Boeing Fourth-Quarter EPS Doubles; Revenue up 26%; 2007 EPS Outlook Raised
- Fourth-quarter EPS grew 122 percent to $1.29 per share; adjusted EPS*
rose 57 percent to $1.16 per share; revenue increased 26 percent to
$17.5 billion
- 2006 EPS totaled $2.85 per share; adjusted EPS* grew 51 percent to
$3.62 per share; revenue rose 15 percent to a record $61.5 billion
- Cash flow generation increased to a record $7.5 billion
- Backlog expanded to a record level of $250 billion
- 2007 EPS outlook raised to between $4.55 and $4.75 per share; 2008 EPS
guidance set at $5.55 to $5.75 per share
Table 1. Summary Financial Results
(Millions, except 4th Quarter Full Year
per share data) 2006 2005 Change 2006 2005 Change
Revenues $17,541 $13,901 26% $61,530 $53,621 15%
Earnings From
Operations $1,152 $544 112% $3,014 $2,812 7%
Operating Margin 6.6% 3.9% 2.7 Pts 4.9% 5.2% (0.3)Pts
Reported Net
Income $989 $460 115% $2,215 $2,572 (14%)
Reported Earnings
per Share $1.29 $0.58 122% $2.85 $3.20 (11%)
Adjusted Earnings
per Share *(1) $1.16 $0.74 57% $3.62 $2.39 51%
Operating Cash
Flow (after
pension
contributions) $2,441 $2,387 2% $7,499 $7,000 7%
(1) Adjusted EPS* excludes $0.14 in tax-related benefits in 4Q2006, a
divestiture-related charge of $0.16 in 4Q2005, and other smaller
adjustments on page 16. Adjusted EPS* for 2006 excludes a
$0.75 charge for global settlement, a $0.24 charge for Connexion and
a $0.21 tax-related benefit; 2005 excludes tax-related benefits of
$0.76, divestiture-related benefits of $0.03 and smaller items on
page 17.
* Non-GAAP measure. A complete definition and reconciliation of
Boeing's use of non-GAAP measures, identified by an asterisk (*), is
found on page 9, "Non-GAAP Measure Disclosure."
CHICAGO, Jan. 31 -- The Boeing Company (NYSE: BA) fourth quarter net
earnings more than doubled to $989 million, or $1.29 per share, from $460
million, or $0.58 per share, a year ago (Table 1). Adjusted earnings per
share*, removing effects of tax benefits and discontinued businesses, rose 57
percent to $1.16 per share.
Boeing boosted its 2007 earnings per share guidance to between $4.55 and
$4.75, and set its 2008 guidance at between $5.55 and $5.75, reflecting
expected strong revenue growth and expanding margins across its businesses.
The company's 2007 R&D forecast is unchanged and R&D spending is expected to
decline in 2008.
"2006 was a very good year for Boeing. We achieved new records in
revenue, cash flow and backlog, and overcame some meaningful challenges by
focusing on improving productivity and meeting our commitments," said Boeing
Chairman, President and Chief Executive Jim McNerney. "This focus on
performance gives us the confidence to set high expectations for 2007 and
2008."
Boeing's fourth-quarter revenue rose 26 percent to $17.5 billion on
double-digit growth in its Commercial Airplanes and Integrated Defense Systems
businesses. The 57 percent increase in fourth-quarter adjusted EPS* was due
to strong business performance, partially offset by an additional charge on
the Airborne Early Warning & Control (AEW&C) program. Operating cash flow for
the quarter was $2.4 billion driven by strong earnings growth and a large
volume of commercial airplane orders (Table 2).
For 2006, the company's reported earnings totaled $2.85 per share, down
from $3.20, while revenue rose 15 percent to $61.5 billion. Adjusted EPS* for
the year grew 51 percent to $3.62 per share. Record operating cash flow of
$7.5 billion provided outstanding liquidity to the company, while free cash
flow* increased to $5.8 billion.
Table 2. Cash Flow
4th Quarter Full Year
(Millions) 2006 2005 2006 2005
Operating Cash Flow(1) $2,441 $2,387 $7,499 $7,000
Less Additions to Property, Plant
& Equipment ($588) ($473) ($1,681) ($1,547)
Free Cash Flow* $1,853 $1,914 $5,818 $5,453
(1) Includes Global Settlement payment of $615 million and Connexion
shutdown costs totaling $320 million in the 3rd and 4th quarters of
2006.
Reflecting a second consecutive year of record commercial airplane orders,
Boeing's backlog at year-end also reached a record level. The backlog rose to
$250 billion, up 22 percent for the year.
Cash and investments in marketable securities totaled $9.3 billion at year
end, up from $8.2 billion at the end of the third quarter (Table 3).
Principal uses of cash during the quarter included $444 million for share
repurchases, retirement of $583 million of maturing debt, and planned
investment increases in Boeing's core businesses.
The company spent $2.0 billion repurchasing 25.0 million shares during the
year. This leaves $2.4 billion remaining available under the current
repurchase authorization. During 2006, the company also contributed
$526 million to its pension plans and retired approximately $1 billion of
maturing debt.
In December, Boeing's board of directors increased the quarterly dividend
by 17 percent to $0.35 per share, or $1.40 annually, based on the company's
strong operating performance and outlook, excellent cash generation and
commitment to delivering value to shareholders.
Table 3. Cash, Marketable Securities and Debt Balances
Quarter-End
(Billions) 4Q06 3Q06
Cash $6.1 $5.2
Marketable Securities(1) $3.2 $3.0
Total $9.3 $8.2
Debt Balances:
The Boeing Company $3.9 $4.4
Boeing Capital Corporation $5.6 $5.7
Total Consolidated Debt $9.5 $10.1
(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 (BCA) fourth-quarter revenues increased
37 percent to $7.6 billion driven by a 41 percent increase in airplane
deliveries and higher services revenue (Table 4). BCA operating earnings
doubled to $665 million. Margins expanded to 8.7 percent due to higher
operating leverage and productivity improvements, partially offset by planned
R&D spending increases and the absence of supplier development cost-sharing
payments.
For the year, BCA deliveries rose 37 percent to 398 airplanes and revenue
rose 33 percent to $28.5 billion. Operating earnings grew 91 percent to
$2.7 billion as margins reached 9.6 percent.
Table 4. Commercial Airplanes Operating Results
(Millions, except
deliveries & margin 4th Quarter % Full Year %
percent) 2006 2005 Change 2006 2005 Change
Commercial Airplanes
Deliveries 103 73 41% 398 290 37%
Revenues $7,606 $5,534 37% $28,465 $21,365 33%
Earnings from
Operations $665 $330 102% $2,733 $1,431 91%
Operating Margins 8.7% 6.0% 2.7 Pts 9.6% 6.7% 2.9 Pts
Contractual backlog rose to a record $174 billion, increasing 40 percent
during the year to more than six times current annual BCA revenues. BCA
booked 320 gross orders during the quarter and a record 1,050 during the year.
Net orders for 2006 were a record 1,044 airplanes. For the second consecutive
year, the 737 program achieved a record tally, bringing in 729 net orders.
Boeing twin-aisle airplanes had another strong order year, with the 747
program achieving its highest order total since 1990.
The 787 Dreamliner program has won 452 firm orders from 36 customers since
program launch in 2004. Important milestones were achieved during the fourth
quarter, including validation of the manufacturing plan which culminated in a
"virtual rollout" in December. The program continues to address pressures
with respect to weight and supplier implementation. Flight testing of the
Dreamliner begins this year, with entry into service scheduled for May 2008.
Boeing continues to expect the 787 will be delivered on time and in accord
with its contractual obligations.
Integrated Defense Systems
Boeing Integrated Defense Systems (IDS) revenues increased 18 percent
during the quarter to a record $9.7 billion on higher volume across all
segments (Table 5). Operating margins were 10.6 percent, driven by strong
execution and productivity improvements, offset by revised cost estimates on
the AEW&C program totaling $274 million which reduced fourth-quarter IDS
operating margins by 2.8 points.
IDS revenues grew 4 percent in 2006 to a record $32.4 billion driven by
growth in Precision Engagement & Mobility Systems and Support Systems.
