Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
  Form 10-Q
  (Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended April 2, 2015
 
Or
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                    to                 
 
Commission File Number 001-33160
 
Spirit AeroSystems Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
20-2436320
(State or other jurisdiction of
 incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
3801 South Oliver
Wichita, Kansas 67210
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code:
(316) 526-9000
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   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 x   No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
 
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 x
 
As of April 23, 2015, the registrant had outstanding 141,629,393 shares of class A common stock, $0.01 par value per share, and 121 shares of class B common stock, $0.01 par value per share.
 

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Table of Contents

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
Page
 
 
 
 


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Table of Contents

PART 1. FINANCIAL INFORMATION
 
Item 1. Financial Statements (unaudited)
 
Spirit AeroSystems Holdings, Inc.
 
Condensed Consolidated Statements of Operations
(unaudited)
 
 
For the Three
 Months Ended
 
April 2,
2015
 
April 3,
2014
 
($ in millions, except per share data)
Net revenues
$
1,742.2

 
$
1,728.5

Operating costs and expenses
 

 
 

Cost of sales
1,448.3

 
1,467.3

Selling, general and administrative
51.6

 
60.5

Research and development
7.0

 
6.3

Total operating costs and expenses
1,506.9

 
1,534.1

Operating income
235.3

 
194.4

Interest expense and financing fee amortization
(17.9
)
 
(35.4
)
Other (expense) income, net
(6.4
)
 
1.3

Income before income taxes and equity in net income of affiliate
211.0

 
160.3

Income tax provision
(29.4
)
 
(6.9
)
Income before equity in net income of affiliate
181.6

 
153.4

Equity in net income of affiliate
0.3

 
0.2

Net income
$
181.9

 
$
153.6

Earnings per share
 

 
 

Basic
$
1.31

 
$
1.08

Diluted
$
1.30

 
$
1.07

 
See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.
 
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
 
 
For the Three
Months Ended
 
April 2,
2015
 
April 3,
2014
 
($ in millions)
Net income
$
181.9

 
$
153.6

Changes in other comprehensive (loss) income, net of tax:
 

 
 

Settlement of swap, net of tax effect of zero for each of the three months ended, respectively
1.1

 
—

Unrealized foreign exchange loss on intercompany loan, net of tax effect of $0.6 and $0.1 for the three months ended, respectively
(2.4
)
 
(0.2
)
Foreign currency translation adjustments
(12.7
)
 
0.4

Total other comprehensive (loss) income
(14.0
)
 
0.2

Total comprehensive income
$
167.9

 
$
153.8

 
See notes to condensed consolidated financial statements (unaudited)

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Table of Contents

Spirit AeroSystems Holdings, Inc.
 
Condensed Consolidated Balance Sheets
(unaudited)
 
 
April 2,
2015
 
December 31,
2014
 
($ in millions)
Current assets
 

 
 

Cash and cash equivalents
$
749.5

 
$
377.9

Accounts receivable, net
601.0

 
605.6

Inventory, net
1,702.4

 
1,753.0

Deferred tax asset - current
39.0

 
53.2

Other current assets
69.1

 
262.4

Total current assets
3,161.0

 
3,052.1

Property, plant and equipment, net
1,776.7

 
1,783.6

Pension assets
210.5

 
203.4

Other assets
124.5

 
123.6

Total assets
$
5,272.7

 
$
5,162.7

Current liabilities
 

 
 

Accounts payable
$
679.2

 
$
611.2

Accrued expenses
256.9

 
329.1

Profit sharing
20.5

 
111.8

Current portion of long-term debt
30.2

 
9.4

Advance payments, short-term
145.5

 
118.6

Deferred revenue, short-term
39.3

 
23.4

Deferred grant income liability - current
10.3

 
10.2

Other current liabilities
45.9

 
45.1

Total current liabilities
1,227.8

 
1,258.8

Long-term debt
1,115.1

 
1,144.1

Advance payments, long-term
643.3

 
680.4

Pension/OPEB obligation
74.7

 
73.0

Deferred grant income liability - non-current
91.9

 
96.1

Deferred revenue and other deferred credits
67.3

 
27.5

Other liabilities
258.2

 
260.8

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, 141,678,165 and 141,084,378 shares issued, respectively
1.4

 
1.4

Common stock, Class B par value $0.01, 150,000,000 shares authorized, 121 and 4,745 shares issued, respectively
—

 
—

Additional paid-in capital
1,040.1

 
1,035.6

Accumulated other comprehensive loss
(167.8
)
 
(153.8
)
Retained earnings
1,049.4

 
867.5

Treasury stock, at cost (4,000,000 shares each period, respectively)
(129.2
)
 
(129.2
)
Total shareholders’ equity
1,793.9

 
1,621.5

Noncontrolling interest
0.5

 
0.5

Total equity
1,794.4

 
1,622.0

Total liabilities and equity
$
5,272.7

 
$
5,162.7

 See notes to condensed consolidated financial statements (unaudited)

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Table of Contents

Spirit AeroSystems Holdings, Inc.  
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
For the Three
Months Ended
 
April 2,
2015
 
April 3,
2014
 
($ in millions)
Operating activities
 

 
 

Net income
$
181.9

 
$
153.6

Adjustments to reconcile net income to net cash provided by operating activities
 

 
 

Depreciation expense
43.6

 
41.3

Amortization expense
0.5

 
4.7

Amortization of deferred financing fees
4.2

 
15.7

Accretion of customer supply agreement
0.4

 
0.1

Employee stock compensation expense
6.9

 
3.7

Excess tax benefit of share-based payment arrangements
—

 
(0.5
)
Loss (gain) from hedge contracts
1.6

 
(0.6
)
Loss from foreign currency transactions
6.4

 
1.8

Deferred taxes
1.2

 
(0.3
)
Pension and other post retirement benefits, net
(6.1
)
 
(8.0
)
Grant income
(2.6
)
 
(2.0
)
Equity in net income of affiliate
(0.3
)
 
(0.2
)
Changes in assets and liabilities
 

 
 

Accounts receivable
0.3

 
(196.7
)
Inventory, net
33.8

 
(51.6
)
Accounts payable and accrued liabilities
(10.2
)
 
50.6

Profit sharing/deferred compensation
(91.1
)
 
(21.7
)
Advance payments
(10.2
)
 
(30.6
)
Income taxes receivable/payable
198.0

 
72.5

Deferred revenue and other deferred credits
56.7

 
4.8

Other
8.7

 
8.4

Net cash provided by operating activities
423.7

 
45.0

Investing activities
 

 
 

Purchase of property, plant and equipment
(40.3
)
 
(53.0
)
Proceeds from sale of assets
—

 
0.1

Net cash used in investing activities
(40.3
)
 
(52.9
)
Financing activities
 

 
 

Proceeds from issuance of debt
535.0

 
—

Proceeds from issuance of bonds
—

 
300.0

Principal payments of debt
(7.5
)
 
(9.5
)
Payments on term loan
(534.9
)
 
—

Payments on bonds
—

 
(227.2
)
Excess tax benefit of share-based payment arrangements
—

 
0.5

Debt issuance and financing costs
(4.7
)
 
(19.2
)
Change in restricted cash
—

 
(72.8
)
Net cash used in financing activities
(12.1
)
 
(28.2
)
Effect of exchange rate changes on cash and cash equivalents
0.3

 
(2.5
)
Net increase (decrease) in cash and cash equivalents for the period
371.6

 
(38.6
)
Cash and cash equivalents, beginning of period
377.9

 
420.7

Cash and cash equivalents, end of period
$
749.5

 
$
382.1

See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)



1.  Organization and Basis of Interim Presentation
 
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 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"). Holdings provides manufacturing and design expertise in a wide range of fuselage, propulsion and wing products and services for aircraft original equipment manufacturers ("OEM") and operators through its subsidiary, Spirit AeroSystems, Inc. ("Spirit"). 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.

In August 2014, Onex sold its remaining investment in the Company in a secondary offering of the Company's class A common stock.

In December 2014, Spirit divested its G280 and G650 programs, consisting of the design, manufacture and support of structural components for the Gulfstream G280 and G650 aircraft in Spirit’s facilities in Tulsa, Oklahoma, to Triumph Aerostructures - Tulsa, LLC, a wholly-owned subsidiary of Triumph Group Inc. ("Triumph").

The accompanying unaudited interim condensed 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-Q and Article 10 of Regulation S-X.  The Company's fiscal quarters are 13 weeks in length. Because the Company's fiscal year ends on December 31, the number of days in the Company's first and fourth quarters varies slightly from year to year. The year-end condensed balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.  The Company's investment in TSACCL, in which the Company does not have a controlling interest, is accounted for under 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 the 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 Company's international entities that have functional currencies other than the U.S. dollar 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.
 
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the three months ended April 2, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. Certain reclassifications have been made to the prior year financial statements and notes to conform to the 2015 presentation.

In connection with the preparation of the condensed consolidated financial statements, the Company evaluated subsequent events through the date the financial statements were issued. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company's 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2015 and subsequently amended on Form 10-K/A filed with the SEC on March 6, 2015 (the "2014 Form 10-K").


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


2.  New Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU ") No. 2015-03, Interest - Imputation of Interest, (FASB ASU 2015-03) which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance of debt issuance costs are not affected by the amendments in this update. FASB ASU 2015-03 is effective for annual and interim periods beginning after December 15, 2015 and requires the Company to apply the new guidance on a retrospective basis upon adoption. The adoption of FASB ASU 2015-03 is not expected to have a material impact on the Company’s consolidated financial statements.
 
In February 2015, the FASB issued ASU No. 2015-02, Consolidation: Amendments to the Consolidation Analysis (FASB ASU 2015-02). FASB ASU 2015-02 amended the process that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. FASB ASU 2015-02 is effective for the annual period ending after December 15, 2015, and for annual periods and interim periods thereafter. Early adoption is permitted, including adoption in an interim period. The adoption of FASB ASU 2015-02 is not expected to have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (FASB ASU 2014-09). This update is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. FASB ASU 2014-09 is effective in annual periods beginning after December 15, 2016 and for interim and annual reporting periods thereafter. Early application is not permitted for public entities. In April 2015, the FASB proposed a one-year delay in the effective date of the standard to January 1, 2018, with an option that would permit companies to adopt the standard as early as the original effective date. Early adoption prior to the original effective date is not permitted. A final decision on the effective date is expected in 2015. The Company is currently evaluating the new guidance to determine the impact it may have to its consolidated financial statements.

3.  Changes in Estimates

The Company has a Company-wide quarterly Estimate at Completion (EAC) process in which management assesses the progress and performance of the Company's contracts. This process requires management to review each program’s progress towards completion by evaluating the program schedule, changes to identified risks and opportunities, changes to estimated contract revenues and estimated contract costs over the current contract block, and any outstanding contract matters. Risks and opportunities include management's judgment about the cost associated with a program’s ability to achieve the schedule, technical requirements (e.g., a newly-developed product versus a mature product), and any other contract requirements. The majority of the Company's fixed priced contracts are life of aircraft program contracts. Due to the span of years it may take to complete a contract block and the scope and nature of the work required to be performed on those contracts, the estimation of total revenue and costs at completion is complicated and subject to many variables and, accordingly, is subject to change. When adjustments in estimated total contract block revenue or estimated total cost are required, any changes from prior estimates for delivered units are recognized in the current period as a cumulative catch-up adjustment for the inception-to-date effect of such changes.  Cumulative catch-up adjustments are driven by several factors including improved production efficiencies, assumed rate of production, the rate of overhead absorption, changes to scope of work and contract modifications. When estimates of total costs to be incurred on a contract block exceed estimates of total revenue to be earned, a provision for the entire loss on the contract block is recorded in the period in which the loss is determined. Changes in estimates are summarized below:


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


 
For the Three Months Ended
Changes in Estimates
April 2, 2015
April 3, 2014
Favorable Cumulative Catch-up Adjustment by Segment
 
 
Fuselage
$
2.7

$
9.0

Propulsion
9.3

4.8

Wing
—

2.8

Total Favorable Cumulative Catch-up Adjustment
$
12.0

$
16.6

 
 
 
Changes in Estimates on Loss Programs and (Forward Loss)
 
 
Fuselage
 
 
Boeing - All other platforms
$
2.9

$
—

Other Platforms
—

(0.9
)
Total Fuselage Change in Estimate on Loss Programs and (Forward Loss)
$
2.9

$
(0.9
)
Wing
 
 
Other Platforms
$
—

$
(0.3
)
Total Wing Forward Loss
$
—

$
(0.3
)
Total Change in Estimate on Loss Programs and (Forward Loss)
$
2.9

$
(1.2
)
 
 
 
Total Change in Estimate
$
14.9

$
15.4

EPS Impact (diluted per share based upon statutory rates)
$
0.07

$
0.07


The Company is currently working on several new and maturing programs which are in various stages of development, including the B787, A350 XWB and Rolls-Royce BR725 programs. These programs carry risks associated with design responsibility, development of production tooling, production inefficiencies during the initial phases of production, hiring and training of qualified personnel, increased capital and funding commitments, supplier performance, delivery schedules and unique customer requirements.  The Company has previously recorded forward loss charges on these programs. If the risks related to these programs are not mitigated, then the Company could record additional forward loss charges.

4.  Accounts Receivable, net
 
Accounts receivable, net consists of the following:
 
April 2,
2015
 
December 31,
2014
Trade receivables (1)(2)
$
589.7

 
$
598.4

Other
11.8

 
7.7

Less: allowance for doubtful accounts
(0.5
)
 
(0.5
)
Accounts receivable, net
$
601.0

 
$
605.6

 
 

(1)
Includes unbilled receivables of $26.0 at both April 2, 2015 and December 31, 2014.
(2)
Includes $135.1 held in retainage by a customer at December 31, 2014.

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 for which the recovery will occur over the term of the contract, which could exceed one year.




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Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


5.  Inventory
 
Inventories are summarized as follows:
 
April 2,
2015
 
December 31,
2014
Raw materials
$
246.1

 
$
254.5

Work-in-process
841.7

 
885.7

Finished goods
51.6

 
46.7

Product inventory
1,139.4

 
1,186.9

Capitalized pre-production
223.0

 
223.4

Deferred production
1,239.2

 
1,244.3

Forward loss provision
(899.2
)
 
(901.6
)
Total inventory, net
$
1,702.4

 
$
1,753.0

 
Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. Significant statement of work changes considered not reimbursable by the customer can also cause pre-production costs to be incurred. These costs are typically amortized over a certain number of shipset deliveries.

Deferred production includes costs for the excess of production costs over the estimated average cost per shipset, and credit balances for favorable variances on contracts between actual costs incurred and the estimated average cost per shipset for units delivered under the current production blocks.  Recovery of excess-over-average deferred production costs is dependent on the number of shipsets 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 losses on these contracts in future periods.

Provisions for anticipated losses on contract blocks are recorded in the period in which they become evident (“forward losses”) and included in inventory with any remaining amount reflected in accrued contract liabilities.

Non-recurring production costs include design and engineering costs and test articles.

Inventories are summarized by platform and costs below:
 
 
April 2, 2015
 
Product Inventory
 
 
 
 
 
 
 
 
 
Inventory
 
Non-Recurring
 
Capitalized Pre-
Production
 
Deferred
Production
 
Forward Loss
Provision
 
Total Inventory,
net April 2, 2015
B787
228.4

 
0.1

 
87.0

 
528.2

 
(606.0
)
 
237.7

Boeing - All other platforms (1)
476.7

 
11.9

 
6.3

 
(15.1
)
 
(36.8
)
 
443.0

A350 XWB
131.0

 
54.6

 
96.4

 
629.3

 
(119.7
)
 
791.6

Airbus - All other platforms
74.0

 
—

 
—

 
5.6

 
—

 
79.6

Rolls-Royce BR725 (2)
16.5

 
—

 
33.3

 
86.9

 
(136.7
)
 
—

Aftermarket
48.6

 
—

 
—

 
—

 
—

 
48.6

Other platforms
87.3

 
10.3

 
—

 
4.3

 
—

 
101.9

Total
$
1,062.5

 
$
76.9

 
$
223.0

 
$
1,239.2

 
$
(899.2
)
 
$
1,702.4


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Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


 
 
December 31, 2014
 
Product Inventory
 
 
 
 
 
 
 
 
 
Inventory
 
Non-Recurring
 
Capitalized Pre-
Production
 
Deferred
Production
 
Forward Loss
Provision
 
Total Inventory,
net December 31,
2014
B787
227.9

 
—

 
102.7

 
551.6

 
(606.0
)
 
276.2

Boeing - All other platforms (1)
497.4

 
7.7

 
7.4

 
(8.9
)
 
(38.8
)
 
464.8

A350 XWB
148.7

 
35.6

 
76.4

 
607.6

 
(120.1
)
 
748.2

Airbus - All other platforms
82.1

 
—

 
—

 
5.6

 
—

 
87.7

Rolls-Royce BR725 (2)
17.5

 
—

 
35.4

 
83.8

 
(136.7
)
 
—

Aftermarket
45.2

 
0.2

 
—

 
—

 
—

 
45.4

Other platforms
113.5

 
11.1

 
1.5

 
4.6

 
—

 
130.7

Total
$
1,132.3

 
$
54.6

 
$
223.4

 
$
1,244.3

 
$
(901.6
)
 
$
1,753.0

 
 

(1)
Forward loss charges recorded in prior periods on a program within Boeing - All other platforms exceeded the total inventory balance. The excess of the charge over program inventory is classified as a contract liability and reported in other current liabilities on the Condensed Consolidated Balance Sheet.  The total contract liability was $1.1 and $2.1 as of April 2, 2015 and December 31, 2014, respectively.
(2)
Forward loss charges recorded in prior periods on the Rolls-Royce BR725 program exceeded the total inventory balance. The excess of the charge over program inventory is classified as a contract liability and reported in other current liabilities on the Condensed Consolidated Balance Sheet.  The total contract liability was $12.2 as of both April 2, 2015 and December 31, 2014.
 
The following is a roll forward of the capitalized pre-production costs included in the inventory balance at April 2, 2015 :
 
Balance, December 31, 2014
$
223.4

Charges to costs and expenses
(21.5
)
Capitalized costs
21.1

Balance, April 2, 2015
$
223.0


The following is a roll forward of the deferred production costs included in the inventory balance at April 2, 2015 :
 
Balance, December 31, 2014
$
1,244.3

Charges to costs and expenses
(163.6
)
Capitalized costs
167.5

Exchange rate
(9.0
)
Balance, April 2, 2015
$
1,239.2

 
Significant amortization of capitalized pre-production and deferred production inventory will occur over the following contract blocks: 
Model
 
Contract Block
Quantity
 
Orders (1)
B787
 
500

 
847

A350 XWB
 
400

 
780

Rolls-Royce BR725
 
350

 
196


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


 
 

(1)
Orders are from the published firm-order backlogs of Airbus and Boeing.  For all other programs, orders represent purchase orders received from OEMs and are not reflective of OEM sales backlog.  Orders reported are total block orders, including delivered units.
 
Current block deliveries are as follows:
 
Model
 
Current Block
Deliveries
B787
 
314

A350 XWB
 
33

Rolls-Royce BR725
 
148

 
Contract block quantities are projected to fully absorb the balance of deferred production inventory.  Capitalized pre-production and deferred production inventories are at risk to the extent that the Company does 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.
 
6.  Property, Plant and Equipment, net
 
Property, plant and equipment, net consists of the following: 
 
 
April 2,
2015
 
December 31,
2014
Land
$
16.5

 
$
17.1

Buildings (including improvements)
570.3

 
572.9

Machinery and equipment
1,138.0

 
1,125.5

Tooling
854.4

 
841.2

Capitalized software
214.7

 
208.3

Construction-in-progress
142.3

 
138.3

Total
2,936.2

 
2,903.3

Less: accumulated depreciation
(1,159.5
)
 
(1,119.7
)
Property, plant and equipment, net
$
1,776.7

 
$
1,783.6

 
Interest costs associated with construction-in-progress are capitalized until the assets are completed and ready for use. Capitalized interest was $1.3 and $1.0 for the three months ended April 2, 2015 and April 3, 2014, respectively. Repair and maintenance costs are expensed as incurred. The Company recognized repair and maintenance costs of $30.3 and $23.9 for the three months ended April 2, 2015 and April 3, 2014, respectively.
 
The Company capitalizes certain costs, such as software coding, installation and testing, that are incurred to purchase or to create and implement internal-use computer software.  Depreciation expense related to capitalized software was $4.2 and $4.0 for the three months ended April 2, 2015 and April 3, 2014, respectively.
 
The Company 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.  The Company evaluated its long-lived assets at its locations and determined no impairment was necessary for the period ended April 2, 2015.  


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


7.  Other Assets
 
Other assets are summarized as follows:
 
 
April 2,
2015
 
December 31,
2014
Intangible assets
 

 
 

Patents
$
1.9

 
$
1.9

Favorable leasehold interests
6.3

 
6.3

Total intangible assets
8.2

 
8.2

Less: Accumulated amortization - patents
(1.5
)
 
(1.5
)
Accumulated amortization - favorable leasehold interest
(3.6
)
 
(3.5
)
Intangible assets, net
3.1

 
3.2

Deferred financing
 

 
 

Deferred financing costs
105.9

 
101.2

Less: Accumulated amortization - deferred financing costs (1)
(83.7
)
 
(79.5
)
Deferred financing costs, net
22.2

 
21.7

Other
 

 
 

Goodwill - Europe
2.7

 
2.9

Equity in net assets of affiliates
2.2

 
1.9

Customer supply agreement (2)
32.7

 
34.3

Restricted Cash
19.9

 
19.9

Other
41.7

 
39.7

Total
$
124.5

 
$
123.6

 

(1)
Includes charges related to debt extinguishment of $3.1 and $15.1 for the periods ended April 2, 2015 and December 31, 2014, respectively.
(2)
Under an agreement with the Company's customer Airbus, certain payments accounted for as consideration given by the Company to Airbus are being amortized as a reduction to net revenues.
 
8.  Advance Payments and Deferred Revenue/Credits
 
Advance payments. Advance payments are those payments made to Spirit by customers in contemplation of the future performance of services, receipt of goods, incurrence of expenditures, or for other assets to be provided by Spirit under a contract and are repayable if such obligation is not satisfied. The amount of advance payments to be recovered against production units expected to be delivered within a year is classified as a short-term liability on the Company's consolidated balance sheet, with the balance of the unliquidated advance payments classified as a long-term liability.

On April 8, 2014, the Company signed a memorandum of agreement with Boeing which suspended advance repayments related to the B787 program for a period of twelve months beginning April 1, 2014. Repayment recommenced on April 1, 2015 and any repayments which otherwise would have become due during such twelve-month period will be offset against the purchase price for shipset 1,001 and beyond.
 
Deferred revenue/credits. Deferred revenue/credits generally consist of nonrefundable amounts received in advance of revenue being earned for specific contractual deliverables or amounts that could be required to be refunded if certain performance obligations or conditions are not met. These payments are classified as deferred revenue/credits on the Company's Condensed Consolidated Balance Sheet when received and recognized as revenue as the production units are delivered or performance obligations or conditions are met.
 


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Advance payments and deferred revenue/credits are summarized by platform as follows:

 
April 2,
2015
 
December 31,
2014
B787
$
637.0

 
$
581.1

Boeing - All other platforms
15.8

 
16.4

A350 XWB
219.6

 
224.3

Airbus — All other platforms
3.6

 
4.1

Other
19.4

 
24.0

Total advance payments and deferred revenue/credits
$
895.4

 
$
849.9

 

9. Government Grants
 
The Company received grants in the form of government funding for a portion of the site construction and other specific capital asset costs at the Company's 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 ten -year period, which began in 2010, in a manner consistent with the job performance criteria. In Malaysia, the deferred grant income is being amortized based on the estimated lives of the eligible assets constructed with the grant funds as there are no performance criteria. The assets related to deferred grant income are consolidated within property, plant, and equipment.
 
Deferred grant income liability, net consists of the following:

Balance, December 31, 2014
$
106.3

Grant liability amortized
(0.7
)
Grant income recognized
(1.9
)
Exchange rate
(1.5
)
Total asset value related to deferred grant income, April 2, 2015
$
102.2

 
The asset related to the deferred grant income consists of the following:
 
Balance, December 31, 2014
$
113.2

Amortization
(1.3
)
Exchange rate
(1.4
)
Total asset value related to deferred grant income, April 2, 2015
$
110.5

 

10.  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 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.


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


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 the 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
 
April 2, 2015
 
At April 2, 2015 using
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
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Money Market Fund
$
205.4

 
$
205.4

 
$
—

 
$
205.4

 
$
—

 
$
—

 
 
Fair Value Measurements
 
December 31, 2014
 
At December 31, 2014 using
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
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Money Market Fund
$
88.3

 
$
88.3

 
$
—

 
$
88.3

 
$
—

 
$
—

Interest Rate Swaps
$
(1.1
)
 
$
—

 
$
(1.1
)
 
$
—

 
$
(1.1
)
 
$
—

 
The fair value of the interest rate swaps is 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 includes a senior secured term loan, senior unsecured notes and the Malaysian term loan.  The estimated fair value of the Company's debt obligations is based on the quoted market prices for such obligations or the historical default rate for debt with similar credit ratings. The following table presents the carrying amount and estimated fair value of long-term debt:
 
 
April 2, 2015
 
December 31, 2014
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Senior secured term loan A (including current portion)
$
528.3

 
$
525.0

(2)
$
—

 
$
—

 
Senior secured term loan B (including current portion)
—

 
—

(1)
$
534.4

 
$
527.1

(1)
Senior unsecured notes due 2020
300.0

 
319.1

(1)
300.0

 
320.3

(1)
Senior unsecured notes due 2022
299.5

 
313.0

(1)
299.5

 
304.7

(1)
Malaysian loan
5.7

 
5.0

(2)
6.7

 
5.8

(2)
Total
$
1,133.5

 
$
1,162.1

 
$
1,140.6

 
$
1,157.9

 
 
(1)
Level 1 Fair Value hierarchy
(2)
Level 2 Fair Value hierarchy 

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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)



11.  Derivative and Hedging Activities
 
The Company has historically entered into interest rate swap agreements to reduce its exposure to the variable rate portion of its long-term debt. On the inception date, the Company designates a derivative contract as either a fair value or cash flow hedge and links the contract to either a specific asset or liability on the balance sheet, or to forecasted commitments or transactions. The Company assesses, both at the hedges' inception and on a quarterly basis, whether the derivative item is effective in offsetting changes in fair value or cash flows. Any gains or losses on hedges are included in earnings when the underlying transaction that was hedged occurs. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values.
 
The Company has historically entered into 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. All assets 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 12, Debt for discussion of the Company's senior secured credit facilities.
 
Interest Rate Swaps
 
During the first quarter of 2015, as a result of Amendment No. 5 to its Credit Agreement, the Company unwound its interest rate swap agreements which had a notional amount of $250.0 . The company recognized a loss of $0.4 as a result of unwinding these interest rate swaps. This loss on derivatives not designated as hedging instruments is included in Other Expense on the Consolidated Statement of Operations for the three months ended April 2, 2015. In total, the Company paid $2.0 as a result of the settlement of the interest rate swap agreements.

As of April 2, 2015, the Company had no outstanding interest rate swap agreements. At December 31, 2014, the fair value of interest rate swaps designated as hedging instruments was a liability of $1.1 .
The impact on other comprehensive income ("OCI") and earnings from cash flow hedges for the three months ended April 2, 2015 and April 3, 2014 was as follows:
Location of Gain (Loss) Reclassified from Accumulated
OCI into Income
(Effective Portion)
 
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
 
 
For the Three Months Ended
 
 
 
For the Three Months Ended
 
 
April 2, 2015
 
April 3, 2014
 
 
 
April 2, 2015
 
April 3, 2014
Interest expense
 
$
(0.5
)
 
$
—

 
Other (expense) income
 
$
(1.6
)
 
$
(0.1
)
Total
 
$
(0.5
)
 
$
—

 
Total
 
$
(1.6
)
 
$
(0.1
)

 












16
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


12.  Debt
 
Total debt shown on the balance sheet is comprised of the following:
 
 
April 2, 2015
 
December 31, 2014
 
Current
Noncurrent
 
Current
Noncurrent
Senior secured term loan A
$
26.8

$
501.5

 
$
—

$
—

Senior secured term loan B
—

—

 
5.5

528.9

Senior notes due 2020
—

300.0

 
—

300.0

Senior notes due 2022
—

299.5

 
—

299.5

Malaysian term loan
2.5

3.2

 
3.0

3.7

Present value of capital lease obligations
0.9

10.9

 
0.9

12.0

Total
$
30.2

$
1,115.1

 
$
9.4

$
1,144.1

 
Senior Secured Credit Facilities
 
On March 18, 2015, Spirit AeroSystems, Inc., as borrower, Spirit AeroSystems Holdings, Inc., as parent guarantor, and certain of its subsidiaries entered into Amendment No. 5 (the “Amendment”) to the Company's senior secured Credit Agreement, dated as of April 18, 2012, as amended by Amendment No. 1, dated as of October 26, 2012, Amendment No. 2, dated as of August 2, 2013, Amendment No. 3, dated as of March 18, 2014 and Amendment No. 4, dated as of June 3, 2014 (the "Credit Agreement"). The Amendment provided for a new $535.0 senior secured term loan A (the “Term Loan”) with a maturity date of March 18, 2020 , which replaces the term loan B which had an amount outstanding of approximately $534.9 (the “Term Loan B”) that was scheduled to mature on September 15, 2020 . The Term Loan bears interest, at Spirit’s option, at either LIBOR plus 1.75% or a defined “base rate” plus 0.75% , subject to adjustment to amounts between and including LIBOR plus 1.75% and LIBOR plus 2.50% (or amounts between and including base rate plus 0.75% and base rate plus 1.50% , as applicable) based on changes to Spirit’s debt-to-EBITDA ratio. The principal obligations under the Term Loan are to be repaid in equal quarterly installments of $6.7 , with the remaining balance due at maturity of the Term Loan. The Amendment maintained substantially the same prepayment requirements and covenant structure under the Credit Agreement, and provided the Company with some additional flexibility with respect to certain activities. Spirit used the proceeds of the Term Loan to pay off the Term Loan B and to pay a portion of the fees and expenses payable in connection with the Amendment.

Substantially all of Spirit's assets, including inventory and property, plant and equipment, continue to be pledged as collateral for both the Term Loan and the revolving credit facility. As of April 2, 2015, the outstanding balance of the Term Loan was $528.3 . As a result of extinguishment of the Term Loan B, the Company recognized a loss on extinguishment of debt of $3.6 . Of this total charge, $3.1 is reflected within amortization of deferred financing fees and $0.5 is reflected within amortization expense on the Condensed Consolidated Statement of Cash Flows for the three months ended April 2, 2015.
 
Senior Notes
 
In November 2010, the Company issued $300.0 in aggregate principal amount 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 guarantee Spirit’s obligations under Spirit’s senior secured credit facility. The carrying value of the 2020 Notes was $300.0 as of April 2, 2015.

In March 2014, the Company issued $300.0 in aggregate principal amount of 5.25% Senior Notes due March 15, 2022 (the "2022 Notes") with interest payable, in cash in arrears, on March 15 and September 15 of each year, beginning September 15, 2014. The 2022 Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by the Company and its existing and future domestic subsidiaries that guarantee Spirit's obligations under its amended senior secured credit facility. The carrying value of the 2022 Notes was $299.5 as of April 2, 2015.
 


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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Malaysian Facility Agreement
 
In June 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 equivalent) from September 2011 through May 2017 and quarterly interest payments payable at a fixed interest rate of 3.50% per annum. As of April 2, 2015, the Malaysia Facility loan balance was $5.7 .
 
French Factory Capital Lease Agreement
 
In July 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 the Company's aerospace-related component assembly plant in Saint-Nazaire, France. Lease payments under the capital lease agreement are variable, subject to the three-month Euribor rate plus 2.20% . Lease payments are due quarterly through April 2025. As of April 2, 2015, the Saint-Nazaire capital lease balance was $7.8 .
 
Nashville Design Center Capital Lease Agreement
 
In September 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 under the capital lease agreement are due monthly, and are subject to yearly rate increases until the end of the lease term of 124 months . As of April 2, 2015, the Nashville Design Center capital lease balance was $2.2 .
 
13. Pension and Other Post-Retirement Benefits
 
 
 
Defined Benefit Plans
 
 
For the Three
  Months Ended
Components of Net Periodic Pension
Income
 
April 2,
2015
 
April 3,
2014
Service cost
 
$
0.3

 
$
—

Interest cost
 
12.0

 
12.9

Expected return on plan assets
 
(20.7
)
 
(22.3
)
Amortization of net loss
 
1.0

 
—

Net periodic pension income
 
$
(7.4
)
 
$
(9.4
)
 
 
 
Other Benefits
 
 
For the Three
Months Ended
Components of Other Benefit Expense
 
April 2,
2015
 
April 3,
2014
Service cost
 
$
0.7

 
$
0.7

Interest cost
 
0.6

 
0.7

Net periodic other benefit expense
 
$
1.3

 
$
1.4

 
Employer Contributions
 
The Company expects to contribute zero dollars to the U.S. qualified pension plan and a combined total of approximately $5.8 for the Supplemental Executive Retirement Plan (SERP) and post-retirement medical plans in 2015.  The Company's projected contributions to the U.K. pension plan for 2015 are zero . The entire amount contributed can vary based on exchange rate fluctuations.
 



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Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


14.  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.

The Executive Incentive Plan, Short-Term Incentive Plan ("STIP"), Long-Term Incentive Plan ("LTIP") and Director Stock Plan (collectively referred to as "Prior Plans") were replaced by the Omnibus Incentive Plan (the "Omnibus Plan") in 2014. No new awards will be granted under such Prior Plans. Outstanding awards under the Prior Plans will continue to be governed by the terms of such plans until exercised, expired, or otherwise terminated or canceled.

The Omnibus Plan provides for a Long-Term Incentive Award ("LTIA") for the 2014 plan year and forward. The LTIAs provide both time and performance based incentives.

•
75% of the LTIA is service-based restricted stock that will vest in equal installments over a three -year period.
•
25% of the LTIA is market-based restricted stock that will vest in the third year contingent upon total shareholder return ("TSR") compared to the Company’s peers.

For the three months ended April 2, 2015, the Company recognized a net total of $6.9 of stock compensation expense, which is net of stock forfeitures, and includes expense for the Prior Plans and the LTIA under the Omnibus Plan. For the three months ended April 3, 2014, the Company recognized $3.7 of stock compensation expense, net of forfeitures. The entire stock compensation expense of $6.9 and $3.7 , for the three months ended April 2, 2015 and April 3, 2014, respectively, was recorded as selling, general and administrative.

During the first quarter ended April 2, 2015, 428,758 shares of class A common stock with an aggregate grant date fair value of $20.9 were granted under the service-based portion of the Company's LTIA. In addition, 93,640 shares of class A common stock with an aggregate grant date fair value of $6.0 were granted under the market-based portion of the Company's LTIA under the Omnibus Plan and such shares are eligible to vest on the three-year anniversary of the grant date depending on total shareholder return compared to the Company's peers. Additionally, 12,293 shares of class A common stock with an aggregate grant date fair value of $0.6 awarded under the Company's LTIP vested during the quarter ended April 2, 2015.

15. Income Taxes
 
The process for calculating the Company's income tax expense involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to determine their recoverability. The total net deferred tax liability at April 2, 2015 and December 31, 2014 was $5.0 , resulting in no change in the period ended April 2, 2015.
 
The Company files income tax returns in all jurisdictions in which it operates. The Company establishes reserves to provide for additional income taxes that may be due upon audit. These reserves are established based on management’s assessment as to the potential exposure attributable to permanent tax adjustments and associated interest. All tax reserves are analyzed quarterly and adjustments made as events occur that warrant modification.

In general, the Company records income tax expense each quarter based on its best estimate as to the full year’s effective tax rate. Certain items, however, are given discrete period treatment and the tax effects for such items are therefore reported in the quarter that an event arises. Events or items that give rise to discrete recognition may include finalizing amounts in income tax returns filed, finalizing audit examinations for open tax years, expiration of statutes of limitations and changes in tax law.

However, the Company has determined that a calculation of an annual effective tax rate would not represent a reliable estimate for its U.S. operations due to historical differences between forecasted and actual U.S. pre-tax earnings and the effect of the Company's U.S. deferred tax valuation allowance, which create results with significant variations in the customary relationship between income tax expense and pre-tax income for the interim periods. Under the discrete method, the Company determines tax expense based upon actual results as if the interim period were an annual period. The discrete method was used for the Company's U.S. pre-tax income and an annual effective rate was used for its international pre-tax income.


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Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


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 continue to maintain a valuation allowance against nearly all of its net U.S. deferred tax assets as of April 2, 2015. At each reporting date, management considers all available positive and negative evidence, both new and historical, that could impact the future realization of deferred tax assets. Management will consider a release of the valuation allowance once there is sufficient positive evidence that it is more likely than not that the deferred tax assets will be realized, or when it is clearly demonstrated that the underlying deferred tax asset has been realized due to positive taxable income in the period the temporary difference was reversed. Any release of the valuation allowance will be recorded as a tax benefit increasing net income or other comprehensive income.

The net valuation allowance was decreased by $42.0 for the three months ended April 2, 2015. The reduction reflects the realization of certain deferred tax assets within the Company’s discrete method taxable income calculation and changes in deferred tax assets associated with certain state income tax credits for the three months ended April 2, 2015. To the extent that the Company generates positive taxable income and expects, with reasonable certainty, to continue to generate positive income the Company may release additional valuation allowance in future periods. This release would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period such release is recorded. The release of all or a portion of the valuation allowance may have a significant effect on the Company's tax expense in the period it is released.
        
The Company's income tax expense for 2015 does not reflect any benefit of the U.S. Federal Research Tax Credit attributable to 2015 as the legislation has not been extended beyond December, 2014. Should the legislation be extended during the year, the Company may record additional tax benefits for 2015 Research Tax Credit.

The 13.9% effective tax rate for the three months ended April 2, 2015 differs from the 4.3% effective tax rate for the same period of 2014 primarily due to higher U.S. net deferred tax asset valuation allowance decrease in 2015 netted against the release of the Malaysia tax reserve and deferred tax liabilities in the first quarter of 2014 as a result of formal approval of the tax holiday by the Malaysian tax authorities.
 
The Company is participating in the Internal Revenue Service’s Compliance Assurance Process (“CAP”) program for its 2014 tax year. Additionally, the Company has been selected for the Compliance Maintenance phase of the CAP program for its 2015 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. The HM Revenue & Customs completed its examination of the Company's 2009-2011 U.K. income tax returns and the statute of limitations has lapsed on the 2012 tax return. The Directorate General of Public Finance is currently examining the Company's 2011-2013 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.
 
16.  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.

 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. The Company did not pay any cash dividends in 2014. The Company's future dividend policy will depend on the requirements of financing agreements to which the Company may be a party. Any future determination to pay dividends will be at the discretion of the Company's Board of Directors and will depend upon, among other factors, the Company's results of

20
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


operations, financial condition, capital requirements and contractual restrictions. The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. As of April 2, 2015, no treasury shares have been reissued or retired.

The following table sets forth the computation of basic and diluted earnings per share:
 
 
For the Three Months Ended
 
April 2, 2015
 
April 3, 2014
 
Income
 
Shares
 
Per Share
Amount
 
Income
 
Shares
 
Per Share
Amount
Basic EPS
 

 
 

 
 

 
 

 
 

 
 

Income available to common shareholders
$
181.7

 
138.9

 
$
1.31

 
$
152.4

 
141.6

 
$
1.08

Income allocated to participating securities
0.2

 
0.1

 
 

 
1.2

 
1.1

 
 

Net income
$
181.9

 
 

 
 

 
$
153.6

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Diluted potential common shares
 

 
1.4

 
 

 
 

 
1.0

 
 

Diluted EPS
 

 
 

 
 

 
 

 
 

 
 

Net income
$
181.9

 
140.4

 
$
1.30

 
$
153.6

 
143.7

 
$
1.07

 
The balance of outstanding common shares presented in the Condensed Consolidated Balance Sheets was 141.7 million and 144.7 million at April 2, 2015 and April 3, 2014, respectively. Included in the outstanding common shares were 2.8 million and 3.0 million of issued but unvested shares at April 2, 2015 and April 3, 2014, respectively, which are excluded from the basic EPS calculation.
 
Accumulated Other Comprehensive Loss
 
Accumulated Other Comprehensive Loss is summarized by component as follows:
 
 
As of
 
As of
 
April 2, 2015
 
December 31, 2014
Pension
$
(129.9
)
 
$
(130.0
)
Interest rate swaps
—

 
(1.1
)
SERP/Retiree medical
2.1

 
2.1

Foreign currency impact on long term intercompany loan
(8.1
)
 
(5.7
)
Currency translation adjustment
(31.9
)
 
(19.1
)
Total accumulated other comprehensive loss
$
(167.8
)
 
$
(153.8
)
 
Noncontrolling Interest
 
The balance of noncontrolling interest presented in the consolidated balance sheet as of April 2, 2015 remained unchanged from December 31, 2014 at $0.5 .

17.  Related Party Transactions
 
In August 2014, in a secondary offering of the Company's class A common stock, Onex sold its remaining shares of the Company's common stock and no longer holds any investment in the Company. For the three months ended April 3, 2014, when Onex was a related party, the Company paid $0.1 to a subsidiary of Onex for services rendered.
 
In December 2014, Onex acquired approximately a 40% interest in Advanced Integration Technologies (“AIT”), a provider of automation and tooling, maintenance services and aircraft components to the aerospace industry and a supplier to the Company.

21
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


For the three months ended April 2, 2015, sales from AIT to the Company and its subsidiaries were $5.9 . The amounts owed to AIT and recorded as accrued liabilities were $1.5 and $3.9 as of April 2, 2015 and December 31, 2014, respectively. Tawfiq Popatia, a former director of Spirit Holdings, is a Managing Director of Onex Corporation.
 
18.  Commitments, Contingencies and Guarantees
 
Litigation
 
From time to time the Company is subject to, and is 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. The Company had outstanding obligations in respect of litigation or other legal proceedings of $55.5 and $96.3 as of April 2, 2015 and December 31, 2014, 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 similar to others in the industry, the Company receives 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. The Company reviews such requests and notices and take appropriate action. The Company has 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, the Company is 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, the Company is required to participate in certain government investigations regarding environmental remediation actions.

On December 5, 2014, The Boeing Company (“Boeing”) filed a complaint in Delaware Superior Court, Complex Commercial Litigation Division, entitled The Boeing Co. v. Spirit AeroSystems, Inc., No. N14C-12-055 (EMD). Boeing seeks indemnification from Spirit for (a) damages assessed against Boeing in International Union, United Automobile, Aerospace and Agricultural Workers of America v. Boeing Co., AAA Case No. 54 300 00795 07 (the “UAW Arbitration”), which was brought on behalf of certain former Boeing employees in Tulsa and McAlester, Oklahoma, and (b) claims that Boeing allegedly settled in Society of Professional Engineering Employees in Aerospace v. Boeing Co., Nos. 05-1251-MLB, 07-1043-MLB (D. Kan.) (the “Harkness Class Action”). Spirit Holdings, Spirit and certain Spirit retirement plan entities were parties to the Harkness Class Action, but all claims against the Spirit entities were subsequently dismissed. Boeing’s Complaint asserts that the damages assessed against Boeing in the UAW Arbitration and the claims settled by Boeing in the Harkness Class Action are liabilities that Spirit assumed under an Asset Purchase Agreement between Boeing and Spirit, dated February 22, 2005 (the “APA”). Boeing asserts claims for breach of contract and declaratory judgment regarding its indemnification rights under the APA. Boeing alleges that, under the UAW Arbitration decision, Boeing has paid more than $13.0 of a liability Boeing estimates to have a net present value of $39.0. The amount of Boeing’s settlement of the Harkness Class Action has not yet been publicly disclosed and will require court approval. In addition, Boeing seeks indemnification for more than $10.0 in attorneys’ fees it alleges it expended to defend the UAW Arbitration and Harkness Class Action. On December 24, 2014, the parties filed a joint stipulation extending Spirit’s deadline to move, answer or otherwise respond to Boeing’s complaint until February 12, 2015. Spirit timely moved to dismiss the complaint. Spirit intends to defend vigorously against the allegations in this lawsuit. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.

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 court-appointed lead plaintiffs - two pension funds that claim to represent a class of investors in the Company's stock - filed an amended complaint on April 7, 2014, naming as additional defendants Spirit's Vice President of the B787 Program Terry J. George and former Senior Vice President of Oklahoma Operations Alexander K. Kummant. The amended complaint alleges that defendants engaged in a scheme to artificially inflate the market price of the Company's stock by making false statements and omissions about certain programs' performance and costs. It contends that the alleged scheme was revealed by the Company’s accrual of $590.0 in forward loss charges on October 25, 2012. The lead plaintiffs seek certification of a class of all persons other than defendants who purchased Holdings securities between May 5, 2011 and October 24, 2012, and seek an unspecified amount of damages on behalf of the putative class. In June 2014, the defendants filed a motion to dismiss the claims set forth in the amended complaint. The parties have fully briefed the defendants’ motion, presented oral arguments before the court on February 6, 2015 and are currently awaiting a decision by the district judge. The

22
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


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.

Guarantees
 
Outstanding guarantees were $20.5 and $21.6 at April 2, 2015 and December 31, 2014, respectively.

Restricted Cash

The Company was required to maintain $19.9 of restricted cash as of both April 2, 2015 and December 31, 2014 related to certain collateral requirements for obligations under its workers’ compensation programs. These collateral requirements were previously supported by letters of credit that were replaced in October 2014. Restricted cash is included in “Other assets” in the Company's Condensed Consolidated Balance Sheets.
 
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.

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 costs are accrued at the time of the sale and are recorded to unallocated cost of goods sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims, including the experience of industry peers. In the case of new development products or new customers, Spirit considers other factors including the experience of other entities in the same business and management judgment, among others. Service warranty and extraordinary work is reported in other liabilities on the Condensed Consolidated Balance Sheet.
 
The following is a roll forward of the service warranty and extraordinary rework balance at April 2, 2015:
 
Balance, December 31, 2014
$
119.9

Charges to costs and expenses
10.5

Payouts
(0.4
)
Exchange rate
(0.1
)
Balance, April 2, 2015
$
129.9

 

19.  Other (Expense) Income, Net
 
Other (expense) income, net is summarized as follows:
 
 
For the Three Months Ended
 
April 2,
2015
 
April 3,
2014
KDFA bond
$
1.2

 
$
1.0

Rental and miscellaneous (expense) (1)
(1.9
)
 
—

Interest income
0.2

 
0.1

Foreign currency (loss) gain
(5.9
)
 
0.2

Total
$
(6.4
)
 
$
1.3

 

23
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


(1)
Includes $2.0 of losses related to the settlement of interest rate swap agreements as further detailed in Note 11, Derivative and Hedging Activities.

Foreign currency (loss) gain is due to the impact of movement in foreign currency exchange rates on an intercompany revolver and long-term contractual rights/obligations, as well as trade and intercompany receivables/payables which are denominated in a currency other than the entity’s functional currency.
 
20.  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 95% of the Company’s net revenues for the three months ended April 2, 2015 came from the Company's 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 corporate selling, general and administrative expenses, research and development and unallocated cost of sales.

Corporate selling, general and administrative expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to the Company's operating segments and are not allocated in measuring the operating segments’ profitability and performance and net profit margins. 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 warranty, early retirement and other incentives. All of these items are not specifically related to the Company's operating segments and are not utilized in measuring the operating segments’ profitability and performance.
 
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 (MRO) services.  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 segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment operating income differs from net profit margin as presented in its primary financial statements and a reconciliation of the segment and consolidated results is provided in the table set forth below.

 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.


24
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


The following table shows segment revenues and operating income for the three months ended April 2, 2015 and April 3, 2014:
 
 
Three Months Ended
 
April 2,
2015
 
April 3,
2014
Segment Revenues
 

 
 

Fuselage Systems
$
916.8

 
$
858.3

Propulsion Systems
446.0

 
450.2

Wing Systems (1)
376.7

 
414.2

All Other
2.7

 
5.8

 
$
1,742.2

 
$
1,728.5

Segment Operating Income (Loss)
 

 
 

Fuselage Systems
$
164.5

 
$
142.0

Propulsion Systems
95.7

 
80.2

Wing Systems
45.2

 
50.0

All Other
(0.3
)
 
0.1

 
305.1

 
272.3

Corporate SG&A
(51.6
)
 
(60.5
)
Research and development
(7.0
)
 
(6.3
)
Unallocated cost of sales (2) 
(11.2
)
 
(11.1
)
Total operating income
$
235.3

 
$
194.4

 
(1)
In December 2014, Spirit divested the Gulfstream G280 and G650 wing work packages to Triumph.
(2)
Includes $10.4 and $11.1 of warranty reserve for the three months ended April 2, 2015 and April 3, 2014, respectively.

