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The Boeing Company 2004 Annual Report The Boeing Company 2004 Annual Report PDF

110 Pages·2005·3.84 MB·English
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BC112_Final Cover0302 3/6/05 10:49 PM Page fc1 The Boeing Company T TThhee BBooeeiinngg CCoommppaannyy 22000044 AAnnnnuuaall RReeppoorrtt h e 100 North Riverside Plaza B o Chicago, IL 60606-1596 e in g U.S.A. C o m p a n y 2 0 0 4 A n n u a l R e p o rt 00770077--AARR--0055 Boeing ifc_ibc_0304 03.04.05 4:06 PM Page ifc1 Vision 2016: People working Shareholder Information together as a global enterprise The Boeing Company Electronic Proxy Receipt and Voting Duplicate ShareholderAccounts World Headquarters Shareholders have the option of voting their Registered shareholders with duplicate The Boeing Company proxies by Internet or telephone, instead of accounts may contact EquiServe for for aerospace leadership. 100 North Riverside Plaza returning their proxy cards through the mail. instructions regarding the consolidation of Chicago, IL 60606-1596 Instructions are in the proxy statement and those accounts. The Company recom- U.S.A. attached to the proxy card for the annual mends that registered shareholders always 312-544-2000 meeting. use the same form of their names in all Registered shareholders can go to stock transactions to be handled in the Strategies Values Transfer Agent, Registrar, Dividend www.econsent.com/ba to sign up to same account. Registered shareholders Paying Agent and Plan Administrator receive their annual report and proxy state- may also ask EquiServe to eliminate excess Run healthy core businesses Leadership The transfer agent is responsible for ment in an electronic format in the future. mailings of annual reports going to share- Leverage strengths into new products and services Integrity shareholder records, issuance of stock, Beneficial owners may contact the brokers holders in the same household. Open new frontiers Quality distribution of dividends and IRS Form or banks that hold their stock to find out 1099. Requests concerning these or whether electronic receipt is available. If you Change of Address Customer satisfaction other related shareholder matters are choose electronic receipt, you will not For Boeing registered shareholders: Core Competencies People working together most efficiently answered by contacting receive the paper form of the annual report Call EquiServe at 888-777-0923, EquiServe Trust Company, N.A. and proxy statement. Instead, you will or log onto your account at Detailed customer knowledge and focus A diverse and involved team receive notice by e-mail when the materials www.equiserve.com, Large-scale system integration Good corporate citizenship EquiServe are available on the Internet. or write to EquiServe Lean enterprise Enhancing shareholder value P.O. Box 43016 P.O. Box 43016 Providence, RI 02940-3016 Written Inquiries May Be Sent To: Providence, RI 02940-3016 U.S.A. Shareholder Services U.S.A. 888-777-0923 The Boeing Company (toll-free for domestic U.S. callers) Mail Code 5003-1001 For Boeing beneficial owners: The Boeing Company 781-575-3400 100 North Riverside Plaza Contact your brokerage firm or bank to (anyone phoning from outside the Chicago, IL 60606-1596 give notice of your change of address. U.S. may call collect) U.S.A. Boeing is the world’s leading aerospace company through network-centric operations; creating Stock Exchanges and the largest manufacturer of commercial jet- advanced technology solutions that reach across Boeing registered shareholders can also Investor Relations The Company’s common stock is traded obtain answers to frequently asked ques- The Boeing Company principally on the New York Stock liners and military aircraft, with capabilities in business units; e-enabling airplanes and providing tions on such topics as transfer instructions, Mail Code 5003-5016 Exchange; the trading symbol is BA. rotorcraft, electronic and defense systems, mis- connectivity on moving platforms; and arranging the replacement of lost certificates, con- 100 North Riverside Plaza Boeing common stock is also listed on the siles, satellites, launch vehicles and advanced financing solutions for our customers. solidation of accounts and book entry Chicago, IL 60606-1596 Amsterdam, Brussels, London, Swiss and shares through EquiServe’s home page on U.S.A. Tokyo stock exchanges. Additionally, the information and communication systems. Our Headquartered in Chicago, Illinois, U.S.A., the Internet at www.equiserve.com. stock is traded without being listed on the reach extends to customers in 145 countries Boeing employs more than 159,200 people in more Registered shareholders also have Company