Item 1. Financial Statements
Item 1. Financial Statements
The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share data) Three months ended March 31
2024 2023
Sales of products $ 13,268 $ 14,914
Sales of services 3,301 3,007
Total revenues 16,569 17,921
Cost of products ( 12,064 ) ( 13,553 )
Cost of services ( 2,629 ) ( 2,445 )
Total costs and expenses ( 14,693 ) ( 15,998 )
1,876 1,923
Income/(loss) from operating investments, net 67 ( 27 )
General and administrative expense ( 1,161 ) ( 1,304 )
Research and development expense, net ( 868 ) ( 741 )
Loss from operations ( 86 ) ( 149 )
Other income, net 277 302
Interest and debt expense ( 569 ) ( 649 )
Loss before income taxes ( 378 ) ( 496 )
Income tax benefit 23 71
Net loss ( 355 ) ( 425 )
Less: net loss attributable to noncontrolling interest ( 12 ) ( 11 )
Net loss attributable to Boeing Shareholders ($ 343 ) ($ 414 )
Basic loss per share ($ 0.56 ) ($ 0.69 )
Diluted loss per share ($ 0.56 ) ($ 0.69 )
Weighted average diluted shares (millions) 613.2 602.5
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in millions) Three months ended March 31
2024 2023
Net loss ($ 355 ) ($ 425 )
Other comprehensive (loss)/income, net of tax:
Currency translation adjustments ( 35 ) 16
Derivative instruments:
Unrealized (losses)/gains arising during period, net of tax of $ 19 and ($ 5 )
( 65 ) 18
Reclassification adjustment for losses/(gains) included in net loss, net of tax of ($ 2 ) and $ 1
7 ( 5 )
Total unrealized (loss)/gain on derivative instruments, net of tax
( 58 ) 13
Defined benefit pension plans and other postretirement benefits:
Net actuarial loss arising during the period, net of tax of $ 17 and $ 2
( 19 ) ( 7 )
Amortization of actuarial losses/(gains) included in net periodic pension cost, net of tax of ($ 12 ) and $ 0
11 ( 2 )
Amortization of prior service credits included in net periodic pension cost, net of tax of $ 12 and $ 6
( 11 ) ( 20 )
Pension and postretirement cost related to our equity method investments, net of tax of ($ 3 ) and $ 0
5
Total defined benefit pension plans and other postretirement benefits, net of tax ( 14 ) ( 29 )
Other comprehensive (loss)/income, net of tax
( 107 ) 0
Comprehensive loss, net of tax ( 462 ) ( 425 )
Less: Comprehensive loss related to noncontrolling interest ( 12 ) ( 11 )
Comprehensive loss attributable to Boeing Shareholders, net of tax ($ 450 ) ($ 414 )
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Financial Position
(Unaudited)
(Dollars in millions, except per share data) March 31
2024 December 31
2023
Assets
Cash and cash equivalents $ 6,914 $ 12,691
Short-term and other investments 615 3,274
Accounts receivable, net 2,959 2,649
Unbilled receivables, net 9,673 8,317
Current portion of financing receivables, net 57 99
Inventories 83,471 79,741
Other current assets, net 2,843 2,504
Total current assets 106,532 109,275
Financing receivables and operating lease equipment, net 833 860
Property, plant and equipment, net of accumulated depreciation of $ 22,414 and $ 22,245
10,696 10,661
Goodwill 8,089 8,093
Acquired intangible assets, net 2,034 2,094
Deferred income taxes 68 59
Investments 1,042 1,035
Other assets, net of accumulated amortization of $ 1,098 and $ 1,046
5,190 4,935
Total assets $ 134,484 $ 137,012
Liabilities and equity
Accounts payable $ 11,616 $ 11,964
Accrued liabilities 21,607 22,331
Advances and progress billings 58,972 56,328
Short-term debt and current portion of long-term debt 1,063 5,204
Total current liabilities 93,258 95,827
Deferred income taxes 223 229
Accrued retiree health care 2,196 2,233
Accrued pension plan liability, net 6,400 6,516
Other long-term liabilities 2,546 2,332
Long-term debt 46,877 47,103
Total liabilities 151,500 154,240
Shareholders’ equity:
Common stock, par value $ 5.00 — 1,200,000,000 shares authorized; 1,012,261,159 shares issued
5,061 5,061
Additional paid-in capital 10,539 10,309
Treasury stock, at cost — 398,878,880 and 402,746,136 shares
( 49,105 ) ( 49,549 )
Retained earnings 26,908 27,251
Accumulated other comprehensive loss ( 10,412 ) ( 10,305 )
Total shareholders’ deficit ( 17,009 ) ( 17,233 )
Noncontrolling interests ( 7 ) 5
Total equity ( 17,016 ) ( 17,228 )
Total liabilities and equity $ 134,484 $ 137,012
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in millions) Three months ended March 31
2024 2023
Cash flows – operating activities:
Net loss ($ 355 ) ($ 425 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash items –
Share-based plans expense 119 222
Treasury shares issued for 401(k) contribution 606 553
Depreciation and amortization 442 457
Investment/asset impairment charges, net 21 11
Other charges and credits, net 10 33
Changes in assets and liabilities –
Accounts receivable ( 328 ) ( 341 )
Unbilled receivables ( 1,357 ) ( 1,055 )
Advances and progress billings 2,718 1,417
Inventories ( 3,778 ) ( 390 )
Other current assets ( 249 ) 82
Accounts payable ( 264 ) 231
Accrued liabilities ( 666 ) ( 769 )
Income taxes receivable, payable and deferred ( 59 ) ( 122 )
Other long-term liabilities ( 83 ) ( 117 )
Pension and other postretirement plans ( 261 ) ( 244 )
Financing receivables and operating lease equipment, net 79 101
Other 43 38
Net cash used by operating activities ( 3,362 ) ( 318 )
Cash flows – investing activities:
Payments to acquire property, plant and equipment ( 567 ) ( 468 )
Proceeds from disposals of property, plant and equipment 11 5
Contributions to investments ( 243 ) ( 3,561 )
Proceeds from investments 2,907 2,203
Other ( 34 ) ( 2 )
Net cash provided/(used) by investing activities 2,074 ( 1,823 )
Cash flows – financing activities:
New borrowings 27 17
Debt repayments ( 4,442 ) ( 1,699 )
Stock options exercised 44
Employee taxes on certain share-based payment arrangements ( 65 ) ( 42 )
Other 18
Net cash used by financing activities ( 4,462 ) ( 1,680 )
Effect of exchange rate changes on cash and cash equivalents ( 28 ) 10
Net decrease in cash & cash equivalents, including restricted ( 5,778 ) ( 3,811 )
Cash & cash equivalents, including restricted, at beginning of year 12,713 14,647
Cash & cash equivalents, including restricted, at end of period 6,935 10,836
Less restricted cash & cash equivalents, included in Investments 21 24
Cash and cash equivalents at end of period $ 6,914 $ 10,812
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Condensed Consolidated Statements of Equity
For the three months ended March 31, 2024 and 2023
(Unaudited)
Boeing shareholders
(Dollars in millions) Common
Stock Additional
Paid-In
Capital Treasury Stock Retained
Earnings Accumulated Other Comprehensive Loss Non-
controlling
Interests Total
Balance at January 1, 2023 $ 5,061 $ 9,947 ($ 50,814 ) $ 29,473 ($ 9,550 ) $ 35 ($ 15,848 )
Net loss ( 414 ) ( 11 ) ( 425 )
Other comprehensive income, net of tax of $ 4
0
Share-based compensation 222 222
Treasury shares issued for stock options exercised, net
( 27 ) 71 44
Treasury shares issued for other share-based plans, net
( 67 ) 37 ( 30 )
Treasury shares issued for 401(k) contribution 223 330 553
Balance at March 31, 2023 $ 5,061 $ 10,298 ($ 50,376 ) $ 29,059 ($ 9,550 ) $ 24 ($ 15,484 )
Balance at January 1, 2024 $ 5,061 $ 10,309 ($ 49,549 ) $ 27,251 ($ 10,305 ) $ 5 ($ 17,228 )
Net loss ( 343 ) ( 12 ) ( 355 )
Other comprehensive loss, net of tax of $ 31
( 107 ) ( 107 )
Share-based compensation 119 119
Treasury shares issued for other share-based plans, net
( 116 ) 65 ( 51 )
Treasury shares issued for 401(k) contribution 227 379 606
Balance at March 31, 2024 $ 5,061 $ 10,539 ($ 49,105 ) $ 26,908 ($ 10,412 ) ($ 7 ) ($ 17,016 )
See Notes to the Condensed Consolidated Financial Statements.
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The Boeing Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Summary of Business Segment Data
(Unaudited)
(Dollars in millions) Three months ended March 31
2024 2023
Revenues:
Commercial Airplanes $ 4,653 $ 6,704
Defense, Space & Security 6,950 6,539
Global Services 5,045 4,720
Unallocated items, eliminations and other ( 79 ) ( 42 )
Total revenues $ 16,569 $ 17,921
Loss from operations:
Commercial Airplanes ($ 1,143 ) ($ 615 )
Defense, Space & Security 151 ( 212 )
Global Services 916 847
Segment operating (loss)/earnings ( 76 ) 20
Unallocated items, eliminations and other ( 312 ) ( 460 )
FAS/CAS service cost adjustment 302 291
Loss from operations ( 86 ) ( 149 )
Other income, net 277 302
Interest and debt expense ( 569 ) ( 649 )
Loss before income taxes ( 378 ) ( 496 )
Income tax benefit 23 71
Net loss ( 355 ) ( 425 )
Less: net loss attributable to noncontrolling interest ( 12 ) ( 11 )
Net loss attributable to Boeing Shareholders ($ 343 ) ($ 414 )
This information is an integral part of the Notes to the Condensed Consolidated Financial Statements. See Note 17 for further segment results.
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The Boeing Company and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Dollars in millions, except otherwise stated)
(Unaudited)
Note 1 – Basis of Presentation
The condensed consolidated interim financial statements included in this report have been prepared by management of The Boeing Company (herein referred to as “Boeing”, the “Company”, “we”, “us”, or “our”). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The results of operations for the period ended March 31, 2024 are not necessarily indicative of the operating results for the full year. The interim financial statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, included in our 2023 Annual Report on Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Long-term Contracts
Substantially all contracts at our Defense, Space & Security (BDS) segment and certain contracts at our Global Services (BGS) segment are long-term contracts with the U.S. government and other customers that generally extend over several years. Changes in estimated revenues, cost of sales, and the related effect on operating income are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a long-term contract’s percentage-of-completion. When the current estimates of total revenues and costs at completion for a long-term contract indicate a loss, a provision for the entire reach-forward loss on the long-term contract is recognized.
The table below reflects the impact of net cumulative catch-up adjustments for changes in estimated revenues and costs at completion across all long-term contracts, including the impact to Loss from operations from changes in estimated losses on unexercised options.
(In millions - except per share amounts) Three months ended March 31
2024 2023
Decrease to Revenue ($ 218 ) ($ 312 )
Increase to Loss from operations
($ 366 ) ($ 518 )
Increase to Diluted loss per share
($ 0.56 ) ($ 0.74 )
Note 2 – Earnings Per Share
Basic and diluted earnings per share are computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings.
Basic earnings per share is calculated by taking net earnings attributable to Boeing Shareholders, less earnings available to participating securities, divided by the basic weighted average common shares outstanding.
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Diluted earnings per share is calculated by taking net earnings attributable to Boeing Shareholders, less earnings available to participating securities, divided by the diluted weighted average common shares outstanding. Diluted weighted average common shares outstanding is calculated using the treasury stock method.
The elements used in the computation of Basic and Diluted loss per share were as follows:
(In millions - except per share amounts) Three months ended March 31
2024 2023
Net loss attributable to Boeing Shareholders ($ 343 ) ($ 414 )
Less: earnings available to participating securities
Net loss available to common shareholders
($ 343 ) ($ 414 )
Basic
Basic weighted average shares outstanding
613.2 602.5
Less: participating securities (1)
0.3 0.3
Basic weighted average common shares outstanding
612.9 602.2
Diluted
Diluted weighted average shares outstanding
613.2 602.5
Less: participating securities (1)
0.3 0.3
Diluted weighted average common shares outstanding
612.9 602.2
Net loss per share:
Basic
($ 0.56 ) ($ 0.69 )
Diluted
( 0.56 ) ( 0.69 )
(1) Participating securities include certain instruments in our deferred compensation plan.
The following table represents potential common shares that were not included in the computation of Diluted loss per share because the effect was antidilutive based on their strike price or the performance condition was not met.
(Shares in millions) Three months ended March 31
2024 2023
Performance restricted stock units 0.5
Restricted stock units 0.1
Stock options 0.8 0.8
In addition, potential common shares of 3.1 million and 5.3 million for the three months ended March 31, 2024 and 2023 were excluded from the computation of Diluted loss per share, because the effect would have been antidilutive as a result of incurring a net loss in those periods.
Note 3 – Income Taxes
We computed our 2024 interim tax provision using an estimated annual effective tax rate of 14.1 %, adjusted for discrete items. Our 2024 estimated annual effective tax rate is primarily driven by taxes on non-U.S. operations. The effective tax rates were 6.1 % and 14.3 % for the three months ended March 31, 2024 and 2023, and differ from the estimated annual effective tax rates primarily due to discrete increases in the domestic valuation allowance.
As of December 31, 2023, the Company had recorded valuation allowances of $ 4,550 primarily for certain domestic deferred tax assets, and certain domestic net operating losses, tax credit and interest carryforwards. To measure the valuation allowance, the Company estimated in what year each of its
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deferred tax assets and liabilities would reverse using systematic and logical methods to estimate the reversal patterns. Based on these methods, deferred tax liabilities are assumed to reverse and generate taxable income over the next 5 to 10 years while deferred tax assets related to pension and other postretirement benefit obligations are assumed to reverse and generate tax deductions over the next 15 to 20 years. The valuation allowance results from not having sufficient income from deferred tax liability reversals in the appropriate future periods to support the realization of deferred tax assets.
Federal income tax audits have been settled for all years prior to 2018. The Internal Revenue Service is currently auditing the 2018-2020 tax years. We are also subject to examination in major state and international jurisdictions for the 2010-2022 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.
Audit outcomes and the timing of audit settlements are subject to significant uncertainty. It is reasonably possible that within the next 12 months, unrecognized tax benefits related to federal tax matters under audit may decrease by up to $ 620 based on current estimates.
Note 4 – Allowances for Losses on Financial Assets
The changes in allowances for expected credit losses for the three months ended March 31, 2024 and 2023 consisted of the following:
Accounts receivable Unbilled receivables Other current assets Financing receivables
Other assets Total
Balance at January 1, 2023 ($ 116 ) ($ 23 ) ($ 85 ) ($ 55 ) ($ 88 ) ($ 367 )
Changes in estimates 1 1 8 ( 4 ) 6
Write-offs 3 1 4
Recoveries 1 1
Balance at March 31, 2023
($ 111 ) ($ 22 ) ($ 76 ) ($ 55 ) ($ 92 ) ($ 356 )
Balance at January 1, 2024 ($ 89 ) ($ 19 ) ($ 50 ) ($ 51 ) ($ 122 ) ($ 331 )
Changes in estimates ( 16 ) ( 1 ) ( 1 ) 15 ( 10 ) ( 13 )
Write-offs 2 9 11
Recoveries 1 1
Balance at March 31, 2024
($ 102 ) ($ 20 ) ($ 42 ) ($ 36 ) ($ 132 ) ($ 332 )
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Note 5 – Inventories
Inventories consisted of the following:
March 31
2024 December 31
2023
Commercial aircraft programs $ 72,505 $ 68,683
Long-term contracts in progress 538 686
Capitalized precontract costs (1)
897 946
Commercial spare parts, used aircraft, general stock materials and other
9,531 9,426
Total $ 83,471 $ 79,741
(1) Capitalized precontract costs at March 31, 2024 and December 31, 2023 included amounts related to KC-46A Tanker, Commercial Crew, and T-7A Red Hawk Production Options. See Note 9.
Commercial Aircraft Programs
At March 31, 2024 and December 31, 2023, commercial aircraft programs inventory included the following amounts related to the 737 program: deferred production costs of $ 6,794 and $ 6,011 and unamortized tooling and other non-recurring costs of $ 872 and $ 792 . At March 31, 2024, $ 7,635 of 737 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders, and $ 31 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.
At March 31, 2024 and December 31, 2023, commercial aircraft programs inventory included the following amounts related to the 777X program: $ 5,337 and $ 4,638 of work in process, $ 2,160 and $ 1,792 of deferred production costs and $ 4,139 and $ 4,063 of unamortized tooling and other non-recurring costs. We expensed abnormal production costs of $ 126 during the three months ended March 31, 2023. In the fourth quarter of 2023, the 777X program resumed production, and as a result, there were no abnormal production costs during the three months ended March 31, 2024.
At March 31, 2024 and December 31, 2023, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $ 12,107 and $ 12,384 , $ 1,606 and $ 1,764 of supplier advances, and $ 1,443 and $ 1,480 of unamortized tooling and other non-recurring costs. At March 31, 2024, $ 11,601 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders, and $ 1,949 is expected to be recovered from units included in the program accounting quantity that represent expected future orders. We expensed abnormal production costs of $ 80 and $ 379 during the three months ended March 31, 2024 and 2023.
Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $ 4,558 and $ 4,126 at March 31, 2024 and December 31, 2023.
Note 6 – Contracts with Customers
Unbilled receivables increased from $ 8,317 at December 31, 2023 to $ 9,673 at March 31, 2024, primarily driven by revenue recognized at BDS in excess of billings.
Advances and progress billings increased from $ 56,328 at December 31, 2023 to $ 58,972 at March 31, 2024, primarily driven by advances on orders received at Commercial Airplanes (BCA), partially offset by revenue recognized at BDS.
Revenues recognized during the three months ended March 31, 2024 and 2023 from amounts recorded as Advances and progress billings at the beginning of each year were $ 4,181 and $ 3,881 .
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Note 7 – Financing Receivables and Operating Lease Equipment
Financing receivables and operating lease equipment, net consisted of the following:
March 31
2024 December 31
2023
Financing receivables:
Investment in sales-type leases $ 492 $ 556
Notes 91 102
Total financing receivables
583 658
Less allowance for losses on receivables 36 51
Financing receivables, net 547 607
Operating lease equipment, at cost, less accumulated depreciation of $ 71 and $ 70
343 352
Total $ 890 $ 959
Financing arrangements typically range in terms from 1 to 12 years and may include options to extend or terminate. Certain leases include provisions to allow the lessee to purchase the underlying aircraft at a specified price. At March 31, 2024 and December 31, 2023, $ 34 and $ 44 were determined to be uncollectible financing receivables and placed on non-accrual status. The allowance for losses on receivables decreased primarily due to cash collections during the three months ended March 31, 2024.
The components of investment in sales-type leases consisted of the following:
March 31
2024 December 31
2023
Gross lease payments receivable $ 616 $ 697
Unearned income ( 137 ) ( 162 )
Net lease payments receivable 479 535
Unguaranteed residual assets 13 21
Total $ 492 $ 556
Financing interest income received for the three months ended March 31, 2024 and 2023 was $ 2 and $ 4 .
Our financing receivable balances at March 31, 2024 by internal credit rating category and year of origination consisted of the following:
Rating categories Current 2023 2022 2021 2020 Prior Total
BBB $ 72 $ 31 $ 194 $ 100 $ 58 $ 455
B 94 94
CCC 34 34
Total carrying value of financing receivables $ 72 $ 31 $ 228 $ 100 $ 152 $ 583
At March 31, 2024, our allowance for losses related to receivables with ratings of CCC, B and BBB. We applied default rates that averaged 100.0 %, 0.0 % and 0.5 %, respectively, to the exposure associated with those receivables.
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Financing Receivables Exposure
The majority of our financing receivables and operating lease equipment portfolio is concentrated in the following aircraft models:
March 31
2024 December 31
2023
717 Aircraft (Accounted for as sales type leases)
$ 456 $ 478
747-8 Aircraft (Accounted for as sales-type leases)
126 129
737 Aircraft ($ 142 and $ 148 accounted for as operating leases)
142 156
777 Aircraft (Accounted for as operating leases)
192 194
747-400 Aircraft (Accounted for as sales-type leases)
43
Operating lease equipment primarily includes large commercial jet aircraft.
Lease income recorded in Sales of services on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 included $ 10 and $ 15 of interest income from sales-type leases and $ 18 and $ 11 from operating lease payments. Profit at the commencement of sales-type leases was recorded in Sales of services for the three months ended March 31, 2024 and 2023 in the amount of $ 0 and $ 12 .
Note 8 – Investments
Our investments, which are recorded in Short-term and other investments or Investments, consisted of the following:
March 31
2024 December 31
2023
Time deposits (1)
$ 105 $ 2,753
Equity method investments (2)
965 966
Available-for-sale debt investments (1)
506 499
Equity and other investments 60 69
Restricted cash & cash equivalents (1)(3)
21 22
Total $ 1,657 $ 4,309
(1) Primarily included in Short-term and other investments on our Condensed Consolidated Statements of Financial Position.
(2) Dividends received were $ 20 and $ 0 during the three months ended March 31, 2024 and 2023.
(3) Reflects amounts restricted in support of our workers’ compensation programs and insurance premiums.
Contributions to investments and Proceeds from investments on our Condensed Consolidated Statements of Cash Flows primarily relate to time deposits and available-for-sale debt investments. Cash used for the purchase of time deposits during the three months ended March 31, 2024 and 2023 was $ 90 and $ 3,435 . Cash proceeds from the maturities of time deposits during the three months ended March 31, 2024 and 2023 were $ 2,740 and $ 2,095 .
Allowance for losses on available-for-sale debt investments are assessed quarterly. All instruments are considered investment grade, and we have not recognized an allowance for credit losses as of March 31, 2024.
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Note 9 – Liabilities, Commitments and Contingencies
737 MAX Customer Concessions and Other Considerations
During the three months ended March 31, 2024, we recorded an earnings charge of $ 443 , net of insurance recoveries, in connection with estimated considerations to customers for disruption related to the Alaska Airlines 737-9 accident and 737-9 grounding. This charge is reflected in the financial statements as a reduction to revenue.
The following table summarizes changes in the 737 MAX customer concessions and other considerations liability during the three months ended March 31, 2024 and 2023.
2024 2023
Beginning balance – January 1 $ 1,327 $ 1,864
Reductions for payments made ( 553 ) ( 141 )
Changes in estimates 510
Ending balance – March 31 $ 1,284 $ 1,723
At March 31, 2024, $ 430 of the liability balance remains subject to negotiations with customers, the majority of which we expect to pay in 2024. Of the contracted amount, we expect to pay $ 332 in 2024, while the remaining amounts are primarily expected to be liquidated by lower customer delivery payments.
Environmental
The following table summarizes changes in environmental remediation liabilities during the three months ended March 31, 2024 and 2023.
2024 2023
Beginning balance – January 1 $ 844 $ 752
Reductions for payments made, net of recoveries ( 14 ) ( 10 )
Changes in estimates 7 46
Ending balance – March 31 $ 837 $ 788
The liabilities recorded represent our best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites, including operation and maintenance over periods of up to 30 years. It is reasonably possible that we may incur costs that exceed these recorded amounts because of regulatory agency orders and directives, changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios that includes the high end of a range of reasonably possible cost estimates for all remediation sites for which we have sufficient information based on our experience and existing laws and regulations. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. At March 31, 2024 and December 31, 2023, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $ 971 and $ 1,030 .
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Product Warranties
The following table summarizes changes in product warranty liabilities recorded during the three months ended March 31, 2024 and 2023.
2024 2023
Beginning balance – January 1 $ 2,448 $ 2,275
Additions for current year deliveries 22 47
Reductions for payments made ( 75 ) ( 116 )
Changes in estimates ( 31 )
Ending balance – March 31 $ 2,395 $ 2,175
Commercial Aircraft Trade-In Commitments
In conjunction with signing definitive agreements for the sale of new aircraft, we have entered into trade-in commitments with certain customers that give them the right to trade in used aircraft at a specified price. The probability that trade-in commitments will be exercised is determined by using both quantitative information from valuation sources and qualitative information from other sources. The probability of exercise is assessed quarterly, or as events trigger a change, and takes into consideration the current economic and airline industry environments. Trade-in commitments, which can be terminated by mutual consent with the customer, may be exercised only during the period specified in the agreement, and require advance notice by the customer.
Trade-in commitment agreements at March 31, 2024 have expiration dates from 2024 through 2030. At March 31, 2024 and December 31, 2023 total contractual trade-in commitments were $ 1,426 and $ 1,415 . As of March 31, 2024 and December 31, 2023, we estimated it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $ 311 and $ 407 and the fair value of the related trade-in aircraft was $ 311 and $ 407 .
Financing Commitments
Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled $ 17,008 and $ 17,003 as of March 31, 2024 and December 31, 2023. The estimated earliest potential funding dates for these commitments as of March 31, 2024 are as follows:
Total
April through December 2024
$ 1,810
2025 3,271
2026 3,996
2027 3,220
2028 1,642
Thereafter 3,069
$ 17,008
As of March 31, 2024, $ 13,682 of these financing commitments relate to customers we believe have less than investment-grade credit. We have concluded that no reserve for future potential losses is required for these financing commitments based upon the terms, such as collateralization and interest rates, under which funding would be provided.
Other Financial Commitments
We have financial commitments to make additional capital contributions totaling $ 262 to certain joint ventures over the next nine years .
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Standby Letters of Credit and Surety Bonds
We have entered into standby letters of credit and surety bonds with financial institutions primarily relating to the guarantee of our future performance on certain contracts and security agreements. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $ 4,480 and $ 4,548 as of March 31, 2024 and December 31, 2023.
Supply Chain Financing Programs
The Company has supply chain financing programs in place under which participating suppliers may elect to obtain payment from an intermediary. The Company confirms the validity of invoices from participating suppliers and agrees to pay the intermediary an amount based on invoice totals. The majority of amounts payable under these programs are due within 30 to 90 days but may extend up to 12 months. At March 31, 2024 and December 31, 2023, Accounts payable included $ 2.5 billion and $ 2.9 billion payable to suppliers who have elected to participate in these programs. We do not believe that future changes in the availability of supply chain financing would have a significant impact on our liquidity.
Recoverable Costs on Government Contracts
Our final incurred costs for each year are subject to audit and review for allowability by the U.S. government, which can result in payment demands related to costs they believe should be disallowed. We work with the U.S. government to assess the merits of claims and where appropriate reserve for amounts disputed. If we are unable to satisfactorily resolve disputed costs, we could be required to record an earnings charge and/or provide refunds to the U.S. government.
Fixed-Price Contracts
Long-term contracts that are contracted on a fixed-price basis could result in losses in future periods. Certain of the fixed-price contracts are for the development of new products, services and related technologies. This development work scope is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work by us and our suppliers. The operational and technical complexities of fixed-price development contracts create financial risk, which could trigger additional earnings charges, termination provisions, order cancellations, or other financially significant exposure.
VC-25B Presidential Aircraft
The Company’s firm fixed-price contract for the Engineering and Manufacturing Development (EMD) effort on the U.S. Air Force’s (USAF) VC-25B Presidential Aircraft, commonly known as Air Force One, is a $ 4 billion program to develop and modify two 747-8 commercial aircraft. During 2023, we increased the reach-forward loss on the contract by $ 482 driven by engineering changes to support the build and installation process; the resolution of supplier negotiations; and factory performance related to labor instability. While we have provisioned for all of our anticipated costs to complete the contract, risk remains that we may record additional losses in future periods.
KC-46A Tanker
In 2011, we were awarded a contract from the USAF to design, develop, manufacture, and deliver four next generation aerial refueling tankers as well as priced options for 13 annual production lots totaling 179 aircraft. Since 2016, the USAF has authorized ten low rate initial production (LRIP) lots for a total of 139 aircraft. The EMD contract and authorized LRIP lots total approximately $ 27 billion as of March 31, 2024.
During 2023, we increased the reach-forward loss on the KC-46A Tanker program by $ 309 primarily resulting from factory disruption and additional rework due to a supplier quality issue. During the three months ended March 31, 2024, we increased the reach-forward loss on the KC-46A Tanker program by $ 128 , primarily due to factory disruption associated with supply chain constraints. As of March 31, 2024, we had approximately $ 130 of capitalized precontract costs and $ 214 of potential termination liabilities to
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suppliers related to future production lots. Risk remains that we may record additional losses in future periods.
MQ-25
In the third quarter of 2018, we were awarded the MQ-25 EMD contract by the U.S. Navy. The contract is a fixed-price contract that now includes development and delivery of seven aircraft and test articles at a contract price of $ 890 . In connection with winning the competition, we recognized a reach-forward loss of $ 291 in the third quarter of 2018. During 2023, we increased the reach-forward loss by $ 231 primarily driven by production and flight testing delays as well as higher than anticipated production costs to complete EMD aircraft attributable to factory performance. During the first quarter of 2024, we were awarded a cost-type contract modification totaling $ 657 for two additional test aircraft plus other scope increases. Risk remains that we may record additional losses in future periods.
T-7A Red Hawk EMD Contract & Production Options
In 2018, we were awarded the T-7A Red Hawk program. The EMD portion of the contract is a $ 860 fixed-price contract and includes five aircraft and seven simulators. The production portion of the contract includes 11 production lots for aircraft and related services for 346 T-7A Red Hawk aircraft that we believe are probable of being exercised. We expect the first production and support contract option to be exercised in 2025. During 2023, we increased the reach-forward loss on the T-7A Red Hawk program by $ 275 primarily reflecting higher estimated production costs. During the three months ended March 31, 2024, we increased the reach-forward loss on the T-7A Red Hawk program by $ 94 primarily reflecting further increases in estimated production costs. At March 31, 2024, we had approximately $ 235 of capitalized precontract costs and $ 305 of potential termination liabilities to suppliers related to future production lots. Risk remains that we may record additional losses in future periods.
Commercial Crew
National Aeronautics and Space Administration (NASA) has contracted us to design and build the CST-100 Starliner spacecraft to transport crews to the International Space Station and in the second quarter of 2022, we successfully completed the uncrewed Orbital Flight Test. During 2023, we increased the reach-forward loss by $ 288 primarily as a result of delaying the crewed flight test previously scheduled for July 2023 following notification by a parachute supplier of an issue identified through testing. A crewed flight test is planned for May 2024. At March 31, 2024, we had approximately $ 229 of capitalized precontract costs and $ 158 of potential termination liabilities to suppliers related to fixed-price unauthorized future missions. Risk remains that we may record additional losses in future periods.
Note 10 – Arrangements with Off-Balance Sheet Risk
We enter into arrangements with off-balance sheet risk in the normal course of business, primarily in the form of guarantees.
The following table provides quantitative data regarding our third party guarantees. The maximum potential payments represent a “worst-case scenario” and do not necessarily reflect amounts that we expect to pay. The carrying amount of liabilities represents the amount included in Accrued liabilities.
Maximum
Potential Payments Estimated Proceeds from
Collateral/Recourse Carrying Amount of
Liabilities
March 31
2024 December 31
2023 March 31
2024 December 31
2023 March 31
2024 December 31
2023
Contingent repurchase commitments
$ 404 $ 404 $ 404 $ 404
Credit guarantees
15 15 $ 14 $ 14
Contingent Repurchase Commitments In conjunction with signing a definitive agreement for the sale of commercial aircraft, we have entered into contingent repurchase commitments with certain customers wherein we agree to repurchase the sold aircraft at a specified price, generally 10 to 15 years after
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delivery. Our repurchase of the aircraft is contingent upon entering into a mutually acceptable agreement for the sale of additional new aircraft in the future. The commercial aircraft repurchase price specified in contingent repurchase commitments is generally lower than the expected fair value at the specified repurchase date. Estimated proceeds from collateral/recourse in the table above represent the lower of the contracted repurchase price or the expected fair value of each aircraft at the specified repurchase date.
If a future sale agreement is reached and a customer elects to exercise its right under a contingent repurchase commitment, the contingent repurchase commitment becomes a trade-in commitment. Our historical experience is that contingent repurchase commitments infrequently become trade-in commitments.
Credit Guarantees We have issued credit guarantees where we are obligated to make payments to a guaranteed party in the event that the original lessee or debtor does not make payments or perform certain specified services. Generally, these guarantees have been extended on behalf of guaranteed parties with less than investment-grade credit. Current outstanding credit guarantees expire through 2036.
Other Indemnifications In conjunction with our sales of Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and our BCA facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma, we agreed to indemnify, for an indefinite period, the buyers for costs relating to pre-closing environmental conditions and certain other items. We are unable to assess the potential number of future claims that may be asserted under these indemnifications, nor the amounts thereof (if any). As a result, we cannot estimate the maximum potential amount of future payments under these indemnities. To the extent that claims have been made under these indemnities and/or are probable and reasonably estimable, liabilities associated with these indemnities are included in the environmental liability disclosure in Note 9.
Note 11 – Postretirement Plans
The components of net periodic benefit (income)/cost for the three months ended March 31 were as follows:
Pension Postretirement
2024 2023 2024 2023
Service cost $ 2 $ 1 $ 12 $ 12
Interest cost 659 705 31 37
Expected return on plan assets ( 829 ) ( 861 ) ( 2 ) ( 2 )
Amortization of prior service credits ( 20 ) ( 20 ) ( 3 ) ( 6 )
Recognized net actuarial loss/(gain) 67 42 ( 44 ) ( 44 )
Net periodic benefit income ($ 121 ) ($ 133 ) ($ 6 ) ($ 3 )
Net periodic benefit cost included in Loss from operations $ 2 $ 1 $ 11 $ 15
Net periodic benefit income included in Other income, net ( 123 ) ( 134 ) ( 18 ) ( 15 )
Net periodic benefit income included in Loss before income taxes
($ 121 ) ($ 133 ) ($ 7 ) $ 0
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Note 12 – Share-Based Compensation and Other Compensation Arrangements
Restricted Stock Units
On February 20 and March 11, 2024, we granted 2,008,499 restricted stock units (RSU) to our executives and 125,432 RSUs to our executive officers as part of our long-term incentive program. The RSUs granted under this program have a grant date fair value of $ 204.15 and $ 192.94 per unit. The RSUs granted under this program will generally vest and settle in common stock (on a one-for-one basis) on the third anniversary of the grant date. If an executive terminates employment because of retirement, layoff, disability, or death, the executive (or beneficiary) may receive some or all of their stock units depending on certain age and service conditions. In all other cases, the RSUs will not vest and all rights to the stock units will terminate.
Performance Restricted Stock Units
On March 11, 2024, we granted 153,306 performance restricted stock units (PRSU) to our executive officers as part of our long-term incentive program that will result in that number of PRSUs being paid out if the target performance metric is achieved. The PRSUs granted under this program have a grant date fair value of $ 192.94 per unit. The award payout can range from 0 % to 200 % of the initial PRSU grant based on cumulative free cash flow achievement over the period January 1, 2024 through December 31, 2026 as compared to the target set at the start of the performance period, as well as the achievement of certain safety goals. The PRSUs granted under this program will vest at the payout amount determined on the third anniversary of the grant date and settle in common stock (on a one-for-one basis). If an executive terminates employment because of retirement, layoff, disability, or death, the executive (or beneficiary) remains eligible under the award and, if the award is earned, may receive some or all of their stock units depending on certain age and service conditions. In all other cases, the PRSUs will not vest and all rights to the stock units will terminate.
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Note 13 – Shareholders' Equity
Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss (AOCI) by component for the three months ended March 31, 2024 and 2023 were as follows:
Currency Translation Adjustments Unrealized Gains and Losses on Certain Investments Unrealized Gains and Losses on Derivative Instruments
Defined Benefit Pension Plans & Other Postretirement Benefits
Total (1)
Balance at January 1, 2023 ($ 167 ) ($ 24 ) ($ 9,359 ) ($ 9,550 )
Other comprehensive income/(loss) before reclassifications
16 18 ( 7 ) 27
Amounts reclassified from AOCI
( 5 ) ( 22 ) (2)
( 27 )
Net current period Other comprehensive income/(loss)
16 13 ( 29 ) 0
Balance at March 31, 2023 ($ 151 ) ($ 11 ) ($ 9,388 ) ($ 9,550 )
Balance at January 1, 2024 ($ 134 ) $ 2 $ 12 ($ 10,185 ) ($ 10,305 )
Other comprehensive loss before reclassifications
( 35 ) ( 65 ) ( 14 ) ( 114 )
Amounts reclassified from AOCI
7 (2)
7
Net current period Other comprehensive loss
( 35 ) ( 58 ) ( 14 ) ( 107 )
Balance at March 31, 2024 ($ 169 ) $ 2 ($ 46 ) ($ 10,199 ) ($ 10,412 )
(1) Net of tax.
(2) Primarily relates to the amortization of prior service credits and actuarial losses/(gains) included in net periodic pension cost for the three months ended March 31, 2024 and 2023 totaling $ 0 and ($ 22 ) (net of tax of $ 0 and $ 6 ).
Note 14 – Derivative Financial Instruments
Cash Flow Hedges
Our cash flow hedges include foreign currency forward contracts, commodity swaps and commodity purchase contracts. We use foreign currency forward contracts to manage currency risk associated with certain expected sales and purchases through 2031. We use commodity derivatives, such as fixed-price purchase commitments and swaps to hedge against potentially unfavorable price changes for commodities used in production. Our commodity contracts hedge forecasted transactions through 2028.
Derivative Instruments Not Receiving Hedge Accounting Treatment
We have entered into agreements to purchase and sell aluminum to address long-term strategic sourcing objectives and non-U.S. business requirements. These agreements are derivative instruments for accounting purposes. The quantities of aluminum in these agreements offset and are priced at prevailing market prices. We also hold certain foreign currency forward contracts and commodity swaps which do not qualify for hedge accounting treatment.
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Notional Amounts and Fair Values
The notional amounts and fair values of derivative instruments in the Condensed Consolidated Statements of Financial Position were as follows:
Notional amounts (1)
Other assets Accrued liabilities
March 31
2024 December 31
2023 March 31
2024 December 31
2023 March 31
2024 December 31
2023
Derivatives designated as hedging instruments:
Foreign exchange contracts $ 4,268 $ 4,120 $ 54 $ 85 ($ 88 ) ($ 63 )
Commodity contracts 479 514 78 83 ( 15 ) ( 8 )
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts 222 254 2 1 ( 24 ) ( 32 )
Commodity contracts 87 115 ( 1 ) ( 2 )
Total derivatives $ 5,056 $ 5,003 $ 134 $ 169 ($ 128 ) ($ 105 )
Netting arrangements ( 47 ) ( 47 ) 47 47
Net recorded balance $ 87 $ 122 ($ 81 ) ($ 58 )
(1) Notional amounts represent the gross contract/notional amount of the derivatives outstanding.
(Losses)/gains associated with our hedging transactions and forward points recognized in Other comprehensive (loss)/income are presented in the following table:
Three months ended March 31
2024 2023
Recognized in Other comprehensive (loss)/income, net of taxes:
Foreign exchange contracts ($ 57 ) $ 10
Commodity contracts ( 8 ) 8
(Losses)/gains associated with our hedging transactions and forward points reclassified from AOCI to earnings are presented in the following table:
Three months ended March 31
2024 2023
Foreign exchange contracts
Costs and expenses ($ 7 ) ($ 2 )
General and administrative expense ( 4 ) ( 11 )
Commodity contracts
Costs and expenses $ 17
General and administrative expense $ 2 2
Gains/(losses) related to undesignated derivatives on foreign exchange and commodity cash flow hedging transactions recognized in Other income, net were insignificant for the three months ended March 31, 2024 and 2023.
Based on our portfolio of cash flow hedges, we expect to reclassify losses of $ 55 (pre-tax) out of AOCI into earnings during the next 12 months.
We have derivative instruments with credit-risk-related contingent features. If we default on our five-year credit facility, our derivative counterparties could require settlement for foreign exchange and certain commodity contracts with original maturities of at least five years . The fair value of those contracts in a net liability position at March 31, 2024 was $ 20 . For other particular commodity contracts, our counterparties
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could require collateral posted in an amount determined by our credit ratings. At March 31, 2024, there was no collateral posted related to our derivatives.
Note 15 – Fair Value Measurements
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.
March 31, 2024 December 31, 2023
Total Level 1 Level 2 Total Level 1 Level 2
Assets
Money market funds $ 1,919 $ 1,919 $ 1,514 $ 1,514
Available-for-sale debt investments:
Commercial paper 299 $ 299 291 $ 291
Corporate notes 200 200 183 183
U.S. and local government agencies 17 17 25 25
Other equity investments 75 75 44 44
Derivatives 87 87 122 122
Total assets $ 2,597 $ 1,994 $ 603 $ 2,179 $ 1,558 $ 621
Liabilities
Derivatives ($ 81 ) ($ 81 ) ($ 58 ) ($ 58 )
Other ( 17 ) ( 17 )
Total liabilities ($ 98 ) ($ 98 ) ($ 58 ) ($ 58 )
Money market funds, available-for-sale debt investments and equity securities are valued using a market approach based on the quoted market prices or broker/dealer quotes of identical or comparable instruments.
Derivatives include foreign currency and commodity contracts. Our foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the present value of the commodity index prices less the contract rate multiplied by the notional amount.
Certain assets have been measured at fair value on a nonrecurring basis. The following table presents the nonrecurring losses recognized for the three months ended March 31 due to long-lived asset impairment and the fair value and asset classification of the related assets as of the impairment date:
2024 2023
Fair Value Level 2 Level 3 Total
Losses Fair Value Level 2 Level 3 Total
Losses
Investments ($ 4 ) ($ 11 )
Operating lease equipment
$ 15 $ 15 ( 5 )
Property, plant and equipment 18 $ 18 ( 9 )
Other assets
( 3 )
Total $ 33 $ 18 $ 15 ($ 21 ) ($ 11 )
Level 3 Investments, Property, plant and equipment, and Other assets were primarily valued using an income approach based on the discounted cash flows associated with the underlying assets. Level 2 Property, plant and equipment were valued based on a third party valuation using a combination of
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income and market approaches that considered estimates of net operating income, capitalization rates, comparable property sales and adjusted for as-is condition. The fair value of the impaired operating lease equipment is derived by calculating a median collateral value from a consistent group of third party aircraft value publications. The values provided by the third party aircraft publications are derived from their knowledge of market trades and other market factors. Management reviews the publications quarterly to assess the continued appropriateness and consistency with market trends. Under certain circumstances, we adjust values based on the attributes and condition of the specific aircraft or equipment, usually when the features or use of the aircraft vary significantly from the more generic aircraft attributes covered by third party publications, or on the expected net sales price for the aircraft.
For Level 3 assets that were measured at fair value on a nonrecurring basis during the period ended March 31, 2024, the following table presents the fair value of those assets as of the measurement date, valuation techniques and related unobservable inputs of those assets.
Fair
Value Valuation
Technique(s) Unobservable Input Range
Median or Average
Operating Lease Equipment
$ 15 Market approach Aircraft value publications $ 21 - $ 27 (1)
Median $ 23
Aircraft condition adjustments ($ 8 ) - $ 0 (2)
Net ($ 8 )
(1) The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process.
(2) The negative amount represents the sum, for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments.
Fair Value Disclosures
The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the Condensed Consolidated Statements of Financial Position were as follows:
March 31, 2024
Carrying
Amount Total Fair
Value Level 1 Level 2 Level 3
Assets
Notes receivable, net $ 283 $ 301 $ 289 $ 12
Liabilities
Debt, excluding finance lease obligations ( 47,689 ) ( 44,246 ) ( 44,246 )
December 31, 2023
Carrying
Amount Total Fair
Value Level 1 Level 2 Level 3
Assets
Notes receivable, net $ 257 $ 270 $ 270
Liabilities
Debt, excluding finance lease obligations ( 52,055 ) ( 51,039 ) ( 51,039 )
The fair value of notes receivables classified as Level 2 is estimated with discounted cash flow analysis using interest rates currently offered on loans with similar terms to borrowers of similar credit quality. The fair value of notes receivables classified as Level 3 is based on our best estimate using available counterparty financial data. The fair value of our debt that is traded in the secondary market is classified as Level 2 and is based on current market yields. For our debt that is not traded in the secondary market, the fair value is classified as Level 2 and is based on our indicative borrowing cost derived from dealer quotes or discounted cash flows. With regard to other financial instruments with off-balance sheet risk, it
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is not practicable to estimate the fair value of our indemnifications and financing commitments because the amount and timing of those arrangements are uncertain. Items not included in the above disclosures include cash, restricted cash, time deposits and other deposits, commercial paper, money market funds, Accounts receivable, Unbilled receivables, Other current assets, Accounts payable and long-term payables. The carrying values of those items, as reflected in the Condensed Consolidated Statements of Financial Position, approximate their fair value at March 31, 2024 and December 31, 2023. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1).
Note 16 – Legal Proceedings
Various legal proceedings, claims and investigations related to products, contracts, employment and other matters are pending against us. In addition, we are subject to various government inquiries and investigations from which civil, criminal or administrative proceedings could result or have resulted in the past. Such proceedings involve or could involve claims by the government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under U.S. government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, have certain of its production certificates suspended or revoked, or lose its export privileges, based on the results of investigations. We believe, based upon current information, that the outcome of any currently pending legal proceeding, claim, or government dispute, inquiry or investigation will not have a material effect on our financial position, results of operations or cash flows. With respect to the matters set forth below, we cannot reasonably estimate a range of loss in excess of recorded amounts, if any.
Multiple legal actions and inquiries were initiated as a result of the October 29, 2018 accident of Lion Air Flight 610 and the March 10, 2019 accident of Ethiopian Airlines Flight 302. On January 7, 2021, we entered into a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice that resolved the Department of Justice’s investigation into us regarding the evaluation of the 737 MAX by the Federal Aviation Administration. Among other obligations, the DPA includes a three-year reporting period, which ended earlier this year. The Department is currently considering whether we fulfilled our obligations under the DPA and whether to move to dismiss the information, which motion will require court approval. Multiple legal actions were initiated as a result of the January 5, 2024 Alaska Airlines Flight 1282 accident. We are also subject to multiple governmental and regulatory investigations and inquiries relating to the Alaska Airlines Flight 1282 accident and our commercial airplanes business. We cannot reasonably estimate a range of loss, if any, not covered by available insurance that may result given the current status of pending lawsuits, investigations and inquiries related to the 737 program.
During 2019, we entered into agreements with Embraer S.A. (Embraer) to establish joint ventures that included the commercial aircraft and services operations of Embraer, of which we were expected to acquire an 80 percent ownership stake for $ 4,200 , as well as a joint venture to promote and develop new markets for the C-390 Millennium. In 2020, we exercised our contractual right to terminate these agreements based on Embraer’s failure to meet certain required closing conditions. Embraer has disputed our right to terminate the agreements, and the dispute is currently in arbitration, which we currently expect to be resolved in 2024.
Note 17 – Segment and Revenue Information
Our primary profitability measurement to review segment operating results is Loss from operations. We operate in three reportable segments: BCA, BDS, and BGS. All other activities fall within Unallocated items, eliminations and other. See page 6 for the Summary of Business Segment Data, which is an integral part of this note.
BCA develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide. Revenue on commercial aircraft contracts is recognized at the point in time when an aircraft is completed and accepted by the customer.
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BDS engages in the research, development, production and modification of the following products and related services: manned and unmanned military aircraft and weapons systems, surveillance and engagement, strategic defense and intelligence systems, satellite systems and space exploration. BDS revenue is generally recognized over the contract term (over time) as costs are incurred.
BGS provides parts, maintenance, modifications, logistics support, training, data analytics and information-based services to commercial and government customers worldwide. BGS segment revenue and costs include certain products and services provided to other segments. Revenue on commercial spare parts contracts is recognized at the point in time when a spare part is delivered to the customer. Revenue on other contracts is generally recognized over the contract term (over time) as costs are incurred.
The following tables present BCA, BDS and BGS revenues from contracts with customers disaggregated in a number of ways, such as geographic location, contract type and the method of revenue recognition. We believe these best depict how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors.
BCA revenues by customer location consisted of the following:
(Dollars in millions) Three months ended March 31
2024 2023
Revenue from contracts with customers:
Europe $ 770 $ 1,355
Asia 2,113 806
Middle East 768 716
Other non-U.S. 410 353
Total non-U.S. revenues 4,061 3,230
United States 985 3,435
Estimated potential concessions and other considerations to 737 MAX customers, net of insurance recoveries
( 443 )
Total revenues from contracts with customers 4,603 6,665
Intersegment revenues eliminated on consolidation 50 39
Total segment revenues $ 4,653 $ 6,704
Revenue recognized on fixed-price contracts 100 % 100 %
Revenue recognized at a point in time 99 % 100 %
BDS revenues on contracts with customers, based on the customer's location, consisted of the following:
(Dollars in millions) Three months ended March 31
2024 2023
Revenue from contracts with customers:
U.S. customers $ 5,444 $ 5,310
Non-U.S. customers (1)
1,506 1,229
Total segment revenue from contracts with customers $ 6,950 $ 6,539
Revenue recognized over time 99 % 99 %
Revenue recognized on fixed-price contracts 58 % 61 %
Revenue from the U.S. government (1)
91 % 91 %
(1) Includes revenues earned from foreign military sales through the U.S. government.
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BGS revenues consisted of the following:
(Dollars in millions) Three months ended March 31
2024 2023
Revenue from contracts with customers:
Commercial $ 3,000 $ 2,716
Government 1,934 1,926
Total revenues from contracts with customers 4,934 4,642
Intersegment revenues eliminated on consolidation 111 78
Total segment revenues $ 5,045 $ 4,720
Revenue recognized at a point in time 54 % 51 %
Revenue recognized on fixed-price contracts 87 % 87 %
Revenue from the U.S. government (1)
29 % 36 %
(1) Includes revenues earned from foreign military sales through the U.S. government.
Backlog
Our total backlog includes contracts that we and our customers are committed to perform. The value in backlog represents the estimated transaction prices on performance obligations to our customers for which work remains to be performed. Backlog is converted into revenue, primarily based on the cost incurred or at delivery and acceptance of products, depending on the applicable revenue recognition model.
Our backlog at March 31, 2024 was $ 528,749 . We expect approximately 27 % to be converted to revenue through 2025 and approximately 71 % through 2028, with the remainder thereafter. There is significant uncertainty regarding the timing of when backlog will convert into revenue. We may experience reductions to backlog and/or significant order cancellations due to production disruptions, and/or further delays to entry into service of the 777X, 737-7 and/or 737-10.
Unallocated Items, Eliminations and Other
Unallocated items, eliminations and other include common internal services that support Boeing’s global business operations and eliminations of certain sales between segments. We generally allocate costs to business segments based on the U.S. Government Cost Accounting Standards (CAS). Components of Unallocated items, eliminations and other (expense)/income are shown in the following table.
Three months ended March 31
2024 2023
Share-based plans $ 10 ($ 52 )
Deferred compensation ( 30 ) ( 54 )
Amortization of previously capitalized interest ( 23 ) ( 23 )
Research and development expense, net ( 89 ) ( 76 )
Eliminations and other unallocated items ( 180 ) ( 255 )
Unallocated items, eliminations and other
($ 312 ) ($ 460 )
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Pension and Other Postretirement Benefit Expense
Pension costs are allocated to BDS and BGS businesses supporting government customers using CAS, which employ different actuarial assumptions and accounting conventions than GAAP. These costs are allocable to government contracts. Other postretirement benefit costs are allocated to business segments based on CAS, which is generally based on benefits paid. 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. 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. Components of FAS/CAS service cost adjustment are shown in the following table:
Three months ended March 31
2024 2023
Pension FAS/CAS service cost adjustment $ 230 $ 223
Postretirement FAS/CAS service cost adjustment 72 68
FAS/CAS service cost adjustment $ 302 $ 291
Assets
Segment assets are summarized in the table below:
March 31
2024 December 31
2023
Commercial Airplanes $ 80,811 $ 77,047
Defense, Space & Security 16,046 14,921
Global Services 16,365 16,193
Unallocated items, eliminations and other 21,262 28,851
Total $ 134,484 $ 137,012
Assets included in Unallocated items, eliminations and other primarily consist of Cash and cash equivalents, Short-term and other investments, tax assets, capitalized interest and assets managed centrally on behalf of the three principal business segments and intercompany eliminations.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
The Boeing Company
Arlington, Virginia
Results of Review of Interim Financial Information
We have reviewed the accompanying condensed consolidated statement of financial position of The Boeing Company and subsidiaries (the “Company”) as of March 31, 2024, the related condensed consolidated statements of operations, comprehensive income, equity, and cash flows for the three-month periods ended March 31, 2024 and 2023, and the related notes (collectively referred to as the "condensed consolidated interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of December 31, 2023, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated January 31, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.
Basis for Review Results
This condensed consolidated interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
April 24, 2024
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FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions generally identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact.
Forward-looking statements are based on expectations and assumptions that we believe to be reasonable when made, but that may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to:
(1) general conditions in the economy and our industry, including those due to regulatory changes;
(2) our reliance on our commercial airline customers;
(3) the overall health of our aircraft production system, production quality issues, commercial airplane production rates, our ability to successfully develop and certify new aircraft or new derivative aircraft, and the ability of our aircraft to meet stringent performance and reliability standards;
(4) changing budget and appropriation levels and acquisition priorities of the U.S. government, as well as significant delays in U.S. government appropriations;
(5) our dependence on our subcontractors and suppliers, as well as the availability of highly skilled labor and raw materials;
(6) work stoppages or other labor disruptions;
(7) competition within our markets;
(8) our non-U.S. operations and sales to non-U.S. customers;
(9) changes in accounting estimates;
(10) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures;
(11) our dependence on U.S. government contracts;
(12) our reliance on fixed-price contracts;
(13) our reliance on cost-type contracts;
(14) contracts that include in-orbit incentive payments;
(15) unauthorized access to our, our customers’ and/or our suppliers' information and systems;
(16) potential business disruptions, including threats to physical security or our information technology systems, extreme weather (including effects of climate change) or other acts of nature, and pandemics or other public health crises;
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(17) potential adverse developments in new or pending litigation and/or government inquiries or investigations;
(18) potential environmental liabilities;
(19) effects of climate change and legal, regulatory or market responses to such change;
(20) changes in our ability to obtain debt financing on commercially reasonable terms, at competitive rates and in sufficient amounts;
(21) substantial pension and other postretirement benefit obligations;
(22) the adequacy of our insurance coverage; and
(23) customer and aircraft concentration in our customer financing portfolio.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
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