Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Overview
On January 5, 2024, a 737-9 flight made an emergency landing after a mid-exit door plug detached in flight. Following the accident, the Federal Aviation Administration (FAA) grounded and required inspections of all 737-9 aircraft with a mid-exit door plug, which constituted the large majority of the approximately 220 737-9 aircraft in the in-service fleet. On January 24, 2024, the FAA approved an enhanced maintenance and inspection process that was required to be performed on each of the grounded 737-9 aircraft. Our 737-9 operators returned their fleets to service in the first quarter of 2024. All 737-9 aircraft in production are undergoing this same enhanced inspection process prior to delivery.
As a result of the accident, the FAA performed an investigation into the 737 quality control system. In the second quarter of 2024, we submitted a comprehensive safety and quality plan to the FAA to address the issues identified. As part of our plan to improve quality and safety and to address the issues identified, we slowed production rates and delayed planned production rate increases to reduce traveled work in our factory, as well as at our suppliers. We also began taking additional actions to improve safety and quality, which include investing in workforce training, simplifying plans and processes, eliminating defects, and enhancing our safety and quality culture.
The 737-9 door plug accident and the resulting actions to improve compliance with our manufacturing quality control requirements have significantly impacted our financial position, results of operations and cash flows.
On November 4, 2024, the International Association of Machinists and Aerospace Workers District 751 (IAM 751) voted to ratify a new contract, thereby ending the work stoppage initiated on September 13, 2024, which paused production of certain commercial aircraft models (737, 767, 777 and 777X aircraft) as well as production of commercial derivative aircraft for our Defense, Space & Security business (KC-46A Tanker and P-8A Poseidon). Production for all programs resumed in December 2024 and gradually ramped up during the first quarter of 2025.
Consolidated Results of Operations and Financial Condition
Consolidated Results of Operations
The following table summarizes key indicators of consolidated results of operations:
(Dollars in millions, except per share data) Three months ended March 31
2025 2024
Revenues $19,496 $16,569
GAAP
Earnings/(loss) from operations $461 ($86)
Operating margins 2.4 % (0.5) %
Effective income tax rate 140.8 % 6.1 %
Net loss attributable to Boeing shareholders ($37) ($343)
Diluted loss per share ($0.16) ($0.56)
Non-GAAP (1)
Core operating earnings/(loss) $199 ($388)
Core operating margins 1.0 % (2.3) %
Core loss per share ($0.49) ($1.13)
(1) These measures exclude certain components of pension and other postretirement benefit expense. See pages 47-48 for important information about these non-GAAP measures and reconciliations to the most directly comparable GAAP measures.
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Revenues
The following table summarizes Revenues:
(Dollars in millions) Three months ended March 31
2025 2024
Commercial Airplanes $8,147 $4,653
Defense, Space & Security 6,298 6,950
Global Services 5,063 5,045
Unallocated items, eliminations and other (12) (79)
Total $19,496 $16,569
Revenues for the three months ended March 31, 2025, increased by $2,927 million compared with the same period in 2024 driven by higher revenues at Commercial Airplanes (BCA) and Global Services (BGS), partially offset by lower revenues at Defense, Space & Security (BDS). BCA revenues increased by $3,494 million primarily due to higher deliveries and the absence of 737-9 customer considerations. BGS revenues increased by $18 million primarily due to higher government services revenue, partially offset by lower commercial services revenue. BDS revenues decreased by $652 million primarily driven by lower volume and the absence of a favorable MQ-25 contract modification that was awarded in the first quarter of 2024, partially offset by lower net unfavorable cumulative catch-up adjustments compared to the comparable period in the prior year.
Revenues will continue to be significantly impacted until deliveries ramp up, the global supply chain stabilizes, and labor instability diminishes.
Earnings/(loss) from Operations
The following table summarizes Earnings/(loss) from operations:
(Dollars in millions) Three months ended March 31
2025 2024
Commercial Airplanes ($537) ($1,143)
Defense, Space & Security 155 151
Global Services 943 916
Segment operating earnings/(loss) 561 (76)
Unallocated items, eliminations and other (362) (312)
Pension FAS/CAS service cost adjustment 193 230
Postretirement FAS/CAS service cost adjustment 69 72
Earnings/(loss) from operations (GAAP)
$461 ($86)
FAS/CAS service cost adjustment * (262) (302)
Core operating earnings/(loss) (Non-GAAP) **
$199 ($388)
* 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 operating earnings/(loss) is a Non-GAAP measure that excludes the FAS/CAS service cost adjustment. See pages 47-48.
Earnings from operations for the three months ended March 31, 2025, was $461 million compared to loss from operations of $86 million during the same period in 2024. BCA loss from operations decreased by $606 million reflecting higher deliveries, the absence of 737-9 customer considerations and lower period expenses. BGS earnings from operations increased by $27 million primarily due to higher government
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services revenue. BDS earnings from operations increased by $4 million compared to the same period in 2024 primarily due to lower net unfavorable cumulative contract catch-up adjustments, largely offset by lower earnings from equity method investments and lower volume. Loss from operations on Unallocated items, eliminations and other increased by $50 million compared with the same period in 2024 primarily due to an increase in eliminations and other unallocated items expense.
Core operating earnings for the three months ended March 31, 2025, increased by $587 million compared with the same period in 2024, primarily due to an increase in Segment operating earnings as described above.
For information related to Postretirement Plans, see Note 12 to our Condensed Consolidated Financial Statements.
Unallocated Items, Eliminations and Other
The most significant items included in Unallocated items, eliminations and other (expense)/income are shown in the following table:
(Dollars in millions) Three months ended March 31
2025 2024
Share-based plans ($30) $10
Deferred compensation 5 (30)
Amortization of previously capitalized interest (21) (23)
Research and development expense, net (82) (89)
Eliminations and other unallocated items (234) (180)
Unallocated items, eliminations and other ($362) ($312)
Share-based plans expense increased by $40 million for the three months ended March 31, 2025 compared with the same period in 2024 primarily due to the timing of corporate allocations.
Deferred compensation expense decreased by $35 million for the three months ended March 31, 2025, compared with the same period in 2024 primarily driven by changes in broad stock market conditions.
Research and development expense was largely unchanged during the three months ended March 31, 2025, compared with the same period in 2024.
Eliminations and other unallocated items expense for the three months ended March 31, 2025, increased by $54 million compared with the same period in 2024 primarily due to the timing of allocations.
Other Earnings Items
(Dollars in millions) Three months ended March 31
2025 2024
Earnings/(loss) from operations $461 ($86)
Other income, net 323 277
Interest and debt expense (708) (569)
Earnings/(loss) before income taxes 76 (378)
Income tax (expense)/benefit (107) 23
Net loss (31) (355)
Less: net earnings/(loss) attributable to noncontrolling interest 6 (12)
Net loss attributable to Boeing shareholders ($37) ($343)
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Other income, net for the three months ended March 31, 2025, increased by $46 million compared with the same period in 2024, primarily due to an increase in interest income on short-term investments and dividend income, partially offset by non-operating pension income. For information on changes related to non-operating pension and postretirement expenses, see Note 12 to our Condensed Consolidated Financial Statements.
Interest and debt expense for the three months ended March 31, 2025, increased by $139 million compared with the same period in the prior year primarily as a result of higher average debt balances.
For a discussion related to Income Taxes, see Note 4 to our Condensed Consolidated Financial Statements.
Total Costs and Expenses (“Cost of Sales”)
Cost of sales, for both products and services, consists primarily of raw materials, parts, sub-assemblies, labor, overhead and subcontracting costs. Our BCA segment predominantly uses program accounting to account for cost of sales. Under program accounting, cost of sales for each commercial aircraft program equals the product of (i) revenue recognized in connection with customer deliveries and (ii) the estimated cost of sales percentage applicable to the total remaining program. For long-term contracts, the amount reported as cost of sales is recognized as incurred. Substantially all contracts at our BDS segment and certain contracts at our BGS segment are long-term contracts with the U.S. government and other customers that generally extend over several years. Cost of sales for commercial spare parts is recorded at average cost.
The following table summarizes cost of sales:
(Dollars in millions) Three months ended March 31
2025 2024 Change
Cost of sales $17,079 $14,693 $2,386
Cost of sales as a % of Revenues
87.6 % 88.7 % (1.1) %
Cost of sales for the three months ended March 31, 2025, increased by $2,386 million, or 16%, compared with the same period in 2024, primarily due to higher revenues at BCA, partially offset by lower volume and the absence of fixed-price development program charges at BDS. Cost of sales as a percentage of Revenues decreased during the three months ended March 31, 2025, compared with the same period in 2024, primarily due to the absence of 737-9 customer considerations at BCA and the absence of charges on BDS fixed-price development programs, partially offset by higher revenues at BCA.
Research and Development
Research and development expense, net is summarized in the following table:
(Dollars in millions) Three months ended March 31
2025 2024
Commercial Airplanes $534 $518
Defense, Space & Security 199 235
Global Services 29 26
Other 82 89
Total $844 $868
Research and development expense was largely unchanged during the three months ended March 31, 2025, compared to the same period in 2024.
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Backlog
(Dollars in millions) March 31
2025 December 31
2024
Commercial Airplanes $460,447 $435,175
Defense, Space & Security 61,567 64,023
Global Services 22,036 21,403
Unallocated items, eliminations and other 686 735
Total Backlog $544,736 $521,336
Contractual backlog $523,964 $498,802
Unobligated backlog 20,772 22,534
Total Backlog $544,736 $521,336
Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, orders where customers have the unilateral right to terminate, and unobligated U.S. and non-U.S. government contract funding. The increase in contractual backlog during the three months ended March 31, 2025, was primarily due to an increase in BCA and BGS backlog that was partially offset by a decrease in BDS backlog. We may experience reductions to backlog and/or significant order cancellations due to various factors including delivery delays, production disruptions and delays to entry into service of the 777X, 737-7 and/or 737-10.
Unobligated backlog includes U.S. and non-U.S. government definitive contracts for which funding has not been authorized. Unobligated backlog during the three months ended March 31, 2025 was largely unchanged.
Additional Considerations
U.S. Government Funding Considerable uncertainty exists regarding how future U.S. government budget and program decisions will unfold, including the spending priorities of the new Administration and Congress.
The Full-Year Continuing Appropriations and Extensions Act, 2025, enacted on March 15, 2025, largely continues federal funding at fiscal year 2024 appropriated levels through September 30, 2025. This bill has been deemed to be a full-year appropriations bill in respect to satisfying the requirements of the Fiscal Responsibility Act, avoiding a sequester of defense and non-defense spending in fiscal year 2025 (FY25).
The U.S. government could experience a disruption to its operations and/or payments in 2025 if the debt limit is not addressed before the U.S. Treasury exhausts extraordinary measures. These potential disruptions, and any broader macroeconomic impacts, could affect our current programs and contracts and have a material effect on our financial position, results of operations and/or cash flows.
Global Trade The global trade landscape is currently highly volatile. Various countries have announced plans for and/or have already implemented new or modified tariffs. For example, in the first quarter of 2025, the United States imposed modified tariffs on aluminum and steel imports, as well as additional tariffs on goods from China. In addition, the United States imposed tariffs on goods imported from Canada and Mexico that are not compliant with the United States-Mexico-Canada Agreement (USMCA). We believe that the majority of our imports from Canada and Mexico are compliant with the provisions of the USMCA. Our first quarter results reflect our best estimate of the impacts of the tariffs enacted as of March 31, 2025, and certain potential mitigations.
On April 2, 2025, the United States announced broad reciprocal tariffs on imports from all countries, comprising a 10% baseline tariff and higher country-specific tariffs. Other countries, including China, announced retaliatory actions or plans for retaliatory actions. On April 9, 2025, the United States implemented a 90-day pause on the country-specific reciprocal tariffs for all countries except China,
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leaving the 10% baseline tariff in place. These tariffs and any retaliatory actions from other countries could have a material impact on our financial position, results of operations and/or cash flows. In April 2025, certain customers in China informed us that they will not accept deliveries. We continually monitor the global trade environment for new and/or changing tariffs, retaliatory actions, trade agreements, export restrictions, sanctions or other restrictions that may impact the Company or our supply chain or customers, and work to mitigate impacts to our business.
The current state of U.S.-China relations remains an ongoing watch item. China is a significant market for commercial aircraft and we have long-standing relationships with our Chinese customers. Overall, the U.S.-China trade relationship is challenged due to tariffs and other economic and national security concerns .
We seek to comply with all U.S. and other government import requirements, export control restrictions and sanctions. We continue to monitor and evaluate additional sanctions and trade restrictions that may be imposed by the U.S. Government or other governments, as well as any responses that could affect our supply chain, business partners or customers, for any additional impacts to our business.
Supply Chain We and our suppliers are experiencing inflationary pressures, as well as supply chain disruptions as a result of global supply chain constraints and labor instability. Our supply chain is also being impacted by the tariffs discussed above. Certain of our suppliers are also experiencing financial difficulties. We continue to monitor the health and stability of the supply chain. These factors have reduced overall productivity and adversely impacted our financial position, results of operations and cash flows. During 2024, we recorded a reach-forward loss of $1,770 million on the T-7A Red Hawk program that was primarily driven by projected increases in supplier cost estimates. In addition, we recorded losses on the KC-46A Tanker and Commercial Crew programs during 2024 that were partially attributable to higher supplier costs.
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Segment Results of Operations and Financial Condition
Commercial Airplanes
Results of Operations
(Dollars in millions) Three months ended March 31
2025 2024
Revenues $8,147 $4,653
Loss from operations ($537) ($1,143)
Operating margins (6.6)% (24.6)%
Revenues
BCA revenues increased by $3,494 million for the three months ended March 31, 2025, compared with the same period in 2024 primarily due to higher deliveries and the absence of 737-9 customer considerations.
Commercial airplane deliveries, including intercompany deliveries, were as follows:
737 * 767 * 777 787 Total
Deliveries during the first three months of 2025 105 (1) 5 (3) 7 13 130
Deliveries during the first three months of 2024 67 (1) 3 (2) 13 83
Cumulative deliveries as of 3/31/2025 8,898 1,326 1,748 1,174
Cumulative deliveries as of 12/31/2024 8,793 1,321 1,741 1,161
* Intercompany deliveries identified by parentheses.
Loss From Operations
BCA loss from operations was $537 million for the three months ended March 31, 2025, compared with $1,143 million in the same period in 2024 reflecting higher deliveries, the absence of 737-9 customer considerations and lower period expenses.
Backlog
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. Backlog does not include prospective orders where customer-controlled contingencies remain, such as the customer receiving approval from its board of directors, shareholders or government or completing financing arrangements. All such contingencies must be satisfied or have expired prior to recording a new firm order even if satisfying such conditions is highly probable. Backlog excludes options and customer financing orders as well as orders where customers have the unilateral right to terminate. A number of our customers may have contractual remedies, including rights to reject individual airplane deliveries if the actual delivery date is significantly later than the contractual delivery date. We address customer claims and requests for other contractual relief as they arise. The value of orders in backlog is adjusted as changes to price and schedule are agreed to with customers and is reported in accordance with the requirements of Accounting Standards Codification (ASC) 606.
BCA total backlog increased from $435,175 million as of December 31, 2024, to $460,447 million at March 31, 2025, reflecting new orders in excess of deliveries and a decrease in the value of existing orders that, in our assessment, do not meet the accounting requirements of ASC 606 for inclusion in backlog and cancellations. Aircraft order cancellations during the three months ended March 31, 2025, totaled $2,312 million and primarily relate to 737 aircraft. Net ASC 606 adjustments during the three
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months ended March 31, 2025, totaled $6,017 million and primarily relate to 777X aircraft. ASC 606 adjustments include consideration of aircraft orders where a customer-controlled contingency may exist, as well as an assessment of whether the customer is committed to perform, impacts of geopolitical events or related sanctions, or whether it is probable that the customer will pay the full amount of consideration when it is due. We may experience reductions to backlog and/or significant order cancellations due to various factors including delivery delays, production disruptions and delays to entry into service of the 777X, 737-7 and/or 737-10.
Accounting Quantity
The following table provides details of the accounting quantities and firm orders by program. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders. Firm orders include certain military derivative aircraft that are not included in program accounting quantities. All revenues and costs associated with military derivative aircraft production are reported in the BDS segment.
Program
As of 3/31/2025 737 767 777 777X 787 †
Program accounting quantities 11,600 1,263 1,825 500 1,800
Undelivered units under firm orders 4,277 * 104 72 428 767 (8)
Cumulative firm orders 13,175 1,430 1,820 428 1,941
As of 12/31/2024 737 767 777 777X 787 †
Program accounting quantities 11,600 1,263 1,822 500 1,800
Undelivered units under firm orders 4,303 *
109 68 358 719 (8)
Cumulative firm orders 13,096 1,430 1,809 358 1,880
† Customer financing aircraft orders are identified in parentheses.
* Approximate undelivered orders by minor model for March 31, 2025 and December 31, 2024: 737-7 (7%), 737-8 (63%), 737-9 (5%) and 737-10 (25%).
Program Highlights
737 Program In January 2024, a 737-9 flight made an emergency landing after a mid-exit door plug detached in flight. As a result of the accident, the FAA investigated the 737 quality control system, including Spirit AeroSystems Holdings, Inc. (Spirit), and increased its oversight of Boeing’s production and quality and safety management systems. The FAA also communicated it will not approve production rate increases beyond 38 per month or additional production lines until Boeing has complied with required quality and safety standards. In 2024, we submitted a comprehensive safety and quality plan to the FAA to address the issues identified in connection with the FAA's investigation. We also took additional actions to improve safety and quality, which include investing in workforce training, simplifying plans and processes, eliminating defects, and enhancing our safety and quality culture. In 2025, we are continuing to implement these improvements and align our production plans consistent with the comprehensive safety and quality plan.
We are gradually increasing to a production rate of 38 per month aligned with our safety and quality plan. As of March 31, 2025, we had approximately 35 737-8 aircraft in inventory that were produced prior to 2023, including approximately 25 aircraft for customers in China. We are scheduled to deliver these aircraft in 2025. It is currently unclear how the trade tensions between the U.S. and China will impact deliveries to China.
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We are continuing to work through the certification process of the 737-7 and 737-10 models, which have been delayed, while we work through the engineering solution for the engine anti-ice system. As of March 31, 2025, we had approximately 35 737-7 and 737-10 aircraft in inventory. We are following the lead of the FAA as we work through the certification process and the ultimate timing will be determined by the regulators.
If we are unable to deliver aircraft and/or increase future production rates, or certify the 737-7 and 737-10 models consistent with our assumptions, our financial position, results of operations and cash flows will be adversely affected.
See further discussion of the 737 MAX in Note 6 and Note 10 to our Condensed Consolidated Financial Statements .
767 Program The 767 assembly line includes the commercial program and a derivative to support the KC-46A Tanker program. We are currently targeting a production rate of approximately 3 aircraft per month. We expect to complete production of the 767 commercial program by 2027. This program has break-even gross margins.
See further discussion of the KC-46A Tanker program in Note 10 to our Condensed Consolidated Financial Statements.
777 and 777X Programs The accounting quantity for the 777 program extends through year-end 2027. We increased the accounting quantity by 3 units during the three months ended March 31, 2025, because we now expect to produce an additional 3 units in that timeframe. We are currently targeting a combined production rate of 4 per month for the 777/777X programs.
In July 2024, we obtained approval from the FAA to begin the first phase of FAA certification flight testing. The first phase of flight testing was paused starting in August and resumed in January. We obtained approval from the FAA to begin the next phase of certification flight testing, and we began these activities in March 2025.
We continue to anticipate first delivery of the 777-9 to occur in 2026 and the 777-8 Freighter to occur in 2028. First delivery of the 777-8 passenger aircraft is not expected to occur before 2030. We are following the lead of the FAA as we work through the certification process and the ultimate timing will be determined by the regulators.
The 777X program had break-even gross margins at March 31, 2025. The level of profitability on the 777X program will be subject to several factors. These factors include aircraft certification requirements and timing, change incorporation on completed aircraft, production disruption due to labor instability and supply chain disruption, customer considerations, delivery timing and negotiations, further production rate adjustments for the 777X or other commercial aircraft programs, and any change in the accounting quantity. One or more of these factors could result in reach-forward losses in future periods.
787 Program We are currently at a production rate of approximately 5 aircraft per month. We are continuing to monitor supply chain health and factory performance as we work to increase production rates. As of March 31, 2025, we had approximately 20 aircraft in inventory, including 4 aircraft for customers in China, that were produced prior to 2023 and required rework. In February 2025, we completed the rework of the last aircraft and expect to deliver the majority of these aircraft in 2025. It is currently unclear how trade tensions between the U.S. and China will impact deliveries to China.
Additional Considerations
On June 30, 2024, we entered into an agreement to acquire Spirit. See Note 2 to our Condensed Consolidated Financial Statements.
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Defense, Space & Security
Overview
The Full-Year Continuing Appropriations and Extensions Act, 2025, enacted on March 15, 2025, provided FY25 appropriations for government departments and agencies, including $856 billion for the U.S. Department of Defense (U.S. DoD) and $25 billion for the National Aeronautics and Space Administration (NASA). This bill has been deemed to be a full-year appropriations bill in respect to satisfying the requirements of the Fiscal Responsibility Act, avoiding a sequester of defense and non-defense spending in FY25.
There is ongoing uncertainty with respect to program-level spending for the U.S. DoD, NASA and other government agencies for FY25 and beyond. Future budget cuts or investment priority changes, including changes associated with the authorizations and appropriations process, could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on our results of operations, financing position, and/or cash flows.
The non-U.S. market continues to be driven by complex and evolving security challenges and the need to modernize aging equipment and inventories. BDS expects that it will continue to have a wide range of opportunities across Asia, Europe and the Middle East given the diverse regional threats. At March 31, 2025, 29% of BDS backlog was attributable to non-U.S. customers.
Results of Operations
(Dollars in millions) Three months ended March 31
2025 2024
Revenues $6,298 $6,950
Earnings from operations
$155 $151
Operating margins 2.5 % 2.2 %
Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular period may not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow-on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily indicative of future workloads. The following discussions of comparative results among periods should be viewed in this context.
Deliveries of new-build production units, including remanufactures and modifications, were as follows:
Three months ended March 31
2025 2024
F/A-18 Models 5 1
F-15 Models 1 1
CH-47 Chinook (New) 1 1
CH-47 Chinook (Renewed) 2 1
AH-64 Apache (New) 4
AH-64 Apache (Remanufactured) 11 6
MH-139 Grey Wolf 1
P-8 Models 1 1
KC-46 Tanker 3
Total 26 14
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Revenues
BDS revenues for the three months ended March 31, 2025, decreased by $652 million compared with the same period in 2024. The decrease is primarily due to lower volume on P-8, KC-46 Tanker, ground-based missile defense, proprietary, and E-7 programs, as well as the absence of a favorable MQ-25 contract modification that was awarded during the first quarter of 2024. The decrease in revenue was partially offset by $70 million lower net unfavorable cumulative catch-up adjustments compared to the prior year comparable period.
Earnings From Operations
BDS earnings from operations for the three months ended March 31, 2025, was $155 million, compared with $151 million in the same period in 2024. The increase in earnings is primarily due to lower net unfavorable cumulative catch-up adjustments of $213 million compared to the comparable period in the prior year. The lower net unfavorable cumulative catch-up adjustments were largely offset by lower earnings from equity method investments and lower volume and mix on P-8, F-15, E-7, and ground-based missile defense programs. During the three months ended March 31, 2025, losses incurred on the five major fixed-price development programs totaled $0 million compared to $222 million in the same period in 2024.
See further discussion of fixed-price contracts in Note 10 to our Condensed Consolidated Financial Statements.
BDS earnings from operations includes our share of earnings from equity method investments of $6 million for the three months ended March 31, 2025, compared with $75 million for the three months ended March 31, 2024.
Backlog
BDS backlog of $61,567 million at March 31, 2025 compared with $64,023 million as of December 31, 2024, reflects revenue recognized on contracts awarded in prior periods and the timing of awards. In March 2025, the U.S. Air Force announced that Boeing has been awarded a contract to design, build and deliver the F-47, its next-generation fighter aircraft. This order is not included in backlog at March 31, 2025, pending completion of the source selection and evaluation review process.
Additional Considerations
Our BDS business includes a variety of development programs which have complex design and technical challenges. Some of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily reduced award or incentive fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense, Proprietary and Space Launch System programs.
Some of our development programs are contracted on a fixed-price basis. Examples of significant fixed-price development programs include Commercial Crew, KC-46A Tanker, MQ-25, T-7A Red Hawk, VC-25B, and commercial and military satellites. A number of our ongoing fixed-price development programs have reach-forward losses. New programs could also have risk for reach-forward loss upon contract award and during the period of contract performance. Many development programs have highly complex designs. As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition. These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions or other financially significant exposure. Risk remains that we may be required to record additional reach-forward losses in future periods.
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Global Services
Results of Operations
(Dollars in millions) Three months ended March 31
2025 2024
Revenues $5,063 $5,045
Earnings from operations $943 $916
Operating margins 18.6 % 18.2 %
Revenues
BGS revenues for the three months ended March 31, 2025 increased by $18 million compared with the same period in 2024, primarily due to higher government services revenue, partially offset by lower commercial services revenue. The net unfavorable impact of cumulative contract catch-up adjustments for the three months ended March 31, 2025 was $8 million lower than the prior year comparable period.
Earnings From Operations
BGS earnings from operations for the three months ended March 31, 2025 increased by $27 million compared with the same period in 2024, primarily due to higher government services revenue. The net unfavorable impact of cumulative contract catch-up adjustments for the three months ended March 31, 2025 was $2 million lower than the prior year comparable period.
Backlog
BGS total backlog increased from $21,403 million at December 31, 2024 to $22,036 million at March 31, 2025, primarily due to the timing of awards, partially offset by revenue recognized on contracts awarded in prior years.
Liquidity and Capital Resources
Cash Flow Summary
(Dollars in millions) Three months ended March 31
2025 2024
Net loss ($31) ($355)
Non-cash items 1,128 1,198
Changes in assets and liabilities (2,713) (4,205)
Net cash used by operating activities (1,616) (3,362)
Net cash (used)/provided by investing activities (1,717) 2,074
Net cash used by financing activities (338) (4,462)
Effect of exchange rate changes on cash and cash equivalents 12 (28)
Net decrease in cash & cash equivalents, including restricted (3,659) (5,778)
Cash & cash equivalents, including restricted, at beginning of year 13,822 12,713
Cash & cash equivalents, including restricted, at end of period $10,163 $6,935
Operating Activities Net cash used by operating activities was $1.6 billion during the three months ended March 31, 2025, compared with $3.4 billion during the same period in 2024. The $1.8 billion decrease in net cash used by operating activities was primarily driven by higher commercial airplane deliveries, lower customer considerations and working capital improvements.
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Changes in assets and liabilities during the three months ended March 31, 2025, improved by $1.5 billion compared with the same period in 2024, primarily driven by favorable changes in Inventories ($2.3 billion), Unbilled receivables ($0.7 billion) and Accrued liabilities ($0.3 billion), partially offset by changes in Advances and progress billings ($1.9 billion). The change in Inventories was primarily driven by higher deliveries on our commercial airplane programs during the three months ended March 31, 2025 as compared to the same period in 2024. The change in Unbilled receivables during the three months ended March 31, 2025 was primarily driven by a decrease in revenue recognized in excess of billings at BDS compared to the same period in 2024. Changes in Accrued liabilities during the three months ended March 31, 2025 was $0.4 billion compared to $0.7 billion during the same period in 2024. Concessions paid to 737 MAX customers totaled $38 million and $553 million for the three months ended March 31, 2025 and 2024. Changes in Advances and progress billings during three months ended March 31, 2025 was $0.8 billion compared to $2.7 billion during the same period in 2024 primarily driven by increased commercial airplane deliveries and lower advances on commercial airplane orders.
Payables to suppliers who elected to participate in supply chain financing programs decreased by $0.6 billion and $0.4 billion during the three months ended March 31, 2025 and 2024. Supply chain financing is not material to our overall liquidity.
Investing Activities Net cash used by investing activities during the three months ended March 31, 2025, was $1.7 billion, compared with net cash provided by investing activities of $2.1 billion during the same period in 2024. The increase in cash used was primarily due to net contributions to investments of $1.0 billion in 2025 compared with net proceeds from investments of $2.7 billion in 2024. During the three months ended March 31, 2025 and 2024, capital expenditures were $0.7 billion and $0.6 billion. We continue to expect capital expenditures in 2025 to be higher than in 2024.
Financing Activities Net cash used by financing activities was $0.3 billion during the three months ended March 31, 2025, compared with $4.5 billion during the same period in 2024. During the three months ended March 31, 2025, net repayments were $0.3 billion compared with $4.4 billion during the same period in 2024.
As of March 31, 2025, the total debt balance was $53.6 billion, down from $53.9 billion at December 31, 2024. At March 31, 2025, $7.9 billion of debt was classified as short-term.
Capital Resources
On June 30, 2024, we entered into an agreement to acquire Spirit in an all-stock transaction at an equity value of approximately $4.7 billion, or $37.25 per share of Spirit Class A Common Stock. The transaction will include the assumption of Spirit's net debt at closing. See Note 2 to our Condensed Consolidated Financial Statements.
At March 31, 2025, we had $10.1 billion of cash, $13.5 billion of short-term investments, and $10.0 billion of unused borrowing capacity on revolving credit line agreements. Our $3.0 billion three-year revolving credit agreement expiring in August 2025, $3.0 billion five-year revolving credit agreement expiring in August 2028, and $4.0 billion five-year revolving credit agreement expiring in May 2029 remain in effect. We anticipate that these credit lines will primarily serve as back-up liquidity to support our general corporate borrowing needs. At March 31, 2025 we were in full compliance with all covenants contained in our debt and credit facility agreements.
We currently maintain investment grade credit ratings across all three credit rating agencies. At Moody's we are rated Baa3 with a negative outlook. At Fitch, we are rated BBB- with a negative outlook. At S&P, we are rated BBB- with a credit watch negative.
We expect to be able to access capital markets when we require additional funding to support our operations, pay off existing debt, address impacts to our business related to market developments, fund outstanding financing commitments or meet other business requirements; however, a number of factors could increase the cost of borrowing, jeopardize our ability to incur debt on terms acceptable to us, and negatively impact our access to the capital and financial markets and our ability to fund our operations
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and commitments. These factors include further downgrades in our credit ratings, disruptions or declines in the global capital markets, a decline in our financial performance or outlook, a delay in our ability to ramp up production and deliveries, and changes in demand for our products and services. The occurrence of any or all of these events may adversely affect our ability to fund our operations and financing or contractual commitments. See “Risks Related to Financing and Liquidity” under “Item 1A. Risk Factors” of our 2024 Annual Report on Form 10-K.
Any future borrowings may affect our credit ratings and are subject to various debt covenants. The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined in the credit agreements). When considering debt covenants, we continue to have substantial borrowing capacity.
Off-Balance Sheet Arrangements
We are a party to certain off-balance sheet arrangements including certain guarantees. For discussion of these arrangements, see Note 11 to our Condensed Consolidated Financial Statements.
Contingent Obligations
We have significant contingent obligations that arise in the ordinary course of business, which include the following:
Legal Various legal proceedings, claims and investigations are pending against us. 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 $855 million at March 31, 2025. For additional information, see Note 10 to our Condensed Consolidated Financial Statements.
Non-GAAP Measures
Core Operating Earnings/(Loss), Core Operating Margins and Core Earnings/(Loss) Per Share
Our unaudited condensed consolidated interim financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Core operating earnings/(loss), Core operating margins and Core earnings/(loss) per share exclude the FAS/CAS service cost adjustment. 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/(loss) per share excludes both the FAS/CAS service cost adjustment and non-operating pension and postretirement income. Non-operating pension and postretirement income represents the components of net periodic benefit costs other than service cost. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to BCA and certain BGS businesses supporting commercial customers. Pension costs allocated to BDS and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. 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 Earnings/(loss) from operations were benefits of $193 million and $230 million for the three months ended March 31, 2025 and 2024 . The lower benefits in 2025 were primarily due to reductions in allocated pension cost year over year. The non-operating pension income included in Other income, net was $43 million and $123 million for the three
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months ended March 31, 2025 and 2024 . The lower benefits in 2025 were primarily due to lower expected return on plan assets. For further discussion of pension and other postretirement costs see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" on page 28 of our 2024 Annual Report on Form 10-K.
Management uses Core operating earnings/(loss), Core operating margins and Core earnings/(loss) per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as unallocated pension and other postretirement benefit costs primarily represent costs driven by market factors and costs not allocable to U.S. government contracts.
Reconciliation of Non-GAAP Measures to GAAP Measures
The table below reconciles the non-GAAP financial measures of Core operating earnings/(loss), Core operating margins and Core loss per share with the most directly comparable GAAP financial measures of Earnings/(loss) from operations, Operating margins and Diluted loss per share.
(Dollars in millions, except per share data) Three months ended March 31
2025 2024
Revenues $19,496 $16,569
Earnings/(loss) from operations, as reported
$461 ($86)
Operating margins 2.4 % (0.5) %
Pension FAS/CAS service cost adjustment (1)
($193) ($230)
Postretirement FAS/CAS service cost adjustment (1)
(69) (72)
FAS/CAS service cost adjustment (1)
($262) ($302)
Core operating earnings/(loss) (non-GAAP)
$199 ($388)
Core operating margins (non-GAAP) 1.0 % (2.3) %
Diluted loss per share, as reported ($0.16) ($0.56)
Pension FAS/CAS service cost adjustment (1)
(0.26) (0.37)
Postretirement FAS/CAS service cost adjustment (1)
(0.09) (0.12)
Non-operating pension income (2)
(0.06) (0.20)
Non-operating postretirement income (2)
(0.01) (0.03)
Provision for deferred income taxes on adjustments (3)
0.09 0.15
Core loss per share (non-GAAP) ($0.49) ($1.13)
Diluted weighted average common shares outstanding (in millions)
753.4 612.9
(1) FAS/CAS service cost adjustment represents the difference between the FAS pension and postretirement service costs calculated under GAAP and costs allocated to the business segments. This adjustment is excluded from Core operating earnings/(loss) (non-GAAP).
(2) Non-operating pension and postretirement income represents the components of net periodic benefit costs/(income) other than service cost/(income). This income is included in Other income, net and is excluded from Core operating earnings/(loss) (non-GAAP).
(3) The income tax impact is calculated using the U.S. corporate statutory tax rate.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes to our market risk since December 31, 2024.
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