Integrated Defense Systems - IIS Windows...

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Integrated Defense Systems

Jim AlbaughExecutive Vice President, The Boeing Company President and Chief Executive Officer, Integrated Defense Systems

May 17, 2006

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Annual Investor Conference | Integrated Defense Systems

$31.1B2005 Revenue


Realigned organization

Validated strategy

Solid revenue base

Industry-leading margins

Focused on cost and execution

Manageable risk

40%

43%

17%

Network& Space Systems


PrecisionEngagement& MobilitySystems


SupportSystemsSupportSystems

Balanced portfolio; focused on executionBalanced portfolio; focused on execution

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IDS 2005 Performance

2005

Revenue $31.1B

Operating Earnings* $3.9B

Operating Margins* 12.6%

Adjusted Operating Margins** 10.8%

* Includes Rocketdyne Power & Propulsion (RPP) divestiture** Excludes RPP divestiture

Delivering solid revenue and double-digit margins

Robust defense portfolio

Industry-leading backlog

Continuing focus on execution

Strong financial engineStrong financial engine

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IDS 1Q 2006 Performance

1Q06

Revenue $7.2B

Operating Earnings $0.8B

Operating Margins 11.4%

Focus on execution drives margin expansionFocus on execution drives margin expansion

Delivered 27 production aircraft

Definitized FCS contract conversion

Completed P-8A PDR

Executed two GMD tests

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Boeing’s newest fighter pilot

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Raising the Bar

Improve execution and productivity

Enhance customer intimacy

Deliver timely capability-based solutions

Reduce cost and complexity

Position IDS for sustainable, long-term profitable growthPosition IDS for sustainable, long-term profitable growth

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Market Environment – Budget Realities

Recent spending is well above the long term growth trend

Multiple top-line pressures given other domestic priorities

Many accounts are oversubscribed, especially aviation

Fewer new starts, must have near-term relevance

Competition for markets, programs, and talent intense

Moderating budget; fierce competition for growthModerating budget; fierce competition for growth

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Market Environment – QDR TransformationDoD Moving to Joint Service Capabilities

New Strategic EnvironmentPast

Single Service Acquisition

Threat-based Planning

Service – Concepts of Operation

Forces That Need to Deconflict

Ships, Guns, Tanks and Planes

Vertical Integration

Joint Portfolio Management

Capabilities-based Planning

Joint Operation

Integrated and Interdependent Forces

Information and Knowledge

Horizontal Integration

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PrecisionEffects

PrecisionEffects

GlobalMobilityGlobal

Mobility

IntegratedISR

IntegratedISR

IntegratedC3

IntegratedC3

SpaceExploitation

SpaceExploitation

IntegratedLogistics

IntegratedLogistics

IntegratedTraining

IntegratedTraining

Customer – Enduring Capabilities

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Market Environment – Summary

Spending money in different ways

Jointness and interoperability dominant QDR themes

Customer focused on capability based solutions

Cost and performance are major discriminators

Competition increasing as market growth slows

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Customer – Boeing’s Portfolio Alignment

Network &Space

Systems

Network &Space

Systems

JDAMJDAM

SDBSDB

AEW&CAEW&CC-17C-17

F-18F-18

ApacheApache CH-47CH-47

J-UCASJ-UCAS MMAMMA

TankersTankers

Classified ShuttleShuttle

ISSISS

SatellitesSatellites

Sea LaunchSea Launch

DeltaDelta

JTRSJTRS

FAB-TFAB-T

FCSFCS

TacticalLasers

TacticalLasers

PAC-3PAC-3

ABLABL

GMDGMD

PrecisionEffects

PrecisionEffects

GlobalMobilityGlobal

Mobility

IntegratedISR

IntegratedISR

IntegratedC3

IntegratedC3

SpaceExploitation

SpaceExploitation

IntegratedLogistics

IntegratedLogistics

IntegratedTraining

IntegratedTraining


C-17 GSPC-17 GSPMaintenance,

Modifications & Upgrades

FIRSTFIRST

Integrated LogisticsTraining Systems

and Services

John Lockard

Precision Engagement

& Mobility Systems

Roger Krone

Pat Finneran

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Business Organization Drives Execution and Productivity Improvements