Shareholder Services Boston, Chicago, Cincinnati, Pacific and secure Internet access to their own Prerecorded shareholder information is Philadelphia exchanges. around the world, and we are the number one than 67 countries. This represents one of the most accounts through EquiServe’s home page available toll-free from Boeing Shareholder U.S. exporter in terms of sales. diverse, talented and innovative workforces any- (see above web site address). They can Services at 800-457-7723. You may also Independent Auditors Boeing has a long tradition of aerospace leader- where. More than 83,800 of our people hold view their account history, change their speak to a Boeing Shareholder Services Deloitte & Touche LLP address, certify their tax identification representative at 312-544-2815 between 180 North Stetson Avenue ship and innovation. We continue to expand our degrees—including more than 28,900 advanced number, replace checks, request duplicate 8:00 a.m. and 4:30 p.m. Central Time. Chicago, IL 60601-6779 product line and services to meet emerging degrees—in virtually every business and technical statements, make additional investments U.S.A. and download a variety of forms related to To Request an Annual Report, 312-946-3000 customer needs. Our broad range of capabilities field from more than 2,800 colleges and universi- stock transactions. If you are a registered Proxy Statement, Form 10-K or includes creating new, more efficient members of ties worldwide. Our enterprise also leverages the shareholder and want Internet access Form 10-Q, Contact: Equal Opportunity Employer our commercial airplane family; integrating military talents of hundreds of thousands more skilled and either need a password or have lost Data Shipping Boeing is an equal opportunity employer your password, please either log onto The Boeing Company and seeks to attract and retain the best- platforms, defense systems and the warfighter people working for Boeing suppliers worldwide. EquiServe’s web site and click on Account Mail Code 3T-33 qualified people regardless of race, color, Access or call one of the EquiServe phone P.O. Box 3707 religion, national origin, gender, sexual numbers above. Seattle, WA 98124-2207 orientation, age, disability, or status as a U.S.A. disabled or Vietnam Era Veteran. Table of Contents Annual Meeting or call 425-393-4964 or 800-457-7723 The annual meeting of Boeing shareholders is scheduled to be held on Monday, Boeing on the Internet 1 Operational Highlights 18 Boeing Internal Services May 2, 2005. Details are provided in the The Boeing home page—www.boeing.com proxy statement. —is your entry point for viewing the latest 2 Message to Shareholders 20 Financials Company information about its products 7 Executive Council 99 Selected Products, Programs and Services and people. You may also view electronic versions of the annual report, proxy state- 8 Boeing Commercial Airplanes 105 Board of Directors ment, Form 10-K or Form 10-Q. 10 Boeing Integrated Defense Systems 106 Company Officers A. 12 Connexion by Boeing 107 Shareholder Information S. U. 14 Boeing Capital Corporation he n t 16 Boeing Technology d i e nt Pri 1-7_NEW_cvo03.09 3/9/05 4:22 PM Page 1 Operational Highlights Sharper focus on execution led to impressive operational performance in 2004. (cid:1) Delivered solid growth and profitability, improving (cid:1) Won $3.9 billion Multi-mission Maritime Aircraft revenues by 4.4 percent and earnings by 161 per- contract—with a potential value of $44 billion— cent over 2003; also increased earnings per share besting the 40-year incumbent to build next- by 164 percent. generation “submarine hunters.” (cid:1) Generated strong cash flow of $3.5 billion after (cid:1) Signed a $6 billion extension to expand the scope $4.4 billion in discretionary and nondiscretionary of the Future Combat Systems program and pension funding. accelerate delivery of technologies and capabili- ties to the U.S. Army. (cid:1) Continued robust stock performance with Boeing stock appreciation of 22.9 percent in 2004, (cid:1) Sold our commercial equipment financing busi- compared with 9 percent for the S&P 500, 14 per- ness to GE for more than $2 billion, strengthening cent for S&P 500 Aerospace and Defense Index an already strong cash balance; with strong and 3.2 percent for the Dow. operating cash flows, allowed Boeing Capital Corporation to retire more than $2 billion in debt. (cid:1) Launched the 787 (formerly 7E7) Dreamliner with our largest-ever inaugural order, ending the year (cid:1) Began initial deployment of Connexion by with customers ordering 56 787s and placing com- BoeingSMservice on four airlines, and reached mitments for 70 additional airplanes. Announced definitive service agreements with three and sales in early 2005 brought the total to 193. preliminary agreements with four others. 