Operating margins were 9.3 percent due to strong performance across IDS's
balanced portfolio of programs, after a 2.4 point reduction for AEW&C. In
2005, IDS operating margins were 12.6 percent, including a 1.9 point benefit
from gains on divestitures.
Table 5. Integrated Defense Systems Operating Results
(Millions, except 4th Quarter % Full Year %
margin percent) 2006 2005 Change 2006 2005 Change
Revenues
Precision
Engagement &
Mobility Systems $4,318 $3,754 15% $14,350 $13,510 6%
Network & Space
Systems $3,425 $2,886 19% $11,980 $12,254 (2%)
Support Systems $1,944 $1,588 22% $6,109 $5,342 14%
Total IDS Revenues $9,687 $8,228 18% $32,439 $31,106 4%
Earnings (Loss) from
Operations
Precision
Engagement &
Mobility Systems $296 $521 (43%) $1,238 $1,755 (29%)
Network & Space
Systems $469 $191 146% $958 $1,399 (32%)
Support Systems $262 $225 16% $836 $765 9%
Total IDS Earnings
from Operations $1,027 $937 10% $3,032 $3,919 (23%)
Operating Margins 10.6%(1) 11.4% (0.8)Pts 9.3%(1) 12.6% (3.3)Pts
(1) Reflects reductions of 2.8 points in the quarter and 2.4 points for
the full year due to increased costs on AEW&C.
Precision Engagement & Mobility Systems revenue grew 15 percent to
$4.3 billion for the quarter on higher deliveries and volume on the F-15 and
Chinook programs. Overall program performance was strong, yet operating
margins were 6.9 percent for the quarter due to the charge mentioned above,
which reduced PE&MS operating margins by 6.3 points.
Network & Space Systems achieved significant milestones on several key
development programs including Future Combat Systems (FCS), Family of Beyond-
line-of-sight Terminals (FAB-T), Ground-based Midcourse Defense (GMD),
Airborne Laser and proprietary programs. The company also completed the
United Launch Alliance joint venture during the quarter. Fourth-quarter
revenues increased 19 percent to $3.4 billion driven in part by a new Delta IV
launch capability services contract. Operating margins increased to
13.7 percent in the quarter driven by strong earnings on FCS and Delta IV,
further boosted by a post-closing adjustment on the divestiture of Electron
Dynamic Devices, Inc.
Support Systems again generated strong profits on its broad portfolio of
services and logistics programs. Revenues for the quarter increased
22 percent to $1.9 billion while operating earnings increased 16 percent to
$262 million resulting in 13.5 percent operating margins. Results were driven
by higher volume on integrated logistics programs; international support
programs; and maintenance, modification and upgrade programs such as AC-130
and KC-10.
IDS' backlog at quarter-end increased to $75.7 billion. For the year,
backlog declined 6 percent as progress continued on large multi-year
contracts. Contractual backlog grew 16 percent during the year to
$42.3 billion while unobligated backlog declined to $33.4 billion.
Boeing Capital Corporation
Boeing Capital Corporation (BCC) continued to deliver strong financial
performance while reducing portfolio risk (Table 6). For the quarter, BCC
delivered pre-tax earnings of $37 million driven by continued strong financing
portfolio performance and aircraft finance restructurings. BCC's portfolio
balance at the end of the fourth quarter was $8.0 billion, down from
$8.2 billion at the end of the third quarter and $9.2 billion in the fourth
quarter of 2005 on normal portfolio run-off, asset sales and depreciation.
Despite the smaller portfolio size, revenues for the fourth quarter increased
slightly to $241 million due to aircraft finance restructurings. For the
year, BCC revenues grew 6 percent to $1.0 billion, and pre-tax income
increased 25 percent to a record $291 million.
BCC contributed $60 million in cash dividends to the company during the
quarter and $344 million in cash 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) 2006 2005 Change 2006 2005 Change
Revenues $241 $238 1% $1,025 $966 6%
Pre-Tax Income $37 $40 (8%) $291 $232 25%
Additional Information
The "Other" segment consists primarily of Boeing Engineering, Operations
and Technology and the Connexion business, as well as certain results related
to the consolidation of all business units. As previously disclosed, the
company decided to exit its Connexion business which resulted in a pre-tax
charge of $40 million in the quarter, or $0.03 per share. Other segment
losses from operations grew to $93 million in the fourth quarter, up from
$73 million in the same period last year.
