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.