BOEING CO

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:

(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.

The following table summarizes Revenues:

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:

• 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 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:

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

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:

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:

Research and development expense was largely unchanged during the three months ended March 31, 2025, compared to the same period in 2024.

Backlog

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.

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, 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.