Pre-tax (non-cash) pension expense for the quarter was $221 million, down
from $451 million in the same period of 2005 which included pension settlement
and curtailment expenses related to the sale of our Rocketdyne operations.
Unallocated share-based-plans expense was $140 million, down 23 percent from
the same period of 2005 due to changes in the company's long-term compensation
plans implemented at the beginning of 2006.
Boeing's pension plans are 101 percent funded on a projected benefit
obligation basis, and cash contribution requirements for the pension plans are
expected to be modest over the next few years. As previously disclosed,
shareholders' equity was reduced by approximately $6.5 billion at the end of
the year to reflect implementation of new accounting rules for pensions and
other post-retirement benefits (SFAS 158).
Outlook
The company expects continued growth in 2007 and 2008 that reflects strong
performance from its core businesses, higher commercial airplane deliveries,
leveling R&D, and companywide productivity gains (Table 7).
Boeing's revenue guidance for 2007 is now between $64.5 billion and
$65 billion, reflecting completion of the United Launch Alliance transaction.
For 2008, the company expects revenues between $71 and $72 billion. The 2007
earnings per share guidance is being raised to between $4.55 and $4.75 per
share. EPS guidance for 2008 is set at between $5.55 and $5.75 per share.
Operating cash flow for 2007 is now expected to be greater than $4 billion, as
portions of cash flow previously expected in 2007 accelerated into the
$7.5 billion achieved in 2006. Cash flow for 2008 is expected to again exceed
$7 billion.
Commercial Airplanes' 2007 delivery guidance remains 440 to 445 airplanes
and is completely sold out. Revenue guidance for 2007 remains between
$32.5 and $33 billion, and operating margin guidance remains at greater than
10 percent. Airplane deliveries in 2008 are expected to rise to between
515 and 520 airplanes and are essentially sold out. Commercial Airplanes'
revenue in 2008 is expected to grow to between $39 billion and $40 billion
accompanied by margin expansion to approximately 11 percent. The company
expects airplane deliveries in 2009 to be higher than in 2008.
IDS revenue guidance for 2007 is approximately $31 billion, and now
excludes approximately $1 billion of launch business revenue due to the change
to equity method accounting following completion of the ULA joint venture.
Operating margins are expected to expand to approximately 11 percent in 2007.
For 2008, IDS expects revenue to grow to between $32 billion and $33 billion,
with operating margins of approximately 11 percent.
Boeing's research and development forecast for 2007 is unchanged at
between $3.2 billion and $3.4 billion. Research and development spending is
expected to decline in 2008 to between $2.8 billion and $3.0 billion. Annual
capital expenditures are expected to be approximately $1.6 billion in 2007 and
in 2008.
The company's non-cash pension expense is expected to be approximately
$1.1 billion for 2007 and approximately $0.9 billion for 2008. The company
expects pension expense to continue to decline after the guidance period with
2009 pension expense likely to be approximately half of the 2008 level.
Discretionary cash funding of Boeing's pension plans is expected to be
approximately $500 million in each of 2007 and 2008, though the company will
continue to evaluate making additional discretionary contributions to its
pension plans.
Table 7. Financial Outlook
(Billions, except per share data) 2007 2008
The Boeing Company
Revenues $64.5 - $65.0 $71 - $72
Earnings Per Share (GAAP) $4.55 - $4.75 $5.55 - $5.75
Operating Cash Flow(1) > $4 > $7
Boeing Commercial Airplanes
Deliveries 440 - 445 515 - 520
Revenues $32.5 - $33 $39 - $40
Operating Margin > 10% ~ 11%
Integrated Defense Systems
Revenues
Precision Engagement
& Mobility Systems ~ $13.5 Steady
Network & Space Systems ~ $11.0 Moderate Growth
Support Systems ~ $6.5 Moderate Growth
Total IDS Revenues ~ $31 $32 - $33
Operating Margin
Precision Engagement
& Mobility Systems ~ 12.5% Low Double Digit
Network & Space Systems ~ 8% High Single Digit
Support Systems ~ 13% Low Double Digit
Total IDS Operating Margin ~ 11% ~ 11%
Boeing Capital Corporation
Portfolio Size Lower Lower
Revenue ~ $0.8 ~ $0.8
Return on Assets > 1.0% > 1.0%
Research & Development $3.2 - $3.4 $2.8 - $3.0
Capital Expenditures ~ $1.6 ~ $1.6
(1) After forecast pension contributions of $0.5 billion in 2007 and
$0.5 billion in 2008.
