What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-26 compared with 2022-07-27 · 198 added, 201 removed, 366 unchanged (52% of the section changed)

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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.

We expect domestic travel to continue to recover before international travel and for the narrow-body market to follow domestic travel recovery, while the wide-body market continues to be paced by international travel recovery.

The pace of the commercial market recovery remains impacted by government restrictions related to COVID-19.

We are seeing a strong recovery in travel demand for our airline customers in North and South America, the Middle East, and Europe, and demand for dedicated freighters continues to be underpinned by a strong recovery in global trade.

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.

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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 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.

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 certification and/or entry into service consistent with our current assumptions, future revenues, earnings and cash flows will be adversely impacted.

We are following the lead of the FAA as we work through the certification process, and currently expect the 737 MAX 7 to be certified in 2022 or 2023 and enter service in 2023, and the 737 MAX 10 to begin FAA certification flight testing in 2022 or 2023 and enter service in 2023 or 2024.

However, 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 specifications.

With safety as our primary focus, we continue to work to meet all current regulatory requirements to support certification, and are also engaged in discussions with stakeholders concerning a possible extension to the ACSAA's December 27, 2022 deadline.

We currently have approximately 27 MAX 7 and 3 MAX 10 aircraft in inventory and approximately 250 MAX 7 and 600 MAX 10 aircraft in backlog.

If the ACSAA deadline is not amended and we otherwise fail to achieve certification, we might choose to discontinue the MAX 7 and/or MAX 10, resulting in future earnings charges and other financial impacts.

We may be able to partially mitigate some of these financial impacts to the extent that customers exercise substitution rights into MAX 8 and/or MAX 9 aircraft.

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.

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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.

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.

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.

There is uncertainty regarding timing of return to service and resumption of deliveries in China which are still subject to final regulatory approvals.

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

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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.

Based on long-term global economic growth projections of 2.6% in average annual gross domestic product, 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.

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.

During the third quarter, commercial services volume at Global Services (BGS) recovered to pre-pandemic levels.

We expect BGS commercial revenues to remain strong in future quarters as the commercial airline industry continues to recover.

The demand outlook for our government services business remains stable.

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

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.

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

These factors have contributed to significant earnings charges on a number of fixed-price development programs which are expected to adversely affect cash flows in future periods.

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.

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

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

(Dollars in millions, except per share data) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Effective income tax rate (0.4) % 62.2 % (5.6) % 57.4 %

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

Net loss attributable to Boeing Shareholders ($4,301) ($59) ($3,275) ($109)

Diluted loss per share ($7.24) ($0.10) ($5.49) ($0.19)

Core operating (loss)/earnings ($4,040) $461 ($3,078) $59

Core operating margins (8.7) % 1.0 % (19.3) % 0.4 %

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

Core loss per share ($9.31) ($1.72) ($6.18) ($0.60)

(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) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Total $46,628 $47,493 $15,956 $15,278

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 for the nine months ended September 30, 2022 decreased by $865 million compared with the same period in 2021 driven by lower revenues at BDS, partially offset by higher revenues at Commercial Airplanes (BCA) and BGS.

BDS revenues decreased by $3,697 million primarily due to charges on development programs.

BCA revenues increased by $1,900 million primarily driven higher 737 MAX deliveries.

BGS revenues increased by $1,007 million primarily due to higher commercial services volume.

Revenues for the three months ended September 30, 2022 increased by $678 million compared with the same period in 2021 driven by higher revenues at BCA and BGS, partially offset by lower revenues at BDS.

BCA revenues increased by $1,804 million due to the resumption of 787 deliveries and higher 737 MAX deliveries.

BGS revenues increased by $211 million due to higher commercial services volume.

BDS revenues decreased by $1,310 million primarily due to charges on development programs.

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.

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

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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* 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 operating earnings/(loss) is a Non-GAAP measure that excludes the FAS/CAS service cost adjustment.

** Core operating (loss)/earnings is a Non-GAAP measure that excludes the FAS/CAS service cost adjustment.

See pages 51-53.

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.

Loss from operations for the nine months ended September 30, 2022 was $3,194 million compared with earnings of $1,269 million during the same period in 2021.

BDS had a loss from operations of $3,656 million compared with earnings of $1,799 million during the same period in 2021, primarily due to charges on development programs ($4,429 million).

BGS earnings from operations increased by $477 million primarily due to higher commercial services volume and favorable mix, partially offset by lower government services performance.

BCA loss from operations decreased by $277 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.

Loss from operations for the three months ended September 30, 2022 was $2,799 million compared with earnings of $329 million during the same period in 2021.

BDS had a loss from operations of $2,798 million, compared with earnings of $436 million during the same period in 2021.

The year over year change at BDS primarily reflects charges on development programs in the third quarter of 2022 of $2,762 million.

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

BGS earnings from operations increased by $89 million due to higher commercial services volume and favorable mix, partially offset by lower government services performance.

BCA loss from operations decreased by $50 million reflecting higher 737 MAX deliveries and lower abnormal production costs, partially offset by higher research and development spending and other period expenses.

Core operating losses for the nine months ended September 30, 2022 were $4,040 million compared with core operating earnings of $461 million for the same period in 2021.

Core operating losses for the three months ended September 30, 2022 were $3,078 million compared with core operating earnings of $59 million for 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.

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

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Unallocated items, eliminations and other ($747) ($1,032) ($393) ($370)

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.

Share-based plans expense for the nine months ended September 30, 2022 decreased by $107 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.

The difference in share-based plans income of $44 million for the three months ended September 30, 2022 compared with expense of $29 million in the same period in 2021 is attributable to timing of corporate allocations.

Deferred compensation income of $204 million for the nine months ended September 30, 2022 compared with expense of $86 million in the same period in 2021 is primarily driven by broad market conditions and changes in our stock price.

Deferred compensation income of $38 million for the three months ended September 30, 2022 compared with $8 million in the same period in 2021 is primarily driven by broad market conditions.

Unallocated research and development expense for the nine and three months ended September 30, 2022 increased by $17 million and decreased by $16 million compared with the same periods in 2021 due to spending on enterprise product development.

Eliminations and other unallocated items for the nine and three months ended September 30, 2022 increased by $90 million and $140 million compared with the same periods in 2021.

The increase in the third quarter of 2022 primarily reflects a $200 million settlement with the Securities and Exchange Commission related to the 737 MAX accidents and lower income from operating investments.

Other Earnings Items

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Interest and debt expense (1,901) (2,021) (621) (669)

(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

Loss before income taxes (4,373) (333) (3,132) (310)

Income tax (expense)/benefit (17) 207 (176) 178

Net loss from continuing operations (4,390) (126) (3,308) (132)

Net loss attributable to noncontrolling interest (89) (67) (33) (23)

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.

Net loss attributable to Boeing Shareholders ($4,301) ($59) ($3,275) ($109)

For the nine months ended September 30, 2022 and 2021, non-operating pension income included in Other income, net was $666 million and $381 million.

The increased income was primarily due to lower

amortization of net actuarial losses and a settlement gain in 2022 compared with charges in 2021.

Non-operating postretirement income included in Other income, net was $44 million and $16 million during the nine months ended September 30, 2022 and 2021.

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

For the three months ended September 30, 2022 and 2021, non-operating pension income included in Other income, net was $225 million and $29 million.

The increased income was primarily due to a settlement loss in 2021 and lower amortization of net actuarial losses.

Interest and debt expense for the nine and three months ended September 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) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 Change 2022 2021 Change

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96.5 % 88.4 % 8.1 % 105.2 % 88.8 % 16.4 %

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.

Cost of sales for the nine months ended September 30, 2022 increased by $3,020 million, or 7% compared with the same period in 2021, primarily due to charges recorded at BDS and higher revenues at BCA.

Cost of sales as a percentage of Revenues increased during the nine months ended September 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.

Cost of sales for the three months ended September 30, 2022 increased by $3,212 million, or 24% compared with the same period in 2021 primarily due to charges recorded at BDS and higher revenues at BCA.

Cost of sales as a percentage of Revenues increased during the three months ended September 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) Six months ended June 30 Three months ended June 30

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Total $2,058 $1,571 $727 $575

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

Research and development expense increased by $487 million and $152 million during the nine and three months ended September 30, 2022 compared to the same periods in 2021.

