BOEING CO - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 1994

Commission file number 1-442

THE BOEING COMPANY

7755 East Marginal Way South
Seattle, Washington 98108
Telephone: (206) 655-2121
State of incorporation: Delaware
IRS identification number: 91-0425694

Securities registered pursuant to Section 12(b) of the Act:

Class of Security: Registered on
------------------------------ ------------------------------
Common Stock, $5 par value New York Stock Exchange

8 3/8% Notes due March 1, 1996 New York Stock Exchange

The registrant 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
and has been subject to such filing requirements for the past 90 days.

No disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.

As of January 31, 1995, there were 340,973,889 common shares outstanding, and
the aggregate market value of the common shares (based upon the closing price
of these shares on the New York Stock Exchange) held by nonaffiliates of the
registrant was approximately $15.2 billion.

Part I and Part II incorporate information by reference from certain portions
of the Company's 1994 Annual Report to Shareholders. Part III incorporates
information by reference from the registrant's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after
the close of the fiscal year.

...........................................................................
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1 of 72 Exhibit index is on page 19
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PART I
Item 1. Business

The Boeing Company, together with its subsidiaries (herein referred to as the
"Company"), is one of the world's major aerospace firms. The Company operates
primarily in two industry segments: Commercial Aircraft, and Defense and Space.
Commercial Aircraft operations - conducted principally through Boeing Commercial
Airplane Group - involve development, production and marketing of commercial jet
transports and providing related support services, principally to commercial
customers. Defense and Space operations - conducted principally through Boeing
Defense & Space Group - involve research, development, production, modification
and support of military aircraft and helicopters and related systems, space
systems and missile systems. Defense and Space sales are principally to the U.S.
Government. Revenues, operating profits and other financial data of the
Company's industry segments for the three years ended December 31, 1994, are set
forth on pages 52 and 53 of the Company's 1994 Annual Report to Shareholders and
are incorporated herein by reference.

With respect to the Commercial Aircraft segment, the Company is a leading
producer of commercial transport aircraft and offers a family of commercial
jetliners designed to meet a broad spectrum of passenger and cargo requirements
of domestic and foreign airlines. This family of jet transport aircraft
currently includes the 737 and 757 standard-body models series and the 767 and
747 wide-body models series. The 777 twinjet, a wide-body model sized between
the 767 and 747, will enter commercial service in mid-1995. In early 1992, the
Company sold the de Havilland division of Boeing of Canada, which produced
turboprop commuter aircraft.

The worldwide market for commercial jet transports is predominantly driven by
long-term trends in airline passenger traffic. The principal factors underlying
long-term traffic growth are sustained economic growth in developed and emerging
markets and political stability. Demand for the Company's commercial aircraft is
further influenced by airline industry profitability, world trade policies,
environmental constraints imposed upon airline operations, technological
evolution, price and other competitive factors.

Commercial jet transports are normally sold on a firm fixed-price basis with
an indexed price escalation clause. The Company's ability to deliver jet
transports on schedule is dependent upon a variety of factors, including
availability of raw materials, performance of suppliers and subcontractors, and
certifications by the Federal Aviation Administration. The introduction of new
commercial aircraft programs and major derivatives involves increased risks
associated with meeting development, production and certification schedules.

The Company's commercial aircraft sales are subject to intense competition
from aircraft manufactured by other companies, including foreign companies
which are nationally owned or subsidized. To meet competition, the Company
maintains a program directed toward continually enhancing the performance
and capability of its products and has a family of commercial aircraft to
meet varied and changing airline requirements. In terms of revenue, the
Company's commercial jet transport deliveries represented approximately 60%
of all new jet transport deliveries during the three-year period ended
December 31, 1994. This level of market share has been generally maintained
by the Company over the past 20 years.

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The Company continually evaluates opportunities to improve current models, and
conducts ongoing marketplace assessments to ensure that its family of jet
transports is well positioned to meet future requirements of the airline
industry. The fundamental strategy is to maintain a broad product line
responsive to changing market conditions by maximizing commonality among the
Boeing family of airplanes. The major focus of development activities over the
past three years has been the 777 wide-body twinjet, which is scheduled to enter
airline service in mid-1995. The 777 is designed to meet airline requirements
for an efficient, comfortable, high-capacity airplane to be used in domestic and
regional markets internationally. An extended-range version of the 777 will
begin delivery in late 1996, and a version with 20% greater passenger-carrying
capability is currently being offered. During 1993 the Company began development
activities on the next generation of the 737 family of short-to-medium-range
jetliners that will provide greater range, increased speed, and reduced noise
and emissions while maintaining 737 family commonality. The first Next-
Generation 737, designated the 737-700, is the middle-sized member of the 737
family and will be followed by the larger 737-800. Customer interest in a
smaller version, the 737-600, will determine the timing of its introduction.

The Company continues to assess the market potential for new or derivative
aircraft that are larger and have more range than the 747-400. Because of a
relatively limited market and the heavy resource investment levels required, the
Company signed an agreement with four European aerospace companies in 1993 to
study the feasibility of developing a new aircraft capable of carrying between
550 and 800 passengers. While product development activities are principally
oriented toward maintaining and enhancing the competitiveness of the Boeing
subsonic fleet, the Company is also involved in studies to understand the
technological and economic issues associated with development of commercial
supersonic aircraft.

The Company's Defense and Space segment is highly sensitive to changes in
national priorities and U.S. Government defense and space budgets. Principal
ongoing activities in the Defense and Space segment include managing NASA's
International Space Station Alpha program, production and remanufacturing of
CH-47 helicopters, F-22 fighter engineering and manufacturing development, V-22
Osprey tiltrotor transport development and test activities, E-3 Airborne Warning
and Control System (AWACS) updates and the new 767-based AWACS, RAH-66 Comanche
helicopter development, B-2 bomber subcontract work, updating and modifying
various military aircraft and systems, and classified projects. The Space
Station, F-22 fighter, V-22 Osprey tiltrotor transport, and RAH-66 Comanche
helicopter are developmental programs currently being conducted primarily under
cost-reimbursement-type contracts. The Company's activities on the F-22, RAH-66,
and V-22 programs are under joint venture teaming arrangements with other
companies.
Defense and space developmental programs are normally performed under cost-
reimbursement-type contracts, although certain past developmental programs were
under fixed-price arrangements. Developmental contracts often contain incentives
related to cost performance and/or awards for other contract milestone accom-
plishments. Production programs are generally performed under firm fixed-price
contracts or fixed-price contracts containing incentive provisions related to
costs.
The U.S. Government defense market environment is one in which continued
intense competition among defense contractors can be expected, especially in
light of U.S. Government budget constraints. The Company's ability to
successfully compete for and retain such business is highly dependent on its
technical excellence, demonstrated management proficiency, strategic alliances,
and cost-effective performance.
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The Company conducts various other activities representing only a small portion
of the Company's total revenues, primarily developing large-scale information
systems and conducting management services, principally for government
agencies. In 1993, the Company discontinued its involvement with the U.S.
Government's strategic petroleum reserve.

Company-sponsored research and development not recoverable under contracts and
charged directly to earnings as incurred amounted to $1,704 million, $1,661
million, and $1,846 million in 1994, 1993 and 1992, respectively. Research and
development expenditures currently planned for 1995 will be below the 1994 and
1993 levels.

The Company's backlog of firm contractual orders (in billions) at December 31
follows:

1994 1993
---- ----
Commercial Aircraft $60.6 $69.0
Defense and Space, other 5.7 4.5
----- -----
Total $66.3 $73.5
===== =====

Not included in firm contractual backlog are purchase options and announced
orders for which definitive contracts have not been executed and orders from
customers which have filed for bankruptcy protection. Additionally, U.S.
Government and foreign military firm backlog is limited to amounts obligated to
contracts. Unobligated U.S. Government contract values not included in backlog
totaled $5.9 billion and $6.9 billion as of December 31, 1994 and 1993.

In evaluating the Company's contractual backlog for commercial customers,
certain risk factors should be considered. Approximately 60% of the contractual
backlog for commercial jet transports is scheduled to be delivered after 1996.
Changes in the economic environment and the financial condition of airlines
sometimes result in customer requests for rescheduling or cancellation of
contractual orders.

Contracts with the U.S. Government are subject to termination for default or
for convenience by the Government if deemed in its best interests. Contracts
which are terminated for convenience generally provide for payments to a
contractor for its costs and a proportionate share of profit for work
accomplished through the date of termination. Contracts which are terminated for
default generally provide that the Government pays only for the work it has
accepted, can require the contractor to pay the difference between the original
contract price and the cost to reprocure the contract items net of the value of
the work accepted from the original contractor, and can hold a contractor liable
for damages. (See Item 3, Legal Proceedings, regarding the Government's partial
termination of the Peace Shield program for alleged default.) A termination for
default, if upheld, also may adversely affect a contractor's ability to compete
successfully for other Government contracts.

Historically, the Company has not experienced significant shortages of raw
materials essential to its business. Although the Company does not anticipate
any shortages of critical commodities over the longer term, this is difficult to
assess because many factors causing such possible shortages are outside its
control.

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The Company is highly dependent on its suppliers and subcontractors in order
to meet commitments to its customers, and many major components and product
equipment items are procured or subcontracted on a sole-source basis with a
number of domestic and foreign companies. The Company maintains an extensive
qualification and performance surveillance system to control risk associated
with such reliance on third parties. Although the Company has occasionally
experienced problems with supplier and subcontractor performance, none have
resulted in material production delays.

While the Company owns numerous patents and has licenses under patents owned
by others relating to its products and their manufacture, it does not believe
that its business would be materially affected by the expiration of any patents
or termination of any patent license agreements. The Company has no trademarks,
franchises or concessions that are considered to be of material importance to
the conduct of its business.

The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of materials
into the environment. The Company believes its policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and the consequent financial liability to the Company. Compliance with
environmental laws and regulations requires continuing management effort and
expenditures by the Company. Compliance with environmental laws and regulations
has not had in the past, and, the Company believes, will not have in the future,
material effects on the capital expenditures, earnings, or competitive position
of the Company. (See Item 3, Legal Proceedings, for additional information
regarding environmental regulation.)

The Company is subject to business and cost classification regulation
associated with its U.S. Government defense and space contracts. Violations can
result in civil, criminal or administrative proceedings involving fines,
compensatory and treble damages, restitution, forfeitures, and suspension or
debarment from Government contracts.

Sales outside the United States (principally export sales from domestic
operations) by geographic area are included on page 52 of the Company's 1994
Annual Report to Shareholders and incorporated herein by reference. Less than 3%
of total sales were derived from non-U.S. operations of the Company for each of
the three years in the period ended December 31, 1994. Approximately 60% of the
Company's contractual backlog at December 31, 1994, in terms of dollar value was
with non-U.S. customers. Sales outside the United States are influenced by
international relationships and U.S. Government foreign policy. Relative
profitability is not significantly different from that experienced in the
domestic market.

Approximately 14% of accounts receivable and customer financing combined
consisted of amounts due from customers outside the United States. These amounts
are payable in U.S. dollars, and, in management's opinion, related risks are
adequately covered by allowance for losses. The Company has not experienced
materially adverse financial consequences as a result of sales and financing
activities outside the United States.

The Company had approximately 115,000 employees at January 31, 1995, including
approximately 1,400 in Canada.

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Item 2. Properties

The locations and floor areas of the Company's principal operating properties
at January 1, 1995, are indicated in the following table.

Floor area in
thousands of square feet

Company-
owned Leased
------- ------
United States:
Seattle, Washington, and
surrounding area 45,496 6,295
Wichita, Kansas 11,766 1,143
Philadelphia, Pennsylvania 3,455 445
Portland, Oregon 1,092 70
Huntsville, Alabama 686 77
Oakridge, Tennessee 492
Sunnyvale, California 461 356
Corinth & Irving, Texas 431 41
Macon, Georgia 399
Spokane, Washington 393
Vienna, Virginia 335 183
Glasgow, Montana 180
Canada:
Winnipeg, Manitoba 522 40
Arnprior, Ontario 162 53

With the exception of the Glasgow Industrial Airport located in Glasgow,
Montana, which is Company-owned, runways and taxiways used by the Company are
located on airport properties owned by others and are used by the Company
jointly with others. The Company's rights to use such facilities are provided
for under long-term leases with municipal, county or other government
authorities. In addition, the U.S. Government furnishes the Company certain
office space, installations and equipment at Government bases for use in
connection with various activities.

Facilities at the major locations support both principal industry segments.
Work related to a given program may be assigned to various locations, based upon
periodic review of shop loads and production capability.

Facilities and equipment expenditures were at an historically high level
during 1992, amounting to $2.2 billion, principally in support of the new 777
program. Expenditures in 1993 and 1994 declined to $1.3 billion and $.8 billion,
respectively, as the 777 program facilities were substantially completed. No
major plant expansions are currently planned for the foreseeable future.

The Company's properties are well maintained and in good operating condition.
There are no significant unused facilities. Existing facilities are sufficient
to meet the Company's near-term operating requirements.

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Item 3. Legal Proceedings

Various legal proceedings, claims and investigations are pending against the
Company related to products, contracts and other matters. Except for the items
discussed below, most of these legal proceedings are related to matters covered
by insurance.

In January 1991, the Company received from the U.S. Government a notice of
partial termination for default which terminated most of the work required under
contracts to develop and install a new air defense system for Saudi Arabia,
known as the Peace Shield program. The Government has filed with the Company a
demand for repayment of $605 million of Peace Shield unliquidated progress
payments plus interest commencing January 25, 1991. In February 1991, the
Company submitted a request for a deferred payment agreement which, if granted,
would formally defer the Company's potential obligation to repay the $605
million of unliquidated progress payments until the conclusion of the appeal
process. In June 1991, the Government selected another contractor to perform the
work which is the subject of the contracts that have been terminated for
default, and the Government will likely assert claims related to the
reprocurement. The Company does not expect the Government to assert such claims
prior to completion of the reprocurement contract, which was originally
scheduled for late 1995.

Management's position, supported by outside legal counsel which specializes in
government procurement law, is that the grounds for default asserted by the
Government in the Peace Shield termination are not legally supportable.
Accordingly, management and counsel are of the opinion that on appeal the
termination for default has a substantial probability of being converted to
termination for the convenience of the Government, which would eliminate any
Government claim for cost of reprocurement or other damages. Additionally, the
Company has a legal basis for a claim for equitable adjustment to the prices and
schedules of the contracts (the "Contract Claim"). Many of the same facts
underlie both the Contract Claim and the Company's appeal of the Government's
termination action. The Company has filed its complaint in the United States
Claims Court to overturn the default termination in order to obtain payment of
the Contract Claim. The parties are currently engaged in the discovery phase of
the litigation. Trial is scheduled for March 1997. The Company expects that its
position will ultimately be upheld with respect to the termination action and
that it will prevail on the Contract Claim.

The Company's financial statements have been prepared on the basis of a
conservative estimate of the revised values of the Peace Shield contracts
including the Contract Claim and the Company's position that the termination was
for the convenience of the Government. At this time, the Company cannot
reasonably estimate the length of time that will be required to resolve the
termination appeal and the Contract Claim. In the event that the Company's
appeal of the termination for default is not successful, the Company could
realize a pre-tax loss on the program approximating the value of the
unliquidated progress payments plus related interest and potential damages
assessed by the Government.

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During 1994, the Company reached a settlement with the U.S. Government
concerning cost classification practices that had been under investigation. The
settlement had no material impact on results of operations.

The Company is subject to federal and state requirements for protection of the
environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations over the past
10 years.

The Company routinely assesses, based on in-depth studies, expert analyses and
legal reviews, its contingencies, obligations and commitments for remediation of
contaminated sites, including assessments of ranges and probabilities of
recoveries from other responsible parties who have and have not agreed to a
settlement and recoveries from insurance carriers. The Company's policy is to
immediately accrue and charge to current expense identified exposures related to
environmental remediation sites based on conservative estimates of
investigation, cleanup and monitoring costs to be incurred.

