Boeing Co., Chicago, expects to contribute $1 billion to its pension plans in 2005 and $500 million in 2006, according to a filing today with the SEC. Boeing said it "significantly strengthened" its pension plans last year with $4.4 billion in contributions, including $750 million in the fourth quarter. It contributed $1.7 billion in 2003.
The company also reported a one-year investment return on pension assets of 13% as of Sept. 30. But despite the return, it lowered its expected long-term return on pension assets to 8.5% for this year from 8.75% in 2004. Also, a decline in interest rates in 2004 caused Boeing to lower its discount rate for valuing pension liabilities to 5.75% from 6%, resulting in a higher estimated actuarial pension liabilities. "However, the impact of lowering the discount rate was more than offset by strong plan returns and company contributions, which together significantly improved the funded status of the plans," the filing states.
Boeing had $38.49 billion in pension assets as of Sept. 30, according to data the company provided for Pensions & Investments' Top 200 pension fund survey. Its pension underfunding fell to $3.17 billion as of Dec. 31, from $6.63 billion at year-end 2003, according to the filing.
Boeing expects non-cash pension expense this year to reduce earnings from operations by between $625 million and $650 million, as the impact of the poor market returns experienced in 2001 and 2002 continues to flow through earnings, according to the filing. Boeing estimates its non-cash pension expense will peak at between $700 million and $750 million in 2006 and then decline in 2007.
For 2004, Boeing recorded pretax expense of $335 million from its pension plans, compared to pretax earnings of $147 million in 2003.
Anne Eisele, Boeing's director-financial communications, could not provide further details.