2004 Financial Highlights (U.S. dollars in millions except per share data) 2004 2003 2002 2001 2000 Revenues 52,457 50,256 53,831 57,970 51,119 Net earnings* 1,872 718 492 2,827 2,128 Earnings per share* 2.24 0.85 2.84 3.40 2.37 Operating margins 3.8% 0.8% 6.4% 6.2% 6.0% Contractual backlog 109,600 104,812 104,173 106,591 120,600 *Before cumulative effect of accounting change. 1 1-7_NEW_cvo03.09 3/9/05 4:22 PM Page 2 Message to the Shareholders and Employees of The Boeing Company Lewis E. Platt Non-Executive Chairman 2 1-7_NEW_cvo03.09 3/9/05 4:23 PM Page 3 An intense focus on execution led to strongly im- Two, we understand the U.S. government’s proved results in 2004. Earnings were up 161 percent, desire—and indeed its obligation—to leave no and Boeing outperformed the S&P 500 Aerospace stone unturned in investigating lingering allegations and Defense Index in total shareholder return for of favoritism or abuse of the public trust. We are co- the year. Based on the numbers, the company is operating with the government in its investigations. doing well. Even so, it was a distressing year for all Three, as a result of our own internal reviews, I who admire this company or feel privileged to be a am more convinced than ever that the misdeeds are part of it. Simply put, our reputation suffered as the not systemic or characteristic of the overall behavior company operated under a cloud of uncertainty of the 159,000 people that make up this company. throughout 2004 and into 2005. That said, we have spent an enormous amount of While the U.S. Air Force lifted the suspension of time and effort to ensure that the people throughout our launch business in early 2005, we continue to Boeing understand fully that integrity is a business bear the effects of events involving a very few peo- fundamental. Our guiding principle is to exhibit the ple who are no longer part of the company. We did highest standards of business conduct at all times. not conclude a long-sought contract with the U.S. We have drawn bright lines to define ethical decision Air Force for a new fleet of tankers. And sadly, the making, and we have made it clear to all of our peo- man who had started to turn the company around ple that there will be zero tolerance for anyone who made a serious error in judgment. The board asked crosses the line into dishonest or unethical behavior. for Harry Stonecipher’s resignation because it deter- mined his actions surrounding a personal relation- Strategy and Execution ship were inconsistent with Boeing’s code of conduct, reflected poor judgment and eroded his Boeing is an aerospace company of unrivaled bal- ability to lead this company. ance and breadth, and our strategy is well known. As the senior leader of this company, I wish to Most Boeing employees could recite the three main make three main points from the outset. elements of our strategy in their sleep. First, we will One, no one should underestimate the strength run healthy core businesses. Next, we will leverage of our business or the firmness of our resolve. It is our strengths and move into adjacent businesses harder to rebuild a reputation than it is to build one where we have a competitive advantage in technol- in the first place. We’ve taken decisive action to fix ogy or in customer knowledge and insight. Last, we the problems identified and feel confident that we will lead, not follow, in opening the new frontiers will succeed in that endeavor because we have that are critical to long-term growth and competi- attracted the right people, and we continue to do tiveness within the aerospace industry. so. Our people are motivated by a fierce pride in That is our strategy. It is working well, and it is what they do and what it means to be part of The not about to change. What has changed is a return Boeing Company. to the fundamentals of executing the business. We 3 1-7_NEW_cvo03.09 3/9/05 4:23 PM Page 4 All in all, there is exceptional upside for Boeing in our defense businesses. took a good, hard look at the business case behind that strategy to a wide array of conventional every one of our programs and businesses—re- and nonconventional threats. It excels as the lead examining targets, establishing new and more integrator of complex defense systems that involve meaningful ones where needed, and really holding different platforms (such as aircraft, tanks, ships people accountable for their performance. and satellites) and has dramatically increased the As a result of these thorough reviews, we took sharing of information and capabilities among them. corrective action in several areas. We