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 company's 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:
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 GAAP diluted earnings per share
adjusted for certain significant charges or credits. Management believes
adjusted earnings per share are important to understanding the company's 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 in this press release include, among
others, statements regarding future results as a result of our growth and
productivity initiatives, our 2007 and 2008 financial outlook and the benefits
of the new IDS structure. 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), availability of raw
materials, acquisition and divestiture plans, and other cost-reduction and
productivity efforts; charges from any future SFAS No. 142 review; ability to
meet development, production and certification schedules for the 787 program;
technical or quality issues in development programs (affecting schedule and
cost estimates) or in the satellite industry; an adverse development in rating
agency credit ratings or assessments; the actual outcomes of certain pending
sales campaigns and the timely 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; costs associated with the exit of the Connexion
by Boeing business; 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, 2005 and our Quarterly Report on Form 10-Q for
the quarters ended March 31, 2006, June 30, 2006, and September 30, 2006.
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Twelve months Three months
(Dollars in millions ended ended
except per share data) December 31 December 31
2006 2005 2006 2005
Sales of products $52,644 $44,174 $15,105 $11,576
Sales of services 8,886 9,447 2,436 2,325
Total revenues 61,530 53,621 17,541 13,901
Cost of products (42,490) (36,858) (12,180) (10,056)
Cost of services (7,594) (7,767) (2,185) (1,717)
Boeing Capital Corporation interest
expense (353) (359) (86) (93)
Total costs and expenses (50,437) (44,984) (14,451) (11,866)
11,093 8,637 3,090 2,035
Income from operating investments, net 146 88 51 20
General and administrative expense (4,171) (4,228) (1,094) (939)
Research and development expense (3,257) (2,205) (937) (601)
(Loss)/gain on dispositions/business
shutdown, net (226) 520 42 29
Settlement with U.S. Department of
Justice, net of accruals (571)
Earnings from operations 3,014 2,812 1,152 544
Other income, net 420 301 124 117
Interest and debt expense (240) (294) (37) (53)
Earnings before income taxes 3,194 2,819 1,239 608
Income tax expense (988) (257) (259) (144)
Net earnings from continuing
operations 2,206 2,562 980 464
Cumulative effect of accounting
change, net of taxes of $10 and $(2) 17 (4)
Net gain/(loss) on disposal of
discontinued operations, net of taxes
of $5 and $(5) 9 (7) 9
Net earnings $2,215 $2,572 $989 $460
Basic earnings per share from
continuing operations $2.88 $3.26 $1.29 $0.61
Cumulative effect of accounting
change, net of taxes 0.03 (0.01)
Net gain/(loss) on disposal of
discontinued operations, net of taxes 0.01 (0.02) 0.01
Basic earnings per share $2.89 $3.27 $1.30 $0.60
Diluted earnings per share from
continuing operations $2.84 $3.19 $1.28 $0.59
Cumulative effect of accounting
change, net of taxes 0.02 (0.01)
Net gain/(loss) on disposal of
discontinued operations, net of taxes 0.01 (0.01) 0.01
Diluted earnings per share $2.85 $3.20 $1.29 $0.58
Cash dividends paid per share $1.20 $1.00 $0.30 $0.25
Weighted average diluted shares
(millions) 787.6 802.9 782.5 791.6
