliminations and other:
Share-based plans
Total
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries
Nine months ended
Three months ended
September 30
September 30
2021
2020
2021
2020
737
179
12
66
3
747
4
2
2
1
767
24
20
11
6
777
20
15
6
5
787
14
49
—
13
Total
241
98
85
28
AH-64 Apache (New)
19
18
4
7
AH-64 Apache (Remanufactured)
42
44
11
12
Commercial Airplanes
Defense, Space & Security
https://investors.boeing.com/investors/investor-news/press-release-details/2021/Boeing-Reports-Third-Quarter-Results/default.aspx
6/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
CH-47 Chinook (New)
12
19
6
4
CH-47 Chinook (Renewed)
5
3
1
2
F-15 Models
11
3
3
—
F/A-18 Models
15
14
4
5
KC-46A Tanker
7
10
3
4
P-8 Models
11
9
5
3
September 30
December 31
2021
2020
$289,644
$281,588
Defense, Space & Security
58,435
60,847
Global Services
18,781
20,632
248
337
Total backlog
$367,108
$363,404
Contractual backlog
$348,193
$339,309
Unobligated backlog
18,915
24,095
$367,108
$363,404
Total backlog (Dollars in millions)
Commercial Airplanes
Unallocated items, eliminations and other
Total backlog
The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
(Unaudited)
The tables provided below reconcile the non-GAAP financial measures core operating earnings/(loss), core operating margin, and core loss per share with the most
directly comparable GAAP financial measures, earnings/(loss) from operations, operating margin, and diluted loss per share. See page 6 of this release for additional
information on the use of these non-GAAP financial measures.
Third Quarter 2021
(Dollars in millions, except per share data)
$ millions
Revenues
Third Quarter 2020
Per Share
$ millions
Per Share
15,278
14,139
Earnings/(loss) from operations (GAAP)
329
(401)
Operating margin (GAAP)
2.2%
(2.8)%
Pension FAS/CAS service cost adjustment
(192)
(260)
Postretirement FAS/CAS service cost adjustment
(78)
(93)
FAS/CAS service cost adjustment
(270)
(353)
Core operating earnings/(loss) (non-GAAP)
$59
($754)
Core operating margin (non-GAAP)
0.4%
(5.3)%
FAS/CAS service cost adjustment:
Diluted loss per share (GAAP)
($0.19)
($0.79)
($192)
(0.33)
($260)
(0.46)
Postretirement FAS/CAS service cost adjustment
(78)
(0.13)
(93)
(0.16)
Non-operating pension expense
(29)
(0.05)
(84)
(0.16)
Non-operating postretirement expense
(6)
(0.01)
10
0.02
Provision for deferred income taxes on adjustments 1
64
0.11
90
0.16
($241)
($0.41)
($337)
($0.60)
Pension FAS/CAS service cost adjustment
Subtotal of adjustments
Core loss per share (non-GAAP)
($0.60)
($1.39)
Weighted average diluted shares (in millions)
589.0
566.6
1 The income tax impact is calculated using the U.S. corporate statutory tax rate .
The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
(Unaudited)
The tables provided below reconcile the non-GAAP financial measures core operating earnings/(loss), core operating margin, and core loss per share with the most
directly comparable GAAP financial measures, earnings/(loss) from operations, operating margin, and diluted loss per share. See page 6 of this release for additional
information on the use of these non-GAAP financial measures.
Nine Months 2021
(Dollars in millions, except per share data)
$ millions
Per Share
Nine months 2020
$ millions
Revenues
47,493
42,854
Earnings/(loss) from operations (GAAP)
1,269
(4,718)
Operating margin (GAAP)
2.7%
(11.0)%
Pension FAS/CAS service cost adjustment
(576)
(773)
Postretirement FAS/CAS service cost adjustment
(232)
(282)
FAS/CAS service cost adjustment
(808)
(1,055)
Per Share
FAS/CAS service cost adjustment:
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7/8
11/11/21, 4:07 PM
Boeing Company – Boeing Reports Third-Quarter Results
Core operating earnings/(loss) (non-GAAP)
$461
Core operating margin (non-GAAP)
1.0%
Diluted loss per share (GAAP)
($5,773)
(13.5)%
($0.10)
($6.10)
Pension FAS/CAS service cost adjustment
($576)
(0.98)
($773)
(1.36)
Postretirement FAS/CAS service cost adjustment
(232)
(0.40)
(282)
(0.50)
Non-operating pension expense
(381)
(0.64)
(255)
(0.46)
Non-operating postretirement expense
(16)
(0.03)
37
0.07
Provision for deferred income taxes on adjustments 1
253
0.43
267
0.47
($952)
($1.62)
($1,006)
($1.78)
Subtotal of adjustments
Core loss per share (non-GAAP)
($1.72)
($7.88)
Weighted average diluted shares (in millions)
587.3
566.3
1 The income tax impact is calculated using the U.S. corporate statutory tax rate .
View original content:https://www.prnewswire.com/news-releases/boeing-reports-third-quarter-results-301409676.html
SOURCE Boeing
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11/11/21, 2:31 PM
Boeing Company – Investors – Fact Sheets
Commercial Airplanes Fact Sheet
As of September 30, 2021
Aircraft
Production Rate
Future Changes
Backlog
Key Facts / Dates
3,334
airplanes
• Over 10,000 737 produced, the first commercial
jet to reach this milestone
• The 737 MAX has an 8% lower operating cost
than its main competitor
• Captured over 5,000 gross orders for 737 MAX
since launch
• First delivery of the 737 MAX 8 in May 2017
• First delivery of the 737 MAX 9 in March 2018
• Completed flight testing of the 737 MAX 7 in
4Q19
• 737 MAX began receiving regulatory approval to
resume operations and restarted deliveries in
4Q20
• Captured order for 75 737 aircraft from Ryanair in
4Q20
• Secured orders for 100 737 aircraft from
Southwest Airlines, 25 737 aircraft from United
Airlines, and 23 737 aircraft from Alaska Airlines
in 1Q21
• Completed 737 MAX 10 first flight in 2Q21
• Secured orders for 200 737 aircraft for United
Airlines and 34 737 aircraft for Southwest Airlines
in 2Q21
9 airplanes
• 747-8 selected as next U.S. Presidential Aircraft
• Secured order for four 747 freighter aircraft from
Atlas Air in 1Q21
• 747 production will end in 2022
97
airplanes
• FedEx announced order in 2Q19 for 6 767
Freighters; additional order for 4 units in the first
half of 2020
• Potential market of up to 400 tanker aircraft
worth $80 billion
57
airplanes
• Over 75 customers
• Captured order for eight 777 freighters from DHL
in 4Q20
• Captured orders for 23 777 freighters in 3Q21
253
airplanes
• Largest product launch in commercial jetliner
history
• New engines and composite wings (built in the
Composite Wing Center); existing 777 fuselage
• In 1Q19, British Airways parent IAG committed to
up to 42 777X aircraft, including 18 firm aircraft
plus 24 options
• Began flight testing in 1Q20; final flight test
airplane added to test program in 3Q20
• GE9X engine achieved FAA certification in 3Q20
• First delivery expected in late 2023
737
19 / mo
– Gradual increase to
31/mo in early 2022,
with further gradual
increases based on
market demand and
supply chain capacity
Learn more
747
0.5 / mo

Learn more
767
3 / mo

Learn more
777
Learn more
777X
Learn more
https://investors.boeing.com/investors/fact-sheets/default.aspx
2/mo
(777 and 777X
combined)
1/3
11/11/21, 2:31 PM
Boeing Company – Investors – Fact Sheets
Aircraft
Production Rate
Future Changes
Backlog
Key Facts / Dates
413
airplanes
• Fleet passed 2.7M passenger flights as of 3Q21;
fastest twin aisle in history to fly over one million
passenger flights
• Over 300 new non-stop markets planned or
already connected by the 787
• First delivery of the 787-10 in March 2018
• Captured approximately 1,500 orders since
launch
• 1000th 787 produced at Boeing South Carolina
in 1Q20
• 787 final assembly consolidated to Boeing
South Carolina in March 2021
787
Currently at rate 2 /
mo
Return to 5 / mo
over time
Learn more
See More Boeing Products
Commercial
Defense, Space & Security Fact Sheet
As of September 30, 2021
Segments
BDS
Key Facts
• Received contract for two KC-46 Tanker aircraft for Japan in 4Q20
• Awarded contract for AEW&C upgrades for the Republic of Korea Air Force in 4Q20
• Achieved MQ-25 unmanned aircraft first flight with aerial refueling store in 4Q20
• Completed engineering design review for Wideband Global SATCOM 11+ communications satellite in 4Q20
• Demonstrated ski-jump launch capability of F/A-18 Super Hornet for Indian Navy in 4Q20
• Completed critical design review of Space Launch System Exploration Upper Stage for NASA in 4Q20
• Awarded Lots 6 and 7 contracts for 27 KC-46A Tanker aircraft for the U.S. Air Force in 1Q21
• Received contract for 11 P-8A Poseidon aircraft for the U.S. Navy and the Royal Australian Air Force in 1Q21
• Awarded contracts for six Bell Boeing V-22 Osprey rotorcraft for the U.S. Navy and the U.S. Air Force in 1Q21
• Completed first flight and delivery of the F-15EX for the U.S. Air Force in 1Q21
• Successfully conducted the Space Launch System Green Run hot fire test in 1Q21
• Began production of the T-7A Red Hawk Advanced Trainer in 1Q21
• Conducted first flight of the uncrewed Loyal Wingman aircraft for the Royal Australian Air Force in 1Q21
• Completed first flight of the Japan KC-46 Tanker aircraft in 1Q21
• Awarded contract for 14 H-47 ER Chinook helicopters for the U.K. Royal Air Force in 2Q21
• Signed an agreement with the German Ministry of Defense for five P-8A Poseidon aircraft in 2Q21
• Conducted first MQ-25 unmanned aerial refueling of a F/A-18 Super Hornet in 2Q21
• Joined T-7A Red Hawk front and aft sections in under 30 minutes enabled by digital design in 2Q21
• First Core Stage for NASA’s Space Launch System began stacking with other Artemis I elements in 2Q21
• Awarded contract for 5 P-8A Poseidon aircraft for Germany in 3Q21
• Received Joint Direct Attack Munition contract with U.S. Air Force in 3Q21
• Awarded contract for 4 CH-47F Block II Chinook helicopters to the U.S. Army in 3Q21
• MQ-25 unmanned aerial tanker refueled U.S. Navy E-2D and F-35C in 3Q21
• Delivered 37 aircraft, including 1st CH-47F Chinook to Australia in 3Q21
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Defense
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11/11/21, 2:31 PM
Boeing Company – Investors – Fact Sheets
Global Services Fact Sheet
As of September 30, 2021
Segments
BGS
Key Facts
• Awarded Performance Based Logistics contract for Singapore Air Force F-15SG fleet in 4Q20
• Secured F-15 spares and logistics support contract for Qatar Emiri Air Force in 4Q20
• Announced 10-year digital services agreement with Frontier Airlines in 4Q20
• Selected to provide P-8A training for Royal New Zealand Air Force in 4Q20
• Captured order for 6 737-800 Boeing Converted Freighters for BBAM in 4Q20
• Awarded ground support equipment and logistics contract for the Royal Moroccan Air Force in 1Q21
• Received contract for F/A-18 and AV-8B avionics equipment repair for the U.S. Navy in 1Q21
• Delivered the 50th 737-800 Boeing Converted Freighter in 1Q21
• Inducted the EA-18G Growler for the U.S. Navy Modification Program in 1Q21
• Signed an expanded parts agreement with Turkish Technic in 2Q21
• Announced a partnership to expand capacity for 737-800 Boeing Converted Freighters in 2Q21
• Selected to provide P-8A training and sustainment as well as C-17 training to the U.K. Royal Air Force in 2Q21
• Awarded a modification for KC-46A interim contract support for the U.S. Air Force in 2Q21
• Announced partnership to expand capacity for 767 converted freighters in 3Q21
• Captured order for 12 additional 737-800 converted freighters for BBAM in 3Q21
• Awarded Performance Based Logistics contract for global C-17 fleet in 3Q21
• Secured Chinook infra-red suppression systems modification award for U.K. Armed Forces in 3Q21
• Selected to provide training to United Aviate Academy in 3Q21
See More Boeing Products
Services
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Boeing
ANALYSIS for NYSE : BA
OCTOBER 29, 2021
— CORPORATE SNAPSHOT —
Boeing is one of the two major manufacturers of 100+ seat aircraft for the global commercial airplane
industry. Theother major airplane maker in this category is Airbus. Boeing designs, develops,
manufactures, sells, and services commercial jetliners such as the single-aisle 737, and twin-aisle 777,
787, and 747.
Apart from commercial aviation, Boeing has a defense contracting business. The company is the secondlargestdefense contractor of the U.S. government after Lockheed Martin.
To promote sales of its commercial airplanes, Boeing offers leasing solutions to airlines through its
BoeingCapital Corporation (BCC) segment.
— WHAT HAS CHANGED? —
With the travel & tourism industry observing a downtrend due to the fears of another infectious wave,
Boeing is likely to observe a slow near-term demand for its aircraft. Moreover, the company is yet to
ramp-up the production of MAX aircraft later this year – a key factor weighing on the top line.
Per Q3 filings, Boeing is expecting to increase MAX’s production from 19 per month at present to 31 per
monthby early-2022. However, the stock is a good pick for long-term gains as new aircraft orders by
United Airlines and Southwest Airlines indicate strong air traffic demand in the coming years.
With the lifting of the FAA’s ban on MAX aircraft, Boeing has been making requisite changes in its
grounded fleet. The company has a 400+ aircraft inventory and is likely to ramp up the 737 MAX
production during the latterhalf of the year.
While multiple coronavirus strains remain a near-term concern for the travel industry, Boeing’s low
productionnumbers and declining inventory levels are likely to ease its heavy balance sheet.
For 2021, the company expects a stable demand for its defense and space divisions. However, vaccination
progresswill impact the commercial segment’s results in the medium-term.
TREFIS ANALYSIS for BOEING
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— VALUATION HIGHLIGHTS —
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Commercial Airplanes constitute 46% of the Trefis price estimate for Boeing’s stock.
Defense, Space & Security Systems constitute 30% of the Trefis price estimate for Boeing’s stock.
Global Services constitute 23% of the Trefis price estimate for Boeing’s stock.
TREFIS ANALYSIS for BOEING
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Our share price estimate and the overall company value is derived by summing-up the values of
individual divisions/businesses in a sum-of-the-parts analysis. The value of each division is calculated
using a discounted cashflow (DCF) methodology.
We forecast fundamental drivers like pricing, market share, and profit margins for different businesses
in estimating the division’s value within the DCF framework. The analysis below primarily focuses on
those importantforecasts that drive our share price and value estimate.
TREFIS ANALYSIS for BOEING
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— POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE —
Below are the key drivers of Boeing’s value that present opportunities for upside or downside:
Commercial Airplanes EBITDA margin stood at 17.4% in 2018. We expect the division’s margins to
decrease marginally (to 13%) over the Trefis forecast, due to the decrease in the production of the 737. If
margins remain aroundthe current level over our forecast period (the stiff price competition from Airbus
and development or delivery delays of 737-MAX might restrict the increase in EBITDA margin), then
there could be a potential downside of about 8% toTrefis price estimate for Boeing’s stock.
Boeing commercial aircraft deliveries represented about 31.4% of global commercial aircraft deliveries
in 2008. This figure rose to 37%-38% during 2009-11 and further to 43.7% in 2018 driven by production
rate hikes of the 737, 777, and 787. Going forward, we expect Boeing’s share of the global commercial
airplane market to increase to about 46% by the end of the Trefis forecast period. If however, due to
increased competition from regional jet makers Bombardier and Embraer, and entry of new players such
as China’s Comac, Russia’s Irkut and Mitsubishi’s Regional Jet, Boeing’s market share remains at the
current levels, then there could be a potential downside of around 15% to Trefis price estimate for
Boeing’s stock.
— SOURCES OF VALUE —
The commercial airplanes division is the largest contributor to Boeing’s total value. The key factors
responsible for thisare:
Established position as one of the two largest aircraft manufacturers
Aircraft manufacturing requires significant upfront capital and research and development expenditure.
Boeing hasmade these investments over the last several decades to establish itself as one of the largest
commercial aircraft manufacturers.
A large number of airlines in the world operate Boeing airplanes. These airlines have a long, established
relationship with Boeing as their airplane provider.
Other companies, including Embraer, Bombardier, Comac, Russian Irkut, or Mitsubishi that are looking
to play a larger role as a commercial airplane manufacturer, face enormous competition from both
Boeing and Airbus. In contrast, airlines have a working relationship with Boeing and Airbus for most of
their airplanes. This track record and existing relationships provide both Boeing and Airbus with a
significant competitive advantage over smaller andrelatively new airplane makers.
TREFIS ANALYSIS for BOEING
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— KEY TRENDS —
Aircraft demand is strongly tied to global economic growth
A decline in passenger and cargo traffic due to the global recession in 2009 adversely impacted
revenues/margins forcommercial airlines world over. This, in turn, affected aircraft demand. In recent
years, as the global economy has steadily grown, airlines have seen their profits rise. Higher profits, in
turn, have enabled airlines to place orders for new airplanes, growing results of airplane makers such as
Boeing.
However, in the recent few quarters, the weak economy has forced air carriers and governments to delay
or cancelorders for new aircraft, including the flagship 787 Dreamliner. This trend is likely to reverse
towards the end of the decade.
Expansion of low-cost airlines (LCC) is boosting growth in the single-aisle airplane segment
Low-cost airlines or carriers (LCC) are fast expanding around the world. They provide an alternative to
other modesof transportation, such as railways.
LCCs typically use single-aisle aircraft such as Boeing’s 737 and Airbus’ A320. The growth of LCCs is
primarily aconsequence of increased liberalization in the commercial aviation industry that has reduced
entry barriers for private players. This is especially true in the emerging countries of the Asia-Pacific
region, where liberalization driven by theAssociation of Southeast Asian Nations (ASEAN) has boosted
the growth of many LCCS. We expect regulatory hurdles in the commercial airline industry to continue
to decline the world over, paving for growth of LCCs. And the expansion of LCCs will boost demand for
single-aisle airplanes. The company estimates that there will be a demand for over 37,000 aircraft over
the next two decades.
Unionized workforce
Unions represent over 40% of Boeing’s total workforce. The company experienced a workforce stoppage
in 2008 due to the IAM (International Association of Machinists and Aerospace Workers) strike. Similar
stoppages in the future have the potential to significantly impact the business through delays in
production and the development of Boeing’sproducts and services.
Boeing’s defense business is highly dependent on the U.S. military spending
Boeing generates about 80% of its defense, space, and security (DSS) division revenues from the US
government through its various agencies such as the Department of Defense and NASA. Owing to this
high degree of dependenceon the U.S. government, Boeing is vulnerable to any cuts in the
government’s military spending.
TREFIS ANALYSIS for BOEING
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— THE BOEING COMPANY NET INCOME COMPARISON —
The Boeing Company (BA) Net Income And Margin History
Last Updated: 11/6/2021
Note: For The Boeing Company, 2020 refers to year ending Dec 31, 2020 | LTM = Last 12 months
What’s Notable?
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The figure for BA changed significantly in 2020 compared to the other years
BA has shown evidence of a downtrend which is unexpected in normal course of business
The trend in BA values apparently reversed downward in 2018
99% of S&P 500 companies have higher net income than BA
In year 2019 BA net income changed from positive to negative
TREFIS ANALYSIS for BOEING
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The Boeing Company (BA) Net Income Comparisons
Net Income vs. Net Margin – BA net margin has decreased from 5.4% to -14.3% in the last 6 years
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Net margin is defined as net income as % of revenue; A high or increasing net margin is
desirable.
TREFIS ANALYSIS for BOEING
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TREFIS ANALYSIS for BOEING
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— THE BOEING COMPANY VS INDUSTRY PEERS —
The Boeing Company vs Lockheed Martin
Last Updated On: 11/4/2021
Lockheed Martin is a global security and aerospace company principally engaged in the research,
design, development, manufacture, integration and sustainment of advanced technology systems,
products and services. It also provides a broad range of management, engineering, technical, scientific,
logistics, system integration and cybersecurity services. Per Q3 filings, the company expects lower
FY2022 revenues from a decline in government spending and impact of the pandemic. However, the
company has been returning cash to shareholders as dividends and share repurchases.
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BA Market Cap: $125 Bil | LMT Market Cap: $92 Bil
BA Revenue: $58 Bil | LMT Revenue: $65 Bil
BA Operating Income: $-13 Bil | LMT Operating Income: $8.6 Bil
SOURCES OF VALUE
CAPABLE MISSILE DEFENSE SYSTEMS: With the growing threat of attack from airborne missiles, missile
defense systems are in demand from governments of many countries including the U.S. Lockheed
possesses multiple, highly capable and efficient missile defense systems which include the Aegis, Patriot
Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD). Sales of these systems
will likely bring significant contracts and revenues to the company in the coming years.
CHIEF CONTRACTOR FOR THE F-35 PROGRAM: The F-35 is a multi-role combat aircraft being developed
by Lockheed Martin. The aircraft is part of the Joint Strike Fighter (JSF) program, intended to replace a
wide range of existing combat aircraft in the U.S., the U.K., Canada, and other countries. The F-35 is a
crucial program for Lockheed Martin and constituted around 22% of its top line in 2015. Over the
coming years, the program is expected to occupy an even larger share in the company’s top line, driven
by its planned production ramp-up. Overall, the U.S. government plans to purchase over 2,400 F-35s,
while international governments are expected to purchase another 600 F-35s. Looking ahead, as the
production of the F-35 rises in the coming years, this program will drive a significant portion of
Lockheed’s value.
KEY TRENDS
INCREASE IN FIXED PRICE CONTRACTS: With a 2009 directive by the Office of Management and Budget
(OMB) to further migrate from cost-based to fixed-price based contracts, we expect the company’s
divisions to be subjected to higher risk. This is because any cost overruns would directly impact margins
under a fixed-price contract (unlike a cost-reimbursement contract, where the contractor is paid for all
of its allowed expenses to a set limit plus additional payment to allow for a profit). This trend can
significantly impact Lockheed Martin’s EBITDA margins in future years.
HIGH RELIANCE ON THE U.S. GOVERNMENT: About 94% of Lockheed’s revenue comes from the U.S.
government through its agencies such as the Department of Defense, Homeland Security, and NASA. As
a result of this high reliance on government spending, Lockheed is highly vulnerable to spending cuts
TREFIS ANALYSIS for BOEING
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from the U.S. government. In 2011, the passage of the Budget Control Act required defense spending to
be slashed by around $500 billion over 2011-2021. These cuts forced the government to slash its
defense spending during 2011-2015 steadily. In turn, lower government defense spending decreased
overall contract volume for Lockheed. However, looking ahead, with fiscal deficit improving, the
government has begun to grow its defense spending. This recovery in U.S. defense spending will likely
help increase Lockheed’s contract volume and its top line in the coming years.
HIGH EMPHASIS ON CYBER SECURITY: With increasing sophistication and growth in cyber attacks in
recent years, IT security challenges are mounting for the U.S. government, which include cyber threats
from foreign nations and terrorist organizations as well as virus/malware intrusions. We expect this
trend to drive increased strengthening of the Federal IT infrastructure. This will likely maintain the
demand for information systems services. Lockheed is one of the key providers of cybersecurity
solutions.
TREFIS ANALYSIS for BOEING
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Notes:
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Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-onquarter
Revenue growth decision is made by giving more weightage to long-term revenue growth (3year average) and lesser weightage to quarterly growths
Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of
increase in last Q vs LTM and increase in last Q vs 3-FY average
TREFIS ANALYSIS for BOEING
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The Boeing Company vs Airbus
Source: Boeing.com, Airbus.com
Airbus is the largest aeronautics and space company in Europe, manufacturing and delivering aerospace
products, services and solutions to customers on a worldwide scale. The company operates in the
domains of commercial aircraft, helicopters, defense and space. The 2021 Q3 reports show:
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Barron’s 1 reported on 10-28-2021 that with solid earning, Airbus traded higher as the company
confirmed that it would deliver 600 jets in 2021. Airbus predicts “a full year operating profit of €4.5
billion with €2.5 billion free cash flow. Q3 operating profit, though down 19% to €666 million, came in
above analysts’ expectations of €620 million. Sales declined by 6% to €10.5 billion.” On 11-05-2021, the
Wall Street Journal 2 reported, however, that Airbus deliveries were slipping in October amid supply
chain struggles.
1
2
Briancon, P. (2021) Airbus Earnings Were Solid. The Stock Is Trading Higher. Barron’s
Katz, B. (2021) Airbus Deliveries Slip Amid Supply-Chain Struggles. WSJ
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WSJ BUSINESS
Airbus Deliveries Slip Amid Supply-Chain Struggles
Ramp-up in aircraft production adds to strain on suppliers
Airbus has grappled with on-time delivery of components and quality lapses as suppliers battle to rehire
staff let go during the pandemic.
By Benjamin Katz Nov. 5, 2021 6:37 am ET
Airbus aircraft deliveries dipped again in October as hiccups in its supply chain disrupted the
manufacturer’s ambitions to rapidly return to pre-pandemic production levels.
The European plane maker said Friday it had delivered 36 commercial aircraft last month, down from 40
in both September and August, and the lowest monthly tally since February. That leaves it needing to
hand over another 140 aircraft in the final two months of the year to meet its full-year target of 600
deliveries.
Airbus Chief Executive Guillaume Faury flagged at the company’s quarterly earnings last month that
snags in its supply chain would again have an impact in October as suppliers come out of a “15-month
hibernation.” Still, he said he didn’t expect the disruption to prevent the company from reaching its
annual goal. Mr. Faury also said some aircraft are ready to be delivered but haven’t yet been handed
over to customers.
Airbus has struggled with on-time delivery of components and quality lapses that have required parts to
be reworked as suppliers battle to rehire staff let go during the pandemic, while grappling with depleted
cash levels because of the crisis. The restart in production of Boeing Co. ’s 737 MAX after its
recertification is also adding pressure to the aerospace supply chain.
Fewer deliveries in October put pressure on Airbus to pull off an end-of-year delivery spree. Still, such
rushes in the final months of the year were common in the years before the pandemic. In 2019, for
example, Airbus delivered 138 aircraft in December alone.
Airbus also said Friday that it booked 22 new orders in October after adding just one new aircraft to its
tally in September. The order and delivery challenges come as Airbus pushes to rapidly return to its prepandemic production rates, in particular for its A320neo narrow-body jet, which competes with the
MAX, to capitalize on the recovery of the travel market and as its biggest rival continues to play catchup.
The company has outlined plans to produce 65 of its A320neo jets a month from the summer of 2023,
up from around 45 a month now, before potentially increasing that rate to 75 a month, exceeding prepandemic production. Mr. Faury has been adamant that there is sufficient demand for production rates
at that level, but suppliers have aired concerns about their ability to facilitate higher rates so quickly.
Leasing companies have questioned whether passenger growth will be sufficient to support it.
Appeared in the November 6, 2021, print edition as ‘Airbus Deliveries Decline’
•
Exit Case Part B Q&As
Q1: Are we to pull the critical problem from Part A?
A1: No. Part B tests for a different set of your skills (see instructions). The problem in Part B should be defined in the
frame of a strategic problem. The Ethical Dilemma you identified in Part A is NOT part of the case content in Part B and
therefore should not be included in your analysis.
A quick tip here is to treat Part B a separate case from Part A because it is, even though the focal company is the same.
Imagine you are a strategist hired by the auto division in Tesla when you read the case and instructions for Part B. Pay
attention to the numbers, graphs, and fine prints in the case. Defining the problem is the key. The Tesla Q1’20 report
seems to show strong performance. So, what can be the problem? That is something for you to think about.
Q2: Should we use bullet points to complete sentences?
A2: Use a complete sentence for each bullet point. For the SWOT and the QSPM, what you are listing are factors
(strengths, weaknesses, opportunities, and threats). So, each factor should be describe with one sentence. Keep the
description precise and concise. Refer to the PPT slides and the video on how these two matrices are used.
Q3: Is the template in Excel?
A3: Yes. For your academic program (see CWU catalog), the learning goal assessed here is “Problems solving ability using
integrative and critical assessment of business information and appropriate technical tools.” This is why we offer the
template in Excel as the technical tool to analyze this case.
Q4: The case doesn’t seem to present a problem. Can you clarify?
A4: The problem is not defined in the case. It’s part of the test for students to define what the problem is. As indicated in
the Q1 Summary, Q1’20 was the first time in Tesla’s history that the company had a positive GAAP (generally accepted
accounting principles) net income. A hint I can offer is: what does that tell you? If you were the CEO, and/or an investor,
what would be your primary concern? That concern would be the critical problem that your strategist is hired to identify
and solve.
My suggestion is to read the tables and the narratives and even the fine prints in the Q1 report. Focus on the auto
business (not energy business, see the Part B instructions).
Q5: What are SO/WO/ST/WT strategies?
A5: You can find the steps in the Excel template with how these categories of strategies can be generated, and you will
see what they mean. Each alternative strategy can be described with one sentence. So, the answers are in the template,
but to provide an example:
ST – Strength-Threat – Match internal strengths with external threats, and record the resultant ST Strategies.
IF a company has a strength as “The company has the highest return on marketing,” and a threat as “New store is set to
open next door in Seattle,” then a possible ST strategy would be “Create new ad campaign in the Seattle local
communities.”
Note that this is only an example to show how an ST strategy can be generated in SWOT and is not applicable to the case
in Part B.
Q6: I have received another question about the critical problem in Part B. Let me see if can provide a little
clarification:
A6: The words to pay attention to in the Summary section of Tesla’s Q1’20 report are “the first time in our history that
we achieved positive GAAP net income.” That means the company had not had a positive GAAP net income till Q1’20. If
you were strategist the company hired, would that concern you? If yes, what is the primary concern given what the case
presents from both the company’s report and the competitors in the industry? The critical problem should be defined
along the lines of what this primary concern is.
ExitCasePartB
ExitCasePartB
Criteria
This criterion is
linked to a
Learning
OutcomeCOBPS1
Critical Problem
Ratings
Pts
2 pts
Exceeds Expectations:
Identify THE critical
strategic problem
1 pts
Meets Expectations:
Identify A strategic
problem
0 pts
Does Not Meet
Expectations: Fail to
identify a problem
2 pts
6 pts
Exceeds Expectations:
Identify 6 Opportunities
and 6 Threats. All 12
factors are related to the
critical problem
3 pts
Meets Expectations:
Identify 3-5
Opportunities and 3-5
Threats. All of the
factors are related to the
critical problem
1 pts
Does Not Meet
Expectations: Identify
fewer than 3
Opportunities and 3
Threats, OR factors are
unrelated to the critical
problem
6 pts
6 pts
Exceeds Expectations:
Identify 6 Strengths and
6 Weaknesses. All 12
factors are related to the
critical problem
3 pts
Meets Expectations:
Identify 3-5 Strengths
and 3-5 Weaknesses. All
of the factors are related
to the critical problem
1 pts
Does Not Meet
Expectations: Identify
fewer than 3 Strengths
and 3 Weaknesses, OR
factors are unrelated to
the critical problem
6 pts
6 pts
Exceeds Expectations:
Generate over 3
alternative solutions
based on the SWOT. All
the alternatives are
consistent with the critical
problem
3 pts
Meets Expectations:
Generate 3 alternative
solutions based on the
SWOT. All of the
alternatives are
consistent with the
critical problem
threshold: 1.0 pts
This criterion is
linked to a
Learning
OutcomeCOBPS2
External Analysis
threshold: 3.0 pts
This criterion is
linked to a
Learning
OutcomeCOBPS3
Internal Analysis
threshold: 3.0 pts
This criterion is
linked to a
Learning
OutcomeCOBPS4
Alternative
Solutions
threshold: 3.0 pts
1 pts
Does Not Meet
Expectations: Generate
fewer than 3
alternatives, OR the
alternatives are
inconsistent with the
critical problem
6 pts
ExitCasePartB
Criteria
This criterion is
linked to a
Learning
OutcomeCOBPS5
Decision
threshold: 3.0 pts
This criterion is
linked to a
Learning
OutcomeCOBPS6
Implementation
threshold: 2.0 pts
Total Points: 30
Ratings
6 pts
Exceeds Expectations:
Evaluate the top 3
alternatives and select the
most attractive alternative,
based on how each
alternative addresses the
SWOT
4 pts
Exceeds Expectations: Produce
a step-by-step action plan to
implement the solution. The
plan anticipates the most likely
stakeholder resistance
Pts
3 pts
Meets Expectations:
Evaluate the top 2
alternatives and select the
most attractive alternative,
based on how each
alternative addresses the
SWOT
1 pts
Does Not Meet
Expectations: Select
an alternative
without evaluating
the alternatives
2 pts
Meets Expectations:
Produce a step-by-step
action plan to
implement the
solution
0 pts
Does Not Meet
Expectations: Fail to
produce an
implementation plan
6 pts
4 pts

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