This Page Intentionally Left Blank The Boeing Company 2007 Annual Report Leading the Way Vision 2016: People working together as a global enterprise for aerospace leadership The Boeing Company information and communication systems. Our reach extends to Boeing is the world’s leading aero- customers in more than 90 countries space company and the largest manu- around the world, and we are a facturer of commercial jetliners and mil- leading U.S. exporter in terms of sales. itary aircraft combined, providing prod- With corporate offices in Chicago, ucts and tailored services to airlines Boeing employs more than 159,300 and U.S. and allied armed forces people in 49 American states and around the world. Our capabilities 70 countries. Our enterprise also include rotorcraft, electronic and leverages the talents of hundreds defense systems, missiles, satellites, of thousands more people working launch systems and advanced for Boeing suppliers worldwide. Table of Contents 1 Operational Highlights 18 Pioneering Environmental 2 Message to Shareholders Performance 7 Executive Council 20 Financials 8 Boeing Commercial Airplanes 80 Selected Programs, Products and Services 10 Boeing Integrated Defense Systems 87 Board of Directors 12 Serving Our Customers 88 Company Officers 14 Global Presence 89 Shareholder Information 16 Technology 1 Operational Highlights I Achieved records for revenues, and services programs, leading to earnings, cash flow and backlog. overall company margins of 8.8 per- Revenue rose 8 percent to $66.4 bil- cent and simultaneous double-digit lion; net income grew 84 percent to operating margins for the year in both $4.1 billion; cash flow rose 28 percent our commercial airplane and defense to $9.6 billion; and total backlog businesses for the first time ever increased more than 30 percent to (10.7 percent each). $327 billion. I Captured nine out of 11 major I Set company record for commercial competitions entered by Integrated airplane orders and a third consecutive Defense Systems, including key orders year of orders exceeding 1,000 planes for Tracking and Data Relay Satellites, with a total of 1,413 net (1,423 gross) Joint Cargo Aircraft, the Airborne Early orders during 2007. Also set single- Warning and Control aircraft for the year order records for our 787, 737 Republic of Korea and two key pieces and freighters. of NASA’s Ares program; received 100- percent award fee for Ground-based I Increased dividend 14 percent; Midcourse Defense program and 100 approved a new share-repurchase plan percent of incentive milestone criteria for up to $7 billion; and repurchased on Future Combat Systems. 29 million shares during the year. I Achieved significant Commercial I Further strengthened our balance Airplanes milestones, including surpass- sheet by increasing cash and short- ing 800 orders for the 787; 7,000 term investments by $2.9 billion orders for the 737; and 1,000 orders and reducing consolidated debt by each for both the 767 and 777. Began $1.3 billion. 787 production, completed firm config- I Continued our focus on growth uration of the 747-8 Intercontinental and productivity with substantial addi- passenger plane, prepared for 777 tions to backlog, major efficiency gains Freighter production and continued and solid execution on production investing for future growth. 2007 Financial Highlights U.S. dollars in millions except per share data 2007 2006 2005 2004 2003 Revenues 66,387 61,530 53,621 51,400 49,311 Net earnings 4,074 2,215 2,572 1,872 718 Earnings per share* 5.26 2.84 3.19 2.24 0.85 Operating margins 8.8% 4.9% 5.2% 3.9% 0.8% Contractual backlog 296,964 216,567 160,637 104,778 104,855 Total backlog† 327,166 250,253 205,215 152,873 155,498 *Before cumulative effect of accounting change and net gain (loss) from discontinued operations †Total backlog includes contractual and unobligated backlog. See page 25. 2 Message From Our Chairman Driving long-term growth and value creation 3 W. James McNerney, Jr., Chairman, President and Chief Executive Officer To the Shareholders We also had our best year ever in cap- and Employees of turing new business and adding to a The Boeing Company: backlog that now totals almost one third of a trillion dollars—or just about From this company’s beginning, we five times our total revenues in 2007. have directed our passion, precision and innovation into our products, Boeing Commercial Airplanes had services, customers and citizenship. spectacular success in landing 1,423 On that foundation, we are pursuing airplane orders during 2007, reaching one big, overarching goal. We aim to more than 1,000 orders for an unprece- be the world’s strongest, best and dented third consecutive year and set- best-integrated aerospace company— ting a Boeing record for total orders in for today and tomorrow. Measured a single year. Commercial airplane against that goal, 2007 stands out orders make up $255 