UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 26, 2008

Or

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

For the transition period from                to

Commission File Number 001-33160

Spirit AeroSystems Holdings, Inc.

(Exact name of registrant as specified in its charter)

3801 South Oliver
Wichita, Kansas 67210
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:
(316) 526-9000

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

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

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

     As of July 25, 2008, the registrant had outstanding 103,214,345 shares of class A common stock, $0.01 par value per share and 36,696,560 shares of class B common stock, $0.01 par value per share.

 

 

TABLE OF CONTENTS

		Page
PART I- FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34
PART II- OTHER INFORMATION
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			34
Item 4. Submission of Matters to a Vote of Security Holders			35
Item 6. Exhibits			36
Signatures			37
Employment Agreement
Inducement Agreement
Lease Agreement
Construction Agency Agreement
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I- FINANCIAL INFORMATION

See notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial statements (unaudited)

Spirit AeroSystems Holdings, Inc.

2. Summary of Significant Accounting Policies

     The significant accounting policies set forth in this report should be read in conjunction with the significant accounting policies discussed in the notes to the consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data”, included in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 22, 2008.

Joint Ventures

     The investment resulting in a 50% ownership interest in Spirit-Progresstech LLC totaled $1.0 at June 26, 2008 and is accounted for under the equity method of accounting.

     The investment resulting in a 25.5% ownership interest in Taikoo Spirit AeroSystems Composite Co. Ltd. will be accounted for under the equity method of accounting when we fund our contribution in the third quarter of 2008.

Government Grants

     As part of our site construction projects in Kinston, North Carolina and Subang, Malaysia, we have the potential benefit of government grants related to government funding of a portion of these buildings and other specific capital assets. Due to the terms of the lease agreements, we are deemed to own the construction projects. During the construction phase of the facilities, as amounts eligible under the terms of the grants are expended, we will record that spending as Property, Plant and Equipment (construction in process) and Deferred Grant Income Liability (less the present value of any future minimum lease payments). Upon completion of the facilities, the Deferred Grant Income will be amortized as a component of production cost. This amortization is based on specific terms associated with the different grants. In North Carolina, the Deferred Grant Income related to the capital investment criteria, which represents half of the grant, will be amortized over the lives of the assets purchased to satisfy the capital investment performance criteria. The other half of the Deferred Grant Income will be amortized over the ten year period in a manner consistent with the job performance criteria. In Malaysia, the Deferred Grant Income will be amortized based on the lives of the eligible assets constructed with the grant funds as there are no performance criteria. As of June 26, 2008, we recorded $7.6 within Property, Plant and Equipment and Other Long-Term Liabilities (Deferred Grant Income) related to the use of grant funds in Malaysia. Of the $7.6 of additions, $6.2 represents transactions where funds have been paid directly to contractors by parties other than Spirit so they are not reflected on the Statement of Cash Flows. The remaining $1.4 amount was paid to contractors by Spirit and we received reimbursement from governmental entities so that amount is reflected within Capital Expenditures and Proceeds from Government Grants within the Investing and Financing sections of the Statement of Cash Flows, respectively.

New Accounting Standards

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS 157, Fair Value Measurements (SFAS 157) , which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (“GAAP”) in the United States, and expands disclosures about fair value measures. It is effective for fiscal years beginning after November 15, 2007, with early adoption encouraged. The provisions of SFAS 157 are to be applied on a prospective basis, with the exception of certain financial instruments for which retrospective application is required. On November 14, 2007, the FASB granted a one year deferral solely for non-financial assets and liabilities to comply with SFAS 157. Financial assets have been subject to the rule since the original effective date of November 15, 2007. The partial adoption of SFAS 157 did not affect our financial position or results of operations, but did require additional disclosures about fair value measurement for financial assets. See Note 8, Fair Value Measurements. In February 2008, the FASB issued Staff Position “Partial Deferral of the Effective Date of Statement 157” (FSP No. 157-2), which delayed the adoption date until January 1, 2009 for non-financial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets. We do not expect the adoption of SFAS 157 for non-financial assets and liabilities to have a material impact on our financial position or results of operations.

     In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 , which allows for the option to measure financial instruments, warranties, and insurance contracts at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. It became effective for fiscal years beginning after November 15, 2007. Early adoption was permitted as of the beginning of a fiscal year that began on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. On January 1, 2008, we did not elect to measure any financial assets or liabilities at fair value.

     In December 2007, the FASB issued SFAS 141(R), Business Combinations (SFAS 141(R)) , which replaces SFAS 141. SFAS 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any goodwill acquired to be measured at their fair value on the acquisition date. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS 141(R) will have an impact on accounting for business combinations completed subsequent to that adoption.

     In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (SFAS 160) , which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 160 to have a material impact on our financial position or results of operations.

     In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (SFAS 161) , which requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. We do not expect the adoption of SFAS 161 to have a material impact on our financial position or results of operations.

     In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162) , which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The adoption of SFAS 162 will not have a material impact on our financial position or results of operations.

3. Accounts Receivable

     Accounts receivable, net consists of the following:

4. Inventory

     Inventories are summarized as follows:

     Inventories are summarized by platform as follows:

     Capitalized pre-production costs include certain costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically recovered over a certain number of ship set deliveries and the Company believes these amounts will be fully recovered.

     At June 26, 2008, work-in-process inventory included $167.1 of deferred production costs on certain contracts for the excess of production costs over the estimated average cost per ship set and $(43.7) of credit balances for favorable variances on other contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. These balances were $57.1 and $(50.4), respectively, at December 31, 2007. Recovery of excess over average deferred production costs is dependent on the number of ship sets ultimately sold and actual selling prices and lower production costs associated with future production under these contract blocks. The Company believes these amounts will be fully recovered.

     Sales significantly under estimates or costs significantly over estimates could result in the realization of losses on these contracts in future periods.

     The following is a roll forward of the inventory obsolescence and surplus reserve included in the inventory balances at June 26, 2008:

5. Property, Plant and Equipment

     Property, plant and equipment, net consists of the following:

     Interest costs associated with construction-in-progress are capitalized until the assets are completed and ready for use. Capitalized interest was $1.6 and $1.7 for the three months ended June 26, 2008 and June 28, 2007, respectively, and $3.1 and $3.3 for the six months ended June 26, 2008 and June 28, 2007, respectively. Repair and maintenance costs are expensed as incurred. We recognized $27.0 and $25.3 of repair and maintenance expense for the three months ended June 26, 2008 and June 28, 2007, respectively, and $49.6 and $42.7 for the six months ended June 26, 2008 and June 28, 2007, respectively.

6. Long-Term Receivable

     In connection with the Boeing Acquisition, Boeing is required to make future non-interest bearing payments to Spirit attributable to the acquisition of title of various tooling and other capital assets to be determined by Spirit. Spirit will retain usage rights and custody of the assets for their remaining useful lives without compensation to Boeing.

     The following is a schedule of future payments from our long-term and short-term receivables:

2008		$	59.6
2009			115.4
Total		$	175.0

     A discount rate of 9.75% was used to record these payments at their estimated present value of $161.6 and $208.8 at June 26, 2008 and December 31, 2007, respectively. At June 26, 2008, the current portion of the long-term receivable was $110.8.

7. Other Assets

     Other assets are summarized as follows:

     Deferred financing costs are recorded net of $12.2 and $10.1 of accumulated amortization at June 26, 2008 and December 31, 2007, respectively. Included in deferred financing fees was an additional $6.8 of financing costs associated with the March 18, 2008 amendment to the Second Amended and Restated Credit Facility (see Note 9 below).

     The Company recognized $1.2 and $1.3 of amortization expense of intangibles for the three months ended June 26, 2008 and June 28, 2007, respectively, and $2.6 for each of the six month periods ended June 26, 2008 and June 28, 2007.

8. Fair Value Measurements

     We use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates and interest rates. To account for our derivative financial instruments, we follow the provisions of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138 . Derivative financial instruments are recognized on the Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. Changes in fair value of derivatives are recorded each period in earnings or accumulated other comprehensive income, depending on whether a derivative is effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item or when the hedge is no longer effective. We present the cash flows associated with our derivatives as a component of the investing section of the Statement of Cash Flows. Our use of derivatives has generally been limited to interest rate swaps, but in fiscal year 2006 we also began using derivative instruments to manage our risk associated with U.S. dollar denominated contracts negotiated by Spirit Europe.

     Effective January 1, 2008, the Company adopted SFAS 157, which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value. In February 2008, the FASB issued Staff Position FSP No. 157-2, Partial Deferral of the Effective Date of Statement 157 , which delayed the adoption date until January 1, 2009 for non-financial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets. We do not expect the adoption of SFAS 157 for non-financial assets and liabilities to have a material impact on our financial position or results of operations.

     SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard discloses three levels of inputs that may be used to measure fair value:

     In the second quarter of 2008, the Company recorded an additional $0.3 for the ineffective portion of the change in fair value of interest rate swaps as a component of Interest Expense bringing the total amount recorded as Interest Expense to $0.6 in the first half of 2008. The ineffective portion of the change in fair value for the foreign currency hedges was immaterial at June 26, 2008.

9. Debt

     In connection with the Boeing Acquisition, Spirit executed an $875.0 credit agreement that consisted of a $700.0 senior secured term loan used to fund the acquisition and pay all related fees and expenses associated with the acquisition and the credit agreement, and a $175.0 senior secured revolving credit facility. On November 27, 2006, the credit agreement was amended to, among other things, increase the revolving credit facility to $400.0. Commitment fees associated with the revolver total 50 basis points on the undrawn amount and 225 basis points on letters of credit. On March 18, 2008, Spirit entered into an amendment (the “Amendment”) to its Second Amended and Restated Credit Agreement dated as of November 27, 2006 (as amended). As a result of the Amendment, the revolving credit facility and the $700.0 term loan B were amended to, among other things, (i) increase the amount of the revolver from $400.0 to $650.0, (ii) increase from $75.0 to $200.0 the amount of indebtedness Spirit and its subsidiaries can incur on a consolidated basis to finance acquisition of capital assets, (iii) add a provision allowing Spirit and Spirit Holdings to have additional indebtedness outstanding of up to $300.0, (iv) add a provision allowing Spirit and its subsidiaries on a consolidated basis the ability to make investments in joint ventures not to exceed a total of $50.0 at any given time, and (v) modify the definition of “Change of Control” to exclude certain circumstances that previously would have been considered a Change of Control. The maturity date and interest cost of both our senior secured term loan and revolving credit facility remains unchanged. At June 26, 2008, the Company had no outstanding loans under the revolving credit facility. The entire asset classes of the Company, including inventory and property, plant and equipment, are pledged as collateral for both the term loan and the revolving credit facility.

Malaysian Term Loan

     On June 2, 2008, Spirit’s wholly owned subsidiary, Spirit AeroSystems Malaysia SDN BHD (“Spirit Malaysia”) entered into a Facility Agreement (“Facility Agreement”) for a term loan facility of Ringgit Malaysia (RM) 69.2 (approximately USD $20.0) (the “Facility”), with EXIM Bank to be used towards partial financing of plant and equipment (including the acquisition of production equipment), materials, inventory and administrative costs associated with the establishment of an aerospace-related composite component assembly plant, plus potential additional work packages in Malaysia at the Malaysia International Aerospace Center in Subang, Selangor, Malaysia (the “Project”). Funds for the Project will be available on a drawdown basis over a twenty-four month period from the date of the Facility Agreement. Spirit Malaysia is scheduled to make periodic draws against the Facility.

     The indebtedness repayment requires quarterly principal installments of RM 3.3 (USD $1.0) from September 2011 through May 2017, or until the entire loan principal has been repaid.

     Outstanding amounts drawn under the Facility are subject to a fixed interest rate of 3.5% per annum, payable quarterly.

     Total debt shown on the balance sheet is comprised of the following:

10. Pension and Other Post-Retirement Benefits

Changes Required by SFAS 158

     As outlined in Form 10-K filed with the Securities and Exchange Commission on February 22, 2008 for the period ending December 31, 2007, SFAS 158 requires that we change our measurement date from November 30 to the fiscal year-end, December 31, by year-end 2008. Spirit has elected to apply the transition option under which a 13-month measurement was determined as of November 30, 2007 that covers the period until the fiscal year-end measurement is required on December 31, 2008. As a result, an adjustment to retained earnings was recorded in the first half of fiscal year-end 2008 as follows: pension $3.2 and other post-retirement benefits ($0.3), resulting in a net adjustment of $1.8, net of $1.1 in tax.

Employer Contributions

     We expect to contribute zero dollars to the U.S. qualified pension plan and less than $0.1 to both the Supplemental Executive Retirement Plan (SERP) and post-retirement medical plans in 2008. As of June 26, 2008, our projected contributions to the U.K. pension plan for 2008 were $9.9, of which $5.1 was contributed during the first six months of 2008. We anticipate contributing the additional $4.8 to the U.K. pension plan during the remainder of 2008. In addition, $0.6 was contributed to the U.K. pension plan in January 2008 for the 2007 plan year. The entire amount contributed and the projected contributions can vary based on exchange rate fluctuations.

11. Stock Compensation

     Holdings has established various stock compensation plans which include restricted share grants and stock purchase plans. Compensation values are based on the value of Holdings’ common stock at the grant date. The common stock value is added to equity and charged to period expense or included in inventory and cost of sales.

     For the three months ended June 26, 2008, Holdings recognized a net total of $3.8 of stock compensation expense, which is net of $0.2 resulting from stock forfeitures, as compared to $14.4 of stock compensation expense, net of forfeitures, recognized for the three months ended June 28, 2007. For the six months ended June 26, 2008, Holdings has recognized a net total of $7.5 of stock compensation expense, which is net of $0.5 resulting from stock forfeitures, as compared to $21.0 of stock compensation expense, net of forfeitures, recognized for the six months ended June 28, 2007.

     Of the total $3.8 of net stock compensation expense recorded for the three months ended June 26, 2008, $3.7 was recorded as an expense in selling, general and administrative expense while the remaining $0.1 was capitalized in inventory and is recognized through cost of sales consistent with the accounting methods we follow in accordance with SOP 81-1. Of the total $7.5 of net stock compensation expense recorded year-to-date, $7.3 was recorded as an expense in selling, general and administrative expense while the remaining $0.2 was capitalized in inventory and is recognized through cost of sales.

     The restricted class B common stock grants that occurred after the Boeing Acquisition were approximately 790,230 under the Short-Term Incentive Plan, 141,941 under the Long-Term Incentive Plan, 9,392,652 under the Executive Incentive Plan, and 390,000 under the Director Stock Plan.

     In April 2008, the Director Stock Plan, Short-Term Incentive Plan, and Long-Term Incentive Plan were amended such that all future stock grants under those plans would consist of class A shares. In addition, the Short-Term Incentive Plan and the Long-Term Incentive Plan were amended to increase the number of shares available for grant thereunder by 2,000,000 and 3,000,000 shares, respectively. In May 2008, the

Board of Directors authorized grants of approximately 327,511 shares of class A common stock under the Long-Term Incentive Plan and 20,816 shares under the Director Stock Plan. The first anticipated grant of class A shares under the Short-Term Incentive Plan is anticipated to be in February of 2009 for 2008 performance. The aggregate fair value of vested class B shares was $61.0 and $58.2 at June 26, 2008 and June 28, 2007, respectively, based on the market value of Holdings’ common stock on those dates.

Board of Directors Stock Awards

     This plan provides non-employee directors the opportunity to receive grants of restricted shares of class A common stock, that vest one year from the grant date, or Restricted Stock Units (RSUs) of class A common stock, that vest upon the later of one year from the grant date or the Director’s separation from service, or both stock and stock units. The maximum aggregate number of shares that may be granted to participants is 3,000,000 shares. In April 2008, the Director Stock Plan was amended such that all issuance of stock pursuant to the plan after that date would be grants of class A common stock or RSUs. All shares granted prior to April 2008 were class B common stock.

     For each non-employee Director of Holdings, one-half of their annual director compensation will be paid in the form of a grant of class A common stock and/or class A common RSUs, as elected by each Director. In addition, each Director may elect to have all or any portion of the remainder of their annual director compensation paid in cash or in the form of a grant of stock and/or RSUs. In addition to this, the Board of Directors or its authorized committee may make discretionary grants of shares or RSUs from time to time.

     Holdings’ restricted class A common stock valued at $0.6 was granted to members of the Holdings’ Board of Directors in May 2008 based on the value of Holdings’ common stock at the grant date. If participants cease to serve as Directors within a year of the grant, the restricted shares are forfeited. Holdings expensed $0.1, and zero during the periods ended June 26, 2008, and June 28, 2007, respectively.

     The following table summarizes stock and RSU grants to members of the Holdings’ Board of Directors for the periods ended December 31, 2007 and June 26, 2008:

Short-Term Incentive Plan

     The Short-Term Incentive Plan enables eligible employees to receive incentive benefits in the form of restricted stock in Holdings, cash, or both, as determined by the Board of Directors or its authorized committee. The stock portion vests one year from the date of grant. Restricted shares are forfeited if the employee’s employment terminates prior to vesting. In April 2008, the Short-Term Incentive Plan was amended such that all issuance of stock pursuant to the plan after that date would be grants of class A common stock and to increase by 2,000,000 the number of shares available for grant thereunder. All shares granted prior to April 2008 were class B common stock.

     In the first quarter of 2008, we recognized $0.9 of expense related to the shares granted under the Short-Term Incentive Plan for 2006 performance, which fully vested twelve months from the grant date. For the 2007 plan year, 149,576 shares with a value of $4.2 were granted on February 22, 2008 and will vest on the one-year anniversary of the grant date. Holdings expensed $1.0 and $1.5 for the three and six months

ended June 26, 2008, respectively, for the 2007 plan year grant. The 2007 cash award of $3.9 was expensed in 2007 and paid in 2008. The intrinsic value of the unvested shares at June 26, 2008 and December 31, 2007 was $3.0 and $8.0, respectively, based on the value of Holdings’ common stock and the number of unvested shares.

     The following table summarizes the activity of the restricted shares under the Short-Term Incentive Plan for the periods ended December 31, 2007 and June 26, 2008:

Long-Term Incentive Plan

     The Long-Term Incentive Plan (“LTIP”) is designed to encourage retention of key employees. In April 2008, the Long-Term Incentive Plan was amended such that all issuance of stock pursuant to the plan after that date would be grants of class A common stock and to increase by 3,000,000 the number of shares available for grant thereunder. All shares granted prior to April 2008 were class B common stock.

     For shares granted in 2007, one-half of the granted restricted shares of class B common stock vest on the second anniversary of the grant date, and the other half vest on the fourth anniversary of the grant date. Restricted shares are forfeited if the employee’s employment terminates prior to vesting. In the first quarter of 2007, 67,391 shares valued at $2.0 were granted. Holdings expensed $0.1 and $0.2 for the unvested class B LTIP shares in the three and six months ended June 26, 2008, respectively. The intrinsic value of the unvested class B LTIP shares at June 26, 2008 and December 31, 2007 was $1.3 and $2.1, respectively, based on the value of Holdings’ common stock and the number of unvested shares.

     In May 2008, 327,511 class A shares valued at $9.4 were granted. Holdings expensed $0.3 for the unvested class A LTIP shares in the three months ended June 26, 2008. Within the May 2008 LTIP grant were three groups of stock, each with a unique vesting schedule. The first group of shares vests over three years, with one-third vesting annually beginning in 2009. The second and third groups also vest in one-third increments, but vesting begins on the second and third anniversary of the grant, respectively. The vesting schedule for the 2008 grant is as follows:

     The intrinsic value of unvested class A LTIP shares at June 26, 2008 was $6.8, based on the value of Holdings’ common stock and the number of unvested shares.

     The following table summarizes the activity of the restricted shares under the Long-Term Incentive Plan for the periods ended December 31, 2007 and June 26, 2008:

12. Income Taxes

     The process for calculating our income tax expense involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to determine their recoverability. The total net deferred tax assets as of June 26, 2008 and December 31, 2007 were $74.2 and $74.1, respectively.

     We file income tax returns in all jurisdictions in which we operate. We established reserves to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. These reserves have been established based on management’s assessment as to the potential exposure attributable to permanent differences and interest applicable to both permanent and temporary differences. All tax reserves are analyzed periodically and adjustments made as events occur that warrant modification.

     In general, the Company records income tax expense during the interim periods based on its best estimate of the full year’s effective tax rate. Certain items, however, are given discrete period treatment and, as a result, the tax effects of such items are reported in the relevant interim period. The Company’s effective tax rate was 33.75% for the six months ended June 26, 2008 compared to 33.10% for the same period in 2007. The effective tax rate for the six months ended June 26, 2008 was slightly higher than the same period in 2007 due to the U.S. Research and Experimentation Tax Credit’s expiration effective December 31, 2007, partially offset by an increase in the Domestic Production Activities Deduction and state income tax credits. The 33.75% estimated annualized effective rate may, however, fluctuate due to discrete events and changes to the Company’s liability assessment for uncertain tax positions.

     The Company’s 2005 and 2006 U.S. Federal income tax returns are scheduled for examination. The Company reasonably expects no material change in its recorded unrecognized tax benefit liability in the next 12 months.

13. Earnings per Share Calculation

     The following table sets forth the computation of basic and diluted earnings per share:

14. Related Party Transactions

     On March 26, 2007, Hawker Beechcraft, Inc. (“Hawker”), of which Onex Partners II LP (an affiliate of Onex) owns approximately a 49% interest, acquired Raytheon Aircraft Acquisition Company and substantially all of the assets of Raytheon Aircraft Services Limited. Spirit’s Prestwick facility provides wing components for the Hawker 800 Series manufactured by Hawker. For the three months ended June 26, 2008 and June 28, 2007, sales to Hawker were $7.4 and $6.3, respectively. Sales to Hawker were $12.5 for each of the six month periods ended June 26, 2008 and June 28, 2007.

     A member of the Holdings’ Board of Directors is also a member of the Board of Directors of Hawker.

     Since February 2007, an executive of the Company has been a member of the Board of Directors of one of Spirit’s suppliers, Precision Castparts Corp. of Portland, Oregon, a manufacturer of complex metal components and products. For the three months ended June 26, 2008 and June 28, 2007, the Company purchased $15.2 and $19.2 of products, respectively, from this supplier. For the six months ended June 26, 2008 and June 28, 2007, the Company purchased $32.9 and $37.6 of products, respectively, from this supplier.

     A member of Holdings’ Board of Directors is the president and chief executive officer of Aviall, Inc., the parent company of one of our customers, Aviall Services, Inc. and a wholly owned subsidiary of Boeing. On September 18, 2006, Spirit entered into a distribution agreement with Aviall Services, Inc. Net revenues under the distribution agreement were $1.3 and $0.9 for the three months ended June 26, 2008 and June 28, 2007, respectively, and $2.9 and $2.6 for the six months ended June 26, 2008 and June 28, 2007, respectively.

     The Company paid $0.2 and less than $0.1 for the three months ended June 26, 2008 and June 28, 2007, respectively, to a subsidiary of Onex for services rendered. Management believes the amounts charged were reasonable in relation to the services provided.

     Boeing owns and operates significant information technology systems utilized by the Company and, as required under the acquisition agreement for the Boeing Acquisition, is providing those systems and support services to Spirit under a Transition Services Agreement. A number of services covered by the Transition Services Agreement have now been established by the Company, and the Company is scheduled to continue to use the remaining systems and support services it has not yet established. The Company incurred fees of $6.6 and $5.6 for services performed for the three months ended June 26, 2008 and June 28, 2007, respectively, and $12.4 and $12.0 for the six months ended June 26, 2008 and June 28, 2007, respectively. These amounts included accrued liabilities of $2.1 and $1.9 at June 26, 2008 and June 28, 2007, respectively.

     The spouse of one of the Company’s executives is a special counsel at a law firm utilized by the Company and at which the executive was previously employed. The Company paid fees of $0.3 and $0.4 to the firm for the three month periods ended June 26, 2008 and June 28, 2007, respectively, and $0.9 and $1.0 for the six months ended June 26, 2008 and June 28, 2007, respectively.

     An executive of the Company is a member of the Board of Directors of a Wichita, Kansas bank that provides banking services to Spirit. In connection with the banking services provided to Spirit, the Company pays fees consistent with commercial terms that would be available to unrelated third parties. Such fees are not material to Spirit.

15. Commitments, Contingencies and Guarantees

Litigation

     We are from time to time subject to, and are presently involved in, litigation or other legal proceedings arising in the ordinary course of business. While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available, it is the opinion of the Company that none of these items, when finally resolved, will have a material adverse effect on the Company’s long-term financial position or liquidity. Consistent with the requirements of SFAS 5, Accounting for Contingencies , we had no accruals at June 26, 2008 or December 31, 2007 for loss contingencies. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

     From time to time, in the ordinary course of business and like others in the industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. We review such requests and notices and take appropriate action. We have been subject to certain requests for information and investigations in the past and could be subject to such requests for information and investigations in the future. Additionally, we are subject to federal and state requirements for protection of the environment, including those for disposal of hazardous waste and remediation of contaminated sites. As a result, we are required to participate in certain government investigations regarding environmental remediation actions.

     In 2005, a lawsuit was filed against Spirit, Onex, and Boeing alleging age discrimination in the hiring of employees by Spirit when Boeing sold its Wichita commercial division to Onex. The complaint was filed in U.S. District Court in Wichita, Kansas and seeks class-action status, an unspecified amount of compensatory damages and more than $1.5 billion in punitive damages. The Asset Purchase Agreement requires Spirit to indemnify Boeing for damages resulting from the employment decisions that were made by us with respect to former employees of the commercial aerostructures manufacturing operations at Boeing (“Boeing Wichita”) which relate or allegedly relate to the involvement of, or consultation with, employees of Boeing in such employment decisions. The Company intends to vigorously defend itself in this matter. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.

     On December 22, 2006, a lawsuit was filed against Spirit, Boeing, Onex and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) alleging age, disability, sex and race discrimination as well as breach of the duty of fair representation, retaliatory discharge, violation of FMLA (retaliation) and the Employee Retirement Income Security Act (ERISA), arising out of Spirit’s failure to hire eight former Boeing employees at the McAlester, Oklahoma facility. The complaint was filed in the U.S. District Court in the Eastern District of Oklahoma. At Court-ordered mediation on February 28 and 29, 2008, the individual cases were settled by the parties. The settlements do not have a material adverse effect on the Company’s financial position or liquidity.

     In December 2005, a federal grand jury sitting in Topeka, Kansas issued subpoenas regarding the vapor degreasing equipment at our Wichita, Kansas facility. The government’s investigation appeared to focus on whether the degreasers were operating within permit parameters and whether chemical wastes from the degreasers were disposed of properly. The subpoenas covered a time period both before and after our purchase of the Wichita, Kansas facility. Subpoenas were issued to Boeing, Spirit and individuals who were employed by Boeing prior to the Boeing Acquisition, but are now employed by us. We responded to the subpoena and provided additional information to the government as

requested. On March 25, 2008, the U.S. Attorney’s Office informed the Company that it was closing its criminal file on the investigation. The Company has no present indication that any civil investigation is ongoing.

     Airbus filed oppositions to six European patents originally issued to or applied for by Boeing and acquired by Spirit in the Boeing Acquisition. Airbus claimed that the subject matter in these patents was not patentable because of a lack of novelty and a lack of inventive activity.

     For two of the patents, oral proceedings before a three panel board of the European Patent Office (EPO) were held in May 2005. In one case, the patent was maintained without amendments to the claims. On the second patent, the board accepted the claims with limitation and Spirit appealed. Airbus did not file an admissible appeal in either of the adverse decisions. Therefore, for the first patent, the opposition is complete, the patent is maintained as granted, and nothing further will be done. For the second patent wherein Spirit appealed the EPO’s Opposition Board’s findings, Spirit may now either continue its appeal or accept the claim limitations.

     For a third patent, Oral Proceedings were held on December 13, 2007. The EPO’s Opposition Board accepted certain claim limitations, and therefore, the patent is maintained with limitations. Spirit has not yet determined whether it plans to appeal this decision.

     Spirit and Airbus entered into an agreement in December 2007, wherein Airbus agreed to withdraw all of its pending oppositions, including the three remaining oppositions for which oral proceedings had not yet been held. Airbus subsequently proceeded to do so. The EPO notified Spirit’s European counsel that it will not proceed with the opposition for two of the three pending oppositions. Spirit is awaiting a decision from the EPO regarding the final opposition.

     On February 16, 2007, an action entitled Harkness et al. v. The Boeing Company et al. was filed in the U.S. District Court for the District of Kansas. The defendants were served in early April. Holdings, The Spirit AeroSystems Retirement Plan for the International Brotherhood of Electrical Workers (IBEW), Wichita Engineering Unit (SPEEA WEU) and Wichita Technical Professional Unit (SPEEA WTPU) employees and The Spirit AeroSystems Retirement Plan for International Association of Machinists and Aerospace Workers (IAM) employees, along with The Boeing Company and Boeing retirement and health plan entities, were sued by 12 former Boeing employees, eight of whom were or are employees of Spirit. The plaintiffs assert several claims under ERISA and general contract law and purport to bring the case as a class action on behalf of similarly situated individuals. The putative sub-class members who have asserted claims against the Spirit entities are those individuals who, as of June 2005, were employed by Boeing in Wichita, Kansas, were participants in the Boeing pension plan, had at least 10 years of vesting service in the Boeing plan, were in jobs represented by a union, were between the ages of 49 and 55 and who went to work for Spirit on or about June 17, 2005. Although there are many claims in the suit, the plaintiffs’ claims against the Spirit entities are that the Spirit plans wrongfully have failed to determine that certain plaintiffs are entitled to early retirement “bridging rights” allegedly triggered by their separation from employment by Boeing and that the plaintiffs’ pension benefits were unlawfully transferred from Boeing to Spirit in that their claimed early retirement “bridging rights” are not being afforded these individuals as a result of their separation from Boeing, thereby decreasing their benefits. The plaintiffs seek certification of a class, declaration that they are entitled to the early retirement benefits, an injunction ordering that the defendants provide the benefits, damages pursuant to breach of contract claims and attorney fees. At this time, the Company does not have enough information to make any predictions about the outcome of this matter. However, management believes that any outcome that does result from this matter will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Guarantees

     Contingent liabilities in the form of letters of credit, letters of guarantee and performance bonds have been provided by the Company. These letters of credit reduce the amount of borrowings available under the revolving credit facility. As of June 26, 2008 and December 31, 2007, $14.1 and $12.4 was outstanding in respect of these guarantees, respectively.

Service and Product Warranties

     The Company provides service and warranty policies on its products. Liabilities under service and warranty policies are based upon specific claims and a review of historical warranty and service claim experience. Adjustments are made to accruals based on claim data changes and historical experience. In addition, the Company incurs discretionary costs to service its products in connection with product performance issues.

     The following is a roll forward of the service warranty balances at June 26, 2008:

16. Segment Information

      Spirit operates in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. The majority of revenues in the three principal segments are with Boeing, with the exception of Wing Systems, which includes revenues from Airbus and other customers. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services and KIESC. The Company’s primary profitability measure to review a segment’s operating performance is segment operating income before unallocated corporate selling, general and administrative expenses and unallocated research and development. Unallocated corporate selling, general and administrative expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to our operating segments and are not allocated in measuring the operating segments’ profitability and performance and operating margins.

     Spirit’s Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs, as well as related spares and maintenance, repairs and overhaul, or MRO services.

     Spirit’s Propulsion Systems segment includes development, production and marketing of struts/pylons, nacelles (including thrust reversers) and related engine structural components primarily to aircraft or engine OEMs, as well as related spares and MRO services.

     Spirit’s Wing Systems segment includes development, production and marketing of wings and wing components (including flight control surfaces) as well as other miscellaneous structural parts primarily to aircraft OEMs, as well as related spares and MRO services. These activities take place at the Company’s facilities in Tulsa and McAlester, Oklahoma and Prestwick, Scotland.

     The Company’s segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment operating income differs from operating income as presented in its primary financial statements and a reconciliation of the segment and consolidated results is provided in the table set forth below. Most selling, general and administrative expenses, and all interest expense or income, related financing costs and income tax amounts, are not allocated to the operating segments.

     While some working capital accounts are maintained on a segment basis, much of the Company’s assets are not managed or maintained on a segment basis. Property, plant and equipment, including tooling, is used in the design and production of products for each of the segments and, therefore, is not allocated to any individual segment. In addition, cash, prepaid expenses, other assets and deferred taxes are managed and maintained on a consolidated basis and generally do not pertain to any particular segment. Raw materials and certain component parts are used in the production of aerostructures across all segments. Work-in-process inventory is identifiable by segment, but is managed and evaluated at the program level. As there is no segmentation of the Company’s productive assets, depreciation expense (included in fixed manufacturing costs and selling, general and administrative expenses) and capital expenditures, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.

     The following table shows segment information:

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

     The following section may include “forward-looking statements.” Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “continue,” “plan,” “forecast,” or other similar words. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.

Recent Events

     On July 7, 2008, Spirit AeroSystems (Europe) Limited (“Spirit Europe”) announced that it had signed a contract with Airbus to design and produce a major wing structure for the A350 XWB program. Spirit Europe will design and assemble the wing leading edge structure primarily at its facility in Prestwick, Scotland. The Composite Front Spar will be built at Spirit’s recently announced Kinston, North Carolina site with composite sub-assemblies being manufactured at the Spirit AeroSystems Malaysia Sdn Bhd (“Spirit Malaysia”) Facility at Subang, Malaysia. In addition, Spirit Europe announced that it had reached an agreement with Airbus to extend its existing contract to supply leading and trailing edges and other wing structures on the A319, A320, and A321 aircraft family at its Prestwick facility from 2011 until 2015. The total value of the extended agreement is expected to be $1.7 billion.

     On May 14, 2008, Spirit announced that it had signed a contract with Airbus to design and produce a major composite fuselage structure for the A350 XWB program with a total contract value expected to be $2.75 billion over the life of the program. To accommodate this and other work, Spirit announced plans to expand its operations with a new facility in Kinston, North Carolina. Construction of the new facility will begin late this year with operations expected to commence in 2010. Total investment, which includes design engineering, tooling, land, building, infrastructure, and capital equipment, is expected to be approximately $700 million over seven years shared by Spirit, Airbus, suppliers, and local government.

     On April 25, 2008, Spirit announced its participation in a joint venture partnership called Taikoo Spirit AeroSystems Composite Co. Ltd., between several major aviation companies to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region. The new service center will be located in Jinjiang, China and will provide repair services for airlines and aircraft operators across the Asia-Pacific region.

     On April 9, 2008, Boeing announced a revised schedule for the first flight and initial deliveries of the B787 Dreamliner. The date of first flight was projected to occur in the fourth quarter of 2008 rather than the end of the second quarter of 2008, and initial deliveries were rescheduled for the third quarter of 2009 from the first quarter of 2009.

Overview

     We are the largest independent non-OEM (OEM refers to aircraft original equipment manufacturer) parts designer and manufacturer of commercial aerostructures in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial, military and business jet aircraft. We derive our revenues primarily through long-term supply agreements with Boeing, Airbus, and various business jet and other aerospace customers. For the three months ended June 26, 2008, we generated net revenues of $1,062.1 million and net income of $86.4 million and for the six months ended June 26, 2008, we generated net revenues of $2,098.5 million and net income of $171.6 million.

     We are organized into three principal reporting segments: (1) Fuselage Systems, which include the forward, mid and rear fuselage sections, (2) Propulsion Systems, which include nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which include facilities in Tulsa and McAlester, Oklahoma and Prestwick, Scotland that manufacture wings, wing components, flight control surfaces, and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services and sales of natural gas through a tenancy-in-common with other Wichita companies. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 28%, 19% and less than 1%, respectively, of our segment operating income before unallocated corporate expenses for the three months ended June 26, 2008. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 27%, 19% and 1%, respectively, of our segment operating income before unallocated corporate expenses for the six months ended June 26, 2008.

Our 2008 outlook is based on the following market assumptions:

	•		Our revenue guidance for the full-year 2008 remains unchanged and is expected to be approximately $4.4 billion based on 2008 Boeing delivery guidance of 475-480 aircraft, 2008 Airbus delivery guidance of approximately 470 aircraft, and internal Spirit forecasts for other products as well as revenue associated with non-recurring development work.
	•		Fully diluted earnings per share guidance for 2008 has increased to be between $2.35 and $2.45 to reflect improved performance in the first half of 2008 and current expectations for the second half of 2008.
	•		Effective December 31, 2007, the U.S. Research and Experimentation tax credit expired. While there has been legislative activity to retroactively extend this credit, no bill has been signed into law. We have assumed the U.S. Research and Experimentation Tax Credit will be reinstated retroactively to January 1, 2008, and this assumption has been reflected in our effective tax rate 2008 outlook.
	•		Cash flow from operations full-year guidance is unchanged and is expected to be approximately $400 million. Capital expenditures guidance for 2008 is unchanged and is expected to be approximately $275 million.

     For purposes of measuring production or deliveries for Boeing aircraft in a given period, the term “ship set” refers to sets of structural fuselage components produced or delivered in such period. For purposes of measuring production or deliveries for Airbus aircraft in a given period, the term “ship set” refers to sets of wing components produced or delivered in such period. Other components which are part of the same aircraft ship sets could be produced or shipped in earlier or later accounting periods than the components used to measure production or deliveries, which may result in slight variations in production or delivery quantities of the various ship set components in any given period.

     Comparative ship set deliveries by model are as follows:

Results of Operations for the Three Months Ended June 26, 2008 and June 28, 2007

      Net Revenues. Net revenues for the three months ended June 26, 2008 were $1,062.1 million, an increase of $103.3 million, or 11%, compared with net revenues of $958.8 million for the same period in the prior year due to increased deliveries on Boeing and Airbus programs. Deliveries to Boeing increased from 115 ship sets during the second quarter of 2007 to 128 ship sets in the second quarter of 2008, an 11% increase. In addition, deliveries to Airbus increased from 105 ship sets during the second quarter of 2007 to 118 ship sets in the second quarter of 2008, a 12% increase. In total, in the second quarter of 2008, we delivered 270 ship sets compared to 235 ship sets delivered for the same period in the prior year, a 15% increase. Approximately 97% of Spirit’s net revenues for the second quarter 2008 came from our two largest customers, Boeing and Airbus.

      Cost of Sales. Cost of sales as a percentage of net revenues was 82% for the three months ended June 26, 2008 and June 28, 2007. During the second quarter of 2008, Spirit updated its contract profitability estimates resulting in a favorable cumulative catch-up adjustment of $4.0 million driven primarily by favorable cost trends within the Fuselage Systems segment’s current contract blocks, as compared to a $3.4 million favorable cumulative catch-up adjustment recorded in the second quarter of 2007, driven primarily by favorable cost trends within the Propulsion Systems segment.

      Selling, General and Administrative. SG&A as a percentage of net revenue for the three months ended June 26, 2008 was 4% as compared to 6% for the same period in the prior year. SG&A expenses for the three months ended June 26, 2008 were lower as a percentage of net revenue due to a decrease in non-cash stock compensation expense and minimal transition related costs. In the second quarter of 2008, we recognized $3.8 million in stock compensation expense as compared to $14.4 million during the second quarter of 2007. Included in the 2007 amount was $7.0 million of stock compensation expense related to the secondary offering. The total amount of expense related to the secondary offering included in SG&A was $9.6 million.

      Research and Development. R&D costs as a percentage of net revenues were approximately 1% for the three months ended June 26, 2008 and June 28, 2007. Total R&D costs declined $3.1 million, or 23%, primarily due to a reduction in R&D spending on new programs. R&D spending on technical development projects has remained constant in recent periods.

      Operating Income. Operating income for the three months ended June 26, 2008 was $136.1 million, an increase of $34.0 million, or 33%, compared to operating income of $102.1 million for the same period in the prior year. The increase was driven by additional gross profit from greater sales volume and lower SG&A and R&D expenses, as compared to the second quarter of 2007.

      Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the three months ended June 26, 2008 includes $7.6 million of interest and fees paid or accrued in connection with long-term debt and $2.9 million in amortization of deferred financing costs as compared to $8.9 million of interest and fees paid or accrued in connection with long-term debt and $0.6 million in amortization of deferred financing costs for the same period in the prior year. The increase of $1.0 million as compared to the second quarter of 2007 primarily resulted from an increase in amortizable costs associated with the amendment and restatement of our senior credit facility on March 18, 2008.

      Interest Income. Interest income for the three months ended June 26, 2008 consisted of $4.4 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $0.6 million in interest income as compared to $5.4 million of accretion of the discounted long-term receivable and $1.8 million of interest income for the same period in the prior year. As we receive additional payments on the receivable, the amount of accretion will decrease.

      Provision for Income Taxes. The income tax provision for the three months ended June 26, 2008 included $40.6 million for federal income taxes, $2.0 million for state taxes, and $1.8 million for foreign taxes. The income tax provision for the three months ended June 28, 2007 included $30.7 million for federal income taxes, $1.1 million for state taxes, and $1.8 million for foreign taxes. The 33.9% effective income tax rate for the three months ended June 26, 2008 differs from the 33.1% effective income tax rate for the same period in the prior year primarily due to the U.S. Research and Experimentation Tax Credit’s expiration effective December 31, 2007, partially offset by an increase in the Domestic Production Activities Deduction and state income tax credits.

      Segments. We are organized into three principal reporting segments: (1) Fuselage Systems, which include the forward, mid and rear fuselage sections, (2) Propulsion Systems, which include nacelles, struts/pylons and engine structural components and (3) Wing Systems, which include facilities in Tulsa and McAlester, Oklahoma and Prestwick, Scotland that manufacture wings, wing components, flight control surfaces, and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services and sales of natural gas through a tenancy-in-common with other Wichita companies.

     The following table shows comparable segment operating income before unallocated corporate expenses for the three months ended June 26, 2008 compared to the three months ended June 28, 2007:

     Improvements to segment net revenues and operating income before unallocated corporate expenses for the three months ended June 26, 2008 compared to the three months ended June 28, 2007 were driven by higher deliveries and lower expenses, primarily R&D associated with new programs. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 46%, 28%, 25% and 1%, respectively, of our net revenues for the three months ended June 26, 2008. Net revenues attributable to Airbus are recorded in the Wing Systems segment. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 28%, 19% and less than 1%, respectively, of our segment operating income before unallocated corporate expenses for the three months ended June 26, 2008.

      Fuselage Systems. Fuselage Systems segment net revenues for the three months ended June 26, 2008 were $493.4 million, an increase of $43.7 million, or 10%, over the same period in the prior year. This reflects an increase in Boeing B737, B747 and B777 model production volumes in support of customer deliveries. Fuselage Systems posted segment operating margins of 19% for the three months ended June 26, 2008, up from 18% in the same period of 2007 driven primarily due to lower fringe benefit costs recognized in the second quarter of 2008.

      Propulsion Systems . Propulsion Systems segment net revenues for the three months ended June 26, 2008 were $296.9 million, an increase of $37.7 million, or 15%, over the same period in the prior year. This reflects an increase in Boeing B737, B747 and B777 model production volumes in support of customer deliveries. Propulsion Systems posted segment operating margins of 17% for the second quarters of 2008 and 2007.

      Wing Systems. Wing Systems segment net revenues for the three months ended June 26, 2008 were $264.4 million, an increase of $19.0 million, or 8%, over the same period in the prior year due to higher deliveries to Boeing. Wing Systems posted segment operating margins of 12% for the second quarters of 2008 and 2007.

      All Other. The All Other net revenues consist of sundry sales and miscellaneous services, and revenues from the Kansas Industrial Energy Supply Company, or KIESC. The $2.9 million increase in net revenues for the three months ended June 26, 2008, compared to the three months ended June 28, 2007, was primarily driven by greater tooling sales.

Results of Operations for the Six Months Ended June 26, 2008 and June 28, 2007

      Net Revenues. Net revenues for the six months ended June 26, 2008 were $2,098.5 million, an increase of $185.6 million, or 10%, compared with net revenues of $1,912.9 million for the same period in the prior year. The increase in net revenues is primarily attributable to increased deliveries on Boeing and Airbus programs. Deliveries to Boeing increased from 227 ship sets during the six months ended June 28, 2007 to 249 ship sets in the six months ended June 26, 2008, a 10% increase. In addition, deliveries to Airbus increased from 220 ship sets during the second quarter of 2007 to 241 ship sets in the second quarter of 2008, a 10% increase. In total, for the six months ended June 26, 2008, we delivered 529 ship sets compared to 478 ship sets delivered for the same period in the prior year, an 11% increase. Approximately 98% of Spirit’s net revenues for the six months ended June 26, 2008 came from our two largest customers, Boeing and Airbus.

      Cost of Sales. Cost of sales as a percentage of net revenues was 83% for the six month periods ended June 26, 2008 and June 28, 2007. During the first six months of 2008, Spirit updated its contract profitability estimates resulting in a favorable cumulative catch-up adjustment of $4.8 million driven primarily by favorable cost trends within the Fuselage and Wing Systems segments’ current contract blocks, as compared to $11.3 million of favorable cumulative catch-up adjustment recorded in the first six months of 2007.

      Selling, General and Administrative. SG&A as a percentage of net revenues for the first six months of 2008 was 4% compared to 5% for the same period in the prior year. SG&A expenses in the six months ended June 26, 2008 were lower as a percentage of net revenues due to a decrease in non-cash stock compensation expenses and minimal transition related costs. In the first six months of 2008, we recognized $7.5 million in stock compensation expense as compared to $21.0 million during the first six months of 2007. Included in the 2007 amount was $7.0 million of stock compensation expense related to the secondary offering. The total amount of expense related to the secondary offering included in SG&A was $9.6 million.

      Research and Development. R&D costs as a percentage of net revenues were approximately 1% for the first six month periods ended June 26, 2008 and June 28, 2007. R&D costs declined $3.7 million, or 15%, primarily due to a reduction in R&D spending on new programs in the first six months of 2008 compared to the first six months of 2007.

      Operating Income. Operating income for the six months ended June 26, 2008 was $266.3 million, an increase of $60.4 million, or 29% compared to operating income of $205.9 million for the same period in the prior year. The increase was driven by additional gross profit from greater sales volume and lower transition and R&D expenses compared to the first six months of 2007.

      Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the six months ended June 26, 2008 includes $15.8 million of interest expense associated with long-term debt and $3.8 million in amortization of deferred financing costs as compared to $17.1 million of interest expense associated with long-term debt and $1.3 million in amortization of deferred financing costs for the same period in the prior year. The increase of $1.2 million as compared to the six months ended June

28, 2007 primarily resulted from an increase in amortizable costs associated with the amendment and restatement of our senior credit facility on March 18, 2008.

      Interest Income. Interest income for the six months ended June 26, 2008 consisted of $9.3 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $1.4 million in interest income as compared to $10.8 million of accretion of the discounted long-term receivable and $4.0 million of interest income for the same period in the prior year. As we receive additional payments on the receivable, the amount of accretion will decrease.

      Provision for Income Taxes. The income tax provision for the six months ended June 26, 2008 includes $81.0 million for federal income taxes, $3.1 million for state taxes and $3.3 million for foreign taxes. The income tax provision for the six months ended June 28, 2007 included $64.6 million for federal income taxes, $2.5 million for state taxes, and $1.2 million for foreign taxes. The 33.75% effective income tax rate for the six months ended June 26, 2008 differs from the 33.1% effective income tax rate for the same period in the prior year primarily due to the U.S. Research and Experimentation Tax Credit’s expiration effective December 31, 2007, partially offset by an increase in the Domestic Production Activities Deduction and state income tax credits.

      Segments. The following table shows comparable segment revenues and operating income before unallocated corporate expenses for the six months ended June 26, 2008 compared to the six months ended June 28, 2007: