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The Boeing Company 2017 Annual Report

2017 Top Dow Performer

The Boeing Company 100 North Riverside Plaza Chicago, IL 60606-1596 USA

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THE BOEING COMPANY

Boeing is the world’s largest aerospace company, the leading manufacturer of commercial airplanes and defense, space and security systems and a major provider of government and commercial aerospace services. The top U.S. exporter, Boeing supports airlines and U.S. and allied government customers in more than 150 countries. Our products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, digital aviation services, engineering modifications and maintenance, supply chain services and training. With corporate headquarters in Chicago, Boeing employs more than 140,000 people across the United States and in more than 65 countries. In addition, our enterprise leverages the talents of skilled people working for Boeing suppliers worldwide, including 1.3 million people at 13,600 U.S. companies.

THE BOEING COMPANY

CONTENTS

Operational Highlights 1

Message From Our Chairman 2

Executive Council 11

Business Highlights 12

Form 10-K 13

Caution Concerning Forward-Looking Statements 118

Non-GAAP Measures 119

Selected Programs, Products and Services 120

Shareholder Information 128

Board of Directors 129

Company Officers 130 The Boeing Company Annual Report was printed with 100 percent certified wind-powered energy on Forestry Stewardship Council certified paper that contains at least 10 percent post-consumer waste. Copyright © 2018 Boeing. All rights reserved. Printed in the USA.

The Boeing Family of Reports

Visit boeing.com/investors to view our Annual Report and to find additional information about our financial performance and Boeing business practices.

Visit boeing.com/community to view our community investment information and other information about how Boeing is working to improve communities worldwide.

Visit boeing.com/environment to view our current Environment Report and information on how the people of Boeing are developing ways to promote a more sustainable future.

“The Boeing and U.S. Air Force test team is well on its way toward completing KC-46 tanker certification testing. We look forward to getting this game-changing tanker into the hands of our customer as soon as possible.” MIKE GIBBONS VICE PRESIDENT AND PROGRAM MANAGER, KC-46 PROGRAM

Photo above: A Boeing KC-46 tanker prepares to refuel a C-17 during testing in Washington State. The advanced multirole tanker will refuel U.S., allied and coalition military aircraft using both its boom and hose-and- drogue systems while providing operators with unparalleled life-cycle cost savings and comprehensive global support.

Photo back cover: The Boeing 787-10 Dreamliner is the third member of the super-efficient, passenger-pleasing 787 family. A stretch of the 787-9, the 787-10 retains more than 95 percent commonality while adding seats and cargo capacity. With a 25 percent better fuel-per-seat rate and lower emissions than the airplanes it will replace, the 787-10 sets a new benchmark for fuel efficiency and operating economics.

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OPERATIONAL HIGHLIGHTS

Our purpose and mission is to connect, protect, explore and inspire the world through aerospace innovation. We aspire to be the best in aerospace and an enduring global industrial champion.

Achieved $93.4 billion in revenue from record commercial airplane deliveries, strong services growth and solid performance in our defense business. Core operating earnings were nearly $9 billion* with core earnings per share of $12.04*.

Increased operating cash flow to a record $13.3 billion and maintained cash and marketable securities of $10 billion, providing strong liquidity.

Replaced the existing share repurchase program with an $18 billion authorization and increased the quarterly dividend by 20 percent. The dividend has increased more than 250 percent over the past five years; shareholders have received quar- terly dividends for more than 75 years.

Delivered 763 commercial airplanes, an industry record, leading the world in airplane deliveries for the sixth consecutive year.

Delivered 170 military aircraft and four satellites, and had strong sales of weapons systems.

Won 912 net orders for commercial airplanes, raising the company’s total order backlog to 5,864 airplanes—worth about seven years of production.

Maintained a solid defense, space and security order backlog of $50 billion, 40 percent of which came from international customers. New and follow-on business included contracts for 27 P-8 Poseidon aircraft, 36 advanced F-15 fighters and 268 Apache helicopters; a contract from

* Non-GAAP measures, see page 119. †Total backlog includes contractual and unobligated backlog. See page 23 of the Form 10-K.

FINANCIAL HIGHLIGHTS

2017 2016 2015 2014 2013

Revenues 93,392 94,571 96,114 90,762 86,623

Earnings from operations 10,278 5,834 7,443 7,473 6,562

Diluted earnings per share 13.43 7.61 7.44 7.38 5.96

Operating margins 11.0% 6.2% 7.7% 8.2% 7.6%

Core operating earnings* 8,970 5,464 7,741 8,860 7,876

Core operating margins* 9.6% 5.8% 8.1% 9.8% 9.1%

Core earnings per share* 12.04 7.24 7.72 8.60 7.07

Operating cash flow 13,344 10,499 9,363 8,858 8,179

Contractual backlog 470,241 458,277 476,595 487,092 422,661

Total backlog† 488,145 473,492 489,299 502,391 440,928

U.S. dollars in millions except per share data

the Missile Defense Agency for Redesigned Kill Vehicle development; a design contract for the Ground Based Strategic Deterrent; the first KC-46 tanker international order, from Japan; and selec- tion to design and build seven satellites for SES.

Reached many Commercial Airplanes milestones, including first flight of the 737 MAX 9 and 787-10; delivery of the first 737 MAX 8, to Malindo Air; a landmark agreement with flydubai for 175 737 MAX airplanes, the largest-ever single-aisle jet order from a Middle East carrier.

Achieved key defense, space and security mile- stones, including the refueling of a KC-46A tanker from another KC-46A; FAA certification of the 767-2C aircraft, verifying the fundamental design of the KC-46 tanker; first flight of the second T-X aircraft; launch of the final Tracking and Data Relay Satellite (TDRS) for NASA’s space communications network; and a successful Ground-based Midcourse Defense (GMD) system intercept test.

Boeing Global Services, a new business unit that provides cost-competitive support to commercial and government customers worldwide, earned $14.6 billion of revenue in 2017. This was driven by key commercial and defense wins, including a contract for F-15 sustainment for Qatar, an order for seven 737-800 Boeing Converted Freighters from GECAS, a 787 landing gear exchange agree- ment with All Nippon and a P-8I training agreement with India.

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TO THE SHAREHOLDERS AND EMPLOYEES OF THE BOEING COMPANY

Dennis A. Muilenburg Chairman, President and Chief Executive Officer

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2017 in Review

In 2017, more than 140,000 dedicated Boeing employees around the world delivered record company financial and operational performance, strengthened our businesses for profitable, long-term growth, and drove additional productivity and quality gains across the enterprise. Our strong performance trend—underpinned by our sizeable backlog, a large and growing aerospace and defense market, and our positive future outlook—helped make Boeing the Dow’s top-performing company in 2017, as measured by stock price and total shareholder returns.

Company revenue in 2017 was $93.4 billion, fueled by record commercial airplane deliveries, growth in our services business, and solid defense, space and security performance. We also won $110.2 billion in net new orders for our market-leading and innovative products and services, raising our companywide backlog to $488 billion.

Core earnings per share of $12.04* for the year, also a company record, reflected our strong operating performance and a favorable tax reform impact of $1.74 per share. Core operating earnings rose 64 percent over 2016 to a Boeing-record $9.0 billion* and operating cash flow grew to an all-time high of $13.3 billion, enabling us to return significant value to our shareholders while investing for the future in our people and our business.

Keeping with our balanced cash deployment strat- egy, in 2017 we repurchased 46.1 million shares of Boeing stock for $9.2 billion and paid $3.4 billion

in dividends. In December, the Boeing Board of Directors signaled its continued confidence in our financial strength and long-term outlook, authorizing a new $18 billion share repurchase program and increasing the quarterly dividend by 20 percent. Over the past five years, we have raised our quarterly dividend by more than 250 percent.

Boeing Commercial Airplanes reported $56.7 billion of revenue in 2017 and led the industry in deliveries for the sixth consecutive year with a record 763 airplanes. With net new orders for an additional 912 airplanes, we grew our commercial airplanes backlog to a company record of 5,864 jets. This strong order book, worth $421 billion, is equal to approximately seven years of production at current rates. Full-year operating margins were 9.6 percent.

The 737 family continues to exceed expectations in the single-aisle market, with 745 net new orders received and a company record of 529 airplanes delivered in 2017. Our 737 backlog now stands at more than 4,600 airplanes. In 2017, we also transi- tioned our production system smoothly to the 737 MAX, allowing us to deliver the first 74 737 MAX 8 airplanes while increasing overall 737 production to 47 aircraft per month. We continued to make progress building out the MAX family, including the start of production on the 737 MAX 7, the rollout and first flight of the 737 MAX 9 and the launch of the 737 MAX 10, the largest plane in the MAX family. The MAX 9 is scheduled to enter service this year. With more than 4,300 orders from 92 customers worldwide, the 737 MAX is the fastest-selling airplane

In the first full year of our second century, we worked together with accelerated pace and purpose to be the best in aerospace and an enduring global industrial champion. For a company that dreams big and delivers on those dreams, a bold, bright future is ours to seize— and we will do so, together.

* Non-GAAP measures, see page 119.

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in Boeing’s history, and we believe it has additional growth potential.

We also extended our market and technology lead in the high-value twin-aisle segment with significant progress on the 787 and 777 programs. We contin- ued building 787s at the highest production rate for a twin-aisle jet (12 airplanes per month), leading to 136 deliveries for the year from our production facilities in Everett, Washington, and North Charleston, South Carolina. We completed rollout and first flight of the 787-10, the third and largest Dreamliner model, and soon will deliver the first airplane to launch customer Singapore Airlines. At the end of 2017, the worldwide operating fleet of 636 787 Dreamliners had flown 2.8 billion miles, carried 210 million passengers and opened more than 170 new nonstop city pairs.

Our newest twin-aisle airplane, the 777X, remains on track to enter service in 2020. In 2017, we began producing parts for the first flight-test airplane in our Composite Wing Center in Everett. Our current backlog of 340 orders and commitments from seven global customers remains strong as interest in the airplane’s unsurpassed efficiency continues to grow. We also expect increased demand for widebody replacements early in the next decade.

Building on our industry-record deliveries in 2017, we remain on track to increase production even further over the next few years to more than 900 airplanes annually, based on previously announced rate increases. Our plans include raising the 737 produc- tion rate from the current 47 airplanes per month to 52 in 2018 and to 57 per month in 2019. And with more than 650 firm orders in our Dreamliner backlog, our plan to increase 787 production from 12 airplanes per month today to 14 in 2019 is well supported.

Production rates on the 747, 767 and 777 are set to continue at existing levels in 2018. Continued improvements in the cargo market, as evidenced by an order for 14 additional 747-8 Freighters from UPS in early 2018, support our 0.5 airplane per month rate. Production of 2.5 767s per month is supported by continued demand for commercial freighters and military aerial refueling tankers. On 777, as we transition to production of the 777X, we expect a delivery rate of roughly 3.5 per month in 2018 and 2019. For the current-generation 777, we received 40 net new orders in 2017, bringing the backlog to 102 as progress continues on the 777 to 777X bridge.

The commercial airplane market remains large and growing, valued at $2.8 trillion over the next decade. Passenger traffic continues to outpace expectations and demand for new airplanes remains high. We esti- mate customers will buy more than 41,000 airplanes over the next 20 years, including approximately 9,100 widebodies, as more people travel by air, particularly in the rapidly growing Asia region. This long-term demand forecast, coupled with healthy market conditions and a robust backlog, provides a solid foundation for our planned production rates.

Boeing Defense, Space & Security achieved continued success in 2017, recording healthy revenue and margins, winning important new orders and logging significant program milestones, including progress on the KC-46 tanker. Revenues were $21.1 billion with operating margins of 10.6 percent. In total, we delivered four commercial and military satellites, 170 military aircraft and 35,618 weapons systems. New orders worth $28.8 billion reinforced our $50 billion backlog, which includes a balanced mix of U.S. and international customers.

Environmental Performance* (Percent Performance to 2012 Baseline)

Hazardous Waste – 26% GHG Emissions – 14%

Solid Waste – 24% Water Intake – 21%

2012 2013 2014 2015 2016 2017

–30

–20

–10

Investing in Our Communities

Total Giving $181 Million Charitable and Business Contributions

$144M Employee Giving

$34M Charitable Trust

$3M *2016 data recalculated because of changes in National Region eGrid emission factors.

In 2017, Boeing and our employees and retirees invested $181 million— plus thousands of employee volunteer hours—to help enhance lives and communities where we live and work around the world.

We outperformed our goal of zero growth in environmental impact from 2012 to 2017, even as we increased produc- tion and expanded our operations globally.

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A cross-functional Boeing team, including Fariba Shokri, systems and data analyst (right), developed an innovative new electronic tool, 3-D Production Illustration, that automates creation of two-dimensional draw- ings for 737 wire bundle installation. The 3DPI tool cuts creation time by 80 percent, relieves a major production bottleneck and promises to benefit other programs in the future.

“As a team, we build our reputation one aircraft at a time, knowing that every action has an impact on the lives of our customers. We take seriously our duty to continually improve the AH-64 Apache and provide innovative products and services that ensure the fleet is always mission-ready.” STEVE WADE VICE PRESIDENT, ATTACK HELICOPTER PROGRAMS, AND SENIOR MESA SITE EXECUTIVE

As the sun sets on the horizon in Mesa, Arizona, an AH-64E Apache helicopter undergoes regular maintenance. Teams from Boeing Global Services ensure that the world’s most advanced multirole combat helicopter is ready— day and night—to meet mission require- ments around the globe.

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Boeing subsidiary Aurora Flight Sciences is developing an autonomous electric vertical-takeoff-and-landing (eVTOL) aircraft that will operate as a safe, on-demand urban air transportation vehicle. The futuristic eVTOL aircraft, which is scheduled for flight testing in 2020, would enable busy commuters to hail an autonomous sky taxi and hop right over traffic jams.

Peter Kunz, chief tech- nologist (left) and Emily Schnieders, engineer (right) are part of a Boeing HorizonX team that built an unmanned electric vertical-takeoff-and-landing cargo air vehicle prototype that will help mature the technological building blocks of safe autonomous flight. Designed to carry up to 500 pounds, the proto- type is paving the way for future air vehicles trans- porting cargo and other logistics applications.

“The combined expertise of Aurora Flight Sciences and Boeing will advance the development of innovative autonomous vehicles and open new markets with transforma- tional technologies.” CHARLES TOUPS VICE PRESIDENT AND GENERAL MANAGER, BOEING RESEARCH & TECHNOLOGY

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Noteworthy defense-related accomplishments in 2017 include:

A $3.4 billion multiyear contract for 268 AH-64E Apache helicopters and a $3.4 billion order for at least 27 P-8 Poseidon aircraft for the United States, Australia and United Kingdom.

A contract to provide 36 F-15 fighter jets to Qatar.

Successful downselect to design the United States’ next intercontinental ballistic missile.

FAA certification of the 767-2C aircraft, verifying that the fundamental design of the KC-46 tanker is safe and reliable, the inaugural flight of the first tanker destined for the U.S. Air Force, and a contract to build a new tanker for Japan—the first international KC-46 customer.

A successful Ground-based Midcourse Defense (GMD) system intercept test and the ahead- of-schedule emplacement of the 44th GMD interceptor at Ft. Greely, Alaska.

We also extended our leadership in the increasingly competitive space market with several achievements:

Successful completion of CST-100 Starliner drop tests and design certification review.

Welding of the five hardware structures that form Space Launch System’s 212-foot-tall (64.6 m) core stage—the backbone of the rocket that will carry the first humans to Mars.

Launch of seven satellites and the X-37B reusable, autonomous spacecraft.

Eight successful launches by our United Launch Alliance joint venture.

A NASA contract to develop a deep-space habita- tion concept.

While our global defense and space customers continue to balance constrained budgets and rapidly evolving threats, we are seeing solid demand for our products and services in a market valued at $2.2 trillion over the next 10 years. Our ongoing pursuit of improved affordability and productivity, as well as strong performance across our core business areas—weapons, fixed-wing strike and integrated missile systems—have us well positioned to fund our future. This foundational work is allowing us to invest in growth markets, such as commercial derivatives, rotorcraft, satellites, services, human space explo- ration and autonomous systems, while competing for exciting new programs including the T-X trainer, MQ-25 unmanned aerial refueling aircraft and the Ground-Based Strategic Deterrent.

In July 2017, our third major business unit, Boeing Global Services, started operations to provide more agile, cost-effective and streamlined after- market support and services, help address our customers’ increased focus on aircraft readiness and value-based life-cycle solutions, and secure a larger share of the 10-year, $2.6 trillion—and growing— commercial and government services market. Because we produce roughly half of the world’s com- mercial and defense fleets, and aircraft service life is increasing, aerospace services represents one of our biggest growth opportunities for the future.

Boeing Global Services got off to a strong start in 2017 with revenue of $14.6 billion and operating margins of 15.4 percent, reflecting solid execution and portfolio diversity. Our services backlog stands at $17.2 billion. Year-on-year growth of 5 percent outpaced the average services market growth rate of 3.5 percent, an outcome we strive to repeat in the coming years as we expand our services offerings and grow market share.

Our services expertise, the global reach of our busi- ness and our strong customer partnerships have us well positioned to compete and win for the long-term in areas such as spare parts; maintenance, modifica- tions and upgrades; training; and, increasingly, digital solutions, which generated approximately $1 billion in revenue in 2017.

Early key wins include:

An F-15 sustainment contract for Qatar.

An order for seven 737-800 Boeing Converted Freighters for GECAS.

A 787 landing gear exchange agreement with All Nippon Airways.

A P-8I training agreement with India.

Accelerating Our Pace of Progress

In 2017, driven in part by a global business environ- ment that is growing more competitive by the day, we promoted a productive sense of urgency at all levels of the company to accelerate the pace of our innovation.

Succeeding in rapidly changing global markets requires that we think and do things differently. It demands change, a willingness to embrace it and the agility to both drive and respond to external forces. The com- petition is not standing still, and neither are we.

Over the past year, we made several strategic invest- ments to better position ourselves for future markets and growth. We stood up Boeing Global Services to expand our share of the aerospace services market.

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We continued to develop new commercial, defense and space products and services such as the 787-10 and 777X, the KC-46 tanker and T-X trainer aircraft, and the CST-100 Starliner and Space Launch System. We took steps to strengthen our capabilities in areas such as data analytics, avionics, actuation and additive manufacturing—high-value work that benefits from our internal expertise and global scale. We launched our Boeing HorizonX innovation cell and formed partnerships with several companies whose technology can change the competitive landscape. We acquired Aurora Flight Sciences to bolster our autonomous-flight portfolio.

As we shape our business for a second century of aerospace innovation, we continue to make meaning- ful progress toward building a zero-injury workplace, achieving world-class quality and creating the kind of culture that breaks down organizational barriers, eliminates bureaucracy and unleashes the full capa- bilities of our people.

Looking ahead to 2018 and beyond, we remain focused on winning through innovation, driving growth and productivity and extending our position as the world’s leading aerospace company—all while deliv- ering the best value to our customers, employees and shareholders.

Our Enduring Values

The importance of our purpose and mission demands that we work with the utmost integrity and excellence and embrace the enduring values that define who we are today and the company we aspire to be tomorrow. These core values—integrity, quality, safety, diversity and inclusion, trust and respect, corporate citizenship and stakeholder success—remind us all that how we do our work is every bit as important as the work itself.

Living these values also means being best-in-class in community and environmental stewardship.

In 2017, Boeing and its employees and retirees contributed a total of $181 million—in addition to time and talent—to help strengthen communities worldwide. We also revamped our approach to corporate citizenship with the launch of Boeing Global Engagement. This new approach takes a companywide, strategic view of our investments and employee engagement activities by focusing on our commitment to science, technology, engineering and math education as well as military veterans—more than 20,000 of whom we are proud to call Boeing teammates. This renewed focus is helping us deepen relationships and inspire positive, lasting change in the places we call home.

Additionally, every day, Boeing employees advance efforts to improve the environmental efficiency and performance of our products and services, reduce emissions and conserve water and resources. To date, we have tested nearly 70 technologies on our ecoDemonstrator program with another 30 planned in 2018. We also further collaborated with outside experts to help identify and deliver stormwater man- agement and water-quality improvements. Finally, even as aircraft production hits record levels, our goal remains zero growth in greenhouse gas emissions, water use, hazardous waste (normalized to revenue) and solid waste sent to landfills.

Achieving Our Bold Aspiration

Boeing is stronger, more innovative and more focused than ever in our mission to connect, protect, explore and inspire the world. I believe we have the industry’s best team, the right products, services and strategies, and a compelling vision that defines who we are as a company, where we are headed and how we are going to win.

As encouraging as our performance was in 2017, I am even more excited about what lies ahead— countless opportunities to build upon our storied legacy, exceed customer and stakeholder expecta- tions and claim Boeing’s position among the world’s best companies, regardless of industry.

We are intensely focused on delivering consistently on our customer commitments and commercial, defense and space development programs, capturing new business and winning key campaigns, growing our new integrated services business, pursuing breakthrough technologies that will strengthen our innovation engine, and further investing in our people.

Since my early days as an engineering intern at Boeing more than 30 years ago, I have viewed this great company with a sense of wonder—in the prod- ucts we design, build and support, in the important mission we serve and in the talented, passionate people around the world who I now have the honor of leading. Our second century is off to a fast start, and I look forward to you joining us on the incredible journey that awaits.

Dennis A. Muilenburg Chairman, President and CEO

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Officially launched at the 2017 Paris Air Show, the new 737 MAX 10 has already gained wide market acceptance with more than 416 orders and commitments from 18 customers worldwide. The MAX 10 will be the most profitable single- aisle airplane, offering the lowest seat-costs ever. It will be introduced in the 2020 time frame.

Boeing employs additive manufacturing, also known as 3D printing, at 20 sites around the world to create aircraft parts, interiors and tooling. Boeing has installed some 50,000 3D-printed parts on commercial, space and defense programs, yielding significant weight and cost savings. Materials process and physics engineer Fatmata Barrie (right) and other employees continu- ally seek new applications for the technology.

“The 737 MAX 10 extends the competitive advantage of the 737 MAX family. We’re honored that so many customers have embraced the outstanding value it will bring to their fleets.” KEITH LEVERKUHN VICE PRESIDENT AND GENERAL MANAGER OF THE 737 MAX PROGRAM

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The Boeing CST-100 Starliner is a self-flying, reusable 21st century space capsule designed to trans- port up to seven crewmembers and cargo to low Earth orbit destinations. The capsule, which could enter service in the next few years with astronaut missions to the International Space Station, is at the forefront of new frontiers in commercial space travel.

Titanium helps reduce the weight of Boeing aircraft— but it’s expensive, at 10 times the cost of alumi- num. Last year, Boeing and its suppliers saved millions of dollars by collecting 15 million pounds of titanium scrap to be recycled into usable form. It’s one way that employees like procurement agents Jennifer Trujillo (left) and Thang Pham (right) are revolutionizing the use — and reuse — of raw materials.

“Our outstanding partnership with NASA has been crucial throughout the development of the CST-100 Starliner. Every successful test marks the next big step toward accomplishing our goal of opening up a new era in human spaceflight.” JOHN MULHOLLAND VICE PRESIDENT AND PROGRAM MANAGER, BOEING COMMERCIAL CREW PROGRAM

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EXECUTIVE COUNCIL

Front row, left to right: Stanley A. Deal Executive Vice President, President and Chief Executive Officer, Boeing Global Services

Gregory D. Smith Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy

Kevin G. McAllister Executive Vice President, President and Chief Executive Officer, Commercial Airplanes

Leanne G. Caret Executive Vice President, President and Chief Executive Officer, Defense, Space & Security

Middle row, left to right: J. Michael Luttig Executive Vice President and General Counsel

Jenette E. Ramos Senior Vice President, Supply Chain & Operations

Heidi B. Capozzi Senior Vice President, Human Resources

Theodore Colbert III Chief Information Officer, Senior Vice President, Information Technology & Data Analytics

Timothy J. Keating Executive Vice President, Government Operations

Back row, left to right: Bertrand-Marc Allen Senior Vice President and President, Boeing International

Gregory L. Hyslop Chief Technology Officer, Senior Vice President, Boeing Engineering, Test & Technology

Philip A. Musser Senior Vice President, Communications

Diana L. Sands Senior Vice President, Office of Internal Governance and Administration

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ktype 8.3750 X 10.8750

8 6 .6 9 0 .8 9 6 .1

9 4 .6

9 3 .4

Revenues $ in billions

FINANCIAL RESULTS

BUSINESS HIGHLIGHTS

Comparison of Cumulative* Five-Year Total Shareholder Returns

5 .9

6 7 .0

7 .3

8 8 .6

1 3 .4 3

1 2 .0 4

7 .6

1 7 .2

7 .4

4 7 .7

Earnings Per Share

8 .2 8

.9 9 .4

1 0 .5

1 3 .3

Operating Cash Flow $ in billions

13 14 15 16 17 13 14 15 16 17 13 14 15 16 17

Boeing

S&P 500 Index

S&P 500 Aerospace & Defense

Company/ Index

Years Ending DecemberBase Period

2012

100

184.74

154.92

132.39

2013

180.07

172.63

150.51

2014

205.37

182.01

152.59

2015

228.61

216.42

170.84

2016 2017

12 13 14 15 16 17

445.27

305.97

208.14

$100

$300

$400

$500

$200

*Cumulative return assumes $100 invested; includes reinvestment of dividends.

The Boeing Company S&P 500 Aerospace & Defense S&P 500 Index

4 4

0 .9

5 0 2 .4

4 8

9 .3

4 7 3 .5

4 8 8 .1

13 14 15 16 17

Total Backlog* $ in billions

1 2 3 4 5

6 0 1 2 0

4 9 0

1 ,5 2 0

6 2 0

1 Regional Jets 2 Freight 3 Medium/Large

Passenger Widebody 4 Small Passenger

Widebody 5 Single-Aisle

Commercial Airplanes Market (2017– 2026) $ in billions

1 ,2 5 0

9 5 0

2 ,2 0 0

1 2 Total

1 International 2 Domestic

Diluted earnings per share

Core earnings per share†

Defense, Space & Security Markets (2017– 2026) $ in billions

1 2 Total

1 ,1 7 01, 4 6 0

2 ,6 3 0

1 Commercial Services

2 Government Services

Global Services Market (2017– 2026) $ in billions

6 4

8 13 14 15 16 17

Commercial Airplanes Deliveries

7 2

3 7 6

7 6 3

7 4

In 2017, we won $110.2 billion in net orders. All three business units increased their backlogs, with the company backlog rising to $488 billion, positioning Boeing to continue to achieve strong growth and performance for many years.

We delivered an industry-record 763 commercial airplanes, maintaining our market share lead for the sixth consecutive year.

We remain highly confident in our commercial market outlook, which forecasts demand for about 41,000 new airplanes over the next 20 years.

Across our defense, space and security portfolio, we provide innovative, reliable and affordable solutions, giving Boeing a strong foundation from which to grow its share of a market expected to be worth $2.2 trillion over the next decade.

With the successful launch of our services business in 2017, we continue to win new business in a market expected to be valued at $2.6 trillion over the next 10 years.

* Total backlog includes contractual and unobligated backlog. See page 23 of the Form 10-K.

† Non-GAAP measure. See page 119.

Revenues in 2017 were $93.4 billion, driven by record commercial deliveries, continued growth in services, and solid performance in our defense, space and security business.

Record core earnings per share for 2017 reflected strong operating performance across the company and favorable tax reform impact.†

Cash generation continued to be robust, with operating cash flow for the year a record at $13.3 billion largely driven by strong operating performance. This supported a 20 percent increase to our dividend and a new $18 billion share repurchase authorization.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K (Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number 1-442

THE BOEING COMPANY (Exact name of registrant as specified in its charter)

Delaware 91-0425694 State or other jurisdiction of

incorporation or organization (I.R.S. Employer Identification No.)

100 N. Riverside Plaza, Chicago, IL 60606-1596 (Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (312) 544-2000 Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $5 par value New York Stock Exchange (Title of each class) (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2017, there were 593,198,552 common shares outstanding held by nonaffiliates of the registrant, and the aggregate market value of the common shares (based upon the closing price of these shares on the New York Stock Exchange) was approximately $117.3 billion. The number of shares of the registrant’s common stock outstanding as of February 5, 2018 was 588,490,313.

DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates information by reference to the registrant’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2017.

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THE BOEING COMPANY Index to the Form 10-K

For the Fiscal Year Ended December 31, 2017

PART I Page Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters

and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7. Management’s Discussion and Analysis of Financial Condition and

Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . Item 9. Changes in and Disagreements With Accountants on Accounting and

Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III Item 10. Directors, Executive Officers and Corporate Governance. . . . . . . . . . . . . Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 12. Security Ownership of Certain Beneficial Owners and Management and

Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 13. Certain Relationships and Related Transactions, and Director

Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 5

14 15 15 15

16 17

18 44 45

108 108 108

109 111

112

112 113

113 115 116

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PART I

Item 1. Business

The Boeing Company, together with its subsidiaries (herein referred to as “Boeing,” the “Company,” “we,” “us,” “our”), is one of the world’s major aerospace firms.

We are organized based on the products and services we offer. We operate in four reportable segments:

• Commercial Airplanes (BCA); • Defense, Space & Security (BDS); • Global Services (BGS); • Boeing Capital (BCC).

Commercial Airplanes Segment

This segment develops, produces and markets commercial jet aircraft and provides fleet support services, principally to the commercial airline industry worldwide. We are a leading producer of commercial aircraft and offer a family of commercial jetliners designed to meet a broad spectrum of global passenger and cargo requirements of airlines. This family of commercial jet aircraft in production includes the 737 narrow- body model and the 747, 767, 777 and 787 wide-body models. Development continues on the 787-10 and certain 737 MAX derivatives and the 777X program.

Defense, Space & Security Segment

This segment is engaged in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for global strike, including fighter aircraft and missile systems; vertical lift, including rotorcraft and tilt-rotor aircraft; mobility, surveillance and engagement, including battle management, airborne, anti-submarine, transport and tanker aircraft. In addition, this segment is engaged in the research, development, production and modification of the following products and related services: strategic defense and intelligence systems, including strategic missile and defense systems, command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR), cyber and information solutions, and intelligence systems; satellite systems, including government and commercial satellites and space exploration.

BDS' primary customer is the United States Department of Defense (U.S. DoD). Revenues from the U.S. DoD, including foreign military sales through the U.S. government, accounted for approximately 79% of its 2017 revenues. Other significant BDS customers include the National Aeronautics and Space Administration (NASA) and customers in international defense, civil and commercial satellite markets.

This segment's primary products include the following fixed-wing military aircraft: EA-18G Growler Airborne Electronic Attack, F/A-18E/F Super Hornet, F-15 Strike Eagle, P-8 programs, and KC-46A Tanker. This segment produces rotorcraft and rotary-wing programs, such as CH-47 Chinook, AH-64 Apache, and V-22 Osprey. In addition, this segment's products include space and missile systems including: government and commercial satellites, the International Space Station, missile defense and weapons programs, and Joint Direct Attack Munition, as well as the United Launch Alliance joint venture.

Global Services Segment

This segment provides services to our commercial and defense customers. This segment offers aviation services support, aircraft modifications, spare parts, training, maintenance documents, data analytics and information-based services, and technical advice to commercial and government customers worldwide.

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In addition, BGS sustains aircraft and systems with a full spectrum of products and services through integrated logistics, including supply chain management and engineering support; maintenance, modification and upgrades for aircraft; and training systems and government services, including pilot and maintenance training. Major defense programs supported include the C-17 Globemaster III, F-15 Strike Eagle, F/A-18E/F Super Hornet, and AH-64 Apache for domestic and international customers.

Boeing Capital Segment

BCC seeks to ensure that Boeing customers have the financing they need to buy and take delivery of their Boeing product and manages overall financing exposure. BCC’s portfolio consists of equipment under operating leases, finance leases, notes and other receivables, assets held for sale or re-lease and investments.

Financial and Other Business Information

See the Summary of Business Segment Data and Note 21 to our Consolidated Financial Statements for financial information, including revenues and earnings from operations, for each of our business segments.

Intellectual Property

We own numerous patents and have licenses for the use of patents owned by others, which relate to our products and their manufacture. In addition to owning a large portfolio of intellectual property, we also license intellectual property to and from third parties. For example, the U.S. government has licenses in our patents that are developed in performance of government contracts, and it may use or authorize others to use the inventions covered by such patents for government purposes. Unpatented research, development and engineering skills, as well as certain trademarks, trade secrets, and other intellectual property rights, also make an important contribution to our business. While our intellectual property rights in the aggregate are important to the operation of each of our businesses, we do not believe that our business would be materially affected by the expiration of any particular intellectual property right or termination of any particular intellectual property patent license agreement.

Non-U.S. Revenues

See Note 21 to our Consolidated Financial Statements for information regarding non-U.S. revenues.

Research and Development

Research and development (R&D) expenditures involve experimentation, design, development and related test activities for defense systems, new and derivative jet aircraft including both commercial and military, advanced space and other company-sponsored product development. R&D expenditures are expensed as incurred including amounts allocable as reimbursable overhead costs on U.S. government contracts.

Our total research and development expense, net amounted to $3.2 billion, $4.6 billion and $3.3 billion in 2017, 2016 and 2015, respectively.

Research and development costs also include bid and proposal efforts related to government products and services, as well as costs incurred in excess of amounts estimated to be recoverable under cost- sharing research and development agreements. Bid and proposal costs were $288 million, $311 million and $286 million in 2017, 2016 and 2015, respectively.

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Employees

Total workforce level at December 31, 2017 was approximately 140,800. As of December 31, 2017, our principal collective bargaining agreements were with the following unions:

Union

Percent of our Employees

Represented Status of the Agreements with Major Union The International Association of Machinists and Aerospace Workers (IAM)

21% We have two major agreements; one expiring in June 2022 and one in September 2024.

The Society of Professional Engineering Employees in Aerospace (SPEEA)

12% We have two major agreements expiring in October 2022.

The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW)

1% We have one major agreement expiring in October 2022.

Competition

The commercial jet aircraft market and the airline industry remain extremely competitive. We face aggressive international competitors who are intent on increasing their market share, such as Airbus, Embraer and Bombardier, and other entrants from Russia, China and Japan. We are focused on improving our processes and continuing cost reduction efforts. We intend to continue to compete with other airplane manufacturers by providing customers with greater value products.

BDS faces strong competition in all market segments, primarily from Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company, General Dynamics Corporation and SpaceX. Non-U.S. companies such as BAE Systems and Airbus Group continue to build a strategic presence in the U.S. market by strengthening their North American operations and partnering with U.S. defense companies. In addition, certain competitors have occasionally formed teams with other competitors to address specific customer requirements. BDS expects the trend of strong competition to continue into 2018.

The commercial and defense services market is an extremely challenging landscape made up of many of the same strong U.S. and non-U.S. competitors facing BCA and BDS along with other competitors in those markets. BGS leverages our extensive services network offering products and services which span the life cycle of our defense and commercial airplane programs: training, fleet services and logistics, maintenance and engineering, modifications and upgrades - as well as the daily cycle of gate-to-gate operations. BGS expects the market to remain highly competitive in 2018, and intends to grow market share by leveraging a high level of customer satisfaction and productivity.

Regulatory Matters

Our businesses are heavily regulated in most of our markets. We deal with numerous U.S. government agencies and entities, including but not limited to all of the branches of the U.S. military, NASA, the Federal Aviation Administration (FAA) and the Department of Homeland Security. Similar government authorities exist in our non-U.S. markets.

Government Contracts. The U.S. government, and other governments, may terminate any of our government contracts at their convenience, as well as for default based on our failure to meet specified performance requirements. If any of our U.S. government contracts were to be terminated for convenience, we generally would be entitled to receive payment for work completed and allowable termination or cancellation costs. If any of our government contracts were to be terminated for default, generally the U.S.

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government would pay only for the work that has been accepted and could require us to pay the difference between the original contract price and the cost to re-procure the contract items, net of the work accepted from the original contract. The U.S. government can also hold us liable for damages resulting from the default.

Commercial Aircraft. In the U.S., our commercial aircraft products are required to comply with FAA regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. Outside the U.S., similar requirements exist for airworthiness, installation and operational approvals. These requirements are generally administered by the national aviation authorities of each country and, in the case of Europe, coordinated by the European Joint Aviation Authorities.

Environmental. We are subject to various federal, state, local and non-U.S. laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes. We continually assess our compliance status and management of environmental matters to ensure our operations are in compliance with all applicable environmental laws and regulations. Investigation, remediation, and operation and maintenance costs associated with environmental compliance and management of sites are a normal, recurring part of our operations. These costs often are allowable costs under our contracts with the U.S. government. It is reasonably possible that costs incurred to ensure continued environmental compliance could have a material impact on our results of operations, financial condition or cash flows if additional work requirements or more stringent clean-up standards are imposed by regulators, new areas of soil, air and groundwater contamination are discovered and/or expansions of work scope are prompted by the results of investigations.

A Potentially Responsible Party (PRP) has joint and several liability under existing U.S. environmental laws. Where we have been designated a PRP by the Environmental Protection Agency or a state environmental agency, we are potentially liable to the government or third parties for the full cost of remediating contamination at our facilities or former facilities or at third-party sites. If we were required to fully fund the remediation of a site for which we were originally assigned a partial share, the statutory framework would allow us to pursue rights to contribution from other PRPs. For additional information relating to environmental contingencies, see Note 11 to our Consolidated Financial Statements.

Non-U.S. Sales. Our non-U.S. sales are subject to both U.S. and non-U.S. governmental regulations and procurement policies and practices, including regulations relating to import-export control, investment, exchange controls, anti-corruption, and repatriation of earnings. Non-U.S. sales are also subject to varying currency, political and economic risks.

Raw Materials, Parts, and Subassemblies

We are highly dependent on the availability of essential materials, parts and subassemblies from our suppliers and subcontractors. The most important raw materials required for our aerospace products are aluminum (sheet, plate, forgings and extrusions), titanium (sheet, plate, forgings and extrusions) and composites (including carbon and boron). Although alternative sources generally exist for these raw materials, qualification of the sources could take a year or more. Many major components and product equipment items are procured or subcontracted on a sole-source basis with a number of companies.

Suppliers

We are dependent upon the ability of a large number of U.S. and non-U.S. suppliers and subcontractors to meet performance specifications, quality standards and delivery schedules at our anticipated costs. While we maintain an extensive qualification and performance surveillance system to control risk associated with such reliance on third parties, failure of suppliers or subcontractors to meet commitments could adversely affect production schedules and program/contract profitability, thereby jeopardizing our ability

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to fulfill commitments to our customers. We are also dependent on the availability of energy sources, such as electricity, at affordable prices.

Seasonality

No material portion of our business is considered to be seasonal.

Executive Officers of the Registrant

See “Item 10. Directors, Executive Officers and Corporate Governance” in Part III.

Other Information

Boeing was originally incorporated in the State of Washington in 1916 and reincorporated in Delaware in 1934. Our principal executive offices are located at 100 N. Riverside Plaza, Chicago, Illinois 60606 and our telephone number is (312) 544-2000.

General information about us can be found at www.boeing.com. The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the Securities and Exchange Commission (SEC). Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC. These reports may also be obtained at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Boeing.

Forward-Looking Statements

This report, as well as our annual report to shareholders, quarterly reports, and other filings we make with the SEC, press and earnings releases and other written and oral communications, contain “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, including those set forth in the “Risk Factors” section below and other important factors disclosed in this report and from time to time in our other filings with the SEC, could cause actual results to differ materially and adversely from these forward-looking statements. 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.

Item 1A. Risk Factors

An investment in our common stock or debt securities involves risks and uncertainties and our actual results and future trends may differ materially from our past or projected future performance. We urge investors to consider carefully the risk factors described below in evaluating the information contained in this report.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Our Commercial Airplanes and Global Services businesses depend heavily on commercial airlines, and are subject to unique risks.

Market conditions have a significant impact on demand for our commercial aircraft and related services. The commercial aircraft market is predominantly driven by long-term trends in airline passenger and cargo traffic. The principal factors underlying long-term traffic growth are sustained economic growth and political stability both in developed and emerging markets. Demand for our commercial aircraft is further influenced by airline profitability, availability of aircraft financing, world trade policies, government-to-government relations, technological advances, price and other competitive factors, fuel prices, terrorism, epidemics and environmental regulations. Traditionally, the airline industry has been cyclical and very competitive and has experienced significant profit swings and constant challenges to be more cost competitive. In addition, availability of financing to non-U.S. customers depends in part on the Export-Import Bank of the United States being fully operational. Significant deterioration in the global economic environment, the airline industry generally, or the financial stability of one or more of our major customers could result in fewer new orders for aircraft or services, or could cause customers to seek to postpone or cancel contractual orders and/or payments to us, which could result in lower revenues, profitability and cash flows and a reduction in our contractual backlog. In addition, because our commercial aircraft backlog consists of aircraft scheduled for delivery over a period of several years, any of these macroeconomic, industry or customer impacts could unexpectedly affect deliveries over a long period.

We enter into firm fixed-price aircraft sales contracts with indexed price escalation clauses which could subject us to losses if we have cost overruns or if increases in our costs exceed the applicable escalation rate. Commercial aircraft sales contracts are often entered into years before the aircraft are delivered. In order to help account for economic fluctuations between the contract date and delivery date, aircraft pricing generally consists of a fixed amount as modified by price escalation formulas derived from labor, commodity and other price indices. Our revenue estimates are based on current expectations with respect to these escalation formulas, but the actual escalation amounts are outside of our control. Escalation factors can fluctuate significantly from period to period. Changes in escalation amounts can significantly impact revenues and operating margins in our Commercial Airplanes business.

We derive a significant portion of our revenues from a limited number of commercial airlines. We can make no assurance that any customer will exercise purchase options, fulfill existing purchase commitments or purchase additional products or services from us. In addition, fleet decisions, airline consolidations or financial challenges involving any of our major commercial airline customers could significantly reduce our revenues and limit our opportunity to generate profits from those customers.

Our Commercial Airplanes business depends on our ability to maintain a healthy production system, achieve planned production rate targets, successfully develop new aircraft or new derivative aircraft, and meet or exceed stringent performance and reliability standards.

The commercial aircraft business is extremely complex, involving extensive coordination and integration with U.S and non-U.S. suppliers, highly-skilled labor from thousands of employees and other partners, and stringent regulatory requirements and performance and reliability standards. In addition, the introduction of new aircraft programs and/or derivatives, such as the 787-10, and 777X, involves increased risks associated with meeting development, testing, production and certification schedules. As a result, our ability to deliver aircraft on time, satisfy regulatory and customer requirements, and achieve or maintain, as applicable, program profitability is subject to significant risks.

We must minimize disruption caused by production changes and achieve productivity improvements in order to meet customer demand and maintain our profitability. We have plans to adjust production rates on several of our commercial aircraft programs, while at the same time engaging in significant ongoing development and production of the 787-10 and 777X aircraft. In addition, we continue to seek opportunities to reduce the costs of building our aircraft, including working with our suppliers to reduce supplier costs,

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

identifying and implementing productivity improvements, and optimizing how we manage inventory. If production rate changes at any of our commercial aircraft assembly facilities are delayed or create significant disruption to our production system, or if our suppliers cannot timely deliver components to us at the cost and rates necessary to achieve our targets, we may be unable to meet delivery schedules and/ or the financial performance of one or more of our programs may suffer.

Operational challenges impacting the production system for one or more of our commercial aircraft programs could result in production delays and/or failure to meet customer demand for new aircraft, either of which would negatively impact our revenues and operating margins. Our commercial aircraft production system is extremely complex. Operational issues, including delays or defects in supplier components, failure to meet internal performance plans, or delays or failures to achieve required regulatory certifications, could result in significant out-of-sequence work and increased production costs, as well as delayed deliveries to customers, impacts to aircraft performance and/or increased warranty or fleet support costs.

If our commercial airplanes fail to satisfy performance and reliability requirements, we could face additional costs and/or lower revenues. Developing and manufacturing commercial aircraft that meet or exceed our performance and reliability standards, as well as those of customers and regulatory agencies, can be costly and technologically challenging. These challenges are particularly significant with newer aircraft programs. Any failure of any Boeing aircraft to satisfy performance or reliability requirements could result in disruption to our operations, higher costs and/or lower revenues.

Changes in levels of U.S. government defense spending or overall acquisition priorities could negatively impact our financial position and results of operations.

We derive a substantial portion of our revenue from the U.S. government, primarily from defense related programs with the United States Department of Defense (U.S. DoD). Levels of U.S. defense spending are very difficult to predict and may be impacted by numerous factors such as the political environment, U.S. foreign policy, macroeconomic conditions and the ability of the U.S. government to enact relevant legislation such as authorization and appropriations bills.

In addition, significant budgetary delays and constraints have already resulted in reduced spending levels, and additional reductions may be forthcoming. The Budget Control Act of 2011 (The Act) established limits on U.S. government discretionary spending, including a reduction of defense spending between the 2012 and 2021 U.S. government fiscal years. Accordingly, long-term uncertainty remains with respect to overall levels of defense spending and it is likely that U.S. government discretionary spending levels will continue to be subject to pressure.

In addition, there continues to be significant uncertainty with respect to program-level appropriations for the U.S. DoD and other government agencies (including NASA) within the overall budgetary framework described above. While the House and Senate Appropriations committees included funding for Boeing’s major programs, such as F/A-18, CH-47 Chinook, AH-64 Apache, KC-46A Tanker and P-8 programs, in the final FY2017 appropriation and in their FY2018 bills, uncertainty remains about how defense budgets in FY2018 and beyond will affect Boeing’s programs. Future budget cuts, including cuts mandated by sequestration, or future procurement decisions 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 the results of the Company’s operations, financial position and/or cash flows.

In addition, as a result of the significant ongoing uncertainty with respect to both U.S. defense spending levels and the nature of the threat environment, we expect the U.S. DoD to continue to emphasize cost- cutting and other efficiency initiatives in its procurement processes. If we can no longer adjust successfully to these changing acquisition priorities and/or fail to meet affordability targets set by the U.S. DoD customer, our revenues and market share would be further impacted.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

We conduct a significant portion of our business pursuant to U.S. government contracts, which are subject to unique risks.

In 2017, 31% of our revenues were earned pursuant to U.S. government contracts, which include foreign military sales (FMS) through the U.S. government. Business conducted pursuant to such contracts is subject to extensive procurement regulations and other unique risks.

Our sales to the U.S. government are subject to extensive procurement regulations, and changes to those regulations could increase our costs. New procurement regulations, or changes to existing requirements, could increase our compliance costs or otherwise have a material impact on the operating margins of our BDS and BGS businesses. These requirements may result in increased compliance costs, and we could be subject to additional costs in the form of withheld payments and/or reduced future business if we fail to comply with these requirements in the future. Compliance costs attributable to current and potential future procurement regulations such as these could negatively impact our financial condition and operating results.

The U.S. government may modify, curtail or terminate one or more of our contracts. The U.S. government contracting party may modify, curtail or terminate its contracts and subcontracts with us, without prior notice and either at its convenience or for default based on performance. In addition, funding pursuant to our U.S. government contracts may be reduced or withheld as part of the U.S. Congressional appropriations process due to fiscal constraints, changes in U.S. national security strategy and/or priorities or other reasons. Further uncertainty with respect to ongoing programs could also result in the event that the U.S. government finances its operations through temporary funding measures such as “continuing resolutions” rather than full-year appropriations. Any loss or anticipated loss or reduction of expected funding and/or modification, curtailment, or termination of one or more large programs could have a material adverse effect on our earnings, cash flow and/or financial position.

We are subject to U.S. government inquiries and investigations, including periodic audits of costs that we determine are reimbursable under U.S. government contracts. U.S. government agencies, including the Defense Contract Audit Agency and the Defense Contract Management Agency, routinely audit government contractors. These agencies review our performance under contracts, cost structure and compliance with applicable laws, regulations, and standards, as well as the adequacy of and our compliance with our internal control systems and policies. Any costs found to be misclassified or inaccurately allocated to a specific contract will be deemed non-reimbursable, and to the extent already reimbursed, must be refunded. Any inadequacies in our systems and policies could result in withholds on billed receivables, penalties and reduced future business. Furthermore, if any audit, inquiry or investigation uncovers improper or illegal activities, we could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with the U.S. government. We also could suffer reputational harm if allegations of impropriety were made against us, even if such allegations are later determined to be false.

We enter into fixed-price contracts which could subject us to losses if we have cost overruns.

Our BDS and BGS defense businesses generated approximately 65% and 77% of their 2017 revenues from fixed-price contracts. While fixed-price contracts enable us to benefit from performance improvements, cost reductions and efficiencies, they also subject us to the risk of reduced margins or incurring losses if we are unable to achieve estimated costs and revenues. If our estimated costs exceed our estimated price, we recognize reach-forward losses which can significantly affect our reported results. For example, during 2017, we recorded reach-forward losses totaling $471 million on the USAF KC-46A Tanker contract, primarily driven by additional costs attributable to certification and incorporating changes into low rate initial production (LRIP) aircraft. The long term nature of many of our contracts makes the process of estimating costs and revenues on fixed-price contracts inherently risky. Fixed-price contracts often contain price incentives and penalties tied to performance which can be difficult to estimate and have significant

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

impacts on margins. In addition, some of our contracts have specific provisions relating to cost, schedule and performance.

Fixed-price development contracts are generally subject to more uncertainty than fixed-price production contracts. Many of these development programs have highly complex designs. In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect our financial condition. Examples of significant BDS fixed-price development contracts include Commercial Crew, Saudi F-15, USAF KC-46A Tanker, and commercial and military satellites.

We enter into cost-type contracts which also carry risks.

Our BDS and BGS defense businesses generated approximately 35% and 23% of their 2017 revenues from cost-type contracting arrangements. Some of these are development programs that have complex design and technical challenges. These cost-type programs typically have award or incentive fees that are subject to uncertainty and may be earned over extended periods. In these cases the associated financial risks are primarily in reduced fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Programs whose contracts are primarily cost-type include GMD, Proprietary and SLS programs.

We enter into contracts that include in-orbit incentive payments that subject us to risks.

Contracts in the commercial satellite industry and certain government satellite contracts include in-orbit incentive payments. These in-orbit payments may be paid over time after final satellite acceptance or paid in full prior to final satellite acceptance. In both cases, the in-orbit incentive payment is at risk if the satellite does not perform to specifications for up to 15 years after acceptance. The net present value of in-orbit incentive fees we ultimately expect to realize is recognized as revenue in the construction period. If the satellite fails to meet contractual performance criteria, customers will not be obligated to continue making in-orbit payments and/or we may be required to provide refunds to the customer and incur significant charges.

Our ability to deliver products and services that satisfy customer requirements is heavily dependent on the performance and financial stability of our subcontractors and suppliers, as well as on the availability of raw materials and other components.

We rely on other companies including U.S. and non-U.S. subcontractors and suppliers to provide and produce raw materials, integrated components and sub-assemblies, and production commodities and to perform some of the services that we provide to our customers. If one or more of our suppliers or subcontractors experiences financial difficulties, delivery delays or other performance problems, we may be unable to meet commitments to our customers or incur additional costs. In addition, if one or more of the raw materials on which we depend (such as aluminum, titanium or composites) becomes unavailable or is available only at very high prices, we may be unable to deliver one or more of our products in a timely fashion or at budgeted costs. In some instances, we depend upon a single source of supply. Any service disruption from one of these suppliers, either due to circumstances beyond the supplier’s control, such as geo-political developments, or as a result of performance problems or financial difficulties, could have a material adverse effect on our ability to meet commitments to our customers or increase our operating costs.

We use estimates in accounting for many contracts and programs. Changes in our estimates could adversely affect our future financial results.

Contract and program accounting require judgment relative to assessing risks, estimating revenues and

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

costs and making assumptions for schedule and technical issues. Due to the size and nature of many of our contracts and programs, the estimation of total revenues and cost at completion is complicated and subject to many variables. Assumptions have to be made regarding the length of time to complete the contract or program because costs also include expected increases in wages and employee benefits, material prices and allocated fixed costs. Incentives or penalties related to performance on contracts are considered in estimating sales and profit rates, and are recorded when there is sufficient information for us to assess anticipated performance. Suppliers’ assertions are also assessed and considered in estimating costs and profit rates. Estimates of award fees are also used in sales and profit rates based on actual and anticipated awards.

With respect to each of our commercial aircraft programs, inventoriable production costs (including overhead), program tooling and other non-recurring costs and routine warranty costs are accumulated and charged as cost of sales by program instead of by individual units or contracts. A program consists of the estimated number of units (accounting quantity) of a product to be produced in a continuing, long-term production effort for delivery under existing and anticipated contracts limited by the ability to make reasonably dependable estimates. To establish the relationship of sales to cost of sales, program accounting requires estimates of (a) the number of units to be produced and sold in a program, (b) the period over which the units can reasonably be expected to be produced and (c) the units’ expected sales prices, production costs, program tooling and other non-recurring costs, and routine warranty costs for the total program. Several factors determine accounting quantity, including firm orders, letters of intent from prospective customers and market studies. Changes to customer or model mix, production costs and rates, learning curve, changes to price escalation indices, costs of derivative aircraft, supplier performance, customer and supplier negotiations/settlements, supplier claims and/or certification issues can impact these estimates. Any such change in estimates relating to program accounting may adversely affect future financial performance.

Because of the significance of the judgments and estimation processes described above, materially different sales and profit amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect future period financial performance. For additional information on our accounting policies for recognizing sales and profits, see our discussion under “Management’s Discussion and Analysis – Critical Accounting Policies – Contract Accounting/Program Accounting” on pages 41 – 43 and Note 1 to our Consolidated Financial Statements on pages 52 – 64 of this Form 10-K.

Competition within our markets and with respect to the products we sell may reduce our future contracts and sales.

The markets in which we operate are highly competitive and one or more of our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas. In our Commercial Airplanes business, we anticipate increasing competition among non-U.S. aircraft manufacturers of commercial jet aircraft. In our BDS business, we anticipate that the effects of defense industry consolidation, fewer large and new programs and new priorities, including near and long- term cost competitiveness, of our U.S. DoD and non-U.S. will intensify competition for many of our BDS products. Our BGS segment faces competition from many of the same strong U.S. and non-U.S. competitors facing BCA and BDS. Furthermore, we are facing increased international competition and cross-border consolidation of competition. There can be no assurance that we will be able to compete successfully against our current or future competitors or that the competitive pressures we face will not result in reduced revenues and market share.

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06-Mar-18

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

We derive a significant portion of our revenues from non-U.S. sales and are subject to the risks of doing business in other countries.

In 2017, non-U.S. customers, which includes FMS, accounted for approximately 55% of our revenues. We expect that non-U.S. sales will continue to account for a significant portion of our revenues for the foreseeable future. As a result, we are subject to risks of doing business internationally, including:

• changes in regulatory requirements;

• U.S. and non-U.S. government policies, including requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements;

• fluctuations in international currency exchange rates;

• volatility in international political and economic environments and changes in non-U.S. national priorities and budgets, which can lead to delays or fluctuations in orders;

• the complexity and necessity of using non-U.S. representatives and consultants;

• the uncertainty of the ability of non-U.S. customers to finance purchases, including the availability of financing from the Export-Import Bank of the United States;

• uncertainties and restrictions concerning the availability of funding credit or guarantees;

• imposition of domestic and international taxes, export controls, tariffs, embargoes, sanctions and other trade restrictions;

• the difficulty of management and operation of an enterprise spread over many countries;

• compliance with a variety of non-U.S. laws, as well as U.S. laws affecting the activities of U.S. companies abroad; and

• unforeseen developments and conditions, including terrorism, war, epidemics and international tensions and conflicts.

While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect our operations in the future.

Unauthorized access to our or our customers’ information and systems could negatively impact our business.

We face certain security threats, including threats to the confidentiality, availability and integrity of our data and systems. We maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems and management oversight in order to address these threats. While these measures are designed to prevent, detect and respond to unauthorized activity in our systems, certain types of attacks, including cyber-attacks, could result in significant financial or information losses and/or reputational harm. In addition, we manage information and information technology systems for certain customers. Many of these customers face similar security threats. If we cannot prevent the unauthorized access, release and/or corruption of our customers’ confidential, classified or personally identifiable information, our reputation could be damaged, and/or we could face financial losses.

The outcome of litigation and of government inquiries and investigations involving our business is unpredictable and an adverse decision in any such matter could have a material effect on our financial position and results of operations.

We are involved in a number of litigation matters. These matters may divert financial and management resources that would otherwise be used to benefit our operations. No assurances can be given that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits, or future lawsuits, could have a material impact on our financial position and results of operations. In addition, we

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06-Mar-18

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

are subject to extensive regulation under the laws of the United States and its various states, as well as other jurisdictions in which we operate. As a result, we are sometimes subject to government inquiries and investigations of our business due, among other things, to our business relationships with the U.S. government, the heavily regulated nature of our industry, and in the case of environmental proceedings, our current or past ownership of certain property. Any such inquiry or investigation could potentially result in an adverse ruling against us, which could have a material impact on our financial position and results of operations.

A significant portion of our customer financing portfolio is concentrated among certain customers and in certain types of Boeing aircraft, which exposes us to concentration risks.

A significant portion of our customer financing portfolio is concentrated among certain customers and in distinct geographic regions. Our portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably 717 and 747-8 aircraft, and among customers that we believe have less than investment-grade credit. If one or more customers holding a significant portion of our portfolio assets experiences financial difficulties or otherwise defaults on or does not renew its leases with us at their expiration, and we are unable to redeploy the aircraft on reasonable terms, or if the types of aircraft that are concentrated in our portfolio suffer greater than expected declines in value, our earnings, cash flows and/or financial position could be materially adversely affected.

We may be unable to obtain debt to fund our operations and contractual commitments at competitive rates, on commercially reasonable terms or in sufficient amounts.

We depend, in part, upon the issuance of debt to fund our operations and contractual commitments. As of December 31, 2017 and 2016, our airplane financing commitments totaled $10,221 million and $14,847 million. If we require additional funding in order to fund outstanding financing commitments or meet other business requirements, our market liquidity may not be sufficient. A number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt. These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, outlook or credit ratings. The occurrence of any or all of these events may adversely affect our ability to fund our operations and contractual or financing commitments.

We may not realize the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures.

As part of our business strategy, we may merge with or acquire businesses and/or form joint ventures and strategic alliances. Whether we realize the anticipated benefits from these acquisitions and related activities depends, in part, upon our ability to integrate the operations of the acquired business, the performance of the underlying product and service portfolio, and the performance of the management team and other personnel of the acquired operations. Accordingly, our financial results could be adversely affected by unanticipated performance issues, legacy liabilities, transaction-related charges, amortization of expenses related to intangibles, charges for impairment of long-term assets, credit guarantees, partner performance and indemnifications. Consolidations of joint ventures could also impact our reported results of operations or financial position. While we believe that we have established appropriate and adequate procedures and processes to mitigate these risks, there is no assurance that these transactions will be successful. We also may make strategic divestitures from time to time. These transactions may result in continued financial involvement in the divested businesses, such as through guarantees or other financial arrangements, following the transaction. Nonperformance by those divested businesses could affect our future financial results through additional payment obligations, higher costs or asset write-downs.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Our insurance coverage may be inadequate to cover all significant risk exposures.

We are exposed to liabilities that are unique to the products and services we provide. We maintain insurance for certain risks and, in some circumstances, we may receive indemnification from the U.S. government. The amount of our insurance coverage may not cover all claims or liabilities and we may be forced to bear substantial costs. For example, liabilities arising from the use of certain of our products, such as aircraft technologies, missile systems, border security systems, anti-terrorism technologies, and/or air traffic management systems may not be insurable on commercially reasonable terms. While some of these products are shielded from liability within the U.S. under the SAFETY Act provisions of the 2002 Homeland Security Act, no such protection is available outside the U.S., potentially resulting in significant liabilities. The amount of insurance coverage we maintain may be inadequate to cover these or other claims or liabilities.

Business disruptions could seriously affect our future sales and financial condition or increase our costs and expenses.

Our business may be impacted by disruptions including threats to physical security, information technology or cyber-attacks or failures, damaging weather or other acts of nature and pandemics or other public health crises. Any of these disruptions could affect our internal operations or our ability to deliver products and services to our customers. Any significant production delays, or any destruction, manipulation or improper use of our data, information systems or networks could impact our sales, increase our expenses and/or have an adverse effect on the reputation of Boeing and of our products and services.

Some of our and our suppliers’ workforces are represented by labor unions, which may lead to work stoppages.

Approximately 52,000 employees, which constitute 37% of our total workforce, were union represented as of December 31, 2017. We experienced a work stoppage in 2008 when a labor strike halted commercial aircraft and certain BDS program production. We may experience additional work stoppages in the future, which could adversely affect our business. We cannot predict how stable our relationships, currently with 10 U.S. labor organizations and 7 non-U.S. labor organizations, will be or whether we will be able to meet the unions’ requirements without impacting our financial condition. The unions may also limit our flexibility in dealing with our workforce. Union actions at suppliers can also affect us. Work stoppages and instability in our union relationships could delay the production and/or development of our products, which could strain relationships with customers and cause a loss of revenues which would adversely affect our operations.

Substantial pension and other postretirement benefit obligations have a material impact on our earnings, shareholders’ equity and cash flows from operations, and could have significant adverse impacts in future periods.

The majority of our employees have earned benefits under defined benefit pension plans. Potential pension contributions include both mandatory amounts required under the Employee Retirement Income Security Act and discretionary contributions to improve the plans' funded status. The extent of future contributions depends heavily on market factors such as the discount rate and the actual return on plan assets. We estimate future contributions to these plans using assumptions with respect to these and other items. Changes to those assumptions could have a significant effect on future contributions as well as on our annual pension costs and/or result in a significant change to shareholders' equity. For U.S. government contracts, we allocate pension costs to individual contracts based on U.S. Cost Accounting Standards which can also affect contract profitability. We also provide other postretirement benefits to certain of our employees, consisting principally of health care coverage for eligible retirees and qualifying dependents. Our estimates of future costs associated with these benefits are also subject to assumptions, including

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estimates of the level of medical cost increases. For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see “Management's Discussion and Analysis-Critical Accounting Policies-Pension Plans” on page 43 of this Form 10-K. Although GAAP expense and pension or other postretirement benefit contributions are not directly related, the key economic factors that affect GAAP expense would also likely affect the amount of cash or stock we would contribute to our plans.

Our operations expose us to the risk of material environmental liabilities.

We are subject to various U.S. federal, state, local and non-U.S. laws and regulations related to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes. We could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as well as third-party claims for property damage or personal injury, if we were to violate or become liable under environmental laws or regulations. In some cases, we may be subject to such costs due to environmental impacts attributable to our current or past manufacturing operations or the operations of companies we have acquired. In other cases, we may become subject to such costs due to an indemnification agreement between us and a third party relating to such environmental liabilities. In addition, new laws and regulations, more stringent enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new remediation requirements could result in additional costs. For additional information relating to environmental contingencies, see Note 11 to our Consolidated Financial Statements.

Item 1B. Unresolved Staff Comments Not applicable

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Item 2. Properties We occupied approximately 85 million square feet of floor space on December 31, 2017 for manufacturing, warehousing, engineering, administration and other productive uses, of which approximately 96% was located in the United States. The following table provides a summary of the floor space by business as of December 31, 2017:

(Square feet in thousands) Owned Leased Government

Owned(1) Total Commercial Airplanes 41,115 2,455 43,570 Defense, Space & Security 26,449 5,390 31,839 Global Services 681 5,274 5,955 Other(2) 2,448 915 305 3,668 Total 70,693 14,034 305 85,032

(1) Excludes rent-free space furnished by U.S. government landlord of 49 square feet. (2) Other includes BCC, sites used for common internal services, and our Corporate Headquarters.

At December 31, 2017, we occupied in excess of 77.8 million square feet of floor space at the following major locations:

• Commercial Airplanes – Greater Seattle, WA; Greater Charleston, SC; Portland, OR; Greater Los Angeles, CA; Greater Salt Lake City, UT; Australia; and Canada

• Defense, Space & Security – Greater St. Louis, MO; Greater Los Angeles, CA; Greater Seattle, WA; Philadelphia, PA; Mesa, AZ; Huntsville, AL; Oklahoma City, OK; Heath, OH; Greater Washington, DC; and Houston, TX

• Global Services – San Antonio, TX; Dallas, TX; and Mesa, AZ • Other – Chicago, IL; Greater Seattle, WA; and Greater Washington, DC

Most runways and taxiways that we use are located on airport properties owned by others and are used jointly with others. Our rights to use such facilities are provided for under long-term leases with municipal, county or other government authorities. In addition, the U.S. government furnishes us certain office space, installations and equipment at U.S. government bases for use in connection with various contract activities.

We believe that our major properties are adequate for our present needs and, as supplemented by planned improvements and construction, expect them to remain adequate for the foreseeable future.

Item 3. Legal Proceedings

Currently, we are involved in a number of legal proceedings. For a discussion of contingencies related to legal proceedings, see Note 20 to our Consolidated Financial Statements, which is hereby incorporated by reference.

Item 4. Mine Safety Disclosures

Not applicable

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The principal market for our common stock is the New York Stock Exchange where it trades under the symbol BA. As of February 5, 2018, there were 108,310 shareholders of record. Additional information required by this item is incorporated by reference from Note 22 to our Consolidated Financial Statements.

Issuer Purchases of Equity Securities

The following table provides information about purchases we made during the quarter ended December 31, 2017 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

(Dollars in millions, except per share data)

(a) (b) (c) (d)

Total Number of Shares

Purchased(1) Average

Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans

or Programs

Approximate Dollar Value of Shares That May Yet

be Purchased Under the Plans or Programs(2)

10/1/2017 thru 10/31/2017 3,860,891 $259.30 3,856,749 $5,501 11/1/2017 thru 11/30/2017 2,806,168 262.85 2,800,181 4,765 12/1/2017 thru 12/31/2017 39,098 276.49 18,000 Total 6,706,157 $260.89 6,656,930

(1) We purchased an aggregate of 6,656,930 shares of our common stock in the open market pursuant to our repurchase plan and 49,227 shares transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. We did not purchase shares in swap transactions.

(2) On December 11, 2017, we announced a new repurchase plan for up to $18 billion of common stock, replacing the plan previously authorized in 2016.

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Item 6. Selected Financial Data

Five-Year Summary (Unaudited) (Dollars in millions, except per share data) 2017 2016 2015 2014 2013 Revenues $93,392 $94,571 $96,114 $90,762 $86,623 Net earnings from continuing operations $8,197 $4,895 $5,176 $5,446 $4,586

Basic earnings per share from continuing operations $13.60 $7.70 $7.52 $7.47 $6.03 Diluted earnings per share from continuing operations 13.43 7.61 7.44 7.38 5.96 Dividends declared per share(1) 5.97 4.69 3.82 3.10 2.185

Cash and cash equivalents $8,813 $8,801 $11,302 $11,733 $9,088 Short-term and other investments 1,179 1,228 750 1,359 6,170 Total assets 92,333 89,997 94,408 92,921 90,014 Total debt 11,117 9,952 9,964 9,070 9,635

Operating cash flow $13,344 $10,499 $9,363 $8,858 $8,179

Total backlog $488,145 $473,492 $489,299 $502,391 $440,928

Year-end workforce 140,800 150,500 161,400 165,500 168,400

(1) Cash dividends have been paid on common stock every year since 1942.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations and Financial Condition

Overview

We are a global market leader in the design, development, manufacture, sale, service and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems and services. We are one of the two major manufacturers of 100+ seat airplanes for the worldwide commercial airline industry and one of the largest defense contractors in the U.S. While our principal operations are in the U.S., we conduct operations in an expanding number of countries and rely on an extensive network of non-U.S. partners, key suppliers and subcontractors.

Our strategy is centered on successful execution in healthy core businesses – Commercial Airplanes (BCA), Defense, Space & Security (BDS), and Global Services (BGS) – supplemented and supported by Boeing Capital (BCC). Taken together, these core businesses have historically generated substantial earnings and cash flow that permit us to invest in new products and services. We focus on producing the products and providing the services that the market demands, and continue to find new ways to improve efficiency and quality to provide a fair return for our shareholders. BCA is committed to being the leader in commercial aviation by offering airplanes and services that deliver superior design, efficiency and value to customers around the world. BDS integrates its resources in defense, intelligence, communications, security, space and services to deliver capability-driven solutions to its customers at reduced costs. Our BDS strategy is to leverage our core businesses to capture key next-generation programs while expanding our presence in adjacent and international markets, underscored by an intense focus on growth and productivity. BGS provides support for commercial, defense and space customers through innovative, comprehensive, and cost-competitive product and service solutions. Our strategy also benefits us as the cyclicality of commercial and defense markets sometimes offset. BCC facilitates, arranges, structures and provides selective financing solutions for our Boeing customers.

Consolidated Results of Operations

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

(Dollars in millions, except per share data) Years ended December 31, 2017 2016 2015 Revenues $93,392 $94,571 $96,114

GAAP Earnings from operations 10,278 5,834 7,443 Operating margins 11.0% 6.2% 7.7% Effective income tax rate 18.4% 12.1% 27.7% Net earnings $8,197 $4,895 $5,176 Diluted earnings per share $13.43 $7.61 $7.44

Non-GAAP (1)

Core operating earnings $8,970 $5,464 $7,741 Core operating margins 9.6% 5.8% 8.1% Core earnings per share $12.04 $7.24 $7.72

(1) These measures exclude certain components of pension and other postretirement benefit expense. See page 39 - 40 for important information about these non-GAAP measures and reconciliations to the most comparable GAAP measures.

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Revenues

The following table summarizes Revenues:

(Dollars in millions) Years ended December 31, 2017 2016 2015 Commercial Airplanes $56,729 $58,012 $59,399 Defense, Space & Security 21,057 22,563 23,708 Global Services 14,639 13,925 13,293 Boeing Capital 307 298 413 Unallocated items, eliminations and other 660 (227) (699) Total $93,392 $94,571 $96,114

Revenues in 2017 decreased by $1,179 million or 1% compared with 2016. BCA revenues decreased by $1,283 million or 2% primarily due to delivery mix, with fewer twin aisle deliveries more than offsetting the impact of higher single aisle deliveries. BDS revenues decreased by $1,506 million primarily due to fewer C-17 deliveries, lower milestone revenue on satellite programs, and the mix of deliveries on the Apache and F-15 programs, partially offset by higher volume on various weapons programs. The decreases at BCA and BDS were partially offset by higher unallocated revenue and higher BGS revenue, primarily due to higher commercial parts revenue.

Revenues in 2016 decreased by $1,543 million or 2% compared with 2015. BCA revenues decreased by $1,387 million or 2% due fewer deliveries. BDS revenues decreased by $1,145 million or 5% primarily due to lower milestone revenue on government satellite programs, fewer C-17 deliveries, lower Commercial Crew revenue, as well as timing and mix of CH-47 Chinook deliveries, partially offset by higher revenue on several modifications and upgrades programs. The decreases at BCA and BDS were partially offset by higher BGS revenue, primarily due to higher commercial parts revenue and government services revenue.

The changes in unallocated items, eliminations and other in 2017, 2016 and 2015 primarily reflect the timing of eliminations for intercompany aircraft deliveries and the sale of aircraft previously leased to customers.

Earnings From Operations

The following table summarizes Earnings from operations:

(Dollars in millions) Years ended December 31, 2017 2016 2015 Commercial Airplanes $5,432 $1,995 $4,284 Defense, Space & Security 2,223 1,966 2,312 Global Services 2,256 2,177 1,835 Boeing Capital 114 59 50 Unallocated pension and other postretirement benefit income/(expense) 1,308 370 (298) Other unallocated items and eliminations (1,055) (733) (740) Earnings from operations (GAAP) $10,278 $5,834 $7,443 Unallocated pension and other postretirement benefit (1,308) (370) 298 Core operating earnings (Non-GAAP) $8,970 $5,464 $7,741

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Earnings from operations in 2017 increased by $4,444 million compared with 2016, primarily due to higher earnings at BCA and BDS, and higher unallocated pension income, which more than offset other unallocated items and eliminations. BCA's 2017 earnings increased by $3,437 million primarily reflecting lower reach-forward losses, lower research and development costs, and improved margins reflecting favorable cost performance, which more than offset the impact of lower revenues. In 2016, BCA recorded reach-forward losses of $1,258 million on the 747 program and reclassified $1,235 million of 787 flight test aircraft inventory costs to research and development expense.

Earnings from operations in 2016 decreased by $1,609 million compared with 2015 due to lower earnings at BCA, partially offset by the change in unallocated pension and postretirement income/(expense). BCA earnings in 2016 decreased by $2,289 million primarily due to the reclassification of $1,235 million of 787 flight test aircraft costs to research and development and higher reach-forward losses on the 747 and KC-46A Tanker programs. The reclassification of flight test aircraft costs was recorded in the second quarter of 2016 as a result of our determination that two 787 flight test aircraft were no longer commercially saleable. The change in the unallocated pension and postretirement income/(expense) in 2016 was primarily driven by lower service costs and lower amortization of actuarial losses.

During 2017, 2016 and 2015, we recorded reach-forward losses on the KC-46A Tanker program. In 2017, we recorded charges of $471 million, of which $378 million was recorded at BCA and $93 million at BDS. During 2016, we recorded charges of $1,128 million: $772 million at BCA and $356 million at BDS. During 2015, we recorded charges of $835 million: $513 million at BCA and $322 million at BDS. During 2016 and 2015 we recorded reach-forward losses on the 747 program of $1,258 million and $885 million.

Core operating earnings for 2017 increased by $3,506 million compared with 2016 primarily due to lower reach forward losses and the reclassification of costs related to the 787 flight test aircraft in 2016.

Core operating earnings in 2016 decreased by $2,227 million compared with 2015 primarily due to the reclassification of costs related to the 787 flight test aircraft and higher charges on the 747 and KC-46A Tanker programs described above.

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

(Dollars in millions) Years ended December 31, 2017 2016 2015 Share-based plans ($77) ($66) ($76) Deferred compensation (240) (46) (63) Eliminations and other (738) (621) (601) Sub-total (included in core operating earnings*) (1,055) (733) (740) Pension 1,120 217 (421) Postretirement 188 153 123 Pension and other postretirement benefit income/(expense) (excluded from core operating earnings*) 1,308 370 (298) Total unallocated items, eliminations and other $253 ($363) ($1,038)

* Core operating earnings is a Non-GAAP measure that excludes certain components of pension and other postretirement benefit expense. See pages 39 - 40.

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Deferred compensation expense increased by $194 million in 2017 and decreased by $17 million in 2016, primarily driven by changes in broad stock market conditions and our stock price.

Eliminations and other unallocated expense increased by $117 million in 2017 and increased by $20 million in 2016 primarily due to the timing of the elimination of profit on intercompany aircraft deliveries and expense allocations.

Net periodic benefit cost related to pension totaled $312 million, $523 million and $2,786 million in 2017, 2016 and 2015, respectively. The components of net periodic benefit cost are shown in the following table:

Pension Years ended December 31, 2017 2016 2015 Service cost $402 $604 $1,764 Interest cost 2,991 3,050 2,990 Expected return on plan assets (3,847) (3,999) (4,031) Amortization of prior service costs (39) 38 196 Recognized net actuarial loss 804 790 1,577 Settlement/curtailment/other losses 1 40 290 Net periodic benefit cost $312 $523 $2,786

The decreases in net periodic pension benefit costs of $211 million in 2017 and of $2,263 million in 2016 are primarily due to lower service costs reflecting the transition of employees in 2016 to defined contribution retirement savings plans. The decrease in 2016 costs is also due to lower amortization of actuarial losses which reflects actuarial gains in 2015 resulting from the year-end discount rate increase from 3.9% to 4.2%.

A portion of net periodic benefit cost is recognized in Earnings from operations in the period incurred and the remainder is included in inventory at the end of the reporting period and recorded in Earnings from operations in subsequent periods. Costs are allocated to the business segments as described in Note 21.

Net periodic benefit costs included in Earnings from operations were as follows:

(Dollars in millions) Pension Years ended December 31, 2017 2016 2015 Allocated to business segments ($1,759) ($2,196) ($1,945) Unallocated items, eliminations and other 1,120 217 (421) Total ($639) ($1,979) ($2,366)

The unallocated pension costs recognized in earnings in 2017 was a benefit of $1,120 million compared with $217 million in 2016. The higher unallocated pension benefit recognized in earnings in 2017 primarily reflects the amortization of pension benefits capitalized as inventory in prior years. The unallocated pension costs recognized in earnings in 2016 was a benefit of $217 million compared with expense of $421 million in 2015. The 2016 benefit reflects the difference between the higher segment allocation compared to the U.S. GAAP net periodic pension costs recognized in earnings in the current period.

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Other Earnings Items

(Dollars in millions) Years ended December 31, 2017 2016 2015 Earnings from operations $10,278 $5,834 $7,443 Other income/(loss), net 129 40 (13) Interest and debt expense (360) (306) (275) Earnings before income taxes 10,047 5,568 7,155 Income tax expense (1,850) (673) (1,979) Net earnings from continuing operations $8,197 $4,895 $5,176

Other income, net increased by $89 million and $53 million in 2017 and 2016, primarily due to higher gains from foreign exchange and interest income.

Interest and debt expense increased by $54 million in 2017 as a result of lower capitalized interest and increased by $31 million in 2016 as a result of higher average debt balances.

Our effective income tax rates were 18.4%, 12.1% and 27.7% for the years ended December 31, 2017, 2016 and 2015, respectively. The Tax Cuts and Jobs Act, enacted in December 2017, reduced the 2017 effective tax rate by 10.5% and resulted in incremental tax benefits of $1,051 million, primarily related to the remeasurement of our U.S. net deferred tax liabilities to reflect the reduction in the corporate tax rate from 35% to 21%. Our 2016 effective tax rate was lower than the 2015 rate primarily due to lower pre-tax income in 2016 and discrete tax benefits of $617 million recorded in the third quarter of 2016 related to tax basis adjustments and the settlement of the 2011-2012 federal tax audit.

For additional discussion related to Income Taxes, see Note 4 to our 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 Commercial Airplanes segment predominantly uses program accounting to account for cost of sales, BDS predominantly uses contract accounting and BGS uses contract accounting for defense contracts. Under program accounting, cost of sales for each commercial airplane 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. Under contract accounting, the amount reported as cost of sales is determined by applying the estimated cost of sales percentage to the amount of revenue recognized.

The following table summarizes cost of sales:

(Dollars in millions) Years ended December 31, 2017 2016 Change 2016 2015 Change Cost of sales $76,066 $80,790 ($4,724) $80,790 $82,088 ($1,298) Cost of sales as a % of revenues 81.4% 85.4% (4.0%) 85.4% 85.4% 0.0%

Cost of sales in 2017 decreased by $4,724 million, or 6%, compared with 2016, primarily due to lower reach-forward losses, delivery model mix at BCA and improved performance at BCA and BDS.

Cost of sales in 2016 decreased by $1,298 million, or 2%, compared with 2015, primarily due to lower volume across all segments, partially offset by the 747 reach-forward losses at BCA.

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Research and Development The following table summarizes our Research and development expense:

(Dollars in millions) Years ended December 31, 2017 2016 2015 Commercial Airplanes $2,247 $3,706 $2,311 Defense, Space & Security 834 815 902 Global Services 140 153 113 Other (42) (47) 5 Total $3,179 $4,627 $3,331

Research and development expense in 2017 decreased by $1,448 million compared with 2016 primarily due to the reclassification of $1,235 million of costs from inventory in the second quarter of 2016 related to the fourth and fifth 787 flight test aircraft as well as lower spending on the 737 MAX, 787-10, and 777X.

Research and development expense in 2016 increased by $1,296 million compared with 2015 primarily due to the reclassification of $1,235 million of costs from inventory in the second quarter of 2016 related to the fourth and fifth 787 flight test aircraft and higher spending on the 777X.

Backlog

Our backlog at December 31 was as follows:

(Dollars in millions) Years ended December 31, 2017 2016 2015

Commercial Airplanes $421,345 $413,036 $429,346 Defense, Space & Security 49,577 44,825 46,933 Global Services 17,223 15,631 13,020

Total Backlog $488,145 $473,492 $489,299

Contractual backlog 470,241 458,277 476,595 Unobligated backlog 17,904 $15,215 $12,704 Total Backlog $488,145 $473,492 $489,299

Contractual backlog of unfilled orders excludes purchase options, announced orders for which definitive contracts have not been executed, and unobligated U.S. and non-U.S. government contract funding. The increase in contractual backlog during 2017 was primarily due to orders and funding in excess of deliveries. The decrease in contractual backlog during 2016 was primarily due to deliveries in excess of net orders.

Unobligated backlog includes U.S. and non-U.S. government definitive contracts for which funding has not been authorized. The increase in unobligated backlog in 2017 and 2016 was primarily due to contract awards, partially offset by reclassifications to contractual backlog related to BDS and BGS contracts.

Additional Considerations

KC-46A Tanker In 2011, we were awarded a contract from the U.S. Air Force (USAF) to design, develop, manufacture and deliver four next generation aerial refueling tankers. The KC-46A Tanker is a derivative of our 767 commercial aircraft. This Engineering, Manufacturing and Development (EMD) contract is a fixed-price incentive fee contract valued at $4.9 billion and involves highly complex designs and systems integration. In 2015, we began work on low rate initial production (LRIP) aircraft for the USAF. During the third quarter of 2016, following our achievement of key flight testing milestones, the USAF authorized two LRIP lots for 7 and 12 aircraft valued at $2.8 billion. On January 27, 2017, the USAF authorized an additional

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LRIP lot for 15 aircraft valued at $2.1 billion. The contract contains production options for both LRIP aircraft and full rate production aircraft. If all options under the contract are exercised, we expect to deliver 179 aircraft for a total expected contract value of approximately $30 billion. The EMD contract is currently in the certification and flight testing phases and we expect 18 fully operational aircraft to be delivered in 2018.

During 2016 and 2015, we recorded reach-forward losses of $1,128 million and $835 million related to the EMD contract and LRIP aircraft. During 2017, we recorded further reach-forward losses of $471 million primarily reflecting higher estimated costs associated with certification and incorporating changes into LRIP aircraft. As with any development program, this program remains subject to additional reach-forward losses or delivery delays if we experience further production, technical or quality issues, delays in certification and/or flight testing.

Export-Import Bank of the United States Many of our non-U.S. customers finance purchases through the Export-Import Bank of the United States. Following the expiration of the bank’s charter on June 30, 2015, the bank’s charter was reauthorized in December 2015. The bank is now authorized through September 30, 2019. However, until the U.S. Senate confirms members sufficient to reconstitute a quorum of the bank’s board of directors, the bank will not be able to approve any transaction totaling more than $10 million. As a result, we may fund additional commitments and/or enter into new financing arrangements with customers. Certain of our non-U.S. customers also may seek to delay purchases if they cannot obtain financing at reasonable costs, and there may be further impacts with respect to future sales campaigns involving non-U.S. customers. We continue to work with our customers to mitigate risks associated with the lack of a quorum of the bank’s board of directors and assist with alternative third party financing sources.

Segment Results of Operations and Financial Condition

Commercial Airplanes

Business Environment and Trends

Airline Industry Environment Global economic growth, a primary driver for air travel, has returned to the long-term average of approximately 3%. Passenger traffic in 2017 is estimated to grow by more than 7%, exceeding the long-term trend of approximately 5%. While growth was strong across all major world regions, there continues to be variation between regions and airline business models. Airlines operating in the Asia Pacific regions and Europe, as well as low-cost-carriers globally, are currently leading the growth in passenger traffic. Air cargo traffic growth, building on the recovery that started in 2016, is expected to exceed 9% in 2017, driven by strong trade and industrial production in all regions.

Airline financial performance also plays a role in the demand for new capacity. Airlines continue to focus on increasing revenue through alliances, partnerships, new marketing initiatives, and effective leveraging of ancillary services and related revenues. Airlines are also focusing on reducing costs and renewing fleets to leverage more efficient airplanes. Net profits in 2017 are expected to approximate $35 billion, consistent with 2016.

The long-term outlook for the industry continues to remain positive due to the fundamental drivers of air travel growth: economic growth and the increasing propensity to travel due to increased trade, globalization, and improved airline services driven by liberalization of air traffic rights between countries. Our 20-year forecast projects a long-term average growth rate of 4.7% per year for passenger traffic and 4.2% for cargo traffic. Based on long-term global economic growth projections of 2.8% average annual GDP growth, we project a $6.1 trillion market for approximately 41,030 new airplanes over the next 20 years.

The industry remains vulnerable to exogenous developments including fuel price spikes, credit market shocks, acts of terrorism, natural disasters, conflicts, epidemics and increased global environmental regulations.

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Industry Competitiveness The commercial jet airplane market and the airline industry remain extremely competitive. Market liberalization in Europe, the Middle East and Asia is enabling low-cost airlines to continue gaining market share. These airlines are increasing the pressure on airfares. This results in continued cost pressures for all airlines and price pressure on our products. Major productivity gains are essential to ensure a favorable market position at acceptable profit margins.

Continued access to global markets remains vital to our ability to fully realize our sales potential and long- term investment returns. Approximately 91% of Commercial Airplanes’ total backlog, in dollar terms, is with non-U.S. airlines.

We face aggressive international competitors who are intent on increasing their market share. They offer competitive products and have access to most of the same customers and suppliers. With government support, Airbus has historically invested heavily to create a family of products to compete with ours. Regional jet makers Embraer and Bombardier continue to develop and market larger and increasingly more capable airplanes, including Embraer’s E-195 in the regional jet market and Bombardier’s C Series in the 100-150 seat transcontinental market. Additionally, other competitors from Russia, China and Japan are developing commercial jet aircraft. Some of these competitors have historically enjoyed access to government- provided financial support, including “launch aid,” which greatly reduces the cost and commercial risks associated with airplane development activities. This has enabled the development of airplanes without commercial viability; others to be brought to market more quickly than otherwise possible; and many offered for sale below market-based prices. Many competitors have continued to make improvements in efficiency, which may result in funding product development, gaining market share and improving earnings. This market environment has resulted in intense pressures on pricing and other competitive factors, and we expect these pressures to continue or intensify in the coming years.

We are focused on improving our products and services and continuing our cost-reduction efforts, which enhances our ability to compete. We are also focused on taking actions to ensure that Boeing is not harmed by unfair subsidization of competitors.

Results of Operations

(Dollars in millions) Years ended December 31, 2017 2016 2015 Revenues $56,729 $58,012 $59,399 % of total company revenues 61% 61% 62% Earnings from operations $5,432 $1,995 $4,284 Operating margins 9.6% 3.4% 7.2% Research and development $2,247 $3,706 $2,311

Revenues

Commercial Airplanes revenues decreased by $1,283 million or 2% in 2017 compared with 2016 due to delivery mix, with fewer twin aisle deliveries more than offsetting the impact of higher single aisle deliveries. Commercial Airplanes revenues decreased by $1,387 million or 2% in 2016 compared with 2015 primarily due to fewer deliveries.

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Boeing_1296

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Commercial Airplanes deliveries as of December 31 were as follows:

737 * 747 † 767 777 787 Total 2017

Cumulative deliveries 6,732 1,542 1,106 1,534 636 Deliveries 529 (17) 14 (1) 10 74 136 763

2016 Cumulative deliveries 6,203 1,528 1,096 1,460 500 Deliveries 490 (19) 9 (3) 13 99 137 748

2015 Cumulative deliveries 5,713 1,519 1,083 1,361 363 Deliveries 495 (15) 18 (3) 16 98 135 762

* Intercompany deliveries identified by parentheses † Aircraft accounted for as revenues by BCA and as operating leases in consolidation identified by parentheses

Earnings From Operations

Earnings from operations in 2017 increased by $3,437 million compared with 2016. The increase in earnings and operating margins is primarily due to lower reach-forward losses, lower research and development costs and improved margins reflecting favorable cost performance, which more than offset the impact of lower revenues.

Earnings from operations in 2016 decreased by $2,289 million compared with 2015. The decrease in earnings and operating margins is primarily due to higher research and development costs of $1,395 million, delivery mix and higher reach-forward losses on the 747 program of $1,258 million compared with $885 million in 2015. Research and development expense in 2016 reflect the reclassification from inventory to research and development expense of $1,235 million related to the fourth and fifth 787 flight test aircraft and higher planned spending related to the 777X program.

Reach-forward losses of $378 million, $772 million and $513 million were recorded related to the KC-46A Tanker in 2017, 2016 and 2015, respectively. During 2016 and 2015, we recorded reach-forward losses on the 747 program of $1,258 million and $885 million.

Backlog

Firm backlog represents orders for products and services 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 certain. Firm backlog excludes options. A number of our customers may have contractual remedies that may be implicated by program delays. We address customer claims and requests for other contractual relief as they arise. However, once orders are included in firm backlog, orders remain in backlog until canceled or fulfilled, although the value of orders is adjusted as changes to price and schedule are agreed to with customers.

BCA total backlog was $421,345 million, $413,036 million and $429,346 million at December 31, 2017, 2016 and 2015, respectively. The increase in 2017 was primarily due to net orders in excess of deliveries. The decrease in 2016 was primarily due to deliveries in excess of net orders.

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Boeing_1296

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Accounting Quantity The accounting quantity is our estimate of the quantity of airplanes that will be produced for delivery under existing and anticipated contracts. The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates of the revenue and cost of existing and anticipated contracts. It is a key determinant of the gross margins we recognize on sales of individual airplanes throughout a program’s life. Estimation of each program’s accounting quantity takes into account several factors that are indicative of the demand for that program, including firm orders, letters of intent from prospective customers and market studies. We review our program accounting quantities quarterly.

The accounting quantity for each program may include units that have been delivered, undelivered units under contract, and units anticipated to be under contract in the reasonable future (anticipated orders). In developing total program estimates, all of these items within the accounting quantity must be considered.

The following table provides details of the accounting quantities and firm orders by program as of December 31. Cumulative firm orders represent the cumulative number of commercial jet aircraft deliveries plus undelivered firm orders.

Program 737 747* 767 777 777X 787

2017 Program accounting quantities 9,800 1,570 1,171 1,625 ** 1,400 Undelivered units under firm orders 4,668 12 98 102 326 658 Cumulative firm orders 11,400 1,554 1,204 1,636 326 1,294

2016 Program accounting quantities 9,000 1,555 1,159 1,625 ** 1,300 Undelivered units under firm orders 4,452 28 93 136 306 700 Cumulative firm orders 10,655 1,556 1,189 1,596 306 1,200

2015 Program accounting quantities 8,400 1,574 1,147 1,650 ** 1,300 Undelivered units under firm orders 4,392 20 80 218 306 779 Cumulative firm orders 10,105 1,539 1,163 1,579 306 1,142

* At December 31, 2017, the 747 accounting quantity includes one already completed aircraft which is being remarketed.

** The accounting quantity for the 777X will be determined in the year of first airplane delivery, targeted for 2020.

Program Highlights

737 Program The accounting quantity for the 737 program increased by 800 units during 2017 due to the program’s normal progress of obtaining additional orders and delivering airplanes. We are currently producing at a rate of 47 per month and plan to increase to 52 per month in 2018. We plan to further increase the rate to 57 per month in 2019. We delivered the first 737 MAX 8 in May 2017 and announced the launch of the 737 MAX 10 in June 2017.

747 Program During the fourth quarter of 2017, we received firm orders and commitments for 15 aircraft and we increased the program accounting quantity by 15 aircraft. The program accounting quantity now includes aircraft scheduled to be produced through 2021. We are currently producing at a rate of 0.5 aircraft per month, having reduced the rate from 1.0 per month in September 2016. In 2016 and 2015, we recorded reach-forward losses of $1,258 million and $885 million as lower than expected demand for large commercial passenger and freighter aircraft and slower-than-expected growth of global freight traffic

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resulted in lower anticipated revenues from future sales and higher costs to produce fewer airplanes. We continue to evaluate the viability of the 747 program and it is reasonably possible that we could decide to end production of the 747.

767 Program The accounting quantity for the 767 program increased by 12 units during the third quarter of 2017 due to the program's normal progress of obtaining additional orders and delivering airplanes. The 767 assembly line includes a 767 derivative to support the tanker program. The combined tanker and commercial production rate increased from 2 per month to 2.5 per month in the third quarter of 2017.

777 Program We implemented a planned production rate decrease from 8.3 per month to 7 per month during the first quarter of 2017. We further reduced the rate to 5 per month in the third quarter of 2017. In the fourth quarter of 2013, we launched the 777X, which features a new composite wing, new engines and folding wing-tips. The 777X will have a separate program accounting quantity, which will be determined in the year of first airplane delivery, targeted for 2020.

787 Program The accounting quantity for the 787 program increased by 100 units during the third quarter of 2017 due to the program’s normal progress of obtaining additional orders and delivering airplanes. We are currently producing at a rate of 12 per month and plan to increase to 14 per month in 2019. First delivery of the 787-10 derivative aircraft is targeted for 2018.

Fleet Support We provide the operators of our commercial airplanes with assistance and services to facilitate efficient and safe airplane operation. Collectively known as fleet support services, these activities and services begin prior to airplane delivery and continue throughout the operational life of the airplane. They include flight and maintenance training, field service support, engineering services, information services and systems and technical data and documents. The costs for fleet support are expensed as incurred and have historically been approximately 1.0% of total consolidated costs of products and services.

Program Development The following chart summarizes the time horizon between go-ahead and planned initial delivery for major Commercial Airplanes derivatives and programs.

Go-ahead and Initial Delivery

737 MAX 7 2011 2019

737 MAX 8 2011 2017

737 MAX 9 2011 2018

737 MAX 10 2017 2020

787-10 2013 2018

777X 2013 2020

Reflects models in development during 2017

We launched the 737 MAX 7, 8, 9 in August 2011 and the 737 MAX 10 in June 2017. We launched the 787-10 in June 2013 and the 777X in November 2013.

Additional Considerations

The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from employees and other partners. Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging. In addition, the introduction of new aircraft and derivatives, such as the 787-10 and 777X, involves increased risks associated with meeting development, production and certification schedules. As a result, our ability to deliver aircraft on time, satisfy performance and reliability standards and achieve or maintain, as applicable, program profitability is subject to significant risks. Factors that could result in lower margins (or a material charge if an airplane program has or is determined to have reach-forward losses) include the following: changes to the program accounting

Go-ahead and Initial Delivery

737 MAX 7 2011 2019

2011 2017737 MAX 8

2011 2018737 MAX 9

737 MAX 10 2017 2020

2013 2018787-10

2013 2020777X

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quantity, customer and model mix, production costs and rates, changes to price escalation factors due to changes in the inflation rate or other economic indicators, performance or reliability issues involving completed aircraft, capital expenditures and other costs associated with increasing or adding new production capacity, learning curve, additional change incorporation, achieving anticipated cost reductions, flight test and certification schedules, costs, schedule and demand for new airplanes and derivatives and status of customer claims, supplier assertions and other contractual negotiations. While we believe the cost and revenue estimates incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure.

Defense, Space & Security

Business Environment and Trends

United States Government Defense Environment Overview

In November 2017, Congress passed the National Defense Authorization Act for fiscal year 2018 (FY2018), which authorizes a U.S. DoD budget topline higher than the administration’s budget request from May. While the appropriations process for FY2018 remains incomplete, both the House and Senate appropriations committees have also produced bills that increase the U.S. DoD budget topline above the administration’s request. On February 9, 2018, Congress passed a fifth Continuing Resolution that maintains current funding levels through March 23, 2018 and includes increases to the Budget Control Act caps for defense and non-defense spending for FY2018 and FY2019. However, the Budget Control Act continues to mandate limits on U.S. government discretionary spending and remains in effect. As a result, continued budget uncertainty and the risk of future sequestration cuts will remain unless Congress acts to repeal or suspend this law.

Funding timeliness also remains a risk. If Congress is unable to pass appropriations bills or an omnibus spending bill before the expiration of the current Continuing Resolution, a government shutdown could result which may have impacts above and beyond those resulting from budget cuts, sequestration impacts or program-level appropriations. For example, requirements to furlough employees in the U.S. DoD, the Department of Transportation, or other government agencies could result in payment delays, impair our ability to perform work on existing contracts, and/or negatively impact future orders.

In addition, there continues to be uncertainty with respect to program-level appropriations for the U.S. DoD and other government agencies, including the National Aeronautics and Space Administration (NASA), within the overall budgetary framework described above. Future budget cuts or investment priority changes could result in reductions, cancellations and/or delays of existing contracts or programs. Any of these impacts could have a material effect on the results of the Company’s operations, financial position and/or cash flows.

Non-U.S. Defense Environment Overview 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 the end of 2017, 40% of BDS backlog was attributable to non-US customers.

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Boeing_1296

M Y K

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Results of Operations

(Dollars in millions) Years ended December 31, 2017 2016 2015 Revenues $21,057 $22,563 $23,708 % of total company revenues 23% 24% 25% Earnings from operations $2,223 $1,966 $2,312 Operating margins 10.6% 8.7% 9.8%

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 year, or year- to-year comparisons of revenues, earnings and backlog 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 units for new-build production aircraft, including remanufactures and modifications were as follows:

Years ended December 31, 2017 2016 2015 F/A-18 Models 23 25 35 F-15 Models 16 15 12 C-17 Globemaster III 4 5 CH-47 Chinook (New) 9 25 41 CH-47 Chinook (Renewed) 35 25 16 AH-64 Apache (New) 11 31 23 AH-64 Apache (Remanufactured) 57 34 38 P-8 Models 19 18 14 AEW&C 1 C-40A 1 1

Total 170 178 186

New-build satellite deliveries were as follows:

Years ended December 31, 2017 2016 2015 Commercial and civil satellites 3 5 3 Military satellites 1 2 1

Revenues

BDS revenues in 2017 decreased by $1,506 million compared with 2016 primarily due to fewer C-17 deliveries, lower milestone revenue on satellite programs, and the mix of deliveries on the Apache and F-15 programs, partially offset by higher volume on various weapons programs.

BDS revenues in 2016 decreased by $1,145 million compared with 2015 primarily due to lower milestone revenue on government satellite programs, fewer C-17 deliveries, lower Commercial Crew revenue, as well as timing and mix of CH-47 Chinook deliveries, partially offset by higher revenue on several modifications and upgrades programs.

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tmurray Larry Liso

Boeing_1296

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Earnings From Operations

BDS earnings from operations in 2017 increased by $257 million compared with 2016 primarily due to lower charges on the KC-46A Tanker and Commercial Crew programs, which more than offset the impact of fewer C-17 deliveries and Apache delivery mix. Higher earnings reflect the favorable impact of cumulative catch-up adjustments which were $541 million higher in 2017 than in 2016, primarily driven by lower charges.

BDS earnings from operations in 2016 decreased by $346 million compared with 2015, primarily due to lower earnings on the Commercial Crew program, driven by a charge of $162 million during the third quarter of 2016, as well as lower volume and mix on the CH-47 Chinook program. Lower earnings include the unfavorable impact of cumulative contract catch-up adjustments which were $441 million higher than 2015, primarily due to Commercial Crew charges in 2016 and the absence of favorable F-15 program adjustments recorded in 2015.

BDS earnings from operations include equity earnings of $183 million, $249 million and $202 million primarily from our ULA joint venture in 2017, 2016 and 2015.

During 2017, 2016 and 2015, BDS recorded charges related to the KC-46A Tanker contract of $93 million, $356 million and $322 million.

Backlog

Total backlog of $49,577 million at December 31, 2017 increased by 11% from December 31, 2016, primarily due to current year contract awards for the F-15 and Apache programs, partially offset by revenue recognized on contracts awarded in prior years.

Total backlog of $44,825 million at December 31, 2016 decreased by 4% reflecting revenue recognized on contracts awarded in prior years, partially offset by current year contract awards for satellite, P-8, weapons, Apache and CH-47 Chinook programs.

Additional Considerations Our BDS business includes a variety of development programs which have complex design and technical challenges. Many of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily in reduced 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. Many of these 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, the loss of satellite in-orbit incentive payments, or other financially significant exposure. These programs have risk for reach-forward losses if our estimated costs exceed our estimated contract revenues. Examples of significant fixed-price development programs include KC-46A Tanker, Commercial Crew, Saudi F-15, and commercial and military satellites.

KC-46A Tanker See the discussion of the USAF KC-46A Tanker program on page 23.

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United Launch Alliance See the discussion of Indemnifications to ULA and Financing Commitments in Notes 6, 11, and 12 to our Consolidated Financial Statements.

F/A-18 See the discussion of the F/A-18 program in Note 11 to our Consolidated Financial Statements.

Sea Launch See the discussion of the Sea Launch receivables in Note 7 to our Consolidated Financial Statements.

Commercial Crew See the discussion of Fixed-Price Development Contracts in Note 11 to our Consolidated Financial Statements.

Global Services

Business Environment and Trends

The aerospace markets we serve include parts distribution, logistics, and other inventory services; maintenance, engineering, and upgrades; training and professional services; and information services. We expect the market to grow by around 3.5% annually.

As the size of the worldwide commercial airline fleet continues to grow, so does demand for aftermarket services designed to increase efficiency and extend the economic lives of airplanes. Airlines are using data analytics to plan flight operations and predictive maintenance to improve their productivity and efficiency. Airlines continue to look for opportunities to reduce the size and cost of their spare parts inventory, frequently outsourcing spares management to third parties.

Government services market segments are growing on pace with related fleets, but vary based on the utilization and age of the aircraft. The U.S. government services market is the single largest individual market, comprising over 50 percent of the government services markets served. Over the next decade, we expect U.S. growth to remain flat and non-U.S. fleets, led by Middle East and Asia Pacific customers, to add rotorcraft and commercial derivative aircraft at the fastest rates. We expect less than 20 percent of the worldwide fleet of military aircraft to be retired and replaced over the next ten years, driving increased demand for services to maintain aging aircraft and enhance aircraft capability.

BGS’ major customer, the U.S. government, remains subject to the spending limits and uncertainty described on page 29, which could restrict the execution of certain program activities and delay new programs or competitions.

Industry Competitiveness Aviation services is a competitive market with many domestic and international competitors. This market environment has resulted in intense pressures on pricing and we expect these pressures to continue or intensify in the coming years. Continued access to global markets remains vital to our ability to fully realize our sales growth potential and long-term investment returns.

Results of Operations

(Dollars in millions) Years ended December 31, 2017 2016 2015 Revenues $14,639 $13,925 $13,293 % of total company revenues 16% 15% 14% Earnings from operations $2,256 $2,177 $1,835 Operating margins 15.4% 15.6% 13.8%

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Revenues

BGS revenues in 2017 increased by $714 million compared with 2016 primarily due to higher commercial parts revenue.

BGS revenues in 2016 increased by $632 million compared with 2015 primarily due to higher commercial parts revenues and government services revenue.

Earnings From Operations

BGS earnings from operations in 2017 increased by $79 million compared with 2016 primarily due to higher revenues, partially offset by commercial services mix. Net favorable cumulative contract catch-up adjustments were $9 million lower in 2017 than in 2016.

BGS earnings from operations in 2016 increased by $342 million compared with 2015 primarily due to higher revenues and favorable mix of commercial parts and government services. Net favorable cumulative contract catch-up adjustments were $12 million higher in 2016 than in 2015.

Backlog

BGS total backlog of $17,223 million at December 31, 2017 increased by 10% from December 31, 2016, primarily due to current year contract awards including F-15, C-17, and Apache support programs.

BGS total backlog of $15,631 million at December 31, 2016 increased by 20% from December 31, 2015 primarily due to current year contract awards including the C-17 support program.

Boeing Capital

Business Environment and Trends

BCC’s gross customer financing and investment portfolio at December 31, 2017 totaled $3,006 million. A substantial portion of BCC’s portfolio is related to customers that we believe have less than investment- grade credit. BCC’s portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably 717 and 747-8 aircraft.

BCC provided customer financing of $480 million and $1,376 million during 2017 and 2016. While we may be required to fund a number of new aircraft deliveries in 2018 and/or provide refinancing for existing bridge debt, we expect alternative financing will be available at reasonable prices from broad and globally diverse sources. However, a number of factors could cause BCC’s new business volume to increase further, including if the Export-Import Bank of the United States continues to be unable to, or does not, approve new financing transactions.

Aircraft values and lease rates are impacted by the number and type of aircraft that are currently out of service. Approximately 2,000 western-built commercial jet aircraft (8.3% of current world fleet) were parked at the end of 2017, including both in-production and out-of-production aircraft types. Of these parked aircraft, approximately 2% are not expected to return to service. At the end of 2016 and 2015, 8.8% and 9.5% of the western-built commercial jet aircraft were parked. Aircraft valuations could decline if significant numbers of additional aircraft, particularly types with relatively few operators, are placed out of service.

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Results of Operations

(Dollars in millions) Years ended December 31, 2017 2016 2015 Revenues $307 $298 $413 Earnings from operations $114 $59 $50 Operating margins 37% 20% 12%

Revenues

BCC segment revenues consist principally of lease income from equipment under operating lease, interest income from financing receivables and notes, and other income. BCC’s revenues in 2017 were consistent with 2016.

BCC’s revenues in 2016 decreased by $115 million compared with 2015 primarily due to lower lease income, and lower end of lease settlement payments.

Earnings From Operations

BCC’s earnings from operations are presented net of interest expense, provision for (recovery of) losses, asset impairment expense, depreciation on leased equipment and other operating expenses. Earnings from operations in 2017 increased by $55 million primarily due to lower asset impairment and depreciation expenses. Earnings from operations in 2016 increased by $9 million primarily due to lower asset impairment expense which more than offset lower revenues.

Financial Position

The following table presents selected financial data for BCC as of December 31:

(Dollars in millions) 2017 2016 Customer financing and investment portfolio, net $3,003 $4,109 Other assets, primarily cash and short-term investments 677 346 Total assets $3,680 $4,455

Other liabilities, primarily deferred income taxes $653 $1,007 Debt, including intercompany loans 2,523 2,864 Equity 504 584 Total liabilities and equity $3,680 $4,455

Debt-to-equity ratio 5.0-to-1 4.9-to-1

BCC’s customer financing and investment portfolio at December 31, 2017 decreased from December 31, 2016, primarily due to $1,434 million of asset sales, note payoffs, and portfolio run-off, partially offset by new volume.

Aircraft subject to leases with a carrying value of approximately $25 million are scheduled to be returned off lease during 2018. We are seeking to remarket these aircraft or have the leases extended.

BCC enters into certain transactions with Boeing, reflected in Unallocated items, eliminations and other, in the form of intercompany guarantees and other subsidies that mitigate the effects of certain credit quality or asset impairment issues on the BCC segment.

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1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Liquidity and Capital Resources

Cash Flow Summary

(Dollars in millions) Years ended December 31, 2017 2016 2015 Net earnings $8,197 $4,895 $5,176

Non-cash items 2,652 2,559 2,392 Changes in working capital 2,495 3,045 1,795

Net cash provided by operating activities 13,344 10,499 9,363 Net cash used by investing activities (2,062) (3,380) (1,846) Net cash used by financing activities (11,350) (9,587) (7,920) Effect of exchange rate changes on cash and cash equivalents 80 (33) (28) Net decrease in cash and cash equivalents 12 (2,501) (431) Cash and cash equivalents at beginning of year 8,801 11,302 11,733 Cash and cash equivalents at end of period $8,813 $8,801 $11,302

Operating Activities Net cash provided by operating activities was $13.3 billion during 2017, compared with $10.5 billion during 2016 and $9.4 billion in 2015. The increase of $2.8 billion in 2017 was primarily driven by higher advances more than offsetting inventory increases. The increase of $1.1 billion in 2016 was primarily due to lower expenditures on commercial airplane program inventory, primarily 787. Advances and progress billings increased by $4.6 billion in 2017, decreased by $1.9 billion in 2016 and increased by $0.4 billion in 2015. During 2017, our discretionary contributions to our pension plans included 14.4 million shares of our common stock with an aggregate value of $3.5 billion and $0.5 billion in cash. Discretionary contributions to our pension plans were insignificant in 2016 and 2015.

Investing Activities Cash used by investing activities during 2017, 2016 and 2015 was $2.1 billion, $3.4 billion and $1.8 billion. Capital expenditures totaled $1.7 billion in 2017, down from $2.6 billion in 2016 and $2.5 billion in 2015. We expect capital expenditures in 2018 to be higher than 2017. Net proceeds from investments was insignificant in 2017. Net contributions to investments were $0.5 billion in 2016 compared with net proceeds from investments of $0.6 billion in 2015.

Financing Activities Cash used by financing activities was $11.4 billion during 2017, an increase of $1.8 billion compared with 2016, primarily due to higher share repurchases and dividend payments. During 2017, our net borrowings were $1.1 billion compared with minimal net repayments in 2016. Cash used by financing activities was $9.6 billion during 2016, an increase of $1.7 billion compared with 2015, primarily due to lower net borrowings and higher dividend payments and share repurchases.

At December 31, 2017 and 2016 the recorded balance of debt was $11.1 billion and $10.0 billion of which $1.3 billion and $0.4 billion was classified as short-term. At December 31, 2017 and 2016 this included $2.5 billion and $2.9 billion of debt attributable to BCC, of which $0.9 billion and $0.1 billion were classified as short-term.

During 2017 and 2016 we repurchased 46.1 million and 55.1 million shares totaling $9.2 billion and $7.0 billion through our open market share repurchase program. In 2017 and 2016, we had 0.7 million shares transferred to us from employees for tax withholdings. At December 31, 2017, the amount available under the share repurchase plan, announced on December 11, 2017, totaled $18 billion.

Capital Resources We have substantial borrowing capacity. Any future borrowings may affect our credit ratings and are subject to various debt covenants as described below. We have a commercial paper

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

program that serves as a source of short-term liquidity. At December 31, 2017, commercial paper borrowings totaling $600 million were supported by unused commitments under the revolving credit agreement. We had no commercial paper borrowings in 2016. Currently, we have $5.0 billion of unused borrowing capacity on revolving credit line agreements. We anticipate that these credit lines will primarily serve as backup liquidity to support our general corporate borrowing needs.

Financing commitments totaled $10.2 billion and $14.8 billion at December 31, 2017 and 2016. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers. Historically, we have not been required to fund significant amounts of outstanding commitments. However, there can be no assurances that we will not be required to fund greater amounts than historically required. In addition, many of our non-U.S. customers finance aircraft purchases through the Export-Import Bank of the United States. Following the expiration of the bank’s charter on June 30, 2015, the bank’s charter was reauthorized in December 2015. The bank is now authorized through September 30, 2019. However, until the U.S. Senate confirms members sufficient to reconstitute a quorum of the bank’s board of directors, the bank will not be able to approve any transaction totaling more than $10 million. As a result, we may fund additional commitments and/or enter into new financing arrangements with customers.

In the event we require additional funding to support strategic business opportunities, our commercial aircraft financing commitments, unfavorable resolution of litigation or other loss contingencies, or other business requirements, we expect to meet increased funding requirements by issuing commercial paper or term debt. We believe our ability to access external capital resources should be sufficient to satisfy existing short-term and long-term commitments and plans, and also to provide adequate financial flexibility to take advantage of potential strategic business opportunities should they arise within the next year. However, there can be no assurance of the cost or availability of future borrowings, if any, under our commercial paper program, in the debt markets or our credit facilities.

At December 31, 2017 and 2016, our pension plans were $16.4 billion and $20.1 billion underfunded as measured under GAAP. On an Employee Retirement Income Security Act (ERISA) basis our plans are more than 100% funded at December 31, 2017 with minimal required contributions in 2018. During 2017, we contributed shares of our common stock with an aggregate value of $3.5 billion and $0.5 billion in cash. We do not expect to make contributions to our pension plans in 2018. We may be required to make higher contributions to our pension plans in future years.

At December 31, 2017, we were in compliance with the covenants for our debt and credit facilities. The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined). When considering debt covenants, we continue to have substantial borrowing capacity.

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Contractual Obligations

The following table summarizes our known obligations to make future payments pursuant to certain contracts as of December 31, 2017, and the estimated timing thereof.

(Dollars in millions) Total

Less than 1

year 1-3

years 3-5

years After 5 years

Long-term debt (including current portion) $11,130 $1,285 $2,362 $1,266 $6,217 Interest on debt 5,635 478 831 672 3,654 Pension and other postretirement cash

requirements 6,190 609 1,245 1,246 3,090 Capital lease obligations 147 55 61 16 15 Operating lease obligations 1,367 220 365 212 570 Purchase obligations not recorded on the

Consolidated Statements of Financial Position 115,064 48,375 31,369 23,223 12,097 Purchase obligations recorded on the Consolidated

Statements of Financial Position 18,630 18,289 325 2 14 Total contractual obligations (1) $158,163 $69,311 $36,558 $26,637 $25,657

(1) Excludes income tax matters. As of December 31, 2017, our net liability for income taxes payable, including uncertain tax positions of $1,736 million, was $1,634 million. For further discussion of income taxes, see Note 4 to our Consolidated Financial Statements. We are not able to reasonably estimate the timing of future cash flows related to uncertain tax positions.

Pension and Other Postretirement Benefits Pension cash requirements are based on an estimate of our minimum funding requirements, pursuant to ERISA regulations, although we may make additional discretionary contributions. Estimates of other postretirement benefits are based on both our estimated future benefit payments and the estimated contributions to plans that are funded through trusts.

Purchase Obligations Purchase obligations represent contractual agreements to purchase goods or services that are legally binding; specify a fixed, minimum or range of quantities; specify a fixed, minimum, variable, or indexed price provision; and specify approximate timing of the transaction. Purchase obligations include amounts recorded as well as amounts that are not recorded on the Consolidated Statements of Financial Position.

Purchase Obligations Not Recorded on the Consolidated Statements of Financial Position Purchase obligations not recorded on the Consolidated Statements of Financial Position include agreements for inventory procurement, tooling costs, electricity and natural gas contracts, property, plant and equipment, customer financing equipment, and other miscellaneous production related obligations. The most significant obligation relates to inventory procurement contracts. We have entered into certain significant inventory procurement contracts that specify determinable prices and quantities, and long-term delivery timeframes. In addition, we purchase raw materials on behalf of our suppliers. These agreements require suppliers and vendors to be prepared to build and deliver items in sufficient time to meet our production schedules. The need for such arrangements with suppliers and vendors arises from the extended production planning horizon for many of our products. A significant portion of these inventory commitments is supported by firm contracts and/or has historically resulted in settlement through reimbursement from customers for penalty payments to the supplier should the customer not take delivery. These amounts are also included in our forecasts of costs for program and contract accounting. Some inventory procurement contracts may include escalation adjustments. In these limited cases, we have included our best estimate of the effect of the escalation adjustment in the amounts disclosed in the table above.

Purchase Obligations Recorded on the Consolidated Statements of Financial Position Purchase obligations recorded on the Consolidated Statements of Financial Position primarily include accounts payable and certain other current and long-term liabilities including accrued compensation.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Industrial Participation Agreements We have entered into various industrial participation agreements with certain customers outside of the U.S. to facilitate economic flow back and/or technology or skills transfer to their businesses or government agencies as the result of their procurement of goods and/or services from us. These commitments may be satisfied by our local operations there, placement of direct work or vendor orders for supplies, opportunities to bid on supply contracts, transfer of technology or other forms of assistance. However, in certain cases, our commitments may be satisfied through other parties (such as our vendors) who purchase supplies from our non-U.S. customers. In certain cases, penalties could be imposed if we do not meet our industrial participation commitments. During 2017, we incurred no such penalties. As of December 31, 2017, we have outstanding industrial participation agreements totaling $17.9 billion that extend through 2030. Purchase order commitments associated with industrial participation agreements are included in purchase obligations in the table above. To be eligible for such a purchase order commitment from us, a non-U.S. supplier must have sufficient capability to meet our requirements and must be competitive in cost, quality and schedule.

Commercial Commitments

The following table summarizes our commercial commitments outstanding as of December 31, 2017.

(Dollars in millions)

Total Amounts Committed/

Maximum Amount of Loss

Less than

1 year 1-3

years 4-5

years After 5 years

Standby letters of credit and surety bonds $3,708 $1,659 $782 $559 $708 Commercial aircraft financing commitments 10,221 2,047 4,372 2,256 1,546 Total commercial commitments $13,929 $3,706 $5,154 $2,815 $2,254

Commercial aircraft financing commitments include commitments to provide financing related to aircraft on order, under option for deliveries or proposed as part of sales campaigns or refinancing with respect to delivered aircraft, based on estimated earliest potential funding dates. Based on historical experience, we anticipate that we will not be required to fund a significant portion of our financing commitments. However, there can be no assurances that we will not be required to fund greater amounts than historically required, particularly if the Export-Import Bank of the United States continues to be unable to, or does not, provide new financing support. See Note 11 to our 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 20 to our Consolidated Financial Statements.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $524 million at December 31, 2017. For additional information, see Note 11 to our Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We are a party to certain off-balance sheet arrangements including certain guarantees. For discussion of these arrangements, see Note 12 to our Consolidated Financial Statements.

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Non-GAAP Measures

Core Operating Earnings, Core Operating Margin and Core Earnings Per Share

Our Consolidated 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, core operating margin and core earnings per share exclude the impact of certain pension and other postretirement benefit expenses that are not allocated to business segments. 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 unallocated pension costs recognized in earnings during 2017 was a benefit of $1,120 million compared with a benefit of $217 million in 2016 and an expense of $421 million in 2015. The higher 2017 benefit reflects the amortization of pension benefits capitalized as inventory in prior years. The 2016 benefit reflects the difference between the higher segment allocation compared to the U.S. GAAP net periodic pension costs recognized in earnings in the current period, as well as lower settlements and curtailments. For further discussion of pension and other postretirement costs see the Management’s Discussion and Analysis on pages 20 and 21 of this Form 10-K and see Note 21 to our Consolidated Financial Statements. Management uses core operating earnings, core operating margin and core earnings 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 cost primarily represent costs driven by market factors and costs not allocable to U.S. government contracts.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Reconciliation of GAAP Measures to Non-GAAP Measures

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

(Dollars in millions, except per share data) Years ended December 31, 2017 2016 2015 Revenues $93,392 $94,571 $96,114 Earnings from operations, as reported $10,278 $5,834 $7,443 Operating margins 11.0% 6.2% 7.7%

Unallocated pension (income)/expense ($1,120) ($217) $421 Unallocated other postretirement benefit income ($188) ($153) ($123) Unallocated pension and other postretirement benefit (income)/ expense ($1,308) ($370) $298 Core operating earnings (non-GAAP) $8,970 $5,464 $7,741 Core operating margins (non-GAAP) 9.6% 5.8% 8.1%

Diluted earnings per share, as reported $13.43 $7.61 $7.44 Unallocated pension (income)/expense ($1.83) ($0.33) $0.61 Unallocated other postretirement benefit income ($0.31) ($0.24) ($0.18) Provision for deferred income taxes on adjustments (1) $0.75 $0.20 ($0.15) Core earnings per share (non-GAAP) $12.04 $7.24 $7.72

Weighted average diluted shares (in millions) 610.7 643.8 696.1 (1) The income tax impact is calculated using the tax rate in effect for the non-GAAP adjustments.

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tmurray Larry Liso

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Critical Accounting Policies

Contract Accounting

Contract accounting is used to determine revenue, cost of sales, and profit predominantly by BDS and for defense contracts at BGS. Contract accounting involves a judgmental process of estimating the total sales and costs for each contract, which results in the development of estimated cost of sales percentages. For each contract, the amount reported as cost of sales is determined by applying the estimated cost of sales percentage to the amount of revenue recognized.

Due to the size, duration and nature of many of our contracts, the estimation of total sales and costs through completion is complicated and subject to many variables. Total contract sales estimates are based on negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, incentive and award provisions associated with technical performance, and price adjustment clauses (such as inflation or index-based clauses). The majority of these contracts are with the U.S. government where the price is generally based on estimated cost to produce the product or service plus profit. Federal Acquisition Regulations provide guidance on the types of cost that will be reimbursed in establishing contract price. Total contract cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, business base and other economic projections. Factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements.

Revenue and cost estimates for all significant contracts are reviewed and reassessed quarterly. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the contract’s inception to date revenues, cost of sales and profit, in the period in which such changes are made. Changes in revenue and cost estimates could also result in a reach-forward loss or an adjustment to a reach-forward loss, which would be recorded immediately in earnings. For the year ended December 31, 2017 net favorable cumulative catch-up adjustments, including reach-forward losses, across all contracts increased Earnings from operations by $14 million. For the years ended December 31, 2016 and 2015, net unfavorable cumulative catch-up adjustments, including reach-forward losses, across all contracts decreased Earnings from operations by $912 million and $224 million.

Due to the significance of judgment in the estimation process described above, it is likely that materially different cost of sales amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions/estimates, supplier performance, or circumstances may adversely or positively affect financial performance in future periods. If the combined gross margin for all contracts in BDS and defense contracts at BGS for all of 2017 had been estimated to be higher or lower by 1%, it would have increased or decreased pre-tax income for the year by approximately $280 million. In addition, a number of our fixed price development contracts are in a reach-forward loss position. Changes to estimated losses are recorded immediately in earnings.

Program Accounting

Program accounting requires the demonstrated ability to reliably estimate the relationship of sales to costs for the defined program accounting quantity. A program consists of the estimated number of units (accounting quantity) of a product to be produced in a continuing, long-term production effort for delivery under existing and anticipated contracts. The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates of the revenue and cost of existing and anticipated contracts. For each program, the amount reported as cost of sales is determined by applying the estimated cost of sales percentage for the total remaining program to the amount of sales recognized for airplanes delivered and accepted by the customer.

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tmurray Larry Liso

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Factors that must be estimated include program accounting quantity, sales price, labor and employee benefit costs, material costs, procured part costs, major component costs, overhead costs, program tooling and other non-recurring costs, and warranty costs. Estimation of the accounting quantity for each program takes into account several factors that are indicative of the demand for the particular program, such as firm orders, letters of intent from prospective customers, and market studies. Total estimated program sales are determined by estimating the model mix and sales price for all unsold units within the accounting quantity, added together with the sales prices for all undelivered units under contract. The sales prices for all undelivered units within the accounting quantity include an escalation adjustment for inflation that is updated quarterly. Cost estimates are based largely on negotiated and anticipated contracts with suppliers, historical performance trends, and business base and other economic projections. Factors that influence these estimates include production rates, internal and subcontractor performance trends, customer and/ or supplier claims or assertions, asset utilization, anticipated labor agreements, and inflationary or deflationary trends.

To ensure reliability in our estimates, we employ a rigorous estimating process that is reviewed and updated on a quarterly basis. Changes in estimates are normally recognized on a prospective basis; when estimated costs to complete a program exceed estimated revenues from undelivered units in the accounting quantity, a loss provision is recorded in the current period for the estimated loss on all undelivered units in the accounting quantity. For example, in 2016 and 2015, we recorded reach-forward losses of $1,258 million and $885 million on the 747 program. We continue to evaluate the viability of the 747 program and it is reasonably possible that we could decide to end production of the 747.

The program method of accounting allocates tooling and other non-recurring and production costs over the accounting quantity for each program. Because of the higher unit production costs experienced at the beginning of a new program and substantial investment required for initial tooling and other non-recurring costs, new commercial aircraft programs, such as the 787 and 777X programs, typically have lower initial margins than established programs. In addition, actual costs incurred for earlier units in excess of the estimated average cost of all units in the program accounting quantity are included within program inventory as deferred production costs. Deferred production, unamortized tooling and other non-recurring costs are expected to be fully recovered when all units in the accounting quantity are delivered as the expected unit cost for later deliveries is below the estimated average cost as learning curve and other improvements are realized.

Due to the significance of judgment in the estimation process described above, it is reasonably possible that changes in underlying circumstances or assumptions could have a material effect on program gross margins. If the combined gross margin percentages for our commercial airplane programs had been estimated to be 1% higher or lower it would have a similar effect on the Commercial Airplane segment’s operating margins. For the year ended December 31, 2017, a 1% increase or decrease in operating margins for our Commercial Airplane segment would have a $567 million impact on operating earnings.

Goodwill and Indefinite-Lived Intangible Impairments

We test goodwill for impairment by performing a qualitative assessment or using a two-step impairment process. If we choose to perform a qualitative assessment, we evaluate economic, industry and company- specific factors as an initial step in assessing the fair value of operations. If we determine it is more likely than not that the carrying value of the net assets is more than the fair value of the related operations, the two-step impairment process is then performed; otherwise, no further testing is required. For operations where the two-step impairment process is used, we first compare the book value of net assets to the fair value of the related operations. If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of goodwill impairment.

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We estimate the fair values of the related operations using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future sales and operating costs, based primarily on existing firm orders, expected future orders, contracts with suppliers, labor agreements and general market conditions. Changes in these forecasts could significantly change the amount of impairment recorded, if any.

The cash flow forecasts are adjusted by an appropriate discount rate derived from our market capitalization plus a suitable control premium at the date of evaluation. Therefore, changes in the stock price may also affect the amount of impairment recorded, if any.

We completed our assessment of goodwill as of April 1, 2017 and determined that there is no impairment of goodwill. As a result of the change in our reportable segments, as described in Note 21, we reallocated goodwill to our new reporting units using a relative fair value approach. We evaluated goodwill for impairment at July 1, 2017 and determined that no impairment existed. As of December 31, 2017, we estimated that the fair value of each reporting unit significantly exceeded its corresponding carrying value. Changes in our forecasts, or decreases in the value of our common stock could cause book values of certain operations to exceed their fair values which may result in goodwill impairment charges in future periods.

As of December 31, 2017 and 2016, we had $490 million of indefinite-lived intangible assets related to the Jeppesen and Aviall brand and trade names acquired in business combinations. We test these intangibles for impairment by comparing their carrying value to current projections of discounted cash flows attributable to the brand and trade names. Any excess carrying value over the amount of discounted cash flows represents the amount of the impairment. A 10% decrease in the discounted cash flows would not impact the carrying value of these indefinite-lived intangible assets.

Pension Plans

The following table shows the sensitivity of our pension plan liability and net periodic cost to a 25 basis point change in the discount rate as of December 31, 2017.

(Dollars in millions) Change in discount rate

Increase 25 bps Change in discount rate

Decrease 25 bps Pension plans

Projected benefit obligation ($2,364) $2,961 Net periodic pension cost (84) 99

Pension expense is also sensitive to changes in the expected long-term rate of asset return. A decrease or increase of 25 basis points in the expected long-term rate of asset return would have increased or decreased 2017 net periodic pension expense by $148 million. We expect 2018 net periodic pension cost to decrease by approximately $44 million and the portion recognized in earnings before income taxes to decrease by approximately $512 million primarily due to lower amortization of actuarial losses.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We have financial instruments that are subject to interest rate risk, principally fixed-rate debt obligations, and customer financing assets and liabilities. Additionally, BCC uses interest rate swaps with certain debt obligations to manage exposure to interest rate changes. Historically, we have not experienced material gains or losses on our customer financing assets and liabilities due to interest rate changes. As of December 31, 2017, the impact over the next 12 months of a 100 basis point rise in interest rates to our pre-tax earnings would not be significant. The investors in our fixed-rate debt obligations do not generally have the right to demand we pay off these obligations prior to maturity. Therefore, exposure to interest rate risk is not believed to be material for our fixed-rate debt.

Foreign Currency Exchange Rate Risk

We are subject to foreign currency exchange rate risk relating to receipts from customers and payments to suppliers in foreign currencies. We use foreign currency forward contracts to hedge the price risk associated with firmly committed and forecasted foreign denominated payments and receipts related to our ongoing business. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates. At December 31, 2017, a 10% increase or decrease in the exchange rate in our portfolio of foreign currency contracts would have increased or decreased our unrealized losses by $289 million. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying transactions being hedged. When taken together, these forward currency contracts and the offsetting underlying commitments do not create material market risk.

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Item 8. Financial Statements and Supplementary Data

Index to the Consolidated Financial Statements

Page Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary of Business Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 1 – Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 2 - Goodwill and Acquired Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 3 - Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 4 - Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 5 - Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 6 - Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 7 - Customer Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 8 - Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 9 - Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 10 - Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 11 - Liabilities, Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 12 - Arrangements with Off-Balance Sheet Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 13 - Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 14 - Postretirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 15 - Share-Based Compensation and Other Compensation Arrangements . . . . . . . . . . . Note 16 - Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 17 - Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 18 - Significant Group Concentrations of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 19 - Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 20 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 21 - Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 22 - Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

46 47 48 49 50 51 52 65 66 67 70 71 72 74 75 75 76 80 81 83 91 95 96 98 98

101 101 105

106

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The Boeing Company and Subsidiaries Consolidated Statements of Operations

(Dollars in millions, except per share data) Years ended December 31, 2017 2016 2015 Sales of products $83,204 $84,399 $85,255 Sales of services 10,188 10,172 10,859 Total revenues 93,392 94,571 96,114

Cost of products (68,365) (72,713) (73,446) Cost of services (7,631) (8,018) (8,578) Boeing Capital interest expense (70) (59) (64) Total costs and expenses (76,066) (80,790) (82,088)

17,326 13,781 14,026 Income from operating investments, net 204 303 274 General and administrative expense (4,094) (3,616) (3,525) Research and development expense, net (3,179) (4,627) (3,331) Gain/(loss) on dispositions, net 21 (7) (1) Earnings from operations 10,278 5,834 7,443 Other income/(loss), net 129 40 (13) Interest and debt expense (360) (306) (275) Earnings before income taxes 10,047 5,568 7,155 Income tax expense (1,850) (673) (1,979) Net earnings $8,197 $4,895 $5,176

Basic earnings per share $13.60 $7.70 $7.52

Diluted earnings per share $13.43 $7.61 $7.44

See Notes to the Consolidated Financial Statements on pages 51 – 105.

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The Boeing Company and Subsidiaries Consolidated Statements of Comprehensive Income

(Dollars in millions) Years ended December 31, 2017 2016 2015 Net earnings $8,197 $4,895 $5,176 Other comprehensive income/(loss), net of tax:

Currency translation adjustments 128 (104) (92) Unrealized gain/(loss) on certain investments, net of tax of ($1), $1

and ($5) 1 (2) 8 Unrealized gain/(loss) on derivative instruments:

Unrealized gain/(loss) arising during period, net of tax of ($66), $4 and $77 119 (8) (140)

Reclassification adjustment for loss included in net earnings, net of tax of ($28), ($43) and ($43) 52 78 79

Total unrealized gain/(loss) on derivative instruments, net of tax 171 70 (61) Defined benefit pension plans & other postretirement benefits:

Net actuarial loss arising during the period, net of tax of $248, $752 and $402 (495) (1,365) (732)

Amortization of actuarial losses included in net periodic pension cost, net of tax of ($272), ($288) and ($570) 542 524 1,038

Settlements and curtailments included in net income, net of tax of $0, ($7) and ($27) 14 51

Pension and postretirement (cost)/benefit related to our equity method investments, net of tax $5, ($7) and ($2) (11) 12 3

Amortization of prior service (credits)/cost included in net periodic pension cost, net of tax of $59, $31 and ($22) (117) (57) 38

Prior service cost arising during the period, net of tax of ($14), ($18) and ($496) 28 33 902

Total defined benefit pension plans & other postretirement benefits, net of tax (53) (839) 1,300

Other comprehensive income/(loss), net of tax 247 (875) 1,155 Comprehensive loss related to noncontrolling interests (2) (1) (3) Comprehensive income, net of tax $8,442 $4,019 $6,328

See Notes to the Consolidated Financial Statements on pages 51 – 105.

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The Boeing Company and Subsidiaries Consolidated Statements of Financial Position

(Dollars in millions, except per share data) December 31, 2017 2016 Assets Cash and cash equivalents $8,813 $8,801 Short-term and other investments 1,179 1,228 Accounts receivable, net 10,516 8,832 Current portion of customer financing, net 309 428 Inventories, net of advances and progress billings 44,344 43,199

Total current assets 65,161 62,488 Customer financing, net 2,740 3,773 Property, plant and equipment, net 12,672 12,807 Goodwill 5,559 5,324 Acquired intangible assets, net 2,573 2,540 Deferred income taxes 341 332 Investments 1,260 1,317 Other assets, net of accumulated amortization of $482 and $497 2,027 1,416

Total assets $92,333 $89,997 Liabilities and equity Accounts payable $12,202 $11,190 Accrued liabilities 15,292 14,691 Advances and billings in excess of related costs 27,440 23,869 Short-term debt and current portion of long-term debt 1,335 384

Total current liabilities 56,269 50,134 Deferred income taxes 1,839 1,338 Accrued retiree health care 5,545 5,916 Accrued pension plan liability, net 16,471 19,943 Other long-term liabilities 2,015 2,221 Long-term debt 9,782 9,568 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 6,804 4,762 Treasury stock, at cost (43,454) (36,097) Retained earnings 45,320 40,714 Accumulated other comprehensive loss (13,376) (13,623)

Total shareholders’ equity 355 817 Noncontrolling interests 57 60 Total equity 412 877 Total liabilities and equity $92,333 $89,997

See Notes to the Consolidated Financial Statements on pages 51 – 105.

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The Boeing Company and Subsidiaries Consolidated Statements of Cash Flows

(Dollars in millions) Years ended December 31, 2017 2016 2015 Cash flows – operating activities:

Net earnings $8,197 $4,895 $5,176 Adjustments to reconcile net earnings to net cash provided by operating

activities: Non-cash items –

Share-based plans expense 202 190 189 Depreciation and amortization 2,069 1,910 1,833 Investment/asset impairment charges, net 113 90 167 Customer financing valuation cost/(benefit) 2 (7) (5) (Gain)/Loss on dispositions, net (21) 7 1 Other charges and credits, net 287 369 364 Excess tax benefits from share-based payment arrangements (157)

Changes in assets and liabilities – Accounts receivable (1,821) 112 (1,069) Inventories, net of advances and progress billings (1,085) 3,755 (1,110) Accounts payable 130 622 (238) Accrued liabilities 573 726 2 Advances and billings in excess of related costs 3,570 (493) 1,192 Income taxes receivable, payable and deferred 857 (810) 477 Other long-term liabilities 94 (68) 46 Pension and other postretirement plans (582) 153 2,470 Customer financing, net 1,017 (696) 167 Other (258) (256) (142)

Net cash provided by operating activities 13,344 10,499 9,363 Cash flows – investing activities:

Property, plant and equipment additions (1,739) (2,613) (2,450) Property, plant and equipment reductions 92 38 42 Acquisitions, net of cash acquired (324) (297) (31) Contributions to investments (3,601) (1,719) (2,036) Proceeds from investments 3,639 1,209 2,590 Purchase of distribution rights (131) Other 2 2 39

Net cash used by investing activities (2,062) (3,380) (1,846) Cash flows – financing activities:

New borrowings 2,077 1,325 1,746 Debt repayments (953) (1,359) (885) Repayments of distribution rights and other asset financing (24) Stock options exercised 311 321 399 Excess tax benefits from share-based payment arrangements 157 Employee taxes on certain share-based payment arrangements (132) (93) (96) Common shares repurchased (9,236) (7,001) (6,751) Dividends paid (3,417) (2,756) (2,490)

Net cash used by financing activities (11,350) (9,587) (7,920) Effect of exchange rate changes on cash and cash equivalents 80 (33) (28) Net decrease in cash and cash equivalents 12 (2,501) (431) Cash and cash equivalents at beginning of year 8,801 11,302 11,733 Cash and cash equivalents at end of year $8,813 $8,801 $11,302

See Notes to the Consolidated Financial Statements on pages 51 – 105.

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The Boeing Company and Subsidiaries Consolidated Statements of Equity

Boeing shareholders

(Dollars in millions, except per share data) Common

Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Accumulated Other

Comprehensive Loss

Non- controlling

Interest Total

Balance at January 1, 2015 $5,061 $4,625 ($23,298) $36,180 ($13,903) $125 $8,790

Net earnings 5,176 (3) 5,173 Other comprehensive income, net of tax of ($686) 1,155 1,155 Share-based compensation and related dividend

equivalents 214 (25) 189

Excess tax pools 158 158 Treasury shares issued for stock options exercised, net (29) 428 399 Treasury shares issued for other share-based plans, net (134) 53 (81) Common shares repurchased (6,751) (6,751) Cash dividends declared ($3.82 per share) (2,575) (2,575) Changes in noncontrolling interests (60) (60)

Balance at December 31, 2015 $5,061 $4,834 ($29,568) $38,756 ($12,748) $62 $6,397

Net earnings 4,895 (1) 4,894 Other comprehensive loss, net of tax of $425 (875) (875) Share-based compensation and related dividend

equivalents 244 (35) 209

Excess tax pools (84) (84) Treasury shares issued for stock options exercised, net (63) 383 320 Treasury shares issued for other share-based plans, net (169) 89 (80) Common shares repurchased (7,001) (7,001) Cash dividends declared ($4.69 per share) (2,902) (2,902) Changes in noncontrolling interests (1) (1)

Balance at December 31, 2016 $5,061 $4,762 ($36,097) $40,714 ($13,623) $60 $877

Net earnings 8,197 (2) 8,195 Other comprehensive income, net of tax of ($69) 247 247 Share-based compensation and related dividend

equivalents 238 (35) 203

Treasury shares issued for stock options exercised, net (88) 399 311

Treasury shares issued for other share-based plans, net (190) 62 (128)

Treasury shares contributed to pension plans 2,082 1,418 3,500 Common shares repurchased (9,236) (9,236) Cash dividends declared ($5.97 per share) (3,556) (3,556) Changes in noncontrolling interests (1) (1)

Balance at December 31, 2017 $5,061 $6,804 ($43,454) $45,320 ($13,376) $57 $412

See Notes to the Consolidated Financial Statements on pages 51 – 105.

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The Boeing Company and Subsidiaries Notes to the Consolidated Financial Statements

Summary of Business Segment Data

(Dollars in millions) Years ended December 31, 2017 2016 2015 Revenues:

Commercial Airplanes $56,729 $58,012 $59,399 Defense, Space & Security 21,057 22,563 23,708 Global Services 14,639 13,925 13,293 Boeing Capital 307 298 413 Unallocated items, eliminations and other 660 (227) (699)

Total revenues $93,392 $94,571 $96,114 Earnings from operations:

Commercial Airplanes $5,432 $1,995 $4,284 Defense, Space & Security 2,223 1,966 2,312 Global Services 2,256 2,177 1,835 Boeing Capital 114 59 50

Segment operating profit 10,025 6,197 8,481 Unallocated items, eliminations and other 253 (363) (1,038)

Earnings from operations 10,278 5,834 7,443 Other income/(loss), net 129 40 (13) Interest and debt expense (360) (306) (275) Earnings before income taxes 10,047 5,568 7,155 Income tax expense (1,850) (673) (1,979) Net earnings $8,197 $4,895 $5,176

This information is an integral part of the Notes to the Consolidated Financial Statements. See Note 21 for further segment results.

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The Boeing Company and Subsidiaries Notes to the Consolidated Financial Statements Years ended December 31, 2017, 2016 and 2015

(Dollars in millions, except per share data)

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The Consolidated 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”). These statements include the accounts of all majority-owned subsidiaries and variable interest entities that are required to be consolidated. All significant intercompany accounts and transactions have been eliminated. As described in Note 21, effective July 1, 2017, we now operate in four reportable segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS), Global Services (BGS), and Boeing Capital (BCC). Amounts in prior periods have been reclassified to conform to the current year presentation.

Use of Estimates

Management makes assumptions and estimates to prepare financial statements in conformity with accounting principles generally accepted in the United States of America. Those assumptions and estimates directly affect the amounts reported in the Consolidated Financial Statements. Significant estimates for which changes in the near term are considered reasonably possible and that may have a material impact on the financial statements are disclosed in these Notes to the Consolidated Financial Statements.

Operating Cycle

For classification of certain current assets and liabilities, we use the duration of the related contract or program as our operating cycle, which is generally longer than one year.

Revenue and Related Cost Recognition

Contract Accounting Contract accounting is used for development and production activities predominantly by BDS and for defense contracts at BGS. The majority of these activities are performed under contracts with the U.S. government and other customers that extend over several years. Contract accounting involves a judgmental process of estimating total sales and costs for each contract resulting in the development of estimated cost of sales percentages. For each contract, the amount reported as cost of sales is determined by applying the estimated cost of sales percentage to the amount of revenue recognized. When the current estimates of total sales and costs for a contract indicate a loss, a provision for the entire loss on the contract is recognized.

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 contract’s percent complete. Net cumulative catch- up adjustments to prior years’ earnings, including reach-forward losses, across all contracts were as follows:

2017 2016 2015 Increase/(decrease) to Earnings from Operations $14 ($912) ($224) Increase/(decrease) to Diluted EPS $0.02 ($1.25) ($0.23)

Significant adjustments during the three years ended December 31, 2017 included reach-forward losses of $471, $1,128 and $835 on the USAF KC-46A Tanker contract recorded during 2017, 2016 and 2015.

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We combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective. These essentially represent an agreement to do a single project for a single customer, involve interrelated construction activities with substantial common costs, and are performed concurrently or sequentially. When a group of contracts is combined, revenue and profit are earned uniformly over the performance of the combined contracts. Similarly, we may segment a single contract or group of contracts when a clear economic decision has been made during contract negotiations that would produce different rates of profitability for each element or phase of the contract.

Sales related to fixed-price contracts are recognized as deliveries are made, except for certain fixed-price contracts that require substantial performance over an extended period before deliveries begin, for which sales are recorded based on the attainment of performance milestones. Sales related to contracts in which we are reimbursed for costs incurred plus an agreed upon profit are recorded as costs are incurred. The Federal Acquisition Regulations provide guidance on the types of cost that will be reimbursed in establishing contract price. Contracts may contain provisions to earn incentive and award fees if specified targets are achieved. Incentive and award fees that can be reasonably estimated and are probable are recorded over the performance period of the contract. Incentive and award fees that cannot be reasonably estimated are recorded when awarded.

Program Accounting Our Commercial Airplanes segment uses program accounting to account for cost of sales related to its programs. Program accounting is applicable to products manufactured for delivery under production-type contracts where profitability is realized over multiple contracts and years. Under program accounting, inventoriable production costs, program tooling and other non-recurring costs, and warranty costs are accumulated and charged to cost of sales by program instead of by individual units or contracts. A program consists of the estimated number of units (accounting quantity) of a product to be produced in a continuing, long-term production effort for delivery under existing and anticipated contracts. The determination of the accounting quantity is limited by the ability to make reasonably dependable estimates of the revenue and cost of existing and anticipated contracts. To establish the relationship of sales to cost of sales, program accounting requires estimates of (a) the number of units to be produced and sold in a program, (b) the period over which the units can reasonably be expected to be produced, and (c) the units’ expected sales prices, production costs, program tooling and other non-recurring costs, and routine warranty costs for the total program.

We recognize sales for commercial airplane deliveries as each unit is completed and accepted by the customer. Sales recognized represent the price negotiated with the customer, adjusted by an escalation formula as specified in the customer agreement. The amount reported as cost of sales is determined by applying the estimated cost of sales percentage for the total remaining program to the amount of sales recognized for airplanes delivered and accepted by the customer. Changes in estimated revenues, cost of sales and the related effects on program margins are recognized prospectively except in cases where the program is determined to have a reach-forward loss in which case the loss is recognized in the current period. Reductions to a reach-forward loss are spread over all undelivered units in the accounting quantity, whereas increases to the estimated loss are recorded immediately. See Note 11.

Concession Sharing Arrangements We account for sales concessions to our customers in consideration of their purchase of products and services as a reduction to revenue when the related products and services are delivered. The sales concessions incurred may be partially reimbursed by certain suppliers in accordance with concession sharing arrangements. We record these reimbursements, which are presumed to represent reductions in the price of the vendor’s products or services, as a reduction in Cost of products.

Spare Parts Revenue We recognize sales of spare parts upon delivery and the amount reported as cost of sales is recorded at average cost.

Service Revenue Service revenue is recognized when the service is performed with the exception of U.S. government service agreements, which are accounted for using contract accounting. Service activities

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primarily include: support agreements associated with military aircraft and helicopter contracts, space travel on Commercial Crew, ongoing maintenance of International Space Station, military and commercial aircraft training contracts, fleet care, and technical and flight operation services for commercial aircraft. Service revenue and associated cost of sales from pay-in-advance subscription fees are deferred and recognized as services are rendered.

Financial Services Revenue We record financial services revenue associated with sales-type/finance leases, operating leases, and notes receivable.

Lease and financing revenue arrangements are included in Sales of services on the Consolidated Statements of Operations. For sales-type/finance leases, we record an asset at lease inception. This asset is recorded at the aggregate of future minimum lease payments, estimated residual value of the leased equipment, and deferred incremental direct costs less unearned income. Income is recognized over the life of the lease to approximate a level rate of return on the net investment. Residual values, which are reviewed periodically, represent the estimated amount we expect to receive at lease termination from the disposition of the leased equipment. Actual residual values realized could differ from these estimates. Declines in estimated residual value that are deemed other-than-temporary are recognized in the period in which the declines occur.

For operating leases, revenue on leased aircraft and equipment is recorded on a straight-line basis over the term of the lease. Operating lease assets, included in Customer financing, are recorded at cost and depreciated over the period that we project we will hold the asset to an estimated residual value, using the straight-line method. We periodically review our estimates of residual value and recognize forecasted changes by prospectively adjusting depreciation expense.

For notes receivable, notes are recorded net of any unamortized discounts and deferred incremental direct costs. Interest income and amortization of any discounts are recorded ratably over the related term of the note.

Reinsurance Revenue Our wholly-owned insurance subsidiary, Astro Ltd., participates in a reinsurance pool for workers’ compensation. The member agreements and practices of the reinsurance pool minimize any participating members’ individual risk. Reinsurance revenues were $141, $147 and $136 during 2017, 2016 and 2015, respectively. Reinsurance costs related to premiums and claims paid to the reinsurance pool were $144, $139 and $132 during 2017, 2016 and 2015, respectively. Revenues and costs are presented net in Cost of sales in the Consolidated Statements of Operations.

Fleet Support

We provide assistance and support to facilitate efficient and safe aircraft operation to the operators of all our commercial airplane models. Collectively known as fleet support, these activities and support services include flight and maintenance training, field service support, engineering support, and technical data and documents. Fleet support activity begins prior to aircraft delivery as the customer receives training, manuals, and technical consulting support. This activity continues throughout the aircraft’s operational life. Services provided after delivery include field service support, consulting on maintenance, repair, and operational issues brought forth by the customer or regulators, updating manuals and engineering data, and the issuance of service bulletins that impact the entire model’s fleet. Field service support involves our personnel located at customer facilities providing and coordinating fleet support activities and requests. The costs for fleet support are expensed as incurred as Cost of services.

Research and Development

Research and development includes costs incurred for experimentation, design, and testing, as well as bid and proposal efforts related to government products and services which are expensed as incurred

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

unless the costs are related to certain contractual arrangements with customers. Costs that are incurred pursuant to such contractual arrangements are recorded over the period that revenue is recognized, consistent with our contract accounting policy. We have certain research and development arrangements that meet the requirement for best efforts research and development accounting. Accordingly, the amounts funded by the customer are recognized as an offset to our research and development expense rather than as contract revenues. Research and development expense included bid and proposal costs of $288, $311 and $286 in 2017, 2016 and 2015, respectively.

Share-Based Compensation

We provide various forms of share-based compensation to our employees. For awards settled in shares, we measure compensation expense based on the grant-date fair value net of estimated forfeitures. For awards settled in cash, or that may be settled in cash, we measure compensation expense based on the fair value at each reporting date net of estimated forfeitures. The expense is recognized over the requisite service period, which is generally the vesting period of the award.

Income Taxes

Provisions for U.S. federal, state and local, and non-U.S. income taxes are calculated on reported Earnings before income taxes based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income tax provisions and evaluating tax positions.

The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Tax-related interest and penalties are classified as a component of Income tax expense.

Postretirement Plans

The majority of our employees have earned benefits under defined benefit pension plans. Nonunion and the majority of union employees that had participated in defined benefit pension plans transitioned to a company-funded defined contribution retirement savings plan in 2016. We also provide postretirement benefit plans other than pensions, consisting principally of health care coverage to eligible retirees and qualifying dependents. Benefits under the pension and other postretirement benefit plans are generally based on age at retirement and years of service and, for some pension plans, benefits are also based on the employee’s annual earnings. The net periodic cost of our pension and other postretirement plans is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate, the long-term rate of asset return, and medical trend (rate of growth for medical costs). A portion of net periodic pension and other postretirement income or expense is not recognized in net earnings in the year incurred because it is allocated to production as product costs, and reflected in inventory at the end of a reporting period. Actuarial gains and losses, which occur when actual experience differs from actuarial assumptions, are reflected in Shareholders’ equity (net of taxes). If actuarial gains and losses exceed ten percent of the greater of plan assets or plan liabilities we amortize them over the average future service period of employees. The funded status of our pension and postretirement plans is reflected on the Consolidated Statements of Financial Position.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Postemployment Plans

We record a liability for postemployment benefits, such as severance or job training, when payment is probable, the amount is reasonably estimable, and the obligation relates to rights that have vested or accumulated.

Environmental Remediation

We are subject to federal and state requirements for protection of the environment, including those for discharge of hazardous materials and remediation of contaminated sites. We routinely assess, based on in-depth studies, expert analyses and legal reviews, our contingencies, obligations, and commitments for remediation of contaminated sites, including assessments of ranges and probabilities of recoveries from other responsible parties and/or insurance carriers. Our policy is to accrue and charge to current expense identified exposures related to environmental remediation sites when it is probable that a liability has been incurred and the amount can be reasonably estimated. The amount of the liability is based on our best estimate or the low end of a range of reasonably possible exposure for investigation, cleanup, and monitoring costs to be incurred. Estimated remediation costs are not discounted to present value as the timing of payments cannot be reasonably estimated. We may be able to recover a portion of the remediation costs from insurers or other third parties. Such recoveries are recorded when realization of the claim for recovery is deemed probable.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits, and other money market instruments, which have original maturities of three months or less. We aggregate our cash balances by bank where conditions for right of set-off are met, and reclassify any negative balances, consisting mainly of uncleared checks, to Accounts payable. Negative balances reclassified to Accounts payable were $116 and $77 at December 31, 2017 and 2016.

Inventories

Inventoried costs on commercial aircraft programs and long-term contracts include direct engineering, production and tooling and other non-recurring costs, and applicable overhead, which includes fringe benefits, production related indirect and plant management salaries and plant services, not in excess of estimated net realizable value. To the extent a material amount of such costs are related to an abnormal event or are fixed costs not appropriately attributable to our programs or contracts, they are expensed in the current period rather than inventoried. Inventoried costs include amounts relating to programs and contracts with long-term production cycles, a portion of which is not expected to be realized within one year. Included in inventory for federal government contracts is an allocation of allowable costs related to manufacturing process reengineering.

Commercial aircraft programs inventory includes deferred production costs and supplier advances. Deferred production costs represent actual costs incurred for production of early units that exceed the estimated average cost of all units in the program accounting quantity. Higher production costs are experienced at the beginning of a new or derivative airplane program. Units produced early in a program require substantially more effort (labor and other resources) than units produced later in a program because of volume efficiencies and the effects of learning. We expect that these deferred costs will be fully recovered when all units included in the accounting quantity are delivered as the expected unit cost for later deliveries is below the estimated average cost of all units in the program. Supplier advances represent payments for parts we have contracted to receive from suppliers in the future. As parts are received, supplier advances are amortized to work in process.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

The determination of net realizable value of long-term contract costs is based upon quarterly reviews that estimate costs to be incurred to complete all contract requirements. When actual contract costs and the estimate to complete exceed total estimated contract revenues, a loss provision is recorded. The determination of net realizable value of commercial aircraft program costs is based upon quarterly program reviews that estimate revenue and cost to be incurred to complete the program accounting quantity. When estimated costs to complete exceed estimated program revenues to go, a program loss provision is recorded in the current period for the estimated loss on all undelivered units in the accounting quantity.

Used aircraft purchased by the Commercial Airplanes segment and general stock materials are stated at cost not in excess of net realizable value. See ‘Aircraft Valuation’ within this Note for a discussion of our valuation of used aircraft. Spare parts inventory is stated at lower of average unit cost or net realizable value. We review our commercial spare parts and general stock materials quarterly to identify impaired inventory, including excess or obsolete inventory, based on historical sales trends, expected production usage, and the size and age of the aircraft fleet using the part. Impaired inventories are charged to Cost of products in the period the impairment occurs.

Included in inventory for commercial aircraft programs are amounts paid or credited in cash, or other consideration to certain airline customers, that are referred to as early issue sales consideration. Early issue sales consideration is recognized as a reduction to revenue when the delivery of the aircraft under contract occurs. If an airline customer does not perform and take delivery of the contracted aircraft, we believe that we would have the ability to recover amounts paid. However, to the extent early issue sales consideration exceeds advances and is not considered to be otherwise recoverable, it would be written off in the current period.

We net advances and progress billings on long-term contracts against inventory in the Consolidated Statements of Financial Position. Advances and progress billings in excess of related inventory are reported in Advances and billings in excess of related costs.

Precontract Costs

We may, from time to time, incur costs in excess of the amounts required for existing contracts. If we determine the costs are probable of recovery from future orders, then we capitalize the precontract costs we incur, excluding start-up costs which are expensed as incurred. Capitalized precontract costs are included in Inventories, net of advances and progress billings, in the accompanying Consolidated Statements of Financial Position. Should future orders not materialize or we determine the costs are no longer probable of recovery, the capitalized costs would be written off.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost, including applicable construction-period interest, less accumulated depreciation and are depreciated principally over the following estimated useful lives: new buildings and land improvements, from 10 to 40 years; and new machinery and equipment, from 4 to 20 years. The principal methods of depreciation are as follows: buildings and land improvements, 150% declining balance; and machinery and equipment, sum-of-the-years’ digits. Capitalized internal use software is included in Other assets and amortized using the straight line method over 5 years. We periodically evaluate the appropriateness of remaining depreciable lives assigned to long-lived assets, including assets that may be subject to a management plan for disposition.

Long-lived assets held for sale are stated at the lower of cost or fair value less cost to sell. Long-lived assets held for use are subject to an impairment assessment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, the amount of the impairment is the difference between the carrying amount and the fair value of the asset.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Asset Retirement Obligations

We record all known asset retirement obligations for which the liability’s fair value can be reasonably estimated, including certain asbestos removal, asset decommissioning and contractual lease restoration obligations. Recorded amounts are not material.

We also have known conditional asset retirement obligations, such as certain asbestos remediation and asset decommissioning activities to be performed in the future, that are not reasonably estimable due to insufficient information about the timing and method of settlement of the obligation. Accordingly, these obligations have not been recorded in the Consolidated Financial Statements. A liability for these obligations will be recorded in the period when sufficient information regarding timing and method of settlement becomes available to make a reasonable estimate of the liability’s fair value. In addition, there may be conditional asset retirement obligations that we have not yet discovered (e.g., asbestos may exist in certain buildings but we have not become aware of it through the normal course of business), and therefore, these obligations also have not been included in the Consolidated Financial Statements.

Goodwill and Other Acquired Intangibles

Goodwill and other acquired intangible assets with indefinite lives are not amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is April 1.

We test goodwill for impairment by performing a qualitative assessment or using a two-step impairment process. If we choose to perform a qualitative assessment and determine it is more likely than not that the carrying value of the net assets is more than the fair value of the related operations, the two-step impairment process is then performed; otherwise, no further testing is required. For operations where the two-step impairment process is used, we first compare the carrying value of net assets to the fair value of the related operations. If the fair value is determined to be less than carrying value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of goodwill impairment.

Indefinite-lived intangibles consist of brand and trade names acquired in business combinations. We test these intangibles for impairment by comparing their carrying value to current projections of discounted cash flows attributable to the brand and trade names. Any excess carrying value over the amount of discounted cash flows represents the amount of the impairment.

Our finite-lived acquired intangible assets are amortized on a straight-line basis over their estimated useful lives as follows: developed technology, from 4 to 14 years; product know-how, from 3 to 30 years; customer base, from 3 to 17 years; distribution rights, from 3 to 27 years; and other, from 2 to 32 years. We evaluate the potential impairment of finite-lived acquired intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, the amount of the impairment is the difference between the carrying amount and the fair value of the asset.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Investments

Time deposits are held-to-maturity investments that are carried at cost.

Available-for-sale securities include commercial paper, U.S. government agency securities, and corporate debt securities. Available-for-sale securities are recorded at fair value, and unrealized gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income. Realized gains and losses on available-for-sale securities are recognized based on the specific identification method. Available-for-sale securities are assessed for impairment quarterly.

The equity method of accounting is used to account for investments for which we have the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of an investee of between 20% and 50%.

We classify investment income and loss on our Consolidated Statements of Operations based on whether the investment is operating or non-operating in nature. Operating investments align strategically and are integrated with our operations. Earnings from operating investments, including our share of income or loss from equity method investments, dividend income from certain cost method investments, and any impairments or gain/loss on the disposition of these investments, are recorded in Income from operating investments, net. Non-operating investments are those we hold for non-strategic purposes. Earnings from non-operating investments, including interest and dividends on marketable securities, and any impairments or gain/loss on the disposition of these investments are recorded in Other income/(expense), net.

Derivatives

All derivative instruments are recognized in the financial statements and measured at fair value regardless of the purpose or intent of holding them. We use derivative instruments to principally manage a variety of market risks. For derivatives designated as hedges of the exposure to changes in fair value of the recognized asset or liability or a firm commitment (referred to as fair value hedges), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to include in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in comprehensive income and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately. We have agreements to purchase and sell aluminum to address long-term strategic sourcing objectives and international business requirements. These agreements are derivatives for accounting purposes but are not designated for hedge accounting treatment. We also hold certain derivative instruments for economic purposes that are not designated for hedge accounting treatment. For these aluminum agreements and for other derivative instruments not designated for hedge accounting treatment, the changes in their fair value are recorded in earnings immediately.

Aircraft Valuation

Used aircraft under trade-in commitments and aircraft under repurchase commitments In conjunction with signing a definitive agreement for the sale of new aircraft (Sale 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 upon the purchase of Sale Aircraft. Additionally, we have entered into contingent repurchase commitments with certain customers wherein we agree to repurchase the Sale Aircraft at a specified price, generally 10 to 15 years after delivery of the Sale Aircraft. Our repurchase of the Sale Aircraft is contingent upon a future, mutually acceptable agreement for the sale of additional new aircraft. If we execute an agreement for the sale of additional new aircraft, and if the customer exercises its right to sell the Sale

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Aircraft to us, a contingent repurchase commitment would become a trade-in commitment. Our historical experience is that contingent repurchase commitments infrequently become trade-in commitments.

Exposure related to trade-in commitments may take the form of:

(1) adjustments to revenue for the difference between the contractual trade-in price in the definitive agreement and our best estimate of the fair value of the trade-in aircraft as of the date of such agreement, which would be recognized upon delivery of the Sale Aircraft, and/or

(2) charges to cost of products for adverse changes in the fair value of trade-in aircraft that occur subsequent to signing of a definitive agreement for Sale Aircraft but prior to the purchase of the used trade-in aircraft. Estimates based on current aircraft values would be included in Accrued liabilities.

The fair value of trade-in aircraft is determined using aircraft-specific data such as model, age and condition, market conditions for specific aircraft and similar models, and multiple valuation sources. This process uses our assessment of the market for each trade-in aircraft, which in most instances begins years before the return of the aircraft. There are several possible markets in which we continually pursue opportunities to place used aircraft. These markets include, but are not limited to, the resale market, which could potentially include the cost of long-term storage; the leasing market, with the potential for refurbishment costs to meet the leasing customer’s requirements; or the scrap market. Trade-in aircraft valuation varies significantly depending on which market we determine is most likely for each aircraft. On a quarterly basis, we update our valuation analysis based on the actual activities associated with placing each aircraft into a market or using current published third-party aircraft valuations based on the type and age of the aircraft, adjusted for individual attributes and known conditions.

Used aircraft acquired by the Commercial Airplanes segment are included in Inventories at the lower of cost or net realizable value as it is our intent to sell these assets. To mitigate costs and enhance marketability, aircraft may be placed on operating lease. While on operating lease, the assets are included in Customer financing.

Customer financing Customer financing includes operating lease equipment, notes receivable, and sales- type/finance leases. Sales-type/finance leases are treated as receivables, and allowances for losses are established as necessary.

We assess the fair value of the assets we own, including equipment under operating leases, assets held for sale or re-lease, and collateral underlying receivables, to determine if their fair values are less than the related assets’ carrying values. Differences between carrying values and fair values of sales-type/finance leases and notes and other receivables, as determined by collateral value, are considered in determining the allowance for losses on receivables.

We use a median calculated from published collateral values from multiple third-party aircraft value publications based on the type and age of the aircraft to determine the fair value of aircraft. Under certain circumstances, we apply judgment based on the attributes 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 outside publications.

Impairment review for assets under operating leases and held for sale or re-lease We evaluate for impairment assets under operating lease or assets held for sale or re-lease when events or changes in circumstances indicate that the expected undiscounted cash flow from the asset may be less than the carrying value. We use various assumptions when determining the expected undiscounted cash flow, including our intentions for how long we will hold an asset subject to operating lease before it is sold, the expected future lease rates, lease terms, residual value of the asset, periods in which the asset may be held in preparation for a follow-on lease, maintenance costs, remarketing costs and the remaining economic

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

life of the asset. We record assets held for sale at the lower of carrying value or fair value less costs to sell.

When we determine that impairment is indicated for an asset, the amount of impairment expense recorded is the excess of the carrying value over the fair value of the asset.

Allowance for losses on customer financing receivables We record the potential impairment of customer financing receivables in a valuation account, the balance of which is an accounting estimate of probable but unconfirmed losses. The allowance for losses on receivables relates to two components of receivables: (a) receivables that are evaluated individually for impairment and (b) all other receivables.

We determine a receivable is impaired when, based on current information and events, it is probable that we will be unable to collect amounts due according to the original contractual terms of the receivable agreement, without regard to any subsequent restructurings. Factors considered in assessing collectability include, but are not limited to, a customer’s extended delinquency, requests for restructuring and filings for bankruptcy. We determine a specific impairment allowance based on the difference between the carrying value of the receivable and the estimated fair value of the related collateral we would expect to realize.

We review the adequacy of the allowance attributable to the remaining receivables (after excluding receivables subject to a specific impairment allowance) by assessing both the collateral exposure and the applicable cumulative default rate. Collateral exposure for a particular receivable is the excess of the carrying value of the receivable over the fair value of the related collateral. A receivable with an estimated fair value in excess of the carrying value is considered to have no collateral exposure. The applicable cumulative default rate is determined using two components: customer credit ratings and weighted average remaining contract term. Internally assigned credit ratings, our credit quality indicator, are determined for each customer in the portfolio. Those ratings are updated based upon public information and information obtained directly from our customers.

We have entered into agreements with certain customers that would entitle us to look beyond the specific collateral underlying the receivable for purposes of determining the collateral exposure as described above. Should the proceeds from the sale of the underlying collateral asset resulting from a default condition be insufficient to cover the carrying value of our receivable (creating a shortfall condition), these agreements would, for example, permit us to take the actions necessary to sell or retain certain other assets in which the customer has an equity interest and use the proceeds to cover the shortfall.

Each quarter we review customer credit ratings, published historical credit default rates for different rating categories, and multiple third-party aircraft value publications as a basis to validate the reasonableness of the allowance for losses on receivables. There can be no assurance that actual results will not differ from estimates or that the consideration of these factors in the future will not result in an increase or decrease to the allowance for losses on receivables.

Warranties In conjunction with certain product sales, we provide warranties that cover factors such as non-conformance to specifications and defects in material and design. The majority of our warranties are issued by our Commercial Airplanes segment. Generally, aircraft sales are accompanied by a three to four-year standard warranty for systems, accessories, equipment, parts, and software manufactured by us or manufactured to certain standards under our authorization. These warranties are included in the programs’ estimate at completion. On occasion we have made commitments beyond the standard warranty obligation to correct fleet-wide major issues of a particular model, resulting in additional accrued warranty expense. Warranties issued by our BDS segment principally relate to sales of military aircraft and weapons hardware and are included in the contract cost estimates. These sales are generally accompanied by a six month to two- year warranty period and cover systems, accessories, equipment, parts, and software manufactured by us to certain contractual specifications. Estimated costs related to standard warranties are recorded in the

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

period in which the related product sales occur. The warranty liability recorded at each balance sheet date reflects the estimated number of months of warranty coverage outstanding for products delivered times the average of historical monthly warranty payments, as well as additional amounts for certain major warranty issues that exceed a normal claims level. Estimated costs of these additional warranty issues are considered changes to the initial liability estimate.

We provide guarantees to certain commercial airplane customers which include compensation provisions for failure to meet specified aircraft performance targets. We account for these performance guarantees as warranties. The estimated liability for these warranties is based on known and anticipated operational characteristics and forecasted customer operation of the aircraft relative to contractually specified performance targets, and anticipated settlements when contractual remedies are not specified. Estimated payments are recorded as a reduction of revenue at delivery of the related aircraft. We have agreements that require certain suppliers to compensate us for amounts paid to customers for failure of supplied equipment to meet specified performance targets. Claims against suppliers under these agreements are included in Inventories and recorded as a reduction in Cost of products at delivery of the related aircraft. These performance warranties and claims against suppliers are included in the programs’ estimate at completion.

Supplier Penalties

We record an accrual for supplier penalties when an event occurs that makes it probable that a supplier penalty will be incurred and the amount is reasonably estimable. Until an event occurs, we fully anticipate accepting all products procured under production-related contracts.

Guarantees

We record a liability in Accrued liabilities for the fair value of guarantees that are issued or modified after December 31, 2002. For a residual value guarantee where we received a cash premium, the liability is equal to the cash premium received at the guarantee’s inception. For credit guarantees, the liability is equal to the present value of the expected loss. We determine the expected loss by multiplying the creditor’s default rate by the guarantee amount reduced by the expected recovery, if applicable, for each future period the credit guarantee will be outstanding. If at inception of a guarantee, we determine there is a probable related contingent loss, we will recognize a liability for the greater of (a) the fair value of the guarantee as described above or (b) the probable contingent loss amount.

Standards Issued and Not Yet Implemented

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The standard will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. We plan to adopt the new lease standard in 2019 and do not expect it to have a material effect on our financial position, results of operations or cash flows.

We are adopting ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) in the first quarter of 2018 using the retrospective transition method which will require 2016 and 2017 financial statements to be restated. The new standard requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The standard also requires expanded disclosures regarding revenue and contracts with customers.

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1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Most of our defense contracts at BDS and BGS that have historically recognized revenue as deliveries are made or based on the attainment of performance milestones will recognize revenue under the new standard over time as costs are incurred. Certain military derivative aircraft contracts included in our BCA segment will also recognize revenue as costs are incurred. The new standard will not change the total amount of revenue recognized on these contracts, only accelerate the timing of when the revenue is recognized. In addition, the timing of cost of sales recognition for these contracts will be accelerated, resulting in a decrease in Inventories from long-term contracts in progress.

The new standard will not affect revenue recognition or the use of program accounting for commercial airplane contracts. We will continue to recognize revenue for these contracts at the point in time when the customer accepts delivery of the airplane.

Because revenue will be recognized under the new standard as costs are incurred for most of our defense and military derivative airplane contracts, approximately $10,000 of revenues and $1,300 of associated operating earnings will be accelerated into years ending prior to January 1, 2016. The restatement will result in a cumulative adjustment to increase retained earnings by $900 effective January 1, 2016. Restated income statements for 2016 and 2017 are shown below.

We are also adopting ASU No. 2017-07,Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost in the first quarter of 2018. The standard requires non-service cost components of net periodic benefit cost to be presented in non-operating earnings using a retrospective transition method which will require us to restate 2016 and 2017 in the first quarter of 2018. In addition, only service costs may be allocated to production costs and capitalized in inventory on a prospective basis effective January 1, 2018. Adoption in the first quarter of 2018 is expected to result in a reclassification of non-service cost components of net periodic benefit cost of $6 in 2017 and $478 in 2016 from Earnings from Operations to Other income/(loss), net. We applied a practical expedient as the estimation basis for this reclassification. Adoption of the new pension standard will not affect previously reported financial position, earnings per share, or cash flows.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

The impact to our 2017 and 2016 operating results as a result of adopting ASC Topic 606 and ASU No. 2017-07 is presented in the tables below:

Reported Restated Reported Restated Years ended December 31, 2017 2017 2016 2016 Revenues:

Commercial Airplanes $56,729 $58,014 $58,012 $59,378 Defense, Space & Security 21,057 20,561 22,563 20,180 Global Services 14,639 14,581 13,925 13,819 Boeing Capital 307 307 298 298 Unallocated items, eliminations and other 660 542 (227) (179)

Total revenues $93,392 $94,005 $94,571 $93,496 Earnings from operations:

Commercial Airplanes $5,432 $5,452 $1,995 $1,981 Defense, Space & Security 2,223 2,193 1,966 1,678 Global Services 2,256 2,246 2,177 2,159 Boeing Capital 114 114 59 59

Segment operating profit 10,025 10,005 6,197 5,877 Unallocated items, eliminations and other 253 (1,099) (363) (707) FAS/CAS service cost adjustment (1) 1,438 1,357

Earnings from operations 10,278 10,344 5,834 6,527 Other income/(loss), net (1) 129 123 40 (438) Interest and debt expense (360) (360) (306) (306) Earnings before income taxes 10,047 10,107 5,568 5,783 Income tax expense (1,850) (1,649) (673) (749) Net earnings $8,197 $8,458 $4,895 $5,034

Diluted earnings per share $13.43 $13.85 $7.61 $7.83 (1) The FAS/CAS service cost adjustment represents the difference between the pension and

postretirement service costs calculated under Generally Accepted Accounting Principles (GAAP) and costs allocated to the business segments which are based on U.S. Government Cost Accounting Standards for our defense businesses. Restated Other income/(loss), net includes the non-service cost components of net periodic benefit cost.

In addition to the income statement changes described above, adoption of ASC Topic 606 is expected to increase total assets and total liabilities at December 31, 2017 and 2016 by approximately $20,000 and $19,000 primarily due to classifying certain advances from customers as liabilities under the new standard, whereas these advances were netted against inventory under existing GAAP. Adoption of ASU No. 2017-07 has no impact on total assets and total liabilities. The new standards have no impact on cash flows reported in 2017 and 2016. The impact of the new revenue standard on our 2017 and 2016 financial results may not be representative of the impact on our financial position and operating results in subsequent years. ASC Topic 606 requires additional detailed disclosures regarding the Company’s contracts with customers, including disclosure of remaining unsatisfied performance obligations, in the first quarter of 2018 which we are continuing to assess. We have identified and implemented changes to the Company’s business processes, systems and controls to support adoption of the new standard.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Note 2 – Goodwill and Acquired Intangibles

Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2017 and 2016 were as follows:

Commercial Airplanes

Defense, Space & Security

Global Services Total

Balance at January 1, 2016 $992 $2,648 $1,486 $5,126 Acquisitions(1) 206 206 Goodwill adjustments (8) (8) Balance at December 31, 2016 $992 $2,854 $1,478 $5,324 Acquisitions(1) 220 220 Goodwill adjustments 15 15 Balance at December 31, 2017(1) $992 $3,074 $1,493 $5,559

(1) The increase in goodwill is primarily the result of acquisitions in the fourth quarter of 2016 and 2017.

As of December 31, 2017 and 2016, we had indefinite-lived intangible assets with carrying amounts of $490 relating to trade names.

The gross carrying amounts and accumulated amortization of our acquired finite-lived intangible assets were as follows at December 31:

2017 2016 Gross

Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

Distribution rights $2,445 $943 $2,281 $797 Product know-how 522 298 503 271 Customer base 650 479 595 436 Developed technology 556 406 523 376 Other 213 177 194 166 Total $4,386 $2,303 $4,096 $2,046

Amortization expense for acquired finite-lived intangible assets for the years ended December 31, 2017 and 2016 was $240 and $220. Estimated amortization expense for the five succeeding years is as follows:

2018 2019 2020 2021 2022 Estimated amortization expense $236 $213 $183 $174 $165

During 2017 and 2016 we acquired $298 and $113 of finite-lived intangible assets, of which $55 and $31 related to non-cash investing and financing transactions.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Note 3 – 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, less earnings available to participating securities, divided by the basic weighted average common shares outstanding.

Diluted earnings per share is calculated by taking net earnings, less earnings available to participating securities, divided by the diluted weighted average common shares outstanding.

The elements used in the computation of basic and diluted earnings per share were as follows:

(In millions - except per share amounts) Years ended December 31, 2017 2016 2015 Net earnings $8,197 $4,895 $5,176 Less: earnings available to participating securities 6 3 4 Net earnings available to common shareholders $8,191 $4,892 $5,172

Basic Basic weighted average shares outstanding 603.2 636.5 688.0 Less: participating securities 0.7 1 1.1 Basic weighted average common shares outstanding 602.5 635.5 686.9

Diluted Basic weighted average shares outstanding 603.2 636.5 688.0 Dilutive potential common shares(1) 7.5 7.3 8.1 Diluted weighted average shares outstanding 610.7 643.8 696.1 Less: participating securities 0.7 1.0 1.1 Diluted weighted average common shares outstanding 610.0 642.8 695.0

Net earnings per share: Basic $13.60 $7.70 $7.52 Diluted 13.43 7.61 7.44

(1) Diluted earnings per share includes any dilutive impact of stock options, restricted stock units, performance-based restricted stock units and performance awards.

The following table includes the number of shares that may be dilutive potential common shares in the future. These shares were not included in the computation of diluted earnings per share because the effect was either antidilutive or the performance condition was not met.

(Shares in millions) Years ended December 31, 2017 2016 2015 Performance awards 4.1 6.5 5.6 Performance-based restricted stock units 0.5 2.5 2.3

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Note 4 – Income Taxes

The components of earnings before income taxes were:

Years ended December 31, 2017 2016 2015 U.S. $9,615 $5,175 $6,828 Non-U.S. 432 393 327 Total $10,047 $5,568 $7,155

Income tax expense/(benefit) consisted of the following:

Years ended December 31, 2017 2016 2015 Current tax expense

U.S. federal $1,276 $1,193 $2,102 Non-U.S. 149 133 122 U.S. state 23 15 21

Total current 1,448 1,341 2,245 Deferred tax expense

U.S. federal 405 (618) (297) Non-U.S. (1) (4) 4 U.S. state (2) (46) 27

Total deferred 402 (668) (266) Total income tax expense $1,850 $673 $1,979

Net income tax payments were $896, $1,460 and $1,490 in 2017, 2016 and 2015, respectively.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

The following is a reconciliation of the U.S. federal statutory tax rate of 35% to our effective income tax rates:

Years ended December 31, 2017 2016 2015 U.S. federal statutory tax 35.0% 35.0% 35.0% Impact of Tax Cuts and Jobs Act(1) (10.5) Tax basis adjustment(2) (7.9) Federal audit settlements(3) (3.2) Excess tax benefits(4) (2.1) (1.9) Research and development credits (1.6) (5.2) (3.4) U.S. manufacturing activity tax benefit (1.3) (3.8) (2.9) Tax on non-US activities (0.9) (0.5) (0.6) Other provision adjustments (0.2) (0.4) (0.4) Effective income tax rate 18.4% 12.1% 27.7%

(1) On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted. The TCJA revises the U.S. corporate income tax by, among other things, lowering the rate from 35% to 21% effective January 1, 2018, implementing a territorial tax system and imposing a one-time tax on deemed repatriated earnings of non-U.S. subsidiaries. In the fourth quarter of 2017, we recorded provisional tax benefits of $1,210 related to the remeasurement of our net U.S. deferred tax liabilities to reflect the reduction in the corporate tax rate. We also recorded a provisional tax expense of $159 related to tax on non- U.S. activities resulting from the TCJA.

(2) In the third quarter of 2016, we recorded incremental tax benefits of $440 related to the application of a 2012 Federal Court of Claims decision which held that the tax basis in certain assets could be increased (tax basis adjustment).

(3) In the third quarter of 2016, a tax benefit of $177 was recorded as a result of the settlement of the 2011-2012 federal tax audit.

(4) In 2017 and 2016, we recorded excess tax benefits related to employee share-based payments of $207 and $105.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Significant components of our deferred tax (liabilities)/assets at December 31 were as follows:

2017 2016 Inventory and long-term contract methods of income recognition (6,290) (9,954) Pension benefits 3,690 7,385 Retiree health care benefits 1,319 2,268 Fixed assets, intangibles and goodwill (net of valuation allowance of $16 and $16) (1,259) (2,007) Other employee benefits 847 1,225 Customer and commercial financing (369) (730) Accrued expenses and reserves 347 587 Net operating loss, credit and capital loss carryovers (net of valuation

allowance of $53 and $79)(1) 299 277 Other (82) (57) Net deferred tax (liabilities)/assets(2) ($1,498) ($1,006)

(1) Of the deferred tax asset for net operating loss and credit carryovers, $278 expires on or before December 31, 2036 and $21 may be carried over indefinitely.

(2) Included in the net deferred tax (liabilities)/assets as of December 31, 2017 and 2016 are deferred tax assets in the amounts of $4,636 and $7,701 related to Accumulated other comprehensive loss.

Net deferred tax (liabilities)/assets at December 31 were as follows:

2017 2016 Deferred tax assets $8,459 $13,591 Deferred tax liabilities (9,888) (14,502) Valuation allowance (69) (95) Net deferred tax (liabilities)/assets ($1,498) ($1,006)

The deferred tax assets are reduced by a valuation allowance if, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The TCJA one-time repatriation tax liability effectively taxed the undistributed earnings previously deferred from U.S. income taxes. We have not provided for foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries because such earnings are considered to be indefinitely reinvested. If such earnings were to be distributed, any foreign withholding tax would not be significant.

In accordance with U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118 the amounts recorded in the fourth quarter of 2017 related to the TCJA represent reasonable estimates based on our analysis to date and are considered to be provisional and subject to revision during 2018. Provisional amounts were recorded for the repatriation tax, the remeasurement of our 2017 U.S. net deferred tax liabilities and ancillary state tax effects. These amounts are considered to be provisional as we continue to assess available tax methods and elections and refine our computations. In addition, further regulatory guidance related to the TCJA is expected to be issued in 2018 which may result in changes to our current estimates. Any revisions to the estimated impacts of TCJA will be recorded quarterly until the computations are complete which is expected no later than the fourth quarter of 2018.

As of December 31, 2017 and 2016, the amounts accrued for the payment of income tax-related interest and penalties included in the Consolidated Statements of Financial Position were not significant. The amounts of interest benefit included in the Consolidated Statements of Operations were not significant for the years ended December 31, 2017, 2016 and 2015.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

2017 2016 2015 Unrecognized tax benefits – January 1 $1,557 $1,617 $1,312

Gross increases – tax positions in prior periods 3 17 38 Gross decreases – tax positions in prior periods (44) (348) (25) Gross increases – current-period tax positions 220 344 292 Settlements (73)

Unrecognized tax benefits – December 31 $1,736 $1,557 $1,617

As of December 31, 2017, 2016 and 2015, the total amount of unrecognized tax benefits was $1,736, $1,557 and $1,617, respectively, of which $1,568, $1,402 and $1,479 would affect the effective tax rate, if recognized. As of December 31, 2017, these amounts are primarily associated with U.S. federal tax issues such as the amount of research tax credits claimed, the U.S. manufacturing activity tax benefit and tax basis adjustments. Also included in these amounts are accruals for domestic state tax issues such as the allocation of income among various state tax jurisdictions and the amount of state tax credits claimed.

Federal income tax audits have been settled for all years prior to 2013. The Internal Revenue Service (IRS) began the 2013-2014 federal tax audit in the fourth quarter of 2016. We are also subject to examination in major state and non-U.S. jurisdictions for the 2001-2016 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 and state matters under audit may decrease by up to $540 and $430, respectively, based on current estimates.

Note 5 – Accounts Receivable, net

Accounts receivable at December 31 consisted of the following:

2017 2016 U.S. government contracts $5,989 $4,639 Commercial Airplanes 1,542 1,375 Global Services(1) 1,472 1,257 Defense, Space & Security(1) 760 533 Reinsurance receivables 467 526 Other 348 567 Less valuation allowance (62) (65) Total $10,516 $8,832

(1) Excludes U.S. government contracts

The following table summarizes our accounts receivable under long-term contracts that were unbillable or related to outstanding claims as of December 31:

Unbillable Claims 2017 2016 2017 2016

Current $2,876 $1,919 $4 $38 Expected to be collected after one year 1,564 2,011 $55 91 Total $4,440 $3,930 $59 $129

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Under contract accounting unbillable receivables on long-term contracts arise when the sales or revenues based on performance attainment, though appropriately recognized, cannot be billed yet under terms of the contract as of the balance sheet date. Any adjustment for the credit quality of unbillable receivables, if required, would be recorded as a direct reduction of revenue. Factors considered in assessing the collectability of unbillable receivables include, but are not limited to, a customer’s extended delinquency, requests for restructuring and filings for bankruptcy. Unbillable receivables related to commercial customers expected to be collected after one year were $172 and $172 at December 31, 2017 and 2016. Accounts receivable related to claims are items that we believe are earned, but are subject to uncertainty concerning their determination or ultimate realization.

Accounts receivable, other than those described above, expected to be collected after one year are not material.

Note 6 – Inventories

Inventories at December 31 consisted of the following:

2017 2016 Long-term contracts in progress $13,889 $12,801 Commercial aircraft programs 52,861 52,048 Commercial spare parts, used aircraft, general stock materials and other 5,688 5,446 Inventory before advances and progress billings 72,438 70,295 Less advances and progress billings (28,094) (27,096) Total $44,344 $43,199

Long-Term Contracts in Progress

Long-term contracts in progress includes Delta launch program inventory that is being sold at cost to United Launch Alliance (ULA) under an inventory supply agreement that terminates on March 31, 2021. The inventory balance was $120 (net of advances of $164 and $220) at December 31, 2017 and 2016. See indemnifications to ULA in Note 12.

Included in inventories at December 31, 2017 and 2016 are capitalized precontract costs of $933 and $729 primarily related to KC-46A Tanker, C-17 and F/A-18. See Note 11.

Commercial Aircraft Programs

At December 31, 2017 and 2016, commercial aircraft programs inventory included the following amounts related to the 787 program: $30,695 and $32,501 of work in process (including deferred production costs of $25,358 and $27,308), $3,189 and $2,398 of supplier advances, and $3,173 and $3,625 of unamortized tooling and other non-recurring costs. At December 31, 2017, $22,220 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 $6,311 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.

At December 31, 2017 and 2016, commercial aircraft programs inventory included $151 and $284 of unamortized tooling costs related to the 747 program. At December 31, 2017, $146 of 747 unamortized tooling costs are expected to be recovered from units included in the program accounting quantity that have firm orders or commitments. The program accounting quantity includes one already completed aircraft which is being remarketed.

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

M Y K

8.3750 X 10.8750

Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $2,976 and $3,117 at December 31, 2017 and 2016.

Note 7 – Customer Financing

Customer financing primarily relates to the BCC segment and consisted of the following at December 31:

2017 2016 Financing receivables:

Investment in sales-type/finance leases $1,364 $1,482 Notes 677 807

Total financing receivables 2,041 2,289 Operating lease equipment, at cost, less accumulated depreciation of $320 and

$359 1,020 1,922 Gross customer financing 3,061 4,211 Less allowance for losses on receivables (12) (10) Total $3,049 $4,201

The components of investment in sales-type/finance leases at December 31 were as follows:

2017 2016 Minimum lease payments receivable $1,159 $1,321 Estimated residual value of leased assets 495 505 Unearned income (290) (344) Total $1,364 $1,482

Operating lease equipment primarily includes large commercial jet aircraft.

Financing receivable balances evaluated for impairment at December 31 were as follows:

2017 2016 Individually evaluated for impairment $77 $55 Collectively evaluated for impairment 1,964 2,234 Total financing receivables $2,041 $2,289

We determine a receivable is impaired when, based on current information and events, it is probable that we will be unable to collect amounts due according to the original contractual terms. At December 31, 2017 and 2016, we individually evaluated for impairment customer financing receivables of $77 and $55, of which $66 and $44 were determined to be impaired. We recorded no allowance for losses on these impaired receivables as the collateral values exceeded the carrying values of the receivables.

Income recognition is generally suspended for financing receivables at the date full recovery of income and principal becomes not probable. Income is recognized when financing receivables become contractually current and performance is demonstrated by the customer. The average recorded investment in impaired financing receivables for the year ended December 31, 2017 was $46 and the related interest income was insignificant.

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200 Entin Road | Clifton, New Jersey 07014 | p 973.470.8100 | f 973.470.9269 | www.sandyinc.com

06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

C M Y K

8.3750 X 10.8750

The change in the allowance for losses on financing receivables for the years ended December 31, 2017, 2016 and 2015, consisted of the following:

2017 2016 2015 Beginning balance - January 1 ($10) ($16) ($21)

Customer financing valuation (cost)/benefit (2) 6 5 Ending balance - December 31 ($12) ($10) ($16) Collectively evaluated for impairment ($12) ($10) ($16)

The adequacy of the allowance for losses is assessed quarterly. Three primary factors influencing the level of our allowance for losses on customer financing receivables are customer credit ratings, default rates and collateral values. We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon publicly available information and information obtained directly from our customers. Our rating categories are comparable to those used by the major credit rating agencies.

Our financing receivable balances at December 31 by internal credit rating category are shown below:

Rating categories 2017 2016 BBB $1,170 $1,324 BB 627 538 B 177 383 CCC 67 44 Total carrying value of financing receivables $2,041 $2,289

At December 31, 2017, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged 22.6%, 4.7% and 0.9% to the exposure associated with those receivables.

Customer Financing Exposure

Customer financing is collateralized by security in the related asset. The value of the collateral is closely tied to commercial airline performance and overall market conditions and may be subject to reduced valuation with market decline. Declines in collateral values could result in asset impairments, reduced finance lease income, and an increase in the allowance for losses. Our customer financing collateral is concentrated in 747-8 and out-of-production aircraft. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft.

The majority of customer financing carrying values are concentrated in the following aircraft models at December 31:

2017 2016 717 Aircraft ($269 and $301 accounted for as operating leases) $1,081 $1,282 747-8 Aircraft ($467 and $1,086 accounted for as operating leases) 467 1,111 MD-80 Aircraft (Accounted for as sales-type finance leases) 231 259 757 Aircraft ($27 and $43 accounted for as operating leases) 217 246 747-400 Aircraft ($88 and $149 Accounted for as operating leases) 170 149 737 Aircraft ($127 and $103 Accounted for as operating leases) 161 103 767 Aircraft ($25 and $85 accounted for as operating leases) 98 170 777 Aircraft (Accounted for as notes) 14 165

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Charges related to customer financing asset impairment for the years ended December 31 were as follows:

2017 2016 2015 Boeing Capital $13 $45 $162 Other Boeing 30 21 Total $43 $66 $162

Scheduled receipts on customer financing are as follows:

Year 2018 2019 2020 2021 2022 Beyond

2022 Principal payments on notes receivable $149 $167 $132 $175 $37 $17 Sales-type/finance lease payments receivable 236 223 185 120 107 288 Operating lease equipment payments receivable 417 86 69 53 40 62

Note 8 – Property, Plant and Equipment

Property, plant and equipment at December 31 consisted of the following:

2017 2016 Land $530 $535 Buildings and land improvements 14,125 13,796 Machinery and equipment 14,577 13,569 Construction in progress 1,081 1,790 Gross property, plant and equipment 30,313 29,690 Less accumulated depreciation (17,641) (16,883) Total $12,672 $12,807

Depreciation expense was $1,548, $1,418 and $1,357 for the years ended December 31, 2017, 2016 and 2015, respectively. Interest capitalized during the years ended December 31, 2017, 2016 and 2015 totaled $110, $170 and $158, respectively.

Rental expense for leased properties was $283, $287 and $267, for the years ended December 31, 2017, 2016 and 2015, respectively. At December 31, 2017, minimum rental payments under capital leases aggregated $147. Minimum rental payments under operating leases with initial or remaining terms of one year or more aggregated $1,355, net of sublease payments of $13 at December 31, 2017. Payments due under operating and capital leases net of sublease amounts and non-cancellable future rentals during the next five years are as follows:

2018 2019 2020 2021 2022 Minimum operating lease payments, net of sublease amounts $216 $201 $157 $115 $96 Minimum capital lease payments 55 37 24 12 4

Accounts payable related to purchases of property, plant and equipment were $196 and $292 for the years ended December 31, 2017 and 2016.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Note 9 – Investments

Our investments, which are recorded in Short-term and other investments or Investments, consisted of the following at December 31:

2017 2016 Equity method investments (1) $1,214 $1,242 Time deposits 613 665 Available-for-sale investments 508 537 Other investments 30 33 Restricted cash & cash equivalents (2) 74 68 Total $2,439 $2,545

(1) Dividends received were $247 and $314 during 2017 and 2016. Retained earnings at December 31, 2017 include undistributed earnings from our equity method investments of $307.

(2) Reflects amounts restricted in support of our workers’ compensation programs, employee benefit programs, and insurance premiums.

Equity Method Investments

Our equity method investments consisted of the following as of December 31:

Segment Ownership

Percentages Investment Balance 2017 2016

United Launch Alliance BDS 50% $889 $914 Other BCA, BDS, and BGS 325 328 Total equity method investments $1,214 $1,242

Note 10 – Other Assets

Sea Launch

At December 31, 2017 and 2016, Other assets included $356 of receivables related to our former investment in the Sea Launch venture which became payable by certain Sea Launch partners following Sea Launch’s bankruptcy filing in June 2009. The net amounts owed to Boeing by each of the partners are as follows: S.P. Koroley Rocket and Space Corporation Energia of Russia (RSC Energia) – $223, PO Yuzhnoye Mashinostroitelny Zavod of Ukraine – $89 and KB Yuzhnoye of Ukraine – $44.

In 2013, we filed an action in the United States District Court for the Central District of California seeking reimbursement from the other Sea Launch partners. In 2016, the United States District Court for the Central District of California issued a judgment in favor of Boeing. Later that year, we reached an agreement which we believe will enable us to recover the outstanding receivable balance from RSC Energia over the next several years. We continue to pursue collection efforts against the former Ukrainian partners in connection with the court judgment. We continue to believe the partners have the financial wherewithal to pay and intend to pursue vigorously all of our rights and remedies. In the event we are unable to secure reimbursement from RSC Energia and the Ukrainian Sea Launch partners, we could incur additional charges.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Spirit AeroSystems

As of December 31, 2017 and 2016, Other assets included $137 and $143 of receivables related to indemnifications from Spirit AeroSystems, Inc. (Spirit), for costs incurred related to pension and retiree medical obligations of former Boeing employees who were subsequently employed by Spirit. During the fourth quarter of 2014, Boeing filed a complaint against Spirit in the Delaware Superior Court seeking to enforce our rights to indemnification and to recover from Spirit amounts incurred by Boeing for pension and retiree medical obligations. During 2017, the court ruled against Boeing and denied our claim. In January 2018, Boeing filed a notice of appeal with the Delaware Supreme Court. We believe we have substantial arguments on appeal and expect to fully recover from Spirit.

Note 11 – Liabilities, Commitments and Contingencies

Accrued Liabilities

Accrued liabilities at December 31 consisted of the following:

2017 2016 Accrued compensation and employee benefit costs $6,659 $5,720 Environmental 524 562 Product warranties 1,211 1,414 Forward loss recognition 1,683 1,385 Dividends payable 1,005 866 Income Taxes Payable 380 89 Other 3,830 4,655 Total $15,292 $14,691

Environmental

The following table summarizes environmental remediation activity during the years ended December 31, 2017 and 2016.

2017 2016 Beginning balance – January 1 $562 $566

Reductions for payments made (45) (47) Changes in estimates 7 43

Ending balance – December 31 $524 $562

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 charges 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 December 31, 2017 and 2016, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $868 and $857.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Product Warranties

The following table summarizes product warranty activity recorded during the years ended December 31, 2017 and 2016.

2017 2016 Beginning balance – January 1 $1,414 $1,485

Additions for current year deliveries 274 356 Reductions for payments made (241) (309) Changes in estimates (236) (118)

Ending balance – December 31 $1,211 $1,414

Commercial Aircraft Commitments

In conjunction with signing definitive agreements for the sale of new aircraft (Sale 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 upon the purchase of Sale Aircraft. 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 December 31, 2017 have expiration dates from 2018 through 2026. At December 31, 2017 and 2016, total contractual trade-in commitments were $1,462 and $1,485. As of December 31, 2017 and 2016, we estimated that it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $155 and $126 and the fair value of the related trade-in aircraft was $155 and $126.

Financing Commitments

Financing commitments related to aircraft on order, including options and those proposed in sales campaigns, and refinancing of delivered aircraft, totaled $10,221 and $14,847 as of December 31, 2017 and 2016. The estimated earliest potential funding dates for these commitments as of December 31, 2017 are as follows:

Total 2018 $2,047 2019 2,975 2020 1,396 2021 1,322 2022 935 Thereafter 1,546

$10,221

As of December 31, 2017, all of these financing commitments related 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.

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

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. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $3,708 and $4,701 as of December 31, 2017 and 2016.

Commitments to ULA

We and Lockheed Martin Corporation have each committed to provide ULA with additional capital contributions in the event ULA does not have sufficient funds to make a required payment to us under an inventory supply agreement. As of December 31, 2017, ULA’s total remaining obligation to Boeing under the inventory supply agreement was $120. See Note 6.

F/A-18

At December 31, 2017, our backlog included 26 F/A-18 aircraft under contract with the U.S. Navy. We have begun work or authorized suppliers to begin working on aircraft beyond those already in backlog in anticipation of future orders. At December 31, 2017, we had $155 of capitalized precontract costs and $855 of potential termination liabilities to suppliers associated with F/A-18 aircraft not yet ordered.

Company Owned Life Insurance

McDonnell Douglas Corporation insured its executives with Company Owned Life Insurance (COLI), which are life insurance policies with a cash surrender value. Although we do not use COLI currently, these obligations from the merger with McDonnell Douglas are still a commitment at this time. We have loans in place to cover costs paid or incurred to carry the underlying life insurance policies. As of December 31, 2017 and 2016, the cash surrender value was $489 and $483 and the total loans were $470 and $456. As we have the right to offset the loans against the cash surrender value of the policies, we present the net asset in Other assets on the Consolidated Statements of Financial Position as of December 31, 2017 and 2016.

United States Government Defense Environment Overview

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

BDS Fixed-Price Development Contracts

Fixed-price development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work. BDS fixed-price contracts with significant development work include Commercial Crew, Saudi F-15, USAF KC-46A Tanker and commercial and military satellites. The operational and technical complexities of these contracts create financial risk, which could trigger termination provisions, order cancellations or other financially significant exposure. Changes to cost and revenue estimates could result in lower margins or material charges for reach-forward losses. For example, during 2017, we recorded additional reach-forward losses of $471 on the KC-46A Tanker program. Moreover, this and our other fixed-price development programs remain subject to additional reach-forward losses if we experience further technical or quality issues, schedule delays, or increased costs.

KC-46A Tanker

In 2011, we were awarded a contract from the U.S. Air Force (USAF) to design, develop, manufacture and deliver four next generation aerial refueling tankers. This Engineering, Manufacturing and Development (EMD) contract is a fixed-price incentive fee contract valued at $4.9 billion and involves highly complex designs and systems integration. In 2016, the USAF authorized two low rate initial production (LRIP) lots for 7 and 12 aircraft valued at $2.8 billion. In January 2017, the USAF authorized an additional LRIP lot for 15 aircraft valued at $2.1 billion.

At December 31, 2017, we had approximately $347 of capitalized precontract costs and $1,024 of potential termination liabilities to suppliers.

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.

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tmurray Larry Liso

Boeing_1296

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Note 12 – 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. Estimated proceeds from collateral and recourse represent the anticipated values of assets we could liquidate or receive from other parties to offset our payments under guarantees. The carrying amount of liabilities represents the amount included in Accrued liabilities.

Maximum Potential Payments

Estimated Proceeds from

Collateral/ Recourse

Carrying Amount of Liabilities

December 31, 2017 2016 2017 2016 2017 2016 Contingent repurchase commitments $1,605 $1,306 $1,605 $1,306 $9 $9 Indemnifications to ULA:

Contributed Delta program launch inventory 72 77

Contract pricing 261 261 7 7 Other Delta contracts 191 216 5

Credit guarantees 109 29 55 27 16 2

Contingent Repurchase Commitments The 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.

Indemnifications to ULA In 2006, we agreed to indemnify ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360 of Boeing Delta launch program inventory included in contributed assets plus $1,860 of inventory subject to an inventory supply agreement which ends on March 31, 2021. Since inception, ULA has consumed $1,288 of the $1,360 of inventory that was contributed by us and has yet to consume $72. Under the inventory supply agreement, we have recorded revenues and cost of sales of $1,528 through December 31, 2017. ULA has made payments of $1,740 to us under the inventory supply agreement and we have made $48 of net indemnification payments to ULA.

We agreed to indemnify ULA against potential losses that ULA may incur in the event ULA is unable to obtain certain additional contract pricing from the USAF for four satellite missions. In 2009, ULA filed a complaint before the Armed Services Board of Contract Appeals (ASBCA) for a contract adjustment for the price of two of these missions, followed in 2011 by a subsequent notice of appeal with respect to a third mission. The USAF did not exercise an option for a fourth mission prior to the expiration of the contract. During the second quarter of 2016, the ASBCA ruled that ULA is entitled to additional contract pricing for each of the three missions and remanded to the parties to negotiate appropriate pricing. During the fourth quarter of 2016, the USAF appealed the ASBCA’s ruling. In April 2017, the USAF withdrew its appeal. If ULA is ultimately unsuccessful in obtaining additional pricing, we may be responsible for an indemnification payment up to $261 and may record up to $277 in pre-tax losses associated with the three missions.

Potential payments for Other Delta contracts include $85 related to deferred support costs and $91 related to deferred production costs. In June 2011, the Defense Contract Management Agency (DCMA) notified ULA that it had determined that $271 of deferred support costs are not recoverable under government contracts. In December 2011, the DCMA notified ULA of the potential non-recoverability of an additional $114 of deferred production costs. ULA and Boeing believe that all costs are recoverable and in November

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tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

2011, ULA filed a certified claim with the USAF for collection of deferred support and production costs. The USAF issued a final decision denying ULA’s certified claim in May 2012. In 2012, Boeing and ULA filed a suit in the Court of Federal Claims seeking recovery of the deferred support and production costs from the U.S. government, which subsequently asserted a counterclaim for credits that it alleges were offset by deferred support cost invoices. We believe that the U.S. government’s counterclaim is without merit. The discovery phase of the litigation completed in 2017, and during the fourth quarter, Boeing filed a motion for summary judgment for full recovery of its costs. If, contrary to our belief, it is determined that some or all of the deferred support or production costs are not recoverable, we could be required to record pre-tax losses and make indemnification payments to ULA for up to $317 of the costs questioned by the DCMA.

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 and therefore, no liability has been recorded. 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 11.

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 and are collateralized by certain assets. Current outstanding credit guarantees expire through 2036.

Industrial Revenue Bonds

Industrial Revenue Bonds (IRB) issued by St. Louis County were used to finance the purchase and/or construction of real and personal property at our St. Louis site. Tax benefits associated with IRBs include a twelve-year property tax abatement and sales tax exemption from St. Louis County. We record these properties on our Consolidated Statements of Financial Position. We have also purchased the IRBs and therefore are the bondholders as well as the borrower/lessee of the properties purchased with the IRB proceeds. The liabilities and IRB assets are equal and are reported net in the Consolidated Statements of Financial Position.

As of December 31, 2017 and 2016, the assets and liabilities associated with the IRBs were $166 and $64.

Note 13 – Debt

On February 16, 2017, we issued $900 of fixed rate senior notes consisting of $300 due March 1, 2022 that bear an annual interest rate of 2.125%, $300 due March 1, 2027 that bear an annual interest rate of 2.8%, and $300 due March 1, 2047 that bear an annual interest rate of 3.65%. The notes are unsecured senior obligations and rank equally in right of payment with our existing and future unsecured and unsubordinated indebtedness. The net proceeds of the issuance totaled $871, after deducting underwriting discounts, commissions and offering expenses.

Interest incurred, including amounts capitalized, was $541, $535 and $497 for the years ended December 31, 2017, 2016 and 2015, respectively. Interest expense recorded by BCC is reflected as Boeing Capital interest expense on our Consolidated Statements of Operations. Total Company interest payments were $527, $523 and $488 for the years ended December 31, 2017, 2016 and 2015, respectively.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

We have $5,000 currently available under credit line agreements, of which $2,500 is a 364-day revolving credit facility expiring in October 2018, $2,470 expires in November 2022, and $30 expires in November 2021. The 364-day credit facility has a one-year term out option which allows us to extend the maturity of any borrowings one year beyond the aforementioned expiration date. We continue to be in full compliance with all covenants contained in our debt or credit facility agreements.

Short-term debt and current portion of long-term debt at December 31 consisted of the following:

2017 2016 Unsecured debt securities $599 $255 Non-recourse debt and notes 33 33 Capital lease obligations 52 57 Commercial Paper 600 Other notes 51 39 Total $1,335 $384

Debt at December 31 consisted of the following:

2017 2016 Unsecured debt securities

0.95% - 4.88% due through 2047 $6,127 5,250 5.80% - 6.88% due through 2043 2,386 2,383 7.25% - 8.75% due through 2043 1,637 1,641 Commercial paper 600 Variable rate: 3-month USD LIBOR plus 12.5 basis points due 2017 $250

Non-recourse debt and notes 6.98% - 7.38% notes due through 2021 94 127

Capital lease obligations due through 2034 138 138 Other notes 135 163 Total debt $11,117 $9,952

As of December 31, 2017, borrowings of commercial paper of $600, with a weighted-average interest rate of 1.4%, were supported by unused commitments under the revolving credit agreement. We had no commercial paper borrowings in 2016.

Total debt is attributable to:

2017 2016 BCC $2,523 $2,864 Other Boeing 8,594 7,088 Total debt $11,117 $9,952

At December 31, 2017, $94 of debt (non-recourse debt, notes and capital lease obligations) was collateralized by customer financing assets totaling $231.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Scheduled principal payments for debt and minimum capital lease obligations for the next five years are as follows:

2018 2019 2020 2021 2022 Scheduled principal payments $1,340 $1,275 $1,148 $728 $554

Note 14 – Postretirement Plans

We fund our major pension plans through trusts. Pension assets are placed in trust solely for the benefit of the plans’ participants, and are structured to maintain liquidity that is sufficient to pay benefit obligations as well as to keep pace over the long-term with the growth of obligations for future benefit payments.

We also have other postretirement benefits (OPB) other than pensions which consist principally of health care coverage for eligible retirees and qualifying dependents, and to a lesser extent, life insurance to certain groups of retirees. Retiree health care is provided principally until age 65 for approximately half those retirees who are eligible for health care coverage. Certain employee groups, including employees covered by most United Auto Workers bargaining agreements, are provided lifetime health care coverage. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation (PBO). We have recognized the aggregate of all overfunded plans in Other assets, and the aggregate of all underfunded plans in either Accrued retiree health care or Accrued pension plan liability, net. The portion of the amount by which the actuarial present value of benefits included in the PBO exceeds the fair value of plan assets, payable in the next 12 months, is reflected in Accrued liabilities.

The components of net periodic benefit cost were as follows:

Pension Other Postretirement

Benefits Years ended December 31, 2017 2016 2015 2017 2016 2015 Service cost $402 $604 $1,764 $106 $128 $140 Interest cost 2,991 3,050 2,990 229 262 248 Expected return on plan assets (3,847) (3,999) (4,031) (7) (8) (8) Amortization of prior service (credits)/

costs (39) 38 196 (137) (126) (136) Recognized net actuarial loss 804 790 1,577 10 22 31 Settlement/curtailment/other losses 1 40 290 10 Net periodic benefit cost $312 $523 $2,786 $201 $278 $285

Net periodic benefit cost included in Earnings from operations $639 $1,979 $2,366 $262 $274 $288

The following tables show changes in the benefit obligation, plan assets and funded status of both pensions and OPB for the years ended December 31, 2017 and 2016. Benefit obligation balances presented below reflect the PBO for our pension plans, and accumulated postretirement benefit obligations (APBO) for our OPB plans.

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Boeing_1296

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Pension

Other Postretirement

Benefits Recognized net actuarial loss/(gain) $1,128 ($10) Amortization of prior service (credits) (56) (126) Total $1,072 ($136)

The accumulated benefit obligation (ABO) for all pension plans was $77,414 and $74,240 at December 31, 2017 and 2016. Key information for our plans with ABO in excess of plan assets as of December 31 was as follows:

2017 2016 Projected benefit obligation $74,953 $76,586 Accumulated benefit obligation 71,975 74,081 Fair value of plan assets $58,353 $56,530

Assumptions

The following assumptions, which are the weighted average for all plans, are used to calculate the benefit obligation at December 31 of each year and the net periodic benefit cost for the subsequent year.

December 31, 2017 2016 2015 Discount rate:

Pension 3.60% 4.00% 4.20% Other postretirement benefits 3.30% 3.70% 3.80%

Expected return on plan assets 6.80% 6.80% 7.00% Rate of compensation increase 5.30% 4.40% 4.00%

The discount rate for each plan is determined based on the plans’ expected future benefit payments using a yield curve developed from high quality bonds that are rated as Aa or better by at least half of the four rating agencies utilized as of the measurement date. The yield curve is fitted to yields developed from bonds at various maturity points. Bonds with the ten percent highest and the ten percent lowest yields are omitted. A portfolio of about 400 bonds is used to construct the yield curve. Since corporate bond yields are generally not available at maturities beyond 30 years, it is assumed that spot rates will remain level beyond that 30-year point. The present value of each plan’s benefits is calculated by applying the discount rates to projected benefit cash flows. All bonds are U.S. issues, with a minimum outstanding of $50.

The pension fund’s expected return on plan assets assumption is derived from a review of actual historical returns achieved by the pension trust and anticipated future long-term performance of individual asset classes. While consideration is given to recent trust performance and historical returns, the assumption represents a long-term, prospective return. The expected return on plan assets component of the net periodic benefit cost for the upcoming plan year is determined based on the expected return on plan assets assumption and the market-related value of plan assets (MRVA). Since our adoption of the accounting standard for pensions in 1987, we have determined the MRVA based on a five-year moving average of plan assets. As of December 31, 2017, the MRVA was approximately $2,260 less than the fair market value of assets.

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Boeing_1296

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Assumed health care cost trend rates were as follows:

December 31, 2017 2016 2015 Health care cost trend rate assumed next year 6.00% 6.50% 6.50% Ultimate trend rate 4.50% 5.00% 5.00% Year that trend reached ultimate rate 2021 2021 2021

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. To determine the health care cost trend rates we look at a combination of information including ongoing claims cost monitoring, annual statistical analyses of claims data, reconciliation of forecast claims against actual claims, review of trend assumptions of other plan sponsors and national health trends, and adjustments for plan design changes, workforce changes, and changes in plan participant behavior. A one-percentage-point change in assumed health care cost trend rates would have the following effect:

Increase Decrease Effect on total of service and interest cost $45 ($37) Effect on postretirement benefit obligation 529 (448)

Plan Assets

Investment Strategy The overall objective of our pension assets is to earn a rate of return over time to satisfy the benefit obligations of the pension plans and to maintain sufficient liquidity to pay benefits and address other cash requirements of the pension fund. Specific investment objectives for our long-term investment strategy include reducing the volatility of pension assets relative to pension liabilities, achieving a competitive total investment return, achieving diversification between and within asset classes and managing other risks. Investment objectives for each asset class are determined based on specific risks and investment opportunities identified.

We periodically update our long-term, strategic asset allocations. We use various analytics to determine the optimal asset mix and consider plan liability characteristics, liquidity characteristics, funding requirements, expected rates of return and the distribution of returns. We identify investment benchmarks to evaluate performance for the asset classes in the strategic asset allocation that are market-based and investable where possible. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations, the length of time it takes to fully implement investment allocation positions, and the timing of benefit payments and contributions. Short-term investments and exchange-traded derivatives are used to rebalance the actual asset allocation to the target asset allocation. The asset allocation is monitored and rebalanced on a monthly basis. The actual and target allocations by asset class for the pension assets at December 31 were as follows:

Actual Allocations Target Allocations Asset Class 2017 2016 2017 2016 Fixed income 46% 48% 47% 47% Global equity 31 28 29 29 Private equity 5 5 5 5 Real estate and real assets 8 9 9 9 Hedge funds 10 10 10 10 Total 100% 100% 100% 100%

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06-Mar-18

1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Fixed income securities are invested primarily in a diversified portfolio of long duration instruments. Global equity securities are invested in a diversified portfolio of U.S. and non-U.S. companies, across various industries and market capitalizations.

Real estate and real assets include global private investments that may be held through an investment in a limited partnership (LP) or other fund structures and publicly traded investments (such as Real Estate Investment Trusts (REITs) in the case of real estate). Real estate includes, but is not limited to, investments in office, retail, apartment and industrial properties. Real assets include, but are not limited to, investments in natural resources (such as energy, farmland and timber), commodities and infrastructure. Private equity investment vehicles are primarily limited partnerships (LPs) that mainly invest in U.S. and non-U.S. leveraged buyout, venture capital and special situation strategies.

Hedge fund investments seek to capitalize on inefficiencies identified across and within different asset classes or markets. Hedge fund strategy types include, but are not limited to directional, event driven, relative value, long-short and multi-strategy.

Investment managers are retained for explicit investment roles specified by contractual investment guidelines. Certain investment managers are authorized to use derivatives, such as equity or bond futures, swaps, options and currency futures or forwards. Derivatives are used to achieve the desired market exposure of a security or an index, transfer value-added performance between asset classes, achieve the desired currency exposure, adjust portfolio duration or rebalance the total portfolio to the target asset allocation.

As a percentage of total pension plan assets, derivative net notional amounts were 5.0% and 6.0% for fixed income, including to-be-announced mortgage-backed securities and treasury forwards, and 6.9% and 1.2% for global equity and commodities at December 31, 2017 and 2016.

In August 2017, the Company elected to contribute $3,500 of our common stock to the pension fund. An independent fiduciary was retained to manage and liquidate the stock over time at its discretion. The liquidation of the common stock holdings was completed during the fourth quarter of 2017.

Risk Management In managing the plan assets, we review and manage risk associated with funded status risk, interest rate risk, market risk, counterparty risk, liquidity risk and operational risk. Liability matching and asset class diversification are central to our risk management approach and are integral to the overall investment strategy. Further, asset classes are constructed to achieve diversification by investment strategy, by investment manager, by industry or sector and by holding. Investment manager guidelines for publicly traded assets are specified and are monitored regularly through the custodian. Credit parameters for counterparties have been established for managers permitted to trade over-the-counter derivatives. Valuation is governed through several types of procedures, including reviews of manager valuation policies, custodian valuation processes, pricing vendor practices, pricing reconciliation, and periodic, security- specific valuation testing.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Fair Value Measurements The following table presents our plan assets using the fair value hierarchy as of December 31, 2017 and 2016. 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.

December 31, 2017 December 31, 2016 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

Fixed income securities: Corporate $19,603 $19,591 $12 $16,730 $16,723 $7 U.S. government and

agencies 5,430 5,430 4,876 4,875 1 Mortgage backed and asset

backed 760 460 300 706 370 336 Municipal 1,355 1,355 1,398 1,398 Sovereign 1,237 1,237 782 782 Other 118 $59 59 74 $9 65 Derivatives:

Assets 49 49 40 40 Liabilities (25) (25) (38) (38)

Cash equivalents and other short-term investments 1,778 1,778 1,037 1,037

Equity securities: U.S. common and preferred

stock 4,615 4,615 5,374 5,373 1 Non-U.S. common and

preferred stock 6,204 6,204 5,746 5,746 Derivatives:

Assets 4 1 3 6 6 Liabilities (4) (4) (8) (8)

Private equity Real estate and real assets:

Real estate 462 462 468 468 Real assets 705 449 253 3 672 372 295 5 Derivatives:

Assets 17 17 4 4 Liabilities (3) (3) (1) (1)

Total $42,305 $11,790 $30,200 $315 $37,866 $11,968 $25,548 $350

Fixed income common/ collective/pooled funds $1,257 $1,625

Fixed income other 303 227 Equity common/collective

pooled funds 6,786 4,962 Private equity 2,767 2,639 Real estate and real assets 3,744 3,625 Hedge funds 6,440 5,441 Total investments measured at

NAV as a practical expedient $21,297 $18,519

Cash $170 $160 Receivables 436 374 Payables (197) (227) Total $64,011 $56,692

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Fixed income securities are primarily valued upon a market approach, using matrix pricing and considering a security’s relationship to other securities for which quoted prices in an active market may be available, or an income approach, converting future cash flows to a single present value amount. Inputs used in developing fair value estimates include reported trades, broker quotes, benchmark yields, and base spreads.

Common/collective/pooled funds are typically common or collective trusts valued at their NAVs that are calculated by the investment manager or sponsor of the fund and have daily or monthly liquidity. Derivatives included in the table above are over-the-counter and are primarily valued using an income approach with inputs that include benchmark yields, swap curves, cash flow analysis, rating agency data and interdealer broker rates. Exchange-traded derivative positions are reported in accordance with changes in daily variation margin which is settled daily and therefore reflected in the payables and receivables portion of the table.

Cash equivalents and other short-term investments (which are used to pay benefits) are held in a separate account which consists of a commingled fund (with daily liquidity) and separately held short-term securities and cash equivalents. All of the investments in this cash vehicle are valued daily using a market approach with inputs that include quoted market prices for similar instruments. In the event a market price is not available for instruments with an original maturity of one year or less, amortized cost is used as a proxy for fair value. Common and preferred stock equity securities are primarily valued using a market approach based on the quoted market prices of identical instruments.

Private equity and private debt NAV valuations are based on the valuation of the underlying investments, which include inputs such as cost, operating results, discounted future cash flows and market based comparable data. For those investments reported on a one-quarter lagged basis (primarily LPs) we use NAVs, adjusted for subsequent cash flows and significant events.

Real estate and real asset NAV valuations are based on valuation of the underlying investments, which include inputs such as cost, discounted future cash flows, independent appraisals and market based comparable data. For those investments reported on a one-quarter lagged basis (primarily LPs) NAVs are adjusted for subsequent cash flows and significant events. Publicly traded REITs and infrastructure stocks are valued using a market approach based on quoted market prices of identical instruments. Exchange- traded commodities futures positions are reported in accordance with changes in daily variation margin which is settled daily and therefore reflected in the payables and receivables portion of the table.

Hedge fund NAVs are generally based on the valuation of the underlying investments. This is primarily done by applying a market or income valuation methodology depending on the specific type of security or instrument held.

Investments in private equity, private debt, real estate, real assets, and hedge funds are primarily calculated and reported by the General Partner (GP), fund manager or third party administrator. Additionally, some investments in fixed income and equity are made via commingled vehicles and are valued in a similar fashion. Pension assets invested in commingled and limited partnership structures rely on the NAV of these investments as the practical expedient for the valuations.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

The following tables present a reconciliation of Level 3 assets (excluding investments which are valued using NAVs as a practical expedient) held during the years ended December 31, 2017 and 2016. Transfers into and out of Level 3 are reported at the beginning-of-year values.

January 1 2017

Balance

Net Realized and Unrealized Gains/(Losses)

Net Purchases,

Issuances and Settlements

Net Transfers

Out of Level 3

December 31 2017

Balance Fixed income securities:

Corporate (1) $12 $1 ($1) $12 U.S. government and agencies 1 (1) Mortgage backed and

asset backed (1) 331 $10 (39) (2) 300 Equity securities:

U.S. common and preferred stock 1 (1)

Real assets 5 (2) 3 Total $350 $9 ($40) ($4) $315

January 1 2016

Balance

Net Realized and Unrealized Gains/(Losses)

Net Purchases,

Issuances and Settlements

Net Transfers

Out of Level 3

December 31 2016

Balance Fixed income securities:

Corporate (1) $11 ($1) ($3) $7 U.S. government and

agencies 1 1 Mortgage backed and

asset backed (1) 440 $7 (93) (18) 336 Equity securities:

U.S. common and preferred stock 1 1

Non-U.S. common and preferred stock 2 (2)

Private equity 3 (3) Real assets 6 (1) 5 Total $464 $4 ($97) ($21) $350

(1) Certain fixed income securities were reclassified between mortgage backed and asset backed to corporate on January 1, 2017 and 2016.

The changes in unrealized gains for Level 3 mortgage backed and asset backed fixed income securities still held at December 31, 2017 and 2016 were $6 and $4.

OPB Plan Assets The majority of OPB plan assets are invested in a balanced index fund which is comprised of approximately 60% equities and 40% debt securities. The index fund is valued using a market approach based on the quoted market price of an identical instrument (Level 1). The expected rate of return on these assets does not have a material effect on the net periodic benefit cost.

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06-Mar-18

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Cash Flows

Contributions Required pension contributions under the Employee Retirement Income Security Act (ERISA), as well as rules governing funding of our non-US pension plans, are not expected to be significant in 2018. During the third quarter of 2017, we contributed $500 in cash and $3,500 in common stock. We do not expect to make contributions to our pension plans in 2018.

Estimated Future Benefit Payments The table below reflects the total pension benefits expected to be paid from the plans or from our assets, including both our share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions. OPB payments reflect our portion only.

Year(s) 2018 2019 2020 2021 2022 2023-2027 Pensions $4,758 $4,712 $4,740 $4,703 $4,631 $22,770 Other postretirement benefits:

Gross benefits paid 496 507 517 520 516 2,364 Subsidies (16) (16) (17) (17) (17) (87)

Net other postretirement benefits $480 $491 $500 $503 $499 $2,277

Termination Provisions

Certain of the pension plans provide that, in the event there is a change in control of the Company which is not approved by the Board of Directors and the plans are terminated within five years thereafter, the assets in the plan first will be used to provide the level of retirement benefits required by ERISA, and then any surplus will be used to fund a trust to continue present and future payments under the postretirement medical and life insurance benefits in our group insurance benefit programs.

Should we terminate certain pension plans under conditions in which the plan’s assets exceed that plan’s obligations, the U.S. government will be entitled to a fair allocation of any of the plan’s assets based on plan contributions that were reimbursed under U.S. government contracts.

Defined Contribution Plans

We provide certain defined contribution plans to all eligible employees. The principal plans are the Company-sponsored 401(k) plans. The expense for these defined contribution plans was $1,522, $1,413 and $768 in 2017, 2016 and 2015, respectively.

Note 15 – Share-Based Compensation and Other Compensation Arrangements

Share-Based Compensation

Our 2003 Incentive Stock Plan, as amended and restated, permits awards of incentive and non-qualified stock options, stock appreciation rights, restricted stock or units, performance shares, performance restricted stock or units, performance units and other stock and cash-based awards to our employees, officers, directors, consultants, and independent contractors. The aggregate number of shares of our stock authorized for issuance under the plan is 87,000,000.

Shares issued as a result of stock option exercises or conversion of stock unit awards will be funded out of treasury shares, except to the extent there are insufficient treasury shares, in which case new shares will be issued. We believe we currently have adequate treasury shares to satisfy these issuances during 2018.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Share-based plans expense is primarily included in General and administrative expense since it is incentive compensation issued primarily to our executives. The share-based plans expense and related income tax benefit were as follows:

Years ended December 31, 2017 2016 2015 Stock options $4 $30 Restricted stock units and other awards 212 189 160 Share-based plans expense $212 $193 $190 Income tax benefit $46 $69 $68

Stock Options

We discontinued granting options in 2014, replacing them with performance-based restricted stock units. Options granted through January 2014 had an exercise price equal to the fair market value of our stock on the date of grant and expire ten years after the date of grant. The stock options vested over a period of three years and were fully vested at December 31, 2017.

Stock option activity for the year ended December 31, 2017 is as follows:

Weighted Average Exercise

Price Per Share

Weighted Average

Remaining Contractual Life (Years)

Aggregate Intrinsic

Value Number of shares under option:

Outstanding at beginning of year 8,646,612 $72.64 Exercised (4,224,194) 73.61 Expired (5,200) 89.65 Outstanding at end of year 4,417,218 $71.69 3.93 $986

Exercisable at end of year 4,417,218 $71.69 3.93 $986

The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $491, $265 and $385, with a related tax benefit of $175, $94 and $135, respectively. The grant date fair value of stock options vested during the years ended December 31, 2017, 2016 and 2015 was $0, $27 and $56, respectively.

Restricted Stock Units

In February 2017, 2016 and 2015, we granted to our executives 523,835, 777,837 and 590,778 restricted stock units (RSUs) as part of our long-term incentive program with grant date fair values of $178.72, $117.50 and $154.64 per unit, respectively. The RSUs granted under this program will 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, involuntary layoff, disability, or death, the employee (or beneficiary) will receive a proration of stock units based on active employment during the three-year service period. In all other cases, the RSUs will not vest and all rights to the stock units will terminate. In addition to RSUs awarded under our long-term incentive program, we grant RSUs to certain executives and employees to encourage retention or to reward various achievements. These RSUs are labeled other RSUs in the table below. The fair values of all RSUs are estimated using the average of the high and low stock prices on the date of grant.

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

RSU activity for the year ended December 31, 2017 was as follows:

Long-Term Incentive Program Other

Number of units: Outstanding at beginning of year 1,814,644 1,077,920 Granted 570,538 390,152 Dividends 45,799 30,477 Forfeited (142,907) (40,670) Distributed (660,972) (301,417) Outstanding at end of year 1,627,102 1,156,462

Unrecognized compensation cost $98 $82 Weighted average remaining contractual life (years) 1.8 3.4

The number of vested but undistributed RSUs at December 31, 2017 was not significant.

Performance-Based Restricted Stock Units

Performance-Based Restricted Stock Units (PBRSUs) are stock units that pay out based on the Company’s total shareholder return as compared to a group of peer companies over a three-year period. The award payout can range from 0% to 200% of the initial PBRSU grant, but will not exceed 400% of the initial value (excluding dividend equivalent credits). The PBRSUs granted under this program will vest at the payout amount 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, involuntary layoff, disability, or death, the employee (or beneficiary) remains eligible under the award and, if the award is earned, will receive a proration of stock units based on active employment during the three-year service period. In all other cases, the PBRSUs will not vest and all rights to the stock units will terminate.

In February 2017, 2016 and 2015, we granted to our executives 492,273, 721,176 and 556,203 PBRSUs as part of our long-term incentive program. Compensation expense for the award is recognized over the three-year performance period based upon the grant date fair value. The grant date fair values were estimated using a Monte-Carlo simulation model with the assumptions presented below. The model includes no expected dividend yield as the units earn dividend equivalents.

Grant Year Grant Date Performance

Period Expected Volatility

Risk Free Interest Rate

Grant Date Fair Value

2017 2/27/2017 3 years 21.37% 1.46% 190.17 2016 2/22/2016 3 years 22.44% 0.92% 126.74 2015 2/23/2015 3 years 20.35% 1.03% 164.26

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1010289bo_financial i-117_T1010289bo

sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

PBRSU activity for the year ended December 31, 2017 was as follows:

Long-Term Incentive Program

Number of units: Outstanding at beginning of year 1,746,511 Granted 492,273 Performance based adjustment (1) 137,363 Dividends 54,683 Forfeited (130,367) Distributed (748,729) Outstanding at end of year 1,551,734

Unrecognized compensation cost $90 Weighted average remaining contractual life (years) 1.8

(1) Represents net incremental number of units issued at vesting based on TSR for units granted in 2014

Other Compensation Arrangements

Performance Awards

Performance Awards are cash units that pay out based on the achievement of long-term financial goals at the end of a three-year period. Each unit has an initial value of $100 dollars. The amount payable at the end of the three-year performance period may be anywhere from $0 to $200 dollars per unit, depending on the Company’s performance against plan for a three-year period. The Compensation Committee has the discretion to pay these awards in cash, stock, or a combination of both after the three-year performance period. Compensation expense, based on the estimated performance payout, is recognized ratably over the performance period.

During 2017, 2016 and 2015, we granted Performance Awards to our executives as part of our long-term incentive program with the payout based on the achievement of financial goals for each three-year period following the grant date. The minimum payout amount is $0 and the maximum amount we could be required to pay out for the 2017, 2016 and 2015 Performance Awards is $352, $318 and $312, respectively. The 2015 grant is expected to be paid out in cash in March 2018.

Deferred Compensation

The Company has deferred compensation plans which permit employees to defer a portion of their salary, bonus, certain other incentive awards, and retirement contributions. Participants can diversify these amounts among 22 investment funds including a Boeing stock unit account.

Total expense related to deferred compensation was $240, $46 and $63 in 2017, 2016 and 2015, respectively. As of December 31, 2017 and 2016, the deferred compensation liability which is being marked to market was $1,547 and $1,289.

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06-Mar-18

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Note 16 – Shareholders’ Equity

On December 11, 2017, the Board approved a new repurchase plan for up to $18,000 of common stock, replacing the previously authorized program. The program will expire when we have used all authorized funds or is otherwise terminated.

As of December 31, 2017 and 2016, there were 1,200,000,000 shares of common stock and 20,000,000 shares of preferred stock authorized. No preferred stock has been issued.

Changes in Share Balances

The following table shows changes in each class of shares:

Common Stock

Treasury Stock

Balance at January 1, 2015 1,012,261,159 305,533,606 Issued (7,288,113) Acquired 47,391,861 Balance at December 31, 2015 1,012,261,159 345,637,354 Issued (6,376,868) Acquired 55,849,082 Balance at December 31, 2016 1,012,261,159 395,109,568 Issued (20,746,426) Acquired 46,859,184 Balance at December 31, 2017 1,012,261,159 421,222,326

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sanjfs5.sa1.com/Sandy/1010289bo

tmurray Larry Liso

Boeing_1296

8.3750 X 10.8750

Accumulated Other Comprehensive Loss

Changes in Accumulated other comprehensive loss (AOCI) by component for the years ended December 31, 2017, 2016 and 2015 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, 2015 $53 ($8) ($136) ($13,812) ($13,903) Other comprehensive (loss)/income before

reclassifications (92) 8 (140) 173 (51) Amounts reclassified from AOCI 79 1,127 (2) 1,206

Net current period Other comprehensive (loss)/income (92) 8 (61) 1,300 1,155

Balance at December 31, 2015 ($39) $— ($197) ($12,512) ($12,748) Other comprehensive loss before

reclassifications (104) (2) (8) (1,320) (1,434) Amounts reclassified from AOCI 78 481 (2) 559

Net current period Other comprehensive (loss)/income (104) (2) 70 (839) (875)

Balance at December 31, 2016 ($143) ($2) ($127) ($13,351) ($13,623) Other comprehensive income/(loss) before

reclassifications 128 1 119 (478) (230) Amounts reclassified from AOCI 52 425 (2) 477

Net current period Other comprehensive income/(loss) 128 1 171 (53) 247

Balance at December 31, 2017 ($15) ($1) $44 ($13,404) ($13,376)

(1) Net of tax. (2) Primarily relates to amortization of actuarial losses for the years ended December 31, 2017, 2016,

and 2015 totaling $542, $524, and $1,038 (net of tax of ($272), ($288), and ($570)), respectively. These are included in the net periodic pension cost of which a portion is allocated to production as inventoried costs. See Note 14.

Note 17 – Derivative Financial Instruments

Cash Flow Hedges

Our cash flow hedges include foreign currency forward contracts and commodity purchase contracts. We use foreign currency forward contracts to manage currency risk associated with certain transactions, specifically forecasted sales and purchases made in foreign currencies. Our foreign currency contracts hedge forecasted transactions through 2024. We use commodity derivatives, such as fixed-price purchase commitments to hedge against potentially unfavorable price changes for items used in production. Our commodity contracts hedge forecasted transactions through 2021.

Fair Value Hedges

Interest rate swaps under which we agree to pay variable rates of interest are designated as fair value hedges of fixed-rate debt. The net change in fair value of the derivatives and the hedged items is reported in Boeing Capital interest expense.

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tmurray Larry Liso

Boeing_1296

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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 which do not qualify for hedge accounting treatment.

Notional Amounts and Fair Values

The notional amounts and fair values of derivative instruments in the Consolidated Statements of Financial Position as of December 31 were as follows:

Notional amounts(1) Other assets

Accrued liabilities

2017 2016 2017 2016 2017 2016 Derivatives designated as hedging instruments:

Foreign exchange contracts $2,930 $2,584 $131 $34 ($63) ($225) Interest rate contracts 125 125 3 6 Commodity contracts 56 53 4 7 (6) (5)

Derivatives not receiving hedge accounting treatment:

Foreign exchange contracts 406 465 16 21 (5) (17) Commodity contracts 563 648 —

Total derivatives $4,080 $3,875 154 68 (74) (247) Netting arrangements (61) (45) 61 45 Net recorded balance $93 $23 ($13) ($202)

(1) Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

Gains/(losses) associated with our cash flow and undesignated hedging transactions and their effect on Other comprehensive income/(loss) and Net earnings were as follows:

Years ended December 31, 2017 2016 Effective portion recognized in Other comprehensive income/(loss), net of taxes:

Foreign exchange contracts $123 ($9) Commodity contracts (4) 1

Effective portion reclassified out of Accumulated other comprehensive loss into earnings, net of taxes: Foreign exchange contracts (50) (70) Commodity contracts (2) (8)

Forward points recognized in Other income, net: Foreign exchange contracts 8 13

Undesignated derivatives recognized in Other income, net: Foreign exchange contracts 8 (2)

Based on our portfolio of cash flow hedges, we expect to reclassify losses of $12 (pre-tax) out of Accumulated other comprehensive loss into earnings during the next 12 months. Ineffectiveness related to our hedges recognized in Other income was insignificant for the years ended December 31, 2017 and 2016.

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We have derivative instruments with credit-risk-related contingent features. For foreign exchange contracts with original maturities of at least five years, our derivative counterparties could require settlement if we default on our five-year credit facility. For certain commodity contracts, our counterparties could require collateral posted in an amount determined by our credit ratings. The fair value of foreign exchange and commodity contracts that have credit-risk-related contingent features that are in a net liability position at December 31, 2017 was $13. At December 31, 2017, there was no collateral posted related to our derivatives.

Note 18 – Significant Group Concentrations of Risk

Credit Risk

Financial instruments involving potential credit risk are predominantly with commercial aircraft customers and the U.S. government. Of the $13,639 in gross accounts receivable and gross customer financing included in the Consolidated Statements of Financial Position as of December 31, 2017, $5,572 related predominantly to commercial aircraft customers ($2,512 of accounts receivable and $3,060 of customer financing) and $5,989 related to the U.S. government.

Of the $3,061 in gross customer financing, $1,828 related to customers we believe have less than investment-grade credit including Silk Way, American, and Hawaiian Airlines who were associated with 14%, 8%, and 7%, respectively, of our financing portfolio. Financing for aircraft is collateralized by security in the related asset and in some instances security in other assets as well.

Other Risk

As of December 31, 2017, approximately 37% of our total workforce was represented by collective bargaining agreements.

Note 19 – 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.

December 31, 2017 December 31, 2016 Total Level 1 Level 2 Total Level 1 Level 2

Assets Money market funds $1,582 $1,582 $2,858 $2,858 Available-for-sale investments:

Commercial paper 70 70 162 162 Corporate notes 382 382 271 271 U.S. government agencies 47 47 63 63 Other 18 18 46 46

Derivatives 93 93 23 $23 Total assets $2,192 $1,600 $592 $3,423 $2,904 $519

Liabilities Derivatives ($13) ($13) ($202) ($202)

Total liabilities ($13) ($13) ($202) ($202)

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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, commodity and interest rate 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. The fair value of our interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve.

Certain assets have been measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). The following table presents the nonrecurring losses recognized for the years ended December 31 due to long-lived asset impairment, and the fair value and asset classification of the related assets as of the impairment date:

2017 2016 Fair

Value Total

Losses Fair

Value Total

Losses Investments $1 ($44) Operating lease equipment 90 (32) $84 ($52) Other assets and Acquired intangible assets 14 (23) 12 (10) Property, plant and equipment 8 (2) 10 (9) Total $113 ($101) $106 ($71)

Investments, Acquired intangible assets and Property, plant and equipment were primarily valued using an income approach based on the discounted cash flows associated with the underlying assets. 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.

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For Level 3 assets that were measured at fair value on a nonrecurring basis during the year ended December 31, 2017, 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 $90 Marketapproach

Aircraft value publications

$140 - $191(1) Median $167

Aircraft condition adjustments

($77) - $0(2) Net ($77)

(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 Consolidated Statements of Financial Position at December 31 were as follows:

December 31, 2017 Carrying Amount

Total Fair

Value Level 1 Level 2 Level 3

Assets Notes receivable, net $677 $682 $682

Liabilities Debt, excluding capital lease

obligations and commercial paper (10,380) (11,923) (11,823) ($100)

December 31, 2016 Carrying Amount

Total Fair Value Level 1 Level 2 Level 3

Assets Notes receivable, net $807 $803 $803

Liabilities Debt, excluding capital lease

obligations (9,815) (11,209) (11,078) ($131)

The fair values of notes receivable are 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 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. The fair values of our debt classified as Level 3 are based on discounted cash flow models using the implied yield from similar securities. With regard to other financial instruments with off-balance sheet risk, it 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, Accounts payable and long-term payables. The carrying values of those items, as reflected in the

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Consolidated Statements of Financial Position, approximate their fair value at December 31, 2017 and 2016. 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 20 – 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 U.S. 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 government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. We believe, based upon current information, that the outcome of any such legal proceeding, claim, or government dispute and investigation will not have a material effect on our financial position, results of operations, or cash flows.

Note 21 – Segment Information

Effective July 1, 2017, we now operate in four reportable segments: BCA, BDS, BGS, and BCC. The new segment, BGS, brings together the Commercial Aviation Services businesses, previously included in the BCA segment, and certain BDS businesses (primarily those previously included in the Global Services & Support segment). All other activities fall within Unallocated items, eliminations and other. See page 51 for the Summary of Business Segment Data, which is an integral part of this note. Prior year numbers have been revised to conform to the current segment presentation.

BCA develops, produces and markets commercial jet aircraft principally to the commercial airline industry worldwide.

BDS is engaged 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.

BGS provides parts, maintenance, modifications, logistics support, training, data analytics and information- based services to commercial and government customers worldwide.

BCC facilitates, arranges, structures and provides selective financing solutions for our Boeing customers.

Unallocated items, eliminations and other include common internal services that support Boeing’s global business operations, intercompany guarantees provided to BCC and eliminations of certain sales between segments.

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Revenues, including foreign military sales, are reported by customer location and consist of the following:

Years ended December 31, 2017 2016 2015 Asia, other than China $8,899 $10,553 $13,433 Europe 11,457 13,790 12,248 China 11,911 10,312 12,556 Middle East 12,287 13,297 10,846 Oceania 2,061 1,843 2,601 Canada 2,197 2,076 1,870 Africa 755 1,999 1,398 Latin America, Caribbean and other 1,494 1,936 1,875 Total non-U.S. revenues 51,061 55,806 56,827 United States 42,331 38,765 39,287 Total revenues $93,392 $94,571 $96,114

Revenues from the U.S. government (including foreign military sales through the U.S. government), primarily recorded at BDS and BGS, represented 31%, 23% and 27% of consolidated revenues for 2017, 2016 and 2015, respectively. Approximately 5% and 4% of operating assets were located outside the United States as of December 31, 2017 and 2016. The information in the following tables is derived directly from the segments’ internal financial reporting used for corporate management purposes.

Depreciation and Amortization

Years ended December 31, 2017 2016 2015 Commercial Airplanes $521 $442 $388 Defense, Space, & Security 252 220 248 Global Services 322 312 317 Boeing Capital Corporation 70 83 87 Unallocated items, eliminations and other 904 853 793 Total $2,069 $1,910 $1,833

Capital Expenditures

Years ended December 31, 2017 2016 2015 Commercial Airplanes $636 $830 $819 Defense, Space, & Security 210 290 226 Global Services 180 209 132 Unallocated items, eliminations and other 713 1,284 1,273 Total $1,739 $2,613 $2,450

Unallocated capital expenditures relate primarily to assets managed centrally on behalf of the five principal segments.

We recorded Earnings from operations associated with our equity method investments of $233, $303 and $274, primarily in our BDS segment, for the years ended December 31, 2017, 2016 and 2015, respectively.

For segment reporting purposes, we record Commercial Airplanes segment revenues and cost of sales for airplanes transferred to other segments. Such transfers may include airplanes accounted for as operating leases and considered transferred to the BCC segment and airplanes transferred to the BDS

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segment for further modification prior to delivery to the customer. In addition, BGS segment revenue and costs include certain services provided to other segments. The revenues and cost of sales for these transfers are eliminated in the Unallocated items and eliminations caption. For segment reporting purposes, we record BDS revenues and cost of sales for the modification performed on airplanes received from Commercial Airplanes when the airplane is delivered to the customer or at the attainment of performance milestones.

Intersegment revenues, eliminated in Unallocated items, eliminations and other, are shown in the following table.

Years ended December 31, 2017 2016 2015 Commercial Airplanes $1,571 $2,001 $1,700 Global Services 49 75 95 Boeing Capital 28 16 15 Total $1,648 $2,092 $1,810

Unallocated Items, Eliminations and other

Unallocated items, eliminations and other includes costs not attributable to business segments as well as intercompany profit eliminations. We generally allocate costs to business segments based on the U.S. federal cost accounting standards. Components of Unallocated items, eliminations and other are shown in the following table.

Years ended December 31, 2017 2016 2015 Share-based plans ($77) ($66) ($76) Deferred compensation (240) (46) (63) Amortization of previously capitalized interest (98) (94) (90) Eliminations and other unallocated items (640) (527) (511) Sub-total (1,055) (733) (740) Pension 1,120 217 (421) Postretirement 188 153 123 Pension and Postretirement 1,308 370 (298) Total $253 ($363) ($1,038)

Unallocated Pension and Other Postretirement Benefit Expense

Unallocated pension and other postretirement benefit expense represent the portion of pension and other postretirement benefit costs that are not recognized by business segments for segment reporting purposes. Pension costs, comprising GAAP service and prior service costs, are allocated to BCA. Pension costs are allocated to BDS and BGS businesses supporting government customers using U.S. Government Cost Accounting Standards (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.

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Assets

Segment assets are summarized in the table below.

December 31, 2017 2016 Commercial Airplanes $47,737 $46,745 Defense, Space & Security 15,865 14,123 Global Services 12,353 11,490 Boeing Capital 3,156 4,139 Unallocated items, eliminations and other 13,222 13,500 Total $92,333 $89,997

Assets included in Unallocated items, eliminations and other primarily consist of Cash and cash equivalents, Short-term and other investments, Deferred tax assets, capitalized interest and assets held centrally as well as intercompany eliminations.

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Note 22 – Quarterly Financial Data (Unaudited)

2017 2016 4th 3rd 2nd 1st 4th 3rd 2nd 1st

Total revenues $25,368 $24,309 $22,739 $20,976 $23,286 $23,898 $24,755 $22,632 Total costs and expenses (20,427) (19,987) (18,388) (17,264) (19,464) (19,904) (22,325) (19,097) Earnings from operations 3,030 2,689 2,535 2,024 2,183 2,282 (419) 1,788 Net earnings/(loss) 3,132 1,853 1,761 1,451 1,631 2,279 (234) 1,219 Basic earnings/(loss) per share 5.25 3.10 2.93 2.36 2.63 3.64 (0.37) 1.85 Diluted earnings/(loss) per

share 5.18 3.06 2.89 2.34 2.59 3.60 (0.37) 1.83 Cash dividends declared per

share 3.13 2.84 2.51 2.18 Common stock sales price per

share: High 299.33 259.30 204.39 185.71 160.07 139.45 137.89 141.70 Low 253.53 197.75 175.47 155.21 130.74 123.96 122.35 102.10 Quarter end 294.91 254.21 197.75 176.86 155.68 131.74 129.87 126.94

Gross profit is calculated as Total revenues minus Total costs and expenses. Total costs and expenses includes Cost of products, Cost of services and Boeing Capital interest expense.

During the fourth quarter of 2017, as a result of the enactment of the TCJA, we recorded incremental tax benefits of $1,051, primarily related to the remeasurement of net U.S. deferred tax liabilities.

During 2017 and 2016, higher estimated costs to complete the KC-46A Tanker contract for the U.S. Air Force resulted in reach-forward losses. We recorded $329 and $142 in the third and first quarter of 2017. We recorded $312, $573 and $243 in the fourth, second and first quarter of 2016, respectively.

During the third quarter of 2016, delays in completion of engineering and supply chain activities for the Commercial Crew program resulted in a charge of $162.

During the second quarter of 2016 and first quarter of 2016, we recorded reach-forward losses of $1,188 and $70 on the 747 program.

During the second quarter of 2016, we determined that the fourth and fifth flight test aircraft for the 787 program are not commercially saleable, and we reclassified costs of $1,235 associated with these aircraft from 787 program inventory to research and development expense.

During the third quarter of 2016, we recorded an incremental tax benefit of $440 that related to the application of a 2012 Federal Court of Claims decision. We also recorded a tax benefit of $177 as a result of the 2011-2012 federal tax audit settlements.

We increased our quarterly dividend from $1.09 to $1.42 in December 2016 and to $1.71 in December 2017.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Boeing Company

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of The Boeing Company and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 12, 2018, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Chicago, Illinois February 12, 2018

We have served as the Company's auditor since at least 1934; however, an earlier year cannot be reliably determined.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Boeing Company

Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of The Boeing Company and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated February 12, 2018, expressed an unqualified opinion on those financial statements.

Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 12, 2018

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of December 31, 2017 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2017.

Our internal control over financial reporting as of December 31, 2017, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this report and is incorporated by reference herein.

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information

None.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance

Our executive officers and their ages as of February 5, 2018, are as follows:

Name Age Principal Occupation or Employment/Other Business Affiliations

Bertrand-Marc Allen 44 Senior Vice President and President, Boeing International since February 2015. Mr. Allen previously served as President of Boeing Capital Corporation from March 2014 to February 2015; Corporate Vice President, Boeing International and Chairman and President of Boeing (China) Co., Ltd. from March 2011 to March 2014; and Vice President, Global Law Affairs from May 2007 to March 2011.

Heidi B. Capozzi 48 Senior Vice President, Human Resources since March 2016. Ms. Capozzi previously served as Vice President of Leadership Development, Talent Management and Organization Effectiveness from April 2013 to March 2016; Director of Human Resources for the Airplane Programs division of Commercial Airplanes from April 2011 to April 2013; and Director of Human Resources for the Surveillance and Engagement division of Boeing Military Aircraft from May 2009 to April 2011.

Leanne G. Caret 51 Executive Vice President, President and Chief Executive Officer, Boeing Defense, Space & Security since March 2016. Ms. Caret joined Boeing in 1988, and her previous positions include President of Global Services & Support from February 2015 to March 2016; Chief Financial Officer and Vice President, Finance, for BDS from March 2014 to February 2015; Vice President and General Manager, Vertical Lift from November 2012 to February 2014; and Vice President and Program Manager, Chinook from November 2009 to October 2012.

Theodore Colbert III 44 Chief Information Officer and Senior Vice President, Information Technology & Data Analytics since April 2016. Mr. Colbert previously served as Chief Information Officer and Vice President of Information Technology from November 2013 to April 2016; Vice President of Information Technology Infrastructure from December 2011 to November 2013; and Vice President of IT Business Systems from September 2010 to December 2011.

Stanley A. Deal 53 Executive Vice President, President and Chief Executive Officer, Boeing Global Services since November 2016. Mr. Deal joined Boeing in 1986, and his previous positions include Senior Vice President of Commercial Aviation Services from March 2014 to November 2016; Vice President and General Manager of Supply Chain Management and Operations for Commercial Airplanes from September 2011 to February 2014; Vice President of Supplier Management from February 2010 to August 2011; and Vice President of Asia Pacific Sales from December 2006 to January 2010.

Gregory L. Hyslop 59 Chief Technology Officer and Senior Vice President, Boeing Engineering, Test & Technology since July 2016. Mr. Hyslop was named Senior Vice President, Boeing Engineering, Test & Technology in March 2016, and his previous positions include Vice President and General Manager of Boeing Research & Technology from February 2013 to March 2016 and Vice President and General Manager of Boeing Strategic Missile & Defense Systems from March 2009 to February 2013.

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Name Age Principal Occupation or Employment/Other Business Affiliations

Timothy J. Keating 56 Senior Vice President, Government Operations since joining Boeing in June 2008. Mr. Keating served as Senior Vice President, Global Government Relations at Honeywell International Inc. from October 2002 to May 2008. Prior thereto, Mr. Keating was Chairman of the Board and Managing Partner of Timmons and Company (a Washington, D.C. lobbying firm).

J. Michael Luttig 63 Executive Vice President and General Counsel since April 2009. Mr. Luttig joined Boeing in May 2006 as Senior Vice President, General Counsel. From October 1991 to May 2006, he served on the United States Court of Appeals for the Fourth Circuit. Mr. Luttig previously served as Assistant Attorney General of the United States, Counselor to the Attorney General at the Department of Justice and Principal Deputy Assistant Attorney General at the Department of Justice and was associated with Davis Polk & Wardwell LLP. Mr. Luttig serves as Director, Franklin Templeton Mutual Funds.

Kevin G. McAllister 54 Executive Vice President, President and Chief Executive Officer, Boeing Commercial Airplanes since November 2016. Mr. McAllister served as President and Chief Executive Officer of GE Aviation Services from January 2014 to November 2016 and Vice President, Global Sales and Marketing of GE Aviation from June 2008 to January 2014.

Dennis A. Muilenburg 54 Chairman, President and Chief Executive Officer since March 2016. Mr. Muilenburg was named President and Chief Executive Officer in July 2015. He joined Boeing in 1985, and his previous positions include Vice Chairman, President and Chief Operating Officer from December 2013 to July 2015; Executive Vice President, President and Chief Executive Officer of BDS from September 2009 to December 2013; President of Global Services & Support from February 2008 to August 2009; Vice President and General Manager of Combat Systems from May 2006 to February 2008; and Vice President and Program Manager for Future Combat Systems. Mr. Muilenburg also serves on the board of Caterpillar Inc.

Philip A. Musser 45 Senior Vice President, Communications since September 2017. Mr. Musser previously served as President of New Frontier Strategy from January 2007 to September 2017 and co-founder of The Media Group of America where he served as Chairman and CEO of IMGE from January 2013 to September 2017.

Jenette E. Ramos 52 Senior Vice President, Supply Chain & Operations since June 2017. Ms. Ramos joined Boeing in 1988, and her previous positions include Vice President and General Manager, BCA Fabrication from April 2014 to May 2017; Vice President, Supply Chain Management from January 2012 to April 2014; Vice President, Operations Supply Chain Rate, Supplier Management Capability for Boeing Commercial Airplanes from June 2011 to January 2012; director of Business Operations for Boeing Fabrication from June 2009 to May 2011; General Manager of Boeing Portland from February 2005 to May 2009 and director of Boeing Fabrication Integrated AeroStructures from September 2003 to January 2005.

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Name Age Principal Occupation or Employment/Other Business Affiliations

Diana L. Sands 52 Senior Vice President, Office of Internal Governance and Administration since March 2016. Ms. Sands previously served as Senior Vice President, Office of Internal Governance from April 2014 to March 2016; Vice President of Finance and Corporate Controller from February 2012 to April 2014 and Vice President of Investor Relations, Financial Planning & Analysis from February 2010 to February 2012. Prior to that, she held positions in Investor Relations, Financial Planning and in Corporate Treasury.

Gregory D. Smith 51 Chief Financial Officer and Executive Vice President, Enterprise Performance and Strategy since February 2015. Mr. Smith previously served as Executive Vice President, Chief Financial Officer from February 2012 to February 2015; Vice President of Finance and Corporate Controller from February 2010 to February 2012; and Vice President of Financial Planning & Analysis from June 2008 to February 2010. From August 2004 until June 2008, he served as Vice President of Global Investor Relations at Raytheon Company. Prior to that, he held a number of positions at Boeing including CFO, Shared Services Group; Controller, Shared Services Group; Senior Director, Internal Audit; and leadership roles in supply chain, factory operations and program management. Mr. Smith serves on the board of Intel Corporation.

Information relating to our directors and nominees will be included under the caption “Election of Directors” in the 2018 Proxy Statement for our Annual Shareholders Meeting scheduled to be held on April 30, 2018 and is incorporated by reference herein. The information required by Items 405, 407(d)(4) and 407(d)(5) of Regulation S-K will be included under the captions “Stock Ownership Information – Section 16(a) Beneficial Ownership Reporting Compliance” and “Board Committees” in the 2018 Proxy Statement, and that information is incorporated by reference herein.

Codes of Ethics. We have adopted (1) The Boeing Company Code of Ethical Business Conduct for the Board of Directors; (2) The Boeing Company Code of Conduct for Finance Employees which is applicable to our Chief Executive Officer (CEO), Chief Financial Officer (CFO), Controller and all finance employees; and (3) The Boeing Code of Conduct that applies to all employees, including our CEO (collectively, the Codes of Conduct). The Codes of Conduct are posted on our website, www.boeing.com/company/general- info/corporate-governance.page, and printed copies may be obtained, without charge, by contacting the Office of Internal Governance, The Boeing Company, 100 N. Riverside Plaza, Chicago, IL 60606. We intend to disclose promptly on our website any amendments to, or waivers of, the Codes of Conduct covering our CEO, CFO and/or Controller.

No family relationships exist among any of the executive officers, directors or director nominees.

Item 11. Executive Compensation

The information required by Item 402 of Regulation S-K will be included under the captions “Compensation Discussion and Analysis,” “Compensation of Executive Officers,” and “Compensation of Directors” in the 2018 Proxy Statement, and that information is incorporated by reference herein. The information required by Item 407(e)(4) and 407(e)(5) of Regulation S-K will be included under the captions “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the 2018 Proxy Statement, and that information is incorporated by reference herein.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 403 of Regulation S-K will be included under the caption “Stock Ownership Information” in the 2018 Proxy Statement, and that information is incorporated by reference herein.

Equity Compensation Plan Information

We currently maintain two equity compensation plans that provide for the issuance of common stock to officers and other employees, directors and consultants. Each of these compensation plans was approved by our shareholders. The following table sets forth information regarding outstanding options and shares available for future issuance under these plans as of December 31, 2017:

Plan Category

Number of shares to be issued upon

exercise of outstanding

options, warrants and rights

Weighted- average

exercise price of outstanding

options, warrants and rights

Number of securities remaining available for future issuance under equity compensation

plans (excluding shares reflected

in column (a)) (a) (b) (c)

Equity compensation plans approved by shareholders

Stock options 4,417,218 $71.69 Deferred compensation 2,237,472 Other stock units(1) 5,887,032

Equity compensation plans not approved by shareholders None None None

Total(2) 12,541,722 $71.69 14,492,124 (1) Includes 3,103,468 shares issuable in respect of PBRSUs subject to the satisfaction of performance

criteria and assumes payout at maximum levels. (2) Excludes the potential performance awards which the Compensation Committee has the discretion

to pay in cash, stock or a combination of both after the three-year performance periods which end in 2017, 2018 and 2019.

For further information, see Note 15 to our Consolidated Financial Statements.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 404 of Regulation S-K will be included under the caption “Related Person Transactions” in the 2018 Proxy Statement, and that information is incorporated by reference herein.

The information required by Item 407(a) of Regulation S-K will be included under the caption “Director Independence” in the 2018 Proxy Statement, and that information is incorporated by reference herein.

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Item 14. Principal Accounting Fees and Services

The information required by this Item will be included under the caption “Independent Auditor Fees” in the 2018 Proxy Statement, and that information is incorporated by reference herein.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) List of documents filed as part of this report:

1. Financial Statements Our consolidated financial statements are as set forth under Item 8 of this report on Form 10-K.

2. Financial Statement Schedules All schedules are omitted because they are not applicable, not required, or the information is included in the consolidated financial statements.

3. Exhibits

3.1 Amended and Restated Certificate of Incorporation of The Boeing Company dated May 5, 2006 (Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 1, 2006).

3.2 By-Laws of The Boeing Company, as amended and restated December 17, 2017 (Exhibit 3.2 to the Company’s Current Report on Form 8-K dated December 17, 2017).

10.1 364-Day Credit Agreement, dated as of November 1, 2017, among The Boeing Company, Citigroup Global Markets Inc. and JPMorgan Chase Bank, N.A. as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 1, 2017).

10.2 Five-Year Credit Agreement, dated as of November 10, 2011, among The Boeing Company, the Lenders party thereto, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 10, 2011).

10.3 Amendment No. 1 dated as of October 9, 2014 to the Five-Year Credit Agreement, dated as of November 10, 2011, among The Boeing Company, the Lenders party thereto, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 14, 2014).

10.4 Amendment No. 2 dated as of November 4, 2015 to the Five-Year Credit Agreement, dated as of November 10, 2011, among The Boeing Company, the Lenders party thereto, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 4, 2015).

10.5 Amendment No. 3 dated as of November 2, 2016 to the Five-Year Credit Agreement, dated as of November 10, 2011, among The Boeing Company, the Lenders party thereto, Citigroup Global Markets Inc. and JPMorgan Chase Bank, N.A. as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 2, 2016).

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10.6 Amendment No. 4 dated as of November 1, 2017 to the Five-Year Credit Agreement, dated as of November 10, 2011, among The Boeing Company, the Lenders party thereto, Citigroup Global Markets Inc. and JPMorgan Chase Bank, N.A. as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 1, 2017).

10.7 Joint Venture Master Agreement, dated as of May 2, 2005, by and among Lockheed Martin Corporation, The Boeing Company and United Launch Alliance, L.L.C. (Exhibit (10)(i) to the Company’s Form 10-Q for the quarter ended June 30, 2005).

10.8 Delta Inventory Supply Agreement, dated as of December 1, 2006, by and between United Launch Alliance, L.L.C. and The Boeing Company (Exhibit (10)(vi) to the Company’s Form 10- K for the year ended December 31, 2006).

10.9 Summary of Non-Employee Director Compensation (Exhibit 10 to the Company’s Form 10-Q for the quarter ended September 30, 2016).*

10.10 Deferred Compensation Plan for Directors of The Boeing Company, as amended and restated effective January 1, 2008 (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated October 28, 2007).*

10.11 Deferred Compensation Plan for Employees of The Boeing Company, as amended and restated on January 1, 2008 (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 28, 2007).*

10.12 Incentive Compensation Plan for Employees of The Boeing Company and Subsidiaries, as amended and restated effective October 31, 2016 (Exhibit (10)(xi) to the Company’s Form 10- K for the year ended December 31, 2016).*

10.13 The Boeing Company Elected Officer Annual Incentive Plan, as amended and restated effective October 31, 2016 (Exhibit (10)(xii) to the Company’s Form 10-K for the year ended December 31, 2016).*

10.14 The Boeing Company 1997 Incentive Stock Plan, as amended effective May 1, 2000 and further amended effective January 1, 2008 (Exhibit 10.5 to the Company’s Current Report on Form 8-K dated October 28, 2007).*

10.15 Supplemental Pension Agreement between The Boeing Company and J. Michael Luttig dated January 25, 2007, as amended on November 14, 2007 (Exhibit (10)(xxx) to the Company’s Form 10-K for the year ended December 31, 2007).*

10.16 Supplemental Benefit Plan for Employees of The Boeing Company, as amended and restated effective January 1, 2016 (Exhibit (10)(xvi) to the Company’s Form 10-K for the year ended December 31, 2016).*

10.17 Supplemental Executive Retirement Plan for Employees of The Boeing Company, as amended and restated as of January 1, 2016 (Exhibit (10)(xvi) to the Company’s Form 10-K for the year ended December 31, 2015).*

10.18 The Boeing Company Executive Layoff Benefits Plan, as amended and restated effective January 1, 2017 (Exhibit (10)(xviii) to the Company’s Form 10-K for the year ended December 31, 2016).*

10.19 The Boeing Company 2003 Incentive Stock Plan, as amended and restated effective October 31, 2016 (Exhibit (10)(xix)(a) to the Company’s Form 10-K for the year ended December 31, 2016).*

10.20 Form of Non-Qualified Stock Option Grant Notice of Terms (Exhibit (10)(xvii)(b) to the Company’s Form 10-K for the year ended December 31, 2010).*

10.21 Form of Notice of Terms of Performance-Based Restricted Stock Units (Exhibit 10.2 of the Company’s 10-Q for the quarter ended March 31, 2017).*

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10.22 Form of Performance Award Notice (Exhibit 10.3 of the Company’s 10-Q for the quarter ended March 31, 2017).*

10.23 Form of Notice of Terms of Restricted Stock Units (Exhibit 10.1 to the Company’s 10-Q for the quarter ended March 31, 2017).*

10.24 Form of Notice of Terms of Supplemental Restricted Stock Units (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 25, 2017).*

10.25 Form of Notice of Terms of Restricted Stock Units dated February 24, 2014 (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 24, 2014).*

10.26 Form of Notice of Terms of Restricted Stock Units dated February 23, 2015. (Exhibit (10)(xviii) (i) to the Company’s Form 10-K for the year ended December 31, 2015).*

10.27 Notice of Terms of Restricted Stock Units (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated June 22, 2015).*

12 Computation of Ratio of Earnings to Fixed Charges.

21 List of Company Subsidiaries.

23 Consent of Independent Registered Public Accounting Firm.

31.1 Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

99.1 Commercial Program Method of Accounting (Exhibit (99)(i) to the Company’s Form 10-K for the year ended December 31, 1997).

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of the Company are not filed herewith. Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.

Item 16. Form 10-K Summary

None

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Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 12, 2018.

THE BOEING COMPANY (Registrant)

By: /s/ Robert E. Verbeck Robert E. Verbeck – Senior Vice President,

Finance and Corporate Controller

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 12, 2018.

/s/ Dennis A. Muilenburg /s/ Lynn J. Good Dennis A. Muilenburg – Chairman, President

and Chief Executive Officer Lynn J. Good – Director

(Principal Executive Officer)

/s/ Gregory D. Smith /s/ Lawrence W. Kellner Gregory D. Smith – Chief Financial Officer and

Executive Vice President, Enterprise Performance and Strategy

Lawrence W. Kellner – Director

(Principal Financial Officer)

/s/ Robert E. Verbeck /s/ Caroline B. Kennedy Robert E. Verbeck – Senior Vice President,

Finance and Corporate Controller Caroline B. Kennedy – Director

(Principal Accounting Officer)

/s/ Robert A. Bradway /s/ Edward M. Liddy Robert A. Bradway – Director Edward M. Liddy – Director

/s/ David L. Calhoun /s/ Susan C. Schwab David L. Calhoun – Director Susan C. Schwab – Director

/s/ Arthur D. Collins, Jr. /s/ Ronald A. Williams Arthur D. Collins, Jr. – Director Ronald A. Williams – Director

/s/ Kenneth M. Duberstein /s/ Mike S. Zafirovski Kenneth M. Duberstein – Director Mike S. Zafirovski – Director

/s/ Edmund P. Giambastiani, Jr. Edmund P. Giambastiani, Jr. – Director

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Caution Concerning Forward-Looking Statements

Certain statements in this report may be “forward-looking” 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 state- ments relating to our future plans, business prospects, 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 outcomes and results to differ materially and adversely from these forward-looking statements, including economic conditions in the United States and globally, general market and industry conditions as they may impact us or our customers, and our reliance on our commercial customers, our U.S. government customers and our suppliers, as well as the other important factors disclosed previously and from time to time in our filings with the Securities and Exchange Commission. 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 such statement, whether as a result of new infor- mation, future events or otherwise, except as required by law.

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Non-GAAP Measures

Reconciliation of GAAP Measures to Non-GAAP Measures The table below reconciles the non-GAAP financial measures of core operating earnings, core operating margin and core earnings per share with the most directly comparable GAAP financial measures of earnings from operations, operating margins and diluted earnings per share. See pages 39 and 40 of Form 10-K.

2017 2016 2015 2014 2013

Revenues 93,392 94,571 96,114 90,762 86,623

Earnings from operations, as reported 10,278 5,834 7,443 7,473 6,562

Operating margins 11.0% 6.2% 7.7% 8.2% 7.6%

Unallocated pension (income)/expense (1,120) (217) 421 1,469 1,374

Unallocated other postretirement benefit income (188) (153) (123) (82) (60)

Unallocated pension and other postretirement benefit (income)/expense (1,308) (370) 298 1,387 1,314

Core operating earnings (non-GAAP) 8,970 5,464 7,741 8,860 7,876

Core operating margins (non-GAAP) 9.6% 5.8% 8.1% 9.8% 9.1%

Diluted earnings per share, as reported 13.43 7.61 7.44 7.38 5.96

Unallocated pension (income)/expense (1.83) (0.33) 0.61 1.99 1.79

Unallocated other postretirement benefit income (0.31) (0.24) (0.18) (0.11) (0.08)

Provision for deferred income taxes on adjustments* 0.75 0.20 (0.15) (0.66) (0.60)

Core earnings per share (non-GAAP) 12.04 7.24 7.72 8.60 7.07

Weighted average diluted shares (in millions) 610.7 643.8 696.1 738.0 769.5

*The income tax impact is calculated using the tax rate in effect for the non-GAAP adjustments.

U.S. dollars in millions except per share data

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Selected Programs, Products and Services

737 MAX 8

737 MAX 10

737 MAX 9

The Boeing 737-700

737-900ER 737 MAX 7

737-800

Boeing Commercial Airplanes Kevin G. McAllister, Executive Vice President, President and Chief Executive Officer Renton, Washington, USA

*Orders and deliveries are as of December 31, 2017

The Boeing 737 is the world’s best-selling family of commercial jetliners. The Next-Generation 737-700, -800 and -900ER models incorporate advanced technology and design features that improve fuel efficiency and reduce operating costs while delivering superior passenger satis- faction. The Next-Generation 737 offers the best on-time schedule performance in the industry. It spans the entire 126- to 220-seat market with ranges of more than 3,000 nautical miles (5,500 kilometers). This flexibility gives operators the ability to respond effectively to market needs. The 737 family also includes four models of Boeing Business Jets—derivatives of the Next-Generation 737-700, 737-700 Convertible, 737-800 and 737-900ER. In 2017, the 737 factory in Renton, Wash., increased the production rate to 47 airplanes per month, up from 42 airplanes. We plan to further increase the production rate to 52 airplanes per month in 2018 and 57 per month in 2019.

Launched in August 2011, the 737 MAX is a family of airplanes that builds on the strengths of the Next-Generation 737. The family includes the 737 MAX 7, MAX 8, MAX 9 and MAX 10. It also includes the Boeing Business Jets MAX 7, MAX 8 and MAX 9 models. The 737 MAX is designed to be 14 percent more fuel-efficient than today’s most efficient Next-Generation 737s and 20 percent more fuel-efficient than

the original Next-Generation 737s when they entered service. With new CFM International LEAP-1B engines, a more efficient structural design, advanced technology winglets and lower maintenance requirements, the entire MAX family has been designed to offer exceptional perfor- mance, flexibility and efficiency. Every 737 MAX will be fitted with the 737 Boeing Sky Interior, giving passengers a more spacious-feeling cabin, overhead bins that disappear into the ceiling while carrying more luggage and soothing LED lighting. Since its launch, the 737 MAX has received more than 4,300 orders from 92 airlines and leasing customers worldwide. The first airplane rolled out of the factory in December 2015. The first suc- cessful flight occurred in January 2016 and first 737 MAX 8 delivery took place in May 2017. The first MAX 9 is scheduled to deliver in 2018. This will be followed in 2019 by the introduction of a smaller, long-range MAX 7 and the high-capacity MAX 8. The MAX 10 is expected to be introduced in the 2020 time frame.

Orders: 14,532 (total for all 737s)*, 7,094 (Next-Generation 737s)*, 4,306 (737 MAXs)*

Deliveries: 9,864 (total for all 737s)*, 6,658 (Next-Generation 737s)*, 74 (737 MAXs)*

The Boeing 747-8 Intercontinental

The Boeing 747-8 Freighter

The 747-8 Intercontinental and the 747-8 Freighter are the latest-generation airplanes of Boeing’s 747 family. The airplanes feature new wings with raked wingtips and more fuel-efficient engines than those on the 747-400. The 747-8 Freighter, first delivered in 2011, carries 16 percent more cargo volume than the 747-400 Freighter and is the industry’s only nose-cargo-loading jet. The 747-8 Intercontinental is offered as a Boeing Business Jets aircraft or a passenger plane. The interior of the passenger model is inspired by the Boeing 787 Dreamliner, including a sculpted ceiling, LED dynamic lighting, larger bins and a new staircase design. The Intercontinental, first delivered in 2012, is the only airplane operating in the 400- to 500-seat market, seating 410

passengers in a typical three-class configuration (66 more than the 747-400). Both the passenger and freighter variants of the 747-8 have an increased maximum takeoff weight of 987,000 pounds (447,700 kilograms) and represent a new benchmark in fuel efficiency and noise reduction, allowing airlines to lower fuel costs and fly into more airports at more times of the day. With 18 percent fewer carbon emissions and 30 per- cent less noise, the 747-8 is more efficient and quieter than the 747-400.

Orders: 1,554*

Deliveries: 1,542*

The Boeing 767 Freighter

767-2C

767-200ER

767-300ER

The 767 Freighter shares all the advancements in avionics, aerodynamics, materials and propul- sion that contribute to the success of the 767-300ER passenger airplane. Excellent fuel efficiency, operational flexibility, low noise levels and an all-digital flight deck allow the 767 Freighter to support time-critical cargo schedules even at airports with stringent noise and emissions standards. Also available is the 767-2C, a new commercial freighter based on the 767-200ER, that is being modified into KC-46A tankers for the U.S. Air Force and the Japan Air Self-Defense Force.

Orders: 1,204*

Deliveries: 1,106*

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777 Freighter

The Boeing 777-200ER

777-8

777-9

777-300ER

777-200LR For airlines that want to win on the world stage and grow now, the 777 family, which includes the 777X, offers flagship status and more growth potential than the competition. The 777 has excellent performance, economics, range capa- bility and efficiency to help operators maximize profits. That’s why the 777 family is the most popular and commercially successful twin-aisle aircraft of all time. The 777’s long range (up to 7,370 nautical miles or 13,650 kilometers for the 777-300ER and 8,555 nautical miles or 15,840 kilometers for the 777-200LR) and large payload capability (313 to 425 passengers in a typical two-class configuration) give operators access to the world’s fastest-growing passenger markets. Boeing Business Jets also offers 777-300ER and 777-200LR models. The 777 Freighter with 112 tons (102 metric tons) of revenue payload capability is the largest and longest-range twin-engine freighter and has the lowest trip costs of any large freighter. Enhancing the market-leading 777 family, the 777X was

launched in November 2013 and will be the largest and most efficient twin-engine jet in the world. Offering airlines new levels of efficiency and growth, the 777X has two family members: the 777-8, with more seats and range capability and lower operating costs than the similarly sized A350-1000, and the 777-9, which seats more than 400 passengers and will have a range of greater than 7,500 nautical miles (14,000 kilo- meters). The 777X builds upon the reliability and superb performance that our customers love and trust about the 777 family, while adding addi- tional technologies and passenger experience enhancements derived from the 787. First delivery of the 777X is expected in 2020.

Orders: 1,962 (total for all 777s)* 1,636 (777)* 326 (777X)*

Deliveries: 1,534*

The Boeing 787-8

787-10

787-9 The Boeing 787 Dreamliner is a family of techno- logically advanced, long-range commercial airplanes that provide exceptional environmental performance and an experience passengers prefer. With the most advanced composite fuse- lage design, a more-electric system architecture and a choice of modern engines, the 787 family reduces fuel usage and emissions by up to 25 percent compared to the airplanes it replaces. As the opening of Boeing’s twin-aisle airplanes portfolio, the 787 family flies 242 to 330 passen- gers from 6,430 to 7,635 nautical miles (11,910 to 14,140 kilometers), allowing airlines to open and grow new nonstop routes profitably. In addition to unprecedented fuel economy, low operating costs and excellent cargo capacity, the 787 family delivers benefits that passengers prefer, such as soothing LED lighting; the largest windows of any commercial airplane, which offer a view from

every seat; the industry’s largest overhead bins; cleaner, more comfortable air; low interior noise; and a smoother ride. The family also includes the Boeing Business Jets 787-8 and 787-9, offering 2,400 square feet (223 square meters) of space and capable of flying almost anywhere in the world nonstop. The first 787-8 was delivered in 2011, and the first 787-9 was delivered in 2014. The 787 is the fastest twin-aisle airplane in history to reach 500 deliveries (2016) and 1 million passengers (2017). Boeing began assembly of the third and longest 787, the super-efficient 787-10, in fall 2016 and is on track for first delivery in 2018.

Orders: 1,294*

Deliveries: 636*

*Orders and deliveries are as of December 31, 2017

Boeing Capital is a global provider of innovative financial solutions for Boeing products. Drawing on its comprehensive expertise gained over five decades of aircraft finance leadership, Boeing Capital ensures Boeing customers have the financing they need to buy and take delivery of their Boeing products. Working with Boeing’s business units, Boeing Capital is dedicated to helping customers obtain efficient product financing, primarily in the commercial markets. To ensure adequate availability of capital for aircraft financing, Boeing Capital is leading efforts

to improve the international aviation financing infrastructure and expand financiers’ involvement in the outstanding opportunities associated with aircraft and aerospace investment, including the development of new funding markets such as insurance and global export credit. The team’s experience in structured financing, leasing, complex restructuring and trading brings oppor- tunity and value to its financial partners. As of December 31, 2017, Boeing Capital owned or had interest in 193 airplanes as part of its approximately $3.0 billion portfolio.

Boeing Capital Corporation Timothy R. Myers, President Renton, Washington, USA

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Medium Medium Plus Heavy

Boeing Defense, Space & Security Leanne G. Caret, Executive Vice President, President and Chief Executive Officer Arlington, Virginia, USA

*Orders and deliveries are as of December 31, 2017

737 Airborne Early Warning and Control (AEW&C)

The AEW&C, a military derivative of the 737 aircraft, delivers flexible mission coverage that includes maritime surveillance, command and control, and air traffic control functionality. The Royal Australian Air Force is operating six AEW&C aircraft designated Wedgetail E-7A. Boeing is on contract for a mission system upgrade for the fleet while providing full performance-based

logistics and sustainment. The Republic of Korea operates four Peace Eye AEW&C aircraft for which Boeing provides spare parts, support equipment and repairs. The Turkish Air Force operates four Peace Eagle AEW&C aircraft, which Boeing supports with software upgrades, support equipment and spare parts.

Aerial Layer Networks Networking airborne assets and providing data to warfighters in the air, on the ground, and at sea is the goal of Boeing’s Aerial Layer Networks. A Phantom Works team is developing network concepts for tiered, integrated communications architectures to increase global connectivity for military forces. Development also includes data correlation and fusion for combat cloud,

net-enabled operations to ensure timely, accurate data across national and coalition military net- works. A Phantom Works team completed testing and delivered four Talon HATE aerial networking systems and multiple system-enabled F-15 aircraft to the U.S. Air Force in 2017 as an initial architecture implementation.

AH-6 Light Attack/Reconnaissance Helicopter

Based on a combat-proven platform, the AH-6 features a state-of-the-art cockpit architecture, integrated and qualified sensors and weapons systems, low maintenance costs and a flexible mission configuration. Offered as a solution for global defense forces, the AH-6 meets

international military forces’ current requirements while maintaining flexibility for future growth. To date, 22 aircraft for the program’s first inter- national customer have been delivered.

2017 deliveries: 14 new*

AH-64 Apache The AH-64 Apache is the world’s most capable, survivable, deployable and maintainable multi- mission attack helicopter. Boeing continues to deliver AH-64E Apache helicopters to the U.S. Army and allied defense forces and is now pro- ducing aircraft on a five-year multi-year contract. Global Apache customers include Egypt, Greece,

India, Indonesia, Israel, Japan, the Republic of Korea, Kuwait, Qatar, Saudi Arabia, Singapore, the Netherlands, the United Arab Emirates and the United Kingdom. Boeing also provides sus- tainment and training devices for all customers.

2017 deliveries: 11 new; 57 remanufactured*

Aircraft Modernization and Modification (AMM)

AMM provides high-quality, affordable aircraft engineering solutions and support to its military, commercial and head-of-state customers. The division specializes in the modernization and sustainment of aircraft to extend platform life and maintain mission readiness and aircraft

relevance. Key programs include the E-3 AWACS and AEW&C, B-1 and B-52, E-4 and the C-32A and C-40A/B/C series and the VC-25A.

Bombers B-1B Lancer B-52H Stratofortress

The iconic B-52H Stratofortress provides the United States with immediate nuclear and conventional global capability and will continue to serve the U.S. Air Force through 2050. The multimission, nonnuclear B-1B Lancer provides unique supersonic speed and low-altitude pen- etration capabilities. These long-range bombers

rapidly deliver weapons anywhere in the world and will continue to serve the U.S. Air Force for decades to come. Boeing is modernizing both bombers to increase combat capability and is conducting new propulsion system studies on the B-52 as well as researching enhanced weapons capabilities on the B-1.

Boeing Launch Services Commercial Delta IV

Boeing continues to offer the Delta family of launch vehicles through launch services con- tracted with United Launch Alliance. Delta rockets provide Boeing’s commercial launch customers with a wide range of payload capabilities and vehicle configuration options to deliver missions reliably to virtually any destination in space.

Air Force One The chief executive air transport fleet consists of two Boeing VC-25A aircraft that are uniquely modified 747-200s with specialized equipment to accomplish the presidential airlift mission. They entered presidential service in 1990 and have received ongoing support services from Boeing since. In 2015, the U.S. Air Force announced its intent to issue a sole-source contract award to Boeing to replace the VC-25A through the

Presidential Aircraft Recapitalization (PAR) pro- gram. In 2017, Boeing agreed to provide the U.S. Air Force with two 747-8 aircraft and begin the design of modifications necessary to meet presi- dential operational requirements. Boeing’s PAR program will bring proven experience in quality and service to provide a fully missionized platform that ensures the safe, comfortable and reliable transportation of the president.

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Medium Medium Plus Heavy

Boeing Defense, Space & Security Leanne G. Caret, Executive Vice President, President and Chief Executive Officer Arlington, Virginia, USA

*Orders and deliveries are as of December 31, 2017

737 Airborne Early Warning and Control (AEW&C)

AH-6 Light Attack/Reconnaissance Helicopter

international military forces’ current requirements while maintaining flexibility for future growth. To date, 22 aircraft for the program’s first inter- national customer have been delivered.

2017 deliveries: 14 new*

2017 deliveries: 11 new; 57 remanufactured*

Aircraft Modernization and Modification (AMM)

relevance. Key programs include the E-3 AWACS and AEW&C, B-1 and B-52, E-4 and the C-32A and C-40A/B/C series and the VC-25A.

Bombers B-1B Lancer B-52H Stratofortress

Boeing Launch Services Commercial Delta IV

Presidential Aircraft Recapitalization (PAR) pro- gram. In 2017, Boeing completed the sale of two 747-8 inventory aircraft and began the design of modifications necessary to meet presidential operational requirements. Boeing’s PAR program will bring proven experience in quality and service to provide a fully missionized platform that ensures the safe, comfortable and reliable transportation of the president.

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C-17 Globemaster III The C-17 Globemaster III, the world’s most advanced and versatile airlifter, is designed for long-range transport of equipment, supplies and military troops. The C-17 is used extensively to support combat operations, disaster response, humanitarian relief and aeromedical evacuation missions. Through the end of 2017, Boeing delivered 275 C-17s, including 52 for customers in Australia, Canada, India, Kuwait, Qatar, the

United Arab Emirates, the United Kingdom and the 12-member Strategic Airlift Capability initia- tive of NATO and Partnership for Peace nations. Although C-17 production has completed, Boeing will continue to provide system-level performance-based logistics and sustainment for the entire fleet, including material manage- ment and depot maintenance support.

*Orders and deliveries are as of December 31, 2017

Boeing Defense, Space & Security continued

EA-18G Growler The EA-18G Growler is the only tactical air combat platform that delivers full-spectrum airborne electronic attack (AEA) capability along with the targeting and self-defense capabilities derived from the U.S. Navy’s frontline fighter, the F/A-18E/F Super Hornet. It is the most advanced AEA platform in the U.S. inventory, providing tactical jamming and electronic protection for U.S., NATO and coalition forces around the world.

The Growler is on contract for integration of the Next Generation Jammer, which will protect and enable all joint force aircraft operating in high- threat environments for decades to come. Boeing delivered 12 Growlers to the Royal Australian Air Force in 2017.

2017 deliveries: 23*

Echo Voyager Boeing’s Echo Voyager is a fully autonomous, extra-large unmanned undersea vehicle that can be used for a variety of missions such as intelligence, surveillance and reconnaissance. The 51-foot-long (15.5 meter) vehicle includes a modular payload section for multiple uses. The ability to carry such a large payload enables the vehicle to perform at sea for months at a time

delivering a more affordable, mission-capable solution over traditional systems. Echo Voyager requires no support vessel for launch or recovery. The U.S. Navy selected Boeing for the first phase of the Orca program, the Navy’s competition to design and produce an extra-large unmanned undersea vehicle.

F-15E Strike Eagle The Advanced F-15, F-15C/D Eagle and F-15E Strike Eagle currently flown by customers provide unparalleled performance. With its service ceiling, top speed, range, endurance and payload capacity, the F-15 is arguably the most capable air superiority fighter currently in service. With its twin engines for greater performance and survivability, active electronically scanned array radar and electronic warfare systems, the F-15 is well suited for both air superiority and multirole missions. Current Advanced F-15 models in pro- duction include digital fly-by-wire flight controls,

two additional weapon hard points (wing stations 1 and 9) for maximum payload capability, and advanced cockpits. The F-15 is currently flown by the U.S. Air Force and five other nations and will be a critical component of the U.S. Air Force’s combat power well into the 2040s. Boeing also offers performance-based logistics sustainment services to F-15 operators, which include varied levels of support tailored to each customer’s needs for the entire fleet.

2017 deliveries: 16*

CST-100 Starliner The Commercial Crew Transportation System comprises the Crew Space Transportation (CST)-100 Starliner spacecraft, launch vehicle, mission operations and ground systems. Boeing designed the reusable, capsule-shaped Starliner with proven materials and subsystem technologies. In 2014, NASA awarded Boeing up to $4.2 billion to design, develop and operate the Starliner, America’s next-generation space

system. The contract includes an uncrewed and a crewed flight test with one NASA astronaut and one Boeing astronaut on board to verify that the fully integrated rocket and spacecraft system can launch, maneuver in orbit and dock to the International Space Station. Boeing received two service mission orders to the space station in 2015, and four more missions were awarded in 2016.

F/A-18E/F Super Hornet The F/A-18E/F Super Hornet is the U.S. Navy’s newest strike fighter, deployed in both air- dominance and precision-strike roles. Through an evolutionary approach, including incremental upgrades to the APG-79 active electronically scanned array radar, the Super Hornet contin- uously improves overall mission capability and supportability to stay ahead of future threats. The Super Hornet’s advanced sensor and information suite collects and fuses data from off-board sources and on-board sensors to seamlessly detect and eliminate air, ground or sea-based threats. Boeing has also developed the Block III

Super Hornet to complement existing and future air wing capabilities while outpacing threats for decades to come, featuring enhanced network capability, conformal fuel tanks, Infrared Search & Track, an advanced cockpit system, signature reduction and a 9,000+ hour airframe. The Super Hornet is built by an industry team of Boeing, General Electric Aviation, Raytheon and Northrop Grumman. The Fiscal Year 2018 budget included a requirement for 80 Super Hornets through the Future Years Defense Program. The U.S. Navy requested 10 additional Super Hornets in their FY18 unfunded priorities list.

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Harpoon Harpoon is the world’s premier anti-ship missile. It features autonomous, all-weather, over- the-horizon capability and can execute both land-strike and anti-ship missions. More than 600 ships, 180 submarines, 12 different types of aircraft and several land-based launch vehicles

carry Harpoon missiles. Boeing has delivered more than 7,500 Harpoon and Harpoon Block II missiles to the U.S. Navy and 30 international military customers. The Harpoon Block II+ is planned for operational capability in 2018.

Inmarsat-5 Satellites Boeing has built four high-power 702 satellites to provide Ka-band global and high-capacity satellite services to Inmarsat. The geostationary satellites provide a wide range of voice and data services through an established global network of distributors and service providers. The satellites are enabling Inmarsat to adapt to shifting subscriber usage patterns of high data

rates, specialized applications and evolving demographics over a projected 15-year lifetime. The fourth Inmarsat-5 satellite was launched in May 2017. Boeing also has a strategic marketing partnership with Inmarsat through Commercial Satellite Services to provide satellite services to commercial and government users.

*Orders and deliveries are as of December 31, 2017

Boeing Defense, Space & Security continued

Ground-based Midcourse Defense (GMD) GMD Interceptor

Boeing is the system developer and prime contractor for the GMD system, the United States’ only defense against long-range ballistic missiles. An integral element of the U.S. global ballistic missile defense system, GMD consists of networked radars, space- and land-based sensors, command and control facilities and ground-based interceptors connected through an extensive space and terrestrial communications

network. Accomplishments for 2017 include a successful Intercontinental Ballistic Missile intercept flight test, and delivery of the 44th interceptor in accordance with a Department of Defense directive. GMD has achieved 10 suc- cessful intercept tests to date. Boeing continues to lead GMD development, integration, testing, operations and sustainment activities, building on the company’s extensive program experience.

H-47 Chinook An advanced multimission helicopter, the H-47 Chinook moves troops and equipment on the battlefield and provides humanitarian relief sup- port. Throughout the Chinook’s 56-year history, Boeing and the U.S. Army have continually inte- grated advanced technologies and affordability improvements; a modernization initiative known

as Chinook Block II ensures the Chinook remains relevant into the 2060s. The U.S. Army and 19 international defense forces have chosen the Chinook to provide reliable, medium-to-heavy lift capability.

2017 deliveries: 9 new, 35 renewed*

Global Positioning System (GPS) Since 1978, Boeing has delivered 50 GPS satellites to the U.S. Air Force, including the 12th and final GPS IIF satellite that launched in February 2016. GPS IIF incorporates several key technology enhancements, including greater navigational accuracy through improvements in atomic-clock technology, a more secure and jam-resistant military signal, a protected signal to assist in commercial aviation and search-and- rescue operations, an onboard reprogrammable

processor and a 12-year design life providing long-term service and reduced operating costs. In 2017, Boeing and the U.S. Air Force signed a sustainment agreement under which Boeing will support GPS IIA and IIF satellites currently on orbit for the next five years. With more than 560 years of on-orbit service to date, Boeing con- tinues to develop affordable solutions for future GPS capabilities.

Insitu Systems Boeing subsidiary Insitu uses unmanned technol- ogy to deliver superior information to customers in the defense, government and commercial industries. Its platforms are designed to be mod- ular, flexible and versatile solutions for operations on land and in maritime environments. Insitu’s ScanEagle is a long-endurance Unmanned Aircraft System (UAS) that provides intelligence, surveillance and reconnaissance services. In 2017, the platform gained significant

traction in new markets including wildfire fighting, disaster relief and oil and gas infrastructure inspection. RQ-21A Blackjack—Insitu’s program of record with the U.S. Navy and Marine Corps — and Integrator are UAS that are modular, versatile and multimission capable. Both feature an open payload architecture that can be customized with cameras, communication capabilities and other technologies to meet customer needs.

Intelsat Satellites Boeing is providing nine 702 communications satellites for Intelsat to refresh and add new telecommunication capacity to its global satellite fleet. Six of these are Intelsat’s Epic next- generation (EpicNG) satellites carrying Boeing’s advanced digital payload. These 702s provide the high-capability features of the flight-proven Boeing 702, but with a substantially updated

satellite bus structure and simplified propulsion system. Five satellites, three of which are Epic- class, were on orbit in 2017 delivering video, data and voice services. A sixth 702, also an EpicNG satellite, is in transfer orbit to its final destination. Two Intelsat Epic-class satellites remain in production.

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Ground-based Midcourse Defense (GMD) GMD Interceptor

H-47 Chinook An advanced multimission helicopter, the CH-47 Chinook moves troops and equipment on the battlefield and provides humanitarian relief sup- port. Throughout the Chinook’s 56-year history, Boeing and the U.S. Army have continually inte- grated advanced technologies and affordability improvements; a modernization initiative known

2017 deliveries: 9 new, 35 renewed*

satellite bus structure and simplified propulsion system. Five satellites, three of which are Epic class, were on orbit in 2017 delivering video, data and voice services. A sixth 702, also an EpicNG satellite, was in transfer orbit to its final destination. Two Intelsat Epic-class satellites remain in production.

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International Space Station (ISS) Crews have inhabited the ISS since 2000, con- ducting research to support human exploration of deep space and performing scientific and technical research. As NASA’s prime contractor for ISS, Boeing designed and built the major U.S. elements of ISS. Boeing integrates new hardware and software and provides sustaining engineering. In 2017, Boeing and its partner

NanoRacks began to develop the first privately funded commercial airlock, which will increase station utilization and facilitate commercial busi- ness. Also in 2017, Boeing unveiled its concept for a Lunar Orbital Platform-Gateway habitat that draws on technology from the station and from Boeing’s 702 satellite family.

Joint Direct Attack Munition (JDAM) JDAM Extended Range Laser JDAM (JDAM ER)

JDAM guidance kits convert existing unguided warheads into more capable, precision-guided air-to-surface weapons, making JDAM the war- fighter’s weapon of choice. Since 1998, Boeing has delivered around 330,000 conventional JDAM guidance kits. The Laser JDAM variant provides a modular laser sensor kit that is easily installed on the front of existing JDAM-enabled weapons to prosecute mobile and maritime

targets. The winged JDAM ER more than triples the range of a conventional JDAM for additional standoff and threat protection for the warfighter. In 2016, the U.S. Air Force awarded Boeing a $3.2 billion contract for delivery of JDAMs into 2020. JDAM derivatives are sold to the U.S. Air Force, U.S. Navy and more than 30 international military customers.

KC-46A Pegasus The KC-46A Pegasus is a 767-based, multirole tanker that will revolutionize the air-mobility mission for the warfighter. Capable of refueling all U.S., allied and coalition military aircraft by a sixth-generation fly-by-wire boom, wing air refueling pods or an integrated centerline drogue system, the KC-46A will also carry passengers, cargo and patients. In 2017, Boeing was awarded $2.1 billion for its third KC-46 production lot of 15

aircraft. The program is now on contract with the U.S. Air Force for 38 tankers and has completed refueling flights with F-16, F/A-18, AV-8B, KC-10, C-17, A-10 and KC-46 aircraft. The KC-46A will replace 179 of the U.S. Air Force’s aging KC-135 tankers. Japan became the program’s first international customer in December 2017, when Boeing signed a $279 million contract for the country’s first KC-46.

Laser & Electro-Optical Systems Boeing integrates high-power lasers into com- pact, tactical and strategic systems that identify, track and defeat threats over air, land and sea. In 2017, Boeing was awarded a contract for multiple Compact Laser Weapon Systems (CLWS) as a result of field tests proving the CLWS ability to destroy low, slow and small unmanned aerial

vehicles. Phantom Works is also studying low- power laser technology as well as supporting laser pod research and development for a U.S. Air Force high energy laser demonstrator program.

P-8A Poseidon/P-8I The P-8 is a military derivative of the Boeing Next-Generation 737-800 providing anti- submarine and anti-surface warfare capabilities, as well as armed intelligence, surveillance and reconnaissance. Boeing is under contract for 98 P-8A Poseidon variants for the U.S. Navy and 12 for the Royal Australian Air Force, as well as an additional four P-8I aircraft for the Indian Navy. In 2017, Boeing delivered 19 P-8A aircraft, including aircraft for both the U.S. Navy and the Royal Australian Air Force. In 2017, Boeing

received a contract for the first two of nine total P-8A Poseidon aircraft for the United Kingdom. Norway also signed an agreement with the U.S. Navy for five P-8A aircraft through the Foreign Military Sales process. Boeing sustainment support includes maintenance, equipment, spares, training, field service engineering and technical publications.

2017 deliveries: 19*

Patriot Advanced Capability-3 (PAC-3) Missile Seeker

The PAC-3 Missile Seeker uses hit-to-kill guidance capability to intercept and destroy tactical ballistic missiles, cruise missiles and hostile aircraft through direct body-to-body impact. Boeing produces and delivers the PAC-3 Missile Seeker to system prime contractor Lockheed Martin. The seeker provides active guidance data to the missile, enabling the missile to acquire the target shortly before intercept, select the optimal

aimpoint and initiate terminal guidance to ensure target kill. The PAC-3 Missile Seeker is deployed with U.S. Army and Army National Guard air defense units and has been purchased by several international customers. Boeing has delivered more than 3,000 seekers to date.

2017 deliveries: 303*

O3b mPOWER Satellites In 2017, Boeing and Luxembourg-based SES announced a contract for Boeing to build seven medium-earth orbit (MEO) satellites that will deliver efficient high-performance data communications services to users around the world. The satellites, which will be part of SES’ O3b mPOWER constellation, will carry Boeing’s most-advanced digital payload technology

and will be built using electronics from the flight- proven 702 satellite platform customized to support the unique MEO environment. The satel- lites are also designed to be launched up to four at a time in a stacked configuration, depending on the selected launch vehicle. Since the 1990s, Boeing has built 12 satellites for SES.

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Selected Programs, Products and Services

V-22 Osprey Produced under a 50-50 strategic alliance between Boeing and Bell Helicopter, a Textron company, the V-22 Osprey tiltrotor combines the speed and range of a fixed-wing aircraft with the vertical flight performance of a helicopter. Under a multiyear contract, Bell Boeing will deliver 101 aircraft within five years, 22 of which were delivered in 2017. Under the current pro- gram, Bell Boeing has delivered 371 fixed-wing

aircraft to the U.S. Marines and U.S. Air Force. Bell Boeing is under contract to provide changes to the V-22 to meet the U.S. Navy’s Carrier Onboard Delivery missions as part of their 44 CMV-22 program of record. Japan is the first international customer for the V-22 with 13 aircraft on contract of a planned purchase of 17.

2017 deliveries: 21 fuselages*

United Launch Alliance (ULA) Using the combined assets of the Boeing Delta and Lockheed Martin Atlas launch vehicle pro- grams (including mission management, support, engineering, vehicle production, test and launch operations, and people), ULA’s primary mission

is to provide satellite launch services to the U.S. government. The joint venture also launches commercial missions on behalf of Boeing Launch Services. ULA launched eight successful missions in 2017.

*Orders and deliveries are as of December 31, 2017

Boeing Defense, Space & Security continued

Space Launch System (SLS) SLS is NASA’s new human-rated heavy-lift transportation program that will enable the human exploration of destinations beyond Earth orbit. Boeing is building the core stages and avionics for this innovative, evolvable rocket to ensure affordability and sustainability. In 2017,

Boeing completed all major welds for the core stage and delivered the upper stage to NASA. Boeing is completing avionics testing with NASA.

Strategic Deterrence Systems Minuteman III ICBM

Boeing designed, developed and, since 1958, continues to sustain the Minuteman intercon- tinental ballistic missile (ICBM) for the U.S. Air Force. In 2017, the Air Force awarded Boeing more than $140 million for continuing ICBM sustainment work and $349 million to design a new ICBM system, the Ground Based Strategic

Deterrent (GBSD). The Air Force is expected to select a GBSD design and award engineering, manufacturing and development work in 2020.

Tracking and Data Relay Satellites (TDRS) Boeing has built six satellites to enhance NASA’s TDRS space communications network, providing high-bandwidth communications to spacecraft in low Earth orbit. The TDRS network enables continuous communication with the International Space Station, the Hubble Space Telescope, the Earth Observing System and other programs

supporting human space flight. The sixth Boeing- built TDRS satellite was launched in August 2017 and was handed over to NASA in February 2018. Boeing also continues to support NASA with studies for future space communications networks.

Small Diameter Bomb (SDB) Laser SDB

The SDB is a 250-pound (113-kilogram) precision- guided munition that can be delivered from a distance of 60 nautical miles (111 kilometers) in any weather, day or night, with reduced collateral damage around the target. The SDB system includes a four-place smart pneumatic carriage system that allows each aircraft to carry more of the miniaturized munitions per sortie. The Focused Lethality Munition variant provides

ultra-low collateral damage, and the Laser SDB variant can prosecute moving targets. The SDB is on most U.S. Air Force delivery platforms, includ- ing the F-15E, F-22A Raptor and F-16 Falcon, and will be part of the F-35 Joint Strike Fighter weap- ons suite for full combat capability. In September 2016, the U.S. Air Force awarded Boeing a $700 million contract for delivery of SDBs into 2021.

Viasat Satellites The Boeing 702 high power Viasat-2 satellite built for Carlsbad, Calif.-based Viasat launched in 2017 and has reached its final orbit. Boeing is also building two Viasat-3 class high-power 702 satellite platforms that will be integrated with the

Viasat-3 payload. The Viasat-3 payload will be designed and built by Viasat. In 2017, Boeing and Viasat announced readiness to begin production of the first Viasat-3 satellite.

Phantom Express Boeing is designing advanced concepts to reduce the cost of on-demand space access. A Phantom Works team is collaborating with the U.S. Defense Advanced Research Projects Agency (DARPA) on the Experimental Spaceplane program. This autonomous spaceplane, called Phantom Express, is intended to be used as a reusable first stage and to demonstrate

technology that will bring aircraft-like operability to space launch. The spaceplane will be sized to support delivery of a minimum of 3,000 pounds (1,360 kilograms) of payload to low Earth orbit.

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Selected Programs, Products and Services

2017 deliveries: 21 fuselages*

*Orders and deliveries are as of December 31, 2017

Boeing Defense, Space & Security continued

In 2017, Boeing completed all major welds for the core stage and delivered the upper stage to NASA. Currently, avionics testing is underway.

Strategic Deterrence Systems Minuteman III ICBM

Deterrent (GBSD). The Air Force is expected to select a GBSD design and award engineering, manufacturing and development work in 2020.

Small Diameter Bomb (SDB) Laser SDB

Viasat-3 payload. The Viasat-3 payload will be designed and built by Viasat. In 2017, Boeing and Viasat announced readiness to begin production of the first Viasat-3 satellite.

technology that will bring aircraft-like operability to space launch. The spaceplane will be sized to support delivery of a minimum of 3,000 pounds (1,360 kilograms) of payload to low Earth orbit.

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Selected Programs, Products and Services

Boeing Defense, Space & Security continued

Wave Glider Boeing subsidiary Liquid Robotics offers the Wave Glider, which is a long-duration ocean robot that operates at the surface and provides a communications link between sea, air and space. Wave Gliders expand how ocean data is collected, transforming how we monitor and protect the ocean.

Wideband Global SATCOM (WGS) As the U.S. Department of Defense’s highest- capacity military communications satellite system, WGS addresses the military’s need for high data- rate communications. Nine WGS satellites have been launched into orbit and are performing

their missions. The Block II series includes enhancements that provide additional bandwidth required by airborne intelligence, surveillance and reconnaissance platforms.

X-37B Orbital Test Vehicle (OTV) The Boeing-built X-37B OTV completed its fourth successful flight for the U.S. Air Force in May 2017, establishing a new 718-day record for flight duration in a reusable space vehicle. The vehicle’s landing at the Kennedy Space Center Shuttle

Landing Facility and Cape Canaveral Air Force Station marked the first autonomous landing and recovery at that site. In September 2017, the X-37B OTV returned to space for a fifth flight.

Digital Aviation & Analytics Across commercial and defense aviation segments, digital aviation & analytics provides operational efficiency solutions to pilots and aircraft operators. The software and data analytics-powered tools help customers reduce fuel consumption, optimize crew utilization, minimize disruption impact and increase asset availability. With dozens of products powered by Boeing AnalytX, which turns data into insight,

digital aviation & analytics provides expertise in everything from asset health management and predictive maintenance to supply and enterprise resource planning. As e-enabled aircraft and the vast amount of information continue to increase, how we analyze data will be critically important for determining how commercial and defense customers eliminate surprises and best operate their fleets.

Boeing Global Services Stanley A. Deal, Executive Vice President, President and Chief Executive Officer Plano, Texas, USA

Training & Professional Services Training & Professional Services is a leader in commercial and defense aviation training and capabilities, including software development, engineering and technical services, training center support and pilot provisioning. Combined with our global infrastructure and research facil- ities, we offer custom simulators, training equip- ment and tailored software. Advances in these

technologies better connect pilots in the sky with simulators on the ground, reducing aircraft usage and extending fleet life. “Professional services” describes our intention to look at the ecosystem of aviation and provide a complete solution, including services such as infrastructure and/or program development and facilities management.

Engineering, Modifications & Maintenance Engineering, Modifications & Maintenance pro- vides technical fleet solutions for Boeing Global Services’ commercial and government customers around the world to convert, sustain and upgrade any type of aircraft flown today, with efficient custom and standard services in engineering and touch-labor. The diverse team has a formal presence in numerous countries and

performs field service work in most markets. Seamless support is possible thanks to Fleet Care engineering services—supporting full fleet operations—in addition to multiple global field service teams, heavy airframe modification facilities, customer service and maintenance, repair, overhaul (MRO) operations centers, and 24/7 technical support for spare parts.

Supply Chain Boeing Global Services’ supply chain operates one of the industry’s most comprehensive parts and services networks. Using supplier manage- ment expertise and advanced analytics capa- bilities, we support all aspects of aircraft fleet, parts and service, including airplane-on-ground support. We also deliver customer-focused solutions such as component repair or landing gear overhaul and exchange. Whether it’s for

aircraft in or out of production, we understand the material and logistics support for aircraft, notably spare parts, retrofit kits, distribution and life-cycle management, as well as perfor- mance-based logistics agreements such as the C-17 Globemaster III Integrated Sustainment Program. Global Services has distribution centers and component repair facilities in nine countries, supporting customers worldwide.

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Shareholder Information

Corporate Headquarters The Boeing Company 100 North Riverside Plaza Chicago, IL 60606-1596 USA 312-544-2000 www.boeing.com

Transfer Agent, Registrar and Dividend Paying Agent The transfer agent is responsible for share- holder records, issuance of stock, replacement of lost stock certificates, consolidation of accounts, and distribution of dividends and tax reporting documents, including Form 1099. Requests concerning these or other related shareholder matters are most efficiently answered by contacting:

Computershare Trust Company, N.A. P.O. Box 505000 Louisville, KY 40233-5000 888-777-0923 781-575-3400 (outside the U.S.) www.computershare.com/investor

Registered shareholders also can access their accounts to view their account history, account statements and tax reporting docu- ments; change their address; certify their tax identification number; replace checks; request duplicate statements; make addi- tional investments; and download a variety of forms related to stock transactions at www.computershare.com/investor.

Electronic Delivery Shareholders are encouraged to enroll in the electronic delivery program to receive all shareholder communications, including proxy voting materials, electronically instead of by mail. Registered shareholders can enroll at www.computershare.com/investor.

Duplicate Shareholder Accounts Registered shareholders with duplicate accounts may contact Computershare for instructions regarding the consolidation of those accounts. We recommend that registered shareholders always use the same form of their names in all stock transactions to be handled in the same account. Registered shareholders may also ask Computershare to eliminate excess mailings of annual reports going to shareholders in the same household.

Change of Address For Boeing registered shareholders: Contact Computershare through one of the means described at left.

For Boeing beneficial shareholders: Contact your brokerage firm or bank to give notice of your change of address.

Annual Meeting and Annual Meeting Admission Policy Boeing’s 2018 annual meeting of shareholders is scheduled to be held on Monday, April 30, 2018, beginning at 9 a.m. Central time, at the Field Museum, Chicago. In order to attend the meeting, you must obtain an admission ticket by registering no later than April 20, 2018. Please refer to our proxy statement for additional information.

Shareholder Services Contact The Boeing Company Mail Code 5003-1001 100 North Riverside Plaza Chicago, IL 60606-1596 800-457-7723 (for pre-recorded shareholder information) 312-544-2660 (8 a.m. to 4:30 p.m. Central time)

Investor Relations Contact The Boeing Company Mail Code 5003-2001 100 North Riverside Plaza Chicago, IL 60606-1596

To Request an Annual Report, Proxy Statement, Form 10-K or Form 10-Q Contact: Mail Services The Boeing Company Mail Code 3T-06 P.O. Box 3707 Seattle, WA 98124-2207

Email address: [email protected] Phone: 425-965-4550 or 800-457-7723

In addition, an electronic version of the annual report is available at www.boeing.com.

You can also view electronic versions of the proxy statement, Form 10-K or Form 10-Q at www.boeing.com or on the Securities and Exchange Commission website at www.sec.gov.

Stock Exchanges The Company’s common stock is traded principally on the New York Stock Exchange; the trading symbol is BA.

Independent Auditors Deloitte & Touche LLP 111 South Wacker Drive Chicago, IL 60606-4301 312-486-1000

Equal Opportunity Employer It is the policy of The Boeing Company to attract and retain the best-qualified people available without regard to race, color, religion, national origin, gender, sexual orientation, gen- der identity, age, physical or mental disability, genetic factors or military/veteran status.

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Board of Directors

Robert A. Bradway Chairman and Chief Executive Officer, Amgen Inc.

Boeing director since 2016

Committees: Audit; Finance

David L. Calhoun Senior Managing Director, The Blackstone Group; Former Chairman and Chief Executive Officer, Nielsen Holdings plc

Boeing director since 2009

Committees: Governance, Organization and Nominating (Chair); Compensation

Arthur D. Collins Jr. Senior Advisor, Oak Hill Capital Partners; Former Chairman and Chief Executive Officer, Medtronic, Inc.

Boeing director since 2007

Committees: Compensation (Chair); Governance, Organization and Nominating

Kenneth M. Duberstein Chairman and Chief Executive Officer, The Duberstein Group; Former White House Chief of Staff

Boeing director since 1997

Committees: Compensation; Governance, Organization and Nominating

Edmund P. Giambastiani Jr. President, The Giambastiani Group; Admiral, U.S. Navy (Retired); Seventh Vice Chairman of the U.S. Joint Chiefs of Staff; Former NATO Supreme Allied Commander Transformation; Former Commander, U.S. Joint Forces Command

Boeing director since 2009

Committees: Audit; Finance; Special Programs

Lynn J. Good Chairman, President and Chief Executive Officer, Duke Energy Corporation

Boeing director since 2015

Committees: Audit; Finance

Lawrence W. Kellner President, Emerald Creek Group, LLC; Former Chairman and Chief Executive Officer, Continental Airlines, Inc.

Boeing director since 2011

Committees: Audit (Chair); Finance

Caroline B. Kennedy Former U.S. Ambassador to Japan

Boeing director since 2017

Committees: Audit; Finance

Edward M. Liddy Former Chairman and Chief Executive Officer, The Allstate Corporation

Boeing director since 2010

Committees: Compensation; Governance, Organization and Nominating

Dennis A. Muilenburg Chairman, President and Chief Executive Officer, The Boeing Company

Boeing director since 2015

Committee: Special Programs (Chair)

Susan C. Schwab Professor, University of Maryland School of Public Policy; Former U.S. Trade Representative

Boeing director since 2010

Committees: Audit; Finance

Ronald A. Williams Chairman and Chief Executive Officer, RW2 Enterprises, LLC; Former Chairman and Chief Executive Officer, Aetna Inc.

Boeing director since 2010

Committees: Finance (Chair); Audit; Special Programs

Mike S. Zafirovski Executive Advisor, The Blackstone Group; President, The Zaf Group; Former President and Chief Executive Officer, Nortel Networks Corporation

Boeing director since 2004

Committees: Compensation; Governance, Organization and Nominating

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Company Officers

Bertrand-Marc Allen Senior Vice President and President, Boeing International

Heidi B. Capozzi Senior Vice President, Human Resources

Leanne G. Caret Executive Vice President, President and Chief Executive Officer, Boeing Defense, Space & Security

Theodore Colbert III Chief Information Officer and Senior Vice President, Information Technology & Data Analytics

Stanley A. Deal Executive Vice President, President and Chief Executive Officer, Boeing Global Services

Grant M. Dixton* Corporate Secretary and Vice President, Deputy General Counsel

David A. Dohnalek* Treasurer and Senior Vice President, Finance

Gregory L. Hyslop Chief Technology Officer and Senior Vice President, Boeing Engineering, Test & Technology

Timothy J. Keating Executive Vice President, Government Operations

J. Michael Luttig Executive Vice President and General Counsel

Kevin G. McAllister Executive Vice President, President and Chief Executive Officer, Boeing Commercial Airplanes

Dennis A. Muilenburg Chairman, President and Chief Executive Officer

Philip A. Musser Senior Vice President, Communications

Jenette E. Ramos Senior Vice President, Supply Chain & Operations

Diana L. Sands Senior Vice President, Office of Internal Governance and Administration

Gregory D. Smith Chief Financial Officer and Executive Vice President, Enterprise Performance & Strategy

Robert E. Verbeck* Corporate Controller and Senior Vice President, Finance

*Appointed officer

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The Boeing Company Annual Report was printed with 100 percent certified wind-powered energy on Forestry Stewardship Council certified paper that contains at least 10 percent post-consumer waste. Copyright © 2018 Boeing. All rights reserved. Printed in the USA.

The Boeing Family of Reports

Visit boeing.com/investors to view our Annual Report and to find additional information about our financial performance and Boeing business practices.

Visit boeing.com/community to view our community investment information and other information about how Boeing is working to improve communities worldwide.

Visit boeing.com/environment to view our current Environment Report and information on how the people of Boeing are developing ways to promote a more sustainable future.

“ The Boeing and U.S. Air Force test team is well on its way toward completing KC-46 tanker certification testing. We look forward to getting this game-changing tanker into the hands of our customer as soon as possible.”

MIKE GIBBONS VICE PRESIDENT AND PROGRAM MANAGER, KC-46 PROGRAM

http://investors.boeing.com/investors/overview/default.aspx

http://www.boeing.com/principles/community-engagement.page

http://www.boeing.com/principles/environment/index.page

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The Boeing Company 2017 Annual Report

2017 Top Dow Performer

The Boeing Company 100 North Riverside Plaza Chicago, IL 60606-1596 USA

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Boeing-2017AR.pdf

Cover
Table of Contents
Operational Highlights
Chairman’s Message
Executive Council
Business Highlights
Form 10-K
Index to the Form 10-K
PART I
PART II
PART III
PART IV
Caution Concerning Forward-Looking Statements
Non-GAAP Measures
Selected Programs, Products and Services
Shareholder Information
Board of Directors
Company Officers
Boeing Websites and Reports Links
Back Cover