BC_Covers_Final_gac0303.qxd 3/6/06 12:41 PM Page 1 The The Boeing Company 2005 Annual Report Boeing Company The Boeing Company 100 North Riverside Plaza Chicago, IL 60606-1596 2005 U.S.A. Annual Report “The Boeing Company aspires to deliver financial results that match the quality of our people and shaping the future our technology, which is a meaningful improve- ment from where we are today.” W. James McNerney, Jr., Chairman, President and Chief Executive Officer 0707-AR-06 BC_Covers_Final_gac0303.qxd 3/7/06 3:00 AM Page 2 Vision 2016: People working together as a Shareholder Information global enterprise for aerospace leadership The Boeing Company Electronic Proxy Receipt and Voting Duplicate Shareholder Accounts 100 North Riverside Plaza Shareholders have the option of voting Registered shareholders with duplicate Chicago, IL 60606-1596 their proxies by Internet or telephone, accounts may contact Computershare U.S.A. instead of returning their proxy cards for instructions regarding the consolida- 312-544-2000 through the mail. Instructions are in the tion of those accounts. 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They Company Shareholder Services can view their account history, change Prerecorded shareholder information is Independent Auditors The Boeing Company Table of Contents their address, certify their tax identifica- available toll-free from Boeing Deloitte & Touche LLP tion number, replace checks, request Shareholder Services at 800-457-7723. 111 South Wacker Drive Boeing is the world’s lead- to customers in 145 coun- 1 Operational Highlights duplicate statements, make additional You may also speak to a Boeing Chicago, IL 60606-4301 investments and download a variety of Shareholder Services representative at U.S.A. ing aerospace company tries around the world, 2 Message to Shareholders forms related to stock transactions. If you 312-544-2660 between 8:00 a.m. and 312-486-1000 and the largest manufac- and we are the number- 7 Executive Council are a registered shareholder and want 4:30 p.m. Central Time. turer of commercial jetlin- one U.S. exporter in terms Equal Opportunity Employer 8 Boeing Commercial Internet access and either need a pass- ers and military aircraft, of sales. With Corporate Boeing is an equal opportunity employer Airplanes word or have lost your password, please To Request an Annual Report, Proxy providing products and Offices in Chicago, Ill., either log onto web site and click on Statement, Form 10-K or Form 10-Q, and seeks to attract and retain the best- 10 Boeing Integrated qualified people regardless of race, color, tailored services to airlines Boeing employs more than Account Access or call one of Contact: Defense Systems Computershare’s phone numbers above. Data Shipping religion, national origin, gender, sexual and U.S. and allied armed 153,300 people in 48 orientation, age, disability, or status as a 12 2006 Initiative Spotlight: The Boeing Company forces around the world. American states and 67 disabled or Vietnam Era Veteran. Lean+ Annual Meeting Mail Code 3T-33 Our capabilities include countries. In addition, our The annual meeting of Boeing sharehold- P.O. Box 3707 rotorcraft, electronic and enterprise leverages the 14 Serving Our Customers ers is scheduled to be held on Monday, Seattle, WA 98124-2207 defense systems, missiles, talents of hundreds of 16 Global Presence May 1, 2006. Details are provided in the U.S.A. proxy statement. or call 425-393-4964 or 800-457-7723 satellites, launch systems, thousands more people 18 Technololgy Development and advanced information working for Boeing suppli- 20 Financials Boeing on the Internet and communication sys- ers worldwide. 89 Selected Products, The Boeing home page — tems. Our reach extends www.boeing.com — is your entry point Programs and Services for viewing the latest Company informa- 95 Board of Directors tion about its products and people. You may also view electronic versions of the 96 Company Officers annual report, proxy statement, Form 10- 97 Shareholder Information K or Form 10-Q. Printed in the U.S.A. BC113_Narrative_Fnl_cvo302.qxd 3/9/06 3:40 PM Page 1 Operational Highlights � Improved revenue growth � Captured a Boeing record � Achieved major IDS pro- by 5 percent and increased 1,002 net (1,029 gross) gram milestones with suc- net income by 37 percent over commercial airplane orders, cessful Future Combat System 2004, despite strikes at two of proving we have the right mar- and Multi-mission Maritime our business units and moder- ket and product strategies. Aircraft program reviews, deliv- ating defense markets. ery of the first F-15K to the � Reached significant Republic of Korea, rollout of � Increased backlog by Commercial Airplanes program the Italian KC-767 Tanker, and 34 percent to a record milestones with launch of the a successful Ground-based $205 billion. 777 Freighter, 737-900 Missile Defense test flight. Extended Range and 747-8 � Generated $7 billion of airplanes and completion of � Completed divestiture of operating cash flow, allowing us firm configuration for the 787 our Wichita operations, to fund $1.9 billion into pen- Dreamliner. Rocketdyne Propulsion & sion plans, buy back approxi- Power and Boeing Electronic mately $3 billion in stock and � Demonstrated outstanding Dynamic Devices, Inc., as we invest in new products. performance from Integrated sharpen our focus on large- Defense Systems with a 33 � Continued strong stock scale aerospace and defense percent operating earnings performance — performing in systems integration and give increase over 2004; and oper- the top quartile of the S&P these businesses the oppor- ating margins at 12.6 percent 500, with 36 percent growth tunity to grow through access compared to 9.6 percent a over 2004; increased earnings to broader markets. year ago. per share by 42 percent. delivering results 2005 Financial Highlights U.S. dollars in millions except per share data 2005 2004 2003 2002 2001 Revenues 54,845 52,457 50,256 53,831 57,970 Net earnings 2,572 1,872 718 492 2,827 Earnings per share* 3.19 2.24 0.85 2.84 3.40 Operating margins 5.1% 3.8% 0.8% 6.4% 6.2% Contractual backlog† 160,473 109,600 104,812 104,173 106,591 * Before cumulative effect of accounting change and net gain (loss) from discontinued operations. †Commercial Airplanes backlog at December 31, 2005, has been reduced by $7.8 billion to reflect the planned change in accounting for concessions effective January 1, 2006. Had December 31, 2004, reflected this method of accounting, Commercial Airplanes contractual backlog would have been reduced by $4.9 billion to $65.5 billion. Refer to Note 1 in the Financial section. NOTE: Page 3 of this report refers to earnings per share adjusted for special items “core earnings per share”. This is a “non-GAAP financial measure” under SEC rules. The reasons we use core earnings per share and a reconcilliation to GAAP earnings per share is included on page 21 of this report. 1 BC113_Narrative_Fnl_cvo302.qxd 3/11/06 4:58 AM Page 2 � W. James McNerney, Jr., Chairman, President and Chief Executive Officer 2 BC113_Narrative_Fnl_cvo302.qxd 3/6/06 2:05 PM Page 3 Message from the Chairman To the Shareholders and Employees of The Boeing Company: Let me begin by saying that I’ve known and admired this company for a long time — as a supplier partner, a member of the board, and, since July 2005, as chairman and chief executive — and I am pleased with our strong results in 2005.