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TABLE OF CONTENTS
Item 8. Financial Statements and Supplementary Data
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-K
(Mark One) | ||
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2013 |
Or |
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission File Number 001-33160 |
Spirit AeroSystems Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-2436320 | |
(State of Incorporation) |
(I.R.S. Employer
Identification Number) |
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3801 South Oliver Wichita, Kansas 67210 (Address of principal executive offices and zip code) |
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Registrant's telephone number, including area code: (316) 526-9000 |
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Securities registered pursuant to Section 12(b) of the Act: |
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Title of Each Class |
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Name of Each Exchange on Which Registered |
Class A Common Stock, $0.01 par value | New York Stock Exchange | |
Securities registered pursuant to Section 12(g) of the Act: |
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None |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not 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. 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):
Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
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
The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the closing price of the class A common stock on June 27, 2013, as reported on the New York Stock Exchange was approximately $2,643,834,149.
As of February 12, 2014, the registrant had outstanding 120,991,868 shares of class A common stock, $0.01 par value per share, and 23,817,017 shares of class B common stock, $0.01 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 2014 Annual Meeting of Stockholders to be filed not later than 120 day after the end of the fiscal year covered by this Report are incorporated herein by reference in Part III of this Annual Report on Form 10-K.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains certain "forward-looking statements" that may involve many risks and uncertainties. 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," "should," "expect," "anticipate," "intend," "estimate," "believe," "project," "continue," "plan," "forecast," or other similar words, or the negative thereof, unless the context requires otherwise. 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.
Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following:
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These factors are not exhaustive and it is not possible for us to predict all factors that could cause actual results to differ materially from those reflected in our forward-looking statements. These factors speak only as of the date hereof, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Except to the extent required by law, we undertake no obligation to, and expressly disclaim any obligation to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should review carefully the sections captioned "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report for a more complete discussion of these and other factors that may affect our business.
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Unless the context otherwise indicates or requires, as used in this Annual Report, references to "we," "us," "our," or the "Company" refer to Spirit AeroSystems Holdings, Inc., its subsidiaries and predecessors. References to "Spirit" refer only to our subsidiary, Spirit AeroSystems, Inc., and references to "Spirit Holdings" or "Holdings" refer only to Spirit AeroSystems Holdings, Inc. References to "Boeing" refer to The Boeing Company and references to "Airbus" refer to Airbus S.A.S., a division of Airbus Group NV. References to "OEM" refer to commercial aerospace original equipment manufacturer.
We are one of the largest independent non-OEM aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the twelve months ended December 31, 2013, we generated net revenues of $5,961.0 million, and had net loss of $621.4 million.
Spirit Holdings was incorporated in the state of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition of Boeing's operations in Wichita, Kansas; Tulsa, Oklahoma and McAlester, Oklahoma (the "Boeing Acquisition") by an investor group led by Onex Partners LP and Onex Corporation (together with its affiliates, "Onex"). Boeing's commercial aerostructures manufacturing operations in Wichita, Kansas and Tulsa and McAlester, Oklahoma, are referred to in this Report as "Boeing Wichita." Although Spirit began operations as a stand-alone company in 2005, its predecessor, Boeing Wichita (the "Predecessor"), had 75 years of operating history and expertise in the commercial and military aerostructures industry. Spirit Holdings, Spirit's parent company, has had publicly traded shares on the New York Stock Exchange under the ticker "SPR" since November 2006. Onex continues to hold approximately 94% of Spirit Holdings' class B common shares, which represents approximately 62% of total Spirit Holdings stockholder voting power.
On April 1, 2006, we became a supplier to Airbus through our acquisition of the aerostructures division of BAE Systems (Operations) Limited, referred to in this Report as "BAE Systems." The acquired division of BAE Systems is referred to in this Report as "BAE Aerostructures," and the acquisition of BAE Aerostructures is referred to as the "BAE Acquisition."
We manufacture aerostructures for every Boeing commercial aircraft currently in production, including the majority of the airframe content for the Boeing B737, the most popular major commercial aircraft in history. As a result of our unique capabilities both in process design and composite materials, we were awarded a contract that makes us the largest aerostructures content supplier on the Boeing B787, Boeing's next generation twin aisle aircraft. In addition, we are one of the largest content suppliers of wing systems for the Airbus A320 family, we are a significant supplier for the Airbus A380, and we will be a significant supplier for the new Airbus A350 XWB (Xtra Wide-Body) after the development stage of the program. Sales related to the large commercial aircraft market, some of which may be used in military applications, represented approximately 99% of our net revenues for the twelve-month period ended December 31, 2013.
We derive our revenues primarily through long-term supply agreements with Boeing and Airbus. For the twelve months ended December 31, 2013, approximately 84% and 10% of our net revenues were generated from sales to Boeing and Airbus, respectively. We are currently the sole-source supplier of 97% of the products we sell to Boeing and Airbus, as measured by the dollar value of products sold. We are a critical partner to our customers due to the broad range of products we currently supply to them and our leading design and manufacturing capabilities using both metallic and composite materials. Under our supply agreements with Boeing and Airbus, we supply products for the life of the aircraft program (other
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than the A350 XWB and A380), including commercial derivative models. For the A350 XWB and A380, we have long-term requirements contracts with Airbus.
Since Spirit's incorporation, the Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, Israel Aerospace Industries, Bombardier, Mitsubishi Aircraft Corporation, Bell Helicopter, Southwest Airlines, United Airlines and American Airlines. The Company has its headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Wichita and Chanute, Kansas; Kinston, North Carolina; Saint-Nazaire, France; and Subang, Malaysia.
In December 2004 and February 2005, an investor group led by Onex formed Spirit and Spirit Holdings, respectively, for the purpose of acquiring Boeing Wichita. The Boeing Acquisition was completed on June 16, 2005. Prior to the acquisition, Boeing Wichita functioned as an internal supplier of parts and assemblies for Boeing's airplane programs and had very few sales to third parties.
In connection with the Boeing Acquisition, we entered into a long-term supply agreement under which we are Boeing's exclusive supplier for substantially all of the products and services provided by Boeing Wichita to Boeing prior to the Boeing Acquisition. The Supply Agreement is a requirements contract covering certain products such as fuselages, struts/pylons and wing components for Boeing B737, B747, B767 and B777 commercial aircraft programs for the life of these programs, including any commercial derivative models. Pricing for existing products on in-production models expired in May 2013 and interim pricing provisions under the supply agreement are currently in effect. We are currently negotiating future pricing terms with Boeing. The future pricing will be effective for a period to be agreed upon by the parties. The interim pricing terms are determined according to the existing prices as of May 2013 using a quantity-based price adjustment formula and specified annual escalation until such time as future pricing is agreed. Interim pricing will be retroactively adjusted in the period in which we agree on future pricing terms.
We also entered into a long-term supply agreement with Boeing for the B787 aircraft, covering the life of this aircraft program, including commercial derivatives. Under this contract we are Boeing's exclusive supplier for the forward fuselage, fixed and moveable leading wing edges and engine pylons for the B787. Pricing for the initial configuration of the B787-8 model is generally set through 2021, with prices decreasing as cumulative production volume levels are achieved. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine initial B787-9 and B787-10 pricing and have not yet reached agreement. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other specific changes, including design changes from the contract configuration baseline for each B787 model.
On April 1, 2006, we acquired BAE Aerostructures, which was subsequently renamed Spirit AeroSystems (Europe) Limited ("Spirit Europe"). Spirit Europe manufactures leading and trailing wing edges and other wing components for commercial aircraft programs for Airbus and Boeing. The BAE Acquisition provided us with a foundation to increase future sales to Airbus, as Spirit Europe is a key supplier of wing and flight control surfaces for the A320 platform, Airbus' core single-aisle program, and of wing components for the A380 platform, one of Airbus' most important new programs and the world's largest commercial passenger aircraft. In July 2008, Spirit Europe was awarded a contract with Airbus to design and assemble a major wing structure for the A350 XWB program. Under our supply agreements with Airbus, we supply most of our products for the life of the aircraft program (other than the A350 XWB and A380), including commercial derivative models, with pricing determined through 2015. For the A380 and A350 XWB, we have long-term requirements contracts with Airbus that cover a fixed number of units.
In November 2006, we issued and sold 10,416,667 shares of our class A common stock and certain selling stockholders sold 52,929,167 shares of our class A common stock at a price to the public of $26.00
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per share in our initial public offering. In May 2007, certain selling stockholders sold 34,340,484 shares of our class A common stock at a price to the public of $33.50 per share in a secondary offering of our class A common stock. In April 2011, certain selling stockholders sold 10,307,375 shares of our class A common stock at a price to the underwriters of $24.49 per share in a secondary offering of our class A common stock.
Supply Agreement with Boeing for B737, B747, B767 and B777 Platforms
Overview. In connection with the Boeing Acquisition, Spirit entered into long-term supply agreements under which we are Boeing's exclusive supplier for substantially all of the products and services provided by Boeing Wichita to Boeing prior to the closing of the Boeing Acquisition. The main supply contract is primarily comprised of two separate agreements: (1) the Special Business Provisions, or Sustaining SBP, which sets forth the specific terms of the supply arrangement with regard to Boeing's B737, B747, B767 and B777 aircraft and (2) the General Terms Agreement, or GTA, which sets forth other general contractual provisions relating to our various supply arrangements with Boeing, including provisions relating to termination, events of default, assignment, ordering procedures, inspections and quality controls. The summary below describes provisions contained in both the Sustaining SBP and the GTA as both agreements govern the main supply arrangement. We refer to the Sustaining SBP, the GTA and any related purchase order or contract collectively as the "Supply Agreement." The Supply Agreement is a requirements contract which covers certain products, including fuselages, struts/pylons and nacelles (including thrust reversers), wings and wing components, as well as tooling, for Boeing B737, B747, B767 and B777 commercial aircraft programs for the life of these programs, including any commercial derivative models. During the term of the Supply Agreement and absent default by Spirit, Boeing is obligated to purchase from Spirit all of its requirements for products covered by the Supply Agreement. Although Boeing is not required to maintain a minimum production rate, Boeing is subject to a maximum production rate above which it must negotiate with us regarding responsibility for non-recurring expenditures related to a capacity increase.
Pricing. The pricing terms for recurring products under the Supply Agreement expired in May 2013. Under these terms, prices were adjusted each year based on a quantity-based price adjustment formula described in the Supply Agreement whereby average per-unit prices are higher at lower volumes and lower at higher volumes. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other changes. See "Changes" below.
As the expiration of the established pricing terms has passed, Boeing and Spirit are currently negotiating future pricing, to be applicable for a period to be agreed upon by the parties. Boeing and Spirit are required to negotiate the pricing for such additional period in good faith based on prevailing U.S. market conditions for forward fuselages, B737 fuselages and B737/B777 struts and nacelles and based on prevailing global market conditions for all other products. Until the parties are able to agree upon future pricing, pricing will be determined according to the price as of the expiration of the initial eight-year period, adjusted using the existing quantity-based price adjustment formula and annual escalation and such interim pricing will be retroactively adjusted in the period in which we agree on future pricing terms.
Prices for commercial derivative models are to be negotiated in good faith by the parties based on then-prevailing market conditions. If the parties cannot agree on price, then they must engage in dispute resolution pursuant to agreed-upon procedures.
Tooling. Under the Supply Agreement, Boeing owns all tooling used in production or inspection of products covered by the Supply Agreement. Spirit is responsible for providing all new tooling required for manufacturing and delivering products under the Supply Agreement, and Boeing acquires title to such tooling upon completion of the manufacturing of the tools and payment by Boeing. Because Boeing owns this tooling, Spirit may not sell, lease, dispose of or encumber any of it. Spirit does, however, have the
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option to procure certain limited tooling needed to manufacture and deliver both Boeing and non-Boeing parts.
Although Boeing owns the tooling, Spirit has the limited right to use this tooling without any additional charge to perform its obligations to Boeing under the Supply Agreement and also to provide aftermarket services in accordance with the rights granted to Spirit under other related agreements, including royalty-bearing license agreements. Boeing is entitled to use the tooling only under limited circumstances. Spirit is responsible for maintaining and insuring the tooling. Spirit's rights to use the tooling are subject to the termination provisions of the Supply Agreement.
Changes. Upon written notification to Spirit, Boeing has the right to make changes within the general scope of work performed by Spirit under the Supply Agreement. If any such change increases or decreases the cost or time required to perform, Boeing and Spirit must negotiate an equitable adjustment (based on rates, factors and methodology set forth in the Supply Agreement) to the price or schedule to reflect the change, except that Spirit will be responsible for absorbing the cost of certain changes. The Supply Agreement also provides for equitable adjustments to product prices if there are order accelerations or decelerations, depending on lead times identified in the Supply Agreement. In addition, the Supply Agreement provides for equitable adjustments to recurring part prices as well as the price of non-recurring work upon the satisfaction of certain conditions and upon certain minimum dollar thresholds being met.
Additional Spirit Costs. In the event that Boeing rejects a product manufactured by Spirit, Boeing is entitled to repair or rework such product, and Spirit is required to pay all reasonable costs and expenses incurred by Boeing related thereto. In addition, Spirit is required to reimburse Boeing for costs expended in providing Spirit and/or Spirit's contractors the technical or manufacturing assistance with respect to Spirit nonperformance issues.
Termination for Convenience. Subject to the restrictions prohibiting Boeing from manufacturing certain products supplied by Spirit or purchasing such products from any other supplier, Boeing may, at any time, terminate all or part of any order under the Supply Agreement by written notice to Spirit. If Boeing terminates all or part of an order, Spirit is entitled to compensation for certain costs.
Termination of Airplane Program. If Boeing decides not to initiate or continue production of a Boeing commercial aircraft model B737, B747, B767 or B777 or commercial derivative because it determines there is insufficient business basis for proceeding, Boeing may terminate such model or derivative, including any order therefor, by written notice to Spirit. In the event of such a termination, Boeing will be liable to Spirit for any orders issued prior to the date of the termination notice and may also be liable for certain termination costs.
Events of Default and Remedies. It is an "event of default" under the Supply Agreement if Spirit:
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If an event of default occurs, Boeing has the right to exercise various remedies set forth in the Supply Agreement, including the right to manufacture or to otherwise obtain substitute products, cancel any or all outstanding orders under the Supply Agreement, and/or terminate the Supply Agreement. Boeing is limited, however, in its ability to cancel orders or terminate the Supply Agreement for the defaults described in items (1), (2) and (6) above. In such cases, Boeing may not cancel orders unless the event of default is material and has an operational or financial impact on Boeing and may not terminate the Supply Agreement unless there are repeated, material events of default and certain other criteria are satisfied. Boeing may only terminate the Supply Agreement with respect to the aircraft program affected by the event of default. If two or more programs are affected by the event of default, Boeing may terminate the entire Supply Agreement. Boeing may also require Spirit to transfer tooling, raw material, work-in-process and other inventory and certain intellectual property to Boeing in return for reasonable compensation.
Excusable Delay. If delivery of any product is delayed by circumstances beyond Spirit's reasonable control, and without Spirit's or its suppliers' or subcontractors' error or negligence (including, without limitation, acts of God, war, terrorist acts, fires, floods, epidemics, strikes, unusually severe weather, riots and acts of government), or by any material act or failure to act by Boeing, each being an "excusable delay," then, subject to certain exceptions, Spirit's delivery obligations will be extended. If delivery of any product is delayed by an excusable delay for more than three months, Boeing may cancel all or part of any order for the delayed products.
If delivery of any product constituting more than 25% of the ship set value for one or more models of program airplanes is delayed by an excusable delay for more than five months, Boeing may cancel the Sustaining SBP as it applies to such models of program airplanes, and neither party will have any liability to the other, other than as described in the above paragraph under the heading "Events of Default and Remedies."
Assignment. Spirit may not assign its rights under the Supply Agreement other than with Boeing's consent, which Boeing may not unreasonably withhold unless the assignment is to a disqualified person. A disqualified person is one: (1) whose principal business is as an OEM of commercial aircraft, space vehicles, satellites or defense systems; (2) that Boeing reasonably believes will not be able to perform its obligations under the Supply Agreement; (3) that, after giving effect to the transaction, would be a supplier of more than 40% by value of the major structural components of any Boeing program then in production; or (4) who is, or is an affiliate of, a commercial airplane operator or is one of five named corporate groups. Sale of majority voting power or of all or substantially all of Spirit's assets to a disqualified person is considered an assignment.
B787 Supply Agreement with Boeing
Overview. Spirit and Boeing also entered into a long-term supply agreement for Boeing's B787 program, or the B787 Supply Agreement, which covers the life of the program and commercial derivatives. The B787 Supply Agreement is a requirements contract pursuant to which Spirit is Boeing's exclusive supplier for the forward fuselage, fixed and moveable leading wing edges, engine pylons and related tooling for the B787. While the B787 Supply Agreement does not provide for a minimum or maximum production rate, the agreement acknowledges that Spirit is responsible for capitalization to support a rate of ten per month. If Boeing decides to increase production above ten ship sets per month, and if a certain percentage of the profit margin of the additional revenue due to the increase is not projected to recover expenditures required to increase the production rate beyond that level, Spirit will negotiate with Boeing regarding an equitable price adjustment. Pursuant to the B787 Amendment described below, Spirit has agreed to proceed with all necessary capital and equipment investments required to support a rate of ten ship sets per month. Under the B787 Supply Agreement, Spirit also provides certain support, development and redesign engineering services to Boeing at an agreed hourly rate.
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Pricing. Pricing for the initial configuration of the B787-8 model is generally established through 2021, with prices decreasing as cumulative volume levels are met over the life of the program. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine the initial B787-9 and B787-10 prices and have not yet reached agreement. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other specific changes, including design changes from the contract configuration baseline for each B787 model. As outlined in the amendment to the B787 Supply Agreement dated May 12, 2011 (the "B787 Amendment"), both parties will participate in an annual price adjustment process for each B787 model, which will involve an evaluation of the cost impact to Spirit as a result of Boeing directed changes. The price adjustments are calculated using a methodology set out in the B787 Supply Agreement. The evaluations take place and conclude in the first quarter of each calendar year and apply retroactively to certain of the prior year's prices to the extent set out in the B787 Supply Agreement. In June 2013, Spirit and Boeing completed the first annual price adjustment for the B787-8.
Advance Payments/Deferred Revenue. In December 2010, Spirit and Boeing entered into a memorandum of agreement ("MOA") and a settlement agreement regarding certain claims associated with the development and production of the B787 airplane. As part of these agreements, Spirit received a payment for $236.2 million which was recorded as deferred revenue (short-term) within the December 31, 2010 consolidated balance sheet pending finalization of a contract amendment, which would contain the final settlement terms. On May 12, 2011, Spirit and Boeing entered into the B787 Amendment, which finalized and implemented substantially all of the provisions of the December 2010 MOA. Among other things, the B787 Amendment spread out repayment of a $700.0 million cash advance made by Boeing to Spirit in 2007 to be offset against the purchase price of the first 1,000 B787 ship sets delivered to Boeing, instead of the first 500 ship sets. In the event Boeing does not take delivery of 1,000 ship sets prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million due on December 15th of each year until the advance payments have been fully recovered by Boeing. The B787 Amendment also changed the treatment of advances paid by Boeing for certain non-recurring work into a nonrefundable payment in full for such work.
Accordingly, portions of the advance repayment liability are included as current and long-term liabilities in our consolidated balance sheet. As of December 31, 2013, the amount of advance payments and deferred revenue received by us from Boeing under the B787 Supply Agreement and not yet repaid or recognized as revenue was $600.2 million.
Termination of Airplane Program. If Boeing decides not to continue production of the B787 airplane program because it determines, after consultation with Spirit, that there is an insufficient business basis for proceeding, Boeing may terminate the B787 airplane program, including any orders, by written notice to Spirit. In the event of such a termination, Boeing will be liable to Spirit for costs incurred in connection with any orders issued prior to the date of the termination notice and may also be liable for certain termination costs and for compensation for any tools, raw materials or work-in-process requested by Boeing in connection with the termination.
Events of Default and Remedies. It is an "event of default" under the B787 Supply Agreement if Spirit:
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If an event of default occurs, Boeing has the right to exercise various remedies set forth in the B787 Supply Agreement, including the right to manufacture or to otherwise obtain substitute products, cancel any or all outstanding orders under the B787 Supply Agreement and/or terminate the B787 Supply Agreement. Before terminating any order or the B787 Supply Agreement, Boeing is required to work with Spirit to attempt to agree on a satisfactory recovery plan. Boeing may also require Spirit to transfer tooling, raw material, work-in-process and other inventory and certain intellectual property to Boeing in return for reasonable compensation.
Assignment. Spirit may not assign its rights under the B787 Supply Agreement or any related order other than with Boeing's consent, which Boeing may not unreasonably withhold unless the assignment is to a disqualified person. A disqualified person is one: (1) whose principal business is as an OEM of commercial aircraft, space vehicles, satellites or defense systems; (2) that Boeing reasonably believes will not be able to perform its obligations under the B787 Supply Agreement; (3) that, after giving effect to the transaction, would be a supplier of more than 40% by value of the major structural components of any Boeing program then in production; or (4) who is, or is an affiliate of, a commercial airplane operator or is one of five named corporate groups. Sale of majority voting power or of all or substantially all of Spirit's assets to a disqualified person is considered an assignment.
License of Intellectual Property
Supply Agreement. All technical work product and works of authorship produced by or for Spirit with respect to any work performed by or for Spirit pursuant to the Supply Agreement are the exclusive property of Boeing. All inventions conceived by or for Spirit with respect to any work performed by or for Spirit pursuant to the Supply Agreement and any patents claiming such inventions are the exclusive property of Spirit, except that Boeing will own any such inventions that Boeing reasonably believes are applicable to the B787 platform, and Boeing may seek patent protection for such B787 inventions or hold them as trade secrets, provided that, if Boeing does not seek patent protection, Spirit may do so.
Except as Boeing otherwise agrees, Spirit may only use Boeing proprietary information and materials (such as tangible and intangible confidential, proprietary and/or trade secret information and tooling) in the performance of its obligations under the Supply Agreement. Spirit is prohibited from selling products manufactured using Boeing proprietary information and materials to any person other than Boeing without Boeing's authorization.
Spirit has granted to Boeing a license to Spirit proprietary information and materials and software and related products for use in connection with the testing, certification, use, sale or support of a product covered by the Supply Agreement, or the manufacture, testing, certification, use, sale or support of any aircraft including and/or utilizing a product covered by the Supply Agreement. Spirit has also granted to Boeing a license to use Spirit intellectual property to the extent such intellectual property interferes with Boeing's use of products or intellectual property belonging to Boeing under the Supply Agreement.
To protect Boeing against Spirit's default, Spirit has granted to Boeing a license, exercisable on such default to practice and/or use, and license for others to practice and/or use on Boeing's behalf, Spirit's
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intellectual property and tooling related to the development, production, maintenance or repair of products in connection with making, using and selling products. As a part of the foregoing license, Spirit must, at the written request of and at no additional cost to Boeing, promptly deliver to Boeing any such licensed property considered by Boeing to be necessary to exercise Boeing's rights under the license.
B787 Supply Agreement. The B787 Supply Agreement establishes three classifications for patented invention and proprietary information: (1) intellectual property developed by Spirit during activity under the B787 Supply Agreement, or Spirit IP; (2) intellectual property developed jointly by Boeing and Spirit during that activity, or Joint IP; and (3) all other intellectual property developed during activity under the B787 Supply Agreement, or Boeing IP.
Boeing may use Spirit IP for work on the B787 program and Spirit may license it to third parties for work on such program. Spirit may also not unreasonably withhold consent to the license of such intellectual property to third parties for work on other Boeing programs, provided that it may require a reasonable royalty to be paid and, with respect to commercial airplane programs, that Spirit has been offered an opportunity, to the extent commercially feasible, to work on such programs.
Each party is free to use Joint IP in connection with work on the B787 and other Boeing programs, but each must obtain the consent of the other to use it for other purposes. If either party wishes to license Joint IP to a third party for work on a Boeing program other than the B787, then the other party may require a reasonable royalty, but may not unreasonably withhold its consent, as long as (if the program in question is another Boeing commercial airplane program) Spirit has been offered an opportunity, to the extent commercially feasible, to perform work for the particular program.
Spirit is entitled to use Boeing IP for the B787 program, and may require Boeing to license it to subcontractors for the same purpose.
Additional License From Boeing. Boeing has licensed certain intellectual property rights to Spirit under a Hardware Material Services General Terms Agreement, or HMSGTA, and four initial Supplemental License Agreements, or SLAs, under the HMSGTA. The HMSGTA and the initial SLAs grant Spirit licenses to use Boeing intellectual property to manufacture listed parts for the aftermarket and to perform maintenance, repair and overhaul, or MRO, of aircraft and aircraft components for customers other than Boeing. These agreements also permit Spirit to use knowledge obtained by Spirit personnel prior to the closing of the Boeing Acquisition. Spirit also may obtain additional SLAs from Boeing and those SLAs will also supersede the restrictions on Spirit's use of Boeing's proprietary information and materials described above. Spirit pays Boeing royalties for the use of these licenses.
We have several patents pertaining to our processes and products. While our patents, in the aggregate, are of material importance to our business, no individual patent or group of patents is of material importance. We also rely on trade secrets, confidentiality agreements, unpatented knowledge, creative products development and continuing technological advancement to maintain our competitive position.
We are organized into three principal reporting segments: (1) Fuselage Systems, which includes forward, mid and rear fuselage sections; (2) Propulsion Systems, which includes nacelles, struts/pylons and engine structural components; and (3) Wing Systems, which includes wing systems and components, flight control surfaces and other miscellaneous structural parts. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas and Kinston, North Carolina, with an assembly plant for the A350 XWB in Saint-Nazaire, France. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas, and the Wing Systems segment manufactures products at our facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Subang, Malaysia and Kinston, North Carolina. Fuselage Systems, Propulsion Systems and Wing Systems represented approximately 48%, 27%,
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and 25%, of our net revenues for the twelve months ended December 31, 2013, respectively. All other activities fall within the All Other segment, representing less than 1% of our net revenues for the twelve months ended December 31, 2013, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita.
As the programs we are involved in move through their life cycles, we classify them based on where they fall in the life cycle. The following table summarizes the program phases and programs in each category:
Program Phases
|
Life Cycle
|
Aircraft Platform
|
||
---|---|---|---|---|
New | Generally early in development phase with possible low rate production |
A350 XWB, Sikorsky CH53-K,
Mitsubishi Regional Jet, Bombardier CSeries |
||
Significant design evolution | ||||
Typically has not achieved certifications | ||||
Maturing |
|
Generally in early production phase |
|
B787, Rolls-Royce BR725, G280, |
Typically certification is achieved in this phase | G650, KC-46 | |||
Less design evolution than in new program phase | ||||
Mature |
|
Generally at full-rate production |
|
B737, B747, B767, B777, A320 |
Typically certification has been achieved | Family, A330, A380, P8-A | |||
Relatively stable design with less engineering change |
Commercial Aircraft Structures
We principally design, engineer and manufacture commercial aircraft structures such as fuselages, nacelles (including thrust reversers), struts/pylons, wings and wing assemblies and flight control surfaces. We are the largest independent supplier of aerostructures to Boeing and one of the largest independent suppliers of aerostructures to Airbus. Sales related to the commercial aircraft structures market, some of which may be used in military applications, represented approximately 99% of our net revenues for the year ended December 31, 2013.
Our structural components, in particular the forward fuselage and nacelles, are among the most complex and highly engineered structural components and represent a significant percentage of the costs of each aircraft. We are currently the sole-source supplier of 97% of the products we sell to Boeing and Airbus, as measured by dollar value of products sold. We typically sell a package of aerostructure components, referred to as a ship set, to our customers.
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The following table summarizes the major commercial programs that we currently have under long-term contract by product and aircraft platform.
Product
|
Description
|
Aircraft Platform
|
||
---|---|---|---|---|
Fuselage Systems | ||||
Forward Fuselage |
Forward section of fuselage which houses flight deck, passenger cabin and cargo area | B737, B747, B767, B777, B787 | ||
Other Fuselage Sections |
Mid-section and other sections of the fuselage and certain other structural components, including floor beams |
B737, B747, B777, A350 XWB |
||
Propulsion Systems | ||||
Nacelles (including Thrust Reversers) |
Aerodynamic structure surrounding engines | B737, B747, B767, B777, Rolls-Royce BR725 Engine (for Gulfstream G650) | ||
Struts/Pylons |
Structure that connects engine to the wing |
B737, B747, B767, B777, B787, Mitsubishi Regional Jet, Bombardier CSeries |
||
Wing Systems | ||||
Flight Control Surfaces |
Flaps and slats | B737, B777, A320 family | ||
Wing Structures |
Wing framework which consists mainly of spars, ribs, fixed leading edge, stringers, trailing edges and flap track beams |
B737, B747, B767, B777, B787, A320 family, A330, A340, A350 XWB, A380, Gulfstream G650, Gulfstream G280 |
Military Equipment
In addition to providing aerostructures for commercial aircraft, we also design, engineer and manufacture structural components for military aircraft. We have been awarded a significant amount of work for the B737 P-8A, B737 C40 and B767 KC-46 Tanker. The B737 P-8A, B737 C40 and B767 KC-46 Tanker are commercial aircraft modified for military use. Other military programs for which we provide products include the development of the Sikorsky CH-53K and Bell Helicopter V-280 tilt-rotor, and various other programs.
The following table summarizes the major military programs that we currently have under long-term contract by product and military platform. Rotorcraft is part of the Fuselage Systems segment and low observables, radome and other military are part of the Wing Systems segment.
Product
|
Description
|
Military Platform
|
||
---|---|---|---|---|
Low Observables | Radar absorbent and translucent materials | Various | ||
Rotorcraft | Forward cockpit and cabin | Sikorsky CH-53K Development Program | ||
|
|
Fuselage |
|
Bell Helicopter V-280 Development Program |
Other Military | Fabrication, bonding, assembly, testing, tooling, processing, engineering analysis, and training | Various |
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Aftermarket
We continue to broaden our base for aftermarket support of the products we design and build. We have developed our global sales and marketing channel for spare parts, with sales offices in Singapore, Ireland, China and the U.S. Our Spirit catalog has over 14,000 parts that we are selling directly to the marketplace by virtue of having obtained parts manufacturing approvals from the FAA. In the area of MRO we have repair stations in Wichita, Kansas, with FAA and European Aviation Safety Agency (EASA) certifications, and Prestwick, Scotland, which is EASA-certified with FAA certification pending. In addition, we operate an MRO repair station through a joint venture in Jinjiang, China, Taikoo Spirit AeroSystems Composite Company, Ltd., which holds Civil Aviation Administration of China certification and FAA and EASA approval.
The following table summarizes our aftermarket products and services:
Product
|
Description
|
Aircraft Platform
|
||
---|---|---|---|---|
Spares | Provides replacement parts and components support for: | |||
In production aircraft | B737NG, B747, B767, B777, B787, Gulfstream G280 and G650, A320 family, A330, A340, A380 | |||
|
|
Out of production aircraft |
|
B707, B727, B737 Classic, B757 |
Maintenance, Repair and Overhaul | Certified repair stations that provide complete on-site nacelle repair and overhaul; maintains global partnerships to support MRO services | B737, B747, B757, B767, B777 and G650 nacelles, and G650 and G280 wing components | ||
Rotable Assets |
|
Maintain a pool of rotable assets for exchange and/or lease |
|
B737, B747, B757, B767, B777 |
We believe our key competitive strengths include:
Leading Position in the Growing Commercial Aerostructures Market. We are one of the largest independent non-OEM commercial aerostructures manufacturers with an estimated 17% market share of the global market. Based on their published aircraft backlog figures, Boeing and Airbus had a combined backlog of 10,639 commercial aircraft as of December 31, 2013, and 9,055 commercial aircraft as of December 31, 2012. We are under contract to provide aerostructure products for approximately 98% of the aircraft that comprise this commercial aircraft backlog. We are currently the sole-source supplier of 97% of the products we sell to Boeing and Airbus, as measured by dollar value of the products sold. The significant Boeing and Airbus aircraft order backlog for scheduled deliveries in this decade, and our strong relationships with Boeing and Airbus, should enable us to continue to profitably grow our core commercial aerostructures business.
Participation on High-Volume and Major Growth Platforms. We derive a high proportion of our Boeing revenues from the high-volume B737 program and a high proportion of our Airbus revenues from the high-volume A320 program. Boeing's backlog consists of approximately 3,680 B737s (more than eight years of backlog at current build rates) and Airbus' backlog consists of approximately 4,298 aircraft in the A320 family (more than eight years of backlog at current build rates). The B737 and A320 families are Boeing's and Airbus' best-selling commercial airplanes, respectively. We have also been awarded a significant amount of work on major twin-aisle programs, the B777, B787 and A350 XWB.
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Stable Base Business. We have entered into long-term supply agreements with Boeing and Airbus, our two largest customers, making us the exclusive supplier for most of the products covered by these contracts. Our supply agreements with Boeing provide that we will continue to supply essentially all of the products we currently supply to Boeing for the life of the current aircraft programs, including commercial derivative models. The principal supply agreements we have entered into with Boeing make us Boeing's exclusive source for substantially all of the products covered by the agreements.
Under our supply agreements with Airbus, we supply most of our products for the life of the aircraft program, including commercial derivative models. For the A380 and A350 XWB, we have long-term requirements contracts with Airbus that cover a fixed number of units. We are currently the sole-source supplier for approximately 50% of the products, as measured by dollar volume, that we sell directly to Airbus.
Strong Incumbent and Competitive Position. We have a strong incumbent position on the products we currently supply to Boeing and Airbus, forged by long-standing relationships and long-term supply agreements. Several members of our management team have a long history of working in the aerospace industry, at Boeing Wichita and BAE Aerostructures. We believe our management team possesses inherent knowledge of and relationships with Boeing and Airbus that may not be matched to a corresponding degree between other suppliers and these two OEMs.
We believe that OEMs incur significant costs to change aerostructures suppliers once contracts are awarded. Such changes after contract award require additional testing and certification, which may create production delays and significant costs for both the OEM and the new supplier. We also believe it would be cost prohibitive for other suppliers to duplicate our facilities and the over 20,000 major pieces of equipment that we own or operate. The combined insurable replacement value of all the buildings and equipment we own or operate is approximately $6.6 billion, including approximately $2.6 billion for buildings, approximately $2.4 billion for equipment that we own and approximately $1.6 billion for other equipment used in the operation of our business. The insurable values represent the estimated replacement cost of buildings and equipment used in our operations and covered by property insurance, and exceed the fair value of assets acquired as determined for financial reporting purposes. As a result, we believe that as long as we continue to meet our customers' requirements, the probability that they change suppliers on our current statement of work is quite low. Our incumbent position also provides us with a competitive advantage with respect to new business from our customers.
Industry-Leading Technology, Design Capabilities and Manufacturing Expertise. Spirit AeroSystems, independently, and previously as Boeing Wichita, has over 80 years of experience designing and manufacturing large-scale, complex aerostructures. We possess industry-leading engineering capabilities that include significant expertise in structural design, technology development, test, and regulatory certification (FAA and international civil aviation authorities). We specialize in the use of metallic and composite materials, conducting stress analyses to ensure structural integrity, systems engineering to ensure customer and regulatory requirements are clearly identified and managed, and acoustics technology.
With approximately 1,500 degreed engineering and technical employees (including over 40 degreed contract engineers) and access to approximately 800 engineers from other engineering firms, we possess knowledge and manufacturing know-how that customers depend on and that would be difficult for other suppliers to replicate. In addition to our engineering expertise, we have strong manufacturing and technological capabilities. Our manufacturing processes are highly automated, delivering efficiency and quality, and we have expertise in manufacturing aerostructures using both metallic and composite materials. We have strong technical expertise in bonding and metals fabrication, assembly, tooling and composite manufacturing, including the handling of all composite material grades and fabricating large-scale complex contour composites. We provide aftermarket support for the products we design and build.
We believe our technological, engineering and manufacturing capabilities separate us from many of our competitors and give us a significant competitive advantage to grow our business and increase our
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market share. The fact that we are one of the major external suppliers of forward fuselages for large commercial aircraft demonstrates our industry leadership. The forward fuselage is one of the most complex and technologically advanced aerostructures on a commercial aircraft because it must satisfy the aircraft's contour requirements; balance strength, aerodynamics and weight; and house the cockpit and avionics.
Competitive and Predictable Labor Cost Structure. Following the Boeing Acquisition, we entered into new labor contracts with our unions that established wage levels that are aligned with the local market. We also changed work rules and significantly reduced the number of job categories, resulting in greater flexibility in work assignment programs and increased productivity. Over the past four years, we successfully negotiated long-term labor agreements with each of the five unions representing factory and office workers in our U.S. locations. As a result, we expect our labor costs to be stable and predictable through 2019.
Experienced Management Team. We have an experienced and proven management team with significant aerospace and defense industry experience. We continue to add new talent to our management team and realign our existing talent pool. Our management team has successfully expanded our business and established the stand-alone operations of our business, and is actively working to reduce costs. Many of our executives and senior managers have lengthy experience working with our primary customers, including Boeing and Airbus, which provides us with detailed insight into how we can better serve our customers.
We operate in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. Substantially all revenues in the three principal segments are from Boeing, with the exception of Wing Systems, which includes revenues from Airbus and other customers. We serve customers in addition to Boeing and Airbus across our three principal segments; however, these customers currently do not represent a significant portion of our revenues, and are not expected to in the near future. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas.
The 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 MRO. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas; Kinston, North Carolina; and Saint-Nazaire, France.
The 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. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas.
The Wing Systems segment includes development, production and marketing of wings and wing components (including flight control surfaces) and 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; Kinston, North Carolina; Prestwick, Scotland; and Subang, Malaysia.
We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.
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Our established sales and marketing infrastructure supports our efforts to expand our business with new and existing customers in three sectors of the aerostructures industry: (1) large commercial airplanes, (2) business and regional jets and (3) military/helicopter. The sales directors establish and maintain relationships with individual customers and are supported in their campaigns by sales teams within specific product specialties and a market research team performing various analyses related to those products and customers. The comprehensive sales and marketing teams work closely to ensure a consistent, single message approach with customers.
Although we have long-term contracts with Boeing and Airbus on programs such as the B737, B787, A320, A350 XWB and A380, and OEMs generally desire to minimize costs by retaining established aerostructure suppliers, our sales and marketing team continues to maintain strong relationships with the OEMs to position us for future business opportunities. Our marketing team continues to research and analyze trends in our industry and in new product development, and our sales team maintains regular contact with key Boeing and Airbus decision-makers to prepare for new business opportunities from both companies.
We maintain a customer contact database to maximize our interactions with existing and potential customers. In the time that Spirit has existed as an independent company, we have been successful in building a positive identity and name recognition for the Company brand through advertising, trade shows, sponsorships and Spirit customer events. In order to diversify and win new customers, we market our expertise in the design and manufacture of major aerostructures and advanced manufacturing capabilities with both composites and traditional metals processes.
Our primary customers are aircraft OEMs. Boeing and Airbus are our two largest customers. We are the largest independent aerostructures supplier to Boeing and one of the largest independent suppliers to Airbus. We entered into long-term supply agreements with our customers to provide aerostructure products to aircraft programs. As of December 31, 2013, virtually all of the products we sell are under long-term contracts and 97% of those products, as measured by dollar value of products sold, are supplied by us on a sole-sourced basis.
We have good relationships with our customers due to our diverse product offerings, leading design and manufacturing capabilities using both metallic and composite materials, and competitive pricing.
Boeing. For the twelve months ended December 31, 2013, approximately 84% of our revenues were from sales to Boeing. We have a strong relationship with Boeing given our predecessor's 75+ year history as a Boeing division. As part of the Boeing Acquisition, we entered into a long-term supply agreement under which we are Boeing's exclusive supplier for substantially all of the products and services provided by Boeing Wichita prior to the Boeing Acquisition for the life of the programs. In addition, Boeing selected us to be the design leader for the Boeing B787 forward fuselage based in part on our expertise with composite technologies.
We believe our relationship with Boeing is unmatched in the industry and will allow us to continue to be an integral partner with Boeing in the designing, engineering and manufacturing of complex aerostructures.
Airbus. For the twelve months ended December 31, 2013, approximately 10% of our revenues were from sales to Airbus. As a result of the BAE Acquisition, we became one of the largest independent aerostructures suppliers to Airbus, and we have expanded our relationship through new business wins. Under our supply agreement with Airbus, we supply products for the life of the aircraft program, including commercial derivative models, with pricing determined through 2015. For the A350 XWB and A380 programs, we have long-term requirements contracts with Airbus that cover a fixed number of units. We believe we can leverage our relationship with Airbus and our history of delivering high-quality products to further increase our sales to Airbus and continue to partner with Airbus on new programs going forward.
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We are a significant supplier of the composite fuselage structure for the new Airbus A350 XWB. To accommodate this and other work, we expanded our operations in 2011 with the opening of a manufacturing facility in Kinston, North Carolina and an assembly plant in Saint-Nazaire, France, which will assemble the center fuselage sections it receives from the Kinston, North Carolina facility before transporting the completed assembled unit to Airbus. In addition, we have a contract with Airbus to design and manufacture a major wing structure for the A350 XWB program. Spirit Europe designs and assembles the wing leading edge structure primarily at its facility in Prestwick, Scotland. The composite front spar is built at the facility in Kinston, North Carolina with sub-assemblies being manufactured at the Spirit AeroSystems Malaysia facility in Subang, Malaysia.
Although most of our revenues are obtained from sales inside the U.S., we generated $806.1 million, $785.7 million, and $653.1 million in sales to international customers for the twelve months ended December 31, 2013, December 31, 2012, and December 31, 2011, respectively, primarily to Airbus.
The following chart illustrates the split between domestic and foreign revenues (dollars in millions):
|
Year Ended
December 31, 2013 |
Year Ended
December 31, 2012 |
Year Ended
December 31, 2011 |
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue Source
(1)
|
Net Revenues |
Percent of
Total Net Revenues |
Net Revenues |
Percent of
Total Net Revenues |
Net Revenues |
Percent of
Total Net Revenues |
|||||||||||||
United States |
$ | 5,154.9 | 87 | % | $ | 4,612.0 | 85 | % | $ | 4,210.7 | 87 | % | |||||||
International |
|||||||||||||||||||
United Kingdom |
559.7 | 9 | % | 470.4 | 9 | % | 422.6 | 8 | % | ||||||||||
Other |
246.4 | 4 | % | 315.3 | 6 | % | 230.5 | 5 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Total International |
806.1 | 13 | % | 785.7 | 15 | % | 653.1 | 13 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Revenues |
$ | 5,961.0 | 100 | % | $ | 5,397.7 | 100 | % | $ | 4,863.8 | 100 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
The international revenue is included primarily in the Wing Systems segment. All other segment revenues are primarily from U.S. sales. Approximately 6% of our long-lived assets based on book value are located in the United Kingdom as part of Spirit Europe with approximately another 5% of our long-lived assets located in countries outside the United States and the United Kingdom.
As of December 31, 2013, our expected backlog associated with large commercial aircraft, business and regional jet, and military equipment deliveries through 2019, calculated based on contractual product prices and expected delivery volumes, was approximately $41.1 billion. This is an increase of $5.8 billion from our corresponding estimate as of the end of 2012 reflecting the fact that Airbus and Boeing new orders exceeded deliveries in 2013. Backlog is calculated based on the number of units Spirit is under contract to produce on our fixed quantity contracts, and Boeing and Airbus announced backlog on our supply agreements. The number of units may be subject to cancellation or delay by the customer prior to shipment, depending on contract terms. The level of unfilled orders at any given date during the year may be materially affected by the timing of our receipt of firm orders and additional airplane orders, and the speed with which those orders are filled. Accordingly, our expected backlog as of December 31, 2013 may not necessarily represent the actual amount of deliveries or sales for any future period.
Manufacturing
Our expertise is in designing, engineering and manufacturing large-scale, complex aerostructures. We maintain eight state-of-the-art manufacturing facilities in Wichita, Kansas; Chanute, Kansas; Tulsa,
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Oklahoma; McAlester, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; Saint-Nazaire, France; and Subang, Malaysia.
Our core manufacturing competencies include:
Our manufacturing expertise is supported by our state-of-the-art equipment. We have over 20,000 major pieces of equipment installed in our customized manufacturing facilities. For example, for the manufacture of the B787 composite forward fuselage, we installed a 30-foot diameter by 70-foot long autoclave, which is one of the largest autoclaves in the world. An autoclave is an enclosure device that generates controlled internal heat and pressure conditions used to cure and bond certain resins which is used in the manufacture of composite structures. We installed a comparable autoclave as well as other specialized machines in Kinston, North Carolina to support our work on the A350 XWB. We intend to continue to make the appropriate investments in our facilities to support and maintain our industry-leading manufacturing expertise.
Engineering
Spirit employs approximately 1,500 engineers and technical employees, including over 40 contract engineers. In addition, we currently contract the work of approximately 800 engineers from engineering services firms worldwide.
Spirit employs 28 technical fellows who are experts in engineering and who keep the Company current with new technology by producing technical solutions for new and existing products and processes. We also employ 13 FAA designees and an additional 13 engineers who are in the process of becoming designees. The designees are experienced engineers appointed by the FAA to approve engineering data and witness compliance testing used for certification. In addition, we have an additional seven FAA designees available via contract to assist on an as-needed basis.
The primary purpose of the engineering organization is to provide continuous support for new and ongoing designs, technology innovation and development for customer advancements, and production-related process improvements. We possess a broad base of engineering skills for design, analysis, test, certification, tooling and support of major fuselage, wing and propulsion assemblies using both metallic and composite materials. In addition, our regulatory certification expertise helps ensure associated designs and design changes are compliant with applicable regulations.
Our engineering organization is composed of four primary groups, including: (1) Structures Design and Drafting, which focuses on production support, design-for-manufacturing and major product derivatives, and new customer introductions; (2) Structures Technology, which focuses on overall structural integrity over the lifecycle of the airframe through stress and durability analysis, damage tolerance analysis and vibration testing; (3) Manufacturing Engineering, which is responsible for applying lean manufacturing techniques, interpreting design drawings and providing manufacturing sequence work plans; and (4) Liaison, Lab and Materials, Processes and Standards, which conducts research into defects discovered by quality assurance through analytical chemistry, metallurgical, static and dynamic testing and full-scale testing.
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Our industry-leading engineering capabilities are key strategic factors differentiating us from our competitors.
Research and Development
We believe that world-class research and development helps to maintain our position as an advanced partner to our OEM customers' new product development teams. As a result, we spend significant capital and financial resources on our research and development, including approximately $34.7 million during the year ended December 31, 2013, approximately $34.1 million during the year ended December 31, 2012, and approximately $35.7 million during the year ended December 31, 2011. Through our research, we strive to develop unique intellectual property and technologies that will improve our OEM customers' products and, at the same time, position us to win work on new products. Our development effort primarily focuses on preparing for the initial production of new products and improving manufacturing processes on our current work. It also serves as an ongoing process that helps develop ways to reduce production costs and streamline manufacturing processes.
Our research and development is geared toward the architectural design of our principal products: fuselage systems, propulsion systems and wing systems. We are currently focused on research in areas such as advanced metallic joining, low-cost composites, acoustic attenuation, efficient structures, systems integration, advanced design and analysis methods, and new material systems. Other items that are expensed relate to research and development that is not funded by the customer. We collaborate with universities, research facilities and technology partners in our research and development.
The principal raw materials used in our manufacturing operations are aluminum, titanium, steel and carbon fiber. We also purchase metallic parts, non-metallic parts, and machined components. In addition, we procure subassemblies from various manufacturers which are used in the final aerostructure assembly.
Currently we have approximately 1,400 active manufacturing suppliers. No one supplier represents more than 3% of our total cost of sales. Our strategy is to enter into long-term contracts with suppliers to secure competitive pricing. Our exposure to rising costs of raw material is limited to some extent through leveraging relationships with our OEM's high-volume contracts.
We continue to seek and develop sourcing opportunities from North America to Europe and Asia to achieve a competitive global cost structure. Over 25 countries are represented in our international network of suppliers.
Our operations and facilities are subject to various environmental, health and safety laws and regulations, including federal, state, local and foreign government requirements, governing, among other matters, the emission, discharge, handling and disposal of regulated materials, the investigation and remediation of contaminated sites, and permits required in connection with our operations. Our operations are designed, maintained and operated to promote protection of human health and the environment. Although we believe that our operations and facilities are in material compliance with applicable environmental and worker protection laws and regulations, management cannot provide assurance that future changes in such laws or their enforcement, or the nature of our operations will not require us to make significant additional expenditures to ensure continued compliance. Further, we could incur substantial costs, including costs to reduce air emissions, clean-up costs, fines and sanctions, and third-party property damage or personal injury claims as a result of violations of or liabilities under environmental laws, relevant common law or the environmental permits required for our operations.
New regulations or more stringent enforcement of existing requirements could also result in additional compliance costs. For example, various governments have enacted or are considering enactment
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of laws to reduce emissions of carbon dioxide and other so-called greenhouse gases ("GHG"). In particular, the U.S. Environmental Protection Agency (the "EPA") has promulgated new regulations that require certain of our facilities to report annual GHG emissions and may require new operating permits to be issued for those facilities. In the absence of a national price for carbon-based air pollutant emissions, new legislation from Congress, or information relative to additional regulation from the EPA, we are not in a position at this time to estimate the costs which may result from these or similar actions.
United States
Under some environmental laws in the United States, a current or previous owner or operator of a contaminated site may be held liable for the entire cost of investigation, removal or remediation of regulated materials at such property, whether or not the owner or operator knew of, or was responsible for, the presence of such regulated materials. Persons who arrange for disposal or treatment of hazardous materials also may be liable for the costs of investigation, removal or remediation of those substances at a disposal or treatment site, regardless of whether the affected site is owned or operated by them. Because we own and/or operate a number of facilities that have a history of industrial or commercial use and because we arrange for the disposal of regulated materials at many disposal sites, we may and do incur costs for investigation, removal and remediation.
The Asset Purchase Agreement for the Boeing Acquisition, referred to herein as the "Asset Purchase Agreement", provides, with limited exceptions, that Boeing is responsible for environmental liabilities relating to conditions existing at the Wichita, Kansas and Tulsa and McAlester, Oklahoma facilities as of the Boeing Acquisition date. For example, Boeing is subject to an administrative consent order issued by the Kansas Department of Health and Environment, or KDHE, to contain and clean up contaminated groundwater, which underlies a majority of the Wichita site. Pursuant to the KDHE order, Boeing has a long-term remediation plan in place, and containment and remediation efforts are underway. We are responsible for any environmental conditions that we cause at these facilities following the Boeing Acquisition.
United Kingdom
In the United Kingdom, remediation of contaminated land may be compelled by the government in certain situations. If a property is to be redeveloped, the local authority, in its planning role, may require remediation as a condition to issuing a permit. In addition, in situations in which the contamination is causing harm to human health or polluting the environment, the local authority may use its environmental legislative powers to force remediation so that the impacted areas are "suitable for use." If contamination is polluting the property of a third party or causing loss, injury or damage, the third party may file an action against the owner or operator of the source in common law based on negligence or nuisance to recover the value of the loss, injury or damage sustained.
Other International Sites
Our interests in other international sites are subject to foreign government environmental laws and regulations. It is our policy and practice to comply with all requirements, both domestic and international. We believe that our procedures are properly designed to prevent unreasonable risk of environmental damage and resulting financial liability in connection with our business.
Although we are one of the largest independent non-OEM aerostructures suppliers, based on annual revenues, with an estimated 17% share of the global non-OEM aerostructures market, this market remains highly competitive and fragmented. Our primary competition currently comes from either work performed by internal divisions of OEMs or other first-tier suppliers, but direct competition continues to grow.
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Our principal competitors among OEMs include Airbus (including their wholly-owned subsidiaries Aerolia SAS, and Premium Aerotec GmbH), Boeing, Dassault Aviation, Embraer Brazilian Aviation Co., Alenia Aermacchi, Gulfstream Aerospace Co., United Technologies Corporation, and Textron Inc. These OEMs may choose not to outsource production of aerostructures due to their own direct labor and overhead considerations and capacity utilization at their own facilities. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce parts in-house or to outsource them. Offset requirements from customers of OEMs may also drive some decisions relative to their business model for production.
Our principal competitors among non-OEM aerostructures suppliers are Aircelle S.A., Fuji Heavy Industries, Ltd., GKN Aerospace, Kawasaki Heavy Industries, Inc., Mitsubishi Heavy Industries, Sonaca, Triumph Group, Inc., Latecoere S.A., and Nexcelle. Our ability to compete for new aerostructures contracts depends upon (1) our design, engineering and manufacturing capabilities, (2) our underlying cost and pricing structure, (3) our business relationship with OEMs, and (4) our available manufacturing capacity. Some of our competitors have greater resources than we do and, therefore, may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can. Providers of aerostructures have traditionally competed on the basis of cost, technology, quality and service. We believe that developing and maintaining a competitive advantage will require continued investment in product development, engineering, supply-chain management and sales and marketing, and we may not have enough resources to make such investments.
As of December 31, 2013, we had approximately 13,948 employees and approximately 229 contract labor personnel, located in our six U.S. facilities. Approximately 85% of our U.S. employees are represented by five unions. Our largest union is the International Association of Machinists and Aerospace Workers ("IAM"), which represents approximately 7,270 employees, or 52%, of the U.S. workforce. We successfully negotiated a new long-term ten-year contract with the IAM in 2010, which is in effect through June 25, 2020. For IAM-represented employees at our Kinston, North Carolina facility, we successfully negotiated a new long-term contract in December 2012, which is in effect through December 2024. The Society of Professional Engineering Employees in Aerospace Wichita Technical and Professional Unit ("SPEEA WTPU") represents approximately 1,696 employees, or 12%, of the U.S. workforce. In December of 2011, we successfully negotiated a new 9 1 / 2 year contract with SPEEA-WTPU, which is in effect through January 31, 2021. The International Union, Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") represents approximately 1,978 employees, or 14%, of the U.S. workforce. The UAW contract is in effect through November 30, 2020. The Society of Professional Engineering Employees in Aerospace Wichita Engineering Unit ("SPEEA WEU") represents approximately 704 employees, or 5%, of the U.S. workforce. We successfully negotiated a new contract with this union in 2012, which is in effect through December 1, 2018. The International Brotherhood of Electrical Workers ("IBEW") represents approximately 193 employees, or 1%, of the U.S. workforce. The IBEW contract is in effect through September 18, 2020.
As of December 31, 2013, we had approximately 953 employees and approximately 75 contract labor personnel located in our two U.K. facilities. Approximately 679, or 71%, of our U.K. employees are represented by one union, Unite (Amicus Section). In 2013, the Company negotiated two separate ten-year pay agreements, with the Manual Staff bargaining and the Monthly Staff bargaining groups of the Unite union. These agreements fundamentally cover basic pay and variable at risk pay, while other employee terms and conditions generally remain the same from year to year until both parties agree to change them. The current pay agreements expire December 31, 2022.
As of December 31, 2013, we had approximately 562 employees and approximately 14 contract labor personnel in our Malaysia facility. None of our Malaysia employees are currently represented by a union.
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As of December 31, 2013, we had approximately 109 employees and approximately 41 contract labor personnel in our French facilities. None of our France employees are currently represented by a union.
We consider our relationships with our employees to be satisfactory.
Companies engaged in supplying defense-related equipment and services to U.S. Government agencies, either directly or by subcontract, are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally: (1) suspend or debar us from receiving new prime contracts or subcontracts; (2) terminate existing contracts; (3) reduce the value of existing contracts; (4) audit our contract-related costs and fees, including allocated indirect costs; and (5) control and potentially prohibit the export of our products.
Most U.S. Government contracts for which we subcontract can be terminated by the U.S. Government either for its convenience or if the prime contractor defaults by failing to perform under the contract. In addition, the prime contractor typically has the right to terminate our subcontract for its convenience or if we default by failing to perform under the subcontract. Termination for convenience provisions generally provide only for our recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Termination for default provisions generally provide for the subcontractor to be liable for excess costs incurred by the prime contractor in procuring undelivered items from another source.
Foreign Ownership, Control or Influence ("FOCI")
Due to the fact that more than 50% of our voting power is effectively controlled by a non-U.S. entity (Onex) we are required to operate in accordance with the terms and requirements of a Special Security Agreement, or SSA, with the Department of Defense ("DOD"). Under the DOD National Industrial Security Program Operating Manual ("NISPOM"), the U.S. Government will not award contracts to companies determined to be under FOCI, where a DOD Facility Security Clearance, or FCL, is required, unless certain "mitigation" measures are put in place. The purpose of the FOCI mitigation measures is to protect cleared U.S. defense contractors against improper FOCI.
We have been cleared to the "Secret" level under an SSA, which is one of the recognized FOCI mitigation measures under the NISPOM. As a cleared entity, we must comply with the requirements of our SSA, the NISPOM and any other applicable U.S. Government industrial security regulations. Failure to follow the requirements of the SSA, the NISPOM or any other applicable U.S. Government industrial security regulations could, among other things, result in termination of our FCL, which in turn would preclude us from being awarded classified contracts or, under certain circumstances, performing on our existing classified contracts.
The commercial aircraft component industry is highly regulated by the Federal Aviation Authority, or FAA, in the United States, the Joint Aviation Authority, or JAA, in Europe and other agencies throughout the world. The military aircraft component industry is governed by military quality specifications. We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in some cases, by individual OEMs, to engineer and service parts and components used in specific aircraft models.
We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA requires that various maintenance routines be performed on aircraft components. We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services. We also maintain several FAA-approved repair stations.
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The technical data and components used in the design and production of our products, as well as many of the products and technical data we export, either as individual items or as components incorporated into aircraft, are subject to compliance with U.S. export control laws. Collaborative agreements that we may have with foreign persons, including manufacturers or suppliers, are also subject to U.S. export control laws.
Our operations are also subject to a variety of worker and community safety laws. The Occupational Safety and Health Act, or OSHA, mandates general requirements for safe workplaces for all employees. In addition, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances. Our management believes that our operations are in material compliance with OSHA's health and safety requirements.
Our Internet address is www.spiritaero.com. The content on our website is available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report.
We make available through our Internet website, under the heading "Investor Relations", our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports after we electronically file such materials with the Securities and Exchange Commission ("SEC"). Copies of our key corporate governance documents, including our Corporate Governance Guidelines, Code of Ethics and Business Conduct, Finance Code of Conduct and charters for our Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are also available on our website.
Our filed Annual and Quarterly Reports, Proxy Statement and other reports previously filed with the SEC are also available to the public through the SEC's website at http://www.sec.gov. Materials we file with the SEC may also be read and copied at the SEC's Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
An investment in our securities involves risk and uncertainties. The risks and uncertainties set forth below are those that we currently believe may materially and adversely affect us, our future business or results of operations, or investments in our securities. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also materially and adversely affect us, our future business or results of operations or investments in our securities.
Risk Factors Related to Our Business and Industry
Our commercial business is cyclical and sensitive to commercial airlines' profitability. The business of commercial airlines is, in turn, affected by global economic conditions and geo-political considerations.
We compete in the aerostructures segment of the aerospace industry. Our customers' business, and therefore our own, is directly affected by the financial condition of commercial airlines and other economic factors, including global economic conditions and geo-political considerations that affect the demand for air transportation. Specifically, our commercial business is dependent on the demand from passenger airlines and cargo carriers for the production of new aircraft. Accordingly, demand for our commercial products is tied to the worldwide airline industry's ability to finance the purchase of new aircraft and the industry's forecasted demand for seats, flights, routes and cargo capacity. Similarly, the size and age of the worldwide commercial aircraft fleet affects the demand for new aircraft and, consequently, for our products. Such factors, in conjunction with evolving economic conditions, cause the market in which we operate to be cyclical to varying degrees, thereby affecting our business and operating results.
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The commercial airline industry is impacted by the strength of the global economy and the geopolitical events around the world. Possible exogenous shocks such as expanding conflicts or political unrest in the Middle East or Asia, renewed terrorist attacks against the industry, or pandemic health crises have the potential to cause precipitous declines in air traffic. Any protracted economic slump, adverse credit market conditions, future terrorist attacks, war or health concerns could cause airlines to cancel or delay the purchase of additional new aircraft which could result in a deterioration of commercial airplane backlogs. If demand for new aircraft decreases, there would likely be a decrease in demand for our commercial aircraft products, and our business, financial condition and results of operations could be materially adversely affected.
Our business jet programs are sensitive to consumer preferences in the business jet market.
Our business jet program success is tied to demand for products from the manufacturers with whom we contract. The business jet market is impacted by consumer preference for different business jet models. If demand for new aircraft from our customers decreases, there would likely be a corresponding decrease in demand for our business jet products, and our business, financial condition and results of operations could be materially adversely affected.
Our business could be materially adversely affected if one of our components causes an aircraft accident.
Our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft component that has been designed, manufactured or serviced by us or our suppliers. While we believe that our liability insurance coverage is sufficient to protect us in the event of future product liability claims, it may not be adequate. Also, we may not be able to maintain insurance coverage in the future at an acceptable cost. Any such liability not covered by insurance or for which third-party indemnification is not available could require us to dedicate a substantial portion of our cash flows to make payments on such liability, which could have a material adverse effect on our business, financial condition and results of operations.
An accident caused by one of our components could also damage our reputation for quality products. We believe our customers consider safety and reliability as key criteria in selecting a provider of aerostructures. If an accident were to be caused by one of our components, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers could be materially adversely affected.
Our business could be materially adversely affected by product warranty obligations.
Our operations expose us to potential liability for warranty claims made by customers or third parties with respect to aircraft components that have been designed, manufactured, or serviced by us or our suppliers. Material product warranty obligations could have a material adverse effect on our business, financial condition and results of operations.
Because we depend on Boeing and, to a lesser extent, Airbus, as our largest customers, our sales, cash flows from operations and results of operations will be negatively affected if either Boeing or Airbus reduces the number of products it purchases from us or if either experiences business difficulties.
Currently, Boeing is our largest customer and Airbus is our second-largest customer. For the twelve months ended December 31, 2013, approximately 84% and 10% of our net revenues were generated from sales to Boeing and Airbus, respectively. Although our strategy, in part, is to diversify our customer base by entering into supply arrangements with additional customers, we cannot give any assurance that we will be successful in doing so. Even if we are successful in obtaining and retaining new customers, we expect that Boeing and, to a lesser extent, Airbus, will continue to account for a substantial portion of our sales for the foreseeable future. Although we are a party to various supply contracts with Boeing and Airbus which obligate Boeing and Airbus to purchase all of their requirements for certain products from us, those
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agreements generally do not require specific minimum purchase volumes. In addition, if we breach certain obligations under these supply agreements and Boeing or Airbus exercises its right to terminate such agreements, our business will be materially adversely affected. Boeing and Airbus have the contractual right to cancel their supply agreements with us for convenience, which could include the termination of one or more aircraft models or programs for which we supply products. Although Boeing and Airbus would be required to reimburse us for certain expenses, there can be no assurance these payments would adequately cover our expenses or lost profits resulting from the termination. In addition, we have agreed to a limitation on recoverable damages if Boeing wrongfully terminates our main supply agreement with respect to any model or program. If this occurs, we may not be able to recover the full amount of our actual damages. Furthermore, if Boeing or Airbus (1) experiences a decrease in requirements for the products which we supply to it; (2) experiences a major disruption in its business, such as a strike, work stoppage or slowdown, a supply-chain problem or a decrease in orders from its customers; or (3) files for bankruptcy protection; our business, financial condition and results of operations could be materially adversely affected.
Our largest customer, Boeing, operates in a very competitive business environment.
Boeing operates in a highly competitive industry. Competition from Airbus, Boeing's main competitor, as well as from regional jet makers and other foreign manufacturers of commercial single-aisle aircraft, has intensified as these competitors expand aircraft model offerings and competitively price their products. As a result of this competitive environment, Boeing continues to face pressure on product offerings and sale prices. While we do have supply agreements with Airbus, we currently have substantially more business with Boeing and thus any adverse effect on Boeing's production of aircraft resulting from this competitive environment may have a material adverse effect on our business, financial condition and results of operations.
Our business depends, in large part, on sales of components for a single aircraft program, the B737.
For the twelve months ended December 31, 2013, approximately 46% of our net revenues were generated from sales of components to Boeing for the B737 aircraft. While we have entered into long-term supply agreements with Boeing to continue to provide components for the B737 for the life of the aircraft program, including commercial and the military P-8A Poseidon derivatives, Boeing does not have any obligation to purchase components from us for any replacement for the B737 that is not a commercial derivative model. If we were unable to obtain significant aerostructures supply business for any B737 replacement program, our business, financial condition and results of operations could be materially adversely affected.
Our business depends, in part, on securing work for replacement programs.
While we have entered into long-term supply agreements with Boeing to provide components for the B737, B747, B767 and B777 and their commercial derivatives for the life of these aircraft programs, Boeing does not have any obligation to purchase components from us for any subsequent variant of these aircraft that is not a commercial derivative as defined by the Supply Agreement. Boeing has publicly announced its intention to update the B777 with a next-generation twin-engine aircraft program currently named the Boeing 777X. If the changes to the aircraft are later deemed significant enough to disqualify it as a commercial derivative for the B777 under the Supply Agreement, or Boeing successfully establishes it is not capable of being FAA certificated by an amendment to an existing Type Certificate through addition of a minor model or by a Supplemental Type Certificate, there is a risk that we may not be engaged by Boeing on the B777X to generally the same extent of Spirit's involvement in the B777, or at all. If we are unable to obtain significant aerostructures supply business for any update or replacement program for the B777 or any other aircraft program for which we provide significant content, our business, financial condition and results of operations could be materially adversely affected.
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We may be required to repay Boeing up to approximately $600.2 million of advance payments related to the B787 Supply Agreement. The advances must be repaid in the event that Boeing does not take delivery of a sufficient number of ship sets prior to the termination of the aircraft program.
In December 2010, Spirit and Boeing entered into a memorandum of agreement and a settlement agreement regarding certain claims associated with the development and production of the B787 airplane. As part of these agreements, Spirit received a payment in December 2010, which was recorded as deferred revenue (short-term) within the consolidated balance sheet pending finalization of a contract amendment which would contain the final settlement terms.
On May 12, 2011, Boeing and Spirit entered into the B787 Amendment, which finalized the provisions of the memorandum of agreement. Based on the terms of the B787 Amendment, the payment received by Spirit in December 2010 was reclassified from deferred revenue to revenue, and certain advance payments received by Spirit were also reclassified to revenue. The B787 Amendment also spread out repayment of a $700.0 million cash advance made by Boeing to Spirit in 2007 to be offset against the purchase price of the first 1,000 B787 ship sets delivered to Boeing, instead of the first 500 ship sets. In the event Boeing does not take delivery of 1,000 ship sets prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million on December 15th of each year until the advance payments have been fully recovered by Boeing.
Accordingly, portions of the advance repayment liability are included as current and long-term liabilities in our consolidated balance sheet. As of December 31, 2013, the amount of advance payments and deferred revenue received by us from Boeing under the B787 Supply Agreement and not yet repaid or recognized as revenue was approximately $600.2 million.
We may be required to repay Airbus up to approximately $243.9 million of advance payments. The advances must be repaid in the event that Airbus does not take delivery of a sufficient number of ship sets prior to the date set out in the advance agreement.
In February 2012, Spirit and Airbus entered into an agreement whereby Spirit received a series of payments totaling $250.0 million, which were recorded as advance payments within our consolidated balance sheet.
The agreement provides for repayment of the $250.0 million in cash advances made by Airbus to be offset against the purchase price of the first 200 Section 15 A350 XWB ship sets delivered to Airbus prior to December 31, 2017. If in the course of 2015, Airbus, in its reasonable opinion, anticipates 200 units will not be ordered and paid for by the end of 2017, both Airbus and Spirit will agree in the first quarter of 2016 on a revised repayment amount to ensure the entire advance is repaid prior to December 31, 2017. In no circumstance would the repayment amount exceed the recurring price of each ship set.
Portions of the advance repayment liability are included as current and long-term liabilities in our consolidated balance sheet. As of December 31, 2013, the amount of advance payments received by us from Airbus under the advance agreement and not yet repaid or recognized as revenue was approximately $243.9 million.
The profitability of certain of our new and maturing programs depends significantly on the assumptions surrounding satisfactory settlement of claims and assertions.
For certain of our new and maturing programs, we regularly commence work or incorporate customer requested changes prior to negotiating pricing terms for engineering work or the product which has been modified. We typically have the legal right to negotiate pricing for customer directed changes. In those cases, we assert to our customers our contractual rights to obtain the additional revenue or cost reimbursement we expect to receive upon finalizing pricing terms. An expected recovery value of these assertions is incorporated into our contract profitability estimates when applying contract accounting. Our
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inability to recover these expected values, among other factors, could result in the recognition of a forward loss on these programs and could have a material adverse effect on our results of operations.
For the G650 program, we currently have $135.1 million of accounts receivable that are related to Gulfstream short-paid invoices for deliveries from 2010 through the end of the third quarter of 2013, the period through which these incomplete payments continued. In August, 2013, we instituted a demand for arbitration against Gulfstream, seeking damages from Gulfstream for the incomplete payments, as well as other damages and relief. Gulfstream counterclaimed against Spirit in the arbitration, seeking liquidated damages for delayed deliveries of wings, as well as other damages and relief. While we believe that the short-paid amount is collectible, if we are unable to collect this amount or if it becomes part of an overall settlement or arbitration award, recognition of additional forward losses on the G650 program could be required and the future cash flows of the Company could be significantly impacted.
We face risks as we work to successfully execute on new or maturing programs.
New or maturing programs with new technologies typically carry risks associated with design responsibility, development of new production tools, hiring and training of qualified personnel, increased capital and funding commitments, ability to meet customer specifications, delivery schedules and unique contractual requirements, supplier performance, ability of the customer to meet its contractual obligations to us, and our ability to accurately estimate costs associated with such programs. In addition, any new or maturing aircraft program may not generate sufficient demand or may experience technological problems or significant delays in the regulatory certification or manufacturing and delivery schedule. If we were unable to perform our obligations under new or maturing programs to the customer's satisfaction or manufacture products at our estimated costs, if we were to experience unexpected fluctuations in raw material prices or supplier problems leading to cost overruns, if we were unable to successfully perform under revised design and manufacturing plans or successfully resolve claims and assertions, or if a new or maturing program in which we had made a significant investment was terminated or experienced weak demand, delays or technological problems, our business, financial condition and results of operations could be materially adversely affected. Some of these risks have affected our maturing programs to the extent that we have recorded significant forward losses and maintain certain of our maturing programs at zero or low margins due to our inability to overcome the effects of these risks. We continue to face similar risks as well as the potential for default, quality problems, or inability to meet weight requirements and these could result in continued zero or low margins or additional forward losses, and the risk of having to write-off additional inventory if it were deemed to be unrecoverable over the life of the program. In addition, beginning new work on existing programs also carries risks associated with the transfer of technology, knowledge and tooling.
In order to perform on new or maturing programs we may be required to construct or acquire new facilities requiring additional up-front investment costs. In the case of significant program delays and/or program cancellations, we could be required to bear certain unrecoverable construction and maintenance costs and incur potential impairment charges for the new facilities. Also, we may need to expend additional resources to determine an alternate revenue-generating use for the facilities. Likewise, significant delays in the construction or acquisition of a plant site could impact production schedules.
We use estimates in accounting for revenue and cost for our contract blocks. Changes in our estimates could adversely affect our future financial performance.
The Company recognizes revenue under the contract method of accounting and estimate s revenue and cost for contract blocks that span a period of multiple years. The contract method of accounting requires judgment on a number of underlying assumptions to develop our estimates. Due to the significant length of time over which revenue streams are generated, the variability of future period estimated revenue and cost may be adversely affected if circumstances or underlying assumptions change. For additional information on our accounting policies for recognizing revenue and profit, please see our
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discussion under "Management's Discussion and Analysis Critical Accounting Policies" in this Form 10-K.
Additionally, variability of future period estimated revenue and cost may result in recording additional valuation allowances against future deferred tax assets, which could adversely affect our future financial performance.
Our operations depend on our ability to maintain continuing, uninterrupted production at our manufacturing facilities. Our production facilities are subject to physical and other risks that could disrupt production.
Our manufacturing facilities could be damaged or disrupted by a natural disaster, war, terrorist activity or sustained mechanical failure. Although we have obtained property damage and business interruption insurance, a major catastrophe, such as a fire, flood, tornado or other natural disaster at any of our sites, war or terrorist activities in any of the areas where we conduct operations or the sustained mechanical failure of a key piece of equipment could result in a prolonged interruption of all or a substantial portion of our business. Any disruption resulting from these events could cause significant delays in shipments of products and the loss of sales and customers and we may not have insurance to adequately compensate us for any of these events. A large portion of our operations takes place at one facility in Wichita, Kansas and any significant damage or disruption to this facility in particular would materially adversely affect our ability to service our customers.
We have announced the initiation of a process to divest our Oklahoma sites, which could disrupt our business, involve increased expenses and present risks not contemplated at the time of the divestiture.
There can be no assurance that any sale of all or any portion of our Oklahoma sites will be completed in a timely manner, on a cost-effective basis, on terms favorable to us, or at all. A significant divestiture such as this typically entails numerous potential risks, including:
Furthermore, the pursuit of any such transaction may require the expenditure of substantial legal and other fees, which may be incurred whether or not a transaction is consummated. As a result of the aforementioned risks, among others, the pursuit of the divestiture may not lead to increased stockholder value.
We actively consider other divestitures from time to time. If we decide to pursue any other divestiture, it may involve numerous potential risks, including those described above.
Future commitments to our customers to increase production rates depend on our ability to expand production at our manufacturing facilities.
Boeing and Airbus, our two largest customers, have both announced planned production rate increases for several of their major programs. In some cases, in order to meet these increases in production rates, we will need to make significant capital expenditures to expand our capacity and improve our performance. While some of these expenditures will be reimbursed by our customers, we could be required to bear a significant portion of the costs. In addition, the increases in production rates could cause
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disruptions in our manufacturing lines, which could materially adversely impact our ability to meet our commitments to our customers, and have a resulting adverse effect on our financial condition and results of operations.
We operate in a very competitive business environment.
Competition in the aerostructures segment of the aerospace industry is intense. Although we have entered into supply agreements with Boeing and Airbus under which we are their exclusive supplier for certain aircraft parts, we will face substantial competition from both OEMs and non-OEM aerostructures suppliers in trying to expand our customer base and the types of parts we make.
OEMs may choose not to outsource production of aerostructures due to, among other things, their own direct labor and other overhead considerations and capacity utilization at their own facilities. Consequently, traditional factors affecting competition, such as price and quality of service, may not be significant determinants when OEMs decide whether to produce a part in-house or to outsource.
Our principal competitors among non-OEM aerostructures suppliers are Aircelle S.A., Fuji Heavy Industries, Ltd., GKN Aerospace, Kawasaki Heavy Industries, Inc., Mitsubishi Heavy Industries, Sonaca, Triumph Group, Inc., Latecoere S.A., and Nexcelle. Some of our competitors have greater resources than we do and, therefore, may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or devote greater resources to the promotion and sale of their products than we can. Providers of aerostructures have traditionally competed on the basis of cost, technology, quality and service. We believe that developing and maintaining a competitive advantage will require continued investment in product development, engineering, supply-chain management and sales and marketing, and we may not have enough resources to make such investments. For these reasons, we may not be able to compete successfully in this market or against our competitors, which could have a material adverse effect on our business, financial condition and results of operations.
High switching costs may substantially limit our ability to obtain business that is currently under contract with other suppliers.
Once a contract is awarded by an OEM to an aerostructures supplier, the OEM and the supplier are typically required to spend significant amounts of time and capital on design, manufacture, testing and certification of tooling and other equipment. For an OEM to change suppliers during the life of an aircraft program, further testing and certification would be necessary, and the OEM would be required either to move the tooling and equipment used by the existing supplier for performance under the existing contract, which may be expensive and difficult (or impossible), or to manufacture new tooling and equipment. Accordingly, any change of suppliers would likely result in production delays and additional costs to both the OEM and the new supplier. These high switching costs may make it more difficult for us to bid competitively against existing suppliers and less likely that an OEM will be willing to switch suppliers during the life of an aircraft program, which could materially adversely affect our ability to obtain new work on existing aircraft programs.
Increases in labor costs, potential labor disputes and work stoppages at our facilities or the facilities of our suppliers or customers could materially adversely affect our financial performance.
Our financial performance is affected by the availability of qualified personnel and the cost of labor. A majority of our workforce is represented by unions. If our workers were to engage in a strike, work stoppage or other slowdown, we could experience a significant disruption of our operations, which could cause us to be unable to deliver products to our customers on a timely basis and could result in a breach of our supply agreements. This could result in a loss of business and an increase in our operating expenses, which could have a material adverse effect on our business, financial condition and results of operations. In addition, our non-unionized labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face.
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We have agreed with Boeing to continue to operate substantial manufacturing operations in Wichita, Kansas until at least June 16, 2015 and we have other commitments to keep major programs in Wichita until 2020 in certain circumstances. This may prevent us from being able to offer our products at prices that are competitive in the marketplace and could have a material adverse effect on our ability to generate new business.
In addition, many aircraft manufacturers, airlines and aerospace suppliers have unionized work forces. Any strikes, work stoppages or slowdowns experienced by aircraft manufacturers, airlines or aerospace suppliers could reduce our customers' demand for additional aircraft structures or prevent us from completing production of our aircraft structures.
Our business may be materially adversely affected if we lose our government, regulatory or industry approvals, if more stringent government regulations are enacted, or if industry oversight is increased.
The FAA prescribes standards and qualification requirements for aerostructures, including virtually all commercial airline and general aviation products, and licenses component repair stations within the United States. Comparable agencies, such as the JAA in Europe, regulate these matters in other countries. If we fail to qualify for or obtain a required license for one of our products or services or lose a qualification or license previously granted, the sale of the subject product or service would be prohibited by law until such license is obtained or renewed and our business, financial condition and results of operations could be materially adversely affected. In addition, designing new products to meet existing regulatory requirements and retrofitting installed products to comply with new regulatory requirements can be expensive and time consuming.
From time to time, the FAA, the JAA or comparable agencies propose new regulations or changes to existing regulations. These changes or new regulations generally increase the costs of compliance. To the extent the FAA, the JAA or comparable agencies implement regulatory changes, we may incur significant additional costs to achieve compliance.
In addition, certain aircraft repair activities we intend to engage in may require the approval of the aircraft's OEM. Our inability to obtain OEM approval could materially restrict our ability to perform such aircraft repair activities.
Our business is subject to regulation in the United States and internationally.
The manufacturing of our products is subject to numerous federal, state and foreign governmental regulations. The number of laws and regulations that are being enacted or proposed by state, federal and international governments and authorities are increasing. Compliance with these regulations is difficult and expensive. If we fail to adhere, or are alleged to have failed to adhere, to any applicable federal, state or foreign laws or regulations, or if such laws or regulations negatively affect sales of our products, our business, prospects, results of operations, financial condition or cash flows may be adversely affected. In addition, our future results could be adversely affected by changes in applicable federal, state and foreign laws and regulations, or the interpretation or enforcement thereof, including those relating to manufacturing processes, product liability, trade rules and customs regulations, intellectual property, consumer laws, privacy laws, as well as accounting standards and taxation requirements (including tax-rate changes, new tax laws and revised tax law interpretations).
We are subject to regulation of our technical data and goods under U.S. export control laws.
As a manufacturer and exporter of defense and dual-use technical data and commodities, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to, the International Traffic in Arms Regulations, administered by the U.S. Department of State, and the Export Administration Regulations, administered by the U.S. Department of Commerce. Collaborative agreements that we may have with foreign persons, including manufacturers and suppliers, are also subject to U.S. export control laws. In addition, we are subject to trade sanctions against embargoed countries, administered by the Office of Foreign Assets Control within the U.S. Department of the Treasury.
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A determination that we have failed to comply with one or more of these export controls or trade sanctions could result in civil or criminal penalties, including the imposition of fines upon us as well as the denial of export privileges and debarment from participation in U.S. government contracts. Additionally, restrictions may be placed on the export of technical data and goods in the future as a result of changing geopolitical conditions. Any one or more of such sanctions could have a material adverse effect on our business, financial condition and results of operations.
We are subject to environmental, health and safety regulations and our ongoing operations may expose us to related liabilities.
Our operations are subject to extensive regulation under environmental, health and safety laws and regulations in the United States and other countries in which we operate. We may be subject to potentially significant fines or penalties, including criminal sanctions, if we fail to comply with these requirements. We have made, and will continue to make, significant capital and other expenditures to comply with these laws and regulations. We cannot predict with certainty what environmental legislation will be enacted in the future or how existing laws will be administered or interpreted. Our operations involve the use of large amounts of hazardous substances and regulated materials and generate many types of wastes, including emissions of hexavalent chromium and volatile organic compounds, and so-called greenhouse gases such as carbon dioxide. Spills and releases of these materials may subject us to clean-up liability for remediation and claims of alleged personal injury, property damage and damage to natural resources, and we may become obligated to reduce our emissions of hexavalent chromium, volatile organic compounds and/or greenhouse gases. We cannot give any assurance that the aggregate amount of future remediation costs and other environmental liabilities will not be material.
Boeing, our predecessor at the Wichita facility, is under an administrative consent order issued by the Kansas Department of Health and Environment to contain and remediate contaminated groundwater, which underlies a majority of our Wichita facility. Pursuant to this order and its agreements with us, Boeing has a long-term remediation plan in place, and treatment, containment and remediation efforts are underway. If Boeing does not comply with its obligations under the order and these agreements, we may be required to undertake such efforts and make material expenditures.
In connection with the BAE Acquisition, we acquired a manufacturing facility in Prestwick, Scotland that is adjacent to contaminated property retained by BAE Systems. The contaminated property may be subject to a regulatory action requiring remediation of the land. It is also possible that the contamination may spread into the property we acquired. BAE Systems has agreed to indemnify us, subject to certain contractual limitations and conditions, for certain clean up costs and other losses, liabilities, expenses and claims related to existing pollution on the acquired property, existing pollution that migrates from the acquired property to a third party's property and any pollution that migrates to our property from property retained by BAE Systems. If BAE Systems does not comply with its obligations under the BAE Acquisition agreement, we may be required to undertake such efforts and make material expenditures.
In the future, contamination may be discovered at or emanating from our facilities or at off-site locations where we send waste. The remediation of such newly discovered contamination, related claims for personal injury or damages, or the enactment of new laws or a stricter interpretation of existing laws, may require us to make additional expenditures, some of which could be material. See "Business Environmental Matters".
New regulations related to conflict minerals have and will continue to force us to incur additional expenses, may make our supply chain more complex, and could adversely impact our business.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 contains provisions to improve transparency and accountability concerning the supply of certain minerals and metals, known as conflict minerals, originating from the Democratic Republic of Congo (DRC) and adjoining countries. As a result, in August 2012, the SEC adopted annual investigation, disclosure and reporting requirements for
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those companies that manufacture or contract to manufacture products that contain conflict minerals that originated from the DRC and adjoining countries. As initial disclosure requirements commence in May 2014 (with respect to 2013), we have and will continue to incur compliance costs, including costs related to determining the sources of conflict minerals used in our products and other potential changes to processes or sources of supply as a consequence of such verification activities. The implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in certain of our products. As there may be only a limited number of suppliers offering "conflict free" minerals, we cannot be sure that we will be able to obtain necessary conflict-free minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free.
Significant consolidation in the aerospace industry could make it difficult for us to obtain new business.
Suppliers in the aerospace industry have consolidated and formed alliances to broaden their product and integrated system offerings and achieve critical mass. This supplier consolidation is in part attributable to aircraft manufacturers more frequently awarding long-term sole-source or preferred supplier contracts to the most capable suppliers, thus reducing the total number of suppliers. If this consolidation were to continue, it may become more difficult for us to be successful in obtaining new customers.
We may be materially adversely affected by high fuel prices.
Due to the competitive nature of the airline industry, airlines are often unable to pass on increased fuel prices to customers by increasing fares. Fluctuations in the global supply of crude oil and the possibility of changes in government policy on jet fuel production, transportation and marketing make it difficult to predict the future availability of jet fuel. In the event there is an outbreak or escalation of hostilities or other conflicts, or significant disruptions in oil production or delivery in oil-producing areas or elsewhere, there could be reductions in the production or importation of crude oil and significant increases in the cost of fuel. If there were major reductions in the availability of jet fuel or significant increases in its cost, the airline industry and, as a result, our business, could be materially adversely affected.
Interruptions in deliveries of components or raw materials, or increased prices for components or raw materials used in our products could delay production and/or materially adversely affect our financial performance, profitability, margins and revenues.
We are highly dependent on the availability of essential materials and purchased components from our suppliers, some of which are available only from a sole source or limited sources. Our dependency upon regular deliveries from particular suppliers of components and raw materials means that interruptions or stoppages in such deliveries could materially adversely affect our operations until arrangements with alternate suppliers, to the extent alternate suppliers exist, could be made. If any of our suppliers were unable or were to refuse to deliver materials to us for an extended period of time, or if we were unable to negotiate acceptable terms for the supply of materials with these or alternative suppliers, our business could suffer.
Moreover, we are dependent upon the ability of our suppliers to provide materials and components that meet specifications, quality standards and delivery schedules. Our suppliers' failure to provide expected raw materials or component parts that meet our technical specifications could adversely affect production schedules and contract profitability. We may not be able to find acceptable alternatives, and any such alternatives could result in increased costs for us and possible forward losses on certain contracts. Even if acceptable alternatives are found, the process of locating and securing such alternatives might be disruptive to our business and might lead to termination of our supply agreements with our customers.
Our continued supply of materials is subject to a number of risks including:
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In addition, our profitability is affected by the prices of the components and raw materials, such as titanium, aluminum and carbon fiber, used in the manufacturing of our products. These prices may fluctuate based on a number of factors beyond our control, including world oil prices, changes in supply and demand, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates and, in some cases, government regulation. Although our supply agreements with Boeing and Airbus allow us to pass on to our customers certain unusual increases in component and raw material costs in limited situations, we may not be fully compensated by the customers for the entirety of any such increased costs.
In order to be successful, we must attract, retain, train, motivate, develop and transition key employees, and failure to do so could harm our business.
In order to be successful, we must attract, retain, train, motivate, develop and transition qualified executives and other key employees, including those in managerial, manufacturing and engineering positions. Identifying, developing internally or hiring externally, training and retaining qualified executives and engineers are critical to our future, and competition for experienced employees in the aerospace industry and in particular, Wichita, Kansas where the majority of our manufacturing and executive offices are located, can be intense. In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash- and share-based compensation. Our share-based incentive awards consist primarily of restricted stock grants, some of which are conditioned on our achievement of certain designated financial performance targets, which makes the size of a particular year's award uncertain. If employees do not receive share-based incentive awards with a value they anticipate, if our share-based compensation otherwise ceases to be viewed as a valuable benefit, if our total compensation package is not viewed as being competitive, or if we do not obtain the shareholder approval needed to continue granting share-based incentive awards in the amounts we believe are necessary, our ability to attract, retain, and motivate executives and key employees could be weakened. The failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations. Further, changes in our management team may be disruptive to our business and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations.
We are subject to the requirements of the National Industrial Security Program Operating Manual ("NISPOM") for our Facility Security Clearance ("FCL"), which is a prerequisite for our ability to perform on classified contracts for the U.S. Government.
A Department of Defense ("DOD") FCL is required for a company to be awarded and perform on classified contracts for the DOD and certain other agencies of the U.S. Government. From time to time we have performed and may perform on classified contracts, although we did not generate any revenues from classified contracts for the twelve months ended December 31, 2013. We have obtained an FCL at the
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"Secret" level. Due to the fact that more than 50% of our voting power is effectively controlled by a non-U.S. entity (Onex), we are required to operate in accordance with the terms and requirements of our Special Security Agreement ("SSA") with the DOD. If we were to violate the terms and requirements of our SSA, the NISPOM, or any other applicable U.S. Government industrial security regulations, we could lose our FCL. We cannot give any assurance that we will be able to maintain our FCL. If for some reason our FCL is invalidated or terminated, we may not be able to continue to perform under our classified contracts in effect at that time, and we would not be able to enter into new classified contracts, which could adversely affect our revenues.
We derive a significant portion of our net revenues from direct and indirect sales outside the United States and are subject to the risks of doing business in foreign countries.
We derive a significant portion of our revenues from sales by Boeing and Airbus to customers outside the United States. In addition, for the twelve months ended December 31, 2013, direct sales to our non-U.S. customers accounted for approximately 13% of our net revenues. We expect that our and our customers' international sales will continue to account for a significant portion of our net revenues for the foreseeable future. As a result, we are subject to risks of doing business internationally, including:
While these factors and the effect of these factors are difficult to predict, adverse developments in one or more of these areas could materially adversely affect our business, financial condition and results of operations in the future.
Our fixed-price contracts and requirements to re-negotiate pricing at specified times may commit us to unfavorable terms.
We provide most of our products and services through long-term contracts in which the pricing terms are fixed based on certain production volumes. Accordingly, there is the risk that we will not be able to sustain a cost structure that is consistent with assumptions used in bidding on contracts. Increased or unexpected costs may reduce our profit margins or cause us to sustain losses on these contracts. Other than certain increases in raw material costs which can be passed on to our customers in most instances, we must fully absorb cost overruns, notwithstanding the difficulty of estimating all of the costs we will incur in performing these contracts and in projecting the ultimate level of sales that we may achieve. Our failure to anticipate technical problems, estimate delivery reductions, estimate costs accurately or control costs during performance of a fixed-price contract may reduce the profitability of a contract or cause a loss.
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This risk particularly applies to products such as the Boeing B787, for which we had delivered one hundred sixty-four production articles as of December 31, 2013 since the inception of the program, and in respect of which our performance at the contracted price depends on our being able to achieve production cost reductions as we gain production experience although Spirit can recoup from Boeing half of any overruns within a certain percentage of shipset prices. When we negotiated the B787-8 pricing under the B787 Amendment, we assumed that a contractually mandated joint-effort by Boeing and Spirit to reduce costs and increase production efficiency, as well as favorable trends in volume, learning curve efficiencies and future pricing from suppliers would reduce our production costs over the life of the B787 program, thus maintaining or improving our margin on each B787 we produced. Pricing for the initial configuration of the B787-8 is generally established through 2021, with prices decreasing as cumulative volume levels are achieved. Prices are subject to adjustment for abnormal inflation (above a specified level in any year) and for certain production, schedule and other specific charges. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine initial B787-9 and B787-10 pricing, and have not yet reached agreement. Our ability to obtain fair and equitable prices for subsequent models could impact the profitability of the overall program. Additionally, we cannot give any assurance that our development of new technologies or capabilities will be successful or that we will be able to reduce our B787 production costs over the life of the program. Our failure to reduce production costs or to obtain pricing as we have anticipated could result in the need to record additional forward losses for this program.
Many of our other production cost estimates also contain pricing terms which anticipate cost reductions over time. In addition, although we have entered into these fixed price contracts with our customers, they may nonetheless seek to re-negotiate pricing with us in the future. Any such higher costs or re-negotiations could materially adversely affect our profitability, margins and revenues.
Certain of our long-term supply agreements provide for re-negotiation of established pricing terms at specified times. In particular, pricing terms under our supply agreement with Boeing for the B737, B747, B767 and B777 platforms, which accounted for 70% of our net revenues in 2013, expired in May 2013, thus activating interim pricing provisions under the Supply Agreement. We are currently negotiating future pricing with Boeing for a period to be agreed upon by the parties. We are required to negotiate the pricing for such additional period in good faith based on prevailing U.S. market conditions for forward fuselages, B737 fuselages and B737/B777 struts and nacelles and based on prevailing global market conditions for all other products. Until we are able to agree upon pricing, pricing will be determined according to the existing prices, adjusted using a quantity-based price adjustment formula and specified annual escalation and such interim pricing will be retroactively adjusted in the period in which we agree on future pricing terms. If we agree on future pricing that provides us with operating margins that are lower than those which we currently experience, or if we are unable to agree on new pricing terms and the default pricing terms remain in effect for a period of time, our business, financial condition and results of operations could be materially adversely affected.
The outcome of litigation and of government inquiries and investigations involving our business is unpredictable and an adverse decision in any such matter could have a material effect on our financial position and results of operations.
We are involved in a number of litigation matters. These claims may divert financial and management resources that would otherwise be used to benefit our operations. No assurances can be given that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits could have a material impact on our financial position and results of operations. In addition, we are sometimes subject to government inquiries and investigations of our business due, among other things, to the heavily regulated nature of our industry and our participation on government programs. Any such inquiry or investigation could potentially result in an adverse ruling against us, which could have a material impact on our financial position and operating results.
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If we are unable to protect our information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.
We rely on information technology networks and systems to manage and support a variety of business activities, including procurement and supply chain, engineering support, and manufacturing. Our information technology systems, some of which are managed by third-parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events. In addition, security breaches could result in unauthorized disclosure of confidential information. If our information technology systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our manufacturing process could be disrupted resulting in late deliveries or even no deliveries if there is a total shutdown.
We are implementing new company-wide software systems, which could cause unexpected production or other delays.
We have recently implemented an Enterprise Resource Planning ("ERP") software system in several of our facilities, and have begun implementation of other system upgrades and infrastructure changes. We plan to complete implementation of ERP software in all of our primary facilities over the next two years. Unexpected problems with these implementations could result in production or other delays.
We do not own most of the intellectual property and tooling used in our business.
Our business depends on using certain intellectual property and tooling that we have rights to use under license grants from Boeing. These licenses contain restrictions on our use of Boeing intellectual property and tooling and may be terminated if we default under certain of these restrictions. Our loss of license rights to use Boeing intellectual property or tooling would materially adversely affect our business. See "Business Our Relationship with Boeing License of Intellectual Property." In addition to the licenses with Boeing, we license some of the intellectual property needed for performance under some of our supply contracts from our customers under those supply agreements. We must honor our contractual commitments to our customers related to intellectual property and comply with infringement laws governing our use of intellectual property. In the event we obtain new business from new or existing customers, we will need to pay particular attention to these contractual commitments and any other restrictions on our use of intellectual property to make sure that we will not be using intellectual property improperly in the performance of such new business. In the event we use any such intellectual property improperly, we could be subject to an infringement claim by the owner or licensee of such intellectual property.
In the future, our entry into new markets may require obtaining additional license grants from Boeing and/or from other third parties. If we are unable to negotiate additional license rights on acceptable terms (or at all) from Boeing and/or other third parties as the need arises, our ability to enter new markets may be materially restricted. In addition, we may be subject to restrictions in future licenses granted to us that may materially restrict our use of third party intellectual property.
Our success depends in part on the success of our research and development initiatives.
We spent approximately $34.7 million on research and development during the twelve months ended December 31, 2013. Our expenditures on our research and development efforts may not create any new sales opportunities or increases in productivity that are commensurate with the level of resources invested.
We are in the process of developing specific technologies and capabilities in pursuit of new business and in anticipation of customers going forward with new programs. If any such programs do not go forward or are not successful, we may be unable to recover the costs incurred in anticipation of such programs and our profitability and revenues may be materially adversely affected.
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Any future business combinations, acquisitions, mergers, or joint ventures will expose us to risks, including the risk that we may not be able to successfully integrate these businesses or achieve expected operating synergies.
We actively consider strategic transactions from time to time. We evaluate acquisitions, joint ventures, alliances and co-production programs as opportunities arise, and we may be engaged in varying levels of negotiations with potential competitors at any time. We may not be able to effect transactions with strategic alliance, acquisition or co-production program candidates on commercially reasonable terms or at all. If we enter into these transactions, we also may not realize the benefits we anticipate. In addition, we may not be able to obtain additional financing for these transactions. The integration of companies that have previously been operated separately involves a number of risks, including, but not limited to:
Consummating any acquisitions, joint ventures, alliances or co-production programs could result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities.
We could be required to make future contributions to our defined benefit pension and post-retirement benefit plans as a result of adverse changes in interest rates and the capital markets.
Our estimates of liabilities and expenses for pensions and other post-retirement benefits incorporate significant assumptions including the rate used to discount the future estimated liability, the long-term rate of return on plan assets and several assumptions relating to the employee workforce (salary increases, medical costs, retirement age and mortality). A dramatic decrease in the fair value of our plan assets resulting from movements in the financial markets may cause the status of our plans to go from an over-funded status to an under-funded status and result in cash funding requirements to meet any minimum required funding levels. Our results of operations, liquidity, or shareholders' equity in a particular period could be affected by a decline in the rate of return on plan assets, the rate used to discount the future estimated liability, or changes in employee workforce assumptions.
We identified material weaknesses in our internal control over financial reporting.
A material weakness is a deficiency, or combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be
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prevented or detected on a timely basis. As of December 31, 2013, we concluded that we had material weaknesses in our internal control over financial reporting as described below:
Because of these material weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013, based on criteria in Internal Control Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
Our efforts to remediate the aforementioned deficiencies in internal control over financial reporting are described further in Item 9A. Controls and Procedures .
While we believe that we have a plan to remediate these deficiencies, we cannot be certain that additional material weaknesses or significant deficiencies will not develop or be identified. We are in the process of remediating our internal control deficiencies over the cost estimation process for the G280 and G650 programs in Tulsa, Oklahoma and completeness, accuracy and valuation of inventory and cost of sales related to the A350 XWB Section 15 program in Kinston, North Carolina. Any failure to maintain adequate internal control over financial reporting or to implement required, new or improved controls, or difficulties encountered in their implementation could cause us to report additional material weaknesses or other deficiencies in our internal control over financial reporting and could result in a reasonable possibility of errors or misstatements in the consolidated financial statements that would be material.
Risk Factors Related to Our Capital Structure
The interests of our controlling stockholder may conflict with your interests.
Onex Partners LP, Onex Corporation and their respective partners and affiliates that beneficially own our class B common stock, herein referred to collectively as the "Onex entities," own 22,411,638 shares of our class B common stock. Our class A common stock has one vote per share, while our class B common stock has ten votes per share on all matters to be voted on by our stockholders. Consequently, the Onex entities control approximately 62% of the combined voting power of our outstanding common stock. Accordingly, and for so long as the Onex entities continue to hold class B common stock that represents at least 10% of the total number of shares of common stock outstanding, Onex will exercise a controlling influence over our business and affairs and will have the power to determine all matters submitted to a
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vote of our stockholders, including the election of directors and approval of significant corporate transactions such as amendments to our certificate of incorporation, mergers and the sale of all or substantially all of our assets. Onex could cause corporate actions to be taken even if the interests of Onex conflict with the interests of our other stockholders. This concentration of voting power could have the effect of deterring or preventing a change in control of Spirit that might otherwise be beneficial to our stockholders. Gerald W. Schwartz, the Chairman, President and Chief Executive Officer of Onex Corporation, owns shares representing a majority of the voting rights of the shares of Onex Corporation.
Our substantial debt could adversely affect our financial condition and our ability to operate our business. The terms of the indenture governing our long-term bonds and our senior secured credit facility impose significant operating and financial restrictions on our company and our subsidiaries, which could also adversely affect our operating flexibility and put us at a competitive disadvantage by preventing us from capitalizing on business opportunities.
As of December 31, 2013, we had total debt of approximately $1,167.3 million, including approximately $538.2 million of borrowings under our senior secured credit facility, $596.4 million of long-term bonds, a $10.0 million Malaysian loan, approximately $15.3 million of capital lease obligations, and $7.4 million in other debt obligations. In addition to our debt, as of December 31, 2013, we had $44.7 million of letters of credit and letters of guarantee outstanding.
The terms of the indentures governing our long-term bonds and our senior secured credit facility impose significant operating and financial restrictions on us, which limit our ability, among other things, to:
These restrictions could have consequences, including the following:
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Our existing senior secured revolving credit facility, which matures on April 18, 2017, is a significant source of liquidity for our business. The failure to extend or renew this agreement could have a significant effect on our ability to invest sufficiently in our programs, fund day to day operations, or pursue strategic opportunities.
We cannot assure you that we will be able to maintain compliance with the covenants in the agreements governing our indebtedness in the future or, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
In addition, despite the restrictions and limitations described above, subject to the limits contained in the agreements governing our indebtedness, we may be able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. The terms of any future indebtedness we may incur could include more restrictive covenants. If we incur additional debt, the risks related to our level of debt could intensify.
In addition, if we are unable to generate sufficient cash flow to service our debt and meet our other commitments, we may need to refinance all or a portion of our debt, sell material assets or operations, or raise additional debt or equity capital. We cannot provide assurance that we could effect any of these actions on a timely basis, on commercially reasonable terms or at all, or that these actions would be sufficient to meet our capital requirements. In addition, the terms of our existing or future debt agreements may restrict us from effecting certain or any of these alternatives.
Global credit markets are still recovering from the 2008 financial crisis, and are subject to numerous risk factors, including but not limited to concerns over sovereign debt in Europe and elsewhere; the impact and effectiveness of new financial legislation and regulation in the United States and Europe; the impact of those reforms on borrowers, financial institutions and credit rating agencies; potential systemic risk resulting from the interrelationship of credit market products and participants; global governmental and central banking policies; and conflict and political instability in the Middle East and Asia. There can be no assurance that access to credit markets will continue to be available to us.
Any reduction in our credit ratings could materially and adversely affect our business or financial condition.
As of December 31, 2013, our corporate credit rating was affirmed at BB and placed on negative outlook by Standard & Poor's and was affirmed at Ba2 and placed on negative outlook by Moody's Investor Services.
On February 6, 2014, Moody's Investors Service placed the credit ratings of Spirit AeroSystems, Inc. under review for possible downgrade.
The ratings reflect the agencies' assessment of our ability to pay interest and principal on our debt securities and credit agreements. A rating is not a recommendation to purchase, sell or hold securities. Each rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings and, accordingly, each rating should be considered independently of all other ratings. Lower ratings would typically result in higher interest costs of debt securities when they are sold, and could make it more difficult to issue future debt securities. In addition, a downgrade in our fixed or revolving long-term debt rating could result in an increase in borrowing costs under our senior secured credit facility and could trigger a prepayment based on the excess cash flow prepayment provision under our term loan depending on our total leverage ratio. Any downgrade in our credit ratings could thus have a material adverse effect on our business or financial condition.
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We may sell more equity and reduce your ownership in Spirit Holdings.
Our business plan may require the investment of new capital, which we may raise by issuing additional equity (including equity interests which may have a preference over shares of our class A common stock) or additional debt (including debt securities and/or bank loans). However, this capital may not be available at all, or when needed, or upon terms and conditions favorable to us. The issuance of additional equity in Spirit Holdings may result in significant dilution of shares of our class A common stock. We may issue additional equity in connection with or to finance acquisitions. Further, our subsidiaries could issue securities in the future to persons or entities (including our affiliates) other than us or another subsidiary. This could materially adversely affect your investment in us because it would dilute your indirect ownership interest in our subsidiaries.
Spirit Holdings' certificate of incorporation and by-laws and our supply agreements with Boeing contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.
Provisions of Spirit Holdings' certificate of incorporation and by-laws may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our current board of directors. These provisions include:
In addition, our supply agreements with Boeing include provisions giving Boeing the ability to terminate the agreements in the event any of certain disqualified persons acquire a majority of Spirit's direct or indirect voting power or all or substantially all of Spirit's assets. See "Business Our Relationship with Boeing."
Spirit Holdings is a "controlled company" within the meaning of the New York Stock Exchange rules and, as a result, qualifies for, and relies on, exemptions from certain corporate governance requirements.
Because the Onex entities own more than 50% of the combined voting power of the common stock of Spirit Holdings, Spirit Holdings is deemed a "controlled company" under the rules of the New York Stock Exchange, or NYSE. As a result, Spirit Holdings qualifies for, and relies upon, the "controlled company" exception to the board of directors and committee composition requirements under the rules of the NYSE. Pursuant to this exception, Spirit Holdings is exempt from rules that would otherwise require that Spirit Holdings' board of directors be comprised of a majority of "independent directors" (as defined under the rules of the NYSE), and that Spirit Holdings' compensation committee and corporate governance and nominating committee be comprised solely of "independent directors," so long as the Onex entities continue to own more than 50% of the combined voting power of the common stock of Spirit Holdings. Spirit Holdings' board of directors consists of eleven directors, eight of whom qualify as "independent." Spirit Holdings' compensation and corporate governance and nominating committees are not comprised
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solely of "independent directors." Spirit Holdings does not currently rely on the exemption related to board composition, although it may do so in the future. See "Management Executive Officers and Directors" and "Committees of the Board of Directors."
Our stock price may be volatile.
Price fluctuations in our class A common stock could result from general market and economic conditions and a variety of other factors, including:
Item 1B.
Unresolved Staff Comments
The Company received a comment letter from the Securities and Exchange Commission (the "SEC") Division of Corporation Finance dated December 10, 2012 regarding its Form 10-K for Fiscal Year Ended December 31, 2011 and Form 10-Q for the Fiscal Quarter Ended September 27, 2012. We have filed responses with the SEC that addressed several of the SEC staff's comments. However, as of February 19, 2014, we have not yet responded to comments regarding updates to our contract estimates which resulted in forward losses recognized in the third quarter of 2012 as we work with the SEC Division of Enforcement on some similar issues. We intend to continue to work with the Division of Corporation Finance to respond to the outstanding comments.
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Item 2.
Significant Properties
The location, primary use, approximate square footage and ownership status of our principal properties as of December 31, 2013 are set forth below:
Location
|
Primary Use |
Approximate
Square Footage |
Owned/Leased | |||
---|---|---|---|---|---|---|
United States |
||||||
Wichita, Kansas (1) |
Primary Manufacturing | 11.3 million | Owned/Leased | |||
|
Facility/Offices/Warehouse | |||||
Chanute, Kansas (2) |
Manufacturing Facility | 59,362 | Leased | |||
Tulsa, Oklahoma |
Manufacturing Facility | 1.9 million | Leased | |||
McAlester, Oklahoma |
Manufacturing Facility | 135,000 | Owned | |||
Kinston, North Carolina |
Primary Manufacturing/Office/Warehouse | 761,600 | Leased | |||
Nashville, Tennessee (3) |
Office | 15,000 | Leased | |||
United Kingdom |
||||||
Prestwick, Scotland |
Manufacturing Facility | 901,000 | Owned | |||
Preston, England |
Administrative Offices | 28,000 | Leased | |||
Malaysia |
||||||
Subang, Malaysia |
Manufacturing | 337,000 | Owned/Leased | |||
France |
||||||
Saint-Nazaire, France |
Primary Manufacturing/Office | 58,800 | Leased | |||
Toulouse, France |
Office | 3,400 | Leased |
Our physical assets consist of 15.5 million square feet of building space located on 1,335 acres in eleven facilities. We produce our fuselage systems and propulsion systems from our primary manufacturing facility located in Wichita, Kansas with some fuselage work done in our Kinston, North Carolina facility. We produce wing systems in our manufacturing facilities in Tulsa, Oklahoma; Kinston, North Carolina; Prestwick, Scotland; Saint-Nazaire, France; and Subang, Malaysia. In addition to these sites, we have a facility located in McAlester, Oklahoma dedicated to supplying machined parts and sub-assemblies to the Wichita and Tulsa facilities. We also have a light sub-assembly manufacturing facility located in Chanute, Kansas which manufactures small parts in support of Wichita propulsion.
The Wichita facility, including Spirit's corporate offices, is comprised of 625 acres, 6.3 million square feet of manufacturing space, 1.3 million square feet of offices and laboratories for the engineering and design group and 3.7 million square feet for support functions and warehouses. A total of 617,429 square feet is currently vacant, with much of it planned for backfill by new programs. The Wichita site has access to transportation by rail, road and air. For air cargo, the Wichita site has access to the runways of McConnell Air Force Base.
The Chanute facility, consists of 59,362 square feet of building space. The Chanute facility manufactures sub-assemblies for the propulsion segment, and is leased from the city of Chanute.
The Tulsa facility consists of 1.9 million square feet of building space set on 153 acres. The Tulsa plant is located five miles from an international shipping port (Port of Catoosa) and is located next to the Tulsa International Airport. The Tulsa facility includes off site leased space, 1.5 miles east in the Green Valley Center. The McAlester site, which manufactures parts and sub-assemblies primarily for the Tulsa facility, consists of 135,000 square feet of building space on 92 acres.
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The Prestwick facility consists of 0.9 million square feet of building space, comprised of 0.7 million square feet of manufacturing space and 0.2 million square feet of office space. This facility is set on 95 acres. The Prestwick plant is located on the west coast of Scotland, approximately 33 miles south of Glasgow, within close proximity to the motorway network that provides access between England and continental Europe. It is also easily accessible by air (at Prestwick International Airport) or by sea. We lease a portion of our Prestwick facility to the Regional Aircraft division of BAE Systems and certain other tenants.
The Malaysian manufacturing plant is located at the Malaysia International Aerospace Center (MIAC) in Subang. The 269,000 square foot leased facility is set on 45 acres and is centrally located with easy access to Kuala Lumpur, Malaysia's capital city, as well as nearby ports and airports. The facility assembles composite panels for wing components. An additional 68,000 square foot warehouse owned by Spirit was constructed in 2012 for shipping/receiving and parts storage to make room for additional manufacturing space in the existing building.
The Wichita and Tulsa manufacturing facilities have significant scale to accommodate the very large structures that are manufactured there, including, in Wichita, entire fuselages. Three of the U.S. facilities are in close proximity, with approximately 175 miles between Wichita and Tulsa and 90 miles between Tulsa and McAlester. Currently, these U.S. facilities utilize approximately 95% of the available building space. The Prestwick manufacturing facility currently utilizes only 72% of the space; of the remaining space, 15% is leased and 13% is vacant. The Preston office space is located in North Lancashire, England, approximately 200 miles south of Prestwick.
The Kinston, North Carolina facility, supports the manufacturing of composite panels and wing components. The primary manufacturing site and off-site leased spaces total 318 acres and 761,600 square feet. In addition to the primary manufacturing facility, this includes three additional buildings leased from the NC Global Transpark Authority: 27,500 square foot warehouse/office supporting receiving needs, a 26,400 square foot warehouse providing tooling storage, and a 120,000 square foot manufacturing facility supporting light manufacturing.
The Saint-Nazaire, France site was built on 6.25 acres and totals 58,800 square feet. This facility receives center fuselage frame sections for the Airbus A350 XWB from the facility in Kinston, North Carolina. Sections designed and manufactured in North Carolina are shipped across the Atlantic, received in Saint-Nazaire, and assembled before being transported to Airbus. Additionally, a 3,400 square foot office area in Toulouse, France is leased for engineering support.
Information concerning the litigation and other legal proceedings in which the Company is involved, may be found in Note 22 under the sub-heading "Litigation" in this Annual Report and that information is hereby incorporated by reference.
Item 4.
Mine Safety Disclosures
Not applicable.
Executive Officers of the Registrant
Listed below are the names, ages, positions held, and biographies of all executive officers of Spirit Holdings. Executive officers hold office until their successors are elected or appointed at the next annual meeting of the Board of Directors, or until their death, retirement, resignation, or removal.
Larry Lawson, 55. Mr. Lawson joined Spirit Holdings as President and Chief Executive Officer on April 6, 2013. Prior to joining Spirit Holdings, Mr. Lawson was Executive Vice President of Lockheed Martin's Aeronautics business segment. Mr. Lawson began his career as a flight control engineer working on the F-15 Eagle at McDonnell Douglas. He has since held a broad range of leadership positions in engineering, advanced development, business development, and program management in a career spanning more than 30 years. In his
44
work at Lockheed Martin, Mr. Lawson has overseen key aircraft production programs such as the F-35, F-22, F-16, C-130J, and C-5, including highly classified programs in the world-renowned Skunk Works® organization. Mr. Lawson holds a bachelor's degree in Electrical Engineering from Lawrence Technological University, where he also serves on the board of trustees, has a master's degree in Electrical Engineering from the University of Missouri, and is a graduate of the Harvard Business School Advanced Management Program and an MIT Seminar XXI Fellow.
Philip Anderson, 49. Mr. Anderson became the Senior Vice President of Defense and Contracts of Spirit Holdings effective September 23, 2013. Mr. Anderson previously served as Senior Vice President and Chief Financial Officer of Spirit Holdings from February 12, 2010 to September 2013. From October 2009 to February 2010, Mr. Anderson served as Vice President and Interim Chief Financial Officer of Spirit Holdings. Mr. Anderson also served as Treasurer of Spirit Holdings from November 2006 to July 2010. From March 2003 to November 2006, Mr. Anderson was the Director of Corporate Finance and Banking for Boeing. Mr. Anderson began his career at Boeing in 1989 as a defense program analyst and served in a variety of finance and manufacturing operations leadership positions at Boeing Defense Systems and Boeing Commercial Airplanes. Mr. Anderson received his Bachelor of Arts and Masters of Business from Wichita State University and holds a Six Sigma Black Belt certification from the University of Michigan.
David M. Coleal, 46. Mr. Coleal assumed the role of Executive Vice President /General Manager Boeing, Military, Business & Regional Jet Programs & Aftermarket in May 2013 after previously serving as Senior Vice President /General Manager of the Fuselage Segment since July 2011. Prior to joining Spirit AeroSystems, Mr. Coleal was Vice President and General Manager of Bombardier-Learjet. He joined Bombardier Aerospace in March 2008 and was responsible for all engineering and manufacturing operations, program change management, quality and material logistics for the Learjet family of aircraft, including development of the pioneering all-composite Learjet 85 mid-size business jet. From 2001 to 2008, Mr. Coleal worked at Cirrus Design Corporation, where he was initially responsible for operations, and he assumed positions of increasing responsibility until being named President and Chief Operating Officer in 2005. Mr. Coleal earned his Masters of Business Administration in Management Science from California State University Hayward in 1997. He graduated from California State University in Sacramento in 1990 with a Bachelor of Science degree in Mechanical Engineering Technology.
Sanjay Kapoor, 53. Mr. Kapoor joined Spirit Holdings as Senior Vice President and Chief Financial Officer on September 23, 2013. Mr. Kapoor joined Spirit from Raytheon where he most recently served as Vice President of Integrated Air & Missile Defense for Raytheon Integrated Defense Systems (IDS). Prior to this role, Mr. Kapoor was IDS Vice President of Finance and Chief Financial Officer from 2004 to 2008. Mr. Kapoor also served as CFO at United Technologies' Pratt and Whitney Power Systems Division. His tenure at Pratt and Whitney also included roles as Director of Aftermarket Services for the Power Systems Business, controller for the Turbine Module Center and business manager for new commercial programs. Mr. Kapoor received his bachelor's degree in technology from the Indian Institute of Technology and a dual Masters of Business Administration in finance and entrepreneurial management from The Wharton School at the University of Pennsylvania.
Jon D. Lammers, 49. Mr. Lammers was named Senior Vice President Secretary of Spirit Holdings in July 2012, and General Counsel of Spirit Holdings in October 2012. Mr. Lammers brings more than 20 years of legal experience, including 15 years at Cargill, Incorporated, where he served from July 1997 to July 2012. He served as Cargill's Asia Pacific general counsel in Singapore from June 2006 to June 2010 as well as Cargill's deputy North American general counsel in Wayzata, Minnesota from July 2010 to July 2012. Mr. Lammers earned his Bachelor of Science in Business Administration from the University of Southern California and his Juris Doctor degree from the University of Virginia.
Samantha J. Marnick, 43. Ms. Marnick became Senior Vice President Chief Administration Officer in October 2012. From January 2011 to September 2012, Ms. Marnick served as Senior Vice President of Corporate Administration and Human Resources. From March 2008 to December 2010, Ms. Marnick served as Vice President Labor Relations & Workforce Strategy responsible for labor relations, global human resource
45
project management office, compensation and benefits, and workforce planning. Ms. Marnick previously served as Director of Communications and Employee Engagement from March 2006 to March 2008. Prior to joining the Company, Ms. Marnick was a senior consultant and Principal for Mercer Human Resource Consulting holding management positions in both the United Kingdom and in the United States. Prior to that Ms. Marnick worked for Watson Wyatt, the UK's Department of Health and Social Security and The British Wool Marketing Board. Ms. Marnick holds a Master's degree from the University of Salford in Corporate Communication Strategy and Management.
John Pilla, 54. Mr. Pilla became the Senior Vice President/General Manager Airbus and A350 XWB Program Management in May 2013. Prior to that, Mr. Pilla served as the Senior Vice President/General Manager, Propulsion Systems Segment of Spirit since July 2009 and added the role of Senior Vice President/General Manager of the Wing segment in September 2012. From July 2011 to May 2013, he was also responsible for the Aftermarket Customer Support Organization. From April 2008 to July 2009, Mr. Pilla was Chief Technology Officer of Spirit Holdings and he served as Vice President/General Manager 787 of Spirit Holdings and/or Spirit, a position he assumed at the date of the Boeing Acquisition in June 2005 and held until March 2008. Mr. Pilla began his career at Boeing Commercial Airplanes in 1981 as a stress engineer and was promoted to Chief Engineer of Structures and Liaison in 1995. In 1997, Mr. Pilla led the Next-Generation 737 engineering programs and ultimately led the Define Team on the 737-900 fuselage and empennage in late 1997 as well as the 777LR airplane in May 2000. In July 2001, Mr. Pilla became the Director of Business Operations, a position he held until July 2003 when he accepted an assignment as 787 Director of Product Definition and Manufacturing. He received his Master's degree in Aerospace Structures Engineering in 1986 and a Masters in Business Administration in 2002 from Wichita State University.
Heidi Wood, 48. Ms. Wood joined Spirit Holdings as Senior Vice President Strategy, Mergers and Acquisitions and Investor Relations in July 2013. Prior to joining the Company, Ms. Wood was Senior Vice President and Co-head of Global Sales at Avjet Corporation. From 1999 to 2013, Ms. Wood served as Managing Director and global head of aerospace/defense analysis at Morgan Stanley. She was responsible for leading North American, Europe, Latin American and Singapore-based teams. Prior to assuming her employment at Morgan Stanley, Ms. Wood was an analyst at Cowen & Company from 1992 to 1999. Ms. Wood holds a Bachelor of Arts degree with honors from Brown University.
46
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our class A common stock has been quoted on the NYSE under the symbol "SPR" since November 21, 2006. Prior to that time, there was no public market for our stock. As of February 12, 2014, there were approximately 1,282 holders of record of class A common stock. However, we believe that many additional holders of our class A common stock are unidentified because a substantial number of shares are held of record by brokers or dealers for their customers in street names. The closing price on February 12, 2014 was $28.86 per share as reported by the NYSE.
As of February 12, 2014, there were approximately 123 holders of record of class B common stock. Our class B common stock is neither listed nor publicly traded.
The following table sets forth for the indicated periods the high and low closing sales price for our class A common stock on the NYSE.
|
2013 | 2012 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal Quarter
|
High | Low | High | Low | |||||||||
1st |
$ | 19.00 | $ | 15.94 | $ | 25.66 | $ | 21.11 | |||||
2nd |
$ | 21.93 | $ | 18.45 | $ | 25.72 | $ | 22.12 | |||||
3rd |
$ | 25.99 | $ | 21.48 | $ | 25.85 | $ | 21.65 | |||||
4th |
$ | 34.18 | $ | 23.54 | $ | 22.87 | $ | 14.04 |
We did not pay any cash dividends in 2012 or 2013 and we currently do not intend to pay cash dividends. Our future dividend policy will depend on the requirements of financing agreements to which we may be a party. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions.
Securities Authorized for Issuance under Equity Compensation Plans
The following table represents restricted shares outstanding under the Executive Incentive Plan, the Director Stock Plan, and the Short-Term and Long-Term Incentive Plans as of December 31, 2013.
Equity Compensation Plan Information
Plan Category
|
Number of Securities
to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities
Remaining Available for Future Issuances Under the Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(a)
|
(b)
|
(c)
|
|||||||
Restricted Stock Awards |
||||||||||
Equity compensation plans approved by security holders (1)(2) |
N/A | (3) | $ | | 8,939,862 | (4) | ||||
Equity compensation plans not approved by security holders (2) |
| $ | | | ||||||
Total |
N/A | (3) | $ | | 8,939,862 | (4) |
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The following graph shows a comparison from December 31, 2008 through December 31, 2013 of cumulative total return of our class A common stock, Standard & Poor's 500 Stock Index, and the Standard & Poor's 500 Aerospace & Defense Index. Such returns are based on historical results and are not intended to suggest future performance. We have never paid dividends on our class A common stock and have no present plans to do so.
|
INDEXED RETURNS
Years Ending |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Company/Index
|
Base
Period 12/31/08 |
12/31/2009 |
12/31/2010 | 12/31/2011 | 12/31/2012 | 12/31/2013 | |||||||||||||
Spirit AeroSystems Holdings, Inc . |
100 | 195.28 | 204.62 | 204.33 | 166.86 | 335.10 | |||||||||||||
S&P 500 Index |
100 | 126.46 | 145.51 | 148.59 | 172.37 | 228.19 | |||||||||||||
S&P 500 Aerospace & Defense Index |
100 | 124.64 | 143.47 | 151.04 | 173.04 | 268.07 |
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Item 6.
Selected Financial Data
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following table sets forth our selected consolidated financial data for each of the periods indicated. Financial data is derived from the audited consolidated financial statements of Spirit Holdings. The audited consolidated financial statements for the years ended December 31, 2011, December 31, 2012 and December 31, 2013 are included in this Annual Report. You should read the information presented below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined and consolidated financial statements and related notes contained elsewhere in the Annual Report.
|
Spirit Holdings | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Twelve Months Ended | |||||||||||||||
|
December 31,
2013 |
December 31,
2012 |
December 31,
2011 |
December 31,
2010 |
December 31,
2009 |
|||||||||||
|
(Dollars in millions, except per share data)
|
|||||||||||||||
Statement of Income Data: |
||||||||||||||||
Net revenues |
$ | 5,961.0 | $ | 5,397.7 | $ | 4,863.8 | $ | 4,172.4 | $ | 4,078.5 | ||||||
Cost of sales (1) |
6,059.5 | 5,245.3 | 4,312.1 | 3,607.9 | 3,581.4 | |||||||||||
Selling, general and administrative expenses (2) |
200.8 | 172.2 | 159.9 | 156.0 | 137.1 | |||||||||||
Impact from severe weather event |
30.3 | (146.2 | ) | | | | ||||||||||
Research and development |
34.7 | 34.1 | 35.7 | 51.5 | 56.7 | |||||||||||
| | | | | | | | | | | | | | | | |
Operating (loss) income |
(364.3 | ) | 92.3 | 356.1 | 357.0 | 303.3 | ||||||||||
Interest expense and financing fee amortization |
(70.1 | ) | (82.9 | ) | (77.5 | ) | (59.1 | ) | (43.6 | ) | ||||||
Interest income |
0.3 | 0.2 | 0.3 | 0.3 | 7.0 | |||||||||||
Other income (loss), net |
3.3 | 1.8 | 1.4 | (0.4 | ) | 6.1 | ||||||||||
| | | | | | | | | | | | | | | | |
(Loss) income before income taxes and equity in net income (loss) of affiliates |
(430.8 | ) | 11.4 | 280.3 | 297.8 | 272.8 | ||||||||||
Income tax (provision) benefit |
(191.1 | ) | 24.1 | (86.9 | ) | (78.2 | ) | (80.9 | ) | |||||||
Equity in net income (loss) of affiliates |
0.5 | (0.7 | ) | (1.0 | ) | (0.7 | ) | (0.2 | ) | |||||||
| | | | | | | | | | | | | | | | |
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | $ | 218.9 | $ | 191.7 | |||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net (loss) income per share, basic |
$ | (4.40 | ) | $ | 0.24 | $ | 1.36 | $ | 1.56 | $ | 1.39 | |||||
Shares used in per share calculation, basic (3) |
141.3 | 140.7 | 139.2 | 137.9 | 137.2 | |||||||||||
Net (loss) income per share, diluted |
$ | (4.40 | ) | $ | 0.24 | $ | 1.35 | $ | 1.55 | $ | 1.37 | |||||
Shares used in per share calculation, diluted |
141.3 | 142.7 | 142.3 | 141.0 | 139.8 |
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|
Spirit Holdings | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Twelve Months Ended | |||||||||||||||
|
December 31,
2013 |
December 31,
2012 |
December 31,
2011 |
December 31,
2010 |
December 31,
2009 |
|||||||||||
|
(Dollars in millions)
|
|||||||||||||||
Other Financial Data: |
||||||||||||||||
Cash flow provided by (used in) operating activities |
$ | 260.6 | $ | 544.4 | $ | (47.3 | ) | $ | 125.1 | $ | (13.9 | ) | ||||
Cash flow (used in) investing activities |
$ | (268.2 | ) | $ | (248.8 | ) | $ | (249.2 | ) | $ | (288.4 | ) | $ | (112.4 | ) | |
Cash flow (used in) provided by financing activities |
$ | (13.9 | ) | $ | (34.6 | ) | $ | (6.7 | ) | $ | 277.4 | $ | 276.1 | |||
Capital expenditures |
$ | (234.2 | ) | $ | (236.1 | ) | $ | (249.7 | ) | $ | (288.1 | ) | $ | (228.2 | ) | |
Consolidated Balance Sheet Data: |
||||||||||||||||
Cash and cash equivalents |
$ | 420.7 | $ | 440.7 | $ | 177.8 | $ | 481.6 | $ | 369.0 | ||||||
Accounts receivable, net |
$ | 550.8 | $ | 420.7 | $ | 267.2 | $ | 200.2 | $ | 160.4 | ||||||
Inventories, net |
$ | 1,842.6 | $ | 2,410.8 | $ | 2,630.9 | $ | 2,507.9 | $ | 2,206.9 | ||||||
Property, plant & equipment, net |
$ | 1,803.3 | $ | 1,698.5 | $ | 1,615.7 | $ | 1,470.0 | $ | 1,279.3 | ||||||
Total assets |
$ | 5,107.2 | $ | 5,415.3 | $ | 5,042.4 | $ | 5,102.0 | $ | 4,473.8 | ||||||
Total debt |
$ | 1,167.3 | $ | 1,176.2 | $ | 1,200.9 | $ | 1,196.8 | $ | 893.8 | ||||||
Long-term debt |
$ | 1,150.5 | $ | 1,165.9 | $ | 1,152.0 | $ | 1,187.3 | $ | 884.7 | ||||||
Total equity |
$ | 1,481.0 | $ | 1,996.9 | $ | 1,964.7 | $ | 1,810.9 | $ | 1,573.8 |
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the audited consolidated financial statements, the notes to the audited consolidated financial statements and the "Selected Consolidated Financial Information and Other Data" appearing elsewhere in this Annual Report. This section includes "forward-looking statements." Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "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, including, but not limited to, those described in the "Risk Factors" section of this Annual Report. See also "Cautionary Statement Regarding Forward-Looking Statements." 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.
On February 6, 2014, Moody's Investors Service placed the rating of Spirit AeroSystems, Inc. under review for possible downgrade.
On January 16, 2014, Bombardier announced a delay in entry-into-service for the new C Series aircraft, for which Spirit provides content. This delay is not expected to have a material impact on Spirit's results of operations.
On December 19, 2013, Spirit completed the sale of its interest in the Spirit-Progresstech joint venture, our former joint venture with ProgressTech, LTD.
We are one of the largest independent non-OEM (original equipment manufacturer) aircraft parts designers and manufacturers of commercial aerostructures in the world, based on annual revenues, as well as the largest independent supplier of aerostructures to Boeing. In addition, we are one of the largest independent suppliers of aerostructures to Airbus. Boeing and Airbus are the two largest aircraft OEMs in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial and military aircraft. For the twelve months ended December 31, 2013, we generated net revenues of $5,961.0 million and net loss of $621.4 million.
We are organized into three principal reporting segments: (1) Fuselage Systems, which includes forward, mid and rear fuselage sections, (2) Propulsion Systems, which includes nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which includes 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, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas and Kinston, North Carolina, with an assembly plant in Saint-Nazaire, France for the A350 XWB program. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas. The Wing Systems segment manufactures products at our facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Subang, Malaysia; and Kinston, North Carolina. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 48%, 27%, 25% and less than 1%, respectively, of our net revenues for the twelve months ended December 31, 2013.
We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.
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The financial health of the commercial airline industry has a direct and significant effect on our commercial aircraft programs. The global industry's year-over-year revenue grew from 2010 through 2013, and is forecast to continue growing in 2014 and 2015, after significant contraction in 2008 and 2009. One key driver of the commercial aircraft market is airline passenger and cargo traffic trends. Principal factors influencing traffic are economic growth and political stability. A significant downturn in global or regional economic stability, or exogenous shocks such as terrorism or a pandemic, could suppress traffic and negatively affect demand for our key customers' products.
Demand for commercial aerostructures is highly correlated to demand for new aircraft. Boeing and Airbus have more than doubled their combined backlog since December 2006. The year-end 2013 combined backlog was 10,639 aircraft. High backlog levels are expected to continue to drive increasing production and delivery forecasts in the near to mid-term from both Boeing and Airbus.
The following table sets forth the historical deliveries of Boeing and Airbus for 2008 through 2013 and delivery expectations for 2014.
|
2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 (1) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Boeing |
375 | 481 | 462 | 477 | 601 | 648 | 715-725 | |||||||||||||||
Airbus |
483 | 498 | 510 | 534 | 588 | 626 | 626 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total |
858 | 979 | 972 | 1,011 | 1,189 | 1,274 | 1,341-1,351 |
Program Inventory
Product inventory continues to grow in terms of absolute dollars and remains stable as a percentage of total assets. Inventory as a percentage of total assets was 36%, 45% and 52% at December 31, 2013, 2012 and 2011, respectively. This overall trend in inventory is driven primarily by our contractually required investments in certain programs, which include the Boeing B747-8, B787, Gulfstream G280 and G650, Airbus A350 XWB, Sikorsky CH-53K and Rolls-Royce BR725 programs. The contracts for these programs accounted for a decrease in inventory from 2012 to 2013 of $682.7 million, which is net of forward loss charges for each year. Excluding the forward loss charges, these programs would have increased inventory by $329.4 million from 2012 to 2013. The increases in inventory for new and maturing programs in the last few years are a result of the application of the percentage-of-completion method of contract accounting with regard to inventory and revenue recognition. Under this method, investments in new and maturing contracts, including contractual pre-production costs and recurring production costs in excess of the projected average cost to manufacture all units in the contract block, initially accumulate in inventory for the related contract. Once production has reached a point where the cost to produce a ship set falls below such projected average cost, the inventory balance for such program will begin to decrease. Deferred inventory costs are evaluated for recoverability through their inclusion in the total costs used in the calculation of each contract block's estimated profit margin. When the estimated total contract block costs exceed total estimated contract block revenues, a forward loss is recorded and an inventory reserve is established.
The Company's focus is on ensuring that our strategy and our operational and cost performance are world class. Overall, we are committed to the concept of change and we have undertaken specific actions recently that highlight that commitment. On May 2, 2013, we announced the undertaking of comprehensive strategic and financial reviews of our development programs at our Tulsa, Wichita, Kinston and St. Nazaire sites. These reviews were concluded in the fourth quarter of 2013. Decisions made as a result of these reviews include some of the actions we announced in 2013, the most significant of which was
53
our commencement of a process to sell our Oklahoma facilities, which we announced on August 6, 2013. Certain of our maturing programs, including the Gulfstream G280 and G650 wing and the B787 wing programs, are produced at these facilities. This decision aligns with our strategy to focus on the commercial aerospace and defense segments of the marketplace. We may ultimately decide to sell only a portion of, or certain programs produced at, our Oklahoma facilities, to sell separate portions and/or programs to different buyers, or to retain the facilities in their entirety. We are also committed to reducing internal cost and improving operational efficiency through centralization of functions as demonstrated by the reduction in workforce activities completed in the third quarter of 2013. Additionally, we continue to align the business around our customers and programs with strong emphasis on markets, business management, program management, production and supply chain. We also added new executive talent and reassigned existing executive talent in an effort to strengthen performance in certain areas of our business. We anticipate taking additional actions in the near-term as we continue to focus on positioning the Company for future success.
We are currently performing work on several new and maturing programs, which are in various stages of development. The Boeing B787-8 has received FAA and JAA certifications, as well as EASA certification for entry into service. The Gulfstream G280 and G650 have each received FAA and EASA certifications.
During 2013, several events occurred that led to significant changes in cost estimates for several programs resulting in forward losses being recorded on some of these programs. Due to these changes, for the twelve months ended December 31, 2013, we recorded forward loss charges of $1,133.3 million, including $240.9 million on the Gulfstream G280, $288.3 million on the Gulfstream G650, $78.6 million on the Airbus A350 XWB fuselage recurring, $32.7 million on the Airbus A350 XWB fuselage non-recurring, $41.1 million on the Boeing B747-8 fuselage, $16.4 million on the Boeing B767 propulsion, $422.0 million on the Boeing B787 and a net $13.3 million on the Rolls-Royce BR725. These amounts are recorded within the Company's results of operations as part of cost of goods sold as well as on the consolidated balance sheet as forward loss provisions within inventory.
A350 XWB
We continue to support the development of the A350 XWB program through a wing contract and a fuselage contract, both of which are segmented into a non-recurring design engineering phase and recurring production phase. In the first quarter of 2013, we reduced the margins for the A350 XWB fuselage recurring and A350 XWB wing recurring programs to break-even to reflect an increase in identified risk profile of these programs. In September and October of 2013, we agreed with Airbus on the work scope for the design and tooling related to the -1000 derivative of the A350 XWB fuselage and wing contracts, respectively.
Based on current estimates, the agreement for the non-recurring design engineering phase of the -1000 derivative fuselage resulted in a $32.7 million forward loss which was recorded in the third quarter of 2013. There is a risk of additional forward loss if we do not successfully execute the design and engineering change process as projected.
Our A350 XWB fuselage recurring program has experienced various production inefficiencies mostly driven by early development discovery and engineering change to the aircraft design, as well as higher test and transportation costs. Airbus is assisting us as we work through these issues and has provided additional resources to work alongside our personnel. In the third quarter of 2013, we recorded a forward loss of $78.6 million for the A350 XWB fuselage recurring contract due to these production inefficiencies. There continues to be risk of additional forward loss associated with the fuselage recurring contract as we work through production issues.
Although we continue to project the wing recurring production contract to be break-even, there is still a substantial amount of risk similar to what we have experienced on other development programs.
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Particularly, our ability to successfully negotiate favorable terms with our suppliers, manage supplier performance, execute cost reduction strategies, hire and retain skilled production and management personnel, execute quality and manufacturing processes, and manage program schedule delays or adjust to higher rate schedules, among other risks, will determine the ultimate performance of these programs.
B787 Program
As we move into a higher production rate on this program, our performance at the current contracted price depends on our continued ability to achieve cost reductions in manufacturing and support labor as well as supply chain. During the first and second quarters of 2013, we experienced production inefficiencies at our Tulsa facility as we transitioned the B787-9 derivative into production, which drove forward losses of $37.3 million on the B787 wing program. Additionally in the fourth quarter of 2013, we revised our estimates of the amount of near-term achievable cost reductions for the B787 program based on cost savings ideas generated, the maturity of those ideas, and the expected realization for the program. This change in cost savings estimates drove a forward loss in the fourth quarter of $384.7 million. Total forward losses for the program were $422.0 million for the twelve months ended December 31, 2013.
Continuous improvement in our cost structure has been on-going since the beginning of the program as design engineering for both the B787-8 and B787-9 derivatives finalized and manufacturing plans solidified. Near term cost improvement efforts will focus on efficiency gains within our manufacturing process and execution of sourcing strategies.
We have not yet established pricing for the B787-9, B787-10 or any future derivatives. The B787 Supply Agreement provides that initial prices for the B787-9 and B787-10 are to be determined by a procedure set out in the B787 Supply Agreement, and to be documented by amendment once that amendment has been agreed to by the parties. The parties have engaged in discussions concerning how to determine initial B787-9 and B787-10 pricing, and have not yet reached agreement. Our ability to successfully negotiate fair and equitable prices for these models as well as overall B787 delivery volumes and our ability to achieve forecasted cost improvements on all B787 models are key factors in achieving the projected financial performance for this program.
G280 and G650 Programs
The Gulfstream G650 and G280 programs face near term risks that includes our ability to execute our contractual work statement, achieve supply chain cost reductions, and successfully perform to manufacturing plans and delivery schedules. Business jet market fluctuations caused by changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market, also present risk to these programs. The G650 program has significant near term risk as we work with our customer to resolve certain commercial issues related to Gulfstream's contention that delivered units failed to meet schedule and weight requirements.
Supply Chain Cost Reductions G280 and G650
Our 2012 cost estimates at completion for the Gulfstream G280 and G650 programs included significant cost reductions primarily related to sourcing opportunities projected to be realized between 2015 and 2018. These sourcing opportunities and related savings amounts were based on the experience of the supply chain team and operational management. During the second quarter of 2013, the supply chain team and operational management determined that a substantial portion of the total cost savings included in the contract estimates for each program would not be realized. This determination was based on a number of changing conditions and new developments including, an assessment of our actual experience with our customers regarding their receptiveness to proposed changes, completion of a detailed part analyses as part of our effort to project future sourcing costs, and our inability to achieve estimated supplier price reductions via negotiations with suppliers.
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Labor Estimates Tulsa Facility
The labor cost forecasts within the contract estimates for the G280, G650 and B787 are based on certain assumptions, including the level of disruption expected in the future. In our contract estimates through the first quarter of 2013, we assumed that certain disruptions to the manufacturing line caused by (i) supplier quality issues and late deliveries, (ii) customer inspections occurring in our facilities and (iii) our own manufacturing quality issues would be resolved by the middle of 2013. During the second and fourth quarters of 2013, key performance dates were missed and we extended the expected period of time during which these issues would be resolved in our assumptions for our contract estimates. As a result, we experienced higher actual costs as well as significant increases to forecasted costs, resulting in additional forward losses recognized on all of these programs in the second and fourth quarters of 2013.
Contractual Items G650
As we worked with Gulfstream to meet its production demand, we negotiated a temporary transfer of a portion of our work scope to Gulfstream for completion. In the second quarter of 2013, due to the effect of continued production challenges on our forecasted ability to achieve scheduled deliveries, we changed our assumptions to extend the duration of the work transfer and updated our estimates regarding this temporarily transferred work scope which is accounted for as a reduction in forecasted revenue. As described in more detail in Note 22, "Commitments, Contingencies and Guarantees," we instituted a demand for arbitration against Gulfstream to resolve certain contractual disputes primarily related to engineering changes made by Gulfstream and the impact of those changes to weight and delivery schedules as well as for incomplete payments to Spirit. We continually assess these contractual items and adjust our estimates as appropriate each quarter. Changes in these particular estimates resulted in additional forward losses recognized on the G650 in the second quarter of 2013.
General Statement Regarding New and Maturing Programs
In order to continue to reduce risk on our new and maturing programs, it will be critical that we successfully perform under revised design and manufacturing plans, achieve forecasted cost reductions as we enter increasing levels of production, meet customer delivery schedules and successfully resolve claims, assertions and pricing negotiations with our customers and suppliers.
Additionally, we face risks related to the announcement on August 6, 2013 of our initiation of a process to divest our Oklahoma facilities, which we may ultimately decide to sell separate portions and/or programs to different buyers, or retain the facilities in their entirety. We have a concentration of maturing programs, including the G650, G280 and B787 wing programs, at these facilities and a divestiture of these facilities may have a material financial impact in the period in which the divestiture becomes probable.
The financial statements include Spirit's financial statements and the financial statements of its majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America. Investments in business entities in which we do not have control, but have the ability to exercise influence over operating and financial policies, are accounted for by the equity method. Kansas Industrial Energy Supply Company ("KIESC"), a tenancy-in-common with other Wichita companies established to purchase natural gas, is fully consolidated as Spirit owns 77.8% of the entity's equity. All intercompany balances and transactions have been eliminated in consolidation. The Company's U.K. subsidiary uses local currency, the British pound, as its functional currency; the Malaysian subsidiary uses the British pound and our Singapore subsidiary uses the Singapore dollar. All other foreign subsidiaries and branches use the U.S. dollar as their functional currency.
As part of the monthly consolidation process, the functional currency is translated to U.S. dollars using the end-of-month currency translation rate for balance sheet accounts and average period currency translation rates for revenue and income accounts as defined by FASB authoritative guidance on foreign currency translation.
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The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to inventory, income taxes, financing obligations, warranties, pensions and other post-retirement benefits and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management believes that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations. However, the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.
The following are our most critical accounting policies, which are those that require management's most subjective and complex judgments, requiring the use of estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Revenues and Profit Recognition
A significant portion of the Company's revenues are recognized under long-term, volume-based pricing contracts, requiring delivery of products over several years. The Company recognizes revenue under the contract method of accounting and records sales and profits on each contract in accordance with the percentage-of-completion method of accounting, primarily using the units-of-delivery method. The units-of-delivery method recognizes as revenue the contract price of units of a basic production product delivered during a period and as the cost of earned revenue the costs allocable to the delivered units; costs allocable to undelivered units are reported in the balance sheet as inventory. The method is used in circumstances in which an entity produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers' specifications. Recurring long-term production contracts are usually divided into contract blocks for this purpose, with each block treated as a separate contract for "units-of-delivery" production-type contract accounting purposes.
The total quantity of production units to be delivered under a contract may be set as a single contract accounting block, or it can be split into multiple blocks. Unless the life of the contract is so long that it prevents reliable estimates, the entire contract quantity will typically be set as the contract accounting block quantity. "Life of program" or "requirements based" contracts often lead to continuing sales of more than twenty years. Since this is much longer than can be reliably estimated, we use parameters based on the contract facts and circumstances to determine the length of the contract block. This analysis includes: considering the customer's firm orders, internal assessment of the market, reliabilities of cost estimates, potential segmentation of non-recurring elements of the contract, and other factors. Contract block sizes may also be determined based on certain contractual terms such as pricing renegotiation dates such that certain contract blocks may use an approximate date instead of a defined unit quantity in order to increase the ability to estimate accurately given that the renegotiated pricing is unknown for the planning block. Shorter contract blocks for mature, ongoing programs are common due to the presence of recent cost history and probable forecast accuracy. Mature program contract blocks tend to be approximately two years in length. Initial contract blocks often require a longer time period and greater number of units in order to take into account the higher cost of early units due to a steeper experience curve and pre-production design costs. Initial contract blocks on new programs can extend up to ten years or longer. As these programs mature and efficiencies are realized, subsequent contract block length shortens to take into account the steady state of the continuing production.
Revenues from non-recurring design work are recognized based on substantive milestones or use of the cost to cost method, that are indicative of our progress toward completion depending on facts and
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circumstances. We follow the requirements of FASB authoritative guidance on accounting for the performance of construction-type and certain production-type contracts (the contract method of accounting), using the cumulative catch-up method in accounting for revisions in estimates. Under the cumulative catch-up method, the impacts of revisions in estimates are recognized immediately when changes in estimated contract profitability become known.
A profit rate is estimated based on the difference between total revenues and total costs over a contract block. Total revenues at any given time include actual historical revenues up to that time plus future estimated revenues. Total costs at any given time include actual historical costs up to that time plus future estimated costs. Estimated revenues include negotiated or expected values for units delivered, estimates of probable recoveries asserted against the customer for changes in specifications, price adjustments for contract and volume changes, escalation and assumed but currently unnegotiated price increases for derivative models. Costs include the estimated cost of certain pre-production effort (including non-recurring engineering and planning subsequent to completion of final design) plus the estimated cost of manufacturing a specified number of production units. Estimates take into account assumptions relative to future labor performance and rates, and projections relative to material and overhead costs including expected "learning curve" cost reductions over the term of the contract. Estimated revenues and costs also take into account the expected impact of specific contingencies that we believe are probable.
Estimates of revenues and costs for our contract blocks span a period of multiple years and are based on a substantial number of underlying assumptions. We believe that the underlying assumptions are sufficiently reliable to provide a reasonable estimate of the profit to be generated. However, due to the significant length of time over which revenue streams will be generated, the variability of the revenue and cost streams can be significant if the assumptions change. Estimates of profit margins for contract accounting blocks are typically reviewed on a quarterly basis. Assuming the initial estimates of sales and costs under the contract block are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contract block. Changes in these underlying estimates due to revisions in sales and cost estimates may result in profit margins being recognized unevenly over a contract block as such changes are accounted for on a cumulative basis in the period estimates are revised, which we refer to as cumulative catch-up adjustments. When the current estimates of total contract revenue and total contract cost indicate a loss, a provision for the entire loss on the contract, known as a forward loss charge, is recorded to cost of sales in the period in which it becomes evident.
For revenues not recognized under the contract method of accounting, the Company recognizes revenues from the sale of products at the point of passage of title, which is generally at the time of shipment. Shipping and handling costs are included in cost of sales. Revenues earned from providing maintenance services including any contracted research and development are recognized when the service is complete or other contractual milestones are attained.
Under an agreement with Airbus, beginning in 2012 certain payments that are also accounted for as consideration given by a vendor to a customer have been amortized as a reduction to net revenues.
A significant portion of the Company's future revenues is expected to be derived from new or maturing programs. There are several risks inherent to such programs. In the design and engineering phase, we may incur costs in excess of our forecasts due to several factors, including cost overruns, customer directed change orders and delays in the overall program. We may also incur higher than expected recurring production costs, which may be caused by a variety of factors, including the future impact of engineering changes (or other change orders) or our inability to secure contracts with our suppliers at projected cost levels. Our ability to recover these excess costs from the customer will depend on several factors, including our rights under our contracts for such programs. In determining our profits and losses in accordance with the percentage-of-completion method of contract accounting, we are required to make significant assumptions regarding our future costs and revenues, as well as the estimated number of units to be manufactured under the contract and other variables. We continually review and update our assumptions based on market trends and our most recent experience. If we make material
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changes to our assumptions, such as a reduction in the estimated number of units to be produced under the contract (which could be caused by emerging market trends or other factors), an increase in future production costs or a change in the recoverability of increased design or production costs, we may experience negative cumulative catch-up adjustments related to revenues previously recognized. In some cases, we may recognize forward loss amounts. For a broader description of the various types of risks we face related to new and maturing programs, see "Risk Factors Risk Factors Related to Our Business and Industry."
Inventory
Raw materials are stated at lower of cost (principally on an actual or average cost basis) or market. Inventoried costs attributed to units delivered under long-term contracts are based on the estimated average cost of all units expected to be produced and are determined under the learning curve concept which anticipates a predictable decrease in unit costs as tasks and production techniques become more efficient through repetition. This usually results in an increase in inventory (referred to as "excess-over-average" or "deferred production costs") during the early years of a contract. These costs are deferred only to the extent the amount of actual or expected excess-over-average is reasonably expected to be fully offset by lower-than-average costs in future periods of a contract. If in-process inventory plus estimated costs to complete a specific contract exceed the actual plus anticipated remaining sales value of such contract, such excess is charged to cost of sales in the period the loss becomes known, thus reducing total inventory to estimated realizable value. Costs in inventory include amounts relating to contracts with long production cycles, some of which are not expected to be realized within one year.
The Company reviews its general stock materials and spare parts inventory each quarter to identify impaired inventory, including excess or obsolete inventory, based on historical sales trends and expected production usage. Impaired inventories are written off to work in process in the period identified.
Total inventory includes deferred production costs for the excess of production costs over the estimated average cost per ship set, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. Recovery of excess over average deferred production costs is dependent on the number of ship sets ultimately sold and the ultimate selling prices and lower production costs associated with future production under these contract blocks. Work-in-process inventory also includes non-recurring production costs. Non-recurring production costs include design and engineering costs and test articles.
Finished goods inventory is stated at its estimated average per unit cost based on all units expected to be produced.
Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. Significant customer-directed work changes can also cause pre-production costs to be incurred. These costs are typically recovered over a certain number of ship set deliveries.
Income Taxes
Income taxes are accounted for in accordance with FASB authoritative guidance on accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a
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deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.
Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's prior earnings history including the forward losses previously recognized in the U.S., Management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position in recent years once results from the year ended December 31, 2013 were included, the threshold after which there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. As of December 31, 2013, the total net U.S. deferred tax asset was $399.6 million. The net U.S. deferred tax asset after recording valuation allowances is $3.7 million. Valuation allowances recorded against the consolidated net U.S. deferred tax asset in the current year were $381.0 million. Additionally, the Company maintains a $14.9 million valuation allowance against separate company state income tax credits and previously recorded other U.S. issues and $0.6 million for other foreign issues which is an increase of $5.1 million from the prior year. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.
We record an income tax expense or benefit based on the net income earned or net loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB authoritative guidance on accounting for the uncertainty in income taxes. The final tax outcome for these matters may be different than management's original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods. We use the flow-through accounting method for tax credits. Under this method, tax credits reduce income tax expense.
Pensions and Other Post-Retirement Benefits
We account for pensions and other post-retirement benefits in accordance with FASB authoritative guidance on employers' accounting for pensions, post-retirement benefits other than pensions, defined benefit pension and other post-retirement plans (See Note 16, "Pension and Other Post-Retirement Benefits," for additional detail on these plans).
Assumptions used in determining the benefit obligations and the annual expense for our pension and post-retirement benefits other than pensions are evaluated and established in conjunction with an independent actuary.
We set the discount rate assumption annually for each of our retirement-related benefit plans as of the measurement date, based on a review of projected cash flows and long-term high-quality corporate bond yield curves. The discount rate determined on each measurement date is used to calculate the benefit obligation as of that date, and is also used to calculate the net periodic benefit expense/(income) for the upcoming plan year.
We derive assumed expected rate of return on pension assets from the long-term expected returns based on the investment allocation by class specified in our investment policy. The expected return on plan assets determined on each measurement date is used to calculate the net periodic benefit expense/(income) for the upcoming plan year.
Assumed health care cost trend rates have a significant effect on the amounts reported for the post-retirement health care plans. To determine the health care cost trend rates, we consider national health trends and adjust for our specific plan designs and locations.
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Stock Compensation Plans
At inception, we adopted FASB authoritative guidance which generally requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value and to recognize this cost over the requisite service period or immediately if there is no service period or other performance requirements. Stock-based compensation represents a significant accounting policy of ours, which is further described in Note 15, "Debt," within the notes to our consolidated financial statements included in this Annual Report.
We have established various stock compensation plans that include restricted share grants and restricted stock units.
For a listing of new accounting standards see Note 2, "Summary of Significant Accounting Policies New Accounting Standards."
The following table sets forth, for the periods indicated, certain of our operating data:
|
Twelve
Months Ended December 31, 2013 |
Twelve
Months Ended December 31, 2012 |
Twelve
Months Ended December 31, 2011 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
($ in millions)
|
|||||||||
Net revenues |
$ | 5,961.0 | $ | 5,397.7 | $ | 4,863.8 | ||||
Cost of sales (1)(2)(3) |
6,059.5 | 5,245.3 | 4,312.1 | |||||||
Selling, general and administrative expenses (4) |
200.8 | 172.2 | 159.9 | |||||||
Impact from severe weather event (5) |
30.3 | (146.2 | ) | | ||||||
Research and development |
34.7 | 34.1 | 35.7 | |||||||
| | | | | | | | | | |
Operating (loss) income |
(364.3 | ) | 92.3 | 356.1 | ||||||
Interest expense and financing fee amortization |
(70.1 | ) | (82.9 | ) | (77.5 | ) | ||||
Interest income |
0.3 | 0.2 | 0.3 | |||||||
Other income, net |
3.3 | 1.8 | 1.4 | |||||||
| | | | | | | | | | |
(Loss) income before income taxes and equity in net loss of affiliate |
(430.8 | ) | 11.4 | 280.3 | ||||||
Income tax (provision) benefit |
(191.1 | ) | 24.1 | (86.9 | ) | |||||
| | | | | | | | | | |
(Loss) income before equity in net loss of affiliate |
(621.9 | ) | 35.5 | 193.4 | ||||||
Equity in net income (loss) of affiliate |
0.5 | (0.7 | ) | (1.0 | ) | |||||
| | | | | | | | | | |
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | |||
| | | | | | | | | | |
| | | | | | | | | | |
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non-recurring, Boeing B767 and Boeing B747-8 programs, respectively. In addition, the twelve months ended December 31, 2012 includes charges of $3.6 million related to asset impairments, $2.2 million related to the disposal of certain assets, $2.2 million related to stock incentives for certain UAW-represented employees, $2.1 million for early retirement incentives for eligible employees and $14.7 million in favorable cumulative catch-up adjustments for periods prior to December 31, 2012. For the twelve months ended December 31, 2012, $11.0 million was reclassified from segment operating income to unallocated cost of sales to conform to current year presentation.
Comparative ship set deliveries by model are as follows:
Model
|
Twelve Months
Ended December 31, 2013 |
Twelve Months
Ended December 31, 2012 |
Twelve Months
Ended December 31, 2011 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
B737 |
442 | 417 | 377 | |||||||
B747 |
19 | 24 | 17 | |||||||
B767 |
15 | 25 | 23 | |||||||
B777 |
99 | 86 | 78 | |||||||
B787 |
65 | 43 | 25 | |||||||
| | | | | | | | | | |
Total Boeing |
640 | 595 | 520 | |||||||
A320 Family |
486 | 437 | 403 | |||||||
A330/340 |
113 | 97 | 93 | |||||||
A350 |
8 | 3 | | |||||||
A380 |
34 | 24 | 24 | |||||||
| | | | | | | | | | |
Total Airbus |
641 | 561 | 520 | |||||||
Business/Regional Jets |
97 | 84 | 49 | |||||||
| | | | | | | | | | |
Total |
1,378 | 1,240 | 1,089 | |||||||
| | | | | | | | | | |
| | | | | | | | | | |
For purposes of measuring production or ship set deliveries for Boeing aircraft in a given period, the term "ship set" refers to sets of structural fuselage components produced or delivered for one aircraft in such period. For purposes of measuring production or ship set deliveries for Airbus and Business/Regional Jet aircraft in a given period, the term "ship set" refers to all structural aircraft components produced or delivered for one aircraft 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
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production or ship set deliveries, which may result in slight variations in production or delivery quantities of the various ship set components in any given period.
Net revenues by prime customer are as follows:
Prime Customer
|
Twelve Months
Ended December 31, 2013 |
Twelve Months
Ended December 31, 2012 |
Twelve Months
Ended December 31, 2011 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Boeing |
$ | 5,022.6 | $ | 4,533.2 | $ | 4,156.7 | ||||
Airbus |
595.1 | 466.1 | 497.0 | |||||||
Gulfstream |
138.6 | 165.1 | 56.5 | |||||||
Sikorsky |
14.7 | 26.2 | 24.9 | |||||||
Other (1) |
190.0 | 207.1 | 128.7 | |||||||
| | | | | | | | | | |
Total net revenues |
$ | 5,961.0 | $ | 5,397.7 | $ | 4,863.8 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Twelve Months Ended December 31, 2013 as Compared to Twelve Months Ended December 31, 2012
Net Revenues. Net revenues for the twelve months ended December 31, 2013 were $5,961.0 million, an increase of $563.3 million, or 10%, compared with net revenues of $5,397.7 million for the prior year. The increase in net revenues in 2013 as compared to 2012 was primarily due to production volume increases on Boeing, Airbus and business jet programs. We recorded approximately $525.3 million of additional production volume driven by customer delivery schedules and higher production rates, approximately $22.9 million of additional non-recurring revenue and approximately $10.1 million of additional aftermarket volume. Non-recurring revenue, which includes design and development efforts, increased during 2013 primarily due to increased efforts on the B737 MAX and A350 XWB non-recurring fuselage, partially offset by lower design and development activities on the B747-8, B787 and Sikorsky non-recurring contracts. Deliveries to Boeing increased by 8% to 640 ship sets during 2013 primarily driven by higher production rates on certain Boeing models, as compared to 595 ship sets delivered in the prior year. Deliveries to Airbus increased by 14% to 641 ship sets during 2013 primarily driven by customer delivery schedules, as compared to 561 ship sets delivered in the prior year. In total, ship set deliveries increased 11% to 1,378 ship sets in 2013 compared to 1,240 ship sets for the same period in the prior year. Approximately 94% of Spirit's net revenues for 2013 came from our two largest customers, Boeing and Airbus.
Pricing terms under our Supply Agreement with Boeing for the B737, B747, B767 and B777 platforms, which accounted for 70% of our net revenue, expired in May 2013, thus activating interim pricing provisions outlined within the terms of the Supply Agreement. We are currently negotiating pricing with Boeing for a period to be agreed upon by both parties. Until we are able to agree upon pricing, revenue is recorded using the pricing terms as of May 2013 and will be retroactively adjusted in the period in which we agree on future pricing terms.
We have not yet established pricing for the B787-9, B787-10 or any future derivatives. In accordance with the B787 Supply Agreement revenue recognized for 2013 B787-9 deliveries was based on interim pricing negotiated with Boeing pending final price negotiations. For B787-9 deliveries in contract block 1, we have applied the appropriate accounting guidance for unpriced change orders in estimating revenues which will also be updated once final pricing is negotiated.
Cost of Sales. Cost of sales as a percentage of net revenues was 102% for the twelve months ended December 31, 2013, as compared to 97% in the prior year. The increase in cost of sales of $814.2 million in 2013 is primarily due to higher production volume and forward loss charges of $1,133.3 million recognized on several programs including the B787, A350 XWB and Gulfstream programs (see "New and Maturing
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Programs"). Cost of sales for the twelve months ended December 31, 2013 includes charges of $17.8 million related to reduction in workforce activities and $38.1 million related to warranty reserve adjustments. These charges were partially offset by a favorable $95.5 million cumulative catch-up adjustment related to periods prior to 2013 driven by productivity and efficiency improvements on core programs as well as a pension related gain of $17.2 million.
In comparison, for the twelve months ended December 31, 2012 we recorded forward loss charges of $644.7 million. Also included in 2012 was a $2.2 million charge for UAW share grant awards in accordance with our labor agreement, a $2.1 million charge for early retirement incentives to eligible employees and other one-time expense reductions, a charge of $3.6 million as a result of impairment of assets, and a charge of $2.2 million related to the disposal of certain assets.
SG&A, Research and Development. Combined SG&A and Research and Development costs as a percentage of net revenues was 4% for each of the twelve month periods ended December 31, 2013 and December 31, 2012. SG&A expense increased $28.6 million for the twelve months ended December 31, 2013, or 17%, primarily due to an increase in executive stock compensation expense and severance amounts of $11.3 million, an increase in executive benefits of $7.7 million and an increase in professional service fees of $5.4 million. Research and development expenses for the twelve months ended December 31, 2013 were up $0.6 million, or 2% compared to the same period in the prior year.
Impact of Severe Weather Event. Expenses related to the April 2012 severe weather event were $30.3 million for the twelve months ended December 31, 2013, as compared to a gain of $146.2 million in 2012. The expenses for 2013 were related to property damage, clean up and continuing recovery costs. In comparison, during the third quarter of 2012, the Company settled the insurance claims resulting from the second quarter 2012 severe weather event and recorded a net $146.2 million gain to operating income for the twelve months ended December 31, 2012. This settlement resolved all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions.
Operating Income (Loss). Operating loss for the twelve months ended December 31, 2013 was ($364.3) million, which was $456.6 million lower than operating income of $92.3 million for the prior year. Operating income in 2013 was unfavorably impacted by forward loss charges of $1,133.3 million, $17.8 million related to reduction in workforce activities and $38.1 million related to warranty reserve adjustments, as compared to charges in prior year of $644.7 million of forward loss, $2.2 million for UAW share grant awards in accordance with our labor agreement, $2.1 million for early retirement incentives to eligible employees and other one-time expense reductions, $3.6 million as a result of impairment of assets, and $2.2 million related to the disposal of certain assets. This was partially offset by higher overall production volumes and aftermarket volumes and a favorable cumulative catch-up adjustment of $95.5 million in 2013.
Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the twelve months ended December 31, 2013 includes $63.4 million of interest and fees paid or accrued in connection with long-term debt and $6.7 million in amortization of deferred financing costs, as compared to $68.3 million of interest and fees paid or accrued in connection with long-term debt and $14.6 million in amortization of deferred financing costs in the prior year. The change in amortization of deferred financing costs was primarily driven by the write down in 2012 of $9.5 million in deferred financing fees as a result of debt extinguishment from the April 18, 2012 term loan refinancing.
Interest Income. Interest income for the twelve months ended December 31, 2013 was $0.3 million compared to $0.2 million for the same period in the prior year.
Other Income, net. Other income, net for the twelve months ended December 31, 2013 was a net gain of $3.3 million, primarily due to gains on foreign exchange rates on intercompany activity and borrowings, offset by a $0.7 million book loss on the sale of Spirit's shares in the Spirit-Progresstech joint venture, compared to income of $1.8 million for the same period in the prior year.
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Provision for Income Taxes. The income tax provision for the twelve months ended December 31, 2013, was $191.1 million compared to $(24.1) million for the prior year. The 2013 effective tax rate was (44.4)% as compared to (211.4)% for 2012. The difference in the effective tax rate recorded for 2013 as compared to 2012 is primarily related to establishing a valuation allowance on the U.S. deferred tax assets, increased losses in the U.S. and the extension of the U.S. Research Tax Credit on January 2, 2013. The decrease from the U.S. statutory tax rate is primarily attributable to the same factors.
Segments. The following table shows segment revenues and operating income for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
Twelve Months
Ended December 31, 2013 |
Twelve Months
Ended December 31, 2012 |
Twelve Months
Ended December 31, 2011 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
($ in millions)
|
|||||||||
Segment Revenues |
||||||||||
Fuselage Systems (1) |
$ | 2,861.1 | $ | 2,590.6 | $ | 2,425.0 | ||||
Propulsion Systems |
1,581.3 | 1,420.9 | 1,221.5 | |||||||
Wing Systems (1) |
1,502.5 | 1,375.1 | 1,207.8 | |||||||
All Other |
16.1 | 11.1 | 9.5 | |||||||
| | | | | | | | | | |
|
$ | 5,961.0 | $ | 5,397.7 | $ | 4,863.8 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Segment Operating Income |
||||||||||
Fuselage Systems (1)(2) |
$ | 70.1 | $ | 387.2 | $ | 318.5 | ||||
Propulsion Systems (3) |
235.8 | 64.7 | 194.1 | |||||||
Wing Systems (1)(4) |
(414.0 | ) | (339.1 | ) | 0.5 | |||||
All Other |
4.4 | 1.0 | 1.3 | |||||||
| | | | | | | | | | |
|
(103.7 | ) | 113.8 | 514.4 | ||||||
Unallocated corporate SG&A |
(181.5 | ) | (155.3 | ) | (145.5 | ) | ||||
Unallocated impact from severe weather event (5) |
(30.3 | ) | 146.2 | | ||||||
Unallocated research and development |
(8.9 | ) | (4.4 | ) | (1.9 | ) | ||||
Unallocated cost of sales (6) |
(39.9 | ) | (8.0 | ) | (10.9 | ) | ||||
| | | | | | | | | | |
Total operating income |
$ | (364.3 | ) | $ | 92.3 | $ | 356.1 | |||
| | | | | | | | | | |
| | | | | | | | | | |
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Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 48%, 27%, 25% and less than 1%, respectively, of our net revenues for the twelve months ended December 31, 2013.
Fuselage Systems. Fuselage Systems segment net revenues for the twelve months ended December 31, 2013 were $2,861.1 million, an increase of $270.5 million, or 10.4%, compared to the same period in the prior year. The increase in net revenues was primarily due to increased production rates on several Boeing models as well as higher deliveries for the A350 XWB program driven by customer delivery schedule. In addition, non-recurring net revenue, which includes design and development efforts, increased during 2013 on the B737 MAX and A350 XWB non-recurring fuselage, partially offset by reduced design and developmental activities on the B747-8, B787 and our Sikorsky non-recurring contracts. Fuselage Systems posted segment operating margins of 2.5% for the twelve months ended December 31, 2013, down from 15% for the same period in the prior year. Reduced segment operating margins were primarily driven by forward loss charges of $41.1 million recorded on the B747-8 program, $4.1 million on the B767 program, $333.1 million on the B787 program and $111.3 million on the A350 XWB program. This was partially offset by favorable cumulative catch-up adjustments of $60.1 million related to periods prior to 2013 driven by productivity and efficiency improvements on core programs. In comparison, in the same period of 2012, we recorded a forward loss of $6.4 million for the B747-8 program, a charge of $2.2 million related to the disposal of certain assets and an unfavorable cumulative catch-up adjustment of $2.4 million related to periods prior to 2012.
Propulsion Systems. Propulsion Systems segment net revenues for the twelve months ended December 31, 2013 were $1,581.3 million, an increase of $160.4 million, or 11.3%, compared to the same period in the prior year. The increase in net revenues was primarily due to higher production rates on several Boeing models, and increased non-recurring revenue on the B737 MAX. Propulsion Systems posted segment operating margins of 14.9% for the twelve months ended December 31, 2013, up from 5% segment operating margins for the same period in the prior year. Improved segment operating margins were primarily due to lower forward loss charges recorded in 2013 compared to the same period in 2012. In 2013, the segment recorded an aggregate forward loss charge of $13.3 million on the Rolls-Royce BR725
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program, $12.3 million on the B767 program and $30.6 million recognized on the B787 program. These charges were partially offset by favorable cumulative catch-up adjustments related to periods prior to 2013 of $30.0 million driven by productivity and efficiency improvements on core programs. In comparison, in the same period of 2012, the segment recognized forward loss charges of $151.0 million recognized on the Rolls-Royce BR725 program and $8.0 million recognized on the B767 program, partially offset by favorable cumulative catch-up adjustments of $7.3 million related to periods prior to 2012.
Wing Systems. Wing Systems segment net revenues for the twelve months ended December 31, 2013 were $1,502.5 million, an increase of $127.4 million, or 9.3%, compared to the same period in the prior year. The increase in net revenues was primarily driven by higher production rates on several Boeing models and higher deliveries on our Airbus programs, partially offset by lower revenue on our Gulfstream G280 program as well as lower levels of non-recurring revenue on the Gulfstream G650 program compared to the prior year. Wing Systems posted segment operating margins of (28)% for the twelve months ended December 31, 2013, down from segment operating margins of (25)% for the same period in the previous year. Lower segment operating margins were due to forward loss charges of $58.3 million on the B787, $288.3 million on the G650 and $240.9 million on the G280 program. In addition, the segment recorded favorable cumulative catch-up adjustments of $5.4 million for periods prior to 2013 driven by productivity and efficiency improvements on core programs. In comparison, for 2012, the segment recorded forward loss charges of $184.0 million on the B787 program, $162.5 million on the G650 program, $118.8 million on the G280 program, $8.9 million on the A350 XWB non-recurring program and $5.1 million on the B747-8 program, partially offset by favorable cumulative catch-up adjustments of $9.8 million related to periods prior to 2012.
All Other. All Other segment net revenues consist of sundry sales of miscellaneous services, tooling contracts and revenues from KIESC. In the twelve months ended December 31, 2013, All Other segment net revenues were $16.1 million, an increase of $5.0 million, as compared to the same period in the prior year. The All Other segment recorded 27% operating margins for the twelve months ended December 31, 2013, up from segment operating margins of 9% for the same period in the prior year driven by increased tooling sales.
We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.
Twelve Months Ended December 31, 2012 as Compared to Twelve Months Ended December 31, 2011
Net Revenues. Net revenues for the twelve months ended December 31, 2012 were $5,397.7 million, an increase of $533.9 million, or 11%, compared with net revenues of $4,863.8 million for the prior year. The increase in net revenues in 2012 as compared to 2011 was primarily due to production volume increases on Boeing and business jet programs. The 2011 amount included the recognition of previously deferred revenue resulting from the B787 Amendment, which was finalized in May 2011. In addition, we recorded approximately $473.6 million of higher production volume driven by customer delivery schedules, approximately $38.2 million of additional aftermarket volume, and increases of approximately $10.8 million in non-recurring revenue. Non-recurring revenues, which includes design and development efforts, increased during 2012 primarily due to increased efforts on the B737, B767, and B787, partially offset by a reduction in A350 XWB non-recurring fuselage efforts. Deliveries to Boeing increased by 14% to 595 ship sets during 2012 compared to 520 ship sets delivered in the prior year, as ship set deliveries increased across all Boeing programs driven by customer delivery schedules. Deliveries to Airbus increased by 8% to 561 ship sets during 2012 compared to 520 ship sets delivered in the prior year due to increased deliveries across all Airbus programs driven by customer delivery schedules. In total, ship set deliveries increased 14% to 1,240 ship sets in 2012 compared to 1,089 ship sets for the same period in the prior year. Approximately 93% of Spirit's net revenues for 2012 came from our two largest customers, Boeing and Airbus.
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Cost of Sales. Cost of sales as a percentage of net revenues was 97% for the twelve months ended December 31, 2012, as compared to 89% in the prior year. The increase in cost of sales of $933.2 million in 2012 was primarily due to an increase in production rates, a net $184.0 million forward loss charge on our B787 wing program, a $162.5 million forward loss charge on our G650 wing program, a $151.0 million forward loss charge on our BR725 program, a $118.8 million forward loss charge on our G280 wing program, an $8.9 million forward loss charge on our A350 wing program, a $6.4 million forward loss charge on our B747-8 fuselage program, a $5.1 million forward loss charge on our B747-8 wing program, an $8.0 million forward loss charge on our B767 propulsion program, a $2.2 million charge for UAW share grant awards in accordance with our labor agreement, a $2.1 million charge for early retirement incentives to eligible employees and other one-time expense reductions, a charge of $3.6 million as a result of impairment of assets, and a charge of $2.2 million related to the disposal of certain assets. In addition, we continued to record zero margins on the B787 program, for which deliveries have increased during the year. In 2012, we recorded a favorable $14.7 million cumulative catch-up adjustment related to periods prior to 2012 driven by productivity and efficiency on core programs.
In comparison, in the same period of 2011, we recorded a net $81.8 million forward loss charge on our G280 wing program, a net $29.0 million forward loss charge on our Sikorsky CH-53K helicopter program, an $18.3 million forward loss charge on our B747-8 program, a $9.0 million charge to replenish warranty and extraordinary rework reserves, a $3.0 million forward loss charge on our A350 XWB non-recurring wing contract and a $1.9 million charge for early retirement incentives for eligible UAW-represented employees. In 2011, we recorded a favorable $13.8 million cumulative catch-up adjustment related to periods prior to 2011 driven by productivity improvements, recognition of favorable performance as we closed out B737 and B777 contract blocks in the fourth quarter, and a lower forecast for our short-term incentive accrual, partially offset by increasing material costs in our Wing Systems segment.
SG&A, Research and Development. Combined SG&A and Research and Development costs as a percentage of net revenues was 4% for the twelve months ended December 31, 2012, compared to 4% in the prior year. SG&A expense increased $12.3 million for the twelve months ended December 31, 2012, or 8%, primarily due to an increase in stock compensation expense of $4.2 million to $15.3 million related to grants awarded in 2012, as compared to $11.1 million during the prior year and an increase in professional services in the last half of 2012. Research and development expenses for the twelve months ended December 31, 2012 were down $1.6 million, or 4% compared to the same period in the prior year, as we had fewer research and development projects underway in 2012 versus 2011.
Impact of Severe Weather Event. During the third quarter of 2012, the Company settled the insurance claims resulting from the second quarter 2012 severe weather event and recorded a net $146.2 million gain to operating income for the twelve months ended December 31, 2012. This settlement resolved all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions.
Operating Income. Operating income for the twelve months ended December 31, 2012 was $92.3 million, which was $263.8 million lower than operating income of $356.1 million for the prior year. Operating income in 2012 was unfavorably impacted by forward loss charges of $644.7 million (see "Cost of Sales"), a $3.6 million charge to impairment of assets, a $2.2 million related to the disposal of certain assets, a $2.2 million charge for UAW share grant awards in accordance with our labor agreement, and a $2.1 million charge for early retirement incentives to eligible employees and other one-time expense reductions as compared to $132.1 million of forward loss charges, a $9.0 million charge to replenish warranty and extraordinary rework reserves, and a $1.9 million charge for early retirement incentives recorded in 2011. This was partially offset by higher overall production volumes and aftermarket volumes and a favorable cumulative catch-up of $14.7 million.
Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the twelve months ended December 31, 2012 includes $68.3 million of interest and fees paid or accrued in connection with long-term debt and $14.6 million in amortization of deferred financing costs, as compared
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to $71.9 million of interest and fees paid or accrued in connection with long-term debt and $5.6 million in amortization of deferred financing costs in the prior year. The change in interest expense associated with long-term debt was primarily driven by lower interest cost from new swaps entered into in the third quarter of 2011, partially offset by interest on the drawn portion of the revolver for a portion of 2012 and the effects of the new term loan entered into during the second quarter of 2012. Amortization of deferred financing costs increased by $9.0 million dollars in 2012 compared to the previous year primarily due to the write down of $9.5 million in deferred financing fees as a result of debt extinguishment from the April 18, 2012 term loan refinancing, partially offset by amortization of deferred financing cost over a longer term.
Interest Income. Interest income for the twelve months ended December 31, 2012 was $0.2 million compared to $0.3 million for the same period in the prior year.
Other Income (Expense, net). Other income (expense) for 2012 included a net gain of $1.8 million, primarily due to gains on foreign exchange rates on intercompany activity and borrowings, offset by a $3.0 million write-off of Hawker Beechcraft receivables and a $4.7 million charge for the impairment of assets, compared to income of $1.4 million for the same period in the prior year.
Provision for Income Taxes. The income tax provision for the twelve months ended December 31, 2012, was ($24.1) million compared to $86.9 million for the prior year. The 2012 effective tax rate was (211.4)% as compared to 31.0% for 2011. The difference in the effective tax rate recorded for 2012 as compared to 2011 is primarily related to reduced earnings and accounting for long term contracts, offset by the expiration of the U.S. Research Tax Credit on December 31, 2012. The decrease from the U.S. statutory tax rate is attributable primarily to reduced earnings, accounting for long term contracts and state income tax credits.
On January 2, 2013, the President signed legislation retroactively extending the U.S. Research Tax Credit for two years, from January 1, 2012 through December 31, 2013. Our income tax expense for 2013 reflected the entire benefit of the Research Tax Credit attributable to 2012, which is estimated at $5.4 million. We also recorded the benefit of the 2013 Research Tax Credit in our 2013 tax expense.
Fuselage Systems. Fuselage Systems segment net revenues for the twelve months ended December 31, 2012 were $2,590.6 million, an increase of $165.6 million, or 7%, compared to the same period in the prior year. The increase in net revenues was primarily due to production volume increases in 2012 on Boeing programs. The 2011 amount included the recognition of revenue previously deferred in the second quarter of 2011 associated with the B787 Amendment settlement. In addition, non-recurring net revenue, which includes design and development efforts, increased in 2012 on the B737, B787 and Sikorsky CH-53K, partially offset by reduced design and developmental effort on the A350 XWB non-recurring fuselage program and the settlement of certain claims and assertions in the third quarter of 2012. Fuselage Systems posted segment operating margins of 15% for the twelve months ended December 31, 2012, up from 13% for the same period in the prior year. Improved segment operating margins were primarily driven by higher production volume due to rate increases on several Boeing programs with favorable margins and improved productivity and efficiency performance on our core programs, partially offset by increased zero margin revenue, a forward loss charge of $6.4 million for the B747-8 program, a charge of $2.2 million related to the disposal of certain assets and an unfavorable cumulative catch-up adjustment of $2.4 million related to periods prior to 2012. In comparison, in the same period of 2011, we recorded a forward loss of $29.0 million on the Sikorsky CH-53K program and a favorable cumulative catch-up adjustment of $13.6 million related to periods prior to 2011.
Propulsion Systems. Propulsion Systems segment net revenues for the twelve months ended December 31, 2012 were $1,420.9 million, an increase of $199.4 million, or 16%, compared to the same period in the prior year. The increase in net revenues was primarily driven by higher production volume on Boeing models, increased aftermarket volume and increased non-recurring efforts on the B737 and B787. Propulsion Systems posted segment operating margins of 5% for the twelve months ended December 31, 2012, down from 16% segment operating margins for the same period in the prior year. Reduced segment
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operating margins were due to forward loss charges of $151.0 million recognized on the Rolls-Royce BR725 program and $8.0 million recognized on the B767 program, partially offset by a favorable cumulative catch-up adjustment related to periods prior to 2012 of $7.3 million associated with productivity and efficiency on core programs. In comparison, in the same period of 2011, the segment recognized a $12.8 million favorable cumulative catch-up adjustment related to periods prior to 2011.
Wing Systems. Wing Systems segment net revenues for the twelve months ended December 31, 2012 were $1,375.1 million, an increase of $167.3 million, or 14%, compared to the same period in the prior year. The increase in net revenues was primarily driven by higher production volume on Boeing models and increased deliveries on our Gulfstream programs, partially offset by reduced non-recurring revenue on the A350 XWB non-recurring wing program and the settlement of certain claims and assertions in the third quarter of 2012. Wing Systems posted segment operating margins of (25)% for the twelve months ended December 31, 2012, down from segment operating margins of less than 1% for the same period in the previous year. In the twelve months of 2012, the segment recorded forward loss charges of $184.0 million on the B787 program, $162.5 million on the G650 program, $118.8 million on the G280 program, $8.9 million on the A350 XWB non-recurring program and $5.1 million on the B747-8 program, partially offset by a favorable cumulative catch-up adjustment related to periods prior to 2012 of $9.8 million driven in part by productivity and efficiency on core programs. In comparison, during 2011, we recorded an $81.8 million forward loss charge on our G280 wing contract, a $5.7 million forward loss charge on our B747-8 program, a $3.0 million forward loss on our A350 XWB non-recurring wing contract, and an unfavorable cumulative catch-up adjustment of $12.6 million related to periods prior to 2011.
All Other. All Other segment net revenues consist of sundry sales of miscellaneous services, tooling contracts and revenues from KIESC. In the twelve months ended December 31, 2012, All Other segment net revenues were $11.1 million, a slight increase of $1.6 million, as compared to the same period in the prior year. The All Other segment posted operating income before unallocated corporate expenses of less than 1% for the twelve months ended December 31, 2012. The All Other segment recorded 9% operating margins for the twelve months ended December 31, 2012, down from segment operating margins of 14% for the same period in the prior year driven by additional sundry sales with lower margins.
Liquidity and Capital Resources
The primary sources of our liquidity include cash on hand, cash flow from operations, which includes receivables from customers and borrowings available under our revolving credit facility. Additionally, we may receive advance payments from customers and proceeds from asset sales. Our liquidity requirements are driven by our long-cycle business model. Our business model is comprised of four to six year non-recurring investment periods, which include design and development efforts, followed by ten to twenty years of recurring production. The non-recurring investment periods require significant outflows of cash as we design the product, build tooling, purchase equipment and build initial production inventories. These activities are typically funded partially through customer advances and milestone payments, which are offset against revenue as production units are delivered in the case of customer advances, or recognized as revenue as milestones are achieved in the case of milestone payments. The remaining funds needed to support non-recurring programs come from predictable cash inflows from our mature programs that are in the recurring phase of the production cycle. Occasionally, we have utilized borrowings and other sources of cash to fund non-recurring investments during periods where cash received from our customers is not adequate to fund our purchase commitments. The non-recurring investment period typically ends concurrently with initial deliveries of completed aircraft by our customers, which indicates that a program has entered into the recurring production phase. When a program reaches steady recurring production, it typically results in long-term generation of cash from operations. As part of our business model, we have continuously added new non-recurring programs, which are supported by mature programs that are in the steady recurring phase of the production cycle to promote growth.
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As of December 31, 2013, we had $420.7 million of cash and cash equivalents on the balance sheet and $650.0 million of available borrowing capacity under our revolving credit facility. We had no outstanding balances under our revolving credit facility at the end of 2013. Based on our planned levels of operations and our strong liquidity position, we currently expect that our cash on hand, cash flow from operations and borrowings available under our revolving credit facility will be sufficient to fund our operations, inventory growth, planned capital investments, research and development expenditures and scheduled debt service payments for at least the next twelve months.
Cash Flows
The following table provides a summary of our cash flows for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
For the Twelve Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
December 31, 2013 | December 31, 2012 | December 31, 2011 | |||||||
|
($ in millions)
|
|||||||||
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | |||
Adjustments to reconcile net income |
343.0 | 66.8 | 154.5 | |||||||
Changes in working capital |
539.0 | 442.8 | (394.2 | ) | ||||||
| | | | | | | | | | |
Net cash provided by (used in) operating activities |
260.6 | 544.4 | (47.3 | ) | ||||||
Net cash (used in) investing activities |
(268.2 | ) | (248.8 | ) | (249.2 | ) | ||||
Net cash (used in) financing activities |
(13.9 | ) | (34.6 | ) | (6.7 | ) | ||||
| | | | | | | | | | |
Effect of exchange rate change on cash and cash equivalents |
1.5 | 1.9 | (0.6 | ) | ||||||
| | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents for the period |
(20.0 | ) | 262.9 | (303.8 | ) | |||||
Cash and cash equivalents, beginning of period |
440.7 | 177.8 | 481.6 | |||||||
| | | | | | | | | | |
Cash and cash equivalents, end of period |
$ | 420.7 | $ | 440.7 | $ | 177.8 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Twelve Months Ended December 31, 2013 as Compared to Twelve Months Ended December 31, 2012
Operating Activities. For the twelve months ended December 31, 2013, we had a net cash inflow of $260.6 million from operating activities, an inflow decrease of $283.8 million; compared to a net cash inflow of $544.4 million for the prior year. The decrease in net cash inflow during 2013 as compared to 2012 was primarily driven by lower cash advances, a 2012 insurance settlement, and lower tax payments (see "Tax" below), partially offset by timing of vendor payments and receivables from customers. In 2012, net cash provided by operating activities was primarily due to the receipt of a $250.0 million advance from Airbus associated with an agreement on the A350 XWB fuselage program, $234.9 million of insurance proceeds from our global settlement, offset by $88.7 million for all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions, and by timing of vendor payments and receivables from customers. Also during 2013, we made tax payments of $69.4 million.
Investing Activities. For the twelve months ended December 31, 2013, we had a net cash outflow of $268.2 million from investing activities, an increase in outflow of $19.4 million, compared to a net cash outflow of $248.8 million for the prior year. In 2013, capital expenditures were $272.6 million, and consisted of purchases of tooling and machinery and equipment to support increasing production rates on several Boeing and maturing programs, as well as for replacement of assets destroyed in the April 2012 severe weather event. In comparison, in 2012, capital expenditures were $249.0 million.
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Financing Activities. For the twelve months ended December 31, 2013, we had a net cash outflow of $13.9 million from financing activities, a decrease in outflow of $20.7 million, compared to a net cash outflow of $34.6 million for the prior year. The decrease in outflow was primarily due to the 2012 refinancing of our $559.0 million senior secured credit facilities with new senior secured credit facilities of $550.0 million, resulting in a prepayment of principal of $9.0 million in 2012. During 2012, in addition to the prepayment of principal, we incurred financing fees of $12.4 million and original issue discount of $2.7 million. Payments on debt for the twelve months ended December 31, 2013 were $10.4 million, compared to $11.7 million, excluding refinancing activities, for the same period in the prior year.
Twelve Months Ended December 31, 2012 as Compared to Twelve Months Ended December 31, 2011
Operating Activities. For the twelve months ended December 31, 2012, we had a net cash inflow of $544.4 million from operating activities, an inflow increase of $591.7 million, compared to a net cash outflow of $47.3 million for the same period in the prior year. During 2012, net cash provided by operating activities was primarily due to the receipt of a $250.0 million advance from Airbus associated with an agreement on the A350 XWB fuselage program, $234.9 million of insurance proceeds from our global settlement, offset by $88.7 million for all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions, and by timing of vendor payments and receivables from customers. For 2012, our cash flow was favorably impacted by cash receipts from B787 deliveries, which were higher in the current period than 2011 due to higher cash payments beginning in the third quarter of 2011 and continuing into 2012 resulting from contractual reductions in the portion of advances repaid by each ship set delivered. This temporary increase in cash received per unit ended with the delivery of the 100 th unit in 2012. Also during 2012, we made federal tax payments of $97.4 million, which are net of an Internal Revenue Service ("IRS") refund for the 2011 tax year, and payments relating to settling the 2008 and 2009 IRS examinations.
We continued to invest in inventory for new programs and additional production costs for ramp-up activities in support of increasing build rates on several Boeing programs. During 2012, inventory build for new programs, including the B787, A350 XWB and Gulfstream programs, was $1,571.0 million, an increase of $768.3 million, compared to the same period in the prior year. Additionally, inventory build for mature Boeing and Airbus programs, including costs associated with announced increasing build rates on several Boeing programs was approximately $3,754.3 million, an increase of $541.7 million, compared to the same period in the prior year. These activities were funded through cash flows from operations, including receivables from customers and customer advances. These increases are partially offset by the $644.7 million in forward loss charges recorded in 2012 which are reflected as sources of cash as they are recorded as provision within inventory.
The $47.3 million net cash outflow for the twelve months ended December 31, 2011 was largely the result of approximately $4.52 billion in expenditures driven by continued growth in inventory to support engineering development and start-up production costs for new programs, including the B787, A350 XWB and Gulfstream programs and for ramp-up activities for increasing build rates on the B737 and B777 programs, partially offset by cash receipts of approximately $4.47 billion driven by revenue from unit deliveries, which increased across all Boeing and Airbus models and aftermarket volume.
Investing Activities. For the twelve months ended December 31, 2012, we had a net cash outflow of $248.8 million from investing activities, a decrease in outflow of $0.4 million compared to a net cash outflow of $249.2 million for the same period in the prior year. In 2012, capital expenditures were $249.0 million, and consisted of purchases of tooling and machinery and equipment to prepare for the manufacturing of our developmental programs, to support increasing production rates on several Boeing programs and for replacement of assets destroyed in the severe weather event. In comparison, in 2011, capital expenditures were $249.7 million.
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Financing Activities. For the twelve months ended December 31, 2012, we had a net cash outflow of $34.6 million from financing activities, an increase in outflow of $27.9 million, compared to a net cash outflow of $6.7 million for the same period in the prior year. The increase in outflow was primarily due to the refinancing of our $559.0 million senior secured credit facilities with new senior secured credit facilities of $550.0 million, resulting in a prepayment of principal of $9.0 million. In addition to the prepayment of principal, we incurred financing fees of $12.4 million and original issue discount of $2.7 million. Payments on debt other than the refinancing activity were $11.7 million, compared to $8.0 million for the same period in the prior year. During the first half of 2012, we drew down and repaid $170.0 million from our revolver.
Future Cash Needs and Capital Spending
Our primary future cash needs will consist of working capital, debt service, research and development and capital expenditures. We expend significant capital as we undertake new programs, which begin in the non-recurring investment phase of our business model. In addition, we expend significant capital to meet increased production rates on certain mature programs, including the B737. We also require capital to develop new technologies for the next generation of aircraft and are evaluating various plans to relieve capacity constraints for the announced customer production rate increases. Capital expenditures totaled approximately $272.6 million and $249.0 million, partially offset by $12.9 million in insurance proceeds from the severe weather event for the twelve months ended December 31, 2013 and December 31, 2012, respectively. Excluding the impact of the severe weather event, capital expenditures totaled approximately $234.2 million and $236.1 million for the twelve months ended December 31, 2013 and December 31, 2012, respectively. We plan to fund future capital expenditures and cash requirements from cash on hand, cash generated by operations, customer cash advances, insurance proceeds; borrowings available under our revolving credit facility and proceeds from assets sales, if any.
EAC Changes in Estimates. As described in more detail in the New and Maturing Programs discussion, the Company significantly increased its estimates regarding future production costs on several of its maturing programs in 2013. The majority of the $1,133.3 million of forward loss charges represent future cash expenditures which increase our projected future cash needs from previous estimates. These charges cover production blocks that are currently estimated to be completed at various dates between now and 2018.
Pension and Other Post-Retirement Benefit Obligations
Our U.S. pension plan remained fully funded at December 31, 2013 and we anticipate non-cash pension income for 2014 to remain at or near the same level as 2013. Our plan investments are broadly diversified and we do not anticipate a near-term requirement to make cash contributions to our U.S. pension plan. Effective December 31, 2013, the BAE Aerostructures pension plan benefits were frozen due to an amendment which closed the plan. Our projected contributions to the U.K. pension plan for 2014 are $0.7 million. See Note 16, "Pension and Other Post-Retirement Benefits," for more information on the Company's pension plans.
Debt and Other Financing Arrangements
Senior Secured Credit Facilities. On April 18, 2012, Spirit entered into a $1.2 billion senior secured Credit Agreement (the "Credit Agreement") consisting of a $650.0 million revolving credit facility and a $550.0 million term loan B facility. The Credit Agreement refinanced and replaced the Second Amended and Restated Credit Agreement dated as of November 27, 2006, as amended. Proceeds of the new term loan were used to pay off outstanding amounts under the prior credit agreement. The revolving credit facility matures April 18, 2017 and bears interest, at Spirit's option, at either LIBOR, or a defined "base rate" plus an applicable margin based on Spirit's debt-to-EBITDA ratio (see table below). The term loan matures April 18, 2019 and bears interest, at Spirit's option, at LIBOR plus 3.00% with a LIBOR floor of 0.75% or base rate plus 2.00%, subject to a step down to LIBOR plus 2.75% or base rate plus 1.75%, as
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applicable, in the event Spirit's secured debt-to-EBITDA ratio is below 1:1 at any time after 2012. Substantially all of Spirit's assets, including inventory and property, plant and equipment, were pledged as collateral for both the term loan and the revolving credit facility. As of December 31, 2013, the outstanding balance of the term loan was $540.4 million. As of December 31, 2012, the outstanding balance of the term loan was $545.9 million. As of December 31, 2013 the carrying amount of the term loan was $538.2 million. The amount outstanding under the revolving credit facility was zero at each of December 31, 2013 and December 31, 2012. In the second quarter of 2012, the Company recorded a charge of $9.5 million for unamortized deferred financing fees as a result of extinguishment of the debt under the prior credit agreement.
In addition to paying interest on outstanding principal under the Credit Agreement, Spirit is required to pay an unused line fee on the unused portion of the commitments under the revolving credit facility based on Spirit's debt-to-EBITDA ratio (see table below). Spirit is required to pay letter of credit fees equal to the applicable margin for LIBOR rate revolving credit borrowings with respect to letters of credit issued under the revolving credit facility (see table below). Spirit is also required to pay to the issuing banks that issue any letters of credit, letter of credit fronting fees in respect of letters of credit at a rate equal to twenty basis points per year, and to the administrative agent thereunder customary administrative fees.
Pricing Tier
|
Debt-to-EBITDA
Ratio |
Commitment
Fee |
Letter of
Credit Fee |
Eurodollar
Rate Loans |
Base Rate
Loans |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 |
³ 3.0:1.0 | 0.450 | % | 2.50 | % | 2.50 | % | 1.50 | % | ||||||
2 |
<3.0:1 but ³ 2.25:1 | 0.375 | % | 2.25 | % | 2.25 | % | 1.25 | % | ||||||
3 |
<2.25:1 but ³ 1.75:1 | 0.300 | % | 2.00 | % | 2.00 | % | 1.00 | % | ||||||
4 |
<1.75:1 | 0.250 | % | 1.75 | % | 1.75 | % | 0.75 | % |
The Credit Agreement contains customary affirmative and negative covenants, including restrictions on indebtedness, liens, type of business, acquisitions, investments, sales or transfers of assets, payments of dividends, transactions with affiliates, change in control and other matters customarily restricted in such agreements. The Credit Agreement also contained the following financial covenants (as defined in the Credit Agreement):
|
|
|
---|---|---|
Senior Secured Leverage Ratio |
Shall not exceed 2.75:1.0 | |
Interest Coverage Ratio |
Shall not be less than 4.0:1.0 | |
Total Leverage Ratio |
Shall not exceed 4.0:1.0
|
To address the forward loss charges that the Company recognized in the third quarter of 2012, the Company amended the Credit Agreement effective October 26, 2012. The amendment resulted in a temporary revision of the quarterly financial covenant ratios and increased the amount of time the Company has to apply the proceeds from the insurance settlement in connection with the severe weather event against expenses resulting from the event from 12 months to 24 months before the proceeds may be considered eligible for prepayment against the senior secured credit facility.
Additionally, to address the forward loss charges that the Company recognized in the second quarter of 2013, the Company amended the Credit Agreement effective August 2, 2013. The amendment suspended the existing financial covenant ratios until December 31, 2014. The amendment requires Spirit to meet certain minimum liquidity and borrowing base requirements while the existing financial covenant ratios are suspended. Among other things, the amendment provides for the following key changes during the suspension period:
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In addition, pursuant to the amendment the mandatory application of proceeds from the potential sale of the Oklahoma sites to repay the borrowings under the senior secured Credit Agreement is reduced from 100% to 50%. The Company expects to be in compliance with all required covenants through December 31, 2014.
On February 6, 2014, Moody's Investors Service placed the credit rating of Spirit AeroSystems, Inc. under review for possible downgrade. A downgrade of our credit rating could trigger a prepayment based on the excess cash flow prepayment provision under our term loan depending on our total leverage ratio.
Senior Notes. On November 18, 2010, we issued $300.0 million aggregate of 6.75% Senior Notes due 2020 (the "2020 Notes"), with interest payable on June 15 and December 15 of each year, beginning June 15, 2011. The 2020 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and Spirit's existing and future domestic subsidiaries that guarantee Spirit's obligations under Spirit's senior secured credit facility. The carrying value of the 2020 Notes was $300.0 million as of December 31, 2013.
On September 30, 2009, we issued $300.0 million of 7.50% Senior Notes due October 1, 2017 (the "2017 Notes"), with interest payable on April 1 and October 1 of each year, beginning April 1, 2010. The 2017 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and Spirit's existing and future domestic subsidiaries that guarantee Spirit's obligations under Spirit's senior secured credit facility. The carrying value of the 2017 Notes was $296.4 million as of December 31, 2013.
As of December 31, 2013, we were and expect to continue to be in full compliance with all covenants contained in the indentures governing the 2020 Notes and the 2017 Notes through December 31, 2014.
Advances and Deferred Revenue on the B787 Program. On May 12, 2011, Spirit and Boeing entered into the B787 Amendment which, among other things, established a new repayment schedule for advances made by Boeing to Spirit to be repaid against the purchase price of the first 1,000 B787 ship sets delivered to Boeing. In the event Boeing does not take delivery of 1,000 ship sets prior to the termination of the B787 program or the B787 Supply Agreement, any advances not then repaid will be applied against any outstanding payments then due by Boeing to us, and any remaining balance will be repaid in annual installments of $42.0 million due on December 15th of each year until the advance payments have been fully recovered by Boeing. The B787 Amendment also changed the treatment of advances paid by Boeing for certain non-recurring work into a nonrefundable payment in full for such work. As of December 31, 2013, the amount of advance payments and deferred revenue received by us from Boeing under the B787 Supply Agreement and not yet repaid or recognized as revenue was approximately $600.2 million.
Advances on the A350 Fuselage Program. In March 2012, we signed a Memorandum of Agreement with Airbus providing for Airbus to make advance payments to us in 2012. The advance payments are offset against the recurring price of A350 XWB ship sets invoiced by Spirit, at a rate of $1.25 million per ship set. As of December 31, 2013, the amount of advance payments received under this Memorandum of Agreement and not yet repaid was approximately $243.9 million.
Malaysian Facility Agreement. On June 2, 2008, Spirit Malaysia entered into a Facility Agreement for a term loan facility for Ringgit Malaysia RM69.2 million (approximately USD $20.0 million equivalent) (the "Malaysia Facility"), with the Malaysian Export-Import Bank. The Malaysia Facility requires quarterly principal repayments of RM3.3 million (approximately USD $1.0 million equivalent) from September 2011
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through May 2017 and quarterly interest payments payable at a fixed interest rate of 3.50% per annum. The Malaysia Facility loan balance as of December 31, 2013 was $10.0 million.
French Factory Capital Lease Agreement. On July 17, 2009, the Company's indirect wholly-owned subsidiary, Spirit AeroSystems France SARL entered into a capital lease agreement for €9.0 million (approximately USD $13.1 million equivalent) with a subsidiary of BNP Paribas Bank to be used towards the construction of our aerospace component assembly plant in Saint-Nazaire, France. Lease payments are variable, subject to the three-month Euribor rate plus 2.2%. Lease payments under the agreement are due quarterly through April 2025. As of December 31, 2013 and December 31, 2012, the Company has $10.7 million and $11.0 million, respectively, of debt attributable to the capital lease transaction. We currently assemble center fuselage frame sections and wings for the new Airbus A350 XWB aircraft at the Saint-Nazaire facility.
Nashville Design Center Capital Lease Agreement. On September 21, 2012, the Company entered into a capital lease agreement for $2.6 million for a portion of an office building in Nashville, Tennessee to be used for design of aerospace components. Lease payments are due monthly, and are subject to yearly rate increases until the end of the lease term of 124 months. As of December 31, 2013 and December 31, 2012, the Nashville Design Center capital lease balance was $2.5 million and $2.6 million, respectively.
Credit Ratings
As of December 31, 2013, our credit ratings were a BB rating and negative outlook by Standard and Poor's, and a Ba2 and negative outlook by Moody Investor Services.
Our credit ratings are reviewed periodically by the rating agencies listed above. On February 6, 2014, Moody's Investors Service placed the credit ratings for Spirit AeroSystems, Inc. under review for possible downgrade.
The credit rating agencies consider many factors when assigning their ratings, such as the global economic environment and its possible impact on our financial performance, including certain financial metrics used by the rating agencies in determining our credit ratings. Accordingly, it is possible the rating agencies could downgrade our credit ratings from their current levels. This could significantly influence the interest rate of any future debt financings.
A debt security credit rating is not a recommendation to buy, sell or hold a security. Each rating is subject to revision or withdrawal at any time by the assigning rating organization. Each rating agency has its own methodology for assigning ratings. Accordingly, each rating should be considered independent of other ratings.
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Contractual Obligations:
The following table summarizes our contractual cash obligations as of December 31, 2013:
Contractual Obligations
(1)(2)
|
2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
2020 and
After |
Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Principal payment on term loan |
$ | 5.5 | $ | 5.5 | $ | 5.5 | $ | 5.5 | $ | 5.5 | $ | 512.9 | $ | | $ | 540.4 | |||||||||
Interest on debt (3) |
20.4 | 20.2 | 20.1 | 19.8 | 19.6 | 6.7 | | 106.8 | |||||||||||||||||
Long-term bonds |
| | | 300.0 | | | 300.0 | 600.0 | |||||||||||||||||
Interest on long-term bonds |
42.8 | 42.8 | 42.8 | 37.1 | 20.3 | 20.3 | 19.3 | 225.4 | |||||||||||||||||
Principal payment on Malaysian term loan |
2.8 | 2.8 | 2.8 | 1.4 | | | | 9.8 | |||||||||||||||||
Interest on Malaysian loan |
0.3 | 0.3 | 0.2 | | | | | 0.8 | |||||||||||||||||
U.K. pension obligation |
0.7 | | | | | | | 0.7 | |||||||||||||||||
Non-cancelable capital lease payments (4) |
0.9 | 0.9 | 1.0 | 1.0 | 1.1 | 1.1 | 9.0 | 15.0 | |||||||||||||||||
Non-cancelable operating lease payments |
20.8 | 17.3 | 10.6 | 5.2 | 4.9 | 4.0 | 10.7 | 73.5 | |||||||||||||||||
Other |
14.4 | 4.6 | 4.5 | 2.2 | 0.4 | 0.4 | 8.5 | 35.0 | |||||||||||||||||
Purchase obligations (5) |
150.5 | 43.5 | 16.1 | 9.5 | 6.4 | | | 226.0 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total |
$ | 259.1 | $ | 137.9 | $ | 103.6 | $ | 381.7 | $ | 58.2 | $ | 545.4 | $ | 347.5 | $ | 1,833.4 | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Off-Balance Sheet Arrangements
Other than operating leases disclosed in the notes to our financial statements included in this Annual Report, we have not entered into any off-balance sheet arrangements as of December 31, 2013.
We establish reserves in accordance with FASB authoritative guidance to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. We recognize the financial statement impact for tax positions only after determining that based on its technical merits the relevant tax authority would more likely than not sustain the position on audit. For tax positions meeting the "more likely than not threshold" the amount recognized in the financial statements is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The reserves are adjusted quarterly to reflect changes in facts and circumstances, such as the tax audit's progress, case law developments, and new or emerging legislation. We believe that with a $13.3 million long-term payable, the tax reserves are adequate and reflect the most probable
77
outcome for all tax contingencies known at December 31, 2013. Accordingly, the tax contingency liability is included as a non-current liability in our consolidated balance sheet.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, Management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.
The amount of current U.S. and state tax receivables outstanding at December 31, 2013 is $75.2 million. The Company is evaluating options regarding the monetization of this asset, which include a refund request with the Internal Revenue Service, applying the balance towards our expected U.S. and state tax liabilities in 2014, or a combination of both approaches.
As of December 31, 2013, our expected backlog associated with large commercial aircraft, business and regional jet, and military equipment deliveries through 2019, calculated based on contractual product prices and expected delivery volumes, was approximately $41.1 billion. This is an increase of $5.8 billion from our corresponding estimate as of the end of 2012 reflecting the fact that Airbus and Boeing new orders exceeded deliveries in 2013. Backlog is calculated based on the number of units Spirit is under contract to produce on our fixed quantity contracts, and Boeing and Airbus announced backlog on our supply agreements. The number of units may be subject to cancellation or delay by the customer prior to shipment, depending on contract terms. The level of unfilled orders at any given date during the year may be materially affected by the timing of our receipt of firm orders and additional airplane orders, and the speed with which those orders are filled. Accordingly, our expected backlog as of December 31, 2013 may not necessarily represent the actual amount of deliveries or sales for any future period.
We engage in business in various non-U.S. markets. As of December 31, 2013, we have a foreign subsidiary with one facility in the United Kingdom, which serves as a production facility, a production facility in Malaysia, a worldwide supplier base, and a repair center for the European and Middle-Eastern regions. We purchase certain components and materials that we use in our products from foreign suppliers and a portion of our products will be sold directly to foreign customers, including Airbus, or resold to foreign end-users (i.e., foreign airlines and militaries). In addition, we operate an assembly facility in Saint-Nazaire, France to receive and assemble center fuselage frame sections for the Airbus A350 XWB commercial aircraft from the facility in Kinston, North Carolina before they are shipped to Airbus.
Spirit is party to a joint venture with Hong Kong Aircraft Engineering Company Limited (HAECO), and its subsidiary, Taikoo Aircraft Engineering Company Limited (TAECO), Cathay Pacific Airways Limited, and Cal-Asia to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region. The service center is called Taikoo Spirit AeroSystems Composite Co. Ltd.
Currency fluctuations, tariffs and similar import limitations, price controls and labor regulations can affect our foreign operations. Other potential limitations on our foreign operations include expropriation, nationalization, restrictions on foreign investments or their transfers and additional political and economic risks. In addition, the transfer of funds from foreign operations could be impaired by any restrictive regulations that foreign governments could enact.
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Sales to foreign customers are subject to numerous additional risks, including the impact of foreign government regulations, political uncertainties and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other actions that would have a direct or indirect adverse impact on our business or market opportunities with such governments' countries. Furthermore, the political, cultural and economic climate outside the United States may be unfavorable to our operations and growth strategy.
For the twelve months ended December 31, 2013, our net revenues from direct sales to non-U.S. customers were approximately $806.1 million, or 13%, of total net revenues for the same period. For the twelve months ended December 31, 2012, our net revenues from direct sales to non-U.S. customers were approximately $785.7 million, or 15%, of total net revenues for the same period. For the twelve months ended December 31, 2011, our net revenues from direct sales to non-U.S. customers were approximately $653.1 million, or 13%, of total net revenues for the same period.
A majority of our sales are conducted pursuant to long-term contracts that set fixed unit prices, some of which provide for price adjustment for inflation. In addition, we typically consider expected inflation in determining proposed pricing when we bid on new work. Although we have attempted to minimize the effect of inflation on our business through these protections, sustained or higher than anticipated increases in costs of labor or materials could have a material adverse effect on our results of operations.
Spirit's contracts with suppliers currently provide for fixed pricing in U.S. dollars. Spirit Europe's supply contracts are denominated in U.S. dollars, British pounds sterling or Euros. In some cases, our supplier arrangements contain inflationary adjustment provisions based on accepted industry indices, and we typically include an inflation component in estimating our supply costs. Although the raw material industry is experiencing a softening in demand, some specific materials have yet to reflect a corresponding reduction in price. We expect that raw material market pricing volatility will remain a factor that may impact our costs, despite protections in our existing supplier arrangements. We will continue to focus our strategic cost reduction plans on mitigating the effects of this potential cost increase on our operations.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
As a result of our operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position. These market risks include fluctuations in interest rates, which impact the amount of interest we must pay on our variable rate debt.
Other than the interest rate swaps described below, financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash investments, the funds in which our pension assets are invested, and trade accounts receivable.
Accounts receivable include amounts billed and currently due from customers, amounts earned but unbilled, particular estimated contract changes, claims in negotiation that are probable of recovery, and amounts retained by the customer pending arbitration. The amounts retained by the customer include $135.1 million at December 31, 2013, See Note 22, "Commitments, Contingencies and Guarantees." For the twelve months ended December 31, 2013, approximately 84% of our net revenues were from sales to Boeing. Additionally, at December 31, 2013 approximately 29% of our outstanding accounts receivable were due from Gulfstream. We continuously monitor collections and payments from customers and maintain a provision for estimated credit losses as deemed appropriate based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically not been material, we cannot guarantee that we will continue to experience the same credit loss rates in the future.
We maintain cash and cash equivalents with various financial institutions and perform periodic evaluations of the relative credit standing of those financial institutions and from time to time we invest
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excess cash in liquid short-term money market funds. We have not experienced any losses in such accounts and believe that we are not exposed to any significant credit risk on cash and cash equivalents. Additionally, we monitor our defined benefit pension plan asset investments on a quarterly basis and we believe that we are not exposed to any significant credit risk in these investments.
Some raw materials and operating supplies are subject to price and supply fluctuations caused by market dynamics. Our strategic sourcing initiatives are focused on mitigating the impact of commodity price risk. We are party to collective raw material sourcing contracts arranged through Boeing and Airbus. These collective sourcing contracts allow us to obtain raw materials at pre-negotiated rates and help insulate us from market volatility across the industry for certain specialized metallic and composite raw materials used in the aerospace industry. Although our supply agreements with Boeing and Airbus allow us to pass on certain unusual increases in component and raw material costs to Boeing and Airbus in limited situations, we may not be fully compensated for such increased costs. We also have long-term supply agreements with a number of our major parts suppliers. We, as well as our supply base, are experiencing pricing increases for metallic raw materials (primarily aluminum and titanium) despite softening market demand across the industry. Although the demand pressure has been somewhat eased for certain metallic and composite raw materials, the specialized nature of the materials used in the aerospace industry has prevented a corresponding decrease in prices. We generally do not employ forward contracts or other financial instruments to hedge commodity price risk, although we continue to review a full range of business options focused on strategic risk management for all raw material commodities.
Any failure by our suppliers to provide acceptable raw materials, components, kits or subassemblies could adversely affect our production schedules and contract profitability. We assess qualification of suppliers and continually monitor them to control risk associated with such supply base reliance.
To a lesser extent, we also are exposed to fluctuations in the prices of certain utilities and services, such as electricity, natural gas, chemicals and freight. We utilize a range of long-term agreements to minimize procurement expense and supply risk in these areas.
After the effect of interest rate swaps, as of December 31, 2013, we had $225.0 million of total fixed rate debt and $315.4 million of variable rate debt outstanding as compared to $325.0 million of total fixed rate debt and $220.9 million of variable rate debt outstanding as of December 31, 2012. Borrowings under our Senior Secured Credit Facility bear interest that varies with LIBOR. Interest rate changes generally do not affect the market value of such debt, but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant. Assuming other variables remain constant, including levels of indebtedness, a one percentage point increase in interest rates on our variable debt would have an estimated impact on pre-tax earnings and cash flows for the next twelve months of approximately $3.2 million.
We enter into floating-to-fixed interest rate swap agreements periodically. As of December 31, 2013, the interest swap agreements had notional amounts totaling $225.0 million.
Notional Amount
|
Expires |
Variable
Rate |
Fixed
Rate (1) |
Effective
Fixed Rate (2) |
Fair Value,
December 31, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ |
225 | July 2014 | 1 Month LIBOR | 1.37% | N/A | $ | (1.4 | ) |
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The purpose of entering into these swaps was to reduce our exposure to variable interest rates. In accordance with FASB authoritative guidance the interest rate swaps are being accounted for as cash flow hedges and the fair value of the swap agreements is reported on the balance sheet as an asset, if positive, or a liability, if negative. The fair value of the interest rate swaps was a net liability of approximately ($1.4) million at December 31, 2013. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has applied these valuation techniques at year end and believes it has obtained the most accurate information available for the types of derivative contracts it holds. The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions which are expected to be able to fully perform under the terms of the agreement. We do not use these contracts for speculative or trading purposes.
As a result of the BAE Acquisition, we have sales, expenses, assets and liabilities that are denominated in British pounds sterling. Spirit Europe's functional currency is the British pound sterling. However, sales of Spirit Europe's products to Boeing and some procurement costs are denominated in U.S. dollars and Euros. As a consequence, movements in exchange rates could cause net sales and our expenses to fluctuate, affecting our profitability and cash flows.
In addition, even when revenues and expenses are matched, we must translate British pound sterling denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated financial statements. Consequently, increases and decreases in the value of the U.S. dollar as compared to the British pound sterling will affect our reported results of operations and the value of our assets and liabilities on our consolidated balance sheet, even if our results of operations or the value of those assets and liabilities has not changed in its original currency. These transactions could significantly affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets, liabilities and shareholders' equity.
In accordance with FASB authoritative guidance, the intercompany revolving credit facility with Spirit Europe is exposed to fluctuations in foreign exchange rates. The fluctuation in rates for 2013 resulted in a gain of $2.9 million reflected in other income/expense.
Other than the interest rate swaps and foreign exchange contracts, we have no other derivative financial instruments.
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Item 8.
Financial Statements and Supplementary Data
SPIRIT AEROSYSTEMS HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page | |
---|---|---|
Consolidated Financial Statements of Spirit AeroSystems Holdings, Inc. for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011 |
||
Report of Independent Registered Public Accounting Firm |
83 | |
Consolidated Statements of Operations |
85 | |
Consolidated Statements of Comprehensive Income |
86 | |
Consolidated Balance Sheets |
87 | |
Consolidated Statements of Changes in Shareholders' Equity |
88 | |
Consolidated Statements of Cash Flows |
89 | |
Notes to Consolidated Financial Statements |
90 |
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Report of Independent Registered Public Accounting Firm
To
the Board of Directors and Stockholders of
Spirit AeroSystems Holdings, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Spirit AeroSystems Holdings, Inc. and its subsidiaries (the "Company") at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule appearing under Item 15 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because material weaknesses in internal control over financial reporting related to the Company's contract accounting estimates for its Airbus A350, Gulfstream G280 and G650 programs existed as of that date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2013 consolidated financial statements and our opinion regarding the effectiveness of the Company's internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
83
or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Kansas City, Missouri
February 19, 2014
84
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Operations
|
For the Twelve Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
December 31,
2013 |
December 31,
2012 |
December 31,
2011 |
|||||||
|
($ in millions, except per share data)
|
|||||||||
Net Revenues |
$ | 5,961.0 | $ | 5,397.7 | $ | 4,863.8 | ||||
Operating costs and expenses |
||||||||||
Cost of sales |
6,059.5 | 5,245.3 | 4,312.1 | |||||||
Selling, general and administrative |
200.8 | 172.2 | 159.9 | |||||||
Impact from severe weather event |
30.3 | (146.2 | ) | | ||||||
Research and development |
34.7 | 34.1 | 35.7 | |||||||
| | | | | | | | | | |
Total operating costs and expenses |
6,325.3 | 5,305.4 | 4,507.7 | |||||||
Operating (loss) income |
(364.3 | ) | 92.3 | 356.1 | ||||||
Interest expense and financing fee amortization |
(70.1 | ) | (82.9 | ) | (77.5 | ) | ||||
Interest income |
0.3 | 0.2 | 0.3 | |||||||
Other income, net |
3.3 | 1.8 | 1.4 | |||||||
| | | | | | | | | | |
(Loss) income before income taxes and equity in net income (loss) of affiliates |
(430.8 | ) | 11.4 | 280.3 | ||||||
Income tax (provision) benefit |
(191.1 | ) | 24.1 | (86.9 | ) | |||||
| | | | | | | | | | |
(Loss) income before equity in net income (loss) of affiliates |
(621.9 | ) | 35.5 | 193.4 | ||||||
Equity in net income (loss) of affiliates |
0.5 | (0.7 | ) | (1.0 | ) | |||||
| | | | | | | | | | |
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | |||
| | | | | | | | | | |
| | | | | | | | | | |
(Loss) earnings per share |
||||||||||
Basic |
$ | (4.40 | ) | $ | 0.24 | $ | 1.36 | |||
Diluted |
$ | (4.40 | ) | $ | 0.24 | $ | 1.35 |
See notes to consolidated financial statements
85
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Comprehensive Income
|
For the Twelve Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
December 31,
2013 |
December 31,
2012 |
December 31,
2011 |
|||||||
|
($ in millions)
|
|||||||||
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | |||
Other comprehensive income (loss), net of tax: |
||||||||||
Unrealized (loss) on interest rate swaps, net of tax effect of zero, zero, $2.4, respectively |
| | (4.2 | ) | ||||||
Less: reclassification adjustment for loss realized in net income, net of tax effect of zero, $1.7, $3.1, respectively |
| 2.9 | 5.3 | |||||||
| | | | | | | | | | |
Net gain on interest rate swaps |
| 2.9 | 1.1 | |||||||
Unrealized gain (loss) on foreign currency hedge contracts, net of tax effect of zero, zero, $0.2, respectively |
| | 0.5 | |||||||
Less: reclassification adjustment for loss realized in net income, net of tax effect of zero, zero, $0.1, respectively |
| 0.1 | 0.2 | |||||||
Less: reclassification adjustment for loss realized in net other assets, net of tax effect of zero, zero, $0.4, respectively |
| | 0.7 | |||||||
| | | | | | | | | | |
Net gain on foreign currency hedge contracts |
| 0.1 | 1.4 | |||||||
Pension, SERP, and Retiree medical adjustments, net of tax effect of ($51.5), $19.5, $30.5, respectively |
84.8 | (30.5 | ) | (52.9 | ) | |||||
Unrealized foreign exchange gain on intercompany loan, net of tax effect of ($0.4), ($0.8), zero, respectively |
1.2 | 2.2 | | |||||||
Foreign currency translation adjustments |
4.6 | 6.3 | (0.5 | ) | ||||||
| | | | | | | | | | |
Total other comprehensive income (loss) |
90.6 | (19.0 | ) | (50.9 | ) | |||||
| | | | | | | | | | |
Total comprehensive (loss) income |
$ | (530.8 | ) | $ | 15.8 | $ | 141.5 | |||
| | | | | | | | | | |
| | | | | | | | | | |
See notes to consolidated financial statements
86
Spirit AeroSystems Holdings, Inc.
Consolidated Balance Sheets
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
|
($ in millions)
|
||||||
Current assets |
|||||||
Cash and cash equivalents |
$ | 420.7 | $ | 440.7 | |||
Accounts receivable, net |
550.8 | 420.7 | |||||
Inventory, net |
1,842.6 | 2,410.8 | |||||
Deferred tax asset-current |
26.9 | 57.1 | |||||
Other current assets |
103.2 | 26.1 | |||||
| | | | | | | |
Total current assets |
2,944.2 | 3,355.4 | |||||
Property, plant and equipment, net |
1,803.3 | 1,698.5 | |||||
Pension assets |
252.6 | 78.4 | |||||
Deferred tax asset-non-current, net |
| 192.0 | |||||
Other assets |
107.1 | 91.0 | |||||
| | | | | | | |
Total assets |
$ | 5,107.2 | $ | 5,415.3 | |||
| | | | | | | |
| | | | | | | |
Current liabilities |
|||||||
Accounts payable |
$ | 753.7 | $ | 659.0 | |||
Accrued expenses |
220.6 | 216.3 | |||||
Profit sharing |
38.4 | 28.3 | |||||
Current portion of long-term debt |
16.8 | 10.3 | |||||
Advance payments, short-term |
133.5 | 70.7 | |||||
Deferred revenue, short-term |
19.8 | 18.4 | |||||
Deferred grant income liability current |
8.6 | 6.9 | |||||
Other current liabilities |
144.2 | 57.1 | |||||
| | | | | | | |
Total current liabilities |
1,335.6 | 1,067.0 | |||||
Long-term debt |
1,150.5 | 1,165.9 | |||||
Advance payments, long-term |
728.9 | 833.6 | |||||
Pension/OPEB obligation |
69.8 | 75.6 | |||||
Deferred grant income liability non-current |
108.2 | 116.6 | |||||
Deferred revenue and other deferred credits |
30.9 | 30.8 | |||||
Other liabilities |
202.3 | 128.9 | |||||
Equity |
|||||||
Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued |
| | |||||
Common stock, Class A par value $0.01, 200,000,000 shares authorized, 120,946,429 and 119,671,298 shares issued, respectively |
1.2 | 1.2 | |||||
Common stock, Class B par value $0.01, 150,000,000 shares authorized, 23,851,694 and 24,025,880 shares issued, respectively |
0.2 | 0.2 | |||||
Additional paid-in capital |
1,025.0 | 1,012.3 | |||||
Accumulated other comprehensive loss |
(54.6 | ) | (145.2 | ) | |||
Retained earnings |
508.7 | 1,127.9 | |||||
| | | | | | | |
Total shareholders' equity |
1,480.5 | 1,996.4 | |||||
Noncontrolling interest |
0.5 | 0.5 | |||||
| | | | | | | |
Total equity |
1,481.0 | 1,996.9 | |||||
| | | | | | | |
Total liabilities and equity |
$ | 5,107.2 | $ | 5,415.3 | |||
| | | | | | | |
| | | | | | | |
See notes to consolidated financial statements
87
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Changes in Shareholders' Equity
|
Common Stock |
|
Accumulated
Other Comprehensive Income (Loss) |
Retained
Earnings/ Accumulated Deficit |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Additional
Paid-in Capital |
|
|||||||||||||||||
|
Shares | Amount | Total | ||||||||||||||||
|
($ in millions, except share data)
|
||||||||||||||||||
Balance December 31, 2010 |
142,098,702 | $ | 1.4 | $ | 983.6 | $ | (75.3 | ) | $ | 900.7 | $ | 1,810.4 | |||||||
Net income |
| | | | 192.4 | 192.4 | |||||||||||||
Employee equity awards |
909,244 | | 12.4 | | | 12.4 | |||||||||||||
Stock forfeitures |
(221,165 | ) | | (1.2 | ) | | | (1.2 | ) | ||||||||||
Excess tax benefits from share-based payment arrangements |
| | 1.1 | | | 1.1 | |||||||||||||
SERP shares issued |
78,862 | | | | | | |||||||||||||
Other comprehensive loss |
| | | (50.9 | ) | | (50.9 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Balance December 31, 2011 |
142,865,643 | 1.4 | 995.9 | (126.2 | ) | 1,093.1 | 1,964.2 | ||||||||||||
Net income |
| | | | 34.8 | 34.8 | |||||||||||||
Employee equity awards |
905,438 | | 15.3 | | | 15.3 | |||||||||||||
Stock forfeitures |
(123,439 | ) | | | | | | ||||||||||||
Excess tax benefits from share-based payment arrangements |
| | 1.1 | | | 1.1 | |||||||||||||
SERP shares issued |
49,536 | | | | | | |||||||||||||
Other comprehensive loss |
| | | (19.0 | ) | | (19.0 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Balance December 31, 2012 |
143,697,178 | 1.4 | 1,012.3 | (145.2 | ) | 1,127.9 | 1,996.4 | ||||||||||||
Net loss |
| | | | (621.4 | ) | (621.4 | ) | |||||||||||
Equity in joint venture |
| | | | 2.2 | 2.2 | |||||||||||||
Employee equity awards |
1,979,066 | | 12.6 | | | 12.6 | |||||||||||||
Stock forfeitures |
(668,263 | ) | | | | | | ||||||||||||
Net shares settled |
(240,359 | ) | | | | | | ||||||||||||
Excess tax benefits from share-based payment arrangements |
| | 0.1 | | | 0.1 | |||||||||||||
SERP shares issued |
30,501 | | | | | | |||||||||||||
Other comprehensive income |
| | | 90.6 | | 90.6 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Balance December 31, 2013 |
144,798,123 | $ | 1.4 | $ | 1,025.0 | $ | (54.6 | ) | $ | 508.7 | $ | 1,480.5 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
See notes to consolidated financial statements
88
Spirit AeroSystems Holdings, Inc.
Consolidated Statements of Cash Flows
|
Twelve Months
Ended December 31, 2013 |
Twelve Months
Ended December 31, 2012 |
Twelve Months
Ended December 31, 2011 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
($ in millions)
|
|||||||||
Operating activities |
||||||||||
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | |||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities |
||||||||||
Depreciation expense |
158.2 | 151.1 | 129.2 | |||||||
Amortization expense |
3.1 | 5.1 | 4.9 | |||||||
Amortization of deferred financing fees |
6.7 | 14.6 | 5.6 | |||||||
Accretion of customer supply agreement |
0.6 | 0.2 | | |||||||
Bad debt expense |
| | 1.4 | |||||||
Employee stock compensation expense |
19.6 | 15.3 | 11.2 | |||||||
Excess tax benefit of share-based payment arrangements |
(0.6 | ) | (1.2 | ) | (1.3 | ) | ||||
Loss from discontinued hedge accounting on interest rate swaps |
| 5.2 | | |||||||
(Gain) from the ineffectiveness of hedge contracts |
(2.6 | ) | (1.5 | ) | | |||||
(Gain) loss from foreign currency transactions |
(2.6 | ) | (5.6 | ) | 1.0 | |||||
Loss on disposition of assets |
0.1 | 14.1 | 1.0 | |||||||
Deferred taxes |
202.8 | (120.1 | ) | 21.6 | ||||||
Long-term tax benefit |
(2.5 | ) | 3.6 | (6.1 | ) | |||||
Pension and other post retirement benefits, net |
(32.0 | ) | (8.9 | ) | (9.6 | ) | ||||
Grant income |
(7.3 | ) | (5.8 | ) | (5.4 | ) | ||||
Equity in net loss of affiliates |
(0.5 | ) | 0.7 | 1.0 | ||||||
Changes in assets and liabilities |
||||||||||
Accounts receivable |
(128.5 | ) | (151.1 | ) | (66.3 | ) | ||||
Inventory, net |
666.0 | 228.3 | (121.6 | ) | ||||||
Accounts payable and accrued liabilities |
94.2 | 109.8 | 106.1 | |||||||
Profit sharing/deferred compensation |
10.0 | 4.7 | (5.5 | ) | ||||||
Advance payments |
(41.9 | ) | 239.6 | (159.9 | ) | |||||
Income taxes receivable/payable |
(82.2 | ) | (4.3 | ) | 65.0 | |||||
Deferred revenue and other deferred credits |
(0.2 | ) | (12.4 | ) | (265.9 | ) | ||||
Other |
21.6 | 28.2 | 53.9 | |||||||
| | | | | | | | | | |
Net cash provided by (used in) operating activities |
260.6 | 544.4 | (47.3 | ) | ||||||
| | | | | | | | | | |
Investing activities |
||||||||||
Purchase of property, plant and equipment |
(234.2 | ) | (236.1 | ) | (249.7 | ) | ||||
Purchase of property, plant and equipment severe weather event (see Note 4) |
(38.4 | ) | (12.9 | ) | | |||||
Proceeds from sale of assets |
0.7 | 1.6 | 0.5 | |||||||
Other |
3.7 | (1.4 | ) | | ||||||
| | | | | | | | | | |
Net cash (used in) investing activities |
(268.2 | ) | (248.8 | ) | (249.2 | ) | ||||
| | | | | | | | | | |
Financing activities |
||||||||||
Proceeds from revolving credit facility |
| 170.0 | 30.0 | |||||||
Payments on revolving credit facility |
| (170.0 | ) | (30.0 | ) | |||||
Proceeds from issuance of debt |
| 547.6 | | |||||||
Principal payments of debt |
(10.4 | ) | (571.0 | ) | (8.0 | ) | ||||
Excess tax benefit of share-based payment arrangements |
0.6 | 1.2 | 1.3 | |||||||
Debt issuance and financing costs |
(4.1 | ) | (12.4 | ) | | |||||
| | | | | | | | | | |
Net cash (used in) financing activities |
(13.9 | ) | (34.6 | ) | (6.7 | ) | ||||
| | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents |
1.5 | 1.9 | (0.6 | ) | ||||||
| | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents for the period |
(20.0 | ) | 262.9 | (303.8 | ) | |||||
Cash and cash equivalents, beginning of period |
440.7 | 177.8 | 481.6 | |||||||
| | | | | | | | | | |
Cash and cash equivalents, end of period |
$ | 420.7 | $ | 440.7 | $ | 177.8 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Supplemental information |
||||||||||
Interest paid |
$ | 68.0 | $ | 69.7 | $ | 83.7 | ||||
Income taxes paid |
$ | 69.4 | $ | 96.7 | $ | 5.6 | ||||
Non-cash investing and financing activities |
||||||||||
Property acquired through capital leases |
$ | 0.4 | $ | 2.6 | $ | 0.1 | ||||
Financing obligations |
$ | | $ | | $ | 12.5 |
See notes to consolidated financial statements
89
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements
($, €, £, and RM in millions other than per share amounts)
1. Nature of Business
Spirit AeroSystems Holdings, Inc. ("Holdings" or the "Company") was incorporated in the state of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition of The Boeing Company's ("Boeing") operations in Wichita, Kansas, Tulsa, Oklahoma and McAlester, Oklahoma (the "Boeing Acquisition"). Holdings provides manufacturing and design expertise in a wide range of products and services for aircraft original equipment manufacturers and operators through its subsidiary, Spirit AeroSystems, Inc. ("Spirit"). Onex Corporation ("Onex") of Toronto, Canada and certain of its affiliates maintain majority voting power of Holdings. In April 2006, Holdings acquired the aerostructures division of BAE Systems (Operations) Limited ("BAE Aerostructures"), which builds structural components for Airbus, a division of Airbus Group NV ("Airbus") and Boeing. Prior to this acquisition, Holdings sold essentially all of its production to Boeing. Since Spirit's incorporation, the Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, Bombardier, Mitsubishi Aircraft Corporation, Southwest Airlines, United Airlines, American Airlines and Bell Helicopter. The Company has its headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Wichita, Kansas; Kinston, North Carolina and Subang, Malaysia. The Company has assembly facilities in Saint-Nazaire, France, and Chanute, Kansas.
The Company is the majority participant in the Kansas Industrial Energy Supply Company ("KIESC"), a tenancy-in-common with other Wichita companies established to purchase natural gas.
The Company participates in a joint venture, Taikoo Spirit AeroSystems Composite Co. Ltd. ("TSACCL"), of which Spirit's ownership interest is 31.5%. TSACCL was formed to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region. On December 19, 2013, Spirit completed the sale of its interest in the Spirit-Progresstech joint venture.
The accompanying consolidated financial statements include the Company's financial statements and the financial statements of its majority owned or controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the instructions to Form 10-K. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year financial statements and notes to conform to the 2013 presentation.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the Company's financial statements and the financial statements of its majority-owned subsidiaries and have been prepared in accordance with GAAP. Investments in business entities in which the Company does not have control, but has the ability to exercise influence over operating and financial policies, including TSACCL, are accounted for by the equity method. KIESC is fully consolidated as the Company owns 77.8% of the entity's equity. All intercompany balances and transactions have been eliminated in consolidation. The Company's U.K. subsidiary uses local currency, the British pound, as its functional currency; the Malaysian subsidiary uses the British pound and our Singapore subsidiary uses the Singapore dollar. All other foreign subsidiaries and branches use the U.S. dollar as their functional currency.
As part of the monthly consolidation process, the functional currencies of the Company's international subsidiaries are translated to U.S. dollars using the end-of-month translation rate for balance sheet accounts and average period currency translation rates for revenue and income accounts.
90
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates and assumptions. See Note 3, "Changes in Estimates," for details on current changes in estimates.
The results of operations during fiscal 2013 include the favorable impact of cumulative catch-up adjustments relating to prior period revenues of $95.5 primarily associated with productivity and efficiency improvements on mature programs.
The results of operations during fiscal 2012 include the favorable impact of cumulative catch-up adjustments relating to prior period revenues of $14.7 primarily associated with productivity and efficiency improvements on mature programs.
The results of operations during fiscal 2011 include the favorable impact of cumulative catch-up adjustments relating to prior period revenues of $13.8 driven by productivity improvements, recognition of favorable performance as we closed out B737 and B777 contract blocks in the fourth quarter, and a lower forecast for our short-term incentive accrual, partially offset by increasing material costs in our Wing Systems segment.
Revenues and Profit Recognition
A significant portion of the Company's revenues are recognized under long-term, volume-based pricing contracts, requiring delivery of products over several years. The Company recognizes revenue under the contract method of accounting and records sales and profits on each contract in accordance with the percentage-of-completion method of accounting, primarily using the units-of-delivery method. The units-of-delivery method recognizes as revenue the contract price of units of a basic production product delivered during a period and as the cost of earned revenue the costs allocable to the delivered units. Costs allocable to undelivered units are reported in the balance sheet as inventory. The method is used in circumstances in which an entity produces units of a basic product under production-type contracts in a continuous or sequential production process to buyers' specifications. Recurring long-term production contracts are usually divided into contract blocks for this purpose, with each block treated as a separate contract for "units-of-delivery" production-type contract accounting purposes.
The total quantity of production units to be delivered under a contract may be set as a single contract accounting block, or it can be split into multiple blocks. Unless the life of the contract is so long that it prevents reliable estimates, the entire contract will typically be set as the contract accounting block quantity. "Life-of-program" or "requirements-based" contracts often lead to continuing sales of more than twenty years. Since this is much longer than can be reliably estimated, Spirit uses parameters based on the contract facts and circumstances to determine the length of the contract block. This analysis includes: considering the customer's firm orders, internal assessment of the market, reliability of cost estimates, potential segmentation of non-recurring elements of the contract, and other factors. Contract block sizes may also be determined based on certain contractual terms such as pricing renegotiation dates, such that certain contract blocks may use an approximate date instead of a defined unit quantity in order to increase the ability to estimate accurately given that the renegotiated pricing is unknown for the planning block. Shorter contract blocks for mature, ongoing programs are common due to the presence of recent cost history and probable forecast accuracy. Mature program contract blocks tend to be approximately two years in length. Initial contract blocks often require a longer time period and a greater number of units in order to take into account the higher cost of early units due to a steeper experience curve and
91
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
pre-production design costs. Initial contract blocks on new programs can extend up to ten years or longer. As these programs mature, costs stabilize and efficiencies are realized, subsequent contract block length shortens to take into account the steady state of the continuing production.
Revenues from non-recurring design work are recognized based on substantive milestones or use of the cost-to-cost method, that are indicative of our progress toward completion depending on facts and circumstances. We follow the requirements of FASB authoritative guidance on accounting for the performance of construction-type and certain production-type contracts (the contract method of accounting), and use the cumulative catch-up method in accounting for revisions in estimates. Under the cumulative catch-up method, the impacts of revisions in estimates are recognized immediately when changes in estimated contract profitability become known.
A profit rate is estimated based on the difference between total revenues and total costs over a contract block. Total revenues at any given time include actual historical revenues up to that time plus future estimated revenues. Total costs at any given time include actual historical costs up to that time plus future estimated costs. Estimated revenues include negotiated or expected values for units delivered, estimates of probable recoveries asserted against the customer for changes in specifications, price adjustments for contract and volume changes, escalation and assumed but currently unnegotiated price increases for derivative models. Costs include the estimated cost of certain pre-production efforts (including non-recurring engineering and planning subsequent to completion of final design) plus the estimated cost of manufacturing a specified number of production units. Estimates take into account assumptions related to future labor performance and rates, and projections related to material and overhead costs including expected "learning curve" cost reductions over the term of the contract. Estimated revenues and costs also take into account the expected impact of specific contingencies that we believe are probable.
Estimates of revenues and costs for our contract blocks span a period of multiple years and are based on a substantial number of underlying assumptions. We believe that the underlying assumptions are sufficiently reliable to provide a reasonable estimate of the profit to be generated. However, due to the significant length of time over which revenue streams will be generated, the variability of the revenue and cost streams can be significant if the assumptions change. Estimates of profit margins for contract accounting blocks are typically reviewed on a quarterly basis. Assuming the initial estimates of sales and costs under the contract block are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contract block. Changes in these underlying estimates due to revisions in sales and cost estimates may result in profit margins being recognized unevenly over a contract block as such changes are accounted for on a cumulative basis in the period estimates are revised, which we refer to as cumulative catch-up adjustments. Our Estimate At Completion estimating process is not solely an accounting process, but is instead an integrated part of the management of our business, involving numerous personnel in our planning, production control, contracts, cost management, supply chain and program and business management functions. In 2013, we recorded positive cumulative catch-up adjustments for periods prior to 2013 of $60.1, $30.0 and $5.4 for the Fuselage, Propulsion and Wing Segments, respectively. When the current estimates of total contract revenue and total contract cost indicate a loss, a provision for the entire loss on the contract, known as a forward loss charge, is recorded to cost of sales in the period in which they become evident. In 2013, we recognized $1,133.3 in forward losses.
For revenues not recognized under the contract method of accounting, the Company recognizes revenues from the sale of products at the point of passage of title, which is generally at the time of shipment. Shipping and handling costs are included in cost of sales. Revenues earned from providing maintenance services, including any contracted research and development, are recognized when the service
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
is complete or other contractual milestones are attained. Revenues from non-recurring design work are recognized based on substantive milestones that are indicative of our progress toward completion. Non-recurring revenues, which are derived primarily from engineering and design efforts, were $255.6, $239.4 and $222.0 for each of the twelve month periods ending December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
As required by FASB authoritative guidance related to accounting for consideration given by a vendor to a customer, under an agreement with Airbus, certain payments are amortized as a reduction to revenues on units delivered. Additionally, in 2012 we began making certain payments related to our Gulfstream G280 and G650 programs. The Company recognized $28.6 and $51.1 as a reduction to net revenues for the periods ended December 31, 2013 and December 31, 2012, respectively.
Developments on Our New and Maturing Programs
A significant portion of the Company's future revenues is expected to be derived from new and maturing programs, most notably the B787, A350 XWB, G650 and G280, on which we may be contracted to provide design and engineering services, recurring production, or both. There are several risks inherent to such new and maturing programs. In the design and engineering phase, we may incur costs in excess of our forecasts due to several factors, including cost overruns, customer-directed change orders and delays in the overall program. We may also incur higher than expected recurring production costs, which may be caused by a variety of factors, including the future impact of engineering changes (or other change orders) or our inability to secure contracts with our suppliers at projected cost levels. Our ability to recover these excess costs from the customer will depend on several factors, including our rights under our contracts for the new and maturing programs. In determining our profits and losses in accordance with the percentage-of-completion method of contract accounting, we are required to make significant assumptions regarding our future costs and revenues, as well as the estimated number of units to be manufactured under the contract and other variables. We continually review and update our assumptions based on market trends and our most recent experience. If we make material changes to our assumptions, such as a reduction in the estimated number of units to be produced under the contract (which could be caused by emerging market trends or other factors), an increase in future production costs or a change in the recoverability of increased design or production costs, we may experience negative cumulative catch-up adjustments related to revenues previously recognized. In some cases, we may recognize forward loss amounts.
Research and Development
Research and development includes costs incurred for experimentation, design and testing and are expensed as incurred as required under FASB authoritative guidance pertaining to accounting for research and development costs.
Joint Venture
The value of the Company's 31.5% ownership interest in Taikoo Spirit AeroSystems Composite Co. Ltd. totaled $1.4 at December 31, 2013 and is accounted for under the equity method of accounting.
Cash and Cash Equivalents
Cash and cash equivalents represent all highly liquid investments with original maturities of three months or less.
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. Consistent with industry practice, the Company classifies unbilled receivables related to contracts accounted for under the long-term contract method of accounting, as current. The Company determines an allowance for doubtful accounts based on a review of outstanding receivables. Account balances are charged off against the allowance after the potential for recovery is considered remote. The Company's allowance for doubtful accounts was approximately $0.2 and $4.3 at December 31, 2013 and December 31, 2012, respectively.
Accounts receivable, net includes unbilled receivables on long-term aerospace contracts, comprised principally of revenue recognized on contracts for which amounts were earned but not contractually billable as of the balance sheet date, or amounts earned in which the recovery will occur over the term of the contract, which could exceed one year.
Inventory
Raw materials are stated at lower of cost (principally on an actual or average cost basis) or market. Inventoried costs attributed to units delivered under long-term contracts are based on the estimated average cost of all units expected to be produced and are determined under the learning curve concept which anticipates a predictable decrease in unit costs as tasks and production techniques become more efficient through repetition and supply chain costs are reduced as contracts are negotiated and design changes result in lower cost. This usually results in an increase in inventory (referred to as "excess-over-average" or "deferred production costs") during the early years of a contract. These costs are deferred only to the extent the amount of actual or expected excess-over-average is reasonably expected to be fully offset by lower-than-average costs in future periods of a contract. If in-process inventory plus estimated costs to complete a specific contract exceed the actual plus anticipated remaining sales value of such contract, such excess is charged to cost of sales in the period the loss becomes known, thus reducing inventory to estimated realizable value. Costs in inventory include amounts relating to contracts with long production cycles, some of which are not expected to be realized within one year.
The Company reviews its general stock materials and spare parts inventory each quarter to identify impaired inventory, including excess or obsolete inventory, based on historical sales trends and expected production usage. Impaired inventories are written off to work-in-process in the period identified.
Total inventory includes deferred production costs for the excess of production costs over the estimated average cost per ship set, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. Recovery of excess over average deferred production costs is dependent on the number of ship sets ultimately sold and the ultimate selling prices and lower production costs associated with future production under these contract blocks. Work-in-process inventory also includes non-recurring production costs. Non-recurring production costs include design and engineering costs and test articles.
Finished goods inventory is stated at its estimated average per unit cost based on all units expected to be produced.
Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. Significant customer directed work changes can also cause pre-production costs to be incurred. These costs are typically recovered over a certain number of ship set deliveries.
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is applied using a straight-line method over the useful lives of the respective assets as described in the following table:
|
Estimated Useful Life | |||
---|---|---|---|---|
Land improvements |
20 years | |||
Buildings |
45 years | |||
Machinery and equipment |
3-20 years | |||
Tooling Airplane program B787, Rolls-Royce |
5-20 years | |||
Tooling Airplane program all others |
2-10 years | |||
Capitalized software |
3-7 years |
We capitalize certain costs, such as software coding, installation and testing, that are incurred to purchase or to create and implement internal-use computer software in accordance with FASB authoritative guidance pertaining to capitalization of cost for internal-use software. Our capitalization policy includes specifications that the software must have a service life greater than one year, is legally and substantially owned by Spirit, and has an acquisition cost of greater than $0.1.
Intangible Assets
Intangible assets are initially recorded at estimated fair value and are comprised of patents, favorable leasehold interests, and customer relationships that are amortized on a straight-line basis over their estimated useful lives, ranging from 6 to 16 years for patents, 14 to 24 years for favorable leasehold interests, and 8 years for customer relationships.
Impairment or Disposal of Long-Lived Assets and Goodwill
Spirit reviews capital and amortizing intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with FASB authoritative guidance on accounting for the impairment or disposal of long-lived assets. Under the standard, assets must be classified as either held-for-use or available-for-sale. An impairment loss is recognized when the carrying amount of an asset that is held for use exceeds the projected undiscounted future net cash flows expected from its use and disposal, and is measured as the amount by which the carrying amount of the asset exceeds its fair value, which is measured by discounted cash flows when quoted market prices are not available. For assets available-for-sale, an impairment loss is recognized when the carrying amount exceeds the fair value less cost to sell. The Company performs an annual impairment test for goodwill in the fourth quarter of each year, in accordance with FASB authoritative guidance pertaining to goodwill and other intangible assets, or more frequently, if an event occurs or circumstances change that would more likely than not reduce fair value below current value. Recent impairment testing has indicated no need for impairment.
Deferred Financing Costs
Costs relating to long-term debt are deferred and included in other long-term assets. These costs are amortized over the term of the related debt or debt facilities, and are included as a component of interest expense.
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Derivative Instruments and Hedging Activity
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 FASB guidance on accounting for derivatives and hedges. 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 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 operating or investing sections of the statement of cash flows. Our use of derivatives has generally been limited to interest rate swaps and foreign currency forward contracts. The Company enters into foreign currency forward contracts to reduce the risks associated with the changes in foreign exchange rates on sales and cost of sales denominated in currencies other than the entities' functional currency.
Fair Value of Financial Instruments
Financial instruments are measured in accordance with FASB authoritative guidance related to fair value measurements. This guidance clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about fair value measurements. See Note 12, "Fair Value Measurements."
Income Taxes
Income taxes are accounted for in accordance with FASB authoritative guidance on accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to reduce deferred income tax assets to an amount that in management's opinion will ultimately be realized. Tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs.
We record an income tax expense or benefit based on the net income earned or net loss incurred in each tax jurisdiction and at the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB authoritative guidance on accounting for the uncertainty in income taxes. The final tax outcome for these matters may be different than management's original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods. We use the flow-through accounting method for tax credits. Under this method, tax credits reduce income tax expense.
Stock-Based Compensation and Other Share-Based Payments
Many of the Company's employees are participants in various stock compensation plans. The Company accounts for stock option plans, restricted share plans and other stock-based payments in accordance with FASB authoritative guidance pertaining to share-based payment. The expense attributable to the Company's employees is recognized over the period the amounts are earned and vested, as described in Note 18 "Stock Compensation."
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Service and Product Warranties and Extraordinary Rework
Provisions for estimated expenses related to service and product warranties and certain extraordinary rework are made at the time products are sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims.
The following is a roll forward for the warranty and extraordinary rework provision as of December 31, 2013 and December 31, 2012:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 30.9 | $ | 19.6 | |||
Charges to costs and expenses |
38.3 | 12.0 | |||||
Write-offs, net of recoveries |
(0.6 | ) | (0.9 | ) | |||
Exchange rate |
0.1 | 0.2 | |||||
| | | | | | | |
Balance, December 31 |
$ | 68.7 | $ | 30.9 | |||
| | | | | | | |
| | | | | | | |
In July 2013, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (FASB ASU 2013-11). This update was issued to give explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The provisions of FASB ASU 2013-11 are effective for fiscal years and interim periods beginning after December 15, 2013. The adoption of the provisions of this update will not have a material impact on the Company's consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (FASB ASU 2013-10). The amendments in this update permit the Fed Funds Effective Swap Rate (OIS) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendment is effective for qualifying new or redesignated hedging relationship entered into on or after July 17, 2013. The adoption of the provisions of ASU 2013-10 did not have a material impact on the Company's consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (FASB ASU 2013-02). The amendment in this update requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. The provisions of FASB ASU 2013-02 were effective for annual and interim periods beginning after December 15, 2012. The adoption of the provisions of FASB ASU 2013-02 did not have a material impact on the Company's consolidated financial statements.
In July 2012, the FASB issued ASU No. 2012-2, Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (FASB ASU 2012-2). The amendment in this update permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles Goodwill and Other
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
General Intangibles Other than Goodwill. The provisions of FASB ASU 2012-2 were effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012. The adoption of the provisions of FASB ASU 2012-2 did not have a material impact on the Company's consolidated financial statements.
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (FASB ASU 2011-11). The amendments in this update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The intention is to enhance required disclosures by improving information about financial instruments and derivative instruments that are either offset in accordance with FASB guidance or are subject to an enforceable master netting arrangement; irrespective of whether they are offset in accordance with FASB guidance. The provisions of FASB ASU 2011-11 have been effective for annual reporting periods beginning on or after January 1, 2013. The adoption of the provisions of FASB ASU 2011-11 has not had a material impact on the Company's consolidated financial statements.
3. Changes in Estimates
The Company's long-term contract estimates are based on estimated contract revenues and related costs over the Company's current contract blocks. Estimated contract revenues are generally not subject to significant revisions as most of the Company's contracts are fixed price and known at the inception of the contract; however, the contract cost elements of these estimates change frequently as the programs mature and that has historically been the primary driver of changes in our estimates. Contract costs are estimated based on actual costs incurred to date and an estimate of remaining costs over the current contract block, which can extend for multiple years. During the early phases of our program contracts, the future cost estimates are subject to significant variability and are based on numerous assumptions and judgments which require management to use its historical experience on similar programs until aircraft programs are type certified; low rate production is achieved; production processes mature; supply chain partners are contracted; and unit costs stabilize; which typically results in assumptions that costs will improve over the life of the contract block. This learning curve concept is typical in our industry; however, the level of design change and time spent in low rate production that was anticipated when we initially established these curves has been significantly exceeded as original delivery schedules have been delayed and engineering changes have continued. During 2013 and 2012, a combination of events occurred that resulted in significant changes in estimates on several new and maturing programs, resulting in forward losses being recorded on some of these programs. The following is a summary of those events.
2013 Changes in Estimates
Performance Issues A350 XWB
Our A350 XWB fuselage recurring program has experienced various production inefficiencies mostly driven by early development discovery and engineering change to the aircraft design, as well as higher test and transportation costs. Airbus is assisting us as we work through these issues and has provided additional resources to work alongside our personnel. In the third quarter of 2013, we recorded a forward loss of $78.6 for the A350 XWB fuselage recurring contract due to these production inefficiencies. There continues to be risk of additional forward loss associated with the recurring contract as we work through production issues.
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Non-Recurring Contract Agreements A350 XWB
In September and October of 2013 we agreed with Airbus on the work scope for the design and tooling related to the -1000 derivative of the A350 XWB fuselage and wing contracts. Based on current estimates, the agreement for the non-recurring phase of the -1000 derivative fuselage resulted in a $32.7 forward loss, which was recorded in the third quarter of 2013. There is a risk of additional forward loss if we do not successfully execute the design and engineering change process as projected.
Supply Chain Cost Reductions G280 and G650
At the time we recorded the forward loss charges on the Gulfstream G280 and G650 programs in the third quarter of 2012, we had included in the respective estimates at completion significant cost reductions primarily related to sourcing costs between 2015 and 2018. These amounts were based on the experience of the supply chain team and operational management. During the second quarter of 2013, it became apparent that a substantial portion of the total cost savings included in the contract estimates for each program would not be realized. This determination was based on a number of changing conditions and new developments including an assessment of our actual experience with our customers regarding their receptiveness to proposed changes, completion of our detailed part analysis during the second quarter of 2013 as part of our effort to project future sourcing costs and our inability to achieve estimated supplier price reductions via negotiations with suppliers.
Labor Estimates Tulsa Facility
The labor cost forecasts within the contract estimates for the G280, G650 and Boeing B787 are based on certain assumptions, including the level of disruption expected in the future. In our contract estimates through the first quarter of 2013, we assumed that certain disruptions to the manufacturing line caused by (i) supplier quality issues and late deliveries, (ii) customer inspections occurring in our facilities and (iii) our own manufacturing quality issues would be resolved by the middle of 2013. During the second quarter of 2013, key performance dates were missed, and we extended the expected period of time during which these issues would be resolved in our assumptions for our contract estimates. As a result, we experienced higher actual costs as well as significant increases to forecasted costs, resulting in additional forward losses recognized on all of these programs in the second and fourth quarters of 2013.
Contractual Items G650
As we worked with Gulfstream to meet its production demand, we negotiated a temporary transfer of a portion of our work scope to Gulfstream for completion. In the second quarter of 2013, due to the effect of continued production challenges on our forecasted ability to achieve scheduled deliveries, we changed our assumptions to extend the duration of the work transfer and updated our estimates regarding this temporarily transferred work scope which is accounted for as a reduction in forecasted revenue. As described in more detail in Note 21, "Commitments, Contingencies and Guarantees," we instituted a demand for arbitration against Gulfstream to resolve certain contractual disputes primarily related to engineering changes made by Gulfstream and the impact of those changes to weight and delivery schedules as well as for incomplete payments to Spirit. We continually assess these contractual items and adjust our estimates as appropriate each quarter. Changes in these particular estimates resulted in additional forward loss recognized on the G650 in the second quarter of 2013.
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
B787 program
As we move into higher rates of production, our performance at the current contracted price depends on our being able to achieve production cost reductions as we gain production experience. During the second quarter of 2013, we continued to experience production inefficiencies at our Tulsa facility as we transitioned to production on the B787-9 derivative, which drove forward losses of $37.3 on the B787 wing program. Additionally in the fourth quarter of 2013, we revised our estimates of the amount of near-term achievable cost reductions for the B787 program based on cost savings ideas generated, the maturity of these ideas and the expected realization for the program. This change in cost savings estimates drove a forward loss of $384.7 in the fourth quarter of 2013.
2012 Changes in Estimates
Performance Issues Tulsa Facility
The Company's Tulsa facility has significant work content on three of the development programs (B787, G280, G650). The multiple complex development programs at this facility have created various performance issues that have resulted in previous changes to our contract estimates on these development programs.
The performance issues at the Tulsa facility were magnified in the third quarter of 2012 when the Company implemented a recovery plan which would bring the Company current on the delivery schedule for its B787 wing components. The Company began implementing the recovery plan during late July 2012 which resulted in the addition of significant additional resources to meet delivery schedules. As the Company was implementing the recovery plan, it became clear during the third quarter estimation process that the remediation would have a significant impact on the future cost curves due to significant amounts of additional headcount and disruption.
Type Certification
On September 4 and 7, 2012, Gulfstream received type certification on the G280 and G650 aircraft, respectively. These type certifications impact three of the Company's development programs, G280, G650 and BR725 (the engine nacelle on the G650). Type certification is a significant program milestone for commercial aerospace products as it represents the airworthiness authority's approval of the completion and functionality of engineering design and the ability of the aircraft to enter into service, and leads directly to the commencement of full rate production. However, following type certification the ability to redesign for cost is significantly less if no derivative aircraft design is planned. We currently have no plans for derivative models, making redesign for cost improvements difficult after type certification.
The pace of cost improvements was not keeping up with projected learning curves particularly related to redesign opportunities and as all three programs are preparing to enter full rate production, we revised our estimates to reflect higher costs.
Decision on Work Package Transfers
Given certain challenges of new programs at the Company's Kinston, North Carolina site and the fact that our newest facility in Chanute, Kansas was in the process of multiple work package transfers during the third quarter, the Company decided to delay the transfer of any additional work packages into these facilities. Overall, this had a significant impact on the BR725 program and the timing of anticipated cost reduction from the planned transfer of work content to lower-cost facilities.
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Finalization of Supplier Contracts
During the early phases of our development programs, the Company will frequently procure small quantities of required sub-assemblies and parts from our suppliers. This practice generally forces us to pay higher unit prices for these sub-assemblies and parts, but allows us flexibility in evaluating supplier performance and quality as well as addressing design changes that frequently occur during the early phases of these development programs. Once design changes subside, we will generally contract on a longer-term basis with our suppliers which allows us to experience more favorable supply chain pricing.
The Company has been successful in negotiating lower costs with suppliers on most of these development programs; however, these costs are not as low as original estimates. This pressure on supply chain cost runs across all of our development programs. As Boeing and Airbus have increased production rates on existing commercial programs, our suppliers have limited capacity to deal with even modest rate increases on our business jet programs. In addition, the capacity constraint in our supply base has prevented us from off-loading to the supply chain certain work we currently perform in-house. As a result of higher current costs which have exceeded estimates and recent negotiations with suppliers, the Company has revised supplier costs across several of the development programs.
New and Maturing Programs Summary Performance
Due primarily to the events described above in this Note 3, in 2013 we recorded forward loss charges of $78.6 on the recurring A350 XWB Section 15, $32.7 on the non-recurring A350 XWB Section 15, $240.9 on the G280 program, $288.3 on the G650 program and $422.0 on the B787 program. Additionally, due to program performance and/or changes in estimates in 2013 we recorded forward loss charges of $41.1, $16.4 and $21.7 on the B747, B767 and Rolls-Royce BR725 programs, respectively. The Rolls-Royce BR725 program also recorded a reduction of forward loss charges of $8.4 for a total net forward loss of $13.3 in 2013. These amounts were recorded within the Company's results of operations as part of cost of goods sold as well as on the condensed consolidated balance sheet as forward loss provisions within inventory to the extent each program's inventory balance was sufficient to absorb the charge. In the case that program inventory was not sufficient to absorb the full amount of a charge, the remainder was classified as a current liability.
Due to performance, type certification, work package transfers and finalization of supplier contracts, as well as other events, for the twelve months ended December 31, 2012, we recorded forward loss charges of $184.0 on the Boeing 787, $162.5 on the Gulfstream G650, $151.0 on the Rolls-Royce BR725, $118.8 on the Gulfstream G280, $8.9 on the Airbus A350 XWB non-recurring wing, $11.5 on the Boeing 747-8 program and $8.0 on the B767 program. These amounts are recorded on the condensed consolidated balance sheet as forward loss provisions within inventory.
Our consolidated net adjustments for costs related to the aforementioned changes in estimates and other circumstances for the twelve months ended December 31, 2013 and December 31, 2012 decreased operating profit, before income taxes, by approximately $1,133.3 and $644.7, respectively. These adjustments decreased net earnings for the twelve months ended December 31, 2013 and December 31, 2012 by approximately $713.0 ($5.04 per share) and $412.0 ($2.88 per share), respectively.
4. Impact from Severe Weather Event
On April 14, 2012, during a severe weather event, the Company's Wichita, Kansas facility, which includes its headquarters and manufacturing facilities for all Boeing models as well as operations for maintenance, repair and overhaul support and services (MRO), was hit by a tornado which caused significant damage to many buildings, disrupted utilities and resulted in complete suspension of production
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Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
for eight days. The Company's work-in-process and production equipment generally remained intact, and the Company resumed production on April 23, 2012, although some inefficiencies continued thereafter as a result of the damage and repair efforts.
As of December 31, 2012, the Company had received a total of $234.9 in insurance payments based on estimated losses incurred as a result of the April 14, 2012 tornado. In accordance with its credit agreement, the Company provided a certificate to its lenders indicating that all net proceeds received in connection with the destruction caused by the April 14, 2012 tornado would be used for repair, replacement or restoration at the Wichita facility.
On October 19, 2012, the Company reached an agreement with its insurers on a final settlement for all claims relating to the April 14, 2012 severe weather event. Under the terms of this settlement the insurers agreed to pay to the Company $234.9 (including payments previously made) to resolve all property damage, clean-up and recovery costs related to the severe weather event as well as all expenses incurred to make up for the interruption of production and to reduce further disruptions. Under the settlement agreement, the Company assumes all further risk involving the severe weather event on April 14, 2012.
For the twelve months ended December 31, 2012, the Company recorded a net gain of $146.2 under severe weather event, which represents the settlement amount of $234.9 less cumulative charges of $88.7, which primarily relates to repair, clean-up, asset impairment and incremental freight, labor and warehousing costs to restore normal operations.
During the twelve months ended December 31, 2013 and December 31, 2012, the Company recorded an impairment charge of zero and $0.2, respectively, for certain assets that were destroyed during the severe weather event. Any future impairment charges are expected to be immaterial.
During the twelve months ended December 31, 2013, the Company recorded expenses of $30.3 under severe weather event, which represents continuing incremental freight, warehousing and other costs which are recorded as incurred.
5. Accounts Receivable, net
Accounts receivable, net consists of the following:
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
Trade receivables (1)(2)(3) |
$ | 544.2 | $ | 415.9 | |||
Other |
6.8 | 9.1 | |||||
Less: allowance for doubtful accounts |
(0.2 | ) | (4.3 | ) | |||
| | | | | | | |
Accounts receivable, net |
$ | 550.8 | $ | 420.7 | |||
| | | | | | | |
| | | | | | | |
Accounts receivable, net includes unbilled receivables on long-term aerospace contracts, comprised principally of revenue recognized on contracts for which amounts were earned but not contractually
102
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
billable as of the balance sheet date, or amounts earned in which the recovery will occur over the term of the contract, which could exceed one year.
Also included in accounts receivable are amounts held in retainage which, as of December 31, 2013, are all related to Gulfstream and represent amounts due on G650 deliveries from 2010 through the third quarter of 2013. As described in more detail in Note 22, "Commitments, Contingencies and Guarantees," in August 2013, the Company instituted a demand for arbitration against Gulfstream Aerospace Corporation, seeking damages from Gulfstream for its incomplete payments to Spirit, as well as other damages and relief. Gulfstream counterclaimed against Spirit in the arbitration, seeking liquidated damages for delayed deliveries of wings, as well as other damages and relief. While we believe that the short-paid amount is collectible, if we are unable to collect this amount or if it becomes part of an overall settlement or arbitration award, recognition of additional forward losses on the G650 program could be required and the future cash flows of the Company could be significantly impacted.
On May 3, 2012, one of our customers, Hawker Beechcraft, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Subsequent to the bankruptcy filing, the Company reserved the remaining balance of its $3.5 receivable from Hawker in 2012. This balance was written off in 2013.
6. Inventory
Inventories are summarized as follows:
|
December 31,
2013 |
December 31,
2012 (1) |
|||||
---|---|---|---|---|---|---|---|
Raw materials |
$ | 240.2 | $ | 250.3 | |||
Work-in-process |
1,057.8 | 1,033.6 | |||||
Finished goods |
43.7 | 35.9 | |||||
| | | | | | | |
Product inventory |
1,341.7 | 1,319.8 | |||||
Capitalized pre-production (2) |
486.2 | 524.6 | |||||
Deferred production |
1,661.2 | 1,173.8 | |||||
Forward loss provision |
(1,646.5 | ) | (607.4 | ) | |||
| | | | | | | |
Total inventory, net |
$ | 1,842.6 | $ | 2,410.8 | |||
| | | | | | | |
| | | | | | | |
Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. Significant unfunded statement of work changes can also cause pre-production costs to be incurred. These costs are typically recovered over a certain number of ship set deliveries and the Company believes these amounts will be fully recovered.
Total inventory includes deferred production costs for the excess of production costs over the estimated average cost per ship set, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. Recovery of excess-over-average deferred production costs is dependent on the number of ship sets ultimately sold and the ultimate 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.
Non-recurring production costs include design and engineering costs and test articles.
103
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Inventories are summarized by platform and costs below:
|
December 31, 2013 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Product Inventory |
|
|
|
|
||||||||||||||
|
Capitalized
Pre-Production |
Deferred
Production |
Forward Loss
Provision (1)(2) |
Total Inventory, net
December 31, 2013 |
|||||||||||||||
|
Inventory | Non-Recurring | |||||||||||||||||
B747 (3) |
$ | 96.4 | $ | 0.1 | $ | 4.4 | $ | 1.0 | $ | (37.2 | ) | $ | 64.7 | ||||||
B787 |
263.9 | 14.7 | 158.2 | 597.3 | (606.0 | ) | 428.1 | ||||||||||||
Boeing All other platforms (4) |
421.4 | 11.5 | 7.0 | (21.7 | ) | (18.6 | ) | 399.6 | |||||||||||
A350 (5) |
166.7 | 42.5 | 76.5 | 388.8 | (120.8 | ) | 553.7 | ||||||||||||
Airbus All other platforms |
83.2 | | | 18.8 | | 102.0 | |||||||||||||
G280 (6) |
46.9 | | 4.9 | 233.7 | (285.5 | ) | | ||||||||||||
G650 |
59.2 | | 192.7 | 373.3 | (450.8 | ) | 174.4 | ||||||||||||
Rolls-Royce (7) |
15.8 | | 42.5 | 69.3 | (127.6 | ) | | ||||||||||||
Sikorsky |
| 5.4 | | | | 5.4 | |||||||||||||
Bombardier C-Series |
9.1 | | | 0.7 | | 9.8 | |||||||||||||
Aftermarket |
37.0 | | | | | 37.0 | |||||||||||||
Other platforms (8) |
67.1 | 0.8 | | | | 67.9 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
$ | 1,266.7 | $ | 75.0 | $ | 486.2 | $ | 1,661.2 | $ | (1,646.5 | ) | $ | 1,842.6 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
December 31, 2012 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Product Inventory |
|
|
|
|
||||||||||||||
|
Capitalized
Pre-Production |
Deferred
Production |
Forward Loss
Provision (1) |
Total Inventory, net
December 31, 2012 |
|||||||||||||||
|
Inventory | Non-Recurring | |||||||||||||||||
B747 |
$ | 83.6 | $ | (0.7 | ) | $ | 7.2 | $ | 3.6 | $ | (11.5 | ) | $ | 82.2 | |||||
B787 |
225.2 | 26.6 | 189.5 | 595.1 | (184.0 | ) | 852.4 | ||||||||||||
Boeing All other platforms (4) |
392.3 | 31.6 | 5.8 | (67.6 | ) | (6.5 | ) | 355.6 | |||||||||||
A350 |
133.2 | 51.3 | 56.8 | 177.4 | (8.9 | ) | 409.8 | ||||||||||||
Airbus All other platforms |
88.2 | | | 18.2 | | 106.4 | |||||||||||||
G280 |
83.3 | | 5.5 | 98.3 | (118.8 | ) | 68.3 | ||||||||||||
G650 |
36.7 | | 208.4 | 297.3 | (162.5 | ) | 379.9 | ||||||||||||
Rolls-Royce (7) |
12.6 | | 51.4 | 51.2 | (115.2 | ) | | ||||||||||||
Sikorsky |
| 4.7 | | | | 4.7 | |||||||||||||
Bombardier C-Series |
3.9 | | | 0.3 | | 4.2 | |||||||||||||
Aftermarket |
45.0 | | | | | 45.0 | |||||||||||||
Other platforms (8) |
98.3 | 4.0 | | | | 102.3 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
$ | 1,202.3 | $ | 117.5 | $ | 524.6 | $ | 1,173.8 | $ | (607.4 | ) | $ | 2,410.8 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
104
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
the Forward Loss Provision figure presented. The cumulative forward loss charges, net of contract liabilities, through December 31, 2013 on open blocks are $123.8, $463.1 and $29.0 for the A350 XWB, G280 and Sikorsky programs, respectively.
The following is a roll forward of the capitalized pre-production costs included in the inventory balance at December 31, 2013 and December 31, 2012:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 524.6 | $ | 553.2 | |||
Charges to costs and expenses |
(64.8 | ) | (59.7 | ) | |||
Capitalized costs (1) |
26.4 | 31.1 | |||||
| | | | | | | |
Balance, December 31 |
$ | 486.2 | $ | 524.6 | |||
| | | | | | | |
| | | | | | | |
105
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following is a roll forward of the deferred production included in the inventory balance at December 31, 2013 and December 31, 2012:
|
2013 (1) | 2012 (1) | |||||
---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 1,173.8 | $ | 813.2 | |||
Charges to costs and expenses |
(591.2 | ) | (260.1 | ) | |||
Capitalized costs |
1,072.8 | 617.6 | |||||
Exchange rate |
5.8 | 3.1 | |||||
| | | | | | | |
Balance, December 31 |
$ | 1,661.2 | $ | 1,173.8 | |||
| | | | | | | |
| | | | | | | |
Significant amortization of capitalized pre-production and deferred production inventory will occur over the following contract blocks:
|
Contract Block
Quantity |
Orders (1) | |||||
---|---|---|---|---|---|---|---|
B787 |
500 | 916 | |||||
A350 XWB |
400 | 812 | |||||
G280 |
250 | 85 | |||||
G650 |
350 | 145 | |||||
Rolls-Royce |
350 | 136 |
Current block deliveries are as follows:
Model
|
Current Block
Deliveries |
|||
---|---|---|---|---|
B787 |
164 | |||
A350 XWB |
11 | |||
Business/Regional Jets |
217 |
Contract block quantity is projected to fully absorb the balance of deferred production inventory. Capitalized pre-production and deferred production inventories are at risk to the extent that we do not achieve the orders in the forecasted blocks or if future actual costs exceed current projected estimates, as those categories of inventory are recoverable over future deliveries. In the case of capitalized pre-production this may be over multiple blocks. Should orders not materialize in future periods to fulfill the block, potential forward loss charges may be necessary to the extent the final delivered quantity does not absorb deferred inventory costs.
106
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
7. Property, Plant and Equipment, net
Property, plant and equipment, net consists of the following:
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
Land |
$ | 17.9 | $ | 17.7 | |||
Buildings (including improvements) |
566.0 | 504.7 | |||||
Machinery and equipment |
1,084.0 | 960.0 | |||||
Tooling |
801.6 | 722.4 | |||||
Capitalized software |
172.2 | 170.2 | |||||
Construction-in-progress |
130.2 | 143.0 | |||||
| | | | | | | |
Total |
2,771.9 | 2,518.0 | |||||
Less: accumulated depreciation |
(968.6 | ) | (819.5 | ) | |||
| | | | | | | |
Property, plant and equipment, net |
$ | 1,803.3 | $ | 1,698.5 | |||
| | | | | | | |
| | | | | | | |
Interest costs associated with construction-in-progress are capitalized until the assets are completed and ready for use. Capitalized interest was $5.8 and $7.5 for the twelve months ended December 31, 2013 and December 31, 2012, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized repair and maintenance costs, excluding the impact of the severe weather event, of $112.5, $124.2 and $115.5 for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
We capitalize certain costs, such as software coding, installation and testing, that are incurred to purchase or to create and implement internal use computer software in accordance with FASB authoritative guidance pertaining to capitalization of costs for internal-use software. Depreciation expense related to capitalized software was $19.6, $18.6 and $18.6 for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
Spirit reviews capital and amortizing intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with FASB authoritative guidance on accounting for the impairment or disposal of long-lived assets. We evaluated the long-lived assets at our locations and determined no impairment was necessary.
107
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
8. Other Assets
Other assets are summarized as follows:
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
Intangible assets |
|||||||
Patents |
$ | 1.9 | $ | 2.0 | |||
Favorable leasehold interests |
6.3 | 9.7 | |||||
Customer relationships |
28.7 | 28.1 | |||||
| | | | | | | |
Total intangible assets |
36.9 | 39.8 | |||||
Less: Accumulated amortization-patents |
(1.3 | ) | (1.2 | ) | |||
Accumulated amortization-favorable leasehold interest |
(3.1 | ) | (4.8 | ) | |||
Accumulated amortization-customer relationships |
(27.8 | ) | (23.7 | ) | |||
| | | | | | | |
Intangible assets, net |
4.7 | 10.1 | |||||
Deferred financing |
|||||||
Deferred financing costs |
80.5 | 76.4 | |||||
Less: Accumulated amortization-deferred financing costs |
(56.3 | ) | (49.6 | ) | |||
| | | | | | | |
Deferred financing costs, net |
24.2 | 26.8 | |||||
Other |
|||||||
Fair value of derivative instruments |
| | |||||
Goodwill Europe |
3.0 | 3.0 | |||||
Equity in net assets of affiliates |
1.4 | 5.1 | |||||
Customer supply agreement (1) |
37.6 | 39.9 | |||||
Other |
36.2 | 6.1 | |||||
| | | | | | | |
Total |
$ | 107.1 | $ | 91.0 | |||
| | | | | | | |
| | | | | | | |
The Company recognized $5.4, $4.1 and $4.1 of amortization expense of intangibles for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
Estimated amortization expense associated with the Company's amortizable intangible assets for each of the next five years is as follows:
2014 |
$ | 1.4 | ||
2015 |
$ | 0.5 | ||
2016 |
$ | 0.5 | ||
2017 |
$ | 0.5 | ||
2018 |
$ | 0.4 |
108
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following is a roll forward of the carrying amount of goodwill at December 31, 2013 and December 31, 2012:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 3.0 | $ | 2.9 | |||
Goodwill acquired |
| | |||||
Exchange rate |
| 0.1 | |||||
| | | | | | | |
Balance, December 31 |
$ | 3.0 | $ | 3.0 | |||
| | | | | | | |
| | | | | | | |
9. Research and Development Milestones
Milestone payments. Milestone payments are recognized as revenue when milestones are deemed to be substantive and are achieved. A substantive milestone is one that is based on successful performance by the Company and not solely contingent upon the passage of time or performance by another party. Milestone payments collected in advance that have significant future performance obligations are presented as advance payments or deferred revenue, and are recognized when the milestone is achieved.
As part of our ongoing participation in the B787-9 program, we received research and development milestone payments of $18.3 and $30.0 for the twelve months ended December 31, 2013 and December 31, 2012, respectively. Revenue and cost associated with the performance of the research and development are included in program revenue and costs. We expect to receive additional payments related to research and development on this program. These additional payments remain to be negotiated as of December 31, 2013.
10. Advance Payments and Deferred Revenue/Credits
Advance payments. Advance payments are those payments made to Spirit by third parties in contemplation of the future performance of services, receipt of goods, incurrence of expenditures, or for other assets to be provided by Spirit on a contract and are repayable if such obligation is not satisfied. The amount of advance payments to be recovered against units expected to be delivered within a year is classified as a short-term liability, with the balance of the unliquidated advance payments classified as a long-term liability.
In March 2012, we signed a Memorandum of Agreement with Airbus providing for us to receive advance payments in 2012. The advance payments will be offset against the recurring price of A350 XWB ship sets invoiced by Spirit at a rate of $1.25 per ship set. We received zero and $250.0 in the twelve months ended December 31, 2013 and December 31, 2012, respectively.
Deferred revenue/credits. Deferred revenue/credits generally consist of nonrefundable amounts received in advance of revenue being earned for specific contractual deliverables. These payments are classified as deferred revenue/credits when received and recognized as revenue as the production units are delivered.
109
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Advance payments and deferred revenue/credits are summarized by platform as follows:
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
B737 |
$ | 18.7 | $ | 20.5 | |||
B787 |
600.2 | 629.8 | |||||
A350 XWB |
243.9 | 250.2 | |||||
Airbus All other platforms |
7.3 | 6.7 | |||||
Gulfstream |
22.0 | 28.2 | |||||
Other |
21.0 | 18.1 | |||||
| | | | | | | |
Total advance payments and deferred revenue/credits |
$ | 913.1 | $ | 953.5 | |||
| | | | | | | |
| | | | | | | |
11. Government Grants
We received grants in the form of government funding for a portion of the site construction and other specific capital asset cost at our Kinston, North Carolina and Subang, Malaysia sites. Deferred grant income is being amortized as a reduction to 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, is being amortized over the lives of the assets purchased to satisfy the capital investment performance criteria. The other half of the deferred grant income is being amortized over a 10-year period in a manner consistent with the job performance criteria. In Malaysia, the deferred grant income is being amortized based on the lives of the eligible assets constructed with the grant funds as there are no performance criteria. The value recorded within property, plant and equipment prior to amortization, including foreign exchange rate changes, related to the use of grant funds in North Carolina and Malaysia was $153.8 and $148.7 as of December 31, 2013 and December 31, 2012, respectively.
Deferred grant income liability consists of the following:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 123.5 | $ | 127.9 | |||
Grant income recognized |
(7.3 | ) | (6.1 | ) | |||
Exchange rate |
0.6 | 1.7 | |||||
| | | | | | | |
Total deferred grant income liability, December 31 |
$ | 116.8 | $ | 123.5 | |||
| | | | | | | |
| | | | | | | |
The asset related to the deferred grant income consists of the following:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Beginning Balance, January 1 |
$ | 124.9 | $ | 128.3 | |||
Amortization |
(5.1 | ) | (5.1 | ) | |||
Exchange rate |
0.5 | 1.7 | |||||
| | | | | | | |
Total asset value related to deferred grant income, December 31 |
$ | 120.3 | $ | 124.9 | |||
| | | | | | | |
| | | | | | | |
12. Fair Value Measurements
FASB's authoritative guidance on fair value measurements 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
110
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It 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 guidance discloses three levels of inputs that may be used to measure fair value:
Level 1 | Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market. | ||
|
Level 2 |
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of our interest rate swaps and foreign currency hedge contracts. |
|
Level 3 |
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets and liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
|
Fair Value Measurements | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
At December 31, 2013 using | |||||||||||||||
|
December 31, 2013 | ||||||||||||||||||
|
|
Significant
Other Observable Inputs (Level 2) |
|
||||||||||||||||
Description
|
Total Carrying
Amount in Balance Sheet |
Assets
Measured at Fair Value |
Liabilities
Measured at Fair Value |
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant
Unobservable Inputs (Level 3) |
||||||||||||||
Money Market Fund |
$ | 293.3 | $ | 293.3 | $ | | $ | 293.3 | $ | | $ | | |||||||
Interest Rate Swaps |
$ | (1.4 | ) | $ | | $ | (1.4 | ) | $ | | $ | (1.4 | ) | $ | |
|
Fair Value Measurements | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
At December 31, 2012 using | |||||||||||||||
|
December 31, 2012 | ||||||||||||||||||
|
|
Significant
Other Observable Inputs (Level 2) |
|
||||||||||||||||
Description
|
Total Carrying
Amount in Balance Sheet |
Assets
Measured at Fair Value |
Liabilities
Measured at Fair Value |
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant
Unobservable Inputs (Level 3) |
||||||||||||||
Money Market Fund |
$ | 312.2 | $ | 312.2 | $ | | $ | 312.2 | $ | | $ | | |||||||
Interest Rate Swaps |
$ | (4.0 | ) | $ | | $ | (4.0 | ) | $ | | $ | (4.0 | ) | $ | |
The fair value of the interest rate swaps and foreign currency hedge contracts are determined by using mark-to-market reports generated for each derivative and evaluated for counterparty risk. In the case of the interest rate swaps, the Company evaluated its counterparty risk using credit default swaps, historical default rates and credit spreads.
The Company's long-term debt consists of a senior secured term loan, senior unsecured notes, and the Malaysian term loan. The estimated fair value of our debt obligations is based on the quoted market prices for such obligations or the historical default rate for debt with similar credit ratings.
111
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following table presents the carrying amount and estimated fair value of long-term debt in accordance with FASB authoritative guidance on fair value measurements related to disclosures of financial instruments:
|
December 31, 2013 | December 31, 2012 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
|||||||||
Senior secured term loan (including current portion) |
$ | 538.2 | $ | 541.9 | (1) | $ | 543.4 | $ | 550.0 | (1) | |||
Senior unsecured notes due 2017 |
296.4 | 309.0 | (1) | 295.6 | 321.8 | (1) | |||||||
Senior unsecured notes due 2020 |
300.0 | 323.4 | (1) | 300.0 | 321.8 | (1) | |||||||
Malaysian loan |
10.0 | 8.5 | (2) | 13.4 | 11.8 | (2) | |||||||
| | | | | | | | | | | | | |
Total |
$ | 1,144.6 | $ | 1,182.8 | $ | 1,152.4 | $ | 1,205.4 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
See Note 14, "Investments" for fair value disclosure on government and corporate debt securities.
13. Derivative and Hedging Activities
The Company enters into interest rate swap agreements to reduce its exposure to the variable rate portion of its long-term debt. The Company could enter into foreign currency hedge contracts to reduce the risks associated with the changes in foreign exchange rates on sales and cost of sales denominated in currencies other than the entities' functional currency. Any gains or losses on hedges are included in earnings when the underlying transaction that was hedged occurs. The Company does not use contracts for speculative or trading purposes. On the inception date, the Company designates a derivative contract as either a fair value or cash flow hedge in accordance with FASB guidance on accounting for derivatives and hedges and links the contract to either a specific asset or liability on the balance sheet, or to forecasted commitments or transactions. The Company formally documents the hedging relationship between the hedging instrument and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge, the nature of the risk being hedged, how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge's inception and on a quarterly basis, whether the derivative item is effective in offsetting changes in fair value or cash flows.
Changes in the fair value of derivative instruments considered to be effective hedges are reported in other comprehensive income, net of tax. In the case of interest rate swaps, amounts are subsequently reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings. If the actual interest rate on the fixed rate portion of debt is less than LIBOR, the monies received are recorded as an offset to interest expense. Conversely, if the actual interest rate on the fixed rate portion of debt is greater than LIBOR, then the Company pays the difference, which is recorded to interest expense. Reclassifications of any amounts related to foreign currency hedge contracts would be recorded to earnings in the same period in which the underlying transaction occurs. Any change in the fair value resulting from ineffectiveness is immediately recognized in earnings.
112
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has applied these valuation techniques as of December 31, 2013 and believes it has obtained the most accurate information available for the types of derivative contracts it holds. The Company attempts to manage exposure to counterparty credit risk by only entering into agreements with major financial institutions, which are expected to be able to fully perform under the terms of the agreement.
The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item; the derivative expires or is sold, terminated or exercised; the derivative is no longer designated as a hedging instrument because it is unlikely that a forecasted transaction will occur; or management determines that the designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued, the Company would carry the derivative instrument on the balance sheet at its fair value with subsequent changes in fair value included in earnings, and gains and losses that were accumulated in other comprehensive income are recognized immediately in earnings to the extent the forecasted transaction is not expected to occur, or when the underlying transaction settles.
To the extent that derivative instruments do not qualify for hedge accounting treatment, the changes in fair market value of the instruments are reported in the results of operations for the current period. As a result of the senior secured Credit Agreement entered into on April 18, 2012, the interest rate swaps no longer qualify for hedge accounting while LIBOR is below the LIBOR floor of 75 basis points under the Credit Agreement. Amounts in other comprehensive income for interest rate swaps as of April 18, 2012 have been included in earnings.
The Company enters into master netting arrangements for its derivatives to mitigate the credit risk of financial instruments. The master netting arrangements do not impact the consolidated balance sheets for December 31, 2013 or December 31, 2012, respectively.
The Company has certain derivative instruments covered by master netting arrangements whereby, in the event of a default as defined by the senior secured credit facility or termination event, the non-defaulting party has the right to offset any amounts payable against any obligation of the defaulting party under the same counterparty agreement.
The entire asset classes of the Company are pledged as collateral for both the term loan and the revolving credit facility under the Company's senior secured credit facility (see Note 15, "Debt").
We enter into floating-to-fixed interest rate swap agreements periodically. As of December 31, 2013, the interest rate swap agreements had notional amounts totaling $225.
Notional Amount
|
Expires |
Variable
Rate |
Fixed
Rate (1) |
Effective
Fixed Rate (2) |
Fair Value,
December 31, 2013 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$ |
225 | July 2014 | 1 Month LIBOR | 1.37 | % | N/A | $ | (1.4 | ) |
113
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The purpose of entering into these swaps was to reduce the Company's exposure to variable interest rates. The interest rate swaps settle on a monthly basis when interest payments are made. These settlements occur through the maturity date. The interest rate swaps are being accounted for as cash flow hedges in accordance with FASB authoritative guidance. The fair value of the interest rate swaps was a liability (unrealized loss) of ($1.4) at December 31, 2013 and ($4.0) at December 31, 2012.
Foreign Currency Forward Contracts
We could use foreign currency hedge contracts to reduce our exposure to currency exchange rate fluctuations, which include hedging contracts to hedge U.S. dollar revenue from certain customers. The objective of these contracts would minimize the impact of currency exchange rate movements on our operating results. The hedges would be accounted for as cash flow hedges in accordance with FASB authoritative guidance. Gains and losses from cash flow hedges would be recorded to other comprehensive income until the underlying transaction for which the hedge was placed occurs and then the value in other comprehensive income is reclassified to earnings. The exception to the aforementioned treatment of realized gains/losses involves certain cash payments to Airbus, payable in British pounds sterling which were hedged, and this amount in other comprehensive income was reclassified into other assets when the underlying transaction occurred and will be amortized over the first A350 XWB contract block.
The following table summarizes the Company's fair value of outstanding derivatives at December 31, 2013 and December 31, 2012:
|
Other Liability Derivatives | ||||||
---|---|---|---|---|---|---|---|
|
December 31, 2013 | December 31, 2012 | |||||
Derivatives designated as hedging instruments |
|||||||
Interest rate swaps |
|||||||
Current |
$ | 1.4 | $ | 2.8 | |||
Non-current |
| 1.2 | |||||
| | | | | | | |
Total derivatives designated as hedging instruments |
1.4 | 4.0 | |||||
| | | | | | | |
Total derivatives |
$ | 1.4 | $ | 4.0 | |||
| | | | | | | |
| | | | | | | |
The impact on other comprehensive income ("OCI") and earnings from cash flow hedges for the twelve months ended December 31, 2013 and December 31, 2012 was as follows:
Derivatives in
Cash Flow Hedging Relationships |
Amount of Gain or (Loss)
Recognized in OCI, net of tax, on Derivative (Effective Portion) |
Location of (Gain) or Loss Reclassified from Accumulated
OCI into Income (Effective Portion) |
Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
For the Twelve Months Ended |
|
For the Twelve Months Ended | ||||||||||||
|
December 31,
2013 |
December 31,
2012 |
|
December 31,
2013 |
December 31,
2012 |
||||||||||
Interest rate swaps |
$ | | $ | | Interest expense | $ | | $ | 6.1 | ||||||
Foreign currency hedge contracts |
| | Sales/ Revenue | | | ||||||||||
| | | | | | | | | | | | | | | |
Total |
$ | | $ | | $ | | $ | 6.1 | |||||||
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
The impact on earnings from interest rate swaps that are no longer effective was a loss of $(0.8) and $(1.0) for the twelve months ended December 31, 2013 and December 31, 2012, respectively.
114
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The impact on earnings from foreign currency hedge contracts that do not qualify as cash flow hedges was zero and income of $0.3 for the twelve months ended December 31, 2013 and December 31, 2012, respectively.
14. Investments
The amortized cost and approximate fair value of held-to-maturity securities are as follows:
|
December 31, 2013 | December 31, 2012 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Current | Noncurrent | Current | Noncurrent | |||||||||
Government and Corporate Debt Securities |
|||||||||||||
Amortized cost |
$ | 0.5 | $ | 3.1 | $ | 0.6 | $ | 2.8 | |||||
Unrealized gains |
| 0.1 | | 0.1 | |||||||||
Unrealized losses |
| (0.1 | ) | | | ||||||||
| | | | | | | | | | | | | |
Fair value |
$ | 0.5 | $ | 3.1 | $ | 0.6 | $ | 2.9 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Maturities of held-to-maturity securities at December 31, 2013 are as follows:
|
Amortized
Cost |
Approximate
Fair Value |
|||||
---|---|---|---|---|---|---|---|
Within One Year |
$ | 0.5 | $ | 0.5 | |||
One to Five Years |
1.2 | 1.2 | |||||
Five to Ten Years |
0.1 | 0.1 | |||||
After Ten Years |
1.8 | 1.8 | |||||
| | | | | | | |
Total |
$ | 3.6 | $ | 3.6 | |||
| | | | | | | |
| | | | | | | |
At December 31, 2013 and December 31, 2012, the fair value of certain investments in debt and marketable securities are less than their historical cost. Total fair value of these investments was $1.8 and $0.8, respectively, for the periods then ended, which is approximately 51% and 22%, respectively, of the Company's held-to-maturity investment portfolio. These declines primarily resulted from decreases in market interest rates and failure of certain investments to maintain consistent credit quality ratings or meet projected earnings targets.
Based on evaluation of available evidence, including changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary.
Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period in which the permanent impairment is identified.
115
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
15. Debt
Total debt shown on the balance sheet is comprised of the following:
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
Senior secured term loan (short and long-term) |
$ | 538.2 | $ | 543.4 | |||
Senior notes (due 2017 and 2020) |
596.4 | 595.6 | |||||
Malaysian term loan |
10.0 | 13.4 | |||||
Present value of capital lease obligations |
15.3 | 16.4 | |||||
Other |
7.4 | 7.4 | |||||
| | | | | | | |
Total |
$ | 1,167.3 | $ | 1,176.2 | |||
| | | | | | | |
| | | | | | | |
Senior Secured Credit Facilities
On April 18, 2012, Spirit entered into a $1.2 billion senior secured Credit Agreement (the "Credit Agreement") consisting of a $650.0 revolving credit facility and a $550.0 term loan B facility. The Credit Agreement refinanced and replaced the Second Amended and Restated Credit Agreement dated as of November 27, 2006, as amended. Proceeds of the new term loan were used to pay off outstanding amounts under the prior credit agreement. The revolving credit facility matures April 18, 2017 and bears interest, at Spirit's option, at either LIBOR, or a defined "base rate" plus an applicable margin based on Spirit's debt-to-EBITDA ratio (see table below). The term loan matures April 18, 2019 and bears interest, at Spirit's option, at LIBOR plus 3.00% with a LIBOR floor of 0.75% or base rate plus 2.00%, subject to a step down to LIBOR plus 2.75% or base rate plus 1.75%, as applicable, in the event Spirit's secured debt-to-EBITDA ratio is below 1:1 at any time after 2012. Substantially all of Spirit's assets, including inventory and property, plant and equipment, were pledged as collateral for both the term loan and the revolving credit facility. As of December 31, 2013, the outstanding balance of the term loan was $540.4. As of December 31, 2012, the outstanding balance of the term loan was $545.9. As of December 31, 2013, the carrying amount of the term loan was $538.2. The amount outstanding under the revolving credit facility was zero as of December 31, 2013 and December 31, 2012. The Company recorded a charge of $9.5 in 2012 for unamortized deferred financing fees as a result of extinguishment of the debt under the prior credit agreement.
In addition to paying interest on outstanding principal under the Credit Agreement, Spirit is required to pay an unused line fee on the unused portion of the commitments under the revolving credit facility based on Spirit's debt-to-EBITDA ratio (see table below). Spirit is required to pay letter of credit fees equal to the applicable margin for LIBOR rate revolving credit borrowings with respect to letters of credit issued under the revolving credit facility (see table below). Spirit is also required to pay to the issuing banks that issue any letters of credit, letter of credit fronting fees in respect of letters of credit at a rate equal to twenty basis points per year, and to the administrative agent thereunder customary administrative fees.
Pricing Tier
|
Debt-to-EBITDA
Ratio |
Commitment
Fee |
Letter of
Credit Fee |
Eurodollar
Rate Loans |
Base Rate
Loans |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 |
³ 3.0:1 | 0.450 | % | 2.50 | % | 2.50 | % | 1.50 | % | ||||||
2 |
<3.0:1 but ³ 2.25:1 | 0.375 | % | 2.25 | % | 2.25 | % | 1.25 | % | ||||||
3 |
<2.25:1 but ³ 1.75:1 | 0.300 | % | 2.00 | % | 2.00 | % | 1.00 | % | ||||||
4 |
<1.75:1 | 0.250 | % | 1.75 | % | 1.75 | % | 0.75 | % |
116
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The Credit Agreement contains customary affirmative and negative covenants, including restrictions on indebtedness, liens, type of business, acquisitions, investments, sales or transfers of assets, payments of dividends, transactions with affiliates, change in control and other matters customarily restricted in such agreements. The Credit Agreement also contained the following financial covenants (as defined in the Credit Agreement):
Senior Secured Leverage Ratio |
Shall not exceed 2.75:1.0 | |
Interest Coverage Ratio |
Shall not be less than 4.0:1.0 | |
Total Leverage Ratio |
Shall not exceed 4.0:1.0 |
To address the forward loss charges that the Company recognized in the third quarter of 2012, the Company amended the Credit Agreement effective October 26, 2012. The amendment resulted in a temporary revision of the quarterly financial covenant ratios and increased the amount of time the Company has to apply the proceeds from the insurance settlement in connection with the severe weather event against expenses resulting from the event from 12 months to 24 months before the proceeds may be considered eligible for prepayment against the senior secured credit facility.
Additionally, to address the forward loss charges that the Company recognized in the second quarter of 2013, the Company amended the Credit Agreement effective August 2, 2013. The amendment suspended the existing financial covenant ratios until December 31, 2014. The amendment requires Spirit to meet certain minimum liquidity and borrowing base requirements while the existing financial covenant ratios are suspended. Among other things, the amendment provides for the following key changes during the suspension period:
In addition, pursuant to the amendment the mandatory application of proceeds from the potential sale of the Oklahoma sites to repay the borrowings under the senior secured credit agreement is reduced from 100% to 50%. The Company expects to be in compliance with all required covenants through December 31, 2014.
On February 6, 2014, Moody's Investors Service placed the credit ratings of Spirit AeroSystems, Inc. under review for possible downgrade. A downgrade of our credit ratings could trigger a prepayment based on the excess cash flow prepayment provision under our term loan depending on our total leverage ratio.
Senior Notes
On November 18, 2010, we issued $300.0 aggregate of 6.75% Senior Notes due December 15, 2020 (the "2020 Notes"), with interest payable, in cash in arrears, on June 15 and December 15 of each year, beginning June 15, 2011. The 2020 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and Spirit's existing and future domestic subsidiaries that
117
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
guarantee Spirit's obligations under Spirit's senior secured credit facility. The carrying value of the 2020 Notes was $300.0 as of December 31, 2013.
On September 30, 2009, we issued $300.0 of 7.50% Senior Notes due October 1, 2017 (the "2017 Notes"), with interest payable, in cash in arrears, on April 1 and October 1 of each year, beginning April 1, 2010. The 2017 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and Spirit's existing and future domestic subsidiaries that guarantee Spirit's obligations under Spirit's senior secured credit facility. The carrying value of the 2017 Notes was $296.4 as of December 31, 2013.
As of December 31, 2013, we were and expect to remain in full compliance with all covenants contained in the indentures governing the 2020 Notes and the 2017 Notes through December 31, 2014.
Malaysian Facility Agreement
On June 2, 2008, the Company's wholly-owned subsidiary, Spirit AeroSystems Malaysia SDN BHD entered into a Facility Agreement for a term loan facility for Ringgit Malaysia ("RM") 69.2 (approximately USD $20.0 equivalent) (the "Malaysia Facility"), with the Malaysian Export-Import Bank. The Malaysia Facility requires quarterly principal repayments of RM3.3 (approximately USD $1.0) from September 2011 through May 2017 and quarterly interest payments payable at a fixed interest rate of 3.50% per annum. The Malaysia Facility loan balance as of December 31, 2013 was $10.0.
French Factory Capital Lease Agreement
On July 17, 2009, the Company's indirect wholly-owned subsidiary, Spirit AeroSystems France SARL entered into a capital lease agreement for €9.0 (approximately USD $13.1 equivalent) with a subsidiary of BNP Paribas Bank to be used towards the construction of our aerospace-related component assembly plant in Saint-Nazaire, France. Lease payments are variable, subject to the three-month Euribor rate plus 2.20%. Lease payments are due quarterly through April 2025. As of December 31, 2013 and December 31, 2012, the Saint-Nazaire capital lease balance was $10.7 and $11.0, respectively.
Nashville Design Center Capital Lease Agreement
On September 21, 2012, the Company entered into a capital lease agreement for $2.6 for a portion of an office building in Nashville, Tennessee to be used for design of aerospace components. Lease payments are due monthly, and are subject to yearly rate increases until the end of the lease term of 124 months. As of December 31, 2013 and December 31, 2012, the Nashville Design Center capital lease balance was $2.5 and $2.6, respectively.
16. Pension and Other Post-Retirement Benefits
Multi-employer Pension Plan
In connection with the collective bargaining agreement signed with the International Association of Machinists and Aerospace Workers (IAM), the Company contributes to a multi-employer defined benefit pension plan (IAM National Pension Fund). The level of contribution, as specified in the bargaining agreement was $1.35 per hour of employee service for a maximum of 80 hours per bi-weekly pay period through June 30, 2010. Effective July 1, 2010 the contribution per the collective bargaining agreement is $1.50 per hour of employee service for a maximum of 80 hours per bi-weekly pay period. The IAM bargaining agreement provides for a $0.05 increase per hour in the contribution rate beginning on July 1, 2011, with an additional $0.05 increase effective July 1 of each year through 2019.
118
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The collective bargaining agreement with the UAW requires the Company to contribute a specified amount per hour of service to a multi-employer defined benefit pension plan (IAM National Pension Fund). The specified amount was $1.30 in 2010. Per the negotiated UAW collective bargaining agreement, the pension contributions will be as follows:
Effective
1/1/2011 $1.45
Effective 1/1/2012 $1.50
Effective 1/1/2014 $1.55
Effective 1/1/2016 $1.60
Effective 1/1/2018 $1.65
Effective 1/1/2019 $1.70
Effective 1/1/2020 $1.75
The risk of this multi-employer plan is different from single-employer plans in the following aspects:
The following table summarizes the multi-employer plan to which the Company contributes:
|
|
Pension
Protection Act Zone Status |
|
|
|
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
Expiration
Date of Collective- Bargaining Agreement |
|||||||||||||||
|
|
FIP/RP
Status Pending/ Implemented |
Contributions of the Company |
|
||||||||||||||||||
|
EIN/Pension
Plan Number |
Surcharge
Imposed |
||||||||||||||||||||
Pension Fund
|
2012 | 2013 | 2011 | 2012 | 2013 | |||||||||||||||||
IAM National Pension Fund |
51-60321295 | Green | Green | No | $ | 22.8 | $ | 25.9 | $ | 27.9 | No |
IAM June 27, 2020
UAW November 30, 2020 |
||||||||||
Pension Fund |
|
Year Company Contributions to Plan Exceeded More Than 5 Percent of Total Contributions (as of December 31 of the Plan's Year-End) |
||||||||||||||||||||
IAM National Pension Fund |
2011, 2012, 2013
|
Defined Contribution Plans
The Company contributes to a defined contribution plan available to all U.S. employees, excluding IAM and UAW represented employees. Under the plan, the Company makes a matching contribution of 75% of the employee contribution to a maximum 8% of eligible individual employee compensation. In addition, non-matching contributions based on an employee's age and years of service are paid at the end of each calendar year for certain employee groups.
The Company recorded $39.1, $39.5 and $38.4 in contributions to these plans for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
On April 1, 2006, as part of the acquisition of BAE Aerostructures, the Company established a defined contribution pension plan for those employees who are hired after the date of acquisition. Under the plan, the Company contributes 8% of basic salary while participating employees are required to contribute 4% of basic salary. The Company recorded $1.8 in contributions to this plan for the period ended December 31, 2013, $0.8 in contributions for the period ended December 31, 2012 and $0.7 in contributions for the period ended December 31, 2011.
119
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Defined Benefit Pension Plans
Effective June 17, 2005, pension assets and liabilities were spun-off from three Boeing qualified plans into four qualified Spirit AeroSystems plans for each Spirit employee who did not retire from Boeing by August 1, 2005. Effective December 31, 2005, all four qualified plans were merged together. In addition, Spirit has one nonqualified plan providing supplemental benefits to executives (SERP) who transferred from a Boeing nonqualified plan to a Spirit AeroSystems plan and elected to keep their benefits in this plan. Both plans are frozen as of the date of the Boeing Acquisition (i.e., no future service benefits are being earned in these plans). We intend to fund our qualified pension plan through a trust. Pension assets are placed in trust solely for the benefit of the pension plans' participants and are structured to maintain liquidity that is sufficient to pay benefit obligations.
On April 1, 2006, as part of the acquisition of BAE Aerostructures, the Company established a defined benefit pension plan for those employees that had pension benefits remaining in BAE Systems' pension plan. In accordance with U.K. legislation, the plan and its assets are managed by an independent trustee company. The investment strategy adopted by this trustee is documented in a Statement of Investment Principles in line with U.K. legislation. The principles for the investment strategy are to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. The trustee has invested the plan assets in pooled arrangements with authorized investment companies which were selected to be consistent with the plan's overall investment principles and strategy. The specified target asset allocation is 55% equities, 5% real estate, 20% corporate bonds and 20% government bonds.
Effective December 31, 2013, the U.K. pension plan was closed and benefits were frozen and thereafter subject only to statutory pension revaluation, resulting in a net curtailment gain of $13.1. This gain was due to the loss of salary linkage for employed members of the plan, less the cost of other benefit changes made as part of the plan closure.
Other Post-Retirement Benefit Plans
We also have post-retirement health care coverage for eligible U.S. retirees and qualifying dependents prior to age 65. Eligibility for employer-provided benefits is limited to those employees who were employed at the date of acquisition (Spirit) and retire on or after attainment of age 62 and 10 years of service. Employees who do not satisfy these eligibility requirements can retire with post-retirement medical benefits at age 55 and 10 years of service, but they must pay the full cost of medical benefits provided.
Obligations and Funded Status
The following tables reconcile the funded status of both pension and post-retirement medical benefits to the balance on the consolidated balance sheets for the fiscal years 2013 and 2012. Benefit obligation balances presented in the tables reflect the projected benefit obligation (PBO) and accumulated benefit obligation (ABO) for our pension plans, and accumulated post-retirement benefit obligations (APBO) for our post-retirement medical plan. We use an end of fiscal year measurement date of December 31 for our U.S. pension and post-retirement medical plans as required by FASB authoritative guidance.
120
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
121
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
122
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Annual Expense
The components of pension and other post-retirement benefit plans expense for the U.S. plans and the assumptions used to determine benefit obligations for 2013, 2012 and 2011 are as follows:
The estimated net (gain) loss that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year for each of Pension Benefits and Other Post-Retirement Benefits plans is zero.
123
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The components of the pension benefit plan expense for the U.K. plans and the assumptions used to determine benefit obligations for 2013, 2012 and 2011 are as follows:
The estimated net (gain) loss that will be amortized from other comprehensive income into net periodic benefit cost over the next fiscal year for the U.K. plan is zero.
Assumptions
The Company sets the discount rate assumption annually for each of its retirement-related benefit plans as of the measurement date, based on a review of projected cash flow and a long-term high-quality corporate bond yield curve. The discount rate determined on each measurement date is used to calculate the benefit obligation as of that date, and is also used to calculate the net periodic benefit (income)/cost for the upcoming plan year.
The pension expected return on assets assumption is derived from the long-term expected returns based on the investment allocation by class specified in the Company's investment policy. The expected return on plan assets determined on each measurement date is used to calculate the net periodic benefit (income)/cost of the upcoming plan year.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. To determine the health care cost trend rates the Company considers national health trends and adjusts for its specific plan design and locations.
A one-percentage point increase in the initial through ultimate assumed health care trend rates would have increased the accumulated post-retirement benefit obligation by $5.7 at December 31, 2013 and the aggregate service and interest cost components of non-pension post-retirement benefit expense for 2013 by $0.4. A one-percentage point decrease would have decreased the obligation by $5.2 and the aggregate service and interest cost components of non-pension post-retirement benefit expense for 2013 by $0.4.
124
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The Company's investment objective is to achieve long-term growth of capital, with exposure to risk set at an appropriate level. This objective shall be accomplished through the utilization of a diversified asset mix consisting of equities (domestic and international) and taxable fixed income securities. The allowable asset allocation range is:
Equities |
20-50 | % | ||
Fixed income |
50-80 | % | ||
Real estate |
0-7 | % |
Investment guidelines include that no security, except issues of the U.S. Government, shall comprise more than 5% of total Plan assets and further, no individual portfolio shall hold more than 7% of its assets in the securities of any single entity, except issues of the U.S. Government. The following derivative transactions are prohibited leverage, unrelated speculation and "exotic" collateralized mortgage obligations or CMOs. Investments in hedge funds, private placements, oil and gas and venture capital must be specifically approved by the Company in advance of their purchase.
The Company's plans have asset allocations for the U.S., as of December 31, 2013 and December 31, 2012, as follows:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Asset Category U.S. |
|||||||
Equity securities U.S. |
29 | % | 29 | % | |||
Equity securities International |
4 | % | 4 | % | |||
Debt securities |
65 | % | 65 | % | |||
Real estate |
2 | % | 2 | % | |||
| | | | | | | |
Total |
100 | % | 100 | % | |||
| | | | | | | |
| | | | | | | |
The Trustee's investment objective is to ensure that they can meet their obligation to the beneficiaries of the Plan. An additional objective is to achieve a return on the total Plan, which is compatible with the level of risk considered appropriate. The overall benchmark allocation of the Plan's assets is:
Equity securities |
55 | % | ||
Debt securities |
40 | % | ||
Property |
5 | % |
The Company's plans have asset allocations for the U.K., as of December 31, 2013 and December 31, 2012, as follows:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Asset Category U.K. |
|||||||
Equity securities |
54 | % | 56 | % | |||
Debt securities |
37 | % | 39 | % | |||
Other |
9 | % | 5 | % | |||
| | | | | | | |
Total |
100 | % | 100 | % | |||
| | | | | | | |
| | | | | | | |
125
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Projected contributions and benefit payments
Required pension contributions under Employee Retirement Income Security Act (ERISA) regulations are expected to be zero in 2014 and discretionary contributions are not expected in 2014. SERP and post-retirement medical plan contributions in 2014 are not expected to exceed $2.9. Expected contributions to the U.K. plan for 2014 are $0.7.
We monitor our defined benefit pension plan asset investments on a quarterly basis and we believe that we are not exposed to any significant credit risk in these investments.
The total benefits expected to be paid over the next ten years from the plans' assets or the assets of the Company, by country, are as follows:
U.S.
|
Pension Plans |
Other
Post-Retirement Benefit Plans |
|||||
---|---|---|---|---|---|---|---|
2014 |
$ | 15.3 | $ | 2.9 | |||
2015 |
$ | 19.6 | $ | 5.3 | |||
2016 |
$ | 24.6 | $ | 6.0 | |||
2017 |
$ | 29.7 | $ | 6.7 | |||
2018 |
$ | 35.0 | $ | 7.7 | |||
2019-2023 |
$ | 254.6 | $ | 42.3 |
U.K.
|
Pension Plans | |||
---|---|---|---|---|
2014 |
$ | 0.7 | ||
2015 |
$ | 0.7 | ||
2016 |
$ | 0.7 | ||
2017 |
$ | 0.7 | ||
2018 |
$ | 0.8 | ||
2019-2023 |
$ | 4.2 |
The pension plan assets are valued at fair value. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for the investments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
Temporary Cash Investments These investments consist of U.S. dollars and foreign currencies held in master trust accounts. Foreign currencies held are reported in terms of U.S. dollars based on currency exchange rates readily available in active markets. These temporary cash investments are classified as level 1 investments.
Collective Investment Trusts These investments are public investment vehicles valued using middle market prices and performance of the fund. The trust allocates notional units to the policy holder based on the underlying notional unit buy (offer) price using the middle market price plus transaction costs. These investments are classified within level 2 of the valuation hierarchy. In addition, the collective investment trust includes a real estate fund which is classified within level 3 of the valuation hierarchy.
Commingled Equity and Bond Funds These investments are valued at the closing price reported by the Plan Trustee. These investments are not being traded in an active market, but are backed by various investment securities managed by the Bank of New York. Fair value is being calculated using unobservable inputs that rely on the Bank of New York's own assumptions and are therefore classified within level 2 of the valuation hierarchy, although these assumptions are based on underlying investments which are traded on an active market.
126
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
As of December 31, 2013 and December 31, 2012, the pension plan assets measured at fair value on a recurring basis were as follows:
|
|
At December 31, 2013 Using | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description
|
December 31, 2013
Total |
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||
Temporary cash investments |
$ | 1.0 | $ | 1.0 | $ | | $ | | |||||
Collective Investment Trusts |
$ | 98.7 | $ | | $ | 94.0 | $ | 4.7 | |||||
Commingled Equity and Bond Funds |
$ | 1,179.3 | $ | | $ | 1,179.3 | $ | | |||||
| | | | | | | | | | | | | |
|
$ | 1,279.0 | $ | 1.0 | $ | 1,273.3 | $ | 4.7 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
|
At December 31, 2012 Using | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description
|
December 31, 2012
Total |
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||
Temporary cash investments |
$ | 0.8 | $ | 0.8 | $ | | $ | | |||||
Collective Investment Trusts |
$ | 78.0 | $ | | $ | 74.1 | $ | 3.9 | |||||
Commingled Equity and Bond Funds |
$ | 1,149.0 | $ | | $ | 1,149.0 | $ | | |||||
| | | | | | | | | | | | | |
|
$ | 1,227.8 | $ | 0.8 | $ | 1,223.1 | $ | 3.9 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The table below sets forth a summary of changes in the fair value of the Plan's level 3 investment assets and liabilities for the years ended December 31, 2013 and December 31, 2012:
|
December 31, 2013 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description
|
Beginning
Fair Value |
Purchases | Gain (Loss) |
Sales,
Maturities, Settlements, Net |
Exchange
rate |
Ending Fair
Value |
|||||||||||||
Collective Investment Trusts |
$ | 3.9 | $ | 0.4 | $ | 0.4 | $ | | $ | | $ | 4.7 | |||||||
| | | | | | | | | | | | | | | | | | | |
|
$ | 3.9 | $ | 0.4 | $ | 0.4 | $ | | $ | | $ | 4.7 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
December 31, 2012 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description
|
Beginning
Fair Value |
Purchases | Gain (Loss) |
Sales,
Maturities, Settlements, Net |
Exchange
rate |
Ending Fair
Value |
|||||||||||||
Collective Investment Trusts |
$ | 3.1 | $ | 0.6 | $ | 0.2 | $ | | $ | | $ | 3.9 | |||||||
| | | | | | | | | | | | | | | | | | | |
|
$ | 3.1 | $ | 0.6 | $ | 0.2 | $ | | $ | | $ | 3.9 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
127
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
17. Capital Stock
Holdings has authorized 360,000,000 shares of stock. Of that, 200,000,000 shares are class A common stock, par value $0.01 per share, one vote per share, 150,000,000 shares are class B common stock, par value $0.01 per share, ten votes per share, and 10,000,000 shares are preferred stock, par value $0.01 per share.
In association with the Boeing Acquisition, Spirit executives with balances in Boeing's Supplemental Executive Retirement Plan (SERP) were authorized to purchase a fixed number of units of Holdings "phantom stock" at $3.33 per unit based on the present value of their SERP balances. Under this arrangement, 860,244 phantom units were purchased. Any payment on account of units may be made in cash or shares of common stock at the sole discretion of Holdings.
18. 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 fiscal period ended December 31, 2013, Holdings has recognized a net total of $19.6 of stock compensation expense. The entire $19.6 of net stock compensation expense recorded in 2013 was charged directly to selling, general and administrative expense accordance with FASB authoritative guidance, which included $0.5 of accelerated vesting expense for participants meeting the conditions for "qualifying retirement" under our Short-Term Incentive Plan. Holdings recognized a total of $15.3 and $11.2 of stock compensation expense for the periods ended December 31, 2012 and December 31, 2011, respectively. The total income tax benefit recognized in the income statement for share based compensation arrangements was $7.1, $5.6, and $4.1 for 2013, 2012, and 2011, respectively.
Executive Incentive Plan
The Company's Executive Incentive Plan, or EIP, is designed to provide participants with the opportunity to acquire an equity interest in the Company through direct purchase of the Company's class B common stock shares at prices established by the Board of Directors or through grants of class B restricted common stock shares with performance based vesting. The Company has the sole authority to designate either stock purchases or grants of restricted shares. The total number of shares authorized under the EIP is 12,000,000 and the grant terminates at the end of ten years.
The Company has issued restricted shares as part of the Company's EIP. The restricted shares have been granted in groups of four shares. Participants do not have the unrestricted rights of stockholders until those shares vest. The shares may vest upon a liquidity event, with the number of shares vested based upon a participant's number of years of service to the Company, the portion of the investment by Onex and its affiliates liquidated through the date of the liquidity event and the return on invested capital by Onex and its affiliates through the date of the liquidity event. If a specific type of liquidity event has not occurred by the 10th year, shares may vest based on a valuation of the Company. The Company's initial public offering in November 2006 (the "IPO") and secondary offerings in May 2007 and April 2011 were considered liquidity events under the EIP. The Company records expenses equal to the fair value of the award over a five-year vesting period. The fair value of the award is based on the value of each share at the time of the grant multiplied by the probability of the share vesting based on historical performance of Onex's controlled investments.
128
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The Company did not recognize any expense under the EIP for the year ended December 31, 2013. The Company expensed zero and a net total of less than $0.1 for the periods ended December 31, 2012 and December 31, 2011, respectively. The weighted average remaining period for the vesting of these shares is 1.5 years. The intrinsic value of the unvested shares based on the value of the Company's stock at December 31, 2013 was $29.6, based on the value of the Company's stock and the number of unvested shares.
The following table summarizes the activity of restricted shares under the EIP for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
Shares | Value (1) | |||||
---|---|---|---|---|---|---|---|
|
(Thousands)
|
|
|||||
Executive Incentive Plan |
|||||||
Nonvested at December 31, 2010 |
1,366 | 15.4 | |||||
Vested during period |
(446 | ) | (5.1 | ) | |||
Forfeited during period |
(40 | ) | (0.5 | ) | |||
| | | | | | | |
Nonvested at December 31, 2011 |
880 | 9.8 | |||||
Vested during period |
| | |||||
Forfeited during period |
| | |||||
| | | | | | | |
Nonvested at December 31, 2012 |
880 | 9.8 | |||||
Vested during period |
| | |||||
Forfeited during period |
(11 | ) | | ||||
| | | | | | | |
Nonvested at December 31, 2013 |
869 | $ | 9.8 | ||||
| | | | | | | |
| | | | | | | |
Board of Directors Stock Awards
The Company's Director Stock Plan provides non-employee directors the opportunity to receive grants of restricted shares of class A common stock, or Restricted Stock Units (RSUs) or a combination of both common stock and RSUs. The class A common stock grants and RSU grants vest one year from the grant date. The RSU grants are payable upon the director's separation from service. The Board of Directors or its authorized committee may make discretionary grants of shares or RSUs from time to time. 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 issuances 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 the Company, at least one-half of their annual director compensation is required to be paid in the form of a grant of class A common stock and/or 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 class A stock and/or RSUs. If participants cease to serve as directors within a year of the grant, the restricted shares and/or RSUs are forfeited. In May and December of 2013, the Board of Directors authorized a grant of 34,747 and 4,321 shares of restricted class A common stock, respectively, valued at $0.9 based on the share price of the Company's common stock at the grant dates. The Company expensed a net amount of $0.7 for the Board of Directors shares for the period ended December 31, 2013. The Company expensed $0.7 during each of the periods ended December 31, 2012 and December 31, 2011. The Company's unamortized stock
129
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
compensation related to these restricted shares is $0.4 which will be recognized over a weighted average remaining period of 11 months. The intrinsic value of the unvested shares based on the value of the Company's stock at December 31, 2013 was $1.3, based on the value of the Company's stock and the number of unvested shares.
The following table summarizes stock and RSU grants to members of the Company's Board of Directors for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
Shares | Value (1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Class A | Class B | Class A | Class B | |||||||||
|
(Thousands)
|
|
|
||||||||||
Board of Directors Stock Grants |
|||||||||||||
Nonvested at December 31, 2010 |
33 | | $ | 0.7 | $ | | |||||||
Granted during period |
30 | | 0.7 | | |||||||||
Vested during period |
(33 | ) | | (0.7 | ) | | |||||||
Forfeited during period |
(3 | ) | | (0.1 | ) | | |||||||
| | | | | | | | | | | | | |
Nonvested at December 31, 2011 |
27 | | 0.6 | | |||||||||
Granted during period |
29 | | 0.7 | | |||||||||
Vested during period |
(27 | ) | | (0.6 | ) | | |||||||
Forfeited during period |
| | | | |||||||||
| | | | | | | | | | | | | |
Nonvested at December 31, 2012 |
29 | | 0.7 | | |||||||||
Granted during period |
39 | | 0.9 | | |||||||||
Vested during period |
(29 | ) | | (0.7 | ) | | |||||||
Forfeited during period |
| | | | |||||||||
| | | | | | | | | | | | | |
Nonvested at December 31, 2013 |
39 | | $ | 0.9 | $ | | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Short-Term Incentive Plan
The Second Amended and Restated Short-Term Incentive Plan ("STIP") enables eligible employees to receive incentive benefits in the form of restricted stock in the Company, 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 August 2011, the STIP was amended such that all unvested stock will vest in the event of a qualifying retirement or change in control.
In February 2013, 86,063 shares of Class A common stock with a value of $1.4 were granted under the Company's STIP for 2012 performance and will vest on the one-year anniversary of the grant date. The Company expensed $1.3 for shares granted under the STIP for the period ended December 31, 2013. The Company expensed $2.9 and $3.9 for the shares for the periods ended December 31, 2012 and December 31, 2011, respectively. The Company's unamortized stock compensation related to the unvested shares is $0.1, which will be recognized over a weighted average remaining period of 2 months. The intrinsic value of the unvested shares at December 31, 2013 was $2.1 based on the value of the Company's stock and the number of unvested shares.
130
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following table summarizes the activity of the restricted shares under the STIP for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
Shares | Value (1) | |||||
---|---|---|---|---|---|---|---|
|
(Thousands)
|
|
|||||
Short-Term Incentive Plan |
|||||||
Nonvested at December 31, 2010 |
| | |||||
Granted during period |
185 | 4.7 | |||||
Vested during period |
(10 | ) | (0.3 | ) | |||
Forfeited during period |
(4 | ) | (0.1 | ) | |||
| | | | | | | |
Nonvested at December 31, 2011 |
171 | 4.3 | |||||
Granted during period |
104 | 2.5 | |||||
Vested during period |
(170 | ) | (4.3 | ) | |||
Forfeited during period |
(9 | ) | (0.2 | ) | |||
| | | | | | | |
Nonvested at December 31, 2012 |
96 | 2.3 | |||||
Granted during period |
86 | 1.4 | |||||
Vested during period |
(113 | ) | (2.6 | ) | |||
Forfeited during period |
(7 | ) | (0.1 | ) | |||
| | | | | | | |
Nonvested at December 31, 2013 |
62 | $ | 1.0 | ||||
| | | | | | | |
| | | | | | | |
Long-Term Incentive Plan
The Fourth Amended and Restated Long-Term Incentive Plan ("LTIP") is designed to encourage retention of key employees.
For shares granted in 2007, one-half of the granted restricted shares of class B common stock vested on the second anniversary of the grant date in February 2009, and the other one-half vested on the fourth anniversary of the grant date in 2011. Restricted shares are forfeited if the participant's employment terminates prior to vesting. In the first quarter of 2007, 67,391 shares valued at $2.0 were granted. The Company expensed zero, zero and less than $0.1 net of forfeitures for each of the periods ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively.
In February and April 2013, as part of the Company's 2012 Long-Term Incentive Plan, 9,460 and 33,784 shares of class A common stock with an aggregate grant date fair value of $0.8 were granted by the Board of Directors, and such shares will vest annually in three equal installments beginning on the two-year anniversary of the grant date.
In May 2013, 1,326,299 class A shares valued at $27.6 were granted pursuant to the LTIP and will vest annually in three equal installments beginning on the two-year anniversary of the grant date. Additionally, 288,047 class A shares valued at $6.0 were granted and will vest annually in three equal installments beginning on the one-year anniversary date of April 2013.
In June 2013, 34,425 class A shares valued at $0.7 were granted pursuant to the LTIP to employees at the UK location pursuant to a union contract ratification. These shares vested approximately one week after issuance.
131
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
In August and November 2013, an additional 37,754 and 103,337 class A shares totaling $4.0 were granted pursuant to the LTIP and will vest annually in three equal installments beginning on the two-year anniversary of the May 2013 grant date. Additionally, 33,859 class A shares valued at $1.0 were granted in November 2013 and will vest annually in three equal installments beginning September 2014.
In May 2012, 618,804 class A shares valued at $15.3 were granted and will vest annually in three equal installments beginning on the two-year anniversary of the grant date. In August and November 2012, an additional 21,590 and 35,578 class A shares valued at $1.1 were granted and will vest annually in three equal installments beginning on the two-year anniversary of the May 2012 grant date. An additional 6,153 shares valued at $0.1 were granted during 2012. These shares will vest annually in three equal installments beginning on the two-year anniversary of the May 2011 grant date. In May 2011, 548,334 class A shares valued at $12.9 were granted (and an additional 1,826 class A shares valued at less than $0.1 were granted during February 2011 for 2010 compensation). These shares begin to vest annually in three equal installments beginning on the two-year anniversary of the May 2010 grant date.
During 2012, 92,250 shares of class A common stock valued at $2.2 were granted to members of the UAW union pursuant to performance improvements set forth in the 2010 ten-year labor contract. These shares vested immediately upon issuance.
During 2011, 500 shares of class A common stock with a value of less than $0.1 were granted to members of the UAW union under the LTIP pursuant to the ten-year labor contract. These shares vested immediately and the value was charged directly to cost of sales.
The Company expensed a total of $17.6 for the unvested class A LTIP shares in the twelve months ended December 31, 2013. The Company expensed a net total of $11.9 and $7.0 for class A LTIP shares for the periods ended December 31, 2012 and December 31, 2011, respectively.
The Company's unamortized stock compensation related to these unvested class A shares is $22.7 which will be recognized over a weighted average remaining period of 3.2 years. The intrinsic value of the unvested class A LTIP shares at December 31, 2013 was $80.3, based on the value of the Company's common stock and the number of unvested shares.
132
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following table summarizes the activity of the restricted shares under the LTIP for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
Shares | Value (1) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Class A | Class B | Class A | Class B | |||||||||
|
(Thousands)
|
|
|
||||||||||
Long-Term Incentive Plan |
|||||||||||||
Nonvested at December 31, 2010 |
1,490 | 28 | $ | 27.6 | $ | 0.8 | |||||||
Granted during period |
550 | | 13.0 | | |||||||||
Vested during period |
(307 | ) | (28 | ) | (5.3 | ) | (0.8 | ) | |||||
Forfeited during period |
(175 | ) | | (3.3 | ) | | |||||||
| | | | | | | | | | | | | |
Nonvested at December 31, 2011 |
1,558 | | 32.0 | | |||||||||
Granted during period |
774 | | 18.8 | | |||||||||
Vested during period |
(513 | ) | | (10.0 | ) | | |||||||
Forfeited during period |
(115 | ) | | (2.5 | ) | | |||||||
| | | | | | | | | | | | | |
Nonvested at December 31, 2012 |
1,704 | | 38.3 | | |||||||||
Granted during period |
1,867 | | 40.1 | | |||||||||
Vested during period |
(552 | ) | | (11.0 | ) | | |||||||
Forfeited during period |
(661 | ) | | (15.1 | ) | | |||||||
| | | | | | | | | | | | | |
Nonvested at December 31, 2013 |
2,358 | | $ | 52.3 | $ | | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
19. Income Taxes
The following summarizes pretax income:
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
U.S. |
$ | (499.8 | ) | $ | (33.6 | ) | $ | 265.9 | ||
International |
69.0 | 45.0 | 14.4 | |||||||
| | | | | | | | | | |
Total |
$ | (430.8 | ) | $ | 11.4 | $ | 280.3 | |||
| | | | | | | | | | |
| | | | | | | | | | |
The tax provision contains the following components:
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Current |
||||||||||
Federal |
$ | (17.1 | ) | $ | 89.8 | $ | 59.6 | |||
State |
(2.1 | ) | 1.9 | 3.4 | ||||||
Foreign |
4.2 | 4.3 | 5.8 | |||||||
| | | | | | | | | | |
Total current |
$ | (15.0 | ) | $ | 96.0 | $ | 68.8 | |||
Deferred |
|
|
|
|||||||
Federal |
$ | 139.0 | $ | (104.0 | ) | $ | 20.3 | |||
State |
57.8 | (19.0 | ) | (2.0 | ) | |||||
Foreign |
9.3 | 2.9 | (0.2 | ) | ||||||
| | | | | | | | | | |
Total deferred |
206.1 | (120.1 | ) | 18.1 | ||||||
| | | | | | | | | | |
Total tax expense |
$ | 191.1 | $ | (24.1 | ) | $ | 86.9 | |||
| | | | | | | | | | |
| | | | | | | | | | |
133
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The income tax provision from operations differs from the tax provision computed at the U.S. federal statutory income tax rate due to the following:
|
2013 |
|
2012 |
|
2011 |
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tax at U.S. Federal statutory rate |
$ | (150.8 | ) | 35.0 | % | $ | 4.0 | 35.0 | % | $ | 98.1 | 35.0 | % | ||||||
State income taxes, net of Federal benefit |
(12.2 | ) | 2.8 | (1.8 | ) | (15.8 | ) | 6.3 | 2.2 | ||||||||||
State income tax credits, net of Federal benefit |
(7.7 | ) | 1.8 | (9.8 | ) | (86.0 | ) | (5.4 | ) | (1.9 | ) | ||||||||
Foreign rate differences |
(6.8 | ) | 1.6 | (4.6 | ) | (40.4 | ) | 1.4 | 0.5 | ||||||||||
Research and Experimentation |
(10.9 | ) | 2.5 | (3.2 | ) | (28.1 | ) | (10.2 | ) | (3.6 | ) | ||||||||
Domestic Production Activities Deduction |
| | (8.8 | ) | (77.2 | ) | (4.7 | ) | (1.7 | ) | |||||||||
Interest on assessments |
(0.6 | ) | 0.1 | 0.3 | 2.6 | 0.8 | 0.4 | ||||||||||||
Valuation Allowance U.S. Deferred Tax Asset |
381.0 | (88.4 | ) | | | | | ||||||||||||
Other |
(0.9 | ) | 0.2 | (0.2 | ) | (1.5 | ) | 0.6 | 0.1 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Total provision for income taxes |
$ | 191.1 | (44.4 | )% | $ | (24.1 | ) | (211.4 | )% | $ | 86.9 | 31.0 | % | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Significant tax effected temporary differences comprising the net deferred tax asset are as follows:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Long-term contracts |
$ | 409.9 | $ | 234.6 | |||
Post-retirement benefits other than pensions |
26.6 | 28.6 | |||||
Pension and other employee benefit plans |
(68.0 | ) | (3.9 | ) | |||
Employee compensation accruals |
45.8 | 35.9 | |||||
Depreciation and amortization |
(123.7 | ) | (106.9 | ) | |||
Inventory |
3.4 | (1.4 | ) | ||||
Interest swap contracts |
0.9 | (0.1 | ) | ||||
State income tax credits |
61.1 | 49.8 | |||||
Accruals and reserves |
36.6 | 20.2 | |||||
Deferred production |
4.1 | 19.5 | |||||
Deferred gain severe weather event |
(21.5 | ) | (39.1 | ) | |||
Net operating loss carryforward |
1.3 | 10.7 | |||||
Other |
4.2 | 1.1 | |||||
| | | | | | | |
Net deferred tax asset |
380.7 | 249.0 | |||||
Valuation allowance |
(396.5 | ) | (10.4 | ) | |||
| | | | | | | |
Net deferred tax asset |
$ | (15.8 | ) | $ | 238.6 | ||
| | | | | | | |
| | | | | | | |
134
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Deferred tax detail above is included in the consolidated balance sheet and supplemental information as follows:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Current deferred tax assets |
$ | 26.9 | $ | 57.1 | |||
Current deferred tax liabilities |
(0.5 | ) | (3.3 | ) | |||
| | | | | | | |
Net current deferred tax asset |
$ | 26.4 | $ | 53.8 | |||
| | | | | | | |
Non-current deferred tax assets |
0.0 | 192.0 | |||||
Non-current deferred tax liabilities |
(42.2 | ) | (7.2 | ) | |||
| | | | | | | |
Net non-current deferred tax asset |
$ | (42.2 | ) | $ | 184.8 | ||
| | | | | | | |
Total deferred tax asset |
$ | (15.8 | ) | $ | 238.6 | ||
| | | | | | | |
| | | | | | | |
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, Management assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.
Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company's prior earnings history including the forward losses previously recognized in the U.S., management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position in recent years once results from the year ended December 31, 2013 were included, the threshold after which there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. As of December 31, 2013, the total net U.S. deferred tax asset was $399.6. The net U.S. deferred tax asset after recording valuation allowances is $3.7. Valuation allowances recorded against the consolidated net U.S. deferred tax asset in the current year were $381.0. Additionally, the Company maintains a $14.9 valuation allowance against separate company state income tax credits and previously recorded other U.S. issues and $0.6 for other foreign issues which is an increase of $5.1 from the prior year. The Company will continue to monitor its deferred tax position and may adjust the valuation allowance, if necessary, for utilization of the underlying deferred tax assets through current taxable income or as available evidence changes.
Certain amounts in the 2012 and 2011 tax footnote have been reclassified to conform to the 2013 presentation.
The increase from 2012 to 2013 in the long-term contracts deferred tax asset is primarily due to forward losses recognized during 2013 that are not currently deductible for tax.
The decrease from 2012 to 2013 in the severe weather event deferred tax liability represents the identification and capitalization of qualified replacement property for book purposes with a corresponding increase to the deferred tax liability for depreciation and amortization.
135
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
We have recognized cumulative book income for our international operations, but have incurred cumulative taxable losses in the United Kingdom. The resulting net operating loss carryforward is primarily due to the manner in which the United Kingdom treats long-term contract income accounting and capital allowances.
As required under FASB authoritative guidance, $0.0 and $1.1 was recorded to Additional Paid in Capital, representing the tax effect associated with the net excess tax pool created during the periods ended December 31, 2013 and December 31, 2012, respectively.
As of December 31, 2013, the Company has not provided U.S. tax on its cumulative undistributed earnings of foreign subsidiaries of approximately $129.0 because it is the Company's intention to reinvest these earnings indefinitely. The calculation of the unrecognized deferred tax liability related to these earnings is complex and the calculation is not practicable. If earnings were distributed, the Company would be subject to U.S. taxes and withholding taxes payable to foreign governments. Based on the facts and circumstances at that time, the Company would determine whether a credit for foreign taxes paid would be available to reduce or offset the U.S. tax liability.
The beginning and ending unrecognized tax benefits reconciliation is as follows:
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Beginning balance |
$ | 16.9 | $ | 15.5 | $ | 15.2 | ||||
Gross increases related to current period tax positions |
3.8 | 4.2 | 6.1 | |||||||
Gross increases related to prior period tax positions |
0.4 | 1.8 | 33.5 | |||||||
Gross decreases related to prior period tax positions |
(2.7 | ) | (3.8 | ) | (9.3 | ) | ||||
Statute of limitations' expiration |
| (0.8 | ) | (0.8 | ) | |||||
Settlements |
| | (29.2 | ) | ||||||
| | | | | | | | | | |
Ending balance |
$ | 18.4 | $ | 16.9 | $ | 15.5 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Included in the December 31, 2013 balance was $16.5 in tax affected unrecognized tax benefits which, if ultimately recognized, will reduce the Company's effective tax rate. The Internal Revenue Service's examination of the Company's 2012 U.S. Federal income tax return is complete. The Company will continue to participate in the Compliance Assurance Process ("CAP") program for our 2013 tax year. Additionally, we have been selected for the Compliance Maintenance phase of the CAP program for the 2014 tax year. The CAP program's objective is to resolve issues in a timely, contemporaneous manner and eliminate the need for a lengthy post-filing examination. HM Revenue & Customs is currently examining our 2009, 2010 and 2011 U.K. income tax returns. The Directorate General of Public Finance is currently examining our 2011 and 2012 France income tax returns. While a change could result from the ongoing examinations, the Company expects no material change in its recorded unrecognized tax benefit liability in the next 12 months, other than the potential $12.2 reduction for Malaysia mentioned below.
Our U.S. federal income tax return for the 2010 tax year is subject to examination. We are also subject to examination in various states and foreign jurisdictions for the 2009-2013 tax years.
We report interest and penalties, if any, related to unrecognized tax benefits in the income tax provision. As of December 31, 2013 and December 31, 2012, accrued interest on our unrecognized tax benefit liability included in the consolidated balance sheets was $0.1 and $0.7, respectively. The impact of interest on our unrecognized tax benefit liability during 2013 and 2012 was $(0.6) and $0.6, respectively.
We operate under a tax holiday in Malaysia effective through September 2024. During the current year, management continues to maintain a reserve for potential uncertainty in meeting the tax holiday's
136
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
conditional employment and investment thresholds. While management believes we have met the required employment and investment thresholds, we continue to work through the process of validating the results with the respective Malaysian governmental authorities. If we can successfully demonstrate that the objectives have been achieved and the respective Malaysian authorities certify the results, we expect a $12.2 reduction in our unrecognized tax benefit liability.
At December 31, 2013, we had $2.6 in United Kingdom net operating loss carryforwards that do not expire and $18.1 in North Carolina net operating loss carryforwards that expire in 2025.
At December 31, 2013, we had $1.1 of U.S. Foreign Tax Credit carryforwards, a portion of which will expire beginning in 2018.
On January 2, 2013, the President signed legislation retroactively extending the U.S. Research Tax Credit for two years, from January 1, 2012 through December 31, 2013. Our income tax expense for 2013 reflects the entire benefit of the Research Tax Credit attributable to 2012, which was $5.8. We also recorded the benefit of the 2013 Research Tax Credit of $5.1 in our 2013 tax expense.
Included in the deferred tax assets at December 31, 2013 are $36.6 in Kansas High Performance Incentive Program ("HPIP") Credit, $7.3 in Kansas Research & Development ("R&D") Credit, and $2.7 in Kansas Business and Jobs Development Credit, totaling $46.6 in Kansas state income tax credit carryforwards, net of federal benefit. The HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas for which $5.9 expires in 2024, $0.6 expires in 2025, $3.5 expires in 2026, $5.0 expires in 2027, $9.7 expires in 2028 and the remainder expires in 2029. The R&D Credit provides a credit for qualified research and development expenditures conducted within Kansas. This credit can be carried forward indefinitely. The Business and Jobs Development Credit provides a tax credit for increased employment in Kansas. This credit can be carried forward indefinitely. As previously discussed, management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. deferred tax assets at December 31, 2013. This determination was made as the Company entered into a cumulative loss position in recent years once results from the year ended December 31, 2013 were included, the threshold after which there is a presumption that the Company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. As a result, a full valuation allowance against all Kansas credits included as deferred tax assets is reflected within the total valuation allowance amount.
