Boeing 2008 Annual Report Download - page 49

have never been installed on an airplane before. Wedgetail includes six aircraft and Peace Eagle and
Peace Eye include four aircraft each. These are advanced and complex fixed-price development
programs involving technical challenges at the individual subsystem level and in the overall integration
of these subsystems into a reliable and effective operational capability. We believe that the cost and
revenue estimates incorporated in the financial statements are appropriate; however, the technical
complexity of the programs creates financial risk as additional completion costs may be necessary or
scheduled delivery dates could be delayed.
International KC-767 Tanker Program During 2008 and 2007, the BMA segment recorded charges of
$85 million and $152 million. The 2007 charge was partially offset at the consolidated level. The
international KC-767 Tanker program includes four aircraft for the Italian Air Force and four aircraft for
the Japanese Air Self Defense Force. We delivered the first two tankers to Japan during the first
quarter of 2008. These programs are ongoing, and while we believe the cost estimates incorporated in
the financial statements are appropriate, the technical complexity of the programs creates financial risk
as additional completion and development costs may be necessary or remaining scheduled delivery
dates could be delayed.
C-17 As of December 31, 2008, we delivered 182 of the 190 C-17 aircraft ordered by the U.S. Air
Force (USAF), with final deliveries scheduled for 2009. In June 2007 and April 2008, we directed key
suppliers to begin work on 10 and 20 aircraft, respectively, beyond the 190 to support potential Fiscal
Year 2008 (FY08) and Fiscal Year 2009 (FY09) orders and anticipated international orders. Our
authorizations allowed us to maintain the current C-17 production rate and to provide for cost-effective
acquisition of the aircraft. As of December 31, 2008, inventory expenditures and potential termination
liabilities to suppliers, primarily related to the anticipated FY08 USAF order, totaled approximately $720
million. In June 2008, the FY08 supplemental defense spending bill, signed by the President, included
funding for up to an additional 15 C-17 aircraft. The USAF placed these aircraft on contract on
February 6, 2009. There continues to be substantial interest in purchasing additional C-17 aircraft from
both the U.S. government and international customers. The National Defense Authorization Act signed
into law by the President authorizes the procurement of six C-17s in FY09. However, funding would
need to be addressed in a future defense appropriations bill. Should additional orders not materialize, it
is reasonably possible that we will decide in 2009 to complete production of the C-17. We are still
evaluating the full financial impact of a potential production shut-down, including any recovery that
would be available from the government. Such recovery from the government would not include the
costs incurred by us resulting from our direction to key suppliers to begin working on aircraft beyond
the 190 ordered by the USAF.
Network and Space Systems
Operating Results
(Dollars in millions)
Years ended December 31, 2008 2007 2006
Revenues $11,338 $11,475 $11,767
% of Total company revenues 19% 17% 19%
Earnings from operations $ 1,033 $ 862 $ 924
Operating margins 9.1% 7.5% 7.9%
Research and development $ 298 $ 289 $ 289
Contractual backlog $ 8,864 $ 9,204 $ 7,784
Unobligated backlog $16,980 $20,133 $23,755
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