If, after all judicial proceedings have ended, the courts determine contrary to the Company’s belief that a termination for default was appropriate, the Company would incur an additional loss of approximately $275, consisting principally of remaining inventory costs and adjustments, and if contrary to the Company’s belief the courts further hold that a money judgment should be entered against the Team, the Company would be required to pay the U.S. Government one-half of the unliquidated progress payments of $1,350 plus statutory interest from February 1991 (currently totaling approximately $1,040). The loss to the Company would total approximately $1,465 in pre-tax charges. Should, however, the trial court’s decision on termination be reversed on appeal and its 1998 judgment in favor of the Team be reinstated, the Company would receive approximately $957, including interest.

The Company believes, supported by an opinion of outside counsel, that the trial court’s rulings with respect to the enforceability of the unilateral schedule and the termination for default are contrary to law and fact and that the loss provision established by McDonnell Douglas in 1990 continues to provide adequately for the reasonably possible reduction in value of A-12 net contracts in process as of December 31, 2002. Final resolution of the A-12 litigation will depend upon the outcome of further proceedings or possible negotiations with the U.S. Government.

The Company is a defendant in seven employment discrimination matters in which class certification is sought or has been granted. Three matters are pending in the Federal District Court for the Western District of Washington in Seattle; one case is pending in the Federal District court for the Central District of California in Los Angeles; one case is pending in the Federal District Court in St. Louis, Missouri; one case is pending in the Federal District Court in Tulsa, Oklahoma; and the final case is pending in the Federal District Court in Wichita, Kansas. The Company intends to continue its aggressive defense of these cases. It is not possible to predict what impact, if any, these cases could have on the financial statements.

Other contingencies 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 since the 1980s.

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 of 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 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, 2002, without consideration for the related contingent recoveries from insurance carriers, are less than 2% of total liabilities.

Because of the regulatory complexities and risk of unidentified contaminated sites and circumstances, the potential exists for environmental remediation costs to be materially different from the estimated costs accrued for identified contaminated sites. However, 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 material adverse impact to the Company’s financial position or operating results and cash flow trends.

The Company has entered into standby letters of credit agreements and surety bonds with financial institutions primarily relating to the guarantee of future performance on certain contracts. Contingent liabilities on outstanding letters of credit agreements and surety bonds aggregated approximately $1,663 at December 31, 2002.

Note 24 – Segment Information

The Company is organized based on the products and services it offers and operates in four principal segments: Commercial Airplanes, Military Aircraft and Missile Systems, Space and Communications, and BCC. All other activities fall within the Other segment, principally made up of Boeing Technology, Connexion by BoeingSM and Air Traffic Management. Commercial Airplanes operations principally involve development, production and marketing of commercial jet aircraft and providing related support services, principally to the commercial airline industry worldwide. Military Aircraft and Missile Systems operations principally involve research, development, production, modification and support of the following products and related systems: military aircraft, both land-based and aircraft-carrier-based, including fighter, transport and attack aircraft with wide mission capability, and vertical/short takeoff and landing capability; helicopters and missiles. Space and Communications operations principally involve research, development, production, modification and support of the following products and related systems: space systems, missile defense systems, satellites and satellite launching vehicles, rocket engines, and information and battle management systems. Although some Military Aircraft and Missile Systems and Space and Communications products are contracted in the commercial environment, the primary customer is the U.S. Government. BCC is primarily engaged in the financing of commercial and private aircraft, and commercial equipment.