21.  Condensed Consolidating Financial Information
 
The 2020 Notes and the 2022 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:
(i)
Holdings, as the parent company and parent guarantor to the Credit Agreement, as further detailed in Note 12, Debt;
(ii)
Spirit, as the subsidiary issuer of the 2020 Notes and the 2022 Notes;
(iii)
The Subsidiary Guarantors, on a combined basis, as guarantors of the 2020 Notes and the 2022 Notes;
(iv)
The Company’s subsidiaries, other than the Subsidiary Guarantors, which are not guarantors of the 2020 Notes and the 2022 Notes (the “Subsidiary Non-Guarantors”), on a combined basis;
(v)
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among Holdings, the Subsidiary Guarantors and the Subsidiary Non-Guarantors, (b) eliminate the investments in the Company’s subsidiaries and (c) record consolidating entries; and
(vi)
Holdings and its subsidiaries on a consolidated basis.



25
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Condensed Consolidating Statements of Operations
For the Three Months Ended April 2, 2015

 
Holdings
 
Spirit
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net revenues
$
—

 
$
1,619.0

 
$
58.1

 
$
186.2

 
$
(121.1
)
 
$
1,742.2

Operating costs and expenses
 

 
 

 
 

 
 
 
 

 
 

Cost of sales
—

 
1,352.0

 
54.8

 
162.6

 
(121.1
)
 
1,448.3

Selling, general and administrative
2.6

 
45.2

 
1.3

 
2.5

 
—

 
51.6

Research and development
—

 
6.3

 
—

 
0.7

 
—

 
7.0

Total operating costs and expenses
2.6

 
1,403.5

 
56.1

 
165.8

 
(121.1
)
 
1,506.9

Operating (loss) income
(2.6
)
 
215.5

 
2.0

 
20.4

 
—

 
235.3

Interest expense and financing fee amortization
—

 
(17.8
)
 
—

 
(2.0
)
 
1.9

 
(17.9
)
Other income (expense), net
—

 
1.4

 
0.1

 
(6.0
)
 
(1.9
)
 
(6.4
)
(Loss) income before income taxes and equity in net income of affiliate and subsidiaries
(2.6
)
 
199.1

 
2.1

 
12.4

 
—

 
211.0

Income tax benefit (provision)
0.3

 
(27.1
)
 
(0.8
)
 
(1.8
)
 
—

 
(29.4
)
(Loss) income before equity in net income of affiliate and subsidiaries
(2.3
)
 
172.0

 
1.3

 
10.6

 
—

 
181.6

Equity in net income of affiliate
0.3

 
—

 
—

 
0.3

 
(0.3
)
 
0.3

Equity in net income of subsidiaries
183.9

 
11.9

 
—

 
—

 
(195.8
)
 
—

Net income
181.9

 
183.9

 
1.3

 
10.9

 
(196.1
)
 
181.9

Other comprehensive (loss) income
(14.0
)
 
1.1

 
—

 
(15.1
)
 
14.0

 
(14.0
)
Comprehensive income (loss)
$
167.9

 
$
185.0

 
$
1.3

 
$
(4.2
)
 
$
(182.1
)
 
$
167.9



26
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


  Condensed Consolidating Statements of Operations
For the Three Months Ended April 3, 2014
 
 
Holdings
 
Spirit
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Net revenues
$
—

 
$
1,613.6

 
$
87.0

 
$
205.8

 
$
(177.9
)
 
$
1,728.5

Operating costs and expenses
 

 
 

 
 

 
 

 
 

 
 

Cost of sales
—

 
1,377.8

 
84.9

 
182.5

 
(177.9
)
 
1,467.3

Selling, general and administrative
1.5

 
53.9

 
0.6

 
4.5

 
—

 
60.5

Research and development
—

 
5.7

 
—

 
0.6

 
—

 
6.3

Total operating costs and expenses
1.5

 
1,437.4

 
85.5

 
187.6

 
(177.9
)
 
1,534.1

Operating (loss) income
(1.5
)
 
176.2

 
1.5

 
18.2

 
—

 
194.4

Interest expense and financing fee amortization
—

 
(35.2
)
 
—

 
(2.8
)
 
2.6

 
(35.4
)
Other income, net
—

 
3.5

 
—

 
0.4

 
(2.6
)
 
1.3

(Loss) income before income taxes and equity in net income of affiliate and subsidiaries
(1.5
)
 
144.5

 
1.5

 
15.8

 
—

 
160.3

Income tax (provision) benefit
(0.1
)
 
(16.6
)
 
(0.5
)
 
10.3

 
—

 
(6.9
)
(Loss) income before equity in net income of affiliate and subsidiaries
(1.6
)
 
127.9

 
1.0

 
26.1

 
—

 
153.4

Equity in net income of affiliate
0.2

 
—

 
—

 
0.2

 
(0.2
)
 
0.2

Equity in net income of subsidiaries
155.0

 
27.0

 
—

 
—

 
(182.0
)
 
—

Net income
153.6

 
154.9

 
1.0

 
26.3

 
(182.2
)
 
153.6

Other comprehensive income
0.2

 
—

 
—

 
0.2

 
(0.2
)
 
0.2

Comprehensive income
$
153.8

 
$
154.9

 
$
1.0

 
$
26.5

 
$
(182.4
)
 
$
153.8







 





















27
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


  Condensed Consolidating Balance Sheet
April 2, 2015
 
 
Holdings
 
Spirit
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
723.6

 
$
—

 
$
25.9

 
$
—

 
$
749.5

Accounts receivable, net
—

 
725.0

 
23.4

 
207.1

 
(354.5
)
 
601.0

Inventory, net
—

 
1,188.2

 
175.0

 
339.2

 
—

 
1,702.4

Deferred tax asset - current
—

 
35.8

 
—

 
3.2

 
—

 
39.0

Other current assets
—

 
66.9

 
—

 
2.2

 
—

 
69.1

Total current assets
—

 
2,739.5

 
198.4

 
577.6

 
(354.5
)
 
3,161.0

Property, plant and equipment, net
—

 
1,259.4

 
340.7

 
176.6

 
—

 
1,776.7

Pension assets, net
—

 
195.4

 
—

 
15.1

 
—

 
210.5

Investment in subsidiary
912.2

 
281.4

 
—

 
—

 
(1,193.6
)
 
—

Equity in net assets of subsidiaries
882.2

 
207.3

 
—

 
—

 
(1,089.5
)
 
—

Other assets
—

 
356.0

 
80.0

 
22.6

 
(334.1
)
 
124.5

Total assets
$
1,794.4

 
$
5,039.0

 
$
619.1

 
$
791.9

 
$
(2,971.7
)
 
$
5,272.7

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Accounts payable
$
—

 
$
627.8

 
$
236.3

 
$
169.6

 
$
(354.5
)
 
$
679.2

Accrued expenses
—

 
229.8

 
0.8

 
26.3

 
—

 
256.9

Profit sharing
—

 
19.9

 
—

 
0.6

 
—

 
20.5

Current portion of long-term debt
—

 
27.0

 
—

 
3.2

 
—

 
30.2

Advance payments, short-term
—

 
145.5

 
—

 
—

 
—

 
145.5

Deferred revenue, short-term
—

 
37.7

 
—

 
1.6

 
—

 
39.3

Deferred grant income liability - current
—

 
—

 
9.1

 
1.2

 
—

 
10.3

Other current liabilities
—

 
41.8

 
—

 
4.1

 
—

 
45.9

Total current liabilities
—

 
1,129.5

 
246.2

 
206.6

 
(354.5
)
 
1,227.8

Long-term debt
—

 
1,103.1

 
—

 
266.0

 
(254.0
)
 
1,115.1

Advance payments, long-term
—

 
643.3

 
—

 
—

 
—

 
643.3

Pension/OPEB obligation
—

 
74.7

 
—

 
—

 
—

 
74.7

Deferred grant income liability - non-current
—

 
—

 
64.2

 
27.7

 
—

 
91.9

Deferred revenue and other deferred credits
—

 
61.6

 
—

 
5.7

 
—

 
67.3

Other liabilities
—

 
312.4

 
—

 
25.8

 
(80.0
)
 
258.2

Total equity
1,794.4

 
1,714.4

 
308.7

 
260.1

 
(2,283.2
)
 
1,794.4

Total liabilities and shareholders’ equity
$
1,794.4

 
$
5,039.0

 
$
619.1

 
$
791.9

 
$
(2,971.7
)
 
$
5,272.7




28
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Condensed Consolidating Balance Sheet
December 31, 2014

 
Holdings
 
Spirit
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Current assets
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
354.6

 
$
—

 
$
23.3

 
$
—

 
$
377.9

Accounts receivable, net
—

 
730.6

 
33.3

 
211.9

 
(370.2
)
 
605.6

Inventory, net
—

 
1,238.1

 
168.1

 
346.8

 
—

 
1,753.0

Deferred tax asset-current
—

 
49.8

 
—

 
3.4

 
—

 
53.2

Other current assets
—

 
260.3

 
—

 
2.1

 
—

 
262.4

Total current assets
—

 
2,633.4

 
201.4

 
587.5

 
(370.2
)
 
3,052.1

Property, plant and equipment, net
—

 
1,263.7

 
337.9

 
182.0

 
—

 
1,783.6

Pension assets, net
—

 
187.8

 
—

 
15.6

 
—

 
203.4

Investment in subsidiary
907.7

 
281.4

 
—

 
—

 
(1,189.1
)
 
—

Equity in net assets of subsidiaries
714.3

 
210.4

 
—

 
—

 
(924.7
)
 
—

Other assets
—

 
352.7

 
80.0

 
22.9

 
(332.0
)
 
123.6

Total assets
$
1,622.0

 
$
4,929.4

 
$
619.3

 
$
808.0

 
$
(2,816.0
)
 
$
5,162.7

Current liabilities
 

 
 

 
 

 
 

 
 

 
 

Accounts payable
$
—

 
$
573.4

 
$
235.5

 
$
172.5

 
$
(370.2
)
 
$
611.2

Accrued expenses
—

 
302.3

 
0.8

 
26.0

 
—

 
329.1

Profit sharing
—

 
105.1

 
—

 
6.7

 
—

 
111.8

Current portion of long-term debt
—

 
5.7

 
—

 
3.7

 
—

 
9.4

Advance payments, short-term
—

 
118.6

 
—

 
—

 
—

 
118.6

Deferred revenue, short-term
—

 
21.7

 
—

 
1.7

 
—

 
23.4

Deferred grant income liability - current
—

 
—

 
9.0

 
1.2

 
—

 
10.2

Other current liabilities
—

 
40.5

 
—

 
4.6

 
—

 
45.1

Total current liabilities
—

 
1,167.3

 
245.3

 
216.4

 
(370.2
)
 
1,258.8

Long-term debt
—

 
1,130.4

 
—

 
265.6

 
(251.9
)
 
1,144.1

Advance payments, long-term
—

 
680.4

 
—

 
—

 
—

 
680.4

Pension/OPEB obligation
—

 
73.0

 
—

 
—

 
—

 
73.0

Deferred grant income liability - non-current
—

 
—

 
66.7

 
29.4

 
—

 
96.1

Deferred revenue and other deferred credits
—

 
21.2

 
—

 
6.3

 
—

 
27.5

Other liabilities
—

 
315.0

 
—

 
25.8

 
(80.0
)
 
260.8

Total equity
1,622.0

 
1,542.1

 
307.3

 
264.5

 
(2,113.9
)
 
1,622.0

Total liabilities and shareholders’ equity
$
1,622.0

 
$
4,929.4

 
$
619.3

 
$
808.0

 
$
(2,816.0
)
 
$
5,162.7


 

29
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Condensed Consolidating Statements of Cash Flows
For the Three Months Ended April 2, 2015
 
 
Holdings
 
Spirit
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Operating activities
 

 
 

 
 

 
 

 
 

 
 

Net cash provided by operating activities
$
—

 
$
408.4

 
$
9.7

 
$
5.6

 
$
—

 
$
423.7

Investing activities
 

 
 

 
 

 
 

 
 

 
 

Purchase of property, plant and equipment
—

 
(26.1
)
 
(9.7
)
 
(4.5
)
 
—

 
(40.3
)
Net cash used in investing activities
—

 
(26.1
)
 
(9.7
)
 
(4.5
)
 
—

 
(40.3
)
Financing activities
 

 
 

 
 

 
 

 
 

 
 

Proceeds from issuance of debt
—

 
535.0

 
—

 
—

 
—

 
535.0

Principal payments of debt
—

 
(6.7
)
 
—

 
(0.8
)
 
—

 
(7.5
)
Payments on term loan
—

 
(534.9
)
 
—

 
—

 
—

 
(534.9
)
(Decrease) increase in intercompany debt
—

 
(2.0
)
 
—

 
2.0

 
—

 
—

Debt issuance and financing costs
—

 
(4.7
)
 
—

 
—

 
—

 
(4.7
)
Net cash (used in) provided by financing activities
—

 
(13.3
)
 
—

 
1.2

 
—

 
(12.1
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
0.3

 
—

 
0.3

Net increase in cash and cash equivalents for the period
—

 
369.0

 
—

 
2.6

 
—

 
371.6

Cash and cash equivalents, beginning of period
—

 
354.6

 
—

 
23.3

 
—

 
377.9

Cash and cash equivalents, end of period
$
—

 
$
723.6

 
$
—

 
$
25.9

 
$
—

 
$
749.5




 

30
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Condensed Consolidating Statements of Cash Flows
For the Three Months Ended April 3, 2014

 
Holdings
 
Spirit
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Operating activities
 

 
 

 
 

 
 

 
 

 
 

Net cash provided by (used in) operating activities
$
153.6

 
$
59.6

 
$
9.2

 
$
(23.8
)
 
$
(153.6
)
 
$
45.0

Investing activities
 

 
 

 
 

 
 

 
 

 
 

Purchase of property, plant and equipment
—

 
(42.8
)
 
(9.2
)
 
(1.0
)
 
—

 
(53.0
)
Proceeds from the sale of assets
—

 
0.1

 
—

 
—

 
—

 
0.1

Equity in net assets of subsidiaries
(153.6
)
 
—

 
—

 
—

 
153.6

 
—

Net cash used in investing activities
(153.6
)
 
(42.7
)
 
(9.2
)
 
(1.0
)
 
153.6

 
(52.9
)
Financing activities
 

 
 

 
 

 
 

 
 

 
 

Proceeds from issuance of bonds
—

 
300.0

 
—

 
—

 
—

 
300.0

Principal payments of debt
—

 
(8.6
)
 
—

 
(0.9
)
 
—

 
(9.5
)
Increase (decrease) in intercompany debt
—

 
7.0

 
—

 
(7.0
)
 
—

 
—

Payments on bonds
—

 
(227.2
)
 
—

 
—

 
—

 
(227.2
)
Debt issuance and financing costs
—

 
(19.2
)
 
—

 
—

 
—

 
(19.2
)
Excess tax benefits from share-based payment arrangements
—

 
0.5

 
—

 
—

 
—

 
0.5

Change in restricted cash
—

 
(72.8
)
 
—

 
—

 
—

 
(72.8
)
Net cash used in financing activities
—

 
(20.3
)
 
—

 
(7.9
)
 
—

 
(28.2
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(2.5
)
 
—

 
(2.5
)
Net decrease in cash and cash equivalents for the period
—

 
(3.4
)
 
—

 
(35.2
)
 
—

 
(38.6
)
Cash and cash equivalents, beginning of period
—

 
359.2

 
—

 
61.5

 
—

 
420.7

Cash and cash equivalents, end of period
$
—

 
$
355.8

 
$
—

 
$
26.3

 
$
—

 
$
382.1



31
Table of Contents

Item 2.   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 unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). The following section may include “forward-looking statements.” Forward-looking statements generally can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “should,” “will,” and other similar words or phrases, 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, including, but not limited to, those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the Securities and Exchange Commission ("SEC") on February 13, 2015 and as subsequently amended on Form 10-K/A filed with the SEC on March 6, 2015 (our “2014 Form 10-K”). 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.
 
Recent Events
 
On March 18, 2015, Spirit AeroSystems, Inc., as borrower, Spirit AeroSystems Holdings, Inc., as parent guarantor, and certain of its subsidiaries entered into Amendment No. 5 (the “Amendment”) to the Company's senior secured Credit Agreement. The Amendment provided for a new $535.0 million senior secured term loan A with a maturity date of March 18, 2020, which replaces the term loan B which had an amount outstanding of approximately $534.9 million that was scheduled to mature on September 15, 2020. For additional detail, see Liquidity and Capital Resources - Debt and Other Financing Arrangements .

On March 9, 2015, Standard & Poor's Rating Services raised its corporate credit rating of Spirit AeroSystems, Inc. to BB from BB-.

On March 4, 2015, Moody's Investors Services upgraded its corporate family credit rating of Spirit AeroSystems, Inc. to Ba1 from Ba2.

Overview
 
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 fuselage systems, propulsion systems and wing systems for commercial and military aircraft. For the three months ended April 2, 2015, we generated net revenues of $1,742.2 million and net income of $181.9 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 53%, 26%, 21% and less than 1%, respectively, of our net revenues for the three months ended April 2, 2015.


32
Table of Contents

Management’s Focus
 
The Company’s focus is on ensuring that our quality and operational and cost performance are world class. We have undertaken specific actions that highlight our commitment to define our core business and improve our operational performance results. At the end of 2014, we divested the G280 and G650 wing work packages at Spirit's facility in Tulsa, Oklahoma to Triumph Aerostructures- Tulsa, LLC, a subsidiary of Triumph Group, Inc. ("Triumph"). We continue to intensify our focus on the performance in our core markets of commercial aerospace and defense. We are also committed to reducing internal cost through cost saving initiatives and improving operational efficiency through centralization of functions. Additionally, we 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 position the Company for future success by focusing on productivity and preparation for sustained growth. Our key objectives for 2015 include continued focus on improved performance, increased productivity, reduced cost and alignment of our business to what we do best; leveraging of our investments in support of aircraft rate increases ahead; continuation of our progress on the A350 XWB program; greater emphasis on long term growth; and implementation of a capital deployment strategy.
 
New and Maturing Programs

We are currently performing work on several new and maturing programs, which are in various stages of development. These programs carry risks associated with design responsibility, development of production tooling, production inefficiencies during the initial phases of production, hiring and training of qualified personnel, increased capital and funding commitments, supplier performance, delivery schedules and unique contractual requirements. Our success depends on our ability to achieve performance obligations on new and maturing programs to our customers' satisfaction and manufacture products at our estimated cost.

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 planned cost reductions as we enter increasing levels of production, meet customer delivery schedules, successfully resolve claims and assertions and negotiate pricing with our customers and suppliers.
       
A350 XWB

We continue to support the development of the A350 XWB program through two contracts we have with Airbus, a fuselage contract and a wing contract, both of which are segmented into a non-recurring design engineering phase and a recurring production phase. We continue to record sales at zero margins to reflect the identified risk profile on these programs.

We also continue to support the development of the work scope for the design and tooling related to the -1000 derivative of the A350 XWB fuselage and wing contracts. Estimates for the non-recurring design engineering phase of the -1000 fuselage derivative have resulted in previously recorded forward losses on this program. 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 which resulted in previously recorded forward losses, mostly driven by early development discovery and engineering change to the aircraft design, as well as higher test and transportation costs.

Estimated revenue for the A350 XWB program includes estimates of probable recoveries asserted against our customer for changes in specifications. Although we continue to project margins on the A350 XWB fuselage and wing contracts to be near or at break-even, there is still a substantial amount of risk similar to what we have experienced on other development programs. Specifically, our ability to successfully negotiate favorable pricing and other terms with Airbus and our suppliers, to manage supplier performance, execute cost reduction strategies, hire and retain skilled production and management personnel, execute quality and manufacturing processes, manage program schedule delays and adjust to higher rate schedules, among other risks, will determine the ultimate performance of this program and these contracts. There continues to be risk of additional forward loss associated with the fuselage recurring contract as we work through production, supply chain and customer issues.

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. Improvement efforts to reduce our cost structure have been ongoing since the beginning of the program and continued as design engineering progressed for each minor model and manufacturing plans were solidified. Near-term cost improvement efforts will focus on efficiency gains within our manufacturing process and execution of sourcing strategies.

33
Table of Contents


Our supply agreement for the B787 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. In November 2014, Spirit and Boeing entered into a Memorandum of Agreement (the "November 2014 MOA"), which includes an agreement to increase production rates to 12 aircraft per month on the B787 program. As part of the November 2014 MOA, the parties have also established near term interim prices for certain B787 shipsets, subject to resolution of recurring prices, future rate increases and other issues across multiple programs in 2015. During this period, while negotiations on these issues are ongoing, Spirit will record appropriate portions of the interim prices on certain 787-8 and 787-9 shipsets as deferred revenue, which will be recognized as revenue only if and when the parties reach resolution on the various issues. We are engaged in discussions with Boeing concerning how to determine the subsequent B787-9 and initial B787-10 prices, 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.

For B787-9 deliveries in our first B787 contract block, we have applied the appropriate accounting guidance for unpriced change orders in estimating revenues which will be updated in the quarter in which final pricing is negotiated. Pending final price negotiations, we have estimated revenue for B787-9 deliveries to include assumptions around design changes from the contract configuration baseline for each B787 model.

Boeing Legacy Programs

On April 8, 2014, we entered into a Memorandum of Agreement with Boeing that established pricing terms for the B737, B747, B767 and B777 programs for the period commencing on April 1, 2014 and ending on December 31, 2015, under the Company's long-term supply contract with Boeing covering products for such programs. The new pricing terms were not applied to the period prior to April 1, 2014. The new prices do not apply to the 737 MAX, for which recurring pricing has not yet been agreed. Until the parties are able to agree upon pricing on the B737, B747, B767 and B777 platforms for the periods beyond 2015, supply agreement pricing will be determined according to then-existing prices, adjusted using a quantity-based price adjustment formula and specified annual escalation. 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.

Divestiture of the Gulfstream G280 and G650 Work Packages

At the end of 2014, we divested the G280 and G650 wing work packages at Spirit's facility in Tulsa, Oklahoma to Triumph. We continue to supply certain parts and services to Triumph under a supply agreement entered into in connection with the transaction.

























34
Table of Contents

Results of Operations
 
The following table sets forth, for the periods indicated, certain of our operating data:
 
 
Three Months Ended
 
 
 
April 2,
2015
 
April 3,
2014
 
Percentage
Change
to Prior Year
 
($ in millions)
 
 
Net revenues
$
1,742.2

 
$
1,728.5

 
1
 %
Operating costs and expenses
 

 
 

 
 

Cost of sales
1,448.3

 
1,467.3

 
(1
)%
Selling, general and administrative
51.6

 
60.5

 
(15
)%
Research and development
7.0

 
6.3

 
11
 %
Operating income
235.3

 
194.4

 


Interest expense and financing fee amortization
(17.9
)
 
(35.4
)
 
(49
)%
Other (expense) income, net
(6.4
)
 
1.3

 
(592
)%
Income before income taxes and equity in net income of affiliate
211.0

 
160.3

 


Income tax provision
(29.4
)
 
(6.9
)
 
326
 %
Income before equity in net income of affiliate
181.6

 
153.4

 


Equity in net income of affiliate
0.3

 
0.2

 
50
 %
Net income
$
181.9

 
$
153.6

 


 
Comparative shipset deliveries by model are as follows:
 
 
 
Three Months Ended
Model
 
April 2,
2015
 
April 3,
2014
B737
 
134

 
125

B747
 
4

 
5

B767
 
5

 
3

B777
 
26

 
26

B787
 
32

 
31

Total Boeing
 
201

 
190

A320 Family
 
135

 
128

A330/340
 
27

 
30

A350 XWB
 
6

 
2

A380
 
6

 
7

Total Airbus
 
174

 
167

Business/Regional Jets (1)
 
17

 
35

Total
 
392

 
392

 
(1)
In December 2014, Spirit divested the Gulfstream G280 and G650 wing work packages to Triumph.