Aligns like capabilities in single organization

Consolidates domain knowledge

Clear responsibility, authority, and accountabilityfor execution

Reduces complexity and cost structure

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IDS Strategic Imperatives

Chart the CourseSet High ExpectationsInspire OthersFind a WayLive the ValuesDeliver Results

Program Management BPSystems EngineeringSupplier ManagementEnhanced Cost StructureCorporate Initiatives

Customer IntimacyCapabilities-based SolutionsNetwork-enabled SolutionsEnhance Existing PlatformsPerformance-based LogisticsBest of IndustryGrow Beyond the Core

Lead EffectivelyExecution/Productivity

Shape and Grow

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Continuing to Drive a Culture of Execution and Productivity

IDS Focus Areas• Program Management• Supplier Management

and Quality• Systems Engineering

• Cost Structure

Lean +

Global Sourcing

EffectivenessDevelopment Effectiveness

and Productivity

Support Services Excellence

Improvements fuel long-term competitivenessImprovements fuel long-term competitiveness

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Global Sourcing InitiativeMission and Charter

CharterLeverage the buying power of Boeing

Shape the supply chain for performance

Reduce Transaction Costs

Reduce Cycle Time

MissionDevelop an integrated sourcing plan that improves productivity and efficiency, leading to higher quality products and services at reduced cost for our customers.

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Daily• Customer call• Schedule status• Calendar• Tactical priorities• Issues/Help

needed• Program

Leadership tagup

Weekly• Communications

look ahead• Program Manager

Review• Change Control

Board• Risk/Opportunities

Board• Progress Report

CONOPS – Battle Rhythm

Monthly• President’s Program

Review• Business

performance review• VSP review• Functional review• Strategy review• NBF review• Leadership Team

Meeting

Quarterly• CEO Reviews• Program reviews• EAC reviews• IDS reviews• Functional

Performance Reviews

Annually• Executive Mtg.• LRBP• Strategic

Planning Cycles• Leadership

Excellence Training

• VSP Goals and Objectives

LeadershipLeadershipPrinciplesPrinciples

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Employee Involvement

100% of IDS in TeamsProduction Operations

3,101 EI Teams$143,000 averagesavings/team ‘05$170M ‘05 savings

Program TeamsRecord ’05 Performance

All Managers trained in Team Leadership

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Lean is Paying Off

F/A-1880% unit cost reduction/55% reduction in throughput time20% increase in capacity and rate while reducing footprint90% reduction in defect rate

Apache85% reduction in hours/aircraft in final assembly69% reduction in flow days90% reduction in defect rate

JDAMUnit labor cost reduced from >8 hours to <2 hours>50% reduction in total production cost67% reduction in scrap/75% reduction in rework hours

C-1745% reduction in final assembly hours28-day reduction in flow75% reduction in defect rate

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Also:Expand the Core

Capability-based solutionsPerformance-based logisticsInternational

Create new coresAdjacent marketsMarket shapingPrudent acquisitions

Continue to:Improve operational efficiency and effectiveness

Leverage our legacy platforms

Provide network-enabledsolutions

Offer Best of Industry

Assessing our strategy and discriminators

Meeting our customers’ evolving needs

Cost and cycle time –Next source of competitive advantage

Cost and cycle time –Next source of competitive advantage

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Historical Revenue Growth

Major program wins drive revenue growth and backlogMajor program wins drive revenue growth and backlog

Focused on customers’ enduring needsLeveraging legacy platform expertiseFocus on delivering network-centric capabilities

0

5

10

15

20

25

30

35

2000 2001 2002 2003 2004 2005

Rev

enue

($B

)

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Efficient Operations Driving Margins

Focus on execution paying dividendsFocus on execution paying dividends

Continuing to employ lean operationsDriving systems integration deeper into organizationExecuting balanced development programs

0

2

4

6

8

10

12

2000 2001 2002 2003* 2004 2005** 2006E 2007E

Ope

ratin

g M

argi

ns (%

)

* Excludes Delta IV manifest charge

**Excludes gain from Rocketdyne sale

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2006 revenue ~$31.5B

2007 revenue ~ 2-5% growth

2006 margins ~10.5%

2007 margins >10.5%


40%

43%

17%






Solid revenues, excellent profitabilitySolid revenues, excellent profitability

$31.1B2005 Revenue

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Based on 2005 revenues

ExecuteF/A-18E/F and EA-18GF-15F-22AApache, ChinookJDAM, Small Diameter BombC-17V-22P-8A (Multi-Mission Maritime Aircraft)AWACS and AEW&C

CaptureInternational Fighter and AEW&CUSAF TankerUnmanned Combat Air VehicleNext Generation Fighter/BomberCombat Search and Rescue Helicopter (CSAR-X)

2005 2006ERevenue $13.5B $14.0BMargins 13.0% 13.0%

Precision Engagement & Mobility Systems

Moderate growth with continued strong marginsModerate growth with continued strong margins

43%

Global MobilityGlobal Mobility

Global StrikeGlobal Strike

Rotorcraft

Rotorcraft

ASW & ISR

ASW & ISRSupportSupportSystemsSystems

Network & Network & Space SystemsSpace Systems

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ExecuteFuture Combat SystemProprietaryJoint Tactical Radio – Ground Mobile RadioGround-based Midcourse DefenseAirborne LaserSpace Shuttle, International Space StationDelta II, Delta IV/EELVMilitary and Commercial Satellites

CaptureTransformational CommunicationAMF JTRSProprietaryCrew Exploration VehicleEELV Buy IIICommercial Satellites

Based on 2005 revenues*

2005* 2006ERevenue $12.3B $11.5BMargins 7.0% 6.0%

Network & Space Systems

*Excludes Rocketdyne 2005 sale

Moderate growth with high single-digit marginsModerate growth with high single-digit margins

40%

S&ISS&ISMissile Defense

Missile Defense

Space Exploration

Space Exploration Combat Systems

Combat Systems

C3C3

Precision Precision Engagement & Engagement &

Mobility SystemsMobility SystemsSupportSupportSystemsSystems

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ExecuteC-17 Globemaster SustainmentPartnership (GSP)C-130 AMPF/A-18E/F supportC-130 Gunship supportB-52 CONECT

CaptureMMA fleet supportC-17 GSP Follow-onV-22 supportInternational

Based on 2005 revenues

2005 2006ERevenue $5.4B $6.0BMargins 14.3% 13.5%

Support Systems

Growing business with continued strong marginsGrowing business with continued strong margins

17%

Support SystemsSupport Systems

Network & Network & Space SystemsSpace Systems

Precision Precision Engagement & Engagement &

Mobility SystemsMobility Systems

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Robust Portfolio

DevelopmentP-8A (MMA)Airborne Early WarningMILSATCOMFuture Combat SystemsFuture Imagery ArchitectureSBSSMUOSISATJTRS GMRAMF JTRSGround-based Midcourse DefenseABLEA-18GSmall Diameter BombC-130 AMP

ProductionC-17ChinookV-22F/A-22F-15F/A-18E/FApacheJDAM/HarpoonLaunch VehiclesCommercial SatellitesInt’l Tanker

SupportAWACSSpace Shuttle/ISSLifecycle Customer SupportC-130 AMPC-17 SustainmentF-18

Near-Term Competitions

InternationalUSAF TankersUCAVProprietaryCSAR-XCEVSDB II

Concept StudiesTSATATLGPS III

Outstanding mix… backlog >2.5x revenueOutstanding mix… backlog >2.5x revenue

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Right organization

Right leadership team

Right strategy

Summary

Positioned for profitable long-term growthPositioned for profitable long-term growth

37%

44%

19%






$31.5B2006E Revenue

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