Included in the deferred tax assets at December 31, 2013 are $6.8 in North Carolina Investing in Business Property Credit, $3.9 in North Carolina Investment in Real Property Credit, and $3.9 in North Carolina Creating Jobs Credit, totaling $14.6 in North Carolina state income tax credit carryforwards, net of federal benefit. The Investing in Business Property Credit provides a 7% investment tax credit for property located in a North Carolina development area and the Investment in Real Property Credit provides a 30% investment tax credit for real property located in a North Carolina development area. The Creating Jobs Credit provides a tax credit for increased employment in North Carolina. These North Carolina state income tax credits can be carried forward 20 years. It is management's opinion that $1.6 of these North Carolina state income tax credits will be utilized before they expire and a $12.9 valuation allowance was recorded, net of federal benefit.
20. Equity
Earnings per Share Calculation
Basic net income per share is computed using the weighted-average number of outstanding shares of common stock during the measurement period. Diluted net income per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential outstanding shares of common stock during the measurement period.
137
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Subject to preferences that may apply to shares of preferred stock outstanding at the time, holders of the Company's outstanding common stock are entitled to any dividend declared by the Board of Directors out of funds legally available for this purpose. No dividend may be declared on the Class A or Class B common stock unless at the same time an equal dividend is paid on every share of Class A and Class B common stock. Dividends paid in shares of the Company's common stock must be paid, with respect to a particular class of common stock, in shares of that class. The Company does not intend to pay cash dividends on its common stock. In addition, the terms of the Company's current financing agreements preclude it from paying any cash dividends on its common stock.
The following table sets forth the computation of basic and diluted earnings per share:
|
For the Twelve Months Ended | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
December 31, 2013 | December 31, 2012 | December 31, 2011 | |||||||||||||||||||||||||
|
Loss | Shares |
Per
Share Amount |
Income | Shares |
Per
Share Amount |
Income | Shares |
Per
Share Amount |
|||||||||||||||||||
Basic EPS |
||||||||||||||||||||||||||||
(Loss) income available to common shareholders |
$ | (621.4 | ) | 141.3 | $ | (4.40 | ) | $ | 34.4 | 140.7 | $ | 0.24 | $ | 189.2 | 139.2 | $ | 1.36 | |||||||||||
Income allocated to participating securities |
| | 0.4 | 1.5 | 3.2 | 2.3 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) income |
$ | (621.4 | ) | $ | 34.8 | $ | 192.4 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted potential common shares |
| 0.5 | 0.8 | |||||||||||||||||||||||||
Diluted EPS |
||||||||||||||||||||||||||||
Net (loss) income |
$ | (621.4 | ) | 141.3 | $ | (4.40 | ) | $ | 34.8 | 142.7 | $ | 0.24 | $ | 192.4 | 142.3 | $ | 1.35 |
The balance of outstanding common shares presented in the consolidated statement of shareholders' equity was 144.8 million, 143.7 million and 142.9 million at December 31, 2013, December 31, 2012 and December 31, 2011, respectively. Included in the outstanding common shares were 3.4 million, 2.7 million and 2.6 million of issued but unvested shares at December 31, 2013, December 31, 2012 and December 31, 2011, respectively, which are excluded from the basic EPS calculation. For the twelve months ended December 31, 2013, 1.0 million shares are not included in the calculation of diluted earnings per share, as their inclusion would have been anti-dilutive. These securities could be dilutive in future periods.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss is summarized by component as follows:
|
December 31, 2013 | December 31, 2012 | |||||
---|---|---|---|---|---|---|---|
Pension |
$ | (52.7 | ) | $ | (132.0 | ) | |
SERP/ Retiree medical |
3.1 | (2.6 | ) | ||||
Foreign currency impact on long term intercompany loan |
(2.2 | ) | (3.5 | ) | |||
Currency translation adjustment |
(2.8 | ) | (7.1 | ) | |||
| | | | | | | |
Total accumulated other comprehensive loss |
$ | (54.6 | ) | $ | (145.2 | ) | |
| | | | | | | |
| | | | | | | |
Noncontrolling Interest
Noncontrolling interest at December 31, 2013 remained unchanged from the prior year at $0.5.
138
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
21. Related Party Transactions
On May 3, 2012, Hawker Beechcraft, Inc. ("Hawker") filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code and emerged from bankruptcy on February 19, 2013 as Beechcraft Corporation. The Company's Prestwick facility provided wing components for the Hawker 800 Series manufactured by Hawker. For the the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011 sales to Hawker were zero, $1.2 and $10.2, respectively. Receivables due from Hawker were $3.5 as of December 31, 2012, net of a $0.3 receivable write-off. The receivable was reserved against in 2012. The Company's $3.5 receivable balance from Hawker was written off during 2013.
The Company paid $0.4, $0.3 and $0.2 to a subsidiary of Onex for services rendered for each of the twelve month periods ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively. Management believes the amounts charged were reasonable in relation to the services provided.
A director (and former executive) of the Company is a member of the Board of Directors of Rockwell Collins, Inc., a supplier of manufacturing parts to the Company. Under the commercial terms of the arrangement with the supplier, Spirit paid $0.1 and less than $0.1 for the twelve month periods ended December 31, 2013 and December 31, 2012, respectively. The amounts owed to Rockwell Collins and recorded as accrued liabilities were less than $0.1 as of both December 31, 2013 and December 31, 2012.
A director (and former 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 the Company.
22. Commitments, Contingencies and Guarantees
Litigation
From time to time we are 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 authoritative guidance on accounting for contingencies, we had an accrual of less than $1.0 and zero at December 31, 2013 and December 31, 2012, respectively. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations and cash flows in a particular quarter or fiscal year.
From time to time, in the ordinary course of business and like others in the industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. We review such requests and notices and take appropriate action. We have been subject to certain requests for information and investigations in the past and could be subject to such requests for information and investigations in the future. Additionally, we are subject to federal and state requirements for protection of the environment, including those for disposal of hazardous waste and remediation of contaminated sites. As a result, we are required to participate in certain government investigations regarding environmental remediation actions.
139
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
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. We understand that a civil investigation into this matter may be ongoing but the Company has not been contacted about this matter since the closing of the criminal investigation. Management believes the resolution of this matter will not materially affect the Company's financial position, results of operations or liquidity.
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 July 2007. The defendants included Spirit AeroSystems Holdings, Inc., Spirit AeroSystems, Inc., the Spirit AeroSystems Holdings Inc. Retirement Plan for the International Brotherhood of Electrical Workers (IBEW), Wichita Engineering Unit (SPEEA WEU) and Wichita Technical and Professional Unit (SPEEA WTPU) Employees, and the Spirit AeroSystems Retirement Plan for International Association of Machinists and Aerospace Workers (IAM) Employees, along with Boeing and Boeing retirement and health plan entities. The named plaintiffs are twelve former Boeing employees, eight of whom were or are employees of Spirit. The plaintiffs assert several claims under the Employee Retirement Income Security Act and general contract law and brought the case as a class action on behalf of similarly situated individuals. The putative class consists of approximately 2,500 current or former employees of Spirit. The parties agreed to class certification. The sub-class members who 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 were many claims in the suit, the plaintiffs' claims against the Spirit entities, asserted under various theories, were (1) that the Spirit plans wrongfully failed to determine that certain plaintiffs are entitled to early retirement "bridging rights" to pension and retiree medical benefits that were allegedly triggered by their separation from employment by Boeing and (2) 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 initially sought a declaration that they were entitled to the early retirement pension benefits and retiree medical benefits, an injunction ordering that the defendants provide the benefits, damages pursuant to breach of contract claims and attorney fees. On June 20, 2013, the district court entered an order dismissing all claims against the Spirit entities with prejudice. Plaintiffs' claims against Boeing entities remain pending in the litigation. Boeing has notified Spirit that it believes it is entitled to indemnification from Spirit for any "indemnifiable damages" it may incur in the Harkness litigation, under the terms of the asset purchase agreement from the Boeing Acquisition between Boeing and Spirit. Spirit disputes Boeing's position on indemnity. Management believes the resolution of this matter will not materially affect the Company's financial position, results of operations or liquidity.
On July 21, 2005, the International Union, Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") filed a grievance against Boeing on behalf of certain former Boeing employees in Tulsa and McAlester, Oklahoma, regarding issues that parallel those asserted in Harkness et al. v. The Boeing Company et al. Boeing denied the grievance, and the UAW subsequently filed suit to compel arbitration, which the parties eventually agreed to pursue. The arbitration was conducted in
140
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
January 2008. In July 2008, the arbitrator issued an opinion and award in favor of the UAW. The arbitrator directed Boeing to reinstate the seniority of the employees and "afford them the benefits appurtenant thereto." On March 5, 2009, the arbitrator entered an Opinion and Supplemental Award that directed Boeing to award certain benefits to UAW members upon whose behalf the grievance was brought, notwithstanding the prior denial of such benefits by the Boeing Plan Administrator. On April 10, 2009, Boeing filed a Complaint in the United States District Court for the Northern District of Illinois, seeking a ruling that the arbitrator exceeded his authority in granting the Supplemental Award. On September 16, 2009, the District Court entered an order affirming the arbitrator's Supplemental Award. Boeing appealed the District Court's decision to the U.S. Seventh Circuit Court of Appeals, which affirmed the District Court's decision. Boeing previously notified Spirit of its intent to seek indemnification from Spirit for any "indemnifiable damages" it may incur in the UAW matter, pursuant to the terms of the asset purchase agreement from the Boeing Acquisition. Spirit disputes Boeing's position on indemnity. Management believes the resolution of this matter will not materially affect the Company's financial position, results of operations or liquidity.
On May 11, 2009, Spirit filed a lawsuit in the United States District Court for the District of Kansas against SPS Technologies LLC ("SPS") and Precision Castparts Corp. Spirit's claims are based on the sale by SPS of certain non-conforming nut plate fasteners to Spirit between August 2007 and August 2008. Many of the fasteners were used on assemblies that Spirit sold to a customer. In the fall of 2008, Spirit discovered the non-conformity and notified the customer of the discrepancy. Subsequently, Spirit and the customer removed and replaced nut plates on various in-process aircraft assemblies and subsequently agreed to an appropriate cost related to those efforts. Spirit's lawsuit seeks damages, including damages related to these efforts, under various theories, including breach of contract and breach of implied warranty.
On June 3, 2013, a putative class action lawsuit was commenced against the Company, Jeffrey L. Turner, and Philip D. Anderson in the U.S. District Court for the District of Kansas. The named plaintiff, who alleges that he is a purchaser of Holdings securities, alleges that defendants violated the federal securities laws by making material misrepresentations and omissions in the Company's public disclosures about the circumstances underlying the Company's accrual of $590.0 in forward loss charges in the third quarter of 2012. The lawsuit seeks certification of a class of all persons other than defendants who purchased Holdings securities between May 5, 2011 and October 24, 2012, and seeks an unspecified amount of damages on behalf of the putative class. On February 5, 2014 the Court entered an order naming two lead plantiffs. The Company intends to vigorously defend against these allegations, and management believes the resolution of this matter will not materially affect the Company's financial position, results of operations, or liquidity.
In August 2013, the Company instituted a demand for arbitration against Gulfstream Aerospace Corporation. Spirit seeks damages from Gulfstream for its incomplete payments to Spirit for the wings Spirit manufactures for the G650 airplane, as well as other damages and relief. Gulfstream counterclaimed against Spirit in the arbitration, seeking liquidated damages for delayed deliveries of wings, as well as other damages and relief. The parties have selected arbitrators, and currently expect the arbitration hearing will take place in the first quarter of 2015. The Company intends to vigorously prosecute and defend the claims in arbitration. Management believes the resolution of this matter will not materially affect the Company's financial position, results of operations, or liquidity.
In October 2012, Spirit was advised by the Staff of the Securities and Exchange Commission that they are conducting an inquiry that the Company believes to be focused on the timing of forward losses recognized in the third quarter of 2012. The Company is fully cooperating with the inquiry. The Company
141
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
cannot predict or determine whether any proceeding may be instituted as a result of the inquiry or the outcome of any proceeding that may be instituted.
Commitments
The Company leases equipment and facilities under various non-cancelable capital and operating leases. The capital leasing arrangements extend through 2025. Minimum future lease payments under these leases at December 31, 2013 are as follows:
|
|
Capital |
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Operating |
Present
Value |
Interest | Total | |||||||||
2014 |
$ | 20.8 | $ | 1.1 | $ | 0.5 | $ | 22.4 | |||||
2015 |
$ | 17.3 | $ | 1.1 | $ | 0.5 | $ | 18.9 | |||||
2016 |
$ | 10.6 | $ | 1.0 | $ | 0.5 | $ | 12.1 | |||||
2017 |
$ | 5.2 | $ | 1.0 | $ | 0.4 | $ | 6.6 | |||||
2018 |
$ | 4.9 | $ | 1.1 | $ | 0.4 | $ | 6.4 | |||||
2019 and thereafter |
$ | 14.7 | $ | 10.1 | $ | 8.8 | $ | 33.6 |
Operating lease payments were as follows:
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Minimum rentals |
$ | 22.6 | $ | 19.6 | $ | 20.2 | ||||
Contingent rentals |
| | | |||||||
Less: Sub-lease |
| | | |||||||
| | | | | | | | | | |
Total |
$ | 22.6 | $ | 19.6 | $ | 20.2 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Spirit's aggregate capital commitments totaled $226.0 and $264.8 at December 31, 2013 and December 31, 2012, respectively.
The Company paid $0.9 and $1.2 in interest expense related to the capital leases for periods ending December 31, 2013 and December 31, 2012, respectively.
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 both December 31, 2013 and December 31, 2012, outstanding letters of credit were $19.9. Outstanding guarantees were $24.8 and $25.6 at December 31, 2013 and December 31, 2012, respectively.
Indemnification
The Company has entered into customary indemnification agreements with each of its Directors, and some of its executive employment agreements include indemnification provisions. Under those agreements, the Company agrees to indemnify each of these individuals against claims arising out of events or occurrences related to that individual's service as the Company's agent or the agent of any of its subsidiaries to the fullest extent legally permitted.
142
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Service and Product Warranties and Extraordinary Rework
The Company provides service and warranty policies on its products. Liability under service and warranty policies is based upon specific claims and a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience change. In addition, the Company incurs discretionary costs to service its products in connection with product performance or quality issues.
The following is a roll forward of the service warranty and extraordinary rework balance at December 31, 2013 and December 31, 2012:
|
2013 | 2012 | |||||
---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 30.9 | $ | 19.6 | |||
Charges to costs and expenses |
38.3 | 12.0 | |||||
Write-offs, net of recoveries |
(0.6 | ) | (0.9 | ) | |||
Exchange rate |
0.1 | 0.2 | |||||
| | | | | | | |
Balance, December 31 |
$ | 68.7 | $ | 30.9 | |||
| | | | | | | |
| | | | | | | |
Bonds
Spirit utilized City of Wichita issued Industrial Revenue Bonds ("IRBs") to finance self-constructed and purchased real and personal property at the Wichita site. Tax benefits associated with IRBs include provisions for a ten-year complete property tax abatement and a Kansas Department of Revenue sales tax exemption on all IRB funded purchases. Spirit and the Predecessor purchased these IRBs so they are bondholders and debtor / lessee for the property purchased with the IRB proceeds.
Spirit recorded the property on its consolidated balance sheet in accordance with FASB authoritative guidance, along with a capital lease obligation to repay the IRB proceeds. Therefore, Spirit and the Predecessor have exercised their right to offset the amounts invested and obligations for these bonds on a consolidated basis. The assets and liabilities associated with these IRBs were $394.7 and $345.7 at December 31, 2013 and December 31, 2012, respectively.
Spirit utilized $80.0 in Kansas Development Finance Authority ("KDFA") issued bonds to receive a rebate of payroll taxes from the Kansas Department of Revenue to KDFA bondholders. Concurrently, a Spirit subsidiary issued an intercompany note with identical principal, terms, and conditions to the KDFA bonds. In accordance with FASB authoritative guidance, the principal and interest payments on these bonds offset in the consolidated financial statements.
23. Other Income (Expense), Net
Other income (expense), net is summarized as follows:
|
For the Twelve Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
12/31/2013 | 12/31/2012 | 12/31/2011 | |||||||
KDFA bond |
$ | 3.4 | $ | 4.5 | $ | 4.3 | ||||
Rental and miscellaneous (expense) |
(1.1 | ) | (8.4 | ) | (0.7 | ) | ||||
Foreign currency gains (loss) |
1.0 | 5.7 | (2.2 | ) | ||||||
| | | | | | | | | | |
Total |
$ | 3.3 | $ | 1.8 | $ | 1.4 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
143
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Foreign currency gains (loss) are due to the impact of movement in foreign currency exchange rates on trade and intercompany receivables/payables and other long-term contractual rights/obligations denominated in a currency other than the entity's functional currency.
24. Significant Concentrations of Risk
Economic Dependence
The Company's largest customer (Boeing) accounted for approximately 84%, 84%, and 85% of the revenues for the periods ending December 31, 2013, December 31, 2012, and December 31, 2011, respectively. Approximately 27% and 28% of the Company's accounts receivable balance at December 31, 2013 and December 31, 2012, respectively, was attributable to Boeing.
The Company's second largest customer (Airbus) accounted for approximately 10%, 9% and 10% of the revenues for the periods ending December 31, 2013, December 31, 2012, and December 31, 2011, respectively. Approximately 28% and 26% of the Company's accounts receivable balance at December 31, 2013 and December 31, 2012, respectively, was attributable to Airbus.
Approximately 29% and 25% of the Company's accounts receivable balance at December 31, 2013 and December 31, 2012, respectively, was attributable to Gulfstream.
25. Supplemental Balance Sheet Information
Accrued expenses and other liabilities consist of the following:
|
December 31,
2013 |
December 31,
2012 |
|||||
---|---|---|---|---|---|---|---|
Accrued expenses |
|||||||
Accrued wages and bonuses |
$ | 26.8 | $ | 35.8 | |||
Accrued fringe benefits |
123.1 | 110.1 | |||||
Accrued interest |
8.6 | 7.8 | |||||
Workers' compensation |
9.1 | 9.0 | |||||
Property and sales tax |
26.3 | 27.0 | |||||
Warranty/extraordinary rework reserve current |
0.8 | 1.4 | |||||
Other |
25.9 | 25.2 | |||||
| | | | | | | |
Total |
$ | 220.6 | $ | 216.3 | |||
| | | | | | | |
| | | | | | | |
Other liabilities |
|||||||
Federal income taxes non-current |
$ | 13.3 | $ | 12.4 | |||
Deferred tax liability non-current |
42.2 | 7.2 | |||||
Warranty/extraordinary rework reserve non-current |
67.9 | 29.5 | |||||
Customer cost recovery (1) |
62.0 | 62.0 | |||||
Other |
16.9 | 17.8 | |||||
| | | | | | | |
Total |
$ | 202.3 | $ | 128.9 | |||
| | | | | | | |
| | | | | | | |
26. Segment Information
The Company operates in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. Substantially all revenues in the three principal segments are from Boeing, with the exception of Wing Systems, which includes revenues from Airbus and other customers. Approximately 94% of the
144
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Company's net revenues for the twelve months ended December 31, 2013 came from our two largest customers, Boeing and Airbus. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services, tooling contracts, and sales of natural gas through a tenancy-in-common with other companies that have operations in Wichita, Kansas. 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, unallocated impact of severe weather event, unallocated research and development and unallocated cost of sales. 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. Unallocated impact of severe weather event includes property repairs, clean up and recovery costs related to the April 14, 2012 tornado at the Company's Wichita facility. Unallocated research and development includes research and development efforts that benefit the Company as a whole and are not unique to a specific segment. Unallocated cost of sales includes general costs not directly attributable to segment operations, such as early retirement and other incentives. All of these unallocated items are not specifically related to our operating segments and are not allocated in measuring the operating segments' profitability and performance and operating margins.
We are evaluating the potential realignment of our reportable segments as part of our 2014 business strategy. The reportable segment amounts and discussions reflected in this Annual Report reflect the management reporting that existed through the end of our 2013 fiscal year.
The Company's Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs (OEM refers to aircraft original equipment manufacturer), as well as related spares and maintenance, repairs and overhaul. The Fuselage Systems segment manufactures products at our facilities in Wichita, Kansas and Kinston, North Carolina. The Fuselage Systems segment also includes an assembly plant for the A350 XWB aircraft in Saint-Nazaire, France.
The Company'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. The Propulsion Systems segment manufactures products at our facilities in Wichita and Chanute, Kansas.
The Company'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; Kinston, North Carolina; Prestwick, Scotland; and Subang, Malaysia.
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.
145
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following table shows segment revenues and operating income for the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011:
|
Twelve Months
Ended December 31, 2013 |
Twelve Months
Ended December 31, 2012 |
Twelve Months
Ended December 31, 2011 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Segment Revenues |
||||||||||
Fuselage Systems |
$ | 2,861.1 | $ | 2,590.6 | $ | 2,425.0 | ||||
Propulsion Systems |
1,581.3 | 1,420.9 | 1,221.5 | |||||||
Wing Systems |
1,502.5 | 1,375.1 | 1,207.8 | |||||||
All Other |
16.1 | 11.1 | 9.5 | |||||||
| | | | | | | | | | |
|
$ | 5,961.0 | $ | 5,397.7 | $ | 4,863.8 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Segment Operating (Loss) Income |
||||||||||
Fuselage Systems (1) |
$ | 70.1 | $ | 391.9 | $ | 323.1 | ||||
Propulsion Systems (2) |
235.8 | 67.5 | 196.4 | |||||||
Wing Systems (3) |
(414.0 | ) | (335.6 | ) | 0.5 | |||||
All Other |
4.4 | 1.0 | 1.3 | |||||||
| | | | | | | | | | |
|
(103.7 | ) | 124.8 | 521.3 | ||||||
Unallocated corporate SG&A |
(181.5 | ) | (155.3 | ) | (145.5 | ) | ||||
Unallocated impact of severe weather event (4) |
(30.3 | ) | 146.2 | | ||||||
Unallocated research and development |
(8.9 | ) | (4.4 | ) | (1.9 | ) | ||||
Unallocated cost of sales (5) |
(39.9 | ) | (19.0 | ) | (17.8 | ) | ||||
| | | | | | | | | | |
Total operating (loss) income |
$ | (364.3 | ) | $ | 92.3 | $ | 356.1 | |||
| | | | | | | | | | |
| | | | | | | | | | |
146
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
The following chart illustrates the split between domestic and foreign revenues:
|
Year Ended
December 31, 2013 |
Year Ended
December 31, 2012 |
Year Ended
December 31, 2011 |
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue Source
(1)
|
Net Revenues |
Percent of
Total Net Revenues |
Net Revenues |
Percent of
Total Net Revenues |
Net Revenues |
Percent of
Total Net Revenues |
|||||||||||||
United States |
$ | 5,154.9 | 87 | % | $ | 4,612.0 | 85 | % | $ | 4,210.7 | 87 | % | |||||||
International |
|||||||||||||||||||
United Kingdom |
559.7 | 9 | % | 470.4 | 9 | % | 422.6 | 8 | % | ||||||||||
Other |
246.4 | 4 | % | 315.3 | 6 | % | 230.5 | 5 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Total International |
806.1 | 13 | % | 785.7 | 15 | % | 653.1 | 13 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Revenues |
$ | 5,961.0 | 100 | % | $ | 5,397.7 | 100 | % | $ | 4,863.8 | 100 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Most of the Company's long-lived assets are located within the United States. Approximately 6% of our long-lived assets based on book value are located in the United Kingdom as part of Spirit Europe with approximately another 5% of our total long-lived assets located in countries outside the United States and the United Kingdom. The following chart illustrates the split between domestic and foreign assets:
|
Year Ended
December 31, 2013 |
Year Ended
December 31, 2012 |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Asset Location
|
Total
Long-Lived Assets |
Percent of
Total Long-Lived Assets |
Total
Long-Lived Assets |
Percent of
Total Long-Lived Assets |
|||||||||
United States |
$ | 1,608.2 | 89 | % | $ | 1,506.9 | 89 | % | |||||
International |
|||||||||||||
United Kingdom |
99.3 | 6 | % | 101.1 | 6 | % | |||||||
Other |
95.8 | 5 | % | 90.5 | 5 | % | |||||||
| | | | | | | | | | | | | |
Total International |
195.1 | 11 | % | 191.6 | 11 | % | |||||||
| | | | | | | | | | | | | |
Total Long-Lived Assets |
$ | 1,803.3 | 100 | % | $ | 1,698.5 | 100 | % | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
147
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
27. Quarterly Financial Data (Unaudited)
|
Quarter Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013
|
December 31,
2013 (1) |
September 27,
2013 (2) |
June 28,
2013 (3) |
March 29,
2013 (4) |
|||||||||
Revenues |
$ | 1,494.4 | $ | 1,503.7 | $ | 1,520.7 | $ | 1,442.2 | |||||
Operating (Loss) income |
$ | (320.8 | ) | $ | 50.5 | $ | (238.5 | ) | $ | 144.5 | |||
Net (loss) income |
$ | (586.9 | ) | $ | 93.7 | $ | (209.4 | ) | $ | 81.2 | |||
(Loss) earnings per share, basic |
$ | (4.15 | ) | $ | 0.66 | $ | (1.48 | ) | $ | 0.57 | |||
(Loss) earnings per share, diluted |
$ | (4.15 | ) | $ | 0.65 | $ | (1.48 | ) | $ | 0.57 |
|
Quarter Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2012
|
December 31,
2012 (5) |
September 29,
2012 (6) |
June 30,
2012 (7) |
March 31,
2012 (8) |
|||||||||
Revenues |
$ | 1,425.6 | $ | 1,365.3 | $ | 1,341.0 | $ | 1,265.8 | |||||
Operating Income (loss) |
$ | 98.0 | $ | (210.5 | ) | $ | 82.5 | $ | 122.3 | ||||
Net income (loss) |
$ | 60.7 | $ | (134.4 | ) | $ | 34.9 | $ | 73.6 | ||||
Earnings (loss) per share, basic |
$ | 0.43 | $ | (0.96 | ) | $ | 0.25 | $ | 0.52 | ||||
Earnings (loss) per share, diluted |
$ | 0.43 | $ | (0.96 | ) | $ | 0.24 | $ | 0.52 |
148
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
incentives for certain UAW-represented employees, and $1.1 in early retirement incentives to eligible employees. Also includes a charge of $54.5 related to the April 14, 2012 severe weather event.
28. Condensed Consolidating Financial Information
On November 18, 2010, Spirit completed an offering of $300.0 aggregate principal amount of its 2020 Notes. On September 30, 2009, Spirit completed an offering of $300.0 aggregate principal amount of its 2017 Notes. Both the 2017 Notes and the 2020 Notes were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States only to non-U.S. persons pursuant to Regulation S promulgated under the Securities Act.
In connection with the initial sales of the 2017 Notes and the 2020 Notes, the Company entered into Registration Rights Agreements with the initial purchasers of the 2017 Notes and the 2020 Notes, respectively, pursuant to which the Company, Spirit and the Subsidiary Guarantors (as defined below) agreed to file (x) a registration statement with respect to an offer to exchange original 2017 Notes for a new issue of substantially identical notes registered under the Securities Act (the "2017 Notes Exchange Offer") and (y) a registration statement with respect to an offer to exchange the original 2020 Notes for a new issue of substantially identical notes registered under the Securities Act (the "2020 Notes Exchange Offer"). The 2017 Notes Exchange Offer was consummated on May 26, 2010. The 2020 Notes Exchange Offer was consummated on January 31, 2011. The 2017 Notes and 2020 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Company and its 100% owned domestic subsidiaries, other than Spirit (the "Subsidiary Guarantors").
The following condensed consolidating financial information, which has been prepared in accordance with the requirements for presentation of Rule 3-10(d) of Regulation S-X promulgated under the Securities Act, presents the condensed consolidating financial information separately for:
149
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2013
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Revenues |
$ | | $ | 5,393.4 | $ | 205.9 | $ | 738.9 | $ | (377.2 | ) | $ | 5,961.0 | ||||||
Operating costs and expenses |
|||||||||||||||||||
Cost of sales |
|
5,602.1 |
197.8 |
636.8 |
(377.2 |
) |
6,059.5 |
||||||||||||
Selling, general and administrative |
3.0 | 174.4 | 3.0 | 20.4 | | 200.8 | |||||||||||||
Impact from severe weather event |
| 30.3 | | | | 30.3 | |||||||||||||
Research and development |
| 32.2 | 0.1 | 2.4 | | 34.7 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total operating costs and expenses |
3.0 | 5,839.0 | 200.9 | 659.6 | (377.2 | ) | 6,325.3 | ||||||||||||
Operating income (loss) |
(3.0 | ) | (445.6 | ) | 5.0 | 79.3 | | (364.3 | ) | ||||||||||
Interest expense and financing fee amortization |
| (69.2 | ) | | (11.2 | ) | 10.3 | (70.1 | ) | ||||||||||
Interest income |
| 10.5 | | 0.1 | (10.3 | ) | 0.3 | ||||||||||||
Other income (expense), net |
| 3.1 | | 0.2 | | 3.3 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes and equity in net (loss) income of affiliates and subsidiaries |
(3.0 | ) | (501.2 | ) | 5.0 | 68.4 | | (430.8 | ) | ||||||||||
Income tax benefit (provision) |
(0.1 | ) | (175.6 | ) | (1.9 | ) | (13.5 | ) | (191.1 | ) | |||||||||
| | | | | | | | | | | | | | | | | | | |
Income (loss) before equity in net income (loss) of affiliates and subsidiaries |
(3.1 | ) | (676.8 | ) | 3.1 | 54.9 | | (621.9 | ) | ||||||||||
Equity in net income (loss) of affiliates |
0.5 | | | 0.5 | (0.5 | ) | 0.5 | ||||||||||||
Equity in net income (loss) of subsidiaries |
(618.8 | ) | 58.2 | | | 560.6 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net income (loss) |
(621.4 | ) | (618.6 | ) | 3.1 | 55.4 | 560.1 | (621.4 | ) | ||||||||||
Other comprehensive income (loss) |
90.6 | 5.8 | 84.8 | (90.6 | ) | 90.6 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive income (loss) |
$ | (530.8 | ) | $ | (612.8 | ) | $ | 3.1 | $ | 140.2 | $ | 469.5 | $ | (530.8 | ) | ||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
150
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2012
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Revenues |
$ | | $ | 4,910.1 | $ | 151.5 | $ | 594.2 | $ | (258.1 | ) | $ | 5,397.7 | ||||||
Operating costs and expenses |
|||||||||||||||||||
Cost of sales |
|
4,842.1 |
141.4 |
519.9 |
(258.1 |
) |
5,245.3 |
||||||||||||
Selling, general and administrative |
3.0 | 145.8 | 2.8 | 20.6 | | 172.2 | |||||||||||||
Impact from severe weather event |
| (146.2 | ) | | | | (146.2 | ) | |||||||||||
Research and development |
| 32.8 | | 1.3 | | 34.1 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total operating costs and expenses |
3.0 | 4,874.5 | 144.2 | 541.8 | (258.1 | ) | 5,305.4 | ||||||||||||
Operating income (loss) |
(3.0 | ) | 35.6 | 7.3 | 52.4 | | 92.3 | ||||||||||||
Interest expense and financing fee amortization |
| (81.9 | ) | | (10.3 | ) | 9.3 | (82.9 | ) | ||||||||||
Interest income |
| 9.4 | | 0.1 | (9.3 | ) | 0.2 | ||||||||||||
Other income (expense), net |
| (0.9 | ) | (0.1 | ) | 2.8 | | 1.8 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes and equity in net income (loss) of affiliates and subsidiaries |
(3.0 | ) | (37.8 | ) | 7.2 | 45.0 | | 11.4 | |||||||||||
Income tax benefit (provision) |
(0.2 | ) | 34.1 | (2.7 | ) | (7.1 | ) | | 24.1 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Income (loss) before equity in net income (loss) of affiliates and subsidiaries |
(3.2 | ) | (3.7 | ) | 4.5 | 37.9 | | 35.5 | |||||||||||
Equity in net income (loss) of affiliates |
(0.7 | ) | (1.3 | ) | | 0.6 | 0.7 | (0.7 | ) | ||||||||||
Equity in net income (loss) of subsidiaries |
38.7 | 42.4 | | | (81.1 | ) | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net income (loss) |
34.8 | 37.4 | 4.5 | 38.5 | (80.4 | ) | 34.8 | ||||||||||||
Other comprehensive income (loss) |
(19.0 | ) | (32.2 | ) | | 13.2 | 19.0 | (19.0 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive income (loss) |
$ | 15.8 | $ | 5.2 | $ | 4.5 | $ | 51.7 | $ | (61.4 | ) | $ | 15.8 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
151
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Operations
For the Twelve Months Ended December 31, 2011
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Revenues |
$ | | $ | 4,401.4 | $ | 22.4 | $ | 536.6 | $ | (96.6 | ) | $ | 4,863.8 | ||||||
Operating costs and expenses |
|||||||||||||||||||
Cost of sales |
|
3,898.2 |
18.3 |
492.2 |
(96.6 |
) |
4,312.1 |
||||||||||||
Selling, general and administrative |
4.4 | 134.0 | 2.6 | 18.9 | | 159.9 | |||||||||||||
Impact from severe weather event |
| | | | | | |||||||||||||
Research and development |
| 34.9 | | 0.8 | | 35.7 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total operating costs and expenses |
4.4 | 4,067.1 | 20.9 | 511.9 | (96.6 | ) | 4,507.7 | ||||||||||||
Operating income (loss) |
(4.4 | ) | 334.3 | 1.5 | 24.7 | | 356.1 | ||||||||||||
Interest expense and financing fee amortization |
| (76.3 | ) | | (7.2 | ) | 6.0 | (77.5 | ) | ||||||||||
Interest income |
| 6.3 | | | (6.0 | ) | 0.3 | ||||||||||||
Other income (expense), net |
| 4.5 | | (3.1 | ) | | 1.4 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes and equity in net income (loss) of affiliates and subsidiaries |
(4.4 | ) | 268.8 | 1.5 | 14.4 | | 280.3 | ||||||||||||
Income tax benefit (provision) |
1.6 | (82.3 | ) | (0.6 | ) | (5.6 | ) | | (86.9 | ) | |||||||||
| | | | | | | | | | | | | | | | | | | |
Income (loss) before equity in net income (loss) of affiliates and subsidiaries |
(2.8 | ) | 186.5 | 0.9 | 8.8 | | 193.4 | ||||||||||||
Equity in net income (loss) of affiliates |
(1.0 | ) | (0.7 | ) | | (0.3 | ) | 1.0 | (1.0 | ) | |||||||||
Equity in net income (loss) of subsidiaries |
196.2 | 9.8 | | | (206.0 | ) | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net income (loss) |
192.4 | 195.6 | 0.9 | 8.5 | (205.0 | ) | 192.4 | ||||||||||||
Other comprehensive income (loss) |
(50.9 | ) | (46.8 | ) | | (4.1 | ) | 50.9 | (50.9 | ) | |||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive income (loss) |
$ | 141.5 | $ | 148.8 | $ | 0.9 | $ | 4.4 | $ | (154.1 | ) | $ | 141.5 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
152
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Balance Sheet
December 31, 2013
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current assets |
|||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 359.2 | $ | | $ | 61.5 | $ | | $ | 420.7 | |||||||
Accounts receivable, net |
| 643.3 | 15.3 | 214.5 | (322.3 | ) | 550.8 | ||||||||||||
Inventory, net |
| 1,340.2 | 208.7 | 293.7 | | 1,842.6 | |||||||||||||
Deferred tax asset current |
| 25.2 | | 1.7 | | 26.9 | |||||||||||||
Other current assets |
| 100.7 | | 2.5 | | 103.2 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total current assets |
| 2,468.6 | 224.0 | 573.9 | (322.3 | ) | 2,944.2 | ||||||||||||
Property, plant and equipment, net |
| 1,308.0 | 305.3 | 190.0 | | 1,803.3 | |||||||||||||
Pension assets |
| 231.1 | | 21.5 | | 252.6 | |||||||||||||
Investment in subsidiary |
1,026.3 | 281.5 | | | (1,307.8 | ) | | ||||||||||||
Equity in net assets of subsidiaries |
454.7 | 119.4 | | | (574.1 | ) | | ||||||||||||
Other assets |
| 422.4 | 80.0 | 24.2 | (419.5 | ) | 107.1 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total assets |
$ | 1,481.0 | $ | 4,831.0 | $ | 609.3 | $ | 809.6 | $ | (2,623.7 | ) | $ | 5,107.2 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Current liabilities |
|||||||||||||||||||
Accounts payable |
$ | | $ | 666.5 | $ | 224.2 | $ | 185.2 | $ | (322.2 | ) | $ | 753.7 | ||||||
Accrued expenses |
| 189.9 | 0.5 | 30.2 | | 220.6 | |||||||||||||
Profit sharing |
| 35.7 | | 2.7 | | 38.4 | |||||||||||||
Current portion of long-term debt |
| 12.9 | | 3.9 | | 16.8 | |||||||||||||
Advance payments, short-term |
| 133.5 | | | | 133.5 | |||||||||||||
Deferred revenue, short-term |
| 15.7 | | 4.1 | | 19.8 | |||||||||||||
Deferred grant income liability current |
| | 7.3 | 1.3 | | 8.6 | |||||||||||||
Other current liabilities |
| 137.1 | | 7.1 | | 144.2 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total current liabilities |
| 1,191.3 | 232.0 | 234.5 | (322.2 | ) | 1,335.6 | ||||||||||||
Long-term debt |
| 1,131.4 | 80.0 | 278.6 | (339.5 | ) | 1,150.5 | ||||||||||||
Advance payments, long-term |
| 728.9 | | | | 728.9 | |||||||||||||
Pension/OPEB obligation |
| 69.8 | | | | 69.8 | |||||||||||||
Deferred grant income liability non-current |
| | 75.6 | 32.6 | | 108.2 | |||||||||||||
Deferred revenue and other deferred credits |
| 22.7 | | 8.2 | | 30.9 | |||||||||||||
Other liabilities |
| 245.6 | | 36.7 | (80.0 | ) | 202.3 | ||||||||||||
Total equity |
1,481.0 | 1,441.3 | 221.7 | 219.0 | (1,882.0 | ) | 1,481.0 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders' equity |
$ | 1,481.0 | $ | 4,831.0 | $ | 609.3 | $ | 809.6 | $ | (2,623.7 | ) | $ | 5,107.2 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
153
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Balance Sheet
December 31, 2012
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Current assets |
|||||||||||||||||||
Cash and cash equivalents |
$ | | $ | 369.1 | $ | | $ | 71.6 | $ | | $ | 440.7 | |||||||
Accounts receivable, net |
| 513.2 | 13.7 | 171.7 | (277.9 | ) | 420.7 | ||||||||||||
Inventory, net |
| 2,006.9 | 164.3 | 239.7 | (0.1 | ) | 2,410.8 | ||||||||||||
Deferred tax asset current |
| 57.1 | | | | 57.1 | |||||||||||||
Other current assets |
| 22.2 | | 3.9 | | 26.1 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total current assets |
| 2,968.5 | 178.0 | 486.9 | (278.0 | ) | 3,355.4 | ||||||||||||
Property, plant and equipment, net |
| 1,221.1 | 289.3 | 188.1 | | 1,698.5 | |||||||||||||
Pension assets |
| 69.9 | | 8.5 | | 78.4 | |||||||||||||
Investment in subsidiary |
1,013.7 | 281.4 | | | (1,295.1 | ) | | ||||||||||||
Equity in net assets of subsidiaries |
983.2 | 58.2 | | | (1,041.4 | ) | | ||||||||||||
Deferred tax asset non-current, net |
| 192.3 | | (0.3 | ) | | 192.0 | ||||||||||||
Other assets |
| 405.0 | 80.0 | 27.5 | (421.5 | ) | 91.0 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total assets |
$ | 1,996.9 | $ | 5,196.4 | $ | 547.3 | $ | 710.7 | $ | (3,036.0 | ) | $ | 5,415.3 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Current liabilities |
|||||||||||||||||||
Accounts payable |
$ | | $ | 616.3 | $ | 157.2 | $ | 163.4 | $ | (277.9 | ) | $ | 659.0 | ||||||
Accrued expenses |
| 188.4 | 2.6 | 25.3 | | 216.3 | |||||||||||||
Profit sharing |
| 25.9 | | 2.4 | | 28.3 | |||||||||||||
Current portion of long-term debt |
| 6.6 | | 3.7 | | 10.3 | |||||||||||||
Advance payments, short-term |
| 70.7 | | | | 70.7 | |||||||||||||
Deferred revenue, short-term |
| 16.6 | | 1.8 | | 18.4 | |||||||||||||
Deferred grant income liability current |
| | 5.7 | 1.2 | | 6.9 | |||||||||||||
Other current liabilities |
| 52.6 | | 4.5 | | 57.1 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total current liabilities |
| 977.1 | 165.5 | 202.3 | (277.9 | ) | 1,067.0 | ||||||||||||
Long-term debt |
| 1,142.9 | 80.0 | 284.5 | (341.5 | ) | 1,165.9 | ||||||||||||
Advance payments, long-term |
| 833.6 | | | | 833.6 | |||||||||||||
Pension/OPEB obligation |
| 75.6 | | | | 75.6 | |||||||||||||
Deferred grant income liability non-current |
| | 83.3 | 33.3 | | 116.6 | |||||||||||||
Deferred revenue and other deferred credits |
| 21.1 | | 9.7 | | 30.8 | |||||||||||||
Other liabilities |
| 189.3 | | 19.6 | (80.0 | ) | 128.9 | ||||||||||||
Total equity |
1,996.9 | 1,956.8 | 218.5 | 161.3 | (2,336.6 | ) | 1,996.9 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders' equity |
$ | 1,996.9 | $ | 5,196.4 | $ | 547.3 | $ | 710.7 | $ | (3,036.0 | ) | $ | 5,415.3 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
154
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Cash Flows
For the Twelve Months Ended December 31, 2013
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating activities |
|||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (621.4 | ) | $ | 219.0 | $ | 34.2 | $ | 7.4 | $ | 621.4 | $ | 260.6 | ||||||
| | | | | | | | | | | | | | | | | | | |
Investing activities |
|||||||||||||||||||
Purchase of property, plant and equipment |
| (190.9 | ) | (34.2 | ) | (9.1 | ) | | (234.2 | ) | |||||||||
Purchase of property, plant and equipment severe weather event |
| (38.4 | ) | | | | (38.4 | ) | |||||||||||
Proceeds from sale of assets |
| 0.7 | | | | 0.7 | |||||||||||||
Equity in net assets of subsidiaries |
621.4 | 3.0 | | 0.7 | (621.4 | ) | 3.7 | ||||||||||||
Other |
| 4.8 | | (4.8 | ) | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net cash provided by (used in) investing activities |
621.4 | (220.8 | ) | (34.2 | ) | (13.2 | ) | (621.4 | ) | (268.2 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Financing activities |
|||||||||||||||||||
Proceeds from revolving credit facility |
| | | | | | |||||||||||||
Payments on revolving credit facility |
| | | | | | |||||||||||||
Proceeds from issuance of debt |
| | | | | | |||||||||||||
Principal payments of debt |
| (6.6 | ) | | (3.8 | ) | | (10.4 | ) | ||||||||||
Collection on (repayment of) intercompany debt |
| 2.0 | | (2.0 | ) | | | ||||||||||||
Debt issuance and financing costs |
| (4.1 | ) | | | | (4.1 | ) | |||||||||||
Excess tax benefits from share-based payment arrangements |
| 0.6 | | | | 0.6 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net cash provided by (used in) financing activities |
| (8.1 | ) | | (5.8 | ) | | (13.9 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents |
| | | 1.5 | | 1.5 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net (decrease) in cash and cash equivalents for the period |
| (9.9 | ) | | (10.1 | ) | | (20.0 | ) | ||||||||||
Cash and cash equivalents, beginning of period |
| 369.1 | | 71.6 | | 440.7 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period |
$ | | $ | 359.2 | $ | | $ | 61.5 | $ | | $ | 420.7 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
155
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Cash Flows
For the Twelve Months Ended December 31, 2012
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating activities |
|||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 34.8 | $ | 586.6 | $ | 4.6 | $ | (46.8 | ) | $ | (34.8 | ) | $ | 544.4 | |||||
| | | | | | | | | | | | | | | | | | | |
Investing activities |
|||||||||||||||||||
Purchase of property, plant and equipment |
| (204.7 | ) | (4.6 | ) | (26.8 | ) | | (236.1 | ) | |||||||||
Purchase of property, plant and equipment severe weather event |
| (12.9 | ) | | | | (12.9 | ) | |||||||||||
Proceeds from sale of assets |
| 0.4 | | 1.2 | | 1.6 | |||||||||||||
Equity in net assets of subsidiaries |
(34.8 | ) | (1.6 | ) | | 0.2 | 34.8 | (1.4 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Net cash provided by (used in) investing activities |
(34.8 | ) | (218.8 | ) | (4.6 | ) | (25.4 | ) | 34.8 | (248.8 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Financing activities |
|||||||||||||||||||
Proceeds from revolving credit facility |
| 170.0 | | | | 170.0 | |||||||||||||
Payments on revolving credit facility |
| (170.0 | ) | | | | (170.0 | ) | |||||||||||
Proceeds from issuance of debt |
| 547.2 | | 0.4 | | 547.6 | |||||||||||||
Principal payments of debt |
| (567.4 | ) | | (3.6 | ) | | (571.0 | ) | ||||||||||
Collection on (repayment of) intercompany debt |
| (74.0 | ) | | 74.0 | | | ||||||||||||
Debt issuance and financing costs |
| (12.4 | ) | | | | (12.4 | ) | |||||||||||
Excess tax benefits from share-based payment arrangements |
| 1.2 | | | | 1.2 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net cash provided by (used in) financing activities |
| (105.4 | ) | | 70.8 | | (34.6 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents |
| | | 1.9 | | 1.9 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net increase in cash and cash equivalents for the period |
| 262.4 | | 0.5 | | 262.9 | |||||||||||||
Cash and cash equivalents, beginning of period |
| 106.7 | | 71.1 | | 177.8 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period |
$ | | $ | 369.1 | $ | | $ | 71.6 | $ | | $ | 440.7 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
156
Spirit AeroSystems Holdings, Inc.
Notes to the Consolidated Financial Statements (Continued)
($, €, £, and RM in millions other than per share amounts)
Condensed Consolidating Statements of Cash Flows
For the Twelve Months Ended December 31, 2011
|
Holdings | Spirit |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Consolidating
Adjustments |
Total | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating activities |
|||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 193.5 | $ | (63.2 | ) | $ | 25.7 | $ | (9.8 | ) | $ | (193.5 | ) | $ | (47.3 | ) | |||
| | | | | | | | | | | | | | | | | | | |
Investing activities |
|||||||||||||||||||
Purchase of property, plant and equipment |
| (184.7 | ) | (25.7 | ) | (39.3 | ) | | (249.7 | ) | |||||||||
Proceeds from the sale of assets |
| 0.3 | | 0.2 | | 0.5 | |||||||||||||
Equity in net assets of subsidiaries |
(193.5 | ) | | | | 193.5 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net cash provided by (used in) investing activities |
(193.5 | ) | (184.4 | ) | (25.7 | ) | (39.1 | ) | 193.5 | (249.2 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Financing activities |
|||||||||||||||||||
Proceeds from revolving credit facility |
| 30.0 | | | | 30.0 | |||||||||||||
Payments on revolving credit facility |
| (30.0 | ) | | | | (30.0 | ) | |||||||||||
Principal payments of debt |
| (5.8 | ) | | (2.2 | ) | | (8.0 | ) | ||||||||||
Collection on (repayment of) intercompany debt |
| (57.3 | ) | | 57.3 | | | ||||||||||||
Excess tax benefits from share-based payment arrangements |
| 1.3 | | | | 1.3 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net cash provided by (used in) financing activities |
| (61.8 | ) | | 55.1 | | (6.7 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents |
| | | (0.6 | ) | | (0.6 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Net (decrease) increase in cash and cash equivalents for the period |
| (309.4 | ) | | 5.6 | | (303.8 | ) | |||||||||||
Cash and cash equivalents, beginning of period |
| 416.1 | | 65.5 | | 481.6 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period |
$ | | $ | 106.7 | $ | | $ | 71.1 | $ | | $ | 177.8 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
29. Subsequent Events
In January 2014, the Company completed its negotiations with its customer for the initial delivery unit of the Bell V280 helicopter. The Company agreed to invest $5.0 in the program over the next five years. Under contract accounting the investment was recorded as a forward loss.
157
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our President and Chief Executive Officer and Senior Vice President and Chief Financial Officer have evaluated the effectiveness of our disclosure controls as of December 31, 2013 and have concluded that, because of the material weakness in our internal control over financial reporting discussed below, these disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) were not effective. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management of the Company, including the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In light of the material weakness discussed below, the Company performed additional analysis and other post-closing procedures to ensure our consolidated financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO and effected by the Company's board of directors, management and other personnel to provide reasonable assurance of the reliability of our financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatement. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. We did not maintain effective controls over the completeness, accuracy and valuation of inventory and cost of sales related to the Airbus A350 XWB Section 15 recurring program. Specifically, we did not maintain controls over the completeness and accuracy of the bill of materials used in the contract accounting estimates for this program. These controls were not designed effectively to ensure that the bill of materials used in the accounting estimates were accurate and provided a sound basis for estimating future costs. Although this material weakness did not result in a material misstatement of the Company's consolidated financial statements, the existence of the
158
control deficiency could result in an undetected material misstatement of the Company's consolidated financial statements.
In addition, we did not maintain effective controls over the completeness, accuracy and valuation of inventory and cost of sales for the Gulfstream G280 and G650 programs. Specifically, controls over contract accounting estimates related to these programs were not operating effectively in order to ensure that (1) the bills of materials used in the accounting estimates were complete and provided a sound basis for estimating future costs; (2) the evaluation of current actual trends impacting prior estimates of supply chain and labor costs were identified and incorporated into the accounting estimates on a timely basis; and (3) the estimation of the number of production units used in the accounting estimates was accurate. This control deficiency resulted in audit adjustments to the cost of sales and inventory accounts and related financial disclosures within the Company's consolidated financial statements for the year ended December 31, 2012 and the condensed consolidated financial statements for the quarter ended June 27, 2013.
Because of these material weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013, based on criteria in Internal Control Integrated Framework issued by COSO.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in their report which appears herein.
Changes in Internal Controls over Financial Reporting
During 2013, several of our sites were implementing a new enterprise resource planning (ERP) system. This conversion affected certain general ledger functions, and resulted in changes to processes and controls as we migrated from legacy systems to the new ERP platforms. Other than this item, there were no other changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management has been actively engaged in developing a remediation plan to address the above material weakness. The remediation efforts expected to be implemented include the following:
Management has developed plans for the implementation of the foregoing remediation efforts and will monitor the implementation. Under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of the Company's internal control environment to improve the overall effectiveness of internal control over financial reporting.
Management believes the foregoing efforts will effectively remediate the material weakness. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address the control deficiency or determine to modify the remediation plan described above.
159
If not remediated, this control deficiency could result in future material misstatements to the Company's financial statements.
None.
160
Item 10.
Director, Executive Officers and Corporate Governance
Information concerning the directors of Spirit Holdings will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders, which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
Information concerning the executive officers of Spirit is included in Part I of this Annual Report on Form 10-K.
Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
Information concerning Corporate Governance and the Board of Directors of Spirit Holdings will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
The Company has adopted a Code of Ethics and a Finance Code of Professional Conduct that applies to the Company's Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and persons performing similar functions. A copy of the Code of Ethics and Finance Code of Professional Conduct is available on the Company's website at www.spiritaero.com under the "Investor Relations" link, and any waiver from the Code of Ethics or Finance Code of Professional Conduct will be timely disclosed on the Company's website or a Current Report on Form 8-K, as will any amendments to the Code of Ethics or Spirit Finance Code of Conduct.
Item 11.
Executive Compensation
Information concerning the compensation of directors and executive officers of Spirit Holdings will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders, which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning the ownership of Spirit Holdings' equity securities by certain beneficial owners and by management will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders, which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
Equity Compensation Plan Information is included in Part II of this Annual Report.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Information concerning certain relationships and related transactions and director independence will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders, which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
Item 14.
Principal Accounting Fees and Services
Information concerning principal accounting fees and services will be provided in Spirit Holdings' proxy statement for its 2014 annual meeting of stockholders, which will be filed with the SEC no later than 120 days after the end of the fiscal year, and that information is hereby incorporated by reference.
161
Item 15.
Exhibits and Financial Statement Schedules
Article I. Exhibit
Number |
Section 1.01 Exhibit |
Incorporated by
Reference to the Following Documents |
||
---|---|---|---|---|
2.1 | Asset Purchase Agreement, dated as of February 22, 2005, between Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) and The Boeing Company | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 2.1 | ||
2.2 | First Amendment to Asset Purchase Agreement, dated June 15, 2005, between Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) and The Boeing Company | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 2.2 | ||
3.1 | Amended and Restated Certificate of Incorporation of Spirit AeroSystems Holdings, Inc. | Annual Report on Form 10-K (File No. 001-33160), filed February 20, 2009, Exhibit 3.1 | ||
3.2 | Third Amended and Restated By Laws of Spirit AeroSystems Holdings, Inc. | Current Report on Form 8-K (File No. 001-33160), filed May 3, 2010, Exhibit 3.1 | ||
4.1 | Form of Class A Common Stock Certificate | Amendment No. 5 to Registration Statement on Form S-1/A (File No. 333-135486), filed November 17, 2006, Exhibit 4.1 | ||
4.2 | Form of Class B Common Stock Certificate | Amendment No. 5 to Registration Statement on Form S-1/A (File No. 333-135486), filed November 17, 2006, Exhibit 4.2 | ||
4.3 | Registration Agreement, dated June 16, 2005, among Spirit AeroSystems Holdings, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) and the persons listed on Schedule A thereto | Registration Statement on Forms S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 4.4 | ||
4.4 | Indenture dated as of September 30, 2009, governing the 7 1 / 2 % Senior Notes due 2017, by and among Spirit AeroSystems, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. | Current Report on Form 8-K (File No. 001-33160), filed October 1, 2009, Exhibit 4.1 | ||
4.5 | Form of 7 1 / 2 % Senior Note due 2017 | Current Report on Form 8-K (File No. 001-33160), filed October 1, 2009, included as Exhibit A to Exhibit 4.1 | ||
4.6 | Registration Rights Agreement, dated as of September 30, 2009, among Spirit AeroSystems, Inc., the guarantors identified therein, Banc of America Securities LLC and the other initial purchasers of the Notes named therein | Current Report on Form 8-K (File No. 001-33160), filed October 1, 2009, Exhibit 4.3 | ||
4.7 | Indenture dated as of November 18, 2010, governing the 6 3 / 4 % Senior Notes due 2020, by and among Spirit AeroSystems, Inc., the guarantors identified therein and The Bank of New York Mellon Trust Company, N.A. | Current Report on Form 8-K (File No. 001-33160), filed November 18, 2010, Exhibit 4.1 | ||
4.8 | Form of 6 3 / 4 % Senior Note due 2020 | Current Report on Form 8-K (File No. 001-33160), filed November 18, 2010, included as Exhibit A to Exhibit 4.2 |
162
Article I. Exhibit
Number |
Section 1.01 Exhibit |
Incorporated by
Reference to the Following Documents |
||
---|---|---|---|---|
4.9 | Registration Rights Agreement, dated as of November 18, 2010, among Spirit AeroSystems, Inc., the guarantors identified therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of itself and as representative of the several initial purchasers of the notes named therein | Current Report on Form 8-K (File No. 001-33160), filed November 18, 2010, Exhibit 4.3 | ||
4.10 | Supplemental Indenture, dated as of August 11, 2010 | Quarterly Report on Form 10-Q (File No. 001-33160), filed November 5, 2010, Exhibit 4.1 | ||
10.1 | Employment Agreement, dated June 16, 2005, between Jeffrey L. Turner and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.1 | ||
10.2 | Amendment to Employment Agreement between Spirit AeroSystems, Inc. and Jeffrey L. Turner, dated December 31, 2008 | Current Report on Form 8-K (File No. 001-33160), filed January 6, 2009, Exhibit 10.1.1 | ||
10.3 | Employment Agreement, dated September 13, 2005, between Spirit AeroSystems, Inc. and H. David Walker | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.3 | ||
10.4 | Employment Agreement, dated December 28, 2005, between Spirit AeroSystems, Inc. and John Lewelling | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.4 | ||
10.5 | Employment Agreement between Spirit AeroSystems, Inc. and Philip D. Anderson, dated February 12, 2010 | Current Report on Form 8-K (File No. 001-33160), filed February 17, 2010, Exhibit 10.1 | ||
10.6 | Spirit AeroSystems Holdings, Inc. Amended and Restated Executive Incentive Plan | Quarterly Report on Form 10-Q (File No. 001-33160), filed October 31, 2008, Exhibit 10.7 | ||
10.7 | Spirit AeroSystems Holdings, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) Supplemental Executive Retirement Plan | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.8 | ||
10.8 | Amendment to Spirit AeroSystems Holdings, Inc. Supplemental Executive Retirement Plan, dated July 30, 2007 | Registration Statement on Form S-8 (File No. 333-146112), filed September 17, 2007, Exhibit 10.2 | ||
10.9 | Spirit AeroSystems Holdings, Inc. Second Amended and Restated Short-Term Incentive Plan. | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 5, 2011, Exhibit 10.3 | ||
10.10 | Spirit AeroSystems Holdings, Inc. Fourth Amended and Restated Long-Term Incentive Plan. | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 5, 2011, Exhibit 10.4 | ||
10.11 | Spirit AeroSystems Holdings, Inc. Cash Incentive Plan | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.11 | ||
10.12 | Spirit AeroSystems Holdings, Inc. Union Equity Participation Program | Amendment No. 2 to Registration Statement on Form S-1/A (File No. 333-135486), filed October 30, 2006, Exhibit 10.12 | ||
10.13 | Spirit AeroSystems Holdings, Inc. Second Amended and Restated Director Stock Plan | Registration Statement on Form S-8 (File No. 333-150402), filed April 23, 2008, Exhibit 10.1 | ||
10.14 | Form of Indemnification Agreement | Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-135486), filed August 29, 2006, Exhibit 10.14 |
163
Article I. Exhibit
Number |
Section 1.01 Exhibit |
Incorporated by
Reference to the Following Documents |
||
---|---|---|---|---|
10.15 | Security Agreement, dated as of June 16, 2005, made by and among Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.), Spirit AeroSystems Holdings, Inc. (f/k/a Mid-Western Aircraft Systems Holdings, Inc.), Onex Wind Finance LP, 3101447 Nova Scotia Company, Onex Wind Finance LLC and Citicorp North America, Inc., as collateral agent. | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.20 | ||
10.16 | Security Agreement, dated as of June 16, 2005, made by and among Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.), Spirit AeroSystems Holdings, Inc. (f/k/a Mid-Western Aircraft Systems Holdings, Inc.), Spirit AeroSystems Finance, Inc. (f/k/a Mid-Western Aircraft Finance, Inc.), Onex Wind Finance LP, 3101447 Nova Scotia Company, Onex Wind Finance LLC and The Boeing Company, as agent. | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.22 | ||
10.17 | Special Business Provisions (Sustaining), as amended through February 6, 2013, between The Boeing Company and Spirit AeroSystems, Inc. | * | ||
10.18 | General Terms Agreement (Sustaining and others), dated as of June 16, 2005, between The Boeing Company and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.24 | ||
10.19 | Hardware Material Services General Terms Agreement, dated as of June 16, 2005, between The Boeing Company and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.25 | ||
10.20 | Ancillary Know-How Supplemental License Agreement, dated as of June 16, 2005, between The Boeing Company and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.26 | ||
10.21 | Sublease Agreement, dated as of June 16, 2005, among The Boeing Company, Boeing IRB Asset Trust and Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.) | Registration Statement on Form S-1 (File No. 333-135486), filed June 30, 2006, Exhibit 10.27 | ||
10.22 | Inducement Agreement between Spirit AeroSystems, Inc. and The North Carolina Global TransPark Authority, dated May 14, 2008 | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2008, Exhibit 10.2 | ||
10.23 | Lease Agreement between Spirit AeroSystems, Inc. and The North Carolina Global TransPark Authority, dated May 14, 2008 | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2008, Exhibit 10.3 | ||
10.24 | Construction Agency Agreement between Spirit AeroSystems, Inc. and The North Carolina Global TransPark Authority, dated May 14, 2008 | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 1, 2008, Exhibit 10.4 |
164
Article I. Exhibit
Number |
Section 1.01 Exhibit |
Incorporated by
Reference to the Following Documents |
||
---|---|---|---|---|
10.25 | Amendment to the Spirit AeroSystems Holdings, Inc. Amended and Restated Executive Incentive Plan. | Quarterly Report on Form 10-Q (File No. 001-33160), filed May 6, 2010, Exhibit 10.1 | ||
10.26 | Amendment No. 3 dated as of October 15, 2010, to the Second Amended and Restated Credit Agreement, dated as of November 27, 2006, among Spirit AeroSystems, Inc. (f/k/a Mid-Western Aircraft Systems, Inc.), Spirit AeroSystems Holdings, Inc. (f/k/a Mid-Western Aircraft Systems Holdings, Inc.), the guarantors party thereto; Bank of America, N.A. and the other lenders party thereto. | Current Report on Form 8-K (File No. 001-33160), filed October 20, 2010, Exhibit 10.1 | ||
10.27 | Spirit AeroSystems Holdings, Inc. Amended and Restated Deferred Compensation Plan, As Amended | Quarterly Report on Form 10-Q (File No. 001-33160), filed May 6, 2011, Exhibit 10.34 | ||
10.28 | Employment Agreement between Spirit AeroSystems, Inc. and David Coleal, effective as of July 14, 2011 | Quarterly Report on Form 10-Q (File No. 001-33160), filed November 4, 2011, Exhibit 10.1 | ||
10.29 | Credit Agreement, dated as of April 18, 2012, among Spirit AeroSystems, Inc., the other guarantors party thereto, Bank of America, N.A. and the other agents and lenders party thereto | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 7, 2012, Exhibit 10.1 | ||
10.30 | Amendment No. 1, dated as of October 26, 2012, to Credit Agreement dated as of April 18, 2012 among Spirit Aerosystems, Inc., Spirit AeroSystems Holdings, Inc., the other guarantors party thereto, Bank of America, N.A. and the other agents and lenders party thereto | Current Report on Form 8-K (File No. 001-33160), filed October 30, 2012, Exhibit 10.1 | ||
10.31 | Amendment No. 2, dated as of August 2, 2013, to Credit Agreement dated as of April 18, 2012 among Spirit Aerosystems, Inc., Spirit AeroSystems Holdings, Inc., the other guarantors party thereto, Bank of America, N.A. and the other agents and lenders party thereto | * | ||
10.32 | Amended and Restated Employment Agreement, between Spirit AeroSystems, Inc. and Jon Lammers, effective as of July 24, 2012 | Quarterly Report on Form 10-Q (File No. 001-33160), filed November 5, 2012, Exhibit 10.1 | ||
10.33 | Amendment No. 2, dated March 4, 2011, to General Terms Agreement (Sustaining and Others) between The Boeing Company and Spirit AeroSystems, Inc. | Quarterly Report on Form 10-Q (File No. 001-33160), filed November 5, 2012, Exhibit 10.2 | ||
10.35 | Memorandum of Agreement, between The Boeing Company and Spirit AeroSystems, Inc., made as of March 9, 2012, amending Special Business Provisions (Sustaining) | Quarterly Report on Form 10-Q (File No. 001-33160), filed November 5, 2012, Exhibit 10.4 | ||
10.36 | Employment Agreement between Spirit AeroSystems, Inc. and Larry A. Lawson, effective as of March 18, 2013 | Current Report on Form 8-K (File No. 001-33160), filed March 22, 2013, Exhibit 10.1 |
165
Article I. Exhibit
Number |
Section 1.01 Exhibit |
Incorporated by
Reference to the Following Documents |
||
---|---|---|---|---|
10.37 | Retirement and Consulting Agreement and General Release between Spirit AeroSystems, Inc., Spirit AeroSystems Holdings, Inc. and Jeffrey L. Turner, effective as of May 2, 2013 | Current Report on Form 8-K (File No. 001-33160), filed May 6, 2013, Exhibit 10.1 | ||
10.38 | Retirement and Consulting Agreement and General Release between Spirit AeroSystems, Inc., Spirit AeroSystems Holdings, Inc. and Michael G. King, effective as of June 18, 2013 | Current Report on Form 8-K (File No. 001-33160), filed June 24, 2013, Exhibit 10.1 | ||
10.39 | Employment Agreement between Spirit AeroSystems, Inc. and Sanjay Kapoor, effective as of August 23, 2013 | Current Report on Form 8-K (File No. 001-33160), filed August 26, 2013, Exhibit 10.1 | ||
10.40 | Employment Agreement between Spirit AeroSystems, Inc. and Heidi Wood, effective as of July 15, 2013 | * | ||
10.41 | Amendment to Employment Agreement between Spirit Aerosystems, Inc. and Heidi Wood, effective as of July 15, 2013 | * | ||
10.42 | Form of Executive Compensation Letter | * | ||
12.1 | Ratio of Earnings to Fixed Charges | * | ||
14.1 | Code of Ethics | |||
(i) Spirit AeroSystems Holdings, Inc. Code of Ethics and Business Conduct, as amended | Quarterly Report on Form 10-Q (File No. 001-33160), filed August 5, 2011, Exhibit 14.1 | |||
(ii) Spirit AeroSystems Holdings, Inc. Code of Conduct for Finance Employees | Annual Report on Form 10-K (File No. 001-33160), filed March 5, 2007, Exhibit 14.1 | |||
21.1 | Subsidiaries of Spirit AeroSystems Holdings, Inc. | * | ||
23.1 | Consent of PricewaterhouseCoopers LLP | * | ||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | * | ||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | * | ||
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | ** | ||
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | ** | ||
101.INS@ | XBRL Instance Document. | * | ||
101.SCH@ | XBRL Taxonomy Extension Schema Document. | * | ||
101.CAL@ | XBRL Taxonomy Extension Calculation Linkbase Document. | * | ||
101.DEF@ | XBRL Taxonomy Extension Definition Linkbase Document. | * | ||
101.LAB@ | XBRL Taxonomy Extension Label Linkbase Document. | * |
166
Article I. Exhibit
Number |
Section 1.01 Exhibit |
Incorporated by
Reference to the Following Documents |
||
---|---|---|---|---|
101.PRE@ | XBRL Taxonomy Extension Presentation Linkbase Document. | * |
167
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Wichita, State of Kansas on February 19, 2014.
SPIRIT AEROSYSTEMS HOLDINGS, INC. | ||||
|
|
By: |
|
/s/ Sanjay Kapoor Sanjay Kapoor Senior Vice President and Chief Financial Officer |
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
---|---|---|---|---|
|
|
|
|
|
/s/ Larry A. Lawson
Larry A. Lawson |
Director, President and Chief Executive
Officer (Principal Executive Officer) |
February 19, 2014 | ||
/s/ Sanjay Kapoor Sanjay Kapoor |
|
Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
|
February 19, 2014 |
/s/ James Steven Sharp James Steven Sharp |
|
Corporate Controller (Principal Accounting Officer) |
|
February 19, 2014 |
/s/ Robert Johnson Robert Johnson |
|
Director, Chairman of the Board |
|
February 19, 2014 |
/s/ Charles Chadwell Charles Chadwell |
|
Director |
|
February 19, 2014 |
/s/ Ivor Evans Ivor Evans |
|
Director |
|
February 19, 2014 |
/s/ Paul Fulchino Paul Fulchino |
|
Director |
|
February 19, 2014 |
/s/ Richard Gephardt Richard Gephardt |
|
Director |
|
February 19, 2014 |
/s/ Ronald Kadish Ronald Kadish |
|
Director |
|
February 19, 2014 |
/s/ Christopher E. Kubasik Christopher E. Kubasik |
|
Director |
|
February 19, 2014 |
/s/ Tawfiq Popatia Tawfiq Popatia |
|
Director |
|
February 19, 2014 |
/s/ Francis Raborn Francis Raborn |
|
Director |
|
February 19, 2014 |
/s/ Jeffrey L. Turner Jeffrey L. Turner |
|
Director |
|
February 19, 2014 |
168
SCHEDULE II Valuation and Qualifying Accounts
Allowance for Doubtful Accounts, Warranties and Extraordinary Rework, and Deferred Tax Asset Valuation
(Deducted from assets to
which they apply)
Allowance for Doubtful Accounts
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 4.3 | $ | 1.4 | $ | | ||||
Charges to costs and expenses |
(0.2 | ) | 3.2 | 1.6 | ||||||
Write-offs, net of recoveries |
(4.3 | ) | (0.3 | ) | (0.2 | ) | ||||
| | | | | | | | | | |
Balance, December 31 |
$ | (0.2 | ) | $ | 4.3 | $ | 1.4 | |||
| | | | | | | | | | |
| | | | | | | | | | |
Warranties and Extraordinary Rework
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 30.9 | $ | 19.6 | $ | 18.7 | ||||
Charges to costs and expenses |
38.3 | 12.0 | 18.4 | |||||||
Write-offs, net of recoveries |
(0.6 | ) | (0.9 | ) | (17.5 | ) | ||||
Exchange rate |
0.1 | 0.2 | | |||||||
| | | | | | | | | | |
Balance, December 31 |
$ | 68.7 | $ | 30.9 | $ | 19.6 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
Deferred Tax Asset Valuation Allowance
|
2013 | 2012 | 2011 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance, January 1 |
$ | 10.4 | $ | 8.2 | $ | 5.3 | ||||
US deferred tax asset |
381.0 | | | |||||||
Income tax credits |
3.7 | 1.9 | 2.9 | |||||||
Depreciation and Amortization |
0.2 | 0.3 | | |||||||
Other |
1.2 | | | |||||||
| | | | | | | | | | |
Balance, December 31 |
$ | 396.5 | $ | 10.4 | $ | 8.2 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
169
Exhibit 10.17
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Amendment 8
SPECIAL BUSINESS PROVISIONS
between
THE BOEING COMPANY
and
SPIRIT AEROSYSTEMS, INCORPORATED
MS-65530-0016
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
TABLE OF CONTENTS
TITLE PAGE
TABLE OF CONTENTS
ATTACHMENTS
AMENDMENT PAGE
RECITAL PAGE
1.0 |
DEFINITIONS |
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9 |
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2.0 |
CONTRACT FORMATION |
|
13 |
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2.1 |
Order |
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13 |
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2.2 |
Entire Agreement |
|
13 |
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2.3 |
Incorporated by Reference |
|
13 |
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2.4 |
Written Authorization to Proceed |
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13 |
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3.0 |
SUBJECT MATTER OF SALE |
|
14 |
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3.1 |
Subject Matter of Sale |
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14 |
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3.2 |
Period of Performance |
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14 |
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3.3 |
Nonrecurring Work |
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14 |
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3.3.1 |
Engineering Services |
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14 |
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3.3.1.1 |
Engineering Services |
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14 |
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3.3.2 |
Product Development and Test |
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14 |
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3.3.2.1 |
Product Development and Test Activities |
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14 |
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3.3.2.2 |
Static and Fatigue Test Articles |
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15 |
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3.3.3 |
Certification Support |
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15 |
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3.3.4 |
Tooling |
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15 |
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3.3.4.1 |
Tooling General |
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15 |
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3.3.4.2 |
Contractor Use-Tooling (also known as Seller-Use Tooling) |
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15 |
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3.3.4.3 |
Common-Use Tooling |
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15 |
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3.3.4.4 |
Use of Casting, Forging and Extrusion Tooling |
|
16 |
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3.3.4.5 |
Initial Planning |
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16 |
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3.3.4.6 |
Title to Tooling |
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16 |
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3.3.4.7 |
Use and Disposition of Tooling |
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16 |
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3.3.4.8 |
Reserved |
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17 |
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3.3.4.9 |
Responsible Party |
|
17 |
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3.3.5 |
Life Cycle Product Teams |
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17 |
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3.3.6 |
Weight Status Reporting |
|
17 |
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3.4 |
Recurring Work |
|
17 |
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3.4.1 |
Production Articles |
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17 |
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3.4.2 |
Delivery Point and Schedule |
|
18 |
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3.4.2.1 |
Additional Events of Excusable Delay |
|
18 |
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3.4.3 |
Transportation Routing Instructions |
|
18 |
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3.4.4 |
Manufacturing Configuration |
|
18 |
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3.4.5 |
Sustaining Product Definition |
|
18 |
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3.4.6 |
Tooling Maintenance |
|
18 |
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3.4.7 |
Maintenance of Production Planning |
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19 |
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3.4.8 |
Certification Support |
|
19 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
|
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3.4.9 |
Type Design and Type Certification Data Development and Protection |
|
19 |
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3.4.10 |
Seller Authorized Representative (AR) Requirements and Obligations |
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19 |
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3.5 |
Product Support and Miscellaneous Work |
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19 |
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3.5.1 |
Miscellaneous Work |
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19 |
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3.5.2 |
Delivery Schedule of Other Products and Performance of Services |
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20 |
4.0 |
PRICING |
|
20 |
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4.1 |
Recurring Price |
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20 |
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4.1.1 |
Interim Extension Pricing |
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20 |
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4.2 |
RESERVED |
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21 |
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4.3 |
Pricing of Requirements for Modification or Retrofit |
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21 |
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4.3.1 |
Boeing Responsibility or Regulatory Requirement |
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21 |
|
|
4.3.2 |
Reserved |
|
21 |
|
4.4 |
Expedite of Production Requirements |
|
21 |
|
|
4.5 |
Pricing for Derivatives |
|
21 |
|
|
4.6 |
POA Pricing |
|
21 |
|
5.0 |
PAYMENT |
|
22 |
||
|
5.1 |
Invoicing |
|
22 |
|
|
|
5.1.1 |
Invoicing Requirements |
|
22 |
|
|
5.1.2 |
Invoicing Shipset Identification |
|
22 |
|
|
5.1.3 |
Customs Invoicing |
|
22 |
|
|
5.1.4 |
Mailing Instructions |
|
22 |
|
|
5.1.5 |
Pay From Receipt |
|
22 |
|
5.2 |
Recurring Payment |
|
23 |
|
|
|
5.2.1 |
Non-Recurring Payment |
|
23 |
|
5.3 |
Payment Method |
|
25 |
|
|
5.4 |
Payment Errors |
|
25 |
|
6.0 |
CHANGES |
|
25 |
||
7.0 |
CHANGE PROVISIONS |
|
26 |
||
|
7.1 |
Price Adjustment for Changes |
|
26 |
|
|
7.2 |
Change Pricing Criteria |
|
26 |
|
|
7.3 |
Reserved |
|
28 |
|
|
7.4 |
Reserved |
|
28 |
|
|
7.5 |
Schedule Acceleration/Deceleration |
|
28 |
|
|
|
7.5.1 |
Production Rates |
|
28 |
|
7.6 |
Total Cost Management |
|
28 |
|
|
|
7.6.1 |
Boeing Generated Technical and Cost Improvement |
|
29 |
|
7.7 |
Obsolescence |
|
29 |
|
|
7.8 |
Reserved |
|
29 |
|
|
7.9 |
Proposals for Price Adjustment |
|
29 |
|
|
7.10 |
Apportionment and Payment of Price Adjustments |
|
32 |
|
|
|
7.10.1 |
Recurring Work Price Adjustment |
|
32 |
|
|
7.10.2 |
Apportionment and Payment |
|
32 |
8.0 |
GOVERNING QUALITY ASSURANCE REQUIREMENTS |
|
32 |
||
9.0 |
STATUS REPORTS/REVIEWS |
|
32 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
|
9.1 |
Notification of Shipment |
|
32 |
|
|
9.2 |
General Reports / Reviews |
|
33 |
|
|
9.3 |
Cost Performance Visibility |
|
33 |
|
|
9.4 |
Problem Reports |
|
34 |
|
|
9.5 |
Notice of Delay - Premium Effort |
|
35 |
|
|
9.6 |
Diversity Reporting Format |
|
35 |
|
|
9.7 |
Planning Schedule |
|
35 |
|
10.0 |
BOEING ASSISTANCE |
|
35 |
||
|
10.1 |
Boeing Technical / Manufacturing Assistance Regarding Sellers Nonperformance |
|
35 |
|
|
10.2 |
Other Boeing Assistance |
|
36 |
|
11.0 |
REPAIR AUTHORIZATION |
|
36 |
||
|
11.1 |
Boeing-Performed Work |
|
36 |
|
|
11.2 |
Reimbursement for Repairs |
|
36 |
|
12.0 |
OTHER REQUIREMENTS |
|
37 |
||
|
12.1 |
SUPPORTING DOCUMENTATION |
|
37 |
|
|
|
12.1.1 |
Supporting Documentation and Priority |
|
37 |
|
|
12.1.2 |
Revision of Documents |
|
37 |
|
|
12.1.3 |
Compliance |
|
38 |
|
12.2 |
Reserved |
|
38 |
|
|
12.3 |
ACCOUNTABILITY FOR TOOLING |
|
39 |
|
|
12.4 |
CERTIFIED TOOL LISTS |
|
39 |
|
|
12.5 |
BOEING FURNISHED TOOLING |
|
39 |
|
|
12.6 |
PACKAGING AND SHIPPING |
|
39 |
|
|
|
12.6.1 |
Packaging |
|
39 |
|
|
12.6.2 |
Product Packaging |
|
40 |
|
|
12.6.3 |
Disposable Shipping Fixtures |
|
40 |
|
|
12.6.4 |
Packing Sheet and Test Reports |
|
40 |
|
|
12.6.5 |
Additional Copies |
|
41 |
|
|
12.6.6 |
Price Inclusive |
|
41 |
|
12.7 |
CYCLE TIME REQUIREMENTS |
|
41 |
|
|
12.8 |
COMPATIBILITY WITH ENGINEERING BUSINESS AND PRODUCTION SYSTEMS |
|
41 |
|
|
12.9 |
ELECTRONIC ACCESS AND EXCHANGE OF DIGITAL PRODUCT DEFINITION |
|
41 |
|
|
|
12.9.1 |
Exchange of Digital Product Definition between Boeing and Seller |
|
41 |
|
|
12.9.2 |
Systems/Software Compatibility between Boeing and Seller |
|
41 |
|
|
12.9.3 |
Electronic Access, Communications and Data Exchange via Telecommunications |
|
42 |
|
12.10 |
PROGRAM MANAGER |
|
42 |
|
|
12.11 |
SUBCONTRACTING |
|
42 |
|
|
|
12.11.1 |
Subcontractors and Suppliers |
|
43 |
|
12.12 |
INTERNATIONAL COOPERATION |
|
43 |
|
|
|
12.12.1 |
Market Access and Sales Support |
|
43 |
|
|
12.12.2 |
Offset Assistance |
|
44 |
|
12.13 |
SUPPLY CHAIN INTEGRATION |
|
44 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
|
|
12.13.1 |
Supplier Banked Material (SBM) or Boeing Provided Details (BPD) |
|
44 |
|
|
|
12.13.1.1 ATA Stringers |
|
45 |
|
|
12.13.2 |
Boeing Raw Material Strategy |
|
45 |
|
|
12.13.3 |
Third Party Pricing |
|
46 |
|
|
|
12.13.3.1 Toray Raw Material |
|
46 |
|
|
12.13.4 |
Obligation to Accept Assignment of Contracts |
|
47 |
|
12.14 |
Reserved |
|
47 |
|
|
12.15 |
LIFE CYCLE PRODUCT TEAM |
|
47 |
|
|
|
12.15.1 |
Purpose |
|
47 |
|
|
|
12.15.1.1 Qualifications |
|
48 |
|
|
12.15.2 |
Work Schedule |
|
48 |
|
|
12.15.3 |
Equipment and Supplies |
|
48 |
|
|
12.15.4 |
Employment Status |
|
48 |
|
|
12.15.5 |
Team Leader |
|
49 |
|
|
12.15.6 |
Discipline |
|
49 |
|
|
12.15.7 |
Removal of Personnel |
|
49 |
|
12.16 |
INCREMENTAL RELEASE |
|
49 |
|
|
12.17 |
PARTICIPATION |
|
49 |
|
|
|
12.17.1 |
Other Boeing Entities |
|
49 |
|
|
12.17.2 |
RESERVED |
|
50 |
|
|
12.17.3 |
RESERVED |
|
50 |
|
|
12.17.4 |
Notification of Contract |
|
50 |
|
12.19 |
Surplus Products |
|
50 |
|
|
|
12.19.1 |
Return of Surplus Products |
|
50 |
|
|
12.19.2 |
Substitution of Surplus Products |
|
50 |
13.0 |
ORDER OF PRECEDENCE |
|
51 |
||
14.0 |
RESERVED |
|
52 |
||
15.0 |
APPLICABLE LAW |
|
52 |
||
16.0 |
PRODUCT SUPPORT AND ASSURANCE |
|
52 |
||
|
16.1 |
Warranty |
|
52 |
|
|
|
16.1.1 |
Product Support and Assurance Document (PSAD) D6-83315 |
|
52 |
17.0 |
ADMINISTRATIVE MATTERS |
|
52 |
||
|
17.1 |
Administrative Authority |
|
52 |
|
|
17.2 |
Administrative Agreement |
|
53 |
|
18.0 |
OBLIGATION TO PURCHASE AND SELL |
|
53 |
||
|
18.1 |
Replacements |
|
53 |
|
19.0 |
STRATEGIC ALIGNMENT / SUBCONTRACTING |
|
53 |
||
20.0 |
OWNERSHIP OF INTELLECTUAL PROPERTY |
|
54 |
||
|
20.1 |
Technical Work Product |
|
54 |
|
|
20.2 |
Inventions and Patents |
|
54 |
|
|
20.3 |
Works of Authorship and Copyrights |
|
55 |
|
|
20.4 |
Pre-Existing Inventions and Works of Authorship |
|
56 |
|
21.0 |
SOFTWARE PROPRIETARY INFORMATION RIGHTS |
|
56 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
22.0 |
INFRINGEMENT |
|
56 |
|
23.0 |
DIGITIZATION OF PROPRIETARY INFORMATION AND MATERIALS |
|
57 |
|
24.0 |
CONFIGURATION CONTROL |
|
57 |
|
25.0 |
RESERVED |
|
57 |
|
26.0 |
ON-SITE SUPPORT |
|
58 |
|
|
26.1 |
Indemnification Negligence of Seller or subcontractor |
|
58 |
|
26.2 |
Commercial General Liability |
|
58 |
|
26.3 |
Automobile Liability |
|
59 |
|
26.4 |
Workers Compensation |
|
59 |
|
26.5 |
Certificates of Insurance |
|
59 |
|
26.6 |
Self-Assumption |
|
59 |
|
26.7 |
Protection of Property |
|
60 |
|
26.8 |
Compliance with Boeing Site Requirements |
|
60 |
27.0 |
RESERVED |
|
60 |
|
28.0 |
DELIVERY - TITLE AND RISK OF LOSS |
|
60 |
|
|
28.1 |
Title and Risk of Loss |
|
60 |
29.0 |
RESERVED |
|
61 |
|
30.0 |
CUSTOMER CONTACT |
|
61 |
|
31.0 |
RESERVED |
|
61 |
|
|
31.1 |
Interest on Overdue Amounts |
|
61 |
32.0 |
SURVIVAL |
|
61 |
|
33.0 |
INVENTORY AT CONTRACT COMPLETION |
|
62 |
|
34.0 |
SELLER ASSISTANCE |
|
62 |
|
35.0 |
NONRECURRING WORK TRANSFER |
|
63 |
|
36.0 |
DISPOSITION OF TOOLING |
|
63 |
|
37.0 |
CUSTOMS-TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT) |
|
64 |
|
38.0 |
ENVIRONMENTAL MANAGEMENT SYSTEMS AND HEALTH AND SAFETY MANAGEMENT SYSTEMS |
|
64 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
ATTACHMENTS
Attachment 1 |
|
Work Statement and Pricing |
Attachment 2 |
|
Production Article Definition and Contract Change Notices |
Attachment 3 |
|
Reserved |
Attachment 4 |
|
Additional Statement of Work |
Attachment 5 |
|
Rates and Factors |
Attachment 8 |
|
Lead time Matrix (Accel/Decel) |
Attachment 7 |
|
Indentured Priced Parts List and POA Pricing |
Attachment 8 |
|
Seller Data Submittals |
Attachment 9 |
|
Non-Recurring Agreements |
Attachment 10 |
|
Quality Assurance Requirements |
Attachment 11 |
|
Second Tier Support |
Attachment 12 |
|
Non-U.S. Procurement Report Form |
Attachment 13 |
|
Reserved |
Attachment 14 |
|
Production Article Delivery Schedule |
Attachment 15 |
|
Model Mix Constraint Matrix |
Attachment 16 |
|
Boeing Furnished Material/Boeing Provided Details |
Attachment 17 |
|
Reserved |
Attachment 18 |
|
Reserved |
Attachment 19 |
|
Reserved |
Attachment 20 |
|
Quantity Price Adjustment |
Attachment 21 |
|
Commodity Listing and Terms of Sale |
Attachment 22 |
|
Abnormal Escalation |
Attachment 23 |
|
767-2C SOW |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
AMENDMENTS
Amend
|
|
Description |
|
Date |
|
Approval |
1 |
|
Revise Company name from Mid-Western Aircraft Systems Incorporated to Spirit AeroSystems throughout document. Update attachments 1, 2, 4, 14 and 16. |
|
2/23/06 |
|
H. McCormick/
|
2 |
|
Incorporate CCNs as listed in attachment 2, includes addition of new section 12,19, modification to sections 3.4.9,12.16 and 32.0, updates to attachments 1, 2, 6, 7, 15, 16, 19 and 20. |
|
4/11/07 |
|
H. McCormick/
|
3 |
|
Incorporate CCNs as listed in attachment 2, updates to attachments 1, 2, 7, 14, 15, 16 and 22. |
|
11/28/07 |
|
H. McCormick/
|
4 |
|
Incorporate CCNs as listed in attachment 2. Updates to Attachments 1, 2, 7, 14, 15, 16. Incorporate Attachment 1A per CCN 508, 1328. |
|
7/8/08 |
|
S. Hu
|
5 |
|
Incorporate CCNs as listed in attachment 2, includes addition of new section 12.3.1.1. Updates to Attachments 1, 2, 7, 14, 15, 16, 20. |
|
6/22/09 |
|
S. Hu
|
6 |
|
Incorporate CCNs as listed in attachment 2. Updates to Attachments 1, 2, 4, 7, 9, 10, 14, 16. Incorporate Attachment 9 per CCN 2385. |
|
11/23/10 |
|
S. Hu
|
7 |
|
Incorporate CCNs as listed in attachment 2, includes addition of new section 12.13.3.1. Updates to Attachments 1, 2, 4, 7, 9, 14, 16. Incorporate Attachment 1B per CCN 4212 and Attachment 23 per the 767-2C MOA. |
|
7/29/11 |
|
S. Hu
|
8 |
|
Incorporate CCNs as listed in attachment 2, includes revisions to section 7.9 and 12.13.1.1. Updates to Attachments 1, 2, 4, 7, 9, 14, 15, 16. |
|
2/6/2013 |
|
C. Howell
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
THESE SPECIAL BUSINESS PROVISIONS (SBP) are entered into as of June 16, 2005 by and between Spirit AeroSystems Inc., a Delaware Corporation with its principal office in Wichita, Kansas (Seller), and The Boeing Company, a Delaware corporation acting by and through its Boeing Commercial Airplanes business unit (collectively and individually Boeing). Hereinafter, the Seller and Boeing may be referred to jointly as Parties hereto.
Now, therefore , in consideration of the mutual covenants set forth herein, the Parties agree as follows:
SPECIAL BUSINESS PROVISIONS
1.0 DEFINITIONS
The definitions used herein are the same as those used in the GTA. In addition, the following terms are defined as follows:
A. Aircraft means a completed Program Airplane ready for delivery or delivered to a Customer.
B. Boeing Proprietary Spare Parts means all Spare Parts, which are manufactured (i) by Boeing, or (ii) to Boeings detailed design with Boeings authorization, or (iii) in whole or in part using Boeing Proprietary Information.
C. Boeing-Use Tooling means certain gauge and interface Tooling (not including Boeing master gauges) manufactured by Seller in accordance with designs provided by Boeing, to be used exclusively by Boeing.
D. Common-Use Tooling means all Contractor-Use Tooling that enters into a Boeing facility or Boeing designated destination and that is required for use by Boeing and Seller, and, if applicable, a third party.
E. Contract Change Notice or CCN means any written notice sent by Boeing to Seller describing any Change to the general scope of this SBP pursuant to SBP Section 6.0 and authorizing Seller to proceed with the performance of work hereunder in accordance with such Change description.
F. Contractor-Use Tooling (also known as Seller-Use Tooling) means all Tooling needed to manufacture and deliver Products (including but not limited to, Supplier-Use Tools, Common-Use Tools, Mechanical Handling Equipment, Rotating Tools, Shipping Equipment, Interface Control Tools and Interface Production Tools as defined in Boeing Document D33200-1).
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
G. Cycle Time means the period of time that elapses between the dates the Program executes a Customer implementation directive for a Program Airplane and delivery of such Program Airplane to such Customer.
H. Dataset means any compilation of data or information (including, without limitation, numerical data, geometric definitions, program instructions or coded information) which may be used directly in, integrated with or applied to, a computer program for further processing. A Dataset may be a composite of two or more other Datasets or an extract of a larger Dataset.
I. Derivative means any model airplane that either (1) can be FAA certificated by an amendment to an existing Type Certificate through addition of a new minor model, or by a Supplemental Type Certificate; and bears the same major model designation as an airplane currently being manufactured (e.g., 737, 747, 767, 777) by Boeing: or (2) includes all of the following conditions: (a) has the same number of engines as the existing model airplane; (b) utilizes essentially the same aerodynamic and propulsion design, major assembly components, and systems as the existing model airplane; (c) achieves other payload/range combinations by changes in body length, engine thrust or variations in certified gross weight; (d) has the same body cross-section as the subject model aircraft; and (e) uses substantially the same technology, design, materials, specifications, and manufacturing processes as existing Program Airplane. Derivative does not mean Boeing Integrated Defense Systems (IDS) Products or any BCA aircraft delivered to Boeing IDS except as currently provided in Attachment 4. A Derivative does not include any subject model airplane, which has been or was currently in production as of the date of execution of this SBP, or any new airplane program receiving a new major model designation and which requires a new Type Certificate.
J. Drawing means an electronic or manual depiction of graphics or technical information representing a Product or any part thereof and which includes the parts list and specifications relating thereto.
K. Effective Date means the date on which both parties fully execute this SBP.
L. End Item Assembly means any Product which is described by a single part number and which is comprised of more than one component part.
M. Engineering Release means engineering Drawings, Datasets or other Documents, that define the design requirements of any Product.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
N. Existing Tooling means all accountable Tooling relating to this SBP in the possession of Boeing on the date hereof, Existing Boeing-Use Tooling, Existing Common-Use Tooling and Existing Contractor-Use Tooling means respectively Boeing-Use Tooling, Common-Use Tooling and Contractor-Use Tooling that are not New Tooling.
O. Life Cycle Product Team or LCPT, Integrated Product Team or IPT or Design Build Team or DBT means a team composed of representatives from engineering, operations, procurement, finance, design-to-cost and other disciplines as Boeing and Seller shall specify whose objective is to optimize designs for cost, weight, performance and producibility.
P. Manufacturing Work Package or Work Package means manufacturing effort that Seller will provide under this SBP.
Q. Miscellaneous Work is Seller performed work or services that includes, but is not limited to provision of additional test articles, New Boeing-Use Tooling, test support, field support and Boeing-used supplier facilities.
R. New Tooling means all Tooling other than Existing Tooling. New Boeing-Use Tooling, New Common-Use Tooling, or New Contractor-Use Tooling, respectively, means Boeing-Use Tooling, Common-Use Tooling, or Contractor-Use Tooling, respectively, that is not Existing Tooling.
S. Nonrecurring Work is Seller performed work other than Recurring Work or Spares and Miscellaneous Work, which may include, but is not limited to Product Definition, product development, Tooling, static and fatigue test articles, Transportation Devices and planning.
T. Obsolescence means the discontinuation of the requirement for any Product as a result of engineering or manufacturing change, which has rendered such Product no longer usable in the production of the Program Airplane or any Derivative.
U. Person means any individual, partnership, corporation, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity.
V. Price means the amount to be paid by Boeing to Seller for any Product in accordance with the terms of this SBP.
W. Products In addition to the definition in the GTA, Products has the meaning of Product Definition.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
X. Product Definition means the engineering design deliverables (layouts, interface drawings, stress notes, etc.) required to design, build, test, certify, deliver and support Orders.
Y. Production Articles means those completed assemblies defined and configured, including SCD Products, as set forth in SBP Attachment 1 and 2 Production Article Definition and Contract Change Notices for the Program Airplane and any Derivative, and not including Products or Production Articles used for modification or retrofit of previously delivered Program Airplanes, except as provided in SBP Section 4.3.1. Purchases of Parts or Production Articles for modifications or retrofits, other than those described in Section 4.3.1, shall be governed by SBP number SBP-6-5118-AEC-016.
Z. Program means the design, development, marketing, manufacture, sales and customer support of Program Airplanes, Derivatives and Products.
AA. Program Airplane means a Boeing commercial transport aircraft having a model designation of 737, 747, 767 or 777 for which Seller shall provide Product Definition and Production Articles pursuant to this SBP.
BB. Purchased on Assembly (POA) means any detail component needed to replace a component on an End Item Assembly currently in Boeings assembly line process.
CC. Recurring Shipset Price or Recurring Price means the Price for the Recurring Work associated with each Shipset and or part as identified in Attachment 1.
DD. Recurring Work means work Seller performs in producing Product Definition and Production Articles. The cost of Recurring Work can include, but is not limited to design, tool maintenance, replacement, and storage, packaging, disposable shipping fixtures and maintenance of production planning.
EE. Replacement means any model airplane that is not a Derivative airplane and substantially takes the place of a current model or models, or serves the same market segment or both.
FF. SCD Products means all goods, including components and parts thereof, designed to a Boeing Specification Control Drawing by Seller or its subcontractors or suppliers, and provided or manufactured under this Contract.
GG. Shipset means the total set of Production Articles provided by Seller hereunder necessary for production of one Program Airplane or Derivative.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
HH. Tooling For purposes of this SBP, Tooling means all tooling, used in production or inspection of Products, either provided to Seller by Boeing or supplied by Seller whereby Boeing agrees to pay Seller for the manufacture of such tooling, including New Tooling and Existing Tooling.
2.0 CONTRACT FORMATION
2.1 Order
Any Order to which this SBP applies will include a statement incorporating this SBP by reference unless otherwise specifically agreed to in writing by the Parties.
Each such Order will be governed by and be deemed to include the provisions of this SBP.
2.2 Entire Agreement
The Order, this SBP, the GTA, the AA, and the EAA sets forth the entire agreement, and supersede any and all other prior agreements, understandings and communications between Boeing and Seller related to the subject matter of an Order. The rights and remedies afforded to Boeing or Customers pursuant to any provisions of an Order are in addition to any other rights and remedies afforded by any other provisions of the Order, the General Terms Agreement (GTA) or the SBP, by law or otherwise.
2.3 Incorporated by Reference
General Terms Agreement (GTA) BCA-65530-0016 dated June 16, 2005 is incorporated in and made a part of this SBP by this reference.
Administrative Agreement (AA) AA-65530-0010 dated June 16, 2005 is incorporated in and made a part of this SBP by this reference.
In addition to any other documents incorporated elsewhere in this SBP or GTA by reference, the Documents set forth in SBP Section 12.1 Supporting Documentation are incorporated in and made a part of this SBP by reference with full force and effect, as if set out in full text. It is the Sellers responsibility to comply with the latest revision of these documents as made available by Boeing.
2.4 Written Authorization to Proceed
Boeings Procurement Representative may give written or electronic authorization to Seller to commence performance before Boeing issues an Order as provided in the GTA.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3.0 SUBJECT MATTER OF SALE
3.1 Subject Matter of Sale
Subject to the provisions of this SBP, Seller shall sell to Boeing and Boeing shall purchase from Seller certain Products as described in this SBP including, certain Production Articles and other recurring Products as described in SBP Section 3.4 Recurring Work, and other Miscellaneous Work as described in SBP Section 3.5 Product Support and Miscellaneous Work. In addition, Seller shall be responsible for providing engineering services and other Nonrecurring Work as described in SBP Section 3.3 Nonrecurring Work
3.2 Period of Performance
The period of performance for this SBP shall include manufacturing and all other activities required to support delivery of Products from June 16, 2005 through life of Program Airplanes and Derivatives of those Program Airplanes.
3.3 Nonrecurring Work
3.3.1 Engineering Services
3.3.1.1 Engineering Services
Seller is responsible for engineering activities as set forth in Attachment 4 Additional Statement of Work. Seller responsibilities for the work packages defined in Attachment 1 include those items outlined in Attachment 4.
Design shall conform to the standards and requirements set forth in Attachment 4 Additional Statement of Work and Product Definition in schedules set forth in Attachment 13 and the applicable documents referred to in SBP Section 12.1 Supporting Documentation.
3.3.2 Product Development and Test
3.3.2.1 Product Development and Test Activities
Seller is responsible for all product development and test activities required to design, build, test, deliver, certify, and support Products as set forth in SBP Attachment 4 Additional Statement of Work. Seller shall also prepare, and Boeing shall have the right to review, initial product development and test planning documentation as necessary to produce Product Definition, Production Articles in accordance with SBP Attachment 2 Production Article Definition and Contract Change Notices and Spare Parts in accordance with SBP Attachment 7.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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Special Business Provisions (SBP)
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3.3.2.2 Static and Fatigue Test Articles
Seller will provide Boeing with Products and associated hardware as set forth in SBP Attachment 2 Production Article Definition and Contract Change Notices for static and fatigue tests, and as scheduled in SBP Attachment 14.
3.3.3 Certification Support
Seller is responsible for all certification activities as set forth in SBP Attachment 4 Additional Statement of Work including the associated costs.
3.3.4 Tooling
3.3.4.1 Tooling General
Boeing will retain ownership of all Existing Tooling and shall acquire ownership of all New Tooling upon passage of title thereto to Boeing in accordance with Section 3.3.4.6 of this SBP, and for financial reporting purposes and income tax purposes the Parties shall treat all Tooling so owned by Boeing in a manner consistent with Boeings ownership thereof. Subject only to Sellers right of use granted by Boeing hereunder and without diminishing the obligations of Seller hereunder, Boeing shall have and retain all rights, title and interest in all Tooling. Seller shall be entitled to use Tooling for the purposes of performing its obligations of this SBP and for Spares and MRO aftermarket according to the terms of the HMSGTA, any applicable SLAs and any other applicable SBPs.
All Tooling produced or used in performance of this SBP must conform to the provisions of Boeing Document D953W001, General Operations Requirements Document for Suppliers External/Internal Suppliers/Program Partners, and D33200-1, Boeing Suppliers Tooling Document or, subject to Boeings review and approval not to be unreasonably withheld or delayed, its equivalent or replacement document.
3.3.4.2 Contractor Use-Tooling (also known as Seller-Use Tooling)
As of the date hereof, Seller is responsible for providing all New Contractor-Use Tooling (as defined in New Tooling) needed to manufacture and deliver Products as required in the performance of this SBP. Seller shall plan, design, manufacture or procure, and test all New Contractor-Use Tooling. Existing Contractor-Use Tooling (as defined in Existing Tooling) and New Contractor-Use Tooling shall be in the configuration, quantity and quality required to produce (i) Production Articles in accordance with SBP Attachment 14 and (ii) other Boeing requirements for Products (including, without limitation, Spare Parts).
3.3.4.3 Common-Use Tooling
Seller shall design, manufacture or procure, and test all New Common-Use Tooling including, without limitation, strongback handling fixtures, rotable
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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shipping fixtures and handling fittings. The requirements for such items will be defined and identified by Boeing.
3.3.4.4 Use of Casting, Forging and Extrusion Tooling
Boeing or its designees shall have and retain the right to use all Tooling for the production of castings, forgings and extrusions produced at Sellers direction for use under this SBP and such Tooling shall be used only in the performance of this SBP or any other SBP that Boeing may designate in writing. Such Tooling shall be retained for use in production of castings, forgings and extrusions for Boeing or as Boeing directs until Boeing gives written notice to Seller that a requirement for the use of such Tooling no longer exists. Subject to the terms of this SBP, Boeing hereby grants to Seller the right to use any Tooling during the term of this SBP for the production of castings, forgings or extrusions that will become part of any Product, in which Boeing has a right of use, ownership or other proprietary interest.
3.3.4.5 Initial Planning
Seller will perform all Tooling and production planning activities. Seller shall also prepare, and Boeing shall have the right to review, Tooling and production planning documentation as necessary to evaluate Sellers ability to produce Production Articles in accordance with SBP Attachment 2 Production Article Definition and Contract Change Notices SBP Attachment 4 Additional Statement of Work and Spare Parts.
3.3.4.6 Title to Tooling
Boeing shall retain title to all Existing Tooling. Title to all New Tooling shall pass from Seller or any of Sellers subcontractors to Boeing upon completion of the manufacture of such New Tooling by Seller or any of its subcontractors and after payment therefore by Boeing, in accordance with Section 5.2.1 or otherwise, and such title shall thereafter be retained by Boeing for all purposes. Seller shall ensure that any subcontract for the production of New Tooling provides for the passing of title to Boeing pursuant to the immediately preceding sentence.
3.3.4.7 Use and Disposition of Tooling
Seller shall use any and all Tooling only for the purpose of performing its obligations under this SBP, except as provided in SBP Section 3.3.4.1, and shall not sell, lease or otherwise dispose of any Tooling. Seller shall, on behalf of Boeing as the owner thereof obtain and maintain in effect insurance in respect of all Seller-Use Tooling and Common-Use Tooling (other than such Tooling, which is in the actual possession of Boeing,). Seller shall not create or be responsible for the creation by others, any lien, claim or right of any person or entity other than the rights of Boeing, in respect of any Tooling, under this SBP.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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Special Business Provisions (SBP)
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3.3.4.8 Reserved
3.3.4.9 Responsible Party
Seller shall absorb alt costs associated with non-accountable tooling manufactured and/or purchased by Seller necessary for the manufacture and delivery of the Products including but not limited to rework, repair, replacement and maintenance of the tooling. Seller shall not use tools, which contain, convey, embody, or were made in accordance with or by reference to any Proprietary Information and Materials of Boeing, to manufacture parts for anyone other than Boeing without the prior written authorization of Boeing; provided, however, that Seller shall be entitled to use Tooling as provided in SBP Section 3.3.4.1.
When Boeing agrees to pay for Tooling to support the manufacture and delivery of applicable Product(s) identified herein, the amount shall be set forth in SBP Attachment 1. The costs of necessary repair and maintenance to the Tooling are included in such amount. Invoices received with incorrect, improperly prepared or incomplete certified tool lists will be returned for correction prior to payment. Invoices shall be dated concurrent with, or subsequent to, shipment of the Products. Boeing shall notify Seller of any action required for discrepant Tooling, other than Boeing-Use Tooling.
3.3.5 Life Cycle Product Teams
Seller shall, in accordance with SBP Section 12.15 and as mutually agreed between the Parties locate at Boeings facilities key personnel for Life Cycle Product Teams (LCPTs) as may be required.
3.3.6 Weight Status Reporting
Seller shall report to Boeing the actual weights of Products in accordance with the requirements of Document D6T-10898-1, Weight Compliance Requirements/Participant Contractors.
3.4 Recurring Work
3.4.1 Production Articles
Upon acceptance of the initial and subsequent Orders, Seller shall provide the Production Articles specified in SBP Attachment 1 Statement of Work, Attachment 2 Production Article Definition and Contract Change Notices in accordance with the delivery schedules set forth in SBP Attachment 14 and/or the Order. All Production Articles will be designed, manufactured, certified, tested, delivered, and supported in accordance with the specifications and schedules set forth in this SBP.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
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3.4.2 Delivery Point and Schedule
Notwithstanding the provisions of GTA Section 4.1, deliveries of Production Articles shall be strictly in accordance with the quantities, the schedule and other requirements specified by Boeing. Notwithstanding the provisions of GTA Section 4.1, all Products shall be delivered F.O.B. carriers transport at Sellers plant.
3.4.2.1 Additional Events of Excusable Delay
In addition to those Excusable Delays described in GTA Section 14.0, in the event of a delay caused by Boeing affecting Sellers on time delivery, Boeing and Seller shall seek commercially practical solutions to assure Boeing maintains on-schedule delivery of the airplane to the airplane customer.
3.4.3 Transportation Routing Instructions
Products shall be transported by the agent, carriers and routings specified by Boeing. Seller shall obtain the prior approval of Boeing, not to be unreasonably withheld or delayed, before shipping any Products on a route other than that specified by Boeing.
3.4.4 Manufacturing Configuration
The pricing set forth in SBP Attachment 1, as of the date hereof, is based on the latest definition or revisions of the statement of work, as of the date hereof, and is subject to change in accordance with this SBP.
3.4.5 Sustaining Product Definition
Seller shall provide Product Definition and sustaining engineering in accordance with the documents set forth in Attachment 4 Additional Statement of Work, Attachment 13 Product Definition Schedule and the applicable documents referred to in SBP Section 12.1 Supporting Documentation.
3.4.6 Tooling Maintenance
Seller shall provide at no cost to Boeing on Boeings behalf as the owner thereof, control, accountability, care, storage, maintenance, insurance and replacements of all Contractor-Use Tooling and Common-Use Tooling in the possession of Seller or its subcontractors in accordance with Document D33200, Boeing Suppliers Tooling Document or, subject to Boeing review and approval, not to be unreasonably withheld or delayed, its equivalent or replacement, as required to support the manufacture, certification, support and delivery of Products; it being understood, however, that Boeing as the owner thereof bears the economic burden of depreciation and obsolescence of all Tooling.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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Special Business Provisions (SBP)
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3.4.7 Maintenance of Production Planning
Seller will revise and maintain the production planning as required to support the production and certification of Production Articles and Spare Parts.
3.4.8 Certification Support
Seller is responsible for all certification activities as set forth in SBP Attachment 4 Additional Statement of Work including the associated costs.
3.4.9 Type Design and Type Certification Data Development and Protection
Seller is responsible for the development and maintenance of all type design and type certification data for which they have type design/certification responsibility and/or support type design/certification, including where applicable, flow down requirements to Sellers subcontractors and suppliers. Seller shall maintain such type design and type certificate data in accordance with Boeing Document D6-83393, Certification Records Retention for Boeing Suppliers for the life of such type certificate. As part of this SBP Boeing is entitled to access, review and receive the type design/certification and data in a manner Boeing and Seller agree to in the D6-83393 or a records management agreement. Boeing Document D6-83393 is incorporated in and made a part hereof by this reference. Seller shall make available to Boeing, upon request, all compliance data as set forth in the D6-83393 related to the Product(s) which is maintained by Seller or Sellers subcontractors or suppliers. Such records shall be made available as soon as possible but in no event later than seventy-two (72) hours of Boeings request.
3.4.10 Seller Authorized Representative (AR) Requirements and Obligations
Sellers AR as designated and approved by Boeing shall operate and act in accordance with Boeing Document DOA-300064-NM Delegated Option Authorization Procedures Manual or BCA Delegated Compliance Organization Procedures Manual as amended from time to time including but not limited to providing compliance findings to Boeing Delegated Compliance Organization. Said document is incorporated and made a part hereof by this reference.
3.5 Product Support and Miscellaneous Work
3.5.1 Miscellaneous Work
Seller shall provide to Boeing Miscellaneous Work, including, without limitation New Boeing-Use Tooling, field support or other related program support items, as may be ordered by Boeing from time to time.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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Special Business Provisions (SBP)
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3.5.2 Delivery Schedule of Other Products and Performance of Services
All deliveries of other Products and performance of services will be as set forth in any applicable Order, as set forth in SBP Section 3.4.2.
4.0 PRICING
4.1 Recurring Price
The Price of Recurring Products is set forth in SBP Attachment 1 and includes the total price for all work under this SBP; subject to any applicable adjustment under SBP Section 7.0.
Prices shall be firm fixed priced through the eighth anniversary of the first day of the month in which both Parties fully execute this SBP as developed using Attachment 20 and listed in Attachment 1. For example, if the Parties fully execute this SBP on March 25, 2005 then the eighth anniversary of the first day of the month of that execution is March 1, 2013. In addition, Attachment 1 work package price(s) are subject to adjustment for abnormal escalation as provided in Attachment 22.
Twenty Four (24) months prior to the eighth anniversary of the first day of the month in which both Parties fully execute this SBP, Seller will propose pricing for the following ten (10) years or a period agreed upon by the Parties.
The Parties will negotiate pricing in good faith based on then-prevailing domestic market conditions for 41 sections (all programs), 737 fuselage, 737/777 struts & nacelles and then-prevailing global market conditions for all other Products.
4.1.1 Interim Extension Pricing
If the Parties are unable to reach agreement on Pricing by the date which is six months prior to the end of the period for which Pricing has been fixed, then such matter shall be resolved pursuant to GTA Section 33.0. If any dispute on Pricing continues after the eighth anniversary of the first day of the month in which both Parties fully execute this SBP, then interim Pricing shall be established. Interim Pricing shall be the then current Base Price (as of the eighth anniversary referred to above) adjusted in accordance with SBP Attachment 20 and escalated annually using the indices outlined below. At such time as a resolution on Pricing has been achieved, an appropriate debit or credit will be made retroactive to the day after the eighth anniversary of the first day of the month in which both Parties fully execute this SBP. Using the example in section 4.1, the date would be March 2, 2013.
A. Material [*****]
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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Special Business Provisions (SBP)
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B. Labor [*****]
Approximately forty-five days before the eighth anniversary of the first day of the month in which both Parties fully execute this SBP and on approximately the same date of each year thereafter until such time as a resolution on Pricing has been achieved, Boeing will use the above referenced indices to calculate the appropriate escalation factor based on actual index growth for the previous twelve (12) months using a composite of [*****] and [*****]. Then current Attachment 1 Pricing will be revised to include this escalation factor for deliveries in the following year.
