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News and Information Article
-- Fourth-quarter net income more than doubled to $460 million, or $0.58
per share; revenue grew 7 percent despite impact of strikes
-- Full-year EPS grew 39 percent to $3.20 on a 5 percent revenue increase
-- Operating cash flow grew to a record $7.0 billion for the year,
reflecting sales success and productivity improvements across the
company
-- Backlog climbed 33 percent to a record $202 billion
-- EPS forecast for 2006 increased; 2007 outlook reflects commercial
airplane market strength and company-wide growth and productivity
initiatives
Table 1. Summary Financial Results
(Millions, except 4th Quarter Full Year
per share data) 2005 2004 Change 2005 2004 Change
Revenues $14,204 $13,314 7% $54,845 $52,457 5%
Earnings From
Operations $544 $28 N.M. $2,812 $2,007 40%
Operating Margin 3.8% 0.2% 3.6 Pts 5.1% 3.8% 1.3 Pts
Reported Net Income $460 $186 147% $2,572 $1,872 37%
Reported Earnings
per Share $0.58 $0.23 152% $3.20 $2.30 39%
Operating Cash Flow
(after pension
contributions) $2,387 $1,327 80% $7,000 $3,504 100%
CHICAGO, Feb. 1 /-FirstCall/ -- The Boeing Company (NYSE: BA)
today reported significant growth in its fourth-quarter financial performance
and provided guidance for 2006 and 2007 emphasizing its expectations for
continued growth and margin expansion.
Boeings fourth-quarter net income more than doubled to $460 million, or
$0.58 per share, from $186 million, or $0.23, a year ago. Revenue increased
7 percent to $14.2 billion from $13.3 billion while operating margin increased
to 3.8 percent from 0.2 percent.
For 2005, Boeings net income increased to $2.6 billion, or $3.20 per
share, from $1.9 billion, or $2.30 per share, in 2004. Revenue rose to
$54.8 billion from $52.5 billion and operating margin rose to 5.1 percent from
3.8 percent. Revenue in 2005 grew 5 percent despite labor strikes at
Commercial Airplanes and the companys launch business that reduced revenue by
approximately $2.3 billion.
Building on progress made in 2005, Boeing is increasing its earnings per
share guidance for 2006 to between $3.25 and $3.45. In 2007, earnings per
share is projected to rise approximately 25 percent to between $4.10 and $4.30
on higher deliveries of commercial airplanes and company-wide productivity
improvements. Further details on financial guidance are provided below.
"Our results and improved outlook reflect a strong commitment to growth,
expanding margins and improving how we do business every day," said Chairman,
President and Chief Executive Officer Jim McNerney. "As we look ahead, that
commitment will be reflected in a continued emphasis on driving results in our
core business units and a new focus on a series of growth and productivity
initiatives to leverage our capabilities, resources and talent across the
entire company."
Boeings fourth-quarter earnings from operations rose to $544 million from
$28 million in the same quarter a year ago, and its operating cash flow grew
by 80 percent to $2.4 billion. Free cash flow* was $1.9 billion for the
quarter after an investment of $0.5 billion in property, plant & equipment
(Table 2). For the year, operating earnings grew 40 percent to $2.8 billion
and operating cash flow doubled to a record $7.0 billion. Free cash flow* was
$5.5 billion, 140 percent higher than last years $2.3 billion on strong
earnings growth and working capital improvements.
Table 2. Cash Flow
4th Quarter Full Year
(Millions) 2005 2004 2005 2004
Operating Cash Flow(1) $2,387 $1,327 $7,000 $3,504
Less Additions to
Property, Plant &
Equipment ($473) ($547) ($1,547) ($1,246)
Free Cash Flow* $1,914 $780 $5,453 $2,258
(1) Includes pension contributions of $0.7 billion in the fourth quarter
of 2004. The full-year pension contributions for 2005 and 2004 are
$1.9 billion and $4.4 billion, respectively.
* A complete definition of Boeings use of non-GAAP measures, identified
by an asterisk (*), is appended to this release.
Fourth quarter earnings per share of $0.58 includes a reduction of 16
cents for the previously disclosed non-cash pension charge related to the sale
of Rocketdyne. Results for the year-ago quarter included a tax benefit of 12
cents per share and charges totaling 44 cents per share related to the U.S.
Air Force 767 Tanker program and to complete 717 production. Without these
items, adjusted earnings per share* would have been 74 cents in fourth quarter
2005 and 55 cents in the same quarter last year. Reconciliations of GAAP
earnings per share to adjusted earnings per share* are appended to this
release.
Boeings backlog at year end was a record $202 billion, up 19 percent from
the end of the third quarter and 33 percent for the year. That growth
primarily reflects the more than 1,000 commercial airplane orders received
during the year.
