UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2016~~2017



¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-442



	THE BOEING COMPANY

(Exact name of registrant as specified in its charter)



Delaware		91-0425694
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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



	(312) 544-2000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý 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 ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of October ~~19, 2016~~,18, 2017, there were ~~617,165,902~~595,578,523 shares of common stock, $5.00 par value, issued and outstanding.

THE BOEING COMPANY

FORM 10-Q

For the Quarter Ended September 30, ~~2016~~2017

INDEX



Part I. Financial Information (Unaudited)		Page

Item 1.	Financial Statements	1
	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Statements of Financial Position	3
	Condensed Consolidated Statements of Cash Flows	4
	Condensed Consolidated Statements of Equity	5
	Summary of Business Segment Data	6
	Note 1 – Basis of Presentation	7
	Note 2 – Earnings Per Share	8
	Note 3 – Income Taxes	9
	Note 4 – Inventories	10
	Note 5 – Customer Financing	11
	Note 6 – Investments	1312
	Note 7 – Other Assets	1312
	Note 8 – Commitments and Contingencies	1413
	Note 9 – Arrangements with Off-Balance Sheet Risk	1816
	Note 10 – Debt	1917
	Note 11 – Postretirement Plans	2018
	Note 12 – Share-Based Compensation and Other Compensation Arrangements	2018
	Note 13 – Shareholders' Equity	2119
	Note 14 – Derivative Financial Instruments	2220
	Note 15 – Fair Value Measurements	2422
	Note 16 – Legal Proceedings	2624
	Note 17 – Segment Information	2624
	Report of Independent Registered Public Accounting Firm	2827

Forward-Looking Statements		2928

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3130
	Consolidated Results of Operations and Financial Condition	3130
	Commercial Airplanes	3635
	Defense, Space & Security	4038
	Boeing Capital	4541
	Liquidity and Capital Resources	4643
	Off-Balance Sheet Arrangements	4744
	Contingent Obligations	4844
	Non-GAAP Measures	4844
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4946

Item 4.	Controls and Procedures	4946

Part II. Other Information

Item 1.	Legal Proceedings	5047

Item 1A.	Risk Factors	5047

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5047

Item 3.	Defaults Upon Senior Securities	5047

Item 4.	Mine Safety Disclosures	5047

Item 5.	Other Information	5047

Item 6.	Exhibits	5148

Signature		5249

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


(Dollars in millions, except per share data)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Sales of products		$63,563			$64,408			$21,494			$23,000			$60,484			$63,563			$21,825			$21,494
Sales of services	7,722			8,133			2,404			2,849			7,540			7,722			2,484			2,404
Total revenues	71,285			72,541			23,898			25,849			68,024			71,285			24,309			23,898

Cost of products	(55,117		)	(55,020		)	(17,907		)	(19,393		)	(49,856		)	(55,117		)	(18,050		)	(17,907		)
Cost of services	(6,163		)	(6,377		)	(1,983		)	(2,191		)	(5,730		)	(6,163		)	(1,910		)	(1,983		)
Boeing Capital interest expense	(46		)	(49		)	(14		)	(16		)	(53		)	(46		)	(27		)	(14		)
Total costs and expenses	(61,326		)	(61,446		)	(19,904		)	(21,600		)	(55,639		)	(61,326		)	(19,987		)	(19,904		)
	9,959			11,095			3,994			4,249			12,385			9,959			4,322			3,994
Income from operating investments, net	220			207			69			78			169			220			49			69
General and administrative expense	(2,617		)	(2,594		)	(923		)	(889		)	(2,888		)	(2,617		)	(915		)	(923		)
Research and development expense, net	(3,901		)	(2,426		)	(857		)	(857		)	(2,418		)	(3,901		)	(767		)	(857		)
Loss on dispositions, net	(10		)				(1		)	(1		)				(10		)				(1		)
Earnings from operations	3,651			6,282			2,282			2,580			7,248			3,651			2,689			2,282
Other income/(loss), net	41			(23		)	2			(26		)
Other income, net													94			41			45			2
Interest and debt expense	(227		)	(203		)	(81		)	(67		)	(267		)	(227		)	(87		)	(81		)
Earnings before income taxes	3,465			6,056			2,203			2,487			7,075			3,465			2,647			2,203
Income tax (expense)/benefit	(201		)	(1,906		)	76			(783		)	(2,010		)	(201		)	(794		)	76
Net earnings		$3,264			$4,150			$2,279			$1,704			$5,065			$3,264			$1,853			$2,279

Basic earnings per share		$5.09			$5.99			$3.64			$2.50			$8.37			$5.09			$3.10			$3.64

Diluted earnings per share		$5.04			$5.92			$3.60			$2.47			$8.27			$5.04			$3.06			$3.60

Cash dividends paid per share		$3.27			$2.73			$1.09			$0.91			$4.26			$3.27			$1.42			$1.09

Weighted average diluted shares (millions)	647.9			700.9			632.7			689.0			612.8			647.9			606.3			632.7

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in millions) Nine months ended September 30 Three months ended September 30
2016
2015
2016
2015
Net earnings
$3,264

$4,150

$2,279

$1,704
Other comprehensive income, net of tax:
Currency translation adjustments (3 ) (79 ) (10 ) (35 )
Unrealized gain on certain investments, net of tax of ($1), ($5), ($2), and ($2) 1
5
2
1
Unrealized gain/(loss) on derivative instruments:
Unrealized gain/(loss) arising during period, net of tax of ($30), $78, ($7), and $41 54
(139 ) 13
(73 )
Reclassification adjustment for losses included in net earnings, net of tax of ($32), ($28), ($8), and ($12) 58
52
15
24
Total unrealized gain/(loss) on derivative instruments, net of tax 112
(87 ) 28
(49 )
Defined benefit pension plans and other postretirement benefits:
Amortization of prior service (benefit)/cost included in net periodic pension cost, net of tax of $23, ($16), $8, and ($5) (42 ) 29
(15 ) 10
Net actuarial (loss)/gain arising during the period, net of tax of $215, ($2), $0, and $15 (388 ) 4
(1 ) (27 )
Amortization of actuarial losses included in net periodic pension cost, net of tax of ($217), ($425), ($72), and ($143) 392
765
131
257
Settlements and curtailments included in net income, net of tax of ($7), ($2), $0, and $0 14
3

Pension and postretirement cost related to our equity method investments, net of tax of ($2), $0, ($1), and $0 4

2

Total defined benefit pension plans and other postretirement benefits, net of tax (20 ) 801
117
240
Other comprehensive income, net of tax 90
640
137
157
Comprehensive loss related to noncontrolling interests (1 ) (2 ) (1 ) (1 )
Comprehensive income, net of tax
$3,353

$4,788

$2,415

$1,860



(Dollars in millions)	Nine months ended September 30						Three months ended September 30
	2017			2016			2017			2016
Net earnings		$5,065			$3,264			$1,853			$2,279
Other comprehensive income, net of tax:
Currency translation adjustments	121			(3		)	44			(10		)
Unrealized gain on certain investments, net of tax of $0, ($1), $0, and ($2)				1						2
Unrealized gain on derivative instruments:
Unrealized gain arising during period, net of tax of ($61), ($30), ($22), and ($7)	111			54			40			13
Reclassification adjustment for losses included in net earnings, net of tax of ($24), ($32), ($5), and ($8)	44			58			10			15
Total unrealized gain on derivative instruments, net of tax	155			112			50			28
Defined benefit pension plans and other postretirement benefits:
Amortization of prior service credits included in net periodic pension cost, net of tax of $47, $23, $16, and $8	(84		)	(42		)	(27		)	(15		)
Net actuarial gain/(loss) arising during the period, net of tax of ($1), $215, $0, and $0	3			(388		)				(1		)
Amortization of actuarial losses included in net periodic pension cost, net of tax of ($217), ($217), ($72), and ($72)	394			392			131			131
Settlements and curtailments included in net income, net of tax of $0, ($7), $0, and $0				14
Pension and postretirement (cost)/benefit related to our equity method investments, net of tax of $1, ($2), $0, and ($1)	(2		)	4						2
Total defined benefit pension plans and other postretirement benefits, net of tax	311			(20		)	104			117
Other comprehensive income, net of tax	587			90			198			137
Comprehensive loss related to noncontrolling interests	(1		)	(1		)				(1		)
Comprehensive income, net of tax		$5,651			$3,353			$2,051			$2,415

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Financial Position

(Unaudited)


(Dollars in millions, except per share data)	September 30 2016			December 31 2015			September 30 2017			December 31 2016
Assets
Cash and cash equivalents		$8,986			$11,302			$8,569			$8,801
Short-term and other investments	682			750			1,463			1,228
Accounts receivable, net	9,524			8,713			10,644			8,832
Current portion of customer financing, net	365			212			435			428
Inventories, net of advances and progress billings	42,680			47,257			43,031			43,199
Total current assets	62,237			68,234			64,142			62,488
Customer financing, net	3,401			3,358			3,039			3,773
Property, plant and equipment, net of accumulated depreciation of $16,752 and $16,286	12,713			12,076
Property, plant and equipment, net of accumulated depreciation of $17,401 and $16,883							12,712			12,807
Goodwill	5,128			5,126			5,344			5,324
Acquired intangible assets, net	2,488			2,657			2,523			2,540
Deferred income taxes	265			265			298			332
Investments	1,303			1,284			1,270			1,317
Other assets, net of accumulated amortization of $470 and $451	1,415			1,408
Other assets, net of accumulated amortization of $509 and $497							1,679			1,416
Total assets		$88,950			$94,408			$91,007			$89,997
Liabilities and equity
Accounts payable		$11,968			$10,800			$12,718			$11,190
Accrued liabilities	13,243			14,014			14,008			14,691
Advances and billings in excess of related costs	22,646			24,364			26,695			23,869
Short-term debt and current portion of long-term debt	632			1,234			988			384
Total current liabilities	48,489			50,412			54,409			50,134
Deferred income taxes	2,211			2,392			2,884			1,338
Accrued retiree health care	6,544			6,616			5,826			5,916
Accrued pension plan liability, net	18,003			17,783			15,514			19,943
Other long-term liabilities	1,729			2,078			1,449			2,221
Long-term debt	9,824			8,730			9,780			9,568
Shareholders’ equity:
Common stock, par value $5.00 – 1,200,000,000 shares authorized; 1,012,261,159 shares issued	5,061			5,061			5,061			5,061
Additional paid-in capital	4,808			4,834			6,754			4,762
Treasury stock, at cost - 393,301,648 and 345,637,354 shares	(35,763		)	(29,568		)
Treasury stock, at cost - 414,910,219 and 395,109,568 shares							(41,745		)	(36,097		)
Retained earnings	40,641			38,756			44,052			40,714
Accumulated other comprehensive loss	(12,658		)	(12,748		)	(13,036		)	(13,623		)
Total shareholders’ equity	2,089			6,335			1,086			817
Noncontrolling interests	61			62			59			60
Total equity	2,150			6,397			1,145			877
Total liabilities and equity		$88,950			$94,408			$91,007			$89,997

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


(Dollars in millions)	Nine months ended September 30						Nine months ended September 30
	2016			2015			2017			2016
Cash flows – operating activities:
Net earnings		$3,264			$4,150			$5,065			$3,264
Adjustments to reconcile net earnings to net cash provided by operating activities:
Non-cash items –
Share-based plans expense	144			141			151			144
Depreciation and amortization	1,364			1,349			1,487			1,364
Investment/asset impairment charges, net	61			124			75			61
Customer financing valuation benefit	(5		)	(3		)
Customer financing valuation expense/(benefit)							4			(5		)
Loss on dispositions, net	10									10
Other charges and credits, net	219			230			190			219
Excess tax benefits from share-based payment arrangements				(139		)
Changes in assets and liabilities –
Accounts receivable	(517		)	(1,202		)	(1,983		)	(517		)
Inventories, net of advances and progress billings	4,334			(2,186		)	254			4,334
Accounts payable	1,366			1,058			778			1,366
Accrued liabilities	82			(196		)	112			82
Advances and billings in excess of related costs	(1,717		)	270			2,828			(1,717		)
Income taxes receivable, payable and deferred	(725		)	824			1,465			(725		)
Other long-term liabilities	(67		)	40			25			(67		)
Pension and other postretirement plans	144			1,837			(550		)	144
Customer financing, net	(195		)	45			635			(195		)
Other	(95		)	(98		)	(96		)	(95		)
Net cash provided by operating activities	7,667			6,244			10,440			7,667
Cash flows – investing activities:
Property, plant and equipment additions	(2,014		)	(1,827		)	(1,304		)	(2,014		)
Property, plant and equipment reductions	14			24			30			14
Acquisitions, net of cash acquired				(23		)
Contributions to investments	(928		)	(1,341		)	(2,847		)	(928		)
Proceeds from investments	956			2,169			2,612			956
Purchase of distribution rights							(131		)
Other	8			33			4			8
Net cash used by investing activities	(1,964		)	(965		)	(1,636		)	(1,964		)
Cash flows – financing activities:
New borrowings	1,323			761			876			1,323
Debt repayments	(836		)	(864		)	(83		)	(836		)
Repayments of distribution rights and other asset financing										(24		)
Stock options exercised	192			331			291			192
Excess tax benefits from share-based payment arrangements				139
Employee taxes on certain share-based payment arrangements	(83		)	(93		)	(118		)	(83		)
Common shares repurchased	(6,501		)	(6,001		)	(7,500		)	(6,501		)
Dividends paid	(2,084		)	(1,882		)	(2,575		)	(2,084		)
Other	(24		)
Net cash used by financing activities	(8,013		)	(7,609		)	(9,109		)	(8,013		)
Effect of exchange rate changes on cash and cash equivalents	(6		)	(20		)	73			(6		)
Net decrease in cash and cash equivalents	(2,316		)	(2,350		)	(232		)	(2,316		)
Cash and cash equivalents at beginning of year	11,302			11,733			8,801			11,302
Cash and cash equivalents at end of period		$8,986			$9,383			$8,569			$8,986

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited)


	Boeing shareholders																				Boeing shareholders
(Dollars in millions, except per share data)	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total			Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Total
Balance at January 1, 2015		$5,061		$4,625			($23,298	)		$36,180			($13,903	)		$125			$8,790
Net earnings									4,150						(2		)	4,148
Other comprehensive income, net of tax of ($400)												640						640
Share-based compensation and related dividend equivalents			154						(13		)							141
Excess tax pools			141															141
Treasury shares issued for stock options exercised, net			(19		)	350												331
Treasury shares issued for other share-based plans, net			(130		)	51												(79		)
Common shares repurchased						(6,001		)										(6,001		)
Cash dividends declared ($1.82 per share)									(1,248		)							(1,248		)
Changes in noncontrolling interests															(77		)	(77		)
Balance at September 30, 2015		$5,061		$4,771			($28,898	)		$39,069			($13,263	)		$46			$6,786

Balance at January 1, 2016		$5,061		$4,834			($29,568	)		$38,756			($12,748	)		$62			$6,397			$5,061		$4,834			($29,568	)		$38,756			($12,748	)		$62			$6,397
Net earnings									3,264						(1		)	3,263											3,264						(1		)	3,263
Other comprehensive income, net of tax of ($51)												90						90														90						90
Share-based compensation and related dividend equivalents			158						(15		)							143					158						(15		)							143
Treasury shares issued for stock options exercised, net			(30		)	222												192					(30		)	222												192
Treasury shares issued for other share-based plans, net			(154		)	84												(70		)			(154		)	84												(70		)
Common shares repurchased						(6,501		)										(6,501		)						(6,501		)										(6,501		)
Cash dividends declared ($2.18 per share)									(1,364		)							(1,364		)									(1,364		)							(1,364		)
Balance at September 30, 2016		$5,061		$4,808			($35,763	)		$40,641			($12,658	)		$61			$2,150			$5,061		$4,808			($35,763	)		$40,641			($12,658	)		$61			$2,150

Balance at January 1, 2017																						$5,061		$4,762			($36,097	)		$40,714			($13,623	)		$60			$877
Net earnings																													5,065						(1		)	5,064
Other comprehensive loss, net of tax of ($255)																																587						587
Share-based compensation and related dividend equivalents																							168						(18		)							150
Treasury shares issued for stock options exercised, net																							(80		)	370												290
Treasury shares issued for other share-based plans, net																							(178		)	64												(114		)
Treasury shares contributed to pension plans																							2,082			1,418												3,500
Common shares repurchased																										(7,500		)										(7,500		)
Cash dividends declared ($2.84 per share)																													(1,709		)							(1,709		)
Balance at September 30, 2017																						$5,061		$6,754			($41,745	)		$44,052			($13,036	)		$59			$1,145

See Notes to the Condensed Consolidated Financial Statements.

Table of Contents

The Boeing Company and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Summary of Business Segment Data

(Unaudited)


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues:
Commercial Airplanes		$48,828			$49,950			$16,973			$17,692			$41,263			$43,630			$14,982			$15,200
Defense, Space & Security:
Boeing Military Aircraft	9,898			10,237			3,260			4,037
Network & Space Systems	5,246			5,797			1,701			2,127
Global Services & Support	7,494			6,569			2,547			2,186
Total Defense, Space & Security	22,638			22,603			7,508			8,350
Defense, Space & Security													15,520			17,281			5,470			5,751
Global Services													10,638			10,508			3,568			3,506
Boeing Capital	211			315			63			114			234			211			70			63
Unallocated items, eliminations and other	(392		)	(327		)	(646		)	(307		)	369			(345		)	219			(622		)
Total revenues		$71,285			$72,541			$23,898			$25,849			$68,024			$71,285			$24,309			$23,898
Earnings from operations:
Commercial Airplanes		$1,657			$4,591			$1,597			$1,768			$3,648			$804			$1,483			$1,293
Defense, Space & Security:
Boeing Military Aircraft	943			874			434			494
Network & Space Systems	336			563			35			245
Global Services & Support	920			874			315			283
Total Defense, Space & Security	2,199			2,311			784			1,022
Defense, Space & Security													1,670			1,443			559			564
Global Services													1,639			1,609			506			524
Boeing Capital	36			41			13			10			87			36			23			13
Segment operating profit/(loss)	3,892			6,943			2,394			2,800
Segment operating profit													7,044			3,892			2,571			2,394
Unallocated items, eliminations and other	(241		)	(661		)	(112		)	(220		)	204			(241		)	118			(112		)
Earnings from operations	3,651			6,282			2,282			2,580			7,248			3,651			2,689			2,282
Other income/(loss), net	41			(23		)	2			(26		)
Other income, net													94			41			45			2
Interest and debt expense	(227		)	(203		)	(81		)	(67		)	(267		)	(227		)	(87		)	(81		)
Earnings before income taxes	3,465			6,056			2,203			2,487			7,075			3,465			2,647			2,203
Income tax (expense)/benefit	(201		)	(1,906		)	76			(783		)	(2,010		)	(201		)	(794		)	76
Net earnings		$3,264			$4,150			$2,279			$1,704			$5,065			$3,264			$1,853			$2,279

This information is an integral part of the Notes to the Condensed Consolidated Financial Statements. See Note 17 for further segment results.

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The Boeing Company and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Dollars in millions, except per share data)

(Unaudited)

Note 1 – Basis of Presentation

The condensed consolidated interim financial statements included in this report have been prepared by management of The Boeing Company (herein referred to as “Boeing”, the “Company”, “we”, “us”, or “our”). In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation are reflected in the interim financial statements. The results of operations for the period ended September 30, ~~2016~~2017 are not necessarily indicative of the operating results for the full year. The interim financial statements should be read in conjunction with the audited Consolidated Financial Statements, including the notes thereto, included in our ~~2015~~2016 Annual Report on Form 10-K. ~~Certain amounts~~As described in Note 17, effective July 1, 2017, we now operate in four reportable segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS), Global Services (BGS) and Boeing Capital (BCC). Amounts in prior periods have been reclassified to conform to the current period's presentation.

Standards Issued and Not Yet Implemented

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

~~In May 2014, the FASB issued~~We plan to adopt ASU No. 2014-09, Revenue from Contracts with Customers~~. The new standard was originally~~ effective ~~for reporting~~January 1, 2018 and apply it retrospectively to all periods beginning after December 15, 2016 and early adoption was not permitted. On August 12, 2015, the FASB approved a one year delay of the effective date to reporting periods beginning after December 15, 2017, while permitting companies to voluntarily adopt the new standard as of the original effective date. Thepresented. This comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. ~~Adoption of the new rules could affect the timing of~~The standard also requires expanded disclosures regarding revenue ~~recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application~~and contracts with customers.

We expect adoption of the new standard ~~with restatement~~will have a material impact on our income statement and balance sheet. We currently expect that most of our defense contracts at BDS and BGS that currently recognize revenue as deliveries are made or based on the attainment of performance milestones will recognize revenue under the new standard as costs are incurred. Certain military derivative aircraft contracts in our BCA business will also recognize revenue as costs are incurred. The new standard will not change the total amount of revenue recognized on these contracts, only accelerate the timing of when the revenue is recognized. We expect a corresponding acceleration in timing of cost of sales recognition for these contracts resulting in a decrease in Inventories from long-term contracts in progress upon adoption of the new standard.

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

We have completed a preliminary assessment of the impact of adopting the new standard on previously reported 2016 and prior period results. Because revenue will be recognized under the new standard as costs are incurred for most of our defense and military derivative airplane contracts, approximately $10,000 of revenues and $1,000 of associated earnings will be accelerated into years ending prior to the January 1, 2016 effective date. Therefore, as of January 1, 2016, we expect to record a cumulative adjustment to increase retained earnings by approximately $1,000. We expect consolidated revenues previously reported in 2016 to decrease by approximately $1,000, primarily reflecting $2,000 of lower revenues on several defense contracts that currently recognize revenues as deliveries are made, partially offset by higher KC-46A Tanker revenues. These revenue changes are expected to reduce previously reported segment operating

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earnings by approximately $400. We expect the reduction in 2016 segment operating earnings to be offset by increases in unallocated pension income. We expect adoption will increase total assets and ~~one requiring prospective application~~total liabilities by approximately $20,000 primarily due to classifying certain advances from customers as liabilities under the new standard, whereas these advances were netted against inventory under existing Generally Accepted Accounting Principles (GAAP). We expect the new standard to have no impact on cash flows reported in 2016. The impact of the new standard ~~with disclosure~~on our 2016 financial results may not be representative of the impact on our financial position and operating results ~~under old standards. The Company plans~~in subsequent years.

We are continuing to ~~adopt~~analyze the impact of the new standard ~~effective January 1, 2018~~on the Company’s revenue contracts, comparing our current accounting policies and ~~is continuing~~practices to ~~evaluate~~ the ~~impacts~~requirements of ~~adoption and~~ the ~~implementation approach to be used.~~

~~Standards Issued and Implemented~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~.new standard. The new standard ~~is effective for reporting periods beginning after December 15, 2016 and early adoption is permitted. The standard~~ requires ~~excess tax benefits or deficiencies for share-based payments to be recorded~~additional detailed disclosures regarding the company’s contracts with customers, including disclosure of remaining unsatisfied performance obligations, in the ~~period shares vest or settle as income tax expense or benefit, rather than within Additional paid-in capital. Cash flows related~~first quarter 2018 which we are continuing to ~~excess tax benefits will be included~~assess. We are also identifying and implementing changes to the Company’s business processes, systems and controls to support adoption of the new standard in ~~Net cash provided by operating activities~~2018 and will no longer be separately classified as a financing activity. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes and provides an accounting policy election to account for forfeitures as they occur. We have elected to continue to estimate forfeitures and are not planning to change tax withholdings.

The Company prospectively adopted the standard during the three months ended June 30, 2016 effective January 1, 2016. For the nine months ended September 30, 2016, this resulted in an increase of $64 to Net earnings and $0.10 to diluted earnings per share and for the three months ended September 30, 2016, an increase of $10 to Net earnings and $0.02 to diluted earnings per share. Adoption also resulted in a $64

~~increase in Net cash provided by operating activities and a corresponding $64 reduction in Net cash used by financing activities for the nine months ended September 30, 2016.~~

recasting prior periods’ financial information.

Use of Estimates

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

Contract accounting is used for development and production activities predominantly by ~~Defense, Space & Security (BDS).~~BDS and for defense contracts at BGS. Contract accounting involves a judgmental process of estimating total sales and costs for each contract resulting in the development of estimated cost of sales percentages. 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. ~~For the nine months ended September 30, 2016 and 2015, net unfavorable~~Net cumulative catch-up adjustments to prior years' earnings, including reach-forward losses, across all contracts decreased Earnings from operations by $656 and $384 and diluted earnings per share by $0.95 and $0.38. For the three months ended September 30, 2016, net unfavorable cumulative catch-up adjustments to prior years' earnings, including reach-forward losses, across all contracts decreased Earnings from operations by $69 and diluted earnings per share by $0.11. For the three months ended September 30, 2015, net favorable cumulative catch-up adjustments, including reach-forward losses, across all contracts increased Earnings from operations by $210 and diluted earnings per share by $0.21.were as follows:



	Nine months ended September 30						��	Three months ended September 30
	2017			2016				2017			2016
Decrease to Earnings from Operations		($39	)		($656	)			($302	)		($69	)
Decrease to Diluted EPS		($0.05	)		($0.95	)			($0.35	)		($0.11	)

Note 2 – Earnings Per Share

Basic and diluted earnings per share are computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings.

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

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

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


(In millions - except per share amounts)	Nine months ended September 30				Three months ended September 30				Nine months ended September 30				Three months ended September 30
	2016		2015		2016		2015		2017		2016		2017		2016
Net earnings		$3,264		$4,150		$2,279		$1,704		$5,065		$3,264		$1,853		$2,279
Less: earnings available to participating securities	3		5		3		3		4		3		2		3
Net earnings available to common shareholders		$3,261		$4,145		$2,276		$1,701		$5,061		$3,261		$1,851		$2,276
Basic
Basic weighted average shares outstanding	641.2		692.9		625.5		681.3		605.6		641.2		598.3		625.5
Less: participating securities	1.0		1.1		0.9		1.2		0.8		1.0		0.7		0.9
Basic weighted average common shares outstanding	640.2		691.8		624.6		680.1		604.8		640.2		597.6		624.6
Diluted
Basic weighted average shares outstanding	641.2		692.9		625.5		681.3		605.6		641.2		598.3		625.5
Dilutive potential common shares⁽¹⁾	6.7		8.0		7.2		7.7		7.2		6.7		8.0		7.2
Diluted weighted average shares outstanding	647.9		700.9		632.7		689.0		612.8		647.9		606.3		632.7
Less: participating securities	1.0		1.1		0.9		1.2		0.8		1.0		0.7		0.9
Diluted weighted average common shares outstanding	646.9		699.8		631.8		687.8		612.0		646.9		605.6		631.8
Net earnings per share:
Basic		$5.09		$5.99		$3.64		$2.50		$8.37		$5.09		$3.10		$3.64
Diluted	5.04		5.92		3.60		2.47		8.27		5.04		3.06		3.60


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

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


(Shares in millions)	Nine months ended September 30		Three months ended September 30		Nine months ended September 30		Three months ended September 30
	2016	2015	2016	2015	2017	2016	2017	2016
Performance awards	7.0	5.9	6.2	5.9	4.6	7.0	3.4	6.2
Performance-based restricted stock units	2.8	2.3	3.1	2.3	0.6	2.8	0.1	3.1

Note 3 – Income Taxes

Our effective income tax rates were ~~5.8%~~28.4% and ~~(3.4)%~~30.0% for the nine and three months ended September 30, ~~2016~~2017 and ~~31.5%~~5.8% and (3.4)% for the same periods in the prior year. The ~~2016~~effective tax rate of 30.0% for the third quarter of 2017 is higher than the nine-month rate primarily due to lower discrete tax benefits in the third quarter compared with the first and second quarters of 2017. The 2017 effective tax rates are ~~lower~~higher than the prior year primarily due to ~~$440 of additional~~discrete tax benefits recorded in the third quarter of 2016 related to ~~the application of a 2012 Federal Court of Claims decision that allowed the~~ tax basis ~~in certain assets to be increased. Also, in the third quarter~~adjustments of ~~2016 a tax benefit of $177 was recorded as a result of~~$440 and the settlement of the 2011-2012 federal tax ~~audit.~~audit of $177. Additionally, ~~the 2016 effective tax rates include the favorable impact of the permanent reinstatement of the U.S. research~~2017 year-to-date and ~~development tax credit at the end of 2015.~~

~~The total amount of unrecognized~~projected pre-tax earnings are higher compared to prior year. Furthermore, higher share-based compensation tax benefits ~~decreased from $1,617 as~~were recognized for the nine and three month periods of ~~December 31, 2015 to $1,378 as~~2017 compared with the prior year.

Table of ~~September 30, 2016 primarily due to the tax basis adjustment and settlement of the 2011-2012 federal tax audit, as discussed above.~~Contents

Federal income tax audits have been settled for all years prior to 2013. The Internal Revenue Service (IRS) ~~will begin~~is currently examining the 2013-2014 ~~federal~~ tax ~~audit in the fourth quarter of 2016.~~years. We are also subject to examination in major state and international jurisdictions for the ~~2001-2015~~2001-2016 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

Note 4 – Inventories

Inventories consisted of the following:


	September 30 2016			December 31 2015			September 30 2017			December 31 2016
Long-term contracts in progress		$12,459			$13,858			$13,608			$12,801
Commercial aircraft programs	53,113			55,230			52,871			52,048
Commercial spare parts, used aircraft, general stock materials and other	5,521			6,673			6,068			5,446
Inventory before advances and progress billings	71,093			75,761			72,547			70,295
Less advances and progress billings	(28,413		)	(28,504		)	(29,516		)	(27,096		)
Total		$42,680			$47,257			$43,031			$43,199

Long-Term Contracts in Progress

Long-term contracts in progress includes Delta launch program inventory that is being sold at cost to United Launch Alliance (ULA) under an inventory supply agreement that terminates on March 31, 2021. The inventory balance was $120 (net of advances of ~~$253~~$187 and ~~$310)~~$220) at September 30, ~~2016~~2017 and December 31, ~~2015.~~2016. See indemnifications to ULA in Note 9.

Included in inventories are capitalized precontract costs of ~~$650~~$847 and ~~$732~~$729 primarily related to KC-46A Tanker and C-17 at September 30, ~~2016~~2017 and December 31, ~~2015.~~2016.

Commercial Aircraft Programs

At September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, commercial aircraft programs inventory included the following amounts related to the 787 program: ~~$33,423~~$31,664 and ~~$34,656~~$32,501 of work in process (including deferred production costs of ~~$27,523~~$25,948 and ~~$28,510)~~$27,308), ~~$2,345~~$2,745 and ~~$2,551~~$2,398 of supplier advances, and ~~$3,691~~$3,334 and ~~$3,890~~$3,625 of unamortized tooling and other non-recurring costs. At September 30, ~~2016, $22,521~~2017, $22,584 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 ~~$8,693~~$6,698 is expected to be recovered from units included in the program accounting quantity that represent expected future orders.

We produced the fourth and fifth flight test aircraft for the 787 program in 2009 but were unable to sell them at acceptable prices. The aircraft had been used extensively for flight and ground testing and we intended to begin to refurbish the aircraft in early 2017 for commercial sale based on sales activity and market interest. However, during the second quarter of 2016 we determined that firm orders for these aircraft prior to refurbishment were now unlikely, and that the Company would not invest company funds for their refurbishment. The Company also determined the costs to refurbish the aircraft at a future date would be prohibitively expensive. We therefore determined that the aircraft are not commercially saleable, and accordingly, costs of $1,235 associated with these aircraft were reclassified from 787 program inventory to research and development expense. The reclassification also impacted 787 deferred production costs, reducing the balance by $1,011 at June 30, 2016.

At September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, commercial aircraft programs inventory included ~~the following amounts~~$173 and $284 of unamortized tooling costs related to the 747 ~~program: $0 and $942 of deferred production costs, net of reach-forward losses, and $298 and $377 of unamortized tooling costs.~~program. At September 30, ~~2016, $99~~2017, $163 of unamortized tooling costs are expected to be recovered from units included in the program accounting quantity that have firm orders and ~~$199~~$10 is expected to be recovered from units included in the program accounting quantity that represent expected future orders. At September 30, ~~2016 and December 31, 2015, work in process inventory included a number of~~2017, the program accounting quantity has 18 undelivered aircraft, including one already completed ~~747~~ aircraft that ~~we expect to recover from future orders.~~has not been sold and is being remarketed.

Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling ~~$3,257~~$2,951 and ~~$3,166~~$3,117 at September 30, ~~2016~~2017 and December 31, ~~2015.~~2016.

~~Used aircraft in inventories at Commercial Airplanes totaled $224 and $267 at September 30, 2016 and December 31, 2015.~~

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Note 5 – Customer Financing

Customer financing primarily relates to the Boeing Capital (BCC) segment and consisted of the following:


	September 30 2016			December 31 2015			September 30 2017			December 31 2016
Financing receivables:
Investment in sales-type/finance leases		$1,473			$1,620			$1,400			$1,482
Notes	417			256			762			807
Total financing receivables	1,890			1,876			2,162			2,289
Operating lease equipment, at cost, less accumulated depreciation of $229 and $338	1,887			1,710
Operating lease equipment, at cost, less accumulated depreciation of $361 and $359							1,327			1,922
Gross customer financing	3,777			3,586			3,489			4,211
Less allowance for losses on receivables	(11		)	(16		)	(14		)	(10		)
Total		$3,766			$3,570			$3,475			$4,201

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 September 30, ~~2016~~2017 and December 31, ~~2015~~2016, we individually evaluated for impairment customer financing receivables of ~~$61~~$50 and ~~$86. At September 30, 2016~~$55, of which $39 and ~~December 31, 2015, $46 and $0 was~~$44 were determined to be impaired. We recorded no allowance for losses on these impaired receivables as the collateral values exceeded the carrying values of the receivables.

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

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


Rating categories	September 30 2016		December 31 2015		September 30 2017		December 31 2016
BBB		$898		$973		$1,200		$1,324
BB	476		536		508		538
B	470		258		405		383
CCC	46		23		49		44
Other			86
Total carrying value of financing receivables		$1,890		$1,876		$2,162		$2,289

At September 30, ~~2016~~2017, our allowance related to receivables with ratings of B, BB and BBB. We applied default rates that averaged ~~13%~~16.8%, 9%8.1% and 1%1.0%, respectively, to the exposure associated with those receivables.

Customer Financing Exposure

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

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

September 30
2016
December 31
2015
717 Aircraft ($353 and $372 accounted for as operating leases)
$1,314

$1,415
747-8 Aircraft ($1,094 and $916 accounted for as operating leases) 1,120
916
MD-80 Aircraft (Accounted for as sales-type finance leases) 269
314
757 Aircraft ($44 and $48 accounted for as operating leases) 251
270
767 Aircraft ($90 and $84 accounted for as operating leases) 178
185
747-400 Aircraft (Accounted for as operating leases) 170
122
777 Aircraft (Accounted for as notes) 164
23
737 Aircraft (Accounted for as operating leases) 106
115



	September 30 2017		December 31 2016
717 Aircraft ($274 and $301 accounted for as operating leases)		$1,114		$1,282
747-8 Aircraft ($769 and $1,086 accounted for as operating leases)	769		1,111
MD-80 Aircraft (accounted for as sales-type finance leases)	236		259
757 Aircraft ($39 and $43 accounted for as operating leases)	233		246
747-400 Aircraft ($94 and $149 accounted for as operating leases)	178		149
777 Aircraft ($13 and $0 accounted for as operating leases)	166		165
767 Aircraft ($27 and $85 accounted for as operating leases)	103		170
737 Aircraft ($94 and $103 accounted for as operating leases)	99		103

Note 6 – Investments

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


	September 30 2016		December 31 2015		September 30 2017		December 31 2016
Equity method investments ⁽¹⁾						$1,226		$1,242
Time deposits		$127		$456	858		665
Pledged money market funds ⁽¹⁾	39		38
Available-for-sale investments	541		244		513		537
Equity method investments ⁽²⁾	1,211		1,230
Restricted cash ⁽³⁾	27		31
Restricted cash & cash equivalents⁽²⁾					106		68
Other investments	40		35		30		33
Total		$1,985		$2,034		$2,733		$2,545


⁽¹⁾	~~Reflects amounts pledged~~Dividends received were $195 and $47 for the nine and three months ended September 30, 2017 and $249 and $83 during the same periods 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.~~the prior year.


⁽²⁾	~~Dividends received were~~ ~~$249~~Reflects amounts restricted in support of our workers’ compensation programs, employee benefit programs, and ~~$83 for the~~ ~~nine and three months ended September 30, 2016~~ ~~and $186 and $62 during the same periods in the prior year.~~


⁽³⁾	~~Restricted to pay certain claims related to workers' compensation and life~~ insurance ~~premiums for certain employees.~~premiums.

Note 7 – Other Assets

Sea Launch

At September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, Other assets included $356 of receivables related to our former investment in the Sea Launch venture which became payable by certain Sea Launch partners following Sea Launch’s bankruptcy filing in June 2009. The ~~$356 includes $147 related to a payment made by us under a bank guarantee on behalf of Sea Launch and $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: S.P. Koroley Rocket and Space Corporation Energia of Russia (RSC Energia) – $223, PO Yuzhnoye Mashinostroitelny Zavod of Ukraine – $89 and KB Yuzhnoye of Ukraine – $44.

~~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 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.~~partners. On May 12, 2016, the court issued a judgment in favor of ~~Boeing relating~~Boeing.

In December 2016, we reached an agreement which we believe will enable us to recover the ~~bank guarantee payment and~~outstanding receivable balance from RSC Energia over the ~~partner loan obligations. Prior~~next several years. The agreement was subject to ~~these proceedings, we had filed a Notice~~certain contingencies which were resolved during the first quarter of Arbitration with the Stockholm Chamber of Commerce seeking reimbursement from the other partners for a portion of these amounts. On May 16, 2016, the appellate court in Sweden dismissed the Swedish proceedings at our request.

2017. We continue to pursue collection efforts against the former Ukrainian partners in connection with the court judgment and continue to believe the partners have the financial wherewithal to pay and intend to pursue vigorously all of our rights and remedies. In the event we are unable to secure reimbursement ~~of $147 related to our payment under~~from the ~~bank guarantee and $209 related to partner loans made to~~ Sea Launch partners, we could incur additional charges. Our current assessment as to the collectability of these receivables takes into account the current economic conditions in Russia and Ukraine, although we will continue to monitor the situation.

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Spirit AeroSystems

As of September 30, ~~2016~~2017 and December 31, ~~2015,~~2016, Other assets included ~~$140~~$143 of receivables related to indemnifications from Spirit AeroSystems, Inc. (Spirit), for costs incurred related to pension and retiree medical obligations of former Boeing employees ~~that~~who were subsequently employed by Spirit. During the fourth quarter of 2014, Boeing filed a complaint against Spirit in the Delaware Superior Court seeking to enforce our rights to indemnification and to recover from Spirit amounts incurred by Boeing for pension and retiree medical obligations. In the second quarter of 2017, the court ruled against Boeing and denied our claim. After a court ruling on legal fees, Boeing plans to appeal to the Delaware Supreme Court and we believe we have substantial arguments on appeal. We expect to fully recover from Spirit.

Note 8 – Commitments and Contingencies

Environmental

The following table summarizes environmental remediation activity during the nine months ended September 30, ~~2016~~2017 and ~~2015~~.2016.


	2016			2015			2017			2016
Beginning balance – January 1		$566			$601			$562			$566
Reductions for payments made	(33		)	(52		)	(25		)	(33		)
Changes in estimates	43			34			6			43
Ending balance – September 30		$576			$583			$543			$576

The liabilities recorded represent our best estimate or the low end of a range of reasonably possible costs expected to be incurred to remediate sites, including operation and maintenance over periods of up to 30 years. It is reasonably possible that we may incur charges that exceed these recorded amounts because of regulatory agency orders and directives, changes in laws and/or regulations, higher than expected costs and/or the discovery of new or additional contamination. As part of our estimating process, we develop a range of reasonably possible alternate scenarios that includes the high end of a range of reasonably possible cost estimates for all remediation sites for which we have sufficient information based on our experience and existing laws and regulations. There are some potential remediation obligations where the costs of remediation cannot be reasonably estimated. At September 30, ~~2016~~2017 and December 31, ~~2015~~2016, the high end of the estimated range of reasonably possible remediation costs exceeded our recorded liabilities by $873 and ~~$853.~~$857.

Product Warranties

The following table summarizes product warranty activity recorded during the nine months ended September 30, ~~2016~~2017 and ~~2015~~.2016.


	2016			2015			2017			2016
Beginning balance – January 1		$1,485			$1,504			$1,414			$1,485
Additions for current year deliveries	293			312			183			293
Reductions for payments made	(258		)	(262		)	(193		)	(258		)
Changes in estimates	(103		)	(101		)	(213		)	(103		)
Ending balance - September 30		$1,417			$1,453
Ending balance – September 30								$1,191			$1,417

Commercial Aircraft Commitments

In conjunction with signing definitive agreements for the sale of new aircraft (Sale Aircraft), we have entered into trade-in commitments with certain customers that give them the right to trade in used aircraft at a specified price upon the purchase of Sale Aircraft. The probability that trade-in commitments will be exercised is determined by using both quantitative information from valuation sources and qualitative information from

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other sources. The probability of exercise is assessed quarterly, or as events trigger a change, and takes into consideration the current economic and airline industry environments. Trade-in commitments, which

can be terminated by mutual consent with the customer, may be exercised only during the period specified in the agreement, and require advance notice by the customer.

Trade-in commitment agreements at September 30, ~~2016~~2017 have expiration dates from ~~2016~~2017 through 2026. At September 30, ~~2016~~2017, and December 31, ~~2015~~2016 total contractual trade-in commitments were $~~1,385~~1,676 and $~~1,585~~1,485. As of September 30, ~~2016~~2017 and December 31, ~~2015~~2016, we estimated that it was probable we would be obligated to perform on certain of these commitments with net amounts payable to customers totaling $~~170~~94 and ~~$240~~$126 and the fair value of the related trade-in aircraft was ~~$170~~$94 and $~~240~~126.

Financing Commitments

Financing commitments ~~which include commitments to provide financing~~ related to aircraft on order, ~~under option for deliveries or~~including options and those proposed ~~as part of~~in sales campaigns, and refinancing of delivered aircraft, totaled ~~$17,425~~$13,106 and ~~$16,283~~$14,847 as of September 30, ~~2016~~2017 and December 31, ~~2015~~.2016. The estimated earliest potential funding dates for these commitments as of September 30, ~~2016~~2017 are as follows:


	Total		Total
October through December 2016		$567
2017	3,703
October through December 2017				$305
2018	3,527		3,439
2019	4,003		3,437
2020	2,399		1,862
2021			1,585
Thereafter	3,226		2,478
		$17,425		$13,106

As of September 30, ~~2016~~2017, ~~$15,266~~all of these financing commitments related to customers we believe have less than investment-grade credit. We have concluded that no reserve for future potential losses is required for these financing commitments based upon the terms, such as collateralization and interest rates, under which funding would be provided.

Standby Letters of Credit and Surety Bonds

We have entered into standby letters of credit and surety bonds with financial institutions primarily relating to the guarantee of our future performance on certain contracts. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $~~4,368~~3,656 and $~~4,968~~4,701 as of September 30, ~~2016~~2017 and December 31, ~~2015~~2016.

Commitments to ULA

We and Lockheed Martin Corporation have each committed to provide ULA with additional capital contributions in the event ULA does not have sufficient funds to make a required payment to us under an inventory supply agreement. As of September 30, ~~2016,~~2017, ULA’s total remaining obligation to Boeing under the inventory supply agreement was $120. See Note 4.

F/A-18

At September 30, ~~2016,~~2017, our backlog included 2831 F/A-18 aircraft under contract with the U.S. Navy. ~~The Consolidated Appropriations Act, 2016, passed~~We have begun work or authorized suppliers to begin working on aircraft beyond those already in ~~December 2015, funds 12 additional~~backlog in anticipation of future orders. At September 30, 2017, we had $94 of capitalized precontract costs and $733 of potential termination liabilities to suppliers associated with F/A-18 aircraft that, combined with the orders in backlog, would complete production in mid-2018. The President’s Fiscal Year 2017 Budget request submitted in February 2016 includes funding for two additional F/A-18 aircraft. In May 2016, both congressional appropriations committees included additional F/A-18s in their proposed FY17 defense funding bills. The Senate bill includes funding for not yet on order.

14 ~~F/A-18s and the House bill includes funding for a total~~

Table of 16 F/A-18s. On September 28, 2016, the White House approved the proposed sale of up to 40 F/A-18 aircraft to Kuwait subject to the Congressional Notification process. We are continuing to work with our U.S. customers as well as international customers to secure additional orders that would extend the program beyond 2018. Should additional orders not materialize, it is reasonably possible that we will decide to end production of the F/A-18 in 2018. We are still evaluating the full financial impact of a potential production shutdown, including any recovery that may be available from the U.S. government.Contents

United States Government Defense Environment Overview

~~The enactment of The Bipartisan Budget Act of 2015 in November 2015 established overall defense spending levels~~In May 2017, the U.S. administration submitted its fiscal year 2018 budget request, which calls for ~~FY2016 and FY2017. However, uncertainty remains with respect to levels of defense spending for FY2018 and beyond including risk of future sequestration cuts.~~

~~Significant uncertainty also continues with respect to program-level appropriations for~~funding the U.S. Department of Defense (U.S. DoD) ~~and other government agencies, including~~base budget at a level that is $52 billion or 10% above the ~~National Aeronautics and Space Administration, within~~spending caps in the overall budgetary framework described above. Future budget cuts, including cuts mandated by sequestration, or future procurement decisions associated with the authorization and appropriations process could result in reductions, cancellations and/or delaysBudget Control Act of ~~existing contracts or programs. Any of these impacts could have a material effect on the results~~2011 (The Act). In addition, three of the ~~Company's operations, financial position and/~~four congressional defense oversight committees have endorsed a U.S. DoD budget topline that is higher than the administration’s fiscal year 2018 request. However, The Act, which mandates limits on U.S. government discretionary spending, remains in effect through fiscal year 2021. As a result, continued budget uncertainty and the risk of future sequestration cuts will remain unless The Act is repealed or ~~cash flows.~~significantly modified by Congress.

OnFunding timeliness also remains a risk. In September ~~29, 2016~~2017, a ~~continuing resolution~~Continuing Resolution was enacted ~~to fund the~~that extends U.S. government funding at fiscal year 2017 rates through December ~~9, 2016. After this date, if~~8, 2017. If Congress is unable to pass appropriations bills ~~in a timely manner,~~before the expiration of the current Continuing Resolution, a government shutdown could result which may have impacts above and beyond those resulting from budget cuts, sequestration impacts or program-level appropriations. For example, requirements to furlough employees in the U.S. DoD, the Department of Transportation, or other government agencies could result in payment delays, impair our ability to perform work on existing contracts, and/or negatively impact future orders. Alternatively, Congress may fund the remainder of fiscal year 2018 by passing one or more Continuing Resolutions; however, this could restrict the execution of certain program activities and delay new programs or competitions.

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

BDS Fixed-Price Development Contracts

Fixed-price development work is inherently uncertain and subject to significant variability in estimates of the cost and time required to complete the work. BDS fixed-price contracts with significant development work include Commercial Crew, ~~Saudi F-15, USAF~~U.S. Air Force (USAF) KC-46A Tanker, and commercial and military satellites. The operational and technical complexities of these contracts create financial risk, which could trigger termination provisions, order cancellations or other financially significant exposure. Changes to cost and revenue estimates could result in lower margins or material charges for reach-forward losses. For example, during ~~2016,~~the first and third quarters of 2017, we ~~have~~ recorded additional reach-forward losses ~~of $816~~totalling $471 on the KC-46A Tanker ~~program~~program. Moreover, this and ~~a charge of $162 resulting from a reach-forward loss of $38 on the Commercial Crew Program. Moreover, both of these~~our other fixed-price development programs remain subject to additional reach-forward losses if we experience further technical or quality issues, schedule delays, or increased costs.

KC-46A Tanker

In 2011, we were awarded a contract from the ~~U.S. Air Force (USAF)~~USAF to design, develop, manufacture and deliver four next generation aerial refueling tankers. This Engineering, Manufacturing and Development (EMD) contract is a fixed-price incentive fee contract valued at $4.9 billion and involves highly complex designs and systems integration. In ~~August~~ 2016, the USAF authorized ~~LRIP~~low rate initial production (LRIP) lots for 7 and 12 aircraft valued at $2.8 billion. In January 2017, the USAF authorized an additional LRIP lot for 15 aircraft valued at $2.1 billion. At September 30, ~~2016,~~2017, we had approximately ~~$298~~$320 of capitalized precontract costs and ~~$690~~$735 of potential termination liabilities to ~~suppliers associated with aircraft we expect USAF to authorize in the future.~~suppliers.

Recoverable Costs on Government Contracts

Our final incurred costs for each year are subject to audit and review for allowability by the U.S. government, which can result in payment demands related to costs they believe should be disallowed. We work with the U.S. government to assess the merits of claims and where appropriate reserve for amounts disputed. If we are unable to satisfactorily resolve disputed costs, we could be required to record an earnings charge and/or provide refunds to the U.S. government.

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Russia/Ukraine

We continue to monitor political unrest involving Russia and Ukraine, where we and some of our suppliers source titanium products and/or have operations. A number of our commercial customers also have operations in Russia and Ukraine. To date, we have not experienced any significant disruptions to production or deliveries. Should suppliers or customers experience disruption, our production and/or deliveries could be materially impacted.

747 Program

Lower-than-expected demand for large commercial passenger and freighter aircraft ~~and slower-than-expected growth of global freight traffic~~ have continued to drive market uncertainties, pricing pressures and fewer orders than anticipated. AsWe are currently producing at a ~~result, during the second quarter of 2016, we canceled previous plans to return to a production~~ rate of ~~1.0~~0.5 aircraft per month beginning in 2019, resulting in a reduction in the program accounting quantity from 1,574 to 1,555 aircraft. This reduction in the program accounting quantity, together with lower anticipated revenues from future sales and higher costs associated with producing fewer airplanes, resulted in a reach-forward loss of $1,188 in the second quarter. We previously recognized reach-forward losses of $885 and $70 during the second half of 2015 and the first quarter of 2016, respectively, related to the prior decision to reduce the production rate to 0.5 per month and lower estimated revenue from future sales due to ongoing pricing and market pressures. We reduced the rate from 1.0 to 0.5 per month in September 2016.month. The ~~adjusted~~ program accounting quantity includes ~~27 undelivered~~ aircraft ~~currently~~ scheduled to be produced through 2019. We ~~continue to have a number of completed aircraft in inventory as well as unsold production positions and we~~ remain focused on obtaining additional orders and implementing cost-reduction efforts. We are currently evaluating several scenarios, including sales campaigns that may determine how long we continue the 747 program. If we are unable to obtain sufficient orders and/or market, production and other risks cannot be mitigated, we could record additional losses that may be ~~material, and~~material. Depending on market conditions, it is reasonably possible that we could decide to end production of the 747.

~~787 Program~~

The 787 program continues to have near breakeven gross margins. The combination of production challenges, change incorporation on early build aircraft, schedule delays, customer and supplier impacts and changes to price escalation factors has created significant pressure on program profitability. If risks related to this program, including risks associated with productivity improvements, supply chain management, planned production rate increases or introducing and manufacturing the 787-10 derivative as scheduled cannot be mitigated, the program could record a reach-forward loss that may be material.

Note 9 – Arrangements with Off-Balance Sheet Risk

We enter into arrangements with off-balance sheet risk in the normal course of business, primarily in the form of guarantees.

The following table provides quantitative data regarding our third party guarantees. The maximum potential payments represent a “worst-case scenario,” and do not necessarily reflect amounts that we expect to pay. Estimated proceeds from collateral and recourse represent the anticipated values of assets we could liquidate or receive from other parties to offset our payments under guarantees. The carrying amount of liabilities represents the amount included in Accrued liabilities.


	Maximum Potential Payments				Estimated Proceeds from Collateral/Recourse				Carrying Amount of Liabilities				Maximum Potential Payments				Estimated Proceeds from Collateral/Recourse				Carrying Amount of Liabilities
	September 30 2016		December 31 2015		September 30 2016		December 31 2015		September 30 2016		December 31 2015		September 30 2017		December 31 2016		September 30 2017		December 31 2016		September 30 2017		December 31 2016
Contingent repurchase commitments		$1,556		$1,529		$1,544		$1,510		$9		$7		$1,393		$1,306		$1,393		$1,306		$11		$9
Indemnifications to ULA:
Contributed Delta program launch inventory	82		107										72		77
Contract pricing	261		261						7		7		261		261						7		7
Other Delta contracts	216		231						5		5		191		216								5
Credit guarantees	29		30		27		27		2		2		111		29		64		27		7		2

Contingent Repurchase Commitments The repurchase price specified in contingent repurchase commitments is generally lower than the expected fair value at the specified repurchase date. Estimated proceeds from collateral/recourse in the table above represent the lower of the contracted repurchase price or the expected fair value of each aircraft at the specified repurchase date.

Indemnifications to ULA In 2006, we agreed to indemnify ULA through December 31, 2020 against potential non-recoverability and non-allowability of $1,360 of Boeing Delta launch program inventory included in contributed assets plus $1,860 of inventory subject to an inventory supply agreement which ends on March 31, 2021. Since inception, ULA has consumed ~~$1,278~~$1,288 of the $1,360 of inventory that was contributed by us and has yet to consume ~~$82.~~$72. Under the inventory supply agreement, we have recorded revenues and cost of sales of ~~$1,436~~$1,505 through September 30, ~~2016.~~2017. ULA has made payments of $1,740 to us under the inventory supply agreement and we have made ~~$63~~$48 of net indemnification payments to ULA.

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

Potential payments for Other Delta contracts include $85 related to deferred support costs and $91 related to deferred production costs. In June 2011, the Defense Contract Management Agency (DCMA) notified ULA that it had determined that $271 of deferred support costs are not recoverable under government contracts. In December 2011, the DCMA notified ULA of the potential non-recoverability of an additional $114 of deferred production costs. ULA and Boeing believe that all costs are recoverable and in November 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 is in the discovery phase, and the Court has not yet set a trial date. If, contrary to our belief, it is determined that some or all of the deferred support or production costs are not recoverable, we could be required to record pre-tax losses and make indemnification payments to ULA for up to $317 of the costs questioned by the DCMA.

Other Indemnifications In conjunction with our sales of Electron Dynamic Devices, Inc. and Rocketdyne Propulsion and Power businesses and our ~~Commercial Airplanes~~BCA facilities in Wichita, Kansas and Tulsa and McAlester, Oklahoma, we agreed to indemnify, for an indefinite period, the buyers for costs relating to pre-closing environmental conditions and certain other items. We are unable to assess the potential number of future claims that may be asserted under these indemnifications, nor the amounts thereof (if any). As a result, we cannot estimate the maximum potential amount of future payments under these indemnities and therefore, no liability has been recorded. To the extent that claims have been made under these indemnities and/or are probable and reasonably estimable, liabilities associated with these indemnities are included in the environmental liability disclosure in Note 8.

Credit Guarantees We have issued credit guarantees ~~principally to facilitate the sale and/or financing of commercial aircraft. Under these arrangements,~~where 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 does not make payments or perform certain specified ~~services are not performed. A substantial portion of~~services. Generally, these guarantees ~~has~~have been extended on behalf of ~~original lessees or debtors~~guaranteed parties with less than investment-grade ~~credit. Our commercial aircraft~~ credit ~~guarantees~~and are collateralized by ~~the underlying commercial aircraft and~~ certain ~~other~~ assets. Current outstanding credit guarantees expire ~~within the next four years.~~through 2036.

Note 10 – Debt

On ~~May 18, 2016,~~February 16, 2017, we issued ~~$1,200~~$900 of fixed rate senior notes consisting of ~~$400~~$300 due ~~June 15, 2023~~March 1, 2022 that bear an annual interest rate of ~~1.875%~~2.125%, ~~$400~~$300 due ~~June 15, 2026~~March 1, 2027 that bear an annual interest rate of ~~2.25%~~2.8%, and ~~$400~~$300 due ~~June 15, 2046~~March 1, 2047 that bear an annual interest rate of ~~3.375%~~3.65%. The notes are unsecured senior obligations and rank equally in right of payment with our existing and future unsecured and unsubordinated indebtedness. The net proceeds of the issuance totaled ~~$1,170,~~$871, after deducting underwriting discounts, commissions and offering expenses.

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Note 11 – Postretirement Plans

The components of net periodic benefit cost were as follows:


	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
Pension Plans	2016			2015			2016			2015			2017			2016			2017			2016
Service cost		$488			$1,325			$162			$441			$301			$488			$100			$162
Interest cost	2,287			2,242			761			748			2,243			2,287			747			761
Expected return on plan assets	(2,998		)	(3,024		)	(1,000		)	(1,008		)	(2,883		)	(2,998		)	(961		)	(1,000		)
Amortization of prior service costs	29			147			9			49
Amortization of prior service (credits)/costs													(29		)	29			(9		)	9
Recognized net actuarial loss	592			1,184			198			392			603			592			201			198
Settlement/curtailment/other losses	39			194			6			83			1			39						6
Net periodic benefit cost		$437			$2,068			$136			$705			$236			$437			$78			$136
Net periodic benefit cost included in Earnings from operations		$1,545			$1,837			$453			$529			$534			$1,545			$100			$453


	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
Other Postretirement Benefits	2016			2015			2016			2015			2017			2016			2017			2016
Service cost		$96			$105			$32			$35			$80			$96			$27			$32
Interest cost	196			186			66			62			171			196			57			66
Expected return on plan assets	(6		)	(6		)	(2		)	(2		)	(5		)	(6		)	(1		)	(2		)
Amortization of prior service credits	(94		)	(102		)	(32		)	(34		)	(102		)	(94		)	(34		)	(32		)
Recognized net actuarial loss	17			23			5			8			8			17			2			5
Settlement and curtailment loss				9						4
Net periodic benefit cost		$209			$215			$69			$73			$152			$209			$51			$69
Net periodic benefit cost included in Earnings from operations		$213			$226			$63			$65			$201			$213			$58			$63

Required pension contributions under the Employee Retirement Income Security Act, as well as rules governing funding of our non-US pension plans, are minimal in 2017. During the third quarter of 2017, we contributed $500 in cash and $3,500in shares of our common stock. These contributions exceed our previously announced plan to contribute approximately $500 to our pension plans in 2017.

Note 12 – Share-Based Compensation and Other Compensation Arrangements

Restricted Stock Units

On February ~~22, 2016,~~27, 2017, we granted to our executives ~~777,837~~523,835 restricted stock units (RSUs) as part of our long-term incentive program with a grant date fair value of ~~$117.50~~$178.72 per unit. 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.

Performance-Based Restricted Stock Units

On February ~~22, 2016,~~27, 2017, we granted to our executives ~~721,176~~492,273 performance-based restricted stock units (PBRSUs) as part of our long-term incentive program with a grant date fair value of ~~$126.74~~$190.17 per unit. Compensation expense for the award is recognized over the three-year performance period based upon the grant date fair value estimated using a Monte-Carlo simulation model. The model used the following assumptions: expected volatility of ~~22.44%~~21.37% based upon historical stock volatility, a risk-free interest rate of ~~0.92%~~1.46%, and no expected dividend yield because the units earn dividend equivalents.

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Performance Awards

On February ~~22, 2016,~~27, 2017, we granted to our executives performance awards as part of our long-term incentive program with a payout based on the achievement of financial goals for the three-year period ending December 31, ~~2018.~~2019. At September 30, ~~2016~~2017, the minimum payout amount is $0 and the maximum amount we could be required to pay out is ~~$344.~~$353.

Note 13 – Shareholders' Equity

Accumulated Other Comprehensive Loss

Changes in Accumulated other comprehensive ~~income/(loss)~~loss (AOCI) by component for the nine and three months ended September 30, ~~2016~~2017 and ~~2015~~2016 were as follows:

Currency Translation Adjustments
Unrealized Gains and Losses on Certain Investments
Unrealized Gains and Losses on Derivative Instruments
Defined Benefit Pension Plans & Other Postretirement Benefits

Total⁽¹⁾

Balance at January 1, 2015
$53

($8 )
($136 )
($13,812 )
($13,903 )
Other comprehensive income/(loss) before reclassifications (79 ) 5
(139 ) 4
(209 )
Amounts reclassified from AOCI

52
797
⁽²⁾
849
Net current period Other comprehensive income/(loss) (79 ) 5
(87 ) 801
640
Balance at September 30, 2015
($26 )
($3 )
($223 )
($13,011 )
($13,263 )

Balance at January 1, 2016
($39 )

($197 )
($12,512 )
($12,748 )
Other comprehensive income/(loss) before reclassifications (3 ) 1
54
(384 ) (332 )
Amounts reclassified from AOCI

58
364
⁽²⁾
422
Net current period Other comprehensive income/(loss) (3 ) 1
112
(20 ) 90
Balance at September 30, 2016
($42 )
$1

($85 )
($12,532 )
($12,658 )

Balance at June 30, 2015
$9

($4 )
($174 )
($13,251 )
($13,420 )
Other comprehensive income/(loss) before reclassifications (35 ) 1
(73 ) (27 ) (134 )
Amounts reclassified from AOCI

24
267
⁽²⁾
291
Net current period Other comprehensive income (35 ) 1
(49 ) 240
157
Balance at September 30, 2015
($26 )
($3 )
($223 )
($13,011 )
($13,263 )

Balance at June 30, 2016
($32 )
($1 )
($113 )
($12,649 )
($12,795 )
Other comprehensive income/(loss) before reclassifications (10 ) 2
13
1
6
Amounts reclassified from AOCI

15
116
⁽²⁾
131
Net current period Other comprehensive income/(loss) (10 ) 2
28
117
137
Balance at September 30, 2016
($42 )
$1

($85 )
($12,532 )
($12,658 )



	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, 2016		($39	)					($197	)		($12,512	)			($12,748	)
Other comprehensive (loss)/income before reclassifications	(3		)	1			54			(384		)		(332		)
Amounts reclassified from AOCI							58			364			⁽²⁾	422
Net current period Other comprehensive (loss)/income	(3		)	1			112			(20		)		90
Balance at September 30, 2016		($42	)		$1			($85	)		($12,532	)			($12,658	)

Balance at January 1, 2017		($143	)		($2	)		($127	)		($13,351	)			($13,623	)
Other comprehensive income before reclassifications	121						111			1				233
Amounts reclassified from AOCI							44			310			⁽²⁾	354
Net current period Other comprehensive income	121						155			311				587
Balance at September 30, 2017		($22	)		($2	)		$28			($13,040	)			($13,036	)

Balance at June 30, 2016		($32	)		($1	)		($113	)		($12,649	)			($12,795	)
Other comprehensive (loss)/income before reclassifications	(10		)	2			13			1				6
Amounts reclassified from AOCI							15			116			⁽²⁾	131
Net current period Other comprehensive (loss)/income	(10		)	2			28			117				137
Balance at September 30, 2016		($42	)		$1			($85	)		($12,532	)			($12,658	)

Balance at June 30, 2017		($66	)		($2	)		($22	)		($13,144	)			($13,234	)
Other comprehensive income before reclassifications	44						40							84
Amounts reclassified from AOCI							10			104			⁽²⁾	114
Net current period Other comprehensive income	44						50			104				198
Balance at September 30, 2017		($22	)		($2	)		$28			($13,040	)			($13,036	)

⁽¹⁾Net of tax.

⁽²⁾

Primarily relates to amortization of actuarial losses ~~for the nine months and three months ended September 30, 2015 totaling $768 and $257 (net of tax of ($427) and ($143)) and~~ for the nine and three months ended September 30, 2016 totaling $392 and $131~~(net~~ (net of tax of ($217) and ($72)) and for the nine and three months ended September 30, 2017 totaling $394 and $131 (net of tax of ($217) and ($72)). These are included in the net periodic pension cost of which a portion is allocated to production as inventoried costs. ~~See Note 11.~~

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Note 14 – Derivative Financial Instruments

Cash Flow Hedges

Our cash flow hedges include foreign currency forward contracts and commodity purchase contracts. We use foreign currency forward contracts to manage currency risk associated with certain transactions, specifically forecasted sales and purchases made in foreign currencies. Our foreign currency contracts hedge forecasted transactions through ~~2021.~~2024. We use commodity derivatives, such as fixed-price purchase commitments to hedge against potentially unfavorable price changes for items used in production. Our commodity contracts hedge forecasted transactions through 2020.

Fair Value Hedges

Interest rate swaps under which we agree to pay variable rates of interest are designated as fair value hedges of fixed-rate debt. The net change in fair value of the derivatives and the hedged items is reported in Boeing Capital interest expense.

Derivative Instruments Not Receiving Hedge Accounting Treatment

We have entered into agreements to purchase and sell aluminum to address long-term strategic sourcing objectives and international business requirements. These agreements are derivative instruments for accounting purposes. The quantities of aluminum in these agreements offset and are priced at prevailing market prices. We also hold certain foreign currency forward contracts which do not qualify for hedge accounting treatment.

Notional Amounts and Fair Values

The notional amounts and fair values of derivative instruments in the Condensed Consolidated Statements of Financial Position were as follows:


	Notional amounts⁽¹⁾				Other assets						Accrued liabilities						Notional amounts⁽¹⁾				Other assets						Accrued liabilities
	September 30 2016		December 31 2015		September 30 2016			December 31 2015			September 30 2016			December 31 2015			September 30 2017		December 31 2016		September 30 2017			December 31 2016			September 30 2017			December 31 2016
Derivatives designated as hedging instruments:
Foreign exchange contracts		$2,211		$2,727		$62			$23			($177	)		($304	)		$2,496		$2,584		$117			$34			($70	)		($225	)
Interest rate contracts	125		125		9			9									125		125		4			6
Commodity contracts	39		40		1			2			(5		)	(13		)	41		53		2			7			(6		)	(5		)
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts	526		436		16			4			(14		)	(11		)	479		465		22			21			(9		)	(17		)
Commodity contracts	675		725														557		648
Total derivatives		$3,576		$4,053	88			38			(196		)	(328		)		$3,698		$3,875		$145			$68			($85	)		($247	)
Netting arrangements					(52		)	(23		)	52			23							(64		)	(45		)	64			45
Net recorded balance						$36			$15			($144	)		($305	)						$81			$23			($21	)		($202	)


⁽¹⁾	Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

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Gains/(losses) associated with our cash flow and undesignated hedging transactions and their effect on Other comprehensive ~~income/(loss)~~income and Net earnings were as follows:


	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Effective portion recognized in Other comprehensive income/(loss), net of taxes:
Effective portion recognized in Other comprehensive income, net of taxes:
Foreign exchange contracts		$55			($137	)		$14			($71	)		$116			$55			$40			$14
Commodity contracts	(1		)	(2		)	(1		)	(2		)	(5		)	(1		)				(1		)
Effective portion reclassified out of Accumulated other comprehensive loss into earnings, net of taxes:
Foreign exchange contracts	(52		)	(44		)	(14		)	(21		)	(43		)	(52		)	(11		)	(14		)
Commodity contracts	(6		)	(8		)	(1		)	(3		)	(1		)	(6		)	1			(1		)
Forward points recognized in Other income, net:
Foreign exchange contracts	8			8			4			1			3			8			1			4
Undesignated derivatives recognized in Other income, net:
Foreign exchange contracts	2			(3		)	2			(5		)	6			2			1			2

Based on our portfolio of cash flow hedges, we expect to reclassify losses of $7022 (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 nine and three months ended September 30, ~~2016~~2017 and ~~2015.~~2016.

We have derivative instruments with credit-risk-related contingent features. For foreign exchange contracts with original maturities of at least five years, our derivative counterparties could require settlement if we default on our five-year credit facility. For certain commodity contracts, our counterparties could require collateral posted in an amount determined by our credit ratings. The fair value of foreign exchange and commodity contracts that have credit-risk-related contingent features that are in a net liability position at September 30, ~~2016~~2017 was $4219. At September 30, ~~2016,~~2017, there was no collateral posted related to our derivatives.

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Note 15 – Fair Value Measurements

The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.


	September 30, 2016								December 31, 2015								September 30, 2017								December 31, 2016
	Total			Level 1		Level 2			Total			Level 1		Level 2			Total			Level 1		Level 2			Total			Level 1		Level 2
Assets
Money market funds		$3,232			$3,232					$4,504			$4,504				2,042				$2,042					$2,858			$2,858
Available-for-sale investments:
Commercial paper	168						$168		87						$87		59						$59		162						$162
Corporate notes	252					252			79					79			392					392			271					271
U.S. government agencies	78					78			83					83			47					47			63					63
Other	52			52					20			20					15			15					46			46
Derivatives	36					36			15					15			81					81			23					23
Total assets		$3,818			$3,284		$534			$4,788			$4,524		$264			$2,636			$2,057		$579			$3,423			$2,904		$519
Liabilities
Derivatives		($144	)				($144	)		($305	)				($305	)		($21	)				($21	)		($202	)				($202	)
Total liabilities		($144	)				($144	)		($305	)				($305	)		($21	)				($21	)		($202	)				($202	)

Money market funds, available-for-sale debt investments and equity securities are valued using a market approach based on the quoted market prices or broker/dealer quotes of identical or comparable instruments.

Derivatives include foreign currency, commodity and interest rate contracts. Our foreign currency forward contracts are valued using an income approach based on the present value of the forward rate less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the present value of the commodity index prices less the contract rate multiplied by the notional amount. The fair value of our interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve.

Certain assets have been measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). The following table presents the nonrecurring losses recognized for the nine months ended September 30 due to long-lived asset impairment and the fair value and asset classification of the related assets as of the impairment date:


	2016					2015					2017					2016
	Fair Value		Total Losses			Fair Value		Total Losses			Fair Value		Total Losses			Fair Value		Total Losses
Operating lease equipment		$54		($31	)		$271		($117	)		$89		($31	)		$54		($31	)
Investments											1		(30		)
Property, plant and equipment			(5		)	8		(5		)	8		(2		)			(5		)
Acquired intangible assets	12		(10		)						14		(1		)	12		(10		)
Total		$66		($46	)		$279		($122	)		$112		($64	)		$66		($46	)

Investments, Property, plant and equipment, and Acquired intangible assets were primarily valued using an income approach based on the discounted cash flows associated with the underlying assets. The fair value of the impaired operating lease equipment is derived by calculating a median collateral value from a consistent group of third party aircraft value publications. The values provided by the third party aircraft publications are derived from their knowledge of market trades and other market factors. Management reviews the

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publications quarterly to assess the continued appropriateness and consistency with market trends. Under certain circumstances, we adjust values based on the attributes and condition of the specific aircraft or equipment, usually when the features or use of the aircraft vary significantly from the more generic

aircraft attributes covered by third party publications, or on the expected net sales price for the aircraft. ~~Property, plant and equipment and Acquired intangible assets were primarily valued using an income approach based on the discounted cash flows associated with the underlying assets.~~

For Level 3 assets that were measured at fair value on a nonrecurring basis during the nine months ended September 30, ~~2016,~~2017, the following table presents the fair value of those assets as of the measurement date, valuation techniques and related unobservable inputs of those assets.



	Fair Value	Valuation Technique(s)	Unobservable Input	Range Median or Average
Operating lease equipment	$5489	Market approach	Aircraft value publications	$94141 - ~~$165~~$190⁽¹⁾ Median ~~$133~~$166
Operating lease equipment	$5489	Market approach	Aircraft condition adjustments	($~~79)~~77) - $0⁽²⁾ Net ($~~79)~~77)


⁽¹⁾	The range represents the sum of the highest and lowest values for all aircraft subject to fair value measurement, according to the third party aircraft valuation publications that we use in our valuation process.


⁽²⁾	The negative amount represents the sum for all aircraft subject to fair value measurement, of all downward adjustments based on consideration of individual aircraft attributes and condition. The positive amount represents the sum of all such upward adjustments.

Fair Value Disclosures

The fair values and related carrying values of financial instruments that are not required to be remeasured at fair value on the Condensed Consolidated Statements of Financial Position were as follows:


	September 30, 2016												September 30, 2017
	Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3		Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3
Assets
Accounts receivable, net		$9,524			$9,548				$9,548
Notes receivable, net	417			433				433						$762			$771				$771
Liabilities
Debt, excluding capital lease obligations	(10,321		)	(12,278		)		(12,142		)	(136	)	(10,635		)	(12,180		)		(12,075		)		($105	)


	December 31, 2015												December 31, 2016
	Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3		Carrying Amount			Total Fair Value			Level 1	Level 2			Level 3
Assets
Accounts receivable, net		$8,713			$8,705				$8,705
Notes receivable, net	255			273				273						$807			$803				$803
Liabilities
Debt, excluding capital lease obligations	(9,814		)	(11,292		)		(11,123		)	(169	)	(9,815		)	(11,209		)		(11,078		)		($131	)

~~The fair value of Accounts receivable is 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 with discounted cash flow analysis using interest rates currently offered on loans with similar terms to borrowers of similar credit quality. The fair value of our debt that is traded in the secondary market is classified as Level 2 and is based on current market yields. For our debt that is not traded in the secondary market, the fair value is classified as Level 2 and is based on our indicative borrowing cost derived from dealer quotes or discounted cash flows. The fair values of our debt classified as Level 3 are based on discounted cash flow models using the implied yield

from similar securities. With regard to other financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of our indemnifications and financing commitments because the amount and timing of those arrangements are uncertain. Items not included in the above disclosures include cash, restricted cash, time deposits and other deposits, commercial paper, money market funds, Accounts receivable, Accounts payable

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and long-term payables. The carrying values of those items, as reflected in the Condensed Consolidated Statements of Financial Position, approximate their fair value at September 30, ~~2016~~2017 and December 31, ~~2015.~~2016. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1).

Note 16 – Legal Proceedings

Various legal proceedings, claims and investigations related to products, contracts, employment and other matters are pending against us.

In addition, we are subject to various U.S. government inquiries and investigations from which civil, criminal or administrative proceedings could result or have resulted in the past. Such proceedings involve or could involve claims by the government for fines, penalties, compensatory and treble damages, restitution and/or forfeitures. Under government regulations, a company, or one or more of its operating divisions or subdivisions, can also be suspended or debarred from government contracts, or lose its export privileges, based on the results of investigations. We believe, based upon current information, that the outcome of any such legal proceeding, claim, or government dispute and investigation will not have a material effect on our financial position, results of operations, or cash flows.

Note 17 – Segment Information

Effective during the first quarter of 2016, certain programs were realigned between Boeing Military Aircraft and Global Services & Support segments. Business segment data for 2015 have been adjusted to reflect the realignment.

Our primary profitability measurements to review a segment’s operating results are Earnings from operations and operating margins. See page 6 for a Summary of Business Segment Data, which is an integral part of this note.

Effective July 1, 2017, we now operate in four reportable segments: BCA, BDS, BGS, and BCC. The new segment, BGS, brings together the Commercial Aviation Services businesses, previously included in the BCA segment, and certain BDS businesses (primarily those previously included in the Global Services & Support segment). Prior year numbers have been revised to conform to the current segment presentation.

BCA develops, produces and markets commercial jet aircraft, principally to the commercial airline industry worldwide.

BDS is engaged in the research, development, production and modification of the following products and related services: manned and unmanned military aircraft and weapons systems, surveillance and engagement, strategic defense and intelligence systems, satellite systems and space exploration.

BGS provides parts, maintenance, modifications, logistics support, training, data analytics and information-based services to commercial and government customers worldwide.

BCC facilitates, arranges, structures and provides selective financing solutions for our Boeing customers.

Unallocated items, eliminations and other include common internal services that support Boeing’s global business operations, intercompany guarantees provided to BCC and eliminations of certain sales between segments. Intersegment revenues, eliminated in Unallocated items, eliminations and other, are shown in the following table.


	Nine months ended September 30				Three months ended September 30				Nine months ended September 30				Three months ended September 30
	2016		2015		2016		2015		2017		2016		2017		2016
Commercial Airplanes		$1,768		$1,143		$991		$595		$1,224		$1,668		$325		$949
Global Services									38		53		12		17
Boeing Capital	13		12		4		4		23		13		13		4
Total		$1,781		$1,155		$995		$599		$1,285		$1,734		$350		$970

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Unallocated Items, Eliminations and other

Unallocated items, eliminations and other includes costs not attributable to business segments as well as intercompany profit eliminations. We generally allocate costs to business segments based on the U.S. federal cost accounting standards. Components of Unallocated items, eliminations and other are shown in the following table.


	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Share-based plans		($50	)		($57	)		($9	)		($20	)		($67	)		($50	)		($21	)		($9	)
Deferred compensation	(38		)	(10		)	(33		)	38			(174		)	(38		)	(78		)	(33		)
Amortization of previously capitalized interest	(71		)	(70		)	(23		)	(21		)	(72		)	(71		)	(21		)	(23		)
Eliminations and other unallocated items	(333		)	(324		)	(135		)	(160		)	(437		)	(333		)	(78		)	(135		)
Sub-total	(492		)	(461		)	(200		)	(163		)	(750		)	(492		)	(198		)	(200		)
Pension	129			(293		)	50			(84		)	808			129			275			50
Postretirement	122			93			38			27			146			122			41			38
Pension and Postretirement	251			(200		)	88			(57		)	954			251			316			88
Total		($241	)		($661	)		($112	)		($220	)		$204			($241	)		$118			($112	)

Unallocated Pension and Other Postretirement Benefit Expense

Unallocated pension and other postretirement benefit expense represent the portion of pension and other postretirement benefit costs that are not recognized by business segments for segment reporting purposes. Pension costs, comprising ~~Generally Accepted Accounting Principles in the United States of America (GAAP)~~GAAP service and prior service costs, are allocated to ~~Commercial Airplanes.~~BCA and the commercial operations at BGS. Pension costs are allocated to BDS and BGS businesses supporting government customers using U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. These costs are allocable to government contracts. Other postretirement benefit costs are allocated to business segments based on CAS, which is generally based on benefits paid.

Assets

Segment assets are summarized in the table below:

September 30
2016
December 31
2015
Commercial Airplanes
$55,441

$57,253
Defense, Space & Security:
Boeing Military Aircraft 6,641
6,793
Network & Space Systems 6,062
6,307
Global Services & Support 4,127
4,567
Total Defense, Space & Security 16,830
17,667
Boeing Capital 3,686
3,492
Unallocated items, eliminations and other 12,993
15,996
Total
$88,950

$94,408



	September 30 2017		December 31 2016
Commercial Airplanes		$46,755		$46,745
Defense, Space & Security	15,279		14,123
Global Services	12,144		11,490
Boeing Capital	3,530		4,139
Unallocated items, eliminations and other	13,299		13,500
Total		$91,007		$89,997

Assets included in Unallocated items, eliminations and other primarily consist of Cash and cash equivalents, Short-term and other investments, Deferred tax assets, capitalized interest and assets held ~~by Shared Services Group~~centrally as well as intercompany eliminations.

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Goodwill

Segment goodwill balances are summarized in the table below:



	September 30, 2017		December 31, 2016
Commercial Airplanes		$992		$992
Defense, Space & Security	2,860		2,854
Global Services	1,492		1,478
Total		$5,344		$5,324

As a result of the change in our reportable segments, we reallocated goodwill to our new reporting units using a relative fair value approach. We evaluated goodwill for impairment at July 1, 2017 and determined that no impairment existed.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

The Boeing Company

Chicago, Illinois

We have reviewed the accompanying condensed consolidated statement of financial position of The Boeing Company and subsidiaries (the “Company”) as of September 30, ~~2016~~2017, and the related condensed consolidated statements of operations and comprehensive income for the three-month and nine-month periods ended September 30, ~~2016~~2017 and ~~2015,~~2016 and the related condensed consolidated statements of cash flows and equity for the nine-month periods ended September 30, ~~2016~~2017 and ~~2015.~~2016. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of the Company as of December 31, ~~2015~~2016, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~10, 2016,~~8, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, ~~2015~~2016 is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

/s/ Deloitte & Touche LLP

Chicago, Illinois

October ~~26, 2016~~25, 2017

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FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact.

Forward-looking statements are based on 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 could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to:

(1)	general conditions in the economy and our industry, including those due to regulatory changes;

(2)	our reliance on our commercial airline customers;

(3)	the overall health of our aircraft production system, planned production rate increases across multiple commercial airline programs, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards;

(4)	changing budget and appropriation levels and acquisition priorities of the U.S. government;

(5)	our dependence on U.S. government contracts;

(6)	our reliance on fixed-price contracts;

(7)	our reliance on cost-type contracts;

(8)	uncertainties concerning contracts that include in-orbit incentive payments;

(9)	our dependence on our subcontractors and suppliers as well as the availability of raw materials;

(10)	changes in accounting estimates;

(11)	changes in the competitive landscape in our markets;

(12)	our non-U.S. operations, including sales to non-U.S. customers;

(13)	potential adverse developments in new or pending litigation and/or government investigations;

(14)	customer and aircraft concentration in Boeing Capital’s customer financing portfolio;

(15)	changes in our ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments;

(16)	realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures;

(17)	the adequacy of our insurance coverage to cover significant risk exposures;

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(18)	potential business disruptions, including those related to physical security threats, information technology or cyber attacks, epidemics, sanctions or natural disasters;

(19)	work stoppages or other labor disruptions;

(20)	significant changes in discount rates and actual investment return on pension assets;

(21)	potential environmental liabilities; and

(22)	threats to the security of our or our customers’ information.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” on pages 6 through 1514 of our most recent Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and ~~Notes 9, 10, and 16~~the notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Current Reports on Form 8-K. Any forward-looking information speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations and Financial Condition

Earnings From Operations and Core Operating Earnings (Non-GAAP) The following table summarizes key indicators of consolidated results of operations:


(Dollars in millions, except per share data)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues		$71,285			$72,541			$23,898			$25,849			$68,024			$71,285			$24,309			$23,898

GAAP
Earnings from operations		$3,651			$6,282			$2,282			$2,580			$7,248			$3,651			$2,689			$2,282
Operating margins	5.1		%	8.7		%	9.5		%	10.0		%	10.7		%	5.1		%	11.1		%	9.5		%
Effective income tax rate	5.8		%	31.5		%	(3.4		)%	31.5		%	28.4		%	5.8		%	30.0		%	(3.4		)%
Net earnings		$3,264			$4,150			$2,279			$1,704			$5,065			$3,264			$1,853			$2,279
Diluted earnings per share		$5.04			$5.92			$3.60			$2.47			$8.27			$5.04			$3.06			$3.60

Non-GAAP ⁽¹⁾
Core operating earnings		$3,400			$6,482			$2,194			$2,637			$6,294			$3,400			$2,373			$2,194
Core operating margins	4.8		%	8.9		%	9.2		%	10.2		%	9.3		%	4.8		%	9.8		%	9.2		%
Core earnings per share		$4.79			$6.11			$3.51			$2.52			$7.26			$4.79			$2.72			$3.51


⁽¹⁾	These measures exclude certain components of pension and other postretirement benefit expense. See page 4845 for important information about these non-GAAP measures and reconciliations to the most comparable GAAP measures.

Revenues

The following table summarizes Revenues:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30					Three months ended September 30
	2016			2015			2016			2015			2017		2016			2017		2016
Commercial Airplanes		$48,828			$49,950			$16,973			$17,692			$41,263		$43,630			$14,982		$15,200
Defense, Space & Security	22,638			22,603			7,508			8,350			15,520		17,281			5,470		5,751
Global Services													10,638		10,508			3,568		3,506
Boeing Capital	211			315			63			114			234		211			70		63
Unallocated items, eliminations and other	(392		)	(327		)	(646		)	(307		)	369		(345		)	219		(622		)
Total		$71,285			$72,541			$23,898			$25,849			$68,024		$71,285			$24,309		$23,898

Revenues for the nine months ended September 30, ~~2016~~2017 decreased by ~~$1,256~~$3,261 million compared with the same period in ~~2015.~~2016. Commercial Airplanes (BCA) revenues decreased by ~~$1,122~~$2,367 million primarily due to ~~lower airplane volume.~~fewer deliveries and Defense, Space & Security (BDS) revenues ~~increased~~decreased by ~~$35~~$1,761 million primarily due to ~~higher revenues~~fewer C-17 deliveries. The decrease in ~~Global Services & Support (GS&S),~~revenue at BCA and BDS for the nine-month period was partially offset by ~~lower revenues~~changes in ~~Network & Space Systems (N&SS)~~unallocated items and ~~Boeing Military Aircraft (BMA).~~eliminations, which primarily reflect the timing of eliminations for intercompany aircraft deliveries and the sale of aircraft previously leased to customers.

Revenues for the three months ended September 30, ~~2016 decreased~~2017 increased by ~~$1,951~~$411 million compared with the same period in ~~2015. Commercial Airplanes~~2016. BCA revenues decreased by ~~$719~~$218 million primarily ~~due to~~driven by the mix of airplane deliveries - revenues from higher single aisle deliveries were more than offset by lower ~~volume.~~twin aisle deliveries. BDS revenues decreased ~~$842~~by $281 million ~~or 10%,~~ due to lower revenues inon the ~~BMA~~KC-46A Tanker program and ~~N&SS segments,~~the mix of deliveries on the Chinook, Apache and F-15 programs, partially offset by higher ~~revenues~~volume on various

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weapons programs. The decrease in ~~GS&S.~~

~~The change~~revenue at BCA and BDS for the three-month period was more than offset by changes in unallocated items and eliminations, which primarily ~~reflects~~reflect the timing of eliminations for intercompany aircraft ~~deliveries.~~

deliveries and the sale of aircraft previously leased to customers.

Earnings From Operations

The following table summarizes Earnings from operations:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Commercial Airplanes		$1,657			$4,591			$1,597			$1,768			$3,648			$804			$1,483			$1,293
Defense, Space & Security	2,199			2,311			784			1,022			1,670			1,443			559			564
Global Services													1,639			1,609			506			524
Boeing Capital	36			41			13			10			87			36			23			13
Unallocated pension and other postretirement benefit income/(expense)	251			(200		)	88			(57		)
Unallocated pension and other postretirement benefit income													954			251			316			88
Other unallocated items and eliminations	(492		)	(461		)	(200		)	(163		)	(750		)	(492		)	(198		)	(200		)
Earnings from operations (GAAP)		$3,651			$6,282			$2,282			$2,580			$7,248			$3,651			$2,689			$2,282
Unallocated pension and other postretirement benefit expense	(251		)	200			(88		)	57
Unallocated pension and other postretirement benefit income													(954		)	(251		)	(316		)	(88		)
Core operating earnings (Non-GAAP)		$3,400			$6,482			$2,194			$2,637			$6,294			$3,400			$2,373			$2,194

Earnings from operations for the nine months ended September 30, ~~2016 decreased~~2017 increased by ~~$2,631~~$3,597 million compared with the same period in ~~2015~~2016, primarily due to ~~lower~~higher earnings at ~~Commercial Airplanes, partially offset by lower~~BCA and BDS and higher unallocated pension income, which more than offset other unallocated items and ~~postretirement~~eliminations. BCA's 2017 earnings reflect lower reach-forward losses on the KC-46A Tanker program, as well as the absence of 747 program reach-forward losses and reclassification of 787 flight test aircraft inventory costs of $1,235 million to research and development expense. ~~Commercial Airplanes earnings~~

Earnings from operations for the nine months ended September 30, ~~2016 decreased by $2,934 million due~~2017 included reach-forward losses related to the KC-46A Tanker program of $471 million, of which $374 million was recorded at BCA and $97 million was recorded at BDS. During the nine months ended September 30, 2016 we recorded reach-forward losses onof $1,258 million related to the 747 program ~~of $1,258 million recorded during the first half of 2016, the reclassification of $1,235 million of 787 flight test aircraft costs, as well as lower volume~~at BCA, and mix. During the second quarter of 2016, we reclassified $1,235 million of costs to research and development related to two 787 flight test aircraft as a result of our determination that those aircraft are no longer commercially saleable.

~~During the first half of 2016, we recorded~~ reach-forward losses of $816 million on the KC-46A Tanker program of which ~~$516~~$529 million was recorded at ~~Commercial Airplanes~~BCA and ~~$300~~$287 million at our BMA segment. During the second quarter of 2015, we recorded KC-46A Tanker program reach-forward losses $835 million of which $513 million was recorded at Commercial Airplanes and $322 million at our BMA segment.BDS.

Earnings from operations for the three months ended September 30, ~~2016 decreased~~2017 increased by ~~$298 million. Commercial Airplanes earnings decreased $171~~$407 million compared with the same period in 2016, primarily due to lower volume and mix, offset by lower period costs. BDS earnings from operations for the three months ended September 30, 2016 decreased by $238 million, primarily due to lower earnings in the N&SS and BMA segments, partially offset by higher earnings ~~in the GS&S segment.~~

~~The earnings decreases for the nine~~at BCA and ~~three months ended September 30, 2016 are offset by~~higher unallocated pension income, which more than offset reach-forward losses on the KC-46A Tanker program. During the third quarter of 2017, we recorded reach-forward losses of $256 million at BCA and ~~other postretirement benefit income recorded in 2016 compared with expense recorded in~~$73 million at BDS related to the ~~comparable prior year periods.~~KC-46A Tanker program.

Core operating earnings for the nine months ended September 30, ~~2016 decreased~~2017 increased by ~~$3,082~~$2,894 million compared with the same period in ~~2015~~2016 primarily due to ~~the 747 charges~~lower reach-forward losses and the ~~reclassification~~$1,235 million of ~~costs related to~~research and development expense associated with the 787 flight test aircraft ~~described above, as well as delivery mix at Commercial Airplanes.~~reclassification recorded in 2016. Core operating earnings for the three months ended September 30, 2017 increased $179 million compared with the same period in 2016 ~~decreased by $443 million~~primarily due to ~~lower~~higher earnings at ~~N&SS and Commercial Airplanes.~~BCA.

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


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Share-based plans		($50	)		($57	)		($9	)		($20	)		($67	)		($50	)		($21	)		($9	)
Deferred compensation	(38		)	(10		)	(33		)	38			(174		)	(38		)	(78		)	(33		)
Eliminations and other unallocated items	(404		)	(394		)	(158		)	(181		)	(509		)	(404		)	(99		)	(158		)
Sub-total (included in core operating earnings*)	(492		)	(461		)	(200		)	(163		)	(750		)	(492		)	(198		)	(200		)
Pension	129			(293		)	50			(84		)	808			129			275			50
Postretirement	122			93			38			27			146			122			41			38
Pension and other postretirement benefit expense (excluded from core operating earnings*)	251			(200		)	88			(57		)
Pension and other postretirement benefit income(excluded from core operating earnings*)													954			251			316			88
Total		($241	)		($661	)		($112	)		($220	)		$204			($241	)		$118			($112	)

* Core operating earnings is a Non-GAAP measure that excludes certain components of pension and postretirement benefit expense. See page ~~48.~~45.

The deferred compensation expense increased by ~~$28~~$136 million and ~~$71~~$45 million for the nine and three months ended September 30, ~~2016~~2017 compared with the same periods in ~~2015~~2016 primarily driven by ~~changes~~increases in ~~broad stock market conditions and~~ our stock ~~price.~~price and broad market conditions.

Eliminations and other unallocated ~~loss~~items increased by ~~$10~~$105 million for the nine months ended September 30, ~~2016~~2017, and decreased by ~~$23~~$59 million for the three months ended September 30, ~~2016~~2017 compared with the same periods in ~~2015~~2016 primarily due to the timing of expense allocations and the elimination of profit on intercompany aircraft ~~deliveries and expense allocations.~~deliveries.

The components of net periodic benefit cost are shown in the following table:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
Pension Plans	2016			2015			2016			2015			2017			2016			2017			2016
Service cost		$488			$1,325			$162			$441			$301			$488			$100			$162
Interest cost	2,287			2,242			761			748			2,243			2,287			747			761
Expected return on plan assets	(2,998		)	(3,024		)	(1,000		)	(1,008		)	(2,883		)	(2,998		)	(961		)	(1,000		)
Amortization of prior service costs	29			147			9			49
Amortization of prior service (credits)/costs													(29		)	29			(9		)	9
Recognized net actuarial loss	592			1,184			198			392			603			592			201			198
Settlement/curtailment/other losses	39			194			6			83			1			39						6
Net periodic benefit cost		$437			$2,068			$136			$705			$236			$437			$78			$136

The decrease in net periodic pension benefit cost for the nine and three months ended September 30, ~~2016~~2017 of ~~$1,631~~$201 million and ~~$569~~$58 million compared with the same periods in ~~2015~~2016 is primarily due to lower service costs ~~and lower amortization~~due to the transition of ~~actuarial losses. The lower service costs reflect the changes~~additional employees to ~~our retirement plans whereby certain employees transitioned in 2016 to a company-funded~~ defined contribution retirement savings ~~plan. The lower amortization~~plans.

Table of actuarial losses reflects actuarial gains in 2015 resulting from the year-end discount rate increase from 3.9% to 4.2%. In 2014, the discount rate decreased to 3.9% from 4.8% resulting in actuarial losses.Contents

A portion of net periodic benefit cost is recognized in Earnings from operations in the period incurred and the remainder is included in inventory at the end of the reporting period and recorded in Earnings from operations in subsequent periods. ~~Costs are allocated to the business segments as described in Note 17.~~ Net periodic pension benefit costs included in Earnings from operations were as follows:


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
Pension Plans	2016			2015			2016			2015			2017			2016			2017			2016
Allocated to business segments		($1,674	)		($1,544	)		($503	)		($445	)		($1,342	)		($1,674	)		($375	)		($503	)
Other unallocated items and eliminations	129			(293		)	50			(84		)
Unallocated items, Eliminations and other													808			129			275			50
Total		($1,545	)		($1,837	)		($453	)		($529	)		($534	)		($1,545	)		($100	)		($453	)

The higher unallocated pension ~~costs~~benefit recognized in earnings was a benefit of $129 million and $50 million for the nine and three months ended September 30, 2016 compared with expense of $293 million and $84 million for the same periods in 2015. The 2016 benefits reflect the difference between the higher segment allocation compared to the U.S. GAAP net periodic pension costs recognized in earnings in the current period. The 2015 unallocated expense reflects the amortization of pension ~~costs~~benefits capitalized as inventory in prior years.

Other Earnings Items


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Earnings from operations		$3,651			$6,282			$2,282			$2,580			$7,248			$3,651			$2,689			$2,282
Other income/(loss), net	41			(23		)	2			(26		)
Other income, net													94			41			45			2
Interest and debt expense	(227		)	(203		)	(81		)	(67		)	(267		)	(227		)	(87		)	(81		)
Earnings from operations	3,465			6,056			2,203			2,487			7,075			3,465			2,647			2,203
Income tax (expense)/benefit	(201		)	(1,906		)	76			(783		)	(2,010		)	(201		)	(794		)	76
Net earnings from continuing operations		$3,264			$4,150			$2,279			$1,704			$5,065			$3,264			$1,853			$2,279

Other income, net increased by $53 million and $43 million during the nine and three months ended September 30, 2017, primarily due to higher gains from foreign exchange and interest income.

For discussion related to Income Taxes, see Note 3 to our Condensed Consolidated Financial Statements.

Total Costs and Expenses (“Cost of Sales”)

Cost of sales, for both products and services, consists primarily of raw materials, parts, sub-assemblies, labor, overhead and subcontracting costs. Our ~~Commercial Airplanes~~BCA segment predominantly uses program accounting to account for cost of sales ~~and~~while BDS predominantly uses contract accounting. BGS uses contract accounting for portions of its business. Under program accounting, cost of sales for each commercial airplane program equals the product of (i) revenue recognized in connection with customer deliveries and (ii) the estimated cost of sales percentage applicable to the total remaining program. Under contract accounting, the amount reported as cost of sales is determined by applying the estimated cost of sales percentage to the amount of revenue recognized. The following table summarizes cost of sales:


(Dollars in millions)	Nine months ended September 30									Three months ended September 30									Nine months ended September 30									Three months ended September 30
	2016			2015			Change			2016			2015			Change			2017			2016			Change			2017			2016			Change
Cost of sales		$61,326			$61,446			($120	)		$19,904			$21,600			($1,696	)		$55,639			$61,326			($5,687	)		$19,987			$19,904			$83
Cost of sales as a % of Revenues	86.0		%	84.7		%	1.3		%	83.3		%	83.6		%	(0.3		)%	81.8		%	86.0		%	(4.2		%)	82.2		%	83.3		%	(1.1		)%

Cost of sales for the nine months ended September 30, ~~2016~~2017 decreased by ~~$120~~$5,687 million, or 9.3% compared with the same period in ~~2015,~~2016, primarily due to lower volume ~~partially offset by the 747~~and lower reach-forward ~~loss at Commercial Airplanes. Cost of sales as a percentage of revenue was approximately 86.0% in the nine~~

~~months ended September 30, 2016 compared with approximately 84.7% in the same period in 2015 primarily driven by the 747 charges recorded in the second quarter of 2016.~~

losses. Cost of sales for the three months ended September 30, ~~2016 decreased~~2017 increased by ~~$1,696~~$83 million ~~or 8%,~~ compared with the same period in ~~2015. Cost of sales at Commercial Airplanes decreased by $610 million, or 4% while BDS decreased by $581 million, or 9%,~~2016, primarily due to ~~lower volume. Cost~~higher reach-forward losses.

Table of ~~sales as a percentage of revenue was approximately 83.3% in the three months ended September 30, 2016 compared with approximately 83.6% in the same period in 2015.~~Contents

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


(Dollars in millions)	Nine months ended September 30						Three months ended September 30					Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015		2017			2016			2017			2016
Commercial Airplanes		$3,194			$1,713			$646			$616		$1,755			$3,152			$538			$633
Defense, Space & Security	750			715			229			241		599			666			207			201
Global Services												101			126			38			41
Other	(43		)	(2		)	(18		)			(37		)	(43		)	(16		)	(18		)
Total		$3,901			$2,426			$857			$857		$2,418			$3,901			$767			$857

Research and development expense for the nine months ended September 30, ~~2016 increased~~2017 decreased by ~~$1,475~~$1,483 million compared with the same period in ~~2015~~2016. The decrease at BCA is primarily due to the reclassification of $1,235 million of costs from inventory in the second quarter of 2016 related to the fourth and fifth 787 flight test aircraft ~~and higher~~as well as lower spending on ~~777X~~the 737 MAX and 787-10. The decrease of $90 million during the three months ended September 30, 2017 is primarily attributable to lower spending at ~~Commercial Airplanes.~~BCA on the 737 MAX and 777X.

BacklogThe following table summarizes our backlog:

(Dollars in millions) September 30
2016
December 31
2015
Total contractual backlog
$448,883

$476,595
Unobligated backlog 13,115
12,704



Total Backlog (Dollars in millions)	September 30 2017		December 31 2016
Commercial Airplanes		$412,185		$413,036
Defense, Space & Security		$45,852		$44,825
Global Services		$16,251		$15,631
Total Backlog		$474,288		$473,492

Contractual backlog		$459,871		$458,277
Unobligated backlog	14,417		15,215
Total Backlog		$474,288		$473,492

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 ~~decrease in contractual backlog~~increase during the nine months ended September 30, ~~2016 compared with December 31, 2015~~2017 was primarily due to ~~deliveries~~orders and funding in excess of ~~net orders.~~deliveries.

Unobligated backlog includes U.S. and non-U.S. government definitive contracts for which funding has not been authorized. The ~~unobligated backlog of $13,115 million at~~decrease during the nine months ended September 30, ~~2016 increased from December 31, 2015~~2017 was primarily due to ~~contract awards, partially offset by~~ reclassifications to contractual backlog related to BDS ~~contracts.~~and BGS contracts, partially offset by contract awards.

Additional Considerations

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

~~Through 2015, we recorded reach-forward losses of $1,260 million related to~~ On January 27, 2017, the ~~EMD contract and~~USAF authorized an additional LRIP aircraft. In the first quarter of 2016, we recorded further reach-forward losses of $243 million which were primarily driven by higher than anticipated certification and test rework and the change incorporation impact to EMD and LRIP aircraft. In the second quarter of 2016, technical complexities and schedule delays resulted in additional charges of $573 millionlot for ~~reach-forward losses. The second quarter charges were driven by~~

costs associated with certification delays and higher costs associated with the overall revised schedule, as well as a boom axial load issue that required a hardware solution, and production concurrency between late-stage development testing and the initial production aircraft. As with any development program, this program remains subject to additional reach-forward losses if we experience further technical or quality issues, schedule delays or increased costs.

~~The first tanker delivery is expected to occur in late 2017 with 18 fully operational~~15 aircraft ~~to be delivered in early 2018. The contract contains production options for both LRIP aircraft and full rate production aircraft.~~valued at $2.1 billion. If all options under the contract are exercised, we expect to deliver 179 aircraft for a total expected contract value of approximately $30 billion. We now expect 18 fully operational aircraft to be delivered in 2018.

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During 2016, we recorded reach-forward losses of $1,128 million related to the EMD contract and LRIP aircraft. During the first quarter of 2017, we recorded further reach-forward losses of $142 million primarily reflecting higher estimated costs associated with certification and incorporating changes into LRIP aircraft. During the third quarter of 2017, we recorded additional reach-forward losses of $329 million, primarily reflecting further increases in estimated costs associated with certification and incorporating changes into LRIP aircraft. As with any development program, this program remains subject to additional reach-forward losses or delivery delays if we experience further production, technical or quality issues, delays in certification and/or flight testing.

Russia/Ukraine We continue to monitor political unrest involving Russia and Ukraine, where we and some of our suppliers source titanium products and/or have operations. A number of our commercial customers also have operations in Russia and Ukraine. To date, we have not experienced any significant disruptions to production or deliveries. Should suppliers or customers experience disruption, our production and/or deliveries could be materially impacted.

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

Segment Results of Operations and Financial Condition

Commercial Airplanes

Business ~~Environment~~Environments and Trends

Airline Industry Environment

Our updated 20-year forecast, published in ~~July 2016,~~June 2017, projects a long-term average growth rate of ~~4.8%~~4.7% per year for passenger traffic and 4.2% for cargo traffic. Based on long-term global economic growth projections of ~~2.9%~~2.8% average annual GDP growth, we project a ~~$5.9~~$6.1 trillion market for ~~approximately 39,600~~41,030 new airplanes over the next 20 years. We continue to monitor near-term market conditions in the wide-body segment. If sufficient wide-body orders do not materialize in the next several quarters, we may consider appropriate adjustments to our production rates.

Results of Operations

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2016
2015
2016
2015
Revenues
$48,828

$49,950

$16,973

$17,692
Earnings from operations:
$1,657

$4,591

$1,597

$1,768
Operating margins 3.4 % 9.2 % 9.4 % 10.0 %

(Dollars in millions) September 30
2016
December 31
2015
Contractual backlog
$408,756

$431,408
Unobligated backlog 219
216



(Dollars in millions)	Nine months ended September 30						Three months ended September 30
	2017			2016			2017			2016
Revenues		$41,263			$43,630			$14,982			$15,200
Earnings from operations:		$3,648			$804			$1,483			$1,293
Operating margins	8.8		%	1.8		%	9.9		%	8.5		%

Revenues

Revenues for the nine ~~and~~months ended September 30, 2017 decreased by $2,367 million, or 5%, compared with the same period in 2016 primarily due to fewer deliveries. Revenues for the three months ended September 30, ~~2016~~2017 decreased by ~~$1,122~~$218 million, ~~and $719 million, or 2% and 4%,~~ compared with the same ~~periods~~period in ~~2015~~2016 primarily due to ~~lower volume.~~delivery mix, with fewer twin aisle deliveries more than offsetting the impact of higher single aisle deliveries.

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Commercial airplane deliveries, including intercompany deliveries, were as follows:

737
* 747
† 767
777
787
Total
Deliveries during the first nine months of 2016 368
(15) 8
(3) 10
73
104
563
Deliveries during the first nine months of 2015 375
(11) 13
(1) 14
77
101
580
Deliveries during the third quarter of 2016 120
(6) 5
(3) 5
22
36
188
Deliveries during the third quarter of 2015 126
(5) 4
(1) 5
27
37
199
Cumulative deliveries as of 9/30/2016 6,081
1,527
1,093
1,434
467

Cumulative deliveries as of 12/31/2015 5,713
1,519
1,083
1,361
363



	737	*	747	†	767	777	787	Total
Deliveries during the first nine months of 2017	381	(13)	8	(1)	7	58	100	554
Deliveries during the first nine months of 2016	368	(15)	8	(3)	10	73	104	563
Deliveries during the third quarter of 2017	145	(4)	4		2	16	35	202
Deliveries during the third quarter of 2016	120	(6)	5	(3)	5	22	36	188
Cumulative deliveries as of 9/30/2017	6,584		1,536		1,103	1,518	600
Cumulative deliveries as of 12/31/2016	6,203		1,528		1,096	1,460	500

* Intercompany deliveries identified by parentheses


†	Aircraft accounted for as revenues by ~~Commercial Airplanes~~BCA and as operating leases in consolidation identified by parentheses

Earnings From Operations

Earnings from operations for the nine months ended September 30, ~~2016 decreased~~2017 increased by ~~$2,934~~$2,844 million compared with the same period in ~~2015. The decrease in earnings and operating margins is~~2016 primarily due to ~~higher~~lower reach-forward losses, lower research and development costs and improved margins reflecting favorable cost performance, which more than offset the impact of ~~$1,481~~lower revenues.

Reach-forward losses for the nine months ended September 30, 2017 and 2016 include $374 million and a$529 million related to the KC-46A Tanker program. In addition, reach-forward ~~loss of~~losses for the nine months ended September 30, 2016 include $1,258 million onrelated to the 747 ~~program, as well as lower volume and mix.~~program. Research and development ~~costs reflect~~expense in 2016 reflects the reclassification from inventory ~~to research and development expense~~ of $1,235 million related to the fourth and fifth 787 flight test aircraft and higher planned costs related to the 777X program. Earnings include reach-forward losses related to the KC-46A Tanker of $516 million recorded in the first half of 2016 compared with $513 million in the comparable period of 2015.aircraft.

Earnings from operations for the three months ended September 30, ~~2016 decreased~~2017 increased by ~~$171~~$190 million compared with the same period in ~~2015~~2016, primarily due to ~~lower volume~~favorable cost performance and ~~mix,~~higher margins on the 787 program, partially offset by ~~lower period costs.~~a $256 million reach-forward loss related to KC-46A Tanker program. The higher margin on the 787 program reflected the increase in the accounting quantity from 1,300 to 1,400 and improved cost performance.

Backlog

~~The decrease in contractual~~BCA total backlog ~~during the nine months ended~~decreased from $413,036 million as of December 31, 2016 to $412,185 million at September 30, ~~2016 was~~2017 primarily due to deliveries in excess of ~~net~~ orders.

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Accounting Quantity

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


	Program						Program
As of 9/30/2016	737	747*	767	777	777X	787
As of 9/30/2017							737	747*	767	777	777X	787
Program accounting quantities	9,000	1,555	1,159	1,650	**	1,300	9,600	1,555	1,171	1,625	**	1,400
Undelivered units under firm orders	4,350	15	96	151	306	694	4,431	17	101	101	326	683
Cumulative firm orders	10,431	1,542	1,189	1,585	306	1,161	11,015	1,553	1,204	1,619	326	1,283


	Program						Program
As of 12/31/2015	737	747	767	777	777X	787
As of 12/31/2016							737	747	767	777	777X	787
Program accounting quantities	8,400	1,574	1,147	1,650	**	1,300	9,000	1,555	1,159	1,625	***	1,300
Undelivered units under firm orders	4,392	20	80	218	306	779	4,452	28	93	136	306	700
Cumulative firm orders	10,105	1,539	1,163	1,579	306	1,142	10,655	1,556	1,189	1,596	306	1,200

* At September 30, 2016, the 747 accounting quantity has 27 undelivered aircraft, including 20 that have not been sold or may be remarketed.

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


*	At September 30, 2017, the 747 accounting quantity has 18 undelivered aircraft, including one already completed aircraft that has not been sold and is being remarketed.


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

Program Highlights

737 Program The accounting quantity for the 737 program increased by 200 units during the three months ended September 30, ~~2016~~2017 and by 600 units during the nine months ended September 30, ~~2016~~2017 due to the program’s normal progress of obtaining additional orders and delivering airplanes. We are currently producing at a rate of 4247 per month and plan to increase to 4752 per month in ~~2017.~~2018. We plan to further increase the rate to ~~52 per month in 2018 and to~~ 57 per month in 2019. ~~First delivery~~We delivered the first 737 MAX 8 in May 2017 and announced the launch of the 737 MAX ~~is expected~~10 in June 2017.

747 Program Lower-than-expected demand for large commercial passenger and freighter aircraft ~~and slower-than-expected growth of global freight traffic~~ have continued to drive market uncertainties, pricing pressures and fewer orders than anticipated. AsWe are currently producing at a ~~result, during the second quarter of 2016, we canceled previous plans to return to a production~~ rate of ~~1.0~~0.5 aircraft per month beginning in 2019, resulting in a reduction in the program accounting quantity from 1,574 to 1,555 aircraft. This reduction in the program accounting quantity, together with lower anticipated revenues from future sales and higher costs associated with producing fewer airplanes, resulted in a reach-forward loss of $1,188 million in the second quarter. We previously recognized reach-forward losses of $885 million and $70 million during the second half of 2015 and the first quarter of 2016, respectively, related to our prior decision to reduce the production rate to 0.5 per month and anticipating lower estimated revenue from future sales due to ongoing pricing and market pressures. We reduced the rate from 1.0 to 0.5 per month in September 2016.month. The ~~adjusted~~ program accounting quantity includes ~~27 undelivered~~ aircraft ~~currently~~ scheduled to be produced through 2019. We ~~continue to have a number of completed aircraft in inventory as well as unsold production positions and we~~ remain focused on obtaining additional orders and implementing cost-reduction efforts. We are currently evaluating several scenarios, including sales campaigns that may determine how long we continue the 747 program. If we are unable to obtain sufficient orders and/or market, production and other risks cannot be mitigated, we could record additional losses that may be ~~material, and~~material. Depending on market conditions, it is reasonably possible that we could decide to end production of the 747.

767 Program The accounting quantity for the 767 program increased by 12 units during the ~~nine~~three months ended September 30, ~~2016~~2017 due to the program’s normal progress of obtaining additional orders and delivering airplanes. The 767 assembly line includes a 767 derivative to support the tanker program. ~~We increased the~~The combined tanker and commercial production rate increased from ~~1.5 per month to~~ 2 per month ~~in April of 2016. We plan to further increase the rate~~ to 2.5 per month in the ~~fourth~~third quarter of 2017.

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

787 Program ~~During~~The accounting quantity for the ~~second quarter~~787 program increased by 100 units during the three months ended September 30, 2017 due to the program’s normal progress of ~~2016, we began~~obtaining additional orders and delivering airplanes.We are currently producing at a rate of 12 per ~~month. We are planning a further rate~~month and plan to increase to 14 per month ~~by the end of the decade.~~in 2019. First delivery of the 787-10 derivative aircraft is targeted for 2018. ~~The accounting quantity~~

Table of ~~1,300 units remains unchanged.~~Contents

We remain focused on improving productivity and obtaining additional orders to support planned production. We continue to monitor and address challenges associated with aircraft production and assembly for both the 787-8 and 787-9, including management of our manufacturing operations and extended global supply chain, completion and integration of traveled work, as well as completing and delivering early build aircraft.

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 those airplanes were included in research and development expense. We produced the fourth and fifth flight test aircraft in 2009 but have been unable to sell them at acceptable prices. The aircraft have been used extensively for flight and ground testing and we intended to begin to refurbish the aircraft in early 2017 for commercial sale based on sales activity and market interest. However, during the second quarter of 2016 we determined that firm orders for these aircraft prior to refurbishment were now unlikely, and that the Company would not invest company funds for their refurbishment. The Company also determined the costs to refurbish the aircraft at a future date would be prohibitively expensive. We have therefore determined that the aircraft are not commercially saleable, and accordingly, costs of $1,235 million associated with these aircraft were reclassified from 787 program inventory to research and development expense during the second quarter of 2016. We have firm orders for the six remaining undelivered early build aircraft and plan to complete retrofitting them by the end of 2017.

The combination of production challenges, change incorporation on early build aircraft, schedule delays, customer and supplier impacts and changes to price escalation factors has created significant pressure on program profitability and we continue to have near breakeven gross margins. If risks related to these challenges, together with risks associated with planned production rate increases and productivity improvements, supply chain management or introducing or manufacturing the 787-10 derivative as scheduled cannot be mitigated, the program could face further pressures on program profitability and/or a reach-forward loss. We continue to implement mitigation plans and cost-reduction efforts to improve program profitability and address program risks.

Additional Considerations

The development and ongoing production of commercial aircraft is extremely complex, involving extensive coordination and integration with suppliers and highly-skilled labor from thousands of employees and other partners. Meeting or exceeding our performance and reliability standards, as well as those of customers and regulators, can be costly and technologically challenging. In addition, the introduction of new aircraft and derivatives, such as the 787-10, 737 MAX and 777X, involves increased risks associated with meeting development, production and certification schedules. As a result, our ability to deliver aircraft on time, satisfy performance and reliability standards and achieve or maintain, as applicable, program profitability is subject to significant risks. Factors that could result in lower margins (or a material charge if an airplane program has or is determined to have reach-forward losses) include the following: changes to the program accounting quantity, customer and model mix, production costs and rates, changes to price escalation factors due to changes in the inflation rate or other economic indicators, performance or reliability issues involving completed aircraft, capital expenditures and other costs associated with increasing or adding new production capacity, learning curve, additional change incorporation, achieving anticipated cost reductions, flight test and certification schedules, costs, schedule and demand for new airplanes and derivatives and status of customer claims, supplier assertions and other contractual negotiations. While we believe the cost and revenue estimates incorporated in the consolidated financial statements are appropriate, the technical complexity of our airplane programs creates financial risk as additional completion costs may become

necessary or scheduled delivery dates could be extended, which could trigger termination provisions, order cancellations or other financially significant exposure.

Defense, Space & Security

Business Environment and Trends

United States Government Defense Environment Overview~~The enactment of The Bipartisan Budget Act of 2015 in November 2015 established overall defense spending levels~~

In May 2017, the U.S. administration submitted its fiscal year 2018 budget request, which calls for ~~FY2016 and FY2017. However, uncertainty remains with respect to levels of defense spending for FY2018 and beyond, including risk of future sequestration cuts.~~

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Results of Operations

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2016
2015
2016
2015
Revenues
$22,638

$22,603

$7,508

$8,350
Earnings from operations
$2,199

$2,311

$784

$1,022
Operating margins 9.7 % 10.2 % 10.4 % 12.2 %

(Dollars in millions) September 30
2016
December 31
2015
Contractual backlog
$40,127

$45,187
Unobligated backlog 12,896
12,488



(Dollars in millions)	Nine months ended September 30						Three months ended September 30
	2017			2016			2017			2016
Revenues		$15,520			$17,281			$5,470			$5,751
Earnings from operations		$1,670			$1,443			$559			$564
Operating margins	10.8		%	8.4		%	10.2		%	9.8		%

Since our operating cycle is long-term and involves many different types of development and production contracts with varying delivery and milestone schedules, the operating results of a particular ~~year, or year-to-year comparisons of revenues, earnings and backlog~~period may not be indicative of future operating results. In addition, depending on the customer and their funding sources, our orders might be structured as annual follow-on contracts, or as one large multi-year order or long-term award. As a result, period-to-period comparisons of backlog are not necessarily indicative of future workloads. The following discussions of comparative results among periods should be viewed in this context.

Deliveries of units for new-build production aircraft, including remanufactures and modifications, were as follows:


	Nine months ended September 30		Three months ended September 30		Nine months ended September 30		Three months ended September 30
	2016	2015	2016	2015	2017	2016	2017	2016
F/A-18 Models	20	28	6	8	18	20	6	6
F-15 Models	11	8	4	3	11	11	4	4
C-17 Globemaster III	4	5	0	2		4
CH-47 Chinook (New)	17	35	7	14	6	17	2	7
CH-47 Chinook (Renewed)	23	6	7	1	28	23	9	7
AH-64 Apache (New)	25	18	10	6	8	25	3	10
AH-64 Apache (Remanufactured)	27	33	9	10	43	27	15	9
P-8 Models	13	10	4	4	14	13	5	4
C-40A		1
Total	140	144	47	48	128	140	44	47

Revenues

BDS revenues for the nine months ended September 30, ~~2016 increased~~2017 decreased by ~~$35~~$1,761 million compared with the same period in ~~2015~~2016 primarily due to ~~higher revenues~~fewer C-17 deliveries and the mix of ~~$925 million in~~deliveries on the ~~GS&S segment,~~Apache and F-15 programs. The decrease was partially offset by ~~lower revenues of $551 million and $339 million in the N&SS and BMA segments.~~higher volume on various weapons programs.

BDS revenues for the three months ended September 30, ~~2016~~2017 decreased by ~~$842~~$281 million compared with the same period in ~~2015~~2016. The decrease was primarily due to lower revenues ~~of $777 million~~related to KC-46A Tanker program milestones and ~~$426 million in~~delivery mix on the ~~BMA~~Chinook, Apache and ~~N&SS segments,~~F-15 programs, partially offset by higher ~~revenues of $361 million in the GS&S segment.~~volume on various weapons programs.

Earnings From Operations

BDS earnings from operations for the nine months ended September 30, ~~2016decreased~~2017 increased by ~~$112~~$227 million compared with the same period in ~~2015~~2016 primarily due to lower ~~earnings~~charges on the KC-46A Tanker and Commercial Crew programs, which more than offset the impact of ~~$227~~fewer C-17 deliveries and Apache delivery mix. BDS recorded charges related to the KC-46A Tanker program of $97 million and $287 million in the ~~N&SS segment, partially offset by higher earnings~~nine months ended September 30, 2017 and 2016. BDS recorded a charge of ~~$69~~$162 million ~~and $46 million~~on the Commercial Crew program in the ~~BMA and GS&S segments.~~nine months ended September 30, 2016.

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BDS earnings from operations for the three months ended September 30, ~~2016 decreased by $238 million compared~~2017 remained largely consistent with the same period in ~~2015~~2016. Third quarter 2017 includes a $73 million charge on the KC-46A Tanker program and third quarter 2016 includes a charge of $162 million on the Commercial Crew program. Lower 2017 revenues and earnings from United Launch Alliance (ULA) also contributed to the year over year change.

BDS earnings from operations include equity earnings of $151 million and $38 million for the nine and three months ended September 30, 2017 compared to $177 million and $53 million for the same periods in 2016 primarily from our ULA joint venture.

Backlog

Total backlog increased from $44,825 million at December 31, 2016 to $45,852 million as of September 30, 2017 primarily due to ~~lower earnings of $210 million~~current year contract awards for the Apache and ~~$60 million in the N&SS and BMA segments,~~weapons programs, partially offset by ~~higher earnings of $32 million~~revenue recognized on contracts awarded in ~~the GS&S segment.~~

~~Backlog~~

BDS total backlog was $53,023 million at September 30, 2016, reflecting a decrease of 8% from December 31, 2015. For further details on the changes between periods, refer to the discussions of the individual segments below.prior years.

Additional Considerations

Our BDS business includes a variety of development programs which have complex design and technical challenges. Many of these programs have cost-type contracting arrangements. In these cases, the associated financial risks are primarily in reduced fees, lower profit rates or program cancellation if cost, schedule or technical performance issues arise. Examples of these programs include Ground-based Midcourse Defense ~~(GMD)~~, Proprietary and Space Launch System ~~(SLS)~~ programs.

Some of our development programs are contracted on a fixed-price basis. Many of these programs have highly complex designs. As technical or quality issues arise during development, we may experience schedule delays and cost impacts, which could increase our estimated cost to perform the work or reduce our estimated price, either of which could result in a material charge or otherwise adversely affect our financial condition. These programs are ongoing, and while we believe the cost and fee estimates incorporated in the financial statements are appropriate, the

technical complexity of these programs creates financial risk as additional completion costs may become necessary or scheduled delivery dates could be extended, which could trigger termination provisions, the loss of satellite in-orbit incentive payments, or other financially significant exposure. These programs have risk for reach-forward losses if our estimated costs exceed our estimated contract revenues. Examples of significant fixed-price development programs include ~~Saudi F-15,~~ USAF KC-46A Tanker, Commercial Crew and commercial and military satellites.

Revenue and cost estimates for all significant contracts are reviewed and reassessed quarterly. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the contract’s inception-to-date revenues, cost of sales and profit, in the period in which such changes are made. Changes in revenue and cost estimates could also result in a reach-forward loss or an adjustment to a reach-forward loss, which would be recorded immediately in earnings. ~~For the nine and three months ended September 30, 2016, net unfavorable~~Net cumulative catch-up adjustments to prior years' earnings, including reach-forward losses, across all ~~BDS~~ contracts ~~decreased Earnings from operations by $127 million and $56 million. For the nine months and three months ended September 30, 2015 net~~were as follows:



(Dollars in millions)	Nine months ended September 30					Three months ended September 30
	2017		2016			2017		2016
Increase/(Decrease) to Earnings from Operations	$	182	$	(289	)	(68	)	$	(69	)

Net favorable cumulative ~~catch-up~~contract adjustments, including reach-forward losses, ~~across all BDS contracts increased Earnings from operations by $129 million and $210 million.~~

~~Boeing Military Aircraft~~

~~Results of Operations~~

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2016
2015
2016
2015
Revenues
$9,898

$10,237

$3,260

$4,037
Earnings from operations
$943

$874

$434

$494
Operating margins 9.5 % 8.5 % 13.3 % 12.2 %

(Dollars in millions) September 30
2016
December 31
2015
Contractual backlog
$20,769

$19,947
Unobligated backlog 3,793
7,141

~~Revenues~~

~~BMA revenues for~~in the nine months ended September 30, ~~2016 decreased by $339 million compared with the same period in 2015~~2017 were primarily due to ~~lower revenues of $720 million related to fewer C-17 deliveries~~vertical lift and timing and mix of deliveries on the CH-47 Chinook and F/A-18 programs. These decreases were partially offset by higher volume on the JDAM and Harpoon programs as well as timing and mix of deliveries on the F-15 ~~program.~~

BMA revenues for the three months ended September 30, 2016 decreased by $777 million compared with the same period in 2015 primarily due to lower revenues of $932 million related to fewer C-17 deliveries and the absence of a cumulative catch-up adjustment recorded in the third quarter of 2015 resulting from F-15 contract negotiations. These decreases were partially offset by higher revenues related to timing and mix of deliveries on the Apache program.

~~Earnings From Operations~~

BMA earnings from operations for the nine months ended September 30, 2016 increased by $69 million compared with the same period in 2015 primarily due to higher volume and mix on the F-15 and Apache programs and lower spending on proprietary programs, partially offset by ~~lower volume and mix on~~ the ~~CH-47 Chinook and C-17 programs.~~KC-46A Tanker charges. Net unfavorable ~~cumulative contract catch-up~~ adjustments ~~were $141 million higher~~ in the nine months ended September 30, 2016 ~~than in the same period in 2015 primarily driven by the absence of favorable F-15 program adjustments recorded in the third quarter of 2015.~~

~~BMA earnings from operations for the three months ended September 30, 2016 decreased by $60 million compared with the same period in 2015~~were primarily due to ~~fewer C-17 deliveries. Net favorable cumulative contract catch-up adjustments were $111 million lower in~~ the ~~three months ended September 30, 2016 than in the same period in 2015 primarily driven by the absence of favorable F-15 program adjustments recorded in the third quarter of 2015.~~

~~Backlog~~

BMA total backlog of $24,562 million at September 30, 2016 decreased by 9% from December 31, 2015, reflecting revenue recognized on contracts awarded in prior years, partially offset by current year contract awards for the Apache, P-8KC-46A Tanker and ~~weapons programs.~~

~~Additional Considerations~~

~~F/A-18~~ ~~See the discussions of the F/A-18 program in Note 8 to our Condensed Consolidated Financial Statements.~~Commercial Crew charges.

KC-46A Tanker See the discussion of the KC-46A Tanker program on page ~~35.~~34.

~~Network & Space Systems~~

~~Results of Operations~~

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2016
2015
2016
2015
Revenues
$5,246

$5,797

$1,701

$2,127
Earnings from operations
$336

$563

$35

$245
Operating margins 6.4 % 9.7 % 2.1 % 11.5 %

(Dollars in millions) September 30
2016
December 31
2015
Contractual backlog
$6,517

$7,368
Unobligated backlog 7,289
4,979

~~Revenues~~

N&SS revenues for the nine months ended September 30, 2016 decreased by $551 million compared with the same period in 2015 primarily due to lower revenue related to the Commercial Crew program, lower milestone revenue on government satellite programs, and lower volume on proprietary and Electronic and Information Solutions (E&IS) programs, partially offset by higher volume on the SLS program.

~~N&SS revenues for the three months ended September 30, 2016 decreased~~by $426 million compared with the same period in 2015 due to lower revenues on the Commercial Crew program, lower volume on proprietary programs, and lower milestone revenue on commercial satellite programs.

~~Lower revenues on the Commercial Crew program for the nine and three months ended September 30, 2016 were largely driven by unfavorable cumulative catch-up adjustments.~~

~~Earnings From Operations~~

N&SS earnings from operations for the nine months ended September 30, 2016 decreased by $227 million compared with the same period in 2015 primarily due to a charge of $162 million on the Commercial Crew program, partially offset by higher earnings related to our United Launch Alliance (ULA) joint venture. Net unfavorable cumulative contract catch-up adjustments were $132 million higher in the nine months ended

~~September 30, 2016 than in the same period in 2015 primarily reflecting the charge on the Commercial Crew program during the three months ended September 30, 2016.~~

N&SS earnings from operations for the three months ended September 30, 2016 decreased by $210 million compared with the same period in 2015. This was primarily due to a Commercial Crew charge of $162 million, largely driven by delays in completion of engineering and supply chain activities, and includes $124 million reversal of cumulative earnings recorded in prior periods and $38 million reach-forward loss. Net unfavorable cumulative contract catch-up adjustments, including reach-forward losses, were $143 million higher in the three months ended September 30, 2016 than in the same period in 2015 primarily reflecting the charge on the Commercial Crew program.

N&SS earnings from operations include equity earnings of $182 million for the nine months ended September 30, 2016 compared to $140 million for the same period in 2015 primarily from our ULA joint venture, primarily due to launch timing and favorable cumulative contract catch-up adjustments.

~~Backlog~~

N&SS total backlog of $13,806 million at September 30, 2016 increased by 12% compared to December 31, 2015 primarily due to current year contract awards for SLS, missile defense, and government satellite programs offset by revenue recognized on contracts awarded in prior years.

~~Additional Considerations~~

United Launch Alliance See the discussion of Indemnifications to ULA and Financing Commitments in Notes 4, 8 and 9 of our Condensed Consolidated Financial Statements.

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

Commercial Crew See the discussion of Fixed-Price Development Contracts in Note 8 to our Condensed Consolidated Financial Statements.

Global Services ~~& Support~~

Results of Operations

(Dollars in millions) Nine months ended September 30 Three months ended September 30

2016
2015
2016
2015
Revenues
$7,494

$6,569

$2,547

$2,186
Earnings from operations
$920

$874

$315

$283
Operating margins 12.3 % 13.3 % 12.4 % 12.9 %

(Dollars in millions) September 30
2016

December 31
2015
Contractual backlog
$12,841

$17,872
Unobligated backlog 1,814
368



(Dollars in millions)	Nine months ended September 30						Three months ended September 30
	2017			2016			2017			2016
Revenues		$10,638			$10,508			$3,568			$3,506
Earnings from operations		$1,639			$1,609			$506			$524
Operating margins	15.4		%	15.3		%	14.2		%	14.9		%

Revenues

~~GS&S~~BGS revenues for the nine and three months ended September 30, ~~2016~~2017 increased by ~~$925~~$130 million and $62 million compared with the same ~~period~~periods in ~~2015~~2016 primarily due to higher ~~volume in several Aircraft Modernization & Sustainment (AM&S), Training Systems & Government Services (TSGS), and Integrated Logistics (IL) programs.~~

~~GS&S~~commercial parts revenues, ~~for the three months ended September 30, 2016 increased~~partially offset by ~~$361 million compared with the same period in 2015 primarily due to higher volume in several AM&S, TSGS, and IL programs.~~

lower government services revenues.

Earnings From Operations

~~GS&S~~BGS earnings from operations for the nine months ended September 30, ~~2016~~2017 increased by ~~$46~~$30 million compared with the same period in ~~2015~~2016, primarily due to higher volume and performance in several AM&S programs, partially offset by lower performance on several IL programs. Net favorable cumulative contract catch-up adjustments were $17 million higher in the nine months ended September 30, 2016 than in the same period in 2015 primarily driven by higher favorable adjustments on the C-17 support programs.

~~GS&S earnings~~revenues. Earnings from operations for the three months ended September 30, ~~2016 increased $32~~2017 decreased by $18 million compared with the same period in ~~2015~~2016, primarily due to unfavorable mix more than offsetting higher ~~volume and~~revenues. Operating margin of 14.2% during the three months ended September 30, 2017 primarily reflects an unfavorable mix ~~in several AM&S programs.~~ of commercial parts.

Net favorable cumulative contract catch-up adjustments ~~were $12 million lower in~~for the nine and three months ended September 30, ~~2016 than in~~2017, were $9 million lower and $9 million higher, compared with the same ~~period~~periods in ~~2015.~~2016.

Backlog

~~GS&S~~BGS total backlog ~~was $14,655~~increased from $15,631 million as of December 31, 2016 to $16,251 million at September 30, ~~2016, reflecting a decrease of 20% from December 31, 2015~~2017, primarily due to ~~revenues~~current year contract awards including C-17, F-15, and Apache support programs, partially offset by revenue recognized on contracts awarded in prior ~~years, partially offset by current year contract awards including F/A-18 and C-17 support programs.~~years.

Boeing Capital

Results of Operations


(Dollars in millions)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues		$211			$315			$63			$114			$234			$211			$70			$63
Earnings from operations		$36			$41			$13			$10			$87			$36			$23			$13
Operating margins	17		%	13		%	21		%	9		%	37		%	17		%	33		%	21		%

Revenues

Boeing Capital (BCC) segment revenues consist principally of lease income from equipment under operating lease, interest income from financing receivables and notes, and other income. BCC’s revenues for the nine

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and three months ended September 30, ~~2016 decreased~~2017 increased by ~~$104~~$23 million and ~~$51~~$7 million compared with the same periods in ~~2015~~2016 primarily due to ~~lower lease~~higher interest income ~~and lower end of lease settlement payments.~~driven by a larger portfolio during 2017.

Earnings From Operations

BCC’s earnings from operations are presented net of interest expense, provision for (recovery of) losses, asset impairment expense, depreciation on leased equipment and other operating expenses. Earnings from operations for the nine months ended September 30, 2017 increased by $51 million compared with the same period in 2016, primarily due to lower impairment expenses and higher revenues. Earnings from operations for the three months ended September 30, ~~2016 decreased~~2017 increased by ~~$5 million and increased $3~~$10 million compared with the same ~~periods~~period in ~~2015,~~2016, primarily due to ~~lower revenues, partially offset by lower asset impairment expense.~~

higher revenues.

Financial Position

The following table presents selected financial data for BCC:


(Dollars in millions)	September 30 2016		December 31 2015		September 30 2017		December 31 2016
Customer financing and investment portfolio, net		$3,660		$3,449		$3,366		$4,109
Other assets, primarily cash and short-term investments	237		480		1,191		346
Total assets		$3,897		$3,929		$4,557		$4,455

Other liabilities, primarily deferred income taxes		$977		$1,099		$923		$1,007
Debt, including intercompany loans	2,421		2,355		3,028		2,864
Equity	499		475		606		584
Total liabilities and equity		$3,897		$3,929		$4,557		$4,455

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

BCC’s customer financing and investment portfolio at September 30, ~~2016 increased~~2017 decreased from December 31, ~~2015~~2016 primarily due to ~~new volume~~$938 million of ~~$919 million more than offsetting~~asset sales, note payoffs, ~~asset sales~~ and portfolio ~~run-off.~~

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

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Liquidity and Capital Resources

Cash Flow Summary


(Dollars in millions)	Nine months ended September 30						Nine months ended September 30
	2016			2015			2017			2016
Net earnings		$3,264			$4,150			$5,065			$3,264
Non-cash items	1,793			1,702			1,907			1,793
Changes in working capital	2,610			392			3,468			2,610
Net cash provided by operating activities	7,667			6,244			10,440			7,667
Net cash used by investing activities	(1,964		)	(965		)	(1,636		)	(1,964		)
Net cash used by financing activities	(8,013		)	(7,609		)	(9,109		)	(8,013		)
Effect of exchange rate changes on cash and cash equivalents	(6		)	(20		)	73			(6		)
Net decrease in cash and cash equivalents	(2,316		)	(2,350		)	(232		)	(2,316		)
Cash and cash equivalents at beginning of year	11,302			11,733			8,801			11,302
Cash and cash equivalents at end of period		$8,986			$9,383			$8,569			$8,986

Operating Activities Net cash provided by operating activities was ~~$7.7~~$10.4 billion during the nine months ended September 30, ~~2016~~2017, compared with ~~$6.2~~$7.7 billion induring the same period in ~~2015, an~~2016. The increase ~~of 1.5 billion. The year-over-year improvement~~was primarily ~~reflects lower expenditures on commercial airplane program~~driven by changes in working capital with higher advances more than offsetting inventory ~~primarily 787.~~increases. Advances and progress billings ~~balances decreased~~increased by ~~$1.8~~$5.2 billion during the nine months ended September 30, 2017 and decreased by $1.8 billion during the same period in 2016. Gross inventories increased by $2.3 billion during the nine months ended September 30, 2017, driven by continued investment in commercial airplane program inventory. Gross inventories decreased by $4.7 billion during the same period in 2016, primarily driven by the reclassification of 787 flight test aircraft and reach-forward losses recorded on our 747 program which did not affect 2016 operating cash flows.

Required pension contributions under the Employee Retirement Income Security Act, as well as rules governing funding of our non-US pension plans, are expected to be minimal in 2017. During the third quarter of 2017, we contributed 14.4 million shares of our common stock with an aggregate value of $3.5 billion and $0.5 billion in cash to our pension plans. These contributions exceed our previously announced plan to contribute approximately $0.5 billion to our pension plans in 2017.

Investing Activities Cash used by investing activities was ~~$2.0~~$1.6 billion during the nine months ended September 30, ~~2016~~2017, compared with ~~$1.0~~$2.0 billion during the same period in ~~2015, largely due to lower net proceeds~~2016. In the nine months ended September 30, 2017, capital expenditures totaled $1.3 billion, down from ~~investments~~$2.0 billion during the same period in ~~time deposits.~~2016. We expect capital expenditures in ~~2016~~2017 to be ~~higher~~lower than ~~2015 due to continued investment to support growth.~~2016.

Financing Activities Cash used by financing activities was $9.1 billion, compared with $8.0 billion during the ~~nine months ended September 30, 2016 compared with $7.6 billion in the~~ same period in ~~2015, primarily due to higher share repurchases and dividend payments, partially offset by higher new borrowings and lower debt repayments.~~2016. During the nine months ended September 30, ~~2016~~2017, we issued ~~$1.3~~$0.9 billion of debt compared with ~~$0.8~~$1.3 billion ~~during~~in the same period in ~~2015.~~ 2016.

At September 30, ~~2016,~~2017, the recorded balance of debt was ~~$10.5~~$10.8 billion, of which ~~$0.6~~$1.0 billion was classified as short-term. ~~This includes $2.4 billion of debt~~Debt, including intercompany loans, attributable to BCC ~~the vast majority~~totaled $3.0 billion, of which $1.1 billion was classified as ~~long-term.~~short-term.

During the nine months ended September 30, ~~2016,~~2017 we repurchased ~~51.4~~39.5 million shares totaling ~~$6.5~~$7.5 billion through our open market share repurchase program. In addition, ~~$0.7~~0.7 million shares were transferred to us from employees for tax withholdings. At September 30, ~~2016,~~2017, the amount available under the share repurchase plan, announced on December ~~14, 2015,~~12, 2016, totaled ~~$7.5 billion.~~$6.5 billion.

Capital Resources We have substantial borrowing capacity. Any future borrowings may affect our credit ratings and are subject to various debt covenants as described below. We have a commercial paper program that continues to serve as a significant potential source of short-term liquidity. Throughout the nine months

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ended September 30, ~~2016,~~2017, we had no commercial paper borrowings outstanding. Currently, we have $5.0 billion of unused borrowing capacity on revolving credit line agreements. We anticipate that these credit lines will primarily serve as backup liquidity to support our general corporate borrowing needs.

Financing commitments totaled ~~$17.4~~$13.1 billion and ~~$16.3~~$14.8 billion at September 30, ~~2016~~2017 and December 31, ~~2015.~~2016. We anticipate that we will not be required to fund a significant portion of our financing commitments as we continue to work with third party financiers to provide alternative financing to customers. Historically, we have not been required to fund significant amounts of outstanding commitments. However, there can be no assurances that we will not be required to fund greater amounts than historically required. In addition, many of our non-U.S. customers finance aircraft purchases through the Export-Import Bank of the United States. Following the expiration of the bank’s charter on June 30, 2015, the bank’s charter was reauthorized in December 2015. The bank is now authorized through September 30, 2019. However, until the U.S. Senate confirms members sufficient to reconstitute a quorum of the bank’s board of directors, the bank will not be able to approve any transaction totaling more than $10 million. As a result, we may fund additional commitments and/or enter into new financing arrangements with customers.

In the event we require additional funding to support strategic business opportunities, our commercial aircraft financing commitments, unfavorable resolution of litigation or other loss contingencies, or other business requirements, we expect to meet increased funding requirements by issuing commercial paper or term debt.

We believe our ability to access external capital resources should be sufficient to satisfy existing short-term and long-term commitments and plans, and also to provide adequate financial flexibility to take advantage of potential strategic business opportunities should they arise within the next year. However, there can be no assurance of the cost or availability of future borrowings, if any, under our commercial paper program, in the debt markets or our credit facilities.

At September 30, ~~2016,~~2017, we were in compliance with the covenants for our debt and credit facilities. The most restrictive covenants include a limitation on mortgage debt and sale and leaseback transactions as a percentage of consolidated net tangible assets (as defined in the credit agreements), and a limitation on consolidated debt as a percentage of total capital (as defined). When considering debt covenants, we continue to have substantial borrowing capacity.

Off-Balance Sheet Arrangements

We are a party to certain off-balance sheet arrangements including certain guarantees. For discussion of these arrangements, see Note 9 to our Condensed Consolidated Financial Statements.

Contingent Obligations

We have significant contingent obligations that arise in the ordinary course of business, which include the following:

Legal Various legal proceedings, claims and investigations are pending against us. Legal contingencies are discussed in Note 16 to our Condensed Consolidated Financial Statements.

Environmental Remediation We are involved with various environmental remediation activities and have recorded a liability of $~~576~~543 million at September 30, ~~2016~~2017. For additional information, see Note 8 ~~to our Condensed Consolidated Financial Statements.~~

~~Income Taxes~~ ~~As of~~ ~~September 30, 2016, we have $1,378 million of unrecognized tax benefits for uncertain tax positions. For further discussion of income taxes, see Note~~ 3 to our Condensed Consolidated Financial Statements.

Non-GAAP Measures

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

Our unaudited condensed consolidated interim financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures

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differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Core operating earnings, core operating margin and core earnings per share exclude the impact of certain pension and other postretirement benefit expenses that are not allocated to business segments. Pension costs, comprising service and prior service costs computed in accordance with GAAP are allocated to ~~Commercial Airplanes.~~BCA and certain BGS businesses supporting commercial customers. Pension costs allocated to BDS ~~segments~~and BGS businesses supporting government customers are computed in accordance with U.S. Government Cost Accounting Standards (CAS), which employ different actuarial assumptions and accounting conventions than GAAP. CAS costs are allocable to government contracts. Other postretirement benefit costs are allocated to all business segments based on CAS, which is generally based on benefits paid. The unallocated pension costs recognized in earnings was a benefit of ~~$129~~$808 million and ~~$50~~$275 million for the nine and three months ended September 30, ~~2016~~2017 compared with ~~an expense of $293~~$129 million and ~~$84~~$50 million for the same periods in ~~2015.~~2016. The ~~2016~~higher 2017 benefit ~~reflects the difference between the higher segment allocation compared to the U.S. GAAP net periodic pension costs recognized in earnings in the current period. The 2015 unallocated expense~~ reflects the amortization of pension ~~costs~~benefits capitalized as inventory in prior years.

For further discussion of pension and other postretirement costs see the Management’s Discussion and Analysis on page 3332 of this Form 10-Q and on page 46 of our ~~2015~~2016 Annual Report on Form 10-K. 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 Measures

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


(Dollars in millions, except per share data)	Nine months ended September 30						Three months ended September 30						Nine months ended September 30						Three months ended September 30
	2016			2015			2016			2015			2017			2016			2017			2016
Revenues		$71,285			$72,541			$23,898			$25,849			$68,024			$71,285			$24,309			$23,898
Earnings from operations, as reported		$3,651			$6,282			$2,282			$2,580			$7,248			$3,651			$2,689			$2,282
Operating margins	5.1		%	8.7		%	9.5		%	10.0		%	10.7		%	5.1		%	11.1		%	9.5		%

Unallocated pension (income)/expense		($129	)		$293			($50	)		$84
Unallocated pension income														($808	)		($129	)		($275	)		($50	)
Unallocated other postretirement benefit income		($122	)		($93	)		($38	)		($27	)		($146	)		($122	)		($41	)		($38	)
Unallocated pension and other postretirement benefit income/(expense)		($251	)		$200			($88	)		$57
Unallocated pension and other postretirement benefit income														($954	)		($251	)		($316	)		($88	)
Core operating earnings (non-GAAP)		$3,400			$6,482			$2,194			$2,637			$6,294			$3,400			$2,373			$2,194
Core operating margins (non-GAAP)	4.8		%	8.9		%	9.2		%	10.2		%	9.3		%	4.8		%	9.8		%	9.2		%

Diluted earnings per share, as reported		$5.04			$5.92			$3.60			$2.47			$8.27			$5.04			$3.06			$3.60
Unallocated pension (income)/expense	(0.20		)	0.42			(0.08		)	0.12
Unallocated pension benefit income													(1.31		)	(0.20		)	(0.45		)	(0.08		)
Unallocated other postretirement benefit income	(0.19		)	(0.13		)	(0.06		)	(0.04		)	(0.24		)	(0.19		)	(0.07		)	(0.06		)
Provision for deferred income taxes on adjustments ⁽¹⁾		$0.14			($0.10	)		$0.05			($0.03	)		$0.54			$0.14			$0.18			$0.05
Core earnings per share (non-GAAP)		$4.79			$6.11			$3.51			$2.52			$7.26			$4.79			$2.72			$3.51

Weighted average diluted shares (in millions)	647.9			700.9			632.7			689.0			612.8			647.9			606.3			632.7


⁽¹⁾	The income tax impact is calculated using the tax rate in effect for the non-GAAP adjustments.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes to our market risk since December 31, ~~2015~~.2016.

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of September 30, ~~2016~~2017 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in Internal Control Over Financial Reporting.

There were no changes that occurred during the third quarter of ~~2016~~2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

Currently, we are involved in a number of legal proceedings. For a discussion of contingencies related to legal proceedings, see Note 16 to our Condensed Consolidated Financial Statements, which is hereby incorporated by reference.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~.2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information about purchases we made during the quarter ended September 30, ~~2016~~2017 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

(Dollars in millions, except per share data)
(a) (b) (c) (d)

Total Number
of Shares
Purchased⁽¹⁾

Average
Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Approximate Dollar
Value of Shares That
May Yet be Purchased
Under the Plans or
Programs⁽²⁾

7/1/2016 thru 7/31/2016 3,815,106

$131.43
3,804,589

$8,000
8/1/2016 thru 8/31/2016 3,759,466
133.23
3,753,417
7,500
9/1/2016 thru 9/30/2016 13,965
129.36

7,500
Total 7,588,537

$132.32
7,558,006



(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⁾
7/1/2017 thru 7/31/2017	4,056,347		$207.19	4,049,851		$8,161
8/1/2017 thru 8/31/2017	4,553,046	237.72		4,541,252	7,082
9/1/2017 thru 9/30/2017	2,417,856	241.21		2,410,417	6,501
Total	11,027,249		$227.25	11,001,520


⁽¹⁾	We purchased an aggregate of ~~7,558,006~~11,001,520 shares of our common stock in the open market pursuant to our repurchase program and ~~30,532~~25,729 shares transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of restricted stock units during the period. We did not purchase shares in swap transactions.


⁽²⁾	On December ~~14, 2015,~~12, 2016, we announced a new repurchase plan for up to $14 billion of common stock, replacing the plan previously authorized in ~~2014.~~2015.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits




3.2	By-Laws of The Boeing Company, as amended and restated effective ~~October 14, 2016~~August 10, 2017 (Exhibit 3.2 to the Company's Current Report on Form 8-K dated ~~October 14, 2016).~~August 10, 2017)

1010.1	~~Non-Employee Director Compensation.~~ Registration Rights Agreement, dated as of August 1, 2017 by and between The Boeing Company and Newport Trust Company, solely in its capacity as duly appointed and acting investment manager of a segregated account held in The Boeing Company Employee Retirement Plans Master Trust (Exhibit 10.1 to the Company's Registration Statement on Form S-3 dated August 2, 2017)

12	Computation of Ratio of Earnings to Fixed ~~Charges.~~Charges

15	Letter from Independent Registered Public Accounting Firm regarding unaudited interim financial ~~information.~~information

~~31(i)~~31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

~~31(ii)~~31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

~~32(i)~~32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

~~32(ii)~~32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

101.INS	XBRL Instance ~~Document.~~Document

101.SCH	XBRL Taxonomy Extension Schema ~~Document.~~Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase ~~Document.~~Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase ~~Document.~~Document

101.LAB	XBRL Taxonomy Extension Label Linkbase ~~Document.~~Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase ~~Document.~~Document

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		THE BOEING COMPANY
		(Registrant)




October ~~26, 2016~~25, 2017		/s/ Robert E. Verbeck
(Date)		Robert E. Verbeck – Senior Vice President, Finance and Corporate Controller

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	September 30 2016		December 31 2015
717 Aircraft ($353 and $372 accounted for as operating leases)		$1,314		$1,415
747-8 Aircraft ($1,094 and $916 accounted for as operating leases)	1,120		916
MD-80 Aircraft (Accounted for as sales-type finance leases)	269		314
757 Aircraft ($44 and $48 accounted for as operating leases)	251		270
767 Aircraft ($90 and $84 accounted for as operating leases)	178		185
747-400 Aircraft (Accounted for as operating leases)	170		122
777 Aircraft (Accounted for as notes)	164		23
737 Aircraft (Accounted for as operating leases)	106		115