Post on 06-Feb-2018
06SB1002L.ppt | 1
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
Integrated Defense Systems
Realigned organization
Validated strategy
Solid revenue base
Industry-leading margins
Focused on cost and execution
Manageable risk
40%
43%
17%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
Balanced portfolio; focused on executionBalanced portfolio; focused on execution
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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
Boeing’s newest fighter pilot
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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
PrecisionEffects
PrecisionEffects
GlobalMobilityGlobal
Mobility
IntegratedISR
IntegratedISR
IntegratedC3
IntegratedC3
SpaceExploitation
SpaceExploitation
IntegratedLogistics
IntegratedLogistics
IntegratedTraining
IntegratedTraining
Customer – Enduring Capabilities
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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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
SupportSystemsSupportSystems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
Employee Involvement
100% of IDS in TeamsProduction Operations
3,101 EI Teams$143,000 averagesavings/team ‘05$170M ‘05 savings
Program TeamsRecord ’05 Performance
All Managers trained in Team Leadership
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Annual Investor Conference | Integrated Defense Systems
Lean is Paying Off
F/A-1880% unit cost reduction/55% reduction in throughput time20% increase in capacity and rate while reducing footprint90% reduction in defect rate
Apache85% reduction in hours/aircraft in final assembly69% reduction in flow days90% reduction in defect rate
JDAMUnit labor cost reduced from >8 hours to <2 hours>50% reduction in total production cost67% reduction in scrap/75% reduction in rework hours
C-1745% reduction in final assembly hours28-day reduction in flow75% reduction in defect rate
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Annual Investor Conference | Integrated Defense Systems
Also:Expand the Core
Capability-based solutionsPerformance-based logisticsInternational
Create new coresAdjacent marketsMarket shapingPrudent acquisitions
Continue to:Improve operational efficiency and effectiveness
Leverage our legacy platforms
Provide network-enabledsolutions
Offer Best of Industry
Assessing our strategy and discriminators
Meeting our customers’ evolving needs
Cost and cycle time –Next source of competitive advantage
Cost and cycle time –Next source of competitive advantage
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Annual Investor Conference | Integrated Defense Systems
Historical Revenue Growth
Major program wins drive revenue growth and backlogMajor program wins drive revenue growth and backlog
Focused on customers’ enduring needsLeveraging legacy platform expertiseFocus on delivering network-centric capabilities
0
5
10
15
20
25
30
35
2000 2001 2002 2003 2004 2005
Rev
enue
($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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Annual Investor Conference | Integrated Defense Systems
2006 revenue ~$31.5B
2007 revenue ~ 2-5% growth
2006 margins ~10.5%
2007 margins >10.5%
Integrated Defense Systems
40%
43%
17%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
Solid revenues, excellent profitabilitySolid revenues, excellent profitability
$31.1B2005 Revenue
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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
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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Annual Investor Conference | Integrated Defense Systems
Right organization
Right leadership team
Right strategy
Summary
Positioned for profitable long-term growthPositioned for profitable long-term growth
37%
44%
19%
Network& Space Systems
Network& Space Systems
PrecisionEngagement& MobilitySystems
PrecisionEngagement& MobilitySystems
SupportSystemsSupportSystems
$31.5B2006E Revenue
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