Boeings cash and investments in marketable securities totaled
$8.4 billion at year end, up from $7.5 billion at the end of the third quarter
(Table 3) and from $6.1 billion at the end of 2004. This reflected strong
operating cash flow partially offset by the ongoing share repurchase program,
pension plan contributions, and planned investment increases in Boeings core
businesses. The company repurchased 12.4 million shares during the quarter
for $832 million and 45.2 million shares for $2.9 billion during the entire
year, leaving 24.3 million shares available under the existing repurchase
authorization. The company made no discretionary contributions to its pension
plans during the quarter; contributions for all of 2005 totaled $1.9 billion.
The funded status of the Companys pension plans improved to 96 percent in
2005.
The Boeing Company debt was unchanged from the end of the third quarter at
$3.9 billion. Boeing Capital debt declined slightly to $6.2 billion as strong
operating cash flow eliminated the need for new financing.
Table 3. Cash, Marketable Securities and Debt Balances
Quarter-End
(Billions) 4Q05 3Q05
Cash $5.4 $4.5
Marketable Securities(1) $3.0 $3.0
Total $8.4 $7.5
Debt Balances:
The Boeing Company $3.9 $3.9
Boeing Capital Corporation $6.2 $6.4
Non-Recourse Customer Financing $0.6 $0.6
Total Consolidated Debt $10.7 $10.9
(1) Marketable securities consists primarily of investments in high-
quality fixed-income and asset-backed securities classified as "short-
term investments" and "investments."
Segment Results
Commercial Airplanes
Boeing Commercial Airplanes contractual backlog rose 37 percent during
the quarter and 89 percent for the full year to $124 billion, reflecting 388
gross orders during the quarter - including 18 that launched the 747-8 program
- and 1,029 for the year. From the 787 Dreamliner program launch to the end
of 2005, 27 customers had booked a total of 379 orders and commitments for the
new airplane, including 291 firm orders.
Revenues for the fourth quarter increased 8 percent to $5.9 billion on
higher airplane deliveries, a favorable model mix and higher spares revenue
(Table 4). Operating margins were 5.6 percent, reflecting higher revenues
partially offset by planned increases in research and development expense.
The tanker and 717 related items mentioned above led to a negative operating
margin for 2004s fourth quarter. Airplane deliveries totaled 73 units, eight
fewer than originally planned due to residual effects of the September labor
strike, which reduced results by an estimated 8 cents in the quarter.
For the year, revenues rose 8 percent to $22.7 billion on higher
deliveries, increased spares and services sales, and higher used aircraft
sales. Deliveries for the year totaled 290 airplanes. Operating earnings
grew 90 percent to $1.4 billion.
Table 4. Commercial Airplanes Operating Results
(Millions, except
deliveries &
margin percent) 4th Quarter % Full Year %
2005 2004 Change 2005 2004 Change
Commercial
Airplanes
Deliveries 73 67 9% 290 285 2%
Revenues $5,856 $5,398 8% $22,651 $21,037 8%
Earnings (Loss)
from Operations $330 ($149) N.M. $1,432 $753 90%
Operating Margins 5.6% (2.8%) 8.4 Pts 6.3% 3.6% 2.7 Pts
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) revenues increased 7 percent in
the quarter to $8.1 billion due to strong growth in Aircraft & Weapon Systems
and Support Systems segments (Table 5). Operating margins increased to 11.4
percent from 8.9 percent driven by double-digit performance in these segments.
A strike at IDSs launch business and lower revenue from proprietary programs
reduced fourth-quarter revenue by nearly $700 million below previous
expectations.
For the year, IDS achieved record revenue, earnings and margins. Revenues
rose 1 percent to $30.8 billion, operating earnings rose 33 percent to
$3.9 billion, and operating margins increased to 12.6 percent, up from
9.6 percent a year ago. Full year operating earnings include a pre-tax gain
of $569 million from the sale of Rocketdyne, without which IDSs operating
margin would have been an industry-leading 10.8%.
Aircraft & Weapon Systems revenues increased 18 percent to $3.1 billion
for the quarter, primarily due to the delivery mix and timing of C-17 and
other aircraft programs. Operating margins were 16.5 percent driven by strong
performance across key programs including C-17, F/A-18 and Rotorcraft.
Network Systems revenues declined to $2.9 billion on lower volume on
Ground-based Midcourse Defense, Homeland Security and Proprietary programs
that was partially offset by increased activity in Future Combat Systems (FCS)
and Airborne Command & Control programs. Operating margins fell to 5.7
percent, as lower missile defense and Airborne Early Warning & Control
earnings from revised cost and fee estimates offset higher earnings from
programs with increased revenues identified above.
Table 5. Integrated Defense Systems Operating Results
(Millions, except 4th Quarter % Full Year %
margin percent) 2005 2004 Change 2005 2004 Change
Revenues
Aircraft and
Weapon Systems $3,099 $2,627 18% $11,444 $11,394 0%
Network Systems $2,890 $2,942 (2%) $11,264 $11,221 0%
Support Systems $1,588 $1,391 14% $5,342 $4,881 9%
Launch and
Orbital Systems $548 $667 (18%) $2,741 $2,969 (8%)
Total IDS
Revenues $8,125 $7,627 7% $30,791 $30,465 1%
Earnings (Loss)
from Operations
Aircraft and
Weapon Systems $511 $291 76% $1,707 $1,636 4%
Network Systems $165 $276 (40%) $638 $969 (34%)
Support Systems $225 $184 22% $765 $662 16%
Launch and
Orbital Systems $23 ($76) N.M. $780 ($342) N.M.
Total IDS Earnings
(Loss) from
Operations $924 $675 37% $3,890 $2,925 33%
Operating Margins 11.4% 8.9% 2.5 Pts 12.6% 9.6% 3.0 Pts
Support Systems revenues rose 14 percent to $1.6 billion driven by
increased volume in Integrated Support Services for Special Operations Forces,
C-17, C-130 and F-15K. Operating margins were 14.2 percent, up from 13.2
percent during the same period in 2004.
Launch and Orbital Systems revenues declined 18 percent to $0.5 billion
due primarily to the strike affecting the launch business during the quarter.
Operating margins rose to 4.2 percent due to higher contract values for Delta
IV launch contracts in 2005 and revised cost and fee estimates in 2004.
As previously announced, IDS is reorganizing into 3 new business segments.
This new structure will more effectively address evolving customer
requirements for capability-driven solutions and improve productivity.
IDSs total backlog continues to be the largest in the industry at
$77.6 billion. Contractual backlog grew to $37.9 billion, up from
$35.5 billion at the end of the third quarter. Unobligated backlog was
$39.7 billion at the end of the fourth quarter. Total IDS backlog, comprised
of contractual and unobligated, was down 1 percent from the end of the third
quarter and down 10 percent from a year earlier.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) continued to support the operations of
Boeings business units and reduce portfolio risk. Revenues for the fourth
quarter grew 5 percent to $238 million on favorable dispositions and
restructurings. Pre-tax income rose 14 percent to $40 million on higher
revenues and lower asset impairment charges.
For the year, pre-tax income grew 27 percent (Table 6). BCCs year-end
portfolio balance was $9.2 billion, unchanged from the end of the third
quarter and down $0.5 billion for the year as normal portfolio run-off and
depreciation more than offset new business volume. BCC contributed $120
million in cash dividends to the company during the quarter and $338 million
for the year. BCC recorded leverage of 5.0-to-1, as measured by the ratio of
debt-to-equity.
Table 6. Boeing Capital Corporation Operating Results
4th Quarter % Full Year %
(Millions) 2005 2004 Change 2005 2004 Change
Revenues(1) $238 $226 5% $966 $959 1%
Pre-Tax Income
(Loss)(1) $40 $35 14% $232 $183 27%
Discontinued
Operations
(After-Tax) $0 $4 N.M. ($7) $52 N.M.
(1) 2004 excludes discontinued operations from the sale of BCCs
commercial finance unit.
Additional Information
The "Other" segment consists primarily of Boeing Technology and Connexion
by Boeing(SM), as well as certain results related to the consolidation of all
business units. For the fourth quarter, losses from operations narrowed to
$60 million from $162 million last year, due primarily to lower expenses in
Boeing Technology in 2005 and asset write-downs in 2004.
Pre-tax (non-cash) pension expense for the quarter was $451 million, up
$330 million or $0.26 per share from the same period of 2004. This includes a
pre-tax, non-cash pension charge of $228 million from the Rocketdyne sale.
Share-based-plans expense was $160 million, up $33 million from the same
period of 2004. Deferred stock compensation expense was $50 million, or $0.04
per share, as Boeings stock price rose during the period.
Outlook
The company is forecasting solid growth in 2006 and 2007 that reflects
continued strong performance from its core businesses, higher commercial
airplane deliveries and productivity gains across the company. (Table 7).
Boeings 2006 revenue is expected to be approximately $60 billion, which
is below prior estimates due solely to a previously disclosed accounting
change in our commercial airplane business. Revenue guidance for 2007 is
established at $63.5 billion to $64.5 billion.
Earnings per share guidance for 2006 is being increased to between $3.25
and $3.45, from $3.10 to $3.30 previously forecasted, due to better operating
performance and a lower deferred tax charge in the first quarter of 2006 than
previously expected. This new outlook indicates an increase of approximately
5 percent over 2005 on a GAAP basis and approximately 40% over 2005 adjusted
earnings per share* of $2.39. Boeing expects further EPS growth in 2007, with
guidance of between $4.10 and $4.30 per share.
The company is maintaining its 2006 operating cash flow guidance at
greater than $5.5 billion, and is setting its 2007 operating cash flow
guidance at greater than $5.5 billion.
As noted above, Boeing Commercial Airplanes (BCA) is changing its method
of accounting for supplier concession sharing agreements beginning in 2006.
It will no longer record concession reimbursements received from suppliers as
"Sales and other operating revenues." Instead those will be reflected as a
reduction to "Cost of products and services." This accounting change reduced
BCAs 2006 revenue guidance by nearly $2 billion, but had only a nominal
impact on expected operating earnings. Guidance for 2006 and 2007 now
includes this change.
The guidance does not include the impact of the pending United Launch
Alliance (ULA) transaction. Launch & Orbital Systems revenue guidance for
2006 includes approximately $1 billion for business planned to be part of ULA.
Upon completion of the transaction, Boeing will use the equity method of
accounting for this new joint venture, recognizing Boeings proportionate
share of the ventures earnings in the Launch & Orbital Systems segment.
The commercial airplane outlook is very strong. The 2006 delivery
forecast remains approximately 395 airplanes, 36 percent higher than in 2005,
while 2007 deliveries are expected to increase to between 440 and 445
airplanes. BCA revenue for 2006 is expected to be approximately $27.5
billion, with operating margins greater than 9 percent, while revenue for 2007
is expected to be between $29.5 billion to $30.5 billion, with operating
margins greater than 10 percent. The 2006 delivery forecast is completely
sold out while the forecast for 2007 is more than 92 percent sold out.
IDS revenues for 2006 are expected to be approximately $31.5 billion, with
operating margins of approximately 10.5 percent. For 2007, IDS expects 2 to 5
percent revenue growth and operating margins above 10.5 percent.
Within IDS, Aircraft & Weapon Systems expects revenues of approximately
$12.5 billion and operating margins of approximately 13 percent in 2006, with
a stable outlook for 2007 and operating margins continuing in the low double-
digit range. Network Systems expects revenues of approximately $10.5 billion
and margins of approximately 8 percent, with a moderate growth outlook for
2007. Support Systems expects revenue to be approximately $6 billion in 2006
with operating margins of about 13 percent, with moderate revenue growth in
2007 and operating margins continuing in the low double-digit range. Launch &
Orbital Systems expects 2006 revenues of about $2.5 billion and operating
margins of about 2 percent, with a stable outlook for 2007.
IDS is reorganizing into 3 new segments: Precision Engagement and
Mobility Systems, Networks and Space Systems, and Support Systems. We expect
to begin reporting through these new segments when we report financial results
for the first quarter of 2006.
Boeings research and development investment is expected to be between
$2.6 billion and $2.8 billion in 2006 and between $2.7 billion and
$2.9 billion in 2007, reflecting continued investment in planned product
development programs. Annual capital expenditures should be approximately
$1.6 billion in 2006 and $1.5 billion in 2007.
The companys non-cash pension expense is expected to be approximately
$1 billion for 2006 and for 2007. Pension cash funding is expected to be
approximately $500 million in each of those years. The company will continue
to evaluate making additional discretionary contributions to its pension
plans.
Table 7. Financial Outlook
(Billions, except per share data) 2006 2007
The Boeing Company
Revenues ~ $60 $63.5 - $64.5
Earnings Per Share (GAAP) $3.25 - $3.45 $4.10 - $4.30
Operating Cash Flow(1) > $5.5 > $5.5
Boeing Commercial Airplanes
Deliveries ~ 395 440 - 445
Revenues(2) ~ $27.5 $29.5 - $30.5
Operating Margin > 9% > 10%
Integrated Defense Systems
Revenues
Aircraft and Weapon Systems ~ $12.5 Stable
Network Systems ~ $10.5 Moderate Growth
Support Systems ~ $6 Moderate Growth
Launch and Orbital Systems ~ $2.5 Stable
Total IDS Revenues ~ $31.5 2% - 5% Growth
Operating Margin
Aircraft and Weapon Systems ~ 13% Low Double Digit
Network Systems ~ 8% High Single Digit
Support Systems ~ 13% Low Double Digit
Launch and Orbital Systems ~ 2% Mid Single Digit
Total IDS Operating Margin ~ 10.5% > 10.5%
Boeing Capital Corporation
Portfolio Growth, Net Flat Flat
Revenue ~ $0.9 ~ $0.9
Return on Assets > 1% > 1%
Research & Development $2.6 - $2.8 $2.7 - $2.9
Capital Expenditures ~$1.6 ~$1.5
(1) After forecast pension contributions of $0.5 billion in 2006 and
$0.5 billion in 2007.
(2) Outlook for 2006 and beyond includes the application of the Financial
Accounting Standards Boards Emerging Issues Task Force (FASB EITF)
02-16 for vendor concession sharing agreements. Applying this
accounting rule decreased expected 2006 revenues by nearly
$2.0 billion.
Non-GAAP Measure Disclosure
Management believes that the non-GAAP (Generally Accepted Accounting
Principles) measures (indicated by an asterisk *) used in this report provide
investors with important perspectives into the companys ongoing business
performance. The company does not intend for the information to be considered
in isolation or as a substitute for the related GAAP measure. Other companies
may define the measure differently. The following definitions are provided
for free cash flow and adjusted earnings per share.
