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Boeing Reports Second-Quarter Results and Raises 2014 EPS Guidance -- Revenue of $22 billion reflects higher commercial deliveries -- Core EPS (non-GAAP)* increased 45 percent to $2.42; GAAP EPS of $2.24 -- Solid operating cash flow of $1.8 billion; strong liquidity of $11.3 billion in cash & marketable securities -- Backlog remains strong at $440 billion with over 5,200 commercial airplane orders -- Repurchased 11.4 million shares for $1.5 billion -- 2014 core EPS guidance increased $0.75 to between $7.90 and $8.10 CHICAGO, July 23, 2014 -- Table 1. SummaryFinancial Results Second Quarter First Half (Dollars in Millions, 2014 2013 Change 2014 2013 Change except per share data) Revenues $22,045 $21,815 1% $42,510 $40,708 4% Non-GAAP*Core Operating Earnings $1,991 $2,028 (2)% $4,086 $3,895 5%Core Operating Margin 9.0% 9.3% (0.3) Pts 9.6% 9.6% 0.0 PtsCore Earnings Per Share $2.42 $1.67 45% $4.16 $3.40 22%Operating Cash Flow Before Pension Contributions $1,809 $3,480 (48)% $2,921 $4,004 (27)% GAAPEarnings From Operations $1,787 $1,716 4% $3,329 $3,244 3%Operating Margin 8.1% 7.9% 0.2 Pts 7.8% 8.0% (0.2) PtsNet Earnings $1,653 $1,088 52% $2,618 $2,194 19%Earnings Per Share $2.24 $1.41 59% $3.50 $2.85 23%Operating Cash Flow $1,809 $3,467 (48)% $2,921 $3,991 (27)% * Non-GAAP measures (core operating earnings, core operating margin and coreearnings per share) exclude certain components of pension and post retirementbenefit expense that management believes are not reflective of underlyingbusiness performance. Complete definitions of Boeing's non-GAAP measures are onpage 7, "Non-GAAP Measures Disclosures." The Boeing Company [NYSE: BA] reported second-quarter core earnings per share(non-GAAP) of $2.42, reflecting strong performance and favorable tax items(Table 1). Second-quarter 2014 results included a $272 million after-tax charge($0.37 per share) on the KC-46A Tanker program reflecting the cost ofadditional engineering and systems installation work required to complete theEngineering and Manufacturing Development contract. Favorable tax items includethe previously announced tax benefit of $116 million for the 2007-2008 taxsettlement, as well as an additional tax benefit of $408 million in the secondquarter. Core earnings per share guidance for 2014 increased to between $7.90 and $8.10,from $7.15 to $7.35, reflecting the $408 million tax benefits, strong operatingperformance and the KC-46A Tanker charge. GAAP earnings per share guidance for2014 increased to between $6.85 and $7.05. "Strong operating performance across our production programs and servicesbusinesses drove revenue and earnings-per-share growth and healthy operatingcash flow, which supported $1.5 billion in additional share repurchases in thequarter," said Boeing Chairman and Chief Executive Officer Jim McNerney. "Wedelivered our first 787-9 and our 8,000th 737, successfully completed a keymissile defense intercept test, and delivered our 100th EA-18G Growler to theU.S. Navy." "While challenges resolving engineering and systems installation issues on ourtanker test aircraft are resulting in higher spending to maintain schedule, theissues are well understood and we remain on path to begin flight testing fullyprovisioned tankers the first part of next year," McNerney said. "With 783 new commercial airplane orders to date this year and significantcontracts in the quarter for military aircraft and satellites, our backlogremains large and diverse. Overall, our strong first-half financialperformance, sustained focus on growth and productivity, and positive marketoutlook support our increased earnings guidance for the year," he said. Table 2. Cash Flow Second Quarter First Half (Millions) 2014 2013 2014 2013 Operating Cash Flow Before Pension Contributions* $1,809 $3,480 $2,921 $4,004 Pension Contributions ($13) ($13) Operating Cash Flow $1,809 $3,467 $2,921 $3,991 Less Additions to Property, Plant & Equipment ($449) ($455) ($946) ($976) Free Cash Flow* $1,360 $3,012 $1,975 $3,015 Operating cash flow in the quarter was $1.8 billion, reflecting commercialairplane production rates, strong operating performance and timing of receiptsand expenditures (Table 2). During the quarter, the company repurchased 11.4million shares for $1.5 billion, leaving $6.8 billion remaining under thecurrent repurchase authorization expected to be completed over approximatelythe next two years. The company also paid $0.5 billion in dividends in thequarter, reflecting an approximately 50 percent increase in dividends per sharecompared to the same period of the prior year. Table 3. Cash, Marketable Securities and Debt Balances Quarter-End (Billions) Q2 14 Q1 14 Cash $7.5 $6.9Marketable Securities (1) $3.8 $5.3 Total $11.3 $12.2Debt Balances:The Boeing Company, net of intercompany loans to BCC $6.4 $6.3Boeing Capital, including intercompany loans $2.5 $2.6 Total Consolidated Debt $8.9 $8.9 (1) Marketable securities consists primarily of time deposits due within one year classified as "short-term investments." Cash and investments in marketable securities totaled $11.3 billion atquarter-end (Table 3), down from $12.2 billion at the beginning of the quarter,primarily due to the share repurchases. Debt was $8.9 billion, unchanged fromthe beginning of the quarter. Total company backlog of $440 billion was unchanged from the beginning of thequarter, and included net orders for the quarter of $23 billion. Segment ResultsCommercial Airplanes Table 4. Commercial Airplanes Second Quarter First Half (Dollars in Millions) 2014 2013 Change 2014 2013 ChangeCommercial Airplanes Deliveries 181 169 7% 342 306 12% Revenues $14,304 $13,624 5% $27,041 $24,314 11%Earnings from Operations $1,550 $1,453 7% $3,052 $2,672 14%Operating Margin 10.8% 10.7% 0.1 Pts 11.3% 11.0% 0.3 Pts Commercial Airplanes second-quarter revenue increased 5 percent to $14.3billion on higher deliveries. Second-quarter operating margin was 10.8 percent,reflecting the delivery volume and strong performance offset by the $238million pre-tax charge on the KC-46A Tanker program (Table 4). During thequarter, Commercial Airplanes delivered the first 787-9 Dreamliner and the 787program received 330-minute ETOPS certification. In July, Emirates Airline andQatar Airways finalized orders totaling 200 777X airplanes and Monarch Airlinesannounced a commitment to purchase 30 737 MAX airplanes. Commercial Airplanes booked 264 net orders during the quarter. Backlog remainsstrong with over 5,200 airplanes valued at a record $377 billion. Defense, Space & Security Table 5. Defense, Space & Security Second Quarter First Half (Dollars in Millions) 2014 2013 Change 2014 2013 ChangeRevenues (1) Boeing Military Aircraft $3,523 $3,641 (3)% $6,981 $7,621 (8)% Network & Space Systems $1,920 $2,049 (6)% $3,796 $4,009 (5)% Global Services & Support $2,304 $2,496 (8)% $4,603 $4,666 (1)%Total BDS Revenues $7,747 $8,186 (5)% $15,380 $16,296 (6)%Earnings from Operations(1) Boeing Military Aircraft $165 $386 (57)% $497 $813 (39)% Network & Space Systems $150 $137 9% $318 $293 9% Global Services & Support $267 $253 6% $545 $502 9%Total BDS Earnings from Operations $582 $776 (25)% $1,360 $1,608 (15)% Operating Margin 7.5% 9.5% (2.0) Pts 8.8% 9.9% (1.1) Pts (1) During the first quarter of 2014, certain programs were realigned between Boeing Military Aircraft and Global Services & Support. Defense, Space & Security's second-quarter revenue was $7.7 billion. Operatingmargin was 7.5 percent, reflecting the $187 million pre-tax charge recorded atBMA on the KC-46A Tanker program partially offset by strong operatingperformance (Table 5). Boeing Military Aircraft (BMA) second-quarter revenue was $3.5 billion,reflecting fewer C-17 and P-8 deliveries partially offset by higher F-15deliveries. Operating margin of 4.7 percent was impacted by the charge on theKC-46A Tanker program. During the quarter, BMA was awarded a contract for 44 E/A-18 and F/A-18 aircraft from the U.S. Navy. Network & Space Systems (N&SS) second-quarter revenue was $1.9 billion,reflecting lower commercial satellites volume, and operating margin increasedto 7.8 percent. During the quarter, N&SS completed a successful Missile DefenseSystem intercept in flight test. Global Services & Support (GS&S) second-quarter revenue was $2.3 billion,reflecting lower volume in maintenance, modifications and upgrades. Operatingmargin increased to 11.6 percent reflecting strong performance. During thequarter, GS&S was awarded a 5 year contract to provide support for Australia'sAirborne Early Warning & Control (AEW&C) aircraft. Backlog at Defense, Space & Security was $63 billion, of which 36 percentrepresents orders with international customers. Additional Financial Information Table 6. Additional Financial Information Second Quarter First Half(Dollars in Millions) 2014 2013 2014 2013Revenues Boeing Capital $90 $104 $172 $209 Other segment $22 $27 $42 $54 Unallocated items and eliminations ($118) ($126) ($125) ($165)Earnings from Operations Boeing Capital $33 $19 $77 $63 Other segment income/(expense) ($48) ($43) ($110) ($101)Unallocated items and eliminations excluding unallocated pension/postretirement expense ($126) ($177) ($293) ($347)Unallocated pension/postretirement expense ($204) ($312) ($757) ($651)Other income, net $11 $13 $20 $22Interest and debt expense ($81) ($96) ($173) ($195)Effective tax rate 3.7% 33.4% 17.6% 28.6% At quarter-end, Boeing Capital's net portfolio balance was $3.4 billion downfrom $3.5 billion at the beginning of the quarter. Unallocated items and eliminations totaled $126 million at quarter end, downfrom $177 million in the same period of the prior year, primarily due to lowerdeferred compensation expense. Total pension expense for the second quarter was$693 million, down from $753 million in the same period of the prior year. Thecompany's effective income tax rate was 3.7 percent at quarter end, down from33.4 percent in the same period of the prior year. The second quarter 2014effective income tax rate included a $265 million benefit for a tax basisadjustment, $143 million benefit for a 2009-2010 tax settlement and thepreviously announced benefit of $116 million for the 2007-2008 tax settlement. Outlook The company's 2014 financial guidance (Table 7) reflects continued strongperformance in both businesses. Table 7. Financial Outlook(Dollars in Billions, except per share data) 2014 The Boeing Company Revenue $87.5 - 90.5Core Earnings Per Share* $7.90 - 8.10 GAAP Earnings Per Share $6.85 - 7.05Operating Cash Flow Before Pension Contributions* ~ $7 Operating Cash Flow (1) ~ $6.25 Commercial Airplanes Deliveries (2) 715 - 725 Revenue $57.5 - 59.5 Operating Margin greater than 10% Defense, Space & Security (revised for business realignment) Revenue Boeing Military Aircraft ~ $14.2 Network & Space Systems ~ $7.7 Global Services & Support ~ $8.6 Total BDS Revenue $30 - 31 Operating Margin Boeing Military Aircraft ~ 9.0% Network & Space Systems ~ 8.5% Global Services & Support ~ 11.0% Total BDS Operating Margin ~ 9.5% Boeing Capital Portfolio Size Lower Revenue ~ $0.3 Pre-Tax Earnings ~ $0.05 Research & Development ~ $3.2Capital Expenditures ~ $2.5Pension Expense (3) ~ $3.2Effective Tax Rate (4) ~ 23% (1) After discretionary cash pension contributions of $0.75 billion and assuming new aircraft financings under $0.5 billion(2) Assumes approximately 110 787 deliveries(3) Approximately $1.3 billion is expected to be recorded in unallocated items and eliminations(4) Assumes the extension of the research and development tax credit * Non-GAAP measures. Complete definitions of Boeing's non-GAAP measures are onpage 7, "Non-GAAP Measures Disclosures." Boeing's core earnings per share guidance for 2014 increased to between $7.90and $8.10, from $7.15 to $7.35, reflecting the $408 million tax benefits,strong operating performance and the KC-46A Tanker charge. GAAP earnings pershare guidance for 2014 increased to between $6.85 and $7.05. Commercial Airplanes operating margin guidance increased to greater than 10percent on strong operating performance. Defense, Space & Security operating margin guidance is unchanged atapproximately 9.5 percent. Boeing Military Aircraft operating margin guidanceis lowered to approximately 9 percent. Global Services & Support operatingmargin guidance increased to approximately 11 percent reflecting strongperformance. Boeing's effective tax rate is now expected to be approximately 23 percent in2014, down from approximately 29 percent, to reflect the additional taxbenefits recorded in the second quarter and continues to assume the extensionof the research and development tax credit. Non-GAAP Measures DisclosuresWe supplement the reporting of our financial information determined under U.S.generally accepted accounting principles (GAAP) with certain non-GAAP financialinformation. The non-GAAP financial information presented excludes certainsignificant items that may not be indicative of, or are unrelated to, resultsfrom our ongoing business operations. We believe that these non-GAAP measuresprovide investors with additional insight into the company's ongoing businessperformance. These non-GAAP measures should not be considered in isolation oras a substitute for the related GAAP measures, and other companies may definesuch measures differently. We encourage investors to review our financialstatements and publicly-filed reports in their entirety and not to rely on anysingle financial measure. The following definitions are provided: Core Operating Earnings, Core Operating Margin and Core Earnings Per ShareCore operating earnings is defined as GAAP earnings from operations excludingunallocated pension and post-retirement expense. Core operating margin isdefined as core operating earnings expressed as a percentage of revenue. Coreearnings per share is defined as GAAP diluted earnings per share excluding thenet earnings per share impact of unallocated pension and post-retirementexpense. Unallocated pension and post-retirement expense represents the portionof pension and other post-retirement costs that are not recognized by businesssegments for segment reporting purposes. Management uses core operatingearnings, core operating margin and core earnings per share for purposes ofevaluating and forecasting underlying business performance. Management believesthese core earnings measures provide investors additional insights intooperational performance as they exclude unallocated pension and post-retirementcosts, which primarily represent costs driven by market factors and costs notallocable to government contracts. A reconciliation between the GAAP andnon-GAAP measures is provided on page 14. Operating Cash Flow Before Pension ContributionsOperating cash flow before pension contributions is defined as GAAP operatingcash flow less pension contributions. Management believes operating cash flowbefore pension contributions provides additional insights into underlyingbusiness performance. Management uses operating cash flow before pensioncontributions as a measure to assess both business performance and overallliquidity. Table 2 provides a reconciliation between GAAP operating cash flowand operating cash flow before pension contributions. Free Cash FlowFree cash flow is defined as GAAP operating cash flow less capital expendituresfor property, plant and equipment additions. Management believes free cash flowprovides investors with an important perspective on the cash available forshareholders, debt repayment, and acquisitions after making the capitalinvestments required to support ongoing business operations and long term valuecreation. Free cash flow does not represent the residual cash flow availablefor discretionary expenditures as it excludes certain mandatory expendituressuch as repayment of maturing debt. Management uses free cash flow as a measureto assess both business performance and overall liquidity. Table 2 provides areconciliation between GAAP operating cash flow and free cash flow. Caution Concerning Forward-Looking StatementsThis press release contains "forward-looking statements" within the meaning ofthe 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 theseforward-looking statements. Examples of forward-looking statements includestatements relating to our future financial condition and operating results, aswell as any other statement that does not directly relate to any historical orcurrent fact. Forward-looking statements are based on our current expectationsand assumptions, which may not prove to be accurate. These statements are notguarantees and are subject to risks, uncertainties, and changes incircumstances that are difficult to predict. Many factors could cause actualresults to differ materially and adversely from these forward-lookingstatements. Among these factors are risks related to: (1) general conditions inthe economy and our industry, including those due to regulatory changes; (2)our reliance on our commercial airline customers; (3) the overall health of ouraircraft production system, planned production rate increases across multiplecommercial airline programs, our commercial development and derivative aircraftprograms, and our aircraft being subject to stringent performance andreliability standards; (4) changing budget and appropriation levels andacquisition priorities of the U.S. government; (5) our dependence on U.S.government contracts; (6) our reliance on fixed-price contracts; (7) ourreliance on cost-type contracts; (8) uncertainties concerning contracts thatinclude in-orbit incentive payments; (9) our dependence on our subcontractorsand suppliers, as well as the availability of raw materials, (10) changes inaccounting 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 governmentinvestigations; (14) customer and aircraft concentration in Boeing Capital'scustomer financing portfolio; (15) changes in our ability to obtain debt oncommercially reasonable terms and at competitive rates in order to fund ouroperations and contractual commitments; (16) realizing the anticipated benefitsof mergers, acquisitions, joint ventures/strategic alliances or divestitures;(17) the adequacy of our insurance coverage to cover significant riskexposures; (18) potential business disruptions, including those related tophysical security threats, information technology or cyber-attacks or naturaldisasters; (19) work stoppages or other labor disruptions; (20) significantchanges in discount rates and actual investment return on pension assets; (21)potential environmental liabilities; and (22) threats to the security of our orour customers' information. Additional information concerning these and other factors can be found in ourfilings with the Securities and Exchange Commission, including our most recentAnnual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reportson Form 8-K. Any forward-looking statement speaks only as of the date on whichit is made, and we assume no obligation to update or revise any forward-lookingstatement, whether as a result of new information, future events, or otherwise,except as required by law. Contact: Investor Relations: Troy Lahr or Matt Welch (312) 544-2140Communications: Chaz Bickers (312) 544-2002 The Boeing Company and Subsidiaries Consolidated Statements of Operations (Unaudited) Six months ended Three months ended June 30 June 30(Dollars in millions, except per share data) 2014 2013 2014 2013Sales of products $37,542 $35,556 $19,527 $19,238Sales of services 4,968 5,152 2,518 2,577Total revenues 42,510 40,708 22,045 21,815 Cost of products (31,932) (30,165) (16,674) (16,437)Cost of services (3,999) (4,004) (1,979) (1,995)Boeing Capital interest expense (35) (37) (17) (18)Total costs and expenses (35,966) (34,206) (18,670) (18,450) 6,544 6,502 3,375 3,365Income from operating investments, net 120 88 61 43General and administrative expense (1,795) (1,900) (918) (929)Research and development expense, net (1,542) (1,468) (733) (763)Gain on dispositions, net 2 22 2Earnings from operations 3,329 3,244 1,787 1,716Other income, net 20 22 11 13Interest and debt expense (173) (195) (81) (96)Earnings before income taxes 3,176 3,071 1,717 1,633Income tax expense (558) (878) (64) (546)Net earnings from continuing operations 2,618 2,193 1,653 1,087Net gain on disposal of discontinued operations, net of taxes of $0, $0, $0 and $0 1 1Net earnings $2,618 $2,194 $1,653 $1,088Basic earnings per share from continuing operations $3.55 $2.88 $2.26 $1.43Net gain on disposal of discontinued operations, net of taxesBasic earnings per share $3.55 $2.88 $2.26 $1.43Diluted earnings per share from continuing operations $3.50 $2.85 $2.24 $1.41Net gain on disposal of discontinued operations, net of taxesDiluted earnings per share $3.50 $2.85 $2.24 $1.41Cash dividends paid per share $1.46 $0.97 $0.73 $0.485Weighted average diluted shares (millions) 747.4 770.1 740.1 771.8 The Boeing Company and Subsidiaries Consolidated Statements of Financial Position (Unaudited) June 30 December 31(Dollars in millions, except per share data) 2014 2013AssetsCash and cash equivalents $7,533 $9,088Short-term and other investments 3,797 6,170Accounts receivable, net 7,694 6,546Current portion of customer financing, net 237 344Deferred income taxes 15 14Inventories, net of advances and progress billings 46,251 42,912 Total current assets 65,527 65,074Customer financing, net 3,180 3,627Property, plant and equipment, net of accumulated depreciation of $15,424 and $15,070 10,449 10,224Goodwill 5,139 5,043Acquired intangible assets, net 3,004 3,052Deferred income taxes 2,664 2,939Investments 1,196 1,204Other assets, net of accumulated amortization of $420 and $448 1,578 1,500 Total assets $92,737 $92,663Liabilities and equityAccounts payable $11,060 $9,498Accrued liabilities 13,222 14,131Advances and billings in excess of related costs 21,244 20,027Deferred income taxes and income taxes payable 6,222 6,267Short-term debt and current portion of long-term debt 1,591 1,563 Total current liabilities 53,339 51,486Accrued retiree health care 6,506 6,528Accrued pension plan liability, net 9,812 10,474Non-current income taxes payable 740 156Other long-term liabilities 864 950Long-term debt 7,292 8,072Shareholders' equity: Common stock, par value $5.00 - 1,200,000,000 shares authorized; 1,012,261,159 shares issued 5,061 5,061 Additional paid-in capital 4,524 4,415 Treasury stock, at cost - 290,904,517 and 264,882,461 shares (21,381) (17,671) Retained earnings 34,516 32,964 Accumulated other comprehensive loss (8,659) (9,894) Total shareholders' equity 14,061 14,875 Noncontrolling interests 123 122 Total equity 14,184 14,997 Total liabilities and equity $92,737 $92,663 The Boeing Company and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30 (Dollars in millions) 2014 2013Cash flows - operating activities: Net earnings $2,618 $2,194 Adjustments to reconcile net earnings to net cash provided by operating activities: Non-cash items - Share-based plans expense 101 107 Depreciation and amortization 900 865 Investment/asset impairment charges, net 36 26 Customer financing valuation benefit (26) (5) Gain on disposal of discontinued operations (1) Gain on dispositions, net (2) (22) Other charges and credits, net 87 31 Excess tax benefits from share-based payment arrangements (97) (47) Changes in assets and liabilities - Accounts receivable (1,286) (550) Inventories, net of advances and progress billings (3,402) (2,614) Accounts payable 1,783 848 Accrued liabilities (913) (682) Advances and billings in excess of related costs 1,217 1,472 Income taxes receivable, payable and deferred 394 608 Other long-term liabilities (88) (60) Pension and other postretirement plans 1,118 1,638 Customer financing, net 466 188 Other 15 (5) Net cash provided by operating activities 2,921 3,991Cash flows - investing activities: Property, plant and equipment additions (946) (976) Property, plant and equipment reductions 17 44 Acquisitions, net of cash acquired (163) (26) Contributions to investments (5,657) (7,045) Proceeds from investments 8,030 4,632 Net cash provided/(used) by investing activities 1,281 (3,371)Cash flows - financing activities: New borrowings 85 531 Debt repayments (854) (1,361) Payments to noncontrolling interests (12) Repayments of distribution rights and other asset financing (184) (139) Stock options exercised, other 261 484 Excess tax benefits from share-based payment arrangements 97 47 Employee taxes on certain share-based payment arrangements (88) (57) Common shares repurchased (3,998) (1,000) Dividends paid (1,071) (735) Net cash used by financing activities (5,764) (2,230)Effect of exchange rate changes on cash and cash equivalents 7 (37)Net decrease in cash and cash equivalents (1,555) (1,647)Cash and cash equivalents at beginning of year 9,088 10,341Cash and cash equivalents at end of period $7,533 $8,694 The Boeing Company and SubsidiariesSummary of Business Segment Data(Unaudited) Six months ended Three months ended June 30 June 30(Dollars in millions) 2014 2013 2014 2013Revenues: Commercial Airplanes $27,041 $24,314 $14,304 $13,624 Defense, Space & Security: Boeing Military Aircraft 6,981 7,621 3,523 3,641 Network & Space Systems 3,796 4,009 1,920 2,049 Global Services & Support 4,603 4,666 2,304 2,496 Total Defense, Space & Security 15,380 16,296 7,747 8,186 Boeing Capital 172 209 90 104 Other segment 42 54 22 27 Unallocated items and eliminations (125) (165) (118) (126)Total revenues $42,510 $40,708 $22,045 $21,815Earnings from operations: Commercial Airplanes $3,052 $2,672 $1,550 $1,453 Defense, Space & Security: Boeing Military Aircraft 497 813 165 386 Network & Space Systems 318 293 150 137 Global Services & Support 545 502 267 253 Total Defense, Space & Security 1,360 1,608 582 776 Boeing Capital 77 63 33 19 Other segment (110) (101) (48) (43) Unallocated items and eliminations (1,050) (998) (330) (489)Earnings from operations 3,329 3,244 1,787 1,716Other income, net 20 22 11 13Interest and debt expense (173) (195) (81) (96)Earnings before income taxes 3,176 3,071 1,717 1,633Income tax expense (558) (878) (64) (546)Net earnings from continuing operations 2,618 2,193 1,653 1,087Net gain on disposal of discontinued operations, net of taxes of $0, $0, $0 and $0 1 1Net earnings $2,618 $2,194 $1,653 $1,088 Research and development expense, net: Commercial Airplanes $970 $865 $441 $446 Defense, Space & Security 577 579 297 307 Other (5) 24 (5) 10Total research and development expense, net $1,542 $1,468 $733 $763 Unallocated items and eliminations: Share-based plans ($44) ($53) ($20) ($22) Deferred compensation (19) (102) (26) (46) Amortization of previously capitalized interest (36) (34) (18) (17) Eliminations and other (194) (158) (62) (92) Sub-total (included in core operating earnings) (293) (347) (126) (177) Pension (804) (689) (228) (331) Postretirement 47 38 24 19Total unallocated items and eliminations ($1,050) ($998) ($330) ($489) The Boeing Company and Subsidiaries Operating and Financial Data (Unaudited) Deliveries Six months ended Three months ended June 30 June 30Commercial Airplanes 2014 2013 2014 2013 737 239 218 124 116 747 6 12 2 6 767 1 12 1 8 777 48 47 24 23 787 48 17 (1) 30 16 (1) Total 342 306 181 169Note: Deliveries under operating lease are identified by parentheses. Defense, Space & SecurityBoeing Military Aircraft F/A-18 Models 23 24 12 12 F-15E Eagle 8 3 4 C-17 Globemaster III 5 6 2 3 CH-47 Chinook 32 17 15 8 AH-64 Apache 19 20 9 5 P-8 Models 2 5 2 3 Global Services & Support AEW&C 2 1 Network & Space Systems Commercial and Civil Satellites 2 1 2 Contractual backlog (Dollars in billions) June 30 March 31 December 31 2014 2014 2013Commercial Airplanes $376.3 $374.0 $373.0Defense, Space & Security:Boeing Military Aircraft 23.8 23.2 23.6Network & Space Systems 9.6 9.4 9.8Global Services & Support 16.3 16.1 16.2Total Defense, Space & Security 49.7 48.7 49.6Total contractual backlog $426.0 $422.7 $422.6Unobligated backlog $14.3 $17.1 $18.3Total backlog $440.3 $439.8 $440.9Workforce 169,300 169,000 168,400 The Boeing Company and Subsidiaries Reconciliation of Non-GAAP Measures Core Operating Earnings, Core Operating Margin and Core Earnings Per Share (Unaudited) The tables provided below reconcile the non-GAAP financial measures core operating earnings, core operating margin and core earnings per share with the most directly comparable GAAP financial measures, earnings from operations, operating margin and diluted earnings per share. See page 7 of this release for additional information on the use of these non-GAAP financial measures. Second Quarter First Half Guidance 2014 2013 2014 2013 2014Revenues $22,045 $21,815 $42,510 $40,708 GAAP Earnings From Operations $1,787 $1,716 $3,329 $3,244GAAP Operating Margin 8.1% 7.9% 7.8% 8.0% Unallocated Pension/Postretirement Expense $204 $312 $757 $651 ~ $1,200Core Operating Earnings (non-GAAP) $1,991 $2,028 $4,086 $3,895Core Operating Margin (non-GAAP) 9.0% 9.3% 9.6% 9.6% Increase/(Decrease) in GAAP Earnings From Operations 4% 3% GAAP Diluted Earnings Per Share $2.24 $1.41 $3.50 $2.85 $6.85 - $7.05 Unallocated Pension/Postretirement $0.18 $0.26 $0.66 $0.55 $1.05Expense (1)Core Earnings Per Share (non-GAAP) $2.42 $1.67 $4.16 $3.40 $7.90 - $8.10 Weighted Average Diluted Shares (millions) 740.1 771.8 747.4 770.1 ~ 740Increase in GAAP Earnings Per Share 59% 23%Increase in Core Earnings Per Share 45% 22% (1) Earnings per share impact is presented net of the federal statutory tax rate of 35.0 percent.

SOURCE Boeing