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 March 28, 2019
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 every Interactive Data File required to be submitted 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 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
 
Emerging Growth Company  o
 
If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act.  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 24, 2019 , the registrant had 103,450,877 shares of class A common stock, $0.01 par value per share, outstanding.
 

1
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
 
March 28,
2019
 
March 29,
2018
 
($ in millions, except per share data)
Revenue
$
1,967.8

 
$
1,736.1

Operating costs and expenses
 

 
 

Cost of sales
1,658.3

 
1,511.0

Selling, general and administrative
63.6

 
56.2

Research and development
12.9

 
9.4

Total operating costs and expenses
1,734.8

 
1,576.6

Operating income
233.0

 
159.5

Interest expense and financing fee amortization
(18.8
)
 
(11.3
)
Other (expense) income, net
(11.0
)
 
4.1

Income before income taxes and equity in net income of affiliate
203.2

 
152.3

Income tax provision
(40.1
)
 
(27.5
)
Income before equity in net income of affiliate
163.1

 
124.8

Equity in net income of affiliate
—

 
0.6

Net income
$
163.1

 
$
125.4

Earnings per share
 

 
 

Basic
$
1.57

 
$
1.11

Diluted
$
1.55

 
$
1.10

 
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
 
March 28,
2019
 
March 29,
2018
 
($ in millions)
Net income
$
163.1

 
$
125.4

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

 
 

Pension, SERP, and Retiree medical adjustments, net of tax effect of $0.1 and $0.2 for the three months ended, respectively
(0.3
)
 
(0.6
)
Unrealized foreign exchange loss on intercompany loan, net of tax effect of ($0.2) and ($0.4) for three months ended, respectively
0.9

 
1.6

Foreign currency translation adjustments
9.4

 
13.6

Total other comprehensive income
10.0

 
14.6

Total comprehensive income
$
173.1

 
$
140.0

 
See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)  
 
March 28, 2019
 
December 31, 2018
 
($ in millions)
Assets
 

 
 

Cash and cash equivalents
$
1,228.4

 
$
773.6

Restricted cash
0.3

 
0.3

Accounts receivable, net
618.9

 
545.1

Contract assets, short-term
556.9

 
469.4

Inventory, net
991.6

 
1,012.6

Other current assets
31.3

 
48.3

Total current assets
3,427.4

 
2,849.3

Property, plant and equipment, net
2,183.7

 
2,167.6

Right of Use assets
51.3

 
—

Contract assets, long-term
25.3

 
54.1

Pension assets
333.9

 
326.7

Other assets
276.1

 
288.2

Total assets
$
6,297.7

 
$
5,685.9

Liabilities
 

 
 

Accounts payable
$
1,072.8

 
$
902.6

Accrued expenses
329.0

 
313.1

Profit sharing
20.4

 
68.3

Current portion of long-term debt
32.4

 
31.4

Operating lease liabilities, short-term
5.6

 
—

Advance payments, short-term
19.8

 
2.2

Contract liabilities, short-term
148.9

 
157.9

Forward loss provision, short-term
15.2

 
12.4

Deferred revenue and other deferred credits, short-term
19.8

 
20.0

Deferred grant income liability - current
12.6

 
16.0

Other current liabilities
79.8

 
58.2

Total current liabilities
1,756.3

 
1,582.1

Long-term debt
2,214.9

 
1,864.0

Operating lease liabilities, long-term
45.7

 
—

Advance payments, long-term
212.1

 
231.9

Pension/OPEB obligation
33.8

 
34.6

Contract liabilities, long-term
383.5

 
369.8

Forward loss provision, long-term
156.5

 
170.6

Deferred revenue and other deferred credits
42.5

 
31.2

Deferred grant income liability - non-current
29.6

 
28.0

Other liabilities
101.7

 
135.6

Stockholders' 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, 104,876,827 and 105,461,817 shares issued and outstanding, respectively
1.0

 
1.1

Additional paid-in capital
1,098.6

 
1,100.9

Accumulated other comprehensive loss
(194.9
)
 
(196.6
)
Retained earnings
2,871.9

 
2,713.2

Treasury stock, at cost (41,515,847 and 40,719,438 shares, respectively)
(2,456.0
)
 
(2,381.0
)
Total stockholders’ equity
1,320.6

 
1,237.6

Noncontrolling interest
0.5

 
0.5

Total equity
1,321.1

 
1,238.1

Total liabilities and equity
$
6,297.7

 
$
5,685.9

 See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.  
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
Total
 
($ in millions, except share data)
Balance — December 31, 2018
105,461,817

 
$
1.1

 
$
1,100.9

 
$
(2,381.0
)
 
$
(196.6
)
 
$
2,713.2

 
$
1,237.6

Net income
—

 
—

 
—

 
—

 
—

 
163.1

 
163.1

Adoption of ASU 2018-02
—

 
—

 
—

 
—

 
(8.3
)
 
8.3

 
—

Dividends Declared (a)
—

 
—

 
—

 
—

 
—

 
(12.7
)
 
(12.7
)
Employee equity awards
351,459

 
—

 
7.7

 
—

 
—

 
—

 
7.7

Stock forfeitures
(27,604
)
 
—

 
—

 
—

 
—

 
—

 
—

Net shares settled
(112,436
)
 
—

 
(10.0
)
 
—

 
—

 
—

 
(10.0
)
SERP shares issued
—

 
—

 
—

 
—

 
—

 
—

 
—

Treasury shares
(796,409
)
 
(0.1
)
 
—

 
(75.0
)
 
—

 
—

 
(75.1
)
Other comprehensive gain
—

 
—

 
—

 
—

 
10.0

 
—

 
10.0

Balance — March 28, 2019
104,876,827

 
$
1.0

 
$
1,098.6

 
$
(2,456.0
)
 
$
(194.9
)
 
$
2,871.9

 
$
1,320.6


 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
Total
 
($ in millions, except share data)
Balance — December 31, 2017
114,447,605

 
$
1.1

 
$
1,086.9

 
$
(1,580.9
)
 
$
(128.5
)
 
$
2,422.4

 
$
1,801.0

Net income
—

 
—

 
—

 
—

 
—

 
125.4

 
125.4

Adoption of ASC 606
—

 
—

 
—

 
—

 
—

 
(276.3
)
 
(276.3
)
Dividends Declared (a)
—

 
—

 
—

 
—

 
—

 
(11.5
)
 
(11.5
)
Employee equity awards
380,000

 
—

 
7.1

 
—

 
—

 
—

 
7.1

Stock forfeitures
(16,336
)
 
—

 
—

 
—

 
—

 
—

 
—

Net shares settled
(141,595
)
 
—

 
(12.7
)
 
—

 
—

 
—

 
(12.7
)
SERP shares issued
—

 
—

 
—

 
—

 
—

 
—

 
—

Treasury shares
(866,113
)
 
—

 
—

 
(75.1
)
 
—

 
—

 
(75.1
)
Other comprehensive gain
—

 
—

 
—

 
—

 
14.6

 
—

 
14.6

Balance — March 29, 2018
113,803,561

 
$
1.1

 
$
1,081.3

 
$
(1,656.0
)
 
$
(113.9
)
 
$
2,260.0

 
$
1,572.5


(a) Cash dividends declared per common share were $0.12 for the three months ended March 28, 2019 and $0.10 for the three months ended March 29, 2018.

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Table of Contents

Spirit AeroSystems Holdings, Inc.  
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
For the Three Months Ended
 
March 28, 2019
 
March 29, 2018
Operating activities
($ in millions)
Net income
$
163.1

 
$
125.4

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

 
 
Depreciation expense
60.5

 
56.8

Amortization of deferred financing fees
0.8

 
0.8

Accretion of customer supply agreement
1.1

 
1.2

Employee stock compensation expense
7.7

 
7.1

Loss (Gain) from derivative instruments
9.6

 
(1.7
)
Gain from foreign currency transactions
(0.1
)
 
(1.6
)
Gain on disposition of assets
(0.1
)
 
(0.2
)
Deferred taxes
8.1

 
(1.2
)
Pension and other post-retirement benefits, net
(6.4
)
 
(8.7
)
Grant liability amortization
(5.7
)
 
(5.1
)
Equity in net income of affiliate
—

 
(0.6
)
Forward loss provision
(11.3
)
 
(36.9
)
Changes in assets and liabilities
 
 
 
Accounts receivable
(68.8
)
 
(96.6
)
Inventory, net
23.5

 
45.3

Contract assets
(57.6
)
 
(70.0
)
Accounts payable and accrued liabilities
129.9

 
177.8

Profit sharing/deferred compensation
(48.0
)
 
(93.1
)
Advance payments
(2.2
)
 
(25.3
)
Income taxes receivable/payable
29.4

 
25.9

Contract liabilities
4.9

 
77.1

Deferred revenue and other deferred credits
11.6

 
2.6

Other
(7.8
)
 
(12.4
)
Net cash provided by operating activities
242.2

 
166.6

Investing activities
 

 
 

Purchase of property, plant and equipment
(40.8
)
 
(48.2
)
Other
0.1

 
0.2

Net cash used in investing activities
(40.7
)
 
(48.0
)
Financing activities
 

 
 

Proceeds from issuance of debt
250.0

 
—

Proceeds from revolving credit facility
100.0

 
—

Principal payments of debt
(2.6
)
 
(1.7
)
Payments on term loan
—

 
(6.2
)
Taxes paid related to net share settlement awards
(10.0
)
 
(12.7
)
Purchase of treasury stock
(75.0
)
 
(73.8
)
Dividends paid
(12.7
)
 
(11.5
)
Net cash provided by (used in) financing activities
249.7

 
(105.9
)
Effect of exchange rate changes on cash and cash equivalents
(0.3
)
 
—

Net increase in cash, cash equivalents, and restricted cash for the period
450.9

 
12.7

Cash, cash equivalents, and restricted cash, beginning of period
794.1

 
445.5

Cash, cash equivalents, and restricted cash, end of period
$
1,245.0

 
$
458.2

Reconciliation of Cash, Cash Equivalents, and Restricted Cash:
 
 
 
 
For the Three Months Ended
 
March 28, 2019
 
March 29, 2018
Cash and cash equivalents, beginning of the period
$
773.6

 
$
423.3

Restricted cash, short-term, beginning of the period
0.3

 
2.2

Restricted cash, long-term, beginning of the period
20.2

 
20.0

Cash, cash equivalents, and restricted cash, beginning of the period
$
794.1

 
$
445.5

 
 
 
 
Cash and cash equivalents, end of the period
$
1,228.4

 
$
437.9

Restricted cash, short-term, end of the period
0.3

 
0.4

Restricted cash, long-term, end of the period
16.3

 
19.9

Cash, cash equivalents, and restricted cash, end of the period
$
1,245.0

 
$
458.2

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”) 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's headquarters are in Wichita, Kansas, with manufacturing and assembly facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland; Wichita, Kansas; Kinston, North Carolina; Subang, Malaysia; and Saint-Nazaire, France.

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. Since 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. All intercompany balances and transactions have been eliminated in consolidation.

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. The U.K. and Malaysian subsidiaries use the British pound as their functional currency. All other foreign subsidiaries and branches use the U.S. dollar as their functional currency.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments and elimination of intercompany balances and transactions) considered necessary to fairly present the results of operations for the interim period. The results of operations for the three months ended March 28, 2019 , are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 .

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 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 8, 2019 (the “2018 Form 10-K”).

2.  Adoption of New Accounting Standards

Adoption of ASU 2016-02

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This update requires recognition of lease assets and lease liabilities on the balance sheet of lessees. ASU 2016-02 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2018. The Company adopted ASU 2016-02 as of January 1, 2019 using the modified retrospective transition approach, with the cumulative effect of the initial application recognized at the date of adoption. Under this effective date method, financial results reported prior to the first quarter of 2019 are unchanged. The Company also chose to adopt the package of practical expedients.

The Company has reviewed all of its current active leases and has implemented the necessary processes and systems to comply with the requirements of ASU 2016-02. Upon adoption of ASU 2016-02, the Company recognized a Right of Use ("ROU") asset on its books for the net present value of all of its active leases with terms greater than 12 months, with an offsetting lease liability. The ROU asset and corresponding lease liability will be amortized over the course of the lease term, which includes all options that the Company expects it will exercise.

The Consolidated Balance Sheet impact of the adoption of the ASU 2016-02 was an increase to both assets and liabilities of $52.7 M. The adoption of ASU 2016-02 did not have any material impact to net income or cash flows.

Adoption of ASU 2018-02

In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”), Income Statement - Reporting Comprehensive Income (Topic 220) . The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts

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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)


and Jobs Act of 2017 (the “TCJA”) from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. As a result of the adoption of ASU 2018-02 in the first quarter of 2019, the Company reclassified $8.3 from accumulated other comprehensive income into retained earnings on the condensed consolidated balance sheet.


3.  New Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018-14 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures. Certain disclosures in ASU 2018-13 are required to be applied on a retrospective basis and others on a prospective basis. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit losses (Topic 326) ( “ASU 2016-13”), which requires the immediate recognition of management's estimates of current expected credit losses. ASU 2016-13 is effective for fiscal years and interim reporting periods within those years beginning after December 15, 2019. Early adoption is permitted after fiscal years beginning December 15, 2018. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.


4.  Changes in Estimates

The Company has a periodic forecasting process in which management assesses the progress and performance of the Company’s programs. This process requires management to review each program’s progress by evaluating the program schedule, changes to identified risks and opportunities, changes to estimated revenues and costs for the accounting contracts (and options if applicable), and any outstanding contract matters. Risks and opportunities include but are not limited to management’s judgment about the cost associated with the Company’s ability to achieve the schedule, technical requirements (e.g., a newly-developed product versus a mature product), and any other program requirements. Due to the span of years it may take to completely satisfy the performance obligations for the accounting contracts (and options, if any) and the scope and nature of the work required to be performed on those contracts, the estimation of total revenue and costs is subject to many variables and, accordingly, is subject to change based upon judgment. When adjustments in estimated total consideration or estimated total cost are required, any changes from prior estimates for fully satisfied performance obligations 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 production efficiencies, assumed rate of production, the rate of overhead absorption, changes to scope of work, and contract modifications. For the first quarter of 2018, forward losses recorded relate primarily to the impact of the adoption of ASU 2017-07 related to pension.

Changes in estimates are summarized below:

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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)



 
 
For the Three Months Ended
Changes in Estimates
 
March 28, 2019
 
March 29, 2018
(Unfavorable) Favorable Cumulative Catch-up Adjustment by Segment
 
 
 
 
Fuselage
 
$
(1.2
)
 
$
(4.9
)
Propulsion
 
(2.8
)
 
(0.6
)
Wing
 
(0.2
)
 
1.4

Total (Unfavorable) Favorable Cumulative Catch-up Adjustment
 
$
(4.2
)
 
$
(4.1
)
 
 
 
 
 
(Forward Loss) and Changes in Estimates on Loss Programs by Segment
 
 
 
 
Fuselage
 
$
3.7

 
$
(11.6
)
Propulsion
 
0.5

 
(3.4
)
Wing
 
0.5

 
(3.5
)
Total (Forward Loss) and Changes in Estimates on Loss Programs
 
$
4.7

 
$
(18.5
)
 
 
 
 
 
Total Change in Estimate
 
$
0.5

 
$
(22.6
)
EPS Impact (diluted per share based upon statutory rates)
 
$
—

 
$
(0.16
)

5.  Accounts Receivable, net
 
Accounts receivable represent the Company’s unconditional rights to consideration, subject to the payment terms of the contract, for which only the passage of time is required before payment. Unbilled receivables are reflected under contract assets on the balance sheet. The Company determines an allowance for doubtful accounts based on a review of outstanding receivables that are charged off against the allowance after the potential for recovery is considered remote.

Accounts receivable, net consists of the following:
 
March 28,
2019
 
December 31,
2018
Trade receivables
$
579.9

 
$
527.9

Other
39.4

 
17.9

Less: allowance for doubtful accounts
(0.4
)
 
(0.7
)
Accounts receivable, net
$
618.9

 
$
545.1


In October 2017, the Company entered into an agreement (the “Receivable Sales Agreement”), to sell, on a revolving basis, certain trade accounts receivable balances to a third party financial institution. Transfers under this agreement are accounted for as sales of receivables resulting in the receivables being de-recognized from the balance sheet. The Receivable Sales Agreement provides for the continuing sale of certain receivables on a revolving basis until terminated by either party. The receivables under the Receivable Sales Agreement are sold without recourse to the third party financial institution. During 2019, $1,453.8 of accounts receivable have been sold via this arrangement. The proceeds from these sales of receivables are included in cash from operating activities in the Consolidated Statement of Cash Flows. The recorded net loss on sale of receivables is $4.6 for the three months ended March 28, 2019 and is included in Other income and expense. See Note 21, Other (Expense) Income, net .

6.  Contract Assets and Contract Liabilities

Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract assets, current are those for which performance obligations are expected to be fully satisfied within 12 months of contract origination. Contract assets, long-term are expected to be fully satisfied over periods greater than 12 months from contract origination. No impairments to contract assets were recorded for the period ended March 28, 2019 .


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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)


Contract liabilities are established for cash received that is in excess of revenues recognized and are contingent upon the satisfaction of performance obligations. Contract liabilities primarily consist of cash received on contracts for which revenue has been deferred since the receipts are in excess of transaction price resulting from the allocation of consideration based on relative standalone selling price to future units (including those under option that the Company believes are likely to be exercised) with prices that are lower than standalone selling price. These contract liabilities will be recognized earlier if the options are not fully exercised, or immediately, if the contract is terminated prior to the options being fully exercised.

 
December 31, 2018

March 28, 2019

Change

Contract assets
$
523.5

$
582.2

$
58.7

Contract liabilities
(527.7
)
(532.4
)
(4.7
)
Net contract assets (liabilities)
$
(4.2
)
$
49.8

$
54.0


The increase in contract assets reflects the net impact of additional revenue recognized in excess of billed revenues during the period. The increase in contract liabilities reflects the net impact of additional deferred revenues recorded in excess of revenue recognized during the period. For the period ended March 28, 2019 , the Company recognized $19.4 of revenue that was included in the contract liability balance at the beginning of the period.

7.  Revenue Disaggregation and Outstanding Performance Obligations
Disaggregation of Revenue
The Company disaggregates revenue based on the method of measuring satisfaction of the performance obligation either over time or at a point in time, based upon major customer, and based upon the location where products and services are transferred to the customer. Additionally, the Company’s principal operating segments and related revenue are noted in Note 22, Segment Information .

The following table shows disaggregated revenues for the three months ended March 28, 2019 and March 29, 2018:

 
 
For the Three 
 Months Ended
Revenue
 
March 28,
2019
March 29,
2018
Contracts with performance obligations satisfied over time
 
$
1,479.7

$
1,322.5

Contracts with performance obligations satisfied at a point in time
 
488.1

413.6

Total Revenue
 
$
1,967.8

$
1,736.1


The following table disaggregates revenue by major customer:
 
 
For the Three 
 Months Ended
Customer
 
March 28,
2019
March 29,
2018
Boeing
 
$
1,548.4

$
1,340.4

Airbus
 
329.8

314.5

Other
 
89.6

81.2

Total Revenue
 
$
1,967.8

$
1,736.1


The following table disaggregates revenue based upon the location where control of products are transferred to the customer:

11
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
Location
 
March 28, 2019
March 29, 2018
United States
 
$
1,627.9

$
1,400.9

International
 
 

United Kingdom
 
209.5

198.5

Other
 
130.4

136.7

Total International
 
339.9

335.2

Total Revenue
 
$
1,967.8

$
1,736.1


Remaining Performance Obligations
Unsatisfied, or partially unsatisfied, performance obligations that are expected to be recognized in the future are noted in the table below. The Company expects options to be exercised in addition to the amounts presented below:

 
Remaining in 2019

2020

2021

2022 and After

Unsatisfied performance obligations
$
5,043.7

$
6,336.1

$
4,296.9

$
619.2


8.  Inventory

Inventory consists of raw materials used in the production process, work-in-process, which is direct material, direct labor, overhead and purchases, and capitalized preproduction costs. Raw materials are stated at lower of cost (principally on an actual or average cost basis) or net realizable value. Capitalized pre-production costs include certain contract costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically amortized over a period that is consistent with the satisfaction of the underlying performance obligations to which these relate.

 
March 28,
2019
 
December 31,
2018
Raw materials
$
248.3

 
$
240.4

Work-in-process (1)
699.5

 
727.8

Finished goods
9.1

 
7.1

Product inventory
956.9

 
975.3

Capitalized pre-production
34.7

 
37.3

Total inventory, net
$
991.6

 
$
1,012.6



Product inventory, summarized in the table above, is shown net of valuation reserves of $50.9 and $55.2 as of March 28, 2019 and December 31, 2018 , respectively. For contract blocks that have not closed, the following non-product inventory amounts were included in the summarized inventory table above.

(1)
Work-in-process inventory includes direct labor, direct material, overhead and purchases on contracts for which revenue is recognized at a point in time as well as sub-assembly parts that have not been issued to production on contracts for which revenue is recognized using the input method. For the periods ended March 28, 2019 and December 31, 2018 , work-in-process inventory includes $149.1 and $151.6 , respectively, of costs incurred in anticipation of specific contracts and no impairments were recorded in the period.




12
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


9.  Property, Plant and Equipment, net
 
Property, plant and equipment, net consists of the following: 
 
 
March 28,
2019
 
December 31,
2018
Land
$
15.2

 
$
15.0

Buildings (including improvements)
831.6

 
822.7

Machinery and equipment
1,754.3

 
1,697.0

Tooling
1,039.1

 
1,032.3

Capitalized software
272.4

 
269.2

Construction-in-progress
226.9

 
227.8

Total
4,139.5

 
4,064.0

Less: accumulated depreciation
(1,955.8
)
 
(1,896.4
)
Property, plant and equipment, net
$
2,183.7

 
$
2,167.6


Repair and maintenance costs are expensed as incurred. The Company recognized repair and maintenance costs of $35.6 and $32.8 for the three months ended March 28, 2019 and March 29, 2018 , 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 $4.3 and $4.4 for the three months ended March 28, 2019 and March 29, 2018 , 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 March 28, 2019 .

10. Leases
The Company determines if an arrangement is a lease at the inception of a signed agreement. Operating leases are included in right-of-use ("ROU") assets (long-term), short-term operating lease liabilities, and long-term operating lease liabilities on the Company's consolidated balance sheet. Finance leases are included in Property, Plant and Equipment, current maturities of long-term debt, and long-term debt.
ROU assets represent the right of the Company to use an underlying asset for the length of the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
To determine the present value of lease payments, the Company uses its estimated incremental borrowing rate or the implicit rate, if readily determinable. The estimated incremental borrowing rate is based on information available at the lease commencement date, including any recent debt issuances and publicly available data for instruments with similar characteristics. The ROU asset also includes any lease payments made and excludes lease incentives.
The Company's lease terms may include options to extend or terminate the lease and, when it is reasonably certain that an option will be exercised, those options are included in the net present value calculation. Leases with a term of 12 months or less, which are primarily related to automobiles and manufacturing equipment, are not recorded on the balance sheet. The aggregate amount of lease cost for leases with a term of 12 months or less is not material.
The Company has lease agreements that include lease and non-lease components, which are generally accounted for separately. For certain leases (primarily related to IT equipment), the Company does account for the lease and non-lease components as a single lease component. A portfolio approach is applied to effectively account for the ROU assets and liabilities for the specific leases. The Company does not have any material leases containing variable lease payments or residual value guarantees. The Company also does not have any material subleases.

13
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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)


The Company currently has operating and finance leases for items such as manufacturing facilities, corporate offices, manufacturing equipment, transportation equipment, and vehicles. The Company's active leases have remaining lease terms that range between less than one year to 18 years, some of which include options to extend the leases for up to 30 years, and some of which include options to terminate the leases within one year.
Comparable information presented in the financial statements for periods prior to January 1, 2019 represent legacy GAAP treatment of leases. For more information on the effective date and transition approach for implementation, see Note 2, Adoption of New Accounting Standards.
For the three months ended March 28, 2019, total net lease cost was $4.4 . This was comprised of $2.2 of operating lease costs, $1.8 amortization of assets related to finance leases, and $0.4 interest on finance lease liabilities.

Supplemental cash flow information related to leases was as follows:
 
For the Three Months Ended
 
March 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
2.2

Operating cash flows from finance leases
$
0.4

Financing cash flows from finance leases
$
1.8

 
 
ROU assets obtained in exchange for lease obligations:
 
Operating leases
$
0.1

Finance Leases
$
—

Supplemental balance sheet information related to leases:
 
March 28, 2019
Finance leases:
 
Property and equipment, gross
$
59.0

Accumulated amortization
(12.3
)
Property and equipment, net
$
46.7


The weighted average remaining lease term as of March 28, 2019 for operating and finance leases was 10.8 years and 5.4 years, respectively. The weighted average discount rate as of March 28, 2019 for operating and finance leases was 5.6% and 4.2% , respectively. See Note 15, Debt , for current and non-current finance lease obligations.

As of March 28, 2019, remaining maturities of lease liabilities were as follows:
 
2019

2020

2021

2022

2023

2024 and thereafter

Total Lease Payments

Less: Imputed Interest
Total Lease Obligations

Operating Leases
$
6.3

$
7.9

$
7.2

$
6.9

$
5.8

$
35.0

$
69.1

$
(17.8
)
$
51.3

Financing Leases
$
7.3

$
9.7

$
9.7

$
9.0

$
7.5

$
5.1

$
48.3

$
(3.7
)
$
44.6


As of March 28, 2019, the Company had additional operating and financing lease commitments that have not yet commenced of approximately $3.0 and $168.0 for manufacturing equipment and facilities which are in various phases of construction or customization for the Company's ultimate use, with lease terms between 3 and 15 years. The Company's involvement in the construction and design process for these assets is generally limited to project management.


14
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.  Other Assets
 
Other assets are summarized as follows:
 
 
March 28,
2019
 
December 31,
2018
Intangible assets
 

 
 

Patents
$
2.0

 
$
2.0

Favorable leasehold interests
6.2

 
6.2

Total intangible assets
8.2

 
8.2

Less: Accumulated amortization - patents
(1.9
)
 
(1.9
)
Accumulated amortization - favorable leasehold interest
(5.0
)
 
(4.9
)
Intangible assets, net
1.3

 
1.4

Deferred financing
 

 
 

Deferred financing costs
41.7

 
41.7

Less: Accumulated amortization - deferred financing costs
(35.9
)
 
(35.6
)
Deferred financing costs, net
5.8

 
6.1

Other
 

 
 

Goodwill - Europe
2.4

 
2.4

Supply agreements (1)
14.3

 
14.6

Restricted cash - collateral requirements
16.3

 
20.2

Deferred Tax Asset - non-current
198.8

 
205.0

Other
37.2

 
38.5

Total
$
276.1

 
$
288.2

 

(1)    Certain payments accounted for as consideration paid by the Company to a customer being amortized as reductions to net revenues.

12.  Advance Payments
 
Advances on the B787 Program.  Boeing has made advance payments to Spirit under the B787 Supply Agreement, that are required to be repaid to Boeing by way of offset against the purchase price for future shipset deliveries. Advance repayments were scheduled to be spread evenly over the remainder of the first 1,000 B787 shipsets delivered to Boeing. On April 8, 2014, the Company signed a memorandum of agreement with Boeing that 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 that otherwise would have become due during such twelve-month period will offset the purchase price for shipsets 1,001 through 1,120. On December 21, 2018, the Company signed the 2018 MOA with Boeing that again suspended the advance repayments beginning with line unit 818. The advance repayments will resume at a lower rate of $450,319 per shipset at line number 1135 and continue through line number 1605.

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 due on December 15th of each year until the advance payments have been fully recovered by Boeing. As of March 28, 2019 , the amount of advance payments received by us from Boeing under the B787 Supply Agreement and not yet repaid was approximately $231.9 .

13.  Fair Value Measurements
 
The 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

15
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance discloses three levels of inputs that may be used to measure fair value:

Level 1
Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.

Level 2                       Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of the interest rate swaps and foreign currency hedge contracts.
 
Level 3                       Unobservable inputs that are supported by little or no market activity and 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.