For purposes of measuring production or shipset deliveries for Boeing aircraft in a given period, the term “shipset” refers to sets of structural fuselage components produced or delivered for one aircraft in such period. For purposes of measuring production or shipset deliveries for Airbus and Business/Regional Jet aircraft in a given period, the term “shipset” refers to all structural aircraft components produced or delivered for one aircraft in such period. For the purposes of measuring wing shipset deliveries, the term "shipset" refers to all wing components produced or delivered for one aircraft in such period. Other components which

35
Table of Contents

are part of the same aircraft shipsets could be produced or shipped in earlier or later accounting periods than the components used to measure production or shipset deliveries, which may result in slight variations in production or delivery quantities of the various shipset components in any given period.
 
Net revenues by prime customer are as follows:
 
 
 
Three Months Ended
Prime Customer
 
April 2,
2015
 
April 3,
2014
 
 
($ in millions)
Boeing
 
$
1,497.4

 
$
1,472.7

Airbus
 
162.2

 
148.6

Other (1)
 
82.6

 
107.2

Total net revenues
 
$
1,742.2

 
$
1,728.5

 
(1)
In December 2014, Spirit divested the Gulfstream G280 and G650 wing work packages to Triumph.

Changes in Estimates

During the first quarter of 2015, we recognized favorable changes in estimates on loss programs of $2.9 million on certain Boeing fuselage programs. During the first quarter of 2014, we recognized forward loss charges of $0.9 million on certain fuselage programs and $0.3 million on certain wing programs (collectively referred to as "Q1 2014 Forward Loss Charges").

During the first quarter of 2015, we recognized favorable cumulative catch-up adjustments related to periods prior to the first quarter of 2015 of $12.0 million. In comparison, during the first quarter of 2014, we recognized favorable cumulative catch-up adjustments related to periods prior to the first quarter of 2014 of $16.6 million.

Three Months Ended April 2, 2015 as Compared to Three Months Ended April 3, 2014
 
Net Revenues.   Net revenues for the three months ended April 2, 2015 were $1,742.2 million, an increase of $13.7 million, or 1%, compared to net revenues of $1,728.5 million for the same period in the prior year. The increase in net revenues was primarily due to $11.9 million of higher production driven by customer delivery schedules, partially offset by significantly lower revenue from Gulfstream due to the divestiture of the G280 and G650 wing work packages in December 2014, lower net revenues due to model mix and lower net revenues recognized on the B787 program. Non-recurring revenue, which includes engineering design and development activities, was higher by $6.3 million compared to the same period in the prior year. Approximately 95% of Spirit’s net revenues for the first quarter of 2015 came from our two largest customers, Boeing and Airbus.

Production deliveries to Boeing increased by 6% to 201 shipsets during the first quarter of 2015, primarily driven by higher production rates on the B737 program, compared to 190 shipsets delivered in the same period of the prior year. Production deliveries to Airbus increased by 4% to 174 shipsets during the first quarter of 2015, primarily driven by higher production on the A320 and A350 XWB programs, compared to 167 shipsets delivered in the same period of the prior year. Production deliveries of business/regional jet wing and wing components decreased by 51% to 17 shipsets during the first quarter of 2015, compared to 35 shipsets delivered in the same period of the prior year primarily due to the divestiture of the G280 and G650 wing work packages in December 2014. In total, production deliveries remained constant at 392 shipsets year over year.
 
Cost of Sales.   Cost of sales as a percentage of net revenues was 83% for the three months ended April 2, 2015, as compared to 85% for the same period in the prior year. The decrease in cost of sales as a percentage of net revenues was primarily driven by favorable labor and material cost performance on mature programs, including a favorable impact of fixed overhead absorption as a result of higher production rates. In the first quarter of 2015, we recorded $12.0 million of favorable cumulative catch-up adjustments related to periods prior to the first quarter of 2015, primarily driven by productivity and efficiency improvements on mature programs, as well as $2.9 million of favorable change in estimates on one of our loss programs. In the same period of 2014, we recorded $16.6 million of favorable cumulative catch-up adjustments related to periods prior to the first quarter of 2014, partially offset by the Q1 2014 Forward Loss Charges.
 

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SG&A and Research and Development.   SG&A expense was $8.9 million lower for the three months ended April 2, 2015, compared to the same period in the prior year, primarily due to the absence of certain consulting and legal fees incurred during the first quarter of 2014. Research and development expense was $0.7 million higher for the three months ended April 2, 2015, compared to the same period in the prior year, as we continued to invest in internal projects.
 
Operating Income.   Operating income for the three months ended April 2, 2015 was $235.3 million, an increase of $40.9 million, compared to operating income of $194.4 million for the same period in the prior year, primarily due to higher sales on profitable programs, favorable cost performance, including a favorable impact of fixed overhead absorption as a result of higher production rates, and lower SG&A expenses.
 
Interest Expense and Financing Fee Amortization.   Interest expense and financing fee amortization for the three months ended April 2, 2015 includes $13.7 million of interest and fees paid or accrued in connection with long-term debt and $4.2 million in amortization of deferred financing costs and original issue discount compared to $19.7 million of interest and fees paid or accrued in connection with long-term debt and $15.7 million in amortization of deferred financing costs and original issue discount for the same period in the prior year. In March 2015, we entered into Amendment No. 5 to our senior secured credit facility which resulted in a loss on extinguishment of debt charge of $3.6 million. During the first quarter of 2014 we recognized a charge of $17.6 million for the write-down of deferred financing costs, original issue discount, and third party fees resulting from the financing activities announced during the first quarter of 2014, which included Amendment No. 3 to our senior secured credit facility and redemption of our 2017 Notes using proceeds from the issuance of our 2022 Notes.
 
Other (Expense) Income, net. Other (expense) income, net for the three months ended April 2, 2015 was $6.4 million of other expense, compared to $1.3 million of other income for the same period in the prior year. Other expense was primarily driven by foreign exchange rate fluctuations as the British Pound weakened against the U.S. Dollar and the recognition of $2.0 million of losses related to the settlement of our interest rate swap agreements. We recognized foreign currency losses on an intercompany revolver and long-term contractual rights/obligations, as well as trade and intercompany receivables/payables which are denominated in a currency other than the entity’s functional currency.
 
Provision for Income Taxes. Our reported tax rate includes two principal components: an expected annual tax rate and discrete items resulting in additional provisions or benefits that are recorded in the quarter that an event arises. Events or items that give rise to discrete recognition could include finalizing audit examinations for open tax years, statute of limitations expiration, or a change in tax law.

However, the Company has determined that a calculation of an annual effective tax rate would not represent a reliable estimate for its U.S. operations due to historical differences between forecasted and actual U.S. pre-tax earnings and the effect of the Company's U.S. deferred tax valuation allowance, which create results with significant variations in the customary relationship between income tax expense and pre-tax income for the interim periods. Under the discrete method, the Company determines tax expense based upon actual results as if the interim period were an annual period. The discrete method was used for our U.S. pre-tax income and an annual effective rate was used for our international pre-tax income.

 Based on evaluation of both the positive and negative evidence available, management determined that it was necessary to continue to maintain a valuation allowance against nearly all of its net U.S. deferred tax assets as of April 2, 2015. The net valuation allowance was decreased by $42.0 million for the three months ended April 2, 2015. The reduction reflects the realization of certain deferred tax assets within the Company’s discrete method taxable income calculation and changes in deferred tax assets associated with certain state income tax credits for the three months ended April 2, 2015. To the extent that the Company generates positive taxable income and expects, with reasonable certainty, to continue to generate positive income, we may release additional valuation allowance in future periods. This release would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period such release is recorded. The release of all or a portion of the valuation allowance may have a significant effect on our tax expense in the period it is released.

The income tax provision for the three months ended April 2, 2015 includes $27.2 million for federal taxes, $0.4 million for state taxes and $1.8 million for foreign taxes. The income tax provision for the three months ended April 3, 2014 includes $17.1 million for federal taxes, $0.1 million for state taxes and ($10.3) million for foreign taxes. The effective tax rate for the three months ended April 2, 2015 was 13.9% as compared to 4.3% for 2014. The difference in the effective tax rate recorded for 2015 as compared to 2014 related primarily to the U.S. net deferred tax asset valuation allowance decrease in 2015 and the release of the Malaysia tax reserve and deferred tax liabilities in the first quarter of 2014 as a result of formal approval of the tax holiday by the Malaysian tax authorities. The decrease from the U.S. statutory tax rate is attributable primarily to the inclusion of U.S. net deferred tax asset valuation allowance decrease, U.S. qualified domestic production activities deduction and foreign tax rates less than the U.S. rate.


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Our income tax expense for 2015 does not reflect any benefit of the Research Tax Credit attributable to 2015 as the legislation has not been extended beyond December 2014. Should the legislation be extended during the year, the Company may record additional tax benefits for 2015 Research Tax Credit.

Segments.   The following table shows segment revenues and operating income for the three months ended April 2, 2015 and April 3, 2014:
 
 
Three Months Ended
 
April 2,
2015
 
April 3,
2014
 
($ in millions)
Segment Revenues
 

 
 

Fuselage Systems
$
916.8

 
$
858.3

Propulsion Systems
446.0

 
450.2

Wing Systems (1)
376.7

 
414.2

All Other
2.7

 
5.8

 
$
1,742.2

 
$
1,728.5

Segment Operating Income
 

 
 

Fuselage Systems
$
164.5

 
$
142.0

Propulsion Systems
95.7

 
80.2

Wing Systems
45.2

 
50.0

All Other
(0.3
)
 
0.1

 
305.1

 
272.3

Corporate SG&A
(51.6
)
 
(60.5
)
Research and development
(7.0
)
 
(6.3
)
Unallocated cost of sales (2)
(11.2
)
 
(11.1
)
Total operating income
$
235.3

 
$
194.4

 
(1)
In December 2014, Spirit divested the Gulfstream G280 and G650 wing work packages to Triumph.
(2)
Includes $10.4 million and $11.1 million of warranty reserve for the three months ended April 2, 2015 and April 3, 2014, respectively.

Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 26%, 21% and less than 1%, respectively, of our net revenues for the three months ended April 2, 2015.
 
Fuselage Systems.   Fuselage Systems segment net revenues for the three months ended April 2, 2015 were $916.8 million, an increase of $58.5 million, or 7%, compared to the same period in the prior year. The increase in net revenues was primarily due to higher production deliveries on the B737 and the A350 XWB programs as well as higher net revenues for non-recurring design and development activities. These increases were partially offset by lower net revenues recognized on the B787 program and model mix. Fuselage Systems segment operating margins were 18% for the three months ended April 2, 2015, compared to 17% for the same period in the prior year, with the increase primarily driven by favorable labor and material cost performance on mature programs, including a favorable impact of fixed overhead absorption as a result of higher production rates. In the first quarter of 2015, the segment recorded favorable cumulative catch-up adjustments of $2.7 million driven by productivity and efficiency improvements on mature programs, as well as $2.9 million of favorable change in estimates on one of our loss programs. In comparison, during the first quarter of 2014, the segment recorded favorable cumulative catch-up adjustments of $9.0 million driven by productivity and efficiency improvements on mature programs, partially offset by a forward loss charge of $0.9 million.
 
Propulsion Systems.   Propulsion Systems segment net revenues for the three months ended April 2, 2015 were $446.0 million, a decrease of $4.2 million, or 1%, compared to the same period in the prior year. The decrease in net revenues was primarily due to lower non-recurring net revenues and model mix, partially offset by higher production deliveries on the B737 and BR725 programs. Propulsion Systems segment operating margins were 21% for the three months ended April 2, 2015, compared to 18% for the same period in the prior year, primarily driven by favorable labor and material cost performance on mature programs,

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including a favorable impact of fixed overhead absorption as a result of higher production rates. In the first quarter of 2015, the segment recorded favorable cumulative catch-up adjustments of $9.3 million driven by productivity and efficiency improvements on mature programs. In comparison, during the first quarter of 2014, the segment recorded favorable cumulative catch-up adjustments of $4.8 million driven by productivity and efficiency improvements on mature programs.
 
Wing Systems.   Wing Systems segment net revenues for the three months ended April 2, 2015 were $376.7 million, a decrease of $37.5 million, or 9%, compared to the same period in the prior year. The decrease in net revenues was primarily due to the divestiture of the G280 and G650 wing work packages in December 2014, partially offset by higher production deliveries on the B737 and A350 XWB programs and higher sales of wing kits. Wing Systems segment operating margins remained unchanged at 12% for the three months ended April 2, 2015, compared to the same period in the prior year. In the first quarter of 2014, the segment recorded favorable cumulative catch-up adjustments of $2.8 million driven by productivity and efficiency improvements on mature programs, partially offset by forward loss charges of $0.3 million.
 
All Other.   All Other segment net revenues consist of sundry sales of miscellaneous services, tooling contracts and natural gas revenues from KIESC. In the three months ended April 2, 2015, All Other segment net revenues were $2.7 million, a decrease of $3.1 million compared to the same period in the prior year primarily due to lower natural gas revenue. The All Other segment recorded (11%) operating margins for the three months ended April 2, 2015, compared to segment operating margins of 2% for the same period in the prior year. The decrease in segment operating margins was primarily driven by higher expenses for miscellaneous services rendered during the first quarter of 2015.


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 recurring production through the life of the contract, which could extend beyond twenty years. 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 could be 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.
 
As of April 2, 2015, we had $749.5 million of cash and cash equivalents on the balance sheet and $650.0 million of available borrowing capacity under our revolving credit facility. There were no borrowings or outstanding balances under our revolving credit facility as of April 2, 2015. 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.














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Cash Flows
 
The following table provides a summary of our cash flows for the three months ended April 2, 2015 and April 3, 2014:
 
 
For the three months ended
 
April 2, 2015
 
April 3, 2014
 
($ in millions)
Net income
$
181.9

 
$
153.6

Adjustments to reconcile net income
55.8

 
55.7

Changes in working capital
186.0

 
(164.3
)
Net cash provided by operating activities
423.7

 
45.0

Net cash used in investing activities
(40.3
)
 
(52.9
)
Net cash used in financing activities
(12.1
)
 
(28.2
)
Effect of exchange rate change on cash and cash equivalents
0.3

 
(2.5
)
Net increase (decrease) in cash and cash equivalents for the period
371.6

 
(38.6
)
Cash and cash equivalents, beginning of period
377.9

 
420.7

Cash and cash equivalents, end of period
$
749.5

 
$
382.1

 
Three Months Ended April 2, 2015 as Compared to Three Months Ended April 3, 2014
 
Operating Activities. For the three months ended April 2, 2015, we had a net cash inflow of $423.7 million from operating activities, an increase of $378.7 million, compared to a net cash inflow of $45.0 million for the same period in the prior year. The increase in net cash provided by operating activities was primarily due to $165.4 million higher cash receipts from customers for production deliveries, including settlement of retainage receivable, and $93.1 million higher cash receipts from customers for non-recurring activities compared to the same period in the prior year. Net tax refunds received were $170.2 million during the first quarter of 2015 compared to $66.2 million received in the same period in the prior year.

Investing Activities. For the three months ended April 2, 2015, we had a net cash outflow of $40.3 million for investing activities, a decrease in outflow of $12.6 million compared to a net cash outflow of $52.9 million for the same period in the prior year. During the first three months of 2015, investing activities consisted primarily of capital expenditures for construction in progress to support increasing production rates. In comparison, during the first three months of 2014, capital expenditures consisted primarily of construction in progress and machinery and equipment to support increasing production rates.
 
Financing Activities. For the three months ended April 2, 2015, we had a net cash outflow of $12.1 million for financing activities, a decrease in outflow of $16.1 million, compared to a net cash outflow of $28.2 million for the same period in the prior year. During the three months ended April 2, 2015, we entered into Amendment No. 5 to our senior secured Credit Agreement which resulted in debt issuance costs of $4.7 million. During the three months ended April 3, 2014, we entered into Amendment No. 3 to our senior secured Credit Agreement and redeemed our 2017 Notes using proceeds from the issuance of our 2022 Notes. Debt issuance costs for the three months ended April 3, 2014 totaled $19.2 million and consisted of third party fees and tender and consent fees. Restricted cash of $72.8 million was reserved at April 3, 2014 to fund the redemption of the remaining 2017 Senior Notes outstanding which were called for redemption on May 1, 2014. In the first quarter of 2015, payments on debt other than the financing activity were $7.5 million compared to $9.5 million in the same period in the prior year.
 
Future Cash Needs and Capital Spending
 
Our primary future cash needs will consist of working capital, debt service, research and development and capital expenditures, including potential share repurchases, dividend payments, merger and acquisition or disposition activities. 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 and maturing programs, including the B737, B787 and the A350 XWB programs. In response to announced customer production rate increases, we are evaluating various plans to relieve capacity constraints. We also require capital to develop new technologies for the next generation of aircraft, which may not be funded by our customers. Capital expenditures for the three months ended April 2, 2015 totaled $40.3 million, as compared to $53.0 million for the same period in 2014. We plan to fund future capital expenditures and cash requirements from cash on hand, cash generated by operations, customer cash advances, borrowings available under our revolving credit facility and proceeds from asset sales, if any.

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Pension and Other Post Retirement Benefit Obligations
 
Our U.S. pension plan remained fully funded at April 2, 2015 and we anticipate non-cash pension income for 2015 to remain at or near the same level as 2014. 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. See Note 13, Pension and Other Post-Retirement Benefits, for more information on the Company's pension plans.
 
Debt and Other Financing Arrangements

On March 18, 2015, Spirit AeroSystems, Inc., as borrower, Spirit AeroSystems Holdings, Inc., as parent guarantor, and certain of its subsidiaries entered into Amendment No. 5 (the “Amendment”) to the Company's senior secured Credit Agreement, dated as of April 18, 2012, as amended by Amendment No. 1, dated as of October 26, 2012, Amendment No. 2, dated as of August 2, 2013, Amendment No. 3, dated as of March 18, 2014 and Amendment No. 4, dated as of June 3, 2014 (the "Credit Agreement"). The Amendment provided for a new $535.0 million senior secured term loan A (the “Term Loan”) with a maturity date of March 18, 2020, which replaces the term loan B which had an amount outstanding of approximately $534.9 million (the “Term Loan B”) that was scheduled to mature on September 15, 2020. The Term Loan bears interest, at Spirit’s option, at either LIBOR plus 1.75% or a defined “base rate” plus 0.75%, subject to adjustment to amounts between and including LIBOR plus 1.75% and LIBOR plus 2.50% (or amounts between and including base rate plus 0.75% and base rate plus 1.50%, as applicable) based on changes to Spirit’s debt-to-EBITDA ratio. The principal obligations under the Term Loan are to be repaid in equal quarterly installments of $6.7 million, with the remaining balance due at maturity of the Term Loan. The Amendment maintained substantially the same prepayment requirements and covenant structure under the Credit Agreement, and provided the Company with some additional flexibility with respect to certain activities. Spirit used the proceeds of the Term Loan to pay off the Term Loan B and to pay a portion of the fees and expenses payable in connection with the Amendment.

Substantially all of Spirit's assets, including inventory and property, plant and equipment, continue to be pledged as collateral for both the Term Loan and the revolving credit facility. As of April 2, 2015, the outstanding balance of the Term Loan was $528.3 million. As a result of extinguishment of the Term Loan B, the Company recognized a loss on extinguishment of debt of $3.6 million. Of this total charge, $3.1 million is reflected within amortization of deferred financing fees and $0.5 million is reflected within amortization expense on the Condensed Consolidated Statement of Cash Flows for the three months ended April 2, 2015.
 
Senior Notes.   In November 2010, the Company issued $300.0 million in aggregate principal amount 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 guarantee Spirit’s obligations under Spirit’s senior secured credit facility.  The carrying value of the 2020 Notes was $300.0 million as of April 2, 2015.

In March 2014, the Company issued $300.0 million in aggregate principal amount of 5.25% Senior Notes due March 15, 2022 (the "2022 Notes") with interest payable, in cash in arrears, on March 15 and September 15 of each year, beginning September 15, 2014. The 2022 Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by the Company and its existing and future domestic subsidiaries that guarantee Spirit's obligations under its amended senior secured credit facility. The carrying value of the 2022 Notes was $299.5 million as of April 2, 2015.
 
Advances and Deferred Revenue on the B787 Program.  Boeing has made advance payments to Spirit under the B787 Supply Agreement, which advance payments are required to be repaid to Boeing by way of offset against the purchase price for future shipset deliveries. On April 8, 2014, the Company signed a memorandum of agreement with Boeing which suspended advance repayments related to the B787 program for a period of twelve months beginning April 1, 2014. Repayment recommenced on April 1, 2015 and any repayments which otherwise would have become due during such twelve-month period will offset the purchase price for shipset 1,001 and beyond. In the event Boeing does not take delivery of a sufficient number of shipsets to repay the full amount of advances 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. As of April 2, 2015, 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 $637.0 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 shipsets invoiced by Spirit, at a rate of $1.25 million per shipset. We received $250.0 million in advance payments in 2012 and the balance that had not been repaid as of April 2, 2015 was $219.6 million .

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Malaysian Facility Agreement .  In June 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 million (approximately USD $20.0 million equivalent) (the “Malaysia Facility”), with the Malaysian Export-Import Bank. The Malaysia Facility requires quarterly principal repayments of RM 3.3 million (approximately USD $1.0 million equivalent) 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 April 2, 2015 was $5.7 million.

French Factory Capital Lease Agreement . In July 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-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 April 2, 2015, the Saint-Nazaire capital lease balance was $7.8 million.
 
Nashville Design Center Capital Lease Agreement.  In September 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 under the capital lease are due monthly, and are subject to yearly rate increases until the end of the lease term of 124 months. As of April 2, 2015, the Nashville Design Center capital lease balance was $2.2 million.
 
Credit Ratings
 
On March 9, 2015, Standard & Poor's Rating Services raised its corporate credit rating on Spirit AeroSystems, Inc. to BB from BB-. The rating outlook is positive.

On March 4, 2015, Moody's Investors Services upgraded its corporate family credit rating of Spirit AeroSystems, Inc. to Ba1 from Ba2. The rating outlook is stable.
 
Our credit ratings are reviewed periodically by the rating agencies listed above.
 
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, as well as certain financial metrics. 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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly 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 “anticipate,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “should,” “will,” and other similar words or phrases, 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:
•
our ability to continue to grow our business and execute our growth strategy, including the timing, execution and profitability of new and maturing programs;
•
our ability to perform our obligations and manage costs related to our new and maturing commercial, business aircraft and military development programs and the related recurring production;
•
margin pressures and the potential for additional forward losses on new and maturing programs;
•
our ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft;
•
the effect on business and commercial aircraft demand and build rates of the following factors: changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia;
•
customer cancellations or deferrals as a result of global economic uncertainty;
•
the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange rates;
•
the success and timely execution of key milestones such as receipt of necessary regulatory approvals and customer adherence to their announced schedules;
•
our ability to successfully negotiate future pricing under our supply agreements with Boeing, Airbus and our other customers;
•
our ability to enter into profitable supply arrangements with additional customers;
•
the ability of all parties to satisfy their performance requirements under existing supply contracts with Boeing and Airbus, our two major customers, and other customers, and the risk of nonpayment by such customers;
•
any adverse impact on Boeing’s and Airbus’ production of aircraft resulting from cancellations, deferrals or reduced orders by their customers or from labor disputes or acts of terrorism;
•
any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks;
•
our ability to avoid or recover from cyber-based or other security attacks, information technology failures or other disruptions;
•
returns on pension plan assets and the impact of future discount rate changes on pension obligations;
•
our ability to borrow additional funds or refinance debt;
•
competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers;
•
the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad;
•
any reduction in our credit ratings;
•
our dependence on our supplier, as well as the cost and availability of raw materials and purchased components;

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•
our ability to recruit and retain highly-skilled employees and our relationships with the unions representing many of our employees;
•
spending by the U.S. and other governments on defense;
•
the possibility that our cash flows and borrowing facilities may not be adequate for our additional capital needs or for payment of interest on and principal of our indebtedness;
•
our exposure under our existing senior secured revolving credit facility to higher interest payments should interest rates increase substantially;
•
the effectiveness of any interest rate hedging programs;
•
the effectiveness of our internal control over financial reporting;
•
the outcome or impact of ongoing or future litigation, claims and regulatory actions; and
•
our exposure to potential product liability and warranty claims.
 
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 our 2014 Form 10-K for a more complete discussion of these and other factors that may affect our business.


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Item 3.  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. In addition to other information set forth in this report, you should carefully consider the factors discussed in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our 2014 Form 10-K which could materially affect our business, financial condition or results of operations. There have been no material changes in our market risk since the filing of our 2014 Form 10-K.
 
Item 4. 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 our disclosure controls as of April 2, 2015 and have concluded that these disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective 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 Security and Exchange Commission 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 our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
  
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting that occurred during the first quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

44
Table of Contents

PART II — OTHER INFORMATION
 
Item 1. Legal Proceedings
 
Information regarding any recent material development relating to our legal proceedings since the filing of our 2014 Form 10-K is included in Note 18, Commitments, Contingencies and Guarantees to our condensed consolidated financial statements included in Part I of this Quarterly Report and incorporated herein by reference.
 
Item 1A. Risk Factors
 
In addition to other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in our 2014 Form 10-K, which could materially affect our business, financial condition or results of operations. There have been no material changes to the Company’s risk factors previously disclosed in our 2014 Form 10-K.
 




45
Table of Contents

Item 6.   Exhibits
 
Article I.
Exhibit
Number
 
Section 1.01 Exhibit
 
 
 
10.1*†
 
Amendment No. 11 to Special Business Provisions, between The Boeing Company and Spirit AeroSystems, Inc., dated as of March 10, 2015
 
 
 
10.2*†
 
Amendment No. 5, dated as of March 18, 2015, 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
 
 
 
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.
 
 
 
101.PRE@ *
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
†
 
Indicates that portions of the exhibit have been omitted and separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment.
 
 
 
*
 
Filed herewith
 
 
 
**
 
Furnished herewith


46
Table of Contents

Signatures
 
Pursuant to the requirements 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.
 
SPIRIT AEROSYSTEMS HOLDINGS, INC.
 
Signature
 
Title
 
Date
 
 
 
 
 
/s/ Sanjay Kapoor
 
Senior Vice President and Chief Financial
 
May 1, 2015
     Sanjay Kapoor
 
Officer (Principal Financial Officer)
 
 




Signature
 
Title
 
Date
 
 
 
 
 
/s/ Mark J. Suchinski
 
Vice President and Corporate Controller (Principal Accounting Officer)
 
May 1, 2015
     Mark J. Suchinski
 
 
 
 


47

EXHIBIT 10.1
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 [*****].


Amendment No. 11
To
Special Business Provisions SPB MS-65530-0016
Between
The Boeing Company
And
Spirit AeroSystems, Inc.

THIS AMENDMENT to Special Business Provisions SBP MS-65530-0016 is entered into as of March 10, 2015, between by Spirit AeroSystems, Inc., a Delaware corporation, with its principal office in Wichita, Kansas (“Seller”) and The Boeing Company, a Delaware Corporation ("Boeing"). Hereinafter, the Seller and Boeing may be referred to jointly as "Parties" hereto.

WHEREAS, the parties have heretofore entered into Special Business Provisions"SBP-MS-65530-0016 ("SBP"), as of the 16 th day of June, 2005.

WHEREAS, Seller and Boeing desire to define certain agreements.

WHEREAS, the Parties have agreed to modify said SBP to incorporate the Attachment 27 "MOA - 737 MAX Non-Recurring Agreement" changes.

WHEREAS, the Parties have agreed to modify said SBP to incorporate the Attachment 28 "MOA - 737/747/767/777 Pricing Agreement through 2015" changes.

NOW THEREFORE, it is hereby agreed by and between the Parties:


I.
Add the following two (2) items to the existing TABLE OF CONTENTS of the SBP:

3.6      737 MAX Titanium Inner Wall Special Provisions
3.7      737 Derailment






















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 [*****].


II.
The ATTACHMENTS index of the SBP is hereby deleted in its entirety and replaced with the following:


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 6          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
Attachment 24      Anti-Lobbying Certificate
Attachment 25      737 Max Titanium Inner-Wall Work Transfer SOW
Attachment 26      737 Derailment
Attachment 27      737 MAX Non-Recurring Agreement
Attachment 28      737/747/767/777 Pricing Agreement Through 2015














2



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 [*****].


III.
The AMENDMENTS index of the SBP is hereby deleted in its entirety and replaced with the following:

AMENDMENTS
Amend
Number
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/ R. Stone

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/ J. Edwards

3
Incorporate CCNs as listed in attachment 2, updates to attachments 1, 2, 7, 14, 15, 16 and 22.

11/28/07
H. McCormick/ J. Edwards

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
W. Wallace

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
R. Stone

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
M. Milan

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
M. Milan


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
M. Milan
9
Incorporate Attachment 25 - 737 Max Titanium Inner Wall Agreement

9/4/2014
E. Flagel
M. Milan
10
Incorporate Attachment 26-737 Derailment

9/2/2014
B. Folden
 R. Ast

11
Incorporate Attachment 27 -737-MAX Non Recurring Agreement, and Attachment 28 737/747/767/777 Pricing Agreement

3/10/2015
C.Howell
R. Ast




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 [*****].


IV.
Section 4.1 (“Recurring Price”) of the SBP is hereby deleted in its entirety and replaced with the following:
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 end of the Pricing Period in accordance with the terms set forth in Article 1 (“PRICING FOR RECURRING PRODUCTS”) of Attachment 28 to this SBP as developed using Attachment 20 and listed in Attachment 1. In addition, Attachment 1 work package price(s) are subject to adjustment for abnormal escalation as provided in Attachment 22.
Follow-on Pricing subsequent to the Pricing Period will be negotiated in accordance with the terms set forth in Article 1.4 of Attachment 28 to this SBP. 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 Pricing Period as defined in Article 1 of Attachment 28 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 end of the Pricing Period, then interim Pricing shall be established in accordance with the Interim Payment Mechanism set forth in Article 1.4 of Attachment 28 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 end of the Pricing Period.
A.        Material - [*****].
B.        Labor - [*****].
Approximately forty-five days before the end of the Pricing Period 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



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 [*****].



V.
Section B.1 (“Product Development Projects”), sub-paragraph e. of Attachment 4 to the SBP is hereby deleted in its entirety and replaced with the following:

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
737-900BBJ3
737-7
737-8
737-9
747-8
777-200LR Freighter


VI.
Add the following two (2) items to the existing list of agreements in Attachment 9 (“NON-RECURRING AGREEMENTS”) to the SBP:

134.      [*****]
135.      [*****]























5



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 [*****].


VII.
Attachment 15 (“MAXIMUM PRODUCTION RATE AND MODEL MIX CONSTRAINT MATRIX”) to the SBP is hereby deleted in its entirety and replaced with the following:

MAXIMUM PRODUCTION RATE
And MODEL MIX CONSTRAINT MAT RIX
(Reference SBP Section 7.5.1)

SBP Attachment 15
MODELS
Monthly
Wichita
STRUCTURES
 
Engines
 
Production Protection Rate
Capacity
MIX
Units Separation
Skin Polish
 
PSD
Protection
WCH Capacity
[*****]
[*****] Units
[*****] Units
 
 
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
 
 
[*****]
 
 
 
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
 
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
 
SBP Attachment 15: 737 continued next page . . .






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 [*****].


NOTES: The number of [*****]  and [*****] airplanes shown above reflect a total capability of [*****] . The number of [*****]  and [*****] airplanes shown above reflect a total capability of [*****] . The number of [*****] model airplanes which can be manufactured with a corresponding reduction in the number of other minor models is [*****] with [*****] of separation between [*****] model units. Production capacity and combinations of [*****] and [*****] models are limited to a total of [*****]  with [*****]  of separation. The combinations in the matrix above reflect the number of [*****]  airplanes that can be produced with a corresponding reduction in [*****] models.
 
 
 
 
 
 
 
 
 
 
NOTES: The maximum monthly deliveries shown above reflect a total capability of [*****]  with the following limitations:
Combined [*****]  deliveries will never exceed a total [*****]  and will be reduced inline with the [*****]  implementation
Maximum combined [*****]  deliveries shall not exceed [*****]
A minimum of [*****]  of Separation (US) between any [*****]
Monthly deliveries of any [*****]  units will result in a corresponding reduction in the number of other model monthly
deliveries
Monthly [*****]  deliveries are limited to [*****] ,
Monthly deliveries of [*****]  and [*****]  models are limited to a total of [*****]  with at least [*****]  of separation
The [*****]  deliveries include all models of the [*****]  derivative aircraft [*****]
Maximum Protection Rate will not go above [*****]  to [*****]  before [*****]  (All dates below are Spirit FOB dates)
Combined Maximum Protection Rate for [*****]  will not exceed [*****]  prior to [*****]  
Combined Maximum Protection Rate for [*****]  will not go above [*****]  to [*****]  prior to [*****]
Combined Maximum Protection Rate for [*****]  will not go above [*****]  to [*****]  prior to [*****]
Combined Maximum Protection Rate for [*****]  will not go above [*****]  to [*****]  prior to [*****]
Combined Maximum Protection Rate for [*****]  will not go above [*****]  to [*****]  prior to [*****]
Combined Maximum Protection Rate for [*****]  will not go above [*****]  to [*****]  prior to [*****]
Combined Maximum Protection Rate for [*****]  minor models will not go above [*****]  to [*****]  prior to [*****]


SBP Attachment 15: 747, 767 & 777 continued next page . . .
























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 [*****].


MODELS
Monthly
Wichita
MIX
STRUCTURES
 
Engine - Protection Rates
747
[*****]  Units
[*****]  Units
[*****]
Units
Separation
Skin Polish
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
 
 
 
 
 
 
 
 
 
 
 
 
767
[*****]  Units
[*****]  Units
MIX
Units
Separation
Skin Polish
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
[*****]
[*****]
[*****]
 
 
 
 
 
 
 
 
 
 
 
 
777
[*****] Units
[*****] Units
MIX
Units
Separation
Skin Polish
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
 
 
 
LEGEND
[*****]
 
 
 
 
 
 
 
 
[*****]
 
 
 
 
 
 
 
 
[*****]
 
 
 
 
 
 
 
 
 
 
 
[*****]
 
 
 
 
 
 
 
 
 
 
[*****]
 
 
 
 
 
 
 
 
 
 
[*****]
 
 
 
 
 

 
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 [*****].


VIII.      Section A (“Supplier Banked Material”) of Attachment 16 to the SBP is hereby deleted in its entirety and replaced with the following:

A.      Supplier Banked Material (SBM) :
Requirements managed per Bonded Stores Agreement (BSA) dated
February 1, 2006.
 
 
SUPPLIER BANK MATERIAL (SBM)
 
Product Number
Program
Description
Quantity per S/S
[*****]
[*****]
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
[*****]
 
 
 
 
 
 
 
 
 
 
 
 



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 [*****].


[*****]
[*****]
GE 115 Damper
[*****]
[*****]
[*****]
GE 115 Harness
[*****]
[*****]
[*****]
GE 115 Harness
[*****]
[*****]
[*****]
Bracket for Prox. Sensor
[*****]
[*****]
[*****]
Bracket for Prox. Sensor
[*****]
[*****]
[*****]
Grommet
[*****]
[*****]
[*****]
Hose
[*****]
[*****]
[*****]
Valve
[*****]
[*****]
[*****]
Weapons Bay Door Set of Parts
[*****]
[*****]
[*****]
Titanium Panel Assy
[*****]
[*****]
[*****]
ACTUATOR ASSY - LOWER, NON LOCKING
[*****]
[*****]
[*****]
ACTUATOR - UPPER, LOCKING W/ FEEDBAC
[*****]
[*****]
[*****]
ACTUATOR - CENTER, LOCKING W/O FEEDBACK
[*****]
[*****]
[*****]
SYNCHRONIZATION SHAFT
[*****]
[*****]
[*****]
TUBE ASSY, UPR
[*****]
[*****]
[*****]
TUBE ASSY, LWR
[*****]
[*****]
[*****]
UBE ASSY, LWR
[*****]
[*****]
[*****]
SYNC SHAFT LOCK
[*****]
[*****]
[*****]
PROXIMITY SENSOR
[*****]






























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 [*****].



IX.
Add the following new Attachment 27 (“737 MAX Non-Recurring Agreement”) to the SBP:

MEMORANDUM OF AGREEMENT
between
THE BOEING COMPANY
and
Spirit AeroSystems, Inc.


737 MAX Non-Recurring Agreement
This Memorandum of Agreement (“MOA”) is entered into as of April 7, 2014 (the “Effective Date”) 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 and Seller have entered into an agreement SBP-MS-65530-0016 (SBP), GTA-BCA-65530-0016 (“GTA”) and AA-65530-0016 (AA) and all attachments and amendments thereto “Sustaining Contract" for Seller to provide product for current model aircraft and derivatives of those models.
B.
Seller currently supplies Products to Boeing under the Sustaining Contract in support of the current production 737 model aircraft.
C.
Boeing is seeking to develop, design and manufacture an aircraft currently designated as the 737 MAX to be sold under the 737-7, 737-8 and 737-9 designations (the “737 MAX Program”).
D.
Boeing and Seller entered into interim pricing agreements documented under Contract Change Notice(s) (CCN) 6818 and 8015 against the Sustaining Contract for a portion of the costs incurred for design, stress and manufacturing engineering for fuselage, wing, thrust reverser and pylon Statements of Work (SOW) through December 31, 2013, the remainder of such costs the parties wish to account for in Section 2.2 of this MOA.
E.
Boeing and Seller entered into an interim pricing agreement documented under CCN 7586 against the Sustaining Contract for a portion of the costs incurred for the [*****] Thrust Reverser Statement of Work, the remainder of such costs the Parties wish to account for in Sections 2.2 and 10.0 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 [*****].


F.
Boeing and Seller wish to establish non-recurring pricing based upon the provisions of the Sustaining Contract and this MOA in support of Boeing’s 737 MAX Program for the 737-7, 737-8 and 737-9 MAX models.
Now, therefore, in consideration of the mutual covenants set forth herein, the Parties agree as follows:
1.0
Applicability and Definitions     

1.1
Applicability

1.1.1
This MOA pertains only to the 737 MAX Program and does not alter any existing agreements relating to other items in the Sustaining Contract.

1.1.2
This MOA only pertains to the non-recurring pricing for the 737 MAX Program.

1.1.3
Capitalized terms used herein but not otherwise defined shall have the meaning set forth in the Sustaining Contract.

1.2
Definitions
1.2.1
“Amended Type Certification” (ATC) means the date upon which type certificate amendment is received from the applicable regulatory body for the modified aircraft design.

1.2.2
“Baseline Statement of Work (BSOW)”: The total requirements set forth in Section 3.0 and Section 4.0 including any referenced Boeing specifications, documents, designs or manuals.

1.2.3
[*****]: The statement of work relating the titanium inner-wall for the aircraft described in the BSOW, which the Parties anticipate at this time to be performed by [*****].

1.2.4
“Initial Tooling”: All Tooling required for the first 737-8 Shipset unit and/or Engine Development Program (EDP) hardware, and such term shall subsequently apply to the 737-9 and 737-7.

1.2.5
“Non-Recurring-Non-Tooling Work”: Any Nonrecurring Work relating to the BSOW, other than Non-Recurring Tooling Work, including, but not limited to, design engineering, stress engineering, project manufacturing engineering, process manufacturing engineering, First Article Inspection, other IPT, and NC programming.

1.2.6
“Non-Recurring Tooling Work”: Any Nonrecurring Work relating to Tooling under the BSOW, including, but not limited to, tool design, tool fabrication, assembly tooling, integration tooling, detail tooling, and rotable tooling, but replacement of Tooling at end of useful life is not included and is not dispositioned as part of this MOA. Non-Recurring Tooling Work includes Tooling work performed by Seller’s vendors.






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 [*****].


1.2.7
“[*****]Amount ([*****] Amount)”: As applicable, the Initial Tooling [*****] Amount or the Rate Tooling [*****] Amount, in each case as set forth in Exhibit A.

1.2.8
“Rate Tooling”: All Tooling, other than the Initial Tooling, required to support the build rate for the 737-8 aircraft.

2.0      Term and CCN Reconciliation

2.1
Effectiveness

This MOA shall become effective on the Effective Date. Within thirty (30) days of the Effective Date the Parties will incorporate the complete terms of this MOA into the Sustaining Contract.

2.2
CCN Reconciliation

Within five (5) days of the Effective Date, Boeing will issue to Seller a Purchase Order to enable payment for the work performed by Seller in support of the 737-8 Aircraft during the period from [*****] through [*****], inclusive of [*****], in the amount of [*****] and will pay such amount within net [*****] calendar days from receipt of invoice.
   
3.0
NON-RECURRING-NON-TOOLING STATEMENT OF WORK

3.1
In performance of the BSOW, Spirit shall perform to the applicable requirements and obligations set forth in the following documents in accordance with the delegated engineering requirements contained in the Sustaining Contract:

3.1.1
The work depicted in the current revision of the 737 MAX Configuration Control Document (CCD) [*****] for 737-8, [*****] for 737-7, and [*****] for 737-9 Fuselage, Propulsion, and Wing Statements of Work;

3.1.2
Fuselage Structures System Requirements and Objectives (SR&O) 737 MAX Document [*****], Structures Fuselage Criteria Document [*****], Propulsion Specification Documents [*****]; and

3.1.3
The 737-8 Engineering Bill of Material (BOM) submitted by Seller, and listed in Exhibit [B].
















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 [*****].


3.1.4
In the event Seller is unable to comply with any requirement, Boeing and Seller’s engineering representatives will work together to define a mutually agreeable solution.

3.2
Program Schedule Baseline: Program baseline schedules as contained in Exhibit D.

3.3
The Parties agree the documents set forth in this Section 3 are the versions existing as of June 2013.


4.0
NON-RECURRING TOOLING STATEMENT OF WORK

In performance of the BSOW, Seller shall perform to the requirements and obligations set forth in the following documents and in accordance with the tooling requirements contained in the Sustaining Contract:

4.1
The Tooling Baseline consists of:

4.1.1
CCD [*****], with proposed revisions, submitted with letter [*****];

4.1.2
The 737-8 Engineering Bill of Material (BOM) submitted by Seller, associated with CCD [*****], as set forth in Exhibit [B];

4.1.3
The Tooling List submitted by Seller, associated with CCD [*****] as set forth in Exhibit [C]; and

4.1.4
The August 1, 2013 version of the 737MAX Baseline Master Phasing Plan MPP, Rev B, initially dated June 28, 2012, as set forth in Exhibit [D]

4.2
For the avoidance of doubt, the BSOW referenced here is for the 737 MAX -8 Non-Recurring Work. Pricing, ground rules, statements of work, unique terms and non-recurring price for the other 737 MAX minor models will be subsequently agreed and incorporated into this MOA at a later date.

5.0
PAYMENT FOR NON-RECURRING-NON-TOOLING WORK

In consideration for Seller’s performance of the Non-Recurring-Non-Tooling statement of work identified in Section 3.0 and other mutual covenants set forth herein, the Parties agree to the following.

5.1
Payment

5.1.1
Boeing will reimburse Seller for all costs incurred less any rebates and discounts in performance of the Non-Recurring-Non-Tooling Work up to [*****], including, but not limited to, [*****], all as set forth in Exhibit [E].








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 [*****].


5.1.2
Seller will invoice its costs incurred less any rebates and discounts in performance of the Non-Recurring-Non-Tooling Work up to Amended Type Certification for 737-7, -8, -9, [*****], for the [*****] period preceding the month of invoice, and for other agreed to costs that have not been previously invoiced. ([*****] invoice to be submitted upon signature of this MOA).

Purchase orders will be released in the following manner to enable invoicing of the Non-Recurring Non-Tooling Define statements of work.

737-8 Fuselage Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-8 Wing Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-8 Pylon Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-8 Thrust Reverser Non-Recurring Non-Tooling Define PO XXXXXX item XX

737-9 Fuselage Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-9 Wing Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-9 Pylon Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-9 Thrust Reverser Non-Recurring Non-Tooling Define PO XXXXXX item XX

737-7 Fuselage Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-7 Wing Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-7 Pylon Non-Recurring Non-Tooling Define PO XXXXXX item XX
737-7 Thrust Reverser Non-Recurring Non-Tooling Define PO XXXXXX item XX


Purchase orders will be released in the following manner to enable invoicing of the Non-Recurring Non-Tooling Build statements of work.

737-8 Fuselage Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-8 Wing Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-8 Pylon Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-8 Thrust Reverser Non-Recurring Non-Tooling Build PO XXXXXX item XX

737-9 Fuselage Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-9 Wing Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-9 Pylon Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-9 Thrust Reverser Non-Recurring Non-Tooling Build PO XXXXXX item XX

737-7 Fuselage Non-Recurring Non-Tooling Build PO XXXXX item XX












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 [*****].


737-7 Wing Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-7 Pylon Non-Recurring Non-Tooling Build PO XXXXXX item XX
737-7 Thrust Reverser Non-Recurring Non-Tooling Build PO XXXXXX item XX

5.1.3
Boeing will pay such invoices per the terms of the Sustaining Contract net [*****] calendar days after receipt of valid invoice and supporting data as defined in Exhibit [E] along with a monthly description of significant accomplishments and work completed for the fuselage, wing, thrust reverser and pylon statements of work. Seller will provide separate invoices for Fuselage, Wing, Thrust Reverser and Pylon.

5.2
Rates

For clarification purposes, the rates described in Attachment 5 of the SBP do not apply.

5.3
Cost Allocation

Seller agrees that the cost allocation methodology utilized to derive costs incurred as of the Effective Date of this MOA will not change without prior review and concurrence from Boeing. In the event public accounting requirements change Seller’s cost allocation methodology the Parties will work together to resolve impacts.

6.0
PAYMENT FOR Non-Recurring Tooling WORK

In consideration for Seller’s performance of the Non-Recurring Tooling statements of work identified in Section 4.0 and other mutual covenants set forth herein, the Parties agree to the following.

6.1
Payment

6.1.1
Boeing will reimburse Seller for all actual costs incurred less any rebates and discounts in performance of the Non-Recurring Tooling Work including, but not limited to, [*****] as set forth in Exhibit [F] submittal form]; up to the [*****] identified in Exhibit [A] for Initial Tooling and Rate Tooling by -7, -8, -9 and by minor model. The [*****] Amount in Exhibit [A] shall be deemed to be reduced by [*****] respectively until all Certified Tool Lists (CTLs) are submitted and approved. Upon submittal of all CTL records associated with each [*****] Amount, such deemed reduction shall no longer apply, and Boeing will pay Seller any remaining amount due for tooling costs incurred up to the [*****] Amount as set forth in Exhibit [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 [*****].


6.1.2
Seller will invoice its costs for the Non-Recurring Tooling Work, [*****], for the [*****] period preceding the month of invoice, and for other agreed to costs that have not been previously invoiced.

6.1.3
Boeing will pay such invoices per the terms of the Sustaining Contract net [*****] calendar days after receipt of valid invoice and supporting data as defined in Exhibit [F], Seller will provide separate invoices for Fuselage, Wing, Thrust Reverser and Pylon work.

6.2
Rates

For clarification purposes, the rates described in Attachment 5 of the SBP do not apply.

6.3
Invoicing Requirements for Non-Recurring Tooling Work

Seller will invoice Tooling separately by program (Fuselage, Wing, Thrust Reverser, Pylon) and by Initial Tooling and Rate Tooling by -7, -8, -9.

Purchase orders will be released in the following manner to enable invoicing of the Non-Recurring Tooling statements of work.

737-8 Fuselage Initial Tools PO XXXXXX item XX
737-8 Fuselage Rate Tools PO XXXXX item XX
737-8 Wing Initial Tools PO XXXXXX item XX
737-8 Wing Rate Tools PO XXXXXX item XX
737-8 Pylon Initial Tools PO XXXXXX item XX
737-8 Pylon Rate Tools PO XXXXXX item XX
737-8 Thrust Reverser Initial tools PO XXXXXX item XX
737-8 Thrust Reverser Rate Tools PO XXXXXX item XX

The Parties shall negotiate [*****] Amounts for 737-7 and 737-9 tooling within [*****] from receipt of Seller’s fully supported proposal. Upon settlement the Parties will amend Exhibits A and C within [*****] days to reflect the agreed pricing.

6.4
Incentive Fee

6.4.1
Upon submittal of all CTL’s associated with each [*****] Amount set forth in Exhibit A [*****], if Seller’s actual costs incurred in the completion of such work are less than the [*****] Amount, and taking into account any adjustments to such [*****] Amount pursuant to Section 8.0 (Changes), then Boeing shall pay to Seller, in addition to the amounts due under Section 6.1 (Payment), an incentive fee equal to [*****] as amended from time to time and agreed to between the parties per section 6.7 [*****].








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 [*****].


6.4.2
If an incentive is earned in accordance with 6.4.1, Boeing will provide a purchase order within [*****]. Upon receipt of valid invoice from Seller, Boeing will pay such invoices per the terms of the Sustaining Contract net [*****] calendar days.

6.5
Schedule

The implementation schedule for the Non-Recurring Tooling Work will be provided on Exhibit [C].

6.6      Capacity

The pricing applicable to the Non-Recurring Tooling Work described herein, as set forth in Exhibit [A] hereto, is based upon supporting a maximum quantity of [*****] Shipsets for the 737 aircraft per month in any of the specified combinations: [*****] per the agreed to transition plan Exhibit [H]. The Parties agree to update the SBP Attachment 15 to include the MAX and to reflect the foregoing.   Nothing herein affects the downside rate protection concerning minimum production rates set forth in Section IV c. (“Failure to Maintain Rate after FOB Dates”) of the Boeing - Seller Memorandum of Agreement dated March 9, 2012.

6.7     [*****] Amount Adjustments
               
6.7.1    If it is determined additional Tooling that is not driven by BSOW Change is required in excess of that set forth in the BSOW, all additional Tooling costs incurred to meet the requirements of initial build and rate to [*****] APM will be assumed by Seller and the [*****] Amount shall not be adjusted.

6.7.2   If it is determined Seller can accomplish the requirements with less Tooling than that set forth in the BSOW, the [*****] Amount shall not be adjusted and the cost savings shall be administered in accordance with Section 6.4 (Incentive Fee).
               
6.7.3   For the sake of clarity, any Change from BSOW requested or driven by Boeing during the duration defined for Initial Changes shall constitute an Initial Change resulting in a commensurate adjustment to the [*****] Amount in accordance with Section 8.0. (Changes).

7.0
BUDGET TRACKING, MONTHLY ACTUALS, AND INVOICE RECONCILIATION
7.1
Monthly Actuals












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 [*****].


Seller will provide monthly costs incurred less any rebates and discounts in performance of the Non-Recurring-Non-Tooling Work up to Amended Type Certification for 737-7, -8, -9, including, but not limited to, [*****], as set forth in Exhibit [E] along with a description of significant accomplishments and work completed for the fuselage, wing, thrust reverser and pylon statements of work.

7.2      Budget Tracking

7.2.1
In conjunction with submittals of costs incurred, Seller will provide to Boeing its projected expenditures in connection with the performance of the Non-Recurring-Non-Tooling Work for the succeeding [*****] period, in the form of the template set forth in Exhibit [E].

7.2.2
At the end of [*****], Boeing will issue its budget forecast for the Non-Recurring-Non-Tooling Work for the succeeding [*****] period.

7.2.3
The Parties agree that regardless of any variances between such budgets and Seller’s costs, Boeing will continue to pay Seller in accordance with Section 5.1.

7.2.4
Weekly reporting requirements

If requested, Seller will provide incurred weekly headcount information by IPT and Job function for Non-Recurring-Non-Tooling.

7.2.5
Budget Management

Boeing and Seller will utilize the [*****] and [*****], if applicable, forecast and actual information to manage the program budget.

Boeing and Seller will work together to jointly manage the Boeing budget through the identification and implementation of forecasted spend reduction opportunities.
  
7.3
Schedule Performance Monitoring

7.3.1
Boeing and Seller will utilize the Event Tracking And Control (“ETAC”) reporting system to track design/stress engineering performance.

7.3.2   Boeing and Seller will utilize the Spirit Compliance And Tracking (“SCAT”) system to track non-define performance.

7.4
Invoice Reconciliation
7.4.1
In the event that Boeing disputes any Seller invoice, including without limitation, the invoice set forth in Section 2.2 above, Boeing will pay 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 [*****].


the invoiced amount by the applicable deadline, in accordance with Section 5.1 or 6.1 (Payment), as applicable, but may review Seller’s books, records and documentation relating to the disputed amounts, provided that such review is conducted at reasonable times at Seller’s facility and that the scope of such review will not extend to any books, records, documentation or other information that is not necessary to support such disputed amounts. As a result of such review, any mutually agreed payment adjustments will be made in [*****]. Should the Parties fail to come to mutual agreement within [*****] of notification pursuant to Section 7.4.3, the Parties will resolve such disputes per GTA section 33.0.

7.4.2
The Parties recognize that Seller may in some instances have confidentiality obligations to third parties which limit the amount or nature of data that can be provided in invoice reconciliation. In such event, the Parties shall work together to determine a mutually agreeable solution which enables the provision of supporting data in Section 7.4.1 in a manner that is in compliance with Seller’s confidentiality obligations to third parties.

7.4.3
Boeing will have [*****] from the date the invoice is received to notify Seller of any exception to the actual costs listed in such invoice, otherwise the invoice will be deemed accepted.

8.0
Changes

8.1
In the event of any Change to the BSOW, directed by Boeing prior to Amended Type Certification as applicable to each MAX minor model (an “Initial Change”):

8.1.1 The Parties will negotiate a schedule adjustment and any applicable adjustment to an [*****] Amount in accordance with Section 8.3 of this MOA.

8.1.2
Costs associated with any revisions to the BSOWs that constitute a Change under Section 6 of the SBP and fall within the time period designated for Initial Changes, shall be addressed in accordance with 5.1.1 of this MOA for Non-Recurring-Non-Tooling Work and 6.1.1 for Non-Recurring Tooling Work.

8.2
For clarification purposes, the change provisions of this MOA, rather than the change provisions in Section 7.0 of the SBP, will govern with respect to Initial Changes (provided, that the term “Change” as used herein, shall have the same meaning as that defined in the SBP, except as modified by this MOA), and equitable price adjustment with respect to Initial Changes will not be subject to the price thresholds described in Section 7.0 of the SBP. For each MAX minor model, Changes following the Initial Change period for such minor model shall be governed by the Sustaining Contract. For the avoidance of doubt Section 6.0 of the SBP shall apply except for the reference to Section 7.0 contained therein.










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 [*****].


8.3
Change Negotiation Process

8.3.1
Following receipt of a direction from Boeing that constitutes a Change under this MOA, Seller will provide updated scope of work documents to Boeing, along with pricing submittals, identifying the associated cost and/or schedule impacts.

8.3.2
Within [*****] of receipt of such proposal, Boeing shall make a settlement offer to Seller. Following receipt of Boeing’s settlement offer, if the Parties are unable to reach agreement on an equitable adjustment within [*****], the negotiations shall be elevated to Senior Contracts Management for resolution.

8.3.3
Upon settlement the [*****] Amounts and/or schedule, this MOA will be adjusted by Contract Change Notice (CCN) for all adjustments agreed in writing between the parties.

9.0
Weight

9.1.
Seller acknowledges the importance of an end item weight for the Products it delivers to Boeing and agrees to follow diligent weight reduction practices during the design process.

9.2
Based on the BSOW, Seller will provide non-binding Advisory Weight Guidelines (AWG) for the Seller provided dry products. No weight requirement, (such as those referenced in any requirement document) other than the AWG are applicable.

9.3
Such AWGs do not constitute a weight requirement, and failure to achieve such AWGs shall not constitute a breach under this MOA or the SBP

9.4
These AWGs are for the end item level and are for production units only.

9.5
In addition, the above AWGs require that adjustments to AWG values be assessed in conjunction with Initial Changes having a weight impact.

9.6
Seller will provide Status Weight reporting and Actual Weight reporting once monthly via agreed to format.

10.0      [*****] STATEMENT OF WORK

10.1
The Parties continue to evaluate the transfer of the [*****] Statement of Work from Seller to 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 [*****].


10.2
Until such time as the transfer agreement has been executed, Seller will invoice Boeing [*****] for payments made to [*****] pursuant to the [*****] Statement of Work, and Boeing will pay such invoices net [*****] days after receipt thereof. For the avoidance of doubt, Seller will not duplicate such amounts in any invoice submitted pursuant to Section 5.1 or 6.1.

10.3
In the event the Parties are unable to reach a transfer agreement by [*****] Boeing and Seller will negotiate additional payment provisions or inclusion of the [*****] Statement of Work into this MOA.

11.0
Propulsion Engine Development Plan (EDP) and Test hardware

11.1
The parties will negotiate pricing for EDP Hardware and test hardware by [*****].

12.0
INCENTIVES: NON-RECURRING-NON-TOOLING

Boeing and Seller agree to the inclusion of an Award Fee program for the Non-Recurring-Non-Tooling Work based on schedule, quality, and cost performance in accordance with terms set forth in Exhibit G.

Boeing and Seller agree to work together to develop a design for cost incentive plan. This plan will be in addition to the incentives identified on Exhibit G.

13.0
MISCELLANEOUS

13.1
This MOA including all Exhibits and Attachments contain the entire agreement between Seller and Boeing about the subject matter hereof and supersedes all previous proposals, understandings, commitments, or representations whatsoever, oral or written for said effort. This MOA may be changed only in writing by authorized representatives of Seller and Boeing. Except as specified herein, all other terms of the Sustaining Contract apply. In the event of a conflict between the terms of this MOA and the Sustaining Contract, the terms of this MOA will have precedence.

13.2
The Parties will update Attachment 9 to include the 737 MAX, and Attachment 4 of the SBP to include the 737 MAX under Section B.1 and incorporate this MOA as a separate attachment to the SBP.

13.3
The Parties will amend the Product Support and Assurance Document (PSAD) D6-83315 to incorporate the 737-7, -8, -9 models in Section 8.3.1 (a) “Warranty for Products”.

13.4
The D6-83323 Document denoting the 737 NG roles, responsibilities, and accountability for the 737 NG will apply to Seller’s engineering responsibility for









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 [*****].


the 737 MAX Products and nothing contained herein is intended to modify such allocation of roles, responsibilities and accountability for 737 MAX 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 Section 13 (Order of Precedence) of the SBP.

EXECUTED in duplicate as of the date and year first set forth above by the duly authorized representatives of the Parties.

BOEING                      SELLER
THE BOEING COMPANY              Spirit AeroSystems, Inc.
Signature:
Signature:
Printed Name:
Printed Name:
Title:
Title:
Date:
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 [*****].


List of Exhibits

Exhibit A: Tooling [*****] Amounts
Exhibit B: Engineering Bill of Material
Exhibit C: Tooling Bill of Material
Exhibit D: Master Phasing Plan and Tier II Schedules
Exhibit E: Non-Recurring-Non-Tooling Cost Submittal Form
Exhibit F: Non-Recurring Tooling Cost Submittal Form
Exhibit G: Award Fee
Exhibit H: MAX Transition Plan



































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 [*****].


Exhibit A: Tooling [*****] Amounts
 


737-8 [*****]  Amounts
Fuselage, Wing, and Propulsion End Items (All SOW)
Initial Tooling [*****] Amount
[*****]
Rate Tooling [*****] Amount
[*****]


737-9 [*****] Amounts
Fuselage, Wing, and Propulsion End Items (All SOW)
Initial Tooling [*****] Amount
To be negotiated per section 6.3
Rate Tooling [*****] Amount
To be negotiated per section 6.3

737-7 [*****] Amounts
Fuselage, Wing, and Propulsion End Items (All SOW)
Initial Tooling [*****] Amount
To be negotiated per section 6.3
Rate Tooling [*****] Amount
To be negotiated per section 6.3



























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 [*****].


Exhibit B: Engineering Bill of Material

Engineering Bill of Material (E-BOM) for Fuselage, Pylon, Thrust Reverser, Flap, Fixed Leading Edge, Fixed Trailing Edge, Slat and K-Flap used for Non-Recurring Tooling base pricing is contained in file 737-8_E-BOM_CCD_Rev_F_Plus_Dated_January_2013.xlsx embedded below and attached to this Exhibit as a separate file due to the size of the file.

Embedded copy of CCD Rev F Plus E-BOM file
737-8_E-BOM_CCD_Rev_F_Plus_Dated_January_2013.xlsx



























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 [*****].


Exhibit C: Tooling List

Tooling List for Fuselage, Pylon, Thrust Reverser, Flap, Fixed Leading Edge, Fixed Trailing Edge, Slat and K-Flap is contained in file 737_MAX_8_Rev_F_Tooling_Lists_GS.XLSX embedded below and attached to this Exhibit as a separate file due to the size of the file.


Embedded copy of MAX 8 Rev F Tooling List files
737_MAX_8_Rev_F_Tooling_Lists_GS.XLSX

































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 [*****].



Exhibit D: Master Phasing Plan and Tier II Schedules







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 [*****].











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 [*****].








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 [*****].








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 [*****].








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 [*****].



Exhibit E: Non-Recurring-Non-Tooling Cost Submittal Form

Summary Totals Page

737 MAX Non-Recurring Actuals
 
 
 
Cumulative through Date Month/Year
 
 
 
 
 
 
 
 
 
Hours
Fuselage
Pylon
TR
Wing
Total
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Design Eng - Subcontract
 
 
 
 
 
Stress Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
Total Hours
 
 
 
 
 
 
 
 
 
 
 
Avg Rate
Fuselage
Pylon
TR
Wing
Total
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost
Fuselage
Pylon
TR
Wing
Total
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
Total Cost
 
 
 
 
 





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 [*****].



Totals by Month

737 MAX Non-Recurring Actuals - Totals
 
 
 
Date (Month/Year)
 
 
 
 
 
 
 
 
 
Hours
Month
Month
Month
Month
Month
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Design Eng - Subcontract
 
 
 
 
 
Stress Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
Total Hours
 
 
 
 
 
 
 
 
 
 
 
Avg Rate
Month
Month
Month
Month
Month
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost
Month
Month
Month
Month
Month
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
Total Cost
 
 
 
 
 






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 [*****].



Totals by IPT

737 MAX Non-Recurring Actuals - (BY IPT)
 
 
 
Month, Year
 
 
 
 
 
 
 
 
 
Hours
Month
Month
Month
Month
Month
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Design Eng - Subcontract
 
 
 
 
 
Stress Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
Total Hours
 
 
 
 
 
 
 
 
 
 
 
Avg Rate
Month
Month
Month
Month
Month
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost
Month
Month
Month
Month
Month
Design Eng
 
 
 
 
 
Stress Eng
 
 
 
 
 
Project ME
 
 
 
 
 
Eng - Subcontract
 
 
 
 
 
Process ME
 
 
 
 
 
NC
 
 
 
 
 
IPT
 
 
 
 
 
QA
 
 
 
 
 
Total Cost
 
 
 
 
 






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 [*****].


Actuals by IPT
Actuals by IP
 
 
Date Month/Year
 
 
 
 
 
 
 
Hours
Month
Month
Month
Month
Design Eng
 
 
 
 
Stress Eng
 
 
 
 
Project ME
 
 
 
 
Offload DE
 
 
 
 
Offload SE
 
 
 
 
Process ME
 
 
 
 
NC
 
 
 
 
IPT
 
 
 
 
Tool Design
 
 
 
 
Tool Fab
 
 
 
 
Total Fuselage Hours
 
 
 
 
 
 
 
 
 
Dollars
Month
Month
Month
Month
Design Eng
 
 
 
 
Stress Eng
 
 
 
 
Project ME
 
 
 
 
Define Offload
 
 
 
 
Process ME
 
 
 
 
NC
 
 
 
 
IPT
 
 
 
 
Tool Design
 
 
 
 
Tool Fab
 
 
 
 
Total Fuselage Dollars
 
 
 
 
 
[*****]

[*****]

[*****]

[*****]

Dollars with G&A
Month
Month
Month
Month
Design Eng
—

—

—

—

Stress Eng
—

—

—

—

Project ME
—

—

—

—

Define Offload
—

—

—

—

Process ME
—

—

—

—

NC
—

—

—

—

IPT
—

—

—

—

Tool Design
—

—

—

—

Tool Fab
—

—

—

—

Total Fuselage 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 [*****].


Exhibit F: Non-Recurring Tooling Cost Submittal Form

MAX In-house tooling template

737 MAX Nacelle Quarterly Analysis - SAMPLE
737 MAX Nacelle Tools Actuals as of the close of business month of January (2/6/2014) (SAMPLE)
 
 
 
 
 
IN-HOUSE HOURS
DOLLARS
 
TOTAL DOLLARS
Tool Number
Unit Number
Serial Number
TCS Order Status
EST Committed/Closed Date
FAB
DESIGN
TOTAL HOURS
FAB
DSN
SUBCONTRACT
FACILITIES ASSIST
MATERIAL
TOTAL DOLLARS
 
CUM-TO-DATE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


MAX Supplier tooling template
737 MAX STRUT SUPPLIER ACCOUNTABLE TOOLS - SAMPLE
Tool Number
Unit
Lifetime Serial
Open/Closed
Estimated Close Date
Cost
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 















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 [*****].



EXHIBIT G: AWARD FEE


A.      Award Fee Plan

An Award Fee plan is provided to improve and assure the execution of the BSOW on Boeing products for the 737 MAX program. ("Award Fee” or “Award Fee Plan").

The Award Fee Plan establishes the basis for providing incentives to Seller, to improve in targeted areas of performance for the 737 MAX program under this MOA. This Award Fee Plan provides the means by which Seller’s performance evaluation will be conducted and amounts to be paid will be determined.

B.      Award Fee Pool

The available Award Fee amount (Award Fee Pool) is [*****].

The Award Fee Pool is allocated between Cost, Quality and Delivery as follows.

Cost: Total [*****] award fee
•
[*****] payable if [*****] Non-Recurring-Non-Tooling cost target is met, [*****] through [*****] of [*****]
•
[*****] payable if overall Non-Recurring-Non-Tooling cost target is achieved through 737-7 ATC. Value to be provided after [*****].

Quality: Up to [*****] if first pass release quality through CMA is in excess of [*****] and less than [*****] second effort driven by drawing error. Reference chart below for payment timing

Schedule: Up to [*****] if ETAC milestone completion is in excess of [*****] for 737-7, 737-8, and 737-9 ETAC performance. Reference chart below for payment timing
•
[*****] payable for ETAC releases [*****] on time
•
[*****] payable for ETAC releases [*****] on time

This value of the Award Fee Pool will be allocated by performance period and area of performance as per Section F (Award Fee Allocation and Payment Record). The actual Award Fees paid will be determined in accordance with the criteria contained in the table included in Section F (Award Fees Allocation and Payment Record). In no event does the Award Fee Plan affect other payments owed to Seller under this MOA.

C.      Award Fee Plan 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 [*****].


Changes to the Award Fee Plan affecting any current evaluation period may only be implemented upon mutual agreement of both parties. Boeing will notify Seller in writing of any change(s) to the Award Fee Plan.

D.      Contract Termination

If this MOA is terminated in accordance with the termination terms set forth under the Sustaining Contract and such termination is after the start of an Award Fee evaluation period, the Award Fee deemed earned for that period shall be determined by Boeing using the normal Award Fee evaluation process, provided that the Award Fee amounts earned will be pro-rated based on the time period the MOA is in effect during the evaluation period. After termination, the remaining Award Fee amounts allocated to all subsequent Award Fee evaluation periods cannot be earned by Seller and, therefore, shall not be paid.

E.      Award Fee Allocation and Payment Record

The Award Fee earned by Seller will be determined at the completion of the evaluation periods shown in the Award Fee tables below. The total dollars shown corresponding to each period is the maximum available Award Fee amount that can be earned during that particular period. The Schedule and Quality categories are to be evaluated based on the individual 737-7, -8, -9 models. The Cost category is to be evaluated based on the combined performance of all models (737-7, 737-8, and 737-9).
F.      Payment of Award Fee
Payment of the Award Fee shall be due net [*****] calendar days after receipt of Seller's invoice.

Award Fee tables: Record of the total amount of Award Fee available and actual payments made.





















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 [*****].



737-MAX Incentive Payment Plan Schedule for Schedule and Quality Incentive
Payment to be based on completion of schedules and meeting quality requirements by model (737-7)
Category
Performance Period Beginning Milestone
Performance Period Ending Milestone
Payment Trigger
Amount Available
Award Amount Calculation
Schedule
[*****]
[*****]

[*****]

[***]

[*****]

Quality
[*****]

[*****]
[*****]

[***]

[*****]



737-MAX Incentive Payment Plan Schedule for Schedule and Quality Incentive
Payment to be based on completion of schedules and meeting quality requirements by model (737-8)
Category
Performance Period Beginning Milestone
Performance Period Ending Milestone
Payment Trigger
Amount Available
Award Amount Calculation
Schedule
[*****]
[*****]

[*****]

[****]

[*****]

Quality
[*****]

[*****]
[*****]

[****]

[*****]









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 [*****].


737-MAX Incentive Payment Plan Schedule for Schedule and Quality Incentive
Payment to be based on completion of schedules and meeting quality requirements by model (737-9)
Category
Performance Period Beginning Milestone
Performance Period Ending Milestone
Payment Trigger
Amount Available
Award Amount Calculation
Schedule
[*****]
[*****]

[*****]

[****]

[*****]

Quality
[*****]

[*****]
[*****]

[****]

[*****]





737-MAX Incentive Payment Plan Schedule for Cost Incentive
Payment to be based on meeting or exceeding Boeing cost targets for ll models (737-7,-8,-9)
Category
Performance Period Beginning Milestone
Performance Period Ending Milestone
Payment Trigger
Amount Available
Award Amount Calculation
Cost applies to 737-7, -8, -9 models only
[*****]
[*****]

[*****]

[****]

[*****]

Cost applies to 737-7, -8, -9 models 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 [*****].


EXHIBIT H - MAX Transition Plan







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 [*****].


X.
Add the following new Attachment 28 (“737/747/767/777 PRICING AGREEMENT THROUGH 2015”) to the SBP:

MEMORANDUM OF AGREEMENT BETWEEN
THE BOEING COMPANY Boeing Commercial Airplanes

AND

SPIRIT AEROSYSTEMS, INC.

737/747/7671777 PRICING AGREEMENT THROUGH 2015


This Memorandum of Agreement ("Agreement " ) is entered into as of the Effective Date (as defined below) , by and between The Boeing Company, a Delaware corporation, acting through its Boeing Commercial Airplane business organization ("Boeing") and Spirit AeroSystems Inc ., a Delaware corporation, with its principal office in Wichita, Kansas ("Spirit") . Boeing and Spirit are referred to herein collectively as the "Parties" or individually as a " Party." Capitalized terms
used but not defined herein shall have the meaning ascribed to such terms in the Sustaining
Contract (as defined below) .

RECITALS

A. WHEREAS , Boeing and Spirit are party to the Special Business Provisions ("SSP") MS-
65530-0016, dated June 16, 2005 ; and other documents incorporated therein by reference, including the General Terms Agreement ( " GTA") BCA-6553 0 - 0016 , and amendments and attachments to such agreements (collectively the "Sustaining Contract");

B . WHEREAS , the Parties wish to establish pricing as referenced in SSP Section 4 . 1 for the time period set forth in this Agreement for the Products set forth on SSP Attachment 1 (the "Recurring Products") that Spirit currently supplies to Boeing in support of current Program Airplanes covered under the Sustaining Contract , based upon the prov i sions of the Sustaining Contract and this Agreement;

C . WHEREAS , the Part i es wish to establish a mechanism to work together to implement cost reduction ideas ; and

D . WHEREAS , the Parties desire to implement a production rate of 47 airplanes per month
( " APM") for the 737 Program .

NOW , THEREFORE , in consideration of the mutual promises set forth in this Agreement , other good and valuable consideration, and subject to the conditions and covenants contained herein , the Parties agree as follows :


ART I CLE 1.      PRICING FOR RECURRING PRODUCTS


1.1
Pricing Period . The Unit Billing Prices as agreed to in this Agreement shall be effective as of Apri11 , 2014 through December 31 , 2015 (the "Pricing Period") .

1.2
Recurring Price . For purposes of Section 4 . 0 (Pricing) of the SBP , during the Pricing Period the Unit Billing Prices for Recurring Products shall be calculated as follows . The Part i es will follow the process set forth in SBP Attachment 20 to generate the Unit B i lling Prices using the Base Prices (as set forth in the SBP Attachment 1 that are in place as of the Effect i ve Date) fo r Recurring Products , which shall be adjusted using the [*****] , and



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 [*****].


wh i ch shall rema i n subject to adjustment pursuant to SBP Sections 6 and 7 (but not SBP Section 7 . 6) . For purposes of ca l culat i ng the Un i t Billing Prices , the Parties wi ll use the percentages [*****] ; prov i ded , however , that during the Pricing Period , the QBD reduct i on appl i ed to Attachment 1 Base Prices shall be [*****] . Period 9 w i ll be from [*****] . For purposes of the [*****] , beginning w i th Pe r iod 10 on [*****] and each new Period wi ll use [*****] .

1.3
Retroactive Adjustment. Upon execut i on of th i s Agreement , the Part i es ag r ee to wa i ve any retroactive debits or credits that would be due to either party e i ther under SBP Sect i on 4 . 1 . 1 (Inter i m Extens i on Pricing) or under Sp i rit Letter 052013-2013 - 0011 - JDR and any related correspondence as a resu l t of the Un i t B illi ng Prices estab li shed i n accordance w i th this Agreement , for payments made to Sp i r i t , or i nvo i ces rece i ved by Boe i ng , from June 1 , 2013 through March 31 , 2014 . Any invoices issued on o r after the Effective Date shall be at the Un i t B i lling Pr i ces set forth in th i s Agreement.

1.4
Extension Pricing Proposal. The Parties agree to commence negot i at i ons in [*****] for pricing beyond the Pricing Period ("Follow-on Pricing " ) . As part of such negotiat i ons , the Part i es shall agree on the durat i on of the Follow - on Pricing . Both Parties agree to negotiate in good faith to reach agreement on Follow-on Pricing by [*****] . If the Part i es fa i l to reach agreement for Follow - on Pric i ng by [*****] , the Parties shall use the Unit Billing Price calculated as the then cu r rent Attachment 1 Base Price at FOB date (inclusive of SOW adds and deletes , i.e PRR changes , adjustments based on implementat i on of cost reduction activit i es under Cost Reduct i on Project Agreements , work transfers , etc) reduced by the [*****] as ad j usted by the ind i ces and adjustment methodology set forth i n SBP Section 4 . 1 . 1 , as an i nter i m payment mechan i sm (the " Interim Payment Mechanism") to be applied to Recurring Products delivered following the end of the Pric i ng Per i od , but before agreement on Follow-on Pricing . The Inter i m Payment Mechan i sm shall apply until such t i me as the Parties agree on Follow - on Pricing .

ARTICLE 2.      COST REDUCTION


2.1
Working Together . The Parties agree to cooperate and work together to implement cost reduction ideas agreed to by both Boeing and Spirit. This Agreement supersedes (i) the Letter of Agreement between Boeing and Spirit dated August 2 , 2013 and (ii) for the duration of the Pricing Period, SBP Section 7 . 6 . For each agreed to cost reduction idea, the Parties shall enter into a written agreement (each, a "Cost Reduction Project Agreement " ) setting forth : (a) the cost reduction idea in detail ; (b) the steps required to implement such idea; (c) the Party responsible for each step; (d) the timeline associated with such implementation; (e) the non-recurring costs to be incurred by each Party and the documentation reasonably necessary to substantiate the non-recurring costs of each Party ; (f) the method for defining and measuring the cost savings ; (g) the process for recapture of each Party's non-recurring costs ; and (h) how the cost savings will be allocated among the Parties after each Party's recapture of its non-recurring costs .

2.2
Cost Reduction Focus . In order to track the progress of cost reduction implementation efforts , the Parties agree to conduct executive reviews [*****] beginning [*****] and on or about [*****] thereafter . These reviews shall track progress of items including , but not limited to , total number of cost reduction ideas, total number of implemented ideas , and total sav i ngs captured by both Parties to-date .

2.3
Nonrecurring Costs . Nonrecurring costs required to implement cost reduction ideas , as set forth in the applicable Cost Reduction Project Agreement, shall be shared by both Parties as outlined below .

In the calendar years 2014 and 2015 , Spirit shall fund up to a total of [*****] in nonrecurring costs required to implement cost reduction ideas agreed on by the Parties. During this timeframe , Boeing shall fund the balance of nonrecurring costs set forth in the applicable Cost Reduction Project Agreements , if required, to implement cost reduction ideas .





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 [*****].


2.4
Recurring Savings . The amount of cost savings realized from completed cost reduction projects shall be as set forth in the applicable Cost Reduction Project Agreement. Any such cost savings shall be applied on a case-by - case basis [*****] in accordance with the terms of the applicable Cost Reduction Project Agreement. In general, Boeing's portion of the recurring adjustment as agreed to between the Parties in the applicable Cost Reduction Project Agreement shall be applied to [*****] Parties [*****] to the Parties' nonrecurring investments .

ARTICLE 3.      PRODUCTION RATES OF 47 APM


3.1
Working Together. The Parties agree to implement a rate increase of 47 APM on the 737 Program in the most cost effective and efficient manner anticipated in [*****] or as otherwise agreed between the Parties. The Parties recognize that achieving rate increases requires coordination and collaboration across various roles and responsibilities between the Parties . The Parties agree to update Attachment 15 following execution of th i s Agreement to reflect 47 APM as the max i mum production r ate for the 737 Program and to reflect any assoc i ated model mix constraints . Until such time as the Parties amend SBP Attachment 15 to reflect a new minor model mix constraint associated with 47 APM on the 737 Program , the minor model m i x constraints exist i ng pr i or to such amendment shall cont i nue to apply . For the avoidance of doubt , nothing in this Agreement othe r than the maximum rate estab li shed here i n sha l l affect eithe r Party ' s rights or ob l igations under the Memorandum of Ag r eement t i tled " Encompass i ng a Revision to Spec i al Bus i ness Prov i s i ons MS-6553 0 - 0016 , Attachment 15 , Maximum P r oduction Rate and Mode l Mix Constra i nt Matr i x between Boeing and Spirit " dated March 9 , 2012 .

3 . 2
Property, Plant & Equipment. Sp i r i t shall be responsible to fund all Property , Pla n t & Equ i pment costs (PP&E) required to implement a production rate of 47 APM on the 737 Program .

3 . 3
Rate Tooling . Boeing shal l be responsible to pay for all Tool i ng , in acco r dance w i th the terms of the SBP , that the Parties agree i s requ i red to implement a product i on rate of 47 APM on the 737 Program at the pr i ces mutually agreed to by the Part i es .

3 . 4
Protection Rates Above 47 APM. T he Part i es ag r ee that nothing here i n conta i ns a n y ag r eement re l ating to any rate i nvestment or protect i on rates for product i on rates above 47 APM . For the avoidance of doubt , nothing in this Agreement shall affect either Party ' s rights or obl i gat i ons under the Memorandum of Agreement titled " Encompassing a Revision to Special Business Provis i ons MS - 6553 0 - 0016 , Attachment 15 , Maximum P r oduction Rate and Mode l M i x Constra i nt Matr i x between the Part i es " dated Novembe r
9 , 2007 .


ARTICLE 4.      787 ADVANCE PAYMENT RECOVERY

The Parties agree to suspend the app li cat i on of Advance Payments , as prescribed in Section 5 . 5 of SBP BCA - MS - 6553 0 - 0019 dated June 16 , 2005 (the " 787 Contract " ) , to decrease the p r ice for shipsets del i vered during the twe l ve (12) months beg i nning on April 1 , 2014 and end i ng on March 31 , 2015 . The appl i cat i on of the Advanced Payments amounts wh i ch reduce the price per shipset will resume for shipsets del i vered after March 31 , 2015 and will extend beyond sh i pset 100 0 , as identif i ed i n the 787 Contract , in order to allow Boeing to recover all Advance Payments as contemplated in the 787 Contract. The Part i es ag r ee to execute an ame n dment to the 787 Contract to document th i s s u spension .


ARTICLE 5 .      ORDER OF PRECEDENCE


Except as specif i ed here i n , all othe r terms and cond i t i ons of the Sustain i ng Contract sha ll app l y . In the event of a conflict between the terms of this Agreement and the Sustain i ng Contract , the terms of this Agreement shall have precedence w i th respect to the subject matter of th i s 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 [*****].



ARTICLE 6.      COMPLIANCE WITH LAWS


The Part i es agree to comply with all applicable laws , regulations , ordinances , rules , consent decrees or statutes enacted in their respective countries and jurisdictions , including , but not limited to , the Foreign Corrupt Practices Act ( " FCPA " ) (15 U . S . C . §§78dd-1 , et. seq.) and the Procurement Integrity Act (41 U . S . C . § 423) .


ARTICLE 7.      ENTIRE AGREEMENT


This Agreement , includ i ng the any other terms , cond i tions or documents incorporated by reference constitute the entire agreement between the Parties within the scope of this Agreement , and neither Party has relied on any representation or prom i se except as expressly set forth in this Agreement. This Agreement supersedes and satisfies in full any and all prior written or oral negotiations , agreements , understandings , and communicat i ons (includ i ng those contained in sales , promotional and/or marketing materials) between the Parties with respect to the subject matter of this Agreement. This Agreement shall become Attachment 24 to the SBP .


ARTICLE 8.      EFFECTIVE DATE


This Agreement shall become effective on the date of the last signature ind i cated below
( " Effective Date " ) .

[Signature Page 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 [*****].


IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives on the date written below .

SPIRIT AEROSYSTEMS, INC .

BY: /s/ Jim D. Reed
TYPED NAME: JIM D. REED

TITLE: DATE: VP Contracts, Pricing & Estimating
April 8, 2014

/s/ Yvonne Tu
Yvonne Tu



THE BOEING COMPANY

BY :

TYPED NAME :

PROCUREMENT AGENT

APRIL 8, 2014
TITLE : 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 [*****].


THAT as expressly provided by this Amendment No.11, all other terms, conditions, provisions and obligations of the Parties under Special Business Provisions SBP MS-65530-0016 remain unchanged.



IN WITNESS THEREOF the Parties hereto have executed this Amendment as of the day and year first written above.


THE BOEING COMPANY
SPIRIT AEROSYSTEMS, INC.
 
Boeing Commercial Airplanes
 
 
 
 
Supplier Management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:________________________
_______________________
 
      Cecelia Howell
 
Ryan Ast
 
 
      Procurement Agent
Contracts Administrator
 
      Date
 
 
Date
 
 
 




EXHIBIT 10.2

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 NO. 5
TO
CREDIT AGREEMENT

This Amendment No. 5, dated as of March 18, 2015 (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 party thereto, certain of 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, that certain Amendment No. 2 dated as of August 2, 2013, that certain Amendment No. 3 dated as of March 18, 2014 and that certain Amendment No. 4 dated as of June 3, 2014, the “ Credit Agreement ”);

WHEREAS, the Borrower has requested certain amendments to the Credit Agreement, and the 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 following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order:

“ Amendment No. 5 Effective Date ” means March 18, 2015.

“ Notice of Prepayment and/or Reduction/Termination of Commitments ” means a notice of prepayment with respect to a Loan, which shall be substantially in the form of Exhibit 2.05(a) or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer.
“ Term A Lender ” means a Lender with a Term A Loan Commitment or an outstanding Term A Loan, in its capacity as such.
“ Term A Loan ” means the Loan made pursuant to Section 2.01(b) .
“ Term A Loan Commitment ” means, with respect to each Term A Lender, the commitment of such Lender to make a Term A Loan hereunder on the Amendment No. 5 Effective Date, expressed as an amount representing the maximum principal amount of the Term A Loan to be made by such Lender hereunder, as the same may be reduced from time to time pursuant to the provisions of this Agreement. The amount of each Lender’s Term A Loan Commitment is set forth in Schedule I or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Term A Loan Commitment, as applicable. The aggregate amount of the Lenders’ Term A Loan Commitments as of the Amendment No. 5 Effective Date is $535,000,000.
“ Term A Loan Maturity Date ” means March 18, 2020.
“ Term A Note ” has the meaning specified in Section 2.11(a) .

CHAR1\1398811v6

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 [*****].


1.2    The following definitions in Section 1.01 of the Credit Agreement are hereby amended as follows:

(a) The definitions of “Advance Percentage”, “Aggregate Borrowing Base Amount”, “Borrowing Base Certificate”, “Customary Permitted Liens”, “Eligible Collateral”, “Eligible Collateral Borrowing Base Amount”, “Eligible Finished Goods Inventory”, “Eligible Intercompany Loans”, “Eligi ble P&E”, “Eligible Raw Materials Inventory”, “Eligible Real Estate”, “Eligible Receivables”, “Eligible Value”, “Eligible Work-in-Process Inventory”, “Minimum Liquidity”, “Net Book Value”, “Permitted Holders”, “Permitted Sponsor Indebtedness”, “Repricing Transaction”, “Requisite Term B Lenders”, “Suspension Period”, “Term B Lender”, “Term B Loan Commitment” and “Term B Loan Maturity Date” are deleted in their entirety.

(b) The definitions of “Applicable Percentage”, “Class”, “Commitment”, “Interest Payment Date”, “Interest Period”, “Loan”, “Permitted Additional Indebtedness”, “Requisite Lenders”, “Term Loan Commitment” and “Term Loans” are amended by replacing, in each instance, each occurrence of “Term B Loan” with “Term A Loan” in each such definition.

(c) The definition of “Applicable Rate” is amended to read as follows:

“ Applicable Rate ” means (a) with respect to an Add-On Term Loan, the percentage(s) per annum set forth in the applicable Add-On Term Loan Lender Joinder Agreement and (b) with respect to Revolving Loans, the Term A Loan, Swing Line Loans, Letters of Credit and the Commitment Fee, the following percentages per annum, based upon the Total Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 7.01(b) or (c) :

 
Pricing Tier
Total
Leverage Ratio
Commitment
Fee
Letter of Credit
Fee
Eurodollar
Rate Loans
Base Rate
Loans
 
 
1
>  3.0:1.0
0.45%
2.50%
2.50%
1.50%
 
2
< 3.0:1.0
but >  2.25:1.0
0.375%
2.25%
2.25%
1.25%
 
3
< 2.25:1.0 but >  1.75:1.0
0.30%
2.00%
2.00%
1.00%
 
4
< 1.75:1.0
0.25%
1.75%
1.75%
0.75%

Any increase or decrease in the Applicable Rate resulting from a change in the Total Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 7.01(b) or (c) ; provided , however , the Applicable Rate shall be based on Pricing Tier 4 from the Amendment No. 5 Effective Date until the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 7.01(b) or (c) for the Fiscal Quarter ending June 30, 2015; provided , further , that if a Compliance Certificate is not delivered when due in accordance with such Section, then, upon the request of the Requisite Lenders, Pricing Tier 1 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall continue to apply until the first Business Day immediately following the date a Compliance Certificate is delivered in accordance with Section 7.01(b) or (c) whereupon the Applicable Rate shall be adjusted based upon the calculation of the Total Leverage Ratio contained in such Compliance Certificate. Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b) .


(d)
The definition of “Change in Control” is amended to read as follows:


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“ Change in Control ” means

(a)      any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in Rules 13d‑3 and 13d‑5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock of the Parent Guarantor representing greater than thirty-five percent (35%) of the voting power of the outstanding Voting Stock of the Parent Guarantor,
(b)      during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Parent Guarantor (together with any new directors whose election to such Board of Directors or whose nomination for election was approved by a vote of a majority of the directors of the Parent Guarantor then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board of Directors of the Parent Guarantor, or
(c)      at any time, the Parent Guarantor ceases to own one hundred percent (100%) of the Equity Interests of the Borrower.
(e) The definition of “Class” is amended by replacing “Term B Lender” with “Term A Lender” in such definition.

(f)
The definition of “Equity Investors” is amended to read as follows:

“ Equity Investors ” means, collectively, officers, employees and directors of the Parent Guarantor or any of its Subsidiaries that own Equity Interests of the Parent Guarantor.

(g) The definition of “Eurodollar Base Rate” is amended to read as follows:

“ Eurodollar Base Rate ” means:
(a) for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate (“ LIBOR ”), or a comparable or successor rate which rate is approved by the Administrative Agent, as published on the applicable Bloomberg screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) (in such case, the “ LIBOR Rate ”) at or about 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; and

(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to the LIBOR Rate, at or about 11:00 a.m., London time, two (2) Business Days prior to such date for Dollar deposits with a term of one (1) month commencing that day;

provided that: (i) to the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided , further that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent and (ii) if the Eurodollar Base Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

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(h) The definition of “Final Maturity Date” is amended by replacing “April 18, 2019” with “March 18, 2020”.

(i) The definition of “Loan Notice” is amended to read as follows:

“ Loan Notice ” means a notice of (a) a Borrowing of Loans, (b) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, in each case pursuant to Section 2.02(a) , which shall be substantially in the form of Exhibit 2.02 or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower.
(j) The definition of “Note” is amended by replacing “Term B Notes” with “Term A Notes” in such definition.

(k) The definition of “Responsible Officer” is amended to read as follows:

“ Responsible Officer ” of any person means (i) any executive officer or Financial Officer of such person and any other officer or similar official thereof with responsibility for the administration of the obligations of such person in respect of this Agreement, (ii) solely for purposes of the delivery of incumbency certificates pursuant to Section 5.01 , the secretary or any assistant secretary of a Loan Party and (iii) solely for purposes of notices given pursuant to Article II, any other officer or employee of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. To the extent requested by the Administrative Agent, each Responsible Officer will provide an incumbency certificate and to the extent requested by the Administrative Agent, appropriate authorization documentation, in form and substance satisfactory to the Administrative Agent.

(l) The definition of “Revolving Loan Maturity Date” is amended by replacing “April 18, 2017” with “March 18, 2020”.

(m) The definition of “Swing Line Loan Notice” is amended to read as follows:

“ Swing Line Loan Notice ” means a notice of a Borrowing of Swing Line Loans pursuant to Section 2.04(b) , which shall be substantially in the form of Exhibit 2.04(b) or such other form as approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower.
(n) The definition of “Term B Loan” is amended to read as follows:

“ Term B Loan ” means the term loan made on the Closing Date to the Borrower pursuant to this Agreement. The aggregate outstanding principal amount of the Term B Loan

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immediately prior to the Amendment No. 5 Effective Date and repaid in full on the Amendment No. 5. Effective Date was $534,875,000.00.

1.3     Section 2.01(b) of the Credit Agreement is amended in its entirety to read as follows:

(c) (b)      Term Loan . Subject to the terms and conditions set forth herein, each Term A Lender severally agrees to make its portion of a term loan (the “ Term A Loan ”) to the Borrower in Dollars on the Amendment No. 5 Effective Date in an amount not to exceed such Lender’s Term A Loan Commitment. Amounts repaid on the Term A Loan may not be reborrowed. The Term A Loan may consist of Base Rate Loans or Eurodollar Rate Loans or a combination thereof, as further provided herein.

1.4      Section 2.01(c)(i) of the Credit Agreement is amended by deleting “after the Suspension Period” from the first sentence of such Section.

1.5      Section 2.01(c)(ii) of the Credit Agreement is amended by (a) deleting “after the Suspension Period” from the first sentence of such Section, (b) adding “and” at the end of clause (A)(VII), (c) replacing “; and” at the end of clause (A)(VIII) with a “.” and (d) deleting clause (A)(IX) thereof.

1.6      Sections 2.01(c)(ii)(A)(VII), 2.01(c)(ii)(A)(VIII), 2.05 and 2.08(a) of the Credit Agreement are amended by replacing each reference to “Term B Loan” in such Section with “Term A Loan”.

1.7      Section 2.02(a) of the Credit Agreement is amended by (a) replacing “which may be given by telephone” in the first sentence thereof with “which may be given by (A) telephone or (B) a Loan Notice”, (b) replacing the third sentence thereof with “Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a Loan Notice.” and (c) replacing “Each Loan Notice (whether telephonic or written)” in the sixth sentence thereof with “Each Loan Notice and each telephonic notice”.

1.8      Section 2.03(h) of the Credit Agreement is amended by deleting “ plus , during the Suspension Period, one-half of one percent (0.50%)” from such Section.

1.9      Section 2.04(b) of the Credit Agreement is amended by (a) replacing “which may be given by telephone” in the first sentence thereof with “which may be given by (A) telephone or (B) a Swing Line Loan Notice”, (b) replacing the third sentence thereof with “Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a Swing Line Loan Notice.” and (c) deleting “telephonic” in the fourth sentence thereto.     

1.10      Section 2.05(a)(i) of the Credit Agreement is amended by replacing “upon notice substantially in the form of Exhibit 2.05 (or in form and substance otherwise reasonably acceptable to the Administrative Agent) from the Borrower to the Administrative Agent” in the first sentence thereof with “upon delivery of a Notice of Prepayment and/or Reduction/Termination of Commitments to the Administrative Agent”.

1.11      Section 2.05(a) of the Credit Agreement is amended by deleting clause (iii) in its entirety.

1.12      The first parenthetical in Section 2.05(b)(ii) of the Credit Agreement is amended to read as follows:

(other than (A) the sale or issuance of Equity Interests of the Borrower and (B) [*****]

1.13      Section 2.07(c) of the Credit Agreement is amended in its entirety to read as follows:

(c)      Term A Loan . The Borrower shall repay the outstanding principal amount of the Term A Loan on the last Business Day of each Fiscal Quarter in the amount of $ 6,687,500.00, with the then Outstanding Amount of the Term A Loan due on the Term A Loan Maturity Date (as such installments may hereafter be adjusted as a result of prepayments made

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pursuant to Section 2.05 ), unless accelerated sooner pursuant to Section 9.02 , Section 9.03 or Section 9.04 .

1.14      Section 2.08(a) of the Credit Agreement is amended by deleting “ plus , during the Suspension Period, one-half of one percent (0.50%)” from each of clauses (i), (iii) and (v) thereof.

1.15      Section 2.11(a)(iii) of the Credit Agreement is amended to read as follows:

(iii) in the case of the Term A Loan, be in the form of Exhibit 2.11(c) (a “ Term A Note ”) and

1.16      Article III of the Credit Agreement is amended by adding a new Section 3.08 as follows:

3.08      Withholding Taxes .      For purposes of determining withholding Taxes imposed under FATCA, from and after the Amendment No. 5 Effective Date, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Loans under this Agreement as not qualifying as a “grandfathered obligation” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

1.17      Article IV of the Credit Agreement is amended by adding a new Section 4.09 as follows:

4.09      Appointment of Borrower . Each of the Loan Parties hereby appoints the Borrower to act as its agent for all purposes of this Agreement, the other Loan Documents and all other documents and electronic platforms entered into in connection herewith and agrees that (a) the Borrower may execute such documents and provide such authorizations on behalf of such Loan Parties as the Borrower deems appropriate in its sole discretion and each Loan Party shall be obligated by all of the terms of any such document and/or authorization executed on its behalf, (b) any notice or communication delivered by the Administrative Agent, L/C Issuer or a Lender to the Borrower shall be deemed delivered to each Loan Party and (c) the Administrative Agent, L/C Issuer or the Lenders may accept, and be permitted to rely on, any document, authorization, instrument or agreement executed by the Borrower on behalf of each of the Loan Parties.

1.18      Section 5.02 of the Credit Agreement is amended by deleting clause (d) in its entirety.

1.19      Section 7.01 of the Credit Agreement is amended by (a) adding “and” at the end of clause (k), (b) replacing “; and” at the end of clause (l) with a “.” and (c) deleting clause (m) in its entirety.

1.20      The first sentence of Section 7.13 of the Credit Agreement is amended to read as follows:

The Borrower covenants and agrees that the proceeds of the Term A Loan received from the Term A Lenders on the Amendment No. 5 Effective Date will be used solely to repay the Term B Loan as well as fees and expenses payable in connection therewith.

1.21      Section 7.18 of the Credit Agreement is amended by adding the following sentence to the end of such Section:

Notwithstanding the foregoing to the contrary, the endorsement to the Sedgwick, Kansas mortgagee’s policy of title insurance deleting the pre-printed exception for mechanics’ liens shall be issued by the title company and delivered to the Administrative Agent no later than July 15, 2015 (or such later date as may be agreed by the Collateral Agent in its sole discretion).

1.22      Section 8.01(a) of the Credit Agreement is amended by (a) replacing “any Permitted Sponsor Indebtedness” with “[Reserved]” in clause (xii), (b) adding “and” at the end of clause (xix), (c) replacing “; and” at the end of clause (xx) with a “.”, (d) deleting clause (xxi) in its entirety and (e) deleting the final paragraph thereof.


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1.23      Section 8.05 of the Credit Agreement is amended by (a) deleting “and” at the end of clause (xiv), (b) adding “and” at the end of clause (xv) and (c) adding a new clause (xvi) to read as follows:

(xvi)      [*****];

1.24      Section 8.07 of the Credit Agreement is amended by (a) deleting clause (viii) in its entirety, (b) adding “and” at the end of clause (vi) and (c) amending clause (vii) in its entirety to read as follows:

(vii)      so long as no Default or Event of Default then exists and the Borrower and its Subsidiaries shall be in compliance with all Financial Covenants on a Pro Forma Basis after giving effect thereto, the Borrower may pay cash dividends to the Parent Guarantor to enable the Parent Guarantor to repurchase, redeem or otherwise acquire its Equity Interests and/or to declare and pay cash dividends to the holders of its Equity Interests; provided that the aggregate amount of such repurchases, redemptions, acquisitions and dividends pursuant to this clause (vii)) shall not exceed (A) $300,000,000 measured from the Amendment No. 5. Effective Date, plus (B) for each Fiscal Year commencing with the Fiscal Year ending December 31, 2015, a positive amount equal to fifty percent (50%) of cumulative Consolidated Net Income (or, in case such Consolidated Net Income is a deficit, minus one hundred percent (100%) of such deficit) for such Fiscal Year; provided the amount determined pursuant to this clause (B) with respect to each Fiscal Year shall be cumulative in nature by including the amount determined with respect to the Fiscal Year ending December 31, 2015 and each subsequent Fiscal Year then ended at the time of determination, plus (C) an amount equal to one hundred percent (100%) of Net Proceeds from any issuance of Equity Interests by the Parent Guarantor from the Closing Date through the Final Maturity Date.

1.25      Section 8.10(b) of the Credit Agreement is amended by deleting “or under any Permitted Sponsor Indebtedness” in the last line of such Section.

1.26      Section 8.10(c) of the Credit Agreement is amended by (a) deleting “the Term B Loans,” immediately prior to “the Add-On Term Loans” and (b) deleting “or any prepayment of the Term B Loans with the proceeds of the Add-On Term Loans” in the second parenthetical in such Section.

1.27      Section 8.12 of the Credit Agreement is amended by deleting clauses (e) and (f) in such Section in their entirety.

1.28      Section 9.01(c) of the Credit Agreement is amended by deleting the proviso thereto in its entirety.

1.29      Section 9.03 of the Credit Agreement is amended by deleting the proviso thereto in its entirety.

1.30      Section 10.10(b) of the Credit Agreement is amended by (a) replacing the “,” prior to clause (y) with “and” and (b) deleting “and (z) the Term B Loan has been repaid in full”.

1.31      Section 11.01(a) of the Credit Agreement is amended by (a) deleting the first clause (ix) thereof, (b) replacing the “,” immediately prior to clause (iv) in the first proviso thereto with “ and”, (c) deleting clause (v) in the first proviso thereto and (d) deleting the second proviso thereto in its entirety.

1.32      Section 11.16 of the Credit Agreement is amended in its entirety to read as follows:

11.16      Electronic Execution .      The words “delivery,” “execute,” “execution,” “signed,” “signature,” and words of like import in any Loan Document or any other document executed in connection herewith shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent

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and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it; provided further without limiting the foregoing, upon the request of the Administrative Agent, any electronic signature shall be promptly followed by such manually executed counterpart.

1.33      Schedule I to the Credit Agreement (Lenders and Commitments) is amended by replacing such Schedule with Schedule I attached hereto.

1.34      Schedule 1.01(d) to the Credit Agreement (Permitted Holders) is deleted as a Schedule to the Credit Agreement.

1.35      Schedule 11.02 to the Credit Agreement (Certain Addresses for Notices) is amended by replacing such Schedule with Schedule 11.02 attached hereto.

1.36      Exhibit 1.01 to the Credit Agreement (Form of Borrowing Base Certificate) is deleted as an Exhibit to the Credit Agreement.

1.37      Exhibits 2.02, 2.05(a) and 11.06 to the Credit Agreement are amended by replacing each reference to “Term B Loan” in such Exhibit with “Term A Loan”.

1.38      Exhibit 2.11(c) to the Credit Agreement is amended by replacing such Exhibit with Exhibit 2.11(c) attached hereto.

Section 2. Joinder of New Lenders.

2.1      Each bank or other financial institution party hereto that did not have a Commitment and/or Loans under the Credit Agreement prior to the Amendment No. 5 Effective Date (each, a “ New Lender ”) hereby agrees to provide a Commitment to the Borrower in the amount for such New Lender as set forth on Schedule I attached hereto.

2.2      Each New Lender with a Revolving Commitment shall be deemed to have purchased, without recourse, a risk participation from the L/C Issuer in all Letters of Credit issued by it under the Credit Agreement and the obligations arising thereunder in an amount equal to its Applicable Percentage of the obligations under such Letters of Credit, and shall absolutely, and unconditionally assume, and be obligated to pay to the L/C Issuer and discharge when due as provided in the Credit Agreement, its Applicable Percentage of the obligations arising under such Letters of Credit. Each New Lender with a Revolving Commitment shall be deemed to have purchased, without recourse, a risk participation from the Swing Line Lender in all Swing Line Loans made by it under the Credit Agreement and the obligations arising thereunder in an amount equal to its Applicable Percentage of the obligations under such Swing Line Loans, and shall absolutely and unconditionally assume, and be obligated to pay to the Swing Line Lender and discharge when due as provided in the Credit Agreement, its Applicable Percentage of the obligations arising under such Swing Line Loans.

2.3      Each New Lender (i) represents and warrants that (A) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (B) from and after the date hereof, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and shall have the obligations of a Lender thereunder, (C) it has received copies of the Credit Agreement and any other Loan Documents requested by it, together with copies of the most recent financial statements delivered pursuant to Section 7.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment and, based on such information, has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender and (D) it has delivered to the Borrower and/or the Administrative Agent, as applicable, any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly

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completed and executed by such New Lender (including, but not limited to, completion, execution and delivery of applicable Internal Revenue Service tax withholding exemption forms); and (ii) agrees that it will (A) independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents and (B) perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.4      Each of the Loan Parties, the Lenders (including the New Lenders) and the Administrative Agent agrees that, as of the Amendment No. 5 Effective Date, each New Lender shall (i) be a party to the Credit Agreement, (ii) be a “Lender” for all purposes of the Credit Agreement and the other Loan Documents and (iii) have the rights and obligations of a Lender under the Credit Agreement and the other Loan Documents.

Section 3. Aggregate Revolving Commitments.

The Loan Parties, the Administrative Agent and the Lenders agree that the Revolving Commitments of each of the Lenders immediately prior to the effectiveness of this Amendment shall be reallocated (and to the extent necessary with respect to each Lender, increased or decreased) among the other Lenders to the extent necessary such that, immediately after the effectiveness of this Amendment in accordance with its terms, the Revolving Commitments of each Lender shall be as set forth on Schedule I attached hereto. In order to effect such reallocations, assignments shall be deemed to be made among the Lenders in such amounts as may be necessary, and with the same force and effect as if such assignments were evidenced by Assignments and Assumptions (but without the payment of any related assignment fee), and no other documents or instruments shall be required to be executed in connection with such assignments (all of which such requirements are hereby waived). Further, to effect the foregoing, each Lender agrees to make cash settlements in respect of any outstanding Loans, either directly or through the Administrative Agent, as the Administrative Agent may direct or approve, such that after giving effect to this Amendment, each Lender holds Loans equal to its Applicable Percentage (based on the Revolving Commitments of each Lender as set forth on Schedule I attached hereto).

Section 4. 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. 5 Effective Date ” ) by the Administrative Agent:

4.1      Executed Counterparts . The Administrative Agent shall have received this Amendment, duly executed by the Borrower, the Guarantors, the Administrative Agent, the Requisite Revolving Lenders and the Term A Lenders;

4.2      Legal Opinions . Receipt by the Administrative Agent of favorable opinions of legal counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, dated as of the Amendment No. 5 Effective Date, and in form and substance reasonably satisfactory to the Administrative Agent;

4.3      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;

4.4      No Material Adverse Change . There shall not have occurred a material adverse change since December 31, 2014 in the business, financial condition, affairs or results of operation of the Parent Guarantor and its Subsidiaries, taken as a whole;

4.5      Litigation . There shall not exist any action, suit, investigation or proceeding pending or threatened in any court or before an arbitrator or Governmental Authority that could reasonably be expected to have a Material Adverse Effect;
    

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4.6      Organizational Documents, Resolutions, Etc . Receipt by the Administrative Agent of the following, each of which shall be originals or facsimiles (followed promptly by originals), in form and substance reasonably satisfactory to the Administrative Agent and its legal counsel:
(a)      copies of the Organizational Documents of each Loan Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, where applicable, and certified by a secretary or assistant secretary of such Loan Party to be true and correct as of the Amendment No. 5 Effective Date, unless a secretary or assistant secretary of such Loan Party certifies to the Administrative Agent and the Lenders that there has been no change in such Organizational Documents from the copies thereof (certified to be true and complete by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization) previously delivered to the Administrative Agent in connection with the closing of the Credit Agreement or prior amendments;
(b)      such certificates of resolutions or other action, incumbency certificates and/or other certificates of authorized officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each authorized officer thereof authorized to act as an authorized officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; and
(c)      evidence that each Loan Party is organized or formed and is validly existing, qualified to engage in business in its state of organization or formation and, in jurisdictions where such certifications may be obtained, in good standing.
4.7      Real Property Collateral . Receipt by the Administrative Agent the following items with respect to each respective Mortgaged Property, as necessary, in each case in form and substance reasonably acceptable to the Administrative Agent:

(i)      a fully executed and notarized amendment to each existing Mortgage encumbering real property located in the State of Oklahoma, in form and substance reasonably satisfactory to the Administrative Agent, with all filing and recording fees and taxes in connection with such amendment duly paid; and

(ii)      endorsements to existing ALTA mortgagee title insurance policies , issued by a title insurance company reasonably acceptable to the Administrative Agent, with respect to each existing Mortgage encumbering real property in the State of Oklahoma for which an amendment is delivered pursuant to subsection (i) above, re-dating the respective mortgagee title insurance policy to the date of recording of each respective Mortgage amendment, and showing no new exceptions to title other than Permitted Liens, taxes not yet delinquent and any other matters reasonably acceptable to the Administrative Agent.

4.8      Term B Loan . Receipt by the Administrative Agent of reasonably satisfactory evidence of the repayment of the Term B Loan with proceeds from the Term A Loan and available cash on hand.

4.9      Exiting Lender Consent . Receipt by the Administrative Agent of a letter agreement signed by each lender immediately prior to the Amendment No. 5 Effective Date who will not have Commitments and/or Loans under the Credit Agreement after giving effect to this Amendment on the Amendment No. 5 Effective Date.

4.10      Fees and Expenses . The Borrower shall have paid the fees set forth in that certain letter agreement dated as of February 26, 2015 (the “ Amendment Fee Letter ”) and all fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Amendment No. 5 Effective Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).

Section 5. Representations and Warranties

On and as of the Amendment No. 5 Effective Date, after giving effect to this Amendment, the Loan Parties hereby represent and warrant to the Administrative Agent and each Lender as follows:


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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 [*****].


5.1      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;

5.2      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);

5.3      no Default or Event of Default has occurred and is continuing; and

5.4      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 6. Fees and Expenses

The Borrower agrees to pay promptly (and in any event on the Amendment No. 5 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 7. Reference to the Effect on the Loan Documents

7.1      As of the Amendment No. 5 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. 5 Effective Date;

7.2      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;

7.3      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

7.4      This Amendment is a Loan Document.

Section 8. 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.


CHAR1\1398811v6

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 [*****].


Section 9. 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 10. 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 11. Notices

All communications and notices hereunder shall be given as provided in the Credit Agreement.

Section 12 . 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 13. 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 14. 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 15. Affirmations

15.1      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.

15.2      Each Loan Party signatory hereto hereby reaffirms, as of the Amendment No. 5 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.

15.3      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. 5 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).


CHAR1\1398811v6

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 [*****].


15.4      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 Agent’s or Lender’s 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.

15.5      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]



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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 [*****].


IN WITNESS 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.

SPIRIT AEROSYSTEMS, INC.

By:      /s/ Stacy Hall                 
Name:      Stacy Hall
Title:      Treasurer

SPIRIT AEROSYSTEMS HOLDINGS, INC.

By:      /s/ Stacy Hall                 
Name:      Stacy Hall
Title:      Treasurer

SPIRIT AEROSYSTEMS INTERNATIONAL HOLDINGS, INC.

By:      /s/ Mark Suchinski             
Name:      Mark Suchinski
Title:      President

SPIRIT AEROSYSTEMS FINANCE, INC.

By:      /s/ Mark Suchinski             
Name:      Mark Suchinski
Title:      President

SPIRIT AEROSYSTEMS INVESTCO, LLC

By:      /s/ Mark Suchinski             
Name:      Mark Suchinski
Title:      Operating Manager

SPIRIT AEROSYSTEMS North Carolina, Inc.

By:      /s/ Mark Suchinski             
Name:      Mark Suchinski
Title:      President

SPIRIT AEROSYSTEMS OPERATIONS INTERNATIONAL, INC.

By:      /s/ Mark Suchinski             
Name:      Mark Suchinski
Title:      President

SPIRIT DEFENSE, INC.

By:      /s/ Mark Suchinski             
Name:      Mark Suchinski
Title:      President



                        

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 [*****].


                        
Bank of America, N.A.,
as Administrative Agent and Collateral Agent

By:      /s/ Kevin L. Ahart             
Name:      Kevin L. Ahart
Title:      Vice President
















































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 [*****].



BANK OF AMERICA, N.A.,
as a Lender

By:      /s/ Kenneth J. Beck             
Name:      Kenneth J. Beck
Title:      Director















































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 [*****].




THE BANK OF NOVA SCOTIA,
as a Lender


By:      /s/ Mauricio Saishio             
Name:      Mauricio Saishio
Title:      Director













































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 [*****].



CITIBANK, N.A.,


By:      /s/ Gurbani Singh             
Name:      Gurbani Singh
Title:      Vice President















































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 [*****].



MORGAN STANLEY BANK, N.A.


By:      /s/ Michael King             
Name:      Michael King
Title:      Authorized Signatory















































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 [*****].




ROYAL BANK OF CANADA


By:      /s/ Sinan Tarlan             
Name:      Sinan Tarlan
Title:      Authorized Signatory














































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 [*****].



THE ROYAL BANK OF SCOTLAND PLC


By:      /s/ L. Peter Yetman             
Name:      L. Peter Yetman
Title:      Director















































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 [*****].



THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.


By:      /s/ Thomas J. Sterr             
Name:      Thomas J. Sterr
Title:      Authorized Signatory















































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 [*****].



COMPASS BANK


By:      /s/ Michael Dixon         
Name:      Michael Dixon
Title:      Senior Vice President















































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 [*****].





U.S. BANK NATIONAL ASSOCIATION


By:      /s/ Tim Landro             
Name:      Tim Landro
Title:      Vice President













































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 [*****].




WELLS FARGO BANK, N.A.


By:      /s/ Reginald M. Goldsmith III         
Name:      Reginald M. Goldsmith III
Title:      Managing Director














































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 [*****].




THE BANK OF NEW YORK MELLON


By:      /s/ John T. Smathers         
Name:      John T. Smathers
Title:      First Vice President














































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 [*****].



BRANCH BANKING AND TRUST COMPANY


By:      /s/ John K. Perez         
Name:      John K. Perez
Title:      Senior Vice President















































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 [*****].



FIFTH THIRD BANK


By:      /s/ Mark Stapleton         
Name:      Mark Stapleton
Title:      Vice President















































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 [*****].



THE NORTHERN TRUST COMPANY


By:      /s/ James Shanel         
Name:      James Shanel
Title:      Vice President















































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 [*****].




CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH


By:      /s/ Nupur Kumar         
Name:      Nupur Kumar
Title:      Authorized Signatory

By:      /s/ Karim Rahimtoola         
Name:      Karim Rahimtoola
Title:      Authorized Signatory











































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 [*****].



SUMITOMO MITSUI BANKING CORPORATION


By:      /s/ Shuji Yabe             
Name:      Shuji Yabe
Title:      Managing Director















































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 [*****].



COMERICA BANK


By:      /s/ Heather Kowalski             
Name:      Heather Kowalski
Title:      Vice President















































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 [*****].



INTRUST BANK, N.A.


By:      /s/ Roger G. Eastwood         
Name:      Roger G. Eastwood
Title:      Division Director















































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 [*****].



PNC BANK, NATIONAL ASSOCIATION


By:      /s/ David Bentzinger             
Name:      David Bentzinger
Title:      Senior Vice President















































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 [*****].



SUNTRUST BANK


By:      /s/ Lisa Garling             
Name:      Lisa Garling
Title:      Director















































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 [*****].




MIZUHO BANK, LTD.


By:      /s/ Donna DeMagistris             
Name:      Donna DeMagistris
Title:      Authorized Signatory















































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 [*****].



Schedule I

Lenders and Commitments

Lender
Revolving Commitments
Applicable Percentage of Revolving Commitments
Term A Loan Commitment
Applicable Percentage of Term A Loan Commitment
Bank of America, N.A.
$60,000,000.00
9.230769231%
$100,000,000.00
18.691588785%
The Bank of Nova Scotia
$53,000,000.00
8.153846154%
$43,000,000.00
8.037383178%
Citibank, N.A.
$53,000,000.00
8.153846154%
$43,000,000.00
8.037383178%
Morgan Stanley Bank, N.A.
$53,000,000.00
8.153846154%
$43,000,000.00
8.037383178%
Royal Bank of Canada
$53,000,000.00
8.153846154%
$43,000,000.00
8.037383178%
The Royal Bank of Scotland plc
$53,000,000.00
8.153846154%
$0
0.000000000%
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
$40,000,000.00
6.153846154%
$32,000,000.00
5.981308412%
Compass Bank
$40,000,000.00
6.153846154%
$32,000,000.00
5.981308412%
U.S. Bank National Association
$40,000,000.00
6.153846154%
$32,000,000.00
5.981308412%
Wells Fargo Bank, N.A.
$40,000,000.00
6.153846154%
$32,000,000.00
5.981308412%
The Bank of New York Mellon
$20,000,000.00
3.076923077%
$14,000,000.00
2.616822429%
Branch Banking and Trust Company
$20,000,000.00
3.076923077%
$14,000,000.00
2.616822429%
Fifth Third Bank, an Ohio banking corporation
$20,000,000.00
3.076923077%
$14,000,000.00
2.616822429%
The Northern Trust Company
$20,000,000.00
3.076923077%
$14,000,000.00
2.616822429%
Sumitomo Mitsui Banking Corporation
$20,000,000.00
3.076923077%
$14,000,000.00
2.616822429%
Comerica Bank
$20,000,000.00
3.076923077%
$10,000,000.00
1.869158879%
INTRUST Bank, N.A.
$20,000,000.00
3.076923077%
$5,000,000.00
0.934579439%
Mizuho Bank
$0
0.000000000%
$25,000,000.00
4.672897196%
PNC Bank, National Association
$5,000,000.00
0.769230768%
$12,500,000.00
2.336448598%
SunTrust Bank
$5,000,000.00
0.769230768%
$12,500,000.00
2.336448598%
Credit Suisse AG, Cayman Islands Branch
$15,000,000.00
2.307692308%
$0
0.000000000%
TOTAL:
$650,000,000.00
100.000000000%
$535,000,000.00
100.000000000%





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 [*****].



Schedule 11.02

Certain Addresses for Notices


1.      Loan Parties
Borrower and Guarantors :
    
Spirit AeroSystems, Inc.
3801 South Oliver Street
Wichita, Kansas 67210
Attention:  Stacy Hall, Treasurer
Telephone: 316-526-4016
Telecopier: 316-529-7950
Electronic Mail:  stacy.m.hall@spiritaero.com

with copies (which shall not constitute notice) to:

Spirit AeroSystems, Inc.
3801 South Oliver Street
Wichita, Kansas 67210
Attention: General Counsel
Telephone: 316-523-0655
Telecopier:  316-523-8814
Electronic Mail: joseph.t.boyle@spiritaero.com

and

Kaye Scholer LLP
250 West 55 th Street
New York, New York 10019
Attention:  Mark Kingsley, Esq.
Telephone:  212-836-7092
Telecopier:  212-836-8689
Electronic Mail:  mkingsley@kayescholer.com

and

Kaye Scholer LLP
250 West 55 th Street
New York, New York 10019
Attention:  Sheryl Gittlitz, Esq.
Telephone:  212-836-8119
Telecopier:  212-836-6619
Electronic Mail:  sgittlitz@kayescholer.com









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 [*****].


2.      Administrative Agent

For payments and Requests for Credit Extensions :

Bank of America, N.A.
101 North Tryon Street
Mail Code: NC1-001-05-46
Charlotte, NC 28255
Attention: David Cochran
Telephone:  980-386-8201
Telecopier:  704-719-5440
Electronic Mail: david.a.cochran@baml.com


Account Information (for U.S. Dollars):
Bank of America, N.A.
New York, New York
ABA #: 026009593
Acct.#: 1366212250600
Account Name: Corporate Credit Services
Ref: Spirit Aerosystems, Inc.

For all other Notices (Financial Statements, Compliance Certificates) :

Bank of America, N.A.
Agency Management
1455 Market Street
Mail Code: CA5-701-05-19
San Francisco, CA 94103
Attention: Kevin Ahart
Telephone: 415-436-2750
Telecopier: 415-503-5000
Electronic Mail: kevin.ahart@baml.com


3.      L/C Issuer:

Bank of America, N.A.
Standby Letters of Credit Department
1000 West Temple Street
Mail Code: CA9-705-07-05
Los Angeles, CA 90012-1514
Attention: Stella Rosales
Telephone: 213-417-9484
Telecopier: 213-457-8841
Electronic Mail: stella.rosales@baml.com

4.      Swing Line Lender:

Bank of America, N.A.
101 North Tryon Street
Mail Code: NC1-001-05-46
Charlotte, NC 28255

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 [*****].


Attention: David Cochran
Telephone:  980-386-8201
Telecopier:  704-719-5440
Electronic Mail: david.a.cochran@baml.com

Account Information (for U.S. Dollars):
Bank of America, N.A.
New York, New York
ABA #: 026009593
Acct.#: 1366212250600
Account Name: Corporate Credit Services
Ref: Spirit Aerosystems, Inc.









































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 [*****].



Exhibit 2.11(c)

[Form of] Term A Note
        
FOR VALUE RECEIVED, Spirit AeroSystems, Inc., a Delaware corporation (the “ Borrower ”), hereby promises to pay to _____________________ or registered assigns (the “ Lender ”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of the Term A Loan made by the Lender to the Borrower under 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, the “ Credit Agreement ”), among 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 Borrower promises to pay interest on the unpaid principal amount of the Term A Loan from the Amendment No. 5. Effective Date until such principal amount is paid in full, at such interest rates and at such times as provided in the Credit Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the Default Rate set forth in the Credit Agreement.
This Term A Note is one of the Term A Notes referred to in the Credit Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Term A Note is also entitled to the benefits of the Guaranty and is secured by the Collateral. Upon the occurrence and continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Term A Note shall become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement. The Term A Loan made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Term A Note and endorse thereon the date, amount and maturity of its Term A Loan and payments with respect thereto.
The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Term A Note.
This TERM A NOTE 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 TERM A NOTE and the transactions contemplated hereby shall be governed by, and construed in accordance with, the law of the State of NEW yORK.
[Signature on Following Page]







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 [*****].



IN WITNESS WHEREOF, the Borrower has caused this Term A Note to be duly executed by its duly authorized officer as of the day and year first above written.

SPIRIT AEROSYSTEMS, INC.,
a Delaware corporation

By:                      
Name:
Title:




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 Quarterly Report on Form 10-Q 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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.
 
 
/s/ Larry A. Lawson
 
Larry A. Lawson
 
President and Chief Executive Officer
 
Date: May 1, 2015





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 Quarterly Report on Form 10-Q 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 registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.
 
 
/s/ Sanjay Kapoor
 
Sanjay Kapoor
 
Senior Vice President and Chief Financial Officer
 
Date: May 1, 2015





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 Quarterly Report of Spirit AeroSystems Holdings, Inc. (the “Company”) on Form 10-Q for the period ended April 2, 2015 , 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.
 
 
/s/ Larry A. Lawson
 
Larry A. Lawson
 
President and Chief Executive Officer
 
Date: May 1, 2015





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 Quarterly Report of Spirit AeroSystems Holdings, Inc. (the “Company”) on Form 10-Q for the period ended April 2, 2015 , 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.
 
 
/s/ Sanjay Kapoor
 
Sanjay Kapoor
 
Senior Vice President and Chief Financial Officer
 
Date: May 1, 2015