Boeing 2011 Annual Report Download - page 33

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Eliminations and other unallocated items expense decreased by $155 million in 2011 and increased by
$218 million in 2010 primarily due to timing of intercompany expense allocations and elimination of
profit on intercompany items. 2010 expense also includes a $55 million charitable contribution.
Unallocated pension and other postretirement expense represents the difference between costs
recognized under Generally Accepted Accounting Principles in the United States of America (GAAP) in
the consolidated financial statements and federal cost accounting standards required to be utilized by
our business segments for U.S. government contracting purposes. We recorded net periodic benefit
cost related to pensions and other postretirement benefits of $3,127 million, $1,864 million and $1,816
million in 2011, 2010, and 2009, respectively. The increase in net periodic benefit costs related to
pensions and other postretirement benefits is primarily due to higher amortization of actuarial losses
and higher service costs driven by lower discount rates. Not all net periodic benefit cost is recognized
in earnings in the period incurred because it is allocated to production as product costs and a portion
remains in inventory at the end of the reporting period. A portion of pension and other postretirement
expense is recorded in the business segments and the remainder is included in unallocated pension
and other postretirement expense. The unallocated expense in 2011 includes $161 million of additional
expense recorded during the third quarter due to an adjustment primarily related to prior years’
accumulated postretirement benefit obligations. See the discussion of the postretirement liabilities in
Note 15 to our Consolidated Financial Statements. Earnings from operations included the following
amounts allocated to business segments and Other unallocated items and eliminations.
(Dollars in millions) Pension
Other Postretirement
Benefits
Years ended December 31, 2011 2010 2009 2011 2010 2009
Allocated to business segments $(1,379) $(1,155) $(989) $(444) $(421) $(522)
Other unallocated items and eliminations (269) 54 110 (248) (59) (93)
Total $(1,648) $(1,101) $(879) $(692) $(480) $(615)
Other Earnings Items
(Dollars in millions)
Years ended December 31, 2011 2010 2009
Earnings from operations $ 5,844 $ 4,971 $2,096
Other income/(expense), net 47 52 (26)
Interest and debt expense (498) (516) (339)
Earnings before income taxes 5,393 4,507 1,731
Income tax expense (1,382) (1,196) (396)
Net earnings from continuing operations $ 4,011 $ 3,311 $1,335
Other income decreased by $5 million in 2011 due to lower interest rates. The increase of $78 million
in 2010 was driven by investment income on higher cash and investment balances. Interest and debt
expense decreased by $18 million in 2011 due to the replacement of debt at lower interest rates. The
increase of $177 million in 2010 was due to debt issued in 2009.
Our effective income tax rate was 25.6%, 26.5% and 22.9% for the years ended December 31, 2011,
2010 and 2009, respectively. Our effective tax rate was lower in 2011 than in 2010 primarily due to an
income tax charge of $150 million recorded during the first quarter of 2010 as a result of the Patient
Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act
of 2010. During 2011, our effective tax rate was reduced by 7.4% due to a tax benefit of $397 million
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