The increase at BCA primarily reflect higher 737 MAX and 777X research and product development expenditures.

(Dollars in millions) September 30

2022 December 31

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government contract funding.

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.

The increase in contractual backlog at BCA during the nine months ended September 30, 2022 was partially offset by a decrease in contractual backlog at BDS and BGS.

If 787 aircraft deliveries are delayed, 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 reductions to backlog and/or significant order cancellations.

Unobligated backlog includes U.S.

government definitive contracts for which funding has not been authorized.

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.

The decrease in unobligated backlog during the nine months ended September 30, 2022 was primarily due to reclassifications to contractual backlog related to BDS and BGS contracts, partially offset by contract awards.

Additional Considerations

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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 have imposed

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.

We are mitigating import costs through Duty Drawback Customs procedures.

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.

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.

Government has imposed tariffs on steel and aluminum imports.

Government imposed tariffs on steel and aluminum imports.

In response to these tariffs, several major U.S.

trading partners have imposed, or announced their intention to impose, tariffs on U.S.

In May 2019, the U.S.

Government, Mexico and Canada reached an agreement to end the steel and aluminum tariffs between these countries.

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

Government has also reached agreements to ease steel and/or aluminum tariffs with the United Kingdom, the European Union (EU) and Japan.

has subsequently reached agreements with Mexico, Canada, the United Kingdom, the European Union, and Japan to ease or remove tariffs on steel and/or aluminum.

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

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Business Environment and Trends

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.

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

Results of Operations

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Operating margins (10.5) % (13.7) % (10.3) % (15.5) %

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.

BCA revenues increased by $1,900 million for the nine months ended September 30, 2022 compared with the same period in 2021 primarily due to higher 737 MAX deliveries, partially offset by lower wide-body deliveries.

BCA revenues increased by $1,804 million for the three months ended September 30, 2022 compared with the same period in 2021 primarily due to the resumption of 787 deliveries and higher 737 MAX 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 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 lingering effects of impacts of COVID-19.

We received FAA authorization to resume deliveries of 787 aircraft on July 28, 2022 and deliveries resumed in August.

Revenues will continue to be impacted until deliveries of the 737 MAX and 787 further ramp up 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 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

Deliveries during the first nine months of 2022 277 (10) 3 21 (10) 18 9 328

Deliveries during the first nine months of 2021 179 (12) 4 24 (9) 20 14 241

Deliveries during the third quarter of 2022 88 (2) 9 (3) 6 9 112

Deliveries during the third quarter of 2021 66 (4) 2 11 (5) 6 85

Cumulative deliveries as of 9/30/2022 8,022 1,570 1,259 1,695 1,015

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Loss From Operations

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

BCA loss from operations was $1,744 million for the nine months ended September 30, 2022 compared with $2,021 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 nine months ended September 30, 2022 were $1,326 million including $925 million related to the 787 program, $213 million related to the 777X program and $188 million related to 737 MAX.

Abnormal production costs for the nine months ended September 30, 2021 were $1,684 million, including $1,501 million related to 737 MAX and $183 million related to the 787 program.

BCA loss from operations was $643 million for the three months ended September 30, 2022 compared with $693 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 September 30, 2022 were $441 million, including $330 million related to the 787 program and $111 million related to the 777X program.

Abnormal production costs for the three months ended September 30, 2021 were $601 million, including $418 million related to 737 MAX and $183 million related to the 787 program.

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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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.

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

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.

BCA total backlog increased from $296,882 million as of December 31, 2021 to $307,168 million at September 30, 2022 reflecting n ew 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 nine months ended September 30, 2022 totaled $8,687 million and relate to 737 MAX and 787 aircraft.

The net ASC 606 adjustments for the nine months ended September 30, 2022 resulted in a decrease to backlog of $6,326 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.

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.

Accounting Quantity

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

767 Program The accounting quantity for the 767 program increased by 12 units during the three months ended March 31, 2022 due to the program's normal progress of obtaining additional orders and delivering airplanes.

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

767 Program The accounting quantity for the 767 program increased by 24 and 12 units during the nine and three months ended September 30, 2022 due to the program's normal progress of obtaining additional orders and delivering airplanes.

The 767 assembly line includes the commercial program and a derivative to support the KC-46A Tanker program.

The commercial program has near break-even gross margins.

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

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, 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.

These factors include continued market uncertainty, the lingering 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.

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

Deliveries remain paused due to production quality issues.

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.

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

The accounting quantity for the 777 program increased by 40 units during the six 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 increased to 3 per month in the third quarter of 2022.

787 Program At September 30, 2022 we have approximately 115 aircraft in inventory.

We received FAA authorization to resume delivery on July 28, 2022 and deliveries resumed in August.

We continue to conduct inspections and rework on undelivered aircraft.

We are currently producing at low rates and expect to gradually return to 5 per month in 2023.

In the third quarter of 2021, we determined that production rates below 5 per month represented abnormally low production rates and result in abnormal production costs.

We also determined that the 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.

Cumulative abnormal costs recorded through September 30, 2022 total $1.4 billion and we continue to 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.

We have implemented 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 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 expected.

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.

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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.

Factors that could result in lower margins (or a material charge if an airplane program has or is determined to have reach-forward losses) include the following:

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.

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.

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Any of these impacts could have a material effect on our results of operations, financial position, and/or cash flows.

The Continuing Resolution (CR) enacted on September 30, 2022, continues federal funding at FY22 appropriated levels until December 16, 2022.

Congress and the President must enact either full-year FY23 appropriations bills or an additional CR to fund government departments and agencies after December 16, 2022, or a government shutdown could result, which may impact the Company's operations.

Results of Operations

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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The following discussions of comparative results among periods should be viewed in this context.

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

Six months ended June 30 Three months ended June 30

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

Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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KC-46 Tanker 9 7 1 3

Commercial Satellites 2 2

Total 117 122 36 37

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.

BDS revenues for the nine months ended September 30, 2022 decreased by $3,697 million compared with the same period in 2021 primarily due to charges on development programs.

Unfavorable performance across other defense programs and lower P-8 and weapons volume also contributed to the decrease in revenue.

Cumulative contract catch-up adjustments for the nine months ended September 30, 2022 were $2,249 million more unfavorable than the comparable period in the prior year largely due to charges on development programs.

BDS revenues for the three months ended September 30, 2022 decreased by $1,310 million compared with the same period in 2021, primarily due to charges on development programs.

Cumulative contract catch-up adjustments were $1,231 million more unfavorable than the comparable period in the prior year largely due to charges on development programs and other program performance.

(Loss)/Earnings From Operations

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.

BDS loss from operations was $3,656 million for the nine months ended September 30, 2022 compared with earnings from operations of $1,799 million in the same period in 2021 primarily due to charges on the VC-25B ($1,452 million), KC-46A Tanker ($1,374 million), MQ-25 ($576 million), T-7A Red Hawk Production Options ($536 million), T-7A Red Hawk EMD ($203 million), and Commercial Crew ($288

The net unfavorable cumulative contract catch-up adjustments for the nine months ended September 30, 2022 were $3,734 million higher than the comparable period in the prior year.

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.

BDS loss from operations was $2,798 million for the three months ended September 30, 2022 compared with earnings from operations of $436 million in the same period in 2021.

The year over year decrease reflects a number of factors including charges in the third quarter of 2022 on KC-46A Tanker ($1,165 million), VC-25B ($766 million), MQ-25 ($351 million), Commercial Crew ($195 million), T-7A Red Hawk Production Options ($185 million) and T-7A Red Hawk EMD ($100 million).

A number of other programs recorded lower earnings during the third quarter of 2022 due to lower volumes, supplier disruption and operational performance.

Net unfavorable cumulative contract catch-up adjustments for the three months ended September 30, 2022 were $2,224 million higher than the comparable period in the prior year reflecting the charges and performance issues described above.

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 $2 million for the nine months ended September 30, 2022 and equity loss of $38 million for the three months ended September 30, 2022 compared with equity earnings of $48 million and $11 million for the same periods in 2021.

Earnings from our United Launch Alliance joint venture increased during the nine and three months ended September 30, 2022.

This was more than offset by losses on other operating investments.