Free Cash Flow
Free cash flow is defined as GAAP operating cash flow less capital
expenditures for property, plant, and equipment, additions. 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 internally to assess both business performance and overall
liquidity. Table 2 provides a reconciliation between GAAP operating cash flow
and free cash flow.
Adjusted earnings per share
Adjusted earnings per share is defined as diluted earnings per share
computed in accordance with generally accepted accounting principles adjusted
for certain significant charges or credits. Management believes adjusted
earnings per share are important to understanding the companys on-going
operations and provide additional insights into underlying business
performance. Significant charges or credits are described in the attachments
to this release which provide reconciliations between GAAP earnings per share
and adjusted earnings per share.
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements in this report may constitute "forward-looking"
statements within the meaning of the Private Litigation Reform Act of 1995.
Words such as "expects," "intends," "plans," "projects," "believes,"
"estimates," and similar expressions are used to identify these forward-
looking statements. These statements are not guarantees of future performance
and involve risks, uncertainties and assumptions that are difficult to
predict. Forward-looking statements are based upon assumptions as to future
events that may not prove to be accurate. Actual outcomes and results may
differ materially from what is expressed or forecasted in these forward-
looking statements. As a result, these statements speak only as of the date
they were made and we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Our actual results and future trends may differ
materially depending on a variety of factors, including the continued
operation, viability and growth of major airline customers and non-airline
customers (such as the U.S. Government); adverse developments in the value of
collateral securing customer and other financings; the occurrence of any
significant collective bargaining labor dispute; our successful execution of
internal performance plans including our company-wide growth and productivity
initiatives, production rate increases and decreases (including any reduction
in or termination of an aircraft product), acquisition and divestiture plans,
and other cost-reduction and productivity efforts; charges from any future
SFAS No. 142 review; an adverse development in rating agency credit ratings or
assessments; the actual outcomes of certain pending sales campaigns and the
launch of the 787 program and U.S. and foreign government procurement
activities, including the uncertainty associated with the procurement of
tankers by the U.S. Department of Defense (DoD) and funding of the C-17
program; the cyclical nature of some of our businesses; unanticipated
financial market changes which may impact pension plan assumptions; domestic
and international competition in the defense, space and commercial areas;
continued integration of acquired businesses; performance issues with key
suppliers, subcontractors and customers; significant disruption to air travel
worldwide (including future terrorist attacks); global trade policies;
worldwide political stability; domestic and international economic conditions;
price escalation; the outcome of political and legal processes, changing
priorities or reductions in the U.S. Government or foreign government defense
and space budgets; termination of government or commercial contracts due to
unilateral government or customer action or failure to perform; legal,
financial and governmental risks related to international transactions; legal
and investigatory proceedings; tax settlements with the IRS and various
states; U.S. Air Force review of previously awarded contracts; and other
economic, political and technological risks and uncertainties. Additional
information regarding these factors is contained in our SEC filings,
including, without limitation, our Annual Report on Form 10-K for the year
ended December 31, 2004 and Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2005, June 30, 2005 and September 30, 2005.
The Boeing Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Twelve months Three months
ended ended
(Dollars in millions except per December 31 December 31
share data) 2005 2004 2005 2004
Sales of products $45,398 $43,799 $11,879 $11,201
Sales of services 9,447 8,658 2,325 2,113
Total revenues 54,845 52,457 14,204 13,314
Cost of products (38,082) (37,759) (10,359) (10,499)
Cost of services (7,767) (6,916) (1,717) (1,426)
Boeing Capital Corporation interest
expense (359) (350) (93) (88)
Total costs and expenses (46,208) (45,025) (12,169) (12,013)
8,637 7,432 2,035 1,301
Income from operating investments,
net 88 91 20 24
General and administrative expense (4,228) (3,657) (939) (899)
Research and development expense (2,205) (1,879) (601) (414)
Gain on dispositions, net 520 23 29 16
Goodwill impairment (3)
Earnings from continuing operations 2,812 2,007 544 28
Other income, net 301 288 117 46
Interest and debt expense (294) (335) (53) (83)
Earnings (loss) before income taxes 2,819 1,960 608 (9)
Income tax (expense)/benefit (257) (140) (144) 191
Net earnings from continuing
operations 2,562 1,820 464 182
Cumulative effect of accounting
change, net of taxes 17 (4)
Income (loss) from discontinued
operations, net of taxes 10 (5)
Net gain (loss) on disposal of
discontinued operations, net
of taxes (7) 42 9
Net earnings $2,572 $1,872 $460 $186
Basic earnings per share from
continuing operations $3.26 $2.27 $0.61 $0.24
Cumulative effect of accounting
change, net of taxes 0.03 (0.01)
Income (loss) from discontinued
operations, net of taxes 0.01 (0.01)
Net gain (loss) on disposal of
discontinued operations, net of
taxes (0.02) 0.05 0.01
Basic earnings per share $3.27 $2.33 $0.60 $0.24
Diluted earnings per share from
continuing operations $3.19 $2.24 $0.59 $0.23
Cumulative effect of accounting
change, net of taxes 0.02 (0.01)
Income (loss) from discontinued
operations, net of taxes 0.01 (0.01)
Net gain (loss) on disposal of
discontinued operations, net of
taxes (0.01) 0.05 0.01
Diluted earnings per share $3.20 $2.30 $0.58 $0.23
Cash dividends paid per share $1.00 $0.77 $0.25 $0.20
Weighted average diluted shares
(millions) 802.9 813.0 791.6 812.7
See notes to consolidated financial statements.
The Boeing Company and Subsidiaries
Consolidated Statements of Financial Position
(Unaudited)
December 31 December 31
(Dollars in millions except per share data) 2005 2004
Assets
Cash and cash equivalents $5,412 $3,204
Short-term investments 554 319
Accounts receivable, net 5,246 4,653
Current portion of customer financing, net 367 616
Deferred income taxes 2,449 1,991
Inventories, net of advances and
progress billings 7,940 6,508
Assets of discontinued operations 70
Total current assets 21,968 17,361
Customer financing, net 9,639 10,385
Property, plant and equipment, net 8,420 8,443
Goodwill 1,924 1,948
Other acquired intangibles, net 875 955
Prepaid pension expense 13,251 12,588
Deferred income taxes 140 154
Investments 2,852 3,050
Other assets 989 1,340
$60,058 $56,224
Liabilities and Shareholders Equity
Accounts payable and other liabilities $16,513 $14,869
Advances and billings in excess of
related costs 9,930 6,384
Income taxes payable 556 522
Short-term debt and current portion of
long-term debt 1,189 1,321
Total current liabilities 28,188 23,096
Deferred income taxes 2,067 1,090
Accrued retiree health care 5,989 5,959
Accrued pension plan liability 2,948 3,169
Deferred lease income 269 745
Long-term debt 9,538 10,879
Shareholders equity:
Common shares, par value $5.00
- 1,200,000,000 shares authorized;
Shares issued - - 1,012,261,159 and
1,011,870,159 5,061 5,059
Additional paid-in capital 4,371 3,420
Treasury shares, at cost - -
212,090,978 and 179,686,231 (11,075) (8,810)
Retained earnings 17,276 15,565
Accumulated other comprehensive loss (1,778) (1,925)
ShareValue Trust Shares - -
39,593,463 and 38,982,205 (2,796) (2,023)
Total shareholders equity 11,059 11,286
$60,058 $56,224
The Boeing Company and Subsidiaries
Business Segment Data
(Unaudited)
Twelve months Three months
ended ended
(Dollars in millions) December 31 December 31
2005 2004 2005 2004
Revenues:
Commercial Airplanes $22,651 $21,037 $5,856 $5,398
Integrated Defense Systems:
Aircraft and Weapon Systems 11,444 11,394 3,099 2,627
Network Systems 11,264 11,221 2,890 2,942
Support Systems 5,342 4,881 1,588 1,391
Launch and Orbital Systems 2,741 2,969 548 667
Total Integrated Defense Systems 30,791 30,465 8,125 7,627
Boeing Capital Corporation 966 959 238 226
Other 972 549 173 139
Accounting differences/eliminations (535) (553) (188) (76)
Total revenues $54,845 $52,457 $14,204 $13,314
Earnings (loss) from continuing
operations:
Commercial Airplanes $1,432 $753 $330 $(149)
Integrated Defense Systems:
Aircraft and Weapon Systems 1,707 1,636 511 291
Network Systems 638 969 165 276
Support Systems 765 662 225 184
Launch and Orbital Systems 780 (342) 23 (76)
Total Integrated Defense Systems 3,890 2,925 924 675
Boeing Capital Corporation 232 183 40 35
Other (334) (535) (60) (162)
Accounting differences/eliminations (989) (403) (372) (169)
Share-based plans expense (852) (576) (160) (127)
Unallocated expense (567) (340) (158) (75)
Earnings from continuing
operations 2,812 2,007 544 28
Other income, net 301 288 117 46
Interest and debt expense (294) (335) (53) (83)
Earnings (loss) before income taxes 2,819 1,960 608 (9)
Income tax (expense)/benefit (257) (140) (144) 191
Net earnings from continuing
operations 2,562 1,820 464 182
Cumulative effect of accounting
change, net of tax 17 (4)
Income (loss) from discontinued
operations, net of taxes 10 (5)
Net gain (loss) on disposal of
discontinued operations, net of
taxes (7) 42 9
Net earnings $2,572 $1,872 $460 $186
Effective income tax rate 9.1% 7.1% 23.7% N.M.
Research and development expense:
Commercial Airplanes $1,302 $941 $381 $245
Integrated Defense Systems:
Aircraft and Weapon Systems 374 382 91 83
Network Systems 285 234 72 31
Support Systems 80 57 20 13
Launch and Orbital Systems 116 161 26 23
Total Integrated Defense Systems 855 834 209 150
Other 48 104 11 19
Total research and development
expense $2,205 $1,879 $601 $414
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Twelve months Twelve months
ended ended
December 31 December 31
(Dollars in millions) 2005 2004
Cash flows - operating activities:
Net earnings $2,572 $1,872
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Non-cash items:
Impairment of goodwill 3
Share-based plans expense 852 576
Depreciation 1,412 1,412
Amortization of other acquired
intangibles 91 97
Amortization of debt
discount/premium and issuance costs 23 15
Pension expense 1,225 335
Investment/asset impairment
charges, net 83 122
Customer financing valuation provision 73 45
Net gain/(loss) on disposal of
discontinued operations 12 (66)
Gain on dispositions, net (520) (23)
Other charges and credits, net 129 539
Non cash adjustments related to
discontinued operations 15
Excess tax benefits from share-based
payment arrangements (70) (23)
Changes in assets and liabilities -
-
Accounts receivable (592) (241)
Inventories, net of advances,
progress billings and reserves (1,965) 535
Accounts payable and other
liabilities 1,147 1,321
Advances in excess of related costs 3,562 735
Income taxes receivable, payable
and deferred 628 1,086
Deferred lease income (476) (30)
Prepaid pension expense (1,862) (4,355)
Goodwill (3)
Other acquired intangibles, net 11 (1)
Accrued retiree health care 30 214
Customer financing, net 589 (421)
Other 46 (255)
Net cash provided by operating
activities 7,000 3,504
Cash flows - investing activities:
Discontinued operations customer
financing, reductions 2 174
Property, plant and equipment,
additions (1,547) (1,246)
Property, plant and equipment,
reductions 51 268
Acquisitions, net of cash acquired (172) (34)
Proceeds from dispositions of
discontinued operations 2,017
Proceeds from dispositions 1,709 194
Contributions to investments (2,866) (4,142)
Proceeds from investments 2,725 1,323
Net cash used by investing
activities (98) (1,446)
Cash flows - financing activities:
Debt repayments (1,378) (2,208)
Stock options exercised 348 98
Excess tax benefits from share-
based payment arrangements 70 23
Common shares repurchased (2,877) (752)
Dividends paid (820) (648)
Net cash used by financing
activities (4,657) (3,487)
Effect of exchange rate changes on
cash and cash equivalents (37)
Net increase/(decrease) in cash and
cash equivalents 2,208 (1,429)
Cash and cash equivalents at
beginning of year 3,204 4,633
Cash and cash equivalents at end of year $5,412 $3,204
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Deliveries Twelve Months 4th Quarter
Commercial Airplanes 2005 2004 2005 2004
717 13 (5) 12 (6) 4 (2) 3 (1)
737 Next-Generation 212 202 52 48
747 13 15 4 4
757 2 11
767 10 9 (1) 3 3
777 40 36 10 9
Total 290 285 73 67
Note: Commercial Airplanes deliveries by model include deliveries
under operating lease, which are identified by parentheses.
Integrated Defense Systems
Aircraft and Weapon Systems:
Chinook International New Builds
Apache (New Builds) 12 3 5 3
F/A-18E/F 42 48 10 11
T-45TS 10 7 2 2
F-15 6 3 4
C-17 16 16 4 3
C-40 2 3 2
Network Systems
Satellites:
Launch and Orbital Systems:
Delta II 2 4 1
Delta IV
Satellites 3 2
Contractual backlog December 31 September 30 December 31
(Dollars in billions) 2005 2005 2004
Commercial Airplanes $124.1 $98.1 $70.4
Integrated Defense Systems:
Aircraft and Weapon Systems 19.2 18.8 18.3
Network Systems 7.4 7.1 10.2
Support Systems 7.7 6.0 6.5
Launch and Orbital Systems 3.6 3.6 4.2
Total Integrated Defense Systems 37.9 35.5 39.2
Total contractual backlog $162.0 $133.6 $109.6
Unobligated backlog $40.2 $43.5 $47.9
Workforce 153,000 152,700 159,000
Note: Commercial Airplanes implemented Emerging Issues Task Force
(EITF) 02-16 as of January 2006. As a result, concession
sharing will no longer be included in ending backlog, this has
been reflected in our 12/31/2005 Commercial Airplanes ending
backlog which was reduced by $7.8 billion. Had earlier periods
reflected this method of accounting, Commercial Airplanes
contractual backlog would have been reduced by $7.8 billion at
9/30/2005 and by $4.9 billion at 12/31/2004.
The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjusted Earnings Per Share
(Unaudited)
In addition to disclosing results that are determined in accordance with
U.S. generally accepted accounting principles (GAAP), the company also
discloses non-GAAP results that exclude certain significant charges or
credits that are important to an understanding of the companys ongoing
operations. The company provides reconciliations of its non-GAAP
financial reporting to the most comparable GAAP reporting. The company
believes that discussion of results excluding certain significant charges
or credits provides additional insights into underlying business
performance. Adjusted earnings per share is not a measure recognized
under GAAP. The determination of significant charges or credits may not
be comparable to similarly titled measures used by other companies and
may vary from quarter to quarter.
Three months ended
Dollars in millions except per share data December 31
2005 2004
GAAP Diluted earnings per share * $0.58 $0.23
Rocketdyne divestiture, settlement
and curtailment costs 0.16 (a) -
Air Force 767 Tanker and 717 Program
completion - 0.44 (b)
Cumulative effect of Accounting
Change, Net of Taxes 0.01 (c)
Tax benefits (0.01)(d) (0.12)(e)
Adjusted earnings per share * $0.74 $0.55
Weighted average diluted shares
(millions) 791.6 812.7
(a) Represents the net earnings per share impact of settlement and
curtailment of pension ($228 pre-tax charge) and other post-
retirement benefits ($28 pre-tax benefit). This charge was disclosed
when the transaction was completed in the third quarter at which time
we recorded a pre-tax gain on the sale of $578. The per share amount
for the fourth quarter is presented net of income taxes at 37.8%.
(b) Represents pre-tax charges of $280 related to the 717 Program
completion and $275 related to 767 United States Air Force Tanker
Program. The per share amount is net of income taxes computed using
a 36.3% tax rate.
(c) Primarily represents the adoption of FASB Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations of ($4).
(d) Represents net tax benefits of $11 resulting from favorable
international tax adjustments and a change in valuation allowances
partly offset by the tax cost of repatriated foreign earnings.
(e) Represents state income tax audit settlements of $98.
* GAAP diluted earnings per share and adjusted earnings per share
exclude the pro-forma impact of 8 missed commercial aircraft
deliveries as a result of the International Association of Machinists
(IAM) strike. These deliveries would have increased EPS by $0.08 per
share.
The Boeing Company and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjusted Earnings Per Share
(Unaudited)
In addition to disclosing results that are determined in accordance with
U.S. generally accepted accounting principles (GAAP), the company also
discloses non-GAAP results that exclude certain significant charges or
credits that are important to an understanding of the companys ongoing
operations. The company provides reconciliations of its non-GAAP
financial reporting to the most comparable GAAP reporting. The company
believes that discussion of results excluding certain significant charges
or credits provides additional insights into underlying business
performance. Adjusted earnings per share is not a measure recognized
under GAAP. The determination of significant charges or credits may not
be comparable to similarly titled measures used by other companies and
may vary from quarter to quarter.
Twelve months ended
Dollars in millions except per share data December 31
2005 2004
GAAP Diluted earnings per share * $3.20 $2.30
Asset Dispositions/Divestitures (0.04)(a) -
Air Force 767 Tanker and 717 Program
completion - 0.44 (b)
Interest associated with income tax
benefits (0.05)(c) (0.17)(d)
Income tax benefits (0.71)(e) (0.45)(f)
Cumulative effect of Accounting
Change, Net of Taxes (0.02)(g)
Net (gain)/loss on Discontinued
Operations, Net of Taxes 0.01 (h) (0.06)(i)
Adjusted earnings per share * $2.39 $2.06
Weighted average diluted shares
(millions) 802.9 813.0
(a) Represents the net earnings per share impact including pension and
other post-retirement benefits on the sale of Rocketdyne, Wichita,
and EDD. The per share amount for the year is presented net of income
taxes at 37.8%.
(b) Represents pre-tax charges of $280 related to the 717 Program
completion and $275 related to 767 United States Air Force Tanker
Program. The per share amount is net of income taxes computed using
a 36.3% tax rate.
(c) Represents interest income of $64 related to income tax audit
settlements. The per share amount is net of income taxes at 37.8%
(d) Represents interest income of $219 related to income tax audit
settlements. The per share amount is net of income taxes at 36.3%
(e) Represents tax benefits of $570 due to a settlement with the Internal
Revenue Service for the years 1998 - 2001, a change in valuation
allowances and provision adjustments related to tax filings for 2004
and prior years partly offset by the tax cost of repatriating foreign
earnings.
(f) Represents tax benefits of $367 from a settlement with the Internal
Revenue Service (IRS) of the years 1986 - 1997, tax benefits
associated with state tax audit settlements and other provision
adjustments.
(g) Primarily represents the adoption of SFAS No. 123 (revised 2004)
Share-Based Payment in Q1 2005 and the adoption of FASB
Interpretation No. 47, Accounting for Conditional Asset Retirement
Obligations in Q4 2005.
(h) Represents the net loss from the disposal of discontinued operations
from the sale of assets from BCCs Commercial Financial Services to
General Electric Capital Corporation.
(i) Represents the net gain from the disposal of discontinued operations
from the sale of assets from BCCs Commercial Financial Services to
General Electric Capital Corporation.
* GAAP diluted earnings per share and adjusted earnings per share
include the impact of the International Association of Machinists
(IAM) strike, which resulted in 29 fewer commercial aircraft
deliveries than planned. These deliveries would have increased EPS by
$0.35 per share.
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