What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-27 compared with 2022-04-27 · 222 added, 199 removed, 345 unchanged (55% of the section changed)

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Consolidated Results of Operations and Financial Condition

The COVID-19 pandemic, 787 production issues and associated rework, 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.

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.

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.

Travel restrictions and global economic activity were improving at the end of 2021, but improvements were delayed by the global outbreak of the Omicron variants.

Governments continue to change travel policy and restrictions due to the virus as well as the war in Ukraine, with global sanctions and economic effects raising energy and other costs.

We continue to expect that the recovery will remain uneven as travel restrictions and varying regional travel protocols continue to ease and lessen their impact on 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, vaccination rates, and resultant government restrictions.

We are seeing a strong recovery in travel demand for our airline customers in North America and Europe.

The lingering effects of the COVID-19 pandemic, 787 production issues and associated rework, 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.

We expect domestic travel to continue to recover faster than international travel, and we expect the narrow-body market to continue to recover faster than the wide-body market.

The pace of the commercial market recovery is heavily dependent on COVID-19 infection rates and resultant government restrictions.

We are seeing a strong recovery in travel demand for our airline customers in North and South America, the Middle East, and Europe.

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.

In addition, we and our suppliers are experiencing supply chain disruptions as a result of the impacts of COVID-19, global supply chain constraints, and labor shortages.

We and our suppliers are also experiencing inflationary pressures.

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.

Airline financial performance, which influences demand for new capacity, has been adversely impacted by the COVID-19 pandemic.

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

According to the International Air Transport Association (IATA), net losses for the airline industry were $138 billion in 2020 and are estimated to be $42 billion in 2021.

IATA also forecasts $9.7 billion of losses for the industry globally in 2022, with approximately $8.8 billion of profits in North America driven by the robust domestic market being more than offset by losses in other regions.

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.

While the outlook continues to improve, 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.

While the outlook continues to improve, we continue to face a challenging environment in the near- to medium-term as airlines are facing increased fuel and other costs, and the global economy is experiencing high inflation.

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

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 balanced market conditions.

As we managed through the effects of the COVID-19 pandemic, we reduced the production rates of several of our Commercial Airplanes (BCA) programs.

These rate decisions continue to be based on our ongoing assessments of the demand environment and availability of aircraft financing.

There is uncertainty with respect to when commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels.

We 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 have implemented appropriate production rate adjustments in response to these factors, but risk remains that we will decide to implement further rate reductions in future quarters.

Additionally, if we are unable to make timely deliveries of the large number of aircraft in inventory as of March 31, 2022, future revenues, earnings and cash flows will be adversely impacted.

During the first quarter of 2022, we made adjustments to our estimates regarding timing of 777X-9 entry into service.

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The 737 MAX 7 and MAX 10 models are also currently going through Federal Aviation Administration (FAA) certification activities.

The 737 MAX 7 completed FAA certification flight testing in 2021 and is expected to enter service later in 2022.

The 737 MAX 7 is expected to be certified in 2022 and enter service in 2023.

The 737 MAX 10 is expected to begin FAA certification flight testing later in 2022 and enter service in 2023.

Section 116 of the December 2020 Aircraft Certification, Safety and Accountability Act (ACSAA) prohibits the FAA from issuing a type certificate to aircraft after December 27, 2022 unless the aircraft’s flight crew alerting system meets certain requirements.

As a result, if the MAX 7 and MAX 10 aircraft are not certified before December 27, 2022 we may encounter further certification delays.

We are working closely with the FAA on implementation of ACSAA legislation and expect any necessary actions to be defined later this year.

If we are unable to achieve entry into service consistent with our current assumptions, future revenues, earnings and cash flows will be adversely impacted.

If we are unable to achieve certification and/or entry into service consistent with our current assumptions, future revenues, earnings and cash flows will be adversely impacted.

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.

Over 190 countries have approved the resumption of 737 MAX operations.

The 737 MAX has yet to return to service in China and a small number of other countries.

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.

The 737 MAX has yet to return to service in China.

While we expect 737 MAX deliveries to China to resume in 2022, subject to final regulatory approvals, 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.

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

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

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economic growth, increasing propensity to travel due to increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries.

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.

Our Commercial Market Outlook forecast projects a 3.8% growth rate for passenger and cargo traffic over a 20 year period.

Based on long-term global economic growth projections of 2.6% average annual gross domestic product (GDP) growth, we project demand for approximately 41,170 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.

At Global Services (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.

While commercial services volume at Global Services (BGS) is recovering, it remains below pre-pandemic levels.

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 fully recovers.

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 Defense, Space & Security (BDS), we continue to see stable demand reflecting the important role our products and services have in ensuring our national security.

Outside of the U.S., we are seeing similar solid demand as governments prioritize security, defense technology and global cooperation given evolving threats.

However, we continue to experience near-term production disruptions and inefficiencies due to COVID-19 impacts.

We continue to experience near-term production disruptions and inefficiencies due to COVID-19 impacts, supplier disruption and factory performance.

On July 24, 2022, employees represented by the International Association of Machinists and Aerospace Workers (IAM) District 837 voted to reject Boeing’s compensation and benefits offer.

The Collective Bargaining agreement expired on July 25, 2022.

The IAM District 837, which represents approximately 2,500 of Boeing’s employees, announced that the employees plan to go on strike effective August 1, 2022.

While we currently do not expect a material impact to our business, a prolonged strike could disrupt our St.

Louis based operations and adversely impact revenues, earnings and cash flows.

As a result of the war in Ukraine, we recorded earnings charges totaling $212 million during the first quarter of 2022, primarily related to asset impairments.

We have temporarily closed our facilities in Ukraine and Russia and are focused on supporting our employees in those countries.

We have closed our facilities in Ukraine and Russia.

We are focused on the safety of our employees and retaining the strength of our engineering talent through voluntary transfers to other countries.

We have also suspended our business in Russia, including parts, maintenance and technical support for Russian airlines, and purchases from Russian suppliers.

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We have sufficient material and parts to avoid production disruptions in the near-term, but future impacts to our production from disruptions in our supply chain are possible.

The war in Ukraine is also impacting our airline and lessor customers.

We are closely monitoring developments and potential Boeing impacts, and will continue to take mitigating actions as appropriate.

In addition, we and our suppliers are experiencing supply chain disruptions as a result of the impacts of COVID-19, global supply chain constraints, and labor shortages.

We and our suppliers are also experiencing inflationary pressures.

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.

We expect that successful execution of these measures will improve near-term liquidity and long-term cost competitiveness.

The war in Ukraine continues to impact our airline and lessor customers.

We continue to monitor developments and potential Boeing impacts, and take mitigating actions as appropriate.

Consolidated Results of Operations

The following table summarizes key indicators of consolidated results of operations:

(Dollars in millions, except per share data) Three months ended March 31

(Dollars in millions, except per share data) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Revenues $30,672 $32,215 $16,681 $16,998

Loss from operations ($1,169) ($83)

(Loss)/earnings from operations ($395) $940 $774 $1,023

Operating margins (1.3) % 2.9 % 4.6 % 6.0 %

Effective income tax rate 12.8 % 126.1 % 57.6 % (3.3) %

Net loss attributable to Boeing Shareholders ($1,219) ($537)

Diluted loss per share ($2.06) ($0.92)

Core operating loss ($1,452) ($353)

Net (loss)/earnings attributable to Boeing Shareholders ($1,026) $50 $193 $587

Diluted (loss)/earnings per share ($1.73) $0.09 $0.32 $1.00

Core operating (loss)/earnings ($962) $402 $490 $755

Core operating margins (3.1) % 1.2 % 2.9 % 4.4 %

Core loss per share ($2.75) ($1.53)

Core (loss)/earnings per share ($3.11) ($1.12) ($0.37) $0.40

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

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The following table summarizes Revenues:

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Commercial Airplanes $10,380 $10,284 $6,219 $6,015

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Total $30,672 $32,215 $16,681 $16,998

Revenues for the three months ended March 31, 2022 decreased by $1,226 million compared with the same period in 2021 driven by lower revenues at BCA and BDS, partially offset by higher revenues at BGS.

BCA revenues decreased by $108 million primarily driven by lower wide-body deliveries, partially offset by higher 737 MAX deliveries.

BDS revenues decreased by $1,702 million primarily due to net unfavorable effects of cumulative contract catch-up adjustments, lower revenue on the KC-46A Tanker program resulting from new orders for 27 aircraft received during the first quarter of 2021 and lower P-8 volume resulting from reduced production rates.

BGS revenues increased by $565 million primarily due to higher commercial services volume.

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

Revenues will continue to be significantly impacted until the global supply chain stabilizes, labor shortages diminish, deliveries ramp up, and commercial airlines recover from the impacts of COVID-19.

Loss From Operations

The following table summarizes Loss from operations:

(Dollars in millions) Three months ended March 31

Revenues for the six months ended June 30, 2022 decreased by $1,543 million compared with the same period in 2021 driven by lower revenues at BDS, partially offset by higher revenues at BGS and Commercial Airplanes (BCA).

BDS revenues decreased by $2,387 million primarily due to lower revenue on the KC-46A Tanker program from new orders for 27 aircraft received during the first quarter of 2021, lower P-8 volume as production was reduced to one per month, and timing of material receipts.

BDS revenues for the six months ended June 30, 2022 also decreased due to charges on development programs discussed below, unfavorable performance across other programs, and the absence of revenue recorded in the second quarter of 2021 related to a favorable adjustment on a non-U.S.

BGS revenues increased by $796 million primarily due to higher commercial services volume, partially offset by lower government services volume.

BCA revenues increased by $96 million primarily driven by higher 737 MAX deliveries, partially offset by lower 787 deliveries.

Revenues for the three months ended June 30, 2022 decreased by $317 million compared with the same period in 2021 driven by lower revenues at BDS, partially offset by higher revenues at BGS and BCA.

BDS revenues decreased by $685 million due to charges on development programs discussed below,

unfavorable performance across other programs, lower P-8 volume, and the absence of revenue recorded in the prior year quarter related to a favorable adjustment on a non-U.S.

BGS revenues increased by $231 million due to higher commercial services volume, partially offset by lower government services volume.

BCA revenues increased by $204 million driven by higher 737 MAX deliveries, partially offset by lower 787 deliveries.

Revenues will continue to be significantly impacted until the global supply chain stabilizes, labor shortages diminish, deliveries ramp up, and the commercial airline industry recovers from the lingering impacts of the COVID-19 pandemic.

Loss/Earnings From Operations

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

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Commercial Airplanes ($1,101) ($1,328) ($242) ($472)

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Unallocated items, eliminations and other (354) (662) (94) (298)

Loss from operations (GAAP) ($1,169) ($83)

(Loss)/earnings from operations (GAAP) ($395) $940 $774 $1,023

FAS/CAS service cost adjustment * (567) (538) (284) (268)

Core operating loss (Non-GAAP) ** ($1,452) ($353)

Core operating (loss)/earnings (Non-GAAP) ** ($962) $402 $490 $755

* 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.

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See pages 51-53.

Loss from operations for the three months ended March 31, 2022 increased by $1,086 million compared with the same period in 2021.

BDS loss from operations for the three months ended March 31, 2022 was $929 million, compared with earnings from operations of $405 million during the same period in 2021,

primarily due to charges on the VC-25B, T-7A Red Hawk, KC-46A Tanker, and MQ-25 programs in the first quarter of 2022.

Loss from operations for the six months ended June 30, 2022 was $395 million compared with earnings of $940 million during the same period in 2021.

BDS had a loss from operations of $858 million, compared with earnings of $1,363 million during the same period in 2021, primarily due to charges on the VC-25B, T-7A Red Hawk, KC-46A Tanker, and MQ-25 programs totaling $1,270 million recorded in the first quarter of 2022 as well as the year over year decrease in second quarter earnings of $887 million discussed below.

BGS earnings from operations increased by $388 million primarily due to higher commercial services volume and favorable mix.

Core operating losses for the three months ended March 31, 2022 increased by $1,099 million compared to the same period in 2021, primarily due to changes in Segment operating (loss)/earnings as described above.

BCA loss from operations decreased by $227 million primarily due to higher 737 MAX deliveries and lower abnormal production costs, partially offset by higher research and development spending, charges related to the war in Ukraine and other period expenses.

Earnings from operations for the three months ended June 30, 2022 decreased by $249 million compared with the same period in 2021.

BDS earnings from operations decreased by $887 million.

The year over year decrease reflects a number of factors including charges in the second quarter of 2022 on MQ-25 ($147 million), Commercial Crew ($93 million), T-7A Red Hawk Production Options ($51 million), and T-7A Red Hawk Engineering, Manufacturing, and Development (EMD) ($36 million).

Other programs recorded lower earnings during the second quarter of 2022 due to lower volumes, supplier disruption and factory performance.

BCA loss from operations decreased by $230 million due to higher 737 MAX deliveries and lower abnormal production costs, partially offset by higher research and development spending and other period expenses.

BGS earnings from operations increased by $197 million due to higher commercial services volume and favorable mix.

Core operating losses for the six months ended June 30, 2022 were $962 million compared with core operating earnings of $402 million for the same period in 2021.

Core operating earnings for the three months ended June 30, 2022 decreased by $265 million compared with the same period in 2021.

The changes in core operating (loss)/earnings were primarily due to changes in Segment operating (loss)/earnings as described above.

For discussion related to Postretirement Plans, see Note 11 to our Condensed Consolidated Financial Statements.

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

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Share-based plans ($108) ($142) ($25) ($14)

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Unallocated items, eliminations and other ($354) ($662) ($94) ($298)

Share-based plans expense for the three months ended March 31, 2022 decreased by $45 million compared with the same period in 2021 due to expenses incurred in 2021 associated with a grant of restricted stock units to most employees in December 2020.

Deferred compensation income was $42 million for the three months ended March 31, 2022 compared with expense of $52 million in the same period in 2021 primarily driven by broad market conditions and changes in our stock price.

Unallocated research and development expense for the three months ended March 31, 2022 was largely consistent with the same period in 2021.

Share-based plans expense for the six months ended June 30, 2022 decreased by $34 million compared with the same period in 2021 due to expenses incurred in 2021 associated with a grant of restricted stock units to most employees in December 2020.

Share-based plans expense for the three months ended June 30, 2022 was consistent with the same period in 2021.

Deferred compensation income was $166 million and $124 million for the six and three months ended June 30, 2022 compared with expense of $94 million and $42 million in the same periods in 2021 primarily driven by broad market conditions and changes in our stock price.

Unallocated research and development expense for the six and three months ended June 30, 2022 increased by $33 million and $23 million compared with the same periods in 2021 due to higher enterprise investments in product development.

Other Earnings Items

(Dollars in millions) Three months ended March 31

Loss from operations ($1,169) ($83)

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

(Loss)/earnings from operations ($395) $940 $774 $1,023

Other income, net 434 389 253 199

Interest and debt expense (1,280) (1,352) (650) (673)

Loss before income taxes (1,618) (572)

Income tax benefit 376 11

Net loss from continuing operations (1,242) (561)

(Loss)/earnings before income taxes (1,241) (23) 377 549

Income tax benefit/(expense) 159 29 (217) 18

Net (loss)/earnings from continuing operations (1,082) 6 160 567

Net loss attributable to noncontrolling interest (56) (44) (33) (20)

Net loss attributable to Boeing Shareholders ($1,219) ($537)

For the three months ended March 31, 2022 and 2021, non-operating pension income included in Other income, net was $220 million and $177 million.

Non-operating pension income increased $43 million during the three months ended March 31, 2022 compared with the same period in 2021 primarily due to lower amortization of net actuarial losses, partially offset by higher interest cost and lower expected return on plan assets.

Non-operating postretirement income was $15 million during the three months ended March 31, 2022 compared with $5 million of expense during the same period in 2021.

Other income, net included losses of $50 million during the three months ended March 31, 2022 reclassified from Accumulated other comprehensive loss (AOCI) associated with certain cash flow hedges because it is probable the forecasted transactions will not occur.

Interest and debt expense for the three months ended March 31, 2022 was lower compared with the same period in the prior year primarily as a result of lower debt balances.

Net (loss)/earnings attributable to Boeing Shareholders ($1,026) $50 $193 $587

For the six months ended June 30, 2022 and 2021, non-operating pension income included in Other income, net was $441 million and $352 million.

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

Non-operating postretirement income was $29 million and $10 million during the six months ended June 30, 2022 and 2021.

Other income, net also included losses of $50 million during the six months ended June 30, 2022 reclassified in the first quarter of 2022 from Accumulated other comprehensive loss (AOCI) associated with certain cash flow hedges because it is probable the forecasted transactions will not occur.

For the three months ended June 30, 2022 and 2021, non-operating pension income included in Other income, net was $221 million and $175 million.

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

Non-operating postretirement income was $14 million and $5 million during the three months ended June 30, 2022 and 2021.

Interest and debt expense for the six and three months ended June 30, 2022 was lower compared with the same period in the prior year primarily as a result of lower debt balances.

For discussion related to Income Taxes, see Note 3 to our Condensed Consolidated Financial Statements.

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The following table summarizes cost of sales:

(Dollars in millions) Three months ended March 31

2022 2021 Change

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 Change 2022 2021 Change

Cost of sales $28,204 $28,396 ($192) $14,559 $14,588 ($29)

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92.0 % 88.1 % 3.9 % 87.3 % 85.8 % 1.5 %

Cost of sales for the three months ended March 31, 2022 decreased by $163 million, or 1% compared with the same period in 2021, primarily due to lower revenues at BCA and BDS in 2022, partially offset by charges recorded at BDS in 2022 and higher revenues at BGS in 2022.

Cost of sales as a percentage of Revenues increased during the three months ended March 31, 2022 compared with the same period in 2021 primarily due to higher charges recorded at BDS in 2022 than in 2021.

Cost of sales for the six months ended June 30, 2022 decreased by $192 million, or 1% compared with the same period in 2021, primarily due to lower revenues at BDS in 2022, partially offset by charges recorded at BDS in 2022.

Cost of sales as a percentage of Revenues increased during the six months ended June 30, 2022 compared with the same period in 2021 primarily due to higher charges recorded at BDS in 2022 than in 2021.

Cost of sales for the three months ended June 30, 2022 was consistent with the same period in 2021.

Cost of sales as a percentage of Revenues increased during the three months ended June 30, 2022 compared with the same period in 2021 primarily due to higher charges recorded at BDS in 2022 than in 2021, partially offset by lower abnormal production costs at BCA.

Research and Development

Research and development expense, net is summarized in the following table:

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Commercial Airplanes $693 $524 $372 $255

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Global Services 54 50 27 25

Other 118 85 66 43

Total $1,331 $996 $698 $497

Research and development expense increased by $134 million during the three months ended March 31, 2022 compared to the same period in 2021.

The increase at BCA is due to higher spending on product development.

The increase at BDS reflects higher bid and proposal costs and timing of product development expenditures.

(Dollars in millions) March 31

Research and development expense increased by $335 million and $201 million during the six and three months ended June 30, 2022 compared to the same periods in 2021.

The increase at BCA is due to higher spending on the 777X Freighter.

The increase at BDS reflects higher research and product development expenditures.

(Dollars in millions) June 30

2022 December 31

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government contract funding.

The decrease in contractual backlog during the three months ended March 31, 2022 was primarily due to changes in orders that in our assessment do not meet the accounting requirements of Accounting Standards Codification (ASC) 606 for inclusion in backlog and cancellations, partially offset by reclassifications from unobligated backlog and orders in excess of deliveries.

During 2022, we have had higher ASC 606 adjustments of 737 MAX and 777X aircraft partially offset by 787 aircraft.

The decrease in contractual backlog at BDS and BGS during the six months ended June 30, 2022 was partially offset by an increase in contractual backlog at BCA.

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.

Unobligated backlog includes U.S.

government definitive contracts for which funding has not been authorized.

The increase in unobligated backlog during the three months ended March 31, 2022 was primarily due to contract awards, partially offset by reclassifications to contractual backlog related to BDS and BGS contracts.

The decrease in unobligated backlog during the six months ended June 30, 2022 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 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.

We are closely monitoring the current impact and potential future economic consequences of COVID-19 to the global economy, the aerospace sector, and our Company.

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.

The current state of U.S.-China relations remains an ongoing watch item.

China is a significant market for commercial airplanes.

Boeing has long-standing relationships with our Chinese customers, who represent a key component of our commercial airplanes backlog.

Since 2018, the U.S.

and China imposed an escalating series of tariffs on each other’s imports.

and China have imposed

tariffs on each other’s imports.

Certain aircraft parts and components that Boeing procures are subject to these tariffs.

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

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

and China have deteriorated.

We continue monitoring developments for potential adverse impacts to the Company.

Overall, the U.S.-China trade relationship remains stalled as economic and national security concerns continue to be a challenge .

We continue monitoring developments for any adverse impacts to the Company.

Beginning in June 2018, the U.S.

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Results of Operations

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Revenues $10,380 $10,284 $6,219 $6,015

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Operating margins (10.6) % (12.9) % (3.9) % (7.8) %

BCA revenues decreased by $108 million for the three months ended March 31, 2022 compared with the same period in 2021 primarily due to lower wide-body deliveries partially offset by higher 737 MAX deliveries.

BCA revenues increased by $96 million and $204 million for the six and three months ended June 30, 2022 compared with the same periods in 2021 primarily due to higher 737 MAX deliveries partially offset by lower 787 deliveries.

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

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jurisdictions have approved return to service of the 737 MAX, the 737 MAX has yet to return to service in China and deliveries have not yet resumed.

Labor shortages and supplier issues contributed to lower first quarter 2022 deliveries.

Labor shortages and supplier issues contributed to lower deliveries of both stored and produced aircraft during the six months ended June 30, 2022.

787 deliveries have been paused since May 2021.

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

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

Commercial airplane deliveries, including intercompany deliveries, were as follows:

737 * 747 767 * 777 787 Total

Deliveries during the first three months of 2022 86 (5) 1 5 (3) 3 0 95

Deliveries during the first three months of 2021 63 (5) 1 5 (1) 6 2 77

Deliveries during the first six months of 2022 189 (8) 3 12 (7) 12 216

Deliveries during the first six months of 2021 113 (8) 2 13 (4) 14 14 156

Deliveries during the second quarter of 2022 103 (3) 2 7 (4) 9 121

Deliveries during the second quarter of 2021 50 (3) 1 8 (3) 8 12 79

Cumulative deliveries as of 6/30/2022 7,934 1,570 1,250 1,689 1,006

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Loss From Operations

BCA loss from operations was $859 million for three months ended March 31, 2022 compared with $856 million in the same period in 2021.

The 2022 loss reflects lower wide-body deliveries partially offset by higher 737 MAX deliveries.

Period expense for the three months ended March 31, 2022 included abnormal production costs totaling $500 million including $312 million related to the 787 program and $188 million related to 737 MAX.

Period expense for abnormal production costs for the three months ended March 31, 2021 comprised of $568 million related to 737 MAX.

Period expenses in the first quarter of 2022 were also higher due to charges related to the war in Ukraine and higher research and development spending.

BCA loss from operations was $1,101 million for the six months ended June 30, 2022 compared with $1,328 million in the same period in 2021 reflecting higher 737 MAX deliveries and lower abnormal production costs, partially offset by higher research and development spending, charges related to the war in Ukraine and other period expenses.

Abnormal production costs for the six months ended June 30, 2022 were $885 million including $595 million related to the 787 program, $188 million related to 737 MAX and $102 million related to the 777X program.

Abnormal production costs for the six months ended June 30, 2021 were $1,083 million related to 737 MAX.

BCA loss from operations was $242 million for the three months ended June 30, 2022 compared with $472 million in the same period in 2021 reflecting higher 737 MAX deliveries and lower abnormal production costs, partially offset by higher research and development spending and other period expenses.

Abnormal production costs for the three months ended June 30, 2022 were $385 million, including $283 million related to the 787 program and $102 million related to the 777X program.

Abnormal production costs for the three months ended June 30, 2021 were $515 million related to 737 MAX

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.

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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 decreased from $296,882 million as of December 31, 2021 to $290,930 million at March 31, 2022 reflecting an increase in the number of existing orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog and order cancellations, partially offset by new orders in excess of deliveries.

The net ASC 606 adjustments for the three months ended March 31, 2022 resulted in a decrease to backlog of $12,737 million primarily due to 737 MAX and 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, impacts of geopolitical events or related sanctions, or whether it is probable that the customer will pay the full amount of consideration when it is due.

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 Accounting Standards Codification (ASC) 606.

BCA total backlog increased from $296,882 million as of December 31, 2021 to $297,044 million at June 30, 2022 reflecting new orders in excess of deliveries and price escalation, offset by order cancellations and by an increase in the value of existing orders that in our assessment do not meet the accounting requirements of ASC 606 for inclusion in backlog.

Aircraft order cancellations during the six months ended June 30, 2022 totaled $7,524 million and primarily relate to 737 MAX and 787 aircraft.

The net ASC 606 adjustments for the six months ended June 30, 2022 resulted in a decrease to backlog of $4,916 million primarily due to a net increase of 777X aircraft in the ASC 606 reserve, partially offset by net decreases in 737 MAX and 787 aircraft in the ASC 606 reserve.

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.

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.

Accounting Quantity

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We are working towards 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.

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.

In April 2022, we decided to pause production of the 777X-9 during 2022 and 2023.

We expect that the production pause will result in abnormal production costs of approximately $1.5 billion beginning in the second quarter of 2022 and continue until 777X-9 production resumes.

The 777X program has near break-even gross margins at March 31, 2022.

We implemented the production pause during the second quarter of 2022, and it is expected to result in abnormal production costs of approximately $1.5 billion that are being expensed as incurred until 777X-9 production resumes.

The 777X program has near break-even gross margins at June 30, 2022.

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

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

The accounting quantity for the 777 program increased by 30 units during the three months ended March 31, 2022 due to the program's normal progress of obtaining additional orders and delivering airplanes.

The accounting quantity for the 777 program increased by 40 and 10 units during the six and three months ended June 30, 2022 due to the program's normal progress of obtaining additional orders and delivering airplanes.

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

787 Program At March 31, 2022 we have approximately 115 aircraft in inventory.

787 Program At June 30, 2022 we have approximately 120 aircraft in inventory.

Deliveries remain paused due to production quality issues.

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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.

These challenges include increased global regulatory scrutiny of all development aircraft in the wake of the 737 MAX accidents.

These challenges include increased global regulatory scrutiny of all development

aircraft in the wake of the 737 MAX accidents.

As a result, our ability to deliver aircraft on time, satisfy performance and reliability standards and achieve or maintain, as applicable, program profitability is subject to significant risks.

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United States Government Defense Environment Overview

The Consolidated Appropriations Act, 2022, enacted in March 2022, provided FY22 appropriations for government departments and agencies, including $742.3 billion for the U.S.

DoD and $24 billion for NASA.

The Consolidated Appropriations Act, 2022, enacted in March 2022, provided fiscal year 2022 (FY22) appropriations for government departments and agencies, including $742.3 billion for the United States Department of Defense (U.S.

DoD) and $24 billion for the National Aeronautics and Space Administration (NASA).

The enacted FY22 appropriations included funding for Boeing’s major programs, including the F/A-18 Super Hornet, F-15EX, CH-47 Chinook, AH-64 Apache, V-22 Osprey, KC-46A tanker, and the Space Launch System.

In April 2022, the U.S.

government released certain details of the President’s budget request for fiscal year 2023 (FY23), which included requests for $773 billion in funding for the U.S.

government released details of the President’s budget request for fiscal year 2023 (FY23), which included requests for $773 billion in funding for the U.S.

DoD and $26 billion for NASA.

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Results of Operations

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Revenues $11,674 $14,061 $6,191 $6,876

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Deliveries of units for new-build production aircraft, including remanufactures and modifications, were as follows:

Three months ended March 31

Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

F/A-18 Models 8 11 4 7

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KC-46 Tanker 8 4 4 2

BDS revenues for the three months ended March 31, 2022 decreased by $1,702 million compared with the same period in 2021, primarily due to lower revenue on the KC-46A Tanker program from new orders for 27 aircraft received during the first quarter of 2021, lower P-8 volume as production was reduced to one per month, and timing of material receipts.

Cumulative contract catch-up adjustments for the three months ended March 31, 2022 were $570 million more unfavorable than the comparable period in the prior year largely due to charges on VC-25B, KC-46A Tanker, and MQ-25.

Total 81 85 40 43

BDS revenues for the six months ended June 30, 2022 decreased by $2,387 million compared with the same period in 2021, primarily due to lower revenue on the KC-46A Tanker program from new orders for 27 aircraft received during the first quarter of 2021, lower P-8 volume as production was reduced to one per month, and timing of material receipts.

Cumulative contract catch-up adjustments for the six months ended June 30, 2022 were $1,018 million more unfavorable than the comparable period in the prior year largely due to charges on VC-25B, KC-46A Tanker, and MQ-25 and the prior year favorable contract adjustment.

BDS revenues for the three months ended June 30, 2022 decreased by $685 million compared with the same period in 2021, due to charges on development programs discussed below, unfavorable performance across other programs, lower P-8 volume, and the absence of revenue recorded in the prior year quarter related to a favorable adjustment on a non-U.S.

Cumulative contract catch-up adjustments were $448 million more unfavorable than the comparable period in the prior year largely due to charges on development programs, the prior year favorable contract adjustment and other program performance.

Loss/Earnings From Operations

BDS loss from operations was $929 million for the three months ended March 31, 2022 compared with earnings from operations of $405 million in the same period in 2021 primarily due to charges on the VC-25B, T-7A Red Hawk, KC-46A Tanker, and MQ-25 programs in the first quarter of 2022.

During the first quarter of 2022, we recorded a $660 million earnings charge on VC-25B compared to $318 million in the same period in 2021.

The charge in the first quarter of 2022 was primarily due to higher supplier costs, higher costs to finalize certain technical requirements and schedule delays.

We recorded earnings charges of $367 million related to the T-7A Red Hawk program including a $300 million increase to the estimated losses associated with future production aircraft lots that we believe are probable of being exercised as well as $67 million related to the T-7A Red Hawk Engineering, Manufacturing, and Development (EMD) contract.

The increase to the losses associated with future production aircraft is

primarily due to ongoing supply chain negotiations which are impacted by supply chain constraints, COVID-19, and inflationary pressures.

The KC-46A Tanker program recorded earnings charges of $165 million primarily reflecting higher supply chain and other costs.

MQ-25 also increased its anticipated loss by $78 million due to additional customer testing requirements and supplier quality challenges.

As a result of the earnings charges above, the net unfavorable cumulative contract catch-up adjustments for the three months ended March 31, 2022 were $890 million higher than the comparable period in the prior year.

BDS loss from operations includes equity earnings of $27 million for the three months ended March 31, 2022 compared with $7 million for the same period in 2021.

BDS backlog decreased from $59,828 million as of December 31, 2021 to $59,739 million at March 31, 2022, primarily due to revenue recognized on contracts awarded in prior periods.

BDS loss from operations was $858 million for the six months ended June 30, 2022 compared with earnings from operations of $1,363 million in the same period in 2021 primarily due to charges on the VC-25B, T-7A Red Hawk, KC-46A Tanker, and MQ-25 programs totaling $1,270 million recorded in the first quarter of 2022 as well as the year over year decrease in second quarter earnings of $887 million discussed below.

The net unfavorable cumulative contract catch-up adjustments for the six months ended June 30, 2022 were $1,510 million higher than the comparable period in the prior year.

BDS earnings from operations was $71 million for the three months ended June 30, 2022 compared with earnings from operations of $958 million in the same period in 2021.

Other programs recorded lower earnings during the second quarter of 2022 due to lower volumes, supplier disruption and factory performance.

Net unfavorable cumulative contract catch-up adjustments for the three months ended June 30, 2022 were $620 million higher than the comparable period in the prior year reflecting the charges and performance issues described above.

The year over

year decrease also reflects the absence of gains recorded in the prior year quarter largely related to a favorable adjustment on a non-U.S.

See further discussion of fixed-price contracts in Note 9 to our Condensed Consolidated Financial Statements.

BDS loss/earnings from operations includes equity earnings of $40 million and $13 million for the six and three months ended June 30, 2022 compared with equity earnings of $37 million and $30 million for the same periods in 2021.

The year over year variances reflect changes in earnings from our United Launch Alliance joint venture.

BDS backlog decreased from $59,828 million as of December 31, 2021 to $55,401 million at June 30, 2022, primarily due to revenue recognized on contracts awarded in prior periods.

Additional Considerations

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Many development programs have highly complex designs.

As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition.

As technical, quality or similar issues in the supply chain arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition.

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.

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Results of Operations

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Revenues $8,612 $7,816 $4,298 $4,067

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Operating margins 15.8 % 12.4 % 16.9 % 13.1 %

BGS revenues for the three months ended March 31, 2022 increased by $565 million compared with the same period in 2021 primarily due to higher commercial services volume.

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

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 fully recovers.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended March 31, 2022 was $49 million lower than the comparable period in the prior year.

BGS revenues for the six months ended June 30, 2022 increased by $796 million compared with the same period in 2021 primarily due to higher commercial services volume, partially offset by lower government services volume.

The decrease in government services volume is partly driven by the discontinuation of an engine distribution agreement in the second quarter of 2022.

The net favorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2022 was $97 million lower than the comparable period in the prior year.

BGS revenues for the three months ended June 30, 2022 increased by $231 million compared with the same period in 2021 primarily due to higher commercial services volume, partially offset by lower government services volume.

The decrease in government services volume is partly driven by the discontinuation of an engine distribution agreement.

The net unfavorable impact of cumulative contract catch-up adjustments for the three months ended June 30, 2022 was $48 million higher than the comparable period in the prior year.

Earnings From Operations

BGS earnings from operations for the three months ended March 31, 2022 increased by $191 million compared with the same period in 2021, primarily due to higher commercial services volume and favorable mix.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended March 31, 2022 was $64 million lower than the comparable period in the prior year.

BGS backlog decreased from $20,496 million as of December 31, 2021 to $19,822 million at March 31, 2022, primarily due to revenue recognized on contracts awarded in prior years.

BGS earnings from operations for the six months ended June 30, 2022 increased by $388 million compared with the same period in 2021, primarily due to higher commercial services volume and favorable mix.

The net favorable impact of cumulative contract catch-up adjustments for the six months ended June 30, 2022 was $89 million lower than the comparable period in the prior year.

BGS earnings from operations for the three months ended June 30, 2022 increased by $197 million compared with the same period in 2021, primarily due to higher commercial services volume and favorable mix.

The net favorable impact of cumulative contract catch-up adjustments for the three months ended June 30, 2022 was $25 million lower than the comparable period in the prior year.

BGS backlog decreased from $20,496 million as of December 31, 2021 to $18,960 million at June 30, 2022, primarily due to revenue recognized on contracts awarded in prior years.

Boeing Capital

Results of Operations

(Dollars in millions) Three months ended March 31

(Dollars in millions) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Revenues $98 $138 $52 $78

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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 for the three months ended March 31, 2022 decreased by $14 million compared with the same period in 2021 primarily due to lower gains on re-lease of assets.

BCC’s revenues for the six and three months ended June 30, 2022 decreased by $40 million and $26 million compared with the same periods in 2021 primarily due to lower gains on re-lease of assets and lower commitment fee income.

Loss/Earnings From Operations

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

Loss from operations for the three months ended March 31, 2022 was $36 million compared with earnings from

operations of $21 million in the same period in 2021 primarily due to an increase in the allowance for losses on receivables as a result of the war in Ukraine.

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

For the six months ended June 30, 2022, BCC had a loss from operations of $9 million, compared with earnings from operations of $57 million during the same period in 2021, primarily due to an increase in the allowance for losses on receivables as a result of the war in Ukraine and lower revenues.

Earnings from operations during the three months ended June 30, 2022 and 2021 were $27 million and $36 million due to lower revenues.

Financial Position

The following table presents selected financial data for BCC:

(Dollars in millions) March 31

(Dollars in millions) June 30

2022 December 31

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Debt-to-equity ratio 5-to-1 4.9-to-1

BCC’s customer financing and investment portfolio at March 31, 2022 decreased $79 million from December 31, 2021 primarily due to an increase in the allowance for losses and portfolio run-off, partially offset by new volume.

BCC’s customer financing and investment portfolio at June 30, 2022 decreased $107 million from December 31, 2021 primarily due to an increase in the allowance for losses and portfolio run-off, partially offset by new volume.

BCC enters into certain intercompany 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.

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Cash Flow Summary

(Dollars in millions) Three months ended March 31

Net loss ($1,242) ($561)

(Dollars in millions) Six months ended June 30

Net (loss)/earnings ($1,082) $6

Non-cash items 2,320 2,130

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Effect of exchange rate changes on cash and cash equivalents (71) (14)

Net decrease in cash & cash equivalents, including restricted (650) (689)

Net increase in cash & cash equivalents, including restricted 2,027 472

Cash & cash equivalents, including restricted, at beginning of year 8,104 7,835

Cash & cash equivalents, including restricted, at end of period $10,131 $8,307

Operating Activities Net cash used by operating activities was $3.2 billion during the three months ended March 31, 2022, compared with $3.4 billion during the same period in 2021.

Net loss increased by $0.7 billion in 2022, which was more than offset by $0.8 billion of reductions to cash used by Changes in assets and liabilities in 2022.

The year-over-year improvement to cash used by Changes in assets and liabilities was driven by improvements in receivables, payables, and accrued liabilities.

Cash used by Advances and progress billings was $0.5 billion in 2022, as compared with $0.4 billion of cash provided in 2021.

Cash used by Inventories was $1.2 billion in 2022, as compared with $0.7 billion of cash used in 2021.

Compensation payments to 737 MAX customers totaled $0.6 billion and $1.2 billion during the

three months ended March 31, 2022 and 2021.

Operating Activities Net cash used by operating activities was $3.1 billion during the six months ended June 30, 2022, compared with $3.9 billion during the same period in 2021.

Net loss for the six months ended June 30, 2022 was $1.1 billion compared with net earnings of $6 million during the same period in 2021.

Changes in assets and liabilities for the six months ended June 30, 2022 were $4.4 billion compared with $6.0 billion during the same period in 2021 driven by changes in Accounts payable and Accrued liabilities, partially offset by Inventories and Advances and progress billings.

Compensation payments to 737 MAX customers totaled $0.8 billion and $1.5 billion during the six months ended June 30, 2022 and 2021.

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.

Cash used by Advances and progress billings was $0.9 billion in 2022, as compared with $0.3 billion of cash provided in 2021.

Cash used by Inventories was $1.3 billion in 2022, as compared with $0.4 billion of cash provided in 2021 primarily reflecting the continued build-up of 787 aircraft, as well as growth in 777X inventory.

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

Payables to suppliers who elected to participate in supply chain financing programs decreased by $0.2 billion during the three months ended March 31, 2022 and remained flat during the three months ended March 31, 2021.

Payables to suppliers who elected to participate in supply chain financing programs increased by $0.1 billion during the six months ended June 30, 2022 and decreased by $0.4 billion during the six months ended June 30, 2021.

Supply chain financing is not material to our overall liquidity.

Investing Activities Cash provided by investing activities was $3.0 billion during the three months ended March 31, 2022, compared with $2.8 billion during the same period in 2021, due to net proceeds from investments of $3.3 billion in 2022 compared to $3.1 billion in 2021.

In the three months ended March 31, 2022 and 2021, capital expenditures were consistent at $0.3 billion.

Investing Activities Cash provided by investing activities was $6.2 billion during the six months ended June 30, 2022, compared with $4.4 billion during the same period in 2021, primarily due to net proceeds from investments of $6.8 billion in 2022 compared to $4.9 billion in 2021.

In the six months ended June 30, 2022 and 2021, capital expenditures were $0.6 billion and $0.5 billion.

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

Financing Activities Cash used by financing activities was $0.4 billion during the three months ended March 31, 2022 compared with $48.0 million during the same period in 2021.

During the three months ended March 31, 2022, net repayments were $0.4 billion compared with $33 million in the same period in 2021.

As of March 31, 2022 the total debt balance was $57.7 billion, down from $58.1 billion at December 31, 2021.

At March 31, 2022, $2.6 billion of debt was classified as short-term.

Financing Activities Cash used by financing activities was $1.0 billion during the six months ended June 30, 2022 compared with $67 million during the same period in 2021.

During the six months ended June 30, 2022, net repayments were $1.0 billion compared with $56 million in the same period in 2021.

As of June 30, 2022 the total debt balance was $57.2 billion, down from $58.1 billion at December 31, 2021.

At June 30, 2022, $5.4 billion of debt was classified as short-term.

Debt, including intercompany loans, attributable to BCC totaled $1.5 billion, $0.3 billion of which was classified as short-term.

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.

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 Condensed Consolidated Financial Statements.

At March 31, 2022, we had $7.4 billion of cash and $4.9 billion of short-term investments.

At March 31, 2022, we had $14.7 billion of unused borrowing capacity on revolving credit line agreements, of which $6.3 billion expires in October 2022, $5.3 billion expires in March 2023, and $3.2 billion expires in October 2024.

At June 30, 2022, we had $10.1 billion of cash and $1.4 billion of short-term investments.

At June 30, 2022, we had $14.7 billion of unused borrowing capacity on revolving credit line agreements, of which $6.3 billion expires in October 2022, $5.3 billion expires in March 2023, and $3.2 billion expires in October 2024.

Of the $6.3 billion scheduled to expire in October 2022, $3.1 billion has a one-year term out option that allows us to extend the maturity of any borrowings one additional year.

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Any future borrowings may affect our credit ratings and are subject to various debt covenants.

At March 31, 2022, we were in compliance with the covenants for our debt and credit facilities.

At June 30, 2022, 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).

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

Customer Financing commitments totaled $12.8 billion and $12.9 billion at March 31, 2022 and December 31, 2021.

The decrease relates to the expiration of financing commitments.

Customer Financing commitments totaled $13.1 billion and $12.9 billion at June 30, 2022 and December 31, 2021.

The increase relates to the addition of new financing commitments in excess of 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.

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Legal contingencies are discussed in Note 16 to our Condensed Consolidated Financial Statements.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $653 million at March 31, 2022.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $725 million at June 30, 2022.

For additional information, see Note 9 to our Condensed Consolidated Financial Statements.

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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.

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

The FAS/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.

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

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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 adjustments recognized in Loss from operations were benefits of $208 million and $193 million for the three months ended March 31, 2022 and 2021.

The Pension FAS/CAS service cost adjustments recognized in (Loss)/earnings from operations were benefits of $413 million and $205 million for the six and three months ended June 30, 2022, compared with benefits of $384 million and $191 million for the same periods in 2021.

The higher benefits in 2022 were primarily due to increases in allocated pension cost year over year.

The non-operating pension expenses included in Other income, net were benefits of $220 million and $177 million for the three months ended March 31, 2022 and 2021.

The higher benefits for the three months ended March 31, 2022 were primarily due to lower amortization of actuarial losses, partially offset by higher interest cost and lower expected return on plan assets.

The non-operating pension expenses included in Other income, net were benefits of $441 million and $221 million for the six and three months ended June 30, 2022, compared with benefits of $352 million and $175 million for the same periods in 2021.

The higher benefits in 2022 were primarily due to lower amortization of actuarial losses, partially offset by higher interest cost and lower expected return on plan assets.

For further discussion of pension and other postretirement costs see the Management’s Discussion and Analysis on page 39 of this Form 10-Q and on page 29 of our 2021 Annual Report on Form 10-K.

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The table below reconciles the non-GAAP financial measures of core operating earnings/(loss), core operating margin and core earnings/(loss) per share with the most directly comparable GAAP financial measures of earnings/(loss) from operations, operating margins and diluted earnings/(loss) per share.

(Dollars in millions, except per share data) Three months ended March 31

(Dollars in millions, except per share data) Six months ended June 30 Three months ended June 30

2022 2021 2022 2021

Revenues $30,672 $32,215 $16,681 $16,998

Loss from operations, as reported ($1,169) ($83)

(Loss)/earnings from operations, as reported ($395) $940 $774 $1,023

Operating margins (1.3) % 2.9 % 4.6 % 6.0 %

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Postretirement FAS/CAS service cost adjustment (1)

(154) (154) (79) (77)

FAS/CAS service cost adjustment (1)

($567) ($538) ($284) ($268)

Core operating loss (non-GAAP) ($1,452) ($353)

Core operating (loss)/earnings (non-GAAP) ($962) $402 $490 $755

Core operating margins (non-GAAP) (3.1) % 1.2 % 2.9 % 4.4 %

Diluted loss per share, as reported ($2.06) ($0.92)

Diluted (loss)/earnings per share, as reported ($1.73) $0.09 $0.32 $1.00

Pension FAS/CAS service cost adjustment (1)

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Provision for deferred income taxes on adjustments (3)

Core loss per share (non-GAAP) ($2.75) ($1.53)

0.37 0.32 0.18 0.16

Core (loss)/earnings per share (non-GAAP) ($3.11) ($1.12) ($0.37) $0.40

Weighted average diluted shares (in millions) 592.8 588.6 596.4 590.2

2 unchanged sentences

(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 per share (non-GAAP).

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

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

1 unchanged sentence

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-Q

Item 2. Management’s Discussion and Analysis