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Unaudited)
December December
(Dollars in millions 31 31
except per share data) 2006 2005
Assets
Cash and cash equivalents $6,118 $5,412
Short-term investments 268 554
Accounts receivable, net 5,285 5,246
Current portion of customer
financing, net 370 367
Deferred income taxes 2,837 2,449
Inventories, net of advances and
progress billings 8,105 7,878
Total current assets 22,983 21,906
Customer financing, net 8,520 9,639
Property, plant and equipment, net of
accumulated depreciation of $11,635
and $11,272 7,675 8,420
Goodwill 3,047 1,924
Prepaid pension expense 13,251
Other acquired intangibles, net 1,698 875
Deferred income taxes 1,051 140
Investments 4,085 2,852
Other assets, net of accumulated
amortization of $272 and $204 2,735 989
$51,794 $59,996
Liabilities and Shareholders' Equity
Accounts payable and other
liabilities $16,201 $16,513
Advances and billings in excess of
related costs 11,449 9,868
Income taxes payable 670 556
Short-term debt and current portion
of long-term debt 1,381 1,189
Total current liabilities 29,701 28,126
Deferred income taxes 2,067
Accrued retiree health care 7,671 5,989
Accrued pension plan liability 1,135 2,948
Other long-term liabilities 391 269
Long-term debt 8,157 9,538
Shareholders' equity:
Common shares, par value $5.00 -
1,200,000,000 shares authorized;
Shares issued - 1,012,261,159 and
1,012,261,159 5,061 5,061
Additional paid-in capital 4,655 4,371
Treasury shares, at cost -
223,522,177 and 212,090,978 (12,459) (11,075)
Retained earnings 18,453 17,276
Accumulated other comprehensive
loss (8,217) (1,778)
ShareValue Trust Shares -
30,903,026 and 39,593,463 (2,754) (2,796)
Total shareholders' equity 4,739 11,059
$51,794 $59,996
The Boeing Company and Subsidiaries
Business Segment Data
(Unaudited)
Twelve months Three months
ended ended
(Dollars in millions) December 31 December 31
2006 2005 2006 2005
Sales and other operating revenues:
Commercial Airplanes $28,465 $21,365 $7,606 $5,534
Integrated Defense Systems:
Precision Engagement and
Mobility Systems 14,350 13,510 4,318 3,754
Network and Space Systems 11,980 12,254 3,425 2,886
Support Systems 6,109 5,342 1,944 1,588
Total Integrated Defense Systems 32,439 31,106 9,687 8,228
Boeing Capital Corporation 1,025 966 241 238
Other 299 657 81 70
Accounting
differences/eliminations (698) (473) (74) (169)
Sales and other operating
revenues $61,530 $53,621 $17,541 $13,901
Earnings from operations:
Commercial Airplanes $2,733 $1,431 $665 $330
Integrated Defense Systems:
Precision Engagement and
Mobility Systems 1,238 1,755 296 521
Network and Space Systems 958 1,399 469 191
Support Systems 836 765 262 225
Total Integrated Defense Systems 3,032 3,919 1,027 937
Boeing Capital Corporation 291 232 37 40
Other (738) (363) (93) (73)
Unallocated expense (1,733) (2,407) (484) (690)
Settlement with U.S. Department of
Justice, net of accruals (571)
Earnings from operations 3,014 2,812 1,152 544
Other income, net 420 301 124 117
Interest and debt expense (240) (294) (37) (53)
Earnings before income taxes 3,194 2,819 1,239 608
Income tax expense (988) (257) (259) (144)
Net earnings from continuing
operations 2,206 2,562 980 464
Cumulative effect of accounting
change, net of taxes of $10 and
$(2) 17 (4)
Net gain(loss) on disposal of
discontinued operations, net of
taxes of $5 and $(5) 9 (7) 9
Net earnings $2,215 $2,572 $989 $460
Research and development expense:
Commercial Airplanes $2,390 $1,302 $722 $381
Integrated Defense Systems:
Precision Engagement and
Mobility Systems 404 440 107 112
Network and Space Systems 301 334 76 76
Support Systems 86 81 23 21
Total Integrated Defense Systems 791 855 206 209
Other 76 48 9 11
Total research and development
expense $3,257 $2,205 $937 $601
Twelve months Three months
ended ended
December 31 December 31
Unallocated expense 2006 2005 2006 2005
Share-based plans expense $(680) $(999) $(140) $(182)
Deferred compensation expense (211) (186) (80) (47)
Pension (369) (846) (67) (334)
Post-retirement (103) (5) (43) 37
Capitalized interest (48) (47) (15) (4)
Other (322) (324) (139) (160)
Total $(1,733) $(2,407) $(484) $(690)
The Boeing Company and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Year ended Year ended
December 31 December 31
(Dollars in millions) 2006 2005
Cash flows - operating activities:
Net earnings $2,215 $2,572
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Non-cash items -
Share-based plans expense 743 1,036
Depreciation 1,445 1,412
Amortization of other
acquired intangibles 100 91
Amortization of debt
discount/premium and
issuance costs 14 23
Pension expense 746 1,225
Investment/asset
impairment charges, net 118 83
Customer financing
valuation provision 32 73
Loss/(gain) on disposal of
discontinued operations,
net (14) 12
Loss/(gain) on
dispositions/business
shutdown, net 226 (520)
Other charges and credits,
net 82 129
Excess tax benefits from
share-based payment
arrangements (395) (70)
Changes in assets and
liabilities -
Accounts receivable (244) (592)
Inventories, net of
advances and progress
billings 444 (1,965)
Accounts payable and other
liabilities (744) 963
Advances and billings in
excess of related costs 1,739 3,562
Income taxes receivable,
payable and deferred 933 628
Other long-term
liabilities (62) (476)
Prepaid pension expense (522) (1,862)
Other acquired
intangibles, net 11
Accrued retiree health
care 114 30
Customer financing, net 718 589
Other (189) 46
Net cash provided by
operating activities 7,499 7,000
Cash flows - investing activities:
Discontinued operations customer
financing, reductions 2
Property, plant and equipment,
additions (1,681) (1,547)
Property, plant and equipment,
reductions 225 51
Acquisitions, net of cash
acquired (1,854) (172)
Proceeds from dispositions of
discontinued operations 33
Proceeds from dispositions 123 1,676
Contributions to investments (2,815) (2,866)
Proceeds from investments 2,850 2,725
Other (34)
Net cash (used)/provided
by investing activities (3,186) (98)
Cash flows - financing activities:
New borrowings 1
Debt repayments (1,681) (1,378)
Stock options exercised, other 294 348
Excess tax benefits from share-
based payment arrangements 395 70
Common shares repurchased (1,698) (2,877)
Dividends paid (956) (820)
Net cash used by
financing activities (3,645) (4,657)
Effect of exchange rate changes on
cash and cash equivalents 38 (37)
Net (decrease)/increase in cash and
cash equivalents 706 2,208
Cash and cash equivalents at
beginning of year 5,412 3,204
Cash and cash equivalents at end of
year $6,118 $5,412
Non-cash investing and financing
activities:
Capital lease obligations
incurred $357
The Boeing Company and Subsidiaries
Operating and Financial Data
(Unaudited)
Twelve months ended Three months ended
Deliveries December 31 December 31
Commercial Airplanes 2006 2005 2006 2005
717 5 (3) 13 (5) 4 (2)
737 Next-Generation 302 212 79 52
747 14 13 3 4
757 2
767 12 10 3 3
777 65 40 18 10
Total 398 290 103 73
Note: Commercial Airplanes deliveries by model include deliveries
under operating lease, which are identified by parentheses.
Integrated Defense Systems
Precision Engagement and
Mobility Systems
Chinook International New
Builds 2 2
Apache (New Builds) 31 12 10 5
F/A-18E/F 42 42 10 10
T-45TS 13 10 2 2
F-15 12 6 9 4
C-17 16 16 4 4
C-40 1 2
Network and Space Systems
Delta II 2 2 1
Delta IV 3 1
Commercial and Civil
Satellites 4 3 1
Military Satellites
December 31 September 30 December 31
Contractual backlog (Dollars in
billions) 2006 2006 2005
Commercial Airplanes $174.3 $154.0 $124.1
Integrated Defense Systems:
Precision Engagement and
Mobility Systems 25.0 20.0 21.8
Network and Space Systems 8.0 7.8 6.3
Support Systems 9.3 8.3 8.4
Total Integrated Defense
Systems 42.3 36.1 36.5
Total contractual backlog $216.6 $190.1 $160.6
Unobligated backlog $33.7 $38.7 $44.6
Total backlog $250.3 $228.8 $205.2
Workforce 154,000 156,300 153,000
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 company's 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
2006 2005
GAAP Diluted earnings per share (1) $1.29 $0.58
Business Shutdown/Asset Dispositions/Divestitures 0.02 a 0.16 b
Income tax adjustments (0.13) c (0.01) d
Interest associated with income tax benefits (0.01) e
Cumulative effect of Accounting Change, Net of Taxes 0.01 f
Net gain on Discontinued Operations, Net of Taxes (0.01) g
Adjusted earnings per share * "Core Earnings"
per share $1.16 $0.74
Weighted average diluted shares (millions) 782.5 791.6
a Represents the net earnings per share impact related to shutdown of
the Connexion business ($40 pre-tax charge) and the EDD divestiture
which was completed in 2005 ($15 pre-tax benefit). The per share
amount for the fourth quarter is presented net of income taxes at
37.3%
b Represents the net earnings per share impact of settlement and
curtailment of pension ($228 charge) and other post-retirement
benefits ($28 benefit) associated with the Rocketdyne divestiture.
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%.
c Represents tax benefits of $104 due to a settlement with the Internal
Revenue Service for the years 1993-1997 ($46 tax benefit) and
provision adjustments primarily related to tax filings for 2005 and
prior years ($58 tax benefit).
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 interest income of $8 related to income tax audit
settlements. The per share amount is net of income taxes at 37.3%
f Primarily represents the adoption of FASB Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations of ($4).
g Represents an after-tax adjustment to the 2004 sale of assets from
BCC's Commercial Financial Services to General Electric Capital
Corporation.
(1) 2005 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. The strike reduced 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 company's 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
2006 2005
GAAP Diluted earnings per share (1) $2.85 $3.20
Global settlement with U.S. Department of Justice 0.75 a
Business Shutdown/Asset Dispositions/Divestitures 0.24 b (0.04) c
Income tax adjustments (0.20) d (0.71) e
Interest associated with income tax benefits (0.01) f (0.05) g
Cumulative effect of Accounting Change, Net of Taxes (0.02) h
Net (gain)/loss on Discontinued Operations,
Net of Taxes (0.01) i 0.01 i
Adjusted earnings per share * "Core Earnings"
per share $3.62 $2.39
Weighted average diluted shares (millions) 787.6 802.9
a Represents the net earnings per share impact for the global settlement
of the Evolved Expendable Launch Vehicle (EELV) and Druyun matters
with the U.S. Department of Justice ($571 pre-tax charge and reversal
of a tax benefit of $16, which was recorded on previous accruals of
$44 at 37.3%. No tax benefit recognized relating to global
settlement.
b Represents the net earnings per share impact related to shutdown of
the Connexion business ($320 pre-tax charge) and the EDD divestiture
which was completed in 2005 ($15 pre-tax benefit). The per share
amount is presented net of income taxes at 37.3%
c 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%.
d Represents tax benefits of $155 due to a settlement with the Internal
Revenue Service for the years 1993-1997 ($46 tax benefit), tax benefit
from a state income tax audit settlement ($25 tax benefit), and
provision adjustments primarily related to tax filings for 2005 and
prior years ($84 tax benefit).
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 interest income of $16 related to income tax audit
settlements. The per share amount is net of income taxes at 37.3%
g Represents interest income of $64 related to income tax audit
settlements. The per share amount is net of income taxes at 37.8%
h 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.
i Represents an after-tax adjustment to the 2004 sale of assets from
BCC's Commercial Financial Services to General Electric Capital
Corporation.
(1) GAAP diluted earnings per share and adjusted earnings per share
exclude the pro-forma impact of 29 missed commercial aircraft
deliveries as a result of the International Association of Machinists
(IAM) strike. The strike reduced EPS by $0.35 per share.
SOURCE The Boeing Company
-0- 01/31/2007
/CONTACT: Investor Relations, David Dohnalek or Rob Young,
+1-312-544-2140, or Communications, Anne Eisele or Todd Blecher,
+1-312-544-2002, all of The Boeing Company/
/Web site: http://www.boeing.com /
(BA)
END
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