The Company’s long-term debt includes a senior unsecured term loan and senior unsecured notes.  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:
 
 
March 28, 2019
 
December 31, 2018
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Senior unsecured term loan A (including current portion)
$
454.7

 
$
450.8

(2)
$
204.7

 
$
197.8

(2)
2018 Revolver
100.0

 
100.0

(2)
—

 
—

(2)
Senior unsecured notes due 2021
298.6

 
296.9

(1)
298.5

 
292.9

(1)
Senior unsecured notes due 2023
298.0

 
303.6

(1)
297.9

 
297.5

(1)
Senior unsecured notes due 2026
297.6

 
286.6

(1)
297.5

 
274.5

(1)
Senior unsecured notes due 2028
693.6

 
696.6

(1)
693.5

 
663.0

(1)
Total
$
2,142.5

 
$
2,134.5

 
$
1,792.1

 
$
1,725.7

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

14.  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. 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 2018 Credit Agreement (as defined below) 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. See Note 15, Debt , for more information.

Interest Rate Swaps
 

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)


On March 15, 2017, the Company entered into an interest rate swap agreement, with an effective date of March 31, 2017. The swaps have a notional value of $250.0 and fix the variable portion of the Company’s floating rate debt at 1.815% . The fair value of the interest rate swaps, using Level 2 inputs, was an asset of $1.4 and $2.2 as of March 28, 2019 and December 31, 2018 , respectively. For the three months ended March 28, 2019 , the Company recorded a loss related to swap activity of $0.4 .

Foreign Currency Forward Contract

On May 1, 2018, the Company and its wholly-owned subsidiary Spirit AeroSystems Belgium Holdings BVBA (“Spirit Belgium”) entered into a definitive agreement (as amended, the “Purchase Agreement”) with certain private sellers pursuant to which Spirit Belgium will purchase all of the issued and outstanding equity of S.R.I.F. N.V., the parent company of Asco Industries N.V. (“Asco”) for $604.0 in cash, subject to certain customary closing adjustments, including foreign currency adjustments. A significant portion of the purchase price in the Asco acquisition is payable in Euros and, accordingly, movements in the Euro exchange rate could cause the purchase price to fluctuate, affecting our cash flows.

To minimize the risk of currency exchange rate movements on the Company's cash flows, the Company entered into foreign currency forward contracts; however the Company has not designated these forward contracts as a hedge and has not applied hedge accounting to them. During the second quarter of 2018, to reduce the Euro exchange rate exposure of the purchase of Asco, the Company entered into a foreign currency forward contract in the amount of $580.0 ; this foreign currency forward contract was net settled in the third quarter of 2018 and a new contract was entered during the fourth quarter of 2018 in the amount of $568.3 ; this contract was net settled and a third contract was entered into with a settlement date in the first quarter of 2019 in the amount of $547.7 . The third contract was settled at the end of the first quarter of 2019 and a fourth contract was entered into in the amount of $542.1 with a settlement date in the second quarter of 2019. The fair value of the foreign currency forward contract, using Level 2 inputs, was a liability of $2.9 as of March 28, 2019 . The Company recorded a net loss related to foreign currency forward contract activity of $14.6 for the three months ended March 28, 2019 .

15.  Debt
 
Total debt shown on the balance sheet is comprised of the following: 
 
March 28, 2019
 
December 31, 2018
 
Current
Noncurrent
 
Current
Noncurrent
Senior unsecured term loan A
$
22.7

$
432.0

 
$
22.7

$
182.0

Revolver
—

100.0

 
—

—

Floating Rate Notes
—

298.6

 
—

298.5

Senior notes due 2023
—

298.0

 
—

297.9

Senior notes due 2026
—

297.6

 
—

297.5

Senior notes due 2028
—

693.6

 
—

693.5

Present value of capital lease obligations
8.1

36.5

 
7.1

35.3

Other
1.6

58.6

 
1.6

59.3

Total
$
32.4

$
2,214.9

 
$
31.4

$
1,864.0




2018 Credit Agreement

On July 12, 2018, the Company entered into a $1,260.0 senior unsecured Second Amended and Restated Credit Agreement among Spirit, as borrower, the Company, as parent guarantor, the lenders party thereto, Bank of America, N.A., as administrative agent, and the other agents named therein (the “2018 Credit Agreement”), consisting of a $800.0 revolving credit facility (the “2018 Revolver”), a $206.0 term loan A facility (the “2018 Term Loan”) and a $250.0 delayed draw term loan facility (the “Delayed Draw Term Loan”).


17
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


Each of the 2018 Revolver, the 2018 Term Loan and the Delayed Draw Term Loan matures July 12, 2023, and bears interest, at Spirit’s option, at either LIBOR plus 1.375% or a defined “base rate” plus 0.375%, subject to adjustment to between LIBOR plus 1.125% and LIBOR plus 1.875% (or between base rate plus 0.125% and base rate plus 0.875%, as applicable) based on changes to Spirit’s senior unsecured debt rating provided by Standard & Poor’s Financial Services LLC and/or Moody’s Investors Service, Inc. The principal obligations under the 2018 Term Loan are to be repaid in equal quarterly installments of $2.6 , commencing with the fiscal quarter ending March 31, 2019, and with the balance due at maturity of the 2018 Term Loan. The principal obligations under the Delayed Draw Term Loan are to be repaid in equal quarterly installments of 1.25% of the outstanding principal amount of the Delayed Draw Term Loan as of March 31, 2019, subject to adjustments for any extension of the availability period of the Delayed Draw Term Loan, with the balance due at maturity of the Delayed Draw Term Loan.

In March 2019 the Company drew $250.0 on the Delayed Draw Term Loan and $100.0 on the 2018 Revolver. The 2018 Revolver had an unutilized amount of $700.0 as of March 28, 2019 .
 
The 2018 Credit Agreement also contains an accordion feature that provides Spirit with the option to increase the 2018 Revolver commitments and/or institute one or more additional term loans by an amount not to exceed $750.0 in the aggregate, subject to the satisfaction of certain conditions and the participation of the lenders. The 2018 Credit Agreement contains customary affirmative and negative covenants, including certain financial covenants that are tested on a quarterly basis. Spirit’s obligations under the 2018 Credit Agreement may be accelerated upon an event of default, which includes non-payment of principal or interest, material breach of a representation or warranty, material breach of a covenant, cross-default to material indebtedness, material judgments, ERISA events, change in control, bankruptcy and invalidity of the guarantee of Spirit’s obligations under the 2018 Credit Agreement made by the Company.

As of March 28, 2019 , the outstanding balance of the 2018 Term Loan was $456.3 and the carrying value was $454.7 .

Senior Notes

Floating Rate, 2023, and 2028 Notes

On May 30, 2018, Spirit entered into an Indenture (the “Indenture”) by and among Spirit, the Company and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”), as trustee in connection with Spirit’s offering of $300.0 aggregate principal amount of its Senior Floating Rate Notes due 2021 (the “Floating Rate Notes”), $300.0 aggregate principal amount of its 3.950% Senior Notes due 2023 (the “2023 Notes”) and $700.0 aggregate principal amount of its 4.600% Senior Notes due 2028 (the “2028 Notes” and, together with the Floating Rate Notes and the 2023 Notes, the “New Notes”). The Company guaranteed Spirit’s obligations under the New Notes on a senior unsecured basis (the “Guarantees”).

The Floating Rate Notes bear interest at a rate per annum equal to three-month LIBOR, as determined in the case of the initial interest period, on May 25, 2018, and thereafter at the beginning of each quarterly period as described herein, plus 80 basis points and mature on June 15, 2021. Interest on the Floating Rate Notes is payable on March 15, June 15, September 15 and December 15 of each year, beginning on September 15, 2018. The 2023 Notes bear interest at a rate of 3.950% per annum and mature on June 15, 2023. The 2028 Notes bear interest at a rate of 4.600% per annum and mature on June 15, 2028. Interest on the 2023 Notes and 2028 Notes is payable on June 15 and December 15 of each year, beginning on December 15, 2018. The outstanding balance of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $300.0, $300.0, and $700.0 as of March 28, 2019 , respectively. The carrying value of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $298.6 , $298.0 , and $693.6 as of March 28, 2019 , respectively.

The New Notes and the Guarantees have been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to a Registration Statement on Form S-3 (No. 333-211423) previously filed with the SEC under the Securities Act.

The Indenture contains covenants that limit Spirit’s, the Company’s and certain of the Company’s subsidiaries’ ability, subject to certain exceptions and qualifications, to create liens without granting equal and ratable liens to the holders of the New Notes and enter into sale and leaseback transactions. These covenants are subject to a number of qualifications and limitations. In addition, the Indenture provides for customary events of default.

2026 Notes

In June 2016, the Company issued $300.0 in aggregate principal amount of 3.850% Senior Notes due June 15, 2026 (the “2026 Notes”) with interest payable, in cash in arrears, on June 15 and December 15 of each year, beginning December 15, 2016. As of March 28, 2019 , the outstanding balance of the 2026 Notes was $300.0 and the carrying value was $297.6 . The Company guarantees Spirit's obligations under the 2026 Notes on a senior unsecured basis.

18
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)



 
16. Pension and Other Post-Retirement Benefits
 
 
 
Defined Benefit Plans
 
 
For the Three
  Months Ended
Components of Net Periodic Pension Expense/(Income)
 
March 28,
2019
 
March 29,
2018
Service cost
 
$
0.3

 
$
0.2

Interest cost
 
10.1

 
9.3

Expected return on plan assets
 
(16.7
)
 
(17.5
)
Amortization of net loss
 
0.4

 
—

Net periodic pension (income) expense
 
$
(5.9
)
 
$
(8.0
)

 
 
 
Other Benefits
 
 
For the Three
Months Ended
Components of Other Benefit Expense
 
March 28,
2019
 
March 29,
2018
Service cost
 
$
0.2

 
$
0.3

Interest cost
 
0.3

 
0.3

Amortization of prior service cost
 
(0.2
)
 
(0.2
)
Amortization of net gain
 
(0.6
)
 
(0.6
)
Net periodic other benefit (income) expense
 
$
(0.3
)
 
$
(0.2
)


Employer Contributions
 
The Company expects to contribute zero dollars to the U.S. qualified pension plan and a combined total of approximately $7.0 for the Supplemental Executive Retirement Plan (“SERP”) and post-retirement medical plans in 2019.  The Company’s projected contributions to the U.K. pension plan for 2019 are $1.8 . The entire amount contributed can vary based on exchange rate fluctuations.

17.  Stock Compensation
 
The Company recognized a net total of $7.7 and $7.1 of stock compensation expense, for the three months ended March 28, 2019 and March 29, 2018 , respectively.

During the three months ended March 28, 2019 , 227,061 shares, 52,478 shares, and 71,920 shares of class A common stock (the "Common Stock") with aggregate grant date fair values of $20.9 , $6.5 and $6.5 were granted under the service-based, market-based, and performance based portions of the Company’s LTIAs, respectively. Additionally, 323,856 shares of Common Stock with an aggregate grant date fair value of $19.2 that were LTIAs vested during the three months ended March 28, 2019 .

18. 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 asset at

19
Table of Contents
Spirit AeroSystems Holdings, Inc.  
Notes to the Condensed Consolidated Financial Statements (unaudited)
($, €, and RM in millions other than per share amounts)


March 28, 2019 , and December 31, 2018, was $197.9 and $204.2 , respectively. The difference is primarily due to the creation of deductible temporary differences and utilization of taxable temporary differences within the current year.

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 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 may give rise to discrete recognition include excess tax benefits with respect to share-based compensation, finalizing amounts in income tax returns filed, finalizing audit examinations for open tax years and expiration of statutes of limitations and changes in tax law.

In January 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (“Topic 220”); Reclassification of Certain Tax effects from Accumulated Other Comprehensive Income (“AOCI”), which gives entities the option to reclassify to retained earnings the tax effects resulting from the Tax Cuts and Job Act that are stranded in AOCI. The adoption of this standard did not have a material effect to the Company’s consolidated financial statements.

The 19.8% effective tax rate for the three months ended March 28, 2019 differs from the 18.0% effective tax rate for the same period of 2018 primarily due to higher tax effect of the Global Intangible Low-Taxed Income and decreased benefit for share based compensation excess tax benefit in the first quarter of 2019.

The Company will continue to participate in the Internal Revenue Service’s Compliance Assurance Process (“CAP”) program for its 2018 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.  There are no open audits in the Company’s foreign jurisdictions.
 
19.  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.

The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. As of March 28, 2019 , no treasury shares have been reissued or retired.

During the period ended March 28, 2019 , the Company repurchased 0.8 million shares of its Common Stock for $75.0 . As a result, the total authorization amount remaining in the 2017 Share Repurchase Program is approximately $925.0.



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)


The following table sets forth the computation of basic and diluted earnings per share:
 
 
For the Three Months Ended
 
March 28, 2019
 
March 29, 2018
 
Income
 
Shares
 
Per Share
Amount
 
Income
 
Shares
 
Per Share
Amount
Basic EPS
 

 
 

 
 

 
 

 
 

 
 

Income available to common stockholders
$
163.0

 
104.0

 
$
1.57

 
$
125.3

 
112.9

 
$
1.11

Income allocated to participating securities
0.1

 
0.1

 
 

 
0.1

 
0.1

 
 

Net income
$
163.1

 
 

 
 

 
$
125.4

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Diluted potential common shares
 

 
1.2

 
 

 
 

 
1.1

 
 

Diluted EPS
 

 
 

 
 

 
 

 
 

 
 

Net income
$
163.1

 
105.3

 
$
1.55

 
$
125.4

 
114.1

 
$
1.10

 
 
Included in the outstanding common shares were 1.4 million and 1.5 million of issued but unvested shares at March 28, 2019 and March 29, 2018 , 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
 
March 28, 2019
 
December 31, 2018
Pension (1)
$
(128.4
)
 
$
(116.7
)
SERP/Retiree medical (1)
20.3

 
17.2

Foreign currency impact on long term intercompany loan
(16.5
)
 
(17.4
)
Currency translation adjustment
(70.3
)
 
(79.7
)
Total accumulated other comprehensive loss
$
(194.9
)
 
$
(196.6
)
 
(1) March 28, 2019 balances include Pension and SERP/Retiree medical reclassifications to retained earnings of $12.0 and ($3.7), respectively, as a result of adopting ASU 2018-02. See Note 2, Adoption of New Accounting Standards.
    
20.  Commitments, Contingencies and Guarantees
 
Litigation
 
From time to time, the Company is subject to, and is presently involved in, litigation, legal proceedings, or other claims 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, the Company believes that, on a basis of information presently available, none of these items, when finally resolved, will have a material adverse effect on the Company’s long-term financial position or liquidity.

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 takes appropriate action. 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.


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)


Customer and Vendor Claims

From time to time the Company receives, or is subject to, customer and vendor claims arising in the ordinary course of business, including, but not limited to, those related to product quality and late delivery. The Company accrues for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration multiple factors including without limitation our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of an unfavorable outcome, and the severity of any potential loss. Any accruals deemed necessary are reevaluated at least quarterly and updated as matters progress over time.

While the final outcome of these types of matters cannot be predicted with certainty, considering, among other things, the factual and legal defenses available, it is the opinion of the Company that, when finally resolved, no current claims will have a material adverse effect on the Company’s long-term financial position or liquidity. However, it is possible that the Company’s results of operations in a period could be materially affected by one or more of these other matters.

Guarantees
 
Outstanding guarantees were $27.3 at both March 28, 2019 and December 31, 2018 .

Restricted Cash - Collateral Requirements

The Company was required to maintain $16.3 and $20.2 of restricted cash as of March 28, 2019 and December 31, 2018 , respectively, related to certain collateral requirements for obligations under its workers’ compensation programs. The 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 its non-employee 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.

The Company has agreed to indemnify parties for specified liabilities incurred, or that may be incurred, in connection with transactions they have entered into with the Company. The Company is unable to assess the potential number of future claims that may be asserted under these indemnities, nor the amounts thereof (if any). As a result, the Company cannot estimate the maximum potential amount of future payments under these indemnities and therefore, no liability has been recorded.

Service and Product Warranties and Extraordinary Rework
 
Provisions for estimated expenses related to service and product warranties and certain extraordinary rework are evaluated on a quarterly basis. These costs are accrued 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 rework is reported in current liabilities and other liabilities on the balance sheet.

The warranty balance presented in the table below includes unresolved warranty claims that are in dispute in regards to their value as well as their contractual liability. The Company estimated the total costs related to some of these claims, however, there is significant uncertainty surrounding the disposition of these disputed claims and as such, the ultimate determination of the provision’s adequacy requires significant management judgment. The amount of the specific provisions recorded against disputed warranty claims was $8.0 and $41.0 as of March 28, 2019 , and December 31, 2018 , respectively. These specific provisions represent the Company’s best estimate of probable warranty claims. Should the Company incur higher than expected warranty costs and/or discover new or additional information related to these warranty provisions, the Company may incur additional charges that exceed these recorded provisions. The Company utilized available information to make appropriate assessments, however, the Company recognizes that data on actual claims experience is of limited duration and therefore, claims projections are subject to significant judgment. The amount of the reasonably possible disputed warranty claims in excess of the specific warranty provision was $12.0 as of March 28, 2019 , and $34.0 as of December 31, 2018 .

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)



The following is a roll forward of the service warranty and extraordinary rework balance at March 28, 2019 :
 
Balance, December 31, 2018
$
104.8

Charges to costs and expenses
(7.9
)
Payouts
(0.2
)
Impact of TGI Settlement (1)
(25.0
)
Exchange rate
0.3

Balance, March 28, 2019
$
72.0

 

(1) Due to a settlement on outstanding warranty issues in the first quarter of 2019 $25.0 of warranty provision was reclassified to accounts payable and is scheduled to be paid in the second quarter of 2019.


21.  Other (Expense) Income, Net
 
Other (expense) income, net is summarized as follows:
 
 
For the Three Months Ended
 
March 28,
2019
 
March 29,
2018
Kansas Development Finance Authority bond
$
1.2

 
$
1.2

Rental and miscellaneous income
0.1

 
0.1

Interest income
3.2

 
1.2

Foreign currency losses
(2.0
)
 
(3.1
)
Loss on foreign currency contract, net of settlement
(15.4
)
 
—

Loss on sale of accounts receivable
(4.6
)
 
(3.7
)
Pension Income
6.5

 
8.4

Total
$
(11.0
)
 
$
4.1


Foreign currency losses are 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 that are denominated in a currency other than the entity’s functional currency.
 
22.  Segment Information
 
The Company operates in three principal segments: Fuselage Systems, Propulsion Systems, and Wing Systems. Revenue from Boeing represents a substantial portion of the Company's revenues in all segments. Wing Systems also includes significant revenues from Airbus. Approximately 95% of the Company's net revenues for the three months ended March 28, 2019 , 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

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)


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 the Company's 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 the Company's facility in Wichita, Kansas.

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

 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 aerostructure production across all segments. Work-in-process inventory is identifiable by segment, but is managed and evaluated at the program level. As there is no segmentation of the Company’s productive assets, depreciation expense (included in fixed manufacturing costs and selling, general and administrative expenses) and capital expenditures, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.

The following table shows segment revenues and operating income for the three months ended March 28, 2019 and March 29, 2018 :

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)


 
 
Three Months Ended
 
March 28,
2019
 
March 29,
2018
Segment Revenues
 

 
 

Fuselage Systems
$
1,069.6

 
$
962.7

Propulsion Systems
485.7

 
394.5

Wing Systems
407.9

 
377.0

All Other
4.6

 
1.9

 
$
1,967.8

 
$
1,736.1

Segment Operating Income (Loss)
 

 
 

Fuselage Systems
$
138.9

 
$
119.7

Propulsion Systems
95.5

 
52.9

Wing Systems
65.8

 
50.8

All Other
1.2

 
(1.0
)
 
301.4

 
222.4

SG&A
(63.6
)
 
(56.2
)
Research and development
(12.9
)
 
(9.4
)
Unallocated cost of sales
8.1

 
2.7

Total operating income
$
233.0

 
$
159.5

 



23.  Asco Acquisition

On May 1, 2018, the Company and its wholly-owned subsidiary Spirit Belgium entered into the Purchase Agreement pursuant to which Spirit Belgium will purchase all of the issued and outstanding equity of Asco, a leading supplier of high lift wing structures, mechanical assemblies and major functional components to major OEMs and Tier I suppliers in the global commercial aerospace and military markets, for the translated amount of $604.0 in cash, subject to certain customary closing adjustments, including foreign currency adjustments. The definitive agreement is subject to customary closing conditions, including regulatory approvals and customer consents.

Acquisition-related expenses were $2.8 for the three months ended March 28, 2019 and are included in selling, general and administrative costs on the condensed and consolidated statements of operations.

24.  Condensed Consolidating Financial Information
 
The Floating Rate Notes, 2023 Notes, 2026 Notes, and 2028 Notes (collectively, the "Notes") are fully and unconditionally guaranteed on a senior unsecured basis by Holdings. No subsidiaries are guarantors to any of the Notes.

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 guarantor of the Notes, as further detailed in Note 15, Debt ;
(ii)
Spirit, as issuer of the Notes;
(iii)
The Company’s subsidiaries (the “Non-Guarantor Subsidiaries”), on a combined basis;
(iv)
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among Holdings and the Non-Guarantor Subsidiaries, (b) eliminate the investments in the Company’s subsidiaries, and (c) record consolidating entries; and
(v)
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 March 28, 2019

 
Holdings
 
Spirit
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Revenue
$
—

 
$
1,765.2

 
$
373.2

 
$
(170.6
)
 
$
1,967.8

Operating costs and expenses
 

 
 

 
 
 
 

 
 

Cost of sales
—

 
1,500.3

 
328.6

 
(170.6
)
 
1,658.3

Selling, general and administrative
2.3

 
56.5

 
4.8

 
—

 
63.6

Research and development
—

 
11.4

 
1.5

 
—

 
12.9

Total operating costs and expenses
2.3

 
1,568.2

 
334.9

 
(170.6
)
 
1,734.8

Operating (loss) income
(2.3
)
 
197.0

 
38.3

 
—

 
233.0

Interest expense and financing fee amortization
—

 
(18.8
)
 
(1.0
)
 
1.0

 
(18.8
)
Other income (expense), net
—

 
(8.4
)
 
(1.6
)
 
(1.0
)
 
(11.0
)
(Loss) income before income taxes and equity in net income of affiliate and subsidiaries
(2.3
)
 
169.8

 
35.7

 
—

 
203.2

Income tax benefit (provision)
0.5

 
(34.7
)
 
(5.9
)
 
—

 
(40.1
)
(Loss) income before equity in net income of affiliate and subsidiaries
(1.8
)
 
135.1

 
29.8

 
—

 
163.1

Equity in net income of affiliate
—

 
—

 
—

 
—

 
—

Equity in net income of subsidiaries
164.9

 
29.8

 
—

 
(194.7
)
 
—

Net income
163.1

 
164.9

 
29.8

 
(194.7
)
 
163.1

Other comprehensive (loss) income
10.0

 
10.0

 
10.4

 
(20.4
)
 
10.0

Comprehensive income (loss)
$
173.1

 
$
174.9

 
$
40.2

 
$
(215.1
)
 
$
173.1


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 March 29, 2018
 
 
Holdings
 
Spirit
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Revenue
$
—

 
$
1,541.0

 
$
369.7

 
$
(174.6
)
 
$
1,736.1

Operating costs and expenses
 

 
 

 
 
 
 

 
 

Cost of sales
—

 
1,351.6

 
334.0

 
(174.6
)
 
1,511.0

Selling, general and administrative
2.4

 
48.1

 
5.7

 
—

 
56.2

Research and development
—

 
8.6

 
0.8

 
—

 
9.4

Total operating costs and expenses
2.4

 
1,408.3

 
340.5

 
(174.6
)
 
1,576.6

Operating (loss) income
(2.4
)
 
132.7

 
29.2

 
—

 
159.5

Interest expense and financing fee amortization
—

 
(11.3
)
 
(1.2
)
 
1.2

 
(11.3
)
Other income (expense), net
—

 
9.9

 
(4.6
)
 
(1.2
)
 
4.1

(Loss) income before income taxes and equity in net income of affiliate and subsidiaries
(2.4
)
 
131.3

 
23.4

 
—

 
152.3

Income tax benefit (provision)
0.4

 
(23.7
)
 
(4.2
)
 
—

 
(27.5
)
(Loss) income before equity in net income of affiliate and subsidiaries
(2.0
)
 
107.6

 
19.2

 
—

 
124.8

Equity in net income of affiliate
0.6

 
—

 
0.6

 
(0.6
)
 
0.6

Equity in net income of subsidiaries
126.8

 
19.2

 
—

 
(146.0
)
 
—

Net income
125.4

 
126.8

 
19.8

 
(146.6
)
 
125.4

Other comprehensive (loss) income
14.6

 
14.6

 
15.1

 
(29.7
)
 
14.6

Comprehensive income (loss)
$
140.0

 
$
141.4

 
$
34.9

 
$
(176.3
)
 
$
140.0







 





















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
March 28, 2019
 
 
Holdings
 
Spirit
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
1,160.9

 
$
67.5

 
$
—

 
$
1,228.4

Restricted cash
—

 
0.3

 
—

 
—

 
0.3

Accounts receivable, net


 
619.3

 
347.3

 
(347.7
)
 
618.9

Contract assets, short-term
—

 
507.0

 
49.9

 
—

 
556.9

Inventory, net
—

 
676.8

 
314.8

 
—

 
991.6

Other current assets
—

 
28.9

 
2.4

 
—

 
31.3

Total current assets
—

 
2,993.2

 
781.9

 
(347.7
)
 
3,427.4

Property, plant and equipment, net
—

 
1,686.4

 
497.3

 
—

 
2,183.7

Right of Use assets
—

 
44.0

 
7.3

 
—

 
51.3

Contract assets, long-term
—

 
14.6

 
10.7

 
—

 
25.3

Pension assets, net
—

 
313.4

 
20.5

 
—

 
333.9

Investment in subsidiary
1,321.1

 
739.2

 
—

 
(2,060.3
)
 
—

Other assets
—

 
344.9

 
124.9

 
(193.7
)
 
276.1

Total assets
$
1,321.1

 
$
6,135.7

 
$
1,442.6

 
$
(2,601.7
)
 
$
6,297.7

Liabilities
 

 
 

 
 

 
 

 
 

Accounts payable
$
—

 
$
1,002.2

 
$
418.5

 
$
(347.9
)
 
$
1,072.8

Accrued expenses
—

 
292.0

 
36.7

 
0.3

 
329.0

Profit sharing
—

 
18.4

 
2.0

 
—

 
20.4

Current portion of long-term debt
—

 
31.5

 
0.9

 
—

 
32.4

Operating lease liabilities, short-term
—

 
5.0

 
0.6

 
—

 
5.6

Advance payments, short-term
—

 
19.8

 
—

 
—

 
19.8

Contract liabilities, short-term
—

 
148.3

 
0.6

 
—

 
148.9

Forward loss provision, long-term
—

 
15.2

 
—

 
—

 
15.2

Deferred revenue and other deferred credits, short-term
—

 
19.1

 
0.7

 
—

 
19.8

Deferred grant income liability - current
—

 
—

 
12.6

 
—

 
12.6

Other current liabilities
—

 
71.8

 
8.0

 
—

 
79.8

Total current liabilities
—

 
1,623.3

 
480.6

 
(347.6
)
 
1,756.3

Long-term debt
—

 
2,207.9

 
100.2

 
(93.2
)
 
2,214.9

Operating lease liabilities, long-term
—

 
39.0

 
6.7

 
—

 
45.7

Advance payments, long-term
—

 
212.1

 
—

 
—

 
212.1

Pension/OPEB obligation
—

 
33.8

 
—

 
—

 
33.8

Contract liabilities, long-term
—

 
383.5

 
—

 
—

 
383.5

Forward loss provision, long-term
—

 
156.5

 
—

 
—

 
156.5

Deferred grant income liability - non-current
—

 
9.3

 
20.3

 
—

 
29.6

Deferred revenue and other deferred credits
—

 
40.2

 
2.3

 
—

 
42.5

Other liabilities
—

 
188.9

 
13.4

 
(100.6
)
 
101.7

Total equity
1,321.1

 
1,241.2

 
819.1

 
(2,060.3
)
 