BDS backlog decreased from $59,828 million as of December 31, 2021 to $54,740 million at September 30, 2022, primarily due to revenue recognized on contracts awarded in prior periods.

Additional Considerations

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Results of Operations

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

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Operating margins 16.0 % 13.4 % 16.5 % 15.3 %

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.

BGS revenues for the nine months ended September 30, 2022 increased by $1,007 million compared with the same period in 2021 primarily due to higher commercial services volume, partially offset by lower government services volume and performance.

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.

The net favorable impact of cumulative contract catch-up adjustments for the nine months ended September 30, 2022 was $122 million lower than the comparable period in the prior year.

BGS revenues for the three months ended September 30, 2022 increased by $211 million compared with the same period in 2021 primarily due to higher commercial services volume, partially offset by lower government services volume.

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

Earnings From Operations

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.

BGS earnings from operations for the nine months ended September 30, 2022 increased by $477 million compared with the same period in 2021, primarily due to higher commercial services volume and favorable mix, partially offset by lower government services performance.

The net favorable impact of cumulative contract catch-up adjustments for the nine months ended September 30, 2022 was $147 million lower than the comparable period in the prior year.

BGS earnings from operations for the three months ended September 30, 2022 increased by $89 million compared with the same period in 2021, primarily due to higher commercial services volume and favorable mix, partially offset by lower government services performance.

The net unfavorable impact of cumulative contract catch-up adjustments for the three months ended September 30, 2022 was $58 million lower than the net favorable impact in the comparable period in the prior year.

BGS backlog decreased from $20,496 million as of December 31, 2021 to $19,072 million at September 30, 2022, primarily due to revenue recognized on contracts awarded in prior years.

Boeing Capital

Results of Operations

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

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

Revenues $150 $209 $52 $71

(Loss)/earnings from operations ($9) $57 $27 $36

Earnings from operations $14 $99 $23 $42

Operating margins 9.3 % 47.4 % 44.2 % 59.2 %

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 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 revenues for the nine and three months ended September 30, 2022 decreased by $59 million and $19 million compared with the same periods in 2021 primarily due to lower gains on re-lease of assets and lower commitment fee income.

Earnings From Operations

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.

For the nine months ended September 30, 2022, BCC had earnings from operations of $14 million, compared with earnings from operations of $99 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 September 30, 2022 and 2021 were $23 million and $42 million due to lower revenues.

Financial Position

The following table presents selected financial data for BCC:

(Dollars in millions) June 30

(Dollars in millions) September 30

2022 December 31

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Debt-to-equity ratio 4.8-to-1 4.9-to-1

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’s customer financing and investment portfolio at September 30, 2022 decreased $144 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) Six months ended June 30

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

(Dollars in millions) Nine months ended September 30

Net loss ($4,390) ($126)

Non-cash items 3,436 2,942

Changes in assets and liabilities 1,009 (6,948)

Net cash used by operating activities (3,135) (3,870)

Net cash provided/(used) by operating activities 55 (4,132)

Net cash provided by investing activities 6,521 7,389

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Cash & cash equivalents, including restricted, at end of period $13,530 $9,820

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.

Operating Activities Net cash provided by operating activities was $0.1 billion during the nine months ended September 30, 2022, compared with $4.1 billion of cash used by operating activities during the same period in 2021.

Net loss for the nine months ended September 30, 2022 was $4.4 billion compared with net loss of $0.1 billion during the same period in 2021.

The $4.3 billion year-over-year increase in the Net loss is primarily driven by losses on BDS fixed-price development contracts that are expected to adversely impact cash flows in future periods.

Changes in assets and liabilities for the nine months ended September 30, 2022 improved by $8.0 billion compared with the same period in 2021 driven by changes in Accrued liabilities and Accounts payable, partially offset by growth in Inventories in 2022.

The increase in Accrued Liabilities is primarily driven by the accrued losses on BDS fixed-price development programs, lower payments to 737 MAX customers in 2022, and the $0.7 billion Department of Justice payment in 2021 discussed below.

Growth in Accounts Payable in 2022 is a source of cash while reductions in Accounts Payable in 2021 were a use of cash generally reflecting increases in production rates.