The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact on the
Company's financial position. With respect to results of operations, related
charges have averaged less than 2% of annual net earnings over the past five
years. Such accruals as of December 31, 1994, without consideration for the
related contingent recoveries from insurance carriers, are less than 2% of total
liabilities.

Based on all known facts and expert analyses, the Company believes it is not
reasonably likely that identified environmental contingencies will result in
additional costs that would have a materially adverse impact on the Company's
financial position or operating results and cash flow trends.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the
quarter ended December 31, 1994.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Information required by this item is included on page 56 and the inside back
cover of the Company's 1994 Annual Report to Shareholders and is incorporated
herein by reference.

Item 6. Selected Financial Data

Information required by this item is included on page 55 of the Company's 1994
Annual Report to Shareholders and is incorporated herein by reference.

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

Information required by this item is included on pages 26-36 of the Company's
1994 Annual Report to Shareholders and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The following consolidated financial statements and supplementary data,
included in the Company's 1994 Annual Report to Shareholders at the pages
indicated, are incorporated herein by reference:

Consolidated Statements of Net Earnings - years ended December 31, 1994,
1993 and 1992: Page 38.

Consolidated Statements of Financial Position - December 31, 1994 and
1993: Page 39.

Consolidated Statements of Cash Flows - years ended December 31, 1994,
1993 and 1992: Page 40.

Notes to Consolidated Financial Statements: Pages 41-53.

Independent Auditors' Report: Page 37.

Supplementary data regarding quarterly results of operations: Page 54.

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

Executive Officers

No family relationships exist between any of the executive officers, directors
or director nominees. The executive officers of the Company as of February 27,
1995, are as follows:

Name Age Positions and offices held and business experience
---- --- --------------------------------------------------

F. A. Shrontz 63 Chairman of the Board since 1988. Chief Executive
Officer since 1986; Director since 1985. President
from 1985 until 1988.

P. M. Condit 53 President and Director since 1992. Prior thereto
Executive Vice President and General Manager - 777
Division, Boeing Commercial Airplane Group from
1989.

D. P. Beighle 62 Senior Vice President since 1986. Secretary from
1981 until 1991.

L. W. Clarkson 56 Senior Vice President - Planning & International
Development since April 1994. Prior thereto Vice
President - Planning & International Development
since 1992. Prior thereto Senior Vice President -
Government & International Affairs of Boeing
Commercial Airplane Group from 1988.

D. D. Cruze 64 Senior Vice President - Operations since 1990.
Prior thereto Vice President - Operations from
1985.

R. A. Davis 61 Vice President - Engineering and Technology since
August 1994. Prior thereto Vice President -
Engineering and Product Development - Boeing
Commercial Airplane Group since 1993. Prior thereto
Vice President - Engineering Division, Boeing
Commercial Airplane Group since 1991. Prior thereto
Director of Engineering - Everett Division, Boeing
Commercial Airplane Group since 1990.

B. E. Givan 58 Senior Vice President and Chief Financial Officer
since 1990. Prior thereto Vice President - Finance
from 1988.

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Name Age Positions and offices held and business experience
---- --- --------------------------------------------------

C. G. King 60 Senior Vice President - President of Boeing Defense
& Space Group since May 1993. Prior thereto
Executive Vice President - Boeing Defense & Space
Group since 1991. Prior thereto Executive Vice
President - Military Airplane Division of Boeing
Defense & Space Group since January 1990. Prior
thereto President - Boeing Advanced Systems since
August 1989.

L. G. McKean 59 Senior Vice President - Human Resources since April
1994. Prior thereto Vice President - Human
Resources since 1990. Prior thereto Staff Vice
President - Human Resources from 1989.

J. D. Warner 55 President - Boeing Computer Services since July
1993. Prior thereto Executive Vice President -
Boeing Computer Services since March 1993. Prior
thereto Vice President, Computing - Boeing
Commercial Airplane Group since 1991. Prior
thereto Vice President - Engineering Division of
Boeing Commercial Airplane Group since 1989.

R. B. Woodard 51 Senior Vice President - President of Boeing
Commercial Airplane Group since December 1993.
Prior thereto Executive Vice President - Boeing
Commercial Airplane Group since March 1993. Prior
thereto Vice President and General Manager - Renton
Division of Boeing Commercial Airplane Group since
1991. Prior thereto President - de Havilland
division of Boeing of Canada since 1987.

Other information required by Item 10 involving the identification and
election of directors is incorporated by reference from the registrant's
definitive proxy statement, which will be filed with the Commission within 120
days after the close of the fiscal year.

Item 11. Executive Compensation *

Item 12. Security Ownership of Certain Beneficial Owners and Management *

Item 13. Certain Relationships and Related Transactions *

* Information required by Items 11, 12, and 13 is incorporated by reference
from the registrant's definitive proxy statement, which will be filed with the
Commission within 120 days after the close of the fiscal year.

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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) List of documents filed as part of this report:

1. Financial Statements

All consolidated financial statements of the Company as set forth under
Item 8 of this report on Form l0-K.

2. Financial Statement Schedules

Schedule Description Page
-------- ----------- ----
VIII Valuation and Qualifying Accounts 16

The auditors' report with respect to the above-listed financial statement
schedule appears on page 15 of this report. All other financial statements
and schedules not listed are omitted either because they are not
applicable, not required, or the required information is included in the
consolidated financial statements.

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3. Exhibits

(3) Articles of Incorporation and By-Laws.
(i) Restated Certificate of Incorporation. (Exhibit (3) of the Form
10-K of the Company for the year ended December 31, 1991 (herein
referred to as "1991 Form 10-K").)
(ii) By-Laws, as amended and restated on October 25, 1993. (Exhibit
(3)(ii) of the Form 10-K of the Company for the year ended
December 31, 1993 (herein referred to as "1993 Form 10-K").)

(4) Instruments Defining the Rights of Security Holders, Including
Indentures.
(i) Indenture, dated as of March 1, 1986, between the Company and The
Chase Manhattan Bank (National Association), Trustee. (Exhibit
(4) of the 1991 Form 10-K.)
(ii) Indenture, dated as of August 15, 1991, between the Company and
The Chase Manhattan Bank (National Association), Trustee.
(Exhibit (4) to the Company's Current Report on Form 8-K dated
August 27, 1991.)
(iii) Rights Agreement, dated as of July 27, 1987, between the Company
and The First National Bank of Boston, Rights Agent. Incorporated
by reference to the Company's Registration Statement on Form 8-A
filed July 20, 1987. (File No. 1-442.)

(10) Material Contracts.
o The Boeing Company Bank Credit Agreements.
(i) Agreement Amended and Restated as of September 30, 1994. (Exhibit
(10)(i) of the Form 10-Q of the Company for the quarter ended
September 30, 1994.)
(ii) Agreement Entered Into as of September 30, 1994. (Exhibit
(10)(ii) of the Form 10-Q of the Company for the quarter ended
September 30, 1994.)
o Management Contracts and Compensatory Plans.
(iii) 1984 Stock Option Plan.
(a) Plan, as amended February 23, 1987, and August 28, 1989.
(Exhibit (19) of the Form l0-Q of the Company for the
quarter ended September 30, 1989.)
(b) Forms of stock option agreements. (Exhibit (10)(vi)(b) of
the Form 10-K of the Company for the year ended December 31,
1992 (herein referred to as "1992 Form 10-K").)
(iv) 1988 Stock Option Plan.
(a) Plan, as amended on December 14, 1992. (Exhibit (10)(vii)(a)
of the 1992 Form 10-K.)
(b) Form of Notice of Terms of Stock Option Grant. (Exhibit
(10)(vii)(b) of the 1992 Form 10-K.)
(v) 1992 Stock Option Plan for Nonemployee Directors.
(a) Plan. (Exhibit (19) of the Form 10-Q of the Company for the
quarter ended March 31, 1992.)
(b) Form of Stock Option Agreement. (Exhibit (10)(viii)(b) of
the 1992 Form 10-K.)
(vi) Supplemental Benefit Plan for Employees of The Boeing Company.
Plan, as amended December 14, 1992. (Filed herewith.)
(vii) Supplemental Retirement Plan for Executives of The Boeing
Company.
Plan, as amended October 25, 1994. (Filed herewith.)

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(viii) Deferred Compensation Plan for Employees of The Boeing Company.
Plan, as amended on October 31, 1994. (Exhibit (10)(iii) of the
Form 10-Q of the Company for the quarter ended September 30,
1994.)
(ix) Deferred Compensation Plan for Directors of The Boeing Company.
Plan, as amended on October 31, 1994. (Exhibit (10)(iv) of the
Form 10-Q of the Company for the quarter ended September 30,
1994.)
(x) 1993 Incentive Stock Plan for Employees.
(a) Plan, as amended on December 13, 1993. (Exhibit (10)(ix)(a)
of the 1993 Form 10-K.)
(b) Form of Notice of Stock Option Grant.
(i) Regular Annual Grant. (Exhibit (10)(ix)(b)(i) of the 1993
Form 10-K.)
(ii) Supplemental Grant. (Exhibit (10)(ix)(b)(ii) of the 1993
Form 10-K.)
(xi) Incentive Compensation Plan for Officers and Employees of the
Company and Subsidiaries.
Plan, as amended on October 31, 1994. (Exhibit (10)(v) of the
Form l0-Q of the Company for the quarter ended September 30,
1994.)
(xii) SAR Deferral Arrangements of the Company.
(a) Form of SAR Deferral Agreement. (Exhibit (10)(iii)(i) of the
Form 10-K of the Company for the year ended December 31,
1990.)
(b) Plan for Employees, as amended. (Exhibit (19) of the Form
10-Q of the Company for the quarter ended
September 30, 1989.)
(c) Form of SAR deferral election notice. (Exhibit (10)(xiv)(c)
of the 1992 Form 10-K.)

(12) Computation of Ratio of Earnings to Fixed Charges. Page 17.

(13) Portions of the 1994 Annual Report to Shareholders incorporated
by reference herein. Filed herewith.

(21) List of Company Subsidiaries. Filed herewith.

(24) Independent Auditors' Consent and Report on Schedules for use in
connection with filings of Form S-8 under the Securities Act
of 1933. Page 15.

(b) Reports on Form 8-K filed during quarter ended December 31, 1994:

None

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Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the date indicated.

THE BOEING COMPANY
(Registrant)

By: /s/ Frank Shrontz By: /s/ B. E. Givan
------------------------------- ------------------------------
Frank Shrontz - Chairman of the B. E. Givan - Senior Vice
Board, Chief Executive Officer President and Chief Financial
and Director Officer

By: /s/ T. M. Budinich
-------------------------------
T. M. Budinich - Vice President
and Controller

Date: February 27, 1995

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

/s/ Robert A. Beck /s/ Stanley Hiller, Jr.
- --------------------------- ---------------------------------
Robert A. Beck - Director Stanley Hiller, Jr. - Director

/s/ John E. Bryson /s/ George M. Keller
- --------------------------- ---------------------------------
John E. Bryson - Director George M. Keller - Director

/s/ Philip M. Condit /s/ Donald E. Petersen
- --------------------------- ---------------------------------
Philip M. Condit - Director and President Donald E. Petersen - Director

/s/ John B. Fery /s/ Charles M. Pigott
- --------------------------- ---------------------------------
John B. Fery - Director Charles M. Pigott - Director

/s/ Paul E. Gray /s/ Rozanne L. Ridgway
- --------------------------- ---------------------------------
Paul E. Gray - Director Rozanne L. Ridgway - Director

/s/ Harold J. Haynes
- --------------------------- ---------------------------------
Harold J. Haynes - Director George H. Weyerhaeuser - Director

Date: February 27, 1995
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16
Independent Auditors' Consent and Report on Schedules

Board of Directors and Shareholders
The Boeing Company:

We consent to the incorporation by reference in Registration Statement Nos.
2-48576, 2-93923, 33-25332, 33-31434, 33-43854, and 33-58798 on Form S-8 of our
report dated January 25, 1995, on the consolidated financial statements of The
Boeing Company and subsidiaries, in The Boeing Company's 1994 Annual Report to
Shareholders and incorporated by reference in this Annual Report on Form 10-K
for the year ended December 31, 1994. We also consent to the incorporation of
the following report on schedules and the reference to us appearing under the
heading "Experts" in the Registration Statements.

Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of The Boeing Company,
listed in Item 14(a)2 in this Annual Report on Form 10-K for the year ended
December 31, 1994. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington

March 8, 1995

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17
SCHEDULE VIII - Valuation and Qualifying Accounts
The Boeing Company and Subsidiaries

Allowance for Doubtful Accounts and Customer Financing
(Deducted from assets to which they apply)

(Dollars in millions)

1994 1993 1992
- ----------------------------------------------------------
Balance at January 1 $126 $103 $ 83

Charged to costs and expenses 1 31 30

Collection of accounts
previously charged off 1

Deductions from reserves
(accounts charged off) 13 8 10

Balance at December 31 $115 $126 $103

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18
EXHIBIT (12) - Computation of Ratio of Earnings to Fixed Charges
The Boeing Company and Subsidiaries

(Dollars in millions)

Year ended December 31,
--------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Earnings before
federal taxes on income $1,143 $1,821 $2,256 $2,204 $1,972

Fixed charges excluding
capitalized interest 154 75 62 66 58

Amortization of previously
capitalized interest 51 31 22 13 13

Less undistributed earnings
of affiliates (3) 1 1 (1) (5)

Plus distributed earnings
of affiliates - - - - 5
------ ------ ------ ------ ------
Earnings available for
fixed charges $1,345 $1,928 $2,341 $2,282 $2,043
====== ====== ====== ====== ======

Fixed charges:

Interest expense $ 130 $ 39 $ 14 $ 13 $ 6

Interest capitalized during
the period 87 150 119 44 22

Rentals deemed
representative of an
interest factor 24 36 48 53 52
------ ------ ------ ------ ------
Total fixed charges $ 241 $ 225 $ 181 $ 110 $ 80
====== ====== ====== ====== ======

Ratio of earnings to fixed
charges 5.6 8.6 12.9 20.8 25.5
====== ====== ====== ====== ======

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19
EXHIBITS FILED WITH THIS REPORT ON FORM 10-K

Commission File Number 1-442

THE BOEING COMPANY
Exhibit Index Annual
Report
to
Share- Form
holders 10-K
Exhibit Description Page Page
- -------------- ------------------------------------------------- ------- ----
(10)(vi) Supplemental Benefit Plan for Employees of
The Boeing Company, as amended December 14, 1992 59
(10)(vii) Supplemental Retirement Plan for Executives of
The Boeing Company, as amended October 25, 1994 63

(12) Computation of Ratio of Earnings to Fixed Charges 18

(13) Portions of the 1994 Annual Report to Shareholders
incorporated by reference in Part I and Part II

Market for Registrant's Common Equity and
Related Stockholder Matters * 57
Selected Financial Data 55 56
Management's Discussion and Analysis of
Financial Position and Results of Operations 26 21
Consolidated Statements of Net Earnings 38 35
Consolidated Statements of Financial Position 39 36
Consolidated Statements of Cash Flows 40 37
Notes to Consolidated Financial Statements 41 38
Independent Auditors' Report 37 34
Supplementary Data Regarding Quarterly Results
of Operations 54 55

(21) List of Company Subsidiaries 69

(24) Independent Auditors' Consent and Report on
Schedules for use in connection with Filings of
Form S-8 under the Securities Act of 1933. 16

Appendix of graphic and image material pursuant
to Rule 304(a) of Regulation S-T 71

*Listed on inside back cover of annual report

19 of 72
20

Exhibit (13)

Portions of the 1994 Annual Report to Shareholders
incorporated by reference in Part I and Part II

20 of 72
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
- ---------------------
REVENUES

Operating revenues for 1994 were $21.9 billion compared to $25.4 billion in 1993
and $30.2 billion in 1992. The decline in revenues over the past two years has
been primarily due to fewer commercial jet transport deliveries as a result of
economic conditions and airline industry overcapacity in most major market areas
of the world. The Company's commercial jet transport market share was
approximately 60% in terms of sales value for each of the three years.

