Delaware 60606-1596 Common Stock, $5 par value New York Stock Exchange 2013 Item 5. Item 10. India P-8I, program concluded. asset management solutions. 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. Total workforce level at December 31, approximately 168,400. Parts, and Subassemblies Market conditions have a significant impact on demand for our position. 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 SLS programs. things, to our business relationships with the results through additional payment obligations, higher costs or asset write-downs. products and services. applicable The following table provides a summary of the floor space by business as of Commercial Airplanes Boeing Defense, Space & Security Other** Total 2013 locations: 10/1/2010 thru 10/31/2010 11/1/2010 thru 11/30/2010 12/1/2010 thru 12/31/2010 Total We purchased an aggregate of On October 29, 2007, the Board approved the repurchase of up to $7 billion of common stock (the 2007 Program). On December 16, 2013, the Board approved a new repurchase plan (the 2013 Program) for up to $10 billion of common stock that commences following the completion of the 2007 Program. Unless terminated earlier by a Board resolution, the 2013 Program will expire when we have used all authorized funds for repurchase. Operations Revenues: Commercial Airplanes Boeing Defense, Space & Security:(1) Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total revenues General and administrative expense Research and development expense Other income/(loss), net Net earnings from continuing operations Net (loss)/gain on disposal of discontinued operations, net of tax Net earnings Basic earnings per share from continuing operations Diluted earnings per share from continuing operations Cash dividends declared Per share Additions to Property, plant and equipment Depreciation of Property, plant and equipment Employee salaries and wages Year-end workforce Financial position at December 31 Total assets Working capital Property, plant and equipment, net Cash and cash equivalents Short-term and other investments Total debt Customer financing assets Shareholders’ equity(2) Per share Common shares outstanding (in millions)(3) Contractual Backlog: Commercial Airplanes Boeing Defense, Space & Security:(1) Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Total contractual backlog Effective January 1, Represents actual number of shares outstanding as of December 31 and excludes treasury shares and the outstanding shares held by the ShareValue Trust, which was terminated in July 2010. subcontractors. The following table summarizes key indicators of consolidated results of operations: Commercial Airplanes Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total The change in unallocated items and eliminations primarily reflects the timing of eliminations for intercompany aircraft deliveries. $82 million in 2011 reflecting higher intercompany deliveries of P-8 and commercial aircraft in 2012. Commercial Airplanes Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total summarizes our Research and development expense: Share-based plans Deferred compensation Pension Postretirement Other unallocated items and eliminations Total pension and other postretirement benefit expense. See page Allocated to business segments Other unallocated items and eliminations Total were as follows: Earnings from operations Other income/(expense), net Interest and debt expense Earnings before income taxes Income tax expense Net earnings from continuing operations balances. Contractual Backlog: Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Total contractual backlog Unobligated backlog political uncertainty. airlines, including cargo carriers. (Dollars in millions) Revenues % of Total company revenues Earnings/(loss) from operations Operating margins Research and development Contractual backlog New airplane sales Commercial aviation services business Other Total $12,956 million or 36% compared with 2011 primarily due to higher new airplane deliveries across all programs. 2010 Cumulative Deliveries Deliveries 2009 Cumulative Deliveries Deliveries 2008 Cumulative Deliveries Deliveries Includes intercompany deliveries of the USAF KC-46A Tanker contract. 2010 Program accounting quantities Undelivered units under firm orders Cumulative firm orders 2009 Program accounting quantities Undelivered units under firm orders Cumulative firm orders 2008 Program accounting quantities Undelivered units under firm orders Cumulative firm orders ’s normal progress of obtaining additional orders and delivering airplanes. During the third quarter of 2013 we reconfigured the 767 assembly line to include a 767 derivative to support the Tanker program and decreased our production rate from 2 to 1 per month. We expect to increase the commercial rate to 1.5 per month in 2014 and back to 2 per month in 2016. In November 2013 we launched the 777X and first delivery is expected in 2020. performance requirements. We continue to monitor and address challenges associated with aircraft production and assembly, program risks. orders. systems. Revenues % of Total company revenues Earnings from operations Operating margins Research and development Contractual backlog Unobligated backlog 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 Revenues % of Total company revenues Earnings from operations Operating margins Research and development Contractual backlog Unobligated backlog conclusion of the KC-767 International Tanker program in 2011. F/A-18 Models F-15E Eagle C-17 Globemaster AH-64 Apache CH-47 Chinook AEW&C KC-767 Tanker T-45TS Goshawk Total new-build production aircraft Chinook programs. Revenues % of Total company revenues Earnings from operations Operating margins Research and development Contractual backlog Unobligated backlog Delta II Delta IV Commercial and civil satellites Military satellites Revenues % of Total company revenues Earnings from operations Operating margins Research and development Contractual backlog Unobligated backlog Boeing Capital BCC's accounting for certain leasing transactions was aligned with Boeing. Segment information previously reported has been adjusted to reflect this change. globally diverse sources. parked at the end of (Dollars in millions) Revenues Earnings from operations Operating margins BCC segment revenues consist principally of lease income from equipment under operating lease, In addition, lower finance lease income reflects the revised contractual terms of BCC expense. BCC Customer Financing and Investment Portfolio Valuation Allowance as a % of Total Receivables Debt Debt-to-Equity Ratio are being extended and non-recourse debt. Revenues Loss from operations other costs. (Dollars in millions) Net earnings Non-cash items Changes in working capital Net cash provided/(used) by operating activities Net cash (used)/provided by investing activities Net cash (used)/provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2013 compared with $1.6 billion in 2012 and $0.5 billion in 2011. 2012, an increase of $1.8 billion compared with 2011 as a result of higher debt repayments of $1.1 billion and lower new borrowings of $0.7 billion. withholdings. Long-term debt (including current portion) Interest on debt (1) Pension and other postretirement cash requirements Capital lease obligations Operating lease obligations Purchase obligations not recorded on the Consolidated Statements of Financial Position Purchase obligations recorded on the Consolidated Statements of Financial Position Total contractual obligations Consolidated Statements of Financial Position. Approximately 1-3 Years 4-5 years Standby letters of credit and surety bonds Commercial aircraft financing commitments Total commercial commitments 2013 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 years ending periods. Pension plans Projected benefit obligation Net periodic pension cost Other postretirement benefit plans Accumulated postretirement benefit obligation Net periodic postretirement benefit cost 2013 Other postretirement benefit plans Accumulated postretirement benefit obligation Net periodic postretirement benefit cost Contents Years ended December 31, Sales of products Sales of services Total revenues Cost of products Cost of services Boeing Capital Corporation interest expense Total costs and expenses Income from operating investments, net General and administrative expense Research and development expense, net Gain/(loss) on dispositions, net Earnings from operations Other income/(expense), net Interest and debt expense Earnings before income taxes Income tax expense Net earnings from continuing operations Net (loss)/gain on disposal of discontinued operations, net of taxes of $2, $13 and ($10) Net earnings Basic earnings per share from continuing operations Net (loss)/gain on disposal of discontinued operations, net of taxes Basic earnings per share Diluted earnings per share from continuing operations Net (loss)/gain on disposal of discontinued operations, net of taxes Diluted earnings per share 54–109. Assets Cash and cash equivalents Short-term and other investments Accounts receivable, net Current portion of customer financing, net Deferred income taxes Inventories, net of advances and progress billings Total current assets Customer financing, net Property, plant and equipment, net Goodwill Other acquired intangibles, net Deferred income taxes Investments Pension plan assets, net Other assets, net of accumulated amortization of $630 and $492 Total assets Liabilities and equity Accounts payable Other accrued liabilities Advances and billings in excess of related costs Deferred income taxes and income taxes payable Short-term debt and current portion of long-term debt Total current liabilities Accrued retiree health care Accrued pension plan liability, net Non-current income taxes payable Other long-term liabilities Long-term debt Shareholders’ equity: Common stock, par value $5.00 – 1,012,261,159 shares issued Additional paid-in capital Treasury stock, at cost Retained earnings Accumulated other comprehensive loss ShareValue Trust Total shareholders’ equity Noncontrolling interest Total equity Total liabilities and equity Cash flows – operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided/(used)by operating activities: Non-cash items – Share-based plans expense Depreciation Amortization of other acquired intangibles Amortization of debt discount/premium and issuance costs Investment/asset impairment charges, net Customer financing valuation provision Loss on disposal of discontinued operations (Gain)/loss on dispositions, net Other charges and credits, net Excess tax benefits from share-based payment arrangements Changes in assets and liabilities – Accounts receivable Inventories, net of advances and progress billings Accounts payable Other accrued liabilities Advances and billings in excess of related costs Income taxes receivable, payable and deferred Other long-term liabilities Pension and other postretirement plans Customer financing, net Other Net cash provided/(used) by operating activities Cash flows – investing activities: Property, plant and equipment additions Property, plant and equipment reductions Acquisitions, net of cash acquired Contributions to investments Proceeds from investments Payments on Sea Launch guarantees Reimbursement of Sea Launch guarantee payments Receipt of economic development program funds Purchase of distribution rights Net cash (used)/provided by investing activities Cash flows – financing activities: New borrowings Debt repayments Payments to noncontrolling interests Repayments of distribution rights financing Stock options exercised, other Excess tax benefits from share-based payment arrangements Employee taxes on certain share-based payment arrangements Common shares repurchased Dividends paid Net cash (used)/provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Balance January 1, 2008 Net earnings Unrealized loss on derivative instruments, net of tax of $93 Unrealized loss on certain investments, net of tax of $61 Reclassification adjustment for losses realized in net earnings, net of tax of $(2) Currency translation adjustment Postretirement liability adjustment, net of tax of $(4,883) Comprehensive expense Share-based compensation and related dividend equivalents ShareValue Trust activity Excess tax pools Treasury shares issued for stock options exercised, net Treasury shares issued for other share-based plans, net Treasury shares repurchased Treasury shares transfer Cash dividends declared ($1.62 per share) Postretirement transition amount, net of tax of $50 Changes in noncontrolling interest Balance December 31, 2008 Net earnings Unrealized gain on derivative instruments, net of tax of $(92) Unrealized gain on certain investments, net of tax of $(18) Reclassification adjustment for losses realized in net earnings, net of tax of $(22) Currency translation adjustment Postretirement liability adjustment, net of tax of $(717) Comprehensive income Share-based compensation and related dividend equivalents ShareValue Trust activity Excess tax pools Treasury shares issued for stock options exercised, net Treasury shares issued for other share-based plans, net Treasury shares repurchased Cash dividends declared ($1.68 per share) Treasury shares contributed to pension plans Changes in noncontrolling interest Balance December 31, 2009 Balance December 31, 2009 Net earnings Unrealized gain on derivative instruments, net of tax of $(22) Reclassification adjustment for gains realized in net earnings, net of tax of $5 Currency translation adjustment Postretirement liability adjustment, net of tax of $1,109 Comprehensive income Share-based compensation and related dividend equivalents ShareValue Trust activity ShareValue Trust termination Excess tax pools Treasury shares issued for stock options exercised, net Treasury shares issued for other share-based plans, net Treasury shares issued for 401(k) contribution Cash dividends declared ($1.68 per share) Changes in noncontrolling interest Balance December 31, 2010 Notes to the Consolidated Financial Statements on pages 54 – 109. Revenues: Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total revenues Earnings/(loss) from operations: Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Earnings from operations Other income/(expense), net Interest and debt expense Earnings before income taxes Income tax expense Net earnings from continuing operations Net (loss)/gain on disposal of discontinued operations, net of taxes of $2, $13 and ($10) Net earnings Similarly, we may segment a single contract 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. See Note Research and development expense included bid and proposal costs of milestones and are recognized as earned when we achieve the milestone events and no ongoing obligation on our part exists. In the event we receive a milestone payment prior to the completion of the milestone, the amount is classified in 2012 process. 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. Should future orders not materialize or we determine the costs are no longer probable of recovery, the capitalized costs would be written off. 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 life of the asset. We collateral we would expect to realize. 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 Accounts receivable Inventory Property, plant and equipment Goodwill Finite-lived intangible assets(1) Other assets Accounts payable Other accrued liabilities Advances and billings in excess of related costs Deferred income taxes Total net assets acquired Inventory Property, plant and equipment Goodwill Finite-lived intangible assets(1) Accounts payable Other accrued liabilities Other long-term liabilities Total net assets acquired Balance at January 1, 2008 Acquisitions(1)(2) Goodwill adjustments Balance at December 31, 2008(1) Vought acquisition Goodwill adjustments Balance at December 31, 2009(1) Argon acquisition Other acquisitions Goodwill adjustments Balance at December 31, 2010 As of trade names. Distribution rights Product know-how Customer base Developed technology Other Total 2012 (Shares in millions) Years ended December 31, 2010 2009 2008 Weighted average shares outstanding Participating securities Basic weighted average shares outstanding Dilutive potential common shares Diluted weighted average shares outstanding if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings. (Shares in millions) Years ended December 31, 2010 2009 2008 Stock options Performance Awards ShareValue Trust Performance Shares Stock units U.S. Non-U.S. Total Current tax expense U.S. federal Non-U.S. U.S. state Total current Deferred tax expense U.S. federal Non-U.S. U.S. state Total deferred Total income tax expense U.S. federal statutory tax Research and development credits Tax on international activities Tax deductible dividends State income tax provision, net of effect on U.S. federal tax Medicare Part D law change Federal audit settlement Other provision adjustments Effective income tax rate Retiree health care accruals Inventory and long-term contract methods of income recognition, fixed assets and other (net of valuation allowance of $27 and $23) Partnerships and joint ventures Other employee benefits accruals In-process research and development related to acquisitions Net operating loss, credit and capital loss carryovers (net of valuation allowance of $78 and $36) Pension asset Customer and commercial financing Unremitted earnings of non-U.S. subsidiaries Other net unrealized losses Net deferred tax assets(1) Deferred tax assets Deferred tax liabilities Valuation allowance Net deferred tax assets settlements. Unrecognized tax benefits – January 1 Gross increases – tax positions in prior periods Gross decreases – tax positions in prior periods Gross increases – current-period tax positions Gross decreases – current-period tax positions Settlements Lapse of statute of limitations Unrecognized tax benefits – December 31 U.S. government contracts Commercial customers Reinsurance receivables Non-U.S. military contracts Sea Launch receivables, net of reserves(1) Other Less valuation allowance Total Current Expected to be collected after one year Total 31 Long-term contracts in progress Commercial aircraft programs Commercial spare parts, used aircraft, general stock materials and other Inventory before advances and progress billings Less advances and progress billings Total Financing receivables Investment in sales-type/finance leases Notes Operating lease equipment, at cost, less accumulated depreciation of $847 and $784 Gross customer financing Less allowance for losses on receivables Total Minimum lease payments receivable Estimated residual value of leased assets Unearned income Total Individually evaluated for impairment Collectively evaluated for impairment Total financing receivables No specific impairment allowance Specific impairment allowance Carrying value of impaired receivables Unpaid principal balance Allowance for losses on impaired receivables Beginning balance – January 1 Customer financing valuation benefit/(provision) Reduction in customer financing assets Ending balance – December 31 Specifically evaluated for impairment Collectively evaluated for impairment B CCC Other Total carrying value of financing receivables 717 Aircraft ($561 and $662 accounted for as operating leases)(1) 757 Aircraft ($629 and $708 accounted for as operating leases)(1) 737 Aircraft ($317 and $400 accounted for as operating leases) 767 Aircraft ($115 and $154 accounted for as operating leases) MD-11 Aircraft ($327 and $384 accounted for as operating leases)(1) Boeing Capital Corporation Other Boeing Total Principal payments on notes receivable Sales-type/finance lease payments receivable Operating lease equipment payments receivable Land Buildings and land improvements Machinery and equipment Construction in progress Gross property, plant and equipment Less accumulated depreciation Total Minimum operating lease payments, net of sublease amounts Future rentals due from customers for equipment on operating leases Minimum capital lease payments, net of sublease amounts Time deposits Pledged money market funds(1) Available-for-sale investments Equity method investments Other investments Total Debt Equity Total Gains Losses, including other-than-temporary-impairments Net United Launch Alliance United Space Alliance Other Primarily Commercial Airplanes and Global Services & Support Total Equity method investments Accrued compensation and employee benefit costs Environmental Product warranties Forward loss recognition(1) Other Total The following table summarizes environmental remediation activity during the years ended December 31, Beginning balance – January 1 Reductions for payments made Changes in estimates Ending balance – December 31 2012. Beginning balance – January 1 Additions for current year deliveries Reductions for payments made Changes in estimates Ending balance – December 31 2012 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 . At December 31, 2013 and 2012, total contractual trade-in commitments were $1,605 and $1,535. As of December 31, provided. $92, primarily for pension curtailment costs. We plan to produce 20 C-17 aircraft in 2014 and 2015 before ending production. At December 31, unsold aircraft. 2012 Contingent repurchase commitments Indemnifications to ULA: Contributed Delta program launch inventory Contract pricing Other Delta contracts Other credit guarantees Residual value guarantees Contingent Repurchase Commitments . agreements. Consolidated Total BCC Only Consolidated Total BCC Only Unsecured debt securities Non-recourse debt and notes Capital lease obligations Other notes Total Boeing Capital Corporation debt: Unsecured debt securities 1.53% – 7.58% due through 2023 Non-recourse debt and notes 1.37% – 5.79% notes due through 2013 Capital lease obligations 0.92% due through 2015 Boeing Capital Corporation debt subtotal Other Boeing debt: Unsecured debentures and notes 1.88% – 5.00% due through 2020 5.88% – 6.88% due through 2043 7.25% – 9.75% due through 2043 Non-recourse debt and notes Enhanced equipment trust Capital lease obligations due through 2017 Other notes Other Boeing debt subtotal Total debt is attributable to: Boeing Capital Corporation Other Boeing Total The components of net periodic benefit cost Service cost Interest cost Expected return on plan assets Amortization of prior service costs Recognized net actuarial loss Settlement/curtailment/transfer loss Net periodic benefit cost Net periodic benefit cost included in Earnings from operations Change in benefit obligation Beginning balance Service cost Interest cost Plan participants’ contributions Amendments Actuarial (gain)/loss Settlement/curtailment/acquisitions/ dispositions, net Gross benefits paid Medicare Part D subsidy Exchange rate adjustment Ending balance Change in plan assets Beginning balance at fair value Actual return on plan assets Company contribution Plan participants’ contributions Settlement/curtailment/acquisitions/ dispositions, net Benefits paid Exchange rate adjustment Ending balance at fair value Amounts recognized in statement of financial position at December 31 consist of: Pension plan assets, net Other accrued liabilities Accrued retiree health care Accrued pension plan liability, net Net amount recognized Net actuarial loss Prior service cost/(credit) Total recognized in Accumulated other comprehensive loss Recognized net actuarial loss Amortization of prior service costs Total Projected benefit obligation Accumulated benefit obligation Fair value of plan assets Discount rate: Pension Other postretirement benefits Expected return on plan assets Rate of compensation increase Health care cost trend rate assumed next year Ultimate trend rate Year that trend reached ultimate rate Effect on total of service and interest cost Effect on postretirement benefit obligation Fixed income Global equity Private equity Real estate and real assets Global strategies Hedge funds Total multi-strategy. 2012 . Fixed income securities: Corporate U.S. government and agencies Mortgage backed and asset backed Other Derivatives: Assets Liabilities Cash equivalents and other short-term investments Currency overlay derivatives: Assets Liabilities Equity securities: U.S. common and preferred stock Non-U.S. common and preferred stock Boeing company stock Common/collective/pooled funds Derivatives: Assets Liabilities Private equity Real estate and real assets Global strategies Hedge funds Total Cash Receivables Payables Total For those investments reported on a one-quarter lagged basis (primarily LPs) we use NAVs, adjusted for subsequent cash flows and significant events. 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. Fixed income securities: Corporate Mortgage backed and asset backed Private equity Real estate and real assets Global strategies Hedge funds Total Fixed income securities: Corporate Mortgage backed and asset backed Private equity Real estate and real assets Hedge funds Total 2014. Pensions Other postretirement benefits: Gross benefits paid Medicare Part D subsidy Net other postretirement benefits 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 Stock options Restricted stock units and other awards ShareValue Trust Share-based plans expense Income tax benefit were as follows: Number of shares under option: Outstanding at beginning of year Granted Exercised Forfeited Expired Outstanding at end of year Exercisable at end of year Grant Year 2010 2009 2008 term and we do not have enough option exercise data from our grants issued subsequent to 2006 to support our own estimate as a result of vesting terms and changes in the stock price. 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 restricted stock units in the table below. The fair values of all RSUs are estimated using the average stock price on the date of grant. Stock units settle in common stock on a one-for-one basis and are not contingent upon stock price. Number of units: Outstanding at beginning of year Granted Dividends Forfeited Distributed Outstanding at end of year Unrecognized compensation cost at December 31, 2010 Weighted average remaining contractual life(years) paid out in cash in Balance January 1, 2008 Issued Acquired Payout Balance December 31, 2008 Issued Acquired Balance December 31, 2009 Issued Acquired ShareValue Trust termination Balance December 31, 2010 Pension and postretirement adjustments Unrealized gains on derivative instruments, net of reclassification adjustments Unrealized losses on certain investments, net of reclassification adjustments Foreign currency translation adjustments Accumulated other comprehensive loss accounting treatment. Notional amounts(1) Derivatives designated as hedging instruments: Foreign exchange contracts Interest rate contracts Commodity contracts Derivatives not receiving hedge accounting treatment: Foreign exchange contracts Total derivatives Netting arrangements Net recorded balance Notional amounts represent the gross contract/notional amount of the derivatives outstanding. Effective portion recognized in other comprehensive loss, net of taxes: Foreign exchange contracts Commodity contracts Undesignated derivatives recognized in Other income/(expense), net: Foreign exchange contracts 2012 2013 in 2014. Assets Money market funds Available-for-sale investments: Debt Equity Derivatives Total assets Liabilities Derivatives Total liabilities Operating lease equipment Property, plant and equipment Receivables Total the impairment date: Assets Accounts receivable, net Notes receivable Liabilities Debt, excluding capital lease obligations Accounts payable Residual value, credit and other guarantees Contingent repurchase commitments related unobservable inputs of those assets. Items not included in the above disclosures include cash, restricted cash, time deposits and other deposits, commercial paper, money market funds, Accounts payable and long-term payables. The carrying values of those items, as reflected in the Consolidated Statements of Financial Position, approximate their fair value at In addition, the discussion below addresses the settlement of the A-12 litigation. reasonably estimated, the reasons why no such estimate can be made. in fact in default. On August 31, 2001, the U.S. Court of Federal Claims issued a decision after trial upholding the government’s default termination of the A-12 contract. In 2003, the Court of Appeals for the Federal Circuit, finding that the trial court had applied the wrong legal standard, vacated the trial court’s 2001 decision and ordered the case sent back to the trial court for further proceedings. On May 3, 2007, the U.S. Court of Federal Claims issued a decision upholding the government’s default termination of the A-12 contract. We filed a Notice of Appeal on May 4, 2007 with the Court of Appeals for the Federal Circuit. On June 2, 2009, the Court of Appeals rendered an opinion affirming the trial court’s 2007 decision sustaining the government’s default termination. On revenues. former Wichita facility, on February 16, 2007, an action entitled Harkness et al. v. The putative class includes 2,000 former Wichita employees. We cannot reasonably estimate the range of loss, if any, that may result from both these matters given the current procedural status of the litigation. On Alsalam Aircraft Company, a joint venture. Effective January 1, 2013, BCC's accounting policies for certain leasing transactions were aligned with Boeing's consolidated accounting policies. Segment information previously reported has been adjusted to reflect this change. The resulting adjustments affected the BCC and Other segments as well as consolidated amounts reported for Boeing Capital interest expense, Earnings from operations, and Interest and debt expense. Asia, other than China China Europe Middle East Oceania Africa Canada Latin America, Caribbean and other Total non-U.S. revenues United States Total revenues 2012 Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Other segment Total research and development expense, net Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Other segment Unallocated items and eliminations Total Commercial Airplanes Boeing Capital Corporation Total Share-based plans Deferred compensation Pension Postretirement Capitalized interest Other unallocated items and eliminations Total Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total Commercial Airplanes Boeing Defense, Space & Security: Boeing Military Aircraft Network & Space Systems Global Services & Support Total Boeing Defense, Space & Security Boeing Capital Corporation Other segment Unallocated items and eliminations Total Total revenues Total costs and expenses Earnings/(loss) from operations Net earnings/(loss) from continuing operations Net (loss)/gain from discontinued operations Net earnings/(loss) Basic earnings/(loss) per share from continuing operations Basic earnings/(loss) per share Diluted earnings/(loss) per share from continuing operations Diluted earnings/(loss) per share Cash dividends declared per share Common stock sales price per share: High Low Quarter end 2012, we recorded a benefit of $121 related to a favorable court judgment on satellite litigation. overall pension liability of approximately $130. 14, 2014 statements. 14, 2014 2013 Wanda K. Denson-Low Thomas J. Downey Shephard W. Hill Timothy J. Keating Name W. James McNerney, Jr. Dennis A. Muilenburg John J. Tracy Equity compensation plans approved by shareholders Stock options Performance shares Deferred compensation Other stock units Equity compensation plans not approved by shareholders Total(1) 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 
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)xx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year endedDecember 31, 20102013or¨¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from toCommission file number1-442THE BOEING COMPANYTHE BOEING COMPANY (Exact name of registrant as specified in its charter)Delaware91-0425694State or other jurisdiction ofincorporation or organization(I.R.S. Employer Identification No.)91-0425694 State or other jurisdiction ofincorporation or organization(I.R.S. Employer Identification No.) 100 N. Riverside Plaza, Chicago, IL (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: (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x 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 ¨ NoxIndicate 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 x 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 x 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.¨xIndicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filerxAccelerated filer ¨Non-accelerated filer¨ (Do not check if a smaller reporting company)Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xAs of June 30, 2010,2013, there were 731,190,389754,034,388 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 $45.9 billion.$77.2 billion.The number of shares of the registrant’s common stock outstanding as of February 1, 20117, 2014 was 736,295,504.743,404,506.DOCUMENTS INCORPORATED BY REFERENCEPart 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, 2010.THE BOEING COMPANYIndex to the Form 10-KFor the Fiscal Year Ended December 31, 20102013Page PageItem 1.1Item 1A.Risk Factors6Item 1B.Unresolved Staff Comments14Item 2.Properties14Item 3.Legal Proceedings15Item 4.Removed and Reserved15PART II 16 17 18 48 49 111 Item 9A.111Item 9B.Other Information111PART III 112 114 115 115 115 PART IV 116121Exhibit (12) – Computation of Ratio of Earnings to Fixed Charges122Exhibit (21) – List of Company Subsidiaries123Exhibit (23) – Consent of Independent Registered Public Accounting Firm128Exhibit (31)(i) – CEO Section 302 Certification129Exhibit (31)(ii) – CFO Section 302 Certification130Exhibit (32)(i) – CEO Section 906 Certification131Exhibit (32)(ii) – CFO Section 906 Certification132PART IItem 1. BusinessThe 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 five principal segments:·Commercial Airplanes;·Our Boeing Defense, Space & Security (BDS) business comprises three segments:·Boeing Military Aircraft (BMA),·Network & Space Systems (N&SS) and·Global Services & Support (GS&S); and·Boeing Capital Corporation (BCC).Commercial Airplanes;Our Defense, Space & Security (BDS) business comprises three segments:Boeing Military Aircraft (BMA),Network & Space Systems (N&SS) andGlobal Services & Support (GS&S); andBoeing Capital (BCC).Our Other segment includes the unallocated activities of Engineering, Operations & Technology (EO&T) and Shared Services Group (SSG), as well as intercompany guarantees provided to BCC. EO&T provides Boeing with technical and functional capabilities, including information technology, research and development, test and evaluation, technology strategy development, environmental remediation management and intellectual property management.Commercial Airplanes SegmentThe Commercial Airplanes segment develops, produces and markets commercial jet aircraft and provides related 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 passenger and cargo requirements of domestic and non-U.S. airlines. This family of commercial jet aircraft in production includes the 737 narrow-body model and the 747, 767, and 777 wide-body models. The 747-8 and 787 wide-body models are currently under development.models. Development continues on the 787-9, 787-10 and 737 MAX derivatives. In November 2013, we launched the 777X, which features a new composite wing, new engines and folding wing-tips all designed to deliver greater efficiency and significant fuel savings. The Commercial Airplanes segment also offers aviation services support, aircraft modifications, spares, training, maintenance documents and technical advice to commercial and government customers worldwide.Boeing Defense, Space & SecurityOur BDS operations principally involve research, development, production, modification and support of the following products and related systems: global strike systems including fighters, bombers, combat rotorcraft systems, weapons and unmanned systems; global mobility systems, including transport and tanker aircraft, rotorcraft transport and tilt-rotor systems; airborne surveillance and reconnaissance aircraft, including command and control, battle management and airborne anti-submarine aircraft; network and tactical systems, including information and battle management systems; intelligence and security systems; missile defense systems; space and intelligence systems, including satellites and commercial satellite launching vehicles; and space exploration. BDS is committed to providing affordable, best-of-industry solutions and brings value to customers through its ability to solve the most complex problems utilizing expertise in large-scale systems integration, knowledge of legacy platforms and development of common network-enabled solutions across all customers’ domains. BDS’as described below. BDS' primary customer is the United States Department of Defense (U.S. DoD) (U.S. DoD) with 82%approximately 67% of BDS 20102013 revenues being derived from this customer.customer (excluding foreign military sales through the U.S. government). Other significant revenues were derived from the National Aeronautics and Space Administration (NASA) and, international defense markets, civil markets and commercial satellite markets. BDS consists of three capabilities-driven businesses: BMA, N&SS and GS&S. Additionally, the Phantom Works group is an integrated team that works with the three businesses via product development, rapid prototyping and customer engagement through experimentation and enterprise technology investment strategies.Boeing Military Aircraft SegmentThis segment is engaged in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for the global strike, including fighter aircraft and missile1systems; vertical lift, including rotorcraft and tilt-rotor aircraft; unmanned airborne systems programs; and mobility, and surveillance and engagement, markets as well as related services. Includedincluding command and control, battle management, airborne, anti-submarine, transport and tanker aircraft. The major programs in this segment are the A160 Hummingbird, AH-64 Apache, Airborne Early Warning and Control (AEW&C), CH-47 Chinook, C-17 Globemaster,include for global strike: EA-18G Growler Airborne Attack Electronic Aircraft,Attack, F/A-18E/F Super Hornet, F-15 Strike Eagle F-22 Raptor, Harpoon, KC-767 International Tanker,and Joint Direct Attack Munition,Munition; for vertical lift: CH-47 Chinook, AH-64 Apache, and V-22 Osprey; for unmanned airborne systems programs: ScanEagle; and for mobility, surveillance and engagement: C-17 Globemaster III, P-8A Poseidon P8-I, ScanEagle, Small Diameter Bomb and V-22 Osprey.Network & Space Systems SegmentThis segment is engaged in the research, development, production and modification of the following products and services to assist our customers in transforming their operations through network integration,related services: electronics and information solutions, including command, control, communications, computers, intelligence, surveillance and surveillancereconnaissance (C4ISR), cyber and information solutions, and intelligence systems; strategic missile and defense systems; space and intelligence systems, communications, architecturesincluding satellites and commercial satellite launch vehicles; and space exploration. IncludedThe major programs in this segment are the Airborne Laser, include for electronics and information solutions: Family of Advanced Beyond Line-of-Sight Terminals (FAB-T), (FAB-T); for strategic missile and defense systems: Ground-based Midcourse Defense (GMD); for space and intelligence systems: commercial, civil and military satellites; and for space exploration: Space Launch System (SLS) and International Space Station. This segment also includes our joint venture operations related to United Launch Alliance and United Space Alliance. During 2011, the Brigade Combat Team Modernization (BCTM), Future Rapid Effects System, Global Positioning System, Ground-based Midcourse Defense (GMD), International Space Station, Joint Tactical Radio System (JTRS), Satellite Systems, Cyber and Security Programs, Space Payloads and Space Shuttle.Global Services & Support SegmentThis segment is engaged inprovides customers with mission readiness through total support solutions. Our global services business 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. GS&S international operations include Boeing Defence U.K. Ltd., and Boeing Defence Australia, as well as Alsalam Aircraft Company and Boeing Sikorsky International Services LLC, joint ventures.Integrated logistics comprises an integrated array of services that address the operations, maintenance,complete life cycle of aircraft and systems. Major programs include the F/A-18E/F support program and domestic and international performance based logistic programs for the AH-64 Apache, CH-47 Chinook and other BDS platforms.Maintenance, modification and upgrades for aircraft are performed at centers throughout the United States and around the world, providing rapid cycle time and aircraft services for military customers on a wide variety of BDS and non-BDS platforms. Major programs include the C-17 Globemaster III Integrated Sustainment Program and F-15 support programs for the United States Air Force (USAF) and several other international customers.Training systems and government services comprise a full range of training upgradescapabilities for domestic and international customers, including the design and development of trainers for multiple aircraft platforms and logistics support functions for military platforms and operations. Included in this segment are the following activities: Integrated Logistics on platforms including AH-64, AV-8B, C-17, CH-47, F-15, F/A-18, F-22, GMD, KC-767 International Tanker and V-22; Maintenance, Modifications and Upgrades on platforms including A-10, B-1, B-52, C-32, C-40, C-130, E-4B, E-6, KC-10, KC-135, T-38 and VC-25; Training Systems and Services on platforms including AH-64, C-17, F-15, F-16, F/A-18 and T-45; and Defense and Government Services including the UK Future Logistics Information Services program.Boeing Capital Corporation SegmentIn the commercial aircraft market, BCC facilitates, arranges, structures and provides selective financing solutions for our Commercial Airplanes customers. In the space and defense markets, BCC primarily arranges and structures financing2solutions for our BDS government and commercial satellite customers. 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 InformationSee page 55 for 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 PropertyWe 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. UnpatentedNon-U.S. RevenuesSee Note 21 to our Consolidated Financial Statements for information regarding non-U.S. revenues.Research and DevelopmentResearch and development 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. These are expensed as incurred including amounts allocable as reimbursable overhead costs on U.S. government contracts.Our total research and development expense amounted to $4.1$3.1 billion $6.5, $3.3 billion and $3.8$3.9 billion in 2010, 20092013, 2012 and 2008,2011, respectively. The 2008 amount is net of 787-related research and development cost sharing payments from suppliers of $50 million. Research and development expense in 2009 included $2.7 billion of production costs related to the first three flight test 787 aircraft that cannot be sold due to the inordinate amount of rework and unique and extensive modifications that would be made to the aircraft.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 $355$285 million $343, $326 million and $330$332 million in 2010, 20092013, 2012 and 2008,2011, respectively.Research and development highlights for each of the major business segments are discussed in more detail in Segment Results of Operations and Financial Condition on pages 22 – 38.EmployeesEmployees20102013 was 160,500.3As of December 31, 2010,2013, our principal collective bargaining agreements were with the following unions:Union Percent of our
Employees
RepresentedStatus of the Agreements with the Union The International Association of Machinists and Aerospace Workers (IAM) 19%21% We have two major agreements; one expiring in SeptemberJanuary of 20122015 and one in JanuarySeptember of 2015.2024. The Society of Professional Engineering Employees in Aerospace (SPEEA) 13%14% We have twoone major agreementsagreement expiring in October of 2012.2016. The United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) 2% We have twoone major agreements; oneagreement expiring in October of 2014 and one in February of 2015.CompetitionThe 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, services, and support. We continue to leverage our extensive customer support services network which includes aviation support, spares, training,span the life cycle of the airplane: aircraft acquisition, readying for service, maintenance documents and technical advice for airlines throughoutengineering, enhancing and upgrading, and transitioning to the worldnext model - as well as the daily cycle of gate-to-gate operations. This enables us to provide a higherhigh level of customer satisfaction and productivity.BDS faces strong competition in all market segments, primarily from Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Company and General Dynamics Corporation. Non-U.S. companies such as BAE Systems and Airbus Group (formerly European Aeronautic Defence and Space Company (EADS)), the parent of Airbus, 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 of our competitors have occasionally formed teams with other competitors to address specific customer requirements. BDS expects the trend of strong competition to continue into 20112014 with many international firms pursuing announced intentions of increasingattempting to increase their U.S. presence.Regulatory MattersOur 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 international markets.U.S. 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 measurements.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. government would pay only for the work that has been accepted and can 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.4Commercial Aircraft. In the United States, our commercial aircraft products are required to comply with Federal Aviation AdministrationFAA regulations governing production and quality systems, airworthiness and installation approvals, repair procedures and continuing operational safety. Internationally, 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 substantial compliance with all applicable environmental laws and regulations. OperatingInvestigation, remediation, 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 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 additionalby regulators, new areas of soil and groundwater contamination isare discovered and/or clean-up costsexpansions of work scope are higher than estimated.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.International. Our international sales are subject to U.S. and non-U.S. governmental regulations and procurement policies and practices, including regulations relating to import-export control, investment, exchange controls and repatriation of earnings. International sales are also subject to varying currency, political and economic risks.Raw Materials,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 one year or more. Many major components and product equipment items are procured or subcontracted on a sole-source basis with a number of companies.SuppliersWe are dependent upon the ability of a large number of 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 to fulfill commitments to our customers. We are also dependent on the availability of energy sources, such as electricity, at affordable prices. A number5SeasonalityNo material portion of our business is considered to be seasonal.Executive Officers of the RegistrantSee “Item 10. Directors, Executive Officers and Corporate Governance” in Part III.Other InformationBoeing 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 web site 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 web site 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, DC 20549. The SEC also maintains a web site at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Boeing.Forward-Looking StatementsThis report, as well as our Annual Report to Shareholders, quarterly reports, and other filings we make with the SEC, press releases and other written and oral communications, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Forward-lookingExamples 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 our current expectations and assumptions, which 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 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 publicly 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 FactorsAn 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.6Our commercial aircraftCommercial Airplanes business depends heavily on commercial airlines, and our suppliers, and is subject to unique risks.Our ability to deliver aircraft on time depends on a variety of factors, which are subject to unique risks.Our ability to deliver aircraft on schedule is dependent upon a variety of factors, including execution of internal performance plans, availability of raw materials (such as aluminum, titanium and composites) and internally and supplier produced parts and structures, conversion of raw materials into parts and assemblies, performance of suppliers and subcontractors and regulatory certification. The failure of any or all of these factors could result in significant out-of-sequence work and disrupted process flows adversely affecting production schedules and program/contract profitability, the latter through increased costs as well as possible customer and/or supplier claims or assertions. In addition, the introduction of new commercial aircraft programs and major derivative aircraft involves increased risk associated with meeting development, production and certification schedules.ability to sellcommercial aircraft. The commercial aircraft into the future.The worldwide market for commercial jet aircraft 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 countries.markets. Demand for our commercial aircraft is further influenced by airline industry profitability, availability of aircraft financing, world trade policies, availability of financing, government-to-government relations, terrorism, disease outbreaks, environmental constraints imposed upon aircraft operations, technological changes, and price and other competitive factors.Our commercial aircraft customers may request to cancel, modify or reschedule orders.We generally make sales under aircraft purchase agreements that may, for a variety of reasons, become the subject of cancellation, modification or rescheduling. Changes in the economic environmentfactors, fuel prices, terrorism, epidemics and the financial condition ofenvironmental 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, whose current authorization expires at the end of September 2014. Significant deterioration in the global economic environment, the airline industry generally, or in the financial stability of one or more of our major customers could result in customer requestsfewer new orders for aircraft or could cause customers to rescheduleseek to postpone or cancel contractual orders. Our contracts have specific provisions relatingorders and/or payments to schedule and performance and failure to deliver airplanes in accordance with such provisionsus, which could result in cancellations and/or claims for compensation. Any such cancellations, modification, rescheduling or claims could significantly reduce our backlog,lower revenues, profitability and cash flows.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 pricing is based in part on escalation formulas established well in advance of delivery and is therefore subject to factors beyond our control.Price escalation provisions in our sales contracts are designedoften entered into years before the aircraft are delivered. In order to adjustaccount for economic fluctuations between the contract date and aircraft delivery a period which can span many years. As a result,date, aircraft pricing generally consists of a fixed amount as modified by aan indexed price escalation formula using pre-defined factors.formula. Our revenue estimates are based on current expectations with respect to these escalation formulas.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 major 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 after our contract with the customer ends.us. In addition, fleet decisions, consolidationairline 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 production rates could change. Production rate reductions could cause us to incur disruption and other costs and result in infrastructure costs being allocated to a smaller quantity of airplanes, all of which could reduce our profitability. The introduction of a new aircraft program and/or higher orders for our aircraft could lead to production rate increases in order to meet the delivery schedules. Failure to successfully implement any production rate changes could lead to extended delivery commitments, and depending on the length of delay in meeting delivery commitments, additional costs and customers rescheduling their deliveries or terminating their related contract with us.The profitability of our commercial aircraft development programs depends upon a variety of factors, which are subject to unique risks.We are currently engaged in the demanding flight testing and certification phases of program development on both the 787-8 and 747-8 Freighter aircraft. These airplanes have highlybusiness is extremely complex, designs, utilize exotic materials and requireinvolving extensive coordination and integration with supplier partners.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 787-9, 787-10, 737 MAX and 777X, involves increased risks associated with meeting development, testing, production and certification schedules. As a result, our ability to deliver aircraft on time, meet contractual performancesatisfy regulatory and customer requirements, and achieve or maintain, as applicable, program profitability is subject to significant risks.Operational issues, including delays or defects in supplier components, the inability to efficiently and cost-effectively incorporate design changes intoWe must meet planned production aircraft, and aircraft performance issues, could result in additional expenses or lower program revenues. For example, in 2009 we determined that three of the six 787 flight test aircraft could not be sold due to the inordinate amount of work that would be required to prepare the aircraft for sale. As a result, we reclassified $2.7 billion from inventory to research and development expense. If we determine that one or more of the other flight test aircraft will not be sold, we may incur additional charges. In addition, flight testing and certification delays or supplier or other operational challenges that impact our ability to achieve our targeted production rates may result in aircraft delivery delays and higher costs to complete. For example, on January 18, 2011, we announced that the expected date of first delivery of our 787 Dreamliner had been moved to the third quarter of 2011 due to a combination of flight testing delays, supplier challenges and other issues common to commercial aircraft development programs. Our inability to deliver aircraft to our customers in a timely manner could resultrate targets in order cancellations or other significant financial exposures, or could otherwise reduce the profitability ofto satisfy customer demand and maintain our Commercial Airplanes business. profitability. We continue to work with our customers and suppliers to assess the specific impact of schedule changes and otherwise to ensure that our aircraft meet customer expectations.Looking beyond entry into serviceincrease production rates for the 787-8737 and 747-8 Freighter, we continue to work toward improving production efficiencies and supplier performance, incorporating design changes into aircraftthat have already been produced, improving aircraft performance, successfully implementing planned increases787 programs, while at the same time engaging in production rates and introducingsignificant ongoing development of the 787-9, 787-10, 737 MAX and 747-8 Intercontinental airplanes. For example, we are increasing production capacity in Everett and Charleston and working closely with our suppliers to support 787777X aircraft. If production rate increases. Iframp-up efforts at any of our commercial aircraft assembly line ramp-up effortsfacilities are delayed or if our suppliers cannot timely deliver components to us at the rates necessary to achieve our planned rate7increases, we may be unable to meet delivery targetsschedules and the financial performance of one or more of our programs may suffer.Management uses its best judgmentOperational challenges impacting the production system for one or more of our commercial aircraft programs could result in production delays and/or failure to estimate the costmeet 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 perform themeet internal performance plans, or delays or failures to achieve required regulatory certifications, could result in significant out-of-sequence work the price we will eventually be paid and the number of units to include in the initial accounting quantity. Changes to estimates of the program accounting quantity, customer and model mix,increased production costs, as well as delayed deliveries to customers, impacts to aircraft performance and/or increased warranty or fleet support costs. Further, if we cannot efficiently and rates, learning curve,cost-effectively incorporate design changes into already-completed 787 production aircraft, we may face further profitability pressures on this program.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 derivativecustomers and regulatory agencies, can be costly and technologically challenging. These challenges are particularly significant with newer aircraft customer negotiations/settlements, supplier claims and certification issuesprograms. Any failure of any Boeing aircraft to satisfy performance or reliability requirements could affect margins or result in reach-forward losses. The cumulative impactdisruption to our operations, higher costs and/or lower revenues.Changes in levels of production challenges, schedule delays and customer and supplier impacts has resulted in a reach-forward loss on the 747 program and continues to place significant pressure on revenues, costs and the profitability of the 787 program.Our BDS business could be adversely affected by changingU.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, particularlyprimarily from defense related programs with the DepartmentU.S. DoD. Levels of Defense, including an increased emphasisU.S. defense spending in future periods are very difficult to predict and subject to significant risks. In addition, significant budgetary delays and constraints have already resulted in reduced spending levels, and additional reductions may be forthcoming. In August 2011, the Budget Control Act (The Act) established limits on affordability.The U.S. government participates in an increasingly wide varietydiscretionary spending, including a reduction of operations, including homeland defense natural disasters, stabilization efforts, counterinsurgencyspending by approximately $490 billion between the 2012 and counterterrorism, that employ our products and services. The2021 U.S. government primarily operating throughfiscal years. The Act also provided that the U.S. DoD, continuesdefense budget would face “sequestration” cuts of up to adjust its funding priorities in response to this changing threat environment. In addition, defense funding currently faces pressures duean additional $500 billion during that same period to the overall economic environmentextent that discretionary spending limits are exceeded. The impact of sequestration cuts was reduced with respect to FY2014 and competing budget priorities. DueFY2015 following the enactment of The Bipartisan Budget Act in December 2013. However, significant uncertainty remains with respect to these pressures, we expect the total U.S. DoD budget growth rate to remain stable or even decline slightly over the next several years. Any reduction in the growth rate or overall levels of defense spending and it is likely that U.S. government discretionary spending levels will continue to be subject to significant pressure, including risk of future sequestration cuts.In addition, there continues to be significant uncertainty with respect to program-level appropriations for the U.S. DoD spending or cancellations or delays impacting existing contracts could have a significant impact on and other government agencies (including NASA) within the operating results of our BDS business.overall budgetary framework described above. While the FY2014 appropriations finalized in January 2014 included funding for Boeing’s major programs, uncertainty remains about how defense budgets in FY2015 and beyond will affect Boeing’s programs. We also expect that ongoing concerns regarding the U.S. national debt will continue to place downward pressure on U.S. DoD willspending levels. Future budget cuts, including cuts mandated by sequestration, or future procurement decisions associated with the 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. These initiatives will require us and our competitorsIf we can no longer adjust successfully to focus increasingly on long-term cost competitiveness and affordability when responding to proposalsthese changing acquisition priorities and/or pursuing development programs. If the priorities of the U.S. government change and/or we are unablefail to meet affordability targets set by the U.S. DoD customer, our BDS revenues and profitability couldmarket share would be negativelyfurther impacted.8We depend heavily onconduct a significant portion of our business pursuant to U.S. government contracts, which are subject to unique risks.In 2010, 43%2013,34% of our revenues were derived fromearned pursuant to U.S. government contracts. In additioncontracts, which include foreign military sales through the U.S. government. Business conducted pursuant to normal business risks, oursuch contracts withis subject to extensive procurement regulations and other unique risks.Our sales to the U.S. government are subject to unique risks, someextensive 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 which are beyond our control.The funding of U.S. government programs isBDS business. These requirements may result in increased compliance costs, and we could be subject to congressional appropriations. Manyadditional costs in the form of withheld payments and/or reduced future business if we fail to comply with these requirements in the U.S. government programs in which we participate may last several years; however, these programs are normally funded annually. Changes in military strategyfuture. Compliance costs attributable to current and priorities may affect ourpotential future procurement opportunitiesregulations such as these could negatively impact our financial condition and existing programs. Long-term government contracts and related orders are subject to cancellation, delay or restructure, if appropriations for subsequent performance periods are not made. The termination or reduction of funding for existing or new U.S. government programs could result in a material adverse effect on our earnings, cash flow and financial position.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 convenienceupon payment or for work done and commitments made atdefault based on performance. For example, in 2011, the timeU.S. Army terminated for convenience the entire BCTM program. In addition, funding pursuant to our U.S. government contracts may be reduced or withheld as part of termination. Modification,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 of our majorlarge programs or contracts could have a material adverse effect on our results of operations andearnings, cash flow and/or financial condition.Our contract costsWe are subject to U.S. government inquiries and investigations, including periodic audits byof costs that we determine are reimbursable under U.S. government contracts. U.S. government agencies,. U.S. including the Defense Contract Audit Agency and the Defense Contract Management Agency, routinely audit government representatives may auditcontractors. These agencies review our performance under contracts, cost structure and compliance with applicable laws, regulations, and standards, as well as the costs we incur onadequacy of and our U.S. government contracts, including allocated indirect costs. Such audits could result in adjustments tocompliance with our contract costs.internal control systems and policies. Any costs found to be improperlymisclassified or inaccurately allocated to a specific contract will not be reimbursed,deemed non-reimbursable, and such coststo the extent already reimbursed, must be refunded. We have recorded contract revenues based upon costs we expect to realize upon final audit. However, we do not know the outcome ofAny inadequacies in our systems and policies could result in withholds on billed receivables, penalties and reduced future business. Furthermore, if any future audits and adjustments and we may be required to reduce our revenuesaudit, inquiry or profits upon completion and final negotiation of audits. If any auditinvestigation uncovers improper or illegal activities, we maycould be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibitiondebarment from doing business with the U.S. government.Our business is subject We also could suffer reputational harm if allegations of impropriety were made against us, even if such allegations are later determined to potential U.S. government inquiries and investigations. We are sometimes subject to certain U.S. government inquiries and investigations due to our participation in government contracts. Any such inquiry or investigation could potentially result in a material adverse effect on our results of operations and financial condition.be false.Our U.S. government business is also subject to specific procurement regulations and other requirements. These requirements, although customary in U.S. government contracts, increase our performance and compliance costs. These costs might increase in the future, reducing our margins, which could have a negative effect on our financial condition. Failure to comply with these regulations and requirements could lead to suspension or debarment, or withholding of revenue and profit, for cause, from U.S. government contracting or subcontracting for a period of time and could have a negative effect on our reputation and ability to secure future U.S. government contracts.We enter into fixed-price contracts which could subject us to losses if we have cost overruns.Our BDS business generated approximately Approximately 55%70% of BDSits 2013 revenues are generated from fixed-price contracts. While firm 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. 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 impacts on margins. In addition, some of our contracts have specific provisions relating to cost, schedule and performance.9Fixed-price development contracts are generally subject to more uncertainty than fixed-price production contracts. Many of these development programs have highly complex designs. If we fail to meet the terms specified in those contracts, our sales price could be reduced. AsIn addition, technical or quality issues that arise we may experienceduring development could lead to schedule delays and higher costs to complete, which wouldcould result in a material charge or otherwise adversely affect our financial condition. Examples of significant BDS fixed-price development contracts include AEW&C KC-767 International, India P-8I, Saudi F-15, USAF KC-46A Tanker, P-8I and commercial and military satellites.We enter into cost-type contracts which also carry risks.Our BDS business generated approximately Approximately 45%30% of BDSits 2013 revenues are generated 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 BCTM, P-8A Poseidon,, Proprietary programs, JTRS, FAB-T and the EA-18G Growler.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 of our subcontractors and suppliers, as well as on the availability of raw materials and other components.We rely on other companies including 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 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 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 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 are10considered 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.Under program accounting,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. Such estimates are reconsidered throughout the lifeChanges to customer or model mix, production costs and rates, learning curve, escalation, costs of our programs. Changes in underlying assumptions,derivative aircraft, supplier performance, circumstances customer negotiations/settlements, supplier claims and/or certification issues can impact these estimates. Any such change in estimates concerning the selection of therelating to program accounting quantity or changes in market conditions, along with a failure to realize predicted costs, may adversely affect future financial performance.Because of the significance of the judgments and estimation processes described above, it is likely that 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—Analysis – Critical Accounting Policies—Policies – Contract Accounting/Program Accounting” on pages 42 - 44 – 45 and Note 1 to our Consolidated Financial Statements on pages 56 - 5755 – 65 of this Form 10-K.Competition within our markets 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 and service providers in one or more of our market segments. In our BDS business, we anticipate that the effects of defense industry consolidation and new priorities, including long-term cost competitiveness, of our U.S. DoD customer will intensify competition for many of our products and services. 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.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 2010, sales to2013, non-U.S. customers accounted for 41%approximately 57% 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;·domestic and international 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;·uncertainties and restrictions concerning the availability of funding credit or guarantees;·imposition of taxes, export controls, tariffs, embargoes and other trade restrictions;·the difficulty of management and operation of an enterprise spread over various countries;·compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies abroad; and·economic and geopolitical developments and conditions.changes in regulatory requirements;domestic and international 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;11volatility 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 and other trade restrictions;the difficulty of management and operation of an enterprise spread over many countries;compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies abroad; andunforeseen developments and conditions, including terrorism, war and international 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.The outcome of litigation and of government inquiries and investigations involving our business is unpredictable and an adverse decision in any such matter could result in significant monetary payments and have a material adverse affecteffect on our financial position and results of operations.We are involved in a number of litigation matters. These claims 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 could have a material adverse affectimpact on our financial position and results of operations. In addition, we are sometimes subject to government inquiries and investigations of our business due, among otherU.SU.S. government, the heavily regulated nature of our industry, and in the case of environmental proceedings, our ownership of certain property. Any such inquiry or investigation could potentially result in an adverse ruling against us, which could result in significant monetary payments (including possible environmental remediation costs) andhave a material adverse effectimpact on our financial position and operating results.A significant portion of our and Boeing Capital Corporation’s customer financing portfolio is concentrated among certain customers based in the United States, 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, particularly in the United States. Our portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably Boeing 717 aircraft. 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, 2013 and 2012, our airplane financing commitments totaled $17,987 million and $18,083 million. If we were called uponrequire additional funding in order to fund all 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 for12debt. These factors include disruptions or declines in the global capital markets and/or a decline in our financial performance, or 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/ventures and strategic alliances and divest operations.alliances. Whether we realize the anticipated benefits from these transactionsacquisitions and related activities depends, in part, upon our ability to integrate the integration betweenoperations of the businesses involved,acquired business, the performance of the underlying products, capabilities or technologiesproduct and service portfolio, and the managementperformance of the transactedmanagement team and other personnel of the acquired operations. Accordingly, our financial results could be adversely affected from 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. DivestituresWe 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.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. While weWe maintain insurance for certain risks and, in some circumstances, we may receive indemnification from the U.S. government, insurance cannot be obtained to protect against all risks and liabilities. It istherefore possible that thegovernment. 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 manysome 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 are able to 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 attacksor 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 provided to customers, andour 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 adversely affecthave an adverse effect on the reputation of Boeing and of our reputation or our stock price.Some of our and our suppliers'suppliers’ workforces are represented by labor unions, which may lead to work stoppages.Approximately 57,40065,000 employees, which constitute 36%38% of our total workforce, are union represented as of December 31, 2010.2013. We experienced a work stoppage in 2008 when a labor strike halted commercial aircraft and certain BMA program production and weproduction. We may experience additional work stoppages in the future, which could adversely affect our business. We cannot predict how stable our relationships, currently with 14 different1311 U.S. labor organizations and 7 different6 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.Significant changes in discount rates, actual investment return on pension assets and other factors could affect our earnings, equity, and pension contributions in future periods.Our earnings may be positively or negatively impacted by the amount of income or expense we record for ourWe have substantial pension and other postretirement benefit plans. Generally Accepted Accounting Principlesobligations, which have a material impact on our earnings, shareholders' equity and cash flows from operations and could have significant adverse impacts in future periods.We have qualified defined benefit pension plans that cover the United Statesmajority of America (GAAP) require that we calculate income or expense forour employees. Potential pension contributions include both mandatory amounts required under the Employee Retirement Income Security Act and discretionary contributions to improve the plans using actuarial valuations. These valuations reflect assumptions relating to financial' funded status. The extent of future contributions depends heavily on market and other economic conditions. Changes in key economic indicators can change the assumptions. The most significant year-end assumptions used to estimate pension or other postretirement income or expense for the following year arefactors such as the discount rate and the expected long-term rate ofactual return on plan assetsassets. We estimate future contributions to these plans using assumptions with respect to these and expectedother items. Changes to those assumptionscould have a significant effect on future medical inflation. In addition, we are required to make ancontributions as well as on our annual measurement of plan assets and liabilities, which maypension costs and/or result in a significant change to Shareholders’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 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“Management's Discussion and Analysis—Analysis-Critical Accounting Policies—Postretirement Plans”Policies-Pension Plans” on pages 46–47page 46 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 common stock we would contribute to the pension or other postretirementour plans. Potential pension contributions include both mandatory amounts required under federal law Employee Retirement Income Security Act (ERISA) and discretionary contributions to improve the plans’ funded status.Our operations expose us to the risk of material environmental liabilities.We are subject to various 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.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 and monitoring systems 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 could result in significant financial or information losses and/or reputational harm. In addition, we manage information14technology 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.Item 1B. Unresolved Staff CommentsNot Applicable.Item 2. PropertiesWe occupied approximately 8583 million square feet of floor space on December 31, 20102013 for manufacturing, warehousing, engineering, administration and other productive uses, of which approximately 96% was located in the United States.2010:(Square feet in thousands) Owned Leased Government
Owned* Total 35,460 4,955 40,415 30,158 9,275 159 39,592 3,957 740 4,697 69,575 14,970 159 84,704 *Excludes rent-free space furnished by U.S. government landlord of 772 square feet.**Other includes BCC; EO&T; SSG; and our Corporate Headquarters.(Square feet in thousands) Owned Leased Government Owned(1) Total Commercial Airplanes 38,108 5,042 43,150 Defense, Space & Security 28,769 7,995 36,764 Other(2)2,082 920 318 3,320 Total 68,959 13,957 318 83,234 (1) Excludes rent-free space furnished by U.S. government landlord of 243 square feet.(2) Other includes BCC; EO&T; SSG; and our Corporate Headquarters.At December 31, 2010,2013, our segments occupied facilitiesin excess of 74.6 million square feet of floor space at the following major locations that occupied in excess of 74 million square feet of floor space:·Commercial Airplanes – Greater Seattle, WA; North Charleston, SC·Boeing Defense, Space & Security – Greater Los Angeles, CA; Greater Seattle, WA; Greater St. Louis, MO; Philadelphia, PA; San Antonio, TX; Huntsville, AL; Mesa, AZ; Wichita, KS; Houston, TX; and Greater Washington, DC·Other – Chicago, IL and Greater Seattle, WACommercial Airplanes – Greater Seattle, WA; Greater Charleston, SC; Portland, OR; Australia; Greater Salt Lake City, UT; Canada; and Greater Los Angeles, CADefense, Space & Security – Greater Los Angeles, CA; Greater St. Louis, MO; Greater Seattle, WA; Philadelphia, PA; Mesa, AZ; Wichita, KS; San Antonio, TX; Huntsville, AL; Greater Washington, DC; Oklahoma City, OK; and Houston, TXOther – Chicago, IL and Greater Seattle, WAMost 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 ProceedingsCurrently, 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. Removed and ReservedMine Safety DisclosuresNot applicable15PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe principal market for our common stock is the New York Stock Exchange where it trades under the symbol BA. The numberAs of holdersFebruary 7, 2014, there were 145,295 shareholders of common stock as of February 1, 2011, was approximately 212,290.record. Additional information required by this item is incorporated by reference from Note 22 to our Consolidated Financial Statements.Issuer Purchases of Equity SecuritiesThe following table provides information about purchases we made during the quarter ended December 31, 20102013 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) 29,776 $ 67.35 $ 3,610 5,666 70.12 3,610 16,894 69.08 3,610 52,336 $ 68.21 (a) (b) (c) (d) Total Numberof SharesPurchased(1) AveragePrice Paid perShare Total Number ofShares Purchasedas Part of PubliclyAnnounced Plansor Programs Approximate DollarValue of Shares That May Yetbe Purchased Under thePlans or Programs(2)10/1/2013 thru 10/31/2013 550,733 $114.75 536,500 $1,750 11/1/2013 thru 11/30/2013 2,620,456 134.06 2,615,281 1,399 12/1/2013 thru 12/31/2013 4,428,106 133.31 4,418,372 10,810 Total 7,599,295 $132.22 7,570,153 (1)52,0617,570,153 shares of our common stock in the open market pursuant to our repurchase program and 29,142 shares transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. In addition, we purchased an aggregate of 275We did not purchase shares in swap transactions.(2)16Item 6. Selected Financial DataFive-Year Summary (Unaudited)(Dollars in millions, except per share data) 2010 2009 2008 2007 2006 $ 31,834 $ 34,051 $ 28,263 $ 33,386 $ 28,465 14,238 14,304 13,445 13,545 14,014 9,455 10,877 11,346 11,481 11,772 8,250 8,480 7,256 7,026 6,625 31,943 33,661 32,047 32,052 32,411 639 660 703 815 1,025 138 165 567 308 327 (248 ) (256 ) (671 ) (174 ) (698 ) $ 64,306 $ 68,281 $ 60,909 $ 66,387 $ 61,530 3,644 3,364 3,084 3,531 4,171 4,121 6,506 3,768 3,850 3,257 52 (26 ) 247 484 420 $ 3,311 $ 1,335 $ 2,654 $ 4,058 $ 2,206 (4 ) (23 ) 18 16 9 $ 3,307 $ 1,312 $ 2,672 $ 4,074 $ 2,215 4.50 1.89 3.68 5.36 2.88 4.46 1.87 3.65 5.26 2.84 $ 1,245 $ 1,233 $ 1,187 $ 1,129 $ 991 1.68 1.68 1.62 1.45 1.25 1,125 1,186 1,674 1,731 1,681 1,096 1,066 1,013 978 1,058 15,709 15,424 15,559 14,852 15,871 160,500 157,100 162,200 159,300 154,000 $ 68,565 $ 62,053 $ 53,779 $ 58,986 $ 51,794 5,177 2,392 (4,809 ) (4,184 ) (6,665 ) 8,931 8,784 8,762 8,265 7,675 5,359 9,215 3,268 7,042 6,118 5,158 2,008 11 2,266 268 12,421 12,924 7,512 8,217 9,538 4,680 5,834 6,282 7,105 8,890 2,766 2,128 (1,294 ) 9,004 4,739 3.76 2.93 (1.85 ) 12.22 6.25 735.3 726.3 698.1 736.7 757.8 $ 255,591 $ 250,476 $ 278,575 $ 255,176 $ 174,276 25,094 26,354 25,802 23,027 24,689 9,586 7,746 8,868 9,207 7,786 13,684 11,924 10,615 9,554 9,812 48,364 46,024 45,285 41,788 42,287 $ 303,955 $ 296,500 $ 323,860 $ 296,964 $ 216,563 Five-Year Summary (Unaudited) (Dollars in millions, except per share data) 2013 2012 2011 2010 2009 Operations Revenues: Commercial Airplanes $52,981 $49,127 $36,171 $31,834 $34,051 Defense, Space & Security:(1) Boeing Military Aircraft 15,936 16,019 14,585 13,876 13,988 Network & Space Systems 8,512 7,911 8,964 9,769 11,136 Global Services & Support 8,749 8,677 8,427 8,298 8,537 Total Defense, Space & Security 33,197 32,607 31,976 31,943 33,661 Boeing Capital(2)408 468 547 672 695 Other segment(2)102 106 123 105 130 Unallocated items and eliminations (65 ) (610 ) (82 ) (248 ) (256 ) Total revenues $86,623 $81,698 $68,735 $64,306 $68,281 General and administrative expense 3,956 3,717 3,408 3,644 3,364 Research and development expense 3,071 3,298 3,918 4,121 6,506 Other income/(loss), net 56 62 47 52 (26 ) Net earnings from continuing operations $4,586 $3,903 $4,011 $3,311 $1,335 Net gain/(loss) on disposal of discontinued operations, net of tax (1 ) (3 ) 7 (4 ) (23 ) Net earnings $4,585 $3,900 $4,018 $3,307 $1,312 Basic earnings per share from continuing operations 6.03 5.15 5.38 4.50 1.89 Diluted earnings per share from continuing operations 5.96 5.11 5.33 4.46 1.87 Cash dividends declared $1,642 $1,360 $1,263 $1,245 $1,233 Per share 2.185 1.805 1.70 1.68 1.68 Additions to Property, plant and equipment 2,098 1,703 1,713 1,125 1,186 Depreciation of Property, plant and equipment 1,338 1,248 1,119 1,096 1,066 Year-end workforce 168,400 174,400 171,700 160,500 157,100 Financial position at December 31 Total assets $92,663 $88,896 $79,986 $68,565 $62,053 Working capital 13,588 12,327 8,536 5,177 2,392 Property, plant and equipment, net 10,224 9,660 9,313 8,931 8,784 Cash and cash equivalents 9,088 10,341 10,049 5,359 9,215 Short-term and other investments 6,170 3,217 1,223 5,158 2,008 Total debt 9,635 10,409 12,371 12,421 12,924 Customer financing assets 3,971 4,420 4,772 4,680 5,834 Shareholders’ equity(3)14,875 5,867 3,515 2,766 2,128 Per share 19.90 7.76 4.72 3.76 2.93 Common shares outstanding (in millions)(4)747.4 755.6 744.7 735.3 726.3 Contractual Backlog: Commercial Airplanes $372,980 $317,287 $293,303 $255,591 $250,476 Defense, Space & Security:(1) Boeing Military Aircraft 24,825 29,226 23,629 24,678 25,974 Network & Space Systems 9,832 10,078 9,429 9,935 8,069 Global Services & Support 15,024 15,764 13,296 13,751 11,981 Total Defense, Space & Security 49,681 55,068 46,354 48,364 46,024 Total contractual backlog $422,661 $372,355 $339,657 $303,955 $296,500 Cash dividends have been paid on common stock every year since 1942.(1)2010,2013, certain programs were realigned between BDS segments. Prior years have been recast for segment realignments.(2)Effective January 1, 2013, BCC's accounting policies for certain leasing transactions were aligned with Boeing's consolidated accounting policies. Amounts reported in prior periods as Interest and debt expense have been reclassified to Boeing Capital interest expense to conform to the current period's presentation.(3)Shareholders’ equity excludes noncontrollingnon-controlling interest. Prior year amounts have been adjusted to conform to this presentation.(3)(4)17Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsConsolidated Results of Operations and Financial ConditionOverviewWe are a global market leader in 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 many countries and rely extensively on aan extensive network of international partners, key suppliers and subcontractors around the world.Our strategy is centered on successful execution in healthy core businesses – Commercial Airplanes and Boeing Defense, Space & Security (BDS) – supplemented and supported by Boeing Capital Corporation (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 we price our products and services to provide a fair return for our shareholders while continuing to find new ways to improve efficiency and quality. Commercial Airplanes 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 and space 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. Our strategy also benefits as the cyclicality of commercial and defense markets often offset. BCC delivers value by supporting our business units and managing overall financing exposure.Consolidated Results of OperationsEarnings From Operations and Core Operating Earnings (Non-GAAP) (Dollars in millions, except per share data) Years ended December 31, 2013 2012 2011 Revenues $86,623 $81,698 $68,735 GAAP Earnings from operations $6,562 $6,290 $5,823 Operating margins 7.6 % 7.7 % 8.5 % Effective income tax rate 26.4 % 34.0 % 25.6 % Net earnings $4,585 $3,900 $4,018 Diluted earnings per share $5.96 $5.11 $5.34 Non-GAAP (1) Core operating earnings $7,876 $7,189 $6,340 Core operating margin 9.1 % 8.8 % 9.2 % Core earnings per share $7.07 $5.88 $5.79 (1)These measures exclude certain components of pension and other postretirement benefit expense. See page 43 for important information about these non-GAAP measures and reconciliations to the most comparable GAAP measures. 18RevenuesThe following table summarizes Revenues:(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 31,834 $ 34,051 $ 28,263 31,943 33,661 32,047 639 660 703 138 165 567 (248 ) (256 ) (671 ) $ 64,306 $ 68,281 $ 60,909 Years ended December 31, 2013 2012 2011 Commercial Airplanes $52,981 $49,127 $36,171 Defense, Space & Security 33,197 32,607 31,976 Boeing Capital 408 468 547 Other segment 102 106 123 Unallocated items and eliminations (65 ) (610 ) (82 ) Total $86,623 $81,698 $68,735 Revenues in 2010 decreased2013 increased by $3,975$4,925 million or 6% compared with 2009.2012. Commercial Airplanes revenues decreasedincreased by $2,217$3,854 milliondue to lower 777higher new airplane deliveries primarily resulting from a production rate change from 7 to 5 per month beginning in June 2010 and no deliveries on the 747 program. BDS revenues increased by $590 million due to the transition from the 747-400 to the 747-8. These were partially offset by increases in commercial aviation services business. BDS revenues decreased by $1,718 million primarily due to lowerhigher revenues in the Network & Space Systems (N&SS) and Global Services & Support (GS&S) segments offset by lower revenues in the Boeing Military Aircraft (BMA) segment.Revenues in 20092012 increased by $7,372$12,963 million or 19% compared with 20082011. Commercial Airplanes revenues increased by $12,956 million primarily due to higher new airplane deliveries across all programs. BDS revenues increased by $631 million due to higher revenues in Commercial Airplanesthe BMA and BDS. Commercial Airplanes revenues increased by $5,788 million, primarily due to higher commercial airplane deliveries in 2009. Deliveries in 2008 were lower as a result of alabor strike in 2008. Increases were partially offset by decreases in commercial aviation services and intercompany revenues. BDS revenues increased by $1,614 million, primarily due to higher revenues in Global Services & Support (GS&S) and Boeing Military Aircraft (BMA),GS&S segments partially offset by lower revenues in N&SS. BCC revenues decreased by $43 million during the year primarily due to a decrease in the customer financing portfolio. Other segment revenues decreased by $402 million partly due to higher revenues in 2008 from the sale of four C-17 aircraft held under operating lease. LowerN&SS segment. Unallocated items and eliminations improvedreduced revenues by $415$610 million primarily due to lower P-8A Poseidon intercompany revenues recognized by Commercial Airplanes in 20092012 compared with 2008.Earnings From OperationsThe following table summarizes our earnings/(loss)Earnings from operations:(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 3,006 $ (583 ) $ 1,186 2,875 3,299 3,232 152 126 162 (327 ) (152 ) (307 ) (735 ) (594 ) (323 ) $ 4,971 $ 2,096 $ 3,950 Operating earningsYears ended December 31, 2013 2012 2011 Commercial Airplanes $5,795 $4,711 $3,495 Defense, Space & Security 3,235 3,068 3,158 Boeing Capital 107 88 119 Other segment (156 ) (186 ) 39 Unallocated pension and other postretirement benefit expense (1,314 ) (899 ) (517 ) Other unallocated items and eliminations (1,105 ) (492 ) (471 ) Earnings from operations (GAAP) $6,562 $6,290 $5,823 Unallocated pension and other postretirement benefit expense 1,314 899 517 Core operating earnings (Non-GAAP) $7,876 $7,189 $6,340 Earnings from operations in 2010 2013 increased by $2,875$272 million compared with 2009.2012. Commercial Airplanes earnings increased by $3,589$1,084 million primarily due to $2,693 million of costs related to the first three 787 flight test aircraft included inreflecting higher new airplane deliveries and lower research and development expense in 2009 and the 2009 reach-forward losses on the 747 program of $1,352 million. BDS earnings decreased by $424 million compared with 2009 due to lower revenues and margins in the BMA segment and lower revenues in the N&SS segment. Other segment earnings decreased by $175 million primarily due to $119 million in intercompany guarantees related to aircraft impairment charges and reduced aircraft collateral values.Operating earnings in 2009 decreased by $1,854 million compared with 2008. Commercial Airplanes earnings decreased by $1,769 million primarily due to $2,693 million of costs related to the first three 787 flight test aircraft included in research and development expense as a result of our determination in August 2009 that these aircraft could not be sold. The earnings decrease is also attributable to $1,352 million in reach-forward losses on the 747 program in 2009, compared with $667 million in 2008. Lower commercial aviation services and intercompany earnings also contributed to lower 2009 earnings. These decreases were partially offset by higher commercial airplane deliveries in 2009 compared with 2008.expense. BDS earnings increased by $67$167 million compared with 2008 primarily due to higher earnings in the BMA segment partiallyN&SS and GS&S segments offset by lower earnings in the BMA segment. Unallocated pension and other postretirement benefit expense in 2013 reduced earnings by 19recorded in 2013 related to the settlement of A-12 litigation described in Note 20 and higher 2013 deferred compensation expense.Earnings from operations in 2012 increased by $467 million compared with 2011. Commercial Airplanes earnings increased by $1,216 million reflecting higher new airplane deliveries and lower research and development expense partially offset by higher fleet support costs, increased operating costs associated with business growth, other period costs and decreased earnings from commercial aviation services. BDS earnings decreased by $90 million due to lower earnings in the N&SS segment.segment, partially offset by higher earnings in the BMA and GS&S segments. Other segment losses decreasedincreased by $155$225 million primarily due to recognition of pre-tax expense of $82 milliona reduction in the prior year to increase the allowance for losses on customer financing receivables in 2011. Unallocated pension and lower environmental remediation charges compared with the prior year. Unallocated items and eliminationsother postretirement benefit expense in 20092012 reduced earnings by $271$382 million compared with 2008, which is further explained2011 primarily due to higher pension expense.Core operating earnings in 2013 increased by $687 million compared with 2012 as higher earnings at Commercial Airplanes and BDS more than offset the A-12 charge and higher 2013 deferred compensation expense.Core operating earnings in 2012 increased by $849 million compared with 2011 primarily reflecting higher earnings at Commercial Airplanes offset by the impact of the reduction in the allowance for losses on receivables recorded in 2011.Research and Development The following table below.(Dollars in millions)Years ended December 31, 2013 2012 2011 Commercial Airplanes $1,807 $2,049 $2,715 Defense, Space & Security 1,215 1,189 1,138 Other 49 60 65 Total $3,071 $3,298 $3,918 Research and development expense in 2013decreased by $227 million compared to 2012 primarily due to lower spending at Commercial Airplanes on the 787 program partially offset by increased spending on the 737 MAX and 777X. Research and development expense in 2012 decreased by $620 million compared to 2011 primarily due to lower spending at Commercial Airplanes on the 747 and 787 programs.20Unallocated Items and Eliminations The most significant items included in Unallocated items and eliminations are shown in the following table:(Dollars in millions) Years ended December 31, 2010 2009 2008 $ (136 ) $ (189 ) $ (149 ) (112 ) (158 ) 223 54 110 (208 ) (59 ) (93 ) (79 ) (482 ) (264 ) (110 ) $ (735 ) $ (594 ) $ (323 ) Share-based plans expense decreased(Dollars in 2010 by $53 million primarily due to the expirationmillions)Years ended December 31, 2013 2012 2011 Share-based plans ($95 ) ($81 ) ($83 ) Deferred compensation (238 ) (75 ) (61 ) Eliminations and other (366 ) (457 ) (327 ) Litigation settlements (406 ) 121 Sub-total (included in core operating earnings*) (1,105 ) (492 ) (471 ) Pension (1,374 ) (787 ) (269 ) Postretirement 60 (112 ) (248 ) Pension and other postretirement benefit expense(excluded from core operating earnings*)(1,314 ) (899 ) (517 ) Total ($2,419 ) ($1,391 ) ($988 ) * Core operating earnings is a Non-GAAP measure that excludes certain components of the ShareValue trust at June 30, 2010.Deferred compensation expense decreasedincreased by $46$163 million in 2010 and increased by $381 million in 2009. The year over year changes in deferred compensation expense are2013, primarily driven by changesincreases in our stock price, and broadby $14 million in 2012, primarily driven by increases in the overall stock market conditions.Otherperformance.Eliminations and other unallocated expense decreased by $91 million in 2013, primarily due to the timing of elimination of profit on intercompany items, and eliminations expense increased by $218$130 million in 2010 primarily2012 due to the timing of intercompany expense allocations and elimination of profit on intercompany items as well as a $55items.Litigation settlements include the 2013 charge of $406 million charitable contribution. The 2009 increaserelated to the settlement of $154the A-12 litigation described in Note 20 and the $121 million was primarilybenefit recorded in 2012 due to timing of intercompany expense allocations, elimination of profita favorable court judgment on intercompany items and a more favorable insurance adjustment.Unallocated pension and other postretirement expense represents the difference between costs recognized under Generally Accepted Accounting Principles in the United States of America (GAAP) in the consolidated financial statements and federal cost accounting standards required to be utilized by our business segments for U.S. government contracting purposes. satellite litigation.We recorded net periodic benefit cost related to pensionspension and other postretirement benefits of $1,864$3,769 million $1,816, $3,383 million and $1,132$3,127 million in 2010, 20092013, 2012 and 2008,2011, respectively. Not allThe increase in net periodic benefit cost related to pension is primarily due to higher amortization of actuarial losses and higher service costs driven by lower discount rates.Unallocated pension expense in 2013 reflects the pension curtailment charge of $73 million related to the decision in September 2013 to end production of the C-17 aircraft in 2015. See Note 11. During the third quarter of 2013 we also determined that the pension expense in prior years was overstated and recorded a reduction in pension expense of $63 million. Unallocated other postretirement benefit expense in 2011 includes $161 million of additional expense due to an adjustment primarily related to prior years’ accumulated postretirement benefit obligations. See the discussion of the postretirement liabilities in Note 14 to our Consolidated Financial Statements.21A portion of net periodic benefit cost is recognized as product costs in earningsEarnings from operations in the period incurred because itand the remainder is allocated to production as product costs and a portion remainsincluded in inventory at the end of the reporting period. A portion of pensionperiod and other postretirement expense is recorded in Earnings from operations in subsequent periods.Costs are allocated to the business segments and the remainder isas described in Note 21.Net periodic benefit costs included in unallocated pension and other postretirement expense. Earnings from operations included the following amounts allocated to business segments and Other unallocated items and eliminations.(Dollars in millions) Pension Other Postretirement
Benefits Years ended December 31, 2010 2009 2008 2010 2009 2008 $ (1,155 ) $ (989 ) $ (488 ) $ (421 ) $ (522 ) $ (428 ) 54 110 (208 ) (59 ) (93 ) (79 ) $ (1,101 ) $ (879 ) $ (696 ) $ (480 ) $ (615 ) $ (507 ) (Dollars in millions) Pension Other PostretirementBenefitsYears ended December 31, 2013 2012 2011 2013 2012 2011 Allocated to business segments ($1,662 ) ($1,620 ) ($1,379 ) ($413 ) ($431 ) ($444 ) Other unallocated items and eliminations (1,374 ) (787 ) (269 ) 60 (112 ) (248 ) Total ($3,036 ) ($2,407 ) ($1,648 ) ($353 ) ($543 ) ($692 ) Other Earnings Items(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 4,971 $ 2,096 $ 3,950 52 (26 ) 247 (516 ) (339 ) (202 ) 4,507 1,731 3,995 (1,196 ) (396 ) (1,341 ) $ 3,311 $ 1,335 $ 2,654 Other income increased by $78 million in 2010 primarily due to investment income on higher cash and investment balances throughout 2010. The decrease in 2009 of $273 million was driven by lower investment income due to both lower interest rates and investment balances. Years ended December 31, 2013 2012 2011 Earnings from operations $6,562 $6,290 $5,823 Other income, net 56 62 47 Interest and debt expense (386 ) (442 ) (477 ) Earnings before income taxes 6,232 5,910 5,393 Income tax expense (1,646 ) (2,007 ) (1,382 ) Net earnings from continuing operations $4,586 $3,903 $4,011 Interest and debt expense increaseddecreased by $177$56 million in 2013 and $137$35 million in 2010 and 2009 due to2012 as a result of lower weighted average debt issued in 2009.Our effective income tax rate was 26.5%rates were 26.4%, 22.9%34.0% and 33.6%25.6% for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. Our effective tax rate was higher in 2010, compared with 2009, primarily because pre-tax book income in 2010 was higher than in 2009 and because of an income tax charge of $150 million recorded during the first quarter of 2010 as a result of the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act of 2010. This was partially offset by a tax benefit of $371 million recorded during the fourth quarter of 2010 as a result of settling the 1998-2003 federal audit. Our2013 effective tax rate was lower in 2009, compared with 2008, primarily becausedue to research tax credits such asfor the 2013 and 2012 tax years that were both recorded in 2013 and research and development credits, represented a higher proportionexperimental regulations issued by the Internal Revenue Service in 2013 which resulted in $212 million of earnings before taxespreviously unrecognized tax benefits being recorded in the fourth quarter of 2013. Our 2011 effective tax rate was lower primarily due to the year-over-year reductiontax benefits of $397 million recorded as a result of federal income tax audit settlements in earnings. addition to research tax credits which were not available in 2012. Federal income tax audits have been settled for all years prior to 2007.For additional discussion related to Income Taxes, see Note 54 to our Consolidated Financial Statements.22BacklogOur backlog at December 31 was as follows:(Dollars in millions) 2010 2009 2008 $ 255,591 $ 250,476 $ 278,575 25,094 26,354 25,802 9,586 7,746 8,868 13,684 11,924 10,615 48,364 46,024 45,285 $ 303,955 $ 296,500 $ 323,860 $ 16,871 $ 19,058 $ 28,066 (Dollars in millions) 2013 2012 2011 Contractual Backlog: Commercial Airplanes $372,980 $317,287 $293,303 Defense, Space & Security: Boeing Military Aircraft 24,825 29,226 23,629 Network & Space Systems 9,832 10,078 9,429 Global Services & Support 15,024 15,764 13,296 Total Defense, Space & Security 49,681 55,068 46,354 Total contractual backlog $422,661 $372,355 $339,657 Unobligated backlog $18,267 $17,873 $15,775 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 20102013 and 2012 was primarily due to commercial aircraft orders in excess of deliveries and changes in projected revenue escalation, partially reducedoffset by cancellationscancellation of orders. The decrease in backlog during 2009 was due to deliveries in excess of orders, changes in projected revenue escalation and cancellations of orders.Unobligated backlog includes U.S. and non-U.S. government definitive contracts for which funding has not been authorized. Unobligated backlog increased during 2013 compared to 2012 primarily due to CH-47 Chinook and V-22 Osprey multi-year contract awards. The decreaseincrease was partially offset by reclassifications to contractual backlog related to incremental funding for the USAF KC-46A Tanker and F-15 multi-year contracts. The increase in unobligated backlog during 2010 is2012 was due to decreasesincreases at BDS of $1,993$2,720 million compared with 20092011 primarily due to funding of existing multi-year contracts includingF-15 orders and the V-22, Brigade Combat Team Modernization (BCTM) and Chinook programs, partially offset by multi-year procurement contract awards onaward for the F/A-18 and International Space Station programs. The decreaseLaunch System program received in unobligated backlog during 2009 is primarily due to decreases at BDS of $8,904 million compared with 2008 partly due to2012.Additional ConsiderationsKC-46A Tanker In 2011, we were awarded a partial termination for convenience bycontract from the U.S. ArmyAir Force (USAF) to design, develop, manufacture and deliver 4 next generation aerial refueling tankers. The KC-46A Tanker is a derivative of our 767 commercial aircraft. This contract is a fixed-price incentive firm contract valued at $4.9 billion and involves highly complex designs and systems integration. Changes to our estimated cost to perform the BCTM System Developmentwork could result in a material charge. This contract contains production options. If all options under the contract are exercised, we expect to deliver 179 aircraft for a total expected contract value of approximately $30 billion. For segment reporting purposes, backlog, revenues and Demonstration contract relating to Manned Ground Vehiclescosts are recorded in the Commercial Airplanes and associated systems and equipment. Approved fundingBMA segments.23Segment Results of Operations and Financial ConditionCommercial AirplanesBusiness Environment and TrendsAirline Industry EnvironmentGlobal economic activity and global trade, which are the primary drivers of air travel and air cargo growth, grew below the long-term average for the second year in a row in 2013. Despite this, passenger traffic exceeded initial expectationsgrew by 5% annually in 2010 growing an estimated 8% for2012 and 2013 and is forecast to continue at or near the year and showing growth over prior 2008 peak levels. Significantlong-term trend of 5% in 2014. There continues to be significant variation existed between regions and airline business models, with airlines operating in emerging marketseconomies and low cost carrierslow-cost-carriers leading recovery and growth into 2011. Air cargo traffic also rebounded in 2010 after two years of contraction. Led by strong growth in Asian exports,growth. In contrast, air cargo traffic recovereddeclined in 2012 and grew by an estimated 1 to peak 2007 levels2% in 2013 with continued improvement projected in 2014. The relative weakness of the air cargo market has impacted near-term demand for new freighter aircraft and is poisedfreighter conversions, and we continue to resume growthmonitor the impact of this trend on our business.Airline financial performance also plays a role in 2011.Airlines cut capacity in 2009 to match the demand environment which allowed them to boost yields as demand recovered in 2010.for new capacity. Airlines have also pursued new revenue sources by expanding alliances and building ancillary revenue streams. In addition, airlines continuedcontinue to focus on cuttingincreasing revenue through alliances, partnerships, new marketing initiatives, and effective leveraging of ancillary services and related revenues. Airlines are also relentlessly focusing on reducing costs by renewing fleets to leverage more fuel efficient airplanes and pursued consolidation opportunities, particularlyby employing efficiency generating service offerings in mature markets, to improve market positioning. These airline tactics, combined with improving demand and relatively stable fuel prices, have driven a strong turnaround inhigh-fuel-price environment. Net profits for the global airline industry profitability. Airlines are forecastestimated to earn $15total $13 billion in 2010 following a $102013 compared to $7 billion net loss in 2009. The 2011 outlook is2012. Nonetheless, these profit levels reflect low profit margins for continued profitability which should allow airlinesthe industry, and risk remains due to rebuild balance sheets that suffered from fuel price spikesongoing economic and recession in 2008-2009.The long-term outlook for the industry remains 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 is for a long-term average growth rate of 5% per year for passenger and cargo traffic, based on a projected average annual worldwide real economic growth rate of 3%. Based on long-term global economic growth projections, and factoring in increased utilization of the worldwide airplane fleet and requirements to replace older airplanes, we project a $3.6$4.8 trillion market for 30,90035,000 new airplanes over the next 20 years.The industry remains vulnerable to near-term exogenous developments including fuel price spikes, disease outbreaks (such as avian or H1N1 flu),credit market shocks, terrorism, natural disasters, conflicts, and increased global environmental regulations.Industry Competitiveness The commercial jet aircraftairplane market and the airline industry remain extremely competitive. We expect the existing long-term downward trend in passenger revenue yields worldwide (measured in real terms) to continue into the foreseeable future. Market liberalization in Europe and Asia has enabledis enabling low-cost airlines to continue gaining market share. These airlines have increasedare increasing the downward 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 10%14% of Commercial Airplanes’ contractual backlog, in dollar terms, is with 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, coming from the less than 100-seat commercial jet market, continue to develop larger and more capable airplanes. Additionally, other competitors from Russia, China and Japan are likely to enterdeveloping commercial jet aircraft in the 70 to 190 seat aircraft market over the next few years.above 90 seats. Many of these competitors have historically enjoyed access to government-provided financial support, including "launch“launch aid,"” which greatly reduces the commercial risks associated with airplane development activities and enables planesairplanes to be brought to market more quickly than otherwise possible. This market environment24has resulted in intense pressures on pricing and other competitive factors, and we expect these pressures to continue or intensify in the coming years.Worldwide, airplane sales are generally conducted in U.S. dollars. Fluctuating exchange rates affect the profit potential of our major competitors, all of whom have significant costs in other currencies. Changes in value of the U.S. dollar relative to their local currencies as experienced in 2010 impactedimpact competitors’ revenues and profits. Competitors routinely respond to a relatively weaker dollarsU.S. dollar by aggressively reducing costs and increasing productivity, thereby improving their longer-term competitive posture. Airbus has announced such initiatives targeting overhead cost savings, a reduction in its development cycle and a significant increase in overall productivity through 2012. If the U.S. dollar strengthens, again, Airbuscompetitors can use the improved efficiency to fund product development, gain market share through pricing and/or improve earnings.We are focused on improving our processes and continuing cost-reduction efforts. We continue to leverage our extensive customer support services network which includes aviation support, spares, training, maintenance documents and technical advice for airlines throughout the world. This enables us to provide a high level of customer satisfaction and productivity. These efforts enhance our ability to pursue pricing strategies that enable us to price competitively.Operating ResultsYears ended December 31, 2010 2009 2008 $ 31,834 $ 34,051 $ 28,263 50 % 50 % 46 % $ 3,006 $ (583 ) $ 1,186 9.4 % -1.7 % 4.2 % $ 2,975 $ 5,383 $ 2,838 $ 255,591 $ 250,476 $ 278,575 Years ended December 31, 2013 2012 2011 Revenues $52,981 $49,127 $36,171 % of total company revenues 61 % 60 % 53 % Earnings from operations $5,795 $4,711 $3,495 Operating margins 10.9 % 9.6 % 9.7 % Research and development $1,807 $2,049 $2,715 Contractual backlog $372,980 $317,287 $293,303 Unobligated backlog $660 $1,466 $2,088 RevenuesYear-over-year changesRevenues in Revenue are shown in the following table:(Dollars in millions) 2010
vs. 2009 2009
vs. 2008 $ (2,733 ) $ 6,129 569 (308 ) (53 ) (33 ) $ (2,217 ) $ 5,788 Revenues for 2010 decreased2013 $2,217$3,854 million or 6.5%8% compared with 2009. The decrease in new airplane revenues primarily reflects lower 777 deliveries resulting from a production rate change from 7 to 5 per month beginning in June 2010 and no deliveries on the 747 program 2012due to the transition from the 747-400 to the 747-8 derivative. The increase in revenues from commercial aviation services business was primarily due to increased sales of spares.The increase in revenue of $5,788 million in 2009 from 2008 was primarily attributable to higher new airplane deliveries partially offsetlower intercompany revenues. 2008 revenues were negatively impacted by a 2008 IAM strike. The decrease in revenues from commercial aviation services business was driven by economic conditions.Commercial jet aircraftairplanes deliveries as of December 31 were as follows: 737 747 767 777 Total 3,504 1,418 994 910 376 (1) 12 74 462 3,128 1,418 982 836 372 (1) 8 13 88 481 2,756 1,410 969 748 290 (1) 14 10 (1) 61 375 737 747 767 777 787 Total 2013 Cumulative deliveries 4,733 1,482 1,061 1,164 114 Deliveries 440 (1) 24 21 98 65 (2) 648 2012 Cumulative deliveries 4,293 1,458 1,040 1,066 49 Deliveries 415 (1) 31 26 83 46 (2) 601 2011 Cumulative deliveries 3,878 1,427 1,014 983 3 Deliveries 372 (1) 9 20 73 3 477 (1)5 737eight aircraft in 2010, 5 7372013, nine in 2012 and seven in 2011.(2)Includes one aircraft in 20092013 and 2 767 aircraftthree in 2012 accounted for as revenues by BCA and 2 737 aircraftas operating leases in 2008.consolidation.25Earnings From OperationsEarnings from operations for 2010in 2013 increased by $1,084 million or 23% compared with 2012. Earnings increased by $3,589$842 million primarily driven by higher new airplane deliveries and lower research and development cost of $242 million due to lower spending on the 787 program partially offset by higher spending on the 737 MAX and 777X. Operating margins increased from 9.6% in 2012 to 10.9% in 2013 primarily due to higher deliveries and lower research and development cost partially offset by the dilutive impact of 787 deliveries.Earnings from operations in 2012 increased by $1,216 million or 35% compared with 2009.2011. This was primarily due to higher new airplane deliveries, which drove an increase in earnings of $1,292 million, and lower research and development expense of $666 million primarily due to lower spending on the 747-8 and 787-8 programs. These increases were partially offset by lower earnings of $742 million driven by higher fleet support costs, increased operating costs associated with business growth, other period costs and decreased earnings from commercial aviation services. The increasedecrease in operating margins from 9.7% in 2011 to 9.6% in 2012 was primarily due to the 2009 reclassification from inventory to research and development expensedilutive effect of costs related to the first three 787 flight test aircraft, and the 2009 reach-forward losses on the 747 program. Costs of $2,693 million included in research and development expense in 2009 for the first three flight test 787 airplanes were a result of our determination that these aircraft could not be sold. The reach-forward loss on the 747 program of $1,352 million during 2009 was primarily due to increased production costs, reductions in projected delivery price increases associated with escalation and the difficult market conditions affecting the 747-8. The remaining net decrease in earnings for 2010 was primarily attributable to increased research and development expense of $285 million and lower new airplane deliveries.Earnings from operations for 2009 decreased by $1,769 million compared with 2008, primarily due to the reclassification from inventory to research and development expense of the three 787 flight test aircraft previously recorded as inventory, partially offset by a $148 million decrease in other research and development expense. The decrease in earnings is also attributable to $1,352 million in reach-forward losses on the 747 program in 2009, compared with $685 million in 2008. Lower commercial aviation services revenues and margins reduced earnings by $245 million. Higher infrastructure cost allocations related to the 787 and 747-8 schedule delays announced in 2008 and 2009 and infrastructure costs incurred during the 2008 IAM strike reduced earnings by $199 million. Increased period and other costs reduced earnings by $47 million. These decreases were partially offset by increased earnings of $1,934 million related to new airplane deliveries.BacklogFirm backlog represents orders for products and services where no contingencies remain before Boeingwe and the customer are required to perform. Backlog does not include prospective orders where customer controlled contingencies remain, such as the customers receiving approval from their Board of Directors, shareholders or government and 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 orders exclude options. A number of our customers may have contractual remedies that may be implicated by program delays. We continue to 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.The increase in contractual backlog during 20102013 and 2012 was due to orders in excess of deliveries partially reduced by cancellation of orders and changes in projected revenue escalation, partially reduced by cancellations of orders.escalation. The decrease in unobligated backlog during 2009in 2013 was due to deliveries in excessthe reclassification from unobligated to contractual backlog related to incremental funding of orders, changes in projected revenue escalation and cancellationsthe existing multi-year contract for Commercial Airplanes’ share of orders.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.Commercial aircraft production costs include a significant amount of infrastructure costs, a portion of which does not vary with production rates. As the amount of time needed to produce the accounting quantity increases, the average cost of the accounting quantity also increases as these infrastructure costs are included in the total cost estimates. This has the effect of decreasing the gross margin and related earnings provided other factors do not change.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.26The following table below 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 737 747 767 777 787 5,000 1,524 1,048 1,150 * 2,186 107 50 253 847 5,690 1,525 1,044 1,163 847 4,600 1,499 1,035 1,100 * 2,076 108 59 281 851 5,204 1,526 1,041 1,117 851 4,200 1,499 1,023 1,050 * 2,270 114 70 350 910 5,026 1,524 1,039 1,098 910 *A final determination of the initial accounting quantity for the 787 program will be made in the quarter of first airplane delivery, targeted for the third quarter of 2011. Program 737 747 767 777 787 2013 Program accounting quantities 7,000 1,574 1,113 1,550 1,300 Undelivered units under firm orders 3,680 55 49 380 916 Cumulative firm orders 8,413 1,537 1,110 1,544 1,030 2012 Program accounting quantities 6,600 1,574 1,103 1,450 1,100 Undelivered units under firm orders 3,074 67 68 365 799 Cumulative firm orders 7,367 1,525 1,108 1,431 848 2011 Program accounting quantities 6,200 1,549 1,084 1,350 1,100 Undelivered units under firm orders 2,365 97 72 380 857 Cumulative firm orders 6,243 1,524 1,086 1,363 860 Program Highlights737 ProgramThe accounting quantity for the 737 program increased by 400 units during 2010. During 2010,2013 due to the program’s normal progress of obtaining additional orders and delivering airplanes. The accounting quantity includes NG and MAX units. We increased our production rate from 35 to 38 per month in the first quarter of 2013 and a further increase to 42 per month is planned for the second quarter of 2014. On October 31, 2013, we announced plans to increase monthly production of the 737 from 31.5 to 3547 airplanes per month beginning in 2017. First delivery of the first quarter737 MAX is expected in 2017.747 Program Continued weakness in the air cargo market and lower-than-expected demand for large commercial passenger aircraft have resulted in pricing pressures and fewer orders than anticipated. We continued to produce at a rate of 2012 and a further increase to 38 airplanes2 per month beginning in the second quarter ofduring 2013.747 ProgramThe accounting quantity for the 747 program increased by 25 units during 2010. During 2009 and 2008, we recorded charges of $1,352 million and $685 million to recognize reach-forward losses on the 747 program reflecting higher than anticipated costs, a reduction in delivery price increases associated with escalation and difficult cargo market conditions which caused us to defer a planned production rate increase for 747-8. First flight of the 747-8 Freighter occurred on February 8, 2010. A fourth aircraft was added to the flight test program in July 2010 to improve flight test efficiency. On September 30, 2010, In April 2013, we announced that the expected first delivery of the 747-8 Freighter would move to the middle of 2011 from the fourth quarter of 2010 and a fifth airplaneproduction rate would be addeddecreased from 2 per month to the flight test fleet to support the new schedule. The new delivery schedule followed an assessment of the expected cumulative impact of flight test discoveries, which include a low frequency vibration1.75 per month starting January 2014 and in certain flight conditions and an underperforming aileron actuator. While neither issue required structural changes to the airplane, they led to disruptions to certification testing, which the program was unable to offset within the prior schedule. We are currently producing 747-8 airplanes and until completion of our flight test program, there is risk that additional items may be identified that require further modifications or other changes to those aircraft we have produced. On March 19, 2010,October 2013 we announced that we will accelerate, from mid-2013 to mid-2012, a plannedwould further reduce the production rate increaseto 1.5 per month from 1.5February 2014 through the end of 2015. We continue to 2 airplanes per month. Certificationhave a number of unsold 747 production positions and first delivery ofremain focused on obtaining additional orders, reducing out-of-sequence work, improving supply chain efficiency and implementing cost-reduction efforts. If market and production risks cannot be mitigated, the Intercontinental passenger derivative is expected in the fourth quarter of 2011. Schedule and other risks inherent in the demanding flight test and certification phases of program development remain.could face a reach-forward loss that may be material.767 ProgramThe accounting quantity for the 767 program increased by 1310 units during 2010.2013 due to the program777 ProgramThe accounting quantity for the 777 program increased by 50100 units during 2010. In April 2009, we announced that monthly2013 due to the program’s normal progress of obtaining additional orders and delivering airplanes. We increased our production of the 777 will declinerate from 7 to 5 airplanes per monthbeginning in June 2010. In March 2010, we announced that we will accelerate by approximately six months, from early 2012 to mid-2011, a planned production rate increase to 7 airplanes per month. In December 2010, we announced that monthly production of the 777 will increase from 7 to 8.3 airplanes per month in the first quarter of 2013.27787 ProgramFirst We delivered 65 aircraft in 2013 bringing cumulative deliveries to 114. In January 2013, following battery-related incidents on two 787 aircraft, the Federal Aviation Administration required U.S. aircraft operators to suspend operations of all 787 aircraft. International government regulators also issued directives to the same effect. We continued production but suspended deliveries until appropriate clearances were granted. During the second quarter, we installed a comprehensive set of battery system improvements on 50 previously-delivered 787 airplanes and resumed 787 deliveries to customers.In May 2013, we achieved a production rate of 7 per month in final assembly. We began the production rate increase to 10 per month in final assembly in November 2013 with first deliveries expected to occur at that rate in early 2014. The first 787-9 derivative began final assembly in May 2013 and completed first flight of the 787 occurred on December 15, 2009September 17, 2013. Production and flight testing for certification continued during 2010. Flight testing involves six flight test aircraftof the 787-9 continues to be on schedule and a limited amount of testing on two production-configured airplanes priorwe expect the first customer delivery to first delivery. On August 27, 2010,occur in mid-2014. In June 2013, we announced that the expected datelaunch of the 787-10 derivative aircraft with first delivery of the 787 had been movedtargeted for 2018.We continue to mid-first quarter 2011 from the fourth quarter of 2010. This schedule revision followed an assessment of the cumulative impact of a number of issues, including supplier workmanship issues related to the horizontal stabilizer, instrumentation delays and the expected availability date of an engine needed to support the final phases of flight test. On November 9, 2010, a flight test aircraft lost primary electrical power as a result of an onboard fire. Back-up systems functioned as expected allowing the crew to complete a safe landing. Flight testing was suspended pending investigation. On November 24, 2010, we announced minor design changes to power distribution panels and updates to systems software resulting from the investigation. On December 23, 2010, we resumed Boeing flight test activities and on January 17, 2011 resumed certification testing. On January 18, 2011, we announced that the expected date of first delivery had been moved to the third quarter of 2011 due to the flight testing and certification delays.A number ofincorporate engineering and other design changes have been identified in conjunction with theduring 787-8 flight test program that are being incorporatedtesting into already completed aircraft at our Everett modification center. We also remain focused on stabilizing 787 production systemrates at 10 per month while continuing to improve aircraft reliability and on aircraft already completed. During 2010, we continued to produce 787 airplanessatisfy customer mission and until completion of our flight test program, there is risk that additional items will be identified that require further modifications or other changes to those aircraft we have produced. of initial airplanes including management of our manufacturing operations and extended global supply chain, incorporation of design changes into aircraft in various stages of assembly, completion and integration of traveled work, as well as weight and systems integration. For example, during the second quarter of 2010 we delayed some 787 component deliveries to reduce out of sequence work moving into final assembly at our Everett factory and improve supply chain efficiency.We continue to work toward planned increases in 787 production rates as well as the timely introductionincorporation of the 787-9 derivative. Such efforts includederivative into the construction of a second assembly line in North Charleston, South Carolina and establishing transitional surge capacity at our Everett, Washington location. On July 1, 2010,manufacturing process. In addition, we completed firm configuration of the 787-9 airplane with first delivery scheduled for late 2013.We continue to work with our customers and suppliers to assess the specific impacts of schedule changes, including requests for contractual relief related to delivery delays and supplier assertions. Efforts continue to ensure we remain focused on satisfying customer mission and performance needs in light of the anticipated weight of their respective aircraft. A number of our customers have contractual remedies for schedule delays and/or performance. We continue to address customer and supplier claims and requests for other contractual relief as brought forth.During 2009, we concluded that the first three flight-test 787 aircraft could not be sold as previously anticipated due to the inordinate amount of rework and unique and extensive modifications made to those aircraft. As a result, costs associated with these aircraftairplanes were included in research and development expense. We have finalized orders for two of the three remaining flight test aircraft. We continue to believe that the other threeremaining 787 flight testflight-test aircraft areis commercially saleable and we continue to include costs related to those aircraftthat airplane in program inventory at December 31, 2010.inventory. If we determine that one or more of the other flight testremaining aircraft cannot be sold, we may incur additional charges.Our current assessment is thatcharges related to the program is notreclassification of costs associated with this aircraft to research and development expense.During the third quarter of 2013 we increased the accounting quantity to 1,300 units from 1,100 units to reflect incorporation of revenue and cost estimates associated with the 787-10 and plans to increase production rates to 12 and 14 per month in a reach-forward loss position, however the cumulative impactsfuture years. The accounting quantity of the1,300 units continues to represent approximately 10 years of production at planned production rates. The combination of production challenges, change incorporation, schedule delays and customer and supplier impacts havehas created significant pressure on program profitability. If risks related to this program, including risks associated with planned production rate increases, or introducing the 787-9 and 787-10 derivatives as scheduled cannot be mitigated, the program could face additional customer claims and/or supplier assertions, as well as further pressures on program profitability and we expect to record zero margin on our initial deliveries.and/or a reach-forward loss. We continue to implement mitigation plans and cost-reduction efforts to improve program profitability and address this pressure.Fleet Support We provide the operators of our commercial airplanes with assistance and services to facilitate efficient and safe aircraftairplane operation. Collectively known as fleet support services, these activities and services begin prior to aircraftairplane delivery and continue throughout the operational life of the aircraft.airplane. They include flight and maintenance training, field service support costs, engineering services, information services and systems and technical data and documents. The costs for fleet support are expensed as incurred and have been historically less than 1.5% of total consolidated costs of products and services. These costs are expected to increase with 787 and 747-8 entry into service.28Program Development The following chart summarizes the time horizon between go-ahead and planned certification/initial delivery for major Commercial Airplanes derivatives and programs.
Our Research and development expense decreased by $2,408 million
We launched the 787-10 in 2010. This was primarily due to the reclassification to research and development expense of $2,693 million of production costs related to the three 787 flight test aircraft in 2009, partially offset by a $285 million increase of other research and development expense.Our Research and development expense increased by $2,545 million in 2009. This was due to the 2009 reclassification of production costs related to the three 787 flight test aircraft and $50 million of lower supplier development cost sharing payments, partially offset by a $198 million decrease of other research and development expense.Additional ConsiderationsThe 787 and 747-8 programs highlight the risks inherent in new airplane programs and new derivative airplanes, particularly as both the 747-8 FreighterJune 2013 and the 787-8 continue the demanding flight test777X in November 2013.Additional ConsiderationsThe development and certification phasesongoing production of program development. Development also continues on the 787-9 and 747-8 Intercontinental. Costs related to development of new programs and derivative airplanes are expensed as incurred. Costs to produce newcommercial aircraft are included in inventory and accounted for using program accounting. Airplane programs have risk for reach-forward losses if our estimated production costs exceed our estimated program revenues for the accounting quantity. Generally commercial airplanes are sold on a firm fixed-price basis with an indexed price escalation clause and are often sold several years before scheduled delivery. Each customer purchase agreement contains an escalation clause to account for the effects of economic fluctuations over the period of time from airplane sale to airplane delivery. A price escalation formula based on pre-defined factors is used to determine the final price ofthe airplane at the time of customer delivery. While firm fixed-price contracts allow us to benefit from cost savings, they also expose us to the risk of cost overruns. Many new airplanes and derivatives have highlyextremely complex, designs, utilize exotic materials and requireinvolving extensive coordination and integration with suppliersuppliers and highly-skilled labor from thousands of employees and other partners. As technicalMeeting or quality issues arise,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 issues experiencedthe 787-9, 787-10, 737 MAX and 777X, involves increased risks associated with meeting development, production and certification schedules. As a result, our ability to deliver aircraft on the 787time, satisfy performance and 747-8 programs, we may experience schedule delaysreliability standards and higher costsachieve or maintain, as applicable, program profitability is subject to complete new programs and derivative aircraft. Additionally, price escalation factors may also impact margins by reducing the estimated price of airplanes delivered in the future. There are other factorssignificant risks. Factors that could also result in lower margins or(or a material charge if aan airplane program has or is determined to have reach-forward losses. These include:losses) include the following: changes to the program accounting quantity, customer and model mix, production costs and rates, changes to price escalation factors in aircraft purchase contracts, 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, anticipated cost reductions, flight test and certification schedules, costs, schedule and demand for derivative airplanes 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 theseour 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.29Defense, Space & SecurityBusiness Environment and TrendsU.S.United States Government Defense Environment OverviewU.S. government appropriation levels remain subject to significant uncertainty. In August 2011, the Budget Control Act (The Act) established limits on U.S. government discretionary spending, including a reduction of defense spending by approximately $490 billion between the 2012 and 2021 U.S. government fiscal years. The Act also provided that the defense budget would face “sequestration” cuts of up to an additional $500 billion during that same period to the extent that discretionary spending limits are exceeded. The impact of sequestration cuts was reduced with respect to FY2014 and FY2015 following the enactment of The Bipartisan Budget Act in December 2013. However, significant 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 significant pressure, including risk of future sequestration cuts.In addition, there continues to balance funding prioritiesbe significant uncertainty with respect to planprogram-level appropriations for the broadest possible range of operations that include homeland defense, natural disasters, stabilization efforts, counterinsurgency and counterterrorism operations, or nation state aggressors with growing sophistication and military means. The U.S. Department of Defense (U.S. DoD) facesand other government agencies (including the simultaneousNational Aeronautics and Space Administration) within the overall budgetary framework described above. While the FY2014 appropriations finalized in January 2014 included funding for Boeing’s major programs, uncertainty remains about how defense budgets in FY2015 and beyond will affect Boeing’s programs. Future budget cuts, including cuts mandated by sequestration, or future procurement decisions associated with the 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 to the risks described above, if Congress is unable to pass appropriations bills in a timely manner, a government shutdown could result which could have impacts above and beyond those resulting from budget cuts or sequestration impacts. For example, requirements to execute the national security policy, recapitalize important capabilities, and transform the force to meet the changing national security threat environment as articulated in the 2010 National Security Strategy and Quadrennial Defense Review. These actions must be carried out against a backdrop of significant competing national priorities including the economic crisis, the national debt and healthcare reform. As a result, the traditional roles of defense and security are converging into a single set of customer needs. We anticipate that the national security environment will remain dynamic and challenging well into this decade trending with the threat environment.U.S. government policies impacting the defense environment include: efficiency initiatives to save at least $100 billion through 2016, defense acquisition reform, increased insourcing, concerns over the decline of the U.S. industrial base, a shift in emphasis towards more affordable solutions, and emphasis on increasing diplomatic efforts to expand and strengthen our alliances. In January 2011, the U.S. DoD announced its intention to further reduce its top-line base budget by $78 billion over the next five years.Although the U.S. DoD budget has grown substantially over the past decade, we expect the total budget growth rate to level off or even decline slightly over the next several years due to these shifting priorities and budget pressures. The fiscal year 2011 discretionary budget of $708 billion includes an Overseas Contingency Operations (OCO) budget of $159 billion. Procurement is expected to increase, while research and development accounts are expected to decrease due to growing requirements from operations and maintenance (O&M) and personnel costs tied to U.S. commitments overseas. However, this trend is partially offset by equipment recapitalization efforts and continued demand for systems development. The near-term forecast of the defense budget environment shows limited growth in the 2012 to 2016 period for investment efforts. Although opportunities may exist following complete U.S. troop draw-downs in Iraq in late 2011, they may be offset by sustained O&M requirements in Afghanistan. Early indications suggest that coalition forces will sustain operations in the Afghanistan Theater longer than initially anticipated. We continue to see pressure to reduce OCO requests that have been used to cover the ongoing costs of the wars.It is unlikely that the U.S. DoD will be able to fully fund all programs of record already in development as well as new initiatives. This imbalance between future costs of programs and expected funding levels is not uncommonfurlough employees in the U.S. DoD and is routinely managed by internally adjusting priorities and schedules, restructuring programs, and lengthening production runsor other government agencies could result in payment delays, impair our ability to meet the constraints of available funding and occasionally by cancellation of programs. We expect the U.S. DoD will respond toperform work on existing contracts, and/or negatively impact future budget constraints by focusing on affordability strategies from acquisition efficiencies and reforms and emphasizing utilization of commercial off-the-shelf solutions and network-enabled operations. These strategies will be enabled through persistent intelligence, surveillance, and reconnaissance (ISR), long-range strike, special operations, unmanned systems, cybersecurity, precision-guided kinetic and non-kinetic weapons, electronic warfare, as well as selected outsourcing of logistics and support activities to improve overall effectiveness while maintaining control over costs.International Environment OverviewThe international market continues to be driven by rapidlycomplex and evolving security challenges and countries’the need to modernize aging inventories. Western governments are pressured by new threats to securityequipment and inventories, while at the same time dealingfaced with constrained budgets. In Europe, global economic conditionsthe continuing financial challenges are creating downward pressure on budget resources andforcing governments to institute austerity measures have been put in place to reducenegatively impacting defense spending in the near term.The strongest opportunities for 2011 growth of the BDS portfolioin 2014 will be in the Middle East and Asia-PacificAsia Pacific regions where modernization budgets remain relatively stable. With increasing needs and aging equipment, these regions have the relative financial strength necessary to make future defense purchases. Boeing's portfolioof these economies, coupled with a broad spectrum of evolving threats, will result in procurement of defense space and security solutions offers proven capability, predictable price, and near-term availability that are well matched to this challenging international environment.30Table of ContentsAdjacent Market Environment OverviewWe are repositioning our business to expand our capabilities and accelerate growth in the following targeted adjacencies: Unmanned Systems; Cyber and Information Services; Security; Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR); and Logistics Command and Control (LogC2) and Energy Services.We anticipate continued growth in unmanned systems as these products provide critical mission functions to the warfighter with a focus on affordability, persistence, and accuracy. The demand for defensive, offensive, and exploit operations in the emerging Cyber market provides unique growth opportunities as explicit needs are further defined by customers. Key growth areas in Security include aviation security, border security, maritime security and cybersecurity as the U.S. government looks to work more closely with state and local institutions. The dependence on time-critical information for intelligence-based operations has fueled the need for C4ISR technologies that locate, identify, and track elusive and ephemeral targets. We continue to find opportunity in the LogC2 market in areas including logistics operations, supply chain management, and logistics training and simulations. Lastly, as energy volatility increases and pressure is placed on the national grid infrastructure, we expect that the need for energy services such as energy management, infrastructure security, and scenario modeling will increase accordingly.BDS RealignmentEffective January 1, 2010, 20092013, 2012 and 2008,2011, certain programs were realigned among BDS segments. Business segment data for all periods presented have been adjusted to reflect the realignment.Operating Results(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 31,943 $ 33,661 $ 32,047 50 % 49 % 53 % $ 2,875 $ 3,299 $ 3,232 9.0 % 9.8 % 10.1 % $ 1,136 $ 1,101 $ 933 $ 48,364 $ 46,024 $ 45,285 $ 16,822 $ 18,815 $ 27,719 Years ended December 31, 2013 2012 2011 Revenues $33,197 $32,607 $31,976 % of total company revenues 38 % 40 % 47 % Earnings from operations $3,235 $3,068 $3,158 Operating margins 9.7 % 9.4 % 9.9 % Contractual backlog $49,681 $55,068 $46,354 Unobligated backlog $17,607 $16,407 $13,687 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 earnings,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.RevenuesBDS revenues decreasedin 2013 increased by $1,718$590 million in 2010 compared with 2009,2012 due to lowerhigher revenues in all three segments, with the largest decreaseof $601 million and $72 million in the N&SS and GS&S segments, partially offset by lower revenues of $83 million in the BMA segment.BDS revenues in 2012 increased by $1,614$631 million in 2009 compared with 2008,2011, due to higher revenues of $1,434 million and $250 million in the BMA and GS&S and BMA,segments, partially offset by decreases in N&SS.Operating EarningsBDS operating earnings in 2010 decreased by $424 million compared with 2009 primarily due to lower margins in the BMA segment and lower revenues of $1,053 million in the N&SS segment.Earnings From Operations BDS operating earnings from operations in 2009 2013 increased by $67$167 million compared with 2008 primarily2012 due to higher earnings of $157 million and $34 millionin the BMA segment,N&SS and GS&S segments, partially offset by lower earnings of $24 million in the BMA segment.Included above are net favorable cumulative contract catch-up adjustments, which were $137 million lower in 2013 compared with 2012, primarily reflecting lower favorable adjustments in the BMA segment.BDS earnings from operations in 2012 decreased by $90 million compared with 2011 due to lower earnings of $197 million in the N&SS segment, partially offset by higher earnings of $58 million and $49 million in the BMA and GS&S segments. Included above are net favorable cumulative contract catch-up adjustments, which were $150 million higher in 2012 compared with 2011, primarily reflecting higher favorable adjustments in the BMA segment.31BacklogBacklogTotal backlog is comprised of contractual backlog, which represents work we are on contract to perform for which we have received funding, and unobligated backlog, which represents work we are on contract to perform for which funding has not yet been authorized and appropriated. BDS total backlog was $67,288 million at December 31, 2013, reflecting a decrease of 6% from December 31, 2012. BDS total backlog increased by less than 1%19% in 2010,2012, from $64,839$60,041 million to $65,186 million, primarily due to multi-year procurement contract awards on the F/A-18 and International Space Station programs, two commercial satellite contract awards, and the UK Future Logistics Information Services (FLIS) contract award, offset by current year deliveries and sales on multi-year contracts awarded in prior years.