1,321.1

Total liabilities and stockholders’ equity
$
1,321.1

 
$
6,135.7

 
$
1,442.6

 
$
(2,601.7
)
 
$
6,297.7


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, 2018

 
Holdings
 
Spirit
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
705.0

 
$
68.6

 
$
—

 
$
773.6

Restricted cash
—

 
0.3

 
—

 
—

 
0.3

Accounts receivable, net
—

 
593.0

 
310.2

 
(358.1
)
 
545.1

Inventory, net
—

 
696.0

 
316.6

 
—

 
1,012.6

Contract assets, short-term
—

 
420.8

 
48.6

 
—

 
469.4

Other current assets
—

 
45.3

 
3.0

 
—

 
48.3

Total current assets
—

 
2,460.4

 
747.0

 
(358.1
)
 
2,849.3

Property, plant and equipment, net
—

 
1,670.8

 
496.8

 
—

 
2,167.6

Contract assets, long-term
—

 
54.1

 
—

 
—

 
54.1

Pension assets, net
—

 
307.0

 
19.7

 
—

 
326.7

Investment in subsidiary
1,238.0

 
699.0

 
—

 
(1,937.0
)
 
—

Other assets
—

 
357.1

 
127.5

 
(196.4
)
 
288.2

Total assets
$
1,238.0

 
$
5,548.4

 
$
1,391.0

 
$
(2,491.5
)
 
$
5,685.9

Liabilities
 

 
 

 
 

 
 

 
 

Accounts payable
$
—

 
$
855.2

 
$
405.6

 
$
(358.2
)
 
$
902.6

Accrued expenses
—

 
276.7

 
36.3

 
0.1

 
313.1

Profit sharing
—

 
62.6

 
5.7

 
—

 
68.3

Current portion of long-term debt
—

 
30.5

 
0.9

 
—

 
31.4

Advance payments, short-term
—

 
2.2

 
—

 
—

 
2.2

Contract liabilities, short-term
—

 
157.3

 
0.6

 
—

 
157.9

Forward loss provision, long-term
—

 
12.4

 
—

 
—

 
12.4

Deferred revenue and other deferred credits, short-term
—

 
19.5

 
0.5

 
—

 
20.0

Deferred grant income liability - current
—

 
—

 
16.0

 
—

 
16.0

Other current liabilities
—

 
52.4

 
5.8

 
—

 
58.2

Total current liabilities
—

 
1,468.8

 
471.4

 
(358.1
)
 
1,582.1

Long-term debt


 
1,856.6

 
103.2

 
(95.8
)
 
1,864.0

Advance payments, long-term
—

 
231.9

 
—

 
—

 
231.9

Pension/OPEB obligation
—

 
34.6

 
—

 
—

 
34.6

Contract liabilities, long-term
—

 
369.8

 
—

 
—

 
369.8

Forward loss provision, long-term
—

 
170.6

 
—

 
—

 
170.6

Deferred grant income liability - non-current
—

 
5.9

 
22.1

 
—

 
28.0

Deferred revenue and other deferred credits
—

 
28.8

 
2.4

 
—

 
31.2

Other liabilities
—

 
223.3

 
12.9

 
(100.6
)
 
135.6

Total equity
1,238.0

 
1,158.1

 
779.0

 
(1,937.0
)
 
1,238.1

Total liabilities and stockholders’ equity
$
1,238.0

 
$
5,548.4

 
$
1,391.0

 
$
(2,491.5
)
 
$
5,685.9


 

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 March 28, 2019
 
 
Holdings
 
Spirit
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Operating activities
 

 
 

 
 

 
 

 
 

Net cash provided by operating activities
$
—

 
$
197.4

 
$
44.8

 
$
—

 
$
242.2

Investing activities
 

 
 

 
 

 
 

 
 

Purchase of property, plant and equipment
—

 
(29.3
)
 
(11.5
)
 
—

 
(40.8
)
Other
—

 
0.1

 
—

 
—

 
0.1

Net cash used in investing activities
—

 
(29.2
)
 
(11.5
)
 
—

 
(40.7
)
Financing activities
 

 
 

 
 

 
 

 
 

Proceeds from issuance of debt
—

 
250.0

 
—

 
—

 
250.0

Proceeds from revolving credit facility
—

 
100.0

 
—

 
—

 
100.0

Principal payments of debt
—

 
(2.4
)
 
(0.2
)
 
—

 
(2.6
)
Proceeds (payments) from intercompany debt
—

 
34.0

 
(34.0
)
 
—

 
—

Taxes paid related to net share settlement of awards
—

 
(10.0
)
 
—

 
—

 
(10.0
)
Proceeds (payments) from subsidiary for purchase of treasury stock
75.0

 
(75.0
)
 
—

 
—

 
—

Purchase of treasury stock
(75.0
)
 
—

 
—

 
—

 
(75.0
)
Proceeds (payments) from subsidiary for dividends paid
12.7

 
(12.7
)
 
—

 
—

 
—

Dividends Paid
(12.7
)
 
—

 
—

 
—

 
(12.7
)
Net cash used in financing activities
—

 
283.9

 
(34.2
)
 
—

 
249.7

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(0.3
)
 
—

 
(0.3
)
Net decrease in cash and cash equivalents for the period
—

 
452.1

 
(1.2
)
 
—

 
450.9

Cash, cash equivalents, and restricted cash, beginning of period
—

 
725.5

 
68.6

 
—

 
794.1

Cash, cash equivalents, and restricted cash, end of period
$
—

 
$
1,177.6

 
$
67.4

 
$
—

 
$
1,245.0




 

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 March 29, 2018

 
Holdings
 
Spirit
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Operating activities
 

 
 

 
 

 
 

 
 

Net cash provided by operating activities
$
—

 
$
119.7

 
$
46.9

 
$
—

 
$
166.6

Investing activities
 

 
 

 
 

 
 

 
 

Purchase of property, plant and equipment
—

 
(43.4
)
 
(4.8
)
 
—

 
(48.2
)
Other
—

 
0.2

 
—

 
—

 
0.2

Net cash used in investing activities
—

 
(43.2
)
 
(4.8
)
 
—

 
(48.0
)
Financing activities
 

 
 

 
 

 
 

 
 

Principal payments of debt
—

 
(1.3
)
 
(0.4
)
 
—

 
(1.7
)
Payments on term loan
—

 
(6.2
)
 
—

 
—

 
(6.2
)
Proceeds (payments) from intercompany debt
—

 
46.4

 
(46.4
)
 
—

 
—

Taxes paid related to net share settlement of awards
—

 
(12.7
)
 
—

 
—

 
(12.7
)
Proceeds (payments) from subsidiary for purchase of treasury stock
73.8

 
(73.8
)
 
—

 
—

 
—

Purchase of treasury stock
(73.8
)
 
—

 
—

 
—

 
(73.8
)
Proceeds (payments) from subsidiary for dividends paid
11.5

 
(11.5
)
 
—

 
—

 
—

Dividends Paid
(11.5
)
 
—

 
—

 
—

 
(11.5
)
Net cash used in financing activities
—

 
(59.1
)
 
(46.8
)
 
—

 
(105.9
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
—

 
—

Net decrease in cash and cash equivalents for the period
—

 
17.4

 
(4.7
)
 
—

 
12.7

Cash, cash equivalents, and restricted cash, beginning of period
—

 
387.3

 
58.2

 
—

 
445.5

Cash, cash equivalents, and restricted cash, end of period
$
—

 
$
404.7

 
$
53.5

 
$
—

 
$
458.2


25.  Subsequent Event

On April 12, 2019, Boeing and the Company executed a Memorandum of Agreement (the “MOA”) relating to Spirit’s production of aircraft with respect to the B737 program. As previously announced by the Company on April 5, 2019, Spirit will maintain its delivery rate of 52 shipsets per month with respect to the B737 program following Boeing’s announced temporary adjustment in the production rate from 52 to 42 aircraft per month. The MOA establishes that all B737 shipsets produced in excess of Boeing’s production rate (collectively, the “incremental shipsets”) will be deemed to be delivered to Boeing “FOB” at Spirit’s facilities, which will trigger Boeing’s payment obligations for the incremental shipsets. Pursuant to the MOA, if requested by Boeing and Spirit has available storage space, Spirit will maintain the incremental shipsets at Spirit’s facilities; however, title to and risk of any loss of or damage to the incremental shipsets will be transferred to Boeing except to the extent loss or damage results from Spirit’s fault or negligence. Pursuant to the MOA, Spirit has agreed to be responsible for any incremental costs associated with storage of the incremental shipsets. The parties also agreed to certain advance payments for material purchases (all of which are repayable).


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Table of Contents

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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 ("Quarterly Report"). The following section may include “forward-looking statements.” Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “aim,” “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “might,” “objective,” “plan,” “predict,” “project,” “should,” “target,” “will,” “would,” 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. 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: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability of new and maturing programs; 2) our ability to perform our obligations under our new and maturing commercial, business aircraft, and military development programs, and the related recurring production, including our ability to meet contractually required production rate increases; 3) our ability to accurately estimate and manage performance, cost, and revenue under our contracts, including our ability to achieve certain cost reductions with respect to the B787 program and other programs; 4) margin pressures and the potential for additional forward losses on new and maturing programs; 5) our ability and our suppliers’ ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft and expanding model mixes; 6) the effect on aircraft demand and build rates of changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market and expanding conflicts or political unrest; 7) customer cancellations or deferrals as a result of global economic uncertainty or otherwise; 8) 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; 9) the success and timely execution of key milestones such as the receipt of necessary regulatory approvals, including our ability to obtain in a timely fashion any required regulatory or other third party approvals for the consummation of our announced acquisition of Asco, and customer adherence to their announced schedules; 10) our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing and our other customers; 11) our ability to enter into profitable supply arrangements with additional customers; 12) the ability of all parties to satisfy their performance requirements, including our ability to timely deliver quality products, under existing supply contracts with our two major customers, Boeing and Airbus, and other customers, and the risk of non-payment by such customers; 13) 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, domestic or international hostilities, acts of terrorism, or government action such as mandatory aircraft fleet grounding; 14) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 15) our ability to avoid or recover from cyber-based or other security attacks, information technology failures, or other disruptions; 16) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 17) our ability to borrow additional funds or refinance debt; 18) competition from or in-sourcing by commercial aerospace original equipment manufacturers and competition from other aerostructures suppliers; 19) 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; 20) the effect of changes in tax law, such as the effect of The Tax Cuts and Jobs Act that was enacted on December 22, 2017, and changes to the interpretations of or guidance related thereto, and the Company’s ability to accurately calculate and estimate the effect of such changes; 21) any reduction in our credit ratings; 22) our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components; 23) our ability to recruit and retain a critical mass of highly skilled employees and our relationships with the unions representing many of our employees, including our ability to avoid labor disputes and work stoppages with respect to our union employees; 24) spending by the U.S. and other governments on defense; 25) the possibility that our cash flows and our credit facility may not be adequate for our additional capital needs or for payment of interest on, and principal of, our indebtedness; 26) our exposure under our revolving credit facility to higher interest payments should interest rates increase substantially; 27) the effectiveness of any interest rate hedging programs; 28) the effectiveness of our internal control over financial reporting; 29) the outcome or impact of ongoing or future litigation, claims, and regulatory actions; 30) our exposure to potential product liability and warranty claims; 31) our ability to effectively assess, manage and integrate acquisitions that we pursue, including our ability to successfully integrate the Asco business and generate synergies and other cost savings; 32) the consummation of our announced acquisition of Asco while avoiding any unexpected costs, charges, expenses, and adverse changes to business relationships and other business disruptions

32
Table of Contents

for ourselves and Asco as a result of the acquisition; 33) our ability to continue selling certain receivables through our supplier financing program; 34) the risks of doing business internationally, including fluctuations in foreign currency exchange rates, impositions of tariffs or embargoes, trade restrictions, compliance with foreign laws, and domestic and foreign government policies; 35) prolonged periods of inflation where we do not have adequate inflation protection in our customer contracts, among other things; and 36) the timing and conditions surrounding the return to service of the 737 MAX fleet and related impacts on our production rate.

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 section captioned “Risk Factors” in the Company’s 2018 Form 10-K for a more complete discussion of these and other factors that may affect our business.


Management’s Focus
 
In 2018, to help support our work on production rate increases and market growth, we continued to focus on attracting, developing, and retaining a world-class team at our sites and being a trusted partner to our customers and suppliers. We also made great efforts to recover to our customers' delivery schedules after facing various challenges in the early quarters of 2018. The improvements we made to our supply chain and factory in 2018 put us in a better position to execute on future rate increases.

Our 2019 focus continues to revolve around our operational execution, with a focus on safety and quality while working to meet our customers' requirements for production rate changes. We will also be working throughout the year to complete our acquisition of Asco and gain efficiencies through this integration. In addition, we will continue to pursue organic and inorganic options for growth as the global market continues to evolve.

B737 Program

Throughout 2018 and in to the first quarter of 2019, the B737 program has increased in production rate to meet increased demand. As we worked to meet these increasing rates we have experienced production challenges, including supplier disruption, model mix changes, and other challenges that have resulted in additional production costs recognized throughout 2018. A recovery plan was implemented in the first half of 2018, and we were able to recover to schedule during the fourth quarter of 2018. During the first quarter of 2019, we improved operational performance despite some continued shortages from certain suppliers.

In March 2019, the B737 MAX fleet was grounded in the U.S. and internationally following the 2018 and 2019 accidents involving two B737 MAX aircraft. On April 5, 2019, Boeing announced that it would make a temporary adjustment in the production rate of the B737 MAX aircraft from 52 to 42 aircraft per month. Subsequent to Boeing’s announcement, we announced that, to minimize supply chain disruption, Spirit would maintain a B737 delivery rate of 52 shipsets per month.

On April 12, 2019, Boeing and Spirit executed a Memorandum of Agreement (the “MOA”) relating to Spirit’s production of aircraft with respect to the B737 program. The MOA memorialized that Spirit would maintain a delivery rate of 52 shipsets per month with respect to the B737 program unless advised otherwise. The MOA further established that all B737 shipsets produced in excess of Boeing’s production rate (collectively, the “incremental shipsets”) will be deemed to be delivered to Boeing “FOB” at Spirit’s facilities, which will trigger Boeing’s payment obligations for the incremental shipsets. Pursuant to the MOA, if requested by Boeing and Spirit has available storage space, Spirit will maintain the incremental shipsets at Spirit’s facilities; however, title to and risk of any loss of or damage to the incremental shipsets will be transferred to Boeing except to the extent loss or damage results from Spirit’s fault or negligence. Pursuant to the MOA, Spirit has agreed to be responsible for any incremental costs associated with storage of the incremental shipsets, which is expected to be immaterial. The parties also agreed to certain advance payments for material purchases (all of which are repayable).

We will continue to work very closely with Boeing and our supply base to minimize the disruption to our operations as much as possible.

Asco Acquisition


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Table of Contents

On May 1, 2018, the Company and its wholly-owned subsidiary Spirit Belgium entered into the Purchase Agreement pursuant to which Spirit Belgium will purchase all of the issued and outstanding equity of Asco, a leading supplier of high lift wing structures, mechanical assemblies and major functional components to major OEMs and Tier I suppliers in the global commercial aerospace and military markets, for the translated amount of $650.0 million in cash, subject to certain customary closing adjustments, including foreign currency adjustments. The Purchase Agreement was amended on March 19, 2019 to reflect a reduced purchase price of $604.0 million in cash, and again on March 27, 2019, to extend the long-stop date of the Purchase Agreement to May 4, 2019. The closing of the transaction is subject to customary closing conditions, including regulatory approvals and customer consents.
 
One of the closing conditions to the transaction is receipt of clearance from the European Commission (the “Commission”). The Commission initially raised competition concerns with respect to the acquisition and, as a remedy, the parties agreed to structurally modify the set-up of Belairbus, one of the joint ventures of which Asco is a party, and further take certain actions with respect to commercially sensitive information in Asco’s possession (collectively, the “Commitments”). The transaction received clearance from the Commission on March 20, 2019, conditioned upon full compliance with the Commitments. The parties are working to satisfy the requirements of the Commitments in order to receive final approval from the Commission to close the transaction.


Results of Operations
 
The following table sets forth, for the periods indicated, certain of our operating data:
 
 
Three Months Ended
 
March 28,
2019
 
March 29,
2018
 
($ in millions)
Revenue
$
1,967.8

 
$
1,736.1

Cost of sales
1,658.3

 
1,511.0

Gross profit
309.5

 
225.1

Selling, general and administrative
63.6

 
56.2

Research and development
12.9

 
9.4

Operating income
233.0

 
159.5

Interest expense and financing fee amortization
(18.8
)
 
(11.3
)
Other (expense) income, net
(11.0
)
 
4.1

Income before income taxes and equity in net income of affiliate
203.2

 
152.3

Income tax provision
(40.1
)
 
(27.5
)
Income before equity in net income of affiliate
163.1

 
124.8

Equity in net income of affiliate
—

 
0.6

Net income
$
163.1

 
$
125.4

 
Comparative shipset deliveries by model are as follows: 

34
Table of Contents

 
 
Three Months Ended
Model
 
March 28,
2019
 
March 29,
2018
B737
 
152
 
128
B747
 
1
 
1
B767
 
8
 
8
B777
 
13
 
9
B787
 
42
 
37
Total Boeing
 
216
 
183
A220 (1)
 
8
 
0
A320 Family
 
178
 
162
A330
 
9
 
16
A350
 
28
 
28
A380
 
1
 
2
Total Airbus
 
224
 
208
Business and Regional Jets (1)
 
13
 
20
Total
 
453
 
411
 

(1) Airbus acquired the majority ownership in the C-Series program (subsequently renamed as the A220 program) in July 2018; all C-Series deliveries prior to the third quarter 2018 are included in the Business and Regional Jets and all A220 deliveries subsequent to the acquisition are included in A220.

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 that 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
 
March 28,
2019
 
March 29,
2018
 
 
($ in millions)
Boeing
 
$
1,548.4

 
$
1,340.4

Airbus
 
329.8

 
314.5

Other
 
89.6

 
81.2

Total net revenues
 
$
1,967.8

 
$
1,736.1


Changes in Estimates

During the first quarter of 2019, we recognized total changes in estimates of $0.5 million , which included favorable changes in estimates on forward loss programs of $4.7 million , and unfavorable cumulative catch-up adjustments related to periods prior to the first quarter of 2019 of $4.2 million . During the same period in the prior year, we recognized unfavorable total changes in estimates of $22.6 million , which included net forward loss charges of $18.5 million , and unfavorable cumulative catch-up adjustments related to periods prior to the first quarter of 2018 of $4.1 million .

Three Months Ended March 28, 2019 as Compared to Three Months Ended March 29, 2018

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Table of Contents

 
Revenue.   Revenues for the three months ended March 28, 2019 were $1,967.8 million , an increase of $ 231.7 million , or 13.3% , compared to net revenues of $1,736.1 million  for the same period in the prior year. Higher revenues were recorded for all segments during the first quarter of 2018 compared to the same period in the prior year. The increase in revenues was primarily due to higher production activity on the B737 and B787 programs, increased revenue recognized on the B787 due to contractual terms agreements, and increased defense related work, partially offset by lower production deliveries on the A330 program. Approximately 95% of Spirit’s net revenues for the first quarter of 2019 came from our two largest customers, Boeing and Airbus.

Total production deliveries to Boeing increased to 216 shipsets during the first quarter of 2019, compared to 183 shipsets delivered in the same period of the prior year, primarily driven by increased production on the B737 and B787 programs, partially offset by decreased production on the B777 program. Total production deliveries to Airbus increased to 224 shipsets during the first quarter of 2019, compared to 208 shipsets delivered in the same period of the prior year, primarily driven by higher production of the A320 program and the transfer of the A220 program to total Airbus deliveries in the third quarter of 2018, partially offset by decreased A330 deliveries. Total production deliveries of business/regional jet wing and wing components decreased to 13 shipsets during the first quarter of 2019, compared to 20 shipsets delivered in the same period of the prior year, due to the transfer of the A220 program to total Airbus deliveries in the third quarter of 2018. In total, production deliveries increased to 453 shipsets during the first quarter of 2019, compared to 411 shipsets delivered in the same period of the prior year.
 
Gross Profit.   Gross profit was $309.5 million for the three months ended March 28, 2019, compared to $225.1 million for the same period in the prior year. This increase was driven by the absence of forward loss charges on the B787 program recorded in the first quarter of 2018 and increased margins recognized on the B737, B777, and A350 programs. In the first quarter of 2019, we recognized $4.2 million of unfavorable cumulative catch-up adjustments related to periods prior to the first quarter of 2019, and $4.7 million of favorable changes in estimates on forward loss programs. In the same period of 2018, we recorded $4.1 million of unfavorable cumulative catch-up adjustments related to periods prior to the first quarter of 2018, and $18.5 million of net forward loss charges.
 
SG&A and Research and Development.   SG&A expense was $7.4 million higher for the three months ended March 28, 2019 , compared to the same period in the prior year related to costs incurred related to the anticipated purchase of Asco and increased headcount. Research and development expense was $3.5 million higher for the three months ended March 28, 2019 , compared to the same period in the prior year, primarily due to more internal projects underway.
 
Operating Income.   Operating income for the three months ended March 28, 2019 was $233.0 million , an increase of $ 73.5 million , or 46.1% compared to operating income of $159.5 million for the same period in the prior year. The increase in operating income was driven by an $81.7 million increase in Gross profit, as outlined in further detail above, partially offset by increased SG&A and Research and development expenses.
 
Interest Expense and Financing Fee Amortization.   Interest expense and financing fee amortization for the three months ended March 28, 2019 includes $16.4 million of interest and fees paid or accrued in connection with long-term debt and $0.9 million in amortization of deferred financing costs and original issue discount, compared to $8.8 million of interest and fees paid or accrued in connection with long-term debt and $0.9 million in amortization of deferred financing costs and original issue discount for the same period in the prior year.

Other (Expense) Income, net. Other expense, net for the three months ended March 28, 2019 was $11.0 million , compared to Other income, net of $4.1 million for the same period in the prior year. Other expense, net during the first quarter of 2019 was primarily driven by a losses on foreign currency forward contracts as the U.S. Dollar strengthened against the Euro, as well as net losses on the sale of receivables, partially offset by pension income. Other income, net during the first quarter of 2018 was primarily driven by pension income, partially offset by net losses on the sale of receivables and foreign exchange rate fluctuations.
 
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 could give rise to discrete recognition include excess tax benefit in respect of share-based compensation, finalizing audit examinations for open tax years, statute of limitations expiration, or a change in tax law.

The income tax provision for the three months ended March 28, 2019 includes $34.0 million for federal taxes, $0.8 million for state taxes and $5.3 million for foreign taxes. The income tax provision for the three months ended March 29, 2018 includes $24.0 million for federal taxes, $0.5 million for state taxes and $3.0 million for foreign taxes. The effective tax rate for the three months ended March 28, 2019 was 19.8% as compared to 18.0% for the same period in 2018. The difference in the effective tax rate recorded for 2019 as compared to 2018 is related primarily to higher tax effect of global intangible low-taxed income in the first quarter of 2019 and lower excess tax benefits with respect to share based compensation in the income tax provision for the

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first quarter of 2019. The decrease from the U.S. statutory tax rate is attributable primarily to share based compensation excess tax benefit, foreign tax rates lower than the U.S. rate, the tax on global intangible low-taxed income, and the generation of state income tax and federal research tax credits.

Segments.   The following table shows segment revenues and operating income for the three months ended March 28, 2019 and March 29, 2018 :
 
 
Three Months Ended
 
March 28,
2019
 
March 29,
2018
 
($ in millions)
Segment Revenues
 

 
 

Fuselage Systems
$
1,069.6

 
$
962.7

Propulsion Systems
485.7

 
394.5

Wing Systems
407.9

 
377.0

All Other
4.6

 
1.9

 
$
1,967.8

 
$
1,736.1

Segment Operating Income
 

 
 

Fuselage Systems
$
138.9

 
$
119.7

Propulsion Systems
95.5

 
52.9

Wing Systems
65.8

 
50.8

All Other
1.2

 
(1.0
)
 
301.4

 
222.4

SG&A
(63.6
)
 
(56.2
)
Impact of severe weather event
—

 
—

Research and development
(12.9
)
 
(9.4
)
Unallocated cost of sales (1)
8.1

 
2.7

Total operating income
$
233.0

 
$
159.5

 

(1) Includes $7.9 million and $3.0 million reversal of warranty expense for the three months ended March 28, 2019 and March 29, 2018, respectively.

Fuselage Systems, Propulsion Systems, Wing Systems, and All Other represented approximately 54% , 25% , 21% and less than 1%, respectively, of our net revenues for the three months ended March 28, 2019 .
 
Fuselage Systems.   Fuselage Systems segment net revenues for the three months ended March 28, 2019 were $1,069.6 million , an increase of $106.9 million , or 11% , compared to the same period in the prior year. The increase was primarily due to higher production activity on the B737, B777, and B787 programs, increased revenue recognized on the B787 program due to contractual terms agreements, and increased defense related work, partially offset by lower revenue on certain non-recurring programs. Fuselage Systems segment operating margins were 13% for the three months ended March 28, 2019 , compared to 12% for the same period in the prior year, primarily due to the absence of net forward loss charges on the B787 program related to pension accounting changes recorded in the first quarter of 2018. In the first quarter of 2019, the segment recorded unfavorable cumulative catch-up adjustments of $1.2 million and favorable changes in estimates on loss programs of $3.7 million . In comparison, during the first quarter of 2018, the segment recorded unfavorable cumulative catch-up adjustments of $4.9 million and forward loss charges of $11.6 million .
 
Propulsion Systems.   Propulsion Systems segment net revenues for the three months ended March 28, 2019 were $485.7 million , an increase of $91.2 million , or 23% , compared to the same period in the prior year. The increase was primarily due to increased production activity on the B737 and B787 programs and increased revenue recognized on the B787 program due to contractual terms agreements. Propulsion Systems segment operating margins were 20% for the three months ended March 28, 2019 , compared to 13% for the same period in the prior year. This increase was primarily driven by increased margins recorded on the B737 program and the absence of net forward loss charges on the B787 program related to pension accounting changes recorded in the first quarter of 2018. The segment recorded unfavorable cumulative catch-up adjustments of $2.8 million and

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favorable changes in estimates on forward loss programs of $0.5 million for the three months ended March 28, 2019 . In comparison, during the same period of the prior year, the segment recorded unfavorable cumulative catch-up adjustments of $0.6 million and net forward loss charges of $3.4 million.
 
Wing Systems.   Wing Systems segment net revenues for the three months ended March 28, 2019 were $407.9 million , an increase of $30.9 million , or 8% , compared to the same period in the prior year. The increase was primarily due to increased production activity on the B737, B777, B787, A350, and A320 programs and increased revenue recognized on the B787 program due to contractual terms agreements. Wing Systems segment operating margins were 16% for the three months ended March 28, 2019 , compared to 13% for the same period in the prior year. This increase was primarily driven by the absence of net forward loss charges on the B787 program related to pension accounting changes recorded in the first quarter of 2018 and increased margins recognized on the A350 program. In the first quarter of 2019, the segment recorded unfavorable cumulative catch-up adjustments of $0.2 million and favorable changes in estimates on forward loss programs of $0.5 million. In comparison, during the first quarter of 2018, the segment recorded $3.5 million of net forward loss charges as well as favorable cumulative catch-up adjustments of $1.4 million .
 
All Other.   All Other segment net revenues consist of sundry sales of miscellaneous services, tooling contracts, and natural gas revenues from the Kansas Industrial Energy Supply Company ("KIESC"), a tenancy in common with other Wichita companies established to purchase natural gas where we are a major participant. In the three months ended March 28, 2019 , All Other segment net revenues were $4.6 million , an increase of $2.7 million compared to the same period in the prior year, primarily due to non-recurring revenue.
 
Liquidity and Capital Resources
 
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Our principal source of liquidity is operating cash flows from continuing operations.

We expend significant capital as we undertake new programs, meet increased production rates on certain mature and maturing programs, and develop new technologies for the next generation of aircraft, which may not be funded by our customers. In addition, other significant factors that affect our overall management of liquidity include: debt service, redemptions of debt, the ability to attract long-term capital at satisfactory terms, research and development, capital expenditures, share repurchases, dividend payments, and merger and acquisition activities, such as the Asco acquisition.

Capital expenditures for the three months ended March 28, 2019 totaled $40.8 million , as compared to $48.2 million for the same period in 2018.

As of March 28, 2019 , we had $1,228.4 million of cash and cash equivalents on the balance sheet. In addition we have $700.0 million of available borrowing capacity under our 2018 Revolver.

On October 24, 2018, the Board of Directors approved an increase to its existing share repurchase program of approximately $800.0 million, resulting in a total program authorization of $1.0 billion. As of March 28, 2019, we had approximately $925.0 million remaining in our share repurchase program.

At the outset of 2019, we expected to increase production of B737 aircraft to a production rate of 57 aircraft per month in 2019. On April 5, 2019, we agreed to maintain the B737 delivery rate at 52 aircraft per month rather than accelerating in rate as was planned. As compared to a planned rate of 57 aircraft per month, a rate of 52 aircraft per month will negatively affect our cash flows from continuing operations and, thus, our liquidity for such period of time that we remain at such rate, or a lower rate. To the extent that the grounding of the B737 MAX fleet continues for an extended period of time, or that Boeing further reduces its production rate of the B737 MAX aircraft, Spirit’s liquidity could be materially adversely impacted.

We believe our future operating cash flows will be sufficient to meet our future operating cash needs. Further, we believe that our access to the 2018 Credit Agreement and our ability to obtain debt financing provides additional potential sources of liquidity as required or appropriate.

Cash Flows
 
The following table provides a summary of our cash flows for the three months ended March 28, 2019 and March 29, 2018 :
 

38

 
For the three months ended
 
March 28, 2019
 
March 29, 2018
 
($ in millions)
Net cash provided by operating activities
$
242.2

 
$
166.6

Net cash used in investing activities
(40.7
)
 
(48.0
)
Net cash provided/(used) in financing activities
249.7

 
(105.9
)
Effect of exchange rate change on cash and cash equivalents
(0.3
)
 
—

Net increase in cash, cash equivalents and restricted cash for the period
450.9

 
12.7

Cash, cash equivalents, and restricted cash beginning of period
794.1

 
445.5

Cash, cash equivalents, and restricted cash, end of period
$
1,245.0

 
$
458.2

 
Three Months Ended March 28, 2019 as Compared to Three Months Ended March 29, 2018
 
Operating Activities. For the three months ended March 28, 2019 , we had a net cash inflow of $242.2 million from operating activities, an increase of $75.6 million compared to a net cash inflow of $166.6 million for the same period in the prior year. The increase in net cash provided by operating activities was primarily due to higher revenues.

Investing Activities. For the three months ended March 28, 2019 , we had a net cash outflow of $40.7 million for investing activities, a decrease in outflow of $7.3 million compared to a net cash outflow of $48.0 million for the same period in the prior year. The decrease in cash outflow is due to decreased capital expenditures during the first three months of 2019.
 
Financing Activities. For the three months ended March 28, 2019 , we had a net cash inflow of $249.7 million for financing activities, an increase in inflow of $355.6 million , compared to a net cash outflow of $105.9 million for the same period in the prior year. This increase in cash inflow is due to a Delayed Draw Term Loan of $250.0 million and $100.0 million on our 2018 Revolver, which were both drawn during the first quarter of 2019. During the three months ended March 28, 2019 , we repurchased 796,409 shares of our Common Stock for $75.0 million , compared to 866,113 shares repurchased for $73.8 million during the same period in the prior year. Additionally, during the three months ended March 28, 2019 , we paid a dividend of $12.7 million to our stockholders of record, compared to a dividend of $11.5 million paid in the same period in the prior year.

Pension and Other Post-Retirement Benefit Obligations
 
Our U.S. pension plan remained fully funded at March 28, 2019 and we anticipate non-cash pension income for 2019 to remain at or near the same level as 2018. 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 17, Pension and Other Post-Retirement Benefits, for more information on the Company’s pension plans.
 
Interest Rate Swaps
 
On March 15, 2017, the Company entered into an interest rate swap agreement, with an effective date of March 31, 2017. The swaps have a notional value of $250.0 million and fix the variable portion of the Company’s floating rate debt at 1.815%. The fair value of the interest rate swaps was an asset of $1.4 million as of March 28, 2019 . For the three months ended March 28, 2019 , the Company recorded a loss related to swap activity of $0.4 million .

Foreign Currency Forward Contract

A significant portion of the purchase price in the Asco acquisition is payable in Euros and, accordingly, movements in the Euro exchange rate could cause the purchase price to fluctuate, affecting our cash flows. To minimize the risk of currency exchange rate movements on the Company’s cash flows, the Company entered into foreign currency forward contracts; however the Company has not designated these forward contracts as a hedge and has not applied hedge accounting to them. During the second quarter of 2018, the Company entered into a foreign currency forward contract in the amount of $580.0 million; this foreign currency forward contract was net settled in the third quarter of 2018 and a new contract was entered during the fourth quarter of 2018 in the amount of $568.3 million; this contract was net settled and a third contract was entered into with a settlement date in the first quarter of 2019 in the amount of $547.7 million. The third contract was settled at the end of the first quarter of 2019 and a fourth contract was entered into in the amount of $542.1 million with a settlement date in the second quarter of 2019. The fair value of the foreign currency forward contract was a liability of $2.9 million as of March 28, 2019 . The Company recorded a net loss related to this activity of $14.6 million for the three months ended March 28, 2019 .

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Assuming all other variables remained constant at March 28, 2019 , a 1% change in the exchange rate between the U.S. dollar and the Euro would have decreased or increased the loss by $2.5 million.

Debt and Other Financing Arrangements

During the first quarter of 2019, we drew $250.0 million on the Delayed Draw Term Loan. As of March 28, 2019 , the outstanding balance of the term loans under the 2018 Credit Agreement was $456.3 and the carrying value was $454.7 million . In addition, during the first quarter of 2019, we drew $100.0 million on the 2018 Revolver.

On May 30, 2018, Spirit entered into an Indenture for the New Notes. The New Notes were issued pursuant to the Company’s shelf registration statement. The carrying value of the Floating Rate Notes, 2023 Notes, and 2028 Notes was $298.6 million , $298.0 million , and $693.6 million as of March 28, 2019 , respectively.

The carrying value of the 2026 Notes was $297.6 million as of March 28, 2019 .

Advances on the B787 Program.  Boeing has made advance payments to Spirit under the B787 Supply Agreement that are required to be repaid to Boeing by way of offset against the purchase price for future shipset deliveries. As of March 28, 2019 , the amount of advance payments received by us from Boeing under the B787 Supply Agreement and not yet repaid was approximately $231.9 million . 

See Note 15, Debt , to our condensed consolidated financial statements included in Part I of this Quarterly Report for more information.

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 2018 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 2018 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 the effectiveness of our disclosure controls and procedures as of March 28, 2019 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 SEC rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management of the Company, including 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 during the quarter ended March 28, 2019 , that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II — OTHER INFORMATION
 
Item 1. Legal Proceedings
 
Information regarding any recent material development relating to our legal proceedings since the filing of our 2018 Form 10-K is included in Note 20, 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 2018 Form 10-K, as updated herein, 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 2018 Form 10-K, as updated herein.

A prolonged grounding of the B737 MAX fleet and relating reductions in production rate of the B737 aircraft may have a material adverse impact on Spirit’s business, financial condition, results of operations, and cash flows.

In March 2019, the B737 MAX fleet was grounded in the U.S. and internationally following the 2018 and 2019 accidents involving two B737 MAX aircraft. On April 5, 2019, Boeing announced that it would reduce its production rate of the B737 MAX aircraft from 52 to 42 aircraft per month. Subsequent to Boeing’s announcement, we announced that, to minimize supply chain disruption, Spirit would maintain a B737 delivery rate of 52 shipsets per month, rather than proceeding to a rate of 57 shipsets per month during the 2019 year. All shipsets produced by Spirit in excess of Boeing’s production rate will be deemed to be delivered to Boeing “FOB” at Spirit’s facilities, which will trigger Boeing’s payment obligations for the incremental shipsets.

For the twelve months ended December 31, 2018, approximately 56% of our net revenues were generated from sales of components to Boeing for the B737 aircraft. Although Boeing announced on April 5 that its adjustment to the production rate of the B737 MAX aircraft was a temporary, there can be no assurances as to how long the rate adjustment will continue or whether there may be a further downward adjustment in the production rate. If Boeing is unable to return the B737 MAX aircraft to service in one or more jurisdictions or begin deliveries to customers in a timely manner, Boeing would be required to further reduce the B737 MAX production rate. In addition, delays in certification and/or return to service of the B737 MAX in one or more jurisdictions could result in additional disruption to the B737 MAX production system, including further reductions in the production rate and/or a temporary cease of production, delaying efforts to restore and/or implement previously planned increases in the B737 MAX production rate. To the extent that the grounding of the B737 MAX fleet continues for an extended period of time and Spirit is required to reduce its production rate on the B737 MAX aircraft, Spirit’s business, financial condition, results of operations and cash flows could be materially adversely impacted.




Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the three months ended March 28, 2019 .

The following table provides information about our repurchases during the three months ended March 28, 2019 of our Common Stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.

ISSUER PURCHASES OF EQUITY SECURITIES
Period (1)
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet be Repurchased Under the Plans or Programs (2)
 
($ in millions other than per share amounts)
 
 
 
 
 
 
 
 
January 1, 2019 - January 31, 2019
—

 
—

 
—

 
$1,000.0
February 1, 2019 - February 28, 2019
176,377

 

$97.5331

 
176,377

 

$982.8

March 1, 2019 - March 28, 2019
620,032

 

$93.2424

 
620,032

 

$925.0

Total
796,409

 

$94.1926

 
796,409

 

$925.0


(1)
Our fiscal months often differ from the calendar months except for the month of December, as our fiscal year ends on December 31. For example, March 28 was the last day of our March 2019 fiscal month.

(2)
On October 24, 2018, the Board of Directors increased the authorization remaining in the Company's share repurchase program to $1.0 billion. As of March 28, 2019, the Company had $925.0 remaining under authorization for shares to be repurchased.


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Item 6.   Exhibits  
Article I.
Exhibit
Number
 
Section 1.01 Exhibit
 
 
 
 
Long-Term Incentive Program under the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Plan, as amended and restated effective January 23, 2019
 
 
 
 
Letter Agreement, dated March 19, 2019, RE; Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V., dated May 1, 2018, by and between Christian Boas, Emile Boas, DREDA, Sylvie Boas, Spirit
 
 
 
 
Letter Agreement, dated March 27, 2019, RE; Agreement for the Sale and Purchase of Shares of S.R.I.F. N.V., dated May 1, 2018, by and between Christian Boas, Emile Boas, DREDA, Sylvie Boas, Spirit
 
 
 
 
Amendment No. 28 to B787 Special Business Provisions (SBP) BCA-MS-65530-0019, between The Boeing Company and Spirit AeroSystems, Inc., dated as of January 30, 2019
 
 
 
 
Amendment 40 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of January 30, 2019
 
 
 
 
Amendment 41 to Special Business Provisions MS-65530-0016, between the Boeing Company and Spirit AeroSystems, Inc., dated as of March 29, 2019
 
 
 
 
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
 
 
 
 
Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
 
 
 
 
Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 
 
 
 
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 management contract or compensation plan or arrangement.
 
 
 
††

 
Indicates that confidential portions of the exhibit have been omitted in accordance with the rules of the Securities and Exchange Commission.
 
 
 

42
Table of Contents

*
 
Filed herewith.
 
 
 
**
 
Furnished herewith.
 
 
 


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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/ Jose Garcia
 
Senior Vice President and Chief Financial
 
May 1, 2019
     Jose Garcia
 
Officer (Principal Financial Officer)
 
 




Signature
 
Title
 
Date
 
 
 
 
 
/s/ John Gilson
 
Vice President and Corporate Controller (Principal Accounting Officer)
 
May 1, 2019
     John Gilson
 
 
 
 


44

EXHIBIT 10.1

LONG-TERM INCENTIVE PROGRAM
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 23, 2019)
1.
Establishment; Restatement . The long-term incentive program (“ LTIP ”) previously established under the Spirit AeroSystems Holdings, Inc. 2014 Omnibus Incentive Plan, as amended (“ OIP ”), pursuant to Section 2.4 of the OIP is hereby amended and restated effective January 23, 2019 (the “ Effective Date ”), on the following terms and conditions. In addition to the generally applicable terms of the OIP, the following terms, conditions, and provisions will apply to Restricted Stock and Restricted Stock Units awarded to Participants as part of the LTIP from and after the Effective Date. Capitalized terms not specifically defined in this LTIP will have the meanings set forth in the OIP.

2.
Awards of Restricted Stock and Restricted Stock Units . Awards of Restricted Stock to Participants as part of the LTIP will be made at such times, in such amounts, and subject to such terms, conditions, and restrictions as the Committee or the Board may determine, in its sole discretion, including, without limitation, designating such Awards as Performance Compensation Awards and setting Performance Goals. Specific awards of Restricted Stock as part of the LTIP may be made pursuant to a resolution adopted by the Committee or the Board, an individual agreement with a Participant (e.g., an employment agreement), or any other means that would represent an Award Agreement under the OIP. Awards of Restricted Stock Units to Participants as part of the LTIP may be made in lieu of awards of Restricted Stock in certain jurisdictions outside of the United States as the Committee or the Board may determine in its sole discretion subject to the terms set forth in this LTIP.
Except as expressly provided in the OIP or an Award Agreement, upon Termination of a Participant following a grant of Restricted Stock or Restricted Stock Units and prior to satisfaction of all conditions and restrictions imposed with respect to those Restricted Stock or Restricted Stock Units, including, without limitation, completion of a time-based vesting schedule or satisfaction of all performance-based conditions, the unearned or nonvested Restricted Shares will be forfeited.
3.
Time-Based Vesting . Unless otherwise provided in an Award Agreement, Restricted Stock and Restricted Stock Units granted under the LTIP to a Participant will be substantially nonvested upon grant and will, in addition to any other conditions or restrictions that may apply (including, without limitation, Performance Goals), be subject to time-based vesting restrictions that will lapse only if and to the extent the Participant satisfies the following vesting schedule, unless a different schedule (including, without limitation, no time-based vesting schedule) is designated by the Committee or the Board in connection with the grant:
    
Years of Service After the Grant Date      Vested Percentage
Less than 1                          0%
1 but less than 2                      33%



2 but less than 3                      66%
3 or more                          100%
A Participant will be credited with a year of service after the Grant Date for each 12-month period after the Grant Date during which the Participant is continuously performing services (or deemed to be continuously performing services) for the Company or an Affiliate. However, the Committee may at any time, in its sole discretion, credit a Participant with additional service after the date the award of Restricted Stock or Restricted Stock Units is granted to the Participant or otherwise accelerate vesting or remove restrictions with respect to Restricted Stock or Restricted Stock Units granted under the LTIP, if the Committee determines, in its sole discretion, it is in the best interests of the Company or other Service Recipient to do so.
4.
Performance Goals . In accordance with Article 10 of the OIP, the Board or Committee may set Performance Goals with respect to an award of Restricted Stock or Restricted Stock Units as part of the LTIP and otherwise set the performance-based terms and conditions of such Award.

5.
83(b) Elections . Although Restricted Stock granted under the LTIP may be subject to certain lapse restrictions and may be substantially nonvested upon grant, grants of such Shares are intended to constitute transfers of such Shares within the meaning of Code Section 83 upon grant. Accordingly, Participants receiving grants of Restricted Stock under the LTIP will be eligible to make an election under Code Section 83(b) with respect to Restricted Shares at the time such Shares are granted, subject to complying with all applicable requirements for making such an election, including, but not limited to, the requirement that such election be made within 30 days after the date of transfer.

6.
Change in Control . In the event of a Change in Control, each Participant who has been awarded Restricted Stock or Restricted Stock Units pursuant to the LTIP before the closing of the Change in Control and who incurs a Qualifying Termination either in anticipation of the Change in Control or during the period beginning 30 days before the closing of the Change in Control and ending two years after the date of the closing of the Change in Control will receive a cash award equal to the dollar value of the award of Restricted Stock or Restricted Stock Units that would have been made under the LTIP to such Participant in the ordinary course of business within the 12-month period following the date of the Qualifying Termination, based on the Participant’s annual base pay as in effect on the date of closing of the Qualifying Termination. Payment of this cash award will be made as soon as administratively practicable on or after the date of the Qualifying Termination, but in no event later than 2-1/2 months after the end of the year in which the Qualifying Termination occurs.

In addition, in the event a Participant who has been awarded Restricted Stock or Restricted Stock Units pursuant to the LTIP before the closing of the Change in Control incurs a Qualifying Termination either in anticipation of a Change in Control or during the period



beginning 30 days before the closing of the Change in Control and ending two years after the date of the closing of the Change in Control, vesting with respect to LTIP awards previously made will be accelerated in accordance with Section 13.1 of the OIP.
* * * *



EXHIBIT 10.2

March 19, 2019

March 19, 2019

Christian Boas
XXXXXXXXXXXXXXXXXXXXXXXXX

Emile Boas
XXXXXXXXXXXXXXXXXXXXXXXXX

Dreda / Sylvie Boas
XXXXXXXXXXXXXXXXXXXXXXXXX

RE: Amendment to Agreement for the Sale and Purchase of the Shares of S.R.I.F. NV

Dear Sir/Madam:
On behalf of Spirit AeroSystems Holding, Inc. (the “Guarantor”) and Spirit AeroSystems Belgium Holdings, BVBA (the “Purchaser” and collectively with the Guarantor, “Spirit”), we seek the agreement of the current shareholders (the “Sellers” and together with Spirit, the “Parties”) of S.R.I.F. NV (“SRIF”) to the following by means of this letter agreement (the “Letter Agreement”):
1.
The Parties entered into an Agreement for the Sale and Purchase of the Shares of SRIF on 1 May 2018 (the “Agreement”).

2.
The Parties wish to consummate the Agreement irrespective of certain Conditions Precedent possibly not being satisfied before or on the Long Stop Date.

To that end, Spirit hereby waives all Conditions Precedent, save for (i) the full and final acquisition by the Company of the profit certificates issued by Asco Industries NV in furtherance of Clause 4.2.1, (ii) the European Commission having (a) issued a clearance decision for the Transaction under conditions materially in line with those offered by Spirit and Asco in the commitments dated 8 March 2019; and (b) granting approval under paragraph 7(c) of those commitments; (iii) Airbus SE, on behalf of itself and its subsidiaries, having provided its consent to the Transaction (in accordance with Clause 4.2.3 of the Agreement), as the case may be by means of a consent provided by Airbus SAS and Airbus Military SL and (iv) there not having occurred a Material Adverse Change since the date of this Letter Agreement.
3.
The Initial Purchase Price under the Agreement is revised to be USD 604 million. For the avoidance of doubt, this revision already incorporates the USD 10 million price revision the Parties had agreed to by entering into the December 20, 2018 letter (“Consent to certain actions by the Asco Group not in the ordinary course of business Framework Agreement, NDA, Supplemental Agreement on the Disaggregation of Belairbus SA and Change of Control Letter”).

4.
Section 9.3 of the Agreement is revised to reduce Seller’s maximum aggregate liability to USD 65,000,000 (USD sixty-five million).




5.
Schedule 12 of the Agreement is amended to include the specific indemnities set forth on Annex A to this letter.

6.
For the avoidance of doubt, Spirit acknowledges and agrees that it is not entitled to any indemnification pursuant to Clause 8 of the Agreement in relation to the termination of the A380 program by Airbus and, to the extent applicable, waives any rights in that respect it might have.

7.
Based on their own respective knowledge or on the basis of information communicated by the other Party, each of the Parties respectively individually acknowledges and agrees that no Material Adverse Change has occurred at the date of this Letter Agreement. Spirit agrees, that even in the event of the occurrence of a Material Adverse Change, it will not request any further change to the Initial Purchase Price.

8.
The Parties acknowledge and agree that this Letter Agreement has been negotiated by the Parties in good faith.

9.
This Letter Agreement constitutes a written agreement by and among the parties as set forth in Clause 25.8 of the Agreement.

10.
Notwithstanding Sections 5.1 and 4.6.1 of the Agreement, subject to the timely satisfaction of the remaining Conditions Precedent referred to under clause 2 of this Letter Agreement, the Parties intend to consummate the Transaction on April 1, 2019, the Long Stop Date.

11.
All terms used but not defined herein shall have the meaning set forth in the Agreement. Clause 26 of the Agreement shall apply also to the Letter Agreement.

Yours faithfully on behalf of Spirit,
/s/ Sam J. Marnick             
Mrs. Sam. J. Marnick

For acknowledgement and acceptance
On behalf of the Sellers and the Asco Group


/s/ Christian Boas                  /s/ Sylvie Boas                 
Mr. Christian Boas                  Dreda general partnership
Date: March 19, 2019                  By: Ms. Sylvie Boas, Director
Date: March 19, 2019

/s/ Emile Boas ______________              /s/ Sylvie Boas                 
Mr. Emile Boas                      Ms. Sylvie Boas
Date: March 19, 2019                  Date: March 19, 2019
                


Cc: Eubelius CVBA
Marieke Wyckaert and Matthias Wauters
Avenue Louise 99, 1050 Brussels (Belgium)



EXHIBIT 10.3

March 27, 2019

Christian Boas
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Emile Boas
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Dreda / Sylvie Boas
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

RE: Extension of the Long Stop Date for the Sale and Purchase of the Shares of S.R.I.F. NV

Dear Sir/Madam,
We refer to the agreement for the sale and purchase of the shares of S.R.I.F. NV among Christian Boas, Emile Boas, Dreda general partnership under Belgian law and Sylvie Boas (together, the “Sellers”), Spirit AeroSystems Belgium Holdings BVBA (the “Purchaser”) and Spirit AeroSystems Holdings, Inc. (together with the Purchaser, “Spirit”), as amended by the Letter Agreement dated March 19, 2019 (the “Agreement”). Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Agreement.
As it is our understanding that the Parties desire to extend the Long Stop Date in order to provide additional time for the Competition Condition to be satisfied, we hereby seek the agreement of the Sellers to replace and restate the definition of Long Stop Date in the Agreement as follows:
“ Long Stop Date means May 4, 2019;”
Additionally, notwithstanding Clause 3.3.1 of the Agreement requiring the Sellers to provide a draft of the Best Estimate to the Purchaser five (5) Business Days prior to Closing, we hereby seek the agreement of the Sellers to provide a draft of the Best Estimate to the Purchaser no later than ten (10) Business Days prior to Closing.
The Parties acknowledge and agree that this Letter Agreement has been negotiated by the Parties in good faith.
This letter agreement constitutes a written agreement by and among the Parties as set forth in Clause 25.8 of the Agreement.
All terms used but not defined herein shall have the meaning set forth in the Agreement. Clause 26 of the Agreement shall apply also to this letter agreement.

[Signature Page Follows]













Yours faithfully on behalf of Spirit,
/s/ Sam J. Marnick
Mrs. Sam. J. Marnick

For acknowledgment and acceptance,
On behalf of the Sellers:



/s/ Christian Boas             
Mr. Christian Boas
Date: March 28, 2019




/s/ Emile Boas             
Mr. Emile Boas
Date: March 28, 2019




/s/ Sylvie Boas             
Mrs. Sylvie Boas
Date: March 28, 2019




/s/ Sylvie Boas             
Dreda General Partnership
Mrs. Sylvie Boas
Director
Date: March 28, 2019






Cc: Eubelius CVBA
Marieke Wyckaert and Matthias Wauters
Avenue Louise 99, 1050 Brussels (Belgium)



EXHIBIT 10.4

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) WOULD BE LIKELY TO CAUSE COMPETITITVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION IS DENOTED BY ASTERISKS IN BRACKETS [*****].

AMENDMENT NUMBER 28

TO

Special Business Provisions (SBP) BCA-MS-65530-0019

BETWEEN

THE BOEING COMPANY

AND

SPIRIT AEROSYSTEMS, INC.


THIS AMENDMENT NUMBER 28 (“Amendment No. 28”) to Special Business Provisions BCA-MS-65530-0019 is made as of the last date executed below (the “Effective Date”) by and between Spirit AeroSystems, Inc., a Delaware corporation having its principal office in Wichita, Kansas (“Spirit”) and The Boeing Company, a Delaware corporation, acting by and through its division, Boeing Commercial Airplanes (“Boeing”). Hereinafter, Spirit and Boeing may be referred to individually as a “Party” or jointly as the “Parties”.


BACKGROUND
 
The Parties have entered into the General Terms Agreement, GTA BCA-65520-0032, dated June 16, 2005 as amended from time to time (the “GTA”) and the Special Business Provisions, BCA-MS-65530-0019, dated June 16, 2005 as amended from time to time (the "SBP"), and the Collective Resolution 2.0 Memorandum of Agreement dated December 21, 2018, and now desire to again amend the SBP.
A.
This Amendment No. 28 incorporates the agreements set forth in Sections 10, 11, 12, and 13 of the Collective Resolution 2.0 Memorandum of Agreement dated December 21, 2018 (“MOA”).

AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and for other good and valuable consideration, the value, receipt, and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:




1.
The SBP is hereby amended by deleting the SBP Table of Contents listing of Attachments and replacing it in its entirety with a new Table of Contents listing of Attachments, attached hereto as Exhibit 1.

2.
The SBP is hereby amended by deleting the SBP Table of Amendments Page 4 and replacing it in its entirety with a new Table of Amendments Page 4, attached hereto as Exhibit 2.

3.
The SBP is hereby amended by deleting SBP Section 4.1.3 “Shipset Price for Shipsets [*****]” and replacing it in its entirety with a new SBP Section 4.1.3, attached hereto as Exhibit 3.

4.
The SBP is hereby amended by deleting SBP Section 4.10 “Risk Sharing” and replacing it in its entirety with a new SBP Section 4.10, attached hereto as Exhibit 4.

5.
The SBP is hereby amended by adding a new SBP Section 4.12.1 “Cost Visibility”, attached hereto as Exhibit 5.

6.
The SBP is hereby amended by deleting SBP Section 5.5 “Advance Payments” and replacing it in its entirety with a new SBP Section 5.5, attached hereto as Exhibit 6.

7.
The SBP is hereby amended by deleting SBP Section 7.2.2 “Annual Price Adjustments” and replacing it in its entirety with a new SBP Section 7.2.2, attached hereto as Exhibit 7.

8.
The SBP is hereby amended by deleting SBP Section 7.5 “Total Cost Management” and replacing it in its entirety with a new SBP Section 7.5, attached hereto as Exhibit 8.

9.
The SBP is hereby amended by deleting SBP Attachment 1 “Work Statement and Pricing” and replacing it in its entirety with a new SBP Attachment 1, attached hereto as Exhibit 9.

10.
The SBP is hereby amended by deleting SBP Attachment 7 “Priced Parts List and Spares Pricing” and replacing it in its entirety with a new SBP Attachment 7, attached hereto as Exhibit 10.

11.
The SBP is hereby amended by deleting SBP Attachment 18 “Abnormal Escalation” and replacing it in its entirety with a new SBP Attachment 18, attached hereto as Exhibit 11.

12.
The SBP is hereby amended by deleting SBP Attachment 27 “Risk Sharing” Section I “Introduction” and replacing it in its entirety with a new SBP Attachment 27 Section I, attached hereto as Exhibit 12.

13.
The SBP is hereby amended by deleting SBP Attachment 27 “Risk Sharing” Section II “Baseline Prices and Risk Sharing Control Limits” and replacing it in its entirety with a new SBP Attachment 27 Section II, attached hereto as Exhibit 13.




14.
The SBP is hereby amended by deleting SBP Attachment 30 “Cost Reduction Achievement Credit” and replacing it in its entirety with a new SBP Attachment 30, attached hereto as Exhibit 14.

15.
The SBP is hereby amended by deleting SBP Attachment 31 “Partner Managed Inventory De-Implementation” Exhibit B and Exhibit C and replacing them in their entirety with a new SBP Attachment 31 Exhibit B and Exhibit C, attached hereto as Exhibit 15.

16.
The SBP is hereby amended by adding a new SBP Attachment 32 “Cost Visibility”, attached hereto as Exhibit 16.

17.
The SBP is hereby amended by adding a new SBP Attachment 33 “Joint Cost Reduction Project Agreement Template”, attached hereto as Exhibit 17.

18.
Entire Agreement. Except as otherwise indicated in this Amendment No. 28, all terms defined in the GTA or SBP shall have the same meanings when used in this Amendment No. 28. This Amendment No. 28 constitutes the complete and exclusive agreement between the Parties with respect to the subject matter of this Amendment No. 28, and this Amendment No. 28 supersedes all previous agreements between the Parties relating to the subject matter of Amendment No. 28, whether written or oral. The GTA and SBP shall remain in full force and effect and are not modified, revoked, or superseded except as specifically stated in this Amendment No. 28.

19.
No Admission of Liability. No Precedential Value. The Parties acknowledge that this Amendment No. 28 reflects a compromise resolution by the Parties of certain claims and that nothing contained in this Amendment No. 28 constitutes or will be construed as an acknowledgment or admission of liability or absence of liability in any way on the part of the Parties, each of which expressly denies any liability or wrongdoing in connection with such claims, and the Parties agree not to issue any public statement or comment to the contrary. The Parties agree that this Amendment No. 28, and the terms and conditions hereof, including without limitation the figures used to reach all pricing and payment figures herein, will have no precedential value and therefore will not be used in support or defense of any other claim arising from the Parties’ contracts.

20.
Governing Law. This Amendment No. 28 will be governed by the laws of the state of Washington exclusive of Washington’s conflict of laws principles.

21.
Order of Precedence. In the event of a conflict between the terms of this Amendment No. 28 and either the SBP or GTA, the terms of this Amendment No. 28 shall have precedence with respect to the subject matter of this Amendment No. 28.

IN WITNESS WHEREOF, the duly authorized representatives of the Parties have executed this Amendment No. 28 as of the last date of execution set forth below.

The Boeing Company      Spirit AeroSystems Inc.
Acting by and through its division



Boeing Commercial Airplanes
By:      /s/ Thomas McGuigan          By:      /s/ Eric Bossler     
Name:      Thomas McGuigan          Name:      Eric Bossler     
Title:      Senior Manager Contracts          Title:      Contract Administrator     
Date:      January 30, 2019          Date:      January 30, 2019     






















































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 1

Signature Page

Attachment 1
Work Statement and Pricing
Attachment 2
Production Article Definition and Contract Change Notices
Attachment 3
[Reserved]
Attachment 4
Work Statement Documents
Attachment 5
Boeing AOG Coverage
Attachment 6
Boeing AOG Shipping Notification
Attachment 7
Priced Parts List and Spares Pricing
Attachment 8
Spirit Data Submittals
Attachment 9
On-Site Terms and Conditions Supplement
Attachment 10
Quality Assurance Requirements
Attachment 11
Second Tier Report
Attachment 12
Non-U.S. Procurement Report Form
Attachment 13
[Reserved]
Attachment 14
Production Article Delivery Schedule
Attachment 15
Schedule Change Examples
Attachment 16
Pricing Methodologies
Attachment 17
Commercial Invoice Requirements (Customs Invoice) For Imports into the United States
Attachment 18
Abnormal Escalation
Attachment 19
[Reserved]
Attachment 20
Bonded Stores Requirements
Attachment 21
Boeing Furnished Material and Inventory Reporting Form
Attachment 22
Compliance and Cooperation regarding orders, Permits and Approvals
Attachment 23
Derivatives and Mission Improvement Performance to Plan
Attachment 24
Anti-Lobbying Certificate
Attachment 25
Incentive Payment
Attachment 26
Total Cost Management
Attachment 27
Risk Sharing
Attachment 28
Business Case for Rates Greater Than [*****] Shipsets Per Month
Attachment 29
Incentive Payment for Quality
Attachment 30
Cost Reduction Achievement Credit
Attachment 31
Partner Managed Inventory De-Implementation
Attachment 32
Cost Visibility
Attachment 33
Joint Cost Reduction Project Agreement Template















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 2

AMENDMENTS
Page 4

Number

23




24




25












26



27





28
Description

Annual Price Adjustment thru Line Number [*****]
Updated SBP Attachments 1, 2, and 27
Boeing Performed Rework and Repair
Updated SBP Attachment 16 Table A.1

Annual Price Adjustment thru Line Number [*****]
Updated SBP Attachments 1, 2, 3, and 27
Boeing Performed Rework and Repair
Updated SBP Attachment 16 Table A.1

MOU Dated 8-1-17 (Collective Resolution)
Amended SBP Sections 3.2.1, 4.1.3, 4.2, 4.3.1.1, 4.10, 4.12, 5.2.1, 7.2.1, 7.2.2, 7.5.1, 7.8.2, 8.1, 11.2, 12.6, and 12.8.1
Updated SBP Attachments 1, 2, 3, 7, 10, 16, 26, 27, 28, and 30
Annual Shipset Price Adjustment thru Line Number [*****]
Updated SBP Attachments 1, 2, and 27
Annual Shipset Price Adjustment thru Line Number [*****]
Updated SBP Attachments 1 and 2
Boeing Performed Rework and Repair
Updated SBP Attachment 16 Table A.1

PMI De-Implementation
Updated SBP Attachments 1 and 27
Added SBP Section 12.8.6 and Attachment 31

Annual Shipset Price Adjustment thru Line Number [*****]
Updated SBP Section 7.2.1 and SBP Attachments 1 and 2
Boeing Performed Rework and Repair
Updated SBP Attachment 16 Section A

MOA Dated 12-21-2018 (Collective Resolution 2.0)
Amended SBP Sections 4.1.3, 4.10, 5.5, and 7.5 and SBP Attachments 1, 7, 18, 27, 30, and 31
Added SBP Section 4.12.1 and Attachments 32 and 33
(Concurrently with the MOA, the Parties also executed that certain Settlement and Release Agreement dated 12-21-2018 pertaining to the release and settlement of warranty and various other claims)
Date

8/3/15




12/16/15




9/22/17












12/14/17



8/17/18





1/30/19
Approval

J. Loomis
L. Hampton



J. Loomis
L. Hampton



J. Will
M. Kurimsky











R. Satterthwaite
L. Hampton

H. Langowski
L. Hampton



T. McGuigan
E. Bossler









SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 3

4.1.3
Shipset Price for Shipsets [*****] and Beyond
Pricing for Shipsets [*****] and beyond shall be negotiated by the Parties, and the Parties will begin negotiating twenty-four (24) months prior to the scheduled delivery date for Shipset [*****].

























































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 4

4.10
Risk Sharing
The Shipset Price for Shipsets [*****] shall be subject to a supplemental payment or credit as provided in SBP Attachment 27 “Risk Sharing”. Any resulting payment shall be due upon amendment of the SBP in accordance with SBP Section 7.8.2 and as provided in SBP Section 5.0. For any resulting credit, Boeing shall be entitled to either (a) set off the amount of such credit against any amounts payable to Spirit hereunder or (b) invoice Spirit for the amount of such costs and expenses, and Spirit shall pay the invoiced amount within [*****] days after receipt of a correct (proper) invoice.


















































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 5

4.12.1          Cost Visibility

For the purposes of carrying out the provisions set forth in SBP Section 4.12 and SBP Attachment 30, Spirit shall provide its Shipset costs to Boeing in accordance with SBP Attachment 32.

























































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 6
5.5
Advance Payments

Notwithstanding the payment due dates for Shipsets specified elsewhere in this SBP, Boeing shall make total advance payments to Spirit for Shipsets in the amount of $[*****] (“Advance Payments”). The schedule for Boeing’s Advance Payments shall be as follows: $[*****] shall be due on [*****]; an additional $[*****] shall be due on each of [*****], [*****], [*****] and [*****]; an additional $[*****] shall be due on each of [*****], [*****], [*****] and [*****]; an additional $[*****] shall be Due on [*****]; an additional $[*****] shall be due on [*****]; an additional $[*****] shall be due on [*****] and [*****]; and an additional $[*****] shall be due on [*****]. Excepting the [*****] payment, Spirit shall invoice Boeing [*****] days prior to these dates. These payments are made for the Work Statement set forth in Attachment 1 - “Work Statement and Pricing”. Notwithstanding anything to the contrary contained herein, in the GTA or in any other agreement between Boeing and Spirit, Boeing shall not be entitled to any offset or credit of the Advance Payments for any amounts owed by Spirit to Boeing under this SBP or otherwise.

The Advance Payments shall be applied against payments due by Boeing to Spirit for the first [*****] Shipsets such that the Shipset Price, for each of the first [*****] Shipsets shall be decreased as follows: $[*****] for shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; $[*****] for Shipsets [*****]; and $[*****] for Shipsets [*****].

In the event that Boeing does not take delivery of [*****] Shipsets under the terms of this SBP prior to the termination of the Program or this SBP, the remaining balance of the Advance Payments shall be first applied against any outstanding payments then due by Boeing to Spirit in respect of the 787 program. Finally, any remaining balance shall be prorated at an equivalent rate of [*****] Shipsets per year, beginning in the month following delivery to Boeing of Spirit’s final production Shipset. Spirit shall make a payment to Boeing on December 15 of each year for the payments due on account of such year until any remaining balance of the Advance Payments has been fully recovered.






















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 7
7.2.2
Price Adjustments
A separate annual adjustment to Shipset Prices for each model (“Annual Shipset Price Adjustment”) shall be developed using the pricing methodology described in SBP Attachment 16 "Pricing Methodologies".
The Parties agree to negotiate provisions that will (when made effective) supersede Section C of SBP Attachment 16 (the “CER”) in order to appropriately adjust Product Prices for changes made in accordance with SBP Sections 6.0 and 7.0. The provisions will be negotiated beginning twelve (12) months prior to the scheduled delivery of Line Number [*****] and incorporated into the SBP. The provisions will, unless otherwise mutually agreed, be effective at such time as the conditions set forth in the fifth paragraph of SBP Section 7.5.1 are satisfied and will apply to those changes incorporated on or after the last Line Number included in the consecutive six (6) month period used to determine that the aforementioned conditions were satisfied. The new mechanism will take into account both recurring and non-recurring costs associated with the change. In the event the Parties do not reach resolution, the negotiations will continue and be escalated in accordance with GTA Section 25.0 and the SBP Attachment 16 Section C “Annual Shipset Price Adjustment” will remain in effect until a resolution is reached.








































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 8

7.5
Total Cost Management
7.5.1
Total Cost Management
Boeing and Spirit shall engage in a process herein known as Total Cost Management ("TCM"). Boeing and Spirit shall each identify cost reduction opportunities and work together for implementation. Each Party shall fund and be responsible for those Nonrecurring costs associated with cost reduction activities that are consistent with their RAAs as generally defined by the scope of the SBP and as set forth in SBP Attachment 4 “Work Statement Documents”. Spirit shall provide certain data to Boeing sufficient to guide cost reduction activities, as specified in SBP Attachment 26. Executive reviews will be conducted from time to time to assess progress of cost reduction activities.
Boeing shall provide at its cost dedicated personnel and engineering resources to Spirit to enable opportunities to reduce costs in an efficient manner. Such opportunities shall include, but not be limited to, raw material cost ([*****]), limited source suppliers, source-controlled drawing parts, and further reductions on supply chain optimization parts (i.e. should-cost pricing).
For purposes of benchmarking and sharing best practices, Boeing shall provide its champion factory performance metrics for 787 Section 47 and 787 Section 48 to Spirit on a regular basis (at least quarterly). Such metrics shall include, but not be limited to, hours per unit, flow days, headcount, and overall process effectiveness (“OPE”)/overall equipment effectiveness (“OEE”).
The Parties shall utilize the TCM program set forth in SBP Attachment 26, which sets forth the general methodology to be used by the Parties to identify and implement cost reduction opportunities.
The provisions set forth in this SBP Section 7.5.1 and SBP Attachment 26 will be in effect for cost reduction opportunities and activities completed prior to all of the following conditions being satisfied: (i) delivery of Shipset [*****]; and (ii) Spirit’s average Shipset costs over a consecutive six (6) month period are below $[*****] per 787-8 Shipset, $[*****] per 787-9 Shipset, and $[*****] per 787-10 Shipset (“Cost Targets”). In the event Spirit’s statement of work in SBP Attachment 1 is modified, the Cost Targets will be appropriately adjusted by mutual agreement.
Formula: [[(Number of 787-8 Deliveries x $[*****]) + (Number of 787-9 Deliveries x $[*****]) + (Number of 787-10 Deliveries x $[*****])] / (Total Number of 787 Deliveries)] - (Total Shipset Cost / Number of 787 Deliveries)
If result is > $0 and delivery of Shipset [*****] has occurred, then the conditions are satisfied.

SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 8
Note: The Shipsets to be included in the calculations will be based on the Section 41 units delivered by Spirit to Boeing in a given consecutive six (6) month period.



At such time as the aforementioned conditions are satisfied, the Parties will engage in a joint cost reduction program. The joint cost reduction program will be administered in a form to be mutually agreed by the Parties and the Parties will share nonrecurring costs and recurring savings equally. The Parties will utilize a Project Agreement as set forth in SBP Attachment 33 to document each mutually-agreed joint cost reduction project. The line number effectivity for any Project Agreement will be as specified in the applicable Project Agreement, but in no event will it be earlier than the first line number immediately following the final line number included in the consecutive six (6) month period used to determine that the conditions set forth in the fifth paragraph of this SBP Section 7.5.1 were satisfied.
For projects in work at the time the conditions set forth in the fifth paragraph of this SBP Section 7.5.1 are satisfied, the Parties will [*****] nonrecurring costs and recurring savings as subsequently documented in a mutually-agreed Project Agreement.
For clarity, until such time as the conditions set forth in the fifth paragraph of this SBP Section 7.5.1 are satisfied, the provisions set forth in this SBP Section 7.5.1 and SBP Attachment 26 shall remain in effect.
7.5.1.1      Cost Visibility

For the purposes of carrying out the provisions set forth in SBP Section 7.5.1, Spirit shall provide its Shipset costs to Boeing in accordance with SBP Attachment 32.
7.5.2      Relationship to D&MI Nonrecurring Work
For the avoidance of doubt, nothing in this SBP Section 7.5, including Nonrecurring funding provisions specific to this SBP Section 7.5, shall modify the process for payments for Nonrecurring Work for D&MI activities set forth in Attachment 23 to the SBP.





























SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 9
SBP ATTACHMENT 1 TO
SPECIAL BUSINESS PROVISIONS

WORK STATEMENT AND PRICING


A104PG14.JPG

















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 9
SBP ATTACHMENT 1 TO
SPECIAL BUSINESS PROVISIONS

WORK STATEMENT AND PRICING (cont.)


A104PG15.JPG



















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 9
SBP ATTACHMENT 1 TO
SPECIAL BUSINESS PROVISIONS

WORK STATEMENT AND PRICING (cont.)


A104PG16.JPG






SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 10

SBP ATTACHMENT 7 TO
SPECIAL BUSINESS PROVISIONS

PRICED PARTS LIST AND SPARES PRICING
(Reference SBP Sections 3.3.2.1, 3.3.4.6, 3.5.2.1, 4.3.1, 4.3.4.1, 4.3.4.2, 4.3.2, 4.5, 4.6.1, 4.6.2, 12.1.3, 12.10.1)
A.
Template for Creation of IPPL and Spare Parts Price Catalog (SPPC) as defined in SBP Section 3.5

A104PG17.JPG














SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 11

SBP ATTACHMENT 18 TO
SPECIAL BUSINESS PROVISIONS

Abnormal Escalation
(Reference SBP Section 4.1.2)

The following Section A (the “Legacy Model” of Abnormal Escalation) will be in effect, except during the time period of [*****]. During this period when the Legacy Model is not applicable, the formula in Section B below will be used to calculate Abnormal Escalation; this formula will be called the “Revised Model” of Abnormal Escalation.

Price adjustments occurring on January 1 of a given year will be determined by the model that is in effect during the previous year (i.e. Prices paid by Boeing to Spirit in [*****] will reflect any potential Price adjustments for Abnormal Escalation utilizing the Legacy Model measured in [*****]).

A.      Abnormal Escalation - Legacy Model

1.
Shipset Prices will be adjusted for Abnormal Escalation as provided below. In the event that escalation, as forecast by a composite of the identified below indices, exceeds [*****] for any given calendar year (“Abnormal Escalation”), the Shipset Prices, as applicable, for the subsequent calendar year shall be adjusted by that percentage value which exceeds [*****]. Abnormal Escalation is calculated each year against the Shipset Prices, as applicable, effective for that year and is not cumulative. The adjusted Shipset Prices will revert back to the SBP Attachment 1 Shipset Prices at the beginning of the subsequent calendar year.

Any prolonged extraordinary inflation would be considered by the Parties to determine any mutually agreeable proper actions to be taken.

2.
Adjustments to the Shipset Prices will be determined by the following economic indices:

A.      Material -[*****]

B.      Labor -[*****]

Composite - [*****]

3.
Special Notes:

In the event the U.S. Bureau of Labor Statistics discontinues or alters its current method of calculating the indices specified above, Boeing and Spirit shall agree upon an appropriate substitution for or adjustment to the indices to be employed herein.














SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 11

SBP ATTACHMENT 18 TO
SPECIAL BUSINESS PROVISIONS

Abnormal Escalation (cont.)

All calculations will be held to a six (6) decimal place level of precision.

Indices shall be pulled on November 15th of each year.

4.
Abnormal Escalation Formula:

Adjustments to the Shipset Prices, if any, for the period 2008 through 2022 shall be calculated as follows:

[*****]

Where [*****]

A = Adjusted Shipset Prices (20X2 Price)
B = Base Shipset Prices
IP = Percentage of composite index as compared to the previous year
MC = Current material index value (September 20X1)
MP = Previous year material index value (September 20X0)
LC = Current labor index value (3rd quarter 20X1)
LP = Previous year labor index value (3rd quarter 20X0)


5.
Example: Abnormal Escalation Price Increase

B = $2,000,000
MC = September 2008 material index value = [*****]
MP = September 2007 material index value = [*****]
LC = 3rd quarter 2008 labor index value = [*****]
LP = 3rd quarter 2007 labor index value = [*****]

IP = [*****]
Since IP > [*****], clause is triggered

2009 Unit Price = [*****]
















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 11

SBP ATTACHMENT 18 TO
SPECIAL BUSINESS PROVISIONS

Abnormal Escalation (cont.)

6. Example: Abnormal Escalation Clause Not Triggered

B = $2,000,000
MC = September 2008 material index value = [*****]
MP = September 2007 material index value = [*****]
LC = 3rd quarter 2008 labor index value = [*****]
LP = 3rd quarter 2007 labor index value = [*****]

IP = [*****]
Clause not triggered because (IP < [*****])]

B.      Abnormal Escalation - Revised Model

1.
Shipset Prices will be adjusted for Abnormal Escalation as follows. In the event that escalation, as determined by a composite of the identified below indices, exceeds [*****] (“Abnormal Escalation”), the Shipset Prices for the subsequent calendar year shall be adjusted by [*****]. Abnormal Escalation is calculated each year against the Shipset Prices effective for that year and [*****]. The adjusted Shipset Prices will [*****].
Any prolonged extraordinary inflation will be considered by the Parties to determine any mutually agreeable proper actions to be taken.

2.
Adjustments to the Shipset Prices will be determined by the following economic indices:

A.
Material - [*****].
B.
Labor - [*****].
Composite - [*****].

3.
Special Notes:
In the event the U.S. Bureau of Labor Statistics discontinues or alters its current method of calculating the indices specified above, Boeing and Spirit shall agree upon an appropriate substitution for or adjustment to the indices to be employed herein.

All calculations will be held to a six (6) decimal place level of precision.

















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 11

SBP ATTACHMENT 18 TO
SPECIAL BUSINESS PROVISIONS

Abnormal Escalation (cont.)

Indices shall be pulled on November 15th of each year.

4.
Formula and Examples:

4.1
Formula
A104PG21.JPG


4.2
Example 1 (escalation measured in November [*****]):

Weighted Escalation Percentage = [*****]
Because [*****]<[*****], no adjustments will be made for Abnormal Escalation for [*****] Prices

4.3
Example 2 (escalation measured in November [*****])

Weighted Escalation Percentage = [*****]

Because [*****]>[*****], adjustments will be made for Abnormal Escalation for [*****]Prices
[*****]= [*****]Price Adjustment for [*****]Prices
















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 12

SBP ATTACHMENT 27 TO
SPECIAL BUSINESS PROVISIONS

Risk Sharing
(Reference SBP Section 4.10)
I.
Introduction
A.
The Prices for Shipsets [*****] set forth in SBP Attachment 1 are subject to an annual risk sharing supplemental payment or credit as set forth in this Attachment 27. The evaluation of a supplemental payment or credit shall take place beginning in the second calendar quarter of the year following the delivery of Shipset [*****]and in each second calendar quarter annually thereafter, if applicable. The final evaluation of a supplemental payment or credit shall be made in the second calendar quarter of the year following Spirit’s delivery to Boeing of Shipset [*****].
B.
The evaluation of Spirit’s costs for Shipsets [*****] and any supplemental payment or credit hereunder shall begin upon receipt of Spirit’s costs in accordance with the templates in this SBP Attachment 27, Section VI (the “Cost Templates”), which shall be submitted no later than [*****], and conclude no later than the [*****].

A.
An annual supplemental payment or credit shall be determined based on the combined result of 2 evaluations: 1) the Price effect of all change as calculated annually in accordance with SBP Section 7.2 and Attachment 16; and 2) a risk sharing calculation when certain Spirit cost conditions exist as specified and calculated in this Attachment 27, if applicable.

B.
Notwithstanding the above provisions, for purposes of evaluating risk and identifying opportunity, Spirit shall provide its costs to Boeing on or about [*****] utilizing the templates in this SBP Attachment 27, Section VI (the “Cost Templates”). The final submittal from Spirit to Boeing of Spirit’s costs in accordance with this SBP Attachment 27 shall be on or about [*****].

C.
For the avoidance of doubt, beginning with Shipset [*****], costs shall not be subject to an Annual Review as set forth in this SBP Attachment 27 Section IV or the validation and audit process as set forth in this SBP Attachment 27 Section V.
















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 13

SBP ATTACHMENT 27 TO
SPECIAL BUSINESS PROVISIONS

Risk Sharing (cont.)
I.
Baseline Prices and Risk Sharing Control Limits
A.
The annual supplemental payment or credit process contained in this Attachment 27 shall utilize the following baseline prices and risk sharing control limits. All prices and calculations shall be made on a total Shipset basis and not at an individual Work Package basis. Upon the establishment of Pricing for a Derivative, a table applicable to such Derivative shall be established and used. Prior to each annual calculation of the supplemental payment or credit, Column (A) shall be updated to reflect the Shipset Prices as determined in each first calendar quarter update in accordance with SBP Section 7.2 and Attachment 16:

787-8 Model
(A)
(B)
(C)
 
Attachment 1 Price
Upper Limit
Lower Limit
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 13

SBP ATTACHMENT 27 TO
SPECIAL BUSINESS PROVISIONS

Risk Sharing (cont.)


787-9 Model
(A)
(B)
(C)
 
Attachment 1 Price
Upper Limit
Lower Limit
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]
Shipsets [*****]
[*****]
[*****]
[*****]



787-10 Model
(A)
(B)
(C)
 
Attachment 1 Price less Attachment 31 Exhibit B Recurring Supplemental Payment
Upper Limit
Lower Limit
Shipsets [*****]
[*****]
[*****]
[*****]



































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 14

SBP ATTACHMENT 30 TO
SPECIAL BUSINESS PROVISIONS

Cost Reduction Achievement Credit
(Reference SBP Section 4.12)

I.
Shipsets [*****] shall be subject to an annual cost reduction achievement credit evaluation as set forth in this SBP Attachment 30. The provisions set forth herein shall apply to only 787[*****] and 787[*****]Shipsets and shall not apply to 787[*****]Shipsets. The evaluation shall take place beginning in the third calendar quarter of the year following the delivery of Shipset [*****]and in each third calendar quarter annually thereafter. The final evaluation shall be made in the third calendar quarter of the year following Spirit’s delivery of Shipset [*****]. For the avoidance of doubt, all calculations shall be made on a total Shipset basis and not at an individual work package basis. The Shipsets to be included in the annual evaluation shall be based on the Section 41 units delivered by Spirit to Boeing in a given calendar year.

II.
The credit shall be calculated using the cost templates set forth in SBP Attachment 32 containing Spirit’s Shipset costs and the cost figures identified in Table A below. In the event Spirit’s statement of work is modified due to work transfers in accordance with the SBP, the Parties shall determine whether an adjustment to the cost figures is appropriate and modify the cost figures in Table A below accordingly.
Table A

Model
Shipsets
Annual
Production Rate
Cost Figure
787[*****]
Shipsets [*****]
<[*****] APM
No credit evaluation
787[*****]
Shipsets [*****]
[*****] APM
$[*****]
787[*****]
Shipsets [*****]
Between [*****]& [*****] APM
[*****] calculated per paragraph IV below
787[*****]
Shipsets [*****]
[*****] APM
$[*****]
787[*****]
Shipsets [*****]
>[*****] APM
No credit evaluation

For Shipsets [*****], in the event Spirit’s average annual Shipset cost is less than the cost figures identified in Table A above, the Parties will [*****] share [*****] the difference between the applicable [*****] figures identified above and the [*****] Shipset [*****].
















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 14

SBP ATTACHMENT 30 TO
SPECIAL BUSINESS PROVISIONS

Cost Reduction Achievement Credit (cont.)
III.
For any resulting credit, Boeing shall submit an invoice to Spirit for the mutually agreed amount and Spirit shall pay the invoiced amount within [*****] days after receipt of a correct and accurate invoice.

IV.
In the event the production rate is not constant at [*****] Shipsets per month or [*****] Shipsets per month in a given year, the Parties will utilize a [*****] based on the production rate break(s) and the cost figures identified in the table above to determine the appropriate cost figure to complete the evaluation. In the event the production rate is decreased to less than [*****] Shipsets per month or increased to greater than [*****] Shipsets per month, the provisions set forth in this SBP Attachment 30 shall not apply.

V.
In the event Spirit’s [*****] Shipset [*****] is less than the applicable [*****] figure identified in Table A above and the Parties reasonably determine that the associated [*****] reductions were proposed and initiated by Spirit, the Parties shall mutually agree on an appropriate substitute method in lieu of the foregoing to share such savings below the applicable [*****] figure that reflects the relative participation of the Parties in achieving such [*****] reduction. For the avoidance of doubt, Boeing’s share shall not exceed [*****] percent [*****] for any such substitute method.

Examples

1.
For Shipsets [*****] ([*****] APM), the [*****] Shipset [*****] is less than the applicable [*****] figure.
a. Credit calculation: [*****]
b. Example: [*****]
2.
For Shipsets [*****] ([*****] Shipsets at [*****] APM and [*****] Shipsets at [*****] APM), the [*****] Shipset [*****] is less than the applicable [*****] figure.
a. Credit calculation: [*****]
b. Example: [*****]















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 15

SBP ATTACHMENT 31 TO
SPECIAL BUSINESS PROVISIONS

Partner Managed Inventory De-Implementation (cont.)

Exhibit B

Work Package
Line Numbers
Recurring Supplemental Payment
787-8
787-9
787-10
[*****]
[*****]
[*****]
[*****]
[*****]


Exhibit C

Work Package
Line Numbers
Established Transfer Cost
787-8
787-9
787-10
[*****]
[*****]
[*****]
[*****]
[*****]







































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 16

SBP ATTACHMENT 32 TO
SPECIAL BUSINESS PROVISIONS

Cost Visibility
(Reference SBP Sections 4.12.1 and 7.5.1.1)

I.
The cost templates set forth in Exhibits A, B, C, D, and E hereto will be provided to Boeing on or about [*****] and [*****] each year beginning in [*****]. At such time as Spirit’s [*****] Shipset [*****] is at or below $[*****], the cost templates will be provided to Boeing [*****] until such time the conditions specified in the fifth paragraph of SBP Section 7.5.1 have been satisfied. Once the aforementioned conditions are satisfied, the cost templates will be provided to Boeing on or about [*****] of each subsequent year.

The Shipsets to be included in each submittal will be determined by the Section 41 Line Numbers delivered from Spirit to Boeing in the prior applicable period.

Such templates are an initial definition of the appropriate level of detail intended to accomplish the required objectives of SBP Section 4.12 and SBP Attachment 30 and SBP Section 7.5.1. Boeing may request reasonable adjustments to these templates for the purpose of providing Boeing better insight in the pursuit of these objectives. Boeing’s requests for adjustment will recognize the capabilities of Spirit’s accounting systems. These templates are also subject to revision based on changes to Spirit’s accounting systems.

Spirit agrees to address any inquiries as reasonably requested by Boeing for the purposes of understanding Spirit’s costs.



























SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 16

SBP ATTACHMENT 32 TO
SPECIAL BUSINESS PROVISIONS

Cost Visibility (cont.)

Exhibit A
Section 41 Assigned Value Template


A104PG29.JPG





































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 16

SBP ATTACHMENT 32 TO
SPECIAL BUSINESS PROVISIONS

Cost Visibility (cont.)

Exhibit B
Pylon Assigned Value Template


A104PG30.JPG


































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 16

SBP ATTACHMENT 32 TO
SPECIAL BUSINESS PROVISIONS

Cost Visibility (cont.)

Exhibit C
Wing Movable Leading Edge Assigned Value Template


A104PG31.JPG


































SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 16

SBP ATTACHMENT 32 TO
SPECIAL BUSINESS PROVISIONS

Cost Visibility (cont.)

Exhibit D
Wing Fixed Leading Edge Assigned Value Template


A104PG32.JPG




























SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 16

SBP ATTACHMENT 32 TO
SPECIAL BUSINESS PROVISIONS

Cost Visibility (cont.)

Exhibit E
Total Shipset Cost Summary

A104PG33.JPG





















SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 17

SBP ATTACHMENT 33 TO
SPECIAL BUSINESS PROVISIONS

Joint Cost Reduction Project Agreement Template

The template below is a notional example for the Parties to utilize for each Project Agreement. The template is subject to change based on mutual agreement.
Project Agreement #________
Project Name:___________________________________
This Project Agreement #________ (“Project Agreement”) is entered into as of the date of last signature in the signature block below (“Effective Date”) between The Boeing Company (“Boeing”) and Spirit AeroSystems, Inc. (“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 meanings ascribed to such terms in the 787 Contract (as defined below).
1.0      TERMS AND CONDITIONS
1.1      This Project Agreement is entered into pursuant to Attachment 33 of SBP BCA-MS-65530-0019.
1.2      Except as specified herein, all terms and conditions of the Special Business Provisions BCA-MS-65530-0019 (“SBP”) and the General Terms Agreement BCA-65520-0032 (“GTA”) between the Parties (collectively the “787 Contract”) shall apply. In the event of a conflict between the terms of this Project Agreement and the 787 Contract, the terms of this Project Agreement shall have precedence with respect to the subject matter of this Project Agreement.
2.0      COST REDUCTION WORK STATEMENT
2.1      Project Name: ___________________________ (the “Project”)
2.2      Description of Project
2.3      Start Date and Anticipated Milestones
2.4      Technical Work Scope:
2.4.1     
2.4.2     
2.4.3      Parts Affected






SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 17

SBP ATTACHMENT 33 TO
SPECIAL BUSINESS PROVISIONS

Joint Cost Reduction Project Agreement Template (cont.)
a.      Production Articles Impacted
b.      Part Numbers Impacted
3.0      IMPLEMENTATION     
3.1      Planned Line Unit of Incorporation
3.2      Key Boeing activities
3.3      Key Spirit activities
4.0      RESPONSIBILITIES
4.1      Spirit
4.2      Boeing
4.3      Spirit Deliverables
4.4      Boeing Deliverables     
5.0      SCHEDULE
5.1      Implementation Schedule
6.0      ESTIMATED NON-RECURRING INVESTMENTS AND RECURRING COST SAVINGS
6.1      Estimated Non-Recurring Investment ([*****])
6.1.1      Spirit NRE and Supporting Documentation
6.1.2      Boeing NRE and Supporting Documentation
6.2      Estimated Spirit Recurring Cost Delta
6.2.1      Total Cost Reduction Value









SBP BCA-MS-65530-0019, Amendment No. 28 Exhibit 17

SBP ATTACHMENT 33 TO
SPECIAL BUSINESS PROVISIONS

Joint Cost Reduction Project Agreement Template (cont.)
7.0      TERMINATION PROCEDURE
7.1      Convenience
7.2      Default
The Parties have caused this Project Agreement to be executed by their duly authorized representatives as of the last date set forth below.

The Boeing Company              Spirit AeroSystems, Inc.
Boeing Commercial Airplanes
By: _________________________      By: _____________________________
Name: ______________________      Name: __________________________
Title: _______________________      Title: ___________________________
Date: _______________________      Date: ___________________________



EXHIBIT 10.5

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) WOULD BE LIKELY TO CAUSE COMPETITITVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION IS DENOTED BY ASTERISKS IN BRACKETS [*****].

AMENDMENT NUMBER 40
TO    
SPECIAL BUSINESS PROVISIONS (SBP) MS-65530-0016
BETWEEN
THE BOEING COMPANY
AND
SPIRIT AEROSYSTEMS, INC.
This Amendment 40 (“ Amendment ”) to Special Business Provisions MS-65530-0016 is entered into, as of the date of the last signature below, between The Boeing Company, a Delaware Corporation (" Boeing "), and SPIRIT AEROSYSTEMS, INC, a Delaware Corporation with its principal office in Wichita, Kansas (“ Seller ”). Boeing and Seller sometimes are referred to herein individually as a “ Party ” and collectively as the “ Parties .”
RECITALS
A.
The Parties entered into Special Business Provisions MS-65530-0016, dated June 16, 2005, (the “ SBP ”) and the General Terms Agreement BCA-65530-0016, dated June 17, 2005, (the “ GTA ”), and including any amendments to the SBP and GTA (collectively the “ Sustaining Agreement ”).

B.
The most recent amendment to the SBP is Amendment 39, entered into November 2, 2018.

C.
The Parties executed an MOA on December 21, 2018 (the “MOA”) regarding, among other things, pricing and other terms and conditions pertaining to certain Derivatives and models of the 737, 747, 767, and 777 programs (the "Programs").

D.
The Parties wish to amend the SBP to carry out the agreements in Sections 3 through 9, 13 and 16 of the MOA as specifically set forth herein.








AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the Parties agree as follows:
1.
The list of “AMENDMENTS” within the Sustaining SBP is hereby deleted and replaced in its entirety as follows:
“AMENDMENTS
 
Amendment 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.
2/23/2006
H. McCormick
 
R. Stone
 
2
Incorporate CCNs as listed in Amendment 2, Attachment A, 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.
4/11/2007
H. McCormick
 
J. Edwards
 
3
Incorporate CCNs as listed in Amendment 3, Attachment A. Updates to attachments 1, 2, 7, 14, 15, 16 and 22.
11/28/2007
H. McCormick
 
J. Edwards
 
4
Incorporate CCNs as listed in Amendment 4, Attachment A. Updates to Attachments 1, 2, 7, 14, 15, 16. Incorporate Attachment 1A per CCN 508, 1328.
7/8/2008
S.Hu
 
W. Wallace
 
5
Incorporate CCNs as listed in Amendment 5, Attachment A, includes addition of new section 12.3.1.1 Updates to Attachments 1, 2, 7, 14, 15, 16, 20.
6/22/2009
S. Hu
 
R. Stone
 
6
Incorporate CCNs as listed in Amendment 6, Attachment A. Updates to Attachments 1, 2, 4, 7, 9, 10, 14, and 16. Incorporate Attachment 9 per CCN 2385.
11/23/2010
S. Hu
 
M. Milan
 
7
Incorporate CCNs as listed in Amendment 7, Attachment A, includes addition of new section 12.13.3.1. Updates to Attachments 1, 2, 4, 7, 9, 14, and 16. Incorporate Attachment 1B per CCN 4212 and Attachment 23 per the 767-2C MOA.
7/28/2011
S. Hu
 
M. Milan
 
8
Incorporate CCNs as listed in Amendment 8, Attachment A, includes revisions to section 7.9 and 12.13.1.1. Updates to Attachments 1, 2, 4, 7, 9, 14, 15, and 16.
8/16/2013
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.
9/26/2014
B. Folden
 
 R. Ast
 
11
Incorporate Attachment 27 -737-MAX Non Recurring Agreement, and Attachment 28 737/747/767/777 Pricing Agreement. Updates Section 4.1 Attachment 4, Section B.1, Attachments 9 and 15.
3/10/2015
C. Howell
 
R. Ast
 
12
Delete and replace Attachment 25, Section 3.0.
4/9/2015
K. Drawsky
 
R. Ast
 
13
Incorporate CCNs as listed in Amendment 13, Attachment A. Updates to Attachments 1, 2, 7, 9, 14, and 16.
1/4/2016
L. Taylor
 
K. Leyba
 
14
Incorporate Attachment 25, Addendum 1.
4/21/2015
D. Blaylock
 
R. Grant
 
15
NULL
NULL
NULL
 
16
NULL
NULL
NULL
 
17
Incorporate Attachment 29 - 777X Non-Recurring Agreement.
12/23/2015
A. Lucker
 
E. Bauer
 
18
NULL
NULL
NULL



19
NULL
NULL
NULL
20
737 MAX Inner Wall.
12/17/2015
S. Garcia-Deleone
J. Reed
21
Revisions to Attachment 27. 737 MAX Non-Recurring Agreement.
5/9/2016
D. Blaylock
R. Grant
22
737 Max Composite Inner Wall Line Movement.
11/2/2016
D. Blaylock
E. Bossler
23
737 MAX 9 INITIAL and CIW Line [*****] Tooling Incentive Agreement.
12/16/2016
D. Blaylock
E. Bossler
24
Incorporate CCNs as listed in Amendment 23, Attachment A. Updates to Attachments 1,2,7,9, and 14.
12/20/2016
L. Taylor
K. Leyba
25
Revisions to Attachment 27, 737 MAX Non-Recurring.
3/16/2017
D. Blaylock
E. Bossler
26
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
3/23/2017
D. Blaylock
E. Bossler
27
Incorporate Attachment 30, “737 NG / MAX Vapor Barrier Agreement”, updates to Attachment 1 and 9.
3/31/2017
B. Edwards
K. Clark
28
Revisions to Attachment 29, 777X NRE Agreement.
6/22/2017
K. O’Connell
C. Green
29
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
7/20/2017
D. Blaylock
E. Bossler
30
Delete and Replace SBP Sections 4.1, 4.1.1, 5.1.1, 5.2.1, 7.2, 8.0, 12.11, and 12.13.1.1 and SBP Attachments 1, 1B, 10 Section A10.2.10, 15, 16, 22, 27, and 29. Delete and Reserve SBP Attachments 1C, 20, and 28. Incorporate SBP Attachment 1D and 31.
9/22/2017
B. Edwards
W. Wilson
31
Revisions to Attachment 27, 737-8 Rate Tooling Incentive Agreement.
10/18/2017
D. Blaylock
E. Bossler
32
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
11/15/2017
D. Blaylock
E. Bossler
33
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
11/30/2017
D. Blaylock
E. Bossler
34
Revisions to Attachment 27, 737-10 Non-Recurring Non-Tooling.
2/23/2018
D. Blaylock
E. Bossler
35
Revisions to Attachment 27, 737-9 Rate Tooling [*****].
4/18/2018
D. Blaylock
J. O'Crowley
36
Revisions to Attachment 27, 737-10 Wing NRE.
6/20/2018
D. Blaylock
E. Bossler
37
Incorporation of new Sections: 3.3.4.10 767 One Piece SOW Tooling, 3.3.7 767 One Piece SOW NonRecurring Pricing, 3.4.2.2 Delivery Point and Schedule for 767 One Piece SOW and 3.8 767 One Piece Statement of Work Special Provisions. Updates to Sections 7.1, Attachment 1 and 9.
8/17/2018
H. Langowski
R. Grant
38
Revisions to Attachment 27, 737 MAX BBJ8, BBJ7, and 737-10 SOW
11/1/2018
T. Willis
E. Bossler



39
4.1.1 is altered. A new section 4.7 is added. Attachment 1 (excluding the Exhibits) is deleted and replaced in its entirety. A new Attachment 32 “737 Value Engineering Cost Sharing” is added. Attachment 1 Exhibits B, B.1, B.2, C, C.1, C.2, D, D.1, D.2, E.1, E.2, F, F.1, and F.2 are deleted and replaced in their entirety. A new Attachment 1 Exhibit C.3 is added. Attachment 1B is deleted in its entirety.
11/2/2018
K. Shipley
E. Bossler
40
SBP Section 4.7 is deleted and replaced in its entirety.
SBP Section 7.2 is deleted and replaced in its entirety.
A new SBP Section 7.5.3 is added.
SBP Attachment 1 (including Exhibits B, B.1, B,2, D, D.1, D. 2, F, F.1, F.2, and G) is deleted and replaced in its entirety.
SBP Attachment 1B is added and marked “Reserved”.
SBP Attachment 15 is deleted and replaced in its entirety.
SBP Attachment 16 (including its Exhibit) is deleted and replaced in its entirety.
SBP Attachment 31 is deleted, replaced in its entirety, and marked “Reserved”.
SBP Attachment 32 (including its Exhibit A) is deleted and replaced in its entirety.

All of the above is accordance with the agreements as set forth in the Collective Resolution 2.0 Memorandum of Agreement (the “CR 2.0 MOA”), dated December 21, 2018
Concurrently with the CR 2.0 MOA, the Parties also executed that certain Settlement and Release Agreement, dated December 21, 2018, pertaining to the release and settlement of warranty and various other claims
1/29/2019
R. Velau
E. Bossler
“

















2.
The SBP is hereby amended by deleting the list of “Attachments” within the SBP and replacing it in its entirety with a new SBP list of Attachments as follows:

“ ATTACHMENTS

Attachment 1    Work Statement and Pricing
Attachment 1A    737 AOE door SOW
Attachment 1B    Reserved
Attachment 1C    Reserved
Attachment 1D    MAX Composite Inner Wall SOW
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    Reserved
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    Reserved
Attachment 29    777X Non-Recurring Agreement
Attachment 30    737 NG / MAX Vapor Barrier Agreement
Attachment 31    Reserved
Attachment 32    737 and 777X Value Engineering Cost Sharing”

3.
SBP Section 4.7 “737 Cost Savings Projects” is deleted in its entirety, renamed to “737 and 777X Cost Savings Projects”, and replaced with the following:




“ 4.7      737 and 777X Cost Savings Projects
Cost savings projects implemented during the Pricing Period for all 737 models and all 777X models will be administered in accordance with SBP Attachment 32 (“737 and 777X Value Engineering Cost Sharing”).”
4.
SBP Section 7.2 “Change Pricing Criteria” is deleted in its entirety and replaced with the following:

“ 7.2      Change Pricing Criteria
The following Change pricing thresholds will apply to all Changes:
Recurring Price :
An equitable adjustment (either debit or credit) shall be negotiated and incorporated into the applicable SBP Attachment 1 recurring Non-Discounted Price and all pricing within the respective SBP Attachment 1 columns as shown in the 737 NG / MAX Change Pricing Criteria Table listed below (as applicable) if both of the following conditions are met:
a.
For Engineering Changes, the recurring price impact to the Attachment 1 part Price for each individual Change exceeds [*****] of the then current Price for that part or for Statement of Work allocation Changes, the recurring price impact to the Attachment 1 part Price for each individual Change exceeds [*****] of the then current Price for that part (see note 1 below), and
b.
The recurring price impact for each individual Change exceeds [*****] per year based on then current requirements forecasted for the following calendar year.

Note 1: For Statement of Work allocation changes only there is an annual cumulative cap of [*****]. The annual cumulative cap will begin January 1 st of each year and end December 31 st of each year. This cap will re-set to zero at the beginning of each year and only new Statement of Work allocation changes falling below the [*****] threshold will be applied against this cap. The value attributable to each change will be as negotiated by the Parties and Seller agrees to provide information to Boeing for these Change proposals consistent with the terms of this SBP for any and all assertions believed to contribute towards the [*****] cap.







For clarity, negotiated changes to Attachment 1 737 NG / MAX recurring pricing will be applied to the Attachment 1 Non-Discounted Prices and all columns will be adjusted as shown in the Table below.
737 NG / MAX Change Pricing Criteria Table:
Non-Discounted Price (Post Change)
Col A
Col B
Col C
Col D
Col E
Col F
Col G
Col H
Col I
Y+X
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)
(Y+X) * (1-Z)

X = Change Value
Y = Non-Discounted Price (Pre Change)
Z = Applicable columns on Attachment 1 Table 1: 737 NG / MAX Discount Structure
Non-Recurring
An equitable adjustment will be made by Boeing to Seller for non-recurring if both of the following conditions are met:
a.
The non-recurring price impact for each individual Change exceeds [*****], and
b.
The non-recurring Change is associated with a new statement of work (not for current configuration of parts defined in Attachment 1 as of June 16, 2005.”
























5.
The SBP is hereby amended by adding a new SBP Section 7.5.3 “737 Rate [*****]” as follows:
“ 7.5.3      737 RATE [*****]
Seller will increase its production rate on the 737 Program to [*****] APM in accordance with Boeing’s direction and in accordance with SBP Section 7.5. Both Parties will mutually work together to establish a reasonable [*****] APM incorporation timeline.”
6.
SBP Attachment 1, not including its Exhibits, is deleted in its entirety and replaced with a revised SBP Attachment 1 (attached hereto as Attachment A). The Exhibits to the existing SBP Attachment 1 remain unchanged except as expressly amended herein.

7.
Exhibits B, B.1, B.2, D, D.1, D.2, F, F.1, F.2, and G of SBP Attachment 1 are deleted in their entirety and replaced with revised Exhibits B, B.1, B.2, D, D.1, D.2, F, F.1, F.2, and G of SBP Attachment 1 (collectively attached hereto as Attachment B).

8.
The SBP is hereby amended by incorporating SBP Attachment 1B (attached hereto as Attachment C), denoted as “Reserved”, reflecting the Parties’ agreement within SBP Amendment 39.

9.
SBP Attachment 1D is deleted in its entirety and replaced with a revised SBP Attachment 1D (attached hereto as Attachment D).

10.
SBP Attachment 15 is deleted in its entirety and replaced with a revised SBP Attachment 15 (attached hereto as Attachment E).

11.
SBP Attachment 16, not including its Exhibit, is deleted in its entirety and replaced with a revised SBP Attachment 16 (attached hereto as Attachment F). The Exhibit to the existing SBP Attachment 16 remains unchanged except as expressly amended herein.

12.
Exhibit A of SBP Attachment 16 is deleted in its entirety and replaced with revised Exhibit A of SBP Attachment 16 (attached hereto as Attachment G).

13.
SBP Attachment 22 is deleted in its entirety and replaced with a revised SBP Attachment 22 (attached hereto as Attachment H).

14.
The SBP is hereby amended by deleting SBP Attachment 31 “Annual Shipset Production Rate-Based Adjustment” and replacing it in its entirety with a new SBP Attachment 31 denoted as “Reserved” (attached hereto as Attachment I)

15.
SBP Attachment 32, not including its Exhibit, is deleted in its entirety and replaced with a revised SBP Attachment 32 (attached hereto as Attachment J). The Exhibit to the existing SBP Attachment 32 remains unchanged.






16.
All other provisions of the SBP shall remain unchanged and in full force and effect.

17.
This Amendment constitutes the complete and exclusive agreement between the Parties with respect to the subject matter set forth herein and supersedes all previous agreements between the Parties relating thereto, whether written or oral.

18.
The Parties acknowledge that this Amendment reflects a compromise resolution by the Parties of certain claims and that nothing contained in this Amendment constitutes or will be construed as an acknowledgement or admission of liability or absence of liability in any way on the part of the Parties, each of which expressly denies any liability or wrongdoing in connection with such claims, and the Parties agree not to issue any public statement or comment to the contrary. The Parties agree that this Amendment, and the terms and conditions hereof, including without limitation the figures used to reach all pricing and payment figures herein, will have no precedential value and therefore will not be used in support or defense of any other claim arising from the Parties’ contracts.

19.
This Amendment shall be governed by the internal laws of the State of Washington without reference to any rules governing conflict of laws.

20.
In the event of a conflict between the terms of this Amendment and either the SBP or GTA, the terms of this Amendment shall have precedence with respect to the subject matter of this Amendment.

IN WITNESS THEREOF, the duly authorized representatives of the Parties have executed this Amendment No. 40 as of the last date of signature below.
The Boeing Company                  Spirit AeroSystems, Inc.
Acting by and through its division
Boeing Commercial Airplanes
By:    _ /s/ Thomas F. McGargan ____        By:    _ /s/ Eric S. Bossler _________
Name:    _ Thomas F. McGargan ______        Name:    _ Eric S. Bossler ____________
Title:     Sr. Manager, Contracts         Title:    _ Contracts Specialist ________    
Date:    _ January 30, 2019 __________        Date:    _ January 30, 2019 __________    








ATTACHMENT A of SBP Amendment 40
SBP ATTACHMENT 1
WORK STATEMENT AND PRICING
(Reference SBP Sections 3.2, 3.3.4.1, 3.4.4, 4.1, 4.1.1, 4, 7, 7.2, 7.10.1, 12.6.1, 12.13.1.1, 18.0, Attachment 32)
1.
RECURRING PRICING PERIOD
a)
Non-Discounted Price means the pricing prior to application of production rate-based discounts, if such discounts are applicable. Non-Discounted Prices are subject to Changes in accordance with SBP Section 7.0. Non-Discounted Prices are listed in SBP Attachment 1 Exhibit(s) B.1, B.2, C.1, C.2, C.3, D.1, D.2, F.1 and F.2.

i.
In the event there is an error in the calculation of Prices contained in this SBP Attachment 1, the Parties shall correct said Prices.

b)
The pricing as set forth in sections 2, 5, and 7 (for 777X and 777 other than 300ER and 200LR) is for the pricing period January 1, 2016, through December 31, 2030. The pricing as set forth in sections 4 and 7 (for 777 300ER and 200LR only) is for life of each respective Program Airplane so long as such models remain in continuous production. The periods specified in this subsection b) are referred to as the “Pricing Period” for the applicable Program Airplane.

c)
The pricing on and after January 1, 2031, for sections 2, 5, and 7 (for 777X and 777 other than 300ER and 200LR) will be negotiated by the Parties, and the Parties will begin negotiating twenty-four (24) months prior to such date.

i.
Pricing on and after January 1, 2031 for 737 NG / MAX will take into account market dynamics, productivity improvements and other cost reductions resulting from increases in rates above [*****] APM, if Boeing is then producing at such rates.

d)
In the event the Parties are unable to agree on follow-on pricing prior to the end of the Pricing Period, interim pricing will take effect and continue thereafter until the earlier of such time as: (i) the Parties agree to follow-on pricing; or (ii) pricing is established in accordance with GTA Section 33.0 and this SBP Attachment 1. The period between the end of the Pricing Period and the establishment of follow-on pricing shall be defined as the “Interim Pricing Period”.

e)
Interim Pricing Reconciliation:
The Parties agree to reconcile the pricing set forth in this SBP Attachment 1 for the Pricing Period with the interim pricing paid by Boeing to Seller from January 1, 2016 to December 31, 2017 in two phases:



i.
Boeing and Seller will validate and agree on phase i amounts for Seller shipments from January 1, 2016 through October 1, 2017. The applicable Party shall make payment within [*****] days of validating the reconciled amount.

ii.
Boeing and Seller will validate and agree on phase ii amounts for Seller shipments from October 2, 2017 through December 31, 2017. The applicable Party shall make payment within [*****] days of validating the reconciled amount.

2.
737 NG / MAX and P-8 RECURRING PRICING
737 NG / MAX and P-8 pricing for the Pricing Period is listed in SBP Attachment 1 Exhibit B.1 (737 NG / MAX and P-8 Detailed Part List Pricing excluding Loose Ship Parts and VSA Wing Kits) and Exhibit B.2 (737 NG / MAX and P-8 Loose Ship Parts and VSA Wing Kits Pricing). Exhibit B (737 NG / MAX and P-8 Product Pricing Roll Up) is an accurate summary of Exhibit B.1 for Boeing internal forecasting purposes only. For the avoidance of doubt, Exhibit B shall not be used for placing orders or calculating thresholds. Exhibit B shall be updated concurrently with any updates to Exhibit B.1.
a)
737 NG / MAX and P8 Pricing
Table 1 - 737 NG / MAX Discount* Structure
Col A
Col B
Col C
Col D
Col E
Col F
Col G
Col H
Col I
[*****]%
[*****]%
[*****]%
[*****]%
[*****]%
[*****]%
[*****]%
[*****]%
[*****]%
*discounts (positive or negative) applied to Non-Discounted Price
For the avoidance of doubt, pricing in SBP Attachment 1 Exhibit B.1 (737 NG / MAX and P-8 Detailed Part List Pricing excluding Loose Ship Parts and VSA Wing Kits) and Exhibit B.2 (737 NG / MAX and P-8 Loose Ship Parts and VSA Wing Kits Pricing) includes the applicable production rate-based discounts referenced in the above Table 1 - 737 NG / MAX Discount Structure.
For clarity, the 737 P-8 will be used to calculate 737 production rates; however, the production rate-based discounts specified in SBP Attachment 1 Table 1 above do not apply to the 737 P-8 Products. In addition, the production rate-based discounts specified in SBP Attachment 1 Table 1 above do not apply to the 737 MAX Composite Inner Wall (CIW; reference SBP Attachment 1D), which is included within the 737 MAX Thrust Reverser Prices listed in SBP Attachment 1 Exhibit B.1.




Table 2 - 737 Pricing Reference Table
Production Rate
2016
2017
2018
2019
2020
2021
2022
2023-2030
[*****] through [*****]
n/a
n/a
n/a
n/a
Col E*
Col F
Col F
Col F
[*****] through [*****]
n/a
n/a
n/a
Col C
Col E
Col E
Col E
Col D
[*****] through [*****]
n/a
n/a
Col B
Col C
Col C
Col C
Col C
Col C
[*****] through [*****]
Col A
Col A
Col B
Col B
Col B
Col B
Col B
Col B
[*****] through [*****]
Col A
Col A
Col B
Col A
Col A
Col A
Col A
Col A
[*****] through [*****]
n/a
n/a
n/a
Col G
Col G
Col G
Col G
Col G
[*****] through [*****]
n/a
n/a
n/a
Col H
Col H
Col H
Col H
Col H
Less than [*****]
n/a
n/a
n/a
Col I
Col I
Col I
Col I
Col I
* Discount applicable if Seller produces at [*****] APM in 2020.
i.
The pricing referenced in Table 2 (737 Pricing Reference Table) shall take effect for deliveries on and after January 1 st of each year following the year in which the applicable rate is achieved and held, except as noted in sections 2.a)vi and 2.a)vii below.

ii.
In the event Boeing does not achieve and hold rate [*****] in 2018, pricing listed in Column B of SBP Attachment 1 Exhibit B.1 and B.2 shall apply for the remainder of the Pricing Period (starting January 1, 2018) until Boeing does so.

iii.
In the event Boeing achieves and holds rate [*****] but does not achieve and hold rate [*****], pricing in Column C of SBP Attachment 1 Exhibit B.1 and B.2 shall apply for the remainder of the Pricing Period until Boeing does so; provided, if rates drop below rate [*****], pricing in Column B of SBP Attachment 1 Exhibit B.1 and B.2 shall apply until such time as rate [*****] is achieved again and held. Further, if rates drop to between rate [*****] and rate [*****], after initially achieving rate [*****], pricing in Column C of SBP Attachment 1 Exhibit B.1 and B.2 shall apply until such time as rate [*****] is achieved again and held.

iv.
In the event a new or adjusted Master Schedule is released in accordance with the SBP, which slides implementation of production rate [*****] beyond 2018 or production rate of [*****] beyond 2019 or requires any production rate reductions, the Parties agree to update SBP Attachment 1 Exhibit A and determine applicable Prices.

v.
Should an update to Prices be required as set forth in the preceding clause (iv), the Parties shall use the appropriate pricing column from SBP Attachment 1 Table 2 to determine the correct Price within [*****] calendar days of when an update is determined to be necessary. In the event reconciliation is required, the Parties will reconcile to the applicable Pricing for that given year and an applicable retroactive payment will be made within [*****] days after the end of the then current calendar year.

vi.
In the event 737 production rates increase to [*****] after calendar year 2018, the pricing for 737 Products will be the pricing referenced in SBP Attachment 1 Exhibit B.1 and B.2 Column B until the month after rate [*****] is achieved. At that time, the



pricing for 737 Products will be the pricing referenced in SBP Attachment 1 Exhibit B.1 and B.2 Column C, except as provided in SBP Attachment 1 Section 2.a)iii.
vii.
In the event 737 production rates increase to [*****] after calendar year 2019, the pricing for 737 Products will be the pricing referenced in SBP Attachment 1 Exhibit B.1 and B.2 Column C until the month after rate [*****] is achieved. At that time, the pricing for 737 Products will be the pricing referenced in SBP Attachment 1 Exhibit B.1 and B.2 Column E (if the then current year is 2020, 2021 or 2022) or SBP Attachment 1 Exhibit B.1 and B.2 Column D (if the then current year is 2023, 2024, 2025, 2026, 2027, 2028, 2029 or 2030), except as provided in SBP Attachment 1 Section 2.a)iii.

viii.
The Price effectivity for rate [*****] will follow the same methodology as described in SBP Attachment 1 Section 2.a)i and iii.







































Spirit & Boeing Proprietary

Amendment 40 of SBP MS-65530-0016
30 of 210      Boeing and Seller Initials     
Boeing: Seller:

i.
Examples:
Achieving Rate [*****] in 2019
2019
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
737 Fuselage Deliveries
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Column
C
C
C
C
C
C
C
C
C
C
C
C
Holding Rate [*****] throughout 2020 (assumes rate [*****] is achieved in 2019)
2020
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
737 Fuselage Deliveries
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Column
E
E
E
E
E
E
E
E
E
E
E
E
Reducing from Rate [*****] to Rate [*****] after Rate [*****] is achieved (assumes rate [*****] is achieved in 2019)
2020
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
737 Fuselage Deliveries
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Column
E
E
E
E
E
C
C
C
C
C
C
C
Holding Rate [*****] throughout 2021 (assumes rate [*****] is achieved in 2019 or 2020)
2021
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
737 Fuselage Deliveries
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Column
E
E
E
E
E
E
E
E
E
E
E
E
Assumes ramp to rate [*****] in 2020 or re-achieving rate [*****] in 2022 after a decrease to [*****] prior to 2022
2022
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
737 Fuselage Deliveries
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Column
C
C
C
C
C
C
C
C
E
E
E
E




b)
737 Interim Pricing

i.
During the Interim Pricing Period, interim pricing for 737 shall be determined using the last buy pricing in 2030 as the baseline, and escalated or de-escalated using the indices and methodology provided in SBP Section 4.1.1.
Table 3 - Reserved
Reserved

ii.
RESERVED

iii.
Notwithstanding the interim pricing set forth in this Section, the Parties will use the dispute resolution process in GTA Section 33.0 to determine reasonable pricing if pricing is not agreed upon by December 31, 2031 .

iv.
At the earlier of such time as: (i) the Parties agree to follow-on pricing; or (ii) pricing is established in accordance with GTA Section 33.0 and this SBP Attachment 1, the Parties will reconcile interim pricing with the follow-on pricing and a corresponding debit or credit as applicable will be made retroactive to the day after the end of the Pricing Period.

c)
Additional 737 MAX Pricing

The 737-8200 delta price (as described in Section 2.c)i below) has been settled as part of SBP Amendment 40 and the provisions addressing the 737-8200 delta price settlement are retained in Section 2.c)i for historical purposes. The 737-8200 delta price value is a delta increase of $[*****] over the then current Non-Discounted Price of the 737-8 (in complete settlement of, and based upon the configuration contained within, Spirit’s proposal ref# [*****]) per applicable Shipset beginning with the first 737-8200. Boeing will update Orders to account for the 737-8200 Production Article Price increases in accordance with the 737-8200 Order Update Schedule noted below.
737-8200 Order Update Schedule
•
Boeing will issue updated recurring Orders no later than February 7, 2019 for Production Articles delivered on and after February 8, 2019; such Orders will include the Prices for the 737-8200 contained in Exhibits B and B.1 of SBP Attachment 1 as amended by SBP Amendment 40.

Reconciliation for any 737-8200 Shipsets delivered prior to January 1, 2019 will be completed in accordance with Section 5 of the Collective Resolution 2.0 Memorandum of Agreement executed by the Parties on December 21, 2018.





i.
The Parties agree to negotiate a delta price for the 737-8200 MAX based on the 737-8 MAX configuration through Post Rev [*****] as defined in SBP Attachment 1 Section 2.d)i and 2.d)ii, and the Prices listed in Attachment 1 Exhibit(s) B.1 and B.2 . Until such price is negotiated, the agreed interim pricing is the then current pricing for the 737-8 MAX. The Parties agree pricing will be negotiated and agreed upon within [*****] days after the first Seller delivery of the 737-8200 fuselage to Boeing. At such time as a subsequent pricing agreement has been achieved, the Parties will reconcile interim pricing with the agreed-upon pricing, and a corresponding debit or credit as applicable will be made.

ii.
The Parties agree to negotiate a delta price for the 737-10 MAX based on the 737-9 MAX configuration through 737-9 Post Rev [*****] as defined in SBP Attachment 1 Section 2.d)iii and 2.d)iv below and the Prices listed in Attachment 1 Exhibit B.1 and B.2. Until such price is negotiated, the agreed interim pricing is the then current pricing for the 737-9 MAX. The Parties agree pricing will be negotiated and agreed upon within [*****] days after the first Seller delivery of the 737-10 fuselage to Boeing. At such time as a subsequent pricing agreement has been achieved, the Parties will reconcile interim pricing with the agreed-upon pricing, and a corresponding debit or credit as applicable will be made.

iii.
The Parties agree, pricing for all 737 MAX minor models shall utilize the same production rate-based discount methodology as described in SBP Attachment 1 Section 2.a) and 2.b).

d)
Changes to 737 MAX Pricing prior to respective ATCs:

Post Rev. [*****] (as defined in Section 2.d)i below) has been settled as part of Amendment 39 and the provisions addressing the Post Rev [*****] settlement are retained in Sections 2.d)i and 2.d)ii for historical purposes. The Post Rev [*****] value is a delta increase of $[*****] per shipset beginning at Line Unit [*****]. Boeing will make a retroactive payment of $[*****] for Line Unit [*****] through all applicable Production Articles delivered on or before November 7, 2018, in accordance with the Reconciliation Schedule noted below, and will increase the future payments by the $[*****] per shipset. Boeing will update Orders to account for Post Rev [*****] Production Article Price increases in accordance with the Order Update Schedule noted below.
Order Update Schedule
•
Boeing will issue updated recurring Orders no later than November 7, 2018 for Production Articles delivered on and after November 8, 2018; such Orders will include the Price adjustments for Post Rev [*****] contained in Exhibits B and B.1 of SBP Attachment 1 as amended by SBP Amendment 39.





Reconciliation Schedule
•
Boeing will issue a reconciliation Order no later than November 15, 2018

•
Spirit will submit the reconciliation invoice to Boeing no later than November 19, 2018

•
Boeing will approve the reconciliation invoice no later than December 1, 2018

i.
737-8 Pricing:

Pricing for the 737-8 Products listed in SBP Attachment 1 Exhibit(s) B.1 and B.2 reflect configuration “IWS Revision [*****]”. Seller shall provide a recurring pricing change proposal for the collective MAX Changes in configuration from IWS Revision [*****] to the configuration incorporating all Changes directed prior to [*****]. The recurring pricing change proposal, to be known as “Post Rev [*****]”, shall be submitted no later than [*****] and shall be negotiated by the Parties no later than [*****]. The Parties agree that SBP Attachment 27 is still in effect and is not impacted by this Section. For the avoidance of doubt, all Changes directed prior to ATC for the 737-8 are not subject to thresholds as described in SBP Section 7.2.
ii.
Post Rev [*****]:

The Post Rev [*****] recurring settlement contemplated in Section 2.d)i above, will be applied to MAX Product Pricing listed in this SBP Attachment 1 Exhibit(s) B.1 and B.2 for the 737-8.
iii.
737-9 Pricing:

After Post Rev [*****] has been settled above in 2.d)i, the Parties agree to apply such amount to the 737-9 MAX Attachment 1 Exhibit(s) B.1 and B.2 pricing reflecting all Changes directed up to [*****]. Seller shall provide a recurring pricing change proposal collectively for all Changes in configuration from [*****] to the configuration incorporating all Changes directed prior to 737-9 ATC. The recurring pricing change proposal, to be known as “737-9 Post Rev [*****]”, shall be submitted no later than [*****] days after 737-9 ATC is achieved and shall be negotiated by the Parties no later than [*****] days after 737-9 ATC. The Parties agree that SBP Attachment 27 is still in effect and is not impacted by this Section. For the avoidance of doubt, all Changes directed prior to ATC for the 737-9 are not subject to thresholds as described in SBP Section 7.2.







iv.
737-9 Post Rev [*****]:

The 737-9 Post Rev [*****] recurring settlement contemplated in Section 2.d)iii above will be applied to 737-9 MAX Product pricing listed in this SBP Attachment 1 Exhibit(s) B.1 and B.2.
v.
737-7 (7150) Pricing:

After Post Rev H has been settled above in 2.d)i, the Parties agree to apply such amount to the 737-7 (7150) MAX SBP Attachment 1 Exhibit(s) B.1 and B.2 pricing reflecting all Changes directed up to [*****]. Seller shall provide a recurring pricing change proposal collectively for all Changes in configuration from [*****] to the configuration incorporating all Changes directed prior to 737-7 (7150) ATC. The recurring pricing change proposal, to be known as “737-7 Post Rev [*****]”, shall be submitted no later than [*****] days after 737-7 (7150) ATC is achieved and shall be negotiated by the Parties no later than [*****] days after 737-7 (7150) ATC. The Parties agree that SBP Attachment 27 is still in effect and is not impacted by this Section. For the avoidance of doubt, all Changes directed prior to ATC for the 737-7 (7150) are not subject to thresholds as described in SBP Section 7.2.
vi.
737-7 Post Rev [*****]:

The 737-7 Post Rev [*****] recurring settlement contemplated in Section 2.d)v above will be applied to 737-7 (7150) MAX Product pricing listed in this SBP Attachment 1 Exhibit(s) B.1 and B.2.
vii.
Any other 737 MAX minor models will follow the same approach as specified in this Section 2.d) and added to SBP Attachment 1 Exhibit(s) B.1 and B.2.

e)
Changes to 737 MAX Pricing Post ATC

i.
737-8 Pricing

a.
Seller will submit a separate change proposal for Changes directed subsequent to 737-8 ATC through [*****] by no later than [*****]. The Parties agree to negotiate the proposal within [*****] days of submittal.

b.
The Parties agree SBP Attachment 27 shall not apply to Changes directed post ATC for the 737-8.

c.
The Parties agree all Changes directed post 737-8 ATC will be in accordance with SBP Section 7.0.






ii.
737-9 Pricing

a.
The Parties agree SBP Attachment 27 shall not apply for 737-9 Changes directed post ATC for the 737-9.

b.
The Parties agree all Changes directed post 737-9 ATC will be in accordance with SBP Section 7.0.

iii.
737-7 (7150) Pricing

a.
The Parties agree SBP Attachment 27 shall not apply for 737-7 (7150) Changes directed post ATC for the 737-7 (7150).

b.
The Parties agree all Changes directed post 737-7 (7150) ATC will be in accordance with SBP Section 7.0.

iv.
Any other 737 MAX minor models will follow the same approach as specified in this Section and added to SBP Attachment 1 Exhibit(s) B.1 and B.2.

3.
737 P-8 INTERIM PRICING

During the Interim Pricing Period, interim pricing for 737 P-8 shall be determined using the last buy pricing in 2030 as the baseline, and escalated or de-escalated using the indices and methodology provided in SBP Section 4.1.1.
Notwithstanding the interim pricing set forth in this Section 3, the Parties will use the dispute resolution process in GTA Section 33.0 to determine reasonable pricing if pricing is not agreed upon by December 31, 2031 .
At the earlier of such time as: (i) the Parties agree to follow-on pricing; or (ii) pricing is established in accordance with GTA Section 33.0 and this SBP Attachment 1, the Parties will reconcile interim pricing with the follow-on pricing and a corresponding debit or credit as applicable will be made retroactive to the day after the end of the Pricing Period.
4.
747 RECURRING PRICING

a)
747 Pricing Period

747 Product pricing for the Pricing Period is listed in SBP Attachment 1 Exhibit C.1 (747 Detailed Part List Pricing excluding Loose Ship Parts, Section 44 Lower Lobe, and Fixed Leading Edge (FLE)), Exhibit C.2 (747 Loose Ship Parts, Section 44 Lower Lobe, and FLE Pricing), and Exhibit C.3 (747-8 Nacelles). Exhibit C (747 Product Pricing Roll Up) is an accurate summary of Exhibit C.1 and C.3 for Boeing internal forecasting purposes only. For the avoidance of doubt, Exhibit C shall not be used for



placing orders or calculating thresholds. Exhibit C shall be updated concurrently with any updates to Exhibit C.1 or C.3.
5.
767 RECURRING PRICING (EXCLUDING 767-2C)

a)
767 Pricing Period

767 Product pricing for the Pricing Period is listed in SBP Attachment 1 Exhibit D.1 (767 Detailed Part List excluding Loose Ship Parts) and Exhibit D.2 (767 Loose Ship Parts). Exhibit D (767 Product Pricing Roll Up) is an accurate summary of Exhibit D.1 for Boeing internal forecasting purposes only. For the avoidance of doubt, Exhibit D shall not be used for placing orders or calculating thresholds. Exhibit D shall be updated concurrently with any updates to Exhibit D.1.
b)
767 Interim Pricing Period (Excluding 767-2C)

During the Interim Pricing Period, interim pricing for 767 shall be determined for the applicable 767 minor models (excluding 767-2C) using the last buy pricing in 2030 as the baseline, and escalated or de-escalated using the indices and methodology provided in SBP Section 4.1.1.
Notwithstanding the interim pricing set forth in this Section 5.b), the Parties will use the dispute resolution process in GTA Section 33.0 to determine reasonable pricing if pricing is not agreed upon by December 31, 2031 .
At the earlier of such time as: (i) the Parties agree to follow-on pricing; or (ii) pricing is established in accordance with GTA Section 33.0 and this SBP Attachment 1, the Parties will reconcile interim pricing with the follow-on pricing and a corresponding debit or credit as applicable will be made retroactive to the day after the end of the Pricing Period.
6.
767-2C RECURRING PRICING

Pricing for the 767-2C (Tanker) Products is listed in SBP Attachment 1 Exhibit(s) E.1 (767-2C Propulsion Product Pricing) and E.2 (767-2C Section 41 Product Pricing). The pricing period and other terms and conditions unique to 767-2C statement of work are defined in SBP Attachment 23.
7.
777 RECURRING PRICING

a)
777 Pricing

i.
777 Product pricing for the Pricing Period is listed in SBP Attachment 1 Exhibit F.1 (777 Detailed Part List Pricing excluding Loose Ship Parts and Floor Beams), and Exhibit F.2 (777 Loose Ship Parts and Floor Beams Pricing). Exhibit F (777



Product Pricing Roll Up) is an accurate summary of Exhibit F.1 for Boeing internal forecasting purposes only. For the avoidance of doubt, Exhibit F shall not be used for placing orders or calculating thresholds. Exhibit F shall be updated concurrently with any updates to Exhibit F.1.

ii.
Boeing will pay Seller a recurring Price of $[*****] per Shipset [*****] combined 777-8 and 777-9 Shipsets. Boeing will pay Seller a recurring Price of $[*****] from Shipset [*****] and all subsequent 777-9 Shipsets through December 31, 2030. These Prices are inclusive of all changes to the 777-9 for which engineering has been released through [*****] .

a.
The Parties will reconcile the pricing set forth above in this SBP Attachment 1 Section 7 with the interim pricing paid by Boeing to Seller for 777-9 Production Articles delivered prior to the effective date of SBP Amendment 40 via a payment in accordance with the following schedule:

•
Boeing will issue a reconciliation Order no later than [*****]

•
Spirit will submit the reconciliation invoice to Boeing no later than [*****]

•
Boeing will approve the reconciliation invoice no later than [*****]

iii.
The Parties agree to negotiate a delta price for the 777-8 from the 777-9 non-discounted price of $[*****], which will not result in a retroactive adjustment in Price for the [*****] .

iv.
Until a 777-8 price is negotiated for Shipsets [*****] and all subsequent 777-8 Shipsets, the agreed interim pricing is the then-current price for the 777-9. The Parties agree pricing negotiations will begin following delivery of the first 777-8 Shipset; with the intent to be completed within [*****] days. Once a pricing agreement is finalized, the Parties will reconcile interim pricing with the agreed-upon pricing, and a corresponding debit or credit, as applicable, will be made within [*****] days.

v.
Pricing listed in SBP Attachment 1 Exhibit F.1 (777 Detailed Part List Pricing excluding Loose Ship Parts and Floor Beams), and Exhibit F.2 (777 Loose Ship Parts and Floor Beams Pricing) includes the applicable 777X production rate based discounts referenced in the below Table 4 - 777X Discount Structure. These discounts will not apply to [*****].

Table 4 - 777X Discount* Structure
Column K
[*****]
*discount applied to Non-Discounted Price




Only 777X Shipsets, including future 777X minor models, will be used to calculate production rates within this discount structure. The pricing referenced in the below Table 5 (777X Pricing Reference Table) shall take effect for deliveries on and after January 1st of each year following the year in which the applicable rate is achieved and held, utilizing a methodology consistent with 737 rate measurement and applicability within SBP Attachment 1 Section 2.
Table 5 - 777X Pricing Reference Table
Shipsets [*****] (777-9/-8)
Column J
 
777X Production Rate through 2030
(Excluding Shipsets [*****])
Greater than [*****]
777X Shipsets per month
Column K
Up to and Including [*****]
777X Shipsets per month
Non-Discounted Price
The Prices will be discounted by [*****], per Shipset, for all 777X minor models, excluding 777X Freighter, once the production rate exceeds [*****] 777X Shipsets per month.
Pricing and discounts for 777X Freighters will be negotiated at a later date.
b)
777 Discount for 777 300ER, 200LR, and 200F Aircraft
To assist Boeing in its marketing and sales opportunities for units unsold as of [*****], Seller will provide a discount of [*****] on each of Boeing’s unsold 777 300ER, 200LR, and 200F aircraft to be built and delivered by Seller to Boeing. The aggregate discount shall not exceed [*****]. For the purpose of administrative convenience, the discount of [*****] shall be paid in increments as defined below:
•
$[*****] to be paid on or about [*****]*
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]**
•
$[*****] to be paid on or about [*****]***
*Representing the last [*****] applicable Shipsets shipped by Seller in the [*****]
**Representing the last [*****] applicable Shipsets shipped by Seller in the [*****]
***Representing the last [*****] applicable Shipsets shipped by Seller in the [*****]



In the event that the 777 production rate is reduced below [*****] APM, the Parties will review and modify the payments set forth above as appropriate. For the avoidance of doubt, no discounts shall be applied prior to [*****] or later than [*****]. At such time as the full [*****] is recovered by Boeing or at the end of the Pricing Period, the Parties shall jointly review this discount concept and potential future applicability.
c)
777 Interim Pricing Period: only applicable to 777X and 777 (other than 300ER and 200LR) minor models
During the Interim Pricing Period, interim pricing for 777X and 777 (other than 300ER and 200LR) models shall be determined using the last buy pricing in 2030 as the baseline, and escalated or de-escalated using the indices and methodology provided in SBP Section 4.1.1. For clarity, the baseline for which the interim pricing will be calculated for 777X and 777 (other than 300ER and 200LR) models shall not include the [*****] discount per aircraft as described in Section 7.b) above.
Notwithstanding the interim pricing set forth in this Section 7.c), the Parties will use the dispute resolution process in GTA Section 33.0 to determine reasonable pricing if pricing is not agreed upon by December 31, 2031 .
At the earlier of such time as: (i) the Parties agree to follow-on pricing; or (ii) pricing is established in accordance with GTA Section 33.0 and this SBP Attachment 1, the Parties will reconcile interim pricing with the follow-on pricing and a corresponding debit or credit as applicable will be made retroactive to the day after the end of the Pricing Period.
8.
NON-RECURRING PRICING:

a)
Boeing agrees to pay Seller a fixed sum of $[*****] to support 737 rate [*****] APM [*****]expenditures by Seller, as follows:
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]

i.
Boeing shall issue purchase orders no later than [*****] days prior to the above dates.

ii.
Payment will be made by Boeing to Seller in accordance with SBP Section 5.2.1.

b)
Boeing agrees to pay Seller a fixed sum of $[*****] to support 737 rate [*****] APM [*****] expenditures, which the Parties agree includes 737-8 rate tooling* (only



from rate [*****] up to and including [*****]), 737-9 rate tooling* (only from rate [*****] up to and including [*****]), 737 CIW rate tooling* (only from rate [*****] up to and including [*****]), 737-8200 rate tooling* (only up to and including rate [*****]), 737-7 (7150) rate tooling* (only up to and including rate [*****]), and 737-10 rate tooling* (only up to and including rate [*****]). Payments shall be made as follows:

•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]
•
$[*****] paid no later than [*****]

*Based on SBP Attachment 15 “Maximum Production Rate and Model Mix Constraint Matrix” as of the Effective Date of SBP Amendment No. 30.
i.
Boeing shall issue purchase orders no later than [*****] days prior to the above dates.

ii.
Seller will submit CTLs for rate [*****] tooling, starting [*****]. The above payments in this section are not contingent upon CTL submittal by Seller or approval by Boeing.

iii.
Payment will be made by Boeing to Seller in accordance with SBP Section 5.2.1. Upon completion of all CTLs, Seller will notify Boeing that all CTLs have been submitted.

iv.
SBP Attachment 1 Exhibit G identifies the rate tooling settlements that are and are not included within the $[*****] fixed sum payment set forth in this Section 8.b). For the avoidance of doubt, SBP Attachment 27 does not apply to the $[*****] fixed sum payment set forth in this Section 8.b).

c)
Boeing agrees to pay Seller a fixed sum of $[*****] to support 737 rate [*****] APM tooling, capital, and equipment expenditures, which the Parties agree includes 737-8 rate tooling** (only from rate [*****] up to and including [*****]), 737 CIW rate tooling** (only from rate [*****] up to and including [*****]), and 737-7 (7150) rate tooling** (only from rate [*****] up to and including [*****]). Payments shall be made as follows, measured from the date Boeing directs Seller in writing to go to rate [*****], in accordance with SBP Section 7.5.3 (the “[*****] Letter”):
•
$[*****]*** paid no later than [*****] days following the [*****] Letter
•
$[*****]*** paid no later than [*****] days following the [*****] Letter
•
$[*****]*** paid no later than [*****] days following the [*****] Letter
•
$[*****]*** paid no later than [*****] days following the [*****] Letter
•
$[*****]*** paid no later than [*****] days following the [*****] Letter



•
$[*****]*** paid no later than [*****] days following the [*****] Letter
•
$[*****]*** paid no later than [*****] days following the [*****] Letter
•
$[*****]*** paid no later than [*****] days following the [*****] Letter
        
**Based on SBP Attachment 15 “Maximum Production Rate and Model Mix Constraint Matrix” as of the Effective Date of SBP Amendment 40.
***These payments may be reduced to account for any payments made by Boeing to Seller for long-lead items associated with rate [*****]. Commencing in [*****], Seller will request authority to proceed (ATP) for appropriate amounts for long-lead items to protect the [*****] Shipsets rate. Upon approval, Boeing will issue the ATP(s) and Boeing will pay appropriate amounts for such long-lead items.
i.
Boeing shall issue purchase orders no later than [*****] days prior to the above dates in this Section 8.c).

a.
After the [*****] Letter is provided by Boeing to Seller, the Parties will amend this Section with actual calendar dates.

ii.
Seller will submit CTLs for rate [*****] Tooling. The above payments (including payments for long-lead items) in this Section 8.c) are not contingent upon CTL submittal by Seller or CTL approval by Boeing . Seller will determine the allocation of the [*****] between [*****] for rate [*****] APM, and provide it to Boeing within [*****] days of the [*****] Letter.

iii.
Payment will be made by Boeing to Seller in accordance with SBP Section 5.2.1. Upon completion of all CTLs, Seller will notify Boeing that all CTLs have been submitted.

SBP Attachment 1 Exhibit G identifies the rate tooling settlements that are and are not included within the $[*****] fixed sum payment set forth in this Section 8.c). For the avoidance of doubt, SBP Attachment 27 does not apply to the $[*****] fixed sum payment set forth in this Section 8.c).














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SBP Attachment 1 - Exhibit G
737 MAX Rate Tooling Settlements ([*****] to [*****]APM)
737-8
Fuselage, Wing, and Propulsion End Items
(All SOW excluding CIW)
Rate Tooling to support up to and including [*****] APM
Reference SBP Attachment 27
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference Pricing Settlement CCN 10657 dated [*****]
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference SBP Attachment 1 Section 8.b)
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference SBP Attachment 1 Section 8.c)

737-9
Fuselage, Wing, and Propulsion End Items
(All SOW excluding CIW)
Rate Tooling to support up to and including [*****] APM
Reference SBP Attachment 27
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference SBP Attachment 1 Section 8.b)



737-7 (7150) and 737-8200
Fuselage, Wing, and Propulsion End Items
 (All SOW excluding CIW)
737-7 (7150) Rate Tooling to support up to and including [*****] APM
 Reference SBP Attachment 1 Section 8.b)
737-8200 Rate Tooling to support up to and including [*****] APM
Reference SBP Attachment 1 Section 8.b)
737-7 (7150) Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference SBP Attachment 1 Section 8.c)

737 MAX CIW
Composite Inner Wall (CIW)
Rate Tooling to support up to and including [*****] APM
Reference SBP Attachment 27
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference Pricing Settlement CCN 10657 dated [*****]
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference SBP Attachment 1 Section 8.b)
Rate Tooling to support above [*****] APM up to and including [*****] APM
Reference SBP Attachment 1 Section 8.c)




737-10
Fuselage, Wing, and Propulsion End Items (All SOW excluding CIW)
Rate Tooling to support up to and including [*****] APM
Reference SBP Attachment 1 Section 8.b)


ATTACHMENT C of SBP Amendment 40

SBP Attachment 1B
RESERVED
ATTACHMENT D of SBP Amendment 40

SBP Attachment 1D
Recitals
The statement of work for 737 MAX Composite Inner Wall listed in this SBP Attachment 1D (MAX Composite Inner Wall SOW 1D) is subject to all terms and conditions of SBP MS-65530-0016 as amended.
MAX Composite Inner Wall SOW
Part Numbers for this SOW will be defined by [*****], which is due to be published on [*****]. The content of [*****] is subject to mutual agreement of the Parties and will not represent any material change impacting Price to the unpublished version reviewed by both Parties that is dated [*****]. SOW represents Composite Inner Wall Panels, a Thermal Protection System, and changes to the interface and surrounding structure to accommodate installation to MAX Thrust Reverser based on IWS Rev [*****].
The Price shall be $[*****] per shipset and not subject to the [*****] set forth in SBP Attachment [*****] Section [*****] beginning with incorporation of the above-defined SOW at MAX line unit 19 per Master Schedule [*****] and [*****]. Pricing is firm fixed through [*****], subject to adjustment beginning [*****] as defined herein.
Adjustment shall be calculated based on the actual index change for the previous twelve (12) months using a composite of [*****]. The indices to be used are as follows: [*****]. In the event the U.S. Bureau of Labor Statistics discontinues or alters its current method of calculating the indices specified above, Boeing and Seller shall agree upon an appropriate substitution for or adjustment to the indices to be employed herein.



Any reference to SBP Attachment 1 Work Statement and Pricing in this SBP is applicable to the MAX Inner Wall SOW 1D with the following exceptions:

1.
With reference to SBP Section 4.1 Recurring Price, Section 4.1 is replaced by the following only for the statement of work listed in this SBP Attachment 1D:
The Price of Recurring Products is set forth in SBP Attachment 1D includes the total Price for all baseline statement of work under this SBP Attachment 1D, subject to any applicable adjustments under SBP Section 7.0 Change Provisions. Pricing shall be included as an update to SBP Attachment 1 and SBP Attachment 7 Indentured Parts List and POA Pricing upon execution of this SBP Attachment 1D.
The Parties acknowledge and agree that those provisions that have been amended in this SBP Attachment 1D do not amend the same provisions with regard to the rest of the Statement of Work under the SBP.

ATTACHMENT E of SBP Amendment 40
Applicable [*****] Maximum Production Rates until rate [*****] implementation
MAXIMUM PRODUCTION RATE
Models
Monthly Production Protection Rate
Units/M-Days Separation
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
*   Monthly Production Protection Rates are based on a [*****] .
**Subject to below model mix constraints - [*****] deliveries of any [*****] units will result in a corresponding reduction in the number of other models [*****]
     Table “[*****] MODEL MIX CONSTRAINTS (Airplanes with [*****])”
     Table “[*****] MODEL MIX CONSTRAINTS ([*****])”




Applicable [*****] Maximum Production Rates until rate [*****] implementation (continued)
[*****] MODEL MIX CONSTRAINTS (Airplanes with [*****])
Capacity
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
 
 
[*****] MODEL MIX CONSTRAINTS [*****]
Capacity
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]

Applicable [*****] Maximum Production Rates until rate [*****] implementation (continued)
NOTES:
The maximum [*****] deliveries shown above reflect a total capability of [*****] APM with the following limitations:
•
Maximum combined [*****] deliveries shall not exceed [*****]
•
A minimum of [*****] of Separation [*****] between any [*****]
•
[*****] must utilize the [*****] or [*****]
•
[*****] must utilize the [*****]
•
[*****] deliveries are limited to [*****]
•
At rate [*****] - [*****] of separation on [*****] between [*****]
•
[*****] deliveries of [*****] and [*****] models are limited to a total of [*****]
•
The [*****]deliveries include all models of the [*****] aircraft (i.e. [*****])
•
Maximum [*****] Protection Rate will not go above [*****] to [*****] before [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****]to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****]to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****]to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****]to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****]prior to [*****] (Spirit FOB for rate [*****])





Applicable Maximum Production Rates at rate [*****]
MAXIMUM PRODUCTION RATE
Models
Monthly Production Protection Rate
Units/M-Days Separation
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
*[*****] and [*****]not available once [*****] is implemented
**Subject to below model mix constraint tables [*****] deliveries of any [*****] will result in a corresponding reduction in the number of other models [*****]
         Table “[*****] MODEL MIX CONSTRAINTS (Airplanes with [*****])”
         Table “[*****] MODEL MIX CONSTRAINTS ([*****])”
 















Applicable Maximum Production Rates at rate [*****] (continued)

 [*****] MODEL MIX CONSTRAINTS (Airplanes with [*****])
Capacity
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
 
 
 
 [*****] MODEL MIX CONSTRAINTS ([*****])
Capacity
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]















Applicable Maximum Production Rates at rate [*****] (continued)

[*****]Constraint Matrix; if rates drop below [*****]the constraints associated with [*****], [*****] still apply in the same fashion as if Boeing was still producing at [*****] (i.e., [*****]), and [*****], or [*****]) are available to be built in [*****] .

NOTES:
The maximum [*****] deliveries shown above reflect a total capability of [*****] with the following limitations:

•
Maximum combined [*****] deliveries shall not exceed [*****]
•
A minimum of [*****] of Separation [*****] between any [*****]
•
Maximum combined [*****] deliveries shall not exceed [*****]
•
[*****] must utilize the [*****]
•
[*****] cannot have more than [*****] scheduled on [*****] and cannot have more than [*****] in a consecutive [*****] span
•
[*****] must utilize the [*****]
•
[*****] deliveries are limited to [*****]
•
At rate [*****] - [*****] of separation on [*****] between [*****] and/or [*****]
•
[*****] deliveries of [*****] and [*****]models are limited to a total of [*****]
•
The [*****] deliveries include all models of the [*****]aircraft (i.e., [*****])
•
Maximum [*****] Protection Rate will not go above [*****]to [*****]before [*****] (Spirit FOB) unless otherwise agreed by both Parties
•
Combined Maximum Protection Rate for [*****] will not exceed [*****]prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****] to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****] to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****] to [*****] prior to [*****] (Spirit FOB)
•
Combined Maximum Protection Rate for [*****] will not go above [*****] to [*****] prior to [*****] (Spirit FOB)

[*****]: Applicable Maximum Production Rates at rate [*****]



MAXIMUM PRODUCTION RATE
Available Models
Production Rate *
Units/M-Days Separation
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
* Per rolling [*****] period
** Subject to below model mix constraints [*****] deliveries of any [*****] will result in a corresponding reduction in the number of other models [*****]
Table “[*****] MODEL MIX CONSTRAINTS (Airplanes with [*****])”
Table “[*****] MODEL MIX CONSTRAINTS ([*****])”


[*****]: Applicable Maximum Production Rates at rate [*****]
(continued)
[*****]MODEL MIX CONSTRAINTS (Airplanes with [*****])
Capacity
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
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[*****] MODEL MIX CONSTRAINTS ([*****])
Capacity
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[*****]: Applicable Maximum Production Rates at rate [*****]
(continued)
NOTES: The maximum [*****] deliveries shown above reflect a total capability of [*****] with the following limitations:
•
Maximum combined [*****] deliveries will not exceed [*****]
•
[*****] cannot have more than [*****]scheduled per [*****]
•
[*****] must utilize the [*****] or [*****]
•
[*****] cannot have more than [*****] scheduled per [*****] and cannot have more than [*****] scheduled in [*****] consecutive [*****]
•
Maximum combined [*****] deliveries will not exceed [*****]
•
[*****] requires [*****]separation between units
•
[*****] must utilize the [*****]
•
[*****] deliveries are limited to [*****]
•
[*****] and [*****] require [*****] of separation between units
•
[*****] and [*****] model deliveries are limited to a combined total of [*****]
•
[*****] deliveries include all models of the [*****] aircraft (i.e. [*****])
•
Maximum [*****] Rate will not go above [*****] to [*****]before [*****] (Spirit FOB) unless otherwise agreed by both Parties
•
Combined Maximum Rate for [*****] will not go above [*****] to [*****] prior to [*****] (Spirit FOB)




















Spirit & Boeing Proprietary

Amendment 40 of SBP MS-65530-0016
102 of 210          Boeing and Seller Initials     
Boeing: Seller:

[*****] CONSTRAINT MATRIX
Models
Monthly
Wichita
Mix
Structures
 
Engine - Protection Rates
[*****]
[*****]
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[*****] CONSTRAINT MATRIX
(continued)
Models
Monthly
Wichita
Mix
Structures
 
Engine - Protection Rates
 
[*****]
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LEGEND
US = Units of Separation Between Events
 
 
 
 



 
 
 
 
 
US Example : [*****]
 
 
 
 
 
 
 
 
R = [*****]
 
 
 
 
 
 
 
 
 
 
 
 
HP = [*****]
 
 
 
 
 
 
 
 
 
FP = [*****]
 
 
 
 
 
 
 
 
 
NP = [*****]
 
 
 
 
 
 





























ATTACHMENT F of SBP Amendment 40
SBP ATTACHMENT 16
BOEING PROVIDED DETAILS (BPD)
AND SUPPLIER BANKED MATERIAL (SBM )
(Reference clause 12.13.1)
ATA Stringers Pricing Period of Performance
a)
Boeing Provided Details (BPD)

This SBP Attachment 16 identifies Boeing Provided Details (parts) and their associated purchase price which are currently being provided to Seller.
Seller shall provide Boeing with discrete schedules (lead-time away) which depicts Seller’s requirements for these parts.
Attachment 16 will continue to be updated / revised to reflect any additional identified BPD or work transfer activity.
b)
ATA Stringers Pricing

The pricing set forth in this Attachment 16 for ATA Stringers is from January 1, 2016 through December 31, 2030. For the purpose of this SBP Attachment 16, Non-Discounted ATA Stringer Price means the pricing prior to application of production rate-based discounts as described in SBP Attachment 1 Table 1. Non-Discounted ATA Stringer Prices are listed in SBP Attachment 16 Exhibit A.
The Parties agree the SBP Attachment 1 Table 2 (737 Pricing Reference Table) shall be utilized for ATA Stringers throughout the pricing period. Column pricing for ATA Stringer prices are identified in Attachment 16 Exhibit A.
For the avoidance of doubt, ATA Stringer pricing from January 1, 2016 through December 31, 2030 shall be subject to the same discount methodology as set forth in SBP Attachment 1 Section 2.a). Such ATA Stringer prices are reflected in SBP Attachment 16 Exhibit A.
c)
ATA Stringers Interim Pricing

ATA Stringer pricing on and after January 1, 2031 shall be subject to the same interim pricing methodology as set forth in SBP Attachment 1 Section 2.b), excluding 2.b)ii.





d)
737 ATA Stringer POA Pricing

The price for POA ATA Stinger requirements shall be the price for such products listed in this SBP Attachment 16 multiplied by a factor of [*****].
e)
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
[*****]
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ATTACHMENT H of SBP Amendment 40
SBP Attachment 22
ABNORMAL ESCALATION
(Reference SBP 4.1)
The following Section A (the “Legacy Model” of Abnormal Escalation) will be in effect, except during the time period of [*****]. During this period when the Legacy Model is not applicable, a different formula will be used to calculate Abnormal Escalation; this formula is described in the below Section B and will be called the “Revised Model” of Abnormal Escalation.
Price adjustments occurring on January 1 of a given year will be determined by the model that is in effect during the previous year (i.e. Prices paid by Boeing to Seller in [*****] will reflect any potential Price adjustments for Abnormal Escalation utilizing the Legacy Model, measured in [*****]).
A.      Abnormal Escalation - Legacy Model
1.
Prices for Recurring Products will be adjusted for Abnormal Escalation as provided below. In the event that escalation, as forecast by a composite of the identified below indices, exceeds [*****] for any given calendar year (“Abnormal Escalation”), the Prices for Recurring Products for the subsequent calendar year shall be adjusted by that percentage value which exceeds [*****]. Abnormal Escalation is calculated each year against the Prices for Recurring Products effective for that year and is not cumulative. The adjusted Prices for Recurring Products will revert back to the SBP Attachment 1 Prices for Recurring Products at the beginning of the subsequent calendar year.
Any prolonged extraordinary inflation would be considered by the Parties to determine any mutually agreeable proper actions to be taken.
2.
Adjustments to the Prices for Recurring Products will be determined by the following economic indices:
A.     Material - [*****].
B.     Labor - [*****].
Composite - [*****].
3.
Special Notes:
In the event the U.S. Bureau of Labor Statistics discontinues or alters its current method of calculating the indices specified above, Boeing and Seller shall agree upon an appropriate substitution for or adjustment to the indices to be employed herein.
All calculations will be held to a six (6) decimal place level of precision.
Indices shall be pulled on [November 15 th ] of each year.



4.
Abnormal Escalation Formula:
Adjustments to the Prices for Recurring Products, if any, for the Pricing Period and any Interim Pricing Period shall be calculated as follows:
[*****]
Where [*****]
A = Adjusted Prices for Recurring Products (20X2 Price)
B = Then current applicable pricing per SBP Attachment 1
IP = Percentage of composite index as compared to the previous year
MC = Current material index value (September 20X1)
MP = Previous year material index value (September 20X0)
LC = Current labor index value (3 rd quarter 20X1)
LP = Previous year labor index value (3 rd quarter 20X0)
5.
Example: Abnormal Escalation Price Increase
B = $2,000,000
MC = September 2008 material index value = [*****]
MP = September 2007 material index value = [*****]
LC = 3 rd quarter 2008 labor index value = [*****]
LP = 3 rd quarter 2007 labor index value = [*****]
IP = [*****]
Since IP > [*****], clause is triggered
2009 Adjusted Price = [*****]
6. Example: Abnormal Escalation Clause Not Triggered
B = $2,000,000
MC = September 2008 material index value = [*****]
MP = September 2007 material index value = [*****]
LC = 3 rd quarter 2008 labor index value = [*****]



LP = 3 rd quarter 2007 labor index value = [*****]
IP = [*****]
Clause not triggered because (IP < [*****])
B.      Abnormal Escalation - Revised Model
1.
Recurring Product Prices for the 737MAX and 777X will be adjusted for Abnormal Escalation as follows. In the event that escalation, as determined by a composite of the identified below indices, exceeds [*****] (“Abnormal Escalation”), the Prices for Recurring Products for the subsequent calendar year shall be adjusted by [*****]. Abnormal Escalation is calculated each year against the Prices for Recurring Products effective for that year and [*****]. The adjusted Prices for Recurring Products will [*****].

Any prolonged extraordinary inflation will be considered by the Parties to determine any mutually agreeable proper actions to be taken.
2.
Adjustments to the 737MAX and 777X Product Prices for Recurring Products will be determined by the following economic indices:

A.
Material - [*****].

B.
Labor - [*****].

3.
Composite - [*****].

4.
Special Notes:
In the event the U.S. Bureau of Labor Statistics discontinues or alters its current method of calculating the indices specified above, Boeing and Seller shall agree upon an appropriate substitution for or adjustment to the indices to be employed herein.
All calculations will be held to a six (6) decimal place level of precision.
Indices shall be pulled on November 15th of each year.
5.
Formula and Examples:

5.1
Formula




A105PG207.JPG

5.2
Example 1 (escalation measured in November [*****]):
Weighted Escalation Percentage = [*****]
Because [*****]<[*****], no adjustments will be made for Abnormal Escalation for [*****]Prices
5.3
Example 2 (escalation measured in November [*****])
Weighted Escalation Percentage = [*****]
Because [*****]>[*****], adjustments will be made for Abnormal Escalation for [*****]Prices
[*****]= [*****] Price Adjustment for [*****] Prices












ATTACHMENT I of SBP Amendment 40
SBP Attachment 31
RESERVED






























ATTACHMENT J of SBP Amendment 40
SBP Attachment 32
737 and 777X Value Engineering Cost Sharing
1.
The Parties agree to cooperate and work together to implement cost reduction ideas agreed to by both Boeing and Seller. This Attachment supersedes SBP Sections 7.6 and 7.6.1 for the 737 and 777X Program Airplanes while this SBP Attachment 32 is effective. For each agreed-to cost reduction project, the Parties will enter into a written agreement in substantially the same form as Exhibit A attached hereto (each, a "Cost Reduction Project Agreement") which will, at a minimum, set forth the following: (a) a detailed description of the cost reduction idea; (b) the steps required to implement such idea; (c) the Party responsible for each step; (d) the timeline associated with such implementation; (e) equal allocation of non-recurring costs between the Parties (50% each) 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; (h) equal allocation of the cost savings between the Parties (50% each); and (i) the process for terminating a Cost Reduction Project Agreement.
2.
In order to track the progress of cost reduction implementation efforts, the Parties agree to conduct, at least once per calendar quarter starting in the first quarter of 2019: (1) executive reviews for both 737 and 777X; and (2) cost reduction symposia for both 737 and 777X to jointly discuss, brainstorm, and identify potential cost reduction projects. These reviews will track progress of jointly-agreed items including, but not limited to, total number of cost reduction ideas, total number of implemented ideas, and total savings captured by both Parties to-date. Any potential 737 projects or ideas conceived by either Party prior to the effective date of SBP Amendment 39 (and which were not included in the December 2017 737 cost reduction symposium list identified as “Boeing_Symposium_Ideas_Capture_All.xlsx”) will not be considered to be covered by this SBP Attachment 32 unless otherwise jointly agreed by the Parties.
3.
The sum of the nonrecurring costs of the Parties required to implement cost reduction ideas, as set forth in the applicable Cost Reduction Project Agreement, will be shared equally by the Parties. The wrap rates contained in SBP Attachment 5 will be utilized for calculating Seller’s nonrecurring costs, and $[*****] per hour will be utilized for calculating Boeing’s nonrecurring costs. Notwithstanding the first sentence in this Section 3, the costs for accountable Tooling will be the sole responsibility of Boeing, and the costs for non-accountable tooling will be the sole responsibility of Seller.
4.
Any cost reductions resulting from incorporation of joint Boeing and Seller cost reduction initiatives will result in a reduction in the Attachment 1 [*****] in a mutually agreed manner that equitably preserves, or enhances if market conditions allow, the anticipated economics for both Boeing and Seller. The wrap rates contained in SBP Attachment 5 will be utilized for calculating Seller’s recurring cost savings.



EXHIBIT 10.6

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) WOULD BE LIKELY TO CAUSE COMPETITITVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. SUCH EXCLUDED INFORMATION IS DENOTED BY ASTERISKS IN BRACKETS [*****].

AMENDMENT 41

TO

SPECIAL BUSINESS PROVISIONS (SBP) MS-65530-0 016

BETWEEN

THE BOEING COMPANY

AND

SPIRIT AEROSYSTEMS, INC.

THIS AMENDMENT 41 (“Amendment”) to Special Business Provisions MS-65530-0016 is entered into, as of the date of the last signature below, between The Boeing Company, a Delaware Corporation (" Boeing "), and SPIRIT AEROSYSTEMS, INC, a Delaware Corporation with its principal office in Wichita, Kansas (“ Seller ”). Boeing and Seller sometimes are referred to herein individually as a “ Party ” and collectively as the “ Parties .”
            
RECITALS

A. The Parties entered into Special Business Provisions MS-65530-0016, dated June 16, 2005, (the “SBP”) and the General Terms Agreement BCA-65530-0016, dated June 17, 2005, (the “GTA”), and including any amendments to the SBP and GTA (collectively the “Sustaining Agreement”).

B. The most recent amendment to the SBP is Amendment 40, entered into January 30, 2019.

C. The Parties have reached agreement regarding 777-9 rate tooling and wish to amend the SBP to define the terms of the 777-9 rate tooling agreement, as set forth herein.

















AGREEMENTS

NOW THEREFORE, the Parties agree as follows:

1.
The list of “AMENDMENTS” within the Sustaining SBP is hereby deleted and replaced in its entirety as follows:

“AMENDMENTS
 
Amendment 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.
2/23/2006
H. McCormick
 
R. Stone
 
2
Incorporate CCNs as listed in Amendment 2, Attachment A, 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.
4/11/2007
H. McCormick
 
J. Edwards
 
3
Incorporate CCNs as listed in Amendment 3, Attachment A. Updates to attachments 1, 2, 7, 14, 15, 16 and 22.
11/28/2007
H. McCormick
 
J. Edwards
 
4
Incorporate CCNs as listed in Amendment 4, Attachment A. Updates to Attachments 1, 2, 7, 14, 15, 16. Incorporate Attachment 1A per CCN 508, 1328.
7/8/2008
S.Hu
 
W. Wallace
 
5
Incorporate CCNs as listed in Amendment 5, Attachment A, includes addition of new section 12.3.1.1 Updates to Attachments 1, 2, 7, 14, 15, 16, 20.
6/22/2009
S. Hu
 
R. Stone
 
6
Incorporate CCNs as listed in Amendment 6, Attachment A. Updates to Attachments 1, 2, 4, 7, 9, 10, 14, and 16. Incorporate Attachment 9 per CCN 2385.
11/23/2010
S. Hu
 
M. Milan
 
7
Incorporate CCNs as listed in Amendment 7, Attachment A, includes addition of new section 12.13.3.1. Updates to Attachments 1, 2, 4, 7, 9, 14, and 16. Incorporate Attachment 1B per CCN 4212 and Attachment 23 per the 767-2C MOA.
7/28/2011
S. Hu
 
M. Milan
 
8
Incorporate CCNs as listed in Amendment 8, Attachment A, includes revisions to section 7.9 and 12.13.1.1. Updates to Attachments 1, 2, 4, 7, 9, 14, 15, and 16.
8/16/2013
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.
9/26/2014
B. Folden
 
 R. Ast
 
11
Incorporate Attachment 27 -737-MAX Non Recurring Agreement, and Attachment 28 737/747/767/777 Pricing Agreement. Updates Section 4.1 Attachment 4, Section B.1, Attachments 9 and 15.
3/10/2015
C. Howell
 
R. Ast
 
12
Delete and replace Attachment 25, Section 3.0.
4/9/2015
K. Drawsky
 
R. Ast
 
13
Incorporate CCNs as listed in Amendment 13, Attachment A. Updates to Attachments 1, 2, 7, 9, 14, and 16.
1/4/2016
L. Taylor
 
K. Leyba
 
14
Incorporate Attachment 25, Addendum 1.
4/21/2015
D. Blaylock
 
R. Grant
 
15
NULL
NULL
NULL
 
16
NULL
NULL
NULL



17
Incorporate Attachment 29 - 777X Non-Recurring Agreement.
12/23/2015
A. Lucker
E. Bauer
18
NULL
NULL
NULL
19
NULL
NULL
NULL
20
737 MAX Inner Wall.
12/17/2015
S. Garcia-Deleone
J. Reed
21
Revisions to Attachment 27. 737 MAX Non-Recurring Agreement.
5/9/2016
D. Blaylock
R. Grant
22
737 Max Composite Inner Wall Line Movement.
11/2/2016
D. Blaylock
E. Bossler
23
737 MAX 9 INITIAL and CIW Line [*****] Tooling Incentive Agreement.
12/16/2016
D. Blaylock
E. Bossler
24
Incorporate CCNs as listed in Amendment 23, Attachment A. Updates to Attachments 1,2,7,9, and 14.
12/20/2016
L. Taylor
K. Leyba
25
Revisions to Attachment 27, 737 MAX Non-Recurring.
3/16/2017
D. Blaylock
E. Bossler
26
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
3/23/2017
D. Blaylock
E. Bossler
27
Incorporate Attachment 30, “737 NG / MAX Vapor Barrier Agreement”, updates to Attachment 1 and 9.
3/31/2017
B. Edwards
K. Clark
28
Revisions to Attachment 29, 777X NRE Agreement.
6/22/2017
K. O’Connell
C. Green
29
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
7/20/2017
D. Blaylock
E. Bossler
30
Delete and Replace SBP Sections 4.1, 4.1.1, 5.1.1, 5.2.1, 7.2, 8.0, 12.11, and 12.13.1.1 and SBP Attachments 1, 1B, 10 Section A10.2.10, 15, 16, 22, 27, and 29. Delete and Reserve SBP Attachments 1C, 20, and 28. Incorporate SBP Attachment 1D and 31.
9/22/2017
B. Edwards
W. Wilson
31
Revisions to Attachment 27, 737-8 Rate Tooling Incentive Agreement.
10/18/2017
D. Blaylock
E. Bossler
32
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
11/15/2017
D. Blaylock
E. Bossler
33
Revisions to Attachment 27, 737 MAX Non-Recurring Agreement.
11/30/2017
D. Blaylock
E. Bossler
34
Revisions to Attachment 27, 737-10 Non-Recurring Non-Tooling.
2/23/2018
D. Blaylock
E. Bossler
35
Revisions to Attachment 27, 737-9 Rate Tooling [*****].
4/18/2018
D. Blaylock
J. O'Crowley
36
Revisions to Attachment 27, 737-10 Wing NRE.
6/20/2018
D. Blaylock
E. Bossler
37
Incorporation of new Sections: 3.3.4.10 767 One Piece SOW Tooling, 3.3.7 767 One Piece SOW NonRecurring Pricing, 3.4.2.2 Delivery Point and Schedule for 767 One Piece SOW and 3.8 767 One Piece Statement of Work Special Provisions. Updates to Sections 7.1, Attachment 1 and 9.
8/17/2018
H. Langowski
R. Grant
38
Revisions to Attachment 27, 737 MAX BBJ8, BBJ7, and 737-10 SOW
11/1/2018
T. Willis
E. Bossler
39
4.1.1 is altered. A new section 4.7 is added. Attachment 1 (excluding the Exhibits) is deleted and replaced in its entirety. A new Attachment 32 “737 Value Engineering Cost Sharing” is added. Attachment 1 Exhibits B, B.1, B.2, C, C.1, C.2, D, D.1, D.2, E.1, E.2, F, F.1, and F.2 are deleted and replaced in their entirety. A new Attachment 1 Exhibit C.3 is added. Attachment 1B is deleted in its entirety.
11/2/2018
K. Shipley
E. Bossler



40
SBP Section 4.7 is deleted and replaced in its entirety.
SBP Section 7.2 is deleted and replaced in its entirety.
A new SBP Section 7.5.3 is added.
SBP Attachment 1 (including Exhibits B, B.1, B,2, D, D.1, D.2, F, F.1, F.2, and G) is deleted and replaced in its entirety.
SBP Attachment 1B is added and marked “Reserved”.
SBP Attachment 15 is deleted and replaced in its entirety.
SBP Attachment 16 (including its Exhibit) is deleted and replaced in its entirety.
SBP Attachment 31 is deleted, replaced in its entirety, and marked “Reserved”.
SBP Attachment 32 (including its Exhibit A) is deleted and replaced in its entirety.

All of the above is accordance with the agreements as set forth in the Collective Resolution 2.0 Memorandum of Agreement (the “CR 2.0 MOA”), dated December 21, 2018
Concurrently with the CR 2.0 MOA, the Parties also executed that certain Settlement and Release Agreement, dated December 21, 2018, pertaining to the release and settlement of warranty and various other claims
1/29/2019
K. Shipley
E. Bossler
41
Revisions to Attachment 29 777-9 Rate Tooling
3/27/2019
R. Velau

D. Currie
































2.
SBP Attachment 29 Exhibit A is deleted in its entirety and is replaced by the following:

Exhibit A: Tooling [*****] Amount A106PG5A01.JPG
SBP Attachment 29 Exhibit C is updated with the following (“777X INITIAL [*****] PRICED TOOL LIST” REMAINS UNCHANGED):
 
Exhibit C: Tooling Bill of Material
(Submitted by Seller)

777-9 RATE [*****] PRICED TOOL LIST

Commodity
Tool Category
Boeing Tool Code
Tool Number
Total Rate Tool Quantity
Total Price for Rate Tools
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]



Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]



Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]



Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]



Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Propulsion
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Fuselage
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Wing
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]



Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]
Floor Beams
[*****]
[*****]
[*****]
[*****]
[*****]

4.
SBP attachment 15 “MAXIMUM PRODUCTION RATE And MODEL MIX CONSTRAINT MATRIX” is updated regarding the [*****] constraint matrix with the following (NON-[*****] CONSTRAINTS UNCHANGED):

Models
Monthly
Wichita
Mix
Structures
 
Engine - Protection Rates
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
[*****]
 
[*****]
[*****]
[*****]
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LEGEND
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5.
This Amendment constitutes the complete and exclusive Agreement between the Parties with respect to the subject matter hereof and cancels and supersedes all previous agreements between the Parties relating thereto, whether written or oral.

6.
This Amendment shall be governed by the internal laws of the State of Washington without reference to any rules governing conflict of laws.

EXECUTED in duplicate as of the last date set forth below by the duly authorized representatives of the Parties.

THE BOEING COMPANY              SPIRIT AEROSYSTEMS INC.
BOEING COMMERCIAL AIRPLANES

Signature: /s/ Ryan Velau              Signature: /s/ Donald Currie

Printed Name: /s/ Ryan Velau      Printed Name: Donald Currie

Title: Contracts Procurement Agent      Title: Specialist, Contracts     

Date: 3/28/2019      Date: 3/28/2019




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, Thomas C. Gentile III, 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/ Thomas C. Gentile III
 
Thomas C. Gentile III
 
President and Chief Executive Officer
 
Date: May 1, 2019





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, Jose Garcia, 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/ Jose Garcia
 
Jose Garcia
 
Senior Vice President and Chief Financial Officer
 
Date: May 1, 2019





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 March 28, 2019 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas C. Gentile III, 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/ Thomas C. Gentile III
 
Thomas C. Gentile III
 
President and Chief Executive Officer
 
Date: May 1, 2019





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 March 28, 2019 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jose Garcia, 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/ Jose Garcia
 
Jose Garcia
 
Senior Vice President and Chief Financial Officer
 
Date: May 1, 2019