decided, for During 2004, IDS captured more than $30 billion instance, that, even though our 717 brings tremen- in orders, including major contract awards from the dous value to the airlines that operate it, the overall U.S. Navy, Army and Air Force: market does not support continuing production (cid:1) A $3.9 billion Navy contract to build the Multi- beyond delivery on our current commitments. We mission Maritime Aircraft that will replace the also determined that Boeing Air Traffic Management Navy’s aging fleet of 223 P-3s with new aircraft simply isn’t a business right now. So we scaled based on the Boeing 737 airframe. This program back the program and moved it into our Phantom represents $44 billion in potential revenues. Works research and development group. There, it (cid:1) A $6 billion extension of the Army’s transforma- will be nurtured as an extremely promising technol- tional Future Combat Systems program to expand ogy and business concept until customers are ready the program’s scope and accelerate delivery of to make a financial commitment to radical improve- key technologies and capabilities to current ment of the global air traffic control system. forces. This brings the total value for Boeing’s But the biggest payoff came in the improved part of the program to $21 billion. performance of our primary businesses—Integrated (cid:1) A contract with a potential value of $4.9 billion Defense Systems and Commercial Airplanes. to provide maintenance and support work for the Air Force’s C-17 fleet. Integrated Defense Systems In addition to resolving issues from an earlier time period that affected the tanker procurement, Boeing Integrated Defense Systems (IDS) performed the one remaining challenge for IDS is the commer- extraordinarily well in 2004. Revenues grew by 11 cial satellite business. This business continues to percent; operating margins improved to 9.6 percent; suffer from cost growth and technical problems. and IDS continued to add to its backlog, already the However, we have assigned good people to the highest in the defense industry. business, and we expect to fix those problems in IDS has established Boeing as the leading indus- the coming year. try partner to the U.S. government in developing a All in all, there is exceptional upside for Boeing “network-centric” view of the world and applying in our defense businesses. Defense customers have 4 1-7_NEW_cvo03.09 3/9/05 4:23 PM Page 5 a high level of confidence in our company. They see of 126 new 787s. With announced sales in early Boeing as a clear leader in understanding the com- 2005, that total reached 193. plex challenges of today’s defense environment and Through the use of new materials and advances in being able to marshal the resources (and espe- in aerodynamics, we’ve designed the sleek-looking cially the information and communications) that are 787 to open a new frontier in commercial flight. As needed to meet them. the first widebody with high-strength, lightweight composite body, wings and tail, it is expected to Commercial Airplanes outperform other midsize airplanes, delivering higher speed, more range, reduced fuel burn and In the leanest of times, Boeing Commercial Airplanes emissions, greater interior comfort, reduced noise (BCA) learned to excel at lean production and assem- on landings and takeoffs, and superior economics. bly. Since the collapse of the commercial airplane In opening nonstop service between scores of new market in September 2001, BCA has exercised great city pairs, the 787 is designed to bring an unrivaled ingenuity in finding new ways to reduce unit costs combination of convenience and comfort to long- and speed cycle times. As a result, it has remained distance travel. Even more compelling, with a 10 profitable despite a huge downturn in production, percent improvement in direct operating costs and and it has continued to invest in the future. Now 45 percent more cargo revenue capacity than com- BCA is in an excellent position to grow and prosper peting aircraft, the 787 can accommodate both low in what promises to be a sustained upturn in the ticket prices for the traveling public and high mar- commercial airplane market. gins for airlines. That makes it a winner on all counts. Airline traffic finally pushed ahead of pre-9/11 levels in 2004. Outside the United States, many air- Time to Level the Playing Field lines have achieved strongly improved profitability. With load factors at record highs, airlines need While we continue to create value for our customers more seats. Boeing is primed to meet that need through Boeing products, we must also insist on a with a full family of airplanes—including the most level competitive playing field in the