4.2 RESERVED
4.3 Pricing of Requirements for Modification or Retrofit
4.3.1 Boeing Responsibility or Regulatory Requirement
Any Products required by Boeing to support a modification or retrofit program, which results from a regulatory requirement or which Boeing may be liable for the cost associated with such program, shall be provided to Boeing at the applicable price as set forth in SBP Attachment 1.
4.3.2 Reserved
4.4 Expedite of Production Requirements
Seller agrees to support Boeings short flow requirements with its best effort.
4.5 Pricing for Derivatives
Prices for Derivative(s) will be negotiated in good faith based on then-prevailing market conditions appropriate for each Product type. If the Parties are unable to reach agreement on Pricing then the Parties shall refer to GTA Section 33.0 Disputes for resolution.
4.6 POA Pricing
Seller shall expend best efforts to provide the earliest possible delivery of any spare designated as POA by Boeing. Such effort includes but is not limited to working twenty-four (24) hours a day, seven (7) days a week and use of premium transportation. Seller shall specify the delivery date of any such POA within two (2) hours of a POA request.
The price for POA requirements shall be the price for such Products listed in SBP Attachment 1 or the pro rata share of the appropriate Attachment 1 price represented by the POA multiplied by a factor of [*****].
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
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5.0 PAYMENT
5.1 Invoicing
5.1.1 Invoicing Requirements
Seller shall submit separate invoices for items other than Pay from Receipt items (as defined in Section 5.1.5) for each applicable Order.
Materials purchased by Seller from Boeing shall be satisfied by Boeing issuing a debit against Sellers account as follows:
In the case of Boeing Provided Details (as defined in Attachment 16), debits will be issued by Boeing as provided in Attachment 20, section titled Billing for BPD Parts not yet transferred from Boeing.
For all other materials, including materials purchased from Boeings Accommodation Sales group, debits will be issued by Boeing on the (net) fifteenth (15 th ) day from the scheduled delivery date. If the debit amount exceeds the amount outstanding on the Sellers account, Boeing will notify Seller and Seller will pay such amount upon receipt of such notification.
5.1.2 Invoicing Shipset Identification
Seller shall indicate on each invoice the line number of each Shipset included therein, as applicable.
5.1.3 Customs Invoicing
All specific questions and concerns on customs invoicing may be addressed to the Boeing Traffic Organization.
5.1.4 Mailing Instructions
All mailed invoices shall be addressed to:
Boeing Commercial Airplanes
P.O. Box 34656
Seattle, WA 98124-1656
Attention: Payment Services
5.1.5 Pay From Receipt
An invoice shall not be required from Seller in the case of Pay From Receipt items. Pay From Receipt items shall include Products (except Tooling), Production Articles, Purchase On Assembly items (POAs) and such other items as Boeing may designate in writing (collectively, the Pay From Receipt Items). Each shipment shall contain an accurate and complete pack slip. In the case of Pay From Receipt items, the date of payment is calculated from the shipment
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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date (the date items are received by carrier from Seller) as stated on such pack slip. If the Sellers pack sip does not state the actual shipment date, the date of payment is calculated from the date the items are received by Boeing at its manufacturing site.
5.2 Recurring Payment
Unless otherwise provided under Written agreement between the Parties, payments shall be paid in immediately available funds net [*****] calendar days after the shipment date (the date items are received by the carrier from Seller). Except in the case of an Order requiring Pay-From Receipt, the date of payment is calculated from the later of (a) the date the items are delivered to Boeing at its manufacturing site, (b) the date of receipt of a correct and valid invoice or (c) the scheduled delivery date of such product. Payment shall be done electronically as mutually agreed. Boeing agrees to promptly notify the Seller if it receives an invoice Boeing believes to be incorrect.
All Payments are subject to adjustment for shortages, credits and rejections.
5.2.1 Non-Recurring Payment
Non Recurring Tooling payment shall be paid in immediately available funds net ten (10) calendar days after receipt by Boeing of both a correct and valid invoice and where required, a completed and approved certified tool list (CTL), (whichever is later).
Timing for non-recurring engineering, product development and test payments for Derivatives shall be tied to specific events as non-recurring effort progresses, which events shall not be limited to first shipset delivery and receipt by Boeing. Schedule of specific events to be mutually agreed upon for each engineering development effort (i.e. 25%, 50%, 90% engineering release).
Future Product Development Projects will be supported up to forty (40) hours (includes technical consultation and development of ROM work statement and schedules as required) before Seller is eligible for compensation under the Technical Services Agreement (TSA) or this SBP.
Attachment 4 contains the Engineering Delegation requirements for sustaining products that are part of this SBP and included in the part pricing in Attachment 1. All costs associated with Seller Engineering responsibility are included within Attachment 1 pricing for sustaining programs and will not be subject to additional payment from Boeing.
To maintain, repair, sustain, and replace Boeings Tooling and to provide certain capital property, plant, and equipment (excluding leasehold improvements and real property) required to support Sellers activities under this Agreement, Boeing shall pay to Seller forty five million five hundred thousand dollars ($45,500,000) in 2007, an additional one hundred and sixteen million one hundred thousand dollars
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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($116,100,000) in 2008, and an additional one hundred and fifteen million four hundred thousand dollars ($115,400,000) in 2009 for such Tooling and property, plant, and equipment costs. Within each such year, the payments are to be made in equal quarterly installments within 15 days following each Invoice Date (as defined below) and shall not be affected by the amount of costs set forth in the written list of costs delivered to Boeing on such Invoice Date pursuant to the following paragraph.
By March 15, June 15, September 15, and December 15 (each an Invoice Date) of each of 2007, 2008, and 2009, Seller will deliver to Boeing a written list of any Tooling and capital property, plant, and equipment (excluding leasehold improvements and real property) acquired after the Effective Date and prior to such Invoice Date (and not previously paid for by Boeing under this provision), and the costs thereof, the aggregate amount of which costs does not exceed the amount of the payment due within 15 days following such Invoice Date. Pursuant to the terms of Section 3.3.4.6, upon payment by Boeing, Boeing will acquire title to and ownership of the Tooling and property, plant and equipment described in such list free of liens, claims or rights of any third party.
In the event Boeing acquires title to and ownership of any property, plant and equipment from Seller pursuant to this Section 5.2.1, Seller shall continue to have the right to use such property, plant and equipment to the same extent it had such right prior to such acquisition by Boeing, without paying any additional consideration to Boeing, and the Parties shall undertake in good faith to enter into any documentation necessary to evidence such right. In addition, to the extent movable, any such property, plant and equipment acquired by Boeing shall remain at Sellers facility subject to the terms of the Agreement, including Boeings rights under GTA sections 12.0 and 13.0 and SBP section 34.0, and Seller shall have the right to move any such movable property, plant and equipment in accordance with its use thereof and with the terms of the Agreement.
If Boeing acquires title to and ownership of any property, plant and equipment pursuant to this Section 5.2.1, then paragraphs (1) and (2) are also applicable.
(1) Seller shall bear the risk of loss and shall provide at no cost to Boeing on Boeings behalf as the owner thereof, control, accountability, care, storage, maintenance, and insurance for such property, plant and equipment to the same extent Seller generally provides such services with respect to property, plant and equipment owned by Seller; it being understood, however, that Boeing as the owner thereof bears the economic burden of any applicable depreciation and obsolescence for such property, plant and equipment;
(2) Seller shall not create or be responsible for the creation by others, any lien, claim or right of any person or entity other than the
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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rights of Boeing, in respect of any property, plant and equipment to which Boeing acquires title to and ownership of pursuant to this Section 5.2.1.
To the extent Seller did not incur Tooling or capital property, plant and equipment (excluding leasehold improvements and real property) costs prior to any Invoice Date which were not previously paid for by Boeing under this provision, in an amount equivalent to the amount paid by Boeing within 15 days following such Invoice Date, the excess amount shall be allocated to other assets not owned by Boeing, in a manner to be mutually determined by Buyer and Seller at that time. For the avoidance of doubt, Boeing will acquire title to and ownership of the other assets to which the excess amounts are allocated free of liens, claims or rights of any third party, provided that such excess amounts allocated are equal to the book value of such other assets.
5.3 Payment Method
All payments hereunder shall be made electronically to an account designated in writing by Seller.
5.4 Payment Errors
If an error in payment (over payment or under payment) is discovered by Boeing or Seller, a written notification will be submitted to the other Party and resolution of the error will occur in a timely manner after discovery of such error.
6.0 CHANGES
Notwithstanding the provisions of GTA Section 10.1, at any time, Boeing may, by written direction to Seller, make changes within the general scope of this SBP in: (i) Statement of Work requirements and Documents, requirements for Product Definition, Drawings, designs, specifications, configurations, Datasets or any other Document (ii) Tooling (including, without limitation, the quantities thereof), services or Spare Parts to be provided by Seller under this SBP; (iii) the method of shipping or packing; (iv) the place of delivery, inspection, or acceptance for all Products (v) Program schedules, delivery rates and schedules for performance of services; including short flow requirements; (vi) Products, the Program Airplane and Derivative models and Customer variables; (vii) Boeing Furnished Material and any Boeing furnished or provided property; (viii) the allocation of responsibility as between Seller and Boeing for production of any component of any Product or the provision of any Service such that it does not significantly reduce the content of Sellers Statement of Work for any given major end item or major sub assembly; (ix) the allocation of responsibility among Seller and third parties such that it does not significantly reduce the content of Sellers Statement of Work for any given major end item or major sub assembly; (x) certification requirements; (xi) Miscellaneous Work requested to be performed not in then current Statement of Work (any of the foregoing a Change); (xii) description, time and place of Services to be performed. Seller shall immediately comply with
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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such written direction upon receipt, irrespective of any failure by the Parties to agree that such Change shall be subject to Price adjustment in accordance with SBP Section 7.0 Change Provisions.
If Seller reasonably expects that any Document or any revision to any Document shall significantly affect Sellers performance of any work hereunder, Seller shall, without affecting its obligation to comply, in accordance with SBP Section 12.1 Supporting Documentation, with any such Document as revised, so notify Boeing in writing in accordance with the Administrative Agreement within twenty (20) days of Sellers receipt of such Document or revision. If Seller provides notification as required by this Section, then any such revision or any written direction pursuant to the immediately preceding paragraph that constitutes or results in a Change shall be subject to Section 7.0.
If Seller considers that Boeings conduct constitutes a Change, Seller shall notify Boeings Procurement Representative promptly in writing as to the nature of such conduct and its effect upon Sellers performance. In the absence of such notification, Seller shall not be entitled to equitable adjustment.
SBP Sections 6.0 and 7.0 apply in lieu of GTA Section 10.0.
7.0 CHANGE PROVISIONS
Notwithstanding the provisions of GTA Section 10.0, Changes, no adjustment will be made to the Price of any Products for any Change orders as provided in GTA Section 10.0 or SBP Section 6.0, Changes issued through the period of performance of this SBP except as may be provided under SBP Sections 7.0 through 7.10.
SBP Sections 6.0 and 7.0 apply in lieu of GTA Section 10.0.
7.1 Price Adjustment for Changes
If any individual Change increases or decreases the cost or time required to perform this contract, Boeing and Seller shall negotiate in good faith an equitable adjustment in the price or schedule for recurring and non recurring work, or both, to reflect the increase or decrease subject to the following provisions: (i) Seller shall be responsible for absorbing the cost of Seller generated changes to meet requirements and specifications of the Program Statement of Work (PSOW) as described in this SBP and as existing prior to the Change; and (ii) Seller shall be responsible for absorbing the cost of changes required to correct Sellers deficiencies related to any delegated engineering part (statement of work) of Seller.
7.2 Change Pricing Criteria
The following Change pricing thresholds will apply to all Changes:
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
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Recurring Price :
An equitable adjustment (either debit or credit) shall be negotiated and incorporated into the applicable Attachment 1 recurring part Price if both of the following conditions are met:
a. For Engineering Changes, the recurring price impact to the Attachment 1 part Price for each individual Change exceeds [*****] of the then current Price for that part or for Statement of Work allocation Changes, the recurring price impact to the Attachment 1 part Price for each individual Change exceeds [*****] of the then current Price for that part (see note 1 below), and
b. The recurring price impact for each individual Change exceeds [*****] per year based on then current requirements forecasted for the following calendar year.
Note 1: For Statement of Work allocation changes only there is an annual cumulative cap of [*****]. The annual cumulative cap will begin January 1 st of each year and end December 31 st of each year. This cap will re-set to zero at the beginning of each year and only new Statement of Work allocation changes falling below the [*****] threshold will be applied against this cap. The value attributable to each change will be as negotiated by the Parties and Seller agrees to provide information to Boeing for these Change proposals consistent with the terms of this SBP for any and all assertions believed to contribute towards the annual [*****] cap.
Non-Recurring
An equitable adjustment will be made by Boeing to Seller for non-recurring if both of the following conditions are met:
a. The non-recurring price impact for each individual Change exceeds [*****], and
b. The non-recurring Change is associated with a new statement of work (not for current configuration of parts defined in Attachment 1 as of June 16, 2005.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
7.3 Reserved
7.4 Reserved
7.5 Schedule Acceleration/Deceleration
Boeing may revise the delivery schedule and/or firing order without additional cost or change to the unit price stated in the applicable Order if (a) the delivery date of the Product under such Order is on or before the last date of contract if applicable, and (b) Boeing provides Seller with written notice of such changes, provided however that Seller shall be entitled to payment for schedule accelerations made with less than the notification lead times for acceleration and deceleration identified in SBP Attachment 6. In case of shorter notification for acceleration, Product price for those Products shipped inside the notification period (less than [*****] notification) shall be equitably adjusted as agreed by the Parties. In case of shorter notification for deceleration, Product price will be adjusted by [*****] for those Products shipped inside the notification period (less than [*****] notification). Except as provided in this clause Schedule Acceleration/Deceleration, there shall be no other price adjustment for schedule rate or firing order changes. The resulting payment amount shall be paid in accordance with SBP Section 5.0. Boeing shall notify Seller of accelerations, decelerations and refirings as soon as reasonably practical. Boeing and Seller further agree to work in good faith to decrease all lead times identified in SBP Attachment 6 in support of then current Boeing lead time objectives for each Airplane Program. Joint reviews of the program lead times will take place at least annually during the contract period to identify opportunities for reduction. Where the Parties mutually agree to reduce the lead times, SBP Attachment 6 will be updated and such update will not be considered a Change under SBP 6.0.
7.5.1 Production Rates
This SBP contains no minimum production rates. The maximum production rates are as defined in Attachment 15 Maximum Production Rates and Model Mix Constraint Matrix. Seller is responsible to support these rates at no additional cost to Boeing. Higher rates are subject to negotiation.
7.6 Total Cost Management
Any cost reductions resulting from incorporation of joint Boeing and Seller cost reduction initiatives (TCMS) will result in a reduction in the Attachment 1 Prices in a mutually agreed manner that equitably preserves, or enhances if market conditions allow, the anticipated economics for both Boeing and Seller. The immediately preceding sentence does not apply to material initiatives referred to in Attachment 20.F.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Boeing and Seller confirm their intention for the Program Airplane to remain price and performance (including weight) competitive throughout the life of the Program by incorporating into the Program Airplane advances in design, configuration, materials, or manufacturing processes that will benefit the Parties and Boeings customers.
If Boeing reasonably demonstrates, after consultation with Seller, that a proposed cost reduction initiative that would materially increase the competetiveness of the Program Airplane in the market place can be accomplished in a manner that would preserve the anticipated economics of the Program for both Boeing and Seller, Seller shall incorporate the subject cost reduction initiative in a timely manner after reasonable notice from Boeing and reduce the price in a mutually agreed manner that equitably preserves the anticipated economics of the Program for both Boeing and Seller.
7.6.1 Boeing Generated Technical and Cost Improvement
At any time during the Sellers performance under this SBP, Boeing may offer specific recommendations to Seller for the incorporation of any new technologies and process improvements intended to reduce Sellers costs or improve product performance. These recommendations may include, but are not limited to, Boeing proprietary information and Boeing owned patents. Notwithstanding any other provision(s) elsewhere in this SBP, where a savings is achieved and documented as a result of the implementation of a recommendation initiated by Boeing and which Seller agrees to implement, the Parties will reduce the Price in a mutually agreed manner.
7.7 Obsolescence
No adjustment pursuant to Section 7.1 shall include any of Sellers costs for Obsolescence. Not withstanding the foregoing Seller shall be entitled to payment for any Obsolescence estimated to exceed the lesser of (i) ten thousand ($10,000) dollars and (ii) ten percent (10%) of the recurring Attachment 1 Price in accordance with GTA Section 12.3. Each Change shall, for purposes of determining Obsolescence costs, be considered separately. Changes, for purposes of determining Obsolescence costs, may not be combined for purposes of exceeding the percentage limit as described in this SBP Section 7.7. Seller may not defer implementation of Changes so as to avoid Obsolescence unless the priority of such Change permits such implementation.
7.8 Reserved
7.9 Timeframe for Price Adjustment Proposals:
Price adjustment proposals for Changes made prior to 100% Engineering Release shall be submitted no later than sixty (60) calendar days after 100% Engineering Release. Seller shall submit to Boeing a listing of all Changes which were received by Seller prior to 100% Engineering Release together with the Sellers proposal for appropriate price adjustment.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
For Changes subsequent to 100% Engineering Release, Seller must submit a written notice of impact to a Boeing Procurement Agent within twenty-five (25) days of receipt of a CCN or other written direction. A fully supported proposal must be submitted within ninety (90) calendar days after receipt of such direction.
If Boeing does not receive a proposal within the ninety (90) day time period, unless otherwise agreed to in writing by both parties, no such adjustment shall be made to Nonrecurring and Recurring Shipset Prices.
Review of Price Adjustment Proposal :
Subject to Sellers delivery of a proposal to Boeing within the Timeframes described above, Boeing will conduct a proposal review within thirty (30) days from receipt of Sellers proposal. If Boeing determines that Sellers proposal is not fully supported, Boeing will provide a detailed list of proposal deficiencies in writing including examples of types of data that were omitted. Boeing will consider proposal timing and data availability when evaluating proposals. Spirit will provide requested data as available to make proposal fully supported.
Once the proposal is considered fully supported, Boeing will make an offer within 90 days and engage in diligent good faith negotiations to settle the claim or request an extension for delay. A mutually agreed to negotiation schedule shall be utilized to set settlement priorities.
If Boeing does not request additional supporting data within thirty (30) days of receipt of Sellers proposal, Spirit will receive an offer within ninety (90) days from date of submittal or Boeing will request an extension. The thirty (30) day review period for fully supported proposals is considered to be part of the ninety (90) day timeframe Boeing has to prepare an offer.
If a settlement is not subsequently reached within ninety (90) days of a formal offer, negotiations shall be elevated to the Senior Manager of Boeing Supplier Management Contracts for resolution. Until such time new Pricing is negotiated, Seller will continue to be paid at the existing Attachment 1 Price.
Proposal Content :
Seller shall provide a detailed description of each Change, the technical impact on the Products form, fit, and/or function, and any significant impact on manufacturing processes. Seller shall include with each proposal a complete estimate of the Changes impact on the Sellers cost per Product, including, but not limited to, the impact on labor hours, labor rates utilized for the proposal, processing costs, sub-tier supplier costs, overhead and raw material costs. Boeing must be able to substantiate and verify Sellers submittal for any such price adjustment claim. Sellers claim must be consistent with market driven prices for such Product.
A Fully Supported Proposal may include but is not limited to the following data as available and applicable to support the Sellers claim:
The standard quote form template will be used for all submittals. Data will be submitted when available unless otherwise agreed to in writing.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
· Dollars and hours on the standard quote form will be:
· Linked via formulas which provide visibility to the calculations and links used to derive the total.
· Linked to a separate tab on the form that contains back-up data to substantiate the numbers.
· Priced bill of material (BOM) for the affected baseline statement of work and delta statement of work:
· Identify part numbers by adds, deletes, and swaps.
· BOMs will be formatted so that adds, deletes and swaps can be easily compared for delta work statement.
· Basis of estimate (BOE), describing effort, SOW and estimating methodology used to arrive at estimate.
· Rates and factors:
· The rates, factors and methodology set forth in SBP Attachment 5, shall be utilized to calculate the equitable adjustment, if any, to be paid by Boeing for each individual change for which Seller estimates a value that is less than [*****] .
· For each Change for which Seller estimates a value that is greater than [*****] , the proposal shall contain the above mentioned Content and stand on its own merits.
Additional data to be provided as available and when applicable if requested by Boeing.
· Make/buy decision updates.
· Learning curves with explanation of assumptions.
· Material: TMX purchase order (PO), Spirit PO number, quantity, raw material specifications, price paid OR a BOE with supporting documentation.
· A list of proposed in-house built parts; Boeing may select a random number of parts for validation. Competitive bid matrix for changes in excess of [*****].
· PO, invoice and supplier quotes:
· Spirit will provide a list of proposed vendor parts; Boeing may select a random number of parts for validation.
· Supplier Purchase Order:
· Provide duration, pricing, and pricing related terms, unless protected by a proprietary agreement.
· Part card totals.
· Tooling:
· Tool type, tool number, tool design hours, tool fabrication hours, tool material and labor rate.
· Supply Chain Management (SCM) tooling:
· Provide Supplier quote, PO, invoice, or a BOE with supporting documentation.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
· Quality Assurance:
· Validation of hours, BOE.
· Numerically Controlled (NC) Programming: List of affected parts, number of NC programming hours per part, number of tapes per part, number of hours per tape.
7.10 Apportionment and Payment of Price Adjustments
7.10.1 Recurring Work Price Adjustment
The amount of the Recurring Price adjustment shall be equal to the value of the Change subject to SBP Sections 6 and 7 and shall be documented in SBP Attachment 1.
7.10.2 Apportionment and Payment
The then-current recurring billing Price shall be adjusted to reflect the Change beginning with the first Shipset, which incorporates such Change.
8.0 GOVERNING QUALITY ASSURANCE REQUIREMENTS
In addition to those general quality assurance requirements set forth in the GTA, the work performed under this SBP shall be in accordance with the requirements set forth in SBP Attachment 10.
9.0 STATUS REPORTS/REVIEWS
9.1 Notification of Shipment
Seller shall notify the Boeing personnel identified in the Administrative Agreement, as identified in SBP Section 17.0, by telephone, facsimile or other agreed means when any shipment has been made. Such notification will include (i) a list of the items and quantities of items shipped, (ii) the Shipset number with respect to any item shipped, (iii) the number and weight of containers shipped, (iv) the shipper or packing sheet number with respect to such shipment, and (v) the date of such shipment. Seller shall airmail, facsimile or send by other agreed means copies of shipping manifests for Common-Use Tools to Boeing. Such manifests shall identify Common-Use Tool codes and part numbers, unit numbers of Common-Use Tools and the airplane effectivity of the Production Article contained in such Common-Use Tools.
Seller shall notify Boeing as soon as possible via fax, telecon, or as otherwise agreed to by the Parties of each POA requirement shipment. Such notification shall include time and date shipped, quantity shipped, Order, pack slip, method of transportation and air bill if applicable. Seller shall also notify Boeing immediately upon the discovery of any delays in shipment of any requirement and identify the earliest revised shipment possible.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
9.2 General Reports / Reviews
When requested by Boeing, Seller shall update and submit, as a minimum, monthly status reports or data requested by Boeing using a method mutually agreed upon by Boeing and Seller. Boeing has the right to impose more frequent reporting on Seller to achieve program objectives, if necessary.
When requested by Boeing, Seller shall provide to Boeing a Product Definition and manufacturing milestone chart identifying the major engineering, purchasing, planning, Tooling and manufacturing operations for the applicable Product(s).
Program reviews will be held at Sellers facility or Boeings facilities as requested by Boeing. The topics of these reviews may include Product Definition status, raw material and component part status, manufacturing status, production status, Sellers current and future capacity assessments, Boeing supplied components, inventory, Boeings requirements, Changes, forecasts and other issues pertinent to Sellers performance under this SBP. Reviews will allow formal presentations and discussion of status reports as set forth above.
Formal management reviews shall be held periodically by Boeing and Seller to evaluate total cost performance. During these reviews, Seller shall present and provide actual cost performance data with respect to this SBP. Boeing and Seller will also use these reviews to discuss production forecast information useful for Sellers planning purposes.
All information normally provided under Section 8.0 of the Administrative Agreement, as identified in SBP Section 17.0, shall be provided by Seller.
9.3 Cost Performance Visibility
Management reviews will be held by Boeing and Seller that will include total cost performance and schedule performance. These reviews will be held on a regularly scheduled basis.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
9.4 Problem Reports
In the event of any anticipated or actual delay, including but not limited to delays attributed to labor disputes, that could impact Sellers ability to deliver Product Definition or Products on time and otherwise in conformance with the terms of the Order, Seller shall promptly provide a detailed report, notifying Boeing Procurement Representative of program problems/issues. The report shall contain a detailed description of the problem, impact on the program or affected tasks, and corrective/remedial action, with a recovery schedule. Seller also promptly shall require each of its subcontractors supporting the Order to provide such notification to Seller concerning any such problems/issues of any subcontracted good or service to Seller. Submittal of a report in no way relieves Seller of any obligations under the Order nor does it constitute a waiver of any rights and remedies Boeing may have with respect to any default, except as provided under GTA Section 14.0.
Problem reports shall be promptly submitted to the Boeing Procurement Representative within twenty-four (24) hours of a problem becoming known to Seller. Status reports shall include, but are not limited to, the following topics:
A. Product Definition maturity, schedule and performance updates;
B. Delivery schedule updates, written recovery schedules, schedule impact issues and corrective action;
C. Technical/manufacturing progress since the previous report period, including significant accomplishments, breakthroughs, problems and solutions;
D. Identification of changes to key manpower or staffing levels;
E. Identification of the critical events/activities expected within the next month and a discussion of potential risk factors;
F. Progress on open action items, including closure dates;
G. Purchased components and raw material status;
H. Identification of quality issues and resolutions;
I. Manufacturing and quality inspection progress of first article Products;
J. Status on New Tooling design and fabrication, as applicable, until completion;
K. Inventory status of castings and forgings procured by Seller (if applicable).
This SBP Section 9.4 applies in lieu of the 2 nd sentence of GTA Section 4.1.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
9.5 Notice of Delay - Premium Effort
Where Seller has notified Boeing of a Program problem pursuant to SBP Section 9.4, Boeing may, at its sole discretion, direct Seller to use additional effort, including premium effort, and shall ship via air or other expedited routing in order to avoid or minimize delay to the maximum extent possible. In the absence of delays caused by Boeing or its designees that have an impact on Sellers delivery schedule, all additional costs resulting from such premium effort and/or premium transportation shall be paid by Seller. Additional costs include, but are not limited to, all costs and expenses incurred by Boeing as a result of production line disruption attributable to Sellers delayed delivery. These requirements will not apply to Seller during the course of an Excusable Delay, as defined in GTA Section 14.0; however, at the conclusion of the Excusable Delay Seller will be responsible for all provisions of this Section 9.5. Boeings rights under this SBP Section 9.5 are not exclusive, and any other rights provided in this contract, in law or equity, are reserved.
The SBP Section 9.5 applies in lieu of the 3 rd sentence of GTA Section 4.1.
9.6 Diversity Reporting Format
Seller shall use reasonable efforts to report to Boeing on a quarterly basis, starting from the date of this SBP award, all payments to small businesses, small disadvantaged business/minority business enterprises, women-owned small business and historically black colleges and universities and minority institutions in dollars and as a percentage of the contract price paid to Seller to date, proving the information shown on the Second Tier Report located in SBP Attachment 11.
9.7 Planning Schedule
From time to time and at least quarterly, Boeing will provide information to facilitate Seller production forecasting. Any such planning schedule, forecast, or quantity estimate provided by Boeing shall be used solely for informational purposes and shall not be binding on either party.
10.0 BOEING ASSISTANCE
10.1 Boeing Technical / Manufacturing Assistance Regarding Sellers Nonperformance
Seller shall reimburse Boeing for all reasonable Boeing costs expended in providing Seller and/or Sellers subcontractors technical or manufacturing assistance in resolving Seller nonperformance issues. Such reimbursement may be offset against any pending Seller invoice, regardless of Boeing model or program; provided, that Boeing shall not be entitled to set off any such obligation, sum or amount against any invoices for payments, in the totality of $277 million, pursuant to Section 5.2.1 of this SBP. Boeings rights under this clause are in addition to those available to Boeing for Sellers nonperformance
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
issues, including those where a demand for an Assurance of Performance may be made under GTA Section 17.0.
10.2 Other Boeing Assistance
In the event either Party believes that Seller requires Boeing technical (including engineering), manufacturing or training assistance for any activity within Sellers area of responsibility under this SBP, Seller and Boeing shall negotiate the scope and price for such Boeing assistance.
11.0 REPAIR AUTHORIZATION
11.1 Boeing-Performed Work
In the event that any Product is rejected by Boeing pursuant to GTA Section 8.3, Seller hereby grants to Boeing the right, without prior authorization from Seller, to repair or rework such Product, or to have such Product repaired or reworked by a third party. Such repair or rework by Boeing or such third party shall be deemed not to be inconsistent with Sellers Ownership of such Product.
All reasonable costs and expenses of Boeing relating to such repair or rework shall be paid by Seller. Such costs and expenses shall be an amount equal to Boeings reasonable estimated rework hours multiplied by Boeings then-current rate for labor and materials or the amount charged Boeing by any third party for performing such repair or rework. Disruption costs and expenses shall be an amount equal to the portion of resultant planned installation time allocated for reasonable out-of-sequence work multiplied by Boeings then-current rate for labor. These provisions shall also apply to incomplete work shipped to Boeing for completion (traveled work).
11.2 Reimbursement for Repairs
Pursuant to this SBP Section 11.2, Boeing will either: 1) advise Seller quarterly, commencing on June 16, 2005, of costs and expenses incurred in the previous quarter for repair of Products; or 2) notify Seller, through Boeings automated systems, of costs and expenses incurred for each individual repair. Seller shall notify Boeing within sixty (60) days after receipt of such advice of any significant errors detected by Seller in Boeings estimate of costs and expenses. Boeing and Seller shall promptly resolve such errors. Sellers failure to so notify Boeing shall be deemed to be an acceptance of Boeings estimate of costs and expenses. The same process shall apply where Seller is repairing products for Boeing. Boeing shall be entitled to either (a) set off the amount of such costs and expenses against any amounts payable to Seller hereunder or (b) invoice Seller for the amount of such costs and expenses, and Seller shall pay the invoiced amount promptly upon receipt of a valid and correct invoice.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.0 OTHER REQUIREMENTS
12.1 SUPPORTING DOCUMENTATION
12.1.1 Supporting Documentation and Priority
All Documents (as hereinafter defined) are by this reference incorporated herein and made a part of this SBP. For purposes of this SBP, Document means all specifications, Drawings, Datasets, documents, publications and other similar materials, whether in a tangible or intangible form, as the same shall be revised from time to time, which relate to the design, manufacture, test, certification, delivery, support and sale of Products or the provision of services to Boeing pursuant to this SBP, including, but not limited to, the documents listed below, and any other documents specifically referred to in this SBP or in such other documents, but shall not include any SBP (including the attachments hereto or thereto), the GTA, the AA, the EAA, or any Order. Reference in any Document to Contractor or Seller or Supplier shall mean Seller for the purposes of this SBP. In the event of any inconsistency between the terms and conditions of this SBP (not including any Documents) and the terms and conditions of any Document, the terms and conditions of the SBP shall control. In the event any provisions of any Document or Documents conflict among themselves, Boeing will, on its own initiative or at the request of Seller, resolve such conflict (subject to the other provisions of this SBP and the GTA), revise such Document or Documents accordingly, and so notify Seller. In resolving any such conflicts, this SBP shall be read as a whole and in a manner most likely to accomplish its purposes.
12.1.2 Revision of Documents
Subject to the terms of this SBP Section 12.1, Boeing may at any time revise any Document prepared by Boeing and Boeing shall provide Seller with revisions to Documents prepared by Boeing. No such revision shall be effective with respect to Seller unless and until such revision is available to Seller.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.1.3 Compliance
Seller shall promptly comply with the provisions of all Documents referenced in this SBP, the GTA and any Order, including any revisions Boeing may make thereto provided that no such revision shall be effective with respect to Seller unless and until such revision is available to Seller.
List of Certain Documents:
Item |
|
No. |
|
Title |
A. |
|
D1-4426 |
|
Boeing Approved Process Sources |
B. |
|
D6-82479 |
|
Boeing Quality Management System Requirements for Suppliers |
C. |
|
D37200 |
|
Skin Quality Acceptance Standards for Clad Aluminum Raw Material |
D. |
|
D6-9002 |
|
Appearance Control of Clad Aluminum Exterior Skins |
E. |
|
D953W001 |
|
General Operations Requirements Document For Suppliers External/internal Suppliers/Program Partners |
F. |
|
D962W101 |
|
Supplier Change Management - Major Structures Program Partners |
G. |
|
D33200-1 |
|
Boeing Suppliers Tooling Document |
H. |
|
D6-17781 |
|
Material and Performance Evaluation of Designated Parts |
I. |
|
D6-1276 |
|
Control of materials and processes for designated parts and components of Boeing products |
J. |
|
D6T10898-1 |
|
Weight Compliance Requirement/Participant Contractors |
K. |
|
ATA 300 |
|
Specification for Packaging of Airline Supplies |
L. |
|
D37520-1, -1A, -1B |
|
Suppliers Part Protection Guides |
M. |
|
D6-51991 |
|
Quality Assurance Standard Reflecting Digital Product Definition for Boeing Suppliers Using CAD/CAM |
N. |
|
D6-81628 |
|
Shipping Label, Barcoded Preparation and Placement |
O. |
|
D6-83315 |
|
Product Support and Assurance Document (PSAD) |
P. |
|
D6-56199 |
|
Hardware and software compatibility requirements for suppliers use of BCAG CATIA native datasets as sole authority for design, manufacturing and inspection |
Q. |
|
D6-83267-201 |
|
BCA Engineering System and Process Transition and Cutover Plan to Support the Divestiture of the Wichita/Tulsa Division |
12.2 Reserved
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.3 ACCOUNTABILITY FOR TOOLING
Seller shall control and account for all Tooling in accordance with the provisions of Boeing Document D33200, Boeing Suppliers Tooling Document or, subject to Boeing review and approval (not to be unreasonably withheld or delayed), its equivalent or replacement. This requirement shall apply to Boeing-Use Tooling until delivery thereof to Boeing and to Contractor-Use Tooling and Common-Use Tooling at all times prior to the removal thereof by Boeing or delivery to Boeing or Boeings designee pursuant to GTA Section 12.0, GTA Section 13.0 or SBP Section 33.0. All Existing Tooling shall remain identified with its identification tag containing the Boeing Lifetime Serial Number of such Tooling. Seller shall identify all New Tooling and any reworked or re-identified Tooling with an identification tag containing the Boeing Lifetime Serial Number of each such Tool. Boeing Lifetime Serial Numbers may be provided to Seller by Boeing.
12.4 CERTIFIED TOOL LISTS
Seller shall prepare a list or lists (Certified Tool List) in accordance with the D33200, Boeing Suppliers Tooling Document or, subject to Boeing review and approval (not to be unreasonably withheld or delayed), its equivalent or replacement, and such other information as Boeing shall request. Seller shall prepare a separate Certified Tool List for (i) Contractor-Use Tools, (ii) Common-Use Tools, (iii) Casting/Extrusion Tools, (iv) each county in Kansas in which any such Tool is located, (v) each state in which any such Tool is located and (vi) each state in which any such Tool is first utilized. Seller shall promptly submit each initial Certified Tool List to Boeing. Seller shall subsequently submit from time to time as specified by Boeing new Certified Tool Lists to supplement the information contained in the initial Certified Tool Lists.
12.5 BOEING FURNISHED TOOLING
With respect to Existing Tooling and New Tooling, and in the event Boeing furnishes Tooling to Seller, Seller shall conform to the standards and requirements of Document D33200-1. Boeing shall notify Seller of any action required for discrepant Tooling.
12.6 PACKAGING AND SHIPPING
In lieu of the provisions of GTA Section 7.0, the following SBP Sections shall address all packaging and shipping matters.
12.6.1 Packaging
The prices shown in SBP Attachment 1 include all packaging costs. Seller shall package Product in accordance with the applicable requirements set forth in the Order.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.6.2 Product Packaging
Except as expressly provided otherwise herein, all Products shall be prepared (cleaned, preserved, etc.) and packed for shipment in a manner reasonably acceptable to Boeing pursuant to Document D37520-1, -1A, & -1B, Suppliers Part Protection Guide, to (i) comply with carrier regulations and (ii) prevent damage or deterioration during handling, shipment and outdoor storage at destination for up to ninety (90) days. Packaging design shall be suitable for, and consistent with, the requirements and limitations of the transportation mode specified by Boeing. Boeing specifically reserves the right, at Boeings discretion; to direct air shipment or other expedited shipping methods from the delivery point information in SBP Section 3.2.1 and Seller shall maintain a capability (where reasonably practicable) for meeting this requirement. Seller shall submit two (2) copies of its proposed preparation procedure and packaging design to Boeing for approval (not to be unreasonably withheld or delayed) prior to the first Product delivery, and shall prepare and package each Product in accordance with the procedure and design approved by Boeing. Notwithstanding any Boeing approval of Sellers packaging design, Seller shall be solely liable for the manufacture of such packaging. Any package (or unitized group of packages) weighing in excess of forty (40) pounds or otherwise not suited to manual handling shall be provided with skids to permit use of mechanical handling equipment.
Product packaging shall be in accordance with document D6-81628, Shipping Label, Barcoded Preparation and Placement, which is incorporated herein by reference.
12.6.3 Disposable Shipping Fixtures
Seller shall design, manufacture or procure, and test disposable shipping fixtures, as requested by Boeing, to support Orders. The requirements for such items will be defined and identified by Boeing. The design of any disposable shipping fixture shall be approved by Boeing (not to be unreasonably withheld or delayed) and conform to the standards and requirements of the applicable documents referred to in SBP Section 2.3.
12.6.4 Packing Sheet and Test Reports
The No. 1 shipping container in each shipment shall contain one (1) copy in English of (i) a packing sheet listing the contents of the entire shipment in accordance with Boeings written instructions and (ii) any test reports required by the specifications applicable to the Products being shipped.
For Non-United States shipments, prior to exportation of any Product, one (1) copy of the required customs invoice shall be enclosed in a waterproof envelope or wrapper, clearly marked Customs Invoice, securely attached to the outside of the No. 1 shipping container of each shipment. Each customs invoice shall contain all of the information specified in SBP Section 27.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.6.5 Additional Copies
Additional copies of packing sheets, test reports shall be furnished to Boeing in accordance with Boeings written instructions.
12.6.6 Price Inclusive
Unless otherwise specified in this SBP, the Prices for Products stated in this SBP include the cost with respect to such Products of preparation, packaging, crating, shipping fixtures and containers, container marking, furnishing of packing sheets and test reports, in accordance with this SBP.
12.7 CYCLE TIME REQUIREMENTS
Boeing and Seller acknowledge that Boeing is committed to reduce Cycle Time. Seller agrees to support Boeing in its commitment and to work with Boeing to develop mutually acceptable actions to support Cycle Time requirements as specified by Boeing to support the Program Airplane. Upon Boeings request, Seller shall submit to Boeing a written plan describing how Seller would comply with the Cycle Time schedules, as specified by Boeing.
12.8 COMPATIBILITY WITH ENGINEERING BUSINESS AND PRODUCTION SYSTEMS
Seller shall implement and maintain systems as required to ensure: i) compatibility with Boeing systems; and ii) Sellers performance under this SBP, including, but not limited to, business, manufacturing and engineering systems.
12.9 ELECTRONIC ACCESS AND EXCHANGE OF DIGITAL PRODUCT DEFINITION
12.9.1 Exchange of Digital Product Definition between Boeing and Seller
Sellers approval to receive and use computerized data shall be in accordance with documents D6-51991 Quality Assurance Standards Reflecting Digital Product Definition for Boeing Suppliers using CAD/CAM, D6-56199 Hardware and Software Compatibility Requirements for Suppliers Use of BCAG CATIA Native Datasets as Authority for Design, Manufacturing and Inspection, and D6-81491, Authority and Usage of CATIA Native, CATIA IGES and PDM STEP Datasets.
12.9.2 Systems/Software Compatibility between Boeing and Seller
After Seller is qualified to use the data exchange methods in accordance with Boeing Document D6-51991, Quality Assurance Standards Reflecting Digital Product Definition for Boeing Suppliers Using CAD/CAM, Seller shall maintain compatibility with Boeings systems in accordance with D6-55199 Hardware and Software Compatibility Requirements for Suppliers Use of BCAG CATIA Native
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Datasets as authority for Design, Manufacturing and Inspection. Boeing shall provide timely notification to Contractor of revisions to Boeings systems.
12.9.3 Electronic Access, Communications and Data Exchange via Telecommunications
Any electronic communications and data exchange via telecommunications between the Parties shall be pursuant to an electronic access agreement executed concurrently with this SBP. Provided, that any amendments to the SBP, GTA, AA or EAA shall be communicated in writing and not solely by electronic communication.
Any electronic access to Boeing by Seller or Seller by Boeing shall be pursuant to an electronic access or similar agreement.
12.10 PROGRAM MANAGER
Seller will assign a full-time program manager whose exclusive responsibility will be to oversee and manage Sellers performance hereunder. The assignment of such program manager will be subject to Boeings prior approval of such persons resume, such approval not to be unreasonably withheld or delayed.
12.11 SUBCONTRACTING
During the term of this SBP, Seller agrees to work with Boeing to identify and implement opportunities to introduce into its sub-contract base substantial changes in manufacturing procedures, manufacturing technology, process specifications, and alternate sourcing to lower cost subcontractors. Seller and Boeing shall periodically review the implementation of these opportunities and evaluate the sharing of cost savings in accordance with SBP Section 7.6.
In addition to the provisions of GTA Section 28.1, for subcontracts in excess of [*****] in value, subcontracting activities are subject to Boeing review and approval. Boeing approval is not to be unreasonably withheld or delayed.
This SBP Section 12.11 shall apply in lieu of the first sentence of the 2 nd paragraph of GTA Section 28.0.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.11.1 Subcontractors and Suppliers
Notwithstanding anything to the contrary set forth in this SBP or the GTA, Seller shall not be in breach of this Agreement with respect to breaches solely attributable to subcontractors or suppliers and where (i) such breach relates to an obligation of Seller with respect to a subcontractor or supplier party to an agreement originally between Boeing and such subcontractor or supplier (an Assigned Agreement), (ii) such breach is solely attributable to an Assigned Agreement that prohibits or does not allow, Seller to require such supplier or subcontractor to comply with such obligation and (iii) Seller has used commercially reasonable efforts to persuade such subcontractor or supplier to comply with such obligation. Provided, however, that (i) Seller will promptly notify Boeing whenever its management becomes aware that an Assigned Agreement prohibits or does not allow Seller to require a supplier or subcontractor to comply with such an obligation; (ii) Seller will use commercially reasonable efforts to obtain the agreement of such supplier or subcontractor to comply with the obligations of Seller to Boeing with respect to subcontractors or suppliers, or both, including reasonable payments therefore. Provided, that this clause shall not apply (i) with respect to obligations that are mandated by law or regulation or safety of flight considerations, and (ii) after two (2) years from the date of this SBP.
12.12 INTERNATIONAL COOPERATION
12.12.1 Market Access and Sales Support
Seller agrees to work with Boeing to develop a lean global supply stream through application of shared strategies and tactics which support market access, and international business strategy. Boeing and Seller agree to work together to identify countries where Seller may subcontract and manage associated supply chain in support of Boeings market access and international business strategy. With respect to work covered by this SBP, and if directed by Boeing, Seller shall use commercially reasonable efforts to procure from subcontractors and manage associated supply chain, in countries selected by Boeing, goods and services having a value of not more than twenty-five-percent (25%) of the total Shipset Price of all undelivered Shipsets as of the date of such notice. Such direction shall be at Boeings sole option and may occur at any time during the performance of this SBP; provided that Seller shall not be required to breach any then existing subcontract. Seller may satisfy such requirement through purchases either related or not related to this SBP. Seller shall document on SBP Attachment 12 all offers to contract and executed contracts with such subcontractors including the dollars contracted. Seller shall provide to Boeing with an updated copy of SBP Attachment 12 for the six-month periods ending June 30 and December 31 of each year. If Seller is directed by Boeing to subcontract any part of its Work Packages and Seller anticipates an increase to the Price of the Order as a result of such direction, Seller shall notify Boeing in writing within thirty (30) days of such direction. If there is a cost or schedule impact, Boeing shall respond within thirty (30) days on whether Seller is to proceed. In such cases if Boeing directs Seller to proceed and there is a
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
resulting increase to the Price of the Order, then the Parties will mutually agree to an equitable adjustment in Price.
12.12.2 Offset Assistance
Seller shall use commercially reasonable efforts to cooperate with Boeing in the fulfillment of any non-United States offset program obligation that Boeing may have accepted as a condition of the sale of a Boeing product. In the event that Seller is either directed by Boeing pursuant to Section 12.12.1, or on its own solicits bids and/or proposals for, or procures or offers to procure any goods or services relating to the work covered by this SBP from any source outside of the United States, Boeing shall be entitled, to the exclusion of all others, to all industrial benefits and other offset credits which may result from such solicitations, procurements or offers to procure. Seller shall take any commercially reasonable actions that may be required on its part to assure that Boeing receives such credits. Seller shall document on SBP Attachment 12 all offers to contract and executed contracts with such subcontractors including the dollars contracted. Seller shall provide to Boeing an updated copy of SBP Attachment 12 for the six-month periods ending June 30 and December 31 of each year. The reports shall be submitted on the next 1 st of August and the 1 st of February respectively. If Seller is directed by Boeing to subcontract any part of its Product(s) to a country in which Boeing has an offset obligation, and Seller anticipates an increase to the Price of the Product(s) as a result of such direction, Seller shall notify Boeing in writing within thirty (30) days of such direction. If there is a cost or schedule impact, Boeing shall respond within thirty (30) days on whether Seller is to proceed. In such cases if Boeing directs Seller to proceed and there is a resulting increase to the Price of the Product(s), then the Parties will mutually agree to an equitable adjustment in Price. Attachment 12, Section 2 lists obligations in place at contract signing.
This SBP Section 12.12.2 applies in lieu of GTA Section 36.0.
12.13 SUPPLY CHAIN INTEGRATION
12.13.1 Supplier Banked Material (SBM) or Boeing Provided Details (BPD)
Material, including but not limited to raw material, standards, detail components and assemblies, furnished to Seller by Boeing (Boeing Furnished Material) shall be administered in accordance with a Bonded Stores Agreement.
Boeing Provided Details (including raw material, standards, detail components and assemblies) to Sellers statement of work are listed in Attachment 16 with their associated purchase price and will be updated by Boeing periodically to reflect Boeing current Price.
Seller shall provide Boeing with required on-dock dates for all such material and BPD. Sellers notice shall provide Boeing with sufficient time to acquire the material. If any parts will be supplied by Boeing then they will be identified in Attachment 16.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.13.1.1 ATA Stringers
Pricing for ATA Stringer parts as noted in Attachment 16 are [*****] priced from [*****] through [*****]. If airplane rates decrease to lower than [*****] APM for the combined 737 and 767 Programs deliveries, ATA Stringer prices will increase up to [*****] as defined by Boeing.
If airplane rates decrease to lower than [*****] APM for the combined 737 and 767 Programs deliveries, ATA Stringer prices will increase by up to an additional [*****] as defined by Boeing, for a total increase up to [*****] to the negotiated [*****] price. Boeing and Spirit will mutually agree on the effective date of the price increase.
The parties mutually agree that equitable compensation may be recovered for [*****].
Boeing is responsible for all [*****] costs associated with Boeing Airplane Program changes including derivatives and Boeing initiated production changes that lead to new [*****].
Spirit is responsible for all Non-recurring and Recurring costs associated with Spirit dictated changes, including part numbers or configurations generated to support Spirit unique requirements, those not dictated by Boeing, e.g., modification work, rejections or any SP (special part). One time non-recurring lot charge of [*****] will apply to each Spirit SP. Non-recurring tooling costs associated with SP will be included in the SP recurring price.
Boeing is not liable for costs incurred by Spirit as a result of Boeing MRB actions related to BPD ATA Stringers or Spirit rejections of Boeing produced BPD ATA Stringers.
12.13.2 Boeing Raw Material Strategy
During the term of this SBP, Seller shall procure from Boeing (or its designated service provider who will act on behalf of Boeing) all raw material of the commodity type specified on the SBP Attachment entitled Commodity Listing and Terms of Sale (SBP Attachment 21) necessary to support any Order issued pursuant to this SBP. From time to time, Boeing may amend the SBP Attachment entitled Commodity Listing and Terms of Sale by adding or deleting commodity types. Any such amendment, or revisions to the raw material pricing, shall be subject to adjustment under SBP Section 7.0, provided that Seller shall take no action to terminate its existing supply agreements when such termination would result in an assertion for an adjustment until the Seller has received approval from Boeing. The provision of any raw material by Boeing to Seller shall be according to Boeings standard terms of sale, the text of which is included in the SBP Attachment entitled Commodity Listing and Terms of Sale. Boeing shall advise Seller of any designated service provider to be used at the
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
time the Order is issued. Upon request by Boeing, Seller must provide to Boeing documentation (e.g., packing slips, invoices) showing Sellers full compliance with the obligations under this SBP Section. If requested by Boeing or its designated service provider, Seller will provide an annual forecast of demand for the applicable commodity. If Seller reasonably believes that Boeing or its designated service provider cannot support Seller requirements to fulfill an Order issued pursuant to this SBP, then Seller shall have the right to procure raw materials from other sources and shall notify Boeing prior to such procurement. The provisions of this Section 12.13.2 will only apply to that portion of Seller contracts that support Boeing Statement of Work.
12.13.3 Third Party Pricing
Boeing may at any time identify products within Sellers Products, for which Boeing has established a contract that Seller may purchase directly from Boeings subcontractor under the terms of Boeings subcontract (Third Party Price Contract). Pricing for products under a Third Party Price Contract is only available for products listed in this SBP. Seller is free to negotiate and enter into contracts at lower prices or on better terms, with this subcontractor or another company. Seller to notify Boeing of any cost reductions resulting from use of Third Party Price Contracts. Seller shall apply [*****] of the savings achieved through the use of these Boeing Third Party Price Contracts towards Price reductions on the applicable Boeing Products.
12.13.3.1 Toray Raw Material
During the term of this SBP, Spirits material purchases from Toray to support any requirements for products listed in Attachment 1 of the SBP shall be applicable to the terms of Section 12.13.3 Third Party Pricing. The Third Party Pricing reimbursement will be based on the difference between the [*****] base (Attachment 1 prices are determined using this value) and [*****].
Methodology:
1) Each year, in February, Boeing and Spirit will agree on the total airplane deliveries for the prior 12-month period for each minor model.
2) Boeing will use the agreed-to Material Buy weights (to be updated every [*****]) and the total airplane deliveries to determine the total Toray material purchases by Spirit for the year.
3) The Third Party Pricing reimbursement will be calculated using the Toray Reimbursement formula.
Toray Reimbursement formula:
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
The formula to be used in the calculation of the Toray Third Party Pricing reimbursement is:
[*****]
P is calculated for the [*****] period, and for the [*****] period, each year, due to two Quantity Based Discount factors in each calendar year.
|
|
Fly Weight |
|
Buy Weight |
[*****] |
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|
[*****] |
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[*****] |
|
[*****] |
[*****] |
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[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
12.13.4 Obligation to Accept Assignment of Contracts
If Boeing has a contract(s) with a third party supplier that is primarily related to Seller and the contract was not assigned to Seller as of the date of this SBP and Boeing later determines that it has residual requirements or obligations for goods or services that 1) Boeing had previously obtained from the third party supplier prior to such date; 2) are still used in the Products provided by Seller under the SBP; and 3) that Seller no longer obtains from the third party supplier, Boeing can require Seller to accept an assignment of the contract(s) up through the current term of each contract or contracts in order for Seller to satisfy the residual requirements obligations.
12.14 Reserved
12.15 LIFE CYCLE PRODUCT TEAM
12.15.1 Purpose
In the event Boeing uses Life Cycle Product Teams LCPT (or similar teams), personnel located at Boeings facilities in accordance with this SBP will conduct
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
their respective activities concurrently in a team environment to assist Boeing in developing firm configuration and product development definition and meeting Program requirements which includes improving producibility, reliability and maintainability of the Program Airplane. Notwithstanding Sellers participation in the LCPT, Boeing shall have the right to make any and all determinations with respect to airplane performance and product strategy and the design of the Program Airplane and any Derivative.
12.15.1.1 Qualifications
Boeing shall have the right to review the qualifications of all personnel proposed by Seller for assignment to the LCPT or similar teams. Seller shall forward professional resumes of such personnel to Boeing for review and approval not to be unreasonably withheld or delayed prior to assignment of such personnel.
12.15.2 Work Schedule
Except for sickness and other unavoidable absence, all personnel assigned to the LCPT by Seller pursuant to this SBP Section 12.15, shall be available during the customary work shift at the place designated by Boeing eight (8) working hours per day, Monday through Friday (except for identified Boeing holidays and such vacation periods as Boeing may reasonably permit) and shall work all overtime hours as Boeing may reasonably request.
12.15.3 Equipment and Supplies
Boeing shall furnish certain office equipment (e.g. desks, telephones, network access) and office supplies to Sellers LCPT personnel. Boeing will not provide personal property (such as computing equipment, software or drafting equipment and calculators) necessary for the performance by Sellers LCPT personnel. Seller shall provide all computing equipment and software required to support its LCPT personnel while located at Boeings facilities.
Boeing shall not be responsible for loss or damage to such personal property.
12.15.4 Employment Status
Sellers LCPT personnel shall at all times remain employees of Seller and not employees of Boeing. Seller shall be responsible for all wages, salaries and other amounts due Sellers LCPT personnel and shall be responsible for all reports, requirements and obligations respecting them under local, state or federal laws of the United States, or the laws of any foreign country, including but not limited to social security, income tax, unemployment compensation, workers compensation and any other local, state or federal taxes of the United States or the taxes of any foreign country.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.15.5 Team Leader
Seller shall designate one of its LCPT personnel Team Leader. Administrative matters between Boeing and Seller arising during the performance of this SBP shall be managed by the Team Leader.
12.15.6 Discipline
Discipline of Sellers LCPT personnel shall be Sellers responsibility. While on Boeing premises, Sellers LCPT personnel shall obey all Boeing rules. While on Seller premises, Boeings LCPT personnel shall obey all Seller rules.
12.15.7 Removal of Personnel
Upon receipt of a written request from Boeing for the replacement of any person assigned to the LCPT by Seller pursuant to this SBP Section 12.15, Seller shall remove such person from the LCPT. As soon thereafter as reasonably possible, Seller shall promptly furnish a satisfactory replacement or alternate arrangement.
12.16 INCREMENTAL RELEASE
Seller shall develop production plans and schedules for Production Articles based on SBP Attachment 14 and applicable Orders. These production plans and schedules will include plans for the purchase of material and the fabrication and assembly of Production Articles in accordance with Seller policy. Seller shall purchase material, standards and purchased parts and authorize fabrication and assembly of Production Articles in accordance with Schedules and lead times as specified in Attachment 6.
Seller-proposed and Boeing-approved costs associated with Schedules will be addressed pursuant to GTA Sections 12.3, 15.0, 16.0 and 25.2, provided the procedural requirements of those GTA sections are met.
12.17 PARTICIPATION
12.17.1 Other Boeing Entities
Seller agrees that any Boeing division or Boeing subsidiary (Boeing Entity) not specifically included in this SBP may, by issuing a purchase order, work order, or other release document, place orders under this SBP during the term hereof or any written extension thereof, under the terms, conditions and pricing specified by this SBP. Seller agrees that the prices set forth herein may be disclosed by Boeing on a confidential basis to Boeing entities wishing to invoke this SBP Section 17.1. Seller shall notify the Boeing Procurement Representative named in SBP Section 9.0 of Boeing Entities not specifically referenced herein who frequently use this SBP.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12.17.2 RESERVED
12.17.3 RESERVED
12.17.4 Notification of Contract
In the event a purchaser known by Seller to be a Boeing Entity places an order for supplies or services covered by this SBP but fails to reference this SBP or otherwise seek the prices established by this SBP, Seller shall notify such purchaser of the existence of this SBP and the prices established hereunder and shall offer such prices to such purchaser.
12.18 RESERVED
12.19 Surplus Products
12.19.1 Return of Surplus Products
Boeing shall be entitled to return to Seller, at Boeings expense, any Product that has been delivered to Boeing in accordance with this SBP and that is surplus to Boeings then current requirements (including without limitation, any Products returned to Boeing by any Customer); provided that (i) any such Product may only be returned to Seller if agreed by Seller, and such agreement shall not be unreasonably withheld, and (ii) such Product is in a current production configuration or can be, in Boeings determination, economically changed to such a configuration. On receipt of any such Product, Seller shall credit Boeings account with [*****] or an amount to be negotiated on a case by case basis, [*****] as set forth in SBP Attachment 7 Indentured Parts Price List and Spare Part Pricing. If instructed by Boeing, Seller shall rework any such returned Product to put such Product in a current configuration. Such rework shall be considered Miscellaneous Work and shall be priced in accordance with SBP Attachment 7 Indentured Priced Parts List and POAs or as may be otherwise mutually agreed between the Parties.
12.19.2 Substitution of Surplus Products
In its sole discretion, Boeing may, upon providing written notice to Seller at least four (4) months prior to the scheduled delivery date for any Production Article, elect to use any Product in inventory or any Product returned to Boeing by any Customer in the place of such Production Article. Boeings notice shall include the cumulative line number of the Program Airplane or Derivative on which Boeing intends to incorporate such Product. Seller shall not deliver such Production Article to Boeing and shall not invoice Boeing for the Price of such undelivered Production Article.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
13.0 ORDER OF PRECEDENCE
In the event of a conflict or inconsistency between any of the terms of the following documents, the following order of precedence shall control:
A. These Special Business Provisions (SBP) including attachments excluding all documents listed below, then
B. General Terms Agreement (GTA) (excluding all documents listed elsewhere on this listing), then
C. Purchase contract, if any, then
D. Order (excluding all documents listed elsewhere on this listing), then
E. D6-83323, Engineering Delegation Levels and Responsibility, Accountability and Authority (RAA) Descriptions for Specific Components on 737, 767, 747 and 777 Aircraft
F. D6-83267-2, BCA Engineering Requirements for Mid-Western Aircraft Systems, Incorporated Divestiture of the Wichita/Tulsa Division
G. Engineering Drawing by Part Number and, if applicable, Supplier Specification Plan (SSP) then
H. All documents incorporated by reference in SBP Section 12.1 Supporting Documentation, List of Certain Documents, and 16.0, Product Support and Assurance, of this SBP, then
I. Electronic Access Agreement, then
J. Administrative Agreement, if any, then
K. Any other Boeing generated exhibits, attachments, forms, flysheets, codes or documents that the Parties agree shall be part of this SBP, then lastly
L. Any Seller generated documents that the Parties agree shall be part of this SBP.
In resolving any such conflicts or inconsistencies, these documents shall be read as a whole and in a manner most likely to accomplish their purposes.
Either party shall promptly report to the other party in writing any inconsistencies in these documents, even if the inconsistency is resolvable using the above rules.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
14.0 RESERVED
15.0 APPLICABLE LAW
This contract shall be governed by the laws of the State of Washington No consideration shall be given to Washingtons conflict of law rules. This contract excludes the application of the 1980 United Nations Convention on Contracts for the International Sale of Goods. Boeing and Seller hereby irrevocably consent to and submit themselves exclusively to the jurisdiction of the applicable courts of King County, Washington and the federal courts of Washington State for the purpose of any suit, action or other judicial proceeding arising out of or connected with any Order or the performance or subject matter thereof. Boeing and Seller hereby waive and agree not to assert by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that (a) Boeing and Seller are not personally subject to the jurisdiction of the above-named courts, (b) the suit, action or proceeding is brought in an inconvenient forum or (c) the venue of the suit, action or proceeding is improper.
16.0 PRODUCT SUPPORT AND ASSURANCE
16.1 Warranty
Seller acknowledges that Boeing and Customers must be able to rely on each Product performing as specified and that Seller will provide all required support pursuant to the PSAD. Accordingly, the following provisions, including documents, if any, set forth below are incorporated herein and made a part hereof:
16.1.1 Product Support and Assurance Document (PSAD) D6-83315
Boeing may choose initially not to extend the Sellers full warranty of Product to Customers. This action shall in no way relieve Seller of any obligation set forth in the warranty documents listed above. Boeing, at its sole discretion, may extend Sellers full warranty of Product to its Customers at any time. Furthermore, Seller agrees to support the Product as long as any aircraft using or supported by the Product remains in service.
17.0 ADMINISTRATIVE MATTERS
17.1 Administrative Authority
For all matters requiring the approval or consent of either Party, such approval or consent shall be requested in writing and is not effective until given in writing by a person authorized to do so in the Administrative Agreement. With respect to Boeing, authority to grant approval or consent is limited to Boeings Procurement Representative as provided in the Administrative Agreement.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
17.2 Administrative Agreement
An Administrative Agreement is used for administrative matters not specifically addressed elsewhere and sets forth certain obligations of the Parties relating to the administration of the SBP, GTA and each Order. The Administrative Agreement is identified and incorporated in SBP Section 12.1 Supporting Documentation.
18.0 OBLIGATION TO PURCHASE AND SELL
Boeing and Seller agree that in consideration of the prices set forth in Attachment 1, Seller shall sell and deliver to Boeing and Boeing shall purchase from Seller all of Boeings requirements for Products as set forth in SBP Section 3.0 and corresponding Products as required for Derivatives which shall be added to Attachment 1 during the period of performance for this SBP. Such Products shall be shipped at any scheduled rate of delivery in accordance with the terms of delivery as determined by Boeing, and Seller shall sell to Boeing and Boeing shall purchase exclusively from Seller Boeings requirements of such Products during the term of this SBP, Provided that, without limitation on Boeings right to determine its requirements, Boeing shall not be obligated to issue an Order for any given Product and shall be relieved of its exclusivity obligations for that Product to the extent that Boeing has the right to cancel as provided in GTA Section 13.2.A.
18.1 Replacements
This Agreement contains no obligation for either Party relating to Replacement Aircraft.
19.0 STRATEGIC ALIGNMENT / SUBCONTRACTING
With the exclusion of major end items as set forth in Attachment 1, Boeing may assign this SBP or any Order, in whole or in part, to a third party who is under an obligation to supply Boeing with components, kits, assemblies or systems that require the Sellers Product; Provided that such assignment shall not relieve Boeing of its obligations under this SBP or any Order. Seller may subcontract its obligations hereunder to a third party, subject to the terms of this SBP and provided that such subcontracting shall not relieve Seller of its obligations under this SBP or any Order.
20.0 OWNERSHIP OF INTELLECTUAL PROPERTY
20.1 Technical Work Product
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
All technical work product, including to the extent protectible by ownership rights, but not limited to, ideas, information, data, documents, drawings, software, software documentation, software tools, designs, specifications, and processes produced by or for Seller, either alone or with others, in the course of or as a result of any work performed by or for Seller pursuant to this SBP will be the exclusive property of Boeing and be delivered to Boeing promptly upon request.
20.2 Inventions and Patents
20.2.1 Subject to the provisions of paragraph 20.2.3, all inventions conceived by or for Seller on or after the effective date of this SBP, either alone or with others, in the course of or as a result of any work performed by or for Seller pursuant to this SBP shall be owned by Seller, and any patents claiming such inventions (both domestic and foreign), will be the exclusive property of Seller. Nothing in this paragraph 20.2.1 shall abridge or modify Boeings rights under 35 USC secs. 102 or 103 to inventions independently developed by or for Boeing on or after the effective date of this SBP.
20.2.2 Seller shall (i) use commercially reasonable efforts to promptly disclose to Boeing in written detail all inventions disclosed to Seller which were conceived prior to the effective date of this SBP (Boeing Inventions) and (ii) shall, at Boeings sole cost and expense, execute all papers, cooperate with Boeing, and perform all acts, reasonably requested by Boeing to assist Boeing in connection with the filing, prosecution, maintenance, or assignment of patents and patent applications claiming such Boeing Inventions.
20.2.3 Notwithstanding anything to the contrary in this SBP, all inventions conceived, developed, or first reduced to practice by or for Seller, either alone or with others, in the course of or as a result of any work performed by or for Seller, pursuant to this SBP (SBP Inventions) that Boeing reasonably believes are applicable to, developed for, incorporated in or to be incorporated in the 787 (SBP 787 Inventions), and any patents claiming such inventions (both domestic and foreign) will, subject to paragraph 20.2.3 (b) below, be the exclusive property of Boeing. Seller will promptly disclose all SBP Inventions to Boeing in written detail. Boeing shall have 90 days in which to inform Seller in writing whether Boeing reasonably believes such SBP Inventions are SBP 787 Inventions, and further, which SBP 787 Inventions Boeing wishes to pursue patent protection on the SBP 787 Inventions.
(a) In the event Boeing elects to pursue patent protection on the SBP 787 Inventions, Boeing shall bear the entire cost and expense and Seller shall execute all papers, cooperate with Boeing and perform all acts, reasonably requested by Boeing to assist Boeing in connection with the filing, prosecution, maintenance, or assignment of related patents or patent applications on behalf of Boeing.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
(b) In the event Boeing elects not to pursue patent protection on the SBP 787 Inventions, Seller shall have a period of 12 calendar months, commencing upon receipt of Boeings notice to not pursue patent protection, in which to file a formal patent application under 35 USC sec. 111(a) or a formal application under the Patent Cooperation Treaty or, subject to the following sentence, a provisional patent application under 35 USc secs. 111(b) or 119(e) or other similar provisional filing permitted by other sovereigns. The filing of a provisional patent application or other similar provisional filing shall not qualify as the filing of a formal patent application for purposes of this subsection (b) unless Seller files a formal patent application within twelve (12) months after the filing of the provisional patent application. In any event, Seller shall, prior to the date on which any such provisional patent application would be published, either abandon or file a formal patent application with respect to any provisional patent application. Seller shall bear the entire cost and expense of filing, prosecuting and maintaining any patents and patent applications so filed.
(c) In the event Seller fails to file a formal patent application or abandons a patent application in the manner described in sub paragraph (b) above and Boeing has also elected not to pursue patent protection on said SBP 787 Inventions as described in subparagraph (a) above, the subject matter of said SBP 787 Inventions shall be held as a trade secret and shall be the sole and exclusive property of Boeing.
20.3 Works of Authorship and Copyrights
All works of authorship (including, but not limited to, documents, drawings, software, software documentation, software tools, photographs, video tapes, sound recordings and images) created by or for Seller, either alone or with others, in the course of or as a result of any work performed by or for Seller pursuant to this SBP, together with all copyrights subsisting therein, will be the sole property of Boeing. To the extent permitted under United States copyright law, all such works will be works made for hire, with the copyrights therein vesting in Boeing. The copyrights in all other such works, including all of the exclusive rights therein, will be promptly transferred and formally assigned free of charge to Boeing.
20.4 Pre-Existing Inventions and Works of Authorship
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Seller grants to Boeing, with the right of Boeing to sublicense the same to Boeings subcontractors, suppliers, and customers in connection with Products or work being performed for Boeing, an irrevocable nonexclusive, paid-up, worldwide license under any patents, copyrights, industrial designs and mask works (whether domestic or foreign) owned or controlled by Seller at any time and existing prior to or during the term of this SBP, but only to the extent that such patents or copyrights would otherwise interfere with Boeings or Boeings subcontractors, suppliers, or customers use or enjoyment of Products or the work product, inventions, or works of authorship belonging to Boeing under this SBP.
21.0 SOFTWARE PROPRIETARY INFORMATION RIGHTS
Seller hereby grants to Boeing a perpetual, nonexclusive, paid-up, worldwide license to reproduce, distribute copies of, perform publicly, display publicly, and make Seller intended derivative works from software included in or provided with or for Products (Software) and related information and materials (Software Documentation) as reasonably required by Boeing in connection with (1) the testing, certification, use, sale, or support of a Product, or the manufacture, testing, certification, use, sale, or support of any aircraft including and/or utilizing a Product, or (2) the design or acquisition of hardware or software intended to interface with Software. The license granted to Boeing under this SBP Section 21.0, also includes the right to grant sublicenses to Customers as reasonably required in connection with Customers operation, maintenance, overhaul, and modification of any aircraft including and/or utilizing Software. All copies and Seller intended derivative works made pursuant to the foregoing license or any sublicense to a Customer will automatically become, subject to the foregoing license, the property of Boeing or Customer, and Boeing agrees to preserve Sellers copyright notice thereon to the extent that such a notice was included with the original Software and/or Software Documentation. Seller acknowledges that Boeing is the owner of all tangible copies of Software and Software Documentation provided to or made by Boeing or Customers pursuant to this SBP, and Seller hereby authorizes Boeing and Customers to dispose of, and to authorize the disposal of, the possession of any and all such copies by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending.
22.0 INFRINGEMENT
Each Party will indemnify, defend, and hold harmless the other Party from all claims, suits, actions, awards (including, but not limited to, awards based on intentional infringement of patents known at the time of such infringement, exceeding actual damages, and/or including attorneys fees and/or costs), liabilities, damages, costs and attorneys fees related to the actual or alleged infringement of any United States or foreign intellectual property right (including, but not limited to, any right in a patent, copyright, industrial design or semiconductor mask work, or based on misappropriation or wrongful use of information or documents) and arising out of the use of the indemnifying Partys
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Proprietary Information and Materials in connection with the manufacture, sale or use of Products by the other Party or by Boeings Customers. Each Party will duly notify the other Party of any such claim, suit or action in respect of which the notifying Party may be obligated to provide indemnification under this SBP Section 22.0; and the indemnifying Party will, at its own expense, fully defend such claim, suit or action on behalf of the indemnified Party and, if applicable, Boeings Customers. Neither Party shall have any obligation under this SBP Section 22.0 with regard to any infringement arising from: (i) such Partys compliance with formal specifications issued by the other Party where infringement could not be avoided in complying with such specifications or (ii) use or sale of Products in combination with other items when such infringement would not have occurred from the use or sale of those Products solely for the purpose for which they were designed or sold by such Party. For purposes of this SBP Section 22.0 only, the term Customer shall not include the United States government; and the term Party shall include Boeing or Seller, as applicable, its subsidiaries and all officers, agents and employees of Boeing or Seller, as applicable, or any of its subsidiaries.
23.0 DIGITIZATION OF PROPRIETARY INFORMATION AND MATERIALS
Seller grants to Boeing a license under Sellers copyrights for the purpose of converting Sellers Proprietary Information and Materials to a digital format (Digital Materials) and making such Digital Materials available to its employees for company internal use through a computer data base system solely in connection with the use of the Products as permitted by Boeings license rights in the underlying Seller Proprietary Information and Materials. Except as otherwise specifically agreed to in writing by the Parties, said license set forth hereunder shall survive termination or cancellation of this SBP relative to Digital Materials included in Boeings computer data base system prior to receipt of such notice of termination or cancellation.
24.0 CONFIGURATION CONTROL
Seller agrees not to make any change in materials or design details which would affect the Product or any component part thereof except as may be provided for in SBP Attachment 4 without prior written approval, not to be unreasonably withheld or delayed, of Boeing. If such approval is granted, all part numbers and the originals of all drawings and data shall be revised accordingly. Seller will use commercially reasonable efforts to place the above requirement in all its subcontracts for supplier identified purchased equipment which it enters into after the date hereof, whether such equipment is supplied to Seller as an end item or as a component part of an end item.
25.0 Reserved
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
26.0 ON-SITE SUPPORT
26.1 Indemnification Negligence of Seller or subcontractor
Seller shall indemnify and hold harmless Boeing, its subsidiaries, and their directors, officers, employees, and agents from and against all actions, causes of action, liabilities, claims, suits, judgments, liens, awards, and damages, of any kind and nature whatsoever for property damage, personal injury, or death (including without limitation injury to or death of employees of Seller or any subcontractor thereof) and expenses, costs of litigation and counsel fees related thereto or arising out of or in any way related to this Agreement t, the performance thereof by Seller or any subcontractor thereof, including without limitation the provision of services, personnel, facilities, equipment, support, supervision, or review which occurs while Sellers employees are on premises owned or controlled by Boeing. The foregoing indemnity shall apply only to the extent of the negligence of Seller, any subcontractor thereof, or their respective employees. In no event shall Sellers obligations hereunder be limited to the extent of any insurance available to or provided by the Seller or any subcontractor thereof. Seller expressly waives any immunity under industrial insurance, whether arising out of statute or source, to the extent of the indemnity set forth in this paragraph.
Boeing shall indemnify and hold harmless Seller, its subsidiaries, and their directors, officers, employees, and agents from and against all actions, causes of action, liabilities, claims, suits, judgments, liens, awards, and damages, of any kind and nature whatsoever for property damage, personal injury, or death (including without limitation injury to or death of employees of Boeing or any subcontractor thereof) and expenses, costs of litigation and counsel fees related thereto or arising out of or in any way related to this Agreement, the performance thereof by Boeing or any subcontractor thereof, including without limitation the provision of services, personnel, facilities, equipment, support, supervision, or review which occurs while Boeings employees are on premises owned or controlled by Seller. The foregoing indemnity shall apply only to the extent of the negligence of Boeing, any subcontractor thereof, or their respective employees. In no event shall Boeings obligations hereunder be limited to the extent of any insurance available to or provided by Boeing or any subcontractor thereof. Boeing expressly waives any immunity under industrial insurance, whether arising out of statute or source, to the extent of the indemnity set forth in this paragraph.
This SBP Section 26.1 applies in lieu of GTA Section 5.3.
26.2 Commercial General Liability
If Seller or any subcontractor thereof will be performing work on Boeing premises, Seller shall carry and maintain, and ensure that all subcontractors or suppliers thereof carry and maintain, throughout the period when work is performed and until final acceptance by Boeing, Commercial General Liability insurance with available limits of not less than One Million Dollars ($1,000,000) per occurrence for bodily injury and property damage combined.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
26.3 Automobile Liability
If licensed vehicles will be used in connection with the performance of the work, Seller shall carry and maintain, and ensure that any subcontractor thereof who uses a licensed vehicle in connection with the performance of the work carries and maintains, throughout the period when work is performed and until final acceptance by Boeing, Business Automobile Liability insurance covering all vehicles, whether owned, hired, rented, borrowed, or otherwise, with available limits of not less than One Million Dollars ($1,000,000) per occurrence combined single limit for bodily injury and property damage.
26.4 Workers Compensation
Throughout the period when work is performed and until final acceptance by Boeing, Seller shall, and ensure that any subcontractor thereof shall, cover or maintain insurance in accordance with the applicable laws relating to Workers Compensation with respect to all of their respective employees working on or about Boeing premises. If Boeing is required by any applicable law to pay any Workers Compensation premiums with respect to an employee of Seller or any subcontractor, Seller shall reimburse Boeing for such payment. Notwithstanding such insurance requirement above, in this SBP section 26.4 Seller shall be allowed to self insure; in compliance with applicable state law.
26.5 Certificates of Insurance
Prior to commencement of the work Seller shall provide for Boeing review and approval, not to be unreasonable withheld or delayed. Certificates of Insurance reflecting full compliance with the requirements set forth in SBP Section 26.2 Commercial General Liability, SBP Section 26.3 Automobile Liability and, SBP Section 26.3 Workers Compensation. Such certificates shall be kept current and in compliance throughout the period when work is being performed and until final acceptance by Boeing, and shall provide for thirty (30) days advance written notice to Boeing in the event of cancellation. Failure of Seller or any subcontractor thereof to furnish Certificates of Insurance, or to procure and maintain the insurance required herein or failure of Boeing to request such certificates, endorsements or other proof of coverage shall not constitute a waiver of the respective Sellers or subcontractors obligations hereunder.
26.6 Self-Assumption
Any self-insured retention, deductibles, and exclusions in coverage in the policies required under this Section 26.0 shall be assumed by, for the account of, and at the sole risk of Seller or the subcontractor, which provides the insurance, and to the extent applicable shall be paid by such Seller or subcontractor. In no event shall the liability of Seller or any subcontractor thereof be limited to the extent of any of the minimum limits of insurance required herein.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
26.7 Protection of Property
Seller assumes, and shall ensure that all subcontractors or suppliers thereof and their respective employees assume, the risk of loss or destruction of or damage to any property of such Parties whether owned, hired, rented, borrowed, or otherwise. Seller waives, and shall ensure that any subcontractor thereof and their respective employees waive, all rights of recovery against Boeing, its subsidiaries, and their respective directors, officers, employees and agents for any such loss or destruction of or damage to any property of Seller, any subcontractor, or their respective employees, other than for any such loss, destruction or damage resulting from the negligence or willful misconduct of Boeing, any of its subsidiaries, or any of their respective directors, officers, employees or agents.
At all times Seller shall, and ensure that any subcontractor thereof shall, use suitable precautions to prevent damage to Boeing property. If any such property is damaged by the fault, negligence, or willful misconduct of Seller or any subcontractor thereof, Seller shall, at no cost to Boeing, promptly and equitably reimburse Boeing for such damage or repair or otherwise make good such property to Boeings satisfaction. If Seller fails to do so, Boeing may do so and recover from Seller the cost thereof.
26.8 Compliance with Boeing Site Requirements
In the event the Seller or Sellers Subcontractor(s) performs any aspect of an applicable GTA, SBP or Order on property owned, operated, leased, or controlled by Boeing (hereinafter On-Site Work), Seller agrees to comply with Boeings environmental, safety and health requirements. These are the same provisions with which Boeing employees must comply. In the event Boeing or Boeings subcontractor(s) performs any aspect of an applicable GTA, SBP or Order on property owned, operated, leased, or controlled by Seller, Boeing agrees to comply with Sellers environmental, safety and health requirements. These are the same provisions with which Sellers employees must comply.
27.0 Reserved
28.0 DELIVERY - TITLE AND RISK OF LOSS
28.1 Title and Risk of Loss
Without diminishing the obligations of Seller under this SBP, title to and risk of any loss of, or damage to, all Products (except for Tooling) shall pass from Seller to Boeing upon delivery as set forth in SBP Section 3.4.2 (Delivery Point and Schedule), except for loss or damage to the extent resulting from Sellers fault, negligence, willful misconduct or failure to comply with the material terms of this SBP. Passing of title on delivery shall not constitute final acceptance of such Products by Boeing.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Notwithstanding the provisions of this SBP Section 28.1, and without diminishing Sellers obligations under this SBP, risk of any loss of, or damage to, all Existing Tooling and New Tooling (except for Common-Use Tooling) shall pass from Seller to Boeing upon delivery as set forth in Section 3.4.2 (Delivery Point and Schedule), except for loss or damage to the extent resulting from Sellers fault or negligence or failure to comply with the terms of this SBP.
29.0 Reserved
30.0 CUSTOMER CONTACT
Boeing is responsible for all contact with Customers regarding the Program, Program Airplanes and Derivatives and any other Boeing model aircraft programs. Seller shall not make any contact with actual or potential Customers on the subject of the Program, Program Airplanes or Derivatives without Boeings prior written consent, not to be unreasonable withheld or delayed; and Seller shall respond to any inquiry from actual or potential Customers regarding the Program, Program Airplanes or Derivatives by requesting that the inquiry be directed to Boeing. Seller shall, concurrently with such response, advise Boeing of such inquiry.
31.0 Reserved
31.1 Interest on Overdue Amounts
If Seller or Boeing shall fail to pay when and as due any amount payable hereunder, such amount shall bear interest payable on demand, at the per annum rate announced by Citibank, New York, New York, as its prime rate on the last working day of the month in which such amount becomes due.
32.0 SURVIVAL
Without limiting any other survival provision contained herein and notwithstanding any other provision of this SBP or the GTA to the contrary, the representations, covenants, agreements and obligations of the Parties set forth in GTA Section 12.3 Sellers Claim, GTA Section 16.0 Termination or Wrongful Cancellation, GTA Section 18.0 Responsibility for Property, GTA Section 20.0 Proprietary Information and Items, GTA Section 24.0 Boeings Rights in Sellers Patents, Copyrights, Trade Secrets and Tooling, GTA Section 29.0 Non-Waiver/Partial Invalidity, GTA Section 38.0 Applicable Law, GTA Section 39.0 Order of Precedence, this SBP Section 32.0 Survival, SBP Section 3.4.9 Type Design and Type Certification Data Development and Protection, SBP Sections 3.5 Product Support and Miscellaneous Work, SBP Section 13.0 Order of Precedence, SBP Section 15.0 Applicable Law, SBP Section 16.0 Product Support and Assurance, SBP Section 20.0 Intellectual Property, SBP Section 22.0 Infringement, and SBP Section 26.0 Insurance for On-Site Support (if applicable), shall survive any cancellation, termination or expiration of this SBP, any assignment of this SBP or any payment and performance of any or all of the other obligations of the Parties hereunder. Termination or cancellation
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
of any part of this SBP shall not alter or affect any part of this SBP which has not been terminated or cancelled.
33.0 INVENTORY AT CONTRACT COMPLETION
Subsequent to Sellers last delivery of Product(s), which contain, convey, embody or were manufactured in accordance with or by reference to Boeings Proprietary Information or Materials, including but not limited to finished goods, work-in-process and detail components (hereafter Inventory) which are in excess of Order quantity may be made available to Boeing for purchase. Seller may be entitled to keep such inventory for other Boeing approved purposes. In the event Boeing, in its sole discretion, elects not to purchase the Inventory, Seller may keep and sell such Inventory, under the terms of its spares supplemental license agreement with Boeing, as long as that supplemental license agreement is in good standing. If Sellers spares supplemental license agreement has been terminated or cancelled, Seller shall scrap the Inventory. Prior to scrapping the Inventory, Seller shall mutilate or render it unusable. Seller shall maintain, pursuant to their quality assurance system, records certifying destruction of the applicable Inventory. Said certification shall state the method and date of mutilation and destruction of the subject Inventory. Boeing or applicable regulatory agencies shall have the right to review and inspect these records at any time it deems necessary. In the event Seller elects to maintain the Inventory, Seller shall maintain accountability for the Inventory and Seller shall not sell or provide the Inventory to any third party without prior specific written authorization from Boeing. Failure to comply with these requirements shall be a material breach and grounds for default pursuant to GTA Section 13.0. Nothing in this SBP Section 33.0 prohibits Seller from making legal sales directly to the United States of America government.
34.0 SELLER ASSISTANCE
In accordance with GTA Section 12.2 and GTA Section 13.2 Boeing may, by written notice to Seller, require Seller to transfer to Boeing or to Boeings designee title (to the extent not previously transferred) to certain (i) Contractor-Use Tooling, Common-Use Tooling and other Tooling, (ii) Transportation Devices, (iii) Boeing Furnished Material, (iv) raw materials, parts, work-in-process, incomplete or completed assemblies, and all other Products or parts thereof in the possession or under the effective control of Seller or any of its subcontractors, and (v) Proprietary Information of Boeing, including, without limitation, planning data, Product Definition, Drawings and other Proprietary Information relating to the design, production, maintenance, repair and use of all Products and Contractor-Use Tooling and Common-Use Tooling, in the possession or under the effective control of Seller or any of its subcontractors, in each case free and clear of all liens, claims or other rights of any Person. Seller shall immediately transfer and deliver, and cause each of its subcontractors to transfer and deliver, any or all of the aforesaid items in accordance with any written notice or notices given hereunder by Boeing to Seller, notwithstanding any event or circumstance whatsoever, including, without limitation, any claim or dispute Seller may assert in connection with a termination of this SBP or any
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
payment for any such items. If Boeing shall require Seller to transfer and deliver to Boeing or Boeings designee any of the aforesaid items, Seller shall cooperate with and shall assist Boeing in developing and implementing plans to transfer the production of Products and provision of services to Boeing, or to any other Person designated by Boeing, in an expeditious and orderly manner and will take such other steps to assist Boeing as Boeing may request in good faith, all for the purpose of maintaining, or attempting to maintain as nearly as may be possible, production of Program Airplanes and Derivatives in accordance with Boeings schedule of delivery of Program Airplanes and Derivatives to Customers. Boeing will bear the reasonable costs associated with such cooperation, assistance and other steps except following an Event of Default in which case Seller shall bear such reasonable costs.
Following an Event of Default, Boeing and Seller acknowledge that the Program, and Boeings ability to sell and deliver Program Airplanes and Derivatives to Customers, will be substantially impaired if Seller delays, for any reason, its performance under this SBP Section 34.0. Boeing and Seller also acknowledge that Sellers assistance hereunder in the event of a cancellation, in whole or in part, of this SBP will be of fundamental significance to reduce incidental, consequential or other damages to Boeing. Consequently, Seller shall transfer and deliver to Boeing any or all of the aforesaid items notwithstanding any dispute or claim that Seller may have against Boeing. Seller shall not delay its performance under this SBP Section 34.0 by any action, including, without limitation, any judicial or other proceeding, or by any failure to act. Seller hereby authorizes Boeing or its representatives to enter upon its, or any of Sellers subcontractors (Seller shall obtain from its subcontractors Boeings right to so enter and act), premises at any time during regular business hours upon one (1) days advance written notice, for the limited purpose of taking physical possession of any or all of the aforesaid items. At the request of Boeing, Seller shall promptly provide to Boeing a detailed list of such items, including the location thereof, and shall catalog, crate, package, mark and ship such items expeditiously and in an orderly manner and otherwise in the manner requested by Boeing, which request may specify incremental or priority shipping of certain items. Seller shall, if instructed by Boeing, store or dispose of any or all of the aforesaid items in any reasonable manner requested by Boeing.
35.0 NONRECURRING WORK TRANSFER
Following an Event of Default, Program Cancellation, expiration of this SBP or the termination of this SBP by mutual agreement of the Parties, Seller agrees to transfer to Boeing all Nonrecurring Work relating to the affected Program, or if this SBP is cancelled, all Non-Recurring Work set forth in SBP Section 3.3 Nonrecurring Work.
36.0 DISPOSITION OF TOOLING
In the event Boeing exercises its rights under GTA Section 12.0, GTA Section 13.0 or SBP Section 34.0, Seller shall transfer and deliver to Boeing any and all Tooling that must be transferred and delivered pursuant to GTA Section 12.0,
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
GTA Section 13.0 or SBP Section 34.0 free and clear of any and all liens, claims or rights of any third party.
37.0 CUSTOMS-TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT)
C-TPAT is an initiative between business and government to protect global commerce from terrorism and increase the efficiencies of global transportation. The program calls for importers, carriers and brokers to establish policies to enhance their own security practices and those of their business partners involved in their supply chain. Such practices may include but are not limited to the following:
Procedural Security Procedures in place to protect against unmanifested material being introduced into the supply chain
Physical Security Buildings constructed to resist intrusion, perimeter fences, locking devices, and adequate lighting;
Access Controls Positive identification of all employees, visitors and suppliers;
Personnel Security Employment screening, background checks and application verifications;
Education and Training Awareness Security awareness training, incentives for participation in security controls.
Seller agrees to work with Boeing and appropriate industry and governmental agencies, as necessary, to develop and implement policies and procedures consistent with the C-TPAT initiative to ensure the safe and secure transport of Products under this SBP.
38.0 ENVIRONMENTAL MANAGEMENT SYSTEMS AND HEALTH AND SAFETY MANAGEMENT SYSTEMS
Seller shall implement an environmental management system (EMS) and health and safety management system (HSMS) with respect to its performance under this SBP; and insert, in any of its subcontractor and supplier contracts for performance of Sellers obligations under this SBP, provisions substantially similar to this SBP Section 38.0 and GTA Section 21.0 (Compliance with Laws).
39.0 RESTRICTIONS ON LOBBYING
39.1 Applicability
SBP Section 39.0 applies to all Sellers, domestic and foreign if:
Sellers Product is sold by Boeing, individually or incorporated into another product such as an Aircraft, to a Customer who finances the purchase of the
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Product or product with a direct loan from the Export-Import Bank of the United States (Direct Loan), and
The ship set price of the Product, combined with the ship set prices of any other items sold to Boeing by Seller which are incorporated into the product sold to the Customer, exceeds [*****].
39.2 Certification
Boeing will notify Seller in writing if it believes the conditions of 39.1 are met and the below described certificate and disclosure form are required. If applicable, Boeing will also identify the Aircraft being financed.
Upon receipt of such notice, Seller will execute an Anti-Lobbying Certificate substantially in the form of Attachment 24 to this SBP and, if applicable, Standard Form-LLL, Disclosure Form to Report Lobbying. (a copy of the form can be found at http://www.whitehouse.gov/sites/default/files/omb/grants/sfillin.pdf )
Seller will provide the executed certificate to the Boeing Procurement Representative. Also, Seller will forward to the Boeing Procurement Representative any originals of the Standard Form-LLL received by Seller from its subcontractors of any tier promptly upon Sellers receipt.
39.3 Flow Down
With respect to any Direct Loan, the substance of this SBP MS-65530-0016 shall apply to all of Sellers suppliers of any tier who supply items with a ship set price exceeding [*****]. Seller agrees to incorporate the substance of SBP MS-65530-0016, including this subsection 39.3, in all applicable subcontracts.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
EXECUTED in duplicate as of the date and year first set forth above by the duly authorized representatives of the Parties.
BOEING |
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SELLER |
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THE BOEING COMPANY Boeing Commercial Airplanes |
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Spirit AeroSystems Inc. |
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Name: |
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Name: |
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Title: |
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Title: |
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Date: |
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Date: |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 1 TO
SPECIAL BUSINESS PROVISIONS
WORK STATEMENT AND PRICING
(Reference SBP Sections 3.2.1, 3.3.4.1, 3.4.4, 4.1, 4.8.2, 7.2, 7.2.1, 7.10.1, 12.6.1, 18.0)
FOR PURPOSES OF SBP Section 18.0, OBLIGATION TO PURCHASE AND SELL Boeing shall be defined as the following organizations, divisions, groups or entities:
BCA Supply Management and Procurement; The Boeing Company, Seattle, WA
The price for Products to be delivered on or before the eighth anniversary of the first day of the month in which both parties fully execute this SBP except as otherwise noted below will be as follows:
Period 1 |
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TBD |
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Period 5 |
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TBD |
Period 2 |
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TBD |
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Period 6 |
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TBD |
Period 3 |
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TBD |
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Period 7 |
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TBD |
Period 4 |
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TBD |
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Period 8 |
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TBD |
Attachment 1 step down pricing is from base year.
· [Note: The total value reflected in attachment 1 (SOW) is intended to represent the total Lloyd site SOW (BCA production) and total Price on June 16, 2005 per the established 2003 Baseline. If a disparity is identified between Attachments 1 SOW and the actual Lloyd site SOW, Attachment 1 will be revised to reflect the change and the summary value will be re-spread among the revised SOW. This Attachment will continue to be revised through the transition period to reflect any change to the 2003 Baseline values and/or part numbers. Items marked as LMIs are being further defined as Boeing Part Numbers (part numbers may be one-to-one or one-to-many after conversion), Engineering Changes, Part Number Rolls, un-identified parts may be added/deleted to the SOW to ensure a clean statement of work, and any work transfer activity identified (ie.. 737 Horizontal/Vertical Stabilizers, 737 Tail cone, etc.) will be deleted from this SBP upon the work transfer date. Seller will continue to support Boeing requirements for these products until successfully transferred to another party.
· Boeing and Seller agree that Attachment 1 prices will be set such that: (i) when the prices are applied to the parts in the bill of material for any minor model type listed on Schedule A [this is to be the agreed minor model pricing sheet], the shipset price for such minor model will equal the amount set forth on Schedule A unless mutually agreed by Boeing and Seller as provided for below; (ii) the shipset price per minor model set forth on Schedule A is to be allocated to component parts incorporated into such shipset proportionately to the part pricing information contained in Boeings enterprise resource planning (ERP) system, with the proviso that any part that is common to two or more minor models will bear a single price irrespective of the minor model for which it is intended to be used; and (iii) to the extent that the proviso in subclause (ii) would result in the bill of material pricing for any minor model not aggregating to the Schedule A price, then the excess or deficiency is to be allocated among parts that are unique to such minor model, proportionately to the part pricing information for such unique parts contained in Boeings ERP system. Boeing and Seller agree to use their best efforts to set Attachment 1 prices on the foregoing basis within 10 calendar days following the date on which the APA is signed. If within this 10 day period a price allocation methodology acceptable to both Boeing and Seller is developed that aligns final Attachment 1 part prices to the proportionate part pricing in Boeings ERP system more closely than the foregoing basis, this revised methodology will be referred to a committee comprised of any four of John Borst, Bryan Gerard, Luis Valdes, Seth Mersky, and Nigel Wright. If for any reason Boeing and Seller have not completed an Attachment 1 acceptable to both Parties within 10 calendar days from the date on which the APA is signed, all associated issues will be referred to such committee. Any decision of such committee must be made unanimously to be valid. When prices are established in accordance with the foregoing, this Attachment 1 will be updated accordingly.]
[The following pages provide detail part numbers and pricing for each year. Note: Attachment 1 Parts and Prices provided under separate file due to size.] Non-recurring pricing and non-pricing agreements are contained in ATTACHMENT 9.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
ATTACHMENT 1 SCHEDULE A
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 1A TO
SPECIAL BUSINESS PROVISIONS
Attachment 1A
The statement of work ([*****]) listed in this Attachment 1A is subject to all terms and conditions of SBP MS-65530-0016 and Amendment 1 thereto. Any reference to Attachment 1 in this SBP is applicable to the work statement listed on this Attachment 1A with the following exceptions:
1. With reference to clause 3.2 Period of Performance, the wording in section 3.2 is amended in its entirety only to the extent that applies to the parts listed in this Attachment 1A by the following:
The period of performance for this work statement is April 18 th , 2006 through [*****]. Boeing has no obligation to Seller for any or all derivative airplane programs for this statement of work. At or prior to the end of this period of performance, the Parties may agree to an extension beyond [*****], subject to agreement of the Parties as to Price and Schedule.
2. With reference to clause 4.1 Recurring Price, wording in section 4.1 is amended in its entirety only to the extent that it applies to the statement of work listed in this Attachment 1A by the following:
The Price of Recurring Products is set forth in SBP Attachment 1A and includes the total price for all work under this Attachment 1A, subject to any applicable adjustments under SBP section 7.0.
3. With reference to clause 4.4.1 Interim Extension Pricing, wording in section 4.1.1 is deleted in its entirety and not applicable for the statement of work listed in this Attachment 1A.
4. With reference to clause 4.5 pricing for Derivatives, wording in section 4.5 is superseded in its entirety for the statement of work listed in this Attachment 1A by the following:
For Derivatives(s) and follow-on work outside the term of this SBP, Boeing reserves the right to contract with any supplier Boeing determines is appropriate for the supply of the Products addressed in the SBP Attachment 1A. In determining the appropriate supplier for Derivative(s),[*****], will be a key consideration in the selection process, and in the establishment of Nonrecurring and Recurring Shipset Prices for Derivative(s). If Boeing selects Seller as the supplier for these Products, change pricing will be subject to SBP Section 7.9.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
5. With reference to Attachment 16 Boeing Furnished Material/Boeing Provided Details, Attachment 16 is deleted in its entirety and not applicable for the statement of work listed in this Attachment 1A.
6. With reference to Attachment 22 Abnormal Escalation, Attachment 22 is deleted in its entirety and not applicable for the statement of work listed in this Attachment 1A.
7. With Reference to GTA section 12.3 Sellers Claim, the following text is deleted and not applicable to the statement of work listed in this Attachment 1A:
If Boeing terminates an Airplane Program according to the terms of GTA 25.0 within [*****] of [*****], then Seller shall further have the right to receive from Boeing an inconvenience fee equal to the [*****], determined without regard to any write-off or other adjustment by reason of such termination, for the Tooling in support of the terminated Airplane Program.
Boeing shall have ninety (90) days from receipt of Sellers claim to dispute such claim by delivering to Seller a written notice setting forth Boeings grounds for dispute. If Boeing does not deliver such a notice to Seller or reach agreement with Seller regarding Sellers claim within such ninety (90) day period, Seller may by written notice, seek resolution of its claim through the Senior Vice President Supplier Management or that persons equivalent (the Senior Executive) as provided in Section 33. If no response from such Senior Executive is received by Seller within 30 days of such Senior Executives receipt of Sellers notice, Boeing shall pay Seller the amount claimed by Seller within fifteen (15) days thereafter. Provided, however, that such payment shall be subject to full or partial recovery by Boeing by setoff, credit or otherwise, to the extent Sellers claim is determined by Boeing to not be (x) in compliance with the terms of Section 12 or Attachment 1A to this GTA or (y) compensable under the regulations cited below; provided, however, that Boeings determination shall remain subject to the provisions of SBP Section 33.
8. With reference to GTA section 15 Suspension of Work, the following text is deleted and not applicable to the statement of work listed in this Attachment 1A:
and Boeing will compensate Seller for its reasonable direct costs incurred as a result of such Stop Work Order.
9. With reference to GTA section 16.0 Termination or Wrongful Cancellation, the following text is deleted and not applicable to the statement of work listed in this Attachment 1A:
plus an amount for [*****], if any. Notwithstanding the foregoing, if Boeing wrongfully cancels or terminates all orders with respect to a model
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
of Program Airplane (Cancelled Program Airplane) and such cancellation or termination results in or has the effect of a cancellation or termination of this Agreement or SBP MS-65530-0016 in its entirety with respect to the Cancelled Program Airplane, or if Boeing wrongfully cancels or terminates SBP MS-65530-0016 with respect to a Cancelled Program Airplane, then Seller shall be entitled to all remedies available at law or in equity, except that the monetary damages that Seller may recover shall not exceed [*****].
The prices for Products to be delivered on or before [*****] through [*****] are [*****] prices. The pricing for [*****] is reflective of [*****] percent of the total yearly requirements for the subject parts. Yearly requirements are inclusive of production, spares, retrofit, modification, POA and replacement part requirements.
The Parties acknowledge and agree that those provisions that have been amended in this Attachment 1A do not amend the same provisions for the rest of the Contract.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 1B TO
SPECIAL BUSINESS PROVISIONS
Attachment 1B
Recitals
WHEREAS, Boeing and Seller entered into a Memorandum of Agreement dated August 28, 2007 (MOA for purposes of this Attachment 1B) for the model 747-8 propulsion work;
WHEREAS, the Parties intended, and established within the MOA, that the nacelle portion of the statement of work in the MOA would be governed by the prospective agreement Special Business Provisions MS-65520-0049;
AND
WHEREAS, the Parties never completed negotiation of or executed MS-65520-0049;
NOW, therefore, the Parties wish to establish terms and conditions by which certain 747-8 nacelle work will be governed by SBP MS-65530-0016.
The statement of work for 747-8 Nacelle listed in this SBP Attachment 1B (Nacelle SOW 1B) is subject to all terms and conditions of SBP MS-65530-0016 and Amendment 5 thereto, except as otherwise specified in this Attachment 1B.
As of the effective date of SBP Attachment 1B, one Non-Recurring milestone payment remains as agreed in MOA 6-5630-MEG07-003, Attachment 2. The remaining milestone payment for [*****] has not been paid and is due at first aircraft delivery to the Customer.
Nacelle SOW-1B
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030-22002-1 - Primary Exhaust (Kit)
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Any reference to SBP Attachment 1 Work Statement and Pricing in this SBP is applicable to the Nacelle SOW 1B with the following exceptions:
1. With reference to SBP Section 3.2 Period of Performance, the wording in section 3.2 is superseded in its entirety by the following for the parts listed in this SBP Attachment 1B:
The period of performance for this work statement is [*****] through [*****] at which time Boeing has no further obligation to procure Attachment 1B statement of work from Seller. If a new 747 derivative airplane program is launched during this Period of Performance, Seller shall retain all rights included in this SBP Attachment 1B for that derivative airplane program.
[*****] prior to the end of the [*****] period of performance, Buyer will notify Seller of Buyers intent to either competitively bid the SBP Attachment 1B statement of work or negotiate pricing with Seller as a single source supplier.
2. With reference to SBP Section 4.1 Recurring Price, wording in section 4.1 is superseded in its entirety by the following for the statement of work listed in this Attachment 1B:
The Price of Recurring Products is set forth in Attachment 1B of the SBP and includes the total price for all baseline statement of work under this Attachment 1B, subject to any applicable adjustments under SBP Section 7.0. Change Provisions, Pricing shall be included as an update to SBP Attachment 1 and SBP Attachment 7 Indentured Parts List and POA Pricing upon execution of this Amendment 1B.
747-8 Nacelle Shipset Pricing
The Nacelle shipset consists of [*****] Inlet, [*****] Fan Cowl and [*****] Exhaust Nozzle / Plug Kits. The [*****] Price [*****] Nacelle shipset baseline pricing shall be [*****]. Individual component pricing shall be [*****] for the Inlet, [*****] for the Fan Cowls and [*****] for the Exhaust Nozzle/Plug Kits.
For clarification purposes, the Pricing in the MOA in August 2007 is for the baseline statement of work, 314U800-01 Rev New dated December 6, 2006, and all Changes subsequent to the baseline statement of work are not included in the SBP Attachment 1B pricing set forth above.
If Buyer, [*****] prior to the [*****] Period of Performance end date has notified Seller of its intent to contract with Seller as a single source supplier, then [*****] prior to the end of the [*****] period of performance, Seller will
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
propose pricing for the following [*****] or a period agreed upon by the Parties. The parties will negotiate pricing in good faith based on then-prevailing market conditions for 747-8 Nacelle hardware.
3. With reference to SBP Section 4.1.1 Interim Extension Pricing, wording in section 4.1.1 is superseded in its entirety by the following for the statement of work listed in this SBP Attachment 1B:
If the parties are unable to reach agreement on Pricing by the date which is [*****] prior to [*****], then such matter shall be resolved pursuant to GTA Section 33.0. If any dispute for Pricing continues after the period of performance then interim pricing shall be established. Interim Pricing shall be the then current Base Price adjusted in accordance with SBP Attachment 20 and escalated annually using the indices outlined below. At such time as a resolution on Pricing has been achieved, an appropriate debit or credit will be made retroactive to the day after the expiration of the period of performance of this Attachment 1B of the SBP.
A. Material - [*****]
B. Labor - [*****]
4. With reference to SBP Section 5.2 Recurring Payment, wording in section 5.2 is superseded in its entirety by the following, for the statement of work listed in this Attachment 1B:
Unless otherwise provided under written agreement between the Parties, payments shall be paid in immediately available funds net [*****] calendar days after the shipment date (the date items are received by the carrier from Seller). Except in the case of an Order requiring Pay-From Receipt, the date of payment is calculated from the later of (a) the date the items are delivered to Boeing at its manufacturing site, (b) the date of receipt of a correct and valid invoice or (c) the scheduled delivery date of such Product. Payment shall be done electronically as mutually agreed. Boeing agrees to promptly notify Seller if it receives an invoice Boeing believes to be incorrect.
All Payments are subject to adjustment for shortages, credits and rejections
5. With reference to SBP Section 5.2.1 Non-Recurring Payment, the first paragraph and only the first paragraph, beginning Non-Recurring Tooling Payment... is superseded by the following for the statement of work listed in this Attachment 1B.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Non-Recurring Tooling payment shall be paid in immediately available funds net [*****] calendar days after receipt by Boeing of both a correct and valid invoice and where required a completed and approved certified tool list (CTL) (whichever is later).
6. With reference to SBP Section 7.5 Schedule Acceleration/Deceleration and SBP Attachment 6 Lead Time Matrix, the 747-8 Nacelle Hardware listed in this Attachment 1B will be subject to the same 747 Strut / Nacelle (S/N) Lead Times, as outlined in Amendment 5 of SBP MS-65530-0016 Atch 6, column 747.
7. With reference to SBP Attachment 16 Boeing Provided Details and Supplier Banked material, Attachment 16 will be updated to reflect the current GE115 Boeing Provided Details for installation on the Inlet.
8. With reference to SBP Attachment 20 Quantity Based Price Adjustment Formula, Attachment 20 is deleted in its entirety and not applicable for the statement of work listed in this Attachment 1B.
9. With reference to SBP Attachment 22 Abnormal Escalation, Attachment 22 is deleted in its entirety and not applicable for the statement of work listed in this Attachment 1B.
The Parties acknowledge and agree that those provisions that have been amended in this Attachment 1B do not amend the same provisions for the rest of the Contract.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 2 TO
SPECIAL BUSINESS PROVISIONS
PRODUCTION ARTICLE DEFINITION AND CONTRACT CHANGE NOTICES
(Reference SBP Section 3.3.2.1, 3.3.2.2, 3.3.4.6, 3.4.1)
A. Configuration
The configuration of each Production Article shall be as described in the latest released Supplier Specification Plan (SSP) revision in the Order and/or in the Contract Change Notices listed in Paragraph B below as such Contract Change Notices relate to the configuration of any Production Article:
B. Contract Change Notices
The following Contract Change Notices are hereby incorporated into this SBP.
Amendment 1 incorporates:
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 2 incorporates:
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231 |
|
232 |
|
233 |
|
234 |
|
235 |
236 |
|
237 |
|
238 |
|
239 |
|
240 |
|
241 |
|
242 |
243 |
|
244 |
|
245 |
|
246 |
|
247 |
|
247 (2) |
|
248 |
249 |
|
250 |
|
251 |
|
252 |
|
253 |
|
254 |
|
255 |
256 |
|
257 |
|
258 |
|
259 |
|
260 |
|
260R1 |
|
261 |
262 |
|
263 |
|
264 |
|
265 |
|
266 |
|
267 |
|
268 |
269 |
|
270 |
|
271 |
|
272 |
|
272r1 |
|
273 |
|
274 |
275 |
|
276 |
|
277 |
|
278 |
|
279 |
|
280 |
|
281 |
282 |
|
283 |
|
284 |
|
285 |
|
286 |
|
287 |
|
288 |
289 |
|
290 |
|
291 |
|
292 |
|
293 |
|
294 |
|
295 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
296 |
|
297 |
|
298 |
|
299 |
|
301 |
|
302 |
|
303 |
303 rev A |
|
304 |
|
305 |
|
306 |
|
307 |
|
308 |
|
309 |
309R2 |
|
310 |
|
311 |
|
311r1 |
|
312 |
|
313 |
|
314 |
315 |
|
316 |
|
317 |
|
318 |
|
318 (2) |
|
319 |
|
319 (2) |
320 |
|
321 |
|
322 |
|
323 |
|
324 |
|
325 |
|
326 |
327 |
|
328 |
|
329 |
|
329 |
|
330 |
|
330 |
|
331 |
332 |
|
333 |
|
334 |
|
335 |
|
336 |
|
337 |
|
338 |
339 |
|
340 |
|
341 |
|
342 |
|
343 |
|
344 |
|
345 |
346 |
|
347 |
|
348 |
|
349 |
|
350 |
|
351 |
|
352 |
353 |
|
354 |
|
355 |
|
356 |
|
357 |
|
358 |
|
359 |
360 |
|
361 |
|
362 |
|
363 |
|
364 |
|
365 |
|
366 |
367 |
|
368 |
|
369 |
|
370 |
|
371 |
|
372 |
|
373 |
374 |
|
375 |
|
376 |
|
377 |
|
378 |
|
379 |
|
380 |
381 |
|
382 |
|
383 |
|
384 |
|
385 |
|
385 (2) |
|
386 |
386 (2) |
|
387 |
|
387 (2) |
|
388 |
|
389 |
|
390 |
|
391 |
392 |
|
394 |
|
395 |
|
396 |
|
397 |
|
399 |
|
400 |
401 |
|
402 |
|
403 |
|
404 |
|
405 |
|
406 |
|
407 |
408 |
|
409 |
|
410 |
|
411 |
|
412 |
|
413 |
|
414 |
415 |
|
415R1 |
|
416 |
|
417 |
|
418 |
|
419 |
|
420 |
421 |
|
422 |
|
423 |
|
424 |
|
426 |
|
427 |
|
428 |
428 (2) |
|
429 |
|
429 |
|
430 |
|
430 (2) |
|
431 |
|
433 |
434 |
|
435 |
|
436 |
|
436 (2) |
|
437 |
|
437 (2) |
|
438 |
439 |
|
440 |
|
442 |
|
446 |
|
447 |
|
448 |
|
449 |
450 |
|
451 |
|
452 |
|
453 |
|
454 |
|
455 |
|
456 |
457 |
|
459 |
|
462 |
|
463 |
|
464 |
|
465 |
|
478 |
480 |
|
481 |
|
482 |
|
482 |
|
483 |
|
485 |
|
486 |
487 |
|
488 |
|
489 |
|
491 |
|
492 |
|
493 |
|
494 |
496 |
|
497 |
|
497R1 |
|
498 |
|
499 |
|
500 |
|
501 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 3 incorporates:
082 |
|
309R4 |
|
309R5 |
|
502 |
|
502R1 |
|
503 |
|
504 |
505 |
|
506 |
|
507 |
|
508R1 |
|
508(2) |
|
509 |
|
510 |
511 |
|
512 |
|
514 |
|
515 |
|
516 |
|
517 |
|
518 |
519 |
|
520 |
|
521 |
|
522 |
|
523 |
|
524 |
|
525 |
526 |
|
527 |
|
529 |
|
530 |
|
530R1 |
|
531 |
|
531R1 |
532 |
|
533 |
|
534 |
|
535 |
|
536 |
|
537 |
|
538 |
539 |
|
540 |
|
541 |
|
542 |
|
543 |
|
544 |
|
545R1 |
546 |
|
547 |
|
549 |
|
549 R.A |
|
550 |
|
551 |
|
552 |
553 |
|
554 |
|
555 |
|
556 |
|
557 |
|
559 |
|
561 |
562 |
|
564 |
|
565 |
|
566R1 |
|
567 |
|
569 |
|
570 |
571 |
|
572 |
|
574 |
|
575 |
|
576 |
|
576 (2) |
|
577R1 |
578 |
|
579 |
|
580 |
|
581 |
|
582 |
|
583 |
|
586 |
587 |
|
588 |
|
589 |
|
590 |
|
592 |
|
593 |
|
594 |
595 |
|
597 |
|
598 |
|
599 |
|
600 |
|
601 |
|
602 |
603 |
|
603R2 |
|
604 |
|
605 |
|
606 |
|
607 |
|
608 |
609 |
|
610 |
|
611 |
|
612 |
|
613 |
|
614 |
|
615 |
616 |
|
617 |
|
618 |
|
618 RI |
|
619 |
|
620 |
|
621 |
622 |
|
623 |
|
625 |
|
626 |
|
627R1 |
|
628 |
|
629 |
630 |
|
633 |
|
634 |
|
635 |
|
636 |
|
637 |
|
639R2 |
640 |
|
641 |
|
642 |
|
643 |
|
644 |
|
645 |
|
646 |
647 |
|
648 |
|
649 |
|
650 |
|
651 |
|
652 |
|
653 |
655 |
|
656 |
|
657 |
|
658 |
|
659 |
|
660 |
|
661 |
662 |
|
664 R1 |
|
666 |
|
667 |
|
668 |
|
668 (2) |
|
669 |
670 |
|
671 |
|
673 |
|
675 |
|
676 |
|
677 |
|
678 |
679 |
|
681 |
|
682 |
|
683 |
|
684R1 |
|
685 |
|
686R1 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
687 |
|
688(2) |
|
688 |
|
689 |
|
689(2) |
|
690 (2) |
|
690 |
691 |
|
692 |
|
693 |
|
694 |
|
695 |
|
697 |
|
698 |
699 |
|
700 R1 |
|
701 |
|
702 R1 |
|
703 |
|
705 |
|
706 |
707 |
|
707 Rev A |
|
708 |
|
709 |
|
710 |
|
711 |
|
712 |
713 |
|
714 |
|
715 |
|
716 |
|
717 |
|
718 |
|
719 |
721 |
|
722 |
|
723 |
|
724 |
|
725 |
|
726 |
|
727 |
728 |
|
729 |
|
730 |
|
731 |
|
732 |
|
733 |
|
734 |
735 |
|
736 |
|
737 |
|
738 |
|
739 |
|
740 |
|
742 |
743 |
|
744 |
|
745 |
|
746 |
|
747 |
|
748 |
|
749 |
750 |
|
751 |
|
752 |
|
753 |
|
754 |
|
755 |
|
757 |
758 |
|
759 |
|
760 |
|
761 |
|
762 |
|
763 |
|
764 |
765 |
|
766 |
|
767 |
|
768 |
|
769 |
|
770 |
|
771 |
772 |
|
773 |
|
774 |
|
775 |
|
778 |
|
779 |
|
780 |
781 |
|
782 |
|
784 |
|
785 |
|
786 |
|
787 |
|
788 |
789 |
|
790R1 |
|
791 |
|
792 |
|
794 |
|
795 |
|
796 |
798 |
|
799 R1 |
|
800 |
|
801 |
|
802 RI |
|
803 |
|
804 |
805 |
|
806 |
|
807 |
|
808 |
|
811 |
|
812 |
|
813 |
814 |
|
816 |
|
817R1 |
|
819 |
|
820 |
|
822 |
|
823 |
824R1 |
|
82581 |
|
826 |
|
827 |
|
828 |
|
829 |
|
830 |
830 R1 |
|
831 |
|
833 |
|
834 |
|
836 |
|
838R1 |
|
839 |
840 |
|
841 |
|
842 |
|
843 |
|
844 |
|
845 |
|
847REV B |
848 |
|
849 |
|
850 |
|
850 |
|
851 |
|
852 |
|
853 |
857 |
|
858 |
|
859 |
|
860 |
|
861 R1 |
|
864 |
|
868 |
874 |
|
875 |
|
876 |
|
879 |
|
880 |
|
881 |
|
883 |
885 |
|
899 |
|
904 |
|
916R2 |
|
939 |
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 4 incorporates:
214R2 |
|
309R3 |
|
444 |
|
445 |
|
460 |
|
479 |
|
484 |
490 |
|
495 |
|
513 |
|
549R1 |
|
596 |
|
619R1 |
|
624 |
631 |
|
632 |
|
639 R3 |
|
663 |
|
673R1 |
|
692R1 |
|
695(2) |
751(2) |
|
752 |
|
756 |
|
769R2 |
|
773R1 |
|
774R1 |
|
776 |
791R1 |
|
793 |
|
796R1 |
|
800R1 |
|
802R2 |
|
803R1 |
|
809 |
810 |
|
815 |
|
818 |
|
821 |
|
840(2) |
|
850R1 |
|
855 |
856 |
|
862R1 |
|
866 |
|
867 |
|
870 |
|
873 |
|
877 |
878 |
|
882 |
|
884 |
|
885 |
|
886 |
|
887R1 |
|
888 |
889 |
|
890(2) |
|
892 |
|
893 |
|
894 |
|
895 |
|
896 |
897 |
|
898 |
|
899 |
|
900 |
|
901 |
|
902 |
|
903 |
905 |
|
906 |
|
907 |
|
908R2 |
|
909R1 |
|
910 |
|
911 |
912 |
|
913 |
|
914 |
|
915 |
|
918 |
|
919 |
|
920 |
921 |
|
922 |
|
923 |
|
924R1 |
|
925 |
|
926 |
|
927 |
928 |
|
929 |
|
930 |
|
933 |
|
935R1 |
|
936 |
|
937 |
938 |
|
940 |
|
942 |
|
947 |
|
948 |
|
949 |
|
950 |
951 |
|
952 |
|
953 |
|
954 |
|
958 |
|
959R1 |
|
962 |
963 |
|
964 |
|
965 |
|
967 |
|
968 |
|
970 |
|
972 |
975 |
|
976R2 |
|
977 |
|
979 |
|
981 |
|
982 |
|
983 |
983(2) |
|
984 |
|
985 |
|
986 |
|
987(2) |
|
991 |
|
992 |
993 |
|
994 |
|
995 |
|
996R1 |
|
997 |
|
997(2) |
|
999 |
1000 |
|
1001 |
|
1002 |
|
1003 |
|
1006 |
|
1008 |
|
1009 |
1012 |
|
1013 |
|
1014 |
|
1015 |
|
1016 |
|
1017 |
|
1030 |
1032 |
|
1035 |
|
1040 |
|
1047 |
|
1071 |
|
1081 |
|
1092 |
1132 |
|
1133 |
|
1134 |
|
1135 |
|
1137R2 |
|
1142 |
|
1146 |
1153 |
|
1271 |
|
1328 |
|
|
|
|
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 5 incorporates:
443 |
|
461 |
|
585 |
|
700R2 |
|
704 |
|
716(2) |
|
803R1 |
821R1 |
|
884R1 |
|
969 |
|
1011 |
|
1018 |
|
1019 |
|
1020 |
1023 |
|
1024 |
|
1025 |
|
1026 |
|
1027 |
|
1028 |
|
1033R1 |
1034 |
|
1036 |
|
1037 |
|
1038 |
|
1039 |
|
1042 |
|
1043 |
1045 |
|
1046 |
|
1048 |
|
1049 |
|
1050 |
|
1051 |
|
1053 |
1054 |
|
1055 |
|
1058 |
|
1059 |
|
1060 |
|
1061 |
|
1062 |
1065 |
|
1066 |
|
1067 |
|
1068 |
|
1069 |
|
1070 |
|
1073 |
1074 |
|
1075 |
|
1076 |
|
1077 |
|
1078 |
|
1079 |
|
1080 |
1083 |
|
1084 |
|
1085 |
|
1086 |
|
1087 |
|
1088 |
|
1089 |
1090 |
|
1091 |
|
1093 |
|
1094 |
|
1095 |
|
1097 |
|
1098 |
1099 |
|
1100 |
|
1101 |
|
1102 |
|
1103 |
|
1104 |
|
1105 |
1106 |
|
1107 |
|
1108 |
|
1109 |
|
1110 |
|
1113 |
|
1114 |
1114R1 |
|
1115 |
|
1116 |
|
1117 |
|
1118 |
|
1119 |
|
1120 |
1121 |
|
1122 |
|
1123 |
|
1124RevA |
|
1125 |
|
1126 |
|
1127 |
1128 |
|
1129 |
|
1130 |
|
1131 |
|
1136 |
|
1138RevA |
|
1139 |
1140 |
|
1141 |
|
1143 |
|
1144 |
|
1145 RevA |
|
1147 |
|
1148 |
1149R1 |
|
1150 |
|
1151 |
|
1152 |
|
1154 |
|
1155 |
|
1156 |
1157 |
|
1158 |
|
1159 |
|
1160 |
|
1161 |
|
1162 |
|
1164 |
1165 |
|
1166 |
|
1167 |
|
1168 |
|
1169 |
|
1170 |
|
1171 |
1172 |
|
1173 |
|
1174 |
|
1175 |
|
1177 |
|
1178 |
|
1179 |
1180 |
|
1181 |
|
1182 |
|
1184 |
|
1185 |
|
1186 |
|
1187 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 5 incorporates - continued
1190 |
|
1191 |
|
1192 |
|
1193 |
|
1194 |
|
1195 |
|
1197 |
1198 |
|
1200 |
|
1201 |
|
1202 |
|
1204 |
|
1205 |
|
1206 |
1208 |
|
1209 |
|
1210 |
|
1211 |
|
1212 |
|
1213 |
|
1214 |
1215R1 |
|
1217 |
|
1219 |
|
1220 |
|
1221 |
|
1223 |
|
1224 |
1225 |
|
1226 |
|
1228 |
|
1229 |
|
1230 |
|
1231 |
|
1232 |
1233 |
|
1234 |
|
1241 |
|
1243 |
|
1244R2 |
|
1245 |
|
1246 |
1247 |
|
1249 |
|
1251 |
|
1253 |
|
1255 |
|
1256 |
|
1257 |
1259 |
|
1260 |
|
1261 |
|
1263 |
|
1264 |
|
1266 |
|
1267 |
1268 |
|
1269 |
|
1270 |
|
1273 |
|
1274 |
|
1275 |
|
1276 |
1277 |
|
1278 |
|
1279 |
|
1280 |
|
1281 |
|
1282 |
|
1283 |
1284R1 |
|
1285 |
|
1286 |
|
1287 |
|
1288 |
|
1290 |
|
1291 |
1293 |
|
1294 |
|
1295 |
|
1296 |
|
1297 |
|
1299 |
|
1300 |
1301 |
|
1302 |
|
1303 |
|
1304 |
|
1305 |
|
1306 |
|
1308 |
1312 |
|
1313 |
|
1315 |
|
1316 |
|
1317 |
|
1318R1 |
|
1319 |
1320 |
|
1321 |
|
1322R1 |
|
1323 |
|
1325 |
|
1326 |
|
1327 |
1329 |
|
1330 |
|
1331 |
|
1332 |
|
1333 |
|
1334 |
|
1335 |
1336 |
|
1337 |
|
1338 |
|
1339 |
|
1340 |
|
1341 |
|
1343 |
1344 |
|
1345 |
|
1346 |
|
1347 |
|
1348 |
|
1349 |
|
1350 |
1351 |
|
1352 |
|
1353 |
|
1354 |
|
1355 |
|
1356 |
|
1357 |
1359 Rev6 |
|
1360R1 |
|
1361 |
|
1362 |
|
1364 |
|
1365 |
|
1366 |
1367 |
|
1388 |
|
1369 |
|
1370 |
|
1371 |
|
1372 |
|
1373 |
1374 |
|
1375 |
|
1376R2 |
|
1377 |
|
1378 |
|
1379 |
|
1380 |
1381 |
|
1382 |
|
1383 |
|
1384 |
|
1385 |
|
1386 |
|
1387 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
1388 |
|
1389R2 |
|
1390 |
|
1391 |
|
1392 |
|
1393 |
|
1395 |
1398 |
|
1399 |
|
1400 |
|
1401 |
|
1402 |
|
1403 |
|
1404RevA |
1407R2 |
|
1408 |
|
1409 |
|
1410 |
|
1411 |
|
1412 |
|
1415 |
1416 |
|
1417 |
|
1418 |
|
1419 |
|
1420 |
|
1421 |
|
1422 |
1423 |
|
1424 |
|
1425 |
|
1426 RevD |
|
1427 |
|
1428 |
|
1429 |
1430 |
|
1431 |
|
1432 |
|
1433 |
|
1434 |
|
1435 |
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1436 |
1438 |
|
1439R1 |
|
1440 |
|
1441 |
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1442 |
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1443 |
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1444 |
1445 |
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1446 |
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1447 |
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1449 |
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1450 |
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1451 |
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1452 |
1454 |
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1455 |
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1456 |
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1457 |
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1458 |
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1459 |
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1460 |
1461 |
|
1462 |
|
1463R1 |
|
1464 |
|
1465 |
|
1466 |
|
1467 |
1468 |
|
1469 |
|
1470 |
|
1471 |
|
1473 |
|
1474 |
|
1475 |
1476 |
|
1477R2 |
|
1478 |
|
1479R1 |
|
1481 |
|
1482 |
|
1484 |
1485 |
|
1486 |
|
1487 |
|
1488 |
|
1489 |
|
1490 |
|
1492 |
1494R1 |
|
1498 |
|
1499R1 |
|
1501 |
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1502 |
|
1503 |
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1504 |
1505 |
|
1506R2 |
|
1507 |
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1509 |
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1510 |
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1511 |
|
1512R1 |
1513R1 |
|
1514 |
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1515 |
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1516 |
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1517 |
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1518 |
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1519 |
1520 |
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1522 |
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1523 |
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1524 |
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1525 |
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1526 |
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1527 |
1528 |
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1529 |
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1530 |
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1531 |
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1532 |
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1533 |
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1534 |
1535 |
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1536 |
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1537 |
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1538 |
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1539 |
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1540 |
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1541 |
1542 |
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1543 |
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1544 |
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1546 |
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1549 |
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1550 |
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1551 |
1552 |
|
1553 |
|
1556 |
|
1557 |
|
1558 |
|
1559 |
|
1560 |
1561 |
|
1562 |
|
1565 |
|
1569 |
|
1570 |
|
1571 |
|
1572 |
1573 |
|
1576 |
|
1577 |
|
1578 |
|
1580R2 |
|
1581 |
|
1584 |
1585 |
|
1586 |
|
1587 |
|
1588 |
|
1589 |
|
1591 |
|
1592 |
1593 |
|
1596 |
|
1597 |
|
1598 |
|
1599 |
|
1600 |
|
1601 |
1602 |
|
1603 |
|
1604 |
|
1605 |
|
1606 |
|
1607 |
|
1608 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
1609 |
|
1611 |
|
1612 |
|
1613 |
|
1614 |
|
1615R2 |
|
1616 |
1617 |
|
1618 |
|
1619 |
|
1620 |
|
1622 |
|
1623 |
|
1624 |
Amendment 5 incorporates - continued:
1625 |
|
1626 |
|
1627 |
|
1628 |
|
1629 |
|
1630 |
|
1632 |
1633 |
|
1634 |
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1635 |
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1636 |
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1637 |
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1638 |
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1639 |
1640 |
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1641 |
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1642 |
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1644 |
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1645 |
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1646 |
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1647 |
1648 |
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1649 |
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1650 |
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1651 |
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1652 |
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1653 |
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1654 |
1655 |
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1656 |
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1657 |
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1658 |
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1659 |
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1661 |
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1662 |
1663 |
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1664 |
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1665 |
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1666 |
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1667 |
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1668 |
|
1669R1 |
1670 |
|
1671 |
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1672 |
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1674 |
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1675 |
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1676 |
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1677 |
1678 |
|
1679 |
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1680 |
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1681 |
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1682 |
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1683 |
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1684 |
1685 |
|
1687 |
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1688 |
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1689 |
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1690 |
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1691 |
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1692 |
1693 |
|
1694 |
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1695 |
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1696 |
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1697 |
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1698 |
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1699 |
1700 |
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1701 |
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1702 |
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1703 |
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1704 |
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1705 |
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1706 |
1707 |
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1708 |
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1709 |
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1710 |
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1711 |
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1712 |
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1713 |
1715 |
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1716 |
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1717 |
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1718 |
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1719 |
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1720 |
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1721 |
1722 |
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1723 |
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1724 |
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1728 |
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1729 |
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1730 |
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1731 |
1732 |
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1733 |
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1734 |
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1735 |
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1736 |
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1737 |
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1738 |
1739 |
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1740 |
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1741 |
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1745 |
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1746 |
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1747 |
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1748 |
1749 |
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1751 |
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1752 |
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1753 |
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1754 |
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1755 |
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1756 |
1757 |
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1758 |
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1759 |
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1760 |
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1761 |
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1762 |
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1763 |
1764 |
|
1765 |
|
1766R1 |
|
1767 |
|
1769 |
|
1770 |
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1771 |
1772 |
|
1773 |
|
1774 |
|
1775 |
|
1776 |
|
1777 |
|
1778 |
17779 |
|
1780 |
|
1781 |
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1783 |
|
1784 |
|
1785 |
|
1786 |
1788 |
|
1789 |
|
1790 |
|
1794 |
|
1795 |
|
1797 |
|
1798 |
1799 |
|
1800 |
|
1803 |
|
1807 |
|
1808 |
|
1809 |
|
1810 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
1811 |
|
1842 |
|
1813 |
|
18141815 |
|
1816 |
|
1817 |
|
1818 |
1819 |
|
1820 |
|
1821 |
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1822 |
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1823 |
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1824 |
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1825 |
1826 |
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1827 |
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1828 |
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1829 |
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1830 |
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1831 |
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1832 |
1835 |
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1836 |
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1837 |
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1838 |
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1839 |
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1840 |
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1842 |
1843 |
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1844 |
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1845 |
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1846 |
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1847 |
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1848 |
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1849 |
1850 |
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1851 |
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1852 |
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1853 |
|
1854R1 |
|
1855 |
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1856 |
1857 |
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1858 |
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1859 |
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1860 |
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1861 |
|
1862 |
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1863 |
1864 |
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1865 |
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1866 |
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1867 |
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1868 |
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1869 |
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1870 |
1871 |
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1872 |
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1873 |
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1874 |
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1875 |
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1876 |
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1877 |
1878 |
|
1879 |
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1880 |
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1882 |
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1883 |
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1885 |
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1886 |
1887 |
|
1888R1 |
|
1889 |
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1890 |
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1891 |
|
1892R1 |
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1893 |
1894 |
|
1895 |
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1896 |
|
1897 |
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1898 |
|
1899 |
|
1900 |
1901 |
|
1902 |
|
1903 |
|
1904 |
|
1905 |
|
1906 |
|
1907 |
1908 |
|
1909 |
|
1910 |
|
1911 |
|
1912 |
|
1913 RevA |
|
1914 |
1915 |
|
1916 |
|
1917 |
|
1918 |
|
1919 |
|
1920 |
|
1922 |
1924 |
|
1925 |
|
1926 |
|
1927 |
|
1928 |
|
1929 |
|
1930 |
1931 |
|
1932 |
|
1933 |
|
1934 |
|
1935 |
|
1936 |
|
1937 |
1938 |
|
1939 |
|
1940 |
|
1941 |
|
1942 |
|
1943 |
|
1945 |
1946 |
|
1947 |
|
1948 |
|
1949 |
|
1956 |
|
1972 |
|
1974 |
1984 |
|
1986 |
|
1998 |
|
2000 |
|
2012 |
|
2013 |
|
2032 |
2040 |
|
2058 |
|
2107 |
|
2108 |
|
2109 |
|
2110 |
|
2111 |
2114 |
|
2115 |
|
2117 |
|
2119 |
|
2120 |
|
2138 |
|
2144 |
2145 |
|
2146 |
|
2147 |
|
2163 |
|
2168 |
|
2190 |
|
|
Amendment 6 incorporates:
841(2) |
|
1022 |
|
1163 |
|
1183 |
|
1188 |
|
1196 |
|
1199 |
1203 |
|
1218 |
|
1227 |
|
1235 |
|
1252 |
|
1265 |
|
1338 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
1406 R1 |
|
1412 |
|
1422 |
|
1423 |
|
1430 |
|
1454 |
|
1480 |
1488 |
|
1491 |
|
1557R1 |
|
1574 |
|
1582 |
|
1583 |
|
1610 |
1621 |
|
1631 |
|
1643 |
|
1660 |
|
1725 |
|
1726 |
|
1727 |
1750 |
|
1768 |
|
1791 |
|
1792 |
|
1793 |
|
1865R1 |
|
1871R1 |
1881 |
|
1921 |
|
1923 |
|
1949R1 |
|
1950 |
|
1951 |
|
1952 |
1953 |
|
1954 |
|
1955 |
|
1957 |
|
1958 |
|
1959 |
|
1960 |
1961 |
|
1962 |
|
1964 |
|
1965 |
|
1966 |
|
1967 |
|
1968 |
1969 |
|
1970 |
|
1971 |
|
1975 |
|
1976 |
|
1977 |
|
1978 |
1979 |
|
1980 |
|
1982 |
|
1963 |
|
1985 |
|
1987 |
|
1988 |
1989 |
|
1990 |
|
1991 |
|
1992 |
|
1993 |
|
1994 |
|
1995 |
1996 |
|
1997 |
|
1999 |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
2011R1 |
|
2013R1 |
2014 |
|
2015 |
|
2016 |
|
2017 |
|
2018 |
|
2019 |
|
2020 |
2021 |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
2027 |
2028 |
|
2029 |
|
2030 |
|
2031 |
|
2033 |
|
2034 |
|
2035 |
2036R2 |
|
2037 |
|
2038 |
|
2039 |
|
2041R1 |
|
2042 |
|
2043 |
2045 |
|
2047 |
|
2048 |
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2049 |
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2050 |
|
2051 |
|
2052 |
2053 |
|
2054 |
|
2055 |
|
2056 |
|
2057 |
|
2059 |
|
2060R1 |
2061 |
|
2065R2 |
|
2066 |
|
2067 |
|
2068 |
|
2069 |
|
2070 |
2071 |
|
2072 |
|
2073 |
|
2074 |
|
2075 |
|
2076 |
|
2077 |
2078 |
|
2079 |
|
2080 |
|
2081 |
|
2086 |
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2087 |
|
2089 |
2090 |
|
2091 |
|
2092 |
|
2093 |
|
2094 |
|
2095 |
|
2096 |
2097 |
|
2098 |
|
2099 |
|
2100 |
|
2101 |
|
2103 |
|
2104 |
2105 |
|
2110 |
|
2112 |
|
2113 |
|
2116 |
|
2121 |
|
2122 |
2123 |
|
2124 |
|
2125 |
|
2126 |
|
2128 |
|
2129 |
|
2130 |
2131 |
|
2132 |
|
2133 |
|
2134 |
|
2135 |
|
2136 |
|
2137 |
2141 |
|
2142 |
|
2143 |
|
2146R1 |
|
2146R2 |
|
2146R3 |
|
2147R1 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
2147R2 |
|
2147R3 |
|
2147R4 |
|
2151 |
|
2152 |
|
2154 |
|
2155 |
2156 |
|
2157 |
|
2159 |
|
2160 |
|
2161 |
|
2162 |
|
2164 |
2165 |
|
2166 |
|
2167 |
|
2168 |
|
2169 |
|
2170 |
|
2171 |
2172 |
|
2173 |
|
2174 |
|
2175 |
|
2176 |
|
2177 |
|
2178 |
2179 |
|
2180 |
|
2181 |
|
2182 |
|
2183 |
|
2184 |
|
2185 |
2186 |
|
2187 |
|
2188 |
|
2189 |
|
2191 |
|
2192 |
|
2193 |
2194 |
|
2195 |
|
2197 |
|
2198 |
|
2199 |
|
2200 |
|
2201 |
2202 |
|
2203 |
|
2204 |
|
2205 |
|
2206 |
|
2207 |
|
2208 |
2209 |
|
2210 |
|
2211 |
|
2214 |
|
2215 |
|
2216 |
|
2217 |
2218 |
|
2219 |
|
2220 |
|
2221 |
|
2221 |
|
2224 |
|
2225 |
2226 |
|
2227 |
|
2228 |
|
2229 |
|
2230 |
|
2231 |
|
2232 |
2233 |
|
2234 |
|
2235 |
|
2236 |
|
2237 |
|
2238 |
|
2239 |
2240 |
|
2241 |
|
2242 |
|
2243 |
|
2244 |
|
2245 |
|
2246 |
2247 |
|
2248 |
|
2249 |
|
2250 |
|
2251 |
|
2252 |
|
2253 |
2254 |
|
2255 |
|
2256 |
|
2257 |
|
2258 |
|
2259 |
|
2260 |
2261 |
|
2262 |
|
2264 |
|
2263 |
|
2265 |
|
2266 |
|
2267 |
Amendment 6 incorporates - continued:
2268 |
|
2269 |
|
2270 |
|
2271 |
|
2272 |
|
2273 |
|
2274 |
2275 |
|
2276 |
|
2277 |
|
2278 |
|
2279 |
|
2280 |
|
2281 |
2282 |
|
2283 |
|
2284 |
|
2285 |
|
2286 |
|
2287 |
|
2288 |
2289 |
|
2290 |
|
2291 |
|
2292 |
|
2293 |
|
2294 |
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2295 |
2296 |
|
2297 |
|
2298 |
|
2299 |
|
2301 |
|
2303 |
|
2304 |
2305 |
|
2306 |
|
2307 |
|
2308 |
|
2309 |
|
2310 |
|
2311 |
2312 |
|
2313 |
|
2314 |
|
2315 |
|
2316 |
|
2317 |
|
2318 |
2319 |
|
2320 |
|
2321 |
|
2322 |
|
2323 |
|
2324 |
|
2325 |
2326 |
|
2327 |
|
2328 |
|
2329 |
|
2330 |
|
2331 |
|
2332 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
2333 |
|
2334 |
|
2335 |
|
2336 |
|
2337 |
|
2338 |
|
2339 |
2340 |
|
2341 |
|
2342 |
|
2343 |
|
2344 |
|
2345 |
|
2346 |
2347 |
|
2348 |
|
2349 |
|
2350R1 |
|
2351 |
|
2352 |
|
2353 |
2354 |
|
2355 |
|
2356 |
|
2357 |
|
2358 |
|
2359 |
|
2360 |
2361 |
|
2362 |
|
2363 |
|
2364 |
|
2365R1 |
|
2366 |
|
2367 |
2368 |
|
2369 |
|
2370 |
|
2371 |
|
2372 |
|
2373 |
|
2374 |
2375 |
|
2376 |
|
2377 |
|
2378 |
|
2379 |
|
2380 |
|
2381 |
2382 |
|
2383 |
|
2384 |
|
2385 |
|
2386 |
|
2387 |
|
2388 |
2389 |
|
2390 |
|
2391 |
|
2392 |
|
2393 |
|
2394 |
|
2395 |
2396 |
|
2397 |
|
2398 |
|
2399 |
|
2400 |
|
2401 |
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2402 |
2403 |
|
2404 |
|
2405 |
|
2406 |
|
2407 |
|
2408 |
|
2409 |
2410 |
|
2411 |
|
2412 |
|
2413 |
|
2414 |
|
2415 |
|
2416 |
2417 |
|
2418 |
|
2419 |
|
2422 |
|
2423 |
|
2424 |
|
2425 |
2426 |
|
2427 |
|
2428 |
|
2429 |
|
2430 |
|
2431 |
|
2432 |
2436R1 |
|
2437 |
|
2438 |
|
2439 |
|
2440 |
|
2441 |
|
2442 |
2443 |
|
2444 |
|
2445 |
|
2446 |
|
2447 |
|
2448 |
|
2449 |
2450 |
|
2451 |
|
2452 |
|
2453 |
|
2454 |
|
2455 |
|
2456 |
2457 |
|
2458 |
|
2459 |
|
2460 |
|
2461 |
|
2462 |
|
2463 |
2464 |
|
2465 |
|
2467 |
|
2470 |
|
2471 |
|
2472 |
|
2473 |
2474 |
|
2475 |
|
2476 |
|
2477 |
|
2478 |
|
2479 |
|
2480 |
2481 |
|
2482 |
|
2483 |
|
2484 |
|
2485 |
|
2486 |
|
2487 |
2489 |
|
2492 |
|
2493 |
|
2494 |
|
2495 |
|
2496 |
|
2497 |
2498 |
|
2499 |
|
2500 |
|
2501 |
|
2502 |
|
2503 |
|
2504 |
2505 |
|
2506 |
|
2508 |
|
2509 |
|
2510 |
|
2510 |
|
2511 |
2512 |
|
2513 |
|
2514 |
|
2515 |
|
2516 |
|
2517 |
|
2518 |
2519 |
|
2520 |
|
2521 |
|
2522 |
|
2523 |
|
2524 |
|
2525 |
2526 |
|
2527 |
|
2528 |
|
2529 |
|
2530 |
|
2531 |
|
2532 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
2533 |
|
2534 |
|
2535 |
|
2536 |
|
2537 |
|
2538 |
|
2539 |
2540 |
|
2542 |
|
2543 |
|
2544 |
|
2545 |
|
2546 |
|
2547 |
2548 |
|
2549 |
|
2550 |
|
2551 |
|
2552 |
|
2553R1 |
|
2554 |
2555 |
|
2556 |
|
2557 |
|
2558 |
|
2559 |
|
2560 |
|
2561 |
2562 |
|
2563 |
|
2564 |
|
2565 |
|
2566 |
|
2567 |
|
2568 |
2569 |
|
2570 |
|
2571 |
|
2572 |
|
2573 |
|
2574 |
|
2575 |
2576 |
|
2577 |
|
2578 |
|
2579 |
|
2580 |
|
2581 |
|
2582 |
2583 |
|
2584 |
|
2585 |
|
2586 |
|
2587 |
|
2588 |
|
2589 |
2590 |
|
2591 |
|
2592 |
|
2593 |
|
2594 |
|
2595 |
|
2596 |
Amendment 6 incorporates continued:
2597 |
|
2598 |
|
2599 |
|
2600 |
|
2601 |
|
2602 |
|
2603 |
2604R1 |
|
2606 |
|
2607 |
|
2608 |
|
2609 |
|
2610 |
|
2611 |
2612 |
|
2613 |
|
2614 |
|
2615 |
|
2616 |
|
2617 |
|
2618 |
2619 |
|
2620 |
|
2621 |
|
2622 |
|
2623 |
|
2624 |
|
2625 |
2626 |
|
2627 |
|
2628 |
|
2629 |
|
2630 |
|
2631 |
|
2632 |
2633 |
|
2634 |
|
2635 |
|
2636 |
|
2637 |
|
2638 |
|
2639 |
2640 |
|
2641 |
|
2642 |
|
2643 |
|
2644 |
|
2645 |
|
2646 |
2647 |
|
2648 |
|
2649 |
|
2650 |
|
2651 |
|
2653 |
|
2654 |
2655 |
|
2656 |
|
2657 |
|
2658 |
|
2659 |
|
2660 |
|
2661 |
2662 |
|
2663 |
|
2664 |
|
2665 |
|
2666 |
|
2667 |
|
2668 |
2669 |
|
2670 |
|
2671 |
|
2672 |
|
2673 |
|
2674 |
|
2675 |
2676 |
|
2677 |
|
2678 |
|
2679 |
|
2680 |
|
2681 |
|
2682 |
2683 |
|
2684 |
|
2685 |
|
2686 |
|
2687 |
|
2688 |
|
2689 |
2690 |
|
2691 |
|
2692 |
|
2693 |
|
2695 |
|
2696 |
|
2697 |
2698 |
|
2699 |
|
2700 |
|
2701 |
|
2702 |
|
2703 |
|
2704 |
2705 |
|
2706 |
|
2707 |
|
2708 |
|
2709 |
|
2710 |
|
2711 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
2712 |
|
2713 |
|
2714 |
|
2715 |
|
2716 |
|
2717 |
|
2718 |
2719 |
|
2720 |
|
2721 |
|
2722 |
|
2723 |
|
2724 |
|
2725 |
2726 |
|
2727 |
|
2728 |
|
2729 |
|
2730 |
|
2731 |
|
2732RA |
2733 |
|
2735 |
|
2736 |
|
2737 |
|
2738 |
|
2739 |
|
2740 |
2741 |
|
2742 |
|
2743 |
|
2744R1 |
|
2745 |
|
2746 |
|
2748 |
2749 |
|
2750 |
|
2751 |
|
2752 |
|
2753 |
|
2754 |
|
2755 |
2756 |
|
2757 |
|
2758 |
|
2759 |
|
2760 |
|
2761 |
|
2762 |
2763 |
|
2764 |
|
2765 |
|
2766 |
|
2767 |
|
2768 |
|
2769 |
2770 |
|
2771 |
|
2772 |
|
2773 |
|
2774 |
|
2775 |
|
2776 |
2777 |
|
2778 |
|
2779 |
|
2780 |
|
2781 |
|
2782 |
|
2783 |
2784 |
|
2785 |
|
2786 |
|
2787 |
|
2788 |
|
2789 |
|
2790 |
2791 |
|
2792 |
|
2793 |
|
2794 |
|
2795 |
|
2796 |
|
2797 |
2798 |
|
2799 |
|
2800 |
|
2801 |
|
2803 |
|
2804 |
|
2805 |
2806 |
|
2807 |
|
2808 |
|
2809 |
|
2810 |
|
2811 |
|
2811R1 |
2812 |
|
2813 |
|
2814 |
|
2815 |
|
2815R1 |
|
2816 |
|
2818 |
2819 |
|
2820 |
|
2821 |
|
2822 |
|
2823 |
|
2824 |
|
2825 |
2826 |
|
2827 |
|
2828 |
|
2829 |
|
2830 |
|
2831 |
|
2832 |
2833 |
|
2834 |
|
2835 |
|
2836 |
|
2837 |
|
2838 |
|
2839 |
2840R1 |
|
2840R2 |
|
2841 |
|
2842 |
|
2843 |
|
2844 |
|
2845 |
2846 |
|
2847 |
|
2848 |
|
2849 |
|
2850 |
|
2852 |
|
2853 |
2854 |
|
2855 |
|
2856 |
|
2858 |
|
2859 |
|
2860 |
|
2861 |
2862 |
|
2863 |
|
2864 |
|
2865 |
|
2866 |
|
2867 |
|
2868 |
2869 |
|
2870 |
|
2871 |
|
2872 |
|
2874 |
|
2879 |
|
2882 |
2886 |
|
2887 |
|
2888 |
|
2889 |
|
2890 |
|
2891 |
|
2892 |
2893 |
|
2895 |
|
2896 |
|
2897 |
|
2898 |
|
2899 |
|
2900 |
2901 |
|
2902 |
|
2903 |
|
2904 |
|
2905 |
|
2906 |
|
2907 |
2908 |
|
2910 |
|
2911 |
|
2912 |
|
2913 |
|
2914 |
|
2915 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
2916 |
|
2917 |
|
2918 |
|
2919 |
|
2920 |
|
2921 |
|
2922 |
2923 |
|
2924 |
|
2926 |
|
2927 |
|
2928 |
|
2929 |
|
2930 |
Amendment 6 incorporates - continued:
2931 |
|
2932 |
|
2933 |
|
2934 |
|
2935 |
|
2936 |
|
2937 |
2937R1 |
|
2938 |
|
2939 |
|
2940 |
|
2941 |
|
2942 |
|
2943 |
2944 |
|
2945 |
|
2946 |
|
2947 |
|
2948 |
|
2949 |
|
2950 |
2951 |
|
2952 |
|
2953 |
|
2954 |
|
2955 |
|
2956 |
|
2957 |
2958 |
|
2959 |
|
2960 |
|
2961 |
|
2962 |
|
2963 |
|
2964 |
2965 |
|
2966 |
|
2967 |
|
2968 |
|
2969 |
|
2970 |
|
2971 |
2972 |
|
2973 |
|
2974 |
|
2975 |
|
2976 |
|
2977 |
|
2978 |
2979 |
|
2980 |
|
2981 |
|
2982 |
|
2983 |
|
2984 |
|
2985 |
2986 |
|
2987 |
|
2988 |
|
2989 |
|
2990 |
|
2991 |
|
2992 |
2993 |
|
2994 |
|
2995 |
|
2996 |
|
2997 |
|
2998 |
|
2999 |
3000 |
|
3011 |
|
3013 |
|
3030 |
|
3035 |
|
3036 |
|
3037 |
3048 |
|
3050 |
|
3051 |
|
3064 |
|
3067 |
|
3077 |
|
3088 |
3091 |
|
3110 |
|
3113 |
|
3128 |
|
3144 |
|
3161 |
|
3162 |
3165 |
|
3167 |
|
3168 |
|
3169 |
|
3174 |
|
3197 |
|
3198 |
3224 |
|
3177 |
|
3201 |
|
|
|
|
|
|
|
|
Amendment 7 incorporates:
2002 |
|
2040 R1 |
|
2118R2 |
|
2126R1 |
|
2126R2 |
|
2140 |
|
2199R1 |
2223 |
|
2488R3 |
|
2490 |
|
2491 |
|
2580R2 |
|
2623R1 |
|
2652R1 |
2724R1 |
|
2802 |
|
2817 |
|
2851 |
|
2894 |
|
2935R1 |
|
3001 |
3001R1 |
|
3002 |
|
3003 |
|
3004 |
|
3005 |
|
3006 |
|
3007 |
3008 |
|
3009 |
|
3010 |
|
3012 |
|
3014 |
|
3015 |
|
3016 |
3017 |
|
3018 |
|
3019 |
|
3020 |
|
3021 |
|
3022 |
|
3023 |
3024 |
|
3025 |
|
3026 |
|
3027 |
|
3028 |
|
3029 |
|
3031 |
3032 |
|
3033 |
|
3033R1 |
|
3034 |
|
3038 |
|
3039 |
|
3040 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3042 |
|
3043 |
|
3044 |
|
3045 |
|
3046 |
|
3052 |
|
3053 |
3054 |
|
3055 |
|
3056 |
|
3057 |
|
3058 |
|
3059 |
|
3060 |
3061 |
|
3062 |
|
3063 |
|
3065 |
|
3068 |
|
3069 |
|
3070 |
3071 |
|
3072 |
|
3074 |
|
3075 |
|
3076 |
|
3080 |
|
3081 |
3082 |
|
3083 |
|
3084 |
|
3089 |
|
3092 |
|
3093 |
|
3094 |
3095 |
|
3096 |
|
3097 |
|
3098 |
|
3099 |
|
3100 |
|
3101 |
3102 |
|
3104 |
|
3105R1 |
|
3105R3 |
|
3108 |
|
3109 |
|
3111 |
3112 |
|
3114 |
|
3115 |
|
3117 |
|
3118 |
|
3119 |
|
3120 |
3124 |
|
3124R1 |
|
3126R1 |
|
3127 |
|
3129 |
|
3130 |
|
3132 |
3133 |
|
3134 |
|
3135 |
|
3137 |
|
3138 |
|
3139 |
|
3140 |
3141 |
|
3142 |
|
3143 |
|
3148 |
|
3149 |
|
3150 |
|
3151 |
3152 |
|
3153 |
|
3154 |
|
3155 |
|
3156 |
|
3157 |
|
3158 |
3159 |
|
3160 |
|
3166 |
|
3170 |
|
3172 |
|
3173R3 |
|
3175 |
3176 |
|
3180 |
|
3181 |
|
3182 |
|
3183 |
|
3184 |
|
3185 |
3186 |
|
3187 |
|
3188 |
|
3188R1 |
|
3189 |
|
3190 |
|
3191 |
3195 |
|
3196 |
|
3198R1 |
|
3198R2 |
|
3202 |
|
3203 |
|
3204 |
3205 |
|
3206 |
|
3208 |
|
3209 |
|
3210 |
|
3211 |
|
3212 |
3216 |
|
3218 |
|
3219 |
|
3221 |
|
3223 |
|
3225 |
|
3227 |
3228 |
|
3229 |
|
3231 |
|
3232 |
|
3233 |
|
3236 |
|
3237 |
3238 |
|
3239 |
|
3240 |
|
3241 |
|
3242 |
|
3243 |
|
3244 |
3245 |
|
3246 |
|
3248 |
|
3249 |
|
3250 |
|
3251 |
|
3252 |
3253 |
|
3254 |
|
3255 |
|
3256 |
|
3257 |
|
3258 |
|
3260 |
3261 |
|
3262 |
|
3263 |
|
3265 |
|
3267 |
|
3268 |
|
3269 |
3272 |
|
3273 |
|
3274 |
|
3277 |
|
3278 |
|
3279 |
|
3280 |
3281 |
|
3282 |
|
3283 |
|
3284 |
|
3285 |
|
3286 |
|
3287 |
3288 |
|
3299 |
|
3290 |
|
3291 |
|
3292 |
|
3294 |
|
3295 |
3296 |
|
3297 |
|
3300 |
|
3302 |
|
3305 |
|
3308 |
|
3309 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3310 |
|
3313 |
|
3318 |
|
3319 |
|
3321 |
|
3322 |
|
3323 |
3324 |
|
3325 |
|
3326 |
|
3327 |
|
3328 |
|
3329 |
|
3330 |
3331 |
|
3337 |
|
3337R1 |
|
3338 |
|
3339 |
|
3340 |
|
3341 |
3342 |
|
3343 |
|
3344 |
|
3345 |
|
3346 |
|
3347 |
|
3348 |
3349 |
|
3350 |
|
3351 |
|
3352 |
|
3353 |
|
3354 |
|
3355 |
3356 |
|
3357 |
|
3358 |
|
3359 |
|
3359R1 |
|
3360 |
|
3360R1 |
3361 |
|
3362 |
|
3362 |
|
3363 |
|
3363R1 |
|
3364 |
|
3365 |
3366 |
|
3367 |
|
3368 |
|
3369R1 |
|
3369R2 |
|
3370 |
|
3371 |
3372 |
|
3373 |
|
3374 |
|
3375 |
|
3375R1 |
|
3376 |
|
3377 |
3378 |
|
3379 |
|
3380 |
|
3382 |
|
3383 |
|
3385 |
|
3387 |
Amendment 7 incorporates - continued:
3388 |
|
3388R1 |
|
3389 |
|
3390 |
|
3391 |
|
3392 |
|
3395 |
3397 |
|
3398 |
|
3390 |
|
3391 |
|
3392 |
|
3395 |
|
3397 |
3398 |
|
3399 |
|
3400 |
|
3401 |
|
3402 |
|
3403 |
|
3405 |
3406 |
|
3408 |
|
3409 |
|
3410 |
|
3411 |
|
3412 |
|
3414 |
3415 |
|
3416 |
|
3417 |
|
3418 |
|
3419 |
|
3420R1 |
|
3421 |
3422 |
|
3423 |
|
3427 |
|
3428 |
|
3429 |
|
3430 |
|
3431 |
3432 |
|
3433 |
|
3434 |
|
3435 |
|
3436 |
|
3437 |
|
3438 |
3438R1 |
|
3439 |
|
3440 |
|
3441 |
|
3442 |
|
3443 |
|
3444 |
3445 |
|
3446 |
|
3447 |
|
3448 |
|
3449 |
|
3450 |
|
3451 |
3452 |
|
3453 |
|
3454 |
|
3455 |
|
3456 |
|
3457 |
|
3458 |
3459 |
|
3460 |
|
3461 |
|
3462 |
|
3463 |
|
3464 |
|
3465 |
3466 |
|
3467 |
|
3468 |
|
3469 |
|
3469R1 |
|
3470 |
|
3471 |
3472 |
|
3473 |
|
3474 |
|
3475 |
|
3479 |
|
3480 |
|
3481 |
3483 |
|
3484 |
|
3485 |
|
3486 |
|
3487 |
|
3488 |
|
3489 |
3490 |
|
3492 |
|
3496 |
|
3497 |
|
3498 |
|
3499 |
|
3500 |
3501 |
|
3502 |
|
3503 |
|
3504 |
|
3505 |
|
3508 |
|
3509R1 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3510 |
|
3511 |
|
3512 |
|
3513 |
|
3513R1 |
|
3514 |
|
3516 |
3517 |
|
3518 |
|
3519 |
|
3620 |
|
3521 |
|
3522 |
|
3523 |
3524 |
|
3526 |
|
3526 |
|
3527 |
|
3527R1 |
|
3528 |
|
3531 |
3532 |
|
3533 |
|
3534 |
|
3534R1 |
|
3535 |
|
3536 |
|
3537 |
3538 |
|
3539 |
|
3540 |
|
3540R1 |
|
3541 |
|
3542 |
|
3543 |
3544 |
|
3545 |
|
3547 |
|
3548 |
|
3549 |
|
3550 |
|
3551 |
3552 |
|
3553 |
|
3553R1 |
|
3554 |
|
3555 |
|
3556 |
|
3557 |
3558 |
|
3559 |
|
3560 |
|
3561 |
|
3562 |
|
3564 |
|
3565 |
3566 |
|
3567 |
|
3568 |
|
3569 |
|
3570 |
|
3571 |
|
3572 |
3573 |
|
3574 |
|
3575 |
|
3576 |
|
3577 |
|
3578 |
|
3580 |
3582 |
|
3584 |
|
3587 |
|
3588 |
|
3589 |
|
3590 |
|
3591 |
3595 |
|
3596 |
|
3597 |
|
3599 |
|
3600 |
|
3601 |
|
3602 |
3604 |
|
3605 |
|
3606 |
|
3607 |
|
3609 |
|
3610 |
|
3611 |
3613 RevA |
|
3614 |
|
3615 |
|
3616 |
|
3619 |
|
3620 |
|
3621 |
3623 |
|
3624 |
|
3626 |
|
3627 |
|
3628 |
|
3629 |
|
3630 |
3631 |
|
3632 |
|
3633 |
|
3634 |
|
3635 |
|
3637 |
|
3638 |
3642 |
|
3643 |
|
3644 |
|
3645 |
|
3647 |
|
3648 |
|
3649 |
3650 |
|
3651 |
|
3652 |
|
3653 |
|
3664 |
|
3655 |
|
3656 |
3657 |
|
3658 |
|
3669 |
|
3661 |
|
3662 |
|
3663 |
|
3664 |
3665 |
|
3666 |
|
3667 |
|
3668 |
|
3669 |
|
3670 |
|
3671 |
3672 |
|
3673 |
|
3674 |
|
3675 |
|
3676 |
|
3677 |
|
3678 |
3679 |
|
3680 |
|
3681 |
|
3682 |
|
3683 |
|
3684 |
|
3685 |
3686 |
|
3687 |
|
3688 |
|
3689 |
|
3690 |
|
3691 |
|
3692 |
3693 |
|
3694 |
|
3695 |
|
3696 |
|
3697 |
|
3698 |
|
3699 |
3700 |
|
3701 |
|
3702 |
|
3703 |
|
3704 |
|
3705 |
|
3706 |
3707 |
|
3708 |
|
3709 |
|
3710 |
|
3711 |
|
3712 |
|
3713 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3714 |
|
3714R1 |
|
3715 |
|
3716 |
|
3717 |
|
3719 |
|
3720 |
3721 |
|
3722 |
|
3723 |
|
3724 |
|
3725 |
|
3726 |
|
3727 |
3728 |
|
3729 |
|
3730 |
|
3731 |
|
3732 |
|
3733 |
|
3734 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 7 incorporates - continued:
3735 |
|
3736 |
|
3737 |
|
3738 |
|
3739 |
|
3740 |
|
3741R1 |
3743 |
|
3744 |
|
3745 |
|
3746 |
|
3757 |
|
3748 |
|
3749 |
3750 |
|
3751 |
|
3752 |
|
3753 |
|
3754 |
|
3755 |
|
3756 |
3757 |
|
3758 |
|
3759 |
|
3760 |
|
3762 |
|
3763 |
|
3765 |
3766 |
|
3767 |
|
3768 |
|
3769 |
|
3770 |
|
3771 |
|
3772 |
3773 |
|
3774 |
|
3775 |
|
3776 |
|
3778 |
|
3779 |
|
3783 |
3784 |
|
3785 |
|
3786 |
|
3787 |
|
3788 |
|
3789 |
|
3790 |
3791 |
|
3792 |
|
3793 |
|
3794 |
|
3795 |
|
3797 |
|
3798 |
3800 |
|
3802 |
|
3803 |
|
3804 |
|
3805 |
|
3806 |
|
3807 |
3808 |
|
3809 |
|
3810 |
|
3811 |
|
3812 |
|
3813 |
|
3814 |
3815 |
|
3816 |
|
3817 |
|
3818 |
|
3819 |
|
3820 |
|
3821 |
3822 |
|
3823 |
|
3824 |
|
3825 |
|
3826 |
|
3827 |
|
3828 |
3829 |
|
3830 |
|
3831 |
|
3832 |
|
3833 |
|
3834 |
|
3836 |
3837 |
|
3838 |
|
3839 |
|
3841 |
|
3842 |
|
3843 |
|
3844 |
3847 |
|
3848 |
|
3850 |
|
3851 |
|
3852 |
|
3853 |
|
3854 |
3855 |
|
3856 |
|
3857 |
|
3860 |
|
3861 |
|
3861R1 |
|
3862 |
3863 |
|
3864 |
|
3865 |
|
3866 |
|
3869 |
|
3870 |
|
3871 |
3871R1 |
|
3873 |
|
3874 |
|
3875 |
|
3876 |
|
3877 |
|
3878 |
3879 |
|
3880 |
|
3881 |
|
3882 |
|
3883 |
|
3884 |
|
3885 |
3886 |
|
3887 |
|
3889 |
|
3890 |
|
3893 |
|
3894 |
|
3895 |
3896 |
|
3897 |
|
3898 |
|
3898R1 |
|
3899 |
|
3900 |
|
3901 |
3902 |
|
3903 |
|
3904 |
|
3905 |
|
3906 |
|
3907 |
|
3908 |
3909 |
|
3910 |
|
3911 |
|
3912 |
|
3913 |
|
3914 |
|
3915 |
3916 |
|
3917 |
|
3918 |
|
3919 |
|
3920 |
|
3921 |
|
3922 |
3923 |
|
3924 |
|
3925 |
|
3926 |
|
3927 |
|
3928 |
|
3929 |
3931 |
|
3932 |
|
3934 |
|
3935 |
|
3936 |
|
3937 |
|
3938 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3939 |
|
3940 |
|
3941 |
|
3942 |
|
3943 |
|
3944 |
|
3945 |
3946 |
|
3947 |
|
3948 |
|
3949 |
|
3950 |
|
3951 |
|
3952 |
3953 |
|
3954 |
|
3955 |
|
3956 |
|
3957 |
|
3958 |
|
3959 |
3960 |
|
3961 |
|
3962 |
|
3963 |
|
3964 |
|
3965 |
|
3966 |
3967 |
|
3968 |
|
3969 |
|
3970 |
|
3971 |
|
3972 |
|
3973 |
3974 |
|
3975 |
|
3976 |
|
3977 |
|
3978 |
|
3979 |
|
3980 |
3981 |
|
3982 |
|
3983 |
|
3984 |
|
3985 |
|
3986 |
|
3987 |
3988 |
|
3989 |
|
3990 |
|
3991 |
|
3992 |
|
3993 |
|
3994 |
3995 |
|
3996 |
|
3997 |
|
3998 |
|
3999 |
|
4000 |
|
4001 |
4002 |
|
4003 |
|
4004 |
|
4005 |
|
4006 |
|
4007 |
|
4008 |
4009 |
|
4010 |
|
4011 |
|
4012 |
|
4013 |
|
4014 |
|
4015 |
4016 |
|
4017 |
|
4018 |
|
4019 |
|
4020 |
|
4021 |
|
4022 |
4023 |
|
4024 |
|
4025 |
|
4026 |
|
4027 |
|
4028 |
|
4029 |
4031 |
|
4032 |
|
4034 |
|
4035 |
|
4036 |
|
4037 |
|
4038 |
4039 |
|
4040 |
|
4040R1 |
|
4042 |
|
4043 |
|
4044 |
|
4045 |
4046 |
|
4047 |
|
4048 |
|
4050 |
|
4051 |
|
4052 |
|
4053 |
4054 |
|
4055 |
|
4056 |
|
4057 |
|
4058 |
|
4059 |
|
4060 |
4061 |
|
4062 |
|
4063 |
|
4064 |
|
4065 |
|
4066 |
|
4067 |
4068 |
|
4069 |
|
4070 |
|
4071 |
|
4072 |
|
4073 |
|
4074 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 7 incorporates - continued:
4075 |
|
4076 |
|
4077 |
|
4078 |
|
4079 |
|
4080 |
|
4081 |
4082 |
|
4083 |
|
4084 |
|
4085 |
|
4089 |
|
4090 |
|
4091 |
4092 |
|
4094 |
|
4095 |
|
4096 |
|
4097 |
|
4098 |
|
4099 |
4100 |
|
4101 |
|
4102 |
|
4102R1 |
|
4104 |
|
4105 |
|
4107RevA |
4108 |
|
4109 |
|
4110 |
|
4111 |
|
4112 |
|
4113 |
|
4114 |
4115 |
|
4116 |
|
4117 |
|
4119 |
|
4120 |
|
4121 |
|
4125 |
4126 |
|
4127 |
|
4128 |
|
4129 |
|
4130 |
|
4131 |
|
4132 |
4133 |
|
4134 |
|
4135 |
|
4136 |
|
4137 |
|
4138 |
|
4139 |
4142 |
|
4144R1 |
|
4145 |
|
4146 |
|
4147 |
|
4148 |
|
4149 |
4150 |
|
4151 |
|
4152 |
|
4154 |
|
4155 |
|
4156 |
|
4157 |
4159 |
|
4160 |
|
4161 |
|
4162 |
|
4163 |
|
4164 |
|
4166 |
4167 |
|
4168 |
|
4170 |
|
4171 |
|
4172 |
|
4173 |
|
4174 |
4175 |
|
4176 |
|
4177 |
|
4178 |
|
4179 |
|
4181 |
|
4182 |
4183 |
|
4185 |
|
4186 |
|
4187 |
|
4188 |
|
4189 |
|
4190 |
4191 |
|
4192 |
|
4193 |
|
4194 |
|
4195 |
|
4196 |
|
4197 |
4198 |
|
4199 |
|
4200 |
|
4201 |
|
4202 |
|
4203 |
|
4204 |
4205 |
|
4206 |
|
4207 |
|
4208 |
|
4209 |
|
4210 |
|
4211 |
4212 |
|
4213 |
|
4214 |
|
4215 |
|
4219 |
|
4220 |
|
4222 |
4223 |
|
4224 |
|
4225 |
|
4226 |
|
4227 |
|
4228 |
|
4229 |
4230 |
|
4231R1 |
|
4232 |
|
4233 |
|
4234 |
|
4235 |
|
4236 |
4237 |
|
4238 |
|
4239 |
|
4240 |
|
4241 |
|
4242 |
|
4243 |
4244 |
|
4246 |
|
4247 |
|
4248 |
|
4249 |
|
4250 |
|
4251 |
4252 |
|
4253 |
|
4254 |
|
4255 |
|
4257 |
|
4258 |
|
4259 |
4260 |
|
4261 |
|
4262 |
|
4264 |
|
4265 |
|
4266 |
|
4267 |
4269 |
|
4272 |
|
4273 |
|
4274 |
|
4275 |
|
4277 |
|
4278 |
4280 |
|
4281 |
|
4282 |
|
4283 |
|
4284 |
|
4285 |
|
4286 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
4287 |
|
4288 |
|
4288R1 |
|
4289 |
|
4291 |
|
4292 |
|
4293 |
4294 |
|
4295 |
|
4296 |
|
4296R1 |
|
4298 |
|
4299 |
|
4300 |
4301 |
|
4302 |
|
4303 |
|
4304 |
|
4305 |
|
4306 |
|
4308 |
4309 |
|
4313 |
|
4314 |
|
4315 |
|
4316 |
|
4318 |
|
4319 |
4319R1 |
|
4320 |
|
4323 |
|
4324 |
|
4325 |
|
4325R1 |
|
4326 |
4327 |
|
4328 |
|
4329 |
|
4330 |
|
4331 |
|
4332 |
|
4333 |
4334 |
|
4335 |
|
4336 |
|
4337 |
|
4338 |
|
4339 |
|
4341 |
4342 |
|
4343 |
|
4344 |
|
4345 |
|
4346 |
|
4347 |
|
4350 |
4351 |
|
43524353 |
|
4354 |
|
4356 |
|
4357 |
|
4358 |
|
4359 |
4360 |
|
4361 |
|
4363 |
|
4365 |
|
4366 |
|
4388 |
|
4370 |
4371 |
|
4372 |
|
4374 |
|
4375 |
|
4376 |
|
4377 |
|
4378 |
4379 |
|
4380 |
|
4381 |
|
4382 |
|
4383 |
|
4384 |
|
4385 |
4386 |
|
4387 |
|
4388 |
|
4389 |
|
4390 |
|
4391 |
|
4392 |
4393 |
|
4394 |
|
4395 |
|
4396 |
|
4397 |
|
4398 |
|
4398R1 |
4399 |
|
4400 |
|
4402 |
|
4405 |
|
4406 |
|
4407 |
|
4408 |
4409 |
|
4410 |
|
4411 |
|
4412 |
|
4413 |
|
4414 |
|
4415 |
4416 |
|
4417 |
|
4419 |
|
4420 |
|
4422 |
|
4423 |
|
4423R1 |
4424 |
|
4424R1 |
|
4425 |
|
4425R1 |
|
4426 |
|
4426R1 |
|
4427 |
4428 |
|
4429 |
|
4430 |
|
4431 |
|
4432 |
|
4433 |
|
4434 |
4435 |
|
4436 |
|
4437 |
|
4438 |
|
4439 |
|
4440 |
|
4441 |
4442 |
|
4443 |
|
4448 |
|
4449 |
|
4452 |
|
4453 |
|
4454 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 7 incorporates - continued:
4457 |
|
4458 |
|
4461 |
|
4462 |
|
4463 |
|
4464 |
|
4465 |
4470 |
|
4471 |
|
4472 |
|
4473 |
|
4474 |
|
4475 |
|
4476 |
4477 |
|
4477R1 |
|
4478 |
|
4479 |
|
4480 |
|
4485 |
|
4486 |
4487 |
|
4488 |
|
4489 |
|
4490 |
|
4491 |
|
4494 |
|
4500 |
4501 |
|
4503 |
|
4504 |
|
4507 |
|
4508 |
|
4510 |
|
4511 |
4512 |
|
4513 |
|
4518 |
|
4520 |
|
4521 |
|
4522 |
|
4523 |
4524 |
|
4527 |
|
4528 |
|
4529 |
|
4531 |
|
4532 |
|
4533 |
4535 |
|
4536 |
|
4537 |
|
4538 |
|
4539 |
|
4540 |
|
4540 |
4542 |
|
4543 |
|
4544 |
|
4545 |
|
4546 |
|
4547 |
|
4548 |
4556 |
|
4557 |
|
4558 |
|
4559 |
|
4560 |
|
4562 |
|
4563 |
4564 |
|
4565 |
|
45666 |
|
4567 |
|
4574 |
|
4575 |
|
4576 |
4577 |
|
4578 |
|
4586 |
|
4587 |
|
4588 |
|
4589 |
|
4590 |
4591 |
|
4592 |
|
4593 |
|
4594 |
|
4595 |
|
4596 |
|
4597 |
4598 |
|
4599 |
|
4601 |
|
4606 |
|
4607 |
|
4611 |
|
4612 |
4613 |
|
4614 |
|
4615 |
|
4616 |
|
4617 |
|
4618 |
|
4619 |
4621 |
|
4622 |
|
4623 |
|
4624 |
|
4625 |
|
4626 |
|
4627 |
4628 |
|
4630 |
|
|
|
|
|
|
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Amendment 8 incorporates
2580 R3 |
|
2805 R1 |
|
3105 |
|
3123 |
|
3126 R1 |
|
3136 |
|
3163 |
3164 |
|
3171 |
|
3178 |
|
3179 |
|
3192 |
|
3193 |
|
3194 |
3199 |
|
3200 |
|
3207 |
|
3215 |
|
3217 |
|
3220 |
|
3222 |
3230 |
|
3234 |
|
3247 |
|
3299 |
|
3336 |
|
3363 R2 |
|
3363 R3 |
3393 |
|
3394 |
|
3396 |
|
3396 R1 |
|
3413 |
|
3476 |
|
3477 |
3478 |
|
3504 R1 |
|
3505 R1 |
|
3504 R2 |
|
3506 R1 |
|
3507 |
|
3509 |
3581 |
|
3583 |
|
3592 |
|
3625 |
|
3639 |
|
3639 R1 |
|
3640 |
3641 |
|
3646 |
|
3761 |
|
3796 |
|
3840 |
|
3845 |
|
3849 |
3865 R1 |
|
3868 |
|
3871 R2 |
|
3872 |
|
3891 |
|
3892 |
|
3930 |
4038 R1 |
|
4049 |
|
4086 |
|
4087 |
|
4093 |
|
4103 |
|
4106 |
4122 |
|
4123 |
|
4124 |
|
4140 |
|
4153 |
|
4163 R1 |
|
4163 R2 |
4165 |
|
4169 |
|
4180 |
|
4217 |
|
4218 |
|
4230 R1 |
|
4231 R3 |
4234 R1 |
|
4268 |
|
4270 |
|
4271 |
|
4276 |
|
4290 |
|
4304 R1 |
4305 R1 |
|
4307 |
|
4317 |
|
4340 |
|
4342 R2 |
|
4355 |
|
4359 R1 |
4359 R2 |
|
4362 R1 |
|
4364 |
|
4373 |
|
4396 R1 |
|
4398 R2 |
|
4399 R2 |
4405 |
|
4418 |
|
4444 |
|
4445 |
|
4451 |
|
4459 |
|
4460 |
4462 R1 |
|
4466 |
|
4467 |
|
4468 |
|
4469 |
|
4471 R1 |
|
4477 R1 |
4481 |
|
4482 |
|
4483 |
|
4483 R1 |
|
4484 |
|
4495 |
|
4496 |
4497 |
|
4498 |
|
4499 |
|
4502 |
|
4505 |
|
4506 |
|
4509 |
4509 R1 |
|
4514 |
|
4515 |
|
4516 |
|
4517 |
|
4519 |
|
4525 |
4548 RA |
|
4548 RB |
|
4549 |
|
4550 |
|
4551 |
|
4552 |
|
4552 R1 |
4553 |
|
4554 |
|
4555 |
|
4555 R1 |
|
4555 R2 |
|
4556 R1 |
|
4560 R1 |
4561 |
|
4570 |
|
4571 |
|
4572 |
|
4602 |
|
4604 |
|
4605 |
4608 |
|
4609 |
|
4609 R1 |
|
4610 |
|
4617 R1 |
|
4620 |
|
4622 R1 |
4622 R2 |
|
4622 R3 |
|
4629 |
|
4631 |
|
4633 |
|
4635 |
|
4636 |
4637 |
|
4638 |
|
4639 |
|
4640 |
|
4641 |
|
4642 |
|
4643 |
4644 |
|
4645 |
|
4646 |
|
4647 |
|
4648 |
|
4649 |
|
4650 |
4651 |
|
4652 |
|
4653 |
|
4653 R1 |
|
4656 |
|
4657 |
|
4658 |
4659 |
|
4660 |
|
4661 |
|
4662 |
|
4663 |
|
4665 |
|
4666 |
4667 |
|
4668 |
|
4669 |
|
4670 |
|
4672 |
|
4673 |
|
4674 |
4675 |
|
4676 |
|
4677 |
|
4678 |
|
4679 |
|
4680 |
|
4681 |
4682 |
|
4683 |
|
4684 |
|
4685 |
|
4686 |
|
4687 |
|
4688 |
4689 |
|
4690 |
|
4690 R1 |
|
4691 R1 |
|
4692 |
|
4693 |
|
4694 |
4695 |
|
4696 |
|
4697 |
|
4698 |
|
4699 |
|
4700 |
|
4701 |
4702 |
|
4703 |
|
4704 |
|
4705 |
|
4706 |
|
4707 |
|
4708 |
4709 |
|
4710 |
|
4711 |
|
4712 |
|
4713 |
|
4714 |
|
4715 |
4716 |
|
4717 |
|
4719 |
|
4720 |
|
4721 |
|
4722 |
|
4724 |
4725 |
|
4726 |
|
4727 |
|
4728 |
|
4729 |
|
4730 |
|
4731 |
4732 |
|
4733 |
|
4734 |
|
4736 |
|
4737 |
|
4737 RA |
|
4738 |
4739 |
|
4740 |
|
4741 |
|
4741 R1 |
|
4742 |
|
4743 |
|
4744 |
4745 |
|
4746 |
|
4747 |
|
4750 |
|
4751 |
|
4752 |
|
4754 |
4755 |
|
4756 |
|
4757 |
|
4758 |
|
4760 |
|
4761 |
|
4762 |
4763 |
|
4764 |
|
4765 |
|
4766 R1 |
|
4767 |
|
4768 |
|
4769 |
4770 |
|
4771 |
|
4772 |
|
4773 |
|
4774 |
|
4775 |
|
4776 |
4777 |
|
4778 |
|
4779 |
|
4780 |
|
4781 |
|
4782 |
|
4783 |
4784 |
|
4785 |
|
4786 |
|
4787 |
|
4788 |
|
4789 |
|
4790 |
4793 |
|
4794 |
|
4795 |
|
4796 |
|
4796 R1 |
|
4797 |
|
4799 |
4800 |
|
4801 |
|
4802 |
|
4803 |
|
4804 |
|
4805 |
|
4806 |
4807 |
|
4809 |
|
4810 |
|
4811 |
|
4812 |
|
4813 |
|
4814 |
4815 |
|
4816 |
|
4816 RA |
|
4817 |
|
4818 |
|
4819 |
|
4820 |
4821 |
|
4822 |
|
4823 |
|
4824 |
|
4825 |
|
4827 |
|
4828 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
4829 |
|
4829 R1 |
|
4830 |
|
4831 |
|
4832 |
|
4833 |
|
4834 |
4835 |
|
4836 |
|
4837 |
|
4838 |
|
4840 |
|
4841 |
|
4842 |
4843 |
|
4844 |
|
4845 |
|
4846 |
|
4847 |
|
4848 |
|
4849 |
4850 |
|
4850 R1 |
|
4851 |
|
4852 |
|
4853 |
|
4854 |
|
4855 |
4856 |
|
4857 |
|
4858 |
|
4859 |
|
4860 |
|
4861 |
|
4862 R1 |
4863 |
|
4864 |
|
4865 |
|
4866 |
|
4867 |
|
4868 |
|
4869 |
4870 |
|
4871 |
|
4872 |
|
4873 |
|
4874 |
|
4875 |
|
4876 |
4877 |
|
4878 |
|
4879 |
|
4880 |
|
4881 |
|
4882 |
|
4883 |
4884 |
|
4885 |
|
4886 |
|
4887 |
|
4888 |
|
4889 |
|
4890 |
4891 |
|
4892 |
|
4893 |
|
4894 |
|
4895 |
|
4896 |
|
4897 |
4898 |
|
4899 |
|
4900 |
|
4901 |
|
4902 |
|
4903 |
|
4904 |
4905 |
|
4906 |
|
4907 |
|
4908 |
|
4909 |
|
4910 |
|
4911 |
4912 |
|
4913 |
|
4914 |
|
4915 |
|
4916 |
|
4917 |
|
4918 |
4919 |
|
4920 |
|
4921 |
|
4922 |
|
4923 |
|
4925 |
|
4929 |
4930 |
|
4931 R1 |
|
4932 |
|
4933 |
|
4934 |
|
4935 |
|
4936 |
4937 |
|
4938 |
|
4939 |
|
4940 |
|
4941 |
|
4942 |
|
4943 |
4944 |
|
4945 |
|
4946 |
|
4947 |
|
4948 |
|
4949 |
|
4950 |
4951 |
|
4952 |
|
4953 |
|
4954 |
|
4956 |
|
4957 |
|
4958 |
4959 |
|
4960 |
|
4961 |
|
4962 |
|
4963 |
|
4964 |
|
4965 |
4966 |
|
4967 |
|
4968 |
|
4969 |
|
4970 |
|
4971 |
|
4972 |
4973 |
|
4974 |
|
4975 |
|
4976 |
|
4977 |
|
4978 |
|
4979 |
4980 |
|
4981 |
|
4982 |
|
4983 |
|
4984 |
|
4985 |
|
4986 |
4987 |
|
4988 |
|
4989 |
|
4990 |
|
4991 |
|
4992 |
|
4993 |
4994 |
|
4995 |
|
4997 |
|
4998 |
|
4999 |
|
5000 |
|
5001 |
5002 |
|
5003 |
|
5004 |
|
5005 |
|
5006 |
|
5007 |
|
5008 |
5009 |
|
5010 |
|
5011 |
|
5012 |
|
5013 |
|
5014 |
|
5015 |
5016 |
|
5017 |
|
5018 |
|
5019 |
|
5020 |
|
5021 |
|
5022 |
5023 |
|
5024 |
|
5025 |
|
5026 |
|
5027 |
|
5028 |
|
5029 |
5031 |
|
5033 |
|
5034 |
|
5035 |
|
5036 |
|
5037 |
|
5038 |
5039 |
|
5040 |
|
5041 |
|
5042 |
|
5043 |
|
5044 |
|
5045 |
5046 |
|
5046 R1 |
|
5047 |
|
5048 |
|
5049 |
|
5050 |
|
5051 |
5052 |
|
5053 |
|
5054 |
|
5055 |
|
5056 |
|
5059 |
|
5061 |
5062 |
|
5063 |
|
5064 |
|
5065 |
|
5066 |
|
5067 |
|
5074 |
5075 |
|
5076 |
|
5077 |
|
5079 |
|
5085 |
|
5086 |
|
5087 |
5088 |
|
5089 |
|
5090 |
|
5091 |
|
5092 |
|
5093 |
|
5094 |
5095 |
|
5097 |
|
5099 |
|
5100 |
|
5102 |
|
5103 |
|
5104 |
5105 |
|
5106 |
|
5107 |
|
5108 |
|
5109 |
|
5110 |
|
5111 |
5112 |
|
5113 |
|
5115 |
|
5116 |
|
5117 |
|
5118 |
|
5118 R1 |
5119 |
|
5120 |
|
5122 |
|
5123 |
|
5126 |
|
5127 |
|
5130 |
5131 |
|
5132 |
|
5133 |
|
5134 |
|
5135 |
|
5136 |
|
5137 |
5138 |
|
5139 |
|
5140 |
|
5141 |
|
5142 |
|
5143 |
|
5144 R1 |
5145 |
|
5146 |
|
5147 |
|
5148 |
|
5149 |
|
5150 |
|
5150 R1 |
5150 R2 |
|
5156 |
|
5157 |
|
5158 |
|
5159 |
|
5160 |
|
5161 |
5150 R2 |
|
5156 |
|
5157 |
|
5158 |
|
5159 |
|
5160 |
|
5161 |
5162 |
|
5163 |
|
5164 |
|
5165 |
|
5167 |
|
5170 |
|
5172 |
5173 |
|
5174 |
|
5175 |
|
5176 |
|
5177 |
|
5178 |
|
5179 |
5183 |
|
5184 |
|
5185 |
|
5186 |
|
5187 |
|
5188 |
|
5189 |
5190 |
|
5190 R1 |
|
5191 |
|
5192 |
|
5193 |
|
5194 |
|
5195 |
5196 |
|
5197 |
|
5198 |
|
5199 |
|
5200 |
|
5201 |
|
5202 |
5203 |
|
5204 |
|
5205 |
|
5206 |
|
5207 |
|
5208 |
|
5208 R1 |
5209 |
|
5210 |
|
5211 |
|
5212 |
|
5213 |
|
5213 R1 |
|
5214 |
5215 |
|
5216 |
|
5217 |
|
5218 |
|
5219 |
|
5220 |
|
5221 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
5222 |
|
5223 |
|
5224 |
|
5226 |
|
5227 |
|
5228 |
|
5229 |
5230 |
|
5231 |
|
5233 |
|
5234 |
|
5235 |
|
5236 |
|
5237 |
5239 |
|
5240 |
|
5241 |
|
5242 |
|
5243 |
|
5244 |
|
5245 |
5246 |
|
5247 |
|
5248 |
|
5249 |
|
5250 |
|
5251 |
|
5252 |
5253 |
|
5254 |
|
5255 |
|
5256 |
|
5257 |
|
5258 |
|
5259 |
5260 |
|
5261 |
|
5262 |
|
5263 |
|
5264 |
|
5265 |
|
5266 |
5267 |
|
5268 |
|
5269 |
|
5270 |
|
5271 |
|
5272 |
|
5273 |
5274 |
|
5275 |
|
5277 |
|
5278 |
|
5279 |
|
5280 |
|
5281 |
5282 |
|
5283 |
|
5284 |
|
5285 |
|
5286 |
|
5287 |
|
5288 |
5289 |
|
5290 |
|
5291 |
|
5293 |
|
5294 |
|
5295 |
|
5296 |
5297 |
|
5298 |
|
5299 |
|
5300 |
|
5301 |
|
5302 |
|
5303 |
5304 |
|
5305 |
|
5306 |
|
5307 |
|
5308 |
|
5309 |
|
5310 |
5311 |
|
5312 |
|
5313 |
|
5314 |
|
5315 |
|
5316 |
|
5317 |
5318 |
|
5319 |
|
5320 |
|
5321 |
|
5322 |
|
5323 |
|
5324 |
5325 |
|
5326 |
|
5327 |
|
5328 |
|
5329 |
|
5330 |
|
5331 |
5332 |
|
5333 |
|
5334 |
|
5335 |
|
5336 |
|
5337 |
|
5338 |
5339 |
|
5340 |
|
5341 |
|
5342 |
|
5343 |
|
5344 |
|
5345 |
5346 |
|
5347 |
|
5348 |
|
5349 |
|
5350 |
|
5351 |
|
5353 |
5354 |
|
5355 |
|
5356 |
|
5357 |
|
5358 |
|
5359 |
|
5360 |
5361 |
|
5362 |
|
5363 |
|
5364 |
|
5365 |
|
5366 |
|
5367 |
5368 |
|
5369 |
|
5370 |
|
5371 |
|
5372 |
|
5373 |
|
5374 |
5375 |
|
5376 |
|
5377 |
|
5378 |
|
5379 |
|
5380 |
|
5381 |
5382 |
|
5383 |
|
5384 |
|
5385 |
|
5386 |
|
5387 |
|
5388 |
5389 |
|
5390 |
|
5391 |
|
5392 |
|
5393 |
|
5394 |
|
5395 |
5396 |
|
5397 |
|
5398 |
|
5399 |
|
5400 |
|
5401 |
|
5402 |
5396 |
|
5397 |
|
5398 |
|
5399 |
|
5400 |
|
5401 |
|
5402 |
5402 R1 |
|
5403 |
|
5404 |
|
5405 |
|
5406 |
|
5407 |
|
5409 |
5410 |
|
5411 |
|
5412 |
|
5414 |
|
5415 |
|
5416 |
|
5417 |
5418 |
|
5419 |
|
5420 |
|
5420 R1 |
|
5421 |
|
5422 |
|
5423 |
5424 |
|
5425 |
|
5426 |
|
5427 |
|
5428 |
|
5429 |
|
5430 |
5431 |
|
5432 |
|
5433 |
|
5434 |
|
5435 |
|
5436 |
|
5437 |
5438 |
|
5439 |
|
5441 |
|
5442 |
|
5443 |
|
5444 |
|
5445 |
5446 |
|
5447 |
|
5448 |
|
5449 |
|
5449 R1 |
|
5450 |
|
5451 |
5452 |
|
5453 |
|
5454 |
|
5455 |
|
5456 |
|
5457 |
|
5458 |
5459 |
|
5461 |
|
5462 |
|
5463 |
|
5464 |
|
5465 |
|
5466 |
5467 |
|
5468 |
|
5469 |
|
5470 |
|
5471 |
|
5472 |
|
5473 |
5474 |
|
5475 |
|
5478 |
|
5479 |
|
5480 |
|
5482 |
|
5483 |
5484 |
|
5485 |
|
5486 |
|
5487 |
|
5488 |
|
5489 |
|
5490 |
5491 |
|
5492 |
|
5493 |
|
5494 |
|
5495 |
|
5496 |
|
5497 |
5498 |
|
5499 |
|
5500 |
|
5501 |
|
5503 |
|
5504 |
|
5505 |
5506 |
|
5507 |
|
5508 |
|
5509 |
|
5510 |
|
5511 |
|
5512 |
5513 |
|
5514 |
|
5515 |
|
5516 |
|
5517 |
|
5518 |
|
5519 |
5520 |
|
5521 |
|
5522 |
|
5524 |
|
5526 |
|
5527 |
|
5528 |
5529 |
|
5530 |
|
5532 |
|
5535 |
|
5538 |
|
5538 R1 |
|
|
5541 |
|
5542 |
|
5543 |
|
5544 |
|
5545 |
|
5546 |
|
5547 |
5548 |
|
5549 |
|
5550 |
|
5551 |
|
5552 |
|
5553 |
|
5554 |
5555 |
|
5556 |
|
5557 |
|
5558 |
|
5559 |
|
5560 |
|
5562 |
5563 |
|
5564 |
|
5565 |
|
5566 |
|
5568 |
|
5568 R2 |
|
5569 |
5571 |
|
5572 |
|
5573 |
|
5574 |
|
5575 |
|
5576 |
|
5577 |
5578 |
|
5579 |
|
5580 |
|
5581 |
|
5582 |
|
5583 |
|
5584 |
5585 |
|
5586 |
|
5587 |
|
5588 |
|
5589 |
|
5590 |
|
5591 |
5592 |
|
5593 |
|
5594 |
|
5595 |
|
5596 |
|
5597 |
|
5598 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
5600 |
|
5602 |
|
5603 |
|
5604 |
|
5605 |
|
5606 |
|
5607 |
5608 |
|
5609 |
|
5610 |
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5611 |
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5612 |
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5613 |
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5614 |
5614 R1 |
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5615 |
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5621 |
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5622 |
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5623 |
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5625 |
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5626 |
5627 |
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5638 R1 |
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5649 R1 |
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5650 |
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5661 |
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5664 |
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5665 |
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5667 |
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5668 |
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5669 R1 |
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5670 |
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5671 |
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5672 |
5673 |
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5674 |
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5675 |
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5676 |
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5678 |
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5699 |
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5700 |
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5701 |
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5702 |
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5703 |
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5704 |
5705 |
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5705 R1 |
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5706 |
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5709 |
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5723 |
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5823 R1 |
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5825 |
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5830 R1 |
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5855 |
5875 |
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5880 |
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5888 R1 |
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5890 |
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5894 |
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5894 R1 |
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5895 |
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5896 R2 |
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5896 R3 |
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5898 |
5899 |
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5901 |
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5904 |
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5907 |
5910 |
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5911 |
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5912 R1 |
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5913 R1 |
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5914 |
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5915 R1 |
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5916 R1 |
5917 R1 |
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5917 R2 |
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5918 |
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5920 R1 |
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5920 R2 |
5921 |
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5977 R1 |
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5981 R1 |
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5983 R1 |
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5992 R1 |
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5997 |
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5999 |
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6000 |
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6001 |
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6002 |
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6004 R1 |
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6006 |
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6010 |
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6010 |
6017 |
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6018 R1 |
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6019 |
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6021 |
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6024 |
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6029 |
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6030R1 |
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6035 R1 |
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6086 R1 |
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6100 |
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6119 |
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6120 |
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6121 |
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6148 |
6151 |
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6154 |
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6159 |
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6160 |
|
6163 |
|
6165 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
6168 |
|
6169 |
|
6171 |
|
6177 |
|
6178 |
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6184 |
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6184 R1 |
6185 |
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6186 R1 |
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6190 |
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6197 |
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6198 R1 |
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6264 |
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6265 R1 |
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6330 R1 |
6331 |
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6360 |
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6398 |
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6399 |
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6401 |
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6409 R1 |
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6505 R1 |
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6517 |
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6586 |
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6598 R1 |
6589 |
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6590 |
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6598 R1 |
|
6598 R2 |
|
6602 |
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6603 |
6604 |
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6609 |
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6672 |
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6679 |
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6686 |
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6706 |
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6710 |
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6713 |
6714 |
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6721 |
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6722 |
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6725 |
6728 |
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6739 |
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6741 |
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|
6744 R1 |
|
6744 R2 |
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6745 |
6746 |
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6751 |
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6752 |
6753 |
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6754 |
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6755 |
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6757 |
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6759 |
6760 |
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6761 |
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6762 |
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6763 |
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6764 |
|
6765 |
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6770 |
6771 |
|
6772 |
|
6775 R1 |
|
6776 |
|
6777 R1 |
|
6777 R2 |
|
6805 |
6815 |
|
6818 |
|
6827 |
|
6828 |
|
6850 |
|
6850 R1 |
|
6851 |
6851 R1 |
|
6857 |
|
6858 |
|
6859 |
|
6866 |
|
6876 R1 |
|
6891 R1 |
6892 |
|
6893 R1 |
|
6899 R1 |
|
6966 |
|
6983 |
|
7023 |
|
7116 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 3 TO
SPECIAL BUSINESS PROVISIONS
RESERVED
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
BP ATTACHMENT 4 TO
SPECIAL BUSINESS PROVISIONS
ADDITIONAL STATEMENT OF WORK
(Reference SBP Section 3.3.1.1, 3.3.2.1, 3.3.3.31, 3.4.51, 3.4.81, 7.9)
A. Sustaining Engineering Delegation Statement of Work
Sellers responsibilities as they relate to Sustaining Engineering Delegation work for the products included in this Special Business Provisions are defined in Boeing Document D6-83323. This Document includes summary matrices depicting the Engineering Delegation requirements for each product commodity and a Responsibility, Authority and Accountability (RAA) Document. The baseline as of the date hereof shall be D6-83323 Rev. New signed January 21, 2005 which will be subject to periodic update.
D6-83323 is a summary of the Engineering Delegation requirements for sustaining products that are part of this SBP and included in the part pricing in Attachment 1. All costs associated with Seller Engineering responsibility as described within D6-83323 with the exception of Fleet Support (as covered in the Technical Services Agreement) or as provided for below are included within Attachment 1 pricing for sustaining programs and will not be subject to additional payment from Boeing.
In addition, Boeing and Seller responsibilities related to the 737MMA program are defined in the 737MMA BCA/IDS Working Together Agreement signed December 2004 by R.K. Gardner, J.L. Turner and A.M. Parasida. All activities and responsibilities identified for BCA - Wichita within this document will be the responsibility of Seller.
Product development projects in work at Boeings Wichita Division that have been selected for inclusion in this SBP as of the date hereof are outlined in Section B of this Attachment 4.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
B. Product Development Projects Subject to Non-Recurring Engineering Payments
For future product development projects, a determination will be made as to whether (i) a requirement for production hardware associated with this developmental effort is anticipated; and (ii) the production hardware resulting from this developmental effort is either a change to or a derivative of the current Attachment 1 Statement of Work. If these conditions are met, these projects will be added to Section B.1 or B.2 of Attachment 4 per the criteria set forth below. If these conditions are not met then the development projects should not be added to Attachment 4 and instead, should be covered by the Services Agreement.
B.1 Product Development Projects
a. Section B1 includes those major re-design efforts that support Derivative aircraft and will be subject to non-recurring engineering payments according to the terms of SBP 5.2.1. The level of effort expended by Boeing on these development projects prior to June 16, 2005 will not be included in such non-recurring engineering payments to Seller.
b. Those projects that support Derivative aircraft or where applicable, BCA aircraft delivered by BCA to BDS, will be added to this Section B.1 pursuant to SBP 7.9 and will be subject to non-recurring payments.
c. For those projects added to this Section B.1, Seller will provide up to [*****] hours in the aggregate of engineering support per project at no charge to Boeing. This support will include but shall not be limited to technical consultation, work statement development and schedule development.
d. All changes that are approved and incorporated prior to certification and subject to the derivative production airplane unit 1, whether in sequence or out of sequence, will be paid for as part of B1. All changes approved and not completed prior to certification will be added to B2 threshold for that year.
e. The following list of product development known projects will be subject to non-recurring engineering payments according to the terms of SBP 5.2.1. The level of effort expended by Boeing on these development projects prior to June 16, 2005 will not be included in such non-recurring engineering payments:
737 Short Field Landing Performance
737-900X
737-800MMA
737 Wedgetail
747-8
777-200LR Freighter
737-900BBJ3
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
B.2. Product Development Projects Subject to Thresholds.
a. Section B.2 is for Boeing initiated and approved PRRs [limited to Design Engineering, Stress Engineering and Project Manufacturing Engineering] that will be subject to such non-recurring engineering payments only after the threshold for embedded engineering support as described below has been exceeded.
b. Those Boeing initiated and approved PRRs [limited to Design Engineering, Stress Engineering and Project Manufacturing Engineering] that support changes to the then existing Attachment 1 statement of work will be incorporated under Section B.2 pursuant to SBP 7.9 and not be subject to additional non-recurring payment until the sustaining engineering threshold for the program appropriate for each project has been exceeded. Only Boeing initiated and approved PRR changes will apply towards these thresholds and will be eligible for additional non-recurring payment once the thresholds have been exceeded.
c. The PRR process starts at Engineering Authorization by the Chief Engineer and is documented in the ECC database on the ECM.
d. For all PRRs issued under Attachment 4, B2, Boeing will issue an ATP for the Design effort, which will contain the Boeings PRR approval minutes, followed by a CCN.
e. Customer Introductions and Master Changes are Sellers responsibility and will not be subject to additional non-recurring payment.
f. In addition, only those Boeing initiated and approved PRR changes [Limited to Design Engineering, Stress Engineering, and Project Manufacturing Engineering] with an impact to Seller that exceeds [*****] engineering hours per change will apply towards these thresholds. PRR changes that do not result in a minimum impact of [*****] engineering hours per change to Seller will not apply towards the threshold and will not be subject to additional non-recurring payment.
g. Baseline PRR Engineering Thresholds:
Each contract year (cy) June 1st through May 31st, an adjustment will be made concurrent with the quantity based price adjustment process outlined within Attachment 20 to establish the appropriate threshold for each program for the following year. To calculate the new threshold, the PRR Engineering Thresholds per Airplane as identified below will be multiplied by [*****] (beta factor) times the change in delivery rates by program for the target year vs. 2003 Airplane Deliveries by Program. This value will then be added to (or subtracted from) the Baseline PRR Engineering Thresholds. In other words, the PRR Engineering Threshold for any given year will be increased (or decreased) by [*****] of the variation in airplane deliveries by program for that year versus 2003 airplane deliveries.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Supporting Documentation: Contract Year to date summary by Program and Business Unit. Refer to example below.
Forecasted PRR
Engineering Thresholds
2003 Baseline Hours |
|
Threshold Hours for Boeing |
|
Initiated PRRs |
|
||||||||||
|
|
2003 (Base) |
|
* |
|
CY1: |
|
CY2: 2006 |
|
CY3: 2007 |
|
CY4: 2008 |
|
CY5: 2009 |
|
737 |
|
[*****] |
|
hours |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
747 |
|
[*****] |
|
hours |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
767 |
|
[*****] |
|
hours |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
777 |
|
[*****] |
|
hours |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
|
|
|
|
*Year is defined as the 12 month period beginning the first day of the anniversary month of the contract.
Model |
|
PRR Engineering
|
|
Quantity of
|
737 |
|
[*****] |
|
424 |
747 |
|
[*****] |
|
24 |
767 |
|
[*****] |
|
24 |
777 |
|
[*****] |
|
90 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
MOA Revision of SBP Clause 7.9 and Attachment 4
Contract Year to date summary detail including hours charged to date by month for each PRR, also PRR approval dates as identified in the Engineering meeting minutes, additional data may be requested. Refer to example below:
|
|
|
|
|
|
737 PRR Threshold Assertion - Period One
|
||||||||||||||||||||||||||||||
PRR Number |
|
Pt Card
|
|
PPR/ECR Title |
|
PRR/ECR
|
|
Jun |
|
Jul |
|
Aug |
|
Sep |
|
Oct |
|
Nov |
|
Dec |
|
Jan |
|
Feb |
|
Mar |
|
Apr |
|
May |
|
Jun |
|
Cu |
|
Date should
|
38656 |
|
|
|
Improved Sound Damping In Aircraft Aft Cabin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECR 01249 |
|
|
|
Improved Sound Damping In Aircraft Aft Cabin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
PRR 38656/ECR 01249 Improved Sound Damping In Aircraft Aft Cabin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38658 |
|
|
|
Flight Deck Door for - 700C Part 121 Operators |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38665 |
|
|
|
Forward Entry Door False Latching/Indication Revision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38275-82 |
|
|
|
Thrust Reverser Cascade Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38275-90 |
|
|
|
Thrust Reverser Lightning Strike Protection |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38275-110S |
|
|
|
Engine Strut Heat Insulation Blanket - Replacement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECR 694 |
|
|
|
Insulation Blanket - Modification - Thrust Reverser (PRR 38690) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38647 |
|
|
|
Tech insertion - Mid Exit Door Plug - Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECR 1513 |
|
|
|
Insulation Blanket Redesign (PRR 38275-110S) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract year to date summary by Program and Business Unit. Seller will provide quarterly report of actual Engineering hours, within 20 working days after the end of each quarter. Refer to example below:
Spirit AeroSystems
PRR Period IV Activity Summary
Status as of 06/11/2009 (Compiled 12-18-2009)
Work Order |
|
Program |
|
<100 hrs
|
|
>100 hrs
|
|
Total
|
|
Current
|
|
Under/
|
3N921 |
|
737 Fuselage |
|
|
|
|
|
|
|
|
|
|
3N931 |
|
737 Nacelles |
|
|
|
|
|
|
|
|
|
|
3N950 |
|
737 Struts |
|
|
|
|
|
|
|
|
|
|
38920 |
|
737 Wing |
|
|
|
|
|
|
|
|
|
|
Total 737 |
|
|
|
|
|
|
|
|
|
14,544 |
|
14,544 |
3N901 |
|
747 Fuselage |
|
|
|
|
|
|
|
|
|
|
3N951 |
|
747 Struts |
|
|
|
|
|
|
|
|
|
|
3N933 |
|
747 Nacelles |
|
|
|
|
|
|
|
|
|
|
Total 747 |
|
|
|
|
|
|
|
|
|
6,635 |
|
6,635 |
3N902 |
|
767 Fuselage |
|
|
|
|
|
|
|
|
|
|
3N952 |
|
767 Struts |
|
|
|
|
|
|
|
|
|
|
Total 767 |
|
|
|
|
|
|
|
|
|
1,350 |
|
1,350 |
3N903 |
|
777 Fuselage |
|
|
|
|
|
|
|
|
|
|
3N934 |
|
777 Nacelles |
|
|
|
|
|
|
|
|
|
|
3N953 |
|
777 Struts |
|
|
|
|
|
|
|
|
|
|
35310 |
|
777 Wing |
|
|
|
|
|
|
|
|
|
|
Total 777 |
|
|
|
|
|
|
|
|
|
17,810 |
|
17,810 |
*YTD values shown above represent cumulative PRR engineering hours through the current status date for the period June 13, 2008 to June 11, 2009. Current threshold values are based on delivery of the following units per model: 366/737, 17/747, 13/767, & 83/777.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 5 TO
SPECIAL BUSINESS PROVISIONS
RATES AND FACTORS
(Reference SBP Section 7)
The following Rates will be utilized for changes to Material, Outside Processing and Touch Labor. All other costs and profit are part of the Wrap Rates fixed for life of contract.
Cost Item |
|
Factor or Rate |
|
|
|
|
|
Direct Engineering: |
|
[*****] |
|
Engineering, Planning, N/C Programming & Tool Design are to be billed at this rate
|
|
|
|
|
|
|
|
Direct Manufacturing Labor: |
|
[*****] |
|
Basic Factory Labor and Quality Assurance are to be billed at this rate
|
|
|
|
|
|
|
|
Direct Material/Outside Processing/Non-Labor: |
|
[*****] |
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 6 TO
SPECIAL BUSINESS PROVISIONS
Lead Time Matrix
(Reference Section 7.5, 12.16)
Lead Time Matrix
Months from Authorization to Proceed to F.O.B. Sellers Plant
|
|
737 |
|
747 |
|
767 |
|
777 |
||||||||
|
|
Structures |
|
S/N |
|
Structures |
|
S/N |
|
Structures |
|
S/N |
|
Structures |
|
S/N |
Raw Material Forward Buy Authorization |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order Base Extension |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Increase |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Decrease |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Introduction |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Reorder |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Refire |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Deimplementation |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assembly - Wichita controlled end items |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assembly - Tulsa controlled end items |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fabrication - Wichita controlled end items |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fabrication - Tulsa controlled end items |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
Lead time in months is from authorization to proceed to F.O.B. sellers plant.
Forward buy authorization is for limited procurement of material and/or parts as required in order to support an expected full authorization of an order base extension.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SPB ATTACHMENT 7 TO
SPECIAL BUSINESS PROVISIONS
INTENDURED PRICED PARTS LIST For POAs
(Seller to submit to Boeing within 60 days of Contract signing)
A. INDENTURE PRICED PARTS LIST
(Reference SBP 3.3.2.1, 4.4, 4.6)
Note: Attachment 7 Parts and Prices provided under separate file due to size.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 8 TO
SPECIAL BUSINESS PROVISIONS
SELLER DATA SUBMITTALS
(Reference SBP 9.0)
EXAMPLES
1.
Program Status Reports
(as requested by Boeing)
Sellers program progress reports, highlighting significant accomplishments and critical program issues, etc.
2.
Production Definition Milestone Schedule
(as requested by Boeing)
Sellers Product Definition schedule depicting key milestone events to support program requirements.
3.
Manufacturing Milestone Schedule
(as requested by Boeing)
Sellers manufacturing schedule depicting key milestone events to support program requirements.
4.
Certified Tool List
Sellers Certified Tool Lists for identifying all accountable tools, including any subsequent new, reworked or re-identified tools affecting the first production spares Product.
5.
Problem Reports
(as required)
Sellers written notification to Boeing of program problems, potential program impact and corrective action.
6.
Total Cost Management System Plan
Annually Seller will submit a TCMS plan as required under SBP Section 7.6.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 9 TO
SPECIAL BUSINESS PROVISIONS
NON-RECURRING AGREEMENTS
The purpose of this attachment 9 is to document and incorporate all nonrecurring pricing and non-pricing agreements into this SBP. These agreements are to be documented in the below format as applicable. The Boeing purchase order must be included below when the agreement is for Boeing accountable tooling. This Boeing purchase order will be used to link the agreements to the Boeing Tooling records.
The following non-recurring pricing and non-pricing agreements are hereby incorporated into this SBP
Item
|
|
Agreement Title |
|
Description |
1. |
|
[*****] |
|
1992 |
2. |
|
[*****] |
|
2055 |
3. |
|
[*****] |
|
2323, CCN 831 |
4. |
|
[*****] |
|
2385 |
5. |
|
[*****] |
|
2572 |
6. |
|
[*****] |
|
2580R1 |
7. |
|
[*****] |
|
2624 |
8. |
|
[*****] |
|
2631 |
9. |
|
[*****] |
|
2632 |
10. |
|
[*****] |
|
2754 |
11. |
|
[*****] |
|
2765 |
12. |
|
[*****] |
|
2808 |
13. |
|
[*****] |
|
2816 |
14. |
|
[*****] |
|
2840R1 |
15. |
|
[*****] |
|
2840R2 |
16. |
|
[*****] |
|
2844 |
17. |
|
[*****] |
|
2846 |
18. |
|
[*****] |
|
2867 |
19. |
|
[*****] |
|
2872 |
20. |
|
[*****] |
|
2938 |
21. |
|
[*****] |
|
3067 |
22. |
|
[*****] |
|
3088 |
23. |
|
[*****] |
|
3197 |
24. |
|
[*****] |
|
3198 |
25. |
|
[*****] |
|
3198R1 |
26. |
|
[*****] |
|
3198R2 |
27. |
|
[*****] |
|
3305 |
28. |
|
[*****] |
|
3363 |
29. |
|
[*****] |
|
3435 |
30. |
|
[*****] |
|
3448 |
31. |
|
[*****] |
|
2488 R3 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
32. |
|
[*****] |
|
2580R2 |
33. |
|
[*****] |
|
3172 |
34. |
|
[*****] |
|
3198R1 |
35. |
|
[*****] |
|
3198R2 |
36. |
|
[*****] |
|
3305 |
37. |
|
[*****] |
|
3363 |
38. |
|
[*****] |
|
3363R1 |
39. |
|
[*****] |
|
3435 |
40. |
|
[*****] |
|
3448 |
41. |
|
[*****] |
|
3519 |
42. |
|
[*****] |
|
3596 |
43. |
|
[*****] |
|
4107 Rev A |
44. |
|
[*****] |
|
4120 |
45. |
|
[*****] |
|
4127 |
46. |
|
[*****] |
|
4247 |
47. |
|
[*****] |
|
4238 |
48. |
|
[*****] |
|
4239 |
49. |
|
[*****] |
|
4285 |
50. |
|
[*****] |
|
4386 |
51. |
|
[*****] |
|
4419 |
52. |
|
[*****] |
|
4434 |
53. |
|
[*****] |
|
4443 |
54. |
|
[*****] |
|
4477 |
55. |
|
[*****] |
|
4477R1 |
56. |
|
[*****] |
|
4490 |
57. |
|
[*****] |
|
4491 |
58. |
|
[*****] |
|
4524 |
59. |
|
[*****] |
|
4621 |
60. |
|
[*****] |
|
2580 R3 |
61. |
|
[*****] |
|
3193 |
62. |
|
[*****] |
|
3200 |
63. |
|
[*****] |
|
3215 |
64. |
|
[*****] |
|
3363R2 |
65. |
|
[*****] |
|
3363R3 |
66. |
|
[*****] |
|
3849 |
67. |
|
[*****] |
|
4049 |
68. |
|
[*****] |
|
4451 |
69. |
|
[*****] |
|
4477 R1 |
70. |
|
[*****] |
|
4742 |
71. |
|
[*****] |
|
4796 |
72. |
|
[*****] |
|
4796 R1 |
73. |
|
[*****] |
|
4806 |
74. |
|
[*****] |
|
4834 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
75. |
|
[*****] |
|
5009 |
76. |
|
[*****] |
|
5023 |
77. |
|
[*****] |
|
5029 |
78. |
|
[*****] |
|
5059 |
79. |
|
[*****] |
|
5061 |
80. |
|
[*****] |
|
5087 |
81. |
|
[*****] |
|
5100 |
82. |
|
[*****] |
|
5104 |
83. |
|
[*****] |
|
5110 |
84. |
|
[*****] |
|
5138 |
85. |
|
[*****] |
|
5148 |
86. |
|
[*****] |
|
5156 |
87. |
|
[*****] |
|
5170 |
88. |
|
[*****] |
|
5186 |
89. |
|
[*****] |
|
5263 |
90. |
|
[*****] |
|
5396 |
91. |
|
[*****] |
|
5398 |
92. |
|
[*****] |
|
5441 |
93. |
|
[*****] |
|
5461 |
94. |
|
[*****] |
|
5462 |
95. |
|
[*****] |
|
5463 |
96. |
|
[*****] |
|
5473 |
97. |
|
[*****] |
|
5510 |
98. |
|
[*****] |
|
5552 |
99. |
|
[*****] |
|
5621 |
100. |
|
[*****] |
|
5649 R1 |
101. |
|
[*****] |
|
5667 |
102. |
|
[*****] |
|
5691 |
103. |
|
[*****] |
|
5692 |
104. |
|
[*****] |
|
5700 |
105. |
|
[*****] |
|
5781 |
106. |
|
[*****] |
|
5782 |
107. |
|
[*****] |
|
5866 |
108. |
|
[*****] |
|
5889 |
109. |
|
[*****] |
|
5889 R1 |
110. |
|
[*****] |
|
5943 |
111. |
|
[*****] |
|
5944 |
112. |
|
[*****] |
|
5945 |
113. |
|
[*****] |
|
5950 |
114. |
|
[*****] |
|
5977 |
115. |
|
[*****] |
|
5991 |
116. |
|
[*****] |
|
6017 |
117. |
|
[*****] |
|
6018 |
118. |
|
[*****] |
|
6018 R1 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
119. |
|
[*****] |
|
6284 |
120. |
|
[*****] |
|
6314 |
121. |
|
[*****] |
|
6324 |
122. |
|
[*****] |
|
6325 |
123. |
|
[*****] |
|
6365 |
124. |
|
[*****] |
|
6413 |
125. |
|
[*****] |
|
6415 |
126. |
|
[*****] |
|
6427 |
127. |
|
[*****] |
|
6429 |
128. |
|
[*****] |
|
6598 Rev1 |
129. |
|
[*****] |
|
6598 Rev2 |
130. |
|
[*****] |
|
6650 |
131. |
|
[*****] |
|
6741 |
132. |
|
[*****] |
|
6772 |
133. |
|
[*****] |
|
6818 |
134. |
|
[*****] |
|
6983 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Agreement text format:
Item XXX: agreement title: incorporated by CCN#XXXX
Overview of agreement including CCN number(s) affected by agreement.
A. Statement of work
B. Settlement value and payment obligations
C. Additional rates and factors
D. Boeing purchase order numbers for non-recurring payments
E. Other
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 10 TO
SPECIAL BUSINESS PROVISIONS
QUALITY ASSURANCE REQUIREMENTS
All work performed under this SBP shall be in accordance with the following:
A10.1 Quality System
A. Document AS/EN/JISQ 9100. Quality Systems - Aerospace - Model for Quality Assurance in Design, Development, Production, Installation and Servicing as may be revised from time to time, which are incorporated herein and made a part hereof by this reference.
B. Document D6-82479, Boeing Quality Management System Requirements for Suppliers - Appendix A - Quality Management System as amended from time to time, which is incorporated herein and made a part hereof by this reference.
C. Document D6-82479, Boeing Quality Management System Requirements for Suppliers - Addendum 1 - Advanced Quality System for Product and Process Improvement as amended from time to time, which is incorporated herein and made a part hereof by this reference.
A10.2 Common Quality Purchasing Data and Business Requirements
A10.2.1 Seller Annual Internal Quality Audit
At lease annually, the Seller shall conduct an internal audit to ensure compliance to their quality system and the controlling quality assurance document.
A10.2.2 Change in Quality Management Representative
The Seller shall promptly notify Boeing of any changes in the management representative with assigned responsibility and authority for the quality system.
A10.2.3 English Language
When specifically requested by Boeing, Seller shall make specified quality data and/or approved design data available in the English language.
The Seller shall maintain an English language translation of (1) its quality manual, and (2) an index of all other Seller procedures that contain quality requirements. Boeing may require the Seller to translate additional documentation.
A10.2.4 Changes to Quality System
The Seller shall immediately notify Boeing in writing of any change to the quality control system that may affect the inspection, conformity or airworthiness of the
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Product. After the issue of initial Boeing quality system approval, each change to the quality control system is subject to review by Boeing.
A10.2.5 Supplier Quality Performance
If Seller fails to achieve and maintain 98% site quality acceptance rate, which is a prerequisite for delegated inspection authority awarded at Boeings discretion, the Seller shall be responsible for one or more of the following as directed by Boeing:
A. Obtaining source inspection from a Boeing-qualified contractor at Sellers own expense;
B. Reimbursing Boeing for reasonable Boeing costs incurred at the point of manufacture (i.e. Sellers site) to verify product conformance;
C. Reimburse Boeing for reasonable Boeing costs incurred at the point of receipt to verify product conformance.
The site quality acceptance rate is a calculation of the ratio of acceptable units delivered to the total units delivered, or an alternate criteria quality acceptance rating, equivalent to 98% as defined by the contracting Boeing site(s).
A10.2.6 Excess Inventory
The Seller shall strictly control all inventory of Boeing proprietary product that is in excess of contract quantity in order to prevent product from being sold or provided to any third party without prior written authorization from Boeing.
A10.2.7 Aerospace Quality Management System (AQMS) Certification
Boeing recognition of Sellers AQMS certification/registration does not affect the right of Boeing to conduct audits and issue findings at the Sellers facility. Boeing reserves the right to provide Boeing-identified quality system findings, associated quality system data, and quality performance data to the Sellers Certification/Registration Board (CRB).
Seller shall ensure the following relative to AQMS certification:
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
A10.2.7.1 Accreditation of Certification/Registration Body
The certification/registration body (CRB) is accredited to perform aerospace quality management system (AQMS) assessments. The CRB must use approved auditors and operate in accordance with the corresponding International Aerospace Quality Group (IAQG) certification/registration scheme.
NOTE: IAQG sanctioned certification/registration schemes include but are not limited to AIR 5359, SJAC 9010, TS157, etc. Reference IAQG website for listing of accredited CRBs: http://www.iagg.sae.org/servlets/index?PORTAL_CODE=IAQG
A10.2.7.2 Records of Certification/Registration
The seller maintains objective evidence of CRB certification/registration on file at Sellers facility. Objective evidence shall include:
a. The accredited AQMS certificate(s) of registration;
b. The audit report(s), including all information pertaining to the audit results in accordance with the applicable certification/registration scheme;
c. Copies of all CRB finding(s), objective evidence of acceptance of corrective action(s), and closure of the finding(s).
NOTE: Certification records shall be maintained in accordance with Boeing specified contractual quality record retention requirements.
A10.2.7.3 Right of Access to CRB
The CRB services agreement provides for right of access to all CRB records by Boeing, applicable accreditation body, applicable Registrar Management Committee (RMC) and other regulatory or government bodies for the purpose of verifying CRB certification/registration criteria and methods are in accordance with the applicable IAQG certification/registration scheme.
A10.2.7.4 Audit Results/Data Reporting to IAQG
The CRB has Sellers written permission to provide audit results/data to IAQG membership as required by the applicable IAQG certification/registration scheme.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
A10.2.7.5 Notification to Boeing of Change in Status
Boeing is immediately notified in writing should the Sellers certification/registration be suspended or withdrawn, or accreditation status of Sellers CRB be withdrawn. Send email notification to grpcrboversightrep@boeing.com.
A10.2.7.6 Provision of Boeing Quality Data to CRB
Boeing-identified findings and Sellers quality performance data is provided to the CRB during certification/registration and surveillance activity.
A10.2.7.7 CRB Access to Proprietary Data
CRB shall be provided access to applicable proprietary data (including Boeing proprietary data) to the extent necessary to assess Sellers compliance to AQMS requirements. CRB shall agree to keep confidential and protect Boeing proprietary information under terms no less stringent than Sellers contractual agreement with Boeing. Seller will assure that such information is conspicuously marked BOEING PROPRIETARY.
A10.2.7.8 Seller Compliance with CRB Requirements
Seller complies with all CRB requirements imposed to issue and maintain certification/registration.
A10.2.8 Verification of Corrective Action
When Boeing notifies Seller of a detected nonconformance, Seller shall immediately take action to eliminate the nonconformance on all products in Sellers control. Seller shall also maintain on file verification that root cause corrective action has occurred and has resolved the subject condition. At the specific request of Boeing, this verification shall occur for the next five (5) shipments after implementation of the corrective action to ensure detected nonconformance has been eliminated. Boeing reserves the right to review the verification data at Sellers facility or have the data submitted to Boeing.
A10.2.9 Corrective Action Report
Where Seller is requested to submit a corrective action report, Seller will submit its response within ten (10) days of receipt of such request unless an extension is otherwise provided by Boeing. Any corrective action report submitted to Boeing shall be in the format specified by Boeing. If after submittal to Boeing supplier determines need for revision, Seller shall immediately notify Boeing of such revision. In the event Seller is unable to respond within the allotted ten day time frame, Seller shall submit a request for extension which shall include the reason for the extension request and the time need to complete the corrective action report.
A10.2.10 Relocation/Subcontract Notification (Puget Sound only)
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
The Seller shall not relocate or subcontract any Category I or II work outside the U.S. without written Boeing acceptance. Notification to Boeing should be made to the Procurement Agent who manages the Sellers contract and shall contain the subcontractor name, address, telephone number, QA manager name, applicable part numbers, and part descriptions. Category I and II work is defined in FAA Order 81200.2, Appendix 4.
A10.2.11 Quality Metrics & Reporting
When requested by Boeing, Seller agrees to work with Boeing to develop and implement processes designed at improving Sellers quality performance. Process will include sufficient detail to allow Boeing to evaluate Sellers progress.
A10.3 Site Unique Quality Purchasing Data Requirements
A10.3.1 Acceptance/Rejection of Sellers Root Cause/Corrective Action
Boeing reserves the right to reject any root cause and/or corrective action determination provided by the Seller, and may request subsequent investigation and/or corrective action to either Boeing or Seller-initiated corrective action requests. If the Seller is late in responding to corrective action requests by Boeing, or if Boeing requires subsequent corrective action, Boeing reserves the right to withhold acceptance of shipments either at source or destination until Seller corrective action is submitted to Boeings satisfaction.
A10.3.2 Change in Manufacturing Facility
The Seller shall immediately notify Boeing in writing of any change to the manufacturing facility location of the contracted part number or assembly.
A10.4 Incorporated by Reference
In addition to any other documents incorporated elsewhere in this SBP or GTA by reference, Seller is required to maintain compliance with the following documents as may be revised from time to time, and incorporated herein, and made a part of this SBP by reference with full force and effect, as if set out in full text:
A10.4.1 Document AS/EN/SJAC 9102. Aerospace First Article Inspection (FAI) Requirement
Seller shall perform First Article Inspections (FAIs) in accordance with AS/EN/SJAC 9102 for all new and revised production articles produced after June 16, 2005.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
A10.4.2 Boeing Document D1-8007, Approval Guide for Supplier Statistical Sampling Plans
A Seller that performs acceptance sampling shall meet the requirements of document D1-8007. Boeing approval of Sellers acceptance sampling plan is required prior to performing acceptance sampling when it is used for in-process or final inspection, and employs continuous sampling or repetitive lot sampling. Subsequent revisions to approved sampling plans require Boeing approval prior to implementation. Prior Boeing approval of a sampling plan is not required if it is used exclusively for receiving inspection, or employs only isolated lot sampling during in-process or final inspection.
When statistical process control is used as an option for either in-process or final inspection, Seller shall satisfy the requirements of document AS/EN/SJAC 9103, Variation Management of Key Characteristics.
In all cases, inspection requirements identified by engineering drawing or specification take precedence over the inspection requirements defined herein.
A10.4.3 Boeing Document D6-51991, Quality Assurance Standard for Digital Product Definition (DPD) at Boeing Suppliers
Seller is required to obtain Boeing approval as a DPD-capable supplier if seller receives, downloads, and/or uses Computer Aided Design (CAD) geometry in any format from any Boeing facility. Boeing digital datasets are reference only (not design or inspection authority) until Boeing DPD approval status is obtained.
A10.4.4 Boeing Document D1-4426, Approved Process Sources
This document defines the approved sources for special processing, composite raw materials, composite products, aircraft bearings, designated fasteners, and metallic raw materials.
A10.4.5 Boeing Document D-13709-4, Requirements for Obtaining MRB Authority by Boeing Suppliers
Seller shall not use dispositions of use-as-is or repair on Boeing-designed product unless current revision of Sellers Material Review Board (MRB) plan complies with D-137094 (not in 7E7) and has been approved by Boeing.
A10.4.6 Reserved
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
A10.4.7 Procurement Operating Instructions (PO1 M6-1007) (used by Puget Sound)
Procurement Operating Instructions (POI M6-1007), as revised from time to time. Individual Quality notes contained in Procurement Operating Instructions (POI M6-1007) are applicable when identified on the purchase document.
See Boeing Website
http://www.boeing.com/companyoffices/doingbiz/index.html, or contact Boeing Procurement representative for printed copy of notes.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 11 TO
SPECIAL BUSINESS PROVISIONS
Boeing Commercial Airplanes (BCA) TIER REPORT (Reference SBP Section 9.6)
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 12 TO
SPECIAL BUSINESS PROVISIONS
NON-U.S. PROCUREMENT REPORT FORM
(Reference SBP Section 12.12)
(Seller to Submit)
Attachment 12, Section 1
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Bid
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Contracted
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 12 TO
SPECIAL BUSINESS PROVISIONS
Attachment 12
(Reference SBP Section 12.12)
Attachment 12 Section 2
The following outlines offset requirements that are currently in work and that Seller is obligated to complete as part of this SBP.
1) Korea - Horizontal Stabilizers and Vertical Fin
· Obligation for Wichita to complete transfer of 737NG Horizontal Stabilizers and Vertical Fin, [*****] (or most current configuration) according to plan and schedule in place on (June 16, 2005).
· The schedules and hardware quantities are subject to change in support of program requirements. Such changes will be made in accordance with the terms indentified in Paragraph 7.5 in the Special Business Provisions.
· Offload to KAI in Korea
· Seller to provide work transfer support/resources as identified for Wichita in above referenced plan. Boeing shall reimburse Seller for the reasonable travel costs incurred by Sellers employees for purposes of providing such work transfer support in Korea. Travel costs shall include airfare, hotels, meals and car rental costs consistent with Sellers standard travel practices and shall not exceed the cost of Boeings ordinary travel practices. Seller shall promptly submit invoices to Boeing substantiating costs for which Seller seeks reimbursement. Such invoices shall be paid by Boeing in accordance with Paragraph 5.0.
· These part numbers will be removed from Attachment 1 of this SBP and Boeing will have no further obligation to purchase these part numbers from Seller at the conclusion of this work transfer.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
WICHITA
737NG HORIZONTAL STABILIZER
PRODUCTION DELIVERY SCHEDULE R-142R2
C/L |
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SHIP TO
|
|
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
1732 |
|
5/4/2005 |
|
1842 |
|
10/11/2005 |
|
1982 |
|
4/14/2006 |
1737 |
|
5/12/2005 |
|
1845 |
|
10/14/2005 |
|
1987 |
|
4/20/2006 |
1742 |
|
5/19/2005 |
|
1848 |
|
10/19/2005 |
|
1991 |
|
4/26/2006 |
1746 |
|
5/25/2005 |
|
1851 |
|
10/24/2005 |
|
1995 |
|
5/2/2006 |
1749 |
|
5/31/2005 |
|
1854 |
|
10/27/2005 |
|
2000 |
|
5/8/2006 |
1752 |
|
6/3/2005 |
|
1857 |
|
11/1/2005 |
|
2004 |
|
5/12/2006 |
1755 |
|
6/8/2005 |
|
1860 |
|
11/4/2005 |
|
2010 |
|
5/18/2006 |
1758 |
|
6/13/2005 |
|
1863 |
|
11/8/2005 |
|
2014 |
|
5/24/2006 |
1761 |
|
6/16/2005 |
|
1866 |
|
11/11/2005 |
|
2018 |
|
5/30/2006 |
1764 |
|
6/21/2005 |
|
1869 |
|
11/15/2005 |
|
2023 |
|
6/5/2006 |
1767 |
|
6/24/2005 |
|
1872 |
|
11/18/2005 |
|
2028 |
|
6/8/2006 |
1770 |
|
6/29/2005 |
|
1875 |
|
11/23/2005 |
|
2032 |
|
6/14/2006 |
1773 |
|
7/5/2005 |
|
1878 |
|
11/29/2005 |
|
2036 |
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6/19/2006 |
1776 |
|
7/8/2005 |
|
1881 |
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12/2/2005 |
|
2041 |
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6/23/2006 |
1779 |
|
7/13/2005 |
|
1886 |
|
12/8/2005 |
|
2046 |
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6/28/2006 |
1782 |
|
7/18/2005 |
|
1890 |
|
12/14/2005 |
|
2050 |
|
7/5/2006 |
1785 |
|
7/21/2005 |
|
1895 |
|
12/20/2005 |
|
2054 |
|
7/10/2006 |
1788 |
|
7/26/2005 |
|
1899 |
|
1/4/2006 |
|
2059 |
|
7/14/2006 |
1791 |
|
7/29/2005 |
|
1904 |
|
1/10/2006 |
|
2064 |
|
7/19/2006 |
1794 |
|
8/3/2005 |
|
1909 |
|
1/16/2006 |
|
2067 |
|
7/24/2006 |
1797 |
|
8/8/2005 |
|
1913 |
|
1/20/2006 |
|
2071 |
|
7/27/2006 |
1800 |
|
8/11/2005 |
|
1918 |
|
1/26/2006 |
|
2075 |
|
8/1/2006 |
1803 |
|
8/16/2005 |
|
1922 |
|
2/1/2006 |
|
2079 |
|
8/4/2006 |
1806 |
|
8/19/2005 |
|
1927 |
|
2/7/2006 |
|
2084 |
|
8/9/2006 |
1809 |
|
8/24/2005 |
|
1931 |
|
2/13/2006 |
|
2087 |
|
8/14/2006 |
1812 |
|
8/29/2005 |
|
1936 |
|
2/17/2006 |
|
2091 |
|
8/17/2006 |
1815 |
|
9/1/2005 |
|
1940 |
|
2/23/2006 |
|
2095 |
|
8/22/2006 |
1818 |
|
9/7/2005 |
|
1945 |
|
3/1/2006 |
|
2099 |
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8/25/2006 |
1821 |
|
9/12/2005 |
|
1950 |
|
3/7/2006 |
|
2103 |
|
8/30/2006 |
1824 |
|
9/15/2005 |
|
1954 |
|
3/13/2006 |
|
2107 |
|
9/5/2006 |
1827 |
|
9/20/2005 |
|
1959 |
|
3/17/2006 |
|
2111 |
|
9/8/2006 |
1830 |
|
9/23/2005 |
|
1963 |
|
3/23/2006 |
|
2115 |
|
9/13/2006 |
1833 |
|
9/28/2005 |
|
1968 |
|
3/29/2006 |
|
2119 |
|
9/18/2006 |
1836 |
|
10/3/2005 |
|
1973 |
|
4/4/2006 |
|
2123 |
|
9/21/2006 |
1839 |
|
10/6/2005 |
|
1977 |
|
4/10/2006 |
|
2127 |
|
9/26/2006 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
WICHITA
737NG HORIZONTAL STABILIZER
PRODUCTION DELIVERY SCHEDULE R-142R2 continued
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
2131 |
|
9/29/2006 |
|
2272 |
|
3/8/2007 |
2135 |
|
10/4/2006 |
|
2275 |
|
3/13/2007 |
2139 |
|
10/9/2006 |
|
2279 |
|
3/16/2007 |
2143 |
|
10/12/2006 |
|
2284 |
|
3/21/2007 |
2147 |
|
10/17/2006 |
|
2287 |
|
3/26/2007 |
2151 |
|
10/20/2006 |
|
2291 |
|
3/29/2007 |
2155 |
|
10/25/2006 |
|
2295 |
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4/3/3007 |
2159 |
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10/30/2006 |
|
2299 |
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4/6/2007 |
2163 |
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11/2/2006 |
|
2304 |
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4/11/2007 |
2167 |
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11/7/2006 |
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2307 |
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4/16/2007 |
2170 |
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11/10/2006 |
|
2311 |
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4/19/2007 |
2174 |
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11/15/2006 |
|
2315 |
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4/24/2007 |
2179 |
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11/20/2006 |
|
2320 |
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4/27/2007 |
2183 |
|
11/27/2006 |
|
2323 |
|
5/2/2007 |
2187 |
|
11/30/2006 |
|
2327 |
|
5/7/2007 |
2191 |
|
12/5/2006 |
|
2331 |
|
5/10/2007 |
2196 |
|
12/8/2006 |
|
2335 |
|
5/15/2007 |
2199 |
|
12/13/2006 |
|
2339 |
|
5/18/2007 |
2203 |
|
12/18/2006 |
|
2343 |
|
5/23/2007 |
2207 |
|
12/21/2006 |
|
2347 |
|
5/29/2007 |
2211 |
|
1/4/2007 |
|
2351 |
|
6/1/2007 |
2215 |
|
1/9/2007 |
|
2356 |
|
6/6/2007 |
2220 |
|
1/12/2007 |
|
2359 |
|
6/11/2007 |
2223 |
|
1/17/2007 |
|
2363 |
|
6/14/2007 |
2227 |
|
1/22/2007 |
|
2367 |
|
6/19/2007 |
2231 |
|
1/25/2007 |
|
2372 |
|
6/22/2007 |
2235 |
|
1/30/2007 |
|
2375 |
|
6/27/2007 |
2240 |
|
2/2/2007 |
|
2379 |
|
7/2/2007 |
2243 |
|
2/7/2007 |
|
2383 |
|
7/6/2007 |
2247 |
|
2/12/2007 |
|
2388 |
|
7/11/2007 |
2251 |
|
2/15/2007 |
|
2391 |
|
7/16/2007 |
2255 |
|
2/20/2007 |
|
2395 |
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7/19/2007 |
2259 |
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2/23/2007 |
|
2399 |
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7/24/2007 |
2264 |
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2/28/2007 |
|
|
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|
2268 |
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3/5/2007 |
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
THE BALANCE OF THIS SCHEDULE IS FOR PLANNING PURPOSES ONLY
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
S/S 1 |
|
8/1/2007 |
|
S/S 22 |
|
11/1/2007 |
|
S/S 43 |
|
5/1/2008 |
S/S 2 |
|
8/1/2007 |
|
S/S 23 |
|
11/1/2007 |
|
S/S 44 |
|
5/1/2008 |
S/S 3 |
|
8/1/2007 |
|
S/S 24 |
|
11/1/2007 |
|
S/S 45 |
|
5/1/2008 |
S/S 4 |
|
8/1/2007 |
|
S/S 25 |
|
12/1/2007 |
|
S/S 46 |
|
5/1/2008 |
S/S 5 |
|
8/1/2007 |
|
S/S 26 |
|
12/1/2007 |
|
S/S 47 |
|
6/1/2009 |
S/S 6 |
|
8/1/2007 |
|
S/S 27 |
|
1/1/2008 |
|
S/S 48 |
|
6/1/2008 |
S/S 7 |
|
9/1/2007 |
|
S/S 28 |
|
1/1/2008 |
|
S/S 49 |
|
6/1/2008 |
S/S 8 |
|
9/1/2007 |
|
S/S 29 |
|
1/1/2008 |
|
S/S 50 |
|
7/1/2008 |
S/S 9 |
|
9/1/2007 |
|
S/S 30 |
|
1/1/2008 |
|
S/S 51 |
|
7/1/2008 |
S/S 10 |
|
9/1/2007 |
|
S/S 31 |
|
2/1/2008 |
|
S/S 52 |
|
7/1/2008 |
S/S 11 |
|
9/1/2007 |
|
S/S 32 |
|
2/1/2008 |
|
S/S 53 |
|
8/1/2008 |
S/S 12 |
|
9/1/2007 |
|
S/S 33 |
|
2/1/2008 |
|
S/S 54 |
|
8/1/2008 |
S/S 13 |
|
10/1/2007 |
|
S/S 34 |
|
2/1/2008 |
|
S/S 55 |
|
8/1/2008 |
S/S 14 |
|
10/1/2007 |
|
S/S 35 |
|
3/1/2008 |
|
S/S 56 |
|
9/1/2008 |
S/S 15 |
|
10/1/2007 |
|
S/S 36 |
|
3/1/2008 |
|
S/S 57 |
|
9/1/2008 |
S/S 16 |
|
10/1/2007 |
|
S/S 37 |
|
3/1/2008 |
|
S/S 58 |
|
9/1/2008 |
S/S 17 |
|
10/1/2007 |
|
S/S 38 |
|
3/1/2008 |
|
S/S 59 |
|
10/1/2008 |
S/S18 |
|
10/1/2007 |
|
S/S 39 |
|
4/1/2008 |
|
S/S 60 |
|
10/1/2008 |
S/S 19 |
|
11/1/2007 |
|
S/S 40 |
|
4/1/2008 |
|
S/S 61 |
|
10/1/2008 |
S/S 20 |
|
11/1/2007 |
|
S/S 41 |
|
4/1/2008 |
|
END OF PRODUCTION |
||
S/S 21 |
|
11/1/2007 |
|
S/S 42 |
|
4/1/ 2008 |
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Wichita
737NG Vertical Fin
Master Schedule R-142R2
S/S |
|
C/L |
|
SHIP TO
|
|
S/S |
|
C/L |
|
SHIP TO
|
|
S/S |
|
C/L |
|
SHIP TO BOEING |
1 |
|
1731 |
|
5/2/2005 |
|
36 |
|
1811 |
|
8/25/2005 |
|
71 |
|
1902 |
|
1/9/2006 |
2 |
|
1732 |
|
5/3/2005 |
|
37 |
|
1814 |
|
8/30/2005 |
|
72 |
|
1904 |
|
1/10/2006 |
3 |
|
1734 |
|
5/6/2005 |
|
38 |
|
1816 |
|
9/1/2005 |
|
73 |
|
1905 |
|
1/12/2006 |
4 |
|
1737 |
|
5/11/2005 |
|
39 |
|
1819 |
|
9/7/2005 |
|
74 |
|
1907 |
|
1/16/2006 |
5 |
|
1740 |
|
5/16/2005 |
|
40 |
|
1821 |
|
9/9/2005 |
|
75 |
|
1910 |
|
1/18/2006 |
6 |
|
1743 |
|
5/19/2005 |
|
41 |
|
1822 |
|
9/12/2005 |
|
76 |
|
1912 |
|
1/19/2006 |
7 |
|
1746 |
|
5/24/2005 |
|
42 |
|
1824 |
|
9/14/2005 |
|
77 |
|
1913 |
|
1/23/2006 |
8 |
|
1749 |
|
5/27/2005 |
|
43 |
|
1826 |
|
9/16/2005 |
|
78 |
|
1915 |
|
1/25/2006 |
9 |
|
1751 |
|
6/1/2005 |
|
44 |
|
1829 |
|
9/21/2005 |
|
79 |
|
1918 |
|
1/27/2006 |
10 |
|
1754 |
|
6/6/2005 |
|
45 |
|
1831 |
|
9/23/2005 |
|
80 |
|
1920 |
|
1/30/2006 |
11 |
|
1756 |
|
6/8/2005 |
|
46 |
|
1834 |
|
9/28/2005 |
|
81 |
|
1921 |
|
2/1/2006 |
12 |
|
1757 |
|
6/9/2005 |
|
47 |
|
1836 |
|
9/30/2005 |
|
82 |
|
1923 |
|
2/3/2006 |
13 |
|
1759 |
|
6/13/2005 |
|
48 |
|
1839 |
|
10/5/2005 |
|
83 |
|
1926 |
|
2/7/2006 |
14 |
|
1761 |
|
6/15/2005 |
|
49 |
|
1841 |
|
10/7/2005 |
|
84 |
|
1928 |
|
2/8/2006 |
15 |
|
1764 |
|
6/20/2005 |
|
50 |
|
1842 |
|
10/10/2005 |
|
85 |
|
1929 |
|
2/10/2006 |
16 |
|
1766 |
|
6/22/2005 |
|
51 |
|
1844 |
|
10/12/2005 |
|
86 |
|
1931 |
|
2/14/2006 |
17 |
|
1769 |
|
6/27/2005 |
|
52 |
|
1846 |
|
10/14/2005 |
|
87 |
|
1934 |
|
2/16/2006 |
18 |
|
1771 |
|
6/29/2005 |
|
53 |
|
1849 |
|
10/19/2005 |
|
88 |
|
1936 |
|
2/17/2006 |
19 |
|
1774 |
|
7/5/2005 |
|
54 |
|
1851 |
|
10/21/2005 |
|
89 |
|
1937 |
|
2/21/2006 |
20 |
|
1776 |
|
7/7/2005 |
|
55 |
|
1854 |
|
10/26/2005 |
|
90 |
|
1939 |
|
2/23/2006 |
21 |
|
1779 |
|
7/12/2005 |
|
56 |
|
1856 |
|
10/28/2005 |
|
91 |
|
1942 |
|
2/27/2006 |
22 |
|
1781 |
|
7/14/2005 |
|
57 |
|
1859 |
|
11/2/2005 |
|
92 |
|
1944 |
|
2/28/2006 |
23 |
|
1784 |
|
7/19/2005 |
|
58 |
|
1861 |
|
11/3/2005 |
|
93 |
|
1945 |
|
3/2/2006 |
24 |
|
1786 |
|
7/21/2005 |
|
59 |
|
1866 |
|
11/10/2005 |
|
94 |
|
1947 |
|
3/3/2006 |
25 |
|
1789 |
|
7/26/2005 |
|
60 |
|
1870 |
|
11/15/2005 |
|
95 |
|
1949 |
|
3/7/2006 |
26 |
|
1791 |
|
7/28/2005 |
|
61 |
|
1873 |
|
11/18/2005 |
|
96 |
|
1951 |
|
3/8/2006 |
27 |
|
1794 |
|
8/2/2005 |
|
62 |
|
1877 |
|
11/23/2005 |
|
97 |
|
1952 |
|
3/10/2006 |
28 |
|
1795 |
|
8/3/2005 |
|
63 |
|
1880 |
|
11/30/2005 |
|
98 |
|
1954 |
|
3/13/2006 |
29 |
|
1796 |
|
8/4/2005 |
|
64 |
|
1883 |
|
12/5/2005 |
|
99 |
|
1956 |
|
3/15/2006 |
30 |
|
1799 |
|
8/9/2005 |
|
65 |
|
1886 |
|
12/7/2005 |
|
100 |
|
1958 |
|
3/16/2006 |
31 |
|
1801 |
|
8/11/2005 |
|
66 |
|
1889 |
|
12/15/2005 |
|
101 |
|
1959 |
|
3/20/2006 |
32 |
|
1803 |
|
8/15/2005 |
|
67 |
|
1891 |
|
12/16/2005 |
|
102 |
|
1961 |
|
3/21/2006 |
33 |
|
1804 |
|
8/16/2005 |
|
68 |
|
1893 |
|
12/19/2005 |
|
103 |
|
1962 |
|
3/23/2006 |
34 |
|
1806 |
|
8/18/2005 |
|
69 |
|
1894 |
|
12/22/2005 |
|
104 |
|
1964 |
|
3/24/2006 |
35 |
|
1809 |
|
8/23/2005 |
|
70 |
|
1897 |
|
1/5/2006 |
|
105 |
|
1966 |
|
3/28/2006 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Wichita
737NG Vertical Fin
Master Schedule R-142R2 continued
S/S |
|
C/L |
|
SHIP TO
|
|
S/S |
|
C/L |
|
SHIP TO
|
|
S/S |
|
C/L |
|
SHIP TO
|
106 |
|
1968 |
|
3/29/2006 |
|
141 |
|
2030 |
|
6/13/2006 |
|
176 |
|
2099 |
|
8/25/2006 |
107 |
|
1969 |
|
3/31/2006 |
|
142 |
|
2032 |
|
6/14/2006 |
|
177 |
|
2101 |
|
8/29/2006 |
108 |
|
1971 |
|
4/3/2006 |
|
143 |
|
2034 |
|
6/16/2006 |
|
178 |
|
2103 |
|
8/30/2006 |
109 |
|
1973 |
|
4/5/2006 |
|
144 |
|
2036 |
|
6/19/2006 |
|
179 |
|
2105 |
|
9/1/2006 |
110 |
|
1975 |
|
4/6/2006 |
|
145 |
|
2038 |
|
6/21/2006 |
|
180 |
|
2107 |
|
9/5/2006 |
111 |
|
1976 |
|
4/10/2006 |
|
146 |
|
2039 |
|
6/22/2006 |
|
181 |
|
2109 |
|
9/7/2006 |
112 |
|
1978 |
|
4/11/2006 |
|
147 |
|
2041 |
|
6/26/2006 |
|
182 |
|
2111 |
|
9/8/2006 |
113 |
|
1979 |
|
4/13/2006 |
|
148 |
|
2043 |
|
6/27/2006 |
|
183 |
|
2113 |
|
9/12/2006 |
114 |
|
1982 |
|
4/14/2006 |
|
149 |
|
2045 |
|
6/29/2006 |
|
184 |
|
2115 |
|
9/13/2006 |
115 |
|
1983 |
|
4/18/2006 |
|
150 |
|
2047 |
|
6/30/2006 |
|
185 |
|
2117 |
|
9/15/2006 |
116 |
|
1985 |
|
4/19/2006 |
|
151 |
|
2049 |
|
7/5/2006 |
|
186 |
|
2119 |
|
9/18/2006 |
117 |
|
1986 |
|
4/21/2006 |
|
152 |
|
2051 |
|
7/6/2006 |
|
187 |
|
2121 |
|
9/20/2006 |
118 |
|
1988 |
|
4/24/2006 |
|
153 |
|
2053 |
|
7/10/2006 |
|
188 |
|
2123 |
|
9/21/2006 |
119 |
|
1990 |
|
4/26/2006 |
|
154 |
|
2055 |
|
7/11/2006 |
|
189 |
|
2125 |
|
9/25/2006 |
120 |
|
1992 |
|
4/27/2006 |
|
155 |
|
2057 |
|
7/13/2006 |
|
190 |
|
2127 |
|
9/26/2006 |
121 |
|
1993 |
|
5/1/2006 |
|
156 |
|
2059 |
|
7/14/2006 |
|
191 |
|
2129 |
|
9/28/2006 |
122 |
|
1995 |
|
5/2/2006 |
|
157 |
|
2061 |
|
7/18/2006 |
|
192 |
|
2131 |
|
9/29/2006 |
123 |
|
1997 |
|
5/4/2006 |
|
158 |
|
2063 |
|
7/19/2006 |
|
193 |
|
2133 |
|
10/3/2006 |
124 |
|
1999 |
|
5/5/2006 |
|
159 |
|
2065 |
|
7/21/2006 |
|
194 |
|
2135 |
|
10/4/2006 |
125 |
|
2001 |
|
5/9/2006 |
|
160 |
|
2067 |
|
7/24/2006 |
|
195 |
|
2137 |
|
10/6/2006 |
126 |
|
2002 |
|
5/10/2006 |
|
161 |
|
2069 |
|
7/26/2006 |
|
196 |
|
2139 |
|
10/9/2006 |
127 |
|
2003 |
|
5/12/2006 |
|
162 |
|
2071 |
|
7/27/2006 |
|
197 |
|
2141 |
|
10/11/2006 |
128 |
|
2006 |
|
5/15/2006 |
|
163 |
|
2073 |
|
7/31/2006 |
|
198 |
|
2143 |
|
10/12/2006 |
129 |
|
2007 |
|
5/17/2006 |
|
164 |
|
2075 |
|
8/1/2006 |
|
199 |
|
2145 |
|
10/16/2006 |
130 |
|
2009 |
|
5/18/2006 |
|
165 |
|
2077 |
|
8/3/2006 |
|
200 |
|
2147 |
|
10/17/2006 |
131 |
|
2010 |
|
5/22/2006 |
|
166 |
|
2079 |
|
8/4/2006 |
|
201 |
|
2149 |
|
10/19/2006 |
132 |
|
2012 |
|
5/23/2006 |
|
167 |
|
2081 |
|
8/8/2006 |
|
202 |
|
2151 |
|
10/20/2006 |
133 |
|
2014 |
|
5/25/2006 |
|
168 |
|
2083 |
|
8/9/2006 |
|
203 |
|
2153 |
|
10/24/2006 |
134 |
|
2016 |
|
5/26/2006 |
|
169 |
|
2085 |
|
8/11/2006 |
|
204 |
|
2155 |
|
10/25/2006 |
135 |
|
2018 |
|
5/31/2006 |
|
170 |
|
2087 |
|
8/14/2006 |
|
205 |
|
2157 |
|
10/27/2006 |
136 |
|
2020 |
|
6/1/2006 |
|
171 |
|
2089 |
|
8/16/2006 |
|
206 |
|
2159 |
|
10/30/2006 |
137 |
|
2022 |
|
6/5/2006 |
|
172 |
|
2091 |
|
8/17/2006 |
|
207 |
|
2161 |
|
11/1/2006 |
138 |
|
2024 |
|
6/6/2006 |
|
173 |
|
2093 |
|
8/21/2006 |
|
208 |
|
2163 |
|
11/2/2006 |
139 |
|
2026 |
|
6/8/2006 |
|
174 |
|
2095 |
|
8/22/2006 |
|
209 |
|
2165 |
|
11/6/2006 |
140 |
|
2028 |
|
6/9/2006 |
|
175 |
|
2097 |
|
8/24/2006 |
|
210 |
|
2167 |
|
11/7/2006 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Wichita
737NG Vertical Fin
Master Schedule R-142R2 continued
S/S |
|
C/L |
|
SHIP TO
|
|
S/S |
|
C/L |
|
SHIP TO
|
|
S/S |
|
C/L |
|
SHIP TO
|
211 |
|
2169 |
|
11/9/2006 |
|
246 |
|
2239 |
|
2//2/2007 |
|
281 |
|
2309 |
|
4/18/2007 |
212 |
|
2171 |
|
11/10/2006 |
|
247 |
|
2241 |
|
2/6/2007 |
|
282 |
|
2311 |
|
4/19/2007 |
213 |
|
2173 |
|
11/14/2006 |
|
248 |
|
2243 |
|
2/7/2007 |
|
283 |
|
2313 |
|
4/23/2007 |
214 |
|
2175 |
|
11/15/2006 |
|
249 |
|
2245 |
|
2/9/2007 |
|
284 |
|
2315 |
|
4/24/2007 |
215 |
|
2177 |
|
11/17/2006 |
|
250 |
|
2247 |
|
2/12/2007 |
|
285 |
|
2317 |
|
4/26/2007 |
216 |
|
2179 |
|
11/20/2006 |
|
251 |
|
2249 |
|
2/14/2007 |
|
286 |
|
2319 |
|
4/27/2007 |
217 |
|
2181 |
|
11/22/2006 |
|
252 |
|
2251 |
|
2/15/2007 |
|
287 |
|
2321 |
|
5/1/2007 |
218 |
|
2183 |
|
11/27/2006 |
|
253 |
|
2253 |
|
2/19/2007 |
|
288 |
|
2323 |
|
5/2/2007 |
219 |
|
2185 |
|
11/29/2006 |
|
254 |
|
2255 |
|
2/20/2007 |
|
289 |
|
2325 |
|
5/4/2007 |
220 |
|
2187 |
|
11/30/2006 |
|
255 |
|
2257 |
|
2/22/2007 |
|
290 |
|
2327 |
|
5/7/2007 |
221 |
|
2189 |
|
12/4/2006 |
|
256 |
|
2259 |
|
2/23/2007 |
|
291 |
|
2329 |
|
5/9/2007 |
222 |
|
2191 |
|
12/5/2006 |
|
257 |
|
2261 |
|
2/27/2007 |
|
292 |
|
2331 |
|
5/10/2007 |
223 |
|
2193 |
|
12/7/2006 |
|
258 |
|
2263 |
|
2/28/2007 |
|
293 |
|
2333 |
|
5/14/2007 |
224 |
|
2195 |
|
12/8/2006 |
|
259 |
|
2265 |
|
3/2/2007 |
|
294 |
|
2335 |
|
5/15/2007 |
225 |
|
2197 |
|
12/12/2006 |
|
260 |
|
2267 |
|
3/5/2007 |
|
295 |
|
2337 |
|
5/17/2007 |
226 |
|
2199 |
|
12/13/2006 |
|
261 |
|
2269 |
|
3/7/2007 |
|
296 |
|
2339 |
|
5/18/2007 |
227 |
|
2201 |
|
12/15/2006 |
|
262 |
|
2271 |
|
3/8/2007 |
|
297 |
|
2341 |
|
5/22/2007 |
228 |
|
2203 |
|
12/18/2006 |
|
263 |
|
2273 |
|
3/12/2007 |
|
298 |
|
2343 |
|
5/23/2007 |
229 |
|
2205 |
|
12/20/2006 |
|
264 |
|
2275 |
|
3/13/2007 |
|
299 |
|
2345 |
|
5/25/2007 |
230 |
|
2207 |
|
12/21/2006 |
|
265 |
|
2277 |
|
3/15/2007 |
|
300 |
|
2347 |
|
5/29/2007 |
231 |
|
2209 |
|
1/3/2007 |
|
266 |
|
2279 |
|
3/16/2007 |
|
301 |
|
2349 |
|
5/31/2007 |
232 |
|
2211 |
|
1/4/2007 |
|
267 |
|
2281 |
|
3/20/2007 |
|
302 |
|
2351 |
|
6/1/2007 |
233 |
|
2213 |
|
1/8/2007 |
|
268 |
|
2283 |
|
3/21/2007 |
|
303 |
|
2353 |
|
6/5/2007 |
234 |
|
2215 |
|
1/9/2007 |
|
269 |
|
2285 |
|
3/23/2007 |
|
304 |
|
2355 |
|
6/6/2007 |
235 |
|
2217 |
|
1/11/2007 |
|
270 |
|
2287 |
|
3/26/2007 |
|
305 |
|
2357 |
|
6/8/2007 |
236 |
|
2219 |
|
1/12/2007 |
|
271 |
|
2289 |
|
3/28/2007 |
|
306 |
|
2359 |
|
6/11/2007 |
237 |
|
2221 |
|
1/16/2007 |
|
272 |
|
2291 |
|
3/29/2007 |
|
307 |
|
2361 |
|
6/13/2007 |
238 |
|
2223 |
|
1/17/2007 |
|
273 |
|
2293 |
|
4/2/2007 |
|
308 |
|
2363 |
|
6/14/2007 |
239 |
|
2225 |
|
1/19/2007 |
|
274 |
|
2295 |
|
4/3/2007 |
|
309 |
|
2365 |
|
6/18/2007 |
240 |
|
2227 |
|
1/22/2007 |
|
275 |
|
2297 |
|
4/5/2007 |
|
310 |
|
2367 |
|
6/19/2007 |
241 |
|
2229 |
|
1/24/2007 |
|
276 |
|
2299 |
|
4/6/2007 |
|
311 |
|
2369 |
|
6/21/2007 |
242 |
|
2231 |
|
1/25/2007 |
|
277 |
|
2301 |
|
4/10/2007 |
|
312 |
|
2371 |
|
6/22/2007 |
243 |
|
2233 |
|
1/29/2007 |
|
278 |
|
2303 |
|
4/11/2007 |
|
313 |
|
2373 |
|
6/26/2007 |
244 |
|
2235 |
|
1/30/2007 |
|
279 |
|
2305 |
|
4/13/2007 |
|
314 |
|
2375 |
|
6/27/2007 |
245 |
|
2237 |
|
2/1/2007 |
|
280 |
|
2307 |
|
4/16/2007 |
|
315 |
|
2377 |
|
6/29/2007 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Wichita
737NG Vertical Fin
Master Schedule R-142R2 continued
S/S |
|
C/L |
|
SHIP TO
|
|
|
|
|
|
|
|
|
|
|
|
|
316 |
|
2379 |
|
7/2/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
317 |
|
2381 |
|
7/5/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
318 |
|
2383 |
|
7/6/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
319 |
|
2385 |
|
7/10/2077 |
|
|
|
|
|
|
|
|
|
|
|
|
320 |
|
2387 |
|
7/11/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
321 |
|
2389 |
|
7/13/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
322 |
|
2391 |
|
7/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
323 |
|
2393 |
|
7/18/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
324 |
|
2395 |
|
7/19/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
325 |
|
2397 |
|
7/23/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
326 |
|
2399 |
|
7/25/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
THE BALANCE OF THIS SCHEDULE IS FOR PLANNING PURPOSES ONLY
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
1 |
|
8/1/2007 |
|
41 |
|
11/1/2007 |
|
81 |
|
4/1/2008 |
2 |
|
8/1/2007 |
|
42 |
|
11/1/2007 |
|
82 |
|
4/1/2008 |
3 |
|
8/1/2007 |
|
43 |
|
11/1/2007 |
|
83 |
|
4/1/2008 |
4 |
|
8/1/2007 |
|
44 |
|
11/1/2007 |
|
84 |
|
4/1/2008 |
5 |
|
8/1/2007 |
|
45 |
|
11/1/2007 |
|
85 |
|
4/1/2008 |
6 |
|
8/1/2007 |
|
46 |
|
12/1/2007 |
|
86 |
|
4/1/2008 |
7 |
|
8/1/2007 |
|
47 |
|
12/1/2007 |
|
87 |
|
4/1/2008 |
8 |
|
8/1/2007 |
|
48 |
|
12/1/2007 |
|
88 |
|
4/1/2008 |
9 |
|
8/1/2007 |
|
49 |
|
12/1/2007 |
|
89 |
|
4/1/2008 |
10 |
|
8/1/2007 |
|
50 |
|
12/1/2007 |
|
90 |
|
4/1/2008 |
11 |
|
8/1/2007 |
|
51 |
|
1/1/2008 |
|
91 |
|
4/1/2008 |
12 |
|
8/1/2007 |
|
52 |
|
1/1/2008 |
|
92 |
|
5/1/2008 |
13 |
|
9/1/2007 |
|
53 |
|
1/1/2008 |
|
93 |
|
5/1/2008 |
14 |
|
9/1/2007 |
|
54 |
|
1/1/2008 |
|
94 |
|
5/1/2008 |
15 |
|
9/1/2007 |
|
55 |
|
1/1/2008 |
|
95 |
|
5/1/2008 |
16 |
|
9/1/2007 |
|
56 |
|
1/1/2008 |
|
96 |
|
5/1/2008 |
17 |
|
9/1/2007 |
|
57 |
|
1/1/2008 |
|
97 |
|
5/1/2008 |
18 |
|
9/1/2007 |
|
58 |
|
1/1/2008 |
|
98 |
|
5/1/2008 |
19 |
|
9/1/2007 |
|
59 |
|
2/1/2008 |
|
99 |
|
5/1/2008 |
20 |
|
9/1/2007 |
|
60 |
|
2/1/2008 |
|
100 |
|
5/1/2008 |
21 |
|
9/1/2007 |
|
61 |
|
2/1/2008 |
|
101 |
|
6/1/2008 |
22 |
|
9/1/2007 |
|
62 |
|
2/1/2008 |
|
102 |
|
6/1/2008 |
23 |
|
9/1/2007 |
|
63 |
|
2/1/2008 |
|
103 |
|
6/1/2008 |
24 |
|
10/1/2007 |
|
64 |
|
2/1/2008 |
|
104 |
|
6/1/2008 |
25 |
|
10/1/2007 |
|
65 |
|
2/1/2008 |
|
105 |
|
6/1/2008 |
26 |
|
10/1/2007 |
|
66 |
|
2/1/2008 |
|
106 |
|
6/1/2008 |
27 |
|
10/1/2007 |
|
67 |
|
2/1/2008 |
|
107 |
|
6/1/2008 |
28 |
|
10/1/2007 |
|
68 |
|
2/1/2008 |
|
108 |
|
6/1/2008 |
29 |
|
10/1/2007 |
|
69 |
|
2/1/2008 |
|
109 |
|
6/1/2008 |
30 |
|
10/1/2007 |
|
70 |
|
3/1/2008 |
|
110 |
|
7/1/2008 |
31 |
|
10/1/2007 |
|
71 |
|
3/1/2008 |
|
111 |
|
7/1/2008 |
32 |
|
10/1/2007 |
|
72 |
|
3/1/2008 |
|
112 |
|
7/1/2008 |
33 |
|
10/1/2007 |
|
73 |
|
3/1/2008 |
|
113 |
|
7/1/2008 |
34 |
|
10/1/2007 |
|
74 |
|
3/1/2008 |
|
114 |
|
7/1/2008 |
35 |
|
11/1/2007 |
|
75 |
|
3/1/2008 |
|
115 |
|
7/1/2008 |
36 |
|
11/1/2007 |
|
76 |
|
3/1/2008 |
|
116 |
|
7/1/2008 |
37 |
|
11/1/2007 |
|
77 |
|
3/1/2008 |
|
117 |
|
7/1/2008 |
38 |
|
11/1/2007 |
|
78 |
|
3/1/2008 |
|
118 |
|
8/1/2008 |
39 |
|
11/1/2007 |
|
79 |
|
3/1/2008 |
|
119 |
|
8/1/2008 |
40 |
|
11/1/2007 |
|
80 |
|
3/1/2008 |
|
120 |
|
8/1/2008 |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
THE BALANCE OF THIS SHCEDULE IS FOR PLANNING PURPOSES ONLY
C/L |
|
SHIP TO
|
|
C/L |
|
SHIP TO
|
121 |
|
8/1/2008 |
|
161 |
|
1/1/2009 |
122 |
|
8/1/2008 |
|
162 |
|
1/1/2009 |
123 |
|
8/1/2008 |
|
163 |
|
1/1/2009 |
124 |
|
8/1/2008 |
|
164 |
|
1/1/2009 |
125 |
|
8/1/2008 |
|
165 |
|
2/1/2009 |
126 |
|
8/1/2008 |
|
166 |
|
2/1/2009 |
127 |
|
9/1/2008 |
|
167 |
|
2/1/2009 |
128 |
|
9/1/2008 |
|
168 |
|
2/1/2009 |
129 |
|
9/1/2008 |
|
169 |
|
2/1/2009 |
130 |
|
9/1/2008 |
|
170 |
|
2/1/2009 |
131 |
|
9/1/2008 |
|
171 |
|
2/1/2009 |
132 |
|
9/1/2008 |
|
172 |
|
2/1/2009 |
133 |
|
9/1/2008 |
|
173 |
|
3/1/2009 |
134 |
|
9/1/2008 |
|
174 |
|
3/1/2009 |
135 |
|
9/1/2008 |
|
175 |
|
3/1/2009 |
136 |
|
10/1/2008 |
|
176 |
|
3/1/2009 |
137 |
|
10/1/2008 |
|
177 |
|
3/1/2009 |
138 |
|
10/1/2008 |
|
178 |
|
3/1/2009 |
139 |
|
10/1/2008 |
|
179 |
|
3/1/2009 |
140 |
|
10/1/2008 |
|
180 |
|
3/1/2009 |
141 |
|
10/1/2008 |
|
181 |
|
4/1/2009 |
142 |
|
10/1/2008 |
|
182 |
|
4/1/2009 |
143 |
|
10/1/2008 |
|
183 |
|
4/1/2009 |
144 |
|
10/1/2008 |
|
184 |
|
4/1/2009 |
145 |
|
11/1/2008 |
|
|
|
End of Production |
146 |
|
11/1/2008 |
|
|
|
|
147 |
|
11/1/2008 |
|
|
|
|
148 |
|
11/1/2008 |
|
|
|
|
149 |
|
11/1/2008 |
|
|
|
|
150 |
|
11/1/2008 |
|
|
|
|
151 |
|
11/1/2008 |
|
|
|
|
152 |
|
11/1/2008 |
|
|
|
|
153 |
|
12/1/2008 |
|
|
|
|
154 |
|
12/1/2008 |
|
|
|
|
155 |
|
12/1/2008 |
|
|
|
|
156 |
|
12/1/2008 |
|
|
|
|
157 |
|
1/1/2009 |
|
|
|
|
158 |
|
1/1/2009 |
|
|
|
|
159 |
|
1/1/2009 |
|
|
|
|
160 |
|
1/1/2009 |
|
|
|
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Wichita/Tulsa KAI 737 HS & VF Support Schedule
2005-2008
The support schedule below represents the support schedule currently agreed to by both parties; it is subject to change by Boeing based on program requirements. Support schedule will be maintained on a rolling 90 day notification process.
|
|
Assembly Support: |
|
Program Support: |
2005 |
|
|
|
|
|
|
|
|
|
May: |
|
1 Person (15 days in-plant) |
|
1 Person (3 days in-plant) |
June: |
|
2 People (5 days each in-plant) |
|
1 Person (3 days in-plant) |
July: |
|
2 People (5 days each in-plant) |
|
3 People (3 days each in-plant) |
Aug: |
|
3 People (5 days each in-plant) |
|
1 Person (3 days in-plant) |
Sep: |
|
2 People (10 days each in-plant) |
|
1 Person (5 days in-plant) |
Oct: |
|
2 People (10 days each in-plant) |
|
2 People (3 days each in-plant) |
Nov: |
|
1 Person (10 days in-plant) |
|
4 People (3 days each in-plant) |
|
|
|
|
|
2006 : |
|
|
|
|
|
|
|
|
|
1st Qtr. |
|
2 People (10 days each in-plant |
|
8 People (5 days each in-plant) |
2nd Qtr. |
|
1 Person (5 days in-plant) |
|
2 People (5 days each in-plant) |
3rd Qtr. |
|
2 People (5 days each in-plant) |
|
6 People (5 days each in-plant) |
4th Qtr. |
|
No Planned Support |
|
No Planned Support |
|
|
|
|
|
2007 : |
|
|
|
|
|
|
|
|
|
1st Qtr. |
|
No Planned Support |
|
2 People (5 days each in-plant) |
2nd Qtr. |
|
4 People (5 days each in-plant |
|
4 People (5 days each in-plant) |
3rd Qtr. |
|
No Planned Support |
|
4 People (5 days each in-plant) |
4th Qtr. |
|
4 People (5 days each in-plant) |
|
4 People (5 days each in-plant) |
|
|
|
|
|
2008 : |
|
|
|
|
|
|
|
|
|
1st Qtr. |
|
4 People (5 days each in-plant) |
|
4 People (5 days each in-plant) |
2nd Qtr. |
|
No Planned Support |
|
No Planned Support |
3rd Qtr. |
|
4 People (5 days each in-plant) |
|
6 People (5 days each in-plant) |
4th Qtr. |
|
4 People (5 days each in-plant) |
|
4 People (5 days each in-plant) |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
2) Turkey - Lot Time Hardware
· Obligation for Wichita to subcontract statement of work as identified in the below referenced plan.
· Offload to TAI or other suppliers in Turkey
· Wichita offloading in Five (5) phases of lot time work.
· The work packages are identified below to denote the scope of work and dollar amounts. It is not Boeings intent to manage the work statement and individual part numbers. For the avoidance of doubt, the intent is that Seller agrees to offload the parts in these work packages to Turkey or place parts of equivalent estimated value
The key elements of the Turkey Program are:
I. Define the work statement using the following WTP numbers:
WTP B2000- 341 - Package #1
WTP B2000- 416 - Package #2
WTP B2000- 322 - Package #3
WTP B2001- 420 - Package #4
WTP B2001- 425 - Package #5
Additionally, Attachment TP 1 (below) describes the number of parts per package.
II. Continue to provide financial actuals to BCAG Finance for Industrial Participation (IP) reporting purposes. Wichita Seller will not be responsible for calculating Turkish Added Value (TAV); however they need to be aware of the TAV contractual requirements levied on the Boeing Company. Boeing is required to have a minimum of 30% TAV on hardware deliveries during the years 2003 to mid-2006; 35% during mid-2006 to mid-2009; and 40% on shipments beyond 2009.
III. Maintain the functions of the current management team supporting the IP program and the direct relationships that have been established. For the period commencing on the date of this SBP and ending at first article shipment of the last detail part of WTP B2001-425-package number 5, Boeing shall reimburse Seller for the reasonable travel costs incurred by such management team. Travel costs shall include airfare between the U.S. and Turkey, hotels, meals and car rental costs consistent with Sellers standard travel practices and shall not exceed the cost of Boeings ordinary travel practices. Seller shall promptly submit invoices to Boeing substantiating costs for which Seller seeks reimbursement. Such invoices shall be paid by Boeing in accordance with Paragraph 5.0. Boeing shall pay for any travel to, and support to, Turkey. The IP manager for Turkey, the procurement organizations and the work transfer group, finance and quality assurance. All of these organizations are involved in the IP program for Turkey and we want to maintain these direct relationships as opposed to working through other entities.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Turkey Work Packages
TAI Package #1
Model |
|
Phase |
|
Package |
|
ACC |
|
Assys |
|
FAB |
|
POP |
|
IWA |
|
737 |
|
2 |
|
216 |
|
|
|
33 |
|
47 |
|
62 |
|
1 |
|
737 |
|
2 |
|
217 |
|
|
|
89 |
|
274 |
|
138 |
|
11 |
|
737 |
|
2 |
|
218 |
|
|
|
14 |
|
27 |
|
40 |
|
2 |
|
737 |
|
3 |
|
301 |
|
|
|
10 |
|
21 |
|
9 |
|
0 |
|
767 |
|
2 |
|
222 |
|
|
|
7 |
|
0 |
|
20 |
|
8 |
|
767 |
|
2 |
|
223 |
|
|
|
4 |
|
8 |
|
4 |
|
1 |
|
767 |
|
2 |
|
224 |
|
|
|
6 |
|
0 |
|
18 |
|
0 |
|
767 |
|
2 |
|
232 |
|
|
|
1 |
|
0 |
|
2 |
|
0 |
|
767 |
|
2 |
|
233 |
|
|
|
79 |
|
196 |
|
135 |
|
17 |
|
777 |
|
2 |
|
226 |
|
|
|
69 |
|
378 |
|
81 |
|
3 |
|
777 |
|
2 |
|
227 |
|
|
|
5 |
|
20 |
|
0 |
|
2 |
|
777 |
|
2 |
|
228 |
|
|
|
34 |
|
79 |
|
19 |
|
0 |
|
Totals |
|
|
|
12 |
|
|
|
351 |
|
1050 |
|
528 |
|
45 |
|
TAI Package #2
Model |
|
Phase |
|
Package |
|
ACC |
|
Assys |
|
FAB |
|
POP |
|
IWA |
|
737 |
|
2 |
|
215 |
|
|
|
62 |
|
83 |
|
73 |
|
0 |
|
737 |
|
3 |
|
302 |
|
|
|
72 |
|
64 |
|
122 |
|
23 |
|
737 |
|
3 |
|
307 |
|
|
|
63 |
|
196 |
|
149 |
|
8 |
|
737 |
|
3 |
|
310 |
|
|
|
26 |
|
24 |
|
144 |
|
0 |
|
737 |
|
4 |
|
2 |
|
|
|
0 |
|
0 |
|
0 |
|
13 |
|
737 |
|
4 |
|
9 |
|
|
|
28 |
|
64 |
|
38 |
|
6 |
|
737 |
|
4 |
|
24 |
|
|
|
9 |
|
64 |
|
16 |
|
0 |
|
747 |
|
2 |
|
229 |
|
|
|
40 |
|
67 |
|
25 |
|
4 |
|
Totals |
|
|
|
8 |
|
|
|
300 |
|
562 |
|
567 |
|
|
|
TAI Package #3
Model |
|
Phase |
|
Package |
|
ACC |
|
Assys |
|
FAB |
|
POP |
|
IWA |
|
737 |
|
5 |
|
6 |
|
|
|
251 |
|
376 |
|
453 |
|
30 |
|
737 |
|
5 |
|
9 |
|
|
|
37 |
|
38 |
|
75 |
|
11 |
|
737 |
|
5 |
|
13 |
|
|
|
19 |
|
22 |
|
58 |
|
15 |
|
737 |
|
5 |
|
16 |
|
|
|
49 |
|
116 |
|
32 |
|
4 |
|
737 |
|
5 |
|
19 |
|
|
|
17 |
|
39 |
|
48 |
|
1 |
|
737 |
|
5 |
|
27 |
|
|
|
14 |
|
11 |
|
19 |
|
7 |
|
737 |
|
5 |
|
38 |
|
|
|
12 |
|
24 |
|
0 |
|
0 |
|
747 |
|
5 |
|
41 |
|
|
|
36 |
|
50 |
|
42 |
|
0 |
|
767 |
|
2 |
|
221 |
|
|
|
7 |
|
7 |
|
6 |
|
0 |
|
767 |
|
3 |
|
309 |
|
|
|
122 |
|
437 |
|
76 |
|
4 |
|
767 |
|
3 |
|
314 |
|
|
|
50 |
|
110 |
|
50 |
|
4 |
|
777/767 |
|
3 |
|
308 |
|
|
|
20 |
|
53 |
|
41 |
|
24 |
|
Totals |
|
|
|
13 |
|
|
|
634 |
|
1283 |
|
900 |
|
100 |
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Turkey Work Packages continued
TAI Package #4
Model |
|
Phase |
|
Package |
|
ACC |
|
Assys |
|
FAB |
|
POP |
|
IWA |
|
737 |
|
3 |
|
318 |
|
|
|
22 |
|
48 |
|
33 |
|
0 |
|
737 |
|
4 |
|
25 |
|
|
|
5 |
|
3 |
|
14 |
|
0 |
|
737 |
|
4 |
|
27 |
|
|
|
4 |
|
4 |
|
7 |
|
0 |
|
737 |
|
4 |
|
36 |
|
|
|
0 |
|
6 |
|
0 |
|
0 |
|
737 |
|
4 |
|
39 |
|
|
|
46 |
|
69 |
|
132 |
|
5 |
|
737 |
|
5 |
|
1 |
|
|
|
22 |
|
25 |
|
35 |
|
6 |
|
737 |
|
5 |
|
5 |
|
|
|
37 |
|
32 |
|
50 |
|
12 |
|
747 |
|
1 |
|
202 |
|
|
|
37 |
|
50 |
|
54 |
|
0 |
|
747 |
|
3 |
|
305 |
|
|
|
11 |
|
36 |
|
34 |
|
0 |
|
747 |
|
3 |
|
316 |
|
|
|
64 |
|
78 |
|
91 |
|
0 |
|
747 |
|
4 |
|
45 |
|
|
|
19 |
|
39 |
|
22 |
|
1 |
|
767 |
|
1 |
|
213 |
|
|
|
87 |
|
255 |
|
99 |
|
4 |
|
767 |
|
2 |
|
220 |
|
|
|
68 |
|
100 |
|
97 |
|
26 |
|
777 |
|
1 |
|
206 |
|
|
|
8 |
|
20 |
|
2 |
|
0 |
|
Totals |
|
|
|
14 |
|
|
|
430 |
|
765 |
|
670 |
|
54 |
|
TM Package #5
Model |
|
Phase |
|
Package |
|
ACC |
|
Assys |
|
FAB |
|
POP |
|
IWA |
|
737 |
|
3 |
|
304 |
|
|
|
23 |
|
54 |
|
7 |
|
0 |
|
737 |
|
3 |
|
321 |
|
|
|
4 |
|
7 |
|
6 |
|
6 |
|
737 |
|
3 |
|
323 |
|
|
|
8 |
|
13 |
|
6 |
|
0 |
|
737 |
|
4 |
|
21 |
|
|
|
4 |
|
4 |
|
4 |
|
0 |
|
737 |
|
4 |
|
41 |
|
|
|
3 |
|
3 |
|
8 |
|
2 |
|
737 |
|
4 |
|
42 |
|
|
|
6 |
|
12 |
|
7 |
|
0 |
|
737 |
|
4 |
|
43 |
|
|
|
3 |
|
14 |
|
3 |
|
0 |
|
737 |
|
5 |
|
87 |
|
|
|
13 |
|
24 |
|
34 |
|
0 |
|
737 |
|
5 |
|
88 |
|
|
|
3 |
|
3 |
|
2 |
|
1 |
|
747 |
|
3 |
|
300 |
|
|
|
28 |
|
61 |
|
22 |
|
6 |
|
747 |
|
4 |
|
46 |
|
|
|
6 |
|
19 |
|
16 |
|
0 |
|
747 |
|
4 |
|
49 |
|
|
|
9 |
|
8 |
|
12 |
|
0 |
|
747 |
|
4 |
|
54 |
|
|
|
69 |
|
93 |
|
127 |
|
6 |
|
747 |
|
4 |
|
58 |
|
|
|
16 |
|
2 |
|
29 |
|
0 |
|
747 |
|
5 |
|
44 |
|
|
|
57 |
|
170 |
|
60 |
|
9 |
|
747 |
|
5 |
|
45 |
|
|
|
54 |
|
145 |
|
50 |
|
0 |
|
777 |
|
3 |
|
303 |
|
|
|
7 |
|
13 |
|
3 |
|
0 |
|
777 |
|
3 |
|
312 |
|
|
|
23 |
|
60 |
|
16 |
|
0 |
|
777 |
|
3 |
|
313 |
|
|
|
42 |
|
127 |
|
32 |
|
0 |
|
777 |
|
3 |
|
317 |
|
|
|
33 |
|
51 |
|
17 |
|
2 |
|
777 |
|
3 |
|
319 |
|
|
|
50 |
|
101 |
|
0 |
|
0 |
|
777 |
|
3 |
|
320 |
|
|
|
8 |
|
0 |
|
0 |
|
18 |
|
777 |
|
3 |
|
325 |
|
|
|
11 |
|
16 |
|
19 |
|
4 |
|
777 |
|
4 |
|
88 |
|
|
|
3 |
|
34 |
|
2 |
|
0 |
|
777 |
|
4 |
|
89 |
|
|
|
64 |
|
130 |
|
38 |
|
0 |
|
777 |
|
4 |
|
100 |
|
|
|
12 |
|
18 |
|
13 |
|
9 |
|
777 |
|
4 |
|
102 |
|
|
|
16 |
|
18 |
|
32 |
|
0 |
|
777 |
|
4 |
|
103 |
|
|
|
26 |
|
48 |
|
20 |
|
11 |
|
Totals |
|
|
|
30 |
|
|
|
601 |
|
1248 |
|
585 |
|
74 |
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Turkey Work Packages continued
Package Summary
|
|
Pkg 1 |
|
Pkg 2 |
|
Pkg 3 |
|
Pkg 4 |
|
Pkg 5 |
|
Total |
|
737 |
|
146 |
|
233 |
|
399 |
|
136 |
|
67 |
|
981 |
|
747 |
|
0 |
|
40 |
|
36 |
|
131 |
|
239 |
|
446 |
|
767 |
|
97 |
|
0 |
|
179 |
|
155 |
|
0 |
|
431 |
|
777 |
|
108 |
|
0 |
|
20 |
|
8 |
|
295 |
|
431 |
|
Total |
|
351 |
|
273 |
|
634 |
|
430 |
|
601 |
|
2289 |
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3) China737 Tailcone
· Work transfer [*****]
· This part number will transition from a Seller build to a Boeing Puget Sound Global Partners purchased item.
· Boeing Puget Sound Global Partners will have responsibility for entering into and maintaining a contract with the target supplier for this work transfer. In the event that Boeing requests that Seller travel to China for purposes of providing support in China, Boeing shall reimburse Seller for the reasonable travel costs incurred by Sellers employees. Travel costs shall include airfare between the U.S. and China, hotels, meals and car rental costs consistent with Sellers standard travel practices and shall not exceed the cost of Boeings ordinary travel practices. Seller shall promptly submit invoices to Boeing substantiating costs for which Seller seeks reimbursement. Such invoices shall be paid by Boeing in accordance with Paragraph 5.0.
This part number will be removed from Attachment 1 of this SBP and Boeing will have no further obligation to purchase part number from Seller at the conclusion of this work transfer. The schedule and hardware quantities are subject to change support program requirements. Such changes will be made in accordance with the terms of paragraph 7.5 of the Special Business Provisions.
· For each 737 airplane delivered by Boeing after the date this SBP is fully executed and through the duration of this SBP, Boeing will make a payment to Spirit AeroSystems Inc. in the amount of [*****] where: (i) Spirit AeroSystems Inc. does not produce and/or supply to Boeing a Tailcone for use on the 737 aircraft delivered and (ii) Boeing obtains and installs on the 737 aircraft delivered a Tailcone from a source other than Spirit AeroSystems Inc.
· Reference WTM item 613.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Schedule for 737 Tailcone for Wichita
Month |
|
Wichita Delivery Quantity |
Jan-05 |
|
19 |
Feb-05 |
|
20 |
Mar-05 |
|
20 |
Apr-05 |
|
19 |
May-05 |
|
21 |
Jun-05 |
|
20 |
Jul-05 |
|
23 |
Aug-05 |
|
21 |
Sep-05 |
|
21 |
Oct-05 |
|
20 |
Nov-05 |
|
19 |
Dec-05 |
|
24 |
Jan-06 |
|
24 |
Feb-06 |
|
24 |
Mar-06 |
|
24 |
Apr-06 |
|
24 |
May-06 |
|
21 |
Jun-06 |
|
21 |
Jul-06 |
|
21 |
Aug-06 |
|
21 |
Sep-06 |
|
21 |
Oct-06 |
|
21 |
Nov-06 |
|
21 |
Dec-06 |
|
21 |
Jan-07 |
|
14 |
Feb-07 |
|
14 |
Mar-07 |
|
14 |
Apr-07 |
|
14 |
May-07 |
|
14 |
Jun-07 |
|
10 |
Jul-07 |
|
10 |
Aug-07 |
|
10 |
Sep-07 |
|
10 |
Oct-07 |
|
10 |
Nov-07 |
|
10 |
Dec-07 |
|
10 |
Jan-08 |
|
0 |
Feb-08 |
|
0 |
Mar-08 |
|
0 |
Apr-08 |
|
0 |
|
|
651 |
Additionally, Boeing receives Market Access credit through the Wichita, Tulsa and McAlester sites as follows:
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Australia: Tulsa / Wichita
Canada: Tulsa / Wichita
China:
Europe/NATO
France-Wichita / Tulsa
India:
South Africa:
South Korea: Wichita / Tulsa
United Kingdom: Wichita / Tulsa
Russia
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 13 TO
SPECIAL BUSINESS PROVISIONS
RESERVED
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 14 TO
SPECIAL BUSINESS PROVISIONS
PRODUCTION ARTICLE DELIVERY SCHEDULE
(Reference SBP Section 3.3.2, 3.3.4, 3.4.1)
MASTER SCHEDULE**
737 R160R1
747 E144R2
767 T123R1
777 U50R13
To be provided by Boeing for Products Delivered via manual FOB Master
Schedule. All other products schedules via the Order.
**Each time a master schedule firing order for the model 737, 747, 767 & 777 Program is released, Boeing will furnish Seller with a copy. Seller will use that information to determine the airplane configuration for each line number .
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 15 TO
SPECIAL BUSINESS PROVIONS
MAXIMUM PRODUCTION RATE
And MODEL MIX CONSTRAINT MATRIX
(Reference SBP Section 7.5.1)
SBP Attachment 15
|
|
Monthly |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
Engines |
|
|
|
|
Protection |
|
Wichita |
|
STRUCTURES |
|
|
|
Units |
|
|
|
PSD |
|
|
MODELS |
|
Rate |
|
Capacity |
|
MIX |
|
Separation |
|
Skin Polish |
|
Protection |
|
WCH Capacity |
||
737 |
|
[*****]Units |
|
[*****] Units |
|
|
|
|
|
|
|
|
|
[*****] |
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
|
|
|
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
|
|
|
|
[*****] |
|
|
|
|
|
[*****] |
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
NOTE: The number of [*****]and [*****] model airplanes shown above reflect a total capability of [*****] and reflect the number of [*****] model airplanes which can be manufactured with a corresponding reduction in the number of [*****] model airplanes. [*****] of separation is preferred and [*****] US may be required between [*****] model units, to ensure [*****] production is achievable within a given month for [*****]. Production capacity and combinations of [*****] and [*****] models are limited to a total of [*****] with [*****] of separation as defined in the matrix above. The combinations in the matrix above reflect the number of [*****] airplanes that can be produced with a corresponding reduction in [*****] Models.
[*****] Rate Schedules above [*****].
[*****] Fin, Stabilizer and Section 48 Sub-Assembly have been removed. Spirit no longer manufactures these products.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
MODELS |
|
Monthly |
|
Wichita |
|
MIX |
|
STRUCTURES |
|
Engine - Protection Rates |
|
|
|
|
||||
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
|
|
747 |
|
[*****] Units |
|
[*****] Units |
|
[*****] |
|
Separation |
|
Skin Polish |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
|
|
767 |
|
[*****] Units |
|
[*****] Units |
|
MIX |
|
eparation |
|
Skin Polish |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
|
|
777 |
|
[*****] Units |
|
[*****] Units |
|
MIX |
|
Separation |
|
Skin Polish |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
|
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
TOTAL UNITS |
|
|
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LEGEND |
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[*****] |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
[*****] |
|
|
|
|
|
|
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|
|
|
[*****] |
|
|
|
|
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[*****] |
|
|
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|
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|
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|
|
|
|
[*****] |
|
|
|
|
|
|
|
|
|
|
BOEING - SPIRIT PROPRIETARY
Skin Fab Polish Program Matrix |
||||
|
|
|
|
|
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
|
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
[*****] |
|
[*****] |
|
[*****] |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 16 TO
SPECIAL BUSINESS PROVISIONS
BOEING PROVIDED DETAILS (BPD)
AND SUPPLIER BANKED MATERIAL (SBM)
(Reference clause 12.13.1)
A. Supplier Banked Material (SBM) :
Requirements managed per Bonded Stores Agreement (BSA) dated
February 1, 2006.
SUPPLIER BANK MATERIAL (SBM)
Product
|
|
Program |
|
Description |
|
Quantity
|
[*****] |
|
[*****] |
|
WEAPONS BAY DOOR ASSY, LEFT |
|
[*****] |
[*****] |
|
[*****] |
|
WEAPONS BAY DOOR ASSY, RIGHT |
|
[*****] |
[*****] |
|
[*****] |
|
SEAL, ACCESS PANEL |
|
[*****] |
[*****] |
|
[*****] |
|
Hydraulic Power Drive Unit (HPDU) |
|
[*****] |
[*****] |
|
[*****] |
|
Manual Drive Shaft |
|
[*****] |
[*****] |
|
[*****] |
|
Angle Gearbox, LH |
|
[*****] |
[*****] |
|
[*****] |
|
Angle Gearbox, RH |
|
[*****] |
[*****] |
|
[*****] |
|
Torque Shaft |
|
[*****] |
[*****] |
|
[*****] |
|
Link Assy |
|
[*****] |
[*****] |
|
[*****] |
|
Rotary Geared Actuator (RGA) |
|
[*****] |
[*****] |
|
[*****] |
|
Torque Shaft |
|
[*****] |
[*****] |
|
[*****] |
|
Torque Shaft |
|
[*****] |
[*****] |
|
[*****] |
|
Torque Shaft |
|
[*****] |
[*****] |
|
[*****] |
|
Torque Shaft |
|
[*****] |
[*****] |
|
[*****] |
|
Torque Coupler |
|
[*****] |
[*****] |
|
[*****] |
|
IDG TO BREAKAWAY CONNECTOR - LEFT ENGINE POWER |
|
[*****] |
[*****] |
|
[*****] |
|
IDG TO BREAKAWAY CONNECTOR - RIGHT ENGINE POWER |
|
[*****] |
[*****] |
|
[*****] |
|
Inboard Actuator Tray Assy (LHS) |
|
[*****] |
[*****] |
|
[*****] |
|
Center Actuator Tray Assy (LHS) |
|
[*****] |
[*****] |
|
[*****] |
|
Outboard Actuator Tray Assy (LHS) |
|
[*****] |
[*****] |
|
[*****] |
|
Inboard Actuator Tray Assy (RHS) |
|
[*****] |
[*****] |
|
[*****] |
|
Center Actuator Tray Assy (RHS) |
|
[*****] |
[*****] |
|
[*****] |
|
Outboard Actuator Tray Assy (RHS) |
|
[*****] |
[*****] |
|
[*****] |
|
ESB (1 per side) |
|
[*****] |
[*****] |
|
[*****] |
|
Cable Harness ESB to LEAS, H-Stab |
|
[*****] |
[*****] |
|
[*****] |
|
Cable Harness ESB to Inboard LEA, H-Stab |
|
[*****] |
[*****] |
|
[*****] |
|
RR Probe |
|
[*****] |
[*****] |
|
[*****] |
|
PW Probe |
|
[*****] |
[*****] |
|
[*****] |
|
GE 90 Sensor |
|
[*****] |
[*****] |
|
[*****] |
|
GE 90 Gasket |
|
[*****] |
[*****] |
|
[*****] |
|
GE 90 Damper |
|
[*****] |
[*****] |
|
[*****] |
|
GE 90 Harness |
|
[*****] |
[*****] |
|
[*****] |
|
GE 90 Harness |
|
[*****] |
[*****] |
|
[*****] |
|
GE 115 Sensor |
|
[*****] |
[*****] |
|
[*****] |
|
GE 115 Gasket |
|
[*****] |
[*****] |
|
[*****] |
|
GE 115 Damper |
|
[*****] |
[*****] |
|
[*****] |
|
GE 115 Harness |
|
[*****] |
[*****] |
|
[*****] |
|
GE 115 Harness |
|
[*****] |
[*****] |
|
[*****] |
|
Bracket for Prox. Sensor |
|
[*****] |
[*****] |
|
[*****] |
|
Bracket for Prox. Sensor |
|
[*****] |
[*****] |
|
[*****] |
|
Grommet |
|
[*****] |
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
[*****] |
|
[*****] |
|
Hose |
|
[*****] |
[*****] |
|
[*****] |
|
Valve |
|
[*****] |
[*****] |
|
[*****] |
|
Weapons Bay Door Set of Parts |
|
[*****] |
B. Boeing Provided Details (BPD )
This SBP Attachment 16 identifies Boeing Provided Details (parts) and their associated purchase price which are currently being provided to Seller.
Per SBP Attachment 20 the intent is for Seller to re-source all BPDs per the agreed to transfer plan.
Seller shall provide Boeing with discreet schedules (lead-time away) which depicts Sellers requirements for these parts until such time as the parts have been resourced. The identified transfer price for each BPD, excluding ATA stringers, will be adjusted periodically to reflect Boeings then current fully burdened cost.
Notwithstanding the foregoing, the prices associated with parts sourced from Boeings Winnipeg operations will be subject to any subsequent pricing agreement established directly between Seller and Boeing Winnipeg.
Attachment 16 will continue to be updated / revised to reflect any additional identified BPD or work transfer activity.
[Note: Attachment 16 BPD Parts list and Prices provided under separate file due to size.]
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 17 TO
SPECIAL BUSINESS PROVISIONS
Reserved
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 18 TO
SPECIAL BUSINESS PROVISIONS
Reserved
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 19 TO
SPECIAL BUSINESS PROVISIONS
Reserved
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 20 TO
SPECIAL BUSINESS PROVISIONS
QUANTITY BASED PRICE ADJUSTMENT FORMULA
This attachment sets forth the methodology used to calculate the annual Unit Billing Prices which shall be reflected along with the Base Prices within Attachment 1.
A) Definitions :
Airplane Program refers to Boeing aircraft designation (e.g. 737, 747, 767, and 777).
Part Number an alpha numeric designation for each unique product manufactured.
Unit Billing Price Price to be paid for each separate Part Number delivered in a specified calendar year based on the airplane quantities and price reduction tables.
Airplane Production Quantity Tables A series of tables that outline a Tier Level based on airplane production quantities.
Tier Level A designation given to represent a specific range of airplane program production quantities.
Quantity Based Price Reduction Percentage Table A table which assigns a discount percentage based on Tier Level.
Base Price Part Number pricing prior to application of quantity based discount percentage. Base Prices (by calendar year) will be included in Attachment 1 and unlike Unit Billing Prices, will not be updated annually to reflect changes in production quantities.
Firing Order Boeing published schedules which depict airplane manufacturing, shop completion and delivery dates for each unique aircraft produced.
BPD Boeing Provided Details are Detailed Part Numbers used by the supplier in the completion of its end-item Statement of Work sold to Boeing under this contract. Seller purchases BPDs from Boeing.
B) Unit Pricing Methodology
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
1) Boeing will utilize the Airplane Production Quantity Tables as contained within this Attachment 20 to determine total number of aircraft which fall within each Tier Level and the Quantity Based Price Reduction Percentage Table to determine the price reduction to the base unit prices.
2) Each year, approximately sixty days prior to the anniversary of the first day of the month in which both parties fully execute this SBP, Boeing will use the most recently published Firing Orders to determine the total forecasted airplane production quantities for all Airplane Programs for the 12 month period immediately following the anniversary of the first day of the month in which both parties fully execute this SBP. This total production quantity will include all aircraft scheduled for shop completion at Boeing during the aforementioned 12 month period as reflected in these Firing Orders.
3) Boeing will utilize the Airplane Production Quantity Tables as contained within this Attachment 20 to determine total number of aircraft which fall within each Tier Level.
4) Boeing will utilize the Quantity Based Price Reduction Percentage Table to calculate a weighted average percentage reduction for use in determining Unit Billing Prices.
5) Boeing will update Attachment 1 approximately 30 days prior to the anniversary of the first day of the month in which both parties fully execute this SBP to include new Unit Billing Prices as calculated above for use during the following 12 month period.
6) Updated Attachment 1 Unit Billing Prices will be utilized by Seller for billing throughout this 12 month period.
7) Each year, a review of the actual airplane deliveries will occur approximately 30 days after the anniversary of the first day of the month in which both parties fully execute this SBP. If there is a deviation from forecasted production quantities to actual production quantities, a reconciliation lump sum payment or credit will be processed by Buyer and Seller.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
C) Unit Pricing Calculation Tables
1) Airplane Production Quantity Tables ( Table 1 ):
737/747/767/777 Total Airplane Production Quantities
Per Year
Tier 1 |
|
Tier 2 |
|
Tier 3 |
[*****] |
|
[*****] |
|
[*****] |
2) Quantity Based Price Reduction Percentage Table ( Table 2 ):
Tier
|
|
Period
|
|
Period
|
|
Period
|
|
Period
|
|
Period
|
|
Period
|
|
Period
|
|
Period
|
Tier 1 |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
Tier 2 |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
Tier 3 |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
|
[*****] |
Each of the Periods within Table 2 will be of 12 month duration and will immediately succeed the prior period. The combined eight years for these eight periods will be equal to the period of firm fixed pricing identified in SBP 4.1.
Period 1 will begin on the first day of the month in which both parties fully execute this SBP and will end 12 months later. Period 8 will end on the day before the eighth anniversary of the first day of the month in which both parties fully execute this SBP. For example, if Period 1 begins on April 1, 2005 then Period 8 will end on March 31, 2013.
D) Unit Pricing Billing Price Formula :
The formula to be used in the calculation of the Unit Billing Price for each Part Number is:
P |
:Unit Billing Price |
A |
:Tier 1 Percent (as reflected Table 2 above) |
B |
:Tier 2 Percent (as reflected in Table 2 above) |
C |
:Tier 3 Percent (as reflected in Table 2 above) |
D |
:Target year Annual Airplane Production Total Quantity |
E |
:Tier 1 airplane quantity (Table 1) |
F |
:Tier 2 airplane quantity (Table 1) |
G |
:Tier 3 airplane quantity (Table 1) |
H |
:Base Unit Price (as reflected in Attachment 1) |
|
|
[*****] |
|
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Note: Discounted Pricing for Part Numbers whos Unit Yearly Billing Price is greater than $200 shall be rounded to the nearest dollar. Discounted Pricing for Part Numbers whos Unit Yearly Billing Price is equal to or less than $200 shall be rounded to the nearest cent.
E) Unit Pricing Example :
This example will calculate a hypothetical Unit Billing Price for a Part Number with a Base Price of [*****] for Period 3, assuming it is the 12 month period from April 1, 2007 through March 31, 2008.
1) On February 1, 2007 Boeing reviews the most recently published Firing Orders and determines that a total of [*****] aircraft are scheduled to be Boeing Shop Complete between April 1, 2007 and March 31, 2008.
2) Boeing utilizes the Attachment 20 Airplane Production Quantity Table to determine that the numbers of aircraft which fall into each Tier Level are as follows:
Tier 1 Airplanes |
|
Tier 2 Airplanes |
|
Tier 3 Airplanes |
[*****] |
|
[*****] |
|
[*****] |
3) Boeing utilizes the Quantity Based Price Reduction Percentage Table to identify the appropriate discount percentages to be used for Period 3 Unit Billing Prices for each Tier Level.
4) Boeing utilizes the Unit Billing Price Formula and the information retrieved from Attachment 1 and Tables 1 and 2 as reflected below to calculate the appropriate Unit Billing Price for this Part Number for Period 3.
[*****]
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
P :Unit Billing Price = [*****]
5) Boeing will utilize this same methodology to re-calculate Period 3 Unit Billing Prices for all Part Numbers contained within Attachment 1. Attachment 1 will be updated to reflect new Unit Billing Prices for Period 3 and provided to Seller.
6) Seller will utilize revised Attachment 1 for billing throughout Period 3.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
F) Boeing Provided Details (BPD) Cost Savings Process
Introduction:
Boeing and Seller expect that cost reductions may be accomplished by moving from Boeing facilities the BPDs related to Sellers Products and renegotiating certain outside material and parts supply contracts related to Sellers Products. The BPDs will be transitioned from Boeing to Seller based on a mutually agreed plan.
Items Included:
· All BPD parts are identified in SBP Attachment 16, only the following are required to be outsourced:
· All BPD produced in [*****] will be outsourced.
· Only parts that are direct shipped to Wichita/Tulsa are included
BPD Savings and Application:
· Boeing will receive an additional [*****] cost reduction per year starting in the year 2006 to the price reduction percentages depicted in the Quantity Based Price Reduction Percentage Table (Table 2 above) for Periods 1 through 8.
The application of the [*****] price adjustment shall be made to the Quantity Based Price Reduction Percentage Table after the calculation of the quantity based price reduction has occurred, for each of the three tiers.
Calculation Example:
· Reference above example (section E) resulted in an initial price of:
[*****]
· Additional [*****] cost reduction applied to Initial Unit Billing Price resulting in the Final Unit Billing Price. Final Unit Billing Price = [*****]
Billing for BPD Parts not yet transferred from Boeing :
· Boeing will debit monthly (against current unpaid Seller invoices) the value of all BPD parts delivered in the prior month. The total value will equal the then current Boeing Unit price as outlined in Attachment 16 multiplied by the quantity of parts delivered to Seller in that month.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Attachment 16 will be updated periodically by Boeing to reflect the most current Boeing fully burdened cost, except for ATA stringers reference SBP section 12.13.1.1.
· This process will remain in effect unless and until an alternate source has been implemented for BPD parts.
· Seller will provide Boeing with a 12 month requirements forecast for BPD parts identified for transfer except for any titanium parts which Seller will provide an 18 month forecast. Seller will also provide no less than four (4) months notification to Boeing prior to alternate source implementation for any BPD part.
· BPD Parts are FOB Boeing-dock and will be shipped at Seller cost.
Tooling associated with BPD :
Only Single use tooling will be made available for transfer to Seller as Boeing accountable tooling. Single use tooling shall mean any tooling that is used solely for the manufacturing of a single part Number and that is not being utilized by Boeing for any other purpose.
Boeing Support of BPD Transfer :
Boeing will provide typical supplier technical and outsource support.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 21 TO
SPECIAL BUSINESS PROVISIONS
COMMODITY LISTING AND TERMS OF SALE
(Reference SBP Section 12.13.2)
COMMODITY LISTING
Aluminum Flat Rolled Products Includes aluminum sheet, aluminum plate, wing plate, and body skins, excluding soft aluminum alloys.
Aluminum extrusions, all press size or circle size.
Titanium includes all wrought and un-wrought titanium mill products.
TERMS OF SALE
Parties
The Seller is The Boeing Company, acting through its agent, TMX. The Customer is a Boeing subcontractor, at any tier, who is manufacturing a product in support of a Boeing requirement.
Sales
All materials to be furnished by Seller are to be within the limits and the sizes published by Seller and subject to Sellers standard tolerances for variations. Seller will warrant that all materials to be supplied will conform to the descriptions contained herein and on the face of the purchase order and that Seller will convey good title to any such materials free from any security interest, or other lien or encumbrance held by any other party and unknown to the customer. THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS AND SELLER WILL MAKE NO OTHER EXPRESS OR IMPLIED WARRANTIES EXCEPT AS STATED HEREIN. Seller will not be liable for any incidental or consequential damages for any breach of warranty, express or implied. Sellers liability and the Customers sole and exclusive remedy will be limited at Sellers option either to (a) return of the materials and repayment of the purchase price, or (b) replacement of nonconforming materials upon return thereof to Seller. The Customer shall be required to notify Seller in writing of any claim of breach of warranty and no materials shall be returned to Seller by the Customer without Sellers consent.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
TERMS OF SALE continued
Payment Terms
The following payment processes will be followed for material sold to Customer by Seller. All payments shall be in United States Dollars.
DEBIT PROCESS
The debit process will be used in all circumstances where the Customer has an account with the Seller. The amount due is the quantity shipped multiplied by the unit price, plus the price for any value added services. The amount due will be collected by the Sellers applying a debit to the Customers account. Payment is due on the (net) fifteenth (15 th ) day from the scheduled delivery date. The debit will be applied to the Sellers account on the payment due date. If the debit amount exceeds the amount outstanding on the Customers account, the Customer will remit to The Boeing Company the amount due beyond the debit payment due date. The foregoing debit process does not apply to Sellers who are only performing under orders issued by the Tulsa Division of the Boeing Commercial Airplanes.
INVOICE PROCESS
The invoice process will be used for Customers not currently making direct sales to Boeing; foreign countries governed by MITI laws and regulations (currently Australia, Brazil, China, India, Japan, and Korea), and orders issued by the Tulsa Division of the Boeing Commercial Airplanes. The amount due is the quantity shipped multiplied by the unit price, plus the price for any value added services. Payment is due on the (net) thirtieth (30 th ) day after the date of Sellers invoice, which shall be issued on the day following the date of shipment.
DEBIT/INVOICE DISPUTE PROCEDURE
Customer may dispute payment amounts due provided that (1) Customer contacts Seller within 25 days of the date of the debit/invoice, (2) Customer provides a complete reason as to the dispute. If the action is Sellers to resolve, late payment charges will not be assessed on amounts that are under dispute. Once a dispute has been resolved, payment terms will be (net) fifteen (15) days from the date of resolution.
FAILURE TO PAY
In the event Customer fails to make payments when due, Seller reserves the right to assert whatever remedies it may have under law, including setoffs against amounts due from Seller to Customer on other contracts. In such an event, Seller may, with respect to future orders, require full payment in advance or otherwise alter the terms of payment specified earlier.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 22 TO
SPECIAL BUSINESS PROVISIONS
ABNORMAL ESCALATION
(Reference SBP 4.1)
1. Prices for Recurring Products will be adjusted for Abnormal Escalation as provided below. In the event that escalation, as forecast by a composite of the identified below indices, exceeds [*****] for any given calendar year (Abnormal Escalation), the Prices for Recurring Products for the subsequent calendar year shall be adjusted by that percentage value which exceeds [*****] . Abnormal Escalation is calculated each year against the Prices for Recurring Products effective for that year and is not cumulative. The adjusted Prices for Recurring Products will revert back to the SBP Attachment 1 Prices for Recurring Products at the beginning of the subsequent calendar year.
Any prolonged extraordinary inflation would be considered by the parties to determine any mutually agreeable proper actions to be taken.
2. Adjustments to the Prices for Recurring Products will be determined by the following economic indices:
A. Material [*****]
B. Labor [*****]
Composite - [*****]
3. Special Notes:
In the event the U.S. Bureau of Labor Statistics discontinues or alters its current method of calculating the indices specified above, Boeing and [Partner] shall agree upon an appropriate substitution for or adjustment to the indices to be employed herein.
All calculations will be held to a six (6) decimal place level of precision.
Indices shall be pulled on [November 15 th ] of each year.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
4. Abnormal Escalation Formula:
Adjustments to the Prices for Recurring Products, if any, for the period 2008 through 2021 shall be calculated as follows:
[*****]
[*****]
A = Adjusted Prices for Recurring Products (20X2 Price)
B = Base Prices for Recurring Products
IP = Percentage of composite index as compared to the previous year
MC = Current material index value (September 20X1)
MP = Previous year material index value (September 20X0)
LC = Current labor index value (3 rd quarter 20X1)
LP = Previous year labor index value (3 rd quarter 20X0)
5. Example: Abnormal Escalation Price Increase
B = $2,000,000
MC = September 2008 material index value = [*****]
MP = September 2007 material index value = [*****]
LC = 3 rd quarter 2008 labor index value = [*****]
LP = 3 rd quarter 2007 labor index value = [*****]
IP = [*****]
Since IP > [*****] , clause is triggered
2009 Unit Price = [*****]
6. Example: Abnormal Escalation Clause Not Triggered
B = $2,000,000
MC = September 2008 material index value = [*****]
MP = September 2007 material index value = [*****]
LC = 3 rd quarter 2008 labor index value = [*****]
LP = 3 rd quarter 2007 labor index value = [*****]
IP = [*****]
Clause not triggered because (IP < [*****] )
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
SBP ATTACHMENT 23 TO
SPECIAL BUSINESS PROVISIONS
767-2C SOW
MEMORANDUM OF AGREEMENT
between
THE BOEING COMPANY
and
Spirit AeroSystems Inc.
Model 767-2C
Recurring and Nonrecurring Agreement
This Memorandum of Agreement (MOA) is entered into as of February 4, 2011 by and between Spirit AeroSystems Inc., a Delaware corporation, with its principal office in Wichita, Kansas (Seller), and The Boeing Company, a Delaware Corporation with an office in Seattle, Washington (Boeing), acting by and through the Boeing Commercial Airplane business unit. Hereinafter, the Seller and Boeing may be referred to individually as a Party or jointly as Parties hereto.
RECITALS
A. Boeing is seeking award of the contract for the United States Air Force (USAF) KC-X Tanker
B. Seller currently supplies Products to Boeing which support the 767 aircraft. Boeing is offering a modified version of the 767, the 767-2C, in support of its response to USAF solicitation FA8625-10-R-6600, for the KC-X Tanker.
C. Boeing and Seller wish to establish pricing based upon the provisions of this MOA in support of Boeings 767-2C Program.
Now, therefore, in consideration of the mutual covenants set forth herein, the Parties agree as follows:
I. Entities
Any Boeing business unit may order 767-2C Products for the USAF KC-X Tanker program from Seller in accordance with the terms of this MOA.
II. Applicability
This MOA pertains only to the 767-2C Products for the USAF KC-X Tanker program and does not alter any existing agreements relating to other items in SBP MS-65530-0016.
III. Term
A. This MOA shall become effective (the Effective Date) and constitute an amendment to SBP MS-65530-0016 at the time Boeing is awarded the USAF KC-X Tanker program, and Boeing provides Seller written direction to begin performance of its obligations under this amendment. Such amendment shall be attached to SBP MS-65530-0016 within 30 days of the Effective Date.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
B. If the MOA does not become effective and constitute an amendment to SBP MS-655300016 prior to [*****] the pricing contained herein shall no longer be valid, and shall be subject to renegotiation by the Parties.
IV. Baseline Statement of Work
The Baseline Statement of Work shall be as depicted in 10-BOE-GBH-113 Rev. New, dated February 3, 2011 for fuselage (the Fuselage BOE) and 10-BOE-GBH-114 Rev. New, dated February 3, 2011 for propulsion (the Propulsion BOE).
V. [*****] Pricing
If the USAF KC-X Tanker contract is awarded to Boeing, then Seller offers to sell to Boeing the Products for the 767-2C Program identified in Exhibits A, B and, C to this MOA at the prices set forth herein, subject to the terms set forth herein. Seller intends that this [*****] price offer be, and confirms that this [*****] price offer is, except as otherwise provided herein, effective throughout the applicable period of performance as set forth herein.
VI. Nonrecurring Statement of Work Price and [*****]
A. The nonrecurring price for the Baseline Statement of Work is [*****] as depicted in Exhibit A.
B. Boeing shall make [*****] other than tooling associated with the Fuselage BOE, in accordance with the process herein. [*****] shall be as specified in Exhibit G and such [*****] shall be based on [*****] as specified therein. A schedule of such [*****] shall be agreed and attached as an amendment to the MOA in Exhibit G within [*****] days of the Effective Date.
C. Boeing shall make [*****] other than tooling associated with the Propulsion BOE, in accordance with the process herein. [*****] shall be as specified in Exhibit G and such [*****] shall be based on [*****] as specified therein. A schedule of such [*****] shall be agreed and attached as an amendment to the MOA in Exhibit G within [*****] days of the Effective Date.
D. In the event of schedule extension or delay, Seller shall be entitled to nonrecurring compensation for the percentage of nonrecurring work other than tooling released at the time of such extension or delay, not to exceed the originally agreed to [*****] due within that [*****] as set forth in Exhibit G. In the event of such schedule extension or delay, Boeing and Seller shall agree on the new [*****] for the remaining engineering release and payments.
E. Nonrecurring payments for tooling shall be paid by Boeing per the first paragraph of SBP MS-65530-0016 Section 5.2.1.
VII. Recurring Baseline Statement of Work Price
A. Recurring pricing shall be [*****] for the Baseline Statement of Work for the first [*****] shipsets at [*****] per shipset of recurring Products delivered, except as provided otherwise herein.
B. Thereafter, Baseline Statement of Work recurring prices for shipsets of Products delivered during years [*****] through [*****] shall be the [*****] prices identified in Exhibit A, except as provided otherwise herein.
C. If the [*****] or subsequent shipsets, deliver to Boeing before [*****] , then the baseline recurring shipset price for such units shall be the [*****] baseline recurring shipset price identified in Exhibit A, and such price does not include, but shall be subject to, price and schedule adjustments otherwise set forth in this MOA.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
D. Price shall be subject to renegotiation at shipset [*****] should the program exceed [*****] shipsets. [*****] , Boeing and Seller shall negotiate an equitable price adjustment.
E. The firm fixed recurring price shall be valid for any quantity up to 24 shipsets per year; however, if the [*****] , the Parties shall negotiate an equitable adjustment in price.
F. The economic price adjustment clause shall be as depicted in Exhibit E. Such economic price adjustment clause shall be applicable beginning with lot [*****] and shall remain effective thereafter.
VIII. D6-83323
For purposes of clarity, descriptions of roles and responsibilities within the Fuselage BOE and Propulsion BOE are only with respect to the original technical requirements. Revisions to the technical requirements which cause Seller to repeat engineering tasks related to Seller roles and responsibilities in the Fuselage BOE or Propulsion BOE are not part of the Baseline Statement of Work Price.
If there is a D6-83323 nonrecurring engineering task or activity that has to be performed for the 767-2C that is outside the contents of either the Fuselage or Propulsion BOE, for which Seller has responsibility per the D6-83323, Seller will perform such task or activity provided that Seller receives written direction from Boeing in accordance with SBP MS-65530-0016 and such task or activity shall be subject to an equitable price and schedule adjustment in accordance with the terms of the MOA.
The D6-83323 Document will continue to define Sellers sustaining engineering responsibility for the 767-2C Products.
For the avoidance of doubt, and despite reference to D6-83323 herein, the D6-83323 shall remain of lower precedence to the SBP, GTA, Purchase contract, and Order as specified in MS-65530-0016 Section 13.
IX. Obligation to Purchase and Sell
767-2C Products shall be subject to SBP MS-65530-0016 Section 18.0 Obligation to Purchase and Sell provided Boeing is awarded the contract for the USAF KC-X system requirements.
X. Schedule
A. A Boeing-Seller master phasing plan shall be attached as an amendment to the MOA within 30 days of the Effective Date.
B. The minimum number of months to avoid Seller schedule compression shall be [*****] months for fuselage and [*****] months for propulsion as measured from the time Boeing provides written direction to Seller to begin performance of its obligations (based upon Boeings receipt of award of the USAF tanker program) to the time of Sellers first unit delivery to Boeing. In the event that Seller provides any build-to-print work hereunder, the Parties shall agree upon the minimum number of months to avoid schedule compression to Seller as measured from the time of Boeings release of frozen detail part definition to delivery to Boeing of the associated unit. For clarification purposes, frozen part definition
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
must include all technical data such as dimensions, materials, ply lay ups if applicable, treatments and process specifications for detail part fabrication.
C. In the event that the USAF awards the USAF KC-X Tanker contract to Boeing and the subsequent Program schedule causes a compression of Sellers schedule, such Program schedule shall constitute a Change and be subject to SBP MS-65530-0016 Section 7.1 Price Adjustment for Changes. For the avoidance of doubt, any subsequent schedule change that increases or decreases the cost or time required to perform the contract, SBP MS-65530-0016 Section 7.1 shall continue to apply.
D. In addition to the foregoing, the lead times established in Attachment 6 of the SPB MS-65530-0016 shall remain in effect.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
XI. Changes
A. Initial Changes
Any Change occurring prior to FAA certification of the 767-2C, that is incorporated on any of the first four shipsets, shall constitute an Initial Change. Initial Changes shall be subject to SBP MS-65530-0016 except as otherwise identified within this MOA. Initial Changes shall not be subject to the Change thresholds described in SBP MS-65530-0016 article 7.2. For the avoidance of doubt the equitable price adjustment for an Initial Change shall include all units upon which the Change is incorporated, including any of the first four units and any subsequent units such Change is incorporated upon, and those for retrofit.
B. Nonrecurring Changes Payment
1. Payment for the Engineering portion of Boeing required Changes that result in Sellers release of Engineering Drawings prior to Sellers 100% Drawing Release, and for which a price has been agreed to between the Parties and a correct and valid invoice has been received by Boeing, shall be paid by equally distributing the agreed price for the Engineering portion of the Change to [*****] in Exhibit G. Such [*****] shall be made net [*****] calendar days after the applicable [*****] as defined in Exhibit G.
2. Payment for the Engineering portion of Boeing required Changes that result in Sellers release of Engineering Drawings after Sellers 100% Drawing Release, and for which a price has been agreed to between the Parties and a correct and valid invoice has been received by Boeing, shall be paid net [*****] calendar days following the later of fours months after the date of Sellers release of the drawings required by the Change, or the date of the agreement by the Parties on the price of the Engineering Change.
C. Change Negotiation Process
Subject to Sellers delivery of a fully supported proposal to Boeing within the timeframes described in SBP Section 7.9 Proposals for Price Adjustment; Boeing shall make an offer to Seller within 90 days of receipt of such proposal, and the Parties shall mutually agree to jointly set negotiation priorities and schedules and to engage in diligent good faith negotiations to settle the claims. If a settlement is not subsequently reached within [*****] , the negotiations shall be elevated to Senior Contracts Management for resolution.
D. Rates and Factors
The Parties shall continue to negotiate rates and factors for pricing Initial Changes to reach agreement within [*****] of execution of the MOA. Such agreement shall be documented as an amendment to the MOA. Boeing and Seller Senior Contracts Management shall have meetings twice monthly with each other to ensure adequate progress in negotiations. If the teams designated by each Party do not reach agreement on such rates and factors within [*****] of the execution of the MOA, such negotiations shall be elevated to Senior Contracts Management.
E. Common Changes
For nonrecurring Changes that are common to sustaining program(s) and 767-2C, the aggregate price of the Change for all affected programs shall be used to assess clearance of the applicable threshold. Only a single threshold shall apply for nonrecurring Changes that are common to sustaining program(s) and the 767-2C in order to assess whether the aggregate price of the common Change exceeded such threshold. The applicable threshold shall be derived from the program on which the Change is first
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
incorporated. The nonrecurring price of the portion of a Change that is common shall be charged to the program on which the Change is first incorporated.
XII. Post Delivery Modifications
If the Government pursues any future modifications to the USAF KC-X Tanker weapon system or equipment after delivery of the USAF KC-X Tanker from The Boeing Company to the Government, regardless of whether the Government procures the modification from the Original Equipment Manufacturer or from a third party manufacturer, Seller agrees to provide to Boeing, as reasonably necessary, the same support consisting of engineering consultation, analyses, and access to technical data and licenses which are required by MS-65530-0016; and Seller shall authorize Boeing to release the results of such engineering consultation, analyses, and access to technical data and licenses to the Government and or Government selected third party. The Sellers support will be provided at commercially reasonable terms at the time of the effort. The price for any support provided by the Seller in accordance with this special contract provision shall be negotiated by the Parties after the Government identifies the nature and scope of the support effort required.
XIII. SBP MS-65530-0016, Attachment 4
PRR engineering thresholds described in SBP MS-65530-0016 Attachment 4 shall not be applicable for calculation of equitable adjustment for Initial Changes.
XIV. Weight
Seller shall participate in any weight reduction studies as authorized by Boeing and agreed to with Seller per the engineering service agreement SBP-6-5118-AEC-016 to support assessment of airplane weight reduction initiatives. Seller shall ensure controls are in place to prevent weight growth in the manufacturing process. Periodic reporting of component weights shall be required to validate such controls are effective and to initially establish actual airplane component weight targets. Seller shall utilize traditional weight efficient design practices. Seller does not agree to a guaranteed weight as part of this agreement. Any guaranteed weight shall be subject to mutual agreement of the Parties.
XV. Obsolescence
Seller shall work to minimize the impact of obsolescence of Products and components throughout the term of the Contract.
XVI. [*****]
[*****] shall not apply to 767-2C end item pricing, and 767-2C end item deliveries shall not be counted toward commercial [*****] .
XVII. Spares and Warranty
Spares shall be subject to, and Spares pricing shall be calculated in accordance with, SBP SPARES-65132-0270. However, the warranty period shall be limited to [*****] from delivery to USAF.
XVIII. Federal Acquisition Regulation Commercial Item Procurement
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
A. Exhibit F to this MOA lists those clauses from FAR, DFARS, Air Force Federal Acquisition Regulation Supplement (AFFARS), and/or Air Force Materiel Command Federal Acquisition Regulation Supplement (AFMCFARS) required by law, regulation, or the prime contract to be included in the subcontract (Subcontract) between Boeing and Seller under the 767-2C Program. So long as Seller is delivering commercial items as defined in FAR Clause 52.244-6 and FAR 2.101 (with the terms General public and nongovernmental entities as used in the definition of commercial item at FAR 2.101 being defined in DFARS 202.101) (Commercial Item), the only FAR, DFAR, AFFARS, or AFMCFARS flow down clauses that shall be included in the Subcontract are those specified in Exhibit F.
B. Seller is the worlds largest supplier of commercial airplane assemblies and components supporting Boeings 737, 747, 767, 777, and 787 commercial aircraft with most of its sales to the commercial aircraft market.
C. The Parties agree that this MOA shall be for Commercial Items.
D. To the extent that Seller has design-build responsibility, or discretion regarding parts selection, Seller will promptly provide information as to its proposed design and/or parts selection to Boeing if such design and/or parts selection has aspects that reasonably would affect the qualification of a Deliverable as a Commercial Item. If either Party believes that such proposed design and/or parts selection would adversely impact the qualification of the Deliverable as a Commercial Item, the Parties shall cooperate in promptly reaching a resolution, acknowledging that maintaining any production schedule is paramount. Boeing shall not issue Seller any modifications or change orders under this MOA, which can only be satisfied by the delivery of products or services that do not meet the definition of Commercial Item. To the extent that either the US Government or Boeing requires Changes which Seller reasonably believes do not qualify as a Commercial Item, the parties shall promptly develop change incorporation plans to mitigate the risk and the need for Spirit to perform non-commercial effort. Should the U.S. Government determine that the statement of work (SOW), or any portion thereof, does not qualify as a Commercial Item, the Parties shall cooperate and work together to obtain a contracting officer determination under FAR 15.403-1(c)(3) that the item(s) are commercial item(s). If (i) the contracting officer finally determines that the item(s) are not commercial item(s), or (ii) Seller reasonably believes a Change does not qualify as a Commercial Item, the Parties shall use their commercially reasonable best efforts to transition, with minimal disruption, that portion of the SOW which represents the noncommercial item to another supplier and shall amend this MOA to reflect such transition and the contracting officers determination. The Parties acknowledge and agree that the alternative of compelling Seller to accept and/or perform work on the USAF KC-X Tanker program which does not qualify as work for a Commercial Item is the least desired alternative, and Boeing will exert every reasonable effort to avoid that alternative subject to good faith cooperation by Seller. In the event that such transition is not achievable with commercially reasonable best efforts, or in the event that such transition occurs, the MOA shall be amended by the Parties to reflect the modification of the MOA terms. If amendment of the MOA causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under this MOA, Boeing shall make an equitable adjustment to the price, the delivery schedule, or both, provided that Seller reasonably satisfies its obligations in (1)(7) of this provision. Such cost adjustment shall include, but is not limited to, [*****] . Boeing shall make such equitable adjustment so long as Seller:
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
1. exercised reasonable due diligence in developing a design and selecting parts that would reasonably ensure its Deliverables would satisfy the FAR Commercial Item definition in advance of performance of its Baseline SOW, and of any subsequent changes to its Baseline SOW;
2. provided Boeing prompt information as to its proposed design and/or parts selection if such design or parts selection has aspects that would reasonably affect the qualification of a Deliverable as Commercial Item;
3. provided Boeing, in response to a contracting officer determination that the SOW or any portion thereof did not qualify as a Commercial Item, data reasonably available to Seller that reasonably supported a determination that Sellers Deliverables were Commercial Items;
4. provides Boeing Sellers other than cost or pricing data as described in FAR 15.403-3 relating to any Deliverables if requested by the U.S. Government contracting officer;
5. provides Boeing or the U.S. Government contracting officer Sellers cost and pricing data relating to any Deliverables that the U.S. Government determines do not qualify as Commercial Items following a final determination by the U.S. Government that the SOW or any portion thereof did not qualify as a Commercial Item;
6. provides Boeing the necessary technical data and tooling to enable another source of supply to perform that portion of the SOW which represents the noncommercial item in the event that Boeing transfers that portion of the SOW to another supplier, provided that the transfer of such tooling does not interfere with Sellers performance of the remaining portions of the SOW; and
7. continues to perform its entire SOW unless and until the Parties can transition that portion of the SOW which represents the noncommercial item to another supplier.
E. The prices in this MOA for the Baseline Statements of Work are based upon, and take into account, the terms and conditions in the FAR and DFARS clauses identified in GTA BCA-65530-0016 Section 21.2 and Exhibit F. Otherwise, the prices contained in this MOA for the respective Baseline Statements of Work do not include the [*****] .
XIX. Export Compliance
A. In performing the obligations of this Agreement, both Parties will comply with United States export control and sanctions laws, regulations, and orders, as they may be amended from time to time, applicable to the export and re-export of goods, software, technology, or technical data (Items) or services, including without limitation the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), and regulations and orders administered by the Treasury Departments Office of Foreign Assets Control (collectively, Export Control Laws).
B. The Party conducting the export shall be responsible for obtaining the required authorizations. The Party conducting the re-export shall be responsible for obtaining the required authorizations. Each Party shall reasonably cooperate and exercise reasonable efforts to support the other Party in obtaining any necessary licenses or authorizations required to perform its obligations under this Agreement.
C. The Party providing Items or services under this contract shall, upon request, notify the other Party of the Items or services export classification (e.g., the Export Control Classification Numbers or United States Munitions List [USML] category and subcategory).
XX. Order of Precedence
Except as specified herein, all other terms and conditions of SBP MS-65530-0016 shall apply. In the event of a conflict between the terms of this MOA and the SBP MS-65530-0016, the terms of this MOA shall have precedence. The Exhibits to this MOA are incorporated as part
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
of this MOA.
XXI. Termination
In the event of termination of an Order, in whole or in part, for any reason other than Seller default, or in the event of termination of the 767-2C Program for any reason other than Seller default, Seller shall have the right to submit a written termination claim under Section 12.0 of the GTA BCA-65530-0016 for nonrecurring work and materials. The reference in Section 12.3 to FAR 52-249-2 is changed to the May 2004 version of the clause without alternates, paragraphs (e) (h) of which are incorporated herein by reference except Government and Contracting Officer shall mean Boeing, Contractor shall mean Seller and Contract shall mean Order, Contract, or Program as applicable. Notwithstanding the foregoing, Seller shall not be subject to cost principles and shall use commercially allowable records as it relates to paragraphs (e) (h) above. Boeing shall be obligated to pay for Seller nonrecurring expenses in accordance with FAR reference specified herein. However, in the event that such termination of Seller is as a result of USAF termination of Boeing under its prime contract with the government, [*****] . The foregoing is limited to nonrecurring payment in termination for any reason other than Seller default, and is not intended to augment or supersede terms of BCA-65530-0016 or SBP MS-65530-0016 related to payment of recurring costs in termination.
XXII. Choice of Law
This MOA shall be governed by the internal laws of the State of Washington without reference to any rules governing conflict of laws.
EXECUTED in duplicate as of the date and year first set forth above by the duly authorized representatives of the Parties.
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit A
Work Statement and Pricing
Baseline Statement of Work Nonrecurring:
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Structures |
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Propulsion |
Nonrecurring other than tooling |
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[*****] |
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[*****] |
Tooling |
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[*****] |
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[*****] |
Baseline Statement of Work Recurring:
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Total S/S |
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Fuselage* |
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Strut* |
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Nacelle* |
Recurring Price Units [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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Price Calendar [*****] |
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[*****] |
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*Boeing and Seller shall agree on the further allocation of the Fuselage, Strut, and Nacelle shipset pricing as set forth above into end-item prices within 30 days of execution of the MOA. The sum of the end-item prices for each of the Fuselage, Strut, and Nacelle shall equal the total shipset prices as set forth above.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit B
10-BOE-GBH-113 Rev. New, Dated February 3, 2011
Spirit AeroSystems, Inc. Proprietary, Business Confidential, Boeing Proprietary,
The information herein may contain Technical Controlled data under Category VIII (i) of the International Traffic in Arms Regulations (ITAR). The control of this data is set forth by the Department of State, Directorate of Defense Trade Controls: 22 CFR§ 120-130. Export of this data by any means to unauthorized persons, as defined by these laws, whether in the United States or abroad, without an export license or other approval from the U.S. Department of State is expressly prohibited.
FUSELAGE BASELINE STATEMENT OF WORK
FUSELAGE BASELINE STATEMENT OF WORK AND GENERAL QUALIFICATIONS
The following constitutes the basis for Sellers Baseline Statement of Work price, and modification from 10-BOE-GBH-113 Rev. New, Dated February 3, 2011 constitutes a Change.
A. FUSELAGE BASELINE STATEMENT OF WORK:
1. Except as otherwise stated herein the Baseline Statement of Work price is based on Spirit redlines (10-BOE-110-GBH, Exhibit B, Fuselage Baseline Statement of Work Technical Configuration Memo, Rev. New, June 7, 2010) to paragraphs 1.4.1 through 1.4.1.9 (less 1.4.1.6) of the Statement of Work (SOW) as described in CONFIG-BKQ15-C09-018 Rev. A (Configuration Description, Model 767-PD-2127 Rev I, Tanker Provisioned 767- 2CX Derivative, Section 41 and Related Systems Extract for Spirit AeroSystems), dated March 17, 2010, prepared by Lennard Baron. Paragraphs 0 through 1.4.0, and 1.6 through the remainder of CONFIG-BKQ15-C09-018 Rev. A is reference information only for Seller.
2. The Baseline Statement of Work price includes all approved PDDMs identified in the configuration memo (CONFIG-BKQ15-C09-018 Rev. A, Table 0.1-3), but does not include work or material for any Tanker associated follow on trade studies or PDDMs for section 41.
3. Seller is not responsible for design or installation of any ballistic panels for military applications. Seller shall design floor panels in areas not requiring ballistic protection. Seller is not responsible to design and install floor panels requiring ballistic protection. Seller shall design and install structural provisions for the refueling receptacle. Seller shall design the mini crown panel assembly to include the skin, doubler, slipway, frames and intercostals. Seller is responsible to build the mini crown panel assembly or have it built by a Seller designated vendor. The baseline SOW does not include Seller effort related to boom strike protection. Refueling doors, actuators and associated mechanisms shall be installed pre-rigged by Seller, or by Seller designated vendor, but such items shall be designed by Boeing and provided to Seller or the Seller designated vendor. Seller shall design and install water system provisions to include a water service pan and door. Seller shall provide provisions for structural hard points (mounting locations) for AROS operator deck that are similar to commercial 767 aircraft structure responsibility of Seller prior to execution of the MOA. Seller is not responsible to install AROS system.
4. The bill of material for the Baseline Statement of Work is documented in file 10-BOE-110-GBH, Exhibit C, Fuselage Baseline Statement of Work Bill of Material, Rev. New, June 7, 2010.xls. This document assumes 767 line unit [*****] as a baseline and contains only the
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
delta work statement to design build and install new details/assemblies and installations for 767-2CX section 41 end items 141T0100-xxx (receptacle panel), 141T0200-xxx (lower Lobe), 141T0300-XXX (LH side panel), 141T0400-XXX (RH Side Panel, 141T0800-XXX (Cab Assy). The work statement also contains the design effort for Boeing build/installation responsibility parts (ex. floor panel details/installs and section 41 join details/ installs). Item A parts are parts for which engineering responsibility for non-structural details, assemblies and modules resides with Boeing and build responsibility resides with Spirit. Item A parts are not included in Exhibit C. (Reference paragraph 40)
5. In addition to the section 41 end items, Sellers Baseline Statement of Work price includes loose parts for section 41 and seat tracks for other sections of the airplane as set forth in 10-BOE-110-GBH, Exhibit D, Fuselage Baseline Statement of Work Loose Parts List, Rev. New, June 7, 2010. This list also includes a shear pin for the Nacelles, a bracket assembly for the forward spar and a bracket assembly for the aft spar. A quantity of one was assumed for each of the parts on this list. All items on the list with yellow highlighting were identified by Boeing as similar-to parts which will be changing for the 767-2CX. New plans and NC tapes were assumed for only the highlighted parts. Seller does not have design responsibility for the loose ship parts.
6. The Baseline Statement of Work for new and revised Tooling is set forth in 10-BOE-110-GBH, Exhibit F, Fuselage New and Revised Tooling List, Rev. New, June 7, 2010. The 767 manufacturing line utilized prior to execution of this MOA will be used for production of 7672C.
B. FUSELAGE GENERAL QUALIFICATIONS:
1. As of the date of signature of this MOA Seller has not received the Design Criteria, Design Requirements and Objectives (DR&O) or the Customer Specific Option Selection (CSOS) documents for the 767-2C. Any additional requirements in these documents that exceed or change those in the Baseline Statement of Work are not included in Sellers Baseline Statement of Work price.
2. Except as otherwise set forth herein, the Seller 767 manufacturing line existing prior to execution of this MOA shall be utilized for manufacture of the 767-2C.
3. Seller shall only be responsible to remove unnecessary structural and systems provisions within the Baseline Statement of Work if Seller design is modifying the module, assembly, or affected detail pursuant to some other design requirement.
4. Seller shall not be responsible for the design or build integration of section 41 to section 43. Boeing bears the responsibility of body integration for the section 41/43 join. The K-hole indexing plan and location/attachment of lift fittings existing prior to execution of this MOA shall be maintained.
5. Any skin gauge increase from that utilized in a particular part prior to the execution of this MOA shall not exceed the capabilities of the current stretch form blocks utilized by Seller. This Baseline Statement of Work price is based upon [*****] prior to execution of this MOA.
6. Any [*****] from that existing in sustaining production prior to execution of this MOA [*****] is not included in the Baseline Statement of Work price.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
7. Any [*****] from that existing in sustaining production prior to execution of this MOA for all skins in the statement of work having impact on [*****] to Seller is not included in the Baseline Statement of Work price.
8. Conversion of Mylar/V4 models to CATIA V5/Enovia/PDM with 2D drawings shall only be performed for new parts released within the Baseline Statement of Work as set forth in 10-BOE-110-GBH, Exhibit C, Fuselage Baseline Statement of Work Bill of Material Rev. New, June 7, 2010. For purposes of clarity, re-tabbed parts will not be converted to V5 and new parts released refers to parts that were released as a result of modification from or addition to sustaining production existing prior to execution of this MOA. Any impact to Seller [*****] are not included in the Baseline Statement of Work price.
9. For Catia V4 to V5 conversion referenced herein, Boeing shall provide software and/or thick/thin client access to Spirit for use as set forth in the Long-Term Access (LTA) matrix for sustaining 767 programs.
Boeing agrees that Supplier may utilize a third-party engineering contractor for purposes of converting, to the extent contemplated under this MOA, Boeing sustaining program drawings from Catia V4 to Catia V5 as needed, either in advance of design for 767-2C program unique characteristics, or otherwise in compliance with ITAR requirements. Utilization of third-party engineering contractor shall comply with proprietary information requirements of BCA-65530-0016 Article 20.
10. Seller shall not be responsible for any interiors design to account for height mismatch between Seller designed traditional floor panels (non-ballistic protection) and Boeing design floor panels for ballistic protection (trip hazard).
11. The Baseline Statement of Work price contained herein is based on [*****] prior to the execution of this MOA.
12. The Baseline Statement of Work price is based upon [*****] existing prior to the execution of this MOA except to the extent otherwise specified in the [*****] set forth as part of the Baseline Statement of Work clarification.
13. Boeing shall provide an appropriate number of Riverbed Technology and licenses to Seller if Enovia is used.
14. The Baseline Statement of Work price does not include any modifications after initial basic release, with exception of [*****] .
15. Finite element modeling shall be MSC-Nastran-Patran.
16. Boeing shall provide Seller with a coarse grid FEM of section 41 representing the Baseline Statement of Work configuration, including a super element representing the stiffness of the remaining airplane with external applied loads or the equivalent stiffness of section 43. The super element shall be validated, by Boeing, against displacements from the master model. Seller shall update FEM model of Section 41 to include refueling receptacle and preliminary sizing.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
17. Boeing shall be responsible for providing preliminary and final structures/systems interfaces that affect Seller design SOW by the negotiated Preliminary Interface Design Definition (PIDD) and Final Interface Design Definition (FIDD) dates. Any delay or revision of such interface data after negotiated dates shall be subject to remuneration to the extent it drives additional Seller effort or expense. Seller shall not be obligated (design or build) to incorporate late interface definition during initial basic release if incorporation of late or revised interface information does not support Seller engineering and build schedule.
18. For purposes of clarity, a single issuance of the following loads from Boeing to Seller shall constitute a complete Single Certification Loads Data Set (SCLDS) for Seller fuselage work: 1. Static ultimate, 2. Decompression, 3. Fatigue, 4. ITDAS templates, 5. Interface, and 6. Floor frame / decompression. Sellers Baseline Statement of Work price is limited to engineering effort and other expenses related to a single loads cycle as defined above as SCLDS.
19. Sellers Baseline Statement of Work price is based upon Boeing providing [*****] , by dates to be agreed upon as relates to support nonrecurring product definition for the associated structure.
20. Boeing shall be responsible for providing payloads certification interface loads for interior items attaching to section 41 structure including but not limited to lavatory, galley, closet, AROs, seats, and crew rest. For concentrated interior loads greater than 300 lbs (waste water tank, water tank, instrument closets, etc), discrete loads shall be included in the floor/frame internal loads analysis. Boeing shall provide interface loads by dates to be agreed upon as relates to support nonrecurring product definition for the associated structure. Any delay or revision of such loads data shall be subject to remuneration to the extent it drives additional Seller effort or expense.
21. The Baseline Statement of Work price is based on informal One-Page loads Estimate Comparison received as part of Boeing letter 6-5255-CH-10-133 on September 15, 2010. Such load comparison shows [*****] . Any exceedance [*****] that impacts Seller Design, Build or Analysis effort will be subject to remuneration.
22. The Baseline Statement of Work price is based on utilization of 767-400 Structural Criteria document requirements existing prior to the execution of this MOA (D6T11108-2, Rev. A, dated May 27, 1998 and D141T-001, Rev B, dated August 24, 1998).
23. The Baseline Statement of Work price is based on the multi-element design/construction approach and the failsafe analysis approach used on current 767 Passenger airplanes in existence prior to the execution of this MOA.
24. Boeing Structures Work Station (SWS) and Common Structural Work Station (CSW) analysis tools (IAS, SA, SA+, SAPB, MATDB, FASTDB, IDTAS, FEADMS, Moss-Duberg, FAMOSS, APARD, DTNAL and other programs for Damage Tolerance) shall be made available to and utilized by Seller, and are the basis for the Baseline Statement of Work price.
25. Boeing shall provide access to Boeings internal loads (Python) codes to Manipulate Bulk Data File (BDF) for model updates. Specific Python codes Include split.py, split_grid.py, and apard_properties.py.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
26. The Baseline Statement of Work price does not include Seller support to Boeing for the Aircraft Recovery Documents or Flight Testing.
27. Strength Check Notes (SCN) shall be archived electronically in the ANI/Castle database by Boeing. Seller shall create cover sheets and provide files to Boeing for submittal in the database by the Boeing librarian. Filing of SCNs in Enovia is not in Sellers Baseline Statement of Work.
28. SCNs are considered informal analysis notes.
29. Quality requirements shall be D6-36592-1, Rev. A.
30. The Baseline Statement of Work price is based on certification analysis deliverables from Seller section 41 to Boeing limited to inputs for the following documents:
a. Static/Ultimate
b. Damage Tolerance
c. Sudden Pressure Loss
d. Detailed Level Report
e. Maintenance Planning Document.
31. Seller Baseline Statement of Work price includes section 41 inputs for the formal certification documents listed above and respective OBAR 8100-3 form approvals as of the date of execution of this MOA. Compilation and formatting of the certification documents shall be Boeings responsibility. For purposes of clarity, Sellers Baseline Statement of Work price does not include any certification or analysis for testing or any test hardware/units. Seller shall review all SCNs for approval for certification in accordance with D6-36592-1, Rev A July 14, 2009. Spirit will support Boeing review of SCNs. If Boeing requests revisions that are not directly due to technical findings caused by Seller, such impact will be subject to remuneration to Seller.
32. Boeing shall provide Seller access to GTTA drawings, CATIA, models and stress analysis for 767-2C structure that is the same or similar to GTTA structure.
33. Boeing shall be responsible for making all entries into the WDEX system for 767-2C. Seller shall provide weight information to Boeing if and as required per an agreed to weight process to be determined.
34. Standard Boeing Commercial Damage Tolerance Methods (D6-24958, Book 3, Oct 2009 Revision) shall be utilized for damage tolerance analysis of modified details.
35. Any Item B parts are parts for which engineering responsibility for the non-structural details and assemblies resides with Boeing, but the engineering responsibility for the next higher structural assembly and module resides with Spirit. Build responsibility also resides with Spirit for such parts. Any Item B parts to be installed by a Seller engineering module shall be released by Boeing by the engineering release date to be negotiated between the parties. Any Boeing engineering parts that are not released by their negotiated date will not be included on Seller module release if late release does not support Seller engineering and build schedule.
36. Based on the One-Page loads Comparison received as part of Boeing letter 6-5255-CH-10133 on September 15, 2010, Boeing and Seller will agree to document areas of minimal
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
loads and requirements changes, and agree on analysis and documentation required for such areas by Firm Structures Loads Configuration (FSLC), Dec 17, 2010.
[*****] (scheduled for release in the fall of 2011) or other Boeing requirements changes that drive additional analyses effort for Spirit above the documented agreement shall be subject to remuneration.
37. The Baseline Statement of Work price is based on the -400 FAA amendment level and certification requirements applicable prior to execution of this MOA; and therefore assumes that any required increase or change in certification level that impacts new or existing part cards, including analysis, design or build activity, shall be subject to remuneration. No test hardware or modification of certification requirements from the 767 baseline passenger configurations in sustaining production prior to the execution of this MOA produced are included in the Baseline Statement of Work price. As such, the 767-200C is planned to be certified to 14 CFR Amendment 25-159 with the following exceptions as per G-1 paper draft:
a. 25.677(b) at 25-23
b. 25.1435 (a)(b) at 25-41
c. 25.1329(h) at 25-46
d. 25.783(e)(f) at 25-23
e. 25.365(e), e(2) at 25-54 (same as original certification basis for 767)
f. 25.571 at 25-86
g. 25.1301 at 25-0
h. 25.1309 at 25-41
38. The Baseline Statement of Work price does not include any modifications in bird strike protection requirements from the 767 baseline passenger configurations in sustaining production prior to the execution of this MOA, nor does it include any modifications in the location of critical flight control systems/components requiring such protection.
39. The Baseline Statement of Work price is based upon material usage consistent with Sellers 767 commercial usages prior to the execution of this MOA. For any new material requirements, Boeing shall be responsible for providing allowables data for analysis and certification activities.
40. The Baseline Statement of Work is based on a maximum of 43 Item A part cards. Effort required for additional part cards beyond the 43 shall be subject to remuneration. Seller shall have the opportunity to conduct manufacturing producibility review of new Boeing engineering planned for installation by Seller. New engineering for which Boeing is responsible shall include determinant assembly features as required by Seller manufacturing to support Seller build plan.
41. Except as otherwise set forth herein, the Baseline Statement of Work price is based upon use of the same software applications utilized for the 767 Program prior to the execution of this MOA.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit C
10-BOE-GBH-114 Rev. New, dated February 3, 2011
Spirit AeroSystems, Inc. Proprietary, Business Confidential, Boeing Proprietary,
The information herein may contain Technical Controlled data under Category VIII (i) of the International Traffic in Arms Regulations (ITAR). The control of this data is set forth by the Department of State, Directorate of Defense Trade Controls: 22 CFR§ 120-130. Export of this data by any means to unauthorized persons, as defined by these laws, whether in the United States or abroad, without an export license or other approval from the U.S. Department of State is expressly prohibited.
STRUT BASELINE STATEMENT OF WORK
STRUT BASELINE STATEMENT OF WORK AND GENERAL QUALIFICATIONS
The following constitutes the basis for Sellers Baseline Statement of Work price, and modification from 10-BOE-GBH-114 Rev. New dated February 3, 2011 constitutes a Change.
A. STRUT BASELINE STATEMENT OF WORK
Sellers Baseline Statement of Work is based upon the 767-200ER 311T4290-61 and -62 strut assemblies, with a change from the PW4060 engine to the PW4062 engine, and with installation of a larger Integrated Drive Generators (IDG) to support electronic loading. In addition, the Seller Baseline Statement of Work includes provisions for a larger power feeder cable and grounding and wire bundle enhancements as set forth herein.
Excluded from this statement of work are Coordination Sheet P-YP70-ERA 10-08 dated 4/26/10 regarding provisions for Electromagnetic Effects Requirements for the Engine and Cowl of the 767-2CX (including, but not limited to, HIRF and lightning strike protection), and Coordination Sheet P-YP70-ERA 10-03 dated 2/25/10.
B. STRUT GENERAL QUALIFICATIONS
1. Test Instrumentation hardware is not defined and is not included in the Baseline Statement of Work price.
2. Tooling and NC tapes impacts associated with engineering changes are not included in the Baseline Statement of Work price.
3. Sellers administration responsibilities shall be: 1. program planning and scheduling, 2. coordination meetings with Boeing program office, and 3. records management.
4. Sellers certification responsibilities shall be: 1. management of Sellers portion of strut structures certification effort, 2. Coordinate with Boeing in Boeings certification effort as needed, 3. Preparation of data for inclusion in certification document deliverables as part of Boeings certification plan, and 4. Signature of 8100 forms as appropriate. Certification document deliverables are static analysis (ultimate, limit), damage tolerance analysis, fan blade out and windmilling, and rotor burst.
5. Sellers design support responsibilities shall be: 1. Supervision of structural analysis effort, 2. Review and incorporation of new, single set of certification loads, pressures, and temperatures, 3. Complete loads assessment of strut structure for new loads against -300ER certification loads, 4. Development of strength check notes for all strut structure with higher loads than -300ER 5. Review and approve 120KVA power feeder provisions, 6. Assist Boeing in minor updates to the Structural Repair Manual (SRM) revisions/documents to the extent specified herein, 7. Provide data and forms for the Maintenance Planning Document and Structural Inspection Planning Data (SIPD), and 8. Execution of Seller Material Review Board (MRB) effort required prior to certification for rejection tags.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
6. Seller shall be responsible for work statement in support of the strut box structure as follows: 1. Structural analysis including ultimate, limit, fatigue, damage tolerance, Fan Blade Off (FBO)/windmilling, rotor burst and wheels-up landing, 2. Revise finite element modeling for inclusion in integrated finite element model, 3. Validate Integrated Finite Element Model (IFEM), 4. Determine fatigue life, 5. Determine margins of safety, 6. Determine damage tolerance capability to include residual strength, crack growth, and Damage Tolerance Rating (DTR) analysis, 7. Prepare analysis documentation to include strength check notes and formal analysis inputs, and 8. Transmit analysis to Boeing. For transmission of analysis to Boeing, electronic PDFs are acceptable, and original paper copies shall be provided by Seller upon request.
7. Seller shall be responsible for the design and substantiation of strut box structure, including R1 first fastener row and on, and R2 first fastener row and on. Seller responsibility for design and substantiation of strut box structure excludes: 1. All strut-to-wing attachment links and pins, 2. Strut mounted R3/R4 (duckbill) fitting, 3. Strut mounted R1 lug and effects of link misalignment, and 4. Strut mounted R2 lug and effects of link misalignment. 5. Strut mounted R7/R8 lug and effects of link misalignment.
8. Seller shall not be responsible for design and substantiation of strut-to-wing attachment, including strut fittings, and shall not be responsible for engine mount structure. In addition the Baseline Statement of Work price does not include combustor burn through analysis, damage locations modifications, or modifications to sonic environment.
9. Boeing shall provide loads, pressures, temperatures and sonic environment data to Seller. Sellers Baseline Statement of Work price is based upon a single set of loads, pressures, temperatures and sonic environment data.
10. Sellers Baseline Statement of Work price is based on use of existing strut hardware as defined by Section A above with no alteration except for upper spar web cut out enlargements (reference DWG 311T3110-60).
11. Sellers price for the Baseline Statement of Work does not include: 1. Test support, 2. Test hardware, 3. Writing of test plans or test reports 4. Support for Preliminary Design Review (PDR) or Critical Design Review (CDR), 5. Travel, 6. Safety assessment of existing fleet hardware to current certification basis or analysis methods, nor 7. Air Force specific requirements beyond those required by the FAA.
12. Sellers price for the Baseline Statement of Work price does not include [*****] except for any new or revised detail as required by this Baseline Strut SOW.
13. Seller shall provide stress AR support as needed.
14. A fitting factor shall be used with current understanding of FAA requirements for a new design, not as a derivative.
15. Sellers Baseline Statement of Work price includes the strut mounted fan cowl support beam and strut fairings.
16. Boeing shall provide strains and STW reactions from previous static 767-200 tests or from 767-2C static tests for model validation purposes.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
17. Sellers Baseline Statement of Work price includes Seller engineering effort associated with a single set of load cycle data provided by Boeing to Seller. Loads for all documents including formal documents shall come from this single set of load cycle data provided by Boeing to Seller. For purposes of clarity, a set of load cycle data for strut shall constitute a complete set of certification loads, including, but not limited to, dynamic gust, static maneuver, IFEM, FBO, windmilling, sonic, and fatigue.
18. For purposes of clarity, a single issuance of the following loads from Boeing to Seller shall constitute a complete Single Certification Loads Data Set (SCLDS) for strut: 1. Dynamic gust, 2. Static maneuver, 3. IFEM, 4. FBO, 5. Windmilling, 6. Sonic, and 7. Fatigue. Sellers Baseline Statement of Work price is limited to engineering effort and other expenses related to a single loads cycle as defined above as SCLDS.
19. Sellers Baseline Statement of Work price is limited to a maximum of [*****] hours of SRM support, including AD and repairs efforts. If any additional effort is required to complete SRM support, this would require a Statement of Work update.
20. Sellers Baseline Statement of Work price includes [*****] damage tolerance details in total.
21. Structural modifications with respect to 120kVA power feeder shall be limited to upper spar web penetration and lower disconnect panel.
22. Sellers Baseline Statement of Work price is based on use of the same Boeing analysis tools utilized by the Parties prior to execution of this MOA. Sellers Baseline Statement of Work price is based upon FAA level existing prior to the execution of this MOA.
23. Except as otherwise set forth herein, the Baseline Statement of Work price is based upon use of the same software applications utilized for the 767 Program prior to the execution of this MOA.
NACELLE BASELINE STATEMENT OF WORK AND GENERAL QUALIFICATIONS
The following constitutes the basis for Sellers Baseline Statement of Work price, and modification from 10-BOE-GBH-114 Rev. New dated February 3, 2011 constitutes a Change.
A. NACELLE BASELINE STATEMENT OF WORK
1. Sellers Baseline Statement of Work is based upon the [*****] . In addition, the Seller Baseline Statement of Work includes provisions for grounding and wire bundle enhancements as set forth herein, enhancements or modifications to composite panels within Propulsion are excluded.
2. Excluded from this statement of work are Coordination Sheet P-YP70-ERA 10-08 dated 4/26/10 regarding provisions for Electromagnetic Effects Requirements for the Engine and Cowl of the 767-2CX (including, but not limited to, HIRF and lightning strike protection), and Coordination Sheet P-YP70-ERA 10-03 dated 2/25/10.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3. The Nacelle NRE Baseline Statement of Work price is based upon Statement of Work Attachment A (2010-01-12_767_SOW_Update) from Boeing 7A7 Propulsion RFP letter No. 6-5-255-CH-10-091 dated January 21, 2010 except as otherwise set forth herein.
4. 314T4080-9 inlet assembly, 314T4085-11 & -12 fan cowl assemblies, and 314T4090-21 & - 22 core cowl assemblies nacelle hardware, other than thrust reverser, shall be used with no change. The thrust reverser revised for tanker 315T4295-80, -82, -83 and -85 shall be used with no change. The current configuration has already been modified to account for new IDG and shall not result in any further modification. Partial RTO and low power burst duct conditions are applicable. Wire bundles installed in the inlet and thrust reverser shall be revised to address increased EME/HIRF threat levels.
B. NACELLE GENERAL QUALIFICATIONS
1. Seller shall be responsible for design and substantiation of inlet, fan cowl, fan duct cowl, and thrust reverser.
2. Boeing shall be responsible for: a. Design and substantiation of nozzle and plug, b. All installation and installation hardware (design and stress), c. Approval of all design data, d. Certification of all nacelle hardware and its installation, including inlet, fan cowl, chine, fan duct, thrust reverser, core cowl and load share, nozzle, and plug, e. Provide revised SCDs that address or reflect any new certification requirements as well as changes necessary to accommodate increased thrust and additional accessories, f. Provide thermal and sonic environment, g. Provide external loads.
3. Seller is responsible for recalculating margins of safety.
4. The product shall be FAA certified and include pRTO, burst duct, FBO/Windmilling and fitting factor.
5. 767 thrust reverser interchangeability with 747 models shall not be included or evaluated.
6. Revised grounding provisions to cowl assembly per latest requirements. Full scale inner wall static test prior to engine test shall not be required.
7. Safety assessment of existing fleet hardware to current certification basis is not included in the Baseline Statement of Work price.
8. Partial RTO condition for the inner wall that results in modifications to the inner wall shall be subject to remuneration for modifications to the inner wall.
9. Changes in Boeing analysis tools that result in redesign of previously acceptable structure, even if loads are lower, shall be subject to remuneration for such redesign.
10. FAA amendment level revisions resulting in redesign of previously acceptable structure, even if loads are lower, shall be subject to remuneration for such redesign.
11. Test Instrumentation hardware is not defined and is not included in the Baseline Statement of Work price.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
12. Tooling and NC tapes impacts associated with engineering changes are not included in the Baseline Statement of Work price.
13. For purposes of clarity, a single issuance of the following loads from Boeing to Seller shall constitute a complete Single Certification Loads Data Set (SCLDS) for nacelle: a. Maneuver, b. Fail safe, c. IFEM, d. FBO, e. Windmilling, f. pRTO, g. Pressure, h. Temperature, i. Sonic Environment, and j. Fatigue. Sellers Baseline Statement of Work price is limited to engineering effort and other expenses related to a single loads cycle as defined above as SCLDS.
14. Except as otherwise set forth herein, the Baseline Statement of Work price is based upon use of the same software applications utilized for the 767 Program prior to the execution of this MOA.
C. NACELLE WORK STATEMENT ADMINISTRATION
Seller administration responsibilities for the nacelle are: 1. Program planning and scheduling, 2. Participation in coordination meetings with Boeing and Boeing Defense Systems as needed, and 3. Records management of Seller created documents and transmittals received from Boeing.
Boeing shall be responsible for coordination with Pratt and Whitney, and Seller shall support the coordination as necessary.
D. NACELLE CERTIFICATION
Seller certification responsibilities shall be: 1. Management of Seller portion of nacelle structures certification effort, 2. Review of and input to the Boeing provided certification plan, 3. AR to support certification effort including delegation, 4. Work of certification activities with Boeing and Boeing Defense Systems, 5. Support certification meetings with the FAA, 6. Prepare analysis data to include review and comments to the certification document, stress and damage tolerance analysis, and 7. Review and sign off of drawings, not including any additional effort associated with a Boeing final approval if deemed necessary.
Boeing shall bear certification responsibilities except as set forth above. Boeing certification responsibilities shall include: 1. coordination and release of the certification plan, 2. Primary responsibility for support of the FAA/BDCO, 3. Preparation of data for inclusion of certification document deliverables relative to summary data, and 4. Coordination and submittal of certification documents for approval by the certifying entity.
E. NACELLE INTEGRATION
Seller shall have the following responsibilities relative to integration of the inlet, chine, fan cowl, thrust reverser, and core cowl: 1. Demonstration of means of compliance, 2. Design review support for PDR and CDR, 3. Coordination with other groups within Seller, 4. Obtain new or revised loads pressures and temperatures, 5. Provide detail analysis for internal temperatures and loads, 6. Develop and transmit internal loads transmittal sheets, 6. Submit strength check notes for review and approval by Boeing, 7. Submit for review and approval SRM documents, and 8. Provide redlines and analysis for approval.
Boeing shall have the following responsibilities relative to integration of the inlet, chine, fan cowl, thrust reverser and core cowl: 1. Provide specific design requirements, 2. Provide thermal and sonic environment, external loads including, but not limited to IFEM, FBO, and windmilling, 3.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Develop and transmit external loads transmittal sheets, 4. Provide AR support for SRM revisions and documents, and 5. Compile and release SRMs.
F. NACELLE DESIGN EFFORT
Seller responsibilities relative to direct support of the design effort for inlet, chine, fan cowl, thrust reverser, and core cowl shall be as follows: 1. Conduct loads review and structural analysis effort, 2. Review and incorporate loads, pressures and temperatures, 3. Review existing structural analysis against new loads, 4. Revise structural analysis as required against new loads, 5. Develop strength check notes and update for new loads as necessary, 6. Review and approve revised drawings as necessary, 7. Develop SRM revisions / documents, provide engineering support to the MRB effort prior to certification for rejection tags, 8. Provide work statement support to Boeing relative to revision of the thrust reverser and core cowl to accommodate the new IDG,
G. NACELLE pRTO SUBSTANTION FOR THRUST REVERSER, V-BLADE DISENGAGMENT
Seller responsibilities relative to Partial Refused Take Off (pRTO) substantiation for the thrust reverser and for v-blade disengagement shall be as follows: 1. Support for 767 PW pRTO compliance via review and incorporation of 737/777 Lessons Learned, 2. Support Boeing test and analysis planning through review and input to test plan, 3. Provide overall minimum engagement analysis for v-groove / blade stack up analysis, 4. Provide new thrust reverser FE model, including 3D CATIA Model conversion, to support FE meshing for modeling only, 5. Validation of new FEM model against full scale engine test data provided by Boeing, 6. FEM correlation of inner v-blade deflection against test data, 7. Support selection of critical deployed positions, 8. Support definition of limit load case (P13 and P15 pressure loading) for pRTO normal operation, and 8. Support of Boeing safety assessment. Seller shall not be responsible to: 1. Provide safety analysis, 2. Conduct testing, nor 3. to provide FBO hardware.
Boeing responsibilities relative to pRTO substantiation for the thrust reverser and for v-blade disengagement shall be as follows: 1. Conduct test, 2. Provide test plan and documentation, 3. Provide probability study related to safety, 4. Provide, including 3D modeling effort, blocker door kinematics analysis (drag link and blocker door angles versus deployment positions), 5. Provide the necessary engine interface information for v-groove/blade stack-up analysis, 6. Provide determination of translating sleeve deployment times, 7. Provide definition of limit load case (P13 and P15 pressure loading) for pRTO normal operation.
H. NACELLE ENGINE TEST SUPPORT
Seller engine test support responsibilities shall be as follows: 1. Provide input to Boeing regarding instrument test drawings, 2. Provide detail and end item hardware conformity for conformity inspection, 3. Provide input and installation instrumentation as required by Full Scale Engine Test document including on-site support during the test, 4. Support of Boeing test preparation as necessary, 5. Support of Boeing test data reduction efforts by formatting data, and 6. Support Boeing test data analysis and report through participation in meetings and Boeing coordination efforts.
Boeing engine test responsibilities as the primary responsible Party shall be as follows: 1. Conduct test, 2. Provide and release instrument test drawings, 3. Conform overall test configuration, 4. Provide and release test preparation, 5. Provide test data reduction efforts, and 6. Provide test data analysis and report.
I. NACELLE STRUCTURAL ANALYSIS
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Seller structural analysis responsibilities as the primary responsible Party shall be as follows: 1. CFD Loads or Loads from engine test applied to model for all design load cases, 2. Generate plots of vent area versus under cowl pressure, 3. FE model prediction of v-blade deflections based on engine test pressure loads, 4. Review model correlation between engine data and FE model deflection, 5. Inner v-blade deflection versus various translating sleeve deployment position to determine the peak deflection, 6. Sensitivity study showing major contributors to v-blade deflection at various sleeve deployment position, 7. Perform detailed stress analysis to obtain margin of safety of fan duct assembly/thrust reverser and core cowl at critical sleeve deployment positions, 8. Provide internal certification loads for final certification design loads, 9. Conduct stress analysis of inlet, chine, fan cowl, thrust reverser, and core cowl, 10. Provide analysis summary for static and damage tolerance analysis, 11. Prepare and transmit analysis documentation to Boeing, and 12. Prepare and transmit documentation in support of Certification documentation.
J. NACELLE FBO/WINDMILLING SUBSTANTIATION
Seller FBO/windmilling substantiation responsibilities shall be as follows: 1. Revise FEM for inclusion in integrated FEM model, 2. Apply FBO /windmilling loads to structure (FEM), 3. Evaluate structure for FBO and windmilling loads, 4. Prepare analysis documentation for FBO and windmilling conditions, and 5. Transmit analysis to Boeing.
Boeing shall provide interface loads to Seller for FBO/windmilling substantiation.
K. NACELLE WIRING
Existing clamps and brackets are the basis for the Baseline Statement of Work price.
Additional grounding provisions shall require no new analysis by Seller.
L. CONVERSION
Sellers price for the Baseline Statement of Work price does not include any [*****] except for any new or revised detail as required by this Baseline Nacelle SOW.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit D
Notional Production Lot Summary
Title |
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LRIP Lot 1 |
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Low Rate Initial Production (Lot 1) |
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[*****] |
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LRIP Lot 2 |
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Low Rate Initial Production (Lot 2) |
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[*****] |
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Full Rate Production Lot 3 |
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[*****] |
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Full Rate Production Lot 4 |
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Full Rate Production (Lot 4) |
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[*****] |
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Full Rate Production Lot 5 |
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Full Rate Production (Lot 5) |
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[*****] |
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Full Rate Production Lot 6 |
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Full Rate Production (Lot 6) |
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[*****] |
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Full Rate Production Lot 7 |
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Full Rate Production (Lot 7) |
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[*****] |
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Full Rate Production Lot 8 |
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Full Rate Production (Lot 8) |
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[*****] |
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Full Rate Production Lot 9 |
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Full Rate Production (Lot 9) |
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[*****] |
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Full Rate Production Lot 10 |
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Full Rate Production (Lot 10) |
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[*****] |
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Full Rate Production Lot 11 |
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Full Rate Production (Lot 11) |
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[*****] |
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Full Rate Production Lot 12 |
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Full Rate Production (Lot 12) |
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[*****] |
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Full Rate Production Lot 13 |
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Full Rate Production (Lot 13) |
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[*****] |
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit E
Economic Price Adjustment Provision
This Economic Price Adjustment (EPA) provision will be included in the amendment to SBP MS-65530-0016 and may be included in sub-tier contracts in support of the program.
(a) The provisions of this EPA clause provide for both price increases and decreases to protect the USAF (Hereinafter Customer), Boeing and the Seller from the effects of economic changes as specified by the indices and the bands as specified in this clause. It shall be the intent of the Customer and Boeing to identify any adjustment authorized by this clause prior to the release of requirements by the Customer for the applicable government fiscal year procurement lot quantities. Boeing shall notify the Customer in writing not later than [*****] calendar days prior to the scheduled release of such requirements if an increase or decrease in the applicable pricing is warranted pursuant to the terms of this clause. The notice to the Customer shall include the amount of the increase or decrease relative to Sellers pricing.
(b) Within [*****] days following authorization from the Customer, Boeing shall issue to Seller a change to the applicable Order(s) revising the pricing upwards or downwards as appropriate for the requirements supporting the applicable EPA period.
(c) Adjustments under this clause, if any, shall be based upon the formula specified in Paragraph (g) below. These adjustment amounts are subject to either upward or downward movement.
(d) [*****] shall be used as the standard of measurement for this clause. The index used for calculations of this clause is [*****] .
(e) The following rules shall apply in making numeric calculations under this clause:
(1) Round decimals to 4 decimal places;
(2) Round dollar calculations to the nearest whole dollar;
(3) Round up numbers equal to or greater than 5;
(4) Round down numbers less than or equal to 4;
(5) Round percentages to 2 decimal places (e.g. 3.47%).
(f) For purposes of calculating the adjustments required by this clause, the following projected average annual index rates shall apply. The source of the baseline projected indices shown below is [*****] . For the years beyond [*****] , the last data point of escalation will be projected at the same rate (straight-lined) on an annual basis through the final period of performance. Table 1 reflects the projected index based on [*****] , year [*****] ( [*****] per annum).
Table 1 - Baseline Projected Average Annual Index Rates
Projected Time
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(Dec 1985=100)
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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(g) The economic price adjustment shall be calculated as follows:
[*****]
[*****]
[*****]
[*****]
Example calculation for [*****]:
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Example 1
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Example 2
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Example 3
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2 |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3 |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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4* |
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5 |
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6 |
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7 |
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[*****] |
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8 |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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* If the resulting value is between [*****] and [*****] , no adjustment will be calculated; therefore, do not proceed to Step 5.
EXAMPLE 1: The EPA adjustment is a [*****] decrease in the Price.
EXAMPLE 2: There is no EPA adjustment since the trigger band was not exceeded.
EXAMPLE 3: The EPA adjustment is a [*****] increase in the Price.
(i) Once an adjustment to an eligible Items Product price amount has been accomplished under this clause, or a determination made that no adjustment is permitted pursuant to paragraph (g)(4) above, said Item shall not be subject to further Economic Price Adjustment for that applicable period.
(j) In the event the [*****] used are discontinued; or if [*****] suspends publication of an index identified in paragraph (d) above or significantly alters the method of calculating the index, Boeing and the Customer shall agree upon an appropriate substitute index for use under this clause and provide that index to Seller. If the Boeing and the Customer cannot agree on a substitute or comparable index within [*****] calendar days after an index has been discontinued or altered in method of calculation, Boeing may, acting unilaterally and subject to Customers appeal in accordance with the applicable contract, either adopt the [*****] as altered or establish a new index which shall be provided to Seller.
(k) Any dispute arising under or related to the terms and/or procedures set forth in the foregoing paragraphs shall be resolved in accordance with the provisions of the contracts Disputes clause located in GTA BCA-65530-0016.
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit F
FAR and DFAR regulations
Flow Down Clauses Applicable to Spirit AeroSystems, Inc.
Flowdown of FAR Clauses Applicable to Commercial Items The FAR clauses listed in FAR 52.244-6(c)(1) below, except as provided in the notes for the clauses marked by asterisks, are incorporated herein by this reference, except that Contractor shall mean Seller. The Seller shall flow down FAR 52.244-6, as modified below, to its suppliers, consistent with the notes.
FAR 52.244-6 Subcontracts for Commercial Items (Dec 2009)
(A) DEFINITIONS. AS USED IN THIS CLAUSE
COMMERCIAL ITEM HAS THE MEANING CONTAINED IN FEDERAL ACQUISITION REGULATION
2.101,
DEFINITIONS.
SUBCONTRACT INCLUDES A TRANSFER OF COMMERCIAL ITEMS BETWEEN DIVISIONS, SUBSIDIARIES, OR AFFILIATES OF THE CONTRACTOR OR SUBCONTRACTOR AT ANY TIER.
(B) TO THE MAXIMUM EXTENT PRACTICABLE, THE CONTRACTOR SHALL INCORPORATE, AND REQUIRE ITS SUBCONTRACTORS AT ALL TIERS TO INCORPORATE, COMMERCIAL ITEMS OR NONDEVELOPMENTAL ITEMS AS COMPONENTS OF ITEMS TO BE SUPPLIED UNDER THIS CONTRACT.
(C)(1) THE CONTRACTOR SHALL INSERT THE FOLLOWING CLAUSES IN SUBCONTRACTS FOR COMMERCIAL ITEMS:
(i)52.203-13 , Contractor Code of Business Ethics and Conduct (Dec 2008) (Pub. L. 110-252, Title VI, Chapter 1 (41 U.S.C. 251 note )), if the subcontract exceeds $5,000,000 and has a performance period of more than 120 days. In altering this clause to identify the appropriate parties, all disclosures of violation of the civil False Claims Act or of Federal criminal law shall be directed to the agency Office of the Inspector General, with a copy to the Contracting Officer.
(ii) [Reserved]
* (iii) 52.219-8 , Utilization of Small Business Concerns (May 2004) (15 U.S.C. 637(d)(2) and (3)), if the subcontract offers further subcontracting opportunities. If the subcontract (except subcontracts to small business concerns) exceeds $550,000 ($1,000,000 for construction of any public facility), the subcontractor must include 52.219-8 in lower tier subcontracts that offer subcontracting opportunities.
** (iv) 52.222-26 , Equal Opportunity (Mar 2007) (E.O. 11246).
**(v) 52.222-35 , Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Sept 2006) (38 U.S.C. 4212(a) );
**(vi) 52.222-36 , Affirmative Action for Workers with Disabilities (June 1998) (29 U.S.C. 793) .
(vii) [Reserved]
(viii) 52.222-50 , Combating Trafficking in Persons (Feb 2009) (22 U.S.C. 7104(g) ).
(ix) [Reserved]
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
(2)While not required, the Contractor may flow down to subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligations.
(D)THE CONTRACTOR SHALL INCLUDE THE TERMS OF THIS CLAUSE, INCLUDING THIS PARAGRAPH (D), IN SUBCONTRACTS AWARDED UNDER THIS CONTRACT.
Notes:
*Not applicable to the performance of Seller to the extent that the contract, together with all of its subcontracts, will be performed entirely outside the United States and its outlying areas as defined in FAR 2.101.
**Not applicable to the performance of Seller to the extent that both the performance of its work under the contract, and its recruitment of workers, will occur outside the United States, Puerto Rico, the Northern Mariana Islands, American Samoa, Guam, the U.S. Virgin Islands, and Wake Island. If a supplier will perform any work, or recruit any workers, within the United States, Puerto Rico, the Northern Mariana Islands, American Samoa, Guam, the U.S. Virgin Islands, and Wake Island, then this clause must be flowed down to that supplier.
Flowdown of DFARS Clauses Applicable to Commercial Items The DFARS clause listed in DFARS 252.244-7000(c) below, is incorporated herein by this reference, except that Contractor shall mean Seller. The Seller shall flow down DFARS 252.244-7000 to its suppliers, as modified below.
DFARS 252.244-7000 SUBCONTRACTS FOR COMMERCIAL ITEMS AND COMMERCIAL COMPONENTS (DOD CONTRACTS) (AUG 2009)
In addition to the clauses listed in paragraph (c) of the Subcontracts for Commercial Items clause of this contract (Federal Acquisition Regulation 52.244-6), the Contractor shall include the terms of the following clause, if applicable, in subcontracts for commercial items or commercial components, awarded at any tier under this contract:
(a) [Reserved]
(b) [Reserved]
(c) 252.246-7003 Notification of Potential Safety Issues.
(d) [Reserved]
(e) [Reserved]
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit G
[*****]
[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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Dollars |
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Dates |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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Dollars |
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Dates |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****] |
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[*****]
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
Exhibit H
[*****]
The following [*****] elements and deliverables are applicable to nonrecurring efforts associated with the Baseline Statement of Work for propulsion.
1. Structural Assessment of static strength for Fan Blade Out (FBO) loads, Ultimate External Dynamic Gust and Ground loads, and Ultimate External Static Maneuver loads
(Based upon delivery of loads by Boeing as part of the single loads cycle)
a. Strut (and Fan Cowl Support Beam (FCSB):
i. [*****] :
1. Revise finite element modeling for inclusion in integrated finite element model,
2. Conduct loads assessment of strut structure for new loads (listed above) against -300ER certification loads, and
3. Conduct a single static strength assessment of critical details for FBO loads, Ultimate External Dynamic Gust and Ground loads, and Ultimate External Static Maneuver loads in order to identify any inadequate margins of safety.
4. For the purpose of clarity, critical strut details are: spar assemblies, side skin assemblies, engine mount bulkheads, frames, and hinge fittings.
ii. [*****]
1. Provide Engineering Memo(s) for:
a. Summary of loads assessment,
b. Margin of safety summary with critical conditions, and
c. List of strut details which require redesign to ensure static strength capability and a description of proposed changes.
2. Provide updated strut FEM model for inclusion into Boeing IFEM.
b. Nacelle:
i. [*****] :
1. Review existing structural analysis against new loads, and
2. Conduct a single assessment of critical details for FBO loads, Ultimate External Dynamic Gust and Ground loads, and Ultimate External Static Maneuver loads in order to identify any inadequate margins of safety for the inlet, fan cowl, fan duct cowl, and thrust reverser.
ii. [*****]
1. Provide Engineering Memo for:
a. Summary of loads assessment,
b. Margin of safety summary with critical conditions, and
c. List of nacelle details which require redesign to ensure static strength capability and a description of proposed changes.
2. Provide updated nacelle FEM model for inclusion into Boeing IFEM.
2. Structural Analysis for Complete Loads Set
(Based upon delivery of loads by Boeing as part of the single loads cycle)
a. Strut (and FCSB):
i. [*****]
1. Conduct an assessment of critical details for loads that were received as part of the single loads cycle but not included in the first milestone. for fatigue, discrete source damage tolerance, windmilling, and wheels up landing (This milestone is not inclusive of any crackgrowth certification deliverables); and
2. Conduct preliminary crack growth analysis for the purposes of evaluating Principal Structural Elements (PSEs).
ii. [*****]
1. Provide Engineering Memo for:
a. Margin of safety summary for fatigue and discrete source damage tolerance for critical details,
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
b. Analysis summary for windmilling, wheels up landing, rotorburst and preliminary crack growth for critical details, and
c. List of strut details which require redesign to ensure required fatigue and damage tolerance capability, and a description of proposed changes.
b. Nacelle:
i. [*****]
1. Conduct an assessment of critical details for loads that were received as part of the single loads cycle, but not included in the first milestone for the inlet, fan cowl, fan duct cowl, and thrust reverser:
a. Obtain new or revised loads pressures and temperatures,
b. Detail analysis for internal temperatures and loads,
c. Generate plots of vent area versus under cowl pressure, and
d. Conduct stress analysis of all thrust reverser and core cowl structure.
2. Partial Refused Take Off (pRTO) substantiation for the thrust reverser and for v-blade disengagement:
a. Support Boeing test and analysis planning for through review and input to test plan as required up to milestone date,
b. Conduct overall minimum engagement analysis for v-groove / blade stack up analysis,
c. Support selection of critical deployed positions, if requested by Boeing and Spirit accepted completion date is prior to milestone date, and
d. Support definition of limit load case (pressure loads P13 and P15) for pRTO normal operation, if requested by Boeing and Spirit accepted completion date is prior to milestone date.
3. Windmilling:
a. Apply FBO /windmilling loads to structure (FEM), and
b. Evaluate structure for FBO and windmilling loads.
ii. [*****]
1. Provide Engineering Memo of Assessment Results to include:
a. Summary of loads assessment,
b. Margin of safety summary with critical conditions (Includes ultimate, limit, fatigue, damage tolerance, and Fan Blade Off (FBO)/windmilling), and
c. List of nacelle details which require redesign to ensure required capability and a description of proposed changes.
2. pRTO
a. Provide Engineering Memo for
i. Overall minimum engagement analysis for v-groove / blade stack up results;
ii. Inputs for test plan, if requested by Boeing and Spirit accepted completion date is prior to milestone date;
iii. Inputs for selection of critical deployed positions as required prior to milestone date,
iv. Inputs for definition of limit load case (P13 and P15 pressure loading) for pRTO normal operation, if requested by Boeing and Spirit accepted completion date is prior to milestone date.
3. Spirit Submittal of Certification package to PS-Div
a. Strut (and FCSB)
i.
[*****]
(Conducted once for a single set of loads)
1. Development of strength check notes for strut structure with higher loads than -300ER,
2. Conduct Finite Element Model validation,
Confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. Omissions are designated by the symbol [*****].
Boeing/Spirit AeroSystems Inc.
Special Business Provisions (SBP)
MS-65530-0016 Amendment 8
3. Preparation of data for inclusion in certification document deliverables as part of Boeings certification plan, and
a. Certification document deliverables are static analysis (ultimate, limit) and damage tolerance analysis for FBO, windmilling, rotor burst, and crack growth.
b. Crack growth has traditionally been delayed to occur after initial type certification and should only be considered an element of this milestone if both parties have mutually agreed to complete all DTR forms prior to certification.
4. Signature of 8100 forms as appropriate.
ii. [*****] :
1. SCNs transmitted to Boeing,
2. DTR forms transmitted to Boeing, if both parties have mutually agreed to complete all damage tolerance crack growth deliverables prior to certification,
3. Transmittal of formal document inputs, and
4. Completed 8100-9 forms as requested.
b. Nacelle
i. [*****] :
1. Submit strength check notes for review and approval by Boeing,
2. Preparation of data for inclusion in certification document deliverables as part of Boeings certification plan, and
3. Signature of 8100 forms as appropriate.
ii. [*****] :
1. SCNs transmitted to Boeing,
2. Transmittal of formal document inputs, and
3. Completed 8100-9 forms as requested.
Exhibit 10.31
AMENDMENT NO. 2
TO
CREDIT AGREEMENT
This Amendment No. 2, dated as of August 2, 2013 (this Amendment ) is entered into among SPIRIT AEROSYSTEMS, INC., a Delaware corporation (the Borrower ); SPIRIT AEROSYSTEMS HOLDINGS, INC., a Delaware corporation (the Parent Guarantor ); each of the other Guarantors party hereto; BANK OF AMERICA, N.A., as Administrative Agent, and the Lenders party hereto. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Parent Guarantor and the other Guarantors identified therein, the Lenders and Bank of America, N.A., as Administrative Agent are parties to that certain Credit Agreement dated as of April 18, 2012 (as amended, modified, extended, restated or otherwise supplemented from time to time, including without limitation pursuant to that certain Amendment No. 1 dated as of October 26, 2012, the Credit Agreement );
WHEREAS, the Borrower has requested certain amendments to the Credit Agreement, and the Lenders (by action of the Requisite Lenders) have agreed to such amendments subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto hereby agree as follows:
Section 1. Amendments
1.1 The definitions set forth on Schedule 1 attached hereto are hereby added to Section 1.01 of the Credit Agreement in appropriate alphabetical order.
1.2 In the definition of Applicable Rate in Section 1.01 of the Credit Agreement, clause (b) is amended by adding a proviso at the end thereof (immediately following the pricing grid) to read as follows:
; provided that, notwithstanding anything to the contrary in the foregoing, at all times during the Suspension Period, the Applicable Rate with respect to any Term B Loan shall be the percentage per annum set forth in Pricing Tier 1;
1.3 In the definition of Applicable Rate in Section 1.01 of the Credit Agreement, clause (c) is amended by adding a proviso at the end thereof (immediately following the pricing grid) to read as follows:
; provided that, notwithstanding anything to the contrary in the foregoing, at all times during the Suspension Period, the Applicable Rate with respect to Revolving Loans, Swing Line Loans, Letters of Credit and the Commitment Fee shall be the percentage per annum set forth in Pricing Tier 1.
1.4 The definition of Eurodollar Base Rate set forth in Section 1.01 of the Credit Agreement is amended in its entirety to read as follows:
Eurodollar Base Rate means:
(a) for any Interest Period with respect to a Eurodollar Rate Loan, (i) the rate per annum equal to the London Interbank Offered Rate or any successor thereto approved by the Administrative Agent ( LIBOR ) as published by the applicable Reuters screen page (or such other commercially available source providing quotations of LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or (ii) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Bank of Americas London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; and
(b) for any interest calculation with respect to a Base Rate Loan on any date, (i) the rate per annum equal to LIBOR published by the applicable Reuters screen page (or such other commercially available source providing quotations of LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, determined two (2) London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Bank of Americas London Branch to major banks in the London interbank eurodollar market at their request at the date and time of determination;
provided , however , that notwithstanding the foregoing, Eurodollar Base Rate with respect to any Term B Loan that bears interest at a rate based on clause (a) or (b) of this definition shall in any event not be less than three-quarters of one percent (0.75%).
1.5 The definition of Guarantors set forth in Section 1.01 of the Credit Agreement is amended by (i) deleting the word and in the first sentence thereof at the end of clause (a) and replacing it with a ,, (ii) deleting the . in the first sentence thereof at the end of clause (b) and replacing it with and and (iii) adding a new clause (c) to the first sentence thereof to read as follows:
(c) with respect to (i) Obligations under any Swap Contract between any Loan Party and any Swap Bank that is permitted to be incurred pursuant to clause (vii) of Section 8.01(a), (ii) Obligations under any Treasury Management Agreement between any Loan Party and any Treasury Management Bank and (iii) any Swap Obligation of a Specified Loan Party (determined before giving effect to Sections 4.01 and 4.08) under the Guaranty, the Borrower.
1.6 The definition of Obligations set forth in Section 1.01 of the Credit Agreement is amended by adding a new sentence at the end thereof to read as follows:
Notwithstanding anything to the contrary in the foregoing, the Obligations of a Guarantor shall exclude any Excluded Swap Obligations with respect to such Guarantor.
1.7 In Section 2.01(c)(i) of the Credit Agreement, the text The Borrower may from time to time on or after the Closing Date is amended to read as The Borrower may from time to time after the Suspension Period.
1.8 In Section 2.01(c)(ii) of the Credit Agreement, the text The Borrower may from time to time on or after the Closing Date is amended to read as The Borrower may from time to time after the Suspension Period.
1.9 In Section 2.03(h), the first sentence thereof is amended by inserting plus , during the Suspension Period, one-half of one percent (0.50%) immediately following the text the Applicable Rate set forth therein.
1.10 Section 2.05(b)(ii) of the Credit Agreement is amended by inserting (except with respect to any Net Proceeds from any Asset Sale of the Tulsa Assets, in which case fifty percent (50%) of such Net Proceeds) immediately after the text one hundred percent (100%) of such Net Proceeds set forth therein.
1.11 In Section 2.08(a) of the Credit Agreement, each of clauses (i), (iii) and (v) are amended by inserting the text plus , during the Suspension Period, one-half of one percent (0.50%) immediately following the text the Applicable Rate for Revolving Loans in clauses (i) and (iii) and following the text the Applicable Rate in clause (v).
1.12 Article IV of the Credit Agreement is amended to add a new Section 4.08 to read as follows:
4.08 Keepwell .
Each Loan Party that is a Qualified ECP Guarantor at the time the Guaranty in this Article IV by any Loan Party that is not then an eligible contract participant under the Commodity Exchange Act (a Specified Loan Party ) or the grant of a security interest under the Loan Documents by any such Specified Loan Party, in either case, becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under this Guaranty and the other Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantors obligations and undertakings under this Article IV voidable under applicable Debtor Relief Laws, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section 4.08 shall remain in full force and effect until the Obligations have been indefeasibly paid and performed in full (other than contingent indemnification obligations under the Loan Documents that are not then due or claimed). Each Loan Party intends this Section 4.08 to constitute, and this Section 4.08 shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each Specified Loan Party for all purposes of the Commodity Exchange Act.
1.13 Section 5.02 of the Credit Agreement is amended by adding a new clause (d) to read as follows:
(d) During the Suspension Period, before and after immediately giving effect to the Credit Extension requested in the Request for Credit Extension, the Total Secured Outstandings shall not exceed the Aggregate Borrowing Base Amount set forth in the Borrowing Base Certificate most recently delivered pursuant to Section 7.01(m) or, with respect to the period prior to the first such delivery after the Amendment No. 2 Effective Date, on the Amendment No. 2 Effective Date.
1.14 Section 7.01 of the Credit Agreement is amended by (i) deleting the word and at the end of 7.01(k), (ii) deleting the period at the end of 7.01(l) and substituting ; and therefor and (iii) adding a new clause (m) to read as follows:
(m) during the Suspension Period, not later than ten (10) Business Days after the delivery of any financial statements pursuant to Section 7.01(a) or (b) , a Borrowing Base Certificate duly executed by a Responsible Officer of the Borrower setting forth a calculation of the Aggregate Borrowing Base Amount as of the end of the most recent Fiscal Quarter covered by such financial statements.
1.15 Section 8.01(a) of the Credit Agreement is amended by (i) deleting the word and at the end of clause (xix), (ii) deleting the period at the end of clause (xx) and substituting ; and therefor and (iii) adding a new clause (xxi) and a new paragraph at the end thereof, in each case to read as follows:
(xxi) during the Suspension Period, Permitted Additional Indebtedness in an aggregate principal amount not to exceed $300,000,000 at any time outstanding.
Notwithstanding anything to the contrary in the foregoing, during the Suspension Period, Indebtedness under the immediately foregoing clauses (xii) , (xvi) , (xvii) , (xviii) and (xix) shall be permitted only to the extent that such Indebtedness (x) is in existence as of the Amendment No. 2 Effective Date and is described on Schedule 8.01 or (y) is a Permitted Refinancing of such Indebtedness.
1.16 Section 8.05 of the Credit Agreement is amended by (i) deleting the word and at the end of clause (xiii), (ii) adding the word and at the end of clause (xiv) and (iii) adding a new clause (xv) to read as follows:
(xv) so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the sale of the Tulsa Assets;
1.17 Section 8.07(vii) is amended by inserting the text except during the Suspension Period, immediately prior to the text so long as no Default or Event of Default then exists set for therein.
1.18 Section 8.12 of the Credit Agreement is amended and restated in its entirety to read as follows:
8.12 Financial Covenants .
(a) Commencing with the Fiscal Quarter ending December 31, 2014, the Borrower will not permit the Senior Secured Leverage Ratio as of the last day of any Fiscal Quarter to exceed 2.75:1.0.
(b) Commencing with the Fiscal Quarter ending December 31, 2014, the Borrower will not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter to be less than 4.00:1.0.
(c) Commencing with the Fiscal Quarter ending December 31, 2014, the Borrower will not permit the Total Leverage Ratio as of the last day of any Fiscal Quarter to exceed 4.00:1.0.
(d) Commencing with the Fiscal Quarter ending December 31, 2014, if, as of the date of any Airbus Discontinuance or any 787 Discontinuance, the outstanding aggregate amount of advance payments or progress payments made by Boeing and/or Airbus in connection with the 787 Program and/or the A350 XWB Program that are then considered Indebtedness exceeds $250,000,000, the Borrower will not permit the Total Leverage Ratio to exceed the Total Leverage Ratio required at such time by Section 8.12(c) for the period in which such Airbus Discontinuance or 787 Discontinuance shall be deemed to have occurred as provided below. For purposes of calculating the Total Leverage Ratio pursuant to this clause (d) , the occurrence of an Airbus Discontinuance or the occurrence of a 787 Discontinuance shall be deemed to have occurred as of the last day of the most recent four Fiscal Quarter period preceding the date of such Airbus Discontinuance and/or such 787 Discontinuance for which the Borrower was required to deliver financial statements pursuant to Section 7.01(a) or (b) .
(e) During the Suspension Period, at any time, the Borrower will not permit the Total Secured Outstandings to exceed the Aggregate Borrowing Base Amount set forth in the most recent Borrowing Base Certificate delivered pursuant to Section 7.01(m) .
(f) As of each Fiscal Quarter ending during the Suspension Period, commencing with the Fiscal Quarter ending June 27, 2013, the Borrower will not permit Minimum Liquidity to be less than $500,000,000.
1.19 Section 9.05 of the Credit Agreement is amended by adding a new sentence at the end thereof to read as follows:
Excluded Swap Obligations with respect to any Guarantor shall not be paid with amounts received from such Guarantor or such Guarantors assets, but appropriate adjustments shall be made with respect to payments from other Loan Parties to preserve the allocation to Obligations otherwise set forth above in this Section.
1.20 The Credit Agreement is amended to include a new Schedule 8.01 (Existing Indebtedness as of the Amendment No. 2 Effective Date under clauses (vi), (xvi), (xvii), (xviii) and (xiv) of Section 8.01(a) of the Credit Agreement) in the form attached hereto as Schedule 8.01, and the table of Schedules and Exhibits following the table of contents in the Credit Agreement shall be amended updated accordingly.
1.21 The Credit Agreement is amended to include a new Exhibit 1.01 (Form of Borrowing Base Certificate) in the form attached hereto as Exhibit 1.01, and the table of Schedules and Exhibits following the table of contents in the Credit Agreement shall be amended accordingly.
Section 2. Conditions Precedent to the Effectiveness of this Amendment.
This Amendment shall become effective as of the date first written above when, and only when, each of the following conditions precedent shall have been satisfied or waived (the Amendment No. 2 Effective Date ) by the Administrative Agent:
2.1 Executed Counterparts . The Administrative Agent shall have received this Amendment, duly executed by the Borrower, the Guarantors, the Administrative Agent, the Requisite Lenders and the Requisite Revolving Lenders;
2.2 Borrowing Base Certificate . The Administrative Agent shall have received a Borrowing Base Certificate as of the Amendment No. 2 Effective Date;
2.3 No Default or Event of Default . Immediately before and after giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing; and
2.4 Fees and Expenses . The Borrower shall have delivered, by wire transfer of immediately available funds, to the Administrative Agent, for the account of each Lender that consents to this Amendment, an amendment fee in an amount equal to twenty-five basis points (0.25%) of the sum of the Revolving Commitment of such Lender plus the aggregate outstanding principal amount of the Term B Loan of such Lender, which fee shall be earned and payable on the Amendment No. 2 Effective Date.
Section 3. Representations and Warranties
On and as of the Amendment No. 2 Effective Date, after giving effect to this Amendment, the Loan Parties hereby represent and warrant to the Administrative Agent and each Lender as follows:
3.1 this Amendment has been duly authorized, executed and delivered by each Loan Party and, assuming the due execution and delivery of this Amendment by each of the other parties hereto, constitutes the legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors rights generally;
3.2 each of the representations and warranties contained in Article VI of the Credit Agreement and in each other Loan Document is true and correct in all material respects (except that any representation or warranty that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects) with the same effect as if then made (unless expressly stated to relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that any representation or warranty that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects) as of such earlier date);
3.3 no Default or Event of Default has occurred and is continuing; and
3.4 after giving effect to this Amendment, neither the modification of the Credit Agreement affected pursuant to this Amendment nor the execution, delivery, performance or effectiveness of this Amendment (a) impairs the validity, effectiveness or priority of the Liens granted pursuant to any Loan Document, and such Liens continue unimpaired with the same priority to secure repayment of all Obligations, whether heretofore or hereafter incurred; or (b) requires that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens.
Section 4. Fees and Expenses
The Borrower agrees to pay promptly (and in any event on the Amendment No. 2 Effective Date) after presentation of an invoice therefor all reasonable and documented out-of-pocket fees and expenses of the Joint Lead Arrangers (including the reasonable and documented fees and out-of-pocket expenses of Moore & Van Allen, PLLC) in connection with the preparation, negotiation, execution and delivery of this Amendment.
Section 5. Reference to the Effect on the Loan Documents
5.1 As of the Amendment No. 2 Effective Date, each reference in the Credit Agreement to this Agreement, hereunder, hereof, herein, or words of like import, and each reference in the other Loan Documents to the Credit Agreement (including, without limitation, by means of words like thereunder, thereof and words of like import), shall mean and be a reference to the Credit Agreement, as amended hereby, and this Amendment and the Credit Agreement shall be read together and construed as a single instrument. Each of the table of contents and lists of Exhibits and Schedules of the Credit Agreement shall be amended to reflect the changes made in this Amendment as of the Amendment No. 2 Effective Date;
5.2 Except as expressly amended hereby or specifically waived above, all of the terms and provisions of the Credit Agreement and all other Loan Documents are and shall remain in full force and effect and are hereby ratified and confirmed;
5.3 The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lenders, the Borrower, Lead Arranger or the Administrative Agent under any of the Loan Documents, nor constitute a waiver or amendment of any other provision of any of the Loan Documents or for any purpose except as expressly set forth herein; and
5.4 This Amendment is a Loan Document.
Section 6. Execution in Counterparts
This Amendment may be executed by the parties hereto in several counterparts (including by facsimile or other electronic imaging means (e.g., .pdf or .tif), each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.
Section 7. Governing Law
THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 8. Headings
The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof.
Section 9. Notices
All communications and notices hereunder shall be given as provided in the Credit Agreement.
Section 10 . Severability
The fact that any term or provision of this Amendment is held invalid, illegal or unenforceable as to any person in any situation in any jurisdiction shall not affect the validity, enforceability or legality of the remaining terms or provisions hereof or the validity, enforceability or legality of such offending term or provision in any other situation or jurisdiction or as applied to any person.
Section 11. Successors
The terms of this Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.
Section 12. Cross-References
References in this Amendment to any Section are, unless otherwise specified or otherwise required by the context, to such Section of this Amendment.
Section 13. Affirmations
13.1 Each Loan Party signatory hereto hereby (a) ratifies and affirms its obligations under the Loan Documents (including guarantees and security agreements) executed by the undersigned and (b) acknowledges, renews and extends its continued liability under all such Loan Documents and agrees such Loan Documents remain in full force and effect, in each case, as modified by this Amendment.
13.2 Each Loan Party signatory hereto hereby reaffirms, as of the Amendment No. 2 Effective Date, (a) the covenants and agreements contained in each Loan Document to which it is a party, including, in each case, such covenants and agreements as in effect immediately after giving effect to this Amendment and the transactions contemplated thereby, and (b) its guarantee of payment of the Obligations pursuant to the Guaranty and the Lien on the Collateral securing payment of the Obligations pursuant to the Security Documents.
13.3 Each Loan Party signatory hereto hereby certifies that, as of the date hereof (both before and after giving effect to the occurrence of the Amendment No. 2 Effective Date), the representations and warranties made by it contained in the Loan Documents to which it is a party are true and correct in all material respects (except that any representation or warranty that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects) with the same effect as if then made (unless expressly stated to relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that any representation or warranty that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects) as of such earlier date).
13.4 Each Loan Party signatory hereto hereby acknowledges and agrees that the acceptance by the Administrative Agent and each Lender shall not be construed in any manner to establish any course of dealing on the Administrative Agents or Lenders part, including the providing of any notice or the requesting of any acknowledgment not otherwise expressly provided for in any Loan Document with respect to any future amendment, waiver, supplement or other modification to any Loan Document or any arrangement contemplated by any Loan Document.
13.5 Each Loan Party signatory hereto hereby represents and warrants that, immediately after giving effect to this Amendment, each Loan Document, in each case as modified by this Amendment (where applicable), to which it is a party, assuming the due execution and delivery of such Loan Document as modified (where applicable) by each of the other parties thereto, continues to be a legal, valid and binding obligation of the undersigned, enforceable against such party in accordance with its terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally and by principles of equity).
[SIGNATURE PAGES FOLLOW]
IN WINTER WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers and general partners thereunto duly authorized, as of the date first written above.
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SPIRIT AEROSYSTEMS, INC. |
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Mark J. Suchinski |
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Vice President, Treasurer & Financial Planning |
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SPIRIT AEROSYSTEMS HOLDINGS, INC. |
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Mark J. Suchinski |
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SPIRIT AEROSYSTEMS INTERNATIONAL HOLDINGS, INC. |
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Joseph T. Boyle |
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SPIRIT AEROSYSTEMS FINANCE, INC. |
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SPIRIT AEROSYSTEMS INVESTCO, LLC |
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SPIRIT AEROSYSTEMS OPERATIONAL INTERNATIONAL, INC. |
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SPIRIT AEROSYSTEMS, INC.
AMENDMENT NO. 2
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SPIRIT DEFENSE, INC. |
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SPIRIT AEROSYSTEMS, INC.
AMENDMENT NO. 2
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Bank of America, N.A., |
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as Administrative Agent and Collateral Agent |
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SPIRIT AEROSYSTEMS, INC.
AMENDMENT NO. 2
LENDERS SIGNATURE PAGES ON FILE WITH ADMINISTRATIVE AGENT
Schedule 1
Defined Terms
Advance Percentage means as follows:
(a) with respect to Eligible Receivables, seventy percent (70%);
(b) with respect to Eligible Raw Materials Inventory and Eligible Finished Goods Inventory, sixty percent (60%);
(c) with respect to Eligible Work-in-Process Inventory, thirty-five percent (35%);
(d) with respect to Eligible P&E, fifty percent (50%);
(e) with respect to Eligible Real Estate, fifty percent (50%); and
(f) with respect to Eligible Intercompany Loans, seventy-five percent (75%).
Aggregate Borrowing Base Amount means, as of any date of determination, the sum of the Eligible Collateral Borrowing Base Amounts for each type of Eligible Collateral.
Amendment No. 2 to Credit Agreement means that certain Amendment No. 2 to Credit Agreement dated as of August 2, 2013 by and among the Loan Parties, the Lenders party thereto and Bank of America, as Administrative Agent.
Amendment No. 2 Effective Date means August 2, 2013.
Borrowing Base Certificate means a certificate substantially in the form of Exhibit 1.01.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq .).
Customary Permitted Liens means, with respect to all Eligible Collateral, the Permitted Liens described in clauses (i) , (v) , and (xv) of Section 8.02 and (b) solely with respect to Eligible P&E and Eligible Real Estate, Permitted Liens described in clauses (vii) and (x) , of Section 8.02 .
Eligible Collateral means Eligible Receivables, Eligible Raw Materials Inventory, Eligible Finished Goods Inventory, Eligible Work-in-Process Inventory, Eligible P&E, Eligible Real Estate and Eligible Intercompany Loans of the Loan Parties; provided that upon the occurrence of any Airbus Discontinuance or any 787 Discontinuance, Eligible Collateral shall exclude any Eligible Receivables, Eligible Raw Materials Inventory, Eligible Finished Goods Inventory, Eligible Work-in-Process Inventory and/or Eligible P&E associated with the 787 Program or the A350 XWB Program, as applicable.
Eligible Collateral Borrowing Base Amount means, as of any date of determination, with respect to any Eligible Collateral, the Eligible Value for such Eligible Collateral multiplied by the Advance Percentage for such Eligible Collateral.
Eligible Finished Goods Inventory means, as of any date of determination, the items classified by the Loan Parties as finished goods in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary
Permitted Liens.
Eligible Intercompany Loans means loans made by any of the Loan Parties to any Foreign Subsidiary of the Borrower that constitute Collateral; provided that (a) loans shall not be included in Eligible Intercompany Loans unless the promissory note or other instrument evidencing such Indebtedness has been delivered to the Collateral Agent, together with a duly executed allonge or other instrument of transfer with respect thereto and (b) a loan shall not be included in Eligible Intercompany Loans if the aggregate outstanding principal amount thereof, when taken together with all other outstanding Indebtedness of the applicable obligor, exceeds the going concern value of the obligor (determined as of the date of the Borrowing Base Certificate most recently delivered pursuant to Section 7.01(m)) with respect to such loan.
Eligible P&E means, as of any date of determination, the items classified by the Loan Parties as property and equipment (other than real property) in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens; provided that any such property and equipment constituting a fixture (as defined in the Uniform Commercial Code), shall constitute Eligible P&E only if a fixture filing has been filed in the appropriate local jurisdiction in respect thereof. For purposes of clarity, any tooling not owned by the Loan Parties shall not be included in Eligible P&E.
Eligible Raw Materials Inventory means, as of any date of determination, the items classified by the Loan Parties as raw materials in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens.
Eligible Real Estate means, as of any date of determination, Mortgaged Properties in respect of which the Collateral Agent has valid, perfected and enforceable Mortgages, subject only to Customary Permitted Liens; provided that no Mortgaged Property shall constitute Eligible Real Estate until the Loan Parties have delivered to the Collateral Agent appraisals that comply with the requirements of the Federal Institutions Reform, Recovery and Enforcement Act with respect to a sampling of parcels of real estate included in the Mortgaged Properties (with the sample to be agreed between the Borrower and the Administrative Agent).
Eligible Receivables means, as of any date of determination, the items classified by the Loan Parties as accounts receivable in accordance with GAAP, in each case (a) that are owing by a Person that is not a consolidated Affiliate of any Loan Party, (b) that have not been outstanding for more than one hundred twenty (120) days, (c) that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens, (d) that are not unbilled receivables and (e) net of retainage. As used herein unbilled receivables means unbilled receivables on long-term aerospace contracts, comprised principally of revenue recognized on contracts for which amounts were earned but not contractually billable as of the date of determination, or amounts earned in which recovery will occur over the term of the contract, which could exceed one year, and retainage means any portion of the agreed upon contract payment withheld until the contracted for work is complete or substantially complete, including without limitation amounts due on Gulfstream G650 deliveries from 2010 through such date of determination.
Eligible Value means, as of any date of determination:
(a) with respect to Eligible Receivables, the Net Book Value of Eligible Receivables as derived from the general ledger or other financial records of the Loan Parties that is the basis for the most recent Borrowing Base Certificate delivered to the Administrative Agent in
accordance with the Credit Agreement;
(b) with respect to each of Eligible Raw Material Inventory, Eligible Finished Goods Inventory and Eligible Work-in-Process Inventory, the Net Book Value of such Eligible Raw Material Inventory, Eligible Finished Goods Inventory and Eligible Work-in-Process Inventory, as derived from the general ledger or other financial records of the Loan Parties that is the basis for the most recent Borrowing Base Certificate delivered to the Administrative Agent in accordance with the Credit Agreement;
(c) with respect to Eligible P&E, the Net Book Value of the Eligible P&E as derived from the general ledger or other financial records of the Loan Parties that is the basis for the most recent Borrowing Base Certificate delivered to the Administrative Agent in accordance with the Credit Agreement; and
(d) with respect to Eligible Real Estate, the Net Book Value of the Eligible Real Estate as derived from the general ledger or other financial records of the Loan Parties that is the basis for the most recent Borrowing Base Certificate delivered to the Administrative Agent in accordance with the Credit Agreement.
Eligible Work-in-Process Inventory means, as of any date of determination, items classified by the Loan Parties as work-in-process in accordance with GAAP, in each case (a) that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens, (b) net of deferred production costs to the extent they are included in work-in-process, (c) net of capitalized pre-production costs to the extent they are included in work-in-process and (d) net of forward loss provision to the extent it is included in work-in-process. As used herein, (x) deferred production costs shall mean inventory costs under long-term contracts that exceed the estimated average cost of all units expected to be produced to the extent the actual or expected excess-over-average is reasonably expected to be fully offset by lower-than-average costs in future periods of a contract, and (y) capitalized pre-production costs shall mean certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis or as a result of significant customer directed work changes.
Excluded Swap Obligation means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant under a Loan Document by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantors failure for any reason to constitute an eligible contract participant as defined in the Commodity Exchange Act (determined after giving effect to Section 4.08 and any and all guarantees of such Guarantors Swap Obligations by other Loan Parties) at the time the Guaranty of such Guarantor, or grant by such Guarantor of a security interest, becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a Master Agreement governing more than one Swap Contract, such exclusion shall apply to only the portion of such Swap Obligation that is attributable to Swap Contracts for which such Guaranty or security interest is or becomes illegal.
Master Agreement has the meaning set forth in the definition of Swap Contract.
Minimum Liquidity means, as of any date of determination, on an aggregate basis for all Loan Parties, the sum of (a) unrestricted and unencumbered (other than by Liens (x) in favor of the Administrative Agent or (y) permitted under clause (xv) of Section 8.02) cash maintained in accounts located in (i) the United States and (ii) to the extent that such cash is available after giving effect to any
reduction for repatriation or other taxes or fees associated with the repatriation of such cash into the United States, Scotland, and (b) unused Revolving Commitments actually available for Borrowing.
Net Book Value means, with respect to any asset of any Person (a) except in the case of accounts receivable, the gross book value of such asset on the balance sheet of such Person, minus depreciation or amortization in respect of such asset on such balance sheet, and (b) in the case of accounts receivable, the gross book value thereof minus any specific reserves attributable thereto, each determined in accordance with GAAP.
Qualified ECP Guarantor means at any time each Loan Party with total assets exceeding $10,000,000 or that qualifies at such time as an eligible contract participant under the Commodity Exchange Act and can cause another Person to qualify as an eligible contract participant at such time under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Specified Loan Party has the meaning specified in Section 4.08.
Suspension Period means the period from and including the Amendment No. 2 Effective Date through and including the date of receipt of a Compliance Certificate for the period of four fiscal quarters ending December 31, 2014 in accordance with Section 7.01(b).
Swap Obligations means with respect to any Guarantor any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of Section 1a(47) of the Commodity Exchange Act.
Total Secured Outstandings means, as of any date of determination, the sum of (a) the aggregate outstanding principal of all Term Loans plus (b) Total Revolving Outstandings plus (c) all other Indebtedness secured by a Lien.
Tulsa Assets means property or assets used for, or in support of, operations in or near Tulsa or McAlester, Oklahoma.
Schedule 8.01
Existing Indebtedness as of the Amendment No. 2 Effective Date Under Clauses (xii), (xvi), (xvii), (xviii) and (xix) of Section 8.01(a) of the Credit Agreement
1. Indebtedness evidenced by that certain Loan Agreement, dated as of April 1, 2006, between the Spirit AeroSystems, Inc. and Spirit Aerosystems (Europe) Ltd., as borrower, as amended, restated, supplemented or otherwise modified from time to time.
2. Indebtedness evidenced by that certain Loan Agreement, dated as of June 18, 2009, among Spirit AeroSystems, Inc. and Spirit AeroSystems France Sarl, as borrower, as amended, restated, supplemented or otherwise modified from time to time.
3. [OTHERS]
Exhibit 1.01
[Form of] Borrowing Base Certificate
Financial Statement Date: ,
To: Bank of America, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of April 18, 2012 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, including without limitation pursuant to that certain Amendment No. 1 dated as of October 26, 2012 and that certain Amendment No. 2 dated as of August 2, 2013, the Credit Agreement ), among Spirit AeroSystems, Inc., a Delaware corporation (the Borrower ), the Parent Guarantor and the other Guarantors identified therein, the Lenders from time to time party thereto and Bank of America, N.A., as Administrative Agent and Collateral Agent. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower pursuant to Section 7.01(m) of the Credit Agreement, and that attached hereto as Schedule 1 is the calculation of the Aggregate Borrowing Base Amount for the most recent Fiscal Quarter covered by the financial statements referenced above in conformance with the terms of the Credit Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of , .
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SPIRIT AEROSYSTEMS, INC., |
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a Delaware corporation |
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By: |
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Name: |
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Title: |
[Must be a Responsible Officer] |
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Schedule 1
ELIGIBLE COLLATERAL |
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AMOUNT |
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1. |
Eligible Receivables(1) |
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a |
Net Book Value of accounts receivable in accordance with GAAP that are owing by a Person that is not a consolidated Affiliate of the Company |
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$ |
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b. |
Net Book Value of accounts receivable in accordance with GAAP that have been outstanding for more than one hundred twenty (120) days |
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$ |
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c. |
Net Book Value of accounts receivable in accordance with GAAP that do not constitute Collateral or in which the Collateral Agent does not have a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens |
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$ |
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d. |
Net Book Value of accounts receivable in accordance with GAAP that are unbilled receivables |
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$ |
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e. |
Retainage |
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$ |
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f. |
Eligible Value of Eligible Receivables (1.a. minus 1.b. minus 1.c. minus 1.d. minus 1.e.) |
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$ |
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g. |
Eligible Receivables to be included in Aggregate Borrowing Base Amount (70% times 1.f.) |
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$ |
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2. |
Eligible Raw Materials Inventory(2) |
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a. |
Net Book Value of raw materials in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens |
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$ |
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b. |
Eligible Raw Materials Inventory to be included in Aggregate Borrowing Base Amount (60% times 2.a.) |
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$ |
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3. |
Eligible Finished Goods Inventory(3) |
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a. |
Net Book Value of finished goods in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens |
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$ |
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b. |
Eligible Finished Goods Inventory to be included in Aggregate Borrowing Base Amount (60% times 3.a.) |
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$ |
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4. |
Eligible Work-in-Process Inventory(4) |
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a. |
Net Book Value of work-in-process in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens |
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$ |
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b. |
Deferred production costs to the extent they are included in work-in-process |
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$ |
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c. |
Capitalized pre-production costs to the extent they are included in work-in- process |
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$ |
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d. |
Forward loss provision to the extent it is included in work-in-process |
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$ |
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(1) Upon the occurrence of any Airbus Discontinuance or any 787 Discontinuance, any Eligible Receivables associated with the 787 Program or the A350 XWB Program shall be excluded.
(2) Upon the occurrence of any Airbus Discontinuance or any 787 Discontinuance, any Eligible Raw Materials Inventory associated with the 787 Program or the A350 XWB Program shall be excluded.
(3) Upon the occurrence of any Airbus Discontinuance or any 787 Discontinuance, any Eligible Finished Goods Inventory associated with the 787 Program or the A350 XWB Program shall be excluded.
(4) Upon the occurrence of any Airbus Discontinuance or any 787 Discontinuance, any Eligible Work-in-Process Inventory associated with the 787 Program or the A350 XWB Program shall be excluded.
e. Eligible Value of Eligible Work-in-Process Inventory (4.a. minus 4.b. minus 4.c. minus 4.d.) |
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$ |
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f. Eligible Work-in-Process Inventory to be included in Aggregate Borrowing Base Amount (35% times 4.e.) |
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$ |
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5. Eligible P&E(5)(6) |
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a. Net Book Value of property and equipment (other than real property) in accordance with GAAP that constitute Collateral and in which the Collateral Agent has a valid, perfected and enforceable security interest, subject only to Customary Permitted Liens(7) |
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$ |
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b. Eligible P&E to be included in Aggregate Borrowing Base Amount (50% times 5.a.) |
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$ |
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6. Eligible Real Estate |
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a. Net Book Value of Mortgaged Properties in respect of which the Collateral Agent has valid, perfected and enforceable Mortgages, subject only to Customary Permitted Liens(8) |
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$ |
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b. Eligible Real Estate to be included in Aggregate Borrowing Base Amount (50% times 6.a.) |
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$ |
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7. Eligible Intercompany Loans |
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a. Loans made by any of the Loan Parties to any Foreign Subsidiary of the Borrower that constitute Collateral(9) |
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$ |
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b. Eligible Intercompany Loans to be included in Aggregate Borrowing Base Amount (75% times 7.a.) |
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$ |
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AGGREGATE BORROWING BASE AMOUNT |
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1. Aggregate Borrowing Base Amount (1.g. plus 2.b. plus 3.b. plus 4.f. plus 5.b. plus 6.b. plus 7.b.) |
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$ |
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2. Total Secured Outstandings |
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a. Aggregate outstanding principal of all Terms Loans |
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$ |
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b. Total Revolving Outstandings |
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$ |
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c. All other Indebtedness secured by a Lien |
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$ |
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d. Total Secured Outstandings (2.a. plus 2.b. plus 2.c.) |
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$ |
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3. Section 8.12(e) of the Credit Agreement requires that the Borrower not permit Total Secured Outstandings to exceed the Aggregate Borrowing Base Amount set forth above. The Borrower [is][is not] in compliance with Section 8.12(e) of the Credit Agreement. |
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Note: In the event of conflict between the provisions and formulas set forth in this Schedule 1 and the
(5) Upon the occurrence of any Airbus Discontinuance or any 787 Discontinuance, any Eligible P&E associated with the 787 Program or the A350 XWB Program shall be excluded.
(6) Any tooling not owned by the Loan Parties shall not be included in Eligible P&E.
(7) Any such property and equipment constituting a fixture (as defined in the Uniform Commercial Code), shall constitute Eligible P&E only if a fixture filing has been filed in the appropriate local jurisdiction in respect thereof.
(8) No Mortgaged Property shall constitute Eligible Real Estate until the Loan Parties have delivered to the Collateral Agent appraisals that comply with the requirements of the Federal Institutions Reform, Recovery and Enforcement Act with respect to a sampling of parcels of real estate included in the Mortgaged Properties (with the sample to be agreed between the Borrower and the Administrative Agent).
(9) Loans shall not be included in Eligible Intercompany Loans (a) unless the promissory note or other instrument evidencing such Indebtedness has been delivered to the Collateral Agent, together with a duly executed allonge or other instrument of transfer with respect thereto and (b) if the aggregate outstanding principal amount thereof, when taken together with all other outstanding Indebtedness of the applicable obligor, exceeds the going concern value of the obligor with respect to such loan.
provisions and formulas set forth in the Credit Agreement, the provisions and formulas of the Credit Agreement shall prevail.
Exhibit 10.40
EMPLOYMENT AGREEMENT
This Employment Agreement (Agreement) is entered into as of June , 2013 (the Effective Date) by Spirit AeroSystems, Inc., a Delaware corporation (we, us, our, and other similar pronouns), and Heidi Wood (you, your, yours, and other similar pronouns). Our parent company is Spirit AeroSystems Holdings, Inc. (Holdings), and references in this Agreement to Spirit mean us and Holdings collectively.
Recitals
A . We are engaged in the manufacture, fabrication, maintenance, repair, overhaul, and modification of aerostructures and aircraft components, and market and sell our products and services to customers throughout the world (together with any other businesses in which Spirit may in the future engage, by acquisition or otherwise, the Business).
B. We have agreed to employ you as our Senior Vice President Strategy, and you have agreed to accept such employment in accordance with the terms and conditions of this Agreement.
C. In the course of performing your duties for us, you are likely to acquire confidential and proprietary information belonging to us, our customers, and our suppliers, develop relationships that are vital to our Business and goodwill, and acquire other important assets in which we have a protectable interest, and you have agreed to the covenants in this Agreement required to protect those assets.
Agreement
In consideration of the foregoing and the representations, warranties and mutual covenants herein, you and we agree as follows:
1. Employment
(a) Position and Responsibility We agree to employ you as our Senior Vice President Strategy, reporting to the Chief Executive Officer, to perform such duties in and about our Business as are appropriate for a person in such position, which may include serving as an executive officer or member of the board of directors of any other affiliated company at our request. The job title and duties referred to in the preceding sentence may be changed by us in our sole discretion at any time. Your office will be at our headquarters in Wichita, KS. You will devote your full time to this employment
(b) Employment Period Your employment will commence on the Effective Date, will continue for a period of two years after the Effective Date (the Initial Term), and will be automatically extended for successive one-year periods thereafter (each a Renewal Term), unless either of us provides the other with written notice at least ninety days in advance of the expiration of the Initial Term or the then-current Renewal Term, as applicable, that such period will not be so extended (the Initial Term and any Renewal Term are, collectively, the
Employment Period). In all cases, your employment is subject to earlier termination as provided in this Agreement.
2 . Performance
You will devote your best efforts and abilities to faithfully preserve and advance our Business, welfare, and best interests. You will strictly comply with all Spirit rules, policies, and procedures in effect and as amended from time to time, including, but not limited to, our Code of Ethical Business Conduct, Insider Trading Policy, Anti-Bribery Policy, Related Person Transaction Policy, Special Security Agreement, and internal and disclosure controls; follow all applicable U.S. and foreign laws and regulations; and be governed by our decisions and instructions consistent with the duties assigned to you.
3 . Compensation
Except as otherwise provided herein, for all services to be performed by you in any capacity, including without limitation any services as an officer, director, member of any committee, or any other duties assigned to you, during the Employment Period we will pay or provide you with the following, and you will accept the same, as compensation for your covenants in and performance of your duties under this Agreement:
(a) Base Salary You will be entitled to an annual salary of $400,000 (Base Salary), which will be paid in accordance with our policies and procedures. The Base Salary may be changed from time to time on a discretionary basis or based upon your and/or our performance or such other factors as the Board or the Boards compensation committee (Committee) deems appropriate in its sole discretion.
(b) Sign On Bonuses
(i) Signing Bonus Cash In consideration of entering into this Agreement, we will pay you a one-time grossed-up cash bonus of $150,000 (the Signing Bonus), plus an amount equal to all taxes required to be withheld with respect to your receipt of that payment, so that after such taxes are withheld you will receive a net amount of $150,000. This amount will be payable within 30 days of the Effective Date of this Agreement. Payment of the Signing Bonus is conditioned upon you being employed on the date payment is made and remaining employed by us for a period of not less than one year after the date of the payment. If the foregoing condition precedent is not satisfied with respect to this payment, this payment plus the grossed-up taxes thereon, must be immediately repaid to us, except that you will not be required to repay any amount if you are terminated by us without Cause. In the event of your termination under circumstances that require repayment of part or all of the Signing Bonus, we may deduct from your paycheck(s) (or other amounts owed to you) an amount equal to the amount due to be repaid. To the extent such deductions are not sufficient to fully reimburse us, you will remain obligated to pay us in full for such amounts still due and owing.
(ii) Signing Bonus Restricted Stock Subject to approval by the Holdings board of directors, in consideration of entering into this Agreement, we will grant you a
one-time award of $440,000 of restricted stock (the Bonus Shares) under the Spirit AeroSystems Holdings, Inc. Long-Term Incentive Plan, as amended or restated from time to time (the LTIP), subject to the terms and provisions of the LTIP and this Section 3(b). The Bonus Shares will vest in accordance with the following vesting schedule:
Years of Service
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Percent Vested
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Less than 2 |
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0 |
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2 but less than 3 |
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33 |
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3 but less than 4 |
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66 |
% |
4 or more |
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100 |
% |
For purposes of this vesting schedule, the Effective Grant Date will be May 7, 2013, which is the same date grants of shares under the LTIP were made to the broad class of LTIP participants for 2013, with the effect that the Bonus Shares will vest on the same schedule as the shares previously awarded to the broad class of LTIP participants for 2013. You will be credited with a year of service after the Effective Grant Date for each 12-month period after the Effective Grant Date during which you are continuously performing services (or deemed to be continuously performing services) for us.
(iii) Number of Shares For purposes of determining the number of shares of stock to be granted in connection with the award described in the foregoing clause (ii), the total dollar value of the award will be divided by an amount equal to the average of the opening value and the closing value of a share of our Class A common stock traded on the New York Stock Exchange, as determined on the third trading day after the date on which we publicly announce our earnings for the second fiscal quarter of 2013. The number of shares so determined with respect to each award will be rounded up to the nearest whole number.
(c) Short-Term Incentive Plan You are eligible to participate in the Spirit AeroSystems Holdings, Inc. Short-Term Incentive Plan, as amended or restated from time to time (STIP), pursuant to and in accordance with the terms and conditions of the STIP. Your STIP award opportunity will be 80% of Base Salary if target performance goals are reached and 160% of Base Salary if outstanding performance goals are reached. If target performance goals are not reached, you will be entitled to such incentive compensation, if any, as is otherwise provided by the STIP and our policies. In addition to the foregoing, we agree that (i) for the 2013 plan year, you will be entitled to an incentive compensation award under the STIP of 80% of Base Salary; (ii) the amount you are entitled to receive for the 2013 plan year will not be prorated due to service for less than the full 2013 plan year; (iii) the cash component payable to you for the 2013 plan year shall be paid to you on or before December 1, 2013, in the amount of $160,000, less applicable withholdings; and (iv) the stock component payable to you for the 2013 plan year shall be made in the time and manner consistent with the STIP, in or about February 2014, and will be subject to the STIPs normal vesting schedule.
(d) Long-Term Incentive Plan You are eligible to participate in annual awards under the LTIP granted by the Board or the Committee, pursuant to and in accordance
with the terms and conditions of the LTIP, as amended or restated from time to time. Each year of the Initial Term, you will receive an annual LTIP award equal to 110% of Base Salary. Your annual LTIP awards will be granted at the time and on the terms that we grant annual LTIP awards to our other executives.
(e) Nonqualified Deferred Compensation Plan You are eligible to participate in the Spirit AeroSystems Holdings, Inc. Amended and Restated Deferred Compensation Plan, as amended or restated from time to time (DCP), subject to and in accordance with the terms and provisions of the DCP. You may elect to voluntarily defer compensation under the DCP in accordance with the terms and conditions of the DCP and the plan administrators policies and procedures.
(f) Other Benefit Plans You will also be eligible to participate in other executive benefit plans, policies, practices, and arrangements in which one or more of our senior executives is eligible to participate from time to time, including without limitation (i) any defined benefit or defined contribution retirement plan, excess or supplementary plan, profit-sharing plan, savings plan, health and dental plan, disability plan, survivor-income and life-insurance plan, executive financial planning program, or other arrangement, or any successors thereto; (ii) any perquisite allowance or reimbursement arrangement the Board or Committee may adopt; and (iii) such other benefit plans as we may establish or maintain from time to time (collectively Benefit Plans). Your entitlement to any other compensation or benefits will be determined in accordance with the terms and conditions of the Benefit Plans and other applicable programs, practices, and arrangements then in effect.
(g) Earned Time Off You will be provided with earned time off and 12 paid holidays each year in accordance with our policies and practices in effect from time to time. Notwithstanding any contrary policy or practice, however, you will be credited with a minimum of 16 days of earned time off per year, of which 16 days will be immediately available to you upon the Effective Date.
(h) Fringe Benefits You will be provided with all other fringe benefits and perquisites awarded by the Board or Committee for your position level from time to time, including relocation benefits at the Companys Level 4 Policy.
(i) Withholding Taxes We will have the right to deduct from all payments made to you hereunder any federal, state, local and foreign taxes required by law to be withheld.
(j) Expenses During your employment, we will promptly pay or reimburse you for all reasonable out-of-pocket expenses incurred by you in the performance of your duties, in accordance with our policies and procedures then in effect.
The payment or reimbursement of expenses described in this Section 3(j) are not intended to provide for the deferral of compensation within the meaning of Code Section 409A because all such expenses are to be paid or reimbursed currently and/or will be tax-free. To the extent such expenses are deemed to provide for the deferral of compensation within the meaning of Code Section 409A, they are intended to meet the requirements of a specified date or a fixed
schedule of payments, and this reimbursement provision will be interpreted and applied in a manner consistent with such requirements. The right to payment of, or reimbursement for, expenses is not subject to liquidation or exchange for any other benefit.
4. Restrictions
(a) Acknowledgements You acknowledge and agree that (i) during the Employment Period, because of the nature of your responsibilities and the resources provided by us, you will acquire and/or develop valuable and confidential skills, information, trade secrets, and relationships with respect to our Business; (ii) you may develop on our behalf a personal relationship with various persons, including but not limited to representatives of customers and suppliers, where you may be a principal or our only contact with such persons, and as a consequence, you will occupy a position of trust and confidence to us; (iii) the Business involves the manufacturing, marketing, and sale of our products and services to customers throughout the world, our competitors, both in the United States and internationally, consist of both domestic and international businesses, and the services to be performed by you involve aspects of both our domestic and international business; and (iv) it would be impossible or impractical for you to perform your duties without access to our confidential and proprietary information and contact with persons who are valuable to our Business and goodwill.
(b) Reasonableness In view of the foregoing and in consideration of the remuneration to be paid to you, you agree that it is reasonable and necessary for the protection of our Business and goodwill that you undertake the covenants in this Section 4 regarding your conduct during and subsequent to your employment by us, and acknowledge we will suffer irreparable injury if you engage in any conduct prohibited by this Section 4.
(c) Non-Compete During the Employment Period and for a period of (1) in the case of involuntary termination without Cause, one year after termination of employment, and (2) in the case of termination of employment for any other reason, two years after such termination of employment, neither you nor any individual, corporation, partnership, limited liability company, trust, estate, joint venture, or other organization or association (Person) with your assistance nor any Person in which you directly or indirectly have any interest of any kind (without limitation) will, anywhere in the world, directly or indirectly own, manage, operate, control, be employed by, serve as an officer or director of, solicit sales for, invest in, participate in, advise, consult with, or be connected with the ownership, management, operation, or control of any business that is engaged, in whole or in part, in the Business, or any business that is competitive with the Business or any portion thereof, except for our exclusive benefit. You will not be deemed to have breached the provisions of this Section 4(c) solely by holding, directly or indirectly, not greater than 2% of the outstanding securities of a company listed on a national securities exchange.
(d) Non-Solicitation During the Employment Period and for a period of (1) in the case of involuntary termination without Cause, one year after termination of employment, and (2) in the case of termination of employment for any other reason, two years after such termination of employment, neither you nor any Person with your assistance nor any Person in which you directly or indirectly have an interest of any kind (without limitation) will, directly or
indirectly (A) solicit or take any action to induce any employee to quit or terminate their employment with us or our affiliates; or (B) employ as an employee, independent contractor, consultant, or in any other position any person who was an employee of ours or our affiliates during the aforementioned period.
(e) Confidentiality
(i) Confidential Information For purposes of this Agreement, Confidential Information means any information (whether in written, oral, graphic, schematic, demonstration, or electronic format, whether or not specifically marked or identified as confidential, and whether obtained by you before or after the Effective Date), not otherwise publicly disclosed by Spirit, regarding (without limitation) Spirit, its Business, customers, suppliers, business partners, prospects, contacts, contractual arrangements, discussions, negotiations, evaluations, labor negotiations, bids, proposals, aircraft programs, costs, pricing, financial condition or results, plans, strategies, governmental relations, projections, analyses, methods, processes, models, tooling, know-how, trade secrets, discoveries, research, developments, inventions, engineering, technology, proprietary information, intellectual property, designs, computer software, intelligence, legal or regulatory compliance, accounting decisions, opportunities, challenges, and any other information of a confidential or proprietary nature. Notwithstanding the foregoing, Confidential Information will not include any information that (A) you are required to disclose by the order of a court or administrative agency, subpoena, or other legal or administrative demand, so long as (1) you give us written notice and an opportunity to contest or seek confidential treatment of such disclosure; and (2) you fully cooperate at our expense with any such contest or confidential treatment request; (B) has been otherwise publicly disclosed or made publicly available by Spirit; or (C) was obtained by you in good faith after your employment with us ended from a source that was under no obligation of confidentiality to Spirit or any customer or supplier.
(ii) Non-Use and Non-Disclosure Without our express written consent, you will not at any time (whether during the Employment Period or after any termination of your employment for any reason) use for any purpose (other than for our exclusive benefit) or disclose to any Person (except at our direction) any Confidential Information.
(f) Effect of Breach You agree that a breach of this Section 4 cannot adequately be compensated by money damages and, therefore, we will be entitled, in addition to any other right or remedy available to us (including, but not limited, to an action for damages, accounting, or disgorgement of profit), to an injunction restraining such breach or a threatened breach and to specific performance of such provisions, and you consent to the issuance of such injunction and the ordering of specific performance without the requirement for us to post a bond or other security or to prove lack of an adequate remedy at law.
(g) Other Rights Preserved Nothing in this Section 4 eliminates or diminishes rights we may have with respect to the subject matter hereof under other agreements, our governing documents or statutes, or provisions of law (including but not limited to common law and the Uniform Trade Secrets Act), equity, or otherwise. Without limiting the foregoing, this
Section 4 does not limit any rights we may have under any Spirit policies or any agreements with you regarding Confidential Information.
5. Termination Your employment with us will terminate upon the following circumstances:
(a) Without Cause At any time at the election of either you or us for any reason or no reason, without Cause, but subject to the provisions of this Agreement. It is expressly understood that your employment is strictly at will.
(b) Cause At any time at our election for Cause.
Cause for this purpose means (i) your commission of a material breach of this Agreement or acts involving fraud, material and intentional dishonesty, material and intentional unauthorized disclosure of Confidential Information, the commission of a felony or other crime involving moral turpitude, or material violation of Spirit policies; (ii) direct and deliberate acts constituting a material breach of your duty of loyalty to Spirit; (iii) your refusal or material failure (other than by reason of your serious physical or mental illness, injury, or medical condition) to perform your job duties and responsibilities, including, but not limited to, any duties or responsibilities reasonably assigned to you by the Board, if such refusal or failure is not remedied within 30 days after you receive written notice thereof from the Board; (iv) your material underperformance, as reflected in two consecutive written performance reviews provided to you not less than 6 months apart; or (v) your inability to obtain and maintain the appropriate level of United States security clearance.
(c) Death or Disability Your death or your inability to perform the services required of you for a period of 180 days during any twelve-month period (Disability).
6. Effect of Termination
(a) General Rule If your employment terminates for any reason other than as described in Section 6(b) below, we will pay your compensation only through the last day of employment, and, except as otherwise expressly provided in this Agreement or the STIP, the LTIP, the DCP, or any Benefit Plan, we will have no further obligation to you.
(b) Termination Without Cause If your employment is terminated by us without Cause at any time during the Initial Term of the Agreement, then for so long as you comply with your continuing obligations under Section 4 we will (1) continue to pay your monthly Base Salary in effect immediately before termination of your employment for a period of six months, and (2) at our option, either pay the cost of COBRA medical and dental benefits coverage for a period of six months or pay you an amount each month for six months equal to the cost of providing COBRA medical and dental benefits.
To receive the benefits described in this Section 6(b), you will be required to sign a general release of claims in a form we deem acceptable. The release must be provided, and any revocation period must have expired, not later than 60 days after termination of employment. If
the foregoing conditions are satisfied then, except as provided below, payment of salary continuation and other benefits will begin 60 days after termination of employment.
Notwithstanding any contrary provision of this Section 6(b), if you are a Specified Employee at the time employment terminates, the payments described in Section 6(b) will, to the extent such amounts are deferred compensation within the meaning of Code Section 409A, be delayed until the date that is the earlier of (i) six months after your termination of employment, or (ii) the date of your death, and upon reaching that date, all amounts that would have been paid during the six-month delay period, plus interest thereon at the prime rate (as published in the Wall Street Journal) from the date the payment would have been made but for this paragraph to the date of payment, will be paid in a single lump sum, and all remaining amounts will be paid in equal monthly payments for the remainder of the Salary Continuation Period.
Specified Employee means that, with respect to a corporation any stock in which is publicly traded on an established securities market or otherwise, you are, or are treated under Code Section 409A as, either (A) an officer having annual compensation greater than $130,000 (as adjusted for cost-of-living increases in accordance with Code Section 416(i)(1)(A) and Code Section 415(d)), (B) a 5% owner, or (C) a 1% owner having annual compensation from the corporation of more than $150,000. For purposes of determining your percentage ownership, the constructive-ownership rules described in Code Section 416(i)(1)(B) will apply. The determination whether you are a Specified Employee will be made in accordance with regulations issued under Code Section 409A and other available guidance.
Except as otherwise expressly provided in this Agreement or in any Benefit Plan, we will have no further obligation to you
(c) Disability or Death If your employment terminates due to Disability or death, we will pay your monthly Base Salary only through the date of termination.
(d) Your Post-Termination Obligations On termination of employment for any reason, (1) you will resign as of the date of such termination as a director and officer of Spirit and its affiliates and as a fiduciary of any of Spirits or its affiliates benefit plans, (2) you will promptly execute and deliver upon such termination any document reasonably required by Spirit or an affiliate to evidence the foregoing resignations, (3) you will immediately deliver to us all Confidential Information, all copies and embodiments thereof, and all records, notes, worksheets, schematics, customer lists, supplier lists, memoranda, computer files and storage devices, analyses and derivative works based thereon or which relate in any way thereto, and (4) you will pay to us any amounts due and owing by you as specified in this Agreement.
(e) Survival of Provisions Your obligations under 4 through 9 of this Agreement will survive the expiration or termination of your employment for any reason.
7. Representations and Warranties You represent and warrant to us that:
(a) No Conflicts To the best of your knowledge, you are under no duty (whether contractual, fiduciary or otherwise) that would prevent, restrict or limit you from
entering into this Agreement and fully performing all duties and services for us, and the performance of such duties and services will not conflict with any other agreement, policy or obligation by which you are bound.
(b) No Hardship Your experience and/or abilities are such that observance of the covenants in this Agreement will not cause you any undue hardship and will not unreasonably interfere with your ability to earn a livelihood.
8. Clawback Right You acknowledge that certain amounts paid under this Agreement or the Benefit Plans described herein are subject to any Spirit policy on the recovery of compensation (i.e., a so-called clawback policy), as it exists now or as later adopted, and as thereafter amended from time to time.
9. Mediation
(a) General Obligation to Mediate Except as provided in this Agreement, prior to initiating any legal action, the parties agree to submit all unsettled claims, disputes, controversies, and other matters in question between them arising out of or relating to this Agreement (including but not limited to any claim that this Agreement or any of its provisions is invalid, illegal, or otherwise voidable or void) or the dealings or relationship between them (Disputes) to mediation in Wichita, Kansas, in accordance with the Commercial Mediation Rules of the American Arbitration Association currently in effect. The mediation will be private, confidential, voluntary, and nonbinding. Either party may withdraw from the mediation at any time before signing a settlement agreement by giving written notice to the other party and the mediator. The mediator will be neutral and impartial. The mediator will be disqualified as a witness, consultant, expert, or counsel for either party with respect to the matters in Dispute and any related matters. Each party will pay its respective attorneys fees and other costs associated with the mediation, and each party will equally bear the costs and fees of the mediator. If a Dispute cannot be resolved through mediation within 90 days of its submission to mediation, the parties may proceed with legal action.
(b) Confidentiality The parties agree that they will not disclose, or permit those acting on their respective behalf to disclose, any aspect of the proceedings under Section 9(a), including but not limited to the resolution or the existence or amount of any award, to any Person, unless divulged (i) to an agency of the federal or state government; (ii) pursuant to a court or administrative order; (iii) pursuant to a requirement of law; (iv) pursuant to prior written consent of the parties; (v) pursuant to a legal proceeding to enforce a settlement agreement or arbitration award; or (vi) by Spirit, to the extent required under federal securities laws and regulations. This provision does not prohibit the parties disclosure of the terms of any settlement to their attorney(s), accountant(s), financial advisor(s), or family members, so long as such persons first agree to comply with the provisions of this Section 9(b).
(c) Injunctions Notwithstanding anything to the contrary in this Section, the parties will have the right in a proper case to obtain temporary restraining orders and temporary or preliminary injunctive relief from a court of competent jurisdiction.
10. General
(a) Notices All notices required or permitted under this Agreement must be in writing and may be given by personal delivery, effective on the day of such delivery, or may be mailed by certified mail, return receipt requested, effective three business days after the date of mailing, addressed as follows:
To us:
Spirit AeroSystems, Inc.
Attention: Senior Vice President, General Counsel and Secretary
3801 S. Oliver
P.O. Box 780008, Mail Code K11-60
Wichita, KS 67278-0008
Facsimile: 316.529.4539
Email: jon.d.lammers@spiritaero.com
or such other person or contact information as designated in writing to you.
To you:
Heidi Wood
at your last known residence address, email, or facsimile number or to such other contact information as designated in writing to us.
(b) Successors Neither this Agreement nor any right or interest herein will be assignable or transferable (whether by pledge, grant of a security interest or otherwise) by you or your beneficiaries or legal representatives, except by will, the laws of descent and distribution, or inter vivos revocable living grantor trust as your beneficiaries, and any other purported assignment will be void. This Agreement will be binding upon and will inure to the benefit of Spirit, its successors and assigns, and will be binding on you and your heirs, beneficiaries, and legal and personal representatives.
(c) Waiver, Modification, and Interpretation No provisions of this Agreement may be modified, waived, or discharged except by written instrument signed by you and an appropriate officer of Spirit empowered to sign the same by our or Holdings Board. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time.
(d) Interpretation The validity, interpretation, construction, and performance of this Agreement will be governed by the laws of the State of Kansas, except that the corporate law of the State of Delaware will govern issues related to the issuance of common stock. Any
action brought to enforce or interpret this Agreement will be maintained exclusively in the state and federal courts located in Wichita, Kansas.
(e) Headings The headings in this Agreement are for reference purposes only and will not in any way affect the meaning or interpretation of any provision of this Agreement. No provision of this Agreement will be interpreted for or against either party on the basis that such party was the draftsman of such provision, and no presumption or burden of proof will arise disfavoring or favoring either party by virtue of the authorship of any provision of this Agreement.
(f) Counterparts We and you may execute this Agreement in counterparts, each of which will be deemed an original and both of which will constitute a single instrument. In proving this Agreement, it will not be necessary to produce or account for more than one such counterpart.
(g) Invalidity of Provisions If a court of competent jurisdiction declares that any provision of this Agreement is invalid, illegal, or unenforceable in any respect, then in lieu of such illegal, invalid, or unenforceable provision the court may add as a part of this Agreement a legal, valid, and enforceable provision as similar in terms to such illegal, invalid, or unenforceable provision as is possible. If such court cannot so substitute or declines to so substitute for such illegal, invalid, or unenforceable provision (i) such provision will be fully severable; (ii) this Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and (iii) the remaining provisions of this Agreement will continue in full force and effect and not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. The covenants in this Agreement will each be construed to be a separate agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action of yours against us, predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by us of any covenants in this Agreement.
(h) Entire Agreement This Agreement (together with the documents expressly referred to herein) constitutes the entire agreement between the parties, supersedes in all respects any prior agreement between you and us, and may not be changed except by written instrument duly executed by you and us in the same manner as this Agreement.
(i) Compliance with Code Section 409A The amounts payable to you after separation from service under 6(b) (if any) are intended to be exempt from the definition of deferred compensation for purposes of Code Section 409A as amounts payable only in the event of involuntary termination without Cause. To the extent any such amounts constitute deferred compensation for purposes of Code Section 409A, then those amounts will be paid to you in equal monthly installments, and payment of such amounts may not be accelerated. This Section 10(i) and the terms of this Agreement are intended to comply with, and will be interpreted and construed in accordance with and in a manner that complies with, the requirements of Code Section 409A, to the extent necessary.
[Signature page follows.]
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the date(s) set forth below, to be effective as of the Effective Date.
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Heidi Wood |
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9. Miscellaneous. This Agreement shall be binding upon, and inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns, but this Agreement shall not be assignable by the Recipient without the prior written consent of the Company. This Agreement constitutes the complete agreement between the parties hereto with respect to the subject matter hereof and shall continue in full force and effect until terminated by mutual agreement of the parties hereto. The section headings used herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. This Agreement shall be construed, performed and enforced in accordance with, and governed by, the internal laws of the State of Kansas, without giving effect to the principles of conflicts of law thereof, and each party consents to personal jurisdiction in such state and voluntarily submits to the jurisdiction of the courts of such state in any action or proceeding relating to this Agreement. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision hereof is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality, or unenforceability, without invalidating the remainder of this Agreement. This Agreement may not be modified or amended and no provision hereof may be waived, in whole or in part, except by a written agreement signed by the parties hereto. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
10. Term. This Agreement shall remain in full force and effect for two years from the date hereof, or until such time as the Recipient becomes employed by the Company, at which point the terms of the Recipients Employment Agreement will control the parties relationship as regards the subject matter of this Agreement.
IN WITNESS WHEREOF, the . parties hereto have duly executed this Agreement effective as of the date first set forth above.
[The Recipient] |
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Spirit AeroSystems , Inc. |
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/s/ Heidi R. Wood |
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/s/ Suzanne K. Smith |
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Title: |
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Title: |
Director, Global H.R. Services |
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Exhibit 10.41
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (Amendment) is entered into by Spirit AeroSystems, Inc., a Delaware corporation (we, us, our, and other similar pronouns), and Heidi Wood (you, your, yours, and other similar pronouns), to be effective as of the Effective Date.
Recitals
A. We previously entered into an Employment Agreement with you (the Agreement), and we now wish to amend the Agreement to reflect the terms and provisions set forth in this Amendment, with such amended terms to be effective as if included in the Agreement from its inception.
B. You have reviewed this Amendment and found it acceptable.
Amendment
On the basis of the foregoing, the Agreement is amended as follows, effective as of the Effective Date:
1. Short-Term Incentive Plan
Section 3(c) of the Agreement, relating to your participation in the STIP, is amended in its entirety to read as follows:
(c) Short-Term Incentive Plan You are eligible to participate in the Spirit AeroSystems Holdings, Inc. Short-Term Incentive Plan, as amended or restated from time to time (STIP), pursuant to and in accordance with the terms and conditions of the STIP. Your STIP award opportunity will be 80% of Base Salary if target performance goals are reached and 160% of Base Salary if outstanding performance goals are reached. If target performance goals are not reached, you will be entitled to such incentive compensation, if any, as is otherwise provided by the STIP and our policies. In addition to the foregoing, we agree that (i) for the 2013 plan year, you will be entitled to an incentive compensation award under the STIP of not less than 80% of Base Salary; (ii) the amount you are entitled to receive for the 2013 plan year will not be prorated due to service for less than the full 2013 plan year; (iii) one-half of the minimum STIP award payable to you for the 2013 plan year shall be paid to you on or before December 1, 2013, in cash in the amount of $160,000; and (iv) the remaining $160,000 of the minimum STIP award payable to you for the 2013 plan year, plus any additional award attributable to performance in excess of target, shall be paid to you one-half in cash and one-half in stock in or about February 2014, and, in the case of stock, will be subject to the STIPs normal vesting schedule.
2. Defined Terms
Terms not specifically defined in this Amendment will have the meanings set forth in the Agreement.
3. Remaining Provisions
The remaining provisions of the Agreement will continue in full force and effect unless and until further amended or modified in accordance with the terms of the Agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the parties on the date(s) set forth below.
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/s/ Suzanne K. Scott |
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Suzanne K. Scott |
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Director, Global H.R. Services |
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9/4/13 |
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Heidi Wood |
Exhibit 10.42
Date
Dear Name,
I would like to take this opportunity to thank and recognize you for your performance contributions, determination, flexibility and teamwork, which have made a positive impact within the Spirit team.
Effective x Date, your Executive Compensation will be adjusted as noted below:
Current Base Salary: |
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$xx |
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New Base Salary: |
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$xx |
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Current Short-Term Incentive Plan (STIP): |
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xx% |
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New Short-Term Incentive Plan (STIP): |
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xx% |
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Current Long-Term Incentive Plan (LTIP): |
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xx% |
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New Long-Term Incentive Plan (LTIP): |
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xx% |
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Current Total Direct Compensation (TDC): |
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$xx |
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Your new Total Direct Compensation (TDC): |
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$xx |
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Once again, thank you and congratulations. I look forward to strong performance and achieving our goals in 201X and beyond.
Sincerely,
Manager
Exhibit 12.1
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Spirit Holdings |
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Twelve Months Ended |
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December 31,
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December 31,
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December 31,
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December 31,
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December 31,
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Earnings: |
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Pre-tax income from continuing operations before adjustment for noncontrolling interests in consolidated subsidiaries or income or loss from equity investees |
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$ |
(430.8 |
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$ |
11.4 |
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$ |
280.3 |
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$ |
297.8 |
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$ |
272.8 |
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Add: Fixed Charge (from below) |
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81.9 |
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95.1 |
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89.6 |
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73.0 |
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54.0 |
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Add: Amortization of capitalized interest |
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3.8 |
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3.6 |
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2.9 |
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2.1 |
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2.3 |
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Add: Distributed income of equity investee |
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0.5 |
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(0.7 |
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(1.0 |
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(0.7 |
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(0.2 |
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Subtract: Capitalized interest expense |
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5.8 |
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7.5 |
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7.1 |
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$ |
(350.4 |
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$ |
101.9 |
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$ |
371.8 |
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$ |
372.2 |
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$ |
321.8 |
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Fixed charges: |
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Interest expense (including amortization of debt issuance costs, debt discounts and premiums) |
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$ |
70.1 |
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$ |
82.9 |
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$ |
77.5 |
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$ |
59.1 |
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$ |
43.6 |
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Add: Capitalized interest expense |
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5.8 |
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7.5 |
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5.4 |
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10.3 |
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7.1 |
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Add: Portion of rentals representing interest (1/3 of Operating Lease Payments) |
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6.0 |
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4.6 |
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6.7 |
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3.6 |
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3.3 |
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$ |
81.9 |
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$ |
95.0 |
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$ |
89.6 |
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$ |
73.0 |
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$ |
54.0 |
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Ratio of earnings to fixed charges |
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(4.3 |
) |
1.1 |
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4.1 |
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5.1 |
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6.0 |
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EXHIBIT 21.1
Subsidiaries of Spirit AeroSystems Holdings, Inc. Delaware
Spirit AeroSystems, Inc. Delaware
Spirit AeroSystems Finance, Inc. Delaware
Subsidiaries of Spirit AeroSystems, Inc. Delaware
Spirit AeroSystems International Holdings, Inc. Delaware
Spirit AeroSystems Operations International, Inc. Delaware
Spirit AeroSystems North Carolina, Inc. North Carolina
Spirit Defense, Inc. Delaware
Subsidiaries of Spirit AeroSystems International Holdings, Inc.
Spirit AeroSystems (Europe) Limited United Kingdom
Spirit AeroSystems Malaysia Sdn Bhd Malaysia
Spirit AeroSystems Singapore Pte. Ltd. Singapore
Spirit AeroSystems Global Investments, CV Netherlands
Spirit AeroSystems Investco, LLC Delaware
Spirit AeroSystems Canada, Ltd. Canada
Subsidiaries of Spirit AeroSystems Global Investments, CV Netherlands
Spirit AeroSystems France SARL France
Spirit AeroSystems Global Investments Cooperatief U.A. Netherlands
Spirit AeroSystems Global Investments B.V. Netherlands
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-146112, 333-150401, 333-150402, and 333-174951), Form S-4 (Nos. 333-16334 and 333-17116) and Form S-3 (No. 333-173369) of Spirit AeroSystems Holdings, Inc. of our report dated February 19, 2014 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K .
/s/ PricewaterhouseCoopers LLP |
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PricewaterhouseCoopers LLP |
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Kansas City, Missouri |
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February 19, 2014 |
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Larry A. Lawson, certify that:
1. I have reviewed this Annual Report on Form 10-K of Spirit AeroSystems Holdings, Inc. (registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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/s/ Larry A. Lawson |
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Larry A. Lawson |
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President and Chief Executive Officer |
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Date: February 19, 2014 |
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sanjay Kapoor, certify that:
1. I have reviewed this Annual Report on Form 10-K of Spirit AeroSystems Holdings, Inc. (registrant);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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/s/ Sanjay Kapoor |
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Sanjay Kapoor
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Date: February 19, 2014
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Spirit AeroSystems Holdings, Inc. (the Company) on Form 10-K for the period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Larry A. Lawson, as President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Larry A. Lawson |
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Larry A. Lawson
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Date: February 19, 2014
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Spirit AeroSystems Holdings, Inc. (the Company) on Form 10-K for the period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I,Sanjay Kapoor, as Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Sanjay Kapoor |
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Sanjay Kapoor
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Date: February 19, 2014