Concessions paid to 737 MAX customers totaled $1.0 billion and $2.0 billion during the nine months ended September 30, 2022 and 2021.

Additionally, in the third quarter of 2022 and 2021 we received income tax refunds of $1.5 billion and $1.3 billion.

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 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.

Cash provided by Advances and progress billings was $0.2 billion in 2022, as compared with $0.8 billion of cash provided in 2021.

Cash used by Inventories was $1.2 billion in 2022, as compared with $0.5 billion of cash provided in 2021 primarily reflecting growth in 777X inventory, as well as the continued build-up of 787 aircraft.

We expect to continue to have a significant negative impact on our operating cash flows until 737 MAX and 787 deliveries ramp up.

Payables to suppliers who elected to participate in supply chain financing programs decreased by $0.1 billion during the nine months ended September 30, 2022 and decreased by $1 billion during the nine months ended September 30, 2021.

Supply chain financing is not material to our overall liquidity.

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.

Investing Activities Cash provided by investing activities was $6.5 billion during the nine months ended September 30, 2022, compared with $7.4 billion during the same period in 2021, primarily due to net proceeds from investments of $7.4 billion in 2022 compared to $7.8 billion in 2021.

Lower proceeds from dispositions of property, plant and equipment in 2022 also contributed to the year-over-year variance.

In the nine months ended September 30, 2022 and 2021, capital expenditures were $0.9 billion and $0.8 billion.

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

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.

Financing Activities Cash used by financing activities was $1.0 billion during the nine months ended September 30, 2022 compared with $1.2 billion during the same period in 2021.

During the nine months

ended September 30, 2022, net repayments on our debt were $1.0 billion compared with $1.2 billion in the same period in 2021.

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

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

Debt, including intercompany loans, attributable to BCC totaled $1.5 billion, $0.5 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 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.

At September 30, 2022, we had $13.5 billion of cash and $0.8 billion of short-term investments.

At September 30, 2022, we had $12.0 billion of unused borrowing capacity on revolving credit line agreements.

In the third quarter of 2022, we entered into a $5.8 billion 364-day revolving credit agreement expiring in August 2023, a $3.0 billion three-year revolving credit agreement expiring in August 2025, and amended our $3.2 billion five-year revolving credit agreement, which expires in October 2024, primarily to incorporate a LIBOR successor rate.

The 364-day facility has a one-year term out option that allows us to extend the maturity of any borrowings one additional year.

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

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

At June 30, 2022, we were in compliance with the covenants for our debt and credit facilities.

At September 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 $13.1 billion and $12.9 billion at June 30, 2022 and December 31, 2021.

Customer Financing commitments totaled $16.5 billion and $12.9 billion at September 30, 2022 and December 31, 2021.

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

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Legal contingencies are discussed in Note 17 to our Condensed Consolidated Financial Statements.

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

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $754 million at September 30, 2022.

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

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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.

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.

4 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 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 Pension FAS/CAS service cost adjustments recognized in (Loss)/earnings from operations were benefits of $621 million and $208 million for the nine and three months ended September 30, 2022, compared with benefits of $576 million and $192 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 $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.

The non-operating pension expenses included in Other income, net were benefits of $666 million and $225 million for the nine and three months ended September 30, 2022, compared with benefits of $381 million and $29 million for the same periods in 2021.

The higher benefits in 2022 were primarily due to lower amortization of net actuarial losses and a settlement gain in 2022 compared to charges in 2021.

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.

4 unchanged sentences

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) Six months ended June 30 Three months ended June 30

(Dollars in millions, except per share data) Nine months ended September 30 Three months ended September 30

2022 2021 2022 2021

10 unchanged sentences

Core operating margins (non-GAAP) (8.7) % 1.0 % (19.3) % 0.4 %

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

Diluted loss per share, as reported ($7.24) ($0.10) ($5.49) ($0.19)

Pension FAS/CAS service cost adjustment (1)

8 unchanged sentences

0.55 0.43 0.18 0.11

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

Core loss per share (non-GAAP) ($9.31) ($1.72) ($6.18) ($0.60)

Weighted average diluted shares (in millions) 594.0 587.3 596.3 589.0

6 unchanged sentences

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