$71,475 million. For further details on the changes between periods, refer to the discussions of the individual segments below.Additional ConsiderationsOur 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 milestones andcost, schedule or technical progress are not accomplished.performance issues arise. Examples of these programs include Family of Beyond Line-of-Sight Terminals, BCTM, Ground-based Midcourse Defense (GMD Joint Tactical Radio System, P-8A Poseidon), Proprietary and ProprietarySpace Launch Systems 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 delayscharge.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 oursignificant fixed-price development programs include (AEW&C) (AEW&C), India P-8I, KC-767 InternationalSaudi Arabia F-15, USAF KC-46A Tanker, and commercial and military satellites.Boeing Military AircraftOperating Results(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 14,238 $ 14,304 $ 13,445 22 % 21 % 22 % $ 1,258 $ 1,528 $ 1,294 8.8 % 10.7 % 9.6 % $ 589 $ 582 $ 486 $ 25,094 $ 26,354 $ 25,802 $ 8,297 $ 9,297 $ 10,035 Years ended December 31, 2013 2012 2011 Revenues $15,936 $16,019 $14,585 % of total company revenues 18 % 20 % 21 % Earnings from operations $1,465 $1,489 $1,431 Operating margins 9.2 % 9.3 % 9.8 % Contractual backlog $24,825 $29,226 $23,629 Unobligated backlog $10,599 $9,270 $7,146 RevenuesBMA revenues in 2013 decreased by less than 1%$83 million compared with 2012 primarily due to a reduction of $1,299 million related to fewer deliveries of AEW&C aircraft, and customer and delivery mix for the F-18 and C-17 programs. This reduction was partially offset by an increase of $1,168 million related to higher 2013 deliveries of P-8 aircraft and Apache rotorcraft, as well as non-recurring effort on several Chinook programs.BMA revenues in 2010 and2012 increased by 6% in 2009. Lower revenues in 2010 on the C-17, Apache and T-45 programs were nearly offset by higher Chinook, F/A-18 and AEW&C revenues. The increase of $859$1,434 million in 2009 wasor 10% compared with 2011 primarily due to higher deliveries on the P-8A and Apache programs of $1,050 million and higher milestone revenue of $42632million on the KC-46A Tanker program. In addition, F-15 program revenues were $450 million higher reflecting initial revenues on the Apache, V-22, Chinook, F/A-18, and Proprietary programs, partlycontract for the Kingdom of Saudi Arabia partially offset by lower revenues onF-15 deliveries. These increases were partially offset by decreases of $723 million related to fewer deliveries of C-17 aircraft in 2012 and the F-22 and several weapons programs.Deliveries of units for new-build production aircraft, excluding remanufactures and modifications, were as follows:Years ended December 31, 2010 2009 2008 50 49 45 13 13 14 14 16 16 13 23 3 20 11 12 4 1 2 2 7 7 115 121 99 Years ended December 31, 2013 2012 2011 F/A-18 Models 48 48 49 F-15E Eagle 14 8 15 C-17 Globemaster III 10 10 13 CH-47 Chinook 44 51 32 AH-64 Apache 37 19 AEW&C 3 3 P-8 Models 11 5 KC-767 International Tanker 3 Total new-build production aircraft 164 144 115 Operating Earnings From Operations BMA earnings from operations in 2013 decreased by $270$24 million in 2010 compared with 2012 primarily due to lower deliveries of C-17 aircraft and less favorable pricing and mix on the C-17 program. BMA operating earnings increased by $234 million in 2009 partly due to higher deliveries on several programs and volume, partially offset by a change in delivery mix. Operating earnings in both years were negatively impacted by charges recorded on the AEW&C and KC-767 International Tanker programs.Research and Developmenthigher 2012 earnings related to the initial revenues on the Saudi F-15 program. The BMA segment continues to focus research and development resources to leverage customer knowledge, technical expertise and system integration of manned and unmanned systems that provide innovative solutions to meet the warfighter’s enduring needs. Research and development expense remained flat in 2010 but in 2009 increased by 20% over 2008 primarily due to increased prototyping activities whichlower earnings were partially offset by higher earnings on the P-8 and Apache program due to increased deliveries and higher revenues. Net favorable cumulative contract catch-up adjustments were $146 million lower international tanker development costs. Researchin 2013 than in 2012, primarily driven by less favorable adjustments to the F-15 program and development activities utilize our capabilitiesunfavorable adjustments to the AEW&C program. In the third quarter of 2013, we decided to end production of C-17 aircraft in architectures, system-of-systems integration2015. See Note 11. Also in the third quarter of 2013, we recorded a charge of $64 million to write off inventory and weapon systems technologiesaccrue termination liabilities as a result of The Republic of Korea's announcement that it will restart its F-X fighter aircraft competition.BMA earnings from operations in 2012 increased by $58 million compared with 2011 primarily due to develop solutions which are designed to better prepare us to meet customers’ needshigher aircraft deliveries on the P-8A and Apache programs and reach-forward loss provisions in U.S.2011 on the KC-767 International Tanker program. These increases were partially offset by fewer aircraft deliveries on the C-17 program and international growth areas such as: military-commercial derivatives, rotorcraft, global strike, missiles and unmanned airborne systems, and surveillance and engagement systems. The products of ourhigher research and development support both new mannedcosts. The increase in earnings includes net favorable cumulative catch-up contract adjustments which were $139 million higher in 2012 compared with 2011 primarily reflecting favorable adjustments on the F-15 and unmanned systems as well as enhanced versions of existing fielded products. Investments support vertical integration of our product line in areas such as autonomous operation of unmanned systems, advanced sensors and electronic warfare. These efforts focus on increasing mission effectiveness, interoperability, reliability and reducing the cost of ownership.BacklogBacklogBMA total backlog in 2010 decreased 6%was $35,424 million at December 31, 2013, reflecting a decrease of 8% from 2009,December 31, 2012 primarily due to deliveriesrevenues recognized on F-15, F-18 and sales on multi-yearC-17 program contracts awarded in prior years, partially offset by aCH-47 Chinook and V-22 Osprey multi-year contract award on the F/A-18 program. Totalawards. BMA total backlog in 2009 was virtually unchanged2012 increased by 25% from 2008. Backlog increases2011, primarily due to 2009 orders forF-15 and C-17 P-8I and Chinook aircraft were offset by revenues recognized on multi-year contracts received in prior years with the largest decrease in the F/A-18 program.orders.Additional ConsiderationsC-17 AEW&CThe AEW&C development program, also known as Wedgetail in Australia, Peace Eagle in Turkey and Peace Eye in the Republic of Korea, consists of 737-700 aircraft outfitted with a variety of command and control and advanced radar systems, some of which have never been installed on an airplane before. Wedgetail includes six aircraft and Peace Eagle and Peace Eye include four aircraft each. During 2010, 2009 and 2008, we recorded charges increasing the reach-forward losses on the AEW&C programs in Australia and Turkey by $174 million, $133 million and $308 million, respectively. These charges reflect technical performance issues associated with the test program, delivery schedule delays, subsystem development issues, and additional time for integration testing. During 2010, four Wedgetail aircraft were delivered to Australia with initial customer acceptance. Final customer acceptance for all six Wedgetail aircraft is scheduled to be completed by the end of 2011. In January 2011, the Peace Eagle program began the formal test phase. These are advanced and complex fixed-price development programs involving technical challenges at the individual subsystem level and in the overall integration of these subsystems into a reliable and effective operational capability. We believe that the cost and revenue estimates incorporated in the financial statements are appropriate; however, the technical complexity of the programs creates financial risk as additional completion costs may be necessary or scheduled delivery dates could be delayed.KC-767 International TankerThe KC-767 International Tanker program includes four aircraft for the Italian Air Force and four aircraft for the Japanese Air Self Defense Force. During 2010, 2009 and 2008, we recorded charges increasing the reach-forward losses in the KC-767 International Tanker program by $53 million, $78 million and $85 million, respectively. The final delivery to Japan was made in December 2009 and first delivery to Italy was made in December 2010. The Italian KC-767 Tanker program is ongoing, and while we believe the revenue and cost estimates incorporated in the financial statements are appropriate, the technical complexity of the program creates financial risk as additional completion and development costs may be necessary or remaining scheduled delivery dates could be delayed.C-17See the discussion of the C-17 program in Note 11 to our Consolidated Financial Statements.KC-46A Tanker See the discussion of the KC-46A Tanker program on page 23.33Network & Space SystemsOperating Results(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 9,455 $ 10,877 $ 11,346 15 % 16 % 19 % $ 711 $ 839 $ 1,034 7.5 % 7.7 % 9.1 % $ 417 $ 397 $ 298 $ 9,586 $ 7,746 $ 8,868 $ 8,435 $ 9,187 $ 16,981 Years ended December 31, 2013 2012 2011 Revenues $8,512 $7,911 $8,964 % of total company revenues 10 % 10 % 13 % Earnings from operations $719 $562 $759 Operating margins 8.4 % 7.1 % 8.5 % Contractual backlog $9,832 $10,078 $9,429 Unobligated backlog $6,076 $6,937 $6,437 RevenuesN&SS revenues decreased 13% in 2010 and 4% in 2009. The decrease of $1,4222013 increased by $601 million in 2010 is compared with 2012 primarily due to lower volumehigher revenue of $364 million on the BCTMSpace Launch System program awarded in the fourth quarter of 2012 and GMD programs. The decreasehigher revenues of $469$329 million in 2009 isour commercial satellite programs. This increase was partially offset by lower revenues of $196 million on our electronic and information solutions programs.N&SS revenues in 2012 decreased by $1,053 million or 12% compared with 2011 primarily due to $835 million of lower volumerevenues on the Brigade Combat Team Modernization (BCTM) program, which was terminated for convenience during 2011. In addition, customer funding constraints on the GMD Intelligence program and Security Systems, and Proprietary programs, partlyconclusion of the Space Shuttle program in 2011 reduced revenues by a total of $251 million. These decreases were partially offset by higher Space & Intelligence Systems revenues of $178 million due to larger volume on several satellite programs.of deliveries in 2012.Delta launch and new-build satellite deliveries were as follows:Years ended December 31, 2010 2009 2008 1 1 2 1 1 3 3 1 1 3 Years ended December 31, 2013 2012 2011 Commercial and civil satellites 3 3 1 Military satellites 4 7 3 Operating Earnings From Operations N&SS earnings decreasedfrom operations in 2013increased by $128$157 million in 2010or 28% compared with 2012 primarily due to higher revenues and mix in our civil and commercial satellite programs and the Space Launch Systems program. These increases were partially offset by lower revenues. earnings from our United Space Alliance (USA) joint venture reflecting a gain of $39 million recorded in the third quarter of 2012 related to the termination and settlement of USA's defined benefit pension plans. The impact of net favorable cumulative contract catch-up adjustments was not significant in 2013.N&SS earnings from operations in 2012 decreased by $195$197 million in 2009or 26% compared with 2011 primarily due to lower revenues on the BCTM program and chargesa $42 million charge related to a contract restructure of an electronic and mission system program. Net favorable cumulative contract catch-up adjustments were $56 million lower in 2012 than in 2011 primarily reflecting the Sea Launch bankruptcy. Earnings in 2009 were also reduced by charges related to the settlement of a satellite contract dispute and indemnification of Delta II inventory. Earnings in 2008 included a favorable settlement on a civil satellite program. $42 million charge described above.N&SS operating earnings from operations include equity earnings of $189$171 million $164, $180 million and $178$194 million from the United Space AllianceUSA joint venture and the United Launch Alliance (ULA)(ULA) joint venture in 2010, 20092013, 2012 and 2008,2011, respectively.Research and DevelopmentThe N&SS research and development funding remains focused on the development34BacklogBacklogN&SS total backlog increased 6% in 2010 compared with 2009was $15,908 million at December 31, 2013, reflecting a decrease of 7% from December 31, 2012 primarily due to two commercial satellite contract awards, a multi-year contract award on the International Space Station program and GMD contract awards, partially offset by revenues recognized on the BCTM program. Total backlog decreased by 34% in 2009 compared with 2008 partly due to the partial termination for convenience by the U.S. Army of the BCTM System Development and Demonstration contract related to Manned Ground Vehicles and associated systems and equipment. 2009 deliveries and sales on multi-year contracts awarded in prior years, including BCTM, GMD,partially offset by government and Proprietary programs also contributedcommercial satellite contract awards. N&SS total backlog increased by 7% in 2012 compared with 2011 primarily due to the backlog reduction.contract award for the Space Launch System program, partially offset by current year deliveries and sales on contracts awarded in prior years.Additional ConsiderationsUnited Launch AllianceOn December 1, 2006, we and Lockheed Martin Corporation (Lockheed) created a 50/50 joint venture named United Launch Alliance L.L.C. ULA combinesSee the production, engineering, test and launch operations associated with U.S. government launchesdiscussion of Boeing Delta and Lockheed Atlas rockets. We initially contributed net assets of $914 million at December 1, 2006. The book value of our investment exceeded our proportionate share of ULA’s net assets. This difference is expensed ratably in future years. Based on the adjusted contributions and the conformed accounting policies established by ULA, this amortization is expected to be approximately $15 million annually for the next 14 years.In connection with the formation of ULA, we and Lockheed each committed to provide up to $200 million to support ULA’s working capital requirements through December 1, 2011. We and Lockheed transferred performance responsibility for certain U.S. government contractsIndemnifications to ULA as of the closing date. We and Lockheed agreed to jointly guarantee the performance of those contracts to the extent required by the U.S. government. WeFinancing Commitments in Notes 6, 11, and Lockheed have also each committed to provide ULA with up to $232 million of additional capital contributions in the event ULA does not have sufficient funds to make a required payment to us under an inventory supply agreement. See Note 1112 to our Consolidated Financial Statements.We agreed to indemnify ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360 million of Boeing Delta launch program inventory included in contributed assets plus $1,860 million of inventory subject to an inventory supply agreement which ends on March 31, 2021. Since inception, ULA has consumed $1,201 million of inventory that was contributed by us. ULA has made advance payments of $420 million to us and we have recorded revenues and cost of sales of $166 million under the inventory supply agreement through December 31, 2010. ULA is continuing to assess the future of the Delta II program beyond what is currently on contract. In the event ULA is unable to sell additional Delta II inventory, our earnings could be reduced by up to $70 million.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 U.S. Air Force (USAF) for four satellite missions. We believe ULA is entitled to additional contract pricing. In December 2008, ULA submitted a claim to the USAF to re-price the contract value for two satellite missions. In March 2009, the USAF issued a denial of that claim and in June 2009, ULA filed an appeal. During 2009, the USAF exercised its option for a third satellite mission. During the third quarter of 2010, ULA submitted a claim to the USAF to re-price the contract value of the third mission. The USAF did not exercise an option for a fourth mission prior to expiration. If ULA is unsuccessful in obtaining additional pricing, we may be responsible for a portion of the shortfall and may record up to $283 million in pre-tax losses associated with the three missions, representing up to $261 million for the indemnification payment and up to $22 million for our portion of additional contract losses incurred by ULA.Sea LaunchSee the discussion of the Sea Launch receivables in Note 610 to our Consolidated Financial Statements.SatellitesLightSquared See the discussionsdiscussion of Boeing Satellite Systems International, Inc. (BSSI)the LightSquared, LLC receivables in Note 205 to our Consolidated Financial Statements.Global Services & SupportOperating Results(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 8,250 $ 8,480 $ 7,256 13 % 12 % 12 % $ 906 $ 932 $ 904 11.0 % 11.0 % 12.5 % $ 130 $ 122 $ 149 $ 13,684 $ 11,924 $ 10,615 $ 90 $ 331 $ 703 Years ended December 31, 2013 2012 2011 Revenues $8,749 $8,677 $8,427 % of total company revenues 10 % 11 % 12 % Earnings from operations $1,051 $1,017 $968 Operating margins 12.0 % 11.7 % 11.5 % Contractual backlog $15,024 $15,764 $13,296 Unobligated backlog $932 $200 $104 RevenuesGS&S revenues decreased $230in 2013increased by $72 million in 2010, a decrease of 3%, and increased $1,224 million in 2009, an increase of 17%, in each case compared with the prior year. The 2010 decrease is2012 primarily due to lowerhigher revenues on several Maintenance, ModificationsModification and UpgradesUpgrade (MM&U) programs partially offset by higher revenues on several Integrated Logistics (IL) programs. The 2009 increase was due to increased volume in the IL programs and the Training Systems and& Government Services (TS&S) divisions.Operating EarningsGS&S operating earnings decreased by 3% in 2010 primarily due to lower revenues. Operating earnings increased 3% in 2009 as additional earnings from increased volume were partially offset by lower margins due to contract adjustments and changes in contract mix.Research and DevelopmentGS&S continues to focus investment strategies on its core businesses including IL, MM&U and TS&S, as well as on moving into new market areas of logistics command and control (Log C2) in Advanced Services and energy management in Boeing Energy. Investments have been made to continue the development and implementation of innovative tools, processes and systems as market discriminators in the delivery of integrated customer solutions.BacklogGS&S total backlog increased by 12% in 2010 compared with 2009 primarily due to the award of the UK FLIS contract. Backlog also increased due to increases in several IL and MM&U(TSGS) programs, partially offset by decreases in several Training SystemsIntegrated Logistics (IL) programs. TotalGS&S revenues in 2012 increased by $250 million compared with 2011 primarily due to higher volume in several IL programs, including contracts to support Chinook and C-17 aircraft, and higher TSGS revenues primarily related to the P-8A program.Earnings From Operations GS&S earnings from operations in 2013increased by $34 million compared with 2012 primarily due to higher revenues and improved performance on several TSGS programs. Net favorable cumulative contract catch-up adjustments in 2013 were largely unchanged from 2012. GS&S earnings from operations in 2012 increased by $49 million compared to 2011 primarily due to improved performance on several MM&U programs and higher revenues on several IL programs. Net favorable cumulative contract catch-up adjustments were $67 million higher in 2012 than in 2011.35BacklogGS&S total backlog was $15,956 million at December 31, 2013, which was largely unchanged from December 31, 2012. GS&S total backlog increased by 8%19% in 20092012 compared with 20082011 primarily due to significant growththe award of F-15 support contracts.Boeing CapitalOn January 23, 2013, BCC terminated its debt registration statement and on February 22, 2013 BCC suspended its separate U.S. Securities and Exchange Commission reporting obligations. This change does not affect operations or customer interactions. On January 23, 2013, Boeing issued full and unconditional guarantees of all of the outstanding publicly-issued debt securities of BCC. Funding requirements will be provided to BCC through intercompany loans from Boeing and we will continue to target a BCC debt-to-equity ratio of 5.0-to-1. As described in International SupportNote 13, on May 3, 2013, Boeing issued $500 million of notes and Defense and Government Services programs and partially offset by decreasesentered into a concurrent intercompany loan with BCC on the same terms. Interest expense associated with these notes is included in several IL and MM&U programs.Corporationinterest expense. Effective January 1, 2013, Business Environment and TrendsBCC’s gross customer financing and investment portfolio at December 31, 20102013 totaled $4,694$3,921 million. A substantial portion of BCC’s portfolio is concentrated among certain U.S. commercial airline customers. BCC’s portfolio is also concentrated by varying degrees across Boeing aircraft product types, most notably out of productionout-of-production Boeing aircraft such as 717 aircraft.WeBCC provided greater amountscustomer financing of financing$220 million and $364 million during 2013 and 2012. While we may be required to Boeing customers during 2009 than in anyfund a number of the preceding five years. Sources of financing available fornew aircraft deliveries improved during 2010in 2014, we expect alternative financing will be available at reasonable prices from broad and as a result, we provided no financing for Boeing aircraft deliveries.Aircraft values and lease rates are impacted by the number and type of aircraft that are currently out of service. Approximately 2,2002,100 western-built commercial jet aircraft (10.5%(9.2% of current world fleet) were2010,over 30%approximately 20% are not expected to return to service. At the end of 20092012 and 2008, 11.6%2011, 10% and 11.0%9.4% 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.Operating Results Summary Financial InformationYears ended December 31, 2010 2009 2008 $ 639 $ 660 $ 703 $ 152 $ 126 $ 162 24 % 19 % 23 % Years ended December 31, 2013 2012 2011 Revenues $408 $468 $547 Earnings from operations $107 $88 $119 Operating margins 26 % 19 % 22 % RevenuesRevenuesand interest income from financing receivables and notes.notes, and other income. BCC’s revenues in 2013 decreased by $60 million compared with 2012 primarily due to lower other income and operating lease income. Other income decreased due to lower aircraft return condition payments. BCC’s revenues in 2012 decreased $2136$79 million and $43 million in 2010 and 2009,compared with 2011 primarily due to a smaller portfolio of equipment underlower operating leasesand finance lease income. Operating lease income decreased as a result of the return of aircraft returns and lower lease rates on re-leased aircraft.Earnings From OperationsBCC’s operating earnings from operations are presented net of interest expense, provision for (recovery of)recovery of losses, asset impairment expense, depreciation on leased equipment and other operating expenses. Operating earnings Earnings from operations in 2013 increased by $26$19 million in 2010 compared with 20092012 primarily due to lower impairmentdepreciation expense and interest expense offset by lower provision for losses. The impact of declinesrevenues. Earnings from operations in aircraft collateral values recognized2012 decreased by BCC and reduced projected cash flows for certain aircraft was not as significant in 2010 as it was in 2009. The decrease in operating earnings in 2009$31 million compared with 2008 was2011 primarily due to lower revenues partially offset by lower interest and higher asset impairment expense and provision for losses.Financial PositionThe following table presents selected financial data for BCC as of December 31:(Dollars in millions) 2010 2009 $ 4,694 $ 5,666 3.8 % 2.5 % $ 3,446 $ 4,075 5.0-to-1 5.8-to-1 (Dollars in millions) 2013 2012 Customer financing and investment portfolio, net $3,883 $4,290 Other assets, primarily cash and short-term investments 505 402 Total assets $4,388 $4,692 Other liabilities, primarily deferred income taxes $1,296 $1,429 Debt, including intercompany loans 2,577 2,742 Equity 515 521 Total liabilities and equity $4,388 $4,692 Debt-to-equity ratio 5.0-to-1 5.3-to-1 The customer financing portfolio and debt balances presented above as of December 31, 2012 have been revised from balances previously reported in the BCC 2012 10-K filing to reflect the alignment of BCC's accounting to the consolidated Boeing accounting for certain leasing transactions within the portfolio.BCC’s customer financing and investment portfolio at December 31, 20102013 decreased from December 31, 20092012 primarily due to normal portfolio run-off and asset pre-payments.sales, partially offset by the origination of notes receivable. At December 31, 20102013 and 2009,2012, BCC had $583$83 million and $385$354 million of assets that were held for sale or re-lease, of which $28$57 million and $345$266 million had either executed term sheets with deposits or firm contracts to be sold or placed on lease. The increase was primarily due to BCC’s termination of aircraft leases with Aevovias Caribe S.A. de C.V. (Click), an affiliate of Compania Mexicana de Aviacion S.A. de C.V. (Mexicana), in August 2010. Additionally, aircraft subject to leases with a carrying value of approximately $174$36 million are scheduled to be returned off lease during 2011.2014. These aircraft are being remarketed or we are seeking to have the leases extended.BCC enters into certain transactions with Boeing, reflected in the Other segment, 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.37BankruptciesIn August 2010, Mexicana2011, American Airlines, Inc. (American Airlines) filed for bankruptcy protection in Mexico and the United States. At the time of those filings, BCC had leased and delivered 19 717 aircraft to Click, and 6 additional 717 aircraft were scheduled for delivery to Click under executed leases. On August 27, 2010, BCC served Click a notice of termination of all 25 leases as a result of non-payment. On or about August 28, 2010, Click ceased flight operations. In September 2010, Click filed forChapter 11 bankruptcy protection. BCC has recoveredOn December 9, 2013, American Airlines emerged from bankruptcy. Upon emergence from bankruptcy, the parent of American Airlines merged with US Airways Group, Inc., the parent of US Airways, to form American Airlines Group Inc., and American Airlines assumed all of the aircraft that had been delivered to Click. In the third quarterBCC financing agreements and underlying leases. At December 31, 2013, American Airlines accounted for $445 million of 2010, we recorded an $81 million net impairment charge related to certain 717 aircraft leased to Click. This charge was primarily recorded in the Other segment due to an intercompany guarantee between us and BCC. Additional impairment charges could be recorded if we are unable to re-lease the aircraft at anticipated rental rates.Southwest/AirTran MergerOn September 26, 2010, Southwest Airlines Co. (Southwest) and AirTran Holdings, Inc. (AirTran) entered into an Agreement and Plan of Merger, whereby Southwest will acquire, subject to certain conditions, all of the outstanding common stock of AirTran. AirTran, together with its subsidiaries, represents approximately 27% of our gross customer financing portfolio, carrying value, consisting principally of 717 aircraft. AirTran is the largest customer in termswhich $371 million represents collateral for $233 million of BCC’s segment revenue and customer financing portfolio carrying value.Restructurings and Restructuring RequestsFrom time to time, certain customers have requested a restructuring of their transactions with BCC. As of December 31, 2010,During 2013, BCC hasdid not reachedreach agreement on any restructuring requests that would have a material adverse effect on itsour earnings, cash flows and/or financial position.Other Segment(Dollars in millions)Years ended December 31, 2010 2009 2008 $ 138 $ 165 $ 567 (327 ) (152 ) (307 ) Years ended December 31, 2013 2012 2011 Revenues $102 $106 $123 Earnings/(Loss) from operations (156 ) (186 ) 39 Other segment operating losses forin 2013decreased by $30 million compared with 2012 primarily related to the year ended December 31, 2010insurance recoveries in the third quarter of 2013. Other segment losses in 2012 increased by $175$225 million compared with 2011 primarily due to $144a $241 million of charges related to our customer financing portfolio and higherreduction in the allowance for losses on AirTran receivables in 2011. Lower environmental remediation expenses of $36 million.Other segment revenues for the year ended December 31, 2009 decreased by $402 million compared with 2008 primarily due to the sale of three C-17 aircraft in 2008 held under operating lease. Other segment operating losses for the year ended December 31, 2009 decreased by $155 million primarily due to recognition of pre-tax expense of $82 million in the prior year to increase the allowance for losses on customer financing receivables2012 compared with 2011 was largely offset by higher costs related to lower U.S. airline customer credit ratings. During 2009, Other segment recognized $76 millionBCC guarantees and increases in lower charges relating to environmental remediation than in 2008.Liquidity and Capital ResourcesCash Flow Summary(Dollars in millions) Years ended December 31, 2010 2009 2008 $ 3,307 $ 1,312 $ 2,672 2,679 2,381 1,829 (3,034 ) 1,910 (4,902 ) 2,952 5,603 (401 ) (4,831 ) (3,794 ) 1,888 (1,962 ) 4,094 (5,202 ) (15 ) 44 (59 ) (3,856 ) 5,947 (3,774 ) 9,215 3,268 7,042 $ 5,359 $ 9,215 $ 3,268 Years ended December 31, 2013 2012 2011 Net earnings $4,585 $3,900 $4,018 Non-cash items 2,516 2,728 2,140 Changes in working capital 1,078 880 (2,135 ) Net cash provided by operating activities 8,179 7,508 4,023 Net cash (used)/provided by investing activities (5,154 ) (3,757 ) 2,369 Net cash used by financing activities (4,249 ) (3,477 ) (1,700 ) Effect of exchange rate changes on cash and cash equivalents (29 ) 18 (2 ) Net (decrease)/increase in cash and cash equivalents (1,253 ) 292 4,690 Cash and cash equivalents at beginning of year 10,341 10,049 5,359 Cash and cash equivalents at end of period $9,088 $10,341 $10,049 Operating Activities Net cash provided by operating activities decreased by $2,651 million to $2,952 millionwas $8.2 billion during 20102013, compared with 2009$7.5 billion during 2012 and $4.0 billion in 2011. The increases of $0.7 billion in 2013 and $3.5 billion in 2012 were primarily due to increased customer receipts reflecting higher net working capitaldelivery and order volumes in 2010,382013 and 2012. Our investment in gross inventories increased by $5.7 billion in 2013, $6.2 billion in 2012 and $9.8 billion in 2011, driven by growthcontinued investment in commercial airplane program inventory, as we continue to build inventories prior to the anticipated deliveryprimarily 787 inventory. Advances and production ramp-up of the 787progress billings increased by $3.9 billion in 2013, $1.9 billion in 2012 and 747-8 programs. We expect the 787 inventory growth$5 billion in 2011, primarily due to be similarpayments from commercial airplane customers. Discretionary contributions to the growth experiencedour pension plans totaled $1.5 billion in 2010 while we expect 747-8 inventory to begin to decline as aircraft are delivered.Investing Activities Cash used by investing activities totaled $4,831 million$5.2 billion during 20102013 compared with $3,794 million$3.8 billion used during 2009, primarily2012 and $2.4 billion provided during 2011, largely due to higher net contributions to investments in time deposits during 2010.deposits. Net contributions to investments were $2.9 billion in 2013 compared with $2 billion in 2012 and net proceeds from investments of $4 billion in 2011. In 2010,2013, capital expenditures totaled $1,125 million down$2.1 billion, up from $1,186 million$1.7 billion in 2009.the prior two years. We expect capital spendingexpenditures to remain higher in 2011 to be higher than 20102014 due to the ongoing construction of a 787 final assembly line in North Charleston, South Carolina and higher spendingcontinued investment to support commercial airplane production rate increases. Expenditures on acquisitions totaled $932 million, up from $639 million, largely reflecting the acquisition of Argon ST, Inc. for $782 million.growth.Financing Activities Cash used by financing activities totaled $1,962 millionwas $4.2 billion during 20102013, an increase of $0.8 billion compared with $4,094 million provided during 2009,2012 primarily due to proceeds fromshare repurchases of $2.8 billion in 2013 partially offset by higher new borrowings of $5,961 million$0.5 billion, lower debt repayments of $0.6 billion and an increase in 2009.stock options exercised of $1 billion in the current year. Cash used by financing activities was $3.5 billion during In 2013, we issued notes totaling $0.5 billion to fund the BCC segment and repaid $1.4 billion of debt, including repayments of $0.6 billion of debt held at BCC. At December 31, 20102013 and 2009,2012, the recorded balance of debt was $12,421 million$9.6 billion and $12,924 million,$10.4 billion, of which $948 million$1.6 billion and $707 million$1.4 billion were classified as short-term. This includes $3,446 million$2.6 billion and $4,075 million$2.7 billion of debt recorded atattributable to BCC, of which $801 million and $659 million were$0.7 billion was classified as short-term.short-term in both periods.During 2013, we repurchased 25.4 million shares totaling $2.8 billion through our open market share repurchase program. There were no shares repurchased through the share repurchase program in 2012 and 2011. In 2010, we repaid $689 million of debt, including repayments of $645 million of debt held at BCC.In 2010,494,9390.8 million and 1 million shares transferred to us from employees for tax withholding and did not repurchase any shares through our open market share repurchase program. During 2009 and 2008, cash used in our open market share repurchase program totaled $50 million and $2,937 million. In 2008, we also repurchased shares for $95 million as part of the ShareValue Trust distribution.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 and BCC have a commercial paper programsprogram that continuecontinues to serve as a significant potential sourcessource of short-term liquidity. Throughout 20102013 and at December 31, 2010, neither2013, we nor BCC had anyno commercial paper borrowings outstanding. Currently, we have $4,376 million ($1,500 million exclusively available for BCC)$4.8 billion of unused borrowing capacity on revolving credit line agreements. We anticipate that these credit lines will primarily serve as backup liquidity to support possible commercial paper borrowings.our general corporate borrowing needs.Financing commitments totaled $18 billion and $18.1 billion at December 31, 2013 and 2012. 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 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.39At December 31, 20102013 and 2009,2012, our pension plans were $9,854 million$10.5 billion and $6,356 million$19.7 billion underfunded as measured under GAAP. On an ERISAEmployee Retirement Income Security Act (ERISA) basis our plans are more than 100% funded. In 2011, wefunded at December 31, 2013 with minimal required contributions in 2014. We expect to make discretionary contributions to our plans of approximately $500 million. Absent increases$750 million in interest rates and/or higher asset values, we2014. We may be required to make significanthigher contributions to our pension plans in the future.As of future years.At December 31, 2010,2013, 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.Contractual ObligationsThe following table summarizes our known obligations to make future payments pursuant to certain contracts as of December 31, 2010,2013, and the estimated timing thereof.(Dollars in millions) Total Less
than 1
year 1-3
years 3-5
years After 5
years $ 12,253 $ 876 $ 3,510 $ 2,103 $ 5,764 6,990 622 1,025 773 4,570 20,638 632 1,622 6,643 11,741 190 63 97 30 1,159 217 280 164 498 104,775 34,572 40,197 20,442 9,564 12,676 12,345 331 $ 158,681 $ 49,327 $ 47,062 $ 30,155 $ 32,137 (Dollars in millions) Total Lessthan 1year 1-3years 3-5years After 5yearsLong-term debt (including current portion) $9,517 $1,490 $1,893 $682 $5,452 Interest on debt(1)6,484 502 893 813 4,276 Pension and other postretirement cash requirements 15,329 577 3,005 6,803 4,944 Capital lease obligations 156 72 70 14 Operating lease obligations 1,414 228 319 217 650 Purchase obligations not recorded on the Consolidated Statements of Financial Position 123,904 46,938 41,985 19,344 15,637 Purchase obligations recorded on the Consolidated Statements of Financial Position 15,849 15,191 658 Total contractual obligations $172,653 $64,998 $48,823 $27,873 $30,959 (1)Includes interest on variable rate debt calculated based on interest rates at December 31, 2010.2013. Variable rate debt was approximately 1%less than 2% of our total debt at December 31, 2010.2013.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 the8%4% of the purchase obligations disclosed above are reimbursable to us pursuant to cost-type government contracts.40Purchase Obligations Not Recorded on the Consolidated Statements of Financial Position Production related purchase obligations not recorded on the Consolidated Statements of Financial Position include agreements for production goods,inventory procurement, tooling costs, electricity and natural gas contracts, property, plant and 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 PositionPurchase obligations recorded on the Consolidated Statements of Financial Position primarily include accounts payable and certain other current and long-term liabilities including accrued compensation.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 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 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. We do not commit to industrial participation agreements unless a contract for sale of our products or services is signed. In certain cases, penalties could be imposed if we do not meet our industrial participation commitments. During 2010,2013, we incurred no such penalties. As of December 31, 2010,2013, we have outstanding industrial participation agreements totaling $9.7$18.4 billion that extend through 2024.2030. 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 foreign supplier must have sufficient capability to meet our requirements and must be competitive in cost, quality and schedule.Income Tax Obligations As of December 31, 2010,2013, our total liabilitynet asset for income taxes payable,receivable, including uncertain tax positions, was $499$24 million of which $81 million we expect to pay in the next twelve months.. We are not able to reasonably estimate the timing of future cash flows related to the remaining $418 million.uncertain tax positions. Our income tax obligationsmatters are excluded from the table above. See Note 54 to our Consolidated Financial Statements.41Commercial CommitmentsThe following table summarizes our commercial commitments outstanding as of December 31, 2010.(Dollars in millions) Total Amounts
Committed/Maximum
Amount of Loss Less than
1 year After 5
years $ 7,599 $ 5,560 $ 1,542 $ 328 $ 169 9,865 1,234 2,035 2,775 3,821 $ 17,464 $ 6,794 $ 3,577 $ 3,103 $ 3,990 (Dollars in millions) Total AmountsCommitted/MaximumAmount of Loss Less than1 year 1-3years 4-5years After 5yearsStandby letters of credit and surety bonds $4,376 $2,525 $1,720 $83 $48 Commercial aircraft financing commitments 17,987 2,309 6,171 4,956 4,551 Total commercial commitments $22,363 $4,834 $7,891 $5,039 $4,599 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 based on estimated earliest potential funding dates. Based on historical experience, we currently do not anticipate that allwe will not be required to fund a significant portion of these commitments will be exercised by our customers; howeverfinancing commitments. However, there can be no assurances that we will not be required to fund greater amounts than historically required. See Note 11 to our Consolidated Financial Statements.Contingent ObligationsWe have significant contingent obligations that arise in the ordinary course of business, which include the following:LegalVarious legal proceedings, claims and investigations are pending against us. Legal contingencies are discussed in Note 20 to our Consolidated Financial Statements, including our contestingcertain employment, labor and benefits litigation. Note 20 also addresses the default terminationsettlement of the A-12 aircraft certain employment and benefits litigation, litigation/arbitration involving BSSI programs and civil securities litigation relating to disclosures concerning the 787 program.litigation.Environmental RemediationWe are involved with various environmental remediation activities and have recorded a liability of $721$649 million at December 31, 2010.2013. For additional information, see Note 11 to our Consolidated Financial Statements.Income TaxesWe have recorded a net liability of $1,198$1,141 million at December 31, 20102013 for uncertain tax positions. For further discussion of these contingencies,income taxes, see Note 54 to our Consolidated Financial Statements.Off-Balance Sheet ArrangementsWe 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.42Non-GAAP MeasuresCore Operating Earnings, Core Operating Margin and Core Earnings Per ShareOur Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States (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 unallocated pension and other postretirement benefit expenses which represent costs not attributable to business segments - 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.Reconciliation of GAAP Measures to Non-GAAP MeasuresThe 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) 2013 2012 2011 Revenues $86,623 $81,698 $68,735 Earnings from operations, as reported $6,562 $6,290 $5,823 Operating margins 7.6 % 7.7 % 8.5 % Unallocated pension and other postretirement benefit expense $1,314 $899 $517 Core operating earnings (non-GAAP) $7,876 $7,189 $6,340 Core operating margins (non-GAAP) 9.1 % 8.8 % 9.2 % Diluted earnings per share, as reported $5.96 $5.11 $5.34 Unallocated pension and other postretirement benefit expense(1)$1.11 $0.77 $0.45 Core earnings per share (non-GAAP) $7.07 $5.88 $5.79 Weighted average diluted shares (in millions) 769.5 763.8 753.1 (1)Earnings per share impact is presented net of the federal statutory rate of 35.0%. 43Critical Accounting PoliciesContract AccountingWe use contract accounting to determine revenue, cost of sales, and profit for almost all of our BDS business. 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. Generallygovernment where the price is generally based on estimated cost to produce the product or service plus profit. Federal acquisition regulationsAcquisition 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.The development ofRevenue and cost of sales percentages involves procedures and personnel inestimates for all areas that provide financial or production information on the status of contracts. Estimates of each significant contract’s sales and costscontracts are reviewed and reassessed quarterly. Any changesChanges in these estimates could result in recognition of cumulative catch-up adjustments to the contractcontract’s inception to date revenues, cost of sales and profit, in the period in which such changes are made.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 for all of 20102013 had been estimated to be higher or lower by 1%, it would have increased or decreased pre-tax income for the year by approximately $319 million. A$332 million. In addition, a number of our fixed price development contracts are in a reach–forwardreach-forward loss position. Changes to estimated loss in future periodslosses are recorded immediately in earnings.Program AccountingProgram 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.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 tooling44and other non-recurring costs, and routine 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 based on projected escalation rates, consistent with typical sales contract terms.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 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.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 program, typically have lower margins than established programs.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 other circumstances may adversely or positively affect financial performance in future periods. If combined cost of sales percentages for commercial airplane programs excluding the 747 and 787 programs, for all of 20102013 had been estimated to be higher or lower by 1%, it would have increased pre-tax income for the year by approximately $460 million. If the combined cost of sales percentages for commercial airplane programs for all of 2013 (excluding the 747 and 787 programs which had gross margins that were breakeven or near breakeven during 2013) had been estimated to be higher by 1%, it would have decreased pre-tax income for the year by approximately $261 million.Theprogram is in a reach-forward loss position having recorded a totaland 787 programs, or if we are required to change one or more of $2,037 million of reach-forward losses in 2009 and 2008. Absent changes in the estimated revenuesour pricing, cost or costs, subsequent deliveries are recorded at zero margin. Reductionsother assumptions related to the estimated loss in subsequent periods are spread over all undelivered units in the accounting quantity, whereas increases to the estimated loss are recorded immediately.Our current assessment is that the 787 program does not have a reach-forward loss. The cumulative impacts of the production challenges, schedule delays and customer and supplier impacts have created significant pressure on revenue and cost estimates such thatthese programs, we expectcould be required to record zero margin on the initial deliveries. The scale and duration of the 787 program is such that relatively minor changes in assumptions or variablesreach forward losses which could have a material effect on our reported results in any period if the program is determined to have a reach-forward loss.Aircraft Valuationresults.Allowance for Losses on Customer Financing Receivables The allowance for losses on customer financing receivables (valuation provision) is used to provide for potential impairment of customer financing receivables in the Consolidated Statements of Financial Position. The balance represents an estimate of probable but unconfirmed losses in the customer financing receivables portfolio. The estimate is based on various qualitative and quantitative factors, including historical loss experience, collateral values, and results of individual credit and collectibility reviews. The adequacy of the allowance is assessed quarterly.Three primary factors influencing the level of our allowance are customer credit ratings, collateral values and default rates. If each customer’s credit rating were upgraded or downgraded by one major rating category at December 31, 2010, the allowance would have decreased by $163 million or increased by $343 million. If the collateral values were 20% higher or lower at December 31, 2010, the allowance would have decreased by $94 million or increased by $72 million. If the cumulative default rates used for each rating category should increase or decrease 1%, the allowance would have increased or decreased by $7 million.Impairment Review for Assets Under Operating Leases and Held for Re-LeaseWe evaluate for impairment assets under operating lease or assets held for re-lease when events or changes incircumstances indicate that the expected undiscounted cash flow from the asset may be less than its carrying value. We use various assumptions when determining the expected undiscounted cash flow including 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 life of the asset.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.Had future lease rates on assets evaluated for impairment been 10% lower, we estimate that we would have incurred additional impairment expense of $30 million for the year ended December 31, 2010.Residual ValuesEquipment under operating leases and assets held for re-lease are carried at cost less accumulated depreciation and are depreciated to estimated residual value using the straight-line method over the period that we project we will hold the asset for lease. Estimates used in determining residual values significantly impact the amount and timing of depreciation expense for equipment under operating leases and assets held for re-lease. If the estimated residual values declined 20% at December 31, 2010, we estimate that we would have incurred additional impairment expense of $31 million for the year ended December 31, 2010, and a future cumulative pre-tax earnings reduction of approximately $132 million recognized over the remaining depreciable periods, of which approximately $30 million would be recognized in 2011.Our investment in sales-type/finance leases includes future minimum lease payments receivable plus the estimated residual value of leased assets less unearned income. Declines in estimated residual value that are deemed other than temporary are recognized in the period in which the decline occurs. If the estimated residual values declined 20% at December 31, 2010, we estimate that we would have reduced pre-tax income by $50 million for the year ended December 31, 2010.Goodwill and Indefinite-Lived Intangible ImpairmentsGoodwill and other acquired intangible assets with indefinite lives are not amortized but are annually tested for impairment, and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist. April 1 is our annual testing date. 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 comparingcompare 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.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.45The 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, 2013 and determined that there is no impairment of goodwill. As of December 31, 2013, 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 A 10% decrease in the estimated fair value of any of our operations would have no impact on the carrying value of goodwill.As of December 31, 20102013 and 2009,2012, we had $499$497 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 reduce the carrying value of these indefinite-lived intangible assets by less than $1 million.Postretirement$1 million.Pension PlansAlmost allThe majority of our employees are covered byearning benefits under defined benefit pension plans with the exception of allplans. All nonunion and some union employees hired after December 31, 2008. We also have other postretirement benefits consisting principally of healthcare coverage for eligible retirees and qualifying dependents.2008 are not covered by defined benefit plans. Accounting rules require an annual measurement of our projected obligationsobligation and plan assets. These measurements are based upon several assumptions, including the discount rate and the expected long-term rate of asset return, and medical trend rate (rate of growth for medical costs).return. Future changes in assumptions or differences between actual and expected outcomes can significantly affect our future annual expense, projected benefit obligationsobligation and Shareholders’ equity.The following table shows the sensitivity of our pension and other postretirement benefit plan liabilitiesliability and net periodic cost to a 25 basis point change in the discount rate as of December 31, 2010.(Dollars in millions) Change in discount rate
Increase 25 bps Change in discount rate
Decrease 25 bps $ (1,772 ) $ 2,204 (185 ) 225 (192 ) 228 (15 ) 17 (Dollars in millions) Change in discount rateIncrease 25 bps Change in discount rateDecrease 25 bpsPension plans Projected benefit obligation ($2,043 ) $2,543 Net periodic pension cost (227 ) 279 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 20102013 net periodic pension expense by $123 million.Differences between actual and expected returns can affect future year’s pension cost. The asset balance used to calculate the expected return on pension plan assets is a calculated value that recognizes changes in the fair value of assets over a five year period. Despite investment gains during 2010 and 2009, the significant losses incurred during 2008 will cause 2011increasedecrease by approximately $1.0 billion$1,400 million and the portion recognized in earnings for 20112014 to increase by approximately $650$100 million primarily due to amortization of actuarial losses. Absent increases in interest rates, higher asset values and/or higher contributions, net periodic pension cost will increase further in future years.The assumed medical trend rates have a significant effect on the following year’s expense, recorded liabilities and Shareholders’ equity. The following table shows the sensitivity46Table of our other postretirement benefit plan liabilities and net periodic cost to a 100 basis point change as of December 31, 2010.(Dollars in millions) Change in medical trend rate
Increase 100 bps Change in medical trend rate
Decrease 100 bps $ 742 $ (654 ) 125 (110 ) Item 7A. Quantitative and Qualitative Disclosures About Market RiskInterest Rate RiskWe 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. ExposureHistorically, we have not experienced material gains or losses on our customer financing assets and liabilities due to this risk is managed by generally matching the profile of BCC’s liabilities with that of BCC’s assets in relation to amount and terms such as expected maturities and fixed versus floating interest rates.rate changes. As of December 31, 2010,2013, the impact over the next 12 months of a 100 basis point immediate and sustained rise in interest rates to our pre-tax earnings would not be a $5 million increase to BCC’s pre-tax earnings. For purposes of the foregoing sensitivity analysis, we assume that the level of our floating rate assets and debt (including the impact of derivatives) remain unchanged from year-end 2010 and that they are all subject to immediate re-pricing. Historically, we have not experienced material gains or losses on our investments or customer financing assets and liabilities due to interest rate changes.Based on the portfolio of other Boeing fixed-rate debt, the unhedged exposure to interest rate risk is not material.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 RiskWe 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 and option 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 and option contracts are sensitive to changes in foreign currency exchange rates. At December 31, 2010,2013, a 10% increase in the exchange rate in our portfolio of foreign currency contracts would have decreased our unrealized gains by $159$244 million and a 10% decrease in the exchange rate would have increased our unrealized gains by $173 million. At December 31, 2009, a 10% increase in the exchange rate in our portfolio of foreign currency contracts would have decreased our unrealized gains by $136$244 million and a 10% decrease in the exchange rate would have increased our unrealized gains by $150 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.47Item 8. Financial Statements and Supplementary DataIndex to the Consolidated Financial Statements Page 505556666869697481838492959698 9910010410810948The Boeing Company and SubsidiariesConsolidated Statements of Operations(Dollars in millions, except per share data) 2010 2009 2008 $ 52,586 $ 57,032 $ 50,180 11,720 11,249 10,729 64,306 68,281 60,909 (42,194 ) (47,639 ) (41,662 ) (9,489 ) (8,726 ) (8,467 ) (160 ) (175 ) (223 ) (51,843 ) (56,540 ) (50,352 ) 12,463 11,741 10,557 267 249 241 (3,644 ) (3,364 ) (3,084 ) (4,121 ) (6,506 ) (3,768 ) 6 (24 ) 4 4,971 2,096 3,950 52 (26 ) 247 (516 ) (339 ) (202 ) 4,507 1,731 3,995 (1,196 ) (396 ) (1,341 ) 3,311 1,335 2,654 (4 ) (23 ) 18 $ 3,307 $ 1,312 $ 2,672 $ 4.50 $ 1.89 $ 3.68 (0.01 ) (0.03 ) 0.02 $ 4.49 $ 1.86 $ 3.70 $ 4.46 $ 1.87 $ 3.65 (0.01 ) (0.03 ) 0.02 $ 4.45 $ 1.84 $ 3.67 (Dollars in millions, except per share data) Years ended December 31, 2013 2012 2011 Sales of products $76,792 $71,234 $57,401 Sales of services 9,831 10,464 11,334 Total revenues 86,623 81,698 68,735 Cost of products (65,640 ) (60,309 ) (46,642 ) Cost of services (7,553 ) (8,247 ) (9,097 ) Boeing Capital interest expense (75 ) (109 ) (149 ) Total costs and expenses (73,268 ) (68,665 ) (55,888 ) 13,355 13,033 12,847 Income from operating investments, net 214 268 278 General and administrative expense (3,956 ) (3,717 ) (3,408 ) Research and development expense, net (3,071 ) (3,298 ) (3,918 ) Gain on dispositions, net 20 4 24 Earnings from operations 6,562 6,290 5,823 Other income, net 56 62 47 Interest and debt expense (386 ) (442 ) (477 ) Earnings before income taxes 6,232 5,910 5,393 Income tax expense (1,646 ) (2,007 ) (1,382 ) Net earnings from continuing operations 4,586 3,903 4,011 Net (loss)/gain on disposal of discontinued operations, net of taxes of $0, $2, ($4) (1 ) (3 ) 7 Net earnings $4,585 $3,900 $4,018 Basic earnings per share from continuing operations $6.03 $5.15 $5.38 Net (loss)/gain on disposal of discontinued operations, net of taxes 0.01 Basic earnings per share $6.03 $5.15 $5.39 Diluted earnings per share from continuing operations $5.96 $5.11 $5.33 Net (loss)/gain on disposal of discontinued operations, net of taxes 0.01 Diluted earnings per share $5.96 $5.11 $5.34 See notesNotes to the consolidated financial statementsConsolidated Financial Statements on pages 5554 – 108.109.49The Boeing Company and SubsidiariesConsolidated Statements of Comprehensive Income(Dollars in millions) Years ended December 31, 2013 2012 2011 Net earnings $4,585 $3,900 $4,018 Other comprehensive income/(loss), net of tax: Currency translation adjustments (64 ) 17 (35 ) Unrealized loss on certain investments, net of tax of $0, $0 and $1 (2 ) Unrealized (loss)/gain on derivative instruments: Unrealized (loss)/gain arising during period, net of tax of $42, ($13) and $7 (75 ) 25 (13 ) Reclassification adjustment for gains included in net earnings, net of tax of $9, $3 and $9 (17 ) (5 ) (16 ) Total unrealized (loss)/gain on derivative instruments, net of tax (92 ) 20 (29 ) Defined benefit pension plans & other postretirement benefits: Prior service (cost)/benefit arising during the period, net of tax of $41, $9 and ($195) (74 ) (16 ) 338 Amortization of prior service cost included in net periodic pension cost, net of tax of ($6), ($10) and ($54) 10 18 94 Net actuarial gain/(loss) arising during the period, net of tax of ($3,437), $1,382 and $2,297 6,143 (2,401 ) (3,993 ) Amortization of actuarial losses included in net periodic pension cost, net of tax of ($849), ($752) and ($523) 1,516 1,304 909 Settlements and curtailments included in net income, net of tax of ($33), ($9) and ($25) 59 15 42 Pension and postretirement benefit/(cost) related to our equity method investments, net of tax ($13), ($74) and $38 24 127 (66 ) Total defined benefit pension plans & other postretirement benefits, net of tax 7,678 (953 ) (2,676 ) Other comprehensive income/(loss), net of tax 7,522 (916 ) (2,742 ) Comprehensive income/(loss) related to non-controlling interest 9 3 (1 ) Comprehensive income, net of tax $12,116 $2,987 $1,275 See Notes to the Consolidated Financial Statements on pages 50The Boeing Company and SubsidiariesConsolidated Statements of Financial Position(Dollars in millions, except per share data) December 31, 2010 2009 $ 5,359 $ 9,215 5,158 2,008 5,422 5,785 285 368 31 966 24,317 16,933 40,572 35,275 4,395 5,466 8,931 8,784 4,937 4,319 2,979 2,877 4,031 3,062 1,111 1,030 6 16 1,603 1,224 $ 68,565 $ 62,053 $ 7,715 $ 7,096 13,802 12,822 12,323 12,076 607 182 948 707 35,395 32,883 8,025 7,049 9,800 6,315 418 827 592 537 11,473 12,217 5,061 5,061 3,866 3,724 (17,187 ) (15,911 ) 24,784 22,746 (13,758 ) (11,877 ) (1,615 ) 2,766 2,128 96 97 2,862 2,225 $ 68,565 $ 62,053 (Dollars in millions, except per share data) December 31, 2013 2012 Assets Cash and cash equivalents $9,088 $10,341 Short-term and other investments 6,170 3,217 Accounts receivable, net 6,546 5,608 Current portion of customer financing, net 344 364 Deferred income taxes 14 28 Inventories, net of advances and progress billings 42,912 37,751 Total current assets 65,074 57,309 Customer financing, net 3,627 4,056 Property, plant and equipment, net 10,224 9,660 Goodwill 5,043 5,035 Acquired intangible assets, net 3,052 3,111 Deferred income taxes 2,939 6,753 Investments 1,204 1,180 Other assets, net of accumulated amortization of $448 and $504 1,500 1,792 Total assets $92,663 $88,896 Liabilities and equity Accounts payable $9,498 $9,394 Accrued liabilities 14,131 12,995 Advances and billings in excess of related costs 20,027 16,672 Deferred income taxes and income taxes payable 6,267 4,485 Short-term debt and current portion of long-term debt 1,563 1,436 Total current liabilities 51,486 44,982 Accrued retiree health care 6,528 7,528 Accrued pension plan liability, net 10,474 19,651 Non-current income taxes payable 156 366 Other long-term liabilities 950 1,429 Long-term debt 8,072 8,973 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 4,415 4,122 Treasury stock, at cost (17,671 ) (15,937 ) Retained earnings 32,964 30,037 Accumulated other comprehensive loss (9,894 ) (17,416 ) Total shareholders’ equity 14,875 5,867 Noncontrolling interest 122 100 Total equity 14,997 5,967 Total liabilities and equity $92,663 $88,896 See notes to the consolidated financial statements on pages 55 – 108.The Boeing Company and SubsidiariesConsolidated Statements of Cash Flows(Dollars in millions) Years ended December 31, 2010 2009 2008 $ 3,307 $ 1,312 $ 2,672 215 238 209 1,510 1,459 1,325 217 207 166 19 12 11 174 151 50 51 45 84 6 36 (28 ) (6 ) 24 (4 ) 512 214 116 (19 ) (5 ) (100 ) 8 (391 ) 564 (7,387 ) (1,525 ) (6,168 ) 313 1,141 318 668 1,327 554 238 (680 ) (1,120 ) 822 607 744 328 (12 ) (211 ) 1,335 1,140 14 717 104 432 (76 ) 199 (29 ) 2,952 5,603 (401 ) (1,125 ) (1,186 ) (1,674 ) 63 27 34 (932 ) (639 ) (964 ) (15,548 ) (2,629 ) (6,673 ) 12,425 1,041 11,343 (448 ) 82 40 206 (2 ) (178 ) (4,831 ) (3,794 ) 1,888 41 5,961 13 (689 ) (551 ) (738 ) (40 ) (137 ) (357 ) 87 10 44 19 5 100 (30 ) (21 ) (135 ) (50 ) (2,937 ) (1,253 ) (1,220 ) (1,192 ) (1,962 ) 4,094 (5,202 ) (15 ) 44 (59 ) (3,856 ) 5,947 (3,774 ) 9,215 3,268 7,042 $ 5,359 $ 9,215 $ 3,268 See notes to the consolidated financial statements on pages 55 – 108.The Boeing Company and SubsidiariesConsolidated Statements of Equity Boeing shareholders (Dollars in millions, except per share data) Common
Stock Additional
Paid-In
Capital Treasury
Stock Share-
Value
Trust Retained
Earnings Accumulated
Other
Comprehensive
Loss Non-
controlling
Interest Total $5,061 $4,757 ($14,842) ($2,752) $ 21,376 ($ 4,596 ) $ 74 $ 9,078 2,672 (2 ) 2,670 (159 ) (159 ) (121 ) (121 ) 4 4 (180 ) (180 ) (8,565 ) (8,565 ) (6,351 ) 243 (8 ) 235 (1,540 ) 1,452 (88 ) 99 99 (9 ) 53 44 (94 ) 65 (29 ) (2,937 ) (2,937 ) (97 ) 97 (1,187 ) (1,187 ) (178 ) 92 (86 ) 80 80 $5,061 $3,456 ($17,758) ($1,203) $ 22,675 ($ 13,525 ) $ 152 ($ 1,142 ) 1,312 2 1,314 159 159 30 30 38 38 154 154 1,267 1,267 2,962 243 (8 ) 235 412 (412 ) (1 ) (1 ) (5 ) 15 10 (80 ) 69 (11 ) (50 ) (50 ) (1,233 ) (1,233 ) (313 ) 1,813 1,500 12 (57 ) (45 ) $5,061 $ 3,724 ($15,911) ($1,615) $ 22,746 ($ 11,877 ) $ 97 $ 2,225 Boeing shareholders (Dollars in millions, except per share data) Common
Stock Additional
Paid-In
Capital Treasury
Stock Share-
Value
Trust Retained
Earnings Accumulated
Other
Comprehensive
Loss Non-
controlling
Interest Total $5,061 $3,724 ($15,911) ($1,615) $22,746 ($11,877) $97 $2,225 3,307 1 3,308 37 37 (9 ) (9 ) 16 16 (1,925 ) (1,925 ) 1,427 235 (24 ) 211 242 (242 ) (1,857 ) 1,857 (234 ) (234 ) (45 ) 132 87 (82 ) 60 (22 ) 26 389 415 (1,245 ) (1,245 ) (2 ) (2 ) $ 5,061 $ 3,866 ($ 17,187 ) $ 24,784 ($ 13,758 ) $ 96 $ 2,862 See notes to the consolidated financial statements on pages 55 – 108.The Boeing Company and Subsidiaries51The Boeing Company and SubsidiariesConsolidated Statements of Cash Flows(Dollars in millions) Years ended December 31, 2013 2012 2011 Cash flows – operating activities: Net earnings $4,585 $3,900 $4,018 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash items – Share-based plans expense 206 193 186 Depreciation and amortization 1,844 1,811 1,675 Investment/asset impairment charges, net 96 84 119 Customer financing valuation benefit (11 ) (10 ) (269 ) Loss/(gain) on disposal of discontinued operations 1 5 (11 ) Gain on dispositions, net (20 ) (4 ) (24 ) Other charges and credits, net 528 694 500 Excess tax benefits from share-based payment arrangements (128 ) (45 ) (36 ) Changes in assets and liabilities – Accounts receivable (879 ) (27 ) (292 ) Inventories, net of advances and progress billings (5,562 ) (5,681 ) (10,012 ) Accounts payable (298 ) 1,199 1,164 Accrued liabilities 883 801 237 Advances and billings in excess of related costs 3,353 1,177 3,173 Income taxes receivable, payable and deferred 1,445 1,605 1,262 Other long-term liabilities 2 157 127 Pension and other postretirement plans 1,720 1,288 2,126 Customer financing, net 391 407 (6 ) Other 23 (46 ) 86 Net cash provided by operating activities 8,179 7,508 4,023 Cash flows – investing activities: Property, plant and equipment additions (2,098 ) (1,703 ) (1,713 ) Property, plant and equipment reductions 51 97 94 Acquisitions, net of cash acquired (26 ) (124 ) (42 ) Contributions to investments (15,394 ) (12,921 ) (6,796 ) Proceeds from investments 12,453 10,901 10,757 Receipt of economic development program funds 69 Purchase of distribution rights (140 ) (7 ) Net cash (used)/provided by investing activities (5,154 ) (3,757 ) 2,369 Cash flows – financing activities: New borrowings 571 60 799 Debt repayments (1,434 ) (2,076 ) (930 ) Repayments of distribution rights and other asset financing (280 ) (228 ) (451 ) Stock options exercised, other 1,097 120 114 Excess tax benefits from share-based payment arrangements 128 45 36 Employee taxes on certain share-based payment arrangements (63 ) (76 ) (24 ) Common shares repurchased (2,801 ) Dividends paid (1,467 ) (1,322 ) (1,244 ) Net cash used by financing activities (4,249 ) (3,477 ) (1,700 ) Effect of exchange rate changes on cash and cash equivalents (29 ) 18 (2 ) Net (decrease)/increase in cash and cash equivalents (1,253 ) 292 4,690 Cash and cash equivalents at beginning of year 10,341 10,049 5,359 Cash and cash equivalents at end of year $9,088 $10,341 $10,049 See Notes to the Consolidated Financial Statements on pages 54 –109.52The Boeing Company and SubsidiariesConsolidated Statements of Equity Boeing shareholders (Dollars in millions, except per share data) Common
StockAdditional
Paid-In
CapitalTreasury
StockRetained
EarningsAccumulated
Other
Comprehensive
LossNon-
controlling
InterestTotal Balance at January 1, 2011 $5,061 $3,866 ($17,187 ) $24,784 ($13,758 ) $96 $2,862 Net earnings 4,018 (1 ) 4,017 Other comprehensive loss, net of tax of $1,555 (2,742 ) (2,742 ) Share-based compensation and related dividend equivalents 197 (15 ) 182 Excess tax pools 20 20 Treasury shares issued for stock options exercised, net (37 ) 151 114 Treasury shares issued for other share-based plans, net (59 ) 45 (14 ) Treasury shares issued for 401(k) contribution 46 388 434 Cash dividends declared ($1.70 per share) (1,263 ) (1,263 ) Changes in noncontrolling interest (2 ) (2 ) Balance at December 31, 2011 $5,061 $4,033 ($16,603) $27,524 ($16,500 ) $93 $3,608 Net earnings 3,900 3 3,903 Other comprehensive loss, net of tax of $536 (916 ) (916 ) Share-based compensation and related dividend equivalents 215 (27 ) 188 Excess tax pools 45 45 Treasury shares issued for stock options exercised, net (54 ) 174 120 Treasury shares issued for other share-based plans, net (183 ) 116 (67 ) Treasury shares issued for 401(k) contribution 66 376 442 Cash dividends declared ($1.805 per share) (1,360 ) (1,360 ) Changes in noncontrolling interest 4 4 Balance at December 31, 2012 $5,061 $4,122 ($15,937) $30,037 ($17,416 ) $100 $5,967 Net earnings 4,585 9 4,594 Other comprehensive income net of tax of ($4,246) 7,522 7,522 Share-based compensation and related dividend equivalents 216 (16 ) 200 Excess tax pools 101 101 Treasury shares issued for stock options exercised, net 109 988 1,097 Treasury shares issued for other share-based plans, net (133 ) 79 (54 ) Common shares repurchased (2,801 ) (2,801 ) Cash dividends declared ($2.185 per share) (1,642 ) (1,642 ) Changes in noncontrolling interest 13 13 Balance at December 31, 2013 $5,061 $4,415 ($17,671 ) $32,964 ($9,894 ) $122 $14,997 See Notes to the Consolidated Financial Statements on pages 54 – 109.53The Boeing Company and SubsidiariesNotes to the Consolidated Financial StatementsSummary of Business Segment Data(Dollars in millions) Years ended December 31, 2010 2009 2008 $ 31,834 $ 34,051 $ 28,263 14,238 14,304 13,445 9,455 10,877 11,346 8,250 8,480 7,256 31,943 33,661 32,047 639 660 703 138 165 567 (248 ) (256 ) (671 ) $ 64,306 $ 68,281 $ 60,909 $ 3,006 $ (583 ) $ 1,186 1,258 1,528 1,294 711 839 1,034 906 932 904 2,875 3,299 3,232 152 126 162 (327 ) (152 ) (307 ) (735 ) (594 ) (323 ) 4,971 2,096 3,950 52 (26 ) 247 (516 ) (339 ) (202 ) 4,507 1,731 3,995 (1,196 ) (396 ) (1,341 ) 3,311 1,335 2,654 (4 ) (23 ) 18 $ 3,307 $ 1,312 $ 2,672 (Dollars in millions) Years ended December 31, 2013 2012 2011 Revenues: Commercial Airplanes $52,981 $49,127 $36,171 Defense, Space & Security: Boeing Military Aircraft 15,936 16,019 14,585 Network & Space Systems 8,512 7,911 8,964 Global Services & Support 8,749 8,677 8,427 Total Defense, Space & Security 33,197 32,607 31,976 Boeing Capital 408 468 547 Other segment 102 106 123 Unallocated items and eliminations (65 ) (610 ) (82 ) Total revenues $86,623 $81,698 $68,735 Earnings from operations: Commercial Airplanes $5,795 $4,711 $3,495 Defense, Space & Security: Boeing Military Aircraft 1,465 1,489 1,431 Network & Space Systems 719 562 759 Global Services & Support 1,051 1,017 968 Total Defense, Space & Security 3,235 3,068 3,158 Boeing Capital 107 88 119 Other segment (156 ) (186 ) 39 Unallocated items and eliminations (2,419 ) (1,391 ) (988 ) Earnings from operations 6,562 6,290 5,823 Other income, net 56 62 47 Interest and debt expense (386 ) (442 ) (477 ) Earnings before income taxes 6,232 5,910 5,393 Income tax expense (1,646 ) (2,007 ) (1,382 ) Net earnings from continuing operations 4,586 3,903 4,011 Net (loss)/gain on disposal of discontinued operations, net of taxes of $0, $2, ($4) (1 ) (3 ) 7 Net earnings $4,585 $3,900 $4,018 This information is an integral part of the notesNotes to the consolidated financial statements.Consolidated Financial Statements. See Note 21 for further segment results.54The Boeing Company and SubsidiariesNotes to the Consolidated Financial StatementsYears ended December 31, 2010, 20092013, 2012 and 20082011(Dollars in millions, except per share data)Note 1 – Summary of Significant Accounting PoliciesPrinciples of Consolidation and Basis of PresentationThe 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. Certain amountsAmounts reported in prior periods as Interest and debt expense have been reclassified to Boeing Capital interest expense to conform to the current year presentation.Use of EstimatesManagement 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 notesNotes to the Consolidated Financial Statements.Operating CycleFor 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 and could exceed three years..Revenue and Related Cost RecognitionContract Accounting Contract accounting is used for development and production activities predominantly by Boeing Defense, Space & Security (BDS). The majority of business conducted by BDS is performed under contracts with the U.S. government and other customers that extend over several years. Contract accounting involves a judgmental process of estimating the 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. In 2013, 2012 and 2011 net favorable cumulative catch-up adjustments increased Earnings from operations by $242, $379 and $229, respectively and diluted EPS by $0.23, $0.33 and $0.23, respectively.We combine contracts for accounting purposes when they are negotiated as a package with an overall profit margin objective,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.55or 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 predominantly 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 routine 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.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 RevenueWe 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 primarily include: support agreements associated with military aircraft and helicopter contracts, ongoing maintenance of International Space Station, and Space Shuttle, commercial Delta launches 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.56Financial Services Revenue We record financial services revenue associated with sales-type 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 sales-type/finance leases, we record an asset at lease inception. This asset is recorded at the aggregate 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 as Cost of services 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. Prepayments received on operating lease contracts are classified as Other long-term liabilities on the Consolidated Statements of Financial Position. 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 RevenueOur 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 $139, $122$160, $129 and $83$144 during 2010, 20092013, 2012 and 2008,2011, respectively. Reinsurance costs related to premiums and claims paid to the reinsurance pool were $123, $118$147, $128 and $86$142 during 2010, 20092013, 2012 and 2008,2011, respectively. Revenues and costs are presented net in Cost of services in the Consolidated Statements of Operations.Fleet SupportWe provide assistance and services to facilitate efficient and safe aircraft operation to the operators of all our commercial airplane models. Collectively known as fleet support services, these activities and services include flight and maintenance training, field service support, engineering services, 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 DevelopmentResearch and development includes costs incurred for experimentation, design, and testing, andas well as bid and proposal efforts related to government products and services which are expensed as incurred 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 than57as contract revenues.We have established cost sharing arrangements with some suppliers for the 787 program. Our cost sharing arrangements state that the supplier contributions are for reimbursements of costs we incur for experimentation, basic design, and testing activities during the 787 development. In each arrangement, we retain substantial rights to the 787 part or component covered by the arrangement. The amounts received from these cost sharing arrangements are recorded as a reduction to research and development expenses since we have no obligation to refund any amounts received per the arrangements regardless of the outcome of the development efforts. Specifically, under the terms of each agreement, payments received from suppliers for their share of the costs are typically based onOther accruedAccrued liabilities until earned.Share-Based CompensationWe 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 TaxesProvisions for federal, state, 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 PlansAlmost allThe majority of our employees are covered byearning benefits under defined benefit pension plans with the exception of allplans. All nonunion and some union employees hired after December 31, 2008.2008 are not covered by defined benefit plans. 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 production58as product costs, and reflected in inventory at the end of a reporting period. IfActuarial 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. Effective December 31, 2008, accounting standards required us to measure our plan assets and benefit obligations at December 31, the date of our year end. We previously performed this measurement at September 30 of each year.Postemployment PlansWe 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 RemediationWe 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 EquivalentsCash 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 $209$108 and $211$159 at December 31, 20102013 and 2009.InventoriesInventoried 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.BecauseCommercial 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 higher unitestimated average cost of all units in the program accounting quantity. Higher production costs are experienced at the beginning of a new or derivative commercial airplane program. Units produced early in a program require substantially more effort (labor and other resources) than units produced later in a program because59of volume efficiencies and the actualeffects of learning. We expect that these deferred costs incurredwill be fully recovered when all units included in the accounting quantity are delivered as the expected unit cost for productionlater deliveries is below the estimated average cost of the earlyall units in the program may exceedprogram. Supplier advances represent payments for parts we have contracted to receive from suppliers in the amount reported as cost of sales for those units. In addition, the application of a total program gross profit ratefuture. As parts are received, supplier advances are amortized to delivered units may resultwork in costs assigned to delivered units in a reporting period being less than the actual cost of those units. The excess actual costs incurred over the amount reported as cost of sales is disclosed as deferred production costs, which are included in inventory along with unamortized tooling costs.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 accountingUsed 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 market. 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 CostsWe may, from time to time, incur costs to begin fulfillingin excess of the statement of work under a specific anticipated contract that we are still negotiating with a customer.amounts required for existing contracts. If we determine it isthe costs are probable that we will be awarded the specific anticipated contract,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 of $527 and $183 at December 31, 2010 and 2009, are included in Inventories, net of advances and progress billings, in the accompanying Consolidated Statements of Financial Position.Property, Plant and EquipmentProperty, 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 3 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 five5 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.60Long-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.Asset Retirement ObligationsWe 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 IntangiblesGoodwill 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 comparingcompare 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 36 to 14 years; product know-how, from 35 to 30 years; customer base, from 35 to 19 years; distribution rights, from 93 to 30 years; and other, from 25 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.61InvestmentsWe classify investment securities as eitherTime deposits are held-to-maturity or available-for-sale. Held-to-maturity securities include time deposits andinvestments that are carried at cost.Available-for-sale securities include marketable debt and equity securities and Enhanced Equipment Trust Certificates and are recorded at their fair values, with unrealized gains and losses reported as part of Accumulated other comprehensive loss on the Consolidated Statements of Financial Position. Realized gains and losses on marketable securities are recognized based on the cost of securitiesusing the first-in, first-out method. Realized gains and losses on all other available-for-sale securities are recognized based on specific identification. 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.DerivativesAll 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 Shareholders’ equity (as a component of Accumulated other comprehensive loss)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 also hold certain instruments for economic purposes that are not designated for hedge accounting treatment. For these derivative instruments, the changes in their fair value are also recorded in earnings immediately.Aircraft ValuationUsed 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 specified-price 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 Aircraft to us, a contingent repurchase commitment would become a trade-in commitment. Our historical experience is that no contingent repurchase agreements havecommitments infrequently become trade-in commitments.All trade-in commitments at December 31, 2010 and 2009 were solely attributable to Sale Aircraft and did not originate from contingent repurchase agreements. 62Exposure 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 recorded in Inventory and 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 Other accruedAccrued 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. This quarterly valuation process yields results that are typically lower than residual value estimates by independent sources and tends to more accurately reflect results upon the actual placement of the aircraft.Used aircraft acquired by the Commercial Airplanes segment are included in Inventories at the lower of cost or market 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.Assets under operating lease, assets held for sale or re-lease and collateral underlying receivablesCustomer financing Customer financing includes operating lease equipment, notes receivables,receivable, and sales-type/financingfinance leases. Sales-type/financingfinance 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 expectedstaterecord assets held for sale at the lower of carrying value or fair value less costs to sell.63When 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 our portfolio in a valuation account, the balance of which is an accounting estimate of probable but unconfirmed losses in the receivables portfolio.losses. The allowance for losses on receivables relates to two components of receivables: (a) specifically identified 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 collectibility 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 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.WarrantiesWarrantiesfour-yearfour-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 segments 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 to twelve-monthtwelve-month 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 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 average64of 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 PenaltiesWe 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.GuaranteesWe record a liability in Other accruedAccrued 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 and performance 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 or performance 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.65Note 2 – AcquisitionsArgon ST, Inc.On August 5, 2010, we acquired Argon ST, Inc. (Argon) for $782, net of cash acquired. Argon develops command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) and, combat systems. The acquisition is part of our strategy to expand our capabilities to address the C4ISR, cyber and intelligence markets. Argon’s results of operations from the acquisition date are included in the Network & Space Systems (N&SS) segment. We also expect to generate synergies associated with the acquisition in other Boeing Defense, Space & Security business units. Goodwill has been recorded in N&SS, Global Services & Support (GS&S) and Boeing Military Aircraft (BMA) segments.The final allocation of the purchase price is as follows: $ 66 47 32 549 216 1 (14 ) (69 ) (8 ) (38 ) $ 782 (1)Finite-lived intangible assets have a weighted average amortization period of 13 years and include $133 of Developed technology and $69 of Customer base.Vought Aircraft Industries Inc.On July 30, 2009, we acquired the business, assets and operations of Vought Aircraft Industries, Inc.’s (Vought) 787 business conducted at North Charleston, South Carolina. In connection with the acquisition, we paid cash consideration of $590 and released Vought from its obligation to repay amounts of $416 previously advanced by us. Vought’s 787 business produces aft fuselage sections, including the fabrication, assembly and systems installation, for the 787 program. The acquisition of Vought is intended to strengthen our 787 program and bolster our capability to develop and produce large composite structures. The results of operations from the acquisition date are included in our Commercial Airplanes’ segment.The final allocation of the purchase price is as follows: $ 241 170 606 49 (24 ) (31 ) (5 ) $ 1,006 (1)The weighted average amortization period for finite-lived intangible assets is 17 years.Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2010, 20092013, 2012 and 20082011 were as follows: Commercial
Airplanes Boeing
Military
Aircraft Network
& Space
Systems Global
Services
& Support Total $1,400 $ 593 $ 883 $205 $3,081 84 255 201 61 601 (35 ) (35) $ 1,449 $ 848 $ 1,084 $ 266 $ 3,647 606 606 28 18 20 66 $ 2,083 $ 848 $ 1,102 $ 286 $ 4,319 193 345 11 549 18 14 4 36 9 24 33 $ 2,110 $ 1,041 $ 1,461 $ 325 $ 4,937 CommercialAirplanes BoeingMilitaryAircraft Network& SpaceSystems GlobalServices& Support Total Balance at January 1, 2011 $2,110 $1,041 $1,461 $325 $4,937 Acquisitions 16 16 Goodwill adjustments (4 ) (4 ) (8 ) Balance at December 31, 2011 $2,106 $1,041 $1,473 $325 $4,945 Acquisitions 12 72 84 Goodwill adjustments 7 (1 ) 6 Balance at December 31, 2012 $2,125 $1,041 $1,472 $397 $5,035 Acquisitions 18 7 25 Goodwill adjustments (1)(17 ) (45 ) 41 4 (17 ) Balance at December 31, 2013 $2,108 $1,014 $1,513 $408 $5,043 (1) Includes adjustments to realign certain programs among BDS segments effective January 1, 2013,(1)Effective January 1, 2010, certain programs were realigned among BDS segments. Prior year amounts have been recast for segment realignments.(2)During 2008, we completed nine acquisitions.20102013 and 2009,2012, we had indefinite-lived intangible assets with carrying amounts of $499$497 relating to tradenames.The gross carrying amounts and accumulated amortization of our acquired finite-lived intangible assets were as follows at December 31: 2010 2009 Gross
Carrying
Amount Accumulated
Amortization Gross
Carrying
Amount Accumulated
Amortization $ 1,661 $ 211 $ 1,596 $ 140 499 116 333 98 603 208 517 165 834 653 831 581 193 122 198 113 $ 3,790 $ 1,310 $ 3,475 $ 1,097 2013 2012 GrossCarryingAmount AccumulatedAmortization GrossCarryingAmount AccumulatedAmortizationDistribution rights $2,275 $483 $2,132 $388 Product know-how 507 199 507 171 Customer base 615 347 617 300 Developed technology 853 742 865 717 Other 233 157 214 145 Total $4,483 $1,928 $4,335 $1,721 Amortization expense for acquired finite-lived intangible assets for the years ended December 31, 20102013 and 20092012 was $217$205 and $207.$213. Estimated amortization expense for the five succeeding years is as follows: 2011 – $192; 2014 2015 2016 2017 2018 Estimated amortization expense $219 $214 $199 $193 $186 During 2013 and 2012 – $190; 2013 – $170; 2014 – $156we acquired $144 and 2015 – $149.Non-cashtransactions related to acquired finite-lived intangibles during 2010 and 2009 were $62 and $329.transactions. Total acquired finite-lived intangibles of $529$182 and $604$352 remain unpaid as of December 31, 20102013 and 2009.66Note 43 – Earnings Per ShareThe weighted-average number of shares outstanding used to computeBasic 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 follows: 735.0 705.9 719.9 3.1 3.7 2.9 738.1 709.6 722.8 6.2 3.8 6.2 744.3 713.4 729.0 Basic earnings per share is calculated by the sum of (1)taking net earnings, less declared dividends and dividend equivalents relatedearnings available to share-based compensationparticipating securities, divided by the basic weighted average common shares outstanding and (2) declared dividends and dividend equivalents relatedoutstanding.Diluted earnings per share is calculated by taking net earnings, less earnings available to share-based compensationparticipating securities, divided by the diluted weighted average common shares outstanding.The weighted average numberelements used in the computation of basic and diluted earnings per share were as follows:(In millions - except per share amounts)Years ended December 31, 2013 2012 2011 Net earnings $4,585 $3,900 $4,018 Less: earnings available to participating securities 7 8 9 Net earnings available to common shareholders $4,578 $3,892 $4,009 Basic Basic weighted average shares outstanding 760.8 758.0 746.6 Less: participating securities 1.9 2.3 2.5 Basic weighted average common shares outstanding 758.9 755.7 744.1 Diluted Basic weighted average shares outstanding 760.8 758.0 746.6 Dilutive potential common shares(1)8.7 5.8 6.5 Diluted weighted average shares outstanding 769.5 763.8 753.1 Less: participating securities 1.9 2.3 2.5 Diluted weighted average common shares outstanding 767.6 761.5 750.6 Net earnings per share: Basic $6.03 $5.15 $5.39 Diluted 5.96 5.11 5.34 (1)Diluted EPS includes any dilutive impact of stock options, restricted stock units and Performance Awards. The shares outstanding, included in the following table below, were excluded fromnot included in the computation of diluted earnings per share because the average market price did not exceed the exercise/threshold price.effect was antidilutive. However, these shares may be dilutive potential common shares in the future. 14.9 16.8 14.9 3.8 2.0 2.0 13.2 12.7 0.8 0.7 0.2 0.3 (Shares in millions)Years ended December 31, 2013 2012 2011 Stock options 4.8 23.6 21.1 Performance Awards 4.2 4.9 1.5 67Note 54 – Income TaxesThe components of earnings before income taxes were:Years ended December 31, 2010 2009 2008 $ 4,310 $ 1,638 $ 3,794 197 93 201 $ 4,507 $ 1,731 $ 3,995 Years ended December 31, 2013 2012 2011 U.S. $5,946 $5,647 $5,083 Non-U.S. 286 263 310 Total $6,232 $5,910 $5,393 Income tax expense/(benefit) consisted of the following:Years ended December 31, 2010 2009 2008 $ 13 $ (132 ) $ 44 80 69 29 (137 ) 145 20 (44 ) 82 93 969 457 1,151 (13 ) (55 ) 26 284 (88 ) 71 1,240 314 1,248 $ 1,196 $ 396 $ 1,341 Years ended December 31, 2013 2012 2011 Current tax expense U.S. federal ($82 ) $657 ($605 ) Non-U.S. 76 52 93 U.S. state 11 19 (22 ) Total current 5 728 (534 ) Deferred tax expense U.S. federal 1,531 1,209 1,856 Non-U.S. 41 (13 ) (8 ) U.S. state 69 83 68 Total deferred 1,641 1,279 1,916 Total income tax expense $1,646 $2,007 $1,382 Net income tax payments/(refunds)payments were $360, ($198)$209, $410, and $599$57 in 2010, 20092013, 2012 and 2008,2011, respectively.Our effective income tax rate was 26.5%rates were 26.4%, 22.9%34.0% and 33.6%25.6% for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. Our 2013 effective tax rate is lower than 2012 primarily due to the inclusion of the U.S. research and development tax credit (research tax credit) in 2013, which was not available in 2012, and the recognition of previously unrecognized tax benefits as a result of new regulations described below. In 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 that retroactively renewed the research tax credit for 2012 and extended the credit through December 31, 2013. As tax law changes are recognized in the period in which new legislation is enacted, the 2012 research tax credit of $145 was recorded in the first quarter of 2013. Our 2012 effective tax rate was higher than 2011, primarily due to tax benefits of $397 recorded in 2010, than 2009, primarily because pre-tax book income in 2010 was higher than in 2009 and because of an income tax charge of $150 recorded during the first quarter of 20102011 as a result of federal income tax audit settlements in addition to research tax credits which were not available in 2012. The research tax credit expired on December 31, 2013. If the Patient Protectionresearch tax credit is not extended there would be an unfavorable impact to our 2014 effective income tax rate.On September 5, 2013, the Internal Revenue Service (IRS) issued proposed regulations that amend the definition of research and Affordable Care Act,experimental (R&E) expenditures. The regulations provided clarity regarding the categories of expense that can be considered when computing the research tax credit. Based upon our analysis of the regulations, $212 of previously unrecognized tax benefits related to research tax credits were recorded as modified by the Health Care and Education Reconciliation Act of 2010. This was partially offset by a reduction to tax benefit of $371 recorded duringexpense in the fourth quarter of 2010 as a result2013.68The following is a reconciliation of the U.S. federal statutory tax rate of 35% to our effective income tax rate:Years ended December 31, 2010 2009 2008 35.0 % 35.0 % 35.0 % (3.5 ) (10.1 ) (4.3 ) (1.2 ) (2.4 ) (0.7 ) (0.9 ) (2.2 ) (0.8 ) 1.8 2.2 1.7 3.3 (8.2 ) 0.2 0.4 2.7 26.5 % 22.9 % 33.6 % Years ended December 31, 2013 2012 2011 U.S. federal statutory tax 35.0 % 35.0 % 35.0 % Research and development credits (4.9 ) 0.8 (2.7 ) Proposed amendments to the R&E regulations (3.4 ) Tax on international activities (0.1 ) (1.2 ) (0.6 ) Tax deductible dividends (0.6 ) (0.7 ) (0.8 ) State income tax provision, net of effect on U.S. federal tax 0.4 0.8 0.7 Federal audit settlement (7.4 ) Other provision adjustments (0.7 ) 1.4 Effective income tax rate 26.4 % 34.0 % 25.6 % Federal income tax audits have been settled for all years prior to 2007. The years 2009-2010 are currently being examined by the IRS. The matters under consideration by IRS Appeals for tax years 2007-2008 are in the final phase of review with the Joint Committee on Taxation. We are also subject to examination in major state and international jurisdictions for the 2001-2013 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.Significant components of our deferred tax assets, net of deferred tax liabilities, at December 31 were as follows: 2010 2009 $ 3,061 $ 2,930 (2,644 ) (994 ) (263 ) (528 ) 1,272 1,411 65 79 300 477 3,443 2,345 (1,645 ) (1,703 ) (60 ) (55 ) 13 66 $ 3,542 $ 4,028 2013 2012 Retiree health care accruals $2,458 $2,867 Inventory and long-term contract methods of income recognition, fixed assets and other (net of valuation allowance of $20 and $27) (9,948 ) (7,151 ) Partnerships and joint ventures (62 ) (162 ) Other employee benefits accruals 1,773 1,427 In-process research and development related to acquisitions 23 37 Net operating loss, credit and capital loss carryovers (net of valuation allowance of $105 and $94) 362 307 Pension asset 3,099 6,232 Customer and commercial financing (990 ) (1,078 ) Unremitted earnings of non-U.S. subsidiaries (44 ) (49 ) Other net unrealized losses 26 (17 ) Net deferred tax (liabilities)/assets(1)($3,303 ) $2,413 (1)Of the deferred tax asset for net operating loss and credit carryovers, $158$295 expires in years ending from December 31, 20112014 through December 31, 20302033 and $142$67 may be carried over indefinitely. Included in the net deferred tax (liabilities)/assets as of December 31, 2013 and 2012 are deferred tax assets in the amounts of $5,818 and $10,210 related to Accumulated other comprehensive loss.69Net deferred tax (liabilities)/assets at December 31 were as follows: 2010 2009 $ 14,383 $ 13,739 (10,736 ) (9,652 ) (105 ) (59 ) $ 3,542 $ 4,028 2013 2012 Deferred tax assets $12,486 $16,580 Deferred tax liabilities (15,664 ) (14,046 ) Valuation allowance (125 ) (121 ) Net deferred tax (liabilities)/assets ($3,303 ) $2,413 The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than notmore-likely-than-not that some or all of the deferred tax assets will not be realized. Included in the net deferred tax assets at December 31, 2010 and 2009 are deferred tax assets in the amounts of $8,186 and $7,226 related to other comprehensive loss.We have provided for U.S. deferred income taxes and foreign withholding tax in the amount of $60$44 on undistributed earnings not considered permanentlyindefinitely reinvested in our non-U.S. subsidiaries. We have not provided for U.S. deferred income taxes or foreign withholding tax on the remainder of undistributed earnings from our non-U.S. subsidiaries of approximately $775 because such earnings are considered to be permanentlyindefinitely reinvested and it is not practicable to estimate the amount of tax that may be payable upon distribution.As of December 31, 20102013 and 2009,2012, the amountamounts accrued for the payment of income tax-related interest and penalties included in the Consolidated Statements of Financial Position waswere as follows: interest of $170$12 and $271$11 and penalties of $12$8 and $14.$11. The amountamounts of interest (benefit)/expense was ($105)benefit included in the Consolidated Statements of Operations were $4, $45$43, and $43$94 for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. The interest benefit recorded during 20102012 was primarily related to the 1998-2003settlement of non-US audits. The interest benefit recorded during 2011 was primarily related to federal audit settlement.The years 2007-2008 are currently being examined by the Internal Revenue Service (IRS), and we have filed appeals with the IRS for 2004-2006. We are also subject to examination in major state and international jurisdictions for the 2001-2010 tax years. We believe appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2010 2009 2008 $ 1,787 $ 1,453 $ 1,272 95 219 88 (465 ) (31 ) (28 ) 76 148 132 (40 ) (254 ) (10 ) (1 ) (2 ) (1 ) $ 1,198 $ 1,787 $ 1,453 2013 2012 2011 Unrecognized tax benefits – January 1 $1,055 $939 $1,198 Gross increases – tax positions in prior periods 10 55 154 Gross decreases – tax positions in prior periods (125 ) (20 ) (383 ) Gross increases – current-period tax positions 202 83 28 Gross decreases – current-period tax positions (1 ) (1 ) (15 ) Settlements (1 ) (42 ) Lapse of statute of limitations (1 ) Unrecognized tax benefits – December 31 $1,141 $1,055 $939 As of December 31, 2010, 20092013, 2012 and 2008,2011, the total amount of unrecognized tax benefits was $1,198, $1,787$1,141, $1,055, and $1,453$939 of which $1,074, $1,452$1,018, $945, and $1,171$838 would affect the effective tax rate, if recognized. TheseAs of December 31, 2013, these amounts are primarily associated with U.S. federal tax issues such as the tax benefits from the Foreign Sales Corporation/Extraterritorial Income tax rules, the amount of research and development tax credits claimed, the domestic production activities deductions claimed and U.S. taxation of foreign earnings, and valuation issues regarding charitable contributions claimed.earnings. 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.Audit outcomes and the timing of audit settlements are subject to significant uncertainty. It is reasonably possible that within the next 12 months we will resolve some or all of the matters presently under consideration for 2004-2006the 2007-2010 tax years with the IRS. Depending on the timing and outcome of the audit settlement,settlements, unrecognized tax benefits that affect the effective tax rate could increase earnings by up to $300$245 based on current estimates.The research and development credit expired on December 31, 2009. On December 17, 2010, President Obama signed into law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act70Note 65 – Accounts ReceivableAccounts receivable at December 31 consisted of the following: 2010 2009 $ 2,969 $ 3,090 1,241 1,206 487 494 514 436 438 253 162 (42 ) (41 ) $ 5,422 $ 5,785 2013 2012 U.S. government contracts $3,604 $2,788 Defense, Space & Security customers (1)1,073 1,196 Commercial Airplanes customers 1,072 903 Reinsurance receivables 525 509 Other 376 294 Less valuation allowance (104 ) (82 ) Total $6,546 $5,608 (1)During 2010, the Sea Launch receivables were reclassified from Accounts receivable to Other assets. See discussion below.The following table summarizes our accounts receivable under long-term contracts that were not billableunbillable or related to outstanding claims as of December 31: Unbillable Claims 2010 2009 2010 2009 $ 994 $ 1,273 $ 30 $ 33 507 450 194 151 $ 1,501 $ 1,723 $ 224 $ 184 Unbillable Claims 2013 2012 2013 2012 Current $1,550 $1,316 $3 $26 Expected to be collected after one year 1,020 730 61 63 Total $2,570 $2,046 $64 $89 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 collectibilitycollectability 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 $213$179 and $158$230 at December 31, 20102013 and 2009.2012. 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 as of December 31, 2013, included $112 of unbillable receivables on a long-term contract with LightSquared, LLC (LightSquared) related to the construction of two commercial satellites. One of the satellites has been delivered, and the other is substantially complete but remains in Boeing’s possession. On May 14, 2012, LightSquared filed for Chapter 11 bankruptcy protection. We believe that our rights in the second satellite and related ground-segment assets are sufficient to protect the value of our receivables in the event LightSquared fails to make payments as contractually required or rejects its contract with us. Given the uncertainties inherent in bankruptcy proceedings, it is reasonably possible that we could incur losses related to these receivables in connection with the LightSquared bankruptcy.Accounts receivable, other than those described above, expected to be collected after one year are not material.71Note 6 – InventoriesInventories at December 31 2010,consisted of the following: 2013 2012 Long-term contracts in progress $12,608 $15,130 Commercial aircraft programs 48,065 40,389 Commercial spare parts, used aircraft, general stock materials and other 7,793 7,206 Inventory before advances and progress billings 68,466 62,725 Less advances and progress billings (25,554 ) (24,974 ) Total $42,912 $37,751 Long-Term Contracts in ProgressLong-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. At December 31, 2013 and 2012, the inventory balance, net of advances, was $425 and $725. At December 31, 2013, $346 of this inventory related to unsold launches. See Note 12.Inventory balances included $0 and $237 subject to claims or other uncertainties relating to the A-12 program at December 31, 2013 and 2012. See Note 20.Capitalized precontract costs of $520 and $238 at December 31, 2013 and 2012, are included in inventories.Commercial Aircraft ProgramsAt December 31, 2013 and 2012, commercial aircraft programs inventory included the following amounts related to the 787 program: $27,576 and $21,289 of work in process (including deferred production costs of $21,620 and $15,929), $2,189 and $1,908 of supplier advances, and $3,377 and $2,339 of unamortized tooling and other non-recurring costs. At December 31, 2013, $16,882 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 $8,115 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.At December 31, 2013 and 2012, commercial aircraft programs inventory included the following amounts related to the 747 program: $1,554 and $1,292 of deferred production costs, net of previously recorded reach-forward losses, and $563 and $683 of unamortized tooling costs. At December 31, 2013, $1,163 of 747 deferred production costs and unamortized tooling are expected to be recovered from units included in the program accounting quantity that have firm orders and $954 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $3,465 and $2,989 at December 31, 2013 and 2012.72Note 7 – Customer FinancingCustomer financing primarily relates to the Boeing Capital (BCC) segment and consisted of the following at December 31: 2013 2012 Financing receivables: Investment in sales-type/finance leases $1,699 $1,850 Notes 587 592 Operating lease equipment, at cost, less accumulated depreciation of $564 and $628 1,734 2,038 Gross customer financing 4,020 4,480 Less allowance for losses on receivables (49 ) (60 ) Total $3,971 $4,420 The components of investment in sales-type/finance leases at December 31 were as follows: 2013 2012 Minimum lease payments receivable $1,731 $1,987 Estimated residual value of leased assets 543 544 Unearned income (575 ) (681 ) Total $1,699 $1,850 Operating lease equipment primarily includes large commercial jet aircraft and regional jet aircraft. At December 31, 2013 and 2012, operating lease equipment included $83 and $354 of BCC equipment available for sale or re-lease. At December 31, 2013 and 2012, we had firm lease commitments for $57 and $266 of this equipment.Financing receivable balances evaluated for impairment at December 31 were as follows: 2013 2012 Individually evaluated for impairment $95 $616 Collectively evaluated for impairment 2,191 1,826 Total financing receivables $2,286 $2,442 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, 2013 and 2012, we individually evaluated for impairment customer financing receivables of $95 and $616. We determined that none of these were impaired at December 31, 2013 and $446 were impaired at December 31, 2012. We recorded no allowance for losses on these receivables as the collateral values exceed the carrying values of the receivables.The average recorded investment in impaired financing receivables for the years ended December 31, 2013, 2012 and 2011, was $376, $466 and $517, respectively. 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. Interest income recognized on such receivables was $30, $6 and $0 for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013 and 2012, we had no material receivables that were greater than 30 days past due.73The change in the allowance for losses on financing receivables for the years ended December 31, 2013, 2012 and 2011, consisted of the following: 2013 2012 2011 Beginning balance - January 1 ($60 ) ($70 ) ($353 ) Customer financing valuation benefit 11 �� 10 269 Write-offs 14 Ending balance - December 31 ($49 ) ($60 ) ($70 ) Collectively evaluated for impairment ($49 ) ($60 ) ($70 ) 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. The customer financing valuation benefit recorded in 2011 was primarily driven by changes in the internal credit rating categories assigned to our receivable balances from AirTran Holdings, LLC.Our financing receivable balances at December 31 by internal credit rating category are shown below:Rating categories 2013 2012 BBB $1,091 $1,201 BB 58 63 B 585 51 CCC 457 511 D 524 Other 95 92 Total carrying value of financing receivables $2,286 $2,442 At December 31, 2013, our allowance primarily related to receivables with ratings of CCC and we applied default rates that averaged 46% to the exposure associated with those receivables.In 2011, American Airlines, Inc. (American Airlines) filed for Chapter 11 bankruptcy protection. On December 9, 2013, American Airlines emerged from bankruptcy. Upon emergence from bankruptcy, the parent of American Airlines merged with US Airways Group, Inc., the parent of US Airways, to form American Airlines Group Inc., and American Airlines assumed all of the BCC financing agreements and underlying leases.74Customer 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 are also a significant driver of our allowance for losses. Generally, out-of-production aircraft have experienced greater collateral value declines than in-production aircraft. Our customer financing portfolio is primarily collateralized by out-of-production aircraft. The majority of customer financing carrying values are concentrated in the following aircraft models: 2013 2012 717 Aircraft ($444 and $465 accounted for as operating leases)(1)$1,674 $1,781 757 Aircraft ($402 and $454 accounted for as operating leases)(1)453 561 MD-80 Aircraft (Accounted for as sales-type finance leases)(1)411 446 747 Aircraft ($183 and $221 accounted for as operating leases) 286 221 787 Aircraft (Accounted for as operating leases) 273 286 MD-11 Aircraft (Accounted for as operating leases)(1)220 269 737 Aircraft ($138 and $193 accounted for as operating leases) 210 316 767 Aircraft ($60 and $63 accounted for as operating leases) 207 223 (1)Out-of-production aircraft Charges related to customer financing asset impairment for the years ended December 31 were as follows: 2013 2012 2011 Boeing Capital $67 $73 $109 Other Boeing 14 (15 ) (36 ) Total $81 $58 $73 Scheduled receipts on customer financing are as follows:Year 2014 2015 2016 2017 2018 Beyond 2018 Principal payments on notes receivable $216 $131 $41 $42 $45 $112 Sales-type/finance lease payments receivable 243 234 230 206 195 623 Operating lease equipment payments receivable 464 181 114 71 52 77 75Note 8 – Property, Plant and EquipmentProperty, plant and equipment at December 31 consisted of the following: 2013 2012 Land $562 $531 Buildings and land improvements 11,068 10,696 Machinery and equipment 12,376 11,847 Construction in progress 1,288 1,231 Gross property, plant and equipment 25,294 24,305 Less accumulated depreciation (15,070 ) (14,645 ) Total $10,224 $9,660 Depreciation expense was $1,338, $1,248 and $1,119 for the years ended December 31, 2013, 2012 and 2011, respectively. Interest capitalized during the years ended December 31, 2013, 2012 and 2011 totaled $87, $74 and $57, respectively.Rental expense for leased properties was $287, $276 and $270, for the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, minimum rental payments under capital leases aggregated $134. Minimum rental payments under operating leases with initial or remaining terms of one year or more aggregated $1,401, net of sublease payments of $14 at December 31, 2013. Payments due under operating and capital leases net of sublease amounts and non-cancellable future rentals during the next five years are as follows: 2014 2015 2016 2017 2018 Minimum operating lease payments, net of sublease amounts $223 $171 $142 $120 $95 Minimum capital lease payments, net of sublease amounts 61 37 22 14 0 Accounts payable related to purchases of property, plant and equipment were $213 and $234 for the years ended December 31, 2013 and 2012.76Note 9 – InvestmentsOur investments, which are recorded in Short-term and other investments or Investments, consisted of the following at December 31: 2013 2012 Time deposits $6,090 $3,135 Pledged money market funds(1)46 56 Available-for-sale investments 8 9 Equity method investments (2)1,164 1,137 Restricted cash(3)33 25 Other investments 33 35 Total $7,374 $4,397 (1)Reflects amounts pledged in lieu of letters of credit as collateral in support of our workers’ compensation programs. These funds can become available within 30 days notice upon issuance of letters of credit. (2)Dividends received were $226 and $341 during 2013 and 2012. Retained earnings at December 31, 2013 include undistributed earnings from our equity method investments of $144.(3)Restricted to pay certain claims related to workers’ compensation and life insurance premiums for certain employees. Equity Method InvestmentsOur equity method investments consisted of the following as of December 31: Segment Ownership Percentages Investment Balance 2013 2012 United Launch Alliance Network & Space Systems (N&SS) 50% $970 $946 Other Commercial Airplanes, N&SS and Global Services & Support (GS&S) 194 191 Total Equity method investments $1,164 $1,137 Note 10 – Other AssetsSea LaunchAt December 31, 2013 and 2012, Other assets included $356$356 of receivables previously recorded as Accounts receivable, 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 $356$356 includes $147$147 related to a payment made by us under a bank guarantee on behalf of Sea Launch and $209$209 related to loans (partner loans) we made to Sea Launch. The net amounts owed to Boeing by each of the partners are as follows;follows: S.P. Koroley Rocket and Space Corporation Energia of Russia – $223,$223, PO Yuzhnoye Mashinostroitelny Zavod of Ukraine – $89$89 and KB Yuzhnoye of Ukraine – $44.$44.Although each partner is contractually obligated to reimburse us for its share of the bank guarantee, the Russian and Ukrainian partners have raised defenses to enforcement and contested our claims. On October 19, 2009, we filed a Notice of Arbitration with the Stockholm Chamber of Commerce seeking reimbursement from the other Sea Launch partners of the $147$147 bank guarantee payment. On October 7, 2010, the arbitrator ruled that the Stockholm Chamber of Commerce lacked jurisdiction to hear the matter77but did not resolve the merits of our claim. We filed a notice appealing the arbitrator’s ruling on January 11, 2011. The Ukrainian partners responded to our appeal on June 30, 2012 and the Russian partner responded on July 3, 2012. We filed replies on September 20, 2012. On February 1, 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 of the $147 bank guarantee payment and the $209 partner loan obligations. We 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 of $147$147 related to our payment under the bank guarantee and $209$209 related to partner loans made to Sea Launch, we could incur additional pre-tax charges of up to $356.$356.Note 7 – InventoriesInventories at December 31 consisted of the following: 2010 2009 $ 14,400 $ 14,673 26,550 18,568 5,788 5,004 46,738 38,245 (22,421 ) (21,312 ) $ 24,317 $ 16,933 Long-Term Contracts in Progress11Long-term contracts in progress included Delta launch program inventory that will be sold at cost to United Launch Alliance (ULA) under an inventory supply agreement that terminates on March 31, 2021. At December 31, 2010 and 2009, the inventory balance was $1,385 and $1,685. As of December 31, 2010, $1,070 of this inventory relates to yet unsold launches. ULA is continuing to assess the future of the Delta II program. In the event ULA is unable to sell additional Delta II inventory, our earnings could be reduced by up to $70. See Note 12.Inventory balances included $236 and $235 subject to claims or other uncertainties relating to the A-12 program as of December 31, 2010 and 2009. See Note 20.Commercial Aircraft ProgramsAs of December 31, 2010 and 2009 commercial aircraft programs inventory included the following amounts related to the 787 program: $9,461 and $3,885 of work in process (including deferred production costs), $1,956 and $2,187 of supplier advances, and $1,447 and $1,231 of tooling and other non-recurring costs.Commercial aircraft programs inventory included $319 and $510 of deferred production cost, and $170 and $211 of unamortized tooling for the 777 program, at December 31, 2010 and 2009.Commercial aircraft program inventory included amounts credited in cash or other consideration (early issue sales consideration), to airline customers totaling $1,970 and $1,577 at December 31, 2010 and 2009.As a normal course of our Commercial Airplanes segment production process, our inventory may include a small quantity of airplanes that are completed but unsold. As of December 31, 2010 and 2009, the value of completed but unsold aircraft in inventory was insignificant.Customer financing at December 31 consisted of the following: 2010 2009 $ 2,272 $ 2,391 480 1,008 2,281 2,737 $ 5,033 $ 6,136 (353 ) (302 ) $ 4,680 $ 5,834 The components of investment in sales-type/finance leases at December 31 were as follows: 2010 2009 $ 2,879 $ 3,147 619 677 (1,226 ) (1,433 ) $ 2,272 $ 2,391 Operating lease equipment primarily includes jet and commuter aircraft. At December 31, 2010 and 2009, operating lease equipment included $583 and $385 of equipment available for sale or re-lease. At December 31, 2010 and 2009, we had firm lease commitments for $28 and $345 of this equipment.When our Commercial Airplanes segment is unable to immediately sell used aircraft, it may place the aircraft under an operating lease. It may also provide customer financing with a note receivable. The carrying amount of the Commercial Airplanes segment used aircraft under operating leases and notes receivable included as a component of customer financing totaled $167 and $203 as of December 31, 2010 and 2009.Financing receivable balances evaluated for impairment are as follows: 2010 2009 $ 99 $ 270 2,653 3,129 $ 2,752 $ 3,399 At December 31, 2010, we had no impaired financing receivables. Impaired financing receivables, unpaid principal balances, and the allowance for losses on those receivables consisted of the following at December 31, 2009: $ 1 144 $ 145 $ 145 2 The average recorded investment in impaired financing receivables as of December 31, 2010, 2009 and 2008, was $88, $162 and $197, respectively. 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. Interest income recognized on such receivables was $9, $9 and $14 for the years ended December 31, 2010, 2009 and 2008, respectively.The change in the allowance for losses on financing receivables for the years ended December 31, 2010, 2009 and 2008, consisted of the following: 2010 2009 2008 $ (302 ) $ (269 ) $ (195 ) (51 ) (45 ) (84 ) 12 10 $ (353 ) $ (302 ) $ (269 ) $ (2 ) $ (8 ) $ (353 ) (300 ) (261 ) We assign internal credit ratings for all customers and determine the creditworthiness of each customer based upon public information and information obtained directly from our customers. We utilize these credit ratings as one of the factors in assessing the adequacy of our allowance for losses on receivables. Our rating categories are comparable to those used by the major credit rating agencies. Credit risk profile by internally assigned ratings, consisted of the following at December 31:Rating categories 2010 2009 $ 207 $ 510 2,432 2,746 113 143 $ 2,752 $ 3,399 At December 31, 2010 and 2009, all of our receivables were related to customers we believe have less than investment-grade credit. For the year ended December 31, 2010, we applied default rates, on average, of 11% and 51% for customers with internally assigned B and CCC ratings.Declines in collateral values are a significant driver of our allowance for losses. Generally, out-of-production aircraft have had greater percentages of collateral value declines than in-production aircraft. Our portfolio is primarily comprised of financing receivables for out-of-production aircraft.As of December 31, 2010, we had no past due receivables. As of December 31, 2009, total financing receivables past due thirty days or more was $1.Customer Financing ExposureCustomer financing is collateralized by security in the related asset. The value of the collateral is closely tied to commercial airline performance and may be subject to reduced valuation with market decline. Our Customer financing portfolio has a concentration of various model aircraft. Customer financing carrying values related to major aircraft concentrations at December 31 were as follows: 2010 2009 $ 2,070 $ 2,262 720 902 366 553 372 465 327 384 (1)Out of production aircraftCharges related to customer financing asset impairment for the years ended December 31 were as follows: 2010 2009 2008 $ 85 $ 91 $ 35 85 8 $ 170 $ 99 $ 35 Scheduled receipts on customer financing are as follows:Year 2011 2012 2013 2014 2015 Beyond 2015 $ 170 $ 98 $ 138 $ 23 $ 25 $ 26 319 317 274 274 273 1,422 292 231 184 141 120 200 Customer financing assets leased under capital leases and subleased to others were not significant in 2010 and 2009.Note 9 – Property, Plant and EquipmentProperty, plant and equipment at December 31 consisted of the following: 2010 2009 $ 542 $ 539 9,695 9,548 11,002 10,383 1,014 1,109 22,253 21,579 (13,322 ) (12,795 ) $ 8,931 $ 8,784 Depreciation expense was $1,096, $1,066 and $1,013 for the years ended December 31, 2010, 2009 and 2008, respectively. Interest capitalized during the years ended December 31, 2010, 2009 and 2008 totaled $48, $90 and $99, respectively.Rental expense for leased properties was $269, $273 and $426, for the years ended December 31, 2010, 2009 and 2008, respectively. For the same periods, these expenses, substantially all minimum rentals, were net of sublease income of $6, $9 and $14, respectively. At December 31, 2010, minimum rental payments under capital leases aggregated $143. Minimum rental payments under operating leases with initial or remaining terms of one year or more aggregated $1,159, net of sublease payments of $4, at December 31, 2010. Non-cancellable future rentals due from customers for equipment on operating leases aggregated $121 at December 31, 2010. Payments due under operating and capital leases net of sublease amounts, and non-cancellable future rentals during the next five years are as follows: 2011 2012 2013 2014 2015 $ 217 $ 158 $ 122 $ 102 $ 62 17 16 15 14 14 54 48 30 8 1 We had accounts payable related to purchases of property, plant and equipment of $265 and $131 for the years ended December 31, 2010 and 2009.Our investments, which are recorded in Short-term and other investments or Investments, consisted of the following at December 31: 2010 2009 $ 5,100 $ 1,900 57 15 139 1,072 974 25 25 $ 6,269 $ 3,038 (1)These money market funds have been pledged in lieu of letters of credit as collateral in support of our workers’ compensation programs. These funds can become available within 30 days notice upon issuance of replacement letters of credit.Available-For-Sale InvestmentsOur investments in available-for-sale debt and equity securities consisted of the following at December 31: December 31, 2010 December 31, 2009 Cost or
Amortized
Cost Gross
Unrealized
Gain Gross
Unrealized
Loss Fair
Value Cost or
Amortized
Cost Gross
Unrealized
Gain Gross
Unrealized
Loss Fair
Value $ 5 $ 5 $ 113 $ (1 ) $ 112 11 $ (1 ) 10 40 $ 1 (14 ) 27 $ 16 $ (1 ) $ 15 $ 153 $ 1 $ (15 ) $ 139 The contractual maturities of the available-for-sale debt securities extend through April 2017. Gross realized gains and losses on available-for-sale investment securities were as follows:Years ended December 31, 2010 2009 2008 $ 10 $ 4 $ 46 (1 ) (48 ) (107 ) $ 9 $ (44 ) $ (61 ) Equity Method InvestmentsOur effective ownership percentages and balances of equity method investments consisted of the following as of December 31: Segment Ownership
Percentages Investment
Balance 2010 2009 Network & Space Systems 50 % $ 950 $ 962 Network & Space Systems 50 % (40 )(1) (150 )(1) 162 162 $ 1,072 $ 974 (1)Credit balances are a result of our proportionate share of the joint venture’s pension and postretirement related adjustments which reduce the carrying value of the investment.Note 11 – Liabilities, Commitments and ContingenciesOther Accrued LiabilitiesOther accruedAccrued liabilities at December 31 consisted of the following: 2010 2009 $ 5,193 $ 4,662 721 706 1,076 999 2,743 2,738 4,069 3,717 $ 13,802 $ 12,822 2013 2012 Accrued compensation and employee benefit costs $6,158 $5,769 Environmental 649 710 Product warranties 1,570 1,572 Forward loss recognition 360 387 Dividends payable 542 367 Other 4,852 4,190 Total $14,131 $12,995 Environmental(1)Forward loss recognition relates primarily to the 747 Program and Airborne Early Warning and Control (AEW&C).Environmental20102013 and 2009. 2010 2009 $ 706 $ 731 (93 ) (89 ) 108 64 $ 721 $ 706 2013 2012 Beginning balance – January 1 $710 $758 Reductions for payments made (120 ) (121 ) Changes in estimates 59 73 Ending balance – December 31 $649 $710 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 andand/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios which include highestthe 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, 20102013 and 2009, our2012, the high end of the estimated range of reasonably possible highest cost estimate for all remediation sitescosts exceeded our recorded liabilities by $957$928 and $948.$865.78Product WarrantiesThe following table summarizes product warranty activity recorded forduring the years ended December 31, 20102013 and 2009. 2010 2009 $ 999 $ 959 141 167 (234 ) (237 ) 170 110 $ 1,076 $ 999 Discontinued Operations.As part of the 2004 purchase and sale agreement with General Electric Capital Corporation related to the sale of Boeing Capital Corporation’s (BCC) Commercial Financial Services business, BCC is involved in a loss sharing arrangement for losses on transferred portfolio assets, such as asset sales, provisions for loss or asset impairment charges offset by gains from asset sales. At December 31, 2010 and 2009, our maximum future cash exposure to losses associated with the loss sharing arrangement was $232 and $234 and our accrued liability under the loss sharing arrangement was $82 and $77. 2013 2012 Beginning balance – January 1 $1,572 $1,046 Additions for current year deliveries 595 678 Reductions for payments made (419 ) (315 ) Changes in estimates (178 ) 163 Ending balance - December 31 $1,570 $1,572 Commercial Aircraft CommitmentsIn conjunction with signing definitive agreements for the sale of new aircraft (Sale Aircraft), we have entered into specified-price 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 total contractual trade-in value was $295 and $427 as of December 31, 2010 and 2009. We anticipate that a significant portion of these commitments will not be exercised by customers.continually assessed takingquarterly, or as events trigger a change, and takes into consideration the current economic environment.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. The estimated fair value of trade-in aircraft related to probable contractual trade-in commitments was $30 and $34 as of December 31, 2010 and 2009. Trade-in commitment agreements at December 31, 2013 have expiration dates from 20112014 through 2023.Future Lease Commitments202320102013 and 2009, future lease commitments2012, we estimated that it was probable we would be obligated to perform on aircraft and other commitments not recorded on the Consolidated Statements of Financial Position totaled $17 and $159. These lease commitments extend through 2015, and our intent is to recover these lease commitments through sublease arrangements. As of December 31, 2010, the future lease commitments on aircraft for each of the next five years were as follows: $3 in 2011, $3 in 2012, $3 in 2013, $3 in 2014, and $3 in 2015. As of December 31, 2010 and 2009, Other accrued liabilities included $12 and $14 attributable to adverse commitments under these lease arrangements.Financing CommitmentsFinancing commitments totaled $9,865 and $10,409 as of December 31, 2010 and 2009. We anticipate that a significant portioncertain of these commitments will notwith net amounts payable to customers totaling $325 and $108 and the fair value of the related trade-in aircraft was $325 and $108.Financing CommitmentsFinancing commitments related to aircraft on order, including options and those proposed in sales campaigns, totaled $17,987 and $18,083 as of December 31, 2013 and 2012. The estimated earliest potential funding dates for these commitments as of December 31, 2013 are as follows: Total 2014 $2,309 2015 2,914 2016 3,257 2017 3,026 2018 1,930 Thereafter 4,551 $17,987 As of December 31, 2013 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 exercised by the customers as we continue to work with third party financiers to provide alternative financing to customers. However, there can be no assurances that we will not be required to fund greater amounts than historically required.79Standby Letters of Credit and Surety BondsWe have entered into standby letters of credit agreements 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 $7,599$4,376 and $7,052$4,545 as of December 31, 20102013 and 2009.In connection with the formation of2012Commitments to ULA weWe and Lockheed Martin Corporation (Lockheed) each committed to provide up to $200 to support its working capital requirements through December 1, 2011. ULA did not request any funds under the commitment as of December 31, 2010. We and Lockheed have also each committed to provide ULA with up to $232$527 of additional capital contributions in the event ULA does not have sufficient funds to make a required payment to us under an inventory supply agreement. See Note 7.6.C-17In September 2013, we decided to end production of C-17 aircraft in 2015 and recorded charges of 2010,2013, our backlog included 6 C-17 aircraft currently under contract with the U.S. Air Force (USAF) as well as international orders for 6 C-17 aircraft that are scheduled for delivery through mid-2014 and we have active sales campaigns for the remaining 14 unsold aircraft. We are currently incurring costs and have made commitments to suppliers related to the unsold aircraft. We believe it is probable that we will recover costs related to the unsold aircraft from international customer orders. Should orders for the 14 unsold aircraft not materialize or should we decide to discontinue production of unsold aircraft, we could incur charges to write-down inventory and/or record termination liabilities. At December 31, 2010,2013, we havehad approximately $620$430 of inventory expenditurescapitalized precontract costs and$420 of potential termination liabilities to suppliers associated primarily with 10 aircraft funded in the Fiscal Year 2010 (FY10) Defense Appropriations Act which are not currently under contract. The President’s Fiscal Year 2011 budget announced during the first quarter of 2010 did not include any additional C-17 aircraft. During the first quarter of 2010 we announced plans to reduce the production rate from 15 per year to 10 per year and expect the transition to be complete by mid-2011. The lower production rate is intended to bridge the gap between existing orders and potential future orders. Should additional orders not materialize, it is reasonably possible that we will decide in 2011 to end production of the C-17 at a future date. We are still evaluating the full financial impact of a potential production shut-down, including any recovery that would be available from the U.S. government. Such recovery from the U.S. government would not include the costs incurred by us resulting from our direction to suppliers to begin working on aircraft beyond those currently under contract with the USAF.Company Owned Life InsuranceMcDonnell 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 ofDecember 31, 20102013 and 2009,2012, the cash surrender value was $381$451 and $360$423 and the total loans were $363$425 and $337.$400. 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, 20102013 and 2009.United States Government Defense Environment OverviewU.S. government appropriation levels remain subject to significant uncertainty. In August 2011, the Budget Control Act (The Act) established limits on U.S. government discretionary spending, including a reduction of defense spending by approximately $490 billion between the 2012 and 2021 U.S. government fiscal years. The Act also provided that the defense budget would face “sequestration” cuts of up to an additional $500 billion during that same period to the extent that discretionary spending limits are exceeded. The impact of sequestration cuts was reduced with respect to FY2014 and FY2015 following the enactment of The Bipartisan Budget Act in December 2013. However, significant 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 significant pressure, including risk of future sequestration cuts.In addition, there continues to be significant uncertainty with respect to program-level appropriations for the U.S. Department of Defense (U.S. DoD) and other government agencies (including the National Aeronautics and Space Administration) within the overall budgetary framework described above. While80the FY2014 appropriations finalized in January 2014 included funding for Boeing’s major programs, uncertainty remains about how defense budgets in FY2015 and beyond will affect Boeing’s programs. Future budget cuts, including cuts mandated by sequestration, or future procurement decisions associated with the 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 to the risks described above, if Congress is unable to pass appropriations bills in a timely manner, a government shutdown could result which could have impacts above and beyond those resulting from budget cuts or sequestration impacts. For example, requirements to furlough employees in the U.S. DoD or other government agencies could result in payment delays, impair our ability to perform work on existing contracts, and/or negatively impact future orders.BDS Fixed-Price Development ContractsFixed-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 Airborne Early Warning and Control, India P-8I, Saudi Arabia 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 also result in lower margins or a material charge for reach-forward losses in 2014.Recoverable Costs on Government ContractsOur 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.747 and 787 Commercial Airplane ProgramsThe development and initial production of new commercial airplanes and new commercial airplane derivatives, which include the 747 and 787, entail significant commitments to customers and suppliers as well as substantial investments in working capital, infrastructure and research and development. The 747 and 787 programs had gross margins that were breakeven or near breakeven during 2013.Continued weakness in the air cargo market and lower-than-expected demand for large commercial passenger aircraft have resulted in pricing pressures and fewer 747 orders than anticipated. We continue to have a number of unsold 747 production positions. If market and production risks cannot be mitigated, the program could face a reach-forward loss that may be material.The combination of production challenges, change incorporation, schedule delays and customer and supplier impacts has created significant pressure on 787 program profitability. If risks related to this program, including risks associated with planned production rate increases, or introducing the 787-9 and 787-10 derivatives as scheduled cannot be mitigated, the program could face additional customer claims and/or supplier assertions, as well as a reach-forward loss that may be material.81Note 12 – Arrangements with Off-Balance Sheet RiskWe enter into arrangements with off-balance sheet risk in the normal course of business, primarily in the form of guarantees.Third-Party GuaranteesThe following tables providetable provides quantitative data regarding our third-partythird 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. Maximum
Potential
Payments Estimated
Proceeds from
Collateral/
Recourse Carrying
Amount of
Liabilities(1) December 31, 2010 2009 2010 2009 2010 2009 $ 3,782 $ 3,958 $ 3,759 $ 3,940 $ 7 $ 7 187 277 261 348 7 7 83 57 16 16 71 119 63 109 6 2 29 51 21 44 6 10 The carrying amount of liabilities represents the amount included in Accrued liabilities. MaximumPotentialPayments EstimatedProceeds fromCollateral/Recourse CarryingAmount ofLiabilitiesDecember 31, 2013 2012 2013 2012 2013 2012 Contingent repurchase commitments $1,872 $2,065 $1,871 $2,065 $5 $5 Indemnifications to ULA: Contributed Delta program launch inventory 127 137 Contract pricing 261 261 7 7 Other Delta contracts 227 232 8 8 Other indemnifications 106 137 28 32 Credit guarantees 35 13 27 4 2 2 (1)Amounts included in Other accrued liabilities.We have entered into contingent repurchase commitments with certain customers in conjunction with signing definitive agreements for the sale of new aircraft. Under these commitments, we agreed 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, and the subsequent exercise by the customer of its right to sell the Sale Aircraft to us. The repurchase price specified in contingent repurchase commitments is generally lower than the expected fair value at the specified repurchase date. Estimated Proceedsproceeds from Collateral/Recoursecollateral/recourse in the tablestable above represent the lower of the contracted repurchase price or the expected fair value of each aircraft at the specified repurchase date.Indemnifications to ULAWe In 2006, we agreed to indemnify ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360$1,360 of Boeing Delta launch program inventory included in contributed assets plus $1,860$1,860 of inventory subject to an inventory supply agreement which ends on March 31, 2021. Since inception, ULA has consumed $1,201$1,233 of the $1,360 of inventory that was contributed by us.us and has yet to consume $127. ULA has made advance payments of $420$1,380 to us and we have recorded revenues and cost of sales of $166$1,049 under the inventory supply agreement through December 31, 2010. ULA is continuing to assess the future of the Delta II program beyond what is currently on contract. In the event ULA is unable to sell additional Delta II inventory, our earnings could be reduced by up to $70.2013We 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 USAFU.S. Air Force (USAF) for four satellite missions. We believe ULA is entitled to additional contract pricing. In December 2008, ULA submitted a claim to the USAF to re-price the contract value for two satellite missions. In March 2009, the USAF issued a denial of that claim and inclaim. In June 2009, ULA filed an appeal. Duringa notice of appeal, and in October 2009, ULA filed a complaint before the Armed Services Board of Contract Appeals (ASBCA) for a contract adjustment for the price of the two satellite missions. In September 2009, the USAF exercised its option for a third satellite mission. During the third quarter of 2010, ULA submitted a claim to the USAF to re-price the contract value of the third mission. The USAF did not exercise an option for a fourth mission prior to the expiration. In March 2011, ULA filed a notice of appeal before the ASBCA, seeking to re-price the third mission. The hearing before the ASBCA concluded on December 20, 2013 and a post-trial briefing is expected by May 2014. If ULA is unsuccessful in obtaining additional pricing, we may be responsible for a portion of the shortfall and may record up to $283$278 in pre-tax losses associated with the three missions, representing up to $261$261 for the indemnification payment and up to $22$17 for our portion of additional contract losses incurred by ULA.82Potential payments for Other Delta contracts include $85 related to deferred support 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. The DCMA has not yet issued a final decision related to the recoverability of the $114. ULA and Boeing believe that all costs are recoverable and in November 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. On June 14, 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. On November 9, 2012, the U.S. government filed an answer to our claim and 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, and have filed an answer challenging it on multiple grounds. The litigation proceeds, with no trial date having yet been set. 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 As part of the 2004 sale agreement with General Electric Capital Corporation related to the sale of Boeing Capital’s (BCC) Commercial Financial Services business, BCC is involved in a loss sharing arrangement for losses on transferred portfolio assets, such as asset sales, provisions for loss or asset impairment charges offset by gains from asset sales. At December 31, 2013 and 2012, our maximum future cash exposure to losses associated with the loss sharing arrangement was $106 and $137 and our accrued liability under the loss sharing arrangement was $28 and $32.In conjunction with our sales of Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and our Commercial Airplanes 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. It is impossible 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, principally to facilitate the sale and/or financing of commercial aircraft. Under these arrangements, we are obligated to make payments to a guaranteed party in the event that lease or loan payments are not made by the original lessee or debtor or certain specified services are not performed. A substantial portion of these guarantees has been extended on behalf of original lessees or debtors with less than investment-grade credit. Our commercial aircraft credit guarantees are collateralized by the underlying commercial aircraft and certain other assets. Current outstanding credit guarantees expire within the next tenseven years.Residual Value GuaranteesWe have issued various residual value guarantees principally to facilitate the sale and financing of certain commercial aircraft. Under these guarantees, we are obligated to make payments to the guaranteed party if the related aircraft or equipment fair values fall below a specified amount at a future time. These obligations are collateralized principally by the underlying commercial aircraft and expire within the next eight years.Other IndemnificationsIn conjunction with our sales of the Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and the sale of our Commercial Airplanes facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma in 2005, we agreed to indemnify, for an indefinite period, the buyers for costs relating to pre-closing environmental contamination and certain other items. As it is impossible to assess whether there will be damages in the future or the amounts thereof (if any), we cannot estimate the maximum potential amount of future payments under these indemnities. Therefore, no liability has been recorded. There have been no claims submitted to date.Industrial Revenue BondsIndustrial Revenue Bonds (IRBs)(IRB) issued by the City of Wichita arewere used to finance the purchase and/or construction of real and personal property at our Wichita site. Tax benefits associated with IRBs include a ten-year property tax abatement and a sales tax exemption from the Kansas Department of Revenue. We record the property on our Consolidated Statements of Financial Position, along with a capital lease obligation to repay the proceeds of the IRB. We have also purchased the IRBs and therefore are the bondholders as well as the borrower/lessee of the property purchased with the IRB proceeds.The capital lease obligation and IRB asset are recorded net in the Consolidated Statements of Financial Position. As of December 31, 20102013 and 2009,2012, the net assets and liabilities associated with the City of Wichita IRBs were $822$690 and $856.$738.83Note 13 – DebtTotal debtOn May 3, 2013, we issued $350 of fixed rate senior notes due May 15, 2018 (Fixed Rate Senior Notes) and $150 of floating rate senior notes due November 3, 2014 (Floating Rate Senior Notes). The Fixed Rate Senior Notes bear an annual interest rate of 0.95%, and may be redeemed at our option at any time for a redemption price equal to the full principal amount plus any accrued and unpaid interest and a make-whole premium. The Floating Rate Senior Notes bear an annual interest rate of three-month LIBOR plus one basis point, and are not redeemable prior to maturity. 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 totaling $494, after deducting underwriting discounts, commissions and offering expenses, were used to fund BCC.Interest incurred, including amounts capitalized, was $729, $610$548, $625 and $520$683 for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. Interest expense recorded by BCC is reflected as a separate line item on our Consolidated Statements of Operations, and is included in earningsEarnings from operations. Total Company interest payments were $670, $502$551, $614 and $493$626 for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively.We have $4,376$4,845 currently available under credit line agreements, of which $2,000 is a five-year credit facility expiring in November 2012 and $ 2,3762,392 is a 364-day revolving credit facility expiring in November 2011. Both the2014 and $2,453 is a five-year credit facility, of which $2,393 expires in November 2018and $60 in November 2017. The 364-day credit facilities havefacility has a one-year term out option which allows us to extend the maturity of any borrowings one year beyond the aforementioned expiration dates. We have given BCC exclusive access to $1,500 under these arrangements.date. We continue to be in full compliance with all covenants contained in our debt or credit facility agreements, including those at BCC.Short-term debt and current portion of long-term debt at December 31 consisted of the following: 2010 2009 $ 785 $ 785 $ 644 $ 644 79 6 24 6 62 10 14 9 22 25 $ 948 $ 801 $ 707 $ 659 2013 2012 Unsecured debt securities $1,370 $1,224 Non-recourse debt and notes 32 51 Capital lease obligations 68 96 Other notes 93 65 Total $1,563 $1,436 Debt at December 31 consisted of the following: 2010 2009 $ 3,339 $ 3,952 55 61 52 62 $ 3,446 $ 4,075 $ 3,376 $ 3,372 2,988 2,987 1,991 1,990 342 360 135 14 143 126 $ 8,975 $ 8,849 $ 12,421 $ 12,924 Other Boeing 2013 2012 Unsecured debt securities Variable rate: 3-month USD LIBOR plus 1 basis point due 2014 $150 0.95% - 5.00% due through 2023 4,832 $4,521 5.80% - 6.88% due through 2043 2,392 3,591 7.25% – 8.75% due through 2043 1,672 1,672 Non-recourse debt and notes 4.12% - 4.84% notes due through 2013 13 6.98% - 7.38% notes due through 2021 233 231 Capital lease obligations due through 2017 151 179 Other notes 205 202 Total debt $9,635 $10,409 84Total debt includes $300 bearing an interest rate of 7.95% due August 15, 2024 that may be redeemed at the holder’s option on August 15, 2012. 2013 2012 BCC $2,577 $2,742 Other Boeing 7,058 7,667 Total debt $9,635 $10,409 At December 31, 2010, $1072013, $256 of BCC debt (non-recourse debt and notes and capital lease obligations) was collateralized by portfoliocustomer financing assets and underlying equipment totaling $186. The debt consists of the 0.92% to 5.79% notes due through 2015.$404.Scheduled principal payments for debt and minimum capital lease obligations for the next five years are as follows: 2011 2012 2013 2014 2015 $ 798 $ 878 $ 652 $ 526 $ 16 141 1,420 657 770 821 $ 939 $ 2,298 $ 1,309 $ 1,296 $ 837 2014 2015 2016 2017 2018 Scheduled principal payments $1,562 $888 $1,075 $58 $638 Note 14 – Postretirement PlansAlmost allThe majority of our employees are covered byearning benefits under defined benefit pension plans, with the exception of allplans. All nonunion and some union employees hired after December 31, 2008.2008 are not covered by defined benefit 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 termlong-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 Pension planOther assets, net, 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 Other accruedAccrued liabilities.arewere as follows: Pension Other
Postretirement
Benefits Years ended December 31, 2010 2009 2008 2010 2009 2008 $ 1,176 $ 1,090 $ 952 $ 121 $ 132 $ 126 3,002 2,964 2,823 404 466 459 (3,850 ) (3,738 ) (3,811 ) (6 ) (5 ) (8 ) 248 242 206 (78 ) (90 ) (93 ) 777 650 392 56 92 86 14 13 $ 1,367 $ 1,221 $ 562 $ 497 $ 595 $ 570 $ 1,101 $ 879 $ 696 $ 480 $ 615 $ 507 A Pension Other Postretirement Benefits Years ended December 31, 2013 2012 2011 2013 2012 2011 Service cost $1,886 $1,649 $1,406 $148 $146 $221 Interest cost 2,906 3,005 3,116 263 313 484 Expected return on plan assets (3,874 ) (3,831 ) (3,741 ) (6 ) (7 ) (6 ) Amortization of prior service costs 196 225 244 (180 ) (197 ) (96 ) Recognized net actuarial loss 2,231 1,937 1,254 95 119 178 Settlement and curtailment loss 104 25 64 (1 ) 3 Net periodic benefit cost $3,449 $3,010 $2,343 $320 $373 $784 Net periodic benefit cost included in Earnings from operations $3,036 $2,407 $1,648 $353 $543 $692 85During the quarter ended September 30, 2011, we determined the accumulated benefit obligation (ABO) for certain other postretirement benefit plans was understated. As a result, we recognized an additional $294 of postretirement benefit obligations at September 30, 2011. This increased net periodic benefit cost during 2011 by $184, which includes service cost of $73, interest cost of $68 and recognized net actuarial loss of $43.Under our accounting policy, a portion of net periodic benefit cost is allocated to production as product costs and may remaininventoried costs. Of the $184 increase in inventory atnet periodic benefit cost described above, the endassociated cost included in Earnings from operations was $161 for the quarter ended September 30, 2011, with the remaining cost of each reporting period.$23 classified as inventory.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, 20102013 and 2009.2012. Benefit obligation balances presented below reflect the PBO for our pension plans, and accumulated postretirement benefit obligations (APBO) for our OPB plans. Pension Other
Postretirement
Benefits 2010 2009 2010 2009 $ 52,166 $ 49,017 $ 7,576 $ 7,859 1,176 1,090 121 132 3,002 2,964 404 466 9 9 142 143 (130 ) (18 ) 5,243 1,445 1,061 (374 ) (93 ) (68 ) 32 (2,567 ) (2,515 ) (555 ) (541 ) 31 30 28 81 6 22 $ 59,106 $ 52,166 $ 8,546 $ 7,576 $ 45,810 $ 40,597 $ 89 $ 79 5,979 6,074 11 13 35 1,582 15 24 9 9 2 2 (98 ) (67 ) (1 ) (2,507 ) (2,459 ) (19 ) (28 ) 24 74 $ 49,252 $ 45,810 $ 98 $ 89 $ 6 $ 16 (60 ) (57 ) $ (423 ) $ (438 ) (8,025 ) (7,049 ) (9,800 ) (6,315 ) $ (9,854 ) $ (6,356 ) $ (8,448 ) $ (7,487 ) Pension Other Postretirement Benefits 2013 2012 2013 2012 Change in benefit obligation Beginning balance $75,895 $67,651 $7,981 $7,997 Service cost 1,886 1,649 148 146 Interest cost 2,906 3,005 263 313 Plan participants’ contributions 8 9 Amendments 111 13 4 12 Actuarial (gain)/loss (9,205 ) 6,378 (905 ) (53 ) Settlement/curtailment/other (81 ) (76 ) (57 ) (1 ) Gross benefits paid (2,874 ) (2,744 ) (451 ) (474 ) Subsidies 32 37 Exchange rate adjustment (21 ) 10 (7 ) 4 Ending balance $68,625 $75,895 $7,008 $7,981 Change in plan assets Beginning balance at fair value $56,178 $51,051 $110 $102 Actual return on plan assets 3,316 6,300 23 1 Company contribution 1,542 1,550 14 15 Plan participants’ contributions 8 9 3 3 Settlement/curtailment/other (103 ) (71 ) 11 10 Benefits paid (2,792 ) (2,669 ) (21 ) (21 ) Exchange rate adjustment (18 ) 8 Ending balance at fair value $58,131 $56,178 $140 $110 Amounts recognized in statement of financial position at December 31 consist of: Other assets $60 $5 Other accrued liabilities (80 ) (71 ) ($340 ) ($343 ) Accrued retiree health care (6,528 ) (7,528 ) Accrued pension plan liability, net (10,474 ) (19,651 ) Net amount recognized ($10,494 ) ($19,717 ) ($6,868 ) ($7,871 ) 86Amounts recognized in Accumulated other comprehensive loss at December 31 arewere as follows: Pensions Other
Postretirement
Benefits 2010 2009 2010 2009 $ 19,343 $ 17,012 $ 2,148 $ 1,197 1,225 1,331 (384 ) (332 ) $ 20,568 $ 18,343 $ 1,764 $ 865 Pension Other Postretirement Benefits 2013 2012 2013 2012 Net actuarial loss $15,460 $26,387 $561 $1,651 Prior service costs/(credits) 788 904 (614 ) (799 ) Total recognized in Accumulated other comprehensive loss $16,248 $27,291 ($53 ) $852 The estimated amount that will be amortized from Accumulated other comprehensive loss into net periodic benefit cost during the year ended December 31, 20112014 is as follows: Pensions Other
Postretirement
Benefits $ 1,252 $ 132 250 (96 ) $ 1,502 $ 36 Pension Other Postretirement Benefits Recognized net actuarial loss $1,032 $7 Amortization of prior service costs/(credits) 178 (141 ) Total $1,210 ($134 ) The accumulated benefit obligation (ABO)ABO for all pension plans was $53,513$63,491 and $47,549$69,312 at December 31, 20102013 and 2009.2012. Key information for our plans with ABO in excess of plan assets as of December 31 is as follows: 2010 2009 $ 58,772 $ 26,141 53,202 24,227 48,926 22,205 The Medicare Prescription Drug, Improvement and Modernization Act of 2003 reduced our APBO by $60 and $497 at December 31, 2010 and 2009. These reductions/actuarial gains are amortized over the expected average future service of current employees.Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act of 2010 increased our APBO by $300 at December 31, 2010. This includes the impact of the excise tax on high cost health plans scheduled to become payable beginning in 2018. This increase is recognized as an actuarial loss and is amortized over the expected future service of current employees. 2013 2012 Projected benefit obligation $63,445 $75,851 Accumulated benefit obligation 58,334 69,272 Fair value of plan assets 52,905 56,129 AssumptionsThe 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, 2010 2009 2008 5.30 % 5.80 % 6.10 % 4.90 % 5.40 % 6.00 % 7.75 % 8.00 % 8.00 % 5.20 % 5.50 % 5.50 % December 31, 2013 2012 2011 Discount rate: Pension 4.80 % 3.80 % 4.40 % Other postretirement benefits 4.20 % 3.30 % 4.00 % Expected return on plan assets 7.50 % 7.50 % 7.75 % Rate of compensation increase 4.00 % 4.00 % 3.90 % 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 Moody’sat 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 spot/discount rates to projected benefit cash flows. All bonds are U.S. issues, with a minimum outstanding of $50.87The 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-yearfive-year moving average of plan assets. As of December 31, 2010,2013, the MRVA is approximately $450 greater$1,340 less than the fair market value of assets.Assumed health care cost trend rates were as follows:December 31, 2010 2009 2008 7.50 % 7.00 % 7.50 % 5.00 % 5.00 % 5.00 % 2018 2014 2014 December 31, 2013 2012 2011 Health care cost trend rate assumed next year 7.00 % 7.50 % 7.50 % Ultimate trend rate 5.00 % 5.00 % 5.00 % Year that trend reached ultimate rate 2018 2018 2018 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 $ 51 $ (44 ) 742 (654 ) Increase Decrease Effect on total of service and interest cost $57 ($47 ) Effect on postretirement benefit obligation 681 (575 ) Plan AssetsInvestment 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 every three-to-five years.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 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 (such as private equity and real estate), and the timing of benefit payments and contributions. Short termShort-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.88The actual and target allocations by asset class for the pension assets at December 31 and target allocations by asset class, arewere as follows: Percentage of Plan Assets Target Allocations Asset Class 2010 2009 2010 2009 49 % 50 % 45 % 45 % 33 34 28 28 5 5 6 6 5 4 10 10 4 4 5 5 4 3 6 6 100 % 100 % 100 % 100 % Actual Allocations Target Allocations Asset Class 2013 2012 2013 2012 Fixed income 49 % 49 % 47 % 47 % Global equity 29 29 26 26 Private equity 5 5 6 6 Real estate and real assets 8 8 11 11 Global strategies 4 4 4 4 Hedge funds 5 5 6 6 Total 100 % 100 % 100 % 100 % Fixed income securities are invested broadly and primarily in long duration instruments. Global equity securities are invested broadly in U.S. and non-U.S. companies, which are inacross various industries and countries and through a range of 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 REITsReal Estate Investment Trusts (REIT) 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) and fund-of-funds that mainly invest in U.S. and non-U.S. leveraged buyout, venture capital and special situation strategies.Global strategies investments seek to capitalize on inefficiencies identified across different asset classes or markets, primarily using long-short positions in derivatives and physical securities. Hedge fund strategy types include, but are not limited to, event driven, relative value, long-short and market neutral. A well-diversified number of hedge funds are held.Investment managers are retained for explicit investment roles specified by contractual investment guidelines. Certain investment managers are authorized to invest in 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 9.8%18.3% and 6.0%10.0% for fixed income, including to-be-announced mortgage-backed securities and treasury forwards, and negative 0.2%(2.2%) and 0.0%(0.3)% for global equity, and currency overlay and commodities at December 31, 20102013 and 2009.In November 2009, the Company elected to contribute $1,500 of our common stock to the pension fund. An independent fiduciary was retained to manage and liquidate the stock over time at its discretion. Plan assets included $1,498 and $1,581 of our common stock as of December 31, 2010 and 2009.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 managementmatching 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 testing89Fair Value MeasurementsThe following table presents our plan assets using the fair value hierarchy as of December 31, 20102013 and 2009.2012. 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 non-observableunobservable inputs. December 31, 2010 December 31, 2009 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 $ 13,038 $ 13,034 $ 4 $ 13,259 $ 13,254 $ 5 3,734 3,734 3,886 3,886 880 847 33 916 893 23 3,469 $ 19 3,450 2,628 $ 19 2,609 18 18 33 33 (20 ) (20 ) (93 ) (93 ) 2,781 2,342 439 2,068 1,679 389 106 106 107 107 (121 ) (121 ) (94 ) (94 ) 4,925 4,925 4,691 4,691 6,414 6,367 47 6,703 6,634 69 1,498 1,498 1,581 1,581 3,097 105 2,992 2,574 89 2,485 21 21 9 9 (11 ) (11 ) (10 ) (10 ) 2,636 10 2,626 2,300 9 2,291 2,488 665 5 1,818 1,784 442 5 1,337 2,015 443 1,503 69 1,676 484 1,192 1,918 1,918 1,347 336 1,011 $ 48,886 $ 16,374 $ 26,044 $ 6,468 $ 45,365 $ 15,628 $ 25,070 $ 4,667 $ 79 $ 125 393 641 (106 ) (321 ) $ 49,252 $ 45,810 December 31, 2013 December 31, 2012 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Fixed income securities: Corporate $15,262 $15,238 $24 $14,363 $14,360 $3 U.S. government and agencies 4,537 4,537 4,921 4,921 Mortgage backed and asset backed 1,040 491 549 752 191 561 Municipal 1,722 1,722 1,770 1,770 Sovereign 1,018 1,018 1,045 1,045 Common/collective/pooled funds 2,538 $16 2,522 2,346 $17 2,329 Other (1)484 229 255 220 1 219 Derivatives: Assets 55 55 36 1 35 Liabilities (10 ) (10 ) (23 ) (23 ) Cash equivalents and other short-term investments 801 801 2,687 2,224 463 Currency overlay derivatives: Assets 2 2 56 56 Liabilities (3 ) (3 ) (55 ) (55 ) Equity securities: U.S. common and preferred stock 6,919 6,919 6,144 6,144 Non-U.S. common and preferred stock 7,722 7,721 1 7,421 7,421 Common/collective/pooled funds 3,239 564 2,675 2,294 344 1,950 Derivatives: Assets 4 4 19 19 Liabilities (6 ) (6 ) (9 ) (9 ) Private equity (1)2,968 10 2,958 2,942 26 2,916 Real estate and real assets: Real estate 2,865 425 16 2,424 2,765 623 14 2,128 Real assets 1,506 336 464 706 1,327 286 377 664 Derivatives: Assets 1 1 1 1 Liabilities (1 ) (1 ) (2 ) (2 ) Global strategies 2,355 2,355 2,147 2,147 Hedge funds 2,776 1,667 1,109 2,736 1,263 1,473 Total $57,794 $15,991 $33,777 $8,026 $55,903 $17,087 $31,071 $7,745 Cash $87 $94 Receivables 458 388 Payables (208 ) (207 ) Total $58,131 $56,178 (1)Certain private funds with a fixed income strategy were reclassified from private equity to other fixed income on January 1, 2013. 90Fixed income securities are primarily valued usingupon a market approach, with inputs thatusing 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 and reported trades.Cash equivalents and other short-term investments, which are used to pay benefits, are primarily held in registered money market funds which are valued using a market approach based on the quoted market prices of identical instruments. Other cash equivalent and short-term investments are valued daily by the fund using a market approach with inputs that include quoted market prices for similar instruments.Common and preferred stock equity securities are primarily valued using a market approach based on the quoted market prices of identical instruments. spreads.Common/collective/pooled funds are typically common or collective trusts valued at their net asset values (NAVs) that are calculated by the investment manager or sponsor of the fund and have daily or monthly liquidity. Active currency managers, through an overlay program, invest in a broad set of currency derivatives. Derivatives leveledincluded 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 LPand private debt NAV valuations are reported by the fund manager and 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.Real estate and real asset fund values are primarily reported by the fund manager andNAV 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. PublicallyFor 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.Global strategies investments are primarily limited liability company (LLC) or mutual fund structures. The LLCsNAVs are based on valuation of the underlying investments, which are primarily valued using a market approach based on NAVs calculated by the fund andapproach. The funds generally have monthly liquidity. Global strategies mutual funds are valued using a market approach based on the quoted market prices of identical instruments.Hedge funds consist of fund-of-fund LLC or commingled fund structures and direct hedge funds. The LLCsNAVs of the fund-of-funds are primarily valued using a market approach based on NAVs calculated by the fund and are not publicly available. Liquidity for the LLCs is monthly and is subject to liquidityNAVs of the underlying hedge funds. The commingled fund NAV is calculated byfunds as well as any cash and accruals held at the manager on a daily basis and has monthly liquidity. Directfund-of-fund level. For direct hedge funds the NAVs are primarily valued by each fund’s third party administrator based on valuation of the underlying securities and instruments andinvestments. This is primarily done by applying a market or income valuation methodology depending on the specific type of security or instrument held. Redemptions in hedge funds are based on specific terms and conditions of the individual funds.Investments in private equity, fixed income, currencyprivate debt, real estate, real assets, global strategies, and hedge funds are primarily calculated and reported by the General Partner (GP), fund manager or derivative, held; inputs for eachthird party administrator. Pension assets invested in these structures rely on the NAV of these investment types are discussed earlier. Direct hedge fund NAVs based on valuationinvestments as the practical expedient for the valuations.91The following tables present a reconciliation of Level 3 assets held during the year ended December 31, 20102013 and 2009. Beginning for the year ended December 31, 2010, transfers2012. Transfers into and out of Level 3 are treated as beginning of yearreported at the beginning-of-year values. January 1,
2010
Balance Net
Realized
and Unrealized
Gains/(Losses) Net
Purchases,
Issuances and
Settlements Net
Transfers
Into/(Out of)
Level 3 December 31,
2010
Balance $ 5 $ (1 ) $ 4 23 $ (1 ) 15 $ (4 ) 33 2,291 379 (44 ) 2,626 1,337 157 324 1,818 (1 ) $ 70 69 1,011 92 $ 815 1,918 $ 4,667 $ 626 $ 1,179 $ (4 ) $ 6,468 January 1, 2013 Balance Net Realized and Unrealized Gains Net Purchases, Issuances and Settlements Net Transfers Into/(Out of) Level 3 December 31,2013BalanceFixed income securities: Corporate $3 $16 $5 $24 Mortgage backed and asset backed 561 (11 ) (1 ) 549 Other (1)245 $37 (27 ) 255 Equity securities: Non-U.S. common and preferred stock 1 1 Private equity (1)2,671 536 (249 ) 2,958 Real estate and real assets: Real estate 2,128 232 64 2,424 Real assets 664 78 (36 ) 706 Hedge funds 1,473 183 (627 ) 80 1,109 Total $7,745 $1,066 ($870 ) $85 $8,026 (1)Certain private funds with a fixed income strategy were reclassified from private equity to other fixed income on January 1, 2013. For the year ended December 31, 2010,2013, the change in unrealized gain for Level 3 assets still held at December 31, 2013 were $21 for other fixed income, $422 for private equity, $243 for real estate, $71 for real assets and $283 for hedge funds. January 1, 2012 Balance Net Realized and Unrealized Gains/(Losses) Net Purchases, Issuances and Settlements Net Transfers Into/(Out of) Level 3 December 31,2012BalanceFixed income securities: Corporate $11 ($12 ) $11 ($7 ) $3 Mortgage backed and asset backed 11 41 151 358 561 Municipal 3 (3 ) Private equity 2,859 208 (151 ) 2,916 Real estate and real assets: Real estate 1,820 133 175 2,128 Real assets 547 45 72 664 Global strategies 75 (75 ) Hedge funds 2,451 104 52 (1,134 ) 1,473 Total $7,777 $519 $310 ($861 ) $7,745 For the year ended December 31, 2012, the change in unrealized gain/(loss) for Level 3 assets still held at December 31, 20102012 were $1($12) for Mortgagecorporate, $36 for mortgage backed and asset backed, securities, $397$113 for Privateprivate equity, $136$579 for Realreal estate, and$62 for real assets $(1)and $101 for Global Strategies and $92 for Hedgehedge funds. January 1,
2009
Balance Net
Realized
and Unrealized
Gains/(Losses) Net
Purchases,
Issuances and
Settlements Net
Transfers
Into/(Out of)
Level 3 December 31,
2009
Balance �� $ 9 $ (4 ) $ 5 49 $ 1 (32 ) $ 5 23 2,020 142 129 2,291 1,629 (505 ) 213 1,337 885 126 1,011 $ 4,592 $ (236 ) $ 306 $ 5 $ 4,667 92OPB Plan AssetsThe 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.Cash FlowsContributionsContributionsRequired pension contributions under the Employee Retirement Income Security Act (ERISA), as well as rules governing funding of our non-U.S. pension plans, are not expected to be materialminimal in 2011. In 2011 we2014. We expect to make discretionary contributions to our plans of approximately $500. We expect that if interest rates remain at their current levels, discount rates for ERISA determinations will likely decline$750 in future years because of retrospective averaging, and as a result, contributions in future years are expected to increase.2014. We expect to contribute approximately $15$12 to our OPB plans in 2011.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) 2011 2012 2013 2014 2015 2016–2020 $ 2,731 $ 2,848 $ 2,992 $ 3,145 $ 3,279 $ 18,712 553 568 592 620 645 3,659 (31 ) (32 ) (33 ) (34 ) (35 ) (177 ) $ 522 $ 536 $ 559 $ 586 $ 610 $ 3,482 Year(s) 2014 2015 2016 2017 2018 2019-2023 Pensions $3,173 $3,346 $3,522 $3,696 $3,865 $21,112 Other postretirement benefits: Gross benefits paid 478 507 539 567 614 3,250 Subsidies (39 ) (41 ) (41 ) (42 ) (43 ) (215 ) Net other postretirement benefits $439 $466 $498 $525 $571 $3,035 Termination ProvisionsCertain 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.We have an agreement with the U.S. government with respect to certain pension plans. Under the agreement, should we terminate any of the 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 Plans401(k) Plans$614, $591$742, $708 and $571$658 in 2010, 20092013, 2012 and 2008,2011, respectively.93Note 15 – Share-Based Compensation and Other Compensation ArrangementsShare-Based CompensationOur 2003 Incentive Stock Plan, as amended on April 27, 2009,and restated effective February 21, 2011, permits awards of incentive stock options, nonqualifiednon-qualified stock options, restricted stock, stock units, Performance Shares,performance shares, performance units and other incentives to our employees, officers, consultants and independent contractors. The aggregate number of shares of our stock available for issuance under the amended plan will not exceed 80,000,000 and no more than an aggregate of 16,000,000 shares are available for issuance as restricted stock awards.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 meet any requirements to issue shares during 2011.2014.Share-based plans expense is primarily included in generalGeneral and administrative expense since it is incentive compensation issued primarily to our executives. The share-based plans expense and related income tax benefit follow:Years ended December 31, 2010 2009 2008 $ 96 $ 111 $ 119 83 56 29 36 71 61 $ 215 $ 238 $ 209 $ 83 $ 89 $ 79 Years ended December 31, 2013 2012 2011 Stock options $93 $85 $88 Restricted stock units and other awards 113 108 98 Share-based plans expense $206 $193 $186 Income tax benefit $76 $75 $73 Stock OptionsOnIn February 22, 2010, February 23, 20092013, 2012 and February 25, 2008,2011, we granted to our executives 5,932,806, 7,423,2426,591,968, 6,114,922 and 6,411,3005,426,910 options, respectively. The options have been granted with 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 granted after 2005 vest over a period of three years, with 34% vesting after the first year, 33% vesting after the second year and the remaining 33% vesting after the third year. If an executive terminates employment for any reason, the non-vested portion of the stock option will not vest and all rights to the non-vested portion will terminate completely.Stock option activity for the year ended December 31, 20102013 is as follows: Shares Weighted
Average
Exercise
Price Per
Share Weighted
Average
Remaining
Contractual
Life (years) Aggregate
Intrinsic
Value 26,336,436 $ 63.93 6,079,675 63.95 (2,123,236 ) 40.96 (1,159,701 ) 55.84 (157,732 ) 59.35 28,975,442 $65.96 6.9 $ 238 17,262,715 $ 72.28 5.7 $ 105 Shares 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 33,664,018 $71.81 Granted 6,698,861 76.35 Exercised (15,605,753) 70.31 Forfeited (926,233) 74.74 Expired (63,150) 68.30 Outstanding at end of year 23,767,743 $73.97 6.81 $1,486 Exercisable at end of year 12,552,449 $72.70 5.11 $801 94The total intrinsic value of options exercised was $59, $2$546, $89 and $22$67 during the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. Cash received from options exercised for the years ended December 31, 2010, 20092013, 2012 and 20082011 was $87, $10$1,097, $120 and $44$114 with a related tax benefit of $20, $1$190, $29 and $6,$23, respectively, derived from the compensation deductions resulting from these option exercises. At December 31, 2010,2013, there was $85$95 of total unrecognized compensation cost related to the Stock Optionour stock option plan which is expected to be recognized over a weighted average period of 1.71.8 years. The totalgrant date fair value of stock options vested during the years ended December 31, 2010, 20092013, 2012 and 20082011 was $103, $114$89, $83 and $82,$92, respectively.The fair values of options were estimated using the Black-Scholes option-pricing model with the following assumptions: Grant
Date Expected
Life Expected
Volatility Dividend
Yield Risk Free
Interest Rate Weighted-Average
Grant Date Fair
Value Per Share 2/22/10 6 years 31.5 % 3.0 % 2.9 % $ 15.70 2/23/09 6 years 39.0 % 2.4 % 2.0 % 11.12 2/25/08 6 years 28.8 % 1.7 % 3.2 % 23.47 Grant Year Grant Date Expected Life Expected Volatility Expected Dividend Yield Risk Free Interest Rate Weighted-Average Grant Date Fair Value Per Share 2013 2/25/2013 6 years 29.0 % 2.6 % 1.0 % $15.85 2012 2/27/2012 6 years 29.9 % 2.4 % 1.1 % $16.89 2011 2/22/2011 6 years 29.8 % 2.3 % 2.5 % $17.96 The expected volatility of the stock options is based on a combination of our historical stock volatility and the volatility levels implied on the grant date by actively traded option contracts on our common stock. We determined the expected term of the stock option grants to be six years, calculated using the “simplified” method in accordance with the SEC Staff Accounting Bulletin 110. We use the “simplified” method since we changed the vesting terms, tax treatment and the recipients of our stock options beginning in 2006 such that we believe our historical data no longer providesprior to 2006 does not provide a reasonable basis upon which to estimate expected term.Restricted Stock UnitsOnIn February 22, 2010,2013, 2012 and 2011, we granted to our executives 1,459,256 1,375,414, 1,369,810 and 1,364,440restricted stock units (RSUs) as part of our long-term incentive program with a grant date fair valuevalues of $63.83$75.97, $75.40 and $71.44 per share. On February 23, 2009, we granted to our executives 2,144,501 RSUs, with a fair value of $35.57 per share.share, 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 immediately vest on a proration of stock units based on active employment during the three-year performanceservice period. In all other cases, the RSUs will not vest and all rights to the stock units will terminate completely.95Stock unit activity for the year ended December 31, 20102013 is as follows: Incentive Program
Restricted Stock Units Other Restricted Stock
Units 2,111,392 1,849,278 1,496,629 336,574 80,631 45,753 (187,135 ) (36,773 ) (75,717 ) (492,881 ) 3,425,800 1,701,951 $ 78 $ 36 1.9 2.1 ShareValue TrustThe ShareValue Trust, established July 1, 1996, was a 14-year irrevocable trust that held shares of our common stock, received dividends, and distributed to employees the appreciation in value above a 3% per annum threshold rate of return at the end of each period. At June 30, 2010, the appreciation in stock price did not exceed the threshold, and no distribution was triggered for the final period of the trust. This was the final investment period of the trust, and no potential distributions remain. The trust was terminated effective July 1, 2010 with the 29,948,920 undistributed shares returned to the Company. Deferred tax assets of $229 related to the undistributed shares were written off at June 30, 2010, offset against previous excess tax benefits recorded in Additional paid-in capital. Incentive Program Restricted Stock Units Other Restricted Stock Units Number of units: Outstanding at beginning of year 3,897,449 1,251,189 Granted 1,398,286 225,815 Dividends 72,405 21,573 Forfeited (201,030 ) (15,614 ) Distributed (1,444,793 ) (350,033 ) Outstanding at end of year 3,722,317 1,132,930 Unrecognized compensation cost $104 $28 Weighted average remaining contractual life (years)1.8 2.2 Other Compensation ArrangementsPerformance AwardsPerformance 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 per unit.$100 dollars. The amount payable at the end of the three-year performance period may be anywhere from $0$0 to $200$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 2010, 20092013, 2012 and 2008,2011, we granted Performance Awards to our executives with the payout based on the achievement of financial goals for each three-yearthree-year period following the grant date. The minimum payout amount is $0$0 and the maximum amount we could be required to pay out for the 20102013, 2012 and 20092011 Performance Awards is $250$275, $259 and $290. There will$248, respectively. The 2011 grant is expected to be no payout of the 2008 Performance Awards.Deferred CompensationThe Company has a deferred compensation plan which permits executives to defer receipt of a portion of their salary, bonus, and certain other incentive awards. Prior to May 1, 2006, employees who participated in theParticipants can diversify deferred compensation plan could choose to defer in either an interest earning account oramong 23 investment funds including a Boeing stock unit account. Effective May 1, 2006, participants can diversify deferred compensation among 19 investment funds including the interest earning account and the Boeing stock unit account.Total expense/(income)expense related to deferred compensation was $112, $158$238, $75 and ($223)$59 in 2010, 20092013, 2012 and 2008,2011, respectively. Additionally, for employees who elected to defer their compensation in stock units prior to January 1, 2006, the Company matched 25% of the deferral with additional stock units. Effective January 1, 2006, all matching contributions are settled in stock upon retirement. As of December 31, 20102013 and 2009,2012, the deferred compensation liability which is being marked to market was $1,149$1,258 and $1,143.$1,104.96Note 16 – Shareholders’ EquityOn October 29, 2007, the Board approved the repurchase of up to $7,000$7,000 of common stock (the 2007 Program). At December 31, 2013, $810 in shares may still be repurchased under the Program. On December 16, 2013, the Board approved a new repurchase plan (the 2013 Program) for up to $10,000 of common stock that commences following the completion of the 2007 Program. Unless terminated earlier by a Board resolution, the Program will expire when we have used all authorized funds for repurchase. At As of December 31, 2010, $3,610 in shares may still be purchased under the Program.As of December 31, 201020132009,2012, 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 BalancesThe following table shows changes in each class of shares: Common
Stock Treasury
Stock ShareValue
Trust 1,012,261,159 244,217,170 31,362,850 (629,111 ) 42,073,885 658,582 (3,560,663 ) 1,012,261,159 285,661,944 28,460,769 (30,428,387 ) 1,173,152 1,102,555 1,012,261,159 256,406,709 29,563,324 (9,353,570 ) 385,596 29,948,920 (29,948,920 ) 1,012,261,159 277,002,059 CommonStock TreasuryStockBalance at January 1, 2011 1,012,261,159 277,002,059 Issued (9,800,174 ) Acquired 354,503 Balance at December 31, 2011 1,012,261,159 267,556,388 Issued (11,935,423 ) Acquired 1,009,663 Balance at December 31, 2012 1,012,261,159 256,630,628 Issued (17,903,704 ) Acquired 26,155,537 Balance at December 31, 2013 1,012,261,159 264,882,461 97Accumulated Other Comprehensive LossThe components ofChanges in Accumulated other comprehensive loss atincome/(loss) (AOCI) by component for the years ended December 31, 2013, 2012 and 2011 were as follows: 2010 2009 $ (14,079 ) $ (12,154 ) 95 67 (6 ) (6 ) 232 216 $ (13,758 ) $ (11,877 ) 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, 2011 $232 ($6 ) $95 ($14,079 ) ($13,758 ) Other comprehensive loss before reclassifications (35 ) (2 ) (13 ) (3,721 ) (3,771 ) Amounts reclassified from AOCI (16 ) 1,045 (2) 1,029 Net current period Other comprehensive loss (35 ) (2 ) (29 ) (2,676 ) (2,742 ) Balance at December 31, 2011 $197 ($8 ) $66 ($16,755 ) ($16,500 ) Other comprehensive income/(loss) before reclassifications 17 25 (2,290 ) (2,248 ) Amounts reclassified from AOCI (5 ) 1,337 (2) 1,332 Net current period Other comprehensive income/(loss) 17 20 (953 ) (916 ) Balance at December 31, 2012 $214 ($8 ) $86 ($17,708 ) ($17,416 ) Other comprehensive income/(loss) before reclassifications (64 ) (75 ) 6,093 5,954 Amounts reclassified from AOCI (17 ) 1,585 (2) 1,568 Net current period Other comprehensive income/(loss) (64 ) (92 ) 7,678 7,522 Balance at December 31, 2013 $150 ($8 ) ($6 ) ($10,030 ) ($9,894 ) (1)Net of tax. (2)Primarily relates to amortization of actuarial gains/losses for the years ended December 31, 2013 2012 and 2011 totaling $1,516, $1,304 and $909 (net of tax of ($849), ($752)and ($523)) which is 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 InstrumentsCash Flow HedgesOur cash flow hedges include foreign currency forward contracts, foreign currency option contracts, commodity swaps, and commodity purchase contracts. We use foreign currency forward and option 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 principally occurring within five years in the future, with certain contracts hedging transactions up to 2021.through 2023. We use commodity derivatives, such as swaps and fixed-price purchase commitments to hedge against potentially unfavorable price changes for items used in production. These include commitments to purchase electricity at fixed pricesOur commodity contracts hedge forecasted transactions through 2016.2017.Fair Value HedgesInterest 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 Corporation interest expense.98Derivative Instruments Not Receiving Hedge Accounting TreatmentWe also hold certain derivative instruments, primarily foreign currency forward contracts, for risk management purposes but without electing any form ofthat are not receiving hedge accounting.Notional Amounts and Fair ValuesThe notional amounts and fair values of derivative instruments in the Consolidated Statements of Financial Position as of December 31 were as follows: Other assets Other
accrued
liabilities 2010 2009 2010 2009 2010 2009 $ 2,001 $ 2,353 $ 266 $ 233 $ (15 ) $ (22 ) 875 1,475 24 32 (18 ) 144 189 (113 ) (88 ) 646 693 8 32 (58 ) (99 ) 3,666 4,710 298 297 (186 ) (227 ) (71 ) (119 ) 71 119 $ 227 $ 178 $ (115 ) $ (108 ) Notionalamounts(1)Other assets Accruedliabilities 2013 2012 2013 2012 2013 2012 Derivatives designated as hedging instruments: Foreign exchange contracts $2,524 $2,310 $122 $202 ($64 ) ($16 ) Interest rate contracts 313 388 13 26 Commodity contracts 72 99 2 (39 ) (71 ) Derivatives not receiving hedge accounting treatment: Foreign exchange contracts 259 412 12 3 (35 ) (42 ) Commodity contracts 9 15 (4 ) (8 ) Total derivatives $3,177 $3,224 149 231 (142 ) (137 ) Netting arrangements (63 ) (53 ) 63 53 Net recorded balance $86 $178 ($79 ) ($84 ) (1)Gains/(losses) associated with our cash flow and undesignated hedging transactions and their effect on otherOther comprehensive lossincome/(loss) and Net earnings were as follows:Years ended December 31, 2010 2009 $ 67 $ 180 (30 ) (24 ) (33 ) (9 ) For the year ended December 31, 2010, we reclassified a net gain of $14 (pre-tax) from Accumulated other comprehensive loss to earnings. Years ended December 31, 2013 2012 Effective portion recognized in Other comprehensive income/(loss), net of taxes: Foreign exchange contracts ($76 ) $35 Commodity contracts 1 (10 ) Effective portion reclassified out of Accumulated other comprehensive loss into earnings, net of taxes: Foreign exchange contracts 37 35 Commodity contracts (20 ) (30 ) Forward points recognized in Other income, net: Foreign exchange contracts 34 22 Undesignated derivatives recognized in Other income, net: Foreign exchange contracts 17 (16 ) Based on our portfolio of cash flow hedges, we expect to reclassify gainslosses of $22$6 (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, 20102013 and 2009.99We 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, expiring November 2012.facility. For 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, 20102013 was $78.$7. At December 31, 2010,2013, there was no collateral posted related to our derivatives.Note 18 – Significant Group Concentrations of RiskCredit RiskFinancial instruments involving potential credit risk are predominantly with commercial aircraft customers and the U.S. government. Of the $10,496$10,670 in gross accounts receivable and gross customer financing included in the Consolidated Statements of Financial Position as of December 31, 2010, $4,9962013, $4,870 related predominantly to commercial aircraft customers ($570($924 of accounts receivable and $4,426$3,946 of customer financing) and $2,969$3,604 related to the U.S. government.Of the $5,033$4,020 in gross customer financing, $4,310$2,720 related to customers we believe have less than investment-grade credit. AirTran Airways,credit including American Airlines, United/Continental Airlines, and Hawaiian Airlines who were associated with 27%11%, 16%, 9% and 8%, respectively, of our financing portfolio. Financing for aircraft is collateralized by security in the related asset. asset and in some instances security in other assets as well.Other RiskAs of December 31, 2010, there was $9,865 of financing commitments related to aircraft on order including options and proposed as part of sales campaigns described in Note 11, of which $8,490 related to customers we believe have less than investment-grade credit.BDS Fixed-Price Development ContractsFixed-price development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work. Significant BDS fixed-price development contracts include AEW&C, P-8I, KC-767 International 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 also result in lower margins or a material charge for reach-forward losses in 2011.Commercial Airplane Development ProgramsSignificant risks are inherent throughout the development of new commercial airplanes and new commercial airplane derivatives. Currently both the 787-8 and 747-8 freighter are in the demanding flight test and certification stages of program development. The 787-9 and 747-8 Intercontinental airplanes are also in development. These programs require substantial investments and research and development as well as investments in working capital and infrastructure. They also entail significant commitments to customers and suppliers and require substantial internal resources. Performance issues on these programs could have a material adverse impact on our consolidated results and financial position in 2011.Other RiskAs of December 31, 2010,, approximately 36%38% of our total workforce was represented by collective bargaining agreements and approximately 1% of our total workforce was represented by agreements expiring during 2011.Note 19 – Fair Value MeasurementsThe following tables presenttable presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. 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 non-observableunobservable inputs. December 31, 2010 December 31, 2009 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 $ 3,337 $ 3,337 $ 3,575 $ 3,575 $ 5 $ 5 112 $ 107 $ 5 10 10 27 27 227 $ 227 178 178 $ 3,579 $ 3,347 $ 227 $ 5 $ 3,892 $ 3,602 $ 285 $ 5 $ (115 ) $ (115 ) $ (108 ) $ (108 ) $ (115 ) $ (115 ) $ (108 ) $ (108 ) December 31, 2013 December 31, 2012 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Assets Money market funds $3,783 $3,783 $4,534 $4,534 Available-for-sale investments 8 6 $2 9 6 $3 Derivatives 86 $86 178 $178 Total assets $3,877 $3,789 $86 $2 $4,721 $4,540 $178 $3 Liabilities Derivatives ($79 ) ($79 ) ($84 ) ($84 ) Total liabilities ($79 ) ($79 ) ($84 ) ($84 ) Money market funds and available-for-sale equity securities are valued using a market approach based on the quoted market prices of identical instruments. Available-for-sale debt investments are primarily valued using a marketan income approach based on benchmark yields, reported trades and broker/dealer quotes.100Derivatives 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 below presents the nonrecurring losses recognized for the years ended December 31, and the carryingfair value and asset classification of the related assets still held as of December 31: 2010 2009 Carrying
Value Total
Losses Carrying
Value Total
Losses $ 247 $ (143 ) $ 199 $ (75 ) (4 ) 13 (13 ) 1 (6) $ 247 $ (147 ) $ 213 $ (94 ) 2013 2012 Fair Value Total Losses Fair Value Total Losses Operating lease equipment $216 ($81 ) $75 ($55 ) Property, plant and equipment 40 (15 ) 21 (21 ) Total $256 ($96 ) $96 ($76 ) The fair value of the impaired operating lease equipment was valued usingis 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 approachtrades 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 fair valueattributes 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 related aircraft. The property,Property, plant and equipment was primarily valued using an income approach based on the discounted cash flows associated with the underlying equipment.Fair Value DisclosuresThe following table presents our financialassets.For Level 3 assets and liabilities that are notwere measured at fair value on a recurring basis. The carrying amountsnon-recurring basis during the year ended December 31, 2012, the following table presents the fair value of those assets as of the measurement date, valuation techniques and estimated fair values were as follows at December 31: 2010 2009 Carrying
Amount Fair
Value Carrying
Amount Fair
Value $ 5,422 $ 5,283 $ 5,785 $ 5,658 480 501 1,045 1,072 (12,234 ) (13,525 ) (12,848 ) (13,809 ) (7,715 ) (7,704 ) (7,096 ) (7,063 ) (35 ) (15 ) (35 ) (20 ) (7 ) (84 ) (7 ) (63 ) FairValueValuationTechnique(s)Unobservable Input RangeMedian or AverageOperating lease equipment $216 Market approach Aircraft value publications $155 - $206(1)Median $189Aircraft condition adjustments ($18) - $45(2)Net $27(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. 101Fair Value DisclosuresThe 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, 2013 Carrying Amount Total Fair Value Level 1 Level 2 Level 3 Assets Accounts receivable, net $6,546 $6,525 $6,525 Notes receivable, net 572 622 622 Liabilities Debt, excluding capital lease obligations (9,483 ) (10,897 ) (10,897 ) December 31, 2012 Carrying Amount Total Fair Value Level 1 Level 2 Level 3 Assets Accounts receivable, net $5,608 $5,642 $5,642 Notes receivable, net 571 632 632 Liabilities Debt, excluding capital lease obligations (10,231 ) (12,269 ) (12,221 ) ($48 ) The fair value of Accounts receivable and Accounts payable areis based on current market rates for loans of the same risk and maturities. The fair values of our variable rate notes receivable that reprice frequently approximate their carrying amounts. The fair values of fixed rate notes receivable are estimated usingwith 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 foryields. For our debt that is not traded in the secondary market. Themarket, the fair values of the residual value guaranteesis classified as Level 2 and contingent repurchase commitments are determined using a Black Futures Options formula and include such assumptions as the expected value of the aircraftis based on the settlement date, volatility of aircraft prices, time until settlement and the risk free discount rate.our indicative borrowing cost derived from dealer quotes or discounted cash flows. The fair value of the credit guaranteesour debt classified as Level 3 is estimated based on the expected cash flowsmedian of those commitments, given the creditor’s probability of default, and discounted using the risk free rate.underlying collateral value as described above. With regard to other financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of futureour indemnifications and financing commitments because the amount and timing of funding those commitmentsarrangements are uncertain.102Note 20 – Legal ProceedingsVarious legal proceedings, claims and investigations related to products, contracts and other matters are pending against us. Potentially material contingencies are discussed below.We are subject to various U.S. government investigations, from which civil, criminal or administrative proceedings could result or have resulted.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 government disputes and investigations will not have a material adverse effect on our financial position, results of operations, or cash flows, except as set forth below. Unless otherwise indicated below, a rangeWhere it is reasonably possible that we will incur losses in excess of loss associatedrecorded amounts in connection with any individual legal proceedingof the matters set forth below, cannotwe have disclosed either the amount or range of reasonably possible losses in excess of such amounts or, where no such amount or range can be estimated.A-12 LitigationIn 1991, the Department of the Navy (the Navy) notified McDonnell Douglas Corporation (now merged into The Boeing Company) and General Dynamics Corporation (together, the Team) that it was terminating for default the Team’s contract for development and initial production of the A-12 aircraft.The Team had full responsibility for performance of the contract and both contractors are jointly and severally liable for any potential liabilities resulting from the termination. The Team filed a legal action to contest the Navy’s default termination, to assert its rights to convert the termination to one for “the convenience of the government,” and to obtain payment for work done and costs incurred on the A-12 contract but not paid to date. AsThe U.S. Court of December 31, 2010, inventories included approximately $586 of recorded costs on the A-12 contract, against which we have established a loss provision of $350. The amount of the provision, which was established in 1990, was based on McDonnell Douglas Corporation’s belief, supported by an opinion of outside counsel,Federal Claims held that the default termination decision could not be sustained and on March 31, 1998, awarded the Team $1,200 in unreimbursed costs. The Court of Appeals for default would be convertedthe Federal Circuit reversed in July 1999 and remanded the case back to a termination for convenience, and that the best estimate of possible loss on termination for conveniencetrial court to determine whether the Team was $350.August 14, 2009, we filed a Combined Petition for Panel Rehearing and for Rehearing En Banc in the Court of Appeals for the Federal Circuit. On November 24, 2009, the Court denied our Combined Petition. On September 28, 2010,May 23, 2011, the U.S. Supreme Court granted our request to reviewvacated the decision of the Court of Appeals. Oral argument was held beforeAppeals upholding the Supreme Court on January 18, 2011. We expect the U.S. Supreme Court to render a decision indefault termination, and remanded the case in 2011. to the Court of Appeals. On July 7, 2011, the Court of Appeals remanded the case to the trial court for additional factual determinations and the trial court heard oral argument on May 7, 2013.$1,352$1,352 in unliquidated progress payments, plus applicable interest. On February 19, 2010,November 15, 2011, the Navy sent a letter confirming that it would not pursue payment from the Team pending all trial court and appellate proceedings adjudicating the U.S.issues remanded by the Supreme Court’s reviewCourt.On May 17, 2013, the President's Fiscal 2014 Budget Request to Congress included a new Department of this matter.We believeDefense General Provision that would authorize the termination for default is contrarySecretary of the Navy to lawreceive and fact and that the loss provision established by McDonnell Douglas Corporationretain payment in-kind in 1990, which was supported by an opinion from outside counsel, continues to provide adequately for the reasonably possible reduction in value of A-12 net contracts in process as of December 31, 2010. Final resolutionsettlement of the A-12 litigation will dependaircraft litigation. On July 30, 2013, the Team and the Navy executed a settlement agreement that took effect upon enactment of the authorization legislation on December 26,1032013. The parties signed a contract modification effectuating the outcomesettlement on January 13, 2014 and, on January 23, 2014, the parties filed a stipulation of further proceedings or possible negotiationsdismissal with the U.S. government. If after reviewingcourt, voluntarily dismissing the Courtlitigation with prejudice. As a result, the Company recorded a $406 pre-tax charge in 2013, which consists of Appeals’ decision,writing-off A-12 inventory, recorded as cost of sales, and providing three EA-18G Growlers at no cost to the U.S. Supreme Court determines, contrary to our belief, thatNavy, recorded as a termination for default was appropriate, we could incur an additional loss of up to $275, consisting principally of $236 of remaining inventory costs. If the courts further hold that a money judgment should be entered against the Team, we could be required to pay the U.S. government up to one-half of the unliquidated progress payments of $1,350 plus statutory interest from February 1991 (currently totaling up to $1,530). In that event, our loss would total approximately $1,711reduction in pre-tax charges. Should, however, the March 31, 1998 judgment of the U.S. Court of Federal Claims in favor of the Team be reinstated, we could be entitled to receive payment of approximately $1,163, including interest from June 26, 1991.Employment, Labor and Benefits LitigationWe have been named as a defendant in two pending class action lawsuits filed in the U.S. District Court for the District of Kansas, each related toIn connection with the 2005 sale of our former Wichita facility to Spirit AeroSystems, Inc. (Spirit). The first action involves allegations, certain individuals not hired by Spirit alleged that Spirit’s hiring decisions following the sale were tainted by age discrimination, violated the Employee Retirement Income Security Act (ERISA),ERISA, violated our collective bargaining agreements, and constituted retaliation. The case was brought in 2006 as a class action on behalf of individuals not hired by Spirit. DuringIn 2012, the second quarterTenth Circuit Court of 2010,Appeals affirmed the court granteddistrict court's 2010 summary judgment in favor of Boeing and Spirit on all class action claims.Duringclaims, but the third quarterparties were not precluded from making claims on an individual basis. As of 2010, plaintiffs filed a motion seeking reconsiderationDecember 31, 2013, eighty-eight individual claims related to this matter were pending. Spirit has agreed to indemnify Boeing for any and all losses.Also related to the 2005 sale of the summary judgment decision.second action, initiatedBoeing Company et al. was filed in 2007, allegesthe U.S. District Court for the District of Kansas, alleging collective bargaining agreement breaches and ERISA violations in connection with alleged failures to provide benefits to certain former employees of the Wichita facility. DiscoveryOn December 11, 2012 the court denied plaintiffs’ motion for summary judgment and granted Boeing’s motion for summary judgment on plaintiffs’ claim that amendment of The Boeing Company Employee Retirement Plan violated the IAM collective bargaining agreement, as well as individual ERISA §510 claims for interference with benefits. The court denied Boeing’s motion for all other claims. The parties are conducting additional discovery in the case is ongoing. Spirit has agreed to indemnify Boeing for any and all losses in the first action, with the exceptionanticipation of claims arising from employment actions prior to January 1, 2005. While Spirit has acknowledged a limited indemnification obligation in the second action, wefurther court proceedings, which have not yet been scheduled. We believe that Spirit is obligated to indemnify Boeing for any and all losses in this matter, although to date Spirit has acknowledged a limited indemnification obligation. We currently estimate that the second action.On October 13, 2006, we were named as a defendant in a lawsuit filed in the U.S. District Court for the Southern District of Illinois. Plaintiffs, seeking to represent a class of similarly situated participants and beneficiaries in theThe Boeing Company Voluntary Investment Plan (the VIP), alleged that fees and expenses incurred by the VIP were and are unreasonable and excessive, not incurred solely for the benefit of the VIP and its participants, and were undisclosed to participants. The plaintiffs further alleged that defendants breached their fiduciary duties in violation of §502(a)(2) of ERISA, and sought injunctive and equitable relief pursuant to §502(a)(3) of ERISA. During the first quarter of 2010, the Seventh Circuit Court of Appeals granted a stay of trial proceedings in the district court pending resolution of an appeal made by Boeing in 2008 to the case’s class certification order. On January 21, 2011, the Seventh Circuit reversed the district court’s class certification order and decertified the class. The Seventh Circuit remanded the case to the district court for further proceedings.BSSI/ICO LitigationAugust 16, 2004, our wholly-owned subsidiary,September 19, 2013, the district court granted plaintiffs’ motion for class certification. On October 3, 2013, Boeing Satellite Systems International, Inc. (BSSI) filed a complaintpetition for declaratory relief against ICO Global Communications (Operations), Ltd. (ICO) in Los Angeles County Superior Court seeking a declaration that ICO’s prior terminationreview of two contracts for convenience extinguished all claims between the parties. On September 16, 2004, ICO filed a cross-complaint alleging breach of contract, economic duress, fraud, unfair competition, and other claims. ICO added The Boeing Company as a defendant in October 2005 to some of these claims and for interference with contract and misappropriation of trade secrets. On January 13, 2006, BSSI filed a cross-complaint against ICO, ICO Global Communications (Holdings) Limited (ICO Holdings), ICO’s parent, and Eagle River Investments, LLC, parent of both ICO and ICO Holdings, alleging fraud and other claims. The trial commenced on June 19, 2008, with ICO seeking to recover approximately $2,000 in damages, including all monies paid to BSSI and Boeing Launch Services, plus punitive damages and other unspecified damages and relief.On October 21, 2008, the jury returned a verdict awarding ICO compensatory damages of $371 plus interest, based upon findings of contract breach, fraud and interference with contract. On October 31, 2008, the jury awarded ICO punitive damages of $236. On January 2, 2009, the court entered judgment for ICO in the amount of $631 which included $24 in prejudgment interest.On February 26, 2009 the trial court granted in part and denied in part post-trial motions we filed seeking to set aside the verdict. As a result, on March 3, 2009, the court entered an amended judgment for ICO in the amount of $604, which included $371 in compensatory damages, $207 in punitive damages and $26 in prejudgment interest. Post-judgment interest will accrue on the judgment at the rate of 10% per year (simple interest) from January 2, 2009. As of December 31, 2010, the amount of post-judgment interest totaled $121.We filed a notice of appeal and ICO filed a notice of cross-appeal in March 2009. As of November 1, 2010, the appeals were fully briefed. No date has been set by the court for argument. We believe that we have substantial arguments on appeal, which we intend to pursue vigorously.BSSI/Telesat CanadaOn November 9, 2006, Telesat Canada (Telesat) and a group of its insurers served BSSI with an arbitration demand alleging breach of contract, gross negligence and willful misconduct in connectionclass certification order with the constructive total loss of Anik F1, a model 702 satellite manufactured by BSSI. Telesat and its insurers initially sought over $385 in damages and $10 in lost profits, but revised their demand to $263. BSSI has asserted a counterclaim against Telesat for $6 in unpaid performance incentive payments and also a $180 contingent counterclaim on the theory that any ultimate award to reimburse the insurers for their payments to Telesat could only result from Telesat’s breach of its contractual obligation to obtain a full waiver of subrogation rights barring recourse against BSSI. We believe that the claims asserted by Telesat and its insurers lack merit, but we have notified our insurance carriers of the demand. The arbitration was stayed pending an application by Telesat to the Ontario Superior Court on a preliminary issue. On July 16, 2010, the court denied Telesat’s request to exclude certain evidence, but granted its alternative request to remove the Chairperson from the arbitration panel. A new Chairperson was appointed on August 19, 2010, and the stay has been lifted. The arbitration hearing has been rescheduled for April 16, 2012.On April 26, 2007, a group of our insurers filed a declaratory judgment action in theSeventh Circuit Court of Cook County, Illinois asserting certain defenses to coverage and requesting a declaration of their obligation under our insurance and reinsurance policies relating toAppeals, which was denied by the Telesat Anik F1 arbitration. On June 12, 2008, the court granted the insurers’ motion for summarySeventh Circuit on November 26, 2013. Summary judgment concluding that our insurance policy excluded the kinds of losses alleged by Telesat. On January 16, 2009, the court granted Boeing’s motion for reconsideration, ruling in favor of Boeing to require the insurers to provide insurance coverage to defend the claim. The case has been stayed pending completion of the underlying arbitration.Civil Securities LitigationOn November 13, 2009, plaintiff shareholders filed a putative securities fraud class action against The Boeing Company and two of our senior executives in federal district court in Chicago. This lawsuit arises from our June 2009 announcement that the first flight of the 787 Dreamliner would be postponed due to a need to reinforce an area within the side-of-body section of the aircraft. Plaintiffs contend that we were aware before June 2009 that the first flight could not take place as scheduled due to issues with the side-of-body section of the aircraft, and that our determination not to announce this delay earlier resulted in an artificial inflation of our stock price for a multi-week period in May and June 2009. In March 2010, we filed a motion to dismiss the complaint for failure to state a cognizable claim, and, on May 26, 2010, the Court granted the motion and dismissed the complaint in its entirety. On June 22, 2010, the Court accepted the plaintiff’s amended complaint, which we moved to dismiss. On August 10, 2010, the Court denied the motion and on August 30, 2010, we answered the amended complaint. On September 24, 2010, we moved to strike the portions of the amended complaint attributed to a confidential source and to dismiss the complaint with prejudice. On October 14, 2010, the Court denied our motions. On December 10, 2010, we moved for reconsideration of the Court’s order denying our motion to dismiss. Discovery has commenced.In addition, plaintiff shareholders have filed three similar shareholder derivative lawsuits concerning the flight schedule for the 787 Dreamliner that closely track the allegations in the putative class action lawsuit. Two of the suitsbriefs were filed in Illinois state court and have been consolidated. The remaining derivative suit was filed in federalthe district court in Chicago. No briefing or discovery has yet taken place inon January 6, 2014, and plaintiffs’ opposition briefs were filed on February 10, 2013. We cannot reasonably estimate the range of loss, if any, that may result from this matter given the current procedural status of these lawsuits. We believe the allegations in alllitigation.104Note 21 – Segment InformationWe operate in five principal segments: Commercial Airplanes; Boeing Military Aircraft (BMA), Network & Space Systems (N&SS), and Global Services & Support (GS&S), collectively Boeing Defense, Space & Security; and Boeing Capital Corporation.Capital. All other activities fall within the Other segment or Unallocated items and eliminations. See page 5554 for the Summary of Business Segment Data, which is an integral part of this note.The Commercial Airplanes segment develops, produces and markets commercial jet aircraft and provides related support services, principally to the commercial airline industry worldwide.Our BDS operations principally involveBMA segment is engaged in the research, development, production and modification of manned and supportunmanned 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 command and control, battle management, airborne, anti-submarine, transport and tanker aircraft.Our N&SS segment is engaged in the research, development, production and modification of the following products and related systems: global strike systems,services: electronics and information solutions, including fighters, bombers, combat rotorcraft systems, weapons and unmanned systems; global mobility systems, including transport and tanker aircraft, rotorcraft transport and tilt-rotor systems; airbornecommand, control, communications, computers, intelligence, surveillance and reconnaissance aircraft, including command(C4ISR), cyber and control, battle management,information solutions, and airborne anti-submarine aircraft; networkintelligence systems; strategic missile and tactical systems, including information and battle management systems, intelligence and security systems, missile defense systems,systems; space and intelligence systems, including satellites and commercial satellite launching vehicles,launch vehicles; and space exploration. BDS support and services deliver a full continuum of innovative products and services that help customers use the systems needed to execute their missions while reducing life-cycle costs. Although some BDS products are contracted in the commercial environment, the primary customer is the U.S. government.Our BMA segment programs include A160 Hummingbird, AH-64 Apache, Airborne Early Warning and Control, CH-47 Chinook, C-17 Globemaster, EA-18G Growler Airborne Attack Electronic Aircraft, F/A-18E/F Super Hornet, F-15 Strike Eagle, F-22 Raptor, Harpoon, KC-767 International Tanker, Joint Direct Attack Munition, P-8A Poseidon, P-8I, ScanEagle, Small Diameter Bomb and V-22 Osprey.Our N&SS segment programs include Airborne Laser, Family of Advanced Beyond Line-of-Sight Terminals, Brigade Combat Team Modernization, Future Rapid Effects System, Global Positioning System, Ground-based Midcourse Defense (GMD), International Space Station, Joint Tactical Radio System, Satellite Systems, Cyber and Security Programs, Space Payloads and Space Shuttle.Our GS&S segment programsprovides customers with mission readiness through total support solutions. Our global services business 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. GS&S international operations include Integrated Logistics on platforms including AH-64, AV-8B, C-17, CH-47, F-15, F/A-18, F-22, GMD, KC-767 International TankerBoeing Defence U.K. Ltd., Boeing Defence Australia, and V-22; Maintenance, Modifications and Upgrades on platforms including A-10, B-1, B-52, C-32, C-40, C-130, E-4B, E-6, KC-10, KC-135, T-38 and VC-25; Training Systems and Services on platforms including AH-64, C-17, F-15, F-16, F/A-18 and T-45; and Defense and Government Services including the UK Future Logistics Information Services program.Our BCC segment facilitates, arranges, structures and provides selective financing solutions for our Commercial Airplanes customers. In the space and defense markets, BCC primarily arranges and structures financing solutions for our BDS government and commercial satellite customers.Our Other segment includes the unallocated activities of Engineering, Operations & Technology (EO&T) and Shared Services Group (SSG), as well as intercompany guarantees provided to BCC. EO&T provides Boeing with technical and functional capabilities, including information technology, research and development, test and evaluation, technology strategy development, environmental remediation management and intellectual property management.Effective January 1, 2010, 20092013, 2012 and 20082011 certain programs were realigned among BDS segments. Business segment data for all periods presented have been adjusted to reflect the realignment.105While our principal operations are in the United States, Canada and Australia, some key suppliers and subcontractors are located in Europe and Japan. Revenues, including foreign military sales, are reported by geographic areacustomer location and consisted of the following:Years ended December 31, 2010 2009 2008 $ 7,288 $ 7,536 $ 7,913 3,109 4,888 2,404 7,872 7,516 5,992 3,685 5,338 2,568 1,707 1,447 989 956 602 406 612 493 1,849 930 963 1,656 26,159 28,783 23,777 38,147 39,498 37,132 $ 64,306 $ 68,281 $ 60,909 Commercial Airplanes segment revenues were approximately 78%, 86% and 70% of total revenues in Europe and approximately 75%, 70% and 75% of total revenues in Asia, excluding China, for 2010, 2009 and 2008, respectively. BDS revenues were approximately 20%, 12% and 20% of total revenues in Europe and approximately 25%, 29% and 24% of total revenues in Asia, excluding China, for 2010, 2009 and 2008, respectively. BDS revenuesYears ended December 31, 2013 2012 2011 Asia, other than China $12,200 $10,390 $7,438 China 10,555 6,086 4,779 Europe 10,622 10,269 9,850 Middle East 9,165 10,285 5,477 Oceania 1,657 2,043 3,067 Canada 1,486 586 618 Africa 621 1,282 1,759 Latin America, Caribbean and other 2,725 3,555 1,356 Total non-U.S. revenues 49,031 44,496 34,344 United States 37,592 37,202 34,391 Total revenues $86,623 $81,698 $68,735 Revenues from the U.S. government (including foreign military sales through the U.S. government), primarily recorded at BDS, represented 43%34%, 43%33% and 46%37% of consolidated revenues for 2010, 20092013, 2012 and 2008,2011, respectively. Approximately 5%3% of operating assets were located outside the United States as of December 31, 20102013 and 2009.Research and Development ExpenseYears ended December 31, 2010 2009 2008 $ 2,975 $ 5,383 $ 2,838 589 582 486 417 397 298 130 122 149 1,136 1,101 933 10 22 (3 ) $ 4,121 $ 6,506 $ 3,768 Research and development expense includes bid and proposal costs of $355, $343 and $330, respectively.Depreciation and AmortizationYears ended December 31, 2013 2012 2011 Commercial Airplanes $632 $614 $565 Defense, Space & Security: Boeing Military Aircraft 131 120 116 Network & Space Systems 120 123 128 Global Services & Support 69 67 62 Total Defense, Space & Security 320 310 306 Boeing Capital Corporation 110 150 153 Other segment 299 261 242 Unallocated items and eliminations 483 476 409 Total $1,844 $1,811 $1,675 106Table of ContentsYears ended December 31, 2010 2009 2008 $ 541 $ 495 $ 379 143 145 133 161 169 140 63 69 54 367 383 327 204 210 225 233 201 49 401 389 522 $ 1,746 $ 1,678 $ 1,502 Capital ExpendituresYears ended December 31, 2010 2009 2008 $ 341 $ 420 $ 708 102 141 140 83 51 87 51 75 40 236 267 267 136 113 12 412 386 687 $ 1,125 $ 1,186 $ 1,674 Years ended December 31, 2013 2012 2011 Commercial Airplanes $694 $665 $540 Defense, Space & Security: Boeing Military Aircraft 186 153 122 Network & Space Systems 96 115 101 Global Services & Support 48 57 55 Total Defense, Space & Security 330 325 278 Other segment 323 232 174 Unallocated items and eliminations 751 481 721 Total $2,098 $1,703 $1,713 Unallocated capital expenditures relate primarily to assets managed by SSG on behalf of the five principal segments.We recorded earningsEarnings from operations associated with our cost and equity method investments of $67, $74$25, $77 and $47$69 in our Commercial Airplanes segment and $201, $175$203, $196 and $194$210 in BDS, primarily in our N&SS segment, for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, 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 segment for further modification prior to delivery to the customer. 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 and eliminations, are shown in the following table.Years ended December 31, 2010 2009 2008 $ 604 $ 740 $ 1,193 92 80 77 $ 696 $ 820 $ 1,270 Years ended December 31, 2013 2012 2011 Commercial Airplanes $879 $1,215 $701 Boeing Capital 29 49 66 Total $908 $1,264 $767 107Unallocated Items and EliminationsUnallocated items and eliminations includes costs not attributable to business segments as well as intercompany profit eliminations. This includes We generally allocate costs to business segments based on the U.S. federal cost accounting standards. Components of Unallocated items and eliminations are shown in the following table.Years ended December 31, 2013 2012 2011 Share-based plans ($95 ) ($81 ) ($83 ) Deferred compensation (238 ) (75 ) (61 ) Capitalized interest (69 ) (70 ) (51 ) Eliminations and other (703 ) (266 ) (276 ) Sub-total (1,105 ) (492 ) (471 ) Pension (1,374 ) (787 ) (269 ) Postretirement 60 (112 ) (248 ) Pension and Postretirement (1,314 ) (899 ) (517 ) Total ($2,419 ) ($1,391 ) ($988 ) Unallocated Pension and Other Postretirement Benefit ExpenseUnallocated pension and other postretirement benefit expense which represents the difference betweenportion of pension and other postretirement benefit costs that are not recognized underby business segments for segment reporting purposes. Through 2012, the business segments have been allocated pension and other postretirement benefit costs using U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than Generally Accepted Accounting Principles in the United States of America (GAAP). Beginning in 2013, pension costs, comprising GAAP service and prior service costs, are allocated to Commercial Airplanes. BDS continues to be allocated CAS pension costs which are allocable to government contracts. Other postretirement benefit costs will continue to be allocated to business segments based on CAS, which is generally based on benefits paid. Prior year allocations have not been adjusted.AssetsSegment assets are summarized in the consolidated financial statementstable below.December 31, 2013 2012 Commercial Airplanes $49,520 $41,769 Defense, Space & Security: Boeing Military Aircraft 6,973 6,582 Network & Space Systems 6,450 6,669 Global Services & Support 3,939 3,692 Total Defense, Space & Security 17,362 16,943 Boeing Capital 3,914 4,347 Other segment 1,208 1,043 Unallocated items and eliminations 20,659 24,794 Total $92,663 $88,896 Assets included in Unallocated items and federal cost accounting standards required to be utilized by our business segments for U.S. government contracting purposes.The most significant items not allocated to segments are shown in the following table.Years ended December 31, 2010 2009 2008 $ (136 ) $ (189 ) $ (149 ) (112 ) (158 ) 223 54 110 (208 ) (59 ) (93 ) (79 ) (54 ) (53 ) (44 ) (428) (211) (66 ) $ (735 ) $ (594 ) $ (323 ) Unallocated assetseliminations primarily consist of Cash and cash equivalents, Short-term and other investments, prepaid pension expense, net deferredDeferred tax assets, capitalized interest and assets held by SSG as well as intercompany eliminations. Unallocated liabilities include various accrued employee compensation and benefit liabilities, including accrued retiree health care, net deferred tax liabilities and income taxes payable. Debentures and notes payable are not allocated to other business segments except for the portion related to BCC.Segment assets and liabilities are summarized in the tables below.AssetsDecember 31, 2010 2009 $ 28,341 $ 20,353 6,731 6,075 7,456 7,434 3,685 3,716 17,872 17,225 5,561 6,178 779 949 16,012 17,348 $ 68,565 $ 62,053 LiabilitiesDecember 31, 2010 2009 $ 19,663 $ 18,616 4,025 4,041 953 1,023 1,582 1,510 6,560 6,574 3,861 4,538 937 872 34,682 29,228 $ 65,703 $ 59,828 108Note 22 – Quarterly Financial Data (Unaudited) 2010 2009 4th 3rd 2nd 1st 4th 3rd 2nd 1st $ 16,550 $ 16,967 $ 15,573 $ 15,216 $ 17,937 $ 16,688 $ 17,154 $ 16,502 (13,413 ) (13,746 ) (12,540 ) (12,144 ) (14,508 ) (14,480 ) (13,807 ) (13,745 ) 1,103 1,387 1,307 1,174 1,693 (2,151 ) 1,529 1,025 1,166 837 789 519 1,283 (1,560 ) 997 615 (2 ) (2 ) (15 ) (4 ) 1 (5 ) 1,164 837 787 519 1,268 (1,564 ) 998 610 1.57 1.13 1.07 0.71 1.79 (2.22 ) 1.42 0.88 1.57 1.13 1.07 0.71 1.77 (2.23 ) 1.42 0.87 1.56 1.12 1.06 0.70 1.77 (2.22 ) 1.41 0.87 1.56 1.12 1.06 0.70 1.75 (2.23 ) 1.41 0.86 0.84 0.84 0.84 0.84 72.49 70.00 76.00 74.53 56.56 55.48 53.39 47.00 61.84 59.48 59.84 54.80 47.18 38.92 34.21 29.05 65.26 66.54 62.75 72.61 54.13 54.15 42.50 35.58 2013 2012 4th 3rd 2nd 1st 4th 3rd 2nd 1st Total revenues $23,785 $22,130 $21,815 $18,893 $22,302 $20,008 $20,005 $19,383 Total costs and expenses (20,388 ) (18,674 ) (18,450 ) (15,756 ) (19,046 ) (16,799 ) (16,746 ) (16,074 ) Earnings from operations 1,515 1,803 1,716 1,528 1,624 1,559 1,542 1,565 Net earnings from continuing operations 1,233 1,160 1,087 1,106 978 1,034 967 924 Net (loss)/gain from disposal of discontinued operations (2 ) 1 (2 ) (1 ) Net earnings 1,233 1,158 1,088 1,106 978 1,032 967 923 Basic earnings per share from continuing operations 1.63 1.53 1.43 1.45 1.29 1.36 1.28 1.23 Basic earnings per share 1.63 1.53 1.43 1.45 1.29 1.36 1.28 1.23 Diluted earnings per share from continuing operations 1.61 1.51 1.41 1.44 1.28 1.35 1.27 1.22 Diluted earnings per share 1.61 1.51 1.41 1.44 1.28 1.35 1.27 1.22 Cash dividends declared per share 1.215 0.97 0.925 0.88 Common stock sales price per share: High 142.00 120.38 104.15 86.84 76.56 75.96 77.83 76.74 Low 113.34 98.99 83.80 72.68 69.20 69.03 66.82 72.30 Quarter end 136.49 117.50 102.44 85.85 75.36 69.60 74.30 74.37 Gross profit is calculated as Total revenues minus Total costs and expenses. Cash dividendsTotal costs and expenses includes Cost of $0.42 per share were paid during eachproducts, Cost of services and Boeing Capital interest expense.During the first quarter of 2010 and 2009.During the fourth quarter of 2010 and 2009,2013, we recorded pre-tax chargesa charge of $136 and $133 on$406 related to the AEW&C programA-12 litigation settlement. See Note 20.In 2013, we recorded income tax benefits of $145 in our BMA segment.During the first quarter and third quarters$212 in the fourth quarter related to research tax credits.We increased our quarterly dividend from $0.44 to $0.485 in December 2012 and to $0.73 in December 2013.Note 23 – Subsequent EventIn January 2014, employees represented by the International Association of 2009, we recorded pre-tax chargesMachinists and Aerospace Workers District 751 (IAM 751) voted to extend our collective bargaining agreement to September 2024. Under the terms of $347the agreement, IAM 751-represented employees’ accrued pension benefits will immediately vest and $1,005in November 2016 these employees will transition to a company-funded retirement savings plan in lieu of participation in the defined benefit pension plan. IAM 751-represented employees hired on or after January 3, 2014 will be immediately covered by the 747 programcompany-funded retirement savings plan. The defined benefit pension plan changes will be accounted for as a curtailment in our Commercial Airplanes segment. During the thirdfirst quarter of 2009, we recorded $2,6192014 and are expected to result in a non-cash charge of researchapproximately $140 and development costs relatinga reduction to the first three 787 flight test aircraft in our Commercial Airplanes segment.109REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders ofThe Boeing CompanyChicago, IllinoisWe have audited the accompanying consolidated statements of financial position of The Boeing Company and subsidiaries (the “Company”) as of December 31, 20102013 and 2009,2012, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a) 2.2013. The financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Boeing Company and subsidiaries as of December 31, 20102013 and 2009,2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010,2013, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010,2013, based on the criteria established inInternal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 9, 201114, 2014 expressed an unqualified opinion on the Company’s internal control over financial reporting./S/ DELOITTEs/ Deloitte & TOUCHETouche LLPChicago, IllinoisFebruary 9, 2011110REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders ofThe Boeing CompanyChicago, IllinoisWe have audited the internal control over financial reporting of The Boeing Company and subsidiaries (the “Company”) as of December 31, 2010,2013, based on criteria established inInternal Control – Integrated Framework(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010,2013, based on the criteria established inInternal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 20102013 of the Company and our report dated February 9, 201114, 2014 expressed an unqualified opinion on those financial statements and financial statement schedule./S/ DELOITTEs/ Deloitte & TOUCHETouche LLPChicago, IllinoisFebruary 9, 2011111Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and Procedures(a)(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, 20102013 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)(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 (1992) 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, 2010.Our internal control over financial reporting as of December 31, 2010,2013, 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.(c)(c) Changes in Internal Controls Over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 20102013 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.Item 9B. Other InformationNonePART IIINone.112Part IIIItem 10. Directors, Executive Officers and Corporate GovernanceOur executive officers as of February 1, 2011,14, 2014, are as follows:Name Age AgePrincipal Occupation or Employment/Other Business Affiliations James F. Albaugh6053 Executive Vice President, since July 2002 and President and Chief Executive Officer of BCABoeing Defense, Space & Security since September 2009. Prior thereto,December 2013. Mr. Chadwick joined Boeing in 1982, and his previous positions include President of Boeing Military Aircraft from March 2009 to December 2013; President of Precise Engagement and Mobility Systems from February 2008 to February 2009; Vice President and CEOGeneral Manager, Global Strike Systems from January 2006 to January 2008; and Vice President of BDSF/A-18 from July 2002January 2004 to August 2009. Prior thereto,December 2005.Raymond L. Conner 58 Vice Chairman, President and Chief Executive Officer of Commercial Airplanes since December 2013. Mr. Conner joined Boeing in 1977, and his previous positions include Executive Vice President, President and Chief Executive Officer of Commercial Airplanes from June 2012 to December 2013; Senior Vice President of BoeingSales and Customer Support of Commercial Airplanes from August 2011 to June 2012; Vice President and General Manager, Supply Chain Management and Operations of Commercial Airplanes from December 2008 to August 2011; Vice President of SpaceSales, Commercial Airplanes from December 2007 to December 2008; and Communications Group since September 1998 (named CEOVice President and General Manager of Space and Communications Group in March 2001). Prior thereto, President, Boeing Space Transportation since April 1998 and President of Rocketdyne Propulsion and Power since March 1997.the 777 Program. Mr. AlbaughConner serves on the board of TRW Automotive Holdings,Johnson Controls, Inc.James A. Bell62Executive Vice President and Chief Financial Officer since January 2004 and Corporate President since June 2008. Prior thereto, Senior Vice President of Finance and Corporate Controller from October 2000 to January 2004. Prior thereto, Vice President of Contracts and Pricing for Boeing Space Communications from January 1997 to October 2000. Mr. Bell serves on the boards of The Dow Chemical Company and Boeing Capital Corporation.5457 Senior Vice President, Office of Internal Governance since May 2007. Prior thereto,Ms. Denson-Low joined Boeing in 2000 when the Company acquired Hughes Space and Communications where she held the position of Vice President, General Counsel. Her prior positions at Boeing include Vice President and Assistant General Counsel of BDS from August 2003 to May 2007. Prior thereto,and Vice President of Human Resources for BDS from March 2002 to August 2003. Ms. Denson-Low joined Boeing when the Company acquired Hughes Space and Communications in 2000, when she held the position of Vice President, General Counsel.BDS.4649 Senior Vice President, Communications since January 2007. Prior thereto,Mr. Downey joined Boeing in 1986, and his prior positions include Vice President, Corporate Communications from April to December 2006 andCommunications; Vice President, BCA Communications from May 2002 to April 2006. Prior positions includeCommercial Airplanes Communications; Corporate Vice President, Internal and Executive CommunicationsCommunications; and General Manager of Communications and Community Relations for Military Aircraft and Missile Systems unit. Mr. Downey joined the Company in 1986.5861 President, Boeing International since November 2007 and Senior Vice President, Business Development and Strategy since October 2009. Prior thereto, Senior Vice President, Business Development and Strategy from March 2006 to November 2007. Prior thereto, Vice President, Business Development at BDS from September 2002 to March 2006. Mr. Hill joined Boeing in 1996 when the Company acquired Rockwell’s Aerospaceaerospace and Defensedefense business in 1996, whenwhere he held the position of Vice President, Aerospace Government Affairs and Marketing. His prior positions at Boeing include Senior Vice President, Business Development and Strategy and Vice President, Business Development at BDS. NameAgePrincipal Occupation or Employment/Other Business Affiliations4952 Senior Vice President, Government Operations since joining Boeing in June 2008. Prior thereto,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) from 1998 until 2002..113Age Principal Occupation or Employment/Other Business Affiliations J. Michael Luttig 5659 Executive Vice President, and General Counsel since April 2009. Prior thereto,Mr. Luttig joined Boeing in May 2006 as Senior Vice President, and General Counsel fromCounsel. From October 1991 to May 2006, to April 2009. Prior thereto, Mr. Luttighe served on the United States Court of Appeals for the Fourth Circuit from October 1991 to May 2006. Prior thereto,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. Mr. LuttigJustice and was associated with Davis Polk & Wardwell LLP from September 1985 to March 1989.LLP. Mr. Luttig serves on the board of Boeing Capital Corporation and as Director, Franklin Templeton Mutual Funds.6164 Chairman President and Chief Executive Officer since July 2005. Prior thereto, heMr. McNerney also served as President of The Boeing Company from July 2005 to December 2013. Mr. McNerney previously served as Chairman and Chief Executive Officer of 3M Company (diversified technology) from January 2001 to June 2005. Beginning in 1982, he served in management positions at General Electric Company, his most recent being President and Chief Executive Officer of GE Aircraft Engines from 1997 to 2000. In addition to The Boeing Company, Mr. McNerney also serves on the boards of The Procter & Gamble Company and International Business Machines Corporation. He is Chair of President Obama’sObama's Export Council and a member of various business and educational organizations.Council.50 47Vice Chairman, President and Chief Operating Officer since December 2013. Mr. Muilenburg joined Boeing in 1985, and his previous positions include Executive Vice President, President and Chief Executive Officer of BDS sincefrom September 2009. Prior thereto,2009 to December 2013; President of Global Services & Support from February 2008 to August 2009. Prior thereto,2009; Vice President and General Manager of Combat Systems from May 2006 to February 2008. Prior thereto,2008; and Vice President and Program Manager for Future Combat Systems from 2003 to May 2006.Systems. Mr. Muilenburg joinedserves on the Company in 1985.board of Caterpillar Inc.Anthony M. ParasidaRichard D. Stephens5857 Senior Vice President, Human Resources and Administration since September 2005. Prior thereto,April 2013. Mr. Parasida joined Boeing in 1978, and his previous positions include Senior Vice President of Internal Services from December 2004October 2012 to September 2005. Prior positions includeApril 2013, President of SharedGlobal Services Group and& Support from September 2009 to October 2012; Vice President and General Manager Homeland Securityof Surveillance and Services. Mr. Stephens joined the Company in 1980.Engagement Systems from January 2006 to September 2009; Vice President of P-8; and Vice President of F/A-18.Gregory D. Smith 47 Executive Vice President, Chief Financial Officer since February 2012. Mr. Smith previously served as 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. 5659 Chief Technology Officer and Senior Vice President, of Engineering, Operations & Technology since October 2006. Prior thereto,Dr. Tracy joined Boeing in 1981, and his previous positions include Vice President of Engineering and Mission Assurance for BDS, February 2004 to September 2006. Prior positions includeBDS; Vice President of Structural Technologies, Prototyping, and Quality for Phantom WorksWorks; and General Manager of Engineering for Military Aircraft and Missiles. Dr. Tracy joined the Company in 1981.114Information relating to our directors and nominees will be included under the caption “Election of Directors” in the 20112014 Proxy Statement for our Annual Shareholders Meeting scheduled to be held on May 2, 2011April 28, 2014 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 – Audit Committee” in the 20112014 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 Financial Officer (CFO), Controller and all finance employees; and (3) The Boeing Code of Conduct that applies to all employees, including our Chief Executive Officer (CEO), (collectively, the Codes of Conduct). The Codes of Conduct are posted on our website, www.boeing.com, 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 CompensationThe information required by Item 402 of Regulation S-K will be included under the captions “Executive Compensation” and “Corporate Governance – Director Compensation” in the 20112014 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 20112014 Proxy Statement, and that information is incorporated by reference herein.115Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by Item 403 of Regulation S-K will be included under the caption “Stock Ownership Information” in the 20112014 Proxy Statement, and that information is incorporated by reference herein.Equity Compensation Plan InformationWe 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, 2010: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) 28,975,422 $ 65.96 42,406,254 3,948,659 5,127,751 None None None 38,051,832 $ 65.96 42,406,254 Plan Category Number of sharesto be issued upon exercise of outstandingoptions, warrantsand rights Weighted-averageexercise price ofoutstandingoptions, warrantsand rights Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingshares reflectedin column (a)) (a) (b) (c) Equity compensation plans approved by shareholders Stock options 23,767,743 $73.97 Deferred compensation 3,793,771 Other stock units 4,855,247 Equity compensation plans not approved by shareholders None None None Total(1)32,416,761 $73.97 24,900,023 (1)endingwhich end in 20112013, 2014 and 2012.For further information, see Note 15 to our Consolidated Financial Statements.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by Item 404 of Regulation S-K will be included under the caption “Corporate Governance – Related Person Transactions” in the 20112014 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 “Corporate Governance – Director Independence” in the 20112014 Proxy Statement, and that information is incorporated by reference herein.Item 14. Principal Accounting Fees and ServicesThe information required by this Item will be included under the caption “Principal Accountant Fees and Services” in the 20112014 Proxy Statement, and that information is incorporated by reference herein.116PART IVItem 15. Exhibits, Financial Statement Schedules(a)(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 SchedulesScheduleDescriptionPageIIValuation and Qualifying Accounts121Financial Statement Schedules The auditors’ report with respect to the above-listed financial statement schedule appears on page 109 of this report. All other financial statements and schedules not listed are omitted either because they are not applicable, not required, or the required information is included in the consolidated financial statements.3. Exhibits (3) Articles of Incorporation and By-Laws. (i) 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). (ii) By-Laws of The Boeing Company, as amended and restated January 10, 2011December 16, 2013 (Exhibit 3.2 to the Company’s Current Report on Form 8-K dated January 7, 2011)December 16, 2013).(10) Material Contracts. Bank Credit Agreements·The Boeing Company Bank Credit Agreements(i) U.S. $2.376 Billion 364-Day Credit Agreement, dated as of November 12, 2010,10, 2011, among The Boeing Company, the Lenders named therein,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 and a syndicate of lenders as defined in the Credit Agreement (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 12, 2010)10, 2011).(ii) U.S. $2.0 Billion Five-Year Credit Agreement, dated as of November 16, 2007,10, 2011, among The Boeing Company, the Lenders named therein, JPMorgan Chase Bank, as syndicated agent,party thereto, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.,LLC as joint lead arrangers and joint book managers, JPMorgan Chase Bank, N.A. as syndication agent and Citibank, N.A. as administrative agent for such Lenders (Exhibit (10)(ii)10.2 to the Company’s Current Report on Form 10-K for the year ended December 31, 2007)8-K dated November 10, 2011).Business Acquisition Agreements·Business Acquisition Agreements(iii) Joint Venture Master Agreement, dated as of May 2, 2005, by and among Lockheed Martin Corporation, The Boeing Company and a Delaware LLC, dated as of May 2, 2005United Launch Alliance, L.L.C. (Exhibit (10)(i) to the Company’s Form 10-Q for the quarter ended June 30, 2005).(iv) 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). Management Contracts and Compensatory Plans(v)Asset Purchase Agreement by and between Vought Aircraft Industries, Inc. and BCACSC, Inc. dated as of July 6, 2009 (Exhibit (10)(i) to the Company’s Form 10-Q for the quarter ended September 30, 2009).·Management Contracts and Compensatory Plans(vi)1992 Stock Option Plan for Nonemployee Directors.(a)Plan (Exhibit (19) to the Company’s Form 10-Q for the quarter ended March 31, 1992).(b)Form of Stock Option Agreement (Exhibit (10)(viii)(b) to the Company’s Form 10-K for the year ended December 31, 1992).(vii)(v)Supplemental Benefit Plan for Employees of The Boeing Company, as amended and restated effective January 1, 2009 (Exhibit 4.1 to the Company’s Form S-8 filed on December 22, 2008). (viii)Supplemental Retirement Plan for Executives of The Boeing Company, as amended on March 22, 2003 (Exhibit (10)(vi) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003).(ix)(vi)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). 117(x)(vii) 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). (xi)(viii) Incentive Compensation Plan for Employees of The Boeing Company and Subsidiaries, as amended and restated January 1, 2008 (Exhibit 10.7 to the Company’s Current Report on Form 8-K dated October 28, 2007). (xii)(ix) 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). (xiii)(x) Amended and Restated Executive Employment Agreement with W. James McNerney, Jr. dated March 13, 2008 (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 13, 2008). (xiv)(xi) Summary of NonemployeeNon-Employee Director Compensation (Exhibit (10)(i)10 to the Company’s Form 10-Q for the quarter ended September 30, 2010)2012).(xv)(xii) 2004 Variable Compensation Plan (formerly the 1999 Bonus and Retention Award Plan), as amended and restated effective January 1, 2008 (Exhibit 10.8 to the Company’s Current Report on Form 8-K dated October 28, 2007). (xvi)(xiii) The Boeing Company Executive Layoff Benefits Plan, as amended and restated effective January 1, 2010 (Exhibit (10)(xxix) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009).
| (xiv) | The Boeing Company 2003 Incentive Stock |
| (a) | Plan, as amended and restated effective February |
| (b) | Form of Non-Qualified Stock Option Grant Notice of |
| (c) | Form of Notice of Terms of Restricted Stock |
| (d) | Form of Performance Award |
| (e) | Form of Notice of Terms of Restricted Stock Units dated February 27, 2012 (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 27, 2012). |
| (f) | Form of Notice of Terms of Restricted Stock Units dated December 17, 2012 (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 17, 2012). |
| (g) | Form of Notice of Terms of Restricted Stock Units dated February 25, 2013. |
| (xv) | Supplemental Executive Retirement Plan for Employees of The Boeing Company, as amended and restated |
| (xvi) | The Boeing Company Elected Officer Annual Incentive Plan, as amended and restated effective January 1, 2008 (Exhibit 10.6 to the Company’s Current Report on Form 8-K dated October 28, 2007). |
| (xvii) | 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). |
|
| (12) | Computation of Ratio of Earnings to Fixed Charges. |
| (14) |
| (i) | The Boeing Company Code of Ethical Business Conduct for Members of the Board of Directors |
| (ii) | The Boeing Company Code of Conduct for Finance Employees |
| (iii) | The Boeing Company Code of Conduct |
| (21) | List of Company Subsidiaries. |
| (23) | Consent of Independent Registered Public Accounting |
| (31) | Section 302 Certifications. |
| (i) | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
| (ii) | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
| (32) | Section 906 Certifications. |
| (i) | Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
| (ii) | Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
| (99) | Additional |
| (i) | Commercial Program Method of Accounting (Exhibit (99)(i) to the 1997 Form 10-K). |
| (101) | Interactive Data |
| (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 | ||
THE BOEING COMPANY
| THE BOEING COMPANY | ||||||||||
| (Registrant) | ||||||||||
| By: | / | |||||||||
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| /s/ W. James McNerney, Jr. | / | |||
| Edmund P. Giambastiani, Jr. – Director | ||||
| (Principal Executive Officer) | ||||
| /s/ Gregory D. Smith | /s/ Lawrence W. Kellner | |||
| Gregory D. Smith – Executive Vice President and Chief Financial Officer | Lawrence W. Kellner – Director | |||
| (Principal Financial Officer) | ||||
| /s/ Diana L. Sands | /s/ Edward M. Liddy | |||
| Diana L. Sands – Vice President of Finance and Corporate Controller | Edward M. Liddy – Director | |||
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/ |
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| David L. Calhoun – Director | ||||
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| /s/ Arthur D. Collins, Jr. | / | |||
| Arthur D. Collins, Jr. – Director | ||||
| ||||
| /s/ Linda Z. Cook | / | |||
| Linda Z. Cook – Director | ||||
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| Mike S. Zafirovski – Director | |||
| ||||
| /s/ Kenneth M. Duberstein | ||||
SCHEDULE II—Valuation and Qualifying Accounts
The Boeing Company and Subsidiaries
Allowance for Customer Financing and Other Assets
(Deducted from assets to which they apply)
(Dollars in millions)
Customer Financing | 2010 | 2009 | 2008 | |||||||||
Balance at January 1 | $ | 302 | $ | 269 | $ | 195 | ||||||
Charged to costs and expenses | 51 | 45 | 84 | |||||||||
Deductions from reserves | (12 | ) | (10 | ) | ||||||||
Balance at December 31 | $ | 353 | $ | 302 | $ | 269 | ||||||
Sea Launch Reserves | 2010 | 2009 | 2008 | |||||||||
Balance at January 1 | $ | 969 | $ | 723 | $ | 660 | ||||||
Additions(1) | 246 | 63 | ||||||||||
Deductions from reserves(2) | (969 | ) | ||||||||||
Balance at December 31 | $ | 969 | $ | 723 | ||||||||
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