marketplace. exciting new airplane since the dawn of the jet age. Four years ago, Airbus drew on substantial launch We launched the Boeing 787 (formerly 7E7) aid from four European governments to begin de- Dreamliner on the biggest single order for a new air- velopment of the A380 super jumbo jet, which is a plane in Boeing history—a firm order for 50 787s direct competitor to our 747. Now it is asking for ad- from ANA (All Nippon Airways), with first deliveries ditional launch aid to support a competitor to the 787. scheduled in 2008. At the end of 2004, we reached Enough is enough. Subsidized competition is 56 firm orders, with airline commitments for a total unfair competition, and it is clearly forbidden by In the leanest of times, Boeing Commercial Airplanes learned to excel at lean production and assembly. 5 1-7_NEW_cvo03.09 3/9/05 4:24 PM Page 6 Boeing is prepared to make the tough decisions to ensure real leadership in the aerospace industry for a long time to come. World Trade Organization rules. If Airbus wants to performance substantially. On a competitive basis, develop another airplane, it should pay for it out of this company is better than ever, with great strength cash from operations, or it should borrow the both in existing programs and in the leading-edge money at market rates—just as Boeing does. developments that will define the future. Founded in 1970, Airbus is 35 years old. It has Our defense systems business accounted for been treated as an “infant industry” for far too long. more than 58 percent of total revenues in 2004. This It’s time for Airbus to play by the rules that apply to is a business that is broad and deep. And, as long large, mature enterprises. as we execute, I am confident that it will continue to grow despite potential defense budget reductions. Connecting Global Travelers At the same time, we are on the cusp of what we believe will be a sustained recovery in the commer- With the launch of our in-flight Connexion by cial airplane market, with an all-new airplane that BoeingSMservice in 2004, we continued to solidify our will set whole new standards for operating perform- leadership in providing secure, high-speed Internet ance and passenger comfort in long-distance travel. and e-mail connectivity to travelers worldwide. At In every way, we are executing the strategy. We year-end, the service was offered to passengers on are running healthy core businesses. We are experi- four global airlines, on routes between Europe, Asia encing strong growth in adjacent businesses such and the United States, with additional airlines plan- as aerospace services. Last, but not least, we have ning to offer the in-flight service in 2005 and shown that Boeing is prepared to make the tough beyond. With in-flight service launched, Connexion decisions to ensure real leadership in the aerospace by Boeing expanded its efforts to the open seas, industry for a long time to come. conducting a successful three-month maritime demonstration of its real-time connectivity solution. Boeing’s Future Lewis E. Platt Despite major distractions, people around the com- Non-Executive Chairman pany kept their eyes on the ball throughout 2004. As a result, almost all parts of Boeing increased their 6 1-7_NEW_cvo03.09 3/9/05 4:24 PM Page 7 The Executive Council Pictured left to right: James F. Albaugh Thomas R. Pickering James A. Bell Executive Vice President; Senior Vice President, President and Chief Executive Officer; President and International Relations Chief Financial Officer Chief Executive Officer, Integrated Defense Systems Richard D. Stephens Laurette T. Koellner Senior Vice President, Executive Vice President; Rudy F. deLeon Internal Services President, Connexion by Boeing Senior Vice President, Government Operations Bonnie W. Soodik Tod R. Hullin Senior Vice President, Senior Vice President, Douglas G. Bain Office of Internal Governance Communications Senior Vice President; General Counsel James M. Jamieson Senior Vice President; Alan R. Mulally Chief Technology Officer Executive Vice President; President and Chief Executive Officer, Commercial Airplanes 7 p1-20_final narrative_cvo2.23 2/23/05 9:39 PM Page 8 “We’ve restructured to operate profitably through the downturn while investing in new products and services for our customers. We’re well positioned for the recovery in our business.” Alan R. Mulally, President and Chief Executive Officer, Commercial Airplanes 8

Description:
systems, mis- siles, satellites, launch vehicles and advanced Corporation to retire more than $2 billion in debt. □ Began initial . Boeing Integrated Defense Systems (IDS) performed Accrued pension plan liability. 3,169.
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