What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-01-31 compared with 2021-02-01 · 353 added, 416 removed, 571 unchanged (57% of the section changed)

14 unchanged sentences

Business Environment and Trends

The global outbreak of COVID-19 and the residual impacts of the 737 MAX grounding continue to have significant adverse impacts on our business and are expected to continue to negatively impact revenue, earnings and operating cash flow in future quarters.

They are also having a significant impact on our liquidity - see Liquidity Matters in Note 1 to our Consolidated Financial Statements for a further discussion of liquidity and additional actions we are taking in response to these challenges.

The global outbreak of COVID-19, 787 production issues and associated rework, and the residual impacts of the 737 MAX grounding continued to have significant adverse impacts on our business in 2021.

The COVID-19 pandemic has caused an unprecedented shock to demand for air travel, creating a tremendous challenge for our customers, our business and the entire commercial aerospace manufacturing and services sector.

Global economic growth, a primary driver for air travel, is expected to have declined to between -4% and -5% in 2020.

The latest International Air Transport Association (IATA) forecast projected full-year 2020 passenger traffic to be down more than 60% compared to 2019 as global economic activity slows due to COVID-19, and governments severely restricted travel to contain the spread of the virus.

The recovery remains slow and uneven as travel restrictions and varying regional travel protocols continue to impact air travel.

Generally, we expect domestic travel to recover faster than international travel.

The latest International Air Transport Association (IATA) release reported that passenger traffic in 2021 recovered to approximately 40% of 2019 levels, as international markets saw continued reopening challenges.

Additionally, global economic activity is improving, but continues to be impacted by COVID-19, and governments continue to restrict travel to contain the spread of the virus.

While recovery is accelerating, we continue to expect that it will remain uneven as travel restrictions and varying regional travel protocols continue to impact air travel.

Generally, we continue to expect domestic travel to recover faster than international travel.

As a result, we expect the narrow-body market to recover faster than the wide-body market.

Also, the pace of the commercial market recovery will be heavily dependent on COVID-19 infection rates, progress on testing, government travel restrictions, and timing and availability of a vaccine.

Air cargo traffic levels contracted this year due to weak global trade growth and capacity limitations given the large impact that COVID-19 has had on international passenger operations, which also carry cargo.

Demand for dedicated freighters is developing better relative to cargo traffic trends.

Also, the pace of the commercial market recovery will be heavily dependent on COVID-19 infection rates, vaccination rates, and government travel and other restrictions on trade and commercial activity.

Demand for dedicated freighters continues to be strong, underpinned by a strong recovery in global trade and overall air cargo growth.

Overall cargo capacity remains challenged given the large impact that COVID-19 has had on international passenger operations, which also carry cargo.

Airline financial performance, which also plays a role in the demand for new capacity, has been adversely impacted by the COVID-19 pandemic.

According to IATA, net losses in 2020 for the airline industry are expected to be approximately $118 billion, compared to net profits of $26 billion in 2019.

According to IATA, net losses for the airline industry were $138 billion in 2020 and are expected to be approximately $52 billion in 2021.

Our customers are taking actions to combat the effects of the COVID-19 pandemic on the market by preserving liquidity.

This comes in many forms, such as deferrals of advances and other payments to suppliers, deferrals of deliveries, reduced spending on services and, in some cases, cancellation of orders.

We face a challenging environment in the near to medium term as airlines adjust to reduced traffic which in turn will lower demand for commercial aerospace products and services.

While the outlook is improving and we have seen an increase in new orders in 2021, we continue to face a challenging environment in the near- to medium-term as airlines have adjusted to reduced traffic, which in turn has resulted in lower demand for commercial aerospace products and services.

The current environment is also affecting the financial viability of some airlines.

We currently expect it will take approximately three years for world-wide travel to return to 2019 levels and a few years beyond that for the industry to return to long-term trend growth of approximately 5%.

We continue to expect commercial air travel to return to 2019 levels in 2023 to 2024.

We expect it will take a few years beyond that for the industry to return to long-term trend growth.

To balance the supply and demand given the COVID-19 shock and to preserve our long-term potential and competitiveness, we have reduced the production rates of several of our BCA programs.

2 unchanged sentences

During the fourth quarter of 2020, we made adjustments to our estimates regarding timing of 777X entry into service and market demand.

We now anticipate that the first 777X delivery will occur in late 2023.

We will closely monitor the key factors that affect backlog and future demand including customers’ evolving fleet plans, the wide-body replacement cycle and the cargo market.

We continue to anticipate that the first 777X delivery will occur in late 2023.

We will closely monitor the key factors that affect backlog and future demand for each of our commercial aircraft programs, including customers’ evolving fleet plans, the wide-body replacement cycle and the cargo market.

We will maintain a disciplined rate management process and make adjustments as appropriate in the future.

1 unchanged sentence

Additionally, if we are unable to make timely deliveries of the large number of aircraft in inventory as of December 31, 2021, future revenues, earnings and cash flows will be adversely impacted.

Deliveries of the 737 MAX resumed in the fourth quarter of 2020, when the Federal Aviation Administration (FAA) rescinded the order that grounded 737 MAX aircraft in the U.S.

In addition, other non-U.S.

civil aviation authorities, including the Brazilian National Civil Aviation Agency, Transport Canada and the European Union Aviation Safety Agency have subsequently approved return of operations, allowing us to resume deliveries in those jurisdictions.

Over 185 countries have approved the resumption of 737 MAX operations.

The Civil Aviation Administration of China issued an airworthiness directive in the fourth quarter of 2021 outlining actions required for airlines to return to service.

We expect 737 MAX deliveries to China to resume in 2022, subject to final regulatory approvals, although risk remains around the timing and rate of those deliveries.

Orders to suspend operations of 737 MAX aircraft from non-U.S.

civil aviation authorities are still in effect in a small number of countries.

Deliveries and production have also been impacted by production issues and associated rework.

For example, deliveries of the 787 are currently paused and the production rate has been reduced while we focus on rework of undelivered aircraft and continue to engage in detailed discussions with the FAA regarding required actions for resuming deliveries.

Risk remains that these issues may continue to impact the timing of airplane deliveries in inventory and/or our ability to achieve planned production rates.

Revenues, earnings and cash flows will continue to be impacted until we are able to resume timely deliveries.

The long-term outlook for the industry remains positive due to the fundamental drivers of air travel demand:

1 unchanged sentence

The shock from COVID-19 has reduced the near- to medium-term demand, but our Commercial Market Outlook forecast projects a 4% growth rate for passenger and cargo traffic over a 20 year period.

Based on long-term global economic growth projections of 2.5% average annual GDP growth, we project demand for approximately 43,000 new airplanes over the next 20 years.

Based on long-term global economic growth projections of 2.7% average annual gross domestic product (GDP) growth, we project demand for approximately 43,610 new airplanes over the next 20 years.

The industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics, pandemics and increased global environmental regulations.

Deliveries of the 737 MAX resumed in the fourth quarter of 2020, when the FAA rescinded the order that grounded 737 MAX aircraft in the U.S.

Orders to suspend operations of 737 MAX aircraft from certain non-U.S.

civil aviation authorities, including the Civil Aviation Administration of China, are still in effect.

The grounding has had a significant adverse impact on our operations and creates significant uncertainty.

We are focused on safely returning the 737 MAX to service for all of our customers.

At BGS, we are seeing a direct impact on our commercial supply chain business as fewer flights and more aircraft retirements result in a decreased demand for our parts and logistics offerings.

A Continuing Resolution (CR), enacted on December 3, 2021, continues funding for the federal government at FY21 appropriated levels through February 18, 2022.

Congress and the President must enact either full-year FY22 appropriations bills or an additional CR to fund government departments and agencies beyond February 18, 2022 or a government shutdown could result, which may impact the Company’s operations.

At BGS, while the outlook is improving, we are continuing to see a direct impact on our commercial supply chain business as fewer flights and more aircraft parked result in a decreased demand for our parts and logistics offerings.

Additionally, our commercial customers are curtailing discretionary spending, such as modifications and upgrades, and focusing on required maintenance.

Similar to BCA, we expect a multi-year recovery period for the commercial services business.

The demand outlook for our government services business, which in 2019 accounted for just under half of BGS revenue, remains stable.

The demand outlook for our government services business remains stable;

government services comprises approximately half of BGS revenue, which is unchanged from pre-pandemic levels.

At BDS, we continue to see a healthy market with solid demand for our major platforms and programs both domestically and internationally.

However, we experienced near-term production impacts associated with our temporary suspension of operations at various locations in 2020 .

In March and April of 2020, as a result of COVID-19, we temporarily suspended operations at multiple locations including the Puget Sound area, South Carolina and Philadelphia.

Operations in Puget Sound and Philadelphia resumed during the week of April 20, while operations in South Carolina resumed beginning on May 3.

We have implemented procedures to promote employee safety in our facilities, including more frequent and enhanced cleaning and adjusted schedules and work flows to support physical distancing.

These actions have resulted, and will continue to result, in increased operating costs.

In addition, a number of our suppliers have suspended or otherwise reduced their operations, and we are experiencing some supply chain shortages.

However, while we continue to experience near-term production disruptions and inefficiencies due to COVID-19 impacts, we saw improvements in 2021.

In addition, we are experiencing some supply chain shortages.

Our suppliers are also experiencing liquidity pressures and disruptions to their operations as a result of COVID-19.

We also continue to have large numbers of employees working from home.

These measures and disruptions have reduced overall productivity and adversely impacted our financial position, results of operations, and cash flows in 2020.

We expect further adverse impacts in future quarters.

In July 2020, we announced our business transformation efforts to assess our business across five key pillars – infrastructure, overhead and organization, portfolio and investments, supply chain health and operational excellence.

We continue to make progress across all five key pillars as we utilize a lower production rate environment to transform and improve our business processes.

Within the infrastructure pillar we are assessing our overall facility requirements in light of reduced demand in our commercial businesses and remote and virtual work opportunities for large numbers of our workforce.

The consolidation of the 787 production in South Carolina is an example of this.

We also anticipate a reduction of approximately 30% in office space needs compared to our current capacity.

During 2020, we made certain reductions to our footprint and are planning to implement further reductions over the next few years.

However, as we consolidate our footprint, we may incur near term adverse impacts to earnings.

The overhead and organization pillar is focused on our cost structure and how we are organized so we can right size our workforce and simplify and reduce management layers and bureaucracy.

During 2020, we recorded severance costs for approximately 26,000 employees, of which approximately 18,000 have left the Company as of December 31, 2020, and the remainder are expected to leave in 2021.

The portfolio and investments pillar includes aligning our portfolio and investments to focus on our core business and the changes in market conditions.

Through our portfolio and investment prioritization, we reduced research and development and capital expenditures during 2020 by $1.3 billion from the prior year.

The supply chain pillar is focused on supply chain health and stability, reducing indirect procurement spend and streamlining our transportation, logistics and warehousing approach.

We reduced indirect spend in 2020, by reducing expenditures in areas such as freight and logistics, purchased services and others.

The operational excellence pillar is focused on improving performance, enhancing quality and reducing rework.

For example, our information technology teams are evaluating opportunities to form or expand strategic partnerships with vendors that allow us to simplify and optimize our operations, and reduce overall costs.

We continue to monitor the health and stability of the supply chain as we ramp up production.

These measures and disruptions have reduced overall productivity and adversely impacted our financial position, results of operations and cash flows.

We continue to transform and improve our business processes.

These activities are not intended to constrain our capacity but to enable the Company to emerge stronger and be more resilient when the market recovers.

5 unchanged sentences

Revenues $62,286 $58,158 $76,559

(Loss)/earnings from operations ($12,767) ($1,975) $11,987

Loss from operations ($2,902) ($12,767) ($1,975)

Operating margins (4.7) % (22.0) % (2.6) %

Effective income tax rate 14.8 % 17.5 % 71.8 %

Net (loss)/earnings attributable to Boeing Shareholders ($11,873) ($636) $10,460

Diluted (loss)/earnings per share ($20.88) ($1.12) $17.85

Core operating (loss)/earnings ($14,150) ($3,390) $10,660

Net loss attributable to Boeing Shareholders ($4,202) ($11,873) ($636)

Diluted loss per share ($7.15) ($20.88) ($1.12)

Core operating loss ($4,075) ($14,150) ($3,390)

Core operating margins (6.5 %) (24.3 %) (4.4 %)

Core (loss)/earnings per share ($23.25) ($3.47) $16.01

Core loss per share ($9.44) ($23.25) ($3.47)

(1) These measures exclude certain components of pension and other postretirement benefit expense.

9 unchanged sentences

Total $62,286 $58,158 $76,559

Revenues increased by $4,128 million in 2021 compared with 2020 driven by higher revenues at BCA, BDS and BGS.

BCA revenues increased by $3,331 million primarily driven by higher 737 MAX deliveries due to recertification and return to service in most jurisdictions and the absence of $498 million of 737 MAX customer considerations which reduced revenues in 2020, partially offset by lower 787 deliveries in 2021.

BDS revenues increased by $283 million primarily from higher revenue on the KC-46A Tanker program and lower charges in 2021.

BGS revenues increased by $785 million primarily due to higher commercial and government services volume.

Revenues decreased by $18,401 million in 2020 compared with 2019 primarily due to lower revenues in our commercial airplanes and commercial services businesses.

1 unchanged sentence

BCA revenues decreased by $16,093 million due to lower deliveries driven by the impacts of the COVID-19 pandemic, 787 production issues and the 737 MAX grounding, offset by lower charges related to estimated potential concessions and other considerations to 737 MAX customers.

BDS revenues increased by $162 million primarily due to higher fighter aircraft and other volume, partially offset by the impact of higher unfavorable cumulative contract catch-up adjustments, largely due to the KC-46A Tanker charges in 2020.

BGS revenues decreased by $2,925 million primarily due to lower commercial services revenue driven by impacts of the COVID-19 pandemic.

BDS revenues increased by $162 million primarily due to higher fighter aircraft

and other volume, partially offset by the impact of higher unfavorable cumulative contract catch-up adjustments, largely due to KC-46A Tanker charges in 2020.

BGS revenues decreased by $2,925 million primarily due to lower commercial services revenue driven by the COVID-19 pandemic.

The changes in Unallocated items, eliminations and other primarily reflect the timing of eliminations for intercompany aircraft deliveries, as well as reserves related to cost accounting litigation recorded in 2019.

We expect the impacts of the COVID-19 pandemic to continue to significantly impact revenues in future quarters until the commercial airline industry recovers.

Revenues decreased by $24,568 million in 2019 compared with 2018 primarily due to lower revenues at BCA, partially offset by higher revenues at BGS.

Lower BCA revenues are primarily driven by lower 737 MAX deliveries and a revenue reduction of $8,259 million recorded in 2019 for estimated potential concessions and other considerations to customers for disruptions and associated delivery delays related to the 737 MAX grounding, net of insurance recoveries.

The changes in Unallocated items, eliminations and other primarily reflect the timing of eliminations for intercompany aircraft deliveries and the sale of aircraft previously leased to customers.

Loss/Earnings From Operations

The following table summarizes (Loss)/earnings from operations:

Revenues will continue to be significantly impacted until deliveries ramp up and the commercial airline industry recovers from the impacts of COVID-19.

Loss From Operations

The following table summarizes Loss from operations:

(Dollars in millions)

4 unchanged sentences

Boeing Capital 106 63 28

Segment operating (loss)/profit (11,795) (1,317) 12,137

Segment operating loss (2,808) (11,795) (1,317)

Pension FAS/CAS service cost adjustment 882 1,024 1,071

1 unchanged sentence

Unallocated items, eliminations and other (1,267) (2,355) (2,073)

(Loss)/earnings from operations (GAAP) ($12,767) ($1,975) $11,987

Loss from operations (GAAP) ($2,902) ($12,767) ($1,975)

FAS/CAS service cost adjustment * (1,173) (1,383) (1,415)

Core operating (loss)/earnings (Non-GAAP) ** ($14,150) ($3,390) $10,660

Core operating loss (Non-GAAP) ** ($4,075) ($14,150) ($3,390)

* The FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.

1 unchanged sentence

See pages 49 - 51.

Loss from operations decreased by $9,865 million in 2021 compared with 2020 primarily due to lower losses at BCA and higher earnings at BGS.

BCA loss from operations decreased by $7,372 million primarily due to the absence of a $6,493 million reach-forward loss on the 777X program recorded in 2020, lower period expenses, lower 737 MAX customer considerations and higher 737 MAX deliveries, partially offset by a $3,460 million reach-forward loss on the 787 program in 2021.

BGS earnings from operations increased by $1,567 million in 2021 compared with 2020 primarily due to charges incurred in 2020 as a result of the COVID-19 pandemic, as well as higher commercial services volume.

Loss from operations increased by $10,792 million in 2020 compared with 2019 primarily due to increased losses at BCA and decreased earnings at BGS and BDS.

1 unchanged sentence

The loss in 2020 primarily reflects a reach-forward loss recorded in the fourth quarter of $6,493 million on the 777X program.

The reach-forward loss reflects a number of factors, including an updated assessment of global certification requirements informed by continued discussions with regulators and resulting in a management decision to make modifications to the aircraft’s design, an updated assessment of COVID-19 impacts on market demand, and discussions with our customers with respect to aircraft delivery timing.

These factors resulted in adjustments to production rates and the program accounting quantity, increased change incorporation costs, and associated customer and supply chain impacts.

The loss in 2020 also reflects the absence of MAX deliveries during the first three quarters of the year, lower wide-body deliveries and lower program margins resulting from the COVID-19 pandemic and 787 production issues, abnormal production costs, 737NG frame fitting component repair costs, severance costs and 737 MAX customer considerations.

BCA’s loss in 2020 also reflects the absence of MAX deliveries during the first three quarters of the year, lower wide-body deliveries and lower program margins resulting from the COVID-19 pandemic and 787 production issues, abnormal production costs, 737NG frame fitting component repair costs, severance costs and 737 MAX customer considerations.

The loss in 2019 primarily reflects the absence of 737 MAX deliveries in the second, third and fourth quarters and charges of $8,259 million for estimated 737 MAX customer considerations.

BDS earnings decreased by $1,076 million in 2020 compared with 2019, primarily due to higher unfavorable cumulative contract catch-up adjustments, including charges of $1,320 million on KC-46A Tanker and $168 million on VC-25B in 2020, offset by $489 million of charges on Commercial Crew in 2019.

lower earnings were also driven by lower gains on property sales compared to 2019.

decreased by $1,076 million in 2020 compared with 2019, primarily due to higher unfavorable cumulative contract catch-up adjustments, including charges of $1,320 million on KC-46A Tanker and $168 million on VC-25B in 2020, partially offset by $489 million of charges on Commercial Crew in 2019.

The lower earnings were also driven by lower gains on property sales compared to 2019.

BGS earnings from operations decreased by $2,247 million in 2020 compared with 2019 primarily due to lower commercial services revenue, as well as asset impairments and severance costs resulting from the COVID-19 market environment.

We expect the impacts of the COVID-19 pandemic to continue to reduce earnings in future quarters until the commercial airline industry recovers.

Loss from operations was $1,975 million in 2019 compared with earnings from operations of $11,987 million in 2018.

The decrease of $13,962 million is primarily due to a loss from operations at BCA of $6,657 million in 2019 compared to earnings from operations of $7,830 million in 2018, partially offset by higher earnings at BDS and BGS in 2019 compared with 2018.

BCA results decreased by $14,487 million due to lower 737 deliveries and the earnings charges for estimated 737 MAX grounding customer considerations of $8,259 million, net of insurance recoveries.

BDS earnings from operations increased by $923 million primarily due to lower charges in 2019 for development programs.

BGS earnings from operations increased by $161 million primarily due to higher revenues, which was partially offset by less favorable performance and mix.

During 2020, 2019 and 2018, we recorded reach-forward losses on the KC-46A Tanker program of $1,320 million, $148 million, and $736 million, respectively.

Lower commercial airplane deliveries and the COVID-19 pandemic will continue to have a significant adverse impact on future earnings and margins until deliveries ramp up and return to historical levels.

Core operating loss decreased by $10,075 million in 2021 compared with 2020 primarily due to lower losses at BCA and higher earnings at BGS, as described above.

Core operating loss increased by $10,760 million in 2020 compared with 2019 primarily due to higher losses at BCA and lower earnings at BGS and BDS.

Core operating earnings decreased by $14,050 million in 2019 compared with 2018 primarily due to a loss from operations at BCA in 2019, partially offset by higher earnings at BDS and BGS.

Unallocated Items, Eliminations and Other The most significant items included in Unallocated items, eliminations and other are shown in the following table:

9 unchanged sentences

Unallocated items, eliminations and other ($1,267) ($2,355) ($2,073)

Share-based plans expense increased by $55 million in 2020, and decreased by $11 million in 2019.

Share-based plans expense increased by $54 million in 2021 and $55 million in 2020.

The higher expense in 2021 was primarily related to a one-time grant of restricted stock units (RSUs) to most employees in December 2020.

The increase in 2020 was due to increased grants of RSUs and other share-based compensation.

Deferred compensation expense decreased by $81 million in 2020 and increased by $155 million in 2019, primarily driven by changes in broad stock market conditions and our stock price.

Research and development expense decreased by $161 million in 2020 and increased by $257 million in 2019 primarily due to spending by Boeing NeXt on product development.

Deferred compensation expense increased by $33 million in 2021, primarily driven by changes in our stock price, and decreased by $81 million in 2020, primarily driven by changes in broad stock market conditions and our stock price.

Research and development expense decreased by $56 million in 2021 and $161 million in 2020 primarily due to decreases in enterprise investments in product development.

In 2019, we recorded a $250 million charge related to the impairment of lease incentives with one customer that experienced liquidity issues and a $109 million charge related to ongoing litigation associated with recoverable costs on U.S.

government contracts.

In 2018, we recorded a $148 million charge related to the outcome of the Spirit litigation.

Eliminations and other unallocated expense increased by $822 million in 2020 primarily due to earnings charges of $744 million in the fourth quarter of 2020 related to an agreement between Boeing and the U.S.

Department of Justice in January 2021.

Eliminations and other unallocated expense decreased by $13 million in 2019 primarily due to timing of expense allocations.

Net periodic pension benefit costs included in (Loss)/earnings from operations were as follows:

Eliminations and other unallocated expense decreased by $1,131 million in 2021 and increased by $822 million in 2020 primarily due to earnings charges of $744 million in the fourth quarter of 2020 in anticipation of the agreement between Boeing and the U.S.

Department of Justice that was finalized in January 2021 and higher income from operating investments in 2021.

Net periodic pension benefit costs included in Loss from operations were as follows:

(Dollars in millions) Pension

2 unchanged sentences

Pension FAS/CAS service cost adjustment 882 1,024 1,071

Net periodic benefit cost included in (Loss)/earnings from operations ($3) ($313) ($313)

The pension FAS/CAS service cost adjustment recognized in (Loss)/earnings from operations in 2020, 2019, and 2018 was largely consistent across all periods.

The decrease in net periodic benefit cost included in (Loss)/earnings from operations in 2020 was primarily due to prior year service cost that was included in earnings in 2019.

The net periodic benefit cost included in (Loss)/earnings from operations in 2019 was consistent with 2018, as reductions in current year service cost were offset by higher amortization of prior year service costs.

Net periodic pension benefit cost included in Loss from operations

($3) ($3) ($313)

The pension FAS/CAS service cost adjustment recognized in Loss from operations in 2021 decreased by $142 million compared with 2020 due to reductions in allocated pension cost year over year.

The pension FAS/CAS service cost adjustment recognized in Loss from operations in 2020 was largely consistent with 2019.

Net periodic benefit cost included in Loss from operations in 2021 was largely consistent with 2020.

The decrease in net periodic benefit cost included in Loss from operations in 2020 was primarily due to prior year service cost that was included in earnings in 2019.

For additional discussion related to Postretirement Plans, see Note 16 to our Consolidated Financial Statements.

2 unchanged sentences

Years ended December 31, 2021 2020 2019

(Loss)/earnings from operations ($12,767) ($1,975) $11,987

Loss from operations ($2,902) ($12,767) ($1,975)

Other income, net 551 447 438

Interest and debt expense (2,682) (2,156) (722)

(Loss)/earnings before income taxes (14,476) (2,259) 11,604

Income tax benefit/(expense) 2,535 1,623 (1,144)

Loss before income taxes (5,033) (14,476) (2,259)

Income tax benefit 743 2,535 1,623

Net loss from continuing operations (4,290) (11,941) (636)

net loss attributable to noncontrolling interest (88) (68)

Net (loss)/earnings attributable to Boeing Shareholders ($11,873) ($636) $10,460

Other income, net increased by $9 million in 2020 primarily due to lower non-operating postretirement expense, partially offset by lower non-operating pension income, lower interest income and higher foreign exchange losses.

Other income, net increased by $346 million in 2019 primarily due to higher non-operating pension income.

Net loss attributable to Boeing Shareholders ($4,202) ($11,873) ($636)

Non-operating pension income included in Other income, net was $528 million in 2021, $340 million in 2020 and $374 million in 2019.

The increased income in 2021 compared to 2020 was primarily due to lower interest cost and higher expected return on plan assets, partially offset by higher amortization of net actuarial losses and higher settlement charges.

The decreased income in 2020 compared to 2019 was due to higher amortization of actuarial losses and lower asset returns, partially offset by lower interest cost.

The increased income in 2019 compared to 2018 was due to lower amortization of actuarial losses, partially offset by lower asset returns and higher interest cost.

Non-operating postretirement expense included in Other income, net was $16 million in 2020, $107 million in 2019, and $101 million in 2018.

Non-operating postretirement income included in Other income, net was $1 million in 2021, compared with expense of $16 million in 2020 and $107 million in 2019.

The increased income in 2021 compared to 2020 was due to lower interest cost.

The decreased expense in 2020 compared to 2019 was due to lower interest cost.

The expense in 2019 was largely consistent with 2018.

Interest and debt expense increased by $1,434 million in 2020 and increased by $247 million in 2019 as a result of higher debt balances.

Interest and debt expense increased by $526 million in 2021 and increased by $1,434 million in 2020 as a result of higher average debt balances.

For additional discussion related to Income Taxes, see Note 4 to our Consolidated Financial Statements.

12 unchanged sentences

Cost of sales as a % of Revenues 95.2 % 109.8 % (14.6) % 109.8 % 94.2 % 15.6 %

Cost of sales decreased by $4,574 million in 2021 compared with 2020, primarily due to higher earnings charges at BCA, BDS and BGS in 2020, partially offset by higher costs as a result of higher revenues in 2021 and the reach-forward loss on the 787 program.

Cost of sales as a percentage of Revenues decreased in 2021 compared to 2020 primarily due to higher earnings charges at BCA and BGS in 2020 and higher revenues in 2021.

Cost of sales decreased by $8,250 million in 2020 compared with 2019, primarily due to lower revenue in 2020, partially offset by higher charges in 2020 related to the 777X program, COVID-19 impacts, KC-46A Tanker program, abnormal production costs at BCA and severance costs.

Cost of sales as a percentage of Revenues increased in 2020 compared to 2019 primarily due to the reach-forward loss on the 777X program, impacts of the 737 MAX grounding and the COVID-19 pandemic, as well as severance costs.

Cost of sales decreased by $9,397 million in 2019 compared with 2018, primarily due to lower revenue and lower reach-forward losses.

Cost of sales as a percentage of Revenues increased in 2019 primarily due to the 737 MAX grounding.

Research and Development The following table summarizes our Research and development expense:

6 unchanged sentences

Total $2,249 $2,476 $3,219

Research and development expense decreased by $227 million in 2021 compared with 2020 primarily due to lower BCA and enterprise investments in product development and lower spending on the 777X program.

Research and development expense decreased by $743 million in 2020 compared with 2019 primarily due to lower spending at BCA and at Boeing NeXt on product development.

Research and development expense decreased by $50 million in 2019 compared with 2018 primarily due to lower spending on 777X and 737 MAX, partially offset by higher spending on product development at BCA and Boeing NeXt.

Our backlog at December 31 was as follows:

9 unchanged sentences

Total Backlog $377,499 $363,404

Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, and unobligated U.S.

Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, orders where customers have the unilateral right to terminate, and unobligated U.S.

government contract funding.

The decrease in contractual backlog during 2020 was primarily due to a reduction for orders that in our assessment no longer meet the accounting requirements of Accounting Standards Codification (ASC) 606 for inclusion in backlog primarily due to 737 MAX and 777X, deliveries in excess of new orders, aircraft order cancellations and changes in projected price escalation.

We are experiencing fewer new 737 MAX orders than we were receiving prior to the grounding.

If 737 MAX aircraft remain grounded in certain jurisdictions for an extended period of time and/or if entry into service of the 777X, 737 MAX 7 and/or 737 MAX 10 is further delayed, we may experience additional reductions to backlog and/or significant order cancellations.

The increase in contractual backlog during 2021 was primarily due to new orders, reclassifications from unobligated backlog related to BDS and BGS contracts, increases in price escalation and reductions in the number of existing orders that in our assessment do not meet the accounting requirements of Accounting Standards Codification (ASC) 606 for inclusion in backlog, partially offset by deliveries and cancellations.

During 2021, we have had higher ASC 606 adjustments of 787 orders as a result of delivery delays related to inspections and rework.

If 787 aircraft deliveries continue to be paused, we remain unable to deliver 737 MAX aircraft in China for an extended period of time, and/or entry into service of the 777X, 737 MAX 7 and/or 737 MAX 10 is further delayed, we may experience additional reductions to backlog and/or significant order cancellations.

Additionally, we may continue to experience fewer new orders and increased cancellations across all of our commercial airplane programs as a result of the COVID-19 pandemic and associated impacts on demand.

1 unchanged sentence

government definitive contracts for which funding has not been authorized.

The decrease in unobligated backlog in 2020 was primarily due to reclassifications to contractual backlog related to BGS and BDS contracts, partially offset by contract awards.

The decrease in unobligated backlog in 2021 was primarily due to reclassifications to contractual backlog related to BDS and BGS contracts, partially offset by contract awards.

Additional Considerations

Global Trade We continually monitor the global trade environment in response to geopolitical economic developments, as well as changes in tariffs, trade agreements or sanctions that may impact the company.

The global economy is currently experiencing significant adverse impacts due to the COVID-19 pandemic, including a decline in overall trade in general and in aerospace in particular.

The global economy continues to experience significant adverse impacts due to the COVID-19 pandemic, including a decline in overall trade in general and in aerospace in particular.

There is a great deal of uncertainty regarding the duration, scale and localization of these impacts to the global economy and governments are enacting a wide range of responses to mitigate the unfolding economic impacts.

1 unchanged sentence

These adverse economic impacts have resulted in fewer orders than previously anticipated for our commercial aircraft.

The current state of U.S.-China relations remains a significant watch item.

China is a very significant market for commercial airplanes and represents a significant component of our commercial airplanes backlog.

3 unchanged sentences

and China entered into a Phase I agreement in January 2020.

However, implementation of this agreement is incomplete and overall diplomatic relations between the U.S.

However, as of December 31, 2021, implementation of this agreement is incomplete and overall diplomatic relations between the U.S.

and China have deteriorated.

7 unchanged sentences

Implementation of the U.S./Mexico/Canada Free Trade Agreement (USMCA) will also result in lower tariffs.

In October 2021, the U.S.

and European Union (EU) announced an agreement to ease steel and aluminum tariffs.

We continue to monitor the potential for any extra costs that may result from the remaining global tariffs.

The current status of U.S.-Russia relations is creating an adverse climate for our business.

Government continues to impose and/or consider imposing sanctions on certain businesses and individuals in Russia.

Although our operations or sales in Russia have not been impacted to date, we continue to monitor additional sanctions that may be imposed by the U.S.

Government and any responses from Russia that could affect our supply chain, business partners or customers.

and European Union (EU) have been engaged in two long-running disputes at the World Trade Organization (WTO) relating to large civil aircraft.

We continue to monitor and evaluate additional sanctions and export restrictions that may be imposed by the U.S.

Government and any responses from Russia that could directly affect our supply chain, business partners or customers.

We also continue to support the 737 MAX return to service in Russia.

and EU have been engaged in two long-running disputes at the World Trade Organization (WTO) relating to large civil aircraft.

As part of those disputes, in October 2019, the WTO authorized the U.S.

to impose approximately $7.50 billion in annual tariffs on EU products in connection with the EU’s provision of eight instances of launch aid subsidies to Airbus.

is currently imposing 15% tariffs on new Airbus airplanes imported into the U.S.

Following this authorization, the U.S.

began to impose 15% tariffs on new Airbus airplanes imported into the U.S.

as well as fuselages that Airbus manufactures in Europe and imports into the U.S.

1 unchanged sentence

products in connection with a tax incentive used by Boeing in Washington state that has since been repealed.

The EU is currently imposing 15% tariffs on Boeing airplanes imported into the EU.

We will continue to assess and work with our customers on the possible impact of these tariffs, as deliveries to European customers are expected to increase in 2021.

Shortly thereafter, the EU began to impose 15% tariffs on Boeing airplanes imported into the EU.

On June 15, 2021, the U.S.

and EU announced that they had reached a cooperative framework to address the large civil aircraft disputes.

As part of the framework, among other items, both sides announced an intent to continue to suspend tariffs related to the disputes for five years.

announced a similar agreement on June 17, 2021.

Segment Results of Operations and Financial Condition

9 unchanged sentences

They offer competitive products and have access to most of the same customers and suppliers.

The grounding of the 737 MAX and the associated suspension of 737 MAX deliveries significantly reduced our market share with respect to deliveries of single aisle aircraft in 2019 and 2020 and may provide competitors with an opportunity to obtain more orders and increase market share.

The grounding of the 737 MAX and the associated suspension of 737 MAX deliveries in multiple jurisdictions significantly reduced our market share with respect to deliveries of single aisle aircraft in 2019, 2020 and 2021 and may provide competitors with an opportunity to obtain more orders and increase market share.

With government support, Airbus has historically invested heavily to create a family of products to compete with ours.

14 unchanged sentences

% of total company revenues 31 % 28 % 42 %

(Loss)/earnings from operations ($13,847) ($6,657) $7,830

Loss from operations ($6,475) ($13,847) ($6,657)

Operating margins (33.2) % (85.7) % (20.6) %

Research and development $1,140 $1,385 $1,956

BCA revenues increased by $3,331 million in 2021 compared with 2020 primarily due to higher 737 MAX deliveries driven by recertification and return to service in most jurisdictions and the absence of charges for 737 MAX customer considerations which reduced revenues in 2020, partially offset by lower 787 deliveries in 2021.

BCA revenues decreased by $16,093 million in 2020 compared with 2019 due to lower deliveries primarily driven by the impacts of the COVID-19 pandemic, 787 production issues and the 737 MAX grounding.

This was partially offset by lower charges related to estimated potential concessions and other considerations to 737 MAX customers of $498 million in 2020 compared with $8,259 million in 2019.

BCA revenues decreased by $25,244 million in 2019 compared with 2018 driven by lower 737 MAX deliveries and a revenue reduction of $8,259 million that was recorded in 2019 for estimated potential concessions and other considerations to customers related to the 737 MAX grounding, net of $500 million of insurance recoveries.

While we resumed deliveries of 737 MAX aircraft in December 2020, the 737 MAX grounding is still in effect in certain non-U.S.

jurisdictions.

The 737 MAX grounding will continue to have a significant impact on future revenues until deliveries ramp up, and COVID-19 will continue to have a significant impact on future revenues until the commercial airline industry recovers.

We resumed deliveries of 737 MAX aircraft in December 2020 following rescission by the FAA of its grounding order.

As of December 31, 2021, most non-U.S.

jurisdictions have approved return to service of the 737 MAX.

787 deliveries have been paused since May 2021.

Revenues will continue to be impacted until deliveries of the 737 MAX ramp up, deliveries of the 787 resume and the commercial airline industry recovers from the impacts of COVID-19.

Commercial Airplanes deliveries as of December 31 were as follows:

8 unchanged sentences

† Aircraft accounted for as revenues by BCA and as operating leases in consolidation identified by parentheses

Loss/Earnings From Operations

BCA loss from operations was $13,847 million in 2020 compared with loss from operations of $6,657 million in 2019.

The 2020 loss reflects the reach-forward loss on 777X of $6,493 million, lower deliveries and lower program margins resulting from the COVID-19 pandemic and 787 production issues and associated rework, $2,567 million of abnormal production costs related to 737 MAX, $623 million of

severance cost, $498 million of 737 MAX customer considerations, $336 million related to 737NG frame fitting component repair costs and $270 million of abnormal production costs in the first half of 2020 from the temporary suspension of operations in response to COVID-19, partially offset by lower research and development spending.

Loss From Operations

BCA loss from operations was $6,475 million in 2021 compared with $13,847 million in 2020.

The 2021 loss includes a reach-forward loss on the 787 program of $3,460 million, abnormal production costs related to 737 MAX of $1,887 million, and abnormal production costs related to the 787 program of $468 million resulting from continued production issues, inspections and rework, partially offset by higher 737 MAX deliveries.

The 2020 loss reflects the reach-forward loss on 777X of $6,493 million and additional drivers as noted in the paragraph below.

BCA loss from operations was $13,847 million in 2020 compared with $6,657 million in 2019.

The 2020 loss reflects the reach-forward loss on 777X of $6,493 million, lower deliveries and lower program margins resulting from the COVID-19 pandemic, $2,567 million of abnormal production costs related to 737 MAX, $623 million of severance cost, $498 million of 737 MAX customer considerations, $336 million related to 737NG frame fitting component repair costs and $270 million of abnormal production costs in the first half of 2020 from the temporary suspension of operations in response to COVID-19, partially offset by lower research and development spending.

Lower 787 margins reflecting a reduction in the accounting quantity in the first quarter of 2020 also contributed to lower earnings.

The 2019 loss primarily reflects the absence of 737 MAX deliveries in the second, third and fourth quarters of 2019 and charges of $8,259 million for estimated 737 MAX customer considerations.

BCA loss from operations was $6,657 million in 2019 compared with earnings from operations of $7,830 million in 2018.

The decrease of $14,487 million is primarily due to lower 737 deliveries and earnings charges related to the 737 MAX.

The 737 MAX grounding and the COVID-19 pandemic will continue to have a significant adverse impact on future earnings and margins until 737 MAX deliveries ramp up and wide-body deliveries return to historical levels.

Our total backlog represents the estimated transaction prices on unsatisfied and partially satisfied performance obligations to our customers where we believe it is probable that we will collect the consideration due and where no contingencies remain before we and the customer are required to perform.

1 unchanged sentence

All such contingencies must be satisfied or have expired prior to recording a new firm order even if satisfying such conditions is highly certain.

Backlog excludes options and BCC orders.

Backlog excludes options and BCC orders as well as orders where customers have the unilateral right to terminate.

A number of our customers may have contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date.

We address customer claims and requests for other contractual relief as they arise.

The value of orders in backlog is adjusted as changes to price and schedule are agreed to with customers and is reported in accordance with the requirements of Topic 606.

BCA total backlog of $281,588 million at December 31, 2020 decreased from $376,593 million at December 31, 2019, reflecting a reduction for orders that in our assessment no longer meet the accounting requirements of ASC 606 for inclusion in backlog, aircraft order cancellations, changes in projected price escalation and deliveries in excess of new orders.

Aircraft order cancellations during the year ended December 31, 2020 totaled $34,618 million and primarily relate to 737 MAX aircraft.

The ASC 606 adjustments for the year ended December 31, 2020 totaled $54,450 million and primarily relate to 737 MAX aircraft and 777X aircraft.

The ASC 606 adjustments include aircraft orders where a customer controlled contingency now exists, as well as orders where we can no longer assert that the customer is committed to perform or that it is probable that the customer will pay the full amount of consideration when it is due.

Additionally, we may continue to experience fewer new orders and increased cancellations across all of our commercial airplane programs as a result the COVID-19 pandemic and associated impacts on demand.

We address customer

claims and requests for other contractual relief as they arise.

The value of orders in backlog is adjusted as changes to price and schedule are agreed to with customers and is reported in accordance with the requirements of ASC 606.

BCA total backlog of $296,882 million at December 31, 2021 increased from $281,588 million at December 31, 2020, reflecting new orders in excess of deliveries, increases in projected price escalation and decreases in the number of existing orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog, partially offset by aircraft order cancellations.

Aircraft order cancellations during the year ended December 31, 2021 totaled $27,542 million and primarily relate to 737 MAX and 787 aircraft.

The net ASC 606 adjustments decreased for the year ended December 31, 2021, which resulted in an increase to backlog of $3,810 million primarily due to 777X aircraft, partially offset by 787 aircraft.

ASC 606 adjustments include consideration of aircraft orders where a customer controlled contingency may exist, as well as an assessment of whether the customer is committed to perform or whether it is probable that the customer will pay the full amount of consideration when it is due.

If 787 aircraft deliveries continue to be paused, we are unable to ramp up deliveries of 737 MAX aircraft, and/or if entry into service of the 777X, 737 MAX 7 and/or 737 MAX 10 is further delayed, we may experience additional reductions to backlog and/or significant order cancellations.

Accounting Quantity The accounting quantity is our estimate of the quantity of airplanes that will be produced for delivery under existing and anticipated contracts.

1 unchanged sentence

It is a key determinant of the gross margins we recognize on sales of individual airplanes throughout a program’s life.

Estimation of each program’s accounting quantity takes into account several factors that are indicative of the demand for that program, including firm orders,

letters of intent from prospective customers and market studies.

Estimation of each program’s accounting quantity takes into account several factors that are indicative of the demand for that program, including firm orders, letters of intent from prospective customers and market studies.

We review our program accounting quantities quarterly.

16 unchanged sentences

† Aircraft ordered by BCC are identified in parentheses.

* At December 31, 2020, the 747 accounting quantity includes one already completed aircraft that has not been sold and is being remarketed.

** See 777 and 777X Programs for discussion of the 777X accounting quantity.

Program Highlights

737 Program We reduced the program accounting quantity from 10,400 at December 31, 2019 to 10,000 at March 31, 2020.

This reflects a slower than previously planned production rate ramp-up caused by commercial airline industry uncertainty due to the impact of COVID-19.

See further discussion of the 737 MAX Grounding and COVID-19 Impacts and Product Warranties in Note 13 to our Consolidated Financial Statements .

737 Program The accounting quantity for the 737 program increased by 400 units during 2021 due to the program's normal progress of obtaining additional orders and delivering airplanes.

See further discussion of the 737 MAX in Note 13 to our Consolidated Financial Statements .

747 Program We are currently producing at a rate of 0.5 aircraft per month.

We will complete production of the 747 in 2022.

We expect to complete production of the 747 in the second half of 2022.

We believe that ending production of the 747 will not have a material impact on our financial position, results of operations or cash flows.

1 unchanged sentence

The 767 assembly line includes the commercial program and a derivative to support the tanker program.

The commercial program has near break-even gross margins.

We are currently producing at a rate of 3 aircraft per month.

777 and 777X Programs The accounting quantity for the 777 program increased by 50 units during 2021 due to the program’s normal progress of obtaining additional orders and delivering airplanes.

The production rate expectation for the combined 777/777X program remains at 2 per month in 2021.

The production rate for the combined 777/777X program is expected to increase from 2 per month to 3 per month in 2022.

In 2013, we launched the 777X-8 and 777X-9, which feature new composite wings, new engines and folding wing-tips.

The first flight of the 777X was completed during the first quarter of 2020.

During the first three quarters of 2020, we made adjustments to our estimates regarding timing of 777X entry into service and market demand.

As previously disclosed, market uncertainties driven primarily by the impacts of COVID-19 resulted in lower planned production rates and created significant pressure on the 777X program’s revenue and cost estimates.

While the 777X program did not have a reach-forward loss as of the third quarter of 2020 based on our assessment of the probable range of initial accounting quantities and other factors at that time, we noted that future levels of 777X profitability would be subject to a number of factors, including continued market uncertainty, the impacts of COVID-19 on our production system as well as on our supply chain and customers, subsequent production rate reductions for both 777X and other commercial programs, and potential risks associated with the testing program and the timing of 777X certification.

We now anticipate that the first 777X delivery will occur in late 2023.

We also recorded a $6.5 billion reach-forward loss on the 777X program in the fourth quarter of 2020.

The revised schedule and the reach-forward loss reflect a number of factors, including an updated assessment of global certification requirements informed by continued discussions with regulators and resulting in a management decision to make modifications to the aircraft’s design, an updated assessment of COVID-19 impacts on market demand, and discussions with our customers with respect to aircraft delivery timing.

In 2021, we began offering the 777X freighter to customers and expect to receive initial orders in 2022.

During the fourth quarter of 2020, we revised the estimated first delivery date of the 777X to late 2023 and recorded a $6.5 billion reach-forward loss on the 777X program.

The revised schedule and reach-

forward loss reflected a number of factors, including an updated assessment of global certification requirements informed by continued discussions with regulators and a management decision in the fourth quarter of 2020 to make modifications to the aircraft’s design, an updated assessment of COVID-19 impacts on market demand and discussions with our customers with respect to aircraft delivery timing.

These factors resulted in adjustments to production rates and the program accounting quantity, increased change incorporation costs, and associated customer and supply chain impacts.

The timing of the certification will ultimately be determined by the regulators, and further determinations with respect to anticipated certification requirements could result in additional delays in entry into service and/or additional cost increases.

The initial accounting quantity of 350 airplanes established in the fourth quarter of 2020 consists of 777X passenger airplanes and remained unchanged during 2021.

We are working towards reaching Type Inspection Authorization (TIA) which will enable us to begin FAA certification flight testing.

The timing of TIA and certification will ultimately be determined by the regulators, and further determinations with respect to anticipated certification requirements could result in additional delays in entry into service and/or additional cost increases.

We continue to anticipate that the first 777X delivery will occur in late 2023.

The 777X program has near break-even gross margins at December 31, 2021.

The level of profitability on the 777X program will be subject to a number of factors.

These factors include continued market uncertainty, the impacts of COVID-19 on our production system as well as impacts on our supply chain and customers, further production rate adjustments for the 777X or other commercial aircraft programs, contraction of the accounting quantity and potential risks associated with the testing program and the timing of aircraft certification.

These factors include continued market uncertainty, the impacts of COVID-19 on our production system as well as impacts on our supply chain and customers, customer negotiations, further production rate adjustments for the 777X or other commercial aircraft programs, contraction of the accounting quantity and potential risks associated with the testing program and the timing of aircraft certification.

One or more of these factors could result in additional reach-forward losses on the 777X program in future periods.

787 Program During 2020, we experienced significant reductions in deliveries due to the impacts of COVID-19 on our customers as well as production issues and associated rework.

The 787 program delivered four airplanes during the fourth quarter of 2020 and has a large number of undelivered airplanes in inventory at December 31, 2020.

We expanded the scope of production inspections during the fourth quarter of 2020, and those inspections and associated rework are delaying scheduled deliveries and resulting in additional 787 aircraft in inventory.

At December 31, 2020, we had approximately 80 787 aircraft in inventory.

We expect deliveries to resume at a slow pace in early 2021, with the majority of the aircraft in inventory expected to be delivered by the end of 2021.

We continue to work with customers to facilitate deliveries.

We are implementing changes in the production process designed to ensure that newly-built airplanes meet our specifications and do not require further inspections.

Pre-COVID-19, we were producing at a rate of 14 per month and had planned to adjust the 787 production rate to 12 per month in late 2020 and to 10 per month in early 2021.

Due to the impacts of COVID-19 on customer demand, we now plan to reduce to 5 per month in 2021.

As a result of the planned production rate changes, we reduced the accounting quantity for the 787 program by 100 units during the first quarter of 2020.

The 787 program has near breakeven gross margins due to the

reductions in the production rates and the reduction in the program accounting quantity.

If we are required to further reduce the accounting quantity and/or production rates, experience further delivery delays, or experience other factors that could result in lower margins, the program could record a reach-forward loss in future periods.

We made the decision during the third quarter of 2020 to consolidate 787 production in South Carolina in 2021, which did not have a significant financial impact on the program.

During 2021 we delivered 14 aircraft between March 2021 and May 2021 prior to deliveries being paused in May 2021.

Deliveries remain paused.

At December 31, 2021 and 2020 we had approximately 110 and 80 aircraft in inventory.

We have identified production quality issues, including in our supply chain, which have contributed to the pause in deliveries.

In July 2021, we announced that we were reprioritizing production resources to support inspections and rework.

We continue to conduct inspections and rework on undelivered aircraft and engage in detailed discussions with the FAA regarding required actions for resuming delivery of the 787.

We are currently producing at very low rates and expect that to continue until deliveries resume, gradually returning to 5 per month over time.

In the third quarter of 2021, we determined that in the current environment production rates below 5 per month represent abnormally low production rates and result in abnormal production costs, and that inspections and rework costs on inventoried aircraft are excessive and should also be accounted for as abnormal production costs that are required to be expensed as incurred.

In the fourth quarter of 2021, we determined that the ongoing rework, as well as our ongoing discussions with the FAA in anticipation of resumption of deliveries, will result in lower production rates longer than previously expected.

As a result of these impacts, we expect to incur approximately $2 billion of abnormal production costs on a cumulative basis with most being incurred by the end of 2023.

We continue to work with customers and suppliers regarding timing of future deliveries and production rate changes.

We are also continuing to implement changes in the production process designed to ensure that newly-built airplanes meet our specifications and do not require further inspections and rework.

During the first quarter of 2021, we consolidated 787 production in South Carolina, in line with our previous assumptions, which did not have a significant financial impact on the program.

During the fourth quarter of 2021, we recorded a loss of $3.5 billion on the program primarily due to the additional rework, as well as other actions required to resume 787 deliveries, taking longer than

These impacts have resulted in longer than expected delivery delays and associated customer considerations.

The timing of the resumption of deliveries and future production rates will depend upon rework, ongoing customer and supplier engagement, production stability and our activities with the FAA.

China is a significant market for the 787 program, and if the program is unable to obtain additional orders from China in future quarters, we may be required to further adjust production rate assumptions.

If we are required to further reduce the accounting quantity and/or production rates, experience further delivery delays or experience other factors that result in lower margins, the program could record additional losses and higher abnormal production costs in future periods.

Fleet Support We provide the operators of our commercial airplanes with assistance and services to facilitate efficient and safe airplane operation.

8 unchanged sentences

Reflects models in development during 2021

We launched the 737 MAX 7 in August 2011 and the 737 MAX 10 in June 2017.

We launched the 777X in November 2013.

We now anticipate that the first 737 MAX 10 and 777X delivery will occur in 2023.

This schedule reflects a number of factors, including an updated assessment of global certification requirements informed by continued discussions with regulators and resulting in a management decision to make modifications to the aircraft’s design.

The development schedules shown above are subject to a number of uncertainties, including changes in certification requirements.

The timing of certifications will ultimately be determined by the regulators.

Additional Considerations

The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from employees and other partners.

Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging.

Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging, such as the 787 production issues and associated rework.

In addition, the introduction of new aircraft and derivatives, such as the 777X and 737 MAX derivatives, involves increased risks associated with meeting development, production and certification schedules.

3 unchanged sentences

changes to the program accounting quantity, customer and model mix, production costs and rates, changes to price escalation factors due to changes in the inflation rate or other economic indicators, performance or reliability issues involving completed aircraft, capital expenditures and other costs associated with increasing or adding new production capacity, learning curve, additional change incorporation, achieving anticipated cost reductions, the addition of regulatory requirements in connection with certification in one or more jurisdictions, flight test and certification schedules, costs, schedule and demand for new airplanes and derivatives and status of customer claims, supplier claims or assertions and other contractual negotiations.

While we believe the cost and revenue estimates incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become

necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure.

While we believe the cost and revenue estimates

incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure.

Defense, Space & Security

1 unchanged sentence

United States Government Defense Environment Overview

The Omnibus appropriations acts for FY21, enacted in December 2020, provided FY21 appropriations for government departments and agencies, including the United States Department of Defense (U.S.

DoD), the National Aeronautics and Space Administration (NASA) and the Federal Aviation Administration.

The enacted FY21 appropriations included funding for Boeing’s major programs, such as the F/A-18 Super Hornet, F-15EX, CH-47 Chinook, AH-64 Apache, V-22 Osprey, KC-46A Tanker, P-8 Poseidon and Space Launch System.

However, there continues to be uncertainty with respect to future program-level appropriations for the U.S.

DoD and other government agencies, including NASA.

In May 2021, the U.S.

government released the President’s budget request for fiscal year 2022 (FY22), which included $715 billion in funding for the United States Department of Defense (U.S.

DoD), $25 billion in funding for the National Aeronautics and Space Administration (NASA) and $19 billion for the FAA.

While the President’s budget request for FY22 includes funding for a majority of Boeing’s programs, it did not include funding for F/A-18 Super Hornet, P-8 Poseidon and CH-47F Block II production aircraft.

While there is continued congressional support for F/A-18 and CH-47F Block II production aircraft for FY22, there is ongoing uncertainty with respect to these and other program-level appropriations for FY22 and future fiscal years.

These programs also continue to pursue non-U.S.

sales opportunities.

In December 2021, Congress passed and the President signed the National Defense Authorization Act for FY22, which authorizes a U.S.

DoD budget $25 billion higher than the budget request.

A CR, enacted on December 3, 2021, continues funding for the federal government at FY21 appropriated levels through February 18, 2022.

Alternatively, Congress may continue to fund the federal government through one or more additional CRs, however, this would continue to restrict the execution of certain program activities and delay new programs or competitions.

Accordingly, there continues to be uncertainty with respect to program-level appropriations for the U.S.

DoD and other government agencies, including NASA, for FY22 and beyond.

Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations and/or delays of existing contracts or programs.

24 unchanged sentences

AH-64 Apache (Remanufactured) 56 52 74

KC-46A Tanker 14 28

KC-46 Tanker 13 14 28

P-8 Models 16 15 18

Total 169 154 229

New-build satellite deliveries were as follows:

Years ended December 31, 2020 2019 2018

Commercial and civil satellites 2 1

Military satellites 1

BDS revenues in 2021 increased by $283 million compared with 2020 primarily due to higher revenue on the KC-46A Tanker program due to new orders for 27 aircraft received during the first quarter of 2021 and lower charges in 2021.

This was partially offset by lower revenues on rotorcraft programs, Commercial Crew and VC-25B.

Cumulative contract catch-up adjustments in 2021 were $56 million less unfavorable than the prior year, largely due to the lower charges described below.

BDS revenues in 2020 increased by $162 million compared with 2019 reflecting higher revenues from fighter aircraft, Space Launch System, B-52 upgrades, proprietary and MQ-25, partially offset by reduced volume in missile defense.

These net increases were offset by the unfavorable impact of cumulative contract catch-up adjustments, which was $312 million higher than the comparable period in the prior year, largely due to the KC-46A Tanker charges during 2020.

BDS revenues in 2019 decreased by $205 million compared with 2018 primarily due to timing associated with non-U.S.

contract awards for fighters and the final C-17 sale occurring in 2018;

in addition, the unfavorable impact of cumulative contract catch-up adjustments was $163 million higher than the prior year, reflecting increased unfavorable adjustments on the Commercial Crew contract and less favorable performance.

These were partially offset by increases from new programs, including E-7 early warning aircraft, VC-25B, T-7A Red Hawk, and MQ-25, as well as from satellites and weapons.