billion of Boeing’s as a year of significant—and $327 billion total backlog. Meanwhile, accelerating—progress. Integrated Defense Systems won nine out of 11 strategically important com- We achieved record financial perfor- petitions in 2007—an outstanding mance, which reflects the potent success rate. IDS is among the indus- combination of good top-line growth try leaders in profitability and holds a and strong gains in productivity. Total healthy $72 billion backlog. revenues rose to an all-time high of $66.4 billion. For the first time ever, I attribute this success to the people both of our core businesses—Boeing of Boeing who continuously improved Commercial Airplanes and Boeing their teams’ execution, productivity and Integrated Defense Systems—simulta- quality of work, doing so with the neously achieved double-digit operating utmost integrity. Without incremental margins. Gains in productivity and improvements generated by thousands performance in existing programs upon thousands of Boeing employees contributed significantly to earnings last year, we would not have met what and helped offset additional investment was—to be sure—a very challenging in key growth programs. Our cash flow business plan. I am exceedingly proud went from strong to even stronger— of this team for displaying the courage, increasing from $7.5 billion in 2006 commitment, integrity and account- to $9.6 billion in 2007. ability that it takes to learn, share, grow and improve. 4 With a record order book, the chal- its way to extraordinary success. It Fortunately, Boeing has a record of lenge before us is fundamentally one took the 737 (the best-selling airliner environmental achievement, as does of execution. Meeting our budget and in commercial aviation history) more the industry as a whole. Over the last schedule commitments not only drives than 15 years from the time it was 40 years, we have reduced carbon customer satisfaction and near-term launched to reach 1,000 orders. We emissions from our commercial air- financial results but is also a prerequi- expect to surpass that milestone with planes by around 70 percent and site for the stability that enables us to the 787 in less than half the time. reduced noise emissions by 75 per- improve productivity further. Still more, Still more, with the greater volume cent. However, commercial aviation we must extend the high level of comes greater opportunity for us to still accounts for roughly 2 percent of performance-to-plan that we have in reduce cost, improve productivity and world CO2 emissions. That percentage existing production programs to our achieve higher performance early in is expected to grow moderately with emerging programs, including the the production run. airline-fleet and travel expansion in eagerly awaited 787 Dreamliner. coming years. So we are taking action Changing Competitive Landscape to ensure sustainable growth for our During 2007, as a result of start-up industry. At research-and-development Many people talk of Boeing and difficulties in our extended supply facilities and with partners around the Airbus as a “duopoly,” and we cer- chain and in our own factories, we world, Boeing is working on a future tainly regard Airbus as an extremely announced delays in both the first that could include sustainable biofuels, tough competitor. In fact, we expect flight and first deliveries of the 787. In fuel cells (which may one day replace to see Airbus’ competitiveness doing so, we disappointed customers the auxiliary power units on today’s increase as it restructures itself and and investors alike. After four consec- airplanes), more efficient air traffic the U.S. dollar ultimately regains utive years of robust share-price management systems and additional ground on the Euro. But Boeing and appreciation, Boeing’s stock declined improvements in reducing emissions. in 2007 (down 1.6 percent for the Airbus will not be alone forever. With year, compared to a 6.4-percent gain encouragement from their govern- Meanwhile, world defense markets are for the Dow Jones Industrial Average). ments, other companies are develop- also changing. While this is opening While this decline brought our valua- ing or building commercial airplanes at up new avenues for growth outside tion down to more normal levels for or near the lower end of the size range the United States, it is also exposing our industry, we are confident that we served by our airplanes. This includes Boeing and other U.S. defense com- will regain a premium for our shares companies in Japan, China, Canada, panies to stiffer challenges from as we deliver on our backlog and Russia and Brazil. We must be pre- overseas competitors at home, where commitments—including the 787— pared for a future in which there could we expect budgets to moderate. and continue growing. be more than two producers of large Companies that provide the most commercial airplanes.