Commercial jet transport deliveries by model:

1994 1993 1992
- -----------------------------------
737 121 152 218
747 40 56 61
757 69 71 99
767 40 51 63
- -----------------------------------
Total 270 330 441
===================================

Commercial aircraft products and services accounted for 77%, 81% and 80% of
total operating revenues for the years 1994, 1993 and 1992.

Total commercial aircraft production declined from a high of 38 aircraft per
month at the beginning of 1992 to 19 1/2 at the end of 1994. During 1994, the
747 production rate was reduced from 5 to 3 per month and the 737 rate was
reduced from 10 to 8 1/2 per month. In early 1995, the 747 rate was reduced
from 3 to 2 per month and the 757 rate was reduced from 5 to 4 per month. The
767 rate is currently being increased from 3 to 4 per month. As previously
announced, the 767 production rate is scheduled to be adjusted again in the
fourth quarter of this year to 3 1/2 per month, and the 737 rate is scheduled to
be reduced from 8 1/2 to 7 per month, also in the fourth quarter. Planned
production rates will continue to be adjusted as necessary to match customer
orders. Deliveries of the new 777 model are scheduled to begin in May 1995.

Total commercial jet transport deliveries for 1995 are currently projected to
be approximately 230 aircraft, including 19 777s. Commercial transportation
sales trends are discussed further in the Commercial Aircraft Business
Environment section on pages 26-28.

Sales by industry segment:
[Graphic and image material item Number 1
See appendix on page 71 for description.]

Commercial aircraft sales by geographic region:
[Graphic and image material item Number 2
See appendix on page 71 for description.]

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22
Defense and space segment revenues were $4.7 billion for 1994, compared with
$4.4 billion and $5.4 billion for 1993 and 1992, respectively. The Space Station
program was the major contributor to the higher sales in 1994 compared to 1993
following NASA's selection of Boeing Defense & Space Group as the prime
contractor for the restructured Space Station program. Declining B-2 bomber
subcontract work accounted for the majority of the reduction in defense and
space sales in 1993 compared with 1992, and B-2 program sales declined further
in 1994. The Company's defense and space business is broadly diversified, and no
program accounted for more than 20% of total 1992-1994 defense and space
revenues. Space Station sales represented less than 25% of total 1994 sales, and
B-2 bomber subcontract work accounted for less than 10% of total 1994 sales.

The principal contributors to defense and space sales in 1994, in addition
to the Space Station program and B-2 bomber subcontract work, included
production and remanufacturing of CH-47 helicopters, F-22 fighter aircraft
engineering and manufacturing development, V-22 Osprey tiltrotor transport
development and test activities, KC-135 tanker update modifications, RAH-66
Comanche helicopter development, E-3 Airborne Warning and Control System (AWACS)
updates, Avenger air defense system deliveries, and B-1B bomber avionics.
U.S. Government classified projects also continued to contribute to defense and
space segment revenues. The Company's activities on the F-22, RAH-66 and V-22
programs are under joint venture teaming arrangements with other companies.

Defense and space activities are discussed further in the Defense and Space
Business Environment section on page 28.

Based on current programs and schedules, the Company projects total 1995 sales
to be in the $20-21 billion range.

EARNINGS

Net earnings of $856 million for 1994 were $388 million lower than in 1993,
primarily due to the fewer commercial aircraft deliveries, a higher level of
research and development expenditures, increased debt expense, and lower
corporate investment income. These factors were partially offset by improved
defense and space earnings and a lower effective federal income tax rate.
Although commercial aircraft sales levels were down substantially in 1994, the
combined operating profit margin on commercial aircraft programs before research
and development was maintained through efficiencies gained by process
improvements throughout the segment's operations. The overall commercial
aircraft operating margin is expected to be somewhat lower in 1995 as sales
levels decline on existing programs, deliveries of the new 777 jet transport
begin, and process improvement investments are made for long-term operating
efficiencies.

The diversified programs of the defense and space segment have adjusted well to
the numerous schedule revisions driven by U.S. Government funding constraints,
and all major programs continue to demonstrate solid technical and cost
performance. Defense and space earnings in 1994 increased by approximately 38%
compared to 1993, while sales increased approximately 8%.

Net earnings:
[Graphic and image material item Number 3
See appendix on page 71 for description.]

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23
Net earnings for 1993 were down $310 million compared to 1992 (excluding the
cumulative effect of the SFAS No. 106 accounting change for retiree health care
in 1992), primarily due to lower commercial aircraft sales, lower corporate
investment income and continued high levels of research and development
expenditures, principally for the new 777 jet transport program. These factors
were partially offset by improved defense and space earnings despite lower
sales, and increased income from customer financing.

Research and development expensed:
[Graphic and image material item Number 4
See appendix on page 72 for description.]

Research and development expenditures charged directly to earnings include
design, developmental and related test activities for new and derivative
commercial jet transports, other company-sponsored product development, and
basic defense and space research and development not recoverable under U.S.
Government flexibly priced contracts. Research and development associated
with new commercial models and derivatives was maintained at high levels over
the past three years even though sales were declining during this period.
These substantial investment levels will help ensure the Company is well
positioned to meet customer requirements in the next growth cycle.

The principal commercial developmental program during the 1993-1994 time period
has been the new 777 wide-body twinjet. Structural design activities on the
777 program peaked in 1992, resulting in the lower level of research and
development charges in 1993 compared to 1992. During 1993, the 777 development
program transitioned from primarily structural and systems design activities to
primarily systems integration and test activities. Flight testing began in mid-
1994, and will continue through 1995. In addition to extensive systems
integration and test activities for the new 777 model, the principal commercial
developmental programs in 1994 were the extended-range version of the 777, which
begins deliveries in late 1996, the Next-Generation 737 family, which begins
deliveries with the 737-700 in late 1997, and a freighter version of the 767,
which begins deliveries in the fourth quarter of 1995.

Research and development expenditures currently planned for 1995 will be below
the 1994 and 1993 levels. Research and development activities are discussed
further in the Strategic Investments section immediately following.

The effective federal income tax rates were 25.1%, 31.7% and 31.1% for 1994,
1993 and 1992, respectively. The effective tax rates for the three years were
lower than the statutory rates primarily due to tax-exempt income benefits from
export sales, and research and development tax credit in 1994. (See Note 6 to
the Consolidated Financial Statements.)

Essentially all of the Company's business is performed under contract, and
therefore operating results trends are not significantly influenced by the
effect of changing prices. Additional information relating to sales and earnings
contributions by business segment can be found in Note 18 to the Consolidated
Financial Statements.

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24
STRATEGIC INVESTMENTS FOR LONG-TERM VALUE
- -----------------------------------------

Over the past several years, the Company has made significant investments to
meet future airline requirements and to aggressively pursue business and process
improvement opportunities. Although constraining earnings and requiring
substantial cash resources in the near-term, these investments are building
long-term value by streamlining operations and positioning the Company to
maintain or increase market share.

NEW PRODUCT DEVELOPMENT

The Company continually evaluates opportunities to improve current models, and
conducts ongoing marketplace assessments to ensure that its family of jet
transports is well positioned to meet future requirements of the airline
industry. The fundamental strategy is to maintain a broad product line
responsive to changing market conditions by maximizing commonality among the
Boeing family of airplanes. The Company expects to continue leading the industry
in customer satisfaction by offering products having the highest standards of
quality, safety, technical excellence, economic performance, and in-service
support.

The major focus of development activities over the past three years has been
the 777 wide-body twinjet which is scheduled to enter airline service in mid-
1995. The new 777 model is designed to meet airline requirements for an
efficient, comfortable, high-capacity airplane to be used
in domestic and regional markets internationally. Deliveries of an extended-
range version of the 777 will begin in late 1996, and a version with 20% greater
passenger-carrying capability is currently being offered. Orders for 150 and
options for 108 777s have been announced by 16 customers.

During 1993 the Company began development activities on the Next-Generation 737
family of short-to-medium-range jetliners that will provide greater range,
increased speed, and reduced noise and emissions while maintaining 737 family
commonality. The first Next-Generation 737, designated the 737-700, is the
middle-sized member of the 737 family, and will be followed by the larger 737-
800. Customer interest for a smaller version, the 737-600, will determine the
timing of its introduction. The improved operational capabilities and
commonality benefits should give the new 737s significant competitive
advantages. Initial 737-700 deliveries are scheduled for late 1997. Orders for
93 and options for 83 Next-Generation 737s have been announced by five
customers.

Other derivatives recently developed or presently in development include
freighter versions of the 747-400 and 767. The initial 747-400 freighter was
delivered in 1993 and the 767 freighter will first deliver in 1995.

The Company continues to assess the market potential for new or derivative
aircraft that are larger and have more range than the 747-400. Because of a
relatively limited market and the heavy resource investment levels required, the
Company signed an agreement with four European aerospace companies in 1993 to
study the feasibility of jointly developing a new aircraft capable of carrying
between 550 and 800 passengers.

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25
While product development activities are principally oriented toward
maintaining and enhancing the competitiveness of the Boeing subsonic fleet, the
Company is also involved in studies to understand the technological and economic
issues associated with development of commercial supersonic aircraft. At this
time, environmental issues such as takeoff noise and emissions at high altitude
appear manageable.

The major developmental programs in the defense and space segment, funded
principally under cost-reimbursement-type contracts, include Space Station, F-22
fighter aircraft, V-22 Osprey tiltrotor transport and RAH-66 Comanche
helicopter.

The Defense & Space Group is on the forward edge of military and space
technology. Although opportunities for major new defense and space programs in
the near term are relatively limited, the Company is aggressively seeking those
for which it is well positioned. In recent years, significant resources have
been applied in technologies for affordable military aircraft, which led to
award of key conceptual design contracts in 1994. These awards were for the
Advanced Short Take-Off Vertical Landing (ASTOVL) aircraft and the Joint Attack
Strike Technology (JAST), a tri-service Defense Department initiative to provide
design concepts for an affordable lightweight fighter. Other potential
opportunities being pursued include a possible replacement for NASA's aging
Space Shuttle fleet and application of the Company's technologies in various
international commercial ventures.

MAJOR PROCESS IMPROVEMENTS

The Company remains strongly committed to continuous quality improvement in all
aspects of its business and to maintaining a strong focus on customer needs,
including product capabilities, technology, in-service economics
and product support. Major long-term productivity gains are being pursued
aggressively, with substantial resources committed to investments in training,
restructuring of processes, technology, and organizational realignment.

In connection with the 777 and other developmental programs, such measures have
included early commitment of resources for integrated product teams, design
interface with customer representatives, use of advanced three-dimensional
digital product definition and digital pre-assembly computer applications, and
increased use of automated manufacturing processes. Although these measures have
required significant current investments, substantial long-term benefits are
anticipated from reductions in design changes and rework, and improved quality
of internally manufactured and supplier parts.

During 1994 a major initiative was launched to simplify and streamline
commercial aircraft production management and related systems. Organizational
realignments have been made and resources have been dedicated to ensure the new
processes and systems are successfully implemented over the next few years.
Investments in new manufacturing processes and flexible configuration designs
are also being made to further streamline the entire order-to-delivery process.

The Defense & Space Group continues to make important process improvements, and
has placed increased emphasis on implementing process improvements to provide
cost-effective solutions that maintain technological superiority. One example is
a process that facilitates quick and effective cross-disciplinary integration in
creating new product prototypes.

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26
COMMERCIAL AIRCRAFT BUSINESS ENVIRONMENT
- ----------------------------------------

The worldwide market for commercial jet transports is predominantly driven by
long-term trends in airline passenger traffic. The principal factors underlying
long-term traffic growth are sustained economic growth in developed and emerging
countries and political stability. Demand for the Company's commercial aircraft
is further influenced by world trade policies, environmental constraints imposed
upon airplane operations, airline industry profitability, technological
evolution, and price and other competitive factors.

GLOBAL ECONOMIC AND PASSENGER TRAFFIC TRENDS

Since the 1970s, worldwide air travel has grown in parallel with prevailing
economic conditions. Two major slumps occurred as a result of rapid petroleum
price increases, and the most recent decline followed the high economic growth
of the late 1980s. The worldwide recession in developed countries appears to
have come to an end, but unlike past recessions, it has not been followed by a
rapid recovery in the world economy. Economic recovery was essentially synchron-
ized throughout the world when oil price hikes subsided in the 1970s and again
in the 1980s. The 1991-93 world recessions were caused by a variety of factors,
and the pace of the current recovery varies by region. The broad-based world
recovery now underway is expected to gain strength in 1995. Recent economic
indicators suggest that growth in Western Europe is accelerating, that Japan
will experience a modest recovery in 1995, and most other Asian economies will
continue to experience rapid expansion. Economic growth rates in the United
States and certain other regions may moderate as Japan and Europe continue their
recoveries.
Following the decline in passenger traffic in 1991, the first annual decline
since the start of the jet era, worldwide passenger traffic in 1992-excluding
traffic in the nations of the Commonwealth of Independent States (CIS) and the
three Baltic republics-was approximately 8 1/2% higher than the depressed levels
of 1991. This was followed by annual growth rates of approximately 5% and 5 1/2%
in 1993 and 1994. For the three-year period 1992-1994, the average annual growth
rate for worldwide passenger traffic (excluding the nations of the CIS and the
three Baltic republics) was approximately 6 1/2%. The Company's forecast of the
average long-term growth rate in passenger traffic is approximately 5.8%
annually for the balance of the decade and slightly less than 5% for the balance
of the 20-year forecast period.
Significant excess capacity in the worldwide aircraft fleet developed during
the recent global recession following several years of record setting delivery
levels of new jet transports. At the end of 1993 approximately 1,110 commercial
jet transports out of the total world fleet of over 11,000 aircraft were in out-
of-service status. By the end of 1994, that number had declined to approximately
950. Analysis indicates that over 200 of these aircraft are awaiting major
maintenance or modification. Due to noise constraints and the inferior operating
economics of older aircraft, the Company currently estimates that more than half
of the remaining stored aircraft will not return to commercial service.

Based on global economic growth projections over the long term, and taking into
consideration increasing utilization levels of the worldwide aircraft fleet and
requirements to replace older aircraft, the Company projects the total
commercial jet transport market opportunity over the next 20 years at
approximately $1,000 billion in 1995 dollars. However, realization of this
market forecast depends on the customer airlines' ability to achieve and sustain
reasonable levels of profits over the long term.
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27
AIRLINE PROFITABILITY

Following substantial operating losses in the aggregate by both U.S. and non-
U.S. airlines in 1992, the airline industry realized positive operating profits
in 1993. Through a combination of passenger traffic growth, improved revenue,
lower fuel costs and aggressive cost reduction measures, the airline industry
showed significant further improvement in operating profitability in 1994.
Airlines' net earnings (after interest costs on debt) also showed marked
improvement in 1994, and the industry aggregate achieved approximately a break-
even level in terms of net earnings, following four years of net losses.

Until the airline industry can achieve sustained levels of acceptable
profitability, future orders of the Company's commercial jet transports will
be restrained. In addition to aggressive cost reduction measures being taken
by airlines, continued growth in passenger traffic together with stable fare
structures will be important factors in returning the industry to sustained
profitability and financial health.

INDUSTRY COMPETITIVENESS AND WORLD TRADE POLICIES

Over the past two decades, the Company has maintained approximately a 60% share
of the available commercial jet transport market. All manufacturers of
commercial jet transports have faced declining production rates in recent years,
and competitive pressures for new orders continue to be intense in terms of
pricing and other conditions. With respect to pricing pressures, the Company's
focus on improving processes and other cost reduction efforts are intended to
enable the Company to maintain market share at satisfactory margins.

In 1992 the U.S. Government and the European Community announced agreement on
interpreting the commercial aircraft code of the General Agreement on Tariffs
and Trade (GATT). The 1992 agreement limits direct European government
development support subsidies to 33% and prohibits government production loans
and government-subsidized sales arrangements. The Company would have preferred a
ban on all government subsidies for commercial airplane programs, but the
controls embodied in the 1992 agreement were considered important in limiting
future government support to the Company's European competitor. A new multi-
lateral subsidies code was incorporated in the GATT agreement reached in
December 1993 limiting government subsidies by all countries covered by the
GATT. The more restrictive 1992 bilateral agreement remains in effect for the
European Community. Further limiting of subsidies to aircraft manufacturing
companies by foreign governments, whether members of GATT or not, remains a
primary Company goal to ensure fair competition.

The Company's extensive customer support services network for airlines through-
out the world plays a key role in maintaining high customer satisfaction. To
help airline customers more effectively manage their operating costs, new
facilities and systems now provide for next-day shipment for routine spare parts
orders, and the highest priority orders are processed and ready for shipment
within two hours. During 1994 a new regional customer services center was opened
in Beijing to serve the growing airline requirements in China and other Asian
countries.

Over the past five years, sales outside the United States have accounted for
more than 70% of total commercial aircraft sales, and over 60% of the
contractual backlog at year-end 1994 was with non-U.S. airlines. Continued
access to global markets is extremely important to the Company's future ability
to fully realize its sales potential and projected long-term investment returns.
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28
SUMMARY

Although market uncertainties remain, particularly with respect to the airline
industry's profitability and financial health, the long-term market outlook
remains favorable. The Company is well positioned in all segments of the
commercial jet transport market, and intends to remain the airline industry's
preferred supplier through emphasis on customer satisfaction and product
offerings.

DEFENSE AND SPACE BUSINESS ENVIRONMENT
- --------------------------------------

Changing defense priorities and severe U.S. Government budget pressures continue
to characterize the business environment for the defense and space segment. Over
the three-year period 1992-1994, total procurement and research funding for U.S.
Government defense and space programs declined more than 20% in inflation-
adjusted dollars. As a consequence, some of the Company's programs have been
subject to stretch-out, curtailment or termination. Although a number of
programs remain subject to future stretch-out and curtailment, the Company's
defense and space business is broadly diversified among priority government
programs involving military aircraft, helicopters, electronic systems, and space
systems. Additionally, the Company's programs are balanced between potential
future production programs and ongoing modernization activities for existing
defense systems.

A larger percentage of the Company's defense and space business was under cost-
reimbursement-type contracts in 1994 compared with 1993 and 1992. The current
major developmental programs, principally the Space Station,
F-22 fighter, V-22 Osprey tiltrotor aircraft and RAH-66 Comanche helicopter,
primarily involve cost-reimbursement-type contracts.

In addition to the developmental programs mentioned above, the major revenue-
producing programs for 1995 include production and remanufacturing of CH-47
helicopters, updating and modifying various military aircraft and systems,
production of 767 AWACS for the government of Japan, continuing B-2 bomber
subcontract work, other program support and classified project activities.

Significant restructuring in the form of mergers, acquisitions, and
consolidations is continuing throughout the industry as a result of the reduced
opportunities in the defense and space industry. Internal consolidations and
restructuring of the Company's defense and space operations, largely completed
by 1992, have helped position the Defense & Space Group to effectively compete
in the current market environment. The Company continues to examine whether its
long-term strategy is best pursued through internal means or through
acquisitions, dispositions or alliances. Joint venture arrangements with other
companies are expected to continue to be common for major developmental programs
and follow-on production activities. Currently, the Company's activities in the
F-22, V-22 and RAH-66 developmental programs are under joint venture
arrangements.

Over the past three years, defense sales to foreign governments have averaged
approximately 10% of total defense and space sales. However, international sales
are expected to represent a higher percentage of total defense and space sales
in 1995, principally due to foreign government sales associated with the 767
AWACS and CH-47 helicopter programs.

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29
In 1993, NASA selected Boeing to become the prime contractor for the
restructured Space Station program, which now includes Russian participation.
The selection as prime contractor for the International Space Station Alpha was
an acknowledgment of Boeing Defense & Space Group's ability to effectively
manage large, complex integration projects, and represents an assignment of
great importance to both the Company and the country's manned space program.
Boeing is responsible for the design, development and integration of the Space
Station, as well as completing the original work package to build the habitat
and laboratory modules. The Space Station program completed a highly successful
system design review in March 1994. Subsequently, strong congressional support
was received for the restructured Space Station program. A series of technical
design reviews will occur during 1995 in preparation for the first launch of a
space station component, currently scheduled for 1997.

The F-22 fighter, being developed in partnership with Lockheed, remains a high-
priority defense program and is scheduled for critical design review in early
1995. First flight is currently scheduled to occur in early 1997 and low-rate
initial production is scheduled to begin approximately two years later.

The V-22 Osprey tiltrotor aircraft, being developed in partnership with Bell
Helicopter Textron, has maintained strong congressional support. The V-22 will
satisfy Marine Corps and Special Operations Forces medium-lift requirements
with exceptional mobility and rapid deployment. Critical design review for the
V-22 was successfully completed in the fourth quarter of 1994. The current
engineering and manufacturing development contract will provide four production
representative aircraft for operational tests scheduled to begin in late 1996.

The RAH-66 Comanche, a light-attack helicopter for the U.S. Army, is being
jointly developed with Sikorsky. First flight of the Comanche prototype is
currently scheduled for late 1995. Due to funding constraints, this
program has been identified for further stretch-out and delayed production.

The CH-47 Chinook helicopter program currently consists of modernizing and
remanufacturing of earlier model Chinooks and production of new CH-47s. Existing
contracts and near-term sales prospects are principally with foreign
governments.

The 767 AWACS program is expected to provide important business opportunities
over the long term. During 1994, the government of Japan ordered two additional
767 airframes, bringing the total to four 767 AWACS. The first 767 airframe was
delivered in late 1994 and modification has begun for installation of the AWACS
system. Upgrade activities for existing 707 AWACS for both the U.S. Government
and NATO are ongoing.

In addition to the 767 AWACS, other opportunities are being pursued to provide
military derivatives of the Company's commercial aircraft, including 747s and
767s for military airlift and tanker requirements.

OTHER BUSINESS ACTIVITIES
- -------------------------

Other business activities include developing large-scale information systems and
conducting management services through Boeing Computer Services, principally for
government agencies. An information systems contract to enhance the readiness of
the Army Reserve and National Guard units is currently the largest contributor
to other business revenues.
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CONTRACTUAL BACKLOG
- -------------------

Contractual backlog:
[Graphic and image material item Number 5
See appendix on page 72 for description.]

Total contractual backlog of unfilled orders at December 31, 1994, was $66.3
billion, compared with $73.5 billion at the end of 1993. Of the total 1994
backlog, $60.6 billion or 91% related to the commercial aircraft segment,
compared with $69.0 billion or 94% in 1993. Not included in contractual backlog
are purchase options and announced orders for which definitive contracts have
not been executed and orders from customers which have filed for bankruptcy
protection.

U.S. Government and foreign military backlog is limited to amounts obligated to
contracts. Unobligated U.S. Government contract values not included in backlog
at December 31, 1994 and 1993, totaled $5.9 billion and $6.9 billion.

In evaluating the Company's contractual backlog for commercial customers,
certain risk factors should be considered. Approximately 60% of the contractual
backlog for commercial jet airplanes is scheduled to be delivered after 1996.
Unfavorable operating results continuing to be experienced by certain airlines
could result in customer requests for rescheduling or possible cancellation of
contractual orders.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

The primary factors that affect the Company's investment requirements and
liquidity position, other than operating results associated with current
sales activity, include the timing of new and derivative commercial jet
transport programs requiring both high developmental expenditures and initial
inventory buildup; cyclical growth and expansion requirements; customer
financing assistance requirements; and the timing of federal income tax
payments.

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31
CASH FLOW SUMMARY

Following is a summary of cash flow (based on changes in cash and short-
term investments) to highlight and facilitate discussion of the principal
cash flow elements:

(Dollars in billions) 1994 1993 1992
- -------------------------------------------------------------------------
Cash flow from earnings (a) $ 2.1 $ 2.4 $ 2.7

Facilities and equipment expenditures (b) (0.8) (1.3) (2.2)

Net change in gross inventory (0.8) 0.6 2.0
Reductions in customer advances (0.7) (1.3) (2.1)
- -------------------------------------------------------------------------
Net inventory change (c) (1.5) (0.7) (0.1)

Net changes in receivables, liabilities,
and deferred income taxes (d) 0.3 (0.4) 1.0

Pension funding in excess of expense (0.1) (0.1) (0.2)

Net increase in customer financing (e) (0.2) (0.9) (1.1)

Disbursement for cash dividends and
treasury stock acquisition (0.3) (0.3) (0.4)
- -------------------------------------------------------------------------
Net cash flow before new debt (0.5) (1.3) (0.3)

Long-term debt issued 0.8 0.5
- -------------------------------------------------------------------------
(Decrease) Increase in cash and
short-term investments $(0.5) $(0.5) $ 0.2
=========================================================================
Cash and short-term investments at end of year $ 2.6 $ 3.1 $ 3.6
=========================================================================

(a) Cash flows from earnings as presented here are adjusted for non-cash
charges for depreciation and retiree health care accruals. The Company has
not funded Statement of Financial Accounting Standards No. 106 retiree
health care accruals and, at this time, has no plan to fund these accruals
in the future.

(b) Facilities and equipment expenditures were at an historically high level
during 1992, principally in support of the new 777 program. Expenditures in
1993 and 1994 were down sharply as the 777 program facilities expansions
were substantially completed. No major plant expansions are currently
planned.

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(c) Inventory balances on the 737, 747, 757 and 767 commercial jet transport
programs declined substantially over each of the three years due to
production rate reductions and improvements in production inventory flow
times. These declines were partially offset during 1993 and 1992 and more
than offset in 1994 by substantial inventory and tooling buildup on the new
777 program. Defense and space segment inventories also declined in 1993.
Primarily because of declining delivery rates, slower order activity, and
program buildup on the 777 program during the 1992-1994 time period, the
ratio of commercial customer advances to commercial gross inventory
declined, resulting in increases in commercial inventory net of customer
advances. With regard to defense and space contract activity, the ratio of
progress billings to gross inventory did not significantly change during
this period. 777 program inventory will continue to increase in 1995 as the
production rate builds following initial deliveries in mid-1995.

(d) Over the three-year period 1992-1994, changes in accounts receivable,
accounts payable, other liabilities and deferred taxes positively impacted
cash flow by $0.9 billion in the aggregate, principally due to increases in
accounts payable. With regard to anticipated near-term cash requirements,
federal income tax payments are projected to substantially exceed income
tax expense for the 1995-1996 time period due to completion of contracts
executed under prior tax regulations.

(e) The increase in customer financing has been largely driven by the
commercial aircraft market conditions discussed above. As of December 31,
1994, the Company had outstanding commitments of approximately $3.2 billion
to arrange or provide financing related to aircraft on order or under
option for deliveries scheduled through 2002. However, not all these
commitments are likely to be utilized. The Company will sell a portion of
customer financing assets from time to time when capital markets are
favorable in order to maintain maximum capital resource flexibility.
Outstanding loans and commitments are secured by the underlying aircraft.

Property, plant and equipment -- net additions:
[Graphic and image material item Number 6
See appendix on page 72 for description.]

Customer financing -- net additions:
[Graphic and image material item Number 7
See appendix on page 72 for description.]

LIQUIDITY AND CAPITAL RESOURCES SUMMARY

The $2.6 billion of long-term debt, primarily issued in the 1990-1993 time
period, is unsecured and has an average maturity of 30 years. Total borrowings
as of year end 1994 amounted to 21% of total book capital (shareholders' equity
plus borrowings), and the Company believes that it has substantial additional
long-term borrowing capability. Revolving credit line agreements with a group of
major banks, totaling $3.0 billion, remain available but unused.

In aggregate, cash and short-term investments are projected to decrease over
the next several quarters due principally to the continuing inventory buildup on
the new 777 jet transport, customer financing commitments, and federal income
tax payments. No additional debt issuances are anticipated at this time.

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The Company believes its internally generated liquidity, together with access
to external capital resources, will be sufficient to satisfy existing
commitments and plans, and to provide adequate financial flexibility to take
advantage of potential strategic business opportunities should they arise.

- - - - -
CONTINGENT ITEMS

As discussed in Note 17 to the Consolidated Financial Statements, the U.S.
Government has terminated for alleged default most of the work required under
contracts for a new Saudi Arabia air defense system known as the Peace Shield
program. The Government has demanded that the Company repay $605 million of
Peace Shield unliquidated progress payments and has selected another contractor
to perform the terminated work. Management believes that the Government's
grounds for default are not legally supportable, and on appeal the Government's
position will be overturned. The Company has filed its complaint in the United
States Claims Court to overturn the default termination, submitted a Contract
Claim for equitable adjustment to the contract prices and schedules, and
requested that repayment of $605 million of unliquidated progress payments be
deferred. The Company's financial statements assume that the termination for
default will be overturned and that the Contract Claim will be settled in the
Company's favor. If the Company's appeal of the termination for default is not
successful, the Company could realize a pre-tax loss on the program
approximating the value of the unliquidated progress payments plus related
interest and potential damages.

The Company is subject to federal and state requirements for protection of the
environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations over the past
10 years. The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact to the
Company's financial position. With respect to results of operations, related
charges have averaged less than 2% of annual net earnings.

Based on in-depth studies, expert analyses and legal reviews, the Company
routinely assesses its contingencies, obligations and commitments to clean up
sites, including assessments of the probability of recoveries from other
responsible parties who have and have not agreed to a settlement and recoveries
from insurance carriers. The Company's policy is to immediately recognize
identified exposures related to environmental cleanup sites based on
conservative estimates of investigation, cleanup, and monitoring costs to be
incurred.

Based on all known facts and expert analyses, the Company believes it is not
reasonably likely that identified environmental contingencies will result in a
materially adverse impact on the Company's financial position or operating
results and cash flow trends.

During 1994 the Company reached a settlement with the U.S. Government concerning
cost classification practices that had been under investigation. The settlement
had no material impact on results of operations.

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34

INDEPENDENT AUDITORS' REPORT

January 25, 1995

Board of Directors and Shareholders
The Boeing Company
Seattle, Washington

We have audited the accompanying consolidated
statements of financial position of The Boeing Company
and subsidiaries as of December 31, 1994 and 1993, and
the related statements of net earnings and cash flows
for each of the three years in the period ended
December 31, 1994. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of The Boeing Company and
subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the financial statements, in
1992 the Company changed its method of accounting for
postretirement benefits other than pensions.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Seattle, Washington

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35

THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS
(Dollars in millions except per share data)

Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Sales and other operating revenues $21,924 $25,438 $30,184
Costs and expenses 20,773 23,747 28,144
- ------------------------------------------------------------------------------
Earnings from operations 1,151 1,691 2,040
Other income, principally interest 122 169 230
Interest and debt expense (130) (39) (14)
- ------------------------------------------------------------------------------
Earnings before federal taxes on income and
cumulative effect of change in accounting 1,143 1,821 2,256
Federal taxes on income 287 577 702
- ------------------------------------------------------------------------------
Earnings before cumulative effect of change
in accounting 856 1,244 1,554
Cumulative effect to January 1, 1992, of
change in accounting for retiree health care (1,002)
- ------------------------------------------------------------------------------
Net earnings $ 856 $ 1,244 $ 552
==============================================================================

Earnings per share:
Before cumulative effect of change in accounting $2.51 $3.66 $ 4.57
Cumulative effect to January 1, 1992, of
change in accounting for retiree health care (2.95)
- ------------------------------------------------------------------------------
$2.51 $3.66 $ 1.62
==============================================================================

Cash dividends per share $1.00 $1.00 $ 1.00
==============================================================================

See notes to consolidated financial statements.

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36

THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in millions except per share data)

December 31, 1994 1993
- ------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 2,084 $ 2,342
Short-term investments 559 766
Accounts receivable 1,664 1,615
Current portion of customer financing 250 218
Deferred income taxes 878 800
Inventories 11,269 10,485
Less advances and progress billings (6,290) (7,051)
- ------------------------------------------------------------------------------
Total current assets 10,414 9,175
Customer financing 3,071 2,959
Property, plant and equipment, at cost 13,588 13,232
Less accumulated depreciation (6,786) (6,144)
Deferred income taxes 63
Other assets 1,176 1,165
- ------------------------------------------------------------------------------
$21,463 $20,450
==============================================================================

Liabilities and Shareholders' Equity
Accounts payable and other liabilities $ 6,267 $ 5,854
Advances in excess of related costs 273 226
Income taxes payable 281 434
Current portion of long-term debt 6 17
- ------------------------------------------------------------------------------
Total current liabilities 6,827 6,531
Deferred income taxes 51
Accrued retiree health care 2,282 2,148
Long-term debt 2,603 2,613
Contingent stock repurchase commitment 175
Shareholders' equity:
Common shares, par value $5.00 -
600,000,000 shares authorized;
349,256,792 shares issued 1,746 1,746
Additional paid-in capital 586 413
Retained earnings 7,696 7,180
Less treasury shares, at cost -
1994 - 8,377,637; 1993 - 9,118,995 (328) (356)
- ------------------------------------------------------------------------------
Total shareholders' equity 9,700 8,983
- ------------------------------------------------------------------------------
$21,463 $20,450
==============================================================================

See notes to consolidated financial statements.

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37
THE BOEING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)

Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Cash flows - operating activities:
Net earnings $ 856 $ 1,244 $ 552
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Effect of cumulative change in accounting
for retiree health care 1,002
Depreciation and amortization -
Plant and equipment 1,081 953 870
Leased aircraft, other 61 72 91
Gain/undistributed earnings - affiliates 3 (1) (13)
Changes in assets and liabilities -
Short-term investments 207 137 (388)
Accounts receivable (49) (187) 635
Inventories, net of advances and
progress billings (1,545) (733) (138)
Accounts payable and other liabilities 413 606 229
Advances in excess of related costs 47 (413) (28)
Income taxes payable and deferred (117) (334) 180
Other assets (14) (134) (202)
Accrued retiree health care 134 144 184
- ------------------------------------------------------------------------------
Net cash provided by operating activities 1,077 1,354 2,974
- ------------------------------------------------------------------------------

Cash flows - investing activities:
Customer financing additions (975) (1,560) (1,156)
Customer financing reductions 770 626 16
Plant and equipment, net additions (795) (1,317) (2,160)
Proceeds from sale of affiliate 50
Other 8 (19)
- ------------------------------------------------------------------------------
Net cash used by investing activities (1,000) (2,243) (3,269)
- ------------------------------------------------------------------------------

Cash flows - financing activities:
Debt financing (21) 837 482
Shareholders' equity -
Cash dividends paid (340) (340) (340)
Treasury shares acquired (109)
Stock options exercised, other 26 23 35
- ------------------------------------------------------------------------------
Net cash provided (used) by financing activities (335) 520 68
- ------------------------------------------------------------------------------

Net decrease in cash and cash equivalents (258) (369) (227)

Cash and cash equivalents at beginning of year 2,342 2,711 2,938
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,084 $ 2,342 $ 2,711
==============================================================================
See notes to consolidated financial statements.
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38

THE BOEING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
(Dollars in millions except per share data)

Note 1 - Summary of Significant Accounting Policies

Principles of consolidation

The consolidated financial statements include the accounts of all subsidiaries.
Intercompany profits, transactions and balances have been eliminated in
consolidation.

Sales and other operating revenues

Sales under commercial programs and U.S. Government and foreign military fixed-
price contracts are generally recorded as deliveries are made. For certain
fixed-price contracts that require substantial performance over an extended
period before deliveries begin, sales are recorded based upon attainment of
scheduled performance milestones. Sales under cost-reimbursement contracts are
recorded as costs are incurred. Certain U.S. Government contracts contain
profit incentives based upon performance relative to predetermined targets.
Incentives based on cost performance are recorded currently, and other
incentives and fee awards are recorded when the amounts can be reasonably
estimated or are awarded. Income associated with customer financing activities
is included in sales and other operating revenues.

Inventories and cost of deliveries

Inventoried costs on long-term commercial jet transport programs and U.S.
Government and foreign military contracts include direct engineering, production
and tooling costs, and applicable overhead. In addition, for U.S. Government
fixed-price-incentive contracts, inventoried costs include research and
development and general and administrative expenses estimated to be recoverable.
Inventoried costs associated with commercial jet transport programs and long-
term contracts are reduced by the estimated average cost of deliveries.

For commercial jet transport programs, average cost of deliveries is based on
the estimated total cost of units represented by the current and near-term
production commitment quantity, except the program quantity for new programs is
initially based on an established number of units representing what is believed
to be a conservative market projection. For the new 777 commercial jet
transport program for which deliveries begin in 1995, the initial program
quantity has been established at 400 units. For U.S. Government and foreign
military contracts, average cost of deliveries is based on the estimated total
cost of contractual units. To the extent the total of such costs is expected to
exceed the total estimated sales price, charges are made to current earnings to
reduce inventoried costs to estimated realizable value.

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In accordance with industry practice, inventoried costs include amounts
relating to programs and contracts with long production cycles, a portion of
which is not expected to be realized within one year.

Commercial spare parts and general stock materials are stated at average cost
not in excess of realizable value.

Research and development, general and administrative expenses

Research and development and general and administrative expenses are charged
directly to earnings as incurred except to the extent estimated to be directly
recoverable under U.S. Government flexibly priced contracts.

Interest expense

Interest and debt expense is presented net of amounts capitalized. Interest
expense is subject to capitalization as a construction-period cost of property,
plant and equipment and major commercial program tooling.

Postretirement benefits

The Company's funding policy for pension plans is to contribute, at a minimum,
the statutorily required amount to an irrevocable trust. Benefits under the
plans are generally based on years of credited service, age at retirement and
average of last five years' earnings. The actuarial cost method used in
determining the net periodic pension cost is the projected unit credit method.

In the fourth quarter of 1992, the Company adopted retroactive to January 1,
1992, the provisions of Statement of Financial Accounting Standards (SFAS) No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
using the immediate recognition transition option. SFAS No. 106 requires
accrual of these benefits during an employee's service period. Prior to 1992,
postretirement benefits consisting of retiree health care were accrued for
eligible retirees and qualifying dependents. The effect of the immediate
recognition of the transition obligation was a decrease to 1992 earnings on an
after-tax basis of $1,002, or $2.95 per share based on the annual average shares
outstanding. This accounting change increased 1992 pre-tax costs by $123. The
retiree health care obligation is unfunded.

Taxes on income

In 1992, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under the
asset and liability method prescribed by SFAS No. 109, deferred income taxes are
provided for the temporary differences between the financial reporting basis and
the tax basis of assets and liabilities. These deferred taxes are measured by
the provisions of currently enacted tax laws. Because the Company had
previously adopted SFAS No. 96, the adoption of SFAS No. 109 did not have a
material effect on the Consolidated Statements of Net Earnings.

State taxes on income, which are relatively minor in amount, are included in
general and administrative expense.

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Cash and cash equivalents

Cash and cash equivalents consist of highly liquid instruments such as
certificates of deposit, time deposits, treasury notes and other money market
instruments which generally have maturities of less than three months.

Short-term investments

Short-term investments principally consist of U.S. Government Treasury
obligations, with unrealized gains and losses reflected in other income.

Capital assets

Property, plant and equipment are recorded at cost, including applicable
construction-period interest, and depreciated over useful lives, principally by
accelerated methods.

Per share data

Net earnings per share are computed based on the weighted average number of
shares outstanding of 340,574,779, 339,736,640 and 340,217,888 for the years
ended December 31, 1994, 1993 and 1992, respectively. There is no material
dilutive effect on net earnings per share due to common stock equivalents.

Note 2 - Accounts Receivable

Accounts receivable at December 31 consisted of the following:
1994 1993
- ------------------------------------------------------------------------------
Accounts receivable under U.S. Government contracts $1,200 $1,182
Accounts receivable from commercial
and foreign military customers 464 433
- ------------------------------------------------------------------------------
$1,664 $1,615
==============================================================================

Accounts receivable included the following as of December 31, 1994 and 1993,
respectively: amounts not currently billable of $137 and $325 relating primarily
to sales values recorded upon attainment of performance milestones that differ
from contractual billing milestones and withholds on U.S. Government contracts
($109 and $192 not expected to be collected in one year); $212 and $271 relating
to claims and other amounts on U.S. Government contracts subject to future
settlement ($212 and $240 not expected to be collected in one year); and $41 and
$57 of other receivables not expected to be collected in one year.

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Note 3 - Inventories

Inventories at December 31, 1994 and 1993, consisted of $10,352 and $9,557
relating to long-term commercial programs and U.S. Government and foreign
military contracts, and $917 and $928 relating to commercial spare parts,
general stock materials and other inventories. General and administrative and
research and development expenses included in inventories represented
approximately 1% of total inventories.

As of December 31, 1994, there were no significant deferred production costs in
excess of estimated average cost of deliveries or unamortized tooling costs not
recoverable from existing firm orders for commercial programs other than the 777
program. Inventory costs relating to the 777 program included unamortized
tooling of $3,089 and $2,299 at December 31, 1994 and 1993. For the 777
program, the number of units for determining deferred production costs in excess
of aggregate estimated average cost and over which total tooling costs will be
amortized and absorbed in cost of sales has been established at 400 units. As
of December 31, 1994, 141 777s were under firm contract.

As of December 31, 1994 and 1993, inventory balances included $318 and $457
subject to claims or other uncertainties related to U.S. Government contracts,
principally for the Peace Shield program. (See Note 17.)

Interest capitalized as construction-period tooling costs amounted to $36, $50
and $53 in 1994, 1993 and 1992, respectively.

Note 4 - Customer Financing

Long-term customer financing, less current portion, at December 31 consisted of
the following:
1994 1993
- ------------------------------------------------------------------------------
Notes receivable $1,189 $1,396
Investment in sales-type leases 1,235 768
Operating lease aircraft, at cost, less
accumulated depreciation of $269 and $220 747 895
- ------------------------------------------------------------------------------
3,171 3,059
Less valuation allowance (100) (100)
- ------------------------------------------------------------------------------
$3,071 $2,959
==============================================================================

Financing for aircraft is collateralized by security in the related asset, and
historically, the Company has not experienced a problem in accessing such
collateral. The operating lease aircraft category includes new and used jet and
commuter aircraft, spare engines and spare parts.

Principal payments from notes receivable and sales-type leases for the next five
years are as follows:

1995 1996 1997 1998 1999
------------------------------
$250 $266 $56 $51 $46
==============================

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The Company has entered into interest rate swaps with third-party investors
whereby the interest rate terms differ from the terms in the original
receivable. These interest rate swaps related to $358 of customer financing
receivables as of December 31, 1994.

Interest rates on fixed-rate notes ranged from 6.5% to 11%, and effective
interest rates on variable-rate notes ranged from the London Interbank Offered
Rate (LIBOR) to 4.125% above LIBOR.

Sales and other operating revenues included interest income associated with
notes receivable and sales-type leases of $183, $153 and $57 for 1994, 1993 and
1992, respectively.

Note 5 - Property, Plant and Equipment

Property, plant and equipment at December 31 consisted of the following:
1994 1993
- ------------------------------------------------------------------------------
Land $ 400 $ 397
Buildings 5,662 5,286
Machinery and equipment 7,090 6,500
Construction in progress 436 1,049
- ------------------------------------------------------------------------------
$13,588 $13,232
==============================================================================

Interest capitalized as construction-period property, plant and equipment costs
amounted to $51, $100 and $66 in 1994, 1993 and 1992, respectively.

Note 6 - Taxes on Income

In 1992, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. State taxes
on income, which are relatively minor in amount, are included in general and
administrative expense.

The provision for federal taxes on income consisted of the following:
Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Taxes paid or currently payable $251 $1,113 $728

Change in deferred taxes other than
SFAS No. 106 cumulative transition effect 36 (536) (26)
- ------------------------------------------------------------------------------
$287 $ 577 $702
==============================================================================

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The provisions for federal taxes on income were less than those which result
from application of the statutory corporate tax rates due to the following:
1994 1993 1992
- ------------------------------------------------------------------------------
Statutory tax rate 35.0 % 35.0 % 34.0 %
Foreign Sales Corporation tax benefit (5.7) (3.3) (3.8)
Research benefit (5.2)
Rate change impact on deferred balances (0.5)
Other 1.0 0.5 0.9
- ------------------------------------------------------------------------------
Effective tax rate 25.1 % 31.7 % 31.1 %
==============================================================================

The net deferred tax assets resulted from temporary tax differences associated
with the following:
Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Inventory and long-term contract methods
of income recognition $ 473 $ 381 $(182)
Pension benefit accruals (347) (323) (288)
Retiree health care accruals 799 752 681
Other employee benefits accruals 220 223 215
Customer financing (318) (158) (76)
Domestic International Sales Corporation (12) (23)
- ------------------------------------------------------------------------------
$ 827 $ 863 $ 327
==============================================================================

The temporary tax differences associated with inventory and long-term contract
methods of income recognition encompass related costing differences, including
timing and depreciation differences.

Valuation allowances were not required due to the nature of and circumstances
associated with the temporary tax differences.

In response to an Internal Revenue Service clarification of a transition rule
relating to the repeal of investment tax credit under the Tax Reform Act of
1986, the Company is conducting a comprehensive study regarding prior years'
investments that may qualify for additional investment tax credit. The study is
expected to be completed during 1995 and will likely result in recognition of
additional prior years' investment tax credit benefits. Income taxes have been
settled with the Internal Revenue Service for all years through 1978, and
Internal Revenue Service field examinations have been completed through 1987.
The Company believes adequate provision has been made for all open years.
Favorable resolution of certain claims by the Company could potentially result
in reductions in future tax provisions. Federal income tax payments and
transfers were $401, $908 and $518 in 1994, 1993 and 1992, respectively.

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Note 7 - Other Assets

Other assets at December 31 consisted of the following:
1994 1993
- ------------------------------------------------------------------------------
Prepaid pension expense $1,115 $ 981
Investments, other 61 184
- ------------------------------------------------------------------------------
$1,176 $1,165
==============================================================================

Note 8 - Accounts Payable and Other Liabilities

Accounts payable and other liabilities at December 31 consisted of the
following:
1994 1993
- ------------------------------------------------------------------------------
Accounts payable $3,207 $2,731
Employee compensation and benefits 1,062 1,005
Lease and other deposits 640 708
Other 1,358 1,410
- ------------------------------------------------------------------------------
$6,267 $5,854
==============================================================================

Note 9 - Long-Term Debt

Long-term debt at December 31 consisted of the following:
1994 1993
- ------------------------------------------------------------------------------
Unsecured debentures and notes:
8 3/8% due Mar. 1, 1996 $ 250 $ 249
6.35% due Jun. 15, 2003 299 299
8 1/10% due Nov. 15, 2006 175 175
8 3/4% due Aug. 15, 2021 398 398
7.95% due Aug. 15, 2024 300 300
7 1/4% due Jun. 15, 2025 247 247
8 3/4% due Sep. 15, 2031 248 248
8 5/8% due Nov. 15, 2031 173 173
7.50% due Aug. 15, 2042 100 100
7 7/8% due Apr. 15, 2043 173 173
6 7/8% due Oct. 15, 2043 125 125
Other notes 121 143
Less current portion (6) (17)
- ------------------------------------------------------------------------------
$2,603 $2,613
==============================================================================

The $300 debentures due August 15, 2024, are redeemable at the holder's option
on August 15, 2012. All other debentures and notes are not redeemable prior to
maturity. The $100 notes due August 15, 2042, with a stated rate of 7.50% were
issued to a private investor in connection with an interest rate swap
arrangement that resulted in an effective synthetic rate of 7.865%.

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Maturities of long-term debt for the next five years are as follows:

1995 1996 1997 1998 1999
------------------------------
$6 $271 $9 $11 $11
==============================

Interest payments were $210, $175 and $120 in 1994, 1993 and 1992,
respectively.

The Company has $3,000 currently available under credit-line agreements with a
group of commercial banks. Under these agreements, there are compensating
balance arrangements, and retained earnings totaling $1,509 are free from
dividend restrictions. The Company has complied with restrictive covenants
contained in the various debt agreements.

Note 10 - Postretirement Plans

Pensions

The Company has various noncontributory plans covering substantially all
employees. All major plans are funded and have plan assets that exceed
accumulated benefit obligations. The following table reconciles the plans'
funded status to the prepaid expense balance at December 31.

1994 1993
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested $(6,826) $(7,196)
Nonvested (647) (547)
- ------------------------------------------------------------------------------
Accumulated benefit obligation (7,473) (7,743)
Effect of projected future salary increases (1,517) (1,299)
- ------------------------------------------------------------------------------
Projected benefit obligation (8,990) (9,042)
Plan assets at fair value - primarily equities,
fixed income obligations and cash equivalents 9,290 9,180
- ------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 300 138
Unrecognized net actuarial loss 463 467
Unrecognized prior service cost 439 476
Unrecognized net asset at January 1, 1987, being recognized
over the plans' average remaining service lives (87) (100)
- ------------------------------------------------------------------------------
Prepaid pension expense recognized in the Consolidated
Statements of Financial Position $ 1,115 $ 981
==============================================================================

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The pension provision included the following components:
Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Service cost (current period attribution) $ 352 $ 307 $ 293
Interest accretion on projected benefit obligation 669 632 594
Actual return on plan assets (101) (923) (483)
Net deferral and amortization of
actuarial losses (gains) (596) 257 (140)
- ------------------------------------------------------------------------------
Net pension provision $ 324 $ 273 $ 264
==============================================================================

The actuarial present value of the projected benefit obligation at December 31,
1994, 1993 and 1992, respectively, was determined using a weighted average
discount rate of 8.5%, 7.25% and 8.25%, and a rate of increase in future
compensation levels of 5.75%, 5.0% and 6.0%. The expected long-term rate of
return on plan assets at December 31, 1994, 1993 and 1992, respectively, was
8.0%, 8.5% and 8.5%.

The pension plans have been amended to provide that, in the event there is a
change in control of the Company which is not approved by the Board of Directors
and the plans are terminated within five years thereafter, the assets in the
plans first will be used to provide the level of retirement benefits required by
the Employee Retirement Income Security Act, and then any surplus will be used
to fund a trust to continue present and future payments under the postretirement
medical and life insurance benefits in the Company's group insurance programs.

Although the Company has no intention of doing so, should it terminate certain
of its pension plans under conditions where the plan's assets exceed the plan's
obligations, the Company has an agreement with the Government whereby the
Government is entitled to a fair allocation of any of the plan's reverted assets
based on plan contributions that were reimbursed under Government contracts.
Also, the Revenue Reconciliation Act of 1990 imposes a 20% nondeductible excise
tax on the gross assets reverted if the Company establishes a qualified
replacement plan or amends the terminating plan to provide for benefit
increases; otherwise, a 50% tax is applied. Any net amount retained by the
Company is treated as taxable income.

The Company has certain unfunded and partially funded plans with a projected
benefit obligation of $132 and $169; plan assets of $5 and $23; and unrecognized
prior service costs and actuarial losses of $39 and $70 as of December 31, 1994
and 1993, respectively, based on actuarial assumptions consistent with the
funded plans. The net provision for the unfunded plans was $23 and $22 for 1994
and 1993.

The principal defined contribution plans are the Company-sponsored 401(k) plans
and a funded plan for unused sick leave. Under the terms of the Company-
sponsored 401(k) plans, eligible employees are allowed to contribute up to 12%
of their base pay. The Company contributes amounts equal to 50% of the
employee's contribution to a maximum of 4% of the employee's pay, subject to
statutory limitations. The provision for these defined contribution plans in
1994, 1993 and 1992 was $206, $213 and $221, respectively.

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Other postretirement benefits

In the fourth quarter of 1992, the Company adopted retroactive to January 1,
1992, the provisions of Statement of Financial Accounting Standards (SFAS) No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
using the immediate recognition transition option. SFAS No. 106 requires
accrual of these benefits during an employee's service period. Prior to 1992,
postretirement benefits were accrued for eligible retirees upon retirement. The
Company's postretirement benefits other than pensions consist of health care
coverage for eligible retirees and qualifying dependents. Except for employees
covered by the United Auto Workers bargaining agreement for whom lifetime
benefits are provided, retiree health care is provided principally until age 65.

At January 1, 1992, the accumulated postretirement benefit obligation was
$1,819; however, $301 of this obligation had been previously accrued, resulting
in a pre-tax transition obligation adjustment of $1,518. The effect of the
immediate recognition of the transition obligation was a decrease to first
quarter 1992 net earnings of $1,002 and a deferred tax benefit of $516.

The retiree health care cost provision was $218, $230 and $257 for 1994, 1993
and 1992, respectively. The components of expense for 1994 and 1993 were as
follows:

Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Service cost (current period attribution) $ 91 $ 92 $110
Interest accretion on accumulated retiree
health care obligation 136 144 147
Net deferral and amortization of actuarial gains (9) (6)
- ------------------------------------------------------------------------------
Net provision for retiree health care $218 $230 $257
==============================================================================

Benefit costs were calculated based on assumed cost growth for retiree health
care costs of a 10.5% annual rate for 1995, decreasing to a 6.0% annual growth
rate by the year 2007. A 1% increase or decrease in the assumed annual trend
rates would increase or decrease the accumulated retiree health care obligation
by $231, $218 and $227 as of December 31, 1994, 1993 and 1992, respectively,
with a corresponding effect on the retiree health care expense of $37, $39 and
$43. The accumulated retiree health care obligation at December 31, 1994, 1993
and 1992, respectively, was determined using a weighted average discount rate of
8.5%, 7.25% and 8.25%.

The accumulated retiree health care obligation at December 31 consisted of the
following components:
1994 1993
- ------------------------------------------------------------------------------
Retirees and dependents $ 562 $ 534
Fully eligible active plan participants 360 364
Other active plan participants 1,039 923
- ------------------------------------------------------------------------------
Total accumulated retiree health care obligation 1,961 1,821
Unrecognized net actuarial gain 321 327
- ------------------------------------------------------------------------------
Accrued retiree health care $2,282 $2,148
==============================================================================
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Note 11 - Research and Development, General and Administrative Expenses

Expenses charged directly to earnings as incurred included the following:
Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Research and development $1,704 $1,661 $1,846
General and administrative 1,126 1,102 1,232
==============================================================================

Note 12 - Shareholders' Equity

Changes in shareholders' equity consisted of the following:

Common Stock
---------------- Additional Treasury Stock
Par Paid-In Retained ----------------
(Shares in thousands) Shares Value Capital Earnings Shares Amount
- ------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1991 349,257 $1,746 $583 $6,064 7,969 $(300)
==================================================================================================================
Net earnings 552
Cash dividends declared (340)
Treasury shares acquired 2,497 (109)
Treasury shares issued for incentive
stock plans, net (10) (630) 25
Tax benefit related to incentive stock plans 4
Cash received on put options 15
Transfer to contingent stock repurchase provision (175)
Stock appreciation rights expired or surrendered 1
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 349,257 $1,746 $418 $6,276 9,836 $(384)
==================================================================================================================
Net earnings 1,244
Cash dividends declared (340)
Treasury shares issued for incentive
stock plans, net (11) (717) 28
Tax benefit related to incentive stock plans 3
Stock appreciation rights expired or surrendered 3
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 349,257 $1,746 $413 $7,180 9,119 $(356)
==================================================================================================================
Net earnings 856
Cash dividends declared (340)
Treasury shares issued for incentive
stock plans, net (9) (741) 28
Tax benefit related to incentive stock plans 3
Transfer from contingent stock repurchase provision 175
Stock appreciation rights expired or surrendered 4
- ------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 349,257 $1,746 $586 $7,696 8,378 $(328)
==================================================================================================================

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In 1992 the Company issued put options on five million shares of its stock,
exercisable on specific dates in 1994, giving another party the right to sell
shares of Boeing stock to the Company at contractually specified prices. As of
December 31, 1993 and 1992, the balance of the temporary equity account
"Contingent stock repurchase commitment" is the amount the Company would have
been obligated to pay if all the put options were exercised. All of the put
options expired in 1994 and none were exercised. The proceeds from the issuance
of the put options were recorded as paid-in capital.

In July 1987, the Company adopted a Stockholder Rights Plan and declared a
dividend distribution of one Right for each outstanding share of common stock.
Under certain conditions, each Right may be exercised to purchase one one-
hundredth of a share of Series A Junior Participating Preferred Stock at a
purchase price of $150, subject to adjustment. The Rights will be exercisable
only if a person or group has acquired, or obtained the right to acquire, 20% or
more of the outstanding shares of common stock; following the commencement of a
tender or exchange offer for 30% or more of such outstanding shares of common
stock; or after the Board of Directors of the Company declares any person, alone
or together with affiliates and associates, to be an Adverse Person. If the
Board of Directors declares an Adverse Person, or a person or group acquires
more than 30% of the then outstanding shares of common stock (except pursuant to
an offer which the independent Directors determine to be fair to and otherwise
in the best interests of the Company and its shareholders), each Right will
entitle its holder to receive, upon exercise, common stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. The Company will be
entitled to redeem the Rights at 5 cents per Right at any time prior to the
earlier of the expiration of the Rights in August 1997 or ten days following the
time that a person has acquired or obtained the right to acquire a 20% position.
The Company may not redeem the Rights if the Board of Directors has previously
declared a person to be an Adverse Person. The Rights do not have voting or
dividend rights, and until they become exercisable, have no dilutive effect on
the earnings of the Company.

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Information concerning stock options and stock appreciation rights (SARs),
issued to officers and other employees at exercise prices equal to market value
of the stock at grant date, is presented in the following table.

(Shares in thousands) 1994 1993 1992
- ------------------------------------------------------------------------------
Number of shares under option:
Outstanding at beginning of year 13,265 12,001 8,123
Granted 2,225 2,531 4,748
Exercised (767) (743) (630)
Cancelled or expired (252) (278) (98)
Exercised as SARs (134) (246) (142)
- ------------------------------------------------------------------------------
Outstanding at end of year 14,337 13,265 12,001
==============================================================================
Exercisable at end of year 6,820 5,715 4,985
==============================================================================

Exercise prices per share for options
outstanding at end of year:
High $60.06 $60.06 $60.06
Low $19.67 $12.63 $10.70
==============================================================================

Stock appreciation rights:
Outstanding at end of year 1,258 1,703 2,174
Exercisable at end of year 1,178 1,480 1,658
==============================================================================

Number of shares authorized for future
stock option grants at end of year 16,813 16,695 5,513
==============================================================================

The Company has authorized 10,000,000 shares of $1 par preferred stock, none of
which has been issued.

Note 13 - Derivative Financial Instruments

The derivative financial instruments held by the Company at December 31, 1994,
consisted of simple and specifically tailored interest rate swaps (associated
with certain customer financing receivables and long-term debt) to facilitate
financing objectives. The interest rate swaps are accounted for as integral
components of the associated receivable and debt, with interest accrued and
recognized based upon the effective rates. Due to the component nature of these
interest rate swaps, there are no associated gains or losses. (See Note 4, Note
9, and Note 16.)

Note 14 - Financial Instruments with Off-Balance-Sheet Risk

The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business, principally relating to customer financing
activities. Off-balance-sheet risk items include financing commitments,
extensions of credit, credit guarantees, and participations in customer
financing receivables with third-party investors which involve interest rate
terms different from the underlying receivables.
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Irrevocable financing commitments related to aircraft on order, including
options, scheduled for delivery through 2002 totaled $3,205 and $3,963 as of
December 31, 1994 and 1993. The Company anticipates that not all of these
commitments will be utilized and that it will be able to arrange for third-party
investors to assume a portion of the remaining commitments, if necessary. None
of these financing commitments have potentially adverse interest rate terms.

Participations in customer financing receivables with third-party investors
which involve interest rate terms different from the underlying receivables
totaled $109 and $83 as of December 31, 1994 and 1993.

The Company's maximum exposure to credit-related losses associated with credit
guarantees, without regard to collateral, totaled $114 and $28 as of December
31, 1994 and 1993. Because substantially all financial instruments subject to
credit risk are adequately collateralized, the probability of accounting loss
arising from these financial instruments is considered remote.

Note 15 - Significant Group Concentrations of Credit Risk

Substantially all financial instruments are with commercial airline customers
and the U.S. Government. As of December 31, 1994, virtually all off-balance-
sheet financial instruments described in Note 14 related to commercial aircraft
customers. Of the $4,238 in accounts receivable and customer financing
receivables included in the Consolidated Statements of Financial Position,
$2,863 related to commercial aircraft customers and $1,200 related to the U.S.
Government. One commercial airline customer is associated with 40% of all
financial instruments relating to customer financing. Financing for aircraft is
collateralized by security in the related asset, and historically, the Company
has not experienced a problem in accessing such collateral.

Note 16 - Disclosures about Fair Value of Financial Instruments

Certain receivable balances will be collected over an extended period;
consequently, the fair value of accounts receivable is estimated to be lower
than the carrying value by $70 and $60 as of December 31, 1994 and 1993,
reflecting a discounted value due to deferred collection. The carrying value of
accounts payable is estimated to approximate fair value.

The carrying amount of notes receivable excluding valuation allowance was
$1,428 and $1,601 as of December 31, 1994 and 1993. Generally, there are no
quoted market prices available for customer financing notes receivable. The net
fair value of such notes, estimated based upon interest rates, risk-related rate
spreads and collateral, was $1,401 and $1,596 as of December 31, 1994 and 1993.

The carrying amount of long-term debt was $2,609 and $2,630 as of December 31,
1994 and 1993. The fair value of long-term debt, based on current market rates
for debt of the same risk and maturities, was estimated at $2,486 and $2,870 as
of December 31, 1994 and 1993. The Company's long-term debt, however, is
generally not callable until maturity.

With regard to financial instruments with off-balance-sheet risk, it is not
practicable to estimate the fair value of future financing commitments, and all
other off-balance-sheet financial instruments are estimated to have only a
nominal fair value. The terms and conditions reflected in the outstanding
guarantees and commitments for financing assistance are not materially different
from those that would have been negotiated as of December 31, 1994.
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Note 17 - Contingencies

Various legal proceedings, claims and investigations are pending against the
Company related to products, contracts and other matters. Except for the items
discussed below, most of these legal proceedings are related to matters covered
by insurance.

In January 1991, the Company received from the U.S. Government a notice of
partial termination for default which terminated most of the work required under
contracts to develop and install a new air defense system for Saudi Arabia,
known as the Peace Shield program. The Government has filed with the Company a
demand for repayment of $605 of Peace Shield unliquidated progress payments plus
interest commencing January 25, 1991. In February 1991, the Company submitted a
request for a deferred payment agreement which, if granted, would formally defer
the Company's potential obligation to repay the $605 of unliquidated progress
payments until the conclusion of the appeal process. In June 1991, the
Government selected another contractor to perform the work which is the subject
of the contracts that have been terminated for default, and the Government will
likely assert claims related to the reprocurement. The Company does not expect
the Government to assert such claims prior to completion of the reprocurement
contract, which is scheduled to complete in 1996.

Management's position, supported by outside legal counsel which specializes in
government procurement law, is that the grounds for default asserted by the
Government in the Peace Shield termination are not legally supportable.
Accordingly, management and counsel are of the opinion that on appeal the
termination for default has a substantial probability of being converted to
termination for the convenience of the Government, which would eliminate any
Government claim for cost of reprocurement or other damages. Additionally, the
Company has a legal basis for a claim for equitable adjustment to the prices and
schedules of the contracts (the "Contract Claim"). Many of the same facts
underlie both the Contract Claim and the Company's appeal of the Government's
termination action. The Company has filed its complaint in the United States
Claims Court to overturn the default termination in order to obtain payment of
the Contract Claim. The parties are currently engaged in the discovery phase of
the litigation. Trial is currently scheduled for March 1997. The Company
expects that its position will ultimately be upheld with respect to the
termination action and that it will prevail on the Contract Claim.

The Company's financial statements have been prepared on the basis of a
conservative estimate of the revised values of the Peace Shield contracts
including the Contract Claim and the Company's position that the termination was
for the convenience of the Government. At this time, the Company cannot
reasonably estimate the length of time that will be required to resolve the
termination appeal and the Contract Claim. In the event that the Company's
appeal of the termination for default is not successful, the Company could
realize a pre-tax loss on the program approximating the value of the
unliquidated progress payments plus related interest and potential damages
assessed by the Government.

The Company is subject to federal and state requirements for protection of the
environment, including those for discharge of hazardous materials and
remediation of contaminated sites. Due in part to their complexity and
pervasiveness, such requirements have resulted in the Company being involved
with related legal proceedings, claims and remediation obligations over the past
10 years.

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The Company routinely assesses, based on in-depth studies, expert analyses and
legal reviews, its contingencies, obligations and commitments for remediation of
contaminated sites, including assessments of ranges and probabilities of
recoveries from other responsible parties who have and have not agreed to a
settlement and recoveries from insurance carriers. The Company's policy is to
immediately accrue and charge to current expense identified exposures related to
environmental remediation sites based on conservative estimates of
investigation, cleanup and monitoring costs to be incurred.

The costs incurred and expected to be incurred in connection with such
activities have not had, and are not expected to have, a material impact to the
Company's financial position. With respect to results of operations, related
charges have averaged less than 2% of annual net earnings. Such accruals as of
December 31, 1994, without consideration for the related contingent recoveries
from insurance carriers, are less than 2% of total liabilities.

Based on all known facts and expert analyses, the Company believes it is not
reasonably likely that identified environmental contingencies will result in
additional costs that would have a materially adverse impact to the Company's
financial position or operating results and cash flow trends.

During 1994, the Company reached a settlement with the U.S. Government
concerning cost classification practices that had been under investigation. The
settlement had no material impact on results of operations.

Note 18 - Industry Segment Information

The Company operates in two principal industries: Commercial Aircraft, and
Defense and Space. Commercial Aircraft operations principally involve
development, production and marketing of commercial jet transports and providing
related support services, principally to the commercial airline industry.
Defense and Space operations involve research, development, production,
modification and support of military aircraft and related systems, space systems
and missile systems. No single product line in the Defense and Space segment
represented more than 10% of consolidated revenues, operating profits or
identifiable assets.

Foreign sales by geographic area consisted of the following:
Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Asia $ 7,403 $ 8,870 $ 7,108
Europe 3,277 4,698 7,165
Oceania 887 635 1,911
Africa 135 264 430
Western Hemisphere 142 149 872
- ------------------------------------------------------------------------------
$11,844 $14,616 $17,486
==============================================================================

Defense sales were approximately 9%, 6% and 3% of total sales in Europe for
1994, 1993 and 1992, respectively. Defense sales were approximately 3%, 2% and
5% of total sales in Asia for 1994, 1993 and 1992, respectively. Exclusive of
these amounts, Defense and Space sales were principally to the U.S. Government.

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Financial information by segment for the three years ended December 31, 1994,
is summarized below. Corporate income consists principally of interest income
from corporate investments. Corporate assets consist principally of cash, cash
equivalents, short-term investments and deferred income taxes.

Year ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
Revenues
Commercial Aircraft $16,851 $20,568 $24,133
Defense and Space 4,742 4,407 5,429
Other industries 331 463 622
- ------------------------------------------------------------------------------
Operating revenues 21,924 25,438 30,184
Corporate income 122 169 230
- ------------------------------------------------------------------------------
Total revenues $22,046 $25,607 $30,414
==============================================================================

Operating profit
Commercial Aircraft $1,022 $1,646 $1,990
Defense and Space 303 219 204
Other industries 2 16 27
- ------------------------------------------------------------------------------
Operating profit 1,327 1,881 2,221
Corporate income 122 169 230
Debt and other corporate expense (306) (229) (195)
- ------------------------------------------------------------------------------
Earnings before taxes $1,143 $1,821 $2,256
==============================================================================

Identifiable assets at December 31
Commercial Aircraft $14,440 $12,686 $10,178
Defense and Space 3,253 3,525 3,687
Other industries 159 202 264
- ------------------------------------------------------------------------------
17,852 16,413 14,129
Corporate 3,611 4,037 4,018
- ------------------------------------------------------------------------------
Consolidated assets $21,463 $20,450 $18,147
==============================================================================

Depreciation
Commercial Aircraft $ 902 $ 710 $ 598
Defense and Space 189 230 241
Other industries 51 67 73
- ------------------------------------------------------------------------------
Total depreciation $1,142 $1,007 $ 912
==============================================================================

Capital expenditures, net
Commercial Aircraft $619 $1,120 $1,890
Defense and Space 145 164 212
Other industries 31 33 58
- ------------------------------------------------------------------------------
Total capital expenditures, net $795 $1,317 $2,160
==============================================================================
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Quarterly Financial Data

(Unaudited)
(Dollars in millions except per share data)

1994 1993
- ----------------------------------------------------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
- ----------------------------------------------------------------------------------------------------------------------

Sales and other operating revenues $5,120 $5,063 $5,396 $6,345 $5,656 $5,153 $7,985 $6,644

Earnings from operations 222 226 270 433 434 246 581 430

Net earnings 157 185 222 292 304 189 426 325
- ----------------------------------------------------------------------------------------------------------------------

Net earnings per share .46 .54 .65 .86 .89 .56 1.25 .96

Cash dividends per share .25 .25 .25 .25 .25 .25 .25 .25
- ----------------------------------------------------------------------------------------------------------------------

Market price:
High 48.38 48.25 50.13 48.75 44.75 40.75 41.00 40.88
Low 42.63 42.50 43.13 42.13 35.50 36.25 34.25 33.38
Quarter end 47.00 43.25 46.25 44.50 43.25 38.38 37.00 35.00
======================================================================================================================

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Five Year Summary
(Dollars in millions except per share data)
(Share data restated for applicable stock splits)

1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------
OPERATIONS
Sales and other operating revenues
Commercial Aircraft $16,851 $20,568 $24,133 $22,970 $21,230
Defense and Space 4,742 4,407 5,429 5,846 5,862
Other industries 331 463 622 498 503
- ---------------------------------------------------------------------------
Total 21,924 25,438 30,184 29,314 27,595
- ---------------------------------------------------------------------------
Net earnings 856 1,244 1,554* 1,567 1,385
Per share 2.51 3.66 4.57* 4.56 4.01
Percent of sales 3.9% 4.9% 5.2% 5.3% 5.0%
- ---------------------------------------------------------------------------
Cash dividends paid $ 340 $ 340 $ 340 $ 343 $ 328
Per share 1.00 1.00 1.00 1.00 .95
- ---------------------------------------------------------------------------
Other income, principally interest 122 169 230 263 448
- ---------------------------------------------------------------------------
Research and development expensed 1,704 1,661 1,846 1,417 827
General and administrative expensed 1,126 1,102 1,232 1,291 1,246
- ---------------------------------------------------------------------------
Additions to plant and equipment 795 1,317 2,160 1,850 1,586
Depreciation of plant and equipment 1,081 953 870 768 636
- ---------------------------------------------------------------------------
Salaries and wages 5,799 6,087 6,318 6,502 6,487
Average employment 119,400 134,400 148,600 159,100 161,700
===========================================================================
FINANCIAL POSITION AT DECEMBER 31
Total assets $21,463 $20,450 $18,147 $15,924 $14,591
Working capital 3,587 2,601 1,947 2,462 1,396
Net plant and equipment 6,802 7,088 6,724 5,530 4,448
- ---------------------------------------------------------------------------
Cash and short-term investments 2,643 3,108 3,614 3,453 3,326
Total debt 2,610 2,630 1,793 1,317 315
Customer financing 3,321 3,177 2,295 1,197 1,133
- ---------------------------------------------------------------------------
Shareholders' equity 9,700 8,983 8,056 8,093 6,973
Per share 28.45 26.41 23.74 23.71 20.30
Common shares outstanding in millions 340.9 340.1 339.4 341.3 343.6
===========================================================================
CONTRACTUAL BACKLOG
Commercial Aircraft $60,614 $69,000 $81,991 $92,161 $89,997
Defense and Space, other 5,696 4,528 5,939 5,755 7,197
- ---------------------------------------------------------------------------
Total $66,310 $73,528 $87,930 $97,916 $97,194
===========================================================================
* Exclusive of the cumulative effect of adopting Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. Net earnings including the effect were
$552 or $1.62 per share.

Cash dividends have been paid on common stock every year since 1942.
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Market for Registrant's Common Equity and Related Stockholder Matters

SHAREHOLDER INFORMATION
- -----------------------

The Boeing Company General Offices
7755 East Marginal Way South
Seattle, Washington 98108
(206) 655-2121

TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston

The transfer agent is responsible for shareholder records, issuance of stock
certificates, and distribution of dividends and IRS Form 1099. Requests con-
cerning these matters are most efficiently answered by corresponding directly
with The First National Bank of Boston at the following address:

The Boeing Company
c/o The First National Bank of Boston
Mail Stop 45-02-09
P.O. Box 644
Boston, Massachusetts 02102-0644
Telephone: (800) 733-5001 or (617) 575-3400

DUPLICATE SHAREHOLDER ACCOUNTS
Shareholders with duplicate accounts may call the Bank of Boston for
instructions on consolidating those accounts. The company recommends that
registered shareholders always use the same form of their names in all stock
transactions to be handled in the same account. Shareholders can also request
the Bank to eliminate excess mailings of annual and midyear reports going to
shareholders in the same household.

EQUAL OPPORTUNITY EMPLOYER
Boeing is an equal opportunity employer and seeks to attract and retain the
best qualified people regardless of race, sex, age, religion, national origin
or veteran status.

COMPANY SHAREHOLDER SERVICES
Pre-recorded shareholder information and quarterly earnings data are available
toll-free from Boeing Shareholder Services at (800) 457-7723.

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ANNUAL MEETING
The annual meeting of Boeing shareholders will be held in the auditorium of
the company's 2-22 building, located at 7755 East Marginal Way South, Seattle,
Washington, at 11:00 a.m. (Pacific Time) on April 24, 1995. Formal notice
of the meeting, proxy statement, form of proxy, and annual report were mailed
to shareholders starting about March 15, 1995.

Written inquiries may be sent to
Shareholder services
Michelle Hayes
Mail Stop 10-13

Investor Relations
Larry A. Bishop
Vice President
Mail Stop 10-16

The Boeing Company
P.O. Box 3707
Seattle, Washington 98124-2207

STOCK EXCHANGES
The company's common stock is traded principally on the New York Stock
Exchange; the trading symbol is BA. Boeing common stock is also listed on
the Amsterdam, Brussels, London, Swiss and Tokyo stock exchanges.
Additionally, the stock is traded on the Boston, Cincinnati, Midwest, Pacific
and Philadelphia exchanges. The number of shareholders of record as of
January 31, 1995, was 94,942.

GENERAL AUDITORS
Deloitte & Touche LLP
700 Fifth Avenue, Suite 4500
Seattle, Washington 98104-5044
(206) 292-1800

SAFETY, HEALTH AND ENVIRONMENT REPORT
The Boeing 1994 Safety, Health and Environmental Affairs Progress Report
details the company's activities in support of pollution prevention,
recycling, energy conservation, and employee health and safety improvement.
A copy may be obtained by writing SHEA Progress Report, Mail Stop 7E-HA,
P.O. Box 3707, Seattle, Washington 98124, or by calling toll-free
(800) 279-2767.

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Exhibit (10)(vi)

Supplemental Benefit Plan for Employees of
The Boeing Company, as amended December 14, 1992

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SUPPLEMENTAL BENEFIT PLAN FOR EMPLOYEES OF THE BOEING COMPANY

Section 1. Purpose of the Plan.

The Supplemental Benefit Plan for Employees of The Boeing Company (the Plan) was
established effective January 1, 1978 by The Boeing Company (the Company). The
purpose of the Plan is to supplement the benefits of certain employees under the
Company's Employee Retirement Plan, Voluntary Investment Plans, Employee Stock
Ownership Plan and Financial Security Plan to the extent that such benefits are
reduced by the limitations on benefits and contributions imposed by Section 415
of the Internal Revenue Code of 1986 (the Code). For the period January 1, 1987
through May 31, 1987, the purpose of the Plan shall also be to supplement the
limitation on Elective Deferrals imposed by Section 402(g)(1) of the Code, to
the extent such deferrals for certain employees are required to be reduced.
Effective January 1, 1989, the purpose of the Plan shall be expanded to also
supplement the benefits of certain employees to the extent such benefits are
curtailed because their Compensation exceeds the annual compensation limit
permitted under Section 401(a)(17) of the Code. It is intended that the Plan
shall be an Excess Benefit Plan as defined in Section 3 (36) of the Employee
Retirement Income Security Act of 1974.

Section 2. Eligibility and Participation.

Participation and eligibility shall be limited to those Executive Payroll (90-
Series) employees of the Company who are participants in the Company's Employee
Retirement Plan, Voluntary Investment Plan or Financial Security Plan and whose
benefits thereunder are affected by the limitations on benefits or contributions
imposed by Section 415 and 401(a)(17) of the Code. Such persons shall be
referred to as Participants.

Section 3. Plan Benefits.

Each Participant shall be entitled to benefits under this Plan as follows:

(a) Employee Retirement Plan. With respect to the Employee Retirement
Plan, the benefits under this Plan shall be the difference between the
actual benefits of a Participant under the Employee Retirement Plan
and the benefits that would have been payable under that plan except
for the limitations on benefits imposed by Sections 415 and 401(a)(17)
of the Code. The benefits payable under this Plan with respect to the
Employee Retirement Plan shall be payable to the Participant or to any
other person who is receiving or entitled to receive benefits with
respect to the Participant under the Employee Retirement Plan, and
shall be paid in the same form, at the same times and for the same
period as benefits are paid with respect to the Participant under the
Employee Retirement Plan.

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(b) Voluntary Investment Plans; Financial Security Plan; Employee Stock
Ownership Plan. With respect to the Voluntary Investment Plans, the
Financial Security Plan and the Employee Stock Ownership Plan (the
"individual account plans"), the benefits under this Plan shall be
determined separately for each such plan and for each year for which
the contributions and other additions to the account of a Participant
are reduced because of Sections 415, 401(a)(17) and 402(g)(1) of the
Code from what they would otherwise have been except for that
provision. The benefits under this Plan with respect to a particular
year shall be the additional benefit that would have been payable
under the individual account plan to which the aforesaid reduction is
applicable if the reduction on contributions and other additions had
not been made. All amounts deferred under this Plan shall be credited
to the Supplemental Benefit Plan accounts of Participants at the time
such amounts would otherwise have been credited to their accounts
under the individual account plans. Interest shall be credited to
each Participant's account balance at the same time and at the same
rate of interest as is established for the period involved under the
Deferred Compensation Plan for Employees of The Boeing Company.

Benefits under this Plan shall be payable to the Participant, or to
any person receiving or entitled to receive benefits with respect to
the Participant under the Voluntary Investment Plans of the Company
(the "VIP"), and shall be paid in any form allowable under the VIP at
the same time or times and for the same periods as benefits are
payable under the VIP to or with respect to such Participant.

Section 4. Funding.

The Plan shall be unfunded, and the benefits under the Plan shall be paid only
from the general assets of the Company.

Section 5. Administration.

The Plan shall be administered by the Compensation Committee of the Board of
Directors of The Boeing Company. No member of the Committee shall become a Plan
Participant. The Committee shall make such rules, interpretations,
determinations of fact and computations as it may deem appropriate. Any
decision of the Committee with respect to the Plan, including (without
limitation) any determination of eligibility to participate in the Plan and any
calculation of plan benefits, shall be conclusive and binding on all persons.
The Committee shall submit to the Board of Directors periodic reports covering
the operation of the Plan.

Section 6. Amendment and Termination.

The Boeing Company shall have the authority to amend or terminate the Plan at
any time. In the event of Plan amendment or termination, a Participant's
benefits under the Plan shall not be less than the Plan benefits to which the
Participant would be entitled if the Participant had terminated employment
immediately prior to such amendment or termination of the Plan.

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Section 7. Employment Rights.

Nothing in the Plan shall be deemed to give any person any right to remain in
the employ of the Company or affect any right of the Company to terminate a
person's employment with or without cause.

Section 8. Employee Rights.

No benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge, execution,
attachment, garnishment, or any other legal process, and any attempt to do so
shall be void.

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Exhibit (10)(vii)

Supplemental Retirement Plan for Executives of
The Boeing Company, as amended October 25, 1994

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SUPPLEMENTAL RETIREMENT PLAN FOR EXECUTIVES OF THE BOEING COMPANY

Section 1. Purpose of the Plan.

The Supplemental Retirement Plan for Executives of The Boeing Company was
established effective July 1, 1980. Its sole purpose is to provide a retirement
benefit for a select group of management or highly compensated employees of The
Boeing Company (the Company) supplemental to the benefits provided by the
Company's Employee Retirement Plan. The prior Plan is amended effective October
31, 1994 to read as set forth in this Plan document.

Section 2. Definitions.

The Plan means the Supplemental Retirement Plan for Executives of The Boeing
Company as herein set forth, together with any amendments to it that may at any
time be adopted.

The Retirement Plan means The Boeing Company Employee Retirement Plan, together
with any amendments to it that may at any time be adopted.

The Incentive Compensation Plan means the Incentive Compensation Plan for
Officers and Employees of The Boeing Company and Subsidiaries, together with any
amendments to it that may at any time be adopted.

The Long-Term Incentive Program means the program provided for by Section 5A of
the Incentive Compensation Plan, together with any modifications that may at any
time be adopted.

The Supplemental Benefit Plan means the Supplemental Benefit Plan for Employees
of The Boeing Company, together with any amendments to it that may at any time
be adopted.

Defined terms in the Retirement Plan will have the same meaning when used in
this Plan.

The Code means the Internal Revenue Code of 1986, as amended.

The Supplemental Benefit means the benefit provided by this Plan.

Effective January 1, 1991, Final Average Monthly Total Earnings means the sum of
(a) Final Average Monthly Earnings as defined in the Retirement Plan without
regard to the compensation limitation under Code Section 401(a)(17) and (b) the
sum of the five highest awards made to the employee under the Incentive
Compensation Plan during the last ten calendar years preceding his retirement
date divided by sixty. If fewer than five awards are made, then the sum of all
awards made during the last ten calendar years preceding retirement will be used
in computing (b) above.

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For purposes of the computations under clause (b) above, an employee's Incentive
Compensation Plan award includes

(i) deferred awards, as well as those paid currently,

(ii) the amount by which the Compensation Committee of the Board of
Directors reduces the employee's Incentive Compensation Plan
award under Section 5 thereof because of the employee's
participation in the Long-Term Incentive program under Section 5A
thereof; and

(iii) Boeing Stock Unit awards made under Section 5B thereof at
their Fair Market Value as of the date of the award, determined
as provided in such Section 5B; provided, that Boeing Stock Unit
awards that have been forfeited pursuant to clause (5) of Section
5B shall be excluded from the computations under clause (b)
above.

Section 3. Eligibility.

Eligibility for the accrual of a Supplemental Benefit under this Plan is limited
to employees of the Company, either on the active payroll or on approved leave
of absence, on or at any time after July 1, 1980, who were also members of the
Incentive Compensation Plan (90-Series Grades) as of July 1, 1980, or who
became members of the Incentive Compensation Plan at a later date.

Eligibility for the payment of a Supplemental Benefit is limited to employees
who have participated in this Plan and who immediately prior to their retirement
or death while in the employ of the Company, as the case may be, were
participants in the Retirement Plan and also on the management payroll; and who,
in the case of death while in the employ of the Company, left a spouse who
became entitled to a survivor benefit under the Retirement Plan.

Section 4. Supplemental Benefit.

The Supplemental Benefit payable to a retiring employee of the Company is a
monthly amount computed as (a) + (b) - (c) below.

(a) Core benefit: A monthly amount equal to 1% of Final Average
Monthly Total Earnings multiplied by Credited Service and the
appropriate Early Retirement Reduction Factor. The Early
Retirement Reduction Factor is based on the employee's age in
completed months on the date of retirement. The appropriate
factors are as follows:
Early Retirement
Age at Retirement Reduction Factor
----------------- ----------------

55 90%
56 92%
57 94%
58 96%
59 98%
60 or older 100%
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(b) Excess benefit. A monthly amount based on .5% of Final
Average Monthly Total Earnings in excess of Covered Compensation
divided by twelve. This amount is multiplied by Credited Service
and then by the appropriate Early Retirement Reduction Factor.
The Early Retirement Reduction Factor is based on the employee's
age in completed months on the date of retirement. The
appropriate factors are as follows:

Early Retirement
Age at Retirement Reduction Factor
----------------- ----------------

55 75%
56 80%
57 85%
58 90%
59 95%
60 or older 100%

(c) Retirement Plan and Supplemental Benefit Plan benefit: The
amount payable from The Boeing Company Employee Retirement Plan
and the amount payable under Section 3 Paragraph (a) of the
Supplemental Benefit Plan. If applicable, this amount will
reflect reductions for early retirement. However, this amount
will not reflect reductions for joint and survivor options or
other optional forms of payment.

In no event will the Supplemental Benefit be less than zero.

Section 5. Payment of Benefit.

Subject to Section 6 and the provisions of this Section 5, the Supplemental
Benefit shall be paid to the retiring employee (and, if applicable, to his or
her surviving spouse) at the same time and for the same period and generally in
accordance with the same provisions as are applicable to the payment of
retirement benefits under the Retirement Plan. Without limiting the generality
of the foregoing, if an employee should die while still in the employ of the
Company leaving a spouse entitled to a survivor benefit under the Retirement
Plan, the spouse will be entitled to receive for life on account of the
Supplemental Benefit an amount determined in the same way as his or her survivor
benefit was determined under the Retirement Plan. The retiring employee may
elect to receive payment of the Supplemental Benefit under either the straight
life method or the 50%, 75% or 100% joint and survivor method, and such election
shall be subject to the same actuarial or other adjustments that are used in
determining benefits under the Retirement Plan. If the employee's benefits
under the Retirement Plan are increased on account of subsequent amendments to
that Plan, for example, amendments providing increased benefits for retirees, a
corresponding increase will be made in the Supplemental Benefit.

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Section 6. Forfeiture.

A retired employee (and a surviving spouse, if applicable) shall forfeit all
right to receive further payments of the Supplemental Benefit and shall have no
further interest in this Plan if at any time after retirement the retired
employee shall engage in an activity, whether individually or as an employee,
consultant or otherwise, which the Retirement Committee, in its sole and
absolute discretion, shall determine to be in competition with any significant
aspect of the Company's business.

Section 7. Nonassignability.

The Supplemental Benefit shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, charge, execution, attachment,
garnishment or any other legal process. Any attempt to take any such action
shall be void and shall authorize the Retirement Committee, in its sole and
absolute judgment, to forfeit all further right and interest in the Supplement
Benefit.

Section 8. Funding.

The Plan shall be unfunded, and the Supplemental Benefit shall be paid only from
the general assets of the Company.

Section 9. Administration.

The Plan shall be administered by the Retirement Committee as appointed by the
Board of Directors of The Boeing Company. The Committee shall make such rules,
interpretation, determinations of fact and computations as it may deem
appropriate. Any decision of the Committee with respect to the Plan, including
(without limitation) any calculation of a Supplement Benefit, shall be
conclusive and binding on all persons.

Section 10. Amendment and Termination.

The Boeing Company shall have the authority to amend or terminate the Plan at
any time. Such amendment or termination shall not adversely affect or impair
the benefit entitlements in course of payment to retired employees and surviving
spouses, the contingent rights to the continuance of benefit payments of the
spouses of retired employees named as Joint Annuitants, or the accrued
Supplemental Benefits as defined in this Section of all eligible employees then
in the employ of the Company.

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For the purpose of this section, an accrued Supplemental Benefit will be
determined for each eligible employee in accordance with the provisions of
Section 4 but based on Credited Service, Final Average Monthly Total Earnings,
Covered Compensation and the accrued benefit provided by the Retirement Plan all
determined as of the effective date of the amendment or termination. Payment of
benefits based on such an accrued Supplemental Benefit will be made in
accordance with the terms of this Plan to the employee if he retires under the
Retirement Plan, or to his surviving spouse if he dies while in the employ of
the Company and leaves a spouse eligible for a Pre-Retirement Joint and Survivor
Spouse Benefit under the Retirement Plan.

Section 11. Employment Rights.

Nothing in the Plan shall be deemed to give any person any right to remain in
the employ of the Company or affect any right of the Company to terminate a
person's employment with or without cause.

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Exhibit (21)

List of Company Subsidiaries

THE BOEING COMPANY
SUBSIDIARIES (ALL WHOLLY-OWNED)

Page 1 of 2
Place of Date
Name Incorporation Incorporated
- ------------------------------------------------------------------------------
Aileron Inc. Delaware 1989
*Aldford Limited Bermuda 1993
Aldford-1 Corporation Delaware 1993
*Amwell Limited Bermuda 1993
Amwell-1 Corporation Delaware 1993
*Andsell Limited Bermuda 1993
Andsell-1 Corporation Delaware 1993
ARGOSystems, Inc. California 1969
*Arneway Limited Bermuda 1993
Arneway-1 Corporation Delaware 1993
Astro Limited Bermuda 1975
Astro-II, Inc. Vermont 1984
*Beaufoy Limited Bermuda 1993
Beaufoy-1 Corporation Delaware 1993
BCS Richland, Inc. Washington 1975
BE&C Engineers, Inc. Delaware 1978
BOECON Corporation Washington 1973
Boeing Aerospace Operations, Inc. Washington 1972
Boeing Agri-Industrial Company Oregon 1973
*Boeing Canada Technology Ltd. Ontario 1929
Boeing China, Inc. Delaware 1986
Boeing Commercial Space Development Company Delaware 1987
BOEING DEFENSE & SPACE-CORINTH CO. Delaware 1987
BOEING DEFENSE & SPACE-IRVING CO. Delaware 1979
Boeing Defense & Space - Oak Ridge, Inc. Delaware 1980
Boeing Domestic Sales Corporation Washington 1974
Boeing Equipment Holding Company Washington 1968
Boeing Financial Corporation Washington 1965
Boeing Georgia, Inc. Delaware 1980
Boeing Information Services, Inc. Delaware 1981
Boeing International Corporation Delaware 1953
Boeing International Sales Corporation Washington 1971
Boeing Investment Company, Inc. Delaware 1985
Boeing Leasing Company Delaware 1988
Boeing Louisiana, Inc. Delaware 1986
Boeing Middle East Limited Delaware 1982
Boeing Mississippi, Inc. Delaware 1985
Boeing Nevada, Inc. Delaware 1989

*Second-tier subsidiaries
**Third-tier subsidiaries

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THE BOEING COMPANY
SUBSIDIARIES (ALL WHOLLY-OWNED)

Page 2 of 2
Place of Date
Name Incorporation Incorporated
- ------------------------------------------------------------------------------
Boeing of Canada Ltd. Delaware 1986
Boeing Offset Company, Inc. Delaware 1985
Boeing Operations International, Incorporated Delaware 1981
Boeing Petroleum Services, Inc. Delaware 1984
Boeing Sales Corporation Guam 1984
Boeing Sales Corporation, Limited Bermuda 1993
Boeing Technology International, Inc. Washington 1973
*Braham Limited Bermuda 1993
Braham-1 Corporation Delaware 1993
Energy Enterprises, Inc. Delaware 1991
*Gainford Limited Bermuda 1993
Gainford-1 Corporation Delaware 1993
Gaucho-1 Inc. Delaware 1994
GAUCHO-2 Inc. Delaware 1994
*Grape Limited Bermuda 1993
Grape Corporation Delaware 1993
Hanway Corporation Delaware 1993
Longacres Park, Inc. Washington 1948
Mandarin-1 Corporation Delaware 1993
Mandarin-2 Corporation Delaware 1993
Mandarin-3 Corporation Delaware 1993
Mandarin-4 Corporation Delaware 1993
Mandarin-5 Corporation Delaware 1993
Mandarin-6 Corporation Delaware 1993
Montana Aviation Research Company Delaware 1991
Precision Gear, Inc. Delaware 1994
RGL-1 Corporation Delaware 1993
RGL-2 Corporation Delaware 1993
RGL-3 Corporation Delaware 1993
RGL-4 Corporation Delaware 1993
RGL-5 Corporation Delaware 1993
RGL-6 Corporation Delaware 1993
Rainier Aircraft Leasing, Inc. Delaware 1992
*UTL Canada, Inc. (in process of dissolution) Canada 1987
*Wingspan, Inc. Delaware 1994
**2433265 Manitoba Ltd. Manitoba 1989
*692567 Ontario Limited Ontario 1986
*757UA, Inc. Delaware 1989
*767ER, Inc. Delaware 1987

*Second-tier subsidiaries
**Third-tier subsidiaries

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Appendix of graphic and image material pursuant
to Rule 304(a) of Regulation S-T

Graphic and image material item Number 1

Sales by industry segment:
A bar chart for the five years 1990-1994 indicating sales by industry
segment (Dollars in billions):

1990 1991 1992 1993 1994

Commercial Aircraft 21.230 22.970 24.133 20.568 16.851
Defense and Space 5.862 5.846 5.429 4.407 4.742
Other 0.503 0.498 0.622 0.463 0.331

Total 27.595 29.314 30.184 25.438 21.924

Graphic and image material item Number 2

Commercial aircraft sales by geographic region:
A bar chart for the five years 1990-1994 indicating sales by type of
customer (Dollars in billions):

1990 1991 1992 1993 1994

United States 6.145 5.851 7.205 6.371 5.490
Asia 4.662 5.179 6.772 8.741 7.215
Europe 7.062 8.300 6.953 4.416 2.994
Oceania 1.793 1.654 1.908 0.631 0.884
Other 1.568 1.986 1.295 0.409 0.268

Total 21.230 22.970 24.133 20.568 16.851

Graphic and image material item Number 3

Net earnings:
A bar chart of net earnings for the five years 1990-1994 (Dollars in billions):

1990 - 1.385; 1991 - 1.567; 1992 - 1.554(*); 1993 - 1.244; 1994 - 0.856

(*) Exclusive of the cumulative effect of the accounting change for retiree
health care.

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Graphic and image material item Number 4

Research and development expensed:
A bar chart of research and development expensed for the five
years 1990-1994 (Dollars in billions):

1990 - 0.827; 1991 - 1.417; 1992 - 1.846; 1993 - 1.661; 1994 - 1.704

Graphic and image material item Number 5

Contractual backlog:
A bar chart for the five years 1990-1994 indicating contractual backlog
(Dollars in billions):

1990 1991 1992 1993 1994

Commercial Aircraft 89.997 92.161 81.991 69.000 60.614
Defense and Space, other 7.197 5.755 5.939 4.528 5.696

Total 97.194 97.916 87.930 73.528 66.310

Graphic and image material item Number 6

Property, plant and equipment -- net additions:
A bar chart for the five years 1990-1994 indicating property, plant and
equipment -- net additions and depreciation (Dollars in billions):

1990 1991 1992 1993 1994

Net additions 1.586 1.850 2.160 1.317 0.795
Depreciation 0.636 0.768 0.870 0.953 1.081

Graphic and image material item Number 7

Customer financing -- net additions:
A bar chart for the five years 1990-1994 indicating customer financing --
net additions (Dollars in billions):

1990 1991 1992 1993 1994

Net additions 0.301 0.100 1.140 0.934 0.205

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