These net increases were offset by the unfavorable impact of cumulative contract catch-up adjustments, which were $312 million higher than the comparable period in the prior year, largely due to the KC-46A Tanker charges during 2020.

Earnings From Operations

BDS earnings from operations in 2020 decreased by $1,076 million compared with 2019 primarily due to the unfavorable impact of cumulative contract catch-up adjustments, which was $828 million higher than the prior year, largely due to charges of $1,320 million on KC-46A Tanker and $168 million on VC-25B, offset by $489 million in charges on Commercial Crew in the prior period.

BDS earnings from operations in 2021 increased by $5 million compared with 2020 primarily due to less unfavorable impacts from cumulative contract catch-up adjustments, which improved $219 million from the prior year, largely due to lower KC-46A Tanker charges in 2021 compared to 2020 and other charges in development programs described below.

The favorable change in cumulative contract catch-up adjustments was offset primarily by lower volume and mix on rotorcraft programs and lower equity earnings for United Launch Alliance (ULA).

During the fourth quarter of 2021, BDS increased the reach-forward loss on the KC-46A Tanker program by $402 million primarily due to continued disruption in the factory and in the supply chain, including impacts of COVID-19, and an increase in costs to complete the new Remote Vision System as the customer’s requirements definition has evolved.

In 2020, we recorded an additional reach-forward loss of $1,320 million on the KC-46A Tanker program reflecting $551 million of costs associated

with the agreement signed in April 2020 with the U.S.

Air Force to develop and integrate the new Remote Vision System, and costs for production inefficiencies including impacts of COVID-19 disruption.

During the third quarter of 2021, we increased the reach-forward loss on Commercial Crew by $185 million driven by the delay in the second uncrewed Orbital Flight Test now anticipated in 2022 and the latest assessment of remaining work.

During the first quarter of 2021, we increased the reach-forward loss on VC-25B by $318 million, which was largely due to COVID-19 impacts and performance issues at a key supplier.

The $168 million reach-forward loss in the first quarter of 2020 on VC-25B was associated with engineering inefficiencies from the COVID-19 environment.

BDS earnings from operations in 2020 decreased by $1,076 million compared with 2019 primarily due to the unfavorable impact of cumulative contract catch-up adjustments, which were $828 million higher than the prior year, largely due to higher charges in 2020 of $1,320 million on KC-46A Tanker and $168 million on VC-25B, offset by $489 million in charges on Commercial Crew in 2019.

The lower earnings in 2020 also reflect lower gains on property sales compared to the same period in 2019.

These current period decreases were partially offset by the volume increases described above.

The KC-46A Tanker reach-forward loss of $1,320 million reflects $551 million of costs associated with the agreement signed in April 2020 with the U.S.

Air Force to develop and integrate a new Remote Vision System, and the remaining costs reflect production inefficiencies including impacts of COVID-19 disruption.

The $168 million reach-forward loss on VC-25B recorded in the first quarter was associated

with engineering inefficiencies from the COVID-19 environment.

We believe these inefficiencies will result in staffing challenges, schedule inefficiencies, and higher costs in the upcoming phases of the program.

BDS earnings from operations in 2019 increased by $923 million compared with 2018 primarily due to the absence of $691 million related to losses on the T-7A Red Hawk and MQ-25 contracts.

The unfavorable impact of cumulative contract catch-up adjustments in 2019 was $62 million lower than the prior year.

In 2019, BDS recorded charges of $489 million related to Commercial Crew and $148 million related to KC-46A Tanker compared with $736 million in 2018.

BDS earnings from operations include equity earnings of $141 million, $128 million and $147 million primarily from our ULA and non-U.S.

BDS earnings from operations includes our share of income or loss from equity method investments of $53 million, $141 million and $128 million primarily from our ULA and non-U.S.

joint ventures in 2021, 2020 and 2019, respectively.

7 unchanged sentences

Examples of significant fixed-price development programs include Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, VC-25B, and commercial and military satellites.

A number of our ongoing fixed-price development programs have reach-forward losses.

New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance.

2 unchanged sentences

These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, the loss of satellite in-orbit incentive payments or other financially significant exposure.

These programs have risk for reach-forward losses if our estimated costs exceed our estimated contract revenues.

Risk remains that we may be required to record additional reach-forward losses in future periods.

Global Services

6 unchanged sentences

See Overview to Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the impacts of COVID-19 on the airline industry environment.

Over the long-term, as the size of the worldwide commercial airline fleet continues to grow, so does demand for aftermarket services designed to increase efficiency and extend the economic lives of

Over the long-term, as the size of the worldwide commercial airline fleet continues to grow, so does demand for aftermarket services designed to increase efficiency and extend the economic lives of airplanes.

Airlines are using data analytics to plan flight operations and predictive maintenance to improve their productivity and efficiency.

19 unchanged sentences

Operating margins 12.4 % 2.9 % 14.6 %

BGS revenues in 2021 increased by $785 million compared with 2020 due to higher commercial and government services volume.

While commercial services volume is recovering, it remains below pre-pandemic levels.

The net favorable impact of cumulative contract catch-up adjustments in 2021 was $37 million lower than the comparable period in the prior year .

We expect the impacts of the COVID-19 pandemic to continue to have an adverse impact on BGS commercial revenues in future quarters until the commercial airline industry environment fully recovers.

BGS revenues in 2020 decreased by $2,925 million compared with 2019 due to lower commercial services revenue driven by impacts of the COVID-19 pandemic.

The favorable impact of cumulative contract catch-up adjustments in 2020 was $101 million lower than the comparable period in the prior year .

We expect the impacts of the COVID-19 pandemic to continue to reduce BGS commercial revenues in future quarters until the commercial airline industry environment recovers.

BGS revenues in 2019 increased by $1,412 million compared with 2018 due to growth across our services portfolio, primarily driven by higher parts revenue, including the acquisition of KLX in the fourth quarter of 2018 and government services revenue, partially offset by lower commercial services revenue.

The favorable impact of cumulative contract catch-up adjustments in 2019 was $80 million higher than the comparable period in the prior year .

Earnings From Operations

BGS earnings from operations in 2020 decreased by $2,247 million compared with 2019, primarily due to lower commercial services revenue as well as earnings charges in 2020, including $531 million of inventory write-downs, $178 million of related impairments of distribution rights primarily driven by airlines' decisions to retire certain aircraft, $398 million for higher expected credit losses primarily driven by customer liquidity issues, $115 million of contract termination and facility impairment charges, as well as $72 million of severance costs.

These charges reflect the significant impacts of the COVID-19 pandemic on commercial airline customers’ liquidity and demand for certain products as customers' fleet plans evolve to adapt to the sharp reduction in demand for air travel.

BGS earnings from operations in 2021 increased by $1,567 million compared with 2020, primarily due to charges incurred in 2020 driven by impacts of the COVID-19 pandemic as well as higher commercial services volume in 2021, partially offset by an inventory write-down of $220 million recognized in the fourth quarter of 2021 driven by revised cost estimates on certain customer contracts.

Charges in 2020 included $531 million of inventory write-downs, $178 million of related impairments of distribution rights primarily driven by airlines’ decisions to retire certain aircraft, $398 million for higher expected credit losses primarily driven by customer liquidity issues, $115 million of contract termination and facility impairment charges, and $72 million of severance costs.

The net favorable impact of cumulative contract catch-up adjustments in 2021 was $98 million lower than the prior year .

BGS earnings from operations in 2020 decreased by $2,247 million compared with 2019, primarily due to lower commercial services revenue as well as the 2020 earnings charges described in the previous paragraph.

The favorable impact of cumulative contract catch-up adjustments in 2020 was consistent with the prior year .

BGS earnings from operations in 2019 increased by $161 million compared with 2018 primarily due to higher revenues, partially offset by less favorable performance and mix.

Earnings from operations for 2019 also includes a divestiture gain of $395 million and a charge of $293 million related to our decision in the fourth quarter to retire the Aviall brand and trade name.

The favorable impact of cumulative contract catch-up adjustments in 2019 was $21 million higher than the comparable period in the prior year .

BGS total backlog of $20,632 million at December 31, 2020 decreased by 10% from $22,902 million at December 31, 2019, primarily due to a reduction for commercial orders that, in our assessment, no longer meet the accounting requirements of ASC 606 for inclusion in backlog.

BGS total backlog of $20,496 million at December 31, 2021 decreased by 1% from $20,632 million at December 31, 2020, primarily due to revenue recognized on contracts awarded in prior years.

Boeing Capital

1 unchanged sentence

BCC’s gross customer financing and investment portfolio at December 31, 2021 totaled $1,734 million.

A substantial portion of BCC’s portfolio is related to customers that we believe have less than investment-grade credit.

A substantial portion of BCC’s portfolio is composed of customers that have less than investment-grade credit.

BCC’s portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably 717 and 747-8 aircraft.

BCC provided customer financing of $14 million and $419 million during 2020 and 2019.

BCC provided customer financing of $14 million during 2020 and none during 2021.

While we may be required to fund a number of new aircraft deliveries in 2021 and/or provide refinancing for existing bridge debt, we expect alternative financing will be available at reasonable prices from broad and globally diverse sources.

13 unchanged sentences

BCC segment revenues consist principally of lease income from equipment under operating lease, interest income from financing receivables and notes, and other income.

BCC’s revenues in 2020 increased by $17 million compared with 2019 primarily due to gains on re-lease of assets.

BCC’s revenues in 2019 decreased by $30 million compared with 2018 primarily due to lower gains on the sale of assets.

BCC’s revenues in 2021 increased by $11 million compared with 2020, and revenues in 2020 increased by $17 million compared with 2019 primarily due to gains on re-lease of assets, partially offset by portfolio run-off.

Earnings From Operations

BCC’s earnings from operations are presented net of interest expense, provision for (recovery of) losses, asset impairment expense, depreciation on leased equipment and other operating expenses.

Earnings from operations in 2021 increased by $43 million compared with 2020 primarily due to higher revenues, lower provision for losses, and lower interest and asset impairment expenses.

Earnings from operations in 2020 increased by $35 million compared with 2019 primarily due to higher revenues, lower asset impairment expenses and lower interest expenses.

Earnings from operations in 2019 decreased by $51 million compared with 2018 primarily due to lower revenues and higher asset impairment expenses.

Financial Position

4 unchanged sentences

Total assets $2,182 $2,363

Other liabilities, primarily deferred income taxes $392 $432

Other liabilities, primarily income taxes

Debt, including intercompany loans 1,525 1,640

3 unchanged sentences

BCC’s customer financing and investment portfolio at December 31, 2021 decreased from December 31, 2020, primarily due to $241 million of note payoffs and portfolio run-off.

BCC enters into certain transactions with Boeing, reflected in Unallocated items, eliminations and other, in the form of intercompany guarantees and other subsidies that mitigate the effects of certain credit quality or asset impairment issues on the BCC segment.

Leased aircraft with a carrying value of approximately $57 million are scheduled to be returned off lease during 2021.

We are seeking to remarket these aircraft or have the leases extended.

BCC enters into certain transactions with other Boeing segments, reflected in Unallocated items, eliminations and other, in the form of intercompany guarantees and other subsidies that mitigate the effects of certain credit quality or asset impairment issues on the BCC segment.

Liquidity and Capital Resources

2 unchanged sentences

Years ended December 31, 2021 2020 2019

Net (loss)/earnings ($11,941) ($636) $10,460

Net loss ($4,290) ($11,941) ($636)

Non-cash items 7,851 10,866 2,819

Changes in working capital (17,335) (4,629) 2,284

Net cash (used)/provided by operating activities (18,410) (2,446) 15,322

Net cash used by investing activities (18,366) (1,530) (4,621)

Net cash provided/(used) by financing activities 34,955 5,739 (11,722)

Changes in assets and liabilities (6,977) (17,335) (4,629)

Net cash used by operating activities (3,416) (18,410) (2,446)

Net cash provided/(used) by investing activities 9,324 (18,366) (1,530)

Net cash (used)/provided by financing activities (5,600) 34,955 5,739

Effect of exchange rate changes on cash and cash equivalents (39) 85 (5)

Net (decrease)/increase in cash & cash equivalents, including restricted (1,736) 1,758 (1,074)

Net increase/(decrease) in cash & cash equivalents, including restricted 269 (1,736) 1,758

Cash & cash equivalents, including restricted, at beginning of year 7,835 9,571 7,813

Cash & cash equivalents, including restricted, at end of year $8,104 $7,835 $9,571

Operating Activities Net cash used by operating activities was $18.4 billion during 2020, compared with net cash used by operating activities of $2.4 billion during 2019 and net cash provided by operating activities of $15.3 billion in 2018.

The decrease in operating cash flows in 2020 is primarily driven by our net loss in 2020 and changes in working capital, partially offset by an increase in non-cash items.

Operating Activities Net cash used by operating activities was $3.4 billion during 2021, compared with $18.4 billion during 2020 and $2.4 billion during 2019.

The reduction in cash used by operating activities in 2021 compared with 2020 is primarily driven by lower net loss and improved changes in assets and liabilities.

Non-cash items in 2021 include the $3.5 billion reach-forward loss on the 787 program which was recorded as a reduction to inventory, as well as $1.2 billion of treasury shares issued to fund Company contributions to the 401(k) plan and $0.8 billion of share-based plans expense reflecting a one-time stock grant to most employees in lieu of 2021 salary increases.

The changes in assets and liabilities reflect the significant increase in commercial airplane inventory in 2020 driven by lower deliveries due to the COVID-19 pandemic and the 737 MAX grounding.

In 2021, inventory growth slowed as the continued buildup of 787 aircraft caused by production issues and 777X inventory growth was partially offset by a decrease in 737 MAX inventory following the resumption of deliveries.

Compensation payments to 737 MAX customers totaled $2.5 billion and $2.2 billion in 2021 and 2020.

In the first quarter of 2021, we paid $0.7 billion consistent with the terms of the Deferred Prosecution Agreement between Boeing and the U.S.

Department of Justice.

Additionally, in 2021, we received income tax refunds of $1.7 billion.

Cash provided by Advances and progress billings was $2.5 billion in 2021, as compared with Cash used by Advances and progress billings of $1.1 billion in 2020.

The pause in 787 deliveries and the residual impacts of the 737 MAX grounding are expected to continue to have a significant impact on our operating cash flows until 787 deliveries resume and 737 MAX deliveries ramp up.

The decrease in operating cash flows in 2020 compared to 2019 is primarily driven by our net loss in 2020 and changes in assets and liabilities, partially offset by an increase in non-cash items.

Non-cash items include the $6.5 billion reach-forward loss on the 777X program in 2020, which was recorded as a reduction to inventory.

The year-over-year increase in non-cash items also reflects higher inventory write-downs and higher allowances for expected credit losses in 2020.

The changes in working capital reflect increases in commercial airplane inventory due to the large number of undelivered aircraft in 2019 resulting from the 737 MAX grounding, and in 2020 due to the 737 MAX grounding, 787 production issues and COVID-19 impacts.

The changes in assets and liabilities reflect increases in commercial airplane inventory due to the large number of undelivered aircraft in 2019 resulting from the 737 MAX grounding, and in 2020 due to the 737 MAX grounding, 787 production issues and COVID-19 impacts.

Cash used by Advances and progress billings was $1.1 billion in 2020, as compared with $0.7 billion provided by Advances and progress billings in 2019.

The changes in working capital in 2020 also reflect lower accounts payable due to reductions in commercial purchases from suppliers and lower supply chain financing.

The changes in assets and liabilities in 2020 also reflect lower accounts payable due to reductions in commercial purchases from suppliers and lower supply chain financing.

Compensation payments to 737 MAX customers totaled $2.2 billion during 2020 and $1.2 billion during 2019.

The accrued liability for 737 MAX customer considerations at December 31, 2019 resulted in a $7.4 billion favorable change to working capital in 2019.

The impacts of the COVID-19 pandemic and the 737 MAX grounding are expected to continue to have a significant negative impact on our operating cash flows during 2021.

The decrease in operating cash flows in 2019 compared to 2018 primarily reflected the impacts of the 737 MAX grounding resulting in lower earnings, higher inventory and lower advances and progress payments.

In addition, compensation payments to 737 MAX customers of $1.2 billion for disruption to their operations also reduced 2019 cash from operating activities.

Cash used to fund inventory was $12.4 billion during 2019 as we continued to produce aircraft while deliveries were suspended.

Cash provided by Advances and progress billings was $0.7 billion in 2019, compared with $2.6 billion in 2018.

Payables to suppliers who elected to participate in supply chain financing programs declined by $1.9 billion for the year ended December 31, 2020, and increased by $2.6 billion and $0.6 billion for the same period in 2019 and 2018.

The accrued liability

for 737 MAX customer considerations at December 31, 2019 resulted in a $7.4 billion favorable change to assets and liabilities in 2019.

Payables to suppliers who elected to participate in supply chain financing programs declined by $1.5 billion and $1.9 billion for the years ended December 31, 2021 and 2020, and increased by $2.6 billion in 2019.

Supply chain financing is not material to our overall liquidity.

The decline for the year ended December 31, 2020 was primarily due to reductions in commercial purchases from suppliers.

The increase for the years ended December 31, 2019 and 2018 reflects a combination of higher purchases, an extension of payment terms with certain suppliers, and increased utilization of our supply chain financing programs.

Investing Activities Cash used by investing activities during 2020, 2019 and 2018 was $18.4 billion, $1.5 billion and $4.6 billion.

The declines for the years ended December 31, 2021 and 2020 were primarily due to reductions in commercial purchases from suppliers.

The increase for the year ended December 31, 2019 reflects a combination of higher purchases, an extension of payment terms with certain suppliers and increased utilization of our supply chain financing programs.

Investing Activities Cash provided by investing activities during 2021 was $9.3 billion, compared with cash used by investing activities of $18.4 billion and $1.5 billion during 2020 and 2019.

The increase in cash inflows in 2021 compared to 2020 is primarily due to $27.1 billion of higher net proceeds from investments.

The increase in cash outflows in 2020 compared to 2019 is primarily due to $17.4 billion of higher net contributions to investments.

The reduction in cash outflows in 2019 compared with 2018 is primarily due to acquisitions completed in the second half of 2018 and the timing of investments.

Acquisitions net of cash acquired were $0.5 billion in 2019, primarily related to the acquisition of KLX.

Proceeds from dispositions was $0.5 billion in 2019 as a result of the divestiture of two businesses.

Capital expenditures totaled $1.3 billion in 2020, compared with $1.8 billion in 2019 and $1.7 billion 2018.

We expect capital expenditures in 2021 to be relatively consistent with 2020.

Net contributions to investments were $17.3 billion in 2020, compared with net proceeds from investments of $0.1 billion in 2019 and $0.3 billion in 2018.

Financing Activities Cash provided by financing activities was $35.0 billion during 2020, compared with cash provided by financing activities of $5.7 billion in 2019 and cash used by financing activities of $11.7 billion in 2018.

The increase of $29.3 billion compared with 2019 primarily reflects higher net borrowings, lower share repurchases, and lower dividend payments.

Cash provided by financing activities increased $17.5 billion compared with 2018 primarily due to higher net borrowings and lower share repurchases, partially offset by higher dividend payments in 2019.

During the twelve months ended December 31, 2020, new borrowings net of repayments were $36.3 billion compared with $13.2 billion and $1.4 billion in the same period in 2019 and 2018.

The increase in 2020 is primarily due to $29.9 billion of fixed rate senior notes issued in 2020 and $13.8 billion of new borrowings under a two-year delayed draw term loan agreement entered into in the first quarter of 2020.

Net proceeds from investments were $9.8 billion in 2021, compared with net contributions to investments of $17.3 billion in 2020 and net proceeds from investments of $0.1 billion in 2019.

Capital expenditures totaled $1.0 billion in 2021, compared with $1.3 billion in 2020 and $1.8 billion in 2019.

We reduced our capital expenditures in 2021 and 2020 as we managed our liquidity throughout the pandemic and 737 MAX grounding.

We expect capital expenditures in 2022 to be higher than in 2021.

Financing Activities Cash used by financing activities was $5.6 billion during 2021, compared with cash provided by financing activities of $35.0 billion during 2020 and $5.7 billion in 2019.

The decrease of $40.6 billion compared with 2020 primarily reflects net debt repayments in 2021 compared with net borrowings in 2020.

The increase of $29.3 billion in 2020 compared with 2019 primarily reflects higher net borrowings, lower share repurchases and lower dividend payments, which reflects the Company’s decision in March 2020 to suspend the declaration or payment of dividends until further notice.

During the twelve months ended December 31, 2021, debt repayments net of new borrowings were $5.6 billion, primarily due to $13.8 billion of repayments of our two-year delayed draw term loan credit agreement, partially offset by $9.8 billion of fixed rate senior notes issued in the first quarter of 2021.

During the twelve months ended December 31, 2020, new borrowings net of repayments were $36.3 billion, primarily due to $29.9 billion of fixed rate senior notes issued in 2020 and $13.8 billion of new borrowings under a two-year delayed draw term loan agreement entered into in the first quarter of 2020.

During the twelve months ended December 31, 2019, new borrowings net of repayments were $13.2 billion, primarily due to the issuance of $10.5 billion of fixed rate senior notes in 2019.

For further discussion see Liquidity Matters in Note 1 to our Consolidated Financial Statements.

At December 31, 2020 and 2019 the recorded balance of debt was $63.6 billion and $27.3 billion, of which $1.7 billion and $7.3 billion were classified as short-term.

At December 31, 2021 and 2020 debt balances totaled $58.1 billion and $63.6 billion, of which $1.3 billion and $1.7 billion were classified as short-term.

This included $1.5 billion and $1.6 billion of debt attributable to BCC at December 31, 2021 and 2020, of which $0.3 billion and $0.9 billion were classified as short-term.

During the year ended December 31, 2020, we did not repurchase any shares through our open market share repurchase program compared to repurchases of 6.9 million and 26.1 million shares in 2019 and 2018 totaling $2.7 billion and $9.0 billion.

Share repurchases under this plan had been suspended since April 2019.

During the years ended December 31, 2021 and 2020, we did not repurchase any shares through our open market share repurchase program compared to repurchases of 6.9 million shares in 2019 totaling $2.7 billion.

Share repurchases under this plan have been suspended since April 2019.

In March 2020, the Board of Directors terminated its prior authorization to repurchase shares of the Company's outstanding common stock.

We had 0.3 million, 0.6 million and 0.6 million shares transferred to us from employee tax withholdings in 2021, 2020 and 2019, respectively.

During the twelve months ended December 31, 2020 we paid dividends of $1.2 billion compared with $4.6 billion and $3.9 billion in the same period in 2019 and 2018.

During the year ended December 31, 2021, we paid no dividends, compared with $1.2 billion and $4.6 billion in 2020 and 2019.

In March 2020, the Company announced that our dividend will be suspended until further notice.

In December 2018 we increased our quarterly dividend from $1.71 to $2.055, which resulted in $684 million of higher dividend payments in 2019 compared with 2018.

Capital Resources The impacts of the COVID-19 pandemic and 737 MAX grounding are having a significant negative impact on our liquidity and ongoing operations and creating significant uncertainty.

Capital Resources The impacts of the COVID-19 pandemic, 787 production issues and associated rework, and residual impacts of the 737 MAX grounding are having a significant negative impact on our liquidity and ongoing operations and creating significant uncertainty.

We have and are continuing to take significant actions to manage and preserve our liquidity.

For further discussion see Liquidity Matters in Note 1 to our Consolidated Financial Statements.

At December 31, 2020, we had $7.8 billion of cash and $17.8 billion of short term investments.

At December 31, 2020, we had $9.5 billion of unused borrowing capacity on revolving credit line agreements.

We anticipate that these credit lines will primarily serve as backup liquidity to support our general corporate borrowing needs.

The $9.5 billion of unused borrowing capacity includes a $3.1 billion 364-day revolving credit facility, which expires in October 2021.

We had no commercial paper borrowings at December 31, 2020, compared to commercial paper borrowings of $6.1 billion and $1.9 billion at December 31, 2019 and 2018, which were supported by unused commitments under the revolving credit agreement.

Our debt balances have increased significantly since 2019, and we are continuing to actively manage our liquidity.

Scheduled principal payments for debt for the next five years are as follows:

The following table summarizes certain cash requirements for known contractual and other obligations as of December 31, 2021, and the estimated timing thereof.

See Note 12 for future operating lease payments.

(Dollars in millions) Current Long-term Total

Long-term debt (including current portion) $1,300 $57,389 $58,689

Interest on debt 2,365 33,658 36,023

Pension and other postretirement 594 4,100 4,694

Purchase obligations 53,041 53,702 106,743

737 MAX customer concessions and consideration (1)

800 200 1,000

Debt $1,630 $14,976 $3,776 $2,001 $4,301

Our increased debt balance has also resulted in downgrades to our credit ratings.

(1) For further discussion, see Note 13 to our Consolidated Financial Statements.

We expect to be able to fund our cash requirements through cash and short-term investments and cash provided by operations, as well as continued access to capital markets.

At December 31, 2021, we had $8.1 billion of cash, $8.2 billion of short-term investments, and $14.7 billion of unused borrowing capacity on revolving credit line agreements.

We anticipate that these revolving credit lines will remain undrawn and primarily serve as backup liquidity to support our general corporate borrowing needs.

Of the $14.7 billion of unused borrowing capacity, $6.3 billion expires in October 2022, $5.3 billion expires in March 2023 and $3.2 billion expires in October 2024.

Our debt balances have increased significantly since 2019, and we are continuing to actively manage our liquidity.

In 2021, we repaid $13.8 billion that was outstanding under our two-year delayed draw term loan credit agreement that had a final maturity date of February 6, 2022.

Our increased debt balance resulted in downgrades to our credit ratings in 2020, and our ratings remained unchanged in 2021.

We expect to be able to access capital markets when we require additional funding in order to pay off existing debt, address further impacts to our business related to market developments, fund outstanding financing commitments or meet other business requirements.

5 unchanged sentences

At December 31, 2021, we were in compliance with the covenants for our debt and credit facilities.

The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined).

The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements) and a limitation on consolidated debt as a percentage of total capital (as defined in the credit agreements).

When considering debt covenants, we continue to have substantial borrowing capacity.

Customer financing commitments totaled $11.5 billion and $13.4 billion at December 31, 2020 and 2019.

The decrease primarily relates to financing commitment amendments and expirations.

We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers.

Historically, we have not been required to fund significant amounts of outstanding commitments.

However, there can be no assurances that we will not be required to fund greater amounts than historically required.

At December 31, 2020 and 2019, our pension plans were $13.7 billion and $15.9 billion underfunded as measured under GAAP.

On an Employee Retirement Income Security Act (ERISA) basis our plans are more than 100% funded at December 31, 2020.

Pension and Other Postretirement Benefits Pension cash requirements are based on an estimate of our minimum funding requirements, pursuant to Employee Retirement Income Security Act (ERISA) regulations, although we may make additional discretionary contributions.

Estimates of other postretirement benefits are based on both our estimated future benefit payments and the estimated contributions to plans that are funded through trusts.

At December 31, 2021 and 2020, our pension plans were $7.8 billion and $13.7 billion underfunded as measured under Generally Accepted Accounting Principles in the United States of America (GAAP).

On an ERISA basis our plans are more than 100% funded at December 31, 2021.

We do not expect to make significant contributions to our pension plans in 2022.

1 unchanged sentence

In the fourth quarter of 2020, we contributed $3 billion of our common stock to our pension fund.

In the fourth quarter of 2020, we also began using our common stock in lieu of cash to fund Company contributions to our 401(k) plans for the foreseeable future, which we estimate will conserve approximately $1 billion of cash over the next 12 months.

In the fourth quarter of 2020, we also began using our common stock in lieu of cash to fund Company contributions to our 401(k) plans for the foreseeable future.

Under this approach, common stock is contributed to our 401(k) plans following each pay period.

1 unchanged sentence

We have retained an independent fiduciary to manage and liquidate stock contributed to these plans at its discretion.

Contractual Obligations

The following table summarizes our known obligations to make future payments pursuant to certain contracts as of December 31, 2020, and the estimated timing thereof.

(Dollars in millions) Total Less

years After 5

Long-term debt (including current portion) $63,963 $1,630 $18,752 $6,302 $37,279

Interest on debt 37,614 2,271 4,274 3,852 27,217

Pension and other postretirement cash requirements

5,077 610 1,163 1,073 2,231

Finance lease obligations 228 68 84 20 56

Operating lease obligations 1,781 307 432 240 802

Purchase obligations not recorded on the Consolidated Statements of Financial Position

93,928 36,540 29,933 16,367 11,088

Purchase obligations recorded on the Consolidated Statements of Financial Position 19,621 19,502 99 7 13

Total contractual obligations (1)

$222,212 $60,928 $54,737 $27,861 $78,686

(1) Excludes income tax matters.

As of December 31, 2020, we have uncertain tax positions of $966 million.

We are not able to reasonably estimate the timing of future cash flows related to uncertain tax positions.

For further discussion of income taxes, see Note 4 to our Consolidated Financial Statements.

Pension and Other Postretirement Benefits Pension cash requirements are based on an estimate of our minimum funding requirements, pursuant to ERISA regulations, although we may make additional discretionary contributions.

Estimates of other postretirement benefits are based on both our estimated future benefit payments and the estimated contributions to plans that are funded through trusts.

Purchase Obligations Purchase obligations represent contractual agreements to purchase goods or services that are legally binding;

3 unchanged sentences

Purchase obligations include amounts recorded as well as amounts that are not recorded on the Consolidated Statements of Financial Position.

Purchase Obligations Not Recorded on the Consolidated Statements of Financial Position Purchase obligations not recorded on the Consolidated Statements of Financial Position include agreements for inventory procurement, tooling costs, electricity and natural gas contracts, property, plant and equipment, customer financing equipment, and other miscellaneous production related obligations.

Purchase obligations not recorded on the Consolidated Statements of Financial Position include agreements for inventory procurement, tooling costs, electricity and natural gas contracts, property, plant and equipment, customer financing equipment and other miscellaneous production related obligations.

The most significant obligation relates to inventory procurement contracts.

3 unchanged sentences

The need for such arrangements with suppliers and vendors arises from the extended production planning horizon for many of our products.

A significant portion of these inventory commitments is supported by firm contracts and/or has historically resulted in settlement through reimbursement from customers for penalty payments to the supplier should the customer not take delivery.

A significant portion of these inventory commitments is supported by firm contracts with customers and/or has historically resulted in settlement through reimbursement from customers for penalty payments to the supplier should the customer not take delivery.

These amounts are also included in our forecasts of costs for program and contract accounting.

1 unchanged sentence

In these limited cases, we have included our best estimate of the effect of the escalation adjustment in the amounts disclosed in the table above.

Purchase Obligations Recorded on the Consolidated Statements of Financial Position Purchase obligations recorded on the Consolidated Statements of Financial Position primarily include accounts payable and certain other current and long-term liabilities including accrued compensation.

Industrial Participation Agreements We have entered into various industrial participation agreements with certain customers outside of the U.S.

Purchase obligations recorded on the Consolidated Statements of Financial Position primarily include accounts payable and certain other current and long-term liabilities including accrued compensation.

We have entered into various industrial participation agreements with certain customers outside of the U.S.

to facilitate economic flow back and/or technology or skills transfer to their businesses or government agencies as the result of their procurement of goods and/or services from us.

3 unchanged sentences

During 2021, we incurred no such penalties.

As of December 31, 2020, we have outstanding industrial participation agreements totaling $26.4 billion that extend through 2034.

As of December 31, 2021, we have outstanding industrial participation agreements

totaling $25.5 billion that extend through 2034.

Purchase order commitments associated with industrial participation agreements are included in purchase obligations in the table above.

1 unchanged sentence

supplier must have sufficient capability to meet our requirements and must be competitive in cost, quality and schedule.

Off-Balance Sheet Arrangements We are a party to certain off-balance sheet arrangements including certain guarantees.

For discussion of these arrangements, see Note 14 to our Consolidated Financial Statements.

Commercial Commitments

8 unchanged sentences

Commercial aircraft financing commitments include commitments to provide financing related to aircraft on order, under option for deliveries or proposed as part of sales campaigns or refinancing with respect to delivered aircraft, based on estimated earliest potential funding dates.

Based on historical experience, we anticipate that we will not be required to fund a significant portion of our financing commitments.

Customer financing commitments totaled $12.9 billion and $11.5 billion at December 31, 2021 and 2020.

The increase relates to new financing commitments.

We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers.

Historically, we have not been required to fund significant amounts of outstanding commitments.

However, there can be no assurances that we will not be required to fund greater amounts than historically required.

6 unchanged sentences

For additional information, see Note 13 to our Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We are a party to certain off-balance sheet arrangements including certain guarantees.

For discussion of these arrangements, see Note 14 to our Consolidated Financial Statements.

Non-GAAP Measures

Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

Our Consolidated Financial Statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) which we supplement with certain non-GAAP financial information.

Our Consolidated Financial Statements are prepared in accordance with GAAP which we supplement with certain non-GAAP financial information.

These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently.

1 unchanged sentence

Core operating earnings, core operating margin and core earnings per share exclude the FAS/CAS service cost adjustment.

The FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.

CAS service cost adjustment represents the difference between the Financial Accounting Standards (FAS) pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.

Core earnings per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement expenses.

5 unchanged sentences

Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid.

The Pension FAS/CAS service cost adjustment recognized in (loss)/earnings from operations during 2020 was a benefit of $1,024 million, largely consistent with a benefit of $1,071 million in 2019 and $1,005 million in 2018.

The Pension FAS/CAS service cost adjustments recognized in Loss from operations were benefits of $882 million in 2021, $1,024 million in 2020 and $1,071 million in 2019.

The lower benefits in 2021 were primarily due to reductions in allocated pension cost year over year.

The non-operating pension expense included in Other income, net was a benefit of $528 million in 2021, $340 million in 2020 and $374 million in 2019.

The higher benefits in 2021 were primarily due to lower interest cost and higher expected return on plan assets, partially offset by higher amortization of actuarial losses and higher settlement charges.

The benefits in 2020 and 2019 reflect expected returns in excess of interest cost and amortization of actuarial losses.

For further discussion of pension and other postretirement costs see the Management’s Discussion and Analysis on pages 30 - 31 of this Form 10-K and see Note 22 to our Consolidated Financial Statements.

For further discussion of pension and other postretirement costs, see the Management’s Discussion and Analysis on page 29 of this Form 10-K and see Note 22 to our Consolidated Financial Statements.

Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance.

7 unchanged sentences

Revenues $62,286 $58,158 $76,559

(Loss)/earnings from operations, as reported ($12,767) ($1,975) $11,987

Loss from operations, as reported ($2,902) ($12,767) ($1,975)

Operating margins (4.7) % (22.0) % (2.6) %

5 unchanged sentences

($1,173) ($1,383) ($1,415)

Core operating (loss)/earnings (non-GAAP) ($14,150) ($3,390) $10,660

Core operating loss (non-GAAP) ($4,075) ($14,150) ($3,390)

Core operating margins (non-GAAP) (6.5) % (24.3) % (4.4) %

Diluted (loss)/earnings per share, as reported ($20.88) ($1.12) $17.85

Diluted loss per share, as reported ($7.15) ($20.88) ($1.12)

Pension FAS/CAS service cost adjustment (1)

5 unchanged sentences

Non-operating postretirement expense (2)

$0.03 $0.19 $0.17

Provision for deferred income taxes on adjustments (3)

0.61 0.63 0.62

Core (loss)/earnings per share (non-GAAP) ($23.25) ($3.47) $16.01

Core loss per share (non-GAAP) ($9.44) ($23.25) ($3.47)

Weighted average diluted shares (in millions) 588.0 569.0 566.0

(1) FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments.

This adjustment is excluded from Core operating (loss)/earnings (non-GAAP).

This adjustment is excluded from Core operating loss (non-GAAP).

(2) Non-operating pension and postretirement expenses represent the components of net periodic benefit costs other than service cost.

These expenses are included in Other income, net and are excluded from Core (loss)/earnings per share (non-GAAP).

These expenses are included in Other income, net and are excluded from Core loss per share (non-GAAP).

(3) The income tax impact is calculated using the U.S.

16 unchanged sentences

Changes in revenue and cost estimates could also result in a reach-forward loss or an adjustment to a reach-forward loss which would be recorded immediately in earnings.

For the years ended December 31, 2020, 2019 and 2018 net unfavorable cumulative catch-up adjustments, including reach-forward losses, across all long-term contracts decreased Earnings from operations by $942 million, $111 million and $190 million, respectively.

The cumulative catch-up adjustments in 2020 were primarily due to reach-forward losses incurred on the KC-46A Tanker program.

For the years ended December 31, 2021, 2020 and 2019, net unfavorable cumulative catch-up adjustments across all long-term contracts increased loss from operations by $880 million, $942 million and $111 million, respectively.

The cumulative catch-up adjustments in 2021 were primarily due to losses recognized on the KC-46A Tanker, VC-25B and Commercial Crew programs.

These are all fixed-price development programs, and there is ongoing risk that similar losses may have to be recognized in future periods on these and/or other programs.

Due to the significance of judgment in the estimation process described above, it is likely that materially different earnings could be recorded if we used different assumptions or if the underlying circumstances were to change.

Changes in underlying assumptions/estimates, supplier performance, or circumstances may adversely or positively affect financial performance in future periods.

If the combined gross margin for all long-term contract performance obligations for all of 2020 had been estimated to be higher or lower by 1%, it would have increased or decreased pre-tax income for the year by approximately $330 million.

In addition, a number of our fixed price development contracts are in a reach-forward loss position.

Changes to estimated losses are recorded immediately in earnings.

If the combined gross margins for our profitable long-term contracts had been estimated to be higher or lower by 1% during 2021, it would have increased or decreased pre-tax income for the year by approximately $300 million.

Program Accounting

Program accounting requires the demonstrated ability to reliably estimate the relationship of sales to costs for the defined program accounting quantity.

Program accounting requires the demonstrated ability to reliably estimate revenues, costs and gross profit margin for the defined program accounting quantity.

A program consists of the estimated number of units (accounting quantity) of a product to be produced in a continuing, long-term production effort for delivery under existing and anticipated contracts.

The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates of the revenue and cost of existing and

anticipated contracts.

For each program, the amount reported as cost of sales is determined by applying the estimated cost of sales percentage for the total remaining program to the amount of sales recognized for airplanes delivered and accepted by the customer.

The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates.

Factors that must be estimated include program accounting quantity, sales price, labor and employee benefit costs, material costs, procured part costs, major component costs, overhead costs, program tooling and other non-recurring costs, and warranty costs.

6 unchanged sentences

This includes reassessing the accounting quantity.

Changes in estimates of program margins are normally recognized on a prospective basis;

however, when estimated costs to complete a program exceed estimated revenues from undelivered units in the accounting quantity, a loss provision is recorded in the current period for the estimated loss on all undelivered units in the accounting quantity.

The program method of accounting allocates tooling and other non-recurring and production costs over the accounting quantity for each program.

Because of the higher unit production costs experienced at the beginning of a new program and substantial investment required for initial tooling and other non-recurring costs, new commercial aircraft programs, typically have lower initial margins than established programs and a higher risk for reach-forward loss.

Actual costs incurred for earlier units in excess of the estimated average cost of all units in the program accounting quantity are included within program inventory as deferred production costs.

Deferred production, unamortized tooling and other non-recurring costs are expected to be fully recovered when all units in the accounting quantity are delivered as the expected unit cost for later deliveries is below the estimated average cost as learning curve and other improvements are realized.

We now anticipate that the first 777X delivery will occur in late 2023.

We also recorded a $6.5 billion reach-forward loss on the 777X program in the fourth quarter of 2020.

Changes in estimates of program gross profit margins are normally recognized on a prospective basis;

however, when estimated costs to complete a program plus costs already included in inventory exceed estimated revenues from the program, a loss is recorded in the current period.

Reductions to the estimated loss are included in the gross profit margin for undelivered units in the accounting quantity whereas increases to the estimated loss are recorded as an earnings charge in the period in which the loss is determined.

The 747, 767 and 777X programs have near break-even margins, and the 787 program has zero margin at December 31, 2021.

Adverse changes to the revenue and/or cost estimates for these programs could result in additional earnings charges in future periods.

777X Program During the fourth quarter of 2020, we revised the estimated first delivery date of the 777X to late 2023 and recorded a $6.5 billion reach-forward loss on the 777X program.

The revised schedule and reach-forward loss reflected a number of factors, including an updated assessment of global certification requirements informed by continued discussions with regulators and a management decision in the fourth quarter of 2020 to make modifications to the aircraft’s design, an updated assessment of COVID-19 impacts on market demand and discussions with our customers with respect to aircraft delivery timing.

These factors resulted in adjustments to production rates and the program accounting quantity, increased change incorporation costs, and associated customer and supply chain impacts.

Absent changes in the estimated revenues or costs, deliveries which are expected to begin in 2023 will be recorded at zero margin.

Reductions to the estimated loss in subsequent periods are spread over all undelivered units in the accounting quantity, whereas increases to the estimated loss are recorded immediately.

The initial accounting quantity of 350 airplanes established in the fourth quarter of 2020 consists of 777X passenger airplanes and remained unchanged during 2021.

We are working towards reaching TIA which will enable us to begin FAA certification flight testing.

We continue to anticipate that the first 777X delivery will occur in late 2023.

The 777X program has near break-even gross margins at December 31, 2021.

The level of profitability on the 777X program will be subject to a number of factors.

One or more of these factors

could result in additional reach-forward losses on the 777X program in future periods which may be material.

Due to the impacts of COVID-19 on our customers as well as production issues and associated rework, the 787 program has near breakeven gross margins at December 31, 2020.

The margins reflect reductions in the production rate and program accounting quantity during 2020.

If we are required to further reduce the accounting quantity and/or production rates or experience higher than anticipated costs or delays addressing production issues and associated rework, or other factors that could result in lower margins, the program could record a reach-forward loss in future periods which may be material.

The 747 and 767 programs also have near breakeven gross margins at December 31, 2020.

If we are unable to mitigate risks associated with these programs, or if our assumptions with respect to items such as pricing, cost, accounting quantity or future production rates were to change, we could be required to record reach-forward losses in future periods which may be material.

737 MAX Grounding

In 2019, following two fatal 737 MAX accidents, the Federal Aviation Administration (FAA) and non-U.S.

civil aviation authorities issued orders suspending commercial operations of 737 MAX aircraft.

Deliveries of the 737 MAX were suspended following these orders.

Deliveries resumed in late 2020 following rescission by the FAA of its grounding order.

Multiple legal actions have been filed against us as a result of the accidents.

In addition, we are fully cooperating with U.S.

government investigations related to the accidents and the 737 MAX program, including an investigation by the Securities and Exchange Commission, the outcome of which may be material.

On January 6, 2021, we entered into a Deferred Prosecution Agreement with the U.S.

Department of Justice that resolves the Department of Justice’s previously disclosed investigation into us regarding the evaluation of the 737 MAX airplane by the FAA.

Other than with respect to the U.S.

Department of Justice, we cannot reasonably estimate a range of loss, if any, not covered by available insurance that may result given the current status of the lawsuits, investigations and inquiries related to the 737 MAX.

In the preparation of our financial statements, we have made assumptions regarding outcomes of accident investigations and other government inquiries, timing and conditions of return to service, the timing of future 737 production rate increases, supplier readiness to support production rate changes, timing and sequence of future customer deliveries as well as outcomes of negotiations with customers impacted by the grounding.

We have also made significant assumptions regarding estimated costs expected to be incurred in 2021 that should be included in program inventory and those costs that should be expensed when incurred as abnormal production costs.

While these assumptions reflect our best estimate at this time, they are highly uncertain and significantly affect the estimates inherent in our financial statements.

In December 2020, we delivered 27 aircraft, in compliance with the FAA regulatory requirements.

We have assumed that the remaining non-U.S.

regulatory approvals will occur and enable deliveries during the first half of 2021.

We have approximately 425 airplanes in inventory as of December 31, 2020.

A number of customers have requested to defer deliveries or to cancel orders for 737 MAX aircraft, and we are remarketing and/or delaying deliveries of certain aircraft included within inventory.

We now expect to deliver about half of the 737 MAX aircraft in inventory by the end of 2021.

In the event that we are unable to resume aircraft deliveries in non-U.S.

jurisdictions consistent with our assumptions of regulatory approval timing, our expectation of delivery timing could be impacted.

Due to the grounding and associated suspension of 737 MAX deliveries, we temporarily suspended 737 MAX production beginning in January 2020.

We resumed early stages of 737 MAX production in May 2020 and continued to produce at low rates through the end of 2020.

In addition, we reduced the number of aircraft included in the accounting quantity by 400 units in the first quarter of 2020 as a result of reductions to planned production rates due to COVID-19 driven market uncertainties.

As we are producing at abnormally low production rates in 2020 and 2021, we expect to incur approximately $5.0 billion of abnormal production costs that are being expensed as incurred.

The slowdown in the planned production rate ramp-up increased expected abnormal costs however this increase was offset by adjustments to the determination of the normal production level due to COVID-19 impacts on customer demand, as well as cost reduction activities, including significant reductions in employment levels.

We expensed approximately $2.6 billion of abnormal production costs during the year ended December 31, 2020.

In addition to impacts related to the 737 MAX accidents and subsequent grounding, the 737 program continues to be significantly impacted by the COVID-19 pandemic and its effect on aircraft demand.

These impacts have resulted in lower production and delivery rate assumptions.

We currently expect to gradually increase the production rate to 31 per month by early 2022.

We currently assume that we will implement further gradual production rate increases in subsequent periods based on market demand.

The ongoing impacts of COVID-19 on market demand have also created significant uncertainty around the timing of deliveries of 737 MAX aircraft in inventory.

We may need to recognize additional costs associated with remarketing and/or reconfiguring aircraft in inventory, which may reduce revenue and/or earnings in future periods.

We are working with our customers to minimize the impact to their operations from grounded and undelivered aircraft.

We continue to reassess the liability for estimated potential concessions and other considerations to customers on a quarterly basis.

This reassessment includes updating estimates to reflect revisions to return to service, delivery and production rate assumptions driven by timing of regulatory approvals, as well as latest information based on engagements with 737 MAX customers.

The remaining liability of $5.5 billion at December 31, 2020 represents our current best estimate of future concessions and other considerations to customers, and is necessarily based on a series of assumptions.

It is subject to change in future quarters as negotiations with customers mature and timing and conditions of return to service are better understood.

Our assumptions reflect our current best estimate, but actual timing and conditions of return to service and resumption of deliveries could differ from this estimate, the effect of which could be material.

We are unable at this time to reasonably estimate potential future additional financial impacts or a range of loss, if any, due to continued uncertainties related to the timing and conditions of return to service, uncertainties related to the impacts of COVID-19 on our operations, supply chain and customers, future changes to the production rate, supply chain impacts, and/or the results of negotiations with particular customers.

Any such impacts, including any changes in our estimates, could have a material adverse effect on our financial position, results of operations, and/or cash flows.

For example, we expect that, in the event that we are unable to resume aircraft deliveries in non-U.S.

jurisdictions consistent with our assumptions, the continued absence of revenue, earnings, and cash flows associated with 737 MAX deliveries would continue to have a material impact on our operating results.

In the event that future production rate increases occur at a slower rate or take longer than we are currently assuming we expect that the growth in inventory and other cash flow impacts associated with production would decrease.

However, while any prolonged production suspension or delays in planned production rate increases could mitigate the impact on our liquidity, it could significantly increase the overall expected costs to produce aircraft included in the accounting quantity, which would reduce 737 program margins and/or increase abnormal production costs in the future.

One or more of these factors could result in additional reach-forward losses on the 777X program in future periods, which may be material.

787 Program The 787 program’s production issues and delivery pause result in significant uncertainties regarding the revenue and cost estimates for the 787 program.

Deliveries have remained paused since May 2021.

During the fourth quarter of 2021, we recorded a loss of $3.5 billion on the program primarily due to rework driving longer delivery delays than were previously expected and associated customer considerations.

The estimate of customer considerations is based on a number of factors, including our current assumptions regarding timing of FAA approval enabling resumption of deliveries, estimated timing of completion of inspections and rework to enable deliveries in future periods, estimated timing of production rate increases as well as customer and market assessments.

We continue to conduct inspections and rework and engage in detailed discussions with the FAA regarding required actions for resuming delivery of the 787.

Our program revenue and cost estimates reflect the assumption that production rates will remain very low until deliveries resume, gradually returning to 5 per month over time.

We have also assumed lower forecasted revenues due to delayed deliveries.

Our program assumptions reflect our current best estimate.

However, if the program experiences further delivery delays or other factors such as additional inspections or rework that result in lower revenue or higher cost estimates, we could record additional losses in future periods, which may be material.

Goodwill Impairments

We test goodwill for impairment by performing a qualitative assessment or quantitative test.

If we choose to perform a qualitative assessment, we evaluate economic, industry and company-specific factors as an initial step in assessing the fair value of operations.

If we determine it is more likely than

not that the carrying value of the net assets is more than the fair value of the related operations, then a quantitative test is performed;

If we choose to perform a qualitative assessment, we evaluate economic, industry and company-specific factors as an initial step in assessing the fair value of the reporting unit.

If we determine it is more likely than not that the carrying value of the net assets is more than the fair value of the reporting unit, then a quantitative test is performed;

otherwise, no further testing is required.

For operations where the quantitative test is used, we compare the carrying value of net assets to the estimated fair value of the related operations.

For reporting units where the quantitative test is used, we compare the carrying value of net assets to the estimated fair value of the reporting unit.

If the fair value is determined to be less than carrying value, the shortfall up to the carrying value of the goodwill represents the amount of goodwill impairment.

We generally estimate the fair values of the related operations using a combination of discounted cash flows and market-based valuation methodologies such as comparable public company trading values.

We generally estimate the fair values of our reporting units using a combination of discounted cash flows and market-based valuation methodologies such as comparable public company trading values.

Forecasts of future cash flows are based on our best estimate of future sales, operating costs and changes in working capital.

4 unchanged sentences

We completed our annual assessment of goodwill as of April 1, 2021 and determined that there was no impairment of goodwill.

As a result of the continuing significant adverse impacts of the COVID-19 pandemic on our Commercial Airplanes and Commercial Services businesses, we concluded it is a triggering event for testing whether goodwill recorded by our Commercial Airplanes and Commercial Services reporting units is impaired.

At December 31, 2020, Commercial Airplanes has $1,316 million of goodwill and Commercial Services has $3,087 million.

We performed a quantitative test and determined the fair values of our Commercial Airplane and Commercial Services reporting units substantially exceeded their carrying values as of December 31, 2020.

As of December 31, 2020, we also estimated the fair values of our other reporting units significantly exceeded their corresponding carrying values.

We will continue to monitor the impacts of the COVID-19 pandemic in future quarters.

As of December 31, 2021, we estimated that the fair value of each reporting unit significantly exceeded its corresponding carrying value.

Changes in our forecasts, discount rates or decreases in the value of our common stock could cause book values to exceed their fair values which may result in goodwill impairment charges in future periods.

5 unchanged sentences

These measurements are based upon several assumptions, including the discount rate and the expected long-term rate of asset return.

Future changes in assumptions or differences between actual and expected outcomes can significantly affect our future annual expense, projected benefit obligation and Shareholders’ equity.

Future changes in assumptions or differences between actual and expected

outcomes can significantly affect our future annual expense, projected benefit obligation and Shareholders’ equity.

The projected benefit obligation is sensitive to discount rates.

3 unchanged sentences

A decrease or increase of 25 basis points in the expected long-term rate of asset return would have increased or decreased 2021 net periodic pension cost by $155 million.

See Note 16 of the Notes to our Consolidated Financial Statements, which includes the discount rate and expected long-term rate of asset return assumptions for the last three years.

Deferred Income Taxes – Valuation Allowance

3 unchanged sentences

The particular years in which temporary differences result in taxable or deductible amounts generally are determined by the timing of the recovery of the related asset or settlement of the related liability.

The deferred income tax assets and liabilities relate primarily to U.S.

federal and state tax jurisdictions.

On a quarterly basis, we assess the likelihood that we will be able to recover our deferred tax assets against future sources of taxable income and reduce the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) that all or a portion of such assets will not be realized.

This assessment, which is completed on a taxing jurisdiction basis, takes into account both positive and negative evidence.

This assessment takes into account both positive and negative evidence.

A recent history of financial reporting losses is heavily weighted as a source of objectively verifiable negative evidence.

Cumulative pre-tax losses in the three-year period ending with the current quarter is considered to be significant negative evidence regarding future profitability.

If cumulative pre-tax losses adjusted for non-recurring items result in positive normalized earnings that would be considered an objectively verifiable source of positive evidence of the ability of the company to generate positive earnings in the future.

When there is a recent history of operating losses and negative normalized earnings and a return to operating profitability has not yet been demonstrated, we cannot rely on projections of future earnings for purposes of assessing recoverability of our deferred tax assets.

In such cases, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions.

Due to our recent history of losses, we determined we could not include future projected earnings in our analysis.

Rather, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions.

The selection of methodologies and assessment of when temporary differences will result in taxable or deductible amounts involves significant management judgment and is inherently complex and subjective.

We believe that the methodologies we use are reasonable and can be replicated on a consistent basis in future periods.

As described above, a recent history of financial reporting losses is heavily weighted as a source of objectively verifiable negative evidence of the Company’s ability to generate future taxable income to recover deferred tax assets.

During 2019 and 2020 the Company generated significant losses and in the fourth quarter of 2020 the Company reached a three-year cumulative pre-tax loss position.

We expect cumulative three-year losses to grow in 2021 as record earnings in 2018 are replaced by 2021 results.

We also normalized earnings and other comprehensive income for certain non-recurring items and expect to reach a three-year cumulative loss position in 2021 as record earnings in 2018 are replaced with 2021 results.

For purposes of assessing the recoverability of deferred tax assets, the Company determined that it could not include future projected earnings in the analysis due to recent history of losses.

Deferred tax liabilities represent the assumed source of future taxable income and the majority are assumed to generate taxable amounts during the next five years.

Deferred tax assets include amounts

related to pension and other postretirement benefits that are assumed to generate significant deductible amounts beyond five years.

Deferred tax assets include amounts related to pension and other postretirement benefits that are assumed to generate significant deductible amounts beyond five years.

The Company’s valuation allowance of $2,423 million at December 31, 2021 primarily relates to pension and other postretirement benefit obligation deferred tax assets that are assumed to reverse beyond the period in which reversals of deferred tax liabilities are assumed to occur.

Because the pension and other postretirement benefit obligations are recorded to both continuing operations and other comprehensive income (OCI), the Company recorded a portion of the fourth quarter increase in the valuation allowance to income tax expense in continuing operations ($2,513 million) and a portion to OCI ($196 million).

If the Company continues to generate losses and negative normalized earnings in future periods, additional valuation allowances may have to be recorded with corresponding adverse impacts on earnings and/or OCI.

When income generation returns to more normal levels we can expect to see the allowance reverse and increase reported earnings and/or OCI.

For additional information regarding income taxes, see Note 4 of the Notes to the Financial Statements.

During 2021, the Company decreased the valuation allowance by $671 primarily due to favorable pension remeasurement.

Until the Company generates sustained levels of profitability, additional valuation allowances may have to be recorded with corresponding adverse impacts on earnings and/or other comprehensive income.

For additional information regarding income taxes